[Federal Register Volume 73, Number 207 (Friday, October 24, 2008)]
[Notices]
[Pages 63531-63533]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-25374]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58804; File No. SR-FINRA-2008-050]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change to Eliminate FINRA/NSX Trade Reporting Facility
Securities Transaction Credit Program
October 17, 2008.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 15, 2008, Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc.
(``NASD'')) filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by FINRA. FINRA has
designated the proposed rule change as ``establishing or changing a
due, fee or other charge'' under section 19(b)(3)(A) of the Act \3\ and
Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal effective
upon receipt of this filing by the Commission. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b 4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to delete FINRA Rule 7610B (Securities
Transaction Credit) to eliminate the securities transaction credit on
market data revenue earned by the FINRA/NSX Trade Reporting Facility
(the ``FINRA/NSX TRF'').
Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions are in brackets.\5\
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\5\ On September 25, 2008, the SEC approved proposed rule change
SR-FINRA-2008-021, in which FINRA proposed, among other things, to
adopt NASD Rule 7001C (Securities Transaction Credit) as FINRA Rule
7610B in the Consolidated FINRA Rulebook. See Securities Exchange
Act Release No. 58643 (September 25, 2008), 73 FR 57174 (October 1,
2008) (Order Approving SR-FINRA-2008-021; SR-FINRA-2008-022; SR-
FINRA-2008-026; SR-FINRA-2008-028 and SR-FINRA-2008-029). FINRA will
announce the implementation date of SR-FINRA-2008-021 in a
Regulatory Notice.
This proposed rule change proposes amendments to the underlying
rule text of FINRA Rule 7610B as adopted pursuant to SR-FINRA-2008-
021. Upon the filing of this proposed rule change, the Consolidated
FINRA Rulebook will be updated to reflect the deletion of FINRA Rule
7610B. In addition, because FINRA Rule 7610B has not yet been
implemented, FINRA's Transitional Rulebook, which includes NASD
Rules and Incorporated NYSE Rules, will be updated to reflect the
deletion of NASD Rule 7001C.
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* * * * *
7600B. CHARGES FOR FINRA/NSX TRADE REPORTING FACILITY SERVICES
7610B. [Securities Transaction Credit] Reserved
[(a) FINRA members that trade securities listed on the NYSE (``Tape
A''), Amex and regional exchanges (``Tape B''), or Nasdaq (``Tape C'')
in over-the-counter transactions reported to the FINRA/NSX Trade
Reporting Facility may receive from the FINRA/NSX Trade Reporting
Facility transaction credits based on the transactions attributed to
them. A transaction is attributed to a member if the member is
identified as the executing party in a trade report submitted to the
FINRA/NSX Trade Reporting Facility that the FINRA/NSX Trade Reporting
Facility submits to the Consolidated Tape Association or the Nasdaq
Securities Information Processor. A FINRA member may earn credits from
any of three pools maintained by the FINRA/NSX Trade Reporting
Facility. The Tape A, Tape B, and Tape C pools represent 75% of the
gross revenue paid by the Consolidated Tape Association or the Nasdaq
Securities Information Processor with respect to the FINRA/NSX Trade
Reporting Facility for Tape A, Tape B, and Tape C transactions. Subject
to paragraph (b) below, a FINRA member may earn credits from the pools
according to the pro rata share of revenue attributable to over-the-
counter transactions reported to the FINRA/NSX Trade Reporting Facility
by the member in Tape A, Tape B, and Tape C for each calendar quarter.
To the extent that Tape A, Tape B or Tape C revenue is subject to any
adjustment, credits provided may be adjusted accordingly.]
[(b) No FINRA member shall be eligible to receive a securities
transaction credit under Rule 7610B(a) for any calendar quarter in
which the
[[Page 63532]]
total transaction credit payable to such member is less than $250.]
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Background
The FINRA/NSX TRF provides FINRA members with another mechanism for
reporting locked-in transactions in NMS stocks, as defined in Rule
600(b)(47) of SEC Regulation NMS, effected otherwise than on an
exchange. In connection with the establishment of the FINRA/NSX TRF,
FINRA and National Stock Exchange, Inc. (``NSX'') entered into a
Limited Liability Company Agreement (the ``FINRA/NSX TRF LLC
Agreement''). Under the FINRA/NSX TRF LLC Agreement, FINRA, the ``SRO
Member,'' has sole regulatory responsibility for the FINRA/NSX TRF.
