[Federal Register Volume 89, Number 17 (Thursday, January 25, 2024)]
[Notices]
[Pages 5034-5047]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-01395]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99404; File No. SR-FINRA-2024-004]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend 
FINRA Rule 6730 (Transaction Reporting) To Reduce the 15-Minute TRACE 
Reporting Timeframe to One Minute

January 19, 2024.
    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 January 11, 2024, 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.
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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 amend FINRA Rule 6730 to reduce the 15-minute 
TRACE reporting timeframe to one minute, with exceptions for member 
firms with de minimis reporting activity and for manual trades.
    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
(i) Background
    FINRA has collected and disseminated transaction information in 
fixed income securities through TRACE since 2002.\3\ Since the 
implementation of TRACE, the fixed income markets have changed 
dramatically, including a significant increase in the use of electronic 
trading platforms or other electronic communication protocols to 
facilitate the execution of transactions. With these changes, FINRA has 
been considering ways to modernize the reporting rules and provide for 
more timely, granular and informative data to enhance the value of 
disseminated transaction data.
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    \3\ See Securities Exchange Act Release No. 43873 (January 23, 
2001), 66 FR 8131 (January 29, 2001) (Order Approving File No. SR-
NASD-99-65).
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    FINRA rules specify the applicable outer-limit reporting timeframe 
for different types of TRACE-Eligible Securities,\4\ and these 
timeframes have been adjusted over time in line with changes in the 
markets. A 15-minute outer-limit reporting timeframe currently applies 
to most transactions \5\ in corporate bonds, agency debt securities,\6\ 
asset-backed securities (ABS) \7\ and agency pass-through mortgage-
backed securities (MBS) traded to-be-announced (TBA) for good delivery 
(GD).\8\ The 15-minute reporting

[[Page 5035]]

timeframe has been in place for corporate bonds since 2005, and later 
was implemented for agency debt, ABS, and MBS TBA GD.\9\
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    \4\ ``TRACE-Eligible Security'' means 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 paragraph (k) or a Government-Sponsored Enterprise as 
defined in paragraph (n); (3) a U.S. Treasury Security as defined in 
paragraph (p); or (4) a Foreign Sovereign Debt Security as defined 
in paragraph (kk). ``TRACE-Eligible Security'' does not include a 
debt security that is a Money Market Instrument as defined in 
paragraph (o). See Rule 6710(a).
    \5\ A ``List or Fixed Offering Price Transaction,'' as defined 
in Rule 6710(q), and a ``Takedown Transaction,'' as defined in Rule 
6710(r) are required to be reported to TRACE by the next business 
day (T+1). See Rule 6730(a)(2).
    \6\ ``Agency Debt Security'' means a debt security (i) issued or 
guaranteed by an Agency as defined in paragraph (k); (ii) issued or 
guaranteed by a Government-Sponsored Enterprise as defined in 
paragraph (n); or (iii) issued by a trust or other entity that was 
established or sponsored by a Government-Sponsored Enterprise for 
the purpose of issuing debt securities, where such enterprise 
provides collateral to the trust or other entity or retains a 
material net economic interest in the reference tranches associated 
with the securities issued by the trust or other entity. The term 
excludes a U.S. Treasury Security as defined in paragraph (p) and a 
Securitized Product as defined in paragraph (m), where an Agency or 
a Government-Sponsored Enterprise is the Securitizer as defined in 
paragraph (s) (or similar person), or the guarantor of the 
Securitized Product. See Rule 6710(l).
    \7\ ``Asset-Backed Security'' means a type of Securitized 
Product where the Asset-Backed Security is collateralized by any 
type of financial asset, such as a consumer or student loan, a 
lease, or a secured or unsecured receivable, and excludes: (i) a 
Securitized Product that is backed by residential or commercial 
mortgage loans, mortgage-backed securities, or other financial 
assets derivative of mortgage-backed securities; (ii) an SBA-Backed 
ABS as defined in paragraph (bb) traded To Be Announced as defined 
in paragraph (u) or in a Specified Pool Transaction as defined in 
paragraph (x); and (iii) a collateralized debt obligation. See Rule 
6710(cc).
    \8\ ``Agency Pass-Through Mortgage-Backed Security'' means a 
type of Securitized Product issued in conformity with a program of 
an Agency as defined in paragraph (k) or a Government-Sponsored 
Enterprise (GSE) as defined in paragraph (n), for which the timely 
payment of principal and interest is guaranteed by the Agency or 
GSE, representing ownership interest in a pool (or pools) of 
mortgage loans structured to ``pass through'' the principal and 
interest payments to the holders of the security on a pro rata 
basis. See Rule 6710(v). ``To Be Announced'' (TBA) means a 
transaction in an Agency Pass-Through Mortgage-Backed Security as 
defined in paragraph (v) or an SBA-Backed ABS as defined in 
paragraph (bb) where the parties agree that the seller will deliver 
to the buyer a pool or pool(s) of a specified face amount and 
meeting certain other criteria but the specific pool or pool(s) to 
be delivered at settlement is not specified at the Time of 
Execution, and includes TBA transactions ``for good delivery'' (GD) 
and TBA transactions ``not for good delivery'' (NGD). See Rule 
6710(u).
    \9\ In 2004, FINRA (then NASD) reduced the timeframe for 
reporting corporate bonds to within 15 minutes of the time of 
execution. See Securities Exchange Act Release No. 49845 (June 14, 
2004), 69 FR 35088 (June 23, 2004) (Order Approving File No. SR-
NASD-2004-057); see also Notice to Members 04-51 (July 2004). Agency 
debt has been subject to the 15-minute reporting timeframe since it 
became TRACE-Eligible in 2010. See Securities Exchange Act Release 
No. 60726 (September 28, 2009), 74 FR 50991 (October 2, 2009) (Order 
Approving File No. SR-FINRA-2009-010); see also Regulatory Notice 
09-57 (September 2009). MBS TBA GD became subject to the 15-minute 
reporting timeframe in 2013, and the reporting timeframe for ABS was 
reduced to 15 minutes in 2015. See Securities Exchange Act Release 
No. 66829 (April 18, 2012), 77 FR 24748 (April 25, 2012) (Order 
Approving File No. SR-FINRA-2012-020); Securities Exchange Act 
Release No. 71607 (February 24, 2014), 79 FR 11481 (February 28, 
2014) (Order Approving File No. SR-FINRA-2013-046); see also 
Regulatory Notices 12-26 (May 2012) and 14-34 (August 2014).
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    Thus, today, transactions in these securities are generally 
required to be reported as soon as practicable \10\ but no later than 
15 minutes from the time of execution, and FINRA publicly disseminates 
information on the transaction immediately upon receipt.\11\ As 
discussed in more detail below, FINRA has found that 82.9 percent of 
trades in the TRACE-Eligible Securities that are currently subject to 
the 15-minute outer-limit reporting timeframe were reported within one 
minute of execution. In light of the technological advances in the 
intervening 18 years since FINRA first adopted the 15-minute reporting 
requirement, including the increase in electronic trading, and 
consistent with FINRA's longstanding goals of increasing transparency 
and improving access to timely transaction data, FINRA is proposing 
updates to modernize the reporting timeframes and provide timelier 
transparency. FINRA will continue to assess its TRACE reporting 
requirements and member reporting and consider whether any adjustments 
to the one-minute requirement are warranted.
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    \10\ In 2015, the SEC approved amendments to FINRA rules to 
require firms to report transactions in TRACE-Eligible Securities as 
soon as practicable. See Securities Exchange Act Release No. 75782 
(August 28, 2015), 80 FR 53375 (September 3, 2015) (Order Approving 
File No. SR-FINRA 2015-025).
    \11\ FINRA Rule 6730(a)(1) sets forth the requirements for when 
trades executed during different time periods throughout the day 
must be reported to TRACE. Currently, corporate, agency, ABS, and 
MBS TBA GD transactions executed on a business day at or after 
12:00:00 a.m. Eastern Time (ET) through 7:59:59 a.m. ET must be 
reported the same day, no later than 15 minutes after the TRACE 
system opens. Transactions executed on a business day at or after 
8:00:00 a.m. ET through 6:29:59 p.m. ET must be reported as soon as 
practicable, but no later than 15 minutes of the Time of Execution, 
except for transactions executed on a business day less than 15 
minutes before 6:30 p.m. ET, which must be reported no later than 15 
minutes after the TRACE system opens the next day (and, if reported 
on T+1, designated ``as/of'' with the date of execution). Finally, 
transactions executed on a business day at or after 6:30:00 p.m. ET 
through 11:59:59 p.m. ET, or trades executed on a Saturday, a 
Sunday, a federal or religious holiday, or other day on which the 
TRACE system is not open at any time during that day, must be 
reported on the next business day, no later than 15 minutes after 
the TRACE system opens (and must be designated ``as/of'' and include 
the date of execution).
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(ii) Proposed Rule Change To Implement One-Minute Reporting
    FINRA is proposing amendments to Rule 6730 (Transaction Reporting) 
to reduce the trade reporting timeframe for securities currently 
subject to the 15-minute reporting outer limit to one minute, with 
exceptions for member firms with de minimis reporting activity and for 
manual trades, discussed further below. As is the case today, FINRA 
would make information on the transactions publicly available 
immediately upon receipt of the trade reports.
    Under existing Rule 6730(a)(1), transactions in corporate bonds, 
agency debt, ABS, and MBS TBA GD generally must be reported as soon as 
practicable, but no later than within 15 minutes of execution. 
Specifically, transactions executed on a business day at or after 
12:00:00 a.m. ET through 7:59:59 a.m. ET must be reported the same day 
no later than 15 minutes after the TRACE system opens. Transactions 
executed on a business day at or after 8:00:00 a.m. ET through 6:29:59 
p.m. ET must be reported no later than within 15 minutes of the Time of 
Execution, except for transactions executed on a business day less than 
15 minutes before 6:30 p.m. ET, which must be reported no later than 15 
minutes after the TRACE system opens the next day (and, if reported on 
T+1, designated ``as/of'' with the date of execution). Finally, 
transactions executed on a business day at or after 6:30:00 p.m. ET 
through 11:59:59 p.m. ET, or trades executed on a Saturday, a Sunday, a 
federal or religious holiday, or other day on which the TRACE system is 
not open at any time during that day, must be reported on the next 
business day no later than 15 minutes after the TRACE system opens (and 
must be designated ``as/of'' and include the date of execution).
    To provide more timely information about transactions in corporate 
bonds, agency debt, ABS, and MBS TBA GD, subject to the exceptions 
discussed below and as provided in Rule 6730(a)(2), FINRA is proposing 
to amend Rule 6730(a)(1) to reduce the trade reporting timeframe as 
follows. Amended Rule 6730(a)(1) would provide that transactions must 
be reported as soon as practicable, but no later than within one minute 
of the Time of Execution.\12\ Amended Rule 6730(a)(1)(B) would require 
that a transaction executed on a business day at or after 8:00:00 a.m. 
ET through 6:29:59 p.m. ET must be reported as soon as practicable, but 
no later than one minute from the Time of Execution, except that, a 
transaction executed on a business day less than one minute before 
6:30:00 p.m. ET, must be reported no later than 15 minutes after the 
TRACE system opens the next business day (T+1) (and, if reported on 
T+1, designated ``as/of'' with the date of execution). Any trades 
executed on a business day prior to the open of the TRACE system, on a 
business day at or after 6:30:00 p.m. ET through 11:59:59 p.m. ET, or 
on a Saturday, a Sunday, a federal or religious holiday or other day on 
which the TRACE system is not open at any time during that day would 
continue to be reportable as soon as practicable on the next business 
day (T+1), but no later than within 15 minutes after the TRACE system 
opens (and must be designated ``as/of,'' as appropriate, and include 
the date of execution).
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    \12\ Under Rule 6710(d), the ``Time of Execution'' generally 
means the time when the parties to a transaction agree to all of the 
terms of the transaction that are sufficient to calculate the dollar 
price of the trade. For transactions involving TRACE-Eligible 
Securities that are trading ``when issued'' on a yield basis, the 
``Time of Execution'' is when the yield for the transaction has been 
agreed to by the parties to the transaction.
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(iii) Exceptions From One-Minute Reporting
    FINRA is proposing two exceptions from the one-minute reporting 
timeframe for: (1) member firms with ``limited trading activity'' in 
the TRACE-Eligible Securities that are subject to one-minute reporting; 
and (2) manual trades.\13\
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    \13\ FINRA is also proposing a conforming amendment to 
Supplementary Material .03 to refer to the Rule generally rather 
than ``paragraph (a)'' to reflect that members reporting pursuant to 
one of the exceptions in new Supplementary Material .08 and .09 are 
still required to report their trades ``as soon as practicable.''

