Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to TRACE Reporting of Asset-Backed Securities, 15352-15357 [2011-6567]
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Federal Register / Vol. 76, No. 54 / Monday, March 21, 2011 / Notices
Compliance with Rule 19b–4 is
mandatory. Information received in
response to Rule 19b–4 shall not be kept
confidential; the information collected
is public information.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
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information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information to be collected; and
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of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Comments should be directed to:
Thomas Bayer, Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
6432 General Green Way, Alexandria,
Virginia 22312 or send an e-mail to:
PRA_Mailbox@sec.gov. Comments must
be submitted within 60 days of this
notice.
Dated: March 15, 2011.
Cathy H. Ahn,
Deputy Secretary.
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Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold a Closed Meeting
on Thursday, March 24, 2011 at 2 p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
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of the scheduled matters at the Closed
Meeting.
Commissioner Aguilar, as duty
officer, voted to consider the items
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64084; File No. SR–FINRA–
2011–012]
March 16, 2011.
SECURITIES AND EXCHANGE
COMMISSION
17:50 Mar 18, 2011
March 17, 2011.
Elizabeth M. Murphy,
Secretary.
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Proposed Rule Change Relating to
TRACE Reporting of Asset-Backed
Securities
[FR Doc. 2011–6513 Filed 3–18–11; 8:45 am]
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listed for the Closed Meeting in a closed
session.
The subject matter of the Closed
Meeting scheduled for Thursday, March
24, 2011 will be:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
A regulatory matter regarding a
financial institution; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact:
The Office of the Secretary at (202)
551–5400.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’)1 and Rule 19b-4
thereunder,2 notice is hereby given that
on March 3, 2011, 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, II, and
III below, which Items have been
prepared by FINRA. 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
FINRA is proposing to amend the
FINRA Rule 6700 Series and FINRA
Rule 7730:
(1) In FINRA Rule 6710, to
incorporate minor amendments to
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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clarify, simplify or conform the defined
terms, ‘‘TRACE–Eligible Security,’’
‘‘Reportable TRACE Transaction,’’
‘‘Agency Debt Security,’’ ‘‘Asset-Backed
Security’’ and ‘‘TRACE System Hours’’;
to add a defined term, ‘‘Securitizer’’;
and, to delete the defined terms
‘‘Sponsor’’ and ‘‘Issuing Entity’’;
(2) In FINRA Rule 6730, (A) to revise,
renumber and conform the text of
parallel reporting provisions in FINRA
Rule 6730(a); (B) to incorporate minor
amendments regarding the duration and
expiration of the pilot program (‘‘Pilot
Program’’) for reporting Asset-Backed
Securities transactions; (C) to
consolidate reporting requirements for
Asset-Backed Securities transactions
that are executed other than during
TRACE System Hours; (D) to simplify
how settlement is reported for AssetBacked Securities transactions; (E) to
add alternative reporting requirements
for Asset-Backed Securities transactions
that are collateralized mortgage
obligation (‘‘CMO’’) or real estate
mortgage investment conduit (‘‘REMIC’’)
transactions that occur prior to the
issuance of the CMO or REMIC (‘‘preissuance CMOs/REMICs’’); and (F) to
incorporate other minor technical,
conforming or clarifying amendments to
the Rule;
(3) In FINRA Rule 6760, to
incorporate requirements that apply to
Securitizers of Asset-Backed Securities,
alternative notification requirements for
pre-issuance CMOs/REMICs and minor
technical, conforming or clarifying
changes; and
(4) In FINRA Rule 7730, to add the
Financial Information eXchange (‘‘FIX’’)
as a method to report transactions to
TRACE, establish a system-related FIX
fee, and incorporate a minor technical
amendment.
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, on the Commission’s
Web site at https://www.sec.gov, and at
the Commission’s Public Reference
Room.
The proposed amendments set forth
in Exhibit 5 are shown as changes to the
FINRA Rule 6700 Series and FINRA
Rule 7730 as amended by SR–FINRA–
2009–065 (‘‘TRACE ABS filing’’), which
was approved by the SEC on February
22, 2010.3 The TRACE ABS filing is
anticipated to become effective on May
16, 2011.4 The proposed rule change
3 See Securities Exchange Act Release No. 61566
(February 22, 2010), 75 FR 9262 (March 1, 2010)
(Order Approving File No. SR–FINRA–2009–065)
(‘‘TRACE ABS filing’’) and Regulatory Notice 10–23
(April 2010).
4 See Securities Exchange Act Release No. 63223
(November 1, 2010), 75 FR 68654 (November 8,
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amends or supplements the TRACE
reporting and other requirements that
will apply to Asset-Backed Securities
transactions, with certain exceptions
regarding minor conforming and other
technical proposed amendments.
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.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On February 22, 2010, the SEC
approved the TRACE ABS filing, which
amends the FINRA Rule 6700 Series to
define Asset-Backed Securities as
TRACE–Eligible Securities and to
require members to report transactions
in such securities to TRACE, and,
concomitantly, FINRA Rule 7730, to
establish reporting fees for transactions
in such securities. The rule amendments
in the TRACE ABS filing currently are
anticipated to become effective on May
16, 2011.5 In the proposed rule change,
FINRA proposes additional
amendments to the FINRA Rule 6700
Series and FINRA Rule 7730 to prepare
for the reporting of Asset-Backed
Securities transactions to TRACE.
As discussed in greater detail below,
in FINRA Rule 6710, FINRA proposes
minor amendments to five defined
terms, an additional defined term,
‘‘Securitizer,’’ and the deletion of two
defined terms that are no longer
necessary. In FINRA Rule 6730, FINRA
proposes to: (A) Revise, renumber and
conform the text of parallel reporting
provisions in FINRA Rule 6730(a); (B)
incorporate minor amendments
regarding the duration and expiration of
the Pilot Program for reporting AssetBacked Securities transactions; (C)
consolidate reporting requirements for
transactions in Asset-Backed Securities
2010) (Notice of Filing and Immediate Effectiveness
of SR–FINRA–2010–054 to Extend the
Implementation Period for SR–FINRA–2009–065);
Regulatory Notice 10–55 (October 2010)
(establishing May 16, 2011 as the effective date).
5 See supra note 4.
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that are executed other than during
TRACE System Hours; (D) simplify how
settlement is reported for Asset-Backed
Securities transactions; and (E) add
alternative reporting requirements for
Asset-Backed Securities transactions
that are pre-issuance CMO/REMIC
transactions. FINRA also proposes to
add new FINRA Rule 6730(a)(6) to
clarify a member’s obligation to provide
information to FINRA Operations
regarding a TRACE–Eligible Security
when such security is not in the TRACE
system, and to incorporate other minor
technical or clarifying amendments to
FINRA Rule 6730. In FINRA Rule 6760,
FINRA proposes to incorporate
requirements that apply to Securitizers
of Asset-Backed Securities, alternative
notification requirements for preissuance CMOs/REMICs, and minor
technical, conforming or clarifying
changes, and in FINRA Rule 7730, to
add FIX as a method to report
transactions to TRACE, establish a
system-related fee for transactions
reported to TRACE via FIX and make a
technical amendment.
FINRA Rule 6710
FINRA proposes minor amendments
to five defined terms in FINRA Rule
6710, a new defined term, and the
deletion of two defined terms that are
no longer necessary, as set forth below.
TRACE-Eligible Security. FINRA
proposes minor technical amendments
to the defined term ‘‘TRACE–Eligible
Security’’ in FINRA Rule 6710(a), such
as deleting unnecessary numbering.
Asset-Backed Security. FINRA
proposes to amend the defined term
‘‘Asset-Backed Security’’ in FINRA Rule
6710(m) to incorporate, in pertinent
part, Section 3(a)(77) of the Act,6 a
definition of asset-backed security
added to the Act as part of the DoddFrank Wall Street Reform and Consumer
Protection Act of 2010 (‘‘Dodd-Frank
Act’’).7 As amended, FINRA Rule
6710(m) would provide:
6 15
U.S.C. 78c(a)(77).
Law 111–203, 124 Stat. 1376 (2010).
‘‘Asset-Backed Security’’ was added to the Act under
Section 941(a) of Title IX of the Dodd-Frank Act.
Under Section 3(a)(77)(A) of the Act, the term assetbacked security:
Means a fixed-income or other security
collateralized by any type of self-liquidating
financial asset (including a loan, a lease, a
mortgage, or a secured or unsecured receivable) that
allows the holder of the security to receive
payments that depend primarily on cash flow from
the asset, including—
(i) A collateralized mortgage obligation;
(ii) A collateralized debt obligation;
(iii) A collateralized bond obligation;
(iv) A collateralized debt obligation of assetbacked securities;
(v) A collateralized debt obligation of
collateralized debt obligations; and
7 Public
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15353
‘‘Asset-Backed Security’’ means a security
collateralized by any type of financial asset,
such as a loan, a lease, a mortgage, or a
secured or unsecured receivable, and
includes but is not limited to an asset-backed
security as defined in Section 3(a)(77)(A) of
the Exchange Act, a synthetic asset-backed
security and any residual tranche or interest
of any security specified above, which
tranche or interest is a debt security for
purposes of Rule 6710(a) and the Rule 6700
Series.
