Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Granting Approval of Proposed Rule Change To Require Members To Report to TRACE the “Factor” in Limited Instances Involving Asset-Backed Security Transactions, 15790-15791 [2013-05570]
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15790
Federal Register / Vol. 78, No. 48 / Tuesday, March 12, 2013 / Notices
believes that its proposal to assess a
charge of 0.15% of the dollar value of
the transaction per side will not burden
intermarket or intramarket competition
as the proposed rate is no more
favorable than the Exchange’s prevailing
maker/taker spread at the Midpoint
Match. In addition, the Exchange
believes that its proposal will not
burden intramarket competition or
intermarket competition because it
applies uniformly to all Members that
place orders in securities priced below
$1.00.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
Members or other interested parties.
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 Rule 19b–4(f)(2) 16
thereunder. At any time within 60 days
of the filing of such proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–EDGX–2013–10 on the
subject line.
mstockstill on DSK4VPTVN1PROD 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.
15 15
16 17
U.S.C. 78s(b)(3)(A).
CFR 19b–4(f)(2)[sic].
VerDate Mar<15>2010
17:21 Mar 11, 2013
All submissions should refer to File
Number SR–EDGX–2013–10. This file
number should be included on the
subject line if email 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
10:00 a.m. and 3:00 p.m. Copies of the
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 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–EDGX–
2013–10 and should be submitted on or
before April 2, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–05583 Filed 3–11–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69037; File No. SR–FINRA–
2012–052]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Granting
Approval of Proposed Rule Change To
Require Members To Report to TRACE
the ‘‘Factor’’ in Limited Instances
Involving Asset-Backed Security
Transactions
March 5, 2013.
I. Introduction
On November 29, 2012, the Financial
Industry Regulatory Authority, Inc.
17 17
Jkt 229001
PO 00000
CFR 200.30–3(a)(12).
Frm 00111
Fmt 4703
Sfmt 4703
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to require FINRA
members to report to the Trade
Reporting and Compliance Engine
(‘‘TRACE’’) the Factor used to determine
the size (volume) of each transaction in
an Asset-Backed Security ‘‘(ABS’’)
(except ABS traded To Be Announced
(‘‘TBA’’)), in the limited instances when
members effect such transactions as
agent and charge a commission.3 The
proposed rule change was published for
comment in the Federal Register on
December 18, 2012.4 The Commission
received one comment on the proposal
and a response to the comment from
FINRA.5 On January 30, 2013, the
Commission extended to March 18,
2013 the time period in which to
approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether the proposed rule change
should be disapproved.6 This order
approves the proposed rule change.
II. Description of the Proposal
FINRA utilizes TRACE to collect from
its members and publicly disseminate
information on secondary over-thecounter transactions in corporate debt
securities and Agency Debt Securities 7
and certain primary market transactions.
FINRA also utilizes TRACE to collect
information on ABS transactions but,
until recently, FINRA’s rules did not
provide for the dissemination of such
information publicly.8 Last year,
however, FINRA amended its rules to
provide for public dissemination of
information regarding, among other
things, certain ABS traded in Specified
Pool Transactions.9 FINRA has
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The terms ‘‘Asset-Backed Security,’’ ‘‘To Be
Announced,’’ and ‘‘Factor’’ are defined in FINRA
Rules 6710(m), (u), and (w), respectively.
4 See Securities Exchange Act Release No. 68414
(December 12, 2012), 77 FR 74896 (‘‘Notice’’).
5 See comment from Mark Sokolow, dated
December 18, 2012 (‘‘Sokolow Comment’’); see also
response letter from Kathryn Moore, Assistant
General Counsel, FINRA, to Elizabeth M. Murphy,
Secretary, Commission, dated January 11, 2013
(‘‘FINRA Letter’’).
6 See Securities Exchange Act Release No. 68768
(January 30, 2013), 78 FR 8216 (February 5, 2013).
