Document ID: SEC-2022-0684-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed RuleChanges: Financial Industry Regulatory Authority, Inc.
Posted Date: 2022-05-17T04:00Z

[Federal Register Volume 87, Number 95 (Tuesday, May 17, 2022)]
[Notices]
[Pages 29980-29986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-10508]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94891; File No. SR-FINRA-2022-011]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Expand 
TRACE Reporting Requirements to Trades in U.S. Dollar-Denominated 
Foreign Sovereign Debt Securities

May 11, 2022.
    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 May 6, 2022, 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 below, which Items have been prepared by FINRA. 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.
---------------------------------------------------------------------------

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

    FINRA is proposing to expand reporting requirements for the Trade 
Reporting and Compliance Engine (TRACE) to collect information on 
trades in foreign sovereign debt securities that are United States 
(U.S.) dollar-denominated.
    The text of the proposed rule change is available on FINRA's 
website at http://www.finra.org, at the principal office 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
    FINRA is submitting this proposed rule change to amend certain 
rules in the Rule 6700 Series (Trade Reporting and Compliance Engine 
(TRACE)) to require members to report to TRACE transactions in U.S. 
dollar-denominated foreign sovereign debt securities. Under the 
proposal, trades in U.S. dollar-denominated foreign sovereign debt 
securities would be subject to same-day reporting and would not be 
disseminated publicly.
Background
    Currently, almost all U.S. dollar-denominated debt securities 
traded in

[[Page 29981]]

the U.S. are TRACE-Eligible Securities \3\ and therefore are subject to 
TRACE reporting requirements. This includes the U.S. dollar-denominated 
debt of foreign private issuers. However, trades in the U.S. dollar-
denominated debt of foreign sovereign issuers are not subject currently 
to TRACE reporting.
---------------------------------------------------------------------------

    \3\ Rule 6710 (Definitions) generally defines a ``TRACE-Eligible 
Security'' as a debt security that is U.S. dollar-denominated and 
is: (1) Issued by a U.S. or foreign private issuer, and, if a 
``restricted security'' as defined in Securities Act Rule 144(a)(3), 
sold pursuant to Securities Act Rule 144A; (2) issued or guaranteed 
by an ``Agency,'' as defined in Rule 6710(k) or a ``Government-
Sponsored Enterprise,'' as defined in Rule 6710(n); or (3) a ``U.S. 
Treasury Security,'' as defined in Rule 6710(p). The term ``TRACE-
Eligible Security'' does not include a debt security that is issued 
by a foreign sovereign or a ``Money Market Instrument,'' as defined 
in Rule 6710(o).
---------------------------------------------------------------------------

    The proposed rule change would enhance FINRA's regulatory audit 
trail and provide FINRA with important transaction information on a 
growing segment of the market. As discussed further below, the U.S. 
dollar-denominated foreign sovereign debt market is a large market 
segment. FINRA believes the proposed rule change would advance FINRA's 
oversight of the fixed income markets without imposing significant 
burdens and costs on members, as FINRA understands that U.S. dollar-
denominated foreign sovereign debt securities generally trade at firms 
that already have TRACE reporting workflows in place.
Proposed Amendments
    FINRA is proposing changes to the TRACE reporting rules to require 
that members report to TRACE transactions in U.S. dollar-denominated 
foreign sovereign debt securities for regulatory purposes. First, FINRA 
is proposing to amend paragraph (a) of Rule 6710 (Definitions) \4\ to 
include the term ``Foreign Sovereign Debt Security'' in the definition 
of TRACE-Eligible Security. FINRA also would define ``Foreign Sovereign 
Debt Security'' \5\ in paragraph (kk) of Rule 6710 as a debt security 
issued or guaranteed by the government of a foreign country, any 
political subdivision of a foreign country (e.g., state, provincial, or 
municipal governments), or a supranational entity.\6\
---------------------------------------------------------------------------

    \4\ The text of Rule 6710 incorporates the changes adopted in 
SR-FINRA-2019-008, which is yet to be implemented.
    \5\ FINRA notes that its proposed definition of ``Foreign 
Sovereign Debt Security'' relies on existing FINRA and SEC guidance. 
Specifically, FINRA published guidance in 2004 to clarify the 
distinction between foreign private and foreign sovereign issuers. 
As noted in that guidance, the term ``foreign private issuer'' means 
a foreign issuer that is not eligible to use the SEC's Schedule B 
for registering a debt offering in the United States. See Notice to 
Members 04-90 (December 2004).
    \6\ ``Supranational entity'' would include multi-national 
organizations such as the International Bank for Reconstruction & 
Development (World Bank), the Inter-American Development Bank, the 
Asian Development Bank, the African Development Bank, the 
International Finance Corporation, and the European Investment Bank.
---------------------------------------------------------------------------

