Document ID: SEC-2015-1667-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2015-10-16T04:00Z

[Federal Register Volume 80, Number 200 (Friday, October 16, 2015)]
[Notices]
[Pages 62578-62580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26326]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76121; File No. SR-FINRA-2015-037]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the TRACE Pilot Program in FINRA Rule 
6730(e)(4)

October 9, 2015.
    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 September 28, 2015, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to extend the pilot program in FINRA Rule 
6730(e)(4) to October 27, 2017. The pilot program exempts from TRACE 
reporting transactions in TRACE-Eligible Securities that are executed 
on a facility of the New York Stock Exchange

[[Page 62579]]

(``NYSE''), subject to specified conditions.
    Below is the text of the proposed rule change. Proposed new 
language is in italics; proposed deletions are in brackets.
* * * * *

6700. TRADE REPORTING AND COMPLIANCE ENGINE (TRACE)

* * * * *

6730. Transaction Reporting

    (a) through (d) No Change.
    (e) Reporting Requirements for Certain Transactions and Transfers 
of Securities
    The following shall not be reported:
    (1) through (3) No Change.
    (4) Provided that a data sharing agreement between FINRA and NYSE 
related to transactions covered by this Rule remains in effect, for a 
pilot program expiring on [October 23, 2015] October 27, 2017, 
transactions in TRACE-Eligible Securities that are executed on a 
facility of NYSE in accordance with NYSE Rules 1400, 1401 and 86 and 
reported to NYSE in accordance with NYSE's applicable trade reporting 
rules and disseminated publicly by NYSE.
    (5) through (6) No Change.
    (f) No Change.

* * * 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
    FINRA Rule 6730(e)(4) exempts members from reporting to the Trade 
Reporting and Compliance Engine (``TRACE'') transactions in TRACE-
Eligible Securities \4\ that are executed on a facility of NYSE in 
accordance with specified NYSE rules and that are reported to NYSE and 
disseminated publicly, provided that a data sharing agreement between 
FINRA and NYSE related to transactions covered by FINRA Rule 6730 
remains in effect. This exemption operates as a pilot program and is 
currently scheduled to expire on October 23, 2015.\5\
---------------------------------------------------------------------------

    \4\ Rule 6710(a) provides that a ``TRACE-Eligible Security'' is 
a debt security that is United States dollar-denominated and issued 
by a U.S. or foreign private issuer, and, if a ``restricted 
security'' as defined in Securities Act Rule 144(a)(3), sold 
pursuant to Securities Act Rule 144A; or is a debt security that is 
U.S. dollar-denominated and issued or guaranteed by an Agency as 
defined in paragraph (k) or a Government-Sponsored Enterprise as 
defined in paragraph (n). ``TRACE-Eligible Security'' does not 
include a debt security that is: Issued by a foreign sovereign, a 
U.S. Treasury Security as defined in paragraph (p), or a Money 
Market Instrument as defined in paragraph (o).
    \5\ See Securities Exchange Act Release No. 54768 (November 16, 
2006), 71 FR 67673 (November 22, 2006) (Order Approving File No. SR-
NASD-2006-110) (pilot program in FINRA Rule 6730(e)(4), subject to 
the execution of a data sharing agreement addressing relevant 
transactions, became effective on January 9, 2007); Securities 
Exchange Act Release No. 59216 (January 8, 2009), 74 FR 2147 
(January 14, 2009) (Notice of Filing and Immediate Effectiveness of 
File No. SR-FINRA-2008-065) (pilot program extended to January 7, 
2011); Securities Exchange Act Release No. 63673 (January 7, 2011), 
76 FR 2739 (January 14, 2011) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2011-002) (pilot program extended 
to July 8, 2011); Securities Exchange Act Release No. 64665 (June 
14, 2011), 76 FR 35933 (June 20, 2011) (Notice of Filing and 
Immediate Effectiveness of File No. SR-FINRA-2011-025) (pilot 
program extended to January 27, 2012); Securities Exchange Act 
Release No. 66018 (December 21, 2011), 76 FR 81549 (December 28, 
2011) (Notice of Filing and Immediate Effectiveness of File No. SR-
FINRA-2011-072) (pilot program extended to October 26, 2012); 
Securities Exchange Act Release No. 68076 (October 22, 2012), 77 FR 
65431 (October 26, 2012) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2012-047) (pilot program extended 
to October 25, 2013); and Securities Exchange Act Release No. 70288 
(August 29, 2013), 78 FR 54694 (September 5, 2013) (Notice of Filing 
and Immediate Effectiveness of File No. SR-FINRA-2013-038) (pilot 
program extended to October 23, 2015).
---------------------------------------------------------------------------

