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[Federal Register Volume 88, Number 216 (Thursday, November 9, 2023)]
[Notices]
[Pages 77388-77396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24758]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98859; File No. SR-FINRA-2023-015]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to 
Dissemination of Information on Individual Transactions in U.S. 
Treasury Securities and Related Fees

November 3, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 2, 2023, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by FINRA. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to (1) amend FINRA Rules 6710 and 6750 to 
provide that FINRA will disseminate information on individual 
transactions in U.S. Treasury Securities that are On-the-Run Nominal 
Coupons reported to FINRA's Trade Reporting and Compliance Engine 
(``TRACE'') on an end-of-day basis with specified dissemination caps 
for large trades, and (2) amend FINRA Rule 7730 to include U.S. 
Treasury Securities within the existing fee structure for end-of-day 
and historic TRACE data.
    The text of the proposed rule change is available on FINRA's 
website at http://www.finra.org, at the principal office of FINRA and 
at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. FINRA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On July 10, 2017,\3\ FINRA members began reporting information on 
transactions in U.S. Treasury

[[Page 77389]]

Securities \4\ to TRACE.\5\ In addition, pursuant to requirements 
adopted by the Board of Governors of the Federal Reserve System (the 
``Federal Reserve Board''), on September 1, 2022, certain banks that 
are not FINRA members (``covered depository institutions'') began 
reporting information on transactions in specified fixed income 
securities, including U.S. Treasury Securities, to TRACE.\6\ 
Information reported to TRACE regarding individual transactions in U.S. 
Treasury Securities is currently used for regulatory and other official 
sector purposes only and is not disseminated publicly. FINRA makes the 
data regarding individual transactions in U.S. Treasury Securities 
available to the official sector to assist them in the monitoring and 
analysis of the U.S. Treasury Security markets.\7\
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    \3\ See Regulatory Notice 16-39 (October 2016); see also 
Securities Exchange Act Release No. 79116 (October 18, 2016), 81 FR 
73167 (October 24, 2016) (Order Granting Accelerated Approval of 
File No. SR-FINRA-2016-027).
    \4\ Under Rule 6710(p), a ``U.S. Treasury Security'' means a 
security, other than a savings bond, issued by the U.S. Department 
of the Treasury (the ``Treasury Department'') to fund the operations 
of the federal government or to retire such outstanding securities. 
The term ``U.S. Treasury Security'' also includes separate principal 
and interest components of a U.S. Treasury Security that has been 
separated pursuant to the Separate Trading of Registered Interest 
and Principal of Securities (STRIPS) program operated by the 
Treasury Department.
    \5\ TRACE is the FINRA-developed system that facilitates the 
mandatory reporting of over-the-counter transactions in eligible 
fixed income securities. See generally Rule 6700 Series.
    \6\ See Agency Information Collection Activities: Announcement 
of Board Approval Under Delegated Authority and Submission to OMB, 
86 FR 59716 (October 28, 2021) (Federal Reserve approval to 
implement the Treasury Securities and Agency Debt and Mortgage-
Backed Securities Reporting Requirements (FR 2956; OMB No. 7100-
NEW)).
    \7\ The Treasury Department, the Federal Reserve Board, the 
Federal Reserve Bank of New York, the SEC and the U.S. Commodity 
Futures Trading Commission (CFTC) comprise the Inter-Agency Working 
Group for Treasury Market Surveillance (IAWG or ``official 
sector'').
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    Since the commencement of TRACE reporting for U.S. Treasury 
Securities, FINRA has actively studied the reported data and, in 
consultation with the Treasury Department, considered ways that it can 
enhance transparency in the U.S. Treasury Security market. On March 10, 
2020, FINRA began posting on its website weekly, aggregate data on the 
trading volume of U.S. Treasury Securities reported to TRACE.\8\ In 
February 2023, FINRA increased the cadence of the aggregated volume 
data it publishes for U.S. Treasury Securities to daily, and enhanced 
the content of the aggregate data by adding trade counts and, for On-
the-Run Nominal Coupons,\9\ volume-weighted average price 
information.\10\
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    \8\ See FINRA Press Release, FINRA Launches New Data on Treasury 
Securities Trading Volume, https://www.finra.org/media-center/newsreleases/2020/finra-launches-new-data-treasury-securities-trading-volume; see also Securities Exchange Act Release No. 87837 
(December 20, 2019), 84 FR 71986 (December 30, 2019) (Order 
Approving File No. SR-FINRA-2019-028). FINRA also made historical 
weekly aggregate data for transactions in U.S. Treasury Securities 
reported since January 2019 available for download on its website.
    \9\ See infra note 20 and accompanying text for the proposed 
definition of ``On-the-Run Nominal Coupon.''
    \10\ See Technical Notice, Enhancements to Aggregated Reports 
and Statistics for U.S. Treasury Securities, https://www.finra.org/filing-reporting/trace/enhancements-weekly-aggregated-reports-statistics-122822; see also Securities Exchange Act Release No. 
95438 (August 5, 2022), 87 FR 49626 (August 11, 2022) (Order 
