[Federal Register Volume 86, Number 6 (Monday, January 11, 2021)]
[Notices]
[Pages 2021-2023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00198]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90852; File No. SR-FINRA-2020-046]


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

January 5, 2021.
    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 December 22, 2020, the 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 October 26, 2021, 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 the text 
of 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.

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 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, 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/rules-guidance/guidance/faqs. 
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/rules-guidance/guidance/faqs.
    \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 2017).
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    Industry participants requested that FINRA reconsider the potential 
impact of certain requirements pursuant to SR-FINRA-2015-036 on smaller 
and medium-sized firms. Industry participants also requested that FINRA 
extend the implementation date pending such reconsideration to reduce 
potential uncertainty in the Covered Agency Transaction market. In 
response to these concerns, FINRA further extended the implementation 
date of the requirements of SR-FINRA-2015-036, other than the risk 
limit determination requirements, to March 25, 2021 (the ``March 25, 
2021 implementation date'').\8\ FINRA noted that, as FINRA stated in 
Partial Amendment No. 3 to SR-FINRA-2015-036, 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.\9\
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    \8\ See Securities Exchange Act Release No. 87441 (November 1, 
2019), 84 FR 60132 (November 7, 2019) (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; File No. SR-FINRA-2019-026).
    \9\ See Partial Amendment No. 3 to SR-FINRA-2015-036, available 
at: www.finra.org.
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    FINRA is considering, in consultation with industry participants 
and other regulators, potential amendments to the requirements of SR-
FINRA-2015-036, and anticipates submitting a proposed rule change to 
the SEC. FINRA believes that this is appropriate in the interest of 
avoiding unnecessary disruption to the Covered Agency Transaction 
market. As

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such, FINRA is proposing to extend the March 25, 2021 implementation 
date to October 26, 2021 while FINRA considers potential amendments. 
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.
    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,\10\ 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 potential amendments to the 
requirements pursuant to SR-FINRA-2015-036 and helps to reduce 
potential uncertainty in the Covered Agency Transaction market while 
FINRA considers such amendments. 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 amendments 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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    \10\ 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 March 25, 2021 implementation date to October 26, 2021, so as to 
provide additional time for FINRA to consider, in consultation with 
industry participants and other regulators, whether any amendments to 
the requirements pursuant to SR-FINRA-2015-036 are appropriate will 
benefit all parties.

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 \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\14\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. FINRA has requested 
that the Commission 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 of 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 the 
requirements of 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. 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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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes 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-2020-046 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-2020-046. 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 a.m. and 3 
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

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available publicly. All submissions should refer to File Number SR-
FINRA-2020-046 and should be submitted on or before February 1, 2021.

    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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-00198 Filed 1-8-21; 8:45 am]
BILLING CODE 8011-01-P