Document ID: SEC-2008-0405-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2008-03-17T04:00Z

[Federal Register: March 17, 2008 (Volume 73, Number 52)]
[Notices]               
[Page 14288-14290]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17mr08-109]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57462; File No. SR-FINRA-2008-006]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Establish a Minimum Quarterly Threshold for 
Securities Transaction Credit Under NASD Rule 7001C

March 10, 2008.
    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 February 28, 2008, Financial Industry Regulatory Authority, Inc. 
(``FINRA''), filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared substantially by FINRA. 
FINRA filed 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. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to establish a minimum quarterly threshold for 
FINRA members that report transactions to the NASD/NSX Trade Reporting 
Facility (the ``NASD/NSX TRF'') \5\ to be eligible to receive the 
securities transaction credit under NASD Rule 7001C (Securities 
Transaction Credit). In addition, FINRA is proposing a technical change 
to clarify an ambiguity relating to the definition of ``Tape B'' in 
Rule 7001C. The text of the proposed rule change is available at http:/
/www.finra.org, the principal offices of FINRA, and the Commission's 
Public Reference Room.
---------------------------------------------------------------------------

    \5\ Effective July 30, 2007, FINRA was formed through the 
consolidation of NASD and the member regulatory functions of NYSE 
Regulation. Accordingly, the NASD/NSX TRF is now doing business as 
the FINRA/NSX TRF. FINRA will file a proposed rule change to reflect 
the formal name change of each FINRA Trade Reporting Facility in the 
Manual.

---------------------------------------------------------------------------

[[Page 14289]]

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
Background
    On November 6, 2006, the Commission approved the establishment of 
the NASD/NSX TRF,\6\ and on November 27, 2006, the NASD/NSX TRF 
commenced operation. The NASD/NSX TRF provides FINRA members with 
another mechanism for reporting locked-in transactions in NMS stocks, 
as defined in Rule 600(b)(47) of Regulation NMS under the Act,\7\ 
effected otherwise than on an exchange.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 54715 (November 6, 
2006), 71 FR 66354 (November 14, 2006) (SR-NASD-2006-108).
    \7\ 17 CFR 242.600(b)(47).
---------------------------------------------------------------------------

    In connection with the establishment of the NASD/NSX TRF, FINRA and 
National Stock Exchange, Inc. (``NSX''), entered into a Limited 
Liability Company Agreement for NASD/NSX Trade Reporting Facility LLC 
(the ``NASD/NSX TRF LLC Agreement''), a copy of which appears in the 
NASD Manual. Under the NASD/NSX TRF LLC Agreement, FINRA, the ``SRO 
Member,'' has sole regulatory responsibility for the NASD/NSX TRF. NSX, 
the ``Business Member,'' is primarily responsible for the management of 
the NASD/NSX TRF's business affairs, including establishing pricing for 
use of the NASD/NSX TRF, to the extent those affairs are not 
inconsistent with the regulatory and oversight functions of FINRA. 
Additionally, 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 NASD/NSX TRF.
    Pursuant to NASD Rule 7001C, FINRA members reporting trades in Tape 
A, Tape B and Tape C securities to the NASD/NSX TRF currently receive a 
50% pro rata credit on gross market data revenue earned by the NASD/NSX 
TRF. ``Gross revenue'' is the revenue received by the NASD/NSX TRF from 
the three tape associations after the tape associations deduct 
allocated support costs and unincorporated business costs.
Proposed Amendments to Rule 7001C
    FINRA is proposing to establish a minimum quarterly threshold for 
FINRA members that report transactions to the NASD/NSX TRF to be 
eligible to receive the securities transaction credit under Rule 7001C. 
Specifically, FINRA is proposing to adopt new paragraph (b) of Rule 
7001C, which provides that no FINRA member shall be eligible to receive 
a securities transaction credit under Rule 7001C for any calendar 
quarter in which the total transaction credit payable to such member is 
less than $250. Thus, pursuant to the proposed rule, a member's 
securities transaction credit totaling less than $250 for any given 
calendar quarter would be forfeited. NSX, as the Business Member, 
believes that establishing this $250 threshold is beneficial because it 
eliminates the administrative and clerical burden of having to process 
such de minimis payments.
    FINRA also is proposing a technical amendment to clarify an 
ambiguity in current Rule 7001C. Rule 7001C refers to ``Amex'' and 
``Tape B'' as synonymous, but in fact the Tape B revenue sharing 
program is interpreted to include stocks listed on regional exchanges, 
such as NYSE Arca, because transactions in such stocks are reported to 
Tape B.\8\
---------------------------------------------------------------------------

    \8\ FINRA recently proposed an identical change to NASD Rule 
7001B relating to the NASD/Nasdaq TRF. See Securities Exchange Act 
Release No. 57164 (January 17, 2008), 73 FR 4295 (January 24, 2008) 
(SR-FINRA-2007-041).
---------------------------------------------------------------------------

    FINRA has filed the proposed rule change for immediate 
effectiveness. FINRA will implement the proposed rule change on April 
1, 2008.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A of the Act,\9\ in general, and with Section 
15A(b)(5) of the Act,\10\ in particular, 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. FINRA believes that the proposed rule change is a reasonable 
and equitable credit structure in that it will be applied uniformly to 
all FINRA members that report trades to the NASD/NSX TRF.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78o-3.
    \10\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

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 designated the 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 after the date of filing, 
or such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest. In addition, as 
required under Rule 19b-4(f)(6)(iii),\11\ FINRA provided the Commission 
with written notice of its intention to file the proposed rule change, 
along with a brief description of the text of the proposed rule change, 
at least five business days prior to filing the proposal with the 
Commission. FINRA believes that the filing is appropriately designated 
as ``non-controversial'' because the proposed rule change is identical 
to the market data revenue rebate threshold that was recently adopted 
by NSX.\12\ Therefore, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) 
thereunder.\14\
---------------------------------------------------------------------------

    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ See Securities Exchange Act Release No. 57316 (February 12, 
2008), 73 FR 9379 (February 20, 2008) (SR-NSX-2008-01).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the 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,

[[Page 14290]]

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-2008-006 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-2008-006. 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 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-2008-006 and should be 
submitted on or before April 7, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \1\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-5221 Filed 3-14-08; 8:45 am]

BILLING CODE 8011-01-P