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[[Page 5036]]

Exception for Members With ``Limited Trading Activity''
    New Supplementary Material .08 would provide an exception to the 
one-minute reporting timeframe for members with ``limited trading 
activity.'' A member with ``limited trading activity'' would be defined 
as a member that, during one of the prior two calendar years, reported 
to TRACE fewer than 4,000 transactions in the TRACE-Eligible Securities 
that are subject to paragraphs (a)(1)(A) through (a)(1)(D) of Rule 6730 
(i.e., corporate bonds, agency debt, ABS and MBS TBA GD), including any 
manual trades. Supplementary Material .08(b) would require members 
relying on the exception to confirm annually their qualification for 
the exception.\14\ As outlined in Supplementary Material .08(c), 
members qualifying for the exception would be required to report these 
trades as soon as practicable, but no later than within 15 minutes of 
the Time of Execution (or in the case of a trade executed outside of 
TRACE system hours, less than 15 minutes before 6:30 p.m. ET, or on a 
Saturday, a Sunday, a federal or religious holiday, or other day on 
which the TRACE system is not open at any time during that day, as soon 
as practicable, but no later than within 15 minutes after the TRACE 
system opens the next business day (T+1)).
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    \14\ Evidence of this confirmation should be retained as part of 
the member's books and records; however, members eligible for the 
exception will not need to take affirmative steps to have their 
trade reports processed pursuant to the exception's 15-minute 
reporting timeframe (e.g., members eligible for the exception will 
not need to submit a certification of eligibility to FINRA or add a 
modifier or indicator to their trade reports).
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    Members that exceeded the 4,000-trade threshold two calendar years 
in a row would be required to comply with the one-minute reporting 
requirements of paragraphs (a)(1)(A) through (a)(1)(D) of the Rule 
beginning 90 days after the firm no longer meets the criteria for the 
exception (i.e., beginning 90 days after January 1 of the next calendar 
year). If a member's reporting activity subsequently dropped below the 
4,000-trade threshold, the member would once again be eligible for the 
exception. For example, a member that reported 3,000 trades in the 
relevant TRACE-Eligible Securities to TRACE in 2022 and then 4,150 
trades in 2023 would continue to be eligible for the exception in 2024; 
however, if the member then reported 4,100 trades in 2024, the member 
would be required to comply with the one-minute reporting requirements 
starting 90 days after January 1, 2025 (with January 1 being day one of 
90). If the member proceeded to report 3,500 trades in 2025, the member 
would once again be eligible for the exception from one-minute 
reporting for 2026 under the two-year lookback. FINRA believes that the 
two-year lookback period for eligibility for the exception will 
accommodate fluctuations in trading activity that may be due to unusual 
market-wide events or unique client demands.
Manual Trades Exception
    New Supplementary Material .09 would provide an exception for 
manual trades that would afford firms additional time to report 
transactions that are not electronic from end to end, as described 
further below. Where a trade qualifies for the manual trades exception, 
a 15-minute outer limit would apply for the first year following 
implementation; a 10-minute outer limit would apply for the second 
year; and a five-minute outer limit would apply thereafter.
    The manual trades exception would apply narrowly only to 
``transactions that are manually executed'' or where a ``member must 
manually enter any of the trade details or information necessary for 
reporting the trade through the TRAQS website or into a system that 
facilitates trade reporting to TRACE.'' Thus, a trade that requires 
manual intervention at any point to complete the trade execution or 
reporting process would qualify for the manual trades exception. In 
that regard, while an exhaustive list cannot be provided here, FINRA 
contemplates that the exception would be available for a variety of 
situations that meet the specified criteria, including, for example:
    <bullet> where a member executes a trade \15\ by manual or hybrid 
means, such as by telephone, email, or through a chat/messaging 
function,\16\ and subsequently must manually enter into a system that 
facilitates trade reporting all or some of the information required to 
book the trade and report it to TRACE;
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    \15\ As noted above, for purposes of Rule 6730, the reporting 
timeframe is measured from the Time of Execution as defined by Rule 
6710(d), which generally refers to the time that the parties have 
agreed to all of the terms of the transaction sufficient to 
calculate the dollar price of the trade (or yield, in the case of 
when-issued securities priced to a spread).
    \16\ FINRA reminds members of their obligation to retain these 
electronic communications as part of their books and records, 
consistent with FINRA and SEC recordkeeping requirements. See, e.g., 
Notice to Members 03-33 (July 2003).
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    <bullet> where allocations to individual accounts must be manually 
input in connection with a trade by a dually-registered broker-dealer/
investment adviser;
    <bullet> where an electronic trade is subject to manual review for 
risk management or regulatory compliance purposes and, as part of or 
following the review, the trade must be manually approved, amended, or 
released before the trade is reported to TRACE (e.g., a firm's risk 
management procedures require a secondary approver for trades over a 
certain threshold; a firm's best execution procedures require manually 
checking another market to confirm that a better price is not available 
to the customer);
    <bullet> where a member trades a bond for the first time and 
additional manual steps are necessary to set the bond up in the firm's 
systems to book and report the trade (e.g., entering the CUSIP number 
and associated bond data into the firm's system); and
    <bullet> where a member agrees to trade a basket of securities at a 
single price and manual action is required to calculate the price of 
component securities in the basket or to book and report the trade in 
component securities to TRACE.
    The above examples are illustrative of the types of circumstances 
in which, due to the manual nature of components of the trade execution 
or reporting process, reporting a transaction within one minute of the 
Time of Execution may be unfeasible, even where a member makes 
reasonable efforts to report the trade as soon as practicable (as 
required). FINRA also will assess members' trade reporting in 
connection with manual trades to determine whether the five-minute 
trade reporting timeframe (to become applicable after two years) is 
appropriate, and will be prepared to make adjustments, as necessary.
    FINRA has extensive experience and data regarding members' historic 
behaviors reporting transactions to TRACE under a myriad of scenarios. 
FINRA will be reviewing the use of the manual trades exception--members 
may not, in any case, purposely delay the execution or reporting of a 
transaction by handling any aspect of a trade manually or introducing 
manual steps following the Time of Execution. Additionally, in light of 
the overarching obligation to report trades as soon as practicable, 
members should consider the types of transactions in which they 
regularly engage and whether they can reasonably reduce the time 
between a trade's Time of Execution and its reporting, and more 
generally must make a good faith effort to report their trades as soon 
as practicable.
    In addition, FINRA proposes to amend Rule 6730(d)(4) to require 
that any member that executes or reports a trade manually append a 
manual trade

