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[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Rules and Regulations]
[Pages 20506-20509]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-8919]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-64251]

Technical Amendment to Rule 19b-4: Filings With Respect to 
Proposed Rule Changes by Self-Regulatory Organizations

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
amending Rule 19b-4(a) under the Securities Exchange Act of 1934 (the 
``Exchange Act'') so that references to ``business day'' in Section 
19(b) of the Exchange Act and Rule 19b-4 thereunder refer to a day 
other than a Saturday, Sunday, Federal holiday, a day that the U.S. 
Office of Personnel Management (``OPM'') has announced that Federal 
agencies in the Washington, DC area are closed to the public, a day on 
which the Commission is subject to a Federal government shutdown in the 
event of a lapse in appropriations, or a day on which the Commission's 
Washington, DC office is otherwise not open for regular business.

DATES: Effective Date: April 13, 2011.

FOR FURTHER INFORMATION CONTACT: Richard Holley III, Assistant 
Director, at (202) 551-5614, Division of Trading and Markets, 
Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-7010.

SUPPLEMENTARY INFORMATION:

I. Filing of SRO Proposed Rule Changes

A. Background

    Section 19(b)(1) of the Exchange Act \1\ requires self-regulatory 
organizations (``SROs''), including national securities exchanges, 
registered securities associations, registered clearing agencies, and 
the Municipal Securities Rulemaking Board,\2\ to file with the 
Commission any proposed rule change,\3\

[[Page 20507]]

which must be submitted on Form 19b-4 \4\ in accordance with the 
General Instructions thereto. Once a proposed rule change has been 
filed, the Commission is required to publish it in the Federal Register 
to provide an opportunity for public comment.\5\ A proposed rule change 
generally may not take effect unless it is either approved by the 
Commission pursuant to Section 19(b)(2) of the Exchange Act \6\ or is 
designated by the SRO to become effective upon filing pursuant to 
Section 19(b)(3)(A) of the Exchange Act.\7\ The Commission's Division 
of Trading and Markets, on behalf of the Commission, is responsible for 
the day-to-day review of SRO proposed rule changes.\8\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ See Section 3(a)(26) of the Exchange Act, 15 U.S.C. 
78c(a)(26) (defining the term ``self-regulatory organization'' to 
mean any national securities exchange, registered securities 
association, registered clearing agency, and, for purposes of 
Section 19(b) and other limited purposes, the Municipal Securities 
Rulemaking Board).
    \3\ Section 19(b)(1) of the Exchange Act defines a ``proposed 
rule change'' as ``any proposed rule, or any proposed change in, 
addition to, or deletion from the rules of'' an SRO. 15 U.S.C. 
78s(b)(1). Section 3(a)(27) of the Exchange Act defines ``rules'' to 
include ``the constitution, articles of incorporation, bylaws, and 
rules, or instruments corresponding to the foregoing * * * and such 
of the stated policies, practices, and interpretations of such 
exchange, association, or clearing agency as the Commission, by 
rule, may determine to be necessary or appropriate in the public 
interest or for the protection of investors to be deemed to be rules 
of such exchange, association, or clearing agency.'' 15 U.S.C. 
78c(a)(27). Rule 19b-4(b) under the Exchange Act defines ``stated 
policy, practice, or interpretation'' to mean, in part, ``[a]ny 
material aspect of the operation of the facilities of the self-
regulatory organization'' or ``[a]ny statement made generally 
available'' that ``establishes or changes any standard, limit, or 
guideline'' with respect to the ``rights, obligations, or 
privileges'' of persons or the ``meaning, administration, or 
enforcement of an existing rule.'' 17 CFR 240.19b-4(b).
    \4\ 17 CFR 249.819.
    \5\ See 15 U.S.C. 78s(b)(1). The SRO is required to prepare the 
notice of its proposed rule change on Exhibit 1 of Form 19b-4 that 
the Commission then publishes in the Federal Register.
    \6\ See 15 U.S.C. 78s(b)(2). However, as provided in Section 
19(b)(2)(D) of the Exchange Act, 15 U.S.C. 78s(b)(2)(D), a proposed 
rule change may be ``deemed to have been approved by the 
Commission'' if the Commission fails to take action on a proposal 
that is subject to Commission approval within the statutory time 
frames specified in Section 19(b)(2).
    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ See 17 CFR 200.30-3 (Delegation of authority to Director of 
the Division of Trading and Markets).
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    There may be days, in addition to Saturday, Sunday and Federal 
holidays, on which the Commission's Washington, DC offices are not open 
for regular business. For example, a lapse in appropriations or an 
announcement by OPM that Federal agencies are closed for business may 
cause the Commission's Washington DC offices to not be open for regular 
business. To make clear that ``business day'' does not include those 
days, the Commission is hereby adopting a technical amendment to Rule 
19b-4 to state what constitute ``business days'' for purposes of 
Section 19(b) under the Exchange Act and Rule 19b-4 concerning SRO 
proposed rule changes.

