[Federal Register Volume 79, Number 184 (Tuesday, September 23, 2014)]
[Notices]
[Pages 56833-56834]
[FR Doc No: 2014-22548]

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SECURITIES AND EXCHANGE COMMISSION

Proposed Collection; Comment Request

Upon Written Request Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, Washington, DC 20549-2736.

Extension:
    Rule 12g3-2, SEC File No. 270-104, OMB Control No. 3235-0119.

    Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collection of
information summarized below. The Commission plans to submit this
existing collection of information to the Office of Management and
Budget for approval.
    Rule 12g3-2 (17 CFR 240.12g3-2) under the Securities Exchange Act
of 1934 (the ``Exchange Act'') provides an exemption from Section 12(g)
of the Exchange Act (15 U.S.C. 78l(g)) for foreign private issuers.
Rule 12g3-2 is designed to provide investors in foreign securities with
information about such securities and the foreign issuer. The
information filed under Rule 12g3-2 must be filed with the Commission
and is publicly available. We estimate that it takes 8.95 hours per
response to prepare and is filed by approximately 1,386 respondents.
Each respondent files an estimated 12 times submissions pursuant to
Rule 12g3-per year for a total of 16,632 respondents. We estimate that
25% of 8.95 hours per response (2.2375 hours per response) to provide
the information required under Rule 12g3-2 for a total annual reporting
burden of 37,214 hours (2.2375 hours per response x 16,632 responses).
    Written comments are invited on: (a) Whether this proposed
collection of information is necessary for the performance of the
functions of the agency, including whether the

information will have practical utility; (b) the accuracy of the
agency's estimate of the burden imposed by the collection of
information; (c) ways to enhance the quality, utility, and clarity of
the information collected; and (d) ways to minimize the burden of the
collection of information on respondents, including through the use of
automated collection techniques or other forms of information
technology. Consideration will be given to comments and suggestions
submitted in writing within 60 days of this publication.
    Please direct your written comment to Thomas Bayer, Director/Chief
Information Officer, Securities and Exchange Commission, c/o Remi
Pavlik-Simon, 100 F Street NE., Washington, DC 20549; or send an email
to<EMAIL_ADDRESS>
    Dated: September 17, 2014.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-22548 Filed 9-22-14; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 79, Number 134 (Monday, July 14, 2014)]
[Notices]
[Pages 40830-40835]
[FR Doc No: 2014-16363]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72554; File No. SR-ISE-2014-35

Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Related to the Price Improvement Mechanism

July 8, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 25, 2014, International Securities Exchange, LLC (``Exchange''
or ``ISE'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend its rules regarding the Price
Improvement Mechanism (``PIM'').
    The text of the proposed rule change is available on the Exchange's
Internet Web site at http://www.ise.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The self-regulatory organization has prepared summaries,
set forth in Sections A, B and C below, of the most significant aspects
of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to amend the Exchange's
rules regarding the PIM functionality. The

Exchange proposes to make two changes to its PIM rules. The first
change is based on a proposal recently submitted by NASDAQ OMX PHLX LLC
(``PHLX''), and approved by the Commission,\3\ pursuant to which orders
of any size may initiate the price improvement auction (``PIXL'') on
PHLX at a price which is at or better than the national best bid or
offer (``NBBO''), even in instances where PHLX has resting interest on
the opposite side and thus not at least one cent better than PHLX's own
best bid or offer as required in the past. The second change proposed
in this filing relates to how responses are addressed in the PIM. With
this proposed change, the manner in which response messages are treated
will be similar to how they are treated in the price improvement
auctions operated at other exchanges.\4\
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    \3\ See Securities Exchange Act Release No. 70654 (October 10,
2013), 78 FR 62891 (October 22, 2013) (SR-PHLX-2013-76).
    \4\ See Securities Exchange Act Release No. 72009 (April 23,
2014), 79 FR 24032 (April 29, 2014) (Notice of Filing of Amendment
No. 1 and Order Granting Accelerated Approval of a Proposed Rule
Change, as Modified by Amendment No. 1, To Adopt the MIAX PRIME
Price Improvement Mechanism and the MIAX PRIME Solicitation
Mechanism) (``MIAX Filing''). See also PHLX Rule 1080(n)(ii)(A)(6).
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    The PIM is a process that allows Electronic Access Members
(``EAM'') to provide price improvement opportunities for a transaction
wherein the Member seeks to execute an agency order as principal or
execute an agency order against a solicited order (a ``Crossing
Transaction'').\5\ A Crossing Transaction is comprised of the order the
EAM represents as agent (the ``Agency Order'') and a counter-side order
for the full size of the Agency Order (the ``Counter-Side Order''). The
Counter-Side Order may represent interest for the Member's own account,
or interest the Member has solicited from one or more other parties, or
a combination of both.
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    \5\ See Securities Exchange Act No. 50819 (December 8, 2004), 69
FR 75093 (December 15, 2004) (SR-ISE-2003-06).
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    Currently under Rule 723, a Crossing Transaction must be entered
only at a price that is better than the ISE best bid or offer (``ISE
BBO'') and equal to or better than the national best bid or offer
(``NBBO''). Under Supplementary Material .08 to Rule 723, when the ISE
BBO is equal to the NBBO, a Crossing Transaction may be entered where
the price of the Crossing Transaction is equal to the ISE BBO if the
Agency Order is on the opposite side of the market from the ISE BBO. In
this case, the Agency Order is automatically executed against the ISE
BBO. If the Agency Order is not fully executed after the ISE BBO is
fully exhausted and is no longer at a price equal to the Crossing
Transaction, the PIM is initiated for the balance of the order as
provided in Rule 723.
    The Exchange now proposes to modify PIM so that Members may enter a
Crossing Transaction at a price that is at or better than the NBBO on
either side of the Agency Order and better than the limit order or
quote on the ISE order book on the same side of the Agency Order.
Members are not required to improve the ISE BBO on the opposite side of
the Agency Order to initiate a PIM. Any resting interest on the ISE
order book on the opposite side of the Agency Order will participate at
the end of the auction in accordance with Rule 723(d). With this
proposed rule change, PIM will now operate similar to the PIXL
functionality at PHLX in terms of the price at which a PIM can be
initiated.\6\ The proposed change to the start price of a PIM will not
impact the current execution priority. However, as discussed in detail
below, the Exchange is also proposing to make PIM auctions blind. In
addition, the Exchange is proposing that Member orders will no longer
yield priority to non-Member orders.\7\
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    \6\ See PHLX Rule 1080(n).
    \7\ Priority Customer interest will continue to be executed
first followed by Professional Orders and Member interest. See
proposed Rule 723(d)(2).
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    The Exchange believes the proposed rule change will allow a greater
number of orders to receive price improvement that might not currently
be afforded any price improvement. By auctioning the entire quantity in
the PIM, the opportunity for price improvement over the prevailing NBBO
is extended to the whole order, rather than only the portion that does
not interact with the resting liquidity at the auction price level. As
before, Priority Customers will continue to have priority at each price
level in accordance with Rule 723(d). At each given price point, ISE
will execute Priority Customer interest in a price/time fashion such
that all Priority Customer interest which was resting on the order book
is satisfied before any other interest that arrived after the PIM was
initiated. After Priority Customer interest at a given price point has
been satisfied, remaining contracts will be allocated among all
Exchange quotes and orders in accordance with the execution rules set
forth in Rule 723(d). Interest, whether resting prior to the
commencement of the auction or arriving during the auction process,
will continue to be executed in accordance with Rule 723(d).
    The Exchange believes using the allocation method that it currently
does is a fair distribution because the Counter-Side Order provides
significant value to the market. The EAM guarantees the Crossing
Transaction price improvement, and is subject to market risk while the
order is exposed to other market participants. The EAM may only improve
the price where it stopped the agency side, and may not cancel its
order once the PIM commences. Other market participants are free to
modify or cancel their quotes and orders at any time during the
auction. The Exchange believes that the EAM provides an important role
in facilitating the price improvement opportunity for market
participants.
    The following examples illustrate how the proposed rule change
would operate: Example 1
    ISE BBO is 2.48-2.51 (60x30) (10 of the 30 on the offer is a
Priority Customer; 20 of the 30 on the offer is a market maker (MM1);
all 60 on the bid is a MM). NBBO is 2.48-2.51 (100x100). Under the
proposed rule change, an Agency Order to buy may be entered into the
PIM at any price between and including 2.49 and 2.51.
    Assume a Priority Customer or non-Priority Customer order to buy
100 contracts is submitted into the PIM with a stop price of 2.51. The
PIM auction will commence with a notification being sent to market
participants. Assume, during the auction, two market makers (MM2 and
MM3) respond. MM2 responds to sell 10 contracts at 2.50 and MM3
responds to sell 20 contracts at 2.51. At the end of the auction, the
agency side of the order will buy 10 contracts from MM2 at 2.50,
leaving 90 to be allocated at the original order limit of 2.51. The
allocation process would continue and 10 contracts will be allocated to
the Priority Customer on the book at 2.51, leaving 80 contracts to be
allocated among the Counter-Side Order at 2.51 and the two market
makers offering at 2.51. The remaining 80 contracts will be allocated
at a price of 2.51 with 40 contracts (40% of the original order
quantity) being allocated to the Counter-Side Order, 20 contracts
allocated to MM1 and 20 contracts allocated to MM3.
    The Exchange believes the proposed rule change will attract new
order flow that might not currently be afforded any price improvement
opportunity. Moreover, the Exchange notes that the Boston Options
Exchange (``BOX'') currently has rules that allow it to commence its
price improvement auction, called the Price Improvement Period
(``PIP''), at a price equal to the

