78930 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 99404 

(January 19, 2024), 89 FR 5034 (January 25, 2024) 

(‘‘Notice’’). 

4See Securities Exchange Act Release No. 99640 

(February 29, 2024), 89 FR 16042 (March 6, 2024). 

5See Securities Exchange Act Release No. 100006 

(April 22, 2024), 89 FR 32475 (April 26, 2024) 

(‘‘OIP’’). 

6 15 U.S.C. 78s(b)(2). 

7See Securities Exchange Act Release No. 100555 

(July 18, 2024), 89 FR 59948 (July 24, 2024). 

8See Securities Exchange Act Release No. 100594 

(July 25, 2024), 89 FR 61514 (July 31, 2024) 

(‘‘Partial Amendment No. 1’’). 9Comments received are available at: https://

www.sec.gov/comments/sr-finra-2024-004/ 

srfinra2024004.htm. 

10See Letter from Racquel L. Russell, Senior Vice 

President, Director of Capital Markets Policy, Office 

of General Counsel, FINRA, dated July 18, 2024, 

available at https://www.sec.gov/comments/sr-finra2024-004/srfinra2024004-491763-1411786.pdf 

(‘‘FINRA Letter’’). 

11See Securities Exchange Act Release No. 43873 

(January 23, 2001), 66 FR 8131 (January 29, 2001) 

(Order Approving File No. SR–NASD–99–65). 

12See FINRA Rule 6710(a) (providing a definition 

for ‘‘TRACE-Eligible Security’’). 

13A ‘‘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). 

14See FINRA Rule 6710(l) (providing a definition 

for ‘‘Agency Debt Security’’). 

15See FINRA Rule 6710(cc) (providing a 

definition for ‘‘Asset-Backed Security’’). 

16See FINRA Rule 6710(v) (providing a definition 

for ‘‘Agency Pass-Through Mortgage-Backed 

Security’’) and FINRA Rule 6710(u) (providing a 

definition for ‘‘To Be Announced’’). 

17See 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). 

18See 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). 

19See 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 Notice 14–34 (August 

2014). 

20See Securities Exchange Act Release No. 66829 

(April 18, 2012), 77 FR 24748 (April 25, 2012) 

(Order Approving File No. SR–FINRA–2012–020); 

see also Regulatory Notice 12–26 (May 2012). 

21See Securities Exchange Act Release No. 75782 

(August 28, 2015), 80 FR 53375 (September 3, 2015) 

(Order Approving File No. SR–FINRA 2015–025). 

22See Notice, 89 FR at Table 1. 

23See id. at 5034. 

24See id. at 5035. 

25See id. 

26See supra notes 17–21. 

27Under Rule 6710(d), the ‘‘Time of Execution’’ 

generally means the time when the parties to a 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101121; File No. SR– 

FINRA–2024–004] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving a 

Proposed Rule Change, as Modified by 

Partial Amendment No. 1, To Amend 

FINRA Rule 6730 (Transaction 

Reporting) To Reduce the 15-Minute 

TRACE Reporting Timeframe to One 

Minute 

September 20, 2024. 

I. Introduction 

On January 11, 2024, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’ 

or ‘‘SEC’’), 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 amend FINRA 

Rule 6730 to reduce the 15-minute 

reporting timeframe for transactions 

reported to FINRA’s Trade Reporting 

and Compliance Engine (‘‘TRACE’’) 

system to one minute, with exceptions 

for FINRA members with de minimis 

reporting activity and for manual trades. 

The proposed rule change was 

published for comment in the Federal 

Register on January 25, 2024.3 On 

February 29, 2024, the Commission 

extended until April 24, 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.4

On April 22, 2024, the Commission 

instituted proceedings to determine 

whether to approve or disapprove the 

proposed rule change.5 On July 18, 

2024, the Commission, pursuant to 

Section 19(b)(2) of the Act,6 designated 

September 20, 2024, as the date by 

which the Commission shall either 

approve or disapprove the proposed 

rule change.7 Also on July 18, 2024, 

FINRA filed a partial amendment to the 

original proposal (‘‘Partial Amendment 

No. 1’’). On July 25, 2024, the 

Commission published notice of Partial 

Amendment No. 1.8 The Commission 

received comment letters in response to 

publications of the Notice, OIP, and 

Partial Amendment No. 1,9 as well as a 

letter from FINRA.10 This order 

approves the proposed rule change, as 

modified by Partial Amendment No. 1 

(collectively, ‘‘Proposal’’). 

II. Description of the Proposed Rule 

Change 

FINRA has collected and 

disseminated transaction information in 

fixed income securities through TRACE 

since 2002.11 FINRA rules currently 

specify the applicable outer-limit 

reporting timeframe for different types 

of TRACE-Eligible Securities.12 Most 

transactions 13 in corporate bonds, 

agency debt securities,14 asset-backed 

securities (‘‘ABS’’),15 and agency passthrough mortgage-backed securities 

(‘‘MBS’’) traded to-be-announced 

(‘‘TBA’’) for good delivery (‘‘GD’’) 16

must be reported within 15 minutes. 

The 15-minute reporting timeframe has 

been in place for corporate bonds since 

2005,17 and was implemented later for 

agency debt (2010),18 ABS (2015),19 and 

MBS TBA GD (2013).20 In 2015, the 

Commission approved FINRA rule 

amendments requiring FINRA members 

to report transactions in these TRACEEligible Securities as soon as practicable 

but no later than 15 minutes from the 

time of execution,21 and FINRA publicly 

disseminates information on these 

transactions immediately upon receipt. 

According to FINRA, ‘‘in 2022, 82.9 

percent of the trades [in TRACE-Eligible 

Securities] executed after 8:00 a.m. and 

before 6:15 p.m. [Eastern Time (‘‘ET’’)] 

were reported within one minute of 

execution.’’ 22

According to FINRA, ‘‘[s]ince 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.’’ 23 In 

light of these advances and consistent 

with FINRA’s goals of increasing 

transparency and improving access to 

timely transaction data, FINRA 

proposed updates to modernize the 

reporting timeframes and provide 

timelier transparency.24

A. One-Minute Reporting 

FINRA proposed amendments to Rule 

6730 to reduce the reporting timeframe 

for securities currently subject to the 15- 

minute reporting outer limit to one 

minute, with exceptions for FINRA 

member firms with de minimis 

reporting activity and for manual trades. 

FINRA would continue to make 

information on the transactions publicly 

available immediately upon receipt of 

the trade reports.25

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.26 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,27


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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. 

28FINRA also proposed a conforming amendment 

to Supplementary Material .03 to refer to the Rule 

generally rather than ‘‘paragraph (a)’’ to reflect that 

FINRA 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.’’ 

29Evidence of this confirmation should be 

retained as part of the FINRA member’s books and 

records. However, FINRA members eligible for the 

exception will not need to take other affirmative 

steps to have their trade reports processed pursuant 

to the exception’s 15-minute reporting timeframe, 

such as submitting a certification of eligibility to 

FINRA or adding a modifier or indicator to their 

trade reports. See Proposed FINRA Rule 6730 

Supplementary Material .08(b). 

30However, a trade executed at or after 12:00:00 

a.m. through 7:59:59 a.m. ET would need to be 

reported as soon as practicable the same day, but 

no later than within 15 minutes after the TRACE 

system opens. Additionally, a trade executed on a 

business day at or after 6:30:00 p.m. through 

11:59:59 p.m. ET; on a business day less than 15 

minutes before 6:30 p.m. ET; or on a Saturday, 

Sunday, federal or religious holiday, or other day 

on which the TRACE system is not open at any time 

during that day, would need to be reported as soon 

as practicable, but no later than within 15 minutes 

after the TRACE system opens the next business 

day (T+1). 

31For example, a FINRA 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 FINRA 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 FINRA 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 states 

that it believes 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. See Notice, 89 FR at 5036. 

32See Notice, 89 FR at 5036. 33See id. 34See id. 35As stated 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). See Notice, 89 FR at n. 15. 

36See Notice, 89 FR at 5036. FINRA reminds its 

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). 

Continued 

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). 

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. Amended Rule 

6730(a)(1)(A) would provide that 

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 as soon as practicable after the 

TRACE system opens, but no later than 

within 15 minutes after the TRACE 

system opens. 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). 

B. Exceptions From One-Minute 

Reporting 

FINRA proposed two exceptions from 

the one-minute reporting timeframe for: 

(1) FINRA member firms with ‘‘limited 

trading activity’’ in the TRACE-Eligible 

Securities that are subject to one-minute 

reporting; and (2) manual trades.28

1. Exception for FINRA Members With 

‘‘Limited Trading Activity’’ 

New Supplementary Material .08 

would provide an exception to the oneminute reporting timeframe for FINRA 

members with ‘‘limited trading 

activity.’’ A FINRA member with 

‘‘limited trading activity’’ would be 

defined as one 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. 

Proposed Supplementary Material .08(b) 

would require FINRA members relying 

on the exception to confirm annually 

their qualification for the exception.29

As outlined in proposed Supplementary 

Material .08(c), qualifying FINRA 

members would be required to report 

these trades as soon as practicable, but 

no later than within 15 minutes of the 

Time of Execution.30

FINRA members exceeding the 4,000- 

trade threshold for each of two 

consecutive calendar years would need 

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 member no 

longer meets the criteria for the 

exception (i.e., beginning 90 days after 

January 1 of the next calendar year). If 

a FINRA member’s reporting activity 

subsequently dropped below the 4,000- 

trade threshold, the FINRA member 

would again be eligible for the 

exception.31

2. Manual Trades Exception 

New Supplementary Material .09 

would provide an exception for manual 

trades that are not electronic from end 

to end. 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 

and third years; and a five-minute outer 

limit would apply thereafter. 

The manual trades exception would 

apply to ‘‘transactions that are manually 

executed’’ or where a ‘‘[FINRA] 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.’’ 32 A trade 

that requires manual intervention at any 

point to complete the trade execution or 

reporting process would qualify.33

According to FINRA,34 it contemplates 

that the exception would be available 

for a variety of situations, including, for 

example: 

• where a FINRA member executes a 

trade 35 by manual or hybrid means, 

such as by telephone, email, or through 

a chat/messaging function,36 and 


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37FINRA Letter at 9. 

38See Notice, 89 FR at 5036. 

39FINRA Letter at 8. 

40See Notice, 89 FR at 5036. 

41FINRA Letter at 9. 

42See Notice, 89 FR at 5036. 

43See id. 

44FINRA Letter at 8. 

45See Notice, 89 FR at 5036. 

46FINRA Letter at 11. 

47See Notice, 89 FR at 5036. 

48See id. 

49See id. at 5037. 

50See id. 

51See, e.g., Rule 6623 describing ‘‘exceptional 

circumstances’’ as instances of system failure by a 

FINRA member or service bureau, or unusual 

market conditions, such as extreme volatility in a 

security, or in the market as a whole. 

52See, e.g., FINRA Trade Reporting Frequently 

Asked Questions, Q206.21, available at https://

www.finra.org/filing-reporting/markettransparency-reporting/trade-reporting-faq. 