[[Page 5037]]

indicator to the trade report so that FINRA can identify manual trades. 
The new manual trade indicator would be required regardless of whether 
the member reported the manual trade outside of the one-minute 
timeframe in reliance on the manual trades exception, which would 
provide FINRA with important insights into manual trading and the use 
of the exception. The manual trade indicator would be used for 
regulatory purposes and would not be included in the TRACE data 
publicly disseminated.
    Finally, FINRA is proposing to amend Rule 6730(f) to provide that a 
pattern or practice of late reporting may be considered conduct 
inconsistent with high standards of commercial honor and just and 
equitable principles of trade, in violation of Rule 2010, absent 
``reasonable justification'' (in addition to the rule's existing 
reference to ``exceptional circumstances'').\17\ FINRA believes that 
the addition of ``reasonable justification'' as a relevant factor in 
FINRA's evaluation of a firm experiencing a pattern or practice of late 
reporting is appropriate given the proposed reduction in the trade 
reporting timeframe; \18\ for example, to enable FINRA to determine 
that reasonable justification exists due to circumstances that could 
not reasonably be anticipated or prevented and that could not be 
resolved by the firm within the one minute reporting timeframe.\19\ 
However, members must have sufficiently robust systems with adequate 
capability and capacity to enable them to report in accordance with 
FINRA rules; thus, recurring systems issues in a member firm's or a 
vendor's systems would not be considered reasonable justification or 
exceptional circumstances under Rule 6730(f) to excuse a pattern or 
practice of late trade reporting.\20\
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    \17\ See, e.g., Rule 6623 describing ``exceptional 
circumstances'' as instances of system failure by a member or 
service bureau, or unusual market conditions, such as extreme 
volatility in a security, or in the market as a whole.
    \18\ This proposed rule change would also make Rule 6730(f) 
consistent with other FINRA trade reporting rules that impose 
shorter reporting timeframes. See, e.g., Rule 6622(a)(4).
    \19\ As is the case today, late trade statistics regarding 
trades reported outside of the applicable timeframe would be 
reflected in the Report Cards available to members. FINRA would 
update its Report Cards to take into consideration the proposed 
exception for firms with de minimis reporting activity and for 
manual trades. In addition, FINRA plans to enhance its TRACE Report 
Cards to include metrics that will facilitate members' ability to 
track their eligibility for the de minimis exception. While these 
trade statistics will continue to be available to members on their 
TRACE Report Cards, these statistics are not publicly available.
    \20\ See, e.g., FINRA Trade Reporting Frequently Asked 
Questions, Q206.21 available at https://www.finra.org/filing-reporting/market-transparency-reporting/trade-reporting-faq.
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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,\21\ 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, to remove impediments to and perfect the mechanism 
of a free and open market, and, in general, to protect investors and 
the public interest.
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    \21\ 15 U.S.C. 78o-3(b)(6).
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    FINRA believes that reducing the reporting timeframe to as soon as 
practicable, but no later than within one minute from the time of 
execution for corporate, agency, ABS and MBS TBA GD transactions helps 
achieve the purposes of the Act. As discussed above, the 15-minute 
reporting timeframe has been in place for corporate bonds and agency 
debt securities since 2005. Since that time, the fixed income markets 
have changed dramatically, including a significant increase in the use 
of electronic trading platforms or other electronic communication 
protocols to facilitate the execution of transactions. With these 
changes, FINRA has been considering ways to modernize the rule and 
provide for more timely, granular and informative data to enhance the 
value of disseminated transaction data. FINRA believes that the 
proposed rule change helps achieve the purposes of the Act in that it 
will improve the timeliness of information reported to TRACE, thereby 
benefiting transparency and allowing investors and other market 
participants to obtain and evaluate more timely pricing information for 
these securities. FINRA also believes that the proposed exceptions from 
the one-minute reporting requirement for members with de minimis 
reporting activity and manual trades are appropriate in that they are 
tailored to balance the burdens on members with the benefits to 
transparency.

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, its potential economic impacts, including anticipated costs, 
benefits, and distributional and competitive effects, relative to the 
current baseline, and the alternatives considered in assessing how best 
to meet its regulatory objective.

[[Page 5038]]

    As described below in more detail, approximately 83 percent of 
transactions in TRACE-Eligible Securities currently subject to the 15-
minute reporting timeframe are reported within one minute of execution. 
However, there is significant variation in reporting timeframes within 
and across member firms of different sizes and across different 
products. The proposed de minimis and manual trades exceptions balance 
the benefits of timelier reporting with the potential costs of 
disrupting markets and disproportionally impacting less active and 
smaller participants. FINRA estimates that, as a result of this 
proposed rule change, after adjusting for the proposed de minimis 
exception, up to 16.4 percent of current annual trading volume, or 6.1 
million trades and 20 trillion dollars in par value, might potentially 
be reported faster (this represents an upper end estimate--impacted by 
the extent to which firms do or do not rely on the proposed manual 
trades exception with respect to such trades (manual trades are not 
currently identifiable as such in TRACE data)).\22\
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    \22\ See Discussion: Economic Impacts, Anticipated Benefits.
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Regulatory Need
    As discussed previously, over the last 18 years there have been 
significant advancements in the fixed income markets, and in 
recognition of those advancements, FINRA is proposing to reduce the 
TRACE trade reporting timeframe for transactions in all TRACE-Eligible 
Securities that currently are subject to a 15-minute reporting 
timeframe. Timelier reporting provides more timely transaction 
information to the market, supporting more effective price formation 
and potentially decreasing trading costs and increasing liquidity.
Economic Baseline
    The economic baseline stems from current Rule 6730, establishing a 
reporting requirement of as soon as practicable but no later than 
within 15 minutes of the Time of Execution. Factors that may affect the 
speed with which firms can report executions include, but are not 
limited to, security characteristics, recency of trading in a 
particular security, trading platform, execution method, reporting 
process and level of automation.
    Overall, in 2022 838 member firms reported trades in TRACE-Eligible 
Securities currently subject to the 15-minute reporting timeframe, with 
803, 443, 79, 216 and 173 member firms reporting trades in corporate 
bonds, agency debt, MBS TBA GD, equity-linked notes (ELNs) and ABS 
respectively.\23\ FINRA found that 83 percent of trades across TRACE-
Eligible Securities currently subject to the 15-minute reporting 
timeframe were reported within one minute of execution. Examining 
reporting times for these securities by individual reporters, FINRA 
found that within one minute: 43 percent of reporters submitted 75 
percent of their trades; 34 percent of reporters submitted 85 percent 
of their trades; and 18 percent of reporters submitted 95 percent of 
their trades.
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    \23\ FINRA aggregated reports across MPIDs (market participant 
identifier) belonging to the same CRD (central registration 
depository) number and excluded covered depository institutions.
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    Specifically, FINRA analyzed trade reporting times by dealers and 
alternative trading systems (ATSs) under the current 15-minute 
reporting timeframe using TRACE data from January 2022 through December 
2022.\24\ The analysis measured the time between the trade Time of 
Execution and report time (and in cases where reports were later 
corrected or canceled, to the time of the initial report). The analysis 
focused on transactions executed at or after 8:00 a.m. ET and before 
6:15 p.m. ET on business days, the time window during which trades must 
be reported on that day as soon as practicable, but no later than 
within 15 minutes of the Time of Execution.\25\ The sample excluded 
covered depository institutions' trade reports in MBS TBA GD and 
agency-issued fixed income securities, as they are subject to the 
Federal Reserve's rule rather than FINRA's rule.\26\
---------------------------------------------------------------------------

    \24\ All analysis used this sample period unless otherwise 
specified.
    \25\ See supra note 11.
    \26\ Covered depository institutions started to report to TRACE 
on September 1, 2022. In the first three quarters of 2023, reports 
by covered depository institutions represented 6.6 percent, 0.8 
percent and 0.7 percent of the total MBS TBA GD, agency debt and ABS 
trade reports, respectively.
---------------------------------------------------------------------------

Reporting Times Across Products
    FINRA examined the distribution of trade reports from one to 15 
minutes from the Time of Execution for corporate bonds, agency debt, 
MBS TBA GD, ELNs and ABS.\27\ Table 1 shows that corporate bonds and 
MBS TBA GD were, on average, reported the fastest among the products, 
with around 83 and 84 percent of the trades reported within one minute, 
respectively. Agency debt followed closely behind at 81 percent. ELNs 
were at 67 percent and ABS were at 52 percent of trades reported within 
one minute. Commenters, discussion with FINRA advisory committees, and 
outreach to members indicated that ELNs and ABS trading and reporting 
frequently involve manual handling of some aspect of the trade 
execution or reporting process.
---------------------------------------------------------------------------

    \27\ Corporate bond trades represented 88.9 percent of the 
37,252,591 total reports in the sample while MBS TBA GD, agency 
debt, ELN and ABS accounted for 7.4 percent, 2.8 percent, 0.5 
percent, and 0.3 percent, respectively.

