Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend FINRA Rule 6730 (Transaction Reporting), 26382-26387 [2025-11298]

Download as PDF 26382 Federal Register / Vol. 90, No. 117 / Friday, June 20, 2025 / Notices levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other options exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. As noted above, market participants are offered an opportunity to transact in NDX or XND, or separately execute options overlying QQQ. Offering these products provides market participants with a variety of choices in selecting the product they desire to use to gain exposure to the Nasdaq 100 Index. Furthermore, the proposed surcharge is in line with surcharges assessed on other proprietary products at another options exchange.12 In addition to the Exchange, market participants have alternative options exchanges that they may participate on and direct their order flow, which list proprietary products that compete with NDX.13 In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing options exchanges to maintain their competitive standing in the financial markets. ddrumheller on DSK120RN23PROD with NOTICES1 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.14 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) necessary or appropriate in the public 12 See supra note 6. e.g., pricing for Russell 2000 Index (‘‘RUT’’) on Cboe’s Fees Schedule and Cboe C2 Exchange, Inc.’s (‘‘C2’’) Fees Schedule. See also SPX pricing on Cboe’s Fees Schedule. Both RUT and SPX are proprietary products on the Cboe markets that are broad-based index options, like NDX. 14 15 U.S.C. 78s(b)(3)(A)(ii). 13 See VerDate Sep<11>2014 20:05 Jun 18, 2025 Jkt 265001 interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments SR–ISE–2025–17 and should be submitted on or before July 11, 2025. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2025–11293 Filed 6–18–25; 8:45 am] Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–103270; File No. SR– FINRA–2025–008] • 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– ISE–2025–17 on the subject line. Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend FINRA Rule 6730 (Transaction Reporting) 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–ISE–2025–17. 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 the Exchange. 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 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 June 16, 2025. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 10, 2025, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to amend FINRA Rule 6730 (Transaction Reporting) to maintain the currently effective 15minute outer limit timeframe for reporting TRACE-eligible securities covered by File No. SR–FINRA–2024– 004 and to provide a streamlined alternative for reporting and dissemination in connection with specified allocations of an aggregate order in a TRACE-eligible security to multiple managed customer accounts. The text of the proposed rule change is available on FINRA’s website at https://www.finra.org, at the principal office of FINRA and at the Commission’s Public Reference Room. 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\20JNN1.SGM 20JNN1 Federal Register / Vol. 90, No. 117 / Friday, June 20, 2025 / Notices II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose ddrumheller on DSK120RN23PROD with NOTICES1 Background On September 20, 2024, the Commission issued an order approving proposed rule change SR–FINRA–2024– 004, as modified by Partial Amendment No. 1, to amend FINRA Rule 6730 to reduce the 15-minute TRACE reporting outer limit timeframe for fully electronic trades to one minute, with a later deadline for manual trades and firms with limited trading activity.3 As approved by the Commission, where a trade qualified for the manual trades exception, a 15-minute outer limit would apply for the first year following implementation; a 10-minute outer limit would have applied for the second and third years; and a five-minute outer limit would have applied thereafter.4 Under File No. SR–FINRA–2024–004, FINRA also adopted a requirement that members append a new manual trade indicator to identify all manual trades. The amendments were intended to modernize the TRACE reporting rules, while providing additional time for reporting trades that were not fully electronic from end to end and for firms with limited trading activity. Following the approval of File No. SR–FINRA–2024–004, FINRA continued its engagement with members regarding TRACE reporting timeframes, and members raised several additional concerns and questions in connection with aspects of the approved reporting regime. Specifically, members provided 3 See Securities Exchange Act Release No. 101121 (September 20, 2024), 89 FR 78930 (September 26, 2024) (Order Approving File No. SR–FINRA–2024– 004) (‘‘Approval Order’’). The reporting timeframe reductions of File No. SR–FINRA–2024–004 would only have applied to TRACE-eligible securities that are currently subject to the 15-minute outer limit reporting threshold under Rule 6730(a)(1). 4 See Rule 6730.09(b); see also, Approval Order, 89 FR 78930, 78931. VerDate Sep<11>2014 20:05 Jun 18, 2025 Jkt 265001 additional insights into the workflows that impact the current feasibility of one-minute reporting for certain fully electronic trades and five-minute reporting for manual trades. In this regard, members discussed, among other things, challenges to reporting within one-minute fully electronic transactions with more complex workflows (such as allocations to managed customer accounts or portfolio trades). Members also discussed challenges to faster reporting for trades executed by telephone, email, or through a chat/ messaging function where some or all of the trade details must be manually entered to book the trade or report it to TRACE. Firms’ challenges varied depending on firm characteristics, such as firm size and business model. Members further noted that the amendments compounded compliance concerns given the rigors of the condensed reporting timeframes. In this context, members also noted FINRA’s current approach to late report marking, which marks as late any corrections made to a disseminated field if such corrections were entered outside of the reporting timeframe (even where the initial trade was reported within the reporting timeframe).5 As a result, FINRA has determined that it is appropriate at this time to maintain the currently effective TRACE reporting standard requiring members to report transactions as soon as practicable, but no later than within 15 minutes of the Time of Execution 6 of the transaction for all types of trades (i.e., manual, hybrid, and fully electronic trades) that are currently subject to Rule 6730(a)(1). In addition, FINRA is proposing to implement additional responsive measures to address concerns raised to FINRA during its engagement process. Therefore, FINRA is filing this proposed rule change to: (1) amend Rule 6730 to maintain the currently effective 15minute outer limit timeframe for 5 In response to these comments, FINRA is updating TRACE system logic with respect to trade corrections so that trade report timeliness is determined based only on the time of submission of the original trade report. Therefore, a member’s trade report will no longer be marked late if the member makes a correction to a disseminated field outside of the reporting timeframe applicable to the original transaction (so long as the transaction was reported originally on a timely basis). 6 See Rule 6710(d). 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, as defined by Rule 6710(a), 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. PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 26383 reporting transactions in the securities impacted by File No. SR–FINRA–2024– 004; and (2) adopt new Rule 6730.08 to provide a streamlined alternative for reporting and dissemination in connection with specified allocations of an aggregate order in a TRACE-Eligible Security to multiple managed customer accounts. Proposed Changes Reporting Timeframes As discussed above, FINRA is proposing amendments to Rule 6730 to maintain the currently effective TRACE reporting outer limit timeframe for the securities transactions subject to Rule 6730(a)(1)—i.e., continuing to require that members report impacted transactions to TRACE as soon as practicable, but no later than within 15 minutes from the Time of Execution. Therefore, FINRA is amending Rule 6730(a) and subparagraphs (a)(1)(B) and (C) to delete references to ‘‘one minute’’ and replace them with ‘‘15 minutes.’’ FINRA also is amending Rule 6730 to: (i) delete paragraph (d)(4)(I) (Manual Trade Indicator) to remove the requirement that members append a manual trade indicator; (ii) delete Supplementary Material .08 (Exception for Members with Limited Trading Activity), which would have retained a 15-minute outer limit reporting timeframe for firms with de minimis trading activity; and (iii) delete Supplementary Material .09 (Exception for Manual Trades), which would have provided additional reporting time for trades other than fully electronic trades. To continue to work with members to support timely and efficient trade reporting, FINRA has an established dedicated email inbox— ‘‘bondreporting@finra.org’’—where members and their service bureaus can self-identify reporting issues. This proactive engagement can help to avoid late trade reporting inquiries from FINRA, reducing the time firms spend responding to inquiries. Self-reporting in this manner is voluntary but continues to be encouraged. FINRA is exploring ways to enhance its processes to improve the ability of members and their service bureaus to identify different types of challenges or issues, including those that may not be systematic or widespread (e.g., manual errors). FINRA remains committed to encouraging timely reporting—i.e., as soon as practicable following the execution of a transaction—to facilitate the benefits to transparency that result. As discussed above, FINRA believes that the proposed rule change is E:\FR\FM\20JNN1.SGM 20JNN1 26384 Federal Register / Vol. 90, No. 117 / Friday, June 20, 2025 / Notices appropriate at this time in light of the additional information obtained since File No. SR–FINRA–2024–004 was approved, to be responsive to members’ concerns, and to ensure that FINRA takes a measured and informed approach to significant modifications to TRACE reporting requirements. FINRA also anticipates that members who elect to avail themselves of the proposed reporting alternative for allocation trades will benefit from a more streamlined approach that should improve their trade reporting processes and efficiency. In addition, the modifications to TRACE system marking logic should provide for a focused view on the timeliness of the initial report. FINRA will continue its engagement with members and monitor and study developments in the market for TRACEEligible Securities, including changes in reporting timeframes. ddrumheller on DSK120RN23PROD with NOTICES1 Aggregate Reporting for Allocation Trades FINRA is proposing to amend Rule 6730 to add new Supplementary Material .08 (Reporting Allocation Trades) to permit a member that is both a broker-dealer and an investment adviser (‘‘BD/IA’’) to report allocations of specified orders to managed customer accounts in a streamlined manner. Specifically, proposed Supplementary Material .08 would provide that a member BD/IA may report allocations of an aggregate order in a TRACE-Eligible Security to multiple managed customer accounts in a single, aggregate TRACE trade report (in lieu of separately reporting allocations to each managed customer account). Under the proposal, an aggregate TRACE trade report must reflect allocations with the same price and Time of Execution and be submitted to TRACE within the timeframes specified in Rule 6730(a).7 In addition, Rule 6730(c) would be updated to require that the aggregate trade report 7 See, e.g., FAQ 3.1.47, Scenario 1, FINRA Frequently Asked Questions (FAQ) about the Trade Reporting and Compliance Engine (TRACE), available at https://www.finra.org/filing-reporting/ trace/faq, (‘‘When reporting the sales of securities to the various managed customer accounts, the time of execution is the time the material terms of the transaction are determined. If BD/IA A finalizes the allocation with respect to each managed customer account (thereby establishing the material terms of the transaction as to each customer) before or at the same time it submits the aggregate order to its trading desk (to purchase from the Street), the time of execution of the sales to individual managed customer accounts is the same time of execution reported for the aggregate purchase. If such allocations (as to the material terms with respect to each managed customer account) are not finalized before or at the same time as the aggregate order (to purchase from the Street), the time of execution of the sales to individual managed customer accounts is the time such allocations are finalized.’’). VerDate Sep<11>2014 20:05 Jun 18, 2025 Jkt 265001 include the number of managed customer accounts to which the TRACEEligible Security is being allocated. The below examples illustrate the operation of the proposed reporting alternative. • Scenario 1: BD/IA A is both a BD and an IA and operates as one legal entity. BD/IA A directs its trading desk to purchase an aggregate amount of $5 million (par value) in bonds from the Street (or otherwise obtain the bonds). BD/IA A then sells portions of the aggregate amount to 20 managed customer accounts at BD/IA A ($250,000 to each account, in accordance with the allocation instructions). The sales to the managed customer accounts are all executed at the same price and do not reflect a mark-up or commission. Æ TRACE reporting under the proposal: BD/IA A reports the purchase (from the Street or another source) of the $5 million in bonds to TRACE, as it would today. In the above scenario, if BD/IA A chooses to report the sale to the 20 managed customer accounts pursuant to proposed Rule 6730.08 in lieu of reporting to TRACE 20 separate sales to its customers’ managed accounts, BD/IA would report a sale of $5 million in bonds to a customer in a single aggregate trade report and include the number of managed accounts to which the aggregated order is being allocated pursuant to proposed Rule 6730(c)(14) (i.e., 20). The BD/IA also would include the ‘‘no renumeration’’ indicator pursuant to Rule 6730(d)(4)(F) and all other information required to be reported pursuant to Rule 6730(c) and the TRACE User Guide and Technical Specifications. • Scenario 2: BD/IA A is both a BD and an IA and operates as one legal entity. BD/IA A directs its trading desk to purchase an aggregate amount of $6 million (par value) in bonds from the Street (or otherwise obtain the bonds). Æ BD/IA A purchases $3 million in bonds from BD B at 11:57:03 a.m. Æ BD/IA A purchases $2 million in bonds from BD C at 11:57:07 a.m. Æ BD/IA A purchases $1 million in bonds from BD D at 11:57:14 a.m. At 11:57:15 a.m., BD/IA A then sells portions of the aggregate amount to 20 managed customer accounts at BD/IA A ($300,000 to each account, in accordance with the allocation instructions). The sales to the managed customer accounts are all executed at the same price and do not reflect a mark-up or commission. Æ TRACE reporting under the proposal: BD/IA A reports the purchases from BD B of the $3 million in bonds, BD C of the $2 million in bonds, and BD D of the $1 million in bonds to TRACE, PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 as it would today. In the above scenario, if BD/IA A chooses to report the sale to the 20 managed customer accounts pursuant to proposed Rule 6730.08 in lieu of reporting to TRACE 20 separate sales to its customers’ managed accounts, BD/IA would report a sale of $6 million in bonds to a customer in a single aggregate trade report,8 include the number of managed accounts to which the aggregated order is being allocated pursuant to proposed Rule 6730(c)(14) (i.e., 20), include the ‘‘no renumeration’’ indicator pursuant to Rule 6730(d)(4)(F), and include all other information required to be reported pursuant to Rule 6730(c) and the TRACE User Guide and Technical Specifications.9 FINRA believes that the proposed alternative approach will streamline reporting, thereby improving efficiency and removing unnecessary burdens. The proposed rule change also may improve transparency by removing reports with low utility from dissemination (to the extent that firms avail themselves of this alternative), while continuing to ensure that the allocation associated with the aggregate order is reported and disseminated to the market, without the loss of price information. FINRA also notes that reporting pursuant to this alternative approach is voluntary; therefore, depending on a member BD/ IA’s business and determinations regarding burdens and benefits, a member may choose to continue to report individual allocations as it does today or to modify its practices to begin reporting on an aggregate basis pursuant to this proposed rule change. Member BD/IAs also will have the flexibility on a case-by-case basis to choose whether to report a particular transaction on an aggregate basis pursuant to proposed Rule 6730.08 or whether to report the allocations to managed customer accounts individually. 8 Dissemination is subject to transaction size caps over which the actual size of a transaction will not be included in the real-time TRACE transaction data (i.e., $5 million (par value) for investment grade corporate bonds and $1 million (par value) for non-investment grade corporate bonds). For trades above the dissemination caps, FINRA disseminates the size of the trade as ‘‘5MM+’’ (for investment grade) and ‘‘1MM+’’ (for non-investment grade). The uncapped transaction sizes become available as part of the Historic Corporate Bond Data Set six months after the calendar quarter in which the transactions are reported. See Rule 7730(d). 