Document ID: SEC-2011-0617-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2011-05-04T04:00Z

[Federal Register Volume 76, Number 86 (Wednesday, May 4, 2011)]
[Notices]
[Pages 25385-25386]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-10809]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64364; File No. SR-FINRA-2011-012]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Granting Approval of a Proposed Rule Change 
Relating to TRACE Reporting of Asset-Backed Securities

April 28, 2011.

I. Introduction

    On March 3, 2011, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change related to Trade Reporting and Compliance Engine 
(``TRACE'') reporting of Asset-Backed Securities. The proposed rule 
change was published for comment in the Federal Register on March 21, 
2011.\3\ The Commission received no comments on the proposal. This 
order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 64084 (March 16, 
2011), 76 FR 15352 (``Notice'').

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[[Page 25386]]

II. Description of the Proposal

    In February 2010, the Commission approved FINRA's proposal to amend 
the FINRA Rule 6700 Series to define ``Asset-Backed Securities'' as 
TRACE-Eligible Securities, thereby subjecting members to the 
requirement to report transactions in such securities to TRACE.\4\ The 
proposal is to become effective on May 16, 2011.\5\ In the current 
proposed rule change, FINRA proposes additional amendments to the FINRA 
Rule 6700 Series and FINRA Rule 7730 to prepare for the reporting of 
Asset-Backed Securities transactions to TRACE. The proposed rule change 
amends or supplements the TRACE reporting and other requirements that 
will apply to Asset-Backed Securities transactions. Specifically, the 
proposed rule change would:
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    \4\ See Securities Exchange Act Release No. 61566 (February 22, 
2010), 75 FR 9262 (March 1, 2010). This proposed rule change also 
amended FINRA Rule 7730 to establish fees for reporting transactions 
in Asset-Backed Securities.
    \5\ See Securities Exchange Act Release No. 63223 (November 1, 
2010), 75 FR 68654 (November 8, 2010) (Notice of Filing and 
Immediate Effectiveness of SR-FINRA-2010-054 to Extend the 
Implementation Period for SR-FINRA-2009-065); Regulatory Notice 10-
55 (October 2010).
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    (1) In FINRA Rule 6710, clarify, simplify, or conform the defined 
terms ``TRACE-Eligible Security,'' ``Reportable TRACE Transaction,'' 
``Agency Debt Security,'' ``Asset-Backed Security'' and ``TRACE System 
Hours''; add the defined term, ``Securitizer''; and delete the defined 
terms ``Sponsor'' and ``Issuing Entity'';
    (2) In FINRA Rule 6730, (A) revise, renumber, and conform the text 
of parallel reporting provisions in FINRA Rule 6730(a); (B) incorporate 
minor amendments regarding the duration and expiration of the pilot 
program for reporting Asset-Backed Securities transactions (``Pilot 
Program''); (C) consolidate reporting requirements for Asset-Backed 
Securities transactions that are executed other than during TRACE 
System Hours; (D) simplify how settlement is reported for Asset-Backed 
Securities transactions; (E) add alternative reporting requirements for 
Asset-Backed Securities transactions that are collateralized mortgage 
obligation (``CMO'') or real estate mortgage investment conduit 
(``REMIC'') transactions that occur prior to the issuance of the CMO or 
REMIC (``pre-issuance CMOs/REMICs''); and (F) add new FINRA Rule 
6730(a)(6) to clarify a member's obligation to provide information to 
FINRA Operations regarding a TRACE-Eligible Security when such security 
is not in the TRACE system, and to incorporate other minor technical or 
clarifying amendments to the Rule;
    (3) In FINRA Rule 6760, incorporate requirements that apply to 
Securitizers of Asset-Backed Securities, alternative notification 
requirements for pre-issuance CMOs/REMICs, and minor technical, 
conforming, or clarifying changes; and
    (4) In FINRA Rule 7730, add the Financial Information eXchange 
(``FIX'') as a method to report transactions to TRACE, establish a 
system-related FIX fee, and incorporate a minor technical amendment.

III. Discussion and Commission's Findings

    After carefully considering the proposed rule change, the 
Commission finds that it is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities association.\6\ In particular, the Commission finds that the 
proposal is consistent with Section 15A(b)(6) of the Act,\7\ 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. The Commission believes that the 
proposal clarifies the standards for reporting Asset-Backed Securities, 
will assist FINRA by supporting more timely and accurate reporting to 
TRACE of transactions in Asset-Backed Securities and enhance FINRA's 
surveillance of the debt market in connection with Asset-Backed 
Securities transactions for the protection of investors and in 
furtherance of the public interest.
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    \6\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78o-3(b)(6).
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    The Commission further finds that the proposal to add to Rule 7730 
a fee for reporting transactions in Asset-Backed Securities via FIX is 
consistent with Section 15A(b)(5) of the Act, which requires, among 
other things, that FINRA rules provide for the equitable allocation of 
reasonable dues, fees, and other charges among members, issuers, and 
other persons using any facility or system that FINRA operates or 
controls.\8\ The fee is similar to the Computer-to-Computer Interface 
(``CTCI'') fee that currently is assessed to members that elect to 
report transactions in TRACE-Eligible Securities to TRACE via a CTCI 
line.
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    \8\ 15 U.S.C. 78o-3(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-FINRA-2011-012), be, and 
hereby is, approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delSegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-10809 Filed 5-3-11; 8:45 am]
BILLING CODE 8011-01-P