Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, Relating to TRACE Reporting of Corporate Bond Trades That Are Part of a Larger Portfolio Trade, 13781-13783 [2022-05021]
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Federal Register / Vol. 87, No. 47 / Thursday, March 10, 2022 / Notices
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acquisition company and spin off the
new acquisition company to its
shareholders in certain situations. The
proposed rule change was published for
comment in the Federal Register on
September 8, 2021.3
On September 30, 2021, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 On December 3,
2021, the Commission instituted
proceedings under Section 19(b)(2)(B) of
the Exchange Act 6 to determine
whether to approve or disapprove the
proposed rule change.7
Section 19(b)(2) of the Act 8 provides
that, after initiating proceedings, the
Commission shall issue an order
approving or disapproving the proposed
rule change not later than 180 days after
the date of publication of notice of filing
of the proposed rule change. The
Commission may extend the period for
issuing an order approving or
disapproving the proposed rule change,
however, by not more than 60 days if
the Commission determines that a
longer period is appropriate and
publishes the reasons for such
determination. The proposed rule
change was published for comment in
the Federal Register on September 8,
2021.9 The 180th day after publication
of the proposed rule change is March 7,
2022. The Commission is extending the
time period for approving or
disapproving the proposed rule change
for an additional 60 days.
The Commission finds that it is
appropriate to designate a longer period
within which to issue an order
approving or disapproving the proposed
rule change so that it has sufficient time
to consider the proposed rule change
and the comments that have been
submitted in connection therewith.
Accordingly, the Commission, pursuant
to Section 19(b)(2) of the Act,10
designates May 6, 2022, as the date by
3 See Securities Exchange Act Release No. 92839
(September 1, 2021), 86 FR 50408. Comments
received on the proposal are available on the
Commission’s website at: https://www.sec.gov/
comments/sr-nyse-2021-42/srnyse202142.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 93222,
86 FR 55671 (October 6, 2021). The Commission
designated December 7, 2021 as the date by which
the Commission shall approve or disapprove, or
institute proceedings to determine whether to
approve or disapprove, the proposed rule change.
6 15 U.S.C. 78s(b)(2)(B).
7 See Securities Exchange Act Release No. 93714,
86 FR 70150 (Dec. 9, 2021).
8 15 U.S.C. 78s(b)(2).
9 See supra note 3.
10 15 U.S.C. 78s(b)(2).
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16:20 Mar 09, 2022
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which the Commission shall either
approve or disapprove the proposed
rule change (File No. SR–NYSE–2021–
42).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–05024 Filed 3–9–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94365; File No. SR–FINRA–
2021–030]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Amendment No. 1 and Order
Approving a Proposed Rule Change,
as Modified by Amendment No. 1,
Relating to TRACE Reporting of
Corporate Bond Trades That Are Part
of a Larger Portfolio Trade
March 4, 2022.
I. Introduction
On November 22, 2021, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to require
members to append a modifier to a
corporate bond trade that is part of a
larger portfolio trade when reporting to
FINRA’s Trade Reporting and
Compliance Engine (‘‘TRACE’’). The
proposed rule change was published for
comment in the Federal Register on
December 7, 2021.3 On January 20,
2022, pursuant to Section 19(b)(2) of the
Act,4 the Commission designated a
longer period within which to approve
the proposed rule change, disapprove
the proposed rule change, or institute
proceedings to determine whether to
disapprove the proposed rule change.5
The Commission received three
comments on the proposal.6 On March
11 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 93699
(December 1, 2021), 86 FR 69337 (December 7,
2021) (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 94011
(January 20, 2022), 87 FR 4097 (January 26, 2022).
6 See Letter from Howard Meyerson, Managing
Director, Financial Information Forum, to Vanessa
A. Countryman, Secretary, SEC, dated December 23,
2021 (‘‘FIF Letter’’); Letter from Chris Killian,
1 15
PO 00000
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Sfmt 4703
13781
4, 2022, FINRA filed Amendment No. 1
to the proposed rule change.7 The
Commission is publishing notice of
Amendment No. 1 and approving the
proposed rule change, as modified by
Amendment No. 1, on an accelerated
basis.
