anticompetitive leveraging of the new bond issuance functionality on
the Petitioner Terminal service to gain preferential access to
reference data.'' See Petitioner Motion, at 9. On the other hand,
FINRA stated that the Declarations neither directly address nor
dispel the concerns expressed by the FIMSAC and others that underlie
the proposed rule change. See FINRA Opposition, at 6-9.
    \165\ Specifically, FINRA pointed to (i) a statement by Larry
Harris, USC Marshall School of Business, that ``FINRA is best
equipped to solve this problem;'' and (ii) a statement by Bob LoBue,
J.P. Morgan, that the firm ``could probably populate [its existing
process for providing new issue reference data to FINRA] a little
bit deeper.'' See FINRA Statement, at 9 (citing to FIMSAC
Transcript, supra note 36).
    \166\ See FINRA Statement, at 9-10 (citing the FIMSAC Letter).
FINRA further noted that the FIMSAC articulated a ``concern that
certain large reference data providers `have in the past, and could
in the future, manage their data and trading businesses in a
coordinated fashion--refusing to license their leading reference
data products to trading platforms that they deem to be competitive
with their own.' '' See id. at 10 (citing FIMSAC Letter, at 3-4).
    \167\ See supra note 153 and accompanying text.
    \168\ See Response Letter, at 10. However, one commenter stated
that FINRA offers no reason why vendors would continue to fund their
own research in addition to paying for FINRA's information. See
Petitioner Letter V, at 3. See also Section III.E for a discussion
of the proposal's impacts on competition.
---------------------------------------------------------------------------

    In response to comments that there exist alternatives to the
proposal that would be less costly,\169\ FINRA noted that it considered
alternatives and explained its rationale for the choices it made in its
proposal.\170\ FINRA further stated that Petitioner's analysis that an
SRO's proposed rule change cannot be approved if some alternative might
also accomplish the same goal is flawed.\171\
---------------------------------------------------------------------------

    \169\ See supra note 153 and accompanying text.
    \170\ See FINRA Statement, at 25. See also Notice, at 13979
(``FINRA alternatively considered maintaining the Rule's phased
reporting approach for offerings in corporate debt securities
subject to the proposal, with certain core information required
prior to the first trade and an extended 60-minute window for
remaining information, given the additional data fields that would
be required to be reported under the proposal. However, FINRA
believes that the proposed approach to require uniform pre-first
trade reporting better supports the stated goals in the FIMSAC
Recommendation to increase the efficiency of the corporate bond
market and promote fair competition among all market
participants.''); 13982-83 (``FINRA also considered whether there
was an appropriate alternative approach that involved an expansion
of the DTCC's NIIDS service to include corporate new issue reference
data. However, based on operational and commercial reasons,
including inefficiencies with integrating the existing FINRA
reporting infrastructure with a separate DTCC infrastructure, FINRA
concluded that expanding the current existing FINRA reporting and
dissemination framework was a more effective and efficient approach
. . .'').
    \171\ See FINRA Statement, at 25.
---------------------------------------------------------------------------

    In response to comments regarding alleged conflicts of interest and
FINRA acting in a commercial rather than a regulatory role,\172\ FINRA
stated that, as a non-profit registered securities association and SRO,
it does not intend to compete with or displace private data
vendors.\173\ FINRA added that it did not initiate the proposal for
commercial benefit but did so in response to a specific recommendation
and regulatory need identified by the FIMSAC.\174\ FINRA stated that
the proposal is designed to achieve a clear regulatory objective--to
provide more timely and accurate consolidation and dissemination of key
corporate bond new issue reference data.\175\ Furthermore, FINRA noted
that under Section 15A of the Act, it is charged with a number of
responsibilities including, among others, removing impediments to a
free and open market and fostering clearance, settlement, and
information processing with respect to transactions in corporate bonds
and other securities.\176\ FINRA stated that, in light of this mandate,
the collection, consolidation and dissemination of fundamental security
information is not a novel role for a registered securities
association, and FINRA routinely provides other types of basic security
information to the marketplace to, among other things, facilitate the
clearing and settlement of securities and improve transparency.\177\
FINRA also noted that SRO regulation of new issue reference data is not
novel, as the same kind of new issue reference data for municipal bonds
are made available under rules adopted by the MSRB, which is charged
with a similar mandate as FINRA in the municipal securities
market.\178\ FINRA concluded that it believes that the establishment of
a corporate bond new issue reference data service fits squarely within
the scope of FINRA's affirmative regulatory authority under the
Act.\179\
---------------------------------------------------------------------------

    \172\ See supra notes 155-157 and accompanying text.
    \173\ See Response Letter, at 10.
    \174\ See id.
    \175\ See id.
    \176\ See FINRA Statement, at 2; Response Letter, at 9. See also
Section 15A(b)(6) of the Act, 15 U.S.C. 78o-3(b)(6).
    \177\ See Response Letter, at 9-10. For example, FINRA makes
available to the public all transaction data in corporate bonds
through TRACE. See FINRA's TRACE Overview, available at https://www.finra.org/sites/default/files/TRACE_Overview.pdf. See also FINRA
Statement, at 2. FINRA also makes details about corporate and agency
debt securities available to FINRA members and provides a tool to
the public that enables them to analyze and compare the costs of
owning mutual funds. See TRACE OTC Corporate Bonds and Agency Debt
User Guide, available at https://www.finra.org/sites/default/files/TRAQS-CA-user-guide-v4.7.pdf.pdf; FINRA Fund Analyzer, available at
https://tools.finra.org/fund_analyzer/.
    \178\ See FINRA Statement, at 2.
    \179\ See FINRA Statement, at 2.
---------------------------------------------------------------------------

    In response to comments concerning the risk of consolidating the
proposed corporate bond new issue reference data with FINRA and the
timeliness and accuracy of current TRACE data,\180\ FINRA stated that
there is key information missing from the analysis on which these
commenters rely, and without such information it is difficult for FINRA
to provide a meaningful response to the analysis.\181\ FINRA stated
that based on its own review of TRACE and the same vendor's data, FINRA
found different results, including a significant number of instances
where it received data not yet available from the vendor.\182\ FINRA
also stated that it would expect substantially fewer reconciliation
differences if the proposal is approved because FINRA believes a number
of the differences found in the analysis may have resulted from data
fields that are not currently system-validated.\183\ In contrast, FINRA
stated that the corporate bond new issue reference data fields would
become system-validated under this proposal, as FINRA would employ
systemic and operational checks for all of the data fields to determine
if any fields are either missing or not conforming to expected format
or standards at the time of submission.\184\ Furthermore, FINRA stated
that FINRA's long history of successfully providing critical TRACE data
to the markets since 2002 negates any concerns about TRACE' s
accuracy.\185\
---------------------------------------------------------------------------

    \180\ See supra notes 148, 158-159 and accompanying text.
    \181\ See Response Letter, at 10-11; FINRA Statement, at 23-22.
Specifically, with respect to the Tabb Study cited by certain
commenters, FINRA stated that it is not clear what TRACE data was
used for the analysis or which point in time during the trading day
was used to compare TRACE data with the vendor's data. In addition,
FINRA stated that the analysis does not explain which of the two
sources (TRACE or the vendor) were deemed accurate (it only
references ``reconciliation differences'') or whether the
differences included cases where data were not present yet in either
system. See id. In response, Petitioner stated that FINRA's response
is ``puzzling'' as the Tabb Study states that it used the ``initial
release'' of FINRA's own ``TRACE Corporate and Agency Master file,''
and stated that neither FINRA nor any other commenter contests that
the concern is with the inaccuracy of FINRA's data. See Petitioner
Letter V, at 2.
    \182\ See Response Letter, at 10-11; FINRA Statement, at 23-22.
    \183\ See id.
    \184\ See id. In response, Petitioner stated that FINRA's
reliance on unspecified ``system-validated'' data is not enough to
refute the historical evidence of ``a high error rate for
comparatively simple data.'' See Petitioner Letter V, at 3.
    \185\ See FINRA Statement, at 24.
---------------------------------------------------------------------------

3. Commission Discussion and Findings
a. Centralized Database Provider
    The Commission believes that FINRA is an appropriate entity to
operate a centralized database for newly issued corporate bond
reference data because of its status as a regulated SRO and its

accompanying regulatory obligations, and because of its demonstrated
experience with the establishment and maintenance of databases used by
the public.\186\ There is an information asymmetry in the market for
newly issued corporate bond reference data.\187\ Specifically, there is
a lack of broadly available and accessible new issue reference data on
the first day of secondary market trading that impedes the efficiency
and competition in the current marketplace.\188\ The Commission finds
that FINRA's proposed reporting requirements and dissemination protocol
of such data are reasonably designed to address this information
asymmetry by facilitating access to timely and accurate new issue
corporate bond reference data, consistent with Section 15A of the
Act.\189\
---------------------------------------------------------------------------

