Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Allow FINRA Members To Use the OTC Reporting Facility To Transfer Transaction Fees Charged by One Member to Another Member, 25020-25022 [2010-10594]
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Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–10600 Filed 5–5–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61997; File No. SR–FINRA–
2010–017]
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–NYSEArca–2010–36 on the
subject line.
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Allow FINRA Members
To Use the OTC Reporting Facility To
Transfer Transaction Fees Charged by
One Member to Another Member
Paper Comments
April 28, 2010.
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 April 12,
2010, the Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
All submissions should refer to File
(‘‘SEC’’ or ‘‘Commission’’) the proposed
Number SR–NYSEArca–2010–36. This
rule change as described in Items I and
file number should be included on the
II below, which Items have been
subject line if e-mail is used. To help the prepared by FINRA. FINRA has
Commission process and review your
designated the proposed rule change as
comments more efficiently, please use
constituting a ‘‘non-controversial’’ rule
only one method. The Commission will change under Section 19(b)(3)(A) of the
post all comments on the Commission’s Act 3 and Rule 19b–4(f)(6) thereunder,4
Internet Web site (https://www.sec.gov/
which renders the proposal effective
rules/sro.shtml). Copies of the
upon receipt of this filing by the
submission, all subsequent
Commission. Additionally, FINRA has
amendments, all written statements
designated the proposed rule change as
with respect to the proposed rule
‘‘establishing or changing a due, fee or
change that are filed with the
other charge’’ under Section 19(b)(3)(A)
Commission, and all written
of the Act 5 and Rule 19b–4(f)(2)
communications relating to the
thereunder,6 which renders the proposal
proposed rule change between the
effective upon receipt of this filing by
Commission and any person, other than the Commission. The Commission is
those that may be withheld from the
publishing this notice to solicit
public in accordance with the
comments on the proposed rule change
provisions of 5 U.S.C. 552, will be
from interested persons.
available for Web site viewing and
I. Self-Regulatory Organization’s
printing in the Commission’s Public
Statement of the Terms of Substance of
Reference Room, on official business
the Proposed Rule Change
days between the hours of 10 a.m. and
FINRA is proposing to (1) adopt
3 p.m. Copies of the filing also will be
FINRA Rule 7330(i) to permit FINRA
available for inspection and copying at
the principal office of the Exchange. All members to use the OTC Reporting
Facility (the ‘‘ORF’’) to transfer
comments received will be posted
transaction fees charged by one member
without change; the Commission does
to another member on trades reported to
not edit personal identifying
information from submissions. You
9 17 CFR 200.30–3(a)(12).
should submit only information that
1 15 U.S.C. 78s(b)(1).
you wish to make available publicly. All
2 17 CFR 240.19b–4.
submissions should refer to File
3 15 U.S.C. 78s(b)(3)(A).
Number SR–NYSEArca–2010–36 and
4 17 CFR 240.19b–4(f)(6).
should be submitted on or before May
5 15 U.S.C. 78s(b)(3)(A).
27, 2010.
6 17 CFR 240.19b–4(f)(2).
mstockstill on DSKH9S0YB1PROD with NOTICES
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
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the ORF; and (2) amend FINRA Rule
7710 to establish the fee to be charged
by the ORF for use of the transaction fee
transfer service.
The text of the proposed rule change
is available on FINRA’s Web site at
https://www.finra.org, on the
Commission’s Web site at https://
www.sec.gov, at the principal office of
FINRA and at 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
Background:
Rule 7230A(h) permits FINRA
members to agree in advance to transfer
a transaction fee charged by one
member to another member on a
transaction in NMS stocks effected
otherwise than on an exchange through
the submission of a clearing report to
the FINRA/Nasdaq Trade Reporting
Facility (‘‘FINRA/Nasdaq TRF’’). Prior to
the adoption of Rule 7230A(h) in 2007,7
there was no mechanism for members to
charge each other commissions or other
explicit transaction fees through the
FINRA trade reporting and clearance
submission process. Generally, members
wanting to charge other members an
explicit transaction fee either billed and
collected those fees directly from the
other member outside the transaction
reporting and clearing process or traded
on a ‘‘net’’ basis.8 Rule 7230A(h)
7 See Securities Exchange Act Release No. 56007
(July 3, 2007), 72 FR 37807 (July 11, 2007) (Notice
of Filing and Immediate Effectiveness of File No.
