[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62788-62791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24680]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70691; File No. SR-FINRA-2013-043]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to TRACE Fees for Securities Act Rule
144A Transaction Data
October 16, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 2, 2013, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission
[[Page 62789]]
(the ``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 ``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 7730 to: (1) Provide for
Trade Reporting and Compliance Engine (``TRACE'') data fees for real-
time and historic data sets of transactions in TRACE-Eligible
Securities \5\ that are effected pursuant to Rule 144A \6\ under the
Securities Act of 1933 \7\ (``Rule 144A transactions''); \8\ (2)
clarify Level II Full Service Web Browser fee rates in light of the
availability of additional data sets; and (3) make other technical
amendments.
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\5\ The term TRACE-Eligible Security is defined in FINRA Rule
6710(a).
\6\ 17 CFR 230.144A.
\7\ 15 U.S.C. 77a et seq. (hereinafter ``Securities Act'').
\8\ See Securities Exchange Act Release No. 70345 (September 6,
2013), 78 FR 56251 (September 12, 2013) (Order Granting Approval of
Proposed Rule Change Relating to the Dissemination of Transactions
in TRACE-Eligible Securities that are Effected Pursuant to
Securities Act Rule 144A; File No. SR-FINRA-2013-029) (``Rule 144A
Dissemination Rule Change''). The Rule 144A Dissemination Rule
Change amends FINRA Rule 6750, FINRA Rule 7730 and the TRACE
dissemination protocols to provide for the dissemination of Rule
144A transactions and to establish real-time and historic data sets
for Rule 144A transactions. The effective date for the Rule 144A
Dissemination Rule Change will be established in a Regulatory
Notice.
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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.\9\
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\9\ As part of the proposed rule change, FINRA submitted an
Exhibit 4 and an Exhibit 5. The Exhibit 4 shows the text of the
proposed rule change marked to show the proposed changes as compared
to FINRA Rule 7730 including amendments approved by the SEC as if
such amendments were effective. See note 8. The Exhibit 5 shows the
text of the proposed rule change marked to show the proposed changes
as compared to the current rule text of FINRA Rule 7730 in
accordance with the requirements of Form 19b-4.
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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
Recently, FINRA amended FINRA Rule 6750, FINRA Rule 7730 and TRACE
dissemination protocols to provide greater transparency in Rule 144A
transactions in TRACE-Eligible Securities.\10\ In the Rule 144A
Dissemination Rule Change, FINRA included amendments to FINRA Rule 7730
to establish data sets for real-time and historic Rule 144A transaction
data.
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\10\ See note 8. FINRA Rule 6750 will provide for the
dissemination of Rule 144A transactions, provided the asset type
(e.g., corporate bonds) currently is subject to dissemination under
FINRA Rule 6750. The Rule 144A Dissemination Rule Change does not
extend to equity transactions effected pursuant to Securities Act
Rule 144A (17 CFR 230.144A).
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In this proposed rule change, FINRA proposes to establish fees for
the real-time disseminated Rule 144A transaction data and the Historic
TRACE Data for Rule 144A transactions, clarify Level II Full Service
Web Browser fee rates in light of the availability of additional data
sets, and incorporate other technical amendments in FINRA Rule 7730.
Rule 144A Data Sets
In the Rule 144A Dissemination Rule Change, FINRA amended FINRA
Rule 7730(c) to establish the Rule 144A transaction data set (``Rule
144A Data Set''), which is similar to the data sets established for
corporate bonds (``Corporate Bond Data Set''), Agency Debt Securities
(``Agency Data Set'') and Asset-Backed Securities (``ABS Data
Set'').\11\ The Rule 144A Data Set will consist of information
disseminated immediately upon receipt of a transaction report for a
Rule 144A transaction. FINRA proposes to extend the market data fees
currently in effect for similar real-time TRACE market data sets (i.e.,
the Corporate Bond Data Set, the Agency Data Set and the ABS Data Set)
to the Rule 144A Data Set. The proposed rule change would amend FINRA
Rule 7730(c)(1), FINRA Rule 7730(c)(2) and the preceding table to
provide that each data set is available at the same rate and eliminate
redundant text.\12\
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\11\ The terms Agency Debt Security and Asset-Backed Security
are defined in FINRA Rule 6710(l) and FINRA Rule 6710(m),
respectively.
\12\ See Exhibit 4 to the Form 19b-4, which is available on
FINRA's Web site.