NBBO.\8\ When a PIP is initiated at a price equal to the NBBO,
regardless of size, the resting quotes and orders on BOX are considered
for allocation at the end of the auction. BOX executes interest that
existed on the BOX order book prior to the commencement of a PIP before
executing any interest which joined during the auction. This behavior
aligns with the BOX standard trade allocation rules as they employ a
price/time allocation algorithm.
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    \8\ See BOX Rules Chapter V, Section 18(e).
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    Similar to BOX, the ISE proposed rule change will allow orders of
any size to initiate an auction at a price which is equal to or better
than the NBBO where ISE may have resting interest. ISE will execute a
Crossing Transaction against any interest, resting prior to the
commencement of an auction or interest which arrived during the
auction, in accordance with the rules as stated and illustrated with
the example above. While this is different than the allocation
algorithm that BOX employs, this behavior is consistent with the ISE
PIM rules in place today. This proposal will continue to afford the
same price improvement opportunities for Priority Customer and non-
Priority Customer Crossing Transactions as is in operation today, but
with the ability to initiate such price improving auctions at a price
that is equal to the NBBO, and therefore permitting more of such orders
to receive price improvement.
    Further, as noted above, under Supplementary Material .08 to Rule
723, when the ISE BBO is equal to the NBBO, a Crossing Transaction may
currently be entered where the price of the Crossing Transaction is
equal to the ISE BBO if the Agency Order is on the opposite side of the
market from the ISE BBO. However, with this proposed rule change, if a
Crossing Transaction is entered at a price equal to the ISE BBO on the
opposite side of the market, the Agency Order will no longer
automatically execute and the Agency Order will trade against any
interest, resting prior to the commencement of an auction or interest
which arrived during the auction, in accordance with rule 723(d). The
Exchange, therefore, proposes to delete Supplementary Material .08 to
Rule 723.
    The second change proposed in this filing is to modify the PIM
functionality so responses sent by Members during a PIM auction are not
visible to other auction participants. With this proposed change,
responses will be treated in the same way they are treated in price
improvement auctions operated by other exchanges.\9\
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    \9\ See supra note 4.
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    Currently, upon entry of a Crossing Transaction into the PIM, a
broadcast message that includes the series, price and size of the
Agency Order, and whether it is to buy or sell, is sent to all Members.
Members are then given 500 milliseconds to indicate the size and price
at which they want to participate in the execution of the Agency Order
(``Improvement Orders''). Improvement Orders may be entered by all
Members for their own account or for the account of a Public Customer
in one-cent increments at the same price as the Crossing Transaction or
at an improved price for the Agency Order, and for any size up to the
size of the Agency Order. During the exposure period, Improvement
Orders cannot be canceled, but can be modified to (1) increase the size
at the same price, or (2) improve the price of the Improvement Order
for any size up to the size of the Agency Order. During the exposure
period, the aggregate size of the best prices (including the Counter-
Side Order, Improvement Orders, and any changes to either) are
continually updated and broadcast to all Members.
    Because the PIM permits Members to continually receive broadcast
messages, the Exchange adopted rules pursuant to which EAMs and
Exchange Market Makers are required to yield priority to all non-Member
orders \10\ which the Commission found to be consistent with the
requirements in Section 11(a) of the Act. At the time PIM was approved,
although the ``effect versus execute'' exemption under Section 11(a)
existed and was available to ISE Members, because of the manner in
which the PIM was designed, ISE Members were not able to comply with
that exemption. Instead, the PIM was designed to rely on yielding by
Members to non-Member orders to be consistent with Section 11(a) of the
Act. The Exchange notes it is now more than a decade since PIM was
approved. The options markets have since greatly evolved and some
options exchanges that have adopted a price improvement auction rely
now on the ``effect versus execute'' exemption under Section 11(a) and
yield execution priority to Priority Customers only. As a competitive
response, the Exchange now proposes to delete relevant parts of Rule
723 to modify the PIM functionality so that responses submitted during
a PIM auction will no longer be continually updated and broadcast to
all Members.\11\ Doing so will allow ISE Members to rely on the
``effect versus execute'' exemption under Section 11(a) of the Act when
utilizing the PIM.
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    \10\ See Securities Exchange Act No. 50819 (December 8, 2004),
69 FR 75093 (December 15, 2004) (SR-ISE-2003-06). See also
Securities Exchange Act Release No. 59287 (January 23, 2009), 74 FR
5694 (January 30, 2009). In connection with the current proposal to
make PIM auctions blind, the Exchange proposes to delete reference
to non-Member Professional Orders from its rules.
    \11\ A number of exchanges currently operate price improvement
auctions where responses submitted by a member are blind, i.e., not
visible to other auction participants. For example, MIAX Rule
515A(a)(2)(i)(E) notes that ``responses shall not be visible to
other Auction participants.'' See Securities Exchange Act Release
No. 72009 (April 23, 2014), 79 FR 24032 (April 29, 2014).
Additionally, PHLX Rule 1080(n)(ii)(A)(6) similarly provides that
``responses will not be visible to Auction participants.'' See PHLX
Rule 1080(n)(ii)(A)(6).
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    Section 11(a) of the Exchange Act prohibits any member of a
national securities exchange from effecting transactions on that
exchange for its own account, the account of an associated person, or
an account over which it or its associated persons exercises discretion
(``covered accounts''), unless an exception applies.\12\ Section
11(a)(1) contains a number of exceptions for principal transactions by
members and their associated persons. As set forth below, the Exchange
believes that with the proposed change, the PIM rules are now
consistent with the requirements in Section 11(a) and the rules
thereunder.
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    \12\ 15 U.S.C. 78k(a)(1).
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    In this regard, Section 11(a)(1)(A) provides an exception from the
prohibitions in Section 11(a) for dealers acting in the capacity of
market makers. With respect to Market Makers on the Exchange, the
Exchange believes that orders sent by them for covered accounts to the
proposed PIM would qualify for this exception from Section 11(a).
    In addition to this Market Maker exception, Rule 11a2-2(T) under
the Exchange Act, known as the ``effect versus execute'' rule, provides
exchange members with an exception from Section 11(a) by permitting
them, subject to certain conditions, to effect transactions for covered
accounts by arranging for an unaffiliated member to execute the
transactions on the exchange.\13\ To comply with the ``effect versus
execute'' rule's conditions, a member: (i) Must transmit the order from
off the exchange floor; (ii) may not participate in the execution of
the transaction once it has been transmitted to the member performing
the execution; \14\ (iii) may not be affiliated with the member
executing the transaction on the floor through the

