Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Designation of Members for Mandatory Disaster Recovery Testing Pursuant to Regulation SCI for Calendar Year 2020, 41259-41262 [2020-14741]
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Federal Register / Vol. 85, No. 132 / Thursday, July 9, 2020 / Notices
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Act of 2000 (‘‘CFMA’’). Prior to the
CFMA, federal law did not allow the
trading of futures on individual stocks
or on narrow-based stock indexes
(collectively, ‘‘security futures
products’’). The CFMA removed this
restriction and provided that trading in
security futures products would be
regulated jointly by the Commission and
the Commodity Futures Trading
Commission (‘‘CFTC’’).
The Exchange Act requires all SROs
to submit to the SEC any proposals to
amend, add, or delete any of their rules.
Certain entities (Security Futures
Product Exchanges) would be notice
registered national securities exchanges
only because they trade security futures
products. Similarly, certain entities
(Limited Purpose National Securities
Associations) would be limited purpose
national securities associations only
because their members trade security
futures products. The Exchange Act, as
amended by the CFMA, established a
procedure for Security Futures Product
Exchanges and Limited Purpose
National Securities Associations to
provide notice of proposed rule changes
relating to certain matters.1 Rule 19b–7
and Form 19b–7 implemented this
procedure. Effective April 28, 2008, the
SEC amended Rule 19b–7 and Form
19b–7 to require that Form 19b–7 be
submitted electronically.2
The collection of information is
designed to provide the Commission
with the information necessary to
determine, as required by the Exchange
Act, whether the proposed rule change
is consistent with the Exchange Act and
the rules thereunder. The information is
used to determine if the proposed rule
change should remain in effect or
abrogated.
The respondents to the collection of
information are SROs. Three
respondents file an average total of
approximately 2 responses per year.3
Each response takes approximately 12.5
hours to complete and each amendment
1 These matters are higher margin levels, fraud or
manipulation, recordkeeping, reporting, listing
standards, or decimal pricing for security futures
products; sales practices for security futures
products for persons who effect transactions in
security futures products; or rules effectuating the
obligation of Security Futures Product Exchanges
and Limited Purpose National Securities
Associations to enforce the securities laws. See 15
U.S.C. 78s(b)(7)(A).
2 See Securities Exchange Act Release No. 57526
(March 19, 2008), 73 FR 16179 (March 27, 2008).
3 There are currently four Security Futures
Product Exchanges and one Limited Purpose
National Securities Association, the National
Futures Authority. However, two Security Futures
Product Exchanges currently do not trade security
futures products and, as a result, have not been
filing proposed rule changes. Therefore, there are
currently three respondents to Form 19b–7.
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takes approximately 3 hours to
complete, which correspond to an
estimated annual response burden of 25
hours ((2 rule change proposals × 12.5
hours) + (0 amendments 4 × 3 hours)).
The average internal cost of compliance
per response is $5,050 (11.5 legal hours
multiplied by an average hourly rate of
$420 5 plus 1 hour of paralegal work
multiplied by an average hourly rate of
$220 6). The total resulting internal cost
of compliance for a respondent is
$10,100 per year (2 responses x $5,050
per response).
In addition to filing its proposed rule
changes and any amendments thereto
with the Commission, a respondent is
also required to post each of its
proposals and any amendments thereto,
on its website. This process takes
approximately 0.5 hours to complete per
proposal and 0.5 hours per amendment.
