Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Reflect That the NASD/NYSE Trade Reporting Facility Does Not Support the Three-Party Trade Report Functionality, 7018-7020 [E8-2134]
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Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices
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review.12 Commenters stated customer
funds could be held in these accounts
and would not result in the issuance of
a contract until principal review has
been completed.13 Some commenters
also stated that customer funds could be
refunded in the event a contract is not
issued.14
Eight commenters suggested that
FINRA revise the timing of principal
review requirement.15 Paragraph (c)
requires a registered principal to review
a transaction and determine whether he
or she approves of it prior to
transmitting the customer’s application
to the issuing insurance company for
processing, but no later than seven
business days after the customer signs
the application.16 Commenters stated
that beginning the seven business day
review period from the time when the
customer signs the application is
problematic because often the customer
signs and mails the application, leaving
the broker-dealer no control over the
timing.17 Commenters also stated that
they have no control over which means
a customer uses to mail an application
and how long it takes for that
application to arrive at the brokerdealer.18 Some commenters suggested
that the principal review process be
required to be completed seven business
days after the broker-dealer has received
an application ‘‘in good order.’’ 19 Other
commenters suggested that the sevenday period should begin when the
broker-dealer receives the application
12 See Letter from MaryAnn Lamendola, Chief
Compliance Officer, Chase Investment Services
Corporation (Jan. 24, 2008) (‘‘Chase Letter’’); ACLI
Letter; Comm. of Annuity Insurers Letter; Dechert
Letter; NAVA Letter; SIFMA Letter. One of these
commenters believes that both the broker-dealer
and the issuing insurance company should be
allowed to negotiate checks upon receipt. See
Dechert Letter. This commenter noted that
customers may send back an application and one
check to cover a variable annuity and other
investment options, including mutual funds. Id. In
this situation, the commenter stated there is a
conflict between NASD Rule 2830(m), which
requires the prompt purchase of mutual fund
shares, and Rule 2821(c), which requires the brokerdealer to hold the customer’s check pending
principal review. Id.
13 See ACLI Letter; Comm. of Annuity Insurers
Letter; Dechert Letter. One commenter noted this
could be accomplished by the broker-dealer
developing controls to ensure that a variable
annuity is not issued until after the completion of
principal review. Chase Letter.
14 Id.
15 See Letter from Barbara Gill, Deputy Director of
Regulatory Affairs, Stifel, Nicolaus & Company, Inc.
(Jan. 22, 2008) (‘‘Stifel Letter’’); Comm. of Annuity
Insurers Letter; Dechert Letter; FSI Letter; ICI Letter;
NAVA Letter; SIFMA Letter; Schwab Letter.
16 See NASD Rule 2821(c).
17 See, e.g., Comm. of Annuity Insurers Letter;
Dechert Letter; SIFMA Letter; Stifel Letter.
18 Id.
19 See, e.g., ACLI Letter; ICI Letter; T. Rowe Price
Letter.
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18:21 Feb 05, 2008
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and the broker-dealer reasonably deems
the application is complete.20
Two commenters requested that
FINRA propose a single implementation
date for the entire rule.21 These
commenters stated that establishing two
different compliance dates would create
confusion when implementing the
proposed rule as well unnecessary and
redundant system design costs.22
Paragraph (d) requires members to
establish supervisory procedures
reasonably designed to achieve
compliance with the rule and paragraph
(e) require members to develop training
policies and programs to ensure
compliance with the rule. One of these
commenters believed imposing two
separate compliance dates would
require broker-dealers to provide
duplicate sets of supervisory procedures
to account for what the rule requires on
May 5, 2008 and for what it requires on
August 4, 2008.23 It also stated brokerdealers would have to implement one
training program for the part of rule
becoming effective on May 5, 2008 and
another training program for principal
review starting on August 4, 2008.24
IV. Discussion and Commission
Findings
The Commission has reviewed
carefully the proposed rule change and
the comments, and finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
association. In particular, the
Commission finds that the proposed
rule change is consistent with section
15A(b)(6) of the Act, which requires,
among other things, that the rules of a
national securities association 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.25
The proposed rule change does not
change any of the substantive provisions
of Rule 2821. It allows broker-dealers
additional time to comply with one
portion of the rule and provides FINRA
with additional time to further consider
its members’ concerns. It is consistent
20 See Comm. of Annuity Insurers Letter; Dechert
Letter; FSI Letter; NAVA Letter; Schwab Letter.
