81 FR 64215 - Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Establish the MSRB Academic Historical Transaction Data Product
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 181 (September 19, 2016)
Federal Register Volume 81, Issue 181 (September 19, 2016)
| Page Range | 64215-64218 | |
| FR Document | 2016-22419 |
[Federal Register Volume 81, Number 181 (Monday, September 19, 2016)] [Notices] [Pages 64215-64218] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-22419] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78826; File No. SR-MSRB-2016-09] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Establish the MSRB Academic Historical Transaction Data Product September 13, 2016. I. Introduction On June 30, 2016, the Municipal Securities Rulemaking Board (the ``MSRB'' or ``Board'') filed with the Securities and Exchange Commission (the ``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change consisting of proposed amendments to establish an academic historical transaction data product (the ``proposed rule change''). The proposed rule change was published for comment in the Federal Register on July 20, 2016.\3\ --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ Securities Exchange Act Release No. 78323 (July 14, 2016) (the ``Notice of Filing''), 81 FR 47211 (July 20, 2016). --------------------------------------------------------------------------- The Commission received two comment letters on the proposed rule change.\4\ On August 29, 2016, the MSRB responded to the comments received by the Commission \5\ and on August 31, 2016, the MSRB filed Amendment No. 1 to the proposed rule change (``Amendment No. 1'').\6\ The Commission is publishing this notice to solicit comments on Amendment No. 1 to the proposed rule change from interested persons and is approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. --------------------------------------------------------------------------- \4\ See Letters to Secretary, Commission, from Sean Davy, Managing Director, Capital Markets Division, and Leslie M. Norwood, Managing Director & Associate General Counsel, Municipal Securities Division, Securities Industry and Financial Markets Association (``SIFMA''), dated July 27, 2016 (the ``SIFMA Letter''); and Mike Nicholas, Chief Executive Officer, Bond Dealers of America (``BDA''), dated August 9, 2016 (the ``BDA Letter''). \5\ See Letter to Secretary, Commission, from Carl E. Tugberk, Assistant General Counsel, MSRB, dated August 29, 2016 (the ``MSRB Response Letter''). \6\ See Letter to Secretary, Commission, from Carl E. Tugberk, Assistant General Counsel, MSRB, dated August 31, 2016 (the ``MSRB Amendment Letter''), available at https://www.sec.gov/comments/sr-msrb-2016-09/msrb201609-4.pdf. In Amendment No. 1, the MSRB partially amended the text of the proposed rule change to conform the description of the RTRS Academic Data Product in the RTRS facility to the description intended by the MSRB and fully described in the Notice of Filing. --------------------------------------------------------------------------- II. Description of Proposed Rule Change The proposed rule change consists of proposed amendments to the MSRB's facility for the Real-Time Transaction Reporting System (``RTRS'') to establish an historical data product to provide institutions of higher education (``academic institutions'') with post- trade municipal securities transaction data collected through RTRS (``MSRB Academic Historical Transaction Data Product,'' hereafter referred to as ``RTRS Academic Data Product'') for purchase.\7\ --------------------------------------------------------------------------- \7\ See Notice of Filing. --------------------------------------------------------------------------- MSRB Rule G-14 requires dealers to report trade information to the RTRS on all executed transactions in municipal securities within 15 minutes of the time of trade, with limited exceptions.\8\ The MSRB then makes much, but not all, of the reported data publicly available on the Electronic Municipal Market Access (``EMMA'') Web site, through subscription services or historical data sets.\9\ The data that are made available through the EMMA Web site do not include any information regarding the identity of the dealers that reported the transactions, and thus, according to the MSRB, limit a researcher's ability to fully understand secondary market trading practices.\10\ According to the MSRB, the absence of any dealer identifiers in the EMMA data caused certain academics to request that the MSRB develop an enhanced version of RTRS trade data that includes dealer [[Page 64216]] identifiers.\11\ As noted in the Notice of Filing, following the requests from members of the academic community, the MSRB published the Request for Comment on Establishment of an Academic Historical Trade Data Product on July 16, 2015 (the ``Request for Comment'') to solicit comments from market participants on a proposed academic historical trade data product.\12\ --------------------------------------------------------------------------- \8\ Id. \9\ Id. \10\ Id. \11\ Id. \12\ Id. --------------------------------------------------------------------------- As stated in the Notice of Filing, after careful consideration of the comments received in response to the Request for Comment, the MSRB decided to make the RTRS Academic Data Product available only to academic institutions, to include anonymous dealer identifiers therein, and to populate the new data product with the same transactions included in the RTRS historical data sets currently available with the exclusion of list offering price and takedown transactions.\13\ According to the MSRB, the proposed rule change will allow the MSRB to provide academics with trade data that include anonymous dealer identifiers while providing protections against the potential for reverse engineering of trade data.\14\ With respect to protecting against reverse engineering, the MSRB stated in the Notice of Filing that any academic institution that wishes to obtain the RTRS Academic Data Product will have to agree: (1) Not to attempt to attempt to reverse engineer the identity of any dealer; (2) not to redistribute the data in the RTRS Academic Data Product; (3) to disclose each intended use of the data; (4) to ensure that any data presented in work product be sufficiently aggregated so as to prevent reverse engineering of any dealer or transaction; and (5) to return or destroy the data if the agreement is terminated.\15\ --------------------------------------------------------------------------- \13\ Id. \14\ Id. \15\ Id. --------------------------------------------------------------------------- The MSRB stated in the Notice of Filing that the effective date of the proposed rule change will be announced in a regulatory notice to be published no later than 90 days from the date of this Order, and such effective date will be no later than 270 days following publication of the regulatory notice announcing Commission approval of the proposed rule change.