81 FR 9545 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend FINRA Rules 7410 (Definitions) and 7440 (Recording of Order Information)
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 37 (February 25, 2016)
Federal Register Volume 81, Issue 37 (February 25, 2016)
| Page Range | 9545-9550 | |
| FR Document | 2016-03941 |
[Federal Register Volume 81, Number 37 (Thursday, February 25, 2016)] [Notices] [Pages 9545-9550] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-03941] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77180; File No. SR-FINRA-2016-006] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend FINRA Rules 7410 (Definitions) and 7440 (Recording of Order Information) February 19, 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 February 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. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to amend FINRA Rules 7410 and 7440 to require FINRA members to identify on their Order Audit Trail System (``OATS'') reports the identity of certain broker-dealers that are not FINRA members when the member has received an order from such a broker- dealer. Below is the text of the proposed rule change. Proposed new language is in italics; proposed deletions are in brackets. * * * * * 7000. CLEARING, TRANSACTION AND ORDER DATA REQUIREMENTS, AND FACILITY CHARGES * * * * * 7400. ORDER AUDIT TRAIL SYSTEM * * * * * 7410. Definitions (a) through (o) No Change. (p) ``SRO-assigned identifier'' shall mean a unique identifier assigned to a broker or dealer by a national securities exchange or national securities association for use by such broker or dealer when accessing the exchange or a facility of the association. * * * * * 7440. Recording of Order Information (a) No Change. (b) Order Origination and Receipt Unless otherwise indicated, the following order information must be recorded under this Rule when an order is received or originated. For purposes of this Rule, the order origination or receipt time is the time the order is received from the customer. (1) through (17) No Change. (18) the type of account, i.e., retail, wholesale, employee, proprietary, or any other type of account designated by FINRA, for which the order is submitted; [and] (19) when the Reporting Member receives an order from a U.S.- registered broker-dealer that is not a member, or from a non-U.S.- registered broker-dealer that is not a member but has received an SRO- assigned identifier for purposes of accessing a FINRA facility pursuant to Rule 7220A or 7320, identification of such broker-dealer by providing an SRO-assigned identifier assigned to the broker-dealer or the number assigned to the broker-dealer in the Central Registration Depository system; and (20) if the member is relying on the exception provided in Rule 5320.02 with respect to the order, the unique identification of any appropriate information barriers in place at the department within the member where the order was received or originated. (c) through (d) No Change. * * * * * II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose FINRA is proposing an amendment to Rule 7440 of the OATS rules to require FINRA members subject to the OATS rules (``Reporting Members'') to specifically identify two types of non-FINRA-member broker-dealers (``Non-Member Firms'') as part of the OATS report when they receive orders from [[Page 9546]] these firms.\3\ Under the proposed rule change, Reporting Members receiving an order from either a U.S.-registered broker-dealer that is not a FINRA member or a broker-dealer that is not registered in the U.S. but has received an SRO-assigned identifier \4\ in order to access certain FINRA trade reporting facilities (each a ``Reportable Non- Member'') must identify the broker-dealer when reporting receipt of the order to OATS.\5\ Pursuant to the proposed rule change, and as described below, Reporting Members receiving an order from or routing an order to a Non-Member Firm would therefore report one of the following: The Non-Member Firm's Central Registration Depository (``CRD[supreg]'') number; an SRO-assigned identifier assigned to the Non-Member Firm; or, for a Non-Member Firm that does not have a CRD number or SRO-assigned identifier (e.g., a foreign broker-dealer), a value indicating that the Non-Member Firm has no CRD number or SRO- assigned identifier. Reporting this information will allow FINRA to obtain the identity of Reportable Non-Members directly from the OATS report. --------------------------------------------------------------------------- \3\ FINRA Rule 7410(o) defines a Reporting Member as ``a member that receives or originates an order and has an obligation to report information under Rules 7440 and 7450.'' The rule also contains exceptions from the rule. See FINRA Rule 7410(o)(1) and (2). \4\ FINRA is proposing to define an ``SRO-assigned identifier'' in Rule 7410 as ``a unique identifier assigned to a broker or dealer by a national securities exchange or national securities association for use by such broker or dealer when accessing the exchange or a facility of the association.'' For purposes of the definition, the identifier is ``unique'' provided the identifier assigned by the exchange or association is used to identify only a single broker- dealer. \5\ Certain broker-dealers registered in Canada, but not in the U.S., have SRO-assigned identifiers so that they can access FINRA trade reporting facilities pursuant to FINRA Rule 7220A or 7320. --------------------------------------------------------------------------- A Reporting Member receiving an order from a Reportable Non-Member would include on its OATS report either the SRO-assigned identifier (e.g., a market participant identifier (``MPID'') assigned by a national securities exchange) or the Reportable Non-Member's CRD number.\6\ The proposed rule change does not mandate which identifier Reporting Members must use; thus, Reporting Members may use either an existing SRO-assigned identifier or a CRD number on their OATS reports to identify the Reportable Non-Member. If a Reportable Non-Member does not have an SRO-assigned identifier that is available to FINRA, the Reporting Member receiving the order would be required to report the CRD number of the Reportable Non-Member.\7\ Similarly, for a non-U.S.- registered broker-dealer that has an SRO-assigned identifier in order to access a FINRA trade reporting facility pursuant to Rule 7220A or 7320 but does not have a CRD number, the Reporting Member receiving the order would be required to report the SRO-assigned identifier for the broker-dealer. --------------------------------------------------------------------------- \6\ To register as a broker-dealer and have a CRD number, firms are required to file a Form BD with CRD. See 17 CFR 240.15b1-1(b). Consequently, all U.S.-registered broker-dealers have a CRD number. Currently, all U.S.