Document ID: SEC-2012-2048-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2012-12-13T05:00Z

[Federal Register Volume 77, Number 240 (Thursday, December 13, 2012)]
[Notices]
[Pages 74249-74252]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30106]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68387; File No. SR-FINRA-2012-053]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change To Establish 
Optional TRACE Data Delivery Services and Related Fees

December 7, 2012.
    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 November 30, 2012, 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. 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.
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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 FINRA Rule 7730 to establish certain 
optional Trade Reporting and Compliance Engine (``TRACE'') data 
delivery services and fees in connection with such optional services.
    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
    FINRA proposes to amend Rule 7730 to establish two new optional 
TRACE data delivery services, TRACE Data Delivery Plus and TRACE Data 
Delivery Secure File Transfer Protocol (``TRACE Data Delivery SFTP''), 
and fees in connection with such optional services. Firms will have the 
option to enroll in neither, one or both of these services.
Background
    The FINRA Automated Data Delivery System (``FINRA ADDS'') is a 
secure Web site that provides a firm, by market participant identifier 
(``MPID''), access to TRACE trade journal files. The TRACE trade 
journal files in FINRA ADDS are available for Asset-Backed Securities 
transactions as well as for corporate bonds and Agency Debt Securities 
(``Corporate/Agency Debt Securities'').\3\ The Asset-Backed Securities 
trade journal files are separate from the Corporate/Agency Debt 
Securities trade journal files.
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    \3\ Transactions in Asset-Backed Securities began to be reported 
to TRACE on May 16, 2011, and TRACE trade journal files on FINRA 
ADDS are available from that date. See Regulatory Notice 11-20 (May 
2011). Transactions in Corporate/Agency Debt Securities became 
available on FINRA ADDS as a result of the migration of the 
reporting of such securities and related data functions from legacy 
TRACE technology to the Multi-Product Platform (``MPP''), which 
occurred on February 6, 2012. See Regulatory Notice 11-53 (November 
2011). Accordingly, the FINRA ADDS trade journal files for 
Corporate/Agency Debt Securities transactions are available only for 
transactions that are reported on or after February 6, 2012. 
Corporate/Agency Debt Securities transactions reported prior to 
February 6, 2012 are not available on FINRA ADDS.
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    Currently, to access the transaction information in FINRA ADDS, a 
firm must have an MPID for trade reporting. Entitled users of the MPID 
must submit a request for a trade journal file for a specified date, 
which must be within 30 calendar days prior to the date of the request. 
A ``report'' is provided in response to the firm's request.
    FINRA ADDS generates a separate report for each data archive 
(Asset-Backed Securities or Corporate/Agency Debt Securities) requested 
as well as a separate report for each date requested. Thus, a single 
report is a trade journal file for one date listing all transactions to 
which the requesting MPID was a party that were reported on that date

[[Page 74250]]

