Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Delay the Implementation Date of the Trade Reporting Amendments Approved Pursuant to SR-FINRA-2013-050, 60874-60876 [2014-23982]
Download as PDF
60874
Federal Register / Vol. 79, No. 195 / Wednesday, October 8, 2014 / Notices
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day from the
publication of notice of filing of this
proposed rule change is October 2,
2014. The Commission is extending this
45-day time period.
CME is proposing to amend its
clearing rules to enable CME to offer
clearing of certain iTraxx Europe index
untranched credit default swap (‘‘CDS’’)
contracts on indices administered by
Markit (‘‘iTraxx Contracts’’). In addition,
CME has submitted to the Commission
a proposed rule change to modify its
risk model for broad-based index CDS
products, including adding a selfreferencing risk component, to enable
CME to offer, among other things,
clearing of additional CDS instruments
that entail self-referencing risk, such as
the iTraxx Contracts.6 The clearing of
iTraxx Contracts is contingent upon the
approval of the proposed rule change
with respect to the risk model,
including the self-referencing risk
component designed for clearing iTraxx
Contracts, which is currently pending
with the Commission. The Commission
therefore finds it appropriate to
designate a longer period within which
to take action on the proposed rule
change so that it has sufficient time to
consider the complex issues under the
proposed rule change.
Accordingly, the Commission,
pursuant to Section 19(b)(2) of the Act,7
designates November 16, 2014, as the
date by which the Commission should
either approve or disapprove, or
institute proceedings to determine
whether to disapprove, the proposed
rule change (File No. SR–CME–2014–
31).
asabaliauskas on DSK5VPTVN1PROD with NOTICES
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–23983 Filed 10–7–14; 8:45 am]
BILLING CODE 8011–01–P
6 See Securities Exchange Act Release No. 34–
72834 (Aug. 13, 2014), 79 FR 48805 (Aug. 18, 2014)
(SR–CME–2014–28) and Securities Exchange Act
Release No. 34–72959 (Sep. 2, 2014), 79 FR 53234
(Sep. 8, 2014) (SR–CME–2014–28).
7 15 U.S.C. 78s(b)(2).
8 17 CFR 200.30–3(a)(31).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73289; File No. SR–FINRA–
2014–039]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Delay the
Implementation Date of the Trade
Reporting Amendments Approved
Pursuant to SR–FINRA–2013–050
October 2, 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
September 24, 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 and II below, which Items
have been prepared by FINRA. FINRA
has designated the proposed rule change
as constituting a ‘‘non-controversial’’
rule change under paragraph (f)(6) of
Rule 19b–4 under the Act,3 which
renders the proposal effective upon
receipt of this filing by the Commission.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
FINRA is proposing to delay the
implementation date of amendments to
the trade reporting rules relating to the
OTC Reporting Facility (‘‘ORF’’), the
Alternative Display Facility (‘‘ADF’’)
and the Trade Reporting Facilities
(‘‘TRFs’’) approved pursuant to SR–
FINRA–2013–050. The proposed rule
change would not make any changes to
FINRA rules.
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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
2 17
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rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On November 12, 2013, FINRA filed
proposed rule change SR–FINRA–2013–
050 to amend FINRA rules governing
the reporting of (i) over-the-counter
(‘‘OTC’’) transactions in equity
securities to the FINRA Facilities; 4 and
(ii) orders in NMS stocks and OTC
Equity Securities to the Order Audit
Trail System (‘‘OATS’’). The proposed
rule change, as amended,5 was
approved by the Commission on
February 27, 2014.6
In SR–FINRA–2013–050, FINRA
proposed that the effective date of the
proposed rule changes to the trade
reporting rules would be no earlier than
April 15, 2014, and no later than
September 30, 2014, and the effective
date of the proposed rule change to the
OATS rules would be no later than 45
days after Commission approval. In
Amendment No. 1, FINRA clarified that
it would implement the amendments to
the trade reporting rules in phases, with
the amendments becoming operative for
the ORF first (upon migration of the
ORF to FINRA’s multi-product platform
(‘‘MPP’’)) and for the ADF and TRFs at
a subsequent date. As previously
announced by FINRA, the amendments
to the OATS rules became effective on
April 7, 2014.7 FINRA also announced
that the amendments to the ORF rules
4 Specifically, the FINRA Facilities are the ADF
and TRFs, to which members report OTC
transactions in NMS stocks, as defined in SEC Rule
600(b) of Regulation NMS; and the ORF, to which
members report transactions in ‘‘OTC Equity
Securities,’’ as defined in FINRA Rule 6420 (i.e.,
non-NMS stocks such as OTC Bulletin Board and
OTC Market securities), as well as transactions in
Restricted Equity Securities, as defined in FINRA
Rule 6420, effected pursuant to Securities Act Rule
144A.
