73 FR 25 pgs. 7018-7020 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Reflect That the NASD/NYSE Trade Reporting Facility Does Not Support the Three-Party Trade Report Functionality
Type: NOTICEVolume: 73Number: 25Pages: 7018 - 7020
Docket number: [Release No. 34-57247; File No. SR-FINRA-2008-002]
FR document: [FR Doc. E8-2134 Filed 2-5-08; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57247; File No. SR-FINRA-2008-002]
Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Reflect That the NASD/NYSE Trade Reporting Facility Does Not Support the Three-Party Trade Report Functionality
January 31, 2008.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 ("Act")1and Rule 19b-4 thereunder,2notice is hereby given that on January 28, 2008, the Financial Industry Regulatory Authority, Inc. ("FINRA") (f/k/a the National Association of Securities Dealers, Inc. ("NASD")) 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 substantially by FINRA. FINRA has filed this proposal pursuant to section 19(b)(3)(A)(iii) of the Act3and Rule 19b-4(f)(6) thereunder,4which renders the proposal effective upon filing with the Commission.5The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
Footnotes:
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b-4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 4 17 CFR 240.19b-4(f)(6).
5 FINRA has asked the Commission to waive the 30-day operative delay provided in Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
FINRA proposes to amend the rules governing the NASD/NYSE Trade Reporting Facility ("NASD/NYSE TRF") to delete NASD Rule 4632E(d), relating to three-party trade reports, because the NASD/NYSE TRF currently does not support the three-party trade report functionality. In addition, FINRA proposes to modify NASD Rule 4632E(c), relating to two-party trade reports, to conform NASD Rule 4632E(c) to the two-party trade report rules of FINRA's other Trade Reporting Facilities ("TRFs").6
Footnotes:
6 Effective July 30, 2007, FINRA was formedthrough the consolidation of NASD and the member regulatory functions of NYSE Regulation. Accordingly, the NASD/NYSE TRF is now doing business as the FINRA/NYSE TRF. In addition to the NASD/NYSE TRF, there are two other TRFs in operation: The NASD/Nasdaq Trade Reporting Facility (the "NASD/Nasdaq TRF") and the NASD/NSX Trade Reporting Facility (the "NASD/NSX TRF"). The formal name change of each TRF is pending and, once completed, FINRA will file a separate proposed rule change to reflect those changes in the Manual.
The text of the proposed rule change is available at http://www.finra.org , the principal office of FINRA, and 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, 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
The TRFs, including the NASD/NYSE TRF, provide FINRA members with mechanisms for reporting trades in NMS stocks, as defined in Rule 600(b)(47) of Regulation NMS under the Act,7executed otherwise than on an exchange. When the NASD/NYSE TRF was established, it was contemplated that members would be able to report trades to the NASD/NYSE TRF using either two- or three-party trade reports.8A three-party trade report is a single trade report that denotes one Reporting Member ( i.e. , the member with the obligation to report the trade under FINRA's rules) and two contra parties.
Footnotes:
7 17 CFR 242.600(b)(47).
8 See NASD Rules 4632E(c) and 4632E(d),respectively. Current NASD Rules 4632E(c) and (d) are substantially similar to the reporting requirements relating to two- and three-party trade reports for FINRA's Alternative Display Facility (the "ADF"). See NASD Rules 4632A(c) and (d).
However, the NASD/NYSE TRF has not implemented the three-party trade report functionality and members currently are able to submit reports to the NASD/NYSE TRF only in the two-party trade report format.9Accordingly, for its rules to accurately reflect the functionality of the NASD/NYSE TRF, FINRA proposes to delete NASD Rule 4632E(d) relating to three-party trade reports. In addition, FINRA proposes to replace the two-party trade report provisions currently found in paragraph (c) of NASD Rule 4632E with a new paragraph (c), which is identical to the two-party trade report provisions of the NASD/Nasdaq TRF and the NASD/NSX TRF. According to FINRA, this will conform, to the extent practicable, the rules relating to the three TRFs.10Finally, FINRA proposes technical changes to paragraphs (c), (d), and (h) of NASD Rule 6130E to reflect the deletion of NASD Rule 4632E(d) and the resulting renumbering of paragraphs in NASD Rule 4632E.