-registered broker-dealers also have at least one SRO-assigned identifier that is available to FINRA. \7\ Because non-U.S. broker-dealers generally do not have SRO- assigned identifiers or CRD numbers, the proposed rule change would not require specific identification of non-U.S. broker-dealers when those firms do not have SRO-assigned identifiers or CRD numbers. In these cases, FINRA intends to permit a value whereby the Reporting Member would indicate the order was received from a non-U.S. broker- dealer without a CRD number or SRO-assigned identifier. --------------------------------------------------------------------------- FINRA is filing the proposed rule change to enhance its market surveillance efforts, both under its own SRO license and pursuant to its Regulatory Service Agreements (``RSAs'') with multiple national securities exchanges, by being able to identify more Non-Member Firm trading activity across exchanges and in the over-the-counter market through trades that are reported to a FINRA trade reporting facility.\8\ Through OATS, FINRA is currently able to identify in detail the order and trading activity of FINRA member broker-dealers across market centers. Using data provided by the exchanges as well as CRD numbers, FINRA is also able to identify in detail the trading activities of Non-Member Firms and aggregate these firms' activities across RSA client exchanges.\9\ Although Reporting Members report orders they receive from, or route to, Non-Member Firms, these reports do not always contain the identity of the Non-Member Firm from whom the order was received, or to whom it was routed.\10\ FINRA cannot, therefore, currently identify in detail Non-Member Firm activity in the over-the-counter market, or Non-Member Firm sponsored access activity, since Reporting Members are not required to report to OATS the identity of Non-Member Firms. Consequently, FINRA is not able to consistently identify Non-Member Firm activity and does not have a complete view of such activities across all exchanges and over-the-counter market centers. As the Commission recently noted when it proposed amendments to SEA Rule 15b9-1,\11\ ``FINRA's ability to perform comprehensive market surveillance, especially for violations of Commission rules, as well as its ability to understand and reconstruct activity in the off- exchange market generally, is limited because [Non-Member Firms] are not consistently identified in trade reports to the TRFs or the ADF, and their order activity is not captured by OATS.'' \12\ --------------------------------------------------------------------------- \8\ FINRA obtains exchange data pursuant to RSAs it has signed with certain client exchanges. Under the current RSAs with national securities exchanges, FINRA conducts comprehensive surveillance across more than 99% of the market for U.S. listed equities by share and trade volume. \9\ This is accomplished by using exchange-assigned identifiers that are mapped to the firm's CRD number. FINRA has access to all SRO-assigned equity identifiers with the exception of those assigned by the Chicago Stock Exchange. Under the proposed rule change, FINRA would thus be able to use any of these SRO-assigned identifiers or a CRD number to obtain the identity of the Non-Member Firm on OATS reports. A FINRA member that provides sponsored access to a Non- Member Firm has an OATS reporting obligation for each order sent to a national securities exchange pursuant to any such agreement. In this scenario, the FINRA member must report a New Order and a Route Report to the applicable exchange reflecting that the order was received from a Non-Member Firm. See OATS FAQ C77. \10\ Although some Reporting Members voluntarily provide the MPID of a Non-Member Firm if one exists, the OATS rules do not require that the identity of the Non-Member Firm be reported. \11\ 17 CFR 240.15b9-1. \12\ See Securities Exchange Act Release No. 74581 (March 25, 2015), 80 FR 18036, 18043 (April 2, 2015). --------------------------------------------------------------------------- In addition to amending Rule 7440 to require the identification of Reportable Non-Members from which an order is received, FINRA is also planning to update the OATS Reporting Technical Specifications to require that OATS reports specifically identify a Reportable Non-Member to which an order is routed. Rule 7440(c)(6)(I) requires that, for orders routed from a member to a non-FINRA-member, including both non- FINRA-member broker-dealers and national securities exchanges, the identity of the non-FINRA member to which the order was routed be reported. Although the OATS Reporting Technical Specifications currently require that OATS reports include a specific identifier for each national securities exchange to which an order is routed, only a generic identifier for Non-Member Firms is required.\13\ Consequently, the identity of the specific Non-Member Firm to which an order is routed is not required under the current OATS Reporting Technical Specifications. To address this gap and to conform the reporting of orders received from and orders routed to Non-Member Firms, in addition to the proposed rule change, FINRA intends to update the OATS Reporting Technical Specifications to require that Reporting Members provide either an SRO-assigned identifier or CRD number [[Page 9547]] when routing an order to a Reportable Non-Member.\14\ --------------------------------------------------------------------------- \13\ See OATS Reporting Technical Specifications, at 4-4, and A- 4 to A-5 (October 12, 2015 ed.). \14\ As noted above, in the case of a non-U.S. broker-dealer that does not have a CRD number or an SRO-assigned identifier, FINRA will provide an indicator for ``non-U.S. broker-dealer'' for use in the destination code field (for routes to a non-member broker- dealer) and as a member type code (for orders received from a non- member broker-dealer). --------------------------------------------------------------------------- The proposed rule change, along with the changes to the OATS Reporting Technical Specifications, will significantly improve FINRA's ability to support cross-market surveillance and monitor over-the- counter trading activity. Reporting Members receive a substantial amount of order flow from Non-Member Firms, particularly in connection with alternative trading system (``ATS'') activity, and this proposed rule change will enable FINRA to identify the activities of Reportable Non-Members, thereby increasing its cross-market surveillance capabilities.\15\ --------------------------------------------------------------------------- \15\ For example, in the fourth quarter of 2014, over 33% of orders reported to OATS were reported as being received from a Non- Member Firm. Of particular note, over 45% of ATS orders were received from a Non-Member Firm. In addition, during that quarter approximately 13% of sponsored access orders were received from a Non-Member Firm. --------------------------------------------------------------------------- FINRA notes that although the data required by the proposed rule change may ultimately be captured as part of the Consolidated Audit Trail (``CAT''), the implementation of the CAT is likely several years away, as the national market system plan filed by the SROs still must be published by the Commission for public notice and comment, approved by the SEC, and, if approved, ultimately implemented pursuant to a multi-year timeline.\16\ FINRA strongly believes that gaps in OATS data must be addressed in the near-term, after weighing the burdens to firms and the necessity of the change, to ensure an effective audit trail. FINRA believes the specific identification of Reportable Non-Members is critical to enhance FINRA's cross-market surveillance and monitoring of the over-the-counter market and believes these changes to the OATS requirements should not be delayed due to the potential future implementation of the CAT.