Document ID: SEC-2011-0853-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2011-06-20T04:00Z

[Federal Register Volume 76, Number 118 (Monday, June 20, 2011)]
[Notices]
[Pages 35933-35934]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15173]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64665; File No. SR-FINRA-2011-025]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Extend a TRACE Pilot Program

June 14, 2011.
    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 June 7, 2011, 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 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 extend the pilot program in FINRA Rule 
6730(e)(4) to January 27, 2012. The pilot program exempts from 
reporting to Trade Reporting and Compliance Engine (``TRACE'') 
transactions in TRACE-Eligible Securities that are executed on a 
facility of the NYSE in accordance with NYSE Rules 1400, 1401 and 86 
and reported to NYSE in accordance with NYSE's applicable trade 
reporting rules and disseminated publicly by NYSE.
    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
    FINRA proposes to amend FINRA Rule 6730(e)(4) to extend the pilot 
program, which is scheduled to expire on July 8, 2011, to January 27, 
2012.\4\ The pilot program exempts from reporting to TRACE transactions 
in TRACE-Eligible Securities that are executed on a facility of NYSE in 
accordance with NYSE Rules 1400, 1401 and 86 and reported to NYSE in 
accordance with NYSE's applicable trade reporting rules and 
disseminated publicly by NYSE, provided that a data sharing agreement 
between FINRA and NYSE related to transactions covered by the Rule 
remains in effect.
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    \4\ See Securities Exchange Act Release No. 54768 (November 16, 
2006), 71 FR 67673 (November 22, 2006) (Order Approving Proposed 
Rule Change; File No. SR-NASD-2006-110) (pilot program in FINRA Rule 
6730(e)(4), subject to the execution of a data sharing agreement 
addressing relevant transactions, became effective on January 9, 
2007); Securities Exchange Act Release No. 59216 (January 8, 2009), 
74 FR 2147 (January 14, 2009) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change; File No. SR-FINRA-2008-065) 
(pilot program extended to January 7, 2011), Securities Exchange Act 
Release No. 63673 (January 7, 2011), 76 FR 2739 (January 14, 2011) 
(Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change; File No. SR-FINRA-2011-002) (pilot program extended to July 
8, 2011).
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    FINRA is proposing to extend the pilot program until January 27, 
2012 to continue to exempt transactions in TRACE-Eligible Securities on 
an NYSE facility (and as to which all the other conditions of the 
exemption are met) from the TRACE reporting requirements.\5\ FINRA 
believes that the extension will provide additional time to analyze the 
impact of the exemption. Without the extension, members would be 
subject to both FINRA's and NYSE's trade reporting requirements with 
respect to these securities.
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    \5\ The exemption in FINRA Rule 6730(e)(4) is conditioned, among 
other things, upon a data sharing agreement between FINRA and NYSE 
remaining in effect. A data sharing agreement between FINRA and NYSE 
related to transactions covered by Rule 6730(e)(4) remains in 
effect.
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    The proposed rule change would not expand or otherwise change the 
pilot. FINRA notes that the success of the pilot program remains 
dependent on FINRA's ability to effectively continue to conduct 
surveillance on corporate debt trading in the over-the-counter market. 
In this regard, FINRA Rule 6730(e)(4) would continue to require that 
the exemption be predicated on the data agreement between FINRA and 
NYSE to share data related to the transactions covered by the Rule 
remaining in effect. However, FINRA supports a regulatory construct 
that, in the future, consolidates all last sale transaction information 
to provide better price transparency and a more efficient means to 
engage in market surveillance of TRACE-Eligible Securities 
transactions. The extension proposed herein will allow the pilot 
program to continue to operate without interruption while FINRA and the 
NYSE further assess the effect of the exemption and issues regarding 
the consolidation of market data, market surveillance and price 
transparency.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The implementation date will be July 8, 2011.

[[Page 35934]]

2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\6\ 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 extension of the exemptive 
provision protects investors and the public because transactions will 
be reported, transparency will be maintained for these transactions, 
and NYSE's agreement to share data with FINRA allows FINRA, at this 
time, to conduct surveillance in the corporate debt securities market.
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    \6\ 15 U.S.C. 78o-3(b)(6).
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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

    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 if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). 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. 
The Exchange has complied with this requirement.
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2011-025 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-2011-025. 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-2011-025 
and should be submitted on or before July 11, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Cathy H. Ahn,
Deputy Secretary.
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    \9\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2011-15173 Filed 6-17-11; 8:45 am]
BILLING CODE 8011-01-P