Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Implementation Date of Certain Amendments to FINRA Rule 4210 Approved Pursuant to SR-FINRA-2015-036, 51207-51210 [2021-19729]

Download as PDF Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices on the expiration date of each single name constituent contract with respect to which an Existing Restructuring has occurred. In practice, this could result in an exercise not occurring during a systems failure if the EOD reference prices are not in the money even if they would have been in the money based on intra-day pricing. Under the proposed rule change, whether an Index Swaption is ‘‘in the money’’ would be based on the relevant market-observed prices for the underlying CDS contract determined by ICC using the intraday market data available to it at the time of the Expiration Period, or the EOD price of the underlying CDS contract on the expiration date established at any Intercontinental Exchange, Inc. (‘‘ICE’’) clearinghouse, and where relevant, also based on the last available ICE EOD price of each single name constituent contract with respect to which an Existing Restructuring has occurred. This approach provides ICC more flexibility to ensure exercise is based on various reference prices. tkelley on DSK125TN23PROD with NOTICES III. Discussion and Commission Findings Section 19(b)(2)(C) of the Act directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization.6 For the reasons given below, the Commission finds that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act 7 and Rule 17Ad–22(e)(17)(i).8 A. Consistency With Section 17A(b)(3)(F) of the Act Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of ICC be designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions, as well as to assure the safeguarding of securities and funds which are in the custody or control of ICC or for which it is responsible.9 As noted above, ICC is proposing to make changes to certain exercise procedures related to systems failures. The Commission believes that by removing the option to cancel and reschedule the Exercise Period under Paragraph 2.6, the proposed rule change would help to streamline and simplify 6 15 U.S.C. 78s(b)(2)(C). U.S.C. 78q–1(b)(3)(F). 8 17 CFR 240.17Ad–22(e)(17)(i). 9 15 U.S.C. 78q–1(b)(3)(F). the Exercise Procedures in the case of an Exercise System Failure and thereby clarify that cancellations and rescheduling will not occur and that exercises will take place during systems failures. The Commission believes that this in turn will enhance ICC’s ability to promptly and accurately clear and settle transactions during systems failures. Additionally, automatic exercise applies to an Index Swaption that is determined by ICC to be in the money. As noted above, under the proposed rule change, whether an Index Swaption is ‘‘in the money’’ will be based on the relevant market-observed prices for the underlying CDS contract determined by ICC using the intraday market data available to it at the time or the EOD price of the underlying CDS contract on the expiration date established at any ICE clearinghouse, and where relevant, also based on the last available ICE EOD price of each single name constituent contract with respect to which an Existing Restructuring has occurred. This will allow ICC additional flexibility for determining whether an Index Swaption is in the money and facilitate exercise based on various reference prices, which the Commission believes provides the ability to reflect accurate prices thereby enhancing ICC’s ability to promptly and accurately settle and clear transactions during systems failures. For the reasons stated above, the Commission finds that the proposed rule changes are consistent with Section 17A(b)(3)(F) of the Act.10 B. Consistency With Rule 17Ad– 22(e)(17)(i) Rule 17Ad–22(e)(17) requires, in relevant part, each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures reasonably designed to, as applicable, manage its operational risks by identifying the plausible sources of operational risk, both internal and external, and mitigating their impact through the use of appropriate systems, policies, procedures, and controls.11 The Commission believes that by revising its Index Swaption Exercise Procedures, as noted above, to remove the ability to cancel or reschedule exercises and to add flexibility to use various reference prices for determining if an Index Swaption is in the money during systems