1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  The Commission published notice of the proposed rule change in the Federal Register on April 8, 2019. See Exchange Act Release No. 85488 (Apr. 2, 2019), 84 FR 13977 (“Notice”). On May 22, 2019, the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. See Exchange Act Release No. 85911, 84 FR 24839 (May 29, 2019). On July 1, 2019, the Commission instituted proceedings under Section 19(b)(2)(B) of the Act, 15 U.S.C. 78s(b)(2)(B), to determine whether to approve or disapprove the proposed rule change. See Exchange Act Release No. 86256, 84 FR 32506 (Jul. 8, 2019). On October 3, 2019, FINRA filed Partial Amendment No. 1 to the proposed rule change, which was subsequently withdrawn on the same day due to a non-substantive administrative error. On October 3, 2019, FINRA filed partial Amendment No. 2 to the proposed rule change (“Amendment No. 2”). On October 4, 2019, the Commission issued a notice of filing of Amendment No. 2 to the proposed rule change and, pursuant to Section 19(b)(2) of the Act, the Commission designated a longer period for Commission action on proceedings to determine whether to disapprove the proposed rule change. See Exchange Act Release No. 87232, 84 FR 54712 (Oct. 10, 2019).

4.  17 CFR 200.30-3(a)(12).

5.   See Exchange Act Release No. 87656, 84 FR 67491 (Dec. 10, 2019).

6.  17 CFR 201.431(e). See Letter to Stephanie Dumont, Senior Vice President and Director of Capital Markets Policy, FINRA (Dec. 12, 2019) (providing notice of receipt of notice of intention to petition for review of delegated action and stay of order), available at www.sec.gov/​rules/​sro/​finra/​2019/​34-87656-acknowledgement-letter.pdf.

7.   See Securities Exchange Act Release No. 88214, 85 FR 9887 (Feb. 20, 2020).

8.   See FINRA's Statement in Support of Proposed Rule Change to Establish a Corporate Bond New Issue Reference Data (“FINRA Statement”).

9.   See Corrected Statement of Bloomberg, L.P. in Opposition to Approval of the Proposed Rule Change (“Petitioner Statement”). Petitioner's original written statement in opposition to the Approval Order was submitted on March 16, 2020. Petitioner stated that it submitted a corrected version on March 17, 2020 in order to correct non-substantive typographical errors and incorrect cross-references.

10.  17 CFR 201.452.

11.   See Motion of Bloomberg, L.P. for Leave to Adduce Additional Evidence (“Petitioner Motion”). See also Declaration of Mark Flatman and Declaration of David Miao (collectively, “Declarations”).

12.   See FINRA's Opposition to Motion of Bloomberg, L.P. for Leave to Adduce Additional Evidence (“FINRA Opposition”).

13.   See Reply of Bloomberg, L.P. in Support of its Motion for Leave to Adduce Additional Evidence. The Commission believes that allowing Petitioner to submit additional evidence would further the Commission's ability to understand the arguments presented by both parties and their relation to FINRA's proposal. Accordingly, the Commission grants the Petitioner Motion. The Declarations are considered below in Section III.A and Section III.C.

14.  15 U.S.C. 78s(b)(2)(C).

15.  17 CFR 201.700(b)(3).

16.   Id.

17.   See id.See also17 CFR 240.19b-4.

18.  15 U.S.C. 78 o -3(b)(6).

19.  15 U.S.C. 78 o -3(b)(9).

20.  FINRA would amend the title of the Rule to “Obligation to Provide Notice and Dissemination of Corporate Debt Security New Issue Reference Data.”

21.  FINRA would amend Rule 6760(a)(1) to require that underwriters subject to the rule report required information for the purpose of providing market participants in the corporate debt security markets with reliable and timely new issue reference data to facilitate the trading and settling of these securities, in addition to the current purpose of facilitating trade reporting and dissemination in TRACE-Eligible Securities, as that term is defined in Rule 6710(a).

22.  FINRA proposes to move the definition of “Corporate Debt Security,” which is currently located in FINRA Rule 2232 (Customer Confirmations), into the TRACE Rule Series (specifically Rule 6710 (Definitions)) and to make corresponding technical edits to Rule 2232 to refer to the relocated definition in Rule 6710. In addition, FINRA proposes to make two changes to the definition of “Corporate Debt Security,” which FINRA states are technical, non-substantive edits that reflect the original intent of the definition and are consistent with current FINRA guidance. See Notice, at 13978, n.6. Specifically, FINRA proposes to revise the current definition of Corporate Debt Security to (i) clarify that the definition is limited to TRACE-Eligible Securities, and (ii) update the definition to exclude Securitized Products (defined in Rule 6710(m)), rather than Asset-Backed Securities (defined in Rule 6710(cc)).

23.  Rule 6760(b), proposed to be renumbered as Rule 6760(b)(1), currently requires the following information to be reported to FINRA: (A) The CUSIP number or if a CUSIP number is not available, a similar numeric identifier ( e.g., a mortgage pool number); (B) the issuer name, or, for a Securitized Product, the names of the Securitizers; (C) the coupon rate; (D) the maturity; (E) whether Securities Act Rule 144A applies; (F) the time that the new issue is priced, and, if different, the time that the first transaction in the offering is executed; (G) a brief description of the issue ( e.g., senior subordinated note, senior note); and (H) such other information FINRA deems necessary to properly implement the reporting and dissemination of a TRACE-Eligible Security, or if any of items (B) through (H) has not been determined or a CUSIP number (or a similar numeric identifier) is not assigned or is not available when notice must be given, such other information that FINRA deems necessary and is sufficient to identify the security accurately.

24.  FINRA states that under proposed Rule 6760(d), there may be some information collected under the rule for security classification or other purposes that would not be disseminated. This may include, for example, information about ratings that is restricted by agreement. In addition, CUSIP Global Services' (“CGS”) information would not be disseminated to subscribers that do not have a valid license regarding use of CGS data.

25.   See Amendment No. 2, at 4. FINRA originally proposed to make the corporate bond new issue reference data available to any person or organization for a fee of $250 per month for internal purposes only, and for a fee of $6,000 per month where the data are retransmitted or repackaged for delivery and dissemination to any outside person or organization. See Notice, at 13979. FINRA withdrew these proposed fees in Amendment No. 2. See supra note 3.

26.  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). Petitioner stated that under Section 3(f) of the Act, the Commission's review of FINRA's proposal must include an assessment of overall costs and benefits. See Petitioner Statement, at 33. The Commission considers costs and benefits when it reviews SRO rule filings and has done so with respect to this proposal. The Commission addresses comments about economic effects of the proposed rule change on efficiency, competition, and capital formation, including the general costs and benefits of the proposal, below in Sections III.A.3; III.B.3, III.C.3; III.D.3; III.E.3 and III.F.3.

27.  It is the Commission's understanding that such reference data include issuer and issue identifiers and details, such as maturity, coupon, par value, payment frequency, amortization details, call schedule and convertibility, among other reference data, which terms are required for identifying, valuing, and settling transactions in newly issued corporate bonds. See Recommendation, at 1.

28.   See generallyinfra notes 31-42 and 89-102 accompanying text.

29.  Comments on the proposed rule change can be found at: www.sec.gov/​comments/​sr-finra-2019-008/​srfinra2019008.htm.

30.  The Commission notes that FINRA's proposal is generally consistent with a unanimous recommendation from the SEC Fixed Income Market Structure Advisory Committee (“FIMSAC”) made to the Commission on October 29, 2018. See Fixed Income Market Structure Advisory Committee Recommendation (October 29, 2018) available at www.sec.gov/​spotlight/​fixed-income-advisory-committee/​fimsac-corporate-bond-new-issue-reference-data-recommendation.pdf (“Recommendation”). The FIMSAC is a federal advisory committee formed in November 2017 to provide the Commission with diverse perspectives on the structure and operations of the U.S. fixed income markets, as well as advice and recommendations on matters related to fixed income market structure. The FIMSAC's charter is available at www.sec.gov/​spotlight/​fixed-income-advisory-committee/​fimsac-charter-nov-2019.pdf. The membership includes 23 individuals representing a range of perspectives on the fixed income markets including retail and institutional investors, corporate and municipal issuers, trading venues, institutional dealers, a retail dealer, a regional municipal securities dealer, a proprietary trading firm, a data provider, academics, and SROs. For a list of FIMSAC members, see www.sec.gov/​spotlight/​fixed-income-advisory-committee.

31.   See Recommendation at 2; Letter from Lynn Martin, President and COO, ICE Data Services, dated April 29, 2019 (“ICE Data Letter”), at 1-2; Letter from Marshall Nicholson and Thomas S. Vales, ICE Bonds dated April 29, 2019 (“ICE Bonds Letter”), at 1-2; Letter from John Plansky, Executive Vice President and Chief Executive Officer, Charles River Development, dated May 24, 2019 (“Charles River Letter”), at 2; and Letter from SEC Fixed Income Market Structure Advisory Committee, dated June 11, 2019 (“FIMSAC Letter”), at 1-2.

32.   See Harris Letter, at 2.

33.   See FIMSAC Letter, at 2; ICE Bonds Letter, at 2 (“Certain electronic trading venues that are not registered as ATSs may have access to new issuance reference data obtained from affiliated corporate entities which process primary market trades prior to the dissemination of the reference data.”).

34.   See ICE Bonds Letter, at 2.

35.   See ICE Data Letter, at 2; Letter from Larry Harris, Fred V. Keenan Chair in Finance, U.S.C. Marshall School of Business, dated May 17, 2019 (“Harris Letter”), at 2-3; Charles River Letter, at 2; FIMSAC Letter, at 1-2.

