Document ID: SEC-2013-1942-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2013-11-15T05:00Z

[Federal Register Volume 78, Number 221 (Friday, November 15, 2013)]
[Notices]
[Pages 68893-68895]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27322]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70839; File No. SR-FINRA-2013-049]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Tier Size Pilot of FINRA Rule 6433 
(Minimum Quotation Size Requirements for OTC Equity Securities)

November 8, 2013.
    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 5, 2013, 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 and 
II below, which Items have been prepared by FINRA. 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.
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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 6433 (Minimum Quotation Size 
Requirements for OTC Equity Securities) to extend the tier size pilot, 
which currently is scheduled to expire on November 12, 2013.
    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.

[[Page 68894]]

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 proposes to amend FINRA Rule 6433 (Minimum Quotation Size 
Requirements for OTC Equity Securities) (the ``Rule'') to extend the 
amendments set forth in File No. SR-FINRA-2011-058 (the ``tier size 
pilot''), which currently are scheduled to expire on November 12, 2013, 
through November 14, 2014.\3\
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    \3\ See Securities Exchange Act Release No. 67208 (June 15, 
2012), 77 FR 37458 (June 21, 2012) (Order Approving File No. SR-
FINRA-2011-058).
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    On October 6, 2011, FINRA filed with the SEC a proposed rule change 
to amend the minimum quotation sizes (or ``tier sizes'') for OTC equity 
securities \4\ to, among other things, simplify the tier structure, 
facilitate the display of customer limit orders, and expand the scope 
of the Rule to apply to additional quoting participants.\5\ During the 
proposal process, the SEC received a number of comments and, in 
response, FINRA proposed that the new tier sizes operate on a pilot 
basis for one year to allow FINRA and the SEC to better analyze the 
impact of the revised tier sizes.
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    \4\ ``OTC Equity Security'' means any equity security that is 
not an ``NMS stock'' as that term is defined in Rule 600(b)(47) of 
SEC Regulation NMS; provided, however, that the term OTC Equity 
Security shall not include any Restricted Equity Security. See FINRA 
Rule 6420(f).
    \5\ See Securities Exchange Act Release No. 65568 (October 14, 
2011), 76 FR 65307 (October 20, 2011) (Notice of Filing of File No. 
SR-FINRA-2011-058).
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    To effectively assess the impact of the tier size pilot on quoted 
OTC equity securities, FINRA has collected and provided to the 
Commission certain pre- and post-pilot data, including:
     The price of the first trade of each trading day executed 
at or after 9:30:00 a.m., based on execution time.
     The price of the last trade of each trading day executed 
at or before 4:00:00 p.m., based on execution time.
     Daily share volume.
     Daily dollar volume.
     Number of limit orders from customers and in total.
     Percentage of the day that the size of the BBO equals the 
minimum quote size.
     Number of market makers actively quoting.
     Number of executions from a limit order and number of 
limit orders at the BBO or better by tier size from a customer and in 
total.
     Liquidity/BBO metrics
    [cir] Time-weighted quoted spread.
    [cir] Effective spread.
    [cir] Time-weighted quoted depth (number of shares) at the inside.
    [cir] Time-weighted quoted depth (dollar value of shares) at the 
inside.
    Amendment No. 2 specified, among other things, that: (1) FINRA 
would begin submitting the above data for the period of one year by no 
later than 90 days after the start of the tier size pilot, and (2) the 
data for each month would be submitted within 20 business days of the 
beginning of the following month.\6\ In Amendment No. 2, FINRA also 
stated that, at least 60 days before the conclusion of the tier size 
pilot, FINRA would provide the SEC with an assessment that addressed 
the impact of the pilot, the concerns raised by commenters during the 
rule filing process, and whether the pilot has resulted in the desired 
effects. FINRA submitted this assessment to the Commission on September 
13, 2013. The purpose of this filing is to extend the operation of the 
tier size pilot for an additional year to provide the SEC with data 
over a longer time period so that the effects of the tier size pilot 
can be more thoroughly reviewed.\7\ Consequently, FINRA will continue 
to provide the Commission with the data noted above, as requested.
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    \6\ See Amendment No. 2 to File No. SR-FINRA-2011-058, available 
at http://www.finra.org/web/groups/industry/@ip/@reg/@rulfil/documents/rulefilings/p126817.pdf (``Amendment No. 2'').
    \7\ The Tier Size Pilot Assessment is part of the SEC's comment 
file for SR-FINRA-2011-058 and also is available on FINRA's Web site 
at: http://www.finra.org/Industry/Regulation/RuleFilings/2011/P124615.
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    FINRA has filed the proposed rule change for immediate 
effectiveness. The effective date of the proposed rule change will be 
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,\8\ 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 also believes that the proposed rule change is 
consistent with the provisions of Section 15A(b)(11) of the Act.\9\ 
Section 15A(b)(11) requires that FINRA rules include provisions 
governing the form and content of quotations relating to securities 
sold otherwise than on a national securities exchange which may be 
distributed or published by any member or person associated with a 
member, and the persons to whom such quotations may be supplied.
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    \8\ 15 U.S.C. 78o-3(b)(6).
    \9\ 15 U.S.C. 78o-3(b)(11).
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    FINRA believes that the extension of the tier size pilot for an 
additional year is consistent with the Act in that it would provide the 
Commission with additional data and more time to undertake a thorough 
review of the submitted data and assessment. FINRA believes this 
additional data and time will enhance the Commission's ability to 
assess the appropriateness of making the tier size pilot permanent.

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

    FINRA has not solicited, and does not intend to solicit, comments 
on this proposed rule change. FINRA has not received any written 
comments from members or other interested parties.

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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6) requires a self-
regulatory organization to give the Commission written notice of its 
intent to file the proposed rule change at least five business days 
prior to the date of filing of the proposed rule change, or such 
shorter time as designated by the Commission. The Exchange has 
satisfied this requirement.

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[[Page 68895]]

    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
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    FINRA has asked the Commission to waive the 30-day operative delay 
so that the proposal may become operative immediately upon filing. The 
Commission believes that waiver of the operative delay is consistent 
with the protection of investors and the public interest because such 
waiver will allow the pilot program to continue without interruption. 
Therefore, the Commission designates the proposal operative upon 
filing.\14\
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    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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-2013-049 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-2013-049. 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 
St. NE., Washington, DC 20549, on official business days between the 
hours of 10:00 a.m. and 3:00 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-2013-
049, and should be submitted on or before December 6, 2013.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-27322 Filed 11-14-13; 8:45 am]
BILLING CODE 8011-01-P