Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Further Extend the Deadline for Certain Written Supervisory-Related Reports Pursuant to Options 10, Section 7 (Supervision of Accounts), 34789-34791 [2020-12278]
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Federal Register / Vol. 85, No. 110 / Monday, June 8, 2020 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88995; File No. SR–Phlx–
2020–29]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Further Extend the
Deadline for Certain Written
Supervisory-Related Reports Pursuant
to Options 10, Section 7 (Supervision
of Accounts)
June 2, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b-4 thereunder,2
notice is hereby given that on June 1,
2020, Nasdaq PHLX LLC (‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to further
extend the filing requirements for
certain written reports pursuant to
Options 10, Section 7, currently due
June 1, 2020, to June 30, 2020.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqphlx.cchwallstreet.com/,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
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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.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Given current market conditions, the
Exchange proposes to provide its
members temporary relief from filing
certain supervision-related reports
pursuant to Options 10, Section 7
(Supervision of Accounts).
In December 2019, COVID–19 began
to spread and disrupt company
operations and supply chains and
impact consumers and investors,
resulting in a dramatic slowdown in
production and spending.3 By March
11, 2020, the World Health Organization
characterized COVID–19 as a
pandemic.4 To slow the spread of the
disease, federal and state officials
implemented social-distancing
measures, placed significant limitations
on large gatherings, limited travel, and
closed non-essential businesses. These
measures have affected the U.S.
markets.5 In the United States, Level 1
market wide circuit breaker halts were
triggered on March 9, March 12, March
16, and March 18, 2020. While markets
have seen significant declines,
governments around the world are
undertaking efforts to stabilize the
economy and assist affected companies
and their employees.6 State
governments have only recently relaxed
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-mda2020-01-30. (‘‘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-openingremarks-at-the-media-briefing-on-covid-19---11march-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-2020-0305.
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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34789
some social distancing measures and
permitted the limited reopening of nonessential businesses. Significant
uncertainty remains.
Amidst this continued and
unprecedented market uncertainty, the
Exchange sought to address potential
challenges that members may face in
timely meeting their obligations to
submit to the Exchange annual
supervision-related reports under
Options 10, Sections 7(g) and (h)
(‘‘Supervision Reporting
Requirements’’), especially in light of
unforeseen and uncertain demands on
resources required to respond to
COVID–19. Options 10, Section 7(g)
requires each Exchange member that
conducts a non-member customer
business to submit to the Exchange a
written report on the member’s
supervision and compliance effort
during the preceding year and on the
adequacy of the member’s ongoing
compliance processes and procedures.
Each member that conducts a public
customer options business is also
required to specifically include its
options compliance program in the
report.7 The Section 7(g) report is due
on April 1 of each year. Options 10,
Section 7(h) requires that each member
submit, by April 1 of each year, a copy
of the Section 7(g) report to one or more
control persons or, if the member has no
control person, to the audit committee
of its board of directors or its equivalent
committee or group.8
On March 31, 2020, the Exchange
filed a proposal to temporarily extend
the filing requirements for these annual
supervision-related reports from April 1,
2020 to June 1, 2020.9 In light of the
continued market uncertainty, the
Exchange is again seeking to address
potential challenges that members may
face in timely meeting their obligations
to submit to the Exchange annual
supervision-related reports.
Accordingly, the Exchange proposes to
provide additional, temporary relief for
members from the Supervision
Reporting Requirements by further
extending the June 1, 2020 filing
deadlines described above to June 30,
2020. The Exchange believes that this
additional, temporary relief will permit
members to continue to focus on
running their businesses and the health
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.
9 See Securities Exchange Act Release No. 88827
(March 31, 2020), 85 FR 19190 (April 6, 2020)
(Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Temporarily Extend
Certain Filing Requirement.
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34790
Federal Register / Vol. 85, No. 110 / Monday, June 8, 2020 / Notices
crisis caused by the COVID–19
pandemic, including its impact on their
employees, customers, and
communities.
