Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7730 Regarding TRACE Reporting Fees For Transactions in Agency Pass-Through Mortgage-Backed Securities Traded “To Be Announced”, 65313-65315 [2011-27132]
Download as PDF
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Federal Register / Vol. 76, No. 203 / Thursday, October 20, 2011 / Notices
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.
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NASDAQ–2011–142 and should be
submitted on or before November 10,
2011.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Elizabeth M. Murphy,
Secretary.
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2011–142 on the
subject line.
sroberts on DSK5SPTVN1PROD with NOTICES
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–NASDAQ–2011–142. 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 the
Exchange. All comments received will
be posted without change; the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
VerDate Mar<15>2010
18:59 Oct 19, 2011
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[FR Doc. 2011–27133 Filed 10–19–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65551; File No. SR–FINRA–
2011–056]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 7730
Regarding TRACE Reporting Fees For
Transactions in Agency Pass-Through
Mortgage-Backed Securities Traded
‘‘To Be Announced’’
65313
a TRACE-Eligible Security that is an
Agency Pass-Through Mortgage-Backed
Security traded ‘‘to be announced’’ and
to incorporate minor technical
amendments.
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.
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
October 13, 2011.
1. Purpose
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 30, 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. FINRA has
designated the proposed rule change as
‘‘establishing or changing a due, fee or
other charge’’ under Section
19(b)(3)(A)(ii) of the Act 3 and Rule 19b–
4(f)(2) 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.
On May 16, 2011, amendments to the
FINRA Rule 6700 Series (the TRACE
rules) and Rule 7730 (TRACE fees)
became effective.5 The amendments
defined Asset-Backed Securities
(‘‘ABS’’) as TRACE-Eligible Securities
and extended TRACE reporting
requirements to transactions in ABS in
the TRACE rules.6 In addition, the
TRACE reporting fees in effect for
transactions in corporate bonds and
Agency Debt Securities were extended
to transactions in ABS in Rule 7730.7
As a result, currently the reporting fee
for transactions in ABS, including
Agency Pass-Through Mortgage-Backed
Securities (‘‘Agency Pass-Through
MBS’’) traded to-be-announced
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend FINRA
Rule 7730 to establish a transaction
reporting fee of $1.50 per transaction for
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
1 15
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5 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’’); Securities Exchange Act
Release No. 64364 (April 28, 2011), 76 FR 25385
(May 4, 2011) (order approving File No. SR–
FINRA–2011–012) (‘‘supplemental TRACE ABS
filing’’); Regulatory Notice 10–55 (October 2010)
(establishing May 16, 2011 as the effective date for
the TRACE ABS filing); and Regulatory Notice 11–
20 (May 2011) (establishing May 16, 2011 as the
effective date for the supplemental TRACE ABS
filing).
6 ‘‘Asset-Backed Security’’ and ‘‘TRACE-Eligible
Security’’ are defined in, respectively, Rule 6710(m)
and Rule 6710(a).
7 ‘‘Agency Debt Security’’ is defined in Rule
6710(l).
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Federal Register / Vol. 76, No. 203 / Thursday, October 20, 2011 / Notices
sroberts on DSK5SPTVN1PROD with NOTICES
(‘‘TBA’’),8 is based upon a sliding scale
and ranges from $0.475 to $2.375 per
transaction depending upon the size
(volume) of the reported transaction.9
Most ABS transactions, including
Agency Pass-Through MBS traded TBA
(‘‘TBA transactions’’), are in excess of
$1,000,000 par value (or, in the case of
certain ABS, in excess of $1,000,000 as
measured by the original face value or
Remaining Principal Balance of the
security, as applicable).10 Thus, for most
ABS transactions, the highest reporting
fee, $2.375 per transaction, applies.
FINRA proposes to amend the
transaction reporting fee in Rule 7730
applicable to TBA transactions.
Specifically, FINRA proposes to charge
a member a flat fee of $1.50 per TBA
transaction in lieu of the current
reporting fee that is based upon a
sliding scale depending on the size
(volume) of the transaction.11
8 As provided in Rule 6710(v), ‘‘Agency PassThrough Mortgage-Backed Security’’ means
‘‘a mortgage-backed security issued by an Agency
or a Government-Sponsored Enterprise, for which
the timely payment of principal and interest is
guaranteed by an Agency or a GovernmentSponsored Enterprise, representing ownership
interests in a pool or pools of residential mortgage
loans with the security structured to ‘‘pass through’’
the principal and interest payments made by the
mortgagees to the owners of the pool(s) on a pro rata
basis.’’