II. Description of the Proposed Rule
Change, as Modified by Amendment
No. 1
For purposes of the proposed rule
change, FINRA considers a ‘‘portfolio
trade’’ to be a trade between two parties
for a basket of corporate bonds at a
single aggregate price for the entire
basket. FINRA rules do not allow for
reporting of a single portfolio trade with
an aggregated price. Instead, a member
firm must report to TRACE a trade for
each individual bond in the portfolio
with an attributed dollar price for each
bond. FINRA believes that, in many
cases, the reported price for each bond
in a portfolio trade is in line with the
bond’s current market price, while in
other cases the attributed price reported
for an individual bond might deviate
from its current market price.
In 2020, the Commission’s Fixed
Income Market Structure Advisory
Committee (‘‘FIMSAC’’) 8 approved a
recommendation that FINRA amend the
TRACE reporting rules to require
members to identify corporate bond
trades that are part of a portfolio trade.9
Accordingly, FINRA is proposing to
add new paragraph (d)(4)(H) to Rule
6730 to require a member to append a
designated modifier if reporting a
transaction in a corporate bond that: (i)
Is executed between only two parties;
Managing Director, Securitization and Credit,
Securities Industry and Financial Markets
Association, to Vanessa A. Countryman, Secretary,
SEC, dated December 28, 2021 (‘‘SIFMA Letter’’);
Letter from Michael Grogan, V.P. & Head of US
Fixed Income Trading—Investment Grade, Dwayne
Middleton, V.P. & Heading of Fixed Income
Trading, Brian Rubin, V.P. & Head of US Fixed
Income Trading—Below Investment Grade, and
Jonathan Siegal, V.P. & Senior Legal Counsel—
Legislative & Regulatory Affairs, T. Rowe Price, to
Vanessa A. Countryman, Secretary, SEC, dated
December 30, 2021 (‘‘T. Rowe Price Letter’’).
7 In Amendment No. 1, FINRA revised the
proposal to remove any requirements relating to
delayed Treasury spot trades so that it can further
consider this issue, and responded to comments
relating to the portfolio trade aspects of the
proposal. Amendment No. 1 to the proposed rule
change is available at https://www.sec.gov/
comments/sr-finra-2021-030/srfinra2021030.htm.
8 The FIMSAC is a federal advisory committee
formed in November 2017 to provide the
Commission with advice and recommendations on
matters related to fixed income market structure.
See https://www.sec.gov/files/fimsac-charter.pdf.
9 See FIMSAC, Recommendation Regarding
Additional TRACE Reporting Indicators for
Corporate Bond Trades (February 10, 2020),
available at: https://www.sec.gov/spotlight/fixedincome-advisory-committee/fimsac-additionaltrace-flags-recommendation.pdf.
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Federal Register / Vol. 87, No. 47 / Thursday, March 10, 2022 / Notices
(ii) involves a basket of corporate bonds
of at least ten 10 unique issues; 11 and
(iii) has a single agreed price for the
entire basket. The new portfolio trade
modifier would be disseminated
through TRACE, together with other
information about the transaction,
immediately upon receipt of a
transaction report. FINRA will publish
the specific format for the new portfolio
trade modifier in the TRACE technical
specifications. FINRA also has
represented that it will publish a
Regulatory Notice announcing the
effective date of the proposed rule
change no later than 90 days following
Commission approval, and the effective
date will be no later than 365 days
following publication of the Regulatory
Notice.
The Notice also included proposed
requirements relating to TRACE
reporting of a delayed Treasury spot
trade, defined by FINRA in the Notice
to mean a transaction in a corporate
bond that occurs on the basis of a spread
to a benchmark U.S. Treasury Security,
where the agreed-upon spread is later
converted to a dollar price by ‘‘spotting’’
the benchmark U.S. Treasury Security at
a designated time. As discussed further
below, FINRA amended the proposed
rule change to remove the provisions
relating to delayed Treasury spot trades.