    With this proposal, FINRA would expand TRACE reporting requirements 
to include U.S. dollar-denominated debt of Schedule B-eligible issuers 
\7\--i.e., U.S. dollar-denominated debt of foreign sovereign issuers 
that are not foreign private issuers. Accordingly, members no longer 
would be required to distinguish between foreign sovereign debt and 
foreign private issuer debt for purposes of TRACE reporting. In 
addition, we note that members' reporting obligations for transactions 
with a foreign component would continue to follow existing guidance.\8\ 
FINRA also is proposing to amend Rule 6730 (Transaction Reporting) to 
adopt a same-day reporting requirement for trades in U.S. dollar-
denominated foreign sovereign debt. Under the proposed amendments, 
reportable transactions in foreign sovereign debt executed on a 
business day at or after 12:00:00 a.m. Eastern Time (ET) through 
5:00:00 p.m. ET must be reported the same day during TRACE System 
Hours.\9\ Transactions executed on a business day after 5:00:00 p.m. ET 
but before the TRACE system closes must be reported no later than the 
next business day (T+1) during TRACE System Hours, and, if reported on 
T+1, designated ``as/of'' and include the date of execution. 
Transactions executed on a business day at or after 6:30:00 p.m. ET 
through 11:59:59 p.m. ET--or on a Saturday, a Sunday, a federal or 
religious holiday or other day on which the TRACE system is not open at 
any time during that day--must be reported the next business day (T+1) 
during TRACE System Hours, designated ``as/of,'' and include the date 
of execution.
---------------------------------------------------------------------------

    \7\ Schedule B is used to register debt for issuance in the 
United States by foreign governments or political subdivisions of 
foreign governments, and in some cases supranational organizations, 
issuers of government-guaranteed securities, and certain other 
issuers closely aligned and identified with a sovereign. See 15 
U.S.C. 77aa.
    \8\ See e.g., TRACE Frequently Asked Questions #3.1.65 
(providing that a member is not required to report a debt security 
to TRACE that is sold pursuant to Regulation S in an off-shore 
transaction; however, if a debt security originally sold in a 
Regulation S transaction is subsequently purchased or sold as part 
of a U.S. transaction, the transactions following the Regulation S 
transaction must be reported to TRACE).
    \9\ See Rule 6710(t). ``TRACE System Hours'' means the hours the 
TRACE system is open, which are 8:00:00 a.m. Eastern Time through 
6:29:59 p.m. Eastern Time on a business day, unless otherwise 
announced by FINRA.
---------------------------------------------------------------------------

    FINRA believes the same-day reporting requirement as opposed to a 
shorter reporting timeframe is appropriate because trades in U.S. 
dollar-denominated foreign sovereign debt securities would be reported 
for regulatory purposes only. To reflect this, FINRA is further 
proposing to amend Rule 6750 (Dissemination of Transaction Information) 
to specify that FINRA will not disseminate information on transactions 
in foreign sovereign debt securities at this time.\10\
---------------------------------------------------------------------------

    \10\ FINRA notes that, if the proposed rule change is adopted, 
FINRA will take a measured approach to potential dissemination, as 
it has taken historically with other TRACE-Eligible Securities and 
would first analyze the regulatory data to determine the appropriate 
contours of a potential dissemination framework.
---------------------------------------------------------------------------

    FINRA notes that, under the proposal, members would be required to 
report specific items of transaction information in line with existing 
requirements for TRACE-Eligible Securities.\11\ Among other things, 
trade reports would be required to include: The CUSIP or CINS number, 
or FINRA-assigned TRACE symbol; \12\ an identifier for the contra-party 
(either MPID, ``A'' for non-member affiliate, or ``C'' for customer); 
the side of the reporting party (buy or sell); the quantity of the 
transaction i.e., face value amount of the transaction); the price of 
the transaction expressed as a percentage of face/par value; the time 
of execution; the date of execution (for ``as/of'' trades); the 
settlement date; any commission charged if the member is acting as 
agent; and any applicable trade modifiers.
---------------------------------------------------------------------------

