Rule 15b9-1 was first put in place in 1965 and expanded in 1976, 46 years ago. The rule set forth an exemption designed for certain exchange floor members and other regional, specialized broker-dealers, allowing them not to register with the National Association of Stock Dealers (NASD), the predecessor to FINRA. The exemption applied to broker-dealers who typically were registered with the single exchange where they operated and met certain other criteria.

Nearly half a century later, our markets have drastically changed. The floor-based trading environment that existed when this exemption was adopted has given way to complex, high-volume, and cross-exchange electronic trading. Yet such complex and often high-frequency activity, made possible by highly-sophisticated technology, is regulated by a rule nearly as old as the first-ever cell phone.[1] Several currently-exempt firms have monthly trading volume valued in the tens of billions of dollars that is not subject to direct FINRA oversight.[2] Thus, today’s proposal updates and narrows the circumstances in which broker-dealers do not need to register with FINRA.

Currently, many broker-dealers conduct significant cross-exchange or off-exchange activity using the latest technology. Compared with the oversight that individual exchanges conduct on their own members, FINRA has the expertise for cross-market oversight. Thus, required FINRA membership for many of these currently-exempt firms would help enhance robust and consistent oversight. Furthermore, requiring firms to join FINRA helps to ensure that these firms report their activities in U.S. treasury markets.

In 2015, the Commission proposed changes to Rule 15b9-1. Informed by public comment, and in light of current markets, we have updated and re-proposed these amendments.

By extending FINRA oversight to potentially dozens of broker-dealers, the proposed amendments would strengthen oversight of firms trading securities across several markets, helping to protect investors and maintain fair, orderly, and efficient markets.

I’d like to thank the staff for their diligent work in preparing these amendments, including:

• Michael Bradley, Haoxiang Zhu, David Saltiel, Andrea Orr, David Shillman, Eric Juzenas, Meredith Macvicar, David Michehl, Vince Vuong, Roni Bergoffen, Nicholas Shwayri, Mark Sater, and Marilyn Parker in the Division of Trading and Markets;
• Cuyler Strong, Laura Tuttle, Jessica Wachter, Amy Edwards, Patti Vegella, Lauren Moore, Charles Woodworth, and Amy Edwards in the Division of Economic and Risk Analysis;
• Ronesha Butler, Cynthia Ginsberg, Maureen Johansen, Dan Berkovitz, Meridith Mitchell, Malou Huth, and Robert Teply in the Office of the General Counsel.
• Connie Kiggins and Carrie O’Brien from the Division of Examinations; and
• Kristin Pauley and Armita Cohen from the Division of Enforcement.

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