Three commenters also specified that the seven
days should not begin to run until a complete
application is specifically received by the brokerdealer’s Office of Supervisory Jurisdiction. See
Comm. of Annuity Insurers Letter; Dechert Letter;
SIFMA Letter.
21 See ACLI Letter; Dechert Letter.
22 Id.
23 See Dechert Letter.
24 Id.
25 15 U.S.C. 78o–3(b)(6).
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with the requirements of the Act for
FINRA to further consider paragraph (c)
of Rule 2821 and its related Regulatory
Notice to determine whether any
unintended or harmful consequences
might ensue upon the current effective
date.
V. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,26 that the
proposed rule change (SR–FINRA 2007–
040) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–2074 Filed 2–5–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57247; File No. SR–FINRA–
2008–002]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Reflect That the NASD/
NYSE Trade Reporting Facility Does
Not Support the Three-Party Trade
Report Functionality
January 31, 2008.
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 January
28, 2008, the Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
(f/k/a the National Association of
Securities Dealers, Inc. (‘‘NASD’’)) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared substantially by FINRA.
FINRA has filed this proposal pursuant
to section 19(b)(3)(A)(iii) of the Act 3
and Rule 19b–4(f)(6) thereunder,4 which
renders the proposal effective upon
filing with the Commission.5 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
26 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 4 17 CFR 240.19b–4(f)(6).
5 FINRA has asked the Commission to waive the
30-day operative delay provided in Rule 19b–
4(f)(6)(iii). 17 CFR 240.19b–4(f)(6)(iii).
27 17
E:\FR\FM\06FEN1.SGM
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Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA proposes to amend the rules
governing the NASD/NYSE Trade
Reporting Facility (‘‘NASD/NYSE TRF’’)
to delete NASD Rule 4632E(d), relating
to three-party trade reports, because the
NASD/NYSE TRF currently does not
support the three-party trade report
functionality. In addition, FINRA
proposes to modify NASD Rule
4632E(c), relating to two-party trade
reports, to conform NASD Rule 4632E(c)
to the two-party trade report rules of
FINRA’s other Trade Reporting
Facilities (‘‘TRFs’’).6
The text of the proposed rule change
is available at https://www.finra.org, the
principal office of FINRA, and the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA included statements concerning
the purpose of, and basis for, the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
2. Statutory Basis
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1. Purpose
The TRFs, including the NASD/NYSE
TRF, provide FINRA members with
mechanisms for reporting trades in NMS
stocks, as defined in Rule 600(b)(47) of
Regulation NMS under the Act,7
executed otherwise than on an
exchange. When the NASD/NYSE TRF
was established, it was contemplated
that members would be able to report
trades to the NASD/NYSE TRF using
either two- or three-party trade reports.8
6 Effective July 30, 2007, FINRA was formed
through the consolidation of NASD and the member
regulatory functions of NYSE Regulation.
Accordingly, the NASD/NYSE TRF is now doing
business as the FINRA/NYSE TRF. In addition to
the NASD/NYSE TRF, there are two other TRFs in
operation: The NASD/Nasdaq Trade Reporting
Facility (the ‘‘NASD/Nasdaq TRF’’) and the NASD/
NSX Trade Reporting Facility (the ‘‘NASD/NSX
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.
7 17 CFR 242.600(b)(47).
8 See NASD Rules 4632E(c) and 4632E(d),
respectively. Current NASD Rules 4632E(c) and (d)
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18:21 Feb 05, 2008
Jkt 214001
A three-party trade report is a single
trade report that denotes one Reporting
Member (i.e., the member with the
obligation to report the trade under
FINRA’s rules) and two contra parties.
However, the NASD/NYSE TRF has
not implemented the three-party trade
report functionality and members
currently are able to submit reports to
the NASD/NYSE TRF only in the twoparty trade report format.9 Accordingly,
for its rules to accurately reflect the
functionality of the NASD/NYSE TRF,
FINRA proposes to delete NASD Rule
4632E(d) relating to three-party trade
reports. In addition, FINRA proposes to
replace the two-party trade report
provisions currently found in paragraph
(c) of NASD Rule 4632E with a new
paragraph (c), which is identical to the
two-party trade report provisions of the
NASD/Nasdaq TRF and the NASD/NSX
TRF. According to FINRA, this will
conform, to the extent practicable, the
rules relating to the three TRFs.10
Finally, FINRA proposes technical
changes to paragraphs (c), (d), and (h) of
NASD Rule 6130E to reflect the deletion
of NASD Rule 4632E(d) and the
resulting renumbering of paragraphs in
NASD Rule 4632E.