‘‘Agency’’ and ‘‘Government-Sponsored
Enterprise’’ (‘‘GSE’’) are defined in, respectively,
Rule 6710(k) and Rule 6710(n).
As provided in Rule 6710(u), ‘‘TBA’’ means
‘‘ ‘to be announced’ and refers to a transaction in
an Agency Pass-Through Mortgage-Backed Security
* * * where the parties agree that the seller will
deliver to the buyer an Agency Pass-Through
Mortgage-Backed Security of a specified face
amount and coupon from a specified Agency or
Government-Sponsored Enterprise program
representing a pool (or pools) of mortgages (that are
not specified by unique pool number).’’
In a transaction traded TBA, the parties agree on
a price for delivering a given volume of Agency
Pass-Through MBS at a specified future date.
9 As set forth in Rule 7730(b)(1)(A), for trades up
to and including $200,000 par value, the reporting
fee is $0.475 per trade; for trades over $200,000 and
up to and including $999,999.99 par value, the
reporting fee is $0.000002375 times par value (i.e.,
$0.002375 per $1000 par value) per trade; and for
trades of $1,000,000 par value or more, the
reporting fee is $2.375 per trade. (Trade reporting
and other TRACE fees are also summarized in a fee
chart in Rule 7730.)
10 For some ABS transactions, including TBA
transactions, par value is not the correct term to
describe the size (volume) of a transaction. When
calculating reporting fees for transactions in such
securities, Rule 7730(b)(1)(B) provides that the size
(volume) of a transaction is the lesser of the original
face value or the Remaining Principal Balance.
‘‘Remaining Principal Balance’’ and ‘‘Time of
Execution’’ are defined in, respectively, Rule
6710(aa) and Rule 6710(d).
11 The proposed TBA transaction fee would be set
forth in Rule 7730(b)(1)(B). FINRA also proposes
three minor technical amendments to Rule
7730(b)(1). The provision regarding the sliding
scale, which determines a reporting fee based on
the size (volume) of a transaction, would be
incorporated in Rule 7730(b)(1)(B) and deleted in
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18:59 Oct 19, 2011
Jkt 226001
Agency Pass-Through MBS are the
most liquid sector among all ABS, and
transactions in Agency Pass-Through
MBS are a significant share of the
volume of all ABS transactions. Many
Agency Pass-Through MBS are TBA
transactions. The proposed amendment
to Rule 7730 to modify the reporting fee
from multiple rates based upon
transaction size (volume) to a flat rate of
$1.50 per transaction for TBA
transactions regardless of transaction
size (volume) would reduce the
reporting fee for approximately 95
percent of all TBA transactions.12 In
addition, the proposed fee reduction
would substantially reduce reporting
fees that members pay in connection
with ABS transactions in general, as
TBA transactions account for
approximately 85 percent of the total
volume (size) traded in ABS and
approximately 51 percent of all ABS
transactions.13
FINRA has filed the proposed rule
change for immediate effectiveness. The
implementation date will be November
1, 2011.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(5) of the Act,14 which
requires, among other things, that
FINRA rules provide for the equitable
allocation of reasonable dues, fees and
other charges among members and
issuers and other persons using any
facility or system that FINRA operates
or controls. FINRA believes that the
proposed amendment, which will
establish a flat fee per transaction for
reporting TBA transactions regardless of
the size (volume) of the TBA
transaction, is a reasonable and fair
Rule 7730(b)(1)(A). The provision indicating that,
for ABS where par value is not used to determine
the size (volume) of a transaction, for purposes of
trade reporting fees, the size (volume) of a
transaction is the lesser of the original face value
or the Remaining Principal Balance would be
incorporated in Rule 7730(b)(1)(A) and deleted in
Rule 7730(b)(1)(B). In addition, the final sentence
of current Rule 7730(b)(1)(B) would be deleted.
12 A review of ABS transaction data reported to
TRACE between May 16, 2011 and July 31, 2011,
indicates that more than 95 percent of all TBA
transactions are larger than $1 million and, thus, are
billed at the rate of $2.375 per transaction.
Reducing the reporting fee to a flat fee of $1.50 per
transaction will raise fees on approximately five
percent of TBA transactions, and lower fees on
approximately 95 percent of such transactions.
13 A review of ABS transaction data reported to
TRACE between May 16, 2011 and July 31, 2011,
showed that TBAs trade in a liquid market. The
average daily volume of TBA transactions is
approximately $219 billion. The average daily
number of trades is slightly more than 7,000. The
average daily volume of TBA transactions is
approximately ten times the average daily volume
of all corporate bonds.
14 15 U.S.C. 78o–3(b)(5).