7 The term ‘‘Agency Debt Security’’ is defined in
FINRA Rule 6710(l).
8 See Securities Exchange Act Release No. 61566
(February 22, 2010), 75 FR 9262 (March 1, 2010)
(approving SR–FINRA–2009–065).
9 See Securities Exchange Act Release No. 68084
(October 23, 2012), 77 FR 65436 (October 26, 2012)
(approving SR–FINRA–2012–042). The term
‘‘Specified Pool Transaction’’ is defined in FINRA
Rule 6710(x).
2 17
E:\FR\FM\12MRN1.SGM
12MRN1
Federal Register / Vol. 78, No. 48 / Tuesday, March 12, 2013 / Notices
proposed the instant rule change to
prepare for such dissemination, which
has not yet become effective, as well as
to prepare for any future dissemination
of additional ABS market segments.10
Specifically, FINRA has proposed to
amend FINRA Rule 6730(d)(2) to require
a member to report to TRACE the Factor
in the limited instances when the
member effects a transaction in an ABS
(except a TBA transaction) as agent and
charges a commission.11 Under FINRA’s
current transaction reporting rules, for a
transaction in an ABS that is backed by
mortgages or other assets that amortize
over the life of the security, instead of
reporting the size of the transaction by
reporting the total par or principal
value, a member must report two items
from which the size is calculable: (1)
The original face value of the ABS,
which is the size at issuance; and (2) the
Factor, but only if the Factor used to
execute the transaction is not the most
current Factor that is publicly available
at the Time of Execution 12 (a ‘‘nonconforming Factor’’).13 As a result of the
proposed rule change, when an ABS
transaction (except for a TBA
transaction) is executed in an agency
capacity with a commission charged,
the FINRA member would be required
to report the Factor regardless of
whether it is the most current Factor
publicly available at the Time of
Execution or is a non-conforming
Factor.14 In addition, FINRA has
proposed supplementary material to
make clear that the requirement to
report the Factor will apply to every
ABS transaction (except for a TBA
transaction) executed in an agency
capacity with a commission charged,
including the small number of
transactions in non-amortizing ABS.15
FINRA has also proposed technical
amendments to reorganize the current
mstockstill on DSK4VPTVN1PROD with NOTICES
10 See
Notice, 77 FR at 74896.
11 See proposed Rule 6730(d)(2)(B)(iv); see also
Notice, 77 FR at 74896. FINRA stated that only a
small number of ABS transactions are executed on
an agency basis with a commission charged; ABS
are traded mostly on a principal basis. See id.
12 The term ‘‘Time of Execution’’ is defined in
FINRA Rule 6710(d).
13 See FINRA Rules 6730(c)(2) and (d)(2); see also
Notice, 77 FR at 74896. When a member uses the
most current Factor that is publicly available at the
Time of Execution of the transaction, the member
currently is not required to report the Factor.
Instead, the TRACE system incorporates the most
current Factor publicly available at the Time of
Execution. FINRA receives such information from
commercial data vendors. See Notice, 77 FR at
74896 n.7.
14 See proposed Rule 6730(d)(2)(B)(iv); see also
Notice, 77 FR at 74897.
15 See proposed supplementary material .01 to
Rule 6730(d)(2); see also Notice, 77 FR at 74897. For
transactions in non-amortizing ABS, a member
would be required to report 1.0 as the Factor. See
id. at 74897 n.11.
VerDate Mar<15>2010
17:21 Mar 11, 2013
Jkt 229001
size reporting requirements in FINRA
Rule 6730(d)(2) and to make them
consistent with proposed Rule
6730(d)(2)(B)(iv).16
FINRA stated that it 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, and
that the effective date will be no later
than 270 days following publication of
the Regulatory Notice.17
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities association.18 In particular,
the Commission finds that the proposed
rule change is consistent with Section
15A(b)(6) of the Act,19 which requires,
among other things, that FINRA rules be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, and, in general, to protect
investors and the public interest.
