Document ID: SEC-2013-0301-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2013-02-12T05:00Z

[Federal Register Volume 78, Number 29 (Tuesday, February 12, 2013)]
[Notices]
[Pages 9979-9981]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03104]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68846; File No. SR-FINRA-2013-009]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Modify the ``Late Report--T+N'' Fee Applicable 
to Members Using the FINRA/Nasdaq Trade Reporting Facility

February 6, 2013.
    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 February 1, 2013, 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 ``establishing or changing a 
due, fee or other charge'' under Section 19(b)(3)(A)(ii) of the Act \3\ 
and Rule 19b-4(f)(2) thereunder,\4\ 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\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 7620A to modify the ``Late 
Report--T+N'' fee applicable to members that use the FINRA/Nasdaq Trade 
Reporting Facility (the ``FINRA/Nasdaq TRF'').
    Below is the text of the proposed rule change. Proposed new 
language is in italics; proposed deletions are in brackets.

* * * * *

7000. CLEARING, TRANSACTION AND ORDER DATA REQUIREMENTS, AND FACILITY 
CHARGES

* * * * *

7600. CHARGES FOR TRADE REPORTING FACILITY SERVICES

7600A. CHARGES FOR FINRA/NASDAQ TRADE REPORTING FACILITY SERVICES

* * * * *

7620A. FINRA/Nasdaq Trade Reporting Facility Reporting Fees

    The following charges shall be paid by participants for use of 
the FINRA/Nasdaq Trade Reporting Facility. In the case of trades 
where the same market participant is on both sides of a trade 
report, applicable fees assessed on a ``per side'' basis will be 
assessed once, rather than twice, and the market participant will be 
assessed applicable Non-Comparison/Accept (Non-Match/Compare) 
Charges as the Executing Party side only.

------------------------------------------------------------------------
 Non-Comparison/Accept (Non-Match/
         Compare) Charges:
------------------------------------------------------------------------
Tape...............................  Daily Average Number of Media/
                                      Executing Party Trades During the
                                      Month Needed to Qualify for Cap
A..................................  2500
B..................................  2500
C..................................  2500
------------------------------------------------------------------------
                          Media/Executing Party
------------------------------------------------------------------------
Monthly Charge.....................  Maximum Monthly Charge if Capped
($0.018) x (Number of Media/         ($0.018) x (Required Daily Average
 Executing Party Reports During the   Number of Media/EP Trades for Tape
 Month).                              A, B or C) x (Number of Trading
                                      Days During the Month)
------------------------------------------------------------------------
                        Non-Media/Executing Party
------------------------------------------------------------------------
Monthly Charge.....................  Maximum Monthly Charge if Capped
($0.018) x (Number of Non-Media/     ($0.018) x 2500 for Tape A, B or C
 Executing Party Reports During the   x (Number of Trading Days During
 Month).                              the Month)
------------------------------------------------------------------------
                              Media/Contra
------------------------------------------------------------------------
Monthly Charge.....................  Maximum Monthly Charge if Capped
($0.013) x (Number of Media/Contra   ($0.013) x 2500 for Tape A, B or C
 Reports During the Month).           x (Number of Trading Days During
                                      the Month)
------------------------------------------------------------------------
                            Non-Media/Contra
------------------------------------------------------------------------
Monthly Charge.....................  Maximum Monthly Charge if Capped

[[Page 9980]]

 
($0.013) x (Number of Non-Media/     ($0.013) x 2500 for Tape A, B or C
 Contra Reports During the Month).    x (Number of Trading Days During
                                      the Month)
------------------------------------------------------------------------
Standard Fees:
Clearing report to transfer a        $0.03/side
 transaction fee charged by one
 member to another member pursuant
 to Rule 7230A(h).
Comparison/Accept..................  $0.0144/side per 100 shares
                                      (minimum 400 shares; maximum 7,500
                                      shares)
Late Report--T+N...................  $0.288/[side] trade (charged to the
                                      Executing Party)
Query..............................  $0.50/query
Corrective Transaction Charge......  $0.25/Cancel, Error, Inhibit, Kill,
                                      or `No' portion of No/Was
                                      transaction, paid by reporting
                                      side; $0.25/Break, Decline
                                      transaction, paid by each party
------------------------------------------------------------------------

