Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving Proposed Rule Change Relating to Dissemination of Information on Individual Transactions in U.S. Treasury Securities and Related Fees, 9883-9887 [2024-02804]
Download as PDF
<![CDATA[
Federal Register / Vol. 89, No. 29 / Monday, February 12, 2024 / Notices
SECURITIES AND EXCHANGE
COMMISSION
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99481; File No. SR–CBOE–
2023–038]
[Release No. 34–99487; File No. SR–FINRA–
2023–015]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Withdrawal
of a Proposed Rule Change To Amend
its Fee Schedule Relating to the
Options Regulatory Fee
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Approving
Proposed Rule Change Relating to
Dissemination of Information on
Individual Transactions in U.S.
Treasury Securities and Related Fees
February 6, 2024.
On August 1, 2023, Cboe Exchange,
Inc. (‘‘Cboe’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change (File No. SR–
CBOE–2023–038) to increase the
amount of its Options Regulatory Fee.3
The proposed rule change was
immediately effective upon filing with
the Commission pursuant to Section
19(b)(3)(A) of the Act.4 The proposed
rule change was published for comment
in the Federal Register on August 16,
2023.5 On September 28, 2023, pursuant
to Section 19(b)(3)(C) of the Act, the
Commission temporarily suspended the
proposed rule change and instituted
proceedings under Section 19(b)(2)(B) of
the Act to determine whether to approve
or disapprove the proposed rule
change.6 On February 1, 2024, the
Exchange withdrew the proposed rule
change (SR–CBOE–2023–038).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–02754 Filed 2–9–24; 8:45 am]
BILLING CODE 8011–01–P
February 7, 2024.
I. Introduction
On November 2, 2023, 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 (1) amend
FINRA Rules 6710 and 6750 to provide
for end-of-day dissemination of data for
individual transactions in U.S. Treasury
Securities that are On-the-Run Nominal
Coupons reported to FINRA’s Trade
Reporting and Compliance Engine
(‘‘TRACE’’) with specified
dissemination caps for large trades, and
(2) amend FINRA Rule 7730 to include
U.S. Treasury Securities within the
existing fee structure for end-of-day and
historic TRACE data. The proposed rule
change was published for comment in
the Federal Register on November 9,
2023.3 The Commission received
comments in response to the proposal.4
FINRA responded to the comments on
December 14, 2023.5 On December 19,
2023, the Commission extended until
February 7, 2024, the time 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.6 This order
approves the proposed rule change.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 98859
(November 3, 2023), 88 FR 77388 (November 9,
2023) (‘‘Notice’’).
4 Comments received on the proposed rule change
are available at: https://www.sec.gov/comments/srfinra-2023-015/srfinra2023015.htm. One comment
did not address the substance of FINRA’s proposal.
See Letter to Vanessa Countryman, Secretary,
Commission, from Adam Deyo (November 18, 2023)
(‘‘Deyo Letter’’).
5 Letter to Vanessa Countryman, Secretary,
Commission, from Racquel Russell, Senior Vice
President, Director of Capital Markets Policy,
FINRA (December 14, 2023) (‘‘FINRA Response
Letter’’).
6 See Securities Exchange Act Release No. 99204
(December 19, 2023), 88 FR 88997 (December 26,
2023).
2 17
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 98106
(Aug. 10, 2023), 88 FR 55796 (Aug. 16, 2023)
(‘‘Notice’’).
4 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
5 See Notice, supra note 3.
6 See Securities Exchange Act Release No. 98596
(Sept. 28, 2023), 88 FR 68793 (Oct. 4, 2023).
7 17 CFR 200.30–3(a)(12).
khammond on DSKJM1Z7X2PROD with NOTICES
2 17
VerDate Sep<11>2014
21:06 Feb 09, 2024
Jkt 262001
PO 00000
Frm 00050
Fmt 4703
Sfmt 4703
9883
II. Description of the Proposed Rule
Change
Since 2016, FINRA has undertaken a
series of initiatives in consultation with
the U.S. Department of the Treasury
(‘‘Treasury Department’’) to increase
transaction reporting and transparency
in the market for U.S. Treasury
Securities.7 On July 10, 2017, FINRA
members began reporting information
on transactions in U.S. Treasury
Securities to TRACE.8 On March 10,
2020, FINRA began to publicly
disseminate aggregate data on U.S.
Treasury Securities trading volume on a
weekly basis.9 In February 2023, FINRA
increased the cadence of the aggregated
volume data it publishes for U.S.
Treasury Securities to daily, and
enhanced the content of the aggregate
data.10 Information reported to TRACE
regarding individual transactions in
U.S. Treasury Securities is currently
used for regulatory and other official
sector purposes, but not disseminated
publicly.11 In November 2022, the
Treasury Department proposed a policy
of publicly releasing secondary market
transaction data for On-the-Run
Nominal coupons,12 with end-of-day
7 ‘‘U.S. Treasury Security’’ means a security, other
than a savings bond, issued by the Treasury
Department to fund the operations of the federal
government or to retire such outstanding securities.
The term ‘‘U.S. Treasury Security’’ also includes
separate principal and interest components of a
U.S. Treasury Security that have been separated
pursuant to the Separate Trading of Registered
Interest and Principal of Securities (‘‘STRIPS’’)
program operated by the Treasury Department. See
FINRA Rule 6710(p).
8 See FINRA Regulatory Notice 16–39 (October
2016); see also Securities Exchange Act Release No.
79116 (October 18, 2016), 81 FR 73167 (October 24,
2016) (Order Granting Accelerated Approval of File
No. SR–FINRA–2016–027).
9 See FINRA Press Release, FINRA Launches New
Data on Treasury Securities Trading Volume,
https://www.finra.org/media-center/newsreleases/
2020/finra-launches-new-data-treasury-securitiestrading-volume; see also Securities Exchange Act
Release No. 87837 (December 20, 2019), 84 FR
71986 (December 30, 2019) (Order Approving File
No. SR–FINRA–2019–028). FINRA also made
historical weekly aggregate data for transactions in
U.S. Treasury Securities reported since January
2019 available for download on its website.
10 See Technical Notice, Enhancements to
Aggregated Reports and Statistics for U.S. Treasury
Securities, https://www.finra.org/filing-reporting/
trace/enhancements-weekly-aggregated-reportsstatistics-jan2023.
11 FINRA makes data regarding individual
transactions in U.S. Treasury Securities available to
the official sector to assist in monitoring and
analysis of the U.S. Treasury Securities market. The
Treasury Department, the Board of Governors of the
Federal Reserve, the Federal Reserve Bank of New
York, the Commission, and the Commodity Futures
Trading Commission comprise the Inter-Agency
Working Group for Treasury Market Surveillance
(‘‘IAWG’’ or ‘‘official sector’’).
12 See infra text accompanying notes 14–15 for a
definition of On-the-Run Nominal Coupon.
E:\FR\FM\12FEN1.SGM
12FEN1
9884
Federal Register / Vol. 89, No. 29 / Monday, February 12, 2024 / Notices
dissemination and with appropriate cap
sizes.13
khammond on DSKJM1Z7X2PROD with NOTICES
Dissemination of Transaction-Level
Information
Under the proposed rule change,
FINRA would begin disseminating
individual transaction information for
On-the-Run Nominal Coupon U.S.
Treasury Securities on an end-of-day
basis. The disseminated transaction
information would be anonymized, i.e.,
it would not include the market
participant identifier (‘‘MPID’’) or other
information that could be used to
identify parties to the trade. However,
consistent with other TRACE products,
the disseminated transaction
information would include counterparty
type (i.e., dealer, customer, affiliate, or
alternative trading system (‘‘ATS’’)), a
flag to indicate whether the trade was
executed on an ATS, and other trade
modifiers and indicators.
