Document ID: SEC-2011-1907-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2011-12-08T05:00Z

[Federal Register Volume 76, Number 236 (Thursday, December 8, 2011)]
[Notices]
[Pages 76777-76781]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31524]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65877; File No. SR-FINRA-2011-069]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating To 
Post-Trade Transparency for Agency Pass-Through Mortgage-Backed 
Securities Traded TBA

December 2, 2011.
    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 November 22, 2011, the Financial Industry Regulatory 
Authority, Inc. (``FINRA'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 6730 to reduce the period to 
report TRACE-Eligible Asset-Backed Securities that are Agency Pass-
Through Mortgage-Backed Securities traded to be announced (``TBA'') 
(``TBA transactions'') in two stages; FINRA Rule 6750, to provide for 
the dissemination of TBA transactions; FINRA Rule 7730, to establish 
fees for real-time TBA transaction data and historical TBA transaction 
data; and FINRA Rule 6730 and FINRA Rule 7730, to delete references to 
a pilot program that is no longer in effect and to incorporate other 
minor administrative, technical or clarifying changes. FINRA also 
proposes to establish a dissemination protocol providing that, for a 
TBA transaction in excess of $50 million, the size (volume) of the 
transaction would be displayed in disseminated TRACE data as $50 
million plus.
    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.

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 proposes amendments to the Rule 6700 Series (the Trade 
Reporting and Compliance Engine (``TRACE'') rules) to provide greater 
transparency in transactions in Asset-Backed Securities that are TBA 
transactions.\3\ First, FINRA proposes to amend Rule 6730 to reduce the 
reporting period for TBA transactions in two phases. Second, FINRA 
proposes to amend Rule 6750 to provide for the dissemination of 
information on TBA transactions in real-time (i.e., immediately upon 
FINRA's receipt of the transaction report). Third, in Rule 7730, FINRA 
proposes to establish fees: (i) For a data set of real-time TRACE 
disseminated TBA transaction data at the same rates currently in effect 
for similar real-time TRACE disseminated data sets, and (ii) for a data 
set of historic TRACE TBA transaction data at the same rates currently 
in effect for similar Historic TRACE Data sets.\4\ FINRA also proposes 
to delete references to a pilot program that is no longer in effect and 
make other minor technical, administrative or clarifying amendments to 
Rule 6730 and Rule 7730. Finally, FINRA proposes to establish a limit 
or ``cap'' of $50 million for disseminated TBA transactions as part of 
FINRA's dissemination policies and protocols, so that the actual size 
of a TBA transaction in excess of $50 million would be displayed as 
``$50MM+'' in disseminated TRACE data.
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    \3\ A TBA transaction is a transaction in a specific type of 
Asset-Backed Security, an Agency Pass-Through Mortgage-Backed 
Security as defined in Rule 6710(v), traded ``to be announced'' as 
defined in Rule 6710(u).
    \4\ The term Historic TRACE Data is defined in Rule 7730(f)(4).
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TBA Transactions

    As defined in Rule 6710(v), an Agency Pass-Through Mortgage-Backed 
Security means:

    a mortgage-backed security issued by an Agency or a Government-
Sponsored Enterprise, for which the timely payment of principal and 
interest is guaranteed by an Agency or a Government-Sponsored 
Enterprise, representing ownership interests in a pool or pools of 
residential mortgage loans with the security structured to ``pass 
through'' the principal and interest payments made by the mortgagees 
to the owners of the pool(s) on a pro rata basis.\5\
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    \5\ The terms Agency and Government-Sponsored Enterprise (GSE) 
are defined in, respectively, Rule 6710(k) and Rule 6710(n).

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    As provided in Rule 6710(u), TBA means:

    ``to be announced'' and refers to a transaction in an Agency 
Pass-Through Mortgage-Backed Security * * * where the parties agree 
that the seller will deliver to the buyer an Agency Pass-Through 
Mortgage-Backed Security of a specified face amount and coupon from 
a specified Agency or Government-Sponsored Enterprise program 
representing a pool (or pools) of mortgages (that are not specified 
by unique pool number).

    In a TBA transaction, the parties agree on a price for delivering a 
given volume of Agency Pass-Through Mortgage-Backed Securities at a 
specified future date. The distinguishing feature of a TBA transaction 
is that the actual identity of the securities to be delivered at 
settlement is not specified on the date of execution (``Trade Date''). 
Instead, the parties to the trade agree on only five general parameters 
of the securities to be delivered: issuer, mortgage type, maturity, 
coupon, and month of

[[Page 76778]]

settlement. Together, the securitization process and the TBA market 
transform what is a fundamentally heterogeneous universe of individual 
mortgages and mortgage pools (with myriad credit and prepayment 
characteristics) into groups of fungible--and therefore liquid--fixed-
income instruments.\6\
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    \6\ James Vichery and Joshua Wright, TBA Trading and Liquidity 
in the Agency MBS Market, Federal Reserve Bank of New York Staff 
Reports, no. 468 (August 2010), available at http://www.newyorkfed.org/research/staff_reports/sr468.pdf.
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Reduction of TBA Transaction Reporting Period

    Currently, Asset-Backed Securities transactions (except certain 
pre-issuance transactions in collateralized mortgage obligations 
(``CMOs'') and real estate mortgage investment conduits (``REMICs'')) 
that are executed on a business day through 5 p.m. Eastern Time must be 
reported to TRACE on the Trade Date during TRACE System Hours, as 
provided in Rule 6730(a)(3)(A)(ii).\7\ In contrast, secondary market 
transactions in all other TRACE-Eligible Securities must be reported 
within 15 minutes of the Time of Execution.\8\ With certain exceptions, 
transaction information on such TRACE-Eligible Securities is 
disseminated as soon as the transaction is reported, and the 15-minute 
reporting requirement results in meaningful price transparency for 
market participants trading such securities.\9\
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    \7\ The terms Asset-Backed Security and TRACE System Hours are 
defined in, respectively, Rule 6710(m) and Rule 6710(t). Rule 
6730(a)(3)(B)(i) addresses reporting requirements for Asset-Backed 
Securities transactions executed after 5 p.m. Eastern Time on a 
business day, and Rule 6730(a)(3)(B)(ii) addresses reporting 
requirements for Asset-Backed Securities transactions executed after 
TRACE System Hours, or on a weekend or a holiday, or other day on 
which the TRACE system is not open at any time during that day.
    In general, Asset-Backed Securities must be reported to TRACE 
under Rules 6730(a)(3)(A) and (B). Although CMOs and REMICs are 
Asset-Backed Securities, for certain pre-issuance transactions in 
CMOs and REMICs, the applicable reporting provisions are set forth 
in Rule 6730(a)(3)(C), and Rules 6730(a)(3)(A) and (B) do not apply.
    As discussed, infra, FINRA proposes to renumber Rule 
6730(a)(3)(A)(ii) as Rule 6730(a)(3)(A).
    \8\ The terms TRACE-Eligible Security and Time of Execution are 
defined in, respectively, Rule 6710(a) and Rule 6710(d).
    \9\ Currently, transaction information on all types of 
securities that are TRACE-Eligible Securities, except Asset-Backed 
Securities, is disseminated as provided in Rule 6750(a). However, 
FINRA does not disseminate information on a transaction in a TRACE-
Eligible Security that is effected pursuant to Securities Act Rule 
144A (17 CFR 239.144A) under Rule 6750(b)(1), certain transfers of 
proprietary securities positions between a member and another member 
or non-member broker-dealer where the transfer is effected in 
connection with a merger of one broker-dealer with the other broker-
dealer or a direct or indirect acquisition of one broker-dealer by 
the other broker-dealer or the other broker-dealer's parent under 
Rule 6750(b)(2), or transactions that are List or Fixed Offering 
Price Transactions or Takedown Transactions under Rule 6750(b)(3). 
The terms List or Fixed Offering Price Transaction and Takedown 
Transaction are defined in, respectively, Rule 6710(q) and Rule 
6710(r).
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    In connection with proposing that TBA transactions be disseminated 
real-time to the public and the market, FINRA proposes to reduce the 
reporting period for TBA transactions to 15 minutes to provide market 
participants meaningful and timely price information.
    However, reduction of the reporting period for TBA transactions 
would occur in two stages to permit industry participants to adjust 
policies and procedures, and to make required technological changes. 
First, for a pilot program of approximately 180 days duration, FINRA 
proposes to reduce the reporting period for TBA transactions from no 
later than the close of the TRACE system on Trade Date to no later than 
45 minutes from the Time of Execution (``TBA Transaction Pilot 
Program''), as set forth in proposed Rule 6730(a)(3)(D)(i).\10\ Minor 
exceptions to the general requirements are set forth in proposed Rule 
6730(a)(3)(D)(i)a., c. and d.\11\ Second, after approximately 180 days, 
the TBA Transaction Pilot Program would expire and the reporting period 
would be reduced from no later than 45 minutes from the Time of 
Execution to 15 minutes from the Time of Execution, as set forth in 
proposed Rule 6730(a)(3)(D)(ii). Again, the proposed rule change 
includes certain limited exceptions for TBA transactions executed 
shortly before the TRACE system closes and when the TRACE system is 
closed.\12\ FINRA would also incorporate cross references to the 
proposed reporting requirements applicable solely to TBA transactions 
in the reporting requirements applicable generally to Asset-Backed 
Securities in Rule 6730(a)(3)(A) and (B).
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    \10\ To accommodate member requests that rule changes requiring 
technology changes occur on a Friday, if possible, the TBA 
Transaction Pilot Program providing for 45-minute reporting may be 
in effect for 180 days or for a few additional days to fix the 
termination date of the TBA Transaction Pilot Program on a Friday 
(i.e., if the 180th day is not a Friday, the 45-minute requirement 
will expire on the Friday next occurring that the TRACE system is 
open).
    \11\ Minor exceptions to the general requirement to report TBA 
transactions no later than 45 minutes from the Time of Execution are 
set forth in proposed Rule 6730(a)(3)(D)(i)a., c. and d. Under 
proposed Rule 6730(a)(3)(D)(i)a., transactions executed on a 
business day at or after 12:00 a.m. Eastern Time through 7:59:59 
a.m. Eastern Time must be reported the same day no later than 45 
minutes after the TRACE system opens. Under proposed Rule 
6730(a)(3)(D)(i)c., transactions executed on a business day less 
than 45 minutes before 6:30 p.m. Eastern Time (the time the TRACE 
system closes) must be reported no later than 45 minutes after the 
TRACE system opens the next business day (T + 1), and if reported on 
T + 1, designated ``as/of'' and include the date of execution. Under 
proposed Rule 6730(a)(3)(D)(i)d., transactions executed on a 
business day at or after 6:30 p.m. Eastern Time through 11:59:59 
p.m. Eastern Time 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 (determined using Eastern Time) must be 
reported the next business day (T + 1), no later than 45 minutes 
after the TRACE system opens, designated ``as/of'' and include the 
date of execution.
    \12\ After the TBA Transaction Pilot Program expires, Rule 
6730(a)(3)(D)(ii), which incorporates by reference Rule 6730(a)(1), 
requires generally that TBA transactions be reported no later than 
15 minutes from the Time of Execution, with certain minor exceptions 
for transactions executed near the end of the TRACE System Hours, 
before and after TRACE System Hours, and on weekends and certain 
federal and religious holidays. See, e.g., Rule 6730(a)(1)(C). The 
exceptions are the same as those that apply to members reporting 
transactions in corporate bonds and Agency Debt Securities to TRACE. 
(The SEC recently approved a proposed rule change, which included 
reorganizing, without substantive amendment, the provisions set 
forth in current Rule 6730(a)(1)(C) as Rule 6730(a)(1)(A). See 
Securities Exchange Act Release No. 65791 (November 18, 2011) (Order 
Approving File No. SR-FINRA-2011-053). The rule change becomes 
effective on February 6, 2012. See Regulatory Notice 11-53 (November 
21, 2011).)
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Dissemination of TBA Transaction Data

    Although members began reporting transactions in Asset-Backed 
Securities to TRACE on May 16, 2011, FINRA currently does not 
disseminate publicly any of the Asset-Backed Securities transaction 
data reported to TRACE. Specifically, Rule 6750(b)(4) provides that 
transaction information on TRACE-Eligible Securities that are Asset-
Backed Securities will not be disseminated.
    However, when FINRA proposed the dissemination restrictions in Rule 
6750(b)(4) regarding Asset-Backed Securities, FINRA represented that it 
would study the Asset-Backed Securities data after transaction 
reporting began. In the Commission's order approving the proposed rule 
change to define Asset-Backed Securities as TRACE-Eligible Securities 
and require reporting of Asset-Backed Securities transactions, the 
Commission noted FINRA's intent to study Asset-Backed Securities 
dissemination issues prior to making any proposal to disseminate some 
or all of such information, and the Commission's historical support of 
efforts to improve post-trade transparency in the fixed income markets:

    FINRA believes that information on Asset-Backed Securities 
transactions should be collected and analyzed before making any 
decision regarding the utility of such information for transparency 
purposes or the consequences of dissemination on this market. FINRA 
has stated that, after a period of study, it would file a proposed 
rule change

[[Page 76779]]

if it determined that its study of the trading data provides a 
reasonable basis to seek dissemination of transaction information on 
Asset-Backed Securities. The Commission has historically been 
supportive of efforts to improve post-trade transparency in the 
fixed income markets and encourages FINRA to carry out that 
study.\13\

    \13\ See Securities Exchange Act Release No. 61566 (February 22, 
2010), 75 FR 9262, 9265 (March 1, 2010) (Order Approving File No. 
SR-FINRA-2009-065).
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    Since reporting began on May 16, 2011, FINRA has reviewed Asset-
Backed Securities transaction data. The reported Asset-Backed 
Securities transaction data, as well as input from market participants 
as FINRA prepared to expand TRACE to include Asset-Backed Securities, 
suggests that real-time disseminated TRACE transaction data should be 
expanded to include transaction information on TBA transactions.
    First, at the launch of Asset-Backed Securities reporting, certain 
market participants noted that TBA transactions trade in a very liquid 
market and suggested that FINRA consider transparency in such 
transactions. Second, as FINRA reviewed and continues to review the 
data reported for Asset-Backed Securities, including TBA transactions, 
and studies the total volume of TBA transactions, the concentration of 
trading in such securities, and the pricing disparity among various 
types of Agency Pass-Through Mortgage-Backed Securities traded TBA to 
understand their liquidity and fungibility, the data supports FINRA's 
proposal to disseminate TBA transactions and increase transparency in 
this market.
    The market activity reported and reviewed reveals that the TBA 
market is generally active and liquid. In addition, the degree of 
fungibility is high, with substantial trading concentrated among a 
relatively small universe of securities as identified by a unique CUSIP 
number (hereinafter, ``CUSIP'' means the specific security identified 
by the unique CUSIP number).\14\ The TBA market has an average daily 
volume of $248 billion traded in close to 8,000 average daily 
trades,\15\ and the average daily volume of all TBA transactions is 
approximately ten times the average daily volume of the entire 
corporate bond market.\16\ The correlation between various TBA CUSIPs 
is high, and the price of one TBA transaction may be derived using 
available prices for TBA transactions for a different issuer, a 
different coupon rate, maturity, or a combination thereof.\17\
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    \14\ CUSIP means Committee on Uniform Security Identification 
Procedures.
    \15\ The information is based upon FINRA's review of all TBA 
transactions reported to TRACE from May 16, 2011 through October 28, 
2011.
    \16\ The information is based upon FINRA's review of 
transactions in all TRACE-Eligible Securities, other than Agency 
Debt Securities, reported to TRACE from May 16, 2011 through October 
28, 2011.
    \17\ From a review of all TBA transactions reported to TRACE 
from May 16, 2011 through July 31, 2011, the data shows that TBA 
transactions (with different issuers, different coupon rates, and 
different maturities) were priced consistently, relative to each 
other.
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    Accordingly, FINRA proposes to disseminate TBA transaction 
information reported to TRACE in real-time.\18\ Specifically, Rule 
6750(b)(4) would be amended to provide that FINRA will not disseminate 
information on a transaction in an Asset-Backed Security, except a 
transaction in an Agency Pass-Through Mortgage-Backed Security traded 
TBA.
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    \18\ FINRA's TRACE system would disseminate transaction 
information immediately upon receipt of a transaction report.
    FINRA continues to review Asset-Backed Security transaction 
information in other sectors of the Asset-Backed Securities market 
and, at a later date, may propose that transactions in other Asset-
Backed Securities be subject to dissemination.
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Data and Fees