FINRA has asked the Commission to
waive the 30-day operative delay and to
make the proposed rule change
operative on the date of filing.
FINRA believes that the proposed rule
change is consistent with the provisions
of section 15A(b)(6) of the Act,11 which
requires, among other things, that
FINRA’s 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 by deleting rules
that apply to a functionality that is not
currently supported by the NASD/NYSE
TRF, the proposed rule change will
prevent member confusion and trade
reporting errors.
are substantially similar to the reporting
requirements relating to two- and three-party trade
reports for FINRA’s Alternative Display Facility (the
‘‘ADF’’). See NASD Rules 4632A(c) and (d).
9 The NASD/NYSE TRF may implement this
functionality at a later date, in which case FINRA
would submit a proposed rule change to amend its
rules accordingly.
10 Neither the NASD/Nasdaq TRF nor the NASD/
NSX TRF supports three-party trade reports.
Accordingly, members may submit trades to a TRF
only in the two-party trade report format. Members
may submit trades in the three-party trade report
format to the ADF.
11 15 U.S.C. 78o–3(b)(6).
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7019
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
FINRA has designated the proposed
rule change as one that: (i) Does not
significantly affect the protection of
investors or the public interest; (ii) does
not impose any significant burden on
competition; and (iii) does not become
operative for 30 days from the date of
filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest. In addition, as required
under Rule 19b–4(f)(6)(iii),12 FINRA
provided the Commission with written
notice of its intention to file the
proposed rule change, along with a brief
description and the text of the proposed
rule change, at least five business days
prior to filing the proposal with the
Commission. Therefore, the foregoing
rule change has become effective
pursuant to section 19(b)(3)(A) of the
Act 13 and Rule 19b–4(f)(6)
thereunder.14
Pursuant to Rule 19b–4(f)(6)(iii) under
the Act, a proposal does not become
operative for 30 days after the date of its
filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest. FINRA has asked the
Commission to waive the 30-day
operative delay to expedite the deletion
of rules relating to the three-party trade
report functionality, which currently is
not supported by the NASD/NYSE TRF,
and the adoption of conforming changes
to the NASD/NYSE TRF’s two-party
trade report provisions. FINRA believes
that these changes will prevent potential
member confusion and trade reporting
errors. FINRA notes, in addition, that
the proposal amends the NASD/NYSE
TRF’s trade reporting rules to accurately
reflect the current functionality of the
NASD/NYSE TRF, but does not affect
members’ reporting obligations or
current capability.
12 17
CFR 240.19b–4(f)(6)(iii).
U.S.C. 78s(b)(3)(A).
14 17 CFR 240.19b–4(f)(6).
13 15
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7020
Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest
because the deletion of the three-party
trade report provisions is designed to
ensure that the rules governing the
NASD/NYSE TRF accurately reflect the
operation of the NASD/NYSE TRF,
which currently does not support the
three-party trade report functionality.15
Similarly, the proposed changes to
conform the NASD/NYSE TRF’s twoparty trade report rules to the two-party
trade report rules of the NASD/Nasdaq
TRF and the NASD/NSX TRF 16 will
provide consistency among the rules of
the TRFs and does not raise new
regulatory issues. Accordingly, the
Commission waives the 30-day
operative delay and designates the
proposal to be operative upon filing
with the Commission.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
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.
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:
pwalker on PROD1PC71 with NOTICES
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–2008–002 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
No. SR–FINRA–2008–002. 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
15 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposal’s impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
16 See NASD Rules 4632(c) and 4632C(c).
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18:21 Feb 05, 2008
Jkt 214001
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. Copies of the 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 No.
SR–FINRA–2008–002 and should be
submitted on or before February 27,
2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–2134 Filed 2–5–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57237; File No. SR–ISE–
2007–124]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change and Amendment No. 1 Thereto
Relating to Equity Fees
January 30, 2008.
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 December
31, 2007, the International Securities
Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’)
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 ISE.
