80 FR 72756 - Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt Proposed New MSRB Rule A-18, on Mandatory Participation in Business Continuity and Disaster Recovery Testing

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 224 (November 20, 2015)

[Federal Register Volume 80, Number 224 (Friday, November 20, 2015)]
[Notices]
[Pages 72756-72758]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-29599]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76443; File No. SR-MSRB-2015-12]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Adopt Proposed New MSRB Rule A-18, on Mandatory Participation 
in Business Continuity and Disaster Recovery Testing

November 16, 2015.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on November 2, 2015, the Municipal 
Securities Rulemaking Board (the ``MSRB'' or ``Board'') 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 MSRB. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change to adopt 
proposed new MSRB Rule A-18 to require certain brokers, dealers, 
municipal securities dealers and municipal advisors registered with the 
MSRB (``MSRB Registrants'') to participate in business continuity and 
disaster recovery plans (``BC/DR Plans'') testing in connection with 
Regulation Systems Compliance and Integrity (``Regulation SCI'') \3\ 
(the ``proposed rule change''). The MSRB has designated the proposed 
rule change as ``non-controversial'' pursuant to section 
19(b)(3)(A)(iii) of the Act \4\ and Rule 19b-4(f)(6)(iii) \5\ 
thereunder, which renders it effective upon filing with the Commission. 
A proposed rule change filed under Rule 19b-4(f)(6) \6\ normally does 
not become operative prior to 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\7\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The MSRB is requesting 
the Commission waive the 30-day operative delay so that the proposed 
rule change to require participation in BC/DR Plans testing as mandated 
by Regulation SCI may become operative immediately upon filing.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 73639 (November 19, 
2014), 79 FR 72251 (December 5, 2014) (``SCI Adopting Release'').
    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ Id.
    \7\ Id.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the MSRB's Web 
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2015-Filings.aspx, at the MSRB's principal office, 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, the MSRB 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 MSRB 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
    As adopted by the Commission, Regulation SCI applies to certain 
self-regulatory organizations (including the MSRB), alternative trading 
systems, plan processors, and exempt clearing agencies (collectively, 
``SCI entities''), and mandates these SCI entities to comply with 
requirements with respect to the automated systems central to the 
performance of their regulated activities. Among the requirements of 
Regulation SCI is Rule 1001(a)(2)(v), which requires the MSRB and other 
SCI entities to maintain ``[b]usiness continuity and disaster recovery 
plans that include maintaining backup and recovery capabilities 
sufficiently resilient and geographically diverse and that are 
reasonably designed to achieve next business day resumption of trading 
and two-hour resumption of critical SCI systems following a wide-scale 
disruption.'' \8\
---------------------------------------------------------------------------

    \8\ 17 CFR 242.1001(a)(2)(v).
---------------------------------------------------------------------------

    The MSRB has put extensive time and resources toward planning for 
system failures and already maintains robust procedures for business 
continuity and disaster recovery. As set forth below, in connection 
with Regulation SCI, the MSRB is proposing to require certain MSRB 
Registrants to participate in the testing of the operation of the 
MSRB's BC/DR Plans. With respect to an SCI entity's BC/DR Plans, 
including its backup systems, paragraph (a) of Rule 1004 of Regulation 
SCI requires each SCI entity to: ``[e]stablish standards for the 
designation of those members or participants that the SCI entity 
reasonably determines are, taken as a whole, the minimum necessary for 
the maintenance of fair and orderly markets in the event of the 
activation of such plans.'' \9\ Paragraph (b) of Rule 1004 further 
requires each SCI entity to ``[d]esignate members or participants 
pursuant to the standards established in paragraph (a) of [Rule 1004] 
and require participation by such designated members or participants in 
scheduled functional and performance testing of the operation of such 
plans, in the manner and frequency specified by the SCI entity, 
provided that such frequency shall not be less than once every 12 
months.'' \10\ In order to comply with Rule 1004 of Regulation SCI, the 
MSRB proposes to adopt new Rule A-18 to provide for the mandatory 
participation

