[Federal Register Volume 81, Number 205 (Monday, October 24, 2016)]
[Notices]
[Pages 73167-73177]
[FR Doc No: 2016-25604]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79116; File No. SR-FINRA-2016-027]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed Rule Change, as Modified by
Amendment No. 1, Relating to the Reporting of Transactions in U.S.
Treasury Securities to TRACE

October 18, 2016.

I. Introduction

    On July 18, 2016, 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 require FINRA members to report secondary
market transactions in U.S. Treasury securities to the Trade Reporting
and Compliance Engine (``TRACE''). The proposed rule change was
published for comment in the Federal Register on July 25, 2016.\3\ The
Commission received 12 comments in response to the proposed rule
change.\4\ On September 6, 2016, FINRA consented to an extension of
time for the Commission to act on the proposal until October 21,
2016.\5\ FINRA responded to the comments and filed Amendment No. 1 to
the proposal on September 23, 2016.\6\ The Commission is publishing
this notice to solicit comment on Amendment No. 1 to the proposal from
interested persons and is approving the proposed rule change, as
modified by Amendment No. 1, on an accelerated basis.
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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. 78359 (July 19,
2016), 81 FR 48465 (``Notice'').
    \4\ See letters to Brent J. Fields, Secretary, Commission, from
Mike Nicholas, Chief Executive Office, Bond Dealers of America
(``BDA''), dated August 15, 2016 (``BDA Letter''); Adam C. Cooper,
Senior Managing Director and Chief Legal Officer, Citadel LLC
(``Citadel''), dated August 15, 2016 (``Citadel Letter''); Shane
O'Cuinn, Managing Director, Credit Suisse, dated August 15, 2016
(``Credit Suisse Letter''); Marc R. Bryant, Senior Vice President
and Deputy General Counsel, Fidelity Investments (``Fidelity''),
dated August 15, 2016 (``Fidelity Letter''); David W. Blass, General
Counsel, Investment Company Institute (``ICI''), dated August 15,
2016 (``ICI Letter''); John A. McCarthy, General Counsel, KCG
Holdings, Inc. (``KCG''), dated August 15, 2016 (``KCG Letter'');
Robert Toomey, Managing Director and Associate General Counsel,
Securities Industry and Financial Markets Association (``SIFMA'')
and Timothy W. Cameron, Head, Asset Management Group, Head, Asset
Management Group, SIFMA, dated August 15, 2016 (``SIFMA Letter'');
and Douglas Friedman, General Counsel, Tradeweb Markets LLC
(``Tradeweb''), dated August 15, 2016 (``Tradeweb Letter''); and
letters to Robert W. Errett, Deputy Secretary, Commission, from Mary
Lou Von Kaenel, Managing Director, Financial Information Forum
(``FIF''), dated August 15, 2016 (``FIF Letter''); Manisha Kimmel,
Chief Regulatory Officer, Wealth Management, Thomson Reuters, dated
August 15, 2016 (``Thomson Reuters Letter''); and John Shay, Senior
Vice President, Virtu Financial, Inc. (``Virtu''), dated August 15,
2016 (``Virtu Letter''); and letter from Jane Carson, received on
August 5, 2016 (``Carson Letter'').
    \5\ See letter from Brant K. Brown, Associate General Counsel,
FINRA, to Katherine England, Assistant Director, Division of Trading
and Markets, Commission, dated September 6, 2016.
    \6\ See letter from Brant Brown, Associate General Counsel,
FINRA, to Brent J. Fields, Secretary, Commission, dated September
23, 2016 (``FINRA Response''). Amendment No. 1 revised the proposal
to indicate that the ``.S'' modifier must be used if a transaction
is part of a series of transactions and may not be priced based on
the current market. FINRA posted a copy of its Amendment No. 1 on
its Web site when if filed the amendment with the Commission.
Amendment No. 1 is also available at https://www.sec.gov/comments/sr-finra-2016-027/finra2016027-14.pdf.
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II. Background

    As described in further detail below, FINRA has proposed to require
its members to report transactions in U.S. Treasury securities to
TRACE. At this time, FINRA is not proposing to publicly disseminate any
reports of transactions in U.S. Treasury securities, nor is FINRA
proposing at this time to impose any fees on its members for the
reporting of such transactions.

A. Origin of the Proposal

    On the morning of October 15, 2014, the market for U.S. Treasury
securities, futures, and other closely related instruments experienced
an unusually high level of volatility. Subsequently, an interagency
working group consisting of representatives from the Commission, the
Department of the Treasury (the ``Treasury Department''), the Board of
Governors of the Federal Reserve System, the Federal Reserve Bank of
New York, and the Commodity Futures Trading Commission (``CFTC'')
issued a report (``Joint Staff Report'') analyzing the structure of the
U.S. Treasury market and the conditions that contributed to the market
volatility on October 15.\7\ The Joint Staff Report proposed several
next steps in understanding the U.S. Treasury market, including an
assessment of the data about the U.S. Treasury market available to the
public and to the official sector.\8\
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    \7\ See Treasury Department et al., Joint Staff Report: The U.S.
Treasury Market on October 15, 2014 (July 13, 2015), https://www.sec.gov/reportspubs/special-studies/treasury-market-volatility-10-14-2014-joint-report.pdf.
    \8\ See Joint Staff Report at 6-7.
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    Following the publication of the Joint Staff Report, the Treasury
Department published a Request for Information (``RFI'') seeking public
comment on structural changes in the U.S. Treasury market and their
implications for the overall functioning of this market, including
considerations with respect to more comprehensive official sector
access to Treasury securities market data.\9\ The RFI Notice observed
that ``[t]he official sector does not currently receive any regular
reporting of Treasury cash market transactions'' and that ``[t]he need
for more comprehensive official sector access to data, particularly
with respect to U.S. Treasury cash market activity, is clear.'' \10\
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    \9\ See Notice Seeking Public Comment on the Evolution of the
Treasury Market Structure, 81 FR 3928, 3931 (January 22, 2016)
(``RFI Notice'').
    \10\ Id. at 3931.
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    The Treasury Department received 52 comment letters in response to
the RFI Notice.\11\ Following a review of these comments, the Treasury
Department and the Commission announced that, as part of their efforts
to obtain better information about the U.S. Treasury market for
oversight purposes, the agencies had requested FINRA to consider a
proposal to require its members to report transactions in U.S. Treasury
securities to a centralized repository.\12\
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    \11\ See https://www.regulations.gov/document?D=TREAS-DO-2015-0013-0001.
    \12\ See Press Release, Treasury Department, Statement on Trade
Reporting in the U.S. Treasury Market (May 16, 2016), https://www.treasury.gov/press-center/press-releases/Pages/jl0457.aspx
(``Treasury Press Release''). See also Joint Press Release, Treasury
Department and Commission, Statement on Trade Reporting in the U.S.
Treasury Market (May 16, 2016), https://www.sec.gov/news/pressrelease/2016-90.html (``May 16 Joint Press Release'').
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B. Definitions and Scope of Proposal

    The TRACE reporting rules apply to ``Reportable TRACE
Transactions,'' as defined in FINRA Rule 6710(c), involving ``TRACE-
Eligible Securities,'' as defined in FINRA Rule 6710(a). Because the
current definition of ``TRACE-Eligible Security'' specifically excludes
a ``U.S. Treasury Security,'' FINRA members currently are not required
to report any transactions in U.S. Treasury Securities to TRACE. The
proposal would amend the definition of ``TRACE-Eligible Security'' to
include a U.S. Treasury Security, which would have the effect of
rendering a transaction in a U.S. Treasury Security a Reportable TRACE
Transaction.
    The proposal would revise the existing definition of ``U.S.
Treasury Security'' in FINRA Rule 6710(p) to include separate principal
and interest components of a U.S. Treasury Security that have been
separated pursuant to the

