The SEC Strengthened Markets a Year Ago. What’s Next?

September marked the first anniversary of the Securities and Exchange Commission’s (SEC) major initiative to better protect retail investors, enhance disclosures, and modernize our markets.

The SEC’s Rule 15c2-11, which governs the public quoting of over-the-counter securities, was modernized last year after decades of discussion. The rule sets baseline transparency standards, with a requirement that companies need to make current disclosures available on an ongoing basis to be publicly quoted by broker-dealers. The rule created a new oversight role for OTC Markets Group, as a Qualified IDQS, to monitor that companies are providing ongoing disclosure on a timely basis.

As the operator of the public trading venue for over 12,000 securities, we have a unique and data-driven vantage point into just how much this improved rule and our higher reporting standards are benefiting retail investors and strengthening the U.S. capital markets.

Effective September 28, 2021, retail investors were no longer able to view public quotes in securities where OTC Markets Group was unable to confirm that the company met its disclosure obligations under the rule. These “No Information” securities shifted to OTC Market Group’s Expert Market, where they are restricted from public viewing and only available to broker-dealers and other professional or sophisticated investors. Thousands of companies have chosen to comply with the Rule’s disclosure standards to retain a public quote. OTC Markets Group’s tiered market approach reflects our commitment to enhancing information for investors, incentivizing higher-quality disclosures and improved governance across our markets.

Earlier in September, in partnership with analytics firm Oxford Metrica, we released data demonstrating that increased transparency requirements add value for shareholders. Transparency and liquidity are improved when companies meet higher standards, thus incentivizing officers and directors to make current disclosure publicly available. The Oxford Metrica study concluded that, since the rule’s effective date we have seen a 16.7% gain in value for issuers on our highest-tiered markets, OTCQX and OTCQB.

Policymakers and regulators should take credit for the success of this rule in the OTC equities space with an eye toward the future. Rule 15c2-11 can be leveraged across other asset classes to support better informed and more efficient markets that promote small business capital formation and help every American investor share in our country’s economic success.

Last summer, the fixed income industry was taken aback when the SEC clarified that Rule 15c2-11 applied not only to equities, but to all securities, including fixed income products. The fixed income market continues to wrestle with the application of Rule 15c2-11 under the Commission’s No-Action guidance. The fixed income industry can benefit from the lessons that we learned from applying this enhanced disclosure and compliance framework to over 12,000 securities traded on our markets. In preparation, compliance and risk management teams should look to OTC Markets Group for expertise and compliance data offerings to integrate into daily operations.

As more digital assets seek to comply with securities laws, the SEC and the crypto industry can apply Rule 15c2-11 to formalize the rules-of -the road for secondary trading in certain digital assets. With appropriately tailored disclosure requirements that set a baseline for investor information and clear interpretative guidance, the SEC can enhance market transparency and provide greater regulatory clarity for digital asset securities.

OTC Markets Group commends the SEC for its efforts to strengthen regulation, protect investors and ensure the U.S. capital markets remain the envy of the world. We look forward to continuing to partner with regulators and lawmakers as Washington looks to further modernize our markets and jumpstart capital formation in communities across the country.

Originally published by RealClearMarkets.

Learn more about the amended SEC Rule 15c-211.


R. Cromwell Coulson is President, CEO and a Director of OTC Markets Group, responsible for the company’s overall growth and strategic direction. Since leading the acquisition of OTC Markets’ predecessor business in 1997, Cromwell has transformed the company from a privately-held publisher of broker-dealer quotations into a publicly-traded company operating three public markets for 12,000 securities that trade nearly $445 billion in dollar volume annually. Cromwell is a strong advocate of improving capital formation, supporting a diverse ecosystem of broker-dealers, and empowering investors with increased disclosure and transparency. He has testified before Congress and spoken on these and other issues at numerous industry conferences. Cromwell is currently the Co-chair of the STANY Market Structure Committee and a former Chair (2017-2018) of the FINRA Market Regulation Committee that advises FINRA on rulemaking and trading issues. Prior to OTC Markets, Cromwell was an institutional trader and portfolio manager at Carr Securities Corporation. He holds an OPM from Harvard Business School and received his BBA from Southern Methodist University.

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