Document ID: SEC-2021-1103-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2021-08-13T04:00Z

[Federal Register Volume 86, Number 154 (Friday, August 13, 2021)]
[Notices]
[Pages 44761-44763]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17307]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92617; File No. SR-FINRA-2021-008]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Amendment No. 1 and Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove 
the Proposed Rule Change, as Modified by Amendment No. 1, Relating to 
Security-Based Swaps

August 9, 2021.

I. Introduction

    On April 26, 2021, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change SR-FINRA-2021-008 (``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 FINRA Rules 0180, 4120, 4210, 4220, 4240 and 9610 to clarify the 
application of FINRA rules to security-based swaps (``SBS'') following 
the SEC's completion of its

[[Page 44762]]

rulemaking regarding SBS dealers (``SBSDs'') and major SBS participants 
(``MSBSPs'') (collectively, ``SBS Entities'').\3\ The Proposed Rule 
Change was published for public comment in the Federal Register on May 
12, 2021.\4\ On June 14, 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 10, 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 order pursuant to Section 19(b)(2)(B) 
of the Exchange Act \7\ to solicit comments on Amendment No. 1 from 
interested persons and to institute proceedings 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\ Exchange Act Release No. 91789, (May 7, 2021), 86 FR 26084 
(May 12, 2021) (File No. SR-FINRA-2021-008) (``Notice'').
    \4\ See id.
    \5\ See letter from Robert McNamee, Assistant General Counsel, 
Office of General Counsel, FINRA, to Daniel Fisher, Division of 
Trading and Markets, Commission, dated June 14, 2021.
    \6\ See letter from Robert McNamee, Assistant General Counsel, 
Office of General Counsel, FINRA to Vanessa Countryman, Secretary, 
Commission, dated August 9, 2021.
    \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 to amend FINRA Rules 0180, 4120, 4210, 4220, 
4240 and 9610 to take into account members' SBS activities once SBS 
Entities begin registering with the Commission on October 6, 2021. The 
proposed amendments to these rules generally fall into three 
categories. First, the Proposed Rule Change, as modified by Amendment 
No. 1, would adopt a new FINRA Rule 0180, to replace expiring current 
FINRA Rule 0180, that would generally apply FINRA rules to members' 
activities and positions with respect to SBS, while providing limited 
exceptions for those activities and positions in circumstances where 
FINRA believes such exceptions are appropriate. Second, the Proposed 
Rule Change, as modified by Amendment No. 1, would amend FINRA's 
financial responsibility and operational rules for SBSDs and broker-
dealers to conform to the SEC's amendments to its capital, margin and 
segregation requirements,\8\ and to otherwise take into account 
members' SBS activities. Third, the Proposed Rule Change, as modified 
by Amendment No. 1, would adopt a new margin rule specifically 
applicable to SBS, which would replace the expiring interim pilot 
program establishing margin requirements for credit default swaps.
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    \8\ See Capital, Margin, and Segregation Requirements for 
Security-Based Swap Dealers and Major Security-Based Swap 
Participants and Capital and Segregation Requirements for Broker-
Dealers, Exchange Act Release No. 86175, (Jun. 21, 2019), 84 FR 
43872 (Aug. 22, 2019) (File No. S7-08-12).
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    Amendment No. 1 would make the following changes to the Proposed 
Rule Change: (1) Extend the effective date of the proposed amendments 
to FINRA Rules 0180, 4120 and 9610 from October 6, 2021 to February 6, 
2022; (2) extend the effective date of the proposed amendments to FINRA 
Rules 4210, 4220 and 4240 from October 6, 2021 to April 6, 2022; and 
(3) conform the proposed definition of Legacy Swap in proposed FINRA 
Rule 4240(d)(12) to reflect the new effective date of April 6, 2022.

III. Proceedings To Determine Whether To Approve or Disapprove File No. 
SR-FINRA-2021-008 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.\9\ 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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    \9\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Exchange Act,\10\ 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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    \10\ 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, any request for an opportunity to make an oral 
presentation.\11\
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    \11\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29, 89 Stat. 97 (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 Acts Amendments of 
1975, Report of the Senate Committee on Banking, Housing and Urban 
Affairs to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 
30 (1975).
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    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 August 30, 2021. 
Any person who wishes to file a rebuttal to any other person's 
submission must file that rebuttal by September 3, 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 No. SR-FINRA-2021-008 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 No. SR-FINRA-2021-008. 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

[[Page 44763]]

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 No. SR-FINRA-2021-008 and 
should be submitted on or before August 30, 2021. If comments are 
received, any rebuttal comments should be submitted on or before 
September 3, 2021.
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    \12\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17307 Filed 8-12-21; 8:45 am]
BILLING CODE 8011-01-P