9 FINRA’s TRACE FAQs currently address a variety of allocation scenarios. FINRA will update its FAQs to illustrate the operation of new Supplementary Material, if the proposed rule change is approved by the Commission. See FINRA Frequently Asked Questions (FAQ) about the Trade Reporting and Compliance Engine (TRACE), available at https://www.finra.org/filing-reporting/ trace/faq. E:\FR\FM\20JNN1.SGM 20JNN1 Federal Register / Vol. 90, No. 117 / Friday, June 20, 2025 / Notices ddrumheller on DSK120RN23PROD with NOTICES1 If the Commission approves the proposed rule change, FINRA will announce the effective date of the proposed rule change in a Regulatory Notice. The effective date of the proposed rule change also will apply to the provisions amended in File No. SR– FINRA–2024–004, as further amended by the instant filing. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,10 which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating transactions in securities, and, in general, to protect investors and the public interest, and Section 15A(b)(9) of the Act,11 which requires that FINRA rules not impose any burden on competition that is not necessary or appropriate. FINRA believes the proposed rule change related to reporting timeframes is in the public interest and consistent with Section 15A(b)(6) of the Act because it addresses the additional concerns and questions raised by members in connection with aspects of the approved reporting regime, including related to the workflows that impact the current feasibility of oneminute reporting for certain fully electronic trades and five-minute reporting for manual trades. FINRA understands that MSRB similarly is proposing a rule change that would provide for a 15-minute outer limit for the reporting of municipal securities. Therefore, the proposed rule change maintains consistency between the regimes applicable to covered TRACEEligible Securities and municipal securities, thereby fostering cooperation and coordination with persons engaged in regulating transactions in securities, consistent with Section 15A(b)(6) of the Act. In addition, FINRA believes that the proposed rule change is consistent with Section 15A(b)(9) of the Act and does not impose any burden on competition that is not necessary or appropriate in that it is intended to alleviate compliance challenges and avoid potential unintended consequences—particularly given the prevalence of manual and hybrid trading workflows for the impacted securities. Therefore, FINRA believes that the proposed rule change related to 10 15 11 15 U.S.C. 78o–3(b)(6). U.S.C. 78o–3(b)(9). VerDate Sep<11>2014 20:05 Jun 18, 2025 Jkt 265001 reporting timeframes helps achieve the purposes of the Act and is appropriate at this time given the additional information obtained since the approval of File No. SR–FINRA–2024–004 and to be responsive to members’ feasibility and compliance concerns. FINRA also believes that the proposed alternative reporting regime to permit members to report allocations of an aggregate order to multiple managed customer accounts with the same Time of Execution and price as a single, aggregate TRACE trade report is consistent with the Act. Specifically, FINRA believes the alternative reporting regime is in the public interest and consistent with Section 15A(b)(6) of the Act because it should improve transparency (to the extent that firms avail themselves of this alternative) by removing reports with low utility from dissemination while continuing to ensure that the allocation associated with the aggregate order is reported and disseminated to the market, without the loss of pricing information. FINRA also believes that the proposed rule change is consistent with Section 15A(b)(9) of the Act and does not impose any burden on competition that is not necessary or appropriate in that the proposed reporting alternative is intended to streamline reporting, improve reporting efficiency, and remove unnecessary burdens. Therefore, FINRA believes that the proposed rule change is consistent with the Act as it maintains valuable transparency while reducing burdens on members. B. Self-Regulatory Organization’s Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Economic Impact Assessment FINRA has undertaken an economic impact assessment, as set forth below, to analyze the regulatory need for the proposed rule change, its potential economic impacts, and the alternatives considered in assessing how to best meet FINRA’s regulatory objectives. Reporting Timeframes As discussed previously, in recognition of the concerns raised through continued engagement with member firms and other market participants regarding the feasibility of shorter TRACE reporting timeframes, FINRA is proposing to maintain the currently effective reporting requirement of as soon as practicable, Frm 00120 Fmt 4703 but no later than within 15 minutes from the Time of Execution for all trades in TRACE-Eligible Securities that are currently subject to Rule 6730(a)(1). The proposed rule change also would prevent potential loss associated with unsuccessful expenditures undertaken to meet the shorter reporting timeframe obligations. The proposed rule change would address these potential impacts, to the extent embedded in the approved but not yet effective reporting rules and is thus consistent with FINRA’s measured approach to enhancing TRACE reporting requirements, carefully balancing transparency benefits against potential operational impacts in the fixed income market. Aggregate Reporting for Allocation Trades As discussed above, currently, if a BD/IA executes a trade for multiple customer accounts as part of an aggregate order and then allocates portions of the aggregate amount to various managed customer accounts at the BD/IA, it is required to separately report the individual allocations to TRACE. Depending on the number of managed accounts to which the bonds are being allocated, the BD/IA may be required to report a large number of separate transactions within the applicable trade reporting timeframe. This can pose operational challenges for firms, particularly those managing numerous accounts. Moreover, when individual allocations reflect the same price and Time of Execution in connection with the same order, separate reporting does not provide additional insight into the price of the traded security. Permitting firms to submit an aggregate allocation report as an alternative to submitting a separate report for each individual allocation trade, as discussed herein, would reduce the number of reports required to be submitted to TRACE and could therefore increase reporting efficiency for members without compromising the availability of important transparency or regulatory information. Economic Baseline Regulatory Need PO 00000 26385 Sfmt 4703 Reporting Timeframes As discussed above, the Commission approved File No. SR–FINRA–2024–004 to amend FINRA Rule 6730 to reduce the 15-minute TRACE reporting outer limit timeframe for fully electronic trades to one minute, with a later deadline for manual trades and firms with limited trading activity; this rule change was never implemented by E:\FR\FM\20JNN1.SGM 20JNN1 26386 Federal Register / Vol. 90, No. 117 / Friday, June 20, 2025 / Notices FINRA.12 Therefore, members have continued to be required to report transactions in TRACE-Eligible Securities that are subject to Rule 6730(a)(1) within the 15-minute outer limit reporting timeframe. As such, the proposed rule change would maintain the status quo for impacted member firms. Aggregate Reporting for Allocation Trades FINRA estimated the number and dollar par value of allocation trades in TRACE-Eligible Securities between July 2023 and June 2024, as well as the number of market participant identifiers engaging in allocation trades covered by the proposed rule change.13 Approximately 117 market participant identifiers reported 7,570,097 allocation trades that represented $205.4 billion in total par value traded. Among these reports, 39.53 percent were corporate and agency trades,14 6.77 percent were securitized product trades,15 and 53.70 percent were transactions in U.S. Treasury Securities.16 The 10 most active TRACE reporters among the 117 market participant identifiers accounted for 97.88 percent of the allocation trades and 79.48 percent of the allocation trade dollar volume.17 Economic Impacts Reporting Timeframes The proposed rule change maintains the currently effective TRACE reporting outer limit timeframe for transactions in TRACE-Eligible Securities that are subject to Rule 6730(a)(1), and therefore there is no economic impact compared to the current economic baseline for reporting to TRACE. As discussed above, the proposed rule change is intended to be responsive to members’ feasibility concerns, alleviate compliance challenges, and avoid potential unintended consequences. It balances transparency benefits with practical implementation considerations identified through member feedback. It 12 See supra notes 3–4 and accompanying text. allocation flag does not exist in TRACE; therefore, FINRA used heuristics to approximate allocation trades. Specifically, FINRA identified as allocation trades agency trades where a dually registered single market participant identifier reported two or more customer-facing trades in a unique security with the same execution price, time of execution, and report side (excluding trades with renumeration and reported by an electronic platform). FINRA believes this approach is more likely to represent a high estimate of impacted trades. 