Document ID: SEC-2008-1462-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2008-10-24T04:00Z

[Federal Register: October 24, 2008 (Volume 73, Number 207)]
[Notices]               
[Page 63531-63533]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24oc08-134]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58804; File No. SR-FINRA-2008-050]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change to Eliminate FINRA/NSX Trade Reporting Facility 
Securities Transaction Credit Program

October 17, 2008.
    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 October 15, 2008, 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 ``establishing or changing a 
due, fee or other charge'' under section 19(b)(3)(A) 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).
    \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 delete FINRA Rule 7610B (Securities 
Transaction Credit) to eliminate the securities transaction credit on 
market data revenue earned by the FINRA/NSX Trade Reporting Facility 
(the ``FINRA/NSX TRF'').
    Below is the text of the proposed rule change. Proposed new 
language is in italics; proposed deletions are in brackets.\5\
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    \5\ On September 25, 2008, the SEC approved proposed rule change 
SR-FINRA-2008-021, in which FINRA proposed, among other things, to 
adopt NASD Rule 7001C (Securities Transaction Credit) as FINRA Rule 
7610B in the Consolidated FINRA Rulebook. See Securities Exchange 
Act Release No. 58643 (September 25, 2008), 73 FR 57174 (October 1, 
2008) (Order Approving SR-FINRA-2008-021; SR-FINRA-2008-022; SR-
FINRA-2008-026; SR-FINRA-2008-028 and SR-FINRA-2008-029). FINRA will 
announce the implementation date of SR-FINRA-2008-021 in a 
Regulatory Notice.
    This proposed rule change proposes amendments to the underlying 
rule text of FINRA Rule 7610B as adopted pursuant to SR-FINRA-2008-
021. Upon the filing of this proposed rule change, the Consolidated 
FINRA Rulebook will be updated to reflect the deletion of FINRA Rule 
7610B. In addition, because FINRA Rule 7610B has not yet been 
implemented, FINRA's Transitional Rulebook, which includes NASD 
Rules and Incorporated NYSE Rules, will be updated to reflect the 
deletion of NASD Rule 7001C.
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* * * * *

7600B. CHARGES FOR FINRA/NSX TRADE REPORTING FACILITY SERVICES

7610B. [Securities Transaction Credit] Reserved
    [(a) FINRA members that trade securities listed on the NYSE (``Tape 
A''), Amex and regional exchanges (``Tape B''), or Nasdaq (``Tape C'') 
in over-the-counter transactions reported to the FINRA/NSX Trade 
Reporting Facility may receive from the FINRA/NSX Trade Reporting 
Facility transaction credits based on the transactions attributed to 
them. A transaction is attributed to a member if the member is 
identified as the executing party in a trade report submitted to the 
FINRA/NSX Trade Reporting Facility that the FINRA/NSX Trade Reporting 
Facility submits to the Consolidated Tape Association or the Nasdaq 
Securities Information Processor. A FINRA member may earn credits from 
any of three pools maintained by the FINRA/NSX Trade Reporting 
Facility. The Tape A, Tape B, and Tape C pools represent 75% of the 
gross revenue paid by the Consolidated Tape Association or the Nasdaq 
Securities Information Processor with respect to the FINRA/NSX Trade 
Reporting Facility for Tape A, Tape B, and Tape C transactions. Subject 
to paragraph (b) below, a FINRA member may earn credits from the pools 
according to the pro rata share of revenue attributable to over-the-
counter transactions reported to the FINRA/NSX Trade Reporting Facility 
by the member in Tape A, Tape B, and Tape C for each calendar quarter. 
To the extent that Tape A, Tape B or Tape C revenue is subject to any 
adjustment, credits provided may be adjusted accordingly.]
    [(b) No FINRA member shall be eligible to receive a securities 
transaction credit under Rule 7610B(a) for any calendar quarter in 
which the

