[Federal Register Volume 85, Number 189 (Tuesday, September 29, 2020)]
[Notices]
[Pages 61044-61048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21409]



[[Page 61044]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89973; File No. SR-FINRA-2020-029]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to 
Granularity of Timestamps in Trade Reports Submitted to FINRA's Equity 
Trade Reporting Facilities

September 23, 2020.
    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 September 17, 2020, 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 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 require firms to report time fields in trade 
reports submitted to an equity trade reporting facility (or ``FINRA 
Facility'') \3\ using the same timestamp granularity that they use to 
report to the consolidated audit trail (``CAT''), in accordance with an 
SEC order granting exemptive relief from certain CAT NMS Plan 
requirements.
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    \3\ Specifically, the equity FINRA Facilities are (1) the 
Alternative Display Facility, the FINRA/Nasdaq Trade Reporting 
Facilities and the FINRA/NYSE Trade Reporting Facility, through 
which member firms report OTC transactions in NMS stocks to FINRA, 
and (2) the OTC Reporting Facility, through which member firms 
report transactions in OTC Equity Securities to FINRA.
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    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
Background
    FINRA's equity trade reporting rules require members to report all 
time fields, including time of trade execution and, if applicable, time 
of trade cancellation, to the FINRA Facilities in seconds (i.e., 
HH:MM:SS) and milliseconds, if the member's system captures time in 
milliseconds.\4\ Pursuant to Rule 6860 of FINRA's CAT Compliance 
Rule,\5\ Industry Members are required to report timestamps for 
Reportable Events, including trade executions, to the CAT's Central 
Repository in milliseconds, and if their system captures time in finer 
increments, to report in such finer increments up to nanoseconds 
(except as otherwise provided under Rule 6860 for Manual Order 
Events).\6\ This requirement is consistent with the CAT NMS Plan,\7\ 
the CAT Compliance Rules of the other Plan Participants and exemptive 
relief granted by the SEC relating to timestamp granularity.\8\
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    \4\ See Rules 6282.04 and 7130.01 (relating to the ADF); 
6380A.04 and 7230A.01 (relating to the FINRA/Nasdaq TRFs); 6380B.04 
and 7230B.01 (relating to the FINRA/NYSE TRF); and 6622.04 and 
7330.01 (relating to the ORF).
    \5\ ``Compliance Rule'' is defined under Section 1.1 of the CAT 
NMS Plan to mean ``with respect to a Participant, the rule(s) 
promulgated by such Participant as contemplated by Section 3.11.'' 
FINRA's CAT Compliance Rule is the FINRA Rule 6800 Series 
(Consolidated Audit Trail Compliance Rule).
    \6\ Terms used but not otherwise defined herein have the meaning 
set forth in the CAT NMS Plan and FINRA's CAT Compliance Rule. 
Specifically, ``Central Repository,'' ``Industry Member,'' ``Manual 
Order Event'' and ``Reportable Event'' are defined under Section 1.1 
of the CAT NMS Plan and FINRA Rule 6810.
    \7\ Section 6.8(b) of the CAT NMS Plan states:
    Each Participant shall, and through its Compliance Rule shall 
require its Industry Members to, report information required by SEC 
Rule 613 and this Agreement to the Central Repository in 
milliseconds. To the extent that any Participant's order handling or 
execution systems utilize timestamps in increments finer than the 
minimum required in this Agreement, such Participant shall utilize 
such finer increment when reporting CAT Data to the Central 
Repository so that all Reportable Events reported to the Central 
Repository can be adequately sequenced. Each Participant shall, 
through its Compliance Rule: (i) Require that, to the extent that 
its Industry Members utilize timestamps in increments finer than the 
minimum required in this Agreement in their order handling or 
execution systems, such Industry Members shall utilize such finer 
increment when reporting CAT Data to the Central Repository; and 
(ii) provide that a pattern or practice of reporting events outside 
of the required clock synchronization time period without reasonable 
justification or exceptional circumstances may be considered a 
violation of SEC Rule 613 and the CAT NMS Plan.
