Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 thereto to Amend Trade Reporting Rules to Require Related Market Center Indicator on Certain Non-Tape Reports Submitted to FINRA, 73930-73932 [E7-25206]

Download as PDF 73930 Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Notices the requirement for firms to re-approve sales material in limited circumstances where a registered principal of a firm has previously approved the sales material and the Department has previously supplied a favorable review letter is 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. This exception from the principal approval requirements of Rule 2210 will eliminate a current compliance redundancy and will continue to protect investors, since the initial firm creating all sales material subject to this exception will still have to obtain approval from its registered principal, file it for review with the Department, and obtain a favorable review letter from the Department. 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 amended. 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 35 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 such proposed rule change; or (B) Institute proceedings to determine whether such proposed rule change should be disapproved. mstockstill on PROD1PC66 with NOTICES 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: VerDate Aug<31>2005 22:27 Dec 27, 2007 Jkt 214001 Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–FINRA–2007–020 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–FINRA–2007–020. This file number should be included on the subject line if e-mail 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 inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 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–2007–020 and should be submitted on or before January 18, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–25191 Filed 12–27–07; 8:45 am] BILLING CODE 8011–01–P 6 17 PO 00000 CFR 200.30–3(a)(12). Frm 00174 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57020; File No. SR–FINRA– 2007–012] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 thereto to Amend Trade Reporting Rules to Require Related Market Center Indicator on Certain Non-Tape Reports Submitted to FINRA December 20, 2007. 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 12, 2007, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (f/k/a National Association of Securities Dealers, Inc. (‘‘NASD’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by FINRA.3 On December 18, 2007, FINRA filed Amendment No. 1 to the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change as modified by Amendment No. 1 from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to amend its trade reporting rules to require that on any non-tape report (a non-tape, nonclearing report or a clearing-only report) submitted to a FINRA Facility (i.e., the Alternative Display Facility (‘‘ADF’’), a Trade Reporting Facility (‘‘TRF’’) 4 or the OTC Reporting Facility (‘‘ORF’’)) associated with a previously executed trade that was not reported to that same 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 On July 26, 2007, the Commission approved a proposed rule change filed by NASD to amend NASD’s Certificate of Incorporation to reflect its name change to the Financial Industry Regulatory Authority, Inc., or FINRA, in connection with the consolidation of the member firm regulatory functions of NASD and NYSE Regulation, Inc. See Securities Exchange Act Release No. 56146 (July 26, 2007), 72 FR 42190 (August 1, 2007). 4 Effective July 30, 2007, FINRA was formed through the consolidation of NASD and the member regulatory functions of NYSE Regulation, Inc. Accordingly, the TRFs are now doing business as the FINRA TRFs (i.e., the FINRA/Nasdaq TRF, the FINRA/NSX TRF and the FINRA/NYSE TRF). The formal name change of each TRF is pending and once completed, FINRA will file a separate proposed rule change to reflect those changes in the Manual. 2 17 E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Notices FINRA Facility, members identify the facility or market where the associated trade was reported. The text of the proposed rule change is available at FINRA, the Commission’s Public Reference Room, and http:// www.finra.org. 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 mstockstill on PROD1PC66 with NOTICES Background Certain transactions can be trade reported in related tape (i.e., the transaction is reported to the tape for publication) and non-tape (i.e., the transaction is not reported to the tape for publication but is reported for clearing or regulatory purposes) reports. Non-tape reports can be (1) ‘‘non-tape, non-clearing,’’ i.e. the transaction is not reported to the tape and is submitted to FINRA for regulatory—and not clearing—purposes, or (2) ‘‘clearingonly,’’ i.e., the transaction is not reported to the tape and is submitted to FINRA for clearing (and perhaps also regulatory) purposes. A riskless principal transaction 5 can be submitted to FINRA as a single trade report properly marked as riskless principal, or as two separate reports: (1) A tape report to reflect the initial leg of the transaction and (2) a non-tape report to reflect the offsetting, ‘‘riskless’’ leg of the transaction. For example, where the initial leg of a riskless principal transaction is executed on and reported through an exchange (often referred to as the ‘‘street leg’’ or ‘‘street side’’), a tape report is not submitted to FINRA to reflect the initial leg; however, members 5 For purposes of over-the-counter trade reporting requirements applicable to equity securities, a ‘‘riskless principal’’ transaction is a transaction in which a member, after having received an order to buy (sell) a security, purchases (sells) the security as principal (the initial leg) and satisfies the original order by selling (buying) as principal at the same price (the offsetting, ‘‘riskless’’ leg). VerDate Aug<31>2005 22:27 Dec 27, 2007 Jkt 214001 are permitted, but not required, to submit a non-tape report to FINRA for the offsetting, ‘‘riskless’’ leg of the transaction. Similarly, agency transactions where one member acts as agent on behalf of another member, which transactions are the functional equivalent of riskless principal transactions, can also be reported in related tape and non-tape reports. Thus, for example, similar to the riskless principal reporting structure, where Member A, as agent for Member B, executes a trade on an exchange (and that trade is reported to the tape through the exchange), Member A may submit a non-tape report to FINRA to reflect the offsetting portion of the agency trade between Member A and Member B.6 Currently, a non-tape report provides no specific information pertaining to a related tape report and as such, it is difficult for FINRA to determine where the associated trade was reported, especially if that trade was reported to an exchange or another FINRA Facility. Proposed Amendments to NASD Rules 6130, 6130A, 6130C and 6130E FINRA is proposing to amend NASD Rules 6130 (relating to the NASD/ Nasdaq TRF and ORF), 6130A (relating to the ADF), 6130C (relating to the NASD/NSX TRF) and 6130E (relating to the NASD/NYSE TRF) to require