Separate Trading of Registered Interest and Principal of Securities
(STRIPS) program operated by the Treasury Department.\13\ The proposal
also would revise several defined terms to ensure that the definition
of ``TRACE-Eligible Security'' encompasses Treasury bills, which have
maturities of one year or less. The existing definition of ``TRACE-
Eligible Security'' in FINRA Rule 6710(a) excludes a Money Market
Instrument. FINRA Rule 6710(o) currently defines ``Money Market
Instrument'' to include, among other things, a debt security that at
issuance has a maturity of one calendar year or less. A Treasury bill
with a maturity of one year or less would fall within the current
definition of ``Money Market Instrument'' and, accordingly, would not
be a TRACE-Eligible Security. To provide for the reporting of
transactions in U.S. Treasury bills, the proposal would revise the
current definition of ``Money Market Instrument'' to exclude U.S.
Treasury Securities. Thus, the definition of ``TRACE-Eligible
Security'' would include Treasury bills, as well as Treasury bonds,
notes, and the separate principal and interest components of a U.S.
Treasury Security that have been separated pursuant to the STRIPS
program.
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    \13\ Although trading a principal or interest component of a
U.S. Treasury Security that has been separated under the STRIPS
program would constitute a Reportable TRACE Transaction, the act of
separating or reconstituting the components of a U.S. Treasury
Security under the STRIPS program would not constitute a Reportable
TRACE Transaction. This is because, for purposes of the trade
reporting rules, FINRA considers a ``trade'' or a ``transaction'' to
entail a change of beneficial ownership between parties. See, e.g.,
Securities Exchange Act Release No. 74482 (March 11, 2015), 80 FR
13940, 13941 (March 17, 2015) (order approving File No. SR-FINRA-
2014-050) (noting that, in the context of TRACE reporting,
``[b]ecause the transaction between the member and its non-member
affiliate represents a change in beneficial ownership between
different legal entities, it is a reportable transaction and is
publicly disseminated under the current rule''); Trade Reporting
Frequently Asked Questions, Q100.4, http://www.finra.org/industry/trade-reporting-faq#100 (defining ``trade'' and ``transaction'' for
purposes of the equity trade reporting rules as a change in
beneficial ownership). See Notice, 81 FR at 48467. FINRA has
proposed new Supplementary Material .05 to FINRA Rule 6730 to
address the reporting obligation associated with this process.
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    In addition, the proposal would revise the definition of ``U.S.
Treasury Security'' to exclude savings bonds. FINRA notes that savings
bonds issued by the Treasury Department are generally non-transferable
and are therefore not marketable securities purchased and sold in the
secondary market. Therefore, FINRA did not believe that it was
appropriate to include savings bonds within the scope of this
proposal.\14\
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    \14\ See Notice, 81 FR at 48466.
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    Under the proposal, any transaction in a U.S. Treasury Security is
a ``Reportable TRACE Transaction'' and would therefore be subject to
TRACE reporting requirements, unless it fell within an enumerated
exception.\15\ FINRA notes that all U.S. Treasury Securities that,
under the proposal, would be reportable to TRACE are offered to the
public by the Treasury Department through an auction process.\16\ When-
issued trading in U.S. Treasury Securities can begin before the auction
takes place after the Treasury Department announces an auction.\17\
When-issued transactions in U.S. Treasury Securities currently are not
reported to the Treasury Department.\18\ Under the proposal, when-
issued transactions would be reportable to TRACE. In connection with
this reporting requirement, FINRA has proposed new definitions of
``Auction'' and ``When-Issued Transaction.'' \19\
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    \15\ See id. at 48467.
    \16\ See id.
    \17\ See id. When-issued trading of Treasury securities, i.e.,
the trading of forward contracts with a delivery date after the
securities are issued, begins on the date of the announcement of a
Treasury auction and continues after the auction takes place, up
until the issue date. Prior to an auction, when-issued securities
are quoted for trading on a yield basis because a coupon is not
determined until after the auction is completed. After the auction,
the securities are quoted on a price basis.
    \18\ See id.
    \19\ See proposed FINRA Rules 6710(ff) (defining ``Auction'')
and 6710(hh) (defining ``When-Issued Transaction'').
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    Existing FINRA Rule 6730(e) enumerates several transactions and
transfers of TRACE-Eligible Securities that are not reportable to
TRACE. The proposal would add two types of transactions to the list in
FINRA Rule 6730(e). First, FINRA Rule 6730(e) would be expanded to
include bona fide repurchase and reverse repurchase transactions
involving TRACE-Eligible Securities. FINRA notes that, although
repurchase and reverse repurchase transactions are structured as
purchases and sales, the transfer of securities effectuated as part of
these transactions is not made as the result of an investment decision,
but is more akin to serving as collateral pledged as part of a secured
financing.\20\ Consequently, repurchase and reverse repurchase
transactions are, according to FINRA, economically equivalent to
financings, and the pricing components of these transactions are
typically not the market value of the securities.\21\ For these
reasons, FINRA historically has taken the position that repurchase and
reverse repurchase transactions should not be reported to TRACE.\22\
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    \20\ See Notice, 81 FR at 48467.
    \21\ See id.
    \22\ See id. See also Reporting of Corporate and Agencies Debt
Frequently Asked Questions, Question 4.6, http://www.finra.org/industry/faq-reporting-corporate-and-agencies-debt-frequently-asked-questions-faq.
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    Second, FINRA Rule 6730(e) would be expanded to include Auction
Transactions, which proposed FINRA Rule 6710(gg) would define as ``the
purchase of a U.S. Treasury Security in an Auction.'' FINRA asserts
that the Treasury Department maintains transaction data for Auction
Transactions and that this data is readily accessible to
regulators.\23\ Accordingly, FINRA believes that TRACE reporting of
these transactions would be duplicative and of little additional
benefit to regulators.\24\
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    \23\ See Notice, 81 FR at 48467.
    \24\ See id.
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C. Reporting Obligations

    As is currently the case with all TRACE reporting obligations, any
FINRA member that is a ``Party to a Transaction'' in a TRACE-Eligible
Security is required to report the transaction.\25\ Thus, by amending
the definition of ``TRACE-Eligible Security'' in the manner described
above, FINRA would require members to report transactions in U.S.
Treasury Securities to TRACE. If both counterparties are FINRA members,
both would have the duty to report.\26\
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    \25\ See id. See also FINRA Rules 6730(a) and 6730(b)(1).
    \26\ See Notice, 81 FR at 48467.
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    Under the proposal, a transaction in a U.S. Treasury Security would
have to be reported on a same-day or next-day basis, depending on the
time of execution.\27\ FINRA states that it is proposing this reporting
requirement, rather than a more immediate reporting requirement,
because FINRA is not

currently proposing to publicly disseminate any trade-level information
regarding transactions in U.S. Treasury Securities.\28\
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    \27\ See proposed FINRA Rule 6730(a)(4). See also Notice, 81 FR
at 48467. Under proposed FINRA Rule 6730(a)(4), a Reportable TRACE
Transaction in a U.S. Treasury Security executed on a business day
at or after 12:00:00 a.m. Eastern Time through 5:00:00 p.m. Eastern
Time would have to be reported the same day during TRACE System
Hours. A transaction executed on a business day after 5:00:00 p.m.
Eastern Time but before the TRACE system closes would have to be
reported no later than the next business day (T+1) during TRACE
System Hours, and, if reported on T+1, would have to be designated
``as/of'' and include the date of execution. 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 on 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)--
would have to be reported the next business day (T+1) during TRACE
System Hours, designated ``as/of,'' and include the date of
execution. See also FINRA Rule 6710(t) (defining ``TRACE System
Hours'').
    \28\ See Notice, 81 FR at 48467.
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    FINRA Rule 6730(c) lists the specific transaction information that
a member must report to TRACE for each Reportable TRACE
Transaction.\29\ These existing requirements generally would apply to
Reportable TRACE Transactions in U.S. Treasury Securities but with
certain modifications to clarify the reporting of certain information
for transactions involving U.S. Treasury Securities.\30\ First, the
proposal would amend FINRA Rule 6730(c)(3) to indicate that a member
must report yield in lieu of price for a When-Issued Transaction
because when-issued trading is based on yield rather than on price as a
percentage of face or par value.\31\
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    \29\ FINRA Rule 6730(c) requires the appropriate member to
report the following information for each Reportable TRACE
Transaction: (1) The CUSIP number or, if a CUSIP number is not
available at the Time of Execution, a similar numeric identifier or
a FINRA symbol; (2) the size (volume) of the transaction, as
required by Rule 6730(d)(2); (3) the price of the transaction (or
the elements necessary to calculate price, which are contract amount
and accrued interest) as required by Rule 6730(d)(1); (4) a symbol
indicating whether the transaction is a buy or a sell; (5) the date
of Trade Execution (for ``as/of'' trades only); (6) the contra-
party's identifier (MPID, customer, or a non-member affiliate, as
applicable); (7) capacity--Principal or Agent (with riskless
principal reported as principal); (8) the time of execution; (9)
reporting side executing broker as ``give-up'' (if any); (10) contra
side Introducing Broker in case of ``give-up'' trade; (11) the
commission (total dollar amount); (12) the date of settlement; (13)
if the member is reporting a transaction that occurred on an ATS
pursuant to FINRA Rule 6732, the ATS's separate MPID obtained in
compliance with FINRA Rule 6720(c); and (14) such trade modifiers as
required by either the TRACE rules or the TRACE users' guide.
    \30\ See Notice, 81 FR at 48468.
    \31\ See id.
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    Second, the proposal would amend FINRA Rule 6730(d)(1) to specify
that (1) for a When-Issued Transaction conducted on a principal basis,
the reported yield must include the mark-up or mark-down; and (2) for a
When Issued Transaction conducted on an agency basis, the reported
yield must exclude the commission and the member must report the total
dollar amount of any commission separately.\32\
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    \32\ See id.
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    Third, the proposal would add new Supplementary Material .04 to
FINRA Rule 6730 to specify that, when reporting a transaction in a U.S.
Treasury Security executed electronically, a member would have to
report the time of execution to the finest increment of time captured
in the member's system (e.g., millisecond or microsecond), but at a
minimum, in increments of seconds.\33\ FINRA noted that the proposal
would not require members to update their systems to comply with a
finer time increment, but to report the time of execution only in the
same time increment captured by the member's system.\34\ FINRA also
noted that a significant portion of the trading in the U.S. Treasury
cash market occurs on electronic platforms, many of which capture
timestamps in sub-second increments.\35\
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    \33\ See id.
    \34\ See id. FINRA noted that the rules governing the trade
reporting of equity securities require a member to report time to
the millisecond if the member captures time to that level of
granularity. See id.; FINRA Rule 6380A, Supplementary Material .04;
FINRA Rule 6380B, Supplementary Material .04; FINRA Rule 6622,
Supplementary Material .04. See also FINRA Regulatory Notice 14-21
at 3 (May 2014).
    \35\ See Notice, 81 FR at 48468.
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    Fourth, the proposal would add new FINRA Rule 6730(d)(4)(G) to
implement a new trade indicator and two new trade modifiers that are
specific to transactions in U.S. Treasury Securities. FINRA states that
a new trade indicator for When-Issued Transactions would allow FINRA to
readily determine whether a price is being reported based on a
percentage of face or par value or whether the member is reporting the
yield, as required for When-Issued Transactions.\36\ This indicator
also would be used to validate a transaction in a U.S. Treasury
Security reported with an execution date before the auction for the
security has taken place.\37\ Because transactions in U.S. Treasury
Securities often are executed as part of larger trading strategies, the
proposal also would add two new modifiers for these transactions.\38\
Proposed FINRA Rule 6730(d)(4)(G)(ii)(a) would require a member to add
a ``.B'' modifier to the trade report for a transaction that is part of
a series of transactions in which at least one involves a futures
contract.\39\ Proposed FINRA Rule 6730(d)(4)(G)(ii)(b) would require a
member to add a ``.S'' modifier if a transaction is part of a series of
transactions and might not be priced based on the current market.\40\
According to FINRA, the ``.B'' and ``.S'' modifiers would allow FINRA
to better understand and evaluate execution prices of transactions in
U.S. Treasury Securities that otherwise might appear aberrant, thus
potentially reducing the number of false positives generated through
automated surveillance mechanisms that include the price as part of the
surveillance pattern.\41\
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    \36\ See id.
    \37\ See id.
    \38\ See id.
    \39\ See id.
    \40\ FINRA Rule 6730(d)(4)(G)(ii)(b), as originally proposed,
would have required use of the ``.S'' modifier ``if the transaction
is part of a series of transactions where at least one of the
transactions is executed at a pre-determined fixed price or would
otherwise result in the transaction being executed away from the
current market'' (emphasis added). One commenter stated that this
formulation suggests that only transactions executed away from the
market should be assigned the ``.S'' modifier. See SIFMA Letter at
7. The commenter recommended, instead, that the ``.S'' modifier
apply to any transaction that is part of a series, regardless of
whether one or more of the legs of the trade is, in fact, away from
the current market. See id. FINRA agreed that the ``.S'' modifier
should be utilized whenever a transaction is part of a series and
therefore could be, but need not be, priced away from the market.
Therefore, in Amendment No. 1, FINRA revised proposed Rule
6730(d)(4)(G)(ii)(b) to require use of the ``.S'' modifier if a
transaction ``is part of a series of transactions and may not be
priced based on the current market'' (emphasis added). FINRA
expressed the view that Amendment No. 1 should reduce compliance
burdens because a member would not be required to assess whether a
particular transaction was, in fact, priced away from the market at
the time of execution when attaching the ``.S'' modifier. See FINRA
Response at 9.
    \41\ See Notice, 81 FR at 48468.
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D. Additional Changes

