The Financial Industry Regulatory Authority has scrapped a deal to sell its OTC Bulletin Board trademark and other assets to Rodman & Renshaw Capital Group. As a result, FINRA will continue to operate its quotations system for over-the-counter securities under the OTCBB name.
The decision, revealed in a regulatory filing, follows a decision by Rodman & Renshaw in May change its name to Direct Markets Holdings Corp., and focus on its DirectMarkets securities issuance platform. In September, Rodman & Renshaw said it would withdraw from the brokerage business.
The deal with FINRA, originally announced by Rodman in September 2010, involved the acquisition of the OTCBB trademark, the operation’s Internet address and content on the OTCBB Web site. A price was never disclosed.
Rodman’s plan was to create a trading system for OTC securities that would compete with the dominant system OTC Markets’ OTC Link ATS.
In August of last year, Rodman hired two industry veterans to run its OTCBB, describing the system as a “trading alternative to the current market for unlisted securities.” Rodman hired Eric Hess from the Direct Edge stock exchange to be OTCBB’s chief executive officer and Carl Giangrasso, a long time OTC Markets executive, to be OTCBB’s chief operating officer.
FINRA had planned to hold onto the quotations publishing business of OTCBB and rename it “Non-NMS Quotation Service,” or NNMS. That plan has been scrapped, according to the filing. FINRA will continue to run its quotes business as OTCBB.
FINRA has run the OTCBB for many years in competition with OTC Markets, formerly known as Pink Sheets. FINRA’s quotation system, however, has lost considerable ground to OTC Markets as market makers have moved most of their quoting over to OTC Markets’ system.
Both FINRA and OTC Markets supply investors with information about over-the-counter companies as well as collect quotes from dealers and disseminate them to market data firms. FINRA is also engaged in a battle with OTC Markets to take over the latter’s quote dissemination service, arguing a single consolidated quotation would best serve the market as well as FINRA’s surveillance needs.
The FINRA/Rodman deal, which needed Securities and Exchange Commission approval, was publicly criticized by OTC Markets, as well as Roth Capital Partners, a Rodman competitor.
Roth told the SEC in a letter the deal would give Rodman an advantage over competitors, as the OTCBB is a well-known brand. The use of the OTCBB name by Rodman to promote its own offerings could also mislead investors, Roth said, as investors might assume the offerings had the blessing of FINRA.
Rodman & Renshaw, a publicly listed company, changed its name to Direct Markets Holdings Corp., in May.
The company was listed on Nasdaq under the “MKTS” symbol until September when it voluntarily delisted itself. Prices for the stock are now available via OTC Markets’ although no market makers are quoting the stock. Shares are trading at about a penny.