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III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change, as
modified by Amendment No. 1, is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities association.12 In particular,
the Commission finds that the proposed
rule change is consistent with Section
15A(b)(6) of the Act,13 which requires,
among other things, that FINRA’s rules
be designed to prevent fraudulent and
manipulative acts and practices;
promote just and equitable principles of
trade; foster cooperation and
coordination with persons engaged in
10 The FIMSAC recommended a size threshold for
portfolio trades of at least 30 unique issuers. In the
Notice, FINRA stated that it was proposing a lower
size threshold—ten rather than 30—believing that
the lower threshold would provide greater
informational benefits to market participants by
capturing a greater number of transactions that
satisfy the other conditions the rule.
11 In the Notice, FINRA stated its belief that using
the number of issues, rather than the number of
issuers, would provide a simpler and more effective
way to identify portfolio trades for purposes of the
proposed rule change.
12 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
13 15 U.S.C. 78o–3(b)(6).
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16:20 Mar 09, 2022
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regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities;
remove impediments to and perfect the
mechanism of a free and open market
and a national market system; and, in
general, protect investors and the public
interest.
The proposal appears reasonably
designed to improve transparency for
portfolio trades, and the individual
components thereof, without imposing
undue burdens on members who report
these trades and who must report other
TRACE modifiers under FINRA rules.14
Requiring a TRACE modifier for each
corporate bond transaction that is part
of a portfolio trade will allow market
participants and other market observers
to know that the price reported for that
transaction might not reflect the price
for the individual bond if it were
individually negotiated. The
Commission also believes that the
criteria for defining the scope of
portfolio trades for which the modifier
must be used, as set forth in new
paragraph (d)(4)(H) of Rule 6730, are
reasonably designed to facilitate
implementation of the proposed rule
change.
No issues were raised by commenters
that would preclude Commission
approval of this proposed rule change.
Although one commenter stated that
‘‘the incremental benefit to transparency
of this flag is somewhat limited,’’ 15
another commenter broadly supported
the proposal for a portfolio trade
modifier to increase transparency.16
Commenters also requested certain
clarifications to the proposal, which
FINRA provided in Amendment No.
1.17 One commenter noted the changes
between the FINRA proposal and the
FIMSAC recommendation but did not
raise an objection to those changes.18
14 See, e.g., Rule 6730(d)(4)(B) (requiring
members to append a trade report modifier if the
price of the transaction is determined using a
weighted average price method); Rule 6730(d)(4)(F)
(requiring members to append a trade report
modifier where a trade report does not reflect either
a commission, mark-up, or mark-down).
15 SIFMA Letter at 1.
16 See T. Rowe Price Letter at 1.
17 For example, one commenter sought guidance
on the meaning of ‘‘single aggregate price’’ for the
entire basket as used in proposed Rule
6730(d)(4)(H)(iii). See SIFMA Letter at 2–3. FINRA
responded that, where the parties to a trade
aggregate individual prices obtained from a pricing
list or service without further negotiation, it would
not be considered within the scope of the rule.
Another commenter asked whether the TRACE
system will validate whether the counterparties to
a trade consistently identify a trade as being part
of a portfolio trade. See FIF Letter at 3. FINRA
stated that the portfolio trade modifier will not be
part of the TRACE system’s matching logic.
18 See SIFMA Letter at 2 (supporting the change
to base the definition on the number of issues rather
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
Finally, issues raised by commenters
pertaining to the proposed requirements
relating to delayed Treasury spot trades
are moot in light of Amendment No. 1.
IV. Solicitation of Comments on
Amendment No. 1 to the Proposed Rule
Change
Interested persons are invited to
submit written data, views, and
arguments concerning whether
Amendment No. 1 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–2021–030 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–2021–030. 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 website (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 website 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. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
than the number of issuers and stating, with regard
to lowering the numerical threshold from 30 to ten
issues: ‘‘We do not have a consensus view on the
number, however, we would point out that as the
number of securities in the basket gets lower, our
members believe it is less likely that any individual
security traded would be off market’’).
