Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend FINRA Rule 6730 (Transaction Reporting) To Reduce the 15-Minute TRACE Reporting Timeframe to One Minute, 32475-32480 [2024-08946]
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Federal Register / Vol. 89, No. 82 / Friday, April 26, 2024 / Notices
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–CboeEDGX–2024–020. 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
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SR–CboeEDGX–2024–020 and should be
submitted on or before May 17, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–08941 Filed 4–25–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100006; File No. SR–
FINRA–2024–004]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change To Amend FINRA Rule
6730 (Transaction Reporting) To
Reduce the 15-Minute TRACE
Reporting Timeframe to One Minute
April 22, 2024.
I. Introduction
On January 11, 2024, 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
(‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend FINRA Rule 6730 to reduce the
15-minute reporting timeframe for
transactions reported to FINRA’s Trade
Reporting and Compliance Engine
(‘‘TRACE’’) system to one minute, with
exceptions for FINRA member firms
with de minimis reporting activity and
for manual trades. The proposed rule
change was published for comment in
the Federal Register on January 25,
2024.3 The Commission received
comments in response to the proposal.4
On February 29, 2024, the Commission
extended until April 24, 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.5
This order institutes proceedings
pursuant to Section 19(b)(2)(B) of the
Exchange Act 6 to determine whether to
approve or disapprove the proposed
rule change.
II. Summary of the Proposed Rule
Change
As described in more detail in the
Notice, FINRA rules currently specify
the applicable outer-limit reporting
timeframe for different types of TRACE-
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1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4
3 See Securities Exchange Act Release No. 99404
(January 19, 2024), 89 FR 5034 (January 25, 2024)
(‘‘Notice’’).
4 Comments received on the proposed rule change
are available at: https://www.sec.gov/comments/srfinra-2024-004/srfinra2024004.htm.
5 See Securities Exchange Act Release No. 99640
(February 29, 2024), 89 FR 16042 (March 6, 2024).
6 15 U.S.C. 78s(b)(2)(B).
2 17
26 17
CFR 200.30–3(a)(12).
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Eligible Securities.7 Most transactions in
corporate bonds, agency debt
securities,8 asset-backed securities
(‘‘ABS’’),9 and agency pass-through
mortgage-backed securities (‘‘MBS’’)
traded to-be-announced (‘‘TBA’’) for
good delivery (‘‘GD’’) 10 must be
reported within 15 minutes.11 The 157 ‘‘TRACE-Eligible Security’’ means a debt
security that is United States (‘‘U.S.’’) dollardenominated and is: (1) issued by a U.S. or foreign
private issuer, and, if a ‘‘restricted security’’ as
defined in Rule 144(a)(3) under the Securities Act
of 1933 (‘‘Securities Act’’), sold pursuant to
Securities Act Rule 144A; (2) issued or guaranteed
by an Agency as defined in Rule 6710(k) or a
Government-Sponsored Enterprise as defined in
Rule 6710(n); (3) a U.S. Treasury Security as
defined in Rule 6710(p); or (4) a Foreign Sovereign
Debt Security as defined in Rule 6710(kk). ‘‘TRACEEligible Security’’ does not include a debt security
that is a Money Market Instrument as defined in
Rule 6710(o). See Rule 6710(a).
8 ‘‘Agency Debt Security’’ means a debt security
(i) issued or guaranteed by an Agency as defined in
Rule 6710(k); (ii) issued or guaranteed by a
Government-Sponsored Enterprise as defined in
Rule 6710(n); or (iii) issued by a trust or other entity
that was established or sponsored by a GovernmentSponsored Enterprise for the purpose of issuing
debt securities, where such enterprise provides
collateral to the trust or other entity or retains a
material net economic interest in the reference
tranches associated with the securities issued by the
trust or other entity. The term excludes a U.S.
Treasury Security as defined in Rule 6710(p) and
a Securitized Product as defined in Rule 6710(m),
where an Agency or a Government-Sponsored
Enterprise is the Securitizer as defined in Rule
6710(s) (or similar person), or the guarantor of the
Securitized Product. See Rule 6710(l).
9 ‘‘Asset-Backed Security’’ means a type of
Securitized Product where the Asset-Backed
Security is collateralized by any type of financial
asset, such as a consumer or student loan, a lease,
or a secured or unsecured receivable, and excludes:
(i) a Securitized Product that is backed by
residential or commercial mortgage loans, mortgagebacked securities, or other financial assets
derivative of mortgage-backed securities; (ii) an
SBA-Backed ABS as defined in Rule 6710(bb)
traded To Be Announced as defined in Rule 6710(u)
or in a Specified Pool Transaction as defined in
Rule 6710(x); and (iii) a collateralized debt
obligation. See Rule 6710(cc).
10 ‘‘Agency Pass-Through Mortgage-Backed
Security’’ means a type of Securitized Product
issued in conformity with a program of an Agency
as defined in Rule 6710(k) or a GovernmentSponsored Enterprise (‘‘GSE’’) as defined in Rule
6710(n), for which the timely payment of principal
and interest is guaranteed by the Agency or GSE,
representing ownership interest in a pool (or pools)
of mortgage loans structured to ‘‘pass through’’ the
principal and interest payments to the holders of
the security on a pro rata basis. See Rule 6710(v).
‘‘To Be Announced’’ means a transaction in an
Agency Pass-Through Mortgage-Backed Security or
an SBA-Backed ABS as defined in Rule 6710(bb)
where the parties agree that the seller will deliver
to the buyer a pool or pool(s) of a specified face
amount and meeting certain other criteria but the
specific pool or pool(s) to be delivered at settlement
is not specified at the Time of Execution, and
includes TBA transactions ‘‘for good delivery’’ and
TBA transactions ‘‘not for good delivery’’ (‘‘NGD’’).
See Rule 6710(u).
11 See Rule 6730(a). However, a ‘‘List or Fixed
Offering Price Transaction,’’ as defined in Rule
6710(q), and a ‘‘Takedown Transaction,’’ as defined
in Rule 6710(r) are required to be reported to
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Federal Register / Vol. 89, No. 82 / Friday, April 26, 2024 / Notices
minute reporting timeframe has been in
place for corporate bonds since 2005 12
and was implemented later for agency
debt (2010),13 ABS (2015),14 and MBS
TBA GD (2013).15 In 2015, the
Commission approved FINRA rule
amendments generally requiring firms
to report transactions in these TRACEEligible Securities as soon as practicable
but no later than 15 minutes from the
time of execution,16 and FINRA publicly
disseminates information on these
transactions immediately upon receipt.
According to FINRA, 82.9 percent of
trades in the TRACE-Eligible Securities
that are currently subject to the 15minute outer-limit reporting timeframe
are reported within one minute of
execution.17
According to FINRA, since the
implementation of TRACE, fixed
income markets have changed
dramatically, including a significant
increase in the use of electronic trading
platforms or other electronic
communication protocols to facilitate
the execution of transactions. In light of
these advances and consistent with
FINRA’s goals of increasing
transparency and improving access to
timely transaction data, FINRA is
proposing updates to modernize the
reporting timeframes and provide
timelier transparency.
A. One-Minute Reporting
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FINRA is proposing amendments to
Rule 6730 to reduce the reporting
timeframe for securities currently
subject to the 15-minute reporting outer
limit to one minute, with exceptions for
FINRA member firms with de minimis
reporting activity and for manual trades.
FINRA would continue to make
information on the transactions publicly
available immediately upon receipt of
the trade reports.
TRACE by the next business day (T+1). See Rule
6730(a)(2).
12 See Securities Exchange Act Release No. 49845
(June 14, 2004), 69 FR 35088 (June 23, 2004) (Order
Approving File No. SR–NASD–2004–057); see also
Notice to Members 04–51 (July 2004).
13 See Securities Exchange Act Release No. 60726
(September 28, 2009), 74 FR 50991 (October 2,
2009) (Order Approving File No. SR–FINRA–2009–
010); see also Regulatory Notice 09–57 (September
2009).
14 See Securities Exchange Act Release No. 71607
(February 24, 2014), 79 FR 11481 (February 28,
2014) (Order Approving File No. SR–FINRA–2013–
046); see also Regulatory Notice 14–34 (August
2014).
15 See Securities Exchange Act Release No. 66829
(April 18, 2012), 77 FR 24748 (April 25, 2012)
(Order Approving File No. SR–FINRA–2012–020);
see also Regulatory Notice 12–26 (May 2012).
16 See Securities Exchange Act Release No. 75782
(August 28, 2015), 80 FR 53375 (September 3, 2015)
(Order Approving File No. SR–FINRA 2015–025).
17 See Notice at Table 1.
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Under existing Rule 6730(a)(1),
transactions in corporate bonds, agency
debt, ABS, and MBS TBA GD generally
must be reported as soon as practicable,
but no later than within 15 minutes of
execution.18 Specifically, transactions
executed on a business day at or after
12:00:00 a.m. ET through 7:59:59 a.m.
ET must be reported the same day no
later than 15 minutes after the TRACE
system opens. Transactions executed on
a business day at or after 8:00:00 a.m.