To implement such dissemination,
FINRA proposed to amend Rule
6750(c)(5) (to be redesignated as Rule
6750(d)(5)) to provide that FINRA
would not disseminate information on a
transaction in a TRACE-Eligible
Security that is a U.S. Treasury Security
‘‘other than an On-the-Run Nominal
Coupon.’’ FINRA also proposed to add
a new paragraph (c) to Rule 6750
providing that FINRA would
disseminate information on individual
transactions in On-the-Run Nominal
Coupons on an end-of-day basis.14 To
further clarify the scope of transactions
subject to individual dissemination
under amended Rule 6750, FINRA
proposed to add as new paragraph (ll)
of Rule 6710 (Definitions) a definition of
‘‘On-the-Run Nominal Coupon,’’
defined as the most recently auctioned
U.S. Treasury Security that is a Treasury
note or bond paying fixed rate nominal
coupons starting after the close of the
TRACE system on the day of its Auction
through the close of the TRACE system
on the day of the Auction of a new issue
for the next U.S. Treasury Security of
the same maturity. The definition would
specify that On-the-Run Nominal
Coupons do not include Treasury bills,
STRIPS, Treasury Inflation-Protected
13 See Treasury Department, Additional Public
Transparency in Treasury Markets, 28–29
(November 2022), https://home.treasury.gov/
system/files/221/TBACCharge1Q42022.pdf;
Remarks by Under Secretary for Domestic Finance
Nellie Liang at the 2022 Treasury Market
Conference (November 16, 2022), https://
home.treasury.gov/news/press-releases/jy1110.
14 To accommodate the addition of new paragraph
6750(c), the proposed rule change would
redesignate current Rule 6750(c) as Rule 6750(d).
The proposed rule change would also make
conforming changes to the paragraph crossreferences in Rule 6750(a) and Supplementary
Material .01 to Rule 6750.
VerDate Sep<11>2014
21:06 Feb 09, 2024
Jkt 262001
Securities, floating rate notes, or any
U.S. Treasury Security that is a Treasury
note or bond paying a fixed rate
nominal coupon that is not the most
recently issued U.S. Treasury Security
of a given maturity (i.e., off-the-run
nominal coupons).15
Dissemination Protocols
To mitigate concerns about
information leakage for large trades,
FINRA proposed to implement
transaction size caps above which the
exact size of the transaction would not
be disseminated. In consultation with
the Treasury Department, FINRA
proposed to apply the following
transaction size dissemination caps
based on the maturity of the On-the-Run
Nominal Coupon at issuance: 16
• Two Years: $250 million;
• Three Years: $250 million;
• Five Years: $250 million;
• Seven Years: $150 million;
• 10 Years: $150 million;
• 20 Years: $50 million; and
• 30 Years: $50 million.
Thus, for example, a $200 million
transaction in a 10-year On-the-Run
Nominal Coupon would be
disseminated with a trade size of
‘‘150MM+’’ rather than the actual dollar
amount of the trade.17 In consultation
with the Treasury Department and
based on ongoing analysis of the data,
FINRA may in the future adjust the
dissemination caps to maintain an
appropriate balance between the
benefits of transparency and the threat
of information leakage. Any proposed
changes to the dissemination caps
15 FINRA will identify the most recently
auctioned U.S. Treasury Security that is a Treasury
note or bond paying fixed rate nominal coupons as
an ‘‘On-the-Run Nominal Coupon’’ in TRACE
reference data beginning on the business day after
its auction.
16 FINRA would incorporate information about
these dissemination caps in the TRACE
dissemination protocols published on its website,
available at https://www.finra.org/filing-reporting/
trade-reporting-and-compliance-engine-trace/tracereporting-timeframes. Specifically, information
about the dissemination caps would be added as a
new bullet in the ‘‘Transparency’’ column of the
row of the table describing the protocols for
‘‘Treasury Bonds,’’ to read as follows: ‘‘Individual
transactions in On-the-Run Nominal Coupons are
disseminated on an end-of-day basis with security
identifiers (e.g., CUSIP) and the following
transaction size caps based on the maturity of the
security at issuance: 2 Years: $250 million; 3 Years:
$250 million; 5 Years: $250 million; 7 Years: $150
million; 10 Years: $150 million; 20 Years: $50
million; 30 Years: $50 million.’’
17 As described further below, these
dissemination caps would apply for the end-of-day
dissemination file. Consistent with its approach to
other TRACE data products, FINRA also plans to
provide a Historic TRACE data product covering the
same scope of transactions, which would provide
the actual, uncapped transaction sizes on a sixmonth delay.
PO 00000
Frm 00051
Fmt 4703
Sfmt 4703
would be filed with the Commission
pursuant to Section 19(b)(1) of the Act.
Dissemination Fees
FINRA also proposed to expand the
existing fee framework for the TRACE
End-of-Day Transaction File 18 and the
Historic TRACE Data 19 to include data
products providing information on
individual transactions in On-the-Run
Nominal Coupons. Generally, Historic
TRACE Data includes the same
information as provided in the End-ofDay TRACE Transaction File, except
that the Historic TRACE Data does not
include dissemination caps for large
transactions. Historic Treasury Data
would also be subject to a minimum sixmonth delay, as is the case for the
existing Historic Corporate Bond and
Historic Agency Data sets.20 FINRA
proposed that the End-of-Day TRACE
Transaction File and Historic Data
include a new set of data for U.S.
Treasury Securities with the same fees
that exist for other sets of TRACEEligible Securities.21
III. Summary of Comments and
FINRA’s Response
The Commission received comments
on the proposed rule change 22 and a
18 The End-of-Day TRACE Transaction File
includes all Real-Time TRACE transaction data
collected from that day. The File is separately
available for each data set for which Real-Time
TRACE transaction data is available (i.e., the
Corporate Bond Data Set, Agency Data Set,
Securitized Product (‘‘SP’’) Data Set, and Rule 144A
Data Set) and made public after the TRACE system
closes each day.
19 The Historic TRACE Data is also made
separately available for each data set after a fixed
delay period that varies by asset type. Historic
Corporate Bond and Historic Agency Data are
delayed a minimum of six months; Historic SP Data
is delayed a minimum of 18 months; and Historic
Rule 144A Data carries a delay consistent with the
delay period applicable to the component security
type (e.g., the delay for a Rule 144A transaction in
a SP is 18 months, while the delay for a Rule 144A
transaction in a corporate bond is six months).
20 A conforming change would also be made in
the description of Historic TRACE Data in Rule
7730(d) to add the Historic Treasury Data Set to the
list of data sets comprising Historic TRACE Data.
21 The current fee for the End-of-Day TRACE
Transaction File is $750/month per data set, with
a lower $250/month per data set fee available to
qualifying Tax-Exempt Organizations. The fee for
Historic TRACE Data is $2,000/calendar year per
data set, with a lower $500/calendar year per data
set fee available to qualifying Tax-Exempt
Organizations. A single fee of $2,000 for
development and set-up to receive Historic TRACE
Data also applies, with a lower $1,000 development
and set-up fee available to qualifying Tax-Exempt
Organizations. See Rule 7730. As for other types of
TRACE-Eligible Securities, FINRA also anticipates
making transaction information for On-the-Run
Nominal Coupons available free of charge for
personal, non-commercial purposes only through
FINRA’s Fixed Income Data website, available at
https://www.finra.org/finra-data/fixed-income.
22 See supra note 4.
E:\FR\FM\12FEN1.SGM
12FEN1
Federal Register / Vol. 89, No. 29 / Monday, February 12, 2024 / Notices
response letter from FINRA.23 Several
commenters support the proposal and
advocate further expansion of the
reporting framework to include
transactions in different classes of
securities and shortened reporting
timeframes.24 Of these commenters, one
advocates setting concrete parameters
for evaluating the effects of the proposal
and a timeline for expanding reporting
obligations.25 Three of these
commenters underscore the positive
influence of market transparency on
fairness, efficiency, and pricing.26
Some commenters state that the scope
of securities subject to transaction-level
dissemination in the proposal should
not have been limited to On-the-Run
Nominal Coupons.27 One commenter
suggests transaction-level dissemination
be expanded to include transactions in
every security in the U.S. Treasury
Security market,28 while two others
suggest initially subjecting to
dissemination transactions in first,
second, and third old off-the-run U.S.