    \186\ See infra notes 193-197 and accompanying text.
    \187\ As discussed above, in the corporate bond market today,
the Commission understands from market participants that Petitioner
typically has the timeliest access to newly issued bond reference
data on the first day a bond trades, as it enjoys the voluntary
cooperation of underwriters. See supra note 91. While market
participants and others have expressed concerns that Petitioner is
engaged in anti-competitive conduct in the market for newly issued
corporate bond reference data, the Commission is not making any
findings herein regarding whether Petitioner has actually engaged in
such conduct. See supra notes 162 and 164 and accompanying text.
    \188\ In contrast to the corporate bond market, the municipal
securities market and Treasury market have centralized mechanisms in
place that provide market-wide access to information about newly
issued securities on the first day of trading. MSRB Rule G-34
requires municipal securities underwriters to submit new issue
information for municipal bonds to the New Issue Information
Dissemination Service (``NIIDS''), which is operated by the
Depository Trust and Clearing Corporation (``DTCC''). The FIMSAC
noted that this information includes ten data elements required to
set up an issue in the NIIDS, as well as up to 70 additional data
elements. See Recommendation, at 1. In the Treasury market, the U.S.
Department of the Treasury publishes details about upcoming
issuances in a new issue calendar and immediately following each
auction.
    \189\ See supra Section III.A.3 and Section III.B.3. One
commenter argued that FINRA should have considered alternatives to
the proposal to address information asymmetries in the market for
newly issued corporate reference data. But, as discussed above, the
Act requires that the Commission approve an SRO's proposed rule
change if it finds that such proposed rule change is consistent with
Act and the rules and regulations issued thereunder that are
applicable to such organization. See Section 19(b)(2)(C)(i) of the
Act. For the reasons set forth herein, the Commission finds that
FINRA has made such a showing.
---------------------------------------------------------------------------

    The Commission believes that FINRA's status as an SRO will help
ensure that it operates the New Issue Reference Data Service in a
manner that will address the current information asymmetry in reference
data availability on the first day of secondary market trading.
Importantly, Section 15A of the Act will require FINRA to provide the
New Issue Reference Data Service to market participants in a manner
that is not unfairly discriminatory and on terms that are equitable and
reasonable.\190\ Furthermore, as an SRO, the Commission oversees FINRA
to ensure that it is carrying out its regulatory responsibilities. The
Commission has the ability to review FINRA's proposed rule changes for
consistency with the Act, which would include any proposed changes with
respect to the operation of the New Issue Reference Data Service and,
as discussed below, any proposed fees for accessing the database.\191\
The Commission also oversees FINRA through inspections of its
operations and programs. Finally, FINRA has an obligation to operate
consistent with requirements under the Act and with its own rules, and
is required to enforce compliance by its members with the federal
securities laws and FINRA's own rules.\192\
---------------------------------------------------------------------------

    \190\ See 15 U.S.C. 78o-3. See also FIMSAC Letter, at 3
(recognizing the importance of the operator of a reference data to
be subject these standards of conduct).
    \191\ Pursuant to Section 15A of the Act, FINRA, as a registered
securities association, must establish rules that generally: (1) Are
designed to prevent fraud and manipulation, promote just and
equitable principles of trade, foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general,
protect investors and the public interest; (2) provide for the
equitable allocation of reasonable fees; (3) do not permit unfair
discrimination; (4) do not impose any unnecessary or inappropriate
burden on competition; and (5) with limited exceptions, allow any
broker-dealer to become a member. See 5 U.S.C. 78s(g).
    \192\ See 5 U.S.C. 78s(g).
---------------------------------------------------------------------------

    In addition to being subject to a comprehensive regulatory regime,
FINRA has extensive experience with collecting data from its members
and disseminating such data to the public. For example, TRACE, which
FINRA has operated since 2002, provides information to investors and
other market participants about secondary market trades in corporate
bonds and other debt securities that it collects from its member firms.
Currently, TRACE disseminates information to the marketplace about
corporate bond trades, including trade price and size, immediately upon
receipt.\193\ U.S. secondary trading markets have greatly benefitted
from the increased transparency that have resulted from FINRA's
establishment, management and expansion of TRACE.\194\ In addition,
FINRA currently operates the Order Audit Trail System (``OATS''), which
was established in 1996.\195\ Pursuant to FINRA Rules, FINRA's members
report data to OATS to create an integrated audit trail of order,
quote, and trade information for all NMS stocks and OTC equity
securities.\196\ The Commission believes that the New Issue Reference
Data Service would be an appropriate extension of the data services
that FINRA provides to the public and would benefit from FINRA's
experience in collecting and disseminating data to the public; the
Commission also notes that the proposal is limited to reference data
regarding TRACE-eligible bonds.\197\
---------------------------------------------------------------------------

    \193\ See FINRA Regulation Notice 19-12 (April 12, 2019),
available at https://www.sec.gov/spotlight/fixed-income-advisory-committee/finra-regulatory-notice-trace-19-12.pdf. In addition,
FINRA makes details about corporate and agency debt securities
available to FINRA members. See TRACE OTC Corporate Bonds and Agency
Debt User Guide, available at https://www.finra.org/sites/default/files/TRAQS-CA-user-guide-v4.7.pdf.pdf.
    \194\ See, e.g., FIMSAC Letter, at 3; Hendrik Bessembinder,
William Maxwell, and Kumar Venkataraman, ``Market Transparency,
Liquidity Externalities, and Institutional Trading Costs in
Corporate Bonds,'' Journal of Financial Economics 82, 251-288
(2006), available at https://doi.org/10.1016/j.jfineco.2005.10.002;
Michael A. Goldstein, Edith S. Hotchkiss, and Erik R. Sirri,
``Transparency and Liquidity: A Controlled Experiment on Corporate
Bonds,'' The Review of Financial Studies 20, 235-273 (2007),
available at https://doi.org/10.1093/rfs/hhl020; Amy K. Edwards,
Lawrence E. Harris, and Michael S. Piwowar, ``Corporate Bond Market
Transaction Costs and Transparency,'' The Journal of Finance 62,
1421-1451 (2007), available at https://doi.org/10.1111/j.1540-6261.2007.01240.x; and Dominique C. Badoer and Cem Demiroglu, ``The
Relevance of Credit Ratings in Corporate Bond Markets,'' The Review
of Financial Studies 32, 42-74 (2018), available at https://doi.org/10.1093/rfs/hhy031.
    \195\ See In the Matter of National Association of Securities
Dealers, Inc., Order Instituting Public Proceedings Pursuant to
Section 19(h)(1) of the Securities Exchange Act of 1934, Making
Findings and Imposing Remedial Sanctions, Exchange Act Release No.
37538 (August 8, 1996), Administrative Proceeding File No. 3-9056
and Report Pursuant to Section 21(a) of the Securities Exchange Act
of 1934 Regarding the NASD and The Nasdaq Stock Market LLC
(``Nasdaq''). See also Securities Exchange Act Release No. 39729
(March 6, 1998), 63 FR 12559 (March 13, 1998) (order approving
proposed rules comprising OATS) (``OATS Approval Order'').
    \196\ Id. See also Securities Exchange Act Release No. 63311
(November 12, 2010), 75 FR 70757 (November 18, 2010) (SR-FINRA-2010-
044) (order approving proposed rule change by FINRA relating to the
expansion of OATS to all NMS stocks). While OATS data are not
disseminated to the public, it is used by FINRA to recreate events
in the lifecycle of an order and monitor the trading activity of
member firms. See https://www.finra.org/filing-reporting/market-transparency-reporting/order-audit-trail-system-oats.
    \197\ The Commission also notes that the FIMSAC considered
various alternatives to FINRA in its deliberations, including
private sector providers, and settled on FINRA because it believed
that FINRA was the most logical and impartial choice because it is
subject to regulatory oversight by the Commission and because of
underwriters' existing reporting mechanisms with FINRA. See FIMSAC
Letter, at 3.

