Order Extending Until February 5, 2019 Certain 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, 5665-5668 [2018-02498]
Download as PDF
Federal Register / Vol. 83, No. 27 / Thursday, February 8, 2018 / Notices
daltland on DSKBBV9HB2PROD with NOTICES
weight to recent observations, would
permit NSCC to more effectively
measure the risk of a rapid change in
market price volatility. The addition of
the Gap Risk Measure and the Portfolio
Margin Floor would also provide NSCC
with additional measurements of the
market price volatility of a Member’s
Net Unsettled Position, enabling NSCC
to assess a VaR Charge that accounts for
the risks those charges are designed to
address, as described above.
Finally, NSCC is proposing to
eliminate the MMD Charge because this
component of the Clearing Fund has
only a limited application and, as such,
does not provide as effective a
measurement of the risk presented by
Net Unsettled Positions that are
concentrated in certain securities as
other proposed and existing risk
management measures. Therefore, the
proposal to eliminate this charge would
enable NSCC to remove an unnecessary
component from the Clearing Fund
calculation, and would help NSCC to
rely on an appropriate method of
measuring its exposures to this risk.
The proposed changes are designed to
assist NSCC in maintaining a risk-based
margin system that considers, and
produces margin levels commensurate
with, the risks and particular attributes
of portfolios that exhibit idiosyncratic
risk attributes, are more susceptible to
price volatility caused by to gap risk
events, and contain concentrated Net
Unsettled Positions. Therefore, NSCC
believes the proposed change is
consistent with Rule 17Ad–22(e)(6)(i)
and (v) under the Act.44
III. Date of Effectiveness of the Advance
Notice, and Timing for Commission
Action
The proposed change may be
implemented if the Commission does
not object to the proposed change
within 60 days of the later of (i) the date
that the proposed change was filed with
the Commission or (ii) the date that any
additional information requested by the
Commission is received. The clearing
agency shall not implement the
proposed change if the Commission has
any objection to the proposed change.
The Commission may extend the
period for review by an additional 60
days if the proposed change raises novel
or complex issues, subject to the
Commission providing the clearing
agency with prompt written notice of
the extension. A proposed change may
be implemented in less than 60 days
from the date the advance notice is
filed, or the date further information
requested by the Commission is
44 17
CFR 240.17Ad–22(e)(6)(i) and (v).
VerDate Sep<11>2014
17:18 Feb 07, 2018
Jkt 244001
received, if the Commission notifies the
clearing agency in writing that it does
not object to the proposed change and
authorizes the clearing agency to
implement the proposed change on an
earlier date, subject to any conditions
imposed by the Commission.
The clearing agency shall post notice
on its website of proposed changes that
are implemented.
The proposal shall not take effect
until all regulatory actions required
with respect to the proposal are
completed.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the Advance Notice
is consistent with the Clearing
Supervision 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–
NSCC–2017–808 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–NSCC–2017–808. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the Advance Notice that
are filed with the Commission, and all
written communications relating to the
Advance Notice 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 NSCC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). All comments received
PO 00000
Frm 00063
Fmt 4703
Sfmt 4703
5665
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–NSCC–
2017–808 and should be submitted on
or before February 23, 2018.
By the Commission.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–02543 Filed 2–7–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82626; File No. S7–27–11]
Order Extending Until February 5, 2019
Certain 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
February 2, 2018.
I. Introduction
The Securities and Exchange
Commission (‘‘Commission’’) is (i)
extending until February 5, 2019 certain
temporary exemptive relief originally
provided by the Commission in
connection with the revision of the
definition of ‘‘security’’ in the Securities
Exchange Act of 1934 (‘‘Exchange Act’’)
to encompass security-based swaps
(‘‘Temporary Exemptions’’); 1 and (ii)
requesting comment on whether
continuing such exemptive relief
beyond February 5, 2019 is necessary or
appropriate in the public interest, and is
consistent with the protection of
investors.
II. Discussion
A. Background
Title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act 2 amended the definition of
‘‘security’’ under the Exchange Act to
expressly encompass security-based
1 See Order Granting Temporary Exemptions
under the Securities Exchange Act of 1934 in
Connection with the Pending Revisions of the
Definition of ‘‘Security’’ to Encompass SecurityBased Swaps, Exchange Act Release No. 64795 (July
1, 2011), 76 FR 39927 (July 7, 2011) (‘‘Exchange Act
Exemptive Order’’).
2 The Dodd-Frank Wall Street Reform and
Consumer Protection Act, Public Law 111–203, 124,
Stat. 1376 (2010) (‘‘Dodd-Frank Act’’).
E:\FR\FM\08FEN1.SGM
08FEN1
5666
Federal Register / Vol. 83, No. 27 / Thursday, February 8, 2018 / Notices
daltland on DSKBBV9HB2PROD with NOTICES
swaps.3 The expansion of the definition
of the term ‘‘security’’ to include
security-based swaps had the effect of
changing the scope of the Exchange Act
regulatory provisions that apply to
security-based swaps and, in doing so,
raised certain complex questions that
require further consideration.
On July 1, 2011, the Commission
issued the Exchange Act Exemptive
Order granting temporary exemptive
relief from compliance with certain
provisions of the Exchange Act in
connection with the revision of the
Exchange Act definition of ‘‘security’’ to
encompass security-based swaps.4 In
general, the Exchange Act Exemptive
Order granted temporary exemptive
relief from compliance with certain
provisions of the Exchange Act in
connection with security-based swap
activity by: (i) Any person who meets
the definition of ‘‘eligible contract
participant’’ (‘‘ECPs’’) set forth in
Section 1a(12) of the Commodity
Exchange Act as of July 20, 2010 (i.e.,
3 See Section 761(a)(2) of the Dodd-Frank Act
(amending Section 3(a)(10) of the Exchange Act (15
U.S.C. 78c(a)(10)). The provisions of Title VII
generally became effective on July 16, 2011 (360
days after the enactment of the Dodd-Frank Act)
(the ‘‘Effective Date’’), unless a provision required
a rulemaking, in which case the provision would
go into effect ‘‘not less than’’ 60 days after
publication of the related final rules in the Federal
Register or on July 16, 2011, whichever is later. See
Section 774 of the Dodd-Frank Act (15 U.S.C. 77b).
