[Federal Register Volume 84, Number 224 (Wednesday, November 20, 2019)]
[Notices]
[Pages 64147-64149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25100]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87540; File No. SR-FINRA-2019-028]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Allow 
FINRA To Publish or Distribute Aggregated Transaction Information and 
Statistics on U.S. Treasury Securities

November 14, 2019.
    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 November 12, 2019, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II,

[[Page 64148]]

and III below, which Items have been prepared by FINRA. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 6750 to provide that FINRA 
may publish or distribute aggregated transaction information and 
statistics on U.S. Treasury Securities.
    The text of the proposed rule change is available on FINRA's 
website at http://www.finra.org, at the principal office of FINRA, and 
at the Commission's Public Reference Room.

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

    In its filing with the Commission, FINRA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. FINRA has prepared summaries, set forth in sections A, 
B, 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
    Rule 6750 (Dissemination of Transaction Information) (the ``Rule'') 
generally provides for the dissemination of information on all 
transactions in TRACE-Eligible Securities \3\ immediately upon receipt 
of the transaction report,\4\ except as set forth in the Rule. Rule 
6750(c) (Transaction Information Not Disseminated) specifies that FINRA 
will not disseminate information on a transaction in a U.S. Treasury 
Security, among others.\5\
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    \3\ Rule 6710 generally defines a ``TRACE-Eligible Security'' 
as: A debt security that is United States (``U.S.'') dollar-
denominated and is: (1) Issued by a U.S. or foreign private issuer, 
and, if a ``restricted security'' as defined in Securities Act Rule 
144(a)(3), sold pursuant to Securities Act Rule 144A; (2) issued or 
guaranteed by an Agency as defined in Rule 6710(k) or a Government-
Sponsored Enterprise as defined in Rule 6710(n); or (3) a U.S. 
Treasury Security as defined in Rule 6710(p). ``TRACE-Eligible 
Security'' does not include a debt security that is issued by a 
foreign sovereign or a Money Market Instrument as defined in Rule 
6710(o).
    \4\ FINRA generally requires members to report transactions in 
any security that meets the definition of ``TRACE-Eligible 
Security'' to the Trade Reporting and Compliance Engine (``TRACE''), 
unless an exception applies. See Rule 6730 (Transaction Reporting).
    \5\ ``U.S. Treasury Security'' means a security, other than a 
savings bond, issued by the U.S. Department of the Treasury 
(``Treasury Department'') to fund the operations of the federal 
government or to retire such outstanding securities. The term also 
includes separate principal and interest components of a U.S. 
Treasury Security that has been separated pursuant to the Separate 
Trading of Registered Interest and Principal of Securities (STRIPS) 
program operated by the Treasury Department. See Rule 6710(p).
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    Supplementary Material .01 to Rule 6750 provides that, even where a 
TRACE-Eligible Security is not subject to trade-by-trade dissemination, 
FINRA may nonetheless publish or distribute aggregated transaction 
information and statistics on the security, other than with respect to 
transactions in U.S. Treasury Securities.\6\ FINRA now is proposing to 
amend Rule 6750.01 to provide that FINRA may publish or distribute 
aggregated transaction information and statistics on U.S. Treasury 
Securities to provide investors and market participants with insight 
into aggregate trading volume for U.S. Treasury Securities. For 
example, after discussions with staff at the SEC and the Treasury 
Department, FINRA intends to publish weekly volume information 
aggregated by U.S. Treasury Security subtype (e.g., Bills, Floating 
Rate Notes, Treasury Inflation-Protected Securities, and Nominal 
Coupons). Further, the volume information may be grouped within dealer-
to-customer, ATS and dealer-to-dealer, remaining years to maturity, or 
other categories.
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    \6\ Beginning on July 10, 2017, amendments to FINRA Rule 6730 
took effect that required members to report transactions in U.S. 
Treasury Securities to TRACE. See Securities Exchange Act Release 
No. 79116 (October 18, 2016), 81 FR 73167 (October 24, 2016) (Notice 
of Filing of Amendment No. 1 and Order Granting Accelerated Approval 
of File No. SR-FINRA-2016-027). See also Regulatory Notice 16-39 
(October 2016).
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    FINRA notes that any aggregated U.S. Treasury Security data 
published would not identify individual market participants or 
transactions. In addition, FINRA would not publish aggregated 
transaction information and statistics by individual U.S. Treasury 
Security, except for the category of on-the-run U.S. Treasury 
Securities because there is for each week often one on-the-run security 
for each subtype and maturity. As is generally the case currently for 
the aggregated transaction information and statistics made available on 
other types of non-disseminated TRACE-Eligible Securities, information 
on transactions in U.S. Treasury Securities would be provided at no 
charge (separately, FINRA may determine to submit a rule filing 
imposing a fee). FINRA believes that the proposed rule change will 
benefit investors and market participants by providing insight into 
U.S. Treasury Security transaction volume, while maintaining the 
confidentiality of individual market participants and transactions.
    If the Commission approves the proposed rule change, the effective 
date of the proposed rule change will be the date of Commission 
approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\7\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest, and Section 15A(b)(9) of the Act,\8\ which requires 
that FINRA rules not impose any burden on competition that is not 
necessary or appropriate.
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    \7\ 15 U.S.C. 78o-3(b)(6).
    \8\ 15 U.S.C. 78o-3(b)(9).
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    FINRA believes that the proposed rule change will benefit investors 
and market participants by providing insight into U.S. Treasury 
Security transaction volume, while maintaining the confidentiality of 
individual market participants and transactions. Accordingly, FINRA 
believes the proposal is in the public interest and will help promote 
transparency in TRACE-Eligible Securities.

