Document ID: SEC-2019-0423-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2019-04-09T04:00Z

[Federal Register Volume 84, Number 68 (Tuesday, April 9, 2019)]
[Notices]
[Pages 14161-14166]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06925]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85499; File No. SR-FINRA-2019-007]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Adopt Rule 7640B, Data Products Offered by NYSE

April 3, 2019.
    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 March 25, 2019, 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 constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under 
the Act,\3\ 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\ 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 is proposing to adopt FINRA Rule 7640B (Data Products Offered 
By NYSE) to (1) describe FINRA's practices relating to the distribution 
of market data for over-the-counter (``OTC'') transactions in NMS 
stocks generated through the operation of the FINRA/NYSE Trade 
Reporting Facility (``FINRA/NYSE TRF'') by NYSE Market (DE), Inc. 
(``NYSE Market'') and its affiliate, New York Stock Exchange LLC 
(``NYSE''); and (2) identify NYSE products that distribute FINRA/NYSE 
TRF data to third parties.
    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.

[[Page 14162]]

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

1. Purpose
Background
    The FINRA Trade Reporting Facilities (``TRFs'') are facilities for 
the reporting of OTC transactions in NMS stocks that allow the TRF 
``Business Members,'' which themselves are affiliates of self-
regulatory organizations (``SROs''), to retain commercial use of the 
market data reported to the respective TRFs.\4\ The operation of each 
TRF is governed by a Limited Liability Company Agreement (the ``LLC 
Agreement'') between FINRA and the respective Business Member. (The LLC 
Agreements, which were submitted as part of the rule filings to 
establish the respective TRFs and subsequently amended and restated, 
appear in the FINRA Manual.)
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    \4\ The establishment of each TRF was subject to a proposed rule 
change filed with the Commission. See Securities Exchange Act 
Release No. 54084 (June 30, 2006), 71 FR 38935 (July 10, 2006) 
(Order Approving File No. SR-NASD-2005-087); Securities Exchange Act 
Release No. 55325 (February 21, 2007), 72 FR 8820 (February 27, 
2007) (Notice of Filing and Immediate Effectiveness of File No. SR-
NASD-2007-011); and Securities Exchange Act Release No. 83559 (June 
29, 2018), 83 FR 31589 (July 6, 2018) (Order Approving File No. SR-
FINRA-2018-013).
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    Under the LLC Agreement, FINRA is the ``SRO Member'' and has sole 
regulatory responsibility for the TRF, including real-time monitoring 
and T+1 surveillance, development and enforcement of trade reporting 
rules and submission of proposed rule changes to the Commission. The 
Business Member under the LLC Agreement is primarily responsible for 
the management of the TRF's business affairs, which may not be 
conducted in a manner inconsistent with the regulatory and oversight 
functions of FINRA. Among other things, the Business Member establishes 
pricing for the TRF and is obligated to pay the cost of regulation and 
is entitled to the profits and losses, if any, derived from operation 
of the TRF. The Business Member also provides the ``user facing'' 
front-end technology used to operate the TRF and transmit in real time 
trade report data directly to the NMS securities information processors 
(``SIPs'') and to FINRA for audit trail purposes.
    Under the terms of the business arrangement between FINRA and the 
Business Members, each TRF owns data resulting from its operation. Each 
Business Member has a non-exclusive, irrevocable, worldwide, perpetual, 
royalty-free right and license to use market data generated by its TRF, 
other than data generated exclusively for regulatory purposes 
(``covered market data''),\5\ consistent with all applicable laws, 
rules and regulations, and has a contractual right to sell covered 
market data to third parties.\6\ Accordingly, although the TRFs are 
facilities of FINRA, the Business Members have the right under the 
contractual arrangements establishing the TRFs to develop market data 
products using covered market data. As each Business Member is an 
affiliate of an SRO, use of TRF data is conducted through the Business 
Member's affiliated SRO, is subject to a separate proposed rule change 
filed with the Commission by the affiliate in its SRO capacity and must 
satisfy the appropriate statutory standards.
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    \5\ For purposes of proposed Rule 7640B, ``covered market data'' 
would be defined as market data generated by the FINRA/NYSE TRF, 
other than data generated exclusively for regulatory purposes.
