[Federal Register Volume 87, Number 171 (Tuesday, September 6, 2022)]
[Notices]
[Pages 54579-54583]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19112]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95635; File No. SR-FINRA-2022-013]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving a Proposed Rule Change To Amend FINRA 
Rule 6730 (Transaction Reporting) To Enhance TRACE Reporting 
Obligations for U.S. Treasury Securities

August 30, 2022.

I. Introduction

    On May 23, 2022, 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 6730 (Transaction Reporting) 
to Enhance TRACE Reporting Obligations for U.S. Treasury Securities. 
The proposed rule change was published for comment in the Federal 
Register on June 3, 2022.\3\ On July 13, 2022, 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\ The Commission received five 
comments on the proposal.\6\ FINRA submitted a response to the comments 
on August 18, 2022.\7\ This order approves 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. 95003 (May 27, 
2022), 87 FR 33844 (June 3, 2022) (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 95270 (July 13, 
2022), 87 FR 43065 (July 19, 2022).
    \6\ See letters to Vanessa Countryman, Secretary, Commission, 
from Rob Toomey, Managing Direct & Associate General Counsel, and 
Charles de Simone, Managing Director, Technology and Operations, 
Securities Industry and Financial Markets Association (``SIFMA''), 
dated June 24, 2022 (``SIFMA Letter''); Howard Meyerson, Managing 
Director, Financial Information Forum (``FIF''), dated June 24, 2022 
(``FIF Letter''); Gerard O'Reilly, Co-CEO and Chief Investment 
Officer, Dimensional Fund Advisors LP, dated June 22, 2022; Stephen 
John Berger, Managing Director, Global Head of Government & 
Regulatory Policy, Citadel Securities, dated June 24, 2022 
(``Citadel Letter''); Joanna Mallers, Secretary, FIA Principal 
Traders Group, dated June 24, 2022 (``FIA Letter''). The comment 
letters are available at: https://www.sec.gov/comments/sr-finra-2022-013/srfinra2022013.htm.
    \7\ See letter to Vanessa Countryman, Secretary, Commission, 
from Robert McNamee, FINRA, dated August 18, 2022 (``FINRA Response 
Letter'').
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II. Description of the Proposal

    FINRA is proposing two changes to its Trade Reporting and 
Compliance Engine (``TRACE'') \8\ reporting rules to enhance the 
regulatory audit trail and require members to report transactions in 
U.S. Treasury Securities \9\ to FINRA in a more timely manner. 
Information reported to TRACE regarding transactions in U.S. Treasury 
Securities \10\ is used for regulatory and

[[Page 54580]]

other official sector \11\ purposes and is not disseminated 
publicly.\12\ Among other regulatory uses, FINRA makes the data 
available to the official sector to assist in the monitoring and 
analysis of the U.S. Treasury Security markets. The first proposed 
change would require members to report electronically executed 
transactions in U.S. Treasury Securities to TRACE in the finest 
increment captured by the system that executed the transaction. FINRA 
is proposing to provide an exception from the amended execution 
timestamp provision for members with limited trading volume in U.S. 
Treasury Securities. The second proposed change would reduce the 
reporting timeframe for transactions in U.S. Treasury Securities.
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    \8\ TRACE is the FINRA-developed system that facilitates the 
mandatory reporting of over-the-counter transactions in eligible 
fixed income securities. See generally FINRA Rule 6700 Series.
    \9\ Under Rule 6710(p), a ``U.S. Treasury Security'' means a 
security, other than a savings bond, issued by the U.S. Department 
of the Treasury (the ``Treasury Department'') to fund the operations 
of the federal government or to retire such outstanding securities. 
The term ``U.S. Treasury Security'' also includes separate principal 
and interest components of a U.S. Treasury Security that has been 
separated pursuant to the Separate Trading of Registered Interest 
and Principal of Securities (STRIPS) program operated by the 
Treasury Department.
    \10\ FINRA members began reporting information on transactions 
in U.S. Treasury Securities to TRACE on July 10, 2017. See FINRA 
Regulatory Notice 16-39 (October 2016); see also Securities Exchange 
Act Release No. 79116 (October 18, 2016), 81 FR 73167 (October 24, 
2016) (Order Granting Accelerated Approval of File No. SR-FINRA-
2016-027). See Notice, supra note 3, at 33844-45.
    \11\ The Treasury Department, the Board of Governors of the 
Federal Reserve System (the ``Federal Reserve''), the Federal 
Reserve Bank of New York, the SEC and the U.S. Commodity Futures 
Trading Commission comprise the Inter-Agency Working Group for 
Treasury Market Surveillance (IAWG or ``official sector'').
    \12\ On March 10, 2020, FINRA began posting on its website 
weekly, aggregate data on the trading volume of U.S. Treasury 
Securities reported to TRACE. See FINRA Press Release, FINRA 
Launches New Data on Treasury Securities Trading Volume, https://www.finra.org/media-center/newsreleases/2020/finra-launches-new-data-treasury-securities-trading-volume; see also Securities 
Exchange Act Release No. 87837 (December 20, 2019), 84 FR 71986 
(December 30, 2019) (Order Approving File No. SR-FINRA-2019-028). 
Information on individual transactions in U.S. Treasury Securities 
is not published or disseminated.
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Execution Timestamps