14 See Rule 6710(l). 15 See Rule 6710(m). 16 See Rule 6710(p). 17 To determine the most active participants, the participants were sorted based on the number of unique allocations they reported. ddrumheller on DSK120RN23PROD with NOTICES1 13 An VerDate Sep<11>2014 20:05 Jun 18, 2025 Jkt 265001 also reduces the compliance costs that member firms otherwise would incur to implement File No. SR–FINRA–2024– 004. To the extent that any firms allocated resources toward system and procedural enhancements to accommodate the anticipated changes in TRACE reporting requirements under File No. SR–FINRA–2024–004, these investments may impact the amount of any potential cost savings from this proposal. However, FINRA notes that it announced its intention to not set an implementation date and to make substantive changes to the amendments a few months following the approval of File No. SR–FINRA–2024–004.18 Aggregate Reporting for Allocation Trades Potential Benefits As noted above, a significant number of market participant identifiers engage in allocation trades and therefore may benefit from the proposed rule change to permit them to streamline their reporting.19 The reduction in the number of reports that would otherwise be reported would improve members’ ability to timely report these transactions within the applicable reporting timeframe while continuing to ensure that the allocation associated with the aggregate order is reported and disseminated to the market, without the loss of price information. Potential Costs Aggregating reports pursuant to the proposed rule change will be optional for firms; therefore, the proposed rule change will not impose costs on members that prefer not to avail themselves of this approach. Member firms that choose to avail themselves of the aggregate reporting alternative could incur costs associated with making any necessary system or process changes and presumably would choose to incur any such costs because the expected benefits exceed the expected costs of implementation. As discussed above, under the proposed alternative, FINRA would disseminate the number of managed accounts to which the securities would be allocated and the aggregate volume of securities allocated, but the individual volume allocated to each managed customer account would not be disseminated. On balance, FINRA 18 See Robert Cook, Updating Trace Reporting Timeframes (February 5, 2025), available at https:// www.finra.org/media-center/blog/updating-tracereporting-timeframes. 19 In particular, the average allocation contains 15.52 trades. If all of these trades were reported pursuant to the proposed alternative reporting regime, the total number of trade reports would have been reduced from 7,570,097 to 487,625. PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 believes that the proposed reporting alternative is appropriate as it continues to ensure that the allocation associated with the aggregate order is reported and disseminated to the market, without the loss of price information. FINRA also considered potential competitive effects the proposed rule change might have within impacted member firms as well as between impacted and unimpacted member firms. The proposed rule change would provide BD/IAs with the option to significantly streamline allocation reporting by permitting them to submit a single allocation trade report (similar to the single report members trading with a separate investment advisor are currently required to submit). Although the proposed rule change would apply equally to all impacted members, the potential effect could differ depending on the business of the member. FINRA believes that any differential competitive effects the rule might have on impacted members with different usage of allocations would be mitigated by the voluntary nature of proposed reporting changes. Hence, FINRA does not believe the proposed rule would create significant competitive effects. Alternatives Considered Reporting Timeframes In developing the proposed rule change, FINRA considered extending the reporting timeframe for manual trades from the ultimate five-minute outer limit under File No. SR–FINRA– 2024–004 (e.g., to 10 or 15 minutes) and maintaining the one-minute outer limit requirement for fully electronic transactions. This approach would address feasibility concerns relevant to reducing the reporting timeframe for trades involving manual intervention but would not address the feasibility issues raised by members related to other types of transactions. Considering these factors, FINRA decided to maintain the currently effective 15minute outer limit requirement for all trades in covered TRACE-Eligible Securities. Aggregate Reporting for Allocation Trades In developing the proposed rule change, FINRA considered various alternatives and the potential costs and benefits of those alternatives. Among other things, FINRA considered permitting BD/IAs to report an aggregate allocation report and identifying it as such, without providing the number of accounts to which the securities will be allocated; however, FINRA believes the number of accounts to which the E:\FR\FM\20JNN1.SGM 20JNN1 Federal Register / Vol. 90, No. 117 / Friday, June 20, 2025 / Notices securities were allocated provides useful insight that is more comparable to the information reported and disseminated today, without adding undue complexity to the aggregate reporting framework. As such, FINRA believes the proposed aggregate allocation report indicating the number of allocations is preferable. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 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–2025–008 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–2025–008. 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 VerDate Sep<11>2014 20:05 Jun 18, 2025 Jkt 265001 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 such 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–2025–008 and should be submitted on or before July 11, 2025. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Sherry R. Haywood, Assistant Secretary. 26387 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 proposes to amend the fees for Nasdaq 100 Index options in the Exchange’s Pricing Schedule at Options 7, Section 5.A to adopt a new surcharge for removing liquidity. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/phlx/rulefilings, at the principal office of the Exchange, 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 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. BILLING CODE 8011–01–P A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION 1. Purpose [FR Doc. 2025–11298 Filed 6–18–25; 8:45 am] [Release No. 34–103268; File No. SR–Phlx– 2025–22] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Fees for Nasdaq 100 Index Options in Options 7, Section 5.A June 16, 2025. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 2, 2025, Nasdaq PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 The purpose of the proposed rule change is to amend the fees for NDX 3 and NDXP.4 As set forth in Options 7, Section 5.A, the Exchange currently charges all NonCustomer 5 orders in NDX and NDXP a $0.75 per contract transaction fee. Customer 6 orders are currently assessed a $0.25 per contract transaction fee in NDX and NDXP. These transaction fees apply to electronic simple and complex executions as well as floor transactions. 3 NDX represents A.M.-settled options on the full value of the Nasdaq 100 Index traded under the symbol NDX. 4 NDXP represents P.M.-settled options on the full value of the Nasdaq 100 Index traded under the symbol NDXP. 5 The term ‘‘Non-Customer’’ applies to transactions for the accounts of Lead Market Makers, Market Makers, Firms, Professionals, Broker-Dealers and JBOs. 6 The term ‘‘Customer’’ applies to any transaction that is identified by a member or member organization for clearing in the Customer range at The Options Clearing Corporation (‘‘OCC’’) which is not for the account of a broker or dealer or for the account of a ‘‘Professional’’ (as that term is defined in Options 1, Section 1(b)(45)). E:\FR\FM\20JNN1.SGM 20JNN1

Agencies

[Federal Register Volume 90, Number 117 (Friday, June 20, 2025)]
[Notices]
[Pages 26382-26387]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-11298]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-103270; File No. SR-FINRA-2025-008]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend 
FINRA Rule 6730 (Transaction Reporting)

June 16, 2025.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 10, 2025, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by FINRA. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 6730 (Transaction Reporting) 
to maintain the currently effective 15-minute outer limit timeframe for 
reporting TRACE-eligible securities covered by File No. SR-FINRA-2024-
004 and to provide a streamlined alternative for reporting and 
dissemination in connection with specified allocations of an aggregate 
order in a TRACE-eligible security to multiple managed customer 
accounts.
    The text of the proposed rule change is available on FINRA's 
website at https://www.finra.org, at the principal office of FINRA and 
at the Commission's Public Reference Room.

[[Page 26383]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. FINRA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Background
    On September 20, 2024, the Commission issued an order approving 
proposed rule change SR-FINRA-2024-004, as modified by Partial 
Amendment No. 1, to amend FINRA Rule 6730 to reduce the 15-minute TRACE 
reporting outer limit timeframe for fully electronic trades to one 
minute, with a later deadline for manual trades and firms with limited 
trading activity.\3\ As approved by the Commission, where a trade 
qualified for the manual trades exception, a 15-minute outer limit 
would apply for the first year following implementation; a 10-minute 
outer limit would have applied for the second and third years; and a 
five-minute outer limit would have applied thereafter.\4\ Under File 
No. SR-FINRA-2024-004, FINRA also adopted a requirement that members 
append a new manual trade indicator to identify all manual trades. The 
amendments were intended to modernize the TRACE reporting rules, while 
providing additional time for reporting trades that were not fully 
electronic from end to end and for firms with limited trading activity.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 101121 (September 
20, 2024), 89 FR 78930 (September 26, 2024) (Order Approving File 
No. SR-FINRA-2024-004) (``Approval Order''). The reporting timeframe 
reductions of File No. SR-FINRA-2024-004 would only have applied to 
TRACE-eligible securities that are currently subject to the 15-
minute outer limit reporting threshold under Rule 6730(a)(1).
    \4\ See Rule 6730.09(b); see also, Approval Order, 89 FR 78930, 
78931.
---------------------------------------------------------------------------

    Following the approval of File No. SR-FINRA-2024-004, FINRA 
continued its engagement with members regarding TRACE reporting 
timeframes, and members raised several additional concerns and 
questions in connection with aspects of the approved reporting regime. 
Specifically, members provided additional insights into the workflows 
that impact the current feasibility of one-minute reporting for certain 
fully electronic trades and five-minute reporting for manual trades. In 
this regard, members discussed, among other things, challenges to 
reporting within one-minute fully electronic transactions with more 
complex workflows (such as allocations to managed customer accounts or 
portfolio trades).
    Members also discussed challenges to faster reporting for trades 
executed by telephone, email, or through a chat/messaging function 
where some or all of the trade details must be manually entered to book 
the trade or report it to TRACE. Firms' challenges varied depending on 
firm characteristics, such as firm size and business model. Members 
further noted that the amendments compounded compliance concerns given 
the rigors of the condensed reporting timeframes. In this context, 
members also noted FINRA's current approach to late report marking, 
which marks as late any corrections made to a disseminated field if 
such corrections were entered outside of the reporting timeframe (even 
where the initial trade was reported within the reporting 
timeframe).\5\
---------------------------------------------------------------------------

    \5\ In response to these comments, FINRA is updating TRACE 
system logic with respect to trade corrections so that trade report 
timeliness is determined based only on the time of submission of the 
original trade report. Therefore, a member's trade report will no 
longer be marked late if the member makes a correction to a 
disseminated field outside of the reporting timeframe applicable to 
the original transaction (so long as the transaction was reported 
originally on a timely basis).
---------------------------------------------------------------------------

    As a result, FINRA has determined that it is appropriate at this 
time to maintain the currently effective TRACE reporting standard 
requiring members to report transactions as soon as practicable, but no 
later than within 15 minutes of the Time of Execution \6\ of the 
transaction for all types of trades (i.e., manual, hybrid, and fully 
electronic trades) that are currently subject to Rule 6730(a)(1). In 
addition, FINRA is proposing to implement additional responsive 
measures to address concerns raised to FINRA during its engagement 
process. Therefore, FINRA is filing this proposed rule change to: (1) 
amend Rule 6730 to maintain the currently effective 15-minute outer 
limit timeframe for reporting transactions in the securities impacted 
by File No. SR-FINRA-2024-004; and (2) adopt new Rule 6730.08 to 
provide a streamlined alternative for reporting and dissemination in 
connection with specified allocations of an aggregate order in a TRACE-
Eligible Security to multiple managed customer accounts.
---------------------------------------------------------------------------

    \6\ See Rule 6710(d). 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, as defined by Rule 
6710(a), 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.
---------------------------------------------------------------------------

Proposed Changes
Reporting Timeframes
    As discussed above, FINRA is proposing amendments to Rule 6730 to 
maintain the currently effective TRACE reporting outer limit timeframe 
for the securities transactions subject to Rule 6730(a)(1)--i.e., 
continuing to require that members report impacted transactions to 
TRACE as soon as practicable, but no later than within 15 minutes from 
the Time of Execution. Therefore, FINRA is amending Rule 6730(a) and 
subparagraphs (a)(1)(B) and (C) to delete references to ``one minute'' 
and replace them with ``15 minutes.'' FINRA also is amending Rule 6730 
to: (i) delete paragraph (d)(4)(I) (Manual Trade Indicator) to remove 
the requirement that members append a manual trade indicator; (ii) 
delete Supplementary Material .08 (Exception for Members with Limited 
Trading Activity), which would have retained a 15-minute outer limit 
reporting timeframe for firms with de minimis trading activity; and 
(iii) delete Supplementary Material .09 (Exception for Manual Trades), 
which would have provided additional reporting time for trades other 
than fully electronic trades.
    To continue to work with members to support timely and efficient 
trade reporting, FINRA has an established dedicated email inbox--
``[email protected]''--where members and their service bureaus 
can self-identify reporting issues. This proactive engagement can help 
to avoid late trade reporting inquiries from FINRA, reducing the time 
firms spend responding to inquiries. Self-reporting in this manner is 
voluntary but continues to be encouraged. FINRA is exploring ways to 
enhance its processes to improve the ability of members and their 
service bureaus to identify different types of challenges or issues, 
including those that may not be systematic or widespread (e.g., manual 
errors).
    FINRA remains committed to encouraging timely reporting--i.e., as 
soon as practicable following the execution of a transaction--to 
facilitate the benefits to transparency that result. As discussed 
above, FINRA believes that the proposed rule change is

