Document ID: SEC-2012-0187-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2012-02-03T05:00Z

[Federal Register Volume 77, Number 23 (Friday, February 3, 2012)]
[Notices]
[Page 5613]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-2394]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66276; File No. SR-FINRA-2011-071]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Granting Approval of a Proposed Rule Change To 
Increase the Trading Activity Fee Rate for Transactions in Covered 
Equity Securities

January 30, 2012.

I. Introduction

    On December 14, 2011, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to increase FINRA's Trading Activity Fee (``TAF'') 
rate for transactions in covered equity securities. The proposed rule 
change was published for comment in the Federal Register on December 
30, 2011.\3\ The Commission received no comments on the proposal. This 
order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 66050 (December 23, 
2011), 76 FR 82334 (``Notice'')
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II. Description of the Proposal

    FINRA's proposal would amend Section 1 of Schedule A to the FINRA 
By-Laws to adjust the rate of FINRA's TAF for transactions in Covered 
Securities that are equity securities.\4\ The rules governing the TAF 
also include a list of exempt transactions.\5\ The TAF, along with the 
Personnel Assessment and the Gross Income Assessment fees, are used to 
fund FINRA's regulatory activities.\6\
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    \4\ Covered Securities are defined in Section 1 of Schedule A to 
the FINRA By-Laws as: Exchange-registered securities wherever 
executed (except debt securities that are not TRACE-Eligible 
Securities); OTC Equity Securities; security futures; TRACE-Eligible 
Securities (provided that the transaction is a Reportable TRACE 
Transaction); and all municipal securities subject to Municipal 
Securities Rulemaking Board reporting requirements.
    \5\ See FINRA By-Laws, Schedule A, Sec.  1(b)(2).
    \6\ See FINRA By-Laws, Schedule A, Sec.  1(a).
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    The current TAF rate is $0.000090 per share for each sale of a 
covered equity security, with a maximum charge of $4.50 per trade.\7\ 
In the Notice, FINRA stated that over 95% of TAF revenue is generated 
by transactions in Covered Securities that are equity securities. Thus, 
FINRA's revenue from the TAF is substantially affected by changes in 
trading volume in the equities markets. According to FINRA, since it 
previously increased the TAF in July 2011, there was a momentary spike 
in equity securities trading volume in the month of August followed by 
a general decline in volumes heading into the fourth quarter of 2011. 
FINRA states that, as a result of declining volume, it is necessary to 
adjust the TAF rate for 2012 to ``stabilize revenue flows necessary to 
support FINRA's regulatory mission.'' \8\ Under the proposal, FINRA's 
TAF rate for Covered Securities that are equity securities would 
increase by $0.000005 per share, from $0.000090 per share to $0.000095 
per share, while the per-transaction cap for Covered Securities that 
are equity securities would increase by $0.25, from $4.50 to $4.75. 
FINRA stated that increasing the TAF rate on these securities by 
$0.000005 per share is the minimum increase necessary to bring the 
revenue from the TAF to its needed levels to adequately fund FINRA's 
member regulatory obligations and that it intends the proposed increase 
to remain revenue neutral, as it did previously when it adjusted the 
TAF rate.\9\
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    \7\ The current TAF rates were approved by the Commission on 
June 2, 2011. See Securities Exchange Act Release No. 64590 (June 2, 
2011), 76 FR 33388 (June 8, 2011).
    \8\ Notice, 76 FR at 82335.
    \9\ See id.
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    FINRA stated that it intends to make the proposal effective on 
February 1, 2012.

III. Discussion and Commission's Findings

    After carefully considering the proposed rule change, the 
Commission finds that it is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities association.\10\ In particular, the Commission finds that 
the proposal is consistent with Section 15A(b)(5) of the Act,\11\ 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. The Commission believes that the proposal 
is reasonably designed to secure adequate funding to support FINRA's 
regulatory duties.
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    \10\ In approving the proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78o-3(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-FINRA-2011-071) be, and 
hereby is, approved.
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    \12\ 15 U.S.C. 78s(b)(2).
    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-2394 Filed 2-2-12; 8:45 am]
BILLING CODE 8011-01-P