ET through 6:29:59 p.m. ET must be
reported no later than within 15
minutes of the Time of Execution,19
except for transactions executed on a
business day less than 15 minutes
before 6:30:00 p.m. ET, which must be
reported no later than 15 minutes after
the TRACE system opens the next day
(and, if reported on T+1, designated ‘‘as/
of’’ with the date of execution). Finally,
transactions executed on a business day
at or after 6:30:00 p.m. ET through
11:59:59 p.m. ET, or trades executed on
a Saturday, a Sunday, a federal or
religious holiday, or other day on which
the TRACE system is not open at any
time during that day, must be reported
on the next business day no later than
15 minutes after the TRACE system
opens (and must be designated ‘‘as/of’’
and include the date of execution).
Amended Rule 6730(a)(1) would
provide that transactions must be
reported as soon as practicable, but no
later than within one minute of the
Time of Execution. Amended Rule
6730(a)(1)(B) would require that a
transaction executed on a business day
at or after 8:00:00 a.m. ET through
6:29:59 p.m. ET must be reported as
soon as practicable, but no later than
one minute from the Time of Execution,
except that, a transaction executed on a
business day less than one minute
before 6:30:00 p.m. ET, must be reported
no later than 15 minutes after the
TRACE system opens the next business
day (T+1) (and, if reported on T+1,
designated ‘‘as/of’’ with the date of
execution). Any trades executed on a
business day prior to the open of the
TRACE system, on a business day at or
after 6:30:00 p.m. ET through 11:59:59
p.m. ET, or on a Saturday, a Sunday, a
federal or religious holiday or other day
on which the TRACE system is not open
at any time during that day would
18 See
supra notes 12–16.
Rule 6710(d), the ‘‘Time of Execution’’
generally means the time when the parties to a
transaction agree to all of the terms of the
transaction that are sufficient to calculate the dollar
price of the trade. For transactions involving
TRACE-Eligible Securities that are trading ‘‘when
issued’’ on a yield basis, the ‘‘Time of Execution’’
is when the yield for the transaction has been
agreed to by the parties to the transaction.
19 Under
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continue to be reportable as soon as
practicable on the next business day
(T+1), but no later than within 15
minutes after the TRACE system opens
(and must be designated ‘‘as/of,’’ as
appropriate, and include the date of
execution).
B. Exceptions From One-Minute
Reporting
FINRA is proposing two exceptions
from the one-minute reporting
timeframe for: (1) FINRA member firms
with ‘‘limited trading activity’’ in the
TRACE-Eligible Securities that are
subject to one-minute reporting; and (2)
manual trades.20
1. Exception for FINRA Members With
‘‘Limited Trading Activity’’
New Supplementary Material .08
would provide an exception to the oneminute reporting timeframe for FINRA
members with ‘‘limited trading
activity.’’ A FINRA member with
‘‘limited trading activity’’ would be
defined as one that, during one of the
prior two calendar years, reported to
TRACE fewer than 4,000 transactions in
the TRACE-Eligible Securities that are
subject to paragraphs (a)(1)(A) through
(a)(1)(D) of Rule 6730 (i.e., corporate
bonds, agency debt, ABS and MBS TBA
GD), including any manual trades.
Supplementary Material .08(b) would
require FINRA members relying on the
exception to confirm annually their
qualification for the exception.21 As
outlined in Supplementary Material
.08(c), qualifying FINRA members
would be required to report these trades
as soon as practicable, but no later than
within 15 minutes of the Time of
Execution.22
FINRA members exceeding the 4,000trade threshold for each of two
consecutive calendar years would need
to comply with the one-minute
reporting requirements of paragraphs
20 FINRA is also proposing a conforming
amendment to Supplementary Material .03 to refer
to Rule 6730 generally rather than ‘‘paragraph (a)’’
to reflect that members reporting pursuant to one
of the exceptions in new Supplementary Material
.08 and .09 are still required to report their trades
‘‘as soon as practicable.’’
21 Evidence of this confirmation should be
retained as part of the member’s books and records.
However, members eligible for the exception would
not need to take other affirmative steps to have their
trade reports processed pursuant to the exception’s
15-minute reporting timeframe, such as submitting
a certification of eligibility to FINRA or adding a
modifier or indicator to their trade reports.
22 However, a trade executed outside of TRACE
system hours, less than 15 minutes before 6:30 p.m.
ET, or on a Saturday, Sunday, federal or religious
holiday, or other day on which the TRACE system
is not open at any time during that day, would need
to be reported as soon as practicable, but no later
than within 15 minutes after the TRACE system
opens the next business day (T+1).
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(a)(1)(A) through (a)(1)(D) of amended
Rule 6730 beginning 90 days after the
firm no longer meets the criteria for the
exception (i.e., beginning 90 days after
January 1 of the next calendar year). If
a FINRA member’s reporting activity
subsequently dropped below the 4,000trade threshold, the member would
again be eligible for the exception.23
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2. Manual Trades Exception
New Supplementary Material .09
would provide an exception for manual
trades that are not electronic from end
to end. Where a trade qualifies for the
manual trades exception, a 15-minute
outer limit would apply for the first year
following implementation; a 10-minute
outer limit would apply for the second
year; and a five-minute outer limit
would apply thereafter.
The manual trades exception would
apply to ‘‘transactions that are manually
executed’’ or where a ‘‘[FINRA] member
must manually enter any of the trade
details or information necessary for
reporting the trade through the TRAQS
website or into a system that facilitates
trade reporting to TRACE.’’ 24 A trade
that requires manual intervention at any
point to complete the trade execution or
reporting process would qualify. FINRA
provided the following non-exhaustive
list of situations in which trades would
be considered to have a manual
component:
• where a FINRA member executes a
trade 25 by manual or hybrid means,
such as by telephone, email, or through
a chat/messaging function,26 and
subsequently must manually enter into
a system that facilitates trade reporting
all or some of the information required
23 For example, a member that reported 3,000
trades in the relevant TRACE-Eligible Securities to
TRACE in 2022 and then 4,150 trades in 2023
would continue to be eligible for the exception in
2024; however, if the member then reported 4,100
trades in 2024, the member would be required to
comply with the one-minute reporting requirements
starting 90 days after January 1, 2025 (with January
1 being day one of 90). If the member proceeded
to report 3,500 trades in 2025, the member would
once again be eligible for the exception from oneminute reporting for 2026 under the two-year
lookback. FINRA believes the two-year lookback
period for eligibility for the exception will
accommodate fluctuations in trading activity that
may be due to unusual market-wide events or
unique client demands.
24 See Supplementary Material .09(a).
25 As noted above, for purposes of Rule 6730, the
reporting timeframe is measured from the Time of
Execution as defined by Rule 6710(d), which
generally refers to the time that the parties have
agreed to all of the terms of the transaction
sufficient to calculate the dollar price of the trade
(or yield, in the case of when-issued securities
priced to a spread).
26 FINRA reminds members of their obligation to
retain these electronic communications as part of
their books and records, consistent with FINRA and
Commission recordkeeping requirements. See, e.g.,
Notice to Members 03–33 (July 2003).
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to book the trade and report it to
TRACE;
• where allocations to individual
accounts must be manually input in
connection with a trade by a duallyregistered broker-dealer/investment
adviser;
• where an electronic trade is subject
to manual review for risk management
or regulatory compliance purposes and,
as part of or following the review, the
trade must be manually approved,
amended, or released before the trade is
reported to TRACE (e.g., a firm’s risk
management procedures require a
secondary approver for trades over a
certain threshold; a firm’s best
execution procedures require manually
checking another market to confirm that
a better price is not available to the
customer);
• where a FINRA member trades a
bond for the first time and additional
manual steps are necessary to set the
bond up in the firm’s systems to book
and report the trade (e.g., entering the
CUSIP number and associated bond data
into the firm’s system); and
• where a FINRA member agrees to
trade a basket of securities at a single
price and manual action is required to
calculate the price of component
securities in the basket or to book and
report the trade in component securities
to TRACE.
According to FINRA, the above
examples are illustrative of the types of
circumstances in which, due to the
manual nature of components of the
trade execution or reporting process,
reporting a transaction within one
minute of the Time of Execution may be
unfeasible, even where a FINRA
member makes reasonable efforts to
report the trade as soon as practicable
(as required). FINRA also would assess
FINRA members’ trade reporting in
connection with manual trades to
determine whether the five-minute trade
reporting timeframe (to become
applicable after two years) is
appropriate, and would be prepared to
adjust, as necessary.
FINRA would review use of the
manual trades exception for abuse.
FINRA members would not, in any case,
be allowed to purposely delay the
execution or reporting of a transaction
by handling any aspect of a trade
manually or introducing manual steps
following the Time of Execution.
Additionally, considering the
overarching obligation to report trades
as soon as practicable, FINRA members
would be encouraged to consider the
types of transactions in which they
regularly engage and whether they can
reasonably reduce the time between a
trade’s Time of Execution and its
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32477
reporting, and more generally must
make a good faith effort to report their
trades as soon as practicable.
Under amended Rule 6730(d)(4), any
FINRA member that executes or reports
a trade manually would be required to
append a manual trade indicator to the
trade report. The indicator must be
included in any manual trade,
regardless of whether the FINRA
member reports outside of the oneminute timeframe in reliance on the
manual trades exception. Application of
the indicator would give FINRA greater
insight into manual trading and the use
of the exception. The indicator would
not be included in publicly
disseminated TRACE data.
