Document ID: SEC-2015-1124-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2015-07-07T04:00Z

[Federal Register Volume 80, Number 129 (Tuesday, July 7, 2015)]
[Notices]
[Pages 38791-38793]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16555]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75339; File No. SR-FINRA-2015-021]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Adopt Rule 7650A Relating to Debit Process for 
the Collection of FINRA/Nasdaq Trade Reporting Facility Fees

June 30, 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 June 23, 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.
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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 the 
Substance of the Proposed Rule Change

    FINRA is proposing to adopt FINRA Rule 7650A (Collection of Fees) 
to require FINRA members that are FINRA/Nasdaq Trade Reporting Facility 
(``FINRA/Nasdaq TRF'') participants to provide a clearing account 
number for an account at the National Securities Clearing Corporation 
(``NSCC'') for purposes of permitting the FINRA/Nasdaq TRF to debit 
undisputed or final fees due and owing by the member under the Rule 
7600A Series.
    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.

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
    The FINRA/Nasdaq TRF is a facility of FINRA that is operated by The 
NASDAQ OMX Group, Inc. (``NASDAQ OMX''). In connection with the 
establishment of the FINRA/Nasdaq TRF, FINRA and NASDAQ OMX entered 
into a limited liability company agreement (the ``LLC Agreement''). 
Under the LLC Agreement, FINRA, the ``SRO Member,'' has sole regulatory 
responsibility for the FINRA/Nasdaq TRF. NASDAQ OMX, the ``Business 
Member,'' is primarily responsible for the management of the FINRA/
Nasdaq TRF's business affairs to the extent those affairs are not 
inconsistent with the regulatory and oversight functions of FINRA. As 
such, the Business Member establishes pricing for use of the FINRA/
Nasdaq TRF, and such pricing is implemented pursuant to FINRA rules 
that must be filed with the SEC and be consistent with the Act. In 
addition, 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/Nasdaq TRF.
    Pursuant to the FINRA Rule 7600A Series, FINRA members that are 
FINRA/Nasdaq TRF participants are charged fees (Rule 7620A) and also 
may qualify for credits for trade reporting to the FINRA/Nasdaq TRF 
(Rule 7610A). These rules are administered by NASDAQ OMX, in its 
capacity as the ``Business Member'' and operator of the FINRA/Nasdaq 
TRF on behalf of FINRA,\4\ and NASDAQ OMX collects all fees on behalf 
of the FINRA/Nasdaq TRF. FINRA is proposing to adopt Rule 7650A to 
require FINRA members that are FINRA/Nasdaq TRF participants to provide 
a clearing account number for an account at NSCC to the FINRA/Nasdaq 
TRF for purposes of permitting NASDAQ OMX, on behalf of the FINRA/
Nasdaq TRF, to debit any undisputed or final fees due and owing under 
the FINRA Rule 7600A Series relating to the FINRA/Nasdaq TRF.

[[Page 38792]]