In approving the original TRACE
rules, the Commission stated that price
transparency plays a fundamental role
in promoting fairness and efficiency of
U.S. capital markets.20 FINRA believes
that the proposed rule change would
promote price transparency provided by
TRACE for ABS transactions executed
in an agency capacity with a
commission charged.21 When an ABS
transaction is executed in an agency
capacity with a commission charged,
the TRACE system must take the Factor,
as well as other information, into
account when calculating the
disseminated price of the transaction.22
Currently, all components of the
formula that would be used to calculate
a disseminated price in an agency ABS
transaction, except the Factor, are
reported by a member effecting the
transaction.23 FINRA represented that
requiring that the Factor also be
reported would ensure the accuracy of
the disseminated price for an agency
ABS transaction because the TRACE
system would rely exclusively upon
16 See
proposed Rules 6730(d)(2)(A)–(2)(B)(iv).
Notice, 77 FR at 74897.
18 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
19 15 U.S.C. 78o–3(b)(6).
20 See Securities Exchange Act Release No. 43873
(January 23, 2001), 66 FR 8131, 8136 (January 29,
2001).
21 See Notice, 77 FR at 74897.
22 See id. at 74896–97.
23 See id. at 74897.
17 See
PO 00000
Frm 00112
Fmt 4703
Sfmt 4703
15791
information reported by the members
that are parties to such a transaction in
calculating the transaction’s
disseminated price.24 The Commission
believes that the proposal is reasonably
designed to promote the accuracy of the
disseminated price data for agency ABS
transactions and to further the goal of
increasing price transparency in the
ABS market.
The commenter suggested that the
proposed rule change would add an
administrative burden to the industry.25
FINRA responded that the proposed
rule change is necessary and
appropriate, and noted that it would be
narrowly tailored to apply to the very
limited number of ABS transactions
where a member trades in an agency
capacity and charges a commission.26
FINRA also noted that the accuracy of
the price transparency provided by
TRACE assists all market participants in
determining the quality of their
executions and firms in complying with
their regulatory obligations.27 The
Commission believes that the
commenter has not raised any issue that
would preclude approval of the
proposal.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,28 that the
proposed rule change (SR–FINRA–
2012–052) be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–05570 Filed 3–11–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69041; File No. SR–BX–
2013–018]
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Relating to
Establishing a Program for Managed
Data Solutions (MDS)
March 5, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
24 See
id.
Sokolow Comment.
26 See FINRA Letter at 2.
27 See id.
28 15 U.S.C. 78s(b)(2).
29 17 CFR 200.30–3(a)(12).
25 See
E:\FR\FM\12MRN1.SGM
12MRN1
]]>Agencies
[Federal Register Volume 78, Number 48 (Tuesday, March 12, 2013)]
[Notices]
[Pages 15790-15791]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05570]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69037; File No. SR-FINRA-2012-052]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Granting Approval of Proposed Rule Change To
Require Members To Report to TRACE the ``Factor'' in Limited Instances
Involving Asset-Backed Security Transactions
March 5, 2013.
I. Introduction
On November 29, 2012, the Financial Industry Regulatory Authority,
Inc. (``FINRA'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to require FINRA members to report to the Trade
Reporting and Compliance Engine (``TRACE'') the Factor used to
determine the size (volume) of each transaction in an Asset-Backed
Security ``(ABS'') (except ABS traded To Be Announced (``TBA'')), in
the limited instances when members effect such transactions as agent
and charge a commission.\3\ The proposed rule change was published for
comment in the Federal Register on December 18, 2012.\4\ The Commission
received one comment on the proposal and a response to the comment from
FINRA.\5\ On January 30, 2013, the Commission extended to March 18,
2013 the time period in which to approve the proposed rule change,
disapprove the proposed rule change, or institute proceedings to
determine whether the proposed rule change should be disapproved.\6\
This order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The terms ``Asset-Backed Security,'' ``To Be Announced,''
and ``Factor'' are defined in FINRA Rules 6710(m), (u), and (w),
respectively.