Thus, for approximately 2 responses
and 0 amendments,7 the total annual
reporting burden on a respondent to
post these on its website is 1 hour ((2
proposals per year × 0.5 hours per filing)
+ (0 amendments × 0.5 hours)). Further,
a respondent is required to update its
rulebook, which it maintains on its
website, to reflect the changes that it
makes in each proposal and any
amendment thereto. Thus, for all filings
that were not withdrawn by a
respondent (0 withdrawn filings in
calendar years 2017–2019) or
disapproved by the Commission (0
disapproved filings in calendar years
2017–2019), a respondent was required
to update its online rulebook to reflect
the effectiveness of 2 filings on average,
each of which takes approximately 4
hours to complete per proposal. Thus,
the total annual reporting burden for
updating an online rulebook is 8 hours
((2 filings per year¥0 withdrawn
4 SEC staff notes that even though no
amendments were received in the previous three
years and that staff does not anticipate the receipt
of any amendments, calculation of amendments is
a separate step in the calculation of the PRA burden
and it is possible that amendments are filed in the
future. Therefore, instead of removing the
calculation altogether, staff has shown the
calculation as anticipating zero amendments.
5 The $420 per hour figure for an Attorney is from
SIFMA’s Management & Professional Earnings in
the Securities Industry 2013, modified by
Commission staff to account for inflation and an
1800-hour work-year and then multiplied by 5.35
to account for bonuses, firm size, employee
benefits, and overhead.
6 The $220 per hour figure for a Paralegal is from
SIFMA’s Management & Professional Earnings in
the Securities Industry 2013, modified by
Commission staff to account for inflation and an
1800-hour work-year and then multiplied by 5.35
to account for bonuses, firm size, employee
benefits, and overhead.
7 See supra note 4.
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41259
filings¥0 disapproved filings) × 4
hours).
Compliance with Rule 19b–7 is
mandatory. Information received in
response to Rule 19b–7 is not kept
confidential; the information collected
is public information.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
Please direct your written comments
to: David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Cynthia
Roscoe, 100 F Street NE, Washington,
DC 20549, or send an email to: PRA_
Mailbox@sec.gov.
Dated: July 2, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–14747 Filed 7–8–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89216; File No. SR–LTSE–
2020–10]
Self-Regulatory Organizations; LongTerm Stock Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to the
Designation of Members for Mandatory
Disaster Recovery Testing Pursuant to
Regulation SCI for Calendar Year 2020
July 2, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 22,
2020, Long-Term Stock Exchange, Inc.
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 85, No. 132 / Thursday, July 9, 2020 / Notices
(‘‘LTSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
LTSE proposes a rule change to
amend how the Exchange will designate
certain Members to participate in
mandatory disaster recovery testing
pursuant to Regulation SCI and LTSE
Rule 2.250 for calendar year 2020.
The text of the proposed rule change
is available at the Exchange’s website at
https://longtermstockexchange.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of
and basis for the proposed rule change
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 self-regulatory organization 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 on the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange proposes to amend
LTSE Rule 2.250 to revise how it will
designate certain Members to participate
in mandatory disaster recovery testing
pursuant to Regulation SCI and Rule
2.250 for calendar year 2020.
Regulation SCI requires LTSE, as an
SCI entity, to maintain business
continuity and disaster recovery plans
that provide for resilient and
geographically diverse backup and
recovery capabilities that are reasonably
designed to achieve two-hour
resumption of critical SCI systems and
next business day resumption of other
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SCI systems following a wide-scale
disruption.3
Regulation SCI and LTSE Rule 2.250
also require LTSE to designate certain
Members 4 to participate in business
continuity and disaster recovery testing
in a manner specified by LTSE and at
a frequency of not less than once every
12 months.5 Such testing ordinarily is
part of an annual industry-wide test,
which is next scheduled for October 24,
2020.
LTSE Rule 2.250 governs mandatory
participation in testing of LTSE’s
backup systems, and states that LTSE
will designate Members that account for
a specified percentage of executed
volume on LTSE, measured on quarterly
basis, as required to connect to LTSE’s
backup systems and participate in
functional and performance testing of
such system.6 Rule 2.250 further
provides that if a Member has not
previously been designated as meeting
the volume criteria, such Member will
have until the next calendar quarter
before such requirements are
applicable.7 LTSE currently is not
operational and is not expecting to have
two quarters of trading data on which to
base its Member designation prior to the
October 24, 2020 test. Thus, as currently
written, Rule 2.250 would not permit
the Exchange to designate any Members
to participate in the industry-wide test
for 2020 because no Members will have
the requisite trading volume on LTSE
upon which a designation can be made.