\16\ --------------------------------------------------------------------------- \16\ Id. --------------------------------------------------------------------------- III. Summary of Comments Received and MSRB's Responses to Comments As noted previously, the Commission received two comment letters on the proposed rule change, and the MSRB Response Letter. One commenter-- SIFMA--generally supported the proposed rule change, while the other commenter--BDA--generally opposed the proposed rule change. While generally supportive of the proposed rule change, SIFMA expressed the view that the MSRB could make modifications to provide additional protections against the potential for reverse engineering the data without impeding its goals of promoting academic access and research.\17\ SIFMA stated that the potential impact of reverse engineering could include deciphering a dealer's trading strategies and revealing confidential business information relating to specific client transactions.\18\ --------------------------------------------------------------------------- \17\ See SIFMA Letter. \18\ Id. --------------------------------------------------------------------------- BDA, however, argued that the proposed rule change would expose dealers and their customers to unnecessary risks.\19\ For example, BDA stated that ``[i]t is very likely that, as a consequence of this proposal, private and non-educational entities will end up possessing full trade history including dealer names for every trade released.'' \20\ --------------------------------------------------------------------------- \19\ See BDA Letter. \20\ Id. --------------------------------------------------------------------------- SIFMA and BDA offered differing views on the MSRB's efforts to mitigate the risk of reverse engineering of the historical trade data provided to academics. SIFMA approved of the MSRB's decision to exclude list offering price and takedown transactions from the data product and noted that such exclusion would mitigate the risk of reverse engineering.\21\ SIFMA also acknowledged that the proposed aging period of 36 months (expanded from 24 months in the Request for Comment) would help reduce the risk of reverse engineering, but thought that an aging period of no less than 48 months would be more appropriate.\22\ BDA also acknowledged that excluding list offering price and takedown transactions from the data product, expanding the aging period, and masking dealer identifiers would make reverse engineering more difficult, but ultimately concluded that these measures were not sufficient to reduce the risk of reverse engineering to an acceptable level.\23\ --------------------------------------------------------------------------- \21\ See SIFMA Letter; see also MSRB Amendment Letter. \22\ See SIFMA Letter. \23\ See BDA Letter; see also MSRB Amendment Letter. --------------------------------------------------------------------------- With respect to protecting dealer identities, both SIFMA and BDA reiterated their respective suggestions that the MSRB make the transaction data available according to groupings of comparable dealers instead of on an individual level, arguing that masked dealer identifiers might not effectively protect dealer identities.\24\ --------------------------------------------------------------------------- \24\ Id.; see also SIFMA Letter. The MSRB addressed these comments in the Notice of Filing. --------------------------------------------------------------------------- SIFMA and BDA also offered suggestions regarding strengthening and enforcing the proposed user agreements. SIFMA urged the MSRB to develop ``robust operational frameworks around the execution and ongoing oversight of user agreements . . . [in order to] further mitigate concerns of reverse engineering and information leakage.'' \25\ BDA stated that although the proposed user agreements are designed to prevent the redistribution of data, federal and state freedom of information (``FOIA'') laws could defeat such intention if the transaction data is held by a public university and classified as a public record.\26\ In addition, BDA raised concerns about data security, suggesting that the data could be subject to hacking or data theft during transmission or when held by an institution of higher education.\27\ --------------------------------------------------------------------------- \25\ See SIFMA Letter. \26\ See BDA Letter. \27\ Id. --------------------------------------------------------------------------- In response to these comments, the MSRB stated that it ``continues to believe that the proposed rule change strikes the appropriate balance between addressing risks regarding potential reverse engineering with facilitating the ability of academic researchers to study the market for municipal securities.'' \28\ With respect to SIFMA's comments, the MSRB noted in its response that ``SIFMA's comments are substantially similar to previous comments submitted in response to the Request for Comment'' and that the MSRB addressed those comments in the Notice of Filing.\29\ --------------------------------------------------------------------------- \28\ See MSRB Response Letter. \29\ Id. --------------------------------------------------------------------------- In response to BDA's data security-related comments, the MSRB stated that it ``understands and appreciates'' BDA's data security concerns and agrees that it cannot guarantee the security of data provided to academics through the proposed RTRS Academic Data Product.\30\ Nonetheless, the MSRB then noted its belief that the terms of the user agreements relating to the RTRS Academic Data Product will ``mitigate those risks.'' \31\ To that end, the MSRB stated that it expects each user agreement to include the following: --------------------------------------------------------------------------- \30\ Id. \31\ Id. (1) a prohibition on reverse engineering; (2) a provision requiring the use of commercially [[Page 64217]] reasonable measures to protect data, including, for example, the use of user IDs and passwords, and other forms of entitlements to gain access to the data; (3) a definition of the term `Internal User' to clarify to whom access to the data may be provided; and (4) a requirement that users have reasonable security procedures in the place(s) where the data are used, accessed, processed, stored, and/ or transmitted to ensure the data remain secure from unauthorized access, including specific requirements regarding physical and logical access, encryption, and network and system security.