Document ID: SEC-2010-0633-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2010-04-29T04:00Z

[Federal Register: April 29, 2010 (Volume 75, Number 82)]
[Notices]               
[Page 22670-22671]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29ap10-132]                         

[[Page 22670]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61948; File No. SR-FINRA-2010-019]

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

April 20, 2010.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 14, 2010, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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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).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA proposes to extend by 45 days the proposed implementation 
period for the rule changes approved in SR-FINRA-2009-065.\5\
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    \5\ See Securities Exchange Act Release No. 61566 (February 22, 
2010), 75 FR 9262 (March 1, 2010) (Order Approving File No. SR-
FINRA-2009-065) (hereinafter, ``SEC Order Approving TRACE 
Expansion--Asset-Backed Securities'').
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    The proposed rule change would not make any new changes to the text 
of FINRA rules.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. FINRA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On October 1, 2009, FINRA filed SR-FINRA-2009-065, a proposed rule 
change to expand the Trade Reporting and Compliance Engine (``TRACE'') 
to designate asset-backed securities, mortgage-backed securities and 
other similar securities (collectively, ``Asset-Backed Securities'') as 
eligible for TRACE, and to establish reporting, fee and other 
requirements for such securities. In SR-FINRA-2009-065, FINRA stated 
that it would announce the effective date of the proposed rule change 
in a Regulatory Notice to be published ``no later than 60 days 
following Commission approval'' and to establish the effective date 
``no later than 270 days following publication'' of the Regulatory 
Notice announcing the Commission's approval.
    The proposed rule change was published for notice and comment.\6\ 
FINRA filed its response to comments on December 22, 2009,\7\ and 
Amendment No. 1 to SR-FINRA-2009-065 on January 19, 2010 (hereinafter, 
SR-FINRA-2009-065 and Amendment No. 1 thereto are, collectively, the 
``TRACE ABS filing'').\8\ The Commission approved the TRACE ABS filing 
on February 22, 2010.\9\
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    \6\ See Securities Exchange Act Release No. 60860 (October 21, 
2009), 74 FR 55600 (October 28, 2009) (Notice of Filing of File No. 
SR-FINRA-2009-065).
    \7\ See Letter from Sharon Zackula, Associate Vice President and 
Associate General Counsel, FINRA, to Elizabeth M. Murphy, Secretary, 
Commission, dated December 22, 2009.
    \8\ The TRACE ABS filing included amendments to: (a) Rule 6710 
to amend the defined terms, ``Asset-Backed Security'' and ``TRACE-
Eligible Security'' to include Asset-Backed Securities as TRACE-
Eligible Securities, to amend several other defined terms, and to 
add several new defined terms, most of which relate to Asset-Backed 
Securities; (b) Rule 6730 to require the reporting of Asset-Backed 
Securities transactions, to establish a six-month pilot period for 
reporting such transactions no later than T + 1 during TRACE System 
hours, and to amend certain requirements in connection with the 
reporting of commissions, factors, transaction size and settlement 
terms in Asset-Backed Securities transactions; (c) Rule 6750 to 
provide that information on a transaction in a TRACE-Eligible 
Security that is an Asset-Backed Security will not be disseminated; 
(d) Rule 6760 to amend the notification requirements; (e) Rule 7730 
to establish fees for reporting transactions in Asset-Backed 
Securities; and (f) the Rule 6700 Series and Rule 7730 to 
incorporate certain other technical, administrative and clarifying 
changes.
    \9\ See SEC Order Approving TRACE Expansion--Asset-Backed 
Securities.
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    As represented in the TRACE ABS filing, FINRA will publish a 
Regulatory Notice no later than April 23, 2010, the 60th day following 
Commission approval of the TRACE ABS filing. However, in this proposed 
rule change, FINRA proposes to extend by 45 days the period in which to 
establish the effective date of the TRACE ABS filing. Specifically, the 
effective date of the TRACE ABS filing will be no later than 315 days, 
rather than 270 days, following publication of the Regulatory Notice 
announcing Commission approval of the filing.
    FINRA recognizes that Asset-Backed Securities are complex 
instruments, and that, in preparing for the accurate reporting of 
transactions in Asset-Backed Securities, firms must make operational 
changes, including significant changes to their systems, and 
modifications to a variety of compliance and supervisory processes and 
procedures. Staffing and training also may be implicated. System 
changes are also being made by FINRA to the TRACE System and by vendors 
and other service providers. In view of the changes that must be 
implemented, FINRA believes it is appropriate to extend for up to 45 
days the date on which the TRACE ABS filing may become effective.
    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, such that FINRA can implement the proposed rule 
change immediately.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\10\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. FINRA believes that the flexibility to establish an 
effective date up to 45 days later than is currently provided by SR-
FINRA-2009-065 to implement the reporting of transactions in Asset-
Backed Securities will allow firms sufficient time to make necessary 
systems changes for the timely and accurate reporting of such 
transactions, creating a more accurate audit trail and enhancing 
FINRA's surveillance of the market in Asset-Backed Securities for the 
protection of investors and in furtherance of the public interest.
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    \10\ 15 U.S.C. 78o-3(b)(6).

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[[Page 22671]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

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

    Written comments were neither solicited nor received.

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

    The Exchange represented that the proposed rule change qualifies 
for immediate effectiveness pursuant to Section 19(b)(3)(A) of the 
Exchange Act \11\ and Rule 19b-4(f)(6) thereunder \12\ because it: (i) 
Does not significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) by its terms, does not become operative for 30 days from the 
date on which it was filed, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest.\13\ The Exchange has requested that the Commission waive the 
30-day operative delay, so that the proposed rule change may become 
operative upon filing. The Commission hereby grants the Exchange's 
request.\14\ The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest because it appears reasonably designed to allow firms 
sufficient time to make necessary systems and operational changes to 
facilitate the timely and accurate reporting of Asset-Backed Securities 
transactions as required by the TRACE ABS filing.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to submit to the Commission written notice 
of its intent to file the proposed rule change, along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. FINRA 
has satisfied this requirement.
    \14\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2010-019 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2010-019. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549, on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of the filing also will be 
available for inspection and copying at the principal office of FINRA. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-FINRA-2010-019 
and should be submitted on or before May 20, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-9873 Filed 4-28-10; 8:45 am]
BILLING CODE 8011-01-P