                                                      Table 1--Reporting Times Across Product Types
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           All products
                 Minutes from execution                         (%)        Corporate (%)    Agency (%)    MBS TBA GD (%)      ELN (%)         ABS (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................            82.9            83.1            80.7            84.1            66.5            51.5
2.......................................................            91.7            91.7            92.4            93.8            70.9            66.9
3.......................................................            96.1            96.3            94.9            95.8            74.8            75.2
4.......................................................            97.0            97.3            96.0            96.7            76.3            80.5
5.......................................................            97.6            97.8            96.6            97.3            77.3            85.1
10......................................................            99.0            99.2            98.8            98.6            80.7            93.2
15......................................................            99.4            99.5            99.2            99.5            81.8            97.6
Share of Reports........................................           100.0            88.9             2.8             7.4             0.5             0.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

Reporting Time by Trade Size
    FINRA examined whether reporting timeframes differ across trade 
sizes. For certain products, large trades are more likely to be more 
complex or a voice trade, or otherwise require manual handling. FINRA 
examined the distribution of trade reports from one to 15 minutes from 
the Time of Execution

[[Page 5039]]

for trades with a par value of less than $1 million, greater than or 
equal to $1 million but less than $5 million, greater than or equal to 
$5 million but less than $10 million, greater than or equal to $10 
million but less than $25 million, and greater than or equal to $25 
million. Panel A of Table 2 shows that approximately 93 percent of 
reported trades were for less than $5 million, with 74 to 84 percent 
reported within one minute and 95 to 98 percent reported within five 
minutes. Similarly, for trades greater than or equal to $5 million, 77 
to 81 percent were reported within one minute and 95 to 96 percent were 
reported within five minutes.
    Panel B of Table 2 shows that, for corporate bonds and agency debt, 
smaller trades were reported faster while larger trades took longer to 
report. FINRA found that 84 percent of corporate bond trades smaller 
than $1 million were reported within one minute whereas 62 percent of 
trades greater than or equal to $25 million were reported within one 
minute. For agency debt, 84 percent of trades smaller than $1 million 
were reported within one minute whereas 44 percent of trades greater 
than or equal to $25 million were reported within one minute. Trade 
size did not appear to be strongly associated with reporting time for 
other products.\28\
---------------------------------------------------------------------------

    \28\ MBS TBA GD trades represented 96 percent of the trades 
larger than $25M and 82 percent of them were reported within one 
minute.

                                    Table 2--Reporting Time Across Trade Size
----------------------------------------------------------------------------------------------------------------
     Minutes from execution          <$1M (%)       $1-<$5M (%)    $5-<$10M (%)    $10-<$25M (%)    >=$25M (%)
----------------------------------------------------------------------------------------------------------------
                            Panel A: Reporting Time by Trade Size (Par Value Traded)
----------------------------------------------------------------------------------------------------------------
1...............................            84.1            74.3            81.0            77.3            81.0
2...............................            92.7            83.8            89.0            87.3            91.9
3...............................            96.8            91.0            93.7            92.6            94.6
4...............................            97.6            93.3            95.2            94.3            95.7
5...............................            98.0            94.8            96.2            95.4            96.4
10..............................            99.2            97.9            98.4            97.9            98.3
15..............................            99.4            98.9            99.2            99.1            99.2
Share of reports................            84.1             9.3             3.2             1.5             1.9
----------------------------------------------------------------------------------------------------------------
           Panel B: Percentages of Trades Reported Within One Minute by Trade Size (Par Value Traded)
----------------------------------------------------------------------------------------------------------------
Product:
    Corporate...................            84.3            73.1            65.8            64.8            61.7
    Agency......................            83.6            62.6            56.0            50.8            44.2
    MBS TBA GD..................            80.4            80.9            90.1            84.1            82.0
    ELN.........................            66.6            62.8            61.0            57.9            61.5
    ABS.........................            53.5            48.2            47.8            48.7            49.6
----------------------------------------------------------------------------------------------------------------

Reporting Time by Reporter Activity Level
    FINRA compared trade reporting times across firms with different 
levels of activity to assess how the potential burdens stemming from 
the proposed rule change would be distributed across firms. The 
analysis measured reporters' activity by number of trades in 2022 and 
assigned them to three activity groups: where a reporter's trades 
accounted for less than 0.01 percent, 0.01 through 0.1 percent, or 
greater than 0.1 percent of total reported trades.\29\ Table 3 shows 
that the distribution of par value traded was concentrated in more 
active reporters. Eighty-four different reporters were in the most 
active group (accounting for over 0.1 percent of reported trades each), 
and together their activity represented 95.5 percent of the total par 
value traded. There were 149 different reporters with 0.01 to 0.1 
percent of reported trades each and their reports accounted for 4.2 
percent of the total par value traded. The last activity group had 605 
different reporters with less than 0.01 percent of reported trades each 
and together their activity represented 0.3 percent of the par value 
traded.
---------------------------------------------------------------------------

    \29\ FINRA looked at finer distinctions of reporter activity 
level, but it did not yield additional insight.

                                                   Table 3--Reporting Times by Reporter Activity Level
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Reporters                 Reporters
                                                                                                                    reporting                 reporting
                                                                               Market       Market       Trades      at least      Trades      at least
                   Reporter activity level                      Number of      share      share (par    reported      95% of      reported      95% of
                                                                reporters      (trade     value) (%)   within one     trades    within five     trades
                                                                            counts) (%)                minute (%)   within one  minutes (%)  within five
                                                                                                                    minute (%)               minutes (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Activity Group 1--Reporters with >0.1% of Trade Counts.......           84         94.1         95.5         84.0         34.5         98.0         86.9
Activity Group 2--Reporters with 0.01 to 0.1 of Trade Counts.          149          4.9          4.2         67.7         14.8         91.7         55.7
Activity Group 3--Reporters with <0.01 of Trade Counts.......          605          0.9          0.3         50.8         17.0         86.2         48.6
All Reporters................................................          838        100.0        100.0         82.9         18.4         97.6         53.7
--------------------------------------------------------------------------------------------------------------------------------------------------------

    On average, the most active trade reporters reported their trades 
to TRACE more quickly. Specifically, 84 percent of trades executed by 
the most active reporters (with more than 0.1 percent of reported 
trades) were reported within

[[Page 5040]]

one minute, and 98 percent of their trades were reported within five 
minutes. In comparison, approximately 51 percent of trades executed by 
reporters with less than 0.01 percent of reported trades were reported 
within one minute, and 86 percent were reported within five minutes. 
FINRA notes that even less-active reporters reported at least some 
material portion of their trades within one minute.
    In addition, FINRA examined the reporting times by individual 
reporters by measuring the percentage of firms that reported at least 
95 percent of their trades within one minute. Overall, approximately 18 
percent of reporters submitted 95 percent of their trades within one 
minute. When examined by reporter activity level, 35 percent of 
reporters with greater than 0.1 percent of trade reports submitted 95 
percent of their trades within one minute, compared to 17 percent of 
reporters with less than 0.01 percent of trade reports. FINRA notes 
that most firms reported some material portion of their trades after 
one minute, regardless of their level of trading activity.
Reporting Time for After Hours Trades
    FINRA examined trades that were executed during TRACE system hours 
and compared the findings to trades that were executed outside of these 
hours, which are subject to different reporting timeframe requirements. 
Table 4 shows that trades executed and reported after hours represented 
only 1.18 percent of total par value. In all cases, these trades took 
longer to report. For instance, less than 21 percent of trades executed 
between 6:15 and 6:29 p.m. ET were reported within one minute,\30\ 
while just over 49 percent of trades executed between 6:29 p.m. and 
8:00 a.m. ET the next day or on non-business days were reported within 
one minute after the TRACE system opened.\31\
---------------------------------------------------------------------------

    \30\ Under the current rule, these trades can be reported either 
on the same day before TRACE closes or the next business day no 
later than 15 minutes after the TRACE system opens. Under the 
proposed rule change, such trades must be reported as soon as 
practicable on the same day, but no later than within one minute of 
the time of execution.
    \31\ Under the current and proposed rules, these trades must be 
reported as soon as practicable, but no later than 15 minutes after 
the TRACE system opens.