facilities of the Exchange; and (iv) with respect to an account over
which the member has investment discretion, neither the member nor its
associated person may retain any compensation in connection with
effecting the transaction except as provided in the rule.\15\ The
Exchange believes that orders sent by Members for covered accounts to
the proposed PIM would qualify for this ``effect versus execute''
exception from Section 11(a), as described below. In this regard, the
first condition of Rule 11a2-2(T) is that orders for covered accounts
be transmitted from off the exchange floor. The ISE trading system and
the PIM receives all orders electronically through remote terminals or
computer-to-computer interfaces. The Exchange represents that orders
for covered accounts from Members will be transmitted from a remote
location directly to the PIM auction by electronic means. In the
context of other automated trading systems, the Commission has found
that the off-floor transmission requirement is met if a covered account
order is transmitted from a remote location directly to an exchange's
floor by electronic means.\16\ The second condition of Rule 11a2-2(T)
requires that the member not participate in the execution of its order
once the order is transmitted to the floor for execution.\17\ The
Exchange represents that, upon submission to the PIM, an order will be
executed automatically pursuant to the rules set forth for the
mechanism. In particular, execution of an order sent to the mechanism
depends not on the Member entering the order, but rather on what other
orders are present and the priority of those orders. Thus, at no time
following the submission of an order is a Member able to acquire
control or influence over the result or timing of order execution.\18\
Rule 11a2-2(T)'s third condition requires that the order be executed by
an exchange member who is unaffiliated with the member initiating the
order. The Commission has stated that the requirement is satisfied when
automated exchange facilities, such as the PIM, are used, as long as
the design of these systems ensures that members do not possess any
special or unique trading advantages in handling their orders after
transmitting them to the exchange.\19\ The Exchange represents that the
PIM is designed so that no Member has any special or unique trading
advantage in the handling of its orders after transmitting its orders
to the mechanism. Rule 11a2-2(T)'s fourth condition requires that, in
the case of a transaction effected for an account with respect to which
the initiating member or an associated person thereof exercises
investment discretion, neither the initiating member nor any associated
person thereof may retain any compensation in connection with effecting
the transaction, unless the person authorized to transact business for
the account has expressly provided otherwise by written contract
referring to Section 11(a) of the Act and Rule 11a2-2(T)
thereunder.\20\ The Exchange recognizes that Members relying on Rule
11a2-2(T) for transactions effected through the PIM must comply with
this condition of the Rule.
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    \13\ 17 CFR 240.11a2-2(T).
    \14\ The member, however, may participate in clearing and
settling the transaction. See Securities Exchange Act Release No.
14563 (March 14, 1978), 43 FR 11542 (March 17, 1978).
    \15\ 17 CFR 240.11a2-2(T).
    \16\ See, e.g., Securities Exchange Act Release Nos. 59154
(December 23, 2008), 73 FR 80468 (December 31, 2008) (SR-BSE-2008-
48); 57478 (March 12, 2008), 73 FR 14521 (March 18, 2008) (SR-
NASDAQ-2007-004 and SR-NASDAQ-2007-080); 49068 (January 13, 2004),
69 FR 2775 (January 20, 2004) (SR-BSE-2002-15); 15533 (January 29,
1979), 44 FR 6084 (January 31, 1979) (``1979 Release''); 14563
(March 14, 1978), 43 FR 11542 (March 17, 1978) (``1978 Release'').
    \17\ The description above covers the universe of the types of
Members (i.e., Market Makers, EAMs).
    \18\ The Exchange notes that a Member may cancel or modify the
order, or modify the instructions for executing the order, but that
such instructions would be transmitted from off the floor of the
Exchange. The Commission has stated that the non-participation
requirement is satisfied under such circumstances so long as such
modifications or cancellations are also transmitted from off the
floor. See 1978 Release (stating that the ``non-participation
requirement does not prevent initiating members from canceling or
modifying orders (or the instructions pursuant to which the
initiating member wishes to be executed) after the orders have been
transmitted to the executing member, provided that any such
instructions are also transmitted from off the floor'').
    \19\ In considering the operation of automated execution systems
operated by an exchange, the Commission noted that, while there is
not an independent executing exchange member, the execution of an
order is automatic once it has been transmitted into the system.
Because the design of these systems ensures that members do not
possess any special or unique trading advantages in handling their
orders after transmitting them to the exchange, the Commission has
stated that executions obtained through these systems satisfy the
independent execution requirement of Rule 11a2-2(T). See 1979
Release.
    \20\ See 17 CFR 240.11a2-2(T)(a)(2)(iv). In addition, Rule 11a2-
2(T)(d) requires a member or associated person authorized by written
contract to retain compensation, in connection with effecting
transactions for covered accounts over which such member or
associated persons thereof exercises investment discretion, to
furnish at least annually to the person authorized to transact
business for the account a statement setting forth the total amount
of compensation retained by the member in connection with effecting
transactions for the account during the period covered by the
statement which amount must be exclusive of all amounts paid to
others during that period for services rendered to effect such
transactions. See also 1978 Release (stating ``[t]he contractual and
disclosure requirements are designed to assure that accounts
electing to permit transaction-related compensation do so only after
deciding that such arrangements are suitable to their interests'').
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2. Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act'') \21\ in
general, and furthers the objectives of Section 6(b)(5) of the Act \22\
in particular, in that it is designed to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
for a free and open market and a national market system, and, in
general, to protect investors and the public interest by creating
positive, beneficial incentives for EAMs to provide price improvement
opportunities to market participants. With the proposed change to the
start price of a PIM auction, Members will not be required to improve
the ISE BBO on the opposite side of the Agency Order to initiate a PIM.
Further, any resting interest on the ISE order book on the opposite
side of the Agency Order will now participate at the end of the
auction. As a result, the proposed rule change will remove impediments
to and perfect the mechanism for a free and open market and will result
in more orders being executed in the PIM, thus providing an increased
probability of price improvement for all orders, regardless of their
size. With this proposed rule change, market participants would be
incentivized to introduce more orders to the PIM for the opportunity to
receive price improvement. Furthermore, Priority Customers will
continue to have priority at each price level in accordance with ISE
Rule 723(d). While currently non-Member Professional Orders are
executed after Priority Customer interest and before Member interest,
with this proposal, which in part amends ISE rules to make PIM a blind
auction, all Professional Orders will now be at par with Member
interest and will be executed after Priority Customer orders are
executed. The Exchange believes it is appropriate to give Professionals
Orders the same priority that is given to broker-dealer orders because
professional customers and broker-dealers essentially behave the same,
i.e., the type of trading professional customers engage in largely
resembles that of a broker-dealer. The Exchange believes it is
appropriate to treat these market participants at par with one another.
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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that using the same allocation
process as is used today for Crossing Transactions is fair and
equitable because of the value the EAM brings to the marketplace.