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. FINRA has undertaken an 
economic impact assessment, as set forth below, to analyze the 
regulatory need for the proposed rule change, its potential economic 
impacts, including anticipated costs and benefits, and any alternatives 
considered in assessing how best to meet the proposal's regulatory 
objectives.
Regulatory Need
    The purpose of the rule is described above and is consistent with 
the TRACE transparency initiatives.
Economic Baseline
    As mentioned above, in July 2017, FINRA member firms began 
reporting transactions in U.S. Treasury Securities to TRACE.\9\ 
Currently, there is no

[[Page 64149]]

dissemination of transactions to the public, either real-time or on a 
delayed basis, as member firms report trade activity in U.S. Treasury 
Securities to TRACE for regulatory and other official sector 
purposes.\10\ There currently is limited and fragmented publicly 
available information on U.S. Treasury Security transaction volume. The 
Federal Reserve Bank of New York publishes average daily trading volume 
and end-of-the-week positions of primary dealers in U.S. Treasury 
Securities on a weekly basis.\11\ However, there is substantial trading 
volume with and among non-primary dealers. Currently there is not 
available, to the public or otherwise, a comprehensive source of 
aggregated volume data that reflects all major segments in the U.S. 
Treasury Securities market.
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    \9\ See supra note 6.
    \10\ FINRA makes the data available to the official sector to 
assist them in monitoring and analyzing the U.S. Treasury Securities 
markets. The Treasury Department, the Board of Governors of the 
Federal Reserve System, the Federal Reserve Bank of New York, the 
Securities and Exchange Commission, and the U.S. Commodity Futures 
Trading Commission comprise the Inter-Agency Working Group for 
Treasury Market Surveillance (``IAWG'' or ``official sector'').
    \11\ See https://www.newyorkfed.org/markets/primarydealers for 
the definition of ``primary dealers'' and the weekly statistics.
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Economic Impacts
    Dissemination of aggregate volume data and statistics for U.S. 
Treasury Securities would not impose any additional requirements on 
firms. Aggregate volume data would be derived from trade reports 
submitted to TRACE. In addition, because the data would be available 
free of charge, FINRA does not believe that there would be any direct 
costs associated with the proposal for firms, investors or data 
consumers.
    FINRA believes that publishing aggregate volume information would 
help market participants better understand the overall trading of U.S. 
Treasury Securities by providing information that could be utilized in 
assessing the level of liquidity over time within published categories. 
Thus, aggregated volume statistics should provide incremental and 
valuable insight into trading activity and supplement the information 
currently published by the Federal Reserve Bank of New York.\12\ 
Furthermore, since the reported volume would be grouped--e.g., by 
security subtype, remaining years to maturity, and market segment 
(e.g., ATS and dealer-to-dealer or dealer-to-customer)--the data could 
provide a breakdown of trading activity information at a level of 
granularity that has not been officially available before for U.S. 
Treasury Securities.
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    \12\ Some primary dealers are FINRA members.
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    FINRA also considered information leakage concerns, i.e., whether 
market participants' proprietary trading strategies could be discerned 
from publishing aggregated data; however, FINRA believes aggregation 
mitigates information leakage concerns by limiting the granularity of 
the data within descriptive groupings with no accompanying security- or 
market participant-level data.
Alternatives Considered
    No other alternatives were considered for the proposed 
dissemination framework.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-FINRA-2019-028 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-2019-028. 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 such 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-2019-028 and should be submitted 
on or before December 11, 2019.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-25100 Filed 11-19-19; 8:45 am]
 BILLING CODE 8011-01-P