\17\ --------------------------------------------------------------------------- \16\ SEC Rule 613, which sets forth the requirements for the CAT, does not require all broker-dealers to report order information to the CAT until three years after the CAT plan is approved. See 17 CFR 242.613(a)(vi). The SROs charged with submitting the CAT plan filed an initial plan with the Commission on September 30, 2014, an amended and restated plan on February 27, 2015, and further amendments on December 23, 2015; however, the Commission has not yet published the CAT plan in the Federal Register for public comment. Pursuant to the plan submitted by the SROs, once the CAT is fully implemented, FINRA intends to sunset the OATS rules. \17\ FINRA notes that, under SEC Rule 613, all U.S.-registered broker-dealers are subject to the CAT reporting requirements. See 17 CFR 242.613(c)(2). Consequently, if the CAT plan submitted by the SROs is approved, firms will need to specifically identify each broker-dealer from which an order is received or to which an order is routed. --------------------------------------------------------------------------- In addition to the CAT, the proposed rule change could also be affected by any amendments to SEA Rule 15b9-1.\18\ Section 15(b)(8) of the Act requires that a registered broker-dealer be a member of a national securities association unless the broker-dealer effects transactions in securities solely on a national securities exchange of which it is a member.\19\ SEA Rule 15b9-1 provides an exemption to the membership requirement in Section 15(b)(8) if a broker-dealer (i) is a member of a national securities exchange, (ii) carries no customer accounts, and (iii) has annual gross income derived from purchases and sales of securities otherwise than on a national securities exchange of which it is a member in an amount no greater than $1,000.\20\ --------------------------------------------------------------------------- \18\ 17 CFR 240.15b9-1. \19\ 15 U.S.C. 78o(b)(8). FINRA is currently the only registered national securities association. \20\ 17 CFR 240.15b9-1. The $1,000 gross income limitation does not apply to income derived from transactions for the dealer's own account with or through another registered broker or dealer. Thus, for example, income derived from over-the-counter trades through an alternative trading system does not count toward the $1,000 threshold. --------------------------------------------------------------------------- On March 25, 2015, the SEC proposed amendments to SEA Rule 15b9-1 that would significantly narrow the exemption from association membership by replacing the $1,000 gross income provision in the rule with a provision that exempts from association membership exchange member broker-dealers that operate on the floor of an exchange to the extent they effect transactions off-exchange solely for the purpose of hedging the risks of their floor-based activities.\21\ If adopted, the amendments generally would require a proprietary trading firm (i.e., a firm that carries no customer accounts and, instead, trades solely for its own account(s)) relying on the current exemption to become a FINRA member if the firm continues to engage in over-the-counter trading or trading on an exchange of which it is not a member. --------------------------------------------------------------------------- \21\ See Securities Exchange Act Release No. 74581 (March 25, 2015), 80 FR 18036, 18045-46 (April 2, 2015). --------------------------------------------------------------------------- If this, or a substantially similar, amendment to SEA Rule 15b9-1 were adopted by the SEC, it is likely that many firms that are not currently FINRA members would become FINRA members and, as a result, would be identified on OATS reports in addition to submitting OATS reports themselves. Even if amendments to SEA Rule 15b9-1 are adopted, there would likely still be some firms that do not become FINRA members, and the timeline for compliance with any potential amendments to SEA Rule 15b9-1, could be substantial. Consequently, FINRA believes that the proposed rule change is necessary regardless of the pending proposed amendments to SEA Rule 15b9-1 and would remain necessary even if amendments are subsequently adopted by the SEC. Although this proposed rule change will require Reporting Members to submit an additional data field when submitting an OATS report for an order received from a Reportable Non-Member, FINRA does not believe that the proposed rule change will have a significant operational impact on Reporting Members or their reporting practices.\22\ Because identifiers already have been assigned to Reportable Non-Members, are generally readily ascertainable by Reporting Members, and OATS will accept submission of any of these identifiers already in use, FINRA anticipates that the expense associated with reporting this additional data will be minimal. FINRA also notes that some Reporting Members already provide identifiers on their OATS reports for orders received from Non-Member Firms.\23\ Finally, if a Reportable Non-Member is a member of multiple SROs or has multiple SRO-assigned identifiers, the Reporting Member could use any of those identifiers to fulfill its reporting obligation in addition to a CRD number. As noted below, FINRA also intends to provide a list of Reportable Non-Members' CRD numbers for Reporting Members to use to aid in implementing the proposed rule change. --------------------------------------------------------------------------- \22\ FINRA also does not anticipate that the change to the OATS Reporting Technical Specifications to require that Reporting Members report a unique identifier when routing an order to a Non-Member Firm will significantly impact Reporting Members' reporting practices, as only a relatively small amount of order flow is typically routed from members to Non-Member Firms. In the fourth quarter of 2014, only 1.16% of all routes reported to OATS were reported as being routed to a Non-Member Firm. \23\ In the fourth quarter of 2014, ATSs reported the SRO- assigned identifiers of seventeen Non-Member Firms that submitted approximately 12.45 billion orders to those ATSs. --------------------------------------------------------------------------- As noted in Item 2 of this filing, if the Commission approves the proposed rule change, FINRA will announce the effective date of the proposed rule no later than 60 days following Commission approval. The effective date will be no later than 120 days following Commission approval. [[Page 9548]] 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,\24\ 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 will enable FINRA to better identify a Reportable Non-Member's trading activity across exchanges and in the over-the-counter market through trades that are reported to a FINRA facility, which will significantly enhance FINRA's cross-market surveillance efforts pursuant to its RSAs with multiple national securities exchanges and carry out its surveillance obligations for the over-the-counter market under its own SRO license. As noted above, FINRA members receive a substantial amount of order flow from Non-Member Firms, particularly in connection with ATS and sponsored access activity, and the proposed rule change will enable FINRA to identify the activities of Reportable Non-Members, thereby increasing its cross-market surveillance capabilities. Improved surveillance capabilities help detect and deter fraudulent and manipulative acts and practices, promote just and equitable principles of trade, and protect investors and the public interest. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78o-3(b)(6). --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Economic Impact Assessment 1. Regulatory Need As discussed above, under the current rules, Reporting Members report orders they receive from, or route to, Non-Member Firms but these reports do not always contain the identity of the Non-Member Firm. As a result, FINRA cannot consistently identify Non-Member Firm activity and cannot see a complete view of such activities across all exchanges and over-the-counter market centers. The proposed rule change will address these current gaps in order reporting by requiring Reporting Members to identify Reportable Non-Members in their OATS reports. Reporting this information will allow FINRA to obtain the identity of the Reportable Non-Member directly from the OATS data, thereby improving FINRA's ability to perform comprehensive market surveillance and increasing investor protection. 2. Economic Impacts The proposed rule change would impact Reporting Members that report orders received from, or routed to, Reportable Non-Members. As a baseline, FINRA estimates that, in the fourth quarter of 2014, approximately 175 Reporting Members received orders from Non-Member Firms and approximately 215 Reporting Members routed orders to Non- Member Firms. As discussed above, FINRA estimates that over 33% of the total OATS orders in the fourth quarter of 2014 were reported as being received from a Non-Member Firm. Non-Member Firm orders accounted for a higher proportion (over 45%) of ATS orders. In addition, during that quarter approximately 13% of sponsored access orders were received from a Non-Member Firm. Reporting Members currently report orders received from or routed to Non-Member Firms but are not required to specifically identify these firms in their OATS reports. The proposed rule change would require the Reporting Members to identify Reportable Non-Members and submit an SRO-assigned identifier or the CRD number of these firms. (i) Anticipated Benefits The proposed rule change would enhance FINRA's cross-market and over-the-counter surveillance efforts by allowing FINRA to identify more Non-Member Firm trading activity across exchanges and the over- the-counter market. As discussed above, FINRA members receive a substantial amount of order flow from Non-Member Firms, particularly in connection with ATS activity. The proposed rule change will enable FINRA to identify these activities from Reportable Non-Members, thereby significantly improving FINRA's ability to support cross-market surveillance and monitor over-the-counter trading activity. (ii) Anticipated Costs As a result of the proposed rule change, Reporting Members that are not already identifying Reportable Non-Members in their OATS reports will incur certain implementation costs and on-going compliance costs associated with identifying Reportable Non-Members and submitting identifiers on their OATS reports. FINRA anticipates that the costs associated with identifying Reportable Non-Members will likely be minimal because identifiers have already been assigned to Reportable Non-Members and these identifiers are generally readily available to the Reporting Member that is receiving orders from or routing orders to Reportable Non-Members. In addition, the proposed rule change would provide Reporting Members with the option to report either the CRD number or the SRO assigned identifier, thereby allowing them to submit the identifiers that are already in use.\25\ Moreover, FINRA intends to provide a list of CRD numbers to assist further in implementing the new requirements for those firms that are not already identifying Reportable Non-Members on their OATS reports, thereby further reducing the burden to ascertain appropriate identifiers for Reportable Non-Members. --------------------------------------------------------------------------- \25\ Reporting Members would, therefore, have flexibility in determining which identifiers to submit, which is intended to reduce costs for these firms by allowing them to choose the most cost effective option. --------------------------------------------------------------------------- FINRA recognizes that some Reporting Members may need to update their reporting systems and would incur certain costs associated with system analysis, coding, and testing in order to submit the required identifiers on their OATS reports. However, based on the provision of the list of identifiers by FINRA, the current volume of OATS Reports already submitted with Non-Member Firm information, and the Staff's experience with previous changes to the OATS requirements requiring similar modification to OATS reporting (i.e., modifications requiring new values for existing fields), FINRA believes that significant coding and development would not be required and that the costs referenced above would likely be minimal. Based on OATS data for the fourth quarter of 2014, FINRA estimates that approximately 23% of Reporting Members that receive orders from Non-Member Firms already identify these firms on their OATS reports and approximately 12% of Reporting Members that route orders to Non-Member Firms identify these firms on their OATS reports.\26\ --------------------------------------------------------------------------- \26\ FINRA notes that a number of these Reporting Members identify Non-Member Firms on some, but not all, orders whereas others do so on all orders. For example, in the fourth quarter of 2014, of the 39 Reporting Members that receive orders from Non- Member Firms and identify them on their OATS report, 28 identify Non-Member Firms on some and 11 identify them on all orders. --------------------------------------------------------------------------- 3. Alternatives In considering the best way to meet its regulatory objectives, FINRA considered certain alternatives to particular features [[Page 9549]] of this proposal, including alternative identifiers that could be used to identify Reportable Non-Members. For example, one FINRA committee member suggested that FINRA consider leveraging use of a Legal Entity Identifier (``LEI'') for identifying Reportable Non-Members. FINRA does not believe that use of a LEI would be feasible at this time considering that the LEI is not universally in use. As a result, FINRA did not propose the use of LEI in the OATS reports for identifying Reportable Non-Members. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The proposed rule change, in addition to another proposal involving ATS order reporting, was published for comment in Regulatory Notice 14- 51 (November 2014).\27\ Five comments were received in response to the Regulatory Notice; \28\ however, only four of the comment letters addressed the proposed rule change.