Specifically, by stopping the Crossing Transaction at or better than
the NBBO, the EAM facilitates a process that protects investors and is
in the public interest by providing an opportunity for price
improvement. The Exchange believes the proposed rule change generally
will benefit investors by offering more opportunities for orders to
receive price improvement. For these reasons, the Exchange believes
that the proposal is fair, reasonable and equitable for all market
participants.
    The Exchange believes its proposal to amend the manner in which
responses in the PIM auction are addressed is consistent with Section
6(b) of the Act. The proposal to make responses in the PIM blind to
other auction participants and the corresponding change to the priority
rules for the PIM are similar to existing priority rules that
distinguish between Priority Customers, Market Makers, and Professional
interest in a manner that will help ensure a fair and orderly market by
maintaining priority of orders and quotes while still affording the
opportunity for price improvement is both reasonable and appropriate.
    The Exchange believes the proposed rule change is appropriate in
the [sic] price improvement auctions are widely recognized by market
participants as invaluable, both as a tool to access liquidity, and a
mechanism to help meet their best execution obligations. The proposed
rule change will further the ability of market participants to carry
out these strategies. Finally, as noted above, the proposed changes are
a competitive response to how price improvement auctions on other
exchanges currently operate and with this proposal, the Exchange will
be on a more equal footing to compete with other exchanges for orders
to be executed in the PIM.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange's proposal to
amend its rules regarding the start price of a PIM auction will not
impose a burden on competition because it will increase the number of
orders that may be executed in the PIM and thereby receive price
improvement opportunities that were not previously available to them.
Further, the Exchange's proposal to make PIM a blind auction will allow
ISE to compete with other options exchanges that already have blind
auctions which most options exchanges that operate a price improvement
auction do. Finally, the Exchange's proposal to amend the execution
priority rules will not be a burden on competition because the proposed
change will allow the Exchange to compete with other options exchanges
that operate a price improvement auction and whose rules already permit
its members to rely on the ``effect versus execute'' exemption when
utilizing the price improvement auction of those markets. The changes
proposed to Rule 723 will offer opportunities found on other options
exchanges and create systems that embolden market participants to seek
out price improvement opportunities for customers. Accordingly, the
proposed rule change will have no impact on competition other than to
strengthen competition among the options exchanges that provide price
improvement opportunities.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \23\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\24\
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \24\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-ISE-2014-35 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2014-35. 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 also will be available
for inspection and copying at the principal office of the ISE. 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-ISE-2014-35 and should be
submitted on or before August 4, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
 Deputy Secretary.
[FR Doc. 2014-16363 Filed 7-11-14; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 82, Number 32 (Friday, February 17, 2017)]
[Rules and Regulations]
[Pages 10962-10964]
[FR Doc No: 2017-03211]

=======================================================================
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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

44 CFR Part 64

[Docket ID FEMA-2016-0002; Internal Agency Docket No. FEMA-8467]

Suspension of Community Eligibility

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Final rule.

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

SUMMARY: This rule identifies communities where the sale of flood
insurance has been authorized under the National Flood Insurance
Program (NFIP) that are scheduled for suspension on the effective dates
listed within this rule because of noncompliance with the floodplain
management requirements of the program. If the Federal Emergency
Management Agency (FEMA) receives documentation that the community has
adopted the required floodplain management measures prior to the
effective suspension date given in this rule, the suspension will not
occur and a notice of this will be provided by publication in the
Federal Register on a subsequent date. Also, information identifying
the current participation status of a community can be obtained from
FEMA's Community Status Book (CSB). The CSB is available at https://www.fema.gov/national-flood-insurance-program-community-status-book.

DATES: The effective date of each community's scheduled suspension is
the third date (``Susp.'') listed in the third column of the following
tables.

FOR FURTHER INFORMATION CONTACT: If you want to determine whether a
particular community was suspended on the suspension date or for
further information, contact Patricia Suber, Federal Insurance and
Mitigation Administration, Federal Emergency Management Agency, 400 C
Street SW., Washington, DC 20472,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: The NFIP enables property owners to purchase
Federal flood insurance that is not otherwise generally available from
private insurers. In return, communities agree to adopt and administer
local floodplain management measures aimed at protecting lives and new
construction from future flooding. Section 1315 of the National Flood
Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits the sale
of NFIP flood insurance unless an appropriate public body adopts
adequate floodplain management measures with effective enforcement
measures. The communities listed in this document no longer meet that
statutory requirement for compliance with program regulations, 44 CFR
part 59. Accordingly, the communities will be suspended on the
effective date in the third column. As of that date, flood insurance
will no longer be available in the community. We recognize that some of
these communities may adopt and submit the required documentation of
legally enforceable floodplain management measures after this rule is
published but prior to the actual suspension date. These communities
will not be suspended and will continue to be eligible for the sale of
NFIP flood insurance. A notice withdrawing the suspension of such
communities will be published in the Federal Register.
    In addition, FEMA publishes a Flood Insurance Rate Map (FIRM) that
identifies the Special Flood Hazard Areas (SFHAs) in these communities.
The date of the FIRM, if one has been published, is indicated in the
fourth column of the table. No direct Federal financial assistance
(except assistance pursuant to the Robert T. Stafford Disaster Relief
and Emergency Assistance Act not in connection with a flood) may be
provided for construction or acquisition of buildings in identified
SFHAs for communities not participating in the NFIP and identified for
more than a year on FEMA's initial FIRM for the community as having
flood-prone areas (section 202(a) of the Flood Disaster Protection Act
of 1973, 42 U.S.C. 4106(a), as amended). This prohibition against
certain types of Federal assistance becomes effective for the
communities listed on the date shown in the last column. The
Administrator finds that notice and public comment procedures under 5
U.S.C. 553(b), are impracticable and unnecessary because communities
listed in this final rule have been adequately notified.
    Each community receives 6-month, 90-day, and 30-day notification
letters addressed to the Chief Executive Officer stating that the
community will be suspended unless the required floodplain management
measures are met prior to the effective suspension date. Since these
notifications were made, this final rule may take effect within less
than 30 days.
    National Environmental Policy Act. FEMA has determined that the
community suspension(s) included in this rule is a non-discretionary
action and therefore the National

Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) does not
apply.
    Regulatory Flexibility Act. The Administrator has determined that
this rule is exempt from the requirements of the Regulatory Flexibility
Act because the National Flood Insurance Act of 1968, as amended,
Section 1315, 42 U.S.C. 4022, prohibits flood insurance coverage unless
an appropriate public body adopts adequate floodplain management
measures with effective enforcement measures. The communities listed no
longer comply with the statutory requirements, and after the effective
date, flood insurance will no longer be available in the communities
unless remedial action takes place.
    Regulatory Classification. This final rule is not a significant
regulatory action under the criteria of section 3(f) of Executive Order
12866 of September 30, 1993, Regulatory Planning and Review, 58 FR
51735.
    Executive Order 13132, Federalism. This rule involves no policies
that have federalism implications under Executive Order 13132.
    Executive Order 12988, Civil Justice Reform. This rule meets the
applicable standards of Executive Order 12988.
    Paperwork Reduction Act. This rule does not involve any collection
of information for purposes of the Paperwork Reduction Act, 44 U.S.C.
3501 et seq.