36.   See ICE Data Letter, at 2; ICE Bonds Letter, at 2; FIMSAC Letter, at 2; Harris Letter, at 2-6; Charles River Letter, at 2 (“[T]he proposed data service will enhance transparency in a manner that benefits both buy-side investors and the financial markets as a whole, by facilitating access to new issuance reference data for corporate bonds. This is especially valuable to the fixed income market, which has historically been more opaque than other more liquid asset classes.”). See also Transcript of FIMSAC Meeting (October 29, 2018), available at www.sec.gov/​spotlight/​fixed-income-advisory-committee/​fimsac-102918transcript.txt (“FIMSAC Transcript”), Comments from Frederic Demesy, Refinitiv, at 0078 (“[A]t the moment, we see that there are some market anomalies where some of the vendors have access to information much earlier than other vendors. And that creates basically competitive advantage on certain platforms, which is in my view not ideal for having a transparent market.”).

37.   See ICE Bonds Letter, at 2.

38.   See FIMSAC Letter, at 1-2; ICE Data Latter, at 2; Harris Letter, at 2-3; Charles River Letter, at 2.

39.   See Charles River Letter, at 2.

40.   See ICE Bonds Letter, at 2.

41.   See ICE Data Letter, at 2. See also Harris Letter, at 3(“[R]educing the costs of investment research will lead to more informative prices and lower liquidity costs as more market participants make better-informed decisions about what to buy, sell, and hold. . . . The value of the reference data and the low costs to the industry of requiring that they should be delivered in some machine-readable form provide an extraordinary strong foundation for the Commission to mandate [reference data collection and dissemination].”); Charles River Letter, at 2 (“By providing market participants with direct access to new issuance reference data, the proposed service will reduce overall costs, while permitting third party vendors to retransmit and repackage the reference data for market participants who may opt for this service. The proposed service also will increase the efficiency and interoperability of the corporate bond market and help promote fair and open competition among market participants.”). See also FIMSAC Transcript, supra note 36, Comments from Spencer Gallagher, ICE Data Services, at 0069-72 (“there is one area that no investment or no level of ingenuity can solve and that is equal access to new issue reference data at or prior to first trade execution”).

42.   See Harris Letter, at 5.

43.   See Letter from David R. Burton, Senior Fellow in Economic Policy, The Heritage Foundation, dated April 29, 2019 (“Heritage Letter”), at 1-2; Letter from Tom Quaadman, Executive Vice President, U.S. Chamber of Commerce, dated April 29, 2019 (“Chamber Letter”), at 2; Letter from Tyler Gellasch, Executive Director, Healthy Markets Association, dated April 29, 2019 (“Healthy Markets Letter”), at 4-5; Letter from Greg Babyak, Global Head of Regulatory Affairs, Bloomberg, L.P., dated April 29, 2019 (“Petitioner Letter”), at 9-10. See also Letter from Tyler Gellasch, Executive Director, Healthy Markets Association, dated July 29, 2019 (“Healthy Markets Letter II”), at 4-6; Letter from Tyler Gellasch, Executive Director, Healthy Markets Association, dated October 25, 2019 (“Healthy Markets Letter III”); Letter from David R. Burton, Senior Fellow in Economic Policy, The Heritage Foundation, dated July 29, 2019 (“Heritage Letter II”), at 2; Letter from David R. Burton, Senior Fellow in Economic Policy, The Heritage Foundation, dated October 23, 2019 (“Heritage Letter III”), at 2; Letter from Tom Quaadman, Executive Vice President, U.S. Chamber of Commerce, dated July 29, 2019 (“Chamber Letter II”), at 3-4; Letter from Greg Babyak, Global Head of Regulatory Affairs, Bloomberg L.P., dated July 1, 2019 (“Petitioner Letter II”), at 4-7; Letter from Greg Babyak, Global Head of Regulatory Affairs, Bloomberg L.P., dated July 29, 2019 (“Petitioner Letter III”), at 5-8; Letter from Greg Babyak, Global Head of Regulatory Affairs, Bloomberg L.P., dated October 24, 2019 (“Petitioner Letter IV”), at 4; Letter from Greg Babyak, Global Head of Regulatory Affairs, Bloomberg L.P., dated November 27, 2019 (“Petitioner Letter V”), at 3-4; and Letter from David R. Burton, Senior Fellow in Economic Policy, The Heritage Foundation, dated March 13, 2020 (“Heritage Letter IV”).

44.   See Petitioner Letter, at 12-13; Petitioner Letter II at 4-6; Petitioner Letter III at 6-7; Petitioner Letter V, at 3. See also Petitioner Statement, at 2, (“No evidence indicates that current methods of consensual information distribution are impeding electronic trading.”).

45.   See Petition for Review, at 19.

46.   See Petitioner Statement, at 21-22. Petitioner also stated that while the proposal asserted barriers to entry, it mentioned only one such supposed barrier: the investment required to build a system to manage bond data. Petitioner argued that the fact that building a new business would require investment is not a barrier to entry and does not make a market uncompetitive. In addition, Petitioner stated that FINRA has not offered any evidence of the investment required to build such a system and how that would dissuade market entrants. See id.

47.   See id. at 22-23.

48.   See id., at 28. Petitioner stated that one anonymous person told FINRA it could not get the data it wanted from its current vendor and that FINRA has not reported any reason that the person could not fulfill its needs with a different, competing vendor. See id., at 28, n.19.

49.   See Petition for Review, at 22; Petitioner Statement, at 24-28. Petitioner presented data regarding trading by alternative trading systems (“ATSs”) on pricing day to argue that electronic trading platforms can readily access new issue bond reference data, and that the market for new issue corporate bonds is healthy and already evolving in the manner that the FIMSAC desires. For example, this commenter provided data (for new issues from March 12, 2019 to April 11, 2019) demonstrating that ATSs arranged a trade in 43% of the new Jumbo-sized issues, 28% of the new Benchmark-sized issues, and 11% of medium-sized issues on the day the bond was free to trade. See Petitioner Letter, at 12-13; Petitioner Statement, at 25, n.15. In addition, this commenter presented evidence that over the past year, the number of Jumbo-sized new issues that traded electronically on the day they were priced more than doubled to 30%. See Petitioner Letter II, at 4-6; Petitioner Letter III, at 6; Petitioner Letter IV, at 4-5; Petitioner Statement, at 25, n.15. This commenter stated that since FINRA proposed its effort to standardize and centralize bond-reference data reporting, competition in this area has only increased, citing a recent effort by various financial institutions to streamline communications and data among market participants by connecting underwriters and investors. See Petitioner Letter IV, at 6. This commenter also pointed to an analysis from Greenwich Associates that it stated shows overall growth in ATS electronic corporate bond trading. See Petitioner Statement, at 25. This commenter further stated that based on data from February 2020 compiled by the commenter's market information, in mid-2018 the percentage of first-day trades over $250 million that were on ATSs increased to 39%, and electronic trading of the largest issues has steadily grown from 16% to over 48%. See Petitioner Statement, at 27.

50.   See Petitioner Statement, at 21, 24.

51.  Petitioner stated that “there appears to be plenty of time to correct errors before they enter the settlement and clearing process” and presented evidence that over 91% of new issues settle three days or more after a new issue is priced and 66% settle four days or more after a new issue is priced. See Petitioner Letter, at 10-11.

52.   See Petitioner Letter, at 9-14; Petitioner Letter II, at 4-7; Petitioner Letter III, at 5-8. Petitioner stated that market participants currently demand more reference data fields than FINRA is proposing to collect; thus the proposal will not avoid “duplicative efforts” and may fragment the market. See Petitioner Letter, at 13-14.

53.   See Petitioner Statement, at 3, 35. See also Heritage Letter V, at 2 (stating that FINRA has not conducted “even the most rudimentary cost-benefit analysis.”).

54.   See Heritage Letter V, at 2.

55.   See FINRA Statement, at 3.

56.  FINRA cited comment letters noting that there currently exist issues with the availability, completeness, and timeliness of new issue reference data; and that the current information asymmetry with respect to such data harms liquidity, execution quality and competition in the corporate bond market. See Letter from Alexander Ellenberg, Associate General Counsel, FINRA, dated October 29, 2019 (“Response Letter”), at 5 (citing to Harris Letter; ICE Bonds Letter; ICE Data Letter; Charles River Letter; and FIMSAC Letter). See alsosupra notes 31-42 and accompanying text.

57.   See FINRA Statement, at 3. See also Response Letter, at 3-4; Notice, at 13980-83.

58.   See FINRA Statement, at 5; Response Letter, at 4-5. See also Recommendation, supra note 30.

59.   See FINRA Statement, at 6-7 (citing Recommendation, supra note 30).

60.   See FINRA Statement, at 7.

61.   See FINRA Statement, at 8.

62.  Specifically, FINRA pointed to (i) a statement by Richard McVey, MarketAxess, that “there are indeed gaps in corporate bond fixed income reference data, both in terms of when that data are available with different reference data providers, as well as sometimes the accuracy;” (ii) a statement from Spencer Gallagher, ICE Data Services, that “there is one area that no investment or no level of ingenuity can solve and that is equal access to new issue reference data at or prior to first trade execution;” (iii) statements from Frederic Demesy, Refinitiv, that “at the moment, we see that there are some market anomalies where some of the vendors have access to information much earlier than other vendors,” and “that creates basically competitive advantage on certain platforms,” and that this disparity imposes “higher costs for our customers;” and (iv) statements from Alex Sedgwick, T. Rowe Price, noting that “[h]istorically we have noticed cases where a new issue does take time to get set up on some of our electronic trading platforms, and that means that we can't necessarily go and use those electronic trading platforms right away.” See FINRA Statement, at 8-9; Response Letter, at 5 (each citing to FIMSAC Transcript).

63.   See FINRA Statement, at 11; Response Letter, at 4; Notice, at 13980-81. FINRA stated that new issue reference data are generated by underwriters, aggregated by data providers, and then sold to various market participants for consumption, including trading and clearing firms, electronic trading platforms, broker-dealers and bond investors. FINRA stated that it conducted outreach to understand this dissemination process, direct and indirect costs imposed by the process and ways it might be improved. See Notice, at 13980.

