Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Establish a Fee Schedule for Alternative Trading System Volume Information, 21324-21328 [2014-08421]

Download as PDF 21324 Federal Register / Vol. 79, No. 72 / Tuesday, April 15, 2014 / Notices Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–ISE–2014–20. 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 (http://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 such filing also will be available for inspection and copying at the principal office of the ISE. 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–ISE– 2014–20 and should be submitted by May 6, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Kevin M. O’Neill, Deputy Secretary. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71919; File No. SR–FINRA– 2014–018] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Establish a Fee Schedule for Alternative Trading System Volume Information April 9, 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 April 4, 2014, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to adopt FINRA Rule 4553 (Fees for ATS Data) to establish a fee schedule for optional professional access to alternative trading system (‘‘ATS’’) volume information published by FINRA on its Web site. Below is the text of the proposed rule change. Proposed new language is in italics; proposed deletions are in brackets. * * * * * 4000. FINANCIAL AND OPERATIONAL RULES * * * * * 4500. BOOKS, RECORDS AND REPORTS * * * * * 4550. ATS Reporting * * * * * 4553. Fees for ATS Data BILLING CODE 8011–01–P mstockstill on DSK4VPTVN1PROD with NOTICES [FR Doc. 2014–08417 Filed 4–14–14; 8:45 am] (a) General Fees are charged for ATS Data as set forth in this Rule. Professionals and Vendors must pay the subscription fee to receive ATS Data in accordance with this Rule and execute appropriate agreements with FINRA. (b) Professionals (1) Professionals may subscribe for the most currently published ATS Data and up to five years of historical ATS Data 1 15 18 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 18:06 Apr 14, 2014 2 17 Jkt 232001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00122 Fmt 4703 Sfmt 4703 in a downloadable, pipe delimited format for a twelve-month subscription fee of $12,000. Such fee is not refundable or transferable. (2) Payment of the Professional subscription fee described in this paragraph (b) provides the Professional with use of such ATS Data to generate Derived Data. (3) Professionals may distribute ATS Data or Derived Data to their employees, affiliates, or employees of affiliates but are prohibited from providing ATS Data or Derived Data to any third party. (c) Vendors (1) Vendors may subscribe for access to the most currently published ATS Data and up to five years of historical ATS Data in a downloadable, pipe delimited format for a twelve-month subscription fee of $18,000. Such fee is not refundable or transferable. (2) Payment of the Vendor subscription fee described in this paragraph (c) provides the Vendor with use of such ATS Data to generate Derived Data. (3) Vendors are prohibited from providing ATS Data to any third party unless a Professional subscription has been purchased for each such third party in accordance with paragraph (b) above. (d) Non-Professionals (1) There shall be no charge paid by a Non-Professional for access to the most recently published four weeks of ATS Data; however, such ATS Data will not be available in a downloadable format. (2) A Non-Professional must agree to terms of use before accessing the ATS Data, including that he or she receives and uses the ATS Data solely for his or her personal, non-commercial use and will not otherwise distribute the ATS Data or Derived Data to other parties. The terms of use for Non-Professionals will be clearly posted on the FINRA.org Web site, and access to the non-fee liable ATS Data content will require a user to acknowledge the terms of use. (e) Definitions For purposes of this rule, the following terms have the meaning set forth: (1) ‘‘ATS Data’’ means Trading Information published by FINRA on its Web site. (2) ‘‘Derived Data’’ means data that is derived from ATS Data and that is not able to be (A) reverse engineered by a reasonably skilled user into ATS Data or (B) used as a surrogate for ATS Data. (3) ‘‘Non-Professional’’ means a natural person who uses the ATS Data solely for his or her personal, noncommercial use. A ‘‘Non-Professional’’ is not: E:\FR\FM\15APN1.SGM 15APN1 Federal Register / Vol. 79, No. 72 / Tuesday, April 15, 2014 / Notices (A) registered nor qualified in any capacity with the SEC, the Commodity Futures Trading Commission, any state securities agency, any securities exchange or association, or any commodities or futures contract market or association, nor an employee of the above and, with respect to any person identified in this subparagraph (A), uses ATS Data for other than personal, noncommercial use; (B) engaged as an ‘‘investment adviser’’ as that term is defined in Section 202(a)(11) of the Investment Advisers Act (whether or not registered or qualified under that Act), nor an employee of the above and, with respect to any person identified in this subparagraph (B), uses ATS Data for other than personal, non-commercial use; (C) employed by a bank, insurance company or other organization exempt from registration under federal or state securities laws to perform functions that would require registration or qualification if such functions were performed for an organization not so exempt, nor any other employee of a bank, insurance company or such other organization referenced above and, with respect to any person identified in this subparagraph (C), uses ATS Data for other than personal, non-commercial use; nor (D) engaged in, nor has the intention to engage in, any commercial redistribution of all or any portion of the ATS Data or Derived Data. (4) ‘‘Professional’’ means any nonnatural person or any natural person that does not meet the definition of ‘‘Non-Professional’’ in paragraph (3). (5) ‘‘Trading Information’’ has the same meaning as set forth in Rule 4552. (6) ‘‘Vendor’’ means a Professional who distributes ATS Data or Derived Data to any third party. * * * * * mstockstill on DSK4VPTVN1PROD with NOTICES 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. VerDate Mar<15>2010 18:06 Apr 14, 2014 Jkt 232001 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose On January 17, 2014, the SEC approved a proposed rule change to (i) adopt FINRA Rule 4552 (Alternative Trading Systems—Trading Information for Securities Executed Within the Alternative Trading System) to require ATSs 3 to report to FINRA weekly volume information and number of trades regarding securities transactions within the ATS; and (ii) amend FINRA Rules 6160, 6170, 6480, and 6720 to require each ATS to acquire and use a single, unique market participant identifier (‘‘MPID’’) when reporting information to FINRA (‘‘MPID Requirement’’).4 The implementation date for the reporting requirements under Rule 4552 is May 12, 2014, and ATSs must comply with the MPID Requirement beginning November 10, 2014.5 As part of these new requirements, and as described in the proposed rule change, FINRA will make the reported volume and trade count information for equity securities publicly available on its Web site. Under Rule 4552, individual ATSs are required to submit weekly reports to FINRA regarding volume information within the ATS.6 For equity securities, this information includes share volume and number of trades for both NMS 3 Regulation ATS defines an ‘‘alternative trading system’’ 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). Rule 4552 and the other amendments in the proposed rule change apply to any alternative trading system, as that term is defined in Regulation ATS, that has filed a Form ATS with the Commission. 