Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to FINRA Trade Reporting Notice on Price Validation and Price-Override Protocol, 60843-60844 [2010-24675]

Download as PDF Federal Register / Vol. 75, No. 190 / Friday, October 1, 2010 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–62995; File No. SR–FINRA– 2010–048] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to FINRA Trade Reporting Notice on Price Validation and Price-Override Protocol September 27, 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 September 17, 2010, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) 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 by FINRA. FINRA has designated the proposed rule change as ‘‘constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule’’ under Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(1) thereunder,4 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. emcdonald on DSK2BSOYB1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is filing a FINRA Trade Reporting Notice (‘‘Notice’’) that explains the price validation protocol of the FINRA trade reporting facilities and sets forth guidance on the use of the price-override indicator in trade reports. Members are required to make systems changes necessary to trade report in accordance with the Notice no later than November 16, 2010. The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, 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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(1). 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 FINRA trade reporting facilities (i.e., the Alternative Display Facility, Trade Reporting Facilities and OTC Reporting Facility) (collectively referred to herein as the ‘‘FINRA Facilities’’) price validate over-the-counter trades by comparing the submitted price against price validation parameters established by FINRA, generally based on a price deviation against the national best bid or offer. The attached Trade Reporting Notice explains the price validation protocol of the FINRA Facilities. Additionally, the Notice advises members that the price-override indicator should not be appended automatically to all trade reports submitted to a FINRA Facility. Rather, this special indicator should be appended only after a trade has been rejected by a FINRA Facility, pursuant to the established price validation protocol, as described more fully in the Notice. Proper trade reporting has become increasingly important because of the single-stock trading pause pilot.5 Specifically, a firm that reports a trade with an incorrect price could trigger a trading pause in certain NMS stocks, as defined in Rule 600(b) of SEC Regulation NMS, and trading in the stock may be unnecessarily halted, which is inconsistent with the intent and purpose of the trading pause rules. Any member that has programmed its systems to append the price-override indicator to its trade reports prior to rejection of the trade must make the technological changes necessary to cease this practice as soon as possible, and no later than November 16, 2010 (60 days from the date of the Notice). After November 16, 2010, a pattern and practice of reporting trades with the price-override indicator not in accordance with the established protocol and the Notice may be considered conduct inconsistent with high standards of commercial honor and just and equitable principles of trade in violation of FINRA Rule 2010. 2 17 VerDate Mar<15>2010 17:34 Sep 30, 2010 FINRA has filed the proposed rule change for immediate effectiveness, and it is 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, 6 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 the proposed rule change will enhance market transparency and further the goal of investor protection by helping to ensure that the trade prices that are publicly disseminated are correct and by reducing the potential for unnecessary trading pauses in certain NMS stocks. 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 The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 7 and paragraph (f)(1) of Rule 19b–4 thereunder.8 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 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: 6 15 5 See FINRA Rule 6121 and Regulatory Notice 10– 30 (June 2010). Jkt 220001 PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 60843 U.S.C. 78o–3(b)(6). U.S.C. 78s(b)(3)(A). 8 17 CFR 240.19b–4(f)(1). 7 15 E:\FR\FM\01OCN1.SGM 01OCN1 60844 Federal Register / Vol. 75, No. 190 / Friday, October 1, 2010 / 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–2010–048 on the subject line. Paper Comments emcdonald on DSK2BSOYB1PROD with NOTICES • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–62992; File No. SR– NASDAQ–2010–114] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Prohibit Members From Voting Uninstructed Shares on Certain Matters September 24, 2010. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 All submissions should refer to File Number SR–FINRA–2010–048. This file notice is hereby given that on September 14, 2010, The NASDAQ number should be included on the subject line if e-mail is used. To help the Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities Commission process and review your and Exchange Commission comments more efficiently, please use only one method. The Commission will (‘‘Commission’’) the proposed rule post all comments on the Commission’s change as described in Items I and II below, which Items have been Internet Web site (https://www.sec.gov/ substantially prepared by Nasdaq. The rules/sro.shtml). Copies of the Commission is publishing this notice to submission, all subsequent solicit comments on the proposed rule amendments, all written statements change from interested persons and is with respect to the proposed rule approving the proposed rule change on change that are filed with the an accelerated basis. Commission, and all written I. Self-Regulatory Organization’s communications relating to the Statement of the Terms of the Substance proposed rule change between the Commission and any person, other than of the Proposed Rule Change those that may be withheld from the Nasdaq proposes to modify Rule 2251 public in accordance with the to prohibit members from voting on the provisions of 5 U.S.C. 552, will be election of a member of the board of directors of an issuer (except for a vote available for Web site viewing and with respect to the uncontested election printing in the Commission’s Public of a member of the board of directors of Reference Room, 100 F Street, NE., any investment company registered Washington, DC 20549, on official under the Investment Company Act of business days between the hours of 10 1940), executive compensation, or any a.m. and 3 p.m. Copies of such filing also will be available for inspection and other significant matter, as determined by the Commission, unless instructed by copying at the principal office of the beneficial owner of the shares. The FINRA. All comments received will be posted without change; the Commission text of the proposed rule change is below. Proposed new language is in does not edit personal identifying italics; proposed deletions are in information from submissions. You brackets.3 should submit only information that you wish to make publicly available. All 2251. Forwarding of Proxy and Other Issuer-Related Materials submissions should refer to File Number SR–FINRA–2010–048 and (a)–(c) No change. should be submitted on or before (d) Notwithstanding the foregoing, a October 22, 2010. Nasdaq Member that is not the beneficial owner of a security registered For the Commission, by the Division of under Section 12 of the Act is prohibited Trading and Markets, pursuant to delegated from granting a proxy to vote the authority.9 security in connection with a Florence E. Harmon, shareholder vote on the election of a Deputy Secretary. member of the board of directors of an [FR Doc. 2010–24675 Filed 9–30–10; 8:45 am] BILLING CODE 8010–01–P 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Changes are marked to the rule text that appears in the electronic manual of Nasdaq found at https://nasdaqomx.cchwallstreet.com. 2 17 9 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 17:34 Sep 30, 2010 Jkt 220001 PO 00000 Frm 00134 Fmt 4703 Sfmt 4703 issuer (except for a vote with respect to the uncontested election of a member of the board of directors of any investment company registered under the Investment Company Act of 1940), executive compensation, or any other significant matter, as determined by the Commission, by rule, unless the beneficial owner of the security has instructed the member to vote the proxy in accordance with the voting instructions of the beneficial owner. * * * * * II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq 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 III below. Nasdaq 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 Section 957 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ‘‘Dodd-Frank Act’’) adopted new Section 6(b)(10) of the Securities Exchange Act.4 This new provision requires all national securities exchanges to adopt rules that prohibit their members from voting on the election of a member of the board of directors of an issuer (except for a vote with respect to the uncontested election of a member of the board of directors of any investment company registered under the Investment Company Act of 1940), executive compensation, or any other significant matter, as determined by the Commission, unless the member receives voting instructions from the beneficial owner of the shares. NASDAQ Rule 2251 governs when NASDAQ members may vote shares held for customers by adopting the FINRA rule on this point. The FINRA rule, in turn, prohibits members from voting any uninstructed shares, but also permits the member to follow the rules of another SRO instead.5 In order to 4 15 U.S.C. 78f(b)(10). Commission notes that the FINRA rule, and by reference Nasdaq’s rule, only allows a member to follow the rules of another SRO of which it is a member, provided that the records of the member 5 The E:\FR\FM\01OCN1.SGM 01OCN1