64.   See Response Letter, at 4.

65.   See FINRA Statement, at 11; Response Letter, at 4; Notice, at 13981.

66.   See FINRA Statement, at 11.

67.   See FINRA Statement, at 11; Response Letter, at 4; Notice, at 13980, n.17.

68.   See FINRA Statement, at 11-12; Notice, at 13981.

69.   See Response Letter, at 4; Notice, at 13980.

70.   See FINRA Statement, at 21-22.

71.   See FINRA Statement, at 22 (emphasis in original).

72.   See FINRA Statement, at 22.

73.   See Response Letter, at 6-7.

74.   See id.

75.   See id.See also FINRA Statement, at 22. FINRA found that for the first day of trading in corporate bond new issues, an ATS traded at most 3% of the 11,518 newly issued bonds, and that over the subsequent 10 days after issuance, ATSs represented an increasing percentage of trading. Id.

76.   See Petitioner Letter V, at 1-2; Petitioner Statement, at 25-26.

77.   See FINRA Statement, at 22, 30. FINRA stated that while it recognizes the limitations of quantitative analysis given that TRACE data cannot currently identify trades on electronic trading platforms other than ATSs, such as trades facilitated by Petitioner, it continues to believe that, because ATSs represent one of the types of market participants that provided statements for the record of their difficulty receiving timely reference data access, this ATS analysis helps validate such qualitative evidence. See FINRA Statement, at 23.

78.   See supra notes 53-54 and accompanying text.

79.   See Response Letter, at 10. See also Notice, at 13981-83 (providing FINRA's Economic Impact Assessment). However, Petitioner stated that “[d]eciding to excise the fee analysis, in the face of overwhelming negative commentary, belies FINRA's claim to have provided a `detailed analysis of the Proposal's anticipated costs and benefits.' ” See Petitioner Letter V, at 4. See also Section III.F., infra.

80.   See Notice, at 13981-83.

81.   See Notice, at 13981. To support this statement, FINRA cited to various studies finding that TRACE implementation has demonstrated that transparency has facilitated trading and improved market quality. See FINRA's website for a list of TRACE Independent Academic Studies, available at www.finra.org/​industry/​trace/​trace-independent-academic-studies. Seeid. at n.20.

82.   See Notice, at 13981.

83.   See Notice, at 13982.

84.   See id.See also Section III.D, infra.

85.   See Notice, at 13982; FINRA Statement, at 18.

86.   See Notice, at 13982.

87.   See Notice, at 13982. See also Section III.C, infra. For example, there are many other data provided by reference data providers concerning a bond issue, such as issuer information ( e.g., fundamentals data, capital structure data), specific bond rating, bond trade and selling restrictions, classification data (industry, legal entity, etc.), corporate action data, ESG (Environmental, Social & Governance) data, dividend data, instrument analytics data, and security ownership data. See e.g., IHS Markit Reference Data Bonds Factsheet, available at cdn.ihs.com/​www/​pdf/​Reference-Data-Bonds-factsheet.pdf; Bloomberg Reference Data Content and Data, available at www.bloomberg.com/​professional/​product/​reference-data/​.

88.   See generallysupra notes 31-42 and accompanying text.

89.   See Notice, at 13980-13981 (describing in FINRA's Economic Impact Statement the current process for the collection and distribution of corporate bond reference data). The Commission notes that the process FINRA described in its Notice is consistent with the comments provided by reference data providers at the October 29, 2018 FIMSAC meeting. See also FIMSAC Transcript, supra note 36, Comments from Spencer Gallagher, ICE Data Services, at 0069-72 (“there is one area that no investment or no level of ingenuity can solve and that is equal access to new issue reference data at or prior to first trade execution”). See generally FIMSAC Transcript, supra note 36 (highlighting a detailed discussion among data vendors of the challenges with collecting and distributing reference data).

90.   See FIMSAC Transcript, supra note 36, Comments from Bob LoBue, J.P. Morgan, at 0080-81 (“We tend to not disseminate data to third party vendors off the corporate platform. I think the point of inaccuracies is the reason for that. So, we tend to use Bloomberg as our let's ensure it is accurate, and then people can source that information from that venue.”). Even if underwriters were to provide access to every market participant that sought to gain access to such information prior to the beginning of secondary market trading, that process would be inefficient as the underwriters would expend substantial effort providing such data to multiple parties and the recipients would likewise expend substantial effort to receive and ultimately utilize data from multiple parties.

91.  In the corporate bond market today, the Commission understands from market participants that Petitioner typically has the timeliest access to newly issued bond reference data on the first day a bond trades, as it enjoys the voluntary cooperation of underwriters. See FIMSAC Transcript, supra note 36, Comments from Bob LoBue, J.P. Morgan, at 0080-81 (“And I think the Refinitiv team and the ICE team intimating a competitive advantage for Bloomberg, there is no question that we do undertake getting our securities set up on the Bloomberg trading platform because that is what the industry predominately uses to book our tickets.”). See also FINRA Statement, at 3 (noting that Petitioner is the dominant private data vendor in today's market for corporate bond new issue reference data and “often gains access to new issue reference data before other vendors and market participants.”). In his declaration, David Miao, the Global Head of Fixed Income Data at Bloomberg, L.P., states that he is “not aware of any legal or structural barrier that prevents other vendors and market participants from accessing new issue reference data” and that “nothing prevents other vendors and market participants from accessing corporate bond new issue reference data in the same voluntary manner in which Bloomberg acquires it.” Based on the information available to the Commission, the Commission disagrees. The statements of one of the largest underwriters of corporate bonds in the United States are particularly informative: Mr. Lobue stated at the October 29, 2018 FIMSAC meeting that J.P. Morgan provides corporate bond reference data to Petitioner and does not provide it to other data vendors. See See FIMSAC Transcript, supra note 36, Comments from Bob LoBue, J.P. Morgan, at 0080-81.

92.   See e.g.,supra notes 32-37; FIMSAC Transcript, supra note 36, Comments from Spencer Gallagher, ICE Data Services, at 0069-72 (“Distribution [of new issue reference data] is not consistent in both completeness of the content or timeliness of the delivery. . . . All said, none of the avenues [for securing new issue reference data], underwriter emails, new issue publishing announcement or issuer websites provide a comprehensive coverage in a timely manner. We piece all of this together as available to us. On the few cases where we see no information, we will see the data on Edgar, usually via prospectus. But that is well after the pricing event and clearly not sufficient for pre-trade and trade workflows.”).

93.   See id.See also FIMSAC Transcript, supra note 36, Comments from Spencer Gallagher, ICE Data Services, at 0069-72 (“there is one area that no investment or no level of ingenuity can solve and that is equal access to new issue reference data at or prior to first trade execution”); Comments from Spencer Gallagher, ICE Data Services, at 0069-72; Comments from Rick McVey, MarketAxess, at 0066 (“there is significant manual effort today in getting new issue information into various databases. And that is prone to error. Reference data errors lead directly to trading errors.”).

94.   See generallysupra notes 31-42 and accompanying text for a discussion of commenter concerns about information asymmetry in the corporate bond market today that can disadvantage many market participants.

95.  Petitioner stated that there is currently a trend in the marketplace toward electronic trading of new issues and therefore concluded that the bond markets are healthy and growing robustly using existing market-based data services and the proposal is unnecessary. See supra notes 49-50. Petitioner presented data concerning ATS trading in new issues purporting to suggest that there is no current access problem relating to new issue bond reference data. See supra note 49. In response, FINRA also presented TRACE data concerning ATSs and conducted its own analysis, which FINRA stated suggests that some ATSs may not be receiving reference data in a timely fashion to allow them to begin trading a newly issued corporate bond. See supra notes 73-75 and 77 and accompanying text. Petitioner disputed FINRA's analysis as flawed. See supra note 76. The Commission believes that the analyses of electronic trading in corporate new issues by ATSs provided by Petitioner and FINRA are necessarily limited, as there are a number of electronic bond trading platforms that are not regulated as ATSs and there are a number of other types of market participants, including investors, intermediaries and data vendors that may not have timely access to newly issued bond reference data to identify, value and settle bonds on the first day of trading in the secondary market. Therefore, these analyses, which focus on ATS trading in new issues, are not reflective of the market for newly issued corporate bonds as a whole.

96.   See ICE Data Letter, at 2; ICE Bonds Letter, at 2; FIMSAC Letter, at 2.

97.   See ICE Bonds Letter, at 2 (“The timely dissemination of complete reference data will allow retail investors to have more timely access to newly issued bonds for purchase and/or price discovery, eliminating unnecessary information asymmetry.”); Notice, at 13981 (discussing in FINRA's Economic Impact Assessment a variety of reasons why market participants that lack timely reference data today are at a competitive disadvantage to those market participants that do have timely access to reference data).

98.   See ICE Bonds Letter, at 2.

99.   See e.g., ICE Bonds Letter at 2; FIMSAC Letter at 2; FINRA Notice at 13980; FIMSAC Transcript, supra note 36, Comments from Rick McVey, MarketAxess, at 0065 (recognizing that not all trading venues have timely access to reference data which results in some venues being able to trade the bonds when they begin trading in the secondary market while others cannot).

100.   See ICE Data Letter, at 2 (“a centralized data reporting requirement for such issues could benefit the industry and investors by enhancing market transparency, potentially aiding liquidity, reducing trading costs, and lowering the cost of capital for issuers”); FIMSAC Letter, at 2. See also FIMSAC Transcript, supra note 36, Comments from Alex Sedgwick, T. Rowe Price, at 0084-85 (“Electronic market-makers ultimately need this information to provide accurate pricing and accurate valuation for the prices that they are pushing out to the market. If this information is not available, that ultimately means that there are liquidity providers that may not be able to provide liquidity to us when those new issues are free to trade.”).

