Federal Register / Vol. 74, No. 70 / Tuesday, April 14, 2009 / Notices 17271 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(6). 

5See Rules 6282, 6380A, 6380B, 6622 and 6730. 

6See Trade Reporting Frequently Asked 

Questions, FAQ 100.4, available at http:// 

www.finra.org/Industry/Regulation/Guidance/ 

P038942. 

7Certain trades are reported to FINRA, but not for 

publication purposes (referred to as ‘‘non-tape 

reports’’). For example, FINRA rules require 

members to submit non-tape reports for transactions 

that are effected upon the exercise of an OTC option 

or for ‘‘away from the market sales’’ (e.g., a gift 

between two parties). The non-tape reports are used 

for audit trail and regulatory fee assessment 

purposes only and are not reported to the 

appropriate exclusive Securities Information 

Processor (‘‘SIP’’) for public dissemination. See 

Rules 6282(i)(2) and 7130(c) (relating to the 

Alternative Display Facility); 6380A(e)(2) and 

7230A(g) (relating to the FINRA/Nasdaq Trade 

Reporting Facility); 6380B(e)(2) and 7230B(f) 

(relating to the FINRA/NYSE Trade Reporting 

Facility); and 6622(e)(2) and 7330(g) (relating to the 

OTC Reporting Facility). 

8Similarly, FINRA amended its trade reporting 

rules to clarify that in the limited circumstance 

where securities are transferred pursuant to an asset 

purchase agreement (‘‘APA’’), such transfer does 

not have to be reported if (1) the APA is subject to 

the jurisdiction and approval of a court of 

competent jurisdiction in insolvency matters; and 

(2) the purchase price under the APA is not based 

on, and cannot be adjusted to reflect, the current 

market prices of the securities on or following the 

effective date of the APA. FINRA believes that 

transfers effected pursuant to an APA under these 

circumstances are not trade reportable events and 

that reporting and dissemination of these transfers 

would not provide meaningful price discovery 

information to the market. See Securities Exchange 

Act Release No. 59126 (December 19, 2008), 73 FR 

79948 (December 30, 2008) (notice of filing and 

immediate effectiveness of SR–FINRA–2008–060). 

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 not be designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Commission believes that the 

proposed rule change will increase 

efficiency in trade reporting and remove 

potential confusion about which party 

to a transaction is responsible for 

reporting such information. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,10 that the 

proposed rule change (SR–NYSEArca– 

2009–11) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–8419 Filed 4–13–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59713; File No. SR–FINRA– 

2009–024] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Trade 

Reporting Transfers of Proprietary 

Securities Positions in Connection 

With Certain Corporate Control 

Transactions 

April 6, 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 April 3, 

2009, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) (f/k/a 

National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) filed with the 

Securities and Exchange Commission 

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

rule change as described in Items I, II 

and III below, which Items have been 

prepared by FINRA. FINRA has 

designated the proposed rule change as 

constituting a ‘‘non-controversial’’ rule 

change under Section 19(b)(3)(A) of the 

Act 3 and paragraph (f)(6) thereunder,4

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 amend FINRA 

trade reporting rules to codify the 

reporting requirements applicable to 

over-the-counter (‘‘OTC’’) transfers of 

proprietary positions in debt and equity 

securities between a member and 

another member or non-member brokerdealer effected in connection with 

certain corporate control transactions. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

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

office of FINRA and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

FINRA trade reporting rules require 

that OTC transactions in debt and equity 

securities be reported to FINRA unless 

they qualify for an express exception 

under the rules.5 For purposes of the 

trade reporting rules, a ‘‘trade’’ or 

‘‘transaction’’ entails a beneficial change 

of ownership of securities between 

parties (e.g., a purchase or sale of 

securities) in which a FINRA member 

participates.6 As a general matter, when 

members report trades to a FINRA trade 

reporting facility, FINRA facilitates the 

public dissemination of the trade 

information and/or assesses regulatory 

transaction fees.7

Occasionally, broker-dealers may 

transfer proprietary securities positions, 

along with other assets, in connection 

with corporate control transactions such 

as mergers and acquisitions. Such 

transfers are ‘‘trades’’ or ‘‘transactions’’ 

because they result in a change of 

beneficial ownership, but unlike the 

typical securities transaction, they are 

not driven by a trading or investment 

strategy (e.g., a desire to exit a position 

or lock in a profit) relating to a 

particular security position. Rather, the 

transfers are in furtherance of the 

consolidation of the broker-dealers’ 

separate sales and proprietary trading 

businesses. Additionally, the securities 

that are transferred typically are 

assigned a value, such as the closing 

price of the security on a date certain, 

solely for purposes of effectuating the 

transfer. 