    \8\ See Securities Exchange Act Release No. 88608 (April 8, 
2020), 85 FR 20743 (April 14, 2020). Pursuant to this exemption, 
Industry Members that capture timestamps in increments more granular 
than nanoseconds must truncate the timestamps, after the nanosecond 
level, for submission to the CAT and not round up or down in such 
circumstances. The exemption remains in effect for five years, until 
April 8, 2025, unless extended by the SEC.
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    Thus, currently there is a difference in the timestamp granularity 
requirements applicable to member firms reporting to the FINRA 
Facilities (up to milliseconds) and to the CAT (up to nanoseconds). 
This difference in timestamp granularity has implications for exemptive 
relief granted by the SEC. On June 11, 2020, the SEC granted the Plan 
Participants exemptive relief from, in pertinent part, Section 
6.4(d)(ii)(B) of the CAT NMS Plan, which states that each Participant, 
through its Compliance Rule, must require its Industry Members to 
report to the CAT a cancelled trade indicator when a trade is 
cancelled.\9\ Specifically, since firms already report trade 
cancellations to the FINRA Facilities pursuant to FINRA's trade 
reporting rules, the Participants requested an exemption so that they 
could relieve firms of their obligation to report the same information 
to the CAT. Instead, the CAT will obtain trade cancellations from trade 
report data that FINRA reports to the CAT (``FINRA Facility Data'') and 
will link such data to the related CAT execution reports submitted by 
Industry Members. As part of the FINRA Facility Data, FINRA submits to 
the CAT the time of trade cancellation as reported by the firm to the 
FINRA Facility. As noted above, under current rules and systems 
limitations, this timestamp is in milliseconds.
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    \9\ See Securities Exchange Act Release No. 89051 (June 11, 
2020), 85 FR 36631 (June 17, 2020) (``FINRA Facility Data Exemption 
Order'').
    FINRA notes that the FINRA Facility Data Exemption Order also 
grants exemptive relief from Section 6.4(d)(ii)(A)(2) of the CAT NMS 
Plan, which states that each Participant, through its Compliance 
Rule, must require its Industry Members to report the SRO-Assigned 
Market Participant Identifier of the clearing broker or prime 
broker, if applicable, for orders that are executed in whole or in 
part. This aspect of the Order is not at issue in the proposed rule 
change.
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    Given the difference in timestamp granularity requirements for 
firms reporting to the FINRA Facilities and the CAT, it is possible 
that the CAT could receive the time of trade cancellation in 
milliseconds from FINRA, while the time of trade cancellation for the 
same event might

[[Page 61045]]

have been expressed in increments finer than milliseconds, had the firm 
reported such information directly to the CAT. In such instances, the 
CAT would not receive the same data it would have received absent the 
exemptive relief.\10\ As a result, to ensure that the FINRA Facility 
Data provided to the CAT is equivalent to the data that would have 
otherwise been submitted by Industry Members, in the FINRA Facility 
Data Exemption Order, the SEC expressly conditioned the exemptive 
relief on the FINRA Facilities accepting timestamps up to nanoseconds.
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    \10\ For example, a firm cancels a trade at 10:30:00.123456 and 
reports the cancellation to a FINRA Facility with a trade 
cancellation time of 10:30:00.123 (the timestamp is truncated at the 
millisecond level for reporting to the FINRA Facility). As a 
consequence of the FINRA Facility Data Exemption Order, the data in 
the CAT reflects the time of cancellation as 10:30:00.123, which is 
the time submitted in the FINRA Facility Data. Had the firm reported 
the trade cancellation directly to the CAT, the data in the CAT 
would reflect the time of cancellation as 10:30:00.123456.
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    Specifically, the FINRA Facility Data Exemption Order requires that 
FINRA amend its rules and technical specifications to permit the FINRA 
Facilities to accept timestamps up to the granularity under the CAT NMS 
Plan (which, as noted above, is currently up to nanoseconds) and to 
implement such changes by December 15, 2021 for the TRFs and ADF and by 
December 15, 2022 for the ORF. In the FINRA Facility Data Exemption 
Order, the SEC notes that if the Plan Participants do not meet all of 
the conditions set forth in the order, on the schedule set forth in the 
order, their ability to recover fees from Industry Members could be 
impacted pursuant to the terms of Section 11.6 of the CAT NMS Plan.\11\
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    \11\ See FINRA Facility Data Exemption Order, citing CAT NMS 
Plan at Section 11.6 (effective June 22, 2020).
