[Federal Register Volume 89, Number 115 (Thursday, June 13, 2024)]
[Notices]
[Pages 50391-50395]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12890]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100296; File No. SR-FINRA-2024-009]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend FINRA Rule 7620A (FINRA/Nasdaq Trade 
Reporting Facility Reporting Fees)

June 7, 2024.
    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 May 31, 2024, the 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, and III below, which Items have been prepared by the Exchange. 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 7620A (FINRA/Nasdaq Trade 
Reporting Facility Reporting Fees) to modify the trade reporting fees 
and caps applicable to non-retail participants that use the FINRA/
Nasdaq Trade Reporting Facility Carteret and the FINRA/Nasdaq Trade 
Reporting Facility Chicago.
    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
    The FINRA/Nasdaq Trade Reporting Facility Carteret (the ``FINRA/
Nasdaq TRF Carteret'') and the FINRA/Nasdaq Trade Reporting Facility 
Chicago (the ``FINRA/Nasdaq TRF Chicago'') (collectively, the ``FINRA/
Nasdaq TRF'') are facilities of FINRA that are operated by Nasdaq, Inc. 
(``Nasdaq''). In connection with the establishment of the FINRA/Nasdaq 
TRF, FINRA and Nasdaq entered into a limited liability company 
agreement (the ``LLC Agreement''). Under the LLC Agreement, FINRA, the 
``SRO Member,'' has sole regulatory responsibility for the FINRA/Nasdaq 
TRF. Nasdaq, the ``Business Member,'' is primarily responsible for the 
management of the FINRA/Nasdaq TRF's business affairs, including 
establishing pricing for use of the FINRA/Nasdaq TRF, 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/Nasdaq TRF. The 
proposed rule change makes several adjustments to the schedule of fees 
and caps that applies to participants in the FINRA/Nasdaq TRF.
Background
    The FINRA/Nasdaq TRF comprises two of four FINRA facilities \3\ 
that FINRA members can use to report over-the-counter (``OTC'') trades 
in NMS stocks. While members are required to report all OTC trades in 
NMS stocks to FINRA, they may choose which FINRA facility (or 
facilities) to use to satisfy their trade reporting obligations.
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    \3\ The four FINRA facilities are the FINRA/Nasdaq TRF Carteret, 
the FINRA/Nasdaq TRF Chicago, the FINRA/NYSE Trade Reporting 
Facility (the ``FINRA/NYSE TRF''), and the Alternative Display 
Facility (``ADF'').
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    Pursuant to the FINRA Rule 7600A Series, participants in the FINRA/
Nasdaq TRF are charged fees and may qualify for fee caps (Rule 7620A) 
and also may qualify for revenue sharing payments for trade reporting 
to the FINRA/Nasdaq TRF (Rule 7610A). These rules are administered by 
Nasdaq, in its capacity as the Business Member and operator of the 
FINRA/Nasdaq TRF, on behalf of FINRA,\4\ and Nasdaq collects all fees 
on behalf of the FINRA/Nasdaq TRF.
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    \4\ FINRA's oversight of this function performed by the Business 
Member is conducted through a recurring assessment and review of TRF 
operations by an outside independent audit firm.
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    Pursuant to FINRA Rule 7620A, participants that are not Retail 
Participants \5\ in the FINRA/Nasdaq TRF are subject to four categories 
of fees, each of which is applicable to transactions on the three 
tapes: \6\ (1) Media/Executing Party; (2) Non-Media/Executing Party; 
(3) Media/Contra Party; and (4) Non-Media/Contra Party.\7\ For each 
Media and Non-Media trade report submitted to the FINRA/Nasdaq TRF, 
both the member firm identified in the report as the Executing Party 
and the member firm identified as the Contra Party are assessed a 
fee.\8\ Rule 7620A provides that for any category of fees, a non-Retail 
Participant will qualify for a cap on the fees they would otherwise pay 
to report non-comparison/accept (non-match/compare) trades to a 
particular tape during a given month, provided that during the month, 
the participant separately has an average daily number of Media/
Executing Party trade reports of at least 5,000 in that same tape.
