Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Implementation of FINRA Rule 4240 (Margin Requirements for Credit Default Swaps), 36458-36460 [2020-12892]

Download as PDF 36458 Federal Register / Vol. 85, No. 116 / Tuesday, June 16, 2020 / Notices The addition of the words ‘‘and Professional’’ will bring greater transparency to the Rulebook. The Exchange’s proposal to correct a typo within Options 5, Section 4(a)(iii)(B)(9) to change the word ‘‘designed’’ to ‘‘designated’’ is nonsubstantive. 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)(iii) of the Act 15 and subparagraph (f)(6) of Rule 19b–4 thereunder.16 A proposed rule change filed under Rule 19b–4(f)(6) 17 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),18 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange requests that the Commission waive the 30-day operative delay so that it may immediately correct an omission in its rules and specify that both Public Customer and Professional SRCH Orders may route. The Exchange believes that the proposed amendment will bring greater clarity to its rules. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission waives the 30-day operative delay and designates the proposed rule change operative upon filing.19 15 15 U.S.C. 78s(b)(3)(A)(iii). 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. 17 17 CFR 240.19b–4(f)(6). 18 17 CFR 240.19b–4(f)(6)(iii). 19 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). lotter on DSK30NT082PROD with NOTICES 16 17 VerDate Sep<11>2014 18:13 Jun 15, 2020 Jkt 250001 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 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–2020–27 and should be submitted on or before July 7, 2020. 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: BILLING CODE 8011–01–P 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–2020–27 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–2020–27. 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 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–12895 Filed 6–15–20; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–89036; File No. SR–FINRA– 2020–016] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Implementation of FINRA Rule 4240 (Margin Requirements for Credit Default Swaps) June 10, 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 2, 2020, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under paragraph (f)(6) of Rule 19b–4 under the Act,3 which renders the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to extend to September 1, 2021 the implementation of FINRA Rule 4240. FINRA Rule 4240 implements an interim pilot program with respect to margin requirements for certain transactions in credit default swaps that are security-based swaps. The text of the proposed rule change is available on FINRA’s website at 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 1 15 E:\FR\FM\16JNN1.SGM 16JNN1 Federal Register / Vol. 85, No. 116 / Tuesday, June 16, 2020 / Notices https://www.finra.org, at the principal office of FINRA and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose lotter on DSK30NT082PROD with NOTICES On May 22, 2009, the Commission approved FINRA Rule 4240,4 which implements an interim pilot program (the ‘‘Interim Pilot Program’’) with respect to margin requirements for certain transactions in credit default swaps (‘‘CDS’’).5 On May 21, 2019, FINRA filed a proposed rule change for immediate effectiveness extending the implementation of FINRA Rule 4240 to July 20, 2020.6 As explained in the Approval Order, FINRA Rule 4240, coterminous with certain Commission actions, was intended to address concerns arising from systemic risk posed by CDS, including, among other things, risks to the financial system arising from the lack of a central clearing counterparty to clear and settle CDS.7 On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ‘‘DoddFrank Act’’) was signed into law.8 Title VII of the Dodd-Frank Act established a comprehensive new regulatory framework for swaps and security-based 4 See Securities Exchange Act Release No. 59955 (May 22, 2009), 74 FR 25586 (May 28, 2009) (Order Approving File No. SR–FINRA–2009–012) (‘‘Approval Order’’). 5 In March 2012, the SEC approved amendments to FINRA Rule 4240 that, among other things, limit at this time the rule’s application to credit default swaps that are security-based swaps. See Securities Exchange Act Release No. 66527 (March 7, 2012), 77 FR 14850 (March 13, 2012) (Order Approving File No. SR–FINRA–2012–015). 6 See Securities Exchange Act Release No. 85981 (May 31, 2019), 84 FR 26486 (June 6, 2019) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2019–016). 7 See Approval Order, 74 FR at 25588–89. 