Treasury Securities.29 Two of these
commenters further suggest (1)
shortening the reporting timeframe to at
most 15 minutes to harmonize Treasury
market data with data in other TRACEeligible securities; 30 and (2) calculating
transaction size caps based on a
percentage of notional volume to ensure
market participants have a timely view
of a sufficient portion of transaction and
pricing data.31 One of these commenters
also requests information regarding the
percentage of notional volume that
would be capped under FINRA’s
23 See
supra note 5.
Letter to Vanessa Countryman, Secretary,
Commission, from Stephen John Berger, Managing
Director, Global Head of Government and
Regulatory Policy, Citadel (November 30, 2023)
(‘‘Citadel Letter’’) at 1–2; Letter to Vanessa
Countryman, Secretary, Commission, from Gerard
O’Reilly, Co-CEO and Chief Investment Officer, and
David A. Plecha, Global Head of Fixed Income,
Dimensional (November 30, 2023) (‘‘Dimensional
Letter’’) at 1; Letter to Vanessa Countryman,
Secretary, Commission, from Joanna Mallers,
Secretary, FIA Principal Traders Group (November
30, 2023) (‘‘FIA PTG Letter’’) at 1; Letter to Vanessa
Countryman, Secretary, Commission, from Jirˇı´ Kro´l,
Deputy CEO, Global Head of Government Affairs,
AIMA (December 20, 2023) (‘‘AIMA Letter’’) at 2.
25 See FIA PTG Letter at 2. Additionally, this
commenter recommends the Commission reassess
the economic analyses for certain Commission rule
proposals taking into consideration the impact of
this FINRA proposal on the economic baselines. See
id. This comment is out of scope for this proposed
rule change because it does not address the
substance of this specific proposed rule change.
26 See Citadel Letter at 1; Dimensional Letter at
1; AIMA Letter at 2.
27 See generally Dimensional Letter; Citadel
Letter; AIMA Letter.
28 See Dimensional Letter at 2.
29 See Citadel Letter at 2; AIMA Letter at 2.
30 See Citadel Letter at 2; AIMA Letter at 2.
31 See Citadel Letter at 3; AIMA Letter at 2.
khammond on DSKJM1Z7X2PROD with NOTICES
24 See
VerDate Sep<11>2014
21:06 Feb 09, 2024
Jkt 262001
proposed thresholds.32 Notwithstanding
its suggestions, this commenter
describes FINRA’s proposal as a
‘‘welcome first step.’’ 33
In response to suggestions that FINRA
expand the scope of U.S. Treasury
Securities subject to reporting and
shorten reporting timeframes, FINRA
states that future proposals would be
based on careful analysis and subject to
proposed rule changes filed with the
Commission pursuant to Section
19(b)(1) of the Act.34 FINRA also
produces data showing the percentage
of notional transaction volume that
would have been capped under the
proposed thresholds during the period
from September 1, 2022, to February 28,
2023, for different duration U.S.
Treasury Securities.35
While two commenters support the
proposal’s stated objective to increase
transparency in the market for U.S.
Treasury Securities, they raise concerns
that transaction-level transparency, if
mandated without careful calibration,
could cause information leakage,
discourage transactions, and hurt
market liquidity, especially in any
potential future expansions of the
proposal.36 One of these commenters
states that FINRA should collect and
analyze at least 12 months of data under
the proposed regime before expanding
the scope of reporting obligations in any
way.37
Both of these commenters refer to the
importance of disclosure limitations as
32 See
Citadel Letter at 2–3.
Letter at 1.
34 See FINRA Response Letter at 3, n.5.
35 ‘‘For the two-year, three-year, and five-year
notes (which would be subject to a $250 million
cap), 14.21 percent, 14.76 percent, and 5.96 percent
of notional volume traded, respectively, would have
been capped upon dissemination (i.e., because the
size of the trade was greater than $250 million); for
the seven-year and 10-year notes (which would be
subject to a $150 million cap), 15.27 percent and
6.49 percent of notional volume traded,
respectively, would have been capped upon
dissemination (i.e., because the size of the trade was
greater than $150 million); and for the 20-year and
30-year bonds (which would be subject to a $50
million cap), 19.87 percent and 14.87 percent of
notional volume traded, respectively, would have
been capped upon dissemination (i.e., because the
size of the trade was greater than $50 million).
Across all maturities, 10.30 percent of notional
volume traded would have been capped.’’ FINRA
Response Letter at 3.
36 See Letter to Vanessa Countryman, Secretary,
Commission, from Robert Toomey, Head of Capital
Markets, Managing Director and Associate General
Counsel, SIFMA, and Lindsey Weber Keljo, Head,
SIFMA Asset Management Group (November 30,
2023) (‘‘SIFMA AMG Letter’’) at 2–3; Letter to
Vanessa Countryman, Secretary, Commission, from
Sarah A. Bessin, Deputy General Counsel,
Investment Company Institute (November 30, 2023)
(‘‘ICI Letter I’’) at 2; Letter to Vanessa Countryman,
Secretary, Commission, from Sarah A. Bessin,
Deputy General Counsel, Investment Company
Institute (December 15, 2023) (‘‘ICI Letter II’’) at 2.
37 See SIFMA AMG Letter at 4.
33 Citadel
PO 00000
Frm 00052
Fmt 4703
Sfmt 4703
9885
a means of reducing information
leakage.38 Both commenters support
aspects of the proposal that limit
transaction-level dissemination to
transactions in On-the-Run Nominal
Coupons,39 cap disclosed transactions at
set thresholds,40 and delay
dissemination to the end of each day.41
One of these commenters, despite
supporting dissemination caps in
principle, states that FINRA has not
made clear the methodology and metrics
used to determine cap levels.42 The
commenter requests FINRA explain how
it determined the caps and provide data
supporting the thresholds it proposed.43
FINRA replies in its letter that it set
dissemination caps based on careful
analysis and in consultation with the
Treasury Department.44 FINRA also lists
some of the factors relevant in setting
dissemination caps, which include
public feedback provided to the
Treasury Department by primary
dealers,45 the impact of interest rates on
U.S. Treasury Securities trades across
maturities (‘‘dollar duration’’ or
‘‘DV01’’), and a market liquidity
analysis for U.S. Treasury Securities of
different maturities.46
Specifically, FINRA explains that it
considered the notional cap sizes
suggested by primary dealers’ feedback
to the Treasury Department and
translated these values to DV01.47 When
translated to DV01, the median
suggested transaction caps ranged
between $70,000 and $190,000.48
FINRA, in consultation with the
Treasury Department, opted to consider
as a baseline caps that approximately
equated to $100,000 DV01, though it
also considered the percentage of traded
market volume that would be
disseminated (versus reported) across
each maturity and the estimated amount
of time it would take to liquidate a
position at the size of the cap. In
addition, FINRA states that the
38 See SIFMA AMG Letter at 3–5; ICI Letter I at
2; ICI Letter II at 2.
39 See SIGMA AMG Letter at 4–5; ICI Letter I at
2; ICI Letter II at 2.
40 See SIFMA AMG Letter at 3; ICI Letter I at 2;
ICI Letter II at 2.
41 See SIFMA AMG Letter at 4–5; ICI Letter I at
2; ICI Letter II at 2.
42 See SIFMA AMG Letter at 3–4.
43 SIFMA AMG Letter at 4.
44 FINRA Response Letter at 4.
45 Primary dealers are trading counterparties of
the New York Fed in its implementation of
monetary policy and are expected, among other
things, to bid on a pro-rata basis in all Treasury
auctions. See https://www.newyorkfed.org/markets/
primarydealers.html. See also https://
home.treasury.gov/policy-issues/financing-thegovernment/quarterly-refunding/primary-dealers.
46 FINRA Response Letter at 5–6.
47 FINRA Response Letter at 5.
48 FINRA Response Letter at 5.
E:\FR\FM\12FEN1.SGM
12FEN1
9886
Federal Register / Vol. 89, No. 29 / Monday, February 12, 2024 / Notices
proposed caps were calibrated to the
maturity, liquidity, and trading
concentration of the underlying security
to preserve the anonymity of market
participants trading large transactions.49
FINRA explains that it ultimately sought
to balance the benefits of providing
similar levels of transparency across
maturities with the risk that
dissemination of the largest transactions
could permit market participants to
reverse engineer the identities,
positions, and trading strategies of
others.50
IV. Discussion and Commission
Findings
After carefully reviewing the proposal
and comment letters received, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities association.51 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 15A(b)(6) of the Act,52
which requires, among other things, that
FINRA rules be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, and, in general, to
protect investors and the public interest.