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    \5\ The term ``Retail Participant'' is defined in Rule 7620A.01. 
Retail Participants are exempt from fees for trade reporting to the 
FINRA/Nasdaq TRF. Unless otherwise stated, references to a 
``participant'' herein mean a non-Retail Participant.
    \6\ Market data is transmitted to three tapes based on the 
listing venue of the security: New York Stock Exchange (``Tape A''); 
BYX, BZX, EDGA, EDGX, IEX, LTSE, MEMX, MIAX, Nasdaq BX, Nasdaq PSX, 
NYSE American, NYSE Chicago, NYSE National, and NYSE Arca (``Tape 
B''); and Nasdaq (``Tape C'').
    \7\ Media eligible trade reports are those that are submitted to 
the FINRA/Nasdaq TRF for public dissemination by the Securities 
Information Processors. By contrast, non-media trade reports are not 
submitted to the FINRA/Nasdaq TRF for public dissemination but are 
submitted for regulatory and/or clearance and settlement purposes.
    \8\ Pursuant to Rule7620A.01, the ``Executing Party'' is defined 
as the member with the trade reporting obligation under FINRA rules 
and the ``Contra'' is defined as the member on the contra side of a 
trade report.
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Proposed Amendments to Fee Schedule
    Nasdaq, as the Business Member, has determined to make several 
adjustments to the schedule of fees and caps that

[[Page 50392]]

applies to participants in the FINRA/Nasdaq TRF. As discussed below, 
the overall aims of the proposed adjustments are to: (1) align the 
activity-based fees and cap levels with the rising costs of operating, 
maintaining, and improving the FINRA/Nasdaq TRF; and (2) re-calibrate 
the fee structure so that it provides for a more equitable allocation 
of fees among Executing Parties and Contra Parties, while providing for 
a reasonable return to Nasdaq on its expenditures in support of and 
investments in the FINRA/Nasdaq TRF as the Business Member. FINRA is 
proposing to amend Rule 7620A accordingly.
    Specifically, the proposed rule change would: (1) raise the 
threshold daily average number of Media/Executing Party trades that are 
necessary for a participant to qualify for a fee cap program during a 
month; (2) provide for new tiered discounted Media/Contra Party and 
Non-Media/Contra Party fees; and (3) make non-substantive clarifying 
changes to Rule 7620A. Each of these proposals is described in detail 
below.
Cap Qualifying Activity
    The proposed rule change would raise the level of the daily average 
number of Media/Executing trades that a participant must report to the 
FINRA/Nasdaq TRF in a given month to qualify for caps on its trade 
reporting fees (``Cap Qualifying Activity''). Presently, the level of 
Cap Qualifying Activity is 5,000 Media/Executing trade reports in each 
of Tapes A, B, and C. Nasdaq, as the Business Member, has determined to 
raise these threshold numbers to 10,000 in each Tape.
    The levels of Cap Qualifying Activity have not increased since 
2018,\9\ at a time when reporting volume on the FINRA/Nasdaq TRF was 
significantly lower than it is now. Over the past five years, the 
FINRA/Nasdaq TRF trade reporting volume has grown twofold, while the 
FINRA/Nasdaq TRF monthly charge and caps for reporting trades have 
remained the same for the four categories over the same time 
period.\10\ Participants eligible for fee caps have paid the same 
capped charges over the past five years while trade reporting volumes 
have increased 201 percent over a five-year span. Meanwhile, the cost 
of operating the FINRA/Nasdaq TRF has increased by approximately 23 
percent from 2019 to 2023. These costs have increased for various 
reasons, including but not limited to inflation, investments that 
Nasdaq has made in upgrading and improving the facility, and increased 
operational and maintenance costs that have flowed from rising levels 
of trade reporting activity. Nasdaq, as the Business Member, believes 
that raising the levels of Cap Qualifying Activity will help to 
recalibrate the thresholds in light of increased volumes and costs.
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    \9\ See Securities Exchange Act Release No. 83866 (August 16, 
2018), 83 FR 42545 (August 22, 2018) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2018-029).
