Proposed Rule2023-06330
Electronic Submission of Certain Materials Under the Securities Exchange Act of 1934; Amendments Regarding the FOCUS Report
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Published
April 18, 2023
Issuing agencies
Securities and Exchange Commission
Abstract
The Securities and Exchange Commission ("Commission" or "SEC") is proposing to require electronic filing or submission of certain forms and other filings or submissions that are required to be filed with or submitted to the Commission under the Securities Exchange Act of 1934 ("Exchange Act") and the rules and regulations under the Exchange Act. The proposal would require the electronic filing or submission on the Commission's Electronic Data Gathering, Analysis, and Retrieval ("EDGAR") system, using structured data where appropriate, for certain forms filed or submitted by self-regulatory organizations ("SROs"). The proposal would require the information currently contained in Form 19b-4(e) to be publicly posted on the SRO's website and remove the manual signature requirements for SRO proposed rule change filings. The Commission is also proposing that a clearing agency post supplemental material to its website. In addition, the proposal would amend rules under the Exchange Act and the Securities Act of 1933 ("Securities Act") to require the electronic filing or submission on EDGAR, using structured data where appropriate, of certain forms, reports and notices provided by broker-dealers, security-based swap dealers and major security-based swap participants. The proposed amendments also would require withdrawal in certain circumstances of notices filed in connection with an exception to counting certain dealing transactions toward determining whether a person is a security- based swap dealer. Finally, the Commission is proposing to allow electronic signatures in certain broker-dealer filings, and is proposing amendments regarding the Financial and Operational Combined Uniform Single Report ("FOCUS Report") to harmonize with other rules, make technical corrections, and provide clarifications.
Full Text
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[Federal Register Volume 88, Number 74 (Tuesday, April 18, 2023)]
[Proposed Rules]
[Pages 23920-24055]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-06330]
[[Page 23919]]
Vol. 88
Tuesday,
No. 74
April 18, 2023
Part III
Securities and Exchange Commission
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17 CFR Parts 202, 232, 240, et al.
Electronic Submission of Certain Materials Under the Securities
Exchange Act of 1934; Amendments Regarding the FOCUS Report; Proposed
Rule
Federal Register / Vol. 88 , No. 74 / Tuesday, April 18, 2023 /
Proposed Rules
[[Page 23920]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 202, 232, 240, 249, and 249b
[Release Nos. 33-11176; 34-97182; IC-34864; File No. S7-08-23]
RIN 3235-AL85
Electronic Submission of Certain Materials Under the Securities
Exchange Act of 1934; Amendments Regarding the FOCUS Report
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
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SUMMARY: The Securities and Exchange Commission (``Commission'' or
``SEC'') is proposing to require electronic filing or submission of
certain forms and other filings or submissions that are required to be
filed with or submitted to the Commission under the Securities Exchange
Act of 1934 (``Exchange Act'') and the rules and regulations under the
Exchange Act. The proposal would require the electronic filing or
submission on the Commission's Electronic Data Gathering, Analysis, and
Retrieval (``EDGAR'') system, using structured data where appropriate,
for certain forms filed or submitted by self-regulatory organizations
(``SROs''). The proposal would require the information currently
contained in Form 19b-4(e) to be publicly posted on the SRO's website
and remove the manual signature requirements for SRO proposed rule
change filings. The Commission is also proposing that a clearing agency
post supplemental material to its website. In addition, the proposal
would amend rules under the Exchange Act and the Securities Act of 1933
(``Securities Act'') to require the electronic filing or submission on
EDGAR, using structured data where appropriate, of certain forms,
reports and notices provided by broker-dealers, security-based swap
dealers and major security-based swap participants. The proposed
amendments also would require withdrawal in certain circumstances of
notices filed in connection with an exception to counting certain
dealing transactions toward determining whether a person is a security-
based swap dealer. Finally, the Commission is proposing to allow
electronic signatures in certain broker-dealer filings, and is
proposing amendments regarding the Financial and Operational Combined
Uniform Single Report (``FOCUS Report'') to harmonize with other rules,
make technical corrections, and provide clarifications.
DATES: Comments should be received on or before May 22, 2023.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/regulatory-actions/how-to-submit-comments">https://www.sec.gov/regulatory-actions/how-to-submit-comments</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3d4f485158105e5250505853494e7d4e585e135a524b"><span class="__cf_email__" data-cfemail="5624233a337b35393b3b333822251625333578313920">[email protected]</span></a>. Please include
File No. S7-08-23 on the subject line.
Paper Comments
<bullet> Send paper comments to Secretary, Securities and Exchange
Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File No. S7-08-23. 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 website (<a href="https://www.sec.gov/rules/proposed.shtml">https://www.sec.gov/rules/proposed.shtml</a>).
Comments are also 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.
Operating conditions may limit access to the Commission's public
reference room. 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.
Studies, memoranda, or other substantive items may be added by the
Commission or staff to the comment file during this rulemaking. A
notification of the inclusion in the comment file of any such materials
will be made available on the Commission's website. To ensure direct
electronic receipt of such notifications, sign up through the ``Stay
Connected'' option at <a href="http://www.sec.gov">www.sec.gov</a> to receive notifications by email.