The Exchange notes that in response
to COVID–19, the Financial Industry
Reporting Authority (‘‘FINRA’’) recently
reissued temporary relief for member
firms by, among other things, extending
the deadline for submitting its
supervision-related reports (FINRA Rule
3120 Report and FINRA Rule 3130
certification) from its initial extension
deadlines of June 1, 2020 10 to June 30,
2020.11 The Exchange notes, too, that at
least one other options exchange that
had previously extended the
supervisory report deadlines from April
1 to June 1 for its members,12 also plans
to submit a similar filing to, again,
extend its deadlines through June 30,
2020. In light of these deadline
extensions, the Exchange believes that
extending its deadline would avoid
unnecessary confusion and added
burden among entities that are members
of both the Exchange and FINRA
because the deadline to submit
supervisory reports would remain
uniform.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,13 in general, and furthers the
objectives of Section 6(b)(5) of the Act,14
in particular, in that it is designed to
promote just and equitable principles of
trade; to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system; and, in general to protect
investors and the public interest. As a
result of continued uncertainty related
to the ongoing spread of the COVID–19
virus, the U.S. exchanges are
experiencing unprecedented market
volatility. The proposed rule change
would allow the Exchange to continue
to provide temporary relief for members
from the Supervision Reporting
Requirements, which were amended
once already to require members to
provide written reports to the Exchange
by June 1, 2020, and further extend that
deadline to June 30, 2020. The Exchange
believes that this additional, temporary
relief is necessary and appropriate in
10 See FINRA Regulatory Notice 20–08 (March 9,
2020) available at https://www.finra.org/rulesguidance/notices/20-08.
11 See FINRA Regulatory Notice 20–08, FAQs,
Supervision (May 19, 2020) available at https://
www.finra.org/rules-guidance/key-topics/covid-19/
faq#supe.
12 See Securities Exchange Act No. 88528 (March
31, 2020), 85 FR 19196 (April 6, 2020) (SR–CBOE–
2020–029).
13 15 U.S.C. 78f(b).
14 15 U.S.C. 78f(b)(5).
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the public interest, and consistent with
the protection of investors, given the
unforeseen and uncertain challenges,
including business continuity
implementation and market volatility,
posed by COVID–19 to members that
must comply with the Supervision
Reporting Requirements. The Exchange
also believes that it is necessary and
appropriate in the public interest, and
consistent with the protection of
investors, because FINRA has also reextended the time for its members to file
supervision-related reports from June 1,
2020 to June 30, 2020.15 Additionally, as
indicated above, at least one other
options exchange that had previously
extended the supervisory report
deadlines from April 1 to June 1 for its
members,16 plans to submit a similar
filing to re-extend its deadlines through
June 30, 2020. Extending the deadline,
therefore, will ensure that those entities
that are members of both FINRA and the
Exchange have a uniform deadline to
submit their supervisory reports.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not designed to
address any competitive issues but
rather to provide temporary relief for all
members that are required to comply
with the Supervision Reporting
Requirements.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 17 and
subparagraph (f)(6) of Rule 19b–4
thereunder.18
15 See
supra note 11.
supra note 12.
17 15 U.S.C. 78s(b)(3)(A).
18 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
16 See
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A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 19 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 20
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has
requested that the Commission waive
the 30-day operative delay so that the
proposed rule change may become
operative upon filing. The Commission
notes that the proposed rule change
would allow the Exchange, in light of
the COVID–19 pandemic, to provide
temporary relief for members by
extending the deadline for written
reports pursuant to the Supervision
Reporting Requirements from June 1,
2020 to June 30, 2020. This is consistent
with the extension FINRA has provided
its members for supervision-related
reports and certifications required
pursuant to FINRA Rule 3120 and
FINRA Rule 3130 21 and the extension
for certain supervision-related reports
Cboe Exchange, Inc. has provided its
trading permit holders.22 The
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the
operative delay and designates the
proposed rule change operative upon
filing.23
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:
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
19 17 CFR 240.19b–4(f)(6).
20 17 CFR 240.19b–4(f)(6)(iii).
21 See supra note 12.
22 See Securities Exchange Act Release No. 88978
(June 1, 2020) (SR–CBOE–2020–049).