    \10\ Over the past five years, annual trade reporting volume on 
the FINRA/Nasdaq TRF has grown from 283.9 billion trades to 855.7 
billion trades, an increase of 201 percent. Annual fees have 
increased by 44 percent over the same period. Annual fees for this 
purpose mean the aggregate of all reporting fees collected by the 
FINRA/Nasdaq TRF in a given calendar year.
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Media and Non-Media/Contra Party Fees
    The proposed rule change would also amend the schedule of fees for 
Media/Contra Party and Non-Media/Contra Party trade reports. Nasdaq, as 
the Business Member, has determined to establish tiered pricing on 
Media/Contra Party and Non-Media/Contra Party trade reports for 
participants that do not qualify for the cap described above. Similar 
to the existing fee caps based on Executing Party trade report volume, 
the tiered pricing will apply based on a member firm's total monthly 
Media/Contra Party trade report volume. To be eligible for the tiered 
pricing, the participant's Media/Contra Party volume must equal or 
exceed 35 percent of the participant's total volume of trades reported 
to the FINRA/Nasdaq TRF in a given month. A participant that meets this 
threshold will qualify for discounted pricing at the following tiers:

------------------------------------------------------------------------
                                                                Fee per
Minimum number of media/contra trade reports during the month    trade
                          (million)                              report
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2............................................................     $0.012
7............................................................     0.0095
12...........................................................     0.0075
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    If a participant has sufficient Media/Contra Party trade reports to 
meet the above thresholds, then the discounted pricing will also apply 
to the participant's Non-Media/Contra Party trade reports. Unlike the 
existing fee caps, the volume and trade report thresholds are not 
calculated on a per tape basis for purposes of the Contra Party tiered 
discounts.
    The proposed tiered pricing is intended to provide for a more 
reasonable allocation of fees among Executing Parties and Contra 
Parties. The three tier levels were developed so that participants can 
qualify for lower fees as their Media/Contra Party trade reporting 
volumes increase.
    As discussed above, the number of trades reported to the FINRA/
Nasdaq TRF has grown significantly in recent years. Currently, 
participants that are primarily identified as the Contra Party on trade 
reports and do not have sufficient Executing Party trades that would 
qualify for the fee cap are not eligible for any pricing discount. The 
proposed rule change would therefore provide tiered discounted fees to 
participants identified in trade reports as the Media/Contra Party and 
Non-Media/Contra Party to allow more participants to qualify for 
discounted rates and to provide for more reasonable allocation of fees 
among the parties to a trade.
    In addition to setting forth the proposed discounted pricing, the 
proposed rule change would add language to Section II.A of Rule 7620A 
to provide an explanation and example of qualifying trade reporting 
activity for the Contra Party tiered discount.
    It is important to note that a participant will not receive both 
the fee cap based on qualifying Media/Executing Party trade reporting 
activity and the proposed Contra Party fee discount in the same month. 
Nasdaq, as the Business Member, will conduct monthly reviews of a non-
Retail Participant's trade reporting volume to determine what pricing 
applies to the participant's activity for a given month.\11\ If a firm 
does not qualify for the fee cap based on Media/Executing Party trade 
reporting activity, the firm will then be evaluated for Contra Party 
tiered pricing based on its Media/Contra Party trade reporting 
activity.\12\ Non-Retail Participants will automatically receive the 
applicable capped or discounted pricing if they qualify based on their 
trade reporting activity; they do not need to submit supporting 
documentation or take any additional steps to qualify.\13\
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    \11\ Retail Participants are not subject to any trade reporting 
fees and therefore would not be considered for any cap or fee 
discounts.
    \12\ If a firm qualifies for an ATS Market Maker fee cap, then 
the firm will not qualify for Contra Party pricing.
    \13\ By contrast, Retail Participants are required to complete 
and submit an application and written attestation to Nasdaq to be 
designated as such and to receive pricing under the Retail 
Participant fee schedule.
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General Clarifications
    FINRA is also proposing non-substantive changes to the FINRA/Nasdaq 
TRF fee schedule to provide more clarity. First, Retail Participants 
are not subject to any trade reporting fees under Rule 7620A. 