Finally, FINRA is proposing to amend
Rule 6730(f) to provide that a pattern or
practice of late reporting may be
considered conduct inconsistent with
high standards of commercial honor and
just and equitable principles of trade, in
violation of Rule 2010, absent
‘‘reasonable justification’’ (in addition to
the rule’s existing reference to
‘‘exceptional circumstances’’).27
Recurring issues in the systems of a
FINRA member firm or its vendor
would not be considered a reasonable
justification or exceptional
circumstance that excuses a pattern or
practice of late trade reporting.28
III. Summary of Comments
The Commission received comments
on the proposed rule change.29
Commenters generally address the oneminute reporting timeframe, the
exceptions to the timeframe (both in
general and specifically discussing the
manual trades and de minimis
exceptions), the gradual five-minute
decreases in the manual trades
exception, consistent application of
reporting requirements, the proposed
implementation period, and the
proposed rule’s consistency with the
Exchange Act.
Several commenters support the
proposal to shorten the 15-minute
TRACE reporting timeframe to one
minute and its aim of increasing
transparency in fixed income markets.30
27 See, e.g., Rule 6623 describing ‘‘exceptional
circumstances’’ as instances of system failure by a
member or service bureau, or unusual market
conditions, such as extreme volatility in a security,
or in the market as a whole.
28 See, e.g., FINRA Trade Reporting Frequently
Asked Questions, Q206.21, available at https://
www.finra.org/filing-reporting/markettransparency-reporting/trade-reporting-faq.
29 See supra note 4.
30 See, e.g., Letter to Vanessa Countryman,
Secretary, Commission, from Tyler Gellasch,
President and CEO, Healthy Markets Association
(February 15, 2024) (‘‘HMA Letter’’) at 7; Letter to
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Some commenters support increasing
price transparency in general but
caution restraint and the need for broad
exceptions, citing the potential for
reduced liquidity and execution
quality.31 Some commenters oppose one
minute reporting, questioning the
feasibility and cost of compliance due to
technical limitations and the prevalence
of manual processes.32
Commenters express varied views on
the proposed exceptions to one minute
reporting. Some commenters state the
exceptions are essential to the success of
the rule.33 These commenters cite the
burdens of compliance with one-minute
reporting on broker-dealers which rely
on manual processes.34 Others state that
the exceptions are too narrow 35 or too
broad.36 One commenter that states the
exceptions are too narrow also states
that anything less than 15-minute
reporting is infeasible and cites the
concern that compliance costs
associated with faster reporting could
price small broker-dealers out of fixed
income markets.37 Two commenters
Vanessa Countryman, Secretary, Commission, from
Stephen John Berger, Managing Director, Global
Head of Government and Regulatory Policy, Citadel
(February 15, 2024) (‘‘Citadel Letter’’) at 1; Letter to
Vanessa Countryman, Secretary, Commission, from
Joanna Mallers, Executive Director, FIA Principal
Traders Group (February 15, 2024) (‘‘FIA PTG
Letter’’) at 1; Letter to Vanessa Countryman,
Secretary, Commission, from Gerard O’Reilly, CoChief Executive Officer and Co-Chief Investment
Officer, Dimensional Fund Advisors LP and David
A. Plecha, Global Head of Fixed Income,
Dimensional Fund Advisors LP (February 15, 2024)
(‘‘Dimensional Letter’’) at 1.
31 See, e.g., Letter to Vanessa Countryman,
Secretary, Commission, from Sarah A. Bessin,
Deputy General Counsel, Investment Company
Institute and Kevin Ercoline, Assistant General
Counsel, Investment Company Institute (February
15, 2024) (‘‘ICI Letter’’) at 2; Letter to Vanessa
Countryman, Secretary, Commission, from Michael
Decker, Senior Vice President, Bond Dealers of
America (February 15, 2024) (‘‘BDA Letter’’) at 1;
Letter to Secretary, Commission, from Howard
Meyerson, Managing Director, Financial
Information Forum (February 15, 2024) (‘‘FIF Letter
I’’) at 2.
32 See, e.g., Letter to Vanessa Countryman,
Secretary, Commission, from Kenneth E. Bentsen,
Jr., President and CEO, Securities Industry and
Financial Markets Association (February 15, 2024)
(‘‘SIFMA Letter’’) at 2; Letter to Vanessa
Countryman, Secretary, Commission, from
Christopher A. Iacovella, President & Chief
Executive Officer, American Securities Association
(February 16, 2024) (‘‘ASA Letter’’) at 2; Letter to
Vanessa Countryman, Secretary, Commission, from
Melissa P. Hoots, CEO/CCO, Falcon Square Capital
(February 15, 2024) (‘‘Falcon Letter’’) at 1–2; BDA
Letter at 2.
33 See, e.g., BDA Letter at 1; FIF Letter I at 2;
SIFMA Letter at 3–4.
34 See BDA Letter at 1; FIF Letter I at 2; SIFMA
Letter at 3–4.
35 See, e.g., ASA Letter at 1–2; Falcon Letter at 1.
36 See, e.g., Dimensional Letter at 2; HMA Letter
at 13; Citadel Letter at 2–3; FIA PTG Letter at 1–
2.
37 See ASA Letter at 2; see also Falcon Letter at
4 (‘‘[O]ur fear is that the Filing will, over time,
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that state the exceptions are too broad
suggest FINRA withdraw the proposal
and instead require market participants
to report trades as soon as practicable
but no later than five minutes after
execution.38 Another commenter that
states the exceptions are too broad also
states that the exceptions ‘‘create
significant risk to the efficacy and legal
durability of the entire rule.’’ 39 Finally,
one commenter encourages FINRA to
phase out both exceptions completely
over time, which it states would
incentivize firms to modernize their
execution processes.40
Several commenters specifically
address the de minimis exception. Some
commenters state support for the de
minimis exception.41 One of these
commenters states the de minimis
exception is appropriately tailored to
protect minority, veteran, and women
owned business enterprises and small
dealers from incurring significant
costs.42 The commenter also states the
proposed two-year look back period will
prevent surprise application of the rule
and allow newly impacted brokerdealers time to comply.43 Some
commenters state opposition to the de
minimis exception.44 One of these
commenters supports the logic behind
the de minimis exception but states the
proposed 4,000-trade report threshold is
too low and insufficiently justified.45
This commenter also requests FINRA
expand the threshold or at minimum
provide more analysis to support its
proposed limit.46 Another commenter
that opposes the de minimis exception
states FINRA did not sufficiently justify
the need for the exception, nor its
decisions to set the exception’s
threshold at 4,000 annual trades and the
lookback period for applicability of the
threshold at two years.47 This
commenter suggests the de minimis
exception be abandoned or more
narrowly tailored.48
Several commenters offer specific
views about the manual trades
exception. Some commenters
characterize the manual trades
eliminate smaller fixed-income brokers like Falcon
Square and harm the small and medium-size
institutional clients that we serve due to an
inability to realistically further reduce the time it
takes to conduct these manual trade processes.’’).
38 See Citadel at 4; FIA PTG at 4.
39 HMA Letter at 2.
40 See Dimensional Letter at 2.
41 See, e.g., SIFMA Letter at 9; BDA Letter at 2.
42 See SIFMA Letter at 9.
43 See id.
44 See, e.g., Falcon Letter at 2–4; HMA Letter at
9–11, 13.
45 See Falcon Letter at 2–3.
46 See id.
47 See HMA Letter at 11.
48 See id. at 9.
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Fmt 4703
Sfmt 4703
exception as essential to ensuring
compliance with the rule.49 Some
commenters state it would be more
operationally feasible to flag trades
subject to one-minute reporting, rather
than flagging all manual trades.50 One
commenter states that the exception
should be expanded to include certain
fully electronic transactions that cannot
feasibly be reported within one minute,
such as large post-trade allocations,
batch-processed trades, and trades
involving multiple systems in trade
workflow.51 This commenter states that
post-trade allocations are especially
difficult to report within one minute for
broker-dealers also registered as
investment advisers.52 Another
commenter states support for FINRA’s
proposal to apply the exception to a
scenario where a firm has not
previously traded a bond.53 This
commenter also notes a similar proposal
by the Municipal Securities Rulemaking
Board (‘‘MSRB’’) that would apply to
transactions in municipal securities and
states that FINRA and MSRB should
harmonize the scope of the manual
trades exceptions.54 Finally, the
commenter describes certain scenarios
that could be experienced by a reporting
firm, questioning whether the manual
trades exception would apply, and
suggesting a dialogue with industry
about such scenarios.55
Several comments address the gradual
phase-in of five-minute reporting
written into the proposed rule for
manual trades.56 One commenter
requests FINRA propose for notice and
comment each time it seeks to reduce
the timeframe.57 The commenter also
states FINRA must consider that the
proposed rule will be implemented
49 See BDA Letter at 1; FIF Letter I at 2; SIFMA
Letter at 6.
