[Federal Register Volume 76, Number 10 (Friday, January 14, 2011)]
[Notices]
[Pages 2739-2741]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-668]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63673; File No. SR-FINRA-2011-002]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Extend a TRACE Pilot Program
January 7, 2011.
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 January 5, 2011, the 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 and
II below, which Items have been prepared by FINRA. FINRA has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule
[[Page 2740]]
19b-4 under the Act,\3\ 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\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to extend the pilot program in FINRA Rule
6730(e)(4) to July 8, 2011. The pilot program does not require
reporting to Trade Reporting and Compliance Engine (``TRACE'')
transactions in TRACE-Eligible Securities that are executed on a
facility of the NYSE in accordance with NYSE Rules 1400, 1401 and 86
and reported to NYSE in accordance with NYSE's applicable trade
reporting rules and disseminated publicly by NYSE.
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 FINRA Rule 6730(e)(4) to extend the pilot
program, which is scheduled to expire on January 7, 2011, to July 8,
2011.\4\ The pilot program does not require reporting to TRACE
transactions in TRACE-Eligible Securities that are executed on a
facility of NYSE in accordance with NYSE Rules 1400, 1401 and 86 and
reported to NYSE in accordance with NYSE's applicable trade reporting
rules and disseminated publicly by NYSE, provided that a data sharing
agreement between FINRA and NYSE related to transactions covered by the
Rule remains in effect.
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\4\ See Securities Exchange Act Release No. 54768 (November 16,
2006), 71 FR 67673 (November 22, 2006) (Order Approving Proposed
Rule Change; File No. SR-NASD-2006-110) (pilot program in FINRA Rule
6730(e)(4), subject to the execution of a data sharing agreement
addressing relevant transactions, became effective on January 9,
2007); Securities Exchange Act Release No. 59216 (January 8, 2009),
74 FR 2147 (January 14, 2009) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change; File No. SR-FINRA-2008-065)
(pilot program extended to January 7, 2011).
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FINRA is proposing to extend the pilot program until July 8, 2011
to continue to exempt transactions in TRACE-Eligible Securities on an
NYSE facility (and as to which all the other conditions of the
exemption are met) from the TRACE reporting requirements. FINRA
believes that the extension will provide additional time to analyze the
impact of the exemption. Without the extension, members would be
subject to both FINRA's and NYSE's trade reporting requirements with
respect to these securities.
The proposed rule change would not expand or otherwise change the
pilot. FINRA notes that the success of the pilot program remains
dependent on FINRA's ability to effectively continue to conduct
surveillance on corporate debt trading in the over-the-counter market.
In this regard, FINRA Rule 6730(e)(4) would continue to require that
the exemption be predicated on the data agreement between FINRA and
NYSE to share data related to the transactions covered by the Rule
remaining in effect. However, FINRA supports a regulatory construct
that, in the future, consolidates all last sale transaction information
to provide better price transparency and a more efficient means to
engage in market surveillance of TRACE-Eligible Securities
transactions. The extension proposed herein will allow the pilot
program to continue to operate without interruption while FINRA and the
NYSE further assess the effect of the exemption and issues regarding
the consolidation of market data, market surveillance and price
transparency.
FINRA has filed the proposed rule change for immediate
effectiveness and has requested that the SEC waive the requirement that
the proposed rule change not become operative for 30 days after the
date of the filing, such that the pilot can continue to operate without
interruption.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\5\ 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 extension of the exemptive
provision protects investors and the public because transactions will
be reported, transparency will be maintained for these transactions,
and NYSE's agreement to share data with FINRA allows FINRA, at this
time, to conduct surveillance in the corporate debt securities market.
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\5\ 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 Exchange represented that the proposed rule change qualifies
for immediate effectiveness pursuant to Section 19(b)(3)(A) of the
Exchange Act \6\ and Rule 19b-4(f)(6) thereunder \7\ because it: (i)
Does not significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
and (iii) by its terms, does not become operative for 30 days from the
date on which it was filed, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest.\8\
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6).
\8\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to submit to the Commission written notice
of its intent to file the proposed rule change, along with a brief
description and text of the proposed rule change, at least five
business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Commission has waived the five-day pre-filing period in this case.
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The Exchange has requested that the Commission waive the 30-day
operative delay, so that the proposed rule change may become operative
upon filing. The Commission hereby grants the Exchange's request.\9\
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public
[[Page 2741]]
interest by allowing the continuation of the pilot program without
interruption while permitting FINRA and NYSE to further assess the
effects of the current exemption issues regarding the consolidation of
market data, market surveillance, and price transparency.
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\9\ For the purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or 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 e-mail to [email protected]. Please include
File Number SR-FINRA-2011-002 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-2011-002. 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 the 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-2011-002
and should be submitted on or before February 4, 2011.
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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-668 Filed 1-13-11; 8:45 am]
BILLING CODE 8011-01-P