Therefore, FINRA is proposing to eliminate language that suggests that, 
in some

[[Page 50393]]

instances, Retail Participants are required to pay trade report 
charges. Second, FINRA is proposing minor changes to the language in 
Section II.A of Rule 7620A to provide more clarity on the qualifying 
activity required to achieve the cap. These proposed changes are not 
intended to make any substantive changes to the operation of the rule.
    FINRA notes that the proposed rule changes do not modify the other 
fees assessed under Rule 7620A, including the ATS Market Maker fee 
caps, the fee assessed a member for submitting a clearing report to the 
FINRA/Nasdaq TRF to transfer a transaction fee pursuant to Rule 
7230A(h), and the ``Comparison'' fee.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The operative date will be June 1, 2024.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of section 15A(b) of the Act,\14\ in general, and section 
15A(b)(5) of the Act,\15\ 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 also believes that the proposed rule change is 
consistent with the provisions of section 15A(b)(6) of the Act,\16\ 
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. FINRA also believes that the 
proposed rule change is consistent with the provisions of section 
15A(b)(9) of the Act,\17\ which requires that FINRA rules not impose 
any burden on competition that is not necessary or appropriate.
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    \14\ 15 U.S.C. 78o-3(b).
    \15\ 15 U.S.C. 78o-3(b)(5).
    \16\ 15 U.S.C. 78o-3(b)(6).
    \17\ 15 U.S.C. 78o-3(b)(9).
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    FINRA believes that the proposed fee schedule is reasonable and 
provides an equitable allocation of fees in that it will apply 
uniformly to all similarly situated FINRA members that use the FINRA/
Nasdaq TRF. Moreover, participation in the FINRA/Nasdaq TRF is 
voluntary, and access to the FINRA/Nasdaq TRF is offered on fair and 
non-discriminatory terms.
    The proposed rule change would: (1) raise from 5,000 to 10,000 the 
Cap Qualifying Activity that a participant needs to achieve to qualify 
for capped reporting fees under Rule 7620A; and (2) provide a three-
tiered fee discount for Media/Contra Party and Non-Media/Contra Party 
monthly charges for participants that may not otherwise achieve Cap 
Qualifying Activity.
    As discussed above, the FINRA/Nasdaq TRF has experienced a 
significant increase in trade reporting activity over the past five 
years, while the monthly charges and caps have remained unchanged over 
the same time period. Nasdaq, as the Business Member, does not believe 
that the current Cap Qualifying Activity of 5,000 daily average trades 
per month continues to be an appropriate threshold in light of such 
increase. The caps and cap formulas have not kept pace with the rapid 
growth of trade reporting volume on the FINRA/Nasdaq TRF since they 
were amended in 2018 or with the corresponding increase in costs 
associated with operating, maintaining, and upgrading the FINRA/Nasdaq 
TRF. Nasdaq, as the Business Member, believes that doubling the minimum 
average daily volume of Media/Executing Party trade reports from 5,000 
to 10,000 will better reflect the current levels of trade reporting 
activity on the FINRA/Nasdaq TRF. The proposed rule change will also 
help Nasdaq continue to accommodate the costs associated with rising 
trade reporting volumes while making substantial enhancements to the 
technology, functionality, and performance of the FINRA/Nasdaq TRF. 
Participants are required to submit Media trade reports to FINRA, while 
not all Non-Media trades are required to be reported under FINRA rules. 
In determining pricing for the FINRA/Nasdaq TRF, the Business Member 
has focused on attracting Media trade reports to the FINRA/Nasdaq TRF 
relative to other trade reporting facilities.\18\ As such, the existing 
approach of using Media/Executing Party trade reports as the criteria 
for a participant to qualify for the fee cap provides for an equitable 
allocation of fees and is not unfairly discriminatory.
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    \18\ The Cap Qualifying Activity requirement has historically 
focused on participants that are identified in the trade report as 
the Executing Party because historically the Executing Party has 
primarily made the decision on which TRF to which it report its 
trades.
