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SFA Advocates on SEC Rule 15c2-11

article by Structured Finance Association


On December 9, SFA submitted a letter to the SEC regarding the potential application of SEC Rule 15c2-11 to ABS. This Rule initially issued decades ago regulates the publication of quotations in OTC markets and was amended to require dealers to obtain and review issuer information prior to publishing quotations for the securities effective September 28, 2021. Since its introduction, the SEC has only applied the rule to equity securities, with no record of application to fixed income or structured products. The SEC issued a time-limited no-action letter postponing the effective date of the amended Rule 15c2-11 on fixed income securities. In its letter, SFA advocates that the information requirements under the Rule are not germane to ABS and calls for a carve-out for fixed income.


Key Points:


  • SFA highlights that the information requirements of Rule 15c2-11 provide no additional material transparency as the limited amount of needed issuer information for a ABS is already available. Further, material collateral information is provided on a frequent basis throughout the life of the securities.


  • SFA argues that most ABS will not be able to meet the requirements of the Rule which will result in an effective prohibition of publishing quotations on ABS. SFA explains the knock-on effect of such a limitation, describing the negative implications on ABS market value, reducing investor appetite for the market.


  • SFA’s letter outlines the industry’s concern that unintended consequences of SEC Rule 15c2-11 will have a material and likely immediate adverse impact on ABS market liquidity and trading, resulting in direct harm to investors.
  • SFA asserts the market impact extends beyond investors and creates negative consequences to everyday consumers whose loans to purchase homes, autos and other credit card goods are financed via the ABS market.