82 FR 29597 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Granting Approval of Proposed Rule Change To Reduce the Delay Period for Transactions Included in the Historic TRACE Data Sets Relating to Corporate and Agency Debt Securities
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 124 (June 29, 2017)
Federal Register Volume 82, Issue 124 (June 29, 2017)
| Page Range | 29597-29598 | |
| FR Document | 2017-13586 |
[Federal Register Volume 82, Number 124 (Thursday, June 29, 2017)] [Notices] [Pages 29597-29598] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-13586] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81011; File No. SR-FINRA-2017-012] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Granting Approval of Proposed Rule Change To Reduce the Delay Period for Transactions Included in the Historic TRACE Data Sets Relating to Corporate and Agency Debt Securities June 23, 2017. I. Introduction On May 12, 2017, the Financial Industry Regulatory Authority, Inc. (``FINRA'') filed with the Securities and Exchange Commission (``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 to amend FINRA Rule 7730 (Trade Reporting and Compliance Engine (TRACE)) to reduce the minimum delay from 18 months to six months for transactions included in the Historic TRACE Data Sets relating to corporate and agency debt securities. The proposed rule change was published for comment in the Federal Register on May 22, 2017.\3\ The Commission did not receive any comments on the proposal.\4\ For the reasons discussed below, the Commission approving the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 80685 (May 16, 2017), 82 FR 23385 (May 22, 2017) (``Notice''). \4\ FINRA previously solicited comments on the proposal as Regulatory Notice 15-24 (June 2015) and received four comments. Regulatory Notice 15-24 and the related comment letters are available as Exhibit 2 to the Notice on both FINRA and the SEC's Web sites. --------------------------------------------------------------------------- II. Description of the Proposal FINRA Rule 7730, among other things, sets forth the TRACE data products offered by FINRA and the fees applicable to such products. In addition to a real-time data feed, FINRA offers a Historic Corporate Bond Data Set, Agency Data Set, Securitized Product Data Set, and Rule 144A Data Set (collectively, the ``Historic TRACE Data'').\5\ The Historic TRACE Data includes information such as the price, date, time of execution, yield, and uncapped volume for each transaction occurring at least 18 months ago.\6\ FINRA originally established this 18-month delay to address the possibility that the Historic TRACE Data might be used to identify positions or strategies of market participants.\7\ FINRA has proposed to reduce the delay applicable to transactions included in the Historic Corporate Bond Data Set and the Historic Agency Data Set--and Rule 144A transactions in corresponding securities (together, the ``Corporate and Agency Historic TRACE Data'')--from a [[Page 29598]] minimum of 18 months to a minimum of six months.\8\ --------------------------------------------------------------------------- \5\ The Historic TRACE Data originally included only the Corporate Bond and Agency Data Sets. The Securitized Product Data Set and the Rule 144A Data Set were added later as information about transactions in those securities became subject to public dissemination. FINRA has stated that additional securities may be included in Historic TRACE Data as they become subject to public dissemination. \6\ Historic TRACE Data also may include transactions or items of information that were not previously disseminated, such as exact trade volumes, where the real-time disseminated amount was capped. \7\ See Securities Exchange Act Release No. 56327 (August 28, 2007), 72 FR 51689, 51690 (September 10, 2007). \8\ FINRA has not proposed to change the 18-month delay for transactions included in the Historic Securitized Product Data Set. --------------------------------------------------------------------------- FINRA has stated that researchers and other non-dealers have been the primary subscribers to Historic TRACE Data. FINRA has attributed the lack of usage by dealers to the minimum 18-month delay period for including transactions in the Corporate and Agency Historic TRACE Data. FINRA has stated that it is not aware of any complaints regarding information leakage under the current 18-month delay, and that market participants have indicated that a reduction in the minimum delay to six months would make the product more useful. FINRA believes that a minimum six-month delay would promote the goal of increased transparency for transactions in TRACE-Eligible Securities while continuing to address information leakage concerns.