Notice2024-01251
Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Adopt FINRA Rule 6897(b) (CAT Cost Recovery Fees) To Implement a Historical Consolidated Audit Trail Recovery Assessment; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove the Proposed Rule Change
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
February 13, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 30 (Tuesday, February 13, 2024)</title>
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[Federal Register Volume 89, Number 30 (Tuesday, February 13, 2024)]
[Notices]
[Pages 11153-11161]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-01251]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99372; File No. SR-FINRA-2024-003]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Adopt
FINRA Rule 6897(b) (CAT Cost Recovery Fees) To Implement a Historical
Consolidated Audit Trail Recovery Assessment; Suspension of and Order
Instituting Proceedings To Determine Whether To Approve or Disapprove
the Proposed Rule Change
January 17, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or the ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that, on January 2, 2024, the Financial Industry
Regulatory Authority, Inc. (``FINRA'') filed with the Securities and
Exchange Commission (``SEC'' or the ``Commission'') the proposed rule
change as described in Items I and II below, which Items have been
prepared by FINRA. FINRA has designated the proposed rule change as
``establishing or changing a due, fee or
[[Page 11154]]
other charge'' under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule
19b-4(f)(2) thereunder,\4\ which renders the proposal effective upon
receipt of this filing by the Commission. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons and is, pursuant to Section 19(b)(3)(C) of the Act,
hereby: (i) temporarily suspending the rule change; and (ii)
instituting proceedings to determine whether to approve or disapprove
the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to adopt FINRA Rule 6897(b) (CAT Cost Recovery
Fees) to implement a historical Consolidated Audit Trail (``CAT'')
recovery assessment through which FINRA would recoup its contributions
to recoverable historical CAT costs incurred prior to January 1,
2022.\5\
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\5\ Pursuant to Section 11.3(b) of the CAT NMS Plan, FINRA filed
a separate proposed rule change to establish fees assessed to
Industry Members, payable to Consolidated Audit Trail, LLC, related
to recoverable historical CAT costs incurred prior to January 1,
2022. See File No. SR-FINRA-2024-002. Unless otherwise specified,
capitalized terms used in this rule filing are defined as set forth
in the CAT NMS Plan and FINRA Rule 6800 Series (Consolidated Audit
Trail Compliance Rule).
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The text of the proposed rule change is available on FINRA's
website at <a href="http://www.finra.org">http://www.finra.org</a>, 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 V below. FINRA has prepared summaries, set forth in sections A, B,
and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Background
On July 11, 2012, the Commission adopted Rule 613 of Regulation
NMS, which required the self-regulatory organizations (``SROs'') to
submit a national market system (``NMS'') plan to create, implement and
maintain a consolidated audit trail that would capture customer and
order event information for orders in NMS securities across all
markets, from the time of order inception through routing,
cancellation, modification, or execution.\6\ On November 15, 2016, the
Commission approved the CAT NMS Plan (``Plan'' or ``CAT NMS Plan'').\7\
Under the CAT NMS Plan, the Operating Committee has the discretion to
establish funding for Consolidated Audit Trail, LLC (``CAT LLC'') to
operate the CAT, including establishing fees for Industry Members to be
assessed by CAT LLC that would be implemented on behalf of CAT LLC by
the Participants.\8\ The Operating Committee adopted a revised funding
model to fund the CAT (``CAT Funding Model'') and, on September 6,
2023, the Commission approved the CAT Funding Model, after concluding
that the model was reasonable and that it satisfied the requirements of
Section 11A of the Exchange Act and Rule 608 thereunder.\9\
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\6\ See Securities Exchange Act Release No. 67457 (July 18,
2012), 77 FR 45721 (August 1, 2012).
\7\ See Securities Exchange Act Release No. 79318 (November 15,
2016), 81 FR 84696 (November 23, 2016) (``CAT NMS Plan Approval
Order'').
\8\ See Section 11.1(b) of the CAT NMS Plan.
\9\ See Securities Exchange Act Release No. 98290 (September 6,
2023), 88 FR 62628 (September 12, 2023) (``CAT Funding Model
Approval Order'').
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The CAT Funding Model provides a framework for the recovery of the
costs to create, develop, and maintain the CAT, including providing a
method for allocating costs to fund the CAT among Participants and
Industry Members. The CAT Funding Model establishes two categories of
fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry
Members to recover a portion of historical CAT costs previously paid by
the Participants (``Historical CAT Assessment'' fees); \10\ and (2) CAT
fees assessed by CAT LLC and payable by Participants and Industry
Members to fund prospective CAT costs.\11\ With respect to Historical
CAT Assessment fees, to date, the CAT Operating Committee has
established Historical CAT Assessment 1 with regard to historical CAT
costs incurred prior to January 1, 2022 (``Historical CAT Costs
1'').\12\
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\10\ See Section 11.3(b) of the CAT NMS Plan.
\11\ See Section 11.3(a) of the CAT NMS Plan.
\12\ See File No. SR-FINRA-2024-002.
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In light of the approval of the CAT Funding Model and the filing of
File No. SR-FINRA-2024-002, FINRA is similarly filing the instant
proposed rule change to establish a fee to allow FINRA to recoup its
contributions to the Participants' assessed share of Historical CAT
Costs 1 (``Historical CAT Cost Recovery Assessment 1''). Historical CAT
Cost Recovery Assessment 1 is designed to allow FINRA to recover its
designated portion of Historical CAT Costs 1--amounting to $4,613,250--
in a manner consistent with the Exchange Act and the CAT Funding Model
Approval Order. In the Approval Order, the Commission acknowledged that
``the Exchange Act expressly contemplates the ability of the
Participants to recoup their costs to fulfill their statutory
obligations under the Exchange Act.'' \13\ The Commission also noted
FINRA's statement ``that it would file a rule change to increase its
member fees with the filing of any proposed rule change to effectuate
the Funding Model.'' \14\ Given the approval of the CAT Funding Model
and FINRA's proposed rule change to establish Historical CAT Assessment
1 to effectuate the CAT Funding Model,\15\ FINRA is submitting this
filing to implement Historical CAT Cost Recovery Assessment 1.\16\
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\13\ CAT Funding Model Approval Order, 88 FR 62628, 62636-37.
