Document ID: SEC-2020-0894-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX, LLC
Posted Date: 2020-06-08T04:00Z

[Federal Register Volume 85, Number 110 (Monday, June 8, 2020)]
[Notices]
[Pages 34789-34791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12278]

[[Page 34789]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88995; File No. SR-Phlx-2020-29]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Further Extend 
the Deadline for Certain Written Supervisory-Related Reports Pursuant 
to Options 10, Section 7 (Supervision of Accounts)

June 2, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 1, 2020, Nasdaq PHLX LLC (``Exchange'') 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 the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to further extend the filing requirements for 
certain written reports pursuant to Options 10, Section 7, currently 
due June 1, 2020, to June 30, 2020.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqphlx.cchwallstreet.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 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

    Given current market conditions, the Exchange proposes to provide 
its members temporary relief from filing certain supervision-related 
reports pursuant to Options 10, Section 7 (Supervision of Accounts).
    In December 2019, COVID-19 began to spread and disrupt company 
operations and supply chains and impact consumers and investors, 
resulting in a dramatic slowdown in production and spending.\3\ By 
March 11, 2020, the World Health Organization characterized COVID-19 as 
a pandemic.\4\ To slow the spread of the disease, federal and state 
officials implemented social-distancing measures, placed significant 
limitations on large gatherings, limited travel, and closed non-
essential businesses. These measures have affected the U.S. markets.\5\ 
In the United States, Level 1 market wide circuit breaker halts were 
triggered on March 9, March 12, March 16, and March 18, 2020. While 
markets have seen significant declines, governments around the world 
are undertaking efforts to stabilize the economy and assist affected 
companies and their employees.\6\ State governments have only recently 
relaxed some social distancing measures and permitted the limited 
reopening of non-essential businesses. Significant uncertainty remains.
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    \3\ See, e.g., Chairman Jay Clayton, Proposed Amendments to 
Modernize and Enhance Financial Disclosures; Other Ongoing 
Disclosure Modernization Initiatives; Impact of the Coronavirus; 
Environmental and Climate-Related Disclosure (Jan. 30, 2020), 
available at https://www.sec.gov/news/public-statement/clayton-mda-2020-01-30. (``Yesterday, I asked the staff to monitor and, to the 
extent necessary or appropriate, provide guidance and other 
assistance to issuers and other market participants regarding 
disclosures related to the current and potential effects of the 
coronavirus. We recognize that such effects may be difficult to 
assess or predict with meaningful precision both generally and as an 
industry- or issuer-specific basis. This is an uncertain issue where 
actual effects will depend on many factors beyond the control and 
knowledge of issuers.'').
    \4\ See WHO Director-General's Opening Remarks at the Media 
Briefing on COVID-19 (March 11, 2020), available at https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19---11-march-2020.
    \5\ ``Analysts showed that we saw the fastest `correction' in 
history (down 10% from a high), occurring in a matter of days. In 
the last week of February, the Dow fell 12.36% with notional trading 
of $3.6 trillion.'' See Phil Mackintosh, Putting the Recent 
Volatility in Perspective, available at https://www.nasdaq.com/articles/putting-the-recent-volatility-in-perspective-2020-03-05.
    \6\ See, e.g., the list of actions undertaken by the Board of 
Governors of the Federal Reserve System at https://www.federalreserve.gov/covid-19.htm. See also Families First 
Coronavirus Response Act, Public Law 116-127.
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    Amidst this continued and unprecedented market uncertainty, the 
Exchange sought to address potential challenges that members may face 
in timely meeting their obligations to submit to the Exchange annual 
supervision-related reports under Options 10, Sections 7(g) and (h) 
(``Supervision Reporting Requirements''), especially in light of 
unforeseen and uncertain demands on resources required to respond to 
COVID-19. Options 10, Section 7(g) requires each Exchange member that 
conducts a non-member customer business to submit to the Exchange a 
written report on the member's supervision and compliance effort during 
the preceding year and on the adequacy of the member's ongoing 
compliance processes and procedures. Each member that conducts a public 
customer options business is also required to specifically include its 
options compliance program in the report.\7\ The Section 7(g) report is 
due on April 1 of each year. Options 10, Section 7(h) requires that 
each member submit, by April 1 of each year, a copy of the Section 7(g) 
report to one or more control persons or, if the member has no control 
person, to the audit committee of its board of directors or its 
equivalent committee or group.\8\
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    \7\ The report shall include, but not be limited to, the 
information set out in Options 10, Section 7(g)(i)-(v).
    \8\ See Options 10, Section 7(h) for the meaning of the term 
``control person'' and requirements in the case of a control person 
that is an organization.
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    On March 31, 2020, the Exchange filed a proposal to temporarily 
extend the filing requirements for these annual supervision-related 
reports from April 1, 2020 to June 1, 2020.\9\ In light of the 
continued market uncertainty, the Exchange is again seeking to address 
potential challenges that members may face in timely meeting their 
obligations to submit to the Exchange annual supervision-related 
reports. Accordingly, the Exchange proposes to provide additional, 
temporary relief for members from the Supervision Reporting 
Requirements by further extending the June 1, 2020 filing deadlines 
described above to June 30, 2020. The Exchange believes that this 
additional, temporary relief will permit members to continue to focus 
on running their businesses and the health