    \6\ Under the TRF contracts, FINRA has a non-exclusive, 
irrevocable, worldwide, perpetual, royalty-free right and license to 
use the data generated by the TRF to fulfill its contractual rights 
and obligations, as well as its obligations as an SRO.
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    In addition to real-time interaction with Business Member staff 
when operational issues arise, FINRA currently executes its SRO 
oversight functions by performing a three-part regularly recurring 
review of TRF operations. First, before initial operation of the TRF 
can commence, the Business Member is required to certify in writing 
that TRF operations will comply with all relevant FINRA rules and 
federal securities laws, and on a quarterly basis thereafter, the 
Business Member must submit its current TRF procedures and a 
certification of compliance with those procedures. Second, FINRA staff 
conducts monthly conference calls with each Business Member to review 
TRF operations. These monthly calls follow an established agenda, 
including discussion of, among other things: (1) Any system outages or 
issues since the prior monthly conference call (as well as any 
applicable reporting to FINRA and the SEC), (2) the status of pending 
systems changes, and (3) TRF market data products, including data 
latency and whether the Business Member has or is developing any new 
products that would use TRF data. Third, FINRA oversees a regular 
assessment cycle and extensive review of TRF operations, as measured 
against the TRF business requirements document and coding guidelines 
established by FINRA, by an outside independent audit firm. FINRA also 
requires the Business Members to submit on a quarterly basis an 
attestation that (1) identifies all products that use TRF data, and (2) 
certifies that the Business Member has no other products that use TRF 
data and that any future products that use TRF data will be developed 
in consultation with FINRA.
    Under the TRF framework, the Business Member must ensure, among 
other things, that the distribution and sale of market data products 
that use TRF data are consistent with the requirements of the Act. In 
addition to FINRA's general oversight of TRF operations, and in 
furtherance of FINRA's SRO responsibilities with respect to OTC market 
data, FINRA requires that each Business Member (and its SRO affiliate) 
make specific commitments and undertakings with respect to its products 
that use TRF data. Among other things, the Business Member will, 
consistent with the Commission's interpretation of Rule 603(a) under 
SEC Regulation NMS, take reasonable steps to ensure--through system 
architecture, monitoring, or otherwise--that it does not transmit TRF 
transaction data to vendors or users any sooner than the TRF transmits 
the data to the SIPs.\7\ The Business Member also must have in place 
procedures and controls to ensure that its products that use TRF data 
are not distributed prior to dissemination of TRF data to the SIPs, 
including monitoring for compliance with this obligation.
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    \7\ Rule 603(a), 17 CFR 242.603(a), provides as follows:
    (1) Any exclusive processor, or any broker or dealer with 
respect to information for which it is the exclusive source, that 
distributes information with respect to quotations for or 
transactions in an NMS stock to a securities information processor 
shall do so on terms that are fair and reasonable.
    (2) Any national securities exchange, national securities 
association, broker, or dealer that distributes information with 
respect to quotations for or transactions in an NMS stock to a 
securities information processor, broker, dealer, or other persons 
shall do so on terms that are not unreasonably discriminatory.
    In adopting Regulation NMS, the Commission stated that ``adopted 
Rule 603(a) prohibits an SRO or broker-dealer from transmitting data 
to a vendor or user any sooner than it transmits the data to a 
Network processor.'' See Securities Exchange Act Release No. 51808 
(June 9, 2005), 70 FR 37496, 37567 (June 29, 2005) (Adopting 
Release; File No. S7-10-04).
    In a subsequent order, the Commission stated that ``exchanges 
have an obligation under Rule 603(a) to take reasonable steps to 
ensure--through system architecture, monitoring, or otherwise--that 
they release data relating to current best-priced quotations and 
trades through proprietary feeds no sooner than they release data to 
the Network Processor, including during periods of heavy trading.'' 
See Securities Exchange Act Release No. 67857 (September 14, 2012) 
(Order Instituting Administrative and Cease-and-Desist Proceedings; 
File No. 3-15023).
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    In this regard, NYSE, the Business Member's affiliated SRO, has 
tools to compare the time of transmission of