\14\ FINRA has consistently made clear its intention to file a
rule change to implement member CAT fees simultaneous with the
filing of any proposed rule change to effectuate the CAT Funding
Model. See Letter from Marcia E. Asquith, Corporate Secretary, EVP,
Board and External Relations, FINRA, to Vanessa Countryman,
Secretary, Commission, dated April 11, 2023 (``FINRA April 2023
Letter'') at 7 (``If the Funding Model is approved by the
Commission, FINRA intends to file a rule change to increase member
fees simultaneous with the filing of any proposed rule change to
effectuate the Funding Model.''); see also Letter from Marcia E.
Asquith, Corporate Secretary, EVP, Board and External Relations,
FINRA, to Vanessa Countryman, Secretary, Commission, dated June 22,
2022 (``FINRA June 2022 Letter'') at 6 (``[G]iven FINRA's unique
nature, FINRA necessarily must seek recovery in turn for the costs
it is allocated.''). FINRA also requested that if the Commission
were to approve the CAT Funding Model, that it acknowledge ``FINRA's
need and ability to cover CAT costs that are not recovered through
contractual arrangements through member fee increases, so as not to
jeopardize FINRA's ability to carry out its critical regulatory
mission.'' See CAT Funding Model Approval Order, 88 FR 62628, 62645.
\15\ See File No. SR-FINRA-2024-002.
\16\ The CAT NMS Plan states that ``[n]o Participant will make a
filing with the SEC pursuant to Section 19(b) of the Exchange Act
regarding any Historical CAT Assessment until any applicable
Financial Accountability Milestone described in Section 11.6 has
been satisfied.'' See Section 11.3(b)(iii)(B)(III) of the CAT NMS
Plan. The CAT NMS Plan further states that ``in all filings
submitted by the Participants to the Commission under Section 19(b)
of the Exchange Act, to establish or implement Post-Amendment
Industry Member Fees pursuant to this Article, . . . the
Participants shall clearly indicate whether such fees are related to
Post-Amendment Expenses incurred during Period 1, Period 2, Period
3, or Period 4.'' See Section 11.6(b) of the CAT NMS Plan. As
discussed in File No. SR-FINRA-2024-002, all applicable Financial
Accountability Milestones for Historical CAT Assessment 1 and, by
extension, Historical CAT Cost Recovery Assessment 1--that is,
Period 1, Period 2, and Period 3 of the Financial Accountability
Milestones--have been satisfied. Furthermore, the costs sought to be
recovered via both Historical CAT Assessment 1 and Historical CAT
Cost Recovery Assessment 1 relate to Post-Amendment Expenses
incurred during Periods 1, 2 and 3 of the Financial Accountability
Milestones.
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[[Page 11155]]
FINRA's Portion of Historical CAT Costs 1
As discussed in File No. SR-FINRA-2024-002, which seeks to
implement Historical CAT Assessment 1,\17\ to date, FINRA and the other
Participants have agreed to pay all Past CAT Costs via loans to CAT
LLC. Specifically, in the absence of an SEC-approved model establishing
how the Participants were to fund the creation, implementation, and
maintenance of the CAT, in 2017, FINRA and the other Participants
unanimously agreed to apportion all CAT operational costs amongst the
group and to fund the CAT through a series of interest-free loans.
Through these loans, FINRA contributed $13,839,748 or roughly 4.1%
toward the $337,688,610 in operating expenses composing Historical CAT
Costs 1. Of that approximately $13.8 million expenditure, FINRA expects
to recover $9,226,499 in loan repayments from CAT LLC following
implementation of Historical CAT Assessment 1, and, under the CAT
Funding Model, will forgive the remaining $4,613,250, which FINRA now
seeks to recover through the implementation of Historical CAT Cost
Recovery Assessment 1.\18\
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\17\ Historical CAT Assessment 1 seeks to recover from CAT
Executing Brokers two-thirds of Historical CAT Costs 1--the
$337,688,610 in recoverable costs incurred by CAT LLC prior to
January 1, 2022. Participants collectively will remain responsible
for one-third of Historical CAT Costs 1 or $112,562,870.
\18\ FINRA notes that, as is the case with respect to Historical
CAT Assessment 1 discussed in File No. SR-FINRA-2024-002, FINRA's
recovery under the instant proposed rule change also would not
include any portion of Excluded Costs, i.e., $48,874,937 of costs
incurred from November 15, 2017 through November 15, 2018, and
$14,749,362 of costs related to the termination of the relationship
with the Initial Plan Processor. See CAT Funding Model Approval
Order, 88 FR 62628, 62660 n704.
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The following table illustrates FINRA's approximate contributions
to the Plan Participants' collective one-third share of Historical CAT
Costs 1 during each of the relevant periods.\19\
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\19\ A detailed description (including the amounts) of all costs
incurred by the Participants during the pre-FAM period (prior to
June 22, 2020) and during each relevant FAM period, i.e., FAM Period
1, FAM Period 2, and FAM Period 3, is provided in File No. SR-FINRA-
2024-002.
[GRAPHIC] [TIFF OMITTED] TN13FE24.072
FINRA's recovery of these approximately $4.6 million in CAT costs
is reasonable and consistent with the Exchange Act. As discussed herein
and in File No. SR-FINRA-2024-002, these costs incurred by FINRA were
necessary to fund the design, implementation, and maintenance of the
CAT. The approximately 4.1% of the Participants' share of Historical
CAT Costs 1 borne by FINRA is significantly smaller than the
approximately 34% of the Participants' share of Prospective CAT costs
to be borne by FINRA under the SEC-approved CAT funding model.\20\ As
stated by FINRA and permitted under the Exchange Act, FINRA will seek
to recover its portion of the Participants' share of CAT costs to
ensure that FINRA can fulfill its regulatory mandate and
responsibilities.
