[Federal Register Volume 76, Number 12 (Wednesday, January 19, 2011)]
[Notices]
[Pages 3182-3184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-949]
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SECURITIES AND EXCHANGE COMMISSION
Release No. 34-63695; File No. SR-FINRA-2010-068
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
January 11, 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 December 30, 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 and
II 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.
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
[[Page 3183]]
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.
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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 Credit Schedule
NASDAQ OMX, as the FINRA/Nasdaq TRF Business Member, has determined
to amend the current Market Share percentages for revenue sharing
eligibility applicable to Tapes A, B and C by increasing the current
qualifying Market Share percentages for each tier and adding a new
Revenue Share tier. In addition, NASDAQ OMX has determined to adjust
the Revenue Share percentages under the credit schedule within each of
the tiers.
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
Previous tier break point share New tier break point Revenue
(percent) share
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Tape A Tier 1..................... =>0.75% 100 =>2% 98%
Tape A Tier 2..................... <0.75%, =>0.25% 80 <2%, =>1% 95
Tape A Tier 3..................... <0.25%, =>0.10% 50 <1%, =>0.50% 75
Tape A Tier 4..................... <0.10% 0 <0.50%, =>0.10% 20
Tape A Tier 5..................... N/A ......... <0.10% 0
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Tape B Tier 1..................... =>0.75% 100 =>2% 98
Tape B Tier 2..................... <0.75%, =>0.25% 80 <2%, =>1% 90
Tape B Tier 3..................... <0.25%, =>0.10% 50 <1%, =>0.35% 70
Tape B Tier 4..................... <0.10% 0 <0.35%, =>0.10% 10
Tape B Tier 5..................... N/A ......... <0.10% 0
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Tape C Tier 1..................... =>0.75% 100 =>2% 98
Tape C Tier 2..................... <0.75%, =>0.25% 80 <2%, =>1% 95
Tape C Tier 3..................... <0.25%, =>0.10% 50 <1%, =>0.50% 75
Tape C Tier 4..................... <0.10% 0 <0.50%, =>0.10% 20
Tape C Tier 5..................... N/A ......... <0.10% 0
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NASDAQ OMX, as the Business Member, has advised FINRA that it
believes that the increase in tier break point percentages coupled with
the adjusted and new Revenue Share tiers will make the tiers more
meaningful. In this regard, the Business Member has observed that the
distribution of participants among the tiers is significantly weighted
toward the top tiers under each of the Tapes. The Business Member
believes that the proposed tier break points will result in a more even
distribution of participants among the various tiers. The Business
Member notes that all participants eligible for Revenue Share under the
current credit schedule will continue to be eligible for Revenue Share
under the proposed credit schedule, although at the adjusted Revenue
Share percentages.
FINRA has filed the proposed rule change for immediate
effectiveness. FINRA is proposing that the operative date of the
proposed rule change will be January 3, 2011.
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
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 \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 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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\8\ 15 U.S.C. 78s(b)(3)(A).
\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-2010-068 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission,
[[Page 3184]]
100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2010-068. 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-
068 and should be submitted on or before February 9, 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. 2011-949 Filed 1-18-11; 8:45 am]
BILLING CODE 8011-01-P