23 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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Federal Register / Vol. 85, No. 110 / Monday, June 8, 2020 / Notices
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–
Phlx–2020–29 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
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All submissions should refer to File
Number SR–Phlx–2020–29. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (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–2020–29 and should
be submitted on or before June 29, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–12278 Filed 6–5–20; 8:45 am]
BILLING CODE 8011–01–P
24 17
CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88989; File No. SR–OCC–
2020–004]
Self-Regulatory Organizations; The
Options Clearing Corporation; Order
Approving Proposed Rule Change To
Modify the Sequence for Processing
Options Transactions
June 2, 2020.
I. Introduction
On April 6, 2020, the Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–OCC–2020–
004 (‘‘Proposed Rule Change’’) pursuant
to Section 19(b) of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 1 and Rule 19b–4 2 thereunder to
describe a change to the sequence in
which options transactions are
processed.3 The Proposed Rule Change
was published for public comment in
the Federal Register on April 21, 2020.4
The Commission has received no
comments regarding the Proposed Rule
Change. This order approves the
Proposed Rule Change.
II. Background
Currently, OCC processes all
securities and commodity futures
options transactions in the following
sequence: 5 (1) Opening Buys; (2)
Opening Sells; (3) Closing Buys; (4)
Exercises; (5) Closing Sells; and (6)
Assignments. As discussed below,
OCC’s Clearing Members indicated that
the current processing sequence could
raise issues related to compliance with
exchange rules requiring that firms
exercise only ‘‘outstanding’’ net long
positions.6 OCC proposes to change the
order in which it processes such
transactions by moving ‘‘Closing Sells’’
ahead of ‘‘Exercises,’’ which would
result in the following sequence: (1)
Opening Buys; (2) Opening Sells; (3)
Closing Buys; (4) Closing Sells; (5)
Exercises; and (6) Assignments. The
current processing sequence was
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Notice of Filing infra note 4, 85 FR at 22197.
4 Securities Exchange Act Release No. 88654
(Apr. 15, 2020), 85 FR 22197 (Apr. 21, 2020) (File
No. SR–OCC–2020–004) (‘‘Notice of Filing’’).
5 A ‘‘commodity future’’ is defined in Article
I(c)(24) of By-Laws as ‘‘a futures contract within the
exclusive jurisdiction of the Commodity Futures
Trading Commission that is traded on, through the
facilities of, or subject to the rules of a futures
market.’’ Options on securities futures currently do
not exist. See https://www.theocc.com/components/
docs/legal/rules_and_bylaws/occ_bylaws.pdf.
6 See Notice of Filing, 85 FR at 22198.
2 17
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34791
designed to protect Clearing Members
against certain errors; however, OCC
believes that operational changes as
well as increased Clearing Member
proficiency in trade processing warrants
a change to the processing sequence to
reflect the tools OCC offers its Clearing
Members as well as increased Clearing
Member proficiency.7
Current Processing Sequence
The current processing sequence was
designed to protect against the risk that
an erroneously coded transaction could
prevent a Clearing Member from
appropriately exercising a long position.
The vast majority of customer securities
options positions are maintained on a
gross basis at OCC. A miscoded sell
transaction of one customer could close
out a long position in the same series of
another customer, which would prevent
the latter from exercising the long
position. Processing closing sell
transactions after exercises avoids the
prevention of exercises by erroneously
coded sell transactions.
Market-Maker and Other Net
Accounts: The current processing
sequence applies to firm, customer, and
Market-Maker accounts. The processing
sequence for Market-Maker accounts,
however, includes one additional step
because Market-Maker accounts are held
on a net basis.8 At the end of each
trading day, OCC nets offsetting
positions in the same options series in
each Market-Maker account. OCC nets
offsetting positions before processing
the exercise of long positions.9 From a
systems perspective, this means that the
current processing sequence for MarketMaker accounts is as follows: (1)
Opening Buys; (2) Opening Sells; (3)
Closing Buys; (4) Position Netting; (5)
7 See
id.
noted above, the vast majority of customer
accounts are maintained on a gross basis. A few
Clearing Members have established the
functionality to designate sub-accounts within their
omnibus customer and firm accounts held at OCC.