The proposed amendment to the term
‘‘Asset-Backed Security’’ clarifies, but
does not broaden, the term.
Securitizer. The Dodd-Frank Act also
added a definition of ‘‘securitizer’’ in
Section 15G(a)(3) of the Act,8 which
FINRA proposes to incorporate in
FINRA Rule 6710 as paragraph (s). In
FINRA Rule 6710(s), ‘‘Securitizer’’
would have the same meaning it has in
Section 15G(a)(3) of the Act.9
Reportable TRACE Transaction;
Agency Debt Security. FINRA proposes
to use the term ‘‘Securitizer,’’ which is
broad and includes sponsors and
issuers, among others,10 in lieu of the
defined terms ‘‘Sponsor’’ and ‘‘Issuing
Entity,’’ in ‘‘Reportable TRACE
Transaction’’ in FINRA Rule 6710(c) and
‘‘Agency Debt Security’’ in FINRA Rule
(vi) A security that the Commission, by rule,
determines to be an asset-backed security for
purposes of this section; and * * *
The definition of ‘‘asset-backed security’’ in
Section 3(a)(77) of the Act (15 U.S.C. 78c(a)(77)) ‘‘is
broader than the definition of ‘asset-backed
security’ in Regulation AB and includes securities
typically offered and sold in private transactions.’’
See Securities Act Release No. 9150 (October 13,
2010), 75 FR 64182, 64183 (October 19, 2010) (File
No. S7–26–10: Issuer Review of Assets in Offerings
of Asset-Backed Securities); and SEC Regulation
AB, Item 1101(c) (17 CFR 229.1101(c)).
8 Section 941(b) of Title IX of the Dodd-Frank Act
added the definition of ‘‘securitizer’’ to the Act as
Section 15G(a)(3) (15 U.S.C. 78o–11(a)(3)).
9 15 U.S.C. 78o–11(a)(3). Section 15G(a)(3) of the
Act provides that a securitizer is ‘‘(A) an issuer of
an asset-backed security; or (B) a person who
organizes and initiates an asset-backed securities
transaction by selling or transferring assets, either
directly or indirectly, including through an affiliate,
to the issuer; and * * * ’’
10 The Commission has stated that ‘‘[W]ith respect
to registered transactions and the definitions of
transaction parties in Regulation AB, sponsors and
depositors both fall within the statutory definition
of securitizer.’’ Securities Exchange Act Release No.
63029 (October 4, 2010), 75 FR 62718, 62720
(October 13, 2010) (File No. S7–24–10: Disclosure
for Asset-Backed Securities Required by Section
943 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act: Proposed Rule). In
addition, the term ‘‘securitizer’’ ‘‘is not specifically
limited to entities that undertake transactions that
are registered under the Securities Act or conducted
in reliance upon any particular exemption.
Consequently, * * * [securitizer] is intended to
apply to any entity or person that issues or
organizes an * * * [asset-backed security] as
specified in Section 15G(a)(3) of the Exchange Act.’’
Id. The SEC noted that entities included in the
definition of securitizer included GovernmentSponsored Enterprises (GSEs) such as Fannie Mae,
Freddie Mac, and municipal entities. Id.
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6710(l), and any other provisions in the
FINRA Rule 6700 Series where Sponsor
and/or Issuing Entity were used.11
TRACE System Hours. FINRA
proposes to conform the time referenced
in the defined term ‘‘TRACE System
Hours’’ to times stated in the FINRA
Rule 6700 Series generally (to include
seconds) and also to relocate the defined
term from FINRA Rule 6710(bb) to
FINRA Rule 6710(t). FINRA Rule
6710(bb) would be deleted.
Sponsor; Issuing Entity. FINRA
proposes to delete the defined terms
‘‘Sponsor’’ in FINRA Rule 6710(s) and
‘‘Issuing Entity’’ in FINRA Rule 6710(t),
which are no longer necessary with the
inclusion of the defined term
Securitizer.
FINRA Rule 6730
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As noted above, FINRA proposes
certain amendments to FINRA Rule
6730 regarding the reporting of AssetBacked Securities transactions to
TRACE, and certain technical
amendments, including restructuring
and renumbering FINRA Rule 6730(a)
and FINRA Rule 6730(a)(1) through
(a)(8), to align parallel or similar
reporting provisions. The proposed
restructuring also includes minor
technical amendments to conform the
text of parallel or similar reporting
provisions.12
FINRA Rule 6730(a); Proposed
Renumbered FINRA Rule 6730(a)(1):
Generally Applicable Reporting
Requirements. FINRA Rule 6730(a)
provides that TRACE-Eligible Securities
transactions must be reported within 15
minutes. FINRA Rule 6730(a)(1) through
(3) set forth reporting requirements for
transactions executed, respectively, on a
business day during, after, and before
TRACE System Hours, and FINRA Rule
6730(a)(4) states such requirements for
transactions executed on a weekend or
a holiday.
11 In FINRA Rule 6710(c) and FINRA Rule
6710(l), FINRA substitutes the single term,
‘‘Securitizer’’ for ‘‘Sponsor’’ and ‘‘Issuing Entity.’’ See
also minor proposed amendments to Rule 6760,
discussed infra.
12 As TRACE has expanded, FINRA Rule 6730 has
been amended several times to incorporate
additional reporting requirements. Before March 1,
2010, all TRACE-Eligible Securities transactions
were subject to a single reporting standard (and
three exceptions relating to transactions executed
when the TRACE System was not open) (see FINRA
Rule 6730(a)(1) and FINRA Rule 6730(a)(2) through
(a)(4)). On March 1, 2010, a second set of
requirements for reporting List or Fixed Offering
Price Transactions and Takedown Transactions
became effective (T+1 reporting requirement for
most transactions) (see FINRA Rule 6730(a)(5)). See
Securities Exchange Act Release No. 60726
(September 28, 2009), 74 FR 50991(October 2, 2009)
(Order Approving File No. SR–FINRA–2009–010).
See also Regulatory Notice 09–57 (September 2009).
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To restructure FINRA Rule 6730(a) to
align parallel or similar reporting
provisions, FINRA first proposes minor
technical amendments to FINRA Rule
6730(a),13 and to reorganize the
reporting requirements of general
applicability (i.e., applicable to
corporate debt and Agency Debt
Securities)14 that are set forth in FINRA
Rule 6730(a)(1) through (a)(4). Amended
FINRA Rule 6730(a)(1) would be titled,
‘‘Reporting Requirements’’ and provide:
‘‘Except as otherwise specifically
provided in paragraph (a)(2) and
paragraph (a)(3), transactions in TRACEEligible Securities must be reported as
provided in this paragraph (a)(1).’’
FINRA Rule 6730(a)(1) through FINRA
Rule 6730(a)(4) would be renumbered as
subparagraphs of FINRA Rule 6730(a)(1)
and include minor technical and
conforming amendments to conform the
rule text to similar or parallel provisions
in FINRA Rule 6730(a).15
Proposed Renumbered FINRA Rule
6730(a)(2)—List or Fixed Offering Price
Transactions and Takedown
Transactions. FINRA Rule 6730(a)(5),
containing reporting requirements for
List or Fixed Offering Price Transactions
and Takedown Transactions, would be
renumbered as FINRA Rule 6730(a)(2),
and titled ‘‘Reporting Requirements—
List or Fixed Offering Price Transactions
and Takedown Transactions.’’ FINRA
also proposes minor technical and
conforming amendments to conform the
rule text to similar or parallel provisions
in FINRA Rule 6730(a).16
Proposed Renumbered FINRA Rule
6730(a)(3)—Asset-Backed Securities.
FINRA Rule 6730(a)(6), containing
reporting requirements for Asset-Backed
Securities, would be renumbered as
proposed FINRA Rule 6730(a)(3), and
titled ‘‘Reporting Requirements—AssetBacked Securities Transactions.’’ 17
13 The current general requirements set forth in
FINRA Rule 6730(a)—requiring all Parties to a
Transaction to report the transaction and for reports
to be made within 15 minutes of the Time of
Execution (except as otherwise provided)—would
be retained. FINRA proposes to delete the statement
that, ‘‘Specific trade reporting obligations during a
24-hour cycle are set forth below.’’
14 The reporting requirements in proposed
renumbered FINRA Rule 6730(a)(1) and
subparagraphs (A) through (D) also would apply to
primary market transactions that do not qualify for
T + 1 reporting, consistent with current FINRA Rule
6730(a)(1) through (4).
15 FINRA Rule 6730(a)(1)–(4) would be
renumbered as Rule 6730(a)(1)(A)–(D), respectively.
16 The rule text would be set forth in two
subparagraphs, proposed FINRA Rule 6730(a)(2)(A)
and proposed FINRA Rule 6730(a)(2)(B).
