Document ID: SEC-2014-1708-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2014-10-08T04:00Z

[Federal Register Volume 79, Number 195 (Wednesday, October 8, 2014)]
[Notices]
[Pages 60874-60876]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-23982]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73289; File No. SR-FINRA-2014-039]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Delay the Implementation Date of the Trade 
Reporting Amendments Approved Pursuant to SR-FINRA-2013-050

October 2, 2014.
    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 24, 2014, 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 the 
Substance of the Proposed Rule Change

    FINRA is proposing to delay the implementation date of amendments 
to the trade reporting rules relating to the OTC Reporting Facility 
(``ORF''), the Alternative Display Facility (``ADF'') and the Trade 
Reporting Facilities (``TRFs'') approved pursuant to SR-FINRA-2013-050. 
The proposed rule change would not make any changes to FINRA rules.
    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
    On November 12, 2013, FINRA filed proposed rule change SR-FINRA-
2013-050 to amend FINRA rules governing the reporting of (i) over-the-
counter (``OTC'') transactions in equity securities to the FINRA 
Facilities; \4\ and (ii) orders in NMS stocks and OTC Equity Securities 
to the Order Audit Trail System (``OATS''). The proposed rule change, 
as amended,\5\ was approved by the Commission on February 27, 2014.\6\
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    \4\ Specifically, the FINRA Facilities are the ADF and TRFs, to 
which members report OTC transactions in NMS stocks, as defined in 
SEC Rule 600(b) of Regulation NMS; and the ORF, to which members 
report transactions in ``OTC Equity Securities,'' as defined in 
FINRA Rule 6420 (i.e., non-NMS stocks such as OTC Bulletin Board and 
OTC Market securities), as well as transactions in Restricted Equity 
Securities, as defined in FINRA Rule 6420, effected pursuant to 
Securities Act Rule 144A.
    \5\ On February 14, 2014, FINRA filed Amendment No. 1 to (1) 
address the comments the Commission received in response to the 
Federal Register publication and propose amendments, where 
appropriate; and (2) propose technical amendments to update cross-
references and make other non-substantive changes to the ADF rules 
as a result of the approval of SR-FINRA-2013-053.
    \6\ See Securities Exchange Act Release No. 71623 (February 27, 
2014), 79 FR 12558 (March 5, 2014) (Order Granting Accelerated 
Approval of Proposed Rule Change, as Modified by Amendment No. 1; 
File No. SR-FINRA-2013-050).
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    In SR-FINRA-2013-050, FINRA proposed that the effective date of the 
proposed rule changes to the trade reporting rules would be no earlier 
than April 15, 2014, and no later than September 30, 2014, and the 
effective date of the proposed rule change to the OATS rules would be 
no later than 45 days after Commission approval. In Amendment No. 1, 
FINRA clarified that it would implement the amendments to the trade 
reporting rules in phases, with the amendments becoming operative for 
the ORF first (upon migration of the ORF to FINRA's multi-product 
platform (``MPP'')) and for the ADF and TRFs at a subsequent date. As 
previously announced by FINRA, the amendments to the OATS rules became 
effective on April 7, 2014.\7\ FINRA also announced that the amendments 
to the ORF rules

[[Page 60875]]