These sub-accounts are established for a specific
customer or joint back office account and the
account holders can elect to hold these accounts on
a net basis to assist with the position reconciliation
process. When the account holders elect to hold the
accounts in this manner, they are subject to the
same netting process to which Market-Maker
accounts are subject. See Interpretation and Policy
.04 to Article VI, Section 3 of OCC’s By-Laws
available at https://www.theocc.com/components/
docs/legal/rules_and_bylaws/occ_bylaws.pdf.
9 OCC represented that netting before exercise is
designed to address operational risk concerns
related to the processing of dividend play
transactions by Market-Makers. See Notice of Filing,
85 FR at 22198. A dividend play is a trading
strategy that historically was primarily engaged in
by Market-Makers and involved buying and selling
an equal number of call options right before a
dividend date on the underlying equity and
exercising the long call options with the goal of
capturing the dividend on the underlying equity.
8 As
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]]>Agencies
[Federal Register Volume 85, Number 110 (Monday, June 8, 2020)]
[Notices]
[Pages 34789-34791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12278]
[[Page 34789]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88995; File No. SR-Phlx-2020-29]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Further Extend
the Deadline for Certain Written Supervisory-Related Reports Pursuant
to Options 10, Section 7 (Supervision of Accounts)
June 2, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 1, 2020, Nasdaq PHLX LLC (``Exchange'') filed with the
Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to further extend the filing requirements for
certain written reports pursuant to Options 10, Section 7, currently
due June 1, 2020, to June 30, 2020.
The text of the proposed rule change is available on the Exchange's
website at 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\ State governments have only recently
relaxed some social distancing measures and permitted the limited
reopening of non-essential businesses. Significant uncertainty remains.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
Amidst this continued and unprecedented market uncertainty, the
Exchange sought to address potential challenges that members may face
in timely meeting their obligations to submit to the Exchange annual
supervision-related reports under Options 10, Sections 7(g) and (h)
(``Supervision Reporting Requirements''), especially in light of
unforeseen and uncertain demands on resources required to respond to
COVID-19. Options 10, Section 7(g) requires each Exchange member that
conducts a non-member customer business to submit to the Exchange a
written report on the member's supervision and compliance effort during
the preceding year and on the adequacy of the member's ongoing
compliance processes and procedures. Each member that conducts a public
customer options business is also required to specifically include its
options compliance program in the report.\7\ The Section 7(g) report is
due on April 1 of each year. Options 10, Section 7(h) requires that
each member submit, by April 1 of each year, a copy of the Section 7(g)
report to one or more control persons or, if the member has no control
person, to the audit committee of its board of directors or its
equivalent committee or group.\8\
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\7\ The report shall include, but not be limited to, the
information set out in Options 10, Section 7(g)(i)-(v).
\8\ See Options 10, Section 7(h) for the meaning of the term
``control person'' and requirements in the case of a control person
that is an organization.
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On March 31, 2020, the Exchange filed a proposal to temporarily
extend the filing requirements for these annual supervision-related
reports from April 1, 2020 to June 1, 2020.\9\ In light of the
continued market uncertainty, the Exchange is again seeking to address
potential challenges that members may face in timely meeting their
obligations to submit to the Exchange annual supervision-related
reports. Accordingly, the Exchange proposes to provide additional,
temporary relief for members from the Supervision Reporting
Requirements by further extending the June 1, 2020 filing deadlines
described above to June 30, 2020. The Exchange believes that this
additional, temporary relief will permit members to continue to focus
on running their businesses and the health
[[Page 34790]]
crisis caused by the COVID-19 pandemic, including its impact on their
employees, customers, and communities.
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\9\ See Securities Exchange Act Release No. 88827 (March 31,
2020), 85 FR 19190 (April 6, 2020) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Temporarily Extend Certain
Filing Requirement.