5 On February 14, 2014, FINRA filed Amendment
No. 1 to (1) address the comments the Commission
received in response to the Federal Register
publication and propose amendments, where
appropriate; and (2) propose technical amendments
to update cross-references and make other nonsubstantive changes to the ADF rules as a result of
the approval of SR–FINRA–2013–053.
6 See Securities Exchange Act Release No. 71623
(February 27, 2014), 79 FR 12558 (March 5, 2014)
(Order Granting Accelerated Approval of Proposed
Rule Change, as Modified by Amendment No. 1;
File No. SR–FINRA–2013–050).
7 See March 21, 2014 OATS Report, ‘‘Firms
Capturing Time in Milliseconds Required to Report
to OATS in Milliseconds Beginning April 7, 2014.’’
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Federal Register / Vol. 79, No. 195 / Wednesday, October 8, 2014 / Notices
would be effective on September 15,
2014 (the date of migration to the MPP),
the amendments to the ADF and TRF
rules relating to millisecond reporting
would be effective on September 29,
2014, and the remaining amendments to
the ADF and TRF rules would be
effective in the first quarter of 2015.8
By letter dated August 8, 2014, the
Financial Information Forum (‘‘FIF’’)
formally requested a delay of migration
of the ORF to the MPP and
implementation of the amendments to
the trade reporting rules approved
pursuant to SR–FINRA–2013–050 until
February 23, 2015, stating that firms
need additional time to complete and
test the systems changes. Firms have
indicated that they do not believe they
could meet a September 2014
implementation date, in light of the
development efforts that the
amendments will entail, as well as other
development efforts currently
underway.9
To accommodate this request and to
provide additional time for firms to
complete the necessary systems
changes, FINRA is filing this proposed
rule change to revise the time frame for
implementation of the amendments to
the trade reporting rules approved
pursuant to SR–FINRA–2013–050.
In response to the FIF’s request,
FINRA believes a delay in the migration
of the ORF to the MPP from September
15, 2014 to November 17, 2014 is
appropriate.10 Accordingly, FINRA is
proposing that the amendments to the
ORF rules (i.e., Rules 6622 and 7330)
approved pursuant to SR–FINRA–2013–
050 be effective on November 17, 2014.
In addition, FINRA is proposing that
the amendments to the ADF and TRF
rules approved pursuant to SR–FINRA–
2013–050 requiring firms to report time
in milliseconds if their systems capture
milliseconds 11 be effective on
November 10, 2014.
Finally, FINRA is proposing that the
remaining amendments to the ADF and
TRF trade reporting rules, as well as the
technical and conforming amendments
to the rules, approved pursuant to SR–
asabaliauskas on DSK5VPTVN1PROD with NOTICES
8 See
Regulatory Notice 14–21 (May 2014).
9 See letter dated August 8, 2014 from Manisha
Kimmel, FIF, to Steve Joachim and Stephanie
Dumont, FINRA (‘‘FIF Letter’’). By letter dated
August 21, 2014, FINRA responded to the FIF
Letter. See letter dated August 21, 2014 from Steven
Joachim, FINRA, to Manisha Kimmel, FIF (‘‘FINRA
Response’’). Copies of the FIF Letter and FINRA
Response are attached to the proposed rule change
as Exhibit 2.
10 See ‘‘Revised Migration Date for New OTC
Reporting Facility Technology Platform,’’ available
at www.finra.org/Industry/Compliance/
MarketTransparency/ORF/Notices/P580334.
11 See Rules 6282.04, 6380A.04, 6380B.04,
7130.01, 7230A.01 and 7230B.01.