List of Subjects in 44 CFR Part 64

    Flood insurance, Floodplains.

    Accordingly, 44 CFR part 64 is amended as follows:

PART 64--[AMENDED]

0
1. The authority citation for Part 64 continues to read as follows:

    Authority:  42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of
1978, 3 CFR, 1978 Comp.; p. 329; E.O. 12127, 44 FR 19367, 3 CFR,
1979 Comp.; p. 376.

Sec.  64.6   [Amended]

0
2. The tables published under the authority of Sec.  64.6 are amended
as follows:

----------------------------------------------------------------------------------------------------------------
                                    Effective date
                                    authorization/
                      Community     cancellation of                                     Date certain Federal
 State and location      No.         sale of flood     Current effective map date       assistance no longer
                                     insurance in                                        available in SFHAs
                                       community
----------------------------------------------------------------------------------------------------------------
     Region III

Virginia:
    Leesburg, Town        510091  March 21, 1975,     February 17, 2017...........  February 17, 2017.
     of, Loudoun                   Emerg; September
     County.                       30, 1982, Reg;
                                   February 17,
                                   2017, Susp.
    Loudoun County,       510090  September 15,       ......do*...................   Do.
     Unincorporated                1972, Emerg;
     Areas.                        January 5, 1978,
                                   Reg; February 17,
                                   2017, Susp.
    Lovettsville,         510259  N/A, Emerg;         ......do....................   Do.
     Town of,                      October 22, 2013,
     Loudoun                       Reg; February 17,
     County.                       2017, Susp.
    Middleburg,           510360  N/A, Emerg; July    ......do....................   Do.
     Town of,                      31, 2001, Reg;
     Loudoun                       February 17,
     County.                       2017, Susp.
    Norfolk, City         510104  August 15, 1973,    ......do....................   Do.
     of,                           Emerg; August 1,
     Independent                   1979, Reg;
     City.                         February 17,
                                   2017, Susp.
    Purcellville,         510231  July 30, 1976,      ......do....................   Do.
     Town of,                      Emerg; November
     Loudoun                       15, 1989, Reg;
     County.                       February 17,
                                   2017, Susp.
    Round Hill,           510279  N/A, Emerg;         ......do....................   Do.
     Town of,                      January 10, 2006,
     Loudoun                       Reg; February 17,
     County.                       2017, Susp.

      Region V

Illinois:
    Fulton, City          170690  July 2, 1975,       ......do....................   Do.
     of, Whiteside                 Emerg; July 3,
     County                        1985, Reg;
                                   February 17,
                                   2017, Susp.
    Hopedale,             170791  July 8, 1975,       ......do....................   Do.
     Village of,                   Emerg; July 18,
     Tazewell                      1985, Reg;
     County.                       February 17,
                                   2017, Susp.
    Marquette             170650  December 2, 1982,   ......do....................   Do.
     Heights, City                 Emerg; July 3,
     of, Tazewell                  1985, Reg;
     County.                       February 17,
                                   2017, Susp.
    Morton, Village       170652  June 23, 1975,      ......do....................   Do.
     of, Tazewell                  Emerg; September
     County.                       2, 1988, Reg;
                                   February 17,
                                   2017, Susp.
    North Pekin,          170653  July 22, 1975,      ......do....................   Do.
     Village of,                   Emerg; June 4,
     Tazewell                      1980, Reg;
     County.                       February 17,
                                   2017, Susp.
    Pekin, City of,       170654  July 30, 1975,      ......do....................   Do.
     Peoria and                    Emerg; June 4,
     Tazewell                      1980, Reg;
     Counties.                     February 17,
                                   2017, Susp.
    Washington,           170655  May 16, 1975,       ......do....................   Do.
     City of,                      Emerg; February
     Tazewell                      5, 1986, Reg;
     County.                       February 17,
                                   2017, Susp.
    Whiteside             170687  March 16, 1973,     ......do....................   Do.
     County,                       Emerg; February
     Unincorporated                19, 1986, Reg;
     Areas.                        February 17,
                                   2017, Susp.

    Region VIII

Colorado: Arapahoe        080011  February 4, 1972,   ......do....................   Do.
 County,                           Emerg; August 15,
 Unincorporated                    1977, Reg;
 Areas.                            February 17,
                                   2017, Susp.
----------------------------------------------------------------------------------------------------------------
*......do = Ditto.
Code for reading third column: Emerg.--Emergency; Reg.--Regular; Susp.--Suspension.

    Dated: February 13, 2017.
Michael M. Grimm,
Assistant Administrator for Mitigation, Federal Insurance and
Mitigation Administration, Department of Homeland Security, Federal
Emergency Management Agency.
[FR Doc. 2017-03211 Filed 2-16-17; 8:45 am]
 BILLING CODE 9110-12-P


[Federal Register Volume 80, Number 131 (Thursday, July 9, 2015)]
[Notices]
[Pages 39463-39468]
[FR Doc No: 2015-16729]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75356; File No. SR-FINRA-2015-020]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Expand
FINRA's Alternative Trading System (``ATS'') Transparency Initiative To
Publish OTC Equity Volume Executed Outside ATSs

July 2, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 23, 2015, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by FINRA. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    FINRA is proposing to expand FINRA's alternative trading system
(``ATS'') transparency initiative to publish the remaining equity
volume executed over-the-counter (``OTC'') by FINRA members, including,
among other trading activity, non-ATS electronic trading systems and
internalized trades.
    The text of the proposed rule change is available on FINRA's Web
site at http://www.finra.org, at the principal office of FINRA and at
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Under FINRA rules, each member that operates an ATS is required to
report its weekly volume, by security, to FINRA and also must use a
unique market participant identifier (``MPID'') for reporting order and
trade information to FINRA. As part of these requirements, FINRA makes
the reported volume and trade count information for equity securities
publicly available on its Web site.\3\ Pursuant to the proposed rule
change, FINRA is proposing to amend Rules 6110 and 6610 to expand this
transparency initiative by publishing the remaining OTC equity (or
``non-ATS'') volume by member firm and security.
---------------------------------------------------------------------------

    \3\ FINRA currently does not publish ATS volume information
regarding fixed income securities.
---------------------------------------------------------------------------

    FINRA is proposing to derive a firm's non-ATS volume information
directly from OTC trades reported to FINRA's equity trade reporting
facilities.\4\ As such, members would not have any new or additional
reporting requirements as a result of the proposed rule change. FINRA
would base a firm's non-ATS volume on trades reported for dissemination
purposes (or ``tape reports'') on which the firm is identified as the
member with the trade reporting obligation.\5\ A firm's published
trading volume information would not include trades for which the firm
is the reported contra party,\6\ nor would it include trades that are
reported for regulatory or clearing purposes only (or ``non-tape
reports'').
---------------------------------------------------------------------------

