Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Dissemination of Agency-Pass Through Mortgage-Backed Securities and SBA-Backed Asset-Backed Securities Traded in Specified Pool Transactions, 35078-35082 [2013-13774]
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notice, or the date the Commission
receives any further information it
requested, if the Commission notifies
the clearing agency in writing that it
does not object to the proposed change
and authorizes the clearing agency to
implement the proposed change on an
earlier date, subject to any conditions
imposed by the Commission. The
clearing agency shall post notice on its
Web site of proposed changes that are
implemented.
The proposal shall not take effect
until all regulatory actions required
with respect to the proposal are
completed.15
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the advance notice is
consistent with the Clearing
Supervision 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
No. SR–NSCC–2013–805 on the subject
line.
wreier-aviles on DSK5TPTVN1PROD with NOTICES
• 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 No.
SR–NSCC–2013–805. 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
15 NSCC also filed the proposals contained in this
advance notice as a proposed rule change under
Section 19(b)(1) of the Exchange Act and Rule 19b–
4 thereunder. 15 U.S.C. 78s(b)(1); 17 CFR 240.19b–
4. Pursuant to Section 19(b)(2) of the Exchange Act,
generally not later than 45 days after the date of
publication of the proposed rule change in the
Federal Register or such longer period up to 90
days if the Commission determines that a longer
period is appropriate and publishes the reasons for
such determination or the self-regulatory
organization consents the Commission will either:
(i) by order approve or disapprove the proposed
rule change or (ii) institute proceedings to
determine whether the proposed rule change
should be disapproved. 17 U.S.C. 78s(b)(2)(A). See
Release No. 34–69571 (May 14, 2013), 78 FR 29408
(May 20, 2013).
15:13 Jun 10, 2013
By the Commission.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–13773 Filed 6–10–13; 8:45 am]
BILLING CODE 8011–01–P
Paper Comments
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amendments, all written statements
with respect to the advance notice that
are filed with the Commission, and all
written communications relating to the
advance notice 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 such
filings also will be available for
inspection and copying at the principal
office of NSCC and on NSCC’s Web site
at https://www.dtcc.com/downloads/
legal/rule_filings/2013/nscc/SR-NSCC203-805.pdf 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–NSCC–
2013–805 and should be submitted on
or before June 26, 2013.
Jkt 229001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69702; File No. SR–FINRA–
2013–022]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to Dissemination
of Agency-Pass Through MortgageBacked Securities and SBA-Backed
Asset-Backed Securities Traded in
Specified Pool Transactions
June 5, 2013.
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 May 24,
2013, the Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by FINRA. FINRA has
designated the proposed rule change as
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00105
Fmt 4703
Sfmt 4703
constituting a ‘‘non-controversial’’ rule
change under paragraph (f)(6) of Rule
19b–4 under the Act,3 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend the
Trade Reporting and Compliance Engine
(‘‘TRACE’’) dissemination protocols to
provide a limited exception to
dissemination requirements for certain
Agency Pass-Through Mortgage BackedSecurities (‘‘MBS’’) and Asset-Backed
Securities (‘‘ABS’’) backed by loans
guaranteed as to principal and interest
by the Small Business Administration
(‘‘SBA-Backed ABS’’) traded in
Specified Pool Transactions
(collectively, ‘‘MBS and SBA-Backed
ABS Specified Pool Transactions’’) that
are reported late and to clarify that
FINRA will disseminate an MBS or
SBA-Backed ABS Specified Pool
Transaction in instances where some
but not all of the data elements are
available and input in the TRACE
System when the transaction is
reported.4
The proposed rule change makes no
changes to the rule text.
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 August 29, 2012, FINRA filed SR–
FINRA–2012–042, a proposed rule
change to amend FINRA Rule 6750 and
3 17
CFR 240.19b–4(f)(6).
terms Agency Pass-Through MortgageBacked Security, Asset-Backed Security, and
Specified Pool Transaction are defined in FINRA
Rule 6710(v), FINRA Rule 6710(m), and FINRA
Rule 6710(x), respectively. The dissemination
requirements were approved and will become
effective on July 22, 2013. See note 5.
4 The
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certain dissemination protocols to
disseminate information on MBS and
SBA-Backed ABS Specified Pool
Transactions immediately upon receipt
of a transaction report (the ‘‘Specified
Pool Filing’’).5 On October 23, 2012, the
SEC approved the Specified Pool
Filing.6 In December 2012, FINRA
issued Regulatory Notice 12–56,
announcing July 22, 2013 as the
effective date for the dissemination of
MBS and SBA-Backed ABS Specified
Pool Transactions, and briefly
describing information (hereinafter,
‘‘data elements’’) to be disseminated for
such transactions.7
FINRA proposes to amend the TRACE
dissemination protocols to provide a
limited exception to dissemination
requirements for certain MBS and SBABacked ABS Specified Pool
Transactions that are reported late in
circumstances where dissemination may
mislead or confuse investors and other
market participants. In addition, the
proposal would clarify that an MBS or
SBA-Backed ABS Specified Pool
Transaction will be disseminated at the
time of reporting, in instances where
some but not all of the data elements are
available and input in the TRACE
System when the transaction is
reported, to make transparent those data
elements that are available at the time
of reporting.
Background. MBS and SBA-Backed
ABS Specified Pool Transactions, which
currently are required to be reported to
TRACE, will be disseminated effective
July 22, 2013. The dissemination
protocols for MBS and SBA-Backed ABS
Specified Pool Transactions will differ
from the dissemination protocols that
currently are used to disseminate other
types of TRACE-Eligible Securities.8
In dissemination protocols currently
in use, the transaction information is
disseminated together with the CUSIP of
5 See Securities Exchange Act Release No. 68084
(October 23, 2012), 77 FR 65436 (October 26, 2012)
(SEC Order Approving File No. SR–FINRA–2012–
042 to provide for, among other things, the
dissemination of MBS and SBA-Backed ABS
Specified Pool Transactions and SBA-Backed ABS
traded To Be Announced (‘‘TBA’’)). (The proposed
rule change does not propose to amend
dissemination requirements of SBA-Backed ABS
traded TBA that were approved in the Specified
Pool Filing.)
