Document ID: SEC-2010-1712-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2010-11-08T05:00Z

[Federal Register Volume 75, Number 215 (Monday, November 8, 2010)]
[Notices]
[Pages 68654-68656]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-28066]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63223; File No. SR-FINRA-2010-054]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Extend the Operational Date of SR-FINRA-2009-
065

November 1, 2010.
    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 October 27, 2010, the 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, 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 Substance 
of the Proposed Rule Change

    FINRA is proposing to extend the period during which FINRA may make 
the rule changes set forth in SR-FINRA-2009-065 and approved by the SEC 
on February 22, 2010, effective to no later than June 1, 2011.\4\
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    \4\ See Securities Exchange Act Release No. 61566 (February 22, 
2010), 75 FR 9262 (March 1, 2010) (Order Approving File No. SR-
FINRA-2009-065) (hereinafter, ``SEC Order Approving TRACE 
Expansion--Asset-Backed Securities'').
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    The proposed rule change would not make any new changes to the text 
of FINRA rules.

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
    On October 1, 2009, FINRA filed SR-FINRA-2009-065, a proposed rule 
change to expand the Trade Reporting and Compliance Engine (``TRACE'') 
to designate asset-backed securities, mortgage-backed securities and 
other similar securities (collectively, ``Asset-Backed Securities'') as 
eligible for TRACE, and to establish reporting, fee and other 
requirements for such securities. In SR-FINRA-2009-065, FINRA stated 
that it would announce the effective date of the proposed rule change 
in a Regulatory Notice to be published ``no later than 60 days 
following Commission approval'' and the effective date would be ``no 
later than 270 days following publication'' of the Regulatory Notice 
announcing the Commission's approval.
    The proposed rule change was published for notice and comment.\5\ 
FINRA filed its response to comments on December 22, 2009,\6\ and 
Amendment No. 1 to SR-FINRA-2009-065 on January 19, 2010 (hereinafter, 
SR-FINRA-2009-065 and Amendment No. 1 thereto are, together, the 
``TRACE ABS filing'').\7\ The Commission

[[Page 68655]]

approved the TRACE ABS filing on February 22, 2010.\8\
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    \5\ See Securities Exchange Act Release No. 60860 (October 21, 
2009), 74 FR 55600 (October 28, 2009) (Notice of Filing of File No. 
SR-FINRA-2009-065).
    \6\ See Letter from Sharon Zackula, Associate Vice President and 
Associate General Counsel, FINRA, to Elizabeth M. Murphy, Secretary, 
SEC, dated December 22, 2009.
    \7\ The TRACE ABS filing included amendments to: (a) Rule 6710 
to amend the defined terms, ``Asset-Backed Security'' and ``TRACE-
Eligible Security'' to include Asset-Backed Securities as TRACE-
Eligible Securities, to amend several other defined terms, and to 
add several new defined terms, most of which relate to Asset-Backed 
Securities; (b) Rule 6730 to require the reporting of Asset-Backed 
Securities transactions, to establish a six-month pilot period for 
reporting such transactions no later than T + 1 during TRACE System 
hours, and to amend certain requirements in connection with the 
reporting of commissions, factors, transaction size and settlement 
terms in Asset-Backed Securities transactions; (c) Rule 6750 to 
provide that information on a transaction in a TRACE-Eligible 
Security that is an Asset-Backed Security will not be disseminated; 
(d) Rule 6760 to amend the notification requirements; (e) Rule 7730 
to establish fees for reporting transactions in Asset-Backed 
Securities; and (f) the Rule 6700 Series and Rule 7730 to 
incorporate certain other technical, administrative and clarifying 
changes.
    \8\ See SEC Order Approving TRACE Expansion--Asset-Backed 
Securities.
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    On April 14, 2010, FINRA filed for immediate effectiveness SR-
FINRA-2010-019, a proposed rule change to extend by 45 days the 
proposed implementation period for SR-FINRA-2009-065.\9\ On April 23, 
2010, FINRA published Regulatory Notice 10-23 announcing Commission 
approval of the TRACE ABS Filing. Regulatory Notice 10-23 briefly 
described the rule changes, and, in reliance upon the 45-day extension 
provided for in SR-FINRA-2010-019, announced that the effective date of 
such rule changes would be February 14, 2011.
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    \9\ See Securities Exchange Act Release No. 61948 (April 20, 
2010), 75 FR 22670 (April 29, 2010) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2010-019 to Extend the 
Implementation Period for SR-FINRA-2009-65).
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    FINRA has determined that it would be beneficial to delay the 
effective date of the TRACE ABS filing to no later than June 1, 2011. 
FINRA will publish a Regulatory Notice no later than 30 days following 
the operative date of this proposed rule change to announce the revised 
effective date of the TRACE ABS filing, and to indicate that the 
previously announced effective date, February 14, 2011, is no longer 
valid.
    The complexity and variety of structures of Asset-Backed Securities 
present significant operational and technical challenges. For example, 
new processes and systems are being developed and must be implemented 
across the industry to assure the integrity of the Asset-Backed 
Securities reference data that facilitates timely and accurate 
reporting. In addition, FINRA believes that it is very important to 
provide extended time for coordinated testing among firms and FINRA. 
Accordingly, FINRA believes a delay of the effective date until no 
later than June 1, 2011 is warranted.
    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, such that FINRA can implement the proposed rule 
change immediately.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\10\ 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. The flexibility to establish an effective date no 
later than June 1, 2011 to implement the TRACE ABS filing will allow 
FINRA and members sufficient time to make additional necessary 
enhancements to the TRACE system and member systems, and to engage in 
coordinated testing of the technology. These steps will facilitate 
timely and accurate reporting of transactions in Asset-Backed 
Securities, and enhance FINRA's surveillance of the market in Asset-
Backed Securities for the protection of investors and in furtherance of 
the public interest.
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    \10\ 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

    The Exchange represented that the proposed rule change qualifies 
for immediate effectiveness pursuant to Section 19(b)(3)(A) of the 
Exchange Act \11\ and Rule 19b-4(f)(6) thereunder \12\ because it: (i) 
Does not significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) by its terms, does not become operative for 30 days from the 
date on which it was filed, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to submit to the Commission written notice 
of its intent to file the proposed rule change, along with a brief 
description and 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. The 
Commission has waived the five-day pre-filing period in this case.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay, so that the proposed rule change may become operative 
upon filing. The Commission hereby grants the Exchange's request.\14\ 
The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The proposal appears reasonably designed to allow firms sufficient time 
to make necessary systems and operational changes to facilitate the 
timely and accurate reporting of Asset-Backed Securities transactions 
as required by the TRACE ABS filing, and waiving the 30-day pre-
operative period will allow FINRA to communicate the new operative date 
to its members without undue delay.
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    \14\ For the 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).
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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 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
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2010-054 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-2010-054. 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

[[Page 68656]]

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 a.m. and 3 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-2010-054 and should be submitted on or before November 29, 
2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-28066 Filed 11-5-10; 8:45 am]
BILLING CODE 8011-01-P