[Federal Register Volume 77, Number 240 (Thursday, December 13, 2012)]
[Notices]
[Pages 74249-74252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-30106]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68387; File No. SR-FINRA-2012-053]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change To Establish
Optional TRACE Data Delivery Services and Related Fees
December 7, 2012.
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 November 30, 2012, 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. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend FINRA Rule 7730 to establish certain
optional Trade Reporting and Compliance Engine (``TRACE'') data
delivery services and fees in connection with such optional services.
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 Rule 7730 to establish two new optional
TRACE data delivery services, TRACE Data Delivery Plus and TRACE Data
Delivery Secure File Transfer Protocol (``TRACE Data Delivery SFTP''),
and fees in connection with such optional services. Firms will have the
option to enroll in neither, one or both of these services.
Background
The FINRA Automated Data Delivery System (``FINRA ADDS'') is a
secure Web site that provides a firm, by market participant identifier
(``MPID''), access to TRACE trade journal files. The TRACE trade
journal files in FINRA ADDS are available for Asset-Backed Securities
transactions as well as for corporate bonds and Agency Debt Securities
(``Corporate/Agency Debt Securities'').\3\ The Asset-Backed Securities
trade journal files are separate from the Corporate/Agency Debt
Securities trade journal files.
---------------------------------------------------------------------------
\3\ Transactions in Asset-Backed Securities began to be reported
to TRACE on May 16, 2011, and TRACE trade journal files on FINRA
ADDS are available from that date. See Regulatory Notice 11-20 (May
2011). Transactions in Corporate/Agency Debt Securities became
available on FINRA ADDS as a result of the migration of the
reporting of such securities and related data functions from legacy
TRACE technology to the Multi-Product Platform (``MPP''), which
occurred on February 6, 2012. See Regulatory Notice 11-53 (November
2011). Accordingly, the FINRA ADDS trade journal files for
Corporate/Agency Debt Securities transactions are available only for
transactions that are reported on or after February 6, 2012.
Corporate/Agency Debt Securities transactions reported prior to
February 6, 2012 are not available on FINRA ADDS.
---------------------------------------------------------------------------
Currently, to access the transaction information in FINRA ADDS, a
firm must have an MPID for trade reporting. Entitled users of the MPID
must submit a request for a trade journal file for a specified date,
which must be within 30 calendar days prior to the date of the request.
A ``report'' is provided in response to the firm's request.
FINRA ADDS generates a separate report for each data archive
(Asset-Backed Securities or Corporate/Agency Debt Securities) requested
as well as a separate report for each date requested. Thus, a single
report is a trade journal file for one date listing all transactions to
which the requesting MPID was a party that were reported on that date
[[Page 74250]]
either in Asset-Backed Securities or Corporate/Agency Debt
Securities.\4\
---------------------------------------------------------------------------
\4\ The FINRA ADDS report provides all of the transaction
reports in which the MPID is a party to a transaction (whether the
trade was reported by the firm or otherwise reported) on the
specified date. The MPID also may request ``reject'' files (i.e.,
transaction reports submitted by the MPID that were not accepted by
the system due to missing or inaccurate information). If a firm uses
multiple MPIDs, persons authorized to use the specified MPID must
make the data request to FINRA ADDS and the data provided by FINRA
ADDS is limited to transactions involving that MPID.
---------------------------------------------------------------------------
The FINRA ADDS service is free, and there are no limits on the
number of requests for reports that a firm may make or the number of
firm personnel associated with a specified MPID that may submit such
requests. The FINRA ADDS reports can be used by firms to assist in
monitoring their trading and reporting activity and in performing other
business activities, such as compliance.
Proposed Optional Data Services and Proposed Fees
Since FINRA ADDS was initiated in July 2011, FINRA has received
feedback from firms requesting access to more of the firm's TRACE
transaction history and increased flexibility to access such data. In
response, FINRA is proposing to establish two additional, optional data
delivery services, TRACE Data Delivery Plus and TRACE Data Delivery
SFTP, and proposed fees in connection with such optional services.
TRACE Data Delivery Plus. TRACE Data Delivery Plus provides greater
access to TRACE trade journal files. With TRACE Data Delivery Plus, an
MPID subscriber will be able to obtain reports for Asset-Backed
Securities or Corporate/Agency Debt Securities transaction data for
transactions to which the MPID was a party that were reported more than
30 calendar days prior to the date of the MPID's request (i.e.,
transaction data in trade journal files no longer available through the
free FINRA ADDS service).\5\ For example, if on September 21, 2012, a
subscriber requests its transaction activity in Asset-Backed Securities
and Corporate/Agency Debt Securities reported on June 21, 2012 and June
22, 2012, the subscriber will receive four reports--one from the Asset-
Backed Securities trade journal files for transactions reported on June
21, 2012, a second report for such transactions reported on June 22,
2012, and two additional reports from the Corporate/Agency Debt
Securities trade journal files for the respective dates. Moreover, the
subscriber will be able to download the requested report(s) on demand.
