Securities Regulation Daily FINRA amends rule involving Regulation NMS resumption of trading
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Monday, August 1, 2016

FINRA amends rule involving Regulation NMS resumption of trading

By Kevin Kulling, J.D.

FINRA has adopted amendments to its rule relating to the Regulation NMS Plan to address extraordinary market volatility. The rule change is intended to clarify the operation of the Regulation NMS Plan (LULD Plan) following a trading pause or regulatory halt in a security subject to the LULD plan.

FINRA Amendment. FINRA’s Regulatory Notice 16-26 discusses the amendment to its Rule 6121.01, which provides that no trades in an NMS stock are permitted to occur during a trading pause. The amendment more specifically addresses the provision involving the resumption of trading otherwise than on an exchange in an NMS stock following a trading pause.

FINRA said that the amendment was part of an effort to clarify the operation of the LULD Plan during the short period of time following the resumption of trading after a trading pause or regulatory halt and before the price bands are received from the processor for securities that are subject to the LULD Plan.

The amended rule addresses the brief time between the resumption of trading following a trading pause or regulatory halt and when the price bands are received from the processor by requiring members to take measures to ensure bands are in place, according to FINRA.

In its SEC filing, FINRA said the amendment provides that following a trading pause or halt, a firm may resume trading otherwise than on an exchange if trading has commenced on the primary listing exchange and either: (1) the member has received the price bands from the processor; or (2) if immediately following a trading pause or regulatory halt the member has not yet received the price bands from the processor, the member has calculated an upper price band and lower price band consistent with the methodology provided for in the plan and ensures that any transactions prior to the receipt of the price bands from the processor are within the ranges provided for pursuant to the plan.

Market volatility. The issue of market volatility and mechanisms that may be employed by regulators to prevent extreme market volatility that can result in securities prices that do not reflect actual market interest is scheduled to be discussed as part of the SEC’s upcoming meeting of the Equity Market Structure Advisory Committee.

FINRA filed the rule for immediate effectiveness and the operative date of the rule change is August 22, 2016.

Companies: Financial Industry Regulatory Authority, Inc.

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