B. References to ``Business Days'' in Section 19 and Rule 19b-4

    Section 19(b) of the Exchange Act provides the time frames within 
which the Commission must act in connection with reviewing and 
processing SRO proposed rule changes. Some time frames are tied to 
calendar days; others are tied to business days.
    In particular, Section 19(b)(10)(B) of the Exchange Act provides 
that the Commission may, within seven business days after receipt of a 
filing, reject as improperly filed a filing that does not comply with 
the rules of the Commission relating to the required form of a proposed 
rule change.\9\ That provision currently is the only reference to 
``business day'' contained in Section 19.
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    \9\ 15 U.S.C. 78s(b)(10)(B). This period may be extended to 21 
calendar days if, not later than 7 business days after the date of 
receipt by the Commission, the Commission notifies the SRO that it 
needs additional time due to the Commission's determination that the 
proposed rule change is unusually lengthy, complex, or raises novel 
regulatory issues. If it is not rejected, Section 19(b)(10)(A) of 
the Exchange Act provides that the date of filing of a proposed rule 
change is the ``date on which the Commission receives the proposed 
rule change.'' 15 U.S.C. 78s(b)(10)(A).
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    References to ``business days'' are also found in Rule 19b-4 under 
the Exchange Act. For example, subparagraph (l) provides a two business 
day deadline by which an SRO must post a proposed rule change on its 
Web site after filing it with the Commission, and subparagraph (m) 
provides a two business day deadline by which an SRO must update its 
Web site to reflect changes to the text of its rules.\10\
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    \10\ See 17 CFR 240.19b-4(l) and (m), respectively. An SRO is 
required to post and maintain a complete version of its rules on its 
Web site. See 17 CFR 240.19b-4(m)(1).
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    Other references to business days, including in paragraphs (f)(6) 
and (k) of Rule 19b-4, refer to the filing by the SRO of materials with 
the Commission, which the Commission must then review in the normal 
course of its oversight of the SRO rule change process. Specifically, 
Rule 19b-4(f)(6) allows an SRO to designate certain proposed rule 
changes as effective upon filing if, among other things, the SRO 
provides written notice of its intent to file, along with a brief 
description and proposed rule text (a ``prefiling''), to the Commission 
at least five business days prior to filing. In addition, Rule 19b-4(k) 
specifies when a proposed rule change is received by the Commission and 
provides that if the conditions of Rule 19b-4 and Form 19b-4 are 
satisfied, a proposed rule change will be received by and accepted as 
filed on a business day if it is filed on or before 5:30 p.m. (Eastern 
time).\11\ Any filing submitted after 5:30 p.m. on a business day will 
be accepted by the Commission but will have as its date of filing the 
next business day.\12\ Rule 19b-4 does not, however, define what 
constitutes a ``business day.''
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    \11\ 17 CFR 240.19b-4(k).
    \12\ See id.
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    While the Commission's Washington DC headquarters is routinely 
closed for business on weekends (Saturdays and Sundays) and designated 
Federal holidays,\13\ the Commission's Washington DC headquarters also 
may be closed for other reasons. For example, Federal agencies may be 
closed in various situations, including, but not limited to, adverse 
weather, the observance of special events in the District of Columbia 
(including, but not limited to, presidential inaugurations or funeral 
observances), or any other conditions or events that cause Federal 
agencies to not open for regular business. These types of closings may 
be non-agency specific and would generally affect most Federal agencies 
in the Washington, DC metropolitan area. For these types of closings, 
the OPM disseminates the Federal government's operating status for the 
Washington, DC area as ``CLOSED'' and publishes that operating status 
on its Web site at http://www.opm.gov.\14\
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    \13\ See Rule 104 of the Commission's Rules of Practice, 17 CFR 
201.104 (Business Hours).
    \14\ These days differ from days when OPM disseminates an 
``OPEN'' status, regardless of whether unscheduled leave or telework 
options are available or whether delayed arrival or early departure 
is in effect. See OPM's Washington, DC, Area Dismissal and Closure 
Procedures, available at: http://www.opm.gov/oca/compmemo/dismissal.pdf.
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    In addition, the Commission could be subject to a Federal 
government-wide shutdown in the event of a lapse in Congressional 
appropriations resulting in the temporary cessation of non-essential 
Federal government operations. Other circumstances may uniquely and 
specifically affect the Commission's Washington, DC headquarters, 
causing the Commission to not be open for regular business at a time 
when other Federal agencies in the Washington, DC metropolitan area may 
or may not be open for regular business. Examples of these kinds of 
circumstances might include a disturbance at or problems with the 
Commission's headquarters facilities that cause it to close temporarily 
for regular business.\15\

