Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Expiration Date of FINRA Rule 0180 (Application of Rules to Security-Based Swaps), 1666-1668 [2016-00465]

Download as PDF 1666 Federal Register / Vol. 81, No. 8 / Wednesday, January 13, 2016 / Notices Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of the above-listed company is suspended for the period from 9:30 a.m. EST on January 11, 2016, through 11:59 p.m. EST on January 25, 2016. By the Commission. Brent J. Fields, Secretary. [FR Doc. 2016–00591 Filed 1–11–16; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–76850; File No. SR–FINRA– 2016–001] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Expiration Date of FINRA Rule 0180 (Application of Rules to Security-Based Swaps) January 7, 2016. asabaliauskas on DSK5VPTVN1PROD with NOTICES 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 January 4, 2016, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under paragraph (f)(6) of Rule 19b–4 under the Act,3 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to extend the expiration date of FINRA Rule 0180 (Application of Rules to Security-Based Swaps) to February 11, 2017. FINRA Rule 0180 temporarily limits, with certain exceptions, the application of FINRA rules with respect to securitybased swaps. The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA and at the Commission’s Public Reference Room. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 2 17 VerDate Sep<11>2014 16:59 Jan 12, 2016 Jkt 238001 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 IV 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 On July 1, 2011, the SEC issued an Order granting temporary exemptive relief (the ‘‘Temporary Exemptions’’) from compliance with certain provisions of the Exchange Act in connection with the revision, pursuant to Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ‘‘Dodd-Frank Act’’),4 of the Exchange Act definition of ‘‘security’’ to encompass security-based swaps.5 Consistent with the Commission’s action, on July 8, 2011, FINRA filed for immediate effectiveness FINRA Rule 0180,6 which, with certain exceptions, is intended to temporarily limit the application of FINRA rules 7 with 4 Public Law 111–203, 124 Stat. 1376 (2010). Securities Exchange Act Release No. 64795 (July 1, 2011), 76 FR 39927 (July 7, 2011) (Order Granting Temporary Exemptions Under the Securities Exchange Act of 1934 in Connection With the Pending Revision of the Definition of ‘‘Security’’ To Encompass Security-Based Swaps, and Request for Comment) (the ‘‘Exemptive Release’’). The term ‘‘security-based swap’’ is defined in Section 761 of the Dodd-Frank Act. See also Securities Exchange Act Release No. 67453 (July 18, 2012), 77 FR 48207 (August 13, 2012) (Further Definition of ‘‘Swap,’’ ‘‘Security-Based Swap,’’ and ‘‘Security-Based Swap Agreement’’; Mixed Swaps; Security-Based Swap Agreement Recordkeeping). 6 See Securities Exchange Act Release No. 64884 (July 14, 2011), 76 FR 42755 (July 19, 2011) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change; File No. SR–FINRA–2011–033) (‘‘FINRA Rule 0180 Notice of Filing’’). See also Securities Exchange Act Release No. 74049 (January 14, 2015), 80 FR 2983 (January 21, 2015) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change; File No. SR–FINRA–2015–001) (extending the expiration date of FINRA Rule 0180 to February 11, 2016). 7 The current FINRA rulebook consists of: (1) FINRA Rules; (2) NASD Rules; and (3) rules incorporated from NYSE (‘‘Incorporated NYSE Rules’’). While the NASD Rules generally apply to all FINRA members, the Incorporated NYSE Rules apply only to those members of FINRA that are also members of the NYSE. The FINRA Rules apply to all FINRA members, unless such rules have a more 5 See PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 respect to security-based swaps, thereby helping to avoid undue market disruptions resulting from the change to the definition of ‘‘security’’ under the Act.8 The Commission, noting the need to avoid a potential unnecessary disruption to the security-based swap market in the absence of an extension of the Temporary Exemptions, and the need for additional time to consider the potential impact of the revision of the Exchange Act definition of ‘‘security’’ in light of ongoing Commission rulemaking efforts under Title VII of the Dodd-Frank Act, issued an Order which extended and refined the applicable expiration dates for the previously granted Temporary Exemptions.9 The Commission previously noted that extending the Temporary Exemptions would facilitate a coordinated consideration of these issues with the limited application by their terms. For more information about the rulebook consolidation process, see Information Notice, March 12, 2008 (Rulebook Consolidation Process). 