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Proposed Amendments to FINRA Trade Reporting Rules
    FINRA is proposing to amend its equity trade reporting rules \12\ 
to require Industry Members with an obligation to report order 
execution events to the Central Repository pursuant to FINRA's CAT 
Compliance Rule to report time fields (including time of execution and 
time of cancellation, if applicable) in trade reports submitted to a 
FINRA Facility using the same timestamp granularity, as set forth in 
Rule 6860 (currently up to nanoseconds), that they use to report to the 
Central Repository.
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    \12\ See Rules 6282.04, 6380A.04, 6380B.04, 6622.04, 7130.01, 
7230A.01, 7230B.01 and 7330.01. FINRA is proposing identical 
amendments to these rules.
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    FINRA notes that, except as discussed below, all trades that are 
reported to a FINRA Facility must also be reported to the CAT. As such, 
firms with a trade reporting obligation under FINRA's trade reporting 
rules also have a CAT reporting obligation and are therefore already 
subject to the timestamp granularity requirements under the CAT 
Compliance Rule. Given that CAT Reporters must have systems that 
capture time in at least milliseconds to meet the requirement that they 
report to the CAT in milliseconds, FINRA expects such firms to report 
to the FINRA Facilities in milliseconds under FINRA's current trade 
reporting rules.\13\ Once the proposed rule change is implemented, any 
firm capturing and reporting time to the CAT in increments finer than 
milliseconds would be required to report time to the FINRA Facilities 
in such finer increments up to nanoseconds.
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    \13\ Small Industry Members that do not currently report to 
FINRA's Order Audit Trail System (``OATS'') are not required to 
begin reporting to the CAT until December 13, 2021. Accordingly, 
FINRA would not expect these non-OATS reporters to report to the 
FINRA Facilities in milliseconds until December 13, 2021, unless 
their systems currently capture milliseconds.
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    There is one instance where firms have an obligation to report 
trades to a FINRA Facility without a corresponding CAT reporting 
obligation. Under FINRA trade reporting rules, firms must report trades 
in Restricted Equity Securities effected pursuant to Securities Act 
Rule 144A to the ORF.\14\ Unlike trades in OTC Equity Securities, these 
144A trades are not required to be reported within 10 seconds \15\ and 
as such are not reportable to the CAT.\16\ Therefore, in this limited 
instance, i.e., where a firm reports a trade in a Restricted Equity 
Security effected pursuant to Rule 144A, the firm could report to the 
ORF in seconds or, if the firm's system captures time in milliseconds, 
the firm would be required to report in milliseconds. The firm would 
not be required under the proposed rule change to report in increments 
finer than milliseconds; however, they could voluntarily do so.
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    \14\ See Rule 6622(a)(3).
    \15\ Pursuant to Rule 6622(a)(3), such trades must be reported 
by the end of the day on trade date or, if executed after the ORF 
closes, by 8:00 p.m. the next business day. These trades are 
reported for regulatory purposes only and are not publicly 
disseminated.
    \16\ The CAT NMS Plan and FINRA's CAT Compliance Rule apply to 
``Eligible Securities,'' which are defined as all NMS Securities and 
all OTC Equity Securities. ``OTC Equity Security'' is defined, in 
turn, as ``any equity security, other than an NMS Security, subject 
to prompt last sale reporting rules of a registered national 
securities association and reported to one of such association's 
equity trade reporting facilities.'' See Rule 6810. Accordingly, 
order and trade events relating to Restricted Equity Securities, 
including trades effected pursuant to Rule 144A, are not reportable 
to CAT.
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    Because the FINRA Facilities do not currently accept timestamps 
more granular than milliseconds, FINRA is unable to estimate, based on 
trade report information, how many firms capture time in increments 
more granular than milliseconds or have trade reporting systems capable 
of reporting time to a FINRA Facility in such finer increments. 