SR–NASD–2007–046). SR–NASD–2007–046
proposed to adopt paragraph (h) of NASD Rule
6130. Pursuant to SR–FINRA–2008–021, NASD
Rule 6130 was renumbered as FINRA Rule 7230A.
See Securities Exchange Act Release No. 58643
(September 25, 2008), 73 FR 57174 (October 1,
2008) (Order Approving File No. SR–FINRA–2008–
021).
8 Trading on a ‘‘net basis’’ means that the brokerdealer’s compensation is implicitly included in the
execution price disseminated to the tape and
reported for clearance and settlement to the
E:\FR\FM\06MYN1.SGM
06MYN1
Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices
mstockstill on DSKH9S0YB1PROD with NOTICES
provides members with another
alternative by permitting the transfer of
a transaction fee as part of a clearing
report submitted to the FINRA/Nasdaq
TRF.
Proposed Amendments Relating to
Transfer of Transaction Fees in Clearing
Reports Submitted to the ORF:
The proposed rule change would
adopt a provision identical to Rule
7230A(h) for purposes of transferring
transaction fees between members as
part of a clearing report submitted to the
ORF. Specifically, pursuant to proposed
Rule 7330(i), members would be
required to provide in reports submitted
to the ORF, in addition to all other
information required to be submitted by
any other rule, a total per share or
contract price amount, inclusive of the
transaction fee. As a result, members
would submit two price amounts as part
of their report to the ORF: one price
including the transaction fee, which
would be submitted by the ORF to
NSCC for clearance and settlement; and
one price exclusive of the transaction
fee, which would be publicly
disseminated. For example, if B/D 1
purchases from B/D 2 at $10.00 and B/
D 1 and B/D 2 agree to a transaction fee
of $.001 per share, the trade price that
would be publicly disseminated would
be $10.00, while the trade would be
cleared and settled by NSCC at
$10.001.9 The parties to the trade would
know both prices—the price reported
for public dissemination and the
clearance/settlement price.
Proposed Rule 7330(i) provides that
both members and their respective
clearing firms, as applicable, must
execute an agreement, as specified by
FINRA, permitting the facilitation of the
transfer of the transaction fee through
the ORF, as well as any other applicable
agreement, such as a give up
agreement.10 Such agreement must be
National Securities Clearing Corporation (‘‘NSCC’’).
For example, broker-dealer 1 (B/D 1) purchases a
security at $10 and sells the security to brokerdealer 2 (B/D 2) ‘‘net’’ at a price of $10.001. Because
$10.001 is the reported trade price, the transaction
fee is included as part of the trade and is transferred
as part of the clearance and settlement process.
9 If the parties were trading on a net basis with
the fee incorporated in the trade price, the
transaction at a price of $10.001 would be reported
to the tape and also submitted to NSCC.
10 FINRA also is proposing to adopt paragraph (h)
of Rule 6622, which would provide expressly that
members may enter into ‘‘give up’’ arrangements
whereby one member reports to the ORF on behalf
of another member, provided that both members
have executed and submitted to the ORF the
appropriate documentation. The proposed
provision is identical to the current rules relating
to the FINRA/Nasdaq Trade Reporting Facility and
the FINRA/NYSE Trade Reporting Facility and
codifies current practice and guidance with respect
to reporting to the FINRA Facilities. See Rules
6380A(h) and 6380B(g); Member Alert: Notice to All
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16:53 May 05, 2010
Jkt 220001
executed and submitted to the ORF
before the members can transfer any
transaction fee under the proposed rule.