Approving File No. SR-FINRA-2022-017).
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    In remarks at the 2022 U.S. Treasury Market Conference,\11\ Under 
Secretary for Domestic Finance Liang proposed a policy of publicly 
releasing secondary market transaction data for On-the-Run Nominal 
Coupons, with end-of-day dissemination and with appropriate cap sizes. 
The Treasury Department's views on their policy proposal were informed 
by a range of inputs, including responses to a survey of the primary 
dealers, analysis and recommendations from the Treasury Borrowing 
Advisory Committee (``TBAC''),\12\ and public comments submitted in 
response to its Request for Information (``RFI'') on Additional 
Transparency for Secondary Market Transactions of Treasury 
Securities.\13\ The Treasury Department concluded that transaction-
level transparency can provide important benefits for the U.S. Treasury 
Securities market, but should proceed in a gradual and calibrated 
manner to mitigate risks for large trades or for trades in less liquid 
segments of the U.S. Treasury Securities market. Accordingly, the 
Treasury Department recommended that the next step should be to release 
transaction data for On-the-Run Nominal Coupons, with end-of-day 
dissemination and appropriate cap sizes.\14\
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    \11\ Remarks by Under Secretary for Domestic Finance Nellie 
Liang at the 2022 Treasury Market Conference (November 16, 2022), 
https://home.treasury.gov/news/press-releases/jy1110 (``Treasury 
Conference Remarks'').
    \12\ See Treasury Department, Additional Public Transparency in 
Treasury Markets, (November 2022), https://home.treasury.gov/system/files/221/TBACCharge1Q42022.pdf (``TBAC Findings'').
    \13\ See Treasury Department, Notice Seeking Public Comment on 
Additional Transparency for Secondary Market Transactions of 
Treasury Securities, 87 FR 38259 (June 27, 2022) (Docket No. TREAS-
DO-2022-0012).
    \14\ See TBAC Findings, supra note 12, at 28-29; Treasury 
Conference Remarks, supra note 11.
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    Consistent with the Treasury Department's proposed policy, and in 
furtherance of FINRA's mission as a national securities association to 
protect investors and promote market integrity, FINRA believes that 
providing transaction-level information for trades in On-the-Run 
Nominal Coupons, with end-of-day dissemination and appropriate cap 
sizes, is an appropriate next step to increase transparency in 
transactions in U.S. Treasury Securities. Accordingly, as described in 
more detail below and in consultation with the Treasury Department, 
FINRA is proposing to commence dissemination of individual transaction 
information at this time for On-the-Run Nominal Coupons,\15\ on an end-
of-day basis with appropriate dissemination caps for large trades. The 
proposed rule change would not require any reporting changes by members 
or covered depository institutions.
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    \15\ The proposed rule change would not affect FINRA's existing 
publication of aggregate U.S. Treasury Security data. FINRA would 
continue to publish daily and monthly aggregate U.S. Treasury 
Security data on the same terms as it does today, which include 
aggregate data on other types of U.S. Treasury Securities in 
addition to On-the-Run Nominal Coupons. See supra notes 8 and 10 and 
accompanying text.
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Scope and Timing of Dissemination
    Under Rule 6750(a), FINRA disseminates information on all 
transactions in TRACE-Eligible Securities,\16\ including transactions 
effected pursuant to Securities Act Rule 144A, immediately upon receipt 
of the transaction report, except as provided in paragraphs (b) and (c) 
of Rule 6750 (Dissemination of Transaction Information). In relevant 
part, current Rule 6750(c)(5) provides that FINRA will not disseminate 
information on a transaction in a TRACE-Eligible Security that is a 
U.S. Treasury Security.
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    \16\ Rule 6710(a) generally defines a ``TRACE-Eligible 
Security'' as a debt security that is United States (``U.S.'') 
dollar-denominated and is: (1) issued by a U.S. or foreign private 
issuer, and, if a ``restricted security'' as defined in Securities 
Act Rule 144(a)(3), sold pursuant to Securities Act Rule 144A; (2) 
issued or guaranteed by an Agency as defined in Rule 6710(k) or a 
Government-Sponsored Enterprise as defined in Rule 6710(n); or (3) a 
U.S. Treasury Security as defined in Rule 6710(p). ``TRACE-Eligible 
Security'' does not include a debt security that is issued by a 
foreign sovereign or a Money Market Instrument as defined in Rule 
6710(o). Beginning on November 6, 2023, the definition of ``TRACE-
Eligible Security'' will be amended to also include a Foreign 
Sovereign Debt Security as defined in new paragraph (kk) of Rule 
6710. See FINRA Adopts Amendments to Require Reporting of 
Transactions in U.S. Dollar-Denominated Foreign Sovereign Debt 
Securities to TRACE, Regulatory Notice 22-28 (December 2022); see 
also Securities Exchange Act Release No. 95465 (August 10, 2022); 87 
FR 50354 (August 16, 2022) (Order Approving File No. SR-FINRA-2022-
011) (``Foreign Sovereign Filing'').
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    Under the proposed rule change, FINRA would begin disseminating 
individual transaction information for On-the-Run Nominal Coupon U.S. 
Treasury Securities on an end-of-day basis. As for all individual TRACE 
transaction information that FINRA