4 See Securities Exchange Act Release No. 71341 (January 17, 2014), 79 FR 4213 (January 24, 2014). On April 3, 2014, FINRA amended Rules 4552, 6160, 6170, 6480, and 6720 to revise the reporting and MPID requirements applicable to ATSs. See SR–FINRA–2014–017. The amendments to Rules 6160, 6170, 6480, and 6720 permit an ATS that trades both debt securities reported to FINRA’s Trade Reporting and Compliance Engine (‘‘TRACE’’) and equity securities (OTC Equity Securities or NMS stocks) reported to a FINRA equity reporting facility (the Alternative Display Facility, the OTC Reporting Facility, the FINRA/ Nasdaq TRF, or the FINRA/NYSE TRF) to use two MPIDs, rather than a single unique MPID, if each MPID is used exclusively for either debt or equity securities. 5 See Regulatory Notice 14–07 (February 2014). 6 See Rule 4552(a). PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 21325 stocks and OTC equity securities.7 The first reports pursuant to Rule 4552 are currently due to FINRA by May 28, 2014, covering the week beginning May 12, 2014.8 After FINRA begins receiving the self-reported data from ATSs, FINRA will publish on its Web site, on a delayed basis, the reported information for each equity security for each ATS with appropriate disclosures that the published volume numbers are based on ATS-submitted reports and not reports produced or validated by FINRA.9 Under the MPID Requirement, beginning November 10, 2014, each individual ATS is required, with one exception, to use a unique MPID, which can be used only for activity on the ATS, for reporting trades and orders to FINRA.10 If a firm operates multiple ATSs, each ATS is required to have its own MPID. After the MPID Requirement is implemented in November 2014, FINRA will be able to compare the trade reporting data to the data already being reported to FINRA by the ATSs pursuant to Rule 4552 to verify the consistency and accuracy of both. After FINRA confirms the MPID Requirement is functioning as intended, FINRA will determine whether to use trade reporting data to publish volume information for equity securities rather than requiring ATSs to continue to selfreport volume information pursuant to Rule 4552. FINRA also will consider whether more frequent (e.g., daily) publication is appropriate. As a result of these new requirements, FINRA will make available on its Web site weekly aggregate Trading Information on equity securities as reported by ATSs upon the implementation of Rule 4552 (‘‘ATS Data’’). Based on the information reported by the ATSs pursuant to Rule 4552, the ATS Data will consist of reports listing aggregate volume and number of trades by security for each ATS within the designated time period. The most recently published four weeks of reports will be accessible to NonProfessionals at no cost on FINRA’s Web site, and FINRA will provide a basic web display listing all reporting ATSs and aggregate volume and number of trades for each symbol in which a trade was reported by the ATS during the 7 See Rule 4552(d). Regulatory Notice 14–07 (February 2014). 9 See Rule 4552(b). 10 As noted above, an ATS that trades both debt securities reported to TRACE and equity securities (OTC Equity Securities or NMS stocks) reported to a FINRA equity reporting facility is permitted to use two MPIDs, rather than a single unique MPID, if each MPID is used exclusively for either debt or equity securities. 8 See E:\FR\FM\15APN1.SGM 15APN1 21326 Federal Register / Vol. 79, No. 72 / Tuesday, April 15, 2014 / Notices designated time period. As described below, in addition to viewing the ATS Data via FINRA’s Web site, Professionals and Vendors, as defined in the proposed rule, will have the ability to download reports electronically for their internal use or, in the case of Vendors, for external redistribution. The downloadable reports will provide the same data as the web-based reports but in pipe delimited format, and historical reports of up to five years will be available.11 The proposed rule change establishes a fee schedule for access to and use of the ATS Data, and the proposed fees to be paid by Professionals and Vendors are intended to recover the costs associated with the collection and dissemination of ATS Data. The proposed rule change establishes three categories of users of the ATS Data, each of which is entitled to different levels and use of data and is subject to a different fee structure: (i) Non-Professionals; (ii) Professionals; and (iii) Vendors. Non-Professionals mstockstill on DSK4VPTVN1PROD with NOTICES Under the proposed rule change, NonProfessionals will be able to access, at no cost, the most recent four weeks of ATS Data in a viewable, but not downloadable, format. As used in proposed Rule 4553, a ‘‘NonProfessional’’ 12 is generally a natural person who uses the ATS Data solely for his or her personal, non-commercial use and is not: (i) Registered or qualified in any capacity with the SEC, the Commodity Futures Trading Commission, any state securities agency, any securities exchange or association, or any commodities or futures contract market or association, nor an employee of the above; (ii) engaged as an ‘‘investment adviser’’ as that term is defined in Section 202(a)(11) of the Investment Advisers Act 13 (whether or not registered or qualified under that Act), nor an employee of the above; (iii) employed by a bank, insurance company or other organization exempt from registration under federal or state securities laws to 11 There will be no reports for time periods before the implementation of Rule 4552. In addition to weekly reports, FINRA intends to produce quarterly reports summarizing the information. The quarterly reports would be publicly available for no charge on FINRA’s Web site. 12 FINRA notes that the proposed definition of ‘‘Non-Professional’’ is substantially the same as the one used under the TRACE data dissemination rules. See Rule 7730(f) (Definitions). Generally, non-commercial requests from regulators, academics, and ad hoc requests from media reporters would be considered non-professional usage under this definition. 13 See 15 U.S.C. 80b–2(a)(11). VerDate Mar<15>2010 18:06 Apr 14, 2014 Jkt 232001 perform functions that would require registration or qualification if such functions were performed for an organization not so exempt, nor any other employee of a bank, insurance company or such other organization referenced above; or (iv) engaged in, or has the intention to engage in, any commercial redistribution of all or any portion of the ATS Data or Derived Data.14 Any individual seeking access to the ATS Data must confirm that he or she is either (i) a Non-Professional or (ii) a Professional (or an affiliate or employee thereof) that has a current Professional or Vendor subscription. A Non-Professional will be required to certify that he or she is a ‘‘NonProfessional’’ within the meaning of proposed Rule 4553 and agree to certain terms of use of the ATS Data, including that he or she receives and uses the ATS Data solely for his or her personal, noncommercial use, and conditions regarding use of the data and prohibiting redistribution of the data. Professionals A ‘‘Professional’’ is defined as any non-natural person or any natural person that does not meet the definition of ‘‘Non-Professional.’’ Under the proposed rule change, to access the ATS Data, Professionals are required to pay an annual, enterprise-wide subscription fee of $12,000 that is non-transferable and renewable annually. A Professional who has paid the subscription fee will have access to the ATS Data available to Non-Professionals, as well as access to up to five years of historical ATS Data, in a downloadable format. The Professional subscription allows an unlimited number of users within the firm to access the ATS Data. Thus, regardless of the size of the entity in question, the subscription fee for the entity would be $12,000 for a twelvemonth subscription. Professionals are not permitted to redistribute ATS Data or Derived Data outside of the enterprise (e.g., to their customers); however, Professionals are permitted to distribute ATS Data and Derived Data within the enterprise (including the firm, any affiliates of the firm, and employees thereof). Professionals will be required to agree to the terms of FINRA’s ATS Data Subscriber Agreement, which establishes the terms and conditions of access to the ATS Data. If the Professional is a FINRA member, the member will have access to the ATS Data so that all of the member’s entitled 14 The proposed rule change defines ‘‘Derived Data’’ as data that is derived from ATS Data and that is not able to be (A) reverse engineered by a reasonably skilled user into ATS Data or (B) used as a surrogate for ATS Data. PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 users can access the ATS Data under the member’s Central Registration Depository number. Professionals that are not FINRA members will be provided with a single logon that may be shared within the entity and its affiliates and employees, but may not be used outside of the entity, its affiliates, and their employees. Vendors The proposed rule change also includes a Vendor subscription fee of $18,000 per year. A Vendor is defined as a Professional that redistributes ATS Data or Derived Data to third parties. A Vendor license permits a Vendor to redistribute the ATS Data or Derived Data in any form (or in exactly the form FINRA provides to the Vendor). In addition to the Vendor subscription fee, a Vendor may provide ATS Data to a third party only if a yearly, nontransferable, enterprise-wide Professional Subscriber license has been purchased for each such third party. Vendors must track specific users and their entitlements (and annual commitment term) and will be subject to regular audits to ensure accurate and timely compliance with redissemination reporting and payment. As with TRACE data, Vendors would be responsible for reporting entity usage as a result of their redistribution of the data. As noted in Item 2 of this filing, FINRA is proposing that the proposed rule change be effective upon Commission approval. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(5) of the Act,15 which requires, among other things, that FINRA rules provide for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system that FINRA operates or controls. FINRA believes that, as described below, the proposed fee is reasonable when compared to existing fees for similar data products. Currently, there are several offerings of ATS volume data available to the public. FINRA understands anecdotally that the most prevalent dark pool volume data product currently offered in the marketplace has a base cost that is significantly higher than the proposed FINRA fee. FINRA understands that this report provides monthly aggregate volume figures by ATS based on voluntarily submitted dark pool ATS 15 15 E:\FR\FM\15APN1.SGM U.S.C. 78o–3(b)(5). 15APN1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 79, No. 72 / Tuesday, April 15, 2014 / Notices data and estimated data. It also provides commentary and analysis regarding the data and volume trends. In addition, the NASDAQ OMX Group, Inc. (‘‘NASDAQ OMX’’) also offers a Daily Share Volume (‘‘DSV’’) product that provides some market transparency by MPID, rather than by ATS, with respect to aggregate volume executed through the NASDAQ OMX equity exchange facilities.16 The DSV product provides end-of-day aggregate volume by MPID and by symbol for those members that opt into the program. On an end-of-month basis, the DSV product provides for aggregate volume by symbol for all members unless they explicitly opt out. The monthly fee for the DSV product is $2,500 per user or $5,000 per month on an enterprise basis (or $54,000 for an annual subscription). The ATS Data to be provided by FINRA differs in significant respects from those described above. For example, the ATS Data provided by FINRA will include all ATS volume (regardless of the FINRA Trade Reporting Facility to which ATS trades are reported) and will offer more granular data by providing aggregate volume by ATS and by symbol. In addition, after the MPID Requirement is implemented, the ATS Data will include data that is calculated and validated by FINRA through the submission of trades for each ATS broken out by MPID.17 Currently, available ATS-specific data is voluntarily submitted and not otherwise validated. Moreover, because the submission of data for the currently available reports is voluntary, certain ATSs may choose not to submit volume reports. The ATS data FINRA will provide will offer more granular data in that the current reports provide aggregate level volume by ATS, while FINRA will provide aggregate level volume by ATS and by symbol. FINRA will also provide ATS data on a weekly basis (with the delay period prior to publication specified in Rule 4552), while the current reports are made available on a monthly basis. FINRA believes the ATS data it will provide will deliver significant benefits to the marketplace overall by increasing transparency and providing additional tools for market participants to engage in better, more timely and more reliable analysis regarding ATS trade volume trends. FINRA further believes the proposed fee schedule is fair and 16 See Securities Exchange Act Release No. 59580 (March 13, 2009), 74 FR 12169 (March 23, 2009). 17 As noted above, until the MPID Requirement is implemented, FINRA will be providing data that is self-reported by ATSs and not validated by FINRA. VerDate Mar<15>2010 18:06 Apr 14, 2014 Jkt 232001 equitable in light of what comparable data is currently available in the marketplace and the price at which it is currently available. FINRA is proposing to establish a fee for professional access to the data in order to recover the costs associated with collecting, formatting, and disseminating the data. In setting the amount of the fee, however, FINRA does not have an exact estimate as to how many subscribers will ultimately pay the proposed fee to access ATS Data. Thus, as discussed above, FINRA is proposing to set the fee at a level significantly below the fees that currently are in place for comparable products in the marketplace. As noted, FINRA believes this fee proposal is fair and reasonable in light of the fact that the level of data to be provided by the FINRA product will be materially more granular than the level of data provided by the comparable products currently available. FINRA intends to reassess the fairness and reasonableness of the proposed fee once it has more experience with the actual usage and ultimate fees paid to access ATS Data, and, if appropriate, may adjust the fee accordingly. Any changes to the fees would be subject to a separate proposed rule change by FINRA with the SEC. 