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FINRA–2013–050 be implemented no
earlier than March 1, 2015 and no later
than April 30, 2015. Specifically, the
remaining amendments to the ADF and
TRF rules (i) require firms to report an
additional time field for Stop Stock
transactions 12 and transactions that
reflect an execution price that is based
on a prior reference point in time,13 and
when reporting block transactions using
the exception for Intermarket Sweep
Orders (ISOs) (outbound) under SEC
Rule 611 of Regulation NMS, if the time
the firm routed the ISOs is different
from the execution time; 14 (ii) require
firms to identify the original trade when
reporting a reversal by including the
control number and report date for the
original trade report; 15 (iii) require firms
to report trades executed on nonbusiness days and trades reported more
than 365 days after trade date (T+365)
to the ADF or a TRF (and not on ‘‘Form
T’’ through FINRA’s Firm Gateway) and
further to report non-business day
trades on an ‘‘as/of’’ basis by 8:15 a.m.
the next business day with the unique
trade report modifier to denote their
execution outside normal market
hours; 16 (iv) provide that where both
sides are submitting a clearing-only
report to effectuate a step-out, the
member transferring out of the position
must report a step-out and the member
receiving the position must report a
‘‘step-in’’; 17 and (v) address the
processing of trades that are submitted
for clearing.18 In addition, SR–FINRA–
2013–050 made a number of nonsubstantive technical and conforming
changes to the ADF and TRF rules that
were otherwise being amended. FINRA
will announce the new effective dates
for the amendments to the trade
reporting rules approved under SR–
FINRA–2013–050 in a Notice.
FINRA has filed the proposed rule
change for immediate effectiveness and
has requested that the Commission
waive the requirement that the proposed
rule change not become operative for 30
days after the date of the filing. The
12 See paragraph (F) of Rules 6282(a)(4),
6380A(a)(5) and 6380B(a)(5).
‘‘Stop stock transaction’’ means a transaction
resulting from an order in which a firm and another
party agree that the order will be executed at a stop
stock price or better, which price is based upon the
prices at which the security is trading at the time
the firm receives the order. See Rules 6220, 6320A
and 6320B.
13 See paragraph (G) of Rules 6282(a)(4),
6380A(a)(5) and 6380B(a)(5).
14 See Rules 6282.03, 6380A.03 and 6380B.03.
15 See Rules 6282(g), 6380A(g) and 6380B(f).
16 See Rules 6282(a)(2), 6380A(a)(2) and
6380B(a)(2).
17 See Rules 7130(g), 7230A(i) and 7230B(h).
18 See Rules 7140, 7240A and 7240B.
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60875
operative date will be the date of filing
of the proposed rule change.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,19 which
requires, among other things, that
FINRA rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest. FINRA believes the
proposed rule change is consistent with
the Act in that it provides firms
additional time to complete the systems
changes necessary to comply with SR–
FINRA–2013–050, which amendments
will, among other things, ensure a more
accurate and complete audit trail,
enable FINRA to recreate more
accurately members’ market activity and
enhance FINRA’s ability to surveil on an
automated basis for compliance with
FINRA trade reporting and other rules.
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. FINRA
believes that providing adequate time
for firms to make the systems changes
necessary to comply with SR–FINRA–
2013–050 will benefit all interested
parties.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Copies of the FIF Letter and FINRA
Response, which addresses the issues
raised in the FIF Letter, are attached to
this filing. In response to the FIF’s
request, as discussed above, FINRA has
delayed migration of the ORF and is
proposing to delay implementation of
the trade reporting amendments
approved under SR–FINRA–2013–050.
FINRA believes that the revised
implementation timeline set forth above
will provide members additional time to
make the necessary system changes
while balancing the need to implement
the amendments without undue delay.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
19 15
E:\FR\FM\08OCN1.SGM
U.S.C. 78o–3(b)(6).
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Federal Register / Vol. 79, No. 195 / Wednesday, October 8, 2014 / Notices
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 20 and
subparagraph (f)(6) of Rule 19b–4
thereunder.21
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of filing.22 However, Rule 19b–
4(f)(6)(iii) permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest.23
FINRA has requested that the
Commission waive the 30-day operative
delay so that FINRA can immediately
delay the implementation dates, as
provided in this proposal.
The Commission believes that the
waiver of the 30-day operative delay is
consistent with the protection of
investors and the public interest as it
will allow FINRA to extend the
implementation dates of certain changes
approved pursuant to SR–FINRA–2013–
050 in a timely manner. Therefore, the
Commission designates the proposal
operative upon filing.24
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.25
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.26
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:
20 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
22 17 CFR 240.19b–4(f)(6)(iii).
23 Id.
24 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
25 15 U.S.C. 78s(b)(3)(C).