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Federal Register / Vol. 87, No. 47 / Thursday, March 10, 2022 / Notices
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FINRA–
2021–030, and should be submitted on
or before March 31, 2022.
V. Accelerated Approval of Proposed
Rule Change, as Modified by
Amendment No. 1
No. 1, be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–05021 Filed 3–9–22; 8:45 am]
BILLING CODE 8011–01–P
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 1, prior to
the thirtieth day after the date of
publication of notice of the filing of
Amendment No. 1 in the Federal
Register. In Amendment No. 1, FINRA
removed all provisions relating to
delayed Treasury spot trades. In doing
so, FINRA noted that it would
‘‘continue to consider whether any
potential alternative to the proposed
approach may better meet FINRA’s
regulatory objectives in this area.’’ The
parts of the proposed rule change
relating to the modifier for corporate
bond transactions that are part of a
larger portfolio trade remain identical to
those noticed for comment, to which
commenters had opportunity to respond
and have in fact responded. Therefore,
the Commission finds good cause,
pursuant to Section 19(b)(2) of the
Act,19 to approve the proposed rule
change, as modified by Amendment No.
1, on an accelerated basis.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,20 that the
proposed rule change (SR–FINRA–
2021–030), as modified by Amendment
SOCIAL SECURITY ADMINISTRATION
[Docket No: SSA–2022–0012]
Agency Information Collection
Activities: Proposed Request
The Social Security Administration
(SSA) publishes a list of information
collection packages requiring clearance
by the Office of Management and
Budget (OMB) in compliance with
Public Law 104–13, the Paperwork
Reduction Act of 1995, effective October
1, 1995. This notice includes revisions
of OMB-approved information
collections.
SSA is soliciting comments on the
accuracy of the agency’s burden
estimate; the need for the information;
its practical utility; ways to enhance its
quality, utility, and clarity; and ways to
minimize burden on respondents,
including the use of automated
collection techniques or other forms of
information technology. Mail, email, or
fax your comments and
recommendations on the information
collection(s) to the OMB Desk Officer
and SSA Reports Clearance Officer at
the following addresses or fax numbers.
(OMB), Office of Management and
Budget, Attn: Desk Officer for SSA,
Modality of completion
Number of
respondents
Frequency of
response
Average
burden per
response
(minutes)
SSA–781 .......................................................
390
1
5
Comments: https://www.reginfo.gov/
public/do/PRAMain. Submit your
comments online referencing Docket
ID Number [SSA–2022–0012].
(SSA), Social Security Administration,
OLCA, Attn: Reports Clearance
Director, 3100 West High Rise, 6401
Security Blvd., Baltimore, MD 21235,
Fax: 410–966–2830, Email address:
OR.Reports.Clearance@ssa.gov.
Or you may submit your comments
online through https://www.reginfo.gov/
public/do/PRAMain, referencing Docket
ID Number [SSA–2022–0012].
The information collections below are
pending at SSA. SSA will submit them
to OMB within 60 days from the date of
this notice. To be sure we consider your
comments, we must receive them no
later than May 9, 2022. Individuals can
obtain copies of the collection
instruments by writing to the above
email address.
1. Certificate of Responsibility for
Welfare and Care of Child Not in
Applicant’s Custody—20 CFR 404.330,
404.339–404.341 and 404.348–
404.349—0960–0019. SSA uses Form
SSA–781 to determine if non-custodial
parents who file for spouse, mother’s,
father’s, or surviving divorced mother’s
or father’s benefits based on having a
child in their care, meet the child-incare requirements. The child-in-care
provision requires claimants to have an
entitled child under age 16 or disabled
in their care. The respondents are
applicants for spouse’s; mother’s;
father’s; or surviving divorced mother’s
or father’s Social Security benefits.
Type of Request: Revision of an OMBapproved information collection.
