Document ID: SEC-2013-1767-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2013-10-22T04:00Z

[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62788-62791]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24680]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70691; File No. SR-FINRA-2013-043]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to TRACE Fees for Securities Act Rule 
144A Transaction Data

October 16, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on October 2, 2013, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission

[[Page 62789]]

(the ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been 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 Substance 
of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 7730 to: (1) Provide for 
Trade Reporting and Compliance Engine (``TRACE'') data fees for real-
time and historic data sets of transactions in TRACE-Eligible 
Securities \5\ that are effected pursuant to Rule 144A \6\ under the 
Securities Act of 1933 \7\ (``Rule 144A transactions''); \8\ (2) 
clarify Level II Full Service Web Browser fee rates in light of the 
availability of additional data sets; and (3) make other technical 
amendments.
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    \5\ The term TRACE-Eligible Security is defined in FINRA Rule 
6710(a).
    \6\ 17 CFR 230.144A.
    \7\ 15 U.S.C. 77a et seq. (hereinafter ``Securities Act'').
    \8\ See Securities Exchange Act Release No. 70345 (September 6, 
2013), 78 FR 56251 (September 12, 2013) (Order Granting Approval of 
Proposed Rule Change Relating to the Dissemination of Transactions 
in TRACE-Eligible Securities that are Effected Pursuant to 
Securities Act Rule 144A; File No. SR-FINRA-2013-029) (``Rule 144A 
Dissemination Rule Change''). The Rule 144A Dissemination Rule 
Change amends FINRA Rule 6750, FINRA Rule 7730 and the TRACE 
dissemination protocols to provide for the dissemination of Rule 
144A transactions and to establish real-time and historic data sets 
for Rule 144A transactions. The effective date for the Rule 144A 
Dissemination Rule Change will be established in a Regulatory 
Notice.
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    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.\9\
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    \9\ As part of the proposed rule change, FINRA submitted an 
Exhibit 4 and an Exhibit 5. The Exhibit 4 shows the text of the 
proposed rule change marked to show the proposed changes as compared 
to FINRA Rule 7730 including amendments approved by the SEC as if 
such amendments were effective. See note 8. The Exhibit 5 shows the 
text of the proposed rule change marked to show the proposed changes 
as compared to the current rule text of FINRA Rule 7730 in 
accordance with the requirements of Form 19b-4.
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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
    Recently, FINRA amended FINRA Rule 6750, FINRA Rule 7730 and TRACE 
dissemination protocols to provide greater transparency in Rule 144A 
transactions in TRACE-Eligible Securities.\10\ In the Rule 144A 
Dissemination Rule Change, FINRA included amendments to FINRA Rule 7730 
to establish data sets for real-time and historic Rule 144A transaction 
data.
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    \10\ See note 8. FINRA Rule 6750 will provide for the 
dissemination of Rule 144A transactions, provided the asset type 
(e.g., corporate bonds) currently is subject to dissemination under 
FINRA Rule 6750. The Rule 144A Dissemination Rule Change does not 
extend to equity transactions effected pursuant to Securities Act 
Rule 144A (17 CFR 230.144A).
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    In this proposed rule change, FINRA proposes to establish fees for 
the real-time disseminated Rule 144A transaction data and the Historic 
TRACE Data for Rule 144A transactions, clarify Level II Full Service 
Web Browser fee rates in light of the availability of additional data 
sets, and incorporate other technical amendments in FINRA Rule 7730.
Rule 144A Data Sets
    In the Rule 144A Dissemination Rule Change, FINRA amended FINRA 
Rule 7730(c) to establish the Rule 144A transaction data set (``Rule 
144A Data Set''), which is similar to the data sets established for 
corporate bonds (``Corporate Bond Data Set''), Agency Debt Securities 
(``Agency Data Set'') and Asset-Backed Securities (``ABS Data 
Set'').\11\ The Rule 144A Data Set will consist of information 
disseminated immediately upon receipt of a transaction report for a 
Rule 144A transaction. FINRA proposes to extend the market data fees 
currently in effect for similar real-time TRACE market data sets (i.e., 
the Corporate Bond Data Set, the Agency Data Set and the ABS Data Set) 
to the Rule 144A Data Set. The proposed rule change would amend FINRA 
Rule 7730(c)(1), FINRA Rule 7730(c)(2) and the preceding table to 
provide that each data set is available at the same rate and eliminate 
redundant text.\12\
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    \11\ The terms Agency Debt Security and Asset-Backed Security 
are defined in FINRA Rule 6710(l) and FINRA Rule 6710(m), 
respectively.
    \12\ See Exhibit 4 to the Form 19b-4, which is available on 
FINRA's Web site.
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    In addition, in the Rule 144A Dissemination Rule Change, FINRA 
amended FINRA Rule 7730(d) to establish a historic data set for Rule 
144A transactions (``Historic Rule 144A Data Set''), which is similar 
to the data sets established for corporate bonds (``Historic Corporate 
Bond Data Set''), Agency Debt Securities (``Historic Agency Data Set'') 
and Asset-Backed Securities (``Historic ABS Data Set'') referenced in 
the rule.\13\ FINRA proposes to establish fees for the Historic Rule 
144A Data Set at the same rates currently in effect in FINRA Rule 
7730(d) for the existing historic data sets. The proposed rule change 
would amend FINRA Rule 7730(d)(1), FINRA Rule 7730(d)(2) and the 
preceding table to provide that each data set is available at the same 
rate and eliminate redundant text.\14\ In connection with the fees for 
the Historic Rule 144A Data Set, FINRA proposes to clarify in FINRA 
Rule 7730(d)(1)(A)(ii) and FINRA Rule 7730(d)(1)(B)(ii) that the 2003 
Historic Rule 144A Data Set includes the 2002 Historic Rule 144A Data 
Set, and in FINRA Rules 7730(d)(1)(A)(i) and 7730(d)(1)(B)(i) that the 
set-up fee to receive Historic TRACE data is paid only one time, 
instead of per data set.\15\
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    \13\ As noted in the Rule 144A Dissemination Rule Change, the 
Historic Rule 144A Data Set would include Rule 144A transactions in 
TRACE-Eligible Securities subject to dissemination, effected as of 
or after July 1, 2002, and, among other things, would include 
uncapped volume information. However, like all other Historic TRACE 
Data, Rule 144A transaction data included in the Historic Rule 144A 
Data Set would be released subject to a delay of approximately 18 
months from the date of the transaction.
    \14\ See Exhibit 4 to the Form 19b-4 on FINRA's Web site.
    \15\ FINRA Rule 7730(d) specifies: ``Historic TRACE Data fees, 
except the Set-Up Fee, are charged for each Data Set.'' See Exhibit 
4 to the Form 19b-4 on FINRA's Web site.
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    FINRA also proposes two clarifying amendments to other provisions 
of Rule 7730 as discussed below.
Level II Full Service Web Browser Fee
    FINRA proposes to clarify in FINRA Rule 7730(a)(1) applicable fees 
when a firm uses a TRACE web browser that includes access to real-time 
TRACE transaction data. The subscription rate

