Federal Register / Vol. 74, No. 9 / Wednesday, January 14, 2009 / Notices 2147 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

4FINRA Rule 6730 became effective on December 

15, 2008. See Regulatory Notice 08–57 (October 

2008). 

5On January 9, 2007, when FINRA Rule 

6730(e)(4) (then NASD Rule 6230(e)(4)) became 

effective, the operation of NYSE’s bond trading 

system, the ‘‘Automated Bond System’’ or ‘‘ABS,’’ 

was addressed in NYSE Rule 86 and identified by 

name in NYSE Rule 1400. In 2007, the NYSE 

replaced the ABS with a new bond trading facility, 

‘‘New York Bonds.’’ NYSE Rule 86 was amended 

to reflect the name and operation of New York 

Bonds. However, NYSE Rule 1400 continues to 

refer to ABS and does not reflect the establishment 

of New York Bonds. See Securities Exchange Act 

Release No. 55496 (March 20, 2007); 72 FR 14631 

(March 28, 2007) (SR–NYSE–2006–37) (Notice of 

Filing of Amendment No. 3 and Order Granting 

Accelerated Approval of Proposed Rule Change, as 

Amended, Relating to the Establishment of NYSE 

Bonds). In addition, a bond trading facility, which 

is ‘‘based on NYSE Bonds,’’ was recently 

established by an affiliate of the NYSE, NYSE 

Alternext US LLC (‘‘NYSE Alternext’’). See 

Securities Exchange Act Release No. 58839 (October 

23, 2008); 73 FR 64645 (October 30, 2008) (SR– 

NYSEALTR–2008–003) (Notice of Filing and 

Immediate Effectiveness of Proposed Rule Change 

Regarding Relocation of the Trading of Certain Debt 

Securities Conducted On or Through the 

Continued 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59216; File No. SR–FINRA– 

2008–065] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Extend a TRACE Pilot 

Program 

January 8, 2009. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on December 

18, 2008, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) (f/k/a 

National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) (‘‘FINRA’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by FINRA. FINRA has designated the 

proposed rule change as constituting a 

‘‘non-controversial’’ rule change under 

paragraph (f)(6) of Rule 19b–4 under the 

Act,3 which renders the proposal 

effective upon receipt of this filing by 

the Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to extend the 

pilot program in FINRA Rule 6730(e)(4) 

(formerly NASD Rule 6230(e)(4)) to 

January 7, 2011, and incorporate a 

reference to current New York Stock 

Exchange (‘‘NYSE’’) Rule 86.4 The pilot 

program exempts from reporting to 

Trade Reporting and Compliance Engine 

(‘‘TRACE’’) transactions in TRACEeligible securities that are executed on 

a facility of the NYSE in accordance 

with NYSE Rules 1400 and 1401 and 

reported to NYSE in accordance with 

NYSE’s applicable trade reporting rules 

and disseminated publicly by NYSE. 

Below is the text of the proposed rule 

change. Proposed new language is in 

italics; proposed deletions are in 

brackets. 

* * * * * 

6700. TRADE REPORTING AND 

COMPLIANCE ENGINE (TRACE) 

* * * * * 

6730. Transaction Reporting 

(a) through (d) No Change. 

(e) Transactions Exempt From 

Reporting 

The following types of transactions 

shall not be reported: 

(1) through (3) No Change. 

(4) [For the duration of a two-year 

pilot program, effective upon the later of 

either: (1) approval of this Rule by the 

SEC, or (2) execution by FINRA and the 

New York Stock Exchange (‘‘NYSE’’) of 

a data sharing agreement addressing 

data related to transactions covered by 

this Rule,]Provided that a data sharing 

agreement between FINRA and NYSE 

related to transactions covered by this 

Rule remains in effect, for a pilot 

program expiring on January 7, 2011, 

transactions in TRACE-eligible 

securities that are executed on a facility 

of NYSE in accordance with NYSE 

Rules 1400, [and]1401 and 86 and 

reported to NYSE in accordance with 

NYSE’s applicable trade reporting rules 

and disseminated publicly by NYSE. 

(5) No Change. 

(f) No Change. 

* * * * * 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of, and basis for, the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of those 

statements may be examined at the 

places specified in Item IV below. 

FINRA has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Pursuant to SR–NASD–2006–110, 

FINRA amended FINRA Rule 6730(e) 

(then NASD Rule 6230(e)) to exempt 

from TRACE reporting requirements, for 

a pilot period of two years, transactions 

in TRACE-eligible securities that are 

executed on a facility of the NYSE in 

accordance with NYSE Rules 1400 and 

1401, reported to NYSE in accordance 

with NYSE’s applicable trade reporting 

rules and disseminated publicly by 

NYSE. The exemption did not take 

effect until FINRA and NYSE entered 

into a data sharing agreement 

addressing data related to the 

transactions covered by FINRA Rule 

6730(e)(4) (then NASD Rule 6230(e)(4)). 