[[Page 77390]]

disseminates, the disseminated transaction information for U.S. 
Treasury Securities would be anonymized, i.e., it would not include the 
market participant identifier (MPID) or other identifying information 
regarding the parties to the trade. However, consistent with other 
TRACE products, the disseminated transaction information would include 
counterparty type (i.e., dealer, customer, affiliate, or alternative 
trading system (``ATS'')), a flag to indicate whether the trade was 
executed on an ATS, and other trade modifiers and indicators. To 
implement such dissemination, FINRA is proposing to amend Rule 
6750(c)(5) (to be redesignated as Rule 6750(d)(5)) to provide that 
FINRA will not disseminate information on a transaction in a TRACE-
Eligible Security that is a U.S. Treasury Security ``other than an On-
the-Run Nominal Coupon,'' and to add a new paragraph (c) to Rule 6750 
providing that FINRA will disseminate information on individual 
transactions in On-the-Run Nominal Coupons on an end-of-day basis.\17\ 
Consistent with the Treasury Department's proposed policy, these 
proposed amendments to Rule 6750 would provide for FINRA to disseminate 
information on individual transactions in U.S. Treasury Securities on 
an end-of-day basis only, rather than immediately upon receipt of the 
transaction report, and would specifically limit such dissemination to 
On-the-Run Nominal Coupons.\18\ FINRA believes that disseminating 
information on individual transactions in On-the-Run Nominal Coupons on 
an end-of-day basis at this time would strike an appropriate balance 
between enhancing transparency by providing timely information to the 
public about U.S. Treasury Security market activity and mitigating 
potential information leakage concerns that could arise with a more 
accelerated dissemination timeframe, such as a real-time data feed.\19\ 
FINRA may in the future consider whether it would be appropriate to 
disseminate information for transactions in U.S. Treasury Securities on 
a more accelerated basis.
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    \17\ To accommodate the addition of new paragraph 6750(c), the 
proposed rule change would redesignate current Rule 6750(c) as Rule 
6750(d), and make conforming changes to the paragraph cross-
references in Rule 6750(a) and Supplementary Material .01 to Rule 
6750. The proposed rule text also reflects the inclusion of Rule 
6750(c)(6) (to be redesignated as Rule 6750(d)(6)), which will be 
added by the Foreign Sovereign Filing effective November 6, 2023. 
See Foreign Sovereign Filing, supra note 16.
    \18\ The proposed dissemination would include all transactions 
in On-the-Run Nominal Coupons reported to TRACE, including both 
transactions reported by FINRA members and transactions reported by 
covered depository institutions pursuant to rulemaking by the 
Federal Reserve. See supra note 6 and accompanying text.
    \19\ FINRA members are generally required to report transactions 
in U.S. Treasury Securities to TRACE within 60 minutes of the Time 
of Execution. See Rule 6730(a)(4).
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    To provide clarity regarding the scope of transactions in U.S. 
Treasury Securities that would be subject to individual dissemination 
under amended Rule 6750, FINRA is proposing to add a definition of 
``On-the-Run Nominal Coupon'' as new paragraph (ll) of Rule 6710 
(Definitions).\20\ Specifically, ``On-the-Run Nominal Coupon'' would be 
defined to mean the most recently auctioned U.S. Treasury Security that 
is a Treasury note or bond paying fixed rate nominal coupons starting 
after the close of the TRACE system on the day of its Auction through 
the close of the TRACE system on the day of the Auction of a new issue 
for the next U.S. Treasury Security of the same maturity.\21\ For 
further clarity, the proposed definition would specify that On-the-Run 
Nominal Coupons do not include Treasury bills, STRIPS, Treasury 
Inflation-Protected Securities (TIPS), floating rate notes (FRNs), or 
any U.S. Treasury Security that is a Treasury note or bond paying a 
fixed rate nominal coupon that is not the most recently issued U.S. 
Treasury Security of a given maturity (i.e., off-the-run nominal 
coupons).\22\ FINRA believes this proposed definition is consistent 
with Treasury Department usage and industry practice in categorizing 
different types of U.S. Treasury Securities, and is also consistent 
with how FINRA currently categorizes different U.S. Treasury Securities 
for purposes of groupings in its existing U.S. Treasury Security 
aggregate data.\23\ Consistent with the Treasury Department's proposed 
policy, FINRA believes it is appropriate at this time to limit 
dissemination of individual transaction information to On-the-Run 
Nominal Coupons. FINRA may in the future consider whether it would be 
appropriate to disseminate information for transactions in other types 
of U.S. Treasury Securities, such as off-the-run nominal coupons.
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    \20\ The proposed paragraph designation for the new definition 
of ``On-the-Run Nominal Coupon'' in Rule 6710 reflects the inclusion 
of paragraphs (jj) and (kk) in Rule 6710, which were added, 
respectively, by the Corporate Bond New Issue Reference Data Service 
Filing (see Securities Exchange Act Release No. 90939 (January 15, 
2021); 86 FR 6922 (January 25, 2021) (Order Approving File No. SR-
FINRA-2019-008)) and Foreign Sovereign Filing. While the Corporate 
Bond New Issue Reference Data Service Filing has not been 
implemented, the Foreign Sovereign Filing will become effective 
November 6, 2023. See Foreign Sovereign Filing, supra note 16.
    \21\ Under Rule 6710(gg), ``Auction'' means the bidding process 
by which the Treasury Department sells marketable securities to the 
public pursuant to Part 356 of Title 31 of the Code of Federal 
Regulations.
    \22\ FINRA will identify the most recently auctioned U.S. 
Treasury Security that is a Treasury note or bond paying fixed rate 
nominal coupons as an ``On-the-Run Nominal Coupon'' in TRACE 
reference data beginning on the business day after its auction.
    \23\ Information about the U.S. Treasury Security aggregate 
statistics, including security subtypes and groupings, is available 
at https://www.finra.org/finra-data/browse-catalog/about-treasury.
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Dissemination Protocols
    As described above, under the proposed rule change all individual 
transactions in On-the-Run Nominal Coupons reported to TRACE on a given 
trading day would generally be included in the end-of-day dissemination 
file for such date. However, to further mitigate concerns around 
information leakage for large trades and in consideration of the 
different risk and liquidity characteristics among different U.S. 
Treasury Security tenors, FINRA would implement transaction size 
dissemination caps to indicate that the size of a trade was above a 
designated threshold. This approach is consistent with the Treasury 
Department's proposed policy as well as FINRA's existing dissemination 
protocols for other types of TRACE-Eligible Securities.
    Accordingly, in consultation with the Treasury Department, FINRA 
proposes to apply the following transaction size dissemination caps 
based on the maturity of the On-the-Run Nominal Coupon at issuance: 
\24\
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    \24\ FINRA would incorporate information about these 
dissemination caps in the TRACE dissemination protocols published on 
its website, available at https://www.finra.org/filing-reporting/trade-reporting-and-compliance-engine-trace/trace-reporting-timeframes. Specifically, information about the dissemination caps 
would be added as a new bullet in the ``Transparency'' column of the 
row of the table describing the protocols for ``Treasury Bonds,'' to 
read as follows: ``Individual transactions in On-the-Run Nominal 
Coupons are disseminated on an end-of-day basis with security 
identifiers (e.g., CUSIP) and the following transaction size caps 
based on the maturity of the security at issuance: 2 Years: $250 
million; 3 Years: $250 million; 5 Years: $250 million; 7 Years: $150 
million; 10 Years: $150 million; 20 Years: $50 million; 30 Years: 
$50 million.''
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     Two Years: $250 million;
     Three Years: $250 million;
     Five Years: $250 million;
     Seven Years: $150 million;
     10 Years: $150 million;
     20 Years: $50 million; and
     30 Years: $50 million.
    Thus, for example, a $200 million transaction in a 10-year On-the-
Run

[[Page 77391]]