8 See Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111–203, 124 Stat. 1376 (2010). VerDate Sep<11>2014 18:13 Jun 15, 2020 Jkt 250001 swaps,9 including certain CDS. The legislation was intended, among other things, to enhance the authority of regulators to implement new rules designed to reduce risk, increase transparency, and promote market integrity with respect to such products. The Commission has finalized a majority of its rulemakings pursuant to Title VII of the Dodd-Frank Act (the ‘‘Title VII rulemakings’’).10 Further, the Commission has specified an extended compliance period for these new rules and guidance so as to permit sufficient time to prepare for and come into compliance with the new requirements.11 In tandem with the 9 The terms ‘‘swap’’ and ‘‘security-based swap’’ are defined in Sections 721 and 761 of the DoddFrank Act. The Commodity Futures Trading Commission (‘‘CFTC’’) and the Commission jointly have approved rules to further define these terms. See Securities Exchange Act Release No. 67453 (July 18, 2012), 77 FR 48208 (August 13, 2012) (Joint Final Rule; Interpretations; Request for Comment on an Interpretation: Further Definition of ‘‘Swap,’’ ‘‘Security-Based Swap,’’ and ‘‘SecurityBased Swap Agreement’’; Mixed Swaps; SecurityBased Swap Agreement Recordkeeping). See also Securities Exchange Act Release No. 66868 (April 27, 2012), 77 FR 30596 (May 23, 2012) (Joint Final Rule; Joint Interim Final Rule; Interpretations: Further Definition of ‘‘Swap Dealer,’’ ‘‘SecurityBased Swap Dealer,’’ ‘‘Major Swap Participant,’’ ‘‘Major Security-Based Swap Participant’’ and ‘‘Eligible Contract Participant’’). 10 See Securities Exchange Act Release No. 75611 (August 5, 2015), 80 FR 48964 (August 14, 2015) (Final Rule: Registration Process for Security-Based Swap Dealers and Major Security-Based Swap Participants) (‘‘Registration Process Release’’); Securities Exchange Act Release No. 77617 (April 14, 2016), 81 FR 29960 (May 13, 2016) (Final Rule: Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants) (the ‘‘Business Conduct Standards Release’’); Securities Exchange Act Release No. 78011 (June 8, 2016), 81 FR 39808 (June 17, 2016) (Final Rule: Trade Acknowledgment and Verification of Security-Based Swap Transactions) (‘‘Trade Acknowledgment and Verification Release’’); Securities Exchange Act Release No. 86175 (June 21, 2019), 84 FR 43872 (August 22, 2019) (Final Rule: Capital, Margin, and Segregation Requirements for Security-Based Swap Dealers and Major Security-Based Swap Participants and Capital and Segregation Requirements for Broker-Dealers) (‘‘Capital, Margin, and Segregation Release’’); Securities Exchange Act Release No. 87005 (September 19, 2019), 84 FR 68550 (December 16, 2019) (Final Rule: Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based Swap Participants, and Broker-Dealers) (‘‘Recordkeeping Release’’); Securities Exchange Act Release No. 87780 (December 18, 2019), 85 FR 6270 (February 4, 2020) (Final Rules; Guidance: Rule Amendments and Guidance Addressing Cross-Border Application of Certain Security-Based Swap Requirements) (‘‘Cross-Border Release’’); Securities Exchange Act Release No. 87782 (December 18, 2019), 85 FR 6359 (February 4, 2020) (Final Rule: Risk Mitigation Techniques for Uncleared Security-Based Swaps) (‘‘Risk Mitigation Release’’). 11 Except as otherwise specified by the Commission, the Commission has broadly coordinated the compliance date for the Title VII rulemakings with the compliance date for registration (the ‘‘Registration Compliance Date’’), pursuant to the Registration Process Release, of PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 36459 Commission’s action, FINRA extended, to September 1, 2021, the expiration date of FINRA Rule 0180 (Application of Rules to Security-Based Swaps).12 FINRA believes it is appropriate to extend the Interim Pilot Program for a limited period, to September 1, 2021, in light of the extended compliance period that the Commission has specified with respect to the Title VII rulemakings, and in alignment with the expiration date of FINRA Rule 0180. FINRA believes that extending the implementation of Rule 4240 will permit FINRA additional time to consider any potential amendments to the Interim Pilot Program in light of the Commission’s finalized Title VII rulemakings, in particular the Capital, Margin, and Segregation Release, thereby helping to promote stability in the financial markets and regulatory certainty for members. FINRA has filed the proposed rule change for immediate effectiveness. FINRA is proposing that the implementation date of the proposed rule change will be July 20, 2020. The proposed rule change will expire on September 1, 2021. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,13 which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. FINRA believes that the proposed rule change is consistent with the Act because extending the implementation of FINRA Rule 4240 will permit FINRA additional time to consider any potential amendments to the Interim Pilot Program in light of the Commission’s finalized Title VII rulemakings, in particular the Capital, Margin, and Segregation Release, security-based swap dealers and major securitybased swap participants (together, referred to as ‘‘SBS Entities’’). See Cross-Border Release, 85 FR at 6345 through 6346; see also Capital, Margin, and Segregation Release, 84 FR at 43954; Recordkeeping Release, 84 FR at 68600; and Risk Mitigation Release, 85 FR at 6381. For further information regarding the Registration Compliance Date, see Key Dates For Registration of Security-Based Swap Dealers and Major Security-Based Swap Participants, available on the SEC website at: https://www.sec.gov/page/key-dates-registrationsecurity-based-swap-dealers-and-major-securitybased-swap-participants. 12 Rule 0180 temporarily limits, with certain exceptions including Rule 4240, the application of FINRA rules with respect to security-based swaps. See Securities Exchange Act Release No. 88023 (January 23, 2020), 85 FR 5261 (January 29, 2020) (Notice of Filing and Immediate Effectiveness of File No: SR–FINRA–2020–001). 13 15 U.S.C. 78o–3(b)(6). E:\FR\FM\16JNN1.SGM 16JNN1 36460 Federal Register / Vol. 85, No. 116 / Tuesday, June 16, 2020 / Notices thereby helping to promote stability in the financial markets and regulatory certainty for members. B. Self-Regulatory Organization’s Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. FINRA believes that extending the implementation of FINRA Rule 4240 for a limited period, to September 1, 2021, will permit FINRA additional time to consider any potential amendments to the Interim Pilot Program in light of the Commission’s finalized Title VII rulemakings, in particular the Capital, Margin, and Segregation Release, thereby helping to promote stability in the financial markets and regulatory certainty for members. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 14 and Rule 19b– 4(f)(6) thereunder.15 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. lotter on DSK30NT082PROD with NOTICES 14 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of 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. FINRA has satisfied this requirement. 15 17 VerDate Sep<11>2014 18:13 Jun 15, 2020 Jkt 250001 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–12892 Filed 6–15–20; 8:45 am] BILLING CODE 8011–01–P Electronic Comments DEPARTMENT OF THE TREASURY • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– FINRA–2020–016 on the subject line. Privacy Act of 1974; System of Records 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–FINRA–2020–016. 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 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change. 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–FINRA– 2020–016 and should be submitted on or before July 7, 2020. PO 00000 ACTION: records. In accordance with the Privacy Act of 1974, the Department of the Treasury (‘‘Treasury’’ or the ‘‘Department’’), proposes to modify the Treasury system of records notices for the Treasury systems of records listed below by adding two new routine uses to 166 systems. DATES: Submit comments on or before July 16, 2020. The new routine uses will be applicable on July 16, 2020 unless Treasury receives comments and determines that changes to the system of records notice are necessary. ADDRESSES: Comments may be submitted to the Federal eRulemaking Portal electronically at https:// www.regulations.gov. Comments can also be sent to the Deputy Assistant Secretary for Privacy, Transparency, and Records, Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 20220, Attention: Revisions to Privacy Act Systems of Records. All comments received, including attachments and other supporting documents, are part of the public record and subject to public disclosure. All comments received will be posted without change to www.regulations.gov, including any personal information provided. You should submit only information that you wish to make publicly available. FOR FURTHER INFORMATION CONTACT: For general questions and for privacy issues please contact: Ryan Law, Deputy Assistant Secretary for Privacy, Transparency, and Records (202–622– 5710), Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 20220. SUPPLEMENTARY INFORMATION: In accordance with the Privacy Act of 1974, 5 U.S.C. 552a, the Department of the Treasury (‘‘Treasury’’) proposes to modify the Treasury system of records, as identified below, to include two new SUMMARY: 16 17 Frm 00088 Fmt 4703 Sfmt 4703 Department of the Treasury. Notice of modified systems of AGENCY: E:\FR\FM\16JNN1.SGM CFR 200.30–3(a)(12). 16JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 85, Number 116 (Tuesday, June 16, 2020)]
[Notices]
[Pages 36458-36460]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12892]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89036; File No. SR-FINRA-2020-016]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Implementation of FINRA Rule 4240 
(Margin Requirements for Credit Default Swaps)