failures, the proposal allows ICC to manage the risks posed by a systems failure by (i) increasing certainty around the timing of the 7 15 VerDate Sep<11>2014 21:55 Sep 13, 2021 10 15 11 17 Jkt 253001 PO 00000 U.S.C. 78q–1(b)(3)(F). CFR 240.17Ad–22(e)(17)(i). Frm 00110 Fmt 4703 Sfmt 4703 51207 Exercise Period and (ii) increasing the likelihood that an Index Swaption would be categorized as being in-themoney, and therefore automatically exercised, as expected. The Commission believes that this in turn supports ICC’s ability to mitigate the consequences of a systems failure and promote systems that have a high degree of resiliency and operational reliability. For these reasons, the Commission believes the proposed rule change is consistent with Rule 17Ad– 22(e)(17)(i).12 IV. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act, and in particular, with the requirements of Section 17A(b)(3)(F) of the Act 13 and Rules 17Ad–22(e)(17)(i).14 It is therefore ordered pursuant to Section 19(b)(2) of the Act 15 that the proposed rule change (SR–ICC–2021– 016), be, and hereby is, approved.16 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–19727 Filed 9–13–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92897; File No. SR–FINRA– 2021–022] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Implementation Date of Certain Amendments to FINRA Rule 4210 Approved Pursuant to SR–FINRA– 2015–036 September 8, 2021. 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 August 26, 2021, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) 12 Id. 13 15 U.S.C. 78q–1(b)(3)(F). CFR 240.17Ad–22(e)(17)(i). 15 15 U.S.C. 78s(b)(2). 16 In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 17 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4 . 14 17 E:\FR\FM\14SEN1.SGM 14SEN1 51208 Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under paragraph (f)(6) of Rule 19b–4 under the Act,3 which renders the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to extend, to January 26, 2022, the implementation date of the amendments to FINRA Rule 4210 (Margin Requirements) pursuant to SR–FINRA–2015–036, other than the amendments pursuant to SR–FINRA– 2015–036 that were implemented on December 15, 2016. The proposed rule change would not make any changes to the text of FINRA rules. The text of the proposed rule change is available on FINRA’s website at https://www.finra.org, at the principal office of FINRA and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. tkelley on DSK125TN23PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On October 6, 2015, FINRA filed with the Commission proposed rule change SR–FINRA–2015–036, which proposed to amend FINRA Rule 4210 to establish margin requirements for (1) To Be Announced (‘‘TBA’’) transactions, inclusive of adjustable rate mortgage (‘‘ARM’’) transactions; (2) Specified Pool Transactions; and (3) transactions in Collateralized Mortgage Obligations (‘‘CMOs’’), issued in conformity with a 3 17 CFR 240.19b–4(f)(6). VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 program of an agency or GovernmentSponsored Enterprise (‘‘GSE’’), with forward settlement dates, as defined more fully in the filing (collectively, ‘‘Covered Agency Transactions’’). The Commission approved SR–FINRA– 2015–036 on June 15, 2016 (the ‘‘Approval Date’’).4 Pursuant to Partial Amendment No. 3 to SR–FINRA–2015–036, FINRA announced in Regulatory Notice 16–31 that the rule change would become effective on December 15, 2017, 18 months from the Approval Date, except that the risk limit determination requirements as set forth in paragraphs (e)(2)(F), (e)(2)(G) and (e)(2)(H) of Rule 4210 and in new Supplementary Material .05, each as respectively amended or established by SR–FINRA– 2015–036 (collectively, the ‘‘risk limit determination requirements’’), would become effective on December 15, 2016, six months from the Approval Date.5 Industry participants sought clarification regarding the implementation of the requirements pursuant to SR–FINRA–2015–036. Industry participants also requested additional time to make system changes necessary to comply with the requirements, including time to test the system changes, and requested additional time to update or amend margining agreements and related documentation. In response, FINRA made available a set of Frequently Asked Questions & Guidance 6 and, pursuant to SR–FINRA–2017–029,7 extended the implementation date of the requirements of SR–FINRA–2015–036 to June 25, 2018, except for the risk limit determination requirements, which, as announced in Regulatory Notice 16–31, became effective on December 15, 2016. 