    The proposal would amend FINRA Rule 6750(b) to add U.S. Treasury
Securities to the list of transaction types for which transaction
information will not be disseminated. The proposal also would amend
FINRA Rule 0150 to add the FINRA Rule 6700 series to the list of FINRA
rules that apply to exempted securities, excluding municipal
securities. Finally, FINRA has proposed to amend two provisions in its
fee rules to reflect that, initially, FINRA will not charge fees for
transactions in U.S. Treasury Securities reported to TRACE. First,
Section 1(b)(2) of Schedule A to the FINRA By-Laws would be revised to
exclude transactions in U.S. Treasury Securities from the Trading
Activity Fee. Second, FINRA Rule 7730(b) would be revised to exclude
transactions in U.S. Treasury Securities from the TRACE transaction
reporting fees.\42\
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    \42\ FINRA states that, because it will incur costs to expand
the TRACE system and to enhance its examination and surveillance
efforts to monitor members' trading activity in U.S. Treasury
Securities, FINRA is considering the appropriate long-term funding
approach for the program and will analyze potential fee structures
once it has more data relating to the size and volume of U.S.
Treasury Security reporting. See id. at 48469.
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E. Effective Date of Proposed Rule Change

    FINRA has represented that it will announce the effective date of
the proposed rule change and the specific implementation dates in a
Regulatory Notice to be published no later than 90 days following
Commission approval of the proposal, and that the effective date

will be no later than 365 days following Commission approval.\43\ FINRA
anticipates staggering the implementation dates so that the general
reporting requirement is implemented before members are required to
include the ``.B'' and ``.S'' trade modifiers.\44\
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    \43\ See id.
    \44\ See id.
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III. Summary of Comments and FINRA's Response

    The Commission received 12 comments regarding the proposed rule
change.\45\ Seven commenters expressed support for the proposal.\46\
Several commenters supported the goals of the proposal but argued that
regulatory reporting requirements should be expanded to other Treasury
market participants that are not FINRA members.\47\ Certain of these
commenters argued that transaction information provided only by FINRA-
member reporting would provide regulators with an incomplete view of
the U.S. Treasury market.\48\ Other commenters noted the
disproportionate impact of the proposal on FINRA members and the
potential to place FINRA members at a competitive disadvantage vis-
[agrave]-vis other market participants.\49\
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    \45\ See supra note 4.
    \46\ See BDA Letter at 1 (stating that regulators should have
access to comprehensive Treasury market transaction data); Citadel
Letter at 1 (stating that enhanced reporting to the official sector
will improve general monitoring and surveillance capabilities,
including those designed to detect prohibited trading practices and
potential risks to market stability) ; ICI Letter at 1-2 (stating
that regulatory reporting of transactions in U.S. Treasury
securities could help regulators ensure an efficient and competitive
market for all participants, including funds and other investors);
KCG Letter at 2-3 (expressing support for the goal of making U.S.
Treasury transactional data more available to regulators); SIFMA
Letter at 1-2 (expressing support for the policy goals underlying
the proposal and noting that regulatory reporting of U.S. Treasury
trades in the secondary market will provide regulators with greater
clarity regarding the nature of activity in this market); Tradeweb
Letter at 2 (expressing broad support for the policy goals of the
proposal and the overall structure of the requirements); Virtu
Letter at 2 (stating that access to transaction-level data will help
regulators to effectively design surveillance to prevent fraudulent
and manipulative acts, and that transaction reporting could inform
future decisions regarding standards such as circuit breakers and
volatility guards).
    \47\ See Credit Suisse Letter at 3 (requesting that the proposal
not be put into effect unless and until the requirements are
expanded to non-FINRA-member market participants); Fidelity Letter
at 3 (stating that ``The official sector and market participants
will be best served by coordinated and harmonized reporting
requirements across Treasury cash market intermediaries''); SIFMA
Letter at 3 (urging the Commission and the Treasury Department to
coordinate the implementation of similar requirements for non-FINRA-
members); BDA Letter at 1 (urging regulators to work to create a
comprehensive reporting regime that would also include banking
institutions that do not currently report any fixed-income
transactions to TRACE); KCG Letter at 5 (stating that regulators
should provide specifics about their plan to collect data from non-
FINRA members and should prioritize implementation of this plan);
Virtu Letter at 2 (asking the Treasury Department and the Commission
to move quickly to capture transactions by non-FINRA members who
trade U.S. Treasury securities to help to assure the efficacy of the
monitoring system).
    \48\ See Credit Suisse Letter at 3; Fidelity Letter at 4-5
(noting that its concern would be more pronounced if incomplete data
were used as a basis for rulemaking); KCG Letter at 5; SIFMA Letter
at 3; ICI Letter at 2 (cautioning regulators not to develop rules
that would change the structure of the U.S. Treasury market using
data obtained through TRACE reporting until regulators attain a more
complete view of market activity, including the activity of
principal trading firms (``PTFs'')).
    \49\ See Credit Suisse Letter at 3; Fidelity Letter at 4;
Tradeweb Letter at 2.
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    FINRA agreed that the proposal would not capture the entire
universe of transactions in the U.S. Treasury market, but stated that
the proposal represents a significant and important first step.\50\
FINRA also noted that the Treasury Department, the Commission, the
Federal Reserve Bank of New York, and the CFTC have stated that they
are assessing means to ensure that the collection of data regarding the
Treasury market is comprehensive and includes information from
institutions that are not FINRA members.\51\
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    \50\ See FINRA Response at 3.
    \51\ See id. (citing Joint Press Release, Treasury Department et
al., Statement Regarding Progress on the Review of the U.S. Treasury
Market Structure since the July 2015 Joint Staff Report (August 2,
2016), available at https://www.sec.gov/news/pressrelease/2016-155.html). See also May 16 Joint Press Release, supra note 12.
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    Several commenters discussed the costs associated with the proposal
or FINRA's analysis of the costs and benefits associated with the
proposal. One commenter disagreed with FINRA's view that the direct
costs to FINRA members already reporting to TRACE would be limited,
stating that the reporting of transactions in U.S. Treasury securities
would require significant IT investment.\52\ A second commenter noted
that the proposal would be a significant build for firms that do not
currently incur TRACE reporting obligations.\53\ A third commenter
stated that a more thorough implementation discussion prior to approval
of the proposal would permit a more robust cost/benefit analysis.\54\
---------------------------------------------------------------------------

    \52\ See Credit Suisse Letter at 6. See also Fidelity Letter at
4 (noting the costs associated with the proposal, including
technology builds, testing, maintenance of feeds, and the
development and maintenance of regulatory compliance programs);
Tradeweb Letter at 2 (stating that the implementation and phasing of
the reporting requirements should be carefully evaluated with
respect to the cost and the technical build required).
    \53\ See FIF Letter at 4.
    \54\ See Thomson Reuters Letter at 2.
---------------------------------------------------------------------------

    FINRA acknowledged that the proposal would impose certain costs and
burdens on FINRA members that would not apply to non-members, but also
noted that there are several cost-effective means for members to comply
with the new rules.\55\ FINRA noted that firms with limited trading
volumes generally could use a web browser to report, thereby limiting
the cost of reporting.\56\ For firms with higher levels of trading
activity, FINRA offers direct connectivity via either CTCI or FIX
protocols.\57\ In addition, FINRA noted that some firms may rely on
clearing firms that offer transaction reporting as a service to their
correspondents, and that several service bureaus offer TRACE reporting
as a service to subscribers to their order management systems.\58\
FINRA stated that a majority of its members that are also government
securities brokers or dealers currently are registered for, and report
to, TRACE.\59\ According to FINRA, the FINRA members that are
government securities dealers or brokers but currently are not
registered for TRACE, or that are registered for TRACE but have not
reported a trade between June 2015 and May 2016, are predominantly
small firms, with 80% having fewer than 25 registered
representatives.\60\
---------------------------------------------------------------------------

