Federal Register / Vol. 77, No. 76 / Thursday, April 19, 2012 / Notices 23521 

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

2 17 CFR 240.19b–4. 

3A QCC Order is comprised of an order to buy 

or sell at least 1000 contracts that is identified as 

being part of a qualified contingent trade, as that 

term is defined in Rule 1080(o)(3), coupled with a 

contra-side order to buy or sell an equal number of 

contracts. The QCC Order must be executed at a 

price at or between the National Best Bid and Offer 

and be rejected if a Customer order is resting on the 

Exchange book at the same price. A QCC Order 

shall only be submitted electronically from off the 

floor to the PHLX XL II System. See Rule 1080(o). 

See also Securities Exchange Act Release No. 64249 

(April 7, 2011), 76 FR 20773 (April 13, 2011) (SR– 

Phlx–2011–47) (a rule change to establish a QCC 

Order to facilitate the execution of stock/option 

Qualified Contingent Trades (‘‘QCTs’’) that satisfy 

the requirements of the trade through exemption in 

connection with Rule 611(d) of the Regulation 

NMS). 

4A Floor QCC Order must: (i) Be for at least 1,000 

contracts; (ii) meet the six requirements of Rule 

1080(o)(3) which are modeled on the QCT 

Exemption; (iii) be executed at a price at or between 

the National Best Bid and Offer (‘‘NBBO’’); and (iv) 

be rejected if a Customer order is resting on the 

Exchange book at the same price. In order to satisfy 

the 1,000-contract requirement, a Floor QCC Order 

must be for 1,000 contracts and could not be, for 

example, two 500-contract orders or two 500- 

contract legs. See Rule 1064(e). See also Securities 

Exchange Act Release No. 64688 (June 16, 2011), 76 

FR 36606 (June 22, 2011) (SR–Phlx–2011–56). 

5A ‘‘Market Maker’’ includes Specialists (see 

Rule 1020) and Registered Options Traders 

(‘‘ROTs’’) (Rule 1014(b)(i) and (ii), which includes 

Streaming Quote Traders (‘‘SQTs’’) (see Rule 

1014(b)(ii)(A)) and Remote Streaming Quote 

Traders (‘‘RSQTs’’) (see Rule 1014(b)(ii)(B)). 

Directed Participants are also Market Makers. 

6A Directed Participant is a Specialist, SQT, or 

RSQT that executes a customer order that is 

directed to them by an Order Flow Provider and is 

executed electronically on PHLX XL II. 

7The Exchange defines a ‘‘professional’’ as any 

person or entity that (i) is not a broker or dealer in 

securities, and (ii) places more than 390 orders in 

listed options per day on average during a calendar 

month for its own beneficial account(s) (hereinafter 

‘‘Professional’’). 

8Section I of the Pricing Schedule is entitled 

‘‘Rebates and Fees for Adding and Removing 

Liquidity in Select Symbols.’’ The Section I fees 

and rebates are applicable to certain Select Symbols 

which are defined in that section. 

9Section II of the Pricing Schedule is entitled 

‘‘Equity Options Fees.’’ Section II includes options 

overlying equities, ETFs, ETNs, indexes and 

HOLDRS which are Multiply Listed. 

10QCC Transaction Fees for a Market Maker, 

Professional, Firm and Broker-Dealer are $0.20 per 

Continued 

Simon, 6432 General Green Way, 

Alexandria, VA 22312 or send an email 

to: PRA_Mailbox@sec.gov. Comments 

must be submitted to OMB within 30 

days of this notice. 

Dated: April 13, 2012. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9417 Filed 4–18–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold an Open Meeting 

on Wednesday, April 18, 2012 at 10 

a.m., in the Auditorium, Room L–002. 

The subject matter of the Open 

Meeting will be: 

The Commission will consider whether to 

adopt joint rules with the Commodity 

Futures Trading Commission relating to the 

definitions of ‘‘Swap Dealer,’’ ‘‘SecurityBased Swap Dealer,’’ ‘‘Major Swap 

Participant,’’ ‘‘Major Security-Based Swap 

Participant,’’ and ‘‘Eligible Contract 

Participant.’’ 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

Commissioner Walter, as duty officer, 

determined that no earlier notice thereof 

was possible. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact: The Office of the Secretary at 

(202) 551–5400. 