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\20\ See FINRA April 2023 Letter, supra note 14, at 3 (noting
that, under the CAT Funding Model, FINRA ``would be assessed an
estimated 34% of the total CAT costs to be borne amongst the 25 SRO
Plan Participants (based on 2021 data).'').
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Historical CAT Cost Recovery Assessment 1
FINRA is proposing to adopt Rule 6897(b) (CAT Cost Recovery Fees)
to implement Historical CAT Cost Recovery Assessment 1 at this time to
allow FINRA to recover its contributions to the Participants' one-third
share of Historical CAT Costs 1.\21\ FINRA intends that the fee
framework for, and the commencement of payment of, the Historical CAT
Cost Recovery Assessment 1 would correspond to the framework put in
place under the SEC-approved CAT Funding Model and the timing for the
commencement of Historical CAT Assessment 1, as provided for in File
No. SR-FINRA-2024-002. Thus, as with Historical CAT Assessment 1, FINRA
proposes that each member CAT Executing Broker shall receive its first
invoice for Historical CAT Cost Recovery Assessment 1 in April 2024,
setting forth fees calculated based on March 2024 transactions in
Eligible Securities executed otherwise than on an exchange, as
reflected in CAT Data. Consistent with the approach taken under the CAT
Funding Model, FINRA proposes to equally apportion one-third of
Historical Fee Rate 1 between the member CAT Executing Broker for the
Buyer (``CEBB'') and the member CAT Executing Broker for the Seller
(``CEBS'') for each transaction in Eligible Securities executed
otherwise than on an exchange.\22\ The following fields of
[[Page 11156]]
the Participant Technical Specifications indicate the CAT Executing
Brokers for transactions executed otherwise than on an exchange.
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\21\ In approving the CAT Funding Model, the Commission noted
that it ``believe[d] that FINRA's allocation of CAT fees likely will
be passed through to Industry Members.'' See CAT Funding Model
Approval Order, 88 FR 62628, 62684.
\22\ As per Section 1.1 of the Plan, for a transaction in an
Eligible Security executed otherwise than on an exchange and
required to be reported to an equity trade reporting facility of a
registered national securities association, i.e., one of FINRA's
Trade Reporting Facilities (each a ``TRF''), OTC Reporting Facility
(``ORF'') or Alternative Display Facility (``ADF''), the CEBB and
CEBS are the Industry Members identified as the executing broker and
the contra-side executing broker in the TRF/ORF/ADF transaction data
event in CAT Data. In those circumstances where there is a non-
Industry Member identified as the contra-side executing broker in
the TRF/ORF/ADF transaction data event or no contra-side executing
broker is identified in the TRF/ORF/ADF transaction data event, then
the Industry Member identified as the executing broker in the TRF/
ORF/ADF transaction data event would be treated as, and be required
to pay the fee assessed to, both the CEBB and CEBS.
[GRAPHIC] [TIFF OMITTED] TN13FE24.073
As discussed in File No. SR-FINRA-2024-002, the Operating Committee
has determined that Historical Fee Rate 1 is $0.0000439371316687066 per
executed equivalent share, and, under the CAT Funding Model, each of
the CEBB, CEBS and relevant Participant for a given transaction in an
Eligible Security would be responsible for one-third of that rate, or
$0.00001464571055623553 per executed equivalent share.\24\ In line with
this approach, with respect to FINRA's portion of the Participants'
one-third share, FINRA is proposing that, for Historical CAT Cost
Recovery Assessment 1, the Participants' assessed fee rate would be
split evenly between the CEBB and CEBS to establish a Historical CAT
Cost Recovery Fee Rate 1 of $0.000007 per executed equivalent share
\25\ for transactions where FINRA is the relevant Participant.\26\
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\23\ See Table 61, Section 6.1 (TRF/ORF/ADF Transaction Data
Event) of the CAT Reporting Technical Specifications for Plan
Participants.
\24\ Dividing $0.0000439371316687066 by three equals
$0.00001464571055623553.
\25\ In approving the CAT Funding Model, the Commission
concluded that ``the use of executed equivalent share volume as the
basis of the proposed cost allocation methodology is reasonable and
consistent with the approach taken by the funding principles of the
CAT NMS Plan.'' See CAT Funding Model Approval Order, 88 FR 62628,
62640. Under the CAT NMS Plan, executed equivalent shares in a
transaction in Eligible Securities are reasonably counted as
follows: (1) each executed share for a transaction in NMS Stocks
will be counted as one executed equivalent share; (2) each executed
contract for a transaction in Listed Options will be counted based
on the multiplier applicable to the specific Listed Options (i.e.,
100 executed equivalent shares or such other applicable multiplier);
and (3) each executed share for a transaction in OTC Equity
Securities shall be counted as 0.01 executed equivalent share. See
Section 11.3(a)(i)(B) and 11.3(b)(i)(B) of the CAT NMS Plan.
\26\ Dividing $0.00001464571055623553 by two and rounding to six
decimal places equals $0.000007. As with Historical CAT Assessment
1, FINRA determined to use six decimal places for Historical CAT
Cost Recovery Fee Rate 1 to balance the accuracy of the calculation
with the potential systems and other impracticalities of using
additional decimal places in the calculation.
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To implement Historical CAT Cost Recovery Assessment 1, FINRA
proposes to adopt Rule 6897(b)(1)(A)(i) to provide that each member CAT
Executing Broker shall receive its first invoice in April 2024, setting
forth the Historical CAT Cost Recovery Assessment 1 fees calculated
based on transactions in March 2024, and shall receive similar invoices
for each month thereafter in which Historical CAT Cost Recovery
Assessment 1 is in effect. As provided in proposed Rule
6897(b)(1)(A)(ii), each monthly invoice shall set forth fees for each
transaction in an Eligible Security executed by the CAT Executing
Broker in its capacity as the CEBB and/or the CEBS (as applicable)
otherwise than on an exchange as set forth in CAT Data. The Historical
CAT Cost Recovery Assessment 1 fee assessed to each CEBB and CEBS for
each such transaction will be calculated by multiplying the number of
executed equivalent shares in the transaction by the Historical CAT
Cost Recovery Fee Rate 1 of $0.000007 per executed equivalent share.