\4\ See Securities Exchange Act Release No. 68414 (December 12,
2012), 77 FR 74896 (``Notice'').
\5\ See comment from Mark Sokolow, dated December 18, 2012
(``Sokolow Comment''); see also response letter from Kathryn Moore,
Assistant General Counsel, FINRA, to Elizabeth M. Murphy, Secretary,
Commission, dated January 11, 2013 (``FINRA Letter'').
\6\ See Securities Exchange Act Release No. 68768 (January 30,
2013), 78 FR 8216 (February 5, 2013).
---------------------------------------------------------------------------
II. Description of the Proposal
FINRA utilizes TRACE to collect from its members and publicly
disseminate information on secondary over-the-counter transactions in
corporate debt securities and Agency Debt Securities \7\ and certain
primary market transactions. FINRA also utilizes TRACE to collect
information on ABS transactions but, until recently, FINRA's rules did
not provide for the dissemination of such information publicly.\8\ Last
year, however, FINRA amended its rules to provide for public
dissemination of information regarding, among other things, certain ABS
traded in Specified Pool Transactions.\9\ FINRA has
[[Page 15791]]
proposed the instant rule change to prepare for such dissemination,
which has not yet become effective, as well as to prepare for any
future dissemination of additional ABS market segments.\10\
---------------------------------------------------------------------------
\7\ The term ``Agency Debt Security'' is defined in FINRA Rule
6710(l).
\8\ See Securities Exchange Act Release No. 61566 (February 22,
2010), 75 FR 9262 (March 1, 2010) (approving SR-FINRA-2009-065).
\9\ See Securities Exchange Act Release No. 68084 (October 23,
2012), 77 FR 65436 (October 26, 2012) (approving SR-FINRA-2012-042).
The term ``Specified Pool Transaction'' is defined in FINRA Rule
6710(x).
\10\ See Notice, 77 FR at 74896.
---------------------------------------------------------------------------
Specifically, FINRA has proposed to amend FINRA Rule 6730(d)(2) to
require a member to report to TRACE the Factor in the limited instances
when the member effects a transaction in an ABS (except a TBA
transaction) as agent and charges a commission.\11\ Under FINRA's
current transaction reporting rules, for a transaction in an ABS that
is backed by mortgages or other assets that amortize over the life of
the security, instead of reporting the size of the transaction by
reporting the total par or principal value, a member must report two
items from which the size is calculable: (1) The original face value of
the ABS, which is the size at issuance; and (2) the Factor, but only if
the Factor used to execute the transaction is not the most current
Factor that is publicly available at the Time of Execution \12\ (a
``non-conforming Factor'').\13\ As a result of the proposed rule
change, when an ABS transaction (except for a TBA transaction) is
executed in an agency capacity with a commission charged, the FINRA
member would be required to report the Factor regardless of whether it
is the most current Factor publicly available at the Time of Execution
or is a non-conforming Factor.\14\ In addition, FINRA has proposed
supplementary material to make clear that the requirement to report the
Factor will apply to every ABS transaction (except for a TBA
transaction) executed in an agency capacity with a commission charged,
including the small number of transactions in non-amortizing ABS.\15\
---------------------------------------------------------------------------
\11\ See proposed Rule 6730(d)(2)(B)(iv); see also Notice, 77 FR
at 74896. FINRA stated that only a small number of ABS transactions
are executed on an agency basis with a commission charged; ABS are
traded mostly on a principal basis. See id.
\12\ The term ``Time of Execution'' is defined in FINRA Rule
6710(d).