PO 00000
Frm 00157
Fmt 4703
Sfmt 4703
adjustment to TRACE reporting fees in
that, currently, for TBA transactions,
members are subject to the highest
TRACE reporting fee for almost all such
transactions, and the proposed
amendment will reduce the reporting
fee for 95 percent of such transactions,
and will result in a more equitable
allocation among members for ABS
reporting fees.
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 15 and paragraph (f)(2) of Rule
19b–4 thereunder.16 At any time within
60 days of the filing of the proposed rule
change, the Commission 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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or 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 rulecomments@sec.gov. Please include File
Number SR–FINRA–2011–056 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
15 15
16 17
E:\FR\FM\20OCN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
20OCN1
65315
Federal Register / Vol. 76, No. 203 / Thursday, October 20, 2011 / Notices
Securities and Exchange Commission,
100 F Street, NE., Washington DC
20549–1090.
All submissions should refer to File
Number SR–FINRA–2011–056. 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–2011–056 and should be
submitted on or before November 10,
2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–27132 Filed 10–19–11; 8:45 am]
BILLING CODE 8011–01–P
SOCIAL SECURITY ADMINISTRATION
Agency Information Collection
Activities: Proposed Request and
Comment Request
The Social Security Administration
(SSA) publishes a list of information
collection packages requiring clearance
by the Office of Management and
Budget (OMB) in compliance with
Public Law (Pub. L.) 104–13, the
Paperwork Reduction Act of 1995,
effective October 1, 1995. This notice
includes revisions to OMB-approved
information collections.
SSA is soliciting comments on the
accuracy of the agency’s burden
estimate; the need for the information;
its practical utility; ways to enhance its
quality, utility, and clarity; and ways to
minimize burden on respondents,
including the use of automated
collection techniques or other forms of
information technology. Mail, e-mail, or
fax your comments and
recommendations on the information
collection(s) to the OMB Desk Officer
and SSA Reports Clearance Officer at
the following addresses or fax numbers.
Number of
responses
Collection instrument
(OMB), Office of Management and
Budget, Attn: Desk Officer for SSA.
Fax: 202–395–6974. E-mail address:
OIRA_Submission@omb.eop.gov.
(SSA), Social Security Administration,
DCBFM, Attn: Reports Clearance
Officer, 107 Altmeyer Building, 6401
Security Blvd., Baltimore, MD 21235.
Fax No.: 410–966–2830. E-mail
address: OPLM.RCO@ssa.gov.
I. The information collections below
are pending at SSA. SSA will submit
them to OMB within 60 days from the
date of this notice. To be sure we
consider your comments, we must
receive them no later than December 19,
2011. Individuals can obtain copies of
the collection instruments by calling the
SSA Reports Clearance Officer at 410–
965–8783 or by writing to the above email address.
1. Medical Report on Adult with
Allegation of Human Immunodeficiency
Virus Infection; Medical Report on Child
with Allegation of Human
Immunodeficiency Virus Infection—20
CFR 416.933–20; CFR 416.934 —0960–
0500. SSA uses Forms SSA–4814–F5
and SSA–4815–F6 to collect
information necessary to determine if an
individual with human
immunodeficiency virus infection, who
is applying for Supplemental Security
Income (SSI) disability benefits, meets
the requirements for presumptive
disability payments. The respondents
are the medical sources of the
applicants for SSI disability payments.
Type of Request: Revision of an OMBapproved information collection.
Average burden
per response
(minutes)
Frequency of
response
Estimated total
annual burden
(hours)
SSA–4814–F5 ..........................................................................
SSA–4815–F6 ..........................................................................
46,200
12,900
1
1
10
10
7,700
2,150
Totals ................................................................................
59,100
..............................
..............................
9,850
sroberts on DSK5SPTVN1PROD with NOTICES
2. Supplement to Claim of Person
Outside the United States—20 CFR
404.463, 20 CFR 422.505(b) and 20 CFR
407.27(c)—0960–0051. Claimants or
beneficiaries (both United States (U.S.)
citizens and aliens entitled to benefits)
living outside the U.S. complete Form
SSA–21 as a supplement to an
application for benefits. SSA collects
the information to determine eligibility
for U.S. Social Security benefits for
those months a beneficiary or claimant
is outside the U.S., and to determine if
tax withholding applies. In addition,
SSA uses the information to terminate
Supplemental Medical Insurance
coverage for recipients who request it,
because they are or will be out of the
Number of
responses
Collection instrument
SSA–21 (non-residents) ..........................................................
17 17
36,874
U.S. The respondents are individuals
entitled to Social Security benefits who
are, will be, or have been residing
outside the U.S. for three months or
longer.
Type of Request: Revision of an OMBapproved information collection.
