Document ID: SEC-2016-1818-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2016-10-12T04:00Z

[Federal Register Volume 81, Number 197 (Wednesday, October 12, 2016)]
[Notices]
[Pages 70462-70467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24575]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79050; File No. SR-FINRA-2016-037]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Modify Fees and Transaction Credits for the 
FINRA/NYSE Trade Reporting Facility

    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 September 28, 2016, 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, 
II, and III below, which Items have been prepared by FINRA. FINRA has 
designated the proposed rule change as ``establishing or changing a 
due, fee or other charge'' under Section

[[Page 70463]]

19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ 
which renders the proposal effective upon receipt of this filing by the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b--4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    FINRA is proposing to amend the FINRA Rule 7600B Series to modify 
fees and transaction credits applicable to members that use the FINRA/
NYSE Trade Reporting Facility (the ``FINRA/NYSE TRF'').
    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
Background
    The FINRA/NYSE TRF, which is operated by NYSE Market (DE), Inc., is 
one of three FINRA facilities that FINRA members can use to report 
over-the-counter (``OTC'') trades in NMS stocks.\5\ In connection with 
the establishment of the FINRA/NYSE TRF, FINRA and NYSE Market (DE), 
Inc. entered into a limited liability company agreement (the ``LLC 
Agreement''). Under the LLC Agreement, FINRA, the ``SRO Member,'' has 
sole regulatory responsibility for the FINRA/NYSE TRF. NYSE Market 
(DE), Inc., the ``Business Member,'' is primarily responsible for the 
management of the FINRA/NYSE TRF's business affairs to the extent those 
affairs are not inconsistent with the regulatory and oversight 
functions of FINRA. As such, the Business Member establishes pricing 
for use of the FINRA/NYSE TRF, and such pricing is implemented pursuant 
to FINRA rules that must be filed with the SEC and be consistent with 
the Act.\6\ In addition, 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 FINRA/NYSE TRF.\7\
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    \5\ In addition to the FINRA/NYSE TRF, members have the option 
of reporting OTC trades in NMS stocks to the FINRA Alternative 
Display Facility (the ``ADF'') or the FINRA/Nasdaq Trade Reporting 
Facility (the ``FINRA/Nasdaq TRF'').
    \6\ Because there are two FINRA Trade Reporting Facilities 
operated by different exchange Business Members competing for market 
share (the FINRA/NYSE TRF and the FINRA/Nasdaq TRF), FINRA does not 
take a position on whether the pricing for one TRF is more favorable 
or competitive than the pricing for the other TRF.
    \7\ FINRA notes that the same contractual arrangement is in 
place for the FINRA/Nasdaq TRF, with FINRA as the SRO Member and 
Nasdaq, Inc. as the Business Member. The LLC agreements for the 
FINRA/NYSE TRF and the FINRA/Nasdaq TRF were submitted as part of 
the rule filings to establish the respective TRFs and can be found 
in the FINRA Manual.
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    The FINRA/NYSE TRF commenced operation in April 2007 and since that 
time, the NYSE Market (DE), Inc., as the Business Member, has funded 
all costs associated with operating the FINRA/NYSE TRF, including all 
regulatory costs, from NYSE Market (DE), Inc. general revenues. 
According to NYSE Market (DE), Inc., the cost of operating the FINRA/
NYSE TRF has increased since 2007, in part because regulatory costs 
have increased with FINRA/NYSE TRF's higher market share, as well as 
additional functionality and development costs. Accordingly, NYSE 
Market (DE), Inc., as the Business Member, has determined to adjust the 