In approving the original TRACE
rules, the Commission stated that price
transparency plays a fundamental role
in promoting fairness and efficiency of
U.S. capital markets.53 To further the
goal of increasing price transparency in
the debt markets in general and the U.S.
Treasury Securities market in particular,
it is reasonable and consistent with the
Act for FINRA to extend post-trade price
transparency to transactions in U.S.
Treasury Securities in the manner set
forth in the proposal. Since 2017,
FINRA has collected post-trade
transaction information for U.S.
Treasury Securities through TRACE.54
In 2020, FINRA commenced public
dissemination of aggregate data on U.S.
Treasury Securities trading volume on a
weekly basis.55 In 2023, FINRA
shortened the publication time of
aggregate data on U.S. Treasury
Securities from a weekly to a daily basis
and increased the information publicly
49 FINRA
Response Letter at 5.
Response Letter at 5 (citing Notice, 88
FR at 77395).
51 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).
52 15 U.S.C. 78o–3(b)(6).
53 See Securities Exchange Act Release No. 43873
(January 23, 2001), 66 FR 8131, 8136 (January 29,
2001).
54 See supra note 8.
55 See supra note 9.
khammond on DSKJM1Z7X2PROD with NOTICES
50 FINRA
VerDate Sep<11>2014
21:06 Feb 09, 2024
Jkt 262001
disseminated to include, among other
things, pricing information for certain
U.S. Treasury Securities.56 FINRA’s
current proposal will further increase
price transparency by making
individual transaction data available
with an end-of-day dissemination and
with appropriate cap sizes and on a
historical basis for U.S. Treasury
Securities that are On-the-Run Nominal
Coupons.
The proposal is reasonably designed
to preserve the confidentiality of
individual market participants and
transactions. While commenters
described concerns that transactionlevel transparency could cause
information leakage, discouraging
transactions and impairing market
liquidity, the proposal is reasonably
designed to mitigate these concerns by
incorporating transaction size
dissemination caps, delaying
dissemination until the end of each day,
and limiting the scope to On-the-Run
Nominal Coupons. This scope limitation
is a reasonable first step, instead of
including every security in the U.S.
Treasury Security market, or specifically
transactions in first, second, and third
old off-the-run U.S. Treasury Securities,
as some commenters suggested.57
FINRA has affirmed that any changes in
the level of transparency it provides,
including changes to the dissemination
cap sizes or scope of transactions
included, would be based on careful
analysis and filed with the Commission
as proposed rule changes pursuant to
Section 19(b)(1) of the Act.58 In
response to commenters, FINRA
addressed the request for additional
information regarding FINRA’s
methodology for setting the transaction
size dissemination caps 59 and the
request for data detailing the portion of
notional value that may exceed the
transaction size dissemination caps.60
The proposal strikes an appropriate
balance between fulfilling the goal of
increased transparency and mitigating
risks that could impair liquidity in the
market for U.S. Treasury Securities.
While some commenters suggested
using a notional amount calculation
method for the dissemination caps,61
the proposal makes a reasonable choice
of method of calculating dissemination
caps by calibrating them to the maturity,
liquidity, and trading concentration of
the underlying securities to preserve the
56 See
supra note 10.
supra note 27.
58 See supra note 34.
59 See supra notes 47 through 50.
60 See supra note 35.
61 See supra note 31.
57 See
PO 00000
Frm 00053
Fmt 4703
Sfmt 4703
anonymity of market participants
trading large transactions.
Lastly, the proposed dissemination
fees are consistent with the Act. The
TRACE U.S. Treasury Security end-ofday and historic data sets are
comparable, in terms of granularity and
timeliness, to existing data sets for other
TRACE-eligible securities. Thus,
charging the same fee level for TRACE
end-of-day and historic data products
that include U.S. Treasury Securities
data as is currently charged for TRACE
end-of-day and historic data products
that include data about securities other
than U.S. Treasury Securities, while
maintaining the current fee levels for
those data products, is reasonable.
Section 15A(b)(5) of the Act requires,
among other things, that FINRA rules
provide for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
persons using any facility or system
which the association operates or
controls. The rules that establish the
current TRACE end-of-day and historic
data products have been approved by
the Commission, and the fees that
FINRA proposes to charge for
information on individual transactions
in U.S. Treasury Securities are identical
to those that currently apply for end-ofday and historic data products for other
types of TRACE-eligible securities,62
which have been in effect for some
time.63
Pursuant to Section 19(b)(5) of the
Act,64 the Commission consulted with
and considered the views of the
Treasury Department in determining to
approve the proposed rule change. The
Treasury Department indicated its
support for the proposal.65 Pursuant to
62 See
FINRA Rule 7730.
Securities Exchange Act Release No. 81995
(November 1, 2017), 82 FR 51658 (November 7,
2017) (SR–FINRA–2017–033) (notice of filing and
immediate effectiveness of fee for end-of-day data
product); Securities Exchange Act Release No.
61012 (November 16, 2009), 74 FR 61189
(November 23, 2009) (SR–FINRA–2007–006)
(approval order for the historic data product and
related fee).
64 See 15 U.S.C. 78s(b)(5) (providing that the
Commission ‘‘shall consult with and consider the
views of the Secretary of the Treasury prior to
approving a proposed rule filed by a registered
securities association that primarily concerns
conduct related to transactions in government
securities, except where the Commission
determines that an emergency exists requiring
expeditious or summary action and publishes its
reasons therefor’’).
65 See, e.g., Remarks by Under Secretary for
Domestic Finance Nellie Liang at the 2023 Treasury
Market Conference (November 16, 2023) (‘‘We are
hopeful that, after a review of the public comments,
the SEC will approve a final rule and the proposed
dissemination by FINRA for on-the-runs can begin
soon afterwards.’’), available at https://
home.treasury.gov/news/press-releases/jy1917.
63 See
E:\FR\FM\12FEN1.SGM
12FEN1
Federal Register / Vol. 89, No. 29 / Monday, February 12, 2024 / Notices
Section 19(b)(6) of the Act,66 the
Commission has considered the
sufficiency and appropriateness of
existing laws and rules applicable to
government securities brokers,
government securities dealers, and their
associated persons in approving the
proposal. The proposal will benefit
investors and market participants by
promoting greater transparency into the
U.S. Treasury Securities market while
also maintaining the confidentiality of
individual market participants and
transactions.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,67 that the
proposed rule change (SR–FINRA–
2023–015) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.68
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–02804 Filed 2–9–24; 8:45 am]
BILLING CODE 8011–01–P
SOCIAL SECURITY ADMINISTRATION
[Docket No: SSA–2023–0051]
khammond on DSKJM1Z7X2PROD with NOTICES
Agency Information Collection
Activities: Proposed Request and
Comment 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, and two new collections for
OMB-approval.
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,
Fax: 202–395–6974
66 15
U.S.C. 78s(b)(6).
U.S.C. 78s(b)(2).
68 17 CFR 200.30–3(a)(12).
67 15
VerDate Sep<11>2014
21:06 Feb 09, 2024
Jkt 262001
(SSA), Social Security Administration,
OLCA, Attn: Reports Clearance
Director, Mail Stop 3253 Altmeyer,
6401 Security Blvd., Baltimore, MD
21235, Fax: 833–410–1631, Email
address: OR.Reports.Clearance@
ssa.gov
Or you may submit your comments
online through https://www.reginfo.gov/
public/do/PRAmain by clicking on
Currently under Review—Open for
Public Comments and choosing to click
on one of SSA’s published items. Please
reference Docket ID Number [SSA–
2023–0051] in your submitted response.
I. The information collection below is
pending at SSA. SSA will submit it 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 April 12, 2024. Individuals
can obtain copies of the collection
instruments by writing to the above
email address.