[[Page 14163]]

data to the SIPs and to NYSE's proprietary data feeds that use 
corresponding data to determine whether data was transmitted to a 
proprietary vendor or user sooner than to the SIPs. In addition, NYSE 
monitors the overall operational performance of its proprietary and SIP 
market data feeds intraday and has developed escalation and reporting 
procedures in the event that issues are detected. NYSE has represented 
to FINRA that these tools and procedures would be used for purposes of 
monitoring for potential latency for any future real-time products 
developed by NYSE that use and distribute FINRA/NYSE TRF data (provided 
such data is also required to be provided to the SIPs).
    As further detailed below, NYSE will be adding FINRA/NYSE TRF 
transaction data to its existing data feeds, and, as such, NYSE will 
leverage the existing Rule 603(a) compliance programs for those data 
feeds for purposes of ensuring compliant distribution of FINRA/NYSE TRF 
transaction data contained therein.
Proposed FINRA Rule 7640B
    FINRA is proposing to adopt new Rule 7640B to address the 
distribution of FINRA/NYSE TRF data in market data products developed 
by NYSE. Proposed Rule 7640B is substantively identical to current Rule 
7640A, which addresses the distribution of FINRA/Nasdaq TRF data in 
market data products developed by Nasdaq, Inc., as the FINRA/Nasdaq TRF 
Business Member, and its wholly owned SRO subsidiary, The NASDAQ Stock 
Market LLC. Rule 7640A was adopted and amended pursuant to proposed 
rule changes filed with the Commission.\8\
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    \8\ See Securities Exchange Act Release No. 71350 (January 17, 
2014), 79 FR 4218 (January 24, 2014) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2014-002); and Securities 
Exchange Act Release No. 76385 (November 6, 2015), 80 FR 70277 
(November 13, 2015) (Notice of Filing and Immediate Effectiveness of 
File No. SR-FINRA-2015-045).
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    As noted above, the FINRA/NYSE TRF is a facility of FINRA and 
FINRA/NYSE TRF data is OTC data for which FINRA is responsible under 
the Act. However, any market data products would be distributed and 
sold by NYSE Market, the Business Member, through NYSE, its affiliated 
SRO, not FINRA. As such, paragraphs (a) and (b) of proposed Rule 7640B 
codify the contractual arrangements between FINRA and NYSE Market and 
provide for the overall structure relating to the FINRA/NYSE TRF and 
the permissible use of FINRA/NYSE TRF data. For example, proposed 
paragraph (b) provides that fees for market data products that use 
covered market data are charged by NYSE pursuant to an NYSE rule 
filing.\9\ Such fees must be adopted pursuant to a proposed rule change 
submitted to the Commission pursuant to Section 19(b) of the Act, and 
NYSE must demonstrate that the fees are consistent with the 
requirements of the Act, including that they are reasonable, equitably 
allocated and not unfairly discriminatory. Paragraph (c) of proposed 
Rule 7640B identifies NYSE products that use FINRA/NYSE TRF data 
pursuant to a proposed rule change filed by NYSE with the Commission, 
and specifically the NYSE Trades market data feed \10\ and NYSE BQT 
market data feed.\11\
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    \9\ FINRA notes that such fees can be found in the ``NYSE PDP 
Market Data Pricing'' fee schedule, available at www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf.
    \10\ See Securities Exchange Act Release No. 59606 (March 19, 
2009), 74 FR 13293 (March 26, 2009) (Order Approving File No. SR-
NYSE-2009-04); Securities Exchange Act Release No. 69272 (April 2, 
2013), 78 FR 20983 (April 8, 2013) (Notice of Filing and Immediate 
Effectiveness of File No. SR-NYSE-2013-23); Securities Exchange Act 
Release No. 70066 (July 30, 2013), 78 FR 47474 (August 5, 2013) 
(Notice of Filing and Immediate Effectiveness of File No. SR-NYSE-
2013-53); and Securities Exchange Act Release No. 76599 (December 9, 
2015), 80 FR 77676 (December 15, 2015) (Notice of Filing and 
Immediate Effectiveness of File No. SR-NYSE-2015-65).
    \11\ See Securities Exchange Act Release No. 73553 (November 6, 
2014), 79 FR 67491 (November 13, 2014) (Order Approving File No. SR-