FOR FURTHER INFORMATION CONTACT: For Form 1--Justin Pica, Assistant
Director, and David Remus, Special Counsel; for Form 1-N--David
Dimitrious, Senior Special Counsel, and Michou Nguyen, Special Counsel;
for Form 15A--Molly Kim, Assistant Director, and David Michehl, Special
Counsel; for Form CA-1--Matthew Lee, Assistant Director, and Claire
Noakes, Special Counsel; for Form 19b-4(e) and technical amendment to
Form 19b-4--Cristie March, Senior Special Counsel, and Edward Cho,
Special Counsel; for Rule 17a-22--Matthew Lee, Assistant Director, and
Susan Petersen, Special Counsel; for Form X-17A-5 Part III and related
annual filings, Form X-17A-5 Parts II, IIA, and IIC, Form 17-H, and
Form X-17A-19--Raymond A. Lombardo, Assistant Director, Rose Wells,
Special Counsel, and Valentina Minak Deng, Special Counsel; for notices
provided pursuant to Exchange Act Rules 3a71-3(d)(1)(vi) and 15fi-
3(c)--Carol McGee, Associate Director, and Russell Mancuso, Special
Counsel; and for reports submitted pursuant to Rule 15fk-
1(c)(2)(ii)(A), Kelly Shoop, Branch Chief, and Katherine Lesker,
Special Counsel, Division of Trading and Markets, at (202) 551-5500,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549.
SUPPLEMENTARY INFORMATION: The Commission is proposing to require the
electronic filing or submission, using structured data where
appropriate, of certain forms and other filings,\1\ which are currently
filed with or submitted to the Commission in paper or via email or are
new filing requirements. The proposal is divided into five parts: (1)
forms that are filed or submitted by or otherwise made available
electronically by SROs (``Covered SRO Forms''); (2) supplementary
materials (``Covered Supplementary Materials'') that are proposed to be
posted on the internet websites of clearing agencies; (3) forms and
related filings filed or submitted by broker-dealers and over-the-
counter derivatives dealers (``OTC derivatives dealers''), as well as
security-based swap dealers (``SBSDs'') and major security-based swap
participants (``MSBSPs'') (each SBSD and each MSBSP also referred to as
an ``SBS Entity'' and together referred to as ``SBS Entities''); (4)
other notices, filings, and reports consisting of (a) Form X-17A-19;
(b) 17 CFR 240.3a71-3(d)(1)(vi) (``Rule 3a71-3(d)(1)(vi)'') Notices;
(c) 17 CFR 240.15Fi-3(c) (``Rule 15fi-3(c)'') Notices; and (d) 17 CFR
240.15Fk-1(c)(2)(ii)(A) (``Rule 15fk-1(c)(2)(ii)(A)'') Compliance
Reports; and (5) amendments regarding the FOCUS Report and signature
requirements in Exchange Act Rules 17a-5, 17a-12, and 18a-7.\2\ The
Commission is proposing
[[Page 23921]]
amendments to or relating to the following rules:
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\1\ For purposes of this proposing release, the term ``form''
means any Commission-created document labeled as a ``Form'' that is
proposed to be submitted or filed electronically, and the term
``filing'' means any form, notice, report, or material proposed to
be submitted or filed electronically or proposed to be posted on an
internet website in lieu of being submitted or filed.
\2\ The Commission's proposal also includes proposed amendments
to CFR designations in order to ensure regulatory text conforms more
consistently with section 2.13 of the Document Drafting Handbook.
See Office of the Federal Register, Document Drafting Handbook (Aug.
2018 Edition, Revision 1.4, dated January 7, 2022), available at
<a href="https://www.archives.gov/files/federal-register/write/handbook/ddh.pdf">https://www.archives.gov/files/federal-register/write/handbook/ddh.pdf</a>. For rules proposed to be amended in this release that
contain an uppercase letter in their CFR citations, the Commission
is proposing to amend their CFR section designations to replace each
such uppercase letter with the corresponding lowercase letter, and,
in one case, to also redesignate the rule numbering. For example, 17
CFR 240.15Fi-3 is proposed to be redesignated as 17 CFR 240.15fi-3,
17 CFR 240.15Fk-1 is proposed to be redesignated as 17 CFR 240.15fk-
1, 17 CFR 240.15Aa-1 is proposed to be redesignated as 17 CFR
240.15aa-1, and 17 CFR 240.15Aj-1 is proposed to be redesignated as
17 CFR 240.15aa-2.
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Commission reference CFR citation (17 CFR)
------------------------------------------------------------------------
Administrative Practice and Procedure,
Securities:
Rule 202.3............................. Sec. 202.3.
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Securities Act of 1933 (``Securities Act'') \3\
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Regulation S-T:
Rule 100............................... Sec. 232.100.
Rule 101............................... Sec. 232.101.
Rule 201............................... Sec. 232.201.
