[Federal Register Volume 85, Number 110 (Monday, June 8, 2020)]
[Notices]
[Pages 34789-34791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12278]
[[Page 34789]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88995; File No. SR-Phlx-2020-29]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Further Extend
the Deadline for Certain Written Supervisory-Related Reports Pursuant
to Options 10, Section 7 (Supervision of Accounts)
June 2, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 1, 2020, Nasdaq PHLX LLC (``Exchange'') filed with the
Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to further extend the filing requirements for
certain written reports pursuant to Options 10, Section 7, currently
due June 1, 2020, to June 30, 2020.
The text of the proposed rule change is available on the Exchange's
website at http://nasdaqphlx.cchwallstreet.com/, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange 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
Given current market conditions, the Exchange proposes to provide
its members temporary relief from filing certain supervision-related
reports pursuant to Options 10, Section 7 (Supervision of Accounts).
In December 2019, COVID-19 began to spread and disrupt company
operations and supply chains and impact consumers and investors,
resulting in a dramatic slowdown in production and spending.\3\ By
March 11, 2020, the World Health Organization characterized COVID-19 as
a pandemic.\4\ To slow the spread of the disease, federal and state
officials implemented social-distancing measures, placed significant
limitations on large gatherings, limited travel, and closed non-
essential businesses. These measures have affected the U.S. markets.\5\
In the United States, Level 1 market wide circuit breaker halts were
triggered on March 9, March 12, March 16, and March 18, 2020. While
markets have seen significant declines, governments around the world
are undertaking efforts to stabilize the economy and assist affected
companies and their employees.\6\ State governments have only recently
relaxed some social distancing measures and permitted the limited
reopening of non-essential businesses. Significant uncertainty remains.
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\3\ See, e.g., Chairman Jay Clayton, Proposed Amendments to
Modernize and Enhance Financial Disclosures; Other Ongoing
Disclosure Modernization Initiatives; Impact of the Coronavirus;
Environmental and Climate-Related Disclosure (Jan. 30, 2020),
available at https://www.sec.gov/news/public-statement/clayton-mda-2020-01-30. (``Yesterday, I asked the staff to monitor and, to the
extent necessary or appropriate, provide guidance and other
assistance to issuers and other market participants regarding
disclosures related to the current and potential effects of the
coronavirus. We recognize that such effects may be difficult to
assess or predict with meaningful precision both generally and as an
industry- or issuer-specific basis. This is an uncertain issue where
actual effects will depend on many factors beyond the control and
knowledge of issuers.'').
\4\ See WHO Director-General's Opening Remarks at the Media
Briefing on COVID-19 (March 11, 2020), available at https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19---11-march-2020.
\5\ ``Analysts showed that we saw the fastest `correction' in
history (down 10% from a high), occurring in a matter of days. In
the last week of February, the Dow fell 12.36% with notional trading
of $3.6 trillion.'' See Phil Mackintosh, Putting the Recent
Volatility in Perspective, available at https://www.nasdaq.com/articles/putting-the-recent-volatility-in-perspective-2020-03-05.
\6\ See, e.g., the list of actions undertaken by the Board of
Governors of the Federal Reserve System at https://www.federalreserve.gov/covid-19.htm. See also Families First
Coronavirus Response Act, Public Law 116-127.
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Amidst this continued and unprecedented market uncertainty, the
Exchange sought to address potential challenges that members may face
in timely meeting their obligations to submit to the Exchange annual
supervision-related reports under Options 10, Sections 7(g) and (h)
(``Supervision Reporting Requirements''), especially in light of
unforeseen and uncertain demands on resources required to respond to
COVID-19. Options 10, Section 7(g) requires each Exchange member that
conducts a non-member customer business to submit to the Exchange a
written report on the member's supervision and compliance effort during
the preceding year and on the adequacy of the member's ongoing
compliance processes and procedures. Each member that conducts a public
customer options business is also required to specifically include its
options compliance program in the report.\7\ The Section 7(g) report is
due on April 1 of each year. Options 10, Section 7(h) requires that
each member submit, by April 1 of each year, a copy of the Section 7(g)
report to one or more control persons or, if the member has no control
person, to the audit committee of its board of directors or its
equivalent committee or group.\8\
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\7\ The report shall include, but not be limited to, the
information set out in Options 10, Section 7(g)(i)-(v).
\8\ See Options 10, Section 7(h) for the meaning of the term
``control person'' and requirements in the case of a control person
that is an organization.
