[Federal Register Volume 83, Number 114 (Wednesday, June 13, 2018)]
[Notices]
[Pages 27638-27640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-12647]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83392; File No. SR-FINRA-2018-022]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Extend the Tier Size Pilot of Rule 6433
(Minimum Quotation Size Requirements for OTC Equity Securities)
June 7, 2018.
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 May 31, 2018, 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 Substance
of the Proposed Rule Change
FINRA is proposing to amend FINRA Rule 6433 (Minimum Quotation Size
Requirements for OTC Equity Securities) to extend the Tier Size Pilot,
which currently is scheduled to expire on June 7, 2018, until December
7, 2018.
The text of the proposed rule change is available on FINRA's
website at http://www.finra.org, at the principal office of FINRA and
at the Commission's Public Reference Room.
[[Page 27639]]
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 FINRA Rule 6433 (Minimum Quotation Size
Requirements for OTC Equity Securities) (the ``Rule'') to extend, until
December 7, 2018, the amendments set forth in File No. SR-FINRA-2011-
058 (``Tier Size Pilot'' or ``Pilot''), which currently are scheduled
to expire on June 7, 2018.\4\
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\4\ See Securities Exchange Act Release No. 82153 (November 22,
2017), 82 FR 56300 (November 28, 2017) (Notice of Filing and
Immediate Effectiveness of File No. SR-FINRA-2017-035).
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The Tier Size Pilot was filed with the SEC on October 6, 2011,\5\
to amend the minimum quotation sizes (or ``tier sizes'') for OTC Equity
Securities.\6\ The goals of the Pilot were to simplify the tier
structure, facilitate the display of customer limit orders, and expand
the scope of the Rule to apply to additional quoting participants.
During the course of the Pilot, FINRA collected and provided to the SEC
specified data with which to assess the impact of the Pilot tiers on
market quality and limit order display.\7\ On September 13, 2013, FINRA
provided to the Commission an assessment on the operation of the Tier
Size Pilot utilizing data covering the period from November 12, 2012
through June 30, 2013.\8\ As noted in the 2013 Assessment, FINRA
believed that the analysis of the data generally showed that the Tier
Size Pilot had a neutral to positive impact on OTC market quality for
the majority of OTC Equity Securities and tiers; and that there was an
overall increase of 13% in the number of customer limit orders that met
the minimum quotation sizes to be eligible for display under the Pilot
tiers. In the 2013 Assessment, FINRA recommended adopting the tiers as
permanent, but extended the Pilot period to allow more time to gather
and analyze data after the November 12, 2012 through June 30, 2013
assessment period.\9\
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\5\ See Securities Exchange Act Release No. 65568 (October 14,
2011), 76 FR 65307 (October 20, 2011) (Notice of Filing of File No.
SR-FINRA-2011-058).
\6\ ``OTC Equity Security'' means any equity security that is
not an ``NMS stock'' as that term is defined in Rule 600(b)(47) of
SEC Regulation NMS; provided, however, that the term OTC Equity
Security shall not include any Restricted Equity Security. See FINRA
Rule 6420.
\7\ FINRA ceased collecting Pilot data for submission to the
Commission on February 13, 2015.
\8\ The assessment is part of the SEC's comment file for SR-
FINRA-2011-058 and also is available on FINRA's website at: http://www.finra.org/Industry/Regulation/RuleFilings/2011/P124615 (``Pilot
Assessment'').
\9\ See Securities Exchange Act Release No. 70839 (November 8,
2013), 78 FR 68893 (November 15, 2013) (Notice of Filing and
Immediate Effectiveness of File No. SR-FINRA-2013-049).
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On April 20, 2018, FINRA proposed a rule change to adopt the pilot
tiers as permanent. The Commission published that proposal in the
Federal Register for notice and comment on May 7, 2018, and the comment
period expired on May 29, 2018.\10\ The Commission received one comment
letter in response to the Proposal.\11\ The purpose of the instant
filing is to extend the operation of the Tier Size Pilot until December
7, 2018, to provide additional time for the Commission to consider
FINRA's proposal to adopt the pilot tiers as permanent and comments
received.
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\10\ See Securities Exchange Act Release No. 83129 (April 30,
2018), 83 FR 20131 (May 7, 2018) (Notice of Filing of File No. SR-
FINRA-2018-015).
\11\ See Letter from Eugene P. Torpey, Chief Compliance Officer,
Vandham Securities Corp., dated May 10, 2018.
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FINRA has filed the proposed rule change for immediate
effectiveness. The operative date of the proposed rule change will be
June 7, 2018.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\12\ 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 also believes that the proposed rule change is
consistent with the provisions of Section 15A(b)(11) of the Act.\13\
Section 15A(b)(11) requires that FINRA rules include provisions
governing the form and content of quotations relating to securities
sold otherwise than on a national securities exchange which may be
distributed or published by any member or person associated with a
member, and the persons to whom such quotations may be supplied.
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\12\ 15 U.S.C. 78o-3(b)(6).
\13\ 15 U.S.C. 78o-3(b)(11).
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FINRA believes that the extension of the Tier Size Pilot until
December 7, 2018, is consistent with the Act in that it would provide
the Commission with additional time to consider FINRA's proposal to
adopt the pilot tiers as permanent and comments received.
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
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) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires FINRA to give the Commission written notice of its intent
to file the proposed rule change, along with a brief description and
text of 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. FINRA has satisfied this
requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally
does not become operative prior to 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission is waiving the 30-day operative delay so that the
proposal may become operative immediately upon filing. The Commission
believes that waiver of the operative delay is consistent with the
protection of investors and the public interest because such waiver
will allow the pilot program to continue without interruption.
Therefore, the Commission
[[Page 27640]]
designates the proposal operative upon filing.\18\
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\18\ 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 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.
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-2018-022 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-2018-022. 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 website (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 website 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 will also be available for inspection
and copying at the principal office of FINRA. All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-FINRA-2018-022 and should be submitted
on or before July 5, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12647 Filed 6-12-18; 8:45 am]
BILLING CODE 8011-01-P