Document ID: SEC-2018-0098-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2018-01-17T05:00Z

[Federal Register Volume 83, Number 11 (Wednesday, January 17, 2018)]
[Notices]
[Pages 2480-2482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00635]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82480; File No. SR-FINRA-2018-001]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Expiration Date of FINRA Rule 0180 
(Application of Rules to Security-Based Swaps)

January 10, 2018.
    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 January 4, 2018, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III 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 the expiration date of FINRA Rule 0180 
(Application of Rules to Security-Based Swaps) to February 12, 2019. 
FINRA Rule 0180 temporarily limits, with certain exceptions, the 
application of FINRA rules with respect to security-based swaps.
    The text of the proposed rule change is available on FINRA's 
website at http://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 July 1, 2011, the SEC issued an Order granting temporary 
exemptive relief (the ``Temporary Exemptions'') from compliance with 
certain provisions of the Exchange Act in connection with the revision, 
pursuant to Title VII of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the ``Dodd-Frank Act''),\4\ of the Exchange Act 
definition of ``security'' to encompass security-based swaps.\5\

[[Page 2481]]

Consistent with the Commission's action, on July 8, 2011, FINRA filed 
for immediate effectiveness FINRA Rule 0180,\6\ which, with certain 
exceptions, is intended to temporarily limit the application of FINRA 
rules \7\ with respect to security-based swaps, thereby helping to 
avoid undue market disruptions resulting from the change to the 
definition of ``security'' under the Act.\8\
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    \4\ Public Law 111-203, 124 Stat. 1376 (2010).
    \5\ See Securities Exchange Act Release No. 64795 (July 1, 
2011), 76 FR 39927 (July 7, 2011) (Order Granting Temporary 
Exemptions Under the Securities Exchange Act of 1934 in Connection 
With the Pending Revision of the Definition of ``Security'' To 
Encompass Security-Based Swaps, and Request for Comment) (the 
``Exemptive Release''). The term ``security-based swap'' is defined 
in Section 761 of the Dodd-Frank Act. See also Securities Exchange 
Act Release No. 67453 (July 18, 2012), 77 FR 48207 (August 13, 2012) 
(Further Definition of ``Swap,'' ``Security-Based Swap,'' and 
``Security-Based Swap Agreement''; Mixed Swaps; Security-Based Swap 
Agreement Recordkeeping).
    \6\ See Securities Exchange Act Release No. 64884 (July 14, 
2011), 76 FR 42755 (July 19, 2011) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change; File No. SR-FINRA-2011-033) 
(``FINRA Rule 0180 Notice of Filing''). See also Securities Exchange 
Act Release No. 79752 (January 6, 2017), 82 FR 3824 (January 12, 
2017) (Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change; File No. SR-FINRA-2017-001) (extending the expiration date 
of FINRA Rule 0180 to February 12, 2018).
    \7\ The current FINRA rulebook consists of: (1) FINRA Rules; (2) 
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated 
NYSE Rules''). While the NASD Rules generally apply to all FINRA 
members, the Incorporated NYSE Rules apply only to those members of 
FINRA that are also members of the NYSE. The FINRA Rules apply to 
all FINRA members, unless such rules have a more limited application 
by their terms. For more information about the rulebook 
consolidation process, see Information Notice, March 12, 2008 
(Rulebook Consolidation Process).
    \8\ In its Exemptive Release, the Commission noted that the 
relief is targeted and does not include, for instance, relief from 
the Act's antifraud and anti-manipulation provisions. FINRA has 
noted that FINRA Rule 0180 is similarly targeted. For instance, 
paragraph (a) of FINRA Rule 0180 provides that FINRA rules shall not 
apply to members' activities and positions with respect to security-
based swaps, except for FINRA Rules 2010 (Standards of Commercial 
Honor and Principles of Trade), 2020 (Use of Manipulative, Deceptive 
or Other Fraudulent Devices), 3310 (Anti-Money Laundering Compliance 
Program) and 4240 (Margin Requirements for Credit Default Swaps). 
See also paragraphs (b) and (c) of FINRA Rule 0180 (addressing the 
applicability of additional rules) and FINRA Rule 0180 Notice of 
Filing.
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    The Commission, noting the need to avoid a potential unnecessary 
disruption to the security-based swap market in the absence of an 
extension of the Temporary Exemptions, and the need for additional time 
to consider the potential impact of the revision of the Exchange Act 
definition of ``security'' in light of ongoing Commission rulemaking 
efforts under Title VII of the Dodd-Frank Act, issued an Order which 
extended and refined the applicable expiration dates for the previously 
granted Temporary Exemptions.\9\ The Commission previously noted that 
extending the Temporary Exemptions would facilitate a coordinated 
consideration of these issues with the relief provided pursuant to 
FINRA Rule 0180.\10\ In establishing Rule 0180, and in extending the 