8 In its Exemptive Release, the Commission noted that the relief is targeted and does not include, for instance, relief from the Act’s antifraud and antimanipulation provisions. FINRA has noted that FINRA Rule 0180 is similarly targeted. For instance, paragraph (a) of FINRA Rule 0180 provides that FINRA rules shall not apply to members’ activities and positions with respect to security-based swaps, except for FINRA Rules 2010 (Standards of Commercial Honor and Principles of Trade), 2020 (Use of Manipulative, Deceptive or Other Fraudulent Devices), 3310 (Anti-Money Laundering Compliance Program) and 4240 (Margin Requirements for Credit Default Swaps). See also paragraphs (b) and (c) of FINRA Rule 0180 (addressing the applicability of additional rules) and FINRA Rule 0180 Notice of Filing. 9 See Securities Exchange Act Release No. 71485 (February 5, 2014), 79 FR 7731 (February 10, 2014) (Order Extending Temporary Exemptions Under the Securities Exchange Act of 1934 in Connection With the Revision of the Definition of ‘‘Security’’ to Encompass Security-Based Swaps, and Request for Comment) (‘‘Temporary Exemptions Extension Release’’) stating that, for those expiring Temporary Exemptions ‘‘that are not directly linked to pending security-based swap rulemakings, the Commission is extending the expiration date until the earlier of such time as the Commission issues an order or rule determining whether any continuing exemptive relief is appropriate for security-based swap activities with respect to any of these Exchange Act provisions or until three years following the effective date of this Order.’’ The Temporary Exemptions Extension Release further stated that for each expiring Temporary Exemption ‘‘that is related to pending security-based swap rulemakings, the Commission is extending the expiration date until the compliance date for the related security-based swap-specific rulemaking.’’ See also Securities Exchange Act Release No. 71482 (February 5, 2014), 79 FR 7570 (February 10, 2014) (Extension of Exemptions for Security-Based Swaps) (extending the expiration dates in interim final rules that provide exemptions under the Securities Act of 1933 (the ‘‘Securities Act’’), the Exchange Act, and the Trust Indenture Act of 1939 for those security-based swaps that prior to July 16, 2011 were security-based swap agreements and are defined as ‘‘securities’’ under the Securities Act and the Exchange Act as of July 16, 2011 due solely to the provisions of Title VII of the Dodd-Frank Act). E:\FR\FM\13JAN1.SGM 13JAN1 Federal Register / Vol. 81, No. 8 / Wednesday, January 13, 2016 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES relief provided pursuant to FINRA Rule 0180.10 In establishing Rule 0180, and in extending the rule’s expiration date, FINRA noted its intent, pending the implementation of any SEC rules and guidance that would provide greater regulatory clarity in relation to securitybased swap activities, to align the expiration date of FINRA Rule 0180 with the termination of relevant provisions of the Temporary Exemptions.11 The Commission’s rulemaking and development of guidance in relation to security-based swap activities is ongoing. As such, FINRA believes it is appropriate and in the public interest, in light of the Commission’s goals as set forth in the Exemptive Release and the Temporary Exemptions Extension Release, to extend FINRA Rule 0180 for a limited period, to February 11, 2017, so as to avoid undue market disruptions resulting from the change to the definition of ‘‘security’’ under the Act. As noted in the FINRA Rule 0180 Notice of Filing, FINRA will amend the expiration date of Rule 0180 in subsequent filings as necessary such that the expiration date will be coterminous with the termination of relevant provisions of the Temporary Exemptions. FINRA has filed the proposed rule change for immediate effectiveness. FINRA is proposing that the implementation date of the proposed rule change will be February 11, 2016. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,12 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. FINRA believes that the proposed rule change would further the purposes of the Act because, consistent with the goals set forth by the Commission in the Exemptive Release and in the Temporary Exemptions Extension Release, the proposed rule change will help to avoid undue market disruption that could result if FINRA Rule 0180 expires before the implementation of any SEC rules and 10 See Securities Exchange Act Release No. 68864 (February 7, 2013), 78 FR 10218 (February 13, 2013) (Order Extending Temporary Exemptions Under the Securities Exchange Act of 1934 in Connection With the Revision of the Definition of ‘‘Security’’ to Encompass Security-Based Swaps, and Request for Comment). 11 See note 6 supra. 12 15 U.S.C. 78o–3(b)(6). VerDate Sep<11>2014 16:59 Jan 12, 2016 Jkt 238001 guidance that would provide greater regulatory clarity in relation to securitybased swap activities. 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. FINRA believes that the proposed rule change would prevent undue market disruption that would otherwise result if securitybased swaps were, by virtue of the expansion of the Act’s definition of ‘‘security’’ to encompass security-based swaps, subject to the application of all FINRA rules before the implementation of any SEC rules and guidance that would provide greater regulatory clarity in relation to security-based swap activities. FINRA believes that, by extending the expiration of FINRA Rule 0180, the proposed rule change will serve to promote regulatory clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection. 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. 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 13 and Rule 19b– 4(f)(6) thereunder.14 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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 13 15 14 17 PO 00000 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: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– FINRA–2016–001 on the subject line. Paper Comments • Send paper comments in triplicate to Robert W. Errett, Deputy Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–FINRA–2016–001. 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 Web site (https://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 Web site 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 such filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–FINRA– 2016–001 and should be submitted on or before February 3, 2016. U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). Frm 00070 Fmt 4703 Sfmt 4703 1667 E:\FR\FM\13JAN1.SGM 13JAN1 1668 Federal Register / Vol. 81, No. 8 / Wednesday, January 13, 2016 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–00465 Filed 1–12–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–76845; File No. SR–NYSE– 2016–07] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 132.30(9) To Conform the Exchange’s Rules to Industry-Wide Standards for Recording the Capacity in Which a Member Organization Executes a Transaction January 7, 2016. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on January 4, 2016, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 132.30(9) to conform the Exchange’s rules to industry-wide standards for the recording the capacity in which a member organization executes a transaction. The proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. asabaliauskas on DSK5VPTVN1PROD with NOTICES 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 self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change 15 17 CFR 200.30–3(a)(12). 1 15 U.S.C.78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. VerDate Sep<11>2014 16:59 Jan 12, 2016 Jkt 238001 and discussed any comments it received on the proposed rule change. The text of those 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 parts of such statements. program trades that are submitted to and executed on the Exchange.5 Since 2009, the Exchange has used ATI data to report program trading statistics for portions of program trades executed on the Exchange to the Commission on a weekly basis.6 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change The Exchange proposes to amend the current requirement in subsection (9) of Rule 132.30 that clearing member organizations identify whether the account for which an order was executed was that of a member or member organization or of a nonmember or non-member