Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Require Alternative Trading Systems To Report Volume Information to FINRA and Use Unique Market Participant Identifiers, 4213-4218 [2014-01395]
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Federal Register / Vol. 79, No. 16 / Friday, January 24, 2014 / Notices
substantive changes. The Commission
believes that these proposed changes
should better conform NASDAQ OMX’s
Charter and By-Laws with current
practice and legal requirements.
Further, the proposed non-substantive
clarifying changes should help to make
the Charter and By-Laws more current
and concise.50
IV. Conclusion
For the foregoing reasons, the
Commission finds that the proposed
rule changes are consistent with the Act
and the rules and regulations
thereunder applicable to a national
securities exchange, in the case of BX,
NASDAQ and Phlx, and to a registered
clearing agency, in the case of BSECC
and SCCP.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 51 that the
proposed rule changes (SR–BSECC–
2013–001; SR–BX–2013–057; SR–
NASDAQ–2013–148; SR-Phlx-2013–
115; SR–SCCP–2013–01) are approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.52
Kevin M. O’Neill,
Deputy Secretary .
[FR Doc. 2014–01406 Filed 1–23–14; 8:45 am]
TKELLEY on DSK3SPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
Compensation Committee is required to be
comprised of Independent Directors (as defined in
NASDAQ Rule 5605(a)(2)) and meet the additional
compensation committee requirements as set forth
in NASDAQ Rule 5605(d)(2). See also NASDAQ IM
5605–6, and Section 10C of the Act and Rule 10C–
1 thereunder.
50 As noted above, however, after the nonsubstantive changes, the SROs acknowledge that
remaining text of Article Fourth, Paragraph C(6) of
the Charter includes an obsolete cross-reference to
Section 6(b) of Article Fourth, Paragraph C in the
second sentence, which begins ‘‘The Board,
however, may not approve an exemption under
Section 6(b). . . .’’ See, e.g., NASDAQ Notice, 78
FR at 75620, at note 9. The Commission notes that
the SROs have committed that: (i) Under no
circumstances will NASDAQ OMX read the
obsolete cross-reference to imply that the Board
could grant an exemption to the ownership
limitation in Article Fourth, Paragraph C(6) of the
Charter for a registered broker or dealer or an
Affiliate thereof, or an individual or entity that is
subject to a statutory disqualification under Section
3(a)(39) of the Exchange Act; and (ii) as soon as
feasible, NASDAQ OMX plans to present a proposal
to the stockholders to conform this provision of the
Charter to the correct language in Section 12.5 of
the By-Laws.
51 15 U.S.C. 78s(b)(2).
52 17 CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71341; File No. SR–FINRA–
2013–042]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc; Notice of Filing of
Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment No. 1, To Require
Alternative Trading Systems To Report
Volume Information to FINRA and Use
Unique Market Participant Identifiers
January 17, 2014.
I. Introduction
On September 30, 2013, 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 each
alternative trading system (‘‘ATS’’) to
report transaction volume information
to FINRA and to obtain and use a
unique market participant identifier
(‘‘MPID’’) when reporting trade
information to FINRA. The proposed
rule change was published for comment
in the Federal Register on October 22,
2013.3 The Commission received ten
comments on the proposal.4
On December 4, 2013, FINRA granted
the Commission an extension of time to
act on the proposal until January 20,
2014. On January 15, 2014, FINRA filed
Amendment No. 1 with the Commission
to respond to the comment letters and
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 70676
(October 11, 2013), 78 FR 62862 (October 22, 2013)
(‘‘Notice of Original Proposal’’).
4 See Letters to the Commission from William
White, Head of Electronic Trading, Barclays Capital
Inc., dated November 12, 2013 (‘‘Barclays Letter’’);
Scott C. Goebel, Senior Vice President & Deputy
General Counsel, Fidelity Investments, dated
November 12, 2013 (‘‘Fidelity Letter’’); Manisha
Kimmel, Executive Director, Financial Information
Forum, dated November 12, 2013 (‘‘FIF Letter’’);
Donald Bollerman, Head of Market Operations, IEX
Services, LLC, dated November 11, 2013 (‘‘IEX
Letter’’); Ari Burstein, Senior Counsel, Investment
Company Institute, dated November 12, 2013 (‘‘ICI
Letter’’); Elizabeth K. King, Global Head of
Regulatory Affairs, KCG Holdings, Inc., dated
November 12, 2013 (‘‘KCG Letter’’); Howard
Meyerson, General Counsel, Liquidnet, dated
November 12, 2013 (‘‘Liquidnet Letter’’); Janet
McGinness, EVP & Corporate Secretary, NYSE
Euronext, dated November 15, 2013 (‘‘NYSE
Letter’’); Theodore R. Lazo, Managing Director &
Associate General Counsel, Securities Industry and
Financial Markets Association, dated November 11,
2013 (‘‘SIFMA Letter’’); and James Toes, President
& CEO, Securities Traders Association, dated
November 12, 2013 (‘‘STA Letter’’).
2 17
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4213
to propose additional clarifying
guidance, including the addition of
supplementary material to one of the
proposed rules.5 The Commission is
publishing this notice and order to
solicit comments on Amendment No. 1
and to approve the proposed rule
change, as modified by Amendment No.
1, on an accelerated basis.
II. Description of the Proposal
Overview
FINRA filed the proposed rule change
to impose certain reporting
requirements on trading venues that
have filed a Form ATS with the
Commission.6 The purpose of the
proposal is to make information about
ATS trading volume publicly available
and thus more transparent. The
proposal is also meant to enhance
FINRA’s ability to monitor ATSs to
determine whether they are complying
with the requirements of Regulation
ATS.
Specifically, FINRA states that the
proposal would allow it to better
determine whether an ATS is subject to
the provisions of Regulation ATS that
are triggered by exceeding certain
volume thresholds. For instance,
Regulation ATS requires an ATS to
provide to a national securities
exchange or association for display the
prices and sizes of orders at the ATS’s
highest buy price and lowest sell price
for any NMS stock, displayed to more
than one person in the ATS, with
respect to which the ATS has had an
average daily trading volume of 5% or
more of the aggregate average daily
share volume for such NMS stock
during at least four of the preceding six
calendar months.7 Regulation ATS also
requires any such ATS to provide
broker-dealers with fair access to the
5 See Letter to the Commission from Brant K.
Brown, Associate General Counsel, FINRA, dated
January 15, 2014 (‘‘FINRA Response Letter’’). The
FINRA Response Letter was submitted into the
public comment file for SR–FINRA–2013–042.
6 Under Regulation ATS, an alternative trading
system is defined as ‘‘any organization, association,
person, group of persons, or system: (1) That
constitutes, maintains, or provides a market place
or facilities for bringing together purchasers and
sellers of securities or for otherwise performing
with respect to securities the functions commonly
performed by a stock exchange within the meaning
of [Exchange Act Rule 3b–16]; and (2) That does
not: (i) Set rules governing the conduct of
subscribers other than the conduct of such
subscribers’ trading on such organization,
association, person, group of persons, or system; or
(ii) Discipline subscribers other than by exclusion
from trading.’’ 17 CFR 242.300(a). FINRA stated in
its Notice of Original Proposal that the proposed
rule change would apply to any alternative trading
system, as that term is defined in Regulation ATS,
that has filed a Form ATS with the Commission.
7 See 17 CFR 242.301(b)(3).
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Federal Register / Vol. 79, No. 16 / Friday, January 24, 2014 / Notices
ATS’s services to effect a transaction in
any such NMS stock.8
To achieve these objectives, the
proposal would impose two new
requirements on ATSs. First, ATSs
would be required to report aggregate
weekly trade volume information to
FINRA, some of which data FINRA
would then make publicly available.
Second, the proposal would require
each ATS to obtain and use a unique
MPID in its regulatory reporting to
FINRA.
TKELLEY on DSK3SPTVN1PROD with NOTICES
Self-Reporting Requirement
Proposed Rule 4552 would require
each FINRA member that operates an
ATS that has filed a Form ATS with the
Commission to report to FINRA its
aggregate weekly volume information 9
and number of trades, by security, in
securities subject to FINRA trade
reporting requirements. The selfreporting requirement would thus apply
to any NMS stock,10 any OTC Equity
Security,11 or any debt security subject
to FINRA’s Trade Reporting and
Compliance Engine (‘‘TRACE’’) rules
(‘‘TRACE-Eligible Securities’’).12 The
proposed rule change would require this
information to be reported to FINRA on
a security-by-security basis within seven
business days after the end of each
calendar week. An ATS that did not
execute any trades in a given week
would need to submit a report that
affirmatively indicated the ATS did not
transact any volume that week.