Among other things, the form of
agreement specified by FINRA would
expressly provide that the acceptance
and processing by the ORF of the
transaction fee as part of a trade report
shall not constitute an estoppel as to
FINRA or bind FINRA in any
subsequent administrative, civil or
disciplinary proceeding with respect to
the transaction fee transferred. In other
words, processing of a transaction fee by
the ORF should not be taken to mean
that FINRA approved that transaction
fee or its amount or its appropriateness
under FINRA rules or federal securities
laws. The mere fact that the transaction
fee flowed through a FINRA facility will
not be a defense to any action taken by
FINRA relating to the fee. The proposed
rule also provides that the relevant
agreements are considered member
records for purposes of NASD Rule
3110(a) and must be made and
preserved by both members in
conformity with applicable FINRA
rules.
Furthermore, the proposed rule
expressly provides that it shall not
relieve a member from its obligations
under FINRA rules and federal
securities laws, including but not
limited to, NASD Rule 2230
(Confirmations) and SEA Rule 10b–10.
To the extent that any transaction fee is
passed onto the customer, members
should review their customer
confirmation obligations to ensure that
they are disclosing such fees in
compliance with all applicable rules
and regulations, as well as other FINRA
rules, including but not limited to,
NASD Rules 2320 (Best Execution and
Interpositioning) and 2440 (Fair Prices
and Commissions).
The proposed rule relates solely to
transaction fees charged by one FINRA
member to another FINRA member.
Members would not be able to use the
ORF to facilitate the transfer of fees for
transactions with a customer (i.e.,
clients that are not brokers or dealers) or
a non-member. In addition, the ORF can
only be used to facilitate the transfer of
transaction fees. Members would not be
able to use the ORF to transfer access
fees or rebates on transactions.
FINRA also is proposing to amend
Rule 7330(d) to require that for any
transaction for which the ORF is used
to transfer a transaction fee between two
members, the trade report must comply
with the requirements of proposed Rule
TRF, ADF and Other NASD Facility Participants
Regarding AGU and QSR Relationships (January 25,
2007).
PO 00000
Frm 00157
Fmt 4703
Sfmt 4703
25021
7330(i). Thus, while use of the ORF to
transfer transaction fees between
members is voluntary, members that opt
to use this service must comply with the
requirements of proposed Rule 7330(i),
as well as all other applicable FINRA
rules.
Proposed Fee for Use of Transaction
Fee Transfer Service:
In this filing, FINRA also is proposing
to establish the fee to be charged by the
ORF for use by members of the
transaction fee transfer service. Pursuant
to Rule 7710, the fee will be $0.03 per
side for each clearing report submitted
to the ORF to transfer a transaction fee.
This fee is in addition to any other fee
applicable to the transaction. The
amount of this fee is identical to the fee
charged by the FINRA/Nasdaq TRF
under Rule 7620A for the same
transaction fee transfer service.
FINRA has filed the proposed rule
change for immediate effectiveness. The
operative date will be June 1, 2010.
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 rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest. FINRA believes that by
automating and improving transaction
fee transfers between members as a
value-added service, the proposed rule
change will enhance market
transparency.
Additionally, FINRA believes that the
proposed rule change is consistent with
the provisions of Section 15A(b)(5) of
the Act,12 which requires, among other
things, that FINRA rules provide for the
equitable allocation of reasonable dues,
fees and other charges among members
and issuers and other persons using any
facility or system that FINRA operates
or controls. FINRA believes that the
proposed fee for the service is
reasonably allocated among members
based on their usage of the functionality
to transfer transaction fees between
members and is generally consistent
with other fees charged by the ORF and
other FINRA trade reporting facilities.
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
11 15
12 15
E:\FR\FM\06MYN1.SGM
U.S.C. 78o–3(b)(6).
U.S.C. 78o–3(b)(5).
06MYN1
25022
Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices
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.