that on any non-tape report (either a non-tape, non-clearing report or a clearing-only report) submitted to a FINRA Facility associated with a previously executed trade that was not reported to that same FINRA Facility, members must identify the facility or market where the associated trade was reported. The proposed rule change also requires that members retain and produce to FINRA, upon request, documentation relating to the associated trade (e.g., a confirmation from the exchange identifying the ‘‘street side’’ of a riskless principal transaction). For example, pursuant to the proposed rule change, if the initial leg of a riskless principal (or agency) transaction is executed on and reported through the Nasdaq Exchange, a member submitting a non-tape report for the offsetting leg of the transaction to the NASD/Nasdaq TRF would be required to use a special indicator on that report to designate that the initial leg was reported through the Nasdaq Exchange. By way of further example, if the initial leg is executed otherwise than on an exchange and reported to the NASD/NYSE TRF, a member submitting a non-tape report for the offsetting leg to 6 See FINRA Regulatory Notice 07–38 (August 2007). PO 00000 Frm 00175 Fmt 4703 Sfmt 4703 73931 the NASD/Nasdaq TRF would be required to use a special indicator on that report to designate that the initial leg was reported to the NASD/NYSE TRF. Finally, if the initial leg is executed on and reported through a foreign exchange,7 a member submitting a non-tape report for the offsetting leg to the ORF would be required to use a special indicator on that report to designate that the initial leg was reported through a foreign exchange. In addition, FINRA is proposing to clarify and consolidate into a single paragraph in NASD Rules 6130, 6130A, 6130C and 6130E the rules relating to the submission of non-tape reports associated with previously executed trades. Pursuant to current Rules 6130(i), 6130A(d), 6130C(h) and 6130E(h), members are prohibited from submitting to a FINRA Facility any nontape report, including but not limited to reports of step-outs and reversals, associated with a previously executed trade that was not reported to that FINRA Facility, except where such report reflects the offsetting, ‘‘riskless’’ portion of a riskless principal transaction.8 This exception also applies to agency transactions where a FINRA member is acting as agent on behalf of another FINRA member.9 The requirement proposed herein, i.e., that a member identify on a non-tape report the market or facility where an associated trade was reported, would apply where a transaction falls within this exception for riskless principal or agency transactions and the related tape and non-tape reports are submitted to different FINRA Facilities or the nontape report is associated with a trade that was reported to the tape through an exchange. Thus, for ease of reference, FINRA is proposing to include the proposed requirement that members identify the facility or market where the associated trade was reported in the same paragraph with the prohibition on the submission of certain non-tape reports to FINRA in current NASD Rules 6130(i), 6130A(d), 6130C(h) and 6130E(h) and to clarify that the proposed requirement applies where a non-tape report is permitted pursuant to current Rules 6130(i), 6130A(d), 6130C(h) and 6130E(h). 7 This leg would not be reported to FINRA pursuant to NASD Rule 6620(g). 8 See Securities Exchange Act Release No. 55962 (June 26, 2007), 72 FR 36536 (July 3, 2007) (notice of filing and immediate effectiveness of SR–NASD– 2007–040). SR–NASD–2007–040 became operative on November 5, 2007. See also FINRA Regulatory Notice 07–38 (August 2007). 9 See FINRA Regulatory Notice 07–38 (August 2007). E:\FR\FM\28DEN1.SGM 28DEN1 73932 Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Notices FINRA believes that the proposed rule change will promote a more complete and accurate audit trail. Additionally, the proposed rule change will help ensure that members are not using nontape reports to circumvent FINRA or Commission rules (e.g., trade-through rules). FINRA will announce the operative date of the proposed rule change on its Web site. In recognition of the technological and systems changes that the proposed rule change will require, the operative date will be at least 90 days following 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,10 which requires, among other things, that FINRA rules 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 will promote a more complete and accurate audit trail. 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 mstockstill on PROD1PC66 with NOTICES Within 35 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 FINRA consents, the Commission will: (A) By order approve 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, 10 15 U.S.C. 78o–3(b)(6). VerDate Aug<31>2005 22:27 Dec 27, 2007 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 e-mail to rulecomments@sec.gov. Please include File Number SR–FINRA–2007–012 on the subject line. Paper comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–FINRA–2007–012. This file number should be included on the subject line if e-mail 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 inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 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–2007–012 and should be submitted on or before January 18, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–25206 Filed 12–27–07; 8:45 am] BILLING CODE 8011–01–P 11 17 Jkt 214001 PO 00000 Fmt 4703 [Release No. 34–56992; File No. SR–ISE– 2007–119] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Amendment of International Securities Exchange Holdings, Inc.’s Certificate of Incorporation and Trust Agreement December 19, 2007. 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 December 14, 2007, the International Securities Exchange, LLC (the ‘‘ISE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which items have been substantially prepared by the Exchange. The ISE filed the proposed rule change pursuant to section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(3) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to make technical changes to the trust agreement (the ‘‘Trust Agreement’’) and the certificate of incorporation (the ‘‘Certificate of Incorporation’’) of its parent, International Securities Exchange Holdings, Inc. (‘‘Holdings’’), which will be adopted in connection with a corporate transaction (the ‘‘Transaction’’), in which Holdings will become a wholly-owned indirect subsidiary of Eurex Frankfurt AG. Certificate of Incorporation The Exchange is proposing to make a technical change to the Certificate of Incorporation to correct the address of Holdings’ registered address in the state of Delaware. Specifically, Article SECOND of the Certificate of Incorporation would be amended to read in its entirety as follows: SECOND: The address of the Corporation’s registered office in the State of Delaware is 160 Greentree Drive, Suite 101, City of Dover, County 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 19b–4(f)(3). 2 17 CFR 200.30–3(a)(12). Frm 00176 SECURITIES AND EXCHANGE COMMISSION Sfmt 4703 E:\FR\FM\28DEN1.SGM 28DEN1