Rule 202............................... Sec. 232.202.
Rule 405............................... Sec. 232.405.
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Securities Exchange Act of 1934 (``Exchange Act'') \4\
------------------------------------------------------------------------
Rule 3a71-3................................ Sec. 240.3a71-3.
Rule 6a-1.................................. Sec. 240.6a-1.
Rule 6a-2.................................. Sec. 240.6a-2.
Rule 6a-3.................................. Sec. 240.6a-3.
Rule 6a-4.................................. Sec. 240.6a-4.
Rule 15Aa-1................................ Sec. 240.15Aa-1.
Rule 15Aa-2................................ Sec. 240.15Aa-2.
Rule 15Aj-1................................ Sec. 240.15Aj-1.
Rule 15c3-1................................ Sec. 240.15c3-1.
Rule 15fi-3................................ Sec. 240.15Fi-3.
Rule 15fk-1................................ Sec. 240.15Fk-1.
Rule 17a-5................................. Sec. 240.17a-5.
Rule 17a-12................................ Sec. 240.17a-12.
Rule 17a-19................................ Sec. 240.17a-19.
Rule 17a-22................................ Sec. 240.17a-22.
Rule 17ab2-1............................... Sec. 240.17ab2-1.
Rule 17h-2T................................ Sec. 240.17h-2T.
Rule 18a-7................................. Sec. 240.18a-7.
Rule 19b-4................................. Sec. 240.19b-4.
Rule 19b-7................................. Sec. 240.19b-7.
Rule 24b-2................................. Sec. 240.24b-2.
Form 1..................................... Sec. 249.1.
Form 1-N................................... Sec. 249.10.
Form CA-1.................................. Sec. 249.200.
Form 17-H.................................. Sec. 249.328T.
Form X-17A-5 Part II....................... Sec. 249.617.
Form X-17A-5 Part IIA...................... Sec. 249.617.
Form X-17A-5 Part IIC...................... Sec. 249.617.
Form X-17A-5 Part III...................... Sec. 249.617.
Form X-17A-19.............................. Sec. 249.635.
Form X-15AA-1.............................. Sec. 249.801.
Proposed new Form 15A...................... Sec. 249.801 (as proposed
to be amended).
Form 19b-4................................. Sec. 249.819.
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Finally, the Commission is proposing to rescind:
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\3\ See 15 U.S.C. 77a through 77mm.
\4\ See 15 U.S.C. 78a through 78qq.
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CFR citation (17
Commission reference CFR)
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Exchange Act:
Form X-15AJ-1.................................... Sec. 249.802.
Form X-15AJ-2.................................... Sec. 249.803.
Form 19b-4(e).................................... Sec. 249.820.
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[[Page 23922]]
In developing this proposal with regard to SBS Entities, the
Commission has consulted and coordinated with the Commodity Futures
Trading Commission (``CFTC'') and the prudential regulators in
accordance with the Dodd-Frank Wall Street Reform and Consumer
Protection Act (``Dodd-Frank Act'').\5\
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\5\ See Public Law 111-203, 124 Stat. 1376 (2010). Section
712(a)(2) of the Dodd-Frank Act provides in part that the Commission
shall ``consult and coordinate to the extent possible with the
Commodity Futures Trading Commission and the prudential regulators
for the purposes of assuring regulatory consistency and
comparability, to the extent possible.''
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Table of Contents
I. Introduction
A. Experience With Targeted Regulatory Assistance During the
COVID-19 Pandemic
B. Covered SRO Forms
C. Covered Supplementary Materials
D. Filings by Broker-Dealers, OTC Derivatives Dealers, SBSDs,
and MSBSPs
E. Other Forms, Reports or Notices
F. Structured Data Requirements
G. Amendments Regarding the FOCUS Report and Signature
Requirements in Rule 17a-5, 17a-12, and 18a-7 Filings
II. Proposed Requirements To Electronically File Covered SRO Forms
A. Form 1
B. Form 1-N
C. Proposed Form 15A
D. Form CA-1
E. Form 19b-4(e)
F. Rule 19b-4(j) and Form 19b-4
G. Conforming Technical Amendment to Rule 202.3(b) Under the
Exchange Act
III. Proposed Requirements for Clearing Agencies to Electronically
File Covered Supplemental Materials
A. Current Rule 17a-22
B. Updated Staff Statement and Resulting Alternate Arrangements
for Rule 17a-22 Compliance
C. Proposed Amendments to Rule 17a-22
D. Request for Comment
IV. Proposed Requirements To Electronically File Broker-Dealer, OTC
Derivatives Dealer, and SBS Entity Reports
A. Rules 17a-5, 18a-7, and 17a-12
B. Rule 17h-2T and Form 17-H
V. Other Forms, Reports or Notices
A. Notices Pursuant To Rule 17a-19 and Form X-17A-19
B. Notice (and Any Withdrawal of a Notice) Filed Pursuant to
Rule 3a71-3(d)(1)(vi)
C. Notice (and Any Amendment, Including Notice of Dispute
Termination) Provided Pursuant to Rule 15fi-3(c)
D. Compliance Reports Submitted to the Commission Pursuant to
Rule 15fk-1(c)(2)(ii)(A)
VI. Amendments Regarding the FOCUS Report and Signature Requirements
