[Federal Register Volume 79, Number 195 (Wednesday, October 8, 2014)]
[Notices]
[Pages 60874-60876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-23982]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73289; File No. SR-FINRA-2014-039]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Delay the Implementation Date of the Trade
Reporting Amendments Approved Pursuant to SR-FINRA-2013-050
October 2, 2014.
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 24, 2014, 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 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 the
Substance of the Proposed Rule Change
FINRA is proposing to delay the implementation date of amendments
to the trade reporting rules relating to the OTC Reporting Facility
(``ORF''), the Alternative Display Facility (``ADF'') and the Trade
Reporting Facilities (``TRFs'') approved pursuant to SR-FINRA-2013-050.
The proposed rule change would not make any changes to FINRA rules.
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
On November 12, 2013, FINRA filed proposed rule change SR-FINRA-
2013-050 to amend FINRA rules governing the reporting of (i) over-the-
counter (``OTC'') transactions in equity securities to the FINRA
Facilities; \4\ and (ii) orders in NMS stocks and OTC Equity Securities
to the Order Audit Trail System (``OATS''). The proposed rule change,
as amended,\5\ was approved by the Commission on February 27, 2014.\6\
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\4\ Specifically, the FINRA Facilities are the ADF and TRFs, to
which members report OTC transactions in NMS stocks, as defined in
SEC Rule 600(b) of Regulation NMS; and the ORF, to which members
report transactions in ``OTC Equity Securities,'' as defined in
FINRA Rule 6420 (i.e., non-NMS stocks such as OTC Bulletin Board and
OTC Market securities), as well as transactions in Restricted Equity
Securities, as defined in FINRA Rule 6420, effected pursuant to
Securities Act Rule 144A.
\5\ On February 14, 2014, FINRA filed Amendment No. 1 to (1)
address the comments the Commission received in response to the
Federal Register publication and propose amendments, where
appropriate; and (2) propose technical amendments to update cross-
references and make other non-substantive changes to the ADF rules
as a result of the approval of SR-FINRA-2013-053.
\6\ See Securities Exchange Act Release No. 71623 (February 27,
2014), 79 FR 12558 (March 5, 2014) (Order Granting Accelerated
Approval of Proposed Rule Change, as Modified by Amendment No. 1;
File No. SR-FINRA-2013-050).
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In SR-FINRA-2013-050, FINRA proposed that the effective date of the
proposed rule changes to the trade reporting rules would be no earlier
than April 15, 2014, and no later than September 30, 2014, and the
effective date of the proposed rule change to the OATS rules would be
no later than 45 days after Commission approval. In Amendment No. 1,
FINRA clarified that it would implement the amendments to the trade
reporting rules in phases, with the amendments becoming operative for
the ORF first (upon migration of the ORF to FINRA's multi-product
platform (``MPP'')) and for the ADF and TRFs at a subsequent date. As
previously announced by FINRA, the amendments to the OATS rules became
effective on April 7, 2014.\7\ FINRA also announced that the amendments
to the ORF rules
[[Page 60875]]
would be effective on September 15, 2014 (the date of migration to the
MPP), the amendments to the ADF and TRF rules relating to millisecond
reporting would be effective on September 29, 2014, and the remaining
amendments to the ADF and TRF rules would be effective in the first
quarter of 2015.\8\
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\7\ See March 21, 2014 OATS Report, ``Firms Capturing Time in
Milliseconds Required to Report to OATS in Milliseconds Beginning
April 7, 2014.''
\8\ See Regulatory Notice 14-21 (May 2014).
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By letter dated August 8, 2014, the Financial Information Forum
(``FIF'') formally requested a delay of migration of the ORF to the MPP
and implementation of the amendments to the trade reporting rules
approved pursuant to SR-FINRA-2013-050 until February 23, 2015, stating
that firms need additional time to complete and test the systems
changes. Firms have indicated that they do not believe they could meet
a September 2014 implementation date, in light of the development
efforts that the amendments will entail, as well as other development
efforts currently underway.\9\
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\9\ See letter dated August 8, 2014 from Manisha Kimmel, FIF, to
Steve Joachim and Stephanie Dumont, FINRA (``FIF Letter''). By
letter dated August 21, 2014, FINRA responded to the FIF Letter. See
letter dated August 21, 2014 from Steven Joachim, FINRA, to Manisha
Kimmel, FIF (``FINRA Response''). Copies of the FIF Letter and FINRA
Response are attached to the proposed rule change as Exhibit 2.
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To accommodate this request and to provide additional time for
firms to complete the necessary systems changes, FINRA is filing this
proposed rule change to revise the time frame for implementation of the
amendments to the trade reporting rules approved pursuant to SR-FINRA-
2013-050.
In response to the FIF's request, FINRA believes a delay in the
migration of the ORF to the MPP from September 15, 2014 to November 17,
2014 is appropriate.\10\ Accordingly, FINRA is proposing that the
amendments to the ORF rules (i.e., Rules 6622 and 7330) approved
pursuant to SR-FINRA-2013-050 be effective on November 17, 2014.
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\10\ See ``Revised Migration Date for New OTC Reporting Facility
Technology Platform,'' available at www.finra.org/Industry/Compliance/MarketTransparency/ORF/Notices/P580334.
