[Federal Register Volume 76, Number 86 (Wednesday, May 4, 2011)]
[Notices]
[Pages 25385-25386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-10809]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64364; File No. SR-FINRA-2011-012]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Granting Approval of a Proposed Rule Change
Relating to TRACE Reporting of Asset-Backed Securities
April 28, 2011.
I. Introduction
On March 3, 2011, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change related to Trade Reporting and Compliance Engine
(``TRACE'') reporting of Asset-Backed Securities. The proposed rule
change was published for comment in the Federal Register on March 21,
2011.\3\ The Commission received no comments on the proposal. This
order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 64084 (March 16,
2011), 76 FR 15352 (``Notice'').
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[[Page 25386]]
II. Description of the Proposal
In February 2010, the Commission approved FINRA's proposal to amend
the FINRA Rule 6700 Series to define ``Asset-Backed Securities'' as
TRACE-Eligible Securities, thereby subjecting members to the
requirement to report transactions in such securities to TRACE.\4\ The
proposal is to become effective on May 16, 2011.\5\ In the current
proposed rule change, FINRA proposes additional amendments to the FINRA
Rule 6700 Series and FINRA Rule 7730 to prepare for the reporting of
Asset-Backed Securities transactions to TRACE. The proposed rule change
amends or supplements the TRACE reporting and other requirements that
will apply to Asset-Backed Securities transactions. Specifically, the
proposed rule change would:
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\4\ See Securities Exchange Act Release No. 61566 (February 22,
2010), 75 FR 9262 (March 1, 2010). This proposed rule change also
amended FINRA Rule 7730 to establish fees for reporting transactions
in Asset-Backed Securities.
\5\ See Securities Exchange Act Release No. 63223 (November 1,
2010), 75 FR 68654 (November 8, 2010) (Notice of Filing and
Immediate Effectiveness of SR-FINRA-2010-054 to Extend the
Implementation Period for SR-FINRA-2009-065); Regulatory Notice 10-
55 (October 2010).
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(1) In FINRA Rule 6710, clarify, simplify, or conform the defined
terms ``TRACE-Eligible Security,'' ``Reportable TRACE Transaction,''
``Agency Debt Security,'' ``Asset-Backed Security'' and ``TRACE System
Hours''; add the defined term, ``Securitizer''; and delete the defined
terms ``Sponsor'' and ``Issuing Entity'';
(2) In FINRA Rule 6730, (A) revise, renumber, and conform the text
of parallel reporting provisions in FINRA Rule 6730(a); (B) incorporate
minor amendments regarding the duration and expiration of the pilot
program for reporting Asset-Backed Securities transactions (``Pilot
Program''); (C) consolidate reporting requirements for Asset-Backed
Securities transactions that are executed other than during TRACE
System Hours; (D) simplify how settlement is reported for Asset-Backed
Securities transactions; (E) add alternative reporting requirements for
Asset-Backed Securities transactions that are collateralized mortgage
obligation (``CMO'') or real estate mortgage investment conduit
(``REMIC'') transactions that occur prior to the issuance of the CMO or
REMIC (``pre-issuance CMOs/REMICs''); and (F) add new FINRA Rule
6730(a)(6) to clarify a member's obligation to provide information to
FINRA Operations regarding a TRACE-Eligible Security when such security
is not in the TRACE system, and to incorporate other minor technical or
clarifying amendments to the Rule;
(3) In FINRA Rule 6760, incorporate requirements that apply to
Securitizers of Asset-Backed Securities, alternative notification
requirements for pre-issuance CMOs/REMICs, and minor technical,
conforming, or clarifying changes; and
(4) In FINRA Rule 7730, add the Financial Information eXchange
(``FIX'') as a method to report transactions to TRACE, establish a
system-related FIX fee, and incorporate a minor technical amendment.
III. Discussion and Commission's Findings
After carefully considering the proposed rule change, the
Commission finds that it is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to a national
securities association.\6\ In particular, the Commission finds that the
proposal is consistent with Section 15A(b)(6) of the Act,\7\ 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. The Commission believes that the
proposal clarifies the standards for reporting Asset-Backed Securities,
will assist FINRA by supporting more timely and accurate reporting to
TRACE of transactions in Asset-Backed Securities and enhance FINRA's
surveillance of the debt market in connection with Asset-Backed
Securities transactions for the protection of investors and in
furtherance of the public interest.
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\6\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78o-3(b)(6).
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The Commission further finds that the proposal to add to Rule 7730
a fee for reporting transactions in Asset-Backed Securities via FIX is
consistent with Section 15A(b)(5) of the Act, which requires, among
other things, that FINRA rules provide for the equitable allocation of
reasonable dues, fees, and other charges among members, issuers, and
other persons using any facility or system that FINRA operates or
controls.\8\ The fee is similar to the Computer-to-Computer Interface
(``CTCI'') fee that currently is assessed to members that elect to
report transactions in TRACE-Eligible Securities to TRACE via a CTCI
line.
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\8\ 15 U.S.C. 78o-3(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-FINRA-2011-012), be, and
hereby is, approved.
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\9\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delSegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-10809 Filed 5-3-11; 8:45 am]
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