I. Date of Effectiveness of the Proposed
Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 13 and Rule 19b–
4(f)(6) thereunder.14 Additionally, the
foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 15 and paragraph (f)(2) of Rule
19b–4 thereunder.16
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.
II. 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 rulecomments@sec.gov. Please include File
Number SR–FINRA–2010–017 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
mstockstill on DSKH9S0YB1PROD with NOTICES
13 15
U.S.C. 78s(b)(3)(A).
14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
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 the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
Exchange has satisfied the pre-filing requirement.
15 15 U.S.C. 78s(b)(3)(A).
16 17 CFR 240.19b–4(f)(2).
VerDate Mar<15>2010
16:53 May 05, 2010
Jkt 220001
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–FINRA–2010–017. 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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
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–2010–017 and
should be submitted on or before May
27, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–10594 Filed 5–5–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61994; File No. SR–Phlx2010–58]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by NASDAQ
OMX PHLX, Inc. To Amend the ByLaws of The NASDAQ OMX Group, Inc.
(‘‘Act’’) 1, and Rule 19b–4 2 thereunder,
notice is hereby given that on April 9,
2010, NASDAQ OMX PHLX, Inc.
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by the Exchange. 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 proposes to file a
proposed rule change relating to the ByLaws of its parent corporation, The
NASDAQ OMX Group, Inc. (‘‘NASDAQ
OMX’’). The text of the proposed rule
change is available on the Exchange’s
Web site at https://
www.nasdaqtrader.com/
micro.aspx?id=PHLXRulefilings, at the
principal office of the Exchange, on the
Commission’s Web site at https://
www.sec.gov, and at 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
NASDAQ OMX has proposed making
certain amendments to its By-Laws to
make improvements in its governance.
In SR–NASDAQ–2010–025, The
NASDAQ Stock Market LLC (‘‘NASDAQ
Exchange’’) sought Commission
approval to adopt these By-Laws
changes as part of the rules of NASDAQ
Exchange, and the Commission granted
approval to these changes in an order
dated April 8, 2010.3 The Exchange is
April 27, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
17 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00158
Fmt 4703
Sfmt 4703
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 61876
(April 8, 2010), 75 FR 19436 (April 14, 2010) (SR–
NASDAQ–2010–025).
2 17
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]]>Agencies
[Federal Register Volume 75, Number 87 (Thursday, May 6, 2010)]
[Notices]
[Pages 25020-25022]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-10594]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61997; File No. SR-FINRA-2010-017]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Allow FINRA Members To Use the OTC Reporting
Facility To Transfer Transaction Fees Charged by One Member to Another
Member
April 28, 2010.
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 April 12, 2010, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by FINRA. FINRA has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)
thereunder,\4\ which renders the proposal effective upon receipt of
this filing by the Commission. Additionally, FINRA has designated the
proposed rule change as ``establishing or changing a due, fee or other
charge'' under Section 19(b)(3)(A) of the Act \5\ and Rule 19b-4(f)(2)
thereunder,\6\ which renders the proposal effective upon receipt of
this filing by the Commission. The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to (1) adopt FINRA Rule 7330(i) to permit FINRA
members to use the OTC Reporting Facility (the ``ORF'') to transfer
transaction fees charged by one member to another member on trades
reported to the ORF; and (2) amend FINRA Rule 7710 to establish the fee
to be charged by the ORF for use of the transaction fee transfer
service.