\9\ In support of that belief, FINRA conducted a sampling analysis of past transactions in both corporate and agency bonds to assess whether positions or strategies of market participants could be identified if the Corporate and Agency Historic TRACE Data had included transactions that were aged only six months.\10\ Based on this analysis, FINRA concluded that ``the proposed rule, if it had been in place, would have provided little additional information to the public relative to these positions'' \11\ and that a reduction of the delay would be ``a limited risk for smaller issues that are held by a limited number of market participants.'' \12\ --------------------------------------------------------------------------- \9\ FINRA noted that the Municipal Securities Rulemaking Board (``MSRB'') disseminates in real time the exact par value on all transactions with a par value of $5 million or less, and includes an indicator (``MM+'') in place of the exact par value on transactions where the par value is greater than $5 million until the fifth business day. MSRB disseminates the exact par value for each transaction on the fifth day after the transaction. See MSRB Rule G- 14. \10\ See Notice, 82 FR 23387-89. \11\ Id. at 23388. \12\ Id. at 23389. --------------------------------------------------------------------------- To further address concerns about information leakage, FINRA solicited comment from its members on an earlier iteration of the proposed rule change.\13\ FINRA received four comment letters and made certain revisions to its initial proposal to respond to those concerns before filing the current proposal with the Commission.\14\ The Commission notes that it has received no comments on the version of the proposed rule change published by the Commission. --------------------------------------------------------------------------- \13\ See supra note 4. \14\ See Notice, 82 FR at 23389. --------------------------------------------------------------------------- FINRA stated that it will announce the effective date of the proposed rule change in a Regulatory Notice to be published no later than 60 days following Commission approval. The effective date will be no later than 120 days following publication of the Regulatory Notice. III. Discussion After carefully consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association.\15\ In particular, the Commission finds that the proposed rule change is consistent with Section 15A(b)(6) of the Act,\16\ which requires, among other things, that FINRA rules 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 and a national market system, and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \15\ In approving this proposed rule change, the Commission has considered the proposed rule change's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \16\ 15 U.S.C. 78o-3(b)(6). --------------------------------------------------------------------------- The Commission notes that, because the proposed rule change does not require firms to provide FINRA with any additional data, it will not have any operational impact on firms. Furthermore, the purchase of TRACE data products is optional for members and others. Finally, in light of FINRA's analysis of past transactions in corporate and agency debt securities and the revisions that FINRA made to its first iteration of the proposal, the Commission believes that reducing the period before which transactions in such securities are included in the Historic TRACE Data from a minimum of 18 months to six months is reasonably designed to promote transparency and respond to consumer demand for a more useful market data product, while minimizing the potential for information leakage. IV. Conclusion It is therefore ordered pursuant to Section 19(b)(2) of the Act \17\ that the proposed rule change (SR-FINRA-2017-012) be, and hereby is, approved. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\18\ --------------------------------------------------------------------------- \18\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-13586 Filed 6-28-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 124 / Thursday, June 29, 2017 / Notices 29597
The Commission believes that the the possibility that a company can delay (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
amendments to Chapter Six of the the public announcement of a going proposed rule change to amend FINRA
Company Guide will add clarity to the concern opinion for up to seven days, as Rule 7730 (Trade Reporting and
periodic reporting requirements in currently permitted under the Company Compliance Engine (TRACE)) to reduce
connection with proposed Section 1007. Guide, will help to further investor the minimum delay from 18 months to
For example, as noted above, the protection consistent with Section six months for transactions included in
deletion and replacement in Section 6(b)(5) of the Exchange Act. the Historic TRACE Data Sets relating to
610(a) of a reference to Section 1002(d) Finally, the Commission believes the corporate and agency debt securities.
