[Federal Register Volume 76, Number 191 (Monday, October 3, 2011)]
[Notices]
[Pages 61124-61125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-25352]
[[Page 61124]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65408; File No. SR-FINRA-2011-049]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change Relating to Aggregation of Activity of Affiliated
Members for Purposes of FINRA/Nasdaq TRF Fees and Credits
September 27, 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 September 13, 2011, 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 ``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)(i) 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)(i).
\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 proposing to amend Rule 7630A (Aggregation of Activity of
Affiliated Members) relating to the pricing schedule for the FINRA/
NASDAQ Trade Reporting Facility (the ``FINRA/NASDAQ TRF'') under the
Rule 7600A Series.
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
Rule 7630A allows affiliated members to aggregate their activity
under certain provisions of the fee and credit schedule applicable to
the FINRA/NASDAQ TRF that make fees and credits dependent upon the
volume of their activity. For example, Rule 7620A caps fees for members
with a daily average number of media/executing party trades during the
month in excess of 2500. Affiliated members that might not qualify for
the cap by themselves may be able to qualify by aggregating their
activity.
Under Rule 7630A, a member may request that the FINRA/NASDAQ TRF
aggregate its activity with the activity of its affiliates.\5\ The rule
defines an ``affiliate'' of the member as any wholly owned subsidiary,
parent or sister (as those terms are defined under the rule) of the
member that is also a member. Thus, the rule requires that one
affiliated member own 100% of the voting interests in the other, or
that they both be under the common control of a parent that owns 100%
of each. A member requesting aggregation of affiliate activity under
Rule 7630A is required to certify the affiliate status of entities
whose activity it seeks to aggregate and immediately to provide notice
of any event that causes an entity to cease to be an affiliate. A
review of information regarding the entities is conducted, and the
member may be requested to provide additional information to verify the
affiliate status of an entity. A request will be approved unless it is
determined that the member's certification is not accurate.\6\ FINRA is
proposing to clarify Rule 7630A by describing the process for review
and approval in proposed paragraph (a)(1). However, FINRA is not
proposing any changes to this process.
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\5\ The rule is administered by The NASDAQ OMX Group, Inc.
(``NASDAQ''), in its capacity as the ``Business Member'' and
operator of the FINRA/NASDAQ TRF on behalf of FINRA. FINRA's
oversight of this function performed by the Business Member is
conducted through an annual assessment and review of TRF operations
by an outside independent audit firm.
\6\ In the event of an inaccurate certification, FINRA would
investigate whether the member had violated FINRA rules and would
take appropriate disciplinary action.
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In addition, FINRA is proposing to adopt a stated policy with
respect to the timing of recognition of aggregation requests. Because
bills for the FINRA/NASDAQ TRF are prepared on a monthly basis,
recognizing an affiliation in the middle of a month would require a
complex proration of members' bills. Accordingly, it has been the
FINRA/NASDAQ TRF's practice to recognize an affiliation request either
at the beginning of the month in which the affiliation occurs or at the
beginning of the following month. FINRA is proposing to adopt new
paragraph (a)(2) of Rule 7630A, which provides that if two or more
members become affiliated on or prior to the sixteenth day of a month
and submit a request for aggregation on or prior to the twenty-second
day of the month, approval of the request shall be deemed effective as
of the first day of that month. Thus, for example, if one member
acquires another, the acquisition is completed by June 16, and the
members file a request for aggregation by June 22, approval of the
request would allow the members to aggregate all activity during June.
This would be the case regardless of the time required to review and
approve the request. However, if members become affiliated after the
sixteenth day of the month, or do not submit a request for aggregation
until after the twenty-second day of the month, the request would not
be recognized until the following month.
FINRA has filed the proposed rule change for immediate
effectiveness. The effective date and the implementation date will be
the date of filing.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15(b)(6) of the Act,\7\ which requires, among
other things, that FINRA rules 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, by
adopting a clear policy with respect to the meaning, administration and
enforcement of Rule 7630A, will promote members' understanding of the
parameters of the rule and enhance the efficiency of its
administration.
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\7\ 15 U.S.C. 78o-3(b)(6).
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FINRA further believes that the proposed rule change is consistent
with Section 15A(b)(5) of the Act,\8\ which requires, among other
things, that
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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. All
similarly situated members are subject to the same fee structure, and
access to the FINRA/NASDAQ TRF is offered on fair and non-
discriminatory terms. The proposed rule change is reasonable because it
establishes a standard for recognition of aggregation requests that is
easy to administer and that reflects the need to review and approve
aggregation requests while avoiding the complexities associated with
proration of the bills of members that affiliate during the course of a
month. The proposed rule change is equitable because all members
seeking to aggregate their activity are subject to the same parameters,
in accordance with a commonsense standard that recognizes an
affiliation as of the month's beginning closest in time to when the
affiliation occurs, provided the members submit a timely request.
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\8\ 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 \9\ and paragraph (f)(1) of Rule 19b-4
thereunder.\10\ 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.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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:
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-2011-049 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-2011-049. 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-2011-
049 and should be submitted on or before October 24, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-25352 Filed 9-30-11; 8:45 am]
BILLING CODE 8011-01-P