\32\ --------------------------------------------------------------------------- \32\ Id. In addition to contractual data security measures like those listed above, the MSRB also stated its intention to encrypt data delivered to users.\33\ --------------------------------------------------------------------------- \33\ Id. --------------------------------------------------------------------------- In response to BDA's FOIA law-related comments, the MSRB recognized the possibility that certain recipients of RTRS Academic Data Product data might be subject to FOIA laws that could require the disclosure of certain trade data but, notwithstanding such risk, noted that federal and state FOIA laws include a variety of exemptions that would likely prevent disclosure of data delivered to users of the RTRS Academic Data Product.\34\ The MSRB also stated its expectation that the user agreements ``will require academic institutions to notify the MSRB of any . . . requests under federal or state FOIA [l]aws prior to any disclosure, claim any and all applicable exemptions from such requests and provide the MSRB the opportunity to seek an injunction, protective order, or confidential treatment, and limit any disclosure ultimately required to the minimum legally necessary.'' \35\ --------------------------------------------------------------------------- \34\ Id. \35\ Id. --------------------------------------------------------------------------- IV. Discussion and Commission Findings The Commission has carefully considered the proposed rule change, as modified by Amendment No. 1, the comments letters received, and the MSRB Response Letter. The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to the MSRB. In particular, the Commission finds that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act,\36\ which requires, among other things that the rules of the MSRB be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market in municipal securities and municipal financial products and, in general, to protect investors, municipal entities, obligated persons, and the public interest. The Commission believes that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act because the proposed rule change is reasonably designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, and remove impediments to and perfect the mechanism of a free and open market in municipal securities by enabling subscribers to the RTRS Academic Data Product to better understand the pricing practices and trading behaviors of participants in the municipal securities market and thereby facilitate higher quality research and analysis of the municipal securities market. Furthermore, the Commission believes that by enhancing transparency in the municipal securities market, the proposed rule change is reasonably designed to protect investors, municipal entities, obligated persons, and the public interest. --------------------------------------------------------------------------- \36\ 15 U.S.C. 78o-4(b)(2)(C). --------------------------------------------------------------------------- In approving the proposed rule change, the Commission has also considered the impact of the proposed rule change on efficiency, competition, and capital formation.\37\ The Commission does not believe that the proposed rule change would impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. --------------------------------------------------------------------------- \37\ 15 U.S.C. 78c(f). --------------------------------------------------------------------------- For the reasons noted above, the Commission believes that the proposed rule change, as modified by Amendment No. 1, is consistent with the Act. V. Solicitation of Comments on Amendment No. 1 Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 1, including whether the proposed rule change, as modified by Amendment No.1, 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-MSRB-2016-09 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR-MSRB-2016-09. 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 MSRB. 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-MSRB-2016-09 and should be submitted on or before October 11, 2016. VI. Accelerated Approval of Proposed Rule Change as Modified by Amendment No. 1 The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, prior to the 30th day after the date of publication of Amendment No. 1 in the Federal Register. As discussed above, Amendment No. 1 partially amends the text of the proposed rule change to conform the description of the RTRS Academic Data Product in the RTRS facility to the description intended by the MSRB.\38\ The proposed rule change, as described in the Notice of Filing, contemplated the exclusion of list offering price and takedown transactions; however, the proposed text of the proposed rule change did not include any reference to such [[Page 64218]] exclusion.\39\ According to the MSRB, it was the MSRB's intent to include the exclusion in the proposed rule change, thus the MSRB submitted Amendment No. 1 in order to conform the proposed description of the RTRS Academic Data Product in the RTRS facility with the description thereof in the Notice of Filing.\40\ --------------------------------------------------------------------------- \38\ Supra note 6. \39\ See Notice of Filing. \40\ See MSRB Amendment Letter. --------------------------------------------------------------------------- As noted by the MSRB, Amendment No. 1 is consistent with the purpose of the proposed rule change and does not raise any significant new issues not already addressed by commenters.\41\ --------------------------------------------------------------------------- \41\ Id. --------------------------------------------------------------------------- For the foregoing reasons, the Commission finds good cause for approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis, pursuant to Section 19(b)(2) of the Act. VII. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\42\ that the proposed rule change, as modified by Amendment No. 1 (SR-MSRB-2016-09) be, and hereby is, approved on an accelerated basis. --------------------------------------------------------------------------- \42\ 15 U.S.C. 78s(b)(2). For the Commission, pursuant to delegated authority.\43\ --------------------------------------------------------------------------- \43\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-22419 Filed 9-16-16; 8:45 am] BILLING CODE 8011-01-P
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there is no significant increase in the the common defense and security. Also, responded to the comments received by
potential for or consequences from special circumstances pursuant to 10 the Commission 5 and on August 31,
radiological accidents; and (vi) the CFR 50.12(a)(2)(ii) are present. 2016, the MSRB filed Amendment No.