    FINRA proposes to amend Rule 7730 to make available the real-time 
disseminated TBA transaction data and the historic TRACE data for TBA 
transactions, and to establish the fees for such TBA transaction data. 
First, FINRA proposes to amend Rule 7730(c) to establish the Asset-
Backed Security data set (``ABS Data Set'') as the third Real-Time 
TRACE market data set. The ABS Data Set will be limited to real-time 
disseminated TBA transaction data initially. The market data fee rates 
currently in effect for similar Real-Time TRACE market data sets (i.e., 
for the Corporate Bond Data Set and the Agency Data Set) in Rule 
7730(c) would be extended to the ABS Data Set.
    Second, FINRA proposes to amend Rule 7730(d) to establish a third 
historic data product for TBA transactions (``Historic ABS Data Set'') 
similar to the data sets for corporate bonds (``Historic Corporate Bond 
Data Set'') and Agency Debt Securities (``Historic Agency Data Set'') 
listed therein. FINRA also proposes to establish fees for the Historic 
ABS Data Set at the same rates currently in effect in Rule 7730(d) for 
the Historic Corporate Bond Data Set and the Historic Agency Data Set. 
The Historic ABS Data Set would include all TBA transactions effected 
as of or after May 16, 2011, and, among other things, would include 
uncapped volume information. However, like all other Historic TRACE 
Data, TBA transaction data to be included in the Historic ABS Data Set 
would be released subject to a delay of approximately 18 months from 
the date of the transaction.\19\
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    \19\ Asset-Backed Securities transactions first began to be 
reported to TRACE on May 16, 2011; thus, the first Historic ABS Data 
Set would be available for release approximately 18 months later, in 
early 2013.
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Other Rule Changes

    FINRA proposes to delete provisions regarding an expired pilot 
program, and to incorporate other minor administrative, technical or 
clarifying changes in Rule 6730 and Rule 7730.
    FINRA proposes to delete Rule 6730(a)(3)(A)(i), the pilot program 
for Asset-Backed Securities transaction reporting that expired on 
November 18, 2011 (``Pilot Program''), Rule 6730(a)(3)(C)(i), which 
references the Pilot Program and applies to certain pre-issuance CMOs 
and REMICs, and all cross references to the two provisions in Rule 
6730(a)(3)(A), (B) and (C).\20\ In addition, FINRA would incorporate 
technical amendments to Rule 6730(a)(3)(C)(ii), and renumber Rule 
6730(a)(3)(A)(ii) and Rule 6730(a)(3)(C)(ii) as, respectively, Rule 
6730(a)(3)(A) and Rule 6730(a)(3)(C).\21\
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    \20\ Cross references to the Pilot Program would be deleted in 
Rule 6730(a)(3)(A)(ii) (proposed renumbered Rule 6730(a)(3)(A)), 
Rule 6730(a)(3)(B) and Rule 6730(a)(3)(C)(ii) (proposed renumbered 
Rule 6730(a)(3)(C)).
    \21\ In Rule 6730(a)(3)(C)(ii) (proposed renumbered Rule 
6730(a)(3)(C)), FINRA proposes to delete the words ``After the 
expiration of the Pilot Program in paragraph (a)(3)(A)(i), such 
transactions must be reported the earlier of:'' and add the 
following text in the same place: ``Transactions in Asset-Backed 
Securities that are collateralized mortgage obligations (CMOs) or 
real estate mortgage investment conduits (REMICs) that are executed 
before the issuance of the security must be reported the earlier 
of:.''
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    Also in Rule 6730, FINRA proposes to incorporate an introductory 
sentence in Rule 6730(a)(3), stating that Asset-Backed Securities 
transactions must be reported as provided in that subparagraph, and a 
caption to Rule 6730(a)(3)(C), regarding the reporting requirements 
that apply to certain pre-issuance transactions involving CMOs and 
REMICs. In addition, FINRA proposes a technical amendment to 
incorporate references in Rule 6730(a)(3)(A) and (B) to the proposed 
reporting requirements for TBA transactions in proposed Rule 
6730(a)(3)(D).
    In Rule 7730, FINRA proposes to add, in paragraphs (d)(1)(A)(ii) 
and (d)(1)(B)(ii) regarding Historic TRACE Data, a sentence to clarify 
that the 2011 Historic Agency Data Set also will include the 2010 
Historic Agency Data Set, and the 2013 Historic ABS Data Set also will 
include the 2012 Historic ABS