50 See BDA Letter at 3; SIFMA Letter at 9.
51 See SIFMA Letter at 7–9.
52 See id. at 7; see also BDA Letter at 3–4; FIF
Letter I at 3 (‘‘FIF members request that FINRA and
the MSRB provide an additional exception for the
scenario where an entity dually-registered as a
broker-dealer and investment adviser . . . is
required to report a large number of allocations for
a block trade that the dual registrant executes,
allocates and reports automatically.’’).
53 See FIF Letter I at 4.
54 See id. at 3.
55 See Letter to Secretary, Commission, from
Howard Meyerson, Managing Director, Financial
Information Forum (February 26, 2024) at 2–4; FIF
Letter I at 3–4.
56 See, e.g., ICI Letter at 3–4; Falcon Letter at 4;
SIFMA Letter at 6; BDA Letter at 2–3.
57 See ICI Letter at 3; see also Falcon Letter at 4
(stating that FINRA must produce supporting data
before proposing a mandatory phase-in period for
the manual trades exception); SIFMA Letter at 6
(stating that FINRA should conduct an impact
assessment before reducing the reporting window
for manual trades to five minutes).
E:\FR\FM\26APN1.SGM
26APN1
Federal Register / Vol. 89, No. 82 / Friday, April 26, 2024 / Notices
alongside other regulatory initiatives.58
Another commenter states support for
the phase-in approach, but asks FINRA
to maintain close communication with
industry during the phase-in period and
to remain sensitive to operational
roadblocks that market participants
could confront.59
Several commenters state the manual
trades exception is too broad.60 Two of
these commenters question the lack of
estimates in the proposal of the number
of transactions expected to qualify for
the manual trades exception.61 These
commenters raise the concern that a
large proportion of the total number of
trades currently reported outside of one
minute could fall within the proposed
rule’s manual trades exception,
undermining the goal of increasing posttrade transparency.62 These commenters
also raise concerns that firms could
build manual steps into the trade
execution process as a means of
qualifying for the longer manual trades
reporting window.63
Several commenters raise concerns
related to consistent application of
reporting requirements. One commenter
describes the potential negative
consequences of applying different
levels of post-trade transparency
depending on a trade’s mode of
execution.64 Another commenter raises
concern about different reporting
requirements under the proposal
depending on a trade’s time of
execution.65 The commenter states that
under the current rule, trades executed
when TRACE is closed must be reported
within 15 minutes of TRACE being
open, mirroring the deadline for
reporting of trades executed when
TRACE is open.66 But, the commenter
continues, under the proposal, trades
executed outside of the hours when
TRACE is open will still be subject to
the deadline to report within 15 minutes
of TRACE being open while trades
executed when TRACE is open will be
subject to the new one minute
requirement.67 The commenter urges
58 See
ICI Letter at 3–4.
BDA at 3.
60 See, e.g., HMA Letter at 11–12; Citadel Letter
at 2–3; FIA PTG Letter at 2–4.
61 See Citadel Letter at 2–3; FIA PTG Letter at 2.
62 See Citadel Letter at 2–3; FIA PTG Letter at 2.
63 See Citadel Letter at 3; FIA PTG at 3; see also
HMA Letter at 12 (‘‘[T]he Proposal . . . does not
assuage our concerns that firms may intentionally
add a ‘manual’ component to their post-execution
processes so as to avoid timely reporting (and
dissemination) of their trading activity.’’).
64 See Citadel Letter at 1–3.
65 See HMA Letter at 8.
66 See id.
67 See id.
ddrumheller on DSK120RN23PROD with NOTICES1
59 See
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20:31 Apr 25, 2024
Jkt 262001
consistent reporting times in this
scenario.68
Some comments address the proposed
implementation period. Two
commenters request an implementation
period of two years from the time of
adoption due to the high cost of
compliance.69 Another commenter
states the cost of implementing the
proposal is anticipated to be especially
high for smaller firms and suggests an
implementation period of at least 18
months from the date of FINRA and
MSRB publishing updated technical
specifications and guidance.70 The
commenter also requests that FINRA
provide an expanded free testing period
of 90 days instead of the standard free
testing period of 30 days.71
Several commenters question the
proposed rule’s consistency with the
Exchange Act. Two commenters state
that FINRA failed to meet its burden to
demonstrate consistency with the
Exchange Act, particularly by failing to
estimate the number of transactions
captured by the manual trades
exception.72 These commenters also
state that the differing reporting
windows for manual and electronic
trades violate the Exchange Act by
discriminating based on the mode of
execution and unduly burdening
competition.73
IV. Proceedings To Determine Whether
To Approve or Disapprove the FINRA
Proposal and Grounds for Disapproval
Under Consideration
The Commission is instituting
proceedings pursuant to Section 19(b)(2)
of the Exchange Act 74 to determine
whether the proposed rule change
should be approved or disapproved.
Institution of proceedings is appropriate
at this time in view of the legal and
policy issues raised by the proposal.
Institution of proceedings does not
indicate, however, that the Commission
has reached any conclusions with
respect to any of the issues involved.
Rather, as described below, the
Commission seeks and encourages
interested persons to provide comments
on the proposed rule change.
Pursuant to Section 19(b)(2)(B) of the
Exchange Act,75 the Commission is
providing notice of the grounds for
68 See
HMA Letter at 9.
SIFMA Letter at 10; BDA Letter at 4.
70 See FIF Letter I at 5.
71 See id. at 6–7.
72 See Citadel Letter at 3; FIA PTG Letter at 3; see
also Falcon Letter at 1 (stating that FINRA did not
adequately justify the exceptions to the rule).
73 See Citadel Letter at 3; FIA PTG Letter at 3–
4.
74 15 U.S.C. 78s(b)(2).
75 15 U.S.C. 78s(b)(2)(B).
69 See
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Frm 00089
Fmt 4703
Sfmt 4703
32479
disapproval under consideration. The
Commission is instituting proceedings
to allow for additional analysis of the
proposed rule change’s consistency
with: (1) Section 15A(b)(6) of the
Exchange Act, which requires, among
other things, that FINRA rules 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, in general, protect investors and
the public interest,76 and (2) Section
15A(b)(9) of the Exchange Act, which
requires that FINRA rules not impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Exchange Act.77
The Commission asks that commenters
address the sufficiency of FINRA’s
statements in support of the proposal,
which are set forth in the Notice, in
addition to any other comments they
may wish to submit about the proposed
rule change. In particular, the
Commission is instituting proceedings
to allow for additional analysis of, and
input from commenters with respect to,
the scope and implementation of the
proposed exceptions to the one-minute
reporting timeframe.
V. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their data, views, and
arguments with respect to the issues
identified above, as well as any other
concerns they may have with the
proposal. In particular, the Commission
invites the written views of interested
persons concerning whether the
proposed rule change is consistent with
the Exchange Act and the rules and
regulations thereunder.
Although there do not appear to be
any issues relevant to approval or
disapproval that would be facilitated by
an oral presentation of data, views, and
arguments, the Commission will
consider, pursuant to Rule 19b–4 under
the Exchange Act,78 any request for an
opportunity to make an oral
presentation.79
76 15
U.S.C. 78o–3(b)(6).
U.S.C. 78o–3(b)(9).
78 17 CFR 240.19b–4.
79 Section 19(b)(2) of the Exchange Act, as
amended by the Securities Acts Amendments of
1975, Public Law 94–29 (Jun. 4, 1975), grants to the
Commission flexibility to determine what type of
proceeding—either oral or notice and opportunity
for written comments—is appropriate for
77 15
E:\FR\FM\26APN1.SGM
Continued
26APN1
32480
Federal Register / Vol. 89, No. 82 / Friday, April 26, 2024 / Notices
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposed rule change should be
approved or disapproved by May 17,
2024. Any person who wishes to file a
rebuttal to any other person’s
submission must file that rebuttal by
May 31, 2024.
Comments may be submitted by any
of the following methods:
ddrumheller on DSK120RN23PROD with NOTICES1
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–2024–004 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–2024–004. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of
FINRA. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–FINRA–2024–004 and should be
consideration of a particular proposal by a selfregulatory organization. See Securities Acts
Amendments of 1975, Senate Comm. on Banking,
Housing & Urban Affairs, S. Rep. No. 75, 94th
Cong., 1st Sess. 30 (1975).
VerDate Sep<11>2014
20:31 Apr 25, 2024
Jkt 262001
submitted on or before May 17, 2024.
Rebuttal comments should be submitted
by May 31, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.80
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–08946 Filed 4–25–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99997; File No. SR–
PEARL–2024–21]
Self-Regulatory Organizations; MIAX
PEARL LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Exchange
Rule 404, Series of Option Contracts
Open for Trading To Amend the Short
Term Option Series Program
April 19, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 18,
2024, MIAX PEARL, LLC (‘‘MIAX Pearl’’
or ‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the Short Term Option Series
Program.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxglobal.com/markets/
us-equities/pearl-equities/rule-filings, at
MIAX Pearl’s principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
80 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Fmt 4703
Sfmt 4703
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Interpretations and Policies .02 of
Exchange Rule 404, ‘‘Series of Options
Contracts Open for Trading.’’ The
Exchange proposes to expand the Short
Term Option Series program to permit
the listing and trading of options series
with Tuesday and Thursday expirations
for options on iShares Russell 2000 ETF
(‘‘IWM’’), specifically permitting two
expiration dates for the proposed
Tuesday and Thursday expirations in
IWM. These proposed rule changes are
based on a similar proposal submitted
by Nasdaq ISE, LLC (‘‘ISE’’) and
approved by the Commission.3
Currently, Table 1 in Interpretations
and Policies .02 of Exchange Rule 404
specifies each symbol that qualifies as a
Short Term Option Daily Expiration.4
Today, Table 1 permits the listing and
trading of Monday Short Term Option
Daily Expirations and Wednesday Short
Term Option Daily Expirations for IWM.
