Document ID: SEC-2017-0963-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2017-06-07T04:00Z

[Federal Register Volume 82, Number 108 (Wednesday, June 7, 2017)]
[Notices]
[Pages 26546-26548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11752]

[[Page 26546]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80843; File No. SR-FINRA-2017-016]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend FINRA Rule 7620A To Eliminate the No/Was 
Corrective Transaction Charge

June 1, 2017.
    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 May 23, 2017, 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 the 
Substance of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 7620A (FINRA/Nasdaq Trade 
Reporting Facility Reporting Fees) to eliminate the ``No/Was'' 
corrective transaction charge from the fee schedule for members that 
use the FINRA/Nasdaq Trade Reporting Facility (the ``FINRA/Nasdaq 
TRF'') in light of the elimination of No/Was functionality.
    Below is the text of the proposed rule change. Proposed new 
language is in italics; proposed deletions are in brackets.
* * * * *
7000. CLEARING, TRANSACTION AND ORDER DATA REQUIREMENTS, AND FACILITY 
CHARGES
* * * * *
7600. DATA PRODUCTS AND CHARGES FOR TRADE REPORTING FACILITY SERVICES
7600A. DATA PRODUCTS AND CHARGES FOR FINRA/NASDAQ TRADE REPORTING 
FACILITY SERVICES
* * * * *
7620A. FINRA/Nasdaq Trade Reporting Facility Reporting Fees
    The following charges shall be paid by participants for use of the 
FINRA/Nasdaq Trade Reporting Facility. In the case of trades where the 
same market participant is on both sides of a trade report, applicable 
fees assessed on a ``per side'' basis will be assessed once, rather 
than twice, and the market participant will be assessed applicable Non-
Comparison/Accept (Non-Match/Compare) Charges as the Executing Party 
side only.

------------------------------------------------------------------------
   Non-comparison/accept (Non-match/
           compare) charges:
------------------------------------------------------------------------
Tape...................................  Daily Average Number of Media/
                                          Executing Party Trades During
                                          the Month Needed to Qualify
                                          for Cap.
A......................................  2500
B......................................  2500
C......................................  2500
------------------------------------------------------------------------
                          Media/Executing Party
------------------------------------------------------------------------
Monthly Charge.........................  Maximum Monthly Charge if
                                          Capped.
------------------------------------------------------------------------
($0.018) x (Number of Media/Executing    ($0.018) x (Required Daily
 Party Reports During the Month).         Average Number of Media/EP
                                          Trades for Tape A, B or C) x
                                          (Number of Trading Days During
                                          the Month).
------------------------------------------------------------------------
                        Non-Media/Executing Party
------------------------------------------------------------------------
Monthly Charge.........................  Maximum Monthly Charge if
                                          Capped.
------------------------------------------------------------------------
($0.018) x (Number of Non-Media/         ($0.018) x 2500 for Tape A, B
 Executing Party Reports During the       or C x (Number of Trading Days
 Month).                                  During the Month).
------------------------------------------------------------------------
                              Media/Contra
------------------------------------------------------------------------
Monthly Charge.........................  Maximum Monthly Charge if
                                          Capped.
------------------------------------------------------------------------
($0.013) x (Number of Media/Contra       ($0.013) x 2500 for Tape A, B
 Reports During the Month).               or C x (Number of Trading Days
                                          During the Month).
------------------------------------------------------------------------
                            Media/Contra Cap
------------------------------------------------------------------------
Participants making markets in
 alternative trading systems registered
 pursuant to Regulation ATS will
 qualify for a fee cap applied to all
 trades under Rule 7620A if they meet
 the following criteria on a monthly
 basis:
------------------------------------------------------------------------
 Participant's percentage of
 contra media trades must represent at
 least 35% of their total FINRA/Nasdaq
 Trade Reporting Facility volume.

[[Page 26547]]

 
 Participant must be contra to
 a minimum of 1,000,000 trades in Tape
 A, 500,000 trades in Tape C and
 250,000 trades in Tape B.
 Participant must complete an
 attestation form stating that they
 maintain a two-sided quote in each
 symbol traded on an alternative
 trading system registered pursuant to
 Regulation ATS and display a quotation
 size of at least one normal unit of
 trading (specific for each security)
 thereon. Participants will be audited
 by Nasdaq, Inc. periodically.
------------------------------------------------------------------------
Maximum Monthly Charge if Capped.......  $5,000 per Tape (A, B or C).
------------------------------------------------------------------------
                            Non-Media/Contra
------------------------------------------------------------------------
Monthly Charge.........................  Maximum Monthly Charge if
                                          Capped
------------------------------------------------------------------------
($0.013) x (Number of Non-Media/Contra   ($0.013) x 2500 for Tape A, B
 Reports During the Month).               or C x (Number of Trading Days
                                          During the Month).
Standard Fees:                           ...............................
    Clearing report to transfer a        $0.03/side.
     transaction fee charged by one
     member to another member pursuant
     to Rule 7230A(h).
    Comparison/Accept..................  $0.0144/side per 100 shares
                                          (minimum 400 shares; maximum
                                          7,500 shares).
    Late Report--T+N...................  $0.288/trade (charged to the
                                          Executing Party).
    Query..............................  $0.50/query.
    Corrective Transaction Charge......  $0.25/Cancel, Error, Inhibit,
                                          or Kill[, or ``No'' portion of
                                          No/Was transaction], paid by
                                          reporting side; $0.25/Break,
                                          Decline transaction, paid by
                                          each party.
------------------------------------------------------------------------

       Supplementary Material: ------------
    .01 through .02 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 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
    The FINRA/Nasdaq TRF is a facility of FINRA that is operated by 
Nasdaq, Inc. and utilizes Automated Confirmation Transaction (``ACT'') 
Service technology. In connection with the establishment of the FINRA/
Nasdaq TRF, FINRA and Nasdaq, Inc. entered into a limited liability 
company agreement (the ``LLC Agreement'').\5\ Under the LLC Agreement, 
FINRA, the ``SRO Member,'' has sole regulatory responsibility for the 
FINRA/Nasdaq TRF. Nasdaq, Inc., the ``Business Member,'' is primarily 
responsible for the management of the FINRA/Nasdaq TRF's business 
affairs, including establishing pricing for use of the FINRA/Nasdaq 
TRF, to the extent those affairs are not inconsistent with the 
regulatory and oversight functions of FINRA. Additionally, the Business 
Member is obligated to pay the cost of regulation and is entitled to 
the profits and losses, if any, derived from the operation of the 
FINRA/Nasdaq TRF.
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    \5\ As approved by its board of directors and the Commission, 
effective September 8, 2015, The NASDAQ OMX Group, Inc. changed its 
legal name to Nasdaq, Inc. See Nasdaq, Inc. Form 8-K Current Report 
(filed September 8, 2015) (available at www.sec.gov/Archives/edgar/data/1120193/000119312515314459/d48431d8k.htm). FINRA and Nasdaq, 
Inc. are in the process of amending the LLC Agreement to reflect the 
name change, and FINRA will file a separate proposed rule change to 
update the FINRA manual accordingly.
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    Pursuant to the FINRA Rule 7600A Series, FINRA members that are 
FINRA/Nasdaq TRF participants are charged fees and may qualify for fee 
caps (Rule 7620A) and also may qualify for revenue sharing payments for 
trade reporting to the FINRA/Nasdaq TRF (Rule 7610A). These rules are 
administered by Nasdaq, Inc., in its capacity as the Business Member 
and operator of the FINRA/Nasdaq TRF on behalf of FINRA,\6\ and Nasdaq, 
Inc. collects all fees on behalf of the FINRA/Nasdaq TRF.
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    \6\ FINRA's oversight of this function performed by the Business 
Member is conducted through a recurring assessment and review of TRF 
operations by an outside independent audit firm.
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    FINRA/Nasdaq TRF participants are required to correct trade reports 
that are inaccurate and may use one of several FINRA/Nasdaq TRF 
functions (collectively referred to herein as ``Corrective 
Transactions'') to do so, including ``No/Was.'' Firms would use a No/
Was submission to correct the details of a trade reported earlier in 
the day. Under FINRA Rule 7620A, FINRA/Nasdaq TRF participants are 
assessed a fee of $0.25 for Corrective Transactions, including No/Was 
submissions. FINRA notes that the Corrective Transaction fee is the 
same, irrespective of the functionality used to correct the trade. In 
addition to the Corrective Transaction fee, reporting firms are also 
assessed the applicable fee for submission of the corrected or 
replacement trade report.\7\
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    \7\ Due to their nature, Corrective Transactions consume system 
capacity and staff resources disproportionate to those required for 
standard reporting transactions, and disproportionate to the fee 
imposed for standard reporting functions. Thus, to cover a portion 
of the costs of processing Corrective Transactions, the FINRA/Nasdaq 
TRF assesses a Corrective Transaction Charge to such transactions.
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    On September 15, 2016, Nasdaq, Inc., as the Business Member, 
provided notice that effective October 31, 2016, the FINRA/Nasdaq TRF 
would no longer support No/Was functionality.\8\ According to Nasdaq, 
Inc., the No/Was logic added complexity to the system with no real 
benefit, since the

