[Federal Register Volume 89, Number 29 (Monday, February 12, 2024)]
[Notices]
[Pages 9883-9887]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-02804]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99487; File No. SR-FINRA-2023-015]


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

February 7, 2024.

I. Introduction

    On November 2, 2023, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to (1) amend FINRA Rules 6710 and 6750 to provide 
for end-of-day dissemination of data for individual transactions in 
U.S. Treasury Securities that are On-the-Run Nominal Coupons reported 
to FINRA's Trade Reporting and Compliance Engine (``TRACE'') with 
specified dissemination caps for large trades, and (2) amend FINRA Rule 
7730 to include U.S. Treasury Securities within the existing fee 
structure for end-of-day and historic TRACE data. The proposed rule 
change was published for comment in the Federal Register on November 9, 
2023.\3\ The Commission received comments in response to the 
proposal.\4\ FINRA responded to the comments on December 14, 2023.\5\ 
On December 19, 2023, the Commission extended until February 7, 2024, 
the time period within which to approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether to disapprove the proposed rule change.\6\ This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 98859 (November 3, 
2023), 88 FR 77388 (November 9, 2023) (``Notice'').
    \4\ Comments received on the proposed rule change are available 
at: https://www.sec.gov/comments/sr-finra-2023-015/srfinra2023015.htm. One comment did not address the substance of 
FINRA's proposal. See Letter to Vanessa Countryman, Secretary, 
Commission, from Adam Deyo (November 18, 2023) (``Deyo Letter'').
    \5\ Letter to Vanessa Countryman, Secretary, Commission, from 
Racquel Russell, Senior Vice President, Director of Capital Markets 
Policy, FINRA (December 14, 2023) (``FINRA Response Letter'').
    \6\ See Securities Exchange Act Release No. 99204 (December 19, 
2023), 88 FR 88997 (December 26, 2023).
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II. Description of the Proposed Rule Change

    Since 2016, FINRA has undertaken a series of initiatives in 
consultation with the U.S. Department of the Treasury (``Treasury 
Department'') to increase transaction reporting and transparency in the 
market for U.S. Treasury Securities.\7\ On July 10, 2017, FINRA members 
began reporting information on transactions in U.S. Treasury Securities 
to TRACE.\8\ On March 10, 2020, FINRA began to publicly disseminate 
aggregate data on U.S. Treasury Securities trading volume on a weekly 
basis.\9\ In February 2023, FINRA increased the cadence of the 
aggregated volume data it publishes for U.S. Treasury Securities to 
daily, and enhanced the content of the aggregate data.\10\ Information 
reported to TRACE regarding individual transactions in U.S. Treasury 
Securities is currently used for regulatory and other official sector 
purposes, but not disseminated publicly.\11\ In November 2022, the 
Treasury Department proposed a policy of publicly releasing secondary 
market transaction data for On-the-Run Nominal coupons,\12\ with end-
of-day

[[Page 9884]]

dissemination and with appropriate cap sizes.\13\
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    \7\ ``U.S. Treasury Security'' means a security, other than a 
savings bond, issued by the Treasury Department to fund the 
operations of the federal government or to retire such outstanding 
securities. The term ``U.S. Treasury Security'' also includes 
separate principal and interest components of a U.S. Treasury 
Security that have been separated pursuant to the Separate Trading 
of Registered Interest and Principal of Securities (``STRIPS'') 
program operated by the Treasury Department. See FINRA Rule 6710(p).
    \8\ See FINRA Regulatory Notice 16-39 (October 2016); see also 
Securities Exchange Act Release No. 79116 (October 18, 2016), 81 FR 
73167 (October 24, 2016) (Order Granting Accelerated Approval of 
File No. SR-FINRA-2016-027).
    \9\ See FINRA Press Release, FINRA Launches New Data on Treasury 
Securities Trading Volume, https://www.finra.org/media-center/newsreleases/2020/finra-launches-new-data-treasury-securities-trading-volume; see also Securities Exchange Act Release No. 87837 
(December 20, 2019), 84 FR 71986 (December 30, 2019) (Order 
Approving File No. SR-FINRA-2019-028). FINRA also made historical 
weekly aggregate data for transactions in U.S. Treasury Securities 
reported since January 2019 available for download on its website.
    \10\ See Technical Notice, Enhancements to Aggregated Reports 
and Statistics for U.S. Treasury Securities, https://www.finra.org/filing-reporting/trace/enhancements-weekly-aggregated-reports-statistics-jan2023.
    \11\ FINRA makes data regarding individual transactions in U.S. 
Treasury Securities available to the official sector to assist in 
monitoring and analysis of the U.S. Treasury Securities market. The 
Treasury Department, the Board of Governors of the Federal Reserve, 
the Federal Reserve Bank of New York, the Commission, and the 
Commodity Futures Trading Commission comprise the Inter-Agency 
Working Group for Treasury Market Surveillance (``IAWG'' or 
``official sector'').
    \12\ See infra text accompanying notes 14-15 for a definition of 
On-the-Run Nominal Coupon.
    \13\ See Treasury Department, Additional Public Transparency in 
Treasury Markets, 28-29 (November 2022), https://home.treasury.gov/system/files/221/TBACCharge1Q42022.pdf; Remarks by Under Secretary 
for Domestic Finance Nellie Liang at the 2022 Treasury Market 
Conference (November 16, 2022), https://home.treasury.gov/news/press-releases/jy1110.
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Dissemination of Transaction-Level Information