    \11\ See Rule 6730(c).
    \12\ FINRA understands that some foreign sovereign debt 
securities may not have a CUSIP or CINS number but may have been 
assigned another type of identifier (e.g., an ISIN). To facilitate 
trade reporting of U.S. dollar-denominated foreign sovereign debt, 
where a CUSIP or CINS is not available, FINRA intends to permit 
members to report using a FINRA-assigned symbol that corresponds to 
the security's other identifier(s) (e.g., the FINRA-assigned symbol 
would be associated with the ISIN on the Security Master List). 
FINRA notes that Rule 6730(a)(7) will continue to apply. Therefore, 
members remain obligated to make a good faith determination as to 
whether they have engaged in a reportable transaction in a TRACE-
Eligible Security and, if the TRACE-Eligible Security is not entered 
in the TRACE system, the member must promptly notify and provide 
FINRA Operations the information required under Rule 6760(b) prior 
to reporting the transaction.
---------------------------------------------------------------------------

    FINRA also notes that, if U.S. dollar-denominated foreign sovereign 
debt securities become subject to TRACE reporting requirements, they 
would become subject to applicable transaction reporting fees. 
Specifically, U.S. dollar-denominated foreign sovereign debt securities 
would be subject to trade reporting fees pursuant to paragraph

[[Page 29982]]

(b)(1) of Rule 7730 (Trade Reporting and Compliance Engine 
(TRACE)).\13\ Similarly, U.S. dollar-denominated foreign sovereign debt 
securities would become subject to FINRA's Trading Activity Fee at the 
rate applicable to bonds, as set out in Section 1 of Schedule A to the 
FINRA By-Laws.
---------------------------------------------------------------------------

    \13\ See FINRA Rule 7730(b)(1). Rule 7730(b)(1) states that, 
except for certain securitized products, a member ``shall be charged 
a trade reporting fee based upon a sliding scale ranging from $0.475 
to $2.375 per transaction based on the size of the reported 
transaction.''
---------------------------------------------------------------------------

    If the Commission approves the filing, FINRA will announce the 
effective date of the proposed rule change in a Regulatory Notice. The 
effective date will be no later than 365 days following publication of 
the Regulatory Notice announcing Commission approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\14\ 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, Section 15A(b)(5) of the Act,\15\ 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, and Section 15A(b)(9) of the Act,\16\ which 
requires that FINRA rules not impose any burden on competition that is 
not necessary or appropriate.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78o-3(b)(6).
    \15\ 15 U.S.C. 78o-3(b)(5).
    \16\ 15 U.S.C. 78o-3(b)(9).
---------------------------------------------------------------------------

    The proposed rule change is designed to provide FINRA with 
important transaction information on a growing segment of the debt 
market, consistent with Section 15A(b)(6). The proposal would do so by 
requiring members to report transactions in U.S. dollar-denominated 
foreign sovereign debt securities for regulatory purposes. Issuance 
activity in U.S. dollar-denominated foreign sovereign debt securities 
has accelerated in recent years, and FINRA believes that enhancing the 
audit trail with information on this growing market segment will 
support better informed surveillance and regulation.
    Pursuant to the proposal, members would become subject to trade 
reporting fees under Rule 7730 and FINRA's Trading Activity Fee in 
connection with transactions in U.S. dollar-denominated foreign 
sovereign debt. The proposal would apply these fees, at established 
rates, equally to members reporting transactions in U.S. dollar-
denominated sovereign debt securities. The proposed transaction 
reporting fees are consistent with FINRA's existing framework under 
Rule 7730 and FINRA's Trading Activity fee for similar types of 
transactions required to be reported to TRACE. Specifically, as noted 
above, transactions in U.S. dollar-denominated foreign sovereign debt 
securities would be charged a trade reporting fee as set forth in Rule 
7730(b)(1), and U.S. dollar-denominated foreign sovereign debt 
securities would become subject to the Trading Activity Fee at the rate 
applicable to bonds set out in Section 1 of Schedule A to the FINRA By-
Laws. Thus, FINRA believes that the proposed rule change is consistent 
with Section 15A(b)(5).
    In addition, FINRA believes that U.S. dollar-denominated foreign 
sovereign debt securities generally trade at firms that already have 
TRACE reporting workflows in place. Accordingly, FINRA believes that 
the proposed rule change also is consistent with Section 15A(b)(9), 
because it would allow FINRA to advance its regulatory goal of 
obtaining important transaction information on these securities through 
incremental measures that FINRA does not believe would impose 
significant burdens and costs on members.