6 See note 5.
7 See Regulatory Notice 12–56 (announcing July
22, 2013 as the effective date of SR–FINRA–2012–
042, and, in Attachment A thereto, describing
certain data elements).
8 Currently, the data elements that are displayed
by TRACE upon dissemination of a transaction in
a TRACE-Eligible Security include, among other
things, CUSIP, time of transaction, size (subject to
dissemination caps), price, counterparty type
(customer or dealer), and buy/sell indicator. The
term TRACE-Eligible Security is defined in FINRA
Rule 6710(a).
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15:13 Jun 10, 2013
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the security. The CUSIP may be crossreferenced with a file that contains
certain reference data, such as issuer,
coupon and maturity date. When
disseminating information regarding an
MBS or SBA-Backed ABS Specified
Pool Transaction, the CUSIP will not be
displayed, as described in the Specified
Pool Filing and Regulatory Notice 12–
56.9 FINRA instead will disseminate an
identifier (a ‘‘reference data identifier’’
or ‘‘RDID’’), which similarly may be
cross-referenced with a file that contains
certain data elements that describe the
security (e.g., type of issuer) and
provide information about
characteristics of the Specified Pool at
the Time of Execution (e.g., the WAM of
the various credit instruments
constituting the pool).10
In contrast to a CUSIP, which is
constant over the life of the security, an
MBS or SBA-Backed ABS Specified
Pool will be identified by and mapped
by the TRACE system to different RDIDs
over the life of the security. This is due
primarily to the amortization of the
securities. Ordinarily, the values of
several of the data elements constituting
the RDID (such as WAC and WAM) will
change approximately once a month,
when the GSEs and agencies (e.g., the
Federal National Mortgage Association
(‘‘Fannie Mae’’), Federal Home Loan
Mortgage Corporation (‘‘Freddie Mac’’),
Government National Mortgage
Association (‘‘Ginnie Mae’’) and the
SBA) publish updated data based on the
payments made on the underlying debt
and the amortization of such
securities.11 Thus, an MBS or SBABacked ABS Specified Pool will be
identified by and mapped by the TRACE
9 For example, for an MBS Specified Pool
Transaction, some of the data elements to be
provided to evaluate pricing include: (a) coupon; (b)
weighted average coupon (‘‘WAC’’); (c) original
maturity; (d) weighted average maturity (‘‘WAM’’);
(e) original loan-to-value (‘‘original LTV’’); (f) the
average loan size (‘‘ALS’’); and (g) weighted average
loan age (‘‘WALA’’). These data elements will be
displayed as rounded and truncated values. In
addition, to identify the type of security traded, in
lieu of the CUSIP, FINRA will include data
elements that identify the pool by agency or
government-sponsored-enterprise (‘‘GSE’’), product
type and amortization type. See the Specified Pool
Filing and Regulatory Notice 12–56, Attachment A,
for a more detailed description of the data elements
to be used in disseminating information about MBS
and SBA-Backed ABS Specified Pool Transactions.
10 The term ‘‘Time of Execution’’ is defined in
FINRA Rule 6710(d).
11 FINRA notes that, in connection with a specific
MBS or SBA-Backed ABS Specified Pool, an RDID
may be superseded by a subsequent RDID more
frequently than monthly if any of the values of the
data elements change (except a change so minor
that the truncated and rounded number does not
change, as explained in note 9). For example, an
RDID may be superseded at any time to correct
inaccurate data elements provided to FINRA by the
agency, FINRA’s reference data provider, or a
member.
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
35079
system to only one RDID at a given
point in time, but will be identified by
and mapped to various RDIDs over the
life of the security as the values of the
data elements are updated.12 In
disseminated data, market participants
will cross-reference the RDID with a file
that contains the corresponding values
of the data elements for the security at
the Time of Execution of the MBS or
SBA-Backed ABS Specified Pool
Transaction.
The dissemination protocol to provide
an RDID that market participants will
use to cross-reference a file that contains
the data elements was developed by
FINRA because it will be impractical to
disseminate directly and immediately
upon receiving a TRACE transaction
report the multiple data elements that
describe a particular MBS or SBABacked ABS Specified Pool. As a result
of this new dissemination protocol, the
TRACE system will maintain vast
amounts of past and current
information. The TRACE system will
store as readily accessible (for
transaction processing purposes,
including real-time dissemination) the
most current version of the RDID (the
RDID that identifies and maps to the
current MBS or SBA-Backed ABS
Specified Pool) and one prior version.
However, the TRACE system will
archive all prior RDID versions, and
although the archived RDIDs will be
available for regulatory purposes, they
will not be available to be displayed in
real-time disseminated data.
Proposal. FINRA proposes to modify
TRACE dissemination protocols to
provide a limited exception to the
dissemination of MBS or SBA-Backed
ABS Specified Pool Transactions when
two conditions are present: the MBS or
SBA-Backed ABS Specified Pool
Transaction is reported late and the
RDID (i.e., the version of RDID that is
applicable at the Time of Execution of
the transaction) has been archived by
the TRACE system. Such transactions
would not be disseminated because the
applicable RDID, if archived, is not
available to be displayed in
disseminated data.13 This would
12 On a specific date in connection with a specific
MBS or SBA-Backed ABS Specified Pool, (such as
the date of execution of a transaction in a specific
MBS or SBA-Backed ABS Specified Pool), only one
RDID will identify and map to the particular MBS
or SBA-Backed ABS Specified Pool. In many cases,
however, on a specific date a single RDID may
identify and map to more than one MBS or SBABacked ABS Specified Pool, because the values of
certain data elements are rounded or truncated.
