82_FR_37637 82 FR 37484 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving Proposed Rule Change To Make Available a New TRACE Security Activity Report

82 FR 37484 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving Proposed Rule Change To Make Available a New TRACE Security Activity Report

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 153 (August 10, 2017)

Page Range37484-37485
FR Document2017-16831

Federal Register, Volume 82 Issue 153 (Thursday, August 10, 2017) 
[Federal Register Volume 82, Number 153 (Thursday, August 10, 2017)]
[Notices]
[Pages 37484-37485]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-16831]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81318; File No. SR-FINRA-2017-021]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving Proposed Rule Change To Make Available 
a New TRACE Security Activity Report

August 4, 2017.

I. Introduction

    On June 19, 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 make available a new ``Security 
Activity Report.'' The proposed rule change was published for comment 
in the Federal Register on June 29, 2017.\3\ The Commission received 
two comments on the proposal.\4\ On August 3, 2017, FINRA submitted a 
letter responding to comments.\5\ As discussed below, the Commission is 
approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 81007 (June 23, 
2017), 82 FR 29602 (June 29, 2017) (``Notice'').
    \4\ See letters to Brent J. Fields, Secretary, Commission, from 
Bennett Golub, Chief Risk Officer, and Alexis Rosenblum, Director, 
BlackRock, Inc., dated July 20, 2017 (``BlackRock Letter''); and 
Sean Davy, Managing Director, Capital Markets Division, Securities 
Industry and Financial Markets Association (``SIFMA''), dated July 
20, 2017 (``SIFMA Letter'').
    \5\ See letter to Brent J. Fields, Secretary Commission, from 
Racquel L. Russell, Associate General Counsel, FINRA, dated August 
3, 2017 (``Response Letter'').
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II. Description of the Proposal

    FINRA Rule 7730, among other things, sets forth the TRACE data 
products offered by FINRA. FINRA proposed to amend Rule 7730 to make 
available a new Security Activity Report, which will provide aggregated 
statistics by security for TRACE-Eligible Securities that are corporate 
or agency bonds (collectively ``CA Bonds''). FINRA stated that the 
Security Activity Report will include basic descriptive elements for 
each CA Bond, such as the issuer's name and the security's coupon and 
maturity date, as well as aggregate transaction statistics. These 
statistics will include par value volume and number of customer buy 
transactions, par value volume and number of customer sell 
transactions, and par value volume and number of inter-dealer 
transactions.\6\ FINRA noted that, currently, transactions whose volume 
is over the dissemination cap \7\ becomes available only after 18 
months as part of the Historic TRACE Data product.\8\ FINRA will 
provide the Security Activity Report on a 90-day delay to address 
potential confidentiality concerns.
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    \6\ The Security Activity Report will reflect differing levels 
of par value volume detail depending on whether the transaction size 
is larger than the dissemination cap and whether there are more than 
six transactions occurring in a calendar month. Additionally, if a 
CA Bond has more than six transactions in a month, the par value 
volume traded would appear on the report within specified size 
categories along with a range of the number of transactions that 
occur within the specified volume size categories. These size 
categories will be announced in the Regulatory Notice which 
announces the effective date of the Security Activity Report.
    \7\ Currently, the actual par value traded is publicly 
disseminated only if it is below the size cap in that asset class. 
For transactions in investment grade CA bonds over a $5 million par 
value, TRACE disseminates the size as ``5MM+.'' For transactions in 
non-investment grade corporate bonds over a $1 million par value, 
TRACE disseminates the size as ``1MM+.''
    \8\ The Commission notes that on June 23, 2017 it approved a 
proposed rule change to reduce the minimum delay from 18 months to 
six months for transactions included in the Historic TRACE Data Sets 
relating to CA Bonds. This approval occurred after the current 
proposed rule change was filed with the Commission. See Securities 
Exchange Act Release No. 81011 (June 23, 2017), 82 FR 29597 (June 
29, 2017). The effective date of this change is October 2, 2017. See 
also, FINRA Regulatory Notice 17-23.
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    The Security Activity Report also will provide information 
regarding the number of unique MPIDs that report transactions in a 
particular security. The report will provide the aggregate activity of 
the five most active MPIDs in each CA Bond and the number of unique 
MPIDs for disseminated uncapped and capped transactions.\9\ In 
addition, the report will include the percentage, in aggregate, of the 
total number of transactions and the total par value volume traded by 
the top five MPIDs for each particular security.
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    \9\ FINRA stated that the number of unique reporting MPIDs will 
be provided by displaying either the actual number of unique MPIDs 
where there are six or more unique MPIDs or as ``1 to 5'' where 
there are five or fewer reporting MPIDs. Specific market 
participants that engaged in the transactions will not be identified 
in the Security Activity Report.
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    FINRA believes that the Security Activity Report might be useful 
for both business and regulatory purposes. For example, FINRA noted 
that members might use the information provided in the Security 
Activity Report to better ascertain their relative trading activity in 
particular CA Bonds. Interested parties also could use the information 
in the Security Activity Report in connection with regulatory 
obligations, such as assessing, classifying, and reviewing the 
liquidity risk of individual securities pursuant to Rule 22e-4 under 
the Investment Company Act.\10\
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    \10\ 17 CFR 270.22e-4.
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    FINRA has stated that it will announce in a Regulatory Notice the 
effective date of the proposed rule change, which will be no later than 
365 days following Commission approval.\11\ FINRA intends to establish 
a fee for the TRACE Security Activity Report in the future. The fee 
will be established pursuant to a separate rule filing.
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    \11\ In its Response Letter FINRA stated that it intends for the 
effective date for the Security Activity Report to be no sooner than 
February 1, 2018. See Response Letter at 2.
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III. Summary of Comments and FINRA's Response

