Document ID: SEC-2012-1940-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2012-11-26T05:00Z

[Federal Register Volume 77, Number 227 (Monday, November 26, 2012)]
[Notices]
[Pages 70515-70517]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-28524]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68255; File No. SR-FINRA-2012-049]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Establish a Limited Waiver of the TRACE 
Professional Real-Time Data Display Fee on a Pilot Basis

November 19, 2012.
    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 November 7, 2012, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by FINRA. 
FINRA has designated the proposed rule change as ``establishing or 
changing a due, fee or other charge'' under Section 19(b)(3)(A)(ii) of 
the Act \3\ and Rule 19b-4(f)(2) 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 7730(c) to establish a pilot 
program to provide a limited waiver of the Professional Real-Time Data 
Display Fee of $60 to access Real-Time Trade Reporting and Compliance 
Engine (``TRACE'') transaction data in connection with certain free 
trials of data products. In addition, FINRA proposes technical 
amendments to Rule 7730(c) and related statements in the fee chart to 
use a single term, ``display application,'' to describe uniformly a 
software program that interrogates and displays TRACE data and allows a 
person to access TRACE data.
    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
    Pursuant to FINRA Rule 7730(c)(1)(A), FINRA charges a Professional 
$60 per month, per display application per Data Set \5\ (``display

[[Page 70516]]

application'') of Real-Time \6\ TRACE transaction data.\7\ The term 
display application refers to any software program that interrogates 
and displays TRACE data. In general, Real-Time TRACE transaction data 
is accessed not directly from FINRA but through a vendor, such as 
Bloomberg, L.P. and its Bloomberg display application, or other 
redistributors (collectively, ``vendors'') of financial market data. 
Under this arrangement, a Professional pays the vendor for the license 
to use the vendor's display application and if the display application 
displays Real-Time TRACE transaction data, the payment must include the 
applicable TRACE fee, which the vendor remits to FINRA.
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    \5\ A Data Set is each of the FINRA databases, which currently 
include the Real-Time TRACE transaction data disseminated by FINRA 
for corporate bonds and Agency Debt Securities (as defined in Rule 
6710(l)). Effective November 12, 2012, FINRA will add the Data Set 
for Asset-Backed Securities, when dissemination of Agency-Pass 
Through Mortgage-Backed Securities traded To Be Announced begins. 
See Securities Exchange Act Release No. 66829 (April 18, 2012), 77 
FR 24748 (April 25, 2012) (SEC Approval Order regarding 
dissemination of Agency-Pass Through Mortgage-Backed Securities 
traded To Be Announced (TBA)), Regulatory Notice 12-26 (May 2012) 
and Regulatory Notice 12-48 (November 2012).
    \6\ Real-Time is defined in FINRA Rule 7730(f)(3).
    \7\ Real-Time TRACE transaction data is also available for a 
flat fee of $7,500 per month per Data Set for Professionals to make 
unlimited internal use of such data as provided in Rule 
7730(c)(1)(A). Professionals associated with enterprises that pay 
the $7,500 flat rate per month are not eligible for the fee waiver 
set forth in the proposed rule change because, as further described 
herein, the waiver is limited to four Professionals during one free 
trial period.
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    FINRA understands that vendors are continually developing new 
products that, among other data, may display Real-Time TRACE 
transaction data. Often a vendor will make its new products available 
to members and other Professional end-users of Real-Time TRACE 
transaction data to test on a free trial basis. In these cases, FINRA 
believes it would be beneficial also to permit Professionals to access 
Real-Time TRACE transaction data on a free trial basis in connection, 
and concurrently, with the free trial of the vendor's product. 
Accordingly, FINRA proposes to amend FINRA Rule 7730(c) to establish a 
pilot program to waive the $60 fee for one month for a Professional to 
access Real-Time TRACE transaction data in connection with a vendor's 
offer of a free trial.
    The pilot program would operate for approximately one year until 
November 8, 2013 to allow FINRA sufficient time to assess the efficacy 
and operation of the program.\8\ In the event FINRA determines to 
extend the pilot program or make the program permanent, FINRA will file 
a proposed rule change in accordance with the Act. Specifically, the 
FINRA fee waiver would be limited to one month (i.e., a period not 
longer than 31 days), and would be available only if the fee waiver is 
provided in conjunction and concurrently with a vendor's offer of a 
free trial to a Professional to test a data product that included Real-
Time TRACE transaction data. In addition, the FINRA fee waiver would be 
available to not more than four Professionals associated with, employed 
by, or otherwise affiliated with a member, employer or other person 
during one free trial period. Once the Real-Time Data Display Fee had 
been waived, a Professional and the member, employer or other person 
with whom the Professional is associated with, employed by, or 
otherwise affiliated with would not be eligible for the FINRA fee 
waiver again in connection with another free trial offered by the same 
vendor until 12 months had lapsed from the last day of the prior fee 
waiver.\9\ However, a Professional and the member, employer or other 
person with whom the Professional is associated or otherwise affiliated 
with would be eligible for a fee waiver in connection with a free trial 
offered by a different vendor regarding its data products.
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    \8\ A fee waiver granted less than one month prior to the 
expiration of the pilot period would continue to be valid and the 
$60 fee would be waived for the full month notwithstanding the pilot 
expiration date.
    \9\ For example, if a Professional were granted a waiver for one 
month beginning on November 1, 2012, the individual would not be 
eligible for another waiver in connection with another free trial 
offered by the same vendor until December 1, 2013. This example 
assumes that the pilot program is extended or adopted on a permanent 
basis.
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    FINRA also proposes technical amendments to Rule 7730(c) and 
related statements in the fee chart to use a single term, ``display 
application,'' to describe uniformly a software program that 
interrogates and displays TRACE data and allows a person to access 
TRACE data.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The implementation date will be November 7, 2012.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\10\ 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 and Section 15A(b)(5) of the Act,\11\ which requires, 
among other things, that FINRA rules provide for the equitable 
allocation of reasonable dues, fees and other charges among members and 
issuers and other persons using any facility or system that FINRA 
operates or controls. FINRA believes that the proposed amendment, which 
is designed to encourage additional Professionals to test and use Real-
Time TRACE transaction data, may promote more accurate and timely 
pricing and valuations of debt securities by members, and may prevent 
fraudulent and manipulative acts and practices regarding pricing and 
valuations, for the protection of investors and the public interest.
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    \10\ 15 U.S.C. 78o-3(b)(6).
    \11\ 15 U.S.C. 78o-3(b)(5).
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    FINRA believes that the pilot program providing for a limited 
waiver of the monthly fee per display application for access to Real-
Time TRACE transaction data also results in reasonable fees and 
financial benefits from fee waivers that are equitably allocated. The 
financial benefit of the fee waiver would be available to all 
Professionals that accept an offer to test a vendor data product that 
includes Real-Time TRACE transaction data on a free trial basis. Any 
Professional that tests data products during a free trial would be 
eligible for and would benefit from the concurrent FINRA fee waiver, 
subject to the proscriptions against a Professional obtaining multiple 
free trials as previously described. In addition, the financial benefit 
of the fee waiver would be available for a very limited period (i.e., 
31 days or less), such that Professionals not eligible for the fee 
waiver are not unfairly or inequitably affected. The proposed amendment 
is reasonable because the waiver of a standard FINRA fee, and the 
financial benefit from such waiver, is of limited amount, duration 
(i.e., one month) and application (i.e., only four Professionals per 
member (or other end-user)), limited to concurrent free trials of data 
products offered by vendors, and subject to restrictions on re-use, and 
is being proposed to enhance a member's ability to access and test, 
among other things, the uses of Real-Time TRACE transaction data to 
determine if access to such Real-Time TRACE transaction data would 
further its business needs. Finally, the proposed amendment does not 
unfairly discriminate between or among Professionals and members (or 
other end-users) in that the waiver would be available to any of such 
persons that accepts an offer to test a vendor data product that 
includes Real-Time TRACE transaction data on a free trial basis, 
subject to the limitations described above. The data vendor, rather 
than FINRA, would decide initially whether to offer a free trial of its 
data product to a particular Professional, member, or other end-user. 
FINRA's role would be limited to refusing to extend a fee waiver to a 
particular person previously identified by the data vendor, due to the 
prohibition against extending multiple fee waivers to the same person. 
FINRA believes that establishing such a