Agencies

[Federal Register Volume 75, Number 190 (Friday, October 1, 2010)]
[Notices]
[Pages 60843-60844]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-24675]



[[Page 60843]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62995; File No. SR-FINRA-2010-048]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to FINRA Trade Reporting Notice on Price 
Validation and Price-Override Protocol

September 27, 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 September 17, 2010, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') 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 by FINRA. FINRA has designated 
the proposed rule change as ``constituting a stated policy, practice, 
or interpretation with respect to the meaning, administration, or 
enforcement of an existing rule'' under Section 19(b)(3)(A) of the Act 
\3\ and Rule 19b-4(f)(1) thereunder,\4\ 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)(1).
---------------------------------------------------------------------------

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

    FINRA is filing a FINRA Trade Reporting Notice (``Notice'') that 
explains the price validation protocol of the FINRA trade reporting 
facilities and sets forth guidance on the use of the price-override 
indicator in trade reports. Members are required to make systems 
changes necessary to trade report in accordance with the Notice no 
later than November 16, 2010.
    The text of the proposed rule change is available on FINRA's Web 
site at https://www.finra.org, 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
    The FINRA trade reporting facilities (i.e., the Alternative Display 
Facility, Trade Reporting Facilities and OTC Reporting Facility) 
(collectively referred to herein as the ``FINRA Facilities'') price 
validate over-the-counter trades by comparing the submitted price 
against price validation parameters established by FINRA, generally 
based on a price deviation against the national best bid or offer. The 
attached Trade Reporting Notice explains the price validation protocol 
of the FINRA Facilities. Additionally, the Notice advises members that 
the price-override indicator should not be appended automatically to 
all trade reports submitted to a FINRA Facility. Rather, this special 
indicator should be appended only after a trade has been rejected by a 
FINRA Facility, pursuant to the established price validation protocol, 
as described more fully in the Notice.
    Proper trade reporting has become increasingly important because of 
the single-stock trading pause pilot.\5\ Specifically, a firm that 
reports a trade with an incorrect price could trigger a trading pause 
in certain NMS stocks, as defined in Rule 600(b) of SEC Regulation NMS, 
and trading in the stock may be unnecessarily halted, which is 
inconsistent with the intent and purpose of the trading pause rules.
---------------------------------------------------------------------------

    \5\ See FINRA Rule 6121 and Regulatory Notice 10-30 (June 2010).
---------------------------------------------------------------------------

    Any member that has programmed its systems to append the price-
override indicator to its trade reports prior to rejection of the trade 
must make the technological changes necessary to cease this practice as 
soon as possible, and no later than November 16, 2010 (60 days from the 
date of the Notice). After November 16, 2010, a pattern and practice of 
reporting trades with the price-override indicator not in accordance 
with the established protocol and the Notice may be considered conduct 
inconsistent with high standards of commercial honor and just and 
equitable principles of trade in violation of FINRA Rule 2010.
    FINRA has filed the proposed rule change for immediate 
effectiveness, and it is 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, \6\ 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 the proposed rule change will 
enhance market transparency and further the goal of investor protection 
by helping to ensure that the trade prices that are publicly 
disseminated are correct and by reducing the potential for unnecessary 
trading pauses in certain NMS stocks.
---------------------------------------------------------------------------

    \6\ 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \7\ and paragraph (f)(1) of Rule 19b-4 
thereunder.\8\ At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------

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:

[[Page 60844]]

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-2010-048 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2010-048. 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 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 publicly 
available. All submissions should refer to File Number SR-FINRA-2010-
048 and should be submitted on or before October 22, 2010.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-24675 Filed 9-30-10; 8:45 am]
BILLING CODE 8010-01-P
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