Document ID: SEC-2017-1775-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2017-10-30T04:00Z

[Federal Register Volume 82, Number 208 (Monday, October 30, 2017)]
[Notices]
[Pages 50194-50196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-23479]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81931; File No. SR-FINRA-2017-032]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Make Permanent an Exception to TRACE Reporting 
for Certain Bond Transactions Effected on the New York Stock Exchange

October 24, 2017.
    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 October 20, 2017, 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

[[Page 50195]]

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 amend Rule 6730 to make permanent an 
exemption from TRACE reporting transactions in TRACE-Eligible 
Securities that are executed on a facility of the New York Stock 
Exchange (``NYSE''), subject to specified conditions.
    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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Rule 6730(e) (Reporting Requirements for Certain Transactions and 
Transfers of Securities) exempts members from reporting to the Trade 
Reporting and Compliance Engine (``TRACE'') transactions in TRACE-
Eligible Securities \4\ that are executed on a facility of the New York 
Stock Exchange (``NYSE'') in accordance with specified NYSE rules and 
that are reported to NYSE and disseminated publicly, provided that a 
data sharing agreement between FINRA and NYSE related to transactions 
covered by Rule 6730 remains in effect.\5\ This exemption currently 
operates as a pilot program and is scheduled to expire on October 27, 
2017.\6\
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    \4\ Rule 6710 (Definitions) provides that a ``TRACE-Eligible 
Security'' is a debt security that is United States (``U.S.'') 
dollar-denominated and is: (1) Issued by a U.S. or foreign private 
issuer, and, if a ``restricted security'' as defined in Securities 
Act Rule 144(a)(3), sold pursuant to Securities Act Rule 144A; (2) 
issued or guaranteed by an Agency as defined in paragraph (k) or a 
Government-Sponsored Enterprise as defined in paragraph (n); or (3) 
a U.S. Treasury Security as defined in paragraph (p). ``TRACE-
Eligible Security'' does not include a debt security that is issued 
by a foreign sovereign or a Money Market Instrument as defined in 
paragraph (o).
    \5\ Rule 6730(e)(2) exempts members from TRACE reporting 
transactions in TRACE-Eligible Securities that are listed on a 
national securities exchange when certain conditions are met. Rule 
6730(e)(4), in contrast, exempts transactions in TRACE-Eligible 
Securities that are not listed on an exchange, but that are executed 
on a facility of NYSE when certain conditions are met.
    \6\ See Securities Exchange Act Release No. 54768 (November 16, 
2006), 71 FR 67673 (November 22, 2006) (Order Approving File No. SR-
NASD-2006-110) (pilot program in FINRA Rule 6730(e)(4), then NASD 
Rule 6230(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 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 File No. SR-FINRA-
2011-002) (pilot program extended to July 8, 2011); Securities 
Exchange Act Release No. 64665 (June 14, 2011), 76 FR 35933 (June 
20, 2011) (Notice of Filing and Immediate Effectiveness of File No. 
SR-FINRA-2011-025) (pilot program extended to January 27, 2012); 
Securities Exchange Act Release No. 66018 (December 21, 2011), 76 FR 
81549 (December 28, 2011) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2011-072) (pilot program extended 
to October 26, 2012); Securities Exchange Act Release No. 68076 
(October 22, 2012), 77 FR 65431 (October 26, 2012) (Notice of Filing 
and Immediate Effectiveness of File No. SR-FINRA-2012-047) (pilot 
program extended to October 25, 2013); Securities Exchange Act 
Release No. 70288 (August 29, 2013), 78 FR 54694 (September 5, 2013) 
(Notice of Filing and Immediate Effectiveness of File No. SR-FINRA-
2013-038) (pilot program extended to October 23, 2015); and 
Securities Exchange Act Release No. 76121 (October 9, 2015) 80 FR 
62578 (October 16, 2015) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2015-037) (pilot program extended 
to October 27, 2017).
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    FINRA is proposing to make the exemption in Rule 6730(e)(4) 
permanent. Thus, pursuant to the proposed rule change, members would 
not be required to report to TRACE transactions in TRACE-Eligible 
Securities that are executed on a NYSE facility in accordance with NYSE 
Rules 1400, 1401 and 86, where such transactions are disseminated 
publicly by NYSE, so long as a data sharing agreement is in effect 
between FINRA and NYSE related to transactions covered by Rule 6730.\7\
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    \7\ FINRA is proposing to delete existing language conditioning 
the exemption on transactions being ``reported to NYSE in accordance 
with NYSE's applicable trade reporting rules.'' FINRA understands 
that, because NYSE immediately and automatically publicly 
disseminates transactions, NYSE does not have any rules requiring 
members to also trade report transactions in TRACE-Eligible 
Securities executed in accordance with NYSE Rules 1400, 1401 and 86.
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    FINRA is proposing to make the exemption available on a permanent 
basis as the pilot has been operating without incident since its 
inception in 2007. Providing this exemption on a permanent basis would 
solidify in the FINRA rule a measure to avoid trade reporting to FINRA 
with regard to transactions in these securities that are disseminated 
publicly by NYSE. FINRA notes that the exemption under Rule 6730(e)(4) 
continues to be conditional on a data sharing agreement being in effect 
between FINRA and NYSE related to transactions covered by Rule 6730.
    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, so FINRA can implement the proposed rule change on 
the date of filing and prior to the expiration of the current pilot.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of section 15A(b)(6) of the Act,\8\ 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.
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    \8\ 15 U.S.C. 78o-3(b)(6).
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    FINRA believes that providing the exemption on a permanent basis 
protects investors and the public because it continues to ensure that 
transactions are required to be publicly disseminated, and therefore 
transparency will be maintained for these transactions. The continued 
condition that a data sharing agreement remain in effect between NYSE 
and FINRA for transactions covered by the Rule 6730(e)(4) exemption 
allows FINRA to conduct surveillance in TRACE-Eligible Securities. In 
addition, providing the exemption on a permanent basis enhances 
regulatory efficiency and, with regard to covered transactions, permits 
members to avoid trade reporting to FINRA and the increased costs that 
may be incurred as a result of such requirement.

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. FINRA

[[Page 50196]]

believes that providing the exemption on a permanent basis does not 
result in any burden on competition since it treats all similarly-
situated members the same. Specifically, with regard to covered 
transactions, the proposal allows members to avoid trade reporting to 
FINRA and the increased costs that may be incurred as a result of such 
requirement.

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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give 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. 
FINRA has satisfied this requirement.
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    FINRA has asked the Commission to waive the 30-day operative delay 
so that the proposal may become operative immediately upon filing. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because such action will allow the existing TRACE exemption to remain 
available without interruption. If the pilot program were to expire on 
October 27, 2017, FINRA members would immediately become subject to 
duplicative reporting obligations with respect to transactions in 
TRACE-eligible debt securities effected on NYSE. In addition, the 
Commission notes that the pilot has been operating since 2007 without 
any issues being raised in the various comment periods to extend the 
pilot. For these reasons, the Commission hereby waives the 30-day 
operative delay requirement and designates the proposed rule change as 
operative upon filing.\11\
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    \11\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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-2017-032 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2017-032. 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, 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 such 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-2017-032, and should 
be submitted on or before November 20, 2017.
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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\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-23479 Filed 10-27-17; 8:45 am]
BILLING CODE 8011-01-P