17 FINRA Rule 6730(a)(6) would be renumbered
as follows: FINRA Rule 6730(a)(6)(A)(i) would be
renumbered as FINRA Rule 6730(a)(3)(A)(ii); FINRA
Rule 6730(a)(6)(A)(ii) (the Pilot Program) would be
renumbered as FINRA Rule 6730(a)(3)(A)(i); and
FINRA Rule 6730(a)(6)(B) and FINRA Rule
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FINRA also proposes minor technical
and conforming amendments to
conform the rule text of renumbered
FINRA Rule 6730(a)(3) to similar or
parallel provisions in FINRA Rule
6730(a). Finally, current FINRA Rule
6730(a)(7) and current FINRA Rule
6730(a)(8) would be renumbered,
respectively, as FINRA Rule 6740(a)(4)
and FINRA Rule 6730(a)(5).
Pilot Program. FINRA Rule
6730(a)(6)(A)(ii) (proposed renumbered
FINRA Rule 6730(a)(3)(A)(i)) provides
for a six-month Pilot Program for
reporting transactions in Asset-Backed
Securities, which extends the period for
a member to timely report such
transactions to no later than the next
business day (T + 1) at any time during
TRACE System Hours.18 The Pilot
Program provides additional time for
members to prepare and submit accurate
transaction reports for Asset-Backed
Securities on a temporary basis.
FINRA proposes a technical
amendment to the Pilot Program
(proposed renumbered FINRA Rule
6730(a)(3)(A)(i)) providing that the Pilot
Program shall expire 180 days (instead
of six months) following the
commencement of the reporting of
Asset-Backed Securities transactions,
provided that if the 180th day is not a
Friday, the Pilot Program will expire on
the Friday next occurring (that the
TRACE system is open) after the 180th
day. FINRA proposes that the Pilot
Program expire on a Friday in response
to comments requesting that members
and vendors be given additional time to
incorporate the system changes that
must be implemented at the termination
of the Pilot Program.19
Asset-Backed Securities Transactions
Executed on Non-Business Day.
Currently, trades that are executed on a
weekend, holiday or other day when the
TRACE system is closed must be
reported the next business day (T + 1),
designated ‘‘as/of,’’ and are subject to
two unique requirements. First, the date
6730(a)(6)(B)(i)–(ii) would be renumbered as FINRA
Rule 6730(a)(3)(B) and FINRA Rule 6730(a)(3)(B)(i)–
(ii), respectively. As discussed infra, FINRA
proposes to consolidate FINRA Rule
6730(a)(6)(B)(ii) and FINRA Rule 6730(a)(6)(B)(iii)
in renumbered FINRA Rule 6730(a)(3)(B)(ii), and
delete FINRA Rule 6730(a)(6)(B)(iii).
18 After the Pilot Program expires, transactions in
Asset-Backed Securities must be reported on the
date of trade during TRACE System Hours, with
certain exceptions. See FINRA Rule 6730(a)(6)(A)(i)
(proposed renumbered FINRA Rule
6730(a)(3)(A)(ii)).
19 As discussed infra, the Pilot Program is also
incorporated in the proposed reporting
requirements applicable to transactions in preissuance CMOs/REMICs (see proposed FINRA Rule
6730(a)(3)(C)). The expiration of the Pilot Program
will also necessitate modifications of systems and
procedures in place to report such transactions.
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of execution reported to TRACE is not
the actual date of execution; instead, a
member reports the date of execution as
the same day (T + 1) that the report must
be timely submitted. In addition, the
execution time reported must be
‘‘12:01:00 a.m. Eastern Time’’
(‘‘00:01:00’’), instead of the actual Time
of Execution.20 These adaptations were
incorporated when TRACE began
because the TRACE system does not
recognize any day on which the TRACE
system is closed as a valid date of
execution, and the two unique
requirements permit FINRA to
distinguish such non-business day
transactions from all other reported
transactions.21
FINRA has improved the TRACE
system, which, for transactions in AssetBacked Securities, will recognize any
calendar day, including days on which
the TRACE system is not open, as a
valid date of execution. Accordingly,
FINRA proposes to streamline FINRA
Rule 6730(a)(6) (proposed renumbered
FINRA Rule 6730(a)(3)) regarding AssetBacked Securities Transactions,
combining the requirements of FINRA
Rule 6730(a)(6)(B)(ii) and FINRA Rule
6730(a)(6)(B)(iii) in proposed
renumbered FINRA Rule
6730(a)(3)(B)(ii) because, with this
system enhancement, the standards for
reporting under both provisions are the
same, and separate provisions are no
longer necessary.22 FINRA Rule
6730(a)(6)(B)(iii) would be deleted.
Settlement. FINRA Rule
6730(d)(4)(B)(ii) currently requires a
member to report two items regarding
the terms of settlement of an AssetBacked Securities transaction: (1) The
actual date of settlement; and (2) an
indicator that the transaction will settle
‘‘regular way’’ (i.e., T + 3 or in
conformity with the uniform practices
established as ‘‘good delivery’’ for the
specific Asset-Backed Security), or one
indicating that the transaction will not
be settled ‘‘regular way.’’
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20 Also,
when the reporting method used includes
a ‘‘special price memo’’ field, the member must
enter the actual date of execution and Time of
Execution in the field.
21 See, e.g., FINRA Rule 6730(a)(4) (proposed
renumbered FINRA Rule 6730(a)(1)(D)), FINRA
Rule 6730(a)(5) (proposed renumbered FINRA Rule
6730(a)(2)(B)), and FINRA Rule 6730(a)(6)(B)(iii).
22 Proposed renumbered FINRA Rule
6730(a)(3)(B)(ii) would provide that any transaction
in an Asset-Backed Security that is executed on a
Saturday, Sunday, a Federal or religious holiday or
other day on which the TRACE system is not open,
or executed on a business day at or after 6:30:00
p.m. Eastern Time through 11:59:59 p.m. Eastern
Time must be reported not later than the next
business day during TRACE System Hours,
designated ‘‘as/of’’ and include the date of
execution.
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FINRA proposes to retain the
requirement to report the actual date of
settlement and delete the requirement to
report the indicator, which will simplify
the reporting of settlement in
connection with Asset-Backed
Securities transactions.
Pre-Issuance CMO/REMIC
Transactions. FINRA proposes to
supplement the rules requiring members
to report Asset-Backed Securities in
FINRA Rule 6730(a)(6) (proposed
renumbered FINRA Rule 6730(a)(3)) to
include alternative reporting
requirements for pre-issuance CMO/
REMIC transactions. Proposed FINRA
Rule 6730(a)(3)(C)(i) provides that a preissuance CMO/REMIC transaction must
be reported, during the Pilot Program,
the earlier of: (i) the business day
following the business day that the
security is assigned a CUSIP, a similar
numeric identifier or a FINRA symbol
during TRACE System Hours, or (ii) the
business day following the date of
issuance of the security during TRACE
System Hours. As provided in proposed
FINRA Rule 6730(a)(3)(C)(ii), after the
Pilot Program expires, such pre-issuance
CMO/REMIC transactions must be
reported the earlier of (i) the business
day that the security is assigned a
CUSIP, a similar numeric identifier or a
FINRA symbol during TRACE System
Hours (unless such identifier is assigned
after 1:00:00 p.m. Eastern Time, and in
such case, such transactions must be
reported no later than the next business
day during TRACE System Hours), or
(ii) the date of issuance of the security
during TRACE System Hours.23
The alternative reporting
requirements in proposed FINRA Rule
6730(a)(3)(C) differ from current TRACE
reporting requirements and those that
will apply generally to Asset-Backed
Securities transactions in that, for preissuance CMO/REMIC transactions, the
reporting period begins (or is triggered)
on the date of issuance of the security
(or, if earlier, the date the security is
assigned an appropriate identifier),
instead of the date and time of the
member’s execution of the transaction.
FINRA proposes this alternative
approach because although pre-issuance
CMO/REMIC transactions occur
frequently, in many cases, a CUSIP or
other identifier is not yet assigned or is
difficult to assign (or cannot be
assigned), because certain aspects of the
collateral and structure of the CMO or
REMIC are not finalized at the time of
such transactions, and will not be
23 Under proposed FINRA Rule 6730(a)(3)(C)(i)
and proposed FINRA Rule 6730(a)(3)(C)(ii), any
transaction that is reported other than on the date
of execution must be designated ‘‘as/of’’ and include
the date of execution.
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
15355
finalized until shortly before the CMO
or REMIC is actually issued. CMO and
REMIC transactions that are not preissuance CMO/REMIC transactions—
i.e., those executed on or after the date
of issuance of the security—must be
reported in compliance with FINRA
Rule 6730(a)(6)(A) and (B) (proposed
renumbered FINRA Rules 6730(a)(3)(A)
and (B)) and may not be reported under
the alternative reporting provisions
(proposed FINRA Rule 6730(a)(3)(C)(i)
and proposed FINRA Rule
6730(a)(3)(C)(ii)).
Other FINRA Rule 6730 Amendments.
FINRA proposes to amend FINRA Rule
6730 to state explicitly in new
paragraph (a)(6) that when a member is
a Party to a Transaction and makes a
good faith determination that a
transaction involves a TRACE–Eligible
Security, if the TRACE–Eligible Security
is not entered in the TRACE system, the
member must promptly provide FINRA
Operations the information required
under FINRA Rule 6760(b) and
thereafter report. The proposed
amendment will incorporate in FINRA
Rule 6730(a)(6) previous guidance
regarding members’ obligations to take
all the steps necessary to report a
transaction to TRACE, including
providing notification to FINRA
Operations when circumstances so
require.
