81 FR 57964 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Use of the Alternative Display Facility for Trade Reporting Purpose Only
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 164 (August 24, 2016)
Federal Register Volume 81, Issue 164 (August 24, 2016)
| Page Range | 57964-57967 | |
| FR Document | 2016-20203 |
[Federal Register Volume 81, Number 164 (Wednesday, August 24, 2016)] [Notices] [Pages 57964-57967] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-20203] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78609; File No. SR-FINRA-2016-031] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Use of the Alternative Display Facility for Trade Reporting Purpose Only August 18, 2016. 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 August 11, 2016, 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. FINRA has designated the proposed rule change as constituting a ``non- controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which renders the proposal effective upon receipt of this filing by the Commission. 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. \3\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing a proposed rule change relating to use of the Alternative Display Facility (``ADF'') by FINRA members for trade reporting purposes only. The text of the proposed rule change is available on FINRA's Web site at http://www.finra.org, at the principal office of FINRA 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, 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. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Background On January 20, 2016, FINRA published a Trade Reporting Notice with guidance on firms' over-the-counter (``OTC'') equity trade reporting obligations in the event of a systems issue during the trading day that prevents them from reporting OTC trades in NMS stocks in accordance with FINRA rules.\4\ As set forth in the Notice, a firm that routinely reports its OTC trades in NMS stocks to only one FINRA trade reporting facility (a firm's ``primary facility'') must establish and maintain connectivity and report to a second FINRA trade reporting facility (a firm's ``secondary facility''), if the firm intends to continue to support OTC trading as an executing broker while its primary facility is experiencing a widespread systems issue.\5\ FINRA currently has three facilities that support member reporting of OTC trades in NMS stocks, as defined in SEC Rule 600(b) of Regulation NMS: the ADF and two Trade Reporting Facilities (``TRFs''). The TRFs are facilities that are operated by both FINRA and its exchange partners (NASDAQ and NYSE). --------------------------------------------------------------------------- \4\ See Trade Reporting Notice, January 20, 2016 (OTC Equity Trading and Reporting in the Event of Systems Issues). \5\ As discussed in the Notice, if a firm chooses not to have connectivity to a secondary facility, it should cease executing OTC trades altogether when its primary trade reporting facility is experiencing a widespread systems issue. In that instance, the firm could route orders for execution to an exchange or another FINRA member (i.e., a member with connectivity and the ability to report to a FINRA trade reporting facility that is operational). --------------------------------------------------------------------------- Since publication of the Trade Reporting Notice, a number of firms have inquired about using the ADF as their secondary facility for trade reporting, and at least one has inquired about using the ADF as its primary facility. While the ADF historically has not been used by members for trade reporting without quoting activity, there is nothing in the ADF rules \6\ to prohibit it. Thus, to better accommodate firms in their efforts to comply with the guidance in the Trade Reporting Notice, and to provide an alternative to connecting to both TRFs, FINRA will make the ADF available to members for trade reporting purposes only.\7\ FINRA currently is making systems updates to the ADF and anticipates that the ADF will be available to members before the end of this year.\8\ Members that use the ADF for trade reporting purposes only would not be able to quote on the ADF without registering under one of the two categories of ``ADF Market Participant'' under current ADF rules (i.e., Registered Reporting ADF ECN and Registered Reporting ADF Market Maker) and satisfying all applicable requirements for quoting.