either in Asset-Backed Securities or Corporate/Agency Debt 
Securities.\4\
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    \4\ The FINRA ADDS report provides all of the transaction 
reports in which the MPID is a party to a transaction (whether the 
trade was reported by the firm or otherwise reported) on the 
specified date. The MPID also may request ``reject'' files (i.e., 
transaction reports submitted by the MPID that were not accepted by 
the system due to missing or inaccurate information). If a firm uses 
multiple MPIDs, persons authorized to use the specified MPID must 
make the data request to FINRA ADDS and the data provided by FINRA 
ADDS is limited to transactions involving that MPID.
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    The FINRA ADDS service is free, and there are no limits on the 
number of requests for reports that a firm may make or the number of 
firm personnel associated with a specified MPID that may submit such 
requests. The FINRA ADDS reports can be used by firms to assist in 
monitoring their trading and reporting activity and in performing other 
business activities, such as compliance.
Proposed Optional Data Services and Proposed Fees
    Since FINRA ADDS was initiated in July 2011, FINRA has received 
feedback from firms requesting access to more of the firm's TRACE 
transaction history and increased flexibility to access such data. In 
response, FINRA is proposing to establish two additional, optional data 
delivery services, TRACE Data Delivery Plus and TRACE Data Delivery 
SFTP, and proposed fees in connection with such optional services.
    TRACE Data Delivery Plus. TRACE Data Delivery Plus provides greater 
access to TRACE trade journal files. With TRACE Data Delivery Plus, an 
MPID subscriber will be able to obtain reports for Asset-Backed 
Securities or Corporate/Agency Debt Securities transaction data for 
transactions to which the MPID was a party that were reported more than 
30 calendar days prior to the date of the MPID's request (i.e., 
transaction data in trade journal files no longer available through the 
free FINRA ADDS service).\5\ For example, if on September 21, 2012, a 
subscriber requests its transaction activity in Asset-Backed Securities 
and Corporate/Agency Debt Securities reported on June 21, 2012 and June 
22, 2012, the subscriber will receive four reports--one from the Asset-
Backed Securities trade journal files for transactions reported on June 
21, 2012, a second report for such transactions reported on June 22, 
2012, and two additional reports from the Corporate/Agency Debt 
Securities trade journal files for the respective dates. Moreover, the 
subscriber will be able to download the requested report(s) on demand.
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    \5\ As with the free FINRA ADDS service, firms interested in 
TRACE Data Delivery Plus must subscribe per MPID. To access 
transaction information for multiple MPIDs, a firm must obtain a 
subscription for each MPID.
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    Subscribers to TRACE Data Delivery Plus also will have the option 
to obtain automated daily delivery of the subscriber's TRACE trade 
journal files to the FINRA ADDS Web site.\6\ Once a subscriber has 
activated subscription preferences, the files to which the user 
subscribes will automatically appear on the Web site each morning for 
download by the user, eliminating the need for the user to submit file 
requests. The automated daily delivery of the subscriber's TRACE trade 
journal files to the Web site will not constitute a request for a 
report for purposes of calculating the monthly fee described below. 
Accordingly, if a subscriber has no other requests for reports, the 
monthly fee would fall in the second column of the table below.
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    \6\ In contrast, firms using the free FINRA ADDS service must 
submit a request for data (e.g., if an MPID wants daily delivery of 
the prior day's Asset-Backed Security trade journal file, the MPID 
must log in each day and submit a request).
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    To provide TRACE Data Delivery Plus, FINRA proposes to amend Rule 
7730 to charge an MPID subscriber a monthly fee. The proposed monthly 
fee is based on two factors: (1) The average number of transactions per 
month to which the MPID was a party that was reported to TRACE in the 
prior calendar year, which number is used to categorize the MPID in one 
of four tiers; \7\ and (2) the number of FINRA ADDS reports received in 
a given month for transaction data that is no longer available through 
the free FINRA ADDS service (i.e., transaction data regarding 
transactions that were reported more than 30 calendar days prior to the 
date of the request) (``Plus reports'').\8\ The proposed monthly fees 
for Plus reports are:
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    \7\ Once assigned to a tier, a subscriber remains in the tier 
for the remainder of the calendar year. For example, an MPID that 
subscribes in September 2012 will be assigned to a tier based upon 
the TRACE transactions reported in 2011 in which the MPID was a 
party, and will remain in that tier until December 31, 2012. In 
2013, the MPID will be re-evaluated and assigned to a tier for 2013 
fee purposes, based upon the MPID's trading in TRACE-Eligible 
Securities in 2012.
    \8\ A subscriber's monthly fee would be assessed each month and 
accordingly may vary during a calendar year, depending on the number 
of reports FINRA sends to the subscriber in response to the 
subscriber's requests. The TRACE Data Delivery Plus fee is based 
upon the number of reports provided to avoid charging for data 
requests that FINRA is unable to provide. For example, FINRA ADDS 
would be unable to provide a report for a Corporate/Agency Debt 
Securities trade journal file for a date prior to February 6, 2012, 
the date such securities were migrated to the MPP.

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                                                          0-5 Plus reports  6-25 Plus reports   >25 Plus reports
 Tier based on average number of transactions per month     received per       received per       received per
 MPID subscriber was a party to in prior calendar year         month              month              month
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Tier 1: 10,000+........................................                $60                $80               $100
Tier 2: 3,000-9,999....................................                 40                 55                 70
Tier 3: 500-2,999......................................                 20                 30                 40
Tier 4: <500...........................................                 10                 15                 20
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    TRACE Data Delivery SFTP. Firms also have requested an automated 
interface to retrieve (without sending a request or query) their prior 
day's TRACE trade journal files daily from FINRA ADDS. The new optional 
TRACE Data Delivery SFTP will provide such a service, permitting an 
MPID subscriber to retrieve the subscriber's prior day TRACE trade 
journal files automatically via SFTP.
    FINRA proposes to amend Rule 7730 to establish two fees to provide 
the TRACE Data Delivery SFTP: (1) A one-time set-up fee of $250 per 
subscriber for TRACE Data Delivery SFTP; and (2) a monthly fee of $200 
per subscriber.
    FINRA will announce the effective date of the proposed rule change 
in a Regulatory Notice to be published no later than 60 days following 
Commission approval. The effective date will be no later than 120 days 
following publication of the Regulatory Notice announcing Commission 
approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\9\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and

