[Federal Register Volume 85, Number 135 (Tuesday, July 14, 2020)]
[Notices]
[Pages 42476-42479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15107]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89246; File No. SR-ISE-2020-28]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change to Temporarily
Extend the Filing Requirements for Certain Written Reports Pursuant to
Options 10, Section 7
July 8, 2020.
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 July 7, 2020, Nasdaq ISE, LLC (``ISE'' 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.\3\ 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\ The Commission notes that the Exchange filed this proposed
rule change on July 1, 2020 (SR-ISE-2020-27). On July 7, 2020, the
Exchange withdrew that filing and submitted this filing.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to further extend the filing requirements for
certain written reports pursuant to Options 10, Section 7, currently
due June 30, 2020, to July 31, 2020.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/ise/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
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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
Given current and ongoing market conditions, the Exchange proposes
to provide its members with continued temporary relief from filing
certain supervision-related reports pursuant to Options 10, Section 7
(Supervision of Accounts).\4\
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\4\ The Exchange notes that ISE Options 10, including Section 7,
is incorporated by reference into the rulebooks of Nasdaq GEMX, LLC
(``GEMX'') and Nasdaq MRX, LLC (``MRX''). As such, the amendments to
ISE Options 10, Section 7 proposed herein will also impact GEMX and
MRX Options 10, Section 7.
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In December 2019, COVID-19 began to spread and disrupt company
operations and supply chains and impact consumers and investors,
resulting in a dramatic slowdown in production and spending.\5\ By
March 11, 2020, the World Health Organization characterized COVID-19 as
a pandemic.\6\ To slow the spread of the disease, federal and state
officials implemented social-distancing measures, placed significant
limitations on large gatherings, limited travel, and closed non-
essential businesses. These measures have affected the U.S. markets.\7\
In the United States, Level 1 market wide circuit breaker halts were
triggered on March 9, March 12, March 16, and March 18, 2020. While
markets have seen significant declines, governments around the world
are undertaking efforts to stabilize the economy and assist affected
companies and their employees.\8\ While many state governments recently
relaxed some social distancing measures and permitted the limited
reopening of non-essential businesses, many state governments have now
paused the reopening of non-essential businesses due to increased
infection rates. Significant uncertainty remains.
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\5\ See, e.g., Chairman Jay Clayton, Proposed Amendments to
Modernize and Enhance Financial Disclosures; Other Ongoing
Disclosure Modernization Initiatives; Impact of the Coronavirus;
Environmental and Climate-Related Disclosure (Jan. 30, 2020),
available at https://www.sec.gov/news/public-statement/clayton-mda-2020-01-30. (``Yesterday, I asked the staff to monitor and, to the
extent necessary or appropriate, provide guidance and other
assistance to issuers and other market participants regarding
disclosures related to the current and potential effects of the
coronavirus. We recognize that such effects may be difficult to
assess or predict with meaningful precision both generally and as an
industry- or issuer-specific basis. This is an uncertain issue where
actual effects will depend on many factors beyond the control and
knowledge of issuers.'').
\6\ See WHO Director-General's Opening Remarks at the Media
Briefing on COVID-19 (March 11, 2020), available at https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19---11-march-2020.
\7\ ``Analysts showed that we saw the fastest `correction' in
history (down 10% from a high), occurring in a matter of days. In
the last week of February, the Dow fell 12.36% with notional trading
of $3.6 trillion.'' See Phil Mackintosh, Putting the Recent
Volatility in Perspective, available at https://www.nasdaq.com/articles/putting-the-recent-volatility-in-perspective-2020-03-05.
\8\ See, e.g., the list of actions undertaken by the Board of
Governors of the Federal Reserve System at https://www.federalreserve.gov/covid-19.htm. See also Families First
Coronavirus Response Act, Public Law 116-127.
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Amidst this continued and unprecedented market uncertainty, the
Exchange sought to address potential challenges that members may face
in timely meeting their obligations to submit to the Exchange annual
supervision-related reports under Options 10, Sections 7(g) and (h)
(``Supervision Reporting Requirements''), especially in light of
unforeseen and uncertain demands on resources required to respond to
COVID-19. Options 10, Section 7(g) requires each Exchange member that
conducts a non-member customer business to submit to the Exchange a
written report on the member's supervision and compliance effort during
the preceding year and on the adequacy of the member's ongoing
compliance processes and procedures. Each member that conducts a public
customer options business is also required to specifically include its
options compliance program in the report.\9\ The Section 7(g) report is
due on April 1 of each year. Options 10, Section 7(h) requires that
each member submit, by April 1 of each year, a copy of the Section 7(g)
report to one or more control persons or, if the member has no control
person, to the audit committee of its board of directors or its
equivalent committee or group.\10\
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\9\ The report shall include, but not be limited to, the
information set out in Options 10, Section 7(g)(1)-(6).
\10\ See Options 10, Section 7(h) for the meaning of the term
``control person'' and requirements in the case of a control person
that is an organization.