requirements from which an exemption Therefore, the NRC hereby grants TVA 1 to the proposed rule change
is sought involve those types of a one-time exemption from the (‘‘Amendment No. 1’’).6 The
requirements identified in 10 CFR requirements of 10 CFR 50.75(h)(2) and Commission is publishing this notice to
51.22(c)(25)(vi). 10 CFR 50.82(a)(8) to allow the solicit comments on Amendment No. 1
The exemption allows the licensee to requested reallocation of surplus funds to the proposed rule change from
reallocate surplus funds from the DTFs from the DTFs for SQN Units 1 and 2 interested persons and is approving the
for SQN Units 1 and 2 to the DTFs for to the DTFs for BFN Units 1, 2, and 3 proposed rule change, as modified by
BFN Units 1, 2, and 3 and WBN Units and WBN Units 1 and 2. Amendment No. 1, on an accelerated
1 and 2. Neither the regulation nor the basis.
Dated at Rockville, Maryland, this 9th day
exemption has any relation to the of September 2016.
operation of the facilities. Therefore, the II. Description of Proposed Rule Change
For the Nuclear Regulatory Commission.
Director, Division of Operating Reactor
Licensing, Office of Nuclear Reactor Anne T. Boland, The proposed rule change consists of
Regulation, has determined that Director, Division of Operating Reactor proposed amendments to the MSRB’s
approval of the exemption request Licensing, Office of Nuclear Reactor facility for the Real-Time Transaction
Regulation. Reporting System (‘‘RTRS’’) to establish
involves no significant hazards
consideration because it does not (1) [FR Doc. 2016–22486 Filed 9–16–16; 8:45 am] an historical data product to provide
involve a significant increase in the BILLING CODE 7590–01–P institutions of higher education
probability or consequences of an (‘‘academic institutions’’) with post-
accident previously evaluated; or (2) trade municipal securities transaction
create the possibility of a new or SECURITIES AND EXCHANGE data collected through RTRS (‘‘MSRB
different kind of accident from any COMMISSION Academic Historical Transaction Data
accident previously evaluated; or (3) [Release No. 34–78826; File No. SR–MSRB– Product,’’ hereafter referred to as ‘‘RTRS
involve a significant reduction in a 2016–09] Academic Data Product’’) for purchase.7
margin of safety. Similarly, as a result of MSRB Rule G–14 requires dealers to
the exemption, which is not related to Self-Regulatory Organizations; report trade information to the RTRS on
facility operation, there is no significant Municipal Securities Rulemaking all executed transactions in municipal
change in the types or significant Board; Notice of Filing of Amendment securities within 15 minutes of the time
increase in the amounts of any effluents No. 1 and Order Granting Accelerated of trade, with limited exceptions.8 The
that may be released offsite and there is Approval of a Proposed Rule Change, MSRB then makes much, but not all, of
no significant increase in individual or as Modified by Amendment No. 1, To the reported data publicly available on
cumulative public or occupational Establish the MSRB Academic
radiation exposure. The exempted the Electronic Municipal Market Access
Historical Transaction Data Product (‘‘EMMA’’) Web site, through
regulation is not associated with
construction, so there is no significant September 13, 2016. subscription services or historical data
construction impact. The exempted sets.9 The data that are made available
I. Introduction through the EMMA Web site do not
regulation does not concern the source
term (i.e., potential amount of radiation On June 30, 2016, the Municipal include any information regarding the
in an accident), nor mitigation. Securities Rulemaking Board (the identity of the dealers that reported the
Therefore, there is no significant ‘‘MSRB’’ or ‘‘Board’’) filed with the transactions, and thus, according to the
increase in the potential for or Securities and Exchange Commission MSRB, limit a researcher’s ability to
consequences from radiological (the ‘‘SEC’’ or ‘‘Commission’’), pursuant fully understand secondary market
accidents. Finally, the requirements for to Section 19(b)(1) of the Securities trading practices.10 According to the
using DTFs for decommissioning Exchange Act of 1934 (‘‘Act’’) 1 and Rule MSRB, the absence of any dealer
activities from which the exemption is 19b–4 thereunder,2 a proposed rule identifiers in the EMMA data caused
sought involve recordkeeping change consisting of proposed certain academics to request that the
requirements, reporting requirements, or amendments to establish an academic MSRB develop an enhanced version of
other requirements of an administrative, historical transaction data product (the RTRS trade data that includes dealer
managerial, or organizational nature. ‘‘proposed rule change’’). The proposed
Based on the above, the NRC staff rule change was published for comment Executive Officer, Bond Dealers of America
concludes that the exemption meets the in the Federal Register on July 20, (‘‘BDA’’), dated August 9, 2016 (the ‘‘BDA Letter’’).