[[Page 72757]]

of certain MSRB Registrants (``Participants'') in the testing of the 
MSRB's BC/DR Plans, as described below.
---------------------------------------------------------------------------

    \9\ 17 CFR 242.1004(a).
    \10\ 17 CFR 242.1004(b).
---------------------------------------------------------------------------

    Section (a) of new Rule A-18 includes language from paragraph (a) 
of Rule 1004 of Regulation SCI to summarize the MSRB's obligation 
pursuant to such rule. Specifically, the MSRB proposes to state that 
``[p]ursuant to Regulation Systems Compliance and Integrity under the 
Securities Exchange Act of 1934 and with respect to the MSRB's business 
continuity and disaster recovery plans, including its backup systems, 
the MSRB is required to establish standards for the designation of MSRB 
Registrants that the MSRB reasonably determines are, taken as a whole, 
the minimum necessary for the maintenance of fair and orderly markets 
in the event of the activation of such plans.'' The MSRB further 
proposes that section (a) indicate that the ``MSRB has established 
standards and will designate Participants according to those standards 
as set forth'' in new Rule A-18. Any changes to the standards by which 
MSRB Registrants might be designated Participants would be applied 
prospectively and would be publicly announced with reasonable advance 
notice. The MSRB would first announce the methodology for designating 
Participants on or before November 3, 2015.
    Second, in section (b) of new Rule A-18, the MSRB proposes to 
specify that it ``shall designate Participants as those MSRB 
Registrants whose submissions of data to the MSRB, taken as a whole, 
account for a meaningful percentage of the MSRB's data submission 
volume required to be provided by MSRB Registrants, measured during the 
Measurement Period'' and that ``[t]he percentage of data submission 
volume and the minimum number of Participants that the MSRB considers 
to be meaningful and the Measurement Period will be determined by the 
MSRB, published to MSRB Registrants in advance of the Measurement 
Period, and applied during the Measurement Period (not 
retroactively).'' The MSRB further proposes that section (b) indicate 
that the MSRB will, at least forty-five (45) calendar days prior to a 
functional and performance testing of the operation of the MSRB's BC/DR 
Plans, individually notify all Participants that are required to 
participate in such testing. The MSRB believes the proposed notice 
requirement is necessary to provide sufficient advance notice to those 
MSRB Registrants that are designated as Participants in mandatory 
business continuity and disaster recovery testing under new Rule A-18.
    In adopting the requirements of new Rule A-18(b), the MSRB intends 
to subject certain MSRB Registrants to mandatory testing as the minimum 
necessary to maintain fair and orderly markets in the event of the 
activation of such BC/DR plans. The MSRB believes that designating 
Participants to participate in mandatory testing because they are among 
those entities whose submissions of data to the MSRB, taken as a whole, 
account for a meaningful percentage of the MSRB's data submission 
volume required to be provided by MSRB Registrants is a measured 
approach to a threshold criteria to ensure the maintenance of a fair 
and orderly market.
    Third, in section (c) of new Rule A-18, the MSRB proposes that 
Participants will be required to participate in functional and 
performance testing of the operation of the MSRB's BC/DR Plans, in the 
manner and frequency specified by the MSRB. In addition, new Rule A-18 
provides that such testing shall occur at least once every 12 months.
    Lastly, in section (d) of new Rule A-18, the MSRB proposes to set 
forth definitions for purposes of new Rule A-18 of ``MSRB Registrants'' 
and ``Participants.'' For purposes of new Rule A-18, ``MSRB 
Registrants'' means ``brokers, dealers, municipal securities dealers or 
municipal advisors registered with the MSRB'' and ``Participants'' 
means ``those MSRB Registrants that the MSRB has determined, pursuant 
to section (b) of [Rule A-18], are among those MSRB Registrants whose 
submissions of data to the MSRB, taken as a whole, account for a 
meaningful percentage of the MSRB's data submission volume required to 
be provided by MSRB Registrants, measured during the Measurement 
Period, which percentage of data submissions volume represents the 
minimum necessary for the maintenance of fair and orderly markets in 
the event of the activation of the MSRB's BC/DR Plans.'' Further, for 
purposes of new Rule A-18, ``Measurement Period'' means ``the time 
period, whether monthly or quarterly, during which time MSRB measures 
data submission required to be provided by MSRB Registrants for 
purposes of designating Participants in accordance with section (b).''
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
the provisions of section 15B(b)(2)(C) of the Act,\11\ which requires, 
in pertinent part, that the MSRB's rules shall be designed
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78o-4(b)(2)(C).

