Document ID: SEC-2020-0147-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2020-02-04T05:00Z

[Federal Register Volume 85, Number 23 (Tuesday, February 4, 2020)]
[Notices]
[Pages 6252-6254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02050]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88077; File No. SR-FINRA-2020-003]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Extend the Effective Date for Eliminating 
Computer-to-Computer Interface as a Technological Option for TRACE 
Reporting

January 29, 2020.
    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 January 28, 2020, 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. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ 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\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to provide members with additional time to 
migrate their trade reporting processes to connect to TRACE through a 
permissible means other than Computer-to-Computer Interface (``CTCI'').
    The text of the proposed rule change is available on FINRA's 
website 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,

[[Page 6253]]

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
    On October 4, 2018, the SEC approved SR-FINRA-2018-030 which 
amended FINRA Rule 7730 (Trade Reporting and Compliance Engine (TRACE)) 
to remove CTCI as a technological means of connectivity for reporting 
transactions to TRACE.\4\ Since filing SR-FINRA-2018-030 (``CTCI 
Elimination Filing''),\5\ FINRA has engaged in extensive outreach to 
industry participants in connection with eliminating CTCI as a means of 
connectivity, including direct outreach to the firms that used CTCI for 
reporting, either directly or via a service bureau.
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    \4\ See Securities Exchange Act Release No. 84366, 83 FR 51514 
(October 11, 2018) (Order Approving File No. SR-FINRA-2018-030).
    \5\ See Securities Exchange Act Release No. 83868 (August 17, 
2018), 83 FR 42741 (August 23, 2018) (Notice of Filing of SR-FINRA-
2018-030).
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    FINRA recently has become aware that some firms have experienced 
trade rejects after migrating from CTCI to FIX. FINRA understands that 
the cause of these rejects is related to the validations done on a FIX 
port to prevent duplicate trade reports from being submitted to the 
system. These validations are specific to FIX messaging and, as such, 
were not anticipated by certain firms migrating from CTCI to FIX. FINRA 
understands that this issue is impacting the successful migration of 
member firms whose activity, in the aggregate, account for a 
significant percentage of TRACE reports (i.e., over 10 percent of 
monthly trade reports). As a result, FINRA is filing the proposed rule 
change to extend the effective date of the CTCI Elimination Filing 
until March 16, 2020, which will allow firms adequate time to perform 
the required coding changes and testing. FINRA will continue to work 
closely with all firms that have not yet successfully migrated from 
CTCI, and expects firms to ensure adequate testing and to continue to 
work expeditiously to migrate as soon as possible in advance of the 
March 16, 2020 date.
    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, so FINRA can implement the proposed rule change 
immediately. The new operative date of the amendments adopted by SR-
FINRA-2018-030 will be March 16, 2020.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\6\ 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. Specifically, the proposed rule change provides 
additional time for members who have not yet successfully migrated to a 
permissible means of connectivity other than CTCI for reporting 
transactions to TRACE. The proposed rule change will allow members to 
continue to report transactions to TRACE through CTCI for a modest 
additional period of time, which FINRA believes is reasonable in light 
of technological difficulties identified recently. Thus, this extension 
will facilitate efficient and uninterrupted trade reporting as firms 
make coding refinements and complete a successful migration.
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    \6\ 15 U.S.C. 78o-3(b)(6).
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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. The proposed rule change would 
provide additional time to all members who have not yet successfully 
migrated to a permissible means of connectivity other than CTCI for 
reporting transactions to TRACE. FINRA also notes that this extension 
does not impact or require any changes by firms that already 
successfully migrated to a permissible means of connectivity other than 
CTCI for reporting transactions to TRACE.

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

    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 \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of 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 Commission is waiving the requirement in this case.
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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 waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. If 
the proposed rule change did not become operative immediately, certain 
member firms that currently report to TRACE using the CTCI protocol 
might be unable to report successfully if CTCI were decommissioned on 
February 3, 2020, as originally planned. This could result in 
significant degradation of the TRACE information available to 
regulators and the public. Allowing the proposal to become immediately 
operative will enable these firms to continue reporting using the CTCI 
protocol while the necessary technological changes continue to be made 
for them to fully transition to other reporting protocols. For these 
reasons, the Commission hereby waives the 30-day operative delay and 
designates the proposed rule change as operative upon filing.\9\
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    \9\ For purposes only of waiving the 30-day operative delay, the 
Commission also 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 change 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:

[[Page 6254]]

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-2020-003 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-2020-003. 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 website (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 website 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 such filing also will be available for inspection 
and copying at the principal office of FINRA. All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-FINRA-2020-003 and should be submitted 
on or before February 25, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
J. Matthew DeLesDernier,
Assistant Secretary.

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    \10\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2020-02050 Filed 2-3-20; 8:45 am]
 BILLING CODE 8011-01-P