Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Rule 11Ac1-6 -- Disclosure of Order Routing Information

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1. Definitions.For purposes of this section:
   
   

   1. The term covered security shall mean:
      
      
      1. Any national market system security and any other security for which a transaction report, last sale data or quotation information is disseminated through an automated quotation system as defined in Section 3(a)(51)(A)(ii) of the Act; and
         
         
      2. Any option contract traded on a national securities exchange for which last sale reports and quotation information are made available pursuant to an effective national market system plan.
         
         
   2. The term customer order shall mean an order to buy or sell a covered security that is not for the account of a broker or dealer, but shall not include any order for a quantity of a security having a market value of at least $ 50,000 for a covered security that is an option contract and a market value of at least $ 200,000 for any other covered security.
      
      
   3. The term directed order shall mean a customer order that the customer specifically instructed the broker or dealer to route to a particular venue for execution.
      
      
   4. The term make publicly available shall mean posting on an Internet web site that is free and readily accessible to the public, furnishing a written copy to customers on request without charge, and notifying customers at least annually in writing that a written copy will be furnished on request.
      
      
   5. The term non-directed order shall mean any customer order other than a directed order.
      
      
   6. The term effective national market system plan shall have the meaning provided in Rule 11Aa3-2(a)(2).
      
      
   7. The term national market system security shall have the meaning provided in Rule 11Aa2-1.
      
      
   8. The term payment for order flow shall have the meaning provided in Rule 10b-10(d)(9).
      
      
   9. The term profit-sharing relationship shall mean any ownership or other type of affiliation under which the broker or dealer, directly or indirectly, may share in any profits that may be derived from the execution of non-directed orders.
      
      
   10. The term time of the transaction shall have the meaning provided in Rule 10b-10(d)(3).
       
       
2. Quarterly report on order routing.
   1. Every broker or dealer shall make publicly available for each calendar quarter a report on its routing of non-directed orders in covered securities during that quarter. For covered securities other than option contracts, such report shall be divided into three separate sections for securities that are listed on the New York Stock Exchange, Inc., securities that are qualified for inclusion in the Nasdaq Stock Market, Inc., and securities that are listed on the American Stock Exchange LLC or any other national securities exchange. Such report also shall include a separate section for covered securities that are option contracts. Each of the four sections in a report shall include the following information:
      
      
      1. The percentage of total customer orders for the section that were non-directed orders, and the percentages of total non-directed orders for the section that were market orders, limit orders, and other orders;
         
         
      2. The identity of the ten venues to which the largest number of total non-directed orders for the section were routed for execution and of any venue to which five percent or more of non-directed orders were routed for execution, the percentage of total non-directed orders for the section routed to the venue, and the percentages of total non-directed market orders, total non-directed limit orders, and total non-directed other orders for the section that were routed to the venue; and
         
         
      3. A discussion of the material aspects of the broker's or dealer's relationship with each venue identified pursuant to paragraph (b)(1)(ii) of this section, including a description of any arrangement for payment for order flow and any profit-sharing relationship.
         
         
   2. A broker or dealer shall make the report required by paragraph (b)(1) of this section publicly available within one month after the end of the quarter addressed in the report.
      
      
3. Customer requests for information on order routing.
   1. Every broker or dealer shall, on request of a customer, disclose to its customer the identity of the venue to which the customer's orders were routed for execution in the six months prior to the request, whether the orders were directed orders or non-directed orders, and the time of the transactions, if any, that resulted from such orders.
      
      
   2. A broker or dealer shall notify customers in writing at least annually of the availability on request of the information specified in paragraph (c)(1) of this section.
      
      
4. Exemptions. The Commission may, by order upon application, conditionally or unconditionally exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision or provisions of this section, if the Commission determines that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.

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