4 At the time it issued the Exchange Act
Exemptive Order, the Commission also adopted
interim final Rule 240 under the Securities Act of
1933 (‘‘Securities Act’’), interim final Rules 12a–11
and 12h–1(i) under the Exchange Act, and interim
final Rule 4d–12 under the Trust Indenture Act
(‘‘Trust Indenture Act’’). See 17 CFR 230.240, 17
CFR 240.12a–11, 17 CFR 240.12h–1, and 17 CFR
260.4d–12. See also Exemptions for Security-Based
Swaps, Securities Act Release No. 9231 (July 1,
2011), 76 FR 40605 (July 11, 2011). This extension
order does not address these interim final rules,
which are scheduled to expire on February 11,
2018. See Exemptions for Security-Based Swaps,
Securities Act Release No. 10305 (Feb. 10, 2017), 82
FR 10703 (Feb. 15, 2017). The Commission recently
adopted a rule under the Securities Act to provide
that certain communications involving securitybased swaps will not be deemed to constitute
‘‘offers’’ of such security-based swaps for purposes
of Section 5 of the Securities Act. See Treatment of
Certain Communications Involving Security-Based
Swaps That May Be Purchased Only By Eligible
Contract Participants, Securities Act Release No.
10450 (Jan. 5, 2018), 83 FR 2046 (Jan. 16, 2018).
The Commission also, on June 15, 2011, issued
an exemptive order granting temporary relief from
compliance with certain provisions added to the
Exchange Act by subtitle B of Title VII of the DoddFrank Act with which compliance would have
otherwise been required as of the Effective Date. In
that order, the Commission provided guidance
regarding the provisions of the Exchange Act that
were added by Title VII with which compliance
was required as of the Effective Date. See
Temporary Exemptions and Other Temporary
Relief, Together with Information on Compliance
Dates for New Provisions of the Securities Exchange
Act of 1934 Applicable to Securities-Based Swaps,
Exchange Act Release No. 64678 (June 15, 2011), 76
FR 36287 (June 22, 2011).
VerDate Sep<11>2014
17:18 Feb 07, 2018
Jkt 244001
the day prior to the date the Dodd-Frank
Act was signed into law) and (ii) a
broker or dealer registered under
Section 15(b) of the Exchange Act.5
The overall approach of the Exchange
Act Exemptive Order was directed
toward maintaining the status quo
during the implementation process for
the Dodd-Frank Act.6 In the Exchange
Act Exemptive Order, the Commission
stated that it would accomplish this ‘‘by
preserving the application of particular
Exchange Act requirements that already
are applicable in connection with
instruments that will be ‘security-based
swaps’ following the Effective Date [of
the Dodd-Frank Act], but deferring the
applicability of additional Exchange Act
requirements in connection with those
instruments explicitly being defined as
‘securities’ as of the Effective Date.’’ 7
5 See Exchange Act Exemptive Order, 76 FR at
39938–39. The Exchange Act Exemptive Order did
not provide exemptive relief for any provisions or
rules prohibiting fraud, manipulation, or insider
trading (other than the prophylactic reporting or
recordkeeping requirements such as the
confirmation requirements of Exchange Act Rule
10b–10). In addition, the Exchange Act Exemptive
Order did not affect the Commission’s investigative,
enforcement, and procedural authority related to
those provisions and rules. See Exchange Act
Exemptive Order at 39931, note 34. The Exchange
Act Exemptive Order also did not address Sections
12, 13, 14, 15(d), 16, and 17A of the Exchange Act
and the rules thereunder. The Commission did,
however, issue limited temporary relief from the
clearing agency registration requirements under
Section 17A(b) for entities providing certain
clearing services for security-based swaps. This
relief was linked to final rules issued by the
Commission relating to the registration of clearing
agencies that clear security-based swaps. See Order
Pursuant to Section 36 of the Securities Exchange
Act of 1934 Granting Temporary Exemptions from
Clearing Agency Registration Requirements under
Section 17A(b) of the Exchange Act for Entities
Providing Certain Clearing Services for SecurityBased Swaps, Exchange Act Release No. 64796 (July
1, 2011), 76 FR 39963 (July 7, 2011).
The Commission also provided a temporary
exemption within the Exchange Act Exemptive
Order for Sections 5 and 6 of the Exchange Act and
linked the expiration date of that exemptive relief
until the earliest compliance date set forth in any
of the final rules regarding registration of securitybased swap execution facilities. See Exchange Act
Exemptive Order, 76 FR at 39934–36.
The Exchange Act Exemptive Order further
provided that no security-based swap contract
entered into on or after July 16, 2011 shall be void
or considered voidable by reason of Section 29(b)
of the Exchange Act because any person that is a
party to the contract violated a provision of the
Exchange Act for which the Commission has
provided exemptive relief in the Exchange Act
Exemptive Order, until such time as the underlying
exemptive relief expires. By extending the
underlying exemptive relief until February 5, 2019,
this order will also extend the relevant Section
29(b) relief until that same date. See Exchange Act
Exemptive Order, 76 FR at 39938–39.
6 See Exchange Act Exemptive Order, 76 FR at
39929.
7 Id. These instruments generally constituted
‘‘security-based swap agreements’’ under the preDodd-Frank Act framework and were already
subject to specific antifraud and anti-manipulation
provisions under the Exchange Act (including
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
In 2014, the Commission extended the
expiration dates for the Temporary
Exemptions.8 In the 2014 Extension
Order, the Commission distinguished
between: (i) The Temporary Exemptions
related to pending security-based swap
rulemakings (‘‘Linked Temporary
Exemptions’’); and (ii) the Temporary
Exemptions that generally were not
directly related to a specific securitybased swap rulemaking (‘‘Unlinked
Temporary Exemptions’’). The
expiration dates for the Linked
Temporary Exemptions established by
the 2014 Extension Order were the
compliance dates for the specific
rulemakings to which they were
‘‘linked,’’ and the expiration date for the
Unlinked Temporary Exemptions was
three years following the effective date
of the 2014 Extension Order (i.e.,
February 5, 2017), or such time that the
Commission issues an order or rule
determining whether continuing
exemptive relief is appropriate for
security-based swaps with respect to
any such Unlinked Temporary
Exemptions. This approach was
designed to provide the Commission
with flexibility while its Dodd-Frank
Act rulemaking is still in progress to
determine whether continuing relief
should be provided for any of the
Unlinked Temporary Exemptions.9
Exchange Act Section 10(b)). Under the Exchange
Act Exemption Order, instruments that (before the
Effective Date) were security-based swap
agreements and (after the Effective Date) constituted
security-based swaps were still subject to the
application of those Exchange Act provisions. See
Exchange Act Exemptive Order, 76 FR at 39930, nn.