101.   See Goldstein, M.A., Hotchkiss, E.S., and Pedersen, D.J., 2019. Secondary market liquidity and primary market pricing of corporate bonds. Journal of Risk and Financial Management 12, 1-17.

102.   See Recommendation at 2. See also FIMSAC Transcript, supra note 36, Comments from Alex Sedgwick, T. Rowe Price, at 0084-85 (So, when . . . we are trading on the desk, we need to be able to measure our execution against benchmarks. If it takes more than a couple of hours or even more than a day for those benchmarks to become available, that is an area where we may not be able to do accurate trade cost analysis. And that is a very important sort of supporting piece of information as we think about best execution on the trading desk.”); Comments from Frederic Demesy, Refinitiv, at 0078 (“[A]t the moment, we see that there are some market anomalies where some of the vendors have access to information much earlier than other vendors. And that creates basically competitive advantage on certain platforms, which is in my view not ideal for having a transparent market. It also incurs higher costs for our customers. The first one would be on vendors. Market participants will have to source the data from multiple vendors to ensure that all the information is available, so [there are] duplicating costs. There is also an operational cost related in terms of data quality. So, when you onboard multiple feeds, ICE Data Service and Refinitiv data is not automatically in the same format. So, the customer has to develop operational efficiency tools to standardize the data on their platform. And third is when the market participant gets things wrong, it can have a huge impact, missing trade opportunities but also reputational risks that would be the worst.”).

103.  FINRA's proposal was informed by FINRA's outreach to a diverse set of market participants—including several data providers, underwriters and trading platforms—and responses from these market participants “demonstrated a regulatory need for consistent, uniform, and timely corporate bond new issue reference data.” See supra notes 63-69 and accompanying text. See also Response Letter, at 4; Notice, at 13980-81. The concerns of market participants, including data vendors, trading venues, and investors, regarding the lack of timely reference data are described in detail above. Based on this outreach, FINRA observed that various market segments may be lacking accurate, complete and timely reference data, including electronic trading platforms and smaller market participants that may not afford multiple data vendor subscriptions. See Response Letter, at 4. See also Notice, at 13980.

104.   See e.g. Notice, at 13980, n.17 (“According to one trading platform, its reference data provider would only provide data relating to new issues the morning after issuance, which resulted in the firm's clients not being able to trade the bond when it began to trade.”). Petitioner argued that nothing prevented this platform from fulfilling its needs with a different, competing vendor. See Petitioner Statement, at 28, n.19. However, as further discussed herein, in the present market different vendors may have access to different reference data relating to new issues as there is no requirement that underwriters or issuers provide the same information to all reference data providers or provide it at the same time. See supra notes 88-93 and accompanying text.

105.   See Credit Roundtable Letter, at 1; ICE Data Letter, at 2-3; SIFMA Letter, at 3; FIMSAC Letter, at 14; Letter from Christopher B. Killian, Managing Director, SIFMA, dated July 29, 2019 (“SIFMA Letter II”), at 2; Letter from Christopher B. Killian, Managing Director, SIFMA, dated October 24, 2019 (“SIFMA Letter III”), at 2-3.

106.   See Healthy Markets Letter, at 4, 6; Healthy Markets Letter III, at 2.

107.   See Harris Letter, at 2, 66 (“The fields on the FINRA list are sufficient to value most bonds. . . . I believe that FINRA chose the fields wisely.”).

108.   See FIMSAC Letter, at 7-8, 10, 12-13. FIMSAC proposed combining the Maturity and Perpetual Maturity indicators into one existing field (Maturity Date) and the 144A Eligible and Regulation S indicators into one new field (Series). In addition, FIMSAC recommended requiring the following additional data fields: First Conversion Date; First Conversion Ratio; Spread; Reference Rate; Floor; and Underlying. The FIMSAC also provided supporting rationale for the data fields included in the proposal and the suggested additional data fields. See FIMSAC Letter at 2-3 and Schedule A.

109.   See Petitioner Letter I, at 17; Petitioner Letter, III, at 11.

110.   See id.

111.   See Petitioner Letter I, at 18.

112.   See Letter from Christopher B. Killian, Managing Director, SIFMA, dated April 29, 2019 (“SIFMA Letter”), at 1-2. See also Letter from Cathy Scott, Director, Fixed Income Forum, on behalf of The Credit Roundtable, dated April 29, 2019 (“Credit Roundtable Letter”), at 1 (cautioning that any data provision requirements on underwriters should not impede their ability to make markets in the new issue as soon as possible).

113.   See Charles River Letter, at 2. See also Healthy Markets Letter, at 4 (“[W]e do not disagree with FINRA's determination to require uniform pre-first trade reporting.”).

114.  Two commenters requested that FINRA clarify the meaning of the “prior to the first transaction” deadline for reporting reference data to FINRA. See ICE Data Letter, at 2; ICE Bonds Letter, at 2. One commenter requested FINRA clarify the process for underwriters to correct erroneously reported reference data. See Letter from Salman Banaei, Executive Director, IHS Markit, dated April 29, 2019 (“IHS Markit Letter”), at 2-3. Two commenters made technical suggestions regarding the methods for supplying and redistributing the required data. See SIFMA Letter, at 2; ICE Data Letter, at 3; SIFMA Letter III, at 2.

115.   See Amendment No. 2, at 5 and Exhibit 3. See also Response Letter, at 12-13.

116.   See Amendment No. 2, at 5 and Exhibit 3; Response Letter, at 13. FINRA stated that it also agrees with FIMSAC's recommendation to combine the Maturity and Perpetual Maturity indicators into one existing field (Maturity Date) and marked the amended Exhibit 3 to reflect that the maturity and perpetual maturity indicator fields will be tied together as combined fields for purposes of reporting the information. See Amendment No. 2, at 5, n.9, and Exhibit 3; Response Letter, at 13, n.41. With respect to FIMSAC's recommendation to combine the 144A Eligible and Regulation S indicator fields into a single “Series” field, FINRA stated that it believes it will be easier operationally to maintain the separate fields to limit potential confusion about other security offering types or issuances that may meet more than one offering type. See id.

117.   See Response Letter, at 13.

118.   See Amendment No. 2, at 5 and Exhibit 3; Response Letter, at 12-13. In particular, FINRA stated that it (i) provided additional guidance to clarify that the ratings data field does not require reporting specific ratings, but rather whether the security is Investment Grade or Non-Investment Grade, as those terms are defined in Rule 6710; and (ii) clarified the information to be reported for the security type, first coupon period type, minimum increment, and minimum piece/denomination data fields. See Amendment No. 2, at 5, n.10, and Exhibit 3; Response Letter, at 12-13, n.39.

119.   See Response Letter, at 14. FINRA stated that “[b]ased on conversations with underwriters, FINRA understands that underwriters do not anticipate incurring significant costs for reporting under this proposal.” See Notice, at 13982.

120.   See Response Letter, at 14 (citing to ICE Bonds Letter, at 2; and ICE Data Letter). In response to comments requesting clarification on what the term “first transaction” means, FINRA stated that “it means the time of execution of the first transaction of the offering ( i.e., the time of execution for the first reported primary transaction in the security), as specified currently in Rule 6760.” See Response Letter, at 14. FINRA stated that it believes this position is consistent with the recommendation from ICE Data to provide clarification for the term “first transaction” consistent with MSRB Rule G-34. See Response Letter at 14, n.45 (citing to ICE Data Letter, at 2).

121.   See FINRA Statement, at 10-11.

122.   See id.

123.   See FINRA Response Letter, at 9, n.28.

124.   See, e.g., SIFMA Letter III, at 2-3.

125.   See Response Letter, at 12-13.

126.   See id., at 14-15.

127.   See id., at 15.

128.   See Recommendation at Schedule A; FIMSAC Letter at Schedule A. The one field from the Recommendation that FINRA did not include is “Calculation Types (CALT).” FINRA stated that it understands from industry outreach that this field leverages calculation methodology that is specific to one data vendor's protocols and may not be readily available to all underwriters that would be required to report information to FINRA under Rule 6760, or to consumers of the data. See Notice, at 13978, n.8.

129.  FINRA stated these additional fields were indicated by market participants as important in liquidity and risk assessment. See Notice, at 13978-79. See also Amendment No. 2, Exhibit 3.

130.   See Notice, at 13978. The FINRA TRACE New Issue Form is used by firms to set up securities pursuant to firms' existing obligations either under Rule 6760 or 6730 (Transaction Reporting). It allows for the submission of data fields required by these rules as well as additional data fields that underwriters often report voluntarily. As part of the proposal, FINRA would codify in Rule 6760 the specific fields that have been deemed necessary under current Rule 6760(b) and therefore are mandatory for successful submission of the TRACE New Issue Form. See Notice, at 13978, n.9.

131.   See supra note 128 and accompanying text.

132.   See, e.g., Harris Letter, at 6 (“The fields on the FINRA list are sufficient to value most bonds. . . . I believe that FINRA chose the fields wisely.”); ICE Data Letter, at 2 (“ICE Data Services believes the scope of the Proposal is appropriate and we support the inclusion of the 30 data fields enumerated in the Proposal's Exhibit 3.”).

133.  FINRA Rule 6760 currently requires underwriters to report to FINRA the following information: Issuer; Coupon; CUSIP Number; Maturity; 144A Eligibility Indicator; the time that a new issue is priced and, if different, the time that the first transaction in the offering is executed; a brief description of the issue; and such other information as FINRA deems necessary to properly implement the reporting and dissemination of a TRACE-Eligible Security. FINRA's proposal will require that these data elements be reported to FINRA prior to the first transaction in the security in all instances.

134.   See Amendment No. 2, Exhibit 3. Similar rationale for each data field was also put forth by the FIMSAC. See FIMSAC Letter, at Schedule A. In addition, in Amendment No. 2, FINRA set forth its rationale for including certain data fields currently required to be reported under Rule 6760, as follows: (1) Issuer—necessary for settlement and valuation purposes; the investor needs to know the issuing entity of the bond; (2) Coupon—needed for settlement and valuation purposes; the coupon rate is needed for accrual/interest/cash flow calculations; (3) CUSIP Number—needed to uniquely identify securities that trade, clear, and settle in North America, particularly in the United States; (4) Maturity—necessary for settlement and valuation purposes; this field is necessary in order to understand when the bond is due to pay back its principal at par; this field is used to back populate accruals and cash flows; and (5) 144A Eligible Indicator—necessary for settlement purposes; this field is needed to distinguish 144A securities for QIB eligible investors. See Amendment No. 2, Exhibit 3. See also FIMSAC Letter, at Schedule A.

135.  The Commission believes that FINRA's statement here is intended to convey that a bond's issuance amount ( e.g., the total par amount issued) is an important piece of information for market participants because the size of the issuance impacts a bond's potential inclusion in ETFs and impacts a bond's secondary market liquidity.

136.   See supra notes 131-132.

137.   See ICE Data Letter, at 2, FIMSAC Letter, at 2-3 and Schedule A and Harris Letter, at 6 (all commenting that FINRA's proposal included the necessary data elements for achieving the purpose of enabling market participants to participate in the secondary market when trading begins). The Commission does not believe that requiring the reporting of CUSIP and ISIN will cause any change in the manner underwriters procure this information today or the extent to which market participants rely on this information to identify specific securities. As FINRA recognized, CUSIP is already required to be reported to FINRA under FINRA Rule 6760. See, e.g., FINRA Response Letter, at 9, n.28. Furthermore, both CUSIP and ISIN are widely used today as primary methods for identifying securities. While consideration could be given by FINRA to accept the reporting of other securities identifiers if FINRA decided to explore that in the future, the Commission agrees with comments that CUSIP and ISIN are currently necessary data elements for market participants to identify specific securities, thereby enabling their participation in the secondary market when these securities begin trading. See e.g., FIMSAC Letter, at Schedule A; FINRA Letter, at 6. Regarding comments concerning the collection of alternative securities identifiers such as FIGI, the Commission recognizes that freely available, open alternatives to proprietary identifiers do not entail fees for storage, use, and redistribution, as is frequently the case for proprietary identifiers. The Commission also recognizes there are challenges to the adoption of alternatives to proprietary identifiers such as CUSIP and ISIN that are in widespread use, such as the need for such alternative identifiers to be supported in reference data and clearance and settlement systems in order for them to be viable alternatives to proprietary identifiers. A future proposed rule change could seek to lessen reliance on proprietary identifiers for regulatory reporting, including regulatory reporting related to corporate bonds. The Commission notes that FINRA could, if appropriate, file a proposed rule change with the Commission to supplement or allow alternatives to the securities identifier information that it will be collecting pursuant to this proposal. Any such proposal would be informed by the public notice and comment process required by the Act.

138.  There are many other data provided by data vendors that provide bond issue reference data, such as issuer information ( e.g., fundamentals data, capital structure data), specific bond rating, bond trade and selling restrictions, classification data (industry, legal entity, etc.), corporate action data, ESG (Environmental, Social & Governance) data, dividend data, instrument analytics data, and security ownership data. See supra note 87.

139.  Currently, for information reported under Rule 6760 for trade reporting purposes, the rule allows phased reporting in some cases. Specifically, for an offering of a security that is priced and begins trading on the same business day between 9:30 a.m. and 4:00 p.m. Eastern Time, Rule 6760 requires “as much of the information set forth in paragraph (b) (1) that is available prior to the execution of the first transaction of the offering, which must be sufficient to identify the security accurately, and such other information that FINRA deems necessary and provide all other information required under paragraph (b) (1) within 15 minutes of the Time of Execution of the first transaction.” See Rule 6760(c).

140.  The Commission recognizes that there may be an incremental burden on underwriters; however, the Commission believes this burden will be mitigated both by the existence of current reporting infrastructures and the fact that the data elements to be reported are likely already in the possession of underwriters, given the use of this information in the newly issued bond's primary offering. See infra Section III.D.3.

141.   See Notice, at 13979. FINRA noted that the Recommendation stated that managing underwriters should be required to report the data elements to FINRA no later than reporting such data elements to any third party not involved in the offering, including reference data vendors. See Recommendation, at 3. See alsosupra note 113 for supporting comment letters.

142.   See Notice, at 13981. See also supra notes 31-42 and accompanying text.

143.   See supra Section III.A.3.

144.   See id.See alsosupra notes 90-104 and accompanying text for a discussion of concerns about information asymmetry in the corporate bond market today that can disadvantage many market participants. Petitioner argued that FINRA provided no evidence the proposal would reduce broken trade errors or reduce costs or duplicated efforts. See supra notes 51-52. In contrast, other commenters and market participants stated that FINRA's proposed data service would reduce costs, eliminate duplicated efforts, and reduce trading errors, as market participants would no longer have to source data from multiple vendors or enter data manually. See supra notes 31-42 and 92-103 and accompanying text. As discussed herein, the Commission believes the proposal would benefit the corporate bond market by, among other things, lowering costs and potentially reducing trading errors.

145.   See supra notes 37-41 and note 100. See also FIMSAC Transcript, supra note 36, Comments from Frederic Demesy, Refinitiv, at 0077-78 (“[W]e see a transformation in the bond markets where in the past market participants were expecting the data to be available at the end of day or the timeliness was not as important as it is now. Now, a market participant wants to have the information when the bond prices to set up their platforms to be able to trade. They want to have updates intraday, and that is a very big difference from what happened maybe two, three or five years ago where end of day updates was enough for them to operate. Now, the market participants want information intraday. And that forces market vendors . . . to rethink the way we distribute the reference data. And obviously the more the bond trades electronically, the more market participants would want to have this information on time.”); Comments from Alex Sedgwick, T. Rowe Price, at 0084-85 (“Electronic market-makers ultimately need this information to provide accurate pricing and accurate valuation for the prices that they are pushing out to the market. If this information is not available, that ultimately means that there are liquidity providers that may not be able to provide liquidity to us when those new issues are free to trade.”)

146.  One commenter stated that FINRA should be required to demonstrate that the benefits of the proposal are so substantial and clear to overcome the strong presumption that private actors in competitive markets are the best means of providing goods and services. See supra note 54 and accompanying text. Pursuant to the Act, the Commission must approve an SRO's proposed rule change if it finds that such proposed rule change is consistent with Act and the rules and regulations issued thereunder that are applicable to such organization. See Section 19(b)(2)(C)(i) of the Act. For the reasons set forth herein, the Commission finds that FINRA has made such a showing.

147.   See supra Section III.A and notes 90-104 and accompanying text for a discussion of concerns about information asymmetry in the corporate bond market today that can disadvantage many market participants; and note 145 and accompanying text. As discussed above, timely availability of this data should promote (i) competition, (ii) improve secondary market liquidity and lower cost of capital and (iii) lower other costs. In addition, FINRA has clearly and explicitly stated that it will provide guidance in the course of new rule implementation to provide any further clarification required regarding data fields, and will engage with market participants as required to provide such guidance. FINRA has also clearly and explicitly stated that it will engage with market participants on the appropriate business requirements for the reporting process and has stated that it may take a phased approach to implementation to promote compliance and data accuracy. See supra notes 125-127 and accompanying text.

148.   See Petitioner Letter, at 9-10.

149.   See Petitioner Statement at 23.

150.   See Petitioner Statement, at 24.

151.   See Petitioner Letter III, at 5-6; Petition for Review, at 31. This commenter further stated that the proposed centralized data service could achieve a dominant position regardless of whether an innovating company could have done a better job and that the proposed database, run as a “regulatory utility,” is likely to produce a service less valuable than what market-based providers would produce. See Petitioner Statement, at 37.

152.   See Letter from Larry Tabb, TABB Group, dated May 15, 2019 (“Tabb Letter”), at 3. See also Petitioner Letter V, at 2.

153.   See Petitioner Statement, at 24.

154.   See Petitioner Statement, at 20.

155.   See Petitioner Letter IV, at 5; Heritage Letter V, at 2. See also Petitioner Statement, at 31 (“The [proposal] . . . creates an inherent conflict between a public regulator and the private parties it regulates.”).

156.   See Heritage Letter V, at 2. See also Petitioner Statement, at 31 (stating that pursuant to the proposal, FINRA “would coerce underwriters to surrender bond-reference data and would (at least implicitly) compel broker-dealers to buy FINRA's data” and that if the proposed database costs more than expected or does not achieve the purported benefits, FINRA may be motivated to take steps to save its own finances that, “as a regulator, it is uniquely empowered to take.”). In Section III.F below, the Commission discusses comments regarding FINRA's potential fees for this service.

157.   See FIMSAC Letter, at 4. The FIMSAC stated that data vendors are conflicted by competing commercial interests and should not be in a position to determine who can have access to data necessary to value, trade and settle a newly issued corporate bond. See id. Petitioner, which has both a data business and an electronic bond trading platform, responded to this comment, stating that there is no basis for FIMSAC's claims that integrated firms are using their data business to harm competition in trading. Petitioner pointed to data showing that it holds only 3.2% of market share of domestic institutional electronic corporate bond trading, and argued that these data contradict any suggestion that the commenter has leveraged its data business to gain a competitive advantage for its electronic trading business. See Petitioner Letter II, at 2-4.