    \4\ FINRA's equity trade reporting facilities (collectively
referred to herein as the ``FINRA Facilities'') are the Alternative
Display Facility (``ADF'') and the Trade Reporting Facilities
(``TRF''), to which members report OTC transactions in NMS stocks,
as defined in SEC Rule 600(b) of Regulation NMS; and the OTC
Reporting Facility (``ORF''), to which members report transactions
in ``OTC Equity Securities,'' as defined in FINRA Rule 6420 (i.e.,
non-NMS stocks such as OTC Bulletin Board and OTC Market
securities), as well as transactions in Restricted Equity
Securities, as defined in FINRA Rule 6420, effected pursuant to
Securities Act Rule 144A.
    \5\ Under FINRA rules, in a trade between a member and non-
member or customer, the member has the obligation to report the
trade, and in a trade between two members, the ``executing party,''
defined as the member that receives an order for handling or
execution or is presented an order against its quote, does not
subsequently re-route the order, and executes the transaction, has
the obligation to report the trade. See Rules 6282(b), 6380A(b),
6380B(b) and 6622(b).
    \6\ FINRA is proposing to include only volume from the executing
party perspective because otherwise, published OTC volume would be
overstated (i.e., publishing volume from both the executing party
and contra party perspectives would double count that executed
volume).
---------------------------------------------------------------------------

    FINRA is proposing to publish on the FINRA Web site weekly volume
information (number of trades and shares) by firm and security, with
limited de minimis exceptions noted below, on a two-week or four-week
delayed basis in accordance with the time frames specified for ATS
volume publication.\7\ Specifically, volume information would be
published on a two-week delayed basis for NMS stocks in Tier 1 under
the NMS Plan to Address Extraordinary Market Volatility (also referred
to as the ``Limit Up/Limit Down Plan'') \8\ and a four-week delayed
basis for all other NMS stocks and OTC Equity Securities.\9\
---------------------------------------------------------------------------

    \7\ See Rule 4552.
    \8\ Tier 1 NMS stocks include those NMS stocks in the S&P 500
Index or the Russell 1000 Index and certain ETPs. See NMS Plan to
Address Extraordinary Market Volatility. FINRA will make changes to
the Tier 1 NMS stocks in accordance with the Indices. Changes to the
S&P 500 are made on an as needed basis and are not subject to an
annual or semi-annual reconstitution. S&P typically does not add new
issues until they have been seasoned for six to twelve months.
Russell 1000 rebalancing typically takes place in June.
    \9\ FINRA notes that non-ATS volume data will be displayed in
the same format in which ATS volume data is displayed today, i.e.,
aggregate volume for each firm across all NMS stocks (Tier 1 and all
other NMS stocks) and OTC equity securities; aggregate volume for
each security across all firms; and volume for each security by each
firm (except with respect to the de minimis volume discussed below).
---------------------------------------------------------------------------

    Based on feedback FINRA has received from firms, FINRA is also
proposing to publish aggregate volume totals across all NMS stocks and
aggregate volume totals across all OTC Equity Securities for each
calendar month. FINRA proposes to publish monthly aggregate totals on a
one month delayed basis, e.g., totals for the month of April would be
published on or around June 1.
    FINRA is proposing to publish non-ATS volume information at the
firm level and not on an MPID-by-MPID basis. FINRA believes that this
is appropriate because outside of the ATS context, not all firms have a
separate MPID for each unique trading center at the firm, and as such,
publishing volume information at the MPID level may not provide
meaningful or consistent information to the marketplace. For members
that use more than one MPID for their non-ATS trading,\10\ FINRA
proposes to aggregate and publish the non-ATS trading volume for all
non-ATS MPIDs belonging to the firm under a single ``parent''
identifier or firm name.\11\ FINRA notes that a firm's ATS volume will
continue to be published separately under the unique MPID(s) for each
ATS operated by the firm.
---------------------------------------------------------------------------

    \10\ For example, a firm may use separate MPIDs for its
proprietary and agency desks.
    \11\ FINRA is able to identify all MPIDs belonging to a given
firm based on currently available information, and as such, members
will not have a new reporting obligation as a result of this
proposal.
---------------------------------------------------------------------------

    FINRA does not believe that publishing volume information for each
firm that executed only a small number of trades or shares in any given
period would provide meaningful information to the marketplace.
Accordingly, as described in more detail below, FINRA is proposing to
combine volume from all members that do not meet a specified minimum
threshold and publish such ``de minimis'' volume information for those
members on an aggregated basis. For example, if five firms each execute
10 trades in the reporting period in a security, their 50 trades would
be aggregated and published as a single line item; the firms and their
volume information would not be identified separately. For a firm with
more than one non-ATS MPID, the total volume across all of its non-ATS
MPIDs would be combined for purposes of determining whether the de
minimis threshold has been met.
    FINRA is proposing to establish a de minimis threshold of fewer
than on average 200 non-ATS transactions per day executed by the firm
across all securities or in a specific security during the one-week
reporting period. This proposed threshold is based on the level of
trading activity used by the SEC to identify ``small market makers''
for purposes of exemptive relief from the rule requiring market centers
that trade NMS securities to make publicly available electronic reports
that include uniform statistical measures of execution quality (SEC
Rule 605 of Regulation NMS).\12\ In developing its proposal, FINRA
reviewed volume statistics for firms across all securities for a one-
week period (June 23-29, 2014). This review indicated that without
applying any threshold, approximately 300 individual firms would have
volume attributed by name. Looking at market participants with on
average 200 or more trades per day across all securities, approximately
62 firms would have volume attributed by

name and would account for 98.99 percent of all trading volume.
---------------------------------------------------------------------------

    \12\ Specifically, the SEC exempted any market center that
reported fewer than 200 transactions per trading day on average over
the preceding six-month period in securities that are covered by the
rule. See letter from Annette L. Nazareth, Director, Division, to
Richard Romano, Chair, and Carl P. Sherr, Co-Chair, NASD Small Firms
Advisory Board, dated June 22, 2001.
---------------------------------------------------------------------------

    Thus, if a firm averages fewer than 200 non-ATS transactions per
day across all securities during the reporting period, FINRA would
aggregate the firm's volume with that of similarly situated firms.
Additionally, because the published volume data would be broken down by
security, if a firm averages fewer than 200 non-ATS transactions per
day in a given security during the reporting period, FINRA would
aggregate the firm's volume in that security with that of similarly
situated firms, even if the firm averages more than 200 non-ATS
transactions per day across all securities during the reporting period.
FINRA notes that all of the OTC volume would be published, but for
members that meet the de minimis threshold, their volume would not be
attributed by name.
    The proposed rule change will provide additional transparency into
a significant portion of the OTC market.\13\ Accordingly, FINRA
believes that the proposed rule change will enable the public to better
understand a firm's equity trading activity off exchanges by reviewing
the proposed non-ATS volume together with the current ATS volume
reports. In this regard, FINRA notes that during the rulemaking process
on the ATS transparency initiative, some commenters recommended
broadening the proposal to include trade information for other OTC
execution venues.
---------------------------------------------------------------------------

    \13\ For example, for the period from March 16 through April 10,
2015, approximately 59 percent of the share volume of OTC trades in
NMS stocks was executed outside an ATS.
---------------------------------------------------------------------------