    Under the proposed rule change, FINRA would begin disseminating 
individual transaction information for On-the-Run Nominal Coupon U.S. 
Treasury Securities on an end-of-day basis. The disseminated 
transaction information would be anonymized, i.e., it would not include 
the market participant identifier (``MPID'') or other information that 
could be used to identify parties to the trade. However, consistent 
with other TRACE products, the disseminated transaction information 
would include counterparty type (i.e., dealer, customer, affiliate, or 
alternative trading system (``ATS'')), a flag to indicate whether the 
trade was executed on an ATS, and other trade modifiers and indicators.
    To implement such dissemination, FINRA proposed to amend Rule 
6750(c)(5) (to be redesignated as Rule 6750(d)(5)) to provide that 
FINRA would not disseminate information on a transaction in a TRACE-
Eligible Security that is a U.S. Treasury Security ``other than an On-
the-Run Nominal Coupon.'' FINRA also proposed to add a new paragraph 
(c) to Rule 6750 providing that FINRA would disseminate information on 
individual transactions in On-the-Run Nominal Coupons on an end-of-day 
basis.\14\ To further clarify the scope of transactions subject to 
individual dissemination under amended Rule 6750, FINRA proposed to add 
as new paragraph (ll) of Rule 6710 (Definitions) a definition of ``On-
the-Run Nominal Coupon,'' defined as the most recently auctioned U.S. 
Treasury Security that is a Treasury note or bond paying fixed rate 
nominal coupons starting after the close of the TRACE system on the day 
of its Auction through the close of the TRACE system on the day of the 
Auction of a new issue for the next U.S. Treasury Security of the same 
maturity. The definition would specify that On-the-Run Nominal Coupons 
do not include Treasury bills, STRIPS, Treasury Inflation-Protected 
Securities, floating rate notes, or any U.S. Treasury Security that is 
a Treasury note or bond paying a fixed rate nominal coupon that is not 
the most recently issued U.S. Treasury Security of a given maturity 
(i.e., off-the-run nominal coupons).\15\
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    \14\ To accommodate the addition of new paragraph 6750(c), the 
proposed rule change would redesignate current Rule 6750(c) as Rule 
6750(d). The proposed rule change would also make conforming changes 
to the paragraph cross-references in Rule 6750(a) and Supplementary 
Material .01 to Rule 6750.
    \15\ FINRA will identify the most recently auctioned U.S. 
Treasury Security that is a Treasury note or bond paying fixed rate 
nominal coupons as an ``On-the-Run Nominal Coupon'' in TRACE 
reference data beginning on the business day after its auction.
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Dissemination Protocols