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. Although several organizations currently provide ATS volume reports to the public, FINRA will provide raw data only and will not be providing any value-added analysis to the data. Moreover, FINRA believes that any burden on competition is outweighed by the benefits to market transparency provided by the proposed rule change, such that any burden is necessary and appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Although written comments were not solicited regarding the specific fee provisions in the proposed rule change, nine comments were received on the proposed rule change adopting Rule 4552 and the MPID Requirement (‘‘Proposal’’) that addressed charging a fee for ATS Data.18 A list of those 18 See Letter to Elizabeth M. Murphy, Secretary, SEC, from William White, Head of Electronic PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 21327 comment letters received in response to SR–FINRA–2013–042 that addressed a subscription fee is attached as Exhibit 2a. Copies of the comment letters are attached in Exhibit 2b. Many of the commenters objected, on some level, to FINRA charging a fee for some of the ATS Data that will be made available; however, the details of the proposed fee were not included in the Proposal. These comments ranged from asserting that the information should be provided free of charge to requesting more information on the fee itself. Several commenters asserted that a fee conflicts with the principles of accessibility of information and transparency.19 One commenter asserted possible legal consequences with reporting and selling ATS data.20 Some commenters noted that free information may better facilitate analysis and market transparency and is consistent with the SEC’s publication of market information.21 One commenter suggested that, given the delayed and limited scope of data, the effort to establish entitlements and fees was not justified,22 while another stated that since FINRA is not producing or validating the information, a fee is unnecessary.23 As previously stated, FINRA believes that establishing a fee for Professionals and Vendors to access ATS Data is appropriate to help FINRA recover the costs associated with collecting, formatting, and disseminating the data. Moreover, as noted above, following the Trading, Barclays Capital Inc., dated November 12, 2013 (‘‘Barclays’’); Letter to Elizabeth M. Murphy, Secretary, SEC, from Scott C. Goebel, Senior Vice President and Deputy General Counsel, Fidelity Investments, dated November 12, 2013 (‘‘Fidelity’’); Letter to Elizabeth M. Murphy, Secretary, SEC, from Manisha Kimmel, Executive Director, Financial Information Forum, dated November 12, 2013 (‘‘FIF’’); Letter to Elizabeth M. Murphy, Secretary, SEC, from Ari Burstein, Senior Counsel, Investment Company Institute, dated November 12, 2013 (‘‘ICI’’); Letter to Elizabeth M. Murphy, Secretary, SEC, from Donald Bollerman, Head of Market Operations, IEX Services LLC, dated November 11, 2013 (‘‘IEX’’); Letter to Elizabeth M. Murphy, Secretary, SEC, from Howard Meyerson, General Counsel, Liquidnet, Inc., dated November 12, 2013 (‘‘Liquidnet’’); Letter to Elizabeth M. Murphy, Secretary, SEC, from Thomas M. Carter, Chairman of the Board and James Toes, President & Chief Executive Officer, Security Traders Association, dated November 12, 2013 (‘‘STA’’); Letter to Elizabeth M. Murphy, Secretary, SEC, from Theodore R. Lazo, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, dated November 11, 2013 (‘‘SIFMA’’) and Letter to Elizabeth M. Murphy, Secretary, SEC, from Timothy Quast, President and Founder, ModernIR, dated February 1, 2014 (‘‘ModernIR’’). 19 See Barclays, Fidelity, Liquidnet. 20 See ModernIR. 21 See Barclays, Fidelity, FIF. 22 See FIF. 23 See Fidelity. E:\FR\FM\15APN1.SGM 15APN1 21328 Federal Register / Vol. 79, No. 72 / Tuesday, April 15, 2014 / Notices implementation of the MPID Requirement, FINRA will be calculating and validating the information rather than relying on ATSs to self-report data to FINRA. FINRA further believes that the level of the fee is fair and reasonable considering it is substantially lower than fees charged for less granular ATS data products currently offered in the marketplace. As noted, FINRA intends to reassess the amount of the fee after it has more experience with the ATS Data usage and actual fees paid. Any proposed changes to the fee will be submitted to the Commission pursuant to Section 19(b)(3)(A)(ii) of the Act 24 and subject to public comment. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of 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– 2014–018, and should be submitted on or before May 6, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–08421 Filed 4–14–14; 8:45 am] Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– FINRA–2014–018 on the subject line. mstockstill on DSK4VPTVN1PROD with NOTICES 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: Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to the Qualified Market Maker Incentive Program Under Rule 7014, and the Schedule of Fees and Rebates Under Rule 7018 Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–FINRA–2014–018. 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 April 10, 2014. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71925; File No. SR– NASDAQ–2014–031] 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 April 2, 2014 The NASDAQ Stock Market LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. 25 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 24 15 U.S.C. 78s(b)(3)(A)(ii). VerDate Mar<15>2010 18:06 Apr 14, 2014 Jkt 232001 PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 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 NASDAQ is proposing to make changes to the Qualified Market Maker (‘‘QMM’’) Incentive Program under Rule 7014, and the schedule of fees and rebates for execution and routing of orders under Rule 7018. The changes will be implemented effective April 2, 2014. The text of the proposed rule change is available at nasdaq.cchwallstreet.com, at NASDAQ’s principal office, 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, NASDAQ 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 NASDAQ is proposing several changes to the QMM Incentive Program under Rule 7014 and to the schedule of fees and credits applicable to execution and routing of orders under Rule 7018, which are described in detail below. QMM Incentive Program NASDAQ is adding a new QMM eligibility requirement to the QMM Incentive Program under Rule 7014(d). A QMM is a member that makes a significant contribution to market quality by providing liquidity at the National Best Bid or Offer (‘‘NBBO’’) in a large number of stocks for a significant portion of the day. In addition, the member must avoid imposing the burdens on NASDAQ and its market participants that may be associated with excessive rates of entry of orders away from the inside and/or order cancellation. The designation reflects the QMM’s commitment to provide meaningful and consistent support to E:\FR\FM\15APN1.SGM 15APN1