NYSE-2014-40); and Securities Exchange Act Release No. 83359 (June 
1, 2018), 83 FR 26507 (June 7, 2018) (Notice of Filing and Immediate 
Effectiveness of File No. SR-NYSE-2018-22).
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    FINRA notes that pursuant to the Consolidated Tape Association 
(``CTA'') Plan and the Nasdaq Unlisted Trading Privileges (``UTP'') 
Plan, if a proprietary feed includes trades reported by the TRF to the 
SIP processor, then the TRF must also furnish the SIP processor with 
the time of the transmission as published on the proprietary feed.\12\ 
This time stamp is in addition to the time of the transaction, which, 
for TRF trades, is the time of execution that a FINRA member reports to 
a TRF in accordance with FINRA rules. FINRA/NYSE TRF data will not be 
included in the NYSE Trades market data feed and the NYSE BQT market 
data feed until the required systems changes have been made to enable 
the FINRA/NYSE TRF to provide the SIP processor [sic] with the time of 
transmission as published on the feeds.
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    \12\ See CTA Plan Section VI(c) and UTP Plan Section VIII.B.
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NYSE Trades Market Data Feed
    Pursuant to proposed rule change SR-NYSE-2019-06, NYSE is proposing 
to enhance the content of the NYSE Trades market data feed product 
offering by adding FINRA/NYSE TRF data.\13\ As noted in its filing, 
NYSE is not proposing to revise the fees for the NYSE Trades feed in 
conjunction with this enhancement. Such fees were adopted pursuant to 
proposed rule changes filed with the Commission by NYSE.\14\
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    \13\ See Securities Exchange Act Release No. 85186 (February 25, 
2019), 84 FR 7156 (March 1, 2019) (Notice of Filing and Immediate 
Effectiveness of File No. SR-NYSE-2019-06).
    \14\ See, e.g., Securities Exchange Act Release No. 59606 (March 
19, 2009), 74 FR 13293 (March 26, 2009) (Order Approving File No. 
SR-NYSE-2009-04); and Securities Exchange Act Release No. 69272 
(April 2, 2013), 78 FR 20983 (April 8, 2013) (Notice of Filing and 
Immediate Effectiveness of File No. SR-NYSE-2013-23).
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    As described in proposed rule change SR-NYSE-2019-06, NYSE Trades 
is an NYSE-only last sale market data feed. NYSE Trades currently 
allows vendors, broker-dealers and others to receive on a real-time 
basis the same last sale information that NYSE reports under the CTA 
Plan and the UTP Plan for inclusion in the CTA and UTP SIP consolidated 
data streams. Specifically, the NYSE Trades feed includes, for each 
security traded on NYSE, the real-time last sale price, time and size 
information, and a stock summary message. The stock summary message 
updates every minute and includes NYSE's opening price, high price, low 
price, closing price, and cumulative volume for the security.
    NYSE is proposing to enhance the content of the NYSE Trades feed by 
including information for OTC trades in NMS stocks reported to the 
FINRA/NYSE TRF. The FINRA/NYSE TRF data disseminated via the NYSE 
Trades feed would include the same real-time last sale price, time and 
size information for each trade reported to the FINRA/NYSE TRF that the 
FINRA/NYSE TRF reports under the CTA Plan and UTP Plan for inclusion in 
the CTA and UTP SIP consolidated data streams. The FINRA/NYSE TRF data 
would also identify whether the trade was reported to the FINRA/NYSE 
TRF on a T+1 (or greater) basis. Unlike for securities traded on NYSE, 
the FINRA/NYSE TRF data would not include a stock summary message, 
which relates to exchange-specific activity only. FINRA/NYSE TRF trades 
would clearly be denoted as such in the NYSE Trades feed to ensure that 
they are not mistaken for trades executed on the exchange.\15\
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    \15\ FINRA notes that FINRA/NYSE TRF and exchange activity also 
must be separate and distinct and cannot be commingled in volume and 
market share statistics in the aggregate.
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    NYSE has represented to FINRA that the NYSE Trades feed is already 
architected so that trades on the NYSE

