82 FR 29956 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Reporting of Certain ATS Transactions in U.S. Treasury Securities

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 125 (June 30, 2017)

Page Range		29956-29960
FR Document		2017-13703
Federal Register, Volume 82 Issue 125 (Friday, June 30, 2017)
[Federal Register Volume 82, Number 125 (Friday, June 30, 2017)]
[Notices]
[Pages 29956-29960]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-13703]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81018; File No. SR-FINRA-2017-023]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change Relating to Reporting of Certain ATS Transactions 
in U.S. Treasury Securities

June 26, 2017.
    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 June 23, 2017, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which 
renders the proposal effective upon receipt of this filing by the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 6730 (Transaction Reporting) 
to provide a temporary exception to permit member alternative trading 
systems (``ATSs'') and member subscribers to report aggregate trade 
information to TRACE for certain transactions in U.S. Treasury 
Securities.
    The text of the proposed rule change is available on FINRA's Web 
site at http://www.finra.org, at the principal office of FINRA and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. FINRA has prepared summaries, set forth in sections A, 
B,

[[Page 29957]]

and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    FINRA is proposing to amend Rule 6730 to add new Supplementary 
Material .06 (Temporary Exception for Aggregate Transaction Reporting 
of U.S. Treasury Securities Executed in ATS Trading Sessions) to 
provide members additional time to report individual transactions in 
U.S. Treasury Securities, as required by Rule 6730 (Transaction 
Reporting), that occur on member ATSs as part of a trading session, as 
described below.
Background
    FINRA Rule 6730 sets forth a member's trade reporting obligations 
with regard to transactions in TRACE-Eligible Securities, which, 
beginning July 10, 2017,\4\ will include U.S. Treasury Securities.\5\ 
Pursuant to Rule 6730, each FINRA member that is a ``Party to a 
Transaction'' \6\ in a TRACE-Eligible Security is obligated to report 
the transaction to TRACE within the prescribed period of time. The term 
``Party to a Transaction'' means an introducing broker-dealer, if any, 
an executing broker-dealer, or a customer.\7\ Thus, in a transaction in 
a TRACE-Eligible Security executed through an ATS between members, each 
member (and the ATS itself) is considered a Party to a Transaction and 
is required to report the trade.\8\ Specifically, the ATS is required 
to report two transactions to TRACE: (1) The purchase of the security 
from one counterparty and (2) the sale of the security to the other 
counterparty. In addition, each FINRA member counterparty is required 
to report a buy or a sell, as applicable, identifying the ATS as the 
counterparty to each trade.\9\
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    \4\ See Securities Exchange Act Release No. 79116 (October 18, 
2016), 81 FR 73167 (October 24, 2016) (Notice of Filing of Amendment 
No. 1 and Order Granting Accelerated Approval of File No. SR-FINRA-
2016-027). See also Regulatory Notice 16-39 (October 2016).
    \5\ Rule 6710(p) will define a ``U.S. Treasury Security'' as ``a 
security, other than a savings bond, issued by the U.S. Department 
of the Treasury to fund the operations of the federal government or 
to retire such outstanding securities.'' The term ``U.S. Treasury 
Security'' also includes separate principal and interest components 
of a U.S. Treasury Security that has been separated pursuant to the 
Separate Trading of Registered Interest and Principal of Securities 
(``STRIPS'') program operated by the U.S. Department of Treasury. 
See Rule 6710(p).
    \6\ See Rule 6710(e).
    \7\ See supra note 6.
    \8\ See Question 7.4 in FINRA's Reporting of Corporate and 
Agencies Debt Frequently Asked Questions: Who reports trades 
executed through electronic trading systems that are themselves 
broker-dealers? All FINRA members that are ``parties to a 
transaction'' have a trade reporting obligation under TRACE Rules. 
Where two FINRA members effect/execute a transaction through an 
electronic trading system that is registered as a broker-dealer, 
both members, as well as the electronic trading system would have a 
trade reporting obligation. See Reporting of Corporate and Agencies 
Debt Frequently Asked Questions, available at http://www.finra.org/industry/faq-reporting-corporate-and-agencies-debt-frequently-asked-questions-faq#7-4. See also Regulatory Notice 14-53 (November 2014).
    \9\ Whether the ATS is involved in the clearance and settlement 
of a transaction does not change the TRACE trade reporting 
obligation for trades occurring through its system. Regulatory 
Notice 14-53 (November 2014).
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    FINRA understands that ATSs that permit subscribers to trade U.S. 
Treasury Securities on their platforms may permit subscribers to 
initiate a ``trading session,'' which is a discrete or timed order-
matching event during which one or more additional subscribers can 
interact with the original order on the opposite side of the market or 
add to the initial order on the same side of the market.\10\ Although 
it is possible that some trading sessions involve a single transaction 
between two counterparties like a typical trade, FINRA understands that 
most trading sessions include multiple participants on one or both 
sides of the market during the time period the trading session is open.
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    \10\ Different members use varying nomenclature to describe 
trading sessions. For example, one member ATS refers to these 
sessions as ``workups'' or ``workup sessions.'' In addition, the 
length of time a session remains open and other characteristics of 
how a session is structured may change from member to member. As 
used in the proposed rule change, the term ``trading session'' is 
meant to capture all variations of such types of sessions that 
member ATSs may use.
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    For example, suppose Subscriber A initiates a trading session to 
sell $25 million of a particular U.S. Treasury Security at a specific 
price. In a typical crossing scenario involving an ATS, the ATS would 
match the incoming sell order with a buy order from Subscriber B thus 
executing some or all of the original order. In this scenario, under 
TRACE rules, Subscriber A is required to report a sell to the ATS for 
the amount crossed, and Subscriber B would report a purchase from the 
ATS for that same amount.\11\ The ATS would report two trades: A 
purchase from Subscriber A and a sell to Subscriber B. Under current 
rules, all of the reports are required to reflect the same terms of the 
trade and the same Time of Execution.\12\
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    \11\ Examples assume that each subscriber is a FINRA member.
    \12\ Under Rule 6710(d), the ``Time of Execution'' for a 
transaction in any TRACE-Eligible Security means ``the time when the 
Parties to a Transaction agree to all of the terms of the 
transaction that are sufficient to calculate the dollar price of the 
trade.''
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    FINRA understands that trading sessions involving U.S. Treasury 
Securities can, and often do, work in very different ways. Using the 
above example, Subscriber A may initiate a trading session to sell $25 
million in a particular U.S. Treasury Security at a specific price. 
Subscriber B, however, may only wish to purchase $10 million. In this 
case, although there will be a sell from Subscriber A to the ATS and a 
subsequent sell from the ATS to Subscriber B (and offsetting trades for 
the purchase from the ATS by Subscriber B and the purchase from 
Subscriber A by the ATS), there may be further activity during the 
trading session. To continue the example, after Subscriber B agrees to 
purchase $10 million, Subscriber C agrees to purchase $15 million at 
the same price (meaning that, at this point, Subscriber A has sold all 
$25 million of the initial order). Subscriber D then joins the trading 
session and offers to sell $10 million of the same U.S. Treasury 
Security at the same price. Subscriber E purchases $5 million, and 
Subscriber B decides to purchase an additional $5 million. If, after 
the period of time defined by the ATS, no further interest is 
indicated, the trading session closes.
Reporting Obligations Under Rule 6730
    Using the above example, at the end of the trading session, the 
individual trades are as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                                    Amount (in
             Trade No.                   Time             Subscriber              Buy/Sell           millions)
----------------------------------------------------------------------------------------------------------------
                                      11:34:02.000  Subscriber A.........  Sell.................             $25
1.................................    11:34:03.155  Subscriber B.........  Buy..................              10
2.................................    11:34:03.483  Subscriber C.........  Buy..................              15
                                      11:34:04.003  Subscriber D.........  Sell.................              10
3.................................    11:34:05.002  Subscriber E.........  Buy..................               5