FINRA also proposes minor technical
amendments to FINRA Rule 6730(a)
regarding reporting transactions
executed on weekends, Federal or
religious holidays, or other days on
which the TRACE system does not
operate. FINRA Rule 6730(a) provisions
would be amended to refer to
transactions executed on ‘‘a Saturday, a
Sunday, a Federal or religious holiday
or other day on which the TRACE
system is not open at any time during
that day’’ (instead of transactions
executed on ‘‘a Saturday, a Sunday or a
Federal or religious holiday on which
the TRACE system is closed’’).24
FINRA Rule 6760
FINRA Rule 6760 requires a member
that is a managing underwriter in an
initial offering of a TRACE–Eligible
Security (or, if a managing underwriter
is not appointed, members that are
underwriters or initial purchasers) to
notify FINRA Operations of a new
TRACE–Eligible Security. For AssetBacked Securities, a member Sponsor or
24 See proposed amendments to FINRA Rule
6730(a)(4) (proposed renumbered Rule
6730(a)(1)(D)), FINRA Rule 6730(a)(5) (proposed
renumbered Rule 6730(a)(2)(B)), FINRA Rule
6730(a)(6)(B)(ii) (proposed renumbered Rule
6730(a)(3)(B)(ii)) and FINRA Rule 6730(a)(8)
(proposed renumbered Rule 6730(a)(5)).
E:\FR\FM\21MRN1.SGM
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15356
Federal Register / Vol. 76, No. 54 / Monday, March 21, 2011 / Notices
a member Issuing Entity must provide
notice. The notice must include certain
information that clearly identifies the
security, which FINRA uses to confirm
information in the TRACE System or
add the security to the TRACE system.
Generally, the notice must be provided
to FINRA Operations prior to the
execution of the first transaction in the
offering. FINRA proposes to amend
FINRA Rule 6760 to incorporate
requirements that apply to Securitizers
of Asset-Backed Securities (and delete
those applicable to Sponsors and
Issuing Entities), to add alternative
notification requirements for preissuance CMOs/REMICs and make other
minor technical, conforming or
clarifying changes.
In FINRA Rule 6760(a), FINRA Rule
6760(a)(1) would be amended such that,
for Asset-Backed Securities, a member
that is a Securitizer (instead of a
member Sponsor or a member Issuing
Entity) would be a managing
underwriter for purposes of the Rule
and required to provide notice under
the Rule. References to Sponsors and
Issuing Entities would be deleted.
FINRA also proposes to amend FINRA
Rule 6760(a)(2) to provide that FINRA
will specify the method of
communication or media that a member
must use to provide the information to
FINRA Operations under FINRA Rule
6760, and to delete the requirement to
provide such information by facsimile
or e-mail. The proposed amendment to
FINRA Rule 6760(a)(2) will provide
FINRA the flexibility, as technology
advances and systems change, to change
quickly the method or media a member
may use to comply with FINRA Rule
6760.
In FINRA Rule 6760(b), FINRA
proposes that when a Securitizer
provides notice regarding an AssetBacked Security, all Securitizers
(instead of the Issuing Entity and the
Sponsor) must be named in the notice.25
Also, FINRA proposes to transfer the
requirement that a member make a good
faith determination of TRACE eligibility
before providing notice about a security
to FINRA Operations from FINRA Rule
6760(b) to FINRA Rule 6760(a)(1), and
the deadline for providing timely notice,
and the exceptions thereto, from FINRA
Rule 6760(b) to proposed FINRA Rule
6760(c).
Proposed FINRA Rule 6760(c) would
set forth the deadline for providing
notice, and the exceptions thereto. The
current provisions regarding the
25 FINRA
notes that only a Securitizer that is also
a FINRA member is required to provide notice
under FINRA Rule 6760(a)(1), but all Securitizers,
including non-member Securitizers, must be
identified in the notice under FINRA Rule 6760(b).
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17:50 Mar 18, 2011
Jkt 223001
deadline for providing notice and the
exceptions would be set forth in
proposed FINRA Rule 6760(c)(1). In
proposed FINRA Rule 6760(c)(2),
FINRA would provide alternative notice
requirements for Asset-Backed
Securities that are CMOs or REMICs in
which pre-issuance transactions will
occur. As discussed above, proposed
alternative reporting requirements for
pre-issuance CMO/REMIC transactions
provide that reporting deadlines will be
calculated by reference to the earlier of
the date of issuance (or, during the Pilot
Program, the following day) or date of
assignment of a CUSIP or another
appropriate identifier (or, during the
Pilot Program, the following day) due to
the delays in the final structuring and
issuance of such CMOs and REMICs.26
For the same reasons, FINRA proposes
alternative notification requirements
regarding CMOs and REMICs in which
pre-issuance transactions will occur.
Under proposed FINRA Rule 6760(c)(2),
a member that is required to provide
notice to FINRA Operations of such
CMOs or REMICs must do so promptly
on the date of issuance or other event
that establishes the reference date that
determines when a reporting period
begins under proposed FINRA Rule
6730(a)(3)(C)(i), which applies during
the Pilot Program, or, after the
expiration of the Pilot Program, under
proposed FINRA Rule 6730(a)(3)(C)(ii).
FINRA also proposes to incorporate
technical and clarifying amendments to
FINRA Rule 6760, including changes
related to the restructuring of FINRA
Rule 6760(a) and (b) and the addition of
proposed FINRA Rule 6760(c).
FINRA Rule 7730
FINRA Rule 7730 sets forth fees
applicable to reporting transactions to
TRACE and purchasing TRACE data.
FINRA proposes minor amendments to
two provisions. Under FINRA Rule
7730(a), members may report
transactions in TRACE–Eligible
Securities to TRACE using: (1) a TRACE
Web browser; (2) a Computer-toComputer Interface (‘‘CTCI’’) (whether or
not dedicated exclusively to TRACE); or
(3) a third-party reporting intermediary,
and incur system-related fees based
upon the method selected. A member
pays a system fee of $25 per month, per
firm to report transactions in TRACE–
Eligible Securities via CTCI as provided
in FINRA Rule 7730(a)(2). FINRA
proposes to amend FINRA Rule 7730(a),
FINRA Rule 7730(a)(2) and the fee chart
in Rule 7730 to add FIX as another
method for reporting transactions in
26 See proposed FINRA Rule 6730(a)(3)(C)(i) and
proposed FINRA Rule 6730(a)(3)(C)(ii).
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Frm 00079
Fmt 4703
Sfmt 4703
TRACE–Eligible Securities. FINRA
proposes that the FIX line, like CTCI,
would not be required to be dedicated
exclusively to TRACE, and the systemrelated fee for reporting via FIX, like
CTCI, would be $25 per month, per
firm. FINRA also proposes minor,
conforming, non-substantive
amendments to FINRA Rule 7730(a).
In addition, FINRA proposes to
correct a technical error regarding
reporting fees in FINRA Rule 7730(b)(1)
and the fee chart. FINRA Rule
7730(b)(1) and the fee chart set forth
three tiers of reporting fees. Currently,
both provide that the middle tier
reporting fee applies to trades ‘‘between
$200,001 and $999,999 par value’’
(which are charged a reporting fee of
$0.000002375 times the par value of the
transaction (i.e., $0.002375/$1000)).
FINRA proposes to correct the middle
tier reporting fee to correctly state that
such middle tier reporting fee is
applicable to ‘‘trades over $200,000 and
up to and including $999,999.99 par
value.’’
Finally, FINRA has received questions
regarding the Factor that will be used to
calculate a reporting fee for a
transaction in an Asset-Backed Security
that will be assessed based on the
Remaining Principal Balance of the
security. The Remaining Principal
Balance will be calculated using the
Factor submitted by the member, if the
member is required to report a Factor
under FINRA Rule 6730(d)(2), and, in
fact, does report such Factor, or if no
Factor is reported, using the Factor that
FINRA has adopted and incorporated in
the TRACE system, which will be the
Factor that FINRA has identified as the
most current Factor publicly available
for such Asset-Backed Security at the
Time of Execution. Also, FINRA will
not recalculate reporting fee amounts
due to FINRA for Asset-Backed
Securities transactions after FINRA has
identified the appropriate Factor for the
specified Asset-Backed Security and
calculated the fee based on such Factor.
FINRA will announce the effective
date of the proposed rule change in a
Regulatory Notice to be published no
later than 60 days following
Commission approval. The effective
date of the proposed rule change will be
the date that the proposed rule changes
in the TRACE ABS filing become
effective, which is currently anticipated
to be May 16, 2011.27
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
27 See
E:\FR\FM\21MRN1.SGM
supra note 4.
21MRN1
Federal Register / Vol. 76, No. 54 / Monday, March 21, 2011 / Notices
of Section 15A(b)(6) of the Act,28 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 facilitate
more timely and accurate reporting of
transactions in Asset-Backed Securities
to TRACE, and enhance FINRA’s
surveillance of the debt market in
connection with Asset-Backed
Securities transactions for the protection
of investors and in furtherance of the
public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
shall: (a) By order approve or
disapprove such proposed rule change,
or (b) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
mstockstill on DSKH9S0YB1PROD with NOTICES
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
28 15
U.S.C. 78o–3(b)(6).