The proposed rule change contains
guidance on how ATSs should calculate
their volumes to ensure consistency and
to avoid potential over-counting of
volume. Proposed Rule 4552 provides
that, ‘‘[w]hen calculating and reporting
the volume of securities traded and the
number of trades, an alternative trading
system shall include only those trades
executed within the alternative trading
system. If two orders are crossed by the
alternative trading system, the volume
shall include only the number of shares
or par value of bonds crossed as a single
trade (e.g., crossing a buy order of 1,000
shares with a sell order of 1,000 shares
would be calculated as a single trade of
8 See 17 CFR 242.301(b)(5). The fair access
requirement also applies to other types of securities,
including certain unlisted equity securities,
municipal securities, and corporate debt securities.
See id. Certain ATSs are excluded from the fair
access requirement. See 17 CFR 242.301(b)(5)(iii).
9 Volume information for NMS stocks and OTC
Equity Securities means the aggregate number of
shares traded in each security for the week. Volume
information for TRACE-Eligible Securities means
the aggregate par value of trades in each security for
the week. See proposed Rule 4552(d)(5).
10 See FINRA Rule 6110.
11 See FINRA Rule 6410.
12 See FINRA Rules 6710 and 6730(a).
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1,000 shares of volume).’’ Thus, for
example, an ATS would be required to
report only trades executed within the
ATS 13 (not individual orders routed out
of the ATS that might be executed at
another venue), and only the volume of
each executed trade once (not doublecounting for the buy and sell side of the
trade).
In addition, FINRA would make some
of this reported ATS trade data available
to the public. Specifically, FINRA
would publish on its Web site the
trading information (volume and
number of trades) reported for each
equity security, with appropriate
disclosures that the information is based
on ATS-submitted reports and not on
reports produced or validated by
FINRA. FINRA would do so on a
delayed basis: aggregate information
concerning trades in NMS stocks in Tier
1 of the NMS Plan to Address
Extraordinary Market Volatility 14
would be published on a two-week
delayed basis, and aggregate information
on all other NMS stocks and all OTC
Equity Securities subject to FINRA trade
reporting requirements on a four-week
delayed basis.15
While the reporting obligations in the
proposal would apply to transactions in
both equity securities (NMS stocks and
OTC Equity Securities) and debt
securities (TRACE-Eligible Securities),
FINRA would not initially publish the
data that it receives concerning
transaction volume in TRACE-Eligible
Securities. FINRA stated that it would
not intend to begin publishing selfreported data for TRACE-Eligible
Securities ‘‘until it has had the
opportunity to evaluate the data
received from such ATSs and the
differences between the existing trade
reporting regimes applicable to equity
and debt securities.’’ 16
MPID Requirement
The proposed rule change also would
require a member operating an ATS to
obtain for each such ATS a single,
unique MPID that is designated for
exclusive use for reporting the ATS’s
transactions. Members that operate
multiple ATSs or engage in other lines
13 In response to comments, FINRA submitted
Amendment No. 1 to propose additional guidance,
in the form of Supplementary Material .01 to the
rule, on what it means for a trade to be executed
‘‘within the ATS.’’ See infra Section III.
14 Tier 1 includes those NMS stocks in the S&P
500 Index or the Russell 1000 Index and certain
ETPs. See NMS Plan to Address Extraordinary
Market Volatility.
15 The delay would be from the week in which
the trades occurred, rather than the week the trades
were reported to FINRA. See Notice of Original
Proposal, 78 FR at 62864 n.17.
16 Notice of Original Proposal, 78 FR at 62864.
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Sfmt 4703
of business requiring the use of MPIDs
would therefore be required to obtain
and use multiple MPIDs. A firm would
not be permitted to use multiple MPIDs
for a single ATS, and if a firm operates
multiple ATSs, each ATS would be
required to have its own MPID.
The proposal would prohibit a
member from using a separate MPID
assigned to an ATS to report any
transaction that is not executed within
the ATS and require members to have
policies and procedures in place to
ensure that trades reported with a
separate MPID obtained under the rules
are restricted to trades executed within
the ATS. FINRA noted that this feature
of the proposal would be consistent
with obligations that already exist for
ATSs, which are required by Regulation
ATS ‘‘to have in place safeguards and
procedures to . . . separate alternative
trading system functions from other
broker-dealer functions, including
proprietary and customer trading.’’ 17
FINRA currently has three rules that
permit the use of multiple MPIDs on
FINRA facilities: Rule 6160 (Multiple
MPIDs for Trade Reporting Facility
Participants), Rule 6170 (Primary and
Additional MPIDs for Alternative
Display Facility Participants), and Rule
6480 (Multiple MPIDs for Quoting and
Trading in OTC Equity Securities). All
three rules are permissive, and none of
the rules currently requires the use of
multiple MPIDs. These three rules
would be revised to include language
that affirmatively requires any
participant of any of these facilities that
operates an ATS to obtain a unique
MPID for each ATS.18 In cases where a
facility participant wished to use
multiple MPIDs, or was required to do
so under the proposal, each rule would
require the facility participant to submit
a written request to FINRA. The three
rules, which currently operate on a pilot
basis, would also be made permanent.
FINRA noted that member firms
currently are required to notify FINRA
before changing the usage of the MPID
in any way (for example, repurposing an
MPID from reflecting ATS activity to
other trading activity at the firm). After
an ATS is provided its MPID, any
reporting by the ATS (either reporting
trades to a FINRA TRF, the ADF, the
ORF, TRACE, or reporting orders to the
Order Audit Trail System (‘‘OATS’’))
would need to include the MPID
assigned to the particular ATS, and the
member would need to use the
17 Securities Exchange Act Release No. 40760
(December 8, 1998), 63 FR 70844, 70879 (December
22, 1998).
18 FINRA also proposed to amend Rule 6720,
which governs reporting to TRACE, to include
similar language.
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Federal Register / Vol. 79, No. 16 / Friday, January 24, 2014 / Notices
particular MPID to report all
transactions executed within the ATS to
the appropriate reporting facility.19
FINRA noted further that it would
leave in place a voluntary program it
adopted in 2010 that allows allow
members operating an ATS dark pool to
have their daily aggregate trading data
published by the TRFs.20 FINRA
believes that the program, which is set
forth in Supplementary Material .02 to
Rule 6160(c), would largely be eclipsed
by the proposal, as all ATSs would now
be subject to mandatory reporting
requirements. The voluntary program
differs slightly from the mandatory
requirements of the proposal, however,
because it provides for the publication
of aggregate daily—rather than weekly—
trading volume information. FINRA
noted in its proposal that no member
has participated in the voluntary
program yet.
TKELLEY on DSK3SPTVN1PROD with NOTICES
Implementation Schedule
FINRA stated that it would announce
the implementation date of the
proposed rule change in a Regulatory
Notice to be published no later than 30
days following Commission approval.
The implementation date for the selfreporting requirement would be no later
than 90 days following publication of
the Regulatory Notice. The
implementation date for the MPID
requirement would be no later than 270
days following publication of the
Regulatory Notice.
The Commission points out that, in
the Notice of Original Proposal, FINRA
stated that it would announce the
‘‘effective date’’ of the proposed rule
change by Regulatory Notice within 30
days of Commission approval. In
Amendment No. 1, FINRA revised this
language to clarify its intent to specify
that it will announce the
‘‘implementation date,’’ rather than the
‘‘effective date,’’ of the proposed rule
change. FINRA clarified further that the
proposed rule change will become
effective when it is approved by the
Commission. Thus, rules that permit
FINRA members to use multiple MPIDs
19 OATS Reporting Members currently are
required to include MPIDs on OATS reports. See,
e.g., FINRA Rule 7440(b)(3), (c)(1)(B), (c)(2)(A)(ii),
and (c)(2)(A)(iii). The proposed rule change would
not amend the OATS rules; however, current OATS
guidance issued by FINRA provides that ‘‘[a]n order
that is transferred between two valid MPIDs within
the same firm is also considered routed.’’ See OATS
Reporting Technical Specifications, at 4–3 (ed.
December 11, 2012). Consequently, FINRA noted,
after the proposed rule change is implemented, an
order routed to an ATS would require the
submission of a Route Report, which must reflect
the unique MPID of the ATS to which the order was
routed. See FINRA Rule 7440(c).
20 See Securities Exchange Act Release No. 61658
(March 5, 2010), 75 FR 11972 (March 12, 2010).
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would immediately convert from
operating on a pilot to a permanent
basis.