    As previously noted, the Commission received two comment letters 
\12\ and a FINRA Response Letter \13\ on the proposed rule change. Both 
commenters expressed general support for the proposal and noted that 
the additional data provided by the Security Activity Report would 
assist in regulatory compliance with Rule 22e-4.\14\ One commenter 
raised concerns about the implementation, calculation, and the format 
of the Security Activity Report.\15\ This commenter noted that the 
delay period reduction for the Historic TRACE Data product from 18 
months to six months had the potential to impact market participant 
behavior, and recommended delaying the implementation of the Security 
Activity

[[Page 37485]]

Report for at least six months from the effective date of the reduced 
delay period.\16\ FINRA disagreed that an additional implementation 
delay related to the Historic TRACE Data product was necessary for the 
Security Activity Report. FINRA stated that proposed features of the 
Security Activity Report, such as the 90-day publication delay and 
other grouping of activity reduce information leakage risks and 
mitigate any potential impacts.\17\ FINRA stated that it intends for 
the effective date of the Security Activity Report to be no sooner than 
February 1, 2018.\18\
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    \12\ See supra note 4.
    \13\ See supra note 5.
    \14\ See SIFMA Letter at 1; BlackRock Letter at 1.
    \15\ See SIFMA Letter at 2-3.
    \16\ See id. at 2.
    \17\ See Response Letter at 2.
    \18\ See id.
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    This commenter also believed there would be confidentiality 
concerns if market concentration percentages were not aggregated across 
the top five MPIDs for each particular security.\19\ In its Response 
Letter, FINRA clarified and reiterated that the activity of the top 
five MPIDs will be expressed in aggregate figures.\20\
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    \19\ See SIFMA Letter at 2.
    \20\ See Response Letter at 2.
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    Finally, this commenter stated that it would be beneficial for 
FINRA to publicly share a draft template of the Security Activity 
Report so that market participants could educate themselves on the 
format and contents of the report.\21\ FINRA responded that it intends 
to post a file layout for the Security Activity Report on its Web site 
at least 30 days before the Security Activity Report's effective 
date.\22\
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    \21\ See SIFMA Letter at 2-3.
    \22\ See Response Letter at 2.
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IV. Discussion

    After careful 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.\23\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 15A(b)(6) of the Act,\24\ 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. The 
Commission does not believe that commenters raised any issue that would 
preclude approval of FINRA's proposal. The Commission notes that the 
Security Activity Report does not require member firms to provide FINRA 
with any additional data. The product is optional and responds to 
consumer demand for a more useful market data product. Finally, the 
Security Activity Report appears reasonably designed to promote 
transparency while minimizing the potential for information leakage.
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    \23\ 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).
    \24\ 15 U.S.C. 78o-3(b)(6).
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IV. Conclusion

    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\25\ that the proposed rule change (SR-FINRA-2017-021) be, and hereby 
is, approved.
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    \25\ 15 U.S.C. 78s(b)(2).
    \26\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-16831 Filed 8-9-17; 8:45 am]
 BILLING CODE 8011-01-P

37484 Federal Register / Vol. 82, No. 153 / Thursday, August 10, 2017 / Notices office of the Exchange. All comments Commission is approving the proposed capped transactions.9 In addition, the received will be posted without change; rule change. report will include the percentage, in the Commission does not edit personal aggregate, of the total number of II. Description of the Proposal identifying information from transactions and the total par value submissions. You should submit only FINRA Rule 7730, among other volume traded by the top five MPIDs for information that you wish to make things, sets forth the TRACE data each particular security. available publicly. All submissions products offered by FINRA. FINRA FINRA believes that the Security should refer to File Number SR–CHX– proposed to amend Rule 7730 to make Activity Report might be useful for both 2017–12, and should be submitted on or available a new Security Activity business and regulatory purposes. For before August 31, 2017. Report, which will provide aggregated example, FINRA noted that members statistics by security for TRACE-Eligible might use the information provided in For the Commission, by the Division of Securities that are corporate or agency the Security Activity Report to better Trading and Markets, pursuant to delegated authority.45 bonds (collectively ‘‘CA Bonds’’). ascertain their relative trading activity FINRA stated that the Security Activity in particular CA Bonds. Interested Eduardo A. Aleman, Report will include basic descriptive parties also could use the information in Assistant Secretary. elements for each CA Bond, such as the [FR Doc. 2017–16829 Filed 8–9–17; 8:45 am] the Security Activity Report in issuer’s name and the security’s coupon connection with regulatory obligations, BILLING CODE 8011–01–P and maturity date, as well as aggregate such as assessing, classifying, and transaction statistics. These statistics reviewing the liquidity risk of will include par value volume and individual securities pursuant to Rule SECURITIES AND EXCHANGE number of customer buy transactions, COMMISSION 22e–4 under the Investment Company par value volume and number of Act.10 [Release No. 34–81318; File No. SR–FINRA– customer sell transactions, and par FINRA has stated that it will 2017–021] value volume and number of inter- announce in a Regulatory Notice the dealer transactions.6 FINRA noted that, effective date of the proposed rule Self-Regulatory Organizations; currently, transactions whose volume is change, which will be no later than 365 Financial Industry Regulatory over the dissemination cap 7 becomes days following Commission approval.11 Authority, Inc.; Order Approving available only after 18 months as part of FINRA intends to establish a fee for the Proposed Rule Change To Make the Historic TRACE Data product.8 TRACE Security Activity Report in the Available a New TRACE Security FINRA will provide the Security future. The fee will be established Activity Report Activity Report on a 90-day delay to pursuant to a separate rule filing. address potential confidentiality August 4, 2017. concerns. III. Summary of Comments and I. Introduction The Security Activity Report also will FINRA’s Response provide information regarding the On June 19, 2017, the Financial As previously noted, the Commission number of unique MPIDs that report Industry Regulatory Authority, Inc. received two comment letters 12 and a transactions in a particular security. The (‘‘FINRA’’) filed with the Securities and FINRA Response Letter 13 on the report will provide the aggregate activity Exchange Commission (‘‘Commission’’), proposed rule change. Both commenters of the five most active MPIDs in each pursuant to Section 19(b)(1) of the expressed general support for the CA Bond and the number of unique Securities Exchange Act of 1934 proposal and noted that the additional MPIDs for disseminated uncapped and (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a data provided by the Security Activity proposed rule change to amend FINRA 6 The Security Activity Report will reflect Report would assist in regulatory Rule 7730 (Trade Reporting and differing levels of par value volume detail compliance with Rule 22e–4.14 One Compliance Engine (‘‘TRACE’’)) to make depending on whether the transaction size is larger commenter raised concerns about the available a new ‘‘Security Activity than the dissemination cap and whether there are implementation, calculation, and the more than six transactions occurring in a calendar format of the Security Activity Report.15 Report.’’ The proposed rule change was month. Additionally, if a CA Bond has more than published for comment in the Federal six transactions in a month, the par value volume This commenter noted that the delay Register on June 29, 2017.3 The traded would appear on the report within specified period reduction for the Historic TRACE Commission received two comments on size categories along with a range of the number of Data product from 18 months to six transactions that occur within the specified volume months had the potential to impact the proposal.4 On August 3, 2017, size categories. These size categories will be FINRA submitted a letter responding to announced in the Regulatory Notice which market participant behavior, and comments.5 As discussed below, the announces the effective date of the Security recommended delaying the Activity Report. implementation of the Security Activity 7 Currently, the actual par value traded is publicly 45 17 CFR 200.30–3(a)(12). 1 15 disseminated only if it is below the size cap in that 9 FINRA stated that the number of unique U.S.C. 78s(b)(1). asset class. For transactions in investment grade CA 2 17 CFR 240.19b–4. reporting MPIDs will be provided by displaying bonds over a $5 million par value, TRACE either the actual number of unique MPIDs where 3 See Securities Exchange Act Release No. 81007 disseminates the size as ‘‘5MM+.’’ For transactions there are six or more unique MPIDs or as ‘‘1 to 5’’ (June 23, 2017), 82 FR 29602 (June 29, 2017) in non-investment grade corporate bonds over a $1 where there are five or fewer reporting MPIDs. (‘‘Notice’’). million par value, TRACE disseminates the size as 4 See letters to Brent J. Fields, Secretary, Specific market participants that engaged in the ‘‘1MM+.’’ transactions will not be identified in the Security Commission, from Bennett Golub, Chief Risk 8 The Commission notes that on June 23, 2017 it Activity Report. Officer, and Alexis Rosenblum, Director, approved a proposed rule change to reduce the mstockstill on DSK30JT082PROD with NOTICES 10 17 CFR 270.22e–4. BlackRock, Inc., dated July 20, 2017 (‘‘BlackRock minimum delay from 18 months to six months for 11 In its Response Letter FINRA stated that it Letter’’); and Sean Davy, Managing Director, Capital transactions included in the Historic TRACE Data Markets Division, Securities Industry and Financial intends for the effective date for the Security Sets relating to CA Bonds. This approval occurred Markets Association (‘‘SIFMA’’), dated July 20, Activity Report to be no sooner than February 1, after the current proposed rule change was filed 2017 (‘‘SIFMA Letter’’). 2018. See Response Letter at 2. with the Commission. See Securities Exchange Act 12 See supra note 4. 5 See letter to Brent J. Fields, Secretary Release No. 81011 (June 23, 2017), 82 FR 29597 13 See supra note 5. Commission, from Racquel L. Russell, Associate (June 29, 2017). The effective date of this change is 14 See SIFMA Letter at 1; BlackRock Letter at 1. General Counsel, FINRA, dated August 3, 2017 October 2, 2017. See also, FINRA Regulatory Notice (‘‘Response Letter’’). 17–23. 15 See SIFMA Letter at 2–3. VerDate Sep<11>2014 17:03 Aug 09, 2017 Jkt 241001 PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 E:\FR\FM\10AUN1.SGM 10AUN1

