Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Rule 11.6800 Series, 47443-47446 [2020-16997]

Download as PDF Federal Register / Vol. 85, No. 151 / Wednesday, August 5, 2020 / Notices 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 30, 2020. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–17010 Filed 8–4–20; 8:45 am] SECURITIES AND EXCHANGE COMMISSION Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Rule 11.6800 Series jbell on DSKJLSW7X2PROD with NOTICES July 30, 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 July 27, 2020, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to U.S.C. 78a. CFR 240.19b–4. VerDate Sep<11>2014 16:55 Aug 04, 2020 Jkt 250001 The Exchange proposes to amend the Rule 11.6800 Series, the Exchange’s compliance rule (‘‘Compliance Rule’’) regarding the National Market System Plan Governing the Consolidated Audit Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’) 3 to be consistent with an amendment to the CAT NMS Plan recently approved by the Commission. The proposed rule change is available on the Exchange’s website at www.nyse.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 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 those 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 parts of such statements. 1. Purpose [Release No. 34–89432; File No. SR– NYSEArca-2020–71] 2 17 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P 1 15 solicit comments on the proposed rule change from interested persons. The purpose of this proposed rule change is to amend the Rule 11.6800 Series, the Compliance Rule regarding the CAT NMS Plan, to be consistent with an amendment to the CAT NMS Plan recently approved by the Commission.4 The Commission approved an amendment to the CAT NMS Plan to amend the requirements for Firm Designated IDs in four ways: (1) To prohibit the use of account numbers as Firm Designated IDs for trading accounts that are not proprietary accounts; (2) to require that the Firm Designated ID for a trading account be persistent over time for each Industry Member so that a single account may be tracked across time within a single Industry Member; (3) to permit the use 3 Unless otherwise specified, capitalized terms used in this rule filing are defined as set forth in the Compliance Rule. 4 See Securities Exchange Act Release No. 89397 (July 24, 2020) (Federal Register publication pending). PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 47443 of relationship identifiers as Firm Designated IDs in certain circumstances; and (4) to permit the use of entity identifiers as Firm Designated IDs in certain circumstances (the ‘‘FDID Amendment’’). As a result, the Exchange proposes to amend the definition of ‘‘Firm Designated ID’’ in Rule 11.6810 to reflect the changes to the CAT NMS Plan regarding the requirements for Firm Designated IDs. Rule 11.6810(r) defines the term ‘‘Firm Designated ID’’ to mean ‘‘a unique identifier for each trading account designated by Industry Members for purposes of providing data to the Central Repository, where each such identifier is unique among all identifiers from any given Industry Member for each business date.’’ (1) Prohibit Use of Account Numbers The Exchange proposes to amend the definition of ‘‘Firm Designated ID’’ in Rule 11.6810(r) to provide that Industry Members may not use account numbers as the Firm Designated ID for trading accounts that are not proprietary accounts. Specifically, the Exchange proposes to add the following to the definition of a Firm Designated ID: ‘‘provided, however, such identifier may not be the account number for such trading account if the trading account is not a proprietary account.’’ (2) Persistent Firm Designated ID The Exchange also proposes to amend the definition of ‘‘Firm Designated ID’’ in Rule 11.6810(r) to require a Firm Designated ID assigned by an Industry Member to a trading account to be persistent over time, not for each business day.5 To effect this change, the Exchange proposes to amend the definition of ‘‘Firm Designated ID’’ in Rule 11.6810(r) to add ‘‘and persistent’’ after ‘‘unique’’ and delete ‘‘for each business date’’ so that the definition of ‘‘Firm Designated ID’’ would read, in relevant part, as follows: A unique and persistent identifier for each trading account designated by Industry Members for purposes of providing data to 5 If an Industry Member assigns a new account number or entity identifier to a client or customer due to a merger, acquisition or some other corporate action, then the Industry Member should create a new Firm Designated ID to identify the new account identifier/relationship identifier/entity identifier in use at the Industry Member for the entity. In addition, if a previously assigned Firm Designated ID is no longer in use by an Industry Member (e.g., if the trading account associated with the Firm Designated ID has been closed), then an Industry Member may reuse the Firm Designated ID for another trading account. The Plan Processor will maintain a history of the use of each Firm Designated ID, including, for example, the effective dates of the Firm Designated ID with respect to each associated trading account. E:\FR\FM\05AUN1.SGM 05AUN1 47444 Federal Register / Vol. 85, No. 151 / Wednesday, August 5, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES the Central Repository . . . where each such identifier is unique among all identifiers from any given Industry Member. (3) Relationship Identifiers The FDID Amendment also permits an Industry Member to provide a relationship identifier as the Firm Designated ID, rather than an identifier that represents a trading account, in certain scenarios in which an Industry Member does not have an account number available to its order handling and/or execution system at the time of order receipt (e.g., certain institutional accounts, managed accounts, accounts for individuals). In such scenarios, the trading account structure may not be available when a new order is first received from a client and, instead, only an identifier representing the client’s trading relationship is available. In these limited instances, the Industry Member may provide an identifier used by the Industry Member to represent the client’s trading relationship with the Industry Member instead of an account number. When a trading relationship is established at a broker-dealer for clients, the broker-dealer typically creates a parent account, under which additional subaccounts are created. However, in some cases, the broker-dealer establishes the parent relationship for a client using a relationship identifier as opposed to an actual parent account. The relationship identifier could be any of a variety of identifiers, such as a short name for a relevant individual or institution. This relationship identifier is established prior to any trading for the client. If a relationship identifier has been established rather than a parent account, and an order is placed on behalf of the client, any executed trades will be kept in a firm account (e.g., a facilitation or average price account) until they are allocated to the proper subaccount(s), i.e., the accounts associated with the parent relationship identifier connecting them to the client. Relationship identifiers are used in circumstances in which the account structure is not available to the trading system at the time of order placement. The clients have established accounts prior to the trade that satisfy relevant regulatory obligations for opening accounts, such as Know Your Customer and other customer obligations. However, the order receipt workflows operate using relationship identifiers, not accounts. For Firm Designated ID purposes, as with an identifier for a trading account, the relationship identifier must be persistent over time. The relationship identifier also must be unique among all VerDate Sep<11>2014 16:55 Aug 04, 2020 Jkt 250001 identifiers from any given Industry Member. With these requirements, a single relationship could be tracked across time within a single Industry Member using the Firm Designated ID. In addition, the relationship identifier must be masked as the relationship identifier could be a name or otherwise provide an indication as to the identity of the relationship. The masking requirement would avoid potentially revealing the identity of the relationship. An example of the use of a relationship identifier as a Firm Designated ID would be as follows: Suppose that Big Fund Manager is known in Industry Member A’s systems as ‘‘BFM1.’’ When an order is placed by Big Fund Manager, the order is tagged to BFM1. Industry Member A could use a masked version of BFM1 in place of the Firm Designated ID representing a trading account when reporting a new order from Big Fund Manager instead of the account numbers to which executed shares/contracts will be allocated at a later time via a booking or other system. Similarly, another example of the use of a relationship identifier as a Firm Designated ID would involve an individual in place of the Big Fund Manager in the above example. In accordance with the FDID Amendment, the Exchange proposes to amend the definition of a ‘‘Firm Designated ID’’ in Rule 11.6810(r) to permit Industry Members to provide a relationship identifier as the Firm Designated ID as described above. Specifically, the Exchange proposes to amend the definition of ‘‘Firm Designated ID’’ in Rule 11.6810(r) to state that a Firm Designated ID means, in relevant part, ‘‘a unique and persistent relationship identifier when an Industry Member does not have an account number available to its order handling and/or execution system at the time of order receipt, provided, however, such identifier must be masked.’’ (4) Entity Identifiers The FDID Amendment also permits Industry Members to provide an entity identifier, rather than an identifier that represents a trading account, when an employee of the Industry Member is exercising discretion over multiple client accounts and creates an aggregated order for which a trading account number of the Industry Member is not available at the time of order origination. An entity identifier is an identifier of the Industry Member that represents the firm discretionary relationship with the client rather than a firm trading account. PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 The scenarios in which a firm uses an entity identifier are comparable to when a firm uses a relationship identifier (as described above) except the entity identifier represents the Industry Member rather than a client. As with relationship identifiers, entity identifiers are used in circumstances in which the account structure