1. Representative Availability Portal
for Social Security Administration
Hearings—20 CFR 404.929, 404.933,
404.1740, 416.1429, 416.1433, 416.1540,
418.1350, 422.203—0960–NEW. As part
of the appeals process, claimants can
request a hearing with an
Administrative Law Judge (ALJ).
Approximately 80 percent of claimants
have appointed representatives at the
hearing level. When the Social Security
Administration (SSA) schedules
hearings before an ALJ, it usually
considers the availability of appointed
representatives, if applicable.
Appointed representatives may be
members of large firms, appearing at
hearings nationwide, or may be solo
practitioners servicing a specific
geographic location or hearing office. In
both situations, it is typical for
appointed representatives to represent
more than one claimant at any given
moment; some represent hundreds of
claimants at once.
Historically, the process of seeking,
tracking, and considering representative
availability has been a manual and timeintensive activity. In the past, hearing
offices sought representative availability
information by contacting each
representative individually. More
recently, Office of Hearings Operations’
Regional Offices representatives
collected availability information.
Representatives provided Regional
Office staff with their hearing
availability via telephone or email.
However, the process for gathering and
considering representative availability
was not standardized and varied greatly
amongst Regional Offices. The
appointed representative community
informed SSA they would appreciate a
PO 00000
Frm 00054
Fmt 4703
Sfmt 4703
9887
consistent and standardized electronic
process to submit their availability for
hearing appearances.
In the Spring of 2023, SSA initiated
the Enhanced Representative
Availability Process (ERAP) to provide
representatives with a more
standardized and streamlined process to
email their availability for hearings. In
the interim, SSA obtained OMB
approval to test a new Representative
Availability Portal (Portal) to offer the
representative community a web-based
option to submit their monthly
availability to SSA, as per 20 CFR
404.1740(b)(3)(iii) and
416.1540(b)(3)(iii) and in a manner
consistent with ERAP. SSA tested the
portal among 11 appointed
representative practice groups
nationwide. We are currently seeking
OMB approval for the national rollout of
the Portal, which collects standardized
information regarding appointed
representative availability for the
purpose of scheduling hearings.
SSA plans to roll the Portal out to all
appointed representatives registered
with the Registration, Appointment and
Services for Representatives (RASR)
application, other professional
representatives who regularly conduct
hearing business with SSA but are not
registered with RASR, and delegated
officials from appointed representative’s
Designated Scheduling Groups (DSG). A
DSG is a representative-identified
scheduling group which can include
one representative, or multiple
representatives. Respondents will need
to have a mySocial Security account to
use the Portal and be registered into the
Portal by SSA systems. Respondents
who wish to use the Portal, but who are
not registered with RASR, or who do not
have a Representative ID, must provide
SSA systems with the necessary data,
including name and SSN, to complete
the Portal registration process.
Portal respondents, once registered,
are authorized representatives and
delegated officials from appointed
representatives’ DSG. SSA will use the
Portal to track availability for hearings
for the DSG. Representatives provide
hearing availability for the DSG monthly
(as described above), and SSA considers
the DSG-provided availability when
scheduling hearings. SSA will announce
the response window for the Portal each
month via a reminder email,
approximately ten days prior to the
deadline for Portal submissions.
Following the submission deadline, the
Portal will ‘‘lock,’’ and respondents will
not be able to submit availability
through the Portal at that time.
However, SSA has some discretion to
approve a request for a late submission
E:\FR\FM\12FEN1.SGM
12FEN1
]]>Agencies
[Federal Register Volume 89, Number 29 (Monday, February 12, 2024)]
[Notices]
[Pages 9883-9887]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-02804]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99487; File No. SR-FINRA-2023-015]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving Proposed Rule Change Relating to
Dissemination of Information on Individual Transactions in U.S.
Treasury Securities and Related Fees
February 7, 2024.
I. Introduction
On November 2, 2023, 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 (1) amend FINRA Rules 6710 and 6750 to provide
for end-of-day dissemination of data for individual transactions in
U.S. Treasury Securities that are On-the-Run Nominal Coupons reported
to FINRA's Trade Reporting and Compliance Engine (``TRACE'') with
specified dissemination caps for large trades, and (2) amend FINRA Rule
7730 to include U.S. Treasury Securities within the existing fee
structure for end-of-day and historic TRACE data. The proposed rule
change was published for comment in the Federal Register on November 9,
2023.\3\ The Commission received comments in response to the
proposal.\4\ FINRA responded to the comments on December 14, 2023.\5\
On December 19, 2023, the Commission extended until February 7, 2024,
the time 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.\6\ This order
approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 98859 (November 3,
2023), 88 FR 77388 (November 9, 2023) (``Notice'').
\4\ Comments received on the proposed rule change are available
at: https://www.sec.gov/comments/sr-finra-2023-015/srfinra2023015.htm. One comment did not address the substance of
FINRA's proposal. See Letter to Vanessa Countryman, Secretary,
Commission, from Adam Deyo (November 18, 2023) (``Deyo Letter'').
\5\ Letter to Vanessa Countryman, Secretary, Commission, from
Racquel Russell, Senior Vice President, Director of Capital Markets
Policy, FINRA (December 14, 2023) (``FINRA Response Letter'').
\6\ See Securities Exchange Act Release No. 99204 (December 19,
2023), 88 FR 88997 (December 26, 2023).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
Since 2016, FINRA has undertaken a series of initiatives in
consultation with the U.S. Department of the Treasury (``Treasury
Department'') to increase transaction reporting and transparency in the
market for U.S. Treasury Securities.\7\ On July 10, 2017, FINRA members
began reporting information on transactions in U.S. Treasury Securities
to TRACE.\8\ On March 10, 2020, FINRA began to publicly disseminate
aggregate data on U.S. Treasury Securities trading volume on a weekly
basis.\9\ In February 2023, FINRA increased the cadence of the
aggregated volume data it publishes for U.S. Treasury Securities to
daily, and enhanced the content of the aggregate data.\10\ Information
reported to TRACE regarding individual transactions in U.S. Treasury
Securities is currently used for regulatory and other official sector
purposes, but not disseminated publicly.\11\ In November 2022, the
Treasury Department proposed a policy of publicly releasing secondary
market transaction data for On-the-Run Nominal coupons,\12\ with end-
of-day
[[Page 9884]]
dissemination and with appropriate cap sizes.\13\
---------------------------------------------------------------------------
\7\ ``U.S. Treasury Security'' means a security, other than a
savings bond, issued by the Treasury Department to fund the
operations of the federal government or to retire such outstanding
securities. The term ``U.S. Treasury Security'' also includes
separate principal and interest components of a U.S. Treasury
Security that have been separated pursuant to the Separate Trading
of Registered Interest and Principal of Securities (``STRIPS'')
program operated by the Treasury Department. See FINRA Rule 6710(p).
\8\ See FINRA Regulatory Notice 16-39 (October 2016); see also
Securities Exchange Act Release No. 79116 (October 18, 2016), 81 FR
73167 (October 24, 2016) (Order Granting Accelerated Approval of
File No. SR-FINRA-2016-027).
\9\ See FINRA Press Release, FINRA Launches New Data on Treasury
Securities Trading Volume, https://www.finra.org/media-center/newsreleases/2020/finra-launches-new-data-treasury-securities-trading-volume; see also Securities Exchange Act Release No. 87837
(December 20, 2019), 84 FR 71986 (December 30, 2019) (Order
Approving File No. SR-FINRA-2019-028). FINRA also made historical
weekly aggregate data for transactions in U.S. Treasury Securities
reported since January 2019 available for download on its website.
\10\ See Technical Notice, Enhancements to Aggregated Reports
and Statistics for U.S. Treasury Securities, https://www.finra.org/filing-reporting/trace/enhancements-weekly-aggregated-reports-statistics-jan2023.
\11\ FINRA makes data regarding individual transactions in U.S.
Treasury Securities available to the official sector to assist in
monitoring and analysis of the U.S. Treasury Securities market. The
Treasury Department, the Board of Governors of the Federal Reserve,
the Federal Reserve Bank of New York, the Commission, and the
Commodity Futures Trading Commission comprise the Inter-Agency
Working Group for Treasury Market Surveillance (``IAWG'' or
``official sector'').