[[Page 29958]]

 
4.................................    11:34:05.877  Subscriber B.........  Buy..................               5
                                                   -------------------------------------------------------------
                                      11:34:07.877                     Trading Session Closes
----------------------------------------------------------------------------------------------------------------

    FINRA understand that, under current practices, after the close of 
the trading session an ATS will provide each subscriber with a single 
trade message indicating the subscriber's aggregate activity during the 
trading session (including, for example, an aggregate size and average 
price), and that the execution time provided to a subscriber can vary 
depending upon the convention used by the particular ATS. FINRA also 
understands that, although information on the individual transactions 
within the trading session is generally available on a real-time basis 
to the subscribers during the trading session to track the status of 
the order, this information is not included on the final trade message, 
which FINRA understands currently is the message that would be used 
systematically by the member ATS and its subscribers for transaction 
reporting purposes.
    Under Rule 6730, each individual trade that occurs during a trading 
session is a separate transaction and, as such, must be reported 
individually. For example, using the example above, at 11:34:03.155 
(``Trade No. 1''), there is a trade agreed to between Subscribers A and 
B and all of the terms of the trade that are sufficient to calculate 
the dollar price of the trade are known at that time, including the 
security, the price, and the parties to the trade (i.e., the Time of 
Execution'').\13\ Thus, under current rules and guidance, FINRA would 
expect the following trade reports for Trade No. 1:
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    \13\ See supra note 12.
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     Subscriber A reports a sell to the ATS for $10 million in 
the security with a Time of Execution of 11:34:03.155.
     Subscriber B reports a purchase from the ATS for $10 
million in the security with a Time of Execution of 11:34:03.155.
     The ATS submits two reports, a buy from Subscriber A and a 
sell to Subscriber B for $10 million in the security, both with a Time 
of Execution of 11:34:03.155.