Dated: April 16, 2012. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2012–9525 Filed 4–17–12; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66800; File No. SR–Phlx– 

2012–47] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Qualified Contingent Cross Orders 

April 12, 2012. 

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 April 2, 

2012, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I, II, 

and III below, which Items have been 

prepared by the Exchange. 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 

The Exchange proposes to amend its 

Pricing Schedule to increase a rebate for 

Qualified Contingent Cross orders. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://nasdaqtrader.com/ 

micro.aspx?id=PHLXRulefilings, at the 

principal office of the Exchange, 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, the 

Exchange 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 

Exchange 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 

The purpose of the proposed rule 

change is to increase a certain rebate 

applicable to both electronic QCC 

Orders (‘‘eQCC’’) 3 and Floor QCC 

Orders 4 (collectively ‘‘QCC Orders’’). 

The Exchange believes that offering an 

increased rebate for executing in excess 

of 1,000,000 QCC Orders in a given 

month should create an additional 

incentive for market participants to 

execute a greater number of QCC Orders 

on the Exchange in Multiply Listed 

Securities. 

There are currently several categories 

of market participants: Customers, 

Market Makers,5 Directed Participants,6

Broker-Dealers, Firms and 

Professionals.7 The Exchange proposes 

to amend the current rebates applicable 

to both eQCC Orders and Floor QCC 

Orders for the above categories of 

market participants. The proposed 

amendment is applicable to both 

Sections I 8 and II 9 of the Pricing 

Schedule. Currently, the Exchange pays 

a rebate of $0.07 per contract on all 

qualifying executed QCC Orders up to 

1,000,000 contracts in a month. In 

addition, if a member exceeds 1,000,000 

contracts in a month of qualifying 

executed QCC Orders, the Exchange 

currently pays a rebate of $0.10 per 

contract on all qualifying executed QCC 

Orders, both eQCC and Floor QCC 

Orders, in a given month.10 The 

mstockstill on DSK4VPTVN1PROD with NOTICES

23522 Federal Register / Vol. 77, No. 76 / Thursday, April 19, 2012 / Notices 

contract. QCC Transaction Fees apply to QCC 

Orders, as defined in Exchange Rule 1080(o), and 

Floor QCC Orders, as defined in 1064(e). 

11A dividend strategy is defined as transactions 

done to achieve a dividend arbitrage involving the 

purchase, sale and exercise of in-the-money options 

of the same class, executed the first business day 

prior to the date on which the underlying stock goes 

ex-dividend. See Section II of the Pricing Schedule. 

12A merger strategy is defined as transactions 

done to achieve a merger arbitrage involving the 

purchase, sale and exercise of options of the same 

class and expiration date, executed the first 

business day prior to the date on which 

shareholders of record are required to elect their 

respective form of consideration, i.e., cash or stock. 

See Section II of the Pricing Schedule. 

13A short stock interest strategy is defined as 

transactions done to achieve a short stock interest 

arbitrage involving the purchase, sale and exercise 

of in-the-money options of the same class. See 

Section II of the Pricing Schedule. 

14Market Maker, Professional, Firm and BrokerDealer equity options transaction fees are capped at 

$1,000 per day for reversal and conversion 

strategies executed on the same trading day in the 

same options class. 

15The following transactions are not eligible for 

the $0.07 per contract rebate: (i) Customer-toCustomer; or (ii) a dividend, merger or short stock 

interest strategy and executions subject to the 

Reversal and Conversion Cap (as defined in Section 

II). 16Firms are subject to a maximum fee of $75,000 

(‘‘Monthly Firm Fee Cap’’). Firm equity option 

transaction fees and QCC Transaction Fees in the 

aggregate, for one billing month may not exceed the 

Monthly Firm Fee Cap per member organization 

when such members are trading in their own 

proprietary account. All dividend, merger, short 

stock interest and reversal and conversion strategy 

executions are excluded from the Monthly Firm Fee 

Cap. In addition, Market Makers that (i) are on the 

contra-side of an electronically-delivered and 

executed Customer order; and (ii) have reached the 

Monthly Market Maker Cap will be assessed a $0.07 

per contract fee, excluding PIXL Orders. For QCC 

Orders as defined in Exchange Rule 1080(o), and 

Floor QCC Orders, as defined in 1064(e), a Service 

Fee of $0.07 per side will apply once a Market 

Maker has reached the Monthly Market Maker Cap. 