[[Page 74251]]

equitable principles of trade, and, in general, to protect investors 
and the public interest; and Section 15A(b)(5) of the Act,\10\ 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.
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    \9\ 15 U.S.C. 78o-3(b)(6).
    \10\ 15 U.S.C. 78o-3(b)(5).
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    FINRA believes that the proposed rule change to establish two 
optional data delivery services subject to appropriate fees would 
provide a member firm with access to more of its TRACE transaction 
history and increased flexibility to access such data, which may assist 
a member firm in monitoring its trading and reporting activity and in 
performing other business activities. FINRA believes that providing 
member firms an additional automated avenue to review pricing in and 
the transaction history of the member firm's TRACE-Eligible Securities 
transactions may enhance the member firm's oversight of its trading in 
fixed income securities, which would promote market integrity and 
provide for the protection of investors and the public generally.
    FINRA believes that the proposed rule change provides for the 
equitable allocation of the proposed reasonable fees among all member 
firms. The optional services would be accessible by all member firms, 
subject to reasonable fees. As with fees for other optional data 
services provided by FINRA, the proposed fees would be charged only to 
those member firms that voluntarily opt to receive one or both of the 
services. Only those member firms that elect to become subscribers and 
use the optional services would incur the costs related to such 
services. The fees proposed for TRACE Data Delivery Plus are equitably 
allocated among those member firms that opt to subscribe in that the 
fees are scaled according to both the average number of transactions in 
TRACE-Eligible Securities per month per MPID and the number of 
requested reports, such that higher volume users would be subject to 
higher fees. Similarly, the fees proposed for TRACE Data Delivery SFTP 
are equitably allocated among MPID subscribers in that the same setup 
fees are charged to every member firm that elects to establish a secure 
and automated interface with the subscriber, and the same monthly fee 
is charged to all subscribers because each subscriber receives the same 
service--an automated daily transmission of the subscriber's prior day 
TRACE trade journal files.
    FINRA believes that the proposed fees are reasonable in light of 
the costs and benefits provided by the corresponding services. In 
creating such services, FINRA incurred costs related to data 
warehousing, software and hardware upgrades and software programming, 
as well as costs related to personnel to support and maintain such 
services. The proposed fees are reasonable in that such fees are 
designed to defray a portion of expenses incurred to establish, 
operate, and administer the two optional services. The proposed fees 
for TRACE Data Delivery Plus are reasonable as the fees would be scaled 
according to both the average number of transactions in TRACE-Eligible 
Securities per month per MPID and the number of requested reports. In 
general, the fees are scaled such that those MPID subscribers having 
fewer transactions per month and making fewer requests for reports per 
month would have lower monthly fees while those subscribers reporting 
larger numbers of transactions per month and making many requests for 
reports would have higher monthly fees. The proposed one-time fee for 
TRACE Data Delivery SFTP would permit FINRA to offset the expense of 
establishing a secure and automated interface with the subscriber. 
Moreover, the monthly TRACE Data Delivery SFTP fee is reasonable, 
because it would provide an MPID subscriber the benefit of automating 
its daily request for, and receipt of, the TRACE trading data from the 
prior trade date, and likely reduce the costs of an MPID subscriber 
that otherwise would make a daily request for such data, and also would 
offset, in part, FINRA's expenses relating to maintaining the automated 
daily transmission of TRACE data to subscribers and the secure and 
automated interface with all subscribers to the service.
    FINRA believes that the services and the proposed fees are not 
unfairly discriminatory because, in addition to the services being 
voluntary, they would be available to all member firms on an equal 
basis. The same range of services would be available to all members and 
the proposed fees would be applicable to all interested members. Thus, 
the proposed rule change would not unfairly discriminate between or 
among similarly situated members as to the optional services or the 
applicable fees.

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. As further detailed above, 
FINRA is proposing to establish two optional data delivery services 
subject to reasonable fees. Members that do not elect to receive such 
data using the optional data delivery services will continue to have 
the ability to access such data upon request at no charge. While such 
members can continue to request such data for a specified date, which 
must be within 30 calendar days prior to the date of the request, FINRA 
does not believe that this alternative imposes a significant 
operational burden on firms seeking access to TRACE trade journal files 
at no charge.
    In addition, because the fees that will be charged for the two 
optional data delivery services are both optional and reasonable in 
amount, FINRA does not believe that the payment of such fees by any 
member, or any group or class of members, will result in a burden on 
competition to such industry members relative to other industry members 
that elect not to subscribe to the optional services.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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 rule-comments@sec.gov. Please include 
File

[[Page 74252]]

Number SR-FINRA-2012-053 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-2012-053. 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 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-2012-053, and should be submitted on or before January 3, 
2013.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30106 Filed 12-12-12; 8:45 am]
BILLING CODE 8011-01-P