The same analysis would apply for each of the other individual trades 
that occurred during the trading session. Thus, under current TRACE 
reporting rules, the following reports would be required by all Parties 
to a Transaction with respect to the trades during the trading session 
in the above example:

----------------------------------------------------------------------------------------------------------------
                                                                                   Quantity (in       Time of
                 Trade No.                              TRACE reports                millions)       execution
----------------------------------------------------------------------------------------------------------------
1..........................................  Subscriber A sell to ATS...........             $10    11:34:03.155
                                             ATS buy from Subscriber A..........              10    11:34:03.155
                                             ATS sell to Subscriber B...........              10    11:34:03.155
                                             Subscriber B buy from ATS..........              10    11:34:03.155
2..........................................  Subscriber A sell to ATS...........              15    11:34:03.483
                                             ATS buy from Subscriber A..........              15    11:34:03.483
                                             ATS sell to Subscriber C...........              15    11:34:03.483
                                             Subscriber C buy from ATS..........              15    11:34:03.483
3..........................................  Subscriber D sell to ATS...........               5    11:34:05.002
                                             ATS buy from Subscriber D..........               5    11:34:05.002
                                             ATS sell to Subscriber E...........               5    11:34:05.002
                                             Subscriber E buy from ATS..........               5    11:34:05.002
4..........................................  Subscriber D sell to ATS...........               5    11:34:05.877
                                             ATS buy from Subscriber D..........               5    11:34:05.877
                                             ATS sell to Subscriber B...........               5    11:34:05.877
                                             Subscriber B buy from ATS..........               5    11:34:05.877
----------------------------------------------------------------------------------------------------------------

Proposed Temporary Relief
    The proposed rule change will, until July 10, 2018, permit members 
the flexibility to report trades that occurred in a U.S. Treasury 
Security executed within discrete ATS trading sessions (sometimes 
referred to as ``work-up sessions'') on an aggregate, rather than 
individual, basis. The proposed rule change is intended to provide 
members with additional time to complete systems changes necessary to 
report each individual transaction in the trading session as required 
by Rule 6730, as discussed below.
    FINRA understands that certain ATSs that are active in the market 
for U.S. Treasury Securities currently are set up to deliver aggregate 
trading session transaction information to each subscriber that 
participated in the trading session through a single trade message 
generated at the conclusion of a trading session. The ATSs use this 
final trade message for purposes of back office processes (which would 
include generating trade reports) and believe their subscribers use the 
final trade messages similarly. As a result, FINRA understands that 
significant systems changes would be required by the ATSs to create and 
generate the individual trade information within a trading session in a 
form that could be integrated into the ATSs', as well as their 
subscribers', back office processes to enable the reporting of 
individual, rather than aggregate, trading session transaction 
information to TRACE, and that these changes cannot be made by July 10, 
2017. As a result, FINRA is proposing to provide a temporary exception 
by adopting Supplementary Material .06 to permit members to report to 
TRACE aggregate, rather than individual, transaction information 
reflecting the aggregate size and average price of such transactions, 
and to permit trade reports to use a Time of Execution communicated by 
the ATS to each Party to a Transaction.\14\
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    \14\ FINRA notes that, even where aggregation is not necessary 
because only the ATS and two subscribers ultimately participated in 
a trading session resulting in a single cross, the proposed rule 
change permits members the flexibility to report a Time of Execution 
that is communicated by the ATS to each party. Thus, even where the 
trading session involves only one cross, member TRACE reports may 
reflect a Time of Execution that is, for example, the beginning of 
the trading session or the end of the trading session.

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[[Page 29959]]

    FINRA believes it is appropriate to provide the proposed relief in 
recognition of the fact that impacted members are unable to implement 
necessary changes by the July 10, 2017 effective date for TRACE 
reporting of transactions in U.S. Treasury Securities. FINRA believes 
the proposal strikes an appropriate balance in that FINRA will continue 
to receive transaction information for purchases and sales that occur 
as part of an ATS trading session, albeit aggregated. A member ATS 
availing itself of this exception must provide individual transaction 
information for each trade in a U.S. Treasury Security occurring in a 
trading session to FINRA upon request. In addition, FINRA notes that 
transparency will not be impacted by the proposed temporary relief 
because transaction information in U.S. Treasury Securities currently 
is not subject to dissemination.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The operative date of the proposed rule change will be 
July 10, 2017 and it will sunset on July 10, 2018, which FINRA believes 
will provide members with the additional time necessary to complete 
necessary systems changes and result in a more orderly implementation 
of the TRACE reporting requirements for Treasury securities.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\15\ 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. Based on discussions with multiple member ATSs, FINRA 
believes that additional time is necessary to permit members to program 
systems to comply with Rule 6730, which, beginning on July 10, 2017, 
will require that members report to TRACE each individual transaction 
in a U.S. Treasury Security.
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    \15\ 15 U.S.C. 78o-3(b)(6).
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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.
    The proposed rule change should benefit members whose trades are 
executed on member ATSs as part of a trading session, as it provides 
members with additional time to build or upgrade systems to enable 
reporting of individual transactions in the trading section. While the 
proposed rule change will temporarily lessen the requirements on ATSs 
and their subscribers as compared to other market participants, FINRA 
believes the proposed rule change is appropriate to allow sufficient 
time to make the technological changes necessary to comply with the 
rule and such accommodation will be limited in duration. Moreover, 
FINRA retains the right to require a member ATS availing itself of this 
exception to provide individual transaction information for each trade 
in a U.S. Treasury Security occurring in a trading session upon 
request.
    The proposed temporary relief is not expected to undermine the 
potential benefits of Rule 6730, as the transaction information 
reflecting the aggregate size and average price of such transactions 
should still assist the regulators to conduct monitoring and 
surveillance of the U.S. Treasury Securities markets, in order to 
detect potential disruptive trading practices and risks to market 
stability.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \16\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Commission has waived the five-day prefiling requirement in this 
case.
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    FINRA has asked the Commission to waive the 30-day operative delay 
so that the proposal will become operative immediately upon filing. 
FINRA represents that it only recently was made aware of the 
significant technological changes to member systems that will be 
necessary to comply with FINRA's requirements to report transactions in 
U.S. Treasury Securities to TRACE. FINRA also represented that it was 
informed by members that these systems changes cannot be completed by 
July 10, 2017, the date on which the new reporting requirements come 
into force. The proposed rule change appears to be a reasonable 
accommodation for members who are affected by unforeseen difficulties 
associated with systems reprogramming because it is of reasonably short 
duration and FINRA will still be able to request full transaction 
information from an ATS that benefits from the accommodation. 
Therefore, to facilitate orderly application of the TRACE reporting 
rules on July 10, 2017, the Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest and designates the proposal operative upon filing.\18\
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    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use 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-2017-023 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange

[[Page 29960]]

Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2017-023. 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 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-2017-023 and should be 
submitted on or before July 21, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-13703 Filed 6-29-17; 8:45 am]
 BILLING CODE 8011-01-P
29956 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices

this clause, thereby providing certainty Electronic Comments SECURITIES AND EXCHANGE
to market participants that the COMMISSION
minimum price fluctuation is stated • Use the Commission’s Internet
comment form (http://www.sec.gov/ [Release No. 34–81018; File No. SR–FINRA–
solely in OneChicago Rule 902, and will 2017–023]
not be amended other than through the rules/sro.shtml); or
rule change process. OneChicago • Send an email to rule-comments@ Self-Regulatory Organizations;
believes that its existing surveillance sec.gov. Please include File Number SR– Financial Industry Regulatory
systems and capacity is sufficient to OC–2017–02 on the subject line. Authority, Inc.; Notice of Filing and
monitor and review trading activity for Immediate Effectiveness of Proposed
any violative trading in the SSF market. Paper Comments
Rule Change Relating to Reporting of
B. Self-Regulatory Organization’s • Send paper comments in triplicate Certain ATS Transactions in U.S.
Statement on Burden on Competition to Secretary, Securities and Exchange Treasury Securities
OneChicago does not believe that the Commission, 100 F Street NE., June 26, 2017.
rule change will impose any burden on Washington, DC 20549–1090. Pursuant to Section 19(b)(1) of the
competition not necessary or All submissions should refer to File Securities Exchange Act of 1934
appropriate in furtherance of the Number SR–OC–2017–02. This file (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
purposes of the Act, in that the rule number should be included on the notice is hereby given that on June 23,
change simply allows an additional type subject line if email is used. To help the 2017, Financial Industry Regulatory
of transaction to be priced in up to four Authority, Inc. (‘‘FINRA’’) filed with the
Commission process and review your
decimal places. This change will allow Securities and Exchange Commission
comments more efficiently, please use
all market participants to more precisely (‘‘Commission’’) the proposed rule
price the interest rate component of only one method. The Commission will
change as described in Items I and II
their outright transactions. By pricing post all comments on the Commission’s below, which Items have been prepared
futures trades more precisely, market Internet Web site (http://www.sec.gov/ by FINRA. FINRA has designated the
participants will be able to submit more rules/sro.shtml). Copies of the proposed rule change as constituting a
competitive bids and offers on the submission, all subsequent ‘‘non-controversial’’ rule change under
Exchange. Further, as described above, amendments, all written statements paragraph (f)(6) of Rule 19b–4 under the
OneChicago believes this rule change with respect to the proposed rule Act,3 which renders the proposal
will increase competition in that it will change that are filed with the effective upon receipt of this filing by
allow all market participants to transact Commission, and all written the Commission. The Commission is
at four decimal places, and not just communications relating to the publishing this notice to solicit
sophisticated parties who qualify as proposed rule change between the comments on the proposed rule change
eligible contract participants. Commission and any person, other than from interested persons.
those that may be withheld from the
C. Self-Regulatory Organization’s I. Self-Regulatory Organization’s
Statement on Comments on the public in accordance with the
Statement of the Terms of Substance of
Proposed Rule Change Received From provisions of 5 U.S.C. 552, will be the Proposed Rule Change
Members, Participants, or Others available for Web site viewing and
printing in the Commission’s Public FINRA is proposing to amend FINRA
No written comments were solicited Reference Room, 100 F Street NE., Rule 6730 (Transaction Reporting) to
or received with respect to the proposed provide a temporary exception to permit
Washington, DC 20549 on official
rule change. member alternative trading systems
business days between the hours of
(‘‘ATSs’’) and member subscribers to
III. Date of Effectiveness of the 10:00 a.m. and 3:00 p.m. Copies of the
report aggregate trade information to
Proposed Rule Change and Timing for filing also will be available for
TRACE for certain transactions in U.S.
Commission Action inspection and copying at the principal Treasury Securities.
The proposed rule change has become office of the Exchange. All comments The text of the proposed rule change
effective on June 16, 2017 and will be received will be posted without change; is available on FINRA’s Web site at
implemented on July 10, 2017. the Commission does not edit personal http://www.finra.org, at the principal
At any time within 60 days of the date identifying information from office of FINRA and at the
of effectiveness of the proposed rule submissions. You should submit only Commission’s Public Reference Room.
change, the Commission, after information that you wish to make
consultation with the CFTC, may publicly available. All submissions II. Self-Regulatory Organization’s
summarily abrogate the proposed rule Statement of the Purpose of, and
should refer to File Number SR–OC–
change and require that the proposed Statutory Basis for, the Proposed Rule
2017–02 and should be submitted on or
rule change be refiled in accordance Change
before July 21, 2017.
with the provisions of Section 19(b)(1) In its filing with the Commission,
of the Act.20 For the Commission, by the Division of
FINRA included statements concerning
Trading and Markets, pursuant to delegated
the purpose of and basis for the
IV. Solicitation of Comments authority.21
proposed rule change and discussed any
Interested persons are invited to Robert W. Errett, comments it received on the proposed
submit written data, views, and
mstockstill on DSK30JT082PROD with NOTICES