is not available to the trading system at the time of order placement. In this workflow, the Industry Member’s order handling and/execution system does not have an account number at the time of order origination. The relevant clients that will receive an allocation of the execution have established accounts prior to the trade that satisfy relevant regulatory obligations for opening accounts, such as Know Your Customer and other customer obligations. However, the order origination workflows operate using entity identifiers, not accounts. For Firm Designated ID purposes, as with the identifier for a trading account or a relationship, the entity identifier must be persistent over time. The entity identifier also must be unique among all identifiers from any given Industry Member. Each Industry Member must make its own risk determination as to whether it believes it is necessary to mask the entity identifier when using an entity identifier to report the Firm Designated ID to CAT. An example of the use of an entity identifier as a Firm Designated ID would be when Industry Member 1 has an employee that is a registered representative that has discretion over several client accounts held at Industry Member 1. The registered representative places an order that he will later allocate to individual client accounts. At the time the order is placed, the trading system only knows it involves a representative of Industry Member 1 and it does not have a specific trading account that could be used for Firm Designated ID reporting. Therefore, Industry Member 1 could report IM1, its entity identifier, as the FDID with the new order. In accordance with the FDID Amendment to the CAT NMS Plan, the Exchange proposes to amend the definition of ‘‘Firm Designated ID’’ in Rule 11.6810(r) to permit the use of an entity identifier as a Firm Designated ID as described above. Specifically, the Exchange proposes to amend the definition of a ‘‘Firm Designated ID’’ in Rule 11.6810(r) to state that a Firm Designated ID means, in relevant part, ‘‘a unique and persistent entity identifier when an employee of an Industry Member is exercising discretion over multiple client accounts E:\FR\FM\05AUN1.SGM 05AUN1 Federal Register / Vol. 85, No. 151 / Wednesday, August 5, 2020 / Notices and creates an aggregated order for which a trading account number of the Industry Member is not available at the time of order origination.’’ jbell on DSKJLSW7X2PROD with NOTICES 2. Statutory Basis NYSE Arca believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act,6 which require, among other things, that the Exchange’s 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, and Section 6(b)(8) of the Act,7 which requires that the Exchange’s rules not impose any burden on competition that is not necessary or appropriate. NYSE Arca believes that this proposal is consistent with the Act because it is consistent with, and implements, a recent amendment to the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan ‘‘is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.’’ 8 To the extent that this proposal implements the Plan, and applies specific requirements to Industry Members, the Exchange believes that this proposal furthers the objectives of the Plan, as identified by the SEC, and is therefore consistent with the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition NYSE Arca 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. NYSE Arca notes that the proposed rule changes are consistent with a recent amendment to the CAT NMS Plan, and are designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. NYSE Arca also notes that the FDID Amendment will apply equally to all Industry Members that trade NMS Securities and OTC Equity Securities. In addition, all national securities exchanges and FINRA are proposing this amendment to their Compliance Rules. Therefore, this is not a 6 15 U.S.C. 78f(b)(6). U.S.C. 78f(b)(8) 8 See Securities Exchange Act Release No. 79318 (November 15, 2016), 81 FR 84696, 84697 (November 23, 2016). 7 15 VerDate Sep<11>2014 18:27 Aug 04, 2020 Jkt 250001 competitive rule filing, and, therefore, it does not impose a burden on competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 9 and Rule 19b–4(f)(6) thereunder.10 Because the 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 prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and Rule 19b–4(f)(6)(iii) thereunder.12 A proposed rule change filed under Rule 19b-4(f)(6) 13 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),14 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 so that the proposal may become operative by July 31, 2020. The Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest because it implements an amendment to the CAT NMS Plan approved by the Commission.15 Accordingly, the Commission hereby waives the 30-day operative delay and 9 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s 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. 13 17 CFR 240.19b-4(f)(6). 14 17 CFR 240.19b-4(f)(6)(iii). 15 See Securities Exchange Act Release No. 89397 (July 24, 2020) (Federal Register publication pending). 