regarding delisting procedures with proposed amendment to harmonize the The proposed rule change was
proposed Section 1007 will avoid semi-annual reporting requirement by published for comment in the Federal
confusion among investors and foreign private issuers in new Section Register on May 22, 2017.3 The
companies about the applicable rules for 110(e) with the applicable rule in the Commission did not receive any
failure to timely file an annual report NYSE Manual would provide a more comments on the proposal.4 For the
with the Commission. In addition, the precise compliance guideline and reasons discussed below, the
Commission believes the proposed establish a minimum interim reporting Commission approving the proposed
modifications to delete Sections 611 regime applicable to all listed foreign rule change.
through 613 of the Company Guide are private issuers.51 Additionally, the
reasonably designed to protect investors II. Description of the Proposal
Commission believes the proposed
and the public interest by removing amendment is consistent with the FINRA Rule 7730, among other
obsolete language that will be replaced investor protection objectives of Section things, sets forth the TRACE data
with a more detailed compliance regime 6(b)(5) because it is reasonably designed products offered by FINRA and the fees
in proposed Section 1007. to ensure that foreign private issuers applicable to such products. In addition
The Commission further believes the provide timely financial information to a real-time data feed, FINRA offers a
Exchange’s deletion of the specific that is necessary to enable investors to Historic Corporate Bond Data Set,
enumerated disclosures with regard to make informed investment decisions. Agency Data Set, Securitized Product
outstanding options in Section 610(a) of Data Set, and Rule 144A Data Set
the Company Guide is consistent with IV. Conclusion (collectively, the ‘‘Historic TRACE
the Exchange Act since listed It is therefore ordered, pursuant to Data’’).5 The Historic TRACE Data
companies are already required to Section 19(b)(2) of the Exchange Act,52 includes information such as the price,
comply with the Commission’s that the proposed rule change (SR– date, time of execution, yield, and
disclosure regime for options in the NYSEMKT–2017–23) be, and hereby is, uncapped volume for each transaction
companies’ Form 10–K. In this regard approved. occurring at least 18 months ago.6
the Commission believes it is reasonable FINRA originally established this 18-
for the Exchange to determine it will For the Commission, by the Division of
Trading and Markets, pursuant to delegated month delay to address the possibility
defer to Commission disclosure authority.53 that the Historic TRACE Data might be
requirements as to options, some of used to identify positions or strategies of
Eduardo A. Aleman,
which are similar to the NYSE market participants.7 FINRA has
requirements.49 Similarly, the deletion Assistant Secretary.
[FR Doc. 2017–13590 Filed 6–28–17; 8:45 am]
proposed to reduce the delay applicable
of outdated references to the Exchange’s to transactions included in the Historic
StockWatch and Listing Qualifications BILLING CODE 8011–01–P
Corporate Bond Data Set and the
Departments in Section 610(b) of the Historic Agency Data Set—and Rule
Company Guide and their replacement 144A transactions in corresponding
with a statement that companies should SECURITIES AND EXCHANGE
COMMISSION securities (together, the ‘‘Corporate and
comply with the Exchange’s material Agency Historic TRACE Data’’)—from a
news policies set forth in Sections 401
and 402 would provide additional [Release No. 34–81011; File No. SR–FINRA–
2017–012] 1 15 U.S.C. 78s(b)(1).
transparency to a listed company on the 2 17 CFR 240.19b–4.
disclosure steps that it must take when Self-Regulatory Organizations; 3 See Securities Exchange Act Release No. 80685
it receives an audit opinion that Financial Industry Regulatory (May 16, 2017), 82 FR 23385 (May 22, 2017)
contains a going concern emphasis.50 Authority, Inc.; Order Granting (‘‘Notice’’).
Additionally, the Commission Approval of Proposed Rule Change To
4 FINRA previously solicited comments on the
believes that the amendment to require proposal as Regulatory Notice 15–24 (June 2015)
Reduce the Delay Period for and received four comments. Regulatory Notice 15–
the public announcement of the Transactions Included in the Historic 24 and the related comment letters are available as
existence of a going concern in an audit TRACE Data Sets Relating to Exhibit 2 to the Notice on both FINRA and the
opinion be made contemporaneously Corporate and Agency Debt Securities
SEC’s Web sites.
