83 FR 20889 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Implementation Date of Certain Amendments to FINRA Rule 4210 Approved Pursuant to SR-FINRA-2015-036

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 89 (May 8, 2018)

[Federal Register Volume 83, Number 89 (Tuesday, May 8, 2018)]
[Notices]
[Pages 20889-20891]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-09695]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83155; File No. SR-FINRA-2018-017]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Implementation Date of Certain 
Amendments to FINRA Rule 4210 Approved Pursuant to SR-FINRA-2015-036

May 2, 2018.
    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 April 20, 2018, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which 
renders the proposal effective upon receipt of this filing by the 
Commission. 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\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to extend, to March 25, 2019, the implementation 
date of the amendments to FINRA Rule 4210 (Margin Requirements) 
pursuant to SR-FINRA-2015-036, other than the amendments pursuant to 
SR-FINRA-2015-036 that were implemented on December 15, 2016. The 
proposed rule change would not make any changes to FINRA rules.
    The text of the proposed rule change is available on FINRA's 
website at http://www.finra.org, at the principal office of FINRA and 
at the Commission's Public Reference Room.

[[Page 20890]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA 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. FINRA 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
    On October 6, 2015, FINRA filed with the Commission proposed rule 
change SR-FINRA-2015-036, which proposed to amend FINRA Rule 4210 to 
establish margin requirements for (1) To Be Announced (``TBA'') 
transactions, inclusive of adjustable rate mortgage (``ARM'') 
transactions; (2) Specified Pool Transactions; and (3) transactions in 
Collateralized Mortgage Obligations (``CMOs''), issued in conformity 
with a program of an agency or Government-Sponsored Enterprise 
(``GSE''), with forward settlement dates, as defined more fully in the 
filing (collectively, ``Covered Agency Transactions''). The Commission 
approved SR-FINRA-2015-036 on June 15, 2016 (the ``Approval Date'').\4\
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    \4\ See Securities 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).
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    Pursuant to Partial Amendment No. 3 to SR-FINRA-2015-036, FINRA 
announced in Regulatory Notice 16-31 that the rule change would be 
become effective on December 15, 2017, 18 months from the Approval 
Date, except that the risk limit determination requirements as set 
forth in paragraphs (e)(2)(F), (e)(2)(G) and (e)(2)(H) of Rule 4210 and 
in new Supplementary Material .05, each as respectively amended or 
established by SR-FINRA-2015-036 (collectively, the ``risk limit 
determination requirements''), would become effective on December 15, 
2016, six months from the Approval Date.\5\
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    \5\ See Partial Amendment No. 3 to SR-FINRA-2015-036 and 
Regulatory Notice 16-31 (August 2016), both available at: 
www.finra.org.
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    Industry participants sought clarification regarding the 
implementation of the requirements pursuant to SR-FINRA-2015-036. 
Industry participants also requested additional time to make system 
changes necessary to comply with the requirements, including time to 
test the system changes, and requested additional time to update or 
amend margining agreements and related documentation. In response, 
FINRA made available a set of Frequently Asked Questions & Guidance \6\ 
and, pursuant to SR-FINRA-2017-029,\7\ extended the implementation date 
of the requirements of SR-FINRA-2015-036 to June 25, 2018 (the ``June 
25, 2018 implementation date''), except for the risk limit 
determination requirements, which, as announced in Regulatory Notice 
16-31, became effective on December 15, 2016.
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    \6\ Available at: www.finra.org/industry/guidance. Further, 
staff of the SEC's Division of Trading and Markets made available a 
set of Frequently Asked Questions regarding Exchange Act Rule 15c3-1 
and Rule 15c3-3 in connection with Covered Agency Transactions under 
FINRA Rule 4210, also available at: www.finra.org/industry/guidance.
    \7\ See Securities Exchange Act Release No. 81722 (September 26, 
2017), 82 FR 45915 (October 2, 2017) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change to Delay the Implementation 
Date of Certain Amendments to FINRA Rule 4210 Approved Pursuant to 
SR-FINRA-2015-036; File No. SR-FINRA-2017-029); see also Regulatory 
Notice 17-28 (September 29, 2017).
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    Industry participants have requested that FINRA reconsider the 
potential impact of certain requirements pursuant to SR-FINRA-2015-036 
on smaller and medium-sized firms. Industry participants have also 
requested that FINRA extend the June 25, 2018 implementation date 
pending such reconsideration to reduce potential uncertainty in the 
Covered Agency Transaction market. FINRA stated in Partial Amendment 
No. 3 to SR-FINRA-2015-036 that FINRA would monitor the impact of the 
requirements pursuant to that rulemaking and, if the requirements prove 
overly onerous or otherwise are shown to negatively impact the market, 
FINRA would consider revisiting such requirements as may be necessary 
to mitigate the rule's impact.\8\ FINRA believes, in the interest of 
avoiding unnecessary disruption to the Covered Agency Transaction 
market, that it is appropriate to consider potential revisions to the 
requirements pursuant to SR-FINRA-2015-036 and is proposing to extend 
the June 25, 2018 implementation date to March 25, 2019 while FINRA 
considers, in consultation with industry participants and other 
regulators, whether any revisions are appropriate. FINRA notes that the 
risk limit determination requirements pursuant to SR-FINRA-2015-036 
became effective on December 15, 2016 and, as such, the implementation 
of such requirements is not affected by the proposed rule change.
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    \8\ See Partial Amendment No. 3 to SR-FINRA-2015-036, available 
at: www.finra.org.
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    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the Commission waive the 
requirement that the proposed rule change not become operative for 30 
days after the date of the filing. The operative date will be the date 
of filing of the proposed rule change.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\9\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. FINRA believes that the proposed rule change provides 
FINRA additional time to consider whether any revisions to the 
requirements pursuant to SR-FINRA-2015-036 are appropriate and helps to 
reduce potential uncertainty in the Covered Agency Transaction market 
while FINRA considers such revisions. FINRA believes that providing 
additional time is consistent with the Act because this provides FINRA, 
in consultation with industry participants and other regulators, 
additional opportunity to consider whether revisions to the 
requirements would improve their effectiveness and thereby protect 
investors and the public interest by helping to promote stability in 
the Covered Agency Transaction market.
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    \9\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. FINRA believes that extending 
the June 25, 2018 implementation date to March 25, 2019, so as to 
provide additional time for FINRA to consider, in consultation with 
industry participants and other regulators, whether any revisions to 
the requirements pursuant to SR-FINRA-2015-036 are appropriate will 
benefit all parties.