Nominal Coupon would be disseminated with a trade size of ``150MM+'' 
rather than the actual dollar amount of the trade.\25\ As discussed 
further below, FINRA believes these transaction size caps are 
appropriately tailored to mitigate potential information leakage 
concerns related to large transactions given the different liquidity 
and concentration characteristics of the market for each maturity. In 
consultation with the Treasury Department and based on ongoing analysis 
of the data, FINRA may in the future make adjustments to these 
dissemination caps to maintain the appropriate balance between enhanced 
transparency and protecting against potential information leakage that 
could negatively impact trading behaviors. Any proposed future changes 
to the dissemination caps would be filed with the Commission pursuant 
to Section 19(b)(1) of the Securities Exchange Act of 1934.
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    \25\ As described further below, these dissemination caps would 
apply for the end-of-day dissemination file. Consistent with its 
approach to other TRACE data products, FINRA also plans to provide 
an Historic TRACE data product covering the same scope of 
transactions, which would provide the actual, uncapped transaction 
sizes on a six-month delayed basis.
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Dissemination Fees
    FINRA is also proposing amendments to Rule 7730 (Trade Reporting 
and Compliance Engine) to expand the existing fee framework for the 
TRACE End-of-Day Transaction File and the Historic TRACE Data product 
to include data products providing for the dissemination of information 
on individual transactions in On-the-Run Nominal Coupons. Rule 7730, 
among other things, sets forth the TRACE data products offered by FINRA 
in connection with information on TRACE-Eligible Securities and 
associated data fees.
    Among other products, Rule 7730 provides for the dissemination of 
an End-of-Day TRACE Transaction File and Historic TRACE Data. Rule 
7730(g)(6) defines the End-of-Day TRACE Transaction File to mean a 
daily file that includes all transaction data disseminated as part of 
Real-Time TRACE transaction data on that day, which is separately 
available for each data set for which Real-Time TRACE transaction data 
is available (i.e., the Corporate Bond Data Set, Agency Data Set, SP 
Data Set, and Rule 144A Data Set) \26\ and made available daily after 
the TRACE system closes. Rule 7730(g)(4) defines Historic TRACE Data to 
mean historic transaction-level data with elements to be determined 
from time to time by FINRA in its discretion as stated in a Regulatory 
Notice or other equivalent publication, which will not include market 
participant identifiers (MPIDs). Historic TRACE Data is separately 
available for each of the Historic Corporate Bond Data Set, the 
Historic Agency Data Set, the Historic SP Data Set, and the Historic 
Rule 144A Data Set, as defined in Rule 7730(g)(4)(A) through (D). 
Historic Corporate Bond and Historic Agency Data is delayed a minimum 
of six months, while Historic SP Data is delayed a minimum of 18 months 
and Historic Rule 144A Data carries a delay consistent with the delay 
period applicable to the component security type (e.g., the delay for a 
Rule 144A transaction in a Securitized Product (SP) is 18 months, while 
the delay for a Rule 144A transaction in a corporate bond is six 
months). Generally, Historic TRACE Data includes the same transaction 
information as provided in the End-of-Day TRACE Transaction File for a 
given period of time, except that the End-of-Day TRACE Transaction File 
includes dissemination caps for large transactions while the Historic 
TRACE Data includes the actual, uncapped transaction sizes.
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    \26\ These data sets are defined in Rule 7730(c), which sets 
forth the market data fees for Real-Time TRACE transaction data. 
Under Rule 7730(g)(3), ``Real-Time'' is defined to mean that period 
of time starting from the time of dissemination by FINRA of 
transaction data on a TRACE-Eligible Security, and ending no more 
than four hours thereafter.
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    Rule 7730 sets forth, among other things, the fees applicable to 
receive the End-of-Day TRACE Transaction File and Historic TRACE Data 
from FINRA, which apply individually for each data set (i.e., a 
separate fee applies for each of the Corporate Bond Data Set, Agency 
Data Set, SP Data Set, and Rule 144A Data Set). The fee for the End-of-
Day TRACE Transaction File is $750/month per data set,\27\ with a lower 
$250/month per data set fee available to qualifying Tax-Exempt 
Organizations.\28\ The fee for Historic TRACE Data is $2,000/calendar 
year per data set, with a lower $500/calendar year per data set fee 
available to qualifying Tax-Exempt Organizations.\29\ A single fee of 
$2,000 for development and set-up to receive Historic TRACE Data also 
applies, with a lower $1,000 development and set-up fee available to 
qualifying Tax-Exempt Organizations.\30\
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    \27\ There is no charge for receipt of the End-of-Day TRACE 
Transaction file for a given data set for a subscriber to the Vendor 
Real-Time Data feed for that data set.
    \28\ For purposes of Rule 7730, a Tax-Exempt Organization means 
an organization that is described in Section 501(c) of the Internal 
Revenue Code (26 U.S.C. 501(c)) and has received recognition of the 
exemption from federal income taxes from the Internal Revenue 
Service. See Rule 7730(g)(2).
    \29\ The $2,000 fee for non-qualifying Tax Exempt Organizations 
is applicable where the subscriber receives the data for internal 
use and internal and/or external display application, but bulk re-
distribution of data is not permitted at this rate. A non-qualifying 
Tax Exempt Organization seeking bulk re-distribution of the Historic 
TRACE Data is instead subject to a fee of $1/CUSIP per calendar year 
(or part thereof) within a single data set of Historic TRACE Data 
per each recipient of re-distributed data, with a maximum fee per 
data set of $1,000/calendar year (or part thereof) per each 
recipient of re-distributed data. A qualifying Tax-Exempt 
Organization is subject to the $500/calendar year per data set fee 
for internal use and internal and/or external display application, 
with bulk re-distribution of data permitted with certain 
restrictions.
    \30\ The development and set-up fee is a one-time fee when a 
subscriber initially begins receiving Historic TRACE Data for any 
data set. The fee does not apply if a subscriber switches data sets, 
or adds additional data sets, of Historic TRACE Data.
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    FINRA is proposing that the End-of-Day TRACE Transaction File and 
Historic Data include a new set of data for U.S. Treasury Securities, 
as outlined above, with the same fees for the Treasury data set that 
exist for other sets of TRACE-Eligible Securities. To effectuate these 
changes, under the proposed rule change, FINRA would amend the existing 
definition of ``End-of-Day TRACE Transaction File'' in Rule 7730(g)(6) 
to include the End-of-Day Transaction File for U.S. Treasury Securities 
as a separately available daily file that includes transaction data for 
On-the-Run Nominal Coupons reported to TRACE on that day.\31\ FINRA 
would similarly amend the definition of ``Historic TRACE Data'' in Rule 
7730(g)(4) to add a new definition of ``Historic Treasury Data Set'' to 
include all historic transactions in On-the-Run Nominal Coupons 
reported to TRACE. Historic Treasury Data would also be subject to a 
minimum six-month delay, as is the case currently for the existing 
Historic Corporate Bond and Historic Agency Data sets.\32\ The addition 
of U.S. Treasury Securities to the current framework in Rule 7730 for 
the TRACE End-of-Day Transaction File and Historic TRACE Data products 
would apply the existing data fees for each current TRACE data set to 
the new U.S.