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    Additionally, as discussed above, the proposed tiered discounts 
will help ensure a more equitable distribution of fees and allocate 
costs associated with the operation and maintenance of the FINRA/Nasdaq 
TRF more equitably among Executing Parties and Contra Parties. Over 
time, as the number of trades reported to the FINRA/Nasdaq TRF has 
grown significantly, the fee burden associated with the FINRA/Nasdaq 
TRF has shifted disproportionately to Contra Parties because 
participants that are primarily identified as the Contra Party and that 
do not have sufficient Executing Party trades to qualify for the fee 
cap are not currently eligible for any pricing discount. According to 
Nasdaq, as the Business Member, without a cap on Contra Party monthly 
trade report charges, the increase in Contra Party activity fees as a 
result of the growth in trade reporting activity over the past five 
years has been disproportionately higher than that of Executing Party 
fees. Therefore, the Business Member has advised that the proposed 
three-tiered fee discount for Contra Parties will help ensure that 
Contra Parties' fees are better calibrated relative to Executing 
Parties. Similar to the existing approach taken with respect to using 
Media/Executing Party trade reports to qualify for a fee cap, Nasdaq, 
as the Business Member, has determined to base the proposed fee 
discount for Contra Parties on Media/Contra trade reports in an effort 
to attract more Media reporting to the FINRA/Nasdaq TRF relative to 
other trade reporting facilities.\19\ Therefore, as with the existing 
approach with respect to Cap Qualifying Activity, using Media/Contra 
Party trade reports as the basis for qualifying for the Contra Party 
fee discount provides for an equitable allocation of fees and is not 
unfairly discriminatory.
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    \19\ Nasdaq has advised that today, some Contra Parties may play 
a greater role in determining where their Executing Parties report 
trades than in the past.
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    Nasdaq also advises that it expects to earn a profit from the 
proposed rule change, but it believes that such profit represents a 
reasonable return on its expenditures in support of and investments in 
the FINRA/Nasdaq TRF, and that the extent of such profit will be 
subject to and constrained by competitive pressures. As the Commission 
has recognized, ``[i]f competitive forces are operative, the self-
interest of the exchanges themselves will work powerfully to constrain 
unreasonable or unfair behavior,'' \20\ and ``the existence of 
significant competition provides a substantial basis for finding that 
the terms of an exchange's fee proposal are equitable, fair, 
reasonable, and not unreasonably or unfairly

[[Page 50394]]

discriminatory.'' \21\ In this instance, the increase in fees resulting 
from the proposal to increase the Media/Executing Party trade reporting 
activity required to qualify for a fee cap will be subject to 
significant competition from the FINRA/NYSE TRF, which in the past has 
increased its market share relative to the FINRA/Nasdaq TRF as a result 
of pricing and other competitive adjustments. As the Commission has 
held in the past, the presence of competition provides a substantial 
basis for a finding that the proposed rule change will be an equitable 
allocation of reasonable dues, fees and other charges.\22\
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    \20\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74781 (December 9, 2008) (Order Setting Aside 
Action by Delegated Authority and Approving File No. SR-NYSEArca-
2006-21).
    \21\ See 73 FR 74770, 74781-82.
    \22\ See supra note 21.
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    Finally, FINRA believes that it is reasonable to make non-
technical, clarifying changes to Rule 7620A. The proposed non-
substantive changes to remove the reference to fees charged to Retail 
Participants and to clarify the Cap Qualifying Activity requirements 
for the fee caps are appropriate to make the rule more easily 
understandable. FINRA, Nasdaq, and all FINRA/Nasdaq TRF participants 
have an interest in FINRA maintaining rules for its trade reporting 
facilities that are clear.

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule changes will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
Regulatory Need
    Nasdaq, as the Business Member and operator of the FINRA/Nasdaq 
TRF, collects all fees on behalf of the FINRA/Nasdaq TRF. As discussed 
above, Nasdaq has observed an increase in off-exchange volumes and the 
associated cost of operating and improving the FINRA/Nasdaq TRF. Nasdaq 
also observed that today, participants predominantly identified as the 
Contra Party pay a disproportionate amount of the fees. Therefore, 
Nasdaq determined to make several adjustments to the schedule of fees 
and caps to better allocate the fees among the participants and align 
them with the costs of operating the FINRA/Nasdaq TRF.