53 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); see also infra 

sections III.A (discussing the Proposal’s impact on 

efficiency of U.S. capital markets); and III.B and 

III.G (discussing comments and responses regarding 

the Proposal’s burden on competition). 

54 15 U.S.C. 78o–3(b)(6). 

55 15 U.S.C. 78o–3(b)(9). 

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 

(FINRA further explains ‘‘that, where 

the only manual step involved is to 

prompt the electronic execution of a 

trade (e.g., click ‘accept’), the manual 

trades exception would not be 

available’’ 37); 38

• where allocations to individual 

accounts must be manually input in 

connection with a trade by a duallyregistered broker-dealer/investment 

adviser (FINRA states that if a block 

trade, allocated to individual accounts 

by a dually-registered broker-dealer/ 

investment adviser, were ‘‘executed 

electronically without manual 

intervention between its execution and 

reporting, the manual trades exception 

would not be available for that 

separately executed block trade’’ 39); 40

• 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) (FINRA explains that the 

exception ‘‘would not be available with 

regard to trades that are subject to 

automated compliance/risk checks but 

that are not selected for manual review/ 

approval, or for trades that were subject 

to a pre-execution compliance or risk 

review, but that do not involve manual 

intervention between the time of 

execution and the trade report’’ 41); 42

• where a FINRA 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); 43 and 

• where a FINRA 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 (FINRA further states that ‘‘if 

manual action was not required to 

calculate the price of component 

securities included in the basket or 

other steps necessary to book and report 

the trades to TRACE, then the manual 

trades exception would not be 

available’’ 44).45

According to FINRA, 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 FINRA 

member makes reasonable efforts to 

report the trade as soon as practicable 

(as required). FINRA also states that it 

will assess FINRA members’ trade 

reporting in connection with manual 

trades to determine whether the fiveminute trade reporting timeframe (to 

become applicable after three years) 46 is 

appropriate, and will be prepared to 

adjust, as necessary.47

FINRA will review use of the manual 

trades exception. FINRA 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, FINRA states that, 

considering the overarching obligation 

to report trades as soon as practicable, 

FINRA 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.48

Under amended Rule 6730(d)(4), any 

FINRA member that executes or reports 

a trade manually would be required to 

append a manual trade indicator to the 

trade report. The indicator must be 

included in any manual trade, 

regardless of whether the FINRA 

member reports outside of the oneminute timeframe in reliance on the 

manual trades exception. FINRA states 

that application of the indicator would 

give FINRA important insight into 

manual trading and the use of the 

exception.49 The indicator would not be 

included in publicly disseminated 

TRACE data.50

Finally, FINRA proposed 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’’).51

Recurring issues in the systems of a 

FINRA member firm or its vendor 

would not be considered a reasonable 

justification or exceptional 

circumstance that excuses a pattern or 

practice of late trade reporting.52

III. Summary of Comments, FINRA’s 

Response, and Commission Findings 

After carefully reviewing the Notice, 

Partial Amendment No. 1, and comment 

letters received, the Commission finds 

that the Proposal is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities association.53 In 

particular, the Commission finds that 

the Proposal is consistent with Section 

15A(b)(6) of the Act,54 which requires, 

among other things, that FINRA rules be 

designed to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system and, in general, to protect 

investors and the public interest; and 

are not designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. The 

Commission also finds that the Proposal 

is consistent, in particular, with Section 

15A(b)(9) of the Act,55 which requires 

that FINRA rules do not impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

In approving the original TRACE rules 

in 2002, the Commission stated that 

price transparency plays a fundamental 

role in promoting fairness and efficiency 


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56See supra note 11. 

57See supra note 17. 

58See supra notes 17–20. 

59See supra note 21; see also https://

www.finra.org/rules-guidance/notices/15-41. 

60See supra note 9. 

61See, e.g., Letter from Stephen John Berger, 

Managing Director, Global Head of Government and 

Regulatory Policy, Citadel (February 15, 2024) 

(‘‘Citadel Letter I’’) at 1; Letter from Joanna Mallers, 

Executive Director, FIA Principal Traders Group 

(February 15, 2024) (‘‘FIA PTG Letter’’) at 1; Letter 

from Gerard O’Reilly, Co-Chief Executive Officer 

and Co-Chief Investment Officer, Dimensional Fund 

Advisors LP and David A. Plecha, Global Head of 

Fixed Income, Dimensional Fund Advisors LP 

(February 15, 2024) (‘‘Dimensional Letter’’) at 1; 

Letter from Ursula Baerlein (May 14, 2024); Letter 

from Dylan Parker, Chief Executive Officer, Moment 

Technology (May 15, 2024) (‘‘Moment Technology 

Letter’’) at 1. 

62See, e.g., Letter from Sarah A. Bessin, Deputy 

General Counsel, Investment Company Institute and 

Kevin Ercoline, Assistant General Counsel, 

Investment Company Institute (February 15, 2024) 

(‘‘ICI Letter’’) at 2; Letter from Frank Fairman, 

Managing Director, Piper Sandler (May 17, 2024) 

(‘‘Piper Sandler Letter’’) at 1. 

63See, e.g., Letter from Kenneth E. Bentsen, Jr., 

President and CEO, Securities Industry and 

Financial Markets Association (February 15, 2024) 

(‘‘SIFMA Letter I’’) at 2; Letter from Kenneth E. 

Bentsen, Jr., President and CEO, Securities Industry 

and Financial Markets Association (May 17, 2024) 

(‘‘SIFMA Letter II’’) at 2 (suggesting transitioning to 

one-minute reporting would ‘‘expos[e] the brokerdealer community to significant regulatory risk and 

clients to diminished liquidity and service from 

their broker-dealers’’); Letter from Christopher A. 

Iacovella, President & Chief Executive Officer, 

American Securities Association (February 16, 

2024) (‘‘ASA Letter I’’) at 2; Letter from Melissa P. 

Hoots, CEO/CCO, Falcon Square Capital (February 

15, 2024) (‘‘Falcon Letter I’’) at 1–2; Letter from 

Melissa P. Hoots, CEO/CCO, Falcon Square Capital 

(August 21, 2024) (‘‘Falcon Letter II’’) at 2; Letter 

from Mark D. Griffin, SVP & Risk Control Manager, 

FHN Financial (May 17, 2024) (‘‘FHN Letter’’) at 2; 

LPL Letter at 1; Letter from Michael Decker, Senior 

Vice President, Bond Dealers of America (February 

15, 2024) (‘‘BDA Letter I’’) at 2. 

64See, e.g., SIFMA Letter I at 2; SIFMA Letter II 

at 2; FHN Letter at 2; BDA Letter I at 1; Letter from 

Michael Decker, Senior Vice President, Bond 

Dealers of America (May 17, 2024) (‘‘BDA Letter II’’) 

at 2; LPL Letter at 2. 65See Citadel at 4; FIA PTG at 4. But cf. SIFMA 

Letter II at 9 (stating that any alternative proposal 

that materially differs from the existing Proposal 

must be subject to notice and comment rulemaking 

and an economic analysis). 

66Letter from Stephen John Berger, Managing 

Director, Global Head of Government & Regulatory 

Policy, Citadel (August 13, 2024) (‘‘Citadel Letter 

II’’) at 1. 

67See, e.g., Falcon Letter I at 1; ASA Letter I at 

2; Letter from Christopher A. Iacovella, President & 

Chief Executive Officer, American Securities 

Association (May 17, 2024) (‘‘ASA Letter II’’) at 1– 

2; Letter from Christopher A. Iacovella, President & 

Chief Executive Officer, American Securities 

Association (August 21, 2024) (‘‘ASA Letter III’’) at 

1–2; FHN Letter at 2; SIFMA Letter II at 2. 

68See ASA Letter I at 1; see also Falcon Letter 

II at 2 (‘‘FINRA has still not substantiated the need 

for a reduction in reporting time for TRACE-eligible 

securities’’). 

69Letter from Tyler Gellasch, President and CEO, 

Healthy Markets Association (September 15, 2024) 

(‘‘HMA Letter II’’) at 1. This commenter states that 

it is writing to supplement its past support for 

shortening the TRACE reporting timeframe to more 

broadly object to the Proposal, citing, among other 

things, its prior comment letter on the Proposal. See 

id. (citing Letter from Tyler Gellasch, President and 

CEO, Healthy Markets Association (February 15, 

2024) (‘‘HMA Letter I’’)). 

70HMA Letter II at 3. 

71 Id. at 1. This commenter also suggests changes 

to TRACE reporting protocols that are outside of the 

scope of the Proposal to provide for separate reports 

of information for price transparency and data 

useful to just regulators. See id. at 2. 

72FINRA Letter at 3. 

73 Id. at 3. 

74 Id. at 3–4. 

of U.S. capital markets.56 Since 2002, 

FINRA has increased transparency by 

requiring more contemporaneous 

reporting and broadening the scope of 

securities included in TRACE. In 2005, 

FINRA shortened the deadline for 

reporting most transactions to TRACE to 

15 minutes.57 From 2010 through 2013, 

FINRA gradually expanded the classes 

of TRACE-eligible securities subject to 

reporting within 15 minutes.58 In 2015, 

FINRA required FINRA member firms to 

report transactions in TRACE-Eligible 

Securities as soon as practicable but no 

later than within 15 minutes of the Time 

of Execution or other timeframe 

specified in FINRA Rule 6730.59

A. One-Minute Reporting 

The Commission received comments 

on the proposed rule change.60 Several 

commenters support the proposal to 

shorten the 15-minute TRACE reporting 

timeframe to one minute and its aim of 

increasing transparency in the fixed 

income markets.61 Some commenters 

support increasing price transparency in 

general through reporting but caution 

restraint and the need for broad 

exceptions, citing the potential for 

reduced liquidity and execution 

quality.62 Some commenters oppose one 

minute reporting, questioning the 

feasibility and cost of compliance due to 

technical limitations and the prevalence 

of manual processes.63 Some 

commenters that oppose one minute 

reporting state that if the Commission 

moves forward with the adoption of the 

one minute reporting requirement, it 

should only do so in conjunction with 

the manual trades and de minimis 

exceptions.64 Some commenters suggest 

FINRA withdraw the Proposal and 

instead require market participants to 

report trades as soon as practicable but 

no later than five minutes after 

execution.65 One commenter also states 

that the one-minute reporting timeframe 

for electronic trades ‘‘will not 

meaningfully change the status quo for 

fully electronic trades,’’ as ‘‘FINRA 

acknowledges that the overwhelming 

majority of fully electronic transactions 

are already reported within one 

minute.’’ 66 Some commenters that 

oppose one minute reporting state 

FINRA did not sufficiently justify the 

need for the rule.67 One commenter 

states that the Proposal ‘‘lack[s] 

evidence of a market failure to justify’’ 

the changes.68 Another commenter 

states that Commission should reject the 

Proposal as amended by Partial 

Amendment No. 1.69 This commenter 

states that ‘‘FINRA and the Commission 

should improve the timeliness of 

TRACE reporting and dissemination,’’ 70

but also states that the manual trades 

exception ‘‘eviscerates any potentially 

added value from the ‘electronic’ 

