Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices 42741 

11 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 42201 

(December 3, 1999), 64 FR 69305 (December 10, 

1999) (Notice of Filing of File No. SR–NASD–99– 

65). 

4See Rule 7730. 

5Currently, 61 members have direct FIX 

connections for TRACE reporting, 32 have direct 

CTCI connections, and 709 members have web 

browser access (the 709 firms with web browser 

access also may have CTCI or FIX access for 

connecting to TRACE). The top five members that 

connect through CTCI for reporting transactions to 

TRACE represent 63% of all TRACE reports 

submitted directly using a CTCI connection. In 

addition, five service bureaus report to TRACE 

through CTCI connections and five report through 

FIX connections. The five service bureaus that use 

CTCI report transactions to TRACE on behalf of 191 

members in aggregate, with over 95% of these 

transaction reports received from one service 

bureau. For all TRACE-eligible securities, 

approximately 33% of all transaction reports are 

received via CTCI, which consists of 23% submitted 

by members with direct CTCI connections and 10% 

by service bureaus connected via CTCI. 

6For example, members may report trades to the 

recently approved second FINRA/Nasdaq Trade 

Reporting Facility via FIX but firms will not have 

the option to report trades via CTCI. See Securities 

Exchange Act Release No. 83082 (April 20, 2018), 

83 FR 18379 (April 26, 2018) (Notice of Filing of 

File No. SR–FINRA–2018–013). 

7FINRA will be eliminating CTCI as a means of 

connectivity for reporting to all FINRA trade 

reporting facilities. 

8 In addition to general outreach (industry-wide 

calls and a Technical Notice), FINRA will contact 

each individual firm that directly reports to TRACE 

via CTCI by email and telephone to provide 

information and assistance in connection with the 

migration. 

9 15 U.S.C. 78o–3(b)(6). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–18164 Filed 8–22–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83868; File No. SR–FINRA– 

2018–030] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of a 

Proposed Rule Change To Amend 

FINRA Rule 7730 (Trade Reporting and 

Compliance Engine (TRACE)) To 

Remove Computer-to-Computer 

Interface as a Technological Option for 

TRACE Reporting 

August 17, 2018. 

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 August 

15, 2018, 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to amend FINRA 

Rule 7730 to modify the technological 

connectivity options available to 

members for reporting transactions to 

TRACE. 

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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

FINRA is proposing to amend Rule 

7730 (Trade Reporting and Compliance 

Engine (TRACE)) to remove Computerto-Computer Interface (‘‘CTCI’’) as a 

technological means of connectivity for 

use in reporting transactions to TRACE. 

Technology and connectivity options 

have evolved since the inception of the 

TRACE system (at which time CTCI, 

rather than Financial Information 

eXchange (‘‘FIX’’), was made available 

for TRACE reporting purposes).3 FINRA 

has determined that it is now 

appropriate to remove CTCI—a Nasdaq 

proprietary protocol—as a means of 

connectivity. Accordingly, firms would 

be required to report transactions to 

TRACE using one of the remaining 

currently available options: (i) Web 

browser access; (ii) FIX line access; or 

(iii) indirectly via third-party 

intermediaries (e.g., service bureaus).4

FINRA notes that FIX—an industry 

standard protocol—is an immediately 

available and viable alternative to CTCI 

that already is widely used by members. 

Since adding FIX as a protocol for 

transaction reporting to TRACE in 2011 

for Securitized Products (and for 

corporates and Agency Debt Securities 

in 2012), approximately two thirds of 

firms with direct connections, and half 

of the service bureaus, have opted to 

migrate from CTCI to FIX. In fact, the 

majority of members that report trades 

to TRACE currently connect via FIX,5

and FINRA believes that an increasing 

amount of firms and service bureaus 

will continue to migrate to FIX.6 FINRA 

also believes that removing CTCI as a 

means of connectivity will reduce 

operational overhead and risk for 

FINRA. 

Accordingly, FINRA is proposing to 

amend Rule 7730 to remove CTCI as a 

means of connectivity for members to 

report transactions to TRACE.7 FINRA 

intends to provide ample time, until 

February 3, 2020, to allow firms that 

still use CTCI as a means of connectivity 

to migrate, and will permit members to 

migrate at any point throughout the 

implementation period. During that 

timeframe, FINRA also will engage in 

extensive outreach with the industry to 

assist in migration awareness and 

efforts.8

If the Commission approves the 

proposed rule change, the effective date 

of the proposed rule change will be 

February 3, 2020. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,9 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. 