26 Id.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
21 17
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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–2014–039 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–2014–039. 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 such
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–
2014–039, and should be submitted on
or before October 29, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–23982 Filed 10–7–14; 8:45 am]
BILLING CODE 8011–01–P
27 17
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73291; File No. SR–Phlx–
2014–23]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Order
Approving Proposed Rule Change, as
Modified by Amendment No. 1, Related
to the Priority Afforded to In-Crowd
Participants Respecting Crossing,
Facilitation, and Solicited Orders in
Open Outcry Trading
October 2, 2014.
I. Introduction
On April 23, 2014, NASDAQ OMX
PHLX LLC (‘‘Exchange’’ or ‘‘Phlx’’) 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 revise the priority afforded to
in-crowd participants respecting
crossing, facilitation, and solicited
orders in open outcry trading
(‘‘Proposal’’). The proposed rule change
was published for comment in the
Federal Register on May 13, 2014.3 On
June 23, 2014, the Commission
extended the time period in which to
either approve the Proposal, disapprove
the Proposal, or institute proceedings to
determine whether to approve or
disapprove the Proposal to August 11,
2014.4 The Commission received two
comment letters from one commenter
regarding the Proposal 5 and one
response letter from Phlx.6 On July 30,
2014, the Exchange filed Amendment
No. 1 to the Proposal (‘‘Amendment No.
1’’).7 On August 4, 2014, the
Commission instituted proceedings
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 72119
(May 7, 2014), 79 FR 27351 (‘‘Notice’’).
4 See Securities Exchange Act Release No. 72447
(June 23, 2014), 79 FR 36569 (June 27, 2014).
5 See Letter from Michael J. Simon, Secretary and
General Counsel, International Securities Exchange,
LLC, dated June 3, 2014 (‘‘ISE Letter I’’); Letter from
Michael J. Simon, Secretary and General Counsel,
International Securities Exchange, LLC, dated July
8, 2014 (‘‘ISE Letter II’’).
6 See Letter from Carla Behnfeldt, Associate
General Counsel, The NASDAQ OMX Group, Inc.,
dated June 20, 2014 (‘‘Phlx Response Letter’’).
7 In Amendment No. 1, the Exchange clarifies a
reference to a previous Phlx filing and an example.
Amendment No. 1 has been placed in the public
comment file for SR–Phlx–2014–23 at https://
www.sec.gov/comments/sr-phlx-2014-23/
phlx201423.shtml (see letter from Carla Behnfeldt,
Associate General Counsel, The NASDAQ OMX
Group, Inc., to Secretary, Commission, dated July
30, 2014) and also is available on the Exchange’s
Web site at https://
nasdaqomxphlx.cchwallstreet.com/
NASDAQOMXPHLX/pdf/phlx-filings/2014/SRPhlx-2014-23_Amendment_1.pdf.
2 17
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[Federal Register Volume 79, Number 195 (Wednesday, October 8, 2014)]
[Notices]
[Pages 60874-60876]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-23982]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73289; File No. SR-FINRA-2014-039]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Delay the Implementation Date of the Trade
Reporting Amendments Approved Pursuant to SR-FINRA-2013-050
October 2, 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 September 24, 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 and
II below, which Items have been prepared by FINRA. FINRA has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which
renders the proposal effective upon receipt of this filing by the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
FINRA is proposing to delay the implementation date of amendments
to the trade reporting rules relating to the OTC Reporting Facility
(``ORF''), the Alternative Display Facility (``ADF'') and the Trade
Reporting Facilities (``TRFs'') approved pursuant to SR-FINRA-2013-050.
The proposed rule change would not make any changes to FINRA rules.
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
On November 12, 2013, FINRA filed proposed rule change SR-FINRA-
2013-050 to amend FINRA rules governing the reporting of (i) over-the-
counter (``OTC'') transactions in equity securities to the FINRA
Facilities; \4\ and (ii) orders in NMS stocks and OTC Equity Securities
to the Order Audit Trail System (``OATS''). The proposed rule change,
as amended,\5\ was approved by the Commission on February 27, 2014.\6\
---------------------------------------------------------------------------
\4\ Specifically, the FINRA Facilities are the ADF and TRFs, to
which members report OTC transactions in NMS stocks, as defined in
SEC Rule 600(b) of Regulation NMS; and the ORF, to which members
report transactions in ``OTC Equity Securities,'' as defined in
FINRA Rule 6420 (i.e., non-NMS stocks such as OTC Bulletin Board and
OTC Market securities), as well as transactions in Restricted Equity
Securities, as defined in FINRA Rule 6420, effected pursuant to
Securities Act Rule 144A.