Economic Baseline
    As discussed above, pursuant to FINRA Rule 7620A, participants in 
the FINRA/Nasdaq TRF are currently subject to four categories of fees, 
each of which is applicable to transactions on the three tapes: (1) 
Media/Executing Party; (2) Non-Media/Executing Party; (3) Media/Contra 
Party; (4) and Non-Media/Contra Party. The rule also provides fee caps 
for participants for a particular tape during a given month, separately 
for Media/Executing Party, Non-Media/Executing Party, Media/Contra 
Party and Non-Media/Contra Party trades. The level of the daily average 
number of Media/Executing Party trades determines a participant's 
eligibility to qualify for fee caps on the Media/Executing Party, Non-
Media/Executing Party, Media/Contra Party, and Non-Media/Contra Party 
trade reports. Consider, for example, a non-Retail Participant 
averaging 10,924 Media/Executing Party trades, 21,279 Non-Media/
Executing Party trades, 1,949 Media/Contra Party trades, and 16,741 
Non-Media/Contra Party trades per day in a given month and tape. This 
participant meets the 5,000 daily trade volume of Media/Executing Party 
trades that qualifies it for the fee caps. The monthly charge on its 
Media/Executing Party trades would be capped at $1,430 (5,000 reports x 
$0.013 x 22), assuming 22 trading days in the month. In this example, 
the charges for Non-Media/Executing Party and Non-Media/Contra Party 
trade reports both would be capped at $1,430 because the volumes in 
both categories are higher than 5,000, while the charge for Media/
Contra Party trade reports would be $557.41 (1,949 reports x $0.013 x 
22) because the volume has not reached the cap size of 5,000. If the 
number of Media/Executing Party trades were below 5,000 in this 
example, then the charges on all categories would be calculated at a 
regular rate without a cap.
    FINRA analyzed data provided by Nasdaq that shows fees incurred by 
584 participants in at least one month of 2023. On average, 505 
participants paid a fee each month to the FINRA/Nasdaq TRF either as an 
Executing Party or Contra Party in at least one of Tape A, B, and C 
securities.\23\ Among these 505 participants, on average, 33 (seven 
percent) were eligible and received capped fees each month. Of the 472 
participants (93 percent) that were ineligible for a cap, on average, 
347 (74 percent) had a larger volume of Contra Party/Media activity 
than Executing Party/Media activity across all tapes.
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    \23\ The counts of participants are averaged across all twelve 
months of 2023 and rounded to the nearest whole numbers.
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Economic Impact
    The proposed rule change entails several changes to the fee and cap 
structure. The potential impact of each proposed change is discussed 
below.
    Nasdaq has determined to raise the threshold for the Cap Qualifying 
Activity--i.e., the daily average number of Media/Executing Party 
trades that a participant must report to the FINRA/Nasdaq TRF in a 
given month to qualify for caps on its trade reporting fees, from 5,000 
reports in each of Tapes A, B, and C, to 10,000 reports. Under the 
proposed new fee structure, some participants currently qualifying for 
fee caps would no longer qualify for the fee cap and would therefore 
see an increase in fees. Participants that continue to qualify for the 
proposed fee cap would also expect higher charges because the required 
volumes for fee caps in all categories would increase from 5,000 to 
10,000 trade reports under the proposed rule. Under the proposed fee 
structure, the cap effectively increases by 100%, approximately from 
$1,430 ($0.013 x 5,000 x 22) to $2,860 ($0.013 x 10,000 x 22), assuming 
22 trading days in a month, for each category of trade reports (i.e., 
Media/Executing Party, Non-Media/Executing Party, Media/Contra Party 
and Non-Media/Contra Party) in each tape.\24\ Participants not 
qualifying for the fee caps would be considered for the proposed tiered 
discounts on Contra Party trade reports and therefore could expect 
lower charges on the Contra Party trade reports if they qualify.\25\
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    \24\ As in the current Rule, under the proposed rule, a firm 
would qualify for fee caps in categories other than the Media/
Executing Party only after it has qualified for the fee caps in the 
Media/Executing Party category in each Tape.