II. Amendment to Rule 19b-4(a)

    The Commission is adding new subparagraph (2) to Rule 19b-4(a) to 
specify that references to ``business days'' in Section 19 of the 
Exchange Act and Rule 19b-4 mean any day other than a Saturday, Sunday, 
Federal holiday, a day that OPM has announced that Federal agencies in 
the Washington,

[[Page 20508]]

DC area are closed to the public, a day on which the Commission is 
subject to a Federal government shutdown in the event of a lapse in 
appropriations, or a day on which the Commission's Washington, DC 
office is otherwise not open for regular business.\16\ The purpose of 
the amendment is to clarify the treatment of days where the Commission 
is not open and how such days impact an SRO's proposed rule change 
submitted pursuant to Rule 19b-4 and an SRO's obligation to post on its 
Web site a proposed rule change that has been filed with the 
Commission, as well as determining the ``business days'' upon which the 
five day prefiling and seven day rejection periods are measured.
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    \16\ The Commission is also redesignating paragraph (a) of Rule 
19b-4 as paragraph (a)(1).
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    The new text in Rule 19b-4(a)(2) applies to several aspects of the 
Commission's operations concerning the processing of SRO proposed rule 
change filings. First, pursuant to Rule 19b-4(k), proposed rule filings 
submitted electronically by SROs via its Electronic Form 19b-4 Filing 
System (``EFFS'') on a day other than a business day of the Commission 
will be accepted by the Commission, but will have as their date of 
filing the next business day, as defined. For example, if the 
Commission is subject to a Federal government shutdown in the event of 
a lapse in appropriations from a Monday through a Friday, and resumes 
operations the following Monday, an SRO proposed rule change that was 
submitted electronically during the week the Federal government was 
shut down would, for purposes of Section 19(b) and Rule 19b-4, receive 
a filing date of the Monday the Federal government resumes operations.
    In the event of a day that the Office of Personnel Management has 
announced that Federal agencies in the Washington, DC area are closed 
to the public, a government shutdown in the event of a lapse in 
appropriations, or other circumstances that cause the Commission to not 
be open for regular business, the Commission would expect, to the 
extent feasible, to disseminate through EFFS a general notification 
viewable by all SROs reflecting that any proposed rule changes that an 
SRO submits through EFFS on such day or days will not be ``filed'' 
until the Commission is open for regular business.
    Further, under Rule 19b-4(f)(6), an SRO is required to submit a 
prefiling at least five business days prior to filing a full 19b-
4(f)(6) proposed rule change with the Commission. Under new paragraph 
(a)(2) to Rule 19b-4, for purposes of counting the five business day 
review period, any day that is not a business day of the Commission is 
not counted. For example, if an SRO submits a prefiling before 5:30 
p.m. on Monday, February 1, and OPM announces that Federal agencies in 
the Washington, DC area, including the Commission, are closed due to 
inclement weather on Tuesday, February 2 and Wednesday, February 3, and 
the Commission subsequently reopens on Thursday, February 4, then 
February 2 and 3 would not be counted as ``business days'' that have 
elapsed for purposes of the five day prefiling period specified in Rule 
19b-4(f)(6).
    Separately, for purposes of the two business day period within 
which an SRO must post a proposed rule change on its Web site after 
filing it with the Commission, or the two business day period within 
which an SRO must update its Web site to reflect changes to the text of 