III. Summary of Comments, FINRA’s
Response, and Proposed Additional
Supplementary Material in Amendment
No. 1
As noted above, the Commission
received ten comment letters concerning
the proposal.21 Eight of the ten
commenters expressed general support
for the purpose of the proposal—
namely, to increase transparency of ATS
trade data.22 For instance, one
commenter stated that it ‘‘encourage[d]
efforts to standardize ATS transparency
across the industry and feel[s] that
FINRA is well-positioned to do so.’’ 23
Another commenter expressed its belief
‘‘that quantitative, publicly available
information regarding ATS trading can
provide market participants, regulators
and policymakers a greater
understanding of the role ATSs play in
the equity marketplace, as well as
provide a factual foundation for key
discussions and decisions concerning
equity market structure issues.’’ 24
Several of these commenters, in fact,
expressed support for an even broader
proposal that would apply to all trading
venues, rather than only to ATSs.25 One
such commenter argued that ‘‘the
proposal should be expanded to include
trade information for other off-exchange
executions and this information should
be made public in the same manner as
proposed for ATS trade information.’’ 26
According to another commenter,
‘‘including the entire universe of nonexchange trading is important because
while ATSs make up approximately
14% of volume, other dark trading
venues account for over 22% of volume
and receive a significant portion of the
retail order flow in the market.’’ 27 A
different commenter, while supporting a
broader effort that would include offexchange venues not limited to ATSs,
stated that such an effort should be
coupled with an increase in the
transparency of information concerning
executions that occur on exchanges
against non-displayed trading interest.28
In response to these comments
concerning the scope of the proposal,
FINRA noted that it considered various
alternatives and concluded that ATS
trade information was an appropriate
21 See
supra note 4.
Barclays, Fidelity, IEX, ICI, KCG, NYSE,
SIFMA, and STA Letters.
23 Barclays Letter at 1.
24 Fidelity Letter at 1–2.
25 See Fidelity, ICI, KCG, and NYSE Letters.
26 Fidelity Letter at 2.
27 NYSE Letter at 1.
28 See KCG Letter at 5.
22 See
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4215
first step toward increased transparency
in the off-exchange, OTC market. FINRA
stated further that it would consider
additional steps, including those
suggested by the commenters, in the
future.29
Some commenters voiced concern
with certain elements of the proposal or
sought further guidance on how the new
requirements would be applied. Of
these commenters, a majority argued
that the self-reporting requirement
should be limited in some fashion
because it would soon become
unnecessary in light of the proposal’s
MPID requirement.30 For example, five
commenters asked FINRA to make an
affirmative commitment that it will
eliminate the reporting requirement
once the MPID requirement is fully
implemented.31 Additionally, three
commenters suggested that FINRA align
the proposal’s reporting requirement
with Rule 605 of Regulation NMS,
meaning that ATSs would report
monthly to FINRA rather than weekly.32
Lastly, four commenters urged FINRA to
facilitate compliance with the reporting
requirement by establishing a standard,
simple format for data transmission.33
In its response to these comments,
FINRA reiterated that it intends to
evaluate the necessity of the selfreporting requirement after the MPID
requirement is in place. However,
FINRA noted that it would plan to use,
for comparison purposes, data reported
by ATSs under the self-reporting
requirement even when those ATSs
have unique MPIDs used exclusively to
report trades for the ATS. Moreover,
FINRA said that the self-reporting
requirement would allow the proposal
to more quickly recognize its objective
of enhancing ATS transparency.
Accordingly, FINRA believes that the
self-reporting requirement is a necessary
first phase of the proposal. FINRA stated
that it would eliminate the selfreporting requirement for ATSs subject
to FINRA trade reporting requirements
29 See FINRA Response Letter at 5. FINRA noted
however, that any commenter’s discussion of
enhancing the transparency of on-exchange, nondisplayed interest was beyond FINRA’s regulatory
jurisdiction.
30 See Barclays, Fidelity, FIF, KCG, SIFMA, and
STA Letters. No commenter appeared to take issue
with the MPID requirement, and four commenters
expressly supported it. See Barclays, Fidelity, IEX,
and KCG Letters.
31 See Fidelity, FIF, KCG, SIFMA, and STA
Letters.
32 See IEX, SIFMA, and STA Letters.
33 See FIF, Fidelity, IEX, and SIFMA Letters. The
FIF Letter additionally requested guidance on
several other specific, technical aspects concerning
the proposal’s implementation. FINRA noted in
response that, if the proposal were approved, it
would issue guidance that addressed technical
details like and including those raised by FIF.
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TKELLEY on DSK3SPTVN1PROD with NOTICES
if the MPID requirement is implemented
and operating as anticipated.34
Aside from the self-reporting
requirement, several commenters also
expressed concern with FINRA’s intent
to charge a fee for professionals to
access and use the data.35 These
comments ranged from questioning the
need for FINRA to charge a fee for data
that it would not validate to flatly
opposing the imposition of any fee on
the data. In response, FINRA noted that
it would make available for free on its
Web site the most recently reported
data, as well as limited historic reports.
FINRA also reiterated its plan to charge
profession users and data vendors a fee
to access professional, downloadable
reports; however, FINRA stated it would
submit a separate filing to propose the
specifics of this data product.36
Additionally, one commenter took the
position that, if the proposal is
approved, FINRA should open up a
second formal comment period one year
after the rule is implemented to allow
for an empirical ‘‘retrospective review’’
of the proposal’s costs and benefits.37 In
its response, FINRA disagreed and
pointed to the Notice of the Original
Proposal, in which FINRA said it
‘‘intends periodically to assess the
reporting and publication of information
to consider whether modifications to the
scope of securities covered, the delay
between the activity and publication, or
the frequency of publication of the
information are appropriate.’’ 38
Moreover, FINRA claimed that it
discussed the terms of the proposed
rules with a number of ATS operators
prior to submitting the proposal, and
‘‘continues to believe that the burdens
imposed by the Proposal will be
minimal for many firms and that the
proposed delays in dissemination are
sufficient to avoid potentially damaging
information leakage of trading
information.’’ 39
Lastly, one commenter questioned
how the proposal would apply to fixed
income ATSs in light of the fact that
trades from fixed income ATSs may be
34 See FINRA Response at 6–7. FINRA noted that,
under FINRA rules, an ATS may be granted an
exemption from its trade reporting requirements.
FINRA said that, in such a case, it would likely
need to continue requiring the ATS to self-report,
even after the MPID requirement were
implemented, because the exempt ATS would not
be using the MPID to report its volume (due to its
trade reporting exemption). See id. at 7 n.13.
35 See Barclays, Fidelity, FIF, IEX, ICI, Liquidnet,
and STA Letters.
36 See FINRA Response Letter at 8.
37 See STA Letter at 2–3.
38 FINRA Response Letter at 8. The Commission
notes that this quoted language in FINRA’s response
appears in the Notice of Original Proposal, 78 FR
at 62864.
39 FINRA Response Letter at 8–9.
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reported to FINRA by one of the trade
counterparties, rather than by the
ATS.40 In response, FINRA pointed out
that various of its equity and debt trade
reporting rules impose a trade reporting
obligation on an ATS, as the ‘‘executing
party’’ under FINRA rules, where the
transaction is executed by the ATS.
FINRA also noted that, under the
proposal, it would not publish the trade
data reported by fixed income ATSs
until it could evaluate the data for
consistency.
Furthermore, FINRA submitted
Amendment No. 1 to adopt
supplementary material to FINRA Rule
4552 to clarify when trades should be
considered to have occurred ‘‘within an
ATS.’’ Specifically, the proposed
supplementary material would provide
that a trade should be considered to
have occurred within the ATS for
purposes of the rule ‘‘if the ATS (i)
executes the trade; (ii) is considered the
‘executing party’ to the trade under
FINRA rules; or (iii) otherwise matches
orders constituting the trade in a
manner as contemplated by SEC Rule
3b–16 or SEC Regulation ATS.’’ 41 So,
for example, a trade would be
considered to have occurred ‘‘within an
ATS’’ if the ATS ‘‘uses established, nondiscretionary methods under which
orders interact with each other, and the
buyers and sellers entering the orders
agree to the terms of the trade.’’ 42
The proposed supplementary material
would further provide a non-exhaustive
list of scenarios to illustrate how the
‘‘within an ATS’’ standard would be
applied. The list would include: if the
trade was executed as a result of the
ATS bringing together the purchaser
and seller on or through its systems; if
the trade was executed by an ATS’s
subscribers where the subscribers used
the ATS system to negotiate the trade,
even if the ATS did not itself execute
the trade; if the ATS takes either side of
the trade for clearance or settlement or
in any other way inserts itself into a
trade. The supplementary material
would also provide that a trade would
not be considered to have occurred
‘‘within the ATS’’ if an ATS were to
route an order to another member firm
or execution venue for handling or
execution where that initial order
matches against interest resident at the
other venue.43
40 See
KCG Letter at 4.