However, FINRA reviewed reporting statistics for order execution events 
in NMS stocks and OTC equity securities reported by Industry Members to 
the CAT (referred to in the CAT Industry Member Technical 
Specifications as ``MEOTs'') during the month of July 2020. On an 
average day, 12,617,227 out of 32,667,792 Industry Member order 
execution events (or 38.6%) have a timestamp granularity finer than 
milliseconds. Of the 167 firms that reported order execution events on 
an average day, 79 firms (or 47.2%) used a timestamp granularity finer 
than milliseconds. Seven of those firms reported time in nanoseconds, 
and together they reported 1,792,160 order execution events (or 5.5% of 
the total number of order execution events).
    Some of these firms may already send timestamps to a FINRA Facility 
in increments finer than milliseconds; \17\ FINRA does not believe that 
these firms would need to make any systems changes to comply with the 
proposed rule change. Other firms that capture time in increments finer 
than milliseconds may truncate the timestamp before sending to the 
FINRA Facility; these firms would need to make systems changes to send 
the more granular timestamp to the FINRA Facility. As noted above, 
FINRA will provide ample advance notice prior to the implementation 
date of the proposed rule change to allow firms to make and test the 
necessary systems changes.
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    \17\ If a FINRA Facility receives a timestamp more granular than 
milliseconds, the Facility will truncate at the millisecond level 
(the Facility will not reject the trade report, nor will it round 
the timestamp up or down).
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    FINRA understands that the securities information processors 
(``SIPs'') currently accommodate timestamps up to nanoseconds \18\ and 
at least some of the exchanges send quotation and transaction 
information to the SIPs in nanoseconds today. Once the proposed rule 
change is implemented, the FINRA Facilities will send transaction 
information to the SIPs with timestamps

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at the level of granularity as reported by the firm.\19\ As such, FINRA 
believes that the proposed rule change will enhance the granularity and 
sequencing of trade reports both for purposes of FINRA's audit trail 
and the publicly disseminated SIP data, to the extent firms are 
reporting time in increments finer than milliseconds. FINRA notes that, 
because not all firms capture and report timestamps at the same 
granularity, there may be questions about the potential for reverse 
engineering based on timestamps published by the SIPs, e.g., could 
market participants attempt to identify the trading activity of a firm 
that they believe has the technological capability of capturing 
timestamps in nanoseconds. However, as noted above, on average, seven 
firms currently capture (and report to CAT) time in nanoseconds and 
these firms reported on average close to 1.8 million order execution 
events to CAT per day. FINRA believes that as more firms capture 
timestamps in more granular increments, the potential for such reverse 
engineering should decrease over time.
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    \18\ Today, where a firm reports time in seconds or 
milliseconds, the FINRA Facilities add zeroes to convert the times 
to nanoseconds before sending to the SIPs.
    \19\ FINRA notes that the SIP NMS Plans require FINRA to send 
the trade execution time reported by its member firms to the SIPs. 
See Section IV(c) of the Consolidated Tape Association (CTA) Plan 
and Section VIII.B of the Nasdaq Unlisted Trading Privileges (UTP) 
Plan (stating that ``in the case of FINRA, the time of the 
transaction shall be the time of execution that a FINRA member 
reports to a FINRA trade reporting facility in accordance with FINRA 
rules''). As such, once the FINRA Facilities begin accepting, and 
member firms begin reporting, more granular timestamps in accordance 
with the proposed rule change, FINRA will be required to send all 
timestamps in the granularity reported by the firm (up to 
nanoseconds) to the SIPs for publication. Any change (e.g., 
truncating a more granular timestamp to the millisecond or 
microsecond level before sending to the SIPs) would require 
amendment (or, at a minimum, interpretation) of the SIP NMS Plans by 
the Plan Participants jointly and is beyond the scope of this 
proposed rule change.
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    If the Commission approves the proposed rule change, FINRA will 
announce the implementation date of the proposed rule change in a 
Regulatory Notice. The implementation date of the proposed rule change 
relating to the TRFs and ADF will be no later than December 15, 2021, 
and the implementation date of the proposed rule change relating to the 
ORF will be no later than December 15, 2022. To provide member firms 
sufficient time to make any systems changes necessary to comply with 
the proposed rule change, FINRA will provide ample advance notice of 
the implementation date, including publication of the Regulatory 
Notice, as well as updated technical specifications and testing 
schedule, at least 120 days prior to the implementation date.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\20\ 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,\21\ which requires 
that FINRA rules not impose any burden on competition that is not 
necessary or appropriate.