    FINRA considered whether dividing published volume information into
more granular categories, such as by trading capacity (i.e., principal
versus agency or riskless principal) or by participant type (e.g.,
market maker), would be feasible or provide additional meaningful or
reliable information to market participants. Segregating the data,
e.g., by trading desk, would entail potentially significant development
work by firms to sufficiently identify the activity for FINRA (e.g.,
volume attributable to a market making desk) and may not be consistent
across firms, while also leading to some concerns about information
leakage. Thus, FINRA is not proposing at this time to publish the non-
ATS volume data at more granular levels than by firm and security.
    In developing its approach, FINRA staff solicited industry input
prior to presenting the proposal to FINRA's Board of Governors in
September 2014. In addition to discussing the proposal with a number of
FINRA's industry advisory committees, FINRA staff also informally
consulted a number of firms, including large and mid-size firms with a
variety of business models, as well as two buy-side firms. The
committees and all but one of the consulted firms were generally
supportive of the proposal. Some of the consulted firms noted that the
published volume information would provide market participants with a
better sense of flow in a given market segment and would most likely be
used for purposes of market share or other longer-term quantitative
market analysis. However, because publication of the data necessarily
would be delayed, the consulted firms believe that it would likely not
be a valuable tool for such purposes as analyzing execution quality or
making day-to-day order routing and trading decisions.
    Several of the consulted firms and committee members expressed some
concern about the potential for information leakage. The consulted
firms agreed on the importance of delaying publication of non-ATS
volume information, noting that the closer to real-time the information
is published, the greater the risks that would result from disclosing a
market participant's trading activity. One of the consulted firms was
concerned about publication of non-ATS volume information at the market
participant and security level, even on a delayed basis, asserting that
other market participants would be able to download data associated
with the firm's trading activity, re-engineer it to discern patterns of
historical trading and identify similar patterns in future trading that
could be used to their advantage (and to the firm's disadvantage). Even
the firms that were generally supportive of the proposal to publish
non-ATS volume information indicated that they would have concerns if
the information were published at a more granular level.\14\
---------------------------------------------------------------------------

    \14\ For example, with respect to publishing data according to
trading capacity, several of the consulted firms expressed concern
that a market participant's large position holdings could be
discerned from the data (e.g., accumulations of proprietary
positions in advance of ETF creations or secondary offerings).
Similarly, the consulted firms did not believe that there would be
value in getting more granular information, e.g., according to desk
or department, noting that since the data would be historical and
not real-time, it would not change behavior in terms of accessing
liquidity. One firm commented that more granular information would
not be reliable or consistent across firms, because not every firm
has the same business model or desk structure. In addition, several
of the firms indicated that they would be less supportive of a
proposal that requires them to comply with a new reporting regime or
undertake development work to be able to identify, e.g., volume
attributable to a market making desk.
---------------------------------------------------------------------------

    FINRA believes it has taken appropriate steps to address firms'
concerns by delaying publication and limiting the granularity of the
published information to firm and security. The proposed rule change is
similar to the approach currently taken with respect to ATS volume
information, and firms have not come to FINRA with any complaints
regarding information leakage since FINRA began publishing ATS volume
information. However, following implementation of the proposed rule
change, FINRA will consider whether modifications are appropriate,
e.g., to the scope of published information or the delay between
trading activity and publication, based on feedback it may receive from
interested parties, including firms and users of the data.
    One of the consulted firms also indicated that FINRA should not
charge for the data, noting that the potential value is diminished if
it is another cost center for the industry. FINRA notes that it has
determined not to charge a fee for the data that would be published
pursuant to the proposed rule change and will make non-ATS OTC volume
information available to the public for free in a downloadable format.
    In addition to the oral feedback discussed above, FINRA solicited
written comments on the proposal in Regulatory Notice 14-48 (November
2014), which are summarized below.
    FINRA proposes that the effective date of the proposed rule change
will be no later than 180 days after Commission approval. Thus, FINRA
anticipates that it will begin publication of data in accordance with
the proposed rule change in the fourth quarter of 2015 or first quarter
of 2016 and will announce the specific date in a Regulatory Notice.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\15\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change will
provide additional transparency into a significant portion of the OTC
market and that the increased transparency will enable market
participants and investors to better understand a firm's trading

volume and market share in the equity market.
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    \15\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. FINRA has undertaken an
economic impact assessment, as set forth below, to analyze the
regulatory need for the proposed rule change, its potential economic
impacts, including anticipated costs and benefits, and the alternatives
FINRA considered in assessing how to best meet its regulatory
objectives.
Regulatory Need
    FINRA's current rules require each member that operates an ATS to
report its weekly trade volume information to FINRA. As part of these
requirements, FINRA makes the information for equity securities
available to the public, thereby providing market participants and
investors useful information about trading activity in the ATS segment
of the OTC equity market. The proposed rule change will expand this
transparency initiative by publishing the remaining OTC equity volume
reported to FINRA. The increased transparency will enable the market to
better understand a firm's trading volume, its market share in the
equity market and the amount of OTC trading in each equity security.
Anticipated Benefits
    The proposed rule change would expand the benefits of FINRA's ATS
transparency initiative by providing additional transparency to the
remaining equity volume executed in the non-ATS segment of the OTC
equity market. The trading activity in this non-ATS segment represents
a significant portion of the overall equity trading in the OTC
market.\16\ The increased transparency would enable market participants
and investors to better understand the overall equity trading in the
OTC market as well as the amount of OTC trading in individual equity
securities. Furthermore, the expansion of transparency would help the
marketplace better understand a firm's overall OTC trading of equities,
thereby enhancing their understanding of executing firms' trading
volume and market shares in the equity market.
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    \16\ See, e.g., Laura Tuttle, ``OTC Trading: Description of Non-
ATS OTC Trading in National Market System Stocks'' (March 2014).
Tuttle reports that the non-ATS segment of the OTC market in NMS
stocks is larger than the ATS segment.
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Anticipated Costs
    The proposed rule change would not impose any additional reporting
requirements on firms since FINRA will directly derive the non-ATS
volume data from OTC trades reported to FINRA's equity trade reporting
facilities. As a result, the proposed rule would have minimal impact on
firms from a systems development and reporting perspective.
Other Economic Impacts
    In developing this proposal, FINRA considered whether a firm's
trading strategy could be discerned from the published data. FINRA
believes that the proposed rule change mitigates such information
leakage concerns by delaying the publication of trading volumes and by
limiting the granularity of the published information. The proposed
rule change is a well-calibrated effort to reduce information leakage
concerns and to provide market participants access to meaningful
information on non-ATS trading activity. FINRA believes that the
proposed rule change will not impose differential risks of information
leakage on firms. Moreover, by expanding transparency to all OTC equity
trading by FINRA members, the proposed rule change would bridge gaps in
information published across ATS versus non-ATS segments of the OTC
equity market, thereby reducing any competitive distortions that may be
associated with such information gaps.
Alternatives
    In considering how to best meet its regulatory objectives, FINRA
considered several alternatives to particular features of this proposed
rule change. For example, FINRA considered whether publishing volume
information at a more granular level (e.g. by trading capacity or by
participant type) would provide additional useful information to market
participants, and the costs associated with such an alternative. FINRA
believes that segregating the data, e.g., by trading desk, would entail
significant development work by firms, without commensurate benefit to
market participants. In addition, as discussed in more detail above,
several commenters raised concerns about information leakage with
publishing more granular data. Accordingly, FINRA has determined not to
publish data at a more granular level than by firm and security.
    FINRA also considered publishing non-ATS volume information at the
MPID level, as opposed to the firm level. FINRA believes that
publishing information at the firm level is more appropriate because
not all firms have a separate MPID for each unique trading center at
the firm. Accordingly, publishing volume information at the firm level
would likely provide more consistent information to the marketplace.
    In developing this proposal, FINRA also considered alternative
approaches related to publishing volume information for firms with
minimal non-ATS trading activity. As discussed in more detail above,
FINRA does not believe that publishing volume information separately
for each firm with minimal trading would provide meaningful information
to the marketplace. Accordingly, FINRA is proposing to combine volume
from all members with trading activity below a de minimis threshold of
on average 200 transactions per day. FINRA considered several
alternative de minimis thresholds and solicited comment on these
alternatives in Regulatory Notice 14-48. FINRA believes that the
proposed de minimis threshold is reasonable as it would account for the
vast majority \17\ of the total non-ATS trading volume and is also
consistent with the level of trading activity used by the SEC to
identify ``small market makers'' for SEC Rule 605 of Regulation NMS.
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    \17\ As discussed above, based on its review of recent trading
volume statistics, FINRA estimates that the proposed de minimis
threshold would account for approximately 99% of the overall non-ATS
trading volume, and as a result the vast majority of the trading
volume would be attributed by firm name under the proposed rule
change.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The proposed rule change was published for comment in Regulatory
Notice 14-48 (November 2014). Three comments were received in response
to the Regulatory Notice.\18\ A copy of the Regulatory Notice is
attached as Exhibit 2a.\19\ Copies of the comment letters