This $0.07 Service Fee will apply to every contract 

side of the QCC Order and Floor QCC Order after 

a Market Maker has reached the Monthly Market 

Maker Cap. The Service Fee will not be assessed to 

a Market Maker that does not reach the Monthly 

Market Maker Cap in a particular calendar month. 

17Market Makers are currently subject to a 

Monthly Market Maker Cap of $550,000. The 

trading activity of separate Market Maker member 

organizations will be aggregated in calculating the 

Monthly Market Maker Cap if there is at least 75% 

common ownership between the member 

organizations. In addition, Market Makers that (i) 

are on the contra-side of an electronically-delivered 

and executed Customer order; and (ii) have reached 

the Monthly Market Maker Cap will be assessed a 

$0.07 per contract fee. 

18 15 U.S.C. 78f(b). 

19 15 U.S.C. 78f(b)(4). 

20The rebate does not apply to Singly Listed 

Securities. For purposes of this filing, a Singly 

Listed Option means an option that is only listed 

on the Exchange and is not listed by any other 

national securities exchange or is otherwise defined 

as a Singly Listed Option in the Pricing Schedule. 

See Section III of the Exchange’s Pricing Schedule 

entitled ’’Singly Listed Options.’’ 

21See NYSE Arca, Inc.’s (‘‘NYSE Arca’’) Fee 

Schedule. NYSE Arca pays a $0.10 per contract 

rebate for executed QCC orders entered by a Floor 

Broker. The Floor Broker Rebate for executed orders 

is $0.05 per contract side. 

22See ISE’s Schedule of Fees. ISE provides a 

rebate to members who reach a certain volume 

threshold in QCC orders and/or solicitation orders 

during a month. Once a member reaches the volume 

threshold, ISE pays a rebate to that member for all 

qualified contingent cross and solicitation traded 

contracts for that month. The rebate is paid to the 

member entering a qualifying order, i.e., a qualified 

contingent cross order and/or a solicitation order. 

The rebate applies to qualified contingent cross 

orders and solicitation orders in all symbols traded 

on the Exchange. Additionally, the threshold levels 

are based on the originating side. Specifically, the 

following rebates apply: for 0–199,999 originating 

contract sides ISE pays no rebate; for 200,000 to 

999,999 originating contract sides ISE pays $0.05 

per contract; for 1,000,000 to 1,599,999 originating 

contract sides ISE pays $0.08 per contract; and for 

Exchange does not offer a rebate on 

executed eQCC Orders or Floor QCC 

Orders where the transaction is either: 

(i) Customer-to-Customer; or (ii) a 

dividend,11 merger 12 or short stock 

interest strategy 13 and executions 

subject to the Reversal and Conversion 

Cap.14

The Exchange proposes to increase 

the current rebate paid to a member that 

exceeds 1,000,000 contracts in a month 

of qualifying executed QCC Orders, both 

eQCC and Floor QCC Orders, from $0.10 

per contract to $0.11 per contract to 

further incentivize members to execute 

a greater number of QCC Orders on the 

Exchange. For example, if a member 

executed 1,200,000 QCC Orders in April 

2012, and those QCC Orders were 

eligible orders in that they did not 

include Customer-to-Customer 

transactions or dividend, merger or 

short stock interest strategies or 

executions subject to the Reversal and 

Conversion Cap, that member would 

receive a rebate of $0.11 per contract on 

all 1,200,000 orders for April 2012. 

Therefore, depending on the number of 

executed eligible QCC Orders, a member 

would receive either a $0.07 or $0.11 

per contract rebate on all qualifying 

QCC Orders in a given month. 

With respect to a Floor QCC Order, 

the Exchange will continue to offer the 

rebate to the Floor Broker. The 

Exchange will continue to pay a rebate 

of $0.07 per contract on all qualifying 

executed QCC Orders up to 1,000,000 

contracts in a month; the Exchange is 

not amending the $0.07 rebate. The 

current exceptions to qualifying QCC 

Orders will remain the same.15

Currently, QCC Transaction Fees apply 

to Sections I and II of the Pricing 

Schedule and are subject to the Monthly 

Firm Fee Cap 16 and the Monthly Market 

Maker Cap.17 This will also remain the 

same. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Pricing Schedule 

is consistent with Section 6(b) of the 

Act 18 in general, and furthers the 

objectives of Section 6(b)(4) of the Act 19

in particular, in that it is an equitable 

allocation of reasonable fees and other 

charges among Exchange members. The 

Exchange also believes that there is an 

equitable allocation of reasonable 

rebates among Exchange members. 