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

b. Data Quality and Resilience
    Some commenters have expressed concerns that the New Issue
Reference Data Service will harm corporate bond reference data quality
and resilience, noting that (1) it would create a single point of
failure, (2) FINRA would not be incentivized to maintain high quality
data, and (3) current error rates in TRACE is evidence that FINRA's
reference database will not be reliable.\198\ The Commission is not
persuaded by these arguments. Regarding concerns about a single point
of failure, it is not clear to the Commission that FINRA's New Issue
Reference Data Service will indeed be a single point of failure.\199\
While some have suggested that FINRA's proposal would increase
efficiencies due to the consolidation of reference data within one
entity,\200\ it is the Commission's judgment that it is premature to
draw conclusions about the impact of FINRA's proposal on the manner in
which underwriters currently distribute data or how other data vendors
conduct business or customers' demand for other data vendors' services.
FINRA's proposal does not disrupt the ability of underwriters to
continue reporting new issue reference data to data vendors. Because
underwriters already have these data reporting processes in place and
have incurred the costs of establishing those processes, underwriters
may choose to continue to provide new issue reference data to data
vendors as well as to FINRA. Should that be the case, private data
vendors will continue to be incentivized to invest in their current
methods of collection and distribution and concerns about a single
point of failure will be mitigated. If market participants do in fact
change their current practices and report new issue reference data to
FINRA only,\201\ the Commission believes that FINRA's experience with
establishing and maintaining databases such as TRACE and OATS and the
Commission's regulatory oversight of FINRA will ensure that the New
Issue Reference Data Service is designed and operated consistent with
the Act.\202\
---------------------------------------------------------------------------

    \198\ See supra notes 148, 151-152, and 158-159 and accompanying
text.
    \199\ The Commission believes that data vendors will continue to
compete for the provision of data services and expects that market
participants will turn to a variety of sources for their data needs
depending on the facts and circumstances at hand. See infra Section
III.E for a discussion of the proposal's impact on competition.
    \200\ See, e.g., infra note 216 and accompanying text.
    \201\ See, e.g., FIMSAC Letter, at 3 and infra note 216 and
accompanying text (describing the potential for underwriters to
change their current practices by reporting reference data to FINRA
only).
    \202\ As discussed above, the Commission oversees FINRA by,
among other things, conducting inspections of its operations and
programs to examine whether FINRA is operating consistent with Act
requirements and its own rules. See supra Section III.C.3.a.
---------------------------------------------------------------------------

    The Commission also believes that FINRA will be incented to build
and maintain a high quality New Issue Reference Data Service. As
discussed previously, it is possible that the current business
processes for new issue reference data distribution remain, which would
impose competitive pressures on FINRA to provide high quality new issue
reference data. If FINRA does become the sole source of new issue
reference data, however, the Commission believes that FINRA will build
and maintain a high quality New Issue Reference Data Service,
mitigating concerns about data quality and resilience, because of (i)
FINRA's experience with the establishment and maintenance of databases
such as TRACE and OATS, (ii) its status and regulatory obligations as a
regulated SRO, and (iii) the Commission's oversight of FINRA, including
our inspection and examination functions.
    Finally, the Commission is not persuaded that commenters' concerns
about error rates in TRACE data call into question the ability of FINRA
to build and maintain a reliable reference database. As discussed
above, commenters have expressed concerns about FINRA's proposed
reference database, arguing that ``reconciliation differences'' show
that FINRA's current collection of bond data contains a high incidence
of errors.\203\ On the other hand, FINRA has argued that
``reconciliation differences'' do not necessarily mean errors nor
demonstrate that FINRA's current collection of data has a high
incidence of errors.\204\ Furthermore, FINRA states that it found
different results based on its own review of TRACE data, including a
significant number of instances where it received data not yet
available from the vendor.\205\ This FINRA analysis suggests that a
number of the ``reconciliation differences'' deemed to reflect FINRA
errors may in fact be the simple result of FINRA possessing certain
data that was not yet available to the vendor.
---------------------------------------------------------------------------

    \203\ See supra notes 158-159 and accompanying text.
    \204\ In particular, FINRA states that the analysis does not
explain which of the two sources (TRACE or the vendor) were deemed
accurate (it only references ``reconciliation differences'') or
whether the differences included cases where data were not present
yet in either system. See Response Letter, at 11.
    \205\ See id.
---------------------------------------------------------------------------

    Moreover, the Commission does not believe that the disputed
comments concerning existing TRACE error rates call into question the
ability of FINRA to build and maintain a reliable reference database
for the following additional reasons.\206\ First, as discussed above,
FINRA has an established track record of creating reliable databases of
information gathered from its member firms and made available to the
public.\207\ Additionally, FINRA has explicitly and clearly stated that
it will engage with market participants on the appropriate business
requirements for the reporting process, it intends to implement
functionality to allow for underwriters to correct previously submitted
data to FINRA for a significant period after receiving the initial Rule
6760 submission, it may take a phased approach to implementation to
promote compliance and data accuracy, and data reported to FINRA will
be system-validated.\208\ The Commission expects FINRA to do these
things and believes that FINRA is committed to establishing a reliable
reference database, consistent with its statutory and regulatory
obligations under the Act, and the Commission will continue to monitor
closely FINRA's work and implementation of the New Issue Reference Data
Service.\209\ Furthermore, as discussed above, the Commission oversees
FINRA as an SRO and, to the extent that it is operating the database in
a manner that violates the Act or the rules and regulations thereunder,
the Commission will have recourse.
---------------------------------------------------------------------------

    \206\ The Commission is not taking a position on the accuracy of
either commenters' or FINRA's statements regarding error rates.
    \207\ See supra notes 193-197 and accompanying text.
    \208\ See Response Letter, at 11-15.
    \209\ In addition, as discussed below, the Commission believes
that data vendors will likely continue to compete in the market for
data. In addition to potentially competing in the market for new
issue reference data by operating as they do today, these data
vendors will also continue to compete based on differing value added
services related to the required information and also based on
additional data fields, data updates, and services related to the
data and that such competition should continue to spur innovation
and allay concerns regarding a single point of failure and error
rates. See infra Section III.E.3.
---------------------------------------------------------------------------

D. Burden on Underwriters

1. Comments on the Proposal
    Commenters expressed concerns about how FINRA's proposal might
impact the underwriters that will be required to provide FINRA with new
reference data elements for newly issued corporate bonds. One commenter
argued that the proposal would increase regulatory and liability
burdens for

underwriters without any clear benefit.\210\ This commenter and
Petitioner argued that the proposed rule's compliance burden would
disproportionately impact smaller underwriters.\211\ Another commenter
stated that FINRA should be required to demonstrate ``that the benefits
to information purchasers [of the proposal] would materially outweigh
the unrecompensed costs imposed on underwriters.'' \212\ Petitioner
argued that FINRA must include information regarding underwriter's
costs of preparing for new infrastructure and compliance
obligations.\213\
---------------------------------------------------------------------------

    \210\ See Chamber Letter, at 4 (``Underwriters would face
potential liability for errors in reporting and calculation, while
there is no clear benefit for this increased burden.''); Letter from
Tom Quaadman, Executive Vice President, U.S. Chamber of Commerce,
dated October 24, 2019 (``Chamber Letter III''), at 2.
    \211\ See Petitioner Letter IV, at 5. See also Chamber Letter
III, at 3. Petitioner presented evidence of the size of underwritten
investment grade corporate bonds in 2019, stating that ``through
October 7, 33 underwriters have each underwritten more than $1
billion (notional) year to date, while 59 other underwriters also
have priced issues during 2019--overwhelmingly for small issues of
less than $25 million'' and stated that FINRA has failed to address
the differential impact of the proposed new compliance burden on
different sized underwriters. See Petitioner Letter IV, at 5, n.10.
    \212\ See Heritage Letter V, at 2.
    \213\ See Petitioner Statement, at 17-18
---------------------------------------------------------------------------

    On the other hand, FIMSAC stated that it heard from underwriters
that it would be relatively easy for them to report the new issue
reference data to FINRA given their current established reporting
mechanisms to TRACE and that underwriters could thereby avoid the
duplicative effort involved in sending the same data multiple times to
various reference data providers.\214\
---------------------------------------------------------------------------

    \214\ See FIMSAC Letter, at 3. As discussed above, it is the
Commission's judgment that it is premature to draw conclusions about
the impact of FINRA's proposal on the manner in which underwriters
currently distribute data. See supra notes 200-202 and accompanying
text.
---------------------------------------------------------------------------

2. Response to Comments
    In its proposal, FINRA stated that ``[b]ased on conversations with
underwriters, FINRA understands that underwriters do not anticipate
incurring significant costs for reporting under this proposal.'' \215\
In addition, FINRA acknowledged the concern that underwriters that
underwrite fewer deals may be disproportionally burdened if there are
fixed costs associated with amending an underwriter's reporting system
to meet the additional requirements of the proposal, but stated that
any such additional burden ``may be alleviated because reporting to
FINRA would reduce or eliminate the need for underwriters to report to
other parties, or by the fact that underwriters can leverage
investments already made in the existing reporting system necessary
under Rule 6760.'' \216\
---------------------------------------------------------------------------

    \215\ See Notice, at 13982.
    \216\ See id.
---------------------------------------------------------------------------

3. Commission Discussion and Findings
    The Commission believes that any burdens imposed on underwriters by
the proposal, including smaller underwriters, would be limited because
of such underwriters' existing data collection and reporting practices
with respect to the information FINRA proposes to be reported.\217\
First, the Commission believes, and no commenter has disputed, that all
underwriters, including small underwriters, should be able to leverage
their existing infrastructure used to connect and report to FINRA with
respect to the information required under the proposal. Underwriters
today are already required to report certain data elements related to
new issue bonds to FINRA pursuant to the requirements of current Rule
6760.\218\ All underwriters of Corporate Debt Securities, as defined in
FINRA's rules, have already developed data reporting mechanisms to
FINRA for purposes of transmitting required data concerning these
securities.\219\
---------------------------------------------------------------------------