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On March 31, 2020, the Exchange filed a proposal to temporarily
extend the filing requirements for these annual supervision-related
reports from April 1, 2020 to June 1, 2020.\9\ In light of the
continued market uncertainty, the Exchange is again seeking to address
potential challenges that members may face in timely meeting their
obligations to submit to the Exchange annual supervision-related
reports. Accordingly, the Exchange proposes to provide additional,
temporary relief for members from the Supervision Reporting
Requirements by further extending the June 1, 2020 filing deadlines
described above to June 30, 2020. The Exchange believes that this
additional, temporary relief will permit members to continue to focus
on running their businesses and the health
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crisis caused by the COVID-19 pandemic, including its impact on their
employees, customers, and communities.
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\9\ See Securities Exchange Act Release No. 88827 (March 31,
2020), 85 FR 19190 (April 6, 2020) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Temporarily Extend Certain
Filing Requirement.
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The Exchange notes that in response to COVID-19, the Financial
Industry Reporting Authority (``FINRA'') recently reissued temporary
relief for member firms by, among other things, extending the deadline
for submitting its supervision-related reports (FINRA Rule 3120 Report
and FINRA Rule 3130 certification) from its initial extension deadlines
of June 1, 2020 \10\ to June 30, 2020.\11\ The Exchange notes, too,
that at least one other options exchange that had previously extended
the supervisory report deadlines from April 1 to June 1 for its
members,\12\ also plans to submit a similar filing to, again, extend
its deadlines through June 30, 2020. In light of these deadline
extensions, the Exchange believes that extending its deadline would
avoid unnecessary confusion and added burden among entities that are
members of both the Exchange and FINRA because the deadline to submit
supervisory reports would remain uniform.
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\10\ See FINRA Regulatory Notice 20-08 (March 9, 2020) available
at https://www.finra.org/rules-guidance/notices/20-08.
\11\ See FINRA Regulatory Notice 20-08, FAQs, Supervision (May
19, 2020) available at https://www.finra.org/rules-guidance/key-topics/covid-19/faq#supe.
\12\ See Securities Exchange Act No. 88528 (March 31, 2020), 85
FR 19196 (April 6, 2020) (SR-CBOE-2020-029).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\13\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\14\ in particular, in that it is designed to
promote just and equitable principles of trade; 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. As a result of continued uncertainty related to the ongoing
spread of the COVID-19 virus, the U.S. exchanges are experiencing
unprecedented market volatility. The proposed rule change would allow
the Exchange to continue to provide temporary relief for members from
the Supervision Reporting Requirements, which were amended once already
to require members to provide written reports to the Exchange by June
1, 2020, and further extend that deadline to June 30, 2020. The
Exchange believes that this additional, temporary relief is necessary
and appropriate in the public interest, and consistent with the
protection of investors, given the unforeseen and uncertain challenges,
including business continuity implementation and market volatility,
posed by COVID-19 to members that must comply with the Supervision
Reporting Requirements. The Exchange also believes that it is necessary
and appropriate in the public interest, and consistent with the
protection of investors, because FINRA has also re-extended the time
for its members to file supervision-related reports from June 1, 2020
to June 30, 2020.\15\ Additionally, as indicated above, at least one
other options exchange that had previously extended the supervisory
report deadlines from April 1 to June 1 for its members,\16\ plans to
submit a similar filing to re-extend its deadlines through June 30,
2020. Extending the deadline, therefore, will ensure that those
entities that are members of both FINRA and the Exchange have a uniform
deadline to submit their supervisory reports.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ See supra note 11.
\16\ See supra note 12.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is not
designed to address any competitive issues but rather to provide
temporary relief for all members that are required to comply with the
Supervision Reporting Requirements.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\18\
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \19\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \20\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposed rule change may become operative upon filing. The
Commission notes that the proposed rule change would allow the
Exchange, in light of the COVID-19 pandemic, to provide temporary
relief for members by extending the deadline for written reports
pursuant to the Supervision Reporting Requirements from June 1, 2020 to
June 30, 2020. This is consistent with the extension FINRA has provided
its members for supervision-related reports and certifications required
pursuant to FINRA Rule 3120 and FINRA Rule 3130 \21\ and the extension
for certain supervision-related reports Cboe Exchange, Inc. has
provided its trading permit holders.\22\ The Commission believes that
waiver of the 30-day operative delay is consistent with the protection
of investors and the public interest. Accordingly, the Commission
hereby waives the operative delay and designates the proposed rule
change operative upon filing.\23\
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6)(iii).
\21\ See supra note 12.
\22\ See Securities Exchange Act Release No. 88978 (June 1,
2020) (SR-CBOE-2020-049).
\23\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
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Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-Phlx-2020-29 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2020-29. 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 (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for 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 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-Phlx-2020-29 and should be submitted on
or before June 29, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-12278 Filed 6-5-20; 8:45 am]
BILLING CODE 8011-01-P