10 17 PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 47445 designates the proposal operative as of July 31, 2020.16 At any time within 60 days of the filing of this 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 will institute proceedings to determine whether the proposed rule change 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– NYSEArca-2020–71 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-NYSEArca-2020–71. 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 16 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). E:\FR\FM\05AUN1.SGM 05AUN1 47446 Federal Register / Vol. 85, No. 151 / Wednesday, August 5, 2020 / Notices 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-NYSEArca-2020–71, and should be submitted on or before August 26, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–16997 Filed 8–4–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–559, OMB Control No. 3235–0621] 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 jbell on DSKJLSW7X2PROD with NOTICES Extension: Form 15F. 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 this request for extension of the previously approved collection of information discussed below. Form 15F (17 CFR 249.324) is filed by a foreign private issuer when terminating its Exchange Act reporting obligations pursuant to Exchange Act Rule 12h–6 (17 CFR 240.12h–6). Form 15F requires a foreign private issuer to disclose information that helps investors understand the foreign private issuer’s decision to terminate its Exchange Act reporting obligations and assists the Commission staff in determining whether the filer is eligible to terminate its Exchange Act reporting obligations pursuant to Rule 12h–6. Rule 12h–6 provides a process for a foreign private issuer to exit the Exchange Act registration and reporting regime when there is relatively little U.S. investor interest in its securities. Rule 12h–6 is intended to remove a 17 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:40 Aug 04, 2020 Jkt 250001 disincentive for foreign private issuers to register their securities with the Commission by lessening concerns that the Exchange Act registration and reporting system would be difficult to exit once an issuer enters it. The information provided to the Commission is mandatory and all information is made available to the public upon request. We estimate that Form 15F takes approximately 30 hours to prepare and is filed by approximately 30 foreign private issuers. We estimate that 25% of the 30 hours per response (7.5 hours per response) is prepared by the filer for a total annual reporting burden of 225 hours (7.5 hours per response × 30 responses). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. The public may view background documentation for this information collection at the following website: www.reginfo.gov. Find this particular information collection by selecting ‘‘Currently under 30-day Review—Open for Public Comments’’ or by using the search function. Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to (i) www.reginfo.gov/public/do/ PRAMain and (ii) David Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o Cynthia Roscoe, 100 F Street NE, Washington, DC 20549, or by sending an email to: PRA_Mailbox@sec.gov. notice is hereby given that on July 28, 2020, the New York Stock Exchange LLC (‘‘NYSE’’ 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 The Exchange proposes to extend the temporary period for specified Commentaries to Rules 7.35, 7.35A, 7.35B, and 7.35C and temporary rule relief in Rule 36.30, to end on the earlier of a full reopening of the Trading Floor facilities to DMMs or after the Exchange closes on September 30, 2020. The proposed rule change is available on the Exchange’s website at www.nyse.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 BILLING CODE 8011–01–P 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 those 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 parts of such statements. SECURITIES AND EXCHANGE COMMISSION A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change [Release No. 34–89425; File No. SR–NYSE– 2020–63] 1. Purpose Dated: July 31, 2020. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–17056 Filed 8–4–20; 8:45 am] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Extend the Temporary Period for Specified Commentaries to Rules 7.35, 7.35A, 7.35B, and 7.35C and Temporary Rule Relief in Rule 36.30 July 30, 2020. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 Background 1 15 U.S.C.78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. PO 00000 Frm 00109 Fmt 4703 The Exchange proposes to extend the temporary period for specified Commentaries to Rules 7.35, 7.35A, 7.35B, and 7.35C and temporary rule relief to Rule 36.30, to end on the earlier of a full reopening of the Trading Floor facilities to DMMs or after the Exchange closes on September 30, 2020. The current temporary period that these Rules are in effect ends on the earlier of a full reopening of the Trading Floor facilities to DMMs or after the Exchange closes on July 31, 2020. To slow the spread of COVID–19 through social-distancing measures, on Sfmt 4703 E:\FR\FM\05AUN1.SGM 05AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 85, Number 151 (Wednesday, August 5, 2020)]
[Notices]
[Pages 47443-47446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16997]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89432; File No. SR-NYSEArca-2020-71]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the Rule 
11.6800 Series