    \217\ See, e.g., Recommendation, at 3 (``The FIMSAC recognizes
that the creation of this service will impose costs on FINRA and the
underwriters. Based on available information, the FIMSAC believes
that the costs would be small relative to the value of the service
as the required information to be reported is similar to the
information that underwriters already provide directly to reference
data vendors.''). See also supra notes 215-216 and accompanying
text.
    \218\ Rule 6760(b), proposed to be renumbered as Rule
6760(b)(1), currently requires the following information to be
reported to FINRA: (A) The CUSIP number or if a CUSIP number is not
available, a similar numeric identifier (e.g., a mortgage pool
number); (B) the issuer name, or, for a Securitized Product, the
names of the Securitizers; (C) the coupon rate; (D) the maturity;
(E) whether Securities Act Rule 144A applies; (F) the time that the
new issue is priced, and, if different, the time that the first
transaction in the offering is executed; (G) a brief description of
the issue (e.g., senior subordinated note, senior note); and (H)
such other information FINRA deems necessary to properly implement
the reporting and dissemination of a TRACE-Eligible Security, or if
any of items (B) through (H) has not been determined or a CUSIP
number (or a similar numeric identifier) is not assigned or is not
available when notice must be given, such other information that
FINRA deems necessary and is sufficient to identify the security
accurately. See FINRA Rule 6760.
    \219\ Indeed, the purpose behind FIMSAC's recommendation to have
FINRA establish this database, as opposed to another entity, was to
minimize any burdens on underwriters by utilizing existing reporting
infrastructures. See Recommendation supra note 30; FIMSAC Letter, at
3.
---------------------------------------------------------------------------

    Second, the Commission believes that underwriters today are already
collecting the additional information required under the 32 data
elements in the proposal, and are already reporting such information to
at least one private vendor on the first day a bond trades, given the
need for this information by investors in the newly issued bond's
primary offering.\220\ Underwriters should be able to leverage their
existing data collection and reporting infrastructures to FINRA and
private data vendors in order to meet their obligations under the
proposal to report additional information to FINRA.\221\ Furthermore,
because underwriters currently have infrastructure in place to report
certain information to FINRA and the information required by the
proposal to private data vendors, they are already incurring costs to
update and maintain this existing infrastructure. As a result, the
Commission believes the initial set-up costs resulting from the
proposal on underwriters will be small and there would be no or very
little additional ongoing costs as a result of the proposal that are
not already being incurred by underwriters.
---------------------------------------------------------------------------

    \220\ See supra note 91. The Commission believes that it would
be rare for an underwriter involved in the distribution of debt
securities to be able to act as an underwriter and broker-dealer
without having this information immediately available for its
engagement with customers. Additionally, the Commission understands
that technical implementation may require a phased approach, as
stated by FINRA, to promote compliance and data accuracy. See
Response Letter, at 15; supra notes 125-127 and accompanying text
(describing FINRA's implementation plans).
    \221\ One commenter raised concerns about underwriters facing
potential liability for errors in reporting. See supra note 210.
While the Commission recognizes that underwriters may be subject to
antifraud liability or FINRA enforcement actions, the Commission
notes that the information to be provided to FINRA under this
proposal is a subset of the information underwriters currently
provide to investors in the primary offering. For this reason, the
Commission believes that the risk of potential additional liability
for reporting this subset of information to FINRA is minimized.
---------------------------------------------------------------------------

    The Commission also notes that underwriters may also be able to
efficiently leverage the services of third-party vendors to comply with
FINRA's new reporting requirements, as one commenter suggested.\222\
Moreover, the Commission believes that the incremental burden on
underwriters to set up and maintain infrastructure to comply with
FINRA's proposal, if any, is justified by the benefits to the market of
eliminating information asymmetries, which should improve efficiency
and competition.\223\
---------------------------------------------------------------------------

    \222\ See IHS Markit Letter, at 3.
    \223\ See supra Section III.B.3. See also FIMSAC Transcript,
supra note 36, Comments from Larry Harris, at 0111 (noting that the
burden on underwriters ``though it might be twice as large, is still
extremely small and very, very small in comparison to the value of
these data.'').

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

    Finally, the proposal would require uniform pre-first trade
reporting to FINRA. Currently, for information reported under Rule 6760
for trade reporting purposes, the rule generally requires pre-first
trade reporting but allows some information to be reported within 15
minutes of the first-trade.\224\ The Commission recognizes that there
may be an incremental burden on underwriters to report certain
information earlier than they were previously required; however, the
Commission believes this burden will be mitigated both by the existence
of current reporting infrastructures discussed above and the fact that
the data elements to be reported are already in the possession of
underwriters, given the use of this information in the newly issued
bond's primary offering.
---------------------------------------------------------------------------

    \224\ See supra note 139.
---------------------------------------------------------------------------

E. Competition

1. Comments on the Proposal
    Several commenters argued that the proposal fails to adequately
explain why the rule's burden on competition is necessary or
appropriate consistent with Section 15A(b)(9) of the Act.\225\ A number
of commenters asserted that the proposal would inappropriately displace
competition among private sector reference data providers, which would
impose costs on the market and could ultimately impede the quality of
data available to market participants.\226\ Petitioner stated that the
proposal would ``both limit vendors' demand and make it harder for
vendors to obtain and distribute information from underwriters mandated
to provide the information to FINRA.'' \227\ Petitioner stated that the
proposal would establish a rival data service that would be a
``government-privileged quasi-monopoly enjoying the advantage of
compulsory access to data that market-based services must compete
for.'' \228\ This commenter argued that ``[s]upplanting the current
competitive system in favor of a compulsory government service'' is
inconsistent with the Act.\229\
---------------------------------------------------------------------------

    \225\ See, e.g., Healthy Markets Letter II, at 5-6; Petitioner
Letter III, at 8-11; Heritage Letter II; at 2-3; Petitioner Letter
IV, at 4.
    \226\ See Heritage Letter, at 1-2; Heritage Letter V, at 3;
Chamber Letter, at 2; Petitioner Letter, at 2-3; Healthy Markets
Letter II, at 5; Tabb Letter, at 2-3. See also Petitioner Statement,
at 3, 32-34.
    \227\ See Petition for Review, at 29.
    \228\ See Petitioner Statement, at 20.
    \229\ See id. at 21.
---------------------------------------------------------------------------

    Petitioner stated that the proposal ``would expand a key
regulator's commercial role into new lines of heretofore competitive
private business'' and stressed ``the likely chilling effect that this
would have on investment and innovation.'' \230\ This commenter stated
that the proposal would chill future innovation and investment
``through the threat of SROs commandeering private markets'' and that
``FINRA's willingness to enter new markets and provide new services
undermines the incentives for private actors to invest and innovate.''
\231\ Petitioner stated that it and other similar companies have spent
``tens of thousands of hours and millions of dollars over decades
building attractive bond-reference data services'' and that ``FINRA's
attempt to appropriate the space would cause incumbent providers to
hesitate before investing more in capital-markets innovation.'' \232\
---------------------------------------------------------------------------

    \230\ See Petitioner Letter II, at 1. See also Petitioner Letter
IV, at 5. This commenter compared the proposal to a previous FINRA
proposal to create a facility to consolidate all quotation data in
the over-the-counter equities market, which was ultimately withdrawn
by FINRA. See Petitioner Letter V, at 3-4 (citing Securities
Exchange Act Release No. 60999 (November 13, 2009), 74 FR 61183
(November 23, 2009) (SR-FINRA-2009-077) (Notice of Filing of
Proposed Rule Change Relating to the Restructuring of Quotation
Collection and Dissemination for OTC Equity Securities).
    \231\ See Petition for Review, at 28, 30. See Petitioner
Statement, at 32-33; 36.
    \232\ See Petitioner Statement, at 38.
---------------------------------------------------------------------------

    In contrast, commenters asserted that because of the limited set of
data proposed to be captured by FINRA, the proposal would not supplant
private sector market data providers.\233\ One of these commenters
asserted that providing reference data in a manner similar to that
proposed by FINRA promotes competition by reducing costs and barriers
to entry for new entrants in the reference data provider market.\234\
This commenter noted that data vendors currently sell reference data
products that provide data in addition to FINRA's proposed required
data fields.\235\
---------------------------------------------------------------------------