organization. The current requirement can be satisfied by entering the appropriate ATI from a list of ATIs that have evolved over the past 30 years.7 In place of this cumbersome process, the Exchange proposes to require member organizations to identify the capacity in which the member organization executed the transaction as follows: Agency, principal or riskless principal.8 The ‘‘principal’’ category would include proprietary trades by a member on the trading Floor relating to the member’s error account pursuant to Rule 134.9 By requiring member organizations to identify the capacity in which a brokerdealer enters an order, the Exchange would be harmonizing its order entry requirements with those of other 1. Purpose The Exchange proposes to amend Supplementary Material .30 of Rule 132 to conform the Exchange’s rules to industry-wide standards for recording the capacity in which a member organization executes a transaction. To effect this change, the Exchange would eliminate the current requirement to identify the account for which an order was executed and require instead that clearing members and member organizations submit account type indicators (‘‘ATI’’) reflecting the capacity in which the member organization executed a transaction (e.g., agency, principal or riskless principal). The Exchange believes that the proposed rule change would align the Exchange’s rules with industry-wide conventions focusing on the capacity in which a broker-dealer acts in effecting a transaction and, by eliminating the complex set of ATIs developed over the years, significantly simplify order entry on the Exchange. Background Rule 132 requires clearing member organizations submitting transactions to comparison to include the audit trail data elements set forth in Supplementary Material .30. Rule 132.30(9) requires that all orders submitted to the Exchange include specified trade data elements, including ‘‘[w]hether the account for which the order was executed was that of a member or member organization or of a non-member or non-member organization.’’ The Exchange has periodically published guidance regarding the ATIs that can be used to satisfy this requirement.4 ATIs are included as part of the audit trail data reported for each transaction on the Exchange. The Exchange also uses ATIs to capture program trade information for those portions of the 4 See, e.g., Information Memos 85–37 (Nov. 12, 1985); 88–29 (Oct. 19, 1988); 92–34 (Nov. 13, 1992); 96–36 (Dec. 5, 1996); 02–59 (Dec. 17, 2002); 09–31 (June 24, 2009); 12–25 (October 9, 2012); 14–04 (January 30, 2014). The current list contains 24 distinct ATIs. PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 Proposed Rule Change 5 Prior to 2009, member organizations reported program trading activity to the Exchange via the Daily Program Trading Report (‘‘DPTR’’). See Securities Exchange Act Release No. 60179 (June 26, 2009), 74 FR 31786, 31786 (July 2, 2009) (SR– NYSE–2009–61). The DPTR requirement was decommissioned in July 2009. See id. at 31787. 6 See id. Since the decommissioning of DPTR in 2009, weekly statistics regarding program trades the Exchange provides to media outlets have also been derived from ATI data. Id. 7 See note 4, supra. 8 In general, the term ‘‘capacity’’ refers to whether a broker-dealer acts as agent, i.e., directly on behalf of a customer, or whether the broker-dealer acts as principal, i.e., for its own account, in a transaction. A riskless principal transaction is one where a broker-dealer receives a customer order and then immediately executes an identical order in the marketplace, while taking on the role of principal, in order to fill the customer order pursuant to Rule 5320. 9 Rule 134 requires a member or member organization who acquires or assumes a security position resulting from an error transaction to clear such error transaction in the member’s or member organization’s error account, or in the error account established for a group of members. Rule 123.22 further requires members to enter orders executed to offset transactions made in error into an electronic system and sends a copy of such order to an electronic system on the Floor within 60 seconds of execution. See also Rule 123(e) (defining system entry). This type of proprietary trade is currently identified by the ‘‘Q’’ account type indicator, which would be retained to identify these trading Floor-based executions. E:\FR\FM\13JAN1.SGM 13JAN1