provisions’’ and ‘‘encourages the return 

to ‘manual’ trading by those seeking to 

avoid transparency.’’ 71

FINRA states that ‘‘approximately 

83% of transactions in TRACE-eligible 

securities currently subject to the 15- 

minute reporting timeframe are reported 

within one minute of execution under 

requirements that, for some TRACEeligible securities, have been in place 

for nearly 20 years, and FINRA believes 

it is appropriate and prudent to consider 

whether this timeframe continues to 

meet regulatory objectives given the 

passage of time and the changes in the 

fixed income securities industry in the 

intervening years.’’ 72 Additionally, 

FINRA states that it believes that 

‘‘identifying possible regulatory 

improvements need not be limited to 

instances where there has already been 

a market failure.’’ 73 FINRA further 

states that it continues to believe that 

the Proposal ‘‘represents an important 

step in modernizing the trade reporting 

timeframes for TRACE-eligible 

securities to facilitate more timely 

transaction data, enhancing 

transparency and the value of 

disseminated transaction data by 

allowing investors and other market 

participants to obtain and evaluate more 

timely pricing information for the 

impacted securities.’’ 74 Additionally, 

with respect to feasibility of one-minute 

reporting, especially with respect to 

fully electronic allocated trades, FINRA 

acknowledges this concern and 

describes its approach to enforcement of 

late reporting of transactions to TRACE 

under the Proposal by stating ‘‘that a 

pattern or practice of late reporting 

without reasonable justification may be 

considered conduct inconsistent with 

high standards of commercial honor and 

just and equitable principles of trade, in 

violation of Rule 2010,’’ but FINRA 

adds: ‘‘In considering whether 

‘reasonable justification’ exists under 

proposed Rule 6730(f), FINRA will take 

into account factors such as the size and 

complexity of the trade, such as in the 


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75FINRA Response Letter at 17. 

76See Notice, 89 FR at 5043. 

77See Notice, 89 FR at 5042. 

78 Id. at 4. 

79See supra notes 56–59 and accompanying text. 

80See infra sections III.C and III.D (discussing 

comments, and FINRA’s responses, on the de 

minimis and manual trades exceptions, including 

with respect to concerns regarding the feasibility of 

complying and the application of the rule in the 

context of manual trades). 

81See FINRA Letter at 17 (citing Notice, 89 FR at 

5034, 5041). 

82See supra note 75 and accompanying text. 

83See FINRA Letter at 17. 

84See infra notes 117 and 144 accompanying text. 

85See infra section III.H (discussing that the 

Exchange Act does not require that a self-regulatory 

organization establish the existence of a market 

failure to justify a proposed rule change). 

86See, e.g., BDA Letter I at 1; BDA Letter II at 2; 

Letter from Michael Decker, Senior Vice President, 

Research and Public Policy, Bond Dealers of 

America (August 21, 2024) (‘‘BDA Letter III’’) at 2; 

Letter from Howard Meyerson, Managing Director, 

Financial Information Forum (February 15, 2024) 

(‘‘FIF Letter I’’) at 2; Letter from Howard Meyerson, 

Managing Director, Financial Information Forum 

(May 17, 2024) (‘‘FIF Letter III’’) at 2; SIFMA Letter 

I at 3–4; SIFMA Letter II at 2; FHN Letter at 2; Piper 

Sandler Letter at 1 (stating that the Proposal 

‘‘strike[s] an appropriate balance’’). 

87See BDA Letter I at 1; FIF Letter I at 2; FIF 

Letter III at 2; LPL Financial Letter at 1–2; SIFMA 

Letter I at 3–4; SIFMA Letter II at 2; see also BDA 

Letter II at 4 (stating small broker-dealers benefit 

fixed income markets and would be especially 

negatively affected by higher compliance costs 

associated with the Proposal). 

88See, e.g., ASA Letter I at 1–2; Falcon Letter I 

at 1. 

89See, e.g., Dimensional Letter at 2; HMA Letter 

II at I; HMA Letter I at 9–12; Citadel Letter I at 2– 

3; FIA PTG Letter at 1–2; Moment Technology 

Letter at 1. 

90See ASA Letter I at 2; see also Falcon Letter 

I at 4 (‘‘[O]ur fear is that the Filing will, over time, 

eliminate smaller fixed-income brokers’’); Falcon 

Letter II at 1 (‘‘Given the limits of [the de minimis 

and manual trades] exceptions, smaller brokerdealers like us risk being driven out of the fixedincome markets due to prohibitive costs.’’); ASA 

Letter III at 2 (stating that the commenter’s concerns 

about the Proposal’s potential harm to market 

competition, particularly for smaller and mid-sized 

broker-dealers, remain unaddressed). 

91HMA Letter I at 2. 

92HMA Letter II at 3 (stating that the manual 

trades exception creates an opportunity to avoid 

transparency). 

93See Dimensional Letter at 2. 

94Moment Technology Letter at 2. 

95Citadel Letter II at 2. 

96 Id. 

97See BDA Letter II at 2–3; SIFMA Letter II at 8. 

98See BDA Letter II at 4. 

case of allocation and portfolio 

trades.’’ 75

As discussed below, the Proposal is 

consistent with the Exchange Act. In 

particular, the Proposal will further 

increase price transparency by reducing 

the 15-minute TRACE reporting window 

to one minute while providing 

appropriately tailored exceptions for 

manual trades and FINRA members 

with de minimis reporting activity. The 

as soon as practicable but no later than 

15-minute deadline for reporting trades 

by FINRA member firms with de 

minimis reporting activity, representing 

1.41% of trades or 0.43% of the total par 

value traded, would remain 

unchanged.76 FINRA states that the 

Proposal will likely result in at least an 

additional 5.3% of total trades reported 

within one minute.77 FINRA 

additionally estimates that, ‘‘after 

adjusting for the proposed de minimis 

exception and prior to accounting for 

the manual exception, the Proposal 

could result in up to 16.4% of current 

annual trading volume, or up to 6.1 

million trades and 20 trillion dollars in 

par value, being reported faster.’’ 78

Accordingly, the Commission views the 

Proposal as one that is reasonably 

designed to provide more timely trade 

reporting. 

As the Commission has found 

previously, more timely reporting 

promotes fairness and efficiency of the 

U.S. capital markets.79 Accordingly, the 

Commission finds that the Proposal will 

promote fair and orderly markets and 

protect investors and the public interest 

by increasing market transparency and 

providing the market with more timely 

pricing information, which may 

improve price efficiency. And as 

discussed below, FINRA responded to 

comments regarding the feasibility of 

complying with a one minute reporting 

requirement, including the feasibility 

and cost of compliance due to technical 

limitations and the prevalence of 

manual processes.80 FINRA also 

responded to comments with respect to 

the feasibility of one-minute reporting 

for fully electronic allocated trades, for 

which FINRA provides data showing 

that 68% of allocated trades already 

were reported within one minute and 

90.6% were reported within three 

minutes,81 describes its approach to 

enforcement,82 and states that it will 

continue to study reporting times to 

determine if any regulatory changes are 

appropriate.83 Moreover, FINRA 

responded to comments with respect to 

gamesmanship of the exceptions.84

After carefully reviewing the Notice, 

Partial Amendment No. 1, and comment 

letters received, the Commission views 

the Proposal as reasonably balancing the 

benefits of more contemporaneous 

transaction reporting and transparency 

against the burden of requiring all 

transactions to be reported within one 

minute. Furthermore, the Commission 

agrees with FINRA that improving rules 

need not require a previous market 

failure.85

B. General Comments on Exceptions to 

One-Minute Reporting 

Commenters express varied views on 

the proposed exceptions to one minute 

reporting. Some commenters state the 

exceptions are essential to the success of 

the rule.86 These commenters cite the 

burdens of compliance with one-minute 

reporting on broker-dealers that rely on 

manual processes.87 Other commenters 

state that the exceptions are too 

narrow 88 or too broad.89 One 

commenter states that for both 

exceptions, anything less than 15- 

minute reporting is infeasible and cites 

the issue that compliance costs 

associated with faster reporting could 

price small broker-dealers out of fixed 

income markets.90 One commenter that 

states the exceptions are too broad also 

states that the exceptions ‘‘create 

significant risk to the efficacy and legal 

durability of the entire rule.’’ 91 This 

commenter also states that instead of 

improving market transparency the 

Proposal would ‘‘exacerbate, rather than 

reduce, information asymmetries.’’ 92

One commenter encourages FINRA to 

phase out both exceptions completely 

over time, which it states would 

incentivize FINRA members to 

modernize their execution processes.93

Another commenter states that both 

exceptions ‘‘complicate the rollout of 

the reporting compression process and 

unnecessarily deprive market 

participants of information necessary to 

achieve full market transparency,’’ and 

that ‘‘technological advances, 

particularly the use of APIs, make the 

need for these exceptions unnecessary 

and expensive relative the overall cost 

savings associated with 

transparency.’’ 94 Another commenter 

highlights that while 96.9% of non-ATS 

transactions are reported within five 

minutes, ‘‘[i]t is curious that the 

Proposal would sanction an outer 

reporting limit that is 3 times longer 

than the time it takes to report the 

overwhelming majority of ‘manual’ 

transactions today.’’ 95 The commenter 

states that this could contribute to 

undermining the transition to electronic 

trading in the fixed income markets.96

Two commenters respond that 

commenters critical of the exceptions as 

proposed fail to recognize unique 

features of fixed income markets, such 

as the prevalence of manual trading and 

the heterogeneity of market participants, 

that make broad exceptions necessary.97

One commenter also states that phasing 

out the de minimis exception, as 

suggested by another commenter, would 

drive small firms out of the fixed 

income business.98


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99FINRA Letter at 6 (citations omitted). 

100See infra section III.C (discussing comments, 

and FINRA’s responses, on the de minimis 

exception, including FINRA’s data in support of the 

threshold and look-back period for the exception, 

as well as the Commission view that the exception 

strikes an appropriate balance between fulfilling the 

goal of increased transparency and mitigating any 

disproportionate cost of compliance on certain, 

small FINRA members). Also, the Proposal would 

not phase out the de minims exception, as 

requested by a commenter and opposed by another 

commenter. See supra notes 93 and 98 and 

accompanying text; see also new Supplementary 

Material .08 and supra section II.B.1. 

101See infra section III.C and III.D (discussing 

comments, and FINRA’s response, on the de 

minimis and manual trades exceptions, including 

those regarding the scope of the exceptions and 

impact on smaller broker-dealers). 

102See FINRA Letter at 2–7, 14–15. 

103See, e.g., SIFMA Letter I at 9; Letter from 

Kenneth E. Bentsen, Jr., President and CEO, 

Securities Industry and Financial Markets 

Association (August 21, 2024) (‘‘SIFMA Letter III’’) 

at 2; BDA Letter I at 2. 