    \55\ See FINRA Response at 3.
    \56\ See id. at 14-15. FINRA noted that the cost of the secure
web browser for reporting purposes is $20 per month. See id. at 14;
FINRA Rule 7730(a)(1).
    \57\ See FINRA Response at 14.
    \58\ See id.
    \59\ See id.
    \60\ See id.
---------------------------------------------------------------------------

    Commenters expressed mixed views regarding the proposed timeframes
for reporting transactions in U.S. Treasury Securities. Three
commenters supported real-time or near-real-time reporting.\61\ One
commenter supported end-of-day reporting.\62\ Two commenters stated
that FINRA should provide flexibility to allow firms to report earlier
than end-of-day.\63\ By contrast, one commenter recommended that
transactions in U.S. Treasury securities be reported on a T+1 basis to
alleviate reporting challenges presented by the limited hours of the
TRACE system.\64\
---------------------------------------------------------------------------

    \61\ See Citadel Letter at 4 (suggesting that FINRA modify the
proposal to require reporting within a certain number of minutes or
hours following execution); KCG Letter at 4 (recommending real-time
reporting); Virtu Letter at 2 (stating that, for surveillance to be
effective, the underlying data collection should be comprehensive
and immediate, with limited exceptions).
    \62\ See Tradeweb Letter at 2.
    \63\ See FIF Letter at 2; SIFMA Letter at 9.
    \64\ See Credit Suisse Letter at 6.
---------------------------------------------------------------------------

    FINRA responded that, because the reported transaction information
would not be publicly disseminated, it is

preferable to provide firms with the flexibility to report as
appropriate for their current operations (e.g., on a trade-by-trade
basis or at the end of the day), rather than to mandate prompt
reporting at this time.\65\ FINRA noted that this flexibility could
ease the compliance burden on some firms, and confirmed that firms that
wish to report on an immediate basis could do so.\66\ FINRA
acknowledged that this reporting timeframe could change in the future,
and noted that firms may wish to consider this possibility in designing
their systems.\67\ FINRA disagreed with one commenter's assertion that
end-of-day reporting would negatively affect the surveillance of
trading in U.S. Treasury Securities.\68\
---------------------------------------------------------------------------

    \65\ See FINRA Response at 7.
    \66\ See id.
    \67\ See id.
    \68\ See id.
---------------------------------------------------------------------------

    Several commenters requested clarifications regarding the scope of
securities covered by the proposal. One commenter asked FINRA to
clarify whether Treasury Inflation-Protected Securities (``TIPS'')
would be in scope and, if so, to publish for comment an amendment to
the proposal providing details regarding the reporting of these
transactions.\69\ Two commenters requested guidance with respect to the
reporting of reopenings of Treasury securities.\70\ One commenter
requested clarification with respect to the reporting of When-Issued
Transactions, noting that execution venues differ in the way that they
define and process these transactions.\71\
---------------------------------------------------------------------------

    \69\ See Thomson Reuter Letter at 2 (stating that TIPS have
characteristics different from other Treasury securities). See also
FIF Letter at 2 (stating its assumption that TIPS would be handled
in a manner similar to the reporting of securitized products and
expressing a preference ``that factor information be required only
in cases where anything other than the default settlement date or
the current factor has been applied'').
    \70\ See Credit Suisse Letter at 4 (asking whether reopened
trades should be reported using the same CUSIP number as the
regular-way security with a different issue date, and noting that
reopenings may not be handled consistently across all systems and
venues); FIF Letter at 1 (questioning whether reopenings should be
considered an extended settlement date trade or should be reported
with a ``when-issued'' flag).
    \71\ See Credit Suisse Letter at 4. The commenter stated that
some execution venues treat transactions as when-issued until the
night of the auction, while others treat transactions as when-issued
only until the day before the issue date. The commenter further
stated that some platforms treat when-issued transactions as two
separate products during their life cycle, ``so additional
consideration will be required for subsequent updates to the trade
bookings from the [when-issued] to the new On-the-Run Treasury.''
See id.
---------------------------------------------------------------------------

    FINRA responded that TIPS would be reportable under the proposal
and that FINRA is not providing, or requiring the reporting of, factor
information in TIPS transactions at this time.\72\ FINRA also stated
that any transaction in a U.S. Treasury Security to be sold in an
Auction but that occurs prior to the Auction, including a reopening
transaction effected prior to the Auction or a transaction on the day
of the Auction, would be considered a When-Issued Transaction for
purposes of the proposed rules.\73\
---------------------------------------------------------------------------

    \72\ See FINRA Response at 4-5.
    \73\ See id. at 5-6.
---------------------------------------------------------------------------

    One commenter expressed support for the proposal to exempt bona
fide repurchase and reverse repurchase transactions in all TRACE-
Eligible Securities from TRACE reporting.\74\ This commenter also noted
its assumption that all applicable TRACE rules would apply to in-scope
transactions in U.S. Treasury Securities, unless explicitly
exempted.\75\ FINRA confirmed that, because U.S. Treasury Securities
would be included within the definition of ``TRACE-Eligible
Securities,'' any rule applicable to TRACE-Eligible Securities would
apply to U.S. Treasury Securities, unless specifically exempted.\76\
---------------------------------------------------------------------------

    \74\ See SIFMA Letter at 5-6.
    \75\ See id. at 6.
    \76\ See FINRA Response at 5.
---------------------------------------------------------------------------

    Commenters also expressed views or raised questions with respect to
the reporting of particular data elements. One commenter requested
clarification regarding the treatment of inter-dealer broker fees for
principal trading and platform fees that may be applied to client
transactions.\77\ A second commenter stated that an additional field
for ATS MPID would be required, and expressed a preference to keep the
fields aligned with existing requirements.\78\ This commenter also
assumed that the ``no remuneration'' flag would be considered a
modifier to be consistent with the reporting of other modifiers under
FINRA Rule 6730.\79\
---------------------------------------------------------------------------

    \77\ See Credit Suisse Letter at 5.
    \78\ See FIF Letter at 2. Another commenter expressed support
for the requirement to report information concerning the ATS on
which a transaction is executed. See SIFMA Letter at 6.
    \79\ See FIF Letter at 2.
---------------------------------------------------------------------------

    FINRA stated that it would be appropriate to remain consistent with
well-established TRACE protocols for reporting commissions, mark-ups,
and mark-downs.\80\ In addition, FINRA confirmed that both the ``no
remuneration'' flag and the ATS MPID field (to be used when an ATS has
received a trade reporting exemption pursuant to FINRA Rule 6732) would
be required, as applicable, for reportable transactions in U.S.
Treasury Securities.\81\ FINRA noted that it has issued rules and
provided guidance with respect to remuneration reporting since the
implementation of TRACE in 2002, and that its current remuneration
guidance will be helpful for reporting of transactions in U.S. Treasury
Securities.\82\ FINRA added that it will continue to provide timely
guidance as needed.\83\
---------------------------------------------------------------------------

    \80\ See FINRA Response at 12.
    \81\ See id. at 11.
    \82\ See id. at 11. FINRA noted, for example, that inter-dealer
brokers that charge remuneration on a per-transaction basis
generally are required to calculate and include such remuneration
when reporting the transaction to TRACE. See id. However,
commissions, mark-ups, or mark-downs charged on a monthly or other
basis that cannot be assessed on a per-transaction basis are not
required to be reported. See id. (citing Regulatory Notice 15-47
(November 2015)). In addition, FINRA stated that firms generally
should not include platform fees in TRACE reports and should report
only bona fide commissions in the commission field. See id. (citing
letter from Sharon K. Zackula, FINRA, to Mustafa Fazel, National
Financial Services, LLC, dated July 11, 2003, available at http://www.finra.org/industry/interpretive-letters/july-11-2003-1200am).
    \83\ See FINRA Response at 11.
---------------------------------------------------------------------------

    Commenters expressed mixed views regarding the proposed ``.B'' and
``.S'' trade modifiers. One commenter supported the use of both
modifiers, stating that ``it is important that the various types of
package transactions involving a U.S. Treasury are able to be
accurately identified so that linkages between different types of
instruments are better understood.'' \84\ Other commenters expressed
concerns regarding these modifiers. One commenter stated that adding
the ``.B'' and ``.S'' modifiers would be ``exceedingly difficult''
because firms would have to establish linkages across trading platforms
and systems that do not exist today and questioned whether there was a
more straightforward way to achieve FINRA's objectives in requiring the
use of the modifiers.\85\ Commenters suggested that it might be
difficult for FINRA members to identify separate trades as components
of a series of transactions.\86\ One commenter asked

FINRA to clarify that the ``.B'' modifier is intended to capture
transactions where both the cash leg and the futures contract relate to
U.S. Treasury transactions.\87\ The commenter also asked FINRA to
provide specific examples of any additional trading strategy that the
``.B'' modifier is designed to capture, and to provide ``a clear and
comprehensive list'' of each specific type of transaction and strategy
to which the ``.S'' modifier must be applied.\88\ Noting that the
language of the proposed rule suggested that only transactions executed
away from the market should be assigned the ``.S'' modifier, the
commenter recommended instead that the ``.S'' modifier apply to the
specified strategy regardless of whether one or both legs of the trade
were off market.\89\
---------------------------------------------------------------------------