4 See Securities Exchange Act Release No. 78081 (June 15, 2016), 81 FR 40364 (June 21, 2016) (Notice of Filing of Amendment No. 3 and Order Granting Accelerated Approval to a Proposed Rule Change to Amend FINRA Rule 4210 (Margin Requirements) to Establish Margin Requirements for the TBA Market, as Modified by Amendment Nos. 1, 2, and 3; File No. SR–FINRA–2015–036). 5 See Partial Amendment No. 3 to SR–FINRA– 2015–036 and Regulatory Notice 16–31 (August 2016), both available at: www.finra.org. 6 Available at: www.finra.org/rules-guidance/ guidance/faqs. Further, staff of the SEC’s Division of Trading and Markets made available a set of Frequently Asked Questions regarding Exchange Act Rule 15c3–1 and Rule 15c3–3 in connection with Covered Agency Transactions under FINRA Rule 4210, also available at: www.finra.org/rulesguidance/guidance/faqs. 7 See Securities Exchange Act Release No. 81722 (September 26, 2017), 82 FR 45915 (October 2, 2017) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Delay the Implementation Date of Certain Amendments to FINRA Rule 4210 Approved Pursuant to SR– FINRA–2015–036; File No. SR–FINRA–2017–029); see also Regulatory Notice 17–28 (September 2017). PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 Industry participants requested that FINRA reconsider the potential impact of certain requirements pursuant to SR– FINRA–2015–036 on smaller and midsized firms. Industry participants also requested that FINRA extend the implementation date pending such reconsideration to reduce potential uncertainty in the Covered Agency Transaction market. In response to these concerns, FINRA further extended the implementation date of the requirements of SR–FINRA–2015–036, other than the risk limit determination requirements, to October 26, 2021 (the ‘‘October 26, 2021 implementation date’’).8 FINRA noted that, as FINRA stated in Partial Amendment No. 3 to SR–FINRA–2015–036, FINRA would monitor the impact of the requirements pursuant to that rulemaking and, if the requirements prove overly onerous or otherwise are shown to negatively impact the market, FINRA would consider revisiting such requirements as may be necessary to mitigate the rule’s impact.9 Informed by extensive dialogue, both with industry participants and other regulators, including the staff of the SEC and the Federal Reserve System, FINRA has proposed amendments to the requirements of SR–FINRA–2015–036 (the ‘‘Proposed Amendments’’).10 This rulemaking is ongoing. If the Commission approves the Proposed Amendments, FINRA believes it is appropriate, in the interest of regulatory clarity, to adjust the implementation of the requirements pursuant to SR– FINRA–2015–036 so as to permit time for the Commission to take action on the Proposed Amendments.11 As such, FINRA is proposing to extend the October 26, 2021 implementation date 8 See Securities Exchange Act Release No. 90852 (January 5, 2021), 86 FR 2021 (January 11, 2021) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Extend the Implementation Date of Certain Amendments to FINRA Rule 4210 Approved Pursuant to SR– FINRA–2015–036; File No. SR–FINRA–2020–046). 9 See Partial Amendment No. 3 to SR–FINRA– 2015–036, available at: www.finra.org. 10 See Securities Exchange Act Release No. 91937 (May 19, 2021), 86 FR 28161 (May 25, 2021) (Notice of Filing of a Proposed Rule Change to Amend the Requirements for Covered Agency Transactions under FINRA Rule 4210 (Margin Requirements) as Approved Pursuant to SR–FINRA–2015–036; File No. SR–FINRA–2021–010). See also Partial Amendment No. 1 to SR–FINRA–2021–010, available at www.finra.org. 11 See Securities Exchange Act Release No. 92713 (August 20, 2021) (Notice of Filing of Amendment No. 1 and Order Instituting Proceedings to Determine Whether to Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, to Amend the Requirements for Covered Agency Transactions under FINRA Rule 4210 (Margin Requirements) as Approved Pursuant to SR–FINRA–2015–036; File No. SR–FINRA–2021– 010). E:\FR\FM\14SEN1.SGM 14SEN1 Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices to January 26, 2022, which date FINRA may propose to further adjust as appropriate in a separate rule filing pending any Commission action on the Proposed Amendments. FINRA notes that the risk limit determination requirements pursuant to SR–FINRA– 2015–036 became effective on December 15, 2016 and, as such, the implementation of such requirements is not affected by the proposed rule change. FINRA has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing. The operative date will be the date of filing of the proposed rule change. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,12 which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. FINRA believes that the proposed rule change will help to reduce potential uncertainty in the Covered Agency Transaction market because, pending any Commission action on the Proposed Amendments, the proposed rule change will permit adjustment and alignment, as appropriate, of the implementation of the requirements pursuant to SR– FINRA–2015–036 with the effective date of the Proposed Amendments. FINRA believes that this will thereby protect investors and the public interest by helping to promote stability in the Covered Agency Transaction market. tkelley on DSK125TN23PROD with NOTICES B. Self-Regulatory Organization’s Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. FINRA believes that extending the October 26, 2021 implementation date to January 26, 2022, pending any Commission action on the Proposed Amendments, so as to permit adjustment and alignment of the implementation of the requirements pursuant to SR–FINRA–2015–036, as appropriate, with the effective date of the Proposed Amendments, will help to provide clarity to industry participants and to reduce any potential uncertainty 12 15 U.S.C. 78o–3(b)(6). VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 in the Covered Agency Transaction market, thereby benefiting all parties. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 13 and Rule 19b– 4(f)(6) thereunder.14 A proposed rule change filed under Rule 19b–4(f)(6) 15 normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b–(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. FINRA has requested that the Commission waive the 30-day operative delay so that the proposal may become operative upon filing. FINRA has stated that the purpose of the proposed rule change is to help to avoid unnecessary disruption in the Covered Agency Transaction market pending any Commission action on the amendments that FINRA has proposed to the Covered Agency Transaction margin requirements. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because the proposal to extend the implementation date of the requirements of Rule 4210 does not raise any new or novel issues and will reduce any potential uncertainty in the Covered Agency Transaction market. Therefore, the Commission hereby waives the 30-day operative delay requirement and designates the 13 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4 (f)(6). 15 17 CFR 240.19b–4(f)(6). 16 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule 19b–4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. FINRA has satisfied this requirement. 14 17 PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 51209 proposed rule change as operative upon filing.17 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– FINRA–2021–022 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–FINRA–2021–022. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 17 For purposes of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). E:\FR\FM\14SEN1.SGM 14SEN1 51210 Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–FINRA– 2021–022 and should be submitted on or before October 5, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–19729 Filed 9–13–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92896; File No. SR–MEMX– 2021–11] Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange’s Fee Schedule September 8, 2021. 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 August 31, 2021, MEMX LLC (‘‘MEMX’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. tkelley on DSK125TN23PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing with the Commission a proposed rule change to amend the Exchange’s fee schedule applicable to Members 3 (the ‘‘Fee Schedule’’) pursuant to Exchange Rules 15.1(a) and (c). The Exchange proposes to implement the changes to the Fee Schedule pursuant to this proposal on September 1, 2021. The text of the 18 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Exchange Rule 1.5(p). proposed rule change is provided in Exhibit 5. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend the Fee Schedule to: (i) Include an additional Liquidity Provision Tier applicable to the rebates for executions of orders in securities priced at or above $1.00 per share that add displayed liquidity to the Exchange (such orders, ‘‘Added Displayed Volume’’) and modify the required criteria under the existing Liquidity Provision Tier; (ii) introduce a tiered pricing structure for the Displayed Liquidity Incentive (‘‘DLI’’) by including an additional DLI Tier and reducing the rebate provided under the existing DLI; (iii) increase the fee under the Liquidity Removal Tier for executions of orders in securities priced at or above $1.00 per share that remove liquidity from the Exchange (such orders, ‘‘Removed Volume’’); and (iv) reduce the standard rebate for executions of Added Displayed Volume. The Exchange first notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. More specifically, the Exchange is only one of 16 registered equities exchanges, as well as a number of alternative trading systems and other off-exchange venues, to which market participants may direct their order flow. Based on publicly available information, no single registered equities exchange currently has more than approximately 16% of the total market share of executed volume of equities trading.4 Thus, in 1 15 VerDate Sep<11>2014 21:55 Sep 13, 2021 4 Market share percentage calculated as of August 30, 2021. The Exchange receives and processes data Jkt 253001 PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 such a low-concentrated and highly competitive market, no single equities exchange possesses significant pricing power in the execution of order flow, and the Exchange currently represents approximately 3% of the overall market share.5 The Exchange in particular operates a ‘‘Maker-Taker’’ model whereby it provides rebates to Members that add liquidity to the Exchange and charges fees to Members that remove liquidity from the Exchange. The Fee Schedule sets forth the standard rebates and fees applied per share for orders that add and remove liquidity, respectively. Additionally, in response to the competitive environment, the Exchange also offers tiered pricing, which provides Members with opportunities to qualify for higher rebates or lower fees where certain volume criteria and thresholds are met. Tiered pricing provides an incremental incentive for Members to strive for higher tier levels, which provides increasingly higher benefits or discounts for satisfying increasingly more stringent criteria. Liquidity Provision Tiers Currently, the Exchange provides a standard rebate of $0.0031 per share for executions of Added Displayed Volume, which the Exchange is proposing to reduce to $0.0028 per share, as further described below. The Exchange also currently offers, in addition to other incentives, a Liquidity Provision Tier in which a Member may receive an enhanced rebate of $0.00335 per share for executions of Added Displayed Volume by achieving an ADAV 6 of at least 15,000,000 shares. Now, the Exchange proposes to rename the existing Liquidity Provision Tier to Liquidity Provision Tier 1, modify the required criteria under Liquidity Provision Tier 1, and add a new Liquidity Provision Tier 2. Specifically, the Exchange proposes to modify the required criteria under Liquidity Provision Tier 1 such that a Member would now qualify for Liquidity Provision Tier 1 by achieving an ADAV of at least 0.20% of the TCV.7 Members that qualify for Liquidity Provision Tier 1 would continue to receive an enhanced rebate of $0.00335 per share made available through consolidated data feeds (i.e., CTS and UTDF). 5 Id. 6 As set forth on the Fee Schedule, ‘‘ADAV’’ means the average daily added volume calculated as the number of shares added per day, which is calculated on a monthly basis. 7 As set forth on the Fee Schedule, ‘‘TCV’’ means total consolidated volume calculated as the volume reported by all exchanges and trade reporting facilities to a consolidated transaction reporting plan for the month for which the fees apply. E:\FR\FM\14SEN1.SGM 14SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 175 (Tuesday, September 14, 2021)]
[Notices]
[Pages 51207-51210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19729]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92897; File No. SR-FINRA-2021-022]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Implementation Date of Certain 
Amendments to FINRA Rule 4210 Approved Pursuant to SR-FINRA-2015-036