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.
Economic Impact Assessment
    FINRA has undertaken an economic impact assessment, as set forth 
below, to analyze the potential economic impacts, including anticipated 
costs, benefits, and distributional and competitive effects, relative 
to the current baseline, and the alternatives FINRA considered in 
assessing how to best meet its regulatory objectives.
Regulatory Objective
    FINRA is proposing that members be required to report transactions 
in U.S. dollar-denominated foreign sovereign debt securities to TRACE 
on a same-day basis, so that FINRA may better supervise the market. 
These foreign sovereign debt security transactions would not be 
disseminated publicly.
Economic Baseline
    Members are not currently required to report transactions in U.S. 
dollar-denominated foreign sovereign debt securities to TRACE. 
Therefore, there is no current TRACE data or reasonably complete 
alternative source with which to estimate the amount of trading volume 
that will become subject to reporting under the proposal. This analysis 
is therefore informed by available data on the issuance and amount 
outstanding of U.S. dollar-denominated foreign sovereign debt obtained 
from other sources.\17\
---------------------------------------------------------------------------

    \17\ Data regarding U.S. dollar-denominated foreign sovereign 
and supranational debt was retrieved from Bloomberg on 3/16/2022 
covering the period from January 1, 2012 through December 31, 2021.
---------------------------------------------------------------------------

    As of December 31, 2021, the total amount outstanding of marketable 
U.S. dollar-denominated foreign sovereign debt was approximately $2.0 
trillion across 2,400 securities issued by 163 foreign sovereign 
governments. This compares to approximately $22.6 trillion, $1.4 
trillion, and $10.1 trillion, respectively, in marketable U.S. Treasury 
Securities, Agency Debt Securities, and U.S. corporate debt.\18\
---------------------------------------------------------------------------

    \18\ These estimates are derived from data sourced from 
Bloomberg. The $10.1 trillion in U.S. corporate debt does not 
include debt securities defined as ``Money Market Instruments'' in 
Rule 6710(o); these money market instruments are debt securities 
that, at issuance, have a maturity of one calendar year or less.
---------------------------------------------------------------------------

    In 2021, U.S. and foreign sovereign governments issued in aggregate 
approximately $6.1 trillion of marketable U.S. dollar-denominated debt. 
Foreign sovereign governments issued $259 billion of it, representing 
approximately 4.3% of the total amount, and the U.S. Government (U.S. 
Treasury Securities and Agency Debt Securities) issued the remaining 
amount, $5.83 trillion.\19\ By comparison, foreign and domestic private 
issuers issued a total of $1.96 trillion in U.S. dollar-denominated 
corporate debt in 2021.
---------------------------------------------------------------------------

    \19\ The estimates for U.S. Government (U.S. Treasury Securities 
and Agency Debt) issuance amounts are derived from data sourced from 
Securities Industry and Financial Markets Association (SIFMA). All 
other estimates and figures in the Economic Impact Assessment are 
derived from data sourced from Bloomberg.
---------------------------------------------------------------------------

    The number of U.S. dollar-denominated foreign sovereign debt 
issuances has increased from 337 unique securities in 2012 to 470 in 
2021. As shown in Figure 1, the top five non-U.S. government issuers of 
marketable U.S. dollar-denominated debt from January 1, 2017 through 
December 31, 2021 (measured by par value issued) are: Argentina, Saudi 
Arabia, the UAE, Egypt, and Austria. Austria has increased its issuance 
of sovereign U.S. dollar-denominated debt by more than six times 
between 2015 and 2020, as measured by the number of unique securities 
(increasing from 22

[[Page 29983]]

to 134). Figure 2 illustrates the change in the issued amount of U.S. 
dollar-denominated foreign sovereign debt from 2012 to 2021.
BILLING CODE 8011-01-P
[GRAPHIC] [TIFF OMITTED] TN17MY22.000