    \84\ Citadel Letter at 2. The commenter also stated that (1)
reported data should more generally identify whether a U.S. Treasury
security transaction is part of a package and, if so, the number of
legs associated with the package and the types of instruments
involved (e.g., a future or an interest rate swap); (2) the
requirement to report trading venue (if any) should be expanded to
include dealer-to-dealer and dealer-to-customer trading venues that
currently are exempt from registration as ATSs because they trade
only U.S. Treasury securities; and (3) market participants should be
required to report whether a transaction was cleared. See id.
    \85\ See FIF Letter at 2. See also SIFMA Letter at 8 (asking
regulators to engage in further discussion with the industry prior
to adopting the proposed modifiers); Thomson Reuters Letter at 2
(urging FINRA to work with the industry to determine whether the new
modifiers are justified).
    \86\ See Credit Suisse Letter at 5; FIF Letter at 2 (stating
that adding the ``.B'' and ``.S'' modifiers assumes that firms are
able to associate multiple trades that may have been executed at
different times on different desks and processed independently).
    \87\ See SIFMA Letter at 6.
    \88\ Id. at 6, 8.
    \89\ See id. at 7.
---------------------------------------------------------------------------

    In response to these comments, FINRA reiterated that the ``.B'' and
``.S'' modifiers would allow FINRA to more easily identify transactions
that, standing alone, might appear to raise regulatory concerns because
they were executed at a price that was significantly outside of the
price range for the security at the time of execution.\90\ FINRA
asserted that the modifiers are necessary for effective and efficient
implementation of the proposal even if they could result in additional
implementation burdens or costs to firms.\91\ FINRA stated that ``.B''
trades are well-defined, in that they relate specifically to a series
of trades involving both a U.S. Treasury Security and a futures
contract.\92\ FINRA agreed that the ``.S'' modifier should apply to a
transaction in a particular strategy that meets the ``.S'' criteria
regardless of whether one or more of the transactions in the series is
off market.\93\ Accordingly, FINRA filed Amendment No. 1 to the
proposal to clarify that the ``.S'' modifier must be used in these
circumstances.\94\ FINRA expressed the view that Amendment No. 1 should
reduce the compliance burden for firms because they would not need to
assess, before appending the ``.S'' indicator, whether a particular
transaction was, in fact, priced outside of the market at the time of
execution.\95\ In addition, FINRA stated that permitting end-of-day
reporting would ease the compliance burden on firms in implementing the
modifiers.\96\
---------------------------------------------------------------------------

    \90\ See FINRA Response at 8-9.
    \91\ See FINRA Response at 9. FINRA also stated that it would
monitor the information that it receives after reporting begins to
determine whether additional transaction information might be needed
to enhance the audit trail and FINRA's surveillance program. See id.
at 8; Notice, 81 FR at 48474.
    \92\ See FINRA Response at 9.
    \93\ See id.
    \94\ See supra note 40.
    \95\ See FINRA Response at 9.
    \96\ See id.
---------------------------------------------------------------------------

    FINRA declined to publish a list of specific transactions and
strategies that would require the ``.S'' modifier, stating that such a
list could not be comprehensive or account for variations that might be
appropriate.\97\ FINRA also stated that, following any Commission
approval of the proposal, it would work with members to better
understand their questions and would post any necessary trade reporting
guidance on FINRA's Web site, as it has done in connection with other
new trade reporting implementations.\98\
---------------------------------------------------------------------------

    \97\ See id.
    \98\ See id.
---------------------------------------------------------------------------

    As discussed above, new Supplementary Material .04 to FINRA Rule
6730 would require members to report the time of an electronically
executed transaction in a U.S. Treasury Security in the finest time
increment captured in the member's system, but at a minimum in
increments of seconds. Three commenters opposed this aspect of the
proposal.\99\ One commenter stated that one standard for timestamps and
clock synchronization should uniformly to ensure a level playing
field.\100\ A second commenter noted that the requirement could result
in mismatched timestamps for transactions involving two FINRA members
if each member captures time differently.\101\ Two commenters
recommended that FINRA eliminate this aspect of the proposal or,
alternatively, that FINRA confirm that it would not require members to
update their systems to provide for time increments of less than one
second.\102\
---------------------------------------------------------------------------

    \99\ See Credit Suisse Letter at 5; FIF Letter at 3; SIFMA
Letter at 9.
    \100\ See FIF Letter at 3.
    \101\ See Credit Suisse Letter at 5.
    \102\ See SIFMA Letter at 9; Credit Suisse Letter at 5.
---------------------------------------------------------------------------

    FINRA reiterated that a significant portion of trading activity in
the U.S. Treasury cash market occurs on electronic platforms that
currently capture timestamps in sub-second time increments.\103\ FINRA
stated that more granular timestamps on execution data could enhance
its ability to surveil trading activity and recreate the proper time
sequencing of trades.\104\ In addition, FINRA noted that it recently
required firms that capture time in milliseconds to report time to the
millisecond level when reporting trades in equity securities to
FINRA.\105\ FINRA noted that in adopting this requirement for equity
securities, it did not require firms to update their existing systems,
but simply required firms to report time at the same level that they
captured it.\106\ FINRA believed that a similar approach is appropriate
for transactions in U.S. Treasury Securities that are executed
electronically.\107\
---------------------------------------------------------------------------

    \103\ See FINRA Response at 10.
    \104\ See id. at 10-11.
    \105\ See id.; Regulatory Notice 14-21 (May 2014).
    \106\ See FINRA Response at 10.
    \107\ See id.
---------------------------------------------------------------------------

    Two commenters recommended that FINRA update its daily list of
reportable securities to include CUSIP numbers of U.S. Treasury
Securities that are TRACE-eligible, so that members would not have to
take steps to have such securities placed on the list.\108\ FINRA
stated that it intends to update the daily list to include the CUSIP
numbers of outstanding U.S. Treasury Securities and thereafter add
CUSIP numbers of new securities coincident with the announcement of an
auction.\109\
---------------------------------------------------------------------------

    \108\ See FIF Letter at 1; SIFMA Letter at 8.
    \109\ See FINRA Response at 12.
---------------------------------------------------------------------------

    Commenters also discussed general aspects of the reporting process.
One commenter expressed hope that FINRA would utilize existing message
formats to the extent possible.\110\ A second commenter urged FINRA to
allow reporting of transactions in U.S. Treasury Securities through an
existing line, rather than requiring new network connectivity.\111\
This commenter also asked FINRA to work directly with the FIX protocol
organization to create industry standard tags for use in reporting new
indicators and modifiers.\112\
---------------------------------------------------------------------------

    \110\ See FIF Letter at 2.
    \111\ See Thomson Reuters Letter at 2.
    \112\ See id. at 1.
---------------------------------------------------------------------------

    FINRA stated that TRACE generally allows a firm reporting through
FIX or CTCI to use the same connection line to submit transactions to
the system.\113\ FINRA noted that some firms currently use the same
connection line to report transactions in the TRACE products that are
currently available.\114\ FINRA stated that firms using the FIX
protocol to report transactions may use the same connection line but
are required to obtain separate ports for each product, and that a
firm's need to obtain and operate separate lines is dependent on the
firm's activity in each product and its desired balance between costs
and latency/performance.\115\
---------------------------------------------------------------------------

    \113\ See FINRA Response at 13.
    \114\ See id.
    \115\ See id.

---------------------------------------------------------------------------

    Commenters also asked FINRA to confirm that error corrections
submitted intra-day would not count toward a firm's error
statistics,\116\ and that there would be no fees or charges for intra-
day corrections.\117\ FINRA stated that, as in other FINRA trade
reporting contexts, re-reporting or amending transaction reports would
be captured in a firm's error statistics published on the TRACE Report
Cards even if the transactions are not considered late.\118\ Because
FINRA is not at this time proposing to charge fees for reporting
transactions in U.S. Treasury Securities, there also would be no fees
charged for re-reports or amendments.\119\
---------------------------------------------------------------------------

    \116\ See FIF Letter at 2; SIFMA Letter at 9.
    \117\ See FIF Letter at 2.
    \118\ See FINRA Response at 12.
    \119\ See id.
---------------------------------------------------------------------------

    Commenters expressed mixed views regarding the proposal's
assignment of reporting obligations. One commenter urged FINRA to re-
assess the dual-sided reporting obligation, stating that the
transaction volume in the U.S. Treasury market may warrant a different
approach to reduce complexity and data discrepancies, and arguing that
a single-sided reporting hierarchy could reduce implementation costs by
leveraging trading venues and registered broker-dealers.\120\ Other
commenters expressed support for use of the existing framework for
TRACE reporting.\121\
---------------------------------------------------------------------------

    \120\ See Citadel Letter at 3. The commenter also stated that a
single-sided methodology could be more easily applied to other
market participants as reporting requirements are extended to
include trading activity involving non-FINRA members. See id.
    \121\ See ICI Letter at 2 (stating that the proposal would
leverage the existing reporting and communications systems for TRACE
reporting rather than imposing obligations on customers--such as
funds and other investors--that do not currently have systems to
accommodate such obligations); SIFMA Letter at 2 (stating that the
proposal leverages the existing framework of the TRACE system and
that FINRA members generally have systems and procedures in place
that can incorporate the additional reporting obligations for U.S.
Treasury securities). One commenter also noted that, because
virtually all trades in U.S. Treasury securities involve an
intermediary--such as a broker-dealer, trading platform, or PTF--
regulators would be able to obtain comprehensive information about
the U.S. Treasury market by receiving trade reports from
intermediaries. See ICI Letter at 2.
---------------------------------------------------------------------------

    FINRA stated that it continues to believe that a two-sided
reporting requirement, like that which currently applies to all TRACE
transactions, is also appropriate for transactions in U.S. Treasury
Securities.\122\ FINRA expressed the view that two-sided reporting
helps to ensure accuracy because it allows FINRA to compare information
reported by each party to identify discrepancies or potential non-
reporting by one party, thereby enhancing the quality of the audit
trail.\123\ FINRA stated, moreover, that altering TRACE requirements to
accommodate single-sided reporting would necessitate changes to TRACE's
existing infrastructure that could affect all TRACE-reporting firms and
reduce the benefits of using TRACE for U.S. Treasury Security
reporting.\124\
---------------------------------------------------------------------------