[[Page 26548]]

functionality may be replicated by FINRA/Nasdaq TRF participants by 
simply cancelling the original report and submitting a corrected 
report. Nasdaq, Inc. has advised FINRA that prior to the disablement of 
the functionality, the volume of No/Was transactions was de minimis. 
For example, there were fewer than 850 No/Was submissions on average 
per month during the period from January through July 2016. By 
contrast, there were 841,000 total Corrective Transaction submissions 
on average per month during that same period (i.e., No/Was submissions 
accounted for approximately one tenth of one percent of all Corrective 
Transaction submissions).
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    \8\ See Nasdaq Equity Trader Alert #2016-179 (available at 
http://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2016-179).
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    To ensure that the fee schedule under FINRA rules accurately 
reflects current FINRA/Nasdaq TRF functionality, FINRA is proposing to 
eliminate the reference to No/Was submissions for purposes of the 
Corrective Transaction charge under Rule 7620A.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The effective date will be the date of filing, May 23, 
2017.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of section 15A(b)(5) of the Act,\9\ 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. All similarly situated members are subject to the same fee 
structure, and access to the FINRA/Nasdaq TRF is offered on fair and 
non-discriminatory terms.
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    \9\ 15 U.S.C. 78o-3(b)(5).
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    Nasdaq, Inc., as the Business Member, has advised FINRA that it 
eliminated No/Was functionality effective October 31, 2016 to reduce 
complexity in the FINRA/Nasdaq TRF system and that such functionality 
can readily be replicated by participants. The proposed rule change 
merely deletes the reference to No/Was Corrective Transactions in Rule 
7620A to ensure that the fee schedule accurately reflects current 
FINRA/Nasdaq TRF functionality. As such, the proposed rule change 
provides for the equitable allocation of reasonable fees for use of the 
FINRA/Nasdaq TRF.

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. The proposed rule change merely 
deletes the reference to No/Was Corrective Transactions in Rule 7620A 
to ensure that the fee schedule accurately reflects current FINRA/
Nasdaq TRF functionality. As discussed above, No/Was functionality was 
eliminated, but may be replicated by FINRA/Nasdaq TRF participants by 
simply canceling the incorrect trade report and submitting a corrected 
trade report, and firms would incur the same charge, irrespective of 
the type of Corrective Transaction submitted.\10\ As such, the proposed 
rule change will have no fee impact on firms for Corrective Transaction 
submissions to the FINRA/Nasdaq TRF.\11\
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    \10\ Also, as discussed above, the volume of No/Was transactions 
was de minimis prior to the disablement of the functionality, 
accounting for approximately one tenth of one percent of all 
Corrective Transaction submissions from January through July 2016.
    \11\ FINRA also believes that the elimination of the No/Was 
functionality itself had little to no cost impact on firms, and did 
not result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.
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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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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-2017-016 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2017-016. 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-2017-016, and should 
be submitted on or before June 28, 2017.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11752 Filed 6-6-17; 8:45 am]
 BILLING CODE 8011-01-P