in Rule 17a-5, 17a-12, and 18a-7 Filings
A. Corrective and Clarifying Amendments to the FOCUS Report Part
II
B. Harmonizing FOCUS Report Part IIC With the Call Report
C. OTC Derivatives Dealer FOCUS Report Filing Requirement
D. Signature Requirements in Rule 17a-5, 17a-12, and 18a-7
Filings
VII. Proposed Amendments to Regulation S-T (Including Structured
Data Requirements) and Rule 24b-2
A. Proposed Amendments to Regulation S-T (Including Structured
Data Requirements)
B. Proposed Amendments to Rule 24b-2
VIII. General Request for Comments
IX. Paperwork Reduction Act
A. Summary of Collection of Information
B. Proposed Use of Information
C. Respondents
D. Total Initial and Annual Reporting and Recordkeeping Burdens
E. Collection of Information is Mandatory
F. Confidentiality of Responses to Collection of Information
G. Retention Period for Recordkeeping Requirements
H. Request for Comments
X. Economic Analysis
A. Broad Economic Considerations
B. Baseline
C. Economic Effects
D. Efficiency, Competition, and Capital Formation
E. Reasonable Alternatives
F. Request for Comment
XI. Initial Regulatory Flexibility Act Analysis
A. Regulatory Flexibility Act Certification
B. Initial Regulatory Flexibility Analysis
C. Reasons for, and Objectives of, the Proposed Action
D. Legal Basis
E. Small Entities Subject to the Proposed Rules
F. Reporting, Recordkeeping, and Other Compliance Requirements
G. Duplicative, Overlapping, or Conflicting Federal Rules
H. Significant Alternatives
I. Request for Comment
XII. Small Business Regulatory Enforcement Fairness Act
Statutory Authority
I. Introduction
A. Experience With Targeted Regulatory Assistance During the COVID-19
Pandemic
As part of its response to the COVID-19 pandemic, the Commission
and its staff provided assistance and regulatory relief to market
participants, as appropriate, to facilitate the continued orderly and
fair functioning of the securities markets.\6\ As part of these
efforts, Division of Trading and Markets (``Division'') staff issued a
statement providing that the staff would not recommend enforcement
action if filers and registrants made alternative arrangements, as
detailed in the statement, for delivery, execution, and notarization of
certain paper filings.\7\ More specifically, the staff stated that it
would not recommend that the Commission take enforcement action with
respect to any failure to comply with the paper format submission
requirement or manual signature requirement of certain ``Impacted Paper
Submissions'' (as defined in the Updated Staff Statement), which
included, but were not limited to, broker-dealer audited annual
reports, Form 1 filings for national securities exchanges, and Form CA-
1 filings for clearing agencies.
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\6\ See generally, e.g., An Update on the Commission's Targeted
Regulatory Relief to Assist Market Participants Affected by COVID-19
and Ensure the Orderly Function of our Markets (public statement by
Chairman Jay Clayton, William Hinman, Director, Division of
Corporation Finance, Dalia Blass, Director, Division of Investment
Management, Brett Redfearn, Director, Division (Jan. 26, 2020,
updated Jan. 5, 2021)), available at <a href="https://www.sec.gov/news/public-statement/update-commissions-targeted-regulatory-relief-assist-market-participants">https://www.sec.gov/news/public-statement/update-commissions-targeted-regulatory-relief-assist-market-participants</a>.
\7\ See generally Division Updated Staff Statement Regarding
Certain Paper Submissions in Light of COVID-19 Concerns (``Updated
Staff Statement''), available at <a href="https://www.sec.gov/tm/paper-submission-requirements-covid-19">https://www.sec.gov/tm/paper-submission-requirements-covid-19</a>-updates-061820. Staff reports,
Investor Bulletins, and other staff documents cited in this release
represent the views of Commission staff and are not a rule,
regulation, or statement of the Commission. The Commission has
neither approved nor disapproved the content of these documents and,
like all staff statements, they have no legal force or effect, do
not alter applicable law, and create no new or additional
obligations for any person.
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In general, electronic filing of Impacted Paper Submissions has
been practical and efficient. It also has been the Commission's
experience that electronic filing has been positively received by the
various registrants that have used it. Based in part on these positive
experiences with electronic filing during the COVID-19 pandemic, and as
part of its efforts to modernize the methods by which it collects and
analyzes information from registrants, the Commission is proposing to
amend some of the rules and forms discussed in this release, as set
forth in more detail below, to require that certain filings be
submitted to the Commission electronically using the Commission's EDGAR
system. As part of the effort to modernize its information collection
and analysis methods, and as discussed more fully below, the Commission
is proposing that a number of the filings submitted to the Commission
electronically on EDGAR use structured data where appropriate.