To address the unique circumstances
for disaster recovery testing in 2020, the
year in which LTSE will become
operational, the Exchange proposes to
add new paragraph (d), which would
provide that for calendar year 2020,
notwithstanding paragraphs (b) and (c),
which assign the Exchange
responsibility of ‘‘identifying Members
that account for a meaningful
percentage of the Exchange’s overall
volume,’’ the Exchange will instead
designate at least three Members who
have a meaningful percentage of trading
volumes in NMS Stocks across the other
equity exchanges. This would allow the
3 See Securities Exchange Act Release No. 73639
(November 19, 2014), 79 FR 72252 (December 5,
2014).
4 The term ‘‘Member’’ refers to any registered
broker or dealer that has been admitted to
membership in the Exchange. A Member will have
the status of a Member of the Exchange as that term
is defined in Section 3(a)(3) of the Act. Membership
may be granted to a sole proprietor, partnership,
corporation, limited liability company, or other
organization that is a registered broker or dealer
pursuant to Section 15 of the Act, and which has
been approved by the Exchange. See LTSE Rule
1.160(w).
5 See LTSE Rule 2.250(a), (b).
6 See LTSE Rule 2.250(a), (c).
7 See LTSE Rule 2.250(c).
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Exchange to identify Members for
industry-wide disaster recovery testing
in the absence of the metrics that will
be used in the ordinary course to
designate such firms.
LTSE believes that designating at least
three Members who are likely already to
be participating in the industry-wide
test by virtue of their trading activities
on other exchanges is likely to reduce
the burdens associated with being
designated for disaster recovery testing
by LTSE in absence of significant
trading volumes on the Exchange.
Moreover, to reduce the burdens on
such Members, the Exchange proposes,
where possible, to designate firms that
have already established connections to
its backup systems. This is intended to
address the ‘‘notice’’ requirements in
the existing Rule 2.250.8 The Exchange
believes that designating three or more
such firms is reasonably designed to
provide the minimum necessary for the
maintenance of fair and orderly markets
in the event of the activation of such
plans.
LTSE intends to notify Members of
their designation for disaster recovery
testing no later than July 10, 2020. With
respect to industry-wide disaster
recovery testing in 2021 and beyond, the
Exchange will issue one or more
regulatory circulars establishing the
standards to be used for determining
which Members contribute a meaningful
percentage of the Exchange’s overall
volume and thus are required to
participate in functional and
performance testing. Such standards
will be informed by the Exchange’s
actual market and trading data, in
accordance with LTSE Rule 2.250(a)–(c).
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 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
prevent fraudulent and manipulative
acts and practices, promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, 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.
The Exchange believes that its
proposed methodology of designating
Members who have meaningful levels of
trading activity on other exchanges and
8 See
id.
U.S.C. 78f.
10 15 U.S.C. 78f(b)(5).
9 15
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who have established connectivity to
LTSE’s backup systems is consistent
with the protection of investors and the
public interest. The Exchange believes
that the proposed rule change will
ensure that the Members necessary to
ensure the maintenance of fair and
orderly markets in the event of the
activation of LTSE’s disaster recovery
plans have been designated consistent
with LTSE Rule 2.250 and Rule 1004 of
Regulation SCI. Specifically, the
proposal will address the unique
circumstances of industry-wide testing
taking place within a short time of when
the Exchange commences operations.
The Exchange believes that the
proposed rule change balances the
objectives of having Members
participate in industry-wide disaster
recovery testing, including LTSE’s
backup systems, and the burdens on
such Members who, at the time of
designation, will not have traded on
LTSE.
As set forth in the SCI Adopting
Release, ‘‘SROs have the authority, and
legal responsibility, under Section 6 of
the Exchange Act, to adopt and enforce
rules (including rules to comply with
Regulation SCI’s requirements relating
to BC/DR testing) applicable to their
members or participants that are
designed to, among other things, foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, 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.’’ 11
The Exchange believes that this
proposal is consistent with such
authority and legal responsibility.