[[Page 14164]]

platforms are transmitted to the SIPs before being transmitted to the 
NYSE Trades feed. The addition of FINRA/NYSE TRF data to the NYSE 
Trades feed will follow a similar protocol. OTC trades reported by the 
FINRA/NYSE TRF are presently transmitted to the SIPs by the same 
systems that transmit NYSE trades to the SIPs, and the same 
architecture can be leveraged to ensure that the sequencing of 
transmission of OTC trades is to the SIPs first and to the NYSE Trades 
feed second. Once FINRA/NYSE TRF data is added to the NYSE Trades feed, 
NYSE, the Business Member's affiliated SRO, will continue to take 
reasonable steps to ensure its distribution of the NYSE Trades feed 
complies with Rule 603(a) through its existing compliance monitoring 
program for same.
NYSE BQT Data Feed
    With this proposed rule change, FINRA/NYSE TRF data disseminated 
via the NYSE Trades feed would also be included as part of the NYSE BQT 
data feed. As described in proposed rule change SR-NYSE-2019-06, the 
NYSE BQT data feed provides a unified view of best bid and offer 
(``BBO'') and last sale information for NYSE and its affiliates, NYSE 
Arca, Inc. (``NYSE Arca''), NYSE National, Inc. (``NYSE National'') and 
NYSE American LLC (``NYSE American''), and consists of data elements 
from eight existing market data feeds: NYSE Trades, NYSE BBO, NYSE Arca 
Trades, NYSE Arca BBO, NYSE National BBO, NYSE National Trades, NYSE 
American Trades and NYSE American BBO. The NYSE BQT data feed would, 
therefore, include the FINRA/NYSE TRF data as part of the data it 
receives via the NYSE Trades market data feed. NYSE is not proposing to 
amend the fees for the NYSE BQT data feed. Such fees were adopted 
pursuant to proposed rule changes filed with the Commission by 
NYSE.\16\
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    \16\ See, e.g., Securities Exchange Act Release No. 73816 
(December 11, 2014), 79 FR 75200 (December 17, 2014) (Notice of 
Filing and Immediate Effectiveness of File No. SR-NYSE-2014-64); and 
Securities Exchange Act Release No. 83360 (June 1, 2018), 83 FR 
26511 (June 7, 2018) (Notice of Filing and Immediate Effectiveness 
of File No. SR-NYSE-2018-24).
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    NYSE has represented to FINRA that because the NYSE BQT feed is, by 
design, always more latent than the NYSE Trades feed, the above-
described Rule 603(a) compliance program for the NYSE Trades feed is 
sufficient to assure that distribution of FINRA/NYSE TRF data via the 
NYSE BQT feed also satisfies Rule 603(a). FINRA will periodically 
reassess satisfaction with this requirement as part of its regular 
oversight of the FINRA/NYSE TRF.
    FINRA believes that NYSE's proposed use of FINRA/NYSE TRF data in 
the NYSE Trades and NYSE BQT feeds satisfies the requirement that 
FINRA/NYSE TRF transaction data not be transmitted to a vendor or user 
any sooner than such data is transmitted to the SIPs. As part of 
FINRA's regular oversight of the FINRA/NYSE TRF, FINRA will review for 
such compliance.
    FINRA anticipates that for any future products developed by NYSE 
that use FINRA/NYSE TRF data, NYSE will submit a proposed rule change 
and FINRA will submit a companion filing proposing to amend Rule 
7640B(c). In addition, NYSE Market and NYSE will be required to make 
the specific commitments and undertakings described above regarding the 
inclusion of FINRA/NYSE TRF data in any new data offering.\17\
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    \17\ FINRA notes that FINRA and NYSE occasionally provide FINRA/
NYSE TRF data to the Commission, other government agencies and 
members of the academic community for the purpose of studying the 
market. While in the latter case, data generally is in an aggregated 
format that does not allow identification of the activity of 