rule's expiration date, FINRA noted its intent, pending the 
implementation of any SEC rules and guidance that would provide greater 
regulatory clarity in relation to security-based swap activities, to 
align the expiration date of FINRA Rule 0180 with the termination of 
relevant provisions of the Temporary Exemptions.\11\
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    \9\ See Securities Exchange Act Release No. 71485 (February 5, 
2014), 79 FR 7731 (February 10, 2014) (Order Extending Temporary 
Exemptions Under the Securities Exchange Act of 1934 in Connection 
With the Revision of the Definition of ``Security'' to Encompass 
Security-Based Swaps, and Request for Comment) (``2014 Extension 
Release'') stating that, for those expiring Temporary Exemptions 
``that are not directly linked to pending security-based swap 
rulemakings, the Commission is extending the expiration date until 
the earlier of such time as the Commission issues an order or rule 
determining whether any continuing exemptive relief is appropriate 
for security-based swap activities with respect to any of these 
Exchange Act provisions or until three years following the effective 
date of this Order.'' The 2014 Extension Release further stated that 
for each expiring Temporary Exemption ``that is related to pending 
security-based swap rulemakings, the Commission is extending the 
expiration date until the compliance date for the related security-
based swap-specific rulemaking.'' On January 18, 2017, the 
Commission further extended the Temporary Exemptions that are not 
directly linked to a security-based swap rulemaking, which otherwise 
would have expired on February 5, 2017, three years from the 
effective date of the 2014 Extension Release. See Securities 
Exchange Act Release No. 79833 (January 18, 2017), 82 FR 8467 
(January 25, 2017) (Order Extending Certain Temporary Exemptions 
Under the Securities Exchange Act of 1934 in Connection With the 
Revision of the Definition of ``Security'' to Encompass Security-
Based Swaps and Request for Comment) (``2017 Extension Release'').
    \10\ See Securities Exchange Act Release No. 68864 (February 7, 
2013), 78 FR 10218 (February 13, 2013) (Order Extending Temporary 
Exemptions Under the Securities Exchange Act of 1934 in Connection 
With the Revision of the Definition of ``Security'' to Encompass 
Security-Based Swaps, and Request for Comment).
    \11\ See note 6 supra.
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    The Commission's rulemaking and development of guidance in relation 
to security-based swap activities is ongoing. As such, FINRA believes 
it is appropriate and in the public interest, in light of the 
Commission's goals as set forth in the Exemptive Release, the 2014 
Extension Release and the 2017 Extension Release, to extend FINRA Rule 
0180 for a limited period, to February 12, 2019, so as to avoid undue 
market disruptions resulting from the change to the definition of 
``security'' under the Act.\12\
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    \12\ FINRA may amend the expiration date of FINRA Rule 0180 
based on any related Commission action.
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    FINRA has filed the proposed rule change for immediate 
effectiveness. FINRA is proposing that the implementation date of the 
proposed rule change will be February 12, 2018.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\13\ 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 would 
further the purposes of the Act because, consistent with the goals set 
forth by the Commission in the Exemptive Release, the 2014 Extension 
Release and the 2017 Extension Release, the proposed rule change will 
help to avoid undue market disruption that could result if FINRA Rule 
0180 expires before the implementation of any SEC rules and guidance 
that would provide greater regulatory clarity in relation to security-
based swap activities.
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    \13\ 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 the 
proposed rule change would prevent undue market disruption that would 
otherwise result if security-based swaps were, by virtue of the 
expansion of the Act's definition of ``security'' to encompass 
security-based swaps, subject to the application of all FINRA rules 
before the implementation of any SEC rules and guidance that would 
provide greater regulatory clarity in relation to security-based swap 
activities. FINRA believes that, by extending the expiration of FINRA 
Rule 0180, the proposed rule change will serve to promote regulatory 
clarity and consistency, thereby reducing burdens on the marketplace 
and facilitating investor protection.

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

[[Page 2482]]

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 \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-FINRA-2018-001 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-2018-001. 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 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-2018-001 and should be submitted 
on or before February 7, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo Aleman,
Assistant Secretary.
[FR Doc. 2018-00635 Filed 1-16-18; 8:45 am]
 BILLING CODE 8011-01-P