158.   See, e.g., Healthy Markets Letter II, at 5; Petitioner Letter III, at 5-6; and Petitioner Letter IV, at 4 (citing to Larry Tabb, Tabb Forum, “An SEC-Mandated Corporate Bond Monopoly Will Not Help Quality” (Mar. 21, 2019) (“Tabb Study”)). See also Petitioner Statement, at 29.

159.   See Petitioner Statement, at 30.

160.   See supra notes 148-152 and accompanying text.

161.   See FINRA Statement, at 2.

162.   See FINRA Statement, at 2 (citing Recommendation, supra note 30). In response, Petitioner stated that it submitted the Petitioner Motion and Declarations to rebut FINRA's allegations of anti-competitive conduct. Specifically, Petitioner stated that the Declarations demonstrate that Petitioner does not restrict access to its reference data service based on firms' willingness to use any of its trading services, or for any other anti-competitive reasons, and that Petitioner makes its reference data service broadly available on standard terms for standard use cases. See Petitioner Motion, at 10. FINRA, on the other hand, stated that the Declarations do not directly address the specific concerns expressed by the FIMSAC and are immaterial in light of the well-developed record. See FINRA Opposition, at 6-7.

163.   See FINRA Statement, at 12.

164.   See FINRA Statement, at 2-3 (citing Recommendation, supra note 30). FINRA further stated that Petitioner is the dominant private data vendor in today's market for corporate bond new issue reference data and “often gains access to new issue reference data before other vendors and market participants.” See FINRA Statement, at 3. In response, Petitioner stated that neither the Recommendation nor the FIMSAC Letter suggested that one dominant private data vendor engaged in anti-competitive activity. See Petitioner Motion, at 3. In addition, Petitioner stated that the Declarations “conclusively rebut the notion that Petitioner engages in an anticompetitive leveraging of the new bond issuance functionality on the Petitioner Terminal service to gain preferential access to reference data.” See Petitioner Motion, at 9. On the other hand, FINRA stated that the Declarations neither directly address nor dispel the concerns expressed by the FIMSAC and others that underlie the proposed rule change. See FINRA Opposition, at 6-9.

165.  Specifically, FINRA pointed to (i) a statement by Larry Harris, USC Marshall School of Business, that “FINRA is best equipped to solve this problem;” and (ii) a statement by Bob LoBue, J.P. Morgan, that the firm “could probably populate [its existing process for providing new issue reference data to FINRA] a little bit deeper.” See FINRA Statement, at 9 (citing to FIMSAC Transcript, supra note 36).

166.   See FINRA Statement, at 9-10 (citing the FIMSAC Letter). FINRA further noted that the FIMSAC articulated a “concern that certain large reference data providers `have in the past, and could in the future, manage their data and trading businesses in a coordinated fashion—refusing to license their leading reference data products to trading platforms that they deem to be competitive with their own.' ” See id. at 10 (citing FIMSAC Letter, at 3-4).

167.   See supra note 153 and accompanying text.

168.   See Response Letter, at 10. However, one commenter stated that FINRA offers no reason why vendors would continue to fund their own research in addition to paying for FINRA's information. See Petitioner Letter V, at 3. See also Section III.E for a discussion of the proposal's impacts on competition.

169.   See supra note 153 and accompanying text.

170.   See FINRA Statement, at 25. See also Notice, at 13979 (“FINRA alternatively considered maintaining the Rule's phased reporting approach for offerings in corporate debt securities subject to the proposal, with certain core information required prior to the first trade and an extended 60-minute window for remaining information, given the additional data fields that would be required to be reported under the proposal. However, FINRA believes that the proposed approach to require uniform pre-first trade reporting better supports the stated goals in the FIMSAC Recommendation to increase the efficiency of the corporate bond market and promote fair competition among all market participants.”); 13982-83 (“FINRA also considered whether there was an appropriate alternative approach that involved an expansion of the DTCC's NIIDS service to include corporate new issue reference data. However, based on operational and commercial reasons, including inefficiencies with integrating the existing FINRA reporting infrastructure with a separate DTCC infrastructure, FINRA concluded that expanding the current existing FINRA reporting and dissemination framework was a more effective and efficient approach . . .”).

171.   See FINRA Statement, at 25.

172.   See supra notes 155-157 and accompanying text.

173.   See Response Letter, at 10.

174.   See id.

175.   See id.

176.   See FINRA Statement, at 2; Response Letter, at 9. See also Section 15A(b)(6) of the Act, 15 U.S.C. 78 o -3(b)(6).

177.   See Response Letter, at 9-10. For example, FINRA makes available to the public all transaction data in corporate bonds through TRACE. See FINRA's TRACE Overview, available at www.finra.org/​sites/​default/​files/​TRACE_​Overview.pdf. Seealso FINRA Statement, at 2. FINRA also makes details about corporate and agency debt securities available to FINRA members and provides a tool to the public that enables them to analyze and compare the costs of owning mutual funds. See TRACE OTC Corporate Bonds and Agency Debt User Guide, available at www.finra.org/​sites/​default/​files/​TRAQS-CA-user-guide-v4.7.pdf.pdf; FINRA Fund Analyzer, available at tools.finra.org/​fund_​analyzer/​.

178.   See FINRA Statement, at 2.

179.   See FINRA Statement, at 2.

180.   See supra notes 148, 158-159 and accompanying text.

181.   See Response Letter, at 10-11; FINRA Statement, at 23-22. Specifically, with respect to the Tabb Study cited by certain commenters, FINRA stated that it is not clear what TRACE data was used for the analysis or which point in time during the trading day was used to compare TRACE data with the vendor's data. In addition, FINRA stated that the analysis does not explain which of the two sources (TRACE or the vendor) were deemed accurate (it only references “reconciliation differences”) or whether the differences included cases where data were not present yet in either system. See id. In response, Petitioner stated that FINRA's response is “puzzling” as the Tabb Study states that it used the “initial release” of FINRA's own “TRACE Corporate and Agency Master file,” and stated that neither FINRA nor any other commenter contests that the concern is with the inaccuracy of FINRA's data. See Petitioner Letter V, at 2.

182.   See Response Letter, at 10-11; FINRA Statement, at 23-22.

183.   See id.

184.   See id. In response, Petitioner stated that FINRA's reliance on unspecified “system-validated” data is not enough to refute the historical evidence of “a high error rate for comparatively simple data.” See Petitioner Letter V, at 3.

185.   See FINRA Statement, at 24.

186.   See infra notes 193-197 and accompanying text.

187.  As discussed above, in the corporate bond market today, the Commission understands from market participants that Petitioner typically has the timeliest access to newly issued bond reference data on the first day a bond trades, as it enjoys the voluntary cooperation of underwriters. See supra note 91. While market participants and others have expressed concerns that Petitioner is engaged in anti-competitive conduct in the market for newly issued corporate bond reference data, the Commission is not making any findings herein regarding whether Petitioner has actually engaged in such conduct. See supra notes 162 and 164 and accompanying text.

188.  In contrast to the corporate bond market, the municipal securities market and Treasury market have centralized mechanisms in place that provide market-wide access to information about newly issued securities on the first day of trading. MSRB Rule G-34 requires municipal securities underwriters to submit new issue information for municipal bonds to the New Issue Information Dissemination Service (“NIIDS”), which is operated by the Depository Trust and Clearing Corporation (“DTCC”). The FIMSAC noted that this information includes ten data elements required to set up an issue in the NIIDS, as well as up to 70 additional data elements. See Recommendation, at 1. In the Treasury market, the U.S. Department of the Treasury publishes details about upcoming issuances in a new issue calendar and immediately following each auction.

189.   See supra Section III.A.3 and Section III.B.3. One commenter argued that FINRA should have considered alternatives to the proposal to address information asymmetries in the market for newly issued corporate reference data. But, as discussed above, the Act requires that the Commission approve an SRO's proposed rule change if it finds that such proposed rule change is consistent with Act and the rules and regulations issued thereunder that are applicable to such organization. See Section 19(b)(2)(C)(i) of the Act. For the reasons set forth herein, the Commission finds that FINRA has made such a showing.

190.   See 15 U.S.C. 78 o -3. See also FIMSAC Letter, at 3 (recognizing the importance of the operator of a reference data to be subject these standards of conduct).

191.  Pursuant to Section 15A of the Act, FINRA, as a registered securities association, must establish rules that generally: (1) Are designed to prevent fraud and manipulation, promote just and equitable principles of trade, foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest; (2) provide for the equitable allocation of reasonable fees; (3) do not permit unfair discrimination; (4) do not impose any unnecessary or inappropriate burden on competition; and (5) with limited exceptions, allow any broker-dealer to become a member. See 5 U.S.C. 78s(g).

192.   See 5 U.S.C. 78s(g).

193.   See FINRA Regulation Notice 19-12 (April 12, 2019), available at www.sec.gov/​spotlight/​fixed-income-advisory-committee/​finra-regulatory-notice-trace-19-12.pdf. In addition, FINRA makes details about corporate and agency debt securities available to FINRA members. See TRACE OTC Corporate Bonds and Agency Debt User Guide, available at www.finra.org/​sites/​default/​files/​TRAQS-CA-user-guide-v4.7.pdf.pdf.

194.   See, e.g., FIMSAC Letter, at 3; Hendrik Bessembinder, William Maxwell, and Kumar Venkataraman, “Market Transparency, Liquidity Externalities, and Institutional Trading Costs in Corporate Bonds,” Journal of Financial Economics 82, 251-288 (2006), available at doi.org/​10.1016/​j.jfineco.2005.10.002; Michael A. Goldstein, Edith S. Hotchkiss, and Erik R. Sirri, “Transparency and Liquidity: A Controlled Experiment on Corporate Bonds,” The Review of Financial Studies 20, 235-273 (2007), available at doi.org/​10.1093/​rfs/​hhl020; Amy K. Edwards, Lawrence E. Harris, and Michael S. Piwowar, “Corporate Bond Market Transaction Costs and Transparency,” The Journal of Finance 62, 1421-1451 (2007), available at doi.org/​10.1111/​j.1540-6261.2007.01240.x; and Dominique C. Badoer and Cem Demiroglu, “The Relevance of Credit Ratings in Corporate Bond Markets,” The Review of Financial Studies 32, 42-74 (2018), available at doi.org/​10.1093/​rfs/​hhy031.