                                     Table 4--Reporting Times by Time of Day
----------------------------------------------------------------------------------------------------------------
                                                                                                   Time group 3:
                                                                                                    before 8:00
                                                                   Time group 1:   Time group 2:   a.m. or after
                     Minutes from execution                        8:00 a.m. to    6:15 p.m. to    6:29 p.m. ET
                                                                   6:15 p.m. ET    6:29 p.m. ET       or non-
                                                                        (%)             (%)       business day *
                                                                                                        (%)
----------------------------------------------------------------------------------------------------------------
1...............................................................            82.9            20.9            49.2
2...............................................................            91.7            26.3            81.4
3...............................................................            96.1            36.7            90.4
4...............................................................            97.0            57.1            92.9
5...............................................................            97.6            71.9            93.9
10..............................................................            99.0            96.2            96.6
15..............................................................            99.4            96.2            96.8
Share of Reports................................................            98.8             0.0             1.2
----------------------------------------------------------------------------------------------------------------
* For time group three, for trades before 8:00 a.m. ET, FINRA measured the reporting time from TRACE opening on
  the same business day; for trades after 6:29 p.m. ET or on non-business day, FINRA measured the reporting time
  from TRACE opening on the next business day.

Execution and Trade Reporting Scenarios
    FINRA examined several trading scenarios, described further below, 
where trading or reporting could involve manual processes.
    When a bond starts to trade, the security may not be on the member 
firm's security master (or on FINRA's security master), which requires 
firms to engage in a set-up process to facilitate execution or trade 
reporting. FINRA examined the reporting time for bonds when they first 
start to trade in the secondary market. Table 5 shows that in the 
three-day period after secondary market trading commenced in a newly 
issued bond, 63 percent of trades were reported within one minute, as 
compared to 83 percent for trades executed more than three days after 
the first trade. Longer reporting times were associated with the 
commencement of secondary market trading in newly issued bonds, but not 
in cases where a firm first started to trade a bond that was not new to 
market (but where the firm had not previously traded the security).

           Table 5--Reporting of Trades in Newly Issued Bonds
------------------------------------------------------------------------
                                            First three
         Minutes from execution             days of S1    All other days
                                            trading (%)         (%)
------------------------------------------------------------------------
1.......................................            63.1            83.3
2.......................................            77.3            91.9
3.......................................            83.5            96.3
4.......................................            86.3            97.2
5.......................................            88.0            97.8
10......................................            92.0            99.1
15......................................            93.5            99.5
Share of Reports........................             1.7            98.3
------------------------------------------------------------------------


[[Page 5041]]

    FINRA examined transaction reporting times for self-cleared trades 
as well as those cleared through third-party clearing firms and found 
that trades that are cleared through third-party clearing firms overall 
took longer to report. For trades cleared through a third party, 71 
percent were reported within one minute, as compared to 85 percent for 
self-cleared trades. FINRA found that trades through some third-party 
clearing firms were reported as fast as self-cleared trades. There were 
also significant variations in trade reporting time by correspondent 
firms through the same third-party clearing firm.

                      Table 6--Third-Party Clearing
------------------------------------------------------------------------
                                            Third party    Self-clearing
         Minutes from execution            clearing (%)         (%)
------------------------------------------------------------------------
1.......................................            71.4            85.2
2.......................................            91.9            91.6
3.......................................            96.0            96.1
4.......................................            97.1            97.0
5.......................................            97.7            97.6
10......................................            99.1            99.0
15......................................            99.4            99.4
Share of Reports........................            16.5            83.5
------------------------------------------------------------------------

    FINRA examined transaction reporting times for trades that were 
subsequently suballocated across multiple accounts and found that, for 
allocated trades,\32\ 68 percent were reported within one minute, as 
compared to 84 percent for other trades. FINRA found significant 
variation in reporting time for allocated trades by different 
reporters.\33\
---------------------------------------------------------------------------

    \32\ An allocation flag does not exist in TRACE, so FINRA used 
heuristics to identify those trades.
    \33\ Five out of 29 reporters that reported allocation trades 
were able to report 90 percent of their allocation trades within one 
minute. Seven more were able to report 90 percent of their 
allocation trades within five minutes.

                        Table 7--Allocated Trades
------------------------------------------------------------------------
                                                               Non-
         Minutes from execution           Allocation (%)  allocation (%)
------------------------------------------------------------------------
1.......................................            68.2            83.7
2.......................................            86.6            92.0
3.......................................            90.6            96.4
4.......................................            92.2            97.3
5.......................................            93.0            97.8
10......................................            97.7            99.1
15......................................            99.0            99.4
Share of Reports........................             5.2            94.8
------------------------------------------------------------------------

    FINRA examined transaction reporting times for basket or portfolio 
trades and found that overall, these trades take longer to report. For 
portfolio trades,\34\ 65 percent were reported within one minute, as 
compared to 85 percent for other trades. Within five minutes, 97.5 
percent of portfolio trades were reported, as compared to 97.7 percent 
for other trades. FINRA also examined the reporting time by portfolio 
size. While larger baskets do tend to be reported more slowly, FINRA 
observed a range of reporting times for portfolio trades within the 
same basket size band--for example, 57.0 percent of portfolio trades in 
the 300-1,000 securities band are reported within one minute and 20.1 
percent of portfolio trades in the 1,000+ securities band are reported 
within one minute.\35\ There were also significant variations in the 
reporting time of portfolio trades by different reporters. This 
suggests that other factors (e.g., the technology employed) besides the 
size of the portfolio trade may be driving the reporting timeframe.
---------------------------------------------------------------------------

    \34\ FINRA used heuristics to identify portfolio trades since a 
portfolio trade identifier did not exist before May 15, 2023.
    \35\ Over 99 percent of portfolio trades include a basket of 
less than 1,000 securities and the vast majority--nearly 85 
percent--are baskets of less than 300 securities. Of the nearly 85 
percent of portfolio trades for baskets of less than 300 securities, 
over 97.9 percent of these are reported within five minutes; 96.9 
percent of portfolio trades for baskets of between 300 and 1,000 
securities are reported within five minutes; and 40.0 percent of the 
0.69 percent of portfolio trades larger than 1,000 securities are 
reported within five minutes.

                        Table 8--Portfolio Trades
------------------------------------------------------------------------
                                             Portfolio     Non-portfolio
         Minutes from execution              trade (%)       trade (%)
------------------------------------------------------------------------
1.......................................            65.3            85.0
2.......................................            83.1            92.8
3.......................................            94.2            96.4
4.......................................            96.5            97.2

[[Page 5042]]

 
5.......................................            97.5            97.7
10......................................            99.1            99.1
15......................................            99.5            99.4
Share of Reports........................             9.5            90.5
------------------------------------------------------------------------

    FINRA analyzed the number of transactions executed on or through an 
ATS, which approximates a subset of electronically executed and 
reported transactions. ATS trades represented 28.1 percent of total 
trade reports during the sample period. Of those, 81.0 percent were 
reported within one minute and 93.9 percent were reported within two 
minutes. For non-ATS trades, which represented 71.9 percent of total 
reports (some of which may qualify for the phased-in five-minute 
reporting timeframe available for manual trades), 83.7 percent were 
reported within one minute and 96.9 percent were reported within five 
minutes.

                           Table 9--ATS Trades
------------------------------------------------------------------------
                                                           Non-ATS trade
         Minutes from execution            ATS trade (%)        (%)
------------------------------------------------------------------------
1.......................................            81.0            83.7
2.......................................            93.9            90.8
3.......................................            98.7            95.1
4.......................................            99.1            96.2
5.......................................            99.3            96.9
10......................................            99.7            98.7
15......................................            99.8            99.2
Share of Reports........................            28.1            71.9
------------------------------------------------------------------------

Economic Impacts
Anticipated Benefits
    The proposed reporting timeframe reduction would require members to 
adopt enhancements to their current trade reporting processes to 
facilitate timelier reporting for transactions that currently are not 
reported within one minute (in 2022, 82.9 percent of the trades 
executed after 8:00 a.m. and before 6:15 p.m. E.T. were reported within 
one minute of execution). The proposed rule change therefore likely 
would result in quicker reporting and thus dissemination of transaction 
information for at least a portion of the approximately 17 percent of 
transactions that are not currently reported within one minute of 
execution. FINRA estimates that, after adjusting for the proposed de 
minimis exception, up to 16.4 percent, or 6.1 million trades and 20 
trillion dollars in par value annually, might potentially be reported 
faster than today (these estimates would be adjusted further to account 
for manual trades--to the extent firms rely on the proposed exception 
with respect to such trades--which FINRA is currently unable to 
identify in the TRACE data).
    FINRA analyzed the number of transactions executed on or through an 
ATS, which approximates a subset of electronically executed and 
reported transactions for which the manual trades exception will not be 
applicable. ATS trades represented 28.1 percent of total reports during 
the sample period. Of those, 81.0 percent were reported within one 
minute and 93.9 percent were reported within two minutes. This 
indicates that the proposed rule change will likely result in at least 
an additional 5.3 percent (28.1 percent x (1-.81)) of total trades 
being reported within one minute (not accounting for the impact of the 
proposed de minimis exception). For the 71.9 percent non-ATS trades 
(some of which may qualify for the manual trades exception), 96.9 
percent were reported within five minutes. This indicates that the 
proposed rule change will likely result in at least another 2.2 percent 
(71.9 percent x (1-.969)) of total trades being reported within five 
minutes in three years (not accounting for the impact of the proposed 
de minimis exception).\36\
---------------------------------------------------------------------------