specific market participants, FINRA on occasion may provide 
attributed data to the academic community pursuant to a non-
disclosure agreement.
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    FINRA has filed the proposed rule change for immediate 
effectiveness. The proposed rule change will be operative on April 29, 
2019.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\18\ which requires, among 
other things, that FINRA rules 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 proposed rule change will 
promote market transparency by allowing the development by NYSE, 
consistent with the guidelines set forth in proposed Rule 7640B, of 
market data products using FINRA/NYSE TRF data for distribution to 
FINRA/NYSE TRF participants, other market participants and the 
investing public. FINRA notes that proposed Rule 7640B is substantively 
identical to current Rule 7640A, which addresses the inclusion of 
FINRA/Nasdaq TRF data in market data products offered by Nasdaq. Rule 
7640A was adopted and amended pursuant to proposed rule changes filed 
with the Commission.\19\
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    \18\ 15 U.S.C. 78o-3(b)(6).
    \19\ See Securities Exchange Act Release No. 71350 (January 17, 
2014), 79 FR 4218 (January 24, 2014) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2014-002); and Securities 
Exchange Act Release No. 76385 (November 6, 2015), 80 FR 70277 
(November 13, 2015) (Notice of Filing and Immediate Effectiveness of 
File No. SR-FINRA-2015-045).
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    FINRA also believes that the proposed rule change is consistent 
with the provisions of Section 15A(b)(5) of the Act,\20\ 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. As noted above, the fees for the NYSE 
Trades and NYSE BQT feeds will not be charged by FINRA under FINRA 
rules, but rather will be charged by NYSE pursuant to NYSE filings. 
Such fees have been adopted pursuant to a proposed rule change 
submitted to the Commission pursuant to Section 19(b) of the Act, in 
which NYSE was required to demonstrate that the fees are consistent 
with the requirements of the Act, including that they are reasonable, 
equitably allocated and not unfairly discriminatory.\21\
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    \20\ 15 U.S.C. 78o-3(b)(5).
    \21\ See, e.g., Securities Exchange Act Release No. 59606 (March 
19, 2009), 74 FR 13293 (March 26, 2009) (Order Approving File No. 
SR-NYSE-2009-04); and Securities Exchange Act Release No. 69272 
(April 2, 2013), 78 FR 20983 (April 8, 2013) (Notice of Filing and 
Immediate Effectiveness of File No. SR-NYSE-2013-23).
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    FINRA believes that the proposed rule change is consistent with the 
Act because subscription to the NYSE Trades and NYSE BQT feeds is not 
mandatory and NYSE's fees for the feeds apply uniformly to all members 
and other market participants that elect to subscribe to the products. 
In addition, FINRA believes that, as described in proposed rule change 
SR-NYSE-2019-06, the existence of alternatives to the NYSE Trades feed 
(or NYSE BQT, through which FINRA/NYSE TRF data derived from the NYSE 
Trades feed can be obtained)--including real-time consolidated data, 
free delayed consolidated data and proprietary data from other 
sources--ensures that NYSE is not unreasonably discriminatory because 
vendors and subscribers can elect alternatives. As further noted in SR-
NYSE-2019-06, the enhanced products would be available to all market 
participants on an equivalent basis with no change in price.
    Finally, FINRA believes that use of FINRA/NYSE TRF market data, as 
set forth in proposed Rule 7640B, is consistent with Rule 603(a) of SEC 
Regulation NMS, which requires, among other things, that distributions 
of certain data by FINRA not be unreasonably

[[Page 14165]]

discriminatory.\22\ The Commission clarified in its adopting release 
that SEC Regulation NMS prohibits an SRO from transmitting quotation 
and transaction data to a vendor or user any sooner than it transmits 
the data to a network processor. As discussed above, NYSE, the Business 
Member's affiliated SRO, must ensure that distribution of market data 
products that use FINRA/NYSE TRF data is consistent with this 
requirement, and FINRA will require that NYSE Market and NYSE make 
specific commitments and undertakings, including real-time monitoring 
for potential data latency, with respect to all FINRA/NYSE TRF data 
products.
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    \22\ See Rule 603(a)(2) of SEC Regulation NMS.
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B. Self-Regulatory Organization's Statement on Burden on Competition 
Regulatory Need

    As discussed in SR-NYSE-2019-06, NYSE proposes to enhance the 
content of its proprietary data feeds by disseminating the FINRA/NYSE 
TRF data via the NYSE Trades and NYSE BQT data feeds. NYSE expects that 
the proposed addition to the data feeds would enable NYSE to better 
compete with Nasdaq, which already offers FINRA/Nasdaq TRF data in its 
data feeds to subscribers. NYSE underlines the motivation of the 
proposal by stating in its filing that ``the proposal would improve the 
content included in the NYSE Trades feed and provide investors with an 
additional option for accessing information that may help to inform 
their trading decisions.''
Economic Baseline
    Proprietary market data is produced by trading and quoting activity 
at each individual exchange, as well as other entities in the OTC 
market, such as internalizing broker-dealers and various forms of 
alternative trading systems, including dark pools and electronic 
communication networks. Exchanges compete with each other for the 
dissemination of market data, which is used by different types of 
consumers for varying needs, such as observing the overall trading 
activity and price discovery.\23\
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    \23\ See Jones (2018) for a discussion of the market data at 
https://www0.gsb.columbia.edu/faculty/cjones/papers/2018.08.31%20US%20Equity%20Market%20Data%20Paper.pdf.
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    The FINRA/NYSE TRF is one of the TRFs that are [sic] used to report 
OTC trades in NMS stocks. Activity reported to the FINRA/NYSE TRF 
constitutes a relatively smaller [sic] part of the overall trades in 
the NMS market. In 2018, FINRA/NYSE TRF reports accounted for 5.06% of 
all SIP-reported share volume and 2.41% of all SIP-reported trades. As 
a percentage of aggregate TRF SIP-reported activity, the FINRA/NYSE TRF 
accounted for 13.93% of the share volume and 10.92% of the trades.
Economic Impacts
    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.
    The proposed rule change establishes the framework for the use of 
FINRA/NYSE TRF data in products developed by NYSE while ensuring that 
the dissemination of such data by NYSE is subject to the oversight of 
FINRA. The proposed FINRA rule merely codifies this structure. 
Therefore, FINRA estimates that there are potentially no material 
impacts stemming from the proposed rule change.
    FINRA believes that the existence of alternatives to the NYSE 
Trades feed (or NYSE BQT, through which FINRA/NYSE TRF data derived 
from the NYSE Trades feed can be obtained)--including real-time 
consolidated data, free delayed consolidated data and proprietary data 
from other sources--is a strong incentive to NYSE to avoid setting 
unreasonable or discriminatory fees. As noted in its filing, NYSE is 
not proposing to amend the fees for the NYSE Trades and NYSE BQT feeds 
in conjunction with this additional feature. Subscription to the NYSE 
feeds is wholly voluntary, and members and other market participants 
can elect not to buy any products that, in their determination, would 
not add value or enhance their business model. As discussed above, 
there are alternative products where FINRA/NYSE TRF data will continue 
to be provided to the users of such data.
Alternatives Considered
    No other alternatives were considered for the proposed rule change.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \24\ and Rule 19b-
4(f)(6) thereunder.\25\
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    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 17 CFR 240.19b-4(f)(6).
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    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.

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-2019-007 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-2019-007. 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

[[Page 14166]]

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-2019-
007, and should be submitted on or before April 30, 2019.

    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).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-06925 Filed 4-8-19; 8:45 am]
 BILLING CODE 8011-01-P