    Existing Supplementary Material .04 to Rule 6730 provides that, 
when reporting transactions in U.S. Treasury Securities executed 
electronically to TRACE, FINRA members must report the Time of 
Execution \13\ pursuant to paragraph (c)(8) of Rule 6730 to the finest 
increment of time captured by the member's system (e.g., millisecond, 
microsecond), but at a minimum, in increments of seconds.\14\ The 
``member's system'' referenced in the existing rule refers to the 
system that is used to report the transaction to TRACE (i.e., the 
member's ``reporting system''). Under the existing FINRA rule and 
related guidance, if a member uses multiple systems to facilitate trade 
reporting and those systems differ in granularity, then the member may 
use the finest increment that is common across all systems.\15\ As a 
result, currently FINRA members may use a reporting system to report a 
trade to TRACE in an increment of time that is less precise than that 
captured by the system that is used to execute the transaction (i.e., 
the ``execution system'').\16\
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    \13\ Under Rule 6710(d), the ``Time of Execution'' generally 
means the time when the parties to a transaction agree to all of the 
terms of the transaction that are sufficient to calculate the dollar 
price of the trade.
    \14\ Existing Supplementary Material .04 provides that a member 
must report ``at a minimum, in increment of seconds.'' As discussed 
below, FINRA states that, to avoid confusion, the proposed 
amendments update this language to clarify that members must report 
trades in an increment of ``no longer than a second'' and no shorter 
than a microsecond. TRACE currently cannot accept a Time of 
Execution in an increment that is finer than a microsecond. The 
proposed rule change would also make a non-substantive edit to 
Supplementary Material .04 to capitalize the defined term ``Time of 
Execution.'' See Notice, supra note 3, at 33845 n. 10.
    \15\ Specifically, TRACE Treasury FAQ #3.5.8 provides as 
follows: Question: Our firm will use two separate systems to 
facilitate trade reporting of U.S. Treasury Securities for different 
business lines. One system (``System A'') has the capability to 
capture the time of execution to the millisecond; however, the 
second system (``System B'') will only capture the time of execution 
to the second. Will our firm be required to update System B to 
capture the time of execution to the millisecond? Answer: No. The 
rule requires members to report the time of electronic executions to 
the finest increment of time captured in the member's system (e.g., 
millisecond, microsecond), but at a minimum, in increments of 
seconds. Since the firm would be reporting the time of execution to 
the finest increment captured by each system, the firm would not 
need to make any updates to System B to comply with a finer time 
increment.
    \16\ For purposes of Supplementary Material .04, FINRA would 
consider the relevant execution system to be the system used to 
execute the particular U.S. Treasury Security transaction being 
reported to TRACE, regardless of whether the member is using its own 
internal systems for execution or if the transaction is executed 
through an external system. For example, if a member executes a 
transaction in a U.S. Treasury Security through an alternative 
trading system (``ATS'') or other electronic trading platform, the 
member would be required to report in the finest increment of time 
captured by such ATS or electronic trading platform (but no finer 
than a microsecond, in line with TRACE system parameters). See 
Notice, supra note 3, at 33845 n. 12.
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    To improve the granularity and consistency of transaction 
information for U.S. Treasury Securities, FINRA is proposing to amend 
Supplementary Material .04 to Rule 6730 to instead provide that, when 
reporting transactions in U.S. Treasury Securities executed 
electronically, members must report the Time of Execution pursuant to 
paragraph (c)(8) of Rule 6730 to the finest increment of time captured 
by the execution system (e.g., millisecond, microsecond), but reporting 
must be in an increment of (i) no longer than a second and (ii) no 
shorter than a microsecond. Amended Supplementary Material .04 would 
not require FINRA members to update execution systems for U.S. Treasury 
Securities--instead members must update their reporting systems, if 
necessary, to ensure that their TRACE reports reflect the finest 
increment of time captured by the execution system (but not finer than 
a microsecond).\17\ Therefore, a FINRA member may be required to update 
its reporting system for U.S. Treasury Securities if such reporting 
system does not currently report to TRACE to the same level of 
granularity as the execution system.\18\
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    \17\ The TRACE system does not accept trade reports in 
increments finer than a microsecond. Where a firm captures time in a 
finer increment, the firm must truncate the time when reporting the 
transaction to TRACE. Specifically, TRACE FAQ #3.5.37 provides as 
follows: Question: Is rounding permitted when reporting the Time of 
Execution of a U.S. Treasury Security transaction to TRACE? Answer: 
No. Members must accurately report a transaction's Time of Execution 
and are not permitted to round when reporting to TRACE. The TRACE 
system can accommodate reporting up to the microsecond and, where 
the firm captures time in an increment finer than microseconds, the 
firm must truncate when reporting to TRACE. See Notice, supra note 
3, at 33845 n. 13.
    \18\ See Notice, supra note 3, at 33845. In connection with the 
proposed rule change, FINRA also proposes to amend its existing 
TRACE FAQs to clarify that a member must report using the finest 
increment of time captured by the execution system, and therefore 
may need to update other systems to enable trade reporting using the 
execution system's level of timestamp granularity. See Notice, supra 
note 3, at 33845 n. 14.
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    FINRA is also proposing to add new Supplementary Material .07 to 
Rule 6730 to provide a limited exception for members with limited 
trading volume in U.S. Treasury Securities from the proposed 
requirement to report electronically executed transactions in U.S. 
Treasury Securities to the finest increment of time captured by the 
execution system.\19\ The proposed Supplementary Material would define 
a ``member with limited trading volume in U.S. Treasury Securities'' as 
a FINRA member that executed transactions in U.S. Treasury Securities 
of $10 million or less in average daily par value, computed by 
aggregating buy and sell transactions, during the preceding calendar 
year. Where a member's activity is below the proposed criteria during 
the preceding calendar year, such member would not be required to 
report transactions in U.S. Treasury Securities in the finest increment 
captured by the execution system and would be permitted to continue to