Agencies

[Federal Register Volume 72, Number 248 (Friday, December 28, 2007)]
[Notices]
[Pages 73930-73932]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-25206]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57020; File No. SR-FINRA-2007-012]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change and Amendment 
No. 1 thereto to Amend Trade Reporting Rules to Require Related Market 
Center Indicator on Certain Non-Tape Reports Submitted to FINRA

December 20, 2007.
    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 12, 2007, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') (f/k/a National Association of Securities Dealers, 
Inc. (``NASD'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by 
FINRA.\3\ On December 18, 2007, FINRA filed Amendment No. 1 to the 
proposed rule change. The Commission is publishing this notice to 
solicit comments on the proposed rule change as modified by Amendment 
No. 1 from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On July 26, 2007, the Commission approved a proposed rule 
change filed by NASD to amend NASD's Certificate of Incorporation to 
reflect its name change to the Financial Industry Regulatory 
Authority, Inc., or FINRA, in connection with the consolidation of 
the member firm regulatory functions of NASD and NYSE Regulation, 
Inc. See Securities Exchange Act Release No. 56146 (July 26, 2007), 
72 FR 42190 (August 1, 2007).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend its trade reporting rules to require 
that on any non-tape report (a non-tape, non-clearing report or a 
clearing-only report) submitted to a FINRA Facility (i.e., the 
Alternative Display Facility (``ADF''), a Trade Reporting Facility 
(``TRF'') \4\ or the OTC Reporting Facility (``ORF'')) associated with 
a previously executed trade that was not reported to that same