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 that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
rule change is designed to promote fair
competition among brokers and dealers
and exchanges by ensuring the
Exchange can designate Members to
participate in mandatory disaster
recovery testing pursuant to Regulation
SCI for calendar year 2020. The
Exchange believes that designating three
or more such firms is reasonably
designed to provide the minimum
necessary for the maintenance of fair
and orderly markets in the event of the
11 See
supra note 3, at 72350.
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activation of such plans, thereby
promoting intermarket competition
between exchanges in furtherance of the
principles of Section 11A(a)(1) of the
Act.12
With respect to intramarket
competition, the proposed rule change
seeks to reduce the burdens on Members
by only designating Members who are
likely already participating in the
industry-wide test by virtue of their
trading activities on other exchanges.
Under the proposed rule change, the
Exchange will designate firms that have
already established connections to the
Exchange’s backup systems.
Consequently, LTSE does not believe
that the proposed rule change would
impose any burden on intramarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
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)(iii) of the Act 13 and
subparagraph (f)(6) of Rule 19b–4
thereunder.14
A proposed rule change filed under
Rule 19b–4(f)(6) 15 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),16 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay to permit the Exchange
to notify Members of their designation
U.S.C. 78k–1(a)(1).
U.S.C. 78s(b)(3)(A)(iii).
14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires the Exchange 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. The Exchange has
satisfied this requirement.
15 17 CFR 240.19b–4(f)(6).
16 17 CFR 240.19b–4(f)(6)(iii).
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13 15
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41261
earlier than would be possible without
a waiver of the operative delay. The
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest because it would provide
designated members additional time to
receive notice of their designation, and
thus prepare for disaster recovery
testing with the Exchange’s backup
systems. Accordingly, the Commission
waives the 30-day operative delay and
designates the proposal operative upon
filing.17
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
LTSE–2020–10 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–LTSE–2020–10. 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
17 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).
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Federal Register / Vol. 85, No. 132 / Thursday, July 9, 2020 / Notices
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 LTSE and on its internet
website at https://
longtermstockexchange.com/.
All comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–LTSE–2020–10 and should
be submitted on or before July 30, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–14741 Filed 7–8–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–505, OMB Control No.
3235–0562]
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
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Extension:
Rule 17d–1
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for extension of the
previously approved collection of
information discussed below.
Section 17(d) (15 U.S.C. 80a–17(d)) of
the Investment Company Act of 1940
(15 U.S.C. 80a et seq.) (the ‘‘Act’’)
prohibits first- and second-tier affiliates
of a fund, the fund’s principal
underwriters, and affiliated persons of
18 17
CFR 200.30–3(a)(12).
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the fund’s principal underwriters, acting
as principal, to effect any transaction in
which the fund or a company controlled
by the fund is a joint or a joint and
several participant in contravention of
the Commission’s rules. Rule 17d–1 (17
CFR 270.17d–1) prohibits an affiliated
person of or principal underwriter for
any fund (a ‘‘first-tier affiliate’’), or any
affiliated person of such person or
underwriter (a ‘‘second-tier affiliate’’),
acting as principal, from participating in
or effecting any transaction in
connection with a joint enterprise or
other joint arrangement in which the
fund is a participant, unless prior to
entering into the enterprise or
arrangement ‘‘an application regarding
[the transaction] has been filed with the
Commission and has been granted by an
order.’’ In reviewing the proposed
affiliated transaction, the rule provides
that the Commission will consider
whether the proposal is (i) consistent
with the provisions, policies, and
purposes of the Act, and (ii) on a basis
different from or less advantageous than
that of other participants in determining
whether to grant an exemptive
application for a proposed joint
enterprise, joint arrangement, or profitsharing plan.
