83 FR 31804 - Self-Regulatory Organizations; National Futures Association; Notice of Filing and Immediate Effectiveness of Proposed Change to the Interpretive Notice to NFA Compliance Rule 2-30(b): Risk Disclosure Statement for Security Futures Contracts

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 131 (July 9, 2018)

[Federal Register Volume 83, Number 131 (Monday, July 9, 2018)]
[Notices]
[Pages 31804-31806]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-14669]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83589; File No. SR-NFA-2018-03]


Self-Regulatory Organizations; National Futures Association; 
Notice of Filing and Immediate Effectiveness of Proposed Change to the 
Interpretive Notice to NFA Compliance Rule 2-30(b): Risk Disclosure 
Statement for Security Futures Contracts

July 3, 2018.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ and Rule 19b-7 under the Exchange Act \2\ notice 
is hereby given that on June 19, 2018, National Futures Association 
(``NFA'') filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change described in Items I, II, and 
III below, which Items have been prepared by NFA. The Commission is 
publishing this notice to

[[Page 31805]]

solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
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    On June 7, 2018, NFA also filed this proposed rule change with the 
Commodity Futures Trading Commission (``CFTC'') and requested that the 
CFTC make a determination that review of the proposed rule change of 
NFA is not necessary. By letter dated June 18, 2018, the CFTC notified 
NFA of its determination not to review the proposed rule change.\3\
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    \3\ See letter from Matthew Kulkin, Director CFTC, to Carol A. 
Wooding, General Counsel, NFA (``Letter'').
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    The text of the proposed rule change is available at the self-
regulatory organization's office, on the NFA's website at 
www.nfa.futures.org, and at the SEC's Public Reference Room.

I. Self-Regulatory Organization's Description and Text of the Proposed 
Rule Change

    NFA's Interpretive Notice 9050 entitled ``NFA Compliance Rule 2-
30(b): Risk Disclosure Statement for Security Futures Contracts'' 
(``Interpretive Notice 9050'') requires NFA Members and Associates 
(``Member'') who are registered as brokers or dealers under Section 
15(b)(11) of the Exchange Act \4\ to provide a disclosure statement for 
security futures products (``SFPs'') to a customer at or before the 
time the Member approves the account to trade SFPs. This risk 
disclosure statement contains, among other things, a section on 
settlement by physical delivery, which indicates that the normal 
clearance and settlement cycle for securities transactions is three 
business days. NFA is amending Section 5.2 of Interpretive Notice 9050 
to update the disclosure statement for SFPs to reflect the shortened 
settlement cycle from three business days to two business days.
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    \4\ 15 U.S.C 78o(b)(11).
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    NFA is also amending Section 6.1 of Interpretive Notice 9050 to 
reflect the current address for the Securities Investor Protection 
Corporation (``SIPC''). Further, NFA is amending Interpretive Notice 
9050 to incorporate other non-substantive changes. The text of the 
proposed rule changes to Interpretive Notice 9050 is found in Exhibit 
4.