\12\ See infra text accompanying notes 14-15 for a definition of
On-the-Run Nominal Coupon.
\13\ See Treasury Department, Additional Public Transparency in
Treasury Markets, 28-29 (November 2022), https://home.treasury.gov/system/files/221/TBACCharge1Q42022.pdf; Remarks by Under Secretary
for Domestic Finance Nellie Liang at the 2022 Treasury Market
Conference (November 16, 2022), https://home.treasury.gov/news/press-releases/jy1110.
---------------------------------------------------------------------------
Dissemination of Transaction-Level Information
Under the proposed rule change, FINRA would begin disseminating
individual transaction information for On-the-Run Nominal Coupon U.S.
Treasury Securities on an end-of-day basis. The disseminated
transaction information would be anonymized, i.e., it would not include
the market participant identifier (``MPID'') or other information that
could be used to identify parties to the trade. However, consistent
with other TRACE products, the disseminated transaction information
would include counterparty type (i.e., dealer, customer, affiliate, or
alternative trading system (``ATS'')), a flag to indicate whether the
trade was executed on an ATS, and other trade modifiers and indicators.
To implement such dissemination, FINRA proposed to amend Rule
6750(c)(5) (to be redesignated as Rule 6750(d)(5)) to provide that
FINRA would not disseminate information on a transaction in a TRACE-
Eligible Security that is a U.S. Treasury Security ``other than an On-
the-Run Nominal Coupon.'' FINRA also proposed to add a new paragraph
(c) to Rule 6750 providing that FINRA would disseminate information on
individual transactions in On-the-Run Nominal Coupons on an end-of-day
basis.\14\ To further clarify the scope of transactions subject to
individual dissemination under amended Rule 6750, FINRA proposed to add
as new paragraph (ll) of Rule 6710 (Definitions) a definition of ``On-
the-Run Nominal Coupon,'' defined as the most recently auctioned U.S.
Treasury Security that is a Treasury note or bond paying fixed rate
nominal coupons starting after the close of the TRACE system on the day
of its Auction through the close of the TRACE system on the day of the
Auction of a new issue for the next U.S. Treasury Security of the same
maturity. The definition would specify that On-the-Run Nominal Coupons
do not include Treasury bills, STRIPS, Treasury Inflation-Protected
Securities, floating rate notes, or any U.S. Treasury Security that is
a Treasury note or bond paying a fixed rate nominal coupon that is not
the most recently issued U.S. Treasury Security of a given maturity
(i.e., off-the-run nominal coupons).\15\
---------------------------------------------------------------------------
\14\ To accommodate the addition of new paragraph 6750(c), the
proposed rule change would redesignate current Rule 6750(c) as Rule
6750(d). The proposed rule change would also make conforming changes
to the paragraph cross-references in Rule 6750(a) and Supplementary
Material .01 to Rule 6750.
\15\ FINRA will identify the most recently auctioned U.S.
Treasury Security that is a Treasury note or bond paying fixed rate
nominal coupons as an ``On-the-Run Nominal Coupon'' in TRACE
reference data beginning on the business day after its auction.
---------------------------------------------------------------------------
Dissemination Protocols
To mitigate concerns about information leakage for large trades,
FINRA proposed to implement transaction size caps above which the exact
size of the transaction would not be disseminated. In consultation with
the Treasury Department, FINRA proposed to apply the following
transaction size dissemination caps based on the maturity of the On-
the-Run Nominal Coupon at issuance: \16\
---------------------------------------------------------------------------
\16\ FINRA would incorporate information about these
dissemination caps in the TRACE dissemination protocols published on
its website, available at https://www.finra.org/filing-reporting/trade-reporting-and-compliance-engine-trace/trace-reporting-timeframes. Specifically, information about the dissemination caps
would be added as a new bullet in the ``Transparency'' column of the
row of the table describing the protocols for ``Treasury Bonds,'' to
read as follows: ``Individual transactions in On-the-Run Nominal
Coupons are disseminated on an end-of-day basis with security
identifiers (e.g., CUSIP) and the following transaction size caps
based on the maturity of the security at issuance: 2 Years: $250
million; 3 Years: $250 million; 5 Years: $250 million; 7 Years: $150
million; 10 Years: $150 million; 20 Years: $50 million; 30 Years:
$50 million.''
---------------------------------------------------------------------------
Two Years: $250 million;
Three Years: $250 million;
Five Years: $250 million;
Seven Years: $150 million;
10 Years: $150 million;
20 Years: $50 million; and
30 Years: $50 million.
Thus, for example, a $200 million transaction in a 10-year On-the-
Run Nominal Coupon would be disseminated with a trade size of
``150MM+'' rather than the actual dollar amount of the trade.\17\ In
consultation with the Treasury Department and based on ongoing analysis
of the data, FINRA may in the future adjust the dissemination caps to
maintain an appropriate balance between the benefits of transparency
and the threat of information leakage. Any proposed changes to the
dissemination caps would be filed with the Commission pursuant to
Section 19(b)(1) of the Act.
---------------------------------------------------------------------------
\17\ As described further below, these dissemination caps would
apply for the end-of-day dissemination file. Consistent with its
approach to other TRACE data products, FINRA also plans to provide a
Historic TRACE data product covering the same scope of transactions,
which would provide the actual, uncapped transaction sizes on a six-
month delay.
---------------------------------------------------------------------------
Dissemination Fees
FINRA also proposed to expand the existing fee framework for the
TRACE End-of-Day Transaction File \18\ and the Historic TRACE Data \19\
to include data products providing information on individual
transactions in On-the-Run Nominal Coupons. Generally, Historic TRACE
Data includes the same information as provided in the End-of-Day TRACE
Transaction File, except that the Historic TRACE Data does not include
dissemination caps for large transactions. Historic Treasury Data would
also be subject to a minimum six-month delay, as is the case for the
existing Historic Corporate Bond and Historic Agency Data sets.\20\
FINRA proposed that the End-of-Day TRACE Transaction File and Historic
Data include a new set of data for U.S. Treasury Securities with the
same fees that exist for other sets of TRACE-Eligible Securities.\21\
---------------------------------------------------------------------------
\18\ The End-of-Day TRACE Transaction File includes all Real-
Time TRACE transaction data collected from that day. The File is
separately available for each data set for which Real-Time TRACE
transaction data is available (i.e., the Corporate Bond Data Set,
Agency Data Set, Securitized Product (``SP'') Data Set, and Rule
144A Data Set) and made public after the TRACE system closes each
day.
\19\ The Historic TRACE Data is also made separately available
for each data set after a fixed delay period that varies by asset
type. Historic Corporate Bond and Historic Agency Data are delayed a
minimum of six months; Historic SP Data is delayed a minimum of 18
months; and Historic Rule 144A Data carries a delay consistent with
the delay period applicable to the component security type (e.g.,
the delay for a Rule 144A transaction in a SP is 18 months, while
the delay for a Rule 144A transaction in a corporate bond is six
months).
\20\ A conforming change would also be made in the description
of Historic TRACE Data in Rule 7730(d) to add the Historic Treasury
Data Set to the list of data sets comprising Historic TRACE Data.
\21\ The current fee for the End-of-Day TRACE Transaction File
is $750/month per data set, with a lower $250/month per data set fee
available to qualifying Tax-Exempt Organizations. The fee for
Historic TRACE Data is $2,000/calendar year per data set, with a
lower $500/calendar year per data set fee available to qualifying
Tax-Exempt Organizations. A single fee of $2,000 for development and
set-up to receive Historic TRACE Data also applies, with a lower
$1,000 development and set-up fee available to qualifying Tax-Exempt
Organizations. See Rule 7730. As for other types of TRACE-Eligible
Securities, FINRA also anticipates making transaction information
for On-the-Run Nominal Coupons available free of charge for
personal, non-commercial purposes only through FINRA's Fixed Income
Data website, available at https://www.finra.org/finra-data/fixed-income.
