SEC Approves Amendments to TRACE Reporting Exempting Trades in TRACE-Eligible Securities Conducted on a Facility of, and Reported to, the New York Stock Exchange
|Legal and Compliance
Rule 6200 Series
On November 16, 2006, the Securities and Exchange Commission approved an amendment to Rule 6230 (Transaction Reporting). Effective January 9, 2007, these amendments provide, on a pilot basis, a reporting exemption for corporate debt securities subject to both NASD's and NYSE's trade reporting requirements. The rules, as amended, are set forth in Attachment A.
Questions concerning this Notice should be directed to Elliot Levine, Chief Counsel, Transparency Services, Markets, Services and Information, at (202) 728-8405; Ola Persson, Director, TRACE Data, Transparency Services, at (212) 858-4796; and James L. Eastman, Assistant General Counsel, Office of General Counsel, at (202) 728-6961.
Background and Discussion
On November 16, 2006, the SEC approved on an accelerated basis an amendment to Rule 6230(e) to exempt from Trade Reporting and Compliance Engine (TRACE) requirements, for a pilot period of two years, transactions in TRACE-eligible securities executed on a facility of the New York Stock Exchange (NYSE) in accordance with NYSE Rules 1400 and 1401.1 The pilot period began January 9, 2007.2
To qualify for this new exemption, Rule 6230(e)(4), the transaction must be reported to NYSE pursuant to applicable NYSE trade reporting rules and disseminated publicly by NYSE. A transaction in a TRACE-eligible security executed on and reported to an exchange other than NYSE that is disseminated publicly still would qualify for an exemption from reporting under Rule 6230(e)(2). However, as was the case prior to the recent amendments, the exemption in Rule 6230(e)(2) is limited to transactions in securities that are listed on a national securities exchange.
NASD amended Rule 6230 to address concerns regarding duplicative trade reporting of corporate debt securities subject to both NASD's and NYSE's trade reporting requirements.
1See Securities Exchange Act Release No. 54768 (November 16, 2006), 71 FR 67673 (November 22, 2006) (SR-NASD-2006-110). The SEC also approved technical changes to NASD Rule 6210 to remove references to "NASDAQ" and the "Nasdaq Stock Market, Inc." and to remove references to "NASDAQ" in NASD Rule 6230 to reflect The NASDAQ Stock Market LLC's registration as a national securities exchange.
2 Unlike virtually every Notice to Members pertaining to a rule change that has a prospective effective date in order to allow member firms time to comply, the effective date of this Transaction Reporting rule change (SEC Release No. 54768) was scheduled to become effective upon either (1) SEC approval of the rule change or (2) execution by NASD and NYSE of a data sharing agreement addressing data related to the transactions covered by the rule change—whichever came later. The effective date of the NASD and NYSE data sharing agreement was the later of these two dates and, therefore, triggered the rule's effectiveness, even though it pre-dates this Notice. The first transactions covered by the rule change—and not subject to TRACE reporting—occurred the week of April 23, 2007.
New language is underlined; deletions are in brackets
6200. TRADE REPORTING AND COMPLIANCE ENGINE (TRACE)
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The terms used in this Rule 6200 Series shall have the same meaning as those defined in NASD's By-Laws and Rules unless otherwise specified.
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6230. Transaction Reporting
The following types of transactions shall not be reported: