Document ID: SEC-2015-0689-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2015-04-21T04:00Z

[Federal Register Volume 80, Number 76 (Tuesday, April 21, 2015)]
[Notices]
[Pages 22243-22245]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-09070]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74734; File No. SR-FINRA-2015-007]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Waive Trade Reporting Fees Under Rule 7710 Due 
to an OTC Reporting Facility Systems Issue

April 15, 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 April 10, 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, 
II, and III below, which Items have been

[[Page 22244]]

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)(ii) 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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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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 waive fees under Rule 7710 for trade 
reporting to the OTC Reporting Facility (``ORF'') due to an ORF systems 
issue on March 24, 2015. The proposed rule change does not make any 
changes to the text of FINRA rules.
    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. [sic]

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 rules require that members report trades in OTC equity 
securities, as defined under Rule 6420, to the ORF for public 
dissemination purposes. Members also may be required or may choose to 
submit one or more ``non-tape'' reports in connection with the trade 
(i.e., the transaction is not reported to the tape for publication but 
is reported for clearing or regulatory purposes). Pursuant to Rule 
7710, FINRA charges members various fees for using the ORF, including, 
e.g., for reporting trades and cancelling or correcting previously 
reported trades, as set forth below:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Reporting of transactions not subject    $0.029/side.
 to comparison through the OTC
 Reporting Facility.
Submission of non-tape, non-clearing     No fee.
 (regulatory) reports.
Clearing report to transfer a            $0.03/side.
 transaction fee charged by one member
 to another member pursuant to Rule
 7330(i).
Comparison.............................  $0.0144/side per 100 shares
                                          (minimum 400 shares; maximum
                                          7,500 shares).
Late Report--T+N.......................  $0.288/trade (charged to the
                                          Executing Party).
Corrective Transaction Charge..........  $0.25/Cancel, Correct
                                          transaction, paid by reporting
                                          side; $0.25/Break, Decline
                                          transaction, paid by each
                                          party.
------------------------------------------------------------------------

    On March 24, 2015, the ORF experienced a systems issue that 
impacted trade reporting. Specifically, following a server failover, 
the ORF system erroneously reprocessed and resubmitted trades that had 
previously been processed and sent to FINRA's Trade Data Dissemination 
Service for public dissemination.\5\ FINRA staff identified 
approximately 70,000 duplicate trades and worked with members to cancel 
them. FINRA also determined that, following the server failover, some 
timely reported trades were incorrectly processed and marked as 
``late,'' and for some trades that were designated for submission to 
clearing, the system erroneously cancelled the clearing information 
that had been submitted to the National Securities Clearing 
Corporation. FINRA continues to work with firms to identify trades that 
were erroneously marked late and clearing submissions that were 
inadvertently cancelled by the system. Approximately 322 firms reported 
trades to the ORF from 2:20 p.m. (the time of the server failover) 
until the close of the system on March 24, 2015 and thus potentially 
were impacted by the ORF systems issue on that date. During this time 
frame, there were over 120,000 trade submissions, which include 
original and duplicate trade reports and cancellations.
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    \5\ See ORF Technical Notices dated March 24, 2015 and March 25, 
2015, available at www.finra.org/industry/orf/orf-technical-notices.
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    As a result of the ORF systems issue, some members were required to 
take corrective action by making additional submissions to the ORF to 
cancel duplicate trades or resubmit cancelled clearing transactions. To 
ensure that members are not charged for such additional submissions, 
and in recognition that members have had to expend resources to take 
corrective action as a result of the ORF systems issue, FINRA is 
proposing to waive all ORF trade reporting fees under Rule 7710 for 
March 24, 2015, the date the ORF systems issues occurred. As such, fees 
under Rule 7710 will be waived for all submissions to the ORF made on 
March 24, 2015, including fees for ``as/of'' reports submitted on March 
24, 2015 for trades that were executed prior to that date.
    In addition, FINRA recognizes that some members may have been 
unable to take the necessary corrective steps on March 24, 2015, i.e., 
some members may not have cancelled the duplicate trades or resubmitted 
trades for clearing until T+1 or later. Accordingly, FINRA also is 
proposing to waive the trade reporting fees under Rule 7710 for trades 
submitted to the ORF with a trade execution date of March 24, 2015 or 
an original report date of March 24, 2015, provided that such trades 
were submitted by March 31, 2015. Because the pertinent billing cycle 
ended on March 31, 2015, trades submitted on or after April 1, 2015 
would not be entitled to the fee relief proposed herein, even if they 
were executed or originally reported on March 24, 2015.\6\ FINRA 
believes that it is most equitable to provide such additional relief to 
members.
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    \6\ FINRA believes that only a small number of trades were not 
cancelled or resubmitted, as necessary, by March 31, 2015.
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    FINRA has filed the proposed rule change for immediate 
effectiveness. The operative date 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)(5) of the Act,\7\ which requires, among 
other things, that

[[Page 22245]]

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 to waive trade reporting fees 
under Rule 7710, as described herein, is appropriate in light of the 
ORF systems issue on March 24, 2015. FINRA does not believe that 
members should incur fees for the corrective action they were required 
to take following the ORF systems issue. FINRA believes that this 
limited waiver results in reasonable fees and financial benefits that 
are equitably allocated. The financial benefit of the trade reporting 
fee waiver is available to all firms that reported to the ORF on March 
24, 2015 and to all firms that reported trades with an execution date 
or original report date of March 24, 2015, provided that such reports 
were received by March 31, 2015. The proposed rule change is reasonable 
because the waiver of ORF trade reporting fees--and the financial 
benefit from such waiver--is of limited amount, duration and 
application, as noted above. Finally, the proposed trade reporting fee 
waiver does not unfairly discriminate between or among members in that 
the waiver is available to any such member that reported transactions 
to the ORF on the relevant dates.
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    \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. FINRA believes that the 
proposed rule change to waive the trade reporting fees is appropriate 
in light of the ORF systems issue, which required members to take 
corrective action and make additional submissions to the ORF. FINRA 
believes that the limited trade reporting fee waiver would not place an 
unreasonable fee burden on members, nor confer an uncompetitive benefit 
to members that have their trade reporting fees waived, in that such 
waiver would be available for a very limited period and the financial 
impact of such a waiver would be de minimis.

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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \8\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\9\ 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.
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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 email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2015-007 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2015-007. 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 the Exchange. 
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-
007, and should be submitted on or before May 12, 2015.

    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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Brent J. Fields,
Secretary.
[FR Doc. 2015-09070 Filed 4-20-15; 8:45 am]
 BILLING CODE 8011-01-P