[Federal Register Volume 75, Number 190 (Friday, October 1, 2010)]
[Notices]
[Pages 60843-60844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-24675]
[[Page 60843]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62995; File No. SR-FINRA-2010-048]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to FINRA Trade Reporting Notice on Price
Validation and Price-Override Protocol
September 27, 2010.
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 17, 2010, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission
(``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 stated policy, practice,
or interpretation with respect to the meaning, administration, or
enforcement of an existing rule'' under Section 19(b)(3)(A) 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).
\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 filing a FINRA Trade Reporting Notice (``Notice'') that
explains the price validation protocol of the FINRA trade reporting
facilities and sets forth guidance on the use of the price-override
indicator in trade reports. Members are required to make systems
changes necessary to trade report in accordance with the Notice no
later than November 16, 2010.
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
The FINRA trade reporting facilities (i.e., the Alternative Display
Facility, Trade Reporting Facilities and OTC Reporting Facility)
(collectively referred to herein as the ``FINRA Facilities'') price
validate over-the-counter trades by comparing the submitted price
against price validation parameters established by FINRA, generally
based on a price deviation against the national best bid or offer. The
attached Trade Reporting Notice explains the price validation protocol
of the FINRA Facilities. Additionally, the Notice advises members that
the price-override indicator should not be appended automatically to
all trade reports submitted to a FINRA Facility. Rather, this special
indicator should be appended only after a trade has been rejected by a
FINRA Facility, pursuant to the established price validation protocol,
as described more fully in the Notice.
Proper trade reporting has become increasingly important because of
the single-stock trading pause pilot.\5\ Specifically, a firm that
reports a trade with an incorrect price could trigger a trading pause
in certain NMS stocks, as defined in Rule 600(b) of SEC Regulation NMS,
and trading in the stock may be unnecessarily halted, which is
inconsistent with the intent and purpose of the trading pause rules.
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\5\ See FINRA Rule 6121 and Regulatory Notice 10-30 (June 2010).
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Any member that has programmed its systems to append the price-
override indicator to its trade reports prior to rejection of the trade
must make the technological changes necessary to cease this practice as
soon as possible, and no later than November 16, 2010 (60 days from the
date of the Notice). After November 16, 2010, a pattern and practice of
reporting trades with the price-override indicator not in accordance
with the established protocol and the Notice may be considered conduct
inconsistent with high standards of commercial honor and just and
equitable principles of trade in violation of FINRA Rule 2010.
FINRA has filed the proposed rule change for immediate
effectiveness, and it is operative on the date of filing.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act, \6\ 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 that the proposed rule change will
enhance market transparency and further the goal of investor protection
by helping to ensure that the trade prices that are publicly
disseminated are correct and by reducing the potential for unnecessary
trading pauses in certain NMS stocks.
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\6\ 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.
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 \7\ and paragraph (f)(1) of Rule 19b-4
thereunder.\8\ 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.
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 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:
[[Page 60844]]
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-FINRA-2010-048 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, Station Place, 100 F Street, NE., Washington,
DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2010-048. 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-2010-
048 and should be submitted on or before October 22, 2010.
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\9\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-24675 Filed 9-30-10; 8:45 am]
BILLING CODE 8010-01-P