\9\ --------------------------------------------------------------------------- \6\ See Rule 6200 and 7100 Series. \7\ While members will have the option of using the ADF as their primary facility for trade reporting, FINRA anticipates that members would be more likely to use the ADF as their secondary facility. FINRA has historically operated the ADF as a utility and has not attempted to actively attract participants in the OTC trade reporting space. For example, FINRA does not offer a market data revenue share program for the ADF comparable to the TRFs. See Rules 7610A and 7610B. \8\ FINRA notes that in addition to the systems updates that will be completed this year, the ADF may need additional infrastructure enhancements to support significant trade reporting volume. However, the necessary enhancements, and the time it may take to make those enhancements, will not be known until FINRA has a more concrete understanding of the level of firms' interest in using the ADF for trade reporting purposes only and their potential volume. \9\ For example, in addition to registration, FINRA rules include certification and deposit requirements for ADF quoting participants, as well as capacity fees and penalties. See, e.g., Rules 6271 and 7580. --------------------------------------------------------------------------- Because the substantive trade reporting and trade reporting participation requirements under current ADF rules are consistent with the trade reporting and participation requirements applicable to the TRFs,\10\ significant rulemaking is not needed to enable firms to use the ADF for trade reporting purposes only. However, FINRA is proposing the following additional requirements that would apply specifically to members that use the ADF for trade reporting purposes only. --------------------------------------------------------------------------- \10\ See, e.g., Rules 6282 and 7120; 6380A and 7220A; and 6380B and 7220B. --------------------------------------------------------------------------- [[Page 57965]] Proposed Testing Requirements FINRA is proposing to adopt new paragraph (b)(2)(E) of Rule 7120 (Trade Reporting Participation Requirements) to require members that intend to use the ADF for trade reporting purposes only and connect to the ADF via a Financial Information eXchange (``FIX'') line to participate in annual connectivity and capacity/stress testing. Members that use only the web browser for trade reporting to the ADF and do not have any FIX connections would not be required to participate in connectivity and capacity/stress testing.\11\ --------------------------------------------------------------------------- \11\ FINRA notes that members using a web browser for trade reporting generally have relatively low volume, since it would be difficult for a member with significant volume to meet its 10-second trade reporting obligation under FINRA rules. Thus, FINRA expects that members using the web browser for trade reporting to the ADF will not put the same demands on the ADF system as firms reporting more significant volume using a FIX connection. As such, FINRA does not believe that it is necessary to require web browser users to participate in annual testing. --------------------------------------------------------------------------- FINRA is proposing to waive the testing requirements under Rule 7120(b)(2)(E) for members that meet certain thresholds. Specifically, members that report at least 100 trades per month to the ADF would not be required to participate in annual connectivity testing. Thus, a member that elects to use the ADF as its primary trade reporting facility likely would be excluded from this requirement. In addition, FINRA is proposing that members would not be required to participate in annual capacity/stress testing unless their actual ADF activity levels or their capacity projections based on their TRF usage \12\ increase by more than 20% from one year to the next. FINRA notes that the proposed waivers would apply independently. For example, a member may be subject to annual connectivity testing (because it reports fewer than 100 trades per month to the ADF), while being excused from the capacity/ stress testing requirement (because its capacity projection based on its TRF usage has not increased by more than 20% from the prior year). --------------------------------------------------------------------------- \12\ FINRA will develop capacity projections for members that will use the ADF for trade reporting purposes only based on their current usage of a TRF, and members may be asked to review and confirm these projections from time to time. If a member's volume on a TRF increases by more than 20% from one year to the next, the member would be required to participate in capacity/stress testing to retain connectivity to the ADF for use as a secondary facility for trade reporting. --------------------------------------------------------------------------- Pursuant to proposed Rule 7120(b)(2)(E), members that are required to participate in annual connectivity and capacity/stress testing will not be charged fees under current Rule 7530(c) for the annual testing. However, members that request additional testing beyond the required annual connectivity and capacity/stress testing would be required to pay fees for testing services under Rule 7530(c).