B. Covered SRO Forms
The Commission is proposing to require that the following forms be
filed electronically on EDGAR:
[[Page 23923]]
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Form Filer type Proposed amendments
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Form 1: Application for, and Exchange......... Amend 17 CFR 249.1
Amendments to Application (``Form 1''),
for, Registration as a including the form
National Securities Exchange and instructions to
or Exemption from the form, and 17 CFR
Registration pursuant to 240.6a-1 (``Rule 6a-
section 5 of the Exchange Act. 1''), 17 CFR 240.6a-
2 (``Rule 6a-2''),
and 17 CFR 240.6a-3
(``Rule 6a-3'')
under the Exchange
Act.
Form 1-N: Form and Amendments Exchange......... Amend 17 CFR 249.10
for Notice of Registration as (``Form 1-N''),
a National Securities including the form
Exchange for the Sole Purpose and instructions to
of Trading Security Future the form, and 17 CFR
Products Pursuant to section 240.6a-4 (``Rule 6a-
6(g) of the Exchange Act. 4'') under the
Exchange Act.
Form X-15AA-1: Application for Securities Form X-15AA-1 (re-
Registration as a National Association. numbered as Form
Securities Association or 15A) and the
Affiliated Securities instructions to the
Association, Form X-15AJ-1: form, and
Amendatory and/or corresponding
Supplementary Statements to Exchange Act Rule
Registration Statement of a 15Aa-1 (redesignated
National Securities as Rule 15aa-1).
Association or an Affiliated Forms X-15AJ-1 and X-
Securities Association, and 15AJ-2 (repealed and
Form X-15AJ-2: Annual the information
Consolidated Supplement of a requirements
National Securities incorporated into
Association or an Affiliated new Form 15A),\8\
Securities Association. and corresponding
Exchange Act Rule
15Aj-1 (re-numbered
as Rule 15aa-2).
Form CA-1: Application for Clearing Agency.. The form and
Registration or for Exemption instructions to the
from Registration as a form, and
Clearing Agency and for corresponding
Amendment to Registration Exchange Act Rule
Pursuant to the Exchange Act. 17ab2-1.
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The Commission's regulatory framework currently requires an entity
seeking to be registered as a national securities exchange (or seeking
an exemption from such registration based on limited volume), a
national securities association, a clearing agency (or seeking an
exemption from such registration), and a national securities exchange
solely for the purpose of trading futures on individual stocks or on
narrow-based stock indexes \9\ (``Security Futures Product Exchange'')
to file, in a paper-based format, certain forms that are mandated by
rules under the Exchange Act. Registered national securities exchanges,
registered national securities associations, registered clearing
agencies, and registered Security Futures Product Exchanges
(collectively, SROs), as well as exempt exchanges and exempt clearing
agencies (together with prospective SROs, ``Filers''), are also
required to submit paper-based amendments to their respective forms.
The Commission's proposal would modernize the filing process for these
various forms by requiring that the forms and information contained
therein be submitted to the Commission electronically, thereby removing
the burden of preparing and submitting paper forms by the Filers, and
of receiving, acting upon, and maintaining the paper forms by the
Commission and its staff.
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\8\ See 17 CFR 249.802 and 803. The forms and instructions to
the form are incorporated by reference into the Code of Federal
Regulations.
\9\ Futures on individual stocks or on narrow-based stock
indexes are hereinafter referred to as ``security futures
products.''
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In particular, as required by 17 CFR 240.6a-1 (``Rule 6a-1''), 17
CFR 240.6a-2 (``Rule 6a-2''), and 17 CFR 240.6a-3 (``Rule 6a-3'') under
the Exchange Act, a prospective exchange must file on 17 CFR 249.1
(``Form 1'') an application for registration as a national securities
exchange (or for an exemption from the requirement to register as a
national securities exchange based on limited volume), and, once
registered, the exchange must file as an amendment to its Form 1
certain updating information, as well as certain supplemental material
and reports. In addition, as required by 17 CFR 240.6a-4 (``Rule 6a-
4'') under the Exchange Act, a prospective exchange may register as a
Security Futures Product Exchange by filing 17 CFR 249.10 (``Form 1-
N'') (``notice registration'') if it satisfies certain prerequisites,
and must file amendments to its initial filing and certain supplemental
materials on Form 1-N as well. An applicant for registration as a
national securities association must file a registration statement with
the Commission on Form X-15AA-1, and every association applying for
registration or registered as a national securities association must
file amendments and supplements to its registration statement with the
Commission on Form X-15AJ-1 and annual supplements to its registration
statement with the Commission on Form X-15AJ-2. Moreover, as required
by Rule 17ab2-1 (``Rule 17ab2-1'') under the Exchange Act, a
prospective clearing agency must file on Form CA-1 an application for
registration as a clearing agency (or for an exemption from such
registration), and both registered and exempt clearing agencies must
file amendments to their Form CA-1 as necessary. In each of the
foregoing situations, these forms are submitted to the Commission in a
paper-based format. As a result, the prospective and existing SROs,
exempt exchanges, and exempt clearing agencies must incur the costs of
completing their respective paper-based forms, making the requisite
number of copies, and submitting the original version and copies to the
Commission.