its rules, any non-business day of the Commission is not counted.\17\ 
For example, if an SRO files a proposed rule change with the Commission 
on April 1 (a business day) on or before 5:30 p.m., and the Commission 
subsequently is not open for regular business on April 2 and 3, then 
April 2 and 3 would not be counted as ``business days'' that have 
elapsed for purposes of the Web site posting requirement in Rule 19b-
4(l).
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    \17\ See 17 CFR 240.19b-4(l) and (m), respectively.
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    Finally, under Section 19(b)(10)(B) of the Exchange Act, the 
Commission generally has seven business days after the date of receipt 
of a filing to reject as improperly filed a filing that does not comply 
with the rules of the Commission relating to the required form of a 
proposed rule change.\18\ Under new paragraph (a)(2) to Rule 19b-4, for 
purposes of counting the seven business day Commission review period, 
any non-business day of the Commission is not counted. For example, if 
the Commission is not open for regular business on February 1 and 2, 
but the Commission reopens on February 3, and an SRO had submitted a 
proposed rule change filing on February 1, February 1 and 2 would not 
be counted as ``business days'' that have elapsed for purposes of the 
seven day period provided under Section 19(b)(10)(B) because those days 
would not be business days.
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    \18\ See supra note 9.
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    The amendment to Rule 19b-4(a)(2) is limited solely to Section 
19(b) under the Exchange Act and Rule 19b-4 thereunder concerning SRO 
proposed rule changes. By excluding as business days those days on 
which the Commission is not open for regular business, and therefore 
lacks personnel to review proposed rule changes, the amendment 
facilitates the statutory purposes and statutory requirements for a 
full and adequate review. Without the rule change, an SRO's proposal 
might go into effect (e.g., in the case of an immediately effective 
filing submitted pursuant to Section 19(b)(3)(A) of the Exchange Act) 
in the absence of Commission review, publication in the Federal 
Register, or an opportunity for public comment, all of which are 
contemplated by the Exchange Act. Accordingly, the amendment is 
intended to support the statutory framework in which the Commission 
reviews and publishes for public comment all SRO proposed rule changes 
to help ensure that SROs carry out the purposes of the Exchange 
Act.\19\
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    \19\ For example, national securities exchanges are subject to 
Section 6 of the Exchange Act, 15 U.S.C. 78f, which requires, among 
other things, that the rules of the SRO be designed to ``prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade * * * [and] to protect investors and 
the public interest'' and that they not be designed to ``permit 
unfair discrimination between customers, issuers, brokers, or 
dealers.'' 15 U.S.C. 78f (b)(5). In reviewing an SRO's proposed rule 
change, Section 19(b)(2)(C) of the Exchange Act, 15 U.S.C. 
78s(b)(2)(C), provides the standards for Commission approval of an 
SRO's proposed rule change, which direct the Commission to consider 
whether the proposal is consistent with the Exchange Act and the 
rules and regulations thereunder that are applicable to the SRO. For 
immediately effective filings, the Commission is authorized to 
suspend the proposal ``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 Exchange Act].'' 15 U.S.C. 78s(b)(3)(C). Accordingly, 
Commission review of SRO proposed rule changes helps ensure that SRO 
proposed rule changes are consistent with the Exchange Act and the 
rules thereunder that are applicable to the SRO.
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III. Certain Findings