Response Letter at 10 (internal citations
omitted).
42 Id.
43 The supplementary material would
additionally state that trades would still be
considered to have occurred ‘‘within an ATS’’ for
purposes of reporting volume under the proposal
even if the ATS has been granted an exemption
41 FINRA
PO 00000
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Fmt 4703
Sfmt 4703
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–2013–042 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–2013–042. 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 will also be available for
inspection and copying at the principal
office of FINRA. All comments received
will be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
publicly available. All submissions
should refer to File Number SR–FINRA–
2013–042 and should be submitted on
or before February 14, 2014.
V. Commission Findings
After carefully considering the
proposed rule change, as modified by
from its trade reporting obligations under FINRA
Rules 6183, 6625, or 6731.
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Federal Register / Vol. 79, No. 16 / Friday, January 24, 2014 / Notices
Amendment No. 1, the comments
submitted, and FINRA’s response to the
comments, the Commission finds that
the proposed rule change, as modified
by Amendment No. 1, is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
association.44 In particular, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Section
15A(b)(6) of the Act,45 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.
The Commission believes that the
stated objectives of the proposal—to
enhance FINRA’s regulatory capabilities
with respect to ATSs and to increase
public transparency with respect to ATS
activity—would further the purposes of
the Act. By better enabling FINRA to
surveil ATSs for compliance with
Regulation ATS, and the display and
fair access requirements applicable to
ATSs that exceed certain volume
thresholds, the proposal is reasonably
designed to help prevent fraudulent and
manipulative acts and practices and to
protect investors and the public interest.
By collecting and publishing weekly
volume statistics (first, through the selfreporting requirement, and later,
potentially, through the MPID
requirement), the proposal would
increase the amount of information that
is publicly available concerning trades
that occur in equity ATSs. As many
commenters noted, such added
transparency would allow regulators
and the public to more fully understand
the role that equity ATSs play in the
marketplace.
The Commission further believes that
the proposal is reasonably tailored to
achieve these objectives. The selfreporting requirement, which is meant
to constitute the first phase of the
proposal, will more quickly deliver the
benefits of the proposal, and also
provide a comparsion for the data that
FINRA will receive once the MPID
requirement is fully in effect. While the
Commission acknowledges that some
commenters took issue with the
additional costs that could potentially
be incurred as a result of the weekly
self-reporting requirement, the
Commission notes, as FINRA did in its
44 In approving this proposed rule change, the
Commission has considered the proposed rule
change’s impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
45 15 U.S.C. 78o–3(b)(6).
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Notice of Original Proposal, that ATSs
are already required by Regulation ATS
to maintain daily summaries of their
trading activities.46
In addition, the method of making the
ATS trade data publicly available—a
two-week delay for Tier 1 NMS stocks
and a four-week delay for all other NMS
stocks and OTC Equity Securities—
appears reasonably designed to balance
the desire to inform the public about
ATS trading activity with the desire to
protect the trading strategies of ATS
subscribers. The Commission notes that
three commenters supported this
element of the proposal,47 and no
commenter objected to the proposed
delays for publishing the trade data.48
The Commission believes that
requiring a member operating an ATS to
obtain for each such ATS a single,
unique MPID that is designated for
exclusive use by the ATS is consistent
with the Act. This aspect of the proposal
is reasonably designed to create a more
reliable and consistent audit trail for
ATS activity, from the time an order is
received until the time it is executed or
cancelled. This is especially important
for firms that conduct both ATS and
other broker-dealer activities. Currently,
if a member uses a single MPID for both
its ATS activity and traditional brokerdealer activity, or uses a single MPID to
report the activity of two or more ATSs,
it could be difficult if not impossible to
track the flow of orders through these
systems. The Commission agrees with
FINRA’s assessment that the fact that
many firms already use separate MPIDs
in the manner now required by this
proposed rule change is evidence that
the costs of using multiple MPIDs as
contemplated by the proposal is not
unduly burdensome. Because the
proposal requires some firms to obtain
and use multiple MPIDs, FINRA has
proposed to make permanent certain
rules, currently operating on a pilot
basis, that allow firms to use multiple
MPIDs. The Commission also believes
that it is consistent with the Act to make
those rules permanent.
Lastly, the Commission believes that
the supplementary material included in
Amendment No. 1 is consistent with the
Act. In response to the initial proposal,
one commenter questioned how the
proposal would apply to fixed income
ATSs, where it is common practice for
trades to be given up to the broker46 See
17 CFR 242.301(b)(8); 17 CFR 242.302.
Fidelity Letter at 3, ICI Letter at 2, and KCG
Letter at 3.
48 The Commission notes that one commenter that
advocated monthly, rather than weekly, reporting
also recommended a two-week publishing delay
from the end of each month when the information
is reported. See STA Letter at 5.
47 See
PO 00000
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Fmt 4703
Sfmt 4703
4217
dealer counterparties.49 FINRA
responded by providing new
Supplementary Material .01 to proposed
Rule 4552 explaining when transactions
are attributable to the ATS for purposes
of the proposal’s volume reporting
provisions. In general, the
supplementary material would require a
transaction to be included in its
reporting to FINRA if the ATS executes
the trade, is the ‘‘executing party’’ to the
trade under FINRA rules,50 or if the ATS
otherwise matches orders constituting
the trade in a manner contemplated by
Rule 3b–16 under the Exchange Act 51
and Regulation ATS. The Commission
believes that it is consistent with the
Act for FINRA to attribute volume to an
ATS when the transactions underlying
that volume would cause the entity
itself to meet the criteria of Rule 3b–
16.52
VI. Accelerated Approval
The Commission finds good cause,
pursuant to Section 19(b)(2) of the
Act,53 for approving the proposed rule
change, as modified by Amendment No.
1 thereto, prior to the 30th day after
publication of Amendment No. 1 in the
Federal Register. The new
supplementary material proposed in
Amendment No. 1 responds to a specific
issue raised in one comment letter
received by the Commission in response
to the Notice of Original Proposal and
clarifies when trading volume is
attributed to an ATS for purposes of this
proposal’s volume reporting
requirements. Amendment No. 1 also
proposed a revision to the language
describing the timeframe for FINRA’s
implementation of the proposal; this
revision is technical in nature and better
clarifies FINRA’s original intent. The
Commission notes that, beyond two
other minor technical revisions that
simply update statutory references,54
the rest of the proposed rule change is
not being amended and was subject to
a full notice-and-comment period.
These revisions add clarity to the
49 See
KCG Letter at 4.
FINRA Rules 6282, 6830A, 6930B, and
6622. See also FINRA Response Letter at 9–10
(discussing when an ATS is considered an
‘‘executing party’’ to a trade under these rules).
51 17 CFR 240.3b–16.
52 Meeting the criteria of Rule 3b–16 would in
turn would cause the entity to have to register with
the Commission as a national securities exchange
or seek an alternative to exchange registration, such
as registering as a broker-dealer and complying with
Regulation ATS.
53 15 U.S.C. 78s(b)(2).
54 Specifically, Amendment No. 1 would: (1)
amend FINRA Rules 4552, 6160, 6170, 6480, and
6720 to replace ‘‘SEA Rule 300’’ with ‘‘Rule 300 of
SEC Regulation ATS’’; and (2) amend proposed
Rule 4552 to replace ‘‘SEA Rule 600(b)(47)’’ with
‘‘Rule 600(b)(47) of SEC Regulation NMS.
50 See
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Federal Register / Vol. 79, No. 16 / Friday, January 24, 2014 / Notices
proposal and do not raise any novel
regulatory concerns. Accordingly, the
Commission finds that good cause exists
to approve the proposal, as modified by
Amendment No. 1, on an accelerated
basis.
VII. Conclusion
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 55 that the
proposed rule change (SR–FINRA–
2013–042), as modified by Amendment
No. 1, be and hereby is approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.56
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–01395 Filed 1–23–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71350; File No. SR–FINRA–
2014–002]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Adopt FINRA Rule
7640A (Data Products Offered By
Nasdaq)
TKELLEY on DSK3SPTVN1PROD with NOTICES
January 17, 2014.
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 January 9,
2014, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) (f/k/a
National Association of Securities
Dealers, Inc. (‘‘NASD’’)) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by FINRA. FINRA has
designated the proposed rule change as
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.