    \233\ See FIMSAC Letter, at 3; Harris Letter at 4.
    \234\ See Harris Letter, at 4.
    \235\ See Harris Letter at 4 (noting that such additional data
include ratings and indications of whether an issuer is currently in
default, in an agreement to merge, or negotiating such an
agreement). One commenter who argued the proposal would diminish
competition amongst reference data providers nevertheless stated
that market participants currently demand more reference data fields
than FINRA is proposing to collect. See Petitioner Letter, at 13-14.
---------------------------------------------------------------------------

2. FINRA Response to Comments
    In response, FINRA reiterated that the proposed data service is not
designed to affect the opportunity for private third party vendors to
compete and is rather intended to promote competition among new
reference data providers by, among other things, lowering barriers to
entry and allowing competition on other dimensions, such as additional
fields, updates to existing data based on subsequent events related to
the security, presentation, ease of access, and integration with other
data sets and systems deemed valuable by market participants.\236\
FINRA stated that its proposed data service is narrowly tailored to
provide only the basic fields of reference data that are essential for
trading and settling newly issued corporate bonds.\237\ FINRA argued
that because of the proposal's narrow scope, it would not interfere
with private data vendors' ability to compete to provide more enriched
and value-added data, including data with supplementary fields and
other value-added services.\238\
---------------------------------------------------------------------------

    \236\ See Response Letter, at 8-9. See also Notice, at 13982.
    \237\ See FINRA Statement, at 3; Response Letter, at 9.
    \238\ See FINRA Statement, at 3-4; Response Letter, at 9.
---------------------------------------------------------------------------

    FINRA noted that several commenters responding to the proposal,
including those that operate alongside Petitioner in both the markets
for reference data and trading services, agreed that the proposal would
not displace reference data providers or chill private market
investments and would instead enhance competition among market
participants, level the playing field, and reduce overall costs.\239\
FINRA also noted that competition among reference data providers
continues to exist in the municipal bond market, where there has long
been a centralized, SRO-mandated data service similar to that proposed
by FINRA.\240\
---------------------------------------------------------------------------

    \239\ See FINRA Statement, at 4, 27; Response Letter, at 8
(citing to Harris Letter; FIMSAC Letter; ICE Data Letter; Charles
River Letter). See also supra notes 233-234 and accompanying text.
    \240\ See FINRA Statement, at 4, 28.
---------------------------------------------------------------------------

    FINRA also stated that a key indicator of enhanced competition is
the ability to reduce prices,\241\ and noted that a number of market
participants stated that the proposal will lower the costs to obtain
new issue reference data.\242\

FINRA stated it believes the proposal will promote competition in the
markets both for reference data and trading in that providing all data
vendors with timely access to a basic set of new issue reference data
will level the playing field and allow vendors to compete on other
value-added dimensions, which in turn will lower the costs of timely
and impartial access to essential data (a barrier to entry) for trading
firms.\243\ FINRA also argued that competition law is meant to protect
competition, not competitors, and that a rule proposal does not burden
competition in a market for services simply because it may impact the
standing of one market competitor.\244\
---------------------------------------------------------------------------

    \241\ See FINRA Statement, at 25 (citing SEC Staff Memorandum,
Current Guidance on Economic Analysis in SEC Rulemakings, at 11
(March 16, 2012)).
    \242\ Specifically, FINRA cited to statements at the FIMSAC
meeting and comment letters submitted in response to the proposal
noting that the status quo currently results in higher costs for
customers and that the proposal will reduce overall costs. See FINRA
Statement, at 25-26 (citing to statements of Frederic Demesy,
Refinitiv, FIMSAC Transcript, supra note 36; Harris Letter, at 4;
and Charles River Letter). As further discussed below, FINRA has
expressly and clearly committed that its fees for the New Issue
Reference Data Service will be cost-based. See FINRA Statement, at
18. In its filing with the Commission to adopt fees for the New
Issue Reference Data Service, FINRA will be required to set forth
why such cost-based fees meet the requirements of the Act, and the
Commission will evaluate FINRA's eventual fee application based on
the requirements of the Act and assess FINRA's proposed cost-based
formula. See infra Section III.F.3.b.
    \243\ See FINRA Statement, at 12.
    \244\ See FINRA Statement, at 26. FINRA further argued that if
an entity is a dominant incumbent and creates barriers to entry for
users of its service, then impacting that entity's standing may be
required to promote competition and relieve inappropriate burdens on
competition. FINRA noted that the FIMSAC expressed particular
concern that a dominant reference data vendor has limited other
market participants' access to its data for anti-competitive
purposes. See FINRA Statement, at 26 (citing FIMSAC Letter, at 4).
---------------------------------------------------------------------------

3. Commission Discussion and Findings
    The Commission believes that FINRA's proposal is designed to
address an information asymmetry in the market for newly issued
corporate bond reference data. Specifically, there is a lack of broadly
available and accessible new issue reference data on the first day of
secondary market trading that impedes the efficiency and competition in
the current marketplace. The Commission believes that FINRA's proposal
will improve competition among market participants, including
investors, data vendors, and trading platforms, by providing all market
participants with the ability to access the same investment products to
meet their own business and investment needs or those of their
customers at the time a bond becomes available in the secondary market.
The Commission believes that the burden on competition imposed on
private data vendors by the proposal should be minimal and is necessary
or appropriate to further the purposes of Section 15A(b)(6) of the Act,
namely to promote just and equitable principles of trade and foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in, newly issued corporate bonds.
    First, as discussed above, the impact of FINRA's proposal on the
manner in which underwriters currently distribute data or how other
data vendors conduct business is uncertain. It is possible, for
example, that FINRA's proposal could have a positive impact on
competition by lowering barriers to entry among data providers and
enabling them to compete on a more level playing field.\245\
Additionally, for those vendors or market participants that may be
getting reference data from underwriters directly, there is nothing in
FINRA's proposal that prohibits underwriters from continuing to provide
new issue reference data to data vendors as they do currently. Because
underwriters already have these data reporting processes in place and
have incurred the costs of establishing those processes, it is possible
that despite the creation of a new database by FINRA, underwriters will
continue to provide new issue reference data as they do today. Should
that be the case, private data vendors will continue to enjoy the
benefits of any investments made to acquire newly issued corporate bond
reference data, which should limit any competitive impacts of FINRA's
proposal.
---------------------------------------------------------------------------

    \245\ See Notice, at 13981; FIMSAC Transcript, supra note 36,
Comments from Frederic Demesy, Refinitiv, at 0078 (``[A]t the
moment, we see that there are some market anomalies where some of
the vendors have access to information much earlier than other
vendors. And that creates basically competitive advantage on certain
platforms, which is in my view not ideal for having a transparent
market.''), Comments from Spencer Gallagher, ICE Data Services, at
0069-72 (``there is one area that no investment or no level of
ingenuity can solve and that is equal access to new issue reference
data at or prior to first trade execution''); Harris Letter, at 4-5
(describing anticipated pro-competitive impacts of the proposal on
the data vendor market).
---------------------------------------------------------------------------

    If market participants do in fact change their current practices
and report new issue reference data to FINRA only,\246\ the Commission
believes that FINRA's proposal will impose a limited burden on
competition.\247\ There is nothing in FINRA's proposal that would
require market participants to purchase the reported data directly from
FINRA. The FINRA proposal only applies to new issue corporate bond data
and does not contemplate collecting and disseminating other data not
collected by FINRA (as described further below) or updates to these
data throughout the life of the bond. For this reason, the Commission
believes market participants would continue to procure data provided by
parties other than FINRA. In addition, the Commission believes that
many market participants may ultimately continue to rely on their
existing data vendors as a single source for all security-specific data
and rely on those vendors to incorporate the data proposed to be
collected by FINRA. Otherwise, these market participants could incur
the costs of collecting and maintaining two data sets--the data
available from FINRA and the range of other data available from other
data vendors as discussed further below. Furthermore, the information
that FINRA will require to be reported is a limited set of data,
leaving data vendors with space to continue competing on a variety of
fronts. For example, reference data providers could offer additional
value add-ons with respect to data reported to FINRA, such as
additional data concerning the newly issued bond, enhanced
presentation, analytical capabilities, ease of access, and integration
with other data sets and systems.\248\ In addition, data vendors could
offer additional services relating to the data, such as enhanced data
scrubbing, if their customers demand such services. Indeed, as stated
by one commenter, data vendors currently sell data products that
provide data in addition to FINRA's proposed required data fields, and
these additional data presumably provide value to their customers.\249\
In addition, the Commission understands that data vendors currently
offer various services beyond the initial supply of the data set, such
as the integration of such data into other data sets and systems, and
data vendors would presumably continue to offer such services relating
to the required reference data.\250\
---------------------------------------------------------------------------