The Commission also is proposing to rescind the following form and
instead require that the information currently contained in the form be
publicly posted on the relevant SRO's internet website:
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Form Filer type Proposed amendment
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Form 19b-4(e): Information SRO.............. Rescind the form and
Required of a Self-Regulatory instructions to the
Organization Listing and form, and amend 17
Trading a New Derivative CFR 240.19b-4(e)
Securities Product Pursuant (``Exchange Act Rule
to Rule 19b-4(e) Under the 19b-4(e)'').
Exchange Act.
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[[Page 23924]]
Currently, 17 CFR 240.19b-4(e) (``Rule 19b-4(e)'') under the
Exchange Act requires an SRO to submit to the Commission reports
regarding the listing and trading of new derivative securities products
on Form 19b-4(e) in a paper-based format. As with the forms discussed
above in this section, SROs must incur the costs of completing the
paper-based form, making the requisite number of copies, and submitting
the original version and copies to the Commission.
C. Covered Supplementary Materials
Rule 17a-22 requires a registered clearing agency to file with the
Commission three copies of any material within 10 days after issuing,
or making generally available, such materials to its participants or to
other entities with whom it has a significant relationship.\10\ A
registered clearing agency for which the Commission is not the
appropriate regulatory agency is required at the same time to file one
copy of such material with its ``appropriate regulatory agency''
(``ARA'').\11\
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\10\ See 17 CFR 240.17a-22. Such materials are hereinafter
referred to as ``supplementary materials.''
\11\ See id. When used with respect to a clearing agency, the
term ``appropriate regulatory authority'' is defined under section
3(a)(34)(B) of the Exchange Act to mean broadly the Comptroller of
the Currency, the Board of Governors of the Federal Reserve System
(``Federal Reserve''), or the Federal Deposit Insurance Corporation,
depending on the type of bank that is acting as a registered
clearing agency. See 15 U.S.C. 78c(a)(34).
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Since the Commission adopted Rule 17a-22 in 1980, technology has
evolved significantly and the internet has played an increasingly vital
role in information distribution.\12\
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\12\ See, e.g., The Impact of Recent Technological Advances on
the Securities Market (Sep. 1997), available at <a href="https://www.sec.gov/news/studies/techrp97.htm">https://www.sec.gov/news/studies/techrp97.htm</a>. In this report, the Commission stated
that it was mindful of the benefits of increasing use of new
technologies, such as the internet, to access information more
efficiently.
---------------------------------------------------------------------------
During this period, the Commission has encouraged the dissemination
of information electronically via the internet and other automated
systems and services.\13\ In general, transitioning from a requirement
to file paper with the Commission to an electronic filing requirement
can help improve efficiency and transparency in the securities markets
for registered clearing agencies, its participants and the general
public. Most recently, under the Updated Staff Statement described
above,\14\ registered clearing agencies have established alternate
arrangements to satisfy the requirements of Rule 17a-22 that do not
require the submission of paper filings.
---------------------------------------------------------------------------
\13\ Id; see also, e.g., Commission Interpretation: Use of
Electronic Media, Exchange Act Release No. 42728 (Apr. 28, 2000), 65
FR 25843 (May 4, 2000), available at <a href="https://www.sec.gov/rules/interp/34-42728.htm">https://www.sec.gov/rules/interp/34-42728.htm</a>; Press Release: SEC Provides Guidance to Open Up
Use of Corporate websites for Disclosures to Investors (July 30,
2008), available at <a href="https://www.sec.gov/news/press/2008/2008-158.htm">https://www.sec.gov/news/press/2008/2008-158.htm</a>.
\14\ See supra note 5.
---------------------------------------------------------------------------
The Commission is now proposing to amend Rule 17a-22 to eliminate
the paper filing requirement altogether and require registered clearing
agencies to post any supplementary materials to its internet website,
as discussed further below.\15\ The Commission believes that the
amended rule would increase efficiency in the distribution of
supplementary materials required under the rule and promote
transparency regarding their contents, as these supplementary materials
are intended to be made generally available to participants in the
clearing agency or other categories of market participants with whom
the clearing agency has a significant relationship. In addition, the
cost associated with the proposal is likely to be less than the costs
currently incurred by clearing agencies utilizing alternative
arrangements consistent with the Updated Staff Statement.
---------------------------------------------------------------------------
\15\ See generally infra section III.
---------------------------------------------------------------------------
D. Filings by Broker-Dealers, OTC Derivatives Dealers, SBSDs, and
MSBSPs
------------------------------------------------------------------------
Form Filer type Proposed amendment
------------------------------------------------------------------------
Form X-17A-5 Part III: Broker-Dealer, Require the form
Information Required Pursuant Security-Based to be filed on
to Rules 17a-5, 17a-12, and 18a- Swap Dealer, EDGAR.
7 under the Exchange Act. Major Security-
Based Swap
Participant.
