On March 6, the SEC released its long-anticipated adopting release amending Rule 605.[1]  Separately, in late February, FINRA issued Regulatory Notice 24-05 discussing new FINRA Rule 6151, which requires member firms to provide Rule 606 reports to FINRA. The following provides a brief overview of these recent moves by both regulators.   

Rule 605 Amendment Highlights

The key changes to Rule 605 include: 



Larger broker-dealers will be required to report. Specifically, Firms that introduce or carry 100,000 or more customer accounts must now publish Rule 605 reports, separate from any reports they must publish as market centers. Further, broker-dealers operating alternative trading systems (“ATSs”) trading NMS stocks or operating single-dealer platforms (“SDPs”) must publish separate reports for their broker-dealer activity and ATS or SDP activity.[2]



Expanded definition of “covered orders.” The definition of “covered order” now includes certain orders submitted outside of regular trading hours, orders submitted with stop prices, and non-exempt short sale orders in securities with price test restrictions. Covered orders now also include certain types of non-marketable limit orders (“NMLOs”) and orders with stop prices. The definitions of “executable,” “marketable limit order,” and “midpoint-or-better limit order” are also amended to accommodate the expansion of the scope of covered orders.



Modification of the execution statistics required to be reported. The amendments modify the existing order size categories to use notional dollar value in conjunction with groupings into orders for less than a share, for an odd-lot, or for at least a round lot. The amendments also replace preexisting order type categories with new ones and introduce new and modified reporting requirements for execution quality statistics.



The Rule 605 amendments also modify the timestamp convention for the number of shares executed to be measured in milliseconds instead of seconds, as well as changing the definitions for order receipt time and order execution time to be measured to the millisecond. Furthermore, average time-to-execution statistics will now be required for all order types. 



Additionally, the following new or modified execution quality statistics will also be required, including for non-marketable orders: average effective spread, percentage-based effective and realized spread, effective over quoted spread, size improvement, price improvement, and relative fill rate.  Riskless principal executions will be excluded from the calculation of the number of shares executed at a receiving market center, broker, or dealer.



A new summary report in addition to the detailed report.  Reporting entities will now be required to produce summary reports of their execution quality statistics in addition to the more detailed Rule 605 report.  The summary report will be in a “user-friendly, easily digestible format” to allow market participants to readily review and compare aggregated data on execution quality statistics between market centers and large broker-dealers. 

The changes to Rule 605 as amended present numerous potential challenges to reporting entities. Market centers and covered broker dealers have until November 2025 to revamp or implement their Rule 605 reporting systems.  This will be particularly impactful to broker-dealers who are newly captured reporting entities as a result of a relatively low threshold number of customer accounts. 

Recent FINRA Developments Regarding Rule 606 Reporting

Regulatory focus on the accessibility and digestibility of Reg NMS reporting is also reflected in FINRA’s addition of Rules 6151 and 6470. These new rules require members to provide Rule 606 reports and over-the-counter securities disclosures to FINRA for centralized publication. Firms will be able to satisfy their obligations under Rule 606 by providing a link to the FINRA central repository on the firm’s website, while continuing to make available their Rule 606(a) reports that predate Rule 6151 in accordance with the requirements of Rule 606. Both Rule 6151 and 6470 become effective on June 30, 2024.

McGuireWoods attorneys have extensive experience advising clients on issues involving Rules 605 and 606, Reg NMS, and securities laws and regulations.  Please reach out to us if we can assist you or answer any questions you may have about the amendments to Rule 605 or the new FINRA rules.

[1] The Adopting Release for the Rule 605 amendments can be found on the SEC’s website.  Disclosure of Order Execution Information, Exchange Act Release No. 99679 (Mar. 6, 2024), https://www.sec.gov/files/rules/final/2024/34-99679.pdf

[2] The Adopting Release defines SDPs as “any OTC market maker that provides a trading system for only a single dealer to solely buy and sell securities against all other persons entering orders in that system” and requires SDPs to “produce a separate report pertaining only to covered orders in such trading system.”  Disclosure of Order Execution Information, Exchange Act Release No. 99679, at 63 (Mar. 6, 2024) (hereinafter “Adopting Release”).  This definition is narrower than that in the Proposing Release.  See id. at 64.