FINRA/NYSE TRF fees and transaction credits to provide revenue to help 
offset these increased operating costs, while allowing the FINRA/NYSE 
TRF to remain competitive. NYSE Market (DE), Inc. will continue to fund 
any costs, including applicable regulatory costs and requisite 
infrastructure costs, associated with the operations of the FINRA/NYSE 
TRF that are not covered by fees and market data revenue from NYSE 
Market (DE), Inc.'s general revenues.
    Pursuant to the FINRA Rule 7600B Series, FINRA members that are 
FINRA/NYSE TRF participants are charged fees (Rule 7620B) and may 
qualify for transaction credits (Rule 7610B) for use of the FINRA/NYSE 
TRF. In addition, affiliated members can aggregate their activity for 
purposes of fees and credits that are dependent upon the volume of 
their activity (Rule 7630B). These rules are administered by NYSE 
Market (DE), Inc., in its capacity as the Business Member and operator 
of the FINRA/NYSE TRF on behalf of FINRA,\8\ and NYSE Market (DE), Inc. 
collects all fees on behalf of the FINRA/NYSE TRF.
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    \8\ FINRA's oversight of this function performed by the Business 
Member is conducted through a recurring assessment and review of TRF 
operations by an outside independent audit firm.
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Proposed Amendments to Rule 7610B
    Pursuant to Rule 7610B (Securities Transaction Credit), FINRA 
members that execute OTC trades in securities listed on the New York 
Stock Exchange (``Tape A''), NYSE MKT and regional exchanges (``Tape 
B''), or Nasdaq (``Tape C'') and report to the FINRA/NYSE TRF may 
receive from the FINRA/NYSE TRF transaction credits based on the 
transactions attributed to them. A transaction is attributed to a 
member if the member is identified as the executing party in a trade 
report submitted to the FINRA/NYSE TRF that the FINRA/NYSE TRF submits 
to the Consolidated Tape Association (``CTA'') or the Nasdaq Securities 
Information Processor (``UTP SIP''). A FINRA member may earn credits 
from any of the three pools maintained by the FINRA/NYSE TRF, each of 
which represents the market data revenue paid by the CTA or the UTP SIP 
with respect to the FINRA/NYSE TRF for each of Tape A, Tape B, and Tape 
C transactions (``Market Data Revenue''). A FINRA member may earn 
credits from the pools according to the pro rata share of revenue 
attributable to OTC transactions reported to the FINRA/NYSE TRF by the 
member in Tape A, Tape B, and Tape C for each calendar quarter.\9\
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    \9\ To the extent that the Market Data Revenue is subject to any 
adjustment, credits provided may be adjusted accordingly.
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    NYSE Market (DE), Inc., as the Business Member, has determined to 
modify the current tiered schedule for Market Data Revenue sharing for 
the FINRA/NYSE TRF, and FINRA is proposing to amend Rule 7610B 
accordingly. Specifically, the proposed rule change would increase the 
percentage of Market Data Revenue shared with a FINRA member reporting 
trades to the FINRA/NYSE TRF based on the member's ``Market Share.'' 
\10\
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    \10\ ``Market Share'' is defined in Rule 7610B as the percentage 
calculated by dividing the total number of trades reported by a 
member to the FINRA/NYSE TRF during a given calendar quarter by the 
total number of all trades reported to the CTA or the UTP SIP, as 
applicable, during that quarter. Market Share is calculated 
separately for each tape. The calculation of Market Share is based 
only on a member's trades that are reported to the CTA or the UTP 
SIP (``tape reports'') and does not include trades that are only 
reported for regulatory and/or clearing--and not dissemination--
purposes (``non-tape reports''). The proposed rule change would not 
amend this definition.