The text of the proposed rule change is available on FINRA's Web
site at https://www.finra.org, on the Commission's Web site at https://www.sec.gov, at the principal office of FINRA and at 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
Background:
Rule 7230A(h) permits FINRA members to agree in advance to transfer
a transaction fee charged by one member to another member on a
transaction in NMS stocks effected otherwise than on an exchange
through the submission of a clearing report to the FINRA/Nasdaq Trade
Reporting Facility (``FINRA/Nasdaq TRF''). Prior to the adoption of
Rule 7230A(h) in 2007,\7\ there was no mechanism for members to charge
each other commissions or other explicit transaction fees through the
FINRA trade reporting and clearance submission process. Generally,
members wanting to charge other members an explicit transaction fee
either billed and collected those fees directly from the other member
outside the transaction reporting and clearing process or traded on a
``net'' basis.\8\ Rule 7230A(h)
[[Page 25021]]
provides members with another alternative by permitting the transfer of
a transaction fee as part of a clearing report submitted to the FINRA/
Nasdaq TRF.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 56007 (July 3,
2007), 72 FR 37807 (July 11, 2007) (Notice of Filing and Immediate
Effectiveness of File No. SR-NASD-2007-046). SR-NASD-2007-046
proposed to adopt paragraph (h) of NASD Rule 6130. Pursuant to SR-
FINRA-2008-021, NASD Rule 6130 was renumbered as FINRA Rule 7230A.
See Securities Exchange Act Release No. 58643 (September 25, 2008),
73 FR 57174 (October 1, 2008) (Order Approving File No. SR-FINRA-
2008-021).
\8\ Trading on a ``net basis'' means that the broker-dealer's
compensation is implicitly included in the execution price
disseminated to the tape and reported for clearance and settlement
to the National Securities Clearing Corporation (``NSCC''). For
example, broker-dealer 1 (B/D 1) purchases a security at $10 and
sells the security to broker-dealer 2 (B/D 2) ``net'' at a price of
$10.001. Because $10.001 is the reported trade price, the
transaction fee is included as part of the trade and is transferred
as part of the clearance and settlement process.
---------------------------------------------------------------------------
Proposed Amendments Relating to Transfer of Transaction Fees in
Clearing Reports Submitted to the ORF:
The proposed rule change would adopt a provision identical to Rule
7230A(h) for purposes of transferring transaction fees between members
as part of a clearing report submitted to the ORF. Specifically,
pursuant to proposed Rule 7330(i), members would be required to provide
in reports submitted to the ORF, in addition to all other information
required to be submitted by any other rule, a total per share or
contract price amount, inclusive of the transaction fee. As a result,
members would submit two price amounts as part of their report to the
ORF: one price including the transaction fee, which would be submitted
by the ORF to NSCC for clearance and settlement; and one price
exclusive of the transaction fee, which would be publicly disseminated.
For example, if B/D 1 purchases from B/D 2 at $10.00 and B/D 1 and B/D
2 agree to a transaction fee of $.001 per share, the trade price that
would be publicly disseminated would be $10.00, while the trade would
be cleared and settled by NSCC at $10.001.\9\ The parties to the trade
would know both prices--the price reported for public dissemination and
the clearance/settlement price.
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\9\ If the parties were trading on a net basis with the fee
incorporated in the trade price, the transaction at a price of
$10.001 would be reported to the tape and also submitted to NSCC.
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Proposed Rule 7330(i) provides that both members and their
respective clearing firms, as applicable, must execute an agreement, as
specified by FINRA, permitting the facilitation of the transfer of the
transaction fee through the ORF, as well as any other applicable
agreement, such as a give up agreement.\10\ Such agreement must be
executed and submitted to the ORF before the members can transfer any
transaction fee under the proposed rule. Among other things, the form
of agreement specified by FINRA would expressly provide that the
acceptance and processing by the ORF of the transaction fee as part of
a trade report shall not constitute an estoppel as to FINRA or bind
FINRA in any subsequent administrative, civil or disciplinary
proceeding with respect to the transaction fee transferred. In other
words, processing of a transaction fee by the ORF should not be taken
to mean that FINRA approved that transaction fee or its amount or its
appropriateness under FINRA rules or federal securities laws. The mere
fact that the transaction fee flowed through a FINRA facility will not
be a defense to any action taken by FINRA relating to the fee. The
proposed rule also provides that the relevant agreements are considered
member records for purposes of NASD Rule 3110(a) and must be made and
preserved by both members in conformity with applicable FINRA rules.