    To mitigate concerns about information leakage for large trades, 
FINRA proposed to implement transaction size caps above which the exact 
size of the transaction would not be disseminated. In consultation with 
the Treasury Department, FINRA proposed to apply the following 
transaction size dissemination caps based on the maturity of the On-
the-Run Nominal Coupon at issuance: \16\
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    \16\ FINRA would incorporate information about these 
dissemination caps in the TRACE dissemination protocols published on 
its website, available at https://www.finra.org/filing-reporting/trade-reporting-and-compliance-engine-trace/trace-reporting-timeframes. Specifically, information about the dissemination caps 
would be added as a new bullet in the ``Transparency'' column of the 
row of the table describing the protocols for ``Treasury Bonds,'' to 
read as follows: ``Individual transactions in On-the-Run Nominal 
Coupons are disseminated on an end-of-day basis with security 
identifiers (e.g., CUSIP) and the following transaction size caps 
based on the maturity of the security at issuance: 2 Years: $250 
million; 3 Years: $250 million; 5 Years: $250 million; 7 Years: $150 
million; 10 Years: $150 million; 20 Years: $50 million; 30 Years: 
$50 million.''
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    <bullet> Two Years: $250 million;
    <bullet> Three Years: $250 million;
    <bullet> Five Years: $250 million;
    <bullet> Seven Years: $150 million;
    <bullet> 10 Years: $150 million;
    <bullet> 20 Years: $50 million; and
    <bullet> 30 Years: $50 million.
    Thus, for example, a $200 million transaction in a 10-year On-the-
Run Nominal Coupon would be disseminated with a trade size of 
``150MM+'' rather than the actual dollar amount of the trade.\17\ In 
consultation with the Treasury Department and based on ongoing analysis 
of the data, FINRA may in the future adjust the dissemination caps to 
maintain an appropriate balance between the benefits of transparency 
and the threat of information leakage. Any proposed changes to the 
dissemination caps would be filed with the Commission pursuant to 
Section 19(b)(1) of the Act.
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    \17\ As described further below, these dissemination caps would 
apply for the end-of-day dissemination file. Consistent with its 
approach to other TRACE data products, FINRA also plans to provide a 
Historic TRACE data product covering the same scope of transactions, 
which would provide the actual, uncapped transaction sizes on a six-
month delay.
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Dissemination Fees

    FINRA also proposed to expand the existing fee framework for the 
TRACE End-of-Day Transaction File \18\ and the Historic TRACE Data \19\ 
to include data products providing information on individual 
transactions in On-the-Run Nominal Coupons. Generally, Historic TRACE 
Data includes the same information as provided in the End-of-Day TRACE 
Transaction File, except that the Historic TRACE Data does not include 
dissemination caps for large transactions. Historic Treasury Data would 
also be subject to a minimum six-month delay, as is the case for the 
existing Historic Corporate Bond and Historic Agency Data sets.\20\ 
FINRA proposed that the End-of-Day TRACE Transaction File and Historic 
Data include a new set of data for U.S. Treasury Securities with the 
same fees that exist for other sets of TRACE-Eligible Securities.\21\
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    \18\ The End-of-Day TRACE Transaction File includes all Real-
Time TRACE transaction data collected from that day. The File is 
separately available for each data set for which Real-Time TRACE 
transaction data is available (i.e., the Corporate Bond Data Set, 
Agency Data Set, Securitized Product (``SP'') Data Set, and Rule 
144A Data Set) and made public after the TRACE system closes each 
day.
    \19\ The Historic TRACE Data is also made separately available 
for each data set after a fixed delay period that varies by asset 
type. Historic Corporate Bond and Historic Agency Data are delayed a 
minimum of six months; Historic SP Data is delayed a minimum of 18 
months; and Historic Rule 144A Data carries a delay consistent with 
the delay period applicable to the component security type (e.g., 
the delay for a Rule 144A transaction in a SP is 18 months, while 
the delay for a Rule 144A transaction in a corporate bond is six 
months).
    \20\ A conforming change would also be made in the description 
of Historic TRACE Data in Rule 7730(d) to add the Historic Treasury 
Data Set to the list of data sets comprising Historic TRACE Data.
    \21\ The current fee for the End-of-Day TRACE Transaction File 
is $750/month per data set, with a lower $250/month per data set fee 
available to qualifying Tax-Exempt Organizations. The fee for 
Historic TRACE Data is $2,000/calendar year per data set, with a 
lower $500/calendar year per data set fee available to qualifying 
Tax-Exempt Organizations. A single fee of $2,000 for development and 
set-up to receive Historic TRACE Data also applies, with a lower 
$1,000 development and set-up fee available to qualifying Tax-Exempt 
Organizations. See Rule 7730. As for other types of TRACE-Eligible 
Securities, FINRA also anticipates making transaction information 
for On-the-Run Nominal Coupons available free of charge for 
personal, non-commercial purposes only through FINRA's Fixed Income 
Data website, available at https://www.finra.org/finra-data/fixed-income.
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III. Summary of Comments and FINRA's Response