    \246\ See supra note 216 and accompanying text.
    \247\ As discussed in more detail in this section, the
Commission expects that data vendors will continue to provide
enhanced data services (e.g., adding additional data and making
various analytical calculations based on the data in the New Issue
Reference Data Service) to customers, and that market participants
will turn to a variety of sources for their data needs depending on
the facts and circumstances at hand.
    \248\ See, e.g., Response Letter, at 9.
    \249\ See Harris Letter at 4 (noting that such additional data
include ratings and indications of whether an issuer is currently in
default, in an agreement to merge, or negotiating such an
agreement). Petitioner, who argued the proposal would diminish
competition amongst reference data providers, nevertheless stated
that market participants currently demand more reference data fields
than FINRA is proposing to collect. See Petitioner Letter, at 13-14.
    \250\ For a description of various data vendor's bond reference
data offerings, see e.g. https://www.bloomberg.com/professional/product/reference-data/; https://www.theice.com/market-data/pricing-and-analytics/reference-data; https://www.refinitiv.com/en/financial-data/market-data/reference-data; and https://www.ftserussell.com/data/fixed-income-data.
---------------------------------------------------------------------------

    The Commission concludes that the limited set of data proposed to
be reported and disseminated to allow for the identification, valuation
and settlement of new issue corporate bonds is unlikely to supplant the
demand for

a more comprehensive reference database with enhanced data sets that
contain additional fields not reported to or disseminated by FINRA and
additional services related to such data not provided by FINRA.\251\
The Commission believes that while FINRA's proposal will provide
certain basic information for a bond on an impartial basis to market
participants to allow for the identification, valuation, and settlement
of newly-issued bonds, market participants will continue to require
additional data and value-added services from reference data providers
beyond what will be provided by FINRA. As such, the Commission believes
that reference data providers will continue to compete and innovate in
order to meet the additional needs of their customers, allaying
commenters' concerns regarding potential increased costs, decreased
data quality, and a chilling on investment and innovation.
---------------------------------------------------------------------------

    \251\ See FIMSAC Letter, at 3. There are many other data
provided by reference data providers concerning a bond issue, such
as issuer information (e.g., fundamentals data, capital structure
data), specific bond rating, bond trade and selling restrictions,
classification data (industry, legal entity, etc.), corporate action
data, ESG (Environmental, Social & Governance) data, dividend data,
instrument analytics data, and security ownership data. See e.g.,
IHS Markit Reference Data Bonds Factsheet, available at https://cdn.ihs.com/www/pdf/Reference-Data-Bonds-factsheet.pdf; Bloomberg
Reference Data Content and Data, available at https://www.bloomberg.com/professional/product/reference-data/.
---------------------------------------------------------------------------

    For these reasons, the Commission believes that the potential
benefits of the proposal discussed above, including furtherance of the
purposes of Section 15A(b)(6), justify the minimal competitive burden
on reference data vendors that may result from this proposal. The
Commission thus finds that the proposal is consistent with Section
15A(b)(9) of the Act, and does not impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Act.

F. Fees

1. Comments on the Proposal
    As discussed above, in Amendment No. 2, FINRA withdrew the proposed
subscription fees for receipt of corporate new issue reference data
from the proposal and stated that it would submit a separate filing to
establish fees related to the new issue reference data service at a
future date and will implement the service after those fees become
effective.\252\ In particular, several commenters believed that removal
of fees from the proposal was problematic.\253\ These commenters stated
that eliminating the fees from the proposal amounts to procedural
maneuvering in order to avoid scrutiny, as any subsequent fee filing
submitted by FINRA will be immediately effective upon filing with the
Commission.\254\ Petitioner stated that ``FINRA should not be allowed
to circumvent the Act's requirement of an affirmative finding of
compliance with [Section] 15A(b)(5) by dodging the many comments
critical of its unjustified fees.'' \255\ This commenter further stated
that ``[b]y segregating and delaying the fee justification, the
[a]mended [p]roposal would relieve FINRA of the burden of proving the
reasonableness of the fees and charges associated with its new
service.'' \256\
---------------------------------------------------------------------------

    \252\ See Amendment No. 2, at 4.
    \253\ See Petitioner Letter IV, at 6-9; Chamber Letter III at 2-
3; Letter from John Thornton, Co-Chair, et al., Committee on Capital
Markets Regulation, dated October 22, 2019 (``Committee Letter
II''), at 2-3; Committee Letter III, at 2; Heritage Letter III, at
2-3; Healthy Markets Letter III, at 2; SIFMA Letter III, at 3-4;
Petitioner Letter V, at 4-5; Petitioner Statement, at 34-36.
    \254\ See Petitioner Letter IV, at 6-9; Chamber Letter III at 2-
3; Committee Letter II at 2-3; Committee Letter III, at 2; Heritage
Letter III, at 2-3; Healthy Markets Letter III at 2; SIFMA Letter
III at 3-4; and Petitioner Letter V, at 4-5. Some commenters pointed
to the Commission's recent proposed rule change to amend Regulation
NMS to rescind a provision that allows a proposed amendment to a
national market system plan (``NMS plan'') that establishes or
changes a fee or other charge to become effective upon filing, and
argued that the concerns voiced by the Commission in that proposal
are applicable to FINRA's current proposal. See Petitioner Letter
IV, at 8; Chamber Letter III at 2; Committee Letter II at 2-3
(citing to Commission, Proposed Rule, ``Rescission of Effective-Upon
Filing Procedure for NMS Plan Fee Amendments,'' 84 FR 54794 (Oct.
11, 2019) (``Proposed Regulation NMS Fee Amendment'')). See also
Petitioner Statement, at 17-19.
    \255\ See Petition for Review, at 16; Petitioner Statement, at
18.
    \256\ See Petitioner Statement, at 17; Petitioner Letter V, at
4.
---------------------------------------------------------------------------

    In addition, these commenters stated that the proposed fees form a
critical part of FINRA's proposed newly issued bond-reference data
service and that the Commission and the public cannot assess whether
the benefits of the proposal outweigh the costs and competitive burdens
without knowing the fees that FINRA would charge for the service.\257\
Petitioner further stated that FINRA has failed to provide any
quantitative estimate for any costs that the proposal would
impose.\258\ This commenter stated that FINRA failed to include any
information regarding the cost of developing and operating the new data
system and provided no information about whether the costs of the
service for traders will be higher or lower than current prices.\259\
This commenter argued that FINRA must include information regarding the
cost of building and operating the new reference data service, which
FINRA proposes to pass on to market participants.\260\ Petitioner
concluded that ``lacking any evidence from FINRA about the costs of its
proposed data service, the Commission cannot approve the [proposal]
consistent with the requirements of the Act.'' \261\
---------------------------------------------------------------------------

    \257\ See Petitioner Letter IV, at 6-9; Chamber Letter III at 2-
3; Letter from John Thornton, Co-Chair, et al., Committee on Capital
Markets Regulation, dated October 22, 2019 (``Committee Letter
II''), at 2-3; Committee Letter III, at 2; Heritage Letter III, at
2-3; Healthy Markets Letter III, at 2; SIFMA Letter III, at 3-4;
Petitioner Letter V, at 4-5; Petitioner Statement, at 34-36.
    \258\ See Petitioner Statement, at 35.
    \259\ See Petitioner Statement, at 14, 36.
    \260\ See id. Petitioner also noted that FINRA's own
representative acknowledged that FINRA's current TRACE system could
not support a new data service and instead FINRA would need to build
new reporting, validation and distribution infrastructure. See id.,
at 5-6 (citing to statements by Ola Persson, FINRA, FIMSAC
Transcript, supra note 36, (``Speaking for FINRA, not the effort on
behalf of the underwriters, but speaking for FINRA, we would have
some work to do. The technology today does not lend itself very well
to this. We would need to create the ability for underwriters to
come in, give us partial information and have the ability to edit
their own records, et cetera. Today, that is a . . . bit of a one-
way street. . . . We would also need to create a separate
distribution channel for this. . . .'').
    \261\ See id. at 2, 12. See also Letter from Hal. S. Scott,
President, Committee on Capital Markets Regulation, dated March 16,
2020 (``Committee Letter III''), at 2 (``[B]ecause the [proposal]
does not specify its proposed fees and underlying cost, the SEC
cannot conduct the informed cost-benefit analysis necessary for
approval . . .''); Heritage Letter V, at 2 (stating that FINRA
should be required to demonstrate ``that the benefits to information
purchasers would materially outweigh the unrecompensed costs imposed
on underwriters. . . .'').
---------------------------------------------------------------------------

    Petitioner further stated that the Commission erred in the Approval
Order by not making a finding under Section 15A(b)(5) of the Act that
the proposal provides for the equitable allocation of reasonable dues,
fees, and other charges among members and issuers and other persons
using any facility or system which FINRA operates or controls.\262\
This commenter stated that ``[t]o the extent the [Approval] Order
suggests that requirement applies only to a `proposed fee filing' . . .
it is wrong'' and, rather, that Section 15A(b)(5) applies to all the
rules of the national securities association.\263\ Petitioner argued
that the Commission must determine whether FINRA's current proposal
provides for the equitable allocation of reasonable charges.\264\
---------------------------------------------------------------------------

    \262\ See Petition for Review, at 12-13; Petitioner Statement,
at 11-13.
    \263\ See Petition for Review, at 13; Petitioner Statement, at
13.
    \264\ See Petitioner Statement, at 11. This commenter further
argued that the proposal cannot satisfy the requirements of Section
15(A)((b)(5) of the Act because FINRA has failed to provide any
information regarding fees or an analysis of costs or ``margins.''
See Petitioner Statement, at 2, 13-16.