    \122\ See FINRA Response at 6.
    \123\ See id.
    \124\ See id.
---------------------------------------------------------------------------

    Three commenters expressed support for the proposed one-year
implementation period, noting, among other things, the complexity of
the system modifications that would be required to comply with the
proposed rules.\125\ Two commenters supported the proposed staggered
implementation period for the ``.B'' and ``.S'' modifiers,\126\ with
one commenter noting that implementing the modifiers would require
extended development time.\127\ Three commenters emphasized the
importance of FINRA's publishing technical specifications as far in
advance as possible.\128\ One of these commenters asked FINRA to
release a technical specification with expected changes for all phases
of implementation to avoid multiple code releases.\129\
---------------------------------------------------------------------------

    \125\ See Credit Suisse Letter at 6 (noting that U.S. Treasury
securities are traded within the firm across multiple divisions and
on various trading platforms, none of which capture trade
information in a uniform or consistent manner); FIF Letter at 3-4
(noting that broker-dealers must devote resources to comply with
multiple regulatory initiatives); SIFMA Letter at 10 (noting that
reportable U.S. Treasury market activity may occur throughout a firm
and on different desks, and that a one-year implementation period
would allow for the integration of these activities within a firm's
reporting apparatus). See also Tradeweb Letter at 3 (expressing the
need for ``an appropriately sized implementation period'' to allow
firms to develop, test, and implement the necessary technical
changes and internal policies and procedures); Thomson Reuters
Letter at 3 (stating that the implementation effort will be complex
and require significant coordination across the industry). One
commenter noted that firms that are solely government securities
dealers, which previously have not reported to TRACE, would be
required to develop reporting systems and policies from scratch. See
SIFMA Letter at 10. Another commenter stated that certain required
data elements, including counterparty identifiers and the total
dollar amount of commissions, would require additional
implementation efforts. See Credit Suisse Letter at 5.
    \126\ See FIF Letter at 2; SIFMA Letter at 10-11.
    \127\ See SIFMA Letter at 11.
    \128\ See id. at 10; Thomson Reuters Letter at 1; Tradeweb
Letter at 3.
    \129\ See Thomson Reuters Letter at 2.
---------------------------------------------------------------------------

    FINRA acknowledged the importance of timely and detailed technical
specifications to ensure that firms are able to effectively implement
the new reporting requirements, and stated that it is preparing to
publish technical specifications concurrent with any Commission
approval of the proposal.\130\ FINRA also acknowledged the
implementation challenges that firms might face if the proposal is
approved, and stated that it would consider these challenges in
establishing an implementation date.\131\
---------------------------------------------------------------------------

    \130\ See FINRA Response at 14.
    \131\ See id.
---------------------------------------------------------------------------

    Commenters expressed different views of FINRA's determination not
to impose fees at this time for reporting transactions in U.S. Treasury
Securities. One commenter expressed support for this aspect of the
proposal.\132\ A second commenter expressed concern that trade
reporting fees eventually will be charged and could be
significant.\133\ A third commenter stated that the proposal's
ambiguity regarding the charging of fees makes it difficult to
understand the true cost of the proposal and expressed the view that
FINRA should not assess fees with respect to the reporting of
transactions in U.S. Treasury Securities for a minimum of five
years.\134\
---------------------------------------------------------------------------

    \132\ See BDA Letter at 2.
    \133\ See Fidelity Letter at 4.
    \134\ See Thomson Reuters Letter at 2.
---------------------------------------------------------------------------

    FINRA stated that, because it would incur costs to expand the TRACE
system and to enhance its existing examination and surveillance efforts
to monitor transactions in U.S. Treasury Securities following any
Commission approval of the proposal, it was unable to commit to
continuing to exclude these transactions from the applicable fees for a
specified period.\135\ FINRA noted, however, that any new fees would be
subject to a proposed rule change filed with the Commission.\136\
---------------------------------------------------------------------------

    \135\ See FINRA Response at 13.
    \136\ See id.
---------------------------------------------------------------------------

    Several commenters expressed support for, or raised concerns
regarding, the public dissemination of information with respect to
transactions in U.S. Treasury Securities.\137\ FINRA

reiterated that it is not proposing to disseminate information with
respect to transactions in U.S. Treasury Securities at this time, and
stated that careful consideration of the potential benefits of public
dissemination, as well as the concerns raised by the commenters, should
be undertaken after a reporting requirement is in place.\138\
---------------------------------------------------------------------------

    \137\ See Carson Letter (expressing support for transparency in
the U.S. Treasury market); Citadel Letter at 3-4, 6 (recommending
that FINRA ensure that the reporting infrastructure is scalable and
able to accommodate possible public dissemination of transactions in
U.S. Treasury securities in the future); KCG Letter at 4 (supporting
real-time reporting and immediate public dissemination); BDA Letter
at 1 (urging financial regulators to refrain from moving forward
with any proposal to require public dissemination); Credit Suisse
Letter at 7 (recommending that regulators study the potential risks
of public dissemination and consult with the industry before moving
forward); Fidelity Letter at 5 (urging careful consideration of any
decision regarding public dissemination); ICI Letter at 3 (stating
that the appropriateness of public dissemination should be
considered after the official sector has obtained a more complete
view of Treasury market activity); SIFMA Letter at 5 (urging careful
consideration of costs and benefits of public dissemination) and 11
(asking regulators to defer any analysis of pricing data in
connection with potential public dissemination until the ``.B'' and
``.S'' trade modifiers are included in reported data); Tradeweb
Letter at 3 (urging regulators to weigh carefully the potential
benefits and risks of public dissemination).
    \138\ See FINRA Response at 4.
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

    After carefully considering the proposal, the comments submitted,
FINRA's response to the comments, and Amendment No. 1, the Commission
finds that the proposed rule change, as modified by Amendment No. 1, is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
association.\139\ In particular, the Commission finds that the proposed
rule change is consistent with Section 15A(b)(6) of the Act,\140\ which
requires, among other things, that FINRA's rules 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.
---------------------------------------------------------------------------

    \139\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
    \140\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    Prior to TRACE's implementation, the National Association of
Securities Dealers (``NASD'') (FINRA's predecessor) did not have
routine access to comprehensive transaction information for the over-
the-counter corporate bond market, even though the NASD bore
responsibility for regulating that market. In originally approving the
TRACE rules, the Commission stated that obtaining such information to
better conduct market surveillance was a fundamental means of promoting
fairness and confidence in U.S. capital markets.\141\ Similarly, with
respect to the over-the-counter market for U.S. Treasury Securities,
FINRA, the Commission, and other public authorities currently do not
possess information to properly oversee the market. The Commission
believes, therefore, that it is consistent with the Act for FINRA to
expand TRACE to designate U.S. Treasury Securities as TRACE-Eligible
Securities and to establish reporting requirements relating to such
securities in the manner set forth in the proposal.\142\ Expanding
TRACE to include member transactions in U.S. Treasury Securities is
reasonably designed to help FINRA fulfill its mandate in Section
15A(b)(6) of the Act 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.
---------------------------------------------------------------------------

    \141\ See Securities Exchange Act Release No. 43873 (January 23,
2001), 66 FR 8131, 8136 (January 29, 2001) (order approving File No.
SR-NASD-99-65).
    \142\ The Commission notes that FINRA previously has expanded
TRACE to require the reporting to TRACE of transactions in agency
debt securities and asset-backed securities. See Securities Exchange
Act Release Nos. 61566 (February 22, 2010), 75 FR 9262 (March 1,
2010) (order approving File No. SR-FINRA-2009-065) (``Asset-Backed
Securities Order''); and 60726 (September 28, 2009), 74 FR 50991
(October 2, 2009) (order approving File No. SR-FINRA-2009-010).
---------------------------------------------------------------------------

    The Commission believes that FINRA's proposal is an important first
step in providing the official sector with more comprehensive data
about the Treasury cash market. The RFI Notice stated that ``[t]he need
for more comprehensive official sector access to data, particularly
with respect to U.S. Treasury cash market activity, is clear'' \143\
and that ``[d]ata from across the U.S. Treasury cash and futures
markets is necessary to conduct comprehensive analysis or surveillance
of these markets.'' \144\ The Commission believes that FINRA's proposal
is reasonably designed to further these objectives outlined in the RFI
Notice with respect to the Treasury cash market. The transaction data
that will become available to the official sector through TRACE will
help to inform policymaking and help regulators detect and deter
improper trading activity.
---------------------------------------------------------------------------

    \143\ 81 FR at 3931.
    \144\ Id. at 3932.
---------------------------------------------------------------------------

    The Commission acknowledges the concerns raised by various
commenters that the proposal could create a competitive advantage for
non-FINRA members over FINRA members, because only FINRA members will
incur costs for reporting transactions in U.S. Treasury Securities and
because counterparties might seek to avoid trading with FINRA members
to shield their trading activity from regulatory oversight. Commenters
also noted that imposing a reporting requirement solely on FINRA
members would provide regulators with a less-than-comprehensive view of
activity in the Treasury market. The Commission believes, nevertheless,
that these comments do not preclude approval of the proposal at this
time. The Commission recognizes that certain transactions in the
Treasury market will not be within scope of the new TRACE reporting
requirements, but the transactions that are reported should greatly
enhance regulators' understanding of the market. The Commission notes
that other public sector authorities have expressed their intention to
continue to assess effective means to ensure that the collection of
data regarding Treasury cash securities market transactions is
comprehensive and includes information from institutions that are not
FINRA members.\145\
---------------------------------------------------------------------------

    \145\ See http://www.sec.gov/news/pressrelease/2016-155.html;
May 16 Joint Press Release, supra note 12.
---------------------------------------------------------------------------