Further, as provided in proposed Rule 6897(b)(1)(A)(iii),
Historical CAT Cost Recovery Assessment 1 will remain in effect until
FINRA's approximately $4.6 million contribution to the one-third share
of Historical CAT Costs 1 assessed to the Plan Participants is
collected from member CAT Executing Brokers collectively, which is
estimated to be four months, but could be for a longer or shorter
period of time.\27\ Proposed Rule 6897(b)(1)(A)(iv) confirms that each
member CAT Executing broker shall be required to pay each invoice for
Historical CAT Cost Recovery Assessment 1.
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\27\ From December 1, 2022 through November 30, 2023, the
average monthly executed equivalent share volume in Eligible
Securities where FINRA is the relevant SRO was approximately 100
billion shares. Assuming similar 2024 trading volumes, FINRA would
recover its approximately $4.6 million portion of the Participants'
assessed share of Historical CAT Costs 1 within four months. Given
the fee rate and total amount to be recovered, the proposed four-
month recovery period is both reasonable and unlikely to
significantly overlap with any future CAT assessments under the CAT
Funding Model or any future CAT cost recovery assessment passed
through by FINRA, which would be the subject of a separate proposed
rule change.
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Historical CAT Cost Recovery Assessment 1 will be assessed for all
transactions in Eligible Securities executed otherwise than on an
exchange in each month through the end of the month in which FINRA's
approximately $4.6 million contribution to the Participants' one-third
share of Historical CAT Costs 1 is assessed, and then FINRA will
provide notice that Historical CAT Cost Recovery Assessment 1 is no
longer in effect. As with Historical CAT Assessment 1, since Historical
CAT Cost Recovery Assessment 1 is a monthly fee based on transaction
volume from the prior month, Historical CAT Cost Recovery Assessment 1
may result in the collection of more than FINRA's approximately $4.6
million contribution to Historical CAT Costs 1. To the extent that
occurs, any excess money collected during the final month in which
Historical CAT Cost Recovery Assessment 1 is in effect will be used to
offset future member fees assessed by FINRA to recover its
contributions, as a Plan Participant, to CAT costs.\28\
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\28\ A similar approach will be taken by CAT LLC with respect to
any excess money collected pursuant to Historical CAT Assessment 1
during its final month. See File No. SR-FINRA-2024-002.
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FINRA also proposes to adopt Rule 6897(b)(2) to further describe
the timing and manner of payment of Historical CAT Cost Recovery
Assessment 1. The proposed provision requires member CAT Executing
Brokers to pay Historical CAT Cost Recovery Assessment 1 on a monthly
basis in the manner prescribed
[[Page 11157]]
by FINRA. In addition, each CAT Executing Broker would be required to
pay the Historical CAT Cost Recovery Assessment 1 within 30 days after
receipt of an invoice or other notice indicating payment is due (unless
a longer payment period is otherwise indicated).
FINRA also notes that, to assist Industry Members in complying with
Historical CAT Assessment 1, each CAT Executing Broker will have access
to mock invoices, made available by CAT LLC, with details for any fee
liable transactions, including those executed otherwise than on an
exchange for the months of November 2023, December 2023, January 2024
and February 2024.\29\ Since Historical CAT Cost Recovery Assessment 1
will allocate fees to each member CAT Executing Broker based on the
same transactions used by CAT LLC to assess the off-exchange portion of
Historical CAT Assessment 1 each month, member CAT Executing Brokers
may also use the off-exchange transaction data provided by CAT LLC in
the mock invoices to prepare for compliance with Historical CAT Cost
Recovery Assessment 1. To further assist, beginning with the initial
invoice in April 2024, FINRA also intends to make available to each
member CAT Executing Broker a separate copy of the relevant details for
fee liable transactions executed each month otherwise than on an
exchange.
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\29\ See File No. SR-FINRA-2024-002.
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Furthermore, FINRA will also make publicly available on its
website: (i) the total amount invoiced each month that Historical CAT
Cost Recovery Assessment 1 is in effect, (ii) the total amount invoiced
for Historical CAT Cost Recovery Assessment 1 for all months since its
commencement, and (iii) the total costs remaining to be collected from
members in aggregate for Historical CAT Cost Recovery Assessment 1. By
reviewing statistics regarding how much has been invoiced and how much
remains to be invoiced for Historical CAT Cost Recovery Assessment 1,
members would have sufficient information to reasonably track how much
longer Historical CAT Cost Recovery Assessment 1 is likely to be in
place.
FINRA has filed the proposed rule change for immediate
effectiveness. The effective date and the implementation date will be
the date of filing.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\30\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest; and must not be designed to permit unfair
discrimination between customers, issuers, brokers or dealers. FINRA
also believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(5) of the Act,\31\ which requires, among
other things, that FINRA rules provide for the equitable allocation of
reasonable dues, fees and other charges among members and issuers and
other persons using any facility or system that FINRA operates or
controls. FINRA further believes that the proposed rule change is
consistent with Section 15A(b)(9) of the Act, which requires that FINRA
rules not impose any burden on competition that is not necessary or
appropriate in furtherance of the purpose of the Exchange Act.\32\
Section 15A(b)(2) of the Act also requires that FINRA be ``so organized
and [have] the capacity to be able to carry out the purposes'' of the
Act and ``to comply, and . . . to enforce compliance by its members,
and persons associated with its members,'' with the provisions of the
Exchange Act.\33\
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\30\ 15 U.S.C. 78o-3(b)(6).
\31\ 15 U.S.C. 78o-3(b)(5).
\32\ 15 U.S.C. 78o-3(b)(9).
\33\ See 15 U.S.C. 78o-3(b)(2).