[GRAPHIC] [TIFF OMITTED] TN17MY22.001

    At the end of 2021, the total amount outstanding of marketable U.S. 
dollar-denominated supranational debt was approximately $733 billion 
across approximately 3,414 securities issued by 44 supranational 
organizations. The top five largest supranational issuers of marketable 
U.S. dollar-denominated debt from January 1, 2017 to December 31, 2021 
(measured by par value issued) is about 57.0% of the total amount 
outstanding. These five entities are: International Bank for 
Reconstruction and Development (``IBRD''), European Investment Bank 
(``EIB''), Asian Development Bank (``ADB''), Inter-American Development 
Bank (``IADB''), and International Islamic Liquidity Management 
(``IILM'').
    Figure 3 shows that the number of supranational U.S. dollar-
denominated debt issuances increased from 1,065 unique securities in 
2011 to 1,346 in 2021. In 2021, out of a total of 21 supranational 
organizations, IBRD issued the largest number of U.S. dollar-
denominated supranational debt

[[Page 29984]]

offerings (41 securities). Figure 4 illustrates the increase in the 
number of U.S. dollar-denominated debt issuances by supranational 
organizations; specifically, issuances increased from $85.9 billion in 
2012 to $172.4 billion in 2021. From January 1, 2017 through December 
31, 2021, $114.02 billion was issued by the top five largest 
supranational issuers of U.S. dollar-denominated debt (measured by par 
value issued).
[GRAPHIC] [TIFF OMITTED] TN17MY22.002

[GRAPHIC] [TIFF OMITTED] TN17MY22.003

BILLING CODE 8011-01-C
    Based on discussions with broker-dealers that are active in 
multiple foreign sovereign debt markets, FINRA understands that market 
participants do not generally treat debt issued by a foreign sovereign 
in U.S. dollars as fungible with debt issued by the same foreign 
sovereign in local or other currencies; therefore, FINRA does not 
believe that members would seek to substitute U.S. dollar-denominated 
foreign sovereign debt securities with securities issued by the foreign 
sovereign in a foreign currency.
Economic Impact
    Requiring members to report transactions in U.S. dollar-denominated 
foreign sovereign debt securities to TRACE would benefit regulatory 
oversight of the fixed income markets by providing FINRA with important 
data regarding member activity in this space. In particular, the 
receipt of the transaction price, par value traded, and other 
transaction information in TRACE would create a better-informed 
surveillance program to help detect fraud, manipulation, unfair 
pricing, and other potential misconduct. Academic studies have found a 
positive empirical relationship between the strength of market 
regulation and market quality in multiple jurisdictions, including the 
United States.\20\
---------------------------------------------------------------------------

    \20\ See e.g., Douglas Cumming et al., Exchange Trading Rules 
and Stock Market Liquidity, 99 J. Fin. Econ. 651 (2011) (discussing 
the impact of trading rules on liquidity in the equity markets)); 
Howell E. Jackson & Mark J. Roe, Public and Private Enforcement of 
Securities Laws: Resource-Based Evidence, 93 J. Fin. Econ. 207 
(2009) (discussing the correlation between public enforcement of 
securities laws and several market indicators, including trading 
volume and capital formation).

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

[[Page 29985]]

    Potential concerns related to the dissemination of this transaction 
information are not relevant to this rule change because FINRA is not 
proposing that U.S. dollar-denominated foreign sovereign debt 
securities be disseminated at this time.\21\ Members engaged in (or 
that anticipate entering) this business may face some additional 
development costs to report these transactions to TRACE, but such costs 
are expected to be relatively modest because, if the members already 
have systems in place to report other types of TRACE-Eligible 
Securities, they may be able to leverage those systems in connection 
with the proposed reporting requirement. Members will incur costs from 
the fees associated with the TRACE reporting required by the proposal. 
FINRA is not able to estimate the anticipated aggregate amount that 
would be collected from members from these fees because there is no 
current TRACE data (or reasonably complete alternative source) with 
which to estimate the trading volume that will become subject to 
reporting under this proposal.
---------------------------------------------------------------------------

    \21\ See supra note 10.
---------------------------------------------------------------------------

    As discussed above, FINRA understands that market participants do 
not generally treat debt issued by a foreign sovereign in U.S. dollars 
as fungible with debt issued by the same foreign sovereign in local or 
other currencies; therefore, FINRA does not believe that firms would be 
likely to avoid the proposed reporting requirements by shifting trading 
to foreign sovereign debt denominated in another currency.
    FINRA estimates that the benefit from improved surveillance of 
member trading activity in U.S. dollar-denominated foreign sovereign 
debt securities outweighs the costs to members associated with 
complying with the proposed reporting requirement.
Alternatives Considered
    No alternatives were considered.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The proposed rule change was published for comment in Regulatory 
Notice 19-25 (July 2019). Four comments were received in response to 
the Regulatory Notice.\22\ A copy of the Regulatory Notice and copies 
of the comment letters received in response to the Regulatory Notice 
are available on FINRA's website at http://www.finra.org. Three 
commenters were generally supportive of the expansion of TRACE to cover 
U.S. dollar-denominated foreign sovereign debt \23\ and one commenter 
neither supported nor opposed the proposal,\24\ as discussed below.
---------------------------------------------------------------------------

