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2 meetings related to this legislation
Removes SEC Rule 15c2–11 from applying to quotations in over‑the‑counter fixed‑income securities and sets a broad statutory definition of “fixed‑income security” that covers notes, bonds, debentures, certificates of deposit, asset‑backed securities, and debt instruments that are convertible into or include warrants/rights to buy equity. In short, broker‑dealers would not need to meet the Rule 15c2–11 information/issuer‑review obligations before publishing quotes for the defined fixed‑income instruments.
On September 16, 2020, the Securities and Exchange Commission adopted a final rule amending Rule 15c2–11 under the Securities Exchange Act of 1934, which addresses disclosures in OTC markets and imposes requirements on broker-dealers who publish quotations in those markets.
Rule 15c2–11 was promulgated in 1971 and has generally been understood to apply to OTC equity markets since that time.
The 2020 amendments to Rule 15c2–11 were based on economic analysis of OTC equity markets.
The fixed-income markets are different in structure and function than OTC equity markets.
The fixed-income markets are critical to the ability of thousands of businesses to raise capital.
Who is affected and how:
Broker‑dealers, market makers, and fixed‑income dealers: The bill directly reduces the regulatory compliance steps required to publish quotes for the defined fixed‑income instruments. That can lower legal and operational costs and speed quoting and trading activity in OTC debt markets.
Issuers of debt (corporates, securitizers, municipal borrowers): Issuers may find it easier for dealers to quote and trade their debt, potentially improving secondary market liquidity. At the same time, the statutory change may reduce incentives for dealers to collect or publish issuer information tied to a quotation.
Investors and retail purchasers of OTC fixed‑income instruments: Some investors could benefit from better liquidity and potentially narrower spreads. However, removing Rule 15c2–11’s applicability may reduce pre‑trade issuer information tied to published quotes, which could increase informational risk for less sophisticated buyers.
Secondary market/platform operators and trading venues: OTC platforms that host bond or other debt trading may see increased activity; they may also need to revisit internal policies about required issuer disclosures or quote review to manage compliance and reputational risk.
Securities regulators and self‑regulatory organizations: The SEC and SROs (e.g., FINRA) may face pressure to adjust guidance, oversight, or reporting expectations for OTC debt if one federal rule no longer governs quotations. Enforcement and market‑surveillance priorities may shift to address any gaps.
Overall trade‑offs: The bill favors market‑access and lower compliance costs for dealers and potentially greater liquidity, at the expense of removing a uniform broker‑dealer verification layer designed to reduce blind or fraudulent quotations. The net effect will depend on market participants’ voluntary disclosure practices and any subsequent SEC or SRO responses to preserve investor protection and market integrity.
Referred to the House Committee on Financial Services.
Last progress June 12, 2025 (8 months ago)
Introduced on June 12, 2025 by Troy Downing