Rule 17d–1 also contains a number of
exceptions to the requirement that a
fund must obtain Commission approval
prior to entering into joint transactions
or arrangements with affiliates. For
example, funds do not have to obtain
Commission approval for certain
employee compensation plans, certain
tax-deferred employee benefit plans,
certain transactions involving small
business investment companies, the
receipt of securities or cash by certain
affiliates pursuant to a plan of
reorganization, certain arrangements
regarding liability insurance policies
and transactions with ‘‘portfolio
affiliates’’ (companies that are affiliated
with the fund solely as a result of the
fund (or an affiliated fund) controlling
them or owning more than five percent
of their voting securities) so long as
certain other affiliated persons of the
fund (e.g., the fund’s adviser, persons
controlling the fund, and persons under
common control with the fund) are not
parties to the transaction and do not
have a ‘‘financial interest’’ in a party to
the transaction. The rule excludes from
the definition of ‘‘financial interest’’ any
interest that the fund’s board of
directors (including a majority of the
directors who are not interested persons
of the fund) finds to be not material, as
long as the board records the basis for
its finding in their meeting minutes.
Thus, the rule contains two filing and
recordkeeping requirements that
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constitute collections of information.
First, rule 17d–1 requires funds that
wish to engage in a joint transaction or
arrangement with affiliates to meet the
procedural requirements for obtaining
exemptive relief from the rule’s
prohibition on joint transactions or
arrangements involving first- or secondtier affiliates. Second, rule 17d–1
permits a portfolio affiliate to enter into
a joint transaction or arrangement with
the fund if a prohibited participant has
a financial interest that the fund’s board
determines is not material and records
the basis for this finding in their
meeting minutes. These requirements of
rule 17d–1 are designed to prevent fund
insiders from managing funds for their
own benefit, rather than for the benefit
of the funds’ shareholders.
Based on an analysis of past filings,
Commission staff estimates that 23
funds file applications under section
17(d) and rule 17d–1 per year. The staff
understands that funds that file an
application generally obtain assistance
from outside counsel to prepare the
application. The cost burden of using
outside counsel is discussed below. The
Commission staff estimates that each
applicant will spend an average of 154
hours to comply with the Commission’s
applications process. The Commission
staff therefore estimates the annual
burden hours per year for all funds
under rule 17d–1’s application process
to be 3,542 hours at a cost of
$1,528,120.1 The Commission,
therefore, requests authorization to
increase the inventory of total burden
hours per year for all funds under rule
17d–1 from the current authorized
burden of 2,772 hours to 3,542 hours.
The increase is due to an increase in the
number of funds that filed applications
for exemptions under rule 17d–1.
As noted above, the Commission staff
understands that funds that file an
application under rule 17d–1 generally
use outside counsel to assist in
preparing the application. The staff
estimates that, on average, funds spend
1 The Commission staff estimates that a senior
executive, such as the fund’s chief compliance
officer, will spend an average of 62 hours and a
mid-level compliance attorney will spend an
average of 92 hours to comply with this collection
of information: 62 hours + 92 hours = 154 hours.
23 funds × 154 burden hours = 3,542 burden hours.
The Commission staff estimate that the chief
compliance officer is paid $530 per hour and the
compliance attorney is paid $365 per hour. ($530
per hour × 62 hours) + ($365 per hour × 92 hours)
= $66,440 per fund. $66,440 × 23 funds =
$1,528,120. The $530 and $365 per hour figures are
based on salary information compiled by SIFMA’s
Management & Professional Earnings in the
Securities Industry, 2013. The Commission staff has
modified SIFMA’s information to account for an
1800-hour work year and inflation, and multiplied
by 5.35 to account for bonuses, firm size, employee
benefits, and overhead.
E:\FR\FM\09JYN1.SGM
09JYN1
]]>Agencies
[Federal Register Volume 85, Number 132 (Thursday, July 9, 2020)]
[Notices]
[Pages 41259-41262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14741]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89216; File No. SR-LTSE-2020-10]
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to the Designation of Members for Mandatory Disaster Recovery
Testing Pursuant to Regulation SCI for Calendar Year 2020
July 2, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 22, 2020, Long-Term Stock Exchange, Inc.