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FINRA believes that this proposed rule change is consistent with
the Act because it is designed to assist FINRA in meeting regulatory
obligations pursuant to the Plan. In approving the Plan, the SEC noted
that the Plan ``is necessary and appropriate in the public interest,
for the protection of investors and the maintenance of fair and orderly
markets, to remove impediments to, and perfect the mechanism of a
national market system, or is otherwise in furtherance of the purposes
of the Act.'' \34\ To the extent that this proposed rule change
implements a requirement that facilitates FINRA's achievement of its
regulatory obligations under the Plan and applies specific requirements
to FINRA members in this regard, FINRA believes that this proposed rule
change furthers the objectives of the Plan, as identified by the SEC,
and is therefore consistent with the Act.
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\34\ CAT NMS Plan Approval Order, 81 FR 84696, 84697.
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As discussed in detail in File No. SR-FINRA-2024-002, FINRA
believes that the proposed fees paid by the CEBBs and CEBSs in
connection with Historical CAT Assessment 1 are reasonable, equitably
allocated and not unfairly discriminatory. Historical CAT Cost Recovery
Assessment 1 would similarly allow FINRA to recover its costs from
member CAT Executing Brokers in a fair and reasonable manner, as
contemplated by the Exchange Act and consistent with the CAT Funding
Model Approval Order.
Proposed Historical CAT Cost Recovery Assessment 1 would be charged
to member CAT Executing Brokers in support of the maintenance of a
consolidated audit trail for regulatory purposes. The proposed fees,
therefore, are consistent with the Commission's view that regulatory
fees be used for regulatory purposes. The proposed fees would not cover
FINRA services unrelated to the CAT, and any surplus would be used as a
reserve to offset future member fees assessed by FINRA to recover its
contributions, as a Plan Participant, to CAT costs. Accordingly, FINRA
believes that the proposed fees are reasonable, equitable and not
unfairly discriminatory.
The reasonableness of Historical CAT Cost Recovery Assessment 1 and
its consistency with the Exchange Act likewise is grounded in the facts
described above and detailed in File No. SR-FINRA-2024-002.
Specifically, the expenses that compose the portion of Past CAT Costs
sought to be recovered through Historical CAT Cost Recovery Assessment
1 were recognized by the SEC as appropriate for recovery pursuant to
the formula approved in the CAT Funding Model (i.e., technology, legal,
consulting, insurance, professional administration, and public
relations costs). FINRA has determined that these costs, which are
described in detail in File No. SR-FINRA-2024-002, are reasonable and
it is appropriate that FINRA recover its Participant contribution to
such costs through Historical CAT Cost Recovery Assessment 1. FINRA
also has determined that Historical CAT Cost Recovery Assessment 1
provides for the equitable allocation of fees among FINRA members and
is not unfairly discriminatory, as discussed herein.
Historical CAT Cost Recovery Assessment 1 is designed to allow
FINRA to recover its designated portion of Historical CAT Costs 1,
consistent with the Exchange Act and the CAT Funding Model Approval
Order. In approving the CAT Funding Model, the Commission noted FINRA's
request that it acknowledge ``FINRA's need and ability to cover CAT
costs that are not recovered through contractual arrangements through
member fee increases, so as not to jeopardize FINRA's ability to carry
out its critical
[[Page 11158]]
regulatory mission.'' \35\ The Commission also recognized that ``the
Exchange Act expressly contemplates the ability of the Participants to
recoup their costs to fulfill their statutory obligations under the
Exchange Act.'' \36\ The Commission further noted FINRA's statement
``that it would file a rule change to increase its member fees with the
filing of any proposed rule change to effectuate the Funding Model.''
\37\ The instant proposed rule change to adopt Historical CAT Cost
Recovery Assessment 1 represents such a fee with respect to Historical
CAT Costs 1.
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\35\ See CAT Funding Model Approval Order, 88 FR 62628, 62645.
\36\ See supra note 35 at 62636-37.
\37\ See supra note 35.
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Without a mechanism to recover its CAT costs, FINRA, a not-for-
profit, national securities association, would not be able to
effectively sustain its regulatory mission. Thus, consistent with the
cost allocation framework put in place by the SEC-approved CAT Funding
Model, whereby CEBBs and CEBSs share equal responsibility for the costs
assessed directly to Industry Members based on their transactions in
Eligible Securities, FINRA is seeking to recoup these historical CAT
costs in a like manner that is fair, reasonable, and equitably
allocated among FINRA's member firms in their capacity as CAT Executing
Brokers.
Historical CAT Cost Recovery Assessment 1 will also allow FINRA to
align its operating expenses with its operating revenues, target break-
even cash flows, and continue to responsibly manage expenses driven by
mandatory initiatives, like the CAT NMS Plan, in a manner consistent
with FINRA's public Financial Guiding Principles.\38\ FINRA
periodically increases its regulatory fees to cover increased costs and
scope of address of its member regulatory program; however, those fee
increases are not designed to recover the separate costs associated
with the development, maintenance, and operation of the CAT system
under the CAT NMS Plan.\39\
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\38\ See FINRA's Financial Guiding Principles, <a href="https://www.finra.org/sites/default/files/finra_financial_guiding_principles_0.pdf">https://www.finra.org/sites/default/files/finra_financial_guiding_principles_0.pdf</a>.
\39\ See Securities Exchange Act Release No. 90176 (October 14,
2020), 85 FR 66592, 66602-03 (October 20, 2020) (Notice of Filing
and Immediate Effectiveness of File No. SR-FINRA-2020-032). As FINRA
explained: ``In addition to costs associated with its CAT reporting
compliance program, FINRA must account for significant costs to
integrate CAT data into its regulatory systems. . . . Importantly,
these costs are separate from and in addition to FINRA's obligation
to contribute funding for the development, maintenance, and
operation of the CAT system incurred by the CAT Plan Processor.''