[[Page 54581]]

report the Time of Execution for transactions in U.S. Treasury 
Securities executed electronically as it does today for the duration of 
the following calendar year.
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    \19\ The proposed rule change would also make non-substantive, 
conforming edits to the Supplementary Material to Rule 6730. 
Specifically, existing Supplementary Material .06 to Rule 6730 
provided a temporary exception for aggregate transaction reporting 
of U.S. Treasury Securities executed in ATS trading sessions. By its 
terms, that temporary exception expired on April 12, 2019. 
Therefore, FINRA is proposing to delete the temporary exception 
under existing Supplementary Material .06, renumber existing 
Supplementary Material .07 (ATS Identification of Non-FINRA Member 
Counterparties for Transactions in U.S. Treasury Securities) as 
Supplementary Material .06 and add the new exception for members 
with limited trading volume in U.S. Treasury Securities as new 
Supplementary Material .07. See Notice, supra note 3, at 33846 n. 
15.
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    Under the proposed rule change, a FINRA member that relies on the 
exception for limited trading volume would be required to confirm on an 
annual basis that it continues to meet the criteria for the exception 
based on its trading activity during the preceding calendar year. Where 
a member no longer meets the criteria for the exception based on its 
trading activity during a given preceding calendar year, the member may 
no longer rely on the exception beginning 90 days after the end of such 
calendar year, which FINRA believes would provide such members with a 
sufficient amount of time to make any systems changes that may be 
needed to comply with the amended timestamp requirement.\20\
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    \20\ Under the proposed rule change, once a member's activity 
falls outside of the scope of the proposed criteria based on its 
trading activity during a given preceding calendar year, such member 
generally may no longer rely on the exception beginning 90 days 
after the end of such calendar year, irrespective of whether it 
again meets the criteria in a subsequent calendar year. However, a 
member may consult with FINRA staff regarding the availability of 
the exception where the member has changed business lines or 
undergone a corporate restructuring that significantly impacts its 
level of activity in U.S. Treasury Securities. See Notice, supra 
note 3, at 33846 n. 16.
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Reporting Timeframe Reduction