13 For example, assume that a GSE or agency
typically publishes updated information regarding
an MBS or SBA-Backed ABS Specified Pool
monthly on the sixth day, that the date and Time
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happen if the Time of Execution of the
transaction reported is prior to the
applicable start date of both the current
and the previous RDID.14 FINRA
believes that if an RDID is displayed in
disseminated data, the RDID must be the
one in effect at the Time of Execution
of a transaction, not the time of
reporting. If the relevant RDID is
archived and a subsequent version of
the RDID were used to disseminate the
transaction for the sake of disseminating
all transactions in an MBS or SBABacked ABS Specified Pool, the data
disseminated, such as the values for
WAC and WAM, would not correspond
to the data values (e.g., such as WAC
and WAM), that are accurate as of the
Time of Execution, and may mislead
and confuse investors and market
participants. FINRA recognizes that
given the amortization of MBS and SBABacked ABS Specified Pools, to provide
meaningful transparency for MBS or
SBA-Backed ABS Specified Pool
Transactions, the data elements
applicable at the Time of Execution
must be the data elements crossreferenced by any RDID that is
disseminated by TRACE to characterize
accurately the security [sic] the subject
of the transaction. If such RDID is not
available for dissemination, the
transaction should not be disseminated.
The proposed amendments to the
TRACE dissemination protocols will
allow the dissemination of almost all
MBS or SBA-Backed ABS Specified
Pool Transactions to proceed while
of Execution of a MBS or SBA-Backed ABS
Specified Pool Transaction is 1:00 p.m. on
September 5, 2013, and that the transaction is
reported late (or ‘‘as/of’’) on October 7, 2013.
As noted above, the version of the RDID that must
be used in the disseminated data is the RDID in
effect at the Time of Execution. In this case, the
RDID on August 6, 2013 is the applicable RDID for
the September 5, 2013 transaction. This August 6
RDID was superseded by the RDID on September 6,
2013 (as a result of the monthly updates of the data
elements) and superseded again on October 6, 2013
(again, due to the monthly updates). On October 6,
2013, the August 6 RDID must be archived, and is
no longer available to be disseminated (the TRACE
system would retain the October 6 RDID and the
September 6 RDID). Thus, when the September 5,
2013 transaction is reported late on October 7, 2013
and the applicable August 6 RDID has been
archived, the late reported transaction cannot be
disseminated with an RDID that would crossreference accurate data. If FINRA were to
disseminate the transaction in the above example,
which was priced based upon the security
characteristics of the MBS or SBA-Backed ABS
Specified Pool that were valid at the time the
August 6 RDID was the applicable RDID, by
disseminating either the September 6 or October 6
RDID, market participants would be misled by the
disseminated RDID and the inaccurate information
that such RDID would cross-reference.
14 FINRA’s ability to surveil the market for such
transactions will not be affected, as the transaction
is available for review by FINRA Market Regulation
staff. In addition, the transaction will be available
in the historical data.
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15:13 Jun 10, 2013
Jkt 229001
providing notice that, in rare
circumstances, a limited number of
transactions will not be disseminated.15
The proposed rule change will not alter
a member’s obligation to report timely
MBS or SBA-Backed ABS Specified
Pool Transactions and FINRA’s
surveillance of the market and member
reporting practices will not be affected.
FINRA will continue to have access to
all reported transactions. All
information, including the superseded
versions of RDID, will be archived and
available at any time for surveillance
purposes to review the trading and
pricing of MBS or SBA-Backed ABS
Specified Pool Transactions and
correlated TBA transactions.16 Finally,
all transaction information will be
maintained in Historic TRACE Data 17
and be available, following the aging of
such transactions, as provided in FINRA
Rule 7730.
FINRA is also proposing to clarify the
dissemination protocols to indicate that
FINRA will disseminate an MBS or
SBA-Backed ABS Specified Pool
Transaction immediately upon receipt
of the transaction report in instances
where some but not all of the data
elements are available and input in the
TRACE System when the transaction is
reported. FINRA will make transparent
the data elements that are available at
the time the transaction is reported.
As noted above, FINRA previously
published a list of certain data elements
that would be accessible in lieu of a
CUSIP to provide transparency for MBS
and SBA-Backed ABS Specified Pool
Transactions. However, an MBS or SBABacked ABS Specified Pool Transaction
may occur and be reported to TRACE
prior to the receipt and input to the
TRACE system of all of the data
elements described previously.18 FINRA
15 Based on a review of the rate of late transaction
reporting in MBS and SBA-Backed ABS Specified
Pool Transactions, FINRA believes that a limited
number of transactions will be not be disseminated.
In 2012, approximately 0.1% of all reported MBS
and SBA-Backed ABS Specified Pool Transactions
were reported late such that FINRA would not be
able to disseminate the transaction.
16 For example, FINRA will surveil to identify
patterns of late reporting in MBS and SBA-Backed
ABS Specified Pool Transactions, alone, or with
correlated TBA transactions.
17 FINRA currently provides access to aged
transaction-level data for a fee. Historic TRACE
Data is defined in FINRA Rule 7730(f)(4) and is
delayed a minimum of 18 months.
18 This may occur if a GSE or an agency has not
published a data element with respect to a specified
MBS or SBA-Backed ABS Specified Pool. FINRA
notes that certain data elements are not available for
some MBS because the GSE or agency only recently
started providing such information (e.g., Fannie
Mae began publishing weighted average original
LTVs for its MBS in 2003, and Ginnie Mae began
to do so in 2004), and the GSE and agencies do not
make such information available for MBS they
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
clarifies the dissemination protocols to
provide that, in such cases, FINRA will
disseminate information on an MBS or
a SBA-Backed ABS Specified Pool
Transaction, by disseminating an RDID
that cross-references a file that contains
the data elements that the TRACE
system has received regarding that
security as of the Time of Execution.
The value provided by making the
transaction information available and
transparent outweighs any negative
impact of disseminating a transaction
for which not all of the data elements
are available.