eligibility criteria for the categorical 2016.3 5 See Letter to Secretary, Commission, from Carl
The Commission received two E. Tugberk, Assistant General Counsel, MSRB,
exclusion set forth in 10 CFR dated August 29, 2016 (the ‘‘MSRB Response
51.22(c)(25). Therefore, in accordance comment letters on the proposed rule Letter’’).
with 10 CFR 51.22(b), no environmental change.4 On August 29, 2016, the MSRB 6 See Letter to Secretary, Commission, from Carl
impact statement or environmental E. Tugberk, Assistant General Counsel, MSRB,
1 15 U.S.C. 78s(b)(1). dated August 31, 2016 (the ‘‘MSRB Amendment
assessment need be prepared in 2 17 Letter’’), available at https://www.sec.gov/
CFR 240.19b–4.
connection with the approval of this 3 Securities Exchange Act Release No. 78323 (July comments/sr-msrb-2016-09/msrb201609-4.pdf. In
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exemption request. 14, 2016) (the ‘‘Notice of Filing’’), 81 FR 47211 (July Amendment No. 1, the MSRB partially amended the
20, 2016). text of the proposed rule change to conform the
IV. Conclusions 4 See Letters to Secretary, Commission, from Sean description of the RTRS Academic Data Product in
the RTRS facility to the description intended by the
The NRC has determined that, Davy, Managing Director, Capital Markets Division,
MSRB and fully described in the Notice of Filing.
pursuant to 10 CFR 50.12(a), the and Leslie M. Norwood, Managing Director & 7 See Notice of Filing.
Associate General Counsel, Municipal Securities
exemption is authorized by law, will not Division, Securities Industry and Financial Markets
8 Id.
present an undue risk to the public Association (‘‘SIFMA’’), dated July 27, 2016 (the 9 Id.
health and safety, and is consistent with ‘‘SIFMA Letter’’); and Mike Nicholas, Chief 10 Id.
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identifiers.11 As noted in the Notice of proposed rule change, and the MSRB that the MSRB make the transaction
Filing, following the requests from Response Letter. One commenter— data available according to groupings of
members of the academic community, SIFMA—generally supported the comparable dealers instead of on an
the MSRB published the Request for proposed rule change, while the other individual level, arguing that masked
Comment on Establishment of an commenter—BDA—generally opposed dealer identifiers might not effectively
Academic Historical Trade Data Product the proposed rule change. protect dealer identities.24
on July 16, 2015 (the ‘‘Request for While generally supportive of the SIFMA and BDA also offered
Comment’’) to solicit comments from proposed rule change, SIFMA expressed suggestions regarding strengthening and
market participants on a proposed the view that the MSRB could make enforcing the proposed user agreements.
academic historical trade data modifications to provide additional SIFMA urged the MSRB to develop
product.12 protections against the potential for ‘‘robust operational frameworks around
As stated in the Notice of Filing, after reverse engineering the data without the execution and ongoing oversight of
careful consideration of the comments impeding its goals of promoting user agreements . . . [in order to]
received in response to the Request for academic access and research.17 SIFMA further mitigate concerns of reverse
Comment, the MSRB decided to make stated that the potential impact of engineering and information leakage.’’ 25
the RTRS Academic Data Product reverse engineering could include BDA stated that although the proposed
available only to academic institutions, deciphering a dealer’s trading strategies user agreements are designed to prevent
to include anonymous dealer identifiers and revealing confidential business the redistribution of data, federal and
therein, and to populate the new data information relating to specific client state freedom of information (‘‘FOIA’’)
product with the same transactions transactions.18 laws could defeat such intention if the
included in the RTRS historical data BDA, however, argued that the transaction data is held by a public
sets currently available with the proposed rule change would expose university and classified as a public
exclusion of list offering price and dealers and their customers to record.26 In addition, BDA raised
takedown transactions.13 According to unnecessary risks.19 For example, BDA concerns about data security, suggesting
the MSRB, the proposed rule change stated that ‘‘[i]t is very likely that, as a that the data could be subject to hacking
will allow the MSRB to provide consequence of this proposal, private or data theft during transmission or
academics with trade data that include and non-educational entities will end when held by an institution of higher
anonymous dealer identifiers while up possessing full trade history education.27
providing protections against the including dealer names for every trade In response to these comments, the
potential for reverse engineering of trade released.’’ 20 MSRB stated that it ‘‘continues to
SIFMA and BDA offered differing believe that the proposed rule change
data.14 With respect to protecting
views on the MSRB’s efforts to mitigate strikes the appropriate balance between
against reverse engineering, the MSRB
the risk of reverse engineering of the addressing risks regarding potential
stated in the Notice of Filing that any
historical trade data provided to reverse engineering with facilitating the
academic institution that wishes to
academics. SIFMA approved of the ability of academic researchers to study
obtain the RTRS Academic Data Product
MSRB’s decision to exclude list offering the market for municipal securities.’’ 28
will have to agree: (1) Not to attempt to
price and takedown transactions from With respect to SIFMA’s comments, the
attempt to reverse engineer the identity
the data product and noted that such MSRB noted in its response that
of any dealer; (2) not to redistribute the
exclusion would mitigate the risk of ‘‘SIFMA’s comments are substantially
data in the RTRS Academic Data
reverse engineering.21 SIFMA also similar to previous comments submitted
Product; (3) to disclose each intended acknowledged that the proposed aging in response to the Request for
use of the data; (4) to ensure that any period of 36 months (expanded from 24 Comment’’ and that the MSRB
data presented in work product be months in the Request for Comment) addressed those comments in the Notice
sufficiently aggregated so as to prevent would help reduce the risk of reverse of Filing.29
reverse engineering of any dealer or engineering, but thought that an aging In response to BDA’s data security-
transaction; and (5) to return or destroy period of no less than 48 months would related comments, the MSRB stated that