[[Page 62790]]

for the Level II Full Service Web Browser includes the fees for a 
subscription to one or two data sets, which were established when there 
were only two data sets. When the Rule 144A Dissemination Rule Change 
becomes effective, there will be four available real-time data sets: 
Corporate Bond Data Set, Agency Data Set, ABS Data Set and Rule 144A 
Data Set. FINRA would extend the subscription rates currently 
applicable to first and second data sets (i.e., a discounted rate of 
$30 per data set for a single user ID and $60 per data set for 
additional user IDs) to the third and fourth data sets in two similar 
provisions. Specifically, in FINRA Rule 7730(a)(1)(B)(i), for a Level 
II Full Service Web Browser subscription for a single user ID or the 
first user ID, the current fee is $50 per month \16\ (including one 
data set), and $80 per month (including two data sets). As amended, the 
Level II Full Service Web Browser subscription fee would be $110 per 
month (for subscribers to three data sets), or $140 per month (for 
subscribers to four data sets). For Level II Full Service Web Browser 
subscriptions for additional user IDs, in FINRA Rule 7730(a)(1)(B)(ii), 
the current fee is $80 per month per user ID (including one data set) 
and $140 per month per user ID (including two data sets).\17\ FINRA 
would extend the same fee rate per data set to the third and fourth 
data sets, so that the Level II Full Service Web Browser subscription 
fee (applicable to additional users IDs) would be $200 per month per 
user ID (for subscribers to three data sets), and $260 per month per 
user ID (for subscribers to four data sets).
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    \16\ Each fee includes the $20 per month fee per user ID for 
Level I Trade Report Only Web Browser Access as specified in FINRA 
Rule 7730(a)(1)(A).
    \17\ Again, each fee includes the $20 per month fee per user ID 
for Level I Trade Report Only Web Browser Access. See note 16.
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TBA Transaction Reporting Fee
    The trade reporting fees for transactions in TRACE-Eligible 
Securities are set forth in FINRA Rule 7730(b)(1). For Agency Pass-
Through Mortgage-Backed Securities, as defined in FINRA Rule 6710(v), 
traded to be announced (``TBA''), as defined in FINRA Rule 6710(u), the 
trade reporting fee is $1.50 per transaction. At the time the TBA 
reporting fee was established, FINRA had not defined TBA transactions 
to include those involving SBA-Backed ABS; however, FINRA intended the 
TBA reporting fee to apply to all TBA transactions. Accordingly, FINRA 
proposes to clarify that SBA-Backed ABS, as defined in FINRA Rule 
6710(bb), traded TBA are subject to the $1.50 per transaction trade 
reporting fee.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The implementation date of the proposed rule change will 
be the same as the effective date of the Rule 144A Dissemination Rule 
Change.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(5) of the Exchange Act,\18\ which 
requires, among other things, that 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.
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    \18\ 15 U.S.C. 78o-3(b)(5).
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    FINRA believes that the proposed fees for the Rule 144A Data Set 
and Historic Rule 144A Data Set that are an extension of the fee rates 
that are assessed currently for existing real-time and historic data 
sets are reasonable, equitably allocated and not unfairly 
discriminatory. FINRA believes that the proposed fees are reasonable in 
light of FINRA's regulatory and operational costs, including personnel, 
technology and storage costs to collect and provide real-time and 
historic Rule 144A transaction data and the increase in such costs 
incurred by FINRA over time. FINRA proposes fees at the rates that have 
been in effect for several years for similar data bases, and such fees 
are designed to defray a portion of such costs.
    FINRA believes that the proposed rule change provides for the 
equitable allocation of the proposed fees among member firms and other 
market participants and data users, and is not unfairly discriminatory. 
The Rule 144A Data Set and Historic Rule 144A Data Set would be 
accessible by all member firms and other market participants and data 
users, subject to the same fee rates that are in effect for the real-
time and historic Corporate Bond, Agency and ABS data sets. As with 
fees for other data sets (real-time and historic) provided by FINRA, 
the proposed fees would be charged only to those member firms and other 
market participants and data users that opt to receive a subscription 