FINRA has filed the proposed rule
change for immediate effectiveness. The
implementation date of the proposed
rule change will be the first day on
which MBS and SBA-Backed ABS
Specified Pool Transactions will be
disseminated.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,19 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. The public
dissemination of information on MBS
and SBA-Backed ABS Specified Pool
Transactions immediately upon receipt
of a transaction will provide
transparency to the MBS and SBABacked ABS Specified Pool market for
the first time, and given the correlation
between the pricing of such Specified
Pool Transactions and TBAs, also will
enhance the information available to the
public and investors regarding the
pricing of TBA transactions. FINRA
believes that the additional
transparency in these two segments of
the ABS market will promote just and
equitable principles of trade for the
benefit of investors, the public and
market participants, and will aid in the
prevention of fraudulent and
manipulative acts and practices. FINRA
believes that the approach to
disseminating MBS and SBA-Backed
ABS Specified Pool Transactions using
a new and substantially more complex
methodology strikes a balance between
providing transparency for such
securities transactions and addressing
concerns regarding anonymity
expressed by both buy and sell-side
market participants. The proposed rule
issued prior to the applicable date. This also may
occur when the information is not provided timely
or accurately to FINRA by the GSE or agency, a
reference data provider, or, a member.
19 15 U.S.C. 78o–3(b)(6).
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change to provide a limited exception to
the dissemination of all MBS or SBABacked ABS Specified Pool
Transactions will permit the broad
dissemination initiative to begin, in
furtherance of the public interest, the
protection of investors, and just and
equitable principles of trade, while
providing notice that a limited number
of MBS or SBA-Backed ABS Specified
Pool Transactions, if reported late and
for which the applicable RDID has been
archived, will not be disseminated.20
Further, the proposed rule change is in
furtherance of the prevention of
fraudulent and manipulative acts and
practices because FINRA will continue
to engage in surveillance of late
transaction reporting and enforce a
member’s obligation to timely report to
deter and address conduct that may
interfere with the timely dissemination
of transaction information.
In addition, FINRA believes that
disseminating an MBS or SBA-Backed
ABS Specified Pool Transaction
immediately upon receipt of the
transaction report in instances where
some but not all of the data elements are
available at the time the transaction is
reported is consistent with providing
additional transparency because the
occurrence of such modified transaction
dissemination will be limited and it
provides information to the market to
the extent it is available. Further FINRA
believes the proposed additional
transparency enhances the ability of
investors and other market participants
to identify and negotiate fair and
competitive prices for such securities,
aids in the prevention of fraudulent and
manipulative acts and practices in the
market in such securities, and is in
furtherance of just and equitable
principles of trade.
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. The
proposed amendments to the
dissemination protocols are appropriate
given the value of providing
transparency in the market for MBS and
SBA-Backed ABS Specified Pool
Transactions, when weighed against the
limited exception and modifications
that FINRA proposes. FINRA’s proposal
to amend the dissemination protocols
and proceed as scheduled on July 22,
2013, with the dissemination of MBS
and SBA-Backed ABS Specified Pool
Transactions, provides transparency in a
20 See
note 15.
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15:13 Jun 10, 2013
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market sector for the first time, which
may foster more competitive,
negotiated, and fairer pricing of such
transactions among members,
institutional investors and other
investors, and, in some cases, may result
in lower prices for investors.
Also, FINRA does not believe that the
proposed rule change would result in
any differential impact on members or
data recipients. FINRA’s surveillance
and enforcement of a member’s
obligation to timely report would apply
equally to all members. FINRA will
surveil for late reporting of MBS or
SBA-Backed ABS Specified Pool
Transactions, especially late reporting
that results in the non-dissemination of
one or more MBS or SBA-Backed ABS
Specified Pool Transactions and may
provide a competitive advantage, and
will enforce rigorously all member
obligations, including timely reporting,
to address such conduct and deter other
members from engaging in such activity.
In addition, all members would
continue to be subject to transaction
reporting fees, including late fees, and
any member that reported MBS or SBABacked ABS Specified Pool
Transactions late would be liable for
late trade reporting fees under FINRA
Rule 7730(b)(3). The proposed limited
exception to dissemination also would
not have a differential impact on data
recipients, in that all data recipients
would receive the same information.
Finally, FINRA’s clarification that it
will disseminate a MBS or SBA-Backed
ABS Specified Pool Transaction
immediately upon receipt of a
transaction report in instances where
some but not all of the data elements are
available when the transaction is
reported, provides notice of a
dissemination practice that will have no
differential impact in that all data
recipients will receive the same
information.
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
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
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Frm 00108
Fmt 4703
Sfmt 4703
35081
19(b)(3)(A) of the Act 21 and Rule 19b–
4(f)(6) thereunder.22
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 email to rulecomments@sec.gov. Please include File
Number SR–FINRA–2013–022 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–2013–022. 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
21 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. FINRA has
satisfied this requirement.
22 17
E:\FR\FM\11JNN1.SGM
11JNN1
35082
Federal Register / Vol. 78, No. 112 / Tuesday, June 11, 2013 / Notices
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 FINRA. All comments received
will be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FINRA–
2013–022 and should be submitted on
or before July 2, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–13774 Filed 6–10–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69701; File No. SR–CHX–
2013–11]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change To Amend
the Order Cancellation Fee
June 5, 2012.
wreier-aviles on DSK5TPTVN1PROD with NOTICES
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on May 31,
2013, the Chicago Stock Exchange, Inc.
