FR 2021-02395

The document in question is a notice from MEMX LLC, a stock exchange, regarding a proposed rule change related to the submission of broker-dealer annual reports. Broker-dealers are financial service firms trading securities on their behalf or for their customers. Until now, such broker-dealers have been required to submit copies of their annual financial reports to every self-regulatory organization (SRO) they belong to. MEMX is suggesting that this requirement be waived for those broker-dealers for whom MEMX is not the Designated Examining Authority (DEA).

General Summary

The change proposes adding an interpretation to an existing MEMX rule, ensuring that only broker-dealers, for whom MEMX acts as the DEA, are required to submit their annual reports directly to the exchange. If MEMX is not the DEA, the burden of submitting these annual reports to MEMX would be waived. This is primarily because MEMX has no current interest or utility in the information within these reports for members where it is not the DEA.

Significant Issues or Concerns

One key issue with the document is its use of complex language that might be difficult for the average reader. The document is laden with legal and financial jargon, which poses comprehension challenges for non-specialists. Additionally, the text heavily references various rules and legal citations without providing comprehensive explanations, assuming prior knowledge. This makes the document less accessible to a general audience.

Furthermore, the document does not discuss any opposing views or potential negative consequences of the proposed change, which might suggest a lack of thorough consideration of possible drawbacks. There's also a notable absence of discussion regarding the financial or administrative impact of the change, leaving readers to infer these details.

Impact on the Public

Broadly, the document's proposed changes will have a limited direct impact on the general public. However, they may indirectly affect public trust and confidence in how regulatory bodies manage and oversee financial market participants. An efficient regulatory environment ensures that the financial markets operate smoothly and without unnecessary bureaucratic hindrances.

Impact on Specific Stakeholders

For broker-dealers that are members of MEMX, but not under its examination authority, the proposed change could represent a significant administrative relief. Such firms would be spared the redundancy of submitting reports to MEMX, streamlining their compliance efforts and potentially reducing administrative costs. The proposed rule change is designed to make operations more efficient by eliminating unnecessary paperwork, aligning with regulatory practices that reduce burdens where supervisory oversight is handled by another authority.

For MEMX itself, although it will receive fewer documents, it ensures it retains the right to access relevant information as needed, preserving its ability to regulate effectively without maintaining excessive records. Meanwhile, other SROs that act as DEAs will continue their oversight with all pertinent financial information required from broker-dealers, maintaining their regulatory function.

Conclusion

In conclusion, the document outlines a procedural change aimed at increasing efficiency for both MEMX and its members. Despite the lack of detailed stakeholder feedback or a thorough examination of the potential ramifications, the changes appear to streamline regulatory processes without sacrificing oversight capability. While beneficial for compliance processes within financial firms, it is essential for such proposals to be communicated in a clearer, more approachable manner to ensure understanding and transparency among all stakeholders, including the broader public.