    \36\ FINRA also examined the reporting time for trades that were 
manually entered into the TRACE system through the TRAQS web 
interface rather than through the automated messaging protocol. The 
median time for web entry is four to five minutes.
---------------------------------------------------------------------------

    A reduction in the time between trade execution and price 
dissemination would enhance transparency in the fixed income market and 
is consistent with the purposes of TRACE. Timelier reporting would 
allow FINRA to provide more timely pricing and other transaction 
information to the market, which supports more efficient price 
formation. Timely reporting has also been shown to increase dealer 
market-making activities in the municipal markets.\37\ While members 
may benefit

[[Page 5043]]

directly from the expedited price discovery, investors are also likely 
to benefit from better execution prices from members. In particular, 
the proposed rule change would aid investors and other market 
participants in obtaining and evaluating pricing and other market 
information more quickly. For example, FINRA identified trades that 
fell into the one to 15-minute window after a prior trade of the same 
bond but executed before the prior trade was reported. These trades 
could have potentially benefited from the knowledge of the material 
terms of the prior (as yet unreported) trade had the prior trade been 
reported within one minute instead of 15 minutes.\38\ For corporate 
bonds, these trades represented 1.6 percent of the sample reports or 
3.4 percent of par value (not accounting for the impact of the proposed 
de minimis or manual trades exceptions).
---------------------------------------------------------------------------

    \37\ In the municipal bond market, research has shown that 
customer trade costs measured as effective spread decreased after 
the 2005 change in the trade reporting time requirement, which was 
from the end of a trading day to 15 minutes after execution. To the 
extent that more timely reporting may have a similar impact on other 
fixed income markets, FINRA expects that shortening the reporting 
timeframe would reduce customer trading costs. Timely reporting has 
also been shown to increase dealer market-making activities in the 
municipal markets, indicated by an increase in the overnight and 
over-the-week dealer capital committed to inventory, an increase in 
the number of dealers involved in completing a round-trip 
transaction, and more round-trip transactions that involve inventory 
taking. No similar studies were done in the corporate bond market, 
possibly due to the fact that the previous reporting timeframe 
reduction for corporate bonds coincided with other TRACE rule 
changes, so the effect was difficult to isolate. See Erik R. Sirri, 
Report on Secondary Market Trading in the Municipal Securities 
Market, July 2014 (Research Paper, Municipal Securities Rulemaking 
Board), https://www.msrb.org/sites/default/files/2022-09/MSRB-Report-on-Secondary-Market-Trading-in-the-Municipal-Securities-Market.pdf; John Chalmers, Yu (Steve) Liu & Z. Jay Wang, The 
Differences a Day Makes: Timely Disclosure and Trading Efficiency in 
the Muni Market, 139(1) Journal of Financial Economics 313-335 
(2021).
    \38\ The analysis excluded trades by a reporter that was also a 
party to the prior trade.
---------------------------------------------------------------------------

    Large trades took longer on average to report than smaller trades. 
Large trades may also have a greater impact on the direction of the 
market. To the extent the proposed rule change results in faster 
dissemination of pricing information for large trades, the market could 
benefit from earlier access to information that could be more 
indicative of market movement.\39\
---------------------------------------------------------------------------

    \39\ Faster reporting of large trades may also level the 
information playing field in the market between dealers and other 
investors. Research shows that investors obtained economically large 
cost reductions on offsetting trades of a block position by dealers 
that occurred after, relative to before, the report of the block 
trade. See Stacey E. Jacobsen & Kumar Venkataraman, Asymmetric 
Information and Receiving Investor Outcomes in the Block Market for 
Corporate Bonds (March 23, 2023), available at SSRN: https://ssrn.com/abstract=4398494 or http://dx.doi.org/10.2139/ssrn.4398494.
---------------------------------------------------------------------------

Anticipated Costs
    FINRA believes that the proposed rule change would likely result in 
direct and indirect costs for members to implement changes to their 
processes and systems for reporting transactions to TRACE within the 
new timeframes. While members currently using a third-party reporting 
service may incur less costs, as these costs will likely be borne 
largely by the third-party reporting service which may spread the costs 
across all of the reporting firms using its services, those firms that 
do not currently use a third-party reporting service may opt to do so 
if the costs would be lower than building or augmenting their own 
system. However, as discussed above, FINRA proposes to provide relief 
for members with respect to manual trades and for members with de 
minimis reporting activity, which should mitigate these costs. All 
members that execute or report a trade manually would incur costs to 
append the manual trade indicator.
    Most firms reported some material portion of their trades after one 
minute. This is true even for very active firms that may have a more 
sophisticated trade reporting infrastructure in place. For these 
trades, members may incur costs to modify their reporting systems and 
procedures to report more quickly and to monitor that the trades are 
reported in the required timeframe. The costs may be mitigated by the 
proposed relief for members with respect to manual trades and for 
members with de minimis reporting activity.
    Given current differences in access to trading and reporting 
technologies across firms, some firms may be impacted by the proposed 
rule change more than others. FINRA understands that larger and more 
active firms already employ reporting services and technologies to 
automate trade reporting and would be better positioned to absorb the 
costs of the proposal. Any impact on competition is likely to be 
limited, given the proposed exceptions described above. In particular, 
the de minimis exception would provide relief for those members for 
which the technological changes required may be more significant 
relative to their level of activity in this space. Based on 2022 data, 
the proposed de minimis threshold would provide relief to 640 (out of 
838 currently active) members that, in the aggregate, accounted for 
1.41 percent of trades or 0.43 percent of the total par value traded.
    Additionally, given trading in the fixed income products covered by 
the proposed rule change in many instances continues to involve manual 
intervention at some point to complete the trade execution or reporting 
process (e.g., trades executed by telephone, email, or chat or trades 
subject to manual review), requiring these trades to be reported in one 
minute could negatively impact market efficiency and competition. For 
example, customers might participate less in fixed income markets 
without the availability of voice brokerage services, or if these 
trades were pushed to electronic platforms, trading may become 
concentrated among fewer member firms, potentially reducing trading 
opportunities and liquidity. FINRA believes that the five-minute 
exception for manual trades, coupled with the phase-in period, will 
allow firms relying upon some manual components in their trading or 
reporting process to continue to trade in these markets while complying 
with the new requirements, and therefore limit the potential for a 
negative impact on these markets.
    Some firms close to exceeding the de minimis threshold may choose 
to reduce the number of trades to qualify for the exception. However, 
this may only happen infrequently given the two-calendar year lookback 
period. Coupled with the fact that members can again qualify for the 
exception and that members under the de minimis threshold accounted for 
only a very small portion of the market volume, FINRA expects that the 
impact on overall trading will be minimal. FINRA notes that as markets 
evolve or firms adjust to the new requirements, the number of dealers 
meeting the de minimis exception and the par value of their trades may 
change over time, even if the threshold for qualifying for the 
exception remains the same.
    Members qualifying for the de minimis exception will be exempted 
from the one-minute requirement for all of their trade reports, and 
therefore will not incur costs to modify their reporting procedures and 
systems to report more quickly. On the other hand, the proposed relief 
for manual trades will likely apply to only some reports of a firm. 
Thus, members that do not qualify for the de minimis exception--
depending upon the circumstances--would be required to incur costs to 
comply with the five-minute reporting requirement for manual trades and 
one-minute reporting requirement for other trades. All members that 
execute or report a trade manually would be required to append the 
manual trade indicator, and members relying on the manual trades 
exception would be required to document their eligibility for the 
relief.
    Depending on the relative costs of investing in systems to report 
in a timelier manner, members may opt to change their practices around 
executing and reporting trades to comply in ways other than improving 
the reporting process, and such modifications might have implications 
for the way in which a member operates its business and manages 
competing tasks. Members may also be reluctant to conduct trades for 
which it will be difficult to comply with the shortened reporting 
timeframe instead of making system changes necessary to comply. 
However, any indirect costs incurred as a result are bounded by the 
costs of improving the reporting process. FINRA expects that members 
will choose to improve their reporting process if it is more cost 
effective than other compliance approaches. The cost effectiveness of 
improving the reporting process through

[[Page 5044]]

direct investment is likely positively correlated with the percentage 
of a firm's trades subject to the shortened reporting timeframes. Those 
firms that find it less cost effective--because a small number of 
trades will be impacted--are more likely to qualify for the de minimis 
exception.
Alternatives Considered
    FINRA considered requiring members to report trades as soon as 
practicable but no later than five minutes from execution. In 2022, 
82.9 percent of trades were reported within one minute after a trade 
execution. By comparison, in 2022 more than 97.6 percent of trades were 
reported in five minutes or less. Accordingly, reducing the required 
reporting time to as soon as practicable but no later than five minutes 
would enhance the timeliness of up to only 2.4 percent of the trades as 
compared to 17.1 percent by moving to no later than one minute. FINRA 
believes a five-minute reporting requirement would not meaningfully 
advance the immediacy of information transparency for market 
participants.
    FINRA considered several alternatives to the threshold for the de 
minimis trading exception from the one-minute reporting requirement. 
First, FINRA considered basing the relief on the par value traded 
rather than the number of trade reports. A par value-based de minimis 
exception would require even less-active dealers to meet the one-minute 
reporting requirement if they engaged in significant aggregate dollar 
volume trading and thus this approach could result in more large trades 
being subject to the one-minute reporting requirement. However, FINRA 
believes that the number of trade reports submitted over the period is 
a more appropriate measurement. The number of trade reports tracks more 
closely the costs that firms incur when reporting and the necessary 
investments in speeding up their reporting. Additionally, the proposed 
exception (using the proposed 4,000-trade report threshold) would only 
impact a de minimis percent of par value traded. FINRA also considered 
a combination of the par value and the number of trades as the 
threshold for the de minimis exception, but that would have 
unnecessarily increased the complexity of the exception. FINRA also 
considered basing the exception on different levels of trading 
activity, for example, up to 10,000 trades. However, FINRA determined 
that a threshold above 4,000 trades would result in the loss of more 
timely information from members that trade significant volumes (74 
members reporting between 4,000 and 10,000 trades traded more than $1 
billion par value, with the highest par value traded being $452 
billion). Accordingly, FINRA believes that the scope of the proposed 
one-minute requirement will apply to firms that are active participants 
in the relevant TRACE-Eligible Securities and should be required to 
implement the reporting changes. Therefore, the proposed threshold for 
the de minimis exception (less than 4,000 trades during one of the 
prior two calendar years) will ensure that markets receive more timely 
information from more active firms.