[[Page 77392]]

Treasury data sets.\33\ FINRA believes these fees are reasonable, and 
notes that, as for any of the TRACE data sets, subscribing to each 
product is optional for members and others.
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    \31\ A clarifying edit would also be made to the first sentence 
of Rule 7730(g)(6), which defines End-of-Day TRACE Transaction File 
for the existing data sets, to clarify that it applies for Data Sets 
other than U.S. Treasury Securities. This change is necessary 
because the definition for other Data Sets is based on data 
disseminated as part of Real-Time TRACE transaction data on that day 
for a given data set, which will not be applicable for U.S. Treasury 
Securities.
    \32\ A conforming change would also be made in the description 
of Historic TRACE Data in Rule 7730(d) to add the Historic Treasury 
Data Set to the list of data sets comprising Historic TRACE Data.
    \33\ As for other types of TRACE-Eligible Securities, FINRA also 
anticipates making transaction information for On-the-Run Nominal 
Coupons available free of charge for personal, non-commercial 
purposes only through FINRA's Fixed Income Data website, available 
at https://www.finra.org/finra-data/fixed-income.
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    FINRA has an expansive and robust regulatory program regarding U.S. 
Treasury Securities, involving TRACE reporting requirements; 
dissemination of aggregate data and, if this filing is approved, 
dissemination of individual transaction data; surveillance and 
examination for complete and accurate reporting; and surveillance, 
examinations, and enforcement for manipulation and other unfair and 
prohibited trading practices, both in the U.S. Treasury Security market 
and across markets and products. FINRA to date has not implemented any 
additional fees to recover its implementation or ongoing operation 
costs with respect to its regulatory programs concerning activity in 
U.S. Treasury Securities.\34\ FINRA continues to review its revenue and 
cost structure and consider ways to fund its operations in this area. 
FINRA believes the fees proposed in the instant filing are reasonable 
given the incremental costs to be incurred by FINRA in developing, 
producing, and distributing the new U.S. Treasury Security data sets 
and providing ongoing administrative, functional, and technical support 
to subscribers. However, FINRA notes that such fees will not, and are 
not designed to, recover FINRA's full costs with respect to FINRA's 
regulatory programs regarding TRACE for U.S. Treasury Securities; FINRA 
intends to further consider the most appropriate fee structure(s) to 
recover these costs.
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    \34\ FINRA notes that, unlike for other types of TRACE-Eligible 
Securities, FINRA does not currently charge reporting fees for 
transactions in U.S. Treasury Securities.
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    If the Commission approves the proposed rule change, FINRA will 
announce the effective date of the proposed rule change in a Regulatory 
Notice.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\35\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest, and Section 15A(b)(9) of the Act,\36\ which requires 
that FINRA rules not impose any burden on competition that is not 
necessary or appropriate. FINRA believes that the proposal represents 
an important step in enhancing transparency in the U.S. Treasury 
Securities market, consistent with the Treasury Department's proposed 
policy, by beginning dissemination of individual transaction 
information in a calibrated and careful manner, on an end-of-day basis, 
limited to On-the-Run Nominal Coupons, and with appropriate 
dissemination caps for large trades. FINRA believes that providing this 
data to the public would improve price transparency for U.S. Treasury 
Securities, benefiting liquidity and resilience in this critical 
market, while also mitigating potential information leakage concerns 
that could negatively impact market behavior.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78o-3(b)(6).
    \36\ 15 U.S.C. 78o-3(b)(9).
---------------------------------------------------------------------------

    FINRA also believes that the proposed rule change is consistent 
with the provisions of Section 15A(b)(5) of the Act,\37\ which 
requires, among other things, that FINRA rules provide for the 
equitable allocation of reasonable dues, fees and other charges among 
members and issuers and other persons using any facility or system that 
FINRA operates or controls. Pursuant to the proposed rule change, FINRA 
will establish fees for (i) the new End-of-Day TRACE Transaction file 
for U.S. Treasury Securities and (ii) the new Historic TRACE Data 
product for U.S. Treasury Securities. In each case, the fees will be 
the same as those FINRA already charges to receive each of the other 
data sets for other types of TRACE-Eligible Securities. FINRA believes 
these fees are reasonable and are identical to existing fees already in 
place for end-of-day and historic data products for other types of 
TRACE-Eligible Securities. FINRA further notes that the fees will be 
applied equally to all similarly situated interested parties that 
choose to subscribe to either data product, and that subscribing to 
these data products is optional for members and others.
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

    Thus, FINRA believes that the proposed rule change is in the public 
interest and consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
Economic Impact Assessment
    FINRA has undertaken an economic impact assessment, as set forth 
below, to further analyze the regulatory need for the proposed 
amendments to the TRACE rules, their potential economic impacts, and 
the alternatives considered in assessing how to best meet FINRA's 
regulatory objectives.
Regulatory Need
    Under existing rules, transaction-level data in U.S. Treasury 
Securities reported to TRACE is used for regulatory and other official 
sector purposes and is not publicly disseminated.\38\ Currently, market 
participants may access some post-trade information for U.S. Treasury 
Securities directly through multiple private platforms. However, the 
data provided by such private platforms is not comprehensive, its 
content and format might vary across venues, and the data is available 
only to those trading on a specific platform or subscribing to its data 
services.
---------------------------------------------------------------------------

    \38\ As noted, FINRA shares this data with the IAWG, which 
includes the Treasury Department, The Federal Reserve Board, The 
Federal Reserve Bank of New York, the SEC, and the CFTC. See supra 
note 7.
---------------------------------------------------------------------------

    FINRA believes that the proposed amendments relating to 
dissemination of individual transaction information for U.S. Treasury 
Securities are consistent with FINRA's ongoing TRACE transparency 
initiatives. The proposal may create a more level playing field, 
increase understanding of market activity, enhance market liquidity, 
reduce transaction costs, and assist in price efficiency and valuation.
Economic Baseline
    FINRA analyzed secondary market activity in U.S. Treasury 
Securities from September 1, 2022, to February 28, 2023 using 
transactions reported to TRACE.\39\ During the six-month sample period, 
there were 941 unique trade reporters (904 broker-dealers, 17 ATSs, 15 
depository institutions, and five depository institution 
customers).\40\ Table 1 shows that, during the sample

[[Page 77393]]

period, there were on average 302,120 trades per day in all U.S. 
Treasury Securities with an average daily volume of approximately 
$732.01 billion. Daily trades in Treasury notes and bonds \41\ on 
average accounted for 77.6 percent of all daily trades and 74.6 percent 
of the total daily dollar volume in all U.S. Treasury Securities, which 
also includes bills, TIPS and STRIPS in addition to notes and bonds.
---------------------------------------------------------------------------

    \39\ The reported statistics include transactions reported to 
TRACE by covered depository institutions pursuant to Federal Reserve 
Board requirements. Beginning September 1, 2022, certain depository 
institutions (Covered Depository Institutions) were required to 
report transactions in U.S. Treasury Securities, agency debt 
securities and agency mortgage-backed securities (Covered 
Securities) to FINRA's Trade Reporting and Compliance Engine 
(TRACE). For more information, see https://www.finra.org/filing-reporting/trace/federal-reserve-depository-institution-reporting.
    \40\ Reporting parties were identified using market participant 
identifiers (MPIDs). Depository institution customers are depository 
institutions with buy-side activity only.
    \41\ Treasury notes and bonds include nominal coupon securities 
and 2-year FRNs.