\29\ A copy of Regulatory Notice 14- 51 is attached as Exhibit 2a.\30\ A list of comment letters received in response to Regulatory Notice 14-51 is attached as Exhibit 2b, and copies of the four comment letters that addressed the proposed rule change are attached as Exhibit 2c. Of the four comment letters received that addressed the proposed rule change, KCG and SIFMA were in favor of the proposed rule change, Liquidnet did not support or oppose the proposed rule change but asked for interpretive guidance on the application of the proposed rule change to non-U.S. broker-dealers, and FIF was generally opposed. --------------------------------------------------------------------------- \27\ The ATS order reporting proposal described in Regulatory Notice 14-51 is not reflected in the current proposed rule change; consequently, comments on that proposal are not addressed. \28\ See Letter from Manisha Kimmel, Managing Director, Financial Information Forum, to Marcia E. Asquith, Secretary, FINRA, dated February 20, 2015 (``FIF''); Letter from John A. McCarthy, General Counsel, KCG Holdings, Inc., to Marcia E. Asquith, Secretary, FINRA, dated February. 20, 2015 (``KCG''); Letter from Howard Meyerson, General Counsel, Liquidnet Inc., to Marcia E. Asquith, Secretary, FINRA, dated February 20, 2015 (``Liquidnet''); Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, to Marcia E. Asquith, Secretary, FINRA, dated February 24, 2015 (``SIFMA''); and Letter from Mark Holder, Managing Director, UBS Securities LLC, to Marcia E. Asquith, Secretary, FINRA, dated February 26, 2015 (``UBS''). \29\ The UBS Letter addressed only the ATS order reporting proposal in the Regulatory Notice and did not address the proposed rule change. \30\ The Commission notes that the exhibits referred to (2a, 2b, and 2c) are exhibits to the proposed rule change, not to this Notice. --------------------------------------------------------------------------- Liquidnet and SIFMA requested that FINRA provide guidance on the application of the proposed rule change to non-U.S. broker-dealers that do not have either SRO-assigned identifiers or CRD numbers. As noted above, FINRA has amended the proposed rule language from that in Regulatory Notice 14-51 to clarify that the specific identification of Non-Member Firms applies only to U.S.-registered broker-dealers that have SRO-assigned identifiers or CRD numbers as well as Canadian broker-dealers who have been assigned SRO identifiers for purposes of accessing a FINRA trade reporting facility pursuant to Rule 7220A or 7320. FINRA will provide an indicator for ``non-U.S. broker-dealer'' for use in the destination code field (for routes to a non-member broker-dealer) and as a member type code (for orders received from a non-member broker-dealer) so that Reporting Members can reflect routes to or from a non-U.S. broker-dealer that does not have a CRD number or an SRO-assigned identifier. FIF noted that using SRO-assigned identifiers would be preferable to using CRD numbers and suggested that FINRA provide a list of allowable identifiers. KCG requested that FINRA develop a list of identifiers that OATS reporting firms could rely upon to identify non- member broker-dealers and suggested that only those identifiers appearing on the list be required to be reported when dealing with non- member broker-dealers. In response to these comments, FINRA intends to develop and publish on its Web site a list of acceptable CRD numbers for Reporting Members to use to meet their OATS reporting obligations. FINRA does not, however, intend that only those identifiers appearing on the list would be acceptable values. For example, Canadian broker-dealers that have been issued MPIDs to access FINRA trade reporting facilities pursuant to Rule 7220A or Rule 7320 do not have CRD numbers; thus, Reporting Members receiving orders from or routing orders to such firms would be required to use the Canadian firm's MPID on their OATS reports. Finally, FIF noted that the issue of identifying Non-Member Firms will be addressed upon the implementation of the CAT and suggested that FINRA not take interim measures to improve OATS but ``work diligently with the other SROs towards driving CAT forward.'' FINRA does not view these undertakings as mutually exclusive. While FINRA is working diligently with other SROs to develop and implement the CAT, FINRA also believes that reasonable changes to OATS should still be made to ensure existing audit trails can be enhanced. As noted above, the full implementation of the CAT is likely still years away. FINRA strongly believes that gaps in OATS data must be addressed in the near-term, after weighing the burdens to firms and the necessity of the change, to ensure an effective audit trail. As set forth above, FINRA has concluded that the identification of Reportable Non-Members is important to enhance FINRA's cross-market surveillance and believes these modest changes to the OATS requirements should not be delayed due to the potential future implementation of the CAT. Although this proposed rule change will require some Reporting Members to submit more specific data when submitting an OATS report for an order received from a Reportable Non-Member, FINRA does not believe that this change will have a significant operational impact on Reporting Members or their reporting practices because identifiers already have been assigned to the Reportable Non-Members, are generally readily ascertainable by the Reporting Member that is receiving orders from or routing orders to the Reportable Non-Member, and OATS will accept submission of any of these identifiers already in use. As noted above, FINRA intends to provide a list of CRD numbers to assist further in implementing the new requirements for those Reporting Members that are not already identifying Reportable Non-Members on their OATS reports. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: [[Page 9550]] 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-2016-006 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-FINRA-2016-006. 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 such filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-FINRA-2016-006 and should be submitted on or before March 17, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\31\ --------------------------------------------------------------------------- \31\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-03941 Filed 2-24-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 37 / Thursday, February 25, 2016 / Notices 9545
Electronic Comments SECURITIES AND EXCHANGE (b) Order Origination and Receipt
COMMISSION Unless otherwise indicated, the
• Use the Commission’s Internet
[Release No. 34–77180; File No. SR–FINRA– following order information must be
comment form (http://www.sec.gov/ recorded under this Rule when an order
rules/sro.shtml); or 2016–006]
is received or originated. For purposes
• Send an email to rule-comments@ Self-Regulatory Organizations; of this Rule, the order origination or
sec.gov. Please include File Number SR– Financial Industry Regulatory receipt time is the time the order is
BATS–2016–08 on the subject line. Authority, Inc.; Notice of Filing of a received from the customer.
Proposed Rule Change To Amend (1) through (17) No Change.