24–25.
8 See 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, Exchange Act Release
No. 71485 (Feb. 5, 2014), 79 FR 7731 (Feb. 10, 2014)
(‘‘2014 Extension Order’’) (extending the expiration
date for certain Temporary Exemptions to February
5, 2017). See also Further Definition of ‘‘Swap,’’
‘‘Security-Based Swap,’’ and ‘‘Security-Based Swap
Agreement’’; Mixed Swaps; Security-Based Swap
Agreement Recordkeeping, Exchange Act Release
No. 67453 (July 18, 2012), 77 FR 48207 (Aug. 13,
2012) (‘‘Product Definitions Adopting Release’’)
(extending the expiration date of the Temporary
Exemptions to February 11, 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, Exchange Act Release No. 68864 (Feb. 7,
2013), 78 FR 10218 (Feb. 13, 2013) (extending the
expiration date to February 11, 2014).
9 See 2014 Extension Order, 79 FR at 7731. The
2014 Extension Order also linked the expiration
date of the Linked Temporary Exemptions to the
compliance date for such rulemakings. The 2014
Extension Order identified the Linked Temporary
Exemptions as those related to: (1) Capital and
margin requirements applicable to a broker or
dealer (Sections 7 and 15(c)(3), Regulation T, and
Exchange Act Rules 15c3–1, 15c3–3, and 15c3–4);
(2) recordkeeping requirements applicable to a
broker or dealer (Sections 17(a) and 17(b) and
E:\FR\FM\08FEN1.SGM
08FEN1
Federal Register / Vol. 83, No. 27 / Thursday, February 8, 2018 / Notices
daltland on DSKBBV9HB2PROD with NOTICES
The Commission most recently
extended the expiration date of the
Unlinked Temporary Exemptions until
February 5, 2018.10 In the 2017
Extension Order, the Commission also
requested comment on whether
continuing exemptive relief is necessary
beyond February 5, 2018.11 Two
commenters expressed support for
extending the exemptive relief, with one
reiterating its prior request that the
Commission provide permanent
exemptive and other relief to securitybased swap market participants from the
Exchange Act and the Securities Act.12
Exchange Act Rules 17a–3, 17a–4, 17a–5, 17a–11,
and 17a–13); (3) registration requirements under
Section 15(a)(1), and the other requirements of the
Exchange Act and the rules and regulations
thereunder that apply to a ‘‘broker’’ or ‘‘dealer’’ that
is not registered with the Commission; (4) Exchange
Act Rule 10b–10; and (5) Regulation ATS.
Accordingly, as applicable, the Commission
extended these exemptions until the compliance
date for pending rulemakings concerning: capital,
margin, and segregation requirements for securitybased swap dealers and major security-based swap
participants; recordkeeping and reporting
requirements for broker-dealers, security-based
swap dealers, and major security-based swap
participants; security-based swap trade
acknowledgements; and registration requirements
for security-based swap execution facilities.
The Linked Temporary Exemptions are not
addressed in this order and will be separately
considered in connection with the related securitybased swap rulemakings. The Commission has
already addressed some of the Linked Temporary
Exemptions. For example, on June 8, 2016, the
Commission adopted new rules for trade
acknowledgement and verification of security-based
swap transactions. See Trade Acknowledgement
and Verification of Security-Based Swap
Transactions, Exchange Act Release No. 78011
(June 8, 2016), 81 FR 39807 (June 17, 2016) (‘‘Trade
Acknowledgement Release’’). In that release, the
Commission described the application of Exchange
Act Rule 10b–10 to transactions in security-based
swaps and noted that the Linked Temporary
Exemption relating to Exchange Act Rule 10b-10
would expire upon the compliance date of the new
Rule 15Fi–2. See Trade Acknowledgement Release,
81 FR at 39824–25, n. 189.
10 See Order Extending Certain Temporary
Exemptions under the Securities Exchange Act of
1934 in Connection with the Revision of the
Definition of ‘‘Security’’ to Encompass SecurityBased Swaps and Request for Comment, Exchange
Act Release No. 79833 (Jan. 18, 2017), 82 FR 8467
(Jan. 25, 2017) (‘‘2017 Extension Order’’).
11 Comments received are available at https://
www.sec.gov/comments/s7-27-11/s72711.shtml.
The Commission did not receive any comments in
response to the request for comment in the 2014
Extension Order. However, in 2012, the
Commission received a request from market
participants to extend certain of the Temporary
Exemptions, citing concerns that key issues and
questions regarding the application of the federal
securities laws remained unresolved and
continuing concerns about the potential for
unnecessary disruption to the security-based swap
market. See SIFMA Request for Extension of the
Expiration Date of the SEC’s Exchange Act
Exemptive Order and SBS Interim final Rules (Dec.
20, 2012), which is available at https://www.sec.gov/
comments/s7-27-11/s72711-12.pdf.
12 See comment from Layla Spencer, dated
January 30, 2017; and letters from Kyle Brandon,
Managing Director, SIFMA, dated February 2, 2017
VerDate Sep<11>2014
17:18 Feb 07, 2018
Jkt 244001
B. Extension of Unlinked Temporary
Exemptions
Since the issuance of the 2014
Extension Order, the Commission has
implemented a substantial portion of
the regulatory regime for security-based
swaps set forth in Title VII of the DoddFrank Act.13 However, the Commission
is still in the process of finalizing its
rules under Title VII of the Dodd-Frank
Act.14 Therefore, the Commission
believes it is necessary or appropriate in
the public interest, and consistent with
the protection of investors to extend the
Unlinked Temporary Exemptions until
February 5, 2019 to avoid any potential
market disruption stemming from the
(‘‘SIFMA Letter I’’) and January 11, 2018 (‘‘SIFMA
Letter II’’) (requesting that the Commission further
extend the exemptive relief for the Unlinked
Temporary Exemptions). For details regarding
SIFMA’s request for permanent exemptive and
other relief, see Draft SIFMA SBS Exemptive Relief
Request (Oct. 20, 2011), which is available at
https://www.sec.gov/comments/s7-27-11/s727117.pdf, and SIFMA SBS Exemptive Relief Request
(Dec. 5, 2011), which is available at https://
www.sec.gov/comments/s7-27-11/s72711-10.pdf.
Two other commenters provided statements that are
not germane to the consideration of the extension.