    Under existing Rule 6730(a)(4)(A), transactions in U.S. Treasury 
Securities executed on a business day at or after 12:00:00 a.m. Eastern 
Time through 5:00:00 p.m. Eastern Time must be reported the same day 
during TRACE System Hours, i.e., 8:00:00 a.m. Eastern Time through 
6:29:59 p.m. Eastern Time.\21\ A transaction executed on a business day 
after 5:00:00 p.m. Eastern Time but before the TRACE system closes can 
be reported the same day before the TRACE system closes, but must be 
reported no later than the next business day (T+1) during TRACE System 
Hours, i.e., 8:00:00 a.m. Eastern Time through 6:29:59 p.m. Eastern 
Time, and, if reported on T+1, designated ``as/of'' and include the 
date of execution. Finally, a transaction executed on a business day at 
or after 6:30:00 p.m. Eastern Time through 11:59:59 p.m. Eastern Time 
(or a Saturday, a Sunday, a federal or religious holiday or other day 
on which the TRACE system is not open at any time during that day) must 
be reported the next business day (T+1) during TRACE System Hours, 
i.e., 8:00:00 a.m. Eastern Time through 6:29:59 p.m. Eastern Time, 
designated ``as/of,'' and include the date of execution.
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    \21\ Under Rule 6710(t), ``TRACE System Hours'' means the hours 
the TRACE system is open, which are 8:00:00 a.m. Eastern Time 
through 6:29:59 p.m. Eastern Time on a business day, unless 
otherwise announced by FINRA.
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    To provide more timely information about transactions in U.S. 
Treasury Securities, FINRA is proposing to amend Rule 6730(a)(4) to 
reduce the trade reporting timeframe as follows.\22\ Amended Rule 
6730(a)(4) would provide that transactions in U.S. Treasury Securities 
must be reported as soon as practicable, but no later than the 
following time periods.\23\ Amended Rule 6730(a)(4)(A) would require 
that a transaction executed on a business day at or after 12:00:00 a.m. 
Eastern Time through 7:59:59 a.m. Eastern Time must be reported the 
same day no later than 60 minutes after the TRACE system opens. A 
transaction executed on a business day at or after the time the TRACE 
system opens at 8:00:00 a.m. Eastern Time through when the TRACE system 
closes at 6:29:59 p.m. Eastern Time (standard TRACE System Hours) must 
be reported within 60 minutes of the Time of Execution, except that a 
transaction executed on a business day less than 60 minutes before 
6:30:00 p.m. Eastern Time can be reported the same day before the TRACE 
system closes, but must be reported no later than 60 minutes after the 
TRACE system opens the next business day (T+1), and if reported on T+1, 
designated ``as/of'' and include the date of execution. Finally, a 
transaction executed on a business day at or after 6:30:00 p.m. Eastern 
Time through 11:59:59 p.m. Eastern Time, or a Saturday, a Sunday, a 
federal or religious holiday or other day on which the TRACE system is 
not open at any time during that day (determined using Eastern Time) 
must be reported the next business day (T+1) no later than 60 minutes 
after the TRACE system opens, designated ``as/of,'' and include the 
date of execution.
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    \22\ FINRA is not proposing to provide an exception for members 
with limited trading activity in U.S. Treasury Securities from the 
proposed reduced reporting timeframe requirement. See Notice, supra 
note 3, at 33846 n. 18.
    \23\ In connection with the proposed changes to Rule 6730(a)(4) 
discussed above, the proposed rule change would also make conforming 
changes to Supplementary Material .03 to Rule 6730, which sets forth 
standards for firms reporting transactions ``as soon as 
practicable'' after the Time of Execution in accordance with Rule 
6730(a). Existing Rule 6730.03 provides that ``[e]ach member with a 
trade reporting obligation pursuant to paragraph (a) above for a 
TRACE-Eligible Security that is subject to dissemination must adopt 
policies and procedures reasonably designed to comply with the 
requirement that transactions in TRACE-Eligible Securities be 
reported `as soon as practicable' by implementing systems that 
commence the trade reporting process at the Time of Execution 
without delay.'' Under the proposed rule change, the ``as soon as 
practicable'' standard would also apply to transactions in U.S. 
Treasury Securities, which are not subject to dissemination. 
Therefore, FINRA is proposing to update the first sentence of Rule 
6730.03 to provide that ``[e]ach member with an obligation to report 
a transaction in a TRACE-Eligible Security `as soon as practicable' 
pursuant to paragraph (a) of this Rule must adopt policies and 
procedures reasonably designed to comply with this requirement by 
implementing systems that commence the trade reporting process at 
the Time of Execution without delay.'' See Notice, supra note 3, at 
33846 n. 19.
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    FINRA represents that it will announce the effective date of the 
proposed rule change in a Regulatory Notice. The effective date will be 
no later than 365 days following publication of the Regulatory Notice 
announcing Commission approval of the proposed rule change.