The Exchange believes that it is 

reasonable to incentivize members to 

transact both eQCC Orders and Floor 

QCC Orders in Multiply Listed 

securities 20 by continuing to pay a 

tiered rebate of $0.07 per contract on all 

qualifying executed QCC Orders up to 

1,000,000 contracts in a month and to 

increase the rebate for members with 

qualifying executed QCC Orders 

exceeding 1,000,000 contracts in a 

month from $0.10 per contract to $0.11 

per contract. The Exchange believes that 

increasing the rebate for qualifying QCC 

Orders exceeding 1,000,000 contracts in 

a month from $0.10 to $0.11 per 

contract is reasonable because the 

Exchange would continue to pay a 

rebate on every executed contract QCC 

Order, as is the case today, while also 

incentivizing members to execute more 

than 1,000,000 qualifying executed QCC 

Orders to achieve a higher rebate on all 

contracts in a month. In other words, 

the proposal offers members an 

incentive to send a greater number of 

QCC Orders, while still paying a $0.07 

rebate below 1,000,000 contracts. The 

proposed increased rebate is within the 

range of rebates paid by other 

exchanges 21 and balances the 

Exchange’s desire to incentivize its 

members to send order flow to the 

Exchange while considering the costs 

attributable to offering such rebates. 

Further, all members have equal 

opportunity, depending on their chosen 

business model, to earn rebates for 

executing QCC Orders on the Exchange. 

The Exchange believes that it is 

equitable and not unfairly 

discriminatory to increase the rebate for 

executed QCC Orders to $0.11 per 

contract because all market participants 

will continue to be eligible for the $0.07 

rebate on qualifying QCC Orders, as 

they are today, unless they are able to 

exceed 1,000,000 contracts of qualifying 

executed QCC Orders in a given month, 

then the member would be entitled to a 

higher rebate of $0.11 per contract on all 

qualifying executed QCC Orders. This 

benefit is intended to incentivize 

members to transact a greater number of 

qualifying QCC Orders in order to take 

advantage of the higher rebate. 

Additionally, the proposed rebate 

increase is within the range of tiered 

rebates offered by the International 

Securities Exchange, LLC (‘‘ISE’’).22

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 76 / Thursday, April 19, 2012 / Notices 23523 

1,600,000+ originating contract sides ISE pays $0.10 

per contract. 

23Market Makers, Professionals, Firms and 

Broker-Dealers are assessed a QCC Transaction Fee 

of $0.20 per contract. 

24See Exchange Rule 1063(e). 

25 In May 2009 the Exchange enhanced the system 

and adopted corresponding rules referring to the 

system as ‘‘Phlx XL II.’’ See Securities Exchange Act 

Release No. 59995 (May 28, 2009), 74 FR 26750 

(June 3, 2009) (SR–Phlx–2009–32). 26 15 U.S.C. 78s(b)(3)(A)(ii). 

Also, all members are equally eligible to 

transact Multiply Listed securities. 

The Exchange believes it continues to 

be reasonable to not offer a rebate for 

eQCC Orders and Floor QCC Orders for 

Customer-to-Customer executions 

because members executing Customer 

orders are not assessed a QCC 

Transaction Fee 23 and therefore do not 

need to be incentivized to send QCC 

Orders to the Exchange. Likewise, the 

Exchange believes that it is reasonable 

to not offer a rebate for dividend, merger 

and short stock interest strategies and 

executions subject to the Reversal and 

Conversion Cap because the Exchange 

already provides a cap today on the 

transaction fees associated with these 

strategies and therefore does not believe 

an additional incentive is required. 