July 30, 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 July 27, 2020, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the 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. 78a.
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Rule 11.6800 Series, the 
Exchange's compliance rule (``Compliance Rule'') regarding the National 
Market System Plan Governing the Consolidated Audit Trail (the ``CAT 
NMS Plan'' or ``Plan'') \3\ to be consistent with an amendment to the 
CAT NMS Plan recently approved by the Commission. The proposed rule 
change is available on the Exchange's website at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.
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    \3\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth in the Compliance Rule.
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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 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 those 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 parts of such statements.

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

1. Purpose
    The purpose of this proposed rule change is to amend the Rule 
11.6800 Series, the Compliance Rule regarding the CAT NMS Plan, to be 
consistent with an amendment to the CAT NMS Plan recently approved by 
the Commission.\4\ The Commission approved an amendment to the CAT NMS 
Plan to amend the requirements for Firm Designated IDs in four ways: 
(1) To prohibit the use of account numbers as Firm Designated IDs for 
trading accounts that are not proprietary accounts; (2) to require that 
the Firm Designated ID for a trading account be persistent over time 
for each Industry Member so that a single account may be tracked across 
time within a single Industry Member; (3) to permit the use of 
relationship identifiers as Firm Designated IDs in certain 
circumstances; and (4) to permit the use of entity identifiers as Firm 
Designated IDs in certain circumstances (the ``FDID Amendment''). As a 
result, the Exchange proposes to amend the definition of ``Firm 
Designated ID'' in Rule 11.6810 to reflect the changes to the CAT NMS 
Plan regarding the requirements for Firm Designated IDs.
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    \4\ See Securities Exchange Act Release No. 89397 (July 24, 
2020) (Federal Register publication pending).
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    Rule 11.6810(r) defines the term ``Firm Designated ID'' to mean ``a 
unique identifier for each trading account designated by Industry 
Members for purposes of providing data to the Central Repository, where 
each such identifier is unique among all identifiers from any given 
Industry Member for each business date.''
(1) Prohibit Use of Account Numbers
    The Exchange proposes to amend the definition of ``Firm Designated 
ID'' in Rule 11.6810(r) to provide that Industry Members may not use 
account numbers as the Firm Designated ID for trading accounts that are 
not proprietary accounts. Specifically, the Exchange proposes to add 
the following to the definition of a Firm Designated ID: ``provided, 
however, such identifier may not be the account number for such trading 
account if the trading account is not a proprietary account.''
(2) Persistent Firm Designated ID
    The Exchange also proposes to amend the definition of ``Firm 
Designated ID'' in Rule 11.6810(r) to require a Firm Designated ID 
assigned by an Industry Member to a trading account to be persistent 
over time, not for each business day.\5\ To effect this change, the 
Exchange proposes to amend the definition of ``Firm Designated ID'' in 
Rule 11.6810(r) to add ``and persistent'' after ``unique'' and delete 
``for each business date'' so that the definition of ``Firm Designated 
ID'' would read, in relevant part, as follows:
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    \5\ If an Industry Member assigns a new account number or entity 
identifier to a client or customer due to a merger, acquisition or 
some other corporate action, then the Industry Member should create 
a new Firm Designated ID to identify the new account identifier/
relationship identifier/entity identifier in use at the Industry 
Member for the entity. In addition, if a previously assigned Firm 
Designated ID is no longer in use by an Industry Member (e.g., if 
the trading account associated with the Firm Designated ID has been 
closed), then an Industry Member may reuse the Firm Designated ID 
for another trading account. The Plan Processor will maintain a 
history of the use of each Firm Designated ID, including, for 
example, the effective dates of the Firm Designated ID with respect 
to each associated trading account.
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    A unique and persistent identifier for each trading account 
designated by Industry Members for purposes of providing data to