\13\ --------------------------------------------------------------------------- \13\ Pursuant to Rule 7530(c)(1), members are charged $333 per hour for testing with the ADF, subject to the exceptions identified in paragraph (c)(2) of the Rule. --------------------------------------------------------------------------- FINRA believes that the proposed testing requirements will help ensure that the ADF has sufficient capability and capacity to support trade reporting, particularly in the event that members relying on the ADF as their secondary facility for trade reporting must report to the ADF in response to a widespread systems issue in their primary facility. Proposed FIX Connectivity Fee FINRA is proposing to charge members that use the ADF for trade reporting purposes only and connect to the ADF via a FIX line a monthly fee of $500. The proposed fee would apply to all members that use the ADF for trade reporting purposes only (as either their primary or secondary facility for trade reporting).\14\ --------------------------------------------------------------------------- \14\ FINRA notes that the proposed fee would be in addition to any charges firms must pay NASDAQ, as FINRA's technology provider for the ADF, under NASDAQ rules. For example, firms that report to the ADF via FIX--either directly or indirectly through third party intermediaries (e.g., service bureaus)--would pay NASDAQ charges associated with FIX ports to connect to the ADF data center. See, e.g., NASDAQ Rule 7015. --------------------------------------------------------------------------- The proposed fee would replace the fees for ADF terminal software and servers under current Rule 7520 (Equipment Related Charges).\15\ These fees are obsolete, as members no longer use workstations to connect to the ADF, but instead, connect via FIX or web browser. Members that elect to trade report to the ADF via web browser would pay the monthly fee of $20 per user ID under current Rule 7510(c), rather than the proposed monthly fee for FIX connectivity.\16\ --------------------------------------------------------------------------- \15\ Pursuant to this rule, the charge for ADF terminal software is $275 a month per terminal and $550 a month for each server. \16\ Members that submit trades to the ADF, via FIX or web browser, also would be subject to the trade reporting fees under current Rule 7510(a), which fees are assessed on a per reported transaction basis. --------------------------------------------------------------------------- The proposed FIX connectivity fee would help cover the costs associated with maintaining the ADF platform and ensuring that there is sufficient capacity on the platform and at the securities information processors to accommodate trade reporting, particularly in the event that firms relying on the ADF as their secondary facility for trade reporting must report to the ADF in response to a widespread systems issue in their primary facility. Technical Conforming Changes FINRA is proposing the following technical conforming changes to the ADF rules. First, FINRA is proposing to amend and rename Rule 6170 (Primary and Additional MPIDs for Alternative Display Facility Participants). With the exception of paragraphs (d) and (e), Rule 6170 relating to the use of multiple market participant identifiers (``MPIDs'') currently is limited to ADF quoting participants. FINRA is proposing to amend the Rule, as applicable, to also apply to members that use the ADF for trade reporting purposes only. In addition, FINRA is proposing to streamline and conform the Rule to Rule 6160 (Multiple MPIDs for Trade Reporting Facility Participants). The standards and processes applicable to the assignment and use of multiple MPIDs are the same for ADF and TRF participants, and as such, FINRA believes that the rules should be identical, to the extent possible. As amended, paragraph (b) of Rule 6170 would provide that any ADF participant (which would include a member that uses the ADF for trade reporting only) that is required to obtain, or otherwise wishes to use, more than one MPID for purposes of displaying quotes/orders or reporting trades to the ADF must submit a written request, in the form required by FINRA, to, and obtain approval from, FINRA Market Operations for such additional MPID(s). As amended, this paragraph would conform to the language of current Rule 6160(a). Paragraph (c) of Rule 6170, which currently applies only to Registered Reporting ADF ECNs, would be amended to apply to ``ADF Market Participants'' (which term encompasses both categories of ADF quoting participant, i.e., Registered Reporting ADF ECNs as well as Registered Reporting ADF Market Makers) and to conform to the language of Rule 6160(b). FINRA also is proposing to amend and reorganize the Supplementary Material under Rule 6170 to conform to Rule 6160 and to delete unnecessary, and in places repetitive, language regarding the specifics of assigning ``Primary'' and ``Additional'' MPIDs. As amended, Rule 6170.01 would apply to any ADF participant (which would include a member that uses the ADF for trade reporting purposes only) and provide that an ADF participant must identify the purpose(s) and system(s) for which the multiple MPIDs will be used. If FINRA determines that the use of multiple MPIDs is detrimental to the marketplace, or that an ADF participant [[Page 57966]] is using one or more additional MPIDs improperly or for other than the purpose(s) identified by the member, FINRA staff