VerDate Mar<15>2010
17:50 Mar 18, 2011
Number SR–FINRA–2011–012 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–2011–012. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for 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 will
also 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–2011–012 and should be
submitted on or before April 11, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–6567 Filed 3–18–11; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
Revocation of License of Small
Business Investment Company
Pursuant to the authority granted to
the United States Small Business
Administration by the Wind-Up Order
of the United States District Court of the
Eastern District of New York, dated July
15, 2009, the United States Small
29 17
Jkt 223001
PO 00000
CFR 200.30–3(a)(12).
Frm 00080
Fmt 4703
Sfmt 4703
15357
Business Administration hereby revokes
the license of Sterling/Carl Marks
Capital, Inc., a New York corporation, to
function as a small business investment
company under the Small Business
Investment Company License No.
02020517 issued to Sterling/Carl Marks
Capital, Inc., on October 3, 1988 and
said license is hereby declared null and
void as of July 15, 2009.
Dated: March 4, 2011.
Sean J. Greene,
Associate Administrator for Investment,
United States Small Business Administration.
[FR Doc. 2011–6475 Filed 3–18–11; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #12468 and #12469]
Utah Disaster #UT–00009
U.S. Small Business
Administration.
AGENCY:
ACTION:
Amendment 1.
This is an amendment of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of Utah (FEMA–1955–DR),
dated 02/11/2011.
Incident: Severe Winter Storms and
Flooding.
Incident Period: 12/20/2010 through
12/24/2010.
Effective Date: 03/11/2011.
Physical Loan Application Deadline
Date: 04/12/2011.
Economic Injury (EIDL) Loan
Application Deadline Date: 11/14/2011.
SUMMARY:
Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
ADDRESSES:
A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street, SW., Suite 6050,
Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT:
The notice
of the President’s major disaster
declaration for Private Non-Profit
organizations in the State of Utah, dated
02/11/2011, is hereby amended to
include the following areas as adversely
affected by the disaster.
SUPPLEMENTARY INFORMATION:
Primary Counties: Garfield.
All other information in the original
declaration remains unchanged.
E:\FR\FM\21MRN1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 54 (Monday, March 21, 2011)]
[Notices]
[Pages 15352-15357]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-6567]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64084; File No. SR-FINRA-2011-012]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to
TRACE Reporting of Asset-Backed Securities
March 16, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'')\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on March 3, 2011, 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, II, and III below, which Items have
been prepared by FINRA. 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend the FINRA Rule 6700 Series and FINRA
Rule 7730:
(1) In FINRA Rule 6710, to incorporate minor amendments to clarify,
simplify or conform the defined terms, ``TRACE-Eligible Security,''
``Reportable TRACE Transaction,'' ``Agency Debt Security,'' ``Asset-
Backed Security'' and ``TRACE System Hours''; to add a defined term,
``Securitizer''; and, to delete the defined terms ``Sponsor'' and
``Issuing Entity'';
(2) In FINRA Rule 6730, (A) to revise, renumber and conform the
text of parallel reporting provisions in FINRA Rule 6730(a); (B) to
incorporate minor amendments regarding the duration and expiration of
the pilot program (``Pilot Program'') for reporting Asset-Backed
Securities transactions; (C) to consolidate reporting requirements for
Asset-Backed Securities transactions that are executed other than
during TRACE System Hours; (D) to simplify how settlement is reported
for Asset-Backed Securities transactions; (E) to add alternative
reporting requirements for Asset-Backed Securities transactions that
are collateralized mortgage obligation (``CMO'') or real estate
mortgage investment conduit (``REMIC'') transactions that occur prior
to the issuance of the CMO or REMIC (``pre-issuance CMOs/REMICs''); and
(F) to incorporate other minor technical, conforming or clarifying
amendments to the Rule;
(3) In FINRA Rule 6760, to incorporate requirements that apply to
Securitizers of Asset-Backed Securities, alternative notification
requirements for pre-issuance CMOs/REMICs and minor technical,
conforming or clarifying changes; and
(4) In FINRA Rule 7730, to add the Financial Information eXchange
(``FIX'') as a method to report transactions to TRACE, establish a
system-related FIX fee, and incorporate a minor technical amendment.
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, on the
Commission's Web site at https://www.sec.gov, and at the Commission's
Public Reference Room.
The proposed amendments set forth in Exhibit 5 are shown as changes
to the FINRA Rule 6700 Series and FINRA Rule 7730 as amended by SR-
FINRA-2009-065 (``TRACE ABS filing''), which was approved by the SEC on
February 22, 2010.\3\ The TRACE ABS filing is anticipated to become
effective on May 16, 2011.\4\ The proposed rule change
[[Page 15353]]
amends or supplements the TRACE reporting and other requirements that
will apply to Asset-Backed Securities transactions, with certain
exceptions regarding minor conforming and other technical proposed
amendments.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 61566 (February 22,
2010), 75 FR 9262 (March 1, 2010) (Order Approving File No. SR-
FINRA-2009-065) (``TRACE ABS filing'') and Regulatory Notice 10-23
(April 2010).
\4\ See Securities Exchange Act Release No. 63223 (November 1,
2010), 75 FR 68654 (November 8, 2010) (Notice of Filing and
Immediate Effectiveness of SR-FINRA-2010-054 to Extend the
Implementation Period for SR-FINRA-2009-065); Regulatory Notice 10-
55 (October 2010) (establishing May 16, 2011 as the effective date).
---------------------------------------------------------------------------
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
On February 22, 2010, the SEC approved the TRACE ABS filing, which
amends the FINRA Rule 6700 Series to define Asset-Backed Securities as
TRACE-Eligible Securities and to require members to report transactions
in such securities to TRACE, and, concomitantly, FINRA Rule 7730, to
establish reporting fees for transactions in such securities. The rule
amendments in the TRACE ABS filing currently are anticipated to become
effective on May 16, 2011.\5\ In the proposed rule change, FINRA
proposes additional amendments to the FINRA Rule 6700 Series and FINRA
Rule 7730 to prepare for the reporting of Asset-Backed Securities
transactions to TRACE.
---------------------------------------------------------------------------
\5\ See supra note 4.
---------------------------------------------------------------------------
As discussed in greater detail below, in FINRA Rule 6710, FINRA
proposes minor amendments to five defined terms, an additional defined
term, ``Securitizer,'' and the deletion of two defined terms that are
no longer necessary. In FINRA Rule 6730, FINRA proposes to: (A) Revise,
renumber and conform the text of parallel reporting provisions in FINRA
Rule 6730(a); (B) incorporate minor amendments regarding the duration
and expiration of the Pilot Program for reporting Asset-Backed
Securities transactions; (C) consolidate reporting requirements for
transactions in Asset-Backed Securities that are executed other than
during TRACE System Hours; (D) simplify how settlement is reported for
Asset-Backed Securities transactions; and (E) add alternative reporting
requirements for Asset-Backed Securities transactions that are pre-
issuance CMO/REMIC transactions. FINRA also proposes to add new FINRA
Rule 6730(a)(6) to clarify a member's obligation to provide information
to FINRA Operations regarding a TRACE-Eligible Security when such
security is not in the TRACE system, and to incorporate other minor
technical or clarifying amendments to FINRA Rule 6730. In FINRA Rule
6760, FINRA proposes to incorporate requirements that apply to
Securitizers of Asset-Backed Securities, alternative notification
requirements for pre-issuance CMOs/REMICs, and minor technical,
conforming or clarifying changes, and in FINRA Rule 7730, to add FIX as
a method to report transactions to TRACE, establish a system-related
fee for transactions reported to TRACE via FIX and make a technical
amendment.
FINRA Rule 6710
FINRA proposes minor amendments to five defined terms in FINRA Rule
6710, a new defined term, and the deletion of two defined terms that
are no longer necessary, as set forth below.
TRACE-Eligible Security. FINRA proposes minor technical amendments
to the defined term ``TRACE-Eligible Security'' in FINRA Rule 6710(a),
such as deleting unnecessary numbering.
Asset-Backed Security. FINRA proposes to amend the defined term
``Asset-Backed Security'' in FINRA Rule 6710(m) to incorporate, in
pertinent part, Section 3(a)(77) of the Act,\6\ a definition of asset-
backed security added to the Act as part of the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010 (``Dodd-Frank Act'').\7\ As
amended, FINRA Rule 6710(m) would provide:
\6\ 15 U.S.C. 78c(a)(77).