    \22\ See Letter from Gerard O'Reilly, Co-CEO and Chief 
Investment Officer, Dimensional Fund Advisors LP, to Marcia E. 
Asquith, Office of the Corporate Secretary, FINRA, dated September 
23, 2019 (``Dimensional''); Letter from Peter Warms, Bloomberg L.P., 
to Marcia E. Asquith, Office of the Corporate Secretary, FINRA, 
dated September 24, 2019 (``Bloomberg''); Letter from Christopher 
Bok, Director, Financial Information Forum, to Marcia E. Asquith, 
Office of the Corporate Secretary, FINRA, dated September 24, 2019 
(``FIF''); and Letter from Christopher B. Killian, Managing 
Director, Securitization and Corporate Credit, SIFMA to Marcia E. 
Asquith, Office of the Corporate Secretary, FINRA, dated September 
24, 2019 (``SIFMA'').
    \23\ See Bloomberg, Dimensional, and FIF.
    \24\ See SIFMA.
---------------------------------------------------------------------------

    SIFMA and FIF requested clarification on the scope of the proposal, 
including regarding the definition of ``political subdivision.'' As 
discussed above, a political subdivision is, for example, a state, 
provincial or municipal government. FINRA notes that, as a practical 
matter, the proposal would remove the current need for members to 
distinguish between U.S. dollar-denominated foreign sovereign debt and 
U.S. dollar-denominated foreign private issuer debt, because 
transactions in both categories of debt would be subject to reporting 
under the proposal (so long as the security otherwise meets the 
definition of ``TRACE-Eligible Security''). In addition, as discussed 
above, the proposal would expand TRACE reporting to include U.S. 
dollar-denominated debt of Schedule B-eligible issuers--i.e., U.S. 
dollar-denominated debt of foreign sovereign issuers that are not 
foreign private issuers.\25\ In addition, the proposal would not alter 
FINRA's approach to the regulatory reporting framework, including for 
reporting trades in foreign private issuer debt, or reporting trades in 
debt issued pursuant to SEC Regulation S.\26\
---------------------------------------------------------------------------

    \25\ See supra notes 5 and 7.
    \26\ See supra note 8.
---------------------------------------------------------------------------

    SIFMA, FIF and Bloomberg noted that CUSIPs may not be available for 
all U.S. dollar-denominated foreign sovereign debt securities at the 
time they become TRACE-Eligible Securities and they suggested that 
FINRA permit members to report using alternative identifiers.\27\ As 
noted above, FINRA intends to provide a FINRA-assigned symbol that 
corresponds to one or more non-CUSIP identifiers (e.g., ISIN).
---------------------------------------------------------------------------

    \27\ See SIFMA, FIF, and Bloomberg.
---------------------------------------------------------------------------

    Dimensional advocated for a 15-minute reporting requirement and for 
public dissemination of transaction information on U.S. dollar-
denominated foreign sovereign debt securities.\28\ In contrast, SIFMA 
noted potential issues regarding public dissemination, including risks 
to liquidity and an incomplete data set, and believed that a same-day 
reporting requirement was appropriate because the proposal impacted new 
securities and operational processes. FINRA continues to believe that 
same-day reporting is appropriate at this time because these 
transactions will not initially be publicly disseminated. FINRA intends 
to take a similar measured approach to potential dissemination that it 
has taken historically with other TRACE-Eligible Securities and, 
therefore, would first analyze the regulatory data to determine the 
appropriate contours of a potential dissemination framework.
---------------------------------------------------------------------------

    \28\ See Dimensional.
---------------------------------------------------------------------------

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days of such 
date (i) as the Commission may designate if it finds such longer period 
to be appropriate and publishes its reasons for so finding or (ii) as 
to which the self-regulatory organization consents, the Commission 
will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 [email protected]. Please include 
File Number SR-FINRA-2022-011 on the subject line.

[[Page 29986]]

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2022-011. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-FINRA-2022-011 and should be submitted 
on or before June 7, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10508 Filed 5-16-22; 8:45 am]
BILLING CODE 8011-01-P