As such, FINRA believes that public 

dissemination of such transfers would 

not provide meaningful price discovery 

information to the market. To the 

contrary, dissemination could confuse 

investors and other market participants, 

particularly where the positions being 

transferred are substantial. Public 

dissemination of significant and 

perhaps unusual trading activity could 

give the false impression of investor 

interest, market participant transactions 

and significant price discovery 

activities, and the volume reports could 

skew a variety of trading activity 

indicators.8

Accordingly, FINRA is proposing to 

amend its trade reporting rules to clarify 

17272 Federal Register / Vol. 74, No. 70 / Tuesday, April 14, 2009 / Notices 

9Pursuant to Section 31 of the Act, FINRA and 

the national securities exchanges are required to 

pay transaction fees and assessments to the SEC 

that are designed to recover the costs related to the 

government’s supervision and regulation of the 

securities markets and securities professionals. 

FINRA obtains its Section 31 fees and assessments 

from its membership, in accordance with Section 3 

of Schedule A to the FINRA By-Laws. 

10The trading activity fee is used by FINRA solely 

to fund its member regulatory activities, including 

the supervision and regulation of members through 

examinations, financial monitoring, policy, 

rulemaking, interpretive and enforcement activities. 

See Section 1(a) of Schedule A to the FINRA ByLaws. 

11See NASD Rule 1017(a)(1) and (2). See also, 

Incorporated NYSE Rule 312. 

12FINRA will publish a Notice setting forth the 

specific reporting requirements applicable to the 

proposed exception. Members also should refer to 

the applicable technical specifications for the 

FINRA facility to which they are reporting trades. 

13FINRA expects that in most instances, if 

members cannot report on the same day that the 

transfers are reflected on their books and records 

(for example, if the transfers take place after the 

close of the FINRA trade reporting facilities), 

members will report no later than the following 

business day (T+1). However, FINRA recognizes 

that for some transfers, manual processing may be 

required or other operational issues may arise. 

14This is consistent with Rules 6282, 6380A and 

6380B, which no longer refer to specific labels (e.g., 

‘‘.PRP’’ or ‘‘.W’’) for the trade report modifiers that 

members are required to use when reporting trades 

to FINRA. Rather, the rules identify the types of 

transactions that must have a unique modifier 

associated with them and such modifiers are 

labeled in the facility’s technical specifications 

rather than in the rules. 

that members are not required to report 

to FINRA for purposes of publication 

transfers of proprietary securities 

positions between a member and 

another member or non-member brokerdealer where the transfer (1) is effected 

in connection with a merger of one 

broker-dealer with the other brokerdealer or a direct or indirect acquisition 

of one broker-dealer by the other brokerdealer or the other broker-dealer’s 

parent company and (2) is not in 

furtherance of a trading or investment 

strategy. However, while such transfers 

are not reportable for publication 

purposes, they nonetheless must be 

reported to FINRA for purposes of 

assessing applicable regulatory 

transaction fees pursuant to Section 3 of 

Schedule A to the FINRA By-Laws 9

and/or trading activity fees under 

Section 1(b) of Schedule A to the FINRA 

By-Laws.10

Specifically, with respect to equity 

securities, FINRA is proposing to amend 

Rule 6282(i)(2) and paragraph (e)(2) of 

Rules 6380A, 6380B and 6622, which 

provisions identify the transactions that 

are not required to be reported for 

publication, but must be reported for 

regulatory fee assessment purposes. 

FINRA also is proposing corresponding 

amendments to Rules 7130(c), 7230A(g), 

7230B(f) and 7330(g), which provisions 

set forth the specific reporting 

requirements for trades reported for 

regulatory transaction fee assessment 

purposes. With respect to debt 

securities, FINRA is proposing to amend 

Rule 6750(b), which identifies the 

transactions in TRACE-eligible 

securities that are reported, but not 

disseminated. 

The distinguishing factor is whether 

the position transfer is being effected as 

part of an overall sale and the 

consolidation of the broker-dealers’ 

separate proprietary trading businesses 

(in which case it would fall within the 

proposed exception) rather than being 

driven by a trading or investment 

strategy (in which case it would not fall 

within the exception). For example, as 

a result of a corporate control 

transaction, a member, Firm 1, acquires 

all of the assets of another member (or 

non-member broker-dealer), Firm 2, or 

Firm 1’s parent company acquires Firm 

2, such that Firm 1 and Firm 2 become 

wholly owned by the same parent 

company. In connection with the 

corporate control transaction, Firm 1 

and Firm 2 consolidate their separate 

sales and trading businesses onto a 

single platform and, along with the 

migration of sales and trading 

personnel, clients and systems and 

technology, Firm 2’s proprietary 

positions are transferred to Firm 1. In 

this instance, the transfer from Firm 2 

to Firm 1 would fall within the 

proposed exception and would not be 

reportable for publication purposes, but 

must be reported for regulatory 

purposes. 

By way of further example, a member, 

Firm 1 and another member (or nonmember broker-dealer), Firm 2, 

currently are wholly owned by the same 

parent company and operate separately. 

