Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Temporarily Extend Certain Filing Requirements, 19190-19191 [2020-07083]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 85, Number 66 (Monday, April 6, 2020)]
[Notices]
[Pages 19190-19191]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07083]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88527; File No. SR-Phlx-2020-16]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Temporarily 
Extend Certain Filing Requirements

March 31, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 27, 2020, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to temporarily extend the filing requirements 
for certain written reports, currently due April 1, 2020 pursuant to 
Options 10, Section 7, to June 1, 2020.
    The text of the proposed rule change is available on the Exchange's 
website at https://nasdaqphlx.cchwallstreet.com/, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Given current market conditions, the Exchange proposes to provide 
its members temporary relief from filing certain supervision-related 
reports pursuant to Options 10, Section 7 (Supervision of Accounts).
    In December 2019, COVID-19 began to spread and disrupt company 
operations and supply chains and impact consumers and investors, 
resulting in a dramatic slowdown in production and spending.\3\ By 
March 11, 2020, the World Health Organization characterized COVID-19 as 
a pandemic.\4\ To slow the spread of the disease, federal and state 
officials implemented social-distancing measures, placed significant 
limitations on large gatherings, limited travel, and closed non-
essential businesses. These measures have affected the U.S. markets.\5\ 
In the United States, Level 1 market wide circuit breaker halts were 
triggered on March 9, March 12, March 16, and March 18, 2020. While 
markets have seen significant declines, governments around the world 
are undertaking efforts to stabilize the economy and assist affected 
companies and their employees.\6\
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    \3\ See, e.g., Chairman Jay Clayton, Proposed Amendments to 
Modernize and Enhance Financial Disclosures; Other Ongoing 
Disclosure Modernization Initiatives; Impact of the Coronavirus; 
Environmental and Climate-Related Disclosure (Jan. 30, 2020), 
available at https://www.sec.gov/news/public-statement/clayton-mda-2020-01-30. (``Yesterday, I asked the staff to monitor and, to the 
extent necessary or appropriate, provide guidance and other 
assistance to issuers and other market participants regarding 
disclosures related to the current and potential effects of the 
coronavirus. We recognize that such effects may be difficult to 
assess or predict with meaningful precision both generally and as an 
industry- or issuer-specific basis. This is an uncertain issue where 
actual effects will depend on many factors beyond the control and 
knowledge of issuers.'').
    \4\ See WHO Director-General's Opening Remarks at the Media 
Briefing on COVID-19 (March 11, 2020), available at https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19-11-march-2020.
    \5\ ``Analysts showed that we saw the fastest `correction' in 
history (down 10% from a high), occurring in a matter of days. In 
the last week of February, the Dow fell 12.36% with notional trading 
of $3.6 trillion.'' See Phil Mackintosh, Putting the Recent 
Volatility in Perspective, available at https://www.nasdaq.com/articles/putting-the-recent-volatility-in-perspective-2020-03-05.
    \6\ See, e.g., the list of actions undertaken by the Board of 
Governors of the Federal Reserve System at https://www.federalreserve.gov/covid-19.htm. See also Families First 
Coronavirus Response Act, Public Law 116-127.
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    Amidst this market uncertainty, the Exchange is seeking to address 
potential challenges that members may face in timely meeting their 
obligations to submit to the Exchange annual supervision-related 
reports under Options 10, Sections 7(g) and (h) (``Supervision 
Reporting Requirements''), especially in light of unforeseen and 
uncertain demands on resources required to respond to COVID-19. Options 
10, Section 7(g) requires each Exchange member that conducts a non-
member customer business to submit to the Exchange a written report on 
the member's supervision and compliance effort during the preceding 
year and on the adequacy of the member's ongoing compliance processes 
and procedures. Each member that conducts a public customer options 
business is also required to specifically include its options 
compliance program in the report.\7\ The Section 7(g) report is due on 
April 1 of each year. Options 10, Section 7(h) requires that each 
member submit, by April 1 of each year, a copy of the Section 7(g) 
report to one or more control persons or, if the member has no control 
person, to the audit committee of its board of directors or its 
equivalent committee or group.\8\
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    \7\ The report shall include, but not be limited to, the 
information set out in Options 10, Section 7(g)(i)-(v).
    \8\ See Options 10, Section 7(h) for the meaning of the term 
``control person'' and requirements in the case of a control person 
that is an organization.
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    Accordingly, the Exchange proposes to provide temporary relief for 
members from the Supervision Reporting Requirements by extending the 
April 1, 2020 filing deadlines described above to June 1, 2020. The 
Exchange believes that this temporary relief will permit members to 
focus on running their businesses and the immediate health crisis 
caused by the COVID-19 pandemic, including its impact on their 
employees, customers, and communities.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\10\ in particular, in that it is designed to 
promote just and equitable principles of trade; to remove impediments 
to and

[[Page 19191]]

perfect the mechanism of a free and open market and a national market 
system; and, in general to protect investors and the public interest. 
As a result of uncertainty related to the ongoing spread of the COVID-
19 virus, the U.S. exchanges are experiencing unprecedented market 
volatility. The proposed rule change would allow the Exchange to 
provide temporary relief for members from the Supervision Reporting 
Requirements, which currently requires members to provide written 
reports to the Exchange by April 1, 2020, and extend that deadline to 
June 1, 2020. The Exchange believes that this temporary relief is 
necessary and appropriate in the public interest, and consistent with 
the protection of investors, given the unforeseen and uncertain 
challenges, including business continuity implementation and market 
volatility, posed by COVID-19 to members that must comply with the 
Supervision Reporting Requirements.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change is not 
designed to address any competitive issues but rather to provide 
temporary relief for all members that are required to comply with the 
Supervision Reporting Requirements.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Commission has waived this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \13\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the proposed rule change may become operative upon filing. The 
Commission notes that the proposed rule change would allow the 
Exchange, in light of the COVID-19 pandemic, to provide temporary 
relief for members by extending the deadline for written reports 
pursuant to the Supervision Reporting Requirements from April 1, 2020 
to June 1, 2020. The Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Accordingly, the Commission hereby waives the 
operative delay and designates the proposed rule change operative upon 
filing.\15\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PHLX-2020-16 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-PHLX-2020-16. 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 proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-PHLX-2020-16 and should be submitted on 
or before April 27, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07083 Filed 4-3-20; 8:45 am]
 BILLING CODE 8011-01-P