[[Page 63532]]

total transaction credit payable to such member is less than $250.]
* * * * *

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
Background
    The FINRA/NSX TRF provides FINRA members with another mechanism for 
reporting locked-in transactions in NMS stocks, as defined in Rule 
600(b)(47) of SEC Regulation NMS, effected otherwise than on an 
exchange. In connection with the establishment of the FINRA/NSX TRF, 
FINRA and National Stock Exchange, Inc. (``NSX'') entered into a 
Limited Liability Company Agreement (the ``FINRA/NSX TRF LLC 
Agreement''). Under the FINRA/NSX TRF LLC Agreement, FINRA, the ``SRO 
Member,'' has sole regulatory responsibility for the FINRA/NSX TRF. 
NSX, the ``Business Member,'' is primarily responsible for the 
management of the FINRA/NSX TRF's business affairs 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/NSX TRF.
    Pursuant to FINRA Rule 7610B(a), FINRA members reporting trades in 
New York Stock Exchange (``Tape A''), American Stock Exchange (now 
known as NYSE Alternext US) and regional exchanges (``Tape B'') and the 
Nasdaq Exchange (``Tape C'') securities to the FINRA/NSX TRF receive a 
75% pro rata credit on gross market data revenue earned by the FINRA/
NSX TRF. ``Gross revenue'' is the revenue received by the FINRA/NSX TRF 
from the three tape associations after the tape associations deduct 
allocated support costs and unincorporated business costs. Under FINRA 
Rule 7610B(b), a member is not eligible to receive a securities 
transaction credit for any calendar quarter in which such credit totals 
less than $250.
Proposal To Eliminate Securities Transaction Credit
    FINRA is proposing to delete FINRA Rule 7610B in its entirety to 
eliminate the securities transaction credit program for FINRA/NSX TRF 
participants. Thus, FINRA members reporting trades in Tape A, Tape B 
and Tape C stocks to the FINRA/NSX TRF will receive no credit on or 
percentage of gross market data revenue earned by the FINRA/NSX TRF. 
NSX, as the Business Member under the FINRA/NSX TRF LLC Agreement, has 
determined that the elimination of the securities transaction credit is 
necessary for competitive reasons and to increase funds to cover the 
regulatory costs associated with the FINRA/NSX TRF.
    Securities transaction credits payable to FINRA members for the 
fourth quarter of 2008 will be calculated under Rule 7610B(a) for the 
period beginning October 1, 2008 and ending at the close of business on 
October 17, 2008. The $250 minimum threshold for the securities 
transaction credit will not apply for this period in order to preclude 
any negative financial impact to reporting members due to the short 
calculation period in the fourth quarter of 2008. Trades submitted to 
the FINRA/NSX TRF on or after October 20, 2008, the operative date of 
the proposed rule change, will not be eligible for securities 
transaction credits. NSX, as the Business Member, will provide notice 
to FINRA/NSX TRF participants respecting this calculation. To the 
extent that the Consolidated Tape Association or the Nasdaq Securities 
Information Processor subsequently adjusts any Tape A, Tape B or Tape C 
revenue earned by the FINRA/NSX TRF for any period(s) during which the 
securities transaction credit program was in effect, credits paid to 
members reporting trades to the FINRA/NSX TRF would be adjusted, as 
necessary, in accordance with the rule in effect during such period.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The operative date of the proposed rule change will be 
October 20, 2008.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A of the Act,\6\ in general, and with Section 
15A(b)(5) of the Act,\7\ in particular, 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 rule change provides for the 
equitable allocation of reasonable dues, fees and other charges among 
members in that it will be applied uniformly among members that 
participate in the FINRA/NSX TRF.
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    \6\ 15 U.S.C. 78o-3.
    \7\ 15 U.S.C. 78o-3(b)(5).
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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

    The proposed rule change has become effective upon filing pursuant 
to section 19(b)(3)(A) of the Act \8\ and paragraph (f)(2) of Rule 19b-
4 thereunder,\9\ in that the proposed rule change is establishing or 
changing a due, fee, or other charge applicable only to a member, which 
renders the proposed rule change effective immediately upon filing. 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.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2008-050 on the subject line.

[[Page 63533]]

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-2008-050. 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 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-2008-050 and should be submitted on or before November 14, 
2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-25374 Filed 10-23-08; 8:45 am]

BILLING CODE 8011-01-P