Estimated
total annual
burden
(hours)
Average
theoretical
hourly cost
amount
(dollars) *
Average wait
time in field
office or for
teleservice
centers
(minutes) **
Total annual
opportunity
cost
(dollars) ***
33
* $27.07
** 21
*** $4,602
khammond on DSKJM1Z7X2PROD with NOTICES
* We based this figure on the average U.S. worker’s hourly wages, as reported by Bureau of Labor Statistics data (https://www.bls.gov/oes/current/oes_nat.htm#000000).
** We based this figure by averaging the average FY 2022 wait times for field offices and teleservice centers, based on SSA’s current management information
data.
*** This figure does not represent actual costs that SSA is imposing on recipients of Social Security payments to complete this application; rather, these are theoretical opportunity costs for the additional time respondents will spend to complete the application. There is no actual charge to respondents to complete the
application.
2. Child Relationship Statement—20
CFR 404.355 and 404.731—0960–0116.
To help determine a child’s entitlement
to Social Security benefits, SSA uses
criteria under Section 216(h)(3) of the
Social Security Act (Act), deemed child
provision. SSA may deem a child to an
insured individual if: (1) The insured
individual presents SSA with
19 15
U.S.C. 78s(b)(2).
VerDate Sep<11>2014
16:20 Mar 09, 2022
satisfactory evidence of parenthood, and
was living with or contributing to the
child’s support at certain specified
times; or (2) the insured individual (a)
acknowledged the child in writing; (b)
was court decreed as the child’s parent;
or (c) was court ordered to support the
child. To obtain this information, SSA
uses Form SSA–2519, Child
20 Id.
Jkt 256001
PO 00000
Frm 00097
Relationship Statement. The
respondents are people with knowledge
of the relationship between certain
individuals filing for Social Security
benefits and their alleged biological
children.
Type of Request: Revision of an OMBapproved information collection.
21 17
Fmt 4703
Sfmt 4703
E:\FR\FM\10MRN1.SGM
CFR 200.30–3(a)(12).
10MRN1
]]>Agencies
[Federal Register Volume 87, Number 47 (Thursday, March 10, 2022)]
[Notices]
[Pages 13781-13783]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05021]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94365; File No. SR-FINRA-2021-030]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Amendment No. 1 and Order
Approving a Proposed Rule Change, as Modified by Amendment No. 1,
Relating to TRACE Reporting of Corporate Bond Trades That Are Part of a
Larger Portfolio Trade
March 4, 2022.
I. Introduction
On November 22, 2021, the Financial Industry Regulatory Authority,
Inc. (``FINRA'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to require members to append a modifier to a
corporate bond trade that is part of a larger portfolio trade when
reporting to FINRA's Trade Reporting and Compliance Engine (``TRACE'').
The proposed rule change was published for comment in the Federal
Register on December 7, 2021.\3\ On January 20, 2022, pursuant to
Section 19(b)(2) of the Act,\4\ the Commission designated a longer
period within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change.\5\ The Commission received three
comments on the proposal.\6\ On March 4, 2022, FINRA filed Amendment
No. 1 to the proposed rule change.\7\ The Commission is publishing
notice of Amendment No. 1 and approving the proposed rule change, as
modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 93699 (December 1,
2021), 86 FR 69337 (December 7, 2021) (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 94011 (January 20,
2022), 87 FR 4097 (January 26, 2022).
\6\ See Letter from Howard Meyerson, Managing Director,
Financial Information Forum, to Vanessa A. Countryman, Secretary,
SEC, dated December 23, 2021 (``FIF Letter''); Letter from Chris
Killian, Managing Director, Securitization and Credit, Securities
Industry and Financial Markets Association, to Vanessa A.
Countryman, Secretary, SEC, dated December 28, 2021 (``SIFMA
Letter''); Letter from Michael Grogan, V.P. & Head of US Fixed
Income Trading--Investment Grade, Dwayne Middleton, V.P. & Heading
of Fixed Income Trading, Brian Rubin, V.P. & Head of US Fixed Income
Trading--Below Investment Grade, and Jonathan Siegal, V.P. & Senior
Legal Counsel--Legislative & Regulatory Affairs, T. Rowe Price, to
Vanessa A. Countryman, Secretary, SEC, dated December 30, 2021 (``T.