[[Page 41260]]
(``LTSE'' or the ``Exchange'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule change as described
in Items I and II below, which Items have been prepared by the self-
regulatory organization. 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
LTSE proposes a rule change to amend how the Exchange will
designate certain Members to participate in mandatory disaster recovery
testing pursuant to Regulation SCI and LTSE Rule 2.250 for calendar
year 2020.
The text of the proposed rule change is available at the Exchange's
website at https://longtermstockexchange.com/, at the principal office
of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change 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 self-regulatory organization
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 on the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend LTSE Rule 2.250 to revise how it
will designate certain Members to participate in mandatory disaster
recovery testing pursuant to Regulation SCI and Rule 2.250 for calendar
year 2020.
Regulation SCI requires LTSE, as an SCI entity, to maintain
business continuity and disaster recovery plans that provide for
resilient and geographically diverse backup and recovery capabilities
that are reasonably designed to achieve two-hour resumption of critical
SCI systems and next business day resumption of other SCI systems
following a wide-scale disruption.\3\
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\3\ See Securities Exchange Act Release No. 73639 (November 19,
2014), 79 FR 72252 (December 5, 2014).
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Regulation SCI and LTSE Rule 2.250 also require LTSE to designate
certain Members \4\ to participate in business continuity and disaster
recovery testing in a manner specified by LTSE and at a frequency of
not less than once every 12 months.\5\ Such testing ordinarily is part
of an annual industry-wide test, which is next scheduled for October
24, 2020.
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\4\ The term ``Member'' refers to any registered broker or
dealer that has been admitted to membership in the Exchange. A
Member will have the status of a Member of the Exchange as that term
is defined in Section 3(a)(3) of the Act. Membership may be granted
to a sole proprietor, partnership, corporation, limited liability
company, or other organization that is a registered broker or dealer
pursuant to Section 15 of the Act, and which has been approved by
the Exchange. See LTSE Rule 1.160(w).
\5\ See LTSE Rule 2.250(a), (b).
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LTSE Rule 2.250 governs mandatory participation in testing of
LTSE's backup systems, and states that LTSE will designate Members that
account for a specified percentage of executed volume on LTSE, measured
on quarterly basis, as required to connect to LTSE's backup systems and
participate in functional and performance testing of such system.\6\
Rule 2.250 further provides that if a Member has not previously been
designated as meeting the volume criteria, such Member will have until
the next calendar quarter before such requirements are applicable.\7\
LTSE currently is not operational and is not expecting to have two
quarters of trading data on which to base its Member designation prior
to the October 24, 2020 test. Thus, as currently written, Rule 2.250
would not permit the Exchange to designate any Members to participate
in the industry-wide test for 2020 because no Members will have the
requisite trading volume on LTSE upon which a designation can be made.
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\6\ See LTSE Rule 2.250(a), (c).
\7\ See LTSE Rule 2.250(c).
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To address the unique circumstances for disaster recovery testing
in 2020, the year in which LTSE will become operational, the Exchange
proposes to add new paragraph (d), which would provide that for
calendar year 2020, notwithstanding paragraphs (b) and (c), which
assign the Exchange responsibility of ``identifying Members that
account for a meaningful percentage of the Exchange's overall volume,''
the Exchange will instead designate at least three Members who have a
meaningful percentage of trading volumes in NMS Stocks across the other
equity exchanges. This would allow the Exchange to identify Members for
industry-wide disaster recovery testing in the absence of the metrics
that will be used in the ordinary course to designate such firms.
LTSE believes that designating at least three Members who are
likely already to be participating in the industry-wide test by virtue
of their trading activities on other exchanges is likely to reduce the
burdens associated with being designated for disaster recovery testing
by LTSE in absence of significant trading volumes on the Exchange.
