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SEC Grants Accelerated Approval to FINRA Rule Amendment Regarding Minimum Quotation Size Requirements for OTC Equity Securities

On June 15, 2012, the SEC granted accelerated approval to an amendment to FINRA rule 6433 related to the minimum quotation size for OTC equity securities.  Rule 6433 applies to all market makers.  Rule 6433 sets forth the specific minimum quotation size requirements in tiers that are based on the price of the OTC equity security being quoted by the market maker.  In addition, the rule change will require market makers to publish customer limit orders.

The new rule amends and lowers the current 9 tier quotation size requirements to 6 tiers as follows:

  • $175.00 per share and above, the minimum quotation size would be 1 share;
  • $1.00 through $174.99 per share, the minimum quotation size would be 100 shares;
  • $0.51 through $0.9999 per share, the minimum quotation size would be 1,000 shares;
  • $0.20 through $0.5099 per share, the minimum quotation size would be 2,500 shares;
  • $0.10 through $0.1999 per share, the minimum quotation size would be 5,000 shares;
  • $0.0001 through $0.0999 per share, the minimum quotation size would be 10,000 shares.

FINRA believes the new tier system will result in greater liquidity in over the counter securities and in the publication of upwards of 95% of customer limit orders.

In addition, the amendment expands the scope of the Rule to apply to all quotations or orders displayed in an inter-dealer quotation system, including quotations displayed by alternative trading systems (“ATSs”) or by non-market maker members representing customer trading interest.  OTC Link, operated by otcmarkets.com (i.e. PinkSheets, OTCQB and OTCQX) is an ATS and accordingly, upon the effective date will be bound by the minimum quotation size and customer limit order publication requirements.  The effective date is scheduled for between 120 and 180 days following the SEC approval date.


FINRA initially filed a proposed amendment to Rule 6433 with the SEC on October 6, 2011.   The proposed rule change is intended to simplify the Rule’s price and size tiers; facilitate the display of customer limit orders under FINRA Rule 6460;and expand the scope of the Rule.  As a result of comments, FINRA filed amendments 1 and 2 to the proposed rule change.  On June 15, 2012, the SEC granted accelerated approval to the proposed rule change, as modified by the two amendments.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the over the counter market including the OTCBB and OTCQB. For almost two decades Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to crowdfunding, registration statements, PIPE transactions, private placements, reverse mergers, and compliance with the reporting requirements of the Securities Exchange Act of 1934 including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SRO’s such as FINRA and DTC for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.

© Legal & Compliance, LLC 2012

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