---------------------------------------------------------------------------
III. Summary of Comments and FINRA's Response
The Commission received comments on the proposed rule change \22\
and a
[[Page 9885]]
response letter from FINRA.\23\ Several commenters support the proposal
and advocate further expansion of the reporting framework to include
transactions in different classes of securities and shortened reporting
timeframes.\24\ Of these commenters, one advocates setting concrete
parameters for evaluating the effects of the proposal and a timeline
for expanding reporting obligations.\25\ Three of these commenters
underscore the positive influence of market transparency on fairness,
efficiency, and pricing.\26\
---------------------------------------------------------------------------
\22\ See supra note 4.
\23\ See supra note 5.
\24\ See Letter to Vanessa Countryman, Secretary, Commission,
from Stephen John Berger, Managing Director, Global Head of
Government and Regulatory Policy, Citadel (November 30, 2023)
(``Citadel Letter'') at 1-2; Letter to Vanessa Countryman,
Secretary, Commission, from Gerard O'Reilly, Co-CEO and Chief
Investment Officer, and David A. Plecha, Global Head of Fixed
Income, Dimensional (November 30, 2023) (``Dimensional Letter'') at
1; Letter to Vanessa Countryman, Secretary, Commission, from Joanna
Mallers, Secretary, FIA Principal Traders Group (November 30, 2023)
(``FIA PTG Letter'') at 1; Letter to Vanessa Countryman, Secretary,
Commission, from Ji[rcaron][iacute] Kr[oacute]l, Deputy CEO, Global
Head of Government Affairs, AIMA (December 20, 2023) (``AIMA
Letter'') at 2.
\25\ See FIA PTG Letter at 2. Additionally, this commenter
recommends the Commission reassess the economic analyses for certain
Commission rule proposals taking into consideration the impact of
this FINRA proposal on the economic baselines. See id. This comment
is out of scope for this proposed rule change because it does not
address the substance of this specific proposed rule change.
\26\ See Citadel Letter at 1; Dimensional Letter at 1; AIMA
Letter at 2.
---------------------------------------------------------------------------
Some commenters state that the scope of securities subject to
transaction-level dissemination in the proposal should not have been
limited to On-the-Run Nominal Coupons.\27\ One commenter suggests
transaction-level dissemination be expanded to include transactions in
every security in the U.S. Treasury Security market,\28\ while two
others suggest initially subjecting to dissemination transactions in
first, second, and third old off-the-run U.S. Treasury Securities.\29\
Two of these commenters further suggest (1) shortening the reporting
timeframe to at most 15 minutes to harmonize Treasury market data with
data in other TRACE-eligible securities; \30\ and (2) calculating
transaction size caps based on a percentage of notional volume to
ensure market participants have a timely view of a sufficient portion
of transaction and pricing data.\31\ One of these commenters also
requests information regarding the percentage of notional volume that
would be capped under FINRA's proposed thresholds.\32\ Notwithstanding
its suggestions, this commenter describes FINRA's proposal as a
``welcome first step.'' \33\
---------------------------------------------------------------------------
\27\ See generally Dimensional Letter; Citadel Letter; AIMA
Letter.
\28\ See Dimensional Letter at 2.
\29\ See Citadel Letter at 2; AIMA Letter at 2.
\30\ See Citadel Letter at 2; AIMA Letter at 2.
\31\ See Citadel Letter at 3; AIMA Letter at 2.
\32\ See Citadel Letter at 2-3.
\33\ Citadel Letter at 1.
---------------------------------------------------------------------------
In response to suggestions that FINRA expand the scope of U.S.
Treasury Securities subject to reporting and shorten reporting
timeframes, FINRA states that future proposals would be based on
careful analysis and subject to proposed rule changes filed with the
Commission pursuant to Section 19(b)(1) of the Act.\34\ FINRA also
produces data showing the percentage of notional transaction volume
that would have been capped under the proposed thresholds during the
period from September 1, 2022, to February 28, 2023, for different
duration U.S. Treasury Securities.\35\
---------------------------------------------------------------------------
\34\ See FINRA Response Letter at 3, n.5.
\35\ ``For the two-year, three-year, and five-year notes (which
would be subject to a $250 million cap), 14.21 percent, 14.76
percent, and 5.96 percent of notional volume traded, respectively,
would have been capped upon dissemination (i.e., because the size of
the trade was greater than $250 million); for the seven-year and 10-
year notes (which would be subject to a $150 million cap), 15.27
percent and 6.49 percent of notional volume traded, respectively,
would have been capped upon dissemination (i.e., because the size of
the trade was greater than $150 million); and for the 20-year and
30-year bonds (which would be subject to a $50 million cap), 19.87
percent and 14.87 percent of notional volume traded, respectively,
would have been capped upon dissemination (i.e., because the size of
the trade was greater than $50 million). Across all maturities,
10.30 percent of notional volume traded would have been capped.''
FINRA Response Letter at 3.
---------------------------------------------------------------------------
While two commenters support the proposal's stated objective to
increase transparency in the market for U.S. Treasury Securities, they
raise concerns that transaction-level transparency, if mandated without
careful calibration, could cause information leakage, discourage
transactions, and hurt market liquidity, especially in any potential
future expansions of the proposal.\36\ One of these commenters states
that FINRA should collect and analyze at least 12 months of data under
the proposed regime before expanding the scope of reporting obligations
in any way.\37\
---------------------------------------------------------------------------
\36\ See Letter to Vanessa Countryman, Secretary, Commission,
from Robert Toomey, Head of Capital Markets, Managing Director and
Associate General Counsel, SIFMA, and Lindsey Weber Keljo, Head,
SIFMA Asset Management Group (November 30, 2023) (``SIFMA AMG
Letter'') at 2-3; Letter to Vanessa Countryman, Secretary,
Commission, from Sarah A. Bessin, Deputy General Counsel, Investment
Company Institute (November 30, 2023) (``ICI Letter I'') at 2;
Letter to Vanessa Countryman, Secretary, Commission, from Sarah A.
Bessin, Deputy General Counsel, Investment Company Institute
(December 15, 2023) (``ICI Letter II'') at 2.
\37\ See SIFMA AMG Letter at 4.
---------------------------------------------------------------------------
Both of these commenters refer to the importance of disclosure
limitations as a means of reducing information leakage.\38\ Both
commenters support aspects of the proposal that limit transaction-level
dissemination to transactions in On-the-Run Nominal Coupons,\39\ cap
disclosed transactions at set thresholds,\40\ and delay dissemination
to the end of each day.\41\ One of these commenters, despite supporting
dissemination caps in principle, states that FINRA has not made clear
the methodology and metrics used to determine cap levels.\42\ The
commenter requests FINRA explain how it determined the caps and provide
data supporting the thresholds it proposed.\43\
---------------------------------------------------------------------------
\38\ See SIFMA AMG Letter at 3-5; ICI Letter I at 2; ICI Letter
II at 2.
\39\ See SIGMA AMG Letter at 4-5; ICI Letter I at 2; ICI Letter
II at 2.
\40\ See SIFMA AMG Letter at 3; ICI Letter I at 2; ICI Letter II
at 2.
\41\ See SIFMA AMG Letter at 4-5; ICI Letter I at 2; ICI Letter
II at 2.
\42\ See SIFMA AMG Letter at 3-4.
\43\ SIFMA AMG Letter at 4.
---------------------------------------------------------------------------
FINRA replies in its letter that it set dissemination caps based on
careful analysis and in consultation with the Treasury Department.\44\
FINRA also lists some of the factors relevant in setting dissemination
caps, which include public feedback provided to the Treasury Department
by primary dealers,\45\ the impact of interest rates on U.S. Treasury
Securities trades across maturities (``dollar duration'' or ``DV01''),
and a market liquidity analysis for U.S. Treasury Securities of
different maturities.\46\
---------------------------------------------------------------------------
\44\ FINRA Response Letter at 4.
\45\ Primary dealers are trading counterparties of the New York
Fed in its implementation of monetary policy and are expected, among
other things, to bid on a pro-rata basis in all Treasury auctions.
See https://www.newyorkfed.org/markets/primarydealers.html. See also
https://home.treasury.gov/policy-issues/financing-the-government/quarterly-refunding/primary-dealers.