104See SIFMA Letter I at 9; SIMFA Letter II at 7; 

see also BDA Letter II at 4 (‘‘Smaller dealers need 

[the de minimis] exception because many conduct 

the trade reporting process entirely manually.’’) 

105See SIFMA Letter I at 9; SIMFA Letter II at 7. 

106See BDA Letter II at 4. 

107See, e.g., Falcon Letter I at 2–4; see also HMA 

Letter I at 9–11, 13 (this commenter also more 

broadly opposes the Proposal, see HMA Letter II). 

108See Falcon Letter I at 2–3; Falcon Letter II at 

2–3. 

109See id. 

110See HMA Letter I at 11. As discussed above, 

this commenter supplemented its prior comments 

to more broadly object to the Proposal. See HMA 

Letter II at 1; supra note 69 and accompanying text. 

111See HMA Letter I at 1 at 10. 

112See id. at 11. 

113See id. at 10. 

With respect to the manual trades 

exception, FINRA explains that ‘‘as is 

the case today, under the Proposal 

members would be required to report 

the subject transactions to TRACE— 

including manual trades—‘as soon as 

practicable’ but no later than the 

applicable outer limit from the time of 

execution. Therefore, the current 

reporting requirements already account 

for the various ways that trades can be 

executed.’’ 99

The Commission finds that the 

Proposal would not impose any burden 

on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act because it creates 

exceptions for manual trades and firms 

with de minimis reporting activity. In 

doing so, the Proposal takes into 

account competitive and liquidity 

concerns that could arise as a result of 

the costs associated with complying 

with a shortened reporting timeframe 

that could lead some FINRA members to 

curtail their activities, or lead some 

FINRA members with less trade volume 

to exit the market, and thereby 

reasonably balances the benefits to 

market participants of increased 

transparency while mitigating the 

burdens of a shortened trade reporting 

deadline. In this regard, the Proposal is 

also reasonably designed to not permit 

unfair discrimination between brokers 

or dealers. 

The Commission views the manual 

trades exception as facilitating greater 

transparency while still allowing 

needed time to report for trades with 

manual processes. Further, the phase-in 

of the manual trades exception’s fiveminute outer limit over three years is 

reasonably designed to provide FINRA 

members time during which to assess 

trade execution and post-trade processes 

and make changes necessary to meet a 

shorter reporting deadline, thereby 

facilitating any changes to manual 

interventions currently employed by 

FINRA members to complete the trade 

execution or reporting process. 

With respect to the de minimis 

exception, as discussed below, the 

exception reasonably and appropriately 

balances the burdens that would 

otherwise fall on FINRA members that 

process limited trade volume without 

diluting the overall benefits of the 

Proposal.100

FINRA responded to the comments 

regarding the de minimis and manual 

trades exceptions, including regarding 

whether the exceptions are too narrow 

or too broad, as well as the potential 

impact of the costs associated with 

faster reporting for small brokerdealers.101 After carefully reviewing the 

Notice, Partial Amendment No. 1, and 

comment letters received, including the 

FINRA Letter, the Commission views 

the Proposal as striking a reasonable 

balance between requiring more 

contemporaneous transaction reporting 

and transparency and the burden of 

requiring all transactions to be reported 

within one minute.102 The Proposal 

both facilitates greater transparency 

through faster post-trade reporting and 

provides FINRA member firms with an 

exception from the one-minute 

reporting deadline that will permit 

continued reliance on manual processes 

and another for FINRA members that 

process limited trade volume. 

Additionally, the Commission disagrees 

with the comment that the exceptions 

‘‘unnecessarily’’ deprive market 

participants of information; the Proposal 

and its exceptions are a reasonable 

balance between providing information 

to market participants, thereby 

increasing transparency, and mitigating 

the burdens of one-minute trade 

reporting. 

C. De Minimis Exception 

Several commenters specifically 

address the de minimis exception. Some 

commenters state support for the de 

minimis exception.103 One of these 

commenters states the de minimis 

exception is appropriately tailored to 

protect minority, veteran, and women 

owned business enterprises and small 

dealers from incurring significant 

costs.104 The commenter also states the 

proposed two-year look back period will 

prevent surprise application of the rule 

and allow newly impacted brokerdealers time to comply.105 Another 

commenter that supports the de 

minimis exception states that market 

participants falling under the threshold 

represent an insignificant portion of the 

market and that the exception will not 

materially affect market transparency.106

Some commenters state opposition to 

the de minimis exception.107 One of 

these commenters supports the logic 

behind the de minimis exception but 

states the proposed 4,000-trade report 

threshold is too low and insufficiently 

justified.108 This commenter also 

requests FINRA expand the threshold or 

at minimum provide more analysis to 

support its proposed limit.109 Another 

commenter that opposes the de minimis 

exception states FINRA did not 

sufficiently justify the need for the 

exception, nor its decisions to set the 

exception’s threshold at 4,000 annual 

trades and the lookback period for 

applicability of the threshold at two 

years.110 Additionally, this commenter 

states that the exception would create 

information asymmetries and could lead 

to gamesmanship, evasion, and market 

distortions.111 Further, the commenter 

stated that this exception could allow a 

firm that ‘‘engaged in 5 trades in one 

year, and 100,000 trades’’ the next to 

continue its 15 minute reporting the 

following year.112 In addition, the de 

minimis exception, the commenter 

stated, ‘‘could incentivize a firm seeking 

to mask its trading activities . . . to use 

an ‘excepted’ broker to effectuate its 

trading.’’ 113

FINRA states ‘‘that the proposed de 

minimis exception balances the 

regulatory goal of providing for timelier 

reporting with the impact and burdens 

on members that are less active in this 

space, including smaller market 

participants. In response to Regulatory 

Notice 22–17, numerous commenters 

expressed concern regarding the impact 

that a one-minute reporting standard 

would have on small [FINRA] member 

firms, including minority, women, and 

veteran-owned broker-dealers. Some of 

these commenters believed that small 

broker-dealers would exit the market for 

fixed income secondary market trading 


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114FINRA Letter at 14 (citations omitted). 

115 Id. 

116 Id. at 14–15 (citations omitted). 

117 Id. at 15. 

118See supra notes 114–116 and accompanying 

text. 

119See Notice, 89 FR at 5043. 

120See supra note 90. 

121See BDA Letter I at 1; BDA Letter II at 2; FIF 

Letter I at 2; FIF Letter III at 2; SIFMA Letter I at 

6; SIFMA Letter II at 3–6; SIFMA Letter III at 2; FHN 

Letter at 2. 

122See SIFMA Letter I at 7–9; SIFMA Letter II at 

6–7; SIFMA Letter III at 2; see also LPL Letter at 

2. 

123See SIFMA Letter I at 7–8; SIFMA Letter II at 

5–7; SIFMA Letter III at 4; see also BDA Letter I at 

3–4; BDA Letter II at 2 (stating that reporting posttrade allocations in one minute sometimes ‘‘is not 

feasible even in a fully automated environment’’); 

FIF Letter I at 3; Falcon Letter II at 4 (stating that 

the concern about manual allocations also extends 

to broker-dealers that are not dual-registrants). 

124See FIF Letter I at 4; see also FIF Letter III at 

3 (requesting FINRA provide guidance that a firm 

would not be held to the applicable reporting 

timeframe in a scenario where FINRA is delayed in 

providing a symbol requested by a firm); BDA Letter 

III at 2 (stating that it would be ‘‘difficult or 

impossible to report in less than 15 minutes’’ trades 

when a firm trades a bond for the first time); SIFMA 

Letter III at n. 6 (referencing the time it currently 

takes to set up and report new bonds using FINRA’s 

TRAQS and New Issue Portal). 

125See FIF Letter I at 3. 

126See Letter from Howard Meyerson, Managing 

Director, Financial Information Forum (February 

26, 2024) (‘‘FIF Letter II’’) at 2–4; FIF Letter I at 3– 

4; FIF Letter III at 3. 

because of the high implementation and 

compliance costs and cautioned that 

this would harm retail investors that 

depend on small [FINRA] member firms 

for access to the market.’’ 114

Accordingly, FINRA believes the 

Proposal adequately established the 

need for the de minimis exception.115

Additionally, FINRA states that 

‘‘[w]ith respect to the 4,000-trade 

threshold (with a two-year lookback) for 

the de minimis exception, as discussed 

in the Proposal, FINRA believes that the 

proposed threshold is appropriately 

tailored to balance the compliance and 

implementation burdens on [FINRA] 

members with the benefits to 

transparency. Based on 2022 data, the 

proposed de minimis threshold would 

provide relief to 640 (out of 838 

currently active) [FINRA] members that, 

in the aggregate, accounted for 1.41% of 

trades or 0.43% of the total par value 

traded. FINRA continues to believe that 

this threshold appropriately balances 

the benefits of timelier reporting with 

the potential costs of disrupting markets 

and disproportionally impacting less 

active and smaller participants. 

Additionally, based on FINRA’s analysis 

of historical trading data over the last 

five years, FINRA does not believe that 

some of the concerns raised by HMA 

about the two-year lookback are likely to 

occur (e.g., that a firm may go from five 

trades in one year to 100,000 the next). 

FINRA’s analysis of trading data 

indicates that, in reality, the difference 

between a one- and two-year lookback 

impacted only 11 firms annually, on 

average, whose activity increased over 

the 4,000-trade threshold by 67% on 

average and a maximum of 421%.’’ 116

Further, FINRA responds to the 

comment that the exception may lead to 

‘‘gamesmanship, evasion, and market 

distortions’’ by stating that ‘‘members 

relying on the de minimis exception 

continue to be subject to the 

requirement that they report their trades 

to TRACE as soon as practicable. 

Existing requirements under Rule 

6730.03(a) make clear, among other 

things, that firms’ policies and 

procedures must be reasonably designed 

to comply with the ‘as soon as 

practicable’ reporting requirement by 

implementing systems that commence 

the trade reporting process at the time 

of execution without delay, and that 

‘[i]n no event may a [FINRA] member 

purposely withhold trade reports, e.g., 

by programming its systems to delay 

reporting until the end of the reporting 

time period.’ Second, to the extent 

commenters are concerned that market 

participants may begin routing orders to 

members qualifying for the de minimis 

exception to take advantage of the 

longer outer-limit reporting timeframe, 

FINRA notes that this would increase 

the member’s activity level and, if 

significant, would cause the firm to no 

longer be eligible for the de minimis 

exception. As with the manual trades 

exception, FINRA has extensive trading 

data history for members and can 

monitor for unusual trading patterns 

that might indicate gamesmanship or 

efforts to delay the reporting of large 

trades.’’ 117

With respect to the de minimis 

exception, FINRA responded to the 

comments regarding whether the 

proposed 4,000-trade threshold is too 

low, including by providing data and 

analysis for the threshold and lookback 

period, and addressed the role of the 

exception in balancing the goal of 

timelier reporting and the burden on 

less active members, including smaller 

broker-dealers.118 After carefully 

reviewing the Notice, Partial 

Amendment No. 1, and comment letters 

received, including the FINRA Letter, 

the Commission views the de minimis 

exception as reasonably and 

appropriately balancing the burdens 

that would otherwise fall on FINRA 

members that process limited trade 

volume without diluting the overall 

benefits of the Proposal. As FINRA 

states, the de minimis exception is 

expected to cover 640 FINRA members, 

which account in aggregate for 1.41% of 

trades and 0.43% of total par value 

traded.119 The Commission is sensitive 

to comments cautioning that small 

broker-dealers may exit the market for 

fixed income secondary market trading 

because of the burdens associated with 

one-minute reporting.120 Retaining the 

15 minute outside limit on reporting 

transactions by FINRA members 

qualifying for the de minimis exception 

would avoid imposing the burdens of 

compliance with one-minute reporting 

on less active market participants, 

including smaller broker-dealers. At the 

same time, FINRA members qualifying 

for the de minimis exception report a 

relatively small portion of transactions. 