[[Page 26384]]

appropriate at this time in light of the additional information 
obtained since File No. SR-FINRA-2024-004 was approved, to be 
responsive to members' concerns, and to ensure that FINRA takes a 
measured and informed approach to significant modifications to TRACE 
reporting requirements. FINRA also anticipates that members who elect 
to avail themselves of the proposed reporting alternative for 
allocation trades will benefit from a more streamlined approach that 
should improve their trade reporting processes and efficiency. In 
addition, the modifications to TRACE system marking logic should 
provide for a focused view on the timeliness of the initial report. 
FINRA will continue its engagement with members and monitor and study 
developments in the market for TRACE-Eligible Securities, including 
changes in reporting timeframes.
Aggregate Reporting for Allocation Trades
    FINRA is proposing to amend Rule 6730 to add new Supplementary 
Material .08 (Reporting Allocation Trades) to permit a member that is 
both a broker-dealer and an investment adviser (``BD/IA'') to report 
allocations of specified orders to managed customer accounts in a 
streamlined manner. Specifically, proposed Supplementary Material .08 
would provide that a member BD/IA may report allocations of an 
aggregate order in a TRACE-Eligible Security to multiple managed 
customer accounts in a single, aggregate TRACE trade report (in lieu of 
separately reporting allocations to each managed customer account). 
Under the proposal, an aggregate TRACE trade report must reflect 
allocations with the same price and Time of Execution and be submitted 
to TRACE within the timeframes specified in Rule 6730(a).\7\ In 
addition, Rule 6730(c) would be updated to require that the aggregate 
trade report include the number of managed customer accounts to which 
the TRACE-Eligible Security is being allocated.
---------------------------------------------------------------------------

    \7\ See, e.g., FAQ 3.1.47, Scenario 1, FINRA Frequently Asked 
Questions (FAQ) about the Trade Reporting and Compliance Engine 
(TRACE), available at https://www.finra.org/filing-reporting/trace/faq, (``When reporting the sales of securities to the various 
managed customer accounts, the time of execution is the time the 
material terms of the transaction are determined. If BD/IA A 
finalizes the allocation with respect to each managed customer 
account (thereby establishing the material terms of the transaction 
as to each customer) before or at the same time it submits the 
aggregate order to its trading desk (to purchase from the Street), 
the time of execution of the sales to individual managed customer 
accounts is the same time of execution reported for the aggregate 
purchase. If such allocations (as to the material terms with respect 
to each managed customer account) are not finalized before or at the 
same time as the aggregate order (to purchase from the Street), the 
time of execution of the sales to individual managed customer 
accounts is the time such allocations are finalized.'').
---------------------------------------------------------------------------

    The below examples illustrate the operation of the proposed 
reporting alternative.
     Scenario 1: BD/IA A is both a BD and an IA and operates as 
one legal entity. BD/IA A directs its trading desk to purchase an 
aggregate amount of $5 million (par value) in bonds from the Street (or 
otherwise obtain the bonds). BD/IA A then sells portions of the 
aggregate amount to 20 managed customer accounts at BD/IA A ($250,000 
to each account, in accordance with the allocation instructions). The 
sales to the managed customer accounts are all executed at the same 
price and do not reflect a mark-up or commission.
    [cir] TRACE reporting under the proposal: BD/IA A reports the 
purchase (from the Street or another source) of the $5 million in bonds 
to TRACE, as it would today. In the above scenario, if BD/IA A chooses 
to report the sale to the 20 managed customer accounts pursuant to 
proposed Rule 6730.08 in lieu of reporting to TRACE 20 separate sales 
to its customers' managed accounts, BD/IA would report a sale of $5 
million in bonds to a customer in a single aggregate trade report and 
include the number of managed accounts to which the aggregated order is 
being allocated pursuant to proposed Rule 6730(c)(14) (i.e., 20). The 
BD/IA also would include the ``no renumeration'' indicator pursuant to 
Rule 6730(d)(4)(F) and all other information required to be reported 
pursuant to Rule 6730(c) and the TRACE User Guide and Technical 
Specifications.
     Scenario 2: BD/IA A is both a BD and an IA and operates as 
one legal entity. BD/IA A directs its trading desk to purchase an 
aggregate amount of $6 million (par value) in bonds from the Street (or 
otherwise obtain the bonds).
    [cir] BD/IA A purchases $3 million in bonds from BD B at 11:57:03 
a.m.
    [cir] BD/IA A purchases $2 million in bonds from BD C at 11:57:07 
a.m.
    [cir] BD/IA A purchases $1 million in bonds from BD D at 11:57:14 
a.m.
    At 11:57:15 a.m., BD/IA A then sells portions of the aggregate 
amount to 20 managed customer accounts at BD/IA A ($300,000 to each 
account, in accordance with the allocation instructions). The sales to 
the managed customer accounts are all executed at the same price and do 
not reflect a mark-up or commission.
    [cir] TRACE reporting under the proposal: BD/IA A reports the 
purchases from BD B of the $3 million in bonds, BD C of the $2 million 
in bonds, and BD D of the $1 million in bonds to TRACE, as it would 
today. In the above scenario, if BD/IA A chooses to report the sale to 
the 20 managed customer accounts pursuant to proposed Rule 6730.08 in 
lieu of reporting to TRACE 20 separate sales to its customers' managed 
accounts, BD/IA would report a sale of $6 million in bonds to a 
customer in a single aggregate trade report,\8\ include the number of 
managed accounts to which the aggregated order is being allocated 
pursuant to proposed Rule 6730(c)(14) (i.e., 20), include the ``no 
renumeration'' indicator pursuant to Rule 6730(d)(4)(F), and include 
all other information required to be reported pursuant to Rule 6730(c) 
and the TRACE User Guide and Technical Specifications.\9\
---------------------------------------------------------------------------