Paper Comments FINRA Rules 7410 (Definitions) and (18) the type of account, i.e., retail,
• Send paper comments in triplicate 7440 (Recording of Order Information) wholesale, employee, proprietary, or
to Brent J. Fields, Secretary, Securities February 19, 2016. any other type of account designated by
and Exchange Commission, 100 F Street Pursuant to Section 19(b)(1) of the FINRA, for which the order is
NE., Washington, DC 20549–1090. Securities Exchange Act of 1934 submitted; [and]
All submissions should refer to File (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 (19) when the Reporting Member
notice is hereby given that on February receives an order from a U.S.-registered
Number SR–BATS–2016–08. This file
11, 2016, Financial Industry Regulatory broker-dealer that is not a member, or
number should be included on the
Authority, Inc. (‘‘FINRA’’) filed with the from a non-U.S.-registered broker-dealer
subject line if email is used. To help the Securities and Exchange Commission that is not a member but has received
Commission process and review your (‘‘SEC’’ or ‘‘Commission’’) the proposed an SRO-assigned identifier for purposes
comments more efficiently, please use rule change as described in Items I, II, of accessing a FINRA facility pursuant
only one method. The Commission will and III below, which Items have been to Rule 7220A or 7320, identification of
post all comments on the Commission’s prepared by FINRA. The Commission is such broker-dealer by providing an
Internet Web site (http://www.sec.gov/ publishing this notice to solicit SRO-assigned identifier assigned to the
rules/sro.shtml). Copies of the comments on the proposed rule change broker-dealer or the number assigned to
submission, all subsequent from interested persons. the broker-dealer in the Central
amendments, all written statements Registration Depository system; and
I. Self-Regulatory Organization’s
with respect to the proposed rule (20) if the member is relying on the
Statement of the Terms of Substance of
change that are filed with the the Proposed Rule Change exception provided in Rule 5320.02
Commission, and all written with respect to the order, the unique
communications relating to the FINRA is proposing to amend FINRA
identification of any appropriate
proposed rule change between the Rules 7410 and 7440 to require FINRA
information barriers in place at the
Commission and any person, other than members to identify on their Order
department within the member where
those that may be withheld from the Audit Trail System (‘‘OATS’’) reports
the order was received or originated.
the identity of certain broker-dealers
public in accordance with the (c) through (d) No Change.
that are not FINRA members when the
provisions of 5 U.S.C. 552, will be * * * * *
member has received an order from
available for Web site viewing and such a broker-dealer.
printing in the Commission’s Public II. Self-Regulatory Organization’s
Below is the text of the proposed rule
Reference Room, 100 F Street NE., Statement of the Purpose of, and
change. Proposed new language is in
Washington, DC 20549 on official Statutory Basis for, the Proposed Rule
italics; proposed deletions are in
business days between the hours of Change
brackets.
10:00 a.m. and 3:00 p.m. Copies of such In its filing with the Commission,
* * * * *
filing also will be available for FINRA included statements concerning
inspection and copying at the principal 7000. CLEARING, TRANSACTION the purpose of and basis for the
office of the Exchange. All comments AND ORDER DATA REQUIREMENTS, proposed rule change and discussed any
received will be posted without change; AND FACILITY CHARGES comments it received on the proposed
the Commission does not edit personal * * * * * rule change. The text of these statements
identifying information from may be examined at the places specified
submissions. You should submit only 7400. ORDER AUDIT TRAIL SYSTEM in Item IV below. FINRA has prepared
information that you wish to make * * * * * summaries, set forth in sections A, B,
available publicly. All submissions and C below, of the most significant
7410. Definitions
should refer to File Number SR–BATS– aspects of such statements.
2016–08, and should be submitted on or (a) through (o) No Change.
(p) ‘‘SRO-assigned identifier’’ shall A. Self-Regulatory Organization’s
before March 17, 2016. Statement of the Purpose of, and
mean a unique identifier assigned to a
For the Commission, by the Division of broker or dealer by a national securities Statutory Basis for, the Proposed Rule
Trading and Markets, pursuant to delegated exchange or national securities Change
authority.17 association for use by such broker or 1. Purpose
Brent J. Fields, dealer when accessing the exchange or
FINRA is proposing an amendment to
mstockstill on DSK4VPTVN1PROD with NOTICES
Secretary. a facility of the association.
Rule 7440 of the OATS rules to require
[FR Doc. 2016–03943 Filed 2–24–16; 8:45 am] * * * * * FINRA members subject to the OATS
BILLING CODE 8011–01–P
7440. Recording of Order Information rules (‘‘Reporting Members’’) to
(a) No Change. specifically identify two types of non-
FINRA-member broker-dealers (‘‘Non-
1 15 U.S.C. 78s(b)(1). Member Firms’’) as part of the OATS
17 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. report when they receive orders from
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![9546 Federal Register / Vol. 81, No. 37 / Thursday, February 25, 2016 / Notices
these firms.3 Under the proposed rule available to FINRA, the Reporting FINRA cannot, therefore, currently
change, Reporting Members receiving an Member receiving the order would be identify in detail Non-Member Firm
order from either a U.S.-registered required to report the CRD number of activity in the over-the-counter market,
broker-dealer that is not a FINRA the Reportable Non-Member.7 Similarly, or Non-Member Firm sponsored access
member or a broker-dealer that is not for a non-U.S.-registered broker-dealer activity, since Reporting Members are
registered in the U.S. but has received that has an SRO-assigned identifier in not required to report to OATS the
an SRO-assigned identifier 4 in order to order to access a FINRA trade reporting identity of Non-Member Firms.