    The Commission received comments on the proposed rule change \22\ 
and a

[[Page 9885]]

response letter from FINRA.\23\ Several commenters support the proposal 
and advocate further expansion of the reporting framework to include 
transactions in different classes of securities and shortened reporting 
timeframes.\24\ Of these commenters, one advocates setting concrete 
parameters for evaluating the effects of the proposal and a timeline 
for expanding reporting obligations.\25\ Three of these commenters 
underscore the positive influence of market transparency on fairness, 
efficiency, and pricing.\26\
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    \22\ See supra note 4.
    \23\ See supra note 5.
    \24\ See Letter to Vanessa Countryman, Secretary, Commission, 
from Stephen John Berger, Managing Director, Global Head of 
Government and Regulatory Policy, Citadel (November 30, 2023) 
(``Citadel Letter'') at 1-2; Letter to Vanessa Countryman, 
Secretary, Commission, from Gerard O'Reilly, Co-CEO and Chief 
Investment Officer, and David A. Plecha, Global Head of Fixed 
Income, Dimensional (November 30, 2023) (``Dimensional Letter'') at 
1; Letter to Vanessa Countryman, Secretary, Commission, from Joanna 
Mallers, Secretary, FIA Principal Traders Group (November 30, 2023) 
(``FIA PTG Letter'') at 1; Letter to Vanessa Countryman, Secretary, 
Commission, from Ji[rcaron][iacute] Kr[oacute]l, Deputy CEO, Global 
Head of Government Affairs, AIMA (December 20, 2023) (``AIMA 
Letter'') at 2.
    \25\ See FIA PTG Letter at 2. Additionally, this commenter 
recommends the Commission reassess the economic analyses for certain 
Commission rule proposals taking into consideration the impact of 
this FINRA proposal on the economic baselines. See id. This comment 
is out of scope for this proposed rule change because it does not 
address the substance of this specific proposed rule change.
    \26\ See Citadel Letter at 1; Dimensional Letter at 1; AIMA 
Letter at 2.
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    Some commenters state that the scope of securities subject to 
transaction-level dissemination in the proposal should not have been 
limited to On-the-Run Nominal Coupons.\27\ One commenter suggests 
transaction-level dissemination be expanded to include transactions in 
every security in the U.S. Treasury Security market,\28\ while two 
others suggest initially subjecting to dissemination transactions in 
first, second, and third old off-the-run U.S. Treasury Securities.\29\ 
Two of these commenters further suggest (1) shortening the reporting 
timeframe to at most 15 minutes to harmonize Treasury market data with 
data in other TRACE-eligible securities; \30\ and (2) calculating 
transaction size caps based on a percentage of notional volume to 
ensure market participants have a timely view of a sufficient portion 
of transaction and pricing data.\31\ One of these commenters also 
requests information regarding the percentage of notional volume that 
would be capped under FINRA's proposed thresholds.\32\ Notwithstanding 
its suggestions, this commenter describes FINRA's proposal as a 
``welcome first step.'' \33\
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    \27\ See generally Dimensional Letter; Citadel Letter; AIMA 
Letter.
    \28\ See Dimensional Letter at 2.
    \29\ See Citadel Letter at 2; AIMA Letter at 2.
    \30\ See Citadel Letter at 2; AIMA Letter at 2.
    \31\ See Citadel Letter at 3; AIMA Letter at 2.
    \32\ See Citadel Letter at 2-3.
    \33\ Citadel Letter at 1.
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    In response to suggestions that FINRA expand the scope of U.S. 
Treasury Securities subject to reporting and shorten reporting 
timeframes, FINRA states that future proposals would be based on 
careful analysis and subject to proposed rule changes filed with the 
Commission pursuant to Section 19(b)(1) of the Act.\34\ FINRA also 
produces data showing the percentage of notional transaction volume 
that would have been capped under the proposed thresholds during the 
period from September 1, 2022, to February 28, 2023, for different 
duration U.S. Treasury Securities.\35\
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    \34\ See FINRA Response Letter at 3, n.5.
    \35\ ``For the two-year, three-year, and five-year notes (which 
would be subject to a $250 million cap), 14.21 percent, 14.76 
percent, and 5.96 percent of notional volume traded, respectively, 
would have been capped upon dissemination (i.e., because the size of 
the trade was greater than $250 million); for the seven-year and 10-
year notes (which would be subject to a $150 million cap), 15.27 
percent and 6.49 percent of notional volume traded, respectively, 
would have been capped upon dissemination (i.e., because the size of 