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In addition, in the Rule 144A Dissemination Rule Change, FINRA
amended FINRA Rule 7730(d) to establish a historic data set for Rule
144A transactions (``Historic Rule 144A Data Set''), which is similar
to the data sets established for corporate bonds (``Historic Corporate
Bond Data Set''), Agency Debt Securities (``Historic Agency Data Set'')
and Asset-Backed Securities (``Historic ABS Data Set'') referenced in
the rule.\13\ FINRA proposes to establish fees for the Historic Rule
144A Data Set at the same rates currently in effect in FINRA Rule
7730(d) for the existing historic data sets. The proposed rule change
would amend FINRA Rule 7730(d)(1), FINRA Rule 7730(d)(2) and the
preceding table to provide that each data set is available at the same
rate and eliminate redundant text.\14\ In connection with the fees for
the Historic Rule 144A Data Set, FINRA proposes to clarify in FINRA
Rule 7730(d)(1)(A)(ii) and FINRA Rule 7730(d)(1)(B)(ii) that the 2003
Historic Rule 144A Data Set includes the 2002 Historic Rule 144A Data
Set, and in FINRA Rules 7730(d)(1)(A)(i) and 7730(d)(1)(B)(i) that the
set-up fee to receive Historic TRACE data is paid only one time,
instead of per data set.\15\
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\13\ As noted in the Rule 144A Dissemination Rule Change, the
Historic Rule 144A Data Set would include Rule 144A transactions in
TRACE-Eligible Securities subject to dissemination, effected as of
or after July 1, 2002, and, among other things, would include
uncapped volume information. However, like all other Historic TRACE
Data, Rule 144A transaction data included in the Historic Rule 144A
Data Set would be released subject to a delay of approximately 18
months from the date of the transaction.
\14\ See Exhibit 4 to the Form 19b-4 on FINRA's Web site.
\15\ FINRA Rule 7730(d) specifies: ``Historic TRACE Data fees,
except the Set-Up Fee, are charged for each Data Set.'' See Exhibit
4 to the Form 19b-4 on FINRA's Web site.
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FINRA also proposes two clarifying amendments to other provisions
of Rule 7730 as discussed below.
Level II Full Service Web Browser Fee
FINRA proposes to clarify in FINRA Rule 7730(a)(1) applicable fees
when a firm uses a TRACE web browser that includes access to real-time
TRACE transaction data. The subscription rate
[[Page 62790]]
for the Level II Full Service Web Browser includes the fees for a
subscription to one or two data sets, which were established when there
were only two data sets. When the Rule 144A Dissemination Rule Change
becomes effective, there will be four available real-time data sets:
Corporate Bond Data Set, Agency Data Set, ABS Data Set and Rule 144A
Data Set. FINRA would extend the subscription rates currently
applicable to first and second data sets (i.e., a discounted rate of
$30 per data set for a single user ID and $60 per data set for
additional user IDs) to the third and fourth data sets in two similar
provisions. Specifically, in FINRA Rule 7730(a)(1)(B)(i), for a Level
II Full Service Web Browser subscription for a single user ID or the
first user ID, the current fee is $50 per month \16\ (including one
data set), and $80 per month (including two data sets). As amended, the
Level II Full Service Web Browser subscription fee would be $110 per
month (for subscribers to three data sets), or $140 per month (for
subscribers to four data sets). For Level II Full Service Web Browser
subscriptions for additional user IDs, in FINRA Rule 7730(a)(1)(B)(ii),
the current fee is $80 per month per user ID (including one data set)
and $140 per month per user ID (including two data sets).\17\ FINRA
would extend the same fee rate per data set to the third and fourth
data sets, so that the Level II Full Service Web Browser subscription
fee (applicable to additional users IDs) would be $200 per month per
user ID (for subscribers to three data sets), and $260 per month per
user ID (for subscribers to four data sets).
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\16\ Each fee includes the $20 per month fee per user ID for
Level I Trade Report Only Web Browser Access as specified in FINRA
Rule 7730(a)(1)(A).
\17\ Again, each fee includes the $20 per month fee per user ID
for Level I Trade Report Only Web Browser Access. See note 16.
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TBA Transaction Reporting Fee
The trade reporting fees for transactions in TRACE-Eligible
Securities are set forth in FINRA Rule 7730(b)(1). For Agency Pass-
Through Mortgage-Backed Securities, as defined in FINRA Rule 6710(v),
traded to be announced (``TBA''), as defined in FINRA Rule 6710(u), the
trade reporting fee is $1.50 per transaction. At the time the TBA
reporting fee was established, FINRA had not defined TBA transactions
to include those involving SBA-Backed ABS; however, FINRA intended the
TBA reporting fee to apply to all TBA transactions. Accordingly, FINRA
proposes to clarify that SBA-Backed ABS, as defined in FINRA Rule
6710(bb), traded TBA are subject to the $1.50 per transaction trade
reporting fee.
FINRA has filed the proposed rule change for immediate
effectiveness. The implementation date of the proposed rule change will
be the same as the effective date of the Rule 144A Dissemination Rule
Change.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(5) of the Exchange Act,\18\ 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.