* * * Supplementary Material:
    .01 No Change.
* * * * *

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
    The FINRA/Nasdaq TRF is a facility of FINRA that is operated by The 
NASDAQ OMX Group, Inc. (``NASDAQ OMX'') and utilizes Automated 
Confirmation Transaction (``ACT'') Service technology. In connection 
with the establishment of the FINRA/Nasdaq TRF, FINRA and NASDAQ OMX 
entered into a limited liability company agreement (the ``LLC 
Agreement''). Under the LLC Agreement, FINRA, the ``SRO Member,'' has 
sole regulatory responsibility for the FINRA/Nasdaq TRF. NASDAQ OMX, 
the ``Business Member,'' is primarily responsible for the management of 
the FINRA/Nasdaq TRF's business affairs, to the extent those affairs 
are not inconsistent with the regulatory and oversight functions of 
FINRA. As such, the Business Member establishes pricing for use of the 
FINRA/Nasdaq TRF, and such pricing is implemented pursuant to FINRA 
rules that must be filed with the SEC and be consistent with the 
Act.\5\ In addition, the Business Member is obligated to pay the cost 
of regulation and is entitled to the profits and losses, if any, 
derived from the operation of the FINRA/Nasdaq TRF.\6\
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    \5\ Because there are two FINRA Trade Reporting Facilities 
operated by different exchange Business Members competing for market 
share (the FINRA/Nasdaq TRF and the FINRA/NYSE TRF), FINRA does not 
take a position on whether the pricing for one TRF is more favorable 
or competitive than the pricing for the other TRF.
    \6\ FINRA notes that the same contractual arrangement is in 
place for the FINRA/NYSE TRF, with FINRA as the SRO Member and NYSE 
as the Business Member. The LLC agreements for the FINRA/Nasdaq TRF 
and the FINRA/NYSE TRF were submitted as part of the rule filings to 
establish the respective TRFs and can be found in the FINRA Manual.
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    Pursuant to Rule 7620A, FINRA members are charged certain fees for 
trade reporting to the FINRA/Nasdaq TRF. Currently, the FINRA/Nasdaq 
TRF imposes a ``Late Report--T+N'' fee of $0.288 on each party to a 
late trade report that is submitted one or more days after trade date 
(T+N). NASDAQ OMX, as the Business Member, has determined to modify 
this fee. Under the proposed rule change, the Late Report--T+N fee 
(which will remain set at $0.288) will be imposed only on the member 
with the obligation to report the trade under FINRA rules (defined in 
Rule 7620A as the ``Executing Party'').\7\ The responsibility for 
reporting trades is imposed on only one party to the trade, and as 
such, NASDAQ OMX, as the Business Member, has determined that the Late 
Report--T+N trade report fee should only be imposed on one party to the 
trade as well. The proposed rule change would ensure that the contra 
party to a trade is not subject to a fee due to late trade reporting by 
the Executing Party.
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    \7\ Rule 7620A defines ``Executing Party (EP)'' as the member 
with the trade reporting obligation under FINRA rules. Under FINRA 
Rule 6380A(b), in a trade between a member and non-member or 
customer, the member has the obligation to report the trade, and in 
a trade between two members, the member that receives an order for 
handling or execution or is presented an order against its quote, 
does not subsequently re-route the order, and executes the 
transaction, has the obligation to report the trade.
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    FINRA has filed the proposed rule change for immediate 
effectiveness. The operative date of the proposed rule change is the 
date of filing, February 1, 2013.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A of the Act,\8\ in general, and with Sections 
15A(b)(5) and (6) of the Act,\9\ in particular, in that it provides 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, and is not designed to permit 
unfair discrimination between customers, issuers, brokers or dealers. 
All similarly situated members are subject to the same fee structure, 
and access to the FINRA/Nasdaq TRF is offered on fair and non-
discriminatory terms. FINRA believes that the proposed rule change is 
reasonable, consistent with an equitable allocation of fees and is not 
unfairly discriminatory because it will reduce fees imposed on members 
that are contra parties to a trade that has been reported late on a T+N 
basis by the Executing Party and eliminate the circumstance where the 
contra party is charged a fee even though it has no responsibility for 
the late submission.
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    \8\ 15 U.S.C. 78o-3.
    \9\ 15 U.S.C. 78o-3(b)(5) and (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. The proposed rule change will 
reduce the fees paid by some members, but will not result in a fee 
increase for any members. Because the price change is not expected to 
have a significant impact on

[[Page 9981]]

the fees paid by market participants, FINRA does not believe that the 
change will affect the competitive standing of the FINRA/Nasdaq TRF or 
members that use the facility to report trades to FINRA.

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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\11\ 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(2).
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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 rule-comments@sec.gov. Please include 
File Number SR-FINRA-2013-009 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-2013-009. 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 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 on 
official business days between the hours of 10:00 a.m. and 3:00 p.m. 
Copies of such filing also will be available for inspection and copying 
at the principal offices 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-2013-009, and should be submitted on or before 
March 5, 2013.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03104 Filed 2-11-13; 8:45 am]
BILLING CODE 8011-01-P