With respect to the Floor QCC Order, 

the Exchange will also continue to offer 

the rebate to the Floor Broker, including 

the proposed increase. The Floor Broker 

is in receipt of the Floor QCC Orders 

and enters those orders into the Floor 

Broker Management System 

(‘‘FBMS’’).24 The Exchange believes it is 

necessary from a competitive standpoint 

to offer this rebate to the executing Floor 

Broker on a Floor QCC Order. The 

Exchange expects that the rebate offered 

to executing Floor Brokers will allow 

them to continue to price their services 

at a level that will enable them to attract 

Floor QCC order flow from participants 

who would otherwise enter these orders 

electronically from off the floor to the 

PHLX XL II System 25 or choose another 

exchange. To the extent that Floor 

Brokers are able to attract these Floor 

QCC Orders, they will gain important 

information that will allow them to 

solicit the parties to the Floor QCC 

Orders for participation in other trades, 

which will in turn benefit all other 

Exchange participants through the 

additional liquidity and price discovery 

that may occur as a result. The 

Exchange believes that it continues to be 

equitable and not unfairly 

discriminatory to pay the rebate for 

Floor QCC Orders to Floor Brokers 

because the rebate would uniformly 

apply to all Floor QCC Orders entered 

by a Floor Broker into FBMS for 

execution based on volume. The rebate 

is not unfairly discriminatory to firms 

that enter eQCC Orders directly into 

PHLX XL II, because the transaction fees 

and rebates are the same whether the 

order is entered electronically or 

through a Floor Broker. In addition, 

pursuant to Exchange Rule 1080(o)(3), 

only Floor Brokers may enter a Floor 

QCC Order from the floor of the 

Exchange; therefore, providing the 

rebate to Floor Brokers does not 

discriminate against eQCC orders 

entered into PHLX XL II. Any 

participant is able to engage a rebatereceiving Floor Broker in a discussion 

surrounding the appropriate level of 

fees that they may be charged for 

entrusting the entry of the Floor QCC 

Order to the Floor Broker into FBMS for 

execution. The additional order flow 

attracted by this rebate should benefit 

all participants. The rebate is meant to 

assist Floor Brokers to recruit business 

on an agency basis. The Floor Broker 

may use all or part of the rebate to offset 

its fees. 

The Exchange operates in a highly 

competitive market comprised of nine 

U.S. options exchanges in which 

sophisticated and knowledgeable 

market participants readily can, and do, 

send order flow to competing exchanges 

if they deem fee levels and rebate 

opportunities at a particular exchange to 

be excessive. The Exchange believes 

that the proposed rebates for eQCC 

Orders and Floor QCC Orders must be 

competitive with rebates offered at other 

options exchanges. The Exchange 

believes that this competitive 

marketplace impacts the rebates and 

fees present on the Exchange today and 

influences the proposals set forth above. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.26 At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or 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 rulecomments@sec.gov. Please include File 

No. SR–Phlx–2012–47 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File No. 

SR–Phlx–2012–47. 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 Web site (http://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 Web site 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 such filing 

also will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

mstockstill on DSK4VPTVN1PROD with NOTICES

23524 Federal Register / Vol. 77, No. 76 / Thursday, April 19, 2012 / Notices 

27 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The terms TRACE–Eligible Security, Agency 

Pass-Through Mortgage-Backed Security, Specified 

Pool Transaction, Asset-Backed Security and To Be 

Announced (‘‘TBA’’) are defined in, respectively, 

Rule 6710(a), Rule 6710(v), Rule 6710(x), Rule 

6710(m) and Rule 6710(u). The definition of SBA– 

Backed ABS is proposed in Rule 6710(bb). 

4The proposed rule text assumes the SEC 

approval of File No. SR–FINRA–2012–020, which 

proposed amendments to the FINRA Rule 6700 

Series to provide for the dissemination of 

transactions in TRACE–Eligible Securities that are 

Agency Pass-Through Mortgage-Backed Securities 

that are traded TBA (‘‘MBS TBA transactions’’), 

subject to dissemination caps, and to reduce the 

reporting periods for such transactions. See 

Securities Exchange Act Release No. 66577 (March 

12, 2012), 77 FR 15827 (March 16, 2012) (Notice of 

Filing of File No. SR–FINRA–2012–020) (‘‘TBA 

proposal’’). 

