
[Federal Register Volume 82, Number 124 (Thursday, June 29, 2017)]
[Notices]
[Pages 29597-29598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13586]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81011; File No. SR-FINRA-2017-012]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Granting Approval of Proposed Rule Change To 
Reduce the Delay Period for Transactions Included in the Historic TRACE 
Data Sets Relating to Corporate and Agency Debt Securities

June 23, 2017.

I. Introduction

    On May 12, 2017, the 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 amend FINRA Rule 7730 (Trade Reporting and 
Compliance Engine (TRACE)) to reduce the minimum delay from 18 months 
to six months for transactions included in the Historic TRACE Data Sets 
relating to corporate and agency debt securities. The proposed rule 
change was published for comment in the Federal Register on May 22, 
2017.\3\ The Commission did not receive any comments on the 
proposal.\4\ For the reasons discussed below, the Commission approving 
the proposed rule change.
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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. 80685 (May 16, 
2017), 82 FR 23385 (May 22, 2017) (``Notice'').
    \4\ FINRA previously solicited comments on the proposal as 
Regulatory Notice 15-24 (June 2015) and received four comments. 
Regulatory Notice 15-24 and the related comment letters are 
available as Exhibit 2 to the Notice on both FINRA and the SEC's Web 
sites.
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II. Description of the Proposal

    FINRA Rule 7730, among other things, sets forth the TRACE data 
products offered by FINRA and the fees applicable to such products. In 
addition to a real-time data feed, FINRA offers a Historic Corporate 
Bond Data Set, Agency Data Set, Securitized Product Data Set, and Rule 
144A Data Set (collectively, the ``Historic TRACE Data'').\5\ The 
Historic TRACE Data includes information such as the price, date, time 
of execution, yield, and uncapped volume for each transaction occurring 
at least 18 months ago.\6\ FINRA originally established this 18-month 
delay to address the possibility that the Historic TRACE Data might be 
used to identify positions or strategies of market participants.\7\ 
FINRA has proposed to reduce the delay applicable to transactions 
included in the Historic Corporate Bond Data Set and the Historic 
Agency Data Set--and Rule 144A transactions in corresponding securities 
(together, the ``Corporate and Agency Historic TRACE Data'')--from a

[[Page 29598]]

minimum of 18 months to a minimum of six months.\8\
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    \5\ The Historic TRACE Data originally included only the 
Corporate Bond and Agency Data Sets. The Securitized Product Data 
Set and the Rule 144A Data Set were added later as information about 
transactions in those securities became subject to public 
dissemination. FINRA has stated that additional securities may be 
included in Historic TRACE Data as they become subject to public 
dissemination.
    \6\ Historic TRACE Data also may include transactions or items 
of information that were not previously disseminated, such as exact 
trade volumes, where the real-time disseminated amount was capped.
    \7\ See Securities Exchange Act Release No. 56327 (August 28, 
2007), 72 FR 51689, 51690 (September 10, 2007).
    \8\ FINRA has not proposed to change the 18-month delay for 
transactions included in the Historic Securitized Product Data Set.
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    FINRA has stated that researchers and other non-dealers have been 
the primary subscribers to Historic TRACE Data. FINRA has attributed 
the lack of usage by dealers to the minimum 18-month delay period for 
including transactions in the Corporate and Agency Historic TRACE Data. 
FINRA has stated that it is not aware of any complaints regarding 
information leakage under the current 18-month delay, and that market 
participants have indicated that a reduction in the minimum delay to 
six months would make the product more useful.
    FINRA believes that a minimum six-month delay would promote the 
goal of increased transparency for transactions in TRACE-Eligible 
Securities while continuing to address information leakage concerns.\9\ 
In support of that belief, FINRA conducted a sampling analysis of past 
transactions in both corporate and agency bonds to assess whether 
positions or strategies of market participants could be identified if 
the Corporate and Agency Historic TRACE Data had included transactions 
that were aged only six months.\10\ Based on this analysis, FINRA 
concluded that ``the proposed rule, if it had been in place, would have 
provided little additional information to the public relative to these 
positions'' \11\ and that a reduction of the delay would be ``a limited 
risk for smaller issues that are held by a limited number of market 
participants.'' \12\
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    \9\ FINRA noted that the Municipal Securities Rulemaking Board 
(``MSRB'') disseminates in real time the exact par value on all 
transactions with a par value of $5 million or less, and includes an 
indicator (``MM+'') in place of the exact par value on transactions 
where the par value is greater than $5 million until the fifth 
business day. MSRB disseminates the exact par value for each 
transaction on the fifth day after the transaction. See MSRB Rule G-
14.
    \10\ See Notice, 82 FR 23387-89.
    \11\ Id. at 23388.
    \12\ Id. at 23389.
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    To further address concerns about information leakage, FINRA 
solicited comment from its members on an earlier iteration of the 
proposed rule change.\13\ FINRA received four comment letters and made 
certain revisions to its initial proposal to respond to those concerns 
before filing the current proposal with the Commission.\14\ The 
Commission notes that it has received no comments on the version of the 
proposed rule change published by the Commission.
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    \13\ See supra note 4.
    \14\ See Notice, 82 FR at 23389.
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    FINRA stated that it will announce the effective date of the 
proposed rule change in a Regulatory Notice to be published no later 
than 60 days following Commission approval. The effective date will be 
no later than 120 days following publication of the Regulatory Notice.

III. Discussion

    After carefully consideration, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities association.\15\ In particular, the Commission finds that 
the proposed rule change is consistent with Section 15A(b)(6) of the 
Act,\16\ which requires, among other things, that FINRA rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.
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    \15\ In approving this proposed rule change, the Commission has 
considered the proposed rule change's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \16\ 15 U.S.C. 78o-3(b)(6).
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    The Commission notes that, because the proposed rule change does 
not require firms to provide FINRA with any additional data, it will 
not have any operational impact on firms. Furthermore, the purchase of 
TRACE data products is optional for members and others. Finally, in 
light of FINRA's analysis of past transactions in corporate and agency 
debt securities and the revisions that FINRA made to its first 
iteration of the proposal, the Commission believes that reducing the 
period before which transactions in such securities are included in the 
Historic TRACE Data from a minimum of 18 months to six months is 
reasonably designed to promote transparency and respond to consumer 
demand for a more useful market data product, while minimizing the 
potential for information leakage.

IV. Conclusion

    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\17\ that the proposed rule change (SR-FINRA-2017-012) be, and hereby 
is, approved.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-13586 Filed 6-28-17; 8:45 am]
 BILLING CODE 8011-01-P