III. Discussion and Commission Findings

    After careful review of the proposed rule change, the comment 
letters, and FINRA's response to the comments, 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.\24\ In particular, the Commission 
finds that the proposed rule change is consistent with Section 
15A(b)(6) of the Act,\25\ which requires, among other things, that 
FINRA's rules be designed to prevent fraudulent and manipulative acts 
and practices; promote just and equitable principles of trade, and, in 
general, protect investors and the public interest. In particular, the 
proposed rule change would enhance the regulatory audit trail for U.S. 
Treasury Securities available to FINRA and the official sector and 
assist FINRA in carrying out its statutory duties to surveil and 
regulate this segment of the market.
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    \24\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \25\ 15 U.S.C. 78o-3(b)(6).
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    Pursuant to Section 19(b)(5) of the Act,\26\ the Commission 
consulted with and considered the views of the Treasury Department in 
determining to approve the proposed rule change. The Treasury 
Department indicated its

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support for the proposal.\27\ Furthermore, pursuant to Section 19(b)(6) 
of the Act,\28\ the Commission has considered the sufficiency and 
appropriateness of existing laws and rules applicable to government 
securities brokers, government securities dealers, and their associated 
persons in approving the proposal.
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    \26\ See 15 U.S.C. 78s(b)(5) (providing that the Commission 
``shall consult with and consider the views of the Secretary of the 
Treasury prior to approving a proposed rule filed by a registered 
securities association that primarily concerns conduct related to 
transactions in government securities, except where the Commission 
determines that an emergency exists requiring expeditious or summary 
action and publishes its reasons therefor'').
    \27\ See Email from U.S. Treasury Department staff to Justin 
Pica, Division of Trading and Markets, Commission (August 25, 2022).
    \28\ 15 U.S.C. 78s(b)(6).
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Execution Timestamps