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

2. FINRA Response to Comments
    In response, FINRA stated that it did not withdraw the fees from
the current proposal to avoid subjecting the fees to further public
comment, but rather so it could further evaluate an appropriate fee
structure for the data service.\265\ FINRA stated that it believed that
``with additional time, it could better assess the costs it incurs to
develop the data service, and also better forecast the number of
expected subscribers,'' and that this information would help it to
better determine the proposed fees for the data service.\266\
---------------------------------------------------------------------------

    \265\ See FINRA Statement, at 17; Response Letter, at 12, n.35.
FINRA stated that it removed the fees so that it could further
evaluate the appropriate fee structure in light of comments
received, as well as new Commission staff guidance on SRO fee
filings published after FINRA's initial proposal. See FINRA
Statement, at 17.
    \266\ See FINRA Statement, at 17-18.
---------------------------------------------------------------------------

    FINRA stated that it has committed to pricing the data service as a
utility, using a cost-based formula, meaning that it will tie the
subscription price of the data service to FINRA's costs and that FINRA
will allow all market participants to subscribe to the data service on
reasonable, disclosed terms, as required of SROs.\267\ In addition,
FINRA stated that it will not employ discriminatory pricing or
unreasonably refuse anyone access to the data, unlike the anti-
competitive practices the FIMSAC noted have been observed in the
current private market.\268\
---------------------------------------------------------------------------

    \267\ See FINRA Statement, at 18.
    \268\ See id.
---------------------------------------------------------------------------

    FINRA stated that any new fees would be filed with the Commission
in advance of the implementation of the newly issued corporate bond new
issue reference data service and would be subject to applicable
Commission rule filing requirements under the Act.\269\ In addition,
FINRA argued that Petitioner's contentions that the proposal cannot be
approved without including the proposed fees and that the Commission
erred by not making an affirmative finding under Section 15A(b)(5) of
the Act are is inconsistent with the plain text of the Act and
longstanding Commission precedent.\270\
---------------------------------------------------------------------------

    \269\ See FINRA Statement, at 18; Response Letter, at 12.
    \270\ See FINRA Statement, at 19-21 (citing to Section
19(b)(3)(A) of the Act, Section 15(A)((b)(5) of the Act, and various
immediately effective proposed rule changes filed by SROs to adopt
fees).
---------------------------------------------------------------------------

3. Commission Discussion and Findings
    A number of commenters expressed concerns about the lack of
information regarding fees for the New Issue Reference Data Service,
including (a) the appropriateness of separating the fees into a
separate immediately effective filing; (b) the ability of the
Commission to assess the proposal's consistency with the Act without
knowing either the proposed fees for the service or the potential costs
to FINRA for building the service; and (c) the application of Section
15A(b)(5) to the proposal. The Commission addresses each of these
issues below.
a. Fee Filings
    The Commission disagrees that separating the fee proposal into a
subsequent filing would allow FINRA to avoid regulatory and public
scrutiny of the proposed fees.\271\ FINRA cannot charge fees for the
proposed data service until the Commission receives a proposed rule
change that complies with the Act and Commission rules concerning
proposed fee changes. All proposed rule changes, including proposed fee
changes, are subject to public notice and comment and must be
consistent with the Act. As required by Section 19(b)(1) of the Act,
the Commission must publish notice of all proposed rule changes and
must give interested persons an opportunity to comment, whether or not
such proposed rule change is immediately effective or not. The
instructions to Form 19b-4 state that the form ``is intended to elicit
information necessary for the public to provide meaningful comment on
the proposed rule change . . . and for the Commission to determine
whether the proposed rule change . . . is consistent with the
requirements of the Act and the rules and regulations thereunder . . .
as applicable to the self- regulatory organization and in accordance
with the requirements for each type of filing.'' A proposed fee filing
must fully and fairly describe the operation of the applicable fee
(including its effect on market participants) and do so in sufficient
detail so that the public can understand the proposal sufficiently to
provide meaningful comment and the Commission can determine whether the
proposal is consistent with the Act. While FINRA may file its eventual
fees for the New Issue Reference Data Service as immediately effective
pursuant to Section 19(b)(3)(A) of the Act, the fee filing will be
subject to the same notice and comment requirements as a proposed rule
change that is not eligible to be filed as immediately effective. Thus,
use of the immediately effective fee filing process will not allow
FINRA to avoid commenter scrutiny for its proposed fees for the
service.
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    \271\ The Commission notes that SROs are required by Section
19(b) of the Act and Rule 19b-4 thereunder to file proposed rule
changes with the Commission on Form 19b-4. The Act provides that a
proposed rule change may not take effect unless it is approved by
the Commission pursuant to Section 19(b)(2) of the Act, or it
becomes immediately effective upon filing pursuant to Section
19(b)(3)(A) of the Act. Furthermore, Section 19(b)(3)(A) of the Act
states ``a proposed rule change shall take effect upon filing with
the Commission if designated by the self-regulatory organization as
. . . establishing or changing a due, fee, or other charge imposed
by the self-regulatory organization on any person, whether or not
the person is a member of the self-regulatory organization. . . .''
See 15 U.S.C. 78s(b)(3)(A). Rule 19b-4(f) under the Act specifies
the types of proposed rule changes that may become immediately
effective upon filing with the Commission, and includes those
properly designated by the SROs as ``establishing or changing a due,
fee, or other charge imposed by the self-regulatory organization.''
See Rule 19b-4(f)(2) under the Act.
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    A proposed fee filing by a national securities association such as
FINRA must also address all relevant statutory requirements, including
Section 15A(b)(5) of the Act which requires that ``[t]he rules of the
association provide for the equitable allocation of reasonable dues,
fees, and other charges among members and issuers and other persons
using any facility or system which the association operates or
controls;'' Section 15A(b)(6) of the Act, which requires, in part, that
the rules of an association are ``not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers;'' and
Section 15A(b)(9)of the Act, which requires, in part, that the rules of
an association ``not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of this title.'' Regardless
of whether a fee proposed by FINRA is effective upon filing with the
Commission, the Commission assesses whether or not the fee proposal is
consistent with the Act.\272\ If the Commission determines that a fee
filing merits further review, the Commission may temporarily suspend it
and issue an order instituting proceedings to determine whether to
approve or disapprove the proposal.\273\ Such a

