SEC Division of Trading and Markets no-action letter: Omgeo LLC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

DIVISION OF
TRADING AND MARKETS
November 19,2010
Nonnan Reed, Esq.
General Counsel
OmgeoLLC
55 Water Street
New York, NY
Re: Omgeo LLC
Dear Mr. Reed:
In your letter dated November 19, 2010, on behalf of OmgeoI you request that the Division clarify that Omgeo's Broker-Dealer Participants that rely on TradeSuite to satisfy their confinnation delivery obligations to their Institutional Customers could still rely on the Division's March 12,2008 Response Letter granting no-action relief under Rule IOb-IO(a) if Broker-Dealer Participants relying on TradeSuite 7.1 provide the Additional Disclosures through free fonn text on TradeSuite confinnations, as well as through dedicated fields that are currently available solely in TradeSuite 7.1 but not available in Prior Versions of TradeSuite. In the March 12,2008 Response Letter, the Division stated that, based on the facts and representations set forth in Omgeo's March 11,2008 Request Letter, it would not recommend enforcement action to the Commission under Rule IOb-IO ifBroker-Dealer Participants rely on TradeSuite to satisfy their confinnation delivery requirements to their Institutional Customers where the disclosures that are customarily provided on the back ofpaper confinnations are electronically provided. In footnote 4 ofOmgeo's March 11,2008 Request Letter, Omgeo represented that as ofMarch 11,2008, TradeSuite included the Previously Existing Dedicated Fields and would include the Additional Dedicated Fields by the end ofthe first quarter of2009. Until the Additional Dedicated Fields were added, Omgeo stated that Broker-Dealer Participants would use free fonn text to disclose the infonnation that would be included in the Additional Dedicated Fields. Omgeo further stated that, after the end ofthe first quarter of2009, its understanding was that Broker-Dealer Participants would use the Dedicated Fields to disclose all ofthe infonnation required under Rule 1Ob-l 0, as applicable. Although Omgeo included the Additional Dedicated Fields by the end ofthe first quarter of 2009 in TradeSuite 7.1, not all Broker-Dealer Participants or Institutional Customers upgraded Unless otherwise noted, each defined term in this letter has the same meaning as defined, directly or by reference, in your letter.

Mr. Norman Reed, Esq.

November 19,2010

to the new version of TradeSuite. In particular, you note that while a Broker-Dealer Participant may have upgraded to TradeSuite 7.1, its Institutional Customer may be using a Prior Version of TradeSuite, resulting in the Institutional Customer not being able to view the information providedin the Additional Dedicated Fields, when applicable. Accordingly, Omgeo requests thatthe Division clarify that Broker-Dealer Participants that use TradeSuite 7.1 may rely on the March 12, 2008 Response Letter if they send to all Institutional Customers confirmations . containing the Additional Disclosures both in free form text and in the Additional Dedicated Fields ofTradeSuite 7.1. As discussed, we aretreating your letter as a request for amodification , ofthe facts and representations relied on by the Division when it issued the March 12,2008 Response Letter. Based on the facts and representations set forth in your letter, the Division will not recommend enforcement action to the Commission under Exchange Act Rule 1Ob-l 0 if Broker￾Dealer Participants using TradeSuite 7.1 send to their Institutional Customers confirmations containing the Additional Disclosures both in free form text and in the Additional Dedicated Fields, in reliance on the March 12,2008 Response Letter. This response expresses the Division's position regarding enforcement action only and does not purport to express any legal conclusions with respect to the applicability ofthe statutory or regulatory provisions ofthe federal securities laws or any self-regulatory organization rules to Omgeo, Broker-Dealer Participants or Institutional Customers. Moreover, this response IS based solely on the facts and representations you have made, and any different facts or conditions may require a different response. . In addition, the Division notes that the Commission has long taken the view that broker-dealers may use electronicinedia to satisfy their Rule IOb-10 delivery obligations,2 provided that the medium used to send the information is not so "burdensome that the intended recipients cannot effectively access the information provided.,,3 In this respect, we emphasize that broker-dealers relying on a vendor's electronic platform to fulfill their Rule 10b-10 obligations must ensure that their customers can effectively access all ofthe information required by Rule 1Oh-l 0 ina format that is understandable but not burdensome for the customer to access. To the extent that this is not the case, broker-dealers may not be able to rely on that vendor's electronic platform to fulfill their Rule IOb-10 obligations. Sincerely, rA.~ James A. Brigagliano Deputy Director See Use ofElectronic Media by Broker-Dealers, Transfer Agents and Irrvestment Advisers for Delivery of Information, Securities Exchange Act Release No. 37182 (May 9, 1996),61 FR 24644 (May 15, 1996). Id at 24646-47. 2