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FINRA's approach in determining Historical CAT Cost Recovery Fee
Rate 1, which is consistent with the approach provided for under the
SEC-approved Funding Model, is also reasonable and consistent with the
Exchange Act. Specifically, similar to the CAT cost assessment
methodology approved by the Commission, FINRA proposes to allocate
equally among member CEBBs and CEBSs the portion of Participants' one-
third share of Historical CAT Costs 1 previously paid by FINRA.\40\
FINRA proposes to determine Historical CAT Cost Recovery Fee Rate 1 by
multiplying the portion of Historical Fee Rate 1 assessed to the
Participants under the CAT Funding Model, i.e., $0.00001464571055623553
per executed equivalent share, by one-half such that member CEBBs and
CEBSs would each be subject to an equal fee, i.e., $0.000007 per
executed equivalent share, for each transaction in Eligible Securities
executed otherwise than on an exchange. Therefore, each month that
Historical CAT Cost Recovery Assessment 1 is in effect, member CEBBs
and CEBSs will pay a fee to FINRA based on the same transactions used
to determine fees payable by CEBBs and CEBSs to CAT LLC under
Historical CAT Assessment 1 for off-exchange transactions. FINRA
believes that this approach is reasonable in that, as is the case with
the SEC-approved funding model, it apportions the assessed fee for
members equally between the CAT Executing Brokers for the buyer and the
seller.\41\
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\40\ In its approval of the CAT Funding Model, the Commission
determined that charging CAT fees to CAT Executing Brokers was
reasonable. In reaching this conclusion the Commission noted that
the use of CAT Executing Brokers is appropriate because the CAT
Funding Model is based upon the calculation of executed equivalent
shares, and, therefore, charging CAT Executing Brokers would reflect
their executing role in each transaction. Furthermore, the
Commission noted that, because CAT Executing Brokers are already
identified in transaction reports from FINRA's equity trade
reporting facilities recorded in CAT Data, charging CAT Executing
Brokers could streamline the billing process. See CAT Funding Model
Approval Order, 88 FR 62628, 62629.
\41\ See supra note 40.
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From December 1, 2022 through November 30, 2023, the average
monthly executed equivalent share volume in Eligible Securities where
FINRA is the relevant SRO was approximately 100 billion shares.\42\
Assuming similar 2024 trading volumes, under Historical CAT Cost
Recovery Assessment 1, FINRA would recover its portion of the
Participants' assessed share of Historical CAT Costs 1 within
approximately four months. Given the relatively modest fee rate and
amount to be recovered, the expected four-month recovery period is
fair, reasonable, and equitable, and will allow FINRA to recover its
costs in a relatively short timeframe without imposing significant
additional financial or compliance burdens on members. Given the
expected duration of four months, Historic CAT Cost Recovery Assessment
1 is also unlikely to significantly overlap with any future CAT
assessments under the CAT Funding Model or any future CAT cost recovery
assessment passed through by FINRA (which would be subject to separate
proposed rule changes with the Commission).
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\42\ See supra note 27.
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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. Section 15A(b)(9) of the Act
\43\ requires that FINRA's rules not impose any burden on competition
that is not necessary or appropriate in furtherance of the purpose of
the Exchange Act. FINRA notes that Historical CAT Cost Recovery
Assessment 1 is designed to assist FINRA in meeting its regulatory
obligations pursuant to the Plan.
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\43\ 15 U.S.C. 78o-3(b)(9).
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Furthermore, in approving the CAT Funding Model, the SEC analyzed
the potential competitive impact of the CAT Funding Model, including
competitive issues related to market services, trading services and
regulatory services, efficiency concerns, and capital formation.\44\
The SEC also analyzed the potential effect of CAT fees calculated
pursuant to the CAT Funding Model on affected categories of market
participants, including Participants (including exchanges and FINRA),
Industry Members (including subcategories of Industry Members, such as
alternative trading systems, CAT Executing Brokers and market makers),
and investors generally, and considered market effects related to
equities and options, among other things.\45\ Based on this analysis,
the SEC approved the CAT Funding Model as compliant with the Exchange
Act. The Historical CAT Cost Recovery Assessment 1 fee framework is
consistent with the fee framework of the CAT Funding Model, as approved
by the SEC.
---------------------------------------------------------------------------
\44\ See CAT Funding Model Approval Order, 88 FR 62628, 62678-
86.
\45\ See supra note 44.
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As discussed in File No. SR-FINRA-2024-002, each of the inputs into
the calculation of Historical CAT Assessment 1 is reasonable and the
resulting fee rate for Historical CAT
[[Page 11159]]
Assessment 1 is reasonable. Therefore, Historical CAT Cost Recovery
Assessment 1, for these same reasons, is reasonable and would not
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Exchange Act.
Economic Impact Assessment
Based on the regulatory need discussed above and summarized below,
FINRA has undertaken an economic impact assessment, as set forth below,
to analyze the potential economic impacts of the proposed rule change,
including potential costs, benefits, and distributional and competitive
effects, relative to the current baseline.
Regulatory Need
On September 6, 2023, the Commission approved an amendment to the
CAT NMS Plan that implements a revised funding model for CAT, the CAT
Funding Model.\46\ This CAT Funding Model provides a framework for
recovering past and future CAT costs, including a method for allocating
these costs among Participants and Industry Members (with two-thirds of
costs to be assessed directly on the industry and one-third to be
assessed on the Participants).\47\
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\46\ See CAT Funding Model Approval Order.
\47\ The CAT Funding Model establishes two categories of fees:
(1) prospective fees (which includes fees for costs not previously
paid by the SROs); and (2) past fees (which includes fees payable by
industry members regarding CAT costs previously paid by the
Participants). With respect to the industry portion, the Plan
provides that each executing broker for the buyer and executing
broker for the seller would be required to pay a fee for each
transaction in an eligible security that is determined by
multiplying the number of executed equivalent shares in the
transaction by one-third, and by the fee rate established by the
Operating Committee.
---------------------------------------------------------------------------
The SEC's approval order for the CAT Funding Model also recognized
that Participants may choose to pass-through their one-third portion of
CAT Costs to their members. FINRA intends to recover from its members
FINRA's portion of the Participants' share of Historical CAT Costs 1.
As stated in FINRA's comment letters, as a not-for-profit national
securities association that relies primarily on regulatory fees from
members for funding, FINRA must increase member fees to fund CAT costs
so as not to jeopardize FINRA's ability to meet its regulatory
mission.\48\
---------------------------------------------------------------------------
\48\ See supra note 14.