Agencies

[Federal Register Volume 81, Number 8 (Wednesday, January 13, 2016)]
[Notices]
[Pages 1666-1668]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00465]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76850; File No. SR-FINRA-2016-001]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Expiration Date of FINRA Rule 0180 
(Application of Rules to Security-Based Swaps)

January 7, 2016.
    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 January 4, 2016, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by FINRA. FINRA has 
designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under 
the Act,\3\ 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to extend the expiration date of FINRA Rule 0180 
(Application of Rules to Security-Based Swaps) to February 11, 2017. 
FINRA Rule 0180 temporarily limits, with certain exceptions, the 
application of FINRA rules with respect to security-based swaps.
    The text of the proposed rule change is available on FINRA's Web 
site at https://www.finra.org, 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 IV 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
    On July 1, 2011, the SEC issued an Order granting temporary 
exemptive relief (the ``Temporary Exemptions'') from compliance with 
certain provisions of the Exchange Act in connection with the revision, 
pursuant to Title VII of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the ``Dodd-Frank Act''),\4\ of the Exchange Act 
definition of ``security'' to encompass security-based swaps.\5\ 
Consistent with the Commission's action, on July 8, 2011, FINRA filed 
for immediate effectiveness FINRA Rule 0180,\6\ which, with certain 
exceptions, is intended to temporarily limit the application of FINRA 
rules \7\ with respect to security-based swaps, thereby helping to 
avoid undue market disruptions resulting from the change to the 
definition of ``security'' under the Act.\8\
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    \4\ Public Law 111-203, 124 Stat. 1376 (2010).
    \5\ See Securities Exchange Act Release No. 64795 (July 1, 
2011), 76 FR 39927 (July 7, 2011) (Order Granting Temporary 
Exemptions Under the Securities Exchange Act of 1934 in Connection 
With the Pending Revision of the Definition of ``Security'' To 
Encompass Security-Based Swaps, and Request for Comment) (the 
``Exemptive Release''). The term ``security-based swap'' is defined 
in Section 761 of the Dodd-Frank Act. See also Securities Exchange 
Act Release No. 67453 (July 18, 2012), 77 FR 48207 (August 13, 2012) 
(Further Definition of ``Swap,'' ``Security-Based Swap,'' and 
``Security-Based Swap Agreement''; Mixed Swaps; Security-Based Swap 
Agreement Recordkeeping).
    \6\ See Securities Exchange Act Release No. 64884 (July 14, 
2011), 76 FR 42755 (July 19, 2011) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change; File No. SR-FINRA-2011-033) 
(``FINRA Rule 0180 Notice of Filing''). See also Securities Exchange 
Act Release No. 74049 (January 14, 2015), 80 FR 2983 (January 21, 
2015) (Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change; File No. SR-FINRA-2015-001) (extending the expiration date 
of FINRA Rule 0180 to February 11, 2016).
    \7\ The current FINRA rulebook consists of: (1) FINRA Rules; (2) 
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated 
NYSE Rules''). While the NASD Rules generally apply to all FINRA 
members, the Incorporated NYSE Rules apply only to those members of 
FINRA that are also members of the NYSE. The FINRA Rules apply to 
all FINRA members, unless such rules have a more limited application 
by their terms. For more information about the rulebook 
consolidation process, see Information Notice, March 12, 2008 
(Rulebook Consolidation Process).
    \8\ In its Exemptive Release, the Commission noted that the 
relief is targeted and does not include, for instance, relief from 
the Act's antifraud and anti-manipulation provisions. FINRA has 
noted that FINRA Rule 0180 is similarly targeted. For instance, 
paragraph (a) of FINRA Rule 0180 provides that FINRA rules shall not 
apply to members' activities and positions with respect to security-
based swaps, except for FINRA Rules 2010 (Standards of Commercial 
Honor and Principles of Trade), 2020 (Use of Manipulative, Deceptive 
or Other Fraudulent Devices), 3310 (Anti-Money Laundering Compliance 
Program) and 4240 (Margin Requirements for Credit Default Swaps). 
See also paragraphs (b) and (c) of FINRA Rule 0180 (addressing the 
applicability of additional rules) and FINRA Rule 0180 Notice of 
Filing.
---------------------------------------------------------------------------

    The Commission, noting the need to avoid a potential unnecessary 
disruption to the security-based swap market in the absence of an 
extension of the Temporary Exemptions, and the need for additional time 
to consider the potential impact of the revision of the Exchange Act 
definition of ``security'' in light of ongoing Commission rulemaking 
efforts under Title VII of the Dodd-Frank Act, issued an Order which 
extended and refined the applicable expiration dates for the previously 
granted Temporary Exemptions.\9\ The Commission previously noted that 
extending the Temporary Exemptions would facilitate a coordinated 
consideration of these issues with the

[[Page 1667]]

