FINRA Rule 6625

A dedicated search for third-party and regulatory commentary found that Rule 6625 itself generates relatively little independent discussion, but its TRACE counterpart, Rule 6732, has a materially richer and more recent amendment history worth understanding by direct comparison. FINRA amended Rule 6732 effective October 3, 2022, under SR-FINRA-2021-029, to expand its scope from requiring trades between two FINRA members to permitting the exemption for transactions involving only one FINRA member other than the ATS, such as a transaction between a member subscriber and a bank. Rule 6625 has not received a parallel expansion; it continues to require that trades be between ATS subscribers that are both FINRA members, meaning the OTC equity exemption remains narrower in scope than its debt market counterpart as of the most recent confirmed rule text.

The Core Exemption Criteria

Rule 6625 sets out five cumulative conditions that must all be satisfied before FINRA staff will grant the exemption. First, trades must occur between ATS subscribers that are both FINRA members; a transaction involving a non-member subscriber does not qualify under the current text of this rule. Second, the system must not permit automatic execution, and a member subscriber must take affirmative steps beyond merely submitting an order to agree to a trade with another member subscriber, meaning the exemption is designed for negotiated trading arrangements rather than continuously matched, algorithmically executed trading.

Third, the trade must not pass through any ATS account, and the ATS must not in any way hold itself out to be a party to the trade. Fourth, the ATS and its member subscribers must acknowledge and agree in writing that the ATS will not be deemed a party to the trade for trade reporting purposes, and that the trade will instead be reported by whichever member subscriber, as between the two, satisfies the definition of "executing party" under FINRA's trade reporting rules. Fifth, the ATS must agree to provide FINRA, on a monthly basis or such other basis as FINRA prescribes, data relating to the volume of trades by security executed by its member subscribers using the ATS's system.

FINRA has been explicit about the consequence of failing to satisfy the fifth condition on an ongoing basis: an ATS's failure to report this volume data to FINRA, beyond constituting an independent violation of FINRA rules, will result in revocation of any exemption previously granted under this rule. The exemption is therefore conditional and continuing, not a one-time determination that survives regardless of subsequent compliance failures.

The Public Disclosure Requirement

Rule 6625 imposes an additional, less frequently discussed obligation as part of the exemption: the ATS must provide FINRA with a link to a public website containing, at no charge and in a format substantially similar to the ATS Trading Information FINRA itself publishes under Rule 6110, the ATS's own trading information for OTC Equity Securities. This means an exempted ATS does not escape transparency obligations by receiving the Rule 6625 exemption; it instead assumes responsibility for publishing broadly comparable data itself, on its own public-facing website, rather than having FINRA publish that data on the ATS's behalf through the ordinary Rule 6610(c) mechanism.

This requirement reflects a deliberate policy choice: FINRA's exemption relieves the ATS of the mechanical trade reporting obligation under Rule 6622(b), shifting that specific task to the member subscribers themselves, but it does not relieve the ATS of the broader market transparency function that underlies FINRA's OTC Transparency initiative generally. An ATS seeking this exemption should recognize that it is trading one compliance obligation for another rather than eliminating a compliance burden altogether.

What Counts as Volume "Within" the ATS

A frequently misunderstood aspect of Rule 6625, addressed directly in FINRA's own guidance, concerns how a firm calculates the volume that continues to count as executed "within" the ATS for Rule 6110 and Rule 6610 volume-reporting purposes, even where the Rule 6625 exemption has been granted. This calculation includes, without limitation, any trade executed as a result of the ATS bringing together the purchaser and seller on or through its own systems, any trade executed by the ATS's subscribers where those subscribers used the ATS to negotiate the trade even if the ATS itself did not execute it, and any trade in which the ATS takes either side for clearing or settlement purposes or otherwise inserts itself into the transaction, such as by exchanging securities or funds on behalf of one or both subscribers.

By contrast, if an ATS routes an order to another member firm or execution venue for handling, and that order matches against interest resident at that other venue rather than within the ATS itself, the ATS is not considered the executing party for that trade and does not include that volume in its own reporting. This distinction matters because it means an ATS cannot use the Rule 6625 exemption, or the underlying reporting relief it provides, as a basis for excluding trading activity from its published volume figures simply because the mechanical trade report is being filed by a member subscriber rather than by the ATS itself; the underlying economic activity still counts as ATS volume for transparency purposes even when the reporting task has shifted elsewhere.