Form 17-H: Risk Assessment Broker-Dealer..... Require the form
Report for Brokers and Dealers. to be filed on
EDGAR.
------------------------------------------------------------------------
The Commission believes that the certain forms and other filings
that are proposed to be filed on EDGAR by broker-dealers, OTC
derivatives dealers, SBSDs, and MSBSPs are appropriate for electronic
filing because many of them are voluminous (in number, size, or both)
and some of them contain certain information that must be disclosed
publicly.\16\ Electronic conversion and/or publication of these filings
by Commission staff, to make them available to the public and/or
Commission staff, can be labor intensive and time consuming. The
Commission believes that requiring submission of these filings on the
Commission's established EDGAR filing system would facilitate more
efficient transmission, analysis, dissemination, storage, and retrieval
of information, and would benefit the Commission, the submitting
entities, investors, and other market participants.
---------------------------------------------------------------------------
\16\ See generally infra section IV.
---------------------------------------------------------------------------
The Commission is proposing to use the existing EDGAR system for
certain filings because Form X-17A-5 Part III and Form 17-H are already
permitted to be filed on EDGAR and the Commission believes that some of
these filings may be readily transitioned to electronic filing on
EDGAR.
E. Other Forms, Reports or Notices
------------------------------------------------------------------------
Filer/submitter
Form, report or notice type Proposed amendment
------------------------------------------------------------------------
Form 17a-19: Information National Require the form
Required of National Securities securities to be filed on
Exchanges and Registered exchanges, EDGAR.
National Securities national
Associations Pursuant to securities
Section 17 and 19 of the associations.
Securities Exchange Act of 1934
and Rule 17a-19 Thereunder,
Report of Change in Membership
Status.
[[Page 23925]]
Notices (and any withdrawals of Certain registered Require the
notices) filed pursuant to Rule SBSDs or notices and
3a71-3(d)(1)(vi) under the registered withdrawals to be
Exchange Act. brokers that meet filed on EDGAR;
certain capital require
and other withdrawal in
requirements. specified
circumstances.
Notices (and any amendments to SBS Entities...... Require the
the notices) of Security-Based notices (and any
Swap Valuation Disputes amendments to the
pursuant to Rule 15fi-3(c). notices) to the
Commission to be
submitted on
EDGAR using
structured data;
specify that
notices
(including
amendments)
required to be
provided to any
applicable
prudential
regulator be in a
form and manner
acceptable to
such prudential
regulator.
Compliance Reports Submitted to SBS Entities...... Require reports to
the Commission pursuant to Rule be submitted on
15fk-1(c)(2)(ii)(A). EDGAR in a
structured data
language.
------------------------------------------------------------------------
The Commission is proposing to use the EDGAR system for the
following notices, reports, and filings: (1) notices made pursuant to
Rule 17a-19 under the Exchange Act and on accompanying Form X-17A-19;
(2) notices made pursuant to Rule 3a71-3(d)(1)(vi) under the Exchange
Act; (3) notices made to the Commission pursuant to Rule 15fi-3(c)
under the Exchange Act; and (4) reports made pursuant to Rule 15fk-
1(c)(2)(ii)(A) under the Exchange Act. Currently, the notices made
pursuant to Rule 17a-19 under the Exchange Act and on accompanying Form
X-17A-19 are submitted via paper.\17\ The notices made pursuant to Rule
3a71-3(d)(1)(vi) under the Exchange Act are filed via email.\18\ The
notices made to the Commission pursuant to Rule 15fi-3(c) and the
reports required under Rule 15fk-1(c)(2)(ii)(A) are either submitted
via email or submitted on EDGAR, at the filer's option.\19\
---------------------------------------------------------------------------
\17\ See infra section V.A.
\18\ See infra section V.B.
\19\ See infra section V.C. Rule 15fi-3(c) requires that SBS
Entities ``notify the Commission'' (emphasis added). See infra
section V.C.1. Requiring these notices and amendments to be
submitted to the Commission via EDGAR as proposed would not cause
them to be deemed filed for purposes of the Exchange Act. See e.g.,
section 18 of the Exchange Act. 17 CFR 240.15Fk-1(c) (``Rule 15fk-
1(c)'') requires that the chief compliance officer of an SBS Entity
prepare and sign an annual compliance report that ``shall [b]e
submitted to the Commission.'' 17 CFR 240.15Fk-1(c) (emphasis
added). Requiring these reports to be submitted via EDGAR as
proposed would not cause the report to be deemed filed for purposes
of the Exchange Act.
---------------------------------------------------------------------------
F. Structured Data Requirements
The Commission is proposing to require certain of the disclosures
required by the following filings to be provided in a structured,
machine-readable data language: (1) the Covered SRO Forms; (2) the
information required under Rule 19b-4(e); (3) Form X-17A-19; (4) the
annual reports (and related annual filings) filed by broker-dealers
(including OTC derivatives dealers) and SBS Entities on Form X-17A-5
Part III; (5) the risk assessment reports filed by certain broker-
dealers on Form 17-H; and (6) the notices and reports provided to the
Commission by SBS Entities under Exchange Act Rules 15fi-3(c) and 15fk-
1(c)(2)(ii)(A), respectively (together, the ``Proposed Structured
Documents'').\20\
---------------------------------------------------------------------------
\20\ For certain affected documents, only some aspects are
proposed to be provided in a structured data language. For example,
only the execution pages of Form 1-N and Form 15A are proposed to be
provided in a structured data language. See infra section VII.A.