\5\ On February 14, 2014, FINRA filed Amendment No. 1 to (1)
address the comments the Commission received in response to the
Federal Register publication and propose amendments, where
appropriate; and (2) propose technical amendments to update cross-
references and make other non-substantive changes to the ADF rules
as a result of the approval of SR-FINRA-2013-053.
\6\ See Securities Exchange Act Release No. 71623 (February 27,
2014), 79 FR 12558 (March 5, 2014) (Order Granting Accelerated
Approval of Proposed Rule Change, as Modified by Amendment No. 1;
File No. SR-FINRA-2013-050).
---------------------------------------------------------------------------
In SR-FINRA-2013-050, FINRA proposed that the effective date of the
proposed rule changes to the trade reporting rules would be no earlier
than April 15, 2014, and no later than September 30, 2014, and the
effective date of the proposed rule change to the OATS rules would be
no later than 45 days after Commission approval. In Amendment No. 1,
FINRA clarified that it would implement the amendments to the trade
reporting rules in phases, with the amendments becoming operative for
the ORF first (upon migration of the ORF to FINRA's multi-product
platform (``MPP'')) and for the ADF and TRFs at a subsequent date. As
previously announced by FINRA, the amendments to the OATS rules became
effective on April 7, 2014.\7\ FINRA also announced that the amendments
to the ORF rules
[[Page 60875]]
would be effective on September 15, 2014 (the date of migration to the
MPP), the amendments to the ADF and TRF rules relating to millisecond
reporting would be effective on September 29, 2014, and the remaining
amendments to the ADF and TRF rules would be effective in the first
quarter of 2015.\8\
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\7\ See March 21, 2014 OATS Report, ``Firms Capturing Time in
Milliseconds Required to Report to OATS in Milliseconds Beginning
April 7, 2014.''
\8\ See Regulatory Notice 14-21 (May 2014).
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By letter dated August 8, 2014, the Financial Information Forum
(``FIF'') formally requested a delay of migration of the ORF to the MPP
and implementation of the amendments to the trade reporting rules
approved pursuant to SR-FINRA-2013-050 until February 23, 2015, stating
that firms need additional time to complete and test the systems
changes. Firms have indicated that they do not believe they could meet
a September 2014 implementation date, in light of the development
efforts that the amendments will entail, as well as other development
efforts currently underway.\9\
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\9\ See letter dated August 8, 2014 from Manisha Kimmel, FIF, to
Steve Joachim and Stephanie Dumont, FINRA (``FIF Letter''). By
letter dated August 21, 2014, FINRA responded to the FIF Letter. See
letter dated August 21, 2014 from Steven Joachim, FINRA, to Manisha
Kimmel, FIF (``FINRA Response''). Copies of the FIF Letter and FINRA
Response are attached to the proposed rule change as Exhibit 2.
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To accommodate this request and to provide additional time for
firms to complete the necessary systems changes, FINRA is filing this
proposed rule change to revise the time frame for implementation of the
amendments to the trade reporting rules approved pursuant to SR-FINRA-
2013-050.
In response to the FIF's request, FINRA believes a delay in the
migration of the ORF to the MPP from September 15, 2014 to November 17,
2014 is appropriate.\10\ Accordingly, FINRA is proposing that the
amendments to the ORF rules (i.e., Rules 6622 and 7330) approved
pursuant to SR-FINRA-2013-050 be effective on November 17, 2014.
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\10\ See ``Revised Migration Date for New OTC Reporting Facility
Technology Platform,'' available at www.finra.org/Industry/Compliance/MarketTransparency/ORF/Notices/P580334.
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In addition, FINRA is proposing that the amendments to the ADF and
TRF rules approved pursuant to SR-FINRA-2013-050 requiring firms to
report time in milliseconds if their systems capture milliseconds \11\
be effective on November 10, 2014.
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\11\ See Rules 6282.04, 6380A.04, 6380B.04, 7130.01, 7230A.01
and 7230B.01.