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The Exchange notes that in response to COVID-19, the Financial
Industry Reporting Authority (``FINRA'') recently reissued temporary
relief for member firms by, among other things, extending the deadline
for submitting its supervision-related reports (FINRA Rule 3120 Report
and FINRA Rule 3130 certification) from its initial extension deadlines
of June 1, 2020 \10\ to June 30, 2020.\11\ The Exchange notes, too,
that at least one other options exchange that had previously extended
the supervisory report deadlines from April 1 to June 1 for its
members,\12\ also plans to submit a similar filing to, again, extend
its deadlines through June 30, 2020. In light of these deadline
extensions, the Exchange believes that extending its deadline would
avoid unnecessary confusion and added burden among entities that are
members of both the Exchange and FINRA because the deadline to submit
supervisory reports would remain uniform.
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\10\ See FINRA Regulatory Notice 20-08 (March 9, 2020) available
at https://www.finra.org/rules-guidance/notices/20-08.
\11\ See FINRA Regulatory Notice 20-08, FAQs, Supervision (May
19, 2020) available at https://www.finra.org/rules-guidance/key-topics/covid-19/faq#supe.
\12\ See Securities Exchange Act No. 88528 (March 31, 2020), 85
FR 19196 (April 6, 2020) (SR-CBOE-2020-029).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\13\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\14\ in particular, in that it is designed to
promote just and equitable principles of trade; to remove impediments
to and perfect the mechanism of a free and open market and a national
market system; and, in general to protect investors and the public
interest. As a result of continued uncertainty related to the ongoing
spread of the COVID-19 virus, the U.S. exchanges are experiencing
unprecedented market volatility. The proposed rule change would allow
the Exchange to continue to provide temporary relief for members from
the Supervision Reporting Requirements, which were amended once already
to require members to provide written reports to the Exchange by June
1, 2020, and further extend that deadline to June 30, 2020. The
Exchange believes that this additional, temporary relief is necessary
and appropriate in the public interest, and consistent with the
protection of investors, given the unforeseen and uncertain challenges,
including business continuity implementation and market volatility,
posed by COVID-19 to members that must comply with the Supervision
Reporting Requirements. The Exchange also believes that it is necessary
and appropriate in the public interest, and consistent with the
protection of investors, because FINRA has also re-extended the time
for its members to file supervision-related reports from June 1, 2020
to June 30, 2020.\15\ Additionally, as indicated above, at least one
other options exchange that had previously extended the supervisory
report deadlines from April 1 to June 1 for its members,\16\ plans to
submit a similar filing to re-extend its deadlines through June 30,
2020. Extending the deadline, therefore, will ensure that those
entities that are members of both FINRA and the Exchange have a uniform
deadline to submit their supervisory reports.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ See supra note 11.
\16\ See supra note 12.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is not
designed to address any competitive issues but rather to provide
temporary relief for all members that are required to comply with the
Supervision Reporting Requirements.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\18\
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \19\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \20\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposed rule change may become operative upon filing. The
Commission notes that the proposed rule change would allow the
Exchange, in light of the COVID-19 pandemic, to provide temporary
relief for members by extending the deadline for written reports
pursuant to the Supervision Reporting Requirements from June 1, 2020 to
June 30, 2020. This is consistent with the extension FINRA has provided
its members for supervision-related reports and certifications required
pursuant to FINRA Rule 3120 and FINRA Rule 3130 \21\ and the extension
for certain supervision-related reports Cboe Exchange, Inc. has
provided its trading permit holders.\22\ The Commission believes that
waiver of the 30-day operative delay is consistent with the protection
of investors and the public interest. Accordingly, the Commission
hereby waives the operative delay and designates the proposed rule
change operative upon filing.\23\
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6)(iii).
\21\ See supra note 12.
\22\ See Securities Exchange Act Release No. 88978 (June 1,
2020) (SR-CBOE-2020-049).
\23\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
[[Page 34791]]
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-2020-29 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2020-29. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (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-2020-29 and should be submitted on
or before June 29, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-12278 Filed 6-5-20; 8:45 am]
BILLING CODE 8011-01-P