\13\ See FINRA Rules 6730(c)(2) and (d)(2); see also Notice, 77
FR at 74896. When a member uses the most current Factor that is
publicly available at the Time of Execution of the transaction, the
member currently is not required to report the Factor. Instead, the
TRACE system incorporates the most current Factor publicly available
at the Time of Execution. FINRA receives such information from
commercial data vendors. See Notice, 77 FR at 74896 n.7.
\14\ See proposed Rule 6730(d)(2)(B)(iv); see also Notice, 77 FR
at 74897.
\15\ See proposed supplementary material .01 to Rule 6730(d)(2);
see also Notice, 77 FR at 74897. For transactions in non-amortizing
ABS, a member would be required to report 1.0 as the Factor. See id.
at 74897 n.11.
---------------------------------------------------------------------------
FINRA has also proposed technical amendments to reorganize the
current size reporting requirements in FINRA Rule 6730(d)(2) and to
make them consistent with proposed Rule 6730(d)(2)(B)(iv).\16\
---------------------------------------------------------------------------
\16\ See proposed Rules 6730(d)(2)(A)-(2)(B)(iv).
---------------------------------------------------------------------------
FINRA stated that it 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, and that the effective date
will be no later than 270 days following publication of the Regulatory
Notice.\17\
---------------------------------------------------------------------------
\17\ See Notice, 77 FR at 74897.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
association.\18\ In particular, the Commission finds that the proposed
rule change is consistent with Section 15A(b)(6) of the Act,\19\ which
requires, among other things, that FINRA rules be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, and, in general, to protect investors
and the public interest.
---------------------------------------------------------------------------
\18\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\19\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
In approving the original TRACE rules, the Commission stated that
price transparency plays a fundamental role in promoting fairness and
efficiency of U.S. capital markets.\20\ FINRA believes that the
proposed rule change would promote price transparency provided by TRACE
for ABS transactions executed in an agency capacity with a commission
charged.\21\ When an ABS transaction is executed in an agency capacity
with a commission charged, the TRACE system must take the Factor, as
well as other information, into account when calculating the
disseminated price of the transaction.\22\ Currently, all components of
the formula that would be used to calculate a disseminated price in an
agency ABS transaction, except the Factor, are reported by a member
effecting the transaction.\23\ FINRA represented that requiring that
the Factor also be reported would ensure the accuracy of the
disseminated price for an agency ABS transaction because the TRACE
system would rely exclusively upon information reported by the members
that are parties to such a transaction in calculating the transaction's
disseminated price.\24\ The Commission believes that the proposal is
reasonably designed to promote the accuracy of the disseminated price
data for agency ABS transactions and to further the goal of increasing
price transparency in the ABS market.
---------------------------------------------------------------------------
\20\ See Securities Exchange Act Release No. 43873 (January 23,
2001), 66 FR 8131, 8136 (January 29, 2001).
\21\ See Notice, 77 FR at 74897.
\22\ See id. at 74896-97.
\23\ See id. at 74897.
\24\ See id.
---------------------------------------------------------------------------
The commenter suggested that the proposed rule change would add an
administrative burden to the industry.\25\ FINRA responded that the
proposed rule change is necessary and appropriate, and noted that it
would be narrowly tailored to apply to the very limited number of ABS
transactions where a member trades in an agency capacity and charges a
commission.\26\ FINRA also noted that the accuracy of the price
transparency provided by TRACE assists all market participants in
determining the quality of their executions and firms in complying with
their regulatory obligations.\27\ The Commission believes that the
commenter has not raised any issue that would preclude approval of the
proposal.
---------------------------------------------------------------------------
\25\ See Sokolow Comment.
\26\ See FINRA Letter at 2.
\27\ See id.
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\28\ that the proposed rule change (SR-FINRA-2012-052) be, and it
hereby is, approved.
---------------------------------------------------------------------------
\28\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
---------------------------------------------------------------------------
\29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05570 Filed 3-11-13; 8:45 am]
BILLING CODE 8011-01-P
