Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Implementation Date for Trade Modifiers When Reporting Transactions in U.S. Treasury Securities, 28917-28919 [2017-13230]
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sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 82, No. 121 / Monday, June 26, 2017 / Notices
concerning Potential Co-Investment
Transactions and Co-Investment
Transactions, including investments
made by other Regulated Funds or
Affiliated Funds that the Regulated
Fund considered but declined to
participate in, so that the Non-Interested
Directors may determine whether all
investments made during the preceding
quarter, including those investments
that the Regulated Fund considered but
declined to participate in, comply with
the conditions of the Order. In addition,
the Non-Interested Directors will
consider at least annually the continued
appropriateness for the Regulated Fund
of participating in new and existing CoInvestment Transactions.
10. Each Regulated Fund will
maintain the records required by section
57(f)(3) of the Act as if each of the
Regulated Funds were a BDC and each
of the investments permitted under
these conditions were approved by the
Required Majority under section 57(f) of
the Act.
11. No Non-Interested Director of a
Regulated Fund will also be a director,
general partner, managing member or
principal, or otherwise an ‘‘affiliated
person’’ (as defined in the Act), of an
Affiliated Fund.
12. The expenses, if any, associated
with acquiring, holding or disposing of
any securities acquired in a CoInvestment Transaction (including,
without limitation, the expenses of the
distribution of any such securities
registered for sale under the Securities
Act) will, to the extent not payable by
the Advisers under their respective
investment advisory agreements with
Affiliated Funds and the Regulated
Funds, be shared by the Regulated
Funds and the Affiliated Funds in
proportion to the relative amounts of the
securities held or to be acquired or
disposed of, as the case may be.
13. Any transaction fee 12 (including
break-up or commitment fees but
excluding broker’s fees contemplated by
section 17(e) or 57(k) of the Act, as
applicable) received in connection with
a Co-Investment Transaction will be
distributed to the participating
Regulated Funds and Affiliated Funds
on a pro rata basis based on the amounts
they invested or committed, as the case
may be, in such Co-Investment
Transaction. If any transaction fee is to
be held by an Adviser pending
consummation of the transaction, the
fee will be deposited into an account
maintained by such Adviser at a bank or
12 Applicants are not requesting and the staff is
not providing any relief for transaction fees
received in connection with any Co-Investment
Transaction.
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banks having the qualifications
prescribed in section 26(a)(1) of the Act,
and the account will earn a competitive
rate of interest that will also be divided
pro rata among the participating
Regulated Funds and Affiliated Funds
based on the amounts they invest in
such Co-Investment Transaction. None
of the Affiliated Funds, the Advisers,
the other Regulated Funds or any
affiliated person of the Regulated Funds
or Affiliated Funds will receive
additional compensation or
remuneration of any kind as a result of
or in connection with a Co-Investment
Transaction (other than (a) in the case
of the Regulated Funds and the
Affiliated Funds, the pro rata
transaction fees described above and
fees or other compensation described in
condition 2(c)(iii)(C); and (b) in the case
of an Adviser, investment advisory fees
paid in accordance with the agreement
between the Adviser and the Regulated
Fund or Affiliated Fund.
14. If the Holders own in the aggregate
more than 25 percent of the Shares of
a Regulated Fund, then the Holders will
vote such Shares as directed by an
independent third party when voting on
(1) the election of directors; (2) the
removal of one or more directors; or (3)
any other matter under either the Act or
applicable State law affecting the
Board’s composition, size or manner of
election.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–13263 Filed 6–23–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80975; File No. SR–FINRA–
2017–018]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to the
Implementation Date for Trade
Modifiers When Reporting
Transactions in U.S. Treasury
Securities
June 20, 2017.
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 June 12,
2017, Financial Industry Regulatory
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00104
Fmt 4703
Sfmt 4703
28917
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by FINRA. FINRA filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b–4(f)(6) thereunder.4 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 establish an
implementation date for certain trade
modifiers required on trade reports to
the Transaction Reporting and
Compliance Engine (‘‘TRACE’’)
involving U.S. Treasury Securities. The
proposed rule change does not make
any changes to the text of FINRA rules.
