[Federal Register Volume 84, Number 197 (Thursday, October 10, 2019)]
[Notices]
[Pages 54712-54714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22142]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87232; File No. SR-FINRA-2019-008]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Amendment No. 2 to a Proposed Rule 
Change To Establish a Corporate Bond New Issue Reference Data Service 
and Designation of a Longer Period for Commission Action on Proceedings 
To Determine Whether To Approve or Disapprove a Proposed Rule Change, 
as Modified by Amendment No. 1, To Establish a Corporate Bond New Issue 
Reference Data Service

October 4, 2019.

I. Introduction

    On March 27, 2019, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to establish a new issue reference data service 
for corporate bonds. The Commission published notice of filing of the 
proposed rule change in the Federal Register on April 8, 2019.\3\ On 
May 22,

[[Page 54713]]

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.\4\ On July 1, 2019, the Commission instituted 
proceedings under Section 19(b)(2)(B) of the Act \5\ to determine 
whether to approve or disapprove the proposed rule change.\6\ On 
October 3, 2019, the Exchange filed partial Amendment No. 2 to the 
proposed rule change.\7\ The Commission received twenty comment letters 
on the proposal from fourteen commenters.\8\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as modified by Amendment No. 2, from interested persons and is 
designating a longer period within which to approve or disapprove the 
proposed rule change, as modified by Amendment No. 2.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 85488 (April 2, 
2019), 84 FR 13977 (``Notice'').
    \4\ See Securities Exchange Act Release No. 85911, 83 FR 24839 
(May 29, 2019). The Commission designated July 7, 2019, as the date 
by which it should approve, disapprove, or institute proceedings to 
determine whether to disapprove the proposed rule change.
    \5\ 15 U.S.C. 78s(b)(2)(B).
    \6\ See Securities Exchange Act Release No. 86256, 84 FR 32506 
(July 8, 2019).
    \7\ Partial Amendment No. 1 was also filed on October 3, 2019 
and subsequently withdrawn on the same day due to a non-substantive 
administrative error and replaced with Amendment No. 2. In Amendment 
No. 2, the Exchange: (i) Withdrew the proposed fees for receipt of 
corporate new issue reference data in the current proposal and 
stated that a separate proposed rule change would be filed to 
establish fees related to the corporate bond new issue reference 
data service at a future date prior to implementing the service; 
(ii) revised the list of data fields to be collected under the 
proposal to clarify certain proposed data fields and to add six new 
data fields; and (iii) included additional rationale for the data 
fields proposed to be collected. Amendment No. 2 is available at: 
https://www.sec.gov/comments/sr-finra-2019-008/srfinra2019008.htm.
    \8\ See Letters from: (1) Cathy Scott, Director, Fixed Income 
Forum, on behalf of The Credit Roundtable, dated April 29, 2019 
(``Credit Roundtable Letter''); (2) Salman Banaei, Executive 
Director, IHS Markit, dated April 29, 2019 (``IHS Markit Letter''); 
(3) David R. Burton, Senior Fellow in Economic Policy, The Heritage 
Foundation, dated April 29, 2019 (``Heritage Letter''); (4) Tom 
Quaadman, Executive Vice President, U.S. Chamber of Commerce, dated 
April 29, 2019 (``Chamber Letter''); (5) Lynn Martin, President and 
COO, ICE Data Services, dated April 29, 2019 (``ICE Data Letter''); 
(6) Tyler Gellasch, Executive Director, Healthy Markets Association, 
dated April 29, 2019 (``Healthy Markets Letter''); (7) Greg Babyak, 
Global Head of Regulatory Affairs, Bloomberg L.P. dated April 29, 
2019 (``Bloomberg Letter''); (8) Marshall Nicholson and Thomas S. 
Vales, ICE Bonds dated April 29, 2019 (``ICE Bonds Letter''); (9) 
Christopher B. Killian, Managing Director, SIFMA, dated April 29, 
2019 (``SIFMA Letter''); (10) Larry Tabb, TABB Group, dated May 15, 
2019 (``Tabb Letter''); (11) Larry Harris, Fred V. Keenan Chair in 
Finance, USC Marshall School of Business, dated May 17, 2019 
(``Harris Letter''); (12) John Plansky, Executive Vice President and 
Chief Executive Officer, Charles River Development, dated May 24, 
2019 (``Charles River Letter''); (13) SEC Fixed Income Market 
Structure Advisory Committee, dated June 11, 2019 (``FIMSAC 
Letter''); (14) Greg Babyak, Global Head of Regulatory Affairs, 
Bloomberg L.P., dated July 1, 2019 (``Bloomberg Letter II''); (15) 
John Thornton, Co-Chair, et al., Committee on Capital Markets 
Regulation, dated July 27, 2019 (``Committee Letter''); (16) Greg 
Babyak, Global Head of Regulatory Affairs, Bloomberg L.P., dated 
July 29, 2019 (``Bloomberg Letter III''); (17) Christopher B. 
Killian, Managing Director, SIFMA, dated July 29, 2019 (``SIFMA 
Letter II''); (18) Tyler Gellasch, Executive Director, Healthy 
Markets Association, dated July 29, 2019 (``Healthy Markets Letter 
II''); (19) David R. Burton, Senior Fellow in Economic Policy, The 
Heritage Foundation, dated July 29, 2019 (``Heritage Letter II''); 
and (20) Tom Quaadman, Executive Vice President, U.S. Chamber of 
Commerce, dated July 29, 2019 (``Chamber Letter II ''). All comments 
on the proposed rule change are available at: https://www.sec.gov/comments/sr-finra-2019-008/srfinra2019-008.htm.
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II. Summary of the Proposed Rule Change, as Modified by Amendment No. 2