retains full discretion to limit or withdraw its grant of the additional MPID(s) to such ADF participant for purposes of displaying quotes/orders or reporting trades through the ADF. This language incorporates language in current Rule 6170.01 and .05 and conforms to the language of Rule 6160.01. Amended Rule 6170.02 would continue to provide that each MPID belonging to a Registered Reporting ADF ECN is subject to the requirements of Rule 6279 (Alternative Trading Systems). Rule 6170.03 would be amended to apply to ``ADF Market Participants,'' which would encompass both categories of ADF quoting participant, and provide that if an ADF Market Participant no longer fulfills the conditions appurtenant to one of its MPIDs (e.g., by being placed into an unexcused withdrawal), it may not use another MPID for any purpose in that security. Rules 6170.04 and .05 would be deleted in their entirety.\17\ --------------------------------------------------------------------------- \17\ FINRA notes that as amended, Rule 6170.02 and .03 apply to quoting activity, and specifically to Registered Reporting ADF ECNs and ADF Market Participants, respectively, and thus do not correspond to any provisions of Rule 6160. FINRA further notes that Rule 6160.02 applies exclusively to the TRFs and thus there is no corresponding provision in Rule 6170. Otherwise, Rule 6160 and 6170 are substantively identical, differing only with respect to the defined terms used or to reflect the fact that the TRFs are used for trade reporting only and the ADF could be used for both quoting and trade reporting. --------------------------------------------------------------------------- Second, FINRA is proposing to amend paragraph (c)(1) of Rule 7510 (System Related Fees) to clarify that the web browser fee of $20 per month per user ID will apply to all ADF participants, including members that use the ADF for trade reporting purposes only. The provision currently applies only to ``ADF Market Participants,'' which term is defined as a Registered Reporting ADF Market Maker or a Registered Reporting ADF ECN. Finally, FINRA is proposing to delete paragraph (a)(9) of Rule 6220. The term ``Non-Registered Reporting Member'' is not used in the ADF rule set and as such should no longer be included in the definitions under Rule 6220. FINRA has filed the proposed rule change for immediate effectiveness and the operative date will be 30 days from 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,\18\ 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, and, in general, to protect investors and the public interest. FINRA believes that the proposed rule change is consistent with the Act because it provides members with an alternative for meeting their trade reporting obligations under FINRA rules and will allow members that wish to connect to a secondary facility for trade reporting in accordance with the Trade Reporting Notice to continue executing OTC trades in NMS stocks in the event their primary facility is experiencing a widespread systems issue. --------------------------------------------------------------------------- \18\ 15 U.S.C. 78o-3(b)(6). --------------------------------------------------------------------------- In addition, FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(5) of the Act,\19\ which requires, among other things, that FINRA rules provide for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system that FINRA operates or controls. FINRA believes that the proposed rule change to apply the web browser fee under Rule 7510(c)(1) and the proposed FIX connectivity fee under Rule 7520 for members that use the ADF for trade reporting purposes only are reasonable in light of FINRA's regulatory and operational costs, including personnel, infrastructure and technology costs. FINRA further believes that the proposed fees are equitably allocated and not unfairly discriminatory because they will apply uniformly to all similarly situated members (i.e., the web browser fee will apply uniformly to all members that elect to use the web browser and the FIX connectivity fee will apply uniformly to all members that elect to connect to the ADF via FIX for trade reporting purposes only). --------------------------------------------------------------------------- \19\ 15 U.S.C. 78o-3(b)(5). --------------------------------------------------------------------------- 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 Analysis As an initial matter, the Trade Reporting Notice applies only to members that have the trade reporting obligation under FINRA rules.