access certain FINRA trade reporting facility pursuant to Rule 7220A or 7320 Consequently, FINRA is not able to
facilities (each a ‘‘Reportable Non- but does not have a CRD number, the consistently identify Non-Member Firm
Member’’) must identify the broker- Reporting Member receiving the order activity and does not have a complete
dealer when reporting receipt of the would be required to report the SRO- view of such activities across all
order to OATS.5 Pursuant to the assigned identifier for the broker-dealer. exchanges and over-the-counter market
proposed rule change, and as described FINRA is filing the proposed rule centers. As the Commission recently
below, Reporting Members receiving an change to enhance its market noted when it proposed amendments to
order from or routing an order to a Non- surveillance efforts, both under its own SEA Rule 15b9–1,11 ‘‘FINRA’s ability to
Member Firm would therefore report SRO license and pursuant to its perform comprehensive market
one of the following: The Non-Member Regulatory Service Agreements surveillance, especially for violations of
Firm’s Central Registration Depository (‘‘RSAs’’) with multiple national Commission rules, as well as its ability
(‘‘CRD®’’) number; an SRO-assigned securities exchanges, by being able to to understand and reconstruct activity
identifier assigned to the Non-Member identify more Non-Member Firm trading in the off-exchange market generally, is
Firm; or, for a Non-Member Firm that activity across exchanges and in the limited because [Non-Member Firms]
does not have a CRD number or SRO- over-the-counter market through trades are not consistently identified in trade
assigned identifier (e.g., a foreign that are reported to a FINRA trade reports to the TRFs or the ADF, and
broker-dealer), a value indicating that reporting facility.8 Through OATS, their order activity is not captured by
the Non-Member Firm has no CRD FINRA is currently able to identify in OATS.’’ 12
number or SRO-assigned identifier. detail the order and trading activity of In addition to amending Rule 7440 to
Reporting this information will allow FINRA member broker-dealers across require the identification of Reportable
FINRA to obtain the identity of market centers. Using data provided by Non-Members from which an order is
Reportable Non-Members directly from the exchanges as well as CRD numbers, received, FINRA is also planning to
the OATS report. FINRA is also able to identify in detail
A Reporting Member receiving an update the OATS Reporting Technical
the trading activities of Non-Member Specifications to require that OATS
order from a Reportable Non-Member Firms and aggregate these firms’
would include on its OATS report either reports specifically identify a Reportable
activities across RSA client exchanges.9 Non-Member to which an order is
the SRO-assigned identifier (e.g., a Although Reporting Members report
market participant identifier (‘‘MPID’’) routed. Rule 7440(c)(6)(I) requires that,
orders they receive from, or route to, for orders routed from a member to a
assigned by a national securities Non-Member Firms, these reports do not
exchange) or the Reportable Non- non-FINRA-member, including both
always contain the identity of the Non- non-FINRA-member broker-dealers and
Member’s CRD number.6 The proposed Member Firm from whom the order was
rule change does not mandate which national securities exchanges, the
received, or to whom it was routed.10 identity of the non-FINRA member to
identifier Reporting Members must use;
thus, Reporting Members may use either 7 Because non-U.S. broker-dealers generally do
which the order was routed be reported.
an existing SRO-assigned identifier or a not have SRO-assigned identifiers or CRD numbers, Although the OATS Reporting
CRD number on their OATS reports to the proposed rule change would not require specific Technical Specifications currently
identify the Reportable Non-Member. If identification of non-U.S. broker-dealers when require that OATS reports include a
those firms do not have SRO-assigned identifiers or specific identifier for each national
a Reportable Non-Member does not have CRD numbers. In these cases, FINRA intends to
an SRO-assigned identifier that is permit a value whereby the Reporting Member securities exchange to which an order is
would indicate the order was received from a non- routed, only a generic identifier for Non-
3 FINRA Rule 7410(o) defines a Reporting U.S. broker-dealer without a CRD number or SRO- Member Firms is required.13
Member as ‘‘a member that receives or originates an assigned identifier. Consequently, the identity of the
8 FINRA obtains exchange data pursuant to RSAs
order and has an obligation to report information specific Non-Member Firm to which an
under Rules 7440 and 7450.’’ The rule also contains it has signed with certain client exchanges. Under
exceptions from the rule. See FINRA Rule the current RSAs with national securities order is routed is not required under the
7410(o)(1) and (2). exchanges, FINRA conducts comprehensive current OATS Reporting Technical
4 FINRA is proposing to define an ‘‘SRO-assigned surveillance across more than 99% of the market for Specifications. To address this gap and
identifier’’ in Rule 7410 as ‘‘a unique identifier U.S. listed equities by share and trade volume.
9 This is accomplished by using exchange-
to conform the reporting of orders
assigned to a broker or dealer by a national
securities exchange or national securities assigned identifiers that are mapped to the firm’s received from and orders routed to Non-
association for use by such broker or dealer when CRD number. FINRA has access to all SRO-assigned Member Firms, in addition to the
accessing the exchange or a facility of the equity identifiers with the exception of those proposed rule change, FINRA intends to
association.’’ For purposes of the definition, the assigned by the Chicago Stock Exchange. Under the update the OATS Reporting Technical
identifier is ‘‘unique’’ provided the identifier proposed rule change, FINRA would thus be able
assigned by the exchange or association is used to to use any of these SRO-assigned identifiers or a Specifications to require that Reporting
identify only a single broker-dealer. CRD number to obtain the identity of the Non- Members provide either an SRO-
5 Certain broker-dealers registered in Canada, but Member Firm on OATS reports. A FINRA member assigned identifier or CRD number
not in the U.S., have SRO-assigned identifiers so that provides sponsored access to a Non-Member
mstockstill on DSK4VPTVN1PROD with NOTICES
that they can access FINRA trade reporting facilities Firm has an OATS reporting obligation for each
pursuant to FINRA Rule 7220A or 7320. order sent to a national securities exchange exists, the OATS rules do not require that the
6 To register as a broker-dealer and have a CRD pursuant to any such agreement. In this scenario, identity of the Non-Member Firm be reported.
11 17 CFR 240.15b9–1.
number, firms are required to file a Form BD with the FINRA member must report a New Order and
a Route Report to the applicable exchange reflecting 12 See Securities Exchange Act Release No. 74581
CRD. See 17 CFR 240.15b1–1(b). Consequently, all
U.S.-registered broker-dealers have a CRD number. that the order was received from a Non-Member (March 25, 2015), 80 FR 18036, 18043 (April 2,
Currently, all U.S.-registered broker-dealers also Firm. See OATS FAQ C77. 2015).
have at least one SRO-assigned identifier that is 10 Although some Reporting Members voluntarily 13 See OATS Reporting Technical Specifications,
available to FINRA. provide the MPID of a Non-Member Firm if one at 4–4, and A–4 to A–5 (October 12, 2015 ed.).