Comparison Across the Three Parallel Exemption Rules

Understanding how Rule 6625 relates to Rule 6183 and Rule 6732 helps clarify what is, and is not, unique to the OTC equity context. All three rules share the same foundational structure: an application-based exemption granted under the Rule 9600 Series, a requirement that the underlying trading arrangement be genuinely negotiated rather than automatically executed, a written acknowledgment shifting the reporting obligation to the member subscribers, and a continuing data-reporting obligation to FINRA as a condition of maintaining the exemption. Where the three rules diverge is in eligibility scope and in the specific fee and reporting mechanics tied to each underlying market.

Rule 6732's 2022 expansion to permit transactions involving only one FINRA member reflects the debt market's distinct participant base, where non-member entities such as banks routinely transact alongside FINRA member broker-dealers in ways that are less common in the OTC equity market Rule 6625 addresses. Rule 6732 also carries a distinctive fee mechanism absent from Rule 6625: an ATS relying on the Rule 6732 exemption must remit to FINRA a transaction reporting fee under Rule 7730(b)(1) for each exempted sell transaction, and must identify the exempted trade using the ATS's own separate MPID. Rule 6625 imposes no equivalent per-transaction fee obligation on the ATS itself, since the underlying OTC equity trade reporting fee structure operates differently from TRACE's debt-market fee schedule.

The Rule 9600 Application Process

Rule 6625's exemption is not self-executing; it operates through the procedural framework set out in the Rule 9600 Series, FINRA's general mechanism for handling exemptive applications across many different rules. An ATS seeking this exemption must submit a written application to FINRA staff, and the staff evaluates that application for good cause shown after considering all relevant factors, rather than applying a fixed checklist alone. This means satisfying the five enumerated criteria in Rule 6625 is a necessary condition for the exemption, but it is not automatically sufficient; FINRA staff retains discretion to deny an application even where the stated criteria appear to be met, if broader investor protection or public interest concerns counsel against granting relief.

This discretionary structure has practical consequences for how an ATS should approach the application. Rather than treating the five criteria as a mechanical compliance checklist to satisfy and then submit, an ATS benefits from presenting FINRA staff with a clear narrative explaining why its particular trading model justifies shifting the reporting obligation to member subscribers, what safeguards exist to ensure those subscribers will in fact report accurately and on time, and how the ATS's own proposed public disclosure will provide transparency genuinely comparable to what FINRA would otherwise publish under Rule 6610. An application that addresses only the letter of the five criteria without this broader context is more likely to face follow-up questions or delay than one that anticipates the underlying policy concerns FINRA staff is evaluating.

Because the exemption is granted upon application and subject to specified terms and conditions, FINRA staff may also tailor the relief to the specific ATS requesting it, potentially imposing additional conditions beyond the five baseline criteria if circumstances warrant. An ATS should not assume that another ATS's previously granted exemption, even one operating a superficially similar trading model, guarantees identical treatment; each application is evaluated on its own facts, and the specific terms and conditions FINRA staff attaches to any given grant may differ accordingly.

Ongoing Compliance and Periodic Review

An ATS that has been granted a Rule 6625 exemption does not receive a permanent, self-monitoring status. The monthly volume reporting obligation under the fourth criterion functions as a continuing compliance checkpoint, giving FINRA regular visibility into the ATS's ongoing trading activity and creating a natural point at which staff can identify irregularities warranting further inquiry. An ATS that experiences a material change in its trading model after the exemption is granted, for example by introducing an automated matching function where none previously existed, should recognize that such a change could itself jeopardize continued eligibility for the exemption, since automatic execution is explicitly disqualifying under the second criterion.

Firms relying on an exempted ATS as subscribers should likewise treat their own reporting obligations under the exemption as an ongoing responsibility requiring periodic reassessment rather than a one-time onboarding exercise. A subscriber that correctly reported trades under the exemption at the outset of its relationship with the ATS should periodically confirm that the underlying written agreement contemplated by Rule 6625(a)(3) remains accurate and that no changes to the ATS's operations or the subscriber's own trading arrangement have altered which party actually satisfies the "executing party" definition for a given transaction type.