13 See, e.g., Regulation SBSR—Reporting and
Dissemination of Security-Based Swap Information,
Exchange Act Release No. 74244 (Feb. 11, 2015), 80
FR 14563 (Mar. 19, 2015); Security-Based Swap
Data Repository Registration, Duties, and Core
Principles, Exchange Act Release No. 74246 (Feb.
11, 2015), 80 FR 14437 (Mar. 19, 2015); Registration
Process for Security-Based Swap Dealers and Major
Security-Based Swap Participants, Exchange Act
Release No. 75611 (Aug. 5, 2015), 80 FR 48963
(Aug. 14, 2015); Security-Based Swap Transactions
Connected with a Non-U.S. Person’s Dealing
Activity That Are Arranged, Negotiated, or
Executed By Personnel Located in a U.S. Branch or
Office or in a U.S. Branch or Office of an Agent;
Security-Based Swap Dealer De Minimis Exception,
Exchange Act Release No. 77104 (Feb. 10, 2016), 81
FR 8597 (Feb. 19, 2016); Trade Acknowledgement
Release; Business Conduct Standards for SecurityBased Swap Dealers and Major Security-Based
Swap Participants, Exchange Act Release 77617
(Apr. 14, 2016), 81 FR 29960 (May 13, 2016);
Regulation SBSR—Reporting and Dissemination of
Security-Based Swap Information, Exchange Act
Release No. 78321 (July 14, 2016), 81 FR 53545
(Aug. 12, 2016); Access to Data Obtained by
Security-Based Swap Data Repositories, Exchange
Act Release No. 78716 (Aug. 29, 2016), 81 FR 60585
(Sept. 2, 2016).
14 See, e.g., Registration and Regulation of
Security-Based Swap Execution Facilities,
Exchange Act Release No. 63825 (Feb. 2, 2011), 76
FR 10948 (Feb. 28, 2011); Capital, Margin, and
Segregation Requirements for Security-Based Swap
Dealers and Major Security-Based Swap
Participants and Capital Requirements for BrokerDealers, Exchange Act Release No. 68071 (Oct. 18,
2012), 77 FR 70213 (Nov. 23, 2012); Recordkeeping
and Reporting Requirements for Security-Based
Swap Dealers, Major Security-Based Swap
Participants, and Broker-Dealers; Capital Rule for
Certain Security-Based Swap Dealers; Proposed
Rules, Exchange Act Release No. 71958 (Apr. 17,
2014), 79 FR 25194 (May 2, 2014); Applications by
Security-Based Swap Dealers or Major SecurityBased Swap Participants for Statutorily Disqualified
Associated Person To Effect or Be Involved in
Effecting Security-Based Swaps, Exchange Act
Release No. 75612 (Aug 5, 2015), 80 FR 51684 (Aug.
25, 2015).
PO 00000
Frm 00065
Fmt 4703
Sfmt 4703
5667
application of certain Exchange Act
provisions and rules to security-based
swap activities. This approach also will
provide the Commission with additional
time to consider the potential impact of
the revision of the Exchange Act
definition of ‘‘security.’’
As noted above, one commenter has
suggested that the Commission extend
the expiration date for the Unlinked
Temporary Exemptions until a time that
the Commission can provide
appropriate permanent relief and other
relief to security-based swap market
participants from the federal securities
laws that apply to security-based swaps
due to their inclusion in the definition
of ‘‘security’’ under the Exchange Act.15
The Commission recognizes that the
security-based swap market and
corresponding regulatory regime have
continued to develop since it originally
issued the Exchange Act Exemptive
Order in 2011. While the Commission
has adopted many of the rules required
under Title VII, it has proposed but not
yet finalized others, including rules
relating to the capital, margin, and
segregation requirements for securitybased swap dealers and major securitybased swap participants. Before the
Commission considers any permanent
exemptive relief, the Commission
believes that additional time will be
beneficial to evaluate the new regulatory
regime and its impact on the market for
security-based swaps once the
Commission has finalized its
rulemakings. Therefore, at this time, the
Commission is not making a
determination on whether permanent
relief should be provided for the
Unlinked Temporary Exemptions.
Accordingly, pursuant to its authority
under Section 36 of the Exchange Act,16
the Commission believes it is necessary
or appropriate in the public interest,
and consistent with the protection of
investors to extend the expiration of the
Unlinked Temporary Exemptions until
February 5, 2019.
III. Solicitation of Comments
The Commission is providing
interested parties the opportunity to
comment on whether any relief should
be granted with respect to any specific
Unlinked Temporary Exemption(s)
beyond February 5, 2019. The
15 See
SIFMA Letter I and SIFMA Letter II.
U.S.C. 78mm. Section 36 of the Exchange
Act authorizes the Commission to conditionally or
unconditionally exempt, by rule, regulation, or
order any person, security, or transaction (or any
class or classes of persons, securities, or
transactions) from any provision of the Exchange
Act or any rule or regulation thereunder, to the
extent such exemption is necessary or appropriate
in the public interest, and is consistent with the
protection of investors.
16 15
E:\FR\FM\08FEN1.SGM
08FEN1
5668
Federal Register / Vol. 83, No. 27 / Thursday, February 8, 2018 / Notices
Commission recognizes that the
security-based swap market and
corresponding regulatory regime have
developed in the period of time since
the Commission originally issued the
Exchange Act Exemptive Order, and
will continue to do so. As such, to
determine whether permanent
exemptive relief is necessary or
appropriate in the public interest, and
consistent with the protection of
investors, the Commission invites
comments on the relief and requests that
interested parties provide detailed and
updated information relating to the
Unlinked Temporary Exemptions.
To the extent that interested parties
request specific relief for any of the
Unlinked Temporary Exemptions
beyond February 5, 2019, the
Commission encourages any such
interested parties to be detailed in any
request as to the circumstances in which
the Exchange Act provision or rule
applies to security-based swaps or
security-based swap market
participants, and why relief would be
necessary.
Comments may be submitted by any
of the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/exorders.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number S7–
27–11 on the subject line; or
• Use the Federal eRulemaking Portal
(https://www.regulations.gov). Follow the
instructions for submitting comments.
daltland on DSKBBV9HB2PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F St. NE, Washington,
DC 20549–1090.
All submissions should refer to File
Number S7–27–11. This file number
should be included on the subject line
if email is used. To help us process and
review your comments more efficiently,
please use only one method. The
Commission will post all comments on
the Commission’s internet website
(https://www.sec.gov/rules/
exorders.shtml). Comments are also
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F St. NE,
Washington, DC 20549 on official
business days between the hours of 10
a.m. and 3 p.m. All comments received
will be posted without change. Persons
submitting comments are cautioned that
the Commission does not redact or edit
personal identifying information from
comment submissions. You should
VerDate Sep<11>2014
17:18 Feb 07, 2018
Jkt 244001
submit only information that you wish
to make available publicly.