the data if the agreement is be more appropriate.22 BDA also it ‘‘understands and appreciates’’ BDA’s
terminated.15 acknowledged that excluding list data security concerns and agrees that it
The MSRB stated in the Notice of offering price and takedown cannot guarantee the security of data
Filing that the effective date of the transactions from the data product, provided to academics through the
proposed rule change will be expanding the aging period, and proposed RTRS Academic Data
announced in a regulatory notice to be masking dealer identifiers would make Product.30 Nonetheless, the MSRB then
published no later than 90 days from the reverse engineering more difficult, but noted its belief that the terms of the user
date of this Order, and such effective ultimately concluded that these agreements relating to the RTRS
date will be no later than 270 days measures were not sufficient to reduce Academic Data Product will ‘‘mitigate
following publication of the regulatory the risk of reverse engineering to an those risks.’’ 31 To that end, the MSRB
notice announcing Commission acceptable level.23 stated that it expects each user
approval of the proposed rule change.16 With respect to protecting dealer agreement to include the following:
III. Summary of Comments Received identities, both SIFMA and BDA (1) a prohibition on reverse engineering; (2)
and MSRB’s Responses to Comments reiterated their respective suggestions a provision requiring the use of commercially
As noted previously, the Commission
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17 See SIFMA Letter. 24 Id.; see also SIFMA Letter. The MSRB
received two comment letters on the 18 Id. addressed these comments in the Notice of Filing.
19 See 25 See SIFMA Letter.
BDA Letter.
11 Id. 20 Id. 26 See BDA Letter.
12 Id. 21 See SIFMA Letter; see also MSRB Amendment 27 Id.
13 Id. 28 See MSRB Response Letter.
Letter.
14 Id. 22 See SIFMA Letter. 29 Id.
15 Id. 23 See BDA Letter; see also MSRB Amendment 30 Id.
16 Id. Letter. 31 Id.
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reasonable measures to protect data, trade, to remove impediments to and Paper Comments
including, for example, the use of user IDs perfect the mechanism of a free and
and passwords, and other forms of • Send paper comments in triplicate
open market in municipal securities and to Secretary, Securities and Exchange
entitlements to gain access to the data; (3) a
municipal financial products and, in Commission, 100 F Street NE.,
definition of the term ‘Internal User’ to
clarify to whom access to the data may be general, to protect investors, municipal Washington, DC 20549.
provided; and (4) a requirement that users entities, obligated persons, and the All submissions should refer to File
have reasonable security procedures in the public interest. The Commission Number SR–MSRB–2016–09. This file
place(s) where the data are used, accessed, believes that the proposed rule change number should be included on the
processed, stored, and/or transmitted to is consistent with Section 15B(b)(2)(C) subject line if email is used. To help the
ensure the data remain secure from of the Act because the proposed rule
unauthorized access, including specific Commission process and review your
change is reasonably designed to comments more efficiently, please use
requirements regarding physical and logical
prevent fraudulent and manipulative only one method. The Commission will
access, encryption, and network and system
security.32 acts and practices, promote just and post all comments on the Commission’s
equitable principles of trade, and Internet Web site (http://www.sec.gov/
In addition to contractual data security remove impediments to and perfect the
measures like those listed above, the rules/sro.shtml). Copies of the
mechanism of a free and open market in submission, all subsequent
MSRB also stated its intention to municipal securities by enabling
encrypt data delivered to users.33 amendments, all written statements
subscribers to the RTRS Academic Data with respect to the proposed rule
In response to BDA’s FOIA law- Product to better understand the pricing
related comments, the MSRB recognized change that are filed with the
practices and trading behaviors of Commission, and all written
the possibility that certain recipients of participants in the municipal securities
RTRS Academic Data Product data communications relating to the
market and thereby facilitate higher proposed rule change between the
might be subject to FOIA laws that quality research and analysis of the
could require the disclosure of certain Commission and any person, other than
municipal securities market. those that may be withheld from the
trade data but, notwithstanding such Furthermore, the Commission believes
risk, noted that federal and state FOIA public in accordance with the
that by enhancing transparency in the provisions of 5 U.S.C. 552, will be
laws include a variety of exemptions municipal securities market, the
that would likely prevent disclosure of available for Web site viewing and
proposed rule change is reasonably printing in the Commission’s Public
data delivered to users of the RTRS
designed to protect investors, municipal Reference Room, 100 F Street NE.,
Academic Data Product.34 The MSRB
entities, obligated persons, and the Washington, DC 20549 on official
also stated its expectation that the user
public interest. business days between the hours of
agreements ‘‘will require academic
institutions to notify the MSRB of any In approving the proposed rule 10:00 a.m. and 3:00 p.m. Copies of the
. . . requests under federal or state change, the Commission has also filing also will be available for
FOIA [l]aws prior to any disclosure, considered the impact of the proposed inspection and copying at the principal
claim any and all applicable exemptions rule change on efficiency, competition, office of the MSRB. All comments
from such requests and provide the and capital formation.37 The received will be posted without change;
MSRB the opportunity to seek an Commission does not believe that the the Commission does not edit personal
injunction, protective order, or proposed rule change would impose any identifying information from
confidential treatment, and limit any burden on competition not necessary or submissions. You should submit only
disclosure ultimately required to the appropriate in furtherance of the information that you wish to make
minimum legally necessary.’’ 35 purposes of the Act. available publicly. All submissions
should refer to File Number SR–MSRB–
IV. Discussion and Commission For the reasons noted above, the 2016–09 and should be submitted on or
Findings Commission believes that the proposed before October 11, 2016.