Series 7 and SIE Relevance

The SIE does not test Rule 6625 or its counterparts, since exemptive relief mechanisms of this kind fall outside the exam's introductory coverage of market structure. Series 7 candidates are not expected to know the specific exemption criteria, though a general awareness that alternative trading systems operate under specialized FINRA rules distinct from ordinary broker-dealer trade reporting obligations provides useful background context for understanding ATS-related questions elsewhere on the exam.

Series 63 and Series 65 Relevance

Series 63 and Series 65 candidates do not need this rule at any operative level. These exams address state securities registration and investment adviser fiduciary standards rather than FINRA's facility-specific exemptive relief mechanisms, and candidates preparing for either exam can disregard Rule 6625 entirely.

Series 24 Relevance

Series 24 candidates, particularly those responsible for supervising an ATS or advising an ATS operator on regulatory strategy, should understand Rule 6625 as a genuine compliance choice with real tradeoffs rather than a purely beneficial exemption. A principal evaluating whether to seek this exemption on behalf of an ATS needs to weigh the operational relief of shifting mechanical trade reporting to member subscribers against the ATS's new obligation to independently publish comparable trading information on its own public website, along with the ongoing risk that a lapse in monthly volume reporting to FINRA will trigger automatic revocation of the exemption.

Series 24 candidates should also be able to explain to ATS operators why volume executed through negotiated, ATS-facilitated trading still counts toward the ATS's own published volume figures even after the Rule 6625 exemption has been granted, since this is a point of genuine confusion for ATS operators who may mistakenly believe the exemption removes their trading activity from FINRA's transparency framework entirely rather than merely reallocating which party performs the mechanical reporting task.

Series 57 Relevance

Series 57 candidates should understand the mechanical consequence of a Rule 6625 exemption at the trade level: once granted, the member subscriber that satisfies the "executing party" definition, rather than the ATS itself, bears the actual trade reporting obligation under Rule 6622. Series 57 candidates working at a firm that subscribes to an exempted ATS should know that their own firm, not the ATS, may be the party legally responsible for timely and accurate trade reporting on a given negotiated transaction, a responsibility that could otherwise be mistakenly assumed to rest with the ATS operating the platform.

Series 57 candidates should also be able to distinguish this rule from its close relatives, recognizing that Rule 6625 governs OTC Equity Securities specifically, Rule 6183 governs the ADF and Trade Reporting Facility context, and Rule 6732 governs TRACE-eligible debt securities, with the debt market version alone having been expanded in 2022 to accommodate transactions involving a single FINRA member rather than two.

Relevance to Working Financial Services Professionals

For an ATS operator's compliance and legal team, Rule 6625 represents a genuine strategic decision point rather than a default posture to pursue automatically. An ATS handling primarily negotiated, non-automated trading between FINRA member subscribers may find real operational benefit in shifting mechanical trade reporting to those subscribers, but that benefit comes paired with a continuing obligation to maintain and publicly host comparable trading information, along with exposure to automatic exemption revocation if monthly volume reporting to FINRA lapses even briefly.

Firms operating as subscribers to an exempted ATS should ensure their own trade reporting supervisory procedures explicitly address transactions executed on that ATS, since the exemption shifts genuine legal responsibility for timely and accurate reporting onto the subscriber rather than leaving it with the platform operator. A firm that assumes an exempted ATS handles trade reporting on its behalf, without confirming that assumption against the specific written agreement contemplated by Rule 6625(a)(3), risks discovering a reporting gap only after a compliance failure has already occurred.

Firms and ATS operators tracking regulatory developments in this area should also watch whether FINRA eventually extends the Rule 6732-style single-member expansion to Rule 6625, since the debt market precedent suggests FINRA is willing to broaden ATS exemption eligibility where market structure supports it. Until any such amendment occurs, however, firms should treat the two-FINRA-member requirement in Rule 6625 as a firm eligibility threshold rather than assume parity with the now-broader TRACE exemption under Rule 6732.