\46\ FINRA Response Letter at 5-6.
---------------------------------------------------------------------------
Specifically, FINRA explains that it considered the notional cap
sizes suggested by primary dealers' feedback to the Treasury Department
and translated these values to DV01.\47\ When translated to DV01, the
median suggested transaction caps ranged between $70,000 and
$190,000.\48\ FINRA, in consultation with the Treasury Department,
opted to consider as a baseline caps that approximately equated to
$100,000 DV01, though it also considered the percentage of traded
market volume that would be disseminated (versus reported) across each
maturity and the estimated amount of time it would take to liquidate a
position at the size of the cap. In addition, FINRA states that the
[[Page 9886]]
proposed caps were calibrated to the maturity, liquidity, and trading
concentration of the underlying security to preserve the anonymity of
market participants trading large transactions.\49\ FINRA explains that
it ultimately sought to balance the benefits of providing similar
levels of transparency across maturities with the risk that
dissemination of the largest transactions could permit market
participants to reverse engineer the identities, positions, and trading
strategies of others.\50\
---------------------------------------------------------------------------
\47\ FINRA Response Letter at 5.
\48\ FINRA Response Letter at 5.
\49\ FINRA Response Letter at 5.
\50\ FINRA Response Letter at 5 (citing Notice, 88 FR at 77395).
---------------------------------------------------------------------------
IV. Discussion and Commission Findings
After carefully reviewing the proposal and comment letters
received, the Commission finds that the proposed rule change is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
association.\51\ In particular, the Commission finds that the proposed
rule change is consistent with Section 15A(b)(6) of the Act,\52\ which
requires, among other things, that FINRA rules be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, and, in general, to protect investors
and the public interest.
---------------------------------------------------------------------------
\51\ 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).
\52\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
In approving the original TRACE rules, the Commission stated that
price transparency plays a fundamental role in promoting fairness and
efficiency of U.S. capital markets.\53\ To further the goal of
increasing price transparency in the debt markets in general and the
U.S. Treasury Securities market in particular, it is reasonable and
consistent with the Act for FINRA to extend post-trade price
transparency to transactions in U.S. Treasury Securities in the manner
set forth in the proposal. Since 2017, FINRA has collected post-trade
transaction information for U.S. Treasury Securities through TRACE.\54\
In 2020, FINRA commenced public dissemination of aggregate data on U.S.
Treasury Securities trading volume on a weekly basis.\55\ In 2023,
FINRA shortened the publication time of aggregate data on U.S. Treasury
Securities from a weekly to a daily basis and increased the information
publicly disseminated to include, among other things, pricing
information for certain U.S. Treasury Securities.\56\ FINRA's current
proposal will further increase price transparency by making individual
transaction data available with an end-of-day dissemination and with
appropriate cap sizes and on a historical basis for U.S. Treasury
Securities that are On-the-Run Nominal Coupons.
---------------------------------------------------------------------------
\53\ See Securities Exchange Act Release No. 43873 (January 23,
2001), 66 FR 8131, 8136 (January 29, 2001).
\54\ See supra note 8.
\55\ See supra note 9.
\56\ See supra note 10.
---------------------------------------------------------------------------
The proposal is reasonably designed to preserve the confidentiality
of individual market participants and transactions. While commenters
described concerns that transaction-level transparency could cause
information leakage, discouraging transactions and impairing market
liquidity, the proposal is reasonably designed to mitigate these
concerns by incorporating transaction size dissemination caps, delaying
dissemination until the end of each day, and limiting the scope to On-
the-Run Nominal Coupons. This scope limitation is a reasonable first
step, instead of including every security in the U.S. Treasury Security
market, or specifically transactions in first, second, and third old
off-the-run U.S. Treasury Securities, as some commenters suggested.\57\
FINRA has affirmed that any changes in the level of transparency it
provides, including changes to the dissemination cap sizes or scope of
transactions included, would be based on careful analysis and filed
with the Commission as proposed rule changes pursuant to Section
19(b)(1) of the Act.\58\ In response to commenters, FINRA addressed the
request for additional information regarding FINRA's methodology for
setting the transaction size dissemination caps \59\ and the request
for data detailing the portion of notional value that may exceed the
transaction size dissemination caps.\60\ The proposal strikes an
appropriate balance between fulfilling the goal of increased
transparency and mitigating risks that could impair liquidity in the
market for U.S. Treasury Securities. While some commenters suggested
using a notional amount calculation method for the dissemination
caps,\61\ the proposal makes a reasonable choice of method of
calculating dissemination caps by calibrating them to the maturity,
liquidity, and trading concentration of the underlying securities to
preserve the anonymity of market participants trading large
transactions.
---------------------------------------------------------------------------
\57\ See supra note 27.
\58\ See supra note 34.
\59\ See supra notes 47 through 50.
\60\ See supra note 35.
\61\ See supra note 31.
---------------------------------------------------------------------------
Lastly, the proposed dissemination fees are consistent with the
Act. The TRACE U.S. Treasury Security end-of-day and historic data sets
are comparable, in terms of granularity and timeliness, to existing
data sets for other TRACE-eligible securities. Thus, charging the same
fee level for TRACE end-of-day and historic data products that include
U.S. Treasury Securities data as is currently charged for TRACE end-of-
day and historic data products that include data about securities other
than U.S. Treasury Securities, while maintaining the current fee levels
for those data products, is reasonable. Section 15A(b)(5) of the Act
requires, among other things, that FINRA rules provide for the
equitable allocation of reasonable dues, fees, and other charges among
members and issuers and other persons using any facility or system
which the association operates or controls. The rules that establish
the current TRACE end-of-day and historic data products have been
approved by the Commission, and the fees that FINRA proposes to charge
for information on individual transactions in U.S. Treasury Securities
are identical to those that currently apply for end-of-day and historic
data products for other types of TRACE-eligible securities,\62\ which
have been in effect for some time.\63\
---------------------------------------------------------------------------
\62\ See FINRA Rule 7730.
\63\ See Securities Exchange Act Release No. 81995 (November 1,
2017), 82 FR 51658 (November 7, 2017) (SR-FINRA-2017-033) (notice of
filing and immediate effectiveness of fee for end-of-day data
product); Securities Exchange Act Release No. 61012 (November 16,
2009), 74 FR 61189 (November 23, 2009) (SR-FINRA-2007-006) (approval
order for the historic data product and related fee).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(5) of the Act,\64\ the Commission
consulted with and considered the views of the Treasury Department in
determining to approve the proposed rule change. The Treasury
Department indicated its support for the proposal.\65\ Pursuant to
[[Page 9887]]
Section 19(b)(6) of the Act,\66\ the Commission has considered the
sufficiency and appropriateness of existing laws and rules applicable
to government securities brokers, government securities dealers, and
their associated persons in approving the proposal. The proposal will
benefit investors and market participants by promoting greater
transparency into the U.S. Treasury Securities market while also
maintaining the confidentiality of individual market participants and
transactions.
---------------------------------------------------------------------------
\64\ See 15 U.S.C. 78s(b)(5) (providing that the Commission
``shall consult with and consider the views of the Secretary of the
Treasury prior to approving a proposed rule filed by a registered
securities association that primarily concerns conduct related to
transactions in government securities, except where the Commission
determines that an emergency exists requiring expeditious or summary
action and publishes its reasons therefor'').
\65\ See, e.g., Remarks by Under Secretary for Domestic Finance
Nellie Liang at the 2023 Treasury Market Conference (November 16,
2023) (``We are hopeful that, after a review of the public comments,
the SEC will approve a final rule and the proposed dissemination by
FINRA for on-the-runs can begin soon afterwards.''), available at
https://home.treasury.gov/news/press-releases/jy1917.
\66\ 15 U.S.C. 78s(b)(6).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\67\ that the proposed rule change (SR-FINRA-2023-015) be, and
hereby is, approved.
---------------------------------------------------------------------------
\67\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\68\
---------------------------------------------------------------------------
\68\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-02804 Filed 2-9-24; 8:45 am]
BILLING CODE 8011-01-P