    As stated above, FINRA proposes to require members to report 
electronically executed transactions in U.S. Treasury Securities to 
TRACE in the finest increment captured by the system that executed the 
transaction. FINRA also proposes to provide an exception from the 
amended execution timestamp provision for members with limited trading 
volume in U.S. Treasury Securities. Two commenters raised operational 
and technological concerns associated with this proposal \29\ and two 
commenters requested clarification to the definition of an 
electronically executed transaction.\30\
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    \29\ See SIFMA Letter at 3; FIF Letter at 2.
    \30\ See SIFMA Letter at 3; FIF Letter at 2.
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    FINRA states that it acknowledges the operational and technological 
changes that members may need to undertake in order to comply with the 
proposed change.\31\ FINRA also states its view that the benefits to 
the regulatory audit trail of aligning the timestamps reported to TRACE 
with those captured by the relevant execution system are 
appropriate.\32\ In response to comments seeking clarification to the 
definition of an electronically executed transaction, FINRA notes that 
the current timestamp granularity provision in TRACE reporting rules 
already applies to transactions that are ``executed electronically'' 
and further notes that it encourages members to contact FINRA for 
guidance on whether a particular transaction would be considered an 
electronically executed transaction.\33\
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    \31\ See FINRA Response Letter at 4-5.
    \32\ See FINRA Response Letter at 5.
    \33\ See id.
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    The Commission believes that the proposed change to align the level 
of granularity provided in TRACE reports with the level of granularity 
in the execution systems will enhance the regulatory audit trail for 
U.S. Treasury Securities available to FINRA and the official sector by 
facilitating more efficient matching and sequencing of transactions in 
the audit trail data.\34\ As discussed above, the current rule permits 
FINRA members to report a trade to TRACE in an increment of time that 
is less precise than that captured by the execution system, which makes 
it difficult for FINRA to match and sequence trades. The Commission 
believes the proposed change is reasonably designed to address this 
concern as FINRA represents that finer time granularity in the audit 
trail would allow transactions to be matched more accurately and 
sequenced with more precision, thus facilitating trade matching and 
sequencing for U.S. Treasury Securities. This, in turn, facilitates 
market oversight by providing FINRA and the official sector with more 
useful information on U.S. Treasury Security transactions. The 
Commission also believes that providing an exception from the amended 
execution timestamp requirement for FINRA members with limited trading 
volume in U.S. Treasury Securities is appropriate, as the proposed 
exception would reduce burdens for FINRA members with limited activity.
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    \34\ FINRA represents that, under the existing rule, members may 
report a trade to TRACE in an increment of time that is less precise 
than that captured by the execution system, which makes it difficult 
for FINRA to match interdealer trades when two sides report at 
different time granularity because coarse granularity in timestamps 
makes sequencing trades less precise. To address this concern, the 
proposal requires that, when reporting transactions in U.S. Treasury 
Securities executed electronically, members must report the Time of 
Execution to the finest increment of time captured by the execution 
system, but must report in an increment of time that is no longer 
than a second and no shorter than a microsecond. See Notice, supra 
note 3, at 33847.
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    The Commission recognizes that the proposed change may result in 
costs for FINRA members that trade U.S. Treasury Securities where 
members must implement changes to their processes and systems for 
reporting U.S. Treasury Securities transactions to TRACE. As discussed 
above, however, the Commission believes that the important regulatory 
purpose served by the proposal justifies the potential burdens. The 
Commission also recognizes that the proposed change may also affect 
competition among reporting firms, where firms reporting only a limited 
number of trades may face the same costs of upgrading their systems and 
therefore find their limited trading in U.S. Treasury Securities less 
viable. The Commission nevertheless believes that the impact on such 
firms is expected to be mitigated by the proposed exception for 
eligible FINRA members with limited trading volume, as previously 
described.

Reporting Timeframe Reduction

    As stated above, FINRA proposes to shorten the reporting timeframe 
for transactions in U.S. Treasury Securities. Two commenters support 
the proposal to require members to report transactions in U.S. Treasury 
Securities to TRACE in a more timely manner.\35\ One commenter suggests 
that FINRA postpone implementation of a shorter reporting 
timeframe.\36\ This commenter notes several current initiatives related 
to TRACE, including the Treasury Department's recent publication of a 
Request for Information \37\ (RFI) on additional post-trade 
transparency of data regarding secondary market transactions of U.S. 
Treasury Securities, and suggests that implementing technological and 
operational changes now, followed by the possibility of additional 
changes at a later date, would be inefficient and could result in work 
that is unnecessary in the long term.\38\
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    \35\ See Citadel Letter at 1; FIA Letter at 1-2.
    \36\ See SIFMA Letter at 1-2. This commenter also encouraged 
FINRA to review the benefits of a shortened reporting timeframe in 
light of how FINRA and its regulatory partners are using TRACE data, 
and to consider whether that use is impeded by the current reporting 
timeframes and whether there are any incremental benefits from a 60-
minute timeframe as opposed to an intermediate interval (such as two 
hours, as originally recommended by SIFMA). See id. In response, 
FINRA states that the proposal strikes an appropriate balance to 
provide FINRA and the official sector with more timely information 
about U.S. Treasury Security market activity, noting that members 
already report over 90 percent of transactions in U.S. Treasury 
Securities within 60 minutes of the Time of Execution. See FINRA 
Response Letter at 4.
    \37\ See Treasury Department, Notice Seeking Public Comment on 
Additional Transparency for Secondary Market Transactions of 
Treasury Securities, 87 FR 38259 (June 27, 2022) (Docket No. TREAS-
DO-2022-0012).
    \38\ See SIFMA Letter at 2.
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    FINRA acknowledges the fact that there are several current TRACE 
initiatives \39\ but notes that it does not believe that there is any 
conflict presented by advancing the proposal to shorten the reporting 
timeframe for transactions in U.S. Treasury Securities and states that 
it does not believe that the benefits of a shortened reporting 
timeframe for transactions in U.S. Treasury Securities are reduced in 
light of these other initiatives.\40\ Further, in response to concerns 
that the Treasury Department's RFI could result in a proposal or 
recommendation to increase transparency for transactions in U.S. 
Treasury Securities,\41\ FINRA notes that prior increases in 
transparency provided by TRACE for other fixed income