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

    FINRA solicited comment on a proposal to reduce the 15-minute 
reporting timeframe to one minute in Regulatory Notice 22-17 (August 
2022). Forty-four comments were received in response to the Regulatory 
Notice. A copy of the Regulatory Notice is available on FINRA's website 
at http://www.finra.org. A list of the comment letters received in 
response to the Regulatory Notice is available on FINRA's website.\40\ 
Copies of the comment letters received in response to the Regulatory 
Notice are also available on FINRA's website. Three commenters 
expressed overall support for the proposal,\41\ while other commenters 
expressed concerns about the proposal. The comments are summarized 
below.
---------------------------------------------------------------------------

    \40\ See SR-FINRA-2024-004 (Form 19b-4, Exhibit 2b) for a list 
of abbreviations assigned to commenters (available on FINRA's 
website at http://www.finra.org). Commenters Anonymous, Barrientos, 
Coker, Dapena, Kienbaum, Moise, Purpura, Rogan, Seinfeld, Sosa, 
Steichen, and Tovar are collectively referred to as ``Individual 
Commenters.'' Commenter Crescent expressed its support of ASA's 
letter, which is referenced specifically below.
    \41\ See Dimensional; FIA PTG; HMA.
---------------------------------------------------------------------------

Small Firm Impact
    Commenters expressed concerns that implementation of the proposal 
would be costly for all member firms,\42\ but many commenters expressed 
particular concern that small member firms, including many minority, 
women, and veteran-owned broker-dealers, would be the most burdened by 
the implementation costs.\43\ Commenters believed that these firms 
would be most affected by the change (and stated that a significant 
portion of their trades are not already reported within or near one-
minute) and would have fewer resources to make changes needed to meet 
the new timeframe.\44\ Some of these commenters expressed concern that 
many small broker-dealers would exit the market for fixed income 
secondary market trading because of the high implementation and 
compliance costs, harming the smaller retail investors that depend on 
small member firms for access to the market.\45\
---------------------------------------------------------------------------

    \42\ See ASA; BDA; Beech; Colliers; Falcon Square; HJS; ICE 
Bonds; InspereX; ISC; NatAlliance; RBI; SIFMA; UPitt Clinic; Wiley.
    \43\ See Arkadios; ASA; BDA; Beech; Colliers; Falcon Square; IBI 
1 and 2; Individual Commenters; InspereX; ISC; NatAlliance; RBI; 
SIFMA; UPitt Clinic; VFM; Wiley.
    \44\ See Arkadios; BDA; Beech; Colliers; Falcon Square; IBI 1 
and 2; InspereX; Individual Commenters; ISC; NatAlliance; RBI; 
SIFMA; UPitt Clinic; VFM; Wiley.
    \45\ See Arkadios; BDA; IBI 1 and 2; Individual Commenters; ISC; 
SIFMA; UPitt Clinic; VFM.
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    To address these concerns, as described above, FINRA is proposing 
to provide an exception for members with de minimis reporting activity. 
FINRA believes that this exception, which would except firms with fewer 
than 4,000 transactions in the TRACE-Eligible Securities subject to 
paragraphs (a)(1)(A) through (a)(1)(D) of Rule 6730, is calibrated to 
provide relief to firms that engage in limited activity in the TRACE-
Eligible Securities subject to the proposed one-minute reporting 
timeframe, and therefore may not have systems in place that would 
enable reporting within one minute. Member firms with ``limited trading 
activity'' as defined in proposed Supplementary Material .08(a) would 
continue to be subject to the 15-minute outer limit reporting 
timeframe.
Reporting Feasibility
    Commenters identified several circumstances under which the nature 
of the execution or reporting process may make it unfeasible to report 
within one minute. In particular, commenters argued that manually 
executed or reported trades,\46\ including large trades that must then 
be manually allocated to multiple subaccounts \47\ and some complex 
transactions that involve multiple securities,\48\ cannot feasibly be 
reported within one-minute. Some commenters argued that reducing the 
reporting timeframe to one minute in these instances would threaten the 
viability of these types of trades, negatively impacting liquidity \49\ 
and harming the retail investors, who may not be accustomed to 
electronic trading, serviced by these firms.\50\ Commenters also raised 
other scenarios that they believe present operational obstacles to

[[Page 5045]]

reporting trades within one minute, such as where the security is not 
already in the firm's security master (or on FINRA's master list) due 
to the set-up process (internally or with FINRA),\51\ as well as trades 
executed when the TRACE system is not open that must be reported within 
one minute after the TRACE system re-opens the next trading day.\52\
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    \46\ See ASA; BDA; Beech; BMO CM; Cambridge; FIF; HJS; HTD; IBI 
1 and 2; ICI; InspereX; ISC; Lynch; SAMCO; Seaport; SIFMA; Wells 
Fargo; Wiley; WMBAA.
    \47\ See BDA; BetaNXT; SIFMA; Wells Fargo.
    \48\ See SAMCO; SIFMA; Wells Fargo.
    \49\ See IBI 1; ICI; SIFMA.
    \50\ See HJS; IBI 2; ISC; SIFMA.
    \51\ See Anonymous; ASA; BDA; BetaNXT; FIF; SAMCO; SIFMA; Wells 
Fargo.
    \52\ See FIF; SIFMA. FINRA notes that these trades would not be 
subject to the one-minute reporting timeframe under the proposed 
rule change and would continue to be subject to the current 15-
minute outer limit.
---------------------------------------------------------------------------

    With respect to commenters' concern that certain types of 
transactions cannot feasibly be reported within one minute, FINRA 
believes that the exception for manual trades included in the proposed 
rule change will adequately address these concerns. New Supplementary 
Material .09 would phase in a five-minute reporting standard for trades 
that involve manual intervention in the execution or reporting process. 
This exception would address commenters' concern that reducing the 
reporting timeframe to one minute would threaten the viability of 
manual trades. Similarly, based on feedback from commenters and 
outreach to members, FINRA understands that other types of trades 
raised by commenters, such as some allocation trades and portfolio or 
list trades, may involve manual intervention in either the execution or 
reporting process \53\ and, if so, would therefore qualify for the 
manual trades exception's extended reporting timeframe. In that regard, 
96.9 percent of non-ATS trades are already reported within five 
minutes; 97.5 percent of portfolio trades are already reported within 
five minutes; and 93 percent of allocation trades are already reported 
within five minutes. The phase-in period from implementation is 
intended to provide members with time to implement a reasonable process 
to comply with the reduced reporting timeframe with respect to their 
manual trades. Trades that do not qualify for the manual trades 
exception must be reported as soon as practical but no later than 
within one minute of the time of execution. As discussed above, FINRA 
has observed a range of reporting times for portfolio trades within the 
same basket size band \54\ and similar variation in reporting times for 
allocation trades depending on the reporter.\55\ This suggests that 
even large portfolio and allocation trades can be reported within one 
minute and other factors (e.g., the technology employed to execute or 
report the trade) contribute to the reporting timeframe.
---------------------------------------------------------------------------

    \53\ See SAMCO; SIFMA; Wells Fargo.
    \54\ For example, 57.0 percent of portfolio trades in the 300-
1,000 securities band were reported within one minute and 20.1 
percent of portfolio trades in the 1,000+ securities band were 
reported within one minute.
    \55\ Sixty-eight percent of allocated trades were reported 
within a minute, with five out of 29 members that reported 
allocation trades able to report 90 percent of their allocation 
trades within one minute.
---------------------------------------------------------------------------