Agencies

[Federal Register Volume 79, Number 72 (Tuesday, April 15, 2014)]
[Notices]
[Pages 21324-21328]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08421]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71919; File No. SR-FINRA-2014-018]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change To 
Establish a Fee Schedule for Alternative Trading System Volume 
Information

April 9, 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 April 4, 2014, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by FINRA. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to adopt FINRA Rule 4553 (Fees for ATS Data) to 
establish a fee schedule for optional professional access to 
alternative trading system (``ATS'') volume information published by 
FINRA on its Web site.
    Below is the text of the proposed rule change. Proposed new 
language is in italics; proposed deletions are in brackets.
* * * * *

4000. FINANCIAL AND OPERATIONAL RULES

* * * * *

4500. BOOKS, RECORDS AND REPORTS

* * * * *

4550. ATS Reporting

* * * * *

4553. Fees for ATS Data

    (a) General
    Fees are charged for ATS Data as set forth in this Rule. 
Professionals and Vendors must pay the subscription fee to receive ATS 
Data in accordance with this Rule and execute appropriate agreements 
with FINRA.
    (b) Professionals
    (1) Professionals may subscribe for the most currently published 
ATS Data and up to five years of historical ATS Data in a downloadable, 
pipe delimited format for a twelve-month subscription fee of $12,000. 
Such fee is not refundable or transferable.
    (2) Payment of the Professional subscription fee described in this 
paragraph (b) provides the Professional with use of such ATS Data to 
generate Derived Data.
    (3) Professionals may distribute ATS Data or Derived Data to their 
employees, affiliates, or employees of affiliates but are prohibited 
from providing ATS Data or Derived Data to any third party.
    (c) Vendors
    (1) Vendors may subscribe for access to the most currently 
published ATS Data and up to five years of historical ATS Data in a 
downloadable, pipe delimited format for a twelve-month subscription fee 
of $18,000. Such fee is not refundable or transferable.
    (2) Payment of the Vendor subscription fee described in this 
paragraph (c) provides the Vendor with use of such ATS Data to generate 
Derived Data.
    (3) Vendors are prohibited from providing ATS Data to any third 
party unless a Professional subscription has been purchased for each 
such third party in accordance with paragraph (b) above.
    (d) Non-Professionals
    (1) There shall be no charge paid by a Non-Professional for access 
to the most recently published four weeks of ATS Data; however, such 
ATS Data will not be available in a downloadable format.
    (2) A Non-Professional must agree to terms of use before accessing 
the ATS Data, including that he or she receives and uses the ATS Data 
solely for his or her personal, non-commercial use and will not 
otherwise distribute the ATS Data or Derived Data to other parties. The 
terms of use for Non-Professionals will be clearly posted on the 
FINRA.org Web site, and access to the non-fee liable ATS Data content 
will require a user to acknowledge the terms of use.
    (e) Definitions
    For purposes of this rule, the following terms have the meaning set 
forth:
    (1) ``ATS Data'' means Trading Information published by FINRA on 
its Web site.
    (2) ``Derived Data'' means data that is derived from ATS Data and 
that is not able to be (A) reverse engineered by a reasonably skilled 
user into ATS Data or (B) used as a surrogate for ATS Data.
    (3) ``Non-Professional'' means a natural person who uses the ATS 
Data solely for his or her personal, non-commercial use. A ``Non-
Professional'' is not:

[[Page 21325]]

    (A) registered nor qualified in any capacity with the SEC, the 
Commodity Futures Trading Commission, any state securities agency, any 
securities exchange or association, or any commodities or futures 
contract market or association, nor an employee of the above and, with 
respect to any person identified in this subparagraph (A), uses ATS 
Data for other than personal, non-commercial use;
    (B) engaged as an ``investment adviser'' as that term is defined in 
Section 202(a)(11) of the Investment Advisers Act (whether or not 
registered or qualified under that Act), nor an employee of the above 
and, with respect to any person identified in this subparagraph (B), 
uses ATS Data for other than personal, non-commercial use;
    (C) employed by a bank, insurance company or other organization 
exempt from registration under federal or state securities laws to 
perform functions that would require registration or qualification if 
such functions were performed for an organization not so exempt, nor 
any other employee of a bank, insurance company or such other 
organization referenced above and, with respect to any person 
identified in this subparagraph (C), uses ATS Data for other than 
personal, non-commercial use; nor
    (D) engaged in, nor has the intention to engage in, any commercial 
redistribution of all or any portion of the ATS Data or Derived Data.
    (4) ``Professional'' means any non-natural person or any natural 
person that does not meet the definition of ``Non-Professional'' in 
paragraph (3).
    (5) ``Trading Information'' has the same meaning as set forth in 
Rule 4552.
    (6) ``Vendor'' means a Professional who distributes ATS Data or 
Derived Data to any third party.
* * * * *

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On January 17, 2014, the SEC approved a proposed rule change to (i) 
adopt FINRA Rule 4552 (Alternative Trading Systems--Trading Information 
for Securities Executed Within the Alternative Trading System) to 
require ATSs \3\ to report to FINRA weekly volume information and 
number of trades regarding securities transactions within the ATS; and 
(ii) amend FINRA Rules 6160, 6170, 6480, and 6720 to require each ATS 
to acquire and use a single, unique market participant identifier 
(``MPID'') when reporting information to FINRA (``MPID 
Requirement'').\4\ The implementation date for the reporting 
requirements under Rule 4552 is May 12, 2014, and ATSs must comply with 
the MPID Requirement beginning November 10, 2014.\5\ As part of these 
new requirements, and as described in the proposed rule change, FINRA 
will make the reported volume and trade count information for equity 
securities publicly available on its Web site.
---------------------------------------------------------------------------