    FINRA is proposing to extend the pilot program for two years until 
October 27, 2017. Thus, members would continue to be exempted from 
reporting to TRACE transactions in TRACE-Eligible Securities that are 
executed on an NYSE facility in accordance with NYSE Rules 1400, 1401 
and 86, where such transactions are reported to NYSE in accordance with 
NYSE's applicable trade reporting rules, and disseminated publicly by 
NYSE.\6\
---------------------------------------------------------------------------

    \6\ The success of the pilot program remains dependent on 
FINRA's ability to continue to effectively conduct surveillance for 
TRACE-Eligible Securities. The exemption, therefore, continues to be 
conditional on a data sharing agreement being in effect between 
FINRA and NYSE related to transactions covered by FINRA Rule 6730.
---------------------------------------------------------------------------

    FINRA is proposing to extend the pilot to provide additional time 
to analyze the impact of the exemption and to avoid duplicative 
reporting requirements for members with regard to transactions in these 
securities, which otherwise would be subject to trade reporting to both 
FINRA and NYSE. However, FINRA supports a regulatory construct that, in 
the future, consolidates all last sale transaction information to 
provide better price transparency and a more efficient means to engage 
in market surveillance of TRACE-Eligible Securities transactions. The 
proposed extension would allow the pilot program to continue to operate 
without interruption while FINRA and NYSE continue to assess the effect 
of the exemption and issues regarding the consolidation of market data, 
market surveillance and price transparency.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The implementation date will be October 23, 2015.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    FINRA believes that extension of the pilot protects investors and 
the public because it continues to ensure that transactions are 
required to be reported and publicly disseminated; therefore, 
transparency will be maintained for these transactions. The continued 
condition that a data sharing agreement remain in effect between NYSE 
and FINRA for transactions covered by the FINRA Rule 6730(e)(4) 
exemption allows FINRA to continue to conduct surveillance in TRACE-
Eligible Securities. In addition, extending the exemption permits 
members that are subject to both FINRA's and NYSE's trade reporting 
requirements to avoid a duplicative regulatory structure and the 
increased costs that may be incurred as a result of such duplicative 
requirements.

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. FINRA believes that the 
extension of the exemptive provision does not result in any burden on 
competition since it allows members that are subject to both

[[Page 62580]]

FINRA's and NYSE's trade reporting requirements to avoid a duplicative 
regulatory structure and the increased costs that may be incurred as a 
result of such duplicative requirements.

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 after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) \9\ 
thereunder.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), FINRA provided the Commission with written notice of 
its intent to file the proposed rule change, along with a brief 
description and the 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.
---------------------------------------------------------------------------

    FINRA has asked the Commission to waive the 30-day operative delay 
so that the pilot may continue to operate without interruption. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
This action will continue to allow the benefits of the pilot--
preventing duplicative reporting of transactions in TRACE-Eligible 
Securities that occur on NYSE--to continue without interruption. 
Therefore, the Commission hereby designates the proposed rule change as 
operative upon filing.\10\
---------------------------------------------------------------------------

    \10\ 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).
---------------------------------------------------------------------------

    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-2015-037 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-2015-037. 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 such filing will also 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-2015-037 and should be 
submitted on or before November 6, 2015.
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26326 Filed 10-15-15; 8:45 am]
 BILLING CODE 8011-01-P