\20\ Today, on average, several hundred firms execute and report OTC trades in NMS stocks to the TRFs on a regular basis. Many firms, including smaller firms, route their order flow to another firm, e.g., their clearing firm, for execution, and as the routing firm, they do not have the trade reporting obligation. Thus, the proposed rule change will have no impact on many members. --------------------------------------------------------------------------- \20\ FINRA rules for reporting OTC transactions in equity securities require that for transactions between members, the ``executing party'' report the trade to a FINRA facility. For transactions between a member and a non-member or customer, the member must report the trade. ``Executing party'' is defined under FINRA rules as the member that receives an order for handling or execution or is presented an order against its quote, does not subsequently re-route the order, and executes the transaction. See, e.g., Rule 6282(b). --------------------------------------------------------------------------- Moreover, members are not required to use the ADF for purposes of meeting their trade reporting obligations under FINRA rules. As noted above, the ADF would simply be another option available to members for trade reporting, particularly those members that elect to connect to a secondary facility in accordance with the Trade Reporting Notice. Members that determine that the ADF is not a cost-effective option for them (as either a primary or secondary facility for trade reporting) can elect to use one (or both) of the TRFs. FINRA further notes that the proposed rule change does not create any new trade reporting obligations to members; rather it is designed to provide an alternative for members to meet their existing equity trade reporting obligations. Members that choose to rely upon the ADF as their primary or secondary facility for trade reporting will incur some costs. Members connecting to the ADF will incur a cost of $500 per month per FIX connection or $20 per month per user for web browser access. FINRA believes that members that report via FIX will also likely maintain at least one web user ID. Members reporting via FIX will also incur a NASDAQ charge of $575 per port per month. Members that report trades through the ADF will be assessed charges based upon the existing fee schedule, as detailed in Rule 7510(a). In addition, members maintaining FIX connectivity to the ADF for trade reporting purposes only will be required to conduct annual testing. The connectivity testing requirement will be waived for members reporting at least 100 trades per month through the ADF and the capacity/stress testing requirement will be waived for members with reported trading activity that does not increase by more than 20% from the previous year. By providing an alternative for trade reporting, FINRA is increasing the choices available to members. FINRA anticipates that few members will use the ADF for trade reporting purposes, [[Page 57967]] but this may change as the relative costs for trade reporting services shift. If a member chooses to use the ADF as a primary or secondary trade reporting venue, it will be because it is determined to be advantageous to that member. 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 Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act \21\ and Rule 19b- 4(f)(6) thereunder.\22\ FINRA believes that the filing is appropriately designated as ``non-controversial'' because the proposed rule change does not create any new trade reporting obligations to members, but rather provides another alternative for members to meet their existing equity trade reporting obligations. Members that do not wish to be subject to the proposed testing requirements and fees or otherwise determine that the ADF is not a cost-effective option for them--as either a primary or secondary facility for trade reporting--can elect to use one (or both) of the TRFs to fulfill their trade reporting obligations under FINRA rules. --------------------------------------------------------------------------- \21\ 15 U.S.C. 78s(b)(3)(A). \22\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- 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 necessary or appropriate in the public interest, for the protection of investors, or 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 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 CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-FINRA-2016-031 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-FINRA-2016-031. 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 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 Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. 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 Number SR-FINRA-2016-031 and should be submitted on or before September 14, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\23\ --------------------------------------------------------------------------- \23\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-20203 Filed 8-23-16; 8:45 am] BILLING CODE 8011-01-P
![57964 Federal Register / Vol. 81, No. 164 / Wednesday, August 24, 2016 / Notices
writing within 60 days of this The text of the proposed rule change Since publication of the Trade
publication. is available on FINRA’s Web site at Reporting Notice, a number of firms
An agency may not conduct or http://www.finra.org, at the principal have inquired about using the ADF as
sponsor, and a person is not required to office of FINRA and at the their secondary facility for trade
