[Federal Register Volume 81, Number 68 (Friday, April 8, 2016)]
[Notices]
[Pages 20714-20716]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08041]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77505; File No. SR-FINRA-2016-012]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend FINRA Rule 6184 (Transactions in
Exchange-Traded Managed Fund Shares (``NextShares''))
April 4, 2016.
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 March 29, 2016, 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 amend FINRA Rule 6184 (Transactions in
Exchange-Traded Managed Fund Shares (``NextShares'')) to provide that
the FINRA/Nasdaq Trade Reporting Facility (``FINRA/Nasdaq TRF'') will
make available to market participants a daily file with the final trade
price for each over-the-counter transaction in exchange-traded managed
fund shares (``NextShares'') reported to the FINRA/Nasdaq TRF for
public dissemination purposes.
Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions are in brackets.
* * * * *
6000. QUOTATION AND TRANSACTION REPORTING FACILITIES
6100. QUOTING AND TRADING IN NMS STOCKS
* * * * *
6180. Transaction Reporting
* * * * *
6184. Transactions in Exchange-Traded Managed Fund Shares
(``NextShares'')
(a) through (d) No Change.
. . . Supplementary Material:
.01 No Change.
.02 End of Day Processing
Members that clear transactions in NextShares directly at NSCC,
e.g., via direct QSR submission, must ensure that they submit to NSCC
all pricing information, including the IIV-based price on intraday
submissions and the final NAV-based trade price after market close, in
accordance with NSCC requirements; such information will not be
provided to NSCC by FINRA.
Following publication of the NAV, the FINRA/Nasdaq Trade Reporting
Facility will make available to market participants a daily file with
the final NAV-based trade price for each transaction in NextShares
reported during the trading day to the FINRA/Nasdaq Trade Reporting
Facility for public dissemination purposes.
* * * * *
[[Page 20715]]
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 recently adopted Rule 6184 \4\ relating to the reporting of
over-the-counter (``OTC'') transactions in NextShares, which have been
approved by the SEC for listing and trading on the Nasdaq Stock Market
LLC (``Nasdaq'').\5\ As described more fully in SR-FINRA-2015-043 and
SR-NASDAQ-2014-020, NextShares will trade in the secondary market using
a new trading protocol called ``NAV-Based Trading.'' In NAV-Based
Trading, all bids, offers and execution prices will be expressed as a
premium or discount (which may be zero) to the fund's next-determined
net asset value per share (``NAV''), e.g., NAV-$0.01 or NAV+$0.01. A
NextShares Fund's NAV will be determined each business day after the
close of trading, and consequently, the final value of a transaction
will not be known until the end of the trading day. Because existing
order transmission and processing systems commonly used by exchanges
and firms are generally not designed to accommodate pricing
arrangements such as NAV-Based Trading, the prices of NextShares trades
and quotes will be represented intraday using a ``proxy price'' format
(discussed more fully in SR-FINRA-2015-043 and SR-NASDAQ-2014-020). The
securities information processor (``SIP'') will publicly disseminate
trades in the proxy price format.
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\4\ See Securities Exchange Act Release No. 76213 (October 21,
2015), 80 FR 65838 (October 27, 2015) (Notice of Filing and
Immediate Effectiveness; File No. SR-FINRA-2015-043). Rule 6184
became operative on February 26, 2016.
\5\ See Securities Exchange Act Release No. 73562 (November 7,
2014), 79 FR 68309 (November 14, 2014) (Notice of Filing of
Amendment No. 1 and Order Granting Accelerated Approval of File No.
SR-NASDAQ-2014-020).
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In SR-NASDAQ-2015-036, Nasdaq stated that after a NextShares Fund's
NAV is calculated, Nasdaq will price each NextShares trade executed on
the exchange during the day at the Fund's NAV plus or minus the trade's
executed premium or discount.\6\ Using the final trade price, each
NextShares trade executed on the exchange will be disseminated to
Nasdaq member firms and market data services via a File Transfer
Protocol (``FTP'') file to be created for NextShares to supplement the
previously provided information to include final pricing.\7\
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\6\ See Securities Exchange Act Release No. 75499 (July 21,
2015), 80 FR 44406 (July 27, 2015) (Order Granting Approval of
Proposed Rule Change, as Modified by Amendments Nos. 1 and 2; File
No. SR-NASDAQ-2015-036).
\7\ As described in SR-NASDAQ-2015-036, FTP is a standard
network protocol used to transfer computer files on the Internet,
and Nasdaq will arrange for the daily dissemination of an FTP file
with executed NextShares trades to Nasdaq member firms and market
data services. See also Frequently Asked Questions: NextShares
Exchange-Traded Managed Funds, #35, available at
www.nasdaqtrader.com/content/ETFs/ETMF_FAQs.pdf.
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Similarly, Nasdaq, Inc., as the ``Business Member'' under the
limited liability company agreement with FINRA establishing the FINRA/
Nasdaq TRF, has determined to make available to market participants a
daily file in FTP format with the final NAV-adjusted trade price for
each OTC transaction in NextShares reported during the trading day to
the FINRA/Nasdaq TRF for public dissemination purposes. Nasdaq has
represented to FINRA that the daily FTP files will be accessible at no
cost to market participants on Nasdaq's public Web site. FINRA is
proposing to amend Rule 6184.02 to reflect the proposed FTP file.
FINRA has filed the proposed rule change for immediate
effectiveness and proposes that the operative date will be on or about
April 4, 2016, the date that the systems development work to support
the proposed FTP file is expected to be completed by the FINRA/Nasdaq
TRF.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\8\ 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 that the proposed rule change is
consistent with the Act because it will further enhance market
transparency and price discovery by ensuring that additional pricing
information relating to OTC transactions in NextShares, i.e., the final
NAV-adjusted trade price on a transaction-by-transaction basis, is
available to market participants.
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\8\ 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. The proposed rule change will
enhance the pricing information relating to OTC transactions in
NextShares available to market participants. The proposed rule change
will not impose any reporting or other requirements on member firms,
and as a result, will have no impact on member firms from a systems
development and reporting perspective. Member firms that choose to
trade NextShares may incur some costs to integrate the pricing
information that will be provided pursuant to the proposed rule change.
However, FINRA anticipates these costs to be minor because the pricing
information will be accessible at no cost to market participants on
Nasdaq's public Web site and also provided through data vendors, and
firms will factor in any attendant costs when making the decision to
enter into the market for NextShares.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant 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)(iii) of the Act \9\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative before 30 days from the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\11\ the Commission may
designate a shorter time if such action is consistent with the
[[Page 20716]]
protection of investors and the public interest.
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\11\ 17 CFR 240.19b-4(f)(6)(iii).
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FINRA has asked the Commission to waive the 30-day operative delay.
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Such waiver will allow the proposed rule change to become operative on
or about April 4, 2016, the date that Nasdaq has designated (and
represented to FINRA) as the date by which it will complete the systems
development work to support the proposed FTP file. This will ensure
that additional pricing information relating to OTC transactions in
NextShares will be available to market participants without delay and
will supplement the FTP file that is already available for trades in
NextShares executed on the Nasdaq exchange. Therefore, the Commission
hereby waives the 30-day operative delay and designates the proposed
rule change to be operative on or about April 4, 2016.\12\
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\12\ For purposes only of waiving the operative delay for this
proposal, 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. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or 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 Number SR-FINRA-2016-012 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-2016-012. 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 offices 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-2016-012, and should
be submitted on or before April 29, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08041 Filed 4-7-16; 8:45 am]
BILLING CODE 8011-01-P