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 October 18, 2016, the Commission
approved a proposed rule change to
require FINRA members to report
certain transactions in U.S. Treasury
Securities to TRACE.5 The new rules
included two new trade modifiers,
which are described below, for use on
certain types of trades in U.S. Treasury
Securities reported to TRACE. On
October 19, 2016, FINRA announced
that the reporting requirements would
3 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
5 See Securities Exchange Act Release No. 79116
(October 18, 2016), 81 FR 73167 (October 24, 2016)
(Notice of Filing of Amendment No. 1 and Order
Granting Accelerated Approval of File No. SR–
FINRA–2016–027) (‘‘Original Filing’’). The Original
Filing stated that the implementation date for the
new rules would be no later than 365 days
following Commission approval. FINRA is filing the
current proposed rule change to extend the
implementation date for the trade modifiers beyond
the 365-day period set forth in the Original Filing.
4 17
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Federal Register / Vol. 82, No. 121 / Monday, June 26, 2017 / Notices
be implemented beginning July 10,
2017; however, FINRA noted that,
although the two new trade modifiers
could be used by members when
reporting trades beginning on July 10,
2017, FINRA would announce at a later
time when the modifiers would be
required.6 The current proposed rule
change establishes February 5, 2018, as
the implementation date for the two
new modifiers.
The Original Filing amended the
TRACE rules to require that transactions
in U.S. Treasury Securities, as defined
in Rule 6710, be reported to TRACE. To
effectuate this requirement, the Original
Filing amended the definition of
‘‘TRACE-Eligible Security’’ to include
U.S. Treasury Securities and amended
the definition of ‘‘U.S. Treasury
Security’’ to exclude savings bonds. The
term ‘‘U.S. Treasury Securities’’
therefore includes Treasury bills, notes,
and bonds, as well as separate principal
and interest components of a U.S.
Treasury Security separated pursuant to
the Separate Trading of Registered
Interest and Principal of Securities
(STRIPS) program operated by the
Treasury Dept.7
The Original Filing also included
amendments to Rule 6730 to require the
use of two new modifiers, when
applicable, to reported transactions in
U.S. Treasury Securities. When
proposing the rule, FINRA noted that
transactions in U.S. Treasury Securities
that are executed as part of larger
trading strategies can often be priced
away from the current market for
legitimate reasons.8 FINRA therefore
adopted two new modifiers to require
members to indicate that particular
transactions are part of larger trading
strategies.
First, the amendments require that
members append a ‘‘.B’’ modifier to a
trade report if the transaction being
reported is part of a series of
transactions where at least one of the
transactions involves a futures contract
(e.g., a ‘‘basis’’ trade). Second, the
amendments require that members
append a ‘‘.S’’ modifier to a trade report
if the transaction being reported is part
of a series of transactions and may not
be priced based on the current market
(e.g., a fixed price transaction in an ‘‘on-
sradovich on DSK3GMQ082PROD with NOTICES
6 See
Regulatory Notice 16–39 (October 2016).
STRIPS program is a program operated by
the Treasury Dept. under which eligible securities
are authorized to be separated into principal and
interest components and transferred separately. See
31 CFR 356.2; see generally 31 CFR 356.31
(providing details on how the STRIPS program
works).
8 See Securities Exchange Act Release No. 78359
(July 19, 2016), 81 FR 48465, 48468 (July 25, 2016)
(Notice of Filing of SR–FINRA–2016–027).
7 The
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17:04 Jun 23, 2017
Jkt 241001
the-run’’ security as part of a transaction
in an ‘‘off-the-run’’ security).
FINRA noted that the use of these
modifiers on TRACE trade reports
involving U.S. Treasury Securities will
allow FINRA to better understand and
evaluate execution prices for specific
transactions that may otherwise appear
aberrant if, for example, they are
significantly outside of the price range
for that security at that time. Among
other things, these modifiers should
reduce the number of false positive
results that could be generated through
automated surveillance patterns that
include the price as part of the pattern.
As noted above, the new TRACE
reporting requirements for U.S. Treasury
Securities are scheduled to be
implemented beginning July 10, 2017,9
and the proposed rule change
establishes February 5, 2018, as the
implementation date for the two new
modifiers.
FINRA has filed the proposed rule
change for immediate effectiveness. The
implementation date will be February 5,
2018.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,10 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. Based on discussions
with multiple FINRA members, FINRA
believes that providing members with
an additional six months after the
implementation of the new TRACE
requirements to report transactions in
U.S. Treasury Securities to report the
trade modifiers on applicable
transactions will give them sufficient
time to program systems to comply with
the requirement.