to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in municipal securities and municipal 
financial products, to remove impediments to and perfect the 
mechanism of a free and open market in municipal securities and 
municipal financial products, and, in general, to protect investors, 
---------------------------------------------------------------------------
municipal entities, obligated persons, and the public interest.

The proposed rule change will provide that MSRB Registrants necessary 
to ensure the maintenance of a fair and orderly market are properly 
designated consistent with Rule 1004 of Regulation SCI.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 242.1004.
---------------------------------------------------------------------------

    Specifically, the proposed rule change will adopt standards with 
respect to the designation of MSRB Registrants that are required to 
participate in the testing of the MSRB's BC/DR Plans, as well as 
appropriate notification regarding such designation. 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.\13\
---------------------------------------------------------------------------

    \13\ See SCI Adopting Release, supra note 3 at 72350.

Though the MSRB is not a national securities exchange as provided in 
section 6 of the Act,\14\ the MSRB believes that the proposed rule 
change is consistent with its authority and legal responsibility under 
section 15B(b)(2)(C) of the Act.\15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Act \16\ requires that MSRB rules not 
be designed to impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The MSRB does 
not believe that the proposed rule change would impose any additional 
burdens on competition that are not necessary or

[[Page 72758]]

appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \16\ Id.
---------------------------------------------------------------------------

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 on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Pursuant to section 19(b)(3)(A) \17\ of the Act and Rule 19b-
4(f)(6) \18\ thereunder, the MSRB has designated the proposed rule 
change as one that affects a change that 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. A proposed rule change filed under Rule 
19b-4(f)(6) normally does not become operative until 30 days after the 
date of filing.\19\ However, Rule 19b-4(f)(6)(iii) permits the 
Commission to waive the 30 day operative delay if such action is 
consistent with the protection of investors and the public 
interest.\20\
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ Id.
    \20\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to give the Commission written notice of its 
intent to file a proposed rule change, along with a brief 
description and text of such proposed rule change, at least five 
business days prior to the date of filing, or such shorter time as 
designated by the Commission. The Commission has designated a 
shorter time for delivery of such written notice.
---------------------------------------------------------------------------

    The MSRB has requested that the Commission designate the proposed 
rule change operative upon filing on November 2, 2015, which is less 
than 30 days after the date of filing of the proposed rule change, as 
specified in Rule 19b-4(f)(6)(iii).\21\ According to the MSRB, the 
proposed rule change is necessary for the MSRB to comply with 
Regulation SCI and the waiver of the 30 day operative delay allows the 
MSRB to conform its rules prior to the Regulation SCI compliance date 
of November 3, 2015. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest as it will allow the MSRB to incorporate changes 
required under Regulation SCI, such as requiring participation in BC/DR 
Plans testing, prior to the Regulation SCI compliance date. 
Accordingly, the Commission designates the proposed rule change to be 
operative upon filing on November 2, 2015.\22\
---------------------------------------------------------------------------

    \21\ See SR-MSRB-2015-12 (filed with the Commission on November 
2, 2015).
    \22\ For purposes only of waiving the 30-day operative delay for 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
---------------------------------------------------------------------------

    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-MSRB-2015-12 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-MSRB-2015-12. 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 Web site (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 Web site 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 MSRB. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MSRB-2015-12 and should be 
submitted on or before December 11, 2015.

    For the Commission, pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-29599 Filed 11-19-15; 8:45 am]
BILLING CODE 8011-01-P