US FINRA Shuts Down OTC Bulletin Board Service

[Sapphire Capital]

FINRA Adopts New Requirements for Inter-Dealer Quotation Systems, Shuts Down OTC Bulletin Board Service

FINRA adopted rule changes to (i) shut down the OTC Bulletin Board Service ("OTCBB") and delete all related FINRA rules, and (ii) establish new requirements for alternative systems run by individual broker-dealers that disseminate identified broker-dealer quotations in OTC Equity Securities (as defined under FINRA Rule 6420(f)) (a/k/a "inter-dealer quotation systems").

In the rule proposal, FINRA asserted that the OTCBB system was technologically outdated and quotation activity on the platform was "nonexistent." FINRA concluded that the OTCBB was rendered obsolete by trading technology run by individual member firms. Accordingly, FINRA proposed to shut down the system and implement new FINRA Rule 6439 ("Requirements for Member Inter-Dealer Quotation Systems") to govern member inter-dealer quotation systems ("IDQS") run by broker-dealers.

The newly adopted requirements under FINRA Rule 6439 mandate that member IDQS:

create and conspicuously disclose to subscribers their (i) policies pertaining to the collection and distribution of quotation information, and (ii) non-discriminatory written criteria for authorizing quoting and trading on their systems;

establish written policies that address complaints by subscribers regarding the display of quotes, and submit monthly reports to FINRA that include order and response information;

offer customers a written description of the order- or quotation-related data products that they offer and related pricing information; and

provide information regarding the integrity of their systems.

The new rule goes into effect on October 1, 2021, with the exception of the provision relating to order-level information collection, which will go into effect at a later date to prevent regulatory duplication with the reporting requirements under FINRA Rule 6830 ("Industry Member Data Reporting"). FINRA stated that the effective date for the deletion of rules will not occur before October 1, 2021.
Primary Sources

FINRA Regulatory Notice 21-28: FINRA Adopts Rule 6439 Governing the Operation of Inter-dealer Quotation Systems and Announces Closure of the OTC Bulletin Board