Deputy Secretary. rule change. The text of these statements
arguments concerning the foregoing, [FR Doc. 2017–13707 Filed 6–29–17; 8:45 am] may be examined at the places specified
including whether the proposed rule BILLING CODE 8011–01–P in Item IV below. FINRA has prepared
change is consistent with the Act. summaries, set forth in sections A, B,
Comments may be submitted by any of
the following methods: 1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
20 15 U.S.C. 78s(b)(1). 21 17 CFR 200.30–3(a)(12). 3 17 CFR 240.19b–4(f)(6).

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Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices 29957

and C below, of the most significant is required to report two transactions to Subscriber A and a sell to Subscriber B.
aspects of such statements. TRACE: (1) The purchase of the security Under current rules, all of the reports
from one counterparty and (2) the sale are required to reflect the same terms of
A. Self-Regulatory Organization’s
of the security to the other counterparty. the trade and the same Time of
Statement of the Purpose of, and the
In addition, each FINRA member Execution.12
Statutory Basis for, the Proposed Rule
counterparty is required to report a buy FINRA understands that trading
Change
or a sell, as applicable, identifying the sessions involving U.S. Treasury
1. Purpose ATS as the counterparty to each trade.9 Securities can, and often do, work in
FINRA is proposing to amend Rule FINRA understands that ATSs that very different ways. Using the above
6730 to add new Supplementary permit subscribers to trade U.S. example, Subscriber A may initiate a
Material .06 (Temporary Exception for Treasury Securities on their platforms trading session to sell $25 million in a
Aggregate Transaction Reporting of U.S. may permit subscribers to initiate a particular U.S. Treasury Security at a
Treasury Securities Executed in ATS ‘‘trading session,’’ which is a discrete or specific price. Subscriber B, however,
Trading Sessions) to provide members timed order-matching event during may only wish to purchase $10 million.
additional time to report individual which one or more additional In this case, although there will be a sell
transactions in U.S. Treasury Securities, subscribers can interact with the from Subscriber A to the ATS and a
as required by Rule 6730 (Transaction original order on the opposite side of subsequent sell from the ATS to
Reporting), that occur on member ATSs the market or add to the initial order on Subscriber B (and offsetting trades for
as part of a trading session, as described the same side of the market.10 Although the purchase from the ATS by
below. it is possible that some trading sessions Subscriber B and the purchase from
involve a single transaction between Subscriber A by the ATS), there may be
Background two counterparties like a typical trade, further activity during the trading
FINRA Rule 6730 sets forth a FINRA understands that most trading session. To continue the example, after
member’s trade reporting obligations sessions include multiple participants Subscriber B agrees to purchase $10
with regard to transactions in TRACE- on one or both sides of the market million, Subscriber C agrees to purchase
Eligible Securities, which, beginning during the time period the trading $15 million at the same price (meaning
July 10, 2017,4 will include U.S. session is open. that, at this point, Subscriber A has sold
Treasury Securities.5 Pursuant to Rule For example, suppose Subscriber A all $25 million of the initial order).
6730, each FINRA member that is a initiates a trading session to sell $25 Subscriber D then joins the trading
‘‘Party to a Transaction’’ 6 in a TRACE- million of a particular U.S. Treasury session and offers to sell $10 million of
Eligible Security is obligated to report Security at a specific price. In a typical the same U.S. Treasury Security at the
the transaction to TRACE within the crossing scenario involving an ATS, the same price. Subscriber E purchases $5
prescribed period of time. The term ATS would match the incoming sell million, and Subscriber B decides to
‘‘Party to a Transaction’’ means an order with a buy order from Subscriber purchase an additional $5 million. If,
introducing broker-dealer, if any, an B thus executing some or all of the after the period of time defined by the
executing broker-dealer, or a customer.7 original order. In this scenario, under ATS, no further interest is indicated, the
Thus, in a transaction in a TRACE- TRACE rules, Subscriber A is required trading session closes.
Eligible Security executed through an to report a sell to the ATS for the
Reporting Obligations Under Rule 6730
ATS between members, each member amount crossed, and Subscriber B
(and the ATS itself) is considered a would report a purchase from the ATS Using the above example, at the end
Party to a Transaction and is required to for that same amount.11 The ATS would of the trading session, the individual
report the trade.8 Specifically, the ATS report two trades: A purchase from trades are as follows:

Amount
Trade No. Time Subscriber Buy/Sell (in millions)

11:34:02.000 Subscriber A .......................................... Sell ......................................................... $25
1 ...................................... 11:34:03.155 Subscriber B .......................................... Buy ......................................................... 10
2 ...................................... 11:34:03.483 Subscriber C .......................................... Buy ......................................................... 15
11:34:04.003 Subscriber D .......................................... Sell ......................................................... 10
3 ...................................... 11:34:05.002 Subscriber E .......................................... Buy ......................................................... 5

4 See Securities Exchange Act Release No. 79116 8 See Question 7.4 in FINRA’s Reporting of occurring through its system. Regulatory Notice 14–
(October 18, 2016), 81 FR 73167 (October 24, 2016) Corporate and Agencies Debt Frequently Asked 53 (November 2014).
(Notice of Filing of Amendment No. 1 and Order Questions: Who reports trades executed through 10 Different members use varying nomenclature to
Granting Accelerated Approval of File No. SR– electronic trading systems that are themselves describe trading sessions. For example, one member
FINRA–2016–027). See also Regulatory Notice 16– broker-dealers? All FINRA members that are ATS refers to these sessions as ‘‘workups’’ or
39 (October 2016). ‘‘parties to a transaction’’ have a trade reporting ‘‘workup sessions.’’ In addition, the length of time
5 Rule 6710(p) will define a ‘‘U.S. Treasury obligation under TRACE Rules. Where two FINRA a session remains open and other characteristics of
members effect/execute a transaction through an
Security’’ as ‘‘a security, other than a savings bond, how a session is structured may change from
electronic trading system that is registered as a
issued by the U.S. Department of the Treasury to member to member. As used in the proposed rule
broker-dealer, both members, as well as the
fund the operations of the federal government or to change, the term ‘‘trading session’’ is meant to
electronic trading system would have a trade
mstockstill on DSK30JT082PROD with NOTICES

retire such outstanding securities.’’ The term ‘‘U.S. reporting obligation. See Reporting of Corporate and capture all variations of such types of sessions that
Treasury Security’’ also includes separate principal Agencies Debt Frequently Asked Questions, member ATSs may use.
and interest components of a U.S. Treasury Security available at http://www.finra.org/industry/faq- 11 Examples assume that each subscriber is a
that has been separated pursuant to the Separate reporting-corporate-and-agencies-debt-frequently- FINRA member.
Trading of Registered Interest and Principal of asked-questions-faq#7-4. See also Regulatory Notice 12 Under Rule 6710(d), the ‘‘Time of Execution’’
Securities (‘‘STRIPS’’) program operated by the U.S. 14–53 (November 2014). for a transaction in any TRACE-Eligible Security
Department of Treasury. See Rule 6710(p). 9 Whether the ATS is involved in the clearance means ‘‘the time when the Parties to a Transaction
6 See Rule 6710(e).
and settlement of a transaction does not change the agree to all of the terms of the transaction that are
7 See supra note 6. TRACE trade reporting obligation for trades sufficient to calculate the dollar price of the trade.’’