At this time, the Exchange proposes to
expand the Short Term Option Series
Program to permit the listing and
trading of no more than a total of two
IWM Short Term Option Daily
Expirations beyond the current week for
each of Monday, Tuesday, Wednesday,
and Thursday expirations at one time.5
3 See Securities Exchange Act Release No. 99946
(April 11, 2024), File No. SR–ISE–2024–06 (Order
Approving a Proposed Rule Change to Amend the
Short Term Option Program).
4 The Exchange may open for trading on any
Thursday or Friday that is a business day series of
options on that class that expire at the close of
business open each of the next five Fridays that are
business days and are not Fridays in which
standard expiration options series, Monthly
Options Series, or Quarterly Options Series. Of
these series of options, the Exchange may have no
more than a total of five Short Term Option
Expiration Dates. In addition, the Exchange may
open for trading series of options on certain
symbols that expire at the close of business on each
of the next two Mondays, Tuesdays, Wednesdays,
and Thursdays, respectively, that are business days
beyond the current week and are not business days
in which standard expiration options series,
Monthly Options Series, or Quarterly Options
Series expire (‘‘Short Term Option Daily
Expirations’’). See Interpretations and Policies .02
of Exchange Rule 404.
5 The Exchange would amend the Tuesday and
Thursday expirations for IWM in Table 1 in
Interpetations and Policies .02 of Exchange Rule
404 from ‘‘0’’ to ‘‘2’’ to permit Tuesday and
Thursday expirations for options on IWM listed
E:\FR\FM\26APN1.SGM
26APN1
]]>Agencies
[Federal Register Volume 89, Number 82 (Friday, April 26, 2024)]
[Notices]
[Pages 32475-32480]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08946]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100006; File No. SR-FINRA-2024-004]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Instituting Proceedings To Determine Whether To
Approve or Disapprove a Proposed Rule Change To Amend FINRA Rule 6730
(Transaction Reporting) To Reduce the 15-Minute TRACE Reporting
Timeframe to One Minute
April 22, 2024.
I. Introduction
On January 11, 2024, 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 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend FINRA Rule 6730 to
reduce the 15-minute reporting timeframe for transactions reported to
FINRA's Trade Reporting and Compliance Engine (``TRACE'') system to one
minute, with exceptions for FINRA member firms with de minimis
reporting activity and for manual trades. The proposed rule change was
published for comment in the Federal Register on January 25, 2024.\3\
The Commission received comments in response to the proposal.\4\ On
February 29, 2024, the Commission extended until April 24, 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.\5\ This order
institutes proceedings pursuant to Section 19(b)(2)(B) of the Exchange
Act \6\ to determine whether to approve or disapprove 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. 99404 (January 19,
2024), 89 FR 5034 (January 25, 2024) (``Notice'').
\4\ Comments received on the proposed rule change are available
at: https://www.sec.gov/comments/sr-finra-2024-004/srfinra2024004.htm.
\5\ See Securities Exchange Act Release No. 99640 (February 29,
2024), 89 FR 16042 (March 6, 2024).
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Summary of the Proposed Rule Change
As described in more detail in the Notice, FINRA rules currently
specify the applicable outer-limit reporting timeframe for different
types of TRACE-Eligible Securities.\7\ Most transactions in corporate
bonds, agency debt securities,\8\ asset-backed securities (``ABS''),\9\
and agency pass-through mortgage-backed securities (``MBS'') traded to-
be-announced (``TBA'') for good delivery (``GD'') \10\ must be reported
within 15 minutes.\11\ The 15-
[[Page 32476]]
minute reporting timeframe has been in place for corporate bonds since
2005 \12\ and was implemented later for agency debt (2010),\13\ ABS
(2015),\14\ and MBS TBA GD (2013).\15\ In 2015, the Commission approved
FINRA rule amendments generally requiring firms to report transactions
in these TRACE-Eligible Securities as soon as practicable but no later
than 15 minutes from the time of execution,\16\ and FINRA publicly
disseminates information on these transactions immediately upon
receipt. According to FINRA, 82.9 percent of trades in the TRACE-
Eligible Securities that are currently subject to the 15-minute outer-
limit reporting timeframe are reported within one minute of
execution.\17\
---------------------------------------------------------------------------
\7\ ``TRACE-Eligible Security'' means a debt security that is
United States (``U.S.'') dollar-denominated and is: (1) issued by a
U.S. or foreign private issuer, and, if a ``restricted security'' as
defined in Rule 144(a)(3) under the Securities Act of 1933
(``Securities Act''), sold pursuant to Securities Act Rule 144A; (2)
issued or guaranteed by an Agency as defined in Rule 6710(k) or a
Government-Sponsored Enterprise as defined in Rule 6710(n); (3) a
U.S. Treasury Security as defined in Rule 6710(p); or (4) a Foreign
Sovereign Debt Security as defined in Rule 6710(kk). ``TRACE-
Eligible Security'' does not include a debt security that is a Money
Market Instrument as defined in Rule 6710(o). See Rule 6710(a).
\8\ ``Agency Debt Security'' means a debt security (i) issued or
guaranteed by an Agency as defined in Rule 6710(k); (ii) issued or
guaranteed by a Government-Sponsored Enterprise as defined in Rule
6710(n); or (iii) issued by a trust or other entity that was
established or sponsored by a Government-Sponsored Enterprise for
the purpose of issuing debt securities, where such enterprise
provides collateral to the trust or other entity or retains a
material net economic interest in the reference tranches associated
with the securities issued by the trust or other entity. The term
excludes a U.S. Treasury Security as defined in Rule 6710(p) and a
Securitized Product as defined in Rule 6710(m), where an Agency or a
Government-Sponsored Enterprise is the Securitizer as defined in
Rule 6710(s) (or similar person), or the guarantor of the
Securitized Product. See Rule 6710(l).
\9\ ``Asset-Backed Security'' means a type of Securitized
Product where the Asset-Backed Security is collateralized by any
type of financial asset, such as a consumer or student loan, a
lease, or a secured or unsecured receivable, and excludes: (i) a
Securitized Product that is backed by residential or commercial
mortgage loans, mortgage-backed securities, or other financial
assets derivative of mortgage-backed securities; (ii) an SBA-Backed
ABS as defined in Rule 6710(bb) traded To Be Announced as defined in
Rule 6710(u) or in a Specified Pool Transaction as defined in Rule
6710(x); and (iii) a collateralized debt obligation. See Rule
6710(cc).
\10\ ``Agency Pass-Through Mortgage-Backed Security'' means a
type of Securitized Product issued in conformity with a program of
an Agency as defined in Rule 6710(k) or a Government-Sponsored
Enterprise (``GSE'') as defined in Rule 6710(n), for which the
timely payment of principal and interest is guaranteed by the Agency
or GSE, representing ownership interest in a pool (or pools) of
mortgage loans structured to ``pass through'' the principal and
interest payments to the holders of the security on a pro rata
basis. See Rule 6710(v). ``To Be Announced'' means a transaction in
an Agency Pass-Through Mortgage-Backed Security or an SBA-Backed ABS
as defined in Rule 6710(bb) where the parties agree that the seller
will deliver to the buyer a pool or pool(s) of a specified face
amount and meeting certain other criteria but the specific pool or
pool(s) to be delivered at settlement is not specified at the Time
of Execution, and includes TBA transactions ``for good delivery''
and TBA transactions ``not for good delivery'' (``NGD''). See Rule
6710(u).
\11\ See Rule 6730(a). However, a ``List or Fixed Offering Price
Transaction,'' as defined in Rule 6710(q), and a ``Takedown
Transaction,'' as defined in Rule 6710(r) are required to be
reported to TRACE by the next business day (T+1). See Rule
6730(a)(2).
\12\ See Securities Exchange Act Release No. 49845 (June 14,
2004), 69 FR 35088 (June 23, 2004) (Order Approving File No. SR-
NASD-2004-057); see also Notice to Members 04-51 (July 2004).
\13\ See Securities Exchange Act Release No. 60726 (September
28, 2009), 74 FR 50991 (October 2, 2009) (Order Approving File No.
SR-FINRA-2009-010); see also Regulatory Notice 09-57 (September
2009).
\14\ See Securities Exchange Act Release No. 71607 (February 24,
2014), 79 FR 11481 (February 28, 2014) (Order Approving File No. SR-
FINRA-2013-046); see also Regulatory Notice 14-34 (August 2014).
\15\ See Securities Exchange Act Release No. 66829 (April 18,
2012), 77 FR 24748 (April 25, 2012) (Order Approving File No. SR-
FINRA-2012-020); see also Regulatory Notice 12-26 (May 2012).