IV. Conclusion
It is hereby ordered, pursuant to
Section 36 of the Exchange Act, that the
Unlinked Temporary Exemptions
contained in the Exchange Act
Exemptive Order and extended in the
2017 Extension Order in connection
with the revisions of the Exchange Act
definition of ‘‘security’’ to encompass
security-based swaps are extended until
February 5, 2019.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2018–02498 Filed 2–7–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82622; File No. SR–CBOE–
2018–008]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing of a
Proposed Rule Change Relating to
Flexibly Structured Options
February 2, 2018.
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
19, 2018, Cboe Exchange, Inc.
(‘‘Exchange’’ or ‘‘Cboe Options’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange seeks to amend its rules
related to flexibly structured options
(‘‘FLEX Options’’). The text of the
proposed rule change is available on the
Exchange’s website (https://
www.cboe.com/AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00066
Fmt 4703
Sfmt 4703
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
The Exchange is proposing to make
certain revisions to Rules 24A.4.02,
which contains certain requirements for
a FLEX Option that has the exact same
terms as a Non-FLEX Option.
FLEX Options with quarterly
expirations, short term expirations,
weekly expirations,3 and End of Month
(‘‘EOM’’) expirations are not currently
fungible with Non-FLEX Options with
identical terms. Such expirations were
not originally intended to be fungible.4
3 The Exchange notes that Rule 24.9(e) no longer
uses the term End of Week (EOW) expirations. The
Exchange added Monday and Wednesday
expirations to Rule 24.9(e), and Monday,
Wednesday, and Friday expirations are termed
weekly expirations in Rule 24.9(e). See Rule 24.9(e).
4 See e.g., Securities Exchange Act Release Nos.
59060 (December 5, 2008), 73 FR 76075 (December
15, 2008)(SR–CBOE–2008–115 proposal notice);
59417 (February 18, 2009), 74 FR 8591 (February
25, 2009) (SR–CBOE–2008–115 approval order);
and Securities Exchange Act Release 59675 (April
1, 2009), 74 FR 15794 (April 7, 2009) (SR–OCC–
2009–05). FLEX Options with non-Expiration
Friday expiration dates that coincide with other
Non-FLEX option expiration dates and with terms
identical to those Non-FLEX Options were
permitted before, and were not originally intended
by the Exchange to become subject to, the
fungibility provisions adopted through SR–CBOE–
2008–115 (e.g., a FLEX Option that expires on the
last day of a quarter and that has terms identical
to a Non-FLEX Option series is not fungible with
that Non-FLEX Option series; however, certain
position limit aggregation requirements apply under
Rules 24A.7(d)(1)–(2) and 24B.7(d)(1)–(2)). See also,
e.g., Securities Exchange Release Act Nos. 62658
(August 5, 2010), 75 FR 49010 (August 12,
2010)(SR–CBOE–2009–075 proposal notice) and
62911 (September 14, 2010), 75 FR 57539
(September 21, 2010) (SR–CBOE–2009–075
approval order)(footnote 8 of the proposal notice
indicates that FLEX Options do not become
fungible with subsequently introduced Non-FLEX
structured quarterly and short term options and
that, because of the similarities between EOW and
EOM expirations and existing Non-FLEX structured
quarterly and short term options, FLEX Options
will similarly not become fungible with EOW and
EOM expirations listed for trading). As previously
noted, Rule 24.9(e) was amended to include
E:\FR\FM\08FEN1.SGM
08FEN1
Agencies
[Federal Register Volume 83, Number 27 (Thursday, February 8, 2018)]
[Notices]
[Pages 5665-5668]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-02498]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82626; File No. S7-27-11]
Order Extending Until February 5, 2019 Certain 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
February 2, 2018.
I. Introduction
The Securities and Exchange Commission (``Commission'') is (i)
extending until February 5, 2019 certain temporary exemptive relief
originally provided by the Commission in connection with the revision
of the definition of ``security'' in the Securities Exchange Act of
1934 (``Exchange Act'') to encompass security-based swaps (``Temporary
Exemptions''); \1\ and (ii) requesting comment on whether continuing
such exemptive relief beyond February 5, 2019 is necessary or
appropriate in the public interest, and is consistent with the
protection of investors.
---------------------------------------------------------------------------
\1\ See Order Granting Temporary Exemptions under the Securities
Exchange Act of 1934 in Connection with the Pending Revisions of the
Definition of ``Security'' to Encompass Security-Based Swaps,
Exchange Act Release No. 64795 (July 1, 2011), 76 FR 39927 (July 7,
2011) (``Exchange Act Exemptive Order'').
---------------------------------------------------------------------------
II. Discussion
A. Background
Title VII of the Dodd-Frank Wall Street Reform and Consumer
Protection Act \2\ amended the definition of ``security'' under the
Exchange Act to expressly encompass security-based
[[Page 5666]]
swaps.\3\ The expansion of the definition of the term ``security'' to
include security-based swaps had the effect of changing the scope of
the Exchange Act regulatory provisions that apply to security-based
swaps and, in doing so, raised certain complex questions that require
further consideration.
---------------------------------------------------------------------------
\2\ The Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124, Stat. 1376 (2010) (``Dodd-Frank
Act'').
\3\ See Section 761(a)(2) of the Dodd-Frank Act (amending
Section 3(a)(10) of the Exchange Act (15 U.S.C. 78c(a)(10)). The
provisions of Title VII generally became effective on July 16, 2011
(360 days after the enactment of the Dodd-Frank Act) (the
``Effective Date''), unless a provision required a rulemaking, in
which case the provision would go into effect ``not less than'' 60
days after publication of the related final rules in the Federal
Register or on July 16, 2011, whichever is later. See Section 774 of
the Dodd-Frank Act (15 U.S.C. 77b).