On January 28, 2007, ISE submitted
Amendment No. 1 to the proposed rule
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Frm 00101
Fmt 4703
Sfmt 4703
change.3 ISE filed the proposal pursuant
to section 19(b)(3)(A)(ii) of the Act 4 and
Rule 19b–4(f)(2) 5 thereunder, as
establishing or changing a due, fee, or
other charges applicable to a member,
which renders the proposed rule change
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
ISE is proposing to amend its
Schedule of Fees with respect to equity
transactions. The text of the proposed
rule change is available at ISE, https://
www.ise.com, and the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange 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. The
Exchange 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
The Exchange proposes to amend its
Schedule of Fees to: (1) Distinguish
between transaction fees related to
equity orders and equity orders
submitted on an order delivery basis; (2)
to increase the rebate for equity orders
that add liquidity for securities that
trade at or above $1.00 from $0.0025 to
$0.0032; (3) to increase the rebate for
equity orders submitted on an order
delivery basis that add liquidity for
securities that trade at or above $1.00
from $0.0025 to $0.0027 (these orders
are submitted by Order Delivery Equity
Electronic Access Members (‘‘Order
Delivery Equity EAMs’’)); and (4) to
cease sharing market data revenues
except with respect to orders submitted
on an order delivery basis. The
3 In Amendment No. 1, the Exchange made
clarifying changes to the purpose section of the
filing.
4 15 U.S.C. 78s(b)(3)(A)(ii).
5 17 CFR 240.19b–4(f)(2).
E:\FR\FM\06FEN1.SGM
06FEN1
]]>Agencies
[Federal Register Volume 73, Number 25 (Wednesday, February 6, 2008)]
[Notices]
[Pages 7018-7020]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-2134]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57247; File No. SR-FINRA-2008-002]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Reflect That the NASD/NYSE Trade Reporting
Facility Does Not Support the Three-Party Trade Report Functionality
January 31, 2008.
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 January 28, 2008, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a the National Association of Securities Dealers, Inc.
(``NASD'')) filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared substantially by FINRA. FINRA
has filed this proposal pursuant to section 19(b)(3)(A)(iii) of the Act
\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal
effective upon filing with the Commission.\5\ The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 4 17 CFR 240.19b-4(f)(6).
\5\ FINRA has asked the Commission to waive the 30-day operative
delay provided in Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-
4(f)(6)(iii).
---------------------------------------------------------------------------
[[Page 7019]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA proposes to amend the rules governing the NASD/NYSE Trade
Reporting Facility (``NASD/NYSE TRF'') to delete NASD Rule 4632E(d),
relating to three-party trade reports, because the NASD/NYSE TRF
currently does not support the three-party trade report functionality.
In addition, FINRA proposes to modify NASD Rule 4632E(c), relating to
two-party trade reports, to conform NASD Rule 4632E(c) to the two-party
trade report rules of FINRA's other Trade Reporting Facilities
(``TRFs'').\6\
---------------------------------------------------------------------------
\6\ Effective July 30, 2007, FINRA was formed through the
consolidation of NASD and the member regulatory functions of NYSE
Regulation. Accordingly, the NASD/NYSE TRF is now doing business as
the FINRA/NYSE TRF. In addition to the NASD/NYSE TRF, there are two
other TRFs in operation: The NASD/Nasdaq Trade Reporting Facility
(the ``NASD/Nasdaq TRF'') and the NASD/NSX Trade Reporting Facility
(the ``NASD/NSX 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.
---------------------------------------------------------------------------
The text of the proposed rule change is available at https://
www.finra.org, the principal office of FINRA, and the Commission's
Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The TRFs, including the NASD/NYSE TRF, provide FINRA members with
mechanisms for reporting trades in NMS stocks, as defined in Rule
600(b)(47) of Regulation NMS under the Act,\7\ executed otherwise than
on an exchange. When the NASD/NYSE TRF was established, it was
contemplated that members would be able to report trades to the NASD/
NYSE TRF using either two- or three-party trade reports.\8\ A three-
party trade report is a single trade report that denotes one Reporting
Member (i.e., the member with the obligation to report the trade under
FINRA's rules) and two contra parties.
---------------------------------------------------------------------------
\7\ 17 CFR 242.600(b)(47).
\8\ See NASD Rules 4632E(c) and 4632E(d), respectively. Current
NASD Rules 4632E(c) and (d) are substantially similar to the
reporting requirements relating to two- and three-party trade
reports for FINRA's Alternative Display Facility (the ``ADF''). See
NASD Rules 4632A(c) and (d).
