Document ID: SEC-2021-1149-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2021-08-26T04:00Z

[Federal Register Volume 86, Number 163 (Thursday, August 26, 2021)]
[Notices]
[Pages 47665-47666]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18346]

[[Page 47665]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92713; File No. SR-FINRA-2021-010]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc., Inc.; Notice of Filing of Amendment No. 1 and Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Rule Change, as Modified by Amendment No. 1, To Amend the 
Requirements for Covered Agency Transactions Under FINRA Rule 4210 
(Margin Requirements) as Approved Pursuant to SR-FINRA-2015-036

August 20, 2021.

I. Introduction

    On May 7, 2021, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change SR-FINRA-2021-010 (``Proposed 
Rule Change'') pursuant to Section 19(b)(1) of the Securities Exchange 
Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 \2\ thereunder, to 
amend the margin requirements for covered agency transactions under 
FINRA Rule 4210.\3\ The Proposed Rule Change was published for public 
comment in the Federal Register on May 25, 2021.\4\ On June 30, 2021, 
FINRA consented to an extension of the time period in which the 
Commission must approve the Proposed Rule Change, disapprove the 
Proposed Rule Change, or institute proceedings to determine whether to 
approve or disapprove the Proposed Rule Change to August 23, 2021.\5\ 
On August 9, 2021, FINRA responded to the comment letters received in 
response to the Notice and filed an amendment to modify the Proposed 
Rule Change (``Amendment No. 1'').\6\ The Commission is publishing this 
notice and order to solicit comment on the Proposed Rule Change, as 
modified by Amendment No. 1, from interested persons and to institute 
proceedings pursuant to Section 19(b)(2)(B) of the Exchange Act \7\ to 
determine whether to approve or disapprove the Proposed Rule Change, as 
modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Exchange Act Release No. 91937 (May 19, 2021), 86 FR 
28161 (May 25, 2021) (File No. SR-FINRA-2021-010) (``Notice'').
    \4\ See id.
    \5\ See letter from Adam Arkel, Associate General Counsel, 
Office of General Counsel, FINRA, to Sheila Swartz, Division of 
Trading and Markets, Commission, dated June 30, 2021.
    \6\ See Amendment No. 1. The comment letters received in 
response to the Notice and the full text of Amendment No. 1 are 
available on the Commission's website at: https://www.sec.gov/comments/sr-finra-2021-010/srfinra2021010.htm.
    \7\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

    FINRA is proposing revisions to the margin requirements for Covered 
Agency Transactions in FINRA Rule 4210 as approved pursuant to SR-
FINRA-2015-036.\8\ Broadly, the Proposed Rule Change, as modified by 
Amendment No. 1 would: (1) Eliminate the two percent maintenance margin 
requirement that applies to non-exempt accounts under FINRA Rule 4210; 
(2) subject to specified conditions and limitations, permit FINRA 
members to take a capital charge in lieu of collecting margin for 
excess net mark to market losses on Covered Agency Transactions; and 
(3) make revisions designed to streamline, consolidate and clarify the 
Covered Agency Transaction rule language.\9\
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    \8\ See Exchange Act Release No. 78081 (June 15, 2016), 81 FR 
40364 (June 21, 2016) (Notice of Filing of Amendment No. 3 and Order 
Granting Accelerated Approval to a Proposed Rule Change to Amend 
FINRA Rule 4210 (Margin Requirements) to Establish Margin 
Requirements for the TBA Market, as Modified by Amendment Nos. 1, 2, 
and 3; File No. SR-FINRA-2015-036). FINRA has extended the 
implementation date of the margin requirements (other than the risk 
limit determination requirements that became effective on December 
15, 2016) pursuant to SR-FINRA-2015-036 on several occasions, most 
recently to October 26, 2021. See Notice, 86 FR at 28162.
    \9\ See Notice, 86 FR at 28163.
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    Amendment No. 1 would make the following changes to the Proposed 
Rule Change: (1) Modify the definition of ``non-margin counterparty'' 
to exclude small cash counterparties and other exempted counterparties; 
and (2) define a FINRA member's ``specified net capital deductions'' as 
the net capital deductions required by paragraph (e)(2)(H)(ii)d.1 of 
FINRA Rule 4210 with respect to all unmargined excess net mark to 
market losses of its counterparties, except to the extent that the 
member, in good faith, expects such excess net mark to market losses to 
be margined by the close of business on the fifth business day after 
they arose.\10\ In addition, Amendment No. 1 states that, if the 
Commission approves the Proposed Rule Change, as modified by Amendment 
No. 1, FINRA will announce the effective date of the Proposed Rule 
Change, as modified by Amendment No. 1, in a Regulatory Notice to be 
published no later than 60 days following Commission approval. The 
effective date would be between nine and ten months following the 
Commission's approval.
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    \10\ Amendment No. 1 also contains some conforming changes to 
paragraph numbering to accommodate the proposed modifications to the 
rule text. See Exhibit 4 to Amendment No. 1.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-
FINRA-2021-010 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Exchange Act to determine whether the Proposed Rule 
Change, as modified by Amendment No. 1, should be approved or 
disapproved.\11\ Institution of proceedings is appropriate at this time 
in view of the legal and policy issues raised by the Proposed Rule 
Change, as modified by Amendment No. 1. Institution of proceedings does 
not indicate that the Commission has reached any conclusions with 
respect to the Proposed Rule Change, as modified by Amendment No. 1.
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    \11\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Exchange Act,\12\ the 
Commission is providing notice of the grounds for disapproval under 
consideration. The Commission is instituting proceedings to allow for 
additional analysis and input concerning whether the Proposed Rule 
Change, as modified by Amendment No. 1, is consistent with the Exchange 
Act and the rules thereunder.
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    \12\ Id.
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IV. Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the Proposed Rule Change, as modified by Amendment No. 1. In 
particular, the Commission invites the written views of interested 
persons concerning whether the Proposed Rule Change, as modified by 
Amendment No. 1, is consistent with the Exchange Act and the rules 
thereunder.
    Although there do not appear to be any issues relevant to approval 
or disapproval that would be facilitated by an oral presentation of 
views, data, and arguments, the Commission will consider, pursuant to 
Rule 19b-4 under the Exchange Act,\13\ any request for an opportunity 
to make an oral presentation.\14\
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    \13\ 17 CFR 240.19b-4.
    \14\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).

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[[Page 47666]]

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the Proposed Rule Change, as modified by 
Amendment No. 1, should be approved or disapproved by September 10, 
2021. Any person who wishes to file a rebuttal to any other person's 
submission must file that rebuttal by September 16, 2021.
    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 rule-comments@sec.gov. Please include 
File Number SR-FINRA-2021-010 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-2021-010. 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, as modified by 
Amendment No. 1, that are filed with the Commission, and all written 
communications relating to the Proposed Rule Change, as modified by 
Amendment No. 1, 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-2021-010, and 
should be submitted on or before September 10, 2021. Rebuttal comments 
should be submitted by September 16, 2021.

    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); 17 CFR 200.30-3(a)(57).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-18346 Filed 8-25-21; 8:45 am]
BILLING CODE 8011-01-P