---------------------------------------------------------------------------
On July 1, 2011, the Commission issued the Exchange Act Exemptive
Order granting temporary exemptive relief from compliance with certain
provisions of the Exchange Act in connection with the revision of the
Exchange Act definition of ``security'' to encompass security-based
swaps.\4\ In general, the Exchange Act Exemptive Order granted
temporary exemptive relief from compliance with certain provisions of
the Exchange Act in connection with security-based swap activity by:
(i) Any person who meets the definition of ``eligible contract
participant'' (``ECPs'') set forth in Section 1a(12) of the Commodity
Exchange Act as of July 20, 2010 (i.e., the day prior to the date the
Dodd-Frank Act was signed into law) and (ii) a broker or dealer
registered under Section 15(b) of the Exchange Act.\5\
---------------------------------------------------------------------------
\4\ At the time it issued the Exchange Act Exemptive Order, the
Commission also adopted interim final Rule 240 under the Securities
Act of 1933 (``Securities Act''), interim final Rules 12a-11 and
12h-1(i) under the Exchange Act, and interim final Rule 4d-12 under
the Trust Indenture Act (``Trust Indenture Act''). See 17 CFR
230.240, 17 CFR 240.12a-11, 17 CFR 240.12h-1, and 17 CFR 260.4d-12.
See also Exemptions for Security-Based Swaps, Securities Act Release
No. 9231 (July 1, 2011), 76 FR 40605 (July 11, 2011). This extension
order does not address these interim final rules, which are
scheduled to expire on February 11, 2018. See Exemptions for
Security-Based Swaps, Securities Act Release No. 10305 (Feb. 10,
2017), 82 FR 10703 (Feb. 15, 2017). The Commission recently adopted
a rule under the Securities Act to provide that certain
communications involving security-based swaps will not be deemed to
constitute ``offers'' of such security-based swaps for purposes of
Section 5 of the Securities Act. See Treatment of Certain
Communications Involving Security-Based Swaps That May Be Purchased
Only By Eligible Contract Participants, Securities Act Release No.
10450 (Jan. 5, 2018), 83 FR 2046 (Jan. 16, 2018).
The Commission also, on June 15, 2011, issued an exemptive
order granting temporary relief from compliance with certain
provisions added to the Exchange Act by subtitle B of Title VII of
the Dodd-Frank Act with which compliance would have otherwise been
required as of the Effective Date. In that order, the Commission
provided guidance regarding the provisions of the Exchange Act that
were added by Title VII with which compliance was required as of the
Effective Date. See Temporary Exemptions and Other Temporary Relief,
Together with Information on Compliance Dates for New Provisions of
the Securities Exchange Act of 1934 Applicable to Securities-Based
Swaps, Exchange Act Release No. 64678 (June 15, 2011), 76 FR 36287
(June 22, 2011).
\5\ See Exchange Act Exemptive Order, 76 FR at 39938-39. The
Exchange Act Exemptive Order did not provide exemptive relief for
any provisions or rules prohibiting fraud, manipulation, or insider
trading (other than the prophylactic reporting or recordkeeping
requirements such as the confirmation requirements of Exchange Act
Rule 10b-10). In addition, the Exchange Act Exemptive Order did not
affect the Commission's investigative, enforcement, and procedural
authority related to those provisions and rules. See Exchange Act
Exemptive Order at 39931, note 34. The Exchange Act Exemptive Order
also did not address Sections 12, 13, 14, 15(d), 16, and 17A of the
Exchange Act and the rules thereunder. The Commission did, however,
issue limited temporary relief from the clearing agency registration
requirements under Section 17A(b) for entities providing certain
clearing services for security-based swaps. This relief was linked
to final rules issued by the Commission relating to the registration
of clearing agencies that clear security-based swaps. See Order
Pursuant to Section 36 of the Securities Exchange Act of 1934
Granting Temporary Exemptions from Clearing Agency Registration
Requirements under Section 17A(b) of the Exchange Act for Entities
Providing Certain Clearing Services for Security-Based Swaps,
Exchange Act Release No. 64796 (July 1, 2011), 76 FR 39963 (July 7,
2011).
The Commission also provided a temporary exemption within the
Exchange Act Exemptive Order for Sections 5 and 6 of the Exchange
Act and linked the expiration date of that exemptive relief until
the earliest compliance date set forth in any of the final rules
regarding registration of security-based swap execution facilities.
See Exchange Act Exemptive Order, 76 FR at 39934-36.
The Exchange Act Exemptive Order further provided that no
security-based swap contract entered into on or after July 16, 2011
shall be void or considered voidable by reason of Section 29(b) of
the Exchange Act because any person that is a party to the contract
violated a provision of the Exchange Act for which the Commission
has provided exemptive relief in the Exchange Act Exemptive Order,
until such time as the underlying exemptive relief expires. By
extending the underlying exemptive relief until February 5, 2019,
this order will also extend the relevant Section 29(b) relief until
that same date. See Exchange Act Exemptive Order, 76 FR at 39938-39.
---------------------------------------------------------------------------
The overall approach of the Exchange Act Exemptive Order was
directed toward maintaining the status quo during the implementation
process for the Dodd-Frank Act.\6\ In the Exchange Act Exemptive Order,
the Commission stated that it would accomplish this ``by preserving the
application of particular Exchange Act requirements that already are
applicable in connection with instruments that will be `security-based
swaps' following the Effective Date [of the Dodd-Frank Act], but
deferring the applicability of additional Exchange Act requirements in
connection with those instruments explicitly being defined as
`securities' as of the Effective Date.'' \7\
---------------------------------------------------------------------------
\6\ See Exchange Act Exemptive Order, 76 FR at 39929.
\7\ Id. These instruments generally constituted ``security-based
swap agreements'' under the pre-Dodd-Frank Act framework and were
already subject to specific antifraud and anti-manipulation
provisions under the Exchange Act (including Exchange Act Section
10(b)). Under the Exchange Act Exemption Order, instruments that
(before the Effective Date) were security-based swap agreements and
(after the Effective Date) constituted security-based swaps were
still subject to the application of those Exchange Act provisions.
See Exchange Act Exemptive Order, 76 FR at 39930, nn. 24-25.