    Under the Administrative Procedure Act (``APA''), notice of 
proposed rulemaking is not required when an agency, for good cause, 
finds ``that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.'' \20\ The Commission 
is making a technical amendment to Rule 19b-4 to provide that 
references to ``business days'' in Section 19 of the Exchange Act and 
Rule 19b-4 mean any day other than a Saturday, Sunday, Federal holiday, 
a day that the Office of Personnel Management has announced that 
Federal agencies in the Washington, DC area are closed to the public, a 
day on which the Commission is subject to a Federal government shutdown 
in the

[[Page 20509]]

event of a lapse in appropriations, or a day on which the Commission's 
Washington, DC office is otherwise closed for regular business due to 
other circumstances. The Commission finds that because the amendment is 
technical in nature and pertains to the Commission's organization, 
procedure or practice, publishing the amendment for comment is 
unnecessary.\21\
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    \20\ 5 U.S.C. 553(b).
    \21\ For similar reasons, the amendment does not require 
analysis under the Regulatory Flexibility Act (``RFA'') or analysis 
of major rule status under the Small Business Regulatory Enforcement 
Fairness Act. See 5 U.S.C. 601(2) (for purposes of RFA analysis, the 
term ``rule'' means any rule for which the agency publishes a 
general notice of proposed rulemaking); and 5 U.S.C. 804(3)(C) (for 
purposes of Congressional review of agency rulemaking, the term 
``rule'' does not include any rule of agency organization, procedure 
or practice that does not substantially affect the rights or 
obligations of non-agency parties).
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    The APA also requires publication of a rule at least 30 days before 
its effective date unless the agency finds otherwise for good 
cause.\22\ For the same reasons described above with respect to notice 
and the opportunity for comment, the Commission finds good cause for 
this technical amendment to take effect immediately.
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    \22\ See 5 U.S.C. 553(d)(3).
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IV. Consideration of Burden on Competition, and Promotion of 
Efficiency, Competition and Capital Formation

    Section 3(f) of the Exchange Act,\23\ provides that whenever the 
Commission is engaged in rulemaking and is required to consider or 
determine whether an action is necessary or appropriate in the public 
interest, the Commission shall consider, in addition to the protection 
of investors, whether the action will promote efficiency, competition, 
and capital formation. Section 23(a)(2) of the Exchange Act requires 
the Commission, in adopting rules under the Exchange Act, to consider 
the competitive effects of such rules, if any, and not to adopt a rule 
that would impose a burden on competition not necessary or appropriate 
in the furtherance of the purposes of the Exchange Act.\24\
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    \23\ 15 U.S.C. 78c(f).
    \24\ 15 U.S.C. 78w(a)(2).
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    Because the amendment to Exchange Act Rule 19b-4 is technical in 
nature, and does not impose any additional requirements beyond those 
already required, we do not anticipate that the amendment would have a 
significant effect on efficiency, competition, or capital formation, 
and we do not anticipate that any competitive advantages or 
disadvantages would be created.

List of Subjects in 17 CFR Part 240

    Brokers, Confidential business information, Fraud, Reporting and 
recordkeeping requirements, Securities.

Statutory Basis and Text of Rules

    The Commission is amending 17 CFR part 240, pursuant to authority 
set forth in the Exchange Act, including Sections 19(b) and 23(a).

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
1. The authority citation for part 240 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78p, 78q, 78s, 
78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 
80b-4 and 80b-11, and 7210 et seq., 18 U.S.C. 1350, and 12 U.S.C. 
5221(e)(3), unless otherwise noted.
* * * * *
0
2. Amend Sec.  240.19b-4 by:
0
a. Redesignating paragraph (a) as paragraph (a)(1); and
0
b. Adding new paragraph (a)(2).
    The addition reads as follows:

Sec.  240.19b-4  Filings with respect to proposed rule changes by self-
regulatory organizations.

* * * * *
    (a) * * *
    (2) For purposes of Section 19(b) of the Act and this rule, a 
``business day'' is any day other than a Saturday, Sunday, Federal 
holiday, a day that the Office of Personnel Management has announced 
that Federal agencies in the Washington, DC area are closed to the 
public, a day on which the Commission is subject to a Federal 
government shutdown or a day on which the Commission's Washington, DC 
office is otherwise not open for regular business.
* * * * *

    Dated: April 7, 2011.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-8919 Filed 4-12-11; 8:45 am]
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