\7\ Public Law 111-203, 124 Stat. 1376 (2010). ``Asset-Backed
Security'' was added to the Act under Section 941(a) of Title IX of
the Dodd-Frank Act. Under Section 3(a)(77)(A) of the Act, the term
asset-backed security:
Means a fixed-income or other security collateralized by any
type of self-liquidating financial asset (including a loan, a lease,
a mortgage, or a secured or unsecured receivable) that allows the
holder of the security to receive payments that depend primarily on
cash flow from the asset, including--
(i) A collateralized mortgage obligation;
(ii) A collateralized debt obligation;
(iii) A collateralized bond obligation;
(iv) A collateralized debt obligation of asset-backed
securities;
(v) A collateralized debt obligation of collateralized debt
obligations; and
(vi) A security that the Commission, by rule, determines to be
an asset-backed security for purposes of this section; and * * *
The definition of ``asset-backed security'' in Section 3(a)(77)
of the Act (15 U.S.C. 78c(a)(77)) ``is broader than the definition
of `asset-backed security' in Regulation AB and includes securities
typically offered and sold in private transactions.'' See Securities
Act Release No. 9150 (October 13, 2010), 75 FR 64182, 64183 (October
19, 2010) (File No. S7-26-10: Issuer Review of Assets in Offerings
of Asset-Backed Securities); and SEC Regulation AB, Item 1101(c) (17
CFR 229.1101(c)).
``Asset-Backed Security'' means a security collateralized by any
type of financial asset, such as a loan, a lease, a mortgage, or a
secured or unsecured receivable, and includes but is not limited to
an asset-backed security as defined in Section 3(a)(77)(A) of the
Exchange Act, a synthetic asset-backed security and any residual
tranche or interest of any security specified above, which tranche
or interest is a debt security for purposes of Rule 6710(a) and the
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Rule 6700 Series.
The proposed amendment to the term ``Asset-Backed Security'' clarifies,
but does not broaden, the term.
Securitizer. The Dodd-Frank Act also added a definition of
``securitizer'' in Section 15G(a)(3) of the Act,\8\ which FINRA
proposes to incorporate in FINRA Rule 6710 as paragraph (s). In FINRA
Rule 6710(s), ``Securitizer'' would have the same meaning it has in
Section 15G(a)(3) of the Act.\9\
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\8\ Section 941(b) of Title IX of the Dodd-Frank Act added the
definition of ``securitizer'' to the Act as Section 15G(a)(3) (15
U.S.C. 78o-11(a)(3)).
\9\ 15 U.S.C. 78o-11(a)(3). Section 15G(a)(3) of the Act
provides that a securitizer is ``(A) an issuer of an asset-backed
security; or (B) a person who organizes and initiates an asset-
backed securities transaction by selling or transferring assets,
either directly or indirectly, including through an affiliate, to
the issuer; and * * * ''
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Reportable TRACE Transaction; Agency Debt Security. FINRA proposes
to use the term ``Securitizer,'' which is broad and includes sponsors
and issuers, among others,\10\ in lieu of the defined terms ``Sponsor''
and ``Issuing Entity,'' in ``Reportable TRACE Transaction'' in FINRA
Rule 6710(c) and ``Agency Debt Security'' in FINRA Rule
[[Page 15354]]
6710(l), and any other provisions in the FINRA Rule 6700 Series where
Sponsor and/or Issuing Entity were used.\11\
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\10\ The Commission has stated that ``[W]ith respect to
registered transactions and the definitions of transaction parties
in Regulation AB, sponsors and depositors both fall within the
statutory definition of securitizer.'' Securities Exchange Act
Release No. 63029 (October 4, 2010), 75 FR 62718, 62720 (October 13,
2010) (File No. S7-24-10: Disclosure for Asset-Backed Securities
Required by Section 943 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act: Proposed Rule). In addition, the term
``securitizer'' ``is not specifically limited to entities that
undertake transactions that are registered under the Securities Act
or conducted in reliance upon any particular exemption.
Consequently, * * * [securitizer] is intended to apply to any entity
or person that issues or organizes an * * * [asset-backed security]
as specified in Section 15G(a)(3) of the Exchange Act.'' Id. The SEC
noted that entities included in the definition of securitizer
included Government-Sponsored Enterprises (GSEs) such as Fannie Mae,
Freddie Mac, and municipal entities. Id.
\11\ In FINRA Rule 6710(c) and FINRA Rule 6710(l), FINRA
substitutes the single term, ``Securitizer'' for ``Sponsor'' and
``Issuing Entity.'' See also minor proposed amendments to Rule 6760,
discussed infra.
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TRACE System Hours. FINRA proposes to conform the time referenced
in the defined term ``TRACE System Hours'' to times stated in the FINRA
Rule 6700 Series generally (to include seconds) and also to relocate
the defined term from FINRA Rule 6710(bb) to FINRA Rule 6710(t). FINRA
Rule 6710(bb) would be deleted.
Sponsor; Issuing Entity. FINRA proposes to delete the defined terms
``Sponsor'' in FINRA Rule 6710(s) and ``Issuing Entity'' in FINRA Rule
6710(t), which are no longer necessary with the inclusion of the
defined term Securitizer.
FINRA Rule 6730
As noted above, FINRA proposes certain amendments to FINRA Rule
6730 regarding the reporting of Asset-Backed Securities transactions to
TRACE, and certain technical amendments, including restructuring and
renumbering FINRA Rule 6730(a) and FINRA Rule 6730(a)(1) through
(a)(8), to align parallel or similar reporting provisions. The proposed
restructuring also includes minor technical amendments to conform the
text of parallel or similar reporting provisions.\12\
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\12\ As TRACE has expanded, FINRA Rule 6730 has been amended
several times to incorporate additional reporting requirements.
Before March 1, 2010, all TRACE-Eligible Securities transactions
were subject to a single reporting standard (and three exceptions
relating to transactions executed when the TRACE System was not
open) (see FINRA Rule 6730(a)(1) and FINRA Rule 6730(a)(2) through
(a)(4)). On March 1, 2010, a second set of requirements for
reporting List or Fixed Offering Price Transactions and Takedown
Transactions became effective (T+1 reporting requirement for most
transactions) (see FINRA Rule 6730(a)(5)). See Securities Exchange
Act Release No. 60726 (September 28, 2009), 74 FR 50991(October 2,
2009) (Order Approving File No. SR-FINRA-2009-010). See also
Regulatory Notice 09-57 (September 2009).
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FINRA Rule 6730(a); Proposed Renumbered FINRA Rule 6730(a)(1):
Generally Applicable Reporting Requirements. FINRA Rule 6730(a)
provides that TRACE-Eligible Securities transactions must be reported
within 15 minutes. FINRA Rule 6730(a)(1) through (3) set forth
reporting requirements for transactions executed, respectively, on a
business day during, after, and before TRACE System Hours, and FINRA
Rule 6730(a)(4) states such requirements for transactions executed on a
weekend or a holiday.
To restructure FINRA Rule 6730(a) to align parallel or similar
reporting provisions, FINRA first proposes minor technical amendments
to FINRA Rule 6730(a),\13\ and to reorganize the reporting requirements
of general applicability (i.e., applicable to corporate debt and Agency
Debt Securities)\14\ that are set forth in FINRA Rule 6730(a)(1)
through (a)(4). Amended FINRA Rule 6730(a)(1) would be titled,
``Reporting Requirements'' and provide: ``Except as otherwise
specifically provided in paragraph (a)(2) and paragraph (a)(3),
transactions in TRACE-Eligible Securities must be reported as provided
in this paragraph (a)(1).'' FINRA Rule 6730(a)(1) through FINRA Rule
6730(a)(4) would be renumbered as subparagraphs of FINRA Rule
6730(a)(1) and include minor technical and conforming amendments to
conform the rule text to similar or parallel provisions in FINRA Rule
6730(a).\15\
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\13\ The current general requirements set forth in FINRA Rule
6730(a)--requiring all Parties to a Transaction to report the
transaction and for reports to be made within 15 minutes of the Time
of Execution (except as otherwise provided)--would be retained.
FINRA proposes to delete the statement that, ``Specific trade
reporting obligations during a 24-hour cycle are set forth below.''
\14\ The reporting requirements in proposed renumbered FINRA
Rule 6730(a)(1) and subparagraphs (A) through (D) also would apply
to primary market transactions that do not qualify for T + 1
reporting, consistent with current FINRA Rule 6730(a)(1) through
(4).
\15\ FINRA Rule 6730(a)(1)-(4) would be renumbered as Rule
6730(a)(1)(A)-(D), respectively.
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Proposed Renumbered FINRA Rule 6730(a)(2)--List or Fixed Offering
Price Transactions and Takedown Transactions. FINRA Rule 6730(a)(5),
containing reporting requirements for List or Fixed Offering Price
Transactions and Takedown Transactions, would be renumbered as FINRA
Rule 6730(a)(2), and titled ``Reporting Requirements--List or Fixed
Offering Price Transactions and Takedown Transactions.'' FINRA also
proposes minor technical and conforming amendments to conform the rule
text to similar or parallel provisions in FINRA Rule 6730(a).\16\
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\16\ The rule text would be set forth in two subparagraphs,
proposed FINRA Rule 6730(a)(2)(A) and proposed FINRA Rule
6730(a)(2)(B).
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Proposed Renumbered FINRA Rule 6730(a)(3)--Asset-Backed Securities.
FINRA Rule 6730(a)(6), containing reporting requirements for Asset-
Backed Securities, would be renumbered as proposed FINRA Rule
6730(a)(3), and titled ``Reporting Requirements--Asset-Backed
Securities Transactions.'' \17\ FINRA also proposes minor technical and
conforming amendments to conform the rule text of renumbered FINRA Rule
6730(a)(3) to similar or parallel provisions in FINRA Rule 6730(a).