Specifically, Rules 7610A (Securities Transaction Credit), 7620A 
(FINRA/Nasdaq Trade Reporting Facility Reporting Fees) and 7630A 
(Aggregation of Activity of Affiliated Members) will be subject to 
proposed Rule 7650A.
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    \4\ FINRA's oversight of this function performed by the Business 
Member is conducted through a recurring assessment and review of TRF 
operations by an outside independent audit firm.
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    The debit process under proposed Rule 7650A would operate in the 
same manner as the debit process under Nasdaq Rule 7007 (Collection of 
Exchange Fees and Other Claims).\5\ Specifically, NASDAQ OMX would send 
a monthly invoice \6\ to each FINRA/Nasdaq TRF participant on 
approximately the 3rd through 10th business day of the following 
month.\7\ NASDAQ OMX would send a file to NSCC each month on 
approximately the 23rd of the following month to initiate the debit of 
the appropriate amount stated on the member's invoice for the prior 
month.\8\ Because the member would receive an invoice well before any 
monies are debited (normally within two weeks), the member would have 
adequate time to contact the FINRA/Nasdaq TRF with any questions 
concerning its invoice.\9\ If a member disagrees with the invoice, the 
debit will not commence until the dispute is resolved. Specifically, 
the disputed amount would not be included in the debit if the member 
has disputed the amount in writing to the FINRA/Nasdaq TRF by the 15th 
of the month, or the following business day if the 15th is not a 
business day, and the amount in dispute is at least $10,000 or 
greater.\10\ Once NSCC receives the file, NSCC would proceed to debit 
the amounts indicated from the clearing member's account.
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    \5\ See Securities Exchange Act Release No. 74823 (April 28, 
2015), 80 FR 25353 (May 4, 2015) (Notice of Filing and Immediate 
Effectiveness of File No. SR-NASDAQ-2015-046).
    \6\ The monthly invoice will clearly indicate that the amount on 
the invoice will be directly debited from the designated NSCC 
account.
    \7\ Members may elect to receive invoices either electronically, 
by mail or by both methods.
    \8\ Each month, NASDAQ OMX will send a file to the member's 
clearing firm which will indicate the amount to be debited from that 
member's account. If a member is ``self-clearing,'' no such file 
would be sent as the member would receive the invoice, as noted 
above, which would indicate the amount to be debited.
    \9\ NASDAQ OMX has represented to FINRA that members generally 
would receive invoices well before the tenth business day of the 
month, and as such, would have ample time to dispute any fee before 
commencement of the debit process.
    \10\ NASDAQ OMX has represented to FINRA that it will attempt to 
resolve all disputes prior to debiting of the disputed amount from 
the member's account; however, where necessary, NASDAQ OMX would 
issue refunds or credits, as appropriate.
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    Where a FINRA/Nasdaq TRF participant clears through a clearing 
member, the estimated transaction fees are typically debited by the 
clearing member on a daily basis in order to ensure that adequate funds 
have been escrowed. NASDAQ OMX would debit any undisputed or final fees 
due and owing under the FINRA Rule 7600A Series. Thus, FINRA and NASDAQ 
OMX believe that the proposed debit process will significantly reduce 
the number of unpaid invoices because of the large amounts of capital 
held at NSCC by members.
    FINRA believes that the proposed direct debit process would create 
an efficient and uniform method of collecting undisputed or final 
amounts due and owing from FINRA/Nasdaq TRF participants under the Rule 
7600A Series.\11\ FINRA further believes that the proposed direct debit 
process would reduce the cost of administrative processes associated 
with invoicing and collecting fees owed by FINRA/Nasdaq TRF 
participants and would help reduce the possibility of their accounts 
becoming overdue.
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    \11\ Consistent with the debit process proposed under SR-NASDAQ-
2015-046, NASDAQ OMX has represented to FINRA that it will not debit 
accounts for fees that are unusually large or for special 
circumstances. FINRA notes that the debit process under this 
proposed rule change is limited to FINRA Rules 7610A, 7620A and 
7630A.
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    FINRA has filed the proposed rule change for immediate 
effectiveness and requested waiver of the 30-day operative delay. FINRA 
proposes that the proposed rule change will become operative on July 1, 
2015. On August 24, 2015, NASDAQ OMX, as the Business Member on behalf 
of the FINRA/Nasdaq TRF, will debit July 2015 billing pursuant to the 
process described in the proposed rule change.\12\ FINRA will notify 
its members of the proposed rule change to provide its members time to 
provide the FINRA/Nasdaq TRF with the information necessary for the 
direct debit and prepare for the change to the collection process.\13\ 
NASDAQ OMX has represented that a member's primary NSCC account number 
will be used unless the member contacts the FINRA/Nasdaq TRF prior to 
July 24, 2015 with an alternate NSCC account number.
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    \12\ The initial debit will include all undisputed outstanding 
fees through August 2015.
    \13\ FINRA notes that NASDAQ OMX has already provided notice 
relating to the proposed debit process under NASDAQ Rule 7007, and 
NASDAQ OMX has represented that FINRA/Nasdaq TRF participants would 
have received such notice. See, e.g., Equity Trader Alert #2015-83 
(June 3, 2015), available at www.nasdaqtrader.com/TraderNews.aspx?id=ETA2015-83.
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2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\14\ 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. Consistent with SR-NASDAQ-2015-046, the proposed debit 
process would provide FINRA/Nasdaq TRF participants with an efficient 
process to pay undisputed or final fees due and owing to the FINRA/
Nasdaq TRF. In addition, consistent with SR-NASDAQ-2015-046, the 
proposed debit process would ease FINRA/Nasdaq TRF participants' 
administrative burden in paying monthly invoices, avoid overdue 
balances and provide same day collection from all FINRA/Nasdaq TRF 
participants that owe monies to the FINRA/Nasdaq TRF. Finally, 
consistent with SR-NASDAQ-2015-046, the proposed debit process is 
equitable and not unfairly discriminatory because it would apply to all 
FINRA/Nasdaq TRF participants in a uniform manner.
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    \14\ 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. As described herein, and 
consistent with the LLC agreement, the proposed debit process is 
identical to the debit process NASDAQ OMX currently has in place for 
collection of fees and other amounts owed by NASDAQ Options Market LLC 
(``NOM'') participants under Nasdaq rules and is also identical to the 
debit process proposed by Nasdaq for collection of fees and other 
amounts owed by Nasdaq equity participants under Nasdaq Stock Market 
rules. As the Business Member, NASDAQ OMX has the obligation of 
assessing the potential impacts of the proposed debit process in its 
own rulemaking. FINRA notes that Nasdaq's debit process was subject to 
proposed rule changes filed by Nasdaq with the Commission.\15\
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    \15\ See, e.g., Securities Exchange Act Release No. 74823 (April 
28, 2015), 80 FR 25353 (May 4, 2015) (Notice of Filing and Immediate 
Effectiveness of File No. SR-NASDAQ-2015-046).
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    Consistent with SR-NASDAQ-2015-046, the proposed debit process 
would apply uniformly to all members that are FINRA/Nasdaq TRF 
participants, as it does today with NOM participants and as proposed 
for Nasdaq equity participants. In addition, consistent with SR-NASDAQ-
2015-046, the proposed debit process would provide a cost savings to 
the FINRA/Nasdaq TRF, in that it would alleviate administrative