    \8\ Dissemination is subject to transaction size caps over which 
the actual size of a transaction will not be included in the real-
time TRACE transaction data (i.e., $5 million (par value) for 
investment grade corporate bonds and $1 million (par value) for non-
investment grade corporate bonds). For trades above the 
dissemination caps, FINRA disseminates the size of the trade as 
``5MM+'' (for investment grade) and ``1MM+'' (for non-investment 
grade). The uncapped transaction sizes become available as part of 
the Historic Corporate Bond Data Set six months after the calendar 
quarter in which the transactions are reported. See Rule 7730(d).
    \9\ FINRA's TRACE FAQs currently address a variety of allocation 
scenarios. FINRA will update its FAQs to illustrate the operation of 
new Supplementary Material, if the proposed rule change is approved 
by the Commission. See FINRA Frequently Asked Questions (FAQ) about 
the Trade Reporting and Compliance Engine (TRACE), available at 
https://www.finra.org/filing-reporting/trace/faq.
---------------------------------------------------------------------------

    FINRA believes that the proposed alternative approach will 
streamline reporting, thereby improving efficiency and removing 
unnecessary burdens. The proposed rule change also may improve 
transparency by removing reports with low utility from dissemination 
(to the extent that firms avail themselves of this alternative), while 
continuing to ensure that the allocation associated with the aggregate 
order is reported and disseminated to the market, without the loss of 
price information. FINRA also notes that reporting pursuant to this 
alternative approach is voluntary; therefore, depending on a member BD/
IA's business and determinations regarding burdens and benefits, a 
member may choose to continue to report individual allocations as it 
does today or to modify its practices to begin reporting on an 
aggregate basis pursuant to this proposed rule change. Member BD/IAs 
also will have the flexibility on a case-by-case basis to choose 
whether to report a particular transaction on an aggregate basis 
pursuant to proposed Rule 6730.08 or whether to report the allocations 
to managed customer accounts individually.

[[Page 26385]]

    If the Commission approves the proposed rule change, FINRA will 
announce the effective date of the proposed rule change in a Regulatory 
Notice. The effective date of the proposed rule change also will apply 
to the provisions amended in File No. SR-FINRA-2024-004, as further 
amended by the instant filing.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\10\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating transactions in securities, and, in 
general, to protect investors and the public interest, and Section 
15A(b)(9) of the Act,\11\ which requires that FINRA rules not impose 
any burden on competition that is not necessary or appropriate.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78o-3(b)(6).
    \11\ 15 U.S.C. 78o-3(b)(9).
---------------------------------------------------------------------------

    FINRA believes the proposed rule change related to reporting 
timeframes is in the public interest and consistent with Section 
15A(b)(6) of the Act because it addresses the additional concerns and 
questions raised by members in connection with aspects of the approved 
reporting regime, including related to the workflows that impact the 
current feasibility of one-minute reporting for certain fully 
electronic trades and five-minute reporting for manual trades. FINRA 
understands that MSRB similarly is proposing a rule change that would 
provide for a 15-minute outer limit for the reporting of municipal 
securities. Therefore, the proposed rule change maintains consistency 
between the regimes applicable to covered TRACE-Eligible Securities and 
municipal securities, thereby fostering cooperation and coordination 
with persons engaged in regulating transactions in securities, 
consistent with Section 15A(b)(6) of the Act. In addition, FINRA 
believes that the proposed rule change is consistent with Section 
15A(b)(9) of the Act and does not impose any burden on competition that 
is not necessary or appropriate in that it is intended to alleviate 
compliance challenges and avoid potential unintended consequences--
particularly given the prevalence of manual and hybrid trading 
workflows for the impacted securities. Therefore, FINRA believes that 
the proposed rule change related to reporting timeframes helps achieve 
the purposes of the Act and is appropriate at this time given the 
additional information obtained since the approval of File No. SR-
FINRA-2024-004 and to be responsive to members' feasibility and 
compliance concerns.
    FINRA also believes that the proposed alternative reporting regime 
to permit members to report allocations of an aggregate order to 
multiple managed customer accounts with the same Time of Execution and 
price as a single, aggregate TRACE trade report is consistent with the 
Act. Specifically, FINRA believes the alternative reporting regime is 
in the public interest and consistent with Section 15A(b)(6) of the Act 
because it should improve transparency (to the extent that firms avail 
themselves of this alternative) by removing reports with low utility 
from dissemination while continuing to ensure that the allocation 
associated with the aggregate order is reported and disseminated to the 
market, without the loss of pricing information. FINRA also believes 
that the proposed rule change is consistent with Section 15A(b)(9) of 
the Act and does not impose any burden on competition that is not 
necessary or appropriate in that the proposed reporting alternative is 
intended to streamline reporting, improve reporting efficiency, and 
remove unnecessary burdens. Therefore, FINRA believes that the proposed 
rule change is consistent with the Act as it maintains valuable 
transparency while reducing burdens on members.

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
Economic Impact Assessment
    FINRA has undertaken an economic impact assessment, as set forth 
below, to analyze the regulatory need for the proposed rule change, its 
potential economic impacts, and the alternatives considered in 
assessing how to best meet FINRA's regulatory objectives.
Regulatory Need
Reporting Timeframes
    As discussed previously, in recognition of the concerns raised 
through continued engagement with member firms and other market 
participants regarding the feasibility of shorter TRACE reporting 
timeframes, FINRA is proposing to maintain the currently effective 
reporting requirement of as soon as practicable, but no later than 
within 15 minutes from the Time of Execution for all trades in TRACE-
Eligible Securities that are currently subject to Rule 6730(a)(1). The 
proposed rule change also would prevent potential loss associated with 
unsuccessful expenditures undertaken to meet the shorter reporting 
timeframe obligations. The proposed rule change would address these 
potential impacts, to the extent embedded in the approved but not yet 
effective reporting rules and is thus consistent with FINRA's measured 
approach to enhancing TRACE reporting requirements, carefully balancing 
transparency benefits against potential operational impacts in the 
fixed income market.
Aggregate Reporting for Allocation Trades
    As discussed above, currently, if a BD/IA executes a trade for 
multiple customer accounts as part of an aggregate order and then 
allocates portions of the aggregate amount to various managed customer 
accounts at the BD/IA, it is required to separately report the 
individual allocations to TRACE. Depending on the number of managed 
accounts to which the bonds are being allocated, the BD/IA may be 
required to report a large number of separate transactions within the 
applicable trade reporting timeframe. This can pose operational 
challenges for firms, particularly those managing numerous accounts. 
Moreover, when individual allocations reflect the same price and Time 
of Execution in connection with the same order, separate reporting does 
not provide additional insight into the price of the traded security.
    Permitting firms to submit an aggregate allocation report as an 
alternative to submitting a separate report for each individual 
allocation trade, as discussed herein, would reduce the number of 
reports required to be submitted to TRACE and could therefore increase 
reporting efficiency for members without compromising the availability 
of important transparency or regulatory information.
Economic Baseline
Reporting Timeframes
    As discussed above, the Commission approved File No. SR-FINRA-2024-
004 to amend FINRA Rule 6730 to reduce the 15-minute TRACE reporting 
outer limit timeframe for fully electronic trades to one minute, with a 
later deadline for manual trades and firms with limited trading 
activity; this rule change was never implemented by

[[Page 26386]]

FINRA.\12\ Therefore, members have continued to be required to report 
transactions in TRACE-Eligible Securities that are subject to Rule 
6730(a)(1) within the 15-minute outer limit reporting timeframe. As 
such, the proposed rule change would maintain the status quo for 
impacted member firms.
---------------------------------------------------------------------------

    \12\ See supra notes 3-4 and accompanying text.
---------------------------------------------------------------------------

Aggregate Reporting for Allocation Trades
    FINRA estimated the number and dollar par value of allocation 
trades in TRACE-Eligible Securities between July 2023 and June 2024, as 
well as the number of market participant identifiers engaging in 
allocation trades covered by the proposed rule change.\13\ 
Approximately 117 market participant identifiers reported 7,570,097 
allocation trades that represented $205.4 billion in total par value 
traded. Among these reports, 39.53 percent were corporate and agency 
trades,\14\ 6.77 percent were securitized product trades,\15\ and 53.70 
percent were transactions in U.S. Treasury Securities.\16\ The 10 most 
active TRACE reporters among the 117 market participant identifiers 
accounted for 97.88 percent of the allocation trades and 79.48 percent 
of the allocation trade dollar volume.\17\
---------------------------------------------------------------------------

    \13\ An allocation flag does not exist in TRACE; therefore, 
FINRA used heuristics to approximate allocation trades. 
Specifically, FINRA identified as allocation trades agency trades 
where a dually registered single market participant identifier 
reported two or more customer-facing trades in a unique security 
with the same execution price, time of execution, and report side 
(excluding trades with renumeration and reported by an electronic 
platform). FINRA believes this approach is more likely to represent 
a high estimate of impacted trades.
    \14\ See Rule 6710(l).
    \15\ See Rule 6710(m).
    \16\ See Rule 6710(p).
    \17\ To determine the most active participants, the participants 
were sorted based on the number of unique allocations they reported.
---------------------------------------------------------------------------

Economic Impacts
Reporting Timeframes
    The proposed rule change maintains the currently effective TRACE 
reporting outer limit timeframe for transactions in TRACE-Eligible 
Securities that are subject to Rule 6730(a)(1), and therefore there is 
no economic impact compared to the current economic baseline for 
reporting to TRACE. As discussed above, the proposed rule change is 
intended to be responsive to members' feasibility concerns, alleviate 
compliance challenges, and avoid potential unintended consequences. It 
balances transparency benefits with practical implementation 
considerations identified through member feedback. It also reduces the 
compliance costs that member firms otherwise would incur to implement 
File No. SR-FINRA-2024-004. To the extent that any firms allocated 
resources toward system and procedural enhancements to accommodate the 
anticipated changes in TRACE reporting requirements under File No. SR-
FINRA-2024-004, these investments may impact the amount of any 
potential cost savings from this proposal. However, FINRA notes that it 
announced its intention to not set an implementation date and to make 
substantive changes to the amendments a few months following the 
approval of File No. SR-FINRA-2024-004.\18\
---------------------------------------------------------------------------

    \18\ See Robert Cook, Updating Trace Reporting Timeframes 
(February 5, 2025), available at https://www.finra.org/media-center/blog/updating-trace-reporting-timeframes.
---------------------------------------------------------------------------

Aggregate Reporting for Allocation Trades Potential Benefits
    As noted above, a significant number of market participant 
identifiers engage in allocation trades and therefore may benefit from 
the proposed rule change to permit them to streamline their 
reporting.\19\ The reduction in the number of reports that would 
otherwise be reported would improve members' ability to timely report 
these transactions within the applicable reporting timeframe while 
continuing to ensure that the allocation associated with the aggregate 
order is reported and disseminated to the market, without the loss of 
price information.
---------------------------------------------------------------------------

    \19\ In particular, the average allocation contains 15.52 
trades. If all of these trades were reported pursuant to the 
proposed alternative reporting regime, the total number of trade 
reports would have been reduced from 7,570,097 to 487,625.
---------------------------------------------------------------------------

Potential Costs
    Aggregating reports pursuant to the proposed rule change will be 
optional for firms; therefore, the proposed rule change will not impose 
costs on members that prefer not to avail themselves of this approach. 
Member firms that choose to avail themselves of the aggregate reporting 
alternative could incur costs associated with making any necessary 
system or process changes and presumably would choose to incur any such 
costs because the expected benefits exceed the expected costs of 
implementation.
    As discussed above, under the proposed alternative, FINRA would 
disseminate the number of managed accounts to which the securities 
would be allocated and the aggregate volume of securities allocated, 
but the individual volume allocated to each managed customer account 
would not be disseminated. On balance, FINRA believes that the proposed 
reporting alternative is appropriate as it continues to ensure that the 
allocation associated with the aggregate order is reported and 
disseminated to the market, without the loss of price information.
    FINRA also considered potential competitive effects the proposed 
rule change might have within impacted member firms as well as between 
impacted and unimpacted member firms. The proposed rule change would 
provide BD/IAs with the option to significantly streamline allocation 
reporting by permitting them to submit a single allocation trade report 
(similar to the single report members trading with a separate 
investment advisor are currently required to submit). Although the 
proposed rule change would apply equally to all impacted members, the 
potential effect could differ depending on the business of the member. 
FINRA believes that any differential competitive effects the rule might 
have on impacted members with different usage of allocations would be 
mitigated by the voluntary nature of proposed reporting changes. Hence, 
FINRA does not believe the proposed rule would create significant 
competitive effects.
Alternatives Considered
Reporting Timeframes
    In developing the proposed rule change, FINRA considered extending 
the reporting timeframe for manual trades from the ultimate five-minute 
outer limit under File No. SR-FINRA-2024-004 (e.g., to 10 or 15 
minutes) and maintaining the one-minute outer limit requirement for 
fully electronic transactions. This approach would address feasibility 
concerns relevant to reducing the reporting timeframe for trades 
involving manual intervention but would not address the feasibility 
issues raised by members related to other types of transactions. 
Considering these factors, FINRA decided to maintain the currently 
effective 15-minute outer limit requirement for all trades in covered 
TRACE-Eligible Securities.
Aggregate Reporting for Allocation Trades
    In developing the proposed rule change, FINRA considered various 
alternatives and the potential costs and benefits of those 
alternatives. Among other things, FINRA considered permitting BD/IAs to 
report an aggregate allocation report and identifying it as such, 
without providing the number of accounts to which the securities will 
be allocated; however, FINRA believes the number of accounts to which 
the

[[Page 26387]]

securities were allocated provides useful insight that is more 
comparable to the information reported and disseminated today, without 
adding undue complexity to the aggregate reporting framework. As such, 
FINRA believes the proposed aggregate allocation report indicating the 
number of allocations is preferable.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-FINRA-2025-008 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-2025-008. 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 such 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-2025-008 and should be submitted on or 
before July 11, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-11298 Filed 6-18-25; 8:45 am]
BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.