the trade was greater than $150 million); and for the 20-year and 
30-year bonds (which would be subject to a $50 million cap), 19.87 
percent and 14.87 percent of notional volume traded, respectively, 
would have been capped upon dissemination (i.e., because the size of 
the trade was greater than $50 million). Across all maturities, 
10.30 percent of notional volume traded would have been capped.'' 
FINRA Response Letter at 3.
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    While two commenters support the proposal's stated objective to 
increase transparency in the market for U.S. Treasury Securities, they 
raise concerns that transaction-level transparency, if mandated without 
careful calibration, could cause information leakage, discourage 
transactions, and hurt market liquidity, especially in any potential 
future expansions of the proposal.\36\ One of these commenters states 
that FINRA should collect and analyze at least 12 months of data under 
the proposed regime before expanding the scope of reporting obligations 
in any way.\37\
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    \36\ See Letter to Vanessa Countryman, Secretary, Commission, 
from Robert Toomey, Head of Capital Markets, Managing Director and 
Associate General Counsel, SIFMA, and Lindsey Weber Keljo, Head, 
SIFMA Asset Management Group (November 30, 2023) (``SIFMA AMG 
Letter'') at 2-3; Letter to Vanessa Countryman, Secretary, 
Commission, from Sarah A. Bessin, Deputy General Counsel, Investment 
Company Institute (November 30, 2023) (``ICI Letter I'') at 2; 
Letter to Vanessa Countryman, Secretary, Commission, from Sarah A. 
Bessin, Deputy General Counsel, Investment Company Institute 
(December 15, 2023) (``ICI Letter II'') at 2.
    \37\ See SIFMA AMG Letter at 4.
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    Both of these commenters refer to the importance of disclosure 
limitations as a means of reducing information leakage.\38\ Both 
commenters support aspects of the proposal that limit transaction-level 
dissemination to transactions in On-the-Run Nominal Coupons,\39\ cap 
disclosed transactions at set thresholds,\40\ and delay dissemination 
to the end of each day.\41\ One of these commenters, despite supporting 
dissemination caps in principle, states that FINRA has not made clear 
the methodology and metrics used to determine cap levels.\42\ The 
commenter requests FINRA explain how it determined the caps and provide 
data supporting the thresholds it proposed.\43\
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    \38\ See SIFMA AMG Letter at 3-5; ICI Letter I at 2; ICI Letter 
II at 2.
    \39\ See SIGMA AMG Letter at 4-5; ICI Letter I at 2; ICI Letter 
II at 2.
    \40\ See SIFMA AMG Letter at 3; ICI Letter I at 2; ICI Letter II 
at 2.
    \41\ See SIFMA AMG Letter at 4-5; ICI Letter I at 2; ICI Letter 
II at 2.
    \42\ See SIFMA AMG Letter at 3-4.
    \43\ SIFMA AMG Letter at 4.
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    FINRA replies in its letter that it set dissemination caps based on 
careful analysis and in consultation with the Treasury Department.\44\ 
FINRA also lists some of the factors relevant in setting dissemination 
caps, which include public feedback provided to the Treasury Department 
by primary dealers,\45\ the impact of interest rates on U.S. Treasury 
Securities trades across maturities (``dollar duration'' or ``DV01''), 
and a market liquidity analysis for U.S. Treasury Securities of 
different maturities.\46\
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    \44\ FINRA Response Letter at 4.
    \45\ Primary dealers are trading counterparties of the New York 
Fed in its implementation of monetary policy and are expected, among 
other things, to bid on a pro-rata basis in all Treasury auctions. 
See https://www.newyorkfed.org/markets/primarydealers.html. See also 
https://home.treasury.gov/policy-issues/financing-the-government/quarterly-refunding/primary-dealers.
    \46\ FINRA Response Letter at 5-6.
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    Specifically, FINRA explains that it considered the notional cap 
sizes suggested by primary dealers' feedback to the Treasury Department 
and translated these values to DV01.\47\ When translated to DV01, the 
median suggested transaction caps ranged between $70,000 and 
$190,000.\48\ FINRA, in consultation with the Treasury Department, 
opted to consider as a baseline caps that approximately equated to 
$100,000 DV01, though it also considered the percentage of traded 
market volume that would be disseminated (versus reported) across each 
maturity and the estimated amount of time it would take to liquidate a 
position at the size of the cap. In addition, FINRA states that the