[[Page 47444]]

the Central Repository . . . where each such identifier is unique 
among all identifiers from any given Industry Member.
(3) Relationship Identifiers
    The FDID Amendment also permits an Industry Member to provide a 
relationship identifier as the Firm Designated ID, rather than an 
identifier that represents a trading account, in certain scenarios in 
which an Industry Member does not have an account number available to 
its order handling and/or execution system at the time of order receipt 
(e.g., certain institutional accounts, managed accounts, accounts for 
individuals). In such scenarios, the trading account structure may not 
be available when a new order is first received from a client and, 
instead, only an identifier representing the client's trading 
relationship is available. In these limited instances, the Industry 
Member may provide an identifier used by the Industry Member to 
represent the client's trading relationship with the Industry Member 
instead of an account number.
    When a trading relationship is established at a broker-dealer for 
clients, the broker-dealer typically creates a parent account, under 
which additional subaccounts are created. However, in some cases, the 
broker-dealer establishes the parent relationship for a client using a 
relationship identifier as opposed to an actual parent account. The 
relationship identifier could be any of a variety of identifiers, such 
as a short name for a relevant individual or institution. This 
relationship identifier is established prior to any trading for the 
client. If a relationship identifier has been established rather than a 
parent account, and an order is placed on behalf of the client, any 
executed trades will be kept in a firm account (e.g., a facilitation or 
average price account) until they are allocated to the proper 
subaccount(s), i.e., the accounts associated with the parent 
relationship identifier connecting them to the client.
    Relationship identifiers are used in circumstances in which the 
account structure is not available to the trading system at the time of 
order placement. The clients have established accounts prior to the 
trade that satisfy relevant regulatory obligations for opening 
accounts, such as Know Your Customer and other customer obligations. 
However, the order receipt workflows operate using relationship 
identifiers, not accounts.
    For Firm Designated ID purposes, as with an identifier for a 
trading account, the relationship identifier must be persistent over 
time. The relationship identifier also must be unique among all 
identifiers from any given Industry Member. With these requirements, a 
single relationship could be tracked across time within a single 
Industry Member using the Firm Designated ID. In addition, the 
relationship identifier must be masked as the relationship identifier 
could be a name or otherwise provide an indication as to the identity 
of the relationship. The masking requirement would avoid potentially 
revealing the identity of the relationship.
    An example of the use of a relationship identifier as a Firm 
Designated ID would be as follows: Suppose that Big Fund Manager is 
known in Industry Member A's systems as ``BFM1.'' When an order is 
placed by Big Fund Manager, the order is tagged to BFM1. Industry 
Member A could use a masked version of BFM1 in place of the Firm 
Designated ID representing a trading account when reporting a new order 
from Big Fund Manager instead of the account numbers to which executed 
shares/contracts will be allocated at a later time via a booking or 
other system. Similarly, another example of the use of a relationship 
identifier as a Firm Designated ID would involve an individual in place 
of the Big Fund Manager in the above example.
    In accordance with the FDID Amendment, the Exchange proposes to 
amend the definition of a ``Firm Designated ID'' in Rule 11.6810(r) to 
permit Industry Members to provide a relationship identifier as the 
Firm Designated ID as described above. Specifically, the Exchange 
proposes to amend the definition of ``Firm Designated ID'' in Rule 
11.6810(r) to state that a Firm Designated ID means, in relevant part, 
``a unique and persistent relationship identifier when an Industry 
Member does not have an account number available to its order handling 
and/or execution system at the time of order receipt, provided, 
however, such identifier must be masked.''
(4) Entity Identifiers
    The FDID Amendment also permits Industry Members to provide an 
entity identifier, rather than an identifier that represents a trading 
account, when an employee of the Industry Member is exercising 
discretion over multiple client accounts and creates an aggregated 
order for which a trading account number of the Industry Member is not 
available at the time of order origination. An entity identifier is an 
identifier of the Industry Member that represents the firm 
discretionary relationship with the client rather than a firm trading 
account.
    The scenarios in which a firm uses an entity identifier are 
comparable to when a firm uses a relationship identifier (as described 
above) except the entity identifier represents the Industry Member 
rather than a client. As with relationship identifiers, entity 
identifiers are used in circumstances in which the account structure is 
not available to the trading system at the time of order placement. In 
this workflow, the Industry Member's order handling and/execution 
system does not have an account number at the time of order 
origination. The relevant clients that will receive an allocation of 
the execution have established accounts prior to the trade that satisfy 
relevant regulatory obligations for opening accounts, such as Know Your 
Customer and other customer obligations. However, the order origination 
workflows operate using entity identifiers, not accounts.
    For Firm Designated ID purposes, as with the identifier for a 
trading account or a relationship, the entity identifier must be 
persistent over time. The entity identifier also must be unique among 
all identifiers from any given Industry Member. Each Industry Member 
must make its own risk determination as to whether it believes it is 
necessary to mask the entity identifier when using an entity identifier 
to report the Firm Designated ID to CAT.
    An example of the use of an entity identifier as a Firm Designated 
ID would be when Industry Member 1 has an employee that is a registered 
representative that has discretion over several client accounts held at 
Industry Member 1. The registered representative places an order that 
he will later allocate to individual client accounts. At the time the 
order is placed, the trading system only knows it involves a 
representative of Industry Member 1 and it does not have a specific 
trading account that could be used for Firm Designated ID reporting. 
Therefore, Industry Member 1 could report IM1, its entity identifier, 
as the FDID with the new order.
    In accordance with the FDID Amendment to the CAT NMS Plan, the 
Exchange proposes to amend the definition of ``Firm Designated ID'' in 
Rule 11.6810(r) to permit the use of an entity identifier as a Firm 
Designated ID as described above. Specifically, the Exchange proposes 
to amend the definition of a ``Firm Designated ID'' in Rule 11.6810(r) 
to state that a Firm Designated ID means, in relevant part, ``a unique 
and persistent entity identifier when an employee of an Industry Member 
is exercising discretion over multiple client accounts

