STA Comments on FINRA SR 2009-077 - Quotation Consolidation Facility

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4 February 2010

February 4, 2010

Ms. Elizabeth M. Murphy
Secretary
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090

Re: Comments to Securities Exchange Act Release No. 60999 (File No. SR-FINRA-2009-077)

Dear Ms. Murphy:

The STA appreciates the opportunity to comment on the proposal filed by the Financial Industry Regulatory Authority (“FINRA”) to establish a Quotation Consolidation Facility (“QCF”).

FINRA is proposing to “create a QCF for OTC Equity Securities for regulatory and transparency purposes that would serve as a data consolidator for all quote data in the over-the-counter equity market.” The proposal would require all market makers to provide FINRA with all over-the-counter quotations. FINRA proposes to distribute these as a consolidated quote data stream and charge broker/dealers a monthly fee to receive the data. They also propose charging a fee for the posting of quotes on the system but against which firms cannot execute.

STA opposes the FINRA proposal because it is not necessary. There exists a private facility providing all required information on an economically sound basis. This proposal fails to demonstrate either the need or requirement for such facility. We cannot see any increased value or increase in protection for investors, or regulators, and, at the same time, this proposal comes with very substantial cost increases to all participants which will passed on to investors either implicitly or explicitly.

There already is, as a practical matter, a consolidated quotation system. Pink Quote is the de facto consolidated quotation facility as a result of its own initiative to offer services to customers. Pink Quote currently merges OTCBB quotes with its own quotes, i.e. creates a consolidated quotation feed. This information is made available to investors, market participants and regulators. Pink Quote publishes a consolidated NBBO in securities that are dually-quoted in the OTCBB and requires vendors that purchase market data from it to consolidate quotations from Pink Quote and the OTCBB. FINRA’s proposal would be unlikely to significantly increase the transparency of quotation information.
Nor does STA believe that FINRA needs to be the quote consolidator for regulatory purposes. FINRA meets its regulatory responsibilities towards Pink Quote today by making use of the quote information already provided to it by that company. Pink OTC makes all of the market data generated by its inter-dealer quotation system available to FINRA as its reporting agent for all its broker dealer customers. This is done without charge to FINRA and pursuant to the requirements of existing FINRA Rule 6330.