[[Page 73931]]

FINRA Facility, members identify the facility or market where the 
associated trade was reported. The text of the proposed rule change is 
available at FINRA, the Commission's Public Reference Room, and http://
www.finra.org.
---------------------------------------------------------------------------

    \4\ Effective July 30, 2007, FINRA was formed through the 
consolidation of NASD and the member regulatory functions of NYSE 
Regulation, Inc. Accordingly, the TRFs are now doing business as the 
FINRA TRFs (i.e., the FINRA/Nasdaq TRF, the FINRA/NSX TRF and the 
FINRA/NYSE TRF). The formal name change of each TRF is pending and 
once completed, FINRA will file a separate proposed rule change to 
reflect those changes in the Manual.
---------------------------------------------------------------------------

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

Background

    Certain transactions can be trade reported in related tape (i.e., 
the transaction is reported to the tape for publication) and non-tape 
(i.e., the transaction is not reported to the tape for publication but 
is reported for clearing or regulatory purposes) reports. Non-tape 
reports can be (1) ``non-tape, non-clearing,'' i.e. the transaction is 
not reported to the tape and is submitted to FINRA for regulatory--and 
not clearing--purposes, or (2) ``clearing-only,'' i.e., the transaction 
is not reported to the tape and is submitted to FINRA for clearing (and 
perhaps also regulatory) purposes.
    A riskless principal transaction \5\ can be submitted to FINRA as a 
single trade report properly marked as riskless principal, or as two 
separate reports: (1) A tape report to reflect the initial leg of the 
transaction and (2) a non-tape report to reflect the offsetting, 
``riskless'' leg of the transaction. For example, where the initial leg 
of a riskless principal transaction is executed on and reported through 
an exchange (often referred to as the ``street leg'' or ``street 
side''), a tape report is not submitted to FINRA to reflect the initial 
leg; however, members are permitted, but not required, to submit a non-
tape report to FINRA for the offsetting, ``riskless'' leg of the 
transaction. Similarly, agency transactions where one member acts as 
agent on behalf of another member, which transactions are the 
functional equivalent of riskless principal transactions, can also be 
reported in related tape and non-tape reports. Thus, for example, 
similar to the riskless principal reporting structure, where Member A, 
as agent for Member B, executes a trade on an exchange (and that trade 
is reported to the tape through the exchange), Member A may submit a 
non-tape report to FINRA to reflect the offsetting portion of the 
agency trade between Member A and Member B.\6\ Currently, a non-tape 
report provides no specific information pertaining to a related tape 
report and as such, it is difficult for FINRA to determine where the 
associated trade was reported, especially if that trade was reported to 
an exchange or another FINRA Facility.
---------------------------------------------------------------------------

    \5\ For purposes of over-the-counter trade reporting 
requirements applicable to equity securities, a ``riskless 
principal'' transaction is a transaction in which a member, after 
having received an order to buy (sell) a security, purchases (sells) 
the security as principal (the initial leg) and satisfies the 
original order by selling (buying) as principal at the same price 
(the offsetting, ``riskless'' leg).
    \6\ See FINRA Regulatory Notice 07-38 (August 2007).
---------------------------------------------------------------------------

