September 21, 2001
Stuart J. Kaswell
Re: Request for Temporary Exemption from Rule 11Ac1-6
Dear Mr. Kaswell:
In your letter dated September 20, 2001 ("Letter") on behalf of the Securities Industry Association, you requested that the Commission issue a temporary exemption to broker-dealers from Rule 11Ac1-6 ("Rule") under the Securities Exchange Act of 1934 ("Exchange Act"). This letter responds to your request.
Adopted in November 2000,1 the Rule requires all broker-dealers that route orders in equity and option securities to make available quarterly reports that present a general overview of their routing practices. The reports must identify the significant venues to which customer orders were routed for execution during the applicable quarter and disclose the material aspects of the broker-dealer's relationship with such venues. In addition, the Rule requires broker-dealers to disclose, on customer request, the venues to which the customer's individual orders were routed. The compliance date for the Rule is July 2, 2001. Accordingly, the first quarterly reports (for the third quarter of 2001) must be made available to the public by the end of October 2001. In addition, broker-dealers must begin responding to customer requests for individual information on orders that are routed on July 2, 2001 and after.
In your Letter, you request a temporary exemption to broker-dealers from the Rule in light of the recent September 11, 2001 attacks in New York City's financial district and the closure of the markets for the remainder of the week. You state that since September 11, 2001, broker-dealers have devoted their resources to resuming trading, which in some cases has required the relocation of trading facilities and personnel. You note that although firms have been collecting the necessary data required by the Rule since July 2, 2001, many of them have not completed their systems programming for issuance of the initial report. You believe that a one-month delay in the requirement to make the report for the third quarter of 2001 publicly available would provide broker-dealers with the flexibility they need at this time in their systems programming efforts, and would contribute to the production of accurate, reliable, and complete reports on their order routing practices.
The Commission believes that many such firms may be unable to issue reliable, accurate reports of their order routing practices by the end of October. A temporary exemption would allow broker-dealers sufficient time to repair their systems and complete the efforts required to issue accurate reports as intended by the Rule.
On the basis of your representations and the facts presented, the Commission, by the Division pursuant to delegated authority,2 is using its exemptive authority under paragraph (d) of the Rule to exempt temporarily broker-dealers from the reporting requirement of paragraph (b)(1) of the Rule. Accordingly, broker-dealers will not be required to post publicly the third quarter report (July-September 2001) under the Rule until November 2001. This quarterly report must be made available to the public by the end of November 30, 2001.
The exemption granted in this letter is subject to modification or revocation at any time if the Commission determines that such action is necessary or appropriate in the public interest or otherwise in furtherance of the purposes of the Exchange Act. If you have questions, please do not hesitate to contact me.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Annette L. Nazareth