Document ID: SEC-2023-0548-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Long-Term Stock Exchange, Inc.
Posted Date: 2023-05-17T04:00Z

[Federal Register Volume 88, Number 95 (Wednesday, May 17, 2023)]
[Notices]
[Pages 31533-31535]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10474]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97494; File No. SR-LTSE-2023-03]

Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend Rule 2.250 To Remove Obsolete Text

May 11, 2023.
    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 May 2, 2023, Long-Term Stock Exchange, Inc. (``LTSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. 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 LTSE Rule 2.250 (Mandatory 
Participation in Testing of Backup Systems) to remove obsolete rule 
text regarding the process it employed to designate certain Members \3\ 
previously subject to the rule to participate in mandatory disaster 
recovery testing pursuant to Regulation SCI and Rule 2.250 for calendar 
year 2020.
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    \3\ The term ``Member'' refers to any registered broker or 
dealer that has been admitted to membership in the Exchange. A 
Member will have the status of a Member of the Exchange as that term 
is defined in section 3(a)(3) of the Act. Membership may be granted 
to a sole proprietor, partnership, corporation, limited liability 
company, or other organization that is a registered broker or dealer 
pursuant to section 15 of the Act, and which has been approved by 
the Exchange. See, LTSE Rule 1.160(w).
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    The text of the proposed rule change is available at the Exchange's 
website at https://longtermstockexchange.com/, at the principal office 
of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement on 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 self-regulatory organization 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 Exchange proposes to amend LTSE Rule 2.250 (Mandatory 
Participation in Testing of Backup Systems) to remove obsolete rule 
text regarding the process it employed to designate certain Members 
previously subject to the rule to participate in mandatory disaster 
recovery testing pursuant to Regulation SCI and Rule 2.250 for calendar 
year 2020.
    Regulation SCI requires LTSE, as an SCI entity, to maintain 
business continuity and disaster recovery plans that provide for 
resilient and

[[Page 31534]]