Firm 1 owns 100,000 shares of ABCD 

security and the value of ABCD has 

increased substantially since Firm 1 

purchased the shares. As part of an 

investment strategy, Firm 1 sells the 

shares to Firm 2. In this instance, the 

sale from Firm 1 to Firm 2 would not 

fall within the proposed exception and 

must be reported for publication 

purposes. 

The proposed rule change would 

expressly limit the exception to 

transfers between two members or 

between a member and a non-member 

broker-dealer that are effected in 

connection with a merger of one brokerdealer with the other broker-dealer or a 

direct or indirect acquisition of one 

broker-dealer by the other broker-dealer 

or the other broker-dealer’s parent 

company. FINRA notes that these 

corporate control transactions are 

among the changes in a member’s 

ownership or control that would trigger 

the notice requirements and 

membership application process under 

FINRA rules.11 Thus, the proposed 

exception generally would apply where 

the merger or acquisition would require 

the member to submit notice and/or an 

application under FINRA rules. 

However, because FINRA membership 

application rules are broader than the 

scope of the proposed trade reporting 

exception, FINRA is clarifying that the 

proposed exception will not be 

considered satisfied merely because a 

member has submitted an application or 

notice under FINRA membership rules. 

Pursuant to the proposed rule change, 

members will be required to report in 

the manner prescribed by FINRA to 

designate that the reports are submitted 

for regulatory and not publication 

purposes.12 Members generally should 

report to FINRA on the same day as the 

ultimate transfer of the positions on 

their books and records, unless later 

reporting is warranted under specific 

circumstances.13

In addition, members will be required 

to provide FINRA at least three business 

days advance written notice of their 

intent to use this exception, including 

the basis for their determination that the 

transfer meets the terms of the 

exception. FINRA notes that while the 

advance notice requirement is not 

intended to establish a protocol for prior 

approval by FINRA, it may help reduce 

the potential for improper use of the 

proposed exception. Advance written 

notice to FINRA shall not constitute an 

estoppel as to FINRA or bind FINRA in 

any subsequent administrative, civil or 

disciplinary proceeding with respect to 

a member’s use of the proposed 

exception. In other words, advance 

notice to FINRA should not be taken to 

mean that FINRA approved the 

transaction as properly qualifying under 

the terms of the exception. A member 

relying on the proposed exception must 

ensure that the transfer satisfies the 

terms of the exception. 

Finally, FINRA is proposing certain 

technical, non-substantive changes to 

these rules. First, FINRA is proposing to 

reorganize Rules 7130(c), 7230A(g), 

7230B(f) and 7330(g), and to delete the 

references to the ‘‘.RA’’ and ‘‘.RX’’ 

modifiers in the rules.14 Second, FINRA 

is proposing to change the heading of 

paragraph (b) of Rule 6750 to 

‘‘Transaction Information Not 

Disseminated,’’ and to create new 

numbered subparagraphs for the 

transactions that are reported to the 

Federal Register / Vol. 74, No. 70 / Tuesday, April 14, 2009 / Notices 17273 

15 15 U.S.C. 78o–3(b)(6). 16 15 U.S.C. 78s(b)(3)(A). 17 17 CFR 240.19b–4(f)(6). 

18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59582 

(March 16, 2009) (SR–NASDAQ–2008–102). 

Trade Reporting and Compliance Engine 

(‘‘TRACE’’), but not disseminated. 

FINRA has filed the proposed rule 

change for immediate effectiveness. The 

operative date of the proposed rule 

change will be 30 days after the date of 

filing. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

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

proposed rule change will clarify 

members’ trade reporting obligations, 

enhance market transparency and 

protect investors and other market 

participants by ensuring that transfers 

that do not contribute to market price 

discovery and could confuse market 

participants are not disseminated. 

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 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 16 and Rule 19b– 

4(f)(6) thereunder.17

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–2009–024 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–2009–024. 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 such 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–2009–024 and 

should be submitted on or before May 

5, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–8417 Filed 4–13–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59712; File No. SR– 

NASDAQ–2009–028] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of Proposed Rule Change To 

Reduce Fees for NASDAQ Basic Data 

Feeds 

April 6, 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 March 27, 

2009, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NASDAQ is proposing a rule change 

to reduce fees for ‘‘NASDAQ Basic’’ 

which is a real time data feed combining 

both NASDAQ’s Best Bid and Offer 

(‘‘QBBO’’) and the ‘‘NASDAQ Last Sale. 

NASDAQ Basic was approved on March 

16, 2009,3 as a pilot program (‘‘Basic 

Pilot’’) that included fees for usage and 

distribution of the data. NASDAQ has 

determined to further promote the 

deployment and usage of NASDAQ 

Basic by reducing the fee for its 

distribution. NASDAQ is seeking 

approval to implement this change 

effective April 1, 2009. 

The text of the proposed rule change 

is available from NASDAQ’s Web site at 

http://nasdaq.cchwallstreet.com, at 

NASDAQ’s principal office, and at the 

Commission’s Public Reference Room.