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FINRA believes it is appropriate to executed on member ATSs as part of a represents that it only recently was
provide the proposed relief in trading session, as it provides members made aware of the significant
recognition of the fact that impacted with additional time to build or upgrade technological changes to member
members are unable to implement systems to enable reporting of systems that will be necessary to
necessary changes by the July 10, 2017 individual transactions in the trading comply with FINRA’s requirements to
effective date for TRACE reporting of section. While the proposed rule change report transactions in U.S. Treasury
transactions in U.S. Treasury Securities. will temporarily lessen the requirements Securities to TRACE. FINRA also
FINRA believes the proposal strikes an on ATSs and their subscribers as represented that it was informed by
appropriate balance in that FINRA will compared to other market participants, members that these systems changes
continue to receive transaction FINRA believes the proposed rule cannot be completed by July 10, 2017,
information for purchases and sales that change is appropriate to allow sufficient the date on which the new reporting
occur as part of an ATS trading session, time to make the technological changes requirements come into force. The
albeit aggregated. A member ATS necessary to comply with the rule and proposed rule change appears to be a
availing itself of this exception must such accommodation will be limited in reasonable accommodation for members
provide individual transaction duration. Moreover, FINRA retains the who are affected by unforeseen
information for each trade in a U.S. right to require a member ATS availing difficulties associated with systems
Treasury Security occurring in a trading itself of this exception to provide reprogramming because it is of
session to FINRA upon request. In individual transaction information for reasonably short duration and FINRA
addition, FINRA notes that transparency each trade in a U.S. Treasury Security will still be able to request full
will not be impacted by the proposed occurring in a trading session upon transaction information from an ATS
temporary relief because transaction request. that benefits from the accommodation.
information in U.S. Treasury Securities The proposed temporary relief is not Therefore, to facilitate orderly
currently is not subject to expected to undermine the potential application of the TRACE reporting
dissemination. benefits of Rule 6730, as the transaction rules on July 10, 2017, the Commission
FINRA has filed the proposed rule information reflecting the aggregate size believes that waiving the 30-day
change for immediate effectiveness. The and average price of such transactions operative delay is consistent with the
operative date of the proposed rule should still assist the regulators to protection of investors and the public
change will be July 10, 2017 and it will conduct monitoring and surveillance of interest and designates the proposal
sunset on July 10, 2018, which FINRA the U.S. Treasury Securities markets, in operative upon filing.18
believes will provide members with the order to detect potential disruptive At any time within 60 days of the
additional time necessary to complete trading practices and risks to market filing of the proposed rule change, the
necessary systems changes and result in stability. Commission summarily may
a more orderly implementation of the C. Self-Regulatory Organization’s temporarily suspend such rule change if
TRACE reporting requirements for Statement on Comments on the it appears to the Commission that such
Treasury securities. Proposed Rule Change Received From action is: (i) Necessary or appropriate in
2. Statutory Basis Members, Participants, or Others the public interest; (ii) for the protection
Written comments were neither of investors; or (iii) otherwise in
FINRA believes that the proposed rule furtherance of the purposes of the Act.
change is consistent with the provisions solicited nor received.
If the Commission takes such action, the
of Section 15A(b)(6) of the Act,15 which III. Date of Effectiveness of the Commission shall institute proceedings
requires, among other things, that Proposed Rule Change and Timing for to determine whether the proposed rule
FINRA rules must be designed to Commission Action should be approved or disapproved.
prevent fraudulent and manipulative
Because the foregoing proposed rule IV. Solicitation of Comments
acts and practices, to promote just and
change does not: (i) Significantly affect
equitable principles of trade, and, in Interested persons are invited to
the protection of investors or the public
general, to protect investors and the submit written data, views, and
interest; (ii) impose any significant
public interest. Based on discussions arguments concerning the foregoing,
burden on competition; and (iii) become
with multiple member ATSs, FINRA including whether the proposed rule
operative for 30 days from the date on
believes that additional time is change is consistent with the Act.
which it was filed, or such shorter time
necessary to permit members to program Comments may be submitted by any of
as the Commission may designate, it has
systems to comply with Rule 6730, the following methods:
become effective pursuant to Section
which, beginning on July 10, 2017, will
19(b)(3)(A)(iii) of the Act 16 and Electronic Comments
require that members report to TRACE
subparagraph (f)(6) of Rule 19b–4
each individual transaction in a U.S.
thereunder.17 • Use the Commission’s Internet
Treasury Security. FINRA has asked the Commission to comment form (http://www.sec.gov/
B. Self-Regulatory Organization’s waive the 30-day operative delay so that rules/sro.shtml); or
Statement on Burden on Competition the proposal will become operative • Send an email to rule-comments@
immediately upon filing. FINRA sec.gov. Please include File Number SR–
FINRA does not believe that the FINRA–2017–023 on the subject line.
proposed rule change will result in any 16 15 U.S.C. 78s(b)(3)(A)(iii).
burden on competition that is not 17 17
Paper Comments
CFR 240.19b–4(f)(6). In addition, Rule 19b–
mstockstill on DSK30JT082PROD with NOTICES

necessary or appropriate in furtherance 4(f)(6)(iii) requires a self-regulatory organization to • Send paper comments in triplicate
of the purposes of the Act. give the Commission written notice of its intent to to Secretary, Securities and Exchange
The proposed rule change should file the proposed rule change, along with a brief
description and text of the proposed rule change,
benefit members whose trades are at least five business days prior to the date of filing 18 For purposes only of waiving the 30-day

of the proposed rule change, or such shorter time operative delay, the Commission has also
example, the beginning of the trading session or the as designated by the Commission. The Commission considered the proposed rule’s impact on
end of the trading session. has waived the five-day prefiling requirement in efficiency, competition, and capital formation. See
15 15 U.S.C. 78o–3(b)(6). this case. 15 U.S.C. 78c(f).