respond to, a collection of information Commission’s Public Reference Room. reporting, and at least one has inquired
under the PRA unless it displays a about using the ADF as its primary
II. Self-Regulatory Organization’s
currently valid OMB control number. facility. While the ADF historically has
Statement of the Purpose of, and
Please direct your written comments not been used by members for trade
Statutory Basis for, the Proposed Rule
to: Pamela Dyson, Director/Chief reporting without quoting activity, there
Change
Information Officer, Securities and is nothing in the ADF rules 6 to prohibit
Exchange Commission, c/o Remi Pavlik- In its filing with the Commission, it. Thus, to better accommodate firms in
Simon, 100 F Street NE., Washington, FINRA included statements concerning their efforts to comply with the
DC 20549, or send an email to: the purpose of and basis for the guidance in the Trade Reporting Notice,
PRA_Mailbox@sec.gov. proposed rule change and discussed any and to provide an alternative to
Dated: August 19, 2016. comments it received on the proposed connecting to both TRFs, FINRA will
Brent J. Fields, rule change. The text of these statements make the ADF available to members for
Secretary. may be examined at the places specified trade reporting purposes only.7 FINRA
in Item IV below. The Exchange has currently is making systems updates to
[FR Doc. 2016–20256 Filed 8–23–16; 8:45 am]
prepared summaries, set forth in the ADF and anticipates that the ADF
BILLING CODE 8011–01–P
sections A, B, and C below, of the most will be available to members before the
significant aspects of such statements. end of this year.8 Members that use the
SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s ADF for trade reporting purposes only
COMMISSION Statement of the Purpose of, and would not be able to quote on the ADF
Statutory Basis for, the Proposed Rule without registering under one of the two
[Release No. 34–78609; File No. SR–FINRA– categories of ‘‘ADF Market Participant’’
2016–031] Change
under current ADF rules (i.e., Registered
1. Purpose Reporting ADF ECN and Registered
Self-Regulatory Organizations;
Financial Industry Regulatory Background Reporting ADF Market Maker) and
Authority, Inc.; Notice of Filing and satisfying all applicable requirements
On January 20, 2016, FINRA for quoting.9
Immediate Effectiveness of a Proposed published a Trade Reporting Notice
Rule Change Relating to Use of the with guidance on firms’ over-the- Because the substantive trade
Alternative Display Facility for Trade counter (‘‘OTC’’) equity trade reporting reporting and trade reporting
Reporting Purpose Only obligations in the event of a systems participation requirements under
issue during the trading day that current ADF rules are consistent with
August 18, 2016. the trade reporting and participation
Pursuant to Section 19(b)(1) of the prevents them from reporting OTC
trades in NMS stocks in accordance requirements applicable to the TRFs,10
Securities Exchange Act of 1934 significant rulemaking is not needed to
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 with FINRA rules.4 As set forth in the
Notice, a firm that routinely reports its enable firms to use the ADF for trade
notice is hereby given that on August reporting purposes only. However,
11, 2016, Financial Industry Regulatory OTC trades in NMS stocks to only one
FINRA trade reporting facility (a firm’s FINRA is proposing the following
Authority, Inc. (‘‘FINRA’’) filed with the additional requirements that would
Securities and Exchange Commission ‘‘primary facility’’) must establish and
maintain connectivity and report to a apply specifically to members that use
(‘‘SEC’’ or ‘‘Commission’’) the proposed the ADF for trade reporting purposes
rule change as described in Items I, II, second FINRA trade reporting facility (a
firm’s ‘‘secondary facility’’), if the firm only.
and III below, which Items have been
prepared by FINRA. FINRA has intends to continue to support OTC
6 See Rule 6200 and 7100 Series.
designated the proposed rule change as trading as an executing broker while its
7 While members will have the option of using
constituting a ‘‘non-controversial’’ rule primary facility is experiencing a
the ADF as their primary facility for trade reporting,
change under paragraph (f)(6) of Rule widespread systems issue.5 FINRA FINRA anticipates that members would be more
19b–4 under the Act,3 which renders currently has three facilities that likely to use the ADF as their secondary facility.
the proposal effective upon receipt of support member reporting of OTC trades FINRA has historically operated the ADF as a utility
in NMS stocks, as defined in SEC Rule and has not attempted to actively attract
this filing by the Commission. The participants in the OTC trade reporting space. For
Commission is publishing this notice to 600(b) of Regulation NMS: the ADF and example, FINRA does not offer a market data
solicit comments on the proposed rule two Trade Reporting Facilities (‘‘TRFs’’). revenue share program for the ADF comparable to
change from interested persons. The TRFs are facilities that are operated the TRFs. See Rules 7610A and 7610B.