    Furthermore, the Commission believes that the proposal is
reasonably designed to minimize any potential disparate impact on FINRA
members. FINRA is not proposing at this time to publicly disseminate
any transactions in U.S. Treasury Securities.\146\ In addition, FINRA
is not at this time imposing any fees on its members for reporting
transactions in U.S. Treasury Securities, so FINRA members will not
face any additional direct costs that their competitors do not. The
Commission recognizes that FINRA members could face additional indirect
costs to expand their infrastructure, policies, and procedures that
support TRACE reporting. However, the proposal is reasonably designed
to minimize those costs. Many FINRA members that will be subject to the
new reporting requirements for U.S. Treasury Securities already report
transactions in other types of debt securities to TRACE, so their costs
of complying with this proposal are likely to be incremental rather
than wholesale. FINRA members who are active in the Treasury market are
likely to be active in other fixed income markets, and are thus likely
to be familiar with existing protocols for reporting transactions to
TRACE. To the extent that certain firms become subject to TRACE
reporting requirements for the first time (or firms that already carry
out TRACE reporting from certain desks have other desks that do not
currently trade TRACE-Eligible Securities and do not yet have TRACE
capabilities), FINRA's proposal to allow transactions to be reported by
end-of-day should provide such firms with some flexibility

to determine the most cost-effective way of meeting the new reporting
requirements, while allowing regulators to obtain Treasury market
transaction information in a reasonable timeframe.
---------------------------------------------------------------------------

    \146\ Pursuant to Section 19(b)(5) of the Act, 15 U.S.C.
78s(b)(5), the Commission shall consult with and consider the views
of the Secretary of the Treasury prior to approving a proposed rule
filed by FINRA that primarily concerns conduct related to
transactions in government securities, including any proposed rule
that would provide for public dissemination of transactions in U.S.
Treasury Securities.
---------------------------------------------------------------------------

    The Commission believes that the timeframes proposed by FINRA for
reporting a transaction in a U.S. Treasury Security--on an end-of-day
or next-day basis, depending on the time that the transaction was
executed--are consistent with the Act. The Commission previously has
approved a similar approach of allowing extended reporting timeframes
when new asset classes were made TRACE-eligible and FINRA sought to
make accommodations for the new compliance burdens.\147\
---------------------------------------------------------------------------

    \147\ See Asset-Backed Securities Order, supra note 142, at
9264-65 (implementing a T+1 reporting period for a six-month pilot
period to ease the compliance burdens on those affected by the
proposal).
---------------------------------------------------------------------------

    The proposal generally extends existing TRACE reporting protocols,
which the Commission has approved previously, to transactions in U.S.
Treasury Securities. For example, the proposal retains FINRA's existing
dual-sided reporting structure (where both parties are FINRA
members),\148\ which has been utilized since TRACE's inception. The
Commission believes that dual-sided reporting for transactions in U.S.
Treasury Securities is consistent with the Act because having both
sides report (where both parties are FINRA members) is reasonably
designed to promote the accuracy of reported transaction information
and, thus, the quality of the audit trail. As a general matter, the
Commission believes that utilizing the existing TRACE reporting
framework to the extent practicable should facilitate compliance and
minimize the costs associated with the proposal. Members that currently
report to TRACE generally will be able to leverage their existing
reporting processes, with some modifications, to report transactions in
U.S. Treasury Securities.
---------------------------------------------------------------------------

    \148\ See FINRA Rule 6730(a).
---------------------------------------------------------------------------

    FINRA proposed various changes to existing TRACE rules and
definitions that will define the scope of U.S. Treasury securities and
transactions that will become subject to the TRACE reporting
requirements. For example, the proposal excludes transactions in
savings bonds because such bonds are generally non-transferable and are
therefore not marketable securities purchased and sold in the secondary
market. Although trading a principal or interest component of a U.S.
Treasury Security that has been separated under the STRIPS program
would constitute a Reportable TRACE Transaction, the act of separating
or reconstituting the components of a U.S. Treasury Security under the
STRIPS program would not constitute a Reportable TRACE Transaction.
This is because, for purposes of the trade reporting rules, FINRA
considers a ``trade'' or a ``transaction'' to entail a change of
beneficial ownership between parties.\149\ The Commission notes that
this is consistent with FINRA's existing treatment of transactions that
do not involve a change of beneficial ownership.\150\ For Treasury
auctions, the Treasury Department maintains the auction data, which is
available to regulators.\151\
---------------------------------------------------------------------------

    \149\ See supra footnote 13.
    \150\ See id.
    \151\ See Notice, 81 FR at 48467.
---------------------------------------------------------------------------

    Furthermore, the proposal excludes from reporting bona fide
repurchase and reverse repurchase transactions involving TRACE-Eligible
Securities. Historically, FINRA has taken the position that repurchase
transactions and reverse repurchase transactions should not be reported
to TRACE.\152\ According to FINRA, the transfer of securities
effectuated as part of a repurchase or a reverse repurchase transaction
is not the result of an investment decision but is more akin to
collateral pledged as part of a secured financing.\153\ Therefore,
FINRA views repurchase and reverse repurchase transactions as
economically equivalent to financings, and the pricing components of
such transactions are typically not the market value of the
securities.\154\ The Commission believes that FINRA's proposed rules
for defining the scope of U.S. Treasury securities and transactions
that will become subject to the TRACE reporting requirements are
consistent with the Act. If FINRA seeks to revise the scope of covered
securities or transactions in the future, it would have to do so
consistent with the requirements of the Act and, in particular, the
rule filing requirements of Section 19(b) of the Act.
---------------------------------------------------------------------------

    \152\ See id.
    \153\ See id.
    \154\ See id.
---------------------------------------------------------------------------

    The Commission believes that it is consistent with the Act for
FINRA to adopt certain new rules and to revise certain existing rules
to accommodate particular features of U.S. Treasury securities or the
Treasury market. The Commission believes, for example, that the new
trade indicator required for When-Issued Transactions is reasonably
designed to promote the accuracy of the audit trail and allow FINRA to
better understand the price of a reported transaction. The Commission
believes that the new ``.B'' and ``.S'' modifiers are reasonably
designed to provide regulators with a more complete understanding of
activity in the Treasury market by identifying transactions that are
negotiated as part of a larger strategy.\155\ The Commission notes that
FINRA has represented that it will work with members on implementing
the new modifiers and will post any necessary guidance on its Web
site.\156\
---------------------------------------------------------------------------

    \155\ The Commission notes that Amendment No. 1 addresses the
concerns of one commenter by revising the ``.S'' modifier to
indicate that the modifier will apply to a strategy that meets the
``.S'' criteria regardless of whether one or more of the
transactions in the series is, in fact, off market. See Amendment
No. 1; FINRA Response at 9.
    \156\ See FINRA Response at 9.
---------------------------------------------------------------------------

    The proposal adds new FINRA Rule 6730, Supplementary Material .04,
to require a member to report an electronically executed transaction in
a U.S. Treasury Security to the finest increment of time captured in
the member's system, but at a minimum in increments of seconds. The
Commission notes that this requirement is consistent with existing
FINRA rules that require a member to report a trade in an equity
security in milliseconds if the member's system captures time in
milliseconds.\157\ The Commission agrees with FINRA that capturing the
time of execution in more granular increments, when available, could
assist FINRA in sequencing trades and enhance its ability to surveil
trading activity.\158\
---------------------------------------------------------------------------

    \157\ See FINRA Rules 6380A, Supplementary Material .04; 6380B,
Supplementary Material .04; 6622, Supplementary Material .04; and
7440(a)(2). See also FINRA Regulatory Notice 14-21 (May 2014).
    \158\ See FINRA Response at 10-11.
---------------------------------------------------------------------------

    FINRA stated that the effective date for the proposal shall be no
later than 365 days following this approval, with the general reporting
requirement preceding the requirement to use the ``.B'' and ``.S''
trade modifiers.\159\ As noted above, several commenters supported a
one-year implementation period.\160\ The Commission believes that the
proposed timeframe for implementation is consistent with the Act, and
that the commenters have not raised any issue that would preclude
approval of the proposal at this time. The Commission notes that FINRA
has acknowledged the importance of timely publication of the technical
specifications for reporting, and indicated that it would publish

technical specifications concurrent with this approval.\161\
---------------------------------------------------------------------------

    \159\ See Notice, 81 FR at 48469. FINRA also represented that it
will announce the effective date of this proposed rule change in a
Regulatory Notice to be published no later than 90 days following
this approval. See id.
    \160\ See supra note 125 and accompanying text.
    \161\ See FINRA Response at 14. See also Notice, 81 FR at 48469
(FINRA's acknowledgement that sufficient lead-time between the
publication of technical specifications and the implementation date
is critical to firms' ability to meet the announced implementation
date).
---------------------------------------------------------------------------

    The proposal amends existing FINRA Rule 6750(b) to add U.S.
Treasury Securities to the list of transaction types for which
transaction information will not be disseminated. The Commission
believes that it is consistent with the Act for FINRA to refrain from
publicly disseminating information regarding transactions in U.S.
Treasury Securities at this time. The Commission agrees that it is
appropriate to study the transaction information that will be reported
to regulators under this rule change before proceeding with any new
proposal to provide for the public dissemination of information
concerning transactions in U.S. Treasury Securities. The proposal also
amends FINRA's existing rules to provide that, at this time, FINRA will
not charge fees for transactions in U.S. Treasury Securities reported
to TRACE. The Commission believes that it is within FINRA's discretion
to refrain from charging fees for reporting transactions in U.S.
Treasury Securities at this time. The Commission notes that FINRA would
be required to file with the Commission, pursuant to Section 19(b)(1)
of the Act, any proposal to establish transaction reporting fees for,
or to provide for the public dissemination of, transactions in U.S.
Treasury Securities.
    Pursuant to Section 19(b)(5) of the Act,\162\ the Commission
consulted with and considered the views of the Treasury Department in
determining to approve the proposed rule change. The Treasury
Department supports FINRA's proposal to require its members to report
transactions in U.S. Treasury Securities to TRACE.\163\ Pursuant to
Section 19(b)(6) of the Act,\164\ 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. As noted above,
regulators currently do not have ready access to information about
transactions in the U.S. Treasury cash market, and the events of
October 15, 2014, highlighted the importance of making available to
regulators more comprehensive information concerning activity in this
market.\165\ By requiring FINRA members, including those that are
government securities brokers or dealers, to report transactions in
U.S. Treasury Securities to TRACE, the new rules represent an important
first step in providing regulators with more comprehensive information
concerning activity in the U.S. Treasury cash market.
---------------------------------------------------------------------------

    \162\ 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'').
    \163\ Telephone conversation between Treasury Department staff
and Stephen Luparello, Director, Division of Trading and Markets, et
al., Commission, on October 14, 2016.
    \164\ 15 U.S.C. 78s(b)(6).
    \165\ See RFI Notice, 81 FR at 3931.
---------------------------------------------------------------------------

V. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
to 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<EMAIL_ADDRESS>Please include
File Number SR-FINRA-2016-027 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-FINRA-2016-027. 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 Web site (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
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing will also be available
for inspection and copying at the principal office of FINRA. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-FINRA-2016-027 and should be
submitted on or before November 14, 2016.

