Document ID: SEC-2023-1328-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX, LLC
Posted Date: 2023-11-21T05:00Z

[Federal Register Volume 88, Number 223 (Tuesday, November 21, 2023)]
[Notices]
[Pages 81161-81163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25668]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98955; File No. SR-Phlx-2023-49]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change to Shorten the 
Standard Settlement Cycle

November 15, 2023.
    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 November 14, 2023, Nasdaq PHLX LLC (``Phlx'' or ``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 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 amend Phlx Rules at Equity 11, Sections 6 
(Ex-dividend, Ex-rights) and Section 7 (Ex-warrants) to conform them to 
the Commission's amendment to Rule 15c6-1(a) of the Act \3\ to shorten 
the standard settlement cycle for most broker-dealer transactions from 
two business days after the trade date (``T+2'') to one business days 
after the trade date (``T+1'').
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    \3\ See Securities Exchange Act Release No. 96930, Investment 
Advisers Act Release No. 6239 (February 15, 2023), 88 FR 13872 
(March 6, 2023) (``T+1 Adopting Release'').
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    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, 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
    Effective May 5, 2023, the Commission adopted rule amendments to 
shorten the standard settlement cycle for most broker-dealer 
transactions from T+2 to T+1.\4\ In light of the recently adopted rule 
amendments to Rule 15c6-1(a) of the Act to require standard settlement 
no later than T+1, Phlx proposes to amend its rules pertaining to 
securities settlement by, among other things, amending the definition 
of ``standard'' settlement as occurring on T+1.
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    \4\ See supra note 3.
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    Specifically, Phlx proposes to amend Equity 11, Sections 6 (Ex-
dividend, Ex-rights) and Section 7 (Ex-warrants). The details of the 
proposed rule changes are described below.
Equity 11, Section 6
    Equity 11, Section 6, Ex-dividend, Ex-rights, currently provides 
that transactions in stocks (except for those made for cash) shall be 
ex-dividend or ex-rights on the first business day preceding the record 
date fixed by the corporation or the date of the closing of transfer 
books thereof. It also provides that if the record date or closing of 
transfer books occurs on a day other than a business day, the 
transaction will be ex-dividend or ex-rights on the second preceding 
business day.
    The Exchange proposes to amend Equity 11, Section 6 to shorten the 
time frames by one business day. With this change the ex-dividend or 
ex-right date would be the same business day as the record date if the 
record date falls on a business day, or the first business day 
preceding the record date if the record date falls on a day other than 
a business day. Additionally, transactions in stocks made for ``cash'' 
would be ex-divided or ex-rights on the same business day as the record 
date or date of closing of transfer books.
Equity 11, Section 7
    Equity 11, Section 7, Ex-warrants, currently provides that 
transactions in securities which have subscription warrants attached 
(except those made for cash) shall be ex-warrants on the first business 
day preceding the date of expiration of the warrants, except that when 
the date of expiration occurs on a day other than a business day, the 
transactions will be ex-warrants on the second business day preceding 
the date of expiration.
    The Exchange proposes to amend Equity 11, Section 7 to shorten the 
time frames by one business day. With this change, transactions in 
securities which have subscription warrants attached (except those made 
for ``cash'') shall be ex-warrants on the same business day preceding 
the date of expiration of the warrants, except that when the date of 
expiration occurs on a day other than a business day, said transactions 
shall be ex-warrants on the first business day preceding said date of 
expiration.
Implementation
    The operative date of this proposed rule change will be Tuesday, 
May 28, 2024, which is the compliance date specified in the 
Commission's amendment to Rule 15c6-1(a) of the Act \5\ to require 
standard settlement no later than T+1.\6\ With the implementation of 
the T+1 settlement cycle, the ex-dividend date for ``normal'' 
distributions pursuant to Equity 11, Section 6 will be the same 
business day as the record date. Accordingly, Phlx proposes to 
interpret Equity 11, Section 6 so that the first record date to which 
this new ex-dividend date rationale will be applied will be Wednesday, 
May 29, 2024. During the implementation of the T+2 settlement cycle, 
the ``regular'' ex-dividend dates will be as follows:
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    \5\ See supra note 3.
    \6\ See supra note 3. Transactions with a trade date of Friday, 
May 24, 2024 would settle on Wednesday, May 29, 2024 because these 
transactions occurred before the rule was effective and continue to 
settle two days after the trade date. Additionally, transactions 
with a trade date of Tuesday, May 28, 2024 would also settle on 
Wednesday, May 29, 2024 because these transactions occurred when the 
T+1 rule was effective and would settle one day after the trade 
date. Of note, May 27, 2024 is Memorial Day and not a business day 
counted for purposes of settlement.