rule change, as modified by Amendment
The Commission has carefully No. 1, is consistent with the Act. VI. Accelerated Approval of Proposed
considered the proposed rule change, as Rule Change as Modified by
modified by Amendment No. 1, the V. Solicitation of Comments on Amendment No. 1
comments letters received, and the Amendment No. 1
MSRB Response Letter. The The Commission finds good cause to
Commission finds that the proposed Interested persons are invited to approve the proposed rule change, as
rule change is consistent with the submit written data, views, and modified by Amendment No. 1, prior to
requirements of the Act and the rules arguments concerning Amendment No. the 30th day after the date of
and regulations thereunder applicable to 1, including whether the proposed rule publication of Amendment No. 1 in the
the MSRB. change, as modified by Amendment Federal Register. As discussed above,
In particular, the Commission finds No.1, is consistent with the Act. Amendment No. 1 partially amends the
that the proposed rule change is Comments may be submitted by any of text of the proposed rule change to
consistent with Section 15B(b)(2)(C) of the following methods: conform the description of the RTRS
the Act,36 which requires, among other Academic Data Product in the RTRS
Electronic Comments facility to the description intended by
things that the rules of the MSRB be
the MSRB.38 The proposed rule change,
designed to prevent fraudulent and • Use the Commission’s Internet
as described in the Notice of Filing,
mstockstill on DSK3G9T082PROD with NOTICES
manipulative acts and practices, to comment form (http://www.sec.gov/
promote just and equitable principles of contemplated the exclusion of list
rules/sro.shtml); or
offering price and takedown
32 Id.
• Send an email to rule-comments@ transactions; however, the proposed text
33 Id. sec.gov. Please include File Number SR– of the proposed rule change did not
34 Id. MSRB–2016–09 on the subject line. include any reference to such
35 Id.
36 15 U.S.C. 78o–4(b)(2)(C). 37 15 U.S.C. 78c(f). 38 Supra note 6.
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![64218 Federal Register / Vol. 81, No. 181 / Monday, September 19, 2016 / Notices
exclusion.39 According to the MSRB, it ‘‘Act’’),1 and Rule 19b–4 thereunder,2 A. Self-Regulatory Organization’s
was the MSRB’s intent to include the notice is hereby given that on August Statement of the Purpose of, and
exclusion in the proposed rule change, 31, 2016, BOX Options Exchange LLC Statutory Basis for, the Proposed Rule
thus the MSRB submitted Amendment (the ‘‘Exchange’’) filed with the Change
No. 1 in order to conform the proposed Securities and Exchange Commission 1. Purpose
description of the RTRS Academic Data (‘‘Commission’’) the proposed rule
Product in the RTRS facility with the The Exchange proposes to amend
change as described in Items I, II, and
description thereof in the Notice of Section III (Complex Order Transaction
III below, which Items have been
Filing.40 Fees) to specify that all Complex Order
prepared by the Exchange. The transactions executed through the
As noted by the MSRB, Amendment Exchange filed the proposed rule change
No. 1 is consistent with the purpose of Exchange’s auction mechanisms will be
pursuant to Section 19(b)(3)(A)(ii) of the subject to Section I (Exchange Fees) and
the proposed rule change and does not Act,3 and Rule 19b–4(f)(2) thereunder,4
raise any significant new issues not II (Liquidity Fees and Credits) of the
which renders the proposal effective BOX Fee Schedule.5 The Exchange
already addressed by commenters.41
upon filing with the Commission. The recently amended its rules to permit
For the foregoing reasons, the
Commission finds good cause for Commission is publishing this notice to Complex Order 6 transactions to execute
approving the proposed rule change, as solicit comments on the proposed rule through the Facilitation Auction
modified by Amendment No. 1, on an change from interested persons. mechanism 7 and the Exchange is
accelerated basis, pursuant to Section submitting this filing to clarify the fees
