Federal Register - September 8, 2021
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Source: Federal Register
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Federal Register / Vol. 86, No. 171 / Wednesday, September 8, 2021 / Notices
establishing margin requirements for CDS. FINRA originally proposed that the effective date of the Proposal would be October 6, 2021, to align with the SECs compliance date for registration of SBS Entities the Registration Compliance Date. FINRA noted in the Proposal that it intended to extend the expiration dates of existing FINRA
Rules 0180 and 4240 to October 6, 2021
to align with the Registration Compliance Date and implementation of the Proposal.11
After consideration of comments on the Proposal, as well as further feedback from member firms, on August 9, 2021
FINRA filed Partial sic Amendment No. 1 to the Proposal.12 The Amendment 1 extends the effective date of the proposed amendments to FINRA Rules 0180, 4120 and 9610 from October 6, 2021 to February 6, 2022; 2
extends the effective date of the proposed amendments to FINRA Rules 4210, 4220 and 4240 from October 6, 2021 to April 6, 2022; and 3 conforms the proposed definition of Legacy Swap in proposed FINRA Rule 4240d12 to reflect the new effective date of April 6, 2022. FINRA noted in the Amendment that it intended to extend the expiration date of existing FINRA Rule 0180 until February 6, 2022, and the expiration date of existing FINRA Rule 4240 until April 6, 2022, so as to align with the new effective dates of the Proposal described above.13
Accordingly, the proposed rule change i amends existing FINRA Rule 0180 to extend the expiration date of the rule from September 1, 2021 to February 6, 2022 and ii amends existing FINRA
Rule 4240 to extend the expiration date of the Interim Pilot Program from September 1, 2021 to April 6, 2022.
FINRA believes it is appropriate to extend the expiring rules so as to align with the effective dates of the new rules that will replace them, thereby avoiding undue burdens on market participants and undue market disruption.
FINRA also noted in the Amendment that, beginning on the Registration Compliance Date, members may register with the SEC as SBSDs, and thereby become subject to the margin requirements applicable to SBSDs under Exchange Act Rule 18a3.14 Therefore, if a member were to register as an SBSD
11 See
Proposal, supra note 10, at 26086 n.18.
Securities Exchange Act Release No. 92617
August 9, 2021, 86 FR 44761 August 13, 2021
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 Amendment.
13 See supra note 12.
14 See supra note 12.
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12 See
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on the Registration Compliance Date or during the period between the Registration Compliance Date and April 6, 2022, the member would be subject to both the new margin requirements for SBS under Exchange Act Rule 18a3
and the expiring Interim Pilot Program for CDS. In order to avoid unnecessary regulatory duplication or any potential conflicting obligations as between Exchange Act Rule 18a3 and the Interim Pilot Program, FINRA is also amending existing, expiring FINRA Rule 4240 to add Supplementary Material .02
to clarify that the rule does not apply to a member that is registered with the SEC
as an SBSD.15
FINRA has filed the proposed rule change for immediate effectiveness and has requested that the SEC waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing, so FINRA can implement the proposed rule change on September 1, 2021.
2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15Ab6 of the Act,16 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 would further the purposes of the Act because the proposed rule change will help to avoid undue burdens on market participants and undue market disruption that could result if existing FINRA Rule 0180
expires before the effective date of new FINRA Rule 0180. Similarly, FINRA
believes that the proposed rule change is consistent with the Act because extending the implementation of FINRA
Rule 4240 will ensure that the Interim Pilot Program establishing margin requirements for CDS will continue to apply until the new SBS margin rule under new FINRA Rule 4240 becomes effective, thereby helping to promote stability in the financial markets and regulatory certainty for members.
FINRA further believes that clarifying that the Interim Pilot Program does not apply to a registered SBSD will promote 15 FINRA notes that this provision is consistent with the new SBS margin rule under the Proposal, which provides that a member that is registered as an SBSD shall instead comply with Exchange Act Rule 18a3. As discussed in the Proposal, FINRA
believes it should defer to the SECs margin framework for registered SBSDs rather than impose additional or different requirements on such entities. See Proposal, supra note 10, at 26098.
16 15 U.S.C. 78o3b6.
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legal certainty and avoid unnecessary regulatory duplication.
B. Self-Regulatory Organizations 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 the proposed rule change would prevent undue burdens on market participants and undue market disruption that would otherwise result if FINRA Rule 0180 expires before the effective date of new FINRA Rule 0180.
FINRA believes that, by extending the expiration of FINRA Rule 0180, the proposed rule change will serve to promote regulatory clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection. Similarly, FINRA
believes that extending the implementation of the Interim Pilot Program under FINRA Rule 4240 will ensure that the Interim Pilot Program establishing margin requirements for CDS will continue to apply until the new SBS margin rule under new FINRA
Rule 4240 becomes effective, thereby helping to promote stability in the financial markets and regulatory certainty for members. FINRA further believes that clarifying that the Interim Pilot Program does not apply to a registered SBSD will promote legal certainty and avoid unnecessary regulatory duplication.
C. Self-Regulatory Organizations 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 19b3A of the Act 17 and Rule 19b 4f6 thereunder.18
A proposed rule change filed under Rule 19b4f6 normally does not become operative prior to 30 days after the date of the filing. However, pursuant 17 15
18 17
E:FRFM08SEN1.SGM
U.S.C. 78sb3A.
CFR 240.19b4f6.
08SEN1