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Finally, FINRA is proposing that the remaining amendments to the
ADF and TRF trade reporting rules, as well as the technical and
conforming amendments to the rules, approved pursuant to SR-FINRA-2013-
050 be implemented no earlier than March 1, 2015 and no later than
April 30, 2015. Specifically, the remaining amendments to the ADF and
TRF rules (i) require firms to report an additional time field for Stop
Stock transactions \12\ and transactions that reflect an execution
price that is based on a prior reference point in time,\13\ and when
reporting block transactions using the exception for Intermarket Sweep
Orders (ISOs) (outbound) under SEC Rule 611 of Regulation NMS, if the
time the firm routed the ISOs is different from the execution time;
\14\ (ii) require firms to identify the original trade when reporting a
reversal by including the control number and report date for the
original trade report; \15\ (iii) require firms to report trades
executed on non-business days and trades reported more than 365 days
after trade date (T+365) to the ADF or a TRF (and not on ``Form T''
through FINRA's Firm Gateway) and further to report non-business day
trades on an ``as/of'' basis by 8:15 a.m. the next business day with
the unique trade report modifier to denote their execution outside
normal market hours; \16\ (iv) provide that where both sides are
submitting a clearing-only report to effectuate a step-out, the member
transferring out of the position must report a step-out and the member
receiving the position must report a ``step-in''; \17\ and (v) address
the processing of trades that are submitted for clearing.\18\ In
addition, SR-FINRA-2013-050 made a number of non-substantive technical
and conforming changes to the ADF and TRF rules that were otherwise
being amended. FINRA will announce the new effective dates for the
amendments to the trade reporting rules approved under SR-FINRA-2013-
050 in a Notice.
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\12\ See paragraph (F) of Rules 6282(a)(4), 6380A(a)(5) and
6380B(a)(5).
``Stop stock transaction'' means a transaction resulting from an
order in which a firm and another party agree that the order will be
executed at a stop stock price or better, which price is based upon
the prices at which the security is trading at the time the firm
receives the order. See Rules 6220, 6320A and 6320B.
\13\ See paragraph (G) of Rules 6282(a)(4), 6380A(a)(5) and
6380B(a)(5).
\14\ See Rules 6282.03, 6380A.03 and 6380B.03.
\15\ See Rules 6282(g), 6380A(g) and 6380B(f).
\16\ See Rules 6282(a)(2), 6380A(a)(2) and 6380B(a)(2).
\17\ See Rules 7130(g), 7230A(i) and 7230B(h).
\18\ See Rules 7140, 7240A and 7240B.
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FINRA has filed the proposed rule change for immediate
effectiveness and has requested that the Commission waive the
requirement that the proposed rule change not become operative for 30
days after the date of the filing. The operative date will be the date
of filing of the proposed rule change.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\19\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes the proposed rule change is consistent
with the Act in that it provides firms additional time to complete the
systems changes necessary to comply with SR-FINRA-2013-050, which
amendments will, among other things, ensure a more accurate and
complete audit trail, enable FINRA to recreate more accurately members'
market activity and enhance FINRA's ability to surveil on an automated
basis for compliance with FINRA trade reporting and other rules.
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\19\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. FINRA believes that providing
adequate time for firms to make the systems changes necessary to comply
with SR-FINRA-2013-050 will benefit all interested parties.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Copies of the FIF Letter and FINRA Response, which addresses the
issues raised in the FIF Letter, are attached to this filing. In
response to the FIF's request, as discussed above, FINRA has delayed
migration of the ORF and is proposing to delay implementation of the
trade reporting amendments approved under SR-FINRA-2013-050. FINRA
believes that the revised implementation timeline set forth above will
provide members additional time to make the necessary system changes
while balancing the need to implement the amendments without undue
delay.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant
[[Page 60876]]
burden on competition; and (iii) become operative for 30 days from the
date on which it was filed, or such shorter time as the Commission may
designate, it has become effective pursuant to Section 19(b)(3)(A) of
the Act \20\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing.\22\ However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest.\23\ FINRA has requested that the Commission waive
the 30-day operative delay so that FINRA can immediately delay the
implementation dates, as provided in this proposal.
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\22\ 17 CFR 240.19b-4(f)(6)(iii).
\23\ Id.
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The Commission believes that the waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest as it will allow FINRA to extend the implementation dates of
certain changes approved pursuant to SR-FINRA-2013-050 in a timely
manner. Therefore, the Commission designates the proposal operative
upon filing.\24\
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\24\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act.\25\ If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule change should be approved or disapproved.\26\
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\25\ 15 U.S.C. 78s(b)(3)(C).
\26\ Id.
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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-2014-039 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-2014-039. 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 such 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-2014-039, and should
be submitted on or before October 29, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-23982 Filed 10-7-14; 8:45 am]
BILLING CODE 8011-01-P