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29960 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices

Commission, 100 F Street NE., For the Commission, by the Division of solicit comments on the proposed rule
Washington, DC 20549–1090. Trading and Markets, pursuant to delegated change from interested persons.
authority.19
All submissions should refer to File Robert W. Errett, I. Self-Regulatory Organization’s
Number SR–FINRA–2017–023. This file Deputy Secretary.
Statement of the Terms of the Substance
number should be included on the of the Proposed Rule Change
[FR Doc. 2017–13703 Filed 6–29–17; 8:45 am]
subject line if email is used. To help the The Exchange proposes to extend the
BILLING CODE 8011–01–P
Commission process and review your operation of a pilot program that
comments more efficiently, please use eliminates position and exercise limits
only one method. The Commission will SECURITIES AND EXCHANGE for physically-settled SPY options
post all comments on the Commission’s COMMISSION (‘‘SPY Pilot Program’’). The text of the
Internet Web site (http://www.sec.gov/ proposed rule change is provided
rules/sro.shtml). Copies of the [Release No. 34–81017; File No. SR–CBOE– below.
submission, all subsequent 2017–050]
(additions are italicized; deletions are
amendments, all written statements [bracketed])
with respect to the proposed rule Self-Regulatory Organizations;
Chicago Board Options Exchange, * * * * *
change that are filed with the
Incorporated; Notice of Filing and Chicago Board Options Exchange,
Commission, and all written
Immediate Effectiveness of a Proposed Incorporated Rules
communications relating to the
Rule Change To Extend a Pilot
proposed rule change between the * * * * *
Program That Eliminates Position and
Commission and any person, other than
Exercise Limits for Physically-Settled Rule 4.11. Position Limits
those that may be withheld from the
SPDR S&P 500 ETF Trust (‘‘SPY’’)
public in accordance with the No changes.
Options
provisions of 5 U.S.C. 552, will be . . . Interpretations and Policies:
available for Web site viewing and June 26, 2017. .01–.06 No change.
printing in the Commission’s Public Pursuant to Section 19(b)(1) of the .07 The position limits under Rule
Reference Room, 100 F Street NE., Securities Exchange Act of 1934 (the 4.11 applicable to options on shares or
Washington, DC 20549 on official ‘‘Act’’),1 and Rule 19b–4 thereunder,2 other securities that represent interests
business days between the hours of notice is hereby given that on June 22, in registered investment companies (or
10:00 a.m. and 3:00 p.m. Copies of the 2017, Chicago Board Options Exchange, series thereof) organized as open-end
filing also will be available for Incorporated (the ‘‘Exchange’’ or management investment companies,
inspection and copying at the principal ‘‘CBOE’’) filed with the Securities and unit investment trusts or similar entities
office of FINRA. All comments received Exchange Commission (‘‘Commission’’) that satisfy the criteria set forth in
will be posted without change; the the proposed rule change as described Interpretation and Policy .06 under Rule
Commission does not edit personal in Items I and II below, which Items 5.3 shall be the same as the position
identifying information from have been prepared by the Exchange. limits applicable to equity options
submissions. You should submit only The Exchange filed the proposal as a under Rule 4.11 and Interpretations and
information that you wish to make ‘‘non-controversial’’ proposed rule Policies thereunder; except that the
available publicly. All submissions change pursuant to Section position limits under Rule 4.11
should refer to File Number SR–FINRA– 19(b)(3)(A)(iii) of the Act 3 and Rule applicable to option contracts on the
2017–023 and should be submitted on 19b–4(f)(6) thereunder.4 The securities listed in the below chart are
or before July 21, 2017. Commission is publishing this notice to as follows:

Security underlying option Position limit

The DIAMONDS Trust (DIA) ................................................................................. 300,000 contracts.
The Standard and Poor’s Depositary Receipt Trust (SPY) .................................. None.
The iShares Russell 2000 Index Fund (IWM) ....................................................... 500,000 contracts.
The PowerShares QQQ Trust (QQQ) ................................................................... 900,000 contracts.
The iShares MSCI Emerging Markets Index Fund (EEM) .................................... 500,000 contracts.

Position limits for SPY options are II. Self-Regulatory Organization’s forth in sections A, B, and C below, of
subject to a pilot program through [July Statement of the Purpose of, and the most significant aspects of such
12, 2017] July 12, 2018. Statutory Basis for, the Proposed Rule statements.
.08 No change. Change
A. Self-Regulatory Organization’s
* * * * * In its filing with the Commission, the Statement of the Purpose of, and
The text of the proposed rule change Exchange included statements Statutory Basis for, the Proposed Rule
is also available on the Exchange’s Web concerning the purpose of and basis for Change
site (http://www.cboe.com/AboutCBOE/ the proposed rule change and discussed
1. Purpose
any comments it received on the
mstockstill on DSK30JT082PROD with NOTICES

CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary, proposed rule change. The text of these The Exchange proposes to amend
and at the Commission’s Public statements may be examined at the Interpretation and Policy .07 to Rule
Reference Room. places specified in Item IV below. The 4.11 (Position Limits) to extend the
Exchange has prepared summaries, set
19 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. 4 17 CFR 240.19b–4(f)(6).
1 15 U.S.C. 78s(b)(1). 3 15 U.S.C. 78s(b)(3)(A)(iii).

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Document Created: 2017-06-30 06:01:15
Document Modified: 2017-06-30 06:01:15
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 29956