Document ID: SEC-2011-0787-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2011-06-08T04:00Z

[Federal Register Volume 76, Number 110 (Wednesday, June 8, 2011)]
[Notices]
[Pages 33388-33389]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-14062]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64590; File No. SR-FINRA-2011-020]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Granting Approval of a Proposed Rule Change 
Relating to FINRA's Trading Activity Fee Rate for Transactions in 
Covered Equity Securities

June 2, 2011.

I. Introduction

    On April 26, 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 related to FINRA's Trading Activity Fee (``TAF'') 
for transactions in Covered Securities. The proposed rule change was 
published for comment in the Federal Register on May 3, 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. 64353 (April 27, 
2011), 76 FR 24942 (``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 exchange-registered equity securities. 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. The rules governing the TAF also include a list of exempt 
transactions.\4\ The TAF, along with the Personnel Assessment and the 
Gross Income Assessment fees, are used to fund FINRA's regulatory 
activities, including examinations; financial monitoring; and FINRA's 
policymaking, rulemaking, and enforcement activities.\5\
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    \4\ See FINRA By-Laws, Schedule A, Sec.  1(b)(2).
    \5\ See FINRA By-Laws, Schedule A, Sec.  1(a).
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    The current TAF rate is $0.000075 per share for each sale of a 
Covered Security, with a maximum charge of

[[Page 33389]]

$3.75 per trade. In the Notice, the Exchange 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 and, due 
to the substantial decrease in average daily share volumes since 2009, 
FINRA has experienced a commensurate substantial decline in revenue 
from the TAF. Accordingly, FINRA has proposed to increase the TAF rate 
for Covered Securities that are equity securities by $0.000015 per 
share, from $0.000075 per share to $0.000090 per share, with a 
corresponding increase to the per-transaction cap for Covered 
Securities that are equity securities from $3.75 to $4.50.\6\ FINRA 
stated in the Notice that the TAF for covered securities that are 
equity securities rate has not been adjusted in over six years, and 
that the proposal is designed to ``stabilize revenue flows necessary to 
support FINRA's regulatory mission.''
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    \6\ Because transactions in Covered Securities that are equity 
securities account for over 95% of TAF revenues, FINRA is not 
proposing adjustments to the TAF rates for other types of Covered 
Securities.
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    FINRA proposes July 1, 2011 as the effective date of the adjusted 
TAF and will announce the effective date of the proposed rule change in 
a Regulatory Notice.

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.\7\ In particular, the Commission finds that the 
proposal is consistent with Section 15A(b)(5) of the Act,\8\ 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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    \7\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \8\ 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,\9\ that the proposed rule change (SR-FINRA-2011-020), be, and 
hereby is, approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-14062 Filed 6-7-11; 8:45 am]
BILLING CODE 8011-01-P