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\18\ 15 U.S.C. 78o-3(b)(5).
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FINRA believes that the proposed fees for the Rule 144A Data Set
and Historic Rule 144A Data Set that are an extension of the fee rates
that are assessed currently for existing real-time and historic data
sets are reasonable, equitably allocated and not unfairly
discriminatory. FINRA believes that the proposed fees are reasonable in
light of FINRA's regulatory and operational costs, including personnel,
technology and storage costs to collect and provide real-time and
historic Rule 144A transaction data and the increase in such costs
incurred by FINRA over time. FINRA proposes fees at the rates that have
been in effect for several years for similar data bases, and such fees
are designed to defray a portion of such costs.
FINRA believes that the proposed rule change provides for the
equitable allocation of the proposed fees among member firms and other
market participants and data users, and is not unfairly discriminatory.
The Rule 144A Data Set and Historic Rule 144A Data Set would be
accessible by all member firms and other market participants and data
users, subject to the same fee rates that are in effect for the real-
time and historic Corporate Bond, Agency and ABS data sets. As with
fees for other data sets (real-time and historic) provided by FINRA,
the proposed fees would be charged only to those member firms and other
market participants and data users that opt to receive a subscription
to the applicable data set. FINRA proposes to charge qualifying Tax-
Exempt Organizations \19\ reduced fees for the Rule 144A Data Set and
Historic Rule 144A Data Set, which are the same reduced fee rates that
FINRA currently charges such organizations to access other data sets.
The proposed reduced data fees for qualifying Tax-Exempt Organizations
are an equitable allocation of fees in that the lower rate provides
greater access to TRACE information to organizations that are formed
exclusively for a charitable purpose. FINRA also believes that the Rule
144A Data Set and Historic Rule 144A Data Set fees are not unfairly
discriminatory because the data sets would be available to all
similarly situated members and other data users on an equal basis at
the same rates, except for the proposed lower rates for qualifying Tax-
Exempt Organizations.
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\19\ Tax-Exempt Organization is defined in FINRA Rule 7730(f)(2)
and means an organization that is described in Section 501(c) of the
Internal Revenue Code (26 U.S.C. Sec. 501(c)) and has received
recognition of the exemption from federal income taxes from the
Internal Revenue Service.
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FINRA believes that the proposed amendments regarding the Level II
Full Service Web Browser subscription fees are reasonable in light of
FINRA's regulatory and operational costs, including personnel,
technology and storage costs to collect and provide real-time
transaction data and the increase in such costs incurred by FINRA over
time. FINRA proposes amendments to allow members to access additional
data bases at the same fee rate that has been in effect for several
years, and such fees are designed to defray a portion of such costs.
FINRA also believes that such amendments provide for the equitable
allocation of fees among member firms in that the combined service/
market data product, which allows members to report and review the
member's transactions and to access market data, is available to all
firms that wish to subscribe at the same rate. In addition, FINRA
believes that the additional proposed fees for access to additional
data sets as part of the Level II Full Service Web Browser are not
unfairly discriminatory because the Level II Full Service Web Browser
service is available to all members.
Finally, FINRA believes that applying the TBA reporting fee that
currently applies to almost all TBA transactions to an additional small
number of TBA transactions is a reasonable and fair fee assessment, and
results in a fee that is equitably allocated among members engaged in
similar transactions. Also, the proposed fee is not unfairly
discriminatory in that all members engaged in such TBA transactions
will be subject to the same fee.
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 Exchange Act.
[[Page 62791]]
The proposed fees for the Rule 144A Data Set and Historic Rule 144A
Data Set, which are consistent with current rates for subscriptions to
similar TRACE data sets, are reasonable, equitably allocated and not
unfairly discriminatory, and will permit a broad spectrum of members,
data vendors and other market participants, including qualifying Tax
Exempt Organizations, to obtain and use the data in furtherance of
market integrity and the protection of investors in such securities.
Similarly, FINRA does not believe that the proposed amendments to the
Level II Full Service Web Browser subscription, providing a member
access to multiple data sets as part of such service, will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Exchange Act. Access to the Rule
144A Data Set and Historic Rule 144A Data Set as well as the Level II
Full Service Browser subscription may facilitate competition in the
market for such securities in that access to such data will assist
members and customers in: (1) Determining the quality of their
executions; (2) price discovery; and (3) assessing the accuracy and
integrity of the valuation of positions.
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 \20\ and paragraph (f) of Rule 19b-4\21\
thereunder. 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 will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f).
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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 email to [email protected]. Please include
File Number SR-FINRA-2013-043 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-2013-043. 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, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 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-2013-043 and should be
submitted on or before November 12, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24680 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P