Document ID: SEC-2007-1329-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Financial Industry Regulatory Authority, Inc
Posted Date: 2007-09-27T04:00Z

[Federal Register: September 27, 2007 (Volume 72, Number 187)]
[Notices]
[Page 54957-54959]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27se07-104]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56491; File No. SR-FINRA-2007-015]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to Changes in the Functionality of the
NASD/NYSE Trade Reporting Facility

September 21, 2007.
    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 19, 2007, the Financial Industry Regulatory Authority,
Inc. (``FINRA'') (f/k/a the National Association of Securities Dealers,
Inc. (``NASD'')) filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared substantially FINRA. FINRA has
submitted the proposed rule change under Section 19(b)(3)(A) of the Act
\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal
effective upon filing with the Commission.\5\ 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).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ FINRA has asked the Commission to waive the 30-day operative
delay provided in Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-
4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    FINRA proposes to amend its rules to reflect a change in the
functionality of the NASD/NYSE Trade Reporting Facility (the ``NASD/
NYSE TRF'') \6\ to permit Participants to submit trades to the NASD/
NYSE TRF for submission to the National Securities Clearing Corporation
(``NSCC'') for clearance and settlement.
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    \6\ Effective July 30, 2007, FINRA was formed through the
consolidation of NASD and the member regulatory functions of NYSE
Regulation, Inc. Accordingly, the NASD/NYSE TRF is now doing
business as the FINRA/NYSE TRF. The formal name change of each of
FINRA's Trade Reporting Facilities (``TRFs'') is pending and, once
completed, FINRA will file a separate proposed rule change to
reflect those changes in the Manual.
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    The text of the proposed rule change is available at http://www.finra.org
, at the principal offices 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 NASD/NYSE TRF provides FINRA members with a mechanism for
reporting locked-in trades in NMS stocks, as defined in Rule 600(b)(47)
of Regulation NMS under the Act,\7\ effected otherwise than on an
exchange. NASD Rules 6130E(a) and 6140E currently provide that the
NASD/NYSE TRF will not submit trades to clearing and, where
appropriate, Participants must have a valid Qualified Service
Representative (``QSR'') agreement with the NSCC or similar arrangement
to

[[Page 54958]]

clear trades submitted to the NASD/NYSE TRF.\8\
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    \7\ 17 CFR 242.600(b)(47).
    \8\ See also Securities Exchange Act Release No. 55325 (February
21, 2007), 72 FR 8820 (February 27, 2007) (notice of filing and
immediate effectiveness of SR-NASD-2007-011).
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    FINRA proposes to amend Rules 6130E(a) and 6140E to reflect a
change in the functionality of the NASD/NYSE TRF to permit Participants
to submit trades to the NASD/NYSE TRF for submission to the NSCC for
clearance and settlement. Thus, locked-in trades (including locked-in
trades reported as other than regular way settlement) will be accepted
by the NASD/NYSE TRF, as they are today, and at the option of the
Participant, clearing information for such trades will be submitted to
the NSCC. In addition, FINRA proposes to amend Rules 4632E(e)(3)(B) and
6130E(f) to include references to ``clearing'' and ``clearing-only''
reports (in addition to non-clearing reports), where appropriate, and
Rule 6160E to refer to trades that have been treated as locked-in ``and
sent to DTCC.'' The amendments proposed herein are identical to the
rules relating to the NASD/NSX TRF,\9\ and are substantially similar to
the rules relating to the NASD/Nasdaq TRF.\10\
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    \9\ See NASD Rules 4632C(d), 6130C(a), 6140C and 6160C. Rule
6130C(a) was recently amended by proposed rule change SR-FINRA-2007-
003, which was filed for immediate effectiveness, but is not yet
operative. See Securities Exchange Act Release No. 56321 (August 24,
2007), 72 FR 50425 (August 31, 2007).
    \10\ See Rules 4632(d), 6130(a), 6140 and 6160. The NASD/Nasdaq
TRF offers trade comparison functionality, while the NASD/NYSE TRF
and NASD/NSX TRF accept locked-in trades only. The pertinent rules
reflect this difference in functionality.
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    The proposed rule change will provide members with another
mechanism for clearing trades that they report to FINRA and will ensure
consistency in the trade reporting rules relating to the TRFs, to the
extent practicable.
    FINRA has filed the proposed rule change for immediate
effectiveness and requested a waiver of the 30-day operative delay.
FINRA proposes that the proposed rule change will be operative on
September 19, 2007, by which date the NASD/NYSE TRF will have made the
necessary systems changes to implement this proposed rule change.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with
Section 15A(b)(6) of the Act,\11\ which requires, among other things,
that FINRA rules be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in securities, and, in general, to
protect investors and the public interest. FINRA believes that the
proposed rule change will assist members in complying with their
reporting obligations by providing another mechanism for members to
clear trades reported to FINRA.
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    \11\ 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.

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

    FINRA has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \12\ and subparagraph (f)(6) of Rule 19b-4
thereunder.\13\ Because FINRA has designated the foregoing proposed
rule change as one that: (1) Does not significantly affect the
protection of investors or the public interest; (2) does not impose any
significant burden on competition; and (3) does not become operative
for 30 days from the date of filing, or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6)
thereunder. As required under Rule 19b-4(f)(6)(iii), FINRA provided the
Commission with written notice of its intention to file the proposed
rule change at least five business days prior to filing the proposal
with the Commission or such shorter period as designated by the
Commission.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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 filing.
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. FINRA has asked the Commission to
waive the 30-day operative delay because of the imminent closing of the
NASD/BSE TRF, which is expected to occur on or before September 21,
2007. According to FINRA, a FINRA member that currently participates
only in the NASD/BSE TRF seeks to report trades to the NASD/NYSE TRF
after the NASD/BSE TRF closes. FINRA states that the member currently
is performing systems testing with the NASD/NYSE TRF so that it can
fully comply with its reporting obligations following the closing of
the NASD/BSE TRF. The proposal would accommodate this (and any other)
FINRA member that, for systems or business reasons, chooses to use the
NASD/NYSE TRF as an alternative facility through which to report trades
to FINRA, but that may also need a facility through which to clear
those trades.
    The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
because, as noted above, the proposed rules are identical, or
substantially similar, to the rules governing the NASD/NSX TRF and the
NASD/Nasdaq TRF.\14\ In addition, the proposal will provide an
additional mechanism for members to submit trades to NSCC for clearance
and settlement in light of the imminent closing of the NASD/BSE
TRF.\15\ For these reasons, the Commission designates the proposal to
be operative on filing with the Commission.
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    \14\ See notes 9 and 10, supra, and accompanying text.
    \15\ 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. 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate 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.

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

[[Page 54959]]

     Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-FINRA-2007-015 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2007-015. This
file number should be included on the subject line if e-mail 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 inspection
and copying in the Commission's Public Reference Room, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the 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 publicly available. All
submissions should refer to File Number SR-FINRA-2007-015 and should be
submitted on or before October 18, 2007.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-19091 Filed 9-26-07; 8:45 am]

BILLING CODE 8010-01-P