Average burden
per response
(minutes)
Frequency of
response
1
5
CFR 200.30–3(a)(12).
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E:\FR\FM\20OCN1.SGM
Estimated total
annual burden
(hours)
20OCN1
3,073
]]>Agencies
[Federal Register Volume 76, Number 203 (Thursday, October 20, 2011)]
[Notices]
[Pages 65313-65315]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-27132]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65551; File No. SR-FINRA-2011-056]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Rule 7730 Regarding TRACE Reporting Fees
For Transactions in Agency Pass-Through Mortgage-Backed Securities
Traded ``To Be Announced''
October 13, 2011.
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 30, 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.
FINRA has designated the proposed rule change as ``establishing or
changing a due, fee or other charge'' under Section 19(b)(3)(A)(ii) of
the Act \3\ and Rule 19b-4(f)(2) 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)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend FINRA Rule 7730 to establish a
transaction reporting fee of $1.50 per transaction for a TRACE-Eligible
Security that is an Agency Pass-Through Mortgage-Backed Security traded
``to be announced'' and to incorporate minor technical amendments.
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.
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 May 16, 2011, amendments to the FINRA Rule 6700 Series (the
TRACE rules) and Rule 7730 (TRACE fees) became effective.\5\ The
amendments defined Asset-Backed Securities (``ABS'') as TRACE-Eligible
Securities and extended TRACE reporting requirements to transactions in
ABS in the TRACE rules.\6\ In addition, the TRACE reporting fees in
effect for transactions in corporate bonds and Agency Debt Securities
were extended to transactions in ABS in Rule 7730.\7\
---------------------------------------------------------------------------
\5\ 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''); Securities Exchange Act
Release No. 64364 (April 28, 2011), 76 FR 25385 (May 4, 2011) (order
approving File No. SR-FINRA-2011-012) (``supplemental TRACE ABS
filing''); Regulatory Notice 10-55 (October 2010) (establishing May
16, 2011 as the effective date for the TRACE ABS filing); and
Regulatory Notice 11-20 (May 2011) (establishing May 16, 2011 as the
effective date for the supplemental TRACE ABS filing).
\6\ ``Asset-Backed Security'' and ``TRACE-Eligible Security''
are defined in, respectively, Rule 6710(m) and Rule 6710(a).
\7\ ``Agency Debt Security'' is defined in Rule 6710(l).
---------------------------------------------------------------------------
As a result, currently the reporting fee for transactions in ABS,
including Agency Pass-Through Mortgage-Backed Securities (``Agency
Pass-Through MBS'') traded to-be-announced
[[Page 65314]]
(``TBA''),\8\ is based upon a sliding scale and ranges from $0.475 to
$2.375 per transaction depending upon the size (volume) of the reported
transaction.\9\ Most ABS transactions, including Agency Pass-Through
MBS traded TBA (``TBA transactions''), are in excess of $1,000,000 par
value (or, in the case of certain ABS, in excess of $1,000,000 as
measured by the original face value or Remaining Principal Balance of
the security, as applicable).\10\ Thus, for most ABS transactions, the
highest reporting fee, $2.375 per transaction, applies.
---------------------------------------------------------------------------
\8\ As provided in Rule 6710(v), ``Agency Pass-Through Mortgage-
Backed Security'' means
``a mortgage-backed security issued by an Agency or a
Government-Sponsored Enterprise, for which the timely payment of
principal and interest is guaranteed by an Agency or a Government-
Sponsored Enterprise, representing ownership interests in a pool or
pools of residential mortgage loans with the security structured to
``pass through'' the principal and interest payments made by the
mortgagees to the owners of the pool(s) on a pro rata basis.''
``Agency'' and ``Government-Sponsored Enterprise'' (``GSE'') are
defined in, respectively, Rule 6710(k) and Rule 6710(n).
As provided in Rule 6710(u), ``TBA'' means
`` `to be announced' and refers to a transaction in an Agency
Pass-Through Mortgage-Backed Security * * * where the parties agree
that the seller will deliver to the buyer an Agency Pass-Through
Mortgage-Backed Security of a specified face amount and coupon from
a specified Agency or Government-Sponsored Enterprise program
representing a pool (or pools) of mortgages (that are not specified
by unique pool number).''
In a transaction traded TBA, the parties agree on a price for
delivering a given volume of Agency Pass-Through MBS at a specified
future date.
\9\ As set forth in Rule 7730(b)(1)(A), for trades up to and
including $200,000 par value, the reporting fee is $0.475 per trade;
for trades over $200,000 and up to and including $999,999.99 par
value, the reporting fee is $0.000002375 times par value (i.e.,
$0.002375 per $1000 par value) per trade; and for trades of
$1,000,000 par value or more, the reporting fee is $2.375 per trade.