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    \20\ 15 U.S.C. 78o-3(b)(6).
    \21\ 15 U.S.C. 78o-3(b)(9).
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    FINRA believes that the proposed rule change is consistent with the 
Act because it is consistent with the SEC's FINRA Facility Exemption 
Order, which provides exemptive relief from certain provisions of the 
CAT NMS Plan, and the proposed rule change is necessary to comply with 
the express conditions of that order. In approving the CAT NMS Plan, 
the SEC noted that the Plan ``is necessary and appropriate in the 
public interest, for the protection of investors and the maintenance of 
fair and orderly markets, to remove impediments to, and perfect the 
mechanism of a national market system, or is otherwise in furtherance 
of the purposes of the Act.'' \22\ Because the proposed rule change 
implements exemptive relief under the CAT NMS Plan, FINRA believes that 
the proposed rule change furthers the objectives of the Plan, as 
identified by the SEC, and is therefore consistent with the Act. In 
addition, FINRA believes that the proposed rule change will enhance the 
granularity and sequencing of trade reports both for purposes of 
FINRA's audit trail and the publicly disseminated SIP data, to the 
extent firms are reporting time in increments finer than milliseconds.
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    \22\ See Securities Exchange Act Release No. 79318 (November 15, 
2016), 81 FR 84696, 84697 (November 23, 2016).
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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.
Economic Impact Assessment
    FINRA has undertaken an economic impact assessment, as set forth 
below, to analyze the potential economic impacts, including anticipated 
costs, benefits, and distributional and competitive effects, relative 
to the current baseline, and the alternatives FINRA considered in 
assessing how to best meet its regulatory objectives.
Regulatory Need
    On June 11, 2020, the SEC granted the Plan Participants exemptive 
relief from, in pertinent part, Section 6.4(d)(ii)(B) of the CAT NMS 
Plan, which states that each Participant, through its Compliance Rule, 
must require its Industry Members to report to the CAT a cancelled 
trade indicator when a trade is cancelled. As firms already report 
trade cancellations to the FINRA Facilities pursuant to FINRA's trade 
reporting rules, the Participants requested an exemption so that they 
could relieve firms of their obligation to report the same information 
to the CAT. Given the exemptive relief, the CAT will obtain trade 
cancellations from trade report data that FINRA reports to the CAT and 
will link such data to the related CAT execution reports submitted by 
Industry Members.
    There is, however, a difference in the timestamp granularity 
requirements applicable to member firms reporting to the FINRA 
Facilities (up to milliseconds) and to the CAT (up to nanoseconds). 
Given the difference in timestamp granularity requirements for firms 
reporting to the FINRA Facilities and the CAT, it is possible that the 
CAT could receive a cancelled trade timestamp in milliseconds from 
FINRA, while a cancelled trade timestamp for the same trade 
cancellation might have been expressed in increments finer than 
milliseconds. In such instances, the CAT would not receive the same 
data it would have received absent the exemptive relief. The FINRA 
Facility Data Exemption Order requires that FINRA amend its rules and 
technical specifications to permit the FINRA Facilities to accept 
timestamps up to the granularity under the CAT NMS Plan.
Economic Baseline
    Pursuant to Rule 6860 of FINRA's CAT Compliance Rule, Industry 
Members are required to report timestamps for Reportable Events, 
including trade executions, to the CAT's Central Repository in 
milliseconds, and if their system captures time in finer increments, to 
report in such finer increments up to nanoseconds. The proposed rule 
change does not require firms to begin capturing time in more granular 
increments than milliseconds; however, if they are reporting timestamps 
to the CAT in increments finer than milliseconds, the proposed rule 
change requires that they also

[[Page 61047]]

report to the FINRA Facilities in such finer increment (up to 
nanoseconds).