[[Page 81162]]

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Record Date May 24, 2024..................  Ex date May 23, 2024.
Record Date May 28, 2024..................  Ex date May 24, 2024.
Record Date May 29, 2024..................  Ex date May 29, 2024.*
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* May 27, 2024 is Memorial Day and not a business day.

    By way of explanation, a record date of Friday, May 24, 2024 would 
be a date prior to the effective date of the adopted T+1 rules. Current 
Rule 1140(b) [sic] would apply to this record date, and, therefore, the 
``ex-dividend date'' would be the first business day preceding the 
record date or Thursday, May 23, 2024. Monday, May 27, 2024 is Memorial 
Day is a federal holiday and not a business day; there would be no 
record date on a holiday. As noted above, Phlx proposes to interpret 
Rule 11140(b)(1) so that the first record date to which this new ex-
dividend date rationale will be applied would be Wednesday, May 29, 
2024. Therefore, a record date of Tuesday, May 28, 2024 would fall 
under current Rule 1140(b) [sic] and the first business day preceding 
the record date would be Friday, May 24, 2024. Finally, as noted above, 
Wednesday, May 29, 2024 is the first record date pursuant to the new 
T+1 rules, therefore, proposed Rule 1140(b) [sic] applies to this date 
and the ``ex-dividend date'' would be the same business day as the 
record date (May, 29, 2024).
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, and, in general, to protect investors and the public 
interest. The proposed rule change seeks to conform Phlx's rules with 
the adopted rule amendments to shorten the standard settlement cycle 
for most broker-dealer transactions from T+2 to T+1.\9\ The proposal is 
consistent with the Commission's amendment to Rule 15c6-1(a) of the Act 
to require standard settlement no later than T+1. This proposal will 
provide Phlx members with regulatory certainty as to the settlement 
cycle that will be utilized to settle transactions executed on the 
Exchange.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ See supra note 3.
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    As noted herein, Phlx will announce the operative date of the 
proposed rule change in an Equity Regulatory Alert, which date would 
correspond with the industry-led transition to a T+1 standard 
settlement, and the compliance date of the Commission's amendment to 
Rule 15c6-1(a) of the Act to require standard settlement no later than 
T+1.

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 proposal amends Phlx's 
rules pertaining to securities settlement and is intended to facilitate 
the implementation of the industry-led transition to a T+1 settlement 
cycle. The shortened settlement cycle will apply uniformly to all 
contracts for the purchase or sale of a security (other than exempted 
securities) that provide for payment of funds and delivery of 
securities that occur on Phlx or other self-regulatory 
organizations.\10\ Moreover, the proposal is consistent with the 
Commission's amendment to Rule 15c6-1(a) of the Act to require standard 
settlement no later than T+1. Accordingly, Phlx believes that the 
proposed amendments do not impose any intra-market or inter-market 
burdens on competition because the amendments conform Phlx's rules with 
the adopted rule amendments to shorten the standard settlement cycle 
for most broker-dealer transactions from T+2 to T+1.\11\ Specifically, 
the proposed amendments include changes to rules that specifically 
establish the settlement cycle as well as rules that establish time 
frames based on settlement dates, including for certain post-settlement 
rights and obligations.
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    \10\ Of note, pursuant to (a) and (d) of Rule 15c6-1, the 
parties may expressly agree to a different settlement date at the 
time of the transaction.
    \11\ See supra note 3.
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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)(iii) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 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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    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-Phlx-2023-49 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-2023-49. 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

[[Page 81163]]

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 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the Exchange. Do not include personal identifiable 
information in submissions; you should submit only information that you 
wish to make available publicly. We may redact in part or withhold 
entirely from publication submitted material that is obscene or subject 
to copyright protection. All submissions should refer to file number 
SR-Phlx-2023-49 and should be submitted on or before December 12, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25668 Filed 11-20-23; 8:45 am]
BILLING CODE 8011-01-P