5See supra note 4. The TBA proposal 

distinguished between MBS TBA transactions for 

good delivery (‘‘MBS TBA transactions GD’’) and 

not for good delivery (‘‘MBS TBA transactions 

NGD’’). In response to comments, FINRA proposed 

a longer period to timely report, and lower 

dissemination caps for, MBS TBA transactions NGD 

than the requirements proposed for MBS TBA 

transactions GD. 

information that you wish to make 

available publicly. All submissions 

should refer to File No. SR–Phlx–2012– 

47 and should be submitted on or before 

May 10, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9404 Filed 4–18–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66804; File No. SR–FINRA– 

2012–021] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to 

Post-Trade Transparency for Agency 

Pass-Through Mortgage-Backed 

Securities Traded in Specified Pool 

Transactions and SBA–Backed AssetBacked Securities Transactions 

April 13, 2012. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that, on April 2, 

2012, the Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘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 the 

FINRA Rule 6700 Series and Trade 

Reporting and Compliance Engine 

(‘‘TRACE’’) dissemination protocols 

regarding the reporting and 

dissemination of transactions in 

TRACE–Eligible Securities that are: (1) 

Agency Pass-Through Mortgage-Backed 

Securities traded in Specified Pool 

Transactions (‘‘MBS Specified Pool 

transactions’’) and (2) Asset-Backed 

Securities backed by loans guaranteed 

as to principal and interest by the Small 

Business Administration (‘‘SBA–Backed 

ABS’’) and traded either in Specified 

Pool Transactions or to be announced 

(‘‘TBA’’) (collectively, ‘‘SBA–Backed 

ABS transactions’’).3

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s Public Reference Room.4

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 March 1, 2012, FINRA filed the 

TBA proposal to provide for the 

dissemination of MBS TBA transactions, 

subject to dissemination caps, and 

concomitant reductions in the reporting 

periods for such transactions.5 FINRA is 

proposing to further expand 

transparency in the market for AssetBacked Securities in this proposed rule 

change, which provides for the 

dissemination of MBS Specified Pool 

and SBA–Backed ABS transactions, 

subject to dissemination caps, and 

concomitant reductions in the reporting 

periods for such transactions. 

FINRA proposes to amend Rule 6730 

to reduce, in two stages, the time frames 

to report MBS Specified Pool and SBA– 

Backed ABS transactions. FINRA also 

proposes minor clarifying amendments 

to Rule 6730(a)(3)(D) and (E) to specify 

that the reporting requirements set forth 

therein apply solely to MBS TBA 

transactions. In connection with such 

changes, FINRA proposes amendments 

to the definitions of ‘‘To Be Announced 

(‘TBA’),’’ ‘‘Specified Pool Transaction,’’ 

and ‘‘Agency Pass-Through MortgageBacked Security’’ and a new defined 

term, ‘‘SBA–Backed ABS.’’ Finally, 

FINRA proposes to amend Rule 6750 to 

provide for the dissemination of MBS 

Specified Pool and SBA–Backed ABS 

transactions, and proposes to establish, 

as part of TRACE dissemination 

protocols, a $10 million dissemination 

cap for such transactions. 

MBS Specified Pool Transactions 

Generally, Agency Pass-Through 

Mortgage-Backed Securities are traded 

either TBA or in Specified Pool 

Transactions as defined in Rule 6710(v) 

and (x), respectively. In MBS Specified 

Pool transactions, on the date of trade 

(trade date), the seller agrees to deliver 

to the buyer a specific security 

identifiable by a unique identification 

number, which is backed by a specific 

pool (or pools) of mortgage loans, or 

other Agency Pass-Through MortgageBacked Securities, or a combination of 

such assets. MBS Specified Pool 

transactions differ from MBS TBA 

transactions in that, on trade date, in an 

MBS TBA transaction, the security to be 

delivered is described (e.g., program, 

interest rate, type of residential 

mortgage, maturity) but is not 

specifically identified (i.e., does not 

have a specific unique identification 

number), and will not be identified until 

shortly before settlement. While the 

majority of Agency Pass-Through 

Mortgage-Backed Securities are traded 

TBA, the daily volume of MBS 

Specified Pool transactions represents 

significant economic activity in 

mortgage-related securities, and FINRA 

believes that additional transparency in 

such securities is appropriate. The 

reported transaction data shows that 

MBS Specified Pool transaction pricing 

is strongly correlated to the pricing of 

the substantially larger market in MBS 

TBA transactions. Moreover, the two 

market sectors exhibit similar trading 

characteristics. For example, 

approximately 98 percent of the total 

volume in MBS Specified Pool 

transactions occurs in securities backed 

by single-family mortgage loans. 

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