---------------------------------------------------------------------------
Economic Baseline
Participants have paid Historical CAT Costs 1, incurred prior to
January 1, 2022, in the amount of $337,688,610.\49\ Applying the SEC-
approved CAT Funding Model, Industry Members are responsible for two-
thirds of these costs, which amounts to $225,125,740, and one-third of
these costs is allocated to Participants, which amounts to
$112,562,870. FINRA's share of Historical CAT Costs 1 is $4,613,250 (or
approximately 4.1% of the Participants' one-third portion of Historical
CAT Costs 1).
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\49\ As discussed above, Historical CAT Costs 1 include
technology (cloud hosting services and operating, CAIS operating,
and change request fees), legal, consulting, insurance, professional
and administration, and public relations costs.
---------------------------------------------------------------------------
The Operating Committee determined the Historical Fee Rate to be
used in calculating Historical CAT Assessment 1 by dividing Historical
CAT Costs 1 ($337,688,610) by the projected total executed share volume
of all transactions in Eligible Securities over 24 months
(7,685,722,694,558.88 shares). Based on this calculation, the Operating
Committee determined that Historical Fee Rate 1 would be
$0.0000439371316687066 per executed equivalent share. Under the CAT
Funding Model, each CEBB, CEBS and relevant Participant for a given
transaction in an Eligible Security is responsible for one-third of
that rate, or $0.00001464571055623553 per executed equivalent share.
To recover FINRA's contribution to the Participants' one-third
share of Historical CAT Costs 1, consistent with the approach taken in
the CAT Funding Model, FINRA is proposing to equally apportion the fee
rate between the member firm CEBB and CEBS for each relevant
transaction, such that each would pay $0.000007 (i.e., 0.5 x
$0.00001464571055623553) per executed equivalent share, for each
transaction in Eligible Securities executed otherwise than on an
exchange.
Historical CAT Cost Recovery Assessment 1 will remain in effect
through the month in which FINRA recovers from FINRA member CEBBs and
CEBSs collectively its contribution to the one-third share of
Historical CAT Costs 1. For the purposes of estimating the recovery
period for the Historical CAT Cost Recovery Assessment 1, FINRA
computed an executed equivalent share volume for OTC transactions in
NMS stocks and OTC equity securities for the twelve months from
December 1, 2022 through November 30, 2023. Assuming similar 2024
trading volume, given an estimated executed equivalent share volume of
1,220,781,467,645 shares \50\ and a fee rate of $0.000007 per executed
equivalent share for each CEBB and CEBS, FINRA estimates that it would
recover its one-third share of Historical CAT Costs 1 in four months.
The actual recovery period could be a longer or shorter period of time
depending on actual trade volume.
---------------------------------------------------------------------------
\50\ For the twelve months from December 1, 2022 through
November 30,2023, 1,208,689,888,387 shares of NMS stocks were
reported to the TRF, and 1,209,157,925,786 shares of OTC Equity
Securities were reported to ORF. Given that each executed share for
a transaction in an OTC Equity Security is counted as 0.01
equivalent share, FINRA estimates that the executed equivalent share
volume for NMS stocks and OTC Equity Securities reported to any
FINRA trade reporting facility in that one-year period is
1,220,781,467,645 shares.
---------------------------------------------------------------------------
For the twelve months from December 1, 2022 through November 30,
2023, based on transactions reported to a FINRA TRF or to the ORF,
there were 883 firm MPIDs that executed at least one purchase or sale
of an equivalent share of an Eligible Security. The top 50 MPIDs by
reported executed equivalent share volume bought and/or sold
2,077,385,279,612 equivalent shares, or 85.08% of total shares bought
and/or sold.
Potential Economic Benefits, Costs and Competitive Impact
FINRA's proposal to recover its portion of the Participants' one-
third share of Historical CAT Costs applies an approach consistent with
the CAT Funding Model as approved by the SEC.\51\ With regard to off-
exchange transactions in Eligible Securities, generally the same
members that will be assessed Historical CAT Cost Recovery Assessment 1
will also be assessed Historical CAT Assessment 1. Therefore, FINRA's
proposed approach in recovering its portion of Historical CAT Costs 1,
which is consistent with the framework of the CAT Funding Model, should
serve to mitigate costs for member firms with respect to the structure
of the fee model, whereas a different proposed fee structure may
involve additional costs or complexity.
---------------------------------------------------------------------------
\51\ See CAT Funding Model Approval Order.
---------------------------------------------------------------------------
The recovery period for FINRA's portion of the one-third share of
Historical CAT Costs 1 is expected to be four months, which is shorter
than the Historical Recovery Period for the two-thirds portion of
Historical CAT Costs 1 assessed to Industry Members.\52\ Given the
expected duration, Historic CAT Cost Recovery Assessment 1 is unlikely
to overlap with any future CAT assessments under the CAT Funding Model
or any future CAT cost recovery assessment passed through by FINRA,
which would be subject to separate proposed rule changes with the
Commission.
---------------------------------------------------------------------------
\52\ See File No. SR-FINRA-2024-002.
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[[Page 11160]]
Where CEBB and CEBS choose to pass Historical CAT Cost Recovery
Assessment 1 on to customers, some customers could attempt to avoid
incurring this temporary cost by delaying trades until after the
FINRA's contribution to the Participants' one-third share of Historical
CAT Costs 1 is paid. FINRA believes this is an unlikely event because
this fee is only one part of a trader's decision to not trade and
potentially miss a trading opportunity. In addition, as the Historical
CAT Cost Recovery Assessment 1 recovery period is dependent on the
level of trading activity, delaying trading may only serve to lengthen
the recovery period. However, traders that do trade during the recovery
period may incur relatively more fees than those that trade after the
recovery period has ended.