    \3\ Regulation ATS defines an ``alternative trading system'' 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). Rule 4552 and 
the other amendments in the proposed rule change apply to any 
alternative trading system, as that term is defined in Regulation 
ATS, that has filed a Form ATS with the Commission.
    \4\ See Securities Exchange Act Release No. 71341 (January 17, 
2014), 79 FR 4213 (January 24, 2014). On April 3, 2014, FINRA 
amended Rules 4552, 6160, 6170, 6480, and 6720 to revise the 
reporting and MPID requirements applicable to ATSs. See SR-FINRA-
2014-017. The amendments to Rules 6160, 6170, 6480, and 6720 permit 
an ATS that trades both debt securities reported to FINRA's Trade 
Reporting and Compliance Engine (``TRACE'') and equity securities 
(OTC Equity Securities or NMS stocks) reported to a FINRA equity 
reporting facility (the Alternative Display Facility, the OTC 
Reporting Facility, the FINRA/Nasdaq TRF, or the FINRA/NYSE TRF) to 
use two MPIDs, rather than a single unique MPID, if each MPID is 
used exclusively for either debt or equity securities.
    \5\ See Regulatory Notice 14-07 (February 2014).
---------------------------------------------------------------------------

    Under Rule 4552, individual ATSs are required to submit weekly 
reports to FINRA regarding volume information within the ATS.\6\ For 
equity securities, this information includes share volume and number of 
trades for both NMS stocks and OTC equity securities.\7\ The first 
reports pursuant to Rule 4552 are currently due to FINRA by May 28, 
2014, covering the week beginning May 12, 2014.\8\ After FINRA begins 
receiving the self-reported data from ATSs, FINRA will publish on its 
Web site, on a delayed basis, the reported information for each equity 
security for each ATS with appropriate disclosures that the published 
volume numbers are based on ATS-submitted reports and not reports 
produced or validated by FINRA.\9\
---------------------------------------------------------------------------

    \6\ See Rule 4552(a).
    \7\ See Rule 4552(d).
    \8\ See Regulatory Notice 14-07 (February 2014).
    \9\ See Rule 4552(b).
---------------------------------------------------------------------------

    Under the MPID Requirement, beginning November 10, 2014, each 
individual ATS is required, with one exception, to use a unique MPID, 
which can be used only for activity on the ATS, for reporting trades 
and orders to FINRA.\10\ If a firm operates multiple ATSs, each ATS is 
required to have its own MPID. After the MPID Requirement is 
implemented in November 2014, FINRA will be able to compare the trade 
reporting data to the data already being reported to FINRA by the ATSs 
pursuant to Rule 4552 to verify the consistency and accuracy of both. 
After FINRA confirms the MPID Requirement is functioning as intended, 
FINRA will determine whether to use trade reporting data to publish 
volume information for equity securities rather than requiring ATSs to 
continue to self-report volume information pursuant to Rule 4552. FINRA 
also will consider whether more frequent (e.g., daily) publication is 
appropriate.
---------------------------------------------------------------------------

    \10\ As noted above, an ATS that trades both debt securities 
reported to TRACE and equity securities (OTC Equity Securities or 
NMS stocks) reported to a FINRA equity reporting facility is 
permitted to use two MPIDs, rather than a single unique MPID, if 
each MPID is used exclusively for either debt or equity securities.
---------------------------------------------------------------------------

    As a result of these new requirements, FINRA will make available on 
its Web site weekly aggregate Trading Information on equity securities 
as reported by ATSs upon the implementation of Rule 4552 (``ATS 
Data''). Based on the information reported by the ATSs pursuant to Rule 
4552, the ATS Data will consist of reports listing aggregate volume and 
number of trades by security for each ATS within the designated time 
period. The most recently published four weeks of reports will be 
accessible to Non-Professionals at no cost on FINRA's Web site, and 
FINRA will provide a basic web display listing all reporting ATSs and 
aggregate volume and number of trades for each symbol in which a trade 
was reported by the ATS during the

[[Page 21326]]

designated time period. As described below, in addition to viewing the 
ATS Data via FINRA's Web site, Professionals and Vendors, as defined in 
the proposed rule, will have the ability to download reports 
electronically for their internal use or, in the case of Vendors, for 
external redistribution. The downloadable reports will provide the same 
data as the web-based reports but in pipe delimited format, and 
historical reports of up to five years will be available.\11\ The 
proposed rule change establishes a fee schedule for access to and use 
of the ATS Data, and the proposed fees to be paid by Professionals and 
Vendors are intended to recover the costs associated with the 
collection and dissemination of ATS Data.
---------------------------------------------------------------------------

    \11\ There will be no reports for time periods before the 
implementation of Rule 4552. In addition to weekly reports, FINRA 
intends to produce quarterly reports summarizing the information. 
The quarterly reports would be publicly available for no charge on 
FINRA's Web site.
---------------------------------------------------------------------------

    The proposed rule change establishes three categories of users of 
the ATS Data, each of which is entitled to different levels and use of 
data and is subject to a different fee structure: (i) Non-
Professionals; (ii) Professionals; and (iii) Vendors.
Non-Professionals
    Under the proposed rule change, Non-Professionals will be able to 
access, at no cost, the most recent four weeks of ATS Data in a 
viewable, but not downloadable, format. As used in proposed Rule 4553, 
a ``Non-Professional'' \12\ is generally a natural person who uses the 
ATS Data solely for his or her personal, non-commercial use and is not: 
(i) Registered or qualified in any capacity with the SEC, the Commodity 
Futures Trading Commission, any state securities agency, any securities 
exchange or association, or any commodities or futures contract market 
or association, nor an employee of the above; (ii) engaged as an 
``investment adviser'' as that term is defined in Section 202(a)(11) of 
the Investment Advisers Act \13\ (whether or not registered or 
qualified under that Act), nor an employee of the above; (iii) employed 
by a bank, insurance company or other organization exempt from 
registration under federal or state securities laws to perform 
functions that would require registration or qualification if such 
functions were performed for an organization not so exempt, nor any 
other employee of a bank, insurance company or such other organization 
referenced above; or (iv) engaged in, or has the intention to engage 
in, any commercial redistribution of all or any portion of the ATS Data 
or Derived Data.\14\ Any individual seeking access to the ATS Data must 
confirm that he or she is either (i) a Non-Professional or (ii) a 
Professional (or an affiliate or employee thereof) that has a current 
Professional or Vendor subscription. A Non-Professional will be 
required to certify that he or she is a ``Non-Professional'' within the 
meaning of proposed Rule 4553 and agree to certain terms of use of the 
ATS Data, including that he or she receives and uses the ATS Data 
solely for his or her personal, non-commercial use, and conditions 
regarding use of the data and prohibiting redistribution of the data.
---------------------------------------------------------------------------

