Two of the criticisms of the earlier proposal were that the brokers’ broker could not notify a bidder about an erroneous bid without the consent of the seller and that the brokers’ broker would have to determine whether a bid was fair and reasonable. The earlier proposal would not have provided clear, objective criteria about when a dealer would be considered a brokers’ broker and would classify alternative trading systems as brokers’ brokers.
The MSRB’s new proposal would require brokers’ brokers to set up predetermined parameters in order for the brokers’ broker to take advantage of the safe harbor. The safe harbor would provide that a broker’s broker that conducted bid-wanteds and offerings in the manner would have satisfied its pricing duty. The predetermined parameters would determine whether the brokers’ broker could contact a bidder about an erroneous bid without first getting the permission of the seller.
A broker’s broker would be required to notify the seller if the highest bid received in a bid-wanted was below the predetermined parameters and receive the seller’s oral or written consent before proceeding with the trade. The selling dealer would then need to satisfy itself that the high bid was, in fact, fair and reasonable.
The new proposal does not clarify the definition of brokers’ broker and continues to classify ATS as brokers’ brokers.
The full MSRB notice is available here. Comments are due November 3, 2011.