[[Page 54583]]

products have been preceded by a shortened reporting timeframe.\42\
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    \39\ See, e.g., FINRA Regulatory Notice 22-17 (August 2, 2022) 
(FINRA Requests Comment on a Proposal to Shorten the Trade Reporting 
Timeframe for Transactions in Certain TRACE-Eligible Securities From 
15 Minutes to One Minute) available at https://www.finra.org/rules-guidance/notices/22-17.
    \40\ See FINRA Response Letter at 3.
    \41\ See SIFMA Letter at 2-3
    \42\ See FINRA Response Letter at 3. With respect to the U.S. 
Treasury Department's RFI, FINRA further states that, should that 
initiative result in a proposal or recommendation to increase 
transparency for transactions in U.S. Treasury Securities, such a 
result would harmonize with a reduced reporting timeframe for U.S. 
Treasury Securities. See id.
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    The Commission believes that shortening the timeframe for FINRA 
members to report transactions in U.S. Treasury Securities to TRACE to 
as soon as practicable, but no later than within 60 minutes of the Time 
of Execution (or within 60 minutes after the TRACE system opens for 
trades executed during specified periods, as described above) will 
assist FINRA in carrying out its statutory duties to surveil and 
regulate this segment of the market by providing FINRA with more timely 
information about activity in the market for U.S. Treasury Securities, 
including more timely data about intraday pricing and liquidity.
    The Commission recognizes that the proposal may result in costs for 
FINRA members that need to implement changes to their processes and 
systems. The Commission notes that, according to FINRA, approximately 
96 percent of U.S. Treasury Security transaction reports were reported 
within 60 minutes of the Time of Execution during a sample period of 
July 2020 to June 2021.\43\ In addition, FINRA represents that some 
FINRA members who trade in U.S. Treasury Securities also trade in other 
types of TRACE-Eligible Securities that already require reporting 
within a shorter timeframe.\44\ While these transactions may occur on 
separate trading desks, the Commission agrees with FINRA that, to the 
extent that members are able to leverage existing technology within the 
firm, the costs associated with the proposed reporting timeframe 
changes for U.S. Treasury Securities could potentially be reduced. With 
respect to comments suggesting that FINRA should review the benefits of 
a shortened reporting timeframe in light of how FINRA and its 
regulatory partners are using TRACE data,\45\ the Commission agrees 
with FINRA's assessment that the proposal strikes an appropriate 
balance to provide FINRA and the official sector with more timely 
information about U.S. Treasury Security market activity. The 
Commission notes that FINRA members already report over 90 percent of 
transactions in U.S. Treasury Securities within 60 minutes of the Time 
of Execution.\46\
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    \43\ See Notice, supra note 3, at 33848.
    \44\ For example, FINRA states that transactions in corporate 
bonds and Agency Debt Securities generally are required to be 
reported to FINRA as soon as practicable, but no later than within 
15 minutes of the Time of Execution. In the FINRA sample period, of 
the 750 MPIDs that reported transactions in U.S. Treasury 
Securities, 691 MPIDs also reported transactions in corporate bonds 
and Agency Debt Securities. See Notice, supra note 3, at 33848.
    \45\ See supra note 36 and accompanying text.
    \46\ See FINRA Response Letter at 4.
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    Finally, the Commission believes that it would not be appropriate 
to delay implementation of the proposal beyond the timeframe set forth 
in the Notice. The Commission agrees with FINRA in its assessment that 
the proposal does not conflict with other TRACE-related initiatives and 
that the benefits of a shortened reporting timeframe for transactions 
in U.S. Treasury Securities are not reduced in light of these other 
initiatives. Moreover, the Commission believes that further delaying 
implementation of the proposal would undermine the regulatory interest 
that the official sector and FINRA have in obtaining access to more 
timely information about activity in the market for U.S. Treasury 
Securities.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\47\ that the proposed rule change (SR-FINRA-2022-013) is approved.
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    \47\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\48\
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    \48\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19112 Filed 9-2-22; 8:45 am]
BILLING CODE 8011-01-P