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omgeo
Shaping STP'''' Norman M. Reed Omgeo Tel 212855.3244 General Counsel 55 Water Street Fax 212.855.3215 22nd Floor www.omgeo.com New York, NY 10041 November 19, 2010 James A. Brigag1iano, Esq. Deputy Director Division of Trading & Markets Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 Re: Omgeo LLC Dear Mr. Brigagliano:
Omgeo LLC ("Omgeo") requests that the staff ofthe Division ofTrading & Markets ("Division") of the Securities and Exchange Commission ("SEC" or "Commission") issue an interpretation clarifying that Omgeo's broker-dealer customers ("Broker-Dealer Participants"), which rely on Omgeo's TradeSuite service ("TradeSuite") to satisfy their confirmation delivery obligations to their institutional customers (each, an "Institutional Customer"), are in compliance with the Division's March 12, 2008 letter ("March 12,2008 Response Letter") granting no￾action relief under Rule 10b-10(a) under the Securities Exchange Act of 1934 ("Exchange Act"), I ifBroker-Dealer Participants rely on TradeSuite version 7.1 ("TradeSuite 7.1") to provide certain disclosures (the "Additional Disclosures"i through free form text on TradeSuite confirmations, as well as through dedicated fields that are currently available solely in TradeSuite 7.1, but are not available in versions ofTradeSuite prior to TradeSuite 7.1 ("Prior Versions of TradeSuite"). Omgeo's Request In the March 12, 2008 Response Letter, the Division stated that, based on the facts and representations in Omgeo's request letter dated March 11, 2008 ("Omgeo's March 11, 2008 Request Letter"), the Division would not recommend enforcement action to the Commission under Exchange Act Rule 10b-10 against Omgeo's Broker-Dealer Participants ifthey rely on 1 Letterre: Omgeo (March 12, 2008). 2 The Additional Disclosures are: (1) "mixed capacity," and "principal, agent and agent for another;" (2) third-party remuneration received; (3) markup/markdown; (4) current yield; (5) yield to maturity; and (6) yield to call. . A DTCaThomson Financial Company

James A. Brigagliano, Esq.
November 19, 2010
TradeSuite to satisfy their confirmation delivery obligations to Institutional Customers under Rule lOb-lOCal where the disclosures customarily provided on the back of paper confirmations are provided electronically, as discussed in Omgeo's March 11, 2008 Request Letter. In footnote 4 ofOmgeo's March 11, 2008 Request Letter, Omgeo stated that as of the date ofOmgeo's March 11, 2008 Request Letter, TradeSuite currently included dedicated fields disclosing specified information, where applicable ("Previously Existing Dedicated Fields,,).3 Omgeo also stated that it would add certain dedicated fields ("Additional Dedicated Fields," with the Previously Existing Dedicated Fields, the "Dedicated Fields") to provide the Additional Disclosures by the end ofthe first quarter of2009. 4 Omgeo's March 11, 2008 Request Letter stated that Broker-Dealer Participants may use free form text to disclose the information to be added by the Additional Dedicated Fields until the end of the first quarter of2009, but that after the first quarter of2009, Omgeo understood that Broker-Dealer Participants would be using Dedicated Fields (including the Additional Dedicated Fields) to disclose information required by Rule 1Ob-1 0 where such Dedicated Fields were available. Omgeo added the Additional Dedicated Fields by the end ofthe first quarter of2009 by introducing a new version ofTradeSuite, TradeSuite 7.1. Prior Versions ofTradeSuite contained the Previously Existing Dedicated Fields, but they did not include the Additional Dedicated Fields. Broker-Dealer Participants relying on Prior Versions of TradeSuite therefore had to upgrade to TradeSuite 7.1 to disclose the Additional Disclosures through the Additional Dedicated Fields by the end of the first quarter of2009 in order to be in compliance with the March 12, 2008 Response Letter. Although some Broker-Dealer Participants upgraded to TradeSuite 7.1 by the end of the first quarter of2009, many oftheir Institutional Customers continued to receive TradeSuite confirmations using Prior Versions of TradeSuite, rather than upgrading to TradeSuite 7.1. As a

