October 5, 2018.
On August 16, 2018, the Financial Industry Regulatory Authority, Inc. (“FINRA”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 
and Rule 19b-4 thereunder,
a proposed rule change to modify the dissemination protocols for Agency Debt Securities. The proposed rule change was published for comment in the Federal Register on August 23, 2018.
The Commission received no comment letters on the proposed rule Start Printed Page 51723change. This order approves the proposed rule change.
II. Description of the Proposal
Under FINRA's rules, each member firm is required to report to the Trade Reporting and Compliance Engine (“TRACE”) transactions in TRACE-Eligible Securities,
including securities that meet the definition of “Agency Debt Security.” 
Currently, for disseminated reports of transactions in Agency Debt Securities, FINRA displays either the entire notional size (volume) of the transaction or a capped amount, depending on whether the security is Investment Grade,
For Agency Debt Securities that are Investment Grade or unrated, FINRA disseminates the entire notional size for transactions of $5 million or less in par value traded, but a capped size—“$5MM+”—for transactions exceeding $5 million in par value traded; for transactions in Agency Debt Securities that are Non-Investment Grade, FINRA disseminates the entire notional size for transactions of $1 million or less in par value traded but a capped size— “1MM+”—for transactions exceeding $1 million in par value traded.
FINRA has proposed to apply the $5 million dissemination cap to transactions in all Agency Debt Securities, regardless of whether the security is Investment Grade, Non-Investment Grade, or unrated. FINRA has stated that, when adopting the original dissemination caps for Agency Debt Securities, it believed that unrated Agency Debt Securities should default to the $5 million dissemination cap due to factors such as that they trade more consistently with Investment Grade securities that are subject to the $5 million dissemination cap.
FINRA has further stated that it is not aware of the existence of any Non-Investment Grade Agency Debt Securities other than credit risk transfer securities (“CRTs”), a type of Agency Debt Security issued by Fannie Mae (“Fannie”) and Freddie Mac (“Freddie”).
Based on FINRA's experience with CRTs and in consultation with Fannie and Freddie, FINRA believes that it is appropriate to disseminate Non-Investment Grade CRTs with the $5 million dissemination cap. Because CRTs are the only type of Agency Debt Security rated less than Investment Grade, FINRA is proposing to simplify the dissemination structure by applying the $5 million cap to all Agency Debt Securities irrespective of rating.
FINRA has stated that it will announce the effective date of the rule change in a Regulatory Notice to be published no later than 60 days following a Commission approval, and the effective date will be no later than 120 days following publication of that Regulatory Notice.
III. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association.
In particular, the Commission finds that the proposed rule change is consistent with Section 15A(b)(6) of the Act,
which requires, among other things, that FINRA rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The Commission believes that the proposal is reasonably designed to simplify the dissemination protocols for transactions in Agency Debt Securities by instituting a uniform $5 million dissemination cap, regardless of whether the security is Investment Grade, Non-Investment Grade, or unrated. The Commission received no comments that objected to the proposed rule change and notes that FINRA consulted with Fannie and Freddie before submitting the proposal.
Pursuant to Section 19(b)(5) of the Act,
the Commission consulted with and considered the views of the Treasury Department in determining to approve the proposed rule change. The Treasury Department indicated its support for the proposal.
Pursuant to Section 19(b)(6) of the Act,
the Commission has considered the sufficiency and appropriateness of existing laws and rules applicable to government securities brokers, government securities dealers, and their associated persons in approving the proposal. As discussed above, by applying the $5 million dissemination cap to all Agency Debt Securities regardless of rating, the rule change will simplify the dissemination protocols for transactions in Agency Debt Securities.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-FINRA-2018-032) is approved.
Start Printed Page 51724
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20
Eduardo A. Aleman,
[FR Doc. 2018-22203 Filed 10-11-18; 8:45 am]
BILLING CODE 8011-01-P