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
<![CDATA[
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 (https://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 (https://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 https://
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 (https://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 (https://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 https://
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 (https://
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 (https://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\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-25206 Filed 12-27-07; 8:45 am]
BILLING CODE 8011-01-P