(‘‘CHX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the self-regulatory organization. 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 the Substance
of the Proposed Rule Change
CHX proposes to amend its Schedule
of Participant Fees and Assessments
(the ‘‘Fee Schedule’’) to amend the
Order Cancellation Fee. The Exchange
proposes to implement the fee change
on June 3, 2013. The text of this
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
VerDate Mar<15>2010
15:13 Jun 10, 2013
Jkt 229001
proposed rule change is available on the
Exchange’s Web site at https://
www.chx.com/rules/
proposed_rules.htm, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Section E.8 of the Fee Schedule to
change the value of the Near order
multiplier (‘‘Nmult’’) from two (2) to four
(4) for all security-types and to replace
an obsolete citation. Under SR–CHX–
2012–15, the Exchange adopted the
current formula-based Order
Cancellation Fee, which assesses a daily
cancellation fee per Account Symbol,4 if
the order cancellation ratio exceeds a
designated threshold.5 In addition, the
Exchange adopted security-type specific
parameter values, such as the Nmult, in
order to permit the Exchange to make
adjustments to ensure equitable
application of the Order Cancellation
Fee.6 To this end, the Exchange noted in
footnote 10 of SR–CHX–2012–15 that
‘‘changes to any of the proposed
parameter values, including Order
Cancellation Fee, Cancellation Ratio,
Threshold Away Amount, Minimum
Duration and Nmult, will be made
through proposed fee filings pursuant to
Rule 19b–4.’’ 7
The Nmult, was adopted because the
Exchange recognized that, inter alia,
Wide orders (i.e. orders that are less
marketable), as well as Near orders (i.e.
orders that are more marketable), can be
4 A CHX ‘‘Account Symbol’’ is similar to the
Market Participant Identifiers (‘‘MPID’’) issued by
the Financial Industry Regulatory Authority.
5 See Securities Exchange Act Release No. 68219
(November 13, 2012), 77 FR 69673 (November 20,
2012) (SR–CHX–2012–15); see also Section E.8 of
the Fee Schedule.
6 Id.
7 Id.
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Frm 00109
Fmt 4703
Sfmt 4703
utilized to promote display liquidity.
Thus, the purpose of the Nmult is to
allow the Exchange to multiply the
mitigating affect of Near orders on Wide
orders and by extension, the overall
order cancellation ratio. Practically
speaking, a higher Nmult, will result in a
lower order cancellation ratio and
thereby allow more Wide orders to be
placed before an order cancellation fee
is assessed.
Based on an analysis of nearly seven
months of data, the Exchange has
determined that the Nmult of two (2) is
overly restrictive. For instance, the
Exchange observed that a Participant
was submitting and cancelling a
significant number of Wide orders as
part of a trading strategy designed to
follow rapid changes to the National
Best Bid and Offer (‘‘NBBO’’). When
these cancellations were viewed within
the totality of the trading strategy, the
Exchange discovered that the Wide
order cancellations were necessary to
provide valuable display liquidity to the
Exchange. After analyzing the trading
activity of this Participant and other
Participants, the Exchange determined
that by increasing the Nmult value to four
(4) for all security-types, the application
of the Order Cancellation Fee will be
adequately relaxed to better promote
display liquidity. Consequently, the
Exchange has decided to forego some
Order Cancellation Fees that would be
lost by increasing the Nmult in favor of
promoting display liquidity.
Moreover, the Exchange proposes to
replace an obsolete citation to the ‘‘Do
Not Display’’ order display modifier
with the correct citation to Article 1,
Rule 2(c)(2).
The Exchange proposes to make these
amendments to Section E.8 effective
June 3, 2013. The formula by which the
cancellation fee is derived shall
continue to be calculated and made
available to Participants daily, but billed
after the end of the month.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act 8 in general, and
furthers the objectives of Section 6(b)(4)
of the Act 9 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and other persons
using any facility or system which the
Exchange operates or controls. The
Exchange believes that the amendment
to the Nmult described herein should
help to recoup some of the costs of
administering and processing large
8 15
9 15
E:\FR\FM\11JNN1.SGM
U.S.C. 78f.
U.S.C. 78f(b)(4).
11JNN1
]]>Agencies
[Federal Register Volume 78, Number 112 (Tuesday, June 11, 2013)]
[Notices]
[Pages 35078-35082]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-13774]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69702; File No. SR-FINRA-2013-022]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to Dissemination of Agency-Pass Through
Mortgage-Backed Securities and SBA-Backed Asset-Backed Securities
Traded in Specified Pool Transactions
June 5, 2013.
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 May 24, 2013, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by FINRA. FINRA has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ 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\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend the Trade Reporting and Compliance
Engine (``TRACE'') dissemination protocols to provide a limited
exception to dissemination requirements for certain Agency Pass-Through
Mortgage Backed-Securities (``MBS'') and Asset-Backed Securities
(``ABS'') backed by loans guaranteed as to principal and interest by
the Small Business Administration (``SBA-Backed ABS'') traded in
Specified Pool Transactions (collectively, ``MBS and SBA-Backed ABS
Specified Pool Transactions'') that are reported late and to clarify
that FINRA will disseminate an MBS or SBA-Backed ABS Specified Pool
Transaction in instances where some but not all of the data elements
are available and input in the TRACE System when the transaction is
reported.\4\
---------------------------------------------------------------------------
\4\ The terms Agency Pass-Through Mortgage-Backed Security,
Asset-Backed Security, and Specified Pool Transaction are defined in
FINRA Rule 6710(v), FINRA Rule 6710(m), and FINRA Rule 6710(x),
respectively. The dissemination requirements were approved and will
become effective on July 22, 2013. See note 5.
---------------------------------------------------------------------------
The proposed rule change makes no changes to the rule text.
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 August 29, 2012, FINRA filed SR-FINRA-2012-042, a proposed rule
change to amend FINRA Rule 6750 and
[[Page 35079]]
certain dissemination protocols to disseminate information on MBS and
SBA-Backed ABS Specified Pool Transactions immediately upon receipt of
a transaction report (the ``Specified Pool Filing'').\5\ On October 23,
2012, the SEC approved the Specified Pool Filing.\6\ In December 2012,
FINRA issued Regulatory Notice 12-56, announcing July 22, 2013 as the
effective date for the dissemination of MBS and SBA-Backed ABS
Specified Pool Transactions, and briefly describing information
(hereinafter, ``data elements'') to be disseminated for such
transactions.\7\
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\5\ See Securities Exchange Act Release No. 68084 (October 23,
2012), 77 FR 65436 (October 26, 2012) (SEC Order Approving File No.