Accordingly, the Proposal strikes an 

appropriate balance between fulfilling 

the goal of increased transparency and 

mitigating any disproportionate cost of 

complying with a shorter reporting 

deadline on certain, small FINRA 

members. 

D. Manual Trades Exception 

Several commenters offer specific 

views about the scope of the manual 

trades exception. Some commenters 

characterize the manual trades 

exception as essential to ensuring 

compliance with the rule.121 One 

commenter states that the exception 

should be expanded to include certain 

fully electronic transactions that cannot 

feasibly be reported within one minute, 

such as transactions with a large 

number of post-trade allocations, batchprocessed trades, and trades involving 

multiple systems in trade workflow.122

This commenter states that transactions 

with a large number of post-trade 

allocations are especially difficult to 

report within one minute for brokerdealers also registered as investment 

advisers.123 Other commenters state 

support for FINRA’s proposal to apply 

the exception to a scenario where a firm 

has not previously traded a bond.124 A 

commenter also states that FINRA 

should harmonize the scope of the 

manual trades exception with a similar 

proposal by the Municipal Securities 

Rulemaking Board (‘‘MSRB’’) that 

would apply to transactions in 

municipal securities.125 In addition, this 

commenter describes certain scenarios 

that could be experienced by a reporting 

firm, questioning whether the manual 

trades exception would apply and 

suggesting a dialogue with industry 

about such scenarios.126 A different 

commenter suggests that the exception 

apply to ‘‘any manual intervention in 


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127See Falcon Letter II at 4. 128See Citadel Letter II at 1–2. 129See, e.g., HMA Letter II at 2–3; HMA Letter I 

at 11–12; Citadel Letter I at 2–3; FIA PTG Letter at 

2–4. 130See Citadel Letter I at 1–3; Citadel Letter II at 

3–5; FIA PTG Letter at 2–3; see also Falcon Letter 

I at 1; Falcon Letter II at 2 (both stating that FINRA 

did not adequately justify the exceptions to the 

rule). 131See Citadel Letter I at 2. 132See Citadel Letter I at 2–3; FIA PTG Letter at 

2; Citadel Letter II at 1–3. 133See Citadel Letter I at 3; FIA PTG at 3; see also 

HMA Letter I at 12 (stating that the Proposal as 

originally proposed did ‘‘not assuage our concerns 

that firms may intentionally add a ‘manual’ 

component to their post-execution processes so as 

to avoid timely reporting (and dissemination) of 

their trading activity.’’); HMA Letter II at 3 (stating 

that the Proposal, as modified by Partial 

Amendment No. 1, did not materially revise the 

extremely broad examples of manual trades and 

further offer relevant guidance as to when a manual 

component or process may nevertheless not qualify 

for the exception, and would lead to market 

abuses); supra note 92 and accompanying text. 

134BDA Letter I at 3. 

135 Id. 

136See BDA Letter II at 4. 

137FINRA Letter at 6 (citations omitted). 

138 Id. at 8 (citations omitted, citing Notice, 89 FR 

at 5036, 5045). 

139 Id. at 17 (citing Notice, 89 FR at 5034, 5041). 

140 Id. at 17 (citing Notice, 89 FR at 5034, 5041 

n.32). 

141See supra note 75 and accompanying text. 

142 Id. at 7–8 (citing Notice, 89 FR at 5036, 5045). 

143 Id. at 7 (citing Notice, 89 FR at 5036, 5045). 

the trade execution or reporting 

process.’’ 127 Another commenter states 

that there should not be a manual trades 

exception, nor a distinction between 

manual and electronic trades at all.128

Several commenters state the manual 

trades exception is too broad.129 Some 

of these commenters state that FINRA 

failed to meet its burden to demonstrate 

consistency with the Act, particularly 

by failing to estimate the number of 

transactions expected to qualify for the 

manual trades exception,130 and one of 

these commenters states that the manual 

trades exception was not included in 

FINRA Regulatory Notice 22–17, which 

was issued by FINRA to solicit comment 

on shortening the trade reporting 

timeline from 15 minutes to one minute 

for certain TRACE-Eligible securities.131

These commenters questioning the lack 

of estimates in the Proposal raise the 

issue that a large proportion of the total 

number of trades currently reported 

outside of one minute could fall within 

the proposed rule’s manual trades 

exception, undermining the goal of 

increasing post-trade transparency.132

These commenters also raise the issue 

that firms could build manual steps into 

the trade execution process as a means 

of qualifying for the longer manual 

trades reporting window.133 One 

commenter responds to this issue by 

stating that under the Proposal any 

action purposefully intended to extend 

the trade reporting time is a violation.134

The commenter also states that there is 

no evidence to suggest market 

participants intentionally delay 

reporting transactions, nor do market 

participants have any incentive to do 

so.135 This commenter disagrees with 

the comment that FINRA has not met 

the requirements of the Act, stating it is 

convinced FINRA demonstrated the 

Proposal’s consistency with the Act by 

providing supporting information and 

statistics throughout the rulemaking 

process.136

FINRA states that it disagrees with the 

comments that the manual trades 

exception should be eliminated and that 

the distinction between manual and 

electronic trades should not exist or that 

the manual trades exception should be 

expanded to include certain fully 

electronic trades. Specifically, as 

discussed above, FINRA states, ‘‘as is 

the case today, under the Proposal 

members would be required to report 

the subject transactions to TRACE— 

including manual trades—‘as soon as 

practicable’ but no later than the 

applicable outer limit from the time of 

execution. Therefore, the current 

reporting requirements already account 

for the various ways that trades can be 

executed and the resultant differences 

in the reporting times—some trades may 

be reported in 30 seconds and others in 

two minutes today, depending upon the 

mode of execution and reporting, and 

what is practicable under the 

circumstances. Thus, the Proposal is not 

introducing tiers or causing additional 

variance; rather it is reducing the 

permissible variance by significantly 

refining the outer limit for both manual 

and electronic trades. The proposed 

five-minute outer limit for reporting that 

eventually would be applicable to 

manual trades recognizes, consistent 

with other FINRA trade reporting rules, 

that trades that are manually executed 

or reported may not be able to be 

reported as quickly as trades that are 

electronically executed and 

reported.’’ 137

With respect to large post-trade 

allocations, batch-processed trades, and 

trades involving multiple systems in 

trade workflow, FINRA states that it 

‘‘contemplates that the manual trades 

exception would apply ‘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.’ 

However, if manual action was not 

required to calculate the price of 

component securities included in the 

basket or other steps necessary to book 

and report the trades to TRACE, then 

the manual trades exception would not 

be available. Therefore, for example, if 

the firm employed an automated 

process to calculate prices for, and book 

and report the trades in, the component 

securities, the manual trades exception 

would not be available since this 

process was completed electronically 

without manual intervention.’’ 138

FINRA also states that, as discussed in 

the Proposal, ‘‘FINRA examined 

transaction reporting times for trades 

that were subsequently suballocated 

across multiple accounts and found 

that, for allocated trades, 68% were 

reported within one minute, and 90.6% 

were reported within three minutes.’’ 139

FINRA also stated that it ‘‘was unable to 

distinguish between allocations that 

involved manual intervention from fully 

electronic allocations in the data; 

therefore, reporting within one minute 

for fully electronic allocations may be 

greater than 68%.’’ 140 As discussed 

above, FINRA also acknowledges 

concerns with respect to feasibility of 

one-minute reporting, especially with 

respect to fully electronic allocated 

trades, and describes its approach to 

enforcement of late reporting of 

transactions to TRACE.141

With respect to post-trade allocations 

by broker-dealers also registered as 

investment advisers, FINRA states that 

the proposed rule ‘‘contemplates that 

the manual trades exception would 

apply ‘where allocations to individual 

accounts must be manually input in 

connection with a trade by a duallyregistered broker-dealer/investment 

adviser.’ ’’ 142

With respect to a scenario where a 

firm has not previously traded a bond, 

FINRA states that the proposed rule 

‘‘contemplates that the manual trades 

exception would be available ‘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).’ ’’ 143

With respect to the comment that the 

manual trades exception incentivizes 

firms to build in manual processes in 

order to qualify for the exception, 

FINRA states that it ‘‘has explicitly 

considered and addressed this concern 

in the Proposal. Specifically, the text of 

the manual trades exception would 

explicitly prohibit a [FINRA] member 

from ‘purposely delay[ing] the 

execution or reporting of a transaction 

by handling a trade manually or 


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144FINRA Letter at 6–7 (citations omitted). 

145See supra note 137 and accompanying text. 

146See supra notes 137–143 and accompanying 

text. 

147See Exchange Act Release No. 99402 (Jan. 19, 

2024), 89 FR 5384. 

148See Notice, 89 FR at 5044–5046. 

149See, e.g., notes 184–185 and accompanying 

text. 

150See FINRA Letter at 10. 

151See Notice, 89 FR at 5036–5037. 

152See BDA Letter I at 3; SIFMA Letter I at 9; 

SIFMA Letter II at 7–8. 

153See SIFMA Letter II at 7. 

154See FIF Letter I at 6; SIFMA Letter II at 8. 

155See, e.g., FIF Letter I at 4–5. 

