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June 18, 2008

Foreign Stocks Go Real-Time

By Peter Chapman

The Financial Industry Regulatory Authority, under pressure from the over-the-counter trading community, has asked the Securities and Exchange Commission for permission to report OTC trades in foreign securities in real time.

FINRA's proposed changes to NASD Rule 6620 follow a three-year campaign by Pink OTC Markets and the Security Traders Association to require it to disseminate the last-sale reports as soon as the trades are reported by dealers. Now, the regulator only reports a summary of trading activity at the end of the day.

The proposal would also require dealers to report all trades in foreign securities within 90 seconds. FINRA notes, though, that the vast majority of these trades are already reported within 90 seconds. The two changes to Rule 6620 would "substantially improve the transparency of the OTC market," FINRA informed the SEC in a filing.

That may be the problem. In the past, the SEC has opposed more transparency for ADRs and other foreign securities traded over the counter--and not registered with the SEC--out of concern that retail investors shouldn't get involved with unregistered foreign securities.

Pink OTC and the traders of its securities are in favor of real-time dissemination of last-sale reports in foreign OTC names because they believe trading volume will grow.

The news of FINRA's proposal was greeted with optimism at the New York headquarters of Pink OTC Markets. "As you can see, FINRA wants transparency in this space," Cromwell Coulson, chief executive of Pink OTC, said, "so I would expect it to happen. It's just a matter of time."

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