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In addition, FINRA is proposing that the amendments to the ADF and
TRF rules approved pursuant to SR-FINRA-2013-050 requiring firms to
report time in milliseconds if their systems capture milliseconds \11\
be effective on November 10, 2014.
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\11\ See Rules 6282.04, 6380A.04, 6380B.04, 7130.01, 7230A.01
and 7230B.01.
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Finally, FINRA is proposing that the remaining amendments to the
ADF and TRF trade reporting rules, as well as the technical and
conforming amendments to the rules, approved pursuant to SR-FINRA-2013-
050 be implemented no earlier than March 1, 2015 and no later than
April 30, 2015. Specifically, the remaining amendments to the ADF and
TRF rules (i) require firms to report an additional time field for Stop
Stock transactions \12\ and transactions that reflect an execution
price that is based on a prior reference point in time,\13\ and when
reporting block transactions using the exception for Intermarket Sweep
Orders (ISOs) (outbound) under SEC Rule 611 of Regulation NMS, if the
time the firm routed the ISOs is different from the execution time;
\14\ (ii) require firms to identify the original trade when reporting a
reversal by including the control number and report date for the
original trade report; \15\ (iii) require firms to report trades
executed on non-business days and trades reported more than 365 days
after trade date (T+365) to the ADF or a TRF (and not on ``Form T''
through FINRA's Firm Gateway) and further to report non-business day
trades on an ``as/of'' basis by 8:15 a.m. the next business day with
the unique trade report modifier to denote their execution outside
normal market hours; \16\ (iv) provide that where both sides are
submitting a clearing-only report to effectuate a step-out, the member
transferring out of the position must report a step-out and the member
receiving the position must report a ``step-in''; \17\ and (v) address
the processing of trades that are submitted for clearing.\18\ In
addition, SR-FINRA-2013-050 made a number of non-substantive technical
and conforming changes to the ADF and TRF rules that were otherwise
being amended. FINRA will announce the new effective dates for the
amendments to the trade reporting rules approved under SR-FINRA-2013-
050 in a Notice.
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\12\ See paragraph (F) of Rules 6282(a)(4), 6380A(a)(5) and
6380B(a)(5).
``Stop stock transaction'' means a transaction resulting from an
order in which a firm and another party agree that the order will be
executed at a stop stock price or better, which price is based upon
the prices at which the security is trading at the time the firm
receives the order. See Rules 6220, 6320A and 6320B.
\13\ See paragraph (G) of Rules 6282(a)(4), 6380A(a)(5) and
6380B(a)(5).
\14\ See Rules 6282.03, 6380A.03 and 6380B.03.
\15\ See Rules 6282(g), 6380A(g) and 6380B(f).
\16\ See Rules 6282(a)(2), 6380A(a)(2) and 6380B(a)(2).
\17\ See Rules 7130(g), 7230A(i) and 7230B(h).
\18\ See Rules 7140, 7240A and 7240B.
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FINRA has filed the proposed rule change for immediate
effectiveness and has requested that the Commission waive the
requirement that the proposed rule change not become operative for 30
days after the date of the filing. The operative date will be the date
of filing of the proposed rule change.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\19\ 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 the proposed rule change is consistent
with the Act in that it provides firms additional time to complete the
systems changes necessary to comply with SR-FINRA-2013-050, which
amendments will, among other things, ensure a more accurate and
complete audit trail, enable FINRA to recreate more accurately members'
market activity and enhance FINRA's ability to surveil on an automated
basis for compliance with FINRA trade reporting and other rules.
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\19\ 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. FINRA believes that providing
adequate time for firms to make the systems changes necessary to comply
with SR-FINRA-2013-050 will benefit all interested parties.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Copies of the FIF Letter and FINRA Response, which addresses the
issues raised in the FIF Letter, are attached to this filing. In
response to the FIF's request, as discussed above, FINRA has delayed
migration of the ORF and is proposing to delay implementation of the
trade reporting amendments approved under SR-FINRA-2013-050. FINRA
believes that the revised implementation timeline set forth above will
provide members additional time to make the necessary system changes
while balancing the need to implement the amendments without undue
delay.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant
[[Page 60876]]
burden on competition; and (iii) become operative for 30 days from the
date on which it was filed, or such shorter time as the Commission may
designate, it has become effective pursuant to Section 19(b)(3)(A) of
the Act \20\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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 Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing.\22\ However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest.\23\ FINRA has requested that the Commission waive
the 30-day operative delay so that FINRA can immediately delay the
implementation dates, as provided in this proposal.
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\22\ 17 CFR 240.19b-4(f)(6)(iii).
\23\ Id.
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The Commission believes that the waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest as it will allow FINRA to extend the implementation dates of
certain changes approved pursuant to SR-FINRA-2013-050 in a timely
manner. Therefore, the Commission designates the proposal operative
upon filing.\24\
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\24\ For 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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act.\25\ If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule change should be approved or disapproved.\26\
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\25\ 15 U.S.C. 78s(b)(3)(C).
\26\ Id.
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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-2014-039 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2014-039. 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 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-2014-039, and should
be submitted on or before October 29, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-23982 Filed 10-7-14; 8:45 am]
BILLING CODE 8011-01-P