Footnotes:
9 The NASD/NYSE TRF may implement thisfunctionality at a later date, in which case FINRA would submit a proposed rule change to amend its rules accordingly.
10 Neither the NASD/Nasdaq TRF nor the NASD/NSXTRF supports three-party trade reports. Accordingly, members may submit trades to a TRF only in the two-party trade report format. Members may submit trades in the three-party trade report format to the ADF.
FINRA has asked the Commission to waive the 30-day operative delay and to make the proposed rule change operative on the date of filing.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the provisions of section 15A(b)(6) of the Act,11which requires, among other things, that FINRA's rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. FINRA believes that by deleting rules that apply to a functionality that is not currently supported by the NASD/NYSE TRF, the proposed rule change will prevent member confusion and trade reporting errors.
Footnotes:
11 15 U.S.C. 78o-3(b)(6).
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.
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
FINRA has designated the proposed rule change as one that: (i) Does not significantly affect the protection of investors or the public interest; (ii) does not impose any significant burden on competition; and (iii) does not become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. In addition, as required under Rule 19b-4(f)(6)(iii),12FINRA provided the Commission with written notice of its intention to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to filing the proposal with the Commission. Therefore, the foregoing rule change has become effective pursuant to section 19(b)(3)(A) of the Act13and Rule 19b-4(f)(6) thereunder.14
Footnotes:
12 17 CFR 240.19b-4(f)(6)(iii).
13 15 U.S.C. 78s(b)(3)(A).
14 17 CFR 240.19b-4(f)(6).
Pursuant to Rule 19b-4(f)(6)(iii) under the Act, a proposal does not become operative for 30 days after the date of its filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. FINRA has asked the Commission to waive the 30-day operative delay to expedite the deletion of rules relating to the three-party trade report functionality, which currently is not supported by the NASD/NYSE TRF, and the adoption of conforming changes to the NASD/NYSE TRF's two-party trade report provisions. FINRA believes that these changes will prevent potential member confusion and trade reporting errors. FINRA notes, in addition, that the proposal amends the NASD/NYSE TRF's trade reporting rules to accurately reflect the current functionality of the NASD/NYSE TRF, but does not affect members' reporting obligations or current capability.
The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because the deletion of the three-party trade report provisions is designed to ensure that the rules governing the NASD/NYSE TRF accurately reflect the operation of the NASD/NYSE TRF, which currently does not support the three-party trade report functionality.15Similarly, the proposed changes to conform the NASD/NYSE TRF's two-party trade report rules to the two-party trade report rules of the NASD/Nasdaq TRF and the NASD/NSX TRF16will provide consistency among the rules of the TRFs and does not raise new regulatory issues. Accordingly, the Commission waives the 30-day operative delay and designates the proposal to be operative upon filing with the Commission.
Footnotes:
15 For purposes only of waiving the 30-dayoperative delay, the Commission has considered the proposal's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).
16 See NASD Rules 4632(c) and 4632C(c).
At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.
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 ( http://www.sec.gov/rules/sro.shtml ); or
• Send an e-mail to rule-comments@sec.gov. Please include File Number SR-FINRA-2008-002 on the subject line.
Paper Comments
• Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File No. SR-FINRA-2008-002. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( http://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 inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-FINRA-2008-002 and should be submitted on or before February 27, 2008.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17
Florence E. Harmon,
Deputy Secretary.
Footnotes:
17 17 CFR 200.30-3(a)(12).
[FR Doc. E8-2134 Filed 2-5-08; 8:45 am]
BILLING CODE 8011-01-P