5 The Historic TRACE Data originally included
with the filing of such audit opinion
only the Corporate Bond and Agency Data Sets. The
with the Commission furthers investor June 23, 2017. Securitized Product Data Set and the Rule 144A
protection by ensuring that investors are Data Set were added later as information about
made aware, as soon as possible, of I. Introduction
transactions in those securities became subject to
material information that may impact On May 12, 2017, the Financial public dissemination. FINRA has stated that
Industry Regulatory Authority, Inc. additional securities may be included in Historic
their investment decisions. The TRACE Data as they become subject to public
sradovich on DSK3GMQ082PROD with NOTICES
Commission also notes that eliminating (‘‘FINRA’’) filed with the Securities and dissemination.
Exchange Commission (‘‘Commission’’), 6 Historic TRACE Data also may include
49 Seesupra note 5 and accompanying text. pursuant to Section 19(b)(1) of the transactions or items of information that were not
50 TheCommission further believes that the Securities Exchange Act of 1934 previously disseminated, such as exact trade
Exchange’s proposal to update the reference to a volumes, where the real-time disseminated amount
going concern ‘‘qualification’’ with a reference to a was capped.
51 See,e.g., Section 203.03 of the NYSE Manual.
going concern ‘‘emphasis’’ would align the 7 See Securities Exchange Act Release No. 56327
52 15 U.S.C. 78f(b)(2).
Exchange’s rules more accurately with general (August 28, 2007), 72 FR 51689, 51690 (September
accounting characterizations. 53 17 CFR 200.30–3(a)(12). 10, 2007).
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![29598 Federal Register / Vol. 82, No. 124 / Thursday, June 29, 2017 / Notices
minimum of 18 months to a minimum FINRA stated that it will announce For the Commission, by the Division of
of six months.8 the effective date of the proposed rule Trading and Markets, pursuant to delegated
FINRA has stated that researchers and change in a Regulatory Notice to be authority.18
other non-dealers have been the primary published no later than 60 days Eduardo A. Aleman,
subscribers to Historic TRACE Data. following Commission approval. The Assistant Secretary.
FINRA has attributed the lack of usage effective date will be no later than 120 [FR Doc. 2017–13586 Filed 6–28–17; 8:45 am]
by dealers to the minimum 18-month days following publication of the BILLING CODE 8011–01–P
delay period for including transactions Regulatory Notice.
in the Corporate and Agency Historic
TRACE Data. FINRA has stated that it is III. Discussion SECURITIES AND EXCHANGE
not aware of any complaints regarding COMMISSION
information leakage under the current After carefully consideration, the
18-month delay, and that market Commission finds that the proposed
[Release No. 34–81008; File No. SR–OCC–
participants have indicated that a rule change is consistent with the 2017–015]
reduction in the minimum delay to six requirements of the Act and the rules
months would make the product more and regulations thereunder applicable to Self-Regulatory Organizations; The
useful. a national securities association.15 In Options Clearing Corporation; Notice
FINRA believes that a minimum six- particular, the Commission finds that of Filing and Immediate Effectiveness
month delay would promote the goal of the proposed rule change is consistent of Proposed Rule Change Concerning
increased transparency for transactions with Section 15A(b)(6) of the Act,16 the U.S. Market Transition to a
in TRACE-Eligible Securities while which requires, among other things, that Shortened Settlement Cycle
continuing to address information FINRA rules be designed to prevent
June 23, 2017.
leakage concerns.9 In support of that fraudulent and manipulative acts and
belief, FINRA conducted a sampling practices, to promote just and equitable Pursuant to Section 19(b)(1) of the
analysis of past transactions in both Securities Exchange Act of 1934
principles of trade, to remove
corporate and agency bonds to assess (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
impediments to and perfect the
whether positions or strategies of market notice is hereby given that on June 9,
mechanism of a free and open market
participants could be identified if the 2017, The Options Clearing Corporation
and a national market system, and, in (‘‘OCC’’) filed with the Securities and
Corporate and Agency Historic TRACE general, to protect investors and the
Data had included transactions that Exchange Commission (‘‘Commission’’)
public interest. the proposed rule change as described
were aged only six months.10 Based on
this analysis, FINRA concluded that The Commission notes that, because in Items I, II and III below. Items I and
‘‘the proposed rule, if it had been in the proposed rule change does not II have been prepared primarily by OCC.