I. Self-Regulatory Organization’s that are applicable to these transactions.
19(b)(2) of the Act. Statement of the Terms of the Substance Generally, Complex Order
VII. Conclusion of the Proposed Rule Change transactions are subject to the fees and
It is therefore ordered, pursuant to credits set forth in Section III (Complex
The Exchange is filing with the
Section 19(b)(2) of the Act,42 that the Order Transaction Fees) of the BOX Fee
Securities and Exchange Commission
proposed rule change, as modified by Schedule while transactions executed
(‘‘Commission’’) a proposed rule change through the Facilitation and Solicitation
Amendment No. 1 (SR–MSRB–2016–09) to amend the Fee Schedule to specify
be, and hereby is, approved on an auction mechanisms are subject to
that all Complex Order transactions Sections I (Exchange Fees) and II
accelerated basis. executed through the Exchange’s (Liquidity Fees and Credits). The
For the Commission, pursuant to delegated auction mechanisms will be subject to Exchange proposes to add language that
authority.43 Section I (Exchange Fees) and II clarifies that Complex Order
Robert W. Errett, (Liquidity Fees and Credits) of the BOX transactions executed through the
Deputy Secretary. Fee Schedule. The text of the proposed COPIP and Facilitation auction
[FR Doc. 2016–22419 Filed 9–16–16; 8:45 am] rule change is available from the mechanism 8 will be subject to Sections
BILLING CODE 8011–01–P principal office of the Exchange, at the I (Exchange Fees) and II (Liquidity Fees
Commission’s Public Reference Room and Credits).
and also on the Exchange’s Internet Web Under Section I (Exchange Fees), the
SECURITIES AND EXCHANGE site at http://boxexchange.com. Exchange proposes the following fees
COMMISSION for Complex Order transactions
II. Self-Regulatory Organization’s executed through the Facilitation
[Release No. 34–78827; File No. SR–BOX– Statement of the Purpose of, and
2016–42]
auction mechanism. For Agency
Statutory Basis for, the Proposed Rule Orders 9 and Facilitation Orders, Public
Self-Regulatory Organizations; BOX Change Customer, Professional Customers and
Options Exchange LLC; Notice of Brokers Dealers and Market Makers will
In its filing with the Commission, the not be charged. For Responses in the
Filing and Immediate Effectiveness of
Exchange included statements Facilitation Auction, Public Customers
a Proposed Rule Change To Amend
concerning the purpose of and basis for will be charged $0.15, Professional
the Fee Schedule on the BOX Market
LLC (‘‘BOX’’) Options Facility To the proposed rule change and discussed Customer and Broker Dealers will be
Specify That All Complex Order any comments it received on the charged $0.27, and Market Makers are
Transactions Executed Through the proposed rule change. The text of these charged $0.20.
Exchange’s Auction Mechanisms Will statements may be examined at the The Exchange then proposes to treat
Be Subject to Section I (Exchange places specified in Item IV below. The Complex Order transactions executed
Fees) and II (Liquidity Fees and Exchange has prepared summaries, set through the Facilitation mechanisms in
Credits) forth in Sections A, B, and C below, of the same manner as single legged
the most significant aspects of such Facilitation transactions for liquidity
September 13, 2016. statements. fees and credits, which are applied in
Pursuant to Section 19(b)(1) of the addition to any applicable exchange fees
Securities Exchange Act of 1934 (the as described in Section I of the Fee
39 See Notice of Filing. in the BOX Fee Schedule effective September 1, 7 See Securities Release No. 78444 (July 29, 2016),
40 See MSRB Amendment Letter. 2016. 81 FR 51533 (August 4, 2016) (SR–BOX–2016–37).
41 Id. 6 As defined in Rule 7240(a)(5), the term 8 BOX’s auction mechanisms include the Price
mstockstill on DSK3G9T082PROD with NOTICES
42 15 U.S.C. 78s(b)(2). ‘‘Complex Order’’ means any order involving the Improvement Period (‘‘PIP’’), Complex Order Price
43 17 CFR 200.30–3(a)(12). simultaneous purchase and/or sale of two or more Improvement Period (‘‘COPIP’’), Facilitation
Auction and Solicitation Auction. The Exchange
1 15 U.S.C. 78s(b)(1). different options series in the same underlying
notes that Complex Orders are currently not
2 17 CFR 240.19b–4. security, for the same account, in a ratio that is
permitted in the Solicitation Auction mechanism.
3 15 U.S.C. 78s(b)(3)(A)(ii). equal to or greater than one-to-three (.333) and less 9 An Agency Order is the block-size order that an
4 17 CFR 240.19b–4(f)(2). than or equal to three-to-one (3.00) and for the Order Flow Provider ‘‘OFP’’ seeks to facilitate as
5 The Exchange notes that it intends to adjust to purpose of executing a particular investment agent through the Facilitation Auction or
certain Facilitation and Solicitation fees and credits strategy. Solicitation Auction mechanism.
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Document Created: 2016-09-17 02:30:38
Document Modified: 2016-09-17 02:30:38
| 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 64215 |
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