to the applicable data set. FINRA proposes to charge qualifying Tax-
Exempt Organizations \19\ reduced fees for the Rule 144A Data Set and 
Historic Rule 144A Data Set, which are the same reduced fee rates that 
FINRA currently charges such organizations to access other data sets. 
The proposed reduced data fees for qualifying Tax-Exempt Organizations 
are an equitable allocation of fees in that the lower rate provides 
greater access to TRACE information to organizations that are formed 
exclusively for a charitable purpose. FINRA also believes that the Rule 
144A Data Set and Historic Rule 144A Data Set fees are not unfairly 
discriminatory because the data sets would be available to all 
similarly situated members and other data users on an equal basis at 
the same rates, except for the proposed lower rates for qualifying Tax-
Exempt Organizations.
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    \19\ Tax-Exempt Organization is defined in FINRA Rule 7730(f)(2) 
and means an organization that is described in Section 501(c) of the 
Internal Revenue Code (26 U.S.C. Sec.  501(c)) and has received 
recognition of the exemption from federal income taxes from the 
Internal Revenue Service.
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    FINRA believes that the proposed amendments regarding the Level II 
Full Service Web Browser subscription fees are reasonable in light of 
FINRA's regulatory and operational costs, including personnel, 
technology and storage costs to collect and provide real-time 
transaction data and the increase in such costs incurred by FINRA over 
time. FINRA proposes amendments to allow members to access additional 
data bases at the same fee rate that has been in effect for several 
years, and such fees are designed to defray a portion of such costs. 
FINRA also believes that such amendments provide for the equitable 
allocation of fees among member firms in that the combined service/
market data product, which allows members to report and review the 
member's transactions and to access market data, is available to all 
firms that wish to subscribe at the same rate. In addition, FINRA 
believes that the additional proposed fees for access to additional 
data sets as part of the Level II Full Service Web Browser are not 
unfairly discriminatory because the Level II Full Service Web Browser 
service is available to all members.
    Finally, FINRA believes that applying the TBA reporting fee that 
currently applies to almost all TBA transactions to an additional small 
number of TBA transactions is a reasonable and fair fee assessment, and 
results in a fee that is equitably allocated among members engaged in 
similar transactions. Also, the proposed fee is not unfairly 
discriminatory in that all members engaged in such TBA transactions 
will be subject to the same fee.

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 Exchange Act.

[[Page 62791]]

The proposed fees for the Rule 144A Data Set and Historic Rule 144A 
Data Set, which are consistent with current rates for subscriptions to 
similar TRACE data sets, are reasonable, equitably allocated and not 
unfairly discriminatory, and will permit a broad spectrum of members, 
data vendors and other market participants, including qualifying Tax 
Exempt Organizations, to obtain and use the data in furtherance of 
market integrity and the protection of investors in such securities. 
Similarly, FINRA does not believe that the proposed amendments to the 
Level II Full Service Web Browser subscription, providing a member 
access to multiple data sets as part of such service, will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Exchange Act. Access to the Rule 
144A Data Set and Historic Rule 144A Data Set as well as the Level II 
Full Service Browser subscription may facilitate competition in the 
market for such securities in that access to such data will assist 
members and customers in: (1) Determining the quality of their 
executions; (2) price discovery; and (3) assessing the accuracy and 
integrity of the valuation of positions.

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 \20\ and paragraph (f) of Rule 19b-4\21\ 
thereunder. 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 will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f).
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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-2013-043 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2013-043. 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 the filing also will 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-2013-043 and should be 
submitted on or before November 12, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24680 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P