would be effective on September 15, 2014 (the date of migration to the 
MPP), the amendments to the ADF and TRF rules relating to millisecond 
reporting would be effective on September 29, 2014, and the remaining 
amendments to the ADF and TRF rules would be effective in the first 
quarter of 2015.\8\
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    \7\ See March 21, 2014 OATS Report, ``Firms Capturing Time in 
Milliseconds Required to Report to OATS in Milliseconds Beginning 
April 7, 2014.''
    \8\ See Regulatory Notice 14-21 (May 2014).
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    By letter dated August 8, 2014, the Financial Information Forum 
(``FIF'') formally requested a delay of migration of the ORF to the MPP 
and implementation of the amendments to the trade reporting rules 
approved pursuant to SR-FINRA-2013-050 until February 23, 2015, stating 
that firms need additional time to complete and test the systems 
changes. Firms have indicated that they do not believe they could meet 
a September 2014 implementation date, in light of the development 
efforts that the amendments will entail, as well as other development 
efforts currently underway.\9\
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    \9\ See letter dated August 8, 2014 from Manisha Kimmel, FIF, to 
Steve Joachim and Stephanie Dumont, FINRA (``FIF Letter''). By 
letter dated August 21, 2014, FINRA responded to the FIF Letter. See 
letter dated August 21, 2014 from Steven Joachim, FINRA, to Manisha 
Kimmel, FIF (``FINRA Response''). Copies of the FIF Letter and FINRA 
Response are attached to the proposed rule change as Exhibit 2.
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    To accommodate this request and to provide additional time for 
firms to complete the necessary systems changes, FINRA is filing this 
proposed rule change to revise the time frame for implementation of the 
amendments to the trade reporting rules approved pursuant to SR-FINRA-
2013-050.
    In response to the FIF's request, FINRA believes a delay in the 
migration of the ORF to the MPP from September 15, 2014 to November 17, 
2014 is appropriate.\10\ Accordingly, FINRA is proposing that the 
amendments to the ORF rules (i.e., Rules 6622 and 7330) approved 
pursuant to SR-FINRA-2013-050 be effective on November 17, 2014.
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    \10\ See ``Revised Migration Date for New OTC Reporting Facility 
Technology Platform,'' available at www.finra.org/Industry/Compliance/MarketTransparency/ORF/Notices/P580334.
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    In addition, FINRA is proposing that the amendments to the ADF and 
TRF rules approved pursuant to SR-FINRA-2013-050 requiring firms to 
report time in milliseconds if their systems capture milliseconds \11\ 
be effective on November 10, 2014.
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    \11\ See Rules 6282.04, 6380A.04, 6380B.04, 7130.01, 7230A.01 
and 7230B.01.
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    Finally, FINRA is proposing that the remaining amendments to the 
ADF and TRF trade reporting rules, as well as the technical and 
conforming amendments to the rules, approved pursuant to SR-FINRA-2013-
050 be implemented no earlier than March 1, 2015 and no later than 
April 30, 2015. Specifically, the remaining amendments to the ADF and 
TRF rules (i) require firms to report an additional time field for Stop 
Stock transactions \12\ and transactions that reflect an execution 
price that is based on a prior reference point in time,\13\ and when 
reporting block transactions using the exception for Intermarket Sweep 
Orders (ISOs) (outbound) under SEC Rule 611 of Regulation NMS, if the 
time the firm routed the ISOs is different from the execution time; 
\14\ (ii) require firms to identify the original trade when reporting a 
reversal by including the control number and report date for the 
original trade report; \15\ (iii) require firms to report trades 
executed on non-business days and trades reported more than 365 days 
after trade date (T+365) to the ADF or a TRF (and not on ``Form T'' 
through FINRA's Firm Gateway) and further to report non-business day 
trades on an ``as/of'' basis by 8:15 a.m. the next business day with 
the unique trade report modifier to denote their execution outside 
normal market hours; \16\ (iv) provide that where both sides are 
submitting a clearing-only report to effectuate a step-out, the member 
transferring out of the position must report a step-out and the member 
receiving the position must report a ``step-in''; \17\ and (v) address 
the processing of trades that are submitted for clearing.\18\ In 
addition, SR-FINRA-2013-050 made a number of non-substantive technical 
and conforming changes to the ADF and TRF rules that were otherwise 
being amended. FINRA will announce the new effective dates for the 
amendments to the trade reporting rules approved under SR-FINRA-2013-
050 in a Notice.
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    \12\ See paragraph (F) of Rules 6282(a)(4), 6380A(a)(5) and 
6380B(a)(5).
    ``Stop stock transaction'' means a transaction resulting from an 
order in which a firm and another party agree that the order will be 
executed at a stop stock price or better, which price is based upon 
the prices at which the security is trading at the time the firm 
receives the order. See Rules 6220, 6320A and 6320B.
    \13\ See paragraph (G) of Rules 6282(a)(4), 6380A(a)(5) and 
6380B(a)(5).
    \14\ See Rules 6282.03, 6380A.03 and 6380B.03.
    \15\ See Rules 6282(g), 6380A(g) and 6380B(f).
    \16\ See Rules 6282(a)(2), 6380A(a)(2) and 6380B(a)(2).
    \17\ See Rules 7130(g), 7230A(i) and 7230B(h).
    \18\ See Rules 7140, 7240A and 7240B.
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    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the Commission waive the 
requirement that the proposed rule change not become operative for 30 
days after the date of the filing. The operative date will be the date 
of filing of the proposed rule change.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\19\ 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 the proposed rule change is consistent 
with the Act in that it provides firms additional time to complete the 
systems changes necessary to comply with SR-FINRA-2013-050, which 
amendments will, among other things, ensure a more accurate and 
complete audit trail, enable FINRA to recreate more accurately members' 
market activity and enhance FINRA's ability to surveil on an automated 
basis for compliance with FINRA trade reporting and other rules.
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    \19\ 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. FINRA believes that providing 
adequate time for firms to make the systems changes necessary to comply 
with SR-FINRA-2013-050 will benefit all interested parties.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Copies of the FIF Letter and FINRA Response, which addresses the 
issues raised in the FIF Letter, are attached to this filing. In 
response to the FIF's request, as discussed above, FINRA has delayed 
migration of the ORF and is proposing to delay implementation of the 
trade reporting amendments approved under SR-FINRA-2013-050. FINRA 
believes that the revised implementation timeline set forth above will 
provide members additional time to make the necessary system changes 
while balancing the need to implement the amendments without undue 
delay.

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

[[Page 60876]]

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 \20\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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 satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing.\22\ However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest.\23\ FINRA has requested that the Commission waive 
the 30-day operative delay so that FINRA can immediately delay the 
implementation dates, as provided in this proposal.
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    \22\ 17 CFR 240.19b-4(f)(6)(iii).
    \23\ Id.
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    The Commission believes that the waiver of the 30-day operative 
delay is consistent with the protection of investors and the public 
interest as it will allow FINRA to extend the implementation dates of 
certain changes approved pursuant to SR-FINRA-2013-050 in a timely 
manner. Therefore, the Commission designates the proposal operative 
upon filing.\24\
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    \24\ 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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act.\25\ If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule change should be approved or disapproved.\26\
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    \25\ 15 U.S.C. 78s(b)(3)(C).
    \26\ Id.
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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-2014-039 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2014-039. 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; 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-2014-039, and should 
be submitted on or before October 29, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-23982 Filed 10-7-14; 8:45 am]
BILLING CODE 8011-01-P