\16\ See Securities Exchange Act Release No. 75782 (August 28,
2015), 80 FR 53375 (September 3, 2015) (Order Approving File No. SR-
FINRA 2015-025).
\17\ See Notice at Table 1.
---------------------------------------------------------------------------
According to FINRA, since the implementation of TRACE, fixed income
markets have changed dramatically, including a significant increase in
the use of electronic trading platforms or other electronic
communication protocols to facilitate the execution of transactions. In
light of these advances and consistent with FINRA's goals of increasing
transparency and improving access to timely transaction data, FINRA is
proposing updates to modernize the reporting timeframes and provide
timelier transparency.
A. One-Minute Reporting
FINRA is proposing amendments to Rule 6730 to reduce the reporting
timeframe for securities currently subject to the 15-minute reporting
outer limit to one minute, with exceptions for FINRA member firms with
de minimis reporting activity and for manual trades. FINRA would
continue to make information on the transactions publicly available
immediately upon receipt of the trade reports.
Under existing Rule 6730(a)(1), transactions in corporate bonds,
agency debt, ABS, and MBS TBA GD generally must be reported as soon as
practicable, but no later than within 15 minutes of execution.\18\
Specifically, transactions executed on a business day at or after
12:00:00 a.m. ET through 7:59:59 a.m. ET must be reported the same day
no later than 15 minutes after the TRACE system opens. Transactions
executed on a business day at or after 8:00:00 a.m. ET through 6:29:59
p.m. ET must be reported no later than within 15 minutes of the Time of
Execution,\19\ except for transactions executed on a business day less
than 15 minutes before 6:30:00 p.m. ET, which must be reported no later
than 15 minutes after the TRACE system opens the next day (and, if
reported on T+1, designated ``as/of'' with the date of execution).
Finally, transactions executed on a business day at or after 6:30:00
p.m. ET through 11:59:59 p.m. ET, or trades executed on a Saturday, a
Sunday, a federal or religious holiday, or other day on which the TRACE
system is not open at any time during that day, must be reported on the
next business day no later than 15 minutes after the TRACE system opens
(and must be designated ``as/of'' and include the date of execution).
---------------------------------------------------------------------------
\18\ See supra notes 12-16.
\19\ Under Rule 6710(d), the ``Time of Execution'' generally
means the time when the parties to a transaction agree to all of the
terms of the transaction that are sufficient to calculate the dollar
price of the trade. For transactions involving TRACE-Eligible
Securities that are trading ``when issued'' on a yield basis, the
``Time of Execution'' is when the yield for the transaction has been
agreed to by the parties to the transaction.
---------------------------------------------------------------------------
Amended Rule 6730(a)(1) would provide that transactions must be
reported as soon as practicable, but no later than within one minute of
the Time of Execution. Amended Rule 6730(a)(1)(B) would require that a
transaction executed on a business day at or after 8:00:00 a.m. ET
through 6:29:59 p.m. ET must be reported as soon as practicable, but no
later than one minute from the Time of Execution, except that, a
transaction executed on a business day less than one minute before
6:30:00 p.m. ET, must be reported no later than 15 minutes after the
TRACE system opens the next business day (T+1) (and, if reported on
T+1, designated ``as/of'' with the date of execution). Any trades
executed on a business day prior to the open of the TRACE system, on a
business day at or after 6:30:00 p.m. ET through 11:59:59 p.m. ET, or
on a Saturday, a Sunday, a federal or religious holiday or other day on
which the TRACE system is not open at any time during that day would
continue to be reportable as soon as practicable on the next business
day (T+1), but no later than within 15 minutes after the TRACE system
opens (and must be designated ``as/of,'' as appropriate, and include
the date of execution).
B. Exceptions From One-Minute Reporting
FINRA is proposing two exceptions from the one-minute reporting
timeframe for: (1) FINRA member firms with ``limited trading activity''
in the TRACE-Eligible Securities that are subject to one-minute
reporting; and (2) manual trades.\20\
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\20\ FINRA is also proposing a conforming amendment to
Supplementary Material .03 to refer to Rule 6730 generally rather
than ``paragraph (a)'' to reflect that members reporting pursuant to
one of the exceptions in new Supplementary Material .08 and .09 are
still required to report their trades ``as soon as practicable.''
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1. Exception for FINRA Members With ``Limited Trading Activity''
New Supplementary Material .08 would provide an exception to the
one-minute reporting timeframe for FINRA members with ``limited trading
activity.'' A FINRA member with ``limited trading activity'' would be
defined as one that, during one of the prior two calendar years,
reported to TRACE fewer than 4,000 transactions in the TRACE-Eligible
Securities that are subject to paragraphs (a)(1)(A) through (a)(1)(D)
of Rule 6730 (i.e., corporate bonds, agency debt, ABS and MBS TBA GD),
including any manual trades. Supplementary Material .08(b) would
require FINRA members relying on the exception to confirm annually
their qualification for the exception.\21\ As outlined in Supplementary
Material .08(c), qualifying FINRA members would be required to report
these trades as soon as practicable, but no later than within 15
minutes of the Time of Execution.\22\
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\21\ Evidence of this confirmation should be retained as part of
the member's books and records. However, members eligible for the
exception would not need to take other affirmative steps to have
their trade reports processed pursuant to the exception's 15-minute
reporting timeframe, such as submitting a certification of
eligibility to FINRA or adding a modifier or indicator to their
trade reports.
\22\ However, a trade executed outside of TRACE system hours,
less than 15 minutes before 6:30 p.m. ET, or on a Saturday, Sunday,
federal or religious holiday, or other day on which the TRACE system
is not open at any time during that day, would need to be reported
as soon as practicable, but no later than within 15 minutes after
the TRACE system opens the next business day (T+1).
---------------------------------------------------------------------------
FINRA members exceeding the 4,000-trade threshold for each of two
consecutive calendar years would need to comply with the one-minute
reporting requirements of paragraphs
[[Page 32477]]
(a)(1)(A) through (a)(1)(D) of amended Rule 6730 beginning 90 days
after the firm no longer meets the criteria for the exception (i.e.,
beginning 90 days after January 1 of the next calendar year). If a
FINRA member's reporting activity subsequently dropped below the 4,000-
trade threshold, the member would again be eligible for the
exception.\23\
---------------------------------------------------------------------------
\23\ For example, a member that reported 3,000 trades in the
relevant TRACE-Eligible Securities to TRACE in 2022 and then 4,150
trades in 2023 would continue to be eligible for the exception in
2024; however, if the member then reported 4,100 trades in 2024, the
member would be required to comply with the one-minute reporting
requirements starting 90 days after January 1, 2025 (with January 1
being day one of 90). If the member proceeded to report 3,500 trades
in 2025, the member would once again be eligible for the exception
from one-minute reporting for 2026 under the two-year lookback.
FINRA believes the two-year lookback period for eligibility for the
exception will accommodate fluctuations in trading activity that may
be due to unusual market-wide events or unique client demands.
---------------------------------------------------------------------------
2. Manual Trades Exception
New Supplementary Material .09 would provide an exception for
manual trades that are not electronic from end to end. Where a trade
qualifies for the manual trades exception, a 15-minute outer limit
would apply for the first year following implementation; a 10-minute
outer limit would apply for the second year; and a five-minute outer
limit would apply thereafter.
The manual trades exception would apply to ``transactions that are
manually executed'' or where a ``[FINRA] member must manually enter any
of the trade details or information necessary for reporting the trade
through the TRAQS website or into a system that facilitates trade
reporting to TRACE.'' \24\ A trade that requires manual intervention at
any point to complete the trade execution or reporting process would
qualify. FINRA provided the following non-exhaustive list of situations
in which trades would be considered to have a manual component:
---------------------------------------------------------------------------
\24\ See Supplementary Material .09(a).
---------------------------------------------------------------------------
where a FINRA member executes a trade \25\ by manual or
hybrid means, such as by telephone, email, or through a chat/messaging
function,\26\ and subsequently must manually enter into a system that
facilitates trade reporting all or some of the information required to
book the trade and report it to TRACE;
---------------------------------------------------------------------------
\25\ As noted above, for purposes of Rule 6730, the reporting
timeframe is measured from the Time of Execution as defined by Rule
6710(d), which generally refers to the time that the parties have
agreed to all of the terms of the transaction sufficient to
calculate the dollar price of the trade (or yield, in the case of
when-issued securities priced to a spread).
\26\ FINRA reminds members of their obligation to retain these
electronic communications as part of their books and records,
consistent with FINRA and Commission recordkeeping requirements.
See, e.g., Notice to Members 03-33 (July 2003).
---------------------------------------------------------------------------
where allocations to individual accounts must be manually
input in connection with a trade by a dually-registered broker-dealer/
investment adviser;
where an electronic trade is subject to manual review for
risk management or regulatory compliance purposes and, as part of or
following the review, the trade must be manually approved, amended, or
released before the trade is reported to TRACE (e.g., a firm's risk
management procedures require a secondary approver for trades over a
certain threshold; a firm's best execution procedures require manually
checking another market to confirm that a better price is not available
to the customer);
where a FINRA member trades a bond for the first time and
additional manual steps are necessary to set the bond up in the firm's
systems to book and report the trade (e.g., entering the CUSIP number
and associated bond data into the firm's system); and
where a FINRA member agrees to trade a basket of
securities at a single price and manual action is required to calculate
the price of component securities in the basket or to book and report
the trade in component securities to TRACE.