Rowe Price Letter'').
\7\ In Amendment No. 1, FINRA revised the proposal to remove any
requirements relating to delayed Treasury spot trades so that it can
further consider this issue, and responded to comments relating to
the portfolio trade aspects of the proposal. Amendment No. 1 to the
proposed rule change is available at https://www.sec.gov/comments/sr-finra-2021-030/srfinra2021030.htm.
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
For purposes of the proposed rule change, FINRA considers a
``portfolio trade'' to be a trade between two parties for a basket of
corporate bonds at a single aggregate price for the entire basket.
FINRA rules do not allow for reporting of a single portfolio trade with
an aggregated price. Instead, a member firm must report to TRACE a
trade for each individual bond in the portfolio with an attributed
dollar price for each bond. FINRA believes that, in many cases, the
reported price for each bond in a portfolio trade is in line with the
bond's current market price, while in other cases the attributed price
reported for an individual bond might deviate from its current market
price.
In 2020, the Commission's Fixed Income Market Structure Advisory
Committee (``FIMSAC'') \8\ approved a recommendation that FINRA amend
the TRACE reporting rules to require members to identify corporate bond
trades that are part of a portfolio trade.\9\
---------------------------------------------------------------------------
\8\ The FIMSAC is a federal advisory committee formed in
November 2017 to provide the Commission with advice and
recommendations on matters related to fixed income market structure.
See https://www.sec.gov/files/fimsac-charter.pdf.
\9\ See FIMSAC, Recommendation Regarding Additional TRACE
Reporting Indicators for Corporate Bond Trades (February 10, 2020),
available at: https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-additional-trace-flags-recommendation.pdf.
---------------------------------------------------------------------------
Accordingly, FINRA is proposing to add new paragraph (d)(4)(H) to
Rule 6730 to require a member to append a designated modifier if
reporting a transaction in a corporate bond that: (i) Is executed
between only two parties;
[[Page 13782]]
(ii) involves a basket of corporate bonds of at least ten \10\ unique
issues; \11\ and (iii) has a single agreed price for the entire basket.
The new portfolio trade modifier would be disseminated through TRACE,
together with other information about the transaction, immediately upon
receipt of a transaction report. FINRA will publish the specific format
for the new portfolio trade modifier in the TRACE technical
specifications. FINRA also has represented that it will publish a
Regulatory Notice announcing the effective date of the proposed rule
change no later than 90 days following Commission approval, and the
effective date will be no later than 365 days following publication of
the Regulatory Notice.
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\10\ The FIMSAC recommended a size threshold for portfolio
trades of at least 30 unique issuers. In the Notice, FINRA stated
that it was proposing a lower size threshold--ten rather than 30--
believing that the lower threshold would provide greater
informational benefits to market participants by capturing a greater
number of transactions that satisfy the other conditions the rule.
\11\ In the Notice, FINRA stated its belief that using the
number of issues, rather than the number of issuers, would provide a
simpler and more effective way to identify portfolio trades for
purposes of the proposed rule change.
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The Notice also included proposed requirements relating to TRACE
reporting of a delayed Treasury spot trade, defined by FINRA in the
Notice to mean a transaction in a corporate bond that occurs on the
basis of a spread to a benchmark U.S. Treasury Security, where the
agreed-upon spread is later converted to a dollar price by ``spotting''
the benchmark U.S. Treasury Security at a designated time. As discussed
further below, FINRA amended the proposed rule change to remove the
provisions relating to delayed Treasury spot trades.
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities association.\12\ In particular, the
Commission finds that the proposed rule change is consistent with
Section 15A(b)(6) of the Act,\13\ which requires, among other things,
that FINRA's rules be designed to prevent fraudulent and manipulative
acts and practices; promote just and equitable principles of trade;
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities; remove impediments to and
perfect the mechanism of a free and open market and a national market
system; and, in general, protect investors and the public interest.