(Trade reporting and other TRACE fees are also summarized in a fee
chart in Rule 7730.)
\10\ For some ABS transactions, including TBA transactions, par
value is not the correct term to describe the size (volume) of a
transaction. When calculating reporting fees for transactions in
such securities, Rule 7730(b)(1)(B) provides that the size (volume)
of a transaction is the lesser of the original face value or the
Remaining Principal Balance. ``Remaining Principal Balance'' and
``Time of Execution'' are defined in, respectively, Rule 6710(aa)
and Rule 6710(d).
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FINRA proposes to amend the transaction reporting fee in Rule 7730
applicable to TBA transactions. Specifically, FINRA proposes to charge
a member a flat fee of $1.50 per TBA transaction in lieu of the current
reporting fee that is based upon a sliding scale depending on the size
(volume) of the transaction.\11\
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\11\ The proposed TBA transaction fee would be set forth in Rule
7730(b)(1)(B). FINRA also proposes three minor technical amendments
to Rule 7730(b)(1). The provision regarding the sliding scale, which
determines a reporting fee based on the size (volume) of a
transaction, would be incorporated in Rule 7730(b)(1)(B) and deleted
in Rule 7730(b)(1)(A). The provision indicating that, for ABS where
par value is not used to determine the size (volume) of a
transaction, for purposes of trade reporting fees, the size (volume)
of a transaction is the lesser of the original face value or the
Remaining Principal Balance would be incorporated in Rule
7730(b)(1)(A) and deleted in Rule 7730(b)(1)(B). In addition, the
final sentence of current Rule 7730(b)(1)(B) would be deleted.
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Agency Pass-Through MBS are the most liquid sector among all ABS,
and transactions in Agency Pass-Through MBS are a significant share of
the volume of all ABS transactions. Many Agency Pass-Through MBS are
TBA transactions. The proposed amendment to Rule 7730 to modify the
reporting fee from multiple rates based upon transaction size (volume)
to a flat rate of $1.50 per transaction for TBA transactions regardless
of transaction size (volume) would reduce the reporting fee for
approximately 95 percent of all TBA transactions.\12\ In addition, the
proposed fee reduction would substantially reduce reporting fees that
members pay in connection with ABS transactions in general, as TBA
transactions account for approximately 85 percent of the total volume
(size) traded in ABS and approximately 51 percent of all ABS
transactions.\13\
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\12\ A review of ABS transaction data reported to TRACE between
May 16, 2011 and July 31, 2011, indicates that more than 95 percent
of all TBA transactions are larger than $1 million and, thus, are
billed at the rate of $2.375 per transaction. Reducing the reporting
fee to a flat fee of $1.50 per transaction will raise fees on
approximately five percent of TBA transactions, and lower fees on
approximately 95 percent of such transactions.
\13\ A review of ABS transaction data reported to TRACE between
May 16, 2011 and July 31, 2011, showed that TBAs trade in a liquid
market. The average daily volume of TBA transactions is
approximately $219 billion. The average daily number of trades is
slightly more than 7,000. The average daily volume of TBA
transactions is approximately ten times the average daily volume of
all corporate bonds.
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FINRA has filed the proposed rule change for immediate
effectiveness. The implementation date will be November 1, 2011.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(5) of the Act,\14\ which requires, among
other things, that FINRA rules provide for the equitable allocation of
reasonable dues, fees and other charges among members and issuers and
other persons using any facility or system that FINRA operates or
controls. FINRA believes that the proposed amendment, which will
establish a flat fee per transaction for reporting TBA transactions
regardless of the size (volume) of the TBA transaction, is a reasonable
and fair adjustment to TRACE reporting fees in that, currently, for TBA
transactions, members are subject to the highest TRACE reporting fee
for almost all such transactions, and the proposed amendment will
reduce the reporting fee for 95 percent of such transactions, and will
result in a more equitable allocation among members for ABS reporting
fees.
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\14\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not 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 \15\ and paragraph (f)(2) of Rule 19b-4
thereunder.\16\ At any time within 60 days of the filing of the
proposed rule change, the Commission 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. If
the Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule should be approved
or disapproved.
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(2).
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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-2011-056 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary,
[[Page 65315]]
Securities and Exchange Commission, 100 F Street, NE., Washington DC
20549-1090.
All submissions should refer to File Number SR-FINRA-2011-056. 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-2011-056
and should be submitted on or before November 10, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-27132 Filed 10-19-11; 8:45 am]
BILLING CODE 8011-01-P