[[Page 9886]]

proposed caps were calibrated to the maturity, liquidity, and trading 
concentration of the underlying security to preserve the anonymity of 
market participants trading large transactions.\49\ FINRA explains that 
it ultimately sought to balance the benefits of providing similar 
levels of transparency across maturities with the risk that 
dissemination of the largest transactions could permit market 
participants to reverse engineer the identities, positions, and trading 
strategies of others.\50\
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    \47\ FINRA Response Letter at 5.
    \48\ FINRA Response Letter at 5.
    \49\ FINRA Response Letter at 5.
    \50\ FINRA Response Letter at 5 (citing Notice, 88 FR at 77395).
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IV. Discussion and Commission Findings

    After carefully reviewing the proposal and comment letters 
received, the Commission finds that the proposed rule change is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
association.\51\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 15A(b)(6) of the Act,\52\ which 
requires, among other things, that FINRA rules be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and, in general, to protect investors 
and the public interest.
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    \51\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \52\ 15 U.S.C. 78o-3(b)(6).
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    In approving the original TRACE rules, the Commission stated that 
price transparency plays a fundamental role in promoting fairness and 
efficiency of U.S. capital markets.\53\ To further the goal of 
increasing price transparency in the debt markets in general and the 
U.S. Treasury Securities market in particular, it is reasonable and 
consistent with the Act for FINRA to extend post-trade price 
transparency to transactions in U.S. Treasury Securities in the manner 
set forth in the proposal. Since 2017, FINRA has collected post-trade 
transaction information for U.S. Treasury Securities through TRACE.\54\ 
In 2020, FINRA commenced public dissemination of aggregate data on U.S. 
Treasury Securities trading volume on a weekly basis.\55\ In 2023, 
FINRA shortened the publication time of aggregate data on U.S. Treasury 
Securities from a weekly to a daily basis and increased the information 
publicly disseminated to include, among other things, pricing 
information for certain U.S. Treasury Securities.\56\ FINRA's current 
proposal will further increase price transparency by making individual 
transaction data available with an end-of-day dissemination and with 
appropriate cap sizes and on a historical basis for U.S. Treasury 
Securities that are On-the-Run Nominal Coupons.
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    \53\ See Securities Exchange Act Release No. 43873 (January 23, 
2001), 66 FR 8131, 8136 (January 29, 2001).
    \54\ See supra note 8.
    \55\ See supra note 9.
    \56\ See supra note 10.
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    The proposal is reasonably designed to preserve the confidentiality 
of individual market participants and transactions. While commenters 
described concerns that transaction-level transparency could cause 
information leakage, discouraging transactions and impairing market 
liquidity, the proposal is reasonably designed to mitigate these 
concerns by incorporating transaction size dissemination caps, delaying 
dissemination until the end of each day, and limiting the scope to On-
the-Run Nominal Coupons. This scope limitation is a reasonable first 
step, instead of including every security in the U.S. Treasury Security 
market, or specifically transactions in first, second, and third old 
off-the-run U.S. Treasury Securities, as some commenters suggested.\57\ 
FINRA has affirmed that any changes in the level of transparency it 
provides, including changes to the dissemination cap sizes or scope of 
transactions included, would be based on careful analysis and filed 
with the Commission as proposed rule changes pursuant to Section 
19(b)(1) of the Act.\58\ In response to commenters, FINRA addressed the 
request for additional information regarding FINRA's methodology for 
setting the transaction size dissemination caps \59\ and the request 
for data detailing the portion of notional value that may exceed the 
transaction size dissemination caps.\60\ The proposal strikes an 
appropriate balance between fulfilling the goal of increased 
transparency and mitigating risks that could impair liquidity in the 