[[Page 47445]]

and creates an aggregated order for which a trading account number of 
the Industry Member is not available at the time of order 
origination.''
2. Statutory Basis
    NYSE Arca believes that the proposed rule change is consistent with 
the provisions of Section 6(b)(5) of the Act,\6\ which require, among 
other things, that the Exchange's 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, and Section 6(b)(8) of the Act,\7\ which 
requires that the Exchange's rules not impose any burden on competition 
that is not necessary or appropriate.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b)(6).
    \7\ 15 U.S.C. 78f(b)(8)
---------------------------------------------------------------------------

    NYSE Arca believes that this proposal is consistent with the Act 
because it is consistent with, and implements, a recent amendment to 
the CAT NMS Plan, and is designed to assist the Exchange and its 
Industry Members in meeting regulatory obligations pursuant to the 
Plan. In approving the Plan, the SEC noted that the Plan ``is necessary 
and appropriate in the public interest, for the protection of investors 
and the maintenance of fair and orderly markets, to remove impediments 
to, and perfect the mechanism of a national market system, or is 
otherwise in furtherance of the purposes of the Act.'' \8\ To the 
extent that this proposal implements the Plan, and applies specific 
requirements to Industry Members, the Exchange believes that this 
proposal furthers the objectives of the Plan, as identified by the SEC, 
and is therefore consistent with the Act.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 79318 (November 15, 
2016), 81 FR 84696, 84697 (November 23, 2016).
---------------------------------------------------------------------------

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

    NYSE Arca 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. NYSE Arca notes 
that the proposed rule changes are consistent with a recent amendment 
to the CAT NMS Plan, and are designed to assist the Exchange in meeting 
its regulatory obligations pursuant to the Plan. NYSE Arca also notes 
that the FDID Amendment will apply equally to all Industry Members that 
trade NMS Securities and OTC Equity Securities. In addition, all 
national securities exchanges and FINRA are proposing this amendment to 
their Compliance Rules. Therefore, this is not a competitive rule 
filing, and, therefore, it does not impose a burden on competition.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6)(iii) thereunder.\12\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\14\ 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 so that the proposal 
may become operative by July 31, 2020. The Commission believes that 
waiver of the 30-day operative delay is consistent with the protection 
of investors and the public interest because it implements an amendment 
to the CAT NMS Plan approved by the Commission.\15\ Accordingly, the 
Commission hereby waives the 30-day operative delay and designates the 
proposal operative as of July 31, 2020.\16\
---------------------------------------------------------------------------

    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ See Securities Exchange Act Release No. 89397 (July 24, 
2020) (Federal Register publication pending).
    \16\ 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).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of this 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 will institute proceedings to 
determine whether the proposed rule change 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-NYSEArca-2020-71 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-NYSEArca-2020-71. 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

[[Page 47446]]

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-NYSEArca-2020-71, and should 
be submitted on or before August 26, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

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

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-16997 Filed 8-4-20; 8:45 am]
BILLING CODE 8011-01-P

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