June 10, 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 2, 2020, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which 
renders the proposal effective upon receipt of this filing by the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    FINRA is proposing to extend to September 1, 2021 the 
implementation of FINRA Rule 4240. FINRA Rule 4240 implements an 
interim pilot program with respect to margin requirements for certain 
transactions in credit default swaps that are security-based swaps.
    The text of the proposed rule change is available on FINRA's 
website at

[[Page 36459]]

https://www.finra.org, at the principal office of FINRA and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    On May 22, 2009, the Commission approved FINRA Rule 4240,\4\ which 
implements an interim pilot program (the ``Interim Pilot Program'') 
with respect to margin requirements for certain transactions in credit 
default swaps (``CDS'').\5\ On May 21, 2019, FINRA filed a proposed 
rule change for immediate effectiveness extending the implementation of 
FINRA Rule 4240 to July 20, 2020.\6\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 59955 (May 22, 
2009), 74 FR 25586 (May 28, 2009) (Order Approving File No. SR-
FINRA-2009-012) (``Approval Order'').
    \5\ In March 2012, the SEC approved amendments to FINRA Rule 
4240 that, among other things, limit at this time the rule's 
application to credit default swaps that are security-based swaps. 
See Securities Exchange Act Release No. 66527 (March 7, 2012), 77 FR 
14850 (March 13, 2012) (Order Approving File No. SR-FINRA-2012-015).
    \6\ See Securities Exchange Act Release No. 85981 (May 31, 
2019), 84 FR 26486 (June 6, 2019) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2019-016).
---------------------------------------------------------------------------

    As explained in the Approval Order, FINRA Rule 4240, coterminous 
with certain Commission actions, was intended to address concerns 
arising from systemic risk posed by CDS, including, among other things, 
risks to the financial system arising from the lack of a central 
clearing counterparty to clear and settle CDS.\7\ On July 21, 2010, the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (the ``Dodd-
Frank Act'') was signed into law.\8\ Title VII of the Dodd-Frank Act 
established a comprehensive new regulatory framework for swaps and 
security-based swaps,\9\ including certain CDS. The legislation was 
intended, among other things, to enhance the authority of regulators to 
implement new rules designed to reduce risk, increase transparency, and 
promote market integrity with respect to such products.
---------------------------------------------------------------------------

    \7\ See Approval Order, 74 FR at 25588-89.
    \8\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010).
    \9\ The terms ``swap'' and ``security-based swap'' are defined 
in Sections 721 and 761 of the Dodd-Frank Act. The Commodity Futures 
Trading Commission (``CFTC'') and the Commission jointly have 
approved rules to further define these terms. See Securities 
Exchange Act Release No. 67453 (July 18, 2012), 77 FR 48208 (August 
13, 2012) (Joint Final Rule; Interpretations; Request for Comment on 
an Interpretation: Further Definition of ``Swap,'' ``Security-Based 
Swap,'' and ``Security-Based Swap Agreement''; Mixed Swaps; 
Security-Based Swap Agreement Recordkeeping). See also Securities 
Exchange Act Release No. 66868 (April 27, 2012), 77 FR 30596 (May 
23, 2012) (Joint Final Rule; Joint Interim Final Rule; 
Interpretations: Further Definition of ``Swap Dealer,'' ``Security-
Based Swap Dealer,'' ``Major Swap Participant,'' ``Major Security-
Based Swap Participant'' and ``Eligible Contract Participant'').
---------------------------------------------------------------------------