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[[Page 70464]]

    Under the current tiered schedule, a member with a Market Share of 
0.9% or more in Tape A or Tape C, or 0.7% or more in Tape B, receives 
90% of the attributable Market Data Revenue; a member with less than 
0.9% but at least 0.5% in Tape A or Tape C, or less than 0.7% but at 
least 0.5% in Tape B, receives 75%; a member with less than 0.5% but at 
least 0.4% in Tape A, Tape B or Tape C receives 70%; a member with less 
than 0.4% but at least 0.075% in Tape A, Tape B or Tape C receives 25%; 
and a member with less than 0.075% in Tape A, Tape B or Tape C is not 
eligible for the Market Data Revenue sharing program.
    Under the proposed rule change, a member with a Market Share of 
2.0% or more in Tape A, Tape B or Tape C, would receive 100% of the 
attributable Market Data Revenue; a member with less than 2.0% but at 
least 0.5% in Tape A, Tape B or Tape C, would receive 95%; a member 
with less than 0.5% but at least 0.1% in Tape A, Tape B or Tape C would 
receive 85%; and a member with less than 0.1% in Tape A, Tape B or Tape 
C would not be eligible for the Market Data Revenue sharing program. 
For example, a member that has a Market Share of 2.5% in Tape A, 1.5% 
in Tape B, and 0.05% in Tape C would be eligible to receive 100% of the 
attributable Market Data Revenue in Tape A, 95% in Tape B, and no 
Market Data Revenue in Tape C. The below chart sets forth the proposed 
tiers.

------------------------------------------------------------------------
                                                          Percentage  of
                      Market share                          market data
                                                          revenue shared
------------------------------------------------------------------------
Greater than or equal to 2.0%...........................             100
Greater than or equal to 0.5% but less than 2.0%........              95
Greater than or equal to 0.1% but less than 0.5%........              85
Less than 0.1%..........................................               0
------------------------------------------------------------------------

    Thus, as a general matter, market participants that make the most 
use of the FINRA/NYSE TRF will be eligible for the highest level of 
revenue sharing with others receiving progressively lower percentages. 
FINRA notes that although the Market Share and Market Data Revenue 
percentages for each tape are identical under the proposed rule change, 
they are independent of each other and, as such, may subsequently be 
adjusted individually.\11\
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    \11\ Any change to one or more of these percentages would be 
subject to a proposed rule change by FINRA.
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    NYSE Market (DE) Inc. has indicated that for competitive reasons 
and in light of the cost of operating the FINRA/NYSE TRF, it has 
determined to make the above adjustments to the Market Data Revenue 
sharing program for the FINRA/NYSE TRF. NYSE Market (DE) Inc. believes 
that, particularly at the adjusted market share levels, the percentage 
of revenue shared is more favorable to reporting firms as compared to 
other revenue share programs.\12\
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    \12\ See, e.g., Rule 7610A.
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Proposed Amendments to Rule 7620B
    Pursuant to Rule 7620B (Trade Reporting Facility Reporting Fees), 
FINRA members that are FINRA/NYSE TRF subscribers are currently charged 
a monthly fee for use of the FINRA/NYSE TRF. Members are charged either 
$500 or $1,000 per month beginning in the month of the member's first 
trade report. Specifically, members reporting an average of 100 trades 
or less per day during the calendar month are charged $500, and members 
reporting an average of more than 100 trades per day during the 
calendar month are charged $1,000. For purposes of meeting the 100 
trade threshold, both tape and non-tape reports are included; however, 
reversals and other modifications to previously reported trades are not 
included. A member's fee could vary from month to month, depending on 
the number of trade reports the member submits. In addition, once a 
member's fee begins, the member is charged a fee each month unless and 
until the member cancels its access to the FINRA/NYSE TRF, even if the 
member reports no trades to the FINRA/NYSE TRF in a given month.\13\ 
The fee is charged at the end of the calendar month; a member's trades 
are counted and the appropriate fee is assessed on the member's invoice 
after the month closes.
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    \13\ In that instance, the member is charged the lower fee of 
$500.
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    NYSE Market (DE), Inc., as the Business Member, has determined to 
replace the current fee structure with a tiered monthly fee structure 
based on a member's OTC trading activity, and FINRA is proposing to 
amend Rule 7620B accordingly. Specifically, the proposed rule change 
would base the tiered fee calculation on a member's ``ATS & Non-ATS OTC 
Market Share,'' which would be defined as the percentage calculated by 
dividing the total number of ATS and non-ATS shares \14\ reported by 
the member to FINRA and published by FINRA pursuant to Rule 6110 \15\ 
during a given calendar quarter \16\ by the total number of all shares 
reported to the CTA and the UTP SIP, as applicable, during that period. 
``ATS & Non-ATS OTC Market Share'' will be calculated in aggregate 
across all tapes.
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    \14\ ``ATS shares'' are shares of NMS stocks executed within a 
member's alternative trading system (``ATS'') and ``non-ATS shares'' 
are shares of NMS stocks executed OTC by a member outside of an ATS.
    \15\ Pursuant to Rule 6110, FINRA publishes on its public Web 
site the number of shares and trades by security executed OTC 
(``Trading Information'') by each ATS and member firm with a trade 
reporting obligation under FINRA rules. Trading Information 
published on FINRA's Web site is derived directly from OTC trades 
reported by the member firm to FINRA's equity trade reporting 
facilities.
    \16\ FINRA notes that a firm's ATS and non-ATS volume 
information, which is published on a delayed basis, is derived 
directly from tape reports of OTC trades submitted to FINRA's equity 
trade reporting facilities. A firm's published trading volume 
information does not include trades for which the firm is the 
reported contra party or trades that are reported solely for 
clearing or regulatory purposes (i.e., non-tape reports).
     For firms executing fewer than on average 200 non-ATS 
transactions per day during the reporting period, FINRA combines and 
publishes such ``de minimis'' volume on an aggregated non-attributed 
basis. Such volume would be unavailable to include in the numerator 
of the ``ATS & Non-ATS OTC Market Share'' calculation.
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    Non-ATS OTC data was first made available on FINRA's Web site using 
data as of April 4, 2016. As such, the ``ATS & Non-ATS OTC Market 
Share'' calculation for the second quarter of 2016 would begin as of 
April 4, 2016 for non-ATS data. Once available over a longer period, 
the ``ATS & Non-ATS OTC Market Share'' calculation will be based on the 
data available for the prior full calendar quarter and will determine 
the monthly fees in subsequent periods. For example, if the third 
quarter ATS and non-ATS data is available by the first business day of 
the month (e.g., November 1), then the calculation will be applied to 
the prior billing month (e.g., October). If the data is available after 
the first business day (e.g., November 2 or later), then the 
calculation will be applied to the next billing month (e.g., November). 
To the extent the ``ATS & Non-ATS OTC Market Share'' calculation is 
subject to any adjustment, fees charged may be adjusted accordingly.
    Under the proposed rule change, a member with an ``ATS & Non-ATS 
OTC Market Share'' of 2.0% or more in aggregate shares across all tapes 
would be charged a monthly fee of $30,000; a member with less than 2.0% 
but at least 0.5% in aggregate across all tapes would be charged a 
monthly fee of $15,000; a member with less than 0.5% but at least 0.1% 
in aggregate would be charged a monthly fee of $5,000; and a member 
with less than 0.1% in aggregate across all tapes would be charged a 
monthly