place, would have provided little require firms to provide FINRA with OCC filed the proposed rule change
additional information to the public any additional data, it will not have any pursuant to Section 19(b)(3)(A)(iii) of
relative to these positions’’ 11 and that a operational impact on firms. the Act 3 and Rule 19b–4(f)(4)(i) 4
reduction of the delay would be ‘‘a Furthermore, the purchase of TRACE thereunder so that the proposal was
limited risk for smaller issues that are data products is optional for members effective upon filing with the
held by a limited number of market and others. Finally, in light of FINRA’s Commission. The Commission is
participants.’’ 12 analysis of past transactions in publishing this notice to solicit
To further address concerns about corporate and agency debt securities comments on the proposed rule change
information leakage, FINRA solicited and the revisions that FINRA made to from interested persons.
comment from its members on an earlier its first iteration of the proposal, the I. Clearing Agency’s Statement of the
iteration of the proposed rule change.13 Commission believes that reducing the Terms of Substance of the Proposed
FINRA received four comment letters period before which transactions in Rule Change
and made certain revisions to its initial such securities are included in the
proposal to respond to those concerns This proposed rule change by OCC
Historic TRACE Data from a minimum concerns the amendment of OCC’s By-
before filing the current proposal with of 18 months to six months is
the Commission.14 The Commission Laws and Rules in connection with
reasonably designed to promote recent amendments adopted by the
notes that it has received no comments transparency and respond to consumer
on the version of the proposed rule Commission to Rule 15c6–1(a) 5 under
demand for a more useful market data the Act. The amendments to Rule 15c6–
change published by the Commission. product, while minimizing the potential 1(a) 6 shorten the standard settlement
8 FINRA has not proposed to change the 18-
for information leakage. cycle for most broker-dealer securities
month delay for transactions included in the IV. Conclusion transactions from three business days
Historic Securitized Product Data Set. after the trade date to two business days
9 FINRA noted that the Municipal Securities
It is therefore ordered pursuant to after the trade date.
Rulemaking Board (‘‘MSRB’’) disseminates in real
time the exact par value on all transactions with a Section 19(b)(2) of the Act 17 that the The proposed changes to OCC’s By-
par value of $5 million or less, and includes an proposed rule change (SR–FINRA– Laws and Rules were included in
indicator (‘‘MM+’’) in place of the exact par value 2017–012) be, and hereby is, approved. Exhibits 5A and 5B of the filing,
on transactions where the par value is greater than respectively.
sradovich on DSK3GMQ082PROD with NOTICES
$5 million until the fifth business day. MSRB
disseminates the exact par value for each
18 17 CFR 200.30–3(a)(12).
transaction on the fifth day after the transaction.
15 Inapproving this proposed rule change, the
See MSRB Rule G–14. 1 15 U.S.C. 78s(b)(1).
10 See Notice, 82 FR 23387–89. Commission has considered the proposed rule 2 17 CFR 240.19b–4.
11 Id. at 23388. change’s impact on efficiency, competition, and 3 15 U.S.C. 78s(b)(3)(A)(iii).
12 Id. at 23389. capital formation. See 15 U.S.C. 78c(f). 4 17 CFR 240.19b–4(f)(4)(i).
13 See supra note 4. 16 15 U.S.C. 78o–3(b)(6). 5 17 CFR 240.15c6–1(a).
14 See Notice, 82 FR at 23389. 17 15 U.S.C. 78s(b)(2). 6 Id.
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Document Created: 2018-11-14 10:17:22
Document Modified: 2018-11-14 10:17:22
| 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 | 82 FR 29597 |
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