    The Commission has finalized a majority of its rulemakings pursuant 
to Title VII of the Dodd-Frank Act (the ``Title VII rulemakings'').\10\ 
Further, the Commission has specified an extended compliance period for 
these new rules and guidance so as to permit sufficient time to prepare 
for and come into compliance with the new requirements.\11\ In tandem 
with the Commission's action, FINRA extended, to September 1, 2021, the 
expiration date of FINRA Rule 0180 (Application of Rules to Security-
Based Swaps).\12\
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 75611 (August 5, 
2015), 80 FR 48964 (August 14, 2015) (Final Rule: Registration 
Process for Security-Based Swap Dealers and Major Security-Based 
Swap Participants) (``Registration Process Release''); Securities 
Exchange Act Release No. 77617 (April 14, 2016), 81 FR 29960 (May 
13, 2016) (Final Rule: Business Conduct Standards for Security-Based 
Swap Dealers and Major Security-Based Swap Participants) (the 
``Business Conduct Standards Release''); Securities Exchange Act 
Release No. 78011 (June 8, 2016), 81 FR 39808 (June 17, 2016) (Final 
Rule: Trade Acknowledgment and Verification of Security-Based Swap 
Transactions) (``Trade Acknowledgment and Verification Release''); 
Securities Exchange Act Release No. 86175 (June 21, 2019), 84 FR 
43872 (August 22, 2019) (Final Rule: Capital, Margin, and 
Segregation Requirements for Security-Based Swap Dealers and Major 
Security-Based Swap Participants and Capital and Segregation 
Requirements for Broker-Dealers) (``Capital, Margin, and Segregation 
Release''); Securities Exchange Act Release No. 87005 (September 19, 
2019), 84 FR 68550 (December 16, 2019) (Final Rule: Recordkeeping 
and Reporting Requirements for Security-Based Swap Dealers, Major 
Security-Based Swap Participants, and Broker-Dealers) 
(``Recordkeeping Release''); Securities Exchange Act Release No. 
87780 (December 18, 2019), 85 FR 6270 (February 4, 2020) (Final 
Rules; Guidance: Rule Amendments and Guidance Addressing Cross-
Border Application of Certain Security-Based Swap Requirements) 
(``Cross-Border Release''); Securities Exchange Act Release No. 
87782 (December 18, 2019), 85 FR 6359 (February 4, 2020) (Final 
Rule: Risk Mitigation Techniques for Uncleared Security-Based Swaps) 
(``Risk Mitigation Release'').
    \11\ Except as otherwise specified by the Commission, the 
Commission has broadly coordinated the compliance date for the Title 
VII rulemakings with the compliance date for registration (the 
``Registration Compliance Date''), pursuant to the Registration 
Process Release, of security-based swap dealers and major security-
based swap participants (together, referred to as ``SBS Entities''). 
See Cross-Border Release, 85 FR at 6345 through 6346; see also 
Capital, Margin, and Segregation Release, 84 FR at 43954; 
Recordkeeping Release, 84 FR at 68600; and Risk Mitigation Release, 
85 FR at 6381. For further information regarding the Registration 
Compliance Date, see Key Dates For Registration of Security-Based 
Swap Dealers and Major Security-Based Swap Participants, available 
on the SEC website at: https://www.sec.gov/page/key-dates-registration-security-based-swap-dealers-and-major-security-based-swap-participants.
    \12\ Rule 0180 temporarily limits, with certain exceptions 
including Rule 4240, the application of FINRA rules with respect to 
security-based swaps. See Securities Exchange Act Release No. 88023 
(January 23, 2020), 85 FR 5261 (January 29, 2020) (Notice of Filing 
and Immediate Effectiveness of File No: SR-FINRA-2020-001).
---------------------------------------------------------------------------

    FINRA believes it is appropriate to extend the Interim Pilot 
Program for a limited period, to September 1, 2021, in light of the 
extended compliance period that the Commission has specified with 
respect to the Title VII rulemakings, and in alignment with the 
expiration date of FINRA Rule 0180. FINRA believes that extending the 
implementation of Rule 4240 will permit FINRA additional time to 
consider any potential amendments to the Interim Pilot Program in light 
of the Commission's finalized Title VII rulemakings, in particular the 
Capital, Margin, and Segregation Release, thereby helping to promote 
stability in the financial markets and regulatory certainty for 
members.
    FINRA has filed the proposed rule change for immediate 
effectiveness. FINRA is proposing that the implementation date of the 
proposed rule change will be July 20, 2020. The proposed rule change 
will expire on September 1, 2021.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\13\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. FINRA believes that the proposed rule change is 
consistent with the Act because extending the implementation of FINRA 
Rule 4240 will permit FINRA additional time to consider any potential 
amendments to the Interim Pilot Program in light of the Commission's 
finalized Title VII rulemakings, in particular the Capital, Margin, and 
Segregation Release,

[[Page 36460]]

thereby helping to promote stability in the financial markets and 
regulatory certainty for members.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. FINRA believes that extending 
the implementation of FINRA Rule 4240 for a limited period, to 
September 1, 2021, will permit FINRA additional time to consider any 
potential amendments to the Interim Pilot Program in light of the 
Commission's finalized Title VII rulemakings, in particular the 
Capital, Margin, and Segregation Release, thereby helping to promote 
stability in the financial markets and regulatory certainty for 
members.

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

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of 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. 
FINRA has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-FINRA-2020-016 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-FINRA-2020-016. 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 a.m. and 3 
p.m. Copies of such filing also will be available for inspection and 
copying at the principal office of FINRA. All comments received will be 
posted without change. 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-
FINRA-2020-016 and should be submitted on or before July 7, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-12892 Filed 6-15-20; 8:45 am]
BILLING CODE 8011-01-P

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.