156FINRA Letter at 12. 

introducing manual steps following the 

Time of Execution.’ FINRA also is very 

familiar with [FINRA] members’ usual 

reporting timeframes and possesses 

extensive data with which to establish 

a baseline for comparison in identifying 

changes in behavior. As noted in the 

Proposal, FINRA will review [FINRA] 

members’ use of the manual trades 

exception and their reporting timeliness 

in light of their historic behaviors 

reporting transactions to TRACE. Thus, 

FINRA believes that the manual trades 

exception continues to be appropriate 

and balanced in order to support the 

overall goal of the Proposal—facilitating 

more timely access to market 

information—while ensuring that 

compliance is achievable for the subset 

of trades that rely on manual 

intervention between the trade’s time of 

execution and when it is reported to 

TRACE.’’ 144

The Proposal both facilitates greater 

transparency through faster post-trade 

reporting and provides FINRA member 

firms with an exception from the oneminute reporting deadline that will 

permit continued reliance on manual 

processes. The Commission agrees with 

FINRA’s statement that ‘‘the proposed 

five-minute outer limit for reporting that 

eventually would be applicable to 

manual trades recognizes, consistent 

with other FINRA trade reporting rules, 

that trades that are manually executed 

or reported may not be able to be 

reported as quickly as trades that are 

electronically executed and 

reported.’’ 145 Moreover, as described 

above,146 FINRA provided additional 

discussion in its letter in response to 

specific scenarios raised by commenters 

regarding the application of the 

proposed manual trades exception to 

large post-trade allocations, batchprocessed trades, trades involving 

multiple systems in trade workflow, 

post-trade allocations by broker-dealers 

also registered as investment advisers, 

and scenarios where firms have not 

previously traded a bond by clarifying 

that such scenarios would not qualify 

for the manual trades exception when 

manual intervention between the time 

of execution and the trade report does 

not occur. FINRA also provided data in 

support of not including fully electronic 

allocated trades in the manual trades 

exception and described its regulatory 

standard for potential violations of its 

reporting rules. Finally, with respect to 

the comment that the scope of the 

manual trades exception should be 

harmonized with the MSRB’s proposal 

that would apply to transactions in 

municipal securities, the definitions of 

‘‘manual trades’’ in proposed 

Supplementary Material .09 to FINRA 

Rule 6730 and a ‘‘trade with a manual 

component’’ in proposed MSRB Rule G– 

14(d)(xii) 147 are consistent. 

Additionally, the Proposal’s manual 

trades exception is appropriately 

tailored for facilitating more timely 

access to market information as well as 

promoting compliance, and, as FINRA 

discussed in the Proposal, the manual 

trades exception included in the 

Proposal was informed by comments 

received in response to FINRA 

Regulatory Notice 22–17. FINRA is not 

required under the Act to publish a 

FINRA notice soliciting comment on a 

potential proposed rule change prior to 

filing such change as a proposed rule 

change with the Commission. FINRA 

included the manual trades exception in 

the Proposal as well as a discussion of 

comments received on FINRA 

Regulatory Notice 22–17 148 and the 

Commission provided three 21-day 

public comment periods in connection 

with publication of the Notice, the OIP, 

and Partial Amendment No. 1. 

Furthermore, FINRA provided 

additional analysis and data in its 

comment letter.149 As FINRA states, 

‘‘the manual trades exception 

appropriately accommodates 

transactions that cannot feasibly be 

reported within one minute, balancing 

the burdens on members with the 

benefits to transparency.’’ 150 The 

Commission agrees: the manual trades 

exception provides a reasonable 

accommodation for transactions that 

cannot feasibly be reported within one 

minute, and FINRA has provided 

sufficient justification for the Proposal. 

The Commission anticipates that FINRA 

will monitor its members to ensure 

compliance with the ‘‘as soon as 

practicable’’ requirement and detect 

changes in reporting behavior. This 

should address concerns about 

manipulation. In particular, this should 

address comments regarding FINRA 

members purposefully delaying the 

reporting of transactions by building 

manual steps into the trade execution 

process and help ensure that the manual 

trades exception would not result in a 

degradation in trade reporting 

timeliness. Additionally, in response to 

comments concerning FINRA’s lack of 

estimates of the number of trades that 

are expected to qualify for the manual 

trades exception, proposed changes to 

FINRA Rule 6730(d)(4) would require 

FINRA members to ‘‘append a manual 

trade indicator to the trade report so that 

FINRA can identify manual trades. The 

new manual trade indicator would be 

required regardless of whether the 

[FINRA] 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.’’ 151 Accordingly, the 

addition of the manual trade indicator 

will allow FINRA to collect data on the 

extent to which manual processes are 

employed by FINRA members, data that, 

due to the current lack of a manual trade 

indicator, is not currently available. 

1. Manual Trade Indicator 

Several commenters offer specific 

views about the manual trade indicator. 

Some commenters state it would be 

more operationally feasible to flag trades 

subject to one-minute reporting, rather 

than flagging all manual trades.152 One 

of these commenters states that 

requiring personnel to identify the 

manual component of a trade will 

hinder compliance and delay 

reporting.153 Some commenters state 

that FINRA should offer an interim 

period during which firms are 

permitted, but not required, to report 

the manual trade indicator.154 One 

commenter requests clarification 

regarding the operation of the manual 

trade indicator in specific scenarios.155

With respect to the manual trade 

indictor, FINRA states that rather than 

identifying electronic trades, 

‘‘identifying manual trades would be 

more appropriate from a regulatory 

perspective because manual trades are 

the universe of trades for which 

additional time may be warranted under 

the proposed framework, and requiring 

members to identify these trades would 

align the responsibility for assessing and 

representing the nature of the trade to 

FINRA with the legal framework for 

reporting. As stated in the Proposal, 

FINRA believes that the proposed 

manual trade indicator would provide 

FINRA with important insights into 

manual trading and the use of the 

exception.’’ 156


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157 Id. at 12. 

158 Id. at 13. 

159 Id. 

160See, e.g., ICI Letter at 3–4; Falcon Letter at 4; 

SIFMA Letter I at 6; SIFMA Letter II at 6; BDA 

Letter I at 2–3; ASA Letter II at 2. 

161See ICI Letter at 3; see also SIFMA Letter I at 

6 (stating that FINRA should conduct an impact 

assessment before reducing the reporting window 

for manual trades to five minutes); SIFMA Letter II 

at 6; ASA Letter II at 2 (stating that the proposal 

to gradually phase in the reporting window for 

manual trades without opportunity for formal 

industry input presents risk and complicates 

compliance for market participants); Falcon Letter 

at 4 (stating that FINRA must produce supporting 

data before proposing a mandatory phase-in period 

for the manual trades exception); LPL Letter at 2 

(stating FINRA should examine impact on liquidity, 

depth, concentration, and transparency prior to 

further decreasing reporting times); BDA Letter II at 

3, 5 (asking FINRA to commit to seeking public 

comment before any reduction in trade reporting 

times for manual trades takes effect). But see BDA 

Letter I at 3 (stating support for the phase-in 

approach, but asking FINRA to communicate with 

industry during the transition period regarding 

operational roadblocks that could arise). One 

commenter states that extension of the phase-in in 

Partial Amendment No. 1 does not address its 

earlier comment that any alteration of the 

compliance threshold should necessitate additional 

input from stakeholders, such as through a formal 

request for comment or a new proposal. See ASA 

Letter III at 1. 

162See ICI Letter at 3–4. 

163See ASA Letter II at 2; see also Falcon Letter 

II at 3–4. 

164SIFMA Letter III at 3. 

165FINRA Letter at 10–11 (citations omitted). 

166 Id. at 11; see also Partial Amendment No. 1, 

89 FR at 61515. 

167 Id. 

168 Id. 

FINRA also responds to one 

commenter’s requests for clarification 

about certain scenarios. With respect to 

the commenter’s request for clarification 

about whether the manual trade 

indicator must be reported for trades 

that are manually corrected, FINRA 

states that ‘‘As stated in the Proposal, 

‘[t]o the extent the trade was originally 

fully electronic, when the member 

amends the trade report, it should add 

the Manual Trade Indicator.’ ’’ 157 For a 

commenter’s request for clarification 

about whether the manual trade 

indicator is applicable to general 

systems fixes necessary to correct a 

technical issue that adversely impacted 

trade reporting, FINRA states that ‘‘the 

manual trade indicator must be 

appended ‘[i]f reporting a transaction 

that is manually executed or where such 

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.’ ’’ 158 Finally, in response to a 

commenter’s request for clarification 

that the manual trade indicator would 

not be included in TRACE’s trade report 

matching criteria, ‘‘FINRA confirms that 

it does not intend to use the manual 

trade indicator in TRACE’s trade report 

matching criteria.’’ 159

The Commission agrees with FINRA 

that the indicator should identify 

manual trades instead of electronic 

trades, and that the manual trade 

indicator will provide FINRA with 

important insight into the extent to 

which FINRA members utilize manual 

intervention between execution and 

trade reporting. Electronic trades will be 

required to be reported as soon as 

practicable but no later than one minute 

and adding a requirement for FINRA 

members to identify electronic trades 

could introduce a delay in reporting 

such electronic trades. Further, to the 

extent that the manual trade indicator 

requirement adds a burden on reporting 

manual trades that otherwise would not 

be present on electronic trades, FINRA 

members may have an incentive to 

eliminate manual intervention to 

complete the trade execution or 

reporting process, which would result 

in a greater number of electronic trades 

facilitating greater transparency through 

faster post-trade reporting. Accordingly, 

the manual trade indicator requirement 

reasonably balances the benefits gained 

against any compliance hinderance or 

reporting delay for manual trades. The 

Commission is not persuaded by the 

view that there should be an interim 

period for voluntary use of the manual 

trade indicator because such a period 

would reduce the benefits of the 

insights into manual trading and the use 

of the exception. 

2. Five-Minute Reporting Phase-In 

Several commenters address the 

gradual phase-in of five-minute 

reporting written into the proposed rule 

for manual trades.160 Multiple 

commenters request FINRA propose for 

notice and comment each time it seeks 

to reduce the timeframe.161 One of these 

commenters also states that FINRA must 

consider that the proposed rule will be 

implemented alongside other regulatory 

initiatives, such as the shortened 

securities settlement cycle (T+1), and 

potentially other rules that have been 

proposed.162 Other commenters state 

that the absence of data in the Proposal 

justifying accelerated reporting 

timeframes for manual trades reflects 

insufficient understanding of the 

complexities involved in manual trade 

reporting.163 Another commenter states 

that FINRA’s amendment to extend the 

10-minute reporting timeframe from one 

year to two is ‘‘encouraging.’’ 164

FINRA states that it ‘‘appreciates that 

members may be concerned by the 

degree to which some manual trades are 

not reported within five minutes today. 

In response to these comments, FINRA 

has amended the manual trades 

exception to provide FINRA members 

with an additional year to transition to 

five-minute reporting for manual 

trades.’’ 165 In particular, a FINRA 

member relying on the manual trades 

exception will be required to report the 

manual trade ‘‘as soon as practicable 

and no later than within 15 minutes of 

the time of execution (for up to one 

calendar year from the effectiveness of 

the proposed amendments), within 10 

minutes of the time of execution (for up 

to three calendar years from the 

effectiveness of the proposed 

amendments), and within five minutes 

of the time of execution (three or more 

calendar years from the effectiveness of 

the proposed amendments).’’ 166

FINRA’s original proposal, as described 

in the Notice, would have required 

FINRA members relying on the manual 

trades exception to report such manual 

trades as soon as practicable but no later 

than five minutes of the time of 

execution two or more calendar years 

from the effectiveness of the proposed 

amendments. 

In addition to this extended phase-in 

timeline, FINRA states that it ‘‘intends 

to closely study the trade reporting data 

(this will be facilitated by the manual 

trade indicator, which will allow FINRA 

to identify manual trades) and will 

continue its engagement with [FINRA] 

members on whether feasibility 

concerns continue to exist once firms 

review and revise their trade reporting 

processes in light of the Proposal. 