55 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
56 17
VerDate Mar<15>2010
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Jkt 232001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to adopt FINRA
Rule 7640A (Data Products Offered By
Nasdaq) to (1) describe FINRA’s
practices relating to the distribution of
market data for over-the-counter
(‘‘OTC’’) transactions in NMS stocks
generated through the operation of the
FINRA/Nasdaq Trade Reporting Facility
(‘‘FINRA/Nasdaq TRF’’) by The
NASDAQ OMX Group, Inc. (‘‘NASDAQ
OMX’’) and its affiliate, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’); and (2)
identify Nasdaq rules relating to
products that distribute FINRA/Nasdaq
TRF data to third parties, and
specifically Nasdaq Rules 7039 (Nasdaq
Last Sale Data Feeds), 7047 (Nasdaq
Basic) and 7037 (Nasdaq FilterView
Service).
The text of the proposed rule change
is available on FINRA’s Web site at
https://www.finra.org, at the principal
office of FINRA and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Background
The FINRA Trade Reporting Facilities
(‘‘TRFs’’) are facilities solely for the
reporting of OTC transactions in NMS
stocks that allow the TRF ‘‘Business
Members,’’ which themselves are
affiliates of self-regulatory organizations
(‘‘SROs’’), to retain commercial use of
the market data reported to the
respective TRFs.4 The operation of each
4 There currently are two TRFs in operation: the
FINRA/Nasdaq TRF and the FINRA/NYSE TRF. The
establishment of each TRF was subject to a
proposed rule change filed with the Commission.
See Securities Exchange Act Release No. 54084
(June 30, 2006), 71 FR 38935 (July 10, 2006) (Order
Approving File No. SR–NASD–2005–087); and
Securities Exchange Act Release No. 55325
(February 21, 2007), 72 FR 8820 (February 27, 2007)
PO 00000
Frm 00069
Fmt 4703
Sfmt 4703
TRF is governed by a Limited Liability
Company Agreement (the ‘‘LLC
Agreement’’) between FINRA and the
respective Business Member. (The LLC
Agreements, which were submitted as
part of the rule filings to establish the
respective TRFs and were subsequently
amended and restated, appear in the
FINRA Manual.) Under the LLC
Agreement, FINRA is the ‘‘SRO
Member’’ and has sole regulatory
responsibility for the TRF, including
real-time monitoring and T+1
surveillance, development and
enforcement of trade reporting rules and
submission of proposed rule changes to
the Commission. The Business Member
under the LLC Agreement is primarily
responsible for the management of the
TRF’s business affairs, which may not
be conducted in a manner inconsistent
with the regulatory and oversight
functions of FINRA. Among other
things, the Business Member establishes
pricing for the TRF and is obligated to
pay the cost of regulation and is entitled
to the profits and losses, if any, derived
from operation of the TRF. The Business
Member also provides the ‘‘user facing’’
front-end technology used to operate the
TRF and transmit in real time trade
report data directly to the NMS
securities information processors
(‘‘SIPs’’) and to FINRA for audit trail
purposes.
Under the terms of the business
arrangement between FINRA and the
Business Members, each TRF owns data
resulting from its operation. Each
Business Member has a non-exclusive,
irrevocable, worldwide, perpetual,
royalty-free right and license to use
market data generated by its TRF, other
than data generated exclusively for
regulatory purposes (‘‘covered market
data’’),5 consistent with all applicable
laws, rules and regulations, and has a
contractual right to sell covered market
data to third parties.6 Accordingly,
although the TRFs are facilities of
FINRA, the Business Members have the
right under the contractual
arrangements establishing the TRFs to
develop market data products using
covered market data. As each Business
Member is an affiliate of an SRO, use of
TRF data is conducted through the
Business Member’s affiliated SRO, is
(Notice of Filing and Immediate Effectiveness of
File No. SR–NASD–2007–011).
5 For purposes of proposed Rule 7640A, ‘‘covered
market data’’ would be defined as market data
generated by the FINRA/Nasdaq Trade Reporting
Facility, other than data generated exclusively for
regulatory purposes.
6 Under the TRF contracts, FINRA has a nonexclusive, irrevocable, worldwide, perpetual,
royalty-free right and license to use the data
generated by the TRF to fulfill its contractual rights
and obligations, as well as its obligations as an SRO.
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]]>Agencies
[Federal Register Volume 79, Number 16 (Friday, January 24, 2014)]
[Notices]
[Pages 4213-4218]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01395]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71341; File No. SR-FINRA-2013-042]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc; Notice of Filing of Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed Rule Change, as Modified by
Amendment No. 1, To Require Alternative Trading Systems To Report
Volume Information to FINRA and Use Unique Market Participant
Identifiers
January 17, 2014.
I. Introduction
On September 30, 2013, 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 each alternative trading system
(``ATS'') to report transaction volume information to FINRA and to
obtain and use a unique market participant identifier (``MPID'') when
reporting trade information to FINRA. The proposed rule change was
published for comment in the Federal Register on October 22, 2013.\3\
The Commission received ten comments on the proposal.\4\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 70676 (October 11,
2013), 78 FR 62862 (October 22, 2013) (``Notice of Original
Proposal'').
\4\ See Letters to the Commission from William White, Head of
Electronic Trading, Barclays Capital Inc., dated November 12, 2013
(``Barclays Letter''); Scott C. Goebel, Senior Vice President &
Deputy General Counsel, Fidelity Investments, dated November 12,
2013 (``Fidelity Letter''); Manisha Kimmel, Executive Director,
Financial Information Forum, dated November 12, 2013 (``FIF
Letter''); Donald Bollerman, Head of Market Operations, IEX
Services, LLC, dated November 11, 2013 (``IEX Letter''); Ari
Burstein, Senior Counsel, Investment Company Institute, dated
November 12, 2013 (``ICI Letter''); Elizabeth K. King, Global Head
of Regulatory Affairs, KCG Holdings, Inc., dated November 12, 2013
(``KCG Letter''); Howard Meyerson, General Counsel, Liquidnet, dated
November 12, 2013 (``Liquidnet Letter''); Janet McGinness, EVP &
Corporate Secretary, NYSE Euronext, dated November 15, 2013 (``NYSE
Letter''); Theodore R. Lazo, Managing Director & Associate General
Counsel, Securities Industry and Financial Markets Association,
dated November 11, 2013 (``SIFMA Letter''); and James Toes,
President & CEO, Securities Traders Association, dated November 12,
2013 (``STA Letter'').
---------------------------------------------------------------------------
On December 4, 2013, FINRA granted the Commission an extension of
time to act on the proposal until January 20, 2014. On January 15,
2014, FINRA filed Amendment No. 1 with the Commission to respond to the
comment letters and to propose additional clarifying guidance,
including the addition of supplementary material to one of the proposed
rules.\5\ The Commission is publishing this notice and order to solicit
comments on Amendment No. 1 and to approve the proposed rule change, as
modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------
\5\ See Letter to the Commission from Brant K. Brown, Associate
General Counsel, FINRA, dated January 15, 2014 (``FINRA Response
Letter''). The FINRA Response Letter was submitted into the public
comment file for SR-FINRA-2013-042.
---------------------------------------------------------------------------
II. Description of the Proposal
Overview
FINRA filed the proposed rule change to impose certain reporting
requirements on trading venues that have filed a Form ATS with the
Commission.\6\ The purpose of the proposal is to make information about
ATS trading volume publicly available and thus more transparent. The
proposal is also meant to enhance FINRA's ability to monitor ATSs to
determine whether they are complying with the requirements of
Regulation ATS.
---------------------------------------------------------------------------
\6\ Under Regulation ATS, an alternative trading system is
defined as ``any organization, association, person, group of
persons, or system: (1) That constitutes, maintains, or provides a
market place or facilities for bringing together purchasers and
sellers of securities or for otherwise performing with respect to
securities the functions commonly performed by a stock exchange
within the meaning of [Exchange Act Rule 3b-16]; and (2) That does
not: (i) Set rules governing the conduct of subscribers other than
the conduct of such subscribers' trading on such organization,
association, person, group of persons, or system; or (ii) Discipline
subscribers other than by exclusion from trading.'' 17 CFR
242.300(a). FINRA stated in its Notice of Original Proposal that the
proposed rule change would apply to any alternative trading system,
as that term is defined in Regulation ATS, that has filed a Form ATS
with the Commission.
---------------------------------------------------------------------------
Specifically, FINRA states that the proposal would allow it to
better determine whether an ATS is subject to the provisions of
Regulation ATS that are triggered by exceeding certain volume
thresholds. For instance, Regulation ATS requires an ATS to provide to
a national securities exchange or association for display the prices
and sizes of orders at the ATS's highest buy price and lowest sell
price for any NMS stock, displayed to more than one person in the ATS,
with respect to which the ATS has had an average daily trading volume
of 5% or more of the aggregate average daily share volume for such NMS
stock during at least four of the preceding six calendar months.\7\
Regulation ATS also requires any such ATS to provide broker-dealers
with fair access to the
[[Page 4214]]
ATS's services to effect a transaction in any such NMS stock.\8\
---------------------------------------------------------------------------
\7\ See 17 CFR 242.301(b)(3).