According to FINRA, the above examples are illustrative of the
types of circumstances in which, due to the manual nature of components
of the trade execution or reporting process, reporting a transaction
within one minute of the Time of Execution may be unfeasible, even
where a FINRA member makes reasonable efforts to report the trade as
soon as practicable (as required). FINRA also would assess FINRA
members' trade reporting in connection with manual trades to determine
whether the five-minute trade reporting timeframe (to become applicable
after two years) is appropriate, and would be prepared to adjust, as
necessary.
FINRA would review use of the manual trades exception for abuse.
FINRA members would not, in any case, be allowed to purposely delay the
execution or reporting of a transaction by handling any aspect of a
trade manually or introducing manual steps following the Time of
Execution. Additionally, considering the overarching obligation to
report trades as soon as practicable, FINRA members would be encouraged
to consider the types of transactions in which they regularly engage
and whether they can reasonably reduce the time between a trade's Time
of Execution and its reporting, and more generally must make a good
faith effort to report their trades as soon as practicable.
Under amended Rule 6730(d)(4), any FINRA member that executes or
reports a trade manually would be required to append a manual trade
indicator to the trade report. The indicator must be included in any
manual trade, regardless of whether the FINRA member reports outside of
the one-minute timeframe in reliance on the manual trades exception.
Application of the indicator would give FINRA greater insight into
manual trading and the use of the exception. The indicator would not be
included in publicly disseminated TRACE data.
Finally, FINRA is proposing to amend Rule 6730(f) to provide that a
pattern or practice of late reporting may be considered conduct
inconsistent with high standards of commercial honor and just and
equitable principles of trade, in violation of Rule 2010, absent
``reasonable justification'' (in addition to the rule's existing
reference to ``exceptional circumstances'').\27\ Recurring issues in
the systems of a FINRA member firm or its vendor would not be
considered a reasonable justification or exceptional circumstance that
excuses a pattern or practice of late trade reporting.\28\
---------------------------------------------------------------------------
\27\ See, e.g., Rule 6623 describing ``exceptional
circumstances'' as instances of system failure by a member or
service bureau, or unusual market conditions, such as extreme
volatility in a security, or in the market as a whole.
\28\ See, e.g., FINRA Trade Reporting Frequently Asked
Questions, Q206.21, available at https://www.finra.org/filing-reporting/market-transparency-reporting/trade-reporting-faq.
---------------------------------------------------------------------------
III. Summary of Comments
The Commission received comments on the proposed rule change.\29\
Commenters generally address the one-minute reporting timeframe, the
exceptions to the timeframe (both in general and specifically
discussing the manual trades and de minimis exceptions), the gradual
five-minute decreases in the manual trades exception, consistent
application of reporting requirements, the proposed implementation
period, and the proposed rule's consistency with the Exchange Act.
---------------------------------------------------------------------------
\29\ See supra note 4.
---------------------------------------------------------------------------
Several commenters support the proposal to shorten the 15-minute
TRACE reporting timeframe to one minute and its aim of increasing
transparency in fixed income markets.\30\
[[Page 32478]]
Some commenters support increasing price transparency in general but
caution restraint and the need for broad exceptions, citing the
potential for reduced liquidity and execution quality.\31\ Some
commenters oppose one minute reporting, questioning the feasibility and
cost of compliance due to technical limitations and the prevalence of
manual processes.\32\
---------------------------------------------------------------------------
\30\ See, e.g., Letter to Vanessa Countryman, Secretary,
Commission, from Tyler Gellasch, President and CEO, Healthy Markets
Association (February 15, 2024) (``HMA Letter'') at 7; Letter to
Vanessa Countryman, Secretary, Commission, from Stephen John Berger,
Managing Director, Global Head of Government and Regulatory Policy,
Citadel (February 15, 2024) (``Citadel Letter'') at 1; Letter to
Vanessa Countryman, Secretary, Commission, from Joanna Mallers,
Executive Director, FIA Principal Traders Group (February 15, 2024)
(``FIA PTG Letter'') at 1; Letter to Vanessa Countryman, Secretary,
Commission, from Gerard O'Reilly, Co-Chief Executive Officer and Co-
Chief Investment Officer, Dimensional Fund Advisors LP and David A.
Plecha, Global Head of Fixed Income, Dimensional Fund Advisors LP
(February 15, 2024) (``Dimensional Letter'') at 1.
\31\ See, e.g., Letter to Vanessa Countryman, Secretary,
Commission, from Sarah A. Bessin, Deputy General Counsel, Investment
Company Institute and Kevin Ercoline, Assistant General Counsel,
Investment Company Institute (February 15, 2024) (``ICI Letter'') at
2; Letter to Vanessa Countryman, Secretary, Commission, from Michael
Decker, Senior Vice President, Bond Dealers of America (February 15,
2024) (``BDA Letter'') at 1; Letter to Secretary, Commission, from
Howard Meyerson, Managing Director, Financial Information Forum
(February 15, 2024) (``FIF Letter I'') at 2.
\32\ See, e.g., Letter to Vanessa Countryman, Secretary,
Commission, from Kenneth E. Bentsen, Jr., President and CEO,
Securities Industry and Financial Markets Association (February 15,
2024) (``SIFMA Letter'') at 2; Letter to Vanessa Countryman,
Secretary, Commission, from Christopher A. Iacovella, President &
Chief Executive Officer, American Securities Association (February
16, 2024) (``ASA Letter'') at 2; Letter to Vanessa Countryman,
Secretary, Commission, from Melissa P. Hoots, CEO/CCO, Falcon Square
Capital (February 15, 2024) (``Falcon Letter'') at 1-2; BDA Letter
at 2.
---------------------------------------------------------------------------
Commenters express varied views on the proposed exceptions to one
minute reporting. Some commenters state the exceptions are essential to
the success of the rule.\33\ These commenters cite the burdens of
compliance with one-minute reporting on broker-dealers which rely on
manual processes.\34\ Others state that the exceptions are too narrow
\35\ or too broad.\36\ One commenter that states the exceptions are too
narrow also states that anything less than 15-minute reporting is
infeasible and cites the concern that compliance costs associated with
faster reporting could price small broker-dealers out of fixed income
markets.\37\ Two commenters that state the exceptions are too broad
suggest FINRA withdraw the proposal and instead require market
participants to report trades as soon as practicable but no later than
five minutes after execution.\38\ Another commenter that states the
exceptions are too broad also states that the exceptions ``create
significant risk to the efficacy and legal durability of the entire
rule.'' \39\ Finally, one commenter encourages FINRA to phase out both
exceptions completely over time, which it states would incentivize
firms to modernize their execution processes.\40\
---------------------------------------------------------------------------
\33\ See, e.g., BDA Letter at 1; FIF Letter I at 2; SIFMA Letter
at 3-4.
\34\ See BDA Letter at 1; FIF Letter I at 2; SIFMA Letter at 3-
4.
\35\ See, e.g., ASA Letter at 1-2; Falcon Letter at 1.
\36\ See, e.g., Dimensional Letter at 2; HMA Letter at 13;
Citadel Letter at 2-3; FIA PTG Letter at 1-2.
\37\ See ASA Letter at 2; see also Falcon Letter at 4 (``[O]ur
fear is that the Filing will, over time, eliminate smaller fixed-
income brokers like Falcon Square and harm the small and medium-size
institutional clients that we serve due to an inability to
realistically further reduce the time it takes to conduct these
manual trade processes.'').
\38\ See Citadel at 4; FIA PTG at 4.
\39\ HMA Letter at 2.
\40\ See Dimensional Letter at 2.
---------------------------------------------------------------------------
Several commenters specifically address the de minimis exception.
Some commenters state support for the de minimis exception.\41\ One of
these commenters states the de minimis exception is appropriately
tailored to protect minority, veteran, and women owned business
enterprises and small dealers from incurring significant costs.\42\ The
commenter also states the proposed two-year look back period will
prevent surprise application of the rule and allow newly impacted
broker-dealers time to comply.\43\ Some commenters state opposition to
the de minimis exception.\44\ One of these commenters supports the
logic behind the de minimis exception but states the proposed 4,000-
trade report threshold is too low and insufficiently justified.\45\
This commenter also requests FINRA expand the threshold or at minimum
provide more analysis to support its proposed limit.\46\ Another
commenter that opposes the de minimis exception states FINRA did not
sufficiently justify the need for the exception, nor its decisions to
set the exception's threshold at 4,000 annual trades and the lookback
period for applicability of the threshold at two years.\47\ This
commenter suggests the de minimis exception be abandoned or more
narrowly tailored.\48\
---------------------------------------------------------------------------
\41\ See, e.g., SIFMA Letter at 9; BDA Letter at 2.
\42\ See SIFMA Letter at 9.
\43\ See id.
\44\ See, e.g., Falcon Letter at 2-4; HMA Letter at 9-11, 13.
\45\ See Falcon Letter at 2-3.
\46\ See id.
\47\ See HMA Letter at 11.
\48\ See id. at 9.