As the SEC noted in approving the revised CAT Funding Model, if
FINRA passes on its portion of the CAT fee allocation to its member
firms and exchanges choose not to pass-through their CAT fee
allocations to their members, the cost to transact off exchange may
increase relative to executing on an exchange, potentially giving
exchanges a competitive advantage.\53\ However, we do not know whether
or to what extent (or how) the exchanges may seek to recover their
portion of the Historical CAT Costs, and we do not know whether or to
what extent member firms will choose to pass through exchange-incurred
CAT fees to customers. We also note that FINRA members remain subject
to regulatory obligations, such as best execution obligations, with
respect to their order routing decisions.
---------------------------------------------------------------------------
\53\ See CAT Funding Model Approval Order, 88 FR 62628, 62684.
---------------------------------------------------------------------------
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Suspension of the Proposed Rule Change
Pursuant to Section 19(b)(3)(C) of the Act,\54\ 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,\55\ the Commission summarily may
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. As discussed below, a temporary
suspension of the proposed rule change is necessary or appropriate to
allow for additional analysis of the proposed rule change's consistency
with the Act and the rules thereunder.
---------------------------------------------------------------------------
\54\ 15 U.S.C. 78s(b)(3)(C).
\55\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
When SROs file their proposed rule changes with the Commission,
including fee filings like FINRA's present proposed rule change, they
are required to provide a statement supporting the proposed rule
change's basis under the Act and the rules and regulations thereunder
applicable to the SRO.\56\ The instructions to Form 19b-4, on which
SROs file their proposed rule changes, specify that such statement
``should be sufficiently detailed and specific to support a finding
that the proposed rule change is consistent with [those]
requirements.'' \57\
---------------------------------------------------------------------------
\56\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change'').
\57\ See id.
---------------------------------------------------------------------------
Among other things, FINRA's proposed rule change is subject to
Section 15A of the Act, including Sections 15A(b)(5), (6), and (9),
which require the rules of a national securities association
(``association'') to: (1) 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; \58\ (2) be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest, and not be designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers; \59\ and (3) not impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Act.\60\
Further, FINRA also is subject to Section 15A(b)(2) of the Act, which
requires that FINRA be ``so organized and [have] the capacity to be
able to carry out the purposes'' of the Act and ``to comply, and . . .
to enforce compliance by its members and persons associated with its
members,'' with the provisions of the Act.\61\
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\58\ See 15 U.S.C. 78o-3(b)(5).
\59\ See 15 U.S.C. 78o-3(b)(6).
\60\ See 15 U.S.C. 78o-3(b)(9).
\61\ See 15 U.S.C. 78o-3(b)(2).
---------------------------------------------------------------------------
In temporarily suspending FINRA's fee change, the Commission
intends to further consider whether the proposed fees are consistent
with the statutory requirements applicable to a national securities
association under the Act. Among other things, the Commission will
consider whether the proposed rule change provides for reasonable fees
that satisfy the standards under the Act and the rules thereunder.\62\
---------------------------------------------------------------------------
\62\ See 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------
Therefore, the Commission finds that it is necessary or appropriate
in the public interest, for the protection of investors, and otherwise
in furtherance of the purposes of the Act, to temporarily suspend the
proposed rule change.\63\
---------------------------------------------------------------------------
\63\ For purposes of temporarily suspending the proposed rule
change, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change
In addition to temporarily suspending the proposed rule change, the
Commission is instituting proceedings pursuant to Sections 19(b)(3)(C)
\64\ and 19(b)(2)(B) \65\ of the Act to determine whether the proposed
rule change should be approved or disapproved. Institution of
proceedings does not indicate that the Commission has reached any
conclusions with respect to any of the issues involved. Rather, as
described below, the Commission seeks and encourages interested persons
to provide comments on the proposed rule change to inform the
Commission's analysis of whether to approve or disapprove the proposed
rule change.
---------------------------------------------------------------------------
\64\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
\65\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\66\ the Commission is
providing notice of the grounds for possible disapproval under
consideration. The Commission is instituting proceedings to allow for
additional consideration and comment on whether FINRA has
[[Page 11161]]
sufficiently demonstrated that the proposed rule change is consistent
with Section 15A(b)(5) \67\ of the Act, which, among other things,
provides that the dues, fees, and other charges for an association's
members be reasonable.
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\66\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also
provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
See id. The time for conclusion of the proceedings may be extended
for up to 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding, or if the SRO
consents to the longer period. See id.
\67\ 15 U.S.C. 78o-3(b)(5).
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V. Commission's Solicitation of Comments
The Commission requests that interested persons provide written
submission of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they have with
the proposed rule change. In particular, the Commission invites the
written views of interested persons concerning whether the proposed
rule change is consistent with Section 15A(b)(5), or any other
provision of the Act, or the rules and regulations thereunder. Although
there do not appear to be any issues relevant to approval or
disapproval that would be facilitated by an oral presentation of views,
data, and arguments, the Commission will consider, pursuant to Rule
19b-4, any request for an opportunity to make an oral presentation.\68\
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\68\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposed rule change by an SRO.
See Securities Acts Amendments of 1975, Report of the Senate
Committee on Banking, Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------
Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule changes should be
approved or disapproved by March 5, 2024. Any person who wishes to file
a rebuttal to any other person's submission must file that rebuttal by
March 19, 2024.
Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#0270776e672f616d6f6f676c7671427167612c656d74"><span class="__cf_email__" data-cfemail="ef9d9a838ac28c8082828a819b9caf9c8a8cc1888099">[email protected]</span></a>. Please include
file number SR-FINRA-2024-003 on the subject line.
Paper Comments
<bullet> 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-2024-003. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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 website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of FINRA. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-FINRA-2024-003 and should be submitted
on or before March 5, 2024. Rebuttal comments should be submitted by
March 19, 2024.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\69\ that File No. SR-FINRA-2024-003 be, and hereby is, temporarily
suspended. In addition, the Commission is instituting proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\69\ 15 U.S.C. 78s(b)(3)(C).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\70\
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\70\ 17 CFR 200.30-3(a)(12), (57) and (58).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-01251 Filed 2-12-24; 8:45 am]
BILLING CODE 8011-01-P
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