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On each of March 31, 2020 and June 2, 2020, the Exchange filed a
proposal to temporarily extend the filing requirements for these annual
supervision-related reports from April 1, 2020 to June 1, 2020, and
from June 1, 2020 to June 30, 2020, respectively.\11\ In light of the
continued market uncertainty, the Exchange is again seeking to address
potential challenges that certain members continue to face in timely
meeting their obligations to submit to the Exchange annual supervision-
related reports. Accordingly, the Exchange proposes to provide
additional, temporary relief for members from the Supervision Reporting
Requirements by further extending the June 30, 2020 filing deadlines
described above to July 31, 2020. The Exchange believes that this
additional, temporary relief will permit those members who have been
unable to submit their annual supervision-related reports to continue
to focus on running their businesses and the health crisis caused by
the COVID-19 pandemic, including its impact on their employees,
customers, and communities.
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\11\ See Securities Exchange Act Release No. 88827 (March 31,
2020), 85 FR 19190 (April 6, 2020) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Temporarily Extend Certain
Filing Requirement); Securities Exchange Act Release No. 88994 (June
2, 2020), 85 FR 35131 (June 8, 2020) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Further Extend the Deadline
for Certain Written Supervisory-Related Reports Pursuant to Options
10, Section 7 (Supervision of Accounts).
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The Exchange notes that in response to COVID-19, the Financial
Industry Reporting Authority (``FINRA'') recently reissued temporary
relief for member firms by, among other things, extending the deadline
for submitting its supervision-related reports (FINRA Rule 3120 Report
and FINRA Rule 3130 certification) from its second extension deadlines
of June 30, 2020 \12\ to July 31, 2020.\13\ The Exchange notes, too,
that at least one other options exchange that had twice previously
extended the supervisory report deadlines from April 1 to June 1 and
then from June 1 to June 30 for its members,\14\ also plans to
[[Page 42478]]
submit a similar filing to, again, extend its deadlines through July
31, 2020. In light of these deadline extensions, the Exchange believes
that a consistent regulatory approach is important and therefore that
extending its deadline would avoid unnecessary confusion and added
burden among entities that are members of both the Exchange and FINRA
because the deadline to submit supervisory reports would remain
uniform.
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\12\ See FINRA Regulatory Notice 20-08 (March 9, 2020) available
at https://www.finra.org/rules-guidance/notices/20-08.
\13\ See FINRA Regulatory Notice 20-08, FAQs, Supervision (June
29, 2020) available at https://www.finra.org/rules-guidance/key-topics/covid-19/faq#supe.
\14\ See Securities Exchange Act No. 88528 (March 31, 2020), 85
FR 19196 (April 6, 2020) (SR-CBOE-2020-029).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\15\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\16\ in particular, in that it is designed to
promote just and equitable principles of trade; 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. As a result of continued uncertainty related to the ongoing
spread of the COVID-19 virus, the U.S. exchanges are experiencing
unprecedented market volatility. The proposed rule change would allow
the Exchange to continue to provide temporary relief to those members
who continue to be unable to comply with the Supervision Reporting
Requirements, which were amended twice already--most recently to
require members to provide written reports to the Exchange by June 30,
2020, and further extend that deadline to July 31, 2020. The Exchange
believes that this additional, temporary relief is necessary and
appropriate in the public interest, and consistent with the protection
of investors, given the unforeseen and uncertain challenges, including
business continuity implementation and market volatility, posed by
COVID-19 to members that must comply with the Supervision Reporting
Requirements. The Exchange also believes that it is necessary and
appropriate in the public interest, and consistent with the protection
of investors, because FINRA has also re-extended twice the time for its
members to file supervision-related reports, most recently from June
30, 2020 to July 31, 2020.\17\ Additionally, as indicated above, at
least one other options exchange that had previously extended the
supervisory report deadlines twice, from April 1 to June 1 and again
from June 1 to June 30 for its members,\18\ plans to submit a similar
filing to re-extend its deadlines through July 31, 2020. Extending the
deadline, therefore, will ensure that those entities that are members
of both FINRA and the Exchange have a uniform deadline to submit their
supervisory reports.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
\17\ See supra note 11.
\18\ See supra note 12.
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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 not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is not
designed to address any competitive issues but rather to provide
temporary relief for all members that are required to comply with the
Supervision Reporting Requirements.
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) of the Act \19\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\20\
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \21\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \22\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposed rule change may become operative upon filing. The
Commission notes that the proposed rule change would allow the
Exchange, in light of the COVID-19 pandemic, to provide temporary
relief for members by further extending the deadline for written
reports pursuant to the Supervision Reporting Requirements from June
30, 2020, to July 31, 2020. The Commission believes that waiver of the
30-day operative delay is consistent with the protection of investors
and the public interest. Accordingly, the Commission hereby waives the
operative delay and designates the proposed rule change operative upon
filing.\23\
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\21\ 17 CFR 240.19b-4(f)(6).
\22\ 17 CFR 240.19b-4(f)(6)(iii).
\23\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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-ISE-2020-28 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-ISE-2020-28. 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
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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. 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-ISE-
2020-28 and should be submitted on or before August 4, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15107 Filed 7-13-20; 8:45 am]
BILLING CODE 8011-01-P