[Federal Register Volume 75, Number 65 (Tuesday, April 6, 2010)]
[Notices]
[Pages 17460-17462]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-7694]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61806; File No. SR-FINRA-2010-013]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Modify FINRA/Nasdaq Trade Reporting Securities
Transaction Credit
March 31, 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 March 26, 2010, 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 ``establishing or changing a
due, fee or other charge'' 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 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)(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 amend FINRA Rule 7610A (Securities
Transaction Credit) to modify credits provided to members that use the
FINRA/Nasdaq Trade Reporting Facility (``FINRA/Nasdaq TRF'').
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.
[[Page 17461]]
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
The FINRA/Nasdaq TRF is a facility of FINRA that is operated by The
NASDAQ OMX Group, Inc. (``NASDAQ OMX''). In connection with the
establishment of the FINRA/Nasdaq TRF, FINRA and NASDAQ OMX entered
into a limited liability company agreement (the ``LLC Agreement'').
Under the LLC Agreement, FINRA, the ``SRO Member,'' has sole regulatory
responsibility for the FINRA/Nasdaq TRF. NASDAQ OMX, the ``Business
Member,'' is primarily responsible for the management of the FINRA/
Nasdaq TRF's business affairs, including establishing pricing for use
of the FINRA/Nasdaq 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 FINRA/Nasdaq TRF.
The FINRA/Nasdaq TRF receives revenue for transactions reported to
the three tapes \5\ from the Consolidated Tape Association and Nasdaq
Securities Information Processor (the ``Tapes''). Pursuant to Rule
7610A, FINRA members are provided with a fractional share of this
revenue based on their ``Market Share.'' \6\ Market Share is calculated
quarterly for each member based on the transactions attributed to them
in each of the three Tapes. Rule 7610A provides four tiers of revenue
share: 0%, 50%, 80% and 100%. Eligibility for a tier is based on the
percentage of Market Share, and the percentage of Market Share required
increases as the tiers of revenue share increase. Currently, the amount
of Market Share required to receive an allocation under each tier is
different for each Tape. For example, to receive an 80% share of
revenue, a member must have 0.15% but less than 0.25% of Market Share
if reporting an NYSE security, 0.25% but less than 0.50% if reporting
an Amex security, or 0.25% but less than 0.75% if reporting a Nasdaq
security.
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\5\ Market data is transmitted to three tapes based on the
listing venue of the security: New York Stock Exchange securities
(``Tape A''), American Stock Exchange and regional exchange
securities (``Tape B''), and Nasdaq Stock Market securities (``Tape
C''). Tape A and Tape B are generally referred to as the
Consolidated Tape.
\6\ Rule 7610A defines Market Share as a percentage calculated
by dividing the total number of shares represented by trades
reported by a FINRA member to the FINRA/Nasdaq TRF during a given
calendar quarter by the total number of shares represented by all
trades reported to the Consolidated Tape Association or the Nasdaq
Securities Information Processor, as applicable, during that
quarter. Market Share is calculated separately for each tape.
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Proposed Amendments to Credit Schedule
NASDAQ OMX, as the FINRA/Nasdaq TRF Business Member, has determined
to amend the Market Share percentages for revenue sharing eligibility
applicable to Tapes A and B so that they are consistent with the
current levels of Tape C. Accordingly, FINRA is proposing to amend Rule
7610A to reflect the new credit schedule. The following table provides
a comparison of the old Market Share tier structure with the proposed
new structure:
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Revenue share
Previous tier break point New tier break point (percent)
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Tape A Tier 1............................ =>0.25%....................................... =>0.75%...................................... 100
Tape A Tier 2............................ <0.25%, =>0.15%............................... <0.75%, =>0.25%.............................. 80
Tape A Tier 3............................ <0.15%, =>0.10%............................... <0.25%, =>10%................................ 50
Tape A Tier 4............................ <0.10%........................................ <0.10%....................................... 0
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Tape B Tier 1............................ =>0.50%....................................... =>0.75%...................................... 100
Tape B Tier 2............................ <0.50%, =>0.25%............................... <0.75%, =>0.25%.............................. 80
Tape B Tier 3............................ <0.25%, =>0.10%............................... <0.25%, =>0.10%.............................. 50
Tape B Tier 4............................ <0.10%........................................ <0.10%....................................... 0
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Tape C Tier 1............................ =>0.75%....................................... =>0.75%...................................... 100
Tape C Tier 2............................ <0.75%, =>0.25%............................... <0.75%, =>0.25%.............................. 80
Tape C Tier 3............................ <0.25%, =>0.10%............................... <0.25%, =>0.10%.............................. 50
Tape C Tier 4............................ <0.10%........................................ <0.10%....................................... 0
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The Business Member notes that the volume and distribution of
Market Share among both Tapes A and B have matured so that they more
closely resemble the Market Share distribution of Tape C. As such, the
Business Member believes that it is appropriate to align the tier
structure of Tapes A and B to that of Tape C.
The Business Member has advised FINRA that it believes that the
proposed amended credit schedule more equitably allocates the revenue
share provided to members for their use of the FINRA/Nasdaq TRF. The
proposed rule change will eliminate the differences in allocation, thus
rewarding each member consistently for its use of the FINRA/Nasdaq TRF,
irrespective of the Tape to which the transaction is reported.
Under the proposed credit schedule, the thresholds for receiving
revenue share under the tiers of Tapes A and B have increased. As a
consequence, members that have historically qualified to receive
revenue share from Tapes A and B may no longer qualify for the same
tier, notwithstanding that they have achieved the same level of Market
Share. The Business Member believes that this is an appropriate result
of aligning Market Share with the revenues received from the Tapes for
reporting those transactions.
FINRA has filed the proposed rule change for immediate
effectiveness.
[[Page 17462]]
FINRA is proposing that the operative date of the proposed rule change
will be April 1, 2010.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(5) of the Act,\7\ 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 amended credit schedule is fair and
provides an equitable allocation of the credits provided to the FINRA/
Nasdaq TRF in that it will apply uniformly to all FINRA members that
use the FINRA/Nasdaq TRF.
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\7\ 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
No written comments were either solicited or 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)(ii) of the Act \8\ and paragraph (f)(2) of Rule 19b-4
thereunder.\9\ 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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\8\ 15 U.S.C. 78s(b)(3)(A)(ii).
\9\ 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 [email protected]. Please include
File Number SR-FINRA-2010-013 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-2010-013. 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-
013 and should be submitted on or before April 27, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7694 Filed 4-5-10; 8:45 am]
BILLING CODE 8011-01-P