[[Page 70517]]

program on a pilot basis for approximately one year will provide FINRA 
sufficient time to assess the efficacy and utility of the program.

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. FINRA believes that the 
proposed amendment, which is designed to encourage additional 
Professionals to test and use Real-Time TRACE transaction data, may 
promote more accurate and timely pricing and valuations of debt 
securities by members. Moreover, the pilot program providing for a 
limited waiver of the monthly fee per display application for access to 
Real-Time TRACE transaction data would not place an unreasonable fee 
burden on members and other persons (i.e., Professionals) that 
currently subscribe to receive Real-Time TRACE transaction data, nor 
confer an uncompetitive benefit to Professionals taking advantage of 
the pilot program, in that the fee waiver would be available for a very 
limited period (i.e, 31 days or less), and the financial impact of such 
a pilot program on Professionals would be de minimis. In addition, the 
proposed rule change does not place a burden on competition in that the 
financial benefit of the fee waiver would be available in general to 
all Professionals. Any Professional that tests data products during a 
free trial would be eligible for and would benefit from the concurrent 
FINRA fee waiver, subject to the proscriptions against a Professional 
obtaining multiple free trials previously described.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\13\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
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. If 
the Commission takes such action, the Commission shall institute 
proceedings to determine whether the proposed rule should be approved 
or disapproved.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(2).
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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 email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2012-049 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-2012-049. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 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-2012-049 and should be 
submitted on or before December 17, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-28524 Filed 11-23-12; 8:45 am]
BILLING CODE 8011-01-P