---------------------------------------------------------------------------
However, the NASD/NYSE TRF has not implemented the three-party
trade report functionality and members currently are able to submit
reports to the NASD/NYSE TRF only in the two-party trade report
format.\9\ Accordingly, for its rules to accurately reflect the
functionality of the NASD/NYSE TRF, FINRA proposes to delete NASD Rule
4632E(d) relating to three-party trade reports. In addition, FINRA
proposes to replace the two-party trade report provisions currently
found in paragraph (c) of NASD Rule 4632E with a new paragraph (c),
which is identical to the two-party trade report provisions of the
NASD/Nasdaq TRF and the NASD/NSX TRF. According to FINRA, this will
conform, to the extent practicable, the rules relating to the three
TRFs.\10\ Finally, FINRA proposes technical changes to paragraphs (c),
(d), and (h) of NASD Rule 6130E to reflect the deletion of NASD Rule
4632E(d) and the resulting renumbering of paragraphs in NASD Rule
4632E.
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\9\ The NASD/NYSE TRF may implement this functionality at a
later date, in which case FINRA would submit a proposed rule change
to amend its rules accordingly.
\10\ Neither the NASD/Nasdaq TRF nor the NASD/NSX TRF supports
three-party trade reports. Accordingly, members may submit trades to
a TRF only in the two-party trade report format. Members may submit
trades in the three-party trade report format to the ADF.
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FINRA has asked the Commission to waive the 30-day operative delay
and to make the proposed rule change operative on the date of filing.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of section 15A(b)(6) of the Act,\11\ which requires, among
other things, that FINRA's 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 by deleting rules that apply to a
functionality that is not currently supported by the NASD/NYSE TRF, the
proposed rule change will prevent member confusion and trade reporting
errors.
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\11\ 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.
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
FINRA has designated the proposed rule change as one that: (i) Does
not significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
and (iii) does not become operative for 30 days from the date of
filing, or such shorter time as the Commission may designate if
consistent with the protection of investors and the public interest. In
addition, as required under Rule 19b-4(f)(6)(iii),\12\ FINRA provided
the Commission with written notice of its intention to file the
proposed rule change, along with a brief description and the text of
the proposed rule change, at least five business days prior to filing
the proposal with the Commission. Therefore, the foregoing rule change
has become effective pursuant to section 19(b)(3)(A) of the Act \13\
and Rule 19b-4(f)(6) thereunder.\14\
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\12\ 17 CFR 240.19b-4(f)(6)(iii).
\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6).
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Pursuant to Rule 19b-4(f)(6)(iii) under the Act, a proposal does
not become operative for 30 days after the date of its filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest. FINRA has asked the
Commission to waive the 30-day operative delay to expedite the deletion
of rules relating to the three-party trade report functionality, which
currently is not supported by the NASD/NYSE TRF, and the adoption of
conforming changes to the NASD/NYSE TRF's two-party trade report
provisions. FINRA believes that these changes will prevent potential
member confusion and trade reporting errors. FINRA notes, in addition,
that the proposal amends the NASD/NYSE TRF's trade reporting rules to
accurately reflect the current functionality of the NASD/NYSE TRF, but
does not affect members' reporting obligations or current capability.
[[Page 7020]]
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
because the deletion of the three-party trade report provisions is
designed to ensure that the rules governing the NASD/NYSE TRF
accurately reflect the operation of the NASD/NYSE TRF, which currently
does not support the three-party trade report functionality.\15\
Similarly, the proposed changes to conform the NASD/NYSE TRF's two-
party trade report rules to the two-party trade report rules of the
NASD/Nasdaq TRF and the NASD/NSX TRF \16\ will provide consistency
among the rules of the TRFs and does not raise new regulatory issues.
Accordingly, the Commission waives the 30-day operative delay and
designates the proposal to be operative upon filing with the
Commission.
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\15\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposal's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\16\ See NASD Rules 4632(c) and 4632C(c).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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.
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-2008-002 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 No. SR-FINRA-2008-002. 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. Copies of the
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 No. SR-
FINRA-2008-002 and should be submitted on or before February 27, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Florence E. Harmon,
Deputy Secretary.
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\17\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E8-2134 Filed 2-5-08; 8:45 am]
BILLING CODE 8011-01-P