    As described in more detail in the Notice and Amendment No. 2,\9\ 
FINRA proposes to establish a new issue reference data service for 
corporate bonds. FINRA states that its proposal is in line with a 
recommendation from the SEC Fixed Income Market Structure Advisory 
Committee, which recommended that FINRA establish a new issue data 
service which would contain specified data elements on TRACE-eligible 
corporate bond new issues.\10\
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    \9\ See supra notes 3 and 7.
    \10\ See Fixed Income Market Structure Advisory Committee 
Recommendation (October 29, 2018) available at: https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-corporate-bond-new-issue-reference-data-recommendation.pdf.
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    Specifically, FINRA is proposing to amend Rule 6760 (Obligation to 
Provide Notice) \11\ to require that underwriters subject to Rule 6760 
\12\ report to FINRA a number of data elements, including some already 
specified by the rule, for new issues in Corporate Debt Securities.\13\ 
Proposed Rule 6760(b)(2) would require that, in addition to the 
information required by Rule 6760(b)(1),\14\ for a new issue in a 
Corporate Debt Security, excluding bonds issued by religious 
organizations or for religious purposes, the following information must 
be reported, if applicable: (A) The International Securities 
Identification Number (ISIN); (B) the currency; (C) the issue date; (D) 
the first settle date; (E) the interest accrual date; (F) the day count 
description; (G) the coupon frequency; (H) the first coupon payment 
date; (I) a Regulation S indicator; (J) the security type; (K) the bond 
type; (L) the first coupon period type; (M) a convertible indicator; 
(N) a call indicator; (O) the first call date; (P) a put indicator; (Q) 
the first put date; (R) the minimum increment; (S) the minimum piece/
denomination; (T) the issuance amount; (U) the first call price; (V) 
the first put price; (W) the coupon type; (X) rating (TRACE Grade); (Y) 
a perpetual maturity indicator; (Z) a Payment-In-Kind (PIK) indicator; 
(AA) first conversion date; (BB) first conversion ratio; (CC) spread; 
(DD) reference rate; (EE) floor; and (FF) underlying entity ticker.\15\
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    \11\ As part of the proposal, FINRA would amend the title of the 
Rule to ``Obligation to Provide Notice and Dissemination of 
Corporate Debt Security New Issue Reference Data.''
    \12\ As part of the proposal, FINRA would amend Rule 6760(a)(1) 
to clarify that underwriters subject to the rule must 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.
    \13\ In connection with the proposal, 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 (in Rule 6710(m)), rather than Asset-Backed Securities 
(defined in Rule 6710(cc)).
    \14\ 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.
    \15\ In Amendment No. 2, FINRA included its rationale for each 
data field proposed to be collected for new issue Corporate Debt 
Securities. See Amendment No. 2, supra note 7, at Exhibit 3.
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    FINRA proposes to require underwriters to report all data fields 
for Corporate Debt Securities prior to the first transaction in the 
security. FINRA would disseminate the corporate bond new issue 
reference data collected under Rule 6760 upon receipt.\16\ FINRA

[[Page 54714]]

states that it will submit a separate filing to establish fees related 
to the new issue reference data service at a future date and will 
implement the service after those fees are adopted.\17\
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    \16\ 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.
    \17\ See Amendment No. 2, supra note 7, at 4.
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    If the Commission approves the filing, FINRA proposes to announce 
the effective date of the proposed rule change in a Regulatory Notice 
to be published no later than 90 days following publication of the 
Regulatory Notice. The effective date will be no later than 270 days 
following Commission approval.

III. Solicitation of Comments on Amendment No. 2 to the Proposed Rule 
Change

    Interested persons are invited to submit written views, data, and 
arguments concerning whether Amendment No. 2 is consistent with the 
Act. Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-FINRA-2019-008 on the subject line.

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-2019-008. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of FINRA. All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-FINRA-2019-008 and should be submitted 
on or before October 24, 2019.

IV. Notice of Designation of a Longer Period for Commission Action on 
Proceedings To Determine Whether To Approve or Disapprove a Proposed 
Rule Change, as Modified by Amendment No. 2, To Establish a Corporate 
Bond New Issue Reference Data Service

    Section 19(b)(2) of the Act \18\ provides that, after initiating 
proceedings, the Commission shall issue an order approving or 
disapproving the proposed rule change not later than 180 days after the 
date of publication of notice of filing of the proposed rule change. 
The Commission may, however, extend the period for issuing an order 
approving or disapproving the proposed rule change by not more than 60 
days if the Commission determines that a longer period is appropriate 
and publishes the reasons for such determination. The proposed rule 
change was published for notice and comment in the Federal Register on 
April 8, 2019. October 5, 2019 is 180 days from that date, and December 
4, 2019 is 240 days from that date.
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    \18\ 15 U.S.C. 78s(b)(2).
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    The Commission finds it appropriate to designate a longer period 
within which to take action on the proposed rule change so that it has 
sufficient time to consider this proposed rule change, as modified by 
Amendment No. 2, and the comments received. Accordingly, the 
Commission, pursuant to Section 19(b)(2) of the Act,\19\ designates 
December 4, 2019, as the date by which the Commission shall either 
approve or disapprove the proposed rule change (File No. SR-FINRA-2019-
008).
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    \19\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22142 Filed 10-9-19; 8:45 am]
 BILLING CODE 8011-01-P