SR-FINRA-2012-042 to provide for, among other things, the
dissemination of MBS and SBA-Backed ABS Specified Pool Transactions
and SBA-Backed ABS traded To Be Announced (``TBA'')). (The proposed
rule change does not propose to amend dissemination requirements of
SBA-Backed ABS traded TBA that were approved in the Specified Pool
Filing.)
\6\ See note 5.
\7\ See Regulatory Notice 12-56 (announcing July 22, 2013 as the
effective date of SR-FINRA-2012-042, and, in Attachment A thereto,
describing certain data elements).
---------------------------------------------------------------------------
FINRA proposes to amend the TRACE dissemination protocols to
provide a limited exception to dissemination requirements for certain
MBS and SBA-Backed ABS Specified Pool Transactions that are reported
late in circumstances where dissemination may mislead or confuse
investors and other market participants. In addition, the proposal
would clarify that an MBS or SBA-Backed ABS Specified Pool Transaction
will be disseminated at the time of reporting, in instances where some
but not all of the data elements are available and input in the TRACE
System when the transaction is reported, to make transparent those data
elements that are available at the time of reporting.
Background. MBS and SBA-Backed ABS Specified Pool Transactions,
which currently are required to be reported to TRACE, will be
disseminated effective July 22, 2013. The dissemination protocols for
MBS and SBA-Backed ABS Specified Pool Transactions will differ from the
dissemination protocols that currently are used to disseminate other
types of TRACE-Eligible Securities.\8\
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\8\ Currently, the data elements that are displayed by TRACE
upon dissemination of a transaction in a TRACE-Eligible Security
include, among other things, CUSIP, time of transaction, size
(subject to dissemination caps), price, counterparty type (customer
or dealer), and buy/sell indicator. The term TRACE-Eligible Security
is defined in FINRA Rule 6710(a).
---------------------------------------------------------------------------
In dissemination protocols currently in use, the transaction
information is disseminated together with the CUSIP of the security.
The CUSIP may be cross-referenced with a file that contains certain
reference data, such as issuer, coupon and maturity date. When
disseminating information regarding an MBS or SBA-Backed ABS Specified
Pool Transaction, the CUSIP will not be displayed, as described in the
Specified Pool Filing and Regulatory Notice 12-56.\9\ FINRA instead
will disseminate an identifier (a ``reference data identifier'' or
``RDID''), which similarly may be cross-referenced with a file that
contains certain data elements that describe the security (e.g., type
of issuer) and provide information about characteristics of the
Specified Pool at the Time of Execution (e.g., the WAM of the various
credit instruments constituting the pool).\10\
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\9\ For example, for an MBS Specified Pool Transaction, some of
the data elements to be provided to evaluate pricing include: (a)
coupon; (b) weighted average coupon (``WAC''); (c) original
maturity; (d) weighted average maturity (``WAM''); (e) original
loan-to-value (``original LTV''); (f) the average loan size
(``ALS''); and (g) weighted average loan age (``WALA''). These data
elements will be displayed as rounded and truncated values. In
addition, to identify the type of security traded, in lieu of the
CUSIP, FINRA will include data elements that identify the pool by
agency or government-sponsored-enterprise (``GSE''), product type
and amortization type. See the Specified Pool Filing and Regulatory
Notice 12-56, Attachment A, for a more detailed description of the
data elements to be used in disseminating information about MBS and
SBA-Backed ABS Specified Pool Transactions.
\10\ The term ``Time of Execution'' is defined in FINRA Rule
6710(d).
---------------------------------------------------------------------------
In contrast to a CUSIP, which is constant over the life of the
security, an MBS or SBA-Backed ABS Specified Pool will be identified by
and mapped by the TRACE system to different RDIDs over the life of the
security. This is due primarily to the amortization of the securities.
Ordinarily, the values of several of the data elements constituting the
RDID (such as WAC and WAM) will change approximately once a month, when
the GSEs and agencies (e.g., the Federal National Mortgage Association
(``Fannie Mae''), Federal Home Loan Mortgage Corporation (``Freddie
Mac''), Government National Mortgage Association (``Ginnie Mae'') and
the SBA) publish updated data based on the payments made on the
underlying debt and the amortization of such securities.\11\ Thus, an
MBS or SBA-Backed ABS Specified Pool will be identified by and mapped
by the TRACE system to only one RDID at a given point in time, but will
be identified by and mapped to various RDIDs over the life of the
security as the values of the data elements are updated.\12\ In
disseminated data, market participants will cross-reference the RDID
with a file that contains the corresponding values of the data elements
for the security at the Time of Execution of the MBS or SBA-Backed ABS
Specified Pool Transaction.
---------------------------------------------------------------------------
\11\ FINRA notes that, in connection with a specific MBS or SBA-
Backed ABS Specified Pool, an RDID may be superseded by a subsequent
RDID more frequently than monthly if any of the values of the data
elements change (except a change so minor that the truncated and
rounded number does not change, as explained in note 9). For
example, an RDID may be superseded at any time to correct inaccurate
data elements provided to FINRA by the agency, FINRA's reference
data provider, or a member.
\12\ On a specific date in connection with a specific MBS or
SBA-Backed ABS Specified Pool, (such as the date of execution of a
transaction in a specific MBS or SBA-Backed ABS Specified Pool),
only one RDID will identify and map to the particular MBS or SBA-
Backed ABS Specified Pool. In many cases, however, on a specific
date a single RDID may identify and map to more than one MBS or SBA-
Backed ABS Specified Pool, because the values of certain data
elements are rounded or truncated.