geographically diverse backup and recovery capabilities that are 
reasonably designed to achieve two-hour resumption of critical SCI 
systems and next business day resumption of other SCI systems following 
a wide-scale disruption.\4\ Rule 1004 under Regulation SCI and LTSE 
Rule 2.250 also require LTSE to designate certain Members to 
participate in business continuity and disaster recovery testing in a 
manner specified by LTSE and at a frequency of not less than once every 
12 months.\5\ Such testing ordinarily is part of an industry-wide test 
conducted annually in the month of October.
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    \4\ See Securities Exchange Act Release No. 73639 (November 19, 
2014), 79 FR 72252 (December 5, 2014).
    \5\ See, LTSE Rule 2.250(a), (b).
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    LTSE Rule 2.250 governs mandatory participation in testing of 
LTSE's backup systems, and states that LTSE will designate Members that 
account for a meaningful percentage of executed volume on LTSE, 
measured on a quarterly basis, as required to connect to LTSE's backup 
systems and participate in functional and performance testing of such 
system.\6\ Rule 2.250 further provides that if a Member has not 
previously been subject to the rule, such Member will have until the 
next calendar quarter before such requirements are applicable.\7\
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    \6\ See, LTSE Rule 2.250(a), (c).
    \7\ See, LTSE Rule 2.250(c).
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    In July 2020, the Exchange filed a proposed rule change, for 
immediate effectiveness, to amend Rule 2.250 to provide for special 
provisions to designate certain Members to participate in mandatory 
disaster recovery training in calendar year 2020.\8\ The rule change 
was based on the fact that the Exchange was not operational as of the 
date of the rule filing, and did not become operational until September 
9, 2020. As a result, for calendar year 2020, the Exchange did not have 
two calendar quarters of trading data on which to base its Member 
designation prior to the October 2020 test. Absent an amendment, Rule 
2.250 would not have permitted the Exchange to designate any Members to 
participate in the industry-wide test for 2020 because no Member would 
have had a meaningful percentage of executed volume on LTSE upon which 
a designation could have been made.
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    \8\ See, Exchange Act Release 34-89216 (July 2, 2020), 85 FR 
41259 (July 9, 2020), SR-LTSE-2020-10.
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    To address the unique circumstances for disaster recovery testing 
in 2020, the Exchange amended Rule 2.250 to add new paragraph (d), 
which provided that for calendar year 2020, notwithstanding paragraphs 
(b) and (c), which assign the Exchange responsibility of ``identifying 
Members that account for a meaningful percentage of the Exchange's 
overall volume,'' the Exchange would instead designate at least three 
Members who have a meaningful percentage of trading volumes in NMS 
stocks across the other equity exchanges. This rule change allowed the 
Exchange to identify Members for industry-wide disaster recovery 
testing in the absence of the LTSE-specific volume metrics that would 
be used in the ordinary course to designate such firms.
    By its terms, Rule 2.250(d) was limited to the special 
circumstances existing in calendar year 2020 given that the Exchange 
did not become operational until September 2020, approximately one 
month prior to the industry test. The special provisions of paragraph 
(d) were not employed in the 2021 and 2022 industry-wide disaster 
recovery testing and the Exchange instead relied on the provisions of 
paragraphs (a) through (c) of the rule in establishing the standards to 
be used for determining which Members contribute a meaningful 
percentage of the Exchange's overall volume and thus are required to 
participate in functional and performance testing.
    Accordingly, the Exchange is now proposing to delete paragraph (d) 
of Rule 2.250 in its entirety as obsolete and unnecessary rule text.
b. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of section 6 of the Act,\9\ in general, and 
furthers the objectives of section 6(b)(5) of the Act,\10\ in 
particular, in that it is designed to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, 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.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange states that its proposed deletion of Rule 2.250(d), 
which was limited by its terms to the required Regulation SCI testing 
for calendar year 2020, is obsolete and was only followed for the 2020 
testing. The Exchange's participation in the 2021 and 2022 industry 
testing was based on the process outlined in paragraphs (a) through (c) 
of Rule 2.250, as was the original intent of the rule. Paragraph (d) 
was only added to account for the unique circumstances of industry-wide 
testing occurring within a short time of when the Exchange commenced 
trading operations and, as a result, the Exchange would not have had 
the data to conduct the testing under the process outlined in Rule 
2.250(a) through (c). The Exchange believes that its proposed deletion 
of this obsolete text is consistent with section 6(b)(5) of the Act 
\11\ in that it assures that the Exchange's rules are current and up-
to-date, which operates to perfect the mechanism of a free and open 
market and national market system and in general with the protection of 
investors and the public interest.
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    \11\ See, supra, note 6.
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    Moreover, as set forth in the SCI Adopting Release, ``SROs have the 
authority, and legal responsibility, under section 6 of the Exchange 
Act, to adopt and enforce rules (including rules to comply with 
Regulation SCI's requirements relating to BC/DR testing) applicable to 
their members or participants that are designed to, among other things, 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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.'' \12\ The Exchange believes that this proposal is consistent 
with such authority and legal responsibility in that it removes 
obsolete text from Rule 2.250 and assures that the Exchange's rule 
aligns with the requirements of Regulation SCI.
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    \12\ See supra note 4, at 72350.
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed amendment is 
intended solely to remove obsolete text from Rule 2.250 relating to 
unique circumstances surrounding the Exchange's participation in 
industry-wide Regulation SCI testing for calendar year 2020. 
Consequently, the Exchange does not believe that the proposed rule 
change would impose any burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.

[[Page 31535]]

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

    The Exchange neither solicited nor received comments on the 
proposed rule change.

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 \13\ and Rule 
19b-4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange 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. 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.

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-LTSE-2023-03 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-LTSE-2023-03. 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.
    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-LTSE-2023-03 and should 
be submitted on or before June 7, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10474 Filed 5-16-23; 8:45 am]
BILLING CODE 8011-01-P