---------------------------------------------------------------------------
\5\ As with the free FINRA ADDS service, firms interested in
TRACE Data Delivery Plus must subscribe per MPID. To access
transaction information for multiple MPIDs, a firm must obtain a
subscription for each MPID.
---------------------------------------------------------------------------
Subscribers to TRACE Data Delivery Plus also will have the option
to obtain automated daily delivery of the subscriber's TRACE trade
journal files to the FINRA ADDS Web site.\6\ Once a subscriber has
activated subscription preferences, the files to which the user
subscribes will automatically appear on the Web site each morning for
download by the user, eliminating the need for the user to submit file
requests. The automated daily delivery of the subscriber's TRACE trade
journal files to the Web site will not constitute a request for a
report for purposes of calculating the monthly fee described below.
Accordingly, if a subscriber has no other requests for reports, the
monthly fee would fall in the second column of the table below.
---------------------------------------------------------------------------
\6\ In contrast, firms using the free FINRA ADDS service must
submit a request for data (e.g., if an MPID wants daily delivery of
the prior day's Asset-Backed Security trade journal file, the MPID
must log in each day and submit a request).
---------------------------------------------------------------------------
To provide TRACE Data Delivery Plus, FINRA proposes to amend Rule
7730 to charge an MPID subscriber a monthly fee. The proposed monthly
fee is based on two factors: (1) The average number of transactions per
month to which the MPID was a party that was reported to TRACE in the
prior calendar year, which number is used to categorize the MPID in one
of four tiers; \7\ and (2) the number of FINRA ADDS reports received in
a given month for transaction data that is no longer available through
the free FINRA ADDS service (i.e., transaction data regarding
transactions that were reported more than 30 calendar days prior to the
date of the request) (``Plus reports'').\8\ The proposed monthly fees
for Plus reports are:
---------------------------------------------------------------------------
\7\ Once assigned to a tier, a subscriber remains in the tier
for the remainder of the calendar year. For example, an MPID that
subscribes in September 2012 will be assigned to a tier based upon
the TRACE transactions reported in 2011 in which the MPID was a
party, and will remain in that tier until December 31, 2012. In
2013, the MPID will be re-evaluated and assigned to a tier for 2013
fee purposes, based upon the MPID's trading in TRACE-Eligible
Securities in 2012.
\8\ A subscriber's monthly fee would be assessed each month and
accordingly may vary during a calendar year, depending on the number
of reports FINRA sends to the subscriber in response to the
subscriber's requests. The TRACE Data Delivery Plus fee is based
upon the number of reports provided to avoid charging for data
requests that FINRA is unable to provide. For example, FINRA ADDS
would be unable to provide a report for a Corporate/Agency Debt
Securities trade journal file for a date prior to February 6, 2012,
the date such securities were migrated to the MPP.
----------------------------------------------------------------------------------------------------------------
0-5 Plus reports 6-25 Plus reports >25 Plus reports
Tier based on average number of transactions per month received per received per received per
MPID subscriber was a party to in prior calendar year month month month
----------------------------------------------------------------------------------------------------------------
Tier 1: 10,000+........................................ $60 $80 $100
Tier 2: 3,000-9,999.................................... 40 55 70
Tier 3: 500-2,999...................................... 20 30 40
Tier 4: <500........................................... 10 15 20
----------------------------------------------------------------------------------------------------------------
TRACE Data Delivery SFTP. Firms also have requested an automated
interface to retrieve (without sending a request or query) their prior
day's TRACE trade journal files daily from FINRA ADDS. The new optional
TRACE Data Delivery SFTP will provide such a service, permitting an
MPID subscriber to retrieve the subscriber's prior day TRACE trade
journal files automatically via SFTP.
FINRA proposes to amend Rule 7730 to establish two fees to provide
the TRACE Data Delivery SFTP: (1) A one-time set-up fee of $250 per
subscriber for TRACE Data Delivery SFTP; and (2) a monthly fee of $200
per subscriber.
FINRA will announce the effective date of the proposed rule change
in a Regulatory Notice to be published no later than 60 days following
Commission approval. The effective date will be no later than 120 days
following publication of the Regulatory Notice announcing Commission
approval.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\9\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and
[[Page 74251]]
equitable principles of trade, and, in general, to protect investors
and the public interest; and Section 15A(b)(5) of the Act,\10\ 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.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78o-3(b)(6).