\8\ See 17 CFR 242.301(b)(5). The fair access requirement also
applies to other types of securities, including certain unlisted
equity securities, municipal securities, and corporate debt
securities. See id. Certain ATSs are excluded from the fair access
requirement. See 17 CFR 242.301(b)(5)(iii).
---------------------------------------------------------------------------
To achieve these objectives, the proposal would impose two new
requirements on ATSs. First, ATSs would be required to report aggregate
weekly trade volume information to FINRA, some of which data FINRA
would then make publicly available. Second, the proposal would require
each ATS to obtain and use a unique MPID in its regulatory reporting to
FINRA.
Self-Reporting Requirement
Proposed Rule 4552 would require each FINRA member that operates an
ATS that has filed a Form ATS with the Commission to report to FINRA
its aggregate weekly volume information \9\ and number of trades, by
security, in securities subject to FINRA trade reporting requirements.
The self-reporting requirement would thus apply to any NMS stock,\10\
any OTC Equity Security,\11\ or any debt security subject to FINRA's
Trade Reporting and Compliance Engine (``TRACE'') rules (``TRACE-
Eligible Securities'').\12\ The proposed rule change would require this
information to be reported to FINRA on a security-by-security basis
within seven business days after the end of each calendar week. An ATS
that did not execute any trades in a given week would need to submit a
report that affirmatively indicated the ATS did not transact any volume
that week.
---------------------------------------------------------------------------
\9\ Volume information for NMS stocks and OTC Equity Securities
means the aggregate number of shares traded in each security for the
week. Volume information for TRACE-Eligible Securities means the
aggregate par value of trades in each security for the week. See
proposed Rule 4552(d)(5).
\10\ See FINRA Rule 6110.
\11\ See FINRA Rule 6410.
\12\ See FINRA Rules 6710 and 6730(a).
---------------------------------------------------------------------------
The proposed rule change contains guidance on how ATSs should
calculate their volumes to ensure consistency and to avoid potential
over-counting of volume. Proposed Rule 4552 provides that, ``[w]hen
calculating and reporting the volume of securities traded and the
number of trades, an alternative trading system shall include only
those trades executed within the alternative trading system. If two
orders are crossed by the alternative trading system, the volume shall
include only the number of shares or par value of bonds crossed as a
single trade (e.g., crossing a buy order of 1,000 shares with a sell
order of 1,000 shares would be calculated as a single trade of 1,000
shares of volume).'' Thus, for example, an ATS would be required to
report only trades executed within the ATS \13\ (not individual orders
routed out of the ATS that might be executed at another venue), and
only the volume of each executed trade once (not double-counting for
the buy and sell side of the trade).
---------------------------------------------------------------------------
\13\ In response to comments, FINRA submitted Amendment No. 1 to
propose additional guidance, in the form of Supplementary Material
.01 to the rule, on what it means for a trade to be executed
``within the ATS.'' See infra Section III.
---------------------------------------------------------------------------
In addition, FINRA would make some of this reported ATS trade data
available to the public. Specifically, FINRA would publish on its Web
site the trading information (volume and number of trades) reported for
each equity security, with appropriate disclosures that the information
is based on ATS-submitted reports and not on reports produced or
validated by FINRA. FINRA would do so on a delayed basis: aggregate
information concerning trades in NMS stocks in Tier 1 of the NMS Plan
to Address Extraordinary Market Volatility \14\ would be published on a
two-week delayed basis, and aggregate information on all other NMS
stocks and all OTC Equity Securities subject to FINRA trade reporting
requirements on a four-week delayed basis.\15\
---------------------------------------------------------------------------
\14\ Tier 1 includes those NMS stocks in the S&P 500 Index or
the Russell 1000 Index and certain ETPs. See NMS Plan to Address
Extraordinary Market Volatility.
\15\ The delay would be from the week in which the trades
occurred, rather than the week the trades were reported to FINRA.
See Notice of Original Proposal, 78 FR at 62864 n.17.
---------------------------------------------------------------------------
While the reporting obligations in the proposal would apply to
transactions in both equity securities (NMS stocks and OTC Equity
Securities) and debt securities (TRACE-Eligible Securities), FINRA
would not initially publish the data that it receives concerning
transaction volume in TRACE-Eligible Securities. FINRA stated that it
would not intend to begin publishing self-reported data for TRACE-
Eligible Securities ``until it has had the opportunity to evaluate the
data received from such ATSs and the differences between the existing
trade reporting regimes applicable to equity and debt securities.''
\16\
---------------------------------------------------------------------------
\16\ Notice of Original Proposal, 78 FR at 62864.
---------------------------------------------------------------------------
MPID Requirement
The proposed rule change also would require a member operating an
ATS to obtain for each such ATS a single, unique MPID that is
designated for exclusive use for reporting the ATS's transactions.
Members that operate multiple ATSs or engage in other lines of business
requiring the use of MPIDs would therefore be required to obtain and
use multiple MPIDs. A firm would not be permitted to use multiple MPIDs
for a single ATS, and if a firm operates multiple ATSs, each ATS would
be required to have its own MPID.
The proposal would prohibit a member from using a separate MPID
assigned to an ATS to report any transaction that is not executed
within the ATS and require members to have policies and procedures in
place to ensure that trades reported with a separate MPID obtained
under the rules are restricted to trades executed within the ATS. FINRA
noted that this feature of the proposal would be consistent with
obligations that already exist for ATSs, which are required by
Regulation ATS ``to have in place safeguards and procedures to . . .
separate alternative trading system functions from other broker-dealer
functions, including proprietary and customer trading.'' \17\
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\17\ Securities Exchange Act Release No. 40760 (December 8,
1998), 63 FR 70844, 70879 (December 22, 1998).
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FINRA currently has three rules that permit the use of multiple
MPIDs on FINRA facilities: Rule 6160 (Multiple MPIDs for Trade
Reporting Facility Participants), Rule 6170 (Primary and Additional
MPIDs for Alternative Display Facility Participants), and Rule 6480
(Multiple MPIDs for Quoting and Trading in OTC Equity Securities). All
three rules are permissive, and none of the rules currently requires
the use of multiple MPIDs. These three rules would be revised to
include language that affirmatively requires any participant of any of
these facilities that operates an ATS to obtain a unique MPID for each
ATS.\18\ In cases where a facility participant wished to use multiple
MPIDs, or was required to do so under the proposal, each rule would
require the facility participant to submit a written request to FINRA.
The three rules, which currently operate on a pilot basis, would also
be made permanent.
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\18\ FINRA also proposed to amend Rule 6720, which governs
reporting to TRACE, to include similar language.
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FINRA noted that member firms currently are required to notify
FINRA before changing the usage of the MPID in any way (for example,
repurposing an MPID from reflecting ATS activity to other trading
activity at the firm). After an ATS is provided its MPID, any reporting
by the ATS (either reporting trades to a FINRA TRF, the ADF, the ORF,
TRACE, or reporting orders to the Order Audit Trail System (``OATS''))
would need to include the MPID assigned to the particular ATS, and the
member would need to use the
[[Page 4215]]
particular MPID to report all transactions executed within the ATS to
the appropriate reporting facility.\19\
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\19\ OATS Reporting Members currently are required to include
MPIDs on OATS reports. See, e.g., FINRA Rule 7440(b)(3), (c)(1)(B),
(c)(2)(A)(ii), and (c)(2)(A)(iii). The proposed rule change would
not amend the OATS rules; however, current OATS guidance issued by
FINRA provides that ``[a]n order that is transferred between two
valid MPIDs within the same firm is also considered routed.'' See
OATS Reporting Technical Specifications, at 4-3 (ed. December 11,
2012). Consequently, FINRA noted, after the proposed rule change is
implemented, an order routed to an ATS would require the submission
of a Route Report, which must reflect the unique MPID of the ATS to
which the order was routed. See FINRA Rule 7440(c).
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FINRA noted further that it would leave in place a voluntary
program it adopted in 2010 that allows allow members operating an ATS
dark pool to have their daily aggregate trading data published by the
TRFs.\20\ FINRA believes that the program, which is set forth in
Supplementary Material .02 to Rule 6160(c), would largely be eclipsed
by the proposal, as all ATSs would now be subject to mandatory
reporting requirements. The voluntary program differs slightly from the
mandatory requirements of the proposal, however, because it provides
for the publication of aggregate daily--rather than weekly--trading
volume information. FINRA noted in its proposal that no member has
participated in the voluntary program yet.
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\20\ See Securities Exchange Act Release No. 61658 (March 5,
2010), 75 FR 11972 (March 12, 2010).