8 FINRA notes that in addition to the systems
by both FINRA and its exchange
I. Self-Regulatory Organization’s updates that will be completed this year, the ADF
partners (NASDAQ and NYSE). may need additional infrastructure enhancements
Statement of the Terms of Substance of to support significant trade reporting volume.
the Proposed Rule Change 4 See Trade Reporting Notice, January 20, 2016 However, the necessary enhancements, and the
(OTC Equity Trading and Reporting in the Event of time it may take to make those enhancements, will
FINRA is proposing a proposed rule not be known until FINRA has a more concrete
Systems Issues).
mstockstill on DSK3G9T082PROD with NOTICES
change relating to use of the Alternative 5 As discussed in the Notice, if a firm chooses not understanding of the level of firms’ interest in using
Display Facility (‘‘ADF’’) by FINRA to have connectivity to a secondary facility, it the ADF for trade reporting purposes only and their
members for trade reporting purposes should cease executing OTC trades altogether when potential volume.
9 For example, in addition to registration, FINRA
only. its primary trade reporting facility is experiencing
a widespread systems issue. In that instance, the rules include certification and deposit requirements
firm could route orders for execution to an for ADF quoting participants, as well as capacity
1 15 U.S.C. 78s(b)(1). exchange or another FINRA member (i.e., a member fees and penalties. See, e.g., Rules 6271 and 7580.
2 17 CFR 240.19b–4. with connectivity and the ability to report to a 10 See, e.g., Rules 6282 and 7120; 6380A and
3 17 CFR 240.19b–4(f)(6). FINRA trade reporting facility that is operational). 7220A; and 6380B and 7220B.
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![Federal Register / Vol. 81, No. 164 / Wednesday, August 24, 2016 / Notices 57967
but this may change as the relative costs Comments may be submitted by any of SECURITIES AND EXCHANGE
for trade reporting services shift. If a the following methods: COMMISSION
member chooses to use the ADF as a
primary or secondary trade reporting Electronic Comments
[Release No. 34–78613; File No. SR–
venue, it will be because it is • Use the Commission’s Internet BatsBZX–2016–35]
determined to be advantageous to that comment form (http://www.sec.gov/
member. rules/sro.shtml); or Self-Regulatory Organizations; Bats
C. Self-Regulatory Organization’s BZX Exchange, Inc.; Notice of
• Send an email to rule-comments@
Statement on Comments on the Designation of a Longer Period for
sec.gov. Please include File Number SR–
Proposed Rule Change Received From Commission Action on a Proposed
FINRA–2016–031 on the subject line.
Members, Participants, or Others Rule Change To List and Trade Shares
Paper Comments of the JPMorgan Global Bond
Written comments were neither
Opportunities ETF
solicited nor received. • Send paper comments in triplicate
III. Date of Effectiveness of the to Brent J. Fields, Secretary, Securities August 18, 2016.
Proposed Rule Change and Timing for and Exchange Commission, 100 F Street On July 1, 2016, Bats BZX Exchange,
Commission Action NE., Washington, DC 20549–1090. Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed
Because the foregoing proposed rule All submissions should refer to File with the Securities and Exchange
change does not: (i) Significantly affect Number SR–FINRA–2016–031. This file Commission (‘‘Commission’’), pursuant
the protection of investors or the public number should be included on the to Section 19(b)(1) of the Securities
interest; (ii) impose any significant subject line if email is used. To help the Exchange Act of 1934 (‘‘Act’’) 1 and Rule
burden on competition; and (iii) become Commission process and review your 19b–4 thereunder,2 a proposed rule
operative for 30 days from the date on comments more efficiently, please use change to list and trade shares of the
which it was filed, or such shorter time only one method. The Commission will JPMorgan Global Bond Opportunities
as the Commission may designate, it has post all comments on the Commission’s ETF of the J.P. Morgan Exchange-Traded
become effective pursuant to Section Internet Web site (http://www.sec.gov/ Fund Trust under BZX Rule 14.11(i).