Moreover, within nine to 12 months of 

the effectiveness of the 10-minute outerlimit reporting timeframe for manual 

trades, FINRA intends to publish a 

Regulatory Notice soliciting comment 

from [FINRA] members regarding the 

operation and impact of the reduced 

reporting timeframe for these manual 

trades. FINRA would evaluate TRACE 

data and the comments received and 

consider if any measures are 

appropriate.’’ 167 FINRA states that such 

measures could include filing a 

‘‘proposed rule change with the 

Commission prior to the effectiveness of 

the five-minute reporting timeframe to 

extend the implementation of, or 

eliminate, the five-minute reporting 

requirement for manual trades, as 

warranted.’’ 168

The Commission views the phase-in 

of the manual trades exception’s fiveminute outer limit over three years as 

reasonably designed to provide FINRA 

members time during which to assess 

trade execution and post-trade processes 


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169See supra note 167 and accompanying text. 170FINRA Letter at 18. 

171See Securities Exchange Act Release No. 

96930 (February 15, 2023), 88 FR 13872 (March 6, 

2023); see also 17 CFR 240.15c6–1. 

172See, e.g., Citadel Letter I at 1–3; HMA Letter 

II at 1–3; HMA Letter I at 8–9; BDA Letter II at 3. 

173See Citadel Letter I at 3; FIA PTG Letter at 3– 

4. 

174See Citadel Letter I at 1–3; HMA Letter II at 

3 

175See HMA Letter II at 3. 

176See HMA Letter I at 8. 

177See id. 

178See id. 

179See HMA Letter I at 9. 

180BDA Letter II at 3. 

181FINRA Letter at 16–17 (citations omitted). 

182FINRA Letter at 6 (citations omitted); see also 

supra section III.D (discussing comments and 

responses, including the Commission’s views, on 

the potential for manipulation). 

183See supra notes 174 and 176. 

and make changes necessary to meet a 

shorter reporting deadline. As part of 

the Proposal, FINRA included in new 

Supplementary Material .09 to FINRA 

Rule 6730 a schedule for implementing 

reductions in the deadline for reporting 

trades eligible for the manual trades 

exception. The three-year phase-in of 

the manual trades exception reasonably 

balances the costs of implementation 

with the goal of increased transparency, 

by giving FINRA members more time to 

meet the requirements. FINRA need not 

provide an additional round of notice 

and comment for every phase of the 

transition. But FINRA nonetheless 

intends to engage with and solicit 

comment from FINRA members 

throughout the phase-in period 

regarding implementation of the 

reduced reporting requirement for 

manual trades.169 The Commission will 

consider any future proposed rule 

changes filed with the Commission 

regarding the implementation. 

Additionally, in response to the 

comment stating that the Proposal 

would need to be implemented 

alongside other regulatory initiatives, 

the Commission views FINRA’s 

statement that it ‘‘will endeavor to 

publish updated technical specifications 

as far as possible in advance of the 

effective date’’ 170 as a reasonable 

response, as the more time FINRA 

members are afforded to implement 

system changes to conform to updated 

technical specifications in support of 

the Proposal, the greater flexibility 

FINRA members will have to schedule 

such system changes. Further, in 

response to the comment specifically 

referencing the implementation of 

amendments to SEC rules to shorten the 

standard settlement cycle to T+1, the 

compliance date for such amendments 

was May 28, 2024.171 In addition, the 

other proposals cited by the commenter 

have not been adopted, so FINRA 

cannot take such possible regulatory 

changes into consideration in 

determining the compliance dates as 

part of this Proposal. 

E. Reporting Requirement Consistency 

Several commenters discuss the 

consistent application of reporting 

requirements,172 including some that 

state that the differing reporting 

windows for manual and electronic 

trades violate the Act by discriminating 

based on the mode of execution and 

unduly burdening competition.173 Two 

commenters describe the potential 

negative consequences of applying 

different levels of post-trade 

transparency depending on a trade’s 

mode of execution.174 One of these 

commenters states that ‘‘[t]he massive 

disparity in timeliness of reporting 

between the two execution methods not 

only creates a significant risk of losing 

the benefits of transparency, but also 

creates new opportunities to manipulate 

markets.’’ 175

Another commenter raises the issue of 

different reporting requirements under 

the proposal depending on a trade’s 

time of execution.176 The commenter 

states that under the current rule, trades 

executed when TRACE is closed must 

be reported within 15 minutes of 

TRACE being open, mirroring the 

deadline for reporting of trades executed 

when TRACE is open.177 But, the 

commenter continues, under the 

Proposal, trades executed outside of the 

hours when TRACE is open will still be 

subject to the deadline to report within 

15 minutes of TRACE being open while 

trades executed when TRACE is open 

will be subject to the new one minute 

requirement.178 The commenter urges 

consistent reporting times in this 

scenario.179 One commenter responds to 

this comment, stating that few bond 

trades take place after hours because of 

limited liquidity and that no evidence 

suggests market participants abuse 

existing exceptions to permit next-day 

reporting of after-hours trades.180

In response to the comment to make 

consistent the different times of 

reporting trades executed when TRACE 

is closed and open, FINRA states that 

‘‘the continued application of a 15- 

minute reporting timeframe to 

afterhours trades would impact a small 

portion of trading activity—only 1.18% 

of total par value. Consistent with 

[FINRA] members’ obligation to report 

trades as soon as practicable, a 

significant portion of these trades are 

already reported well before the 15- 

minute outer limit, (e.g., over 90% of 

trades executed before 8:00 a.m. or after 

6:29 p.m. ET or on a nonbusiness day 

were reported within three minutes of 

the TRACE system open), and FINRA’s 

analysis of trading near the close of 

TRACE system hours found no 

indication that market participants 

execute trades near the close of TRACE 

system hours to delay reporting. 

Accordingly, FINRA does not believe, at 

this time, that the potential benefits of 

a one-minute reporting requirement for 

afterhours trades outweigh the burdens 

such a requirement may impose. In 

particular, FINRA is sensitive to the 

concerns previously expressed by 

commenters that reporting afterhours 

trades within one minute of the TRACE 

system open would present operational 

obstacles. FINRA also notes that the 

Proposal’s continued application of a 

15-minute reporting timeframe for 

afterhours trades is consistent with the 

rules governing other trade reporting 

facilities.’’ 181

With respect to the potential negative 

consequences of applying different 

levels of post-trade transparency 

depending on a trade’s mode of 

execution, FINRA states that ‘‘as is the 

case today, under the Proposal members 

would be required to report the subject 

transactions to TRACE—including 

manual trades—‘‘as soon as practicable’’ 

but no later than the applicable outer 

limit from the time of execution. 

Therefore, the current reporting 

requirements already account for the 

various ways that trades can be 

executed and the resultant differences 

in the reporting times.’’ 182

The Proposal will set three outside 

limits for reporting transactions: a oneminute default deadline, a 15-minute 

deadline that will shorten to five 

minutes three years after the Proposal 

becomes operative for transactions 

eligible for the manual trades exception, 

and a 15-minute deadline for FINRA 

member firms with de minimis 

reporting activity. The Commission 

disagrees with the comment that this 

will result in varying levels of post-trade 

transparency or create new 

opportunities for market 

manipulation.183 The Proposal’s varying 

reporting deadlines do not change the 

existing requirement that transactions 

be reported as soon as practicable, 

which applies to all transactions 

covered by the Proposal, and is 

accommodative of unique aspects of 

different transactions. Because of the 

current ‘‘as soon as practicable’’ 

requirement, FINRA-provided data 

show that 82.9% of transactions are 

reported within one minute, 97.6% 

reported within five minutes, and 


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184See Notice, 89 FR at Table 1. 

185FINRA Letter at 4 (citations omitted). 

186 Id. at 4–5. 

187See supra note 147. 

188See, e.g. Letter from Ernesto A. Lanza, Chief 

Regulatory and Policy Officer, MSRB, dated July 18, 

2024, available at https://www.sec.gov/comments/ 

sr-msrb-2024-01/srmsrb202401-491663- 

1411646.pdf. 

189See, e.g., SIFMA Letter I at 10; BDA Letter I 

at 4; FIF Letter I at 5–7; SIFMA Letter II at 8. 

190See SIFMA Letter I at 10; BDA Letter I at 4. 

191See FIF Letter I at 5. 

192See id. at 6–7; see also SIFMA Letter II at 8 

(encouraging FINRA to eliminate its charge for 

testing and instead to offer no-cost testing). 

Comments related to FINRA’s free testing period 

and current practice to charge for testing after such 

free testing period are outside of the scope of this 

proposal. 

193FINRA Letter at 18. 

194See ASA Letter III at 2–3; ASA Letter II at 2; 

ASA Letter 1 at 3. 

195See id.; ASA Letter III at 2 & n.4. 

196See ASA Letter III at 1; see also ASA Letter 

II at 2; ASA Letter I at 3. 

197The commenter cites a speech by the Chair in 

stating to the contrary, but that speech does not 

specifically address the TRACE trade reporting 

timeframe at all. See ASA Letter III at 2 n.4 (citing 

Gary Gensler, Chair, Securities and Exchange 

Commission, Prepared Remarks before SEC Speaks: 

U.S. Capital Markets and the Public Good (Apr. 2, 

2024) (transcript available at https://www.sec.gov/ 

newsroom/speeches-statements/prepared-remarkssec-speaks-us-capital-markets-public-good). And, in 

any event, the speech reflects the views of the Chair 

alone, not the Commission. 

198FINRA Letter at 3. 

199 Id. 

200 Id. at 3–4. 

99.4% reported within 15 minutes.184

Accordingly, transaction reporting times 

currently are variable. However, 

‘‘FINRA estimates that, after adjusting 

for the proposed de minimis exception 

and prior to accounting for the manual 

exception, the Proposal could result in 

up to 16.4% of current annual trading 

volume, or up to 6.1 million trades and 

20 trillion dollars in par value, being 

reported faster. As further detailed in 

the Proposal, for non-ATS trades (some 

of which may qualify for the manual 

trades exception), 96.9% were reported 

within five minutes. Given that some 

non-ATS trades are fully electronic 

while others involve manual 

intervention between execution and 

trade reporting, FINRA conservatively 

estimates that the Proposal would result 

in at least another 2.03%, or over 

755,000 trades representing 

approximately $3.702 trillion traded 

(accounting for the impact of the 

proposed de minimis exception), being 

reported faster.’’ 185 Additionally, 

FINRA states that ‘‘[a]s evidenced by 

FINRA’s analysis of trades executed 

between one and 15 minutes after a 

prior trade of the same bond but before 

the prior trade was reported, the 

Proposal could potentially benefit the 

ability to evaluate pricing in a 

substantial amount of trades—over 

486,100 corporate bond trades alone 

representing approximately $459.6 

billion traded (accounting for the impact 

of the proposed de minimis 

exception).’’ 186 Thus, the Proposal will 

reduce variation in reporting times by 

shortening the outer limit reporting time 

for FINRA member firms with more 

than de minimis reportable activity. 