received in response to the Regulatory Notice are attached as Exhibit
2c. The comments are summarized below.
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    \18\ See Letter from St[eacute]phane Ty[ccaron], Co-founder,
Quincy Data, LLC to Marcia E. Asquith, Corporate Secretary, FINRA,
dated January 9, 2015 (``QD Letter''); letter from John Ramsay,
Chief Market Policy and Regulatory Officer, IEX Services LLC to
Marcia E. Asquith, Corporate Secretary, FINRA, dated February 12,
2015 (``IEX Letter''); and letter from Theodore R. Lazo, Managing
Director and Associate General Counsel, Securities Industry and
Financial Markets Association, to Marcia E. Asquith, Corporate
Secretary, FINRA, dated February 20, 2015 (``SIFMA Letter'').
    \19\ The Commission notes that the Exhibits referred to herein,
as well as the comment letters cited in the footnotes, are attached
to the filing itself and not to this Notice.
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    All three commenters generally supported the proposal. One
commenter specifically noted that the data can be used by market
participants, regulators and academics to better understand and track
trends in OTC trading generally, and can also help investors better
evaluate the routing and execution practices of individual firms.\20\
This commenter agreed with the proposal to publish non-ATS volume
information at the firm (rather than MPID) level, while another
commenter disagreed with this aspect of the proposal, stating that the
trade publication should identify the matching engine with a unique
identifier.\21\ FINRA agrees that publication at the MPID level makes
sense in the context of ATS executions; however, as noted above,
outside of the ATS context, not all firms have a separate MPID for each
unique trading center at the firm, and as such, publishing volume
information at the MPID level may not provide meaningful or consistent
information to the marketplace.
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    \20\ See IEX Letter.
    \21\ See QD Letter.
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    One commenter agreed with the proposal to aggregate volume
information for firms with a de minimis amount of OTC volume, noting
that it is a reasonable way to assure that the published information
will be meaningful and free of the ``noise'' that could otherwise arise
from a broader publication measure.\22\ On the other hand, another
commenter disagreed with the proposal to aggregate data for firms with
a de minimis amount of trading, noting that they believe in simple
rules with no exceptions.\23\ However, this commenter did not discuss
the potential value of publishing unaggregated volume information for
firms with only a small number of trades. As discussed above, FINRA
does not believe that publishing volume information below the proposed
de minimis threshold would provide meaningful information to the
marketplace.
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    \22\ See IEX Letter.
    \23\ See QD Letter.
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    One commenter suggested using an alternate notional volume measure
as part of the de minimis threshold so that firms doing relatively few
trades but in large notional volume are included.\24\ FINRA believes
that the potential costs and additional resources, including technology
infrastructure, that would be required to implement a second de minimis
threshold measure would outweigh any potential benefit. In addition,
FINRA is concerned that utilizing two different threshold measures may
be confusing to consumers of the data, and believes that a single
threshold measure, based on number of trades, would be the simplest and
easiest to understand. However, as noted above, following
implementation of the proposed rule change, FINRA will consider whether
modifications are appropriate, including whether changes to the de
minimis threshold would be appropriate, based on feedback it may
receive from interested parties.
---------------------------------------------------------------------------

    \24\ See IEX Letter.
---------------------------------------------------------------------------

    Another commenter expressed concern that the proposed two-week
publication timeframe for Tier 1 NMS stocks may result in unintended
information leakage, and in particular disclosure of large
institutional trades, which could enable reverse engineering of those
trades if published within two weeks of execution.\25\ To address the
information leakage concerns, this commenter recommended aggregation on
a monthly, not weekly basis, and publishing on a four-week delayed
basis. Another commenter stated that a delay of one month is sufficient
to enable broker-dealers to manage their risk, but also recommended
that FINRA consider the shortest publication time that provides enough
time to manage the risk of a position, which could differ by security
class (e.g., two weeks for liquid equities and six months for illiquid
bonds).\26\ This commenter further noted that it supports the
publication of complete and fully granular data, without specifying the
level of granularity or how to mitigate the attendant risk of
information leakage.\27\
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    \25\ See SIFMA Letter.
    \26\ See QD Letter. FINRA notes that the proposed rule change
applies only to OTC equity volume; information for fixed income
securities would not be published as part of this proposal.
    \27\ See QD Letter.
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    As discussed above, FINRA considered the potential for information
leakage in developing its proposal and believes that it has taken
adequate steps to mitigate that potential by, among other things,
proposing to publish non-ATS volume information on the same delayed
basis that is used for ATS volume data, as well as at the firm, rather
than MPID, level and not further segregating volume information by
trading capacity or trading desk.
    One commenter opposes FINRA charging for non-ATS volume
information.\28\ As noted above, FINRA has determined not to charge for
the non-ATS volume information that would be published pursuant to the
proposed rule change.
---------------------------------------------------------------------------

    \28\ See SIFMA Letter.
---------------------------------------------------------------------------

    Finally, several comments submitted on Regulatory Notice 14-48 are
not germane to the proposal. One commenter urged FINRA to eliminate the
current requirement for ATSs to report volume information to FINRA.\29\
FINRA notes that elimination of the ATS volume reporting requirement
will be addressed in a separate proposed rule change by FINRA. Another
commenter proposed an alternative to the consolidated audit trail,\30\
which is not germane to the proposed rule change and does not warrant a
specific response.
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    \29\ See SIFMA Letter.
    \30\ See QD Letter.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-FINRA-2015-020 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2015-020. 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
such filing also will 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-2015-020 and should be submitted on or before July 30, 2015.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-16729 Filed 7-8-15; 8:45 am]
 BILLING CODE 8011-01-P