SEC Order Granting Limited Exemptions from Rule 605 of Regulation NMS for Certain Fractional Share Orders and Modifying Prior Exemptions
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The SEC is granting a new limited exemption from Rule 605 reporting requirements for customer-facing broker-dealers that only execute fractional share orders when customers are exiting positions acquired through dividend reinvestment programs or fractional stock dividends. These situations occur infrequently, so the compliance costs outweigh the benefits of reporting execution quality statistics. The order also rescinds and replaces the prior exemption for orders received during trading halts, distinguishing between marketable and non-marketable orders, and makes adjustments to exemptions for inactively traded securities and crossed markets. It rescinds the exemption for manually received orders.
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Key Changes
- New exemption for customer-facing broker-dealers executing fractional share orders only from dividend reinvestment programs or fractional stock dividends
- Broker-dealers engaging in additional OTC market making cannot rely on the fractional share exemption
- Rescinds and replaces exemption for orders received during announced trading halts with new rules distinguishing marketable and non-marketable orders
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