---------------------------------------------------------------------------
Specifically, the Commission is proposing to require the report
required by Exchange Act Rule 15fk-1(c)(2)(ii)(A) and portions of Form
1, Form CA-1, Form 17-H, and Form X-17A-5 Part III and related annual
filings to be provided in the Inline eXtensible Business Reporting
Language (``Inline XBRL'') structured data language. The Commission is
also proposing to require Form X-17A-19, the notice to the Commission
(and any amendments to the notices) required by Exchange Act Rule 15fi-
3(c), and portions of Form 1-N, Form 15A, Form 1, Form CA-1, Form 17-H,
and Form X-17A-5 Part III and related annual filings to be provided in
machine-readable, eXtensible Markup Language (``XML'')-based data
languages specific to those documents (``custom XMLs''). As noted,
these structured documents would be filed or submitted on EDGAR.\21\
---------------------------------------------------------------------------
\21\ The details of the proposed structured data requirements,
including the specific portions of affected documents that would be
structured in Inline XBRL versus custom XML, are discussed in
Section VII.A below.
---------------------------------------------------------------------------
In addition, the Commission is proposing to require SROs to
electronically post the information required under Rule 19b-4(e) using
a custom XML-based data language (also referred to as a ``schema'')
that the Commission would create and publish on its website for SROs to
use.\22\ The Commission is also proposing to require SROs to post a
rendered Portable Digital Format (``PDF'') version of the custom XML
document using a PDF renderer that the Commission would also create and
publish on its website for SROs to use.\23\
---------------------------------------------------------------------------
\22\ This requirement would mirror the existing requirement for
registered broker-dealers to electronically post reports containing
order routing information using the most recent versions of the XML
schema and the associated PDF renderer as published on the
Commission's website. See 17 CFR 242.606. The custom XML schema and
PDF renderer for Rule 606 reports are available at <a href="https://www.sec.gov/structureddata/dera_taxonomies">https://www.sec.gov/structureddata/dera_taxonomies</a>.
\23\ See id.
---------------------------------------------------------------------------
As discussed in further detail below, the Commission believes the
proposed structured data requirements would facilitate access to the
disclosures by users (e.g., investors, market participants, analysts,
the Commission), enabling more efficient retrieval, aggregation, and
comparison across different filers and time periods, as compared to an
unstructured PDF, HyperText Markup Language (``HTML''), or American
Standard Code for Information Interchange (``ASCII'') requirement.\24\
---------------------------------------------------------------------------
\24\ See infra sections VII.A and X.C. The addition of
structured data requirements would also be generally consistent with
objectives of the recently enacted Financial Data Transparency Act
(``FDTA''), which concerns the manner in which the Commission
collects and disseminates information. The FDTA was signed into law
on Dec. 23, 2022, as Title LVIII of the James M. Inhofe National
Defense Authorization Act for Fiscal Year 2023. See James M. Inhofe
National Defense Authorization Act for Fiscal Year 2023, Public Law
117-263 (Dec. 23, 2022). Section 5811 of the FDTA directs the
Commission and other covered agencies (e.g., financial regulators)
to jointly issue proposed rules for public comment that establish
data standards for the collections of information reported to each
covered agency by financial entities and for the data collected from
covered agencies on behalf of the Financial Stability Oversight
Council. The data standards must meet specified criteria relating to
openness and machine-readability and promote interoperability of
financial regulatory data across members of the Financial Stability
Oversight Council. In addition, Section 5822 of the Financial Data
Transparency Act requires that all public data assets published by
the Commission under the securities laws and the Dodd-Frank Act be
made available in accordance with specified criteria relating to
openness and machine-readability. See 44 U.S.C. 3502(20) (defining
the term ``open Government data asset'' to mean, among other things,
machine-readable and available (or could be made available) in an
open format).
---------------------------------------------------------------------------
The Commission is proposing some disclosures to be structured in
Inline
[[Page 23926]]
XBRL, and other disclosures to be structured in custom XML, because the
Commission believes Inline XBRL is well-suited for certain types of
content--such as financial statements and extended narrative
discussions--whereas other types of content can be readily captured
using custom XML data languages that yield smaller file sizes than
Inline XBRL and thus facilitate more streamlined data processing. Such
custom XML languages also enable EDGAR to generate fillable web forms
that permit affected entities to input disclosures into form fields
rather than encode their disclosures in custom XML themselves, thus
likely easing compliance burdens on affected entities. Finally, certain
of the proposed structured documents--Form X-17A-5 Part III and Form
17-H--are already partially subject to custom XML structured data