---------------------------------------------------------------------------
The dissemination protocol to provide an RDID that market
participants will use to cross-reference a file that contains the data
elements was developed by FINRA because it will be impractical to
disseminate directly and immediately upon receiving a TRACE transaction
report the multiple data elements that describe a particular MBS or
SBA-Backed ABS Specified Pool. As a result of this new dissemination
protocol, the TRACE system will maintain vast amounts of past and
current information. The TRACE system will store as readily accessible
(for transaction processing purposes, including real-time
dissemination) the most current version of the RDID (the RDID that
identifies and maps to the current MBS or SBA-Backed ABS Specified
Pool) and one prior version. However, the TRACE system will archive all
prior RDID versions, and although the archived RDIDs will be available
for regulatory purposes, they will not be available to be displayed in
real-time disseminated data.
Proposal. FINRA proposes to modify TRACE dissemination protocols to
provide a limited exception to the dissemination of MBS or SBA-Backed
ABS Specified Pool Transactions when two conditions are present: the
MBS or SBA-Backed ABS Specified Pool Transaction is reported late and
the RDID (i.e., the version of RDID that is applicable at the Time of
Execution of the transaction) has been archived by the TRACE system.
Such transactions would not be disseminated because the applicable
RDID, if archived, is not available to be displayed in disseminated
data.\13\ This would
[[Page 35080]]
happen if the Time of Execution of the transaction reported is prior to
the applicable start date of both the current and the previous
RDID.\14\ FINRA believes that if an RDID is displayed in disseminated
data, the RDID must be the one in effect at the Time of Execution of a
transaction, not the time of reporting. If the relevant RDID is
archived and a subsequent version of the RDID were used to disseminate
the transaction for the sake of disseminating all transactions in an
MBS or SBA-Backed ABS Specified Pool, the data disseminated, such as
the values for WAC and WAM, would not correspond to the data values
(e.g., such as WAC and WAM), that are accurate as of the Time of
Execution, and may mislead and confuse investors and market
participants. FINRA recognizes that given the amortization of MBS and
SBA-Backed ABS Specified Pools, to provide meaningful transparency for
MBS or SBA-Backed ABS Specified Pool Transactions, the data elements
applicable at the Time of Execution must be the data elements cross-
referenced by any RDID that is disseminated by TRACE to characterize
accurately the security [sic] the subject of the transaction. If such
RDID is not available for dissemination, the transaction should not be
disseminated.
---------------------------------------------------------------------------
\13\ For example, assume that a GSE or agency typically
publishes updated information regarding an MBS or SBA-Backed ABS
Specified Pool monthly on the sixth day, that the date and Time of
Execution of a MBS or SBA-Backed ABS Specified Pool Transaction is
1:00 p.m. on September 5, 2013, and that the transaction is reported
late (or ``as/of'') on October 7, 2013.
As noted above, the version of the RDID that must be used in the
disseminated data is the RDID in effect at the Time of Execution. In
this case, the RDID on August 6, 2013 is the applicable RDID for the
September 5, 2013 transaction. This August 6 RDID was superseded by
the RDID on September 6, 2013 (as a result of the monthly updates of
the data elements) and superseded again on October 6, 2013 (again,
due to the monthly updates). On October 6, 2013, the August 6 RDID
must be archived, and is no longer available to be disseminated (the
TRACE system would retain the October 6 RDID and the September 6
RDID). Thus, when the September 5, 2013 transaction is reported late
on October 7, 2013 and the applicable August 6 RDID has been
archived, the late reported transaction cannot be disseminated with
an RDID that would cross-reference accurate data. If FINRA were to
disseminate the transaction in the above example, which was priced
based upon the security characteristics of the MBS or SBA-Backed ABS
Specified Pool that were valid at the time the August 6 RDID was the
applicable RDID, by disseminating either the September 6 or October
6 RDID, market participants would be misled by the disseminated RDID
and the inaccurate information that such RDID would cross-reference.
\14\ FINRA's ability to surveil the market for such transactions
will not be affected, as the transaction is available for review by
FINRA Market Regulation staff. In addition, the transaction will be
available in the historical data.
---------------------------------------------------------------------------
The proposed amendments to the TRACE dissemination protocols will
allow the dissemination of almost all MBS or SBA-Backed ABS Specified
Pool Transactions to proceed while providing notice that, in rare
circumstances, a limited number of transactions will not be
disseminated.\15\ The proposed rule change will not alter a member's
obligation to report timely MBS or SBA-Backed ABS Specified Pool
Transactions and FINRA's surveillance of the market and member
reporting practices will not be affected. FINRA will continue to have
access to all reported transactions. All information, including the
superseded versions of RDID, will be archived and available at any time
for surveillance purposes to review the trading and pricing of MBS or
SBA-Backed ABS Specified Pool Transactions and correlated TBA
transactions.\16\ Finally, all transaction information will be
maintained in Historic TRACE Data \17\ and be available, following the
aging of such transactions, as provided in FINRA Rule 7730.
---------------------------------------------------------------------------
\15\ Based on a review of the rate of late transaction reporting
in MBS and SBA-Backed ABS Specified Pool Transactions, FINRA
believes that a limited number of transactions will be not be
disseminated. In 2012, approximately 0.1% of all reported MBS and
SBA-Backed ABS Specified Pool Transactions were reported late such
that FINRA would not be able to disseminate the transaction.
\16\ For example, FINRA will surveil to identify patterns of
late reporting in MBS and SBA-Backed ABS Specified Pool
Transactions, alone, or with correlated TBA transactions.
\17\ FINRA currently provides access to aged transaction-level
data for a fee. Historic TRACE Data is defined in FINRA Rule
7730(f)(4) and is delayed a minimum of 18 months.
---------------------------------------------------------------------------
FINRA is also proposing to clarify the dissemination protocols to
indicate that FINRA will disseminate an MBS or SBA-Backed ABS Specified
Pool Transaction immediately upon receipt of the transaction report in
instances where some but not all of the data elements are available and
input in the TRACE System when the transaction is reported. FINRA will
make transparent the data elements that are available at the time the
transaction is reported.
As noted above, FINRA previously published a list of certain data
elements that would be accessible in lieu of a CUSIP to provide
transparency for MBS and SBA-Backed ABS Specified Pool Transactions.
