[Federal Register Volume 89, Number 147 (Wednesday, July 31, 2024)]
[Notices]
[Pages 61514-61516]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16801]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100594; File No. SR-FINRA-2024-004]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Partial Amendment No. 1 to Proposed Rule 
Change To Amend FINRA Rule 6730 To Reduce the 15-Minute TRACE Reporting 
Timeframe to One Minute

July 25, 2024.

I. Introduction

    On January 11, 2024, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and 
Rule 19b-4 thereunder,\2\ a proposed rule change (SR-FINRA-2024-004) to 
amend FINRA Rule 6730 to reduce the 15-minute reporting timeframe for 
transactions reported to FINRA's Trade

[[Page 61515]]

Reporting and Compliance Engine (``TRACE'') system to one minute, with 
exceptions for FINRA member firms with de minimis reporting activity 
and for manual trades. The proposed rule change was published for 
comment in the Federal Register on January 25, 2024.\3\
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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. 99404 (Jan. 19, 
2024), 89 FR 5034 (Jan. 25, 2024) (``Notice''). Comments received on 
the proposed rule change are available at: https://www.sec.gov/comments/sr-finra-2024-004/srfinra2024004.htm.
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    On February 29, 2024, pursuant to Section 19(b)(2) of the Act,\4\ 
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 to disapprove the proposed rule 
change.\5\ On April 22, 2024, the Commission instituted proceedings 
under Section 19(b)(2)(B) of the Act \6\ to determine whether to 
approve or disapprove the proposed rule change.\7\ On July 18, 2024, 
the Commission, pursuant to Section 19(b)(2) of the Act,\8\ designated 
September 20, 2024, as the date by which the Commission shall either 
approve or disapprove the proposed rule change.\9\ On July 18, 2024, 
FINRA responded to comments \10\ and filed a partial amendment to the 
proposed rule change in response to certain comments on the proposed 
rule change (``Partial Amendment No. 1''). Partial Amendment No. 1 is 
described in Item II below, which has been substantially prepared by 
FINRA.\11\ The Commission is publishing this notice to solicit comments 
on Partial Amendment No. 1 from interested persons.\12\
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 99640 (Feb. 29, 
2024), 89 FR 16042 (Mar. 6, 2024). The Commission designated April 
24, 2024, as the date by which the Commission shall approve or 
disapprove, or institute proceedings to determine whether to 
disapprove, the proposed rule change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 100006 (Apr. 22, 
2024), 89 FR 32475 (Apr. 26, 2024).
    \8\ 15 U.S.C. 78s(b)(2).
    \9\ See Securities Exchange Act Release No. 100555 (July 18, 
2024), 89 FR 59948 (July 24, 2024) (``Extension'').
    \10\ See Letter from Racquel L. Russell, Senior Vice President, 
Director of Capital Markets Policy, Office of General Counsel, 
FINRA, dated July 18, 2024, available at https://www.sec.gov/comments/sr-finra-2024-004/srfinra2024004.htm.
    \11\ The Commission has reformatted FINRA's presentation of its 
proposed modifications to, and descriptions of, the proposed rule 
change.
    \12\ Partial Amendment No. 1 is also available on FINRA's 
website at https://www.finra.org/sites/default/files/2024-07/SR-FINRA-2024-004-Partial-A-1.pdf.
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II. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Partial Amendment

    FINRA is proposing the following amendments to the filing:

1. FINRA Proposes To Amend the Proposed Manual Trades Exception To 
Provide FINRA Members With an Additional Year To Transition to Five-
Minute Reporting for Manual Trades

    As discussed in the original filing, the proposed rule change would 
create an exception from the proposed one-minute reporting requirement 
for manual trades.\13\ As originally proposed, manual trades would have 
been subject to reporting as soon as practicable with a five-minute 
outer-limit reporting timeframe, phased in after two years.\14\ 
Specifically, where a trade qualified for the manual trades exception, 
a 15-minute outer limit would have applied for the first year following 
implementation; a 10-minute outer limit would have applied for the 
second year; and a five-minute outer limit would have applied 
thereafter.\15\ Some commenters raised various concerns regarding the 
feasibility of five-minute reporting for manual trades, and some 
commenters recommended that FINRA study and assess (and provide an 
opportunity for public comment on) the feasibility of five-minute 
reporting for manual trades prior to its implementation or maintain a 
15-minute reporting requirement for manual trades.\16\
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    \13\ See Notice, supra note 3.
    \14\ Id.
    \15\ Id.
    \16\ See Partial Amendment No. 1 at 4.
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    In response to these comments, FINRA is amending the proposed rule 
change to extend the phase-in period for five-minute reporting by one 
year so that FINRA members would have three years to transition to 
five-minute reporting for manual trades.\17\
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    \17\ Id.
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    Accordingly, the proposed rule change, as amended, would provide 
that a FINRA member relying on the manual trades exception will be 
required to report the manual trade as soon as practicable and no later 
than within 15 minutes of the time of execution (for up to one calendar 
year from the effectiveness of the proposed amendments), within 10 
minutes of the time of execution (for up to three calendar years from 
the effectiveness of the proposed amendments), and within five minutes 
of the time of execution (three or more calendar years from the 
effectiveness of the proposed amendments).\18\ Partial Amendment No. 1 
will provide FINRA with additional time to assess FINRA members' trade 
reporting times in connection with manual trades and request comment on 
the operation of the manual trades exception--and FINRA will be 
prepared to make adjustments, as necessary, prior to the effectiveness 
of the five-minute reporting timeframe.\19\
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    \18\ See proposed Rule 6730.09(b).
    \19\ See Partial Amendment No. 1 at 5.
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    Following are the changes proposed in Partial Amendment No. 1, with 
the proposed changes in the original filing shown as if adopted. 
Proposed new language in Partial Amendment No. 1 is italicized; 
proposed deletions in Partial Amendment No. 1 are in brackets:

6730. Transaction Reporting

    (a) through (f) No Change.

   Supplementary Material:----------

    .01 through .08 No Change.

.09 Exception for Manual Trades

    (a) No Change.
    (b) Except as otherwise specifically provided in paragraph (a)(2) 
of this Rule with respect to List or Fixed Offering Price Transactions 
and Takedown Transactions, a member relying on the exception for manual 
trades in this Supplementary Material .09 must report the transaction 
as soon as practicable but no later than within: 15 minutes of the Time 
of Execution (this 15-minute outer timeframe is available for up to one 
calendar year from the effectiveness of this Supplementary Material 
.09); within 10 minutes of the Time of Execution (this 10-minute outer 
timeframe is available for up to three[two] calendar years from the 
effectiveness of this Supplementary Material .09); or within 5 minutes 
of the Time of Execution (this 5-minute outer timeframe is applicable 
three[two] or more calendars years from the effectiveness of this 
Supplementary Material .09), as further provided in this paragraph.
    (1) No Change.
(2) Transactions Executed During TRACE System Hours
    Transactions executed on a business day at or after 8:00:00 a.m. 
Eastern Time through 6:29:59 p.m. Eastern Time (standard TRACE System 
Hours) must be reported as soon as practicable, but no later than 
within 15, 10, or 5 minutes of the Time of Execution[after the TRACE 
system opens] (the 15-, 10-, or 5-minute outer timeframe is available 
for up to one year, up to three[two]

[[Page 61516]]

years, or three[two] or more years, respectively, from the 
effectiveness of this Supplementary Material .09), except as provided 
in paragraph (b)(3) of this Supplementary Material .09.
(3) Transactions Executed Less Than 5 Minutes Before TRACE System 
Closes
    Transactions executed on a business day less than 15, 10, or 5 
minutes (the 15-, 10-, or 5-minute timeframe is available for up to one 
year, up to three[two] years, or three[two] or more years, 
respectively, from the effectiveness of this Supplementary Material 
.09) before 6:30:00 p.m. Eastern Time must be reported as soon as 
practicable after the TRACE system opens the next business day (T + 1), 
but no later than within 15 minutes after the TRACE system opens the 
next business day, and if reported on T + 1, designated ``as/of'' and 
include the date of execution.
    (4) No Change.

2. FINRA Proposes To Make a Correction to the Text of Proposed Rule 
6730.09(b)(2)

    Additionally, Partial Amendment No. 1 would make a correction to 
the proposed rule text such that proposed Rule 6730.09(b)(2) would 
require reporting within the prescribed timeframe from ``the Time of 
Execution'' rather than ``after the TRACE system opens.'' \20\ As 
originally proposed, for transactions subject to the manual trades 
exception that were executed on a business day at or after 8:00:00 a.m. 
Eastern Time (``ET'') through 6:29:59 p.m. ET (i.e., during TRACE 
system hours), the rule text erroneously would have required reporting 
``. . . as soon as practicable, but no later than within 15, 10, or 5 
minutes after the TRACE system opens. . . .'' \21\ Partial Amendment 
No. 1 would correct the text of proposed Rule 6730.09(b)(2) so that it 
requires reporting of these transactions ``. . . as soon as 
practicable, but no later than within 15, 10, or 5 minutes of the Time 
of Execution. . . .'' \22\
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    \20\ See Partial Amendment No. 1 at 5.
    \21\ See proposed Rule 6730.09(b)(2).
    \22\ See Partial Amendment No. 1 at 5.
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III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended by Partial Amendment No. 1, 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-2024-004 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-2024-004. 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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of FINRA. 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-2024-004 and 
should be submitted on or before August 21, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-16801 Filed 7-30-24; 8:45 am]
BILLING CODE 8011-01-P