September 8, 2021.
    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 August 26, 2021, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'')

[[Page 51208]]

filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which 
renders the proposal effective upon receipt of this filing by the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4 .
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to extend, to January 26, 2022, the 
implementation date of the amendments to FINRA Rule 4210 (Margin 
Requirements) pursuant to SR-FINRA-2015-036, other than the amendments 
pursuant to SR-FINRA-2015-036 that were implemented on December 15, 
2016. The proposed rule change would not make any changes to the text 
of FINRA rules.
    The text of the proposed rule change is available on FINRA's 
website at https://www.finra.org, at the principal office of FINRA and 
at the Commission's Public Reference Room.

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

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

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

1. Purpose
    On October 6, 2015, FINRA filed with the Commission proposed rule 
change SR-FINRA-2015-036, which proposed to amend FINRA Rule 4210 to 
establish margin requirements for (1) To Be Announced (``TBA'') 
transactions, inclusive of adjustable rate mortgage (``ARM'') 
transactions; (2) Specified Pool Transactions; and (3) transactions in 
Collateralized Mortgage Obligations (``CMOs''), issued in conformity 
with a program of an agency or Government-Sponsored Enterprise 
(``GSE''), with forward settlement dates, as defined more fully in the 
filing (collectively, ``Covered Agency Transactions''). The Commission 
approved SR-FINRA-2015-036 on June 15, 2016 (the ``Approval Date'').\4\
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    \4\ See Securities Exchange Act Release No. 78081 (June 15, 
2016), 81 FR 40364 (June 21, 2016) (Notice of Filing of Amendment 
No. 3 and Order Granting Accelerated Approval to a Proposed Rule 
Change to Amend FINRA Rule 4210 (Margin Requirements) to Establish 
Margin Requirements for the TBA Market, as Modified by Amendment 
Nos. 1, 2, and 3; File No. SR-FINRA-2015-036).
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    Pursuant to Partial Amendment No. 3 to SR-FINRA-2015-036, FINRA 
announced in Regulatory Notice 16-31 that the rule change would become 
effective on December 15, 2017, 18 months from the Approval Date, 
except that the risk limit determination requirements as set forth in 
paragraphs (e)(2)(F), (e)(2)(G) and (e)(2)(H) of Rule 4210 and in new 
Supplementary Material .05, each as respectively amended or established 
by SR-FINRA-2015-036 (collectively, the ``risk limit determination 
requirements''), would become effective on December 15, 2016, six 
months from the Approval Date.\5\
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    \5\ See Partial Amendment No. 3 to SR-FINRA-2015-036 and 
Regulatory Notice 16-31 (August 2016), both available at: 
www.finra.org.
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    Industry participants sought clarification regarding the 
implementation of the requirements pursuant to SR-FINRA-2015-036. 
Industry participants also requested additional time to make system 
changes necessary to comply with the requirements, including time to 
test the system changes, and requested additional time to update or 
amend margining agreements and related documentation. In response, 
FINRA made available a set of Frequently Asked Questions & Guidance \6\ 
and, pursuant to SR-FINRA-2017-029,\7\ extended the implementation date 
of the requirements of SR-FINRA-2015-036 to June 25, 2018, except for 
the risk limit determination requirements, which, as announced in 
Regulatory Notice 16-31, became effective on December 15, 2016.
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    \6\ Available at: www.finra.org/rules-guidance/guidance/faqs. 
Further, staff of the SEC's Division of Trading and Markets made 
available a set of Frequently Asked Questions regarding Exchange Act 
Rule 15c3-1 and Rule 15c3-3 in connection with Covered Agency 
Transactions under FINRA Rule 4210, also available at: 
www.finra.org/rules-guidance/guidance/faqs.
    \7\ See Securities Exchange Act Release No. 81722 (September 26, 
2017), 82 FR 45915 (October 2, 2017) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change to Delay the Implementation 
Date of Certain Amendments to FINRA Rule 4210 Approved Pursuant to 
SR-FINRA-2015-036; File No. SR-FINRA-2017-029); see also Regulatory 
Notice 17-28 (September 2017).
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    Industry participants requested that FINRA reconsider the potential 
impact of certain requirements pursuant to SR-FINRA-2015-036 on smaller 
and mid-sized firms. Industry participants also requested that FINRA 
extend the implementation date pending such reconsideration to reduce 
potential uncertainty in the Covered Agency Transaction market. In 
response to these concerns, FINRA further extended the implementation 
date of the requirements of SR-FINRA-2015-036, other than the risk 
limit determination requirements, to October 26, 2021 (the ``October 
26, 2021 implementation date'').\8\ FINRA noted that, as FINRA stated 
in Partial Amendment No. 3 to SR-FINRA-2015-036, FINRA would monitor 
the impact of the requirements pursuant to that rulemaking and, if the 
requirements prove overly onerous or otherwise are shown to negatively 
impact the market, FINRA would consider revisiting such requirements as 
may be necessary to mitigate the rule's impact.\9\
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    \8\ See Securities Exchange Act Release No. 90852 (January 5, 
2021), 86 FR 2021 (January 11, 2021) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change to Extend the Implementation 
Date of Certain Amendments to FINRA Rule 4210 Approved Pursuant to 
SR-FINRA-2015-036; File No. SR-FINRA-2020-046).
    \9\ See Partial Amendment No. 3 to SR-FINRA-2015-036, available 
at: www.finra.org.
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    Informed by extensive dialogue, both with industry participants and 
other regulators, including the staff of the SEC and the Federal 
Reserve System, FINRA has proposed amendments to the requirements of 
SR-FINRA-2015-036 (the ``Proposed Amendments'').\10\ This rulemaking is 
ongoing. If the Commission approves the Proposed Amendments, FINRA 
believes it is appropriate, in the interest of regulatory clarity, to 
adjust the implementation of the requirements pursuant to SR-FINRA-
2015-036 so as to permit time for the Commission to take action on the 
Proposed Amendments.\11\ As such, FINRA is proposing to extend the 
October 26, 2021 implementation date