• result, these Institutional Customers were not able to review the Additional Disclosures through
  the Additional Dedicated Fields, because the Additional Dedicated Fields were not available in Prior Versions ofTradeSuite. Omgeo therefore requests that the Division clarify that Broker￾Dealer Participants may rely on TradeSuite 7.1 to send confirmations containing the Additional Disclosures in both free form text, as well as through the Additional Dedicated Fields, where 3 The Previously Existing Dedicated Fields available through TradeSuite as of March 11, 2008 were: (1) trade date; (2) identity of the security; (3) price; (4) shares, units or principal amount; (5) capacity; (6) conunission; (7) reported price; (8) debt security subject to redemption prior to maturity; (9) dollar price (where debt security transaction effected on the basis of yield; (10) non-governmental debt security not rated by a nationally recogoized statistical rating organization; (11) market maker status; (12) non-S1Pe membership; and (13) time of the transaction. 4 The Additional Dedicated Fields contain the Additional Disclosures, see fn. 2, supra.

James A. Brigagliano, Esq.
November 19, 2010 their Institutional Customers rely on Prior Versions of TradeSuite to receive TradeSuite confirmations in reliance on the March 12, 2008 Response Letter.5 Providing this clarification would be consistent with prior Division positions regarding the use of TradeSuite since at least 1974, when the Division first explicitly permitted The Depository Trust Company ("DTC") to confirm broker-dealer transactions using DTC ID, TradeSuite's predecessor, including via wire transfer.6 This relief was expanded nine years later, to explicitly permit DTC to send ID confirmations on behalf of its broker-dealer participants through a variety of electronic means in satisfaction ofRule 10b-lO.' Omgeo notes that those prior letters did not explicitly require use of dedicated fields to provide disclosures required by Rule 1Ob-l 08 . We note also that under this proposed modification to facts and representations relief on by the Division when it issued the March 12,2008 Response Letter, Institutional Customers would still receive all ofthe disclosures required by Rule 1Ob-l 0 during the period of time before Omgeo discontinues the Prior Versions of TradeSuite. We welcome the opportunity to discuss this request for clarification with you. If you have any questions regarding this matter, please call me at 212-855-3244 or our outside counsel, Jack Drogin of Schiff, Hardin LLP at 202-778-6422. On behalfofOmgeo, we appreciate the Division's consideration of this matter. Sincerely, :J~?;?7 12cJ Norman M. Reed General Counsel cc: Paula R. Jenson Joseph Furey Daniel Fisher Ignacio A. Sandoval 5 In this respect, Omgeo notes that it will cease supporting Prior Versions of TradeSuite for Broker-Dealer Participants and Institutional Customers by July 15, 2011. 6 See letter re: The Depository Trust Company (October 29, 1974). 7 See letter re: The Depository Trust Company (January 31, 1983). 8 See, also, letter re: Society for Worldwide Interbank Financial Telecommunication (May 27,
2010) (where use of dedicated fields was not required for compliance with Rule 1Ob-1O).