[[Page 76780]]

Data Set.\22\ FINRA also proposes minor technical amendments to Rule 
7730(c) and (d) to reflect that the number of Data Sets and Historic 
Data Sets will increase from two to three, and other minor technical 
amendments to Rule 7730(b)(1) and Rule 7730(c) and (d).
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    \22\ FINRA proposes not to add the clarification to the fee 
chart in Rule 7730. Also, FINRA proposes to delete a similar 
statement-- ``The 2003 Historic Corporate Bond Data Set also 
includes the 2002 Historic Corporate Bond Data Set.''--in two 
sections of the fee chart in Rule 7730 summarizing Historic TRACE 
Data fees. Also, FINRA proposes to delete ``BTDS'' in two sections 
of the fee chart in Rule 7730 summarizing market data fees.
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Dissemination Cap

    Currently, there are two TRACE dissemination protocols in place, 
referred to as dissemination caps, under which the actual size (volume) 
of a transaction over a certain par value is not displayed in 
disseminated TRACE transaction data. For TRACE-Eligible Securities that 
are rated Investment Grade, the dissemination cap is $5 million ($5MM), 
and the size of transactions in excess of $5MM is displayed as 
``$5MM+.'' For TRACE-Eligible Securities that are rated Non-Investment 
Grade, the dissemination cap is $1 million ($1MM), and the size of a 
transaction in excess of $1MM is displayed as ``$1MM+.'' \23\
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    \23\ The terms Investment Grade and Non-Investment Grade are 
defined in, respectively, Rule 6710((h) and Rule 6710(i).
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    FINRA has analyzed the distribution of TBA trades to determine an 
appropriate cap for these securities. FINRA proposes initially to set a 
dissemination cap for a TBA transaction at $50 million (a ``$50 million 
dissemination cap''). Accordingly, TBA transactions greater than $50 
million would be displayed as ``$50MM+.'' At this level, approximately 
12 percent of TBA transactions and approximately 63 percent of TBA 
transaction volume will be subject to the $50 million dissemination 
cap.\24\
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    \24\ In contrast, the existing caps for corporate Investment 
Grade bonds limit the display of actual size for approximately 1.6 
percent of trades representing 48 percent of par value traded, and, 
for Agency Debt Securities, 6 percent of trades and 74 percent of 
par value. The information is based on a review of all TBA 
transactions, and transactions in Investment Grade corporate bonds 
and Agency Debt Securities reported to TRACE from May 16, 2011 
through September 30, 2011.
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    FINRA will announce the effective date of the proposed rule change 
in a Regulatory Notice to be published no later than 60 days following 
Commission approval. The effective date will be no later than 180 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,\25\ 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, and Section 15A(b)(5) of the Act,\26\ 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 to 
increase fixed income market transparency is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and, generally to protect investors and 
the public, because transparency in TBA transactions will enhance the 
ability of investors and other market participants to identify and 
negotiate fair and competitive prices for Agency Pass-Through Mortgage-
Backed Securities; and because the dissemination of price and other TBA 
transaction information publicly will promote just and equitable 
principles of trade among participants in the more transparent market, 
and will aid in the prevention of fraudulent and manipulative acts and 
practices in the TBA market. In addition, FINRA believes that the 
proposed data fees for the ABS Data Set (TBA transaction data 
disseminated immediately upon receipt by FINRA) and the Historic ABS 
Data Set (TBA transaction data delayed for 18 months), which are 
proposed at the same rates currently in effect for similar TRACE 
corporate bond and Agency Debt Securities data products, are reasonable 
fees that are equitably allocated among members, data vendors, 
qualifying Tax-Exempt Organizations and other TRACE data consumers.
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    \25\ 15 U.S.C. 78o-3(b)(6).
    \26\ 15 U.S.C. 78o-3(b)(5).
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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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date 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 rule-comments@sec.gov. Please include 
File Number SR-FINRA-2011-069 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-2011-069. 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

[[Page 76781]]

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 available publicly. All submissions should refer to File Number 
SR-FINRA-2011-069 and should be submitted on or before December 29, 
2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31524 Filed 12-7-11; 8:45 am]
BILLING CODE 8011-01-P