market for U.S. Treasury Securities. While some commenters suggested 
using a notional amount calculation method for the dissemination 
caps,\61\ the proposal makes a reasonable choice of method of 
calculating dissemination caps by calibrating them to the maturity, 
liquidity, and trading concentration of the underlying securities to 
preserve the anonymity of market participants trading large 
transactions.
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    \57\ See supra note 27.
    \58\ See supra note 34.
    \59\ See supra notes 47 through 50.
    \60\ See supra note 35.
    \61\ See supra note 31.
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    Lastly, the proposed dissemination fees are consistent with the 
Act. The TRACE U.S. Treasury Security end-of-day and historic data sets 
are comparable, in terms of granularity and timeliness, to existing 
data sets for other TRACE-eligible securities. Thus, charging the same 
fee level for TRACE end-of-day and historic data products that include 
U.S. Treasury Securities data as is currently charged for TRACE end-of-
day and historic data products that include data about securities other 
than U.S. Treasury Securities, while maintaining the current fee levels 
for those data products, is reasonable. Section 15A(b)(5) of the Act 
requires, among other things, that FINRA rules provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
members and issuers and other persons using any facility or system 
which the association operates or controls. The rules that establish 
the current TRACE end-of-day and historic data products have been 
approved by the Commission, and the fees that FINRA proposes to charge 
for information on individual transactions in U.S. Treasury Securities 
are identical to those that currently apply for end-of-day and historic 
data products for other types of TRACE-eligible securities,\62\ which 
have been in effect for some time.\63\
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    \62\ See FINRA Rule 7730.
    \63\ See Securities Exchange Act Release No. 81995 (November 1, 
2017), 82 FR 51658 (November 7, 2017) (SR-FINRA-2017-033) (notice of 
filing and immediate effectiveness of fee for end-of-day data 
product); Securities Exchange Act Release No. 61012 (November 16, 
2009), 74 FR 61189 (November 23, 2009) (SR-FINRA-2007-006) (approval 
order for the historic data product and related fee).
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    Pursuant to Section 19(b)(5) of the Act,\64\ the Commission 
consulted with and considered the views of the Treasury Department in 
determining to approve the proposed rule change. The Treasury 
Department indicated its support for the proposal.\65\ Pursuant to

[[Page 9887]]

Section 19(b)(6) of the Act,\66\ the Commission has considered the 
sufficiency and appropriateness of existing laws and rules applicable 
to government securities brokers, government securities dealers, and 
their associated persons in approving the proposal. The proposal will 
benefit investors and market participants by promoting greater 
transparency into the U.S. Treasury Securities market while also 
maintaining the confidentiality of individual market participants and 
transactions.
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    \64\ See 15 U.S.C. 78s(b)(5) (providing that the Commission 
``shall consult with and consider the views of the Secretary of the 
Treasury prior to approving a proposed rule filed by a registered 
securities association that primarily concerns conduct related to 
transactions in government securities, except where the Commission 
determines that an emergency exists requiring expeditious or summary 
action and publishes its reasons therefor'').
    \65\ See, e.g., Remarks by Under Secretary for Domestic Finance 
Nellie Liang at the 2023 Treasury Market Conference (November 16, 
2023) (``We are hopeful that, after a review of the public comments, 
the SEC will approve a final rule and the proposed dissemination by 
FINRA for on-the-runs can begin soon afterwards.''), available at 
https://home.treasury.gov/news/press-releases/jy1917.
    \66\ 15 U.S.C. 78s(b)(6).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\67\ that the proposed rule change (SR-FINRA-2023-015) be, and 
hereby is, approved.
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    \67\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\68\
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    \68\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-02804 Filed 2-9-24; 8:45 am]
BILLING CODE 8011-01-P