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

    In its filing with the Commission, NFA 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. NFA 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
    Section 15A(k) of the Exchange Act \5\ makes NFA a national 
securities association for the limited purpose of regulating the 
activities of NFA Members who are registered as brokers or dealers in 
security futures products under Section 15(b)(11) of the Exchange 
Act.\6\ NFA's Interpretive Notice 9050 applies to all NFA Members who 
meet the criteria outlined in Interpretive Notice 9050, including those 
that are registered as security futures brokers or dealers under 
Section 15(b)(11) of the Exchange Act.\7\
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    \5\ 15 U.S.C. 78o-3(k).
    \6\ 15 U.S.C. 78o(b)(11).
    \7\ Id.
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    The risk disclosure statement for SFPs is a uniform statement that 
was jointly developed in 2002 by NFA, FINRA, and a number of securities 
and futures exchanges. The statement discusses the characteristics and 
risk of standardized security futures contracts traded on regulated 
U.S. exchanges and indicates that the settlement by physical delivery 
is three business days.
    On September 5, 2017, the securities industry moved from a T+3 
settlement cycle to a T+2 settlement cycle for in-scope securities 
trades, including U.S. equity trades. Accordingly, NFA's amendment to 
Section 5.2 of Interpretive Notice 9050 is nothing more than a 
technical amendment to update the disclosure statement for SFPs to 
reflect the shortened settlement cycle from three business days to two 
business days.
    NFA is also amending Section 6.1 of Interpretive Notice 9050 to 
provide the current contact information for SIPC and to change the 
spelling of ``broker/dealer'' to ``broker-dealer''. To incorporate 
other non-substantive changes, NFA is amending Interpretive Notice 9050 
in Section 2.4 to correct a cross-reference and in Section 8.2 to 
remove an extraneous word. FINRA has amended and submitted the proposed 
changes to the SEC for approval.
    Amendments to NFA Interpretive Notice 9050 were previously filed 
with the SEC in SR-NFA-2002-05, Exchange Act Release No. 34-46613 (Oct. 
7, 2002), 67 FR 64176 (Oct. 17, 2002); SR-NFA-2002-06, Exchange Act 
Release No. 34-47150 (Jan. 9, 2003), 68 FR 2381 (Jan. 16, 2003); SR-
NFA-2007-07, Exchange Act Release No. 34-57142 (Jan. 14, 2008), 73 FR 
3502 (Jan. 18, 2008); SR-NFA-2010-02, Exchange Act Release No. 34-62624 
(Aug. 2, 2010), 75 FR 47666 (Aug. 6, 2010); SR-NFA-2010-03, Exchange 
Act Release No. 34-62651 (Aug. 4, 2010), 75 FR 48393 (Aug. 10, 2010); 
and SR-NFA-2014-02, Exchange Act Release No. 34-71980 (Apr. 21, 2014), 
79 FR 23027 (Apr. 25, 2014) .
2. Statutory Basis
    The proposed rule change is authorized by, and consistent with, 
Section 15A(k)(2)(B) of the Exchange Act.\8\ That Section requires NFA 
to have rules that are 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, 
including rules governing sales practices and advertising of security 
futures products. The proposed rule change accomplishes this by 
requiring Members to provide customers trading in SFPs with a risk 
disclosure statement which reflects the shortened settlement date of 
two days after the transaction. Accordingly, NFA is amending 
Interpretive Notice 9050 to update the disclosure statement for SFPs to 
reflect the shortened settlement cycle from T+3 to T+2. Further, NFA is 
amending Interpretive Notice 9050 to reflect the updated contact 
information for SIPC and other non-substantive stylistic changes. This 
proposal is not designed to regulate, by virtue of any authority 
conferred by the Exchange Act, matters not related to the purposes of 
the Exchange Act or the administration of the association.
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    \8\ 15 U.S.C. 78o-3(k).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NFA 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. The proposed change would not 
impose any additional reporting requirements or costs on Members.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    NFA did not publish the rule change to the membership for comment. 
NFA

[[Page 31806]]

did not receive comment letters concerning the rule change.

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

    On June 18, 2018, the CFTC notified NFA of its determination not to 
review the proposed rule change.\9\ The proposed rule change will 
become effective on July 18, 2018.
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    \9\ See Letter, Supra note 3.
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    At any time within 60 days of the date of effectiveness of the 
proposed rule change, the Commission, after consultation with the CFTC, 
may summarily abrogate the proposed rule change and require that the 
proposed rule change be refiled in accordance with the provisions of 
Section 19(b)(1) of the Exchange Act.\10\
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    \10\ 15 U.S.C. 78s(b)(1).
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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 Exchange 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-NFA-2018-03 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-NFA-2018-03. 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 NFA. 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 publicly available. All submissions should refer to File Number 
SR-NFA-2018-03 and should be submitted on or before July 30, 2018.
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    \11\ 17 CFR 200.30-3(a)(73).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14669 Filed 7-6-18; 8:45 am]
 BILLING CODE 8011-01-P