---------------------------------------------------------------------------
In 2014, the Commission extended the expiration dates for the
Temporary Exemptions.\8\ In the 2014 Extension Order, the Commission
distinguished between: (i) The Temporary Exemptions related to pending
security-based swap rulemakings (``Linked Temporary Exemptions''); and
(ii) the Temporary Exemptions that generally were not directly related
to a specific security-based swap rulemaking (``Unlinked Temporary
Exemptions''). The expiration dates for the Linked Temporary Exemptions
established by the 2014 Extension Order were the compliance dates for
the specific rulemakings to which they were ``linked,'' and the
expiration date for the Unlinked Temporary Exemptions was three years
following the effective date of the 2014 Extension Order (i.e.,
February 5, 2017), or such time that the Commission issues an order or
rule determining whether continuing exemptive relief is appropriate for
security-based swaps with respect to any such Unlinked Temporary
Exemptions. This approach was designed to provide the Commission with
flexibility while its Dodd-Frank Act rulemaking is still in progress to
determine whether continuing relief should be provided for any of the
Unlinked Temporary Exemptions.\9\
---------------------------------------------------------------------------
\8\ See 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, Exchange Act Release No. 71485 (Feb. 5,
2014), 79 FR 7731 (Feb. 10, 2014) (``2014 Extension Order'')
(extending the expiration date for certain Temporary Exemptions to
February 5, 2017). See also Further Definition of ``Swap,''
``Security-Based Swap,'' and ``Security-Based Swap Agreement'';
Mixed Swaps; Security-Based Swap Agreement Recordkeeping, Exchange
Act Release No. 67453 (July 18, 2012), 77 FR 48207 (Aug. 13, 2012)
(``Product Definitions Adopting Release'') (extending the expiration
date of the Temporary Exemptions to February 11, 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, Exchange Act Release No. 68864 (Feb. 7, 2013), 78 FR 10218
(Feb. 13, 2013) (extending the expiration date to February 11,
2014).
\9\ See 2014 Extension Order, 79 FR at 7731. The 2014 Extension
Order also linked the expiration date of the Linked Temporary
Exemptions to the compliance date for such rulemakings. The 2014
Extension Order identified the Linked Temporary Exemptions as those
related to: (1) Capital and margin requirements applicable to a
broker or dealer (Sections 7 and 15(c)(3), Regulation T, and
Exchange Act Rules 15c3-1, 15c3-3, and 15c3-4); (2) recordkeeping
requirements applicable to a broker or dealer (Sections 17(a) and
17(b) and Exchange Act Rules 17a-3, 17a-4, 17a-5, 17a-11, and 17a-
13); (3) registration requirements under Section 15(a)(1), and the
other requirements of the Exchange Act and the rules and regulations
thereunder that apply to a ``broker'' or ``dealer'' that is not
registered with the Commission; (4) Exchange Act Rule 10b-10; and
(5) Regulation ATS. Accordingly, as applicable, the Commission
extended these exemptions until the compliance date for pending
rulemakings concerning: capital, margin, and segregation
requirements for security-based swap dealers and major security-
based swap participants; recordkeeping and reporting requirements
for broker-dealers, security-based swap dealers, and major security-
based swap participants; security-based swap trade acknowledgements;
and registration requirements for security-based swap execution
facilities.
The Linked Temporary Exemptions are not addressed in this order
and will be separately considered in connection with the related
security-based swap rulemakings. The Commission has already
addressed some of the Linked Temporary Exemptions. For example, on
June 8, 2016, the Commission adopted new rules for trade
acknowledgement and verification of security-based swap
transactions. See Trade Acknowledgement and Verification of
Security-Based Swap Transactions, Exchange Act Release No. 78011
(June 8, 2016), 81 FR 39807 (June 17, 2016) (``Trade Acknowledgement
Release''). In that release, the Commission described the
application of Exchange Act Rule 10b-10 to transactions in security-
based swaps and noted that the Linked Temporary Exemption relating
to Exchange Act Rule 10b-10 would expire upon the compliance date of
the new Rule 15Fi-2. See Trade Acknowledgement Release, 81 FR at
39824-25, n. 189.
---------------------------------------------------------------------------
[[Page 5667]]
The Commission most recently extended the expiration date of the
Unlinked Temporary Exemptions until February 5, 2018.\10\ In the 2017
Extension Order, the Commission also requested comment on whether
continuing exemptive relief is necessary beyond February 5, 2018.\11\
Two commenters expressed support for extending the exemptive relief,
with one reiterating its prior request that the Commission provide
permanent exemptive and other relief to security-based swap market
participants from the Exchange Act and the Securities Act.\12\
---------------------------------------------------------------------------
\10\ See Order Extending Certain 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, Exchange Act Release No. 79833 (Jan. 18, 2017),
82 FR 8467 (Jan. 25, 2017) (``2017 Extension Order'').
\11\ Comments received are available at https://www.sec.gov/comments/s7-27-11/s72711.shtml. The Commission did not receive any
comments in response to the request for comment in the 2014
Extension Order. However, in 2012, the Commission received a request
from market participants to extend certain of the Temporary
Exemptions, citing concerns that key issues and questions regarding
the application of the federal securities laws remained unresolved
and continuing concerns about the potential for unnecessary
disruption to the security-based swap market. See SIFMA Request for
Extension of the Expiration Date of the SEC's Exchange Act Exemptive
Order and SBS Interim final Rules (Dec. 20, 2012), which is
available at https://www.sec.gov/comments/s7-27-11/s72711-12.pdf.
\12\ See comment from Layla Spencer, dated January 30, 2017; and
letters from Kyle Brandon, Managing Director, SIFMA, dated February
2, 2017 (``SIFMA Letter I'') and January 11, 2018 (``SIFMA Letter
II'') (requesting that the Commission further extend the exemptive
relief for the Unlinked Temporary Exemptions). For details regarding
SIFMA's request for permanent exemptive and other relief, see Draft
SIFMA SBS Exemptive Relief Request (Oct. 20, 2011), which is
available at https://www.sec.gov/comments/s7-27-11/s72711-7.pdf, and
SIFMA SBS Exemptive Relief Request (Dec. 5, 2011), which is
available at https://www.sec.gov/comments/s7-27-11/s72711-10.pdf.
Two other commenters provided statements that are not germane to the
consideration of the extension.
---------------------------------------------------------------------------
B. Extension of Unlinked Temporary Exemptions
Since the issuance of the 2014 Extension Order, the Commission has
implemented a substantial portion of the regulatory regime for
security-based swaps set forth in Title VII of the Dodd-Frank Act.\13\
However, the Commission is still in the process of finalizing its rules
under Title VII of the Dodd-Frank Act.\14\ Therefore, the Commission
believes it is necessary or appropriate in the public interest, and
consistent with the protection of investors to extend the Unlinked
Temporary Exemptions until February 5, 2019 to avoid any potential
market disruption stemming from the application of certain Exchange Act
provisions and rules to security-based swap activities. This approach
also will provide the Commission with additional time to consider the
potential impact of the revision of the Exchange Act definition of
``security.''