19(b)(3)(A) of the Act 21 and Rule 19b– rules/sro.shtml). Copies of the The proposed rule change was
4(f)(6) thereunder.22 FINRA believes submission, all subsequent published for comment in the Federal
that the filing is appropriately amendments, all written statements Register on July 14, 2016.3 The
designated as ‘‘non-controversial’’ with respect to the proposed rule Commission received no comments on
because the proposed rule change does the proposed rule change.
change that are filed with the
not create any new trade reporting Section 19(b)(2) of the Act 4 provides
Commission, and all written
obligations to members, but rather
communications relating to the that, within 45 days of the publication
provides another alternative for
proposed rule change between the of notice of the filing of a proposed rule
members to meet their existing equity
Commission and any person, other than change, or within such longer period up
trade reporting obligations. Members
those that may be withheld from the to 90 days as the Commission may
that do not wish to be subject to the
public in accordance with the designate if it finds such longer period
proposed testing requirements and fees
provisions of 5 U.S.C. 552, will be to be appropriate and publishes its
or otherwise determine that the ADF is
not a cost-effective option for them—as available for Web site viewing and reasons for so finding or as to which the
either a primary or secondary facility for printing in the Commission’s Public self-regulatory organization consents,
trade reporting—can elect to use one (or Reference Room, 100 F Street NE., the Commission shall either approve the
both) of the TRFs to fulfill their trade Washington, DC 20549 on official proposed rule change, disapprove the
reporting obligations under FINRA business days between the hours of proposed rule change, or institute
rules. 10:00 a.m. and 3:00 p.m. Copies of the proceedings to determine whether the
At any time within 60 days of the filing also will be available for proposed rule change should be
filing of the proposed rule change, the inspection and copying at the principal disapproved. The Commission is
Commission summarily may extending this 45-day time period.
office of the Exchange. All comments
temporarily suspend such rule change if received will be posted without change; The Commission finds it appropriate
it appears to the Commission that such the Commission does not edit personal to designate a longer period within
action is necessary or appropriate in the identifying information from which to take action on the proposed
public interest, for the protection of submissions. You should submit only rule change so that it has sufficient time
investors, or otherwise in furtherance of information that you wish to make to consider the proposed rule change.
the purposes of the Act. If the available publicly. All submissions Accordingly, the Commission, pursuant
Commission takes such action, the to Section 19(b)(2) of the Act,5
should refer to File Number SR–FINRA–
Commission shall institute proceedings designates October 12, 2016 as the date
2016–031 and should be submitted on
to determine whether the proposed rule by which the Commission should either
should be approved or disapproved. or before September 14, 2016.
approve or disapprove, or institute
For the Commission, by the Division of proceedings to determine whether to
IV. Solicitation of Comments Trading and Markets, pursuant to delegated disapprove, the proposed rule change
mstockstill on DSK3G9T082PROD with NOTICES
Interested persons are invited to authority.23 (File No. SR–BatsBZX–2016–35).
submit written data, views, and Robert W. Errett,
arguments concerning the foregoing, Deputy Secretary. 1 15 U.S.C. 78s(b)(1).
including whether the proposed rule 2 17 CFR 240.19b–4.
[FR Doc. 2016–20203 Filed 8–23–16; 8:45 am]
change is consistent with the Act. 3 See Securities Exchange Act Release No. 78264
BILLING CODE 8011–01–P
(July 8, 2016), 81 FR 45546.
21 15 U.S.C. 78s(b)(3)(A). 4 15 U.S.C. 78s(b)(2).
22 17 CFR 240.19b–4(f)(6). 23 17 CFR 200.30–3(a)(12). 5 Id.
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Document Created: 2016-08-24 03:02:44
Document Modified: 2016-08-24 03:02:44
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 57964 |
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