Finally, current FINRA Rule 6730(a)(7) and current FINRA Rule
6730(a)(8) would be renumbered, respectively, as FINRA Rule 6740(a)(4)
and FINRA Rule 6730(a)(5).
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\17\ FINRA Rule 6730(a)(6) would be renumbered as follows: FINRA
Rule 6730(a)(6)(A)(i) would be renumbered as FINRA Rule
6730(a)(3)(A)(ii); FINRA Rule 6730(a)(6)(A)(ii) (the Pilot Program)
would be renumbered as FINRA Rule 6730(a)(3)(A)(i); and FINRA Rule
6730(a)(6)(B) and FINRA Rule 6730(a)(6)(B)(i)-(ii) would be
renumbered as FINRA Rule 6730(a)(3)(B) and FINRA Rule
6730(a)(3)(B)(i)-(ii), respectively. As discussed infra, FINRA
proposes to consolidate FINRA Rule 6730(a)(6)(B)(ii) and FINRA Rule
6730(a)(6)(B)(iii) in renumbered FINRA Rule 6730(a)(3)(B)(ii), and
delete FINRA Rule 6730(a)(6)(B)(iii).
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Pilot Program. FINRA Rule 6730(a)(6)(A)(ii) (proposed renumbered
FINRA Rule 6730(a)(3)(A)(i)) provides for a six-month Pilot Program for
reporting transactions in Asset-Backed Securities, which extends the
period for a member to timely report such transactions to no later than
the next business day (T + 1) at any time during TRACE System
Hours.\18\ The Pilot Program provides additional time for members to
prepare and submit accurate transaction reports for Asset-Backed
Securities on a temporary basis.
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\18\ After the Pilot Program expires, transactions in Asset-
Backed Securities must be reported on the date of trade during TRACE
System Hours, with certain exceptions. See FINRA Rule
6730(a)(6)(A)(i) (proposed renumbered FINRA Rule 6730(a)(3)(A)(ii)).
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FINRA proposes a technical amendment to the Pilot Program (proposed
renumbered FINRA Rule 6730(a)(3)(A)(i)) providing that the Pilot
Program shall expire 180 days (instead of six months) following the
commencement of the reporting of Asset-Backed Securities transactions,
provided that if the 180th day is not a Friday, the Pilot Program will
expire on the Friday next occurring (that the TRACE system is open)
after the 180th day. FINRA proposes that the Pilot Program expire on a
Friday in response to comments requesting that members and vendors be
given additional time to incorporate the system changes that must be
implemented at the termination of the Pilot Program.\19\
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\19\ As discussed infra, the Pilot Program is also incorporated
in the proposed reporting requirements applicable to transactions in
pre-issuance CMOs/REMICs (see proposed FINRA Rule 6730(a)(3)(C)).
The expiration of the Pilot Program will also necessitate
modifications of systems and procedures in place to report such
transactions.
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Asset-Backed Securities Transactions Executed on Non-Business Day.
Currently, trades that are executed on a weekend, holiday or other day
when the TRACE system is closed must be reported the next business day
(T + 1), designated ``as/of,'' and are subject to two unique
requirements. First, the date
[[Page 15355]]
of execution reported to TRACE is not the actual date of execution;
instead, a member reports the date of execution as the same day (T + 1)
that the report must be timely submitted. In addition, the execution
time reported must be ``12:01:00 a.m. Eastern Time'' (``00:01:00''),
instead of the actual Time of Execution.\20\ These adaptations were
incorporated when TRACE began because the TRACE system does not
recognize any day on which the TRACE system is closed as a valid date
of execution, and the two unique requirements permit FINRA to
distinguish such non-business day transactions from all other reported
transactions.\21\
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\20\ Also, when the reporting method used includes a ``special
price memo'' field, the member must enter the actual date of
execution and Time of Execution in the field.
\21\ See, e.g., FINRA Rule 6730(a)(4) (proposed renumbered FINRA
Rule 6730(a)(1)(D)), FINRA Rule 6730(a)(5) (proposed renumbered
FINRA Rule 6730(a)(2)(B)), and FINRA Rule 6730(a)(6)(B)(iii).
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FINRA has improved the TRACE system, which, for transactions in
Asset-Backed Securities, will recognize any calendar day, including
days on which the TRACE system is not open, as a valid date of
execution. Accordingly, FINRA proposes to streamline FINRA Rule
6730(a)(6) (proposed renumbered FINRA Rule 6730(a)(3)) regarding Asset-
Backed Securities Transactions, combining the requirements of FINRA
Rule 6730(a)(6)(B)(ii) and FINRA Rule 6730(a)(6)(B)(iii) in proposed
renumbered FINRA Rule 6730(a)(3)(B)(ii) because, with this system
enhancement, the standards for reporting under both provisions are the
same, and separate provisions are no longer necessary.\22\ FINRA Rule
6730(a)(6)(B)(iii) would be deleted.
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\22\ Proposed renumbered FINRA Rule 6730(a)(3)(B)(ii) would
provide that any transaction in an Asset-Backed Security that is
executed on a Saturday, Sunday, a Federal or religious holiday or
other day on which the TRACE system is not open, or executed on a
business day at or after 6:30:00 p.m. Eastern Time through 11:59:59
p.m. Eastern Time must be reported not later than the next business
day during TRACE System Hours, designated ``as/of'' and include the
date of execution.
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Settlement. FINRA Rule 6730(d)(4)(B)(ii) currently requires a
member to report two items regarding the terms of settlement of an
Asset-Backed Securities transaction: (1) The actual date of settlement;
and (2) an indicator that the transaction will settle ``regular way''
(i.e., T + 3 or in conformity with the uniform practices established as
``good delivery'' for the specific Asset-Backed Security), or one
indicating that the transaction will not be settled ``regular way.''
FINRA proposes to retain the requirement to report the actual date
of settlement and delete the requirement to report the indicator, which
will simplify the reporting of settlement in connection with Asset-
Backed Securities transactions.
Pre-Issuance CMO/REMIC Transactions. FINRA proposes to supplement
the rules requiring members to report Asset-Backed Securities in FINRA
Rule 6730(a)(6) (proposed renumbered FINRA Rule 6730(a)(3)) to include
alternative reporting requirements for pre-issuance CMO/REMIC
transactions. Proposed FINRA Rule 6730(a)(3)(C)(i) provides that a pre-
issuance CMO/REMIC transaction must be reported, during the Pilot
Program, the earlier of: (i) the business day following the business
day that the security is assigned a CUSIP, a similar numeric identifier
or a FINRA symbol during TRACE System Hours, or (ii) the business day
following the date of issuance of the security during TRACE System
Hours. As provided in proposed FINRA Rule 6730(a)(3)(C)(ii), after the
Pilot Program expires, such pre-issuance CMO/REMIC transactions must be
reported the earlier of (i) the business day that the security is
assigned a CUSIP, a similar numeric identifier or a FINRA symbol during
TRACE System Hours (unless such identifier is assigned after 1:00:00
p.m. Eastern Time, and in such case, such transactions must be reported
no later than the next business day during TRACE System Hours), or (ii)
the date of issuance of the security during TRACE System Hours.\23\
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\23\ Under proposed FINRA Rule 6730(a)(3)(C)(i) and proposed
FINRA Rule 6730(a)(3)(C)(ii), any transaction that is reported other
than on the date of execution must be designated ``as/of'' and
include the date of execution.
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The alternative reporting requirements in proposed FINRA Rule
6730(a)(3)(C) differ from current TRACE reporting requirements and
those that will apply generally to Asset-Backed Securities transactions
in that, for pre-issuance CMO/REMIC transactions, the reporting period
begins (or is triggered) on the date of issuance of the security (or,
if earlier, the date the security is assigned an appropriate
identifier), instead of the date and time of the member's execution of
the transaction. FINRA proposes this alternative approach because
although pre-issuance CMO/REMIC transactions occur frequently, in many
cases, a CUSIP or other identifier is not yet assigned or is difficult
to assign (or cannot be assigned), because certain aspects of the
collateral and structure of the CMO or REMIC are not finalized at the
time of such transactions, and will not be finalized until shortly
before the CMO or REMIC is actually issued. CMO and REMIC transactions
that are not pre-issuance CMO/REMIC transactions--i.e., those executed
on or after the date of issuance of the security--must be reported in
compliance with FINRA Rule 6730(a)(6)(A) and (B) (proposed renumbered
FINRA Rules 6730(a)(3)(A) and (B)) and may not be reported under the
alternative reporting provisions (proposed FINRA Rule 6730(a)(3)(C)(i)
and proposed FINRA Rule 6730(a)(3)(C)(ii)).