VI. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1

    The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\166\ for approving the proposed rule change, as modified by
Amendment No. 1, prior to the 30th day after the publication of
Amendment No. 1 in the Federal Register. The Commission believes that
Amendment No. 1 addresses the commenter's suggestion that the ``.S''
modifier apply to transactions in a series that meet the ``.S''
criteria regardless of whether one or more of the transactions is
executed away from the market.\167\ The Commission believes that the
changes with respect to the ``.S'' modifier simplify the rule, and ease
the compliance burden associated with it, by eliminating the need for
members to determine whether a transaction was priced outside of the
market at the time of execution. At the same time, the ``.S'' modifier
will facilitate oversight and provide regulators with information and
insights into trading activity by identifying transactions in U.S.
Treasury Securities that were executed as part of a series of
transactions. Accordingly, the Commission finds that good cause exists
to approve the proposal, as modified by Amendment No. 1, on an
accelerated basis.
---------------------------------------------------------------------------

    \166\ 15 U.S.C. 78s(b)(2).
    \167\ See SIFMA Letter at 7.
---------------------------------------------------------------------------

VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\168\ that the proposed rule change (SR-FINRA-2016-027), as
modified by Amendment No. 1, is approved on an accelerated basis.
---------------------------------------------------------------------------

    \168\ 15 U.S.C. 78s(b)(2).

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    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\169\
---------------------------------------------------------------------------

    \169\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-25604 Filed 10-21-16; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 88, Number 225 (Friday, November 24, 2023)]
[Rules and Regulations]
[Pages 82257-82259]
[FR Doc No: 2023-25850]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 73

[Docket No. FAA-2023-0242; Airspace Docket No. 23-ASO-25]
RIN 2120-AA66

Renaming of Restricted Areas R-2103A and R-2103B; Fort Rucker, AL

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: This action is an administrative change to rename restricted
areas R-2103A and R-2103B, Fort Rucker, AL, and to update the using
agency description to reflect the change. This action partially
implements recommendations of the Commission on the Naming of Items
(Naming Commission) of the Department of Defense (DoD) as established
by section 370 of the Fiscal Year (FY) 2021 National Defense
Authorization Act (NDAA).

DATES: Effective date 0901 UTC, January 25, 2024.

ADDRESSES: A copy of this final rule, and all background material may
be viewed online at www.regulations.gov using the FAA Docket number.
Electronic retrieval help and guidelines are available on the website.
It is available 24 hours each day, 365 days each year.

FOR FURTHER INFORMATION CONTACT: Brian Vidis, Rules and Regulations
Group, Office of Policy, Federal Aviation Administration, 800
Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-
8783.

SUPPLEMENTARY INFORMATION:

Authority for This Rulemaking

    The FAA's authority to issue rules regarding aviation safety is
found in Title 49 of the United States Code. Subtitle I, Section 106
describes the authority of the FAA Administrator. Subtitle VII,
Aviation Programs, describes in more detail the scope of the agency's
authority. This rulemaking is promulgated under the authority described
in Subtitle VII, Part A, Subpart I, Section 40103. Under that section,
the FAA is charged with prescribing regulations to assign the use of
the airspace necessary to ensure the safety of aircraft and the
efficient use of airspace. This regulation is within the scope of that
authority as it updates the information in the airspace descriptions of
restricted areas R-2103A and R-2103B.

Background

    The FY 2021 NDAA directed the DoD to establish a commission
relating to assigning, modifying, or removing of names, symbols,
displays, monuments, and paraphernalia to assets of the DoD that
commemorate the Confederate States of America or any person who served
voluntarily with the Confederate States of America.\1\ In January 2023,
the Secretary of Defense directed all DoD organizations to begin full
implementation of the Naming Commission's recommendations. As approved
by the Secretary of Defense, the name ``Fort Rucker, AL'' is changed to
``Fort Novosel, AL''. Consequently, this rulemaking action implements
the requisite changes to part 73 by updating the airspace descriptions
of restricted areas R-2103A and R-2103B to reflect the new name.
---------------------------------------------------------------------------

    \1\ Public Law 116-283, 134 Stat. 3388, Jan. 1, 2021.
---------------------------------------------------------------------------

The Rule

    This action amends 14 CFR part 73 by updating the airspace titles
and using agency descriptions for restricted areas R-2103A and R-2103B
by removing the name ``Fort Rucker, AL'' and replacing it with ``Fort
Novosel, AL''. Additionally, the FAA added the word ``statute'' to the
part 73 description to clarify the unit of measurement for the radius
of each volume of airspace. This action consists of administrative name
changes only and does not affect the boundaries, altitudes, time of
designation, or activities conducted in the airspace. Therefore, notice
and public procedure under 5 U.S.C. 553(b) is unnecessary.

Regulatory Notices and Analyses

    The FAA has determined that this regulation only involves an
established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
It, therefore: (1) is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under
Department of Transportation (DOT) Regulatory Policies and Procedures
(44 FR 11034; February 26, 1979); and (3) does not warrant preparation
of a regulatory evaluation as the anticipated impact is so minimal.
Since this is a routine matter that only affects air traffic procedures
and air navigation, it is certified that this rule, when promulgated,
does not have a significant economic impact on a substantial number of
small entities under the criteria of the Regulatory Flexibility Act.

Environmental Review

    The FAA has determined that this action of making administrative
name changes to restricted areas R-2103A and R-2103B, which do not
alter the boundaries, altitudes, or time of designation, qualifies for
categorical exclusion under the National Environmental Policy Act (42
U.S.C. 4321 et seq.) and its implementing regulations at 40 CFR part
1500, and in accordance with FAA Order 1050.1F, Environmental Impacts:
Policies and Procedures, paragraph 5-6.5a, which categorically excludes
from further environmental impact review rulemaking actions that
designate or modify classes of airspace areas, airways, routes, and
reporting points (see 14 CFR part 71, Designation of Class A, B, C, D,
and E Airspace Areas; Air Traffic Service Routes; and Reporting
Points); and paragraph 5-6.5d--Modification of the technical
description of special use airspace (SUA) that does not alter the
dimensions, altitudes, or times of designation of the airspace (such as
changes in designation of the controlling or using agency, or
correction of typographical errors). In accordance with FAA Order
1050.1F, paragraph 5-2 regarding Extraordinary Circumstances, the FAA
has reviewed this action for factors and circumstances in which a
normally categorically excluded action may have a significant
environmental impact requiring further analysis. Accordingly, the FAA
has determined that no extraordinary circumstances exist that warrant
preparation of an environmental assessment or environmental impact
study.

List of Subjects in 14 CFR part 73

    Airspace, Prohibited areas, Restricted areas.

The Amendment

    In consideration of the foregoing, the Federal Aviation
Administration amends 14 CFR part 73 as follows:

PART 73--SPECIAL USE AIRSPACE

0
1. The authority citation for 14 CFR part 73 continues to read as
follows:

    Authority: 49 U.S.C. 106(f), 106(g), 40103, 40113, 40120; E.O.
10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p.389.

Sec.  73.21  Alabama [Amended]

0
2. Section 73.21 is amended as follows:
* * * * *

R-2103A Fort Rucker, AL [Removed]

R-2103B Fort Rucker, AL [Removed]

R-2103A Fort Novosel, AL [New]

    Boundaries. A circular area with a radius of 4 statute miles
centered at lat. 31[deg]26'56'' N, long. 85[deg]47'45'' W.
    Designated altitudes. Surface to but not including 10,000 feet.
MSL.
    Time of designation. Continuous.
    Controlling agency. U.S. Army, Cairns Approach Control.
    Using agency. Commanding General, U.S. Army Aviation Center, Fort
Novosel, AL.

R-2103B Fort Novosel, AL [New]

    Boundaries. A circular area with a radius of 4 statute miles
centered at lat. 31[deg]26'56'' N, long. 85[deg]47'45'' W.
    Designated altitudes. 10,000 feet MSL to 15,000 feet MSL.
    Time of designation. By NOTAM 6 hours in advance.
    Controlling agency. FAA, Jacksonville ARTCC.
    Using agency. Commanding General, U.S. Army Aviation Center, Fort
Novosel, AL.
* * * * *

    Issued in Washington, DC, on November 17, 2023.
Karen L. Chiodini,
Acting Manager, Airspace Rules and Regulations Group.
[FR Doc. 2023-25850 Filed 11-22-23; 8:45 am]
BILLING CODE 4910-13-P