Document ID: SEC-2008-0256-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2008-02-15T05:00Z

[Federal Register: February 15, 2008 (Volume 73, Number 32)]
[Notices]               
[Page 8915-8916]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15fe08-116]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57299; File No. SR-FINRA-2008-004]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Establish a Fee for the Submission of Non-Media 
Reports to the NASD/NSX Trade Reporting Facility

 February 8, 2008.
    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 6, 2008, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc. 
(``NASD'')) filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared substantially by FINRA. 
FINRA has designated this proposal as one establishing or changing a 
member due, fee, or other charge imposed by Nasdaq 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 filing with 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 Substance 
of the Proposed Rule Change

    FINRA is proposing to establish a fee for the submission of non-
media reports to the NASD/NSX Trade Reporting Facility (the ``NASD/NSX 
TRF'').\5\ The text of the proposed rule change is available at 
http://www.finra.org, the principal offices of FINRA, and the Commission's 

Public Reference Room.
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    \5\ Effective July 30, 2007, FINRA was formed through the 
consolidation of NASD and the member regulatory functions of NYSE 
Regulation. Accordingly, the NASD/NSX TRF is now doing business as 
the FINRA/NSX TRF. The formal name change of each Trade Reporting 
Facility is pending and once completed, FINRA will file a separate 
proposed rule change to reflect those changes in the Manual.
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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
Background
    On November 6, 2006, the Commission approved the establishment of 
the NASD/NSX TRF,\6\ and on November 27, 2006, the NASD/NSX TRF 
commenced operation. The NASD/NSX TRF provides FINRA members with 
another mechanism for reporting locked-in transactions in NMS stocks, 
as defined in Rule 600(b)(47) of Regulation NMS under the Act,\7\ 
effected otherwise than on an exchange.
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    \6\ See Securities Exchange Act Release No. 54715 (November 6, 
2006), 71 FR 66354 (November 14, 2006) (SR-NASD-2006-108).
    \7\ 7 17 CFR 242.600(b)(47).
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    In connection with the establishment of the NASD/NSX TRF, FINRA and 
National Stock Exchange, Inc. (``NSX'') entered into a Limited 
Liability Company Agreement for NASD/NSX Trade Reporting Facility LLC 
(the ``NASD/NSX TRF LLC Agreement''), a copy of which appears in the 
NASD Manual. Under the NASD/NSX TRF LLC Agreement, FINRA, the ``SRO 
Member,'' has sole regulatory responsibility for the NASD/NSX TRF. NSX, 
the ``Business Member,'' is primarily responsible for the management of 
the NASD/NSX TRF's business affairs, including establishing pricing for 
use of the NASD/NSX TRF, to the extent those affairs are not 
inconsistent with the regulatory and oversight functions of FINRA. 
Additionally, 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 NASD/NSX TRF.
    FINRA members can submit to the NASD/NSX TRF ``media'' reports 
(i.e., trade reports that are publicly disseminated by the Securities 
Information Processors (``SIPs'')) and ``non-media'' reports (i.e., 
reports that are submitted not for publication by the SIPs, but solely 
for clearing and/or regulatory purposes). Because FINRA uses all 
reports submitted, whether media or non-media, in conducting its 
regulatory and oversight functions, the NASD/NSX TRF is charged 
regulatory costs by FINRA based on all such reports that are submitted 
to the NASD/NSX TRF. However, market data revenue generated for NASD/
NSX TRF activity is derived solely from media reports submitted and, as 
provided in NASD Rule 7002C, no other fees currently apply to the use 
of the NASD/NSX TRF. Thus, NSX, as the Business Member, believes that 
members should be charged a fee for submission of non-media reports 
that would serve to offset directly its regulatory costs associated 
with non-media reports.
Proposed Fee for Submission of Non-Media Reports
    Accordingly, FINRA is proposing to adopt new NASD Rule 7003C to 
establish a fee for the submission of non-media reports to the NASD/NSX 
TRF. Specifically, under the proposed Rule, at the end of each billing 
cycle, a FINRA member will be charged a fee in the amount of $.0075 for 
each non-media report that the member submitted to the NASD/NSX TRF 
during that billing cycle. For purposes of the proposed Rule, a non-
media report is any report submitted by the member to the NASD/NSX TRF 
that is not submitted by the NASD/NSX TRF to the Consolidated Tape 
Association or the Nasdaq Securities Information Processor.
    NSX, as the Business Member, has determined that the proposed fee 
of $.0075 per report best approximates its regulatory costs associated 
with non-media reports submitted to the NASD/NSX TRF and is necessary 
for competitive reasons. NSX believes that the ability to offset such 
regulatory costs is crucial to the business of the NASD/NSX TRF and 
will keep the NASD/NSX TRF's prices competitive.
    Additionally, FINRA is proposing a technical amendment to NASD Rule 
7002C to clarify that there will be no charge for use of the NASD/NSX 
TRF, except as otherwise provided in the Rule 7000C Series (Charges for 
NASD/NSX Trade Reporting Facility Services). This technical amendment 
is necessary to avoid any potential confusion between Rule 7002C and 
proposed Rule 7003C.

[[Page 8916]]

    FINRA has filed the proposed rule change for immediate 
effectiveness. The operative date will be the date of filing.
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 Section 
15A(b)(5) of the Act,\9\ in particular, which requires, among other 
things, that 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. FINRA believes that the proposed rule change is a reasonable 
fee structure in that it will be applied uniformly to all FINRA members 
that submit non-media reports to the NASD/NSX TRF.
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    \8\ 8 15 U.S.C. 78o-3.
    \9\ 9 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 proposed rule change has been designated as a fee 
change pursuant to Section 19(b)(3)(A)(ii) of the Act \10\ and Rule 
19b-4(f)(2) \11\ thereunder, because it establishes or changes a due, 
fee, or other charge imposed on members by FINRA. Accordingly, the 
proposal is effective upon filing with the Commission. At any time 
within 60 days of the filing of the proposed rule change, the 
Commission may summarily abrogate 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-FINRA-2008-004 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2008-004. 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 inspection 
and copying 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-2008-004 and should be 
submitted on or before March 7, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-2865 Filed 2-14-08; 8:45 am]

BILLING CODE 8011-01-P