determination would be informed by any comments received on a fee
filing. Therefore, the Commission does not believe that FINRA's use of
the immediately effective fee filing process would allow FINRA to avoid
regulatory scrutiny for its proposed fees for the service.
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    \272\ Furthermore, in contrast to Petitioner's assertion, FINRA
has the burden of demonstrating that a proposed fee is consistent
with the Act and the rules and regulations thereunder, regardless of
whether the proposed fee is effective upon filing with the
Commission. See Securities and Exchange Commission Rules of
Practice, Rule 700(b)(3) (17 CFR 201.700(b)(3)). See also supra note
256.
    \273\ See Section 19(b)(3)(C) of the Act, authorizing the
Commission at any time within 60 days of the date of filing of a
proposed rule change pursuant to Section 19(b)(1) of the Act, to
summarily temporarily suspend the change in the rules of an SRO 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, and Section
19(b)(2)(B) of the Act, setting forth a notice and hearing procedure
for an order instituting proceedings.
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    Finally, while the Commission outlined various concerns relating to
effective-upon-filing fee changes for NMS plans under Rule 608(b) in
the Proposed Regulation NMS Fee Amendment, we do not believe those
concerns call into question our approach here. Fee filings in this
context are governed by Section 19 of the Act rather than Rule 608.
More importantly, as stated above, the Commission assesses whether or
not any fee proposal filed under Section 19 of the Act is consistent
with the Act. If the Commission determines that a fee filing pursuant
to Section 19(b)(3)(A) merits further review, which may be informed by
the required notice and comment process, the Commission may temporarily
suspend it and issue an order instituting proceedings to determine
whether to approve or disapprove the proposal.
b. Assessment of Proposal's Consistency With the Act
    The Commission further disagrees that it cannot adequately assess
the proposal's consistency with the Act and its economic effects
without knowing the fees that FINRA will charge for the proposed
reference data service or the costs to build the service. The
Commission has evaluated the economic effects, including the
qualitative costs and benefits, of the proposal based on the record
before it and has concluded that there is a lack of broadly available
and accessible new issue reference data on the first day of secondary
market trading that impedes the efficiency and competition in the
current marketplace, and that FINRA's proposal would address this
information asymmetry to the benefit of the market and market
participants.\274\ The Commission's consideration of the proposal's
economic effects, including the burden on underwriters, the proposal's
impact on competition among market participants, including other data
vendors, and its impact on efficiency and capital formation, as
discussed above, is based upon the understanding that the fees assessed
will be consistent with the Act and will be assessed using a cost-based
formula. It is reasonable for the Commission to assume that any future
fees assessed will be consistent with the Act because, as discussed
above, if it believes such fees are not consistent with the Act, the
Commission must suspend and disapprove them.\275\ The Commission will
evaluate FINRA's eventual fee application based on the requirements of
the Act and assess FINRA's proposed cost-based formula. It is that fee
filing that will merit a consideration of FINRA's cost to build the New
Issue Reference Data Service because the costs of the system, which
will be better known once the system is built, will be necessary to
assess whether FINRA has proposed a fee for that service that is
consistent with the Act, including Section 15A(b)(5).\276\ FINRA has
expressly and clearly committed that its fees will be cost-based, and
it will be required to set forth why such cost-based fees meet the
requirements of the Act. While commenters have raised concerns
regarding FINRA's costs to build and operate the new reference data
service,\277\ should FINRA hypothetically build a New Issue Reference
Data Service at a high cost that would be unreasonable to pass on to
end-users, FINRA would not be able to make a showing that any such fees
proposed to be assessed on the basis of its cost to build the service
are reasonable, as required by Section 15A(b)(5) of the Act. In such a
case, as discussed above, the Commission would suspend and disapprove
the proposal.
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    \274\ See generally Sections III.A and III.B; supra notes 31-42,
89-102 and 139-145 and accompanying text.
    \275\ See supra note 273 and accompanying text.
    \276\ See supra note 266 and accompanying text.
    \277\ See supra notes 259-261 and accompanying text.
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c. Application of Section 15A(b)(5) to FINRA's Proposal
    The Commission disagrees with one commenter's argument that the
Commission is required to make a finding under Section 15A(b)(5) of the
Act that the current proposal ``provides for the equitable allocation
of reasonable dues, fees, and other charges among members and issuers
and other persons using any facility or system which the association
operates or controls.'' The plain language of the Act necessitates that
the proposal involve a due, fee or other charge in order to make such a
finding concerning Section 15A(b)(5) of the Act.

IV. Conclusion

    For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with the Act and the rules and regulations
thereunder applicable to a national securities association.
    It is therefore ordered, pursuant to Rule 431 of the Commission's
Rules of Practice, that the earlier action taken by delegated
authority, Exchange Act Release No. 87656 (December 4, 2019), 84 FR
67491 (December 10, 2019), is set aside and, pursuant to Section
19(b)(2) of the Act, the proposed rule change (SR-FINRA-2019-008), as
modified by Amendment No. 2, hereby is approved.

    By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021-01438 Filed 1-22-21; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 77, Number 250 (Monday, December 31, 2012)]
[Rules and Regulations]
[Pages 76897-76898]
[FR Doc No: 2012-31403]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 9 and 721

[EPA-HQ-OPPT-2011-0941; FRL-9369-8]
RIN 2070-AB27

Significant New Use Rule on Certain Chemical Substances; Removal
of Significant New Use Rules

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is removing significant new use rules (SNURs) promulgated
under the Toxic Substances Control Act (TSCA) for four chemical
substances which were the subject of premanufacture notices (PMNs). EPA
published these SNURs using direct final rulemaking procedures. EPA
received notice of intent to submit adverse comments on these rules.
Therefore, the Agency is removing these SNURs, as required under the
expedited SNUR rulemaking process. EPA intends to publish in the near
future proposed SNURs for these four chemical substances under separate
notice and comment procedures.

DATES: This final rule is effective December 31, 2012.

FOR FURTHER INFORMATION CONTACT: For technical information contact:
Kenneth Moss, Chemical Control Division (7405M), Office of Pollution
Prevention and Toxics, Environmental Protection Agency, 1200
Pennsylvania Ave. NW., Washington, DC 20460-0001; telephone number:
(202) 564-9232; email address<EMAIL_ADDRESS>    For general information contact: The TSCA-Hotline, ABVI-Goodwill,
422 South Clinton Ave. Rochester, NY 14620; telephone number: (202)
554-1404; email address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Does this action apply to me?

    A list of potentially affected entities is provided in the Federal
Register of September 21, 2012 (77 FR 58666) (FRL-9357-2). If you have
questions regarding the applicability of this action to a particular
entity, consult the technical person listed under FOR FURTHER
INFORMATION CONTACT.

II. What rules are being removed?

    In the Federal Register of September 21, 2012 (77 FR 58666), EPA
issued several direct final SNURs, including SNURs for the chemical
substances that are the subject of this removal. These direct final
rules were issued pursuant to the procedures in 40 CFR part 721,
subpart D. In accordance with Sec.  721.160(c)(3)(ii), EPA is removing
these rules issued for four chemical substances which were the subject
of PMNs P-07-204, P-10-58, P-10-59, and P-10-60, because the Agency
received notice of intent to submit adverse comments without sufficient
time to respond prior to the effective date of the rules. EPA intends
to publish proposed SNURs for these chemical substances under separate
notice and comment procedures.
    For further information regarding EPA's expedited process for
issuing SNURs, interested parties are directed to 40 CFR part 721,
subpart D, and the Federal Register of July 27, 1989 (54 FR 31314). The
record for the direct final SNURs for the chemical substances that are
being removed was established at EPA-HQ-OPPT-2011-0941. That record
includes information considered by the Agency in developing this rule
and the notice of intent to submit adverse comments.

III. How do I access the docket?

    To access the electronic docket, please go to http://www.regulations.gov and follow the online instructions to access docket
ID number EPA-HQ-OPPT-2011-0941. Additional information about the
Docket Facility is provided under ADDRESSES in the Federal Register of
September 21, 2012 (77 FR 58666). If you have questions, consult the
technical person listed under FOR FURTHER INFORMATION CONTACT.

IV. Statutory and Executive Order Reviews

    This final rule removes existing regulatory requirement and does
not contain any new or amended requirements. As such, the Agency has
determined that this removal will not have any adverse impacts,
economic or otherwise. The statutory and executive order review
requirements applicable to the direct final rule were discussed in the
Federal Register of September 21, 2012 (77 FR 58666). Those review
requirements do not apply to this action because it is a removal and
does not contain any new or amended requirements.

V. Congressional Review Act (CRA)

    The Congressional Review Act, 5 U.S.C. 801 et seq., generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General

of the United States. EPA will submit a report containing this rule and
other required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. This rule is not a
``major rule'' as defined by 5 U.S.C. 804(2).

List of Subjects

40 CFR Part 9

    Environmental protection, Reporting and recordkeeping requirements.

40 CFR Part 721

    Environmental protection, Chemicals, Hazardous substances,
Reporting and recordkeeping requirements.

    Dated: December 17, 2012.
Maria J. Doa,
Director, Chemical Control Division, Office of Pollution Prevention and
Toxics.
    Therefore, 40 CFR parts 9 and 721 are amended as follows:

PART 9--[AMENDED]

0
1. The authority citation for part 9 continues to read as follows:

    Authority:  7 U.S.C. 135 et seq., 136-136y; 15 U.S.C. 2001,
2003, 2005, 2006, 2601-2671; 21 U.S.C. 331j, 346a, 348; 31 U.S.C.
9701; 33 U.S.C. 1251 et seq., 1311, 1313d, 1314, 1318, 1321, 1326,
1330, 1342, 1344, 1345(d) and (e), 1361; E.O. 11735, 38 FR 21243, 3
CFR, 1971-1975 Comp. p. 973; 42 U.S.C. 241, 242b, 243, 246, 300f,
300g, 300g-1, 300g-2, 300g-3, 300g-4, 300g-5, 300g-6, 300j-1, 300j-
2, 300j-3, 300j-4, 300j-9, 1857 et seq., 6901-6992k, 7401-7671q,
7542, 9601-9657, 11023, 11048.

Sec.  9.1  [Amended]

0
2. The table in Sec.  9.1 is amended by removing the entries ``Sec.
721.10509'' and ``Sec.  721.10515'' under the undesignated center
heading ``Significant New Uses of Chemical Substances.''

PART 721--[AMENDED]

0
3. The authority citation for part 721 continues to read as follows:

    Authority: 15 U.S.C. 2604, 2607, and 2625(c).

Sec.  721.10509  [Removed]

0
4. Remove Sec.  721.10509.

Sec.  721.10515  [Removed]

0
5. Remove Sec.  721.10515.

[FR Doc. 2012-31403 Filed 12-28-12; 8:45 am]
BILLING CODE 6560-50-P