Federal Register / Vol. 82, No. 153 / Thursday, August 10, 2017 / Notices 37485 Report for at least six months from the issue that would preclude approval of address is U.S. Department of State, L/ effective date of the reduced delay FINRA’s proposal. The Commission PD, SA–5, Suite 5H03, Washington, DC period.16 FINRA disagreed that an notes that the Security Activity Report 20522–0505. additional implementation delay related does not require member firms to SUPPLEMENTARY INFORMATION: The to the Historic TRACE Data product was provide FINRA with any additional foregoing determinations were made necessary for the Security Activity data. The product is optional and pursuant to the authority vested in me Report. FINRA stated that proposed responds to consumer demand for a by the Act of October 19, 1965 (79 Stat. features of the Security Activity Report, more useful market data product. 985; 22 U.S.C. 2459), E.O. 12047 of such as the 90-day publication delay Finally, the Security Activity Report March 27, 1978, the Foreign Affairs and other grouping of activity reduce appears reasonably designed to promote Reform and Restructuring Act of 1998 information leakage risks and mitigate transparency while minimizing the (112 Stat. 2681, et seq.; 22 U.S.C. 6501 any potential impacts.17 FINRA stated potential for information leakage. note, et seq.), Delegation of Authority that it intends for the effective date of No. 234 of October 1, 1999, Delegation IV. Conclusion the Security Activity Report to be no of Authority No. 236–3 of August 28, sooner than February 1, 2018.18 It is therefore ordered pursuant to 2000 (and, as appropriate, Delegation of This commenter also believed there Section 19(b)(2) of the Act 25 that the Authority No. 257–1 of December 11, would be confidentiality concerns if proposed rule change (SR–FINRA– 2015). I have ordered that Public Notice market concentration percentages were 2017–021) be, and hereby is, approved. of these Determinations be published in not aggregated across the top five MPIDs For the Commission, by the Division of the Federal Register. for each particular security.19 In its Trading and Markets, pursuant to delegated Response Letter, FINRA clarified and authority.26 Alyson Grunder, reiterated that the activity of the top five Eduardo A. Aleman, Deputy Assistant Secretary for Policy, Bureau MPIDs will be expressed in aggregate of Educational and Cultural Affairs, Assistant Secretary. Department of State. figures.20 [FR Doc. 2017–16831 Filed 8–9–17; 8:45 am] Finally, this commenter stated that it [FR Doc. 2017–16853 Filed 8–9–17; 8:45 am] BILLING CODE 8011–01–P would be beneficial for FINRA to BILLING CODE 4710–05–P publicly share a draft template of the Security Activity Report so that market participants could educate themselves DEPARTMENT OF STATE DEPARTMENT OF STATE on the format and contents of the [Public Notice: 10081] [Public Notice: 10060] report.21 FINRA responded that it intends to post a file layout for the Notice of Determinations; Culturally 30-Day Notice of Proposed Information Security Activity Report on its Web site Significant Objects Imported for Collection: J–1 Visa Waiver at least 30 days before the Security Exhibition Determinations: ‘‘The Recommendation Application Activity Report’s effective date.22 Metropolis in Latin America, 1830– 1930’’ Exhibition Notice of request for public ACTION: IV. Discussion comment. After careful consideration, the SUMMARY: Notice is hereby given of the following determinations: I hereby SUMMARY: The Department of State has Commission finds that the proposed submitted the information collection rule change is consistent with the determine that certain objects to be included in the exhibition ‘‘The described below to the Office of requirements of the Act and the rules Management and Budget (OMB) for and regulations thereunder applicable to Metropolis in Latin America, 1830– 1930,’’ imported from abroad for approval. In accordance with the a national securities association.23 In Paperwork Reduction Act of 1995 we particular, the Commission finds that temporary exhibition within the United States, are of cultural significance. The are requesting comments on this the proposed rule change is consistent collection from all interested with Section 15A(b)(6) of the Act,24 objects are imported pursuant to loan agreements with the foreign owners or individuals and organizations. The which requires, among other things, that purpose of this Notice is to allow 30 FINRA rules be designed to prevent custodians. I also determine that the exhibition or display of the exhibit days for public comment. fraudulent and manipulative acts and objects at the Getty Research Institute at DATES: The Department will accept practices, to promote just and equitable the Getty Center, in Los Angeles, comments from the public up to principles of trade, to remove California, from on or about September September 11, 2017. impediments to and perfect the mechanism of a free and open market 16, 2017, until on or about January 7, ADDRESSES: Direct comments to the and a national market system, and, in 2018; the Americas Society, in New Department of State Desk Officer in the general, to protect investors and the York, New York, from on or about Office of Information and Regulatory public interest. The Commission does February 28, 2018, until on or about Affairs at the Office of Management and not believe that commenters raised any June 24, 2018, and at possible additional Budget (OMB). You may submit exhibitions or venues yet to be comments by the following methods: 16 See id. at 2. determined, is in the national interest. • Email: oira_submission@ 17 See Response Letter at 2. FOR FURTHER INFORMATION CONTACT: For omb.eop.gov. You must include the DS 18 See id. further information, including a list of form number, information collection the imported objects, contact Julie title, and the OMB control number in mstockstill on DSK30JT082PROD with NOTICES 19 See SIFMA Letter at 2. 20 See Response Letter at 2. Simpson in the Office of the Legal the subject line of your message. 21 See SIFMA Letter at 2–3. Adviser, U.S. Department of State • Fax: 202–395–5806. Attention: Desk 22 See Response Letter at 2. (telephone: 202–632–6467) or email: Officer for Department of State. 23 In approving this proposed rule change, the section2459@state.gov. The mailing FOR FURTHER INFORMATION CONTACT: Commission has considered the proposed rule change’s impact on efficiency, competition, and Direct requests for additional capital formation. See 15 U.S.C. 78c(f). 25 15 U.S.C. 78s(b)(2). information regarding the collection 24 15 U.S.C. 78o–3(b)(6). 26 17 CFR 200.30–3(a)(12). listed in this notice, including requests VerDate Sep<11>2014 17:03 Aug 09, 2017 Jkt 241001 PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 E:\FR\FM\10AUN1.SGM 10AUN1


Document Created: 2017-08-10 01:01:31
Document Modified: 2017-08-10 01:01:31
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 37484 
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