FINRA is proposing to amend Rule 

7730 to remove CTCI as a means of 

connectivity for members to report 

transactions to TRACE. FINRA does not 

believe the proposed rule change will 

have a significant impact, as a majority 

of members already use FIX as a means 

of connectivity to report trades to 

TRACE, and FINRA believes that an 

increasing amount of members and 

service providers are migrating to 

exclusive use of FIX. FIX is an industry 

standard protocol that is an immediately 

available and viable alternative for the 

minority of members who directly use 

CTCI as a means of connectivity to 

report transactions to TRACE. 


daltland on DSKBBV9HB2PROD with NOTICES
42742 Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices 

10See supra note 5. 

11At the time of this filing, 309 members report 

to TRACE via CTCI or FIX (either directly or 

indirectly). 

12The programming costs that these firms incur 

would vary due to a number of factors, including 

existing expertise. 

13FINRA also should realize cost savings as a 

result of the proposal, since it no longer would need 

to maintain a CTCI protocol. 14See supra note 6. 

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 rule change, the economic 

baseline, the economic impact, and the 

alternatives considered. 

Regulatory Need 

Rule 7730 provides that members may 

report transactions to TRACE via CTCI 

protocol. Due to technological advances, 

FINRA is proposing to discontinue 

supporting CTCI as means of 

connectivity for members to report 

transactions. Therefore, FINRA is 

proposing to amend Rule 7730 to reflect 

this change. 

Economic Baseline 

The baseline for the proposed 

amendment is current Rule 7730, which 

allows members to report to TRACE via 

(1) CTCI, (2) FIX, (3) web browser, or (4) 

indirectly via a third party intermediary. 

Presently, 32 members directly report 

transactions to TRACE via CTCI and 61 

members directly report transactions to 

TRACE via FIX. In addition, five service 

bureaus report transactions to TRACE 

via FIX (on behalf of 25 members), and 

five service bureaus report transactions 

to TRACE via CTCI (on behalf of 191 

members).10 Firms reporting via either 

CTCI or FIX are charged $25/month to 

do so. Firms that report via a web 

browser are charged $20/month per user 

ID. For all TRACE-eligible securities, 

approximately 33% of all transaction 

reports are received via CTCI, which 

consists of 23% submitted by members 

with direct CTCI connections and 10% 

by service bureaus connected via CTCI. 

Economic Impact 

The proposal would apply equally to 

all members who report transactions to 

TRACE. However, there is no impact to 

firms that currently report via FIX or a 

web browser. Only firms reporting via 

CTCI would incur additional costs as a 

result of the proposed rule change. 

There are 223 members that use CTCI 

(either directly or indirectly) for TRACE 

reporting purposes.11 However, the 

majority of these members (191) are 

indirectly impacted—i.e., those who 

report through a service bureau—since 

most of the work to migrate to the FIX 

protocol will be performed by the 

service bureaus. Although the service 

bureaus may choose to pass some or all 

of the cost of reprogramming on to the 

member firms, the costs would be 

spread across these firms. 

The 32 members reporting directly via 

their own CTCI connection would incur 

costs associated with reporting via a 

new method. These members would 

face a tradeoff between greater upfront 

costs and on-going efficiencies. The 

development of a compliant FIX 

submission protocol would require upfront investment, but could provide 

cost-saving efficiency over time.12 A 

firm that chooses not to replace CTCI 

with FIX, but instead chooses to submit 

their trades via web browser access, will 

require a more limited initial 

investment, but relatively more on-going 

cost. Presumably, firms will choose a 

new reporting method that minimizes 

their overall costs or maximizes their 

efficiency. Anecdotally, FINRA 

understands that some firms are 

contemplating discontinuing use of 

CTCI and migrating to FIX. For these 

firms, however, the proposal may result 

in them incurring certain costs sooner 

than planned. 

For FINRA, each protocol type 

requires maintenance and support, and 

maintaining two protocols increases 

operational risk.13 There is inherent risk 

associated with supporting any 

information technology system, 

including risk of an operational failure. 

Since CTCI currently is used to collect 

transaction information, an operational 

event could negatively impact any 

market stakeholder that uses 

disseminated transaction information. 

Thus, a benefit of this proposal would 

be to eliminate risk associated with 

supporting CTCI. Since an operational 

event could harm the integrity of the 

market (by resulting in information 

asymmetry), this benefit should accrue 

to all market stakeholders. Thus, it is 

FINRA’s view that the benefits of the 

amendment outweigh any associated 

cost. 

Alternatives Considered 

FINRA considered maintaining the 

status quo and continuing to support 

CTCI. However, given the decreased 

reliance on the protocol and that the 

owner of the protocol does not intend to 

support it for its new facility,14 FINRA 

determined that it is now appropriate to 

retire the protocol for the purpose of 

reporting transactions to FINRA 

facilities. 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FINRA–2018–030 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–2018–030. 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 (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices 42743 

15 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(6). 