relief provided pursuant to FINRA Rule 0180.\10\ In establishing Rule 
0180, and in extending the rule's expiration date, FINRA noted its 
intent, pending the implementation of any SEC rules and guidance that 
would provide greater regulatory clarity in relation to security-based 
swap activities, to align the expiration date of FINRA Rule 0180 with 
the termination of relevant provisions of the Temporary Exemptions.\11\
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    \9\ See Securities Exchange Act Release No. 71485 (February 5, 
2014), 79 FR 7731 (February 10, 2014) (Order Extending Temporary 
Exemptions Under the Securities Exchange Act of 1934 in Connection 
With the Revision of the Definition of ``Security'' to Encompass 
Security-Based Swaps, and Request for Comment) (``Temporary 
Exemptions Extension Release'') stating that, for those expiring 
Temporary Exemptions ``that are not directly linked to pending 
security-based swap rulemakings, the Commission is extending the 
expiration date until the earlier of such time as the Commission 
issues an order or rule determining whether any continuing exemptive 
relief is appropriate for security-based swap activities with 
respect to any of these Exchange Act provisions or until three years 
following the effective date of this Order.'' The Temporary 
Exemptions Extension Release further stated that for each expiring 
Temporary Exemption ``that is related to pending security-based swap 
rulemakings, the Commission is extending the expiration date until 
the compliance date for the related security-based swap-specific 
rulemaking.'' See also Securities Exchange Act Release No. 71482 
(February 5, 2014), 79 FR 7570 (February 10, 2014) (Extension of 
Exemptions for Security-Based Swaps) (extending the expiration dates 
in interim final rules that provide exemptions under the Securities 
Act of 1933 (the ``Securities Act''), the Exchange Act, and the 
Trust Indenture Act of 1939 for those security-based swaps that 
prior to July 16, 2011 were security-based swap agreements and are 
defined as ``securities'' under the Securities Act and the Exchange 
Act as of July 16, 2011 due solely to the provisions of Title VII of 
the Dodd-Frank Act).
    \10\ See Securities Exchange Act Release No. 68864 (February 7, 
2013), 78 FR 10218 (February 13, 2013) (Order Extending Temporary 
Exemptions Under the Securities Exchange Act of 1934 in Connection 
With the Revision of the Definition of ``Security'' to Encompass 
Security-Based Swaps, and Request for Comment).
    \11\ See note 6 supra.
---------------------------------------------------------------------------

    The Commission's rulemaking and development of guidance in relation 
to security-based swap activities is ongoing. As such, FINRA believes 
it is appropriate and in the public interest, in light of the 
Commission's goals as set forth in the Exemptive Release and the 
Temporary Exemptions Extension Release, to extend FINRA Rule 0180 for a 
limited period, to February 11, 2017, so as to avoid undue market 
disruptions resulting from the change to the definition of ``security'' 
under the Act. As noted in the FINRA Rule 0180 Notice of Filing, FINRA 
will amend the expiration date of Rule 0180 in subsequent filings as 
necessary such that the expiration date will be coterminous with the 
termination of relevant provisions of the Temporary Exemptions.
    FINRA has filed the proposed rule change for immediate 
effectiveness. FINRA is proposing that the implementation date of the 
proposed rule change will be February 11, 2016.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\12\ 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. FINRA believes that the proposed rule change would 
further the purposes of the Act because, consistent with the goals set 
forth by the Commission in the Exemptive Release and in the Temporary 
Exemptions Extension Release, the proposed rule change will help to 
avoid undue market disruption that could result if FINRA Rule 0180 
expires before the implementation of any SEC rules and guidance that 
would provide greater regulatory clarity in relation to security-based 
swap activities.
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    \12\ 15 U.S.C. 78o-3(b)(6).
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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. FINRA believes that the 
proposed rule change would prevent undue market disruption that would 
otherwise result if security-based swaps were, by virtue of the 
expansion of the Act's definition of ``security'' to encompass 
security-based swaps, subject to the application of all FINRA rules 
before the implementation of any SEC rules and guidance that would 
provide greater regulatory clarity in relation to security-based swap 
activities. FINRA believes that, by extending the expiration of FINRA 
Rule 0180, the proposed rule change will serve to promote regulatory 
clarity and consistency, thereby reducing burdens on the marketplace 
and facilitating investor protection.

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. 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 \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2016-001 on the subject line.

Paper Comments

     Send paper comments in triplicate to Robert W. Errett, 
Deputy Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2016-001. 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 Web site (https://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 Web site 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 such filing also will be available 
for inspection and copying at the principal office of FINRA. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-FINRA-2016-001 and should be 
submitted on or before February 3, 2016.


[[Page 1668]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-00465 Filed 1-12-16; 8:45 am]
 BILLING CODE 8011-01-P
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