Document ID: SEC-2011-1477-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2011-10-03T04:00Z

[Federal Register Volume 76, Number 191 (Monday, October 3, 2011)]
[Notices]
[Pages 61124-61125]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-25352]

[[Page 61124]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65408; File No. SR-FINRA-2011-049]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change Relating to Aggregation of Activity of Affiliated 
Members for Purposes of FINRA/Nasdaq TRF Fees and Credits

September 27, 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 September 13, 2011, 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 stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule'' under Section 
19(b)(3)(A)(i) of the Act \3\ and Rule 19b-4(f)(1) 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)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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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 7630A (Aggregation of Activity of 
Affiliated Members) relating to the pricing schedule for the FINRA/
NASDAQ Trade Reporting Facility (the ``FINRA/NASDAQ TRF'') under the 
Rule 7600A Series.
    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
    Rule 7630A allows affiliated members to aggregate their activity 
under certain provisions of the fee and credit schedule applicable to 
the FINRA/NASDAQ TRF that make fees and credits dependent upon the 
volume of their activity. For example, Rule 7620A caps fees for members 
with a daily average number of media/executing party trades during the 
month in excess of 2500. Affiliated members that might not qualify for 
the cap by themselves may be able to qualify by aggregating their 
activity.
    Under Rule 7630A, a member may request that the FINRA/NASDAQ TRF 
aggregate its activity with the activity of its affiliates.\5\ The rule 
defines an ``affiliate'' of the member as any wholly owned subsidiary, 
parent or sister (as those terms are defined under the rule) of the 
member that is also a member. Thus, the rule requires that one 
affiliated member own 100% of the voting interests in the other, or 
that they both be under the common control of a parent that owns 100% 
of each. A member requesting aggregation of affiliate activity under 
Rule 7630A is required to certify the affiliate status of entities 
whose activity it seeks to aggregate and immediately to provide notice 
of any event that causes an entity to cease to be an affiliate. A 
review of information regarding the entities is conducted, and the 
member may be requested to provide additional information to verify the 
affiliate status of an entity. A request will be approved unless it is 
determined that the member's certification is not accurate.\6\ FINRA is 
proposing to clarify Rule 7630A by describing the process for review 
and approval in proposed paragraph (a)(1). However, FINRA is not 
proposing any changes to this process.
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    \5\ The rule is administered by The NASDAQ OMX Group, Inc. 
(``NASDAQ''), in its capacity as the ``Business Member'' and 
operator of the FINRA/NASDAQ TRF on behalf of FINRA. FINRA's 
oversight of this function performed by the Business Member is 
conducted through an annual assessment and review of TRF operations 
by an outside independent audit firm.
    \6\ In the event of an inaccurate certification, FINRA would 
investigate whether the member had violated FINRA rules and would 
take appropriate disciplinary action.
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    In addition, FINRA is proposing to adopt a stated policy with 
respect to the timing of recognition of aggregation requests. Because 
bills for the FINRA/NASDAQ TRF are prepared on a monthly basis, 
recognizing an affiliation in the middle of a month would require a 
complex proration of members' bills. Accordingly, it has been the 
FINRA/NASDAQ TRF's practice to recognize an affiliation request either 
at the beginning of the month in which the affiliation occurs or at the 
beginning of the following month. FINRA is proposing to adopt new 
paragraph (a)(2) of Rule 7630A, which provides that if two or more 
members become affiliated on or prior to the sixteenth day of a month 
and submit a request for aggregation on or prior to the twenty-second 
day of the month, approval of the request shall be deemed effective as 
of the first day of that month. Thus, for example, if one member 
acquires another, the acquisition is completed by June 16, and the 
members file a request for aggregation by June 22, approval of the 
request would allow the members to aggregate all activity during June. 
This would be the case regardless of the time required to review and 
approve the request. However, if members become affiliated after the 
sixteenth day of the month, or do not submit a request for aggregation 
until after the twenty-second day of the month, the request would not 
be recognized until the following month.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The effective date and the implementation date will be 
the date of filing.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15(b)(6) of the Act,\7\ 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, by 
adopting a clear policy with respect to the meaning, administration and 
enforcement of Rule 7630A, will promote members' understanding of the 
parameters of the rule and enhance the efficiency of its 
administration.
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    \7\ 15 U.S.C. 78o-3(b)(6).
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    FINRA further believes that the proposed rule change is consistent 
with Section 15A(b)(5) of the Act,\8\ which requires, among other 
things, that

[[Page 61125]]

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. 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. The proposed rule change is reasonable because it 
establishes a standard for recognition of aggregation requests that is 
easy to administer and that reflects the need to review and approve 
aggregation requests while avoiding the complexities associated with 
proration of the bills of members that affiliate during the course of a 
month. The proposed rule change is equitable because all members 
seeking to aggregate their activity are subject to the same parameters, 
in accordance with a commonsense standard that recognizes an 
affiliation as of the month's beginning closest in time to when the 
affiliation occurs, provided the members submit a timely request.
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    \8\ 15 U.S.C. 78o-3(b)(5).
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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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \9\ and paragraph (f)(1) of Rule 19b-4 
thereunder.\10\ 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(1).
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2011-049 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-2011-049. 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 such 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 publicly 
available. All submissions should refer to File Number SR-FINRA-2011-
049 and should be submitted on or before October 24, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-25352 Filed 9-30-11; 8:45 am]
BILLING CODE 8011-01-P