5Each capitalized term not otherwise defined 

herein has its respective meaning as set forth in the 

Rules, By-Laws and Organization Certificate of DTC 

(the ‘‘Rules’’), available at http://www.dtcc.com/ 

legal/rules-and-procedures.aspx; the DTC 

Operational Arrangements (Necessary for Securities 

to Become and Remain Eligible for DTC Services) 

(‘‘Operational Arrangements’’), available at http://

www.dtcc.com/∼/media/Files/Downloads/legal/ 

issue-eligibility/eligibility/operationalarrangements.pdf; the Distributions Service Guide 

(the ‘‘Distributions Guide’’), available at http://

www.dtcc.com/∼/media/Files/Downloads/legal/ 

service-guides/Service%20Guide

%20Distributions.pdf; and the Guide to the 2018 

DTC Fee Schedule (‘‘Fee Guide’’), available at 

http://www.dtcc.com/∼/media/Files/Downloads/ 

legal/fee-guides/dtcfeeguide.pdf. 

6The proposed rule changes with respect to the 

Fee Guide would apply to Treasury Shares or 

Repurchased Debt Securities position adjustments 

in connection with distributions with a record date 

as well as to distributions with an effective date 

(i.e., mandatory corporate actions). For information 

on the process for reducing payment on Treasury 

Shares or Repurchased Debt Securities in 

connection with an effective date distribution, see 

Operational Arrangements, supra note 5, at 42–43. 

7 DTC also maintains internal records for 

scheduled fixed rate interest and principal 

payments. 

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 

10:00 a.m. and 3:00 p.m. Copies of such 

filing also will be available for 

inspection and copying at the principal 

office of FINRA. All comments received 

will be posted without change. Persons 

submitting comments are cautioned that 

we do not redact or edit personal 

identifying information from comment 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–FINRA– 

2018–030, and should be submitted on 

or before September 13, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–18156 Filed 8–22–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83871; File No. SR–DTC– 

2018–007] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend the 

Process of the Reduction of Dividend 

or Interest Payments to a Participant 

on Treasury Shares or Repurchased 

Debt Securities 

August 17, 2018. 

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 August 9, 

2018, The Depository Trust Company 

(‘‘DTC’’) 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 the clearing 

agency. DTC filed the proposed rule 

change pursuant to Section 19(b)(3)(A) 

of the Act 3 and Rule 19b–4(f)(6) 4

thereunder. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change of DTC 

would amend the Operational 

Arrangements and the Distributions 

Guide‘‘ 5 to streamline the process for 

reducing payment to a Participant of a 

dividend or interest payment with 

respect to an equity or debt security, 

when such Participant held, on the 

record date for the distribution: (i) 

Shares of the security that had been 

repurchased by the issuer of the security 

(‘‘Treasury Shares’’) or (ii) debt that had 

been repurchased by the issuer of the 

debt (‘‘Repurchased Debt Securities’’). 

Specifically, DTC proposes to provide 

functionality to Participants so that a 

Participant that held Treasury Shares or 

Repurchased Debt Securities on the 

record date would use the Corporate 

Actions Web (‘‘CA Web’’) to reduce its 

entitlement to the distribution by the 

amount attributable to the Treasury 

Shares or Repurchased Debt Securities. 

The proposed rule change would also 

amend the Fee Guide to modify and 

clarify the fees associated with Treasury 

Shares or Repurchased Debt Securities 

adjustments.6 In addition, DTC would 

make ministerial and clarifying changes 

to the Operational Arrangements and 

the Fee Guide, as discussed below. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency 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. The 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

The proposed rule change would 

amend the Operational Arrangements 

and the Distributions Guide to 

streamline the process for reducing 

payment to a Participant of a dividend 

or interest payment with respect to an 

equity or debt security, when such 

Participant held, on the record date for 

the distribution, Treasury Shares or 

Repurchased Debt Securities. 

Specifically, DTC proposes to provide 

functionality to Participants so that a 

Participant that held Treasury Shares or 

Repurchased Debt Securities on the 

record date would use the CA Web to 

reduce its entitlement to the distribution 

by the amount attributable to the 

Treasury Shares or Repurchased Debt 

Securities. The proposed rule change 

would also amend the Fee Guide to 

modify and clarify the fees associated 

with Treasury Shares or Repurchased 

Debt Securities adjustments. In 

addition, DTC would make ministerial 

and clarifying changes to the 

Operational Arrangements and the Fee 

Guide, as discussed below. 

(i) Background 

A. Dividend and Interest Payments 

DTC receives information on dividend 

and interest payment distributions 

(each, an ‘‘announcement’’) from the 

issuer, the transfer agent or paying agent 

of the issuer (each, an ‘‘Agent’’), 

exchanges, trustees, and various other 

industry sources.7 An announcement of 

a distribution typically includes, among 

other things, a security description and 

CUSIP, record date, payable date, and 

either the rate per share for a dividend 

or the interest rate per $1,000 principal 

amount. DTC uses the information to 


daltland on DSKBBV9HB2PROD with NOTICES