[[Page 70465]]

fee of $2,000. The below chart sets forth the proposed fee tiers.

------------------------------------------------------------------------
                                                              Monthly
             ATS & non-ATS OTC market share               subscriber fee
------------------------------------------------------------------------
Greater than or equal to 2.0%...........................         $30,000
Greater than or equal to 0.5% but less than 2.00%.......          15,000
Greater than or equal to 0.1% but less than 0.5%........           5,000
Less than 0.1%..........................................           2,000
------------------------------------------------------------------------

    The monthly fee will be charged at the end of the calendar month 
and applies to any member that has submitted a participant application 
agreement to the FINRA/NYSE TRF pursuant to Rule 7220B. Where a new 
member submits the participant application agreement and reports no 
shares traded in a given month, the member will not be charged the 
monthly fee for the first two calendar months in order to provide time 
to connect to the FINRA/NYSE TRF.\17\
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    \17\ After the first two calendar months, a member will be 
charged regardless of connectivity.
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    The monthly subscriber fee will continue to include full access to 
the FINRA/NYSE TRF and supporting functionality, e.g., trade 
submission, reversal and cancellation, and unlimited use of the Client 
Management Tool. In addition to submitting, correcting, breaking, and 
reversing trades, the Client Management Tool currently allows users to 
View/Query/Export trade reports, potential trade throughs and rejected 
trade submissions. Additionally, members can use the FINRA/NYSE TRF as 
a backup system and reserve bandwidth if there is a failure at another 
FINRA facility that supports the reporting of OTC trades in NMS 
stocks.\18\
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    \18\ As set forth in Trade Reporting Notice 1/20/16 (OTC Equity 
Trading and Reporting in the Event of Systems Issues), a firm that 
routinely reports its OTC trades in NMS stocks to only one FINRA 
trade reporting facility must establish and maintain connectivity 
and report to a second FINRA trade reporting facility, if the firm 
intends to continue to support OTC trading as an executing broker 
while its primary facility is experiencing a widespread systems 
issue.
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    As noted above, members have the option of reporting OTC trades in 
NMS stocks to one of three FINRA facilities. NYSE Market (DE) Inc., as 
the Business Member, has determined that the FINRA/NYSE TRF would be 
more competitive with these other facilities if users are charged a 
flat fee for access to the complete range of functionality offered by 
the FINRA/NYSE TRF rather than a separate fee for each activity (e.g., 
a per trade or per side fee for reporting a trade, a separate per trade 
fee for canceling a trade, a per terminal fee, etc.).\19\ Rather than 
charging the same fee to all FINRA/NYSE TRF participants irrespective 
of trading activity, the fees are designed such that more active firms 
in the overall market pay more for access to the FINRA/NYSE TRF, while 
less active firms in the overall market pay less.
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    \19\ See, e.g., Rules 7510(a) and 7520 (trade reporting fees and 
connectivity charges for the ADF) and Rule 7620A (trade reporting 
fees for the FINRA/Nasdaq TRF).
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Proposed Amendments to Rule 7630B
    Rule 7630B (Aggregation of Activity of Affiliated Members) provides 
for the aggregation of affiliated member activity for purposes of the 
fee and credit schedule applicable to the FINRA/NYSE TRF. NYSE Market 
(DE), Inc., as the Business Member, has determined to replace the 
current approval process and automatically aggregate affiliated member 
activity for purposes of determining Market Share and Market Data 
Revenue shared under Rule 7610B, as well as for determining a member's 
``ATS & Non-ATS OTC Market Share'' under Rule 7620B. FINRA is proposing 
to amend Rule 7630B accordingly. Under the proposed rule change, firms 
will be required to submit a form to the FINRA/NYSE TRF disclosing 
their affiliates and update the form if there are changes in affiliate 
status.\20\
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    \20\ The affiliate disclosure form that firms will be required 
to submit under the proposed rule change is attached to this filing 
as Exhibit 3.
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    NYSE Market (DE) Inc. believes that automatically aggregating 
affiliated member activity will guarantee that firms qualify for the 
highest securities transaction credit based on their overall use of the 
FINRA/NYSE TRF. Additionally, automatically aggregating affiliated 
member activity will guarantee that firms are charged the appropriate 
monthly subscription fee based on their overall OTC activity reported 
on the FINRA Web site, which will ensure more active firms pay more and 
less active firms pay less.
    FINRA has filed the proposed rule change for immediate 
effectiveness and the operative date will be October 1, 2016.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(5) of the Act,\21\ 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. All similarly situated members are subject to the same fee 
structure and access to the FINRA/NYSE TRF is offered on fair and non-
discriminatory terms.
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    \21\ 15 U.S.C. 78o-3(b)(5).
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    FINRA believes that the proposed transaction credit schedule under 
Rule 7610B provides for the equitable allocation of reasonable fees in 
that it bases the percentage of revenue shared on members' respective 
contributions to the revenues of the FINRA/NYSE TRF, i.e., market 
participants that make the most use of the FINRA/NYSE TRF will be 
eligible for the highest level of revenue sharing with others receiving 
progressively lower percentages. In addition, FINRA believes that the 
proposed fee schedule under Rule 7620B provides for the equitable 
allocation of reasonable fees in that FINRA members that are 
potentially higher volume users will pay more for access to the FINRA/
NYSE TRF, while potentially lower volume users will pay less. While 
firms with larger volume will pay higher fixed costs, they also will 
potentially benefit from higher revenue sharing percentages. NYSE 
Market (DE) Inc., as the Business Member, has indicated that the 
proposed fee and credit structure will help offset the increased cost 
of operating the FINRA/NYSE TRF, and as such, FINRA believes that the 
proposed rule change provides for the equitable allocation of 
reasonable fees.\22\
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    \22\ NYSE Market (DE) Inc. has indicated that any costs, 
including regulatory and infrastructure costs, associated with the 
operation of the FINRA/NYSE TRF that are not covered by market data 
revenue and trade reporting fees will continue to be funded by NYSE 
Market (DE) Inc. general revenues.
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    FINRA further believes that the proposed fee and credit structure 
provides for the equitable allocation of reasonable fees in that it 
will apply only to members that choose to subscribe to the FINRA/NYSE 
TRF. Access to the FINRA/NYSE TRF is offered on fair and non-
discriminatory terms, and FINRA members will continue to have the 
option of using another FINRA facility for purposes of reporting OTC 
trades in NMS stocks if they determine that the fees and credits of 
another facility are more favorable.
    Finally, FINRA believes that the proposed rule change to 
automatically aggregate affiliated firm activity would provide a more 
streamlined and efficient process for aggregating affiliate activity 
than the current process, which requires the FINRA/NYSE TRF to 
affirmatively approve a member's request for aggregation.