NSX, the ``Business Member,'' is primarily responsible for the
management of the FINRA/NSX TRF's business affairs to the extent those
affairs are not inconsistent with the regulatory and oversight
functions of FINRA. Additionally, the Business Member is obligated to
pay the cost of regulation and is entitled to the profits and losses,
if any, derived from the operation of the FINRA/NSX TRF.
Pursuant to FINRA Rule 7610B(a), FINRA members reporting trades in
New York Stock Exchange (``Tape A''), American Stock Exchange (now
known as NYSE Alternext US) and regional exchanges (``Tape B'') and the
Nasdaq Exchange (``Tape C'') securities to the FINRA/NSX TRF receive a
75% pro rata credit on gross market data revenue earned by the FINRA/
NSX TRF. ``Gross revenue'' is the revenue received by the FINRA/NSX TRF
from the three tape associations after the tape associations deduct
allocated support costs and unincorporated business costs. Under FINRA
Rule 7610B(b), a member is not eligible to receive a securities
transaction credit for any calendar quarter in which such credit totals
less than $250.
Proposal To Eliminate Securities Transaction Credit
FINRA is proposing to delete FINRA Rule 7610B in its entirety to
eliminate the securities transaction credit program for FINRA/NSX TRF
participants. Thus, FINRA members reporting trades in Tape A, Tape B
and Tape C stocks to the FINRA/NSX TRF will receive no credit on or
percentage of gross market data revenue earned by the FINRA/NSX TRF.
NSX, as the Business Member under the FINRA/NSX TRF LLC Agreement, has
determined that the elimination of the securities transaction credit is
necessary for competitive reasons and to increase funds to cover the
regulatory costs associated with the FINRA/NSX TRF.
Securities transaction credits payable to FINRA members for the
fourth quarter of 2008 will be calculated under Rule 7610B(a) for the
period beginning October 1, 2008 and ending at the close of business on
October 17, 2008. The $250 minimum threshold for the securities
transaction credit will not apply for this period in order to preclude
any negative financial impact to reporting members due to the short
calculation period in the fourth quarter of 2008. Trades submitted to
the FINRA/NSX TRF on or after October 20, 2008, the operative date of
the proposed rule change, will not be eligible for securities
transaction credits. NSX, as the Business Member, will provide notice
to FINRA/NSX TRF participants respecting this calculation. To the
extent that the Consolidated Tape Association or the Nasdaq Securities
Information Processor subsequently adjusts any Tape A, Tape B or Tape C
revenue earned by the FINRA/NSX TRF for any period(s) during which the
securities transaction credit program was in effect, credits paid to
members reporting trades to the FINRA/NSX TRF would be adjusted, as
necessary, in accordance with the rule in effect during such period.
FINRA has filed the proposed rule change for immediate
effectiveness. The operative date of the proposed rule change will be
October 20, 2008.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A of the Act,\6\ in general, and with Section
15A(b)(5) of the Act,\7\ in particular, which requires, among other
things, that FINRA rules provide for the equitable allocation of
reasonable dues, fees and other charges among members and issuers and
other persons using any facility or system that FINRA operates or
controls. FINRA believes that the proposed rule change provides for the
equitable allocation of reasonable dues, fees and other charges among
members in that it will be applied uniformly among members that
participate in the FINRA/NSX TRF.
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\6\ 15 U.S.C. 78o-3.
\7\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change has become effective upon filing pursuant
to section 19(b)(3)(A) of the Act \8\ and paragraph (f)(2) of Rule 19b-
4 thereunder,\9\ in that the proposed rule change is establishing or
changing a due, fee, or other charge applicable only to a member, which
renders the proposed rule change effective immediately upon filing. At
any time within 60 days of the filing of the proposed rule change, the
Commission may summarily abrogate such rule change 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.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-FINRA-2008-050 on the subject line.
[[Page 63533]]
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2008-050. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room on official
business days between the hours of 10 a.m. and 3 p.m. Copies of such
filing also will be available for inspection and copying at the
principal office of FINRA. All comments received will be posted without
change; the Commission does not edit personal identifying information
from submissions. You should submit only information that you wish to
make available publicly. All submissions should refer to File Number
SR-FINRA-2008-050 and should be submitted on or before November 14,
2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-25374 Filed 10-23-08; 8:45 am]
BILLING CODE 8011-01-P