    \12\ FINRA notes that the proposed definition of ``Non-
Professional'' is substantially the same as the one used under the 
TRACE data dissemination rules. See Rule 7730(f) (Definitions). 
Generally, non-commercial requests from regulators, academics, and 
ad hoc requests from media reporters would be considered non-
professional usage under this definition.
    \13\ See 15 U.S.C. 80b-2(a)(11).
    \14\ The proposed rule change defines ``Derived Data'' as data 
that is derived from ATS Data and that is not able to be (A) reverse 
engineered by a reasonably skilled user into ATS Data or (B) used as 
a surrogate for ATS Data.
---------------------------------------------------------------------------

Professionals
    A ``Professional'' is defined as any non-natural person or any 
natural person that does not meet the definition of ``Non-
Professional.'' Under the proposed rule change, to access the ATS Data, 
Professionals are required to pay an annual, enterprise-wide 
subscription fee of $12,000 that is non-transferable and renewable 
annually. A Professional who has paid the subscription fee will have 
access to the ATS Data available to Non-Professionals, as well as 
access to up to five years of historical ATS Data, in a downloadable 
format. The Professional subscription allows an unlimited number of 
users within the firm to access the ATS Data. Thus, regardless of the 
size of the entity in question, the subscription fee for the entity 
would be $12,000 for a twelve-month subscription. Professionals are not 
permitted to redistribute ATS Data or Derived Data outside of the 
enterprise (e.g., to their customers); however, Professionals are 
permitted to distribute ATS Data and Derived Data within the enterprise 
(including the firm, any affiliates of the firm, and employees 
thereof). Professionals will be required to agree to the terms of 
FINRA's ATS Data Subscriber Agreement, which establishes the terms and 
conditions of access to the ATS Data. If the Professional is a FINRA 
member, the member will have access to the ATS Data so that all of the 
member's entitled users can access the ATS Data under the member's 
Central Registration Depository number. Professionals that are not 
FINRA members will be provided with a single logon that may be shared 
within the entity and its affiliates and employees, but may not be used 
outside of the entity, its affiliates, and their employees.
Vendors
    The proposed rule change also includes a Vendor subscription fee of 
$18,000 per year. A Vendor is defined as a Professional that 
redistributes ATS Data or Derived Data to third parties. A Vendor 
license permits a Vendor to redistribute the ATS Data or Derived Data 
in any form (or in exactly the form FINRA provides to the Vendor). In 
addition to the Vendor subscription fee, a Vendor may provide ATS Data 
to a third party only if a yearly, non-transferable, enterprise-wide 
Professional Subscriber license has been purchased for each such third 
party. Vendors must track specific users and their entitlements (and 
annual commitment term) and will be subject to regular audits to ensure 
accurate and timely compliance with re-dissemination reporting and 
payment. As with TRACE data, Vendors would be responsible for reporting 
entity usage as a result of their redistribution of the data.
    As noted in Item 2 of this filing, FINRA is proposing that the 
proposed rule change be effective upon Commission approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(5) of the Act,\15\ which requires, among 
other things, that FINRA rules provide for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system that FINRA operates or 
controls.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

    FINRA believes that, as described below, the proposed fee is 
reasonable when compared to existing fees for similar data products. 
Currently, there are several offerings of ATS volume data available to 
the public. FINRA understands anecdotally that the most prevalent dark 
pool volume data product currently offered in the marketplace has a 
base cost that is significantly higher than the proposed FINRA fee. 
FINRA understands that this report provides monthly aggregate volume 
figures by ATS based on voluntarily submitted dark pool ATS

[[Page 21327]]

data and estimated data. It also provides commentary and analysis 
regarding the data and volume trends.
    In addition, the NASDAQ OMX Group, Inc. (``NASDAQ OMX'') also 
offers a Daily Share Volume (``DSV'') product that provides some market 
transparency by MPID, rather than by ATS, with respect to aggregate 
volume executed through the NASDAQ OMX equity exchange facilities.\16\ 
The DSV product provides end-of-day aggregate volume by MPID and by 
symbol for those members that opt into the program. On an end-of-month 
basis, the DSV product provides for aggregate volume by symbol for all 
members unless they explicitly opt out. The monthly fee for the DSV 
product is $2,500 per user or $5,000 per month on an enterprise basis 
(or $54,000 for an annual subscription).
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 59580 (March 13, 
2009), 74 FR 12169 (March 23, 2009).
---------------------------------------------------------------------------

    The ATS Data to be provided by FINRA differs in significant 
respects from those described above. For example, the ATS Data provided 
by FINRA will include all ATS volume (regardless of the FINRA Trade 
Reporting Facility to which ATS trades are reported) and will offer 
more granular data by providing aggregate volume by ATS and by symbol. 
In addition, after the MPID Requirement is implemented, the ATS Data 
will include data that is calculated and validated by FINRA through the 
submission of trades for each ATS broken out by MPID.\17\ Currently, 
available ATS-specific data is voluntarily submitted and not otherwise 
validated. Moreover, because the submission of data for the currently 
available reports is voluntary, certain ATSs may choose not to submit 
volume reports. The ATS data FINRA will provide will offer more 
granular data in that the current reports provide aggregate level 
volume by ATS, while FINRA will provide aggregate level volume by ATS 
and by symbol. FINRA will also provide ATS data on a weekly basis (with 
the delay period prior to publication specified in Rule 4552), while 
the current reports are made available on a monthly basis. FINRA 
believes the ATS data it will provide will deliver significant benefits 
to the marketplace overall by increasing transparency and providing 
additional tools for market participants to engage in better, more 
timely and more reliable analysis regarding ATS trade volume trends. 
FINRA further believes the proposed fee schedule is fair and equitable 
in light of what comparable data is currently available in the 
marketplace and the price at which it is currently available.
---------------------------------------------------------------------------