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\10\ FINRA also is proposing to adopt paragraph (h) of Rule
6622, which would provide expressly that members may enter into
``give up'' arrangements whereby one member reports to the ORF on
behalf of another member, provided that both members have executed
and submitted to the ORF the appropriate documentation. The proposed
provision is identical to the current rules relating to the FINRA/
Nasdaq Trade Reporting Facility and the FINRA/NYSE Trade Reporting
Facility and codifies current practice and guidance with respect to
reporting to the FINRA Facilities. See Rules 6380A(h) and 6380B(g);
Member Alert: Notice to All TRF, ADF and Other NASD Facility
Participants Regarding AGU and QSR Relationships (January 25, 2007).
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Furthermore, the proposed rule expressly provides that it shall not
relieve a member from its obligations under FINRA rules and federal
securities laws, including but not limited to, NASD Rule 2230
(Confirmations) and SEA Rule 10b-10. To the extent that any transaction
fee is passed onto the customer, members should review their customer
confirmation obligations to ensure that they are disclosing such fees
in compliance with all applicable rules and regulations, as well as
other FINRA rules, including but not limited to, NASD Rules 2320 (Best
Execution and Interpositioning) and 2440 (Fair Prices and Commissions).
The proposed rule relates solely to transaction fees charged by one
FINRA member to another FINRA member. Members would not be able to use
the ORF to facilitate the transfer of fees for transactions with a
customer (i.e., clients that are not brokers or dealers) or a non-
member. In addition, the ORF can only be used to facilitate the
transfer of transaction fees. Members would not be able to use the ORF
to transfer access fees or rebates on transactions.
FINRA also is proposing to amend Rule 7330(d) to require that for
any transaction for which the ORF is used to transfer a transaction fee
between two members, the trade report must comply with the requirements
of proposed Rule 7330(i). Thus, while use of the ORF to transfer
transaction fees between members is voluntary, members that opt to use
this service must comply with the requirements of proposed Rule
7330(i), as well as all other applicable FINRA rules.
Proposed Fee for Use of Transaction Fee Transfer Service:
In this filing, FINRA also is proposing to establish the fee to be
charged by the ORF for use by members of the transaction fee transfer
service. Pursuant to Rule 7710, the fee will be $0.03 per side for each
clearing report submitted to the ORF to transfer a transaction fee.
This fee is in addition to any other fee applicable to the transaction.
The amount of this fee is identical to the fee charged by the FINRA/
Nasdaq TRF under Rule 7620A for the same transaction fee transfer
service.
FINRA has filed the proposed rule change for immediate
effectiveness. The operative date will be June 1, 2010.
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 rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that by automating and improving
transaction fee transfers between members as a value-added service, the
proposed rule change will enhance market transparency.
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\11\ 15 U.S.C. 78o-3(b)(6).
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Additionally, FINRA believes that the proposed rule change is
consistent with the provisions of Section 15A(b)(5) of the Act,\12\
which requires, among other things, that FINRA rules provide for the
equitable allocation of reasonable dues, fees and other charges among
members and issuers and other persons using any facility or system that
FINRA operates or controls. FINRA believes that the proposed fee for
the service is reasonably allocated among members based on their usage
of the functionality to transfer transaction fees between members and
is generally consistent with other fees charged by the ORF and other
FINRA trade reporting facilities.
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\12\ 15 U.S.C. 78o-3(b)(5).
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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
[[Page 25022]]
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.
I. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\ Additionally, the foregoing rule change has
become effective pursuant to Section 19(b)(3)(A) of the Act \15\ and
paragraph (f)(2) of Rule 19b-4 thereunder.\16\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent 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 the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied the pre-filing requirement.
\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(2).
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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.
II. 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-2010-017 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2010-017. 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 Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street, NE., Washington, DC 20549, on official business days between
the hours of 10 a.m. and 3 p.m. Copies of the filing also will be
available for inspection and copying at the principal office of the
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-2010-017 and should be submitted on or before May 27, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-10594 Filed 5-5-10; 8:45 am]
BILLING CODE 8011-01-P