[[Page 20891]]

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.

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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires FINRA to give the Commission written notice of FINRA's 
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 filing of the proposed rule change, or 
such shorter time as designated by the Commission. FINRA has 
satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. FINRA has asked the 
Commission to waive the 30-day operative delay so that the proposal may 
become operative upon filing. FINRA has stated that the purpose of the 
proposed rule change is to allow FINRA additional time to consider 
potential revisions to the requirements pursuant to SR-FINRA-2015-036 
and to consult with industry participants and other regulators whether 
any revisions are appropriate, in the interest of avoiding unnecessary 
disruption to the Covered Agency Transaction market. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because the proposal to 
extend the implementation date of certain amendments to FINRA Rule 4210 
does not raise any new or novel issues and will help to facilitate the 
implementation of the margin requirements for Covered Agency 
Transactions. Furthermore, the Commission understands that market 
participants have expressed support for the extension of the 
implementation date in order to give FINRA time to determine, in 
consultation with market participants and other interested parties, 
whether changes to the amendments are appropriate, and if so, what 
those changes should be.\14\ Therefore, the Commission hereby waives 
the 30-day operative delay requirement and designates the proposed rule 
change as operative upon filing.\15\
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ See, e.g., Letter from Chris Killian, Managing Director, 
SIFMA (March 7, 2018), available at: www.sec.gov.
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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-FINRA-2018-017 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-2018-017. 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 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-2018-017 and should be submitted 
on or before May 29, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-09695 Filed 5-7-18; 8:45 am]
BILLING CODE 8011-01-P