The Commission approved SR–NASD– 

2006–110 on an accelerated basis on 

November 16, 2006, and the two-year 

pilot period began on January 9, 2007. 

The pilot program is scheduled to 

expire on January 9, 2009. 

FINRA is proposing to extend the 

pilot program for two years to continue 

to exempt members that execute 

transactions in TRACE-eligible 

securities on an NYSE facility (and as to 

which all the other conditions of the 

exemption are met) from the TRACE 

reporting requirements. The pilot will 

expire at 11:59:59 p.m. on January 7, 

2011. FINRA believes that a two-year 

extension will provide additional time 

to analyze the impact of the exemption. 

Without the extension, members would 

be subject to both FINRA’s and NYSE’s 

trade reporting requirements with 

respect to these securities. 

FINRA also proposes two technical 

changes to FINRA Rule 6730(e)(4). 

FINRA proposes to incorporate a 

reference to amended NYSE Rule 86 in 

FINRA Rule 6730(e)(4) to identify more 

clearly the scope of the pilot program. 

FINRA believes this is necessary 

because the NYSE recently established a 

new bond trading facility, which is not 

reflected in NYSE Rules 1400 or 1401 

(i.e., the rules currently referenced in 

FINRA Rule 6730(e)(4)). Rather, NYSE 

Rule 1400, which addresses eligibility 

requirements for unlisted debt securities 

to be traded on the NYSE, refers to ABS, 

the bond trading facility that is no 

longer in existence.5 FINRA’s proposal 


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2148 Federal Register / Vol. 74, No. 9 / Wednesday, January 14, 2009 / Notices 

Exchange’s Legacy Trading Systems and Facilities 

to an Automated Bond Trading Platform Based on 

NYSE Bonds). FINRA’s proposed amendment 

makes explicit that the pilot program is intended to 

include transactions executed on a facility of NYSE 

in accordance with NYSE Rules 1400, 1401 and 86, 

but would not extend to any transactions executed 

on the NYSE Alternext bond trading facility. 

6 15 U.S.C. 78o–3(b)(6). 

7 15 U.S.C. 78s(b)(3)(A). 

8 17 CFR 240.19b–4(f)(6). 

9 In addition, Rule 19b–4(f)(6)(iii) requires a selfregulatory organization to give the Commission 

written notice of its intent to file the proposed rule 

change at least five business days prior to the date 

of filing of the proposed rule change, or such 

shorter time as designated by the Commission. 

FINRA has satisfied this requirement. 

10For the purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 11 17 CFR 200.30–3(a)(12). 

to reference NYSE Rule 86 in FINRA 

Rule 6730(e)(4) would clarify the scope 

of the pilot program currently in effect 

and proposed to be extended. The 

proposed rule change would not expand 

or otherwise change the pilot program. 

Also, the proposed rule change would 

amend FINRA Rule 6730(e)(4) to restate 

the requirement that the exemption is 

predicated on the data agreement 

between FINRA and NYSE to share data 

related to the transactions covered by 

the Rule remaining in effect. The 

success of the pilot program remains 

dependent on FINRA’s ability to 

effectively continue to conduct 

surveillance on corporate debt trading 

in the over-the-counter market. 

The effective date of the proposed 

rule change will be January 8, 2009. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,6 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. FINRA believes that the 

extension of the exemptive provision 

protects investors and the public 

because transactions will be reported, 

price transparency will be maintained 

for these transactions, and NYSE’s 

agreement to share data with FINRA 

allows FINRA to conduct surveillance 

in the corporate debt securities market. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

FINRA represented that the proposed 

rule change qualifies for immediate 

effectiveness pursuant to Section 

19(b)(3)(A) of the Act 7 and Rule 19b– 

4(f)(6) thereunder 8 because it: (i) Does 

not significantly affect the protection of 

investors or the public interest; (ii) does 

not impose any significant burden on 

competition; and (iii) by its terms, does 

not become operative for 30 days from 

the date on which it was filed, or such 

shorter time as the Commission may 

designate if consistent with the 

protection of investors and the public 

interest.9

The Exchange has requested that the 

Commission waive the 30-day operative 

delay, so that the proposed rule change 

may become operative upon filing. The 

Commission hereby grants the 

Exchange’s request and believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest.10 This 

will allow the existing pilot program to 

continue without interruption and 

thereby eliminate duplicative 

transaction reporting obligations of 

broker-dealers engaging in transactions 

in TRACE-eligible debt securities on 

NYSE. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2008–065 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2008–065. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of the filing also will be available 

for inspection and copying at the 

principal office of FINRA. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–FINRA– 

2008–065 and should be submitted on 

or before February 4, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–612 Filed 1–13–09; 8:45 am] 

BILLING CODE 8011–01–P 


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