                                Table 1--Trading Activity in Treasury Securities
----------------------------------------------------------------------------------------------------------------
                                                         Number of trades                  Dollar volume
                                                 ---------------------------------------------------------------
                      Type                         Average daily                   Average daily
                                                    (thousands)     Total (MM)         ($B)         Total ($T)
----------------------------------------------------------------------------------------------------------------
Total...........................................          302.12           36.56          732.01           88.57
----------------------------------------------------------------------------------------------------------------
                                                  Security Type
----------------------------------------------------------------------------------------------------------------
Bills...........................................           63.17            7.64          165.89           20.07
Notes & Bonds...................................          234.56           28.38          546.27           66.10
TIPS............................................            2.82            0.34           16.30            1.97
STRIPS..........................................            1.57            0.19            3.55            0.43
----------------------------------------------------------------------------------------------------------------
                                               Counterparty Type *
----------------------------------------------------------------------------------------------------------------
Customer........................................           83.45           10.10          270.64           32.75
Dealer..........................................          148.87           18.01          301.00           36.42
Affiliate.......................................           11.36            1.38           78.65            9.52
PTF.............................................           58.44            7.07           81.72            9.89
----------------------------------------------------------------------------------------------------------------
                                                      Venue
----------------------------------------------------------------------------------------------------------------
ATS.............................................          157.14           19.01          251.15           30.39
Non-ATS.........................................          144.98           17.54          480.86           58.18
----------------------------------------------------------------------------------------------------------------
* The ``customer'' counterparty type includes trades between broker-dealers and customers or between covered
  depository institutions and customers. The ``dealer'' counterparty type includes interdealer trades, trades
  between broker-dealers and covered depository institutions, as well as trades among covered depository
  institutions. The ``affiliate'' counterparty type includes trades between broker-dealers and non-member
  affiliates or trades between covered depository institutions and non-member affiliates. The ``PTF''
  counterparty type includes trades conducted by principal trading firms (PTFs) and other non-FINRA members on a
  ``covered ATS,'' as defined in FINRA Rule 6730.07.

    Further analysis of the data shows that the average daily number of 
trades and average daily dollar volume of On-the-Run Nominal Coupons 
were approximately 166,240 and $392.80 billion respectively which were 
substantially higher than the number and volume of trades in off-the-
run nominal coupons (approximately 68,079 and $150.18 billion 
respectively).
    Table 2 provides more detail regarding the trades in the On-the-Run 
Nominal Coupons that are subject to the proposed amendments. On-the-Run 
Nominal Coupons on average accounted for approximately 55 percent of 
the total daily number of trades and 53.7 percent of the total daily 
volume of trades in U.S. Treasury Securities during the sample 
period.\42\ Separating out the activity by maturity shows that 5-year 
notes are the most actively traded both in terms of the number and 
volume of trades. The analysis also shows active interdealer trading 
and electronic trading, as proxied by ATS volume, in this market 
segment and a substantial volume of trades by non-FINRA members, such 
as PTFs, on the ATS platforms that are subject to Rule 6730.07.\43\
---------------------------------------------------------------------------

    \42\ The average transaction size in these securities was $2.37 
million. The median and the 99th percentile are approximately $1 
million and $26.76 million, respectively.
    \43\ The proportion of customer and non-ATS trades are 
substantially lower in On-the-Run Nominal Coupons compared to the 
broader Treasury Securities market. Trade sizes for transactions in 
U.S. Treasury Securities that occur on an ATS are, on average, 
smaller than non-ATS trades.

                   Table 2--Trading Activity in On-the-Run Nominal Coupon Treasury Securities
----------------------------------------------------------------------------------------------------------------
                                                         Number of trades                  Dollar volume
                                                 ---------------------------------------------------------------
                      Type                         Average daily                   Average daily
                                                    (thousands)     Total (MM)         ($B)         Total ($T)
----------------------------------------------------------------------------------------------------------------
Total...........................................          166.24           20.11          392.80           47.53
----------------------------------------------------------------------------------------------------------------
                                                    Maturity
----------------------------------------------------------------------------------------------------------------
2Y..............................................           21.99            2.66           60.19            7.28
3Y..............................................           20.19            2.44           53.27            6.45
5Y..............................................           46.72            5.65          115.38           13.96
7Y..............................................           13.76            1.66           31.85            3.85
10Y.............................................           43.95            5.32           94.24           11.40
20Y.............................................            5.14            0.62           10.66            1.29

[[Page 77394]]

 
30Y.............................................           14.50            1.75           27.21            3.29
----------------------------------------------------------------------------------------------------------------
                                                Counterparty Type
----------------------------------------------------------------------------------------------------------------
Customer........................................           10.34            1.25          100.87           12.20
Dealer..........................................           90.93           11.00          184.99           22.38
Affiliate.......................................            7.02            0.85           33.47            4.05
PTF.............................................           57.95            7.01           73.48            8.89
----------------------------------------------------------------------------------------------------------------
                                                      Venue
----------------------------------------------------------------------------------------------------------------
ATS.............................................          130.17           15.75          184.87           22.37
Non-ATS.........................................           36.07            4.36          207.93           25.16
----------------------------------------------------------------------------------------------------------------

Economic Impacts
    Given the unique and fundamental role of the U.S. Treasury 
Securities market in the global economy, promoting the market's 
liquidity, efficient functioning, and resilience in times of stress is 
crucial both to Treasury market participants and the broader financial 
system.
    The following sections outline the potential benefits and costs of 
the proposed dissemination of end-of-day and historical transaction-
level information for On-the-Run Nominal Coupons, with appropriate 
dissemination caps for large trades. The discussion is informed by the 
public comments submitted in response to the Treasury Department's 
RFI,\44\ the Sia Partners/SIFMA survey results,\45\ TBAC Findings,\46\ 
and the academic literature.
---------------------------------------------------------------------------

    \44\ See supra note 13.
    \45\ See Additional Transparency for Secondary Market 
Transactions of Treasury Securities (October 2022), https://www.sifma.org/wp-content/uploads/2022/10/FINAL-SIA-SIFMA-REPORT-Additional-Transparency-for-Secondary-Market-Transactions-of-Treasury-Securities.pdf.
    \46\ See TBAC Findings, supra note 12.
---------------------------------------------------------------------------