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Implementation Schedule
FINRA stated that it would announce the implementation date of the
proposed rule change in a Regulatory Notice to be published no later
than 30 days following Commission approval. The implementation date for
the self-reporting requirement would be no later than 90 days following
publication of the Regulatory Notice. The implementation date for the
MPID requirement would be no later than 270 days following publication
of the Regulatory Notice.
The Commission points out that, in the Notice of Original Proposal,
FINRA stated that it would announce the ``effective date'' of the
proposed rule change by Regulatory Notice within 30 days of Commission
approval. In Amendment No. 1, FINRA revised this language to clarify
its intent to specify that it will announce the ``implementation
date,'' rather than the ``effective date,'' of the proposed rule
change. FINRA clarified further that the proposed rule change will
become effective when it is approved by the Commission. Thus, rules
that permit FINRA members to use multiple MPIDs would immediately
convert from operating on a pilot to a permanent basis.
III. Summary of Comments, FINRA's Response, and Proposed Additional
Supplementary Material in Amendment No. 1
As noted above, the Commission received ten comment letters
concerning the proposal.\21\ Eight of the ten commenters expressed
general support for the purpose of the proposal--namely, to increase
transparency of ATS trade data.\22\ For instance, one commenter stated
that it ``encourage[d] efforts to standardize ATS transparency across
the industry and feel[s] that FINRA is well-positioned to do so.'' \23\
Another commenter expressed its belief ``that quantitative, publicly
available information regarding ATS trading can provide market
participants, regulators and policymakers a greater understanding of
the role ATSs play in the equity marketplace, as well as provide a
factual foundation for key discussions and decisions concerning equity
market structure issues.'' \24\
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\21\ See supra note 4.
\22\ See Barclays, Fidelity, IEX, ICI, KCG, NYSE, SIFMA, and STA
Letters.
\23\ Barclays Letter at 1.
\24\ Fidelity Letter at 1-2.
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Several of these commenters, in fact, expressed support for an even
broader proposal that would apply to all trading venues, rather than
only to ATSs.\25\ One such commenter argued that ``the proposal should
be expanded to include trade information for other off-exchange
executions and this information should be made public in the same
manner as proposed for ATS trade information.'' \26\ According to
another commenter, ``including the entire universe of non-exchange
trading is important because while ATSs make up approximately 14% of
volume, other dark trading venues account for over 22% of volume and
receive a significant portion of the retail order flow in the market.''
\27\ A different commenter, while supporting a broader effort that
would include off-exchange venues not limited to ATSs, stated that such
an effort should be coupled with an increase in the transparency of
information concerning executions that occur on exchanges against non-
displayed trading interest.\28\
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\25\ See Fidelity, ICI, KCG, and NYSE Letters.
\26\ Fidelity Letter at 2.
\27\ NYSE Letter at 1.
\28\ See KCG Letter at 5.
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In response to these comments concerning the scope of the proposal,
FINRA noted that it considered various alternatives and concluded that
ATS trade information was an appropriate first step toward increased
transparency in the off-exchange, OTC market. FINRA stated further that
it would consider additional steps, including those suggested by the
commenters, in the future.\29\
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\29\ See FINRA Response Letter at 5. FINRA noted however, that
any commenter's discussion of enhancing the transparency of on-
exchange, non-displayed interest was beyond FINRA's regulatory
jurisdiction.
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Some commenters voiced concern with certain elements of the
proposal or sought further guidance on how the new requirements would
be applied. Of these commenters, a majority argued that the self-
reporting requirement should be limited in some fashion because it
would soon become unnecessary in light of the proposal's MPID
requirement.\30\ For example, five commenters asked FINRA to make an
affirmative commitment that it will eliminate the reporting requirement
once the MPID requirement is fully implemented.\31\ Additionally, three
commenters suggested that FINRA align the proposal's reporting
requirement with Rule 605 of Regulation NMS, meaning that ATSs would
report monthly to FINRA rather than weekly.\32\ Lastly, four commenters
urged FINRA to facilitate compliance with the reporting requirement by
establishing a standard, simple format for data transmission.\33\
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\30\ See Barclays, Fidelity, FIF, KCG, SIFMA, and STA Letters.
No commenter appeared to take issue with the MPID requirement, and
four commenters expressly supported it. See Barclays, Fidelity, IEX,
and KCG Letters.
\31\ See Fidelity, FIF, KCG, SIFMA, and STA Letters.
\32\ See IEX, SIFMA, and STA Letters.
\33\ See FIF, Fidelity, IEX, and SIFMA Letters. The FIF Letter
additionally requested guidance on several other specific, technical
aspects concerning the proposal's implementation. FINRA noted in
response that, if the proposal were approved, it would issue
guidance that addressed technical details like and including those
raised by FIF.
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In its response to these comments, FINRA reiterated that it intends
to evaluate the necessity of the self-reporting requirement after the
MPID requirement is in place. However, FINRA noted that it would plan
to use, for comparison purposes, data reported by ATSs under the self-
reporting requirement even when those ATSs have unique MPIDs used
exclusively to report trades for the ATS. Moreover, FINRA said that the
self-reporting requirement would allow the proposal to more quickly
recognize its objective of enhancing ATS transparency. Accordingly,
FINRA believes that the self-reporting requirement is a necessary first
phase of the proposal. FINRA stated that it would eliminate the self-
reporting requirement for ATSs subject to FINRA trade reporting
requirements
[[Page 4216]]
if the MPID requirement is implemented and operating as
anticipated.\34\
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\34\ See FINRA Response at 6-7. FINRA noted that, under FINRA
rules, an ATS may be granted an exemption from its trade reporting
requirements. FINRA said that, in such a case, it would likely need
to continue requiring the ATS to self-report, even after the MPID
requirement were implemented, because the exempt ATS would not be
using the MPID to report its volume (due to its trade reporting
exemption). See id. at 7 n.13.
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Aside from the self-reporting requirement, several commenters also
expressed concern with FINRA's intent to charge a fee for professionals
to access and use the data.\35\ These comments ranged from questioning
the need for FINRA to charge a fee for data that it would not validate
to flatly opposing the imposition of any fee on the data. In response,
FINRA noted that it would make available for free on its Web site the
most recently reported data, as well as limited historic reports. FINRA
also reiterated its plan to charge profession users and data vendors a
fee to access professional, downloadable reports; however, FINRA stated
it would submit a separate filing to propose the specifics of this data
product.\36\
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\35\ See Barclays, Fidelity, FIF, IEX, ICI, Liquidnet, and STA
Letters.
\36\ See FINRA Response Letter at 8.
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Additionally, one commenter took the position that, if the proposal
is approved, FINRA should open up a second formal comment period one
year after the rule is implemented to allow for an empirical
``retrospective review'' of the proposal's costs and benefits.\37\ In
its response, FINRA disagreed and pointed to the Notice of the Original
Proposal, in which FINRA said it ``intends periodically to assess the
reporting and publication of information to consider whether
modifications to the scope of securities covered, the delay between the
activity and publication, or the frequency of publication of the
information are appropriate.'' \38\ Moreover, FINRA claimed that it
discussed the terms of the proposed rules with a number of ATS
operators prior to submitting the proposal, and ``continues to believe
that the burdens imposed by the Proposal will be minimal for many firms
and that the proposed delays in dissemination are sufficient to avoid
potentially damaging information leakage of trading information.'' \39\
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\37\ See STA Letter at 2-3.
\38\ FINRA Response Letter at 8. The Commission notes that this
quoted language in FINRA's response appears in the Notice of
Original Proposal, 78 FR at 62864.
\39\ FINRA Response Letter at 8-9.
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Lastly, one commenter questioned how the proposal would apply to
fixed income ATSs in light of the fact that trades from fixed income
ATSs may be reported to FINRA by one of the trade counterparties,
rather than by the ATS.\40\ In response, FINRA pointed out that various
of its equity and debt trade reporting rules impose a trade reporting
obligation on an ATS, as the ``executing party'' under FINRA rules,
where the transaction is executed by the ATS. FINRA also noted that,
under the proposal, it would not publish the trade data reported by
fixed income ATSs until it could evaluate the data for consistency.
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\40\ See KCG Letter at 4.
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Furthermore, FINRA submitted Amendment No. 1 to adopt supplementary
material to FINRA Rule 4552 to clarify when trades should be considered
to have occurred ``within an ATS.'' Specifically, the proposed
supplementary material would provide that a trade should be considered
to have occurred within the ATS for purposes of the rule ``if the ATS
(i) executes the trade; (ii) is considered the `executing party' to the
trade under FINRA rules; or (iii) otherwise matches orders constituting
the trade in a manner as contemplated by SEC Rule 3b-16 or SEC
Regulation ATS.'' \41\ So, for example, a trade would be considered to
have occurred ``within an ATS'' if the ATS ``uses established, non-
discretionary methods under which orders interact with each other, and
the buyers and sellers entering the orders agree to the terms of the
trade.'' \42\
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\41\ FINRA Response Letter at 10 (internal citations omitted).