    During the month of July 2020, 202 market participant identifiers 
(``MPIDs'') submitted at least one trade cancellation message to a 
FINRA Facility. In total, 57,325 trade cancellation messages were 
submitted to the FINRA Facilities in July 2020 by these 202 MPIDs. Each 
of the 57,325 cancellation messages reported to the FINRA Facilities 
would then be reported to CAT by FINRA. Some of these cancellation 
messages are not publicly disseminated.\23\ Out of the 202 MPIDs, 146 
MPIDs submitted at least one trade cancellation message to a FINRA 
Facility that was publicly disseminated in July 2020. Of the total 
57,325 cancellation messages, 14,539 were publicly disseminated.
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    \23\ FINRA notes that where the original trade report was 
submitted for non-dissemination (i.e., regulatory and/or clearing 
only) purposes, the cancellation of that report would not be 
disseminated.
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    Because the FINRA Facilities do not currently accept timestamps 
more granular than milliseconds, FINRA is unable to estimate, based on 
trade report information, how many firms capture time in increments 
more granular than milliseconds or have trade reporting systems capable 
of reporting time to a FINRA Facility in such finer increments. FINRA, 
however, has reviewed reporting statistics for order execution events 
\24\ in NMS stocks and OTC equity securities reported by Industry 
Members to the CAT. On an average day in July 2020, 12,617,227 out of 
32,667,792 Industry Member order execution events (or 38.6%) have a 
timestamp granularity finer than milliseconds. Of the 167 firms \25\ 
that reported order execution events on an average day, 79 firms (or 
47.2%) used a timestamp granularity finer than milliseconds (i.e., 
microseconds or nanoseconds). Seven of those firms reported time in 
nanoseconds, and together these firms reported 1,792,160 order 
execution events (or 5.5% of the total number of order execution 
events).
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    \24\ Order execution events are referred to in the CAT Industry 
Member Technical Specifications as ``MEOTs.''
    \25\ The number of firms is calculated by the number of unique 
Central Registration Depository (``CRD'') numbers.
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Economic Impact
Benefits
    Given the exemptive relief, firms reporting trade cancellations to 
the FINRA Facilities are not required to report the same information to 
CAT, as CAT will obtain trade cancellations from trade report data that 
FINRA reports to the CAT. Consequently, firms are not required to 
report trade cancellations to both the FINRA Facilities and CAT.
    Once the proposed rule change is implemented, any firm capturing 
and reporting time to the CAT in increments finer than milliseconds 
would be required to report time to the FINRA Facilities in such finer 
increments up to nanoseconds. This may enhance the granularity and 
sequencing of trade reports for FINRA's audit trail, which, in turn, 
may improve FINRA's ability to surveil equity markets. In addition, as 
the FINRA Facilities send transaction information to the SIPs with 
timestamps at the level of granularity as reported, the granularity of 
the publicly disseminated SIP would improve. This would benefit market 
participants who currently use data from the SIP, as the timestamps 
would be more granular.
Costs
    Some firms that capture time in increments finer than milliseconds 
may already send timestamps to a FINRA Facility in such finer 
increment. If a firm already submits timestamps to a FINRA Facility in 
increments finer than milliseconds, then the firm would not need to 
make any systems changes to comply with this proposed rule change. 
However, if a firm currently truncates more granular timestamps at the 
millisecond level before sending to a FINRA Facility, then the firm 
would incur costs to make system changes to report more granular 
timestamps, up to nanoseconds. On an average day in July 2020, seven 
firms reported 1,792,160 order execution events to the CAT with 
timestamps reported in nanoseconds. As not all firms capture and report 
timestamps at that same granularity, there is a risk that firms that 
report executions with nanosecond timestamps published in the SIP may 
be identified by potential reverse engineering. This may put firms that 
report executions with nanosecond timestamps at a competitive 
disadvantage, relative to firms that do not report executions in 
nanoseconds, because firms reporting in nanoseconds might be identified 
by their executions. This risk of potential reverse engineering may 
decline over time as more firms capture timestamps in more granular 
increments.
Alternatives Considered
    No further alternatives are under consideration.

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 rule-comments@sec.gov. Please include 
File Number SR-FINRA-2020-029 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-2020-029. 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

[[Page 61048]]

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-2020-029 and should be 
submitted on or before October 20, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-21409 Filed 9-28-20; 8:45 am]
BILLING CODE 8011-01-P