[[Page 70466]]

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
    NYSE Market (DE), Inc. has indicated that the cost of operating the 
FINRA/NYSE TRF has increased substantially since 2007, due to rising 
regulatory costs, the need for additional functionality and the 
attendant development costs. Therefore, NYSE Market (DE), Inc., as the 
Business Member, has determined to adjust the FINRA/NYSE TRF fees and 
market data revenue paid to reporting firms as transaction credits.
    The proposed rule change to modify fees and transaction credits 
applicable to members that use the FINRA/NYSE TRF increases access fees 
to most reporters and provides for greater revenue sharing, depending 
on the factors described above. As a whole, the proposed rule change 
may provide net benefits or impose net costs for member firms to the 
extent that member firms maintain connectivity and report trades to the 
FINRA/NYSE TRF.
    In the first quarter of 2016, there were 20 firms that subscribed 
to and/or reported trades to the FINRA/NYSE TRF, of which 12 were in 
the $500 per month schedule and 8 were in the $1,000 per month 
schedule. The average fee incurred during the period was estimated to 
be approximately $1,950 per firm across the 20 firms. Under the current 
percentages of market data revenue shared, six firms received 
transaction credits, on average $235,061 per firm in the first quarter 
of 2016.
    Under the proposed fee structure, the average subscriber fee that 
would have been incurred during the quarter would increase to 
approximately $24,900 per firm (and approximately $6,000 for smaller 
firms), assuming that the same 20 firms maintain their subscription and 
report the same number of trades to the FINRA/NYSE TRF. In the case of 
the six firms that were eligible for transaction credits, market data 
revenue shared would also have been higher, due to the proposed 
increase in the percentage of revenue shared, with an average increase 
of approximately $40,000 per firm in the first quarter of 2016. Had the 
proposed fee and revenue share structure been in place, two firms would 
see a net decrease in the cost of reporting to the TRF, with an average 
decrease of $35,157. The remaining 18 firms would have experienced an 
increase averaging $12,353 per quarter.\23\ However, NYSE Market (DE) 
Inc., as the Business Member, believes that at the adjusted market 
share levels, the percentage of revenue shared represents a more 
favorable program to reporting firms as compared to other revenue share 
programs, and thus anticipate an increase in reporting through the 
FINRA/NYSE TRF. By way of example, one firm, with 0.60% reported share 
in the first quarter, received 75% revenue share or $281,434.45. Under 
the proposed structure, the revenue share would increase to 95% or 
$356,483.64. Additionally, the firm could benefit from more cost 
savings by reporting additional volume that, in turn, would receive 
higher revenue sharing than other programs and/or push the firm into a 
higher revenue sharing tier.
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    \23\ The reporting fee and transaction credit estimates are 
highly sensitive to the assumptions that the same firms would be 
reporting the same level of activity to the FINRA/NYSE TRF. In case 
there is a change in the composition of the reporting firms and/or 
the level of reporting activity in response to the proposed changes 
or other exogenous events, the estimates can vary significantly.
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    Firms may potentially alter their trading activity in response to 
the proposed rule change. Specifically, those firms that would incur 
higher fees may refrain from reporting to the FINRA/NYSE TRF and may 
choose to report to the ADF and/or FINRA/Nasdaq TRF. Alternatively, 
such firms may continue reporting or new firms may start reporting to 
the FINRA/NYSE TRF if they find that the proposed net cost of reporting 
and other functionalities provided represent the best value to their 
business. The net effect on any individual member firm of the proposed 
increase in reporting fees and amount of revenue shared will depend on 
the firm's OTC market share and reporting to the FINRA/NYSE TRF.

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

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \24\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\25\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act. If 
the Commission takes such action, the Commission shall institute 
proceedings to determine whether the proposed rule should be approved 
or disapproved.
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    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2016-037 on the subject line.

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-2016-037. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of 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

[[Page 70467]]

should refer to File Number SR-FINRA-2016-037, and should be submitted 
on or before November 2, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).

    Dated: October 5, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016-24575 Filed 10-11-16; 8:45 am]
 BILLING CODE 8011-01-P