A similar proposed rule change by the 

MSRB,187 on which the MSRB closely 

coordinated with FINRA,188 would 

result in a consistent standard for trade 

reporting for municipal securities and 

the TRACE-Eligible Securities covered 

by the Proposal. Accordingly, the 

Commission finds that the Proposal 

would foster cooperation and 

coordination between the MSRB and 

FINRA by establishing consistent trade 

reporting requirements across various 

classes of fixed income securities. 

Consistent trade reporting requirements 

for municipal securities covered by 

MSRB rules and the TRACE-Eligible 

Securities covered by the Proposal also 

may reduce compliance burdens 

resulting from inconsistent obligations 

and standards for different classes of 

fixed income securities. 

F. Implementation Period 

Some commenters address the 

implementation period.189 Two 

commenters request an implementation 

period of two years from the time of 

approval due to the high cost of 

compliance.190 Another commenter 

states the cost of implementing the 

proposal is anticipated to be especially 

high for smaller firms and suggests an 

implementation period of at least 18 

months from the date of publication of 

updated technical specifications and 

guidance.191 The commenter also 

requests that FINRA provide an 

expanded free testing period of 90 days 

instead of the standard free testing 

period of 30 days.192

FINRA responds that it ‘‘intends to 

provide [FINRA] members with a 

sufficient implementation timeframe 

(for example, approximately within 18 

months from any SEC approval) to make 

the changes necessary to comply with 

the Proposal. If approved by the SEC, 

FINRA will announce the effective date 

of the Proposal in a Regulatory Notice. 

As is generally the case for TRACE rule 

changes, FINRA will endeavor to 

publish updated technical specifications 

as far as possible in advance of the 

effective date(s) and will work with 

[FINRA] members to provide 

interpretive guidance, where 

needed.’’ 193

The Commission views FINRA’s 

statements with respect to 

implementation as reasonable and 

appropriate. As stated above, FINRA 

intends to provide FINRA members 

with a sufficient implementation 

timeframe, publish updated technical 

specifications as far as possible in 

advance of the effective date, and be 

responsive to requests for interpretive 

guidance. FINRA represents that it will 

announce the effective date of the 

proposed rule change in a FINRA 

Regulatory Notice. 

G. Consistency With the Administrative 

Procedure Act (‘‘APA’’) 

One commenter questions the 

proposed rule’s consistency with the 

APA.194 This commenter asserts that 

FINRA filed the proposed rule at the 

direction of the Commission, and 

objects to the Commission’s alleged use 

of self-regulatory organizations such as 

FINRA ‘‘as a conduit to carry out 

rulemakings that are the ultimate 

responsibility of the Commission.’’ 195

The commenter further argues that there 

is ‘‘no demonstrable market failure in 

the fixed income markets that would 

justify reducing the reporting timeframe 

from 15 minutes to 1 minute.’’ 196

The Commission did not direct 

FINRA to file the proposed rule and it 

is not using FINRA as a conduit to enact 

the proposed rule.197 Rather, as FINRA 

explains, FINRA reassessed the TRACE 

trade reporting timeframe because 

FINRA believes that it is ‘‘appropriate 

and prudent to consider whether this 

timeframe continues to meet regulatory 

objectives given the passage of time and 

the changes in the fixed income 

securities industry in the intervening 

years.’’ 198 FINRA designed the Proposal 

itself based on ‘‘extensive data 

analysis,’’ ‘‘carefully consider[ing] the 

different ways trades can be executed in 

the fixed income markets and craft[ing] 

the manual trades exception to address 

a range of execution and reporting 

scenarios to account for these 

differences.’’ 199 In support of the 

Proposal, FINRA states that it 

‘‘represents an important step in 

modernizing the trade reporting 

timeframes for TRACE-eligible 

securities to facilitate more timely 

transaction data, enhancing 

transparency and the value of 

disseminated transaction data by 

allowing investors and other market 

participants to obtain and evaluate more 

timely pricing information for the 

impacted securities.’’ 200


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78942 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Notices 

201 15 U.S.C. 78o–3(b), 78s(b)(2)(C). 

202The commenter’s references to the Supreme 

Court’s decisions in Loper Bright Enterprises v. 

Raimondo, 144 S. Ct. 2244 (2024) and Ohio v. EPA, 

144 S. Ct. 2040 (2024), are similarly misplaced. 

Loper Bright is inapposite because the question here 

is whether FINRA’s proposed rule change is 

consistent with the requirements of Section 

15A(b)—in which case the Exchange Act requires 

the Commission to approve it—not whether the 

Commission would have statutory authority to 

adopt its own market-wide rule. And Ohio is 

inapposite because we explain above why 

commenters’ concerns do not establish that the 

Proposal is inconsistent with the requirements of 

the Act. 

203 15 U.S.C. 78s(b)(6). 

204 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’’). 

205 15 U.S.C. 78s(b)(2). 

206 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3On January 10, 2024, the Commission approved 

proposals by NYSE Arca, Inc., The Nasdaq Stock 

Market LLC, and Cboe BZX Exchange, Inc. to list 

and trade the shares of 11 bitcoin-based 

commodity-based trust shares and trust units, 

including the iShares Bitcoin Trust, the Grayscale 

Bitcoin Trust, and the Bitwise Bitcoin ETF. See 

Securities Exchange Act Release No. 99306 (Jan. 10, 

2024), 89 FR 3008 (Jan. 17, 2024) (order approving 

File Nos. SR–NYSEARCA–2021–90; SR– 

NYSEARCA–2023–44; SR–NYSEARCA–2023–58; 

SR–NASDAQ–2023–016; SR–NASDAQ–2023–019; 

SR–CboeBZX–2023–028; SR–CboeBZX–2023–038; 

SR–CboeBZX–2023–040; SR–CboeBZX–2023–042; 

SR–CboeBZX–2023–044; SR–CboeBZX–2023–072) 

(‘‘Bitcoin ETP Order’’). 

4See Securities Exchange Act Release No. 99396 

(Jan. 19, 2024), 89 FR 5047 (Jan. 25, 2024) (‘‘Notice’’ 

or ‘‘Proposal’’). 

5 15 U.S.C. 78s(b)(2). 

6See Securities Exchange Act Release No. 99681 

(Mar. 6, 2024), 89 FR 17886 (Mar. 12, 2024). 

7 15 U.S.C. 78s(b)(2)(B). 

8See Securities Exchange Act Release No. 100024 

(Apr. 24, 2024), 89 FR 34290 (Apr. 30, 2024) 

(‘‘Order Instituting Proceedings’’). 

9See Securities Exchange Act Release No. 100567 

(Jul. 19, 2024), 89 FR 60482 (Jul. 25, 2024). 

10Comment letters on the Proposal are available 

at https://www.sec.gov/comments/sr-ise-2024-03/ 

srise202403.htm. 

11See letter from Greg Ferrari, Vice President, 

U.S. Options, ISE, dated May 23, 2024 (‘‘ISE Letter 

I’’). 

12See letter from Angela Dunn, Nasdaq ISE, LLC, 

dated Aug. 21, 2024 (‘‘ISE Letter II’’). 

13Amendment No. 4 amends ISE Options 9, 

Section 13, Supplementary Material .01 and ISE 

Options 9, Section 15, Supplementary Material .01, 

respectively, to establish position and exercise 

limits of 25,000 contracts for the proposed IBIT 

options. 

14Amendment No. 5 amends the Proposal to 

describe in greater detail the surveillance 

procedures that will apply to the trading of options 

on IBIT. The full text of Amendment Nos. 4 and 5 

is available at the Exchange’s website at https://

listingcenter.nasdaq.com/rulebook/ISE/rulefilings. 

Nor does the Exchange Act require 

that a self-regulatory organization 

establish the existence of a market 

failure to justify a proposed rule change. 

Under Section 19(b) of the Exchange 

Act, the Commission must approve a 

rule change proposed by FINRA if the 

Commission finds that the proposed 

change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder, including 

the requirements of section 15A(b).201

For the reasons discussed above, the 

Commission finds that the Proposal is 

consistent with those requirements 

because, among other things, it is 

designed to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest; and is not designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Proposal also does not impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act.202

H. Consultation With the Treasury 

Department 

Pursuant to section 19(b)(6) of the 

Act,203 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 

proposed rule change. Pursuant to 

section 19(b)(5) of the Act,204 the 

Commission consulted with and 

considered the views of the Treasury 

Department in determining whether to 

approve the proposed rule change. The 

Treasury Department did not object to 

the proposed rule change. 

IV. Conclusion 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,205 that the 

proposed rule change (SR–FINRA– 

2024–004), as modified by Partial 

Amendment No. 1, be, and hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.206

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–22027 Filed 9–25–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101128; File No. SR–ISE– 

2024–03] 

Self-Regulatory Organizations; Nasdaq 

ISE, LLC; Notice of Filing of 

Amendment Nos. 4 and 5 and Order 

Granting Accelerated Approval of a 

Proposed Rule Change, as Modified by 

Amendment Nos. 1, 4, and 5, To Permit 

the Listing and Trading of Options on 

the iShares Bitcoin Trust 

September 20, 2024. 

I. Introduction 

On January 9, 2024, Nasdaq ISE, LLC 

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

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and 

Rule 19b–4 thereunder,2 a proposed rule 

change to list and trade options on 

exchange-traded product (‘‘ETP’’) shares 

that represent interests in the iShares 

Bitcoin Trust (‘‘IBIT’’).3 On January 11, 

2024, the Exchange filed Amendment 

No. 1 to the proposed rule change, 

which replaced and superseded the 

proposed rule change as originally filed. 

On January 25, 2024, the proposed rule 

change, as modified by Amendment No. 

1, was published for comment in the 

Federal Register.4 On March 6, 2024, 

pursuant to Section 19(b)(2) of the Act,5

the Commission designated a longer 

period within which to approve the 

Proposal, disapprove the Proposal, or 

institute proceedings to determine 

whether to disapprove the Proposal.6

On April 24, 2024, the Commission 

instituted proceedings under Section 

19(b)(2)(B) of the Act 7 to determine 

whether to approve or disapprove the 

Proposal.8 On July 19, 2024, the 

Commission designated a longer time 

for Commission action on the Proposal.9

The Commission received comments 

addressing the proposed rule change.10

On May 23, 2024, ISE submitted a letter 

providing additional information 

regarding IBIT and other bitcoin-based 

ETPs.11 On August 21, 2024, ISE 

submitted a second letter that provides 

additional analysis supporting the 

proposed position limit of 25,000 

contracts for IBIT options.12 The 

Exchange filed Amendment Nos. 2 and 

3 to the Proposal on August 29, 2024, 

and September 12, 2024, respectively. 

On September 12, 2024, the Exchange 

withdrew Amendment Nos. 2 and 3 and 

filed Amendment No. 4 to the 

Proposal.13 The Exchange filed 

Amendment No. 5 to the Proposal on 

September 19, 2024.14 The Commission 

is publishing this notice to solicit 

comments on Amendment Nos. 4 and 5 

from interested persons, and is 

approving the proposed rule change, as 


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