[[Page 34790]]

crisis caused by the COVID-19 pandemic, including its impact on their 
employees, customers, and communities.
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    \9\ See Securities Exchange Act Release No. 88827 (March 31, 
2020), 85 FR 19190 (April 6, 2020) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change To Temporarily Extend Certain 
Filing Requirement.
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    The Exchange notes that in response to COVID-19, the Financial 
Industry Reporting Authority (``FINRA'') recently reissued temporary 
relief for member firms by, among other things, extending the deadline 
for submitting its supervision-related reports (FINRA Rule 3120 Report 
and FINRA Rule 3130 certification) from its initial extension deadlines 
of June 1, 2020 \10\ to June 30, 2020.\11\ The Exchange notes, too, 
that at least one other options exchange that had previously extended 
the supervisory report deadlines from April 1 to June 1 for its 
members,\12\ also plans to submit a similar filing to, again, extend 
its deadlines through June 30, 2020. In light of these deadline 
extensions, the Exchange believes that extending its deadline would 
avoid unnecessary confusion and added burden among entities that are 
members of both the Exchange and FINRA because the deadline to submit 
supervisory reports would remain uniform.
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    \10\ See FINRA Regulatory Notice 20-08 (March 9, 2020) available 
at https://www.finra.org/rules-guidance/notices/20-08.
    \11\ See FINRA Regulatory Notice 20-08, FAQs, Supervision (May 
19, 2020) available at https://www.finra.org/rules-guidance/key-topics/covid-19/faq#supe.
    \12\ See Securities Exchange Act No. 88528 (March 31, 2020), 85 
FR 19196 (April 6, 2020) (SR-CBOE-2020-029).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\13\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\14\ in particular, in that it is designed to 
promote just and equitable principles of trade; to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system; and, in general to protect investors and the public 
interest. As a result of continued uncertainty related to the ongoing 
spread of the COVID-19 virus, the U.S. exchanges are experiencing 
unprecedented market volatility. The proposed rule change would allow 
the Exchange to continue to provide temporary relief for members from 
the Supervision Reporting Requirements, which were amended once already 
to require members to provide written reports to the Exchange by June 
1, 2020, and further extend that deadline to June 30, 2020. The 
Exchange believes that this additional, temporary relief is necessary 
and appropriate in the public interest, and consistent with the 
protection of investors, given the unforeseen and uncertain challenges, 
including business continuity implementation and market volatility, 
posed by COVID-19 to members that must comply with the Supervision 
Reporting Requirements. The Exchange also believes that it is necessary 
and appropriate in the public interest, and consistent with the 
protection of investors, because FINRA has also re-extended the time 
for its members to file supervision-related reports from June 1, 2020 
to June 30, 2020.\15\ Additionally, as indicated above, at least one 
other options exchange that had previously extended the supervisory 
report deadlines from April 1 to June 1 for its members,\16\ plans to 
submit a similar filing to re-extend its deadlines through June 30, 
2020. Extending the deadline, therefore, will ensure that those 
entities that are members of both FINRA and the Exchange have a uniform 
deadline to submit their supervisory reports.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ See supra note 11.
    \16\ See supra note 12.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change is not 
designed to address any competitive issues but rather to provide 
temporary relief for all members that are required to comply with the 
Supervision Reporting Requirements.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \19\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \20\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the proposed rule change may become operative upon filing. The 
Commission notes that the proposed rule change would allow the 
Exchange, in light of the COVID-19 pandemic, to provide temporary 
relief for members by extending the deadline for written reports 
pursuant to the Supervision Reporting Requirements from June 1, 2020 to 
June 30, 2020. This is consistent with the extension FINRA has provided 
its members for supervision-related reports and certifications required 
pursuant to FINRA Rule 3120 and FINRA Rule 3130 \21\ and the extension 
for certain supervision-related reports Cboe Exchange, Inc. has 
provided its trading permit holders.\22\ The Commission believes that 
waiver of the 30-day operative delay is consistent with the protection 
of investors and the public interest. Accordingly, the Commission 
hereby waives the operative delay and designates the proposed rule 
change operative upon filing.\23\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ See supra note 12.
    \22\ See Securities Exchange Act Release No. 88978 (June 1, 
2020) (SR-CBOE-2020-049).
    \23\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of 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.

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:

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Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2020-29 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2020-29. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-Phlx-2020-29 and should be submitted on 
or before June 29, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-12278 Filed 6-5-20; 8:45 am]
 BILLING CODE 8011-01-P