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.
As noted in the Original Filing, the
new modifiers may introduce additional
complexity to the proposed reporting, as
traders at FINRA-member firms must
apply the modifiers correctly and
consistently to ensure meaningful data
collection. FINRA noted that, in
discussions with market participants,
9 See
10 15
PO 00000
Regulatory Notice 16–39 (October 2016).
U.S.C. 78o–3(b)(6).
Frm 00105
Fmt 4703
Sfmt 4703
larger firms, for example, indicated that
U.S. Treasury Securities are typically
traded across many desks within the
firm and this increases compliance costs
because the new modifiers need to be
identified by individual traders, as they
are uniquely situated to know whether
a specific trade is associated with a
cross-instrument strategy that would
require the modifier.11 Some firms also
suggested that it may be difficult for a
trader to know at the time of a trade
whether it is part of a cross-instrument
strategy, thus increasing complexity and
their regulatory risk. When proposing
the requirements, FINRA noted that it
planned to phase in the modifiers to
simplify the immediate implementation
of the proposed rule change and provide
firms additional time to make the
necessary changes to implement the
new modifiers.12 The proposed rule
change is consistent with these
representations and provides firms with
additional time after they begin
reporting transactions in U.S. Treasury
Securities to TRACE to implement the
requirement to append modifiers if
applicable.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 13 and Rule 19b–
4(f)(6) thereunder.14
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
11 See Securities Exchange Act Release No. 78359
(July 19, 2016), 81 FR 48465, 48471 (July 25, 2016).
12 See id. at 48469, n.25; see also Original Filing,
supra note 5, at 73170.
13 15 U.S.C. 78s(b)(3)(A).
14 In addition, Rule 19b–4(f)(6)(iii) requires a selfregulatory organization to provide the Commission
with written notice of its intent to file the proposed
rule change, along with a brief description and the
text of the proposed rule change, at least five
business days prior to the date of filing of the
proposed rule change, or such shorter time as
designated by the Commission. FINRA complied
with this requirement.
E:\FR\FM\26JNN1.SGM
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Federal Register / Vol. 82, No. 121 / Monday, June 26, 2017 / Notices
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
2017–018, and should be submitted on
or before July 17, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–13230 Filed 6–23–17; 8:45 am]
BILLING CODE 8011–01–P
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–2017–018 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80978; File No. SR–ICEEU–
2017–003]
Self-Regulatory Organizations; ICE
Clear Europe Limited; Notice of Filing
of Amendment No. 1 and Order
Approving Proposed Rule Change, as
Modified by Amendment No. 1 Thereto,
Relating to ICE Clear Europe’s End-ofDay Price Discovery Policy
June 20, 2017.
sradovich on DSK3GMQ082PROD with NOTICES
Paper Comments
I. Introduction
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2017–018. 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 (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–
On March 10, 2017, ICE Clear Europe
Limited (‘‘ICE Clear Europe’’) 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 (SR–ICEEU–2017–003) to amend
ICE Clear Europe’s CDS End-of-Day
Price Discovery Policy (‘‘EOD Price
Discovery Policy’’) to implement a new
price submission process for Clearing
Members. The proposed rule change
was published for comment in the
Federal Register on March 23, 2017.3
The Commission did not receive
comments regarding the proposed
changes. On May 1, 2017, the
Commission extended the period in
which to approve, disapprove, or
institute proceedings to determine
whether to disapprove the proposed
rule change to June 21, 2017.4 On June
9, 2017, ICE Clear Europe filed
Amendment No. 1 to the proposal.5 For
the reasons discussed below, the
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17:04 Jun 23, 2017
Jkt 241001
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 34–80269
(March 17, 2017), 82 FR 14925 (March 23, 2017)
(SR–ICEEU–2017–003) (‘‘Notice’’).
4 Securities Exchange Act Release No. 34–80566
(May 1, 2017), 82 FR 21287 (May 5, 2017).
5 ICE Clear Europe filed Amendment No. 1 to
clarify that the implementation date for the
proposed rule change will be July 10, 2017, and to
note that ICE Clear Europe will issue a circular
confirming this timeline in advance of the July 10,
2017 implementation date. Because Amendment
No. 1 is a clarifying amendment that does not alter
the substance of the propose rule change the
Commission is not publishing it for comment.