Anticipated Benefits
    While the RFI and survey respondents expressed mixed opinions on 
the impact of increased transparency on market liquidity and 
resilience, they broadly supported a gradual and calibrated approach to 
providing additional transparency in the Treasury Security market.\47\ 
The anticipated benefits included reducing trading costs, increasing 
liquidity, incentivizing intermediation and promoting additional 
participation, increasing market confidence, enhancing risk management, 
and higher market resilience during times of stress.\48\ Some 
respondents indicated that having access to transaction-level 
information could lead to improved price discovery and trade execution 
for both investors and dealers. Others indicated that additional 
transparency would assist quantitative trading firms as electronic 
trading becomes more prevalent.\49\
---------------------------------------------------------------------------

    \47\ See, e.g., comment letters from CME Group Inc. and JPMorgan 
Chase & Co., available at https://www.regulations.gov/docket/TREAS-DO-2022-0012/comments.
    \48\ See, e.g., comment letters from Spatt, Hollifield & 
Neklyudov; Jane Street Capital, LLC; MarketAxess Holdings Inc.; and 
Citadel Securities, available at https://www.regulations.gov/docket/TREAS-DO-2022-0012/comments.
    \49\ See Sia Partners/SIFMA survey, supra note 45, at 9-10.
---------------------------------------------------------------------------

    The academic literature also provides insights on the effects of 
post-trade transparency in other fixed income markets and investigates 
the effect of transparency on price discovery, market liquidity, and 
the welfare of different classes of market participants. Several 
studies found that the transparency following the initiation of TRACE 
resulted in substantially lower trading costs and bid-ask spreads in 
the corporate bond market, not only for bonds whose trades were 
disseminated, but for other bonds as well.\50\ Studies on the impacts 
of post-trade transparency in the municipal bond market and securitized 
products market also reported reduced transaction costs as a result of 
additional transparency.\51\ These results are consistent with 
investors' ability to negotiate better prices in the presence of post-
trade transparency.
---------------------------------------------------------------------------

    \50\ The studies interpret the effect on other bonds as a 
``liquidity spillover'' where the traded prices of disseminated 
bonds provided useful information for valuing bonds whose trades 
were not disseminated. See Hendrik Bessembinder, William Maxwell & 
Kumar Venkataraman, Market Transparency, Liquidity Externalities, 
and Institutional Trading Costs in Corporate Bonds, 82(2) Journal of 
Financial Economics 251-288 (2006); Amy K. Edwards, Lawrence E. 
Harris & Michael S. Piwowar, Corporate Bond Market Transaction Costs 
and Transparency, 62(3) The Journal of Finance 1421-1451 (2007); 
Michael A. Goldstein, Edith S. Hotchkiss & Erik R. Sirri, 
Transparency and Liquidity: A Controlled Experiment on Corporate 
Bonds, 20(2) The Review of Financial Studies 235-273 (2007); Hendrik 
Bessembinder & William Maxwell, Markets: Transparency and the 
Corporate Bond Market, 22(2) The Journal of Economic Perspectives 
217-234 (2008).
    \51\ See Erik R. Sirri, Report on Secondary Market Trading in 
the Municipal Securities Market (2014), https://www.msrb.org/sites/default/files/2022-09/MSRB-Report-on-Secondary-Market-Trading-in-the-Municipal-Securities-Market.pdf; John Chalmers, Yu Liu & Z. Jay 
Wang, The Difference a Day Makes: Timely Disclosure and Trading 
Efficiency in the Muni Market, 139(1) Journal of Financial Economics 
313-335 (2021); Paul Schultz & Zhaogang Song, Transparency and 
Dealer Networks: Evidence from the Initiation of Post-Trade 
Reporting in the Mortgage Backed Security Market, 133(1) Journal of 
Financial Economics 113-133 (2019).
---------------------------------------------------------------------------

    FINRA believes that end-of-day public dissemination of transaction 
information on On-the-Run Nominal Coupons, as described above, would 
similarly benefit market participants by providing access to a single-
source, comprehensive data set, subject to the proposed fees. The 
availability of this information, together with the historic TRACE data 
product for U.S. Treasury Securities, may also prompt further research 
and facilitate a better understanding of the U.S. Treasury Securities 
market, ultimately benefiting investors and other market participants 
and providing insight into how to better support the resiliency of the 
U.S. Treasury Securities market in times of stress.
Anticipated Costs
    Market participants (and dealers in particular) expressed a concern 
in response to the Treasury Department's RFI and Sia Partners/SIFMA 
survey that releasing transaction details could potentially expose 
trading strategies or

[[Page 77395]]

positions to competitors and impede dealers' ability to appropriately 
manage risk and confidentially hedge their positions. If true, this 
could decrease intermediaries' risk-taking capacity and their 
willingness to participate, leading to a decline in liquidity supply 
and market resilience during stressed conditions. These concerns were 
mostly directed to the less-liquid market segments, larger trade sizes, 
and real-time dissemination.\52\ Most commenters and respondents 
believed that there was limited risk to the delayed dissemination of 
the transaction-level information for On-the-Run Nominal Coupons with 
appropriate transaction size dissemination caps. Some RFI commentors 
indicated that additional transparency could impact market 
participants' trading behavior by incentivizing market participants to 
engage in smaller size trades or other behaviors to avoid 
dissemination, such as attempting to move flows outside the U.S. 
market.\53\ Generally, the RFI and survey respondents shared the view 
that introducing additional post-trade transparency in the U.S. 
Treasury Securities market requires careful and prudent implementation 
to avoid disrupting market functioning.
---------------------------------------------------------------------------

    \52\ See, e.g., comment letters from Citigroup Global Markets 
Inc.; Vanguard Group, Inc.; and the joint comment letter from SIFMA, 
SIFMA AMG, ABASA, and IIB, available at https://www.regulations.gov/docket/TREAS-DO-2022-0012/comments.
    \53\ See TBAC Findings, supra note 12, at 7.
---------------------------------------------------------------------------

    The academic papers and industry reports that studied the impacts 
of post-trade transparency in other markets have found evidence of 
dealers' reluctance to carry inventory in the disseminated securities 
and moving flow to alternative markets.\54\ Others found evidence of 
difficulty in executing larger trades, reduced trading volume and 
transaction size--particularly in riskier and less liquid assets.\55\
---------------------------------------------------------------------------