However, an MBS or SBA-Backed ABS Specified Pool Transaction may occur
and be reported to TRACE prior to the receipt and input to the TRACE
system of all of the data elements described previously.\18\ FINRA
clarifies the dissemination protocols to provide that, in such cases,
FINRA will disseminate information on an MBS or a SBA-Backed ABS
Specified Pool Transaction, by disseminating an RDID that cross-
references a file that contains the data elements that the TRACE system
has received regarding that security as of the Time of Execution. The
value provided by making the transaction information available and
transparent outweighs any negative impact of disseminating a
transaction for which not all of the data elements are available.
---------------------------------------------------------------------------
\18\ This may occur if a GSE or an agency has not published a
data element with respect to a specified MBS or SBA-Backed ABS
Specified Pool. FINRA notes that certain data elements are not
available for some MBS because the GSE or agency only recently
started providing such information (e.g., Fannie Mae began
publishing weighted average original LTVs for its MBS in 2003, and
Ginnie Mae began to do so in 2004), and the GSE and agencies do not
make such information available for MBS they issued prior to the
applicable date. This also may occur when the information is not
provided timely or accurately to FINRA by the GSE or agency, a
reference data provider, or, a member.
---------------------------------------------------------------------------
FINRA has filed the proposed rule change for immediate
effectiveness. The implementation date of the proposed rule change will
be the first day on which MBS and SBA-Backed ABS Specified Pool
Transactions will be disseminated.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\19\ 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. The public dissemination of information on MBS and
SBA-Backed ABS Specified Pool Transactions immediately upon receipt of
a transaction will provide transparency to the MBS and SBA-Backed ABS
Specified Pool market for the first time, and given the correlation
between the pricing of such Specified Pool Transactions and TBAs, also
will enhance the information available to the public and investors
regarding the pricing of TBA transactions. FINRA believes that the
additional transparency in these two segments of the ABS market will
promote just and equitable principles of trade for the benefit of
investors, the public and market participants, and will aid in the
prevention of fraudulent and manipulative acts and practices. FINRA
believes that the approach to disseminating MBS and SBA-Backed ABS
Specified Pool Transactions using a new and substantially more complex
methodology strikes a balance between providing transparency for such
securities transactions and addressing concerns regarding anonymity
expressed by both buy and sell-side market participants. The proposed
rule
[[Page 35081]]
change to provide a limited exception to the dissemination of all MBS
or SBA-Backed ABS Specified Pool Transactions will permit the broad
dissemination initiative to begin, in furtherance of the public
interest, the protection of investors, and just and equitable
principles of trade, while providing notice that a limited number of
MBS or SBA-Backed ABS Specified Pool Transactions, if reported late and
for which the applicable RDID has been archived, will not be
disseminated.\20\ Further, the proposed rule change is in furtherance
of the prevention of fraudulent and manipulative acts and practices
because FINRA will continue to engage in surveillance of late
transaction reporting and enforce a member's obligation to timely
report to deter and address conduct that may interfere with the timely
dissemination of transaction information.
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\19\ 15 U.S.C. 78o-3(b)(6).
\20\ See note 15.
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In addition, FINRA believes that disseminating an MBS or SBA-Backed
ABS Specified Pool Transaction immediately upon receipt of the
transaction report in instances where some but not all of the data
elements are available at the time the transaction is reported is
consistent with providing additional transparency because the
occurrence of such modified transaction dissemination will be limited
and it provides information to the market to the extent it is
available. Further FINRA believes the proposed additional transparency
enhances the ability of investors and other market participants to
identify and negotiate fair and competitive prices for such securities,
aids in the prevention of fraudulent and manipulative acts and
practices in the market in such securities, and is in furtherance of
just and equitable principles of trade.
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. The proposed amendments to the
dissemination protocols are appropriate given the value of providing
transparency in the market for MBS and SBA-Backed ABS Specified Pool
Transactions, when weighed against the limited exception and
modifications that FINRA proposes. FINRA's proposal to amend the
dissemination protocols and proceed as scheduled on July 22, 2013, with
the dissemination of MBS and SBA-Backed ABS Specified Pool
Transactions, provides transparency in a market sector for the first
time, which may foster more competitive, negotiated, and fairer pricing
of such transactions among members, institutional investors and other
investors, and, in some cases, may result in lower prices for
investors.
Also, FINRA does not believe that the proposed rule change would
result in any differential impact on members or data recipients.
FINRA's surveillance and enforcement of a member's obligation to timely
report would apply equally to all members. FINRA will surveil for late
reporting of MBS or SBA-Backed ABS Specified Pool Transactions,
especially late reporting that results in the non-dissemination of one
or more MBS or SBA-Backed ABS Specified Pool Transactions and may
provide a competitive advantage, and will enforce rigorously all member
obligations, including timely reporting, to address such conduct and
deter other members from engaging in such activity. In addition, all
members would continue to be subject to transaction reporting fees,
including late fees, and any member that reported MBS or SBA-Backed ABS
Specified Pool Transactions late would be liable for late trade
reporting fees under FINRA Rule 7730(b)(3). The proposed limited
exception to dissemination also would not have a differential impact on
data recipients, in that all data recipients would receive the same
information.
Finally, FINRA's clarification that it will disseminate a MBS or
SBA-Backed ABS Specified Pool Transaction immediately upon receipt of a
transaction report in instances where some but not all of the data
elements are available when the transaction is reported, provides
notice of a dissemination practice that will have no differential
impact in that all data recipients will receive the same information.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \21\ and Rule 19b-
4(f)(6) thereunder.\22\
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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
FINRA has satisfied this requirement.
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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 email to rule-comments@sec.gov. Please include
File Number SR-FINRA-2013-022 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-2013-022. 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
[[Page 35082]]
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 FINRA. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-FINRA-2013-022 and should be
submitted on or before July 2, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13774 Filed 6-10-13; 8:45 am]
BILLING CODE 8011-01-P