195.   See In the Matter of National Association of Securities Dealers, Inc., Order Instituting Public Proceedings Pursuant to Section 19(h)(1) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions, Exchange Act Release No. 37538 (August 8, 1996), Administrative Proceeding File No. 3-9056 and Report Pursuant to Section 21(a) of the Securities Exchange Act of 1934 Regarding the NASD and The Nasdaq Stock Market LLC (“Nasdaq”). See also Securities Exchange Act Release No. 39729 (March 6, 1998), 63 FR 12559 (March 13, 1998) (order approving proposed rules comprising OATS) (“OATS Approval Order”).

196.   Id. Seealso Securities Exchange Act Release No. 63311 (November 12, 2010), 75 FR 70757 (November 18, 2010) (SR-FINRA-2010-044) (order approving proposed rule change by FINRA relating to the expansion of OATS to all NMS stocks). While OATS data are not disseminated to the public, it is used by FINRA to recreate events in the lifecycle of an order and monitor the trading activity of member firms. See www.finra.org/​filing-reporting/​market-transparency-reporting/​order-audit-trail-system-oats.

197.  The Commission also notes that the FIMSAC considered various alternatives to FINRA in its deliberations, including private sector providers, and settled on FINRA because it believed that FINRA was the most logical and impartial choice because it is subject to regulatory oversight by the Commission and because of underwriters' existing reporting mechanisms with FINRA. See FIMSAC Letter, at 3.

198.   See supra notes 148, 151-152, and 158-159 and accompanying text.

199.  The Commission believes that data vendors will continue to compete for the provision of data services and expects that market participants will turn to a variety of sources for their data needs depending on the facts and circumstances at hand. See infra Section III.E for a discussion of the proposal's impact on competition.

200.   See, e.g.,infra note 216 and accompanying text.

201.   See, e.g., FIMSAC Letter, at 3 and infra note 216 and accompanying text (describing the potential for underwriters to change their current practices by reporting reference data to FINRA only).

202.  As discussed above, the Commission oversees FINRA by, among other things, conducting inspections of its operations and programs to examine whether FINRA is operating consistent with Act requirements and its own rules. See supra Section III.C.3.a.

203.   See supra notes 158-159 and accompanying text.

204.  In particular, FINRA states that the analysis does not explain which of the two sources (TRACE or the vendor) were deemed accurate (it only references “reconciliation differences”) or whether the differences included cases where data were not present yet in either system. See Response Letter, at 11.

205.   See id.

206.  The Commission is not taking a position on the accuracy of either commenters' or FINRA's statements regarding error rates.

207.   See supra notes 193-197 and accompanying text.

208.   See Response Letter, at 11-15.

209.  In addition, as discussed below, the Commission believes that data vendors will likely continue to compete in the market for data. In addition to potentially competing in the market for new issue reference data by operating as they do today, these data vendors will also continue to compete based on differing value added services related to the required information and also based on additional data fields, data updates, and services related to the data and that such competition should continue to spur innovation and allay concerns regarding a single point of failure and error rates. See infra Section III.E.3.

210.   See Chamber Letter, at 4 (“Underwriters would face potential liability for errors in reporting and calculation, while there is no clear benefit for this increased burden.”); Letter from Tom Quaadman, Executive Vice President, U.S. Chamber of Commerce, dated October 24, 2019 (“Chamber Letter III”), at 2.

211.   See Petitioner Letter IV, at 5. See also Chamber Letter III, at 3. Petitioner presented evidence of the size of underwritten investment grade corporate bonds in 2019, stating that “through October 7, 33 underwriters have each underwritten more than $1 billion (notional) year to date, while 59 other underwriters also have priced issues during 2019—overwhelmingly for small issues of less than $25 million” and stated that FINRA has failed to address the differential impact of the proposed new compliance burden on different sized underwriters. See Petitioner Letter IV, at 5, n.10.

212.   See Heritage Letter V, at 2.

213.   See Petitioner Statement, at 17-18

214.   See FIMSAC Letter, at 3. As discussed above, it is the Commission's judgment that it is premature to draw conclusions about the impact of FINRA's proposal on the manner in which underwriters currently distribute data. See supra notes 200-202 and accompanying text.

215.   See Notice, at 13982.

216.   See id.

217.   See, e.g., Recommendation, at 3 (“The FIMSAC recognizes that the creation of this service will impose costs on FINRA and the underwriters. Based on available information, the FIMSAC believes that the costs would be small relative to the value of the service as the required information to be reported is similar to the information that underwriters already provide directly to reference data vendors.”). See alsosupra notes 215-216 and accompanying text.

218.  Rule 6760(b), proposed to be renumbered as Rule 6760(b)(1), currently requires the following information to be reported to FINRA: (A) The CUSIP number or if a CUSIP number is not available, a similar numeric identifier ( e.g., a mortgage pool number); (B) the issuer name, or, for a Securitized Product, the names of the Securitizers; (C) the coupon rate; (D) the maturity; (E) whether Securities Act Rule 144A applies; (F) the time that the new issue is priced, and, if different, the time that the first transaction in the offering is executed; (G) a brief description of the issue ( e.g., senior subordinated note, senior note); and (H) such other information FINRA deems necessary to properly implement the reporting and dissemination of a TRACE-Eligible Security, or if any of items (B) through (H) has not been determined or a CUSIP number (or a similar numeric identifier) is not assigned or is not available when notice must be given, such other information that FINRA deems necessary and is sufficient to identify the security accurately. See FINRA Rule 6760.

219.  Indeed, the purpose behind FIMSAC's recommendation to have FINRA establish this database, as opposed to another entity, was to minimize any burdens on underwriters by utilizing existing reporting infrastructures. See Recommendation supra note 30; FIMSAC Letter, at 3.

220.   See supra note 91. The Commission believes that it would be rare for an underwriter involved in the distribution of debt securities to be able to act as an underwriter and broker-dealer without having this information immediately available for its engagement with customers. Additionally, the Commission understands that technical implementation may require a phased approach, as stated by FINRA, to promote compliance and data accuracy. See Response Letter, at 15; supra notes 125-127 and accompanying text (describing FINRA's implementation plans).

221.  One commenter raised concerns about underwriters facing potential liability for errors in reporting. See supra note 210. While the Commission recognizes that underwriters may be subject to antifraud liability or FINRA enforcement actions, the Commission notes that the information to be provided to FINRA under this proposal is a subset of the information underwriters currently provide to investors in the primary offering. For this reason, the Commission believes that the risk of potential additional liability for reporting this subset of information to FINRA is minimized.

222.   See IHS Markit Letter, at 3.

223.   See supra Section III.B.3. See also FIMSAC Transcript, supra note 36, Comments from Larry Harris, at 0111 (noting that the burden on underwriters “though it might be twice as large, is still extremely small and very, very small in comparison to the value of these data.”).

224.   See supra note 139.

225.   See, e.g., Healthy Markets Letter II, at 5-6; Petitioner Letter III, at 8-11; Heritage Letter II; at 2-3; Petitioner Letter IV, at 4.

226.   See Heritage Letter, at 1-2; Heritage Letter V, at 3; Chamber Letter, at 2; Petitioner Letter, at 2-3; Healthy Markets Letter II, at 5; Tabb Letter, at 2-3. See also Petitioner Statement, at 3, 32-34.

227.   See Petition for Review, at 29.

228.   See Petitioner Statement, at 20.

229.   See id. at 21.

230.   See Petitioner Letter II, at 1. See also Petitioner Letter IV, at 5. This commenter compared the proposal to a previous FINRA proposal to create a facility to consolidate all quotation data in the over-the-counter equities market, which was ultimately withdrawn by FINRA. See Petitioner Letter V, at 3-4 (citing Securities Exchange Act Release No. 60999 (November 13, 2009), 74 FR 61183 (November 23, 2009) (SR-FINRA-2009-077) (Notice of Filing of Proposed Rule Change Relating to the Restructuring of Quotation Collection and Dissemination for OTC Equity Securities).

231.   See Petition for Review, at 28, 30. See Petitioner Statement, at 32-33; 36.

232.   See Petitioner Statement, at 38.

233.   See FIMSAC Letter, at 3; Harris Letter at 4.

234.   See Harris Letter, at 4.

235.   See Harris Letter at 4 (noting that such additional data include ratings and indications of whether an issuer is currently in default, in an agreement to merge, or negotiating such an agreement). One commenter who argued the proposal would diminish competition amongst reference data providers nevertheless stated that market participants currently demand more reference data fields than FINRA is proposing to collect. See Petitioner Letter, at 13-14.

236.   See Response Letter, at 8-9. See also Notice, at 13982.

237.   See FINRA Statement, at 3; Response Letter, at 9.

238.   See FINRA Statement, at 3-4; Response Letter, at 9.

239.   See FINRA Statement, at 4, 27; Response Letter, at 8 (citing to Harris Letter; FIMSAC Letter; ICE Data Letter; Charles River Letter). See alsosupra notes 233-234 and accompanying text.

240.   See FINRA Statement, at 4, 28.

241.   See FINRA Statement, at 25 (citing SEC Staff Memorandum, Current Guidance on Economic Analysis in SEC Rulemakings, at 11 (March 16, 2012)).