\42\ Id.
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The proposed supplementary material would further provide a non-
exhaustive list of scenarios to illustrate how the ``within an ATS''
standard would be applied. The list would include: if the trade was
executed as a result of the ATS bringing together the purchaser and
seller on or through its systems; if the trade was executed by an ATS's
subscribers where the subscribers used the ATS system to negotiate the
trade, even if the ATS did not itself execute the trade; if the ATS
takes either side of the trade for clearance or settlement or in any
other way inserts itself into a trade. The supplementary material would
also provide that a trade would not be considered to have occurred
``within the ATS'' if an ATS were to route an order to another member
firm or execution venue for handling or execution where that initial
order matches against interest resident at the other venue.\43\
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\43\ The supplementary material would additionally state that
trades would still be considered to have occurred ``within an ATS''
for purposes of reporting volume under the proposal even if the ATS
has been granted an exemption from its trade reporting obligations
under FINRA Rules 6183, 6625, or 6731.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml ); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-FINRA-2013-042 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-2013-042.
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 will also be
available for inspection and copying at the principal office of FINRA.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make publicly
available. All submissions should refer to File Number SR-FINRA-2013-
042 and should be submitted on or before February 14, 2014.
V. Commission Findings
After carefully considering the proposed rule change, as modified
by
[[Page 4217]]
Amendment No. 1, the comments submitted, and FINRA's response to the
comments, the Commission finds that the proposed rule change, as
modified by Amendment No. 1, is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to a national
securities association.\44\ In particular, the Commission finds that
the proposed rule change, as modified by Amendment No. 1, is consistent
with Section 15A(b)(6) of the Act,\45\ 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.
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\44\ In approving this proposed rule change, the Commission has
considered the proposed rule change's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\45\ 15 U.S.C. 78o-3(b)(6).
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The Commission believes that the stated objectives of the
proposal--to enhance FINRA's regulatory capabilities with respect to
ATSs and to increase public transparency with respect to ATS activity--
would further the purposes of the Act. By better enabling FINRA to
surveil ATSs for compliance with Regulation ATS, and the display and
fair access requirements applicable to ATSs that exceed certain volume
thresholds, the proposal is reasonably designed to help prevent
fraudulent and manipulative acts and practices and to protect investors
and the public interest. By collecting and publishing weekly volume
statistics (first, through the self-reporting requirement, and later,
potentially, through the MPID requirement), the proposal would increase
the amount of information that is publicly available concerning trades
that occur in equity ATSs. As many commenters noted, such added
transparency would allow regulators and the public to more fully
understand the role that equity ATSs play in the marketplace.
The Commission further believes that the proposal is reasonably
tailored to achieve these objectives. The self-reporting requirement,
which is meant to constitute the first phase of the proposal, will more
quickly deliver the benefits of the proposal, and also provide a
comparsion for the data that FINRA will receive once the MPID
requirement is fully in effect. While the Commission acknowledges that
some commenters took issue with the additional costs that could
potentially be incurred as a result of the weekly self-reporting
requirement, the Commission notes, as FINRA did in its Notice of
Original Proposal, that ATSs are already required by Regulation ATS to
maintain daily summaries of their trading activities.\46\
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\46\ See 17 CFR 242.301(b)(8); 17 CFR 242.302.
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In addition, the method of making the ATS trade data publicly
available--a two-week delay for Tier 1 NMS stocks and a four-week delay
for all other NMS stocks and OTC Equity Securities--appears reasonably
designed to balance the desire to inform the public about ATS trading
activity with the desire to protect the trading strategies of ATS
subscribers. The Commission notes that three commenters supported this
element of the proposal,\47\ and no commenter objected to the proposed
delays for publishing the trade data.\48\
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\47\ See Fidelity Letter at 3, ICI Letter at 2, and KCG Letter
at 3.
\48\ The Commission notes that one commenter that advocated
monthly, rather than weekly, reporting also recommended a two-week
publishing delay from the end of each month when the information is
reported. See STA Letter at 5.
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The Commission believes that requiring a member operating an ATS to
obtain for each such ATS a single, unique MPID that is designated for
exclusive use by the ATS is consistent with the Act. This aspect of the
proposal is reasonably designed to create a more reliable and
consistent audit trail for ATS activity, from the time an order is
received until the time it is executed or cancelled. This is especially
important for firms that conduct both ATS and other broker-dealer
activities. Currently, if a member uses a single MPID for both its ATS
activity and traditional broker-dealer activity, or uses a single MPID
to report the activity of two or more ATSs, it could be difficult if
not impossible to track the flow of orders through these systems. The
Commission agrees with FINRA's assessment that the fact that many firms
already use separate MPIDs in the manner now required by this proposed
rule change is evidence that the costs of using multiple MPIDs as
contemplated by the proposal is not unduly burdensome. Because the
proposal requires some firms to obtain and use multiple MPIDs, FINRA
has proposed to make permanent certain rules, currently operating on a
pilot basis, that allow firms to use multiple MPIDs. The Commission
also believes that it is consistent with the Act to make those rules
permanent.
Lastly, the Commission believes that the supplementary material
included in Amendment No. 1 is consistent with the Act. In response to
the initial proposal, one commenter questioned how the proposal would
apply to fixed income ATSs, where it is common practice for trades to
be given up to the broker-dealer counterparties.\49\ FINRA responded by
providing new Supplementary Material .01 to proposed Rule 4552
explaining when transactions are attributable to the ATS for purposes
of the proposal's volume reporting provisions. In general, the
supplementary material would require a transaction to be included in
its reporting to FINRA if the ATS executes the trade, is the
``executing party'' to the trade under FINRA rules,\50\ or if the ATS
otherwise matches orders constituting the trade in a manner
contemplated by Rule 3b-16 under the Exchange Act \51\ and Regulation
ATS. The Commission believes that it is consistent with the Act for
FINRA to attribute volume to an ATS when the transactions underlying
that volume would cause the entity itself to meet the criteria of Rule
3b-16.\52\
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\49\ See KCG Letter at 4.
\50\ See FINRA Rules 6282, 6830A, 6930B, and 6622. See also
FINRA Response Letter at 9-10 (discussing when an ATS is considered
an ``executing party'' to a trade under these rules).
\51\ 17 CFR 240.3b-16.
\52\ Meeting the criteria of Rule 3b-16 would in turn would
cause the entity to have to register with the Commission as a
national securities exchange or seek an alternative to exchange
registration, such as registering as a broker-dealer and complying
with Regulation ATS.
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VI. Accelerated Approval
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\53\ for approving the proposed rule change, as modified by
Amendment No. 1 thereto, prior to the 30th day after publication of
Amendment No. 1 in the Federal Register. The new supplementary material
proposed in Amendment No. 1 responds to a specific issue raised in one
comment letter received by the Commission in response to the Notice of
Original Proposal and clarifies when trading volume is attributed to an
ATS for purposes of this proposal's volume reporting requirements.
Amendment No. 1 also proposed a revision to the language describing the
timeframe for FINRA's implementation of the proposal; this revision is
technical in nature and better clarifies FINRA's original intent. The
Commission notes that, beyond two other minor technical revisions that
simply update statutory references,\54\ the rest of the proposed rule
change is not being amended and was subject to a full notice-and-
comment period. These revisions add clarity to the
[[Page 4218]]
proposal and do not raise any novel regulatory concerns. Accordingly,
the Commission finds that good cause exists to approve the proposal, as
modified by Amendment No. 1, on an accelerated basis.
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\53\ 15 U.S.C. 78s(b)(2).
\54\ Specifically, Amendment No. 1 would: (1) amend FINRA Rules
4552, 6160, 6170, 6480, and 6720 to replace ``SEA Rule 300'' with
``Rule 300 of SEC Regulation ATS''; and (2) amend proposed Rule 4552
to replace ``SEA Rule 600(b)(47)'' with ``Rule 600(b)(47) of SEC
Regulation NMS.
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VII. Conclusion
It is therefore ordered pursuant to Section 19(b)(2) of the Act
\55\ that the proposed rule change (SR-FINRA-2013-042), as modified by
Amendment No. 1, be and hereby is approved on an accelerated basis.
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\55\ 15 U.S.C. 78s(b)(2).
\56\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\56\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01395 Filed 1-23-14; 8:45 am]
BILLING CODE 8011-01-P