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![9550 Federal Register / Vol. 81, No. 37 / Thursday, February 25, 2016 / Notices
Electronic Comments SECURITIES AND EXCHANGE summaries, set forth in sections A, B,
COMMISSION and C below, of the most significant
• Use the Commission’s Internet aspects of such statements.
comment form (http://www.sec.gov/ [Release No. 34–77196; File No. SR–FINRA–
rules/sro.shtml); or 2016–005] A. Self-Regulatory Organization’s
Statement of the Purpose of, and
• Send an email to rule-comments@ Self-Regulatory Organizations; Statutory Basis for, the Proposed Rule
sec.gov. Please include File Number SR– Financial Industry Regulatory Change
FINRA–2016–006 on the subject line. Authority, Inc.; Notice of Filing of a
Proposed Rule Change To Reduce the 1. Purpose
Paper Comments Synchronization Tolerance for Current FINRA rules require that
• Send paper comments in triplicate Computer Clocks That Are Used To firms synchronize their business clocks
to Secretary, Securities and Exchange Record Events in NMS Securities and in conformity with procedures
Commission, 100 F Street NE., OTC Equity Securities prescribed by FINRA. Specifically,
Washington, DC 20549–1090. FINRA Rule 7430 requires that firms
February 19, 2016. synchronize their business clocks that
All submissions should refer to File Pursuant to Section 19(b)(1) of the are used for purposes of recording the
Number SR–FINRA–2016–006. This file Securities Exchange Act of 1934 date and time of any event that must be
number should be included on the (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 recorded pursuant to the FINRA By-
notice is hereby given that on February Laws or other FINRA rules (e.g., the
subject line if email is used. To help the
9, 2016, Financial Industry Regulatory time a trade was executed or the time an
Commission process and review your
Authority, Inc. (‘‘FINRA’’) filed with the order was received or routed), with
comments more efficiently, please use
Securities and Exchange Commission reference to a time source as designated
only one method. The Commission will (‘‘SEC’’ or ‘‘Commission’’) the proposed
post all comments on the Commission’s by FINRA. As specified in the current
rule change as described in Items I, II, OATS technical specifications, all
Internet Web site (http://www.sec.gov/ and III below, which Items have been
rules/sro.shtml). Copies of the computer system clocks and mechanical
prepared by FINRA. The Commission is time stamping devices must be
submission, all subsequent publishing this notice to solicit synchronized to within one second of
amendments, all written statements comments on the proposed rule change the NIST atomic clock.3 To maintain
with respect to the proposed rule from interested persons. clock synchronization, clocks should be
change that are filed with the checked against the NIST atomic clock
Commission, and all written I. Self-Regulatory Organization’s
Statement of the Terms of Substance of and re-synchronized, if necessary, at
communications relating to the pre-determined intervals throughout the
the Proposed Rule Change
proposed rule change between the day.4 FINRA understands that currently,
Commission and any person, other than FINRA is proposing to reduce the some firms synchronize their clocks
those that may be withheld from the synchronization tolerance for members’ continuously throughout the day, while
public in accordance with the computer clocks that are used to record others do so at various times during the
provisions of 5 U.S.C. 552, will be events in NMS securities, including day and still others do so only once a
available for Web site viewing and standardized options, and OTC Equity day.5
printing in the Commission’s Public Securities. This proposal would not Given the increasing speed of trading
change the current clock in today’s automated markets, FINRA
Reference Room, 100 F Street NE.,
synchronization requirement for believes the current one second
Washington, DC 20549, on official
members’ mechanical time stamping tolerance is no longer appropriate for
business days between the hours of
devices or computer clocks that are used computer system clocks recording
10:00 a.m. and 3:00 p.m. Copies of such to record events for securities other than
filing also will be available for NMS securities or OTC Equity 3 Any time provider may be used for
inspection and copying at the principal Securities. synchronization; however, all clocks and time
office of FINRA. All comments received The text of the proposed rule change stamping devices must remain accurate within a
will be posted without change; the is available on FINRA’s Web site at one-second tolerance of the NIST clock. This
tolerance includes (1) the difference between the
Commission does not edit personal http://www.finra.org, at the principal NIST standard and a time provider’s clock, (2)
identifying information from office of FINRA, on the Commission’s transmission delay from the source and (3) the
submissions. You should submit only Web site at http://www.sec.gov, and at amount of drift of the member firm’s clock. The
information that you wish to make the Commission’s Public Reference OATS technical specifications further specify that
computer system and mechanical clocks must be
available publicly. All submissions Room. synchronized every business day before market
should refer to File Number SR–FINRA– II. Self-Regulatory Organization’s open to ensure that recorded order event
2016–006 and should be submitted on timestamps are accurate.
Statement of the Purpose of, and 4 The OATS technical specifications also provide
or before March 17, 2016. Statutory Basis for, the Proposed Rule that member firms must document and maintain
For the Commission, by the Division of Change their clock synchronization procedures. In addition,
Trading and Markets, pursuant to delegated the technical specifications state that member firms
In its filing with the Commission, should keep a log of the times when they
authority.31 FINRA included statements concerning synchronize their clocks and the results of the
Brent J. Fields, the purpose of and basis for the synchronization process, including notice of any
time a member’s clock drifts more than the one
mstockstill on DSK4VPTVN1PROD with NOTICES
Secretary. proposed rule change and discussed any second standard. The technical specifications
[FR Doc. 2016–03941 Filed 2–24–16; 8:45 am] comments it received on the proposed further provide that such logs should be maintained
BILLING CODE 8011–01–P rule change. The text of these statements for the period of time and accessibility specified in
may be examined at the places specified SEC Rule 17a–4(b), and maintained and preserved
for the required time period in paper format or in
in Item IV below. FINRA has prepared a format permitted under SEC Rule 17a–4(f).
5 FINRA generally believes that the firms that
1 15 U.S.C. 78s(b)(1). synchronize once daily are firms that accept manual
31 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. orders.
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Document Created: 2018-02-02 14:35:37
Document Modified: 2018-02-02 14:35:37
| 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 9545 |
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