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\12\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\13\ 15 U.S.C. 78o-3(b)(6).
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The proposal appears reasonably designed to improve transparency
for portfolio trades, and the individual components thereof, without
imposing undue burdens on members who report these trades and who must
report other TRACE modifiers under FINRA rules.\14\ Requiring a TRACE
modifier for each corporate bond transaction that is part of a
portfolio trade will allow market participants and other market
observers to know that the price reported for that transaction might
not reflect the price for the individual bond if it were individually
negotiated. The Commission also believes that the criteria for defining
the scope of portfolio trades for which the modifier must be used, as
set forth in new paragraph (d)(4)(H) of Rule 6730, are reasonably
designed to facilitate implementation of the proposed rule change.
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\14\ See, e.g., Rule 6730(d)(4)(B) (requiring members to append
a trade report modifier if the price of the transaction is
determined using a weighted average price method); Rule
6730(d)(4)(F) (requiring members to append a trade report modifier
where a trade report does not reflect either a commission, mark-up,
or mark-down).
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No issues were raised by commenters that would preclude Commission
approval of this proposed rule change. Although one commenter stated
that ``the incremental benefit to transparency of this flag is somewhat
limited,'' \15\ another commenter broadly supported the proposal for a
portfolio trade modifier to increase transparency.\16\ Commenters also
requested certain clarifications to the proposal, which FINRA provided
in Amendment No. 1.\17\ One commenter noted the changes between the
FINRA proposal and the FIMSAC recommendation but did not raise an
objection to those changes.\18\ Finally, issues raised by commenters
pertaining to the proposed requirements relating to delayed Treasury
spot trades are moot in light of Amendment No. 1.
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\15\ SIFMA Letter at 1.
\16\ See T. Rowe Price Letter at 1.
\17\ For example, one commenter sought guidance on the meaning
of ``single aggregate price'' for the entire basket as used in
proposed Rule 6730(d)(4)(H)(iii). See SIFMA Letter at 2-3. FINRA
responded that, where the parties to a trade aggregate individual
prices obtained from a pricing list or service without further
negotiation, it would not be considered within the scope of the
rule. Another commenter asked whether the TRACE system will validate
whether the counterparties to a trade consistently identify a trade
as being part of a portfolio trade. See FIF Letter at 3. FINRA
stated that the portfolio trade modifier will not be part of the
TRACE system's matching logic.
\18\ See SIFMA Letter at 2 (supporting the change to base the
definition on the number of issues rather than the number of issuers
and stating, with regard to lowering the numerical threshold from 30
to ten issues: ``We do not have a consensus view on the number,
however, we would point out that as the number of securities in the
basket gets lower, our members believe it is less likely that any
individual security traded would be off market'').
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IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 1 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 [email protected]. Please include
File Number SR-FINRA-2021-030 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-2021-030. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment
[[Page 13783]]
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
FINRA-2021-030, and should be submitted on or before March 31, 2022.
V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
1 in the Federal Register. In Amendment No. 1, FINRA removed all
provisions relating to delayed Treasury spot trades. In doing so, FINRA
noted that it would ``continue to consider whether any potential
alternative to the proposed approach may better meet FINRA's regulatory
objectives in this area.'' The parts of the proposed rule change
relating to the modifier for corporate bond transactions that are part
of a larger portfolio trade remain identical to those noticed for
comment, to which commenters had opportunity to respond and have in
fact responded. Therefore, the Commission finds good cause, pursuant to
Section 19(b)(2) of the Act,\19\ to approve the proposed rule change,
as modified by Amendment No. 1, on an accelerated basis.
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\19\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\20\ that the proposed rule change (SR-FINRA-2021-030), as modified
by Amendment No. 1, be, and hereby is, approved on an accelerated
basis.
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\20\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05021 Filed 3-9-22; 8:45 am]
BILLING CODE 8011-01-P