1 15
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
28919
Commission is approving the proposed
rule changes, as modified by
Amendment No. 1.
II. Description of the Proposed Rule
Change
ICE Clear Europe has proposed
changes to its EOD Price Discovery
Policy that are designed to implement a
new price submission process. As part
of its current price submission process,
ICE Clear Europe requires Clearing
Members to submit certain required
price information to an intermediary,
which ICE Clear Europe then obtains
and uses as part of its price discovery
process. The proposed rule changes
would eliminate the use of the
intermediary in the price submission
process and instead require Clearing
Members to submit required price
information directly to ICE Clear
Europe. In order to implement the direct
price submission process, ICE Clear
Europe proposed to amend its EOD
Price Discovery Policy to (1) require
Clearing Members establish direct
connectivity with ICE Clear Europe and
use a FIX API to provide ICE Clear
Europe with the required price
information, (2) add references to FIX
API terminology, and (3) make revisions
reflecting the replacement of existing
trade date files with FIX API firm trade
messages.6 Moreover, ICE Clear Europe
proposed amending the Pricing Policy
to note that ICE Clear Europe will send
FIX API messages directly to Clearing
Members, and to remove references to
the intermediary and its ‘‘Valuation
Service API’’ that ICE Clear Europe
previously used.7 Although ICE Clear
Europe proposed additional minor
changes to the timing of various steps in
the pricing process, these proposed
changes would not affect the actual
settlement submission windows.8
In addition to the changes described
above, ICE Clear Europe also proposed
changes with respect to the format of
information required to be submitted by
Clearing Members for the CDX.NA.HY
index. Moreover, ICE Clear Europe
proposed modifications to the process
for distributing end-of-day prices, which
will result in ICE Clear Europe
publishing separate messages setting
forth end-of-day price information for
single name and index CDS to Clearing
Members.9
6 Notice,
82 FR at 14925.
7 Id.
8 Id.
9 Id.
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]]>Agencies
[Federal Register Volume 82, Number 121 (Monday, June 26, 2017)]
[Notices]
[Pages 28917-28919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13230]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80975; File No. SR-FINRA-2017-018]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to the Implementation Date for Trade
Modifiers When Reporting Transactions in U.S. Treasury Securities
June 20, 2017.
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 June 12, 2017, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by FINRA. FINRA filed the
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
\3\ and Rule 19b-4(f)(6) thereunder.\4\ 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\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to establish an implementation date for certain
trade modifiers required on trade reports to the Transaction Reporting
and Compliance Engine (``TRACE'') involving U.S. Treasury Securities.
The proposed rule change does not make any changes to the text of FINRA
rules.
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 October 18, 2016, the Commission approved a proposed rule change
to require FINRA members to report certain transactions in U.S.
Treasury Securities to TRACE.\5\ The new rules included two new trade
modifiers, which are described below, for use on certain types of
trades in U.S. Treasury Securities reported to TRACE. On October 19,
2016, FINRA announced that the reporting requirements would
[[Page 28918]]
be implemented beginning July 10, 2017; however, FINRA noted that,
although the two new trade modifiers could be used by members when
reporting trades beginning on July 10, 2017, FINRA would announce at a
later time when the modifiers would be required.\6\ The current
proposed rule change establishes February 5, 2018, as the
implementation date for the two new modifiers.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 79116 (October 18,
2016), 81 FR 73167 (October 24, 2016) (Notice of Filing of Amendment
No. 1 and Order Granting Accelerated Approval of File No. SR-FINRA-
2016-027) (``Original Filing''). The Original Filing stated that the
implementation date for the new rules would be no later than 365
days following Commission approval. FINRA is filing the current
proposed rule change to extend the implementation date for the trade
modifiers beyond the 365-day period set forth in the Original
Filing.
\6\ See Regulatory Notice 16-39 (October 2016).
---------------------------------------------------------------------------
The Original Filing amended the TRACE rules to require that
transactions in U.S. Treasury Securities, as defined in Rule 6710, be
reported to TRACE. To effectuate this requirement, the Original Filing
amended the definition of ``TRACE-Eligible Security'' to include U.S.