    \17\ As noted above, until the MPID Requirement is implemented, 
FINRA will be providing data that is self-reported by ATSs and not 
validated by FINRA.
---------------------------------------------------------------------------

    FINRA is proposing to establish a fee for professional access to 
the data in order to recover the costs associated with collecting, 
formatting, and disseminating the data. In setting the amount of the 
fee, however, FINRA does not have an exact estimate as to how many 
subscribers will ultimately pay the proposed fee to access ATS Data. 
Thus, as discussed above, FINRA is proposing to set the fee at a level 
significantly below the fees that currently are in place for comparable 
products in the marketplace. As noted, FINRA believes this fee proposal 
is fair and reasonable in light of the fact that the level of data to 
be provided by the FINRA product will be materially more granular than 
the level of data provided by the comparable products currently 
available.
    FINRA intends to reassess the fairness and reasonableness of the 
proposed fee once it has more experience with the actual usage and 
ultimate fees paid to access ATS Data, and, if appropriate, may adjust 
the fee accordingly. Any changes to the fees would be subject to a 
separate proposed rule change by FINRA with the SEC.

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. Although several organizations 
currently provide ATS volume reports to the public, FINRA will provide 
raw data only and will not be providing any value-added analysis to the 
data. Moreover, FINRA believes that any burden on competition is 
outweighed by the benefits to market transparency provided by the 
proposed rule change, such that any burden is necessary and appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Although written comments were not solicited regarding the specific 
fee provisions in the proposed rule change, nine comments were received 
on the proposed rule change adopting Rule 4552 and the MPID Requirement 
(``Proposal'') that addressed charging a fee for ATS Data.\18\ A list 
of those comment letters received in response to SR-FINRA-2013-042 that 
addressed a subscription fee is attached as Exhibit 2a. Copies of the 
comment letters are attached in Exhibit 2b.
---------------------------------------------------------------------------

    \18\ See Letter to Elizabeth M. Murphy, Secretary, SEC, from 
William White, Head of Electronic Trading, Barclays Capital Inc., 
dated November 12, 2013 (``Barclays''); Letter to Elizabeth M. 
Murphy, Secretary, SEC, from Scott C. Goebel, Senior Vice President 
and Deputy General Counsel, Fidelity Investments, dated November 12, 
2013 (``Fidelity''); Letter to Elizabeth M. Murphy, Secretary, SEC, 
from Manisha Kimmel, Executive Director, Financial Information 
Forum, dated November 12, 2013 (``FIF''); Letter to Elizabeth M. 
Murphy, Secretary, SEC, from Ari Burstein, Senior Counsel, 
Investment Company Institute, dated November 12, 2013 (``ICI''); 
Letter to Elizabeth M. Murphy, Secretary, SEC, from Donald 
Bollerman, Head of Market Operations, IEX Services LLC, dated 
November 11, 2013 (``IEX''); Letter to Elizabeth M. Murphy, 
Secretary, SEC, from Howard Meyerson, General Counsel, Liquidnet, 
Inc., dated November 12, 2013 (``Liquidnet''); Letter to Elizabeth 
M. Murphy, Secretary, SEC, from Thomas M. Carter, Chairman of the 
Board and James Toes, President & Chief Executive Officer, Security 
Traders Association, dated November 12, 2013 (``STA''); Letter to 
Elizabeth M. Murphy, Secretary, SEC, from Theodore R. Lazo, Managing 
Director and Associate General Counsel, Securities Industry and 
Financial Markets Association, dated November 11, 2013 (``SIFMA'') 
and Letter to Elizabeth M. Murphy, Secretary, SEC, from Timothy 
Quast, President and Founder, ModernIR, dated February 1, 2014 
(``ModernIR'').
---------------------------------------------------------------------------

    Many of the commenters objected, on some level, to FINRA charging a 
fee for some of the ATS Data that will be made available; however, the 
details of the proposed fee were not included in the Proposal. These 
comments ranged from asserting that the information should be provided 
free of charge to requesting more information on the fee itself. 
Several commenters asserted that a fee conflicts with the principles of 
accessibility of information and transparency.\19\ One commenter 
asserted possible legal consequences with reporting and selling ATS 
data.\20\ Some commenters noted that free information may better 
facilitate analysis and market transparency and is consistent with the 
SEC's publication of market information.\21\ One commenter suggested 
that, given the delayed and limited scope of data, the effort to 
establish entitlements and fees was not justified,\22\ while another 
stated that since FINRA is not producing or validating the information, 
a fee is unnecessary.\23\
---------------------------------------------------------------------------

    \19\ See Barclays, Fidelity, Liquidnet.
    \20\ See ModernIR.
    \21\ See Barclays, Fidelity, FIF.
    \22\ See FIF.
    \23\ See Fidelity.
---------------------------------------------------------------------------

    As previously stated, FINRA believes that establishing a fee for 
Professionals and Vendors to access ATS Data is appropriate to help 
FINRA recover the costs associated with collecting, formatting, and 
disseminating the data. Moreover, as noted above, following the

[[Page 21328]]

implementation of the MPID Requirement, FINRA will be calculating and 
validating the information rather than relying on ATSs to self-report 
data to FINRA. FINRA further believes that the level of the fee is fair 
and reasonable considering it is substantially lower than fees charged 
for less granular ATS data products currently offered in the 
marketplace. As noted, FINRA intends to reassess the amount of the fee 
after it has more experience with the ATS Data usage and actual fees 
paid. Any proposed changes to the fee will be submitted to the 
Commission pursuant to Section 19(b)(3)(A)(ii) of the Act \24\ and 
subject to public comment.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2014-018 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2014-018. 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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of 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-2014-018, and should 
be submitted on or before May 6, 2014.
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    \25\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08421 Filed 4-14-14; 8:45 am]
BILLING CODE 8011-01-P