Other FINRA Rule 6730 Amendments. FINRA proposes to amend FINRA
Rule 6730 to state explicitly in new paragraph (a)(6) that when a
member is a Party to a Transaction and makes a good faith determination
that a transaction involves a TRACE-Eligible Security, if the TRACE-
Eligible Security is not entered in the TRACE system, the member must
promptly provide FINRA Operations the information required under FINRA
Rule 6760(b) and thereafter report. The proposed amendment will
incorporate in FINRA Rule 6730(a)(6) previous guidance regarding
members' obligations to take all the steps necessary to report a
transaction to TRACE, including providing notification to FINRA
Operations when circumstances so require.
FINRA also proposes minor technical amendments to FINRA Rule
6730(a) regarding reporting transactions executed on weekends, Federal
or religious holidays, or other days on which the TRACE system does not
operate. FINRA Rule 6730(a) provisions would be amended to refer to
transactions executed on ``a Saturday, a Sunday, a Federal or religious
holiday or other day on which the TRACE system is not open at any time
during that day'' (instead of transactions executed on ``a Saturday, a
Sunday or a Federal or religious holiday on which the TRACE system is
closed'').\24\
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\24\ See proposed amendments to FINRA Rule 6730(a)(4) (proposed
renumbered Rule 6730(a)(1)(D)), FINRA Rule 6730(a)(5) (proposed
renumbered Rule 6730(a)(2)(B)), FINRA Rule 6730(a)(6)(B)(ii)
(proposed renumbered Rule 6730(a)(3)(B)(ii)) and FINRA Rule
6730(a)(8) (proposed renumbered Rule 6730(a)(5)).
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FINRA Rule 6760
FINRA Rule 6760 requires a member that is a managing underwriter in
an initial offering of a TRACE-Eligible Security (or, if a managing
underwriter is not appointed, members that are underwriters or initial
purchasers) to notify FINRA Operations of a new TRACE-Eligible
Security. For Asset-Backed Securities, a member Sponsor or
[[Page 15356]]
a member Issuing Entity must provide notice. The notice must include
certain information that clearly identifies the security, which FINRA
uses to confirm information in the TRACE System or add the security to
the TRACE system. Generally, the notice must be provided to FINRA
Operations prior to the execution of the first transaction in the
offering. FINRA proposes to amend FINRA Rule 6760 to incorporate
requirements that apply to Securitizers of Asset-Backed Securities (and
delete those applicable to Sponsors and Issuing Entities), to add
alternative notification requirements for pre-issuance CMOs/REMICs and
make other minor technical, conforming or clarifying changes.
In FINRA Rule 6760(a), FINRA Rule 6760(a)(1) would be amended such
that, for Asset-Backed Securities, a member that is a Securitizer
(instead of a member Sponsor or a member Issuing Entity) would be a
managing underwriter for purposes of the Rule and required to provide
notice under the Rule. References to Sponsors and Issuing Entities
would be deleted. FINRA also proposes to amend FINRA Rule 6760(a)(2) to
provide that FINRA will specify the method of communication or media
that a member must use to provide the information to FINRA Operations
under FINRA Rule 6760, and to delete the requirement to provide such
information by facsimile or e-mail. The proposed amendment to FINRA
Rule 6760(a)(2) will provide FINRA the flexibility, as technology
advances and systems change, to change quickly the method or media a
member may use to comply with FINRA Rule 6760.
In FINRA Rule 6760(b), FINRA proposes that when a Securitizer
provides notice regarding an Asset-Backed Security, all Securitizers
(instead of the Issuing Entity and the Sponsor) must be named in the
notice.\25\ Also, FINRA proposes to transfer the requirement that a
member make a good faith determination of TRACE eligibility before
providing notice about a security to FINRA Operations from FINRA Rule
6760(b) to FINRA Rule 6760(a)(1), and the deadline for providing timely
notice, and the exceptions thereto, from FINRA Rule 6760(b) to proposed
FINRA Rule 6760(c).
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\25\ FINRA notes that only a Securitizer that is also a FINRA
member is required to provide notice under FINRA Rule 6760(a)(1),
but all Securitizers, including non-member Securitizers, must be
identified in the notice under FINRA Rule 6760(b).
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Proposed FINRA Rule 6760(c) would set forth the deadline for
providing notice, and the exceptions thereto. The current provisions
regarding the deadline for providing notice and the exceptions would be
set forth in proposed FINRA Rule 6760(c)(1). In proposed FINRA Rule
6760(c)(2), FINRA would provide alternative notice requirements for
Asset-Backed Securities that are CMOs or REMICs in which pre-issuance
transactions will occur. As discussed above, proposed alternative
reporting requirements for pre-issuance CMO/REMIC transactions provide
that reporting deadlines will be calculated by reference to the earlier
of the date of issuance (or, during the Pilot Program, the following
day) or date of assignment of a CUSIP or another appropriate identifier
(or, during the Pilot Program, the following day) due to the delays in
the final structuring and issuance of such CMOs and REMICs.\26\ For the
same reasons, FINRA proposes alternative notification requirements
regarding CMOs and REMICs in which pre-issuance transactions will
occur. Under proposed FINRA Rule 6760(c)(2), a member that is required
to provide notice to FINRA Operations of such CMOs or REMICs must do so
promptly on the date of issuance or other event that establishes the
reference date that determines when a reporting period begins under
proposed FINRA Rule 6730(a)(3)(C)(i), which applies during the Pilot
Program, or, after the expiration of the Pilot Program, under proposed
FINRA Rule 6730(a)(3)(C)(ii).
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\26\ See proposed FINRA Rule 6730(a)(3)(C)(i) and proposed FINRA
Rule 6730(a)(3)(C)(ii).
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FINRA also proposes to incorporate technical and clarifying
amendments to FINRA Rule 6760, including changes related to the
restructuring of FINRA Rule 6760(a) and (b) and the addition of
proposed FINRA Rule 6760(c).
FINRA Rule 7730
FINRA Rule 7730 sets forth fees applicable to reporting
transactions to TRACE and purchasing TRACE data. FINRA proposes minor
amendments to two provisions. Under FINRA Rule 7730(a), members may
report transactions in TRACE-Eligible Securities to TRACE using: (1) a
TRACE Web browser; (2) a Computer-to-Computer Interface (``CTCI'')
(whether or not dedicated exclusively to TRACE); or (3) a third-party
reporting intermediary, and incur system-related fees based upon the
method selected. A member pays a system fee of $25 per month, per firm
to report transactions in TRACE-Eligible Securities via CTCI as
provided in FINRA Rule 7730(a)(2). FINRA proposes to amend FINRA Rule
7730(a), FINRA Rule 7730(a)(2) and the fee chart in Rule 7730 to add
FIX as another method for reporting transactions in TRACE-Eligible
Securities. FINRA proposes that the FIX line, like CTCI, would not be
required to be dedicated exclusively to TRACE, and the system-related
fee for reporting via FIX, like CTCI, would be $25 per month, per firm.
FINRA also proposes minor, conforming, non-substantive amendments to
FINRA Rule 7730(a).
In addition, FINRA proposes to correct a technical error regarding
reporting fees in FINRA Rule 7730(b)(1) and the fee chart. FINRA Rule
7730(b)(1) and the fee chart set forth three tiers of reporting fees.
Currently, both provide that the middle tier reporting fee applies to
trades ``between $200,001 and $999,999 par value'' (which are charged a
reporting fee of $0.000002375 times the par value of the transaction
(i.e., $0.002375/$1000)). FINRA proposes to correct the middle tier
reporting fee to correctly state that such middle tier reporting fee is
applicable to ``trades over $200,000 and up to and including
$999,999.99 par value.''
Finally, FINRA has received questions regarding the Factor that
will be used to calculate a reporting fee for a transaction in an
Asset-Backed Security that will be assessed based on the Remaining
Principal Balance of the security. The Remaining Principal Balance will
be calculated using the Factor submitted by the member, if the member
is required to report a Factor under FINRA Rule 6730(d)(2), and, in
fact, does report such Factor, or if no Factor is reported, using the
Factor that FINRA has adopted and incorporated in the TRACE system,
which will be the Factor that FINRA has identified as the most current
Factor publicly available for such Asset-Backed Security at the Time of
Execution. Also, FINRA will not recalculate reporting fee amounts due
to FINRA for Asset-Backed Securities transactions after FINRA has
identified the appropriate Factor for the specified Asset-Backed
Security and calculated the fee based on such Factor.
FINRA will announce the effective date of the proposed rule change
in a Regulatory Notice to be published no later than 60 days following
Commission approval. The effective date of the proposed rule change
will be the date that the proposed rule changes in the TRACE ABS filing
become effective, which is currently anticipated to be May 16,
2011.\27\
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\27\ See supra note 4.
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2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions
[[Page 15357]]
of Section 15A(b)(6) of the Act,\28\ 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
facilitate more timely and accurate reporting of transactions in Asset-
Backed Securities to TRACE, and enhance FINRA's surveillance of the
debt market in connection with Asset-Backed Securities transactions for
the protection of investors and in furtherance of the public interest.
---------------------------------------------------------------------------
\28\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission shall:
(a) By order approve or disapprove such proposed rule change, or (b)
institute proceedings to determine whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-FINRA-2011-012 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-2011-012. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for 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 will also 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-2011-012
and should be submitted on or before April 11, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-6567 Filed 3-18-11; 8:45 am]
BILLING CODE 8011-01-P