\10\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------
FINRA believes that the proposed rule change to establish two
optional data delivery services subject to appropriate fees would
provide a member firm with access to more of its TRACE transaction
history and increased flexibility to access such data, which may assist
a member firm in monitoring its trading and reporting activity and in
performing other business activities. FINRA believes that providing
member firms an additional automated avenue to review pricing in and
the transaction history of the member firm's TRACE-Eligible Securities
transactions may enhance the member firm's oversight of its trading in
fixed income securities, which would promote market integrity and
provide for the protection of investors and the public generally.
FINRA believes that the proposed rule change provides for the
equitable allocation of the proposed reasonable fees among all member
firms. The optional services would be accessible by all member firms,
subject to reasonable fees. As with fees for other optional data
services provided by FINRA, the proposed fees would be charged only to
those member firms that voluntarily opt to receive one or both of the
services. Only those member firms that elect to become subscribers and
use the optional services would incur the costs related to such
services. The fees proposed for TRACE Data Delivery Plus are equitably
allocated among those member firms that opt to subscribe in that the
fees are scaled according to both the average number of transactions in
TRACE-Eligible Securities per month per MPID and the number of
requested reports, such that higher volume users would be subject to
higher fees. Similarly, the fees proposed for TRACE Data Delivery SFTP
are equitably allocated among MPID subscribers in that the same setup
fees are charged to every member firm that elects to establish a secure
and automated interface with the subscriber, and the same monthly fee
is charged to all subscribers because each subscriber receives the same
service--an automated daily transmission of the subscriber's prior day
TRACE trade journal files.
FINRA believes that the proposed fees are reasonable in light of
the costs and benefits provided by the corresponding services. In
creating such services, FINRA incurred costs related to data
warehousing, software and hardware upgrades and software programming,
as well as costs related to personnel to support and maintain such
services. The proposed fees are reasonable in that such fees are
designed to defray a portion of expenses incurred to establish,
operate, and administer the two optional services. The proposed fees
for TRACE Data Delivery Plus are reasonable as the fees would be scaled
according to both the average number of transactions in TRACE-Eligible
Securities per month per MPID and the number of requested reports. In
general, the fees are scaled such that those MPID subscribers having
fewer transactions per month and making fewer requests for reports per
month would have lower monthly fees while those subscribers reporting
larger numbers of transactions per month and making many requests for
reports would have higher monthly fees. The proposed one-time fee for
TRACE Data Delivery SFTP would permit FINRA to offset the expense of
establishing a secure and automated interface with the subscriber.
Moreover, the monthly TRACE Data Delivery SFTP fee is reasonable,
because it would provide an MPID subscriber the benefit of automating
its daily request for, and receipt of, the TRACE trading data from the
prior trade date, and likely reduce the costs of an MPID subscriber
that otherwise would make a daily request for such data, and also would
offset, in part, FINRA's expenses relating to maintaining the automated
daily transmission of TRACE data to subscribers and the secure and
automated interface with all subscribers to the service.
FINRA believes that the services and the proposed fees are not
unfairly discriminatory because, in addition to the services being
voluntary, they would be available to all member firms on an equal
basis. The same range of services would be available to all members and
the proposed fees would be applicable to all interested members. Thus,
the proposed rule change would not unfairly discriminate between or
among similarly situated members as to the optional services or the
applicable fees.
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. As further detailed above,
FINRA is proposing to establish two optional data delivery services
subject to reasonable fees. Members that do not elect to receive such
data using the optional data delivery services will continue to have
the ability to access such data upon request at no charge. While such
members can continue to request such data for a specified date, which
must be within 30 calendar days prior to the date of the request, FINRA
does not believe that this alternative imposes a significant
operational burden on firms seeking access to TRACE trade journal files
at no charge.
In addition, because the fees that will be charged for the two
optional data delivery services are both optional and reasonable in
amount, FINRA does not believe that the payment of such fees by any
member, or any group or class of members, will result in a burden on
competition to such industry members relative to other industry members
that elect not to subscribe to the optional services.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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 email to [email protected]. Please include
File
[[Page 74252]]
Number SR-FINRA-2012-053 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-2012-053. This
file number should be included on the subject line if email 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 on official business
days between the hours of 10:00 a.m. and 3:00 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 available publicly. All submissions should refer to File Number
SR-FINRA-2012-053, and should be submitted on or before January 3,
2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30106 Filed 12-12-12; 8:45 am]
BILLING CODE 8011-01-P