    \25\ As described above, tiered pricing on Media/Contra Party 
and Non-Media/Contra Party trade reports would only be available for 
participants that do not qualify for the Media/Executing Party fee 
cap.
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    For the purpose of estimating the impacts of the proposed rule 
change, FINRA used monthly trade reporting volumes and fees data 
provided by Nasdaq from January through December of 2023 to calculate 
the projected fees assuming the reporting behavior would be the same as 
the 2023 data. Under the proposed rule change, 31 participants could 
expect an increase in costs on both Executing Party and Contra Party 
trade reporting activity (increase of $11,531, or 68 percent, on 
average monthly); seven participants could expect an increase in costs 
on Executing Party trade reporting activity (increase of $5,279, or 73 
percent, on average monthly) and no change in costs on Contra Party 
activity; 11 participants could expect a decrease in costs on Contra 
Party trade reporting activity (decrease of $18,562, or 18 percent, on 
average monthly) because they would qualify for the proposed tiered

[[Page 50395]]

discounts; and 535 participants would expect no change in costs.
    The proposed fee structure is likely to reduce the gap in trade 
reporting fees between participants predominantly reporting as an 
Executing Party and those predominantly reporting as a Contra Party. 
Across all participants, the effective cost per Executing Party trade 
report would increase by 52 percent, from 0.053 cents to 0.080 cents 
per report. The effective cost per Contra Party trade report would 
decline by one percent, from 0.415 cents to 0.412 cents per report. In 
2023, a Contra Party, on average, paid approximately eight times as 
much ($0.00415/$0.00053) as an Executing Party for each trade report. 
If the proposed fee structure were in effect in 2023, the ratio would 
have been approximately five times ($0.00412/$0.00080).
    Besides the fees that are measurable, the proposed fee structure 
could potentially deliver long term economic benefits for its 
participants that cannot easily be estimated. Specifically, the 
proposed fee structure would allow Nasdaq to more effectively cover the 
rising operating costs associated with increased volumes, as well as 
improve the functionality and service of the reporting facility, such 
as potentially better processing speed to enable quicker transmission 
and dissemination of trade reports.
    FINRA cannot estimate whether the proposed fee structure would 
deliver a net benefit or cost to participants and investors in the long 
term, as some of the economic benefits discussed above are not 
quantifiable. Additionally, FINRA notes that the proposed fee and fee 
cap changes occur within the context of a competitive environment in 
which multiple trade reporting facilities vie for market share. If any 
existing or prospective participant in either FINRA/Nasdaq TRF 
determines that the new fees or fee cap thresholds are too high or are 
unfavorable relative to fees and fee cap programs applicable to the 
FINRA/NYSE TRF, such participants may choose to report to the FINRA/
NYSE TRF or the ADF in lieu of the FINRA/Nasdaq TRF. Firms would 
continue reporting to FINRA/Nasdaq TRFs to the extent that they find 
the net cost of reporting to FINRA/Nasdaq TRF relative to reporting to 
other facilities preferable.
    FINRA does not know how the proposed rule change would affect 
competing facilities, which in part determines market competition and 
prices for trade reporting in the long run. Should the long-run 
equilibrium cost of reporting off-exchange trades to any available 
facility, including the FINRA/Nasdaq TRF, the FINRA/NYSE TRF or the 
ADF, rise in a competitive market, firms could potentially choose to 
pass the costs to investors.
Alternatives Considered
    No other alternatives were considered for the proposed rule change.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \26\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\27\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
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. If 
the Commission takes such action, the Commission shall institute 
proceedings to determine whether the proposed rule should be approved 
or disapproved.
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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-FINRA-2024-009 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-2024-009. 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 (https://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 the Exchange. Do 
not include personal identifiable information in submissions; you 
should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-FINRA-2024-009, and 
should be submitted on or before July 5, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-12890 Filed 6-12-24; 8:45 am]
BILLING CODE 8011-01-P