---------------------------------------------------------------------------
Several commenters offer specific views about the manual trades
exception. Some commenters characterize the manual trades exception as
essential to ensuring compliance with the rule.\49\ Some commenters
state it would be more operationally feasible to flag trades subject to
one-minute reporting, rather than flagging all manual trades.\50\ One
commenter states that the exception should be expanded to include
certain fully electronic transactions that cannot feasibly be reported
within one minute, such as large post-trade allocations, batch-
processed trades, and trades involving multiple systems in trade
workflow.\51\ This commenter states that post-trade allocations are
especially difficult to report within one minute for broker-dealers
also registered as investment advisers.\52\ Another commenter states
support for FINRA's proposal to apply the exception to a scenario where
a firm has not previously traded a bond.\53\ This commenter also notes
a similar proposal by the Municipal Securities Rulemaking Board
(``MSRB'') that would apply to transactions in municipal securities and
states that FINRA and MSRB should harmonize the scope of the manual
trades exceptions.\54\ Finally, the commenter describes certain
scenarios that could be experienced by a reporting firm, questioning
whether the manual trades exception would apply, and suggesting a
dialogue with industry about such scenarios.\55\
---------------------------------------------------------------------------
\49\ See BDA Letter at 1; FIF Letter I at 2; SIFMA Letter at 6.
\50\ See BDA Letter at 3; SIFMA Letter at 9.
\51\ See SIFMA Letter at 7-9.
\52\ See id. at 7; see also BDA Letter at 3-4; FIF Letter I at 3
(``FIF members request that FINRA and the MSRB provide an additional
exception for the scenario where an entity dually-registered as a
broker-dealer and investment adviser . . . is required to report a
large number of allocations for a block trade that the dual
registrant executes, allocates and reports automatically.'').
\53\ See FIF Letter I at 4.
\54\ See id. at 3.
\55\ See Letter to Secretary, Commission, from Howard Meyerson,
Managing Director, Financial Information Forum (February 26, 2024)
at 2-4; FIF Letter I at 3-4.
---------------------------------------------------------------------------
Several comments address the gradual phase-in of five-minute
reporting written into the proposed rule for manual trades.\56\ One
commenter requests FINRA propose for notice and comment each time it
seeks to reduce the timeframe.\57\ The commenter also states FINRA must
consider that the proposed rule will be implemented
[[Page 32479]]
alongside other regulatory initiatives.\58\ Another commenter states
support for the phase-in approach, but asks FINRA to maintain close
communication with industry during the phase-in period and to remain
sensitive to operational roadblocks that market participants could
confront.\59\
---------------------------------------------------------------------------
\56\ See, e.g., ICI Letter at 3-4; Falcon Letter at 4; SIFMA
Letter at 6; BDA Letter at 2-3.
\57\ See ICI Letter at 3; see also Falcon Letter at 4 (stating
that FINRA must produce supporting data before proposing a mandatory
phase-in period for the manual trades exception); SIFMA Letter at 6
(stating that FINRA should conduct an impact assessment before
reducing the reporting window for manual trades to five minutes).
\58\ See ICI Letter at 3-4.
\59\ See BDA at 3.
---------------------------------------------------------------------------
Several commenters state the manual trades exception is too
broad.\60\ Two of these commenters question the lack of estimates in
the proposal of the number of transactions expected to qualify for the
manual trades exception.\61\ These commenters raise the concern that a
large proportion of the total number of trades currently reported
outside of one minute could fall within the proposed rule's manual
trades exception, undermining the goal of increasing post-trade
transparency.\62\ These commenters also raise concerns that firms could
build manual steps into the trade execution process as a means of
qualifying for the longer manual trades reporting window.\63\
---------------------------------------------------------------------------
\60\ See, e.g., HMA Letter at 11-12; Citadel Letter at 2-3; FIA
PTG Letter at 2-4.
\61\ See Citadel Letter at 2-3; FIA PTG Letter at 2.
\62\ See Citadel Letter at 2-3; FIA PTG Letter at 2.
\63\ See Citadel Letter at 3; FIA PTG at 3; see also HMA Letter
at 12 (``[T]he Proposal . . . does not assuage our concerns that
firms may intentionally add a `manual' component to their post-
execution processes so as to avoid timely reporting (and
dissemination) of their trading activity.'').
---------------------------------------------------------------------------
Several commenters raise concerns related to consistent application
of reporting requirements. One commenter describes the potential
negative consequences of applying different levels of post-trade
transparency depending on a trade's mode of execution.\64\ Another
commenter raises concern about different reporting requirements under
the proposal depending on a trade's time of execution.\65\ The
commenter states that under the current rule, trades executed when
TRACE is closed must be reported within 15 minutes of TRACE being open,
mirroring the deadline for reporting of trades executed when TRACE is
open.\66\ But, the commenter continues, under the proposal, trades
executed outside of the hours when TRACE is open will still be subject
to the deadline to report within 15 minutes of TRACE being open while
trades executed when TRACE is open will be subject to the new one
minute requirement.\67\ The commenter urges consistent reporting times
in this scenario.\68\
---------------------------------------------------------------------------
\64\ See Citadel Letter at 1-3.
\65\ See HMA Letter at 8.
\66\ See id.
\67\ See id.
\68\ See HMA Letter at 9.
---------------------------------------------------------------------------
Some comments address the proposed implementation period. Two
commenters request an implementation period of two years from the time
of adoption due to the high cost of compliance.\69\ Another commenter
states the cost of implementing the proposal is anticipated to be
especially high for smaller firms and suggests an implementation period
of at least 18 months from the date of FINRA and MSRB publishing
updated technical specifications and guidance.\70\ The commenter also
requests that FINRA provide an expanded free testing period of 90 days
instead of the standard free testing period of 30 days.\71\
---------------------------------------------------------------------------
\69\ See SIFMA Letter at 10; BDA Letter at 4.
\70\ See FIF Letter I at 5.
\71\ See id. at 6-7.
---------------------------------------------------------------------------
Several commenters question the proposed rule's consistency with
the Exchange Act. Two commenters state that FINRA failed to meet its
burden to demonstrate consistency with the Exchange Act, particularly
by failing to estimate the number of transactions captured by the
manual trades exception.\72\ These commenters also state that the
differing reporting windows for manual and electronic trades violate
the Exchange Act by discriminating based on the mode of execution and
unduly burdening competition.\73\
---------------------------------------------------------------------------
\72\ See Citadel Letter at 3; FIA PTG Letter at 3; see also
Falcon Letter at 1 (stating that FINRA did not adequately justify
the exceptions to the rule).
\73\ See Citadel Letter at 3; FIA PTG Letter at 3-4.
---------------------------------------------------------------------------
IV. Proceedings To Determine Whether To Approve or Disapprove the FINRA
Proposal and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2) of the Exchange Act \74\ to determine whether the proposed
rule change should be approved or disapproved. Institution of
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposal. Institution of proceedings does not
indicate, however, that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as described below, the
Commission seeks and encourages interested persons to provide comments
on the proposed rule change.
---------------------------------------------------------------------------
\74\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Exchange Act,\75\ the
Commission is providing notice of the grounds for disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis of the proposed rule change's consistency with: (1)
Section 15A(b)(6) of the Exchange Act, which requires, among other
things, that FINRA rules 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, in general,
protect investors and the public interest,\76\ and (2) Section
15A(b)(9) of the Exchange Act, which requires that FINRA rules not
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Exchange Act.\77\ The Commission
asks that commenters address the sufficiency of FINRA's statements in
support of the proposal, which are set forth in the Notice, in addition
to any other comments they may wish to submit about the proposed rule
change. In particular, the Commission is instituting proceedings to
allow for additional analysis of, and input from commenters with
respect to, the scope and implementation of the proposed exceptions to
the one-minute reporting timeframe.
---------------------------------------------------------------------------
\75\ 15 U.S.C. 78s(b)(2)(B).
\76\ 15 U.S.C. 78o-3(b)(6).
\77\ 15 U.S.C. 78o-3(b)(9).
---------------------------------------------------------------------------
V. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their data, views, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposed rule change
is consistent with the Exchange Act and the rules and regulations
thereunder.
Although there do not appear to be any issues relevant to approval
or disapproval that would be facilitated by an oral presentation of
data, views, and arguments, the Commission will consider, pursuant to
Rule 19b-4 under the Exchange Act,\78\ any request for an opportunity
to make an oral presentation.\79\
---------------------------------------------------------------------------
\78\ 17 CFR 240.19b-4.
\79\ Section 19(b)(2) of the Exchange Act, as amended by the
Securities Acts Amendments of 1975, Public Law 94-29 (Jun. 4, 1975),
grants to the Commission flexibility to determine what type of
proceeding--either oral or notice and opportunity for written
comments--is appropriate for consideration of a particular proposal
by a self-regulatory organization. See Securities Acts Amendments of
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------
[[Page 32480]]
Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by May 17, 2024. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
May 31, 2024.
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-2024-004 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-2024-004. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of FINRA. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-FINRA-2024-004 and should be submitted
on or before May 17, 2024. Rebuttal comments should be submitted by May
31, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\80\
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\80\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-08946 Filed 4-25-24; 8:45 am]
BILLING CODE 8011-01-P