242.  Specifically, FINRA cited to statements at the FIMSAC meeting and comment letters submitted in response to the proposal noting that the status quo currently results in higher costs for customers and that the proposal will reduce overall costs. See FINRA Statement, at 25-26 (citing to statements of Frederic Demesy, Refinitiv, FIMSAC Transcript, supra note 36; Harris Letter, at 4; and Charles River Letter). As further discussed below, FINRA has expressly and clearly committed that its fees for the New Issue Reference Data Service will be cost-based. See FINRA Statement, at 18. In its filing with the Commission to adopt fees for the New Issue Reference Data Service, FINRA will be required to set forth why such cost-based fees meet the requirements of the Act, and the Commission will evaluate FINRA's eventual fee application based on the requirements of the Act and assess FINRA's proposed cost-based formula. See infra Section III.F.3.b.

243.   See FINRA Statement, at 12.

244.   See FINRA Statement, at 26. FINRA further argued that if an entity is a dominant incumbent and creates barriers to entry for users of its service, then impacting that entity's standing may be required to promote competition and relieve inappropriate burdens on competition. FINRA noted that the FIMSAC expressed particular concern that a dominant reference data vendor has limited other market participants' access to its data for anti-competitive purposes. See FINRA Statement, at 26 (citing FIMSAC Letter, at 4).

245.   See Notice, at 13981; FIMSAC Transcript, supra note 36, Comments from Frederic Demesy, Refinitiv, at 0078 (“[A]t the moment, we see that there are some market anomalies where some of the vendors have access to information much earlier than other vendors. And that creates basically competitive advantage on certain platforms, which is in my view not ideal for having a transparent market.”), Comments from Spencer Gallagher, ICE Data Services, at 0069-72 (“there is one area that no investment or no level of ingenuity can solve and that is equal access to new issue reference data at or prior to first trade execution”); Harris Letter, at 4-5 (describing anticipated pro-competitive impacts of the proposal on the data vendor market).

246.   See supra note 216 and accompanying text.

247.  As discussed in more detail in this section, the Commission expects that data vendors will continue to provide enhanced data services ( e.g., adding additional data and making various analytical calculations based on the data in the New Issue Reference Data Service) to customers, and that market participants will turn to a variety of sources for their data needs depending on the facts and circumstances at hand.

248.   See, e.g., Response Letter, at 9.

249.   See Harris Letter at 4 (noting that such additional data include ratings and indications of whether an issuer is currently in default, in an agreement to merge, or negotiating such an agreement). Petitioner, who argued the proposal would diminish competition amongst reference data providers, nevertheless stated that market participants currently demand more reference data fields than FINRA is proposing to collect. See Petitioner Letter, at 13-14.

250.  For a description of various data vendor's bond reference data offerings, see e.g.www.bloomberg.com/​professional/​product/​reference-data/​; www.theice.com/​market-data/​pricing-and-analytics/​reference-data;www.refinitiv.com/​en/​financial-data/​market-data/​reference-data; and www.ftserussell.com/​data/​fixed-income-data.

251.   See FIMSAC Letter, at 3. There are many other data provided by reference data providers concerning a bond issue, such as issuer information ( e.g., fundamentals data, capital structure data), specific bond rating, bond trade and selling restrictions, classification data (industry, legal entity, etc.), corporate action data, ESG (Environmental, Social & Governance) data, dividend data, instrument analytics data, and security ownership data. See e.g., IHS Markit Reference Data Bonds Factsheet, available at cdn.ihs.com/​www/​pdf/​Reference-Data-Bonds-factsheet.pdf; Bloomberg Reference Data Content and Data, available at www.bloomberg.com/​professional/​product/​reference-data/​.

252.   See Amendment No. 2, at 4.

253.   See Petitioner Letter IV, at 6-9; Chamber Letter III at 2-3; Letter from John Thornton, Co-Chair, et al., Committee on Capital Markets Regulation, dated October 22, 2019 (“Committee Letter II”), at 2-3; Committee Letter III, at 2; Heritage Letter III, at 2-3; Healthy Markets Letter III, at 2; SIFMA Letter III, at 3-4; Petitioner Letter V, at 4-5; Petitioner Statement, at 34-36.

254.   See Petitioner Letter IV, at 6-9; Chamber Letter III at 2-3; Committee Letter II at 2-3; Committee Letter III, at 2; Heritage Letter III, at 2-3; Healthy Markets Letter III at 2; SIFMA Letter III at 3-4; and Petitioner Letter V, at 4-5. Some commenters pointed to the Commission's recent proposed rule change to amend Regulation NMS to rescind a provision that allows a proposed amendment to a national market system plan (“NMS plan”) that establishes or changes a fee or other charge to become effective upon filing, and argued that the concerns voiced by the Commission in that proposal are applicable to FINRA's current proposal. See Petitioner Letter IV, at 8; Chamber Letter III at 2; Committee Letter II at 2-3 (citing to Commission, Proposed Rule, “Rescission of Effective-Upon Filing Procedure for NMS Plan Fee Amendments,” 84 FR 54794 (Oct. 11, 2019) (“Proposed Regulation NMS Fee Amendment”)). See also Petitioner Statement, at 17-19.

255.   See Petition for Review, at 16; Petitioner Statement, at 18.

256.   See Petitioner Statement, at 17; Petitioner Letter V, at 4.

257.   See Petitioner Letter IV, at 6-9; Chamber Letter III at 2-3; Letter from John Thornton, Co-Chair, et al., Committee on Capital Markets Regulation, dated October 22, 2019 (“Committee Letter II”), at 2-3; Committee Letter III, at 2; Heritage Letter III, at 2-3; Healthy Markets Letter III, at 2; SIFMA Letter III, at 3-4; Petitioner Letter V, at 4-5; Petitioner Statement, at 34-36.

258.   See Petitioner Statement, at 35.

259.   See Petitioner Statement, at 14, 36.

260.   See id. Petitioner also noted that FINRA's own representative acknowledged that FINRA's current TRACE system could not support a new data service and instead FINRA would need to build new reporting, validation and distribution infrastructure. See id., at 5-6 (citing to statements by Ola Persson, FINRA, FIMSAC Transcript, supra note 36, (“Speaking for FINRA, not the effort on behalf of the underwriters, but speaking for FINRA, we would have some work to do. The technology today does not lend itself very well to this. We would need to create the ability for underwriters to come in, give us partial information and have the ability to edit their own records, et cetera. Today, that is a . . . bit of a one-way street. . . . We would also need to create a separate distribution channel for this. . . .”).

261.   See id. at 2, 12. See also Letter from Hal. S. Scott, President, Committee on Capital Markets Regulation, dated March 16, 2020 (“Committee Letter III”), at 2 (“[B]ecause the [proposal] does not specify its proposed fees and underlying cost, the SEC cannot conduct the informed cost-benefit analysis necessary for approval . . .”); Heritage Letter V, at 2 (stating that FINRA should be required to demonstrate “that the benefits to information purchasers would materially outweigh the unrecompensed costs imposed on underwriters. . . .”).

262.   See Petition for Review, at 12-13; Petitioner Statement, at 11-13.

263.   See Petition for Review, at 13; Petitioner Statement, at 13.

264.   See Petitioner Statement, at 11. This commenter further argued that the proposal cannot satisfy the requirements of Section 15(A)((b)(5) of the Act because FINRA has failed to provide any information regarding fees or an analysis of costs or “margins.” See Petitioner Statement, at 2, 13-16.

265.   See FINRA Statement, at 17; Response Letter, at 12, n.35. FINRA stated that it removed the fees so that it could further evaluate the appropriate fee structure in light of comments received, as well as new Commission staff guidance on SRO fee filings published after FINRA's initial proposal. See FINRA Statement, at 17.

266.   See FINRA Statement, at 17-18.

267.   See FINRA Statement, at 18.

268.   See id.

269.   See FINRA Statement, at 18; Response Letter, at 12.

270.   See FINRA Statement, at 19-21 (citing to Section 19(b)(3)(A) of the Act, Section 15(A)((b)(5) of the Act, and various immediately effective proposed rule changes filed by SROs to adopt fees).

271.  The Commission notes that SROs are required by Section 19(b) of the Act and Rule 19b-4 thereunder to file proposed rule changes with the Commission on Form 19b-4. The Act provides that a proposed rule change may not take effect unless it is approved by the Commission pursuant to Section 19(b)(2) of the Act, or it becomes immediately effective upon filing pursuant to Section 19(b)(3)(A) of the Act. Furthermore, Section 19(b)(3)(A) of the Act states “a proposed rule change shall take effect upon filing with the Commission if designated by the self-regulatory organization as . . . establishing or changing a due, fee, or other charge imposed by the self-regulatory organization on any person, whether or not the person is a member of the self-regulatory organization. . . .” See 15 U.S.C. 78s(b)(3)(A). Rule 19b-4(f) under the Act specifies the types of proposed rule changes that may become immediately effective upon filing with the Commission, and includes those properly designated by the SROs as “establishing or changing a due, fee, or other charge imposed by the self-regulatory organization.” See Rule 19b-4(f)(2) under the Act.

272.  Furthermore, in contrast to Petitioner's assertion, FINRA has the burden of demonstrating that a proposed fee is consistent with the Act and the rules and regulations thereunder, regardless of whether the proposed fee is effective upon filing with the Commission. See Securities and Exchange Commission Rules of Practice, Rule 700(b)(3) (17 CFR 201.700(b)(3)). See alsosupra note 256.

273.   See Section 19(b)(3)(C) of the Act, authorizing the Commission at any time within 60 days of the date of filing of a proposed rule change pursuant to Section 19(b)(1) of the Act, to summarily temporarily suspend the change in the rules of an SRO if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act, and Section 19(b)(2)(B) of the Act, setting forth a notice and hearing procedure for an order instituting proceedings.

274.   See generally Sections III.A and III.B; supra notes 31-42, 89-102 and 139-145 and accompanying text.

275.   See supra note 273 and accompanying text.

276.   See supra note 266 and accompanying text.

277.   See supra notes 259-261 and accompanying text.