[[Page 38793]]

processes related to the collection of amounts owed by members for 
reporting to the FINRA/Nasdaq TRF, as it does today with NOM 
participants and as proposed for Nasdaq equity participants. Finally, 
consistent with SR-NASDAQ-2015-046, the proposed debit process would 
prevent FINRA/Nasdaq TRF participant accounts from becoming overdue.

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 \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\18\ 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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    \18\ 17 CFR 240.19b-4(f)(6)(iii).
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    FINRA has asked the Commission to waive the 30-day operative delay. 
The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
FINRA will implement the proposed rule change on July 1, 2015, and on 
August 24, 2015, NASDAQ OMX, as the Business Member on behalf of the 
FINRA/Nasdaq TRF, will debit July 2015 billing pursuant to the process 
described in the proposed rule change. FINRA will notify its members of 
the proposed rule change to provide its members time to provide the 
FINRA/Nasdaq TRF with the information necessary for the direct debit 
and prepare for the change to the collection process. NASDAQ OMX has 
represented that a member's primary NSCC account number will be used 
unless the member contacts the FINRA/Nasdaq TRF prior to July 24, 2015 
with an alternate NSCC account number. The proposal presents no novel 
issues, and the Commission believes the terms of this implementation 
schedule are reasonable. Furthermore, the Commission finds no reason to 
delay implementation for 30 days, given the reduction of administrative 
burdens and costs inherent in the proposed rule change. Therefore, the 
Commission hereby waives the 30-day operative delay and designates the 
proposed rule change to be operative upon filing with the 
Commission.\19\
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    \19\ For purposes only of waiving the operative delay for this 
proposal, 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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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-2015-021 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-2015-021. 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 also will be available 
for inspection and copying at the principal offices 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-2015-021, and should 
be submitted on or before July 28, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Robert W. Errett,
Deputy Secretary.
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    \20\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-16555 Filed 7-6-15; 8:45 am]
BILLING CODE 8011-01-P