[[Page 51209]]

to January 26, 2022, which date FINRA may propose to further adjust as 
appropriate in a separate rule filing pending any Commission action on 
the Proposed Amendments. FINRA notes that the risk limit determination 
requirements pursuant to SR-FINRA-2015-036 became effective on December 
15, 2016 and, as such, the implementation of such requirements is not 
affected by the proposed rule change.
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    \10\ See Securities Exchange Act Release No. 91937 (May 19, 
2021), 86 FR 28161 (May 25, 2021) (Notice of Filing of a Proposed 
Rule Change to Amend the Requirements for Covered Agency 
Transactions under FINRA Rule 4210 (Margin Requirements) as Approved 
Pursuant to SR-FINRA-2015-036; File No. SR-FINRA-2021-010). See also 
Partial Amendment No. 1 to SR-FINRA-2021-010, available at 
www.finra.org.
    \11\ See Securities Exchange Act Release No. 92713 (August 20, 
2021) (Notice of Filing of Amendment No. 1 and Order Instituting 
Proceedings to Determine Whether to Approve or Disapprove a Proposed 
Rule Change, as Modified by Amendment No. 1, to Amend the 
Requirements for Covered Agency Transactions under FINRA Rule 4210 
(Margin Requirements) as Approved Pursuant to SR-FINRA-2015-036; 
File No. SR-FINRA-2021-010).
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    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the Commission waive the 
requirement that the proposed rule change not become operative for 30 
days after the date of the filing. The operative date will be the date 
of filing of the proposed rule change.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\12\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. FINRA believes that the proposed rule change will help 
to reduce potential uncertainty in the Covered Agency Transaction 
market because, pending any Commission action on the Proposed 
Amendments, the proposed rule change will permit adjustment and 
alignment, as appropriate, of the implementation of the requirements 
pursuant to SR-FINRA-2015-036 with the effective date of the Proposed 
Amendments. FINRA believes that this will thereby protect investors and 
the public interest by helping to promote stability in the Covered 
Agency Transaction market.
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    \12\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. FINRA believes that extending 
the October 26, 2021 implementation date to January 26, 2022, pending 
any Commission action on the Proposed Amendments, so as to permit 
adjustment and alignment of the implementation of the requirements 
pursuant to SR-FINRA-2015-036, as appropriate, with the effective date 
of the Proposed Amendments, will help to provide clarity to industry 
participants and to reduce any potential uncertainty in the Covered 
Agency Transaction market, thereby benefiting all parties.

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

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4 (f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-(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. FINRA has requested 
that the Commission waive the 30-day operative delay so that the 
proposal may become operative upon filing. FINRA has stated that the 
purpose of the proposed rule change is to help to avoid unnecessary 
disruption in the Covered Agency Transaction market pending any 
Commission action on the amendments that FINRA has proposed to the 
Covered Agency Transaction margin requirements. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because the proposal to 
extend the implementation date of the requirements of Rule 4210 does 
not raise any new or novel issues and will reduce any potential 
uncertainty in the Covered Agency Transaction market. Therefore, the 
Commission hereby waives the 30-day operative delay requirement and 
designates the proposed rule change as 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). In addition, Rule 19b-
4(f)(6)(iii) requires a self-regulatory organization to give the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of 
the proposed rule change, or such shorter time as designated by the 
Commission. FINRA has satisfied this requirement.
    \17\ For purposes of waiving the 30-day operative delay, the 
Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-FINRA-2021-022 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2021-022. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10

[[Page 51210]]

a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of FINRA. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-FINRA-2021-022 and should be submitted 
on or before October 5, 2021.

    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. 2021-19729 Filed 9-13-21; 8:45 am]
BILLING CODE 8011-01-P

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