    Commenters raised additional concerns that other operational 
obstacles might make reporting trades within one minute unfeasible. As 
mentioned above, FINRA believes many of the concerns raised should be 
addressed with the proposed exceptions; however, other instances 
described by commenters do not appear to warrant an exception. For 
example, with respect to comments that TRACE reporting through a third-
party clearing firm presents an operational obstacle to one minute 
reporting, FINRA has observed that 71 percent of third-party cleared 
trades are reported within one minute (as compared to 85 percent for 
self-cleared trades), and there are significant variations in trade 
reporting time by correspondent firms through the same third-party 
clearing firm, which suggests that other factors contribute to the 
reporting timeframe. FINRA notes that many smaller members rely on 
their third-party clearing firms to report trades to TRACE. Under the 
proposed rule change, members with ``limited trading activity'' would 
continue to be subject to a 15-minute outer limit reporting standard.
    With respect to trades in securities that are not already in the 
member firm's security master (or on FINRA's master list), FINRA 
believes that the proposed rule change's exception for manual trades 
should help alleviate commenters' concerns. FINRA understands that 
setting up a security in a firm's security master (or with FINRA) 
typically involves manual intervention. Thus, initial trades in such 
securities--where manual steps must be taken to set up the security at 
the firm or with FINRA before the trade(s) can be booked or reported--
would be subject to the phased-in five-minute reporting standard for 
manual trades rather than the one-minute standard. In addition, in 
response to commenters' concern regarding trades reportable to FINRA on 
the next business day, FINRA is proposing to retain a reporting 
timeframe of as soon as practicable but no later than within 15 minutes 
of when the TRACE system opens.
Market Impact
    While some commenters argued that the benefits associated with 
shortening the timeframe for trade reporting have not been sufficiently 
explained,\56\ FINRA agrees with other commenters that the proposed 
rule change will increase transparency,\57\ which has historically been 
shown to improve price discovery and reduce trading costs.\58\ FINRA 
believes that the proposed rule change's exceptions for members with de 
minimis reporting activity and for manual trades will mitigate the 
potential for the proposed rule change to have a negative impact on 
liquidity or execution quality.\59\ With respect to commenters' 
concerns that the more rapid dissemination of trades could negatively 
impact liquidity for block trades \60\ and benefit algorithmic traders 
at the expense of retail and institutional investors,\61\ FINRA 
believes the current trade dissemination caps effectively mitigate 
these concerns, and note that members already have an obligation under 
the current Rule to report trades as soon as practicable and are not 
permitted to delay the reporting (and thus dissemination) of trades.
---------------------------------------------------------------------------

    \56\ See Arkadios; ASA; BDA; Cambridge; Falcon Square; HJS; HTD; 
IBI 2; InspereX; ISC; RBI; SAMCO; SIFMA; TRADEliance; Wells Fargo.
    \57\ See Dimensional; FIA PTG; HMA.
    \58\ See Discussion: Economic Impacts, Anticipated Benefits.
    \59\ As discussed above, the proposed rule change's exception 
for members with ``limited trading activity'' should address 
commenters' concern that the proposal's implementation costs may 
cause many small firms to exit the fixed income market, negatively 
impacting liquidity. See Falcon Square; IBI 1 and 2; Individual 
Commenters; InspereX; ISC; SIFMA; VFM; Wiley. Likewise, FINRA 
believes that the manual trades exception should address commenters' 
concerns regarding the continued viability of manual trades and the 
ability to hedge large trades and trades in thinly traded 
securities, which FINRA understands are often executed manually. See 
IBI 1; ICI; SIFMA. Similarly, the exception for manual trades would 
provide an extended reporting timeframe to accommodate manual 
intervention in the trade execution or reporting process to conduct 
best execution and fair pricing reviews. See ASA; SIFMA.
    \60\ See ICI; SIFMA.
    \61\ See BMO CM; SIFMA; VFM.
---------------------------------------------------------------------------

    FINRA recognizes that covered depository institutions will not be 
subject to the proposed rule change.\62\ However, FINRA continues to 
believe that the proposed rule change is appropriate at this time. 
First, until recently, covered depository institutions did not report 
transactions to TRACE at all,\63\ and they are not subject to the TRACE 
reporting requirement for all TRACE-Eligible Securities. In addition, 
covered depository institutions do not

[[Page 5046]]

report a significant number of trades in agency debt since they began 
reporting to TRACE.\64\ While covered depository institutions are more 
active in the MBS TBA GD market, this activity has historically been 
concentrated in a few large institutions. FINRA believes that any 
potential competitive disadvantage is speculative. On balance, FINRA 
thinks the proposed rule change is appropriate and should improve the 
timing of market information.
---------------------------------------------------------------------------

    \62\ See InspereX; SIFMA.
    \63\ Covered depository institutions started to report to TRACE 
on September 1, 2022. See 86 FR 59716, 59717 (October 28, 2021).
    \64\ Covered depository institutions' transactions in ABS are 
limited to SBA-Backed ABS.
---------------------------------------------------------------------------

Other Issues
    While the proposed rule change may lead to an increase in reporting 
errors, corrections, and late reporting rates, particularly at the 
outset as members adapt to the proposed rule change's new 
standards,\65\ FINRA expects that the impact to members' accuracy and 
late reporting rates will largely be temporary, as accuracy and 
timeliness will increase as members adapt to the proposed rule change's 
new standards. FINRA also intends to provide members with a sufficient 
implementation timeframe to make the changes necessary to comply with 
the reduced reporting timeframe (for example, approximately within 18 
months from any SEC approval). As stated above, FINRA will announce the 
effective date of the proposed rule change in a Regulatory Notice.
---------------------------------------------------------------------------

    \65\ See Arkadios; BDA; Beech; BMO CM; Cambridge; HJS; HTD; IBI 
2; ICI; Individual Commenters; InspereX; SAMCO; Seaport; SIFMA; VFM.
---------------------------------------------------------------------------

    FINRA also believes that the extended reporting timeframes 
available for members with de minimis reporting activity and for manual 
trades will help mitigate these issues. FINRA likewise believes that 
the exception for manual trades will help mitigate commenters' concern 
that errors will be less likely to be corrected within the reporting 
timeframe as FINRA understands that trade report corrections often 
involve manual intervention (e.g., a customer calling or instant 
messaging/chatting to request a change to the trade, which change is 
then manually made to the trade ticket/booking entry).\66\ Under such 
circumstances, the trade would qualify for the extended reporting 
timeframe applicable to manual trades.\67\ Additionally, in the event a 
trade report correction cannot be completed within the applicable 
timeframe, FINRA has historically taken into account whether cancels 
and corrections are driving untimely reporting and the reason(s) for 
the cancels and corrections in monitoring members for compliance with 
the Rule and assessing whether a firm has a ``pattern or practice'' of 
late reporting. Accordingly, FINRA believes that potential issues 
related to errors, corrections, and late reporting will not be 
significant and do not outweigh the proposed rule change's potential 
benefits.
---------------------------------------------------------------------------

    \66\ See Arkadios; ASA; BDA; Beech; BMO CM; Cambridge; HJS; HTD; 
ICI; InspereX; SAMCO; Seaport; SIFMA; VFM.
    \67\ To the extent the trade was originally fully electronic, 
when the member amends the trade report, it should add the Manual 
Trade Indicator.
---------------------------------------------------------------------------

    Finally, commenters also suggested a number of alternatives to the 
proposal that they believed would improve the TRACE reporting regime, 
including implementing a phased-in approach to shortening the reporting 
timeframe,\68\ establishing a global securities master list,\69\ 
improving TRACE's web-based reporting interfaces, reducing TRACE system 
latencies and providing more transparency regarding systems issues that 
may impact reporting,\70\ and providing additional guidance on members' 
``as soon as practicable'' reporting obligation and additional TRACE 
reporting metrics to members.\71\ FINRA determined to implement a 
phased-in approach to reducing the reporting timeframe to five minutes 
for manual trades in light of commenters' concerns. However, FINRA does 
not believe that the alternatives proposed by commenters will provide 
improvements to the TRACE reporting regime similar to those of the 
proposed rule change. Accordingly, FINRA determined to move forward 
with the proposal while it also continues to consider other ways to 
provide more timely, granular and informative data to market 
participants and enhance the value of disseminated transaction data.
---------------------------------------------------------------------------

    \68\ See Arkadios; ICE Bonds; ICI; InspereX; TRADEliance; UPitt 
Clinic; SIFMA; VFM.
    \69\ See SIFMA. For corporate bonds, FINRA has proposed 
establishing a reference data service for new issues. See Securities 
Exchange Act Release No. 85488 (April 2, 2019), 84 FR 13977 (April 
8, 2019) (Notice of Filing of File No. SR-FINRA-2019-008) (Proposed 
Rule Change to Establish a Corporate Bond New Issue Reference Data 
Service).
    \70\ See SIFMA.
    \71\ See FIF; SIFMA.
---------------------------------------------------------------------------

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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#8bf9fee7eea6e8e4e6e6eee5fff8cbf8eee8a5ece4fd"><span class="__cf_email__" data-cfemail="7103041d145c121e1c1c141f0502310214125f161e07">[email protected]</span></a>. Please include 
file number SR-FINRA-2024-004 on the subject line.

Paper Comments

    <bullet> 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-2024-004. 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 FINRA. 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-2024-004 and should be submitted 
on or before February 15, 2024.


[[Page 5047]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\72\
---------------------------------------------------------------------------

    \72\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-01395 Filed 1-24-24; 8:45 am]
BILLING CODE 8011-01-P


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