Moreover, to reduce the burdens on such Members, the Exchange proposes,
where possible, to designate firms that have already established
connections to its backup systems. This is intended to address the
``notice'' requirements in the existing Rule 2.250.\8\ The Exchange
believes that designating three or more such firms is reasonably
designed to provide the minimum necessary for the maintenance of fair
and orderly markets in the event of the activation of such plans.
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\8\ See id.
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LTSE intends to notify Members of their designation for disaster
recovery testing no later than July 10, 2020. With respect to industry-
wide disaster recovery testing in 2021 and beyond, the Exchange will
issue one or more regulatory circulars establishing the standards to be
used for determining which Members contribute a meaningful percentage
of the Exchange's overall volume and thus are required to participate
in functional and performance testing. Such standards will be informed
by the Exchange's actual market and trading data, in accordance with
LTSE Rule 2.250(a)-(c).
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 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 prevent fraudulent and
manipulative acts and practices, promote just and equitable principles
of trade, to foster cooperation and coordination with persons engaged
in facilitating transactions in securities, 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.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that its proposed methodology of designating
Members who have meaningful levels of trading activity on other
exchanges and
[[Page 41261]]
who have established connectivity to LTSE's backup systems is
consistent with the protection of investors and the public interest.
The Exchange believes that the proposed rule change will ensure that
the Members necessary to ensure the maintenance of fair and orderly
markets in the event of the activation of LTSE's disaster recovery
plans have been designated consistent with LTSE Rule 2.250 and Rule
1004 of Regulation SCI. Specifically, the proposal will address the
unique circumstances of industry-wide testing taking place within a
short time of when the Exchange commences operations. The Exchange
believes that the proposed rule change balances the objectives of
having Members participate in industry-wide disaster recovery testing,
including LTSE's backup systems, and the burdens on such Members who,
at the time of designation, will not have traded on LTSE.
As set forth in the SCI Adopting Release, ``SROs have the
authority, and legal responsibility, under Section 6 of the Exchange
Act, to adopt and enforce rules (including rules to comply with
Regulation SCI's requirements relating to BC/DR testing) applicable to
their members or participants that are designed to, among other things,
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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.'' \11\ The Exchange believes that this proposal is consistent
with such authority and legal responsibility.
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\11\ See supra note 3, at 72350.
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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 that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed rule change is designed to promote fair competition among
brokers and dealers and exchanges by ensuring the Exchange can
designate Members to participate in mandatory disaster recovery testing
pursuant to Regulation SCI for calendar year 2020. The Exchange
believes that designating three or more such firms is reasonably
designed to provide the minimum necessary for the maintenance of fair
and orderly markets in the event of the activation of such plans,
thereby promoting intermarket competition between exchanges in
furtherance of the principles of Section 11A(a)(1) of the Act.\12\
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\12\ 15 U.S.C. 78k-1(a)(1).
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With respect to intramarket competition, the proposed rule change
seeks to reduce the burdens on Members by only designating Members who
are likely already participating in the industry-wide test by virtue of
their trading activities on other exchanges. Under the proposed rule
change, the Exchange will designate firms that have already established
connections to the Exchange's backup systems. Consequently, LTSE does
not believe that the proposed rule change would impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
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)(iii) of the Act \13\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange 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. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay to permit the
Exchange to notify Members of their designation earlier than would be
possible without a waiver of the operative delay. The Commission
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest because it would
provide designated members additional time to receive notice of their
designation, and thus prepare for disaster recovery testing with the
Exchange's backup systems. Accordingly, the Commission waives the 30-
day operative delay and designates the proposal operative upon
filing.\17\
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\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ 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).
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At any time within 60 days of the filing of such 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-LTSE-2020-10 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-LTSE-2020-10. 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
[[Page 41262]]
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 LTSE and on its internet website
at https://longtermstockexchange.com/.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-LTSE-2020-10
and should be submitted on or before July 30, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-14741 Filed 7-8-20; 8:45 am]
BILLING CODE 8011-01-P