---------------------------------------------------------------------------
\13\ See, e.g., Regulation SBSR--Reporting and Dissemination of
Security-Based Swap Information, Exchange Act Release No. 74244
(Feb. 11, 2015), 80 FR 14563 (Mar. 19, 2015); Security-Based Swap
Data Repository Registration, Duties, and Core Principles, Exchange
Act Release No. 74246 (Feb. 11, 2015), 80 FR 14437 (Mar. 19, 2015);
Registration Process for Security-Based Swap Dealers and Major
Security-Based Swap Participants, Exchange Act Release No. 75611
(Aug. 5, 2015), 80 FR 48963 (Aug. 14, 2015); Security-Based Swap
Transactions Connected with a Non-U.S. Person's Dealing Activity
That Are Arranged, Negotiated, or Executed By Personnel Located in a
U.S. Branch or Office or in a U.S. Branch or Office of an Agent;
Security-Based Swap Dealer De Minimis Exception, Exchange Act
Release No. 77104 (Feb. 10, 2016), 81 FR 8597 (Feb. 19, 2016); Trade
Acknowledgement Release; Business Conduct Standards for Security-
Based Swap Dealers and Major Security-Based Swap Participants,
Exchange Act Release 77617 (Apr. 14, 2016), 81 FR 29960 (May 13,
2016); Regulation SBSR--Reporting and Dissemination of Security-
Based Swap Information, Exchange Act Release No. 78321 (July 14,
2016), 81 FR 53545 (Aug. 12, 2016); Access to Data Obtained by
Security-Based Swap Data Repositories, Exchange Act Release No.
78716 (Aug. 29, 2016), 81 FR 60585 (Sept. 2, 2016).
\14\ See, e.g., Registration and Regulation of Security-Based
Swap Execution Facilities, Exchange Act Release No. 63825 (Feb. 2,
2011), 76 FR 10948 (Feb. 28, 2011); Capital, Margin, and Segregation
Requirements for Security-Based Swap Dealers and Major Security-
Based Swap Participants and Capital Requirements for Broker-Dealers,
Exchange Act Release No. 68071 (Oct. 18, 2012), 77 FR 70213 (Nov.
23, 2012); Recordkeeping and Reporting Requirements for Security-
Based Swap Dealers, Major Security-Based Swap Participants, and
Broker-Dealers; Capital Rule for Certain Security-Based Swap
Dealers; Proposed Rules, Exchange Act Release No. 71958 (Apr. 17,
2014), 79 FR 25194 (May 2, 2014); Applications by Security-Based
Swap Dealers or Major Security-Based Swap Participants for
Statutorily Disqualified Associated Person To Effect or Be Involved
in Effecting Security-Based Swaps, Exchange Act Release No. 75612
(Aug 5, 2015), 80 FR 51684 (Aug. 25, 2015).
---------------------------------------------------------------------------
As noted above, one commenter has suggested that the Commission
extend the expiration date for the Unlinked Temporary Exemptions until
a time that the Commission can provide appropriate permanent relief and
other relief to security-based swap market participants from the
federal securities laws that apply to security-based swaps due to their
inclusion in the definition of ``security'' under the Exchange Act.\15\
The Commission recognizes that the security-based swap market and
corresponding regulatory regime have continued to develop since it
originally issued the Exchange Act Exemptive Order in 2011. While the
Commission has adopted many of the rules required under Title VII, it
has proposed but not yet finalized others, including rules relating to
the capital, margin, and segregation requirements for security-based
swap dealers and major security-based swap participants. Before the
Commission considers any permanent exemptive relief, the Commission
believes that additional time will be beneficial to evaluate the new
regulatory regime and its impact on the market for security-based swaps
once the Commission has finalized its rulemakings. Therefore, at this
time, the Commission is not making a determination on whether permanent
relief should be provided for the Unlinked Temporary Exemptions.
---------------------------------------------------------------------------
\15\ See SIFMA Letter I and SIFMA Letter II.
---------------------------------------------------------------------------
Accordingly, pursuant to its authority under Section 36 of the
Exchange Act,\16\ the Commission believes it is necessary or
appropriate in the public interest, and consistent with the protection
of investors to extend the expiration of the Unlinked Temporary
Exemptions until February 5, 2019.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78mm. Section 36 of the Exchange Act authorizes
the Commission to conditionally or unconditionally exempt, by rule,
regulation, or order any person, security, or transaction (or any
class or classes of persons, securities, or transactions) from any
provision of the Exchange Act or any rule or regulation thereunder,
to the extent such exemption is necessary or appropriate in the
public interest, and is consistent with the protection of investors.
---------------------------------------------------------------------------
III. Solicitation of Comments
The Commission is providing interested parties the opportunity to
comment on whether any relief should be granted with respect to any
specific Unlinked Temporary Exemption(s) beyond February 5, 2019. The
[[Page 5668]]
Commission recognizes that the security-based swap market and
corresponding regulatory regime have developed in the period of time
since the Commission originally issued the Exchange Act Exemptive
Order, and will continue to do so. As such, to determine whether
permanent exemptive relief is necessary or appropriate in the public
interest, and consistent with the protection of investors, the
Commission invites comments on the relief and requests that interested
parties provide detailed and updated information relating to the
Unlinked Temporary Exemptions.
To the extent that interested parties request specific relief for
any of the Unlinked Temporary Exemptions beyond February 5, 2019, the
Commission encourages any such interested parties to be detailed in any
request as to the circumstances in which the Exchange Act provision or
rule applies to security-based swaps or security-based swap market
participants, and why relief would be necessary.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/exorders.shtml); or
Send an email to [email protected]. Please include
File Number S7-27-11 on the subject line; or
Use the Federal eRulemaking Portal (https://www.regulations.gov). Follow the instructions for submitting comments.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F St. NE, Washington, DC 20549-1090.
All submissions should refer to File Number S7-27-11. This file number
should be included on the subject line if email is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
internet website (https://www.sec.gov/rules/exorders.shtml). Comments
are also available for website viewing and printing in the Commission's
Public Reference Room, 100 F St. NE, Washington, DC 20549 on official
business days between the hours of 10 a.m. and 3 p.m. All comments
received will be posted without change. Persons submitting comments are
cautioned that the Commission does not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly.
IV. Conclusion
It is hereby ordered, pursuant to Section 36 of the Exchange Act,
that the Unlinked Temporary Exemptions contained in the Exchange Act
Exemptive Order and extended in the 2017 Extension Order in connection
with the revisions of the Exchange Act definition of ``security'' to
encompass security-based swaps are extended until February 5, 2019.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2018-02498 Filed 2-7-18; 8:45 am]
BILLING CODE 8011-01-P