Treasury Securities and amended the definition of ``U.S. Treasury
Security'' to exclude savings bonds. The term ``U.S. Treasury
Securities'' therefore includes Treasury bills, notes, and bonds, as
well as separate principal and interest components of a U.S. Treasury
Security separated pursuant to the Separate Trading of Registered
Interest and Principal of Securities (STRIPS) program operated by the
Treasury Dept.\7\
---------------------------------------------------------------------------
\7\ The STRIPS program is a program operated by the Treasury
Dept. under which eligible securities are authorized to be separated
into principal and interest components and transferred separately.
See 31 CFR 356.2; see generally 31 CFR 356.31 (providing details on
how the STRIPS program works).
---------------------------------------------------------------------------
The Original Filing also included amendments to Rule 6730 to
require the use of two new modifiers, when applicable, to reported
transactions in U.S. Treasury Securities. When proposing the rule,
FINRA noted that transactions in U.S. Treasury Securities that are
executed as part of larger trading strategies can often be priced away
from the current market for legitimate reasons.\8\ FINRA therefore
adopted two new modifiers to require members to indicate that
particular transactions are part of larger trading strategies.
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 78359 (July 19,
2016), 81 FR 48465, 48468 (July 25, 2016) (Notice of Filing of SR-
FINRA-2016-027).
---------------------------------------------------------------------------
First, the amendments require that members append a ``.B'' modifier
to a trade report if the transaction being reported is part of a series
of transactions where at least one of the transactions involves a
futures contract (e.g., a ``basis'' trade). Second, the amendments
require that members append a ``.S'' modifier to a trade report if the
transaction being reported is part of a series of transactions and may
not be priced based on the current market (e.g., a fixed price
transaction in an ``on-the-run'' security as part of a transaction in
an ``off-the-run'' security).
FINRA noted that the use of these modifiers on TRACE trade reports
involving U.S. Treasury Securities will allow FINRA to better
understand and evaluate execution prices for specific transactions that
may otherwise appear aberrant if, for example, they are significantly
outside of the price range for that security at that time. Among other
things, these modifiers should reduce the number of false positive
results that could be generated through automated surveillance patterns
that include the price as part of the pattern.
As noted above, the new TRACE reporting requirements for U.S.
Treasury Securities are scheduled to be implemented beginning July 10,
2017,\9\ and the proposed rule change establishes February 5, 2018, as
the implementation date for the two new modifiers.
---------------------------------------------------------------------------
\9\ See Regulatory Notice 16-39 (October 2016).
---------------------------------------------------------------------------
FINRA has filed the proposed rule change for immediate
effectiveness. The implementation date will be February 5, 2018.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\10\ 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. Based on discussions with multiple FINRA members,
FINRA believes that providing members with an additional six months
after the implementation of the new TRACE requirements to report
transactions in U.S. Treasury Securities to report the trade modifiers
on applicable transactions will give them sufficient time to program
systems to comply with the requirement.
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\10\ 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.
As noted in the Original Filing, the new modifiers may introduce
additional complexity to the proposed reporting, as traders at FINRA-
member firms must apply the modifiers correctly and consistently to
ensure meaningful data collection. FINRA noted that, in discussions
with market participants, larger firms, for example, indicated that
U.S. Treasury Securities are typically traded across many desks within
the firm and this increases compliance costs because the new modifiers
need to be identified by individual traders, as they are uniquely
situated to know whether a specific trade is associated with a cross-
instrument strategy that would require the modifier.\11\ Some firms
also suggested that it may be difficult for a trader to know at the
time of a trade whether it is part of a cross-instrument strategy, thus
increasing complexity and their regulatory risk. When proposing the
requirements, FINRA noted that it planned to phase in the modifiers to
simplify the immediate implementation of the proposed rule change and
provide firms additional time to make the necessary changes to
implement the new modifiers.\12\ The proposed rule change is consistent
with these representations and provides firms with additional time
after they begin reporting transactions in U.S. Treasury Securities to
TRACE to implement the requirement to append modifiers if applicable.
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\11\ See Securities Exchange Act Release No. 78359 (July 19,
2016), 81 FR 48465, 48471 (July 25, 2016).
\12\ See id. at 48469, n.25; see also Original Filing, supra
note 5, at 73170.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to provide the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. FINRA
complied with this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such
[[Page 28919]]
action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Act. If the Commission takes such action, the Commission shall
institute proceedings to determine whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-FINRA-2017-018 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2017-018. 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 (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-2017-018, and should
be submitted on or before July 17, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-13230 Filed 6-23-17; 8:45 am]
BILLING CODE 8011-01-P