    \54\ See Hendrik Bessembinder & William Maxwell, Markets: 
Transparency and the Corporate Bond Market, 22(2) The Journal of 
Economic Perspectives 217-234 (2008).
    \55\ See Paul Asquith, Thomas Covert & Parag A. Pathak, The 
Effects of Mandatory Transparency in Financial Market Design: 
Evidence from the Corporate Bond Market (2019), available at https://ssrn.com/abstract=2320623; Bruce Mizrach, Analysis of Corporate 
Bond Liquidity (2015), https://www.finra.org/sites/default/files/OCE_researchnote_liquidity_2015_12.pdf; Greenwich Associates, In 
Search of New Corporate Bond Liquidity (2016) available at https://www.greenwich.com/fixed-income-fx-cmds/search-new-corporate-bond-liquidity; Schultz & Song, supra note 51.
---------------------------------------------------------------------------

    Accordingly, the proposed rule change incorporates multiple 
mitigants, developed in consultation with the Treasury Department, to 
address these concerns. First, the scope of the proposed rule change is 
limited to only transactions in On-the-Run Nominal Coupons, which are 
highly liquid. Second, delayed, end-of-day dissemination would further 
protect market participants against information leakage. Third, FINRA 
has conducted careful analysis and consulted with Treasury to specify 
appropriate transaction size dissemination caps calibrated to the 
maturity, liquidity and trading concentration in the underlying 
security to preserve the anonymity of market participants trading large 
transactions. In setting the proposed transaction size dissemination 
caps, FINRA considered both the percentage of traded market volume that 
would be disseminated (versus reported) across each maturity along with 
the daily number of unique intermediaries trading each security at or 
above the cap size for each maturity. This approach balances providing 
similar levels of transparency across maturities with sensitivity to 
information leakage concerns regarding reverse engineering of other 
market participants' identities, positions, or trading strategies. In 
this regard, FINRA analyzed the concentration of dealer activity and 
market liquidity in trades above various cap sizes in each specific 
Treasury maturity.
    The proposed dissemination caps would--across all maturities--
result in 0.09 percent of transactions being capped. Specifically, for 
the two-year, three-year, and five-year notes (which would be subject 
to a $250 million dollar cap), 0.08 percent, 0.08 percent, and 0.03 
percent of transactions, respectively, would be capped upon 
dissemination (i.e., because the size of the trade was greater than 
$250 million); for the seven-year and 10-year notes (which would be 
subject to a $150 million dollar cap), 0.13 percent and 0.05 percent of 
transactions, respectively, would be capped upon dissemination (i.e., 
because the size of the trade was greater than $150 million); and for 
the 20-year and 30-year bonds (which would be subject to a $50 million 
dollar cap), 0.39 percent and 0.29 percent of transactions, 
respectively, would be capped upon dissemination (i.e., because the 
size of the trade was greater than $50 million).
    There is no anticipated operational impact on member firms as a 
result of FINRA's proposed end-of-day and historical dissemination of 
On-the-Run Nominal Coupon data, as reporting requirements will remain 
unchanged. As noted above, the disseminated data would be available to 
market participants for a fee. The proposed fees for the Treasury data 
set are the same as those that exist for other types of TRACE-Eligible 
Securities. FINRA does not anticipate any negative competitive effects 
as a result of the proposed fees. The proposed end-of-day and 
historical dissemination of transactions in On-the-Run Nominal Coupon 
U.S. Treasury Securities, subject to their related fees, will provide 
an option for all market participants, including smaller firms, to 
access post-trade transparency in the U.S. Treasury Securities market 
at a reasonable cost. Some market participants may choose to access the 
data indirectly through their data vendors as the vendors may 
externally display the data.\56\ Those market participants who choose 
to access the data directly through FINRA may incur an additional cost 
to set up the technological infrastructure necessary to access the data 
if they are not already subscribed to other TRACE data products. On 
balance, market participants would only incur costs if they determine 
that the benefits of receiving the data outweigh the costs.
---------------------------------------------------------------------------

    \56\ The bulk re-distribution of the data is permitted subject 
to a different fee structure or additional restrictions, as 
discussed above.
---------------------------------------------------------------------------

Alternatives Considered
    FINRA, in consultation with the Treasury Department, considered 
several alternatives with respect to the scope of the Treasury 
Securities that would be subject to dissemination under the proposed 
rule change, dissemination timeframes, and transaction size 
dissemination caps.
Scope of the Treasury Securities Subject to Dissemination
    Regarding the scope of the U.S. Treasury Securities proposed to be 
subject to dissemination, FINRA considered including off-the-run and 
other types of U.S. Treasury Securities. However, since On-the-Run 
Nominal Coupons are both highly liquid and represent a significant 
portion of the Treasury Securities volume, FINRA believes that 
disseminating transaction-level data for On-the-Run Nominal Coupons 
would improve Treasury Securities market transparency with limited risk 
for market participants. The RFI and survey respondents' concerns 
regarding the potential impact of disseminating transaction data on 
their ability to manage their inventory risk were more pronounced for 
the less-liquid segments of the market, such as off-the-run U.S. 
Treasury Securities.

[[Page 77396]]

Dissemination Timeframe
    FINRA also considered real-time and less delayed dissemination of 
transaction level data as potential dissemination timeframe 
alternatives. However, weighing the potential benefits of providing the 
market with more timely data against concerns about protecting the 
confidentiality of market participants' positions and trading 
strategies, FINRA believes that, on balance, end-of-day dissemination 
will prudently balance the timeliness of transparency and concerns 
regarding potential negative impacts. End-of-day dissemination will 
provide FINRA and others the ability to research the proposed rule 
change's impact.\57\
---------------------------------------------------------------------------

    \57\ FINRA also notes that covered depository institutions that 
report to TRACE pursuant to Federal Reserve Board requirements 
generally report transactions in U.S. Treasury Securities to TRACE 
by the end of the day. Thus, not all transactions in U.S. Treasuries 
reported to TRACE are subject to a one-hour timeframe, which is 
another factor that FINRA considered in connection with the proposed 
rule change.
---------------------------------------------------------------------------

Transaction Size Caps
    FINRA considered setting a single transaction size dissemination 
cap applicable to all transactions in On-the-Run Nominal Coupons. 
However, since liquidity and trading volume varies across U.S. Treasury 
Securities with different maturities, FINRA, in consultation with the 
Treasury Department, determined that it is appropriate to propose 
dissemination caps that are calibrated to the maturity, liquidity, 
interest rate sensitivity, and trading concentration of the underlying 
U.S. Treasury Security.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-FINRA-2023-015 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-FINRA-2023-015. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-FINRA-2023-015 and should be 
submitted on or before November 30, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\58\
---------------------------------------------------------------------------

    \58\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-24758 Filed 11-8-23; 8:45 am]
BILLING CODE 8011-01-P
```