Proposed Amendments to NASD Rules 6130, 6130A, 6130C and 6130E

    FINRA is proposing to amend NASD Rules 6130 (relating to the NASD/
Nasdaq TRF and ORF), 6130A (relating to the ADF), 6130C (relating to 
the NASD/NSX TRF) and 6130E (relating to the NASD/NYSE TRF) to require 
that on any non-tape report (either a non-tape, non-clearing report or 
a clearing-only report) submitted to a FINRA Facility associated with a 
previously executed trade that was not reported to that same FINRA 
Facility, members must identify the facility or market where the 
associated trade was reported. The proposed rule change also requires 
that members retain and produce to FINRA, upon request, documentation 
relating to the associated trade (e.g., a confirmation from the 
exchange identifying the ``street side'' of a riskless principal 
transaction).
    For example, pursuant to the proposed rule change, if the initial 
leg of a riskless principal (or agency) transaction is executed on and 
reported through the Nasdaq Exchange, a member submitting a non-tape 
report for the offsetting leg of the transaction to the NASD/Nasdaq TRF 
would be required to use a special indicator on that report to 
designate that the initial leg was reported through the Nasdaq 
Exchange. By way of further example, if the initial leg is executed 
otherwise than on an exchange and reported to the NASD/NYSE TRF, a 
member submitting a non-tape report for the offsetting leg to the NASD/
Nasdaq TRF would be required to use a special indicator on that report 
to designate that the initial leg was reported to the NASD/NYSE TRF. 
Finally, if the initial leg is executed on and reported through a 
foreign exchange,\7\ a member submitting a non-tape report for the 
offsetting leg to the ORF would be required to use a special indicator 
on that report to designate that the initial leg was reported through a 
foreign exchange.
---------------------------------------------------------------------------

    \7\ This leg would not be reported to FINRA pursuant to NASD 
Rule 6620(g).
---------------------------------------------------------------------------

    In addition, FINRA is proposing to clarify and consolidate into a 
single paragraph in NASD Rules 6130, 6130A, 6130C and 6130E the rules 
relating to the submission of non-tape reports associated with 
previously executed trades. Pursuant to current Rules 6130(i), 
6130A(d), 6130C(h) and 6130E(h), members are prohibited from submitting 
to a FINRA Facility any non-tape report, including but not limited to 
reports of step-outs and reversals, associated with a previously 
executed trade that was not reported to that FINRA Facility, except 
where such report reflects the offsetting, ``riskless'' portion of a 
riskless principal transaction.\8\ This exception also applies to 
agency transactions where a FINRA member is acting as agent on behalf 
of another FINRA member.\9\ The requirement proposed herein, i.e., that 
a member identify on a non-tape report the market or facility where an 
associated trade was reported, would apply where a transaction falls 
within this exception for riskless principal or agency transactions and 
the related tape and non-tape reports are submitted to different FINRA 
Facilities or the non-tape report is associated with a trade that was 
reported to the tape through an exchange. Thus, for ease of reference, 
FINRA is proposing to include the proposed requirement that members 
identify the facility or market where the associated trade was reported 
in the same paragraph with the prohibition on the submission of certain 
non-tape reports to FINRA in current NASD Rules 6130(i), 6130A(d), 
6130C(h) and 6130E(h) and to clarify that the proposed requirement 
applies where a non-tape report is permitted pursuant to current Rules 
6130(i), 6130A(d), 6130C(h) and 6130E(h).
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 55962 (June 26, 
2007), 72 FR 36536 (July 3, 2007) (notice of filing and immediate 
effectiveness of SR-NASD-2007-040). SR-NASD-2007-040 became 
operative on November 5, 2007. See also FINRA Regulatory Notice 07-
38 (August 2007).
    \9\ See FINRA Regulatory Notice 07-38 (August 2007).

---------------------------------------------------------------------------

[[Page 73932]]

    FINRA believes that the proposed rule change will promote a more 
complete and accurate audit trail. Additionally, the proposed rule 
change will help ensure that members are not using non-tape reports to 
circumvent FINRA or Commission rules (e.g., trade-through rules).
    FINRA will announce the operative date of the proposed rule change 
on its Web site. In recognition of the technological and systems 
changes that the proposed rule change will require, the operative date 
will be at least 90 days following 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,\10\ which requires, among 
other things, that FINRA rules 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 will 
promote a more complete and accurate audit trail.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

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

    Within 35 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 FINRA consents, the Commission will:
    (A) By order approve 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2007-012 on the subject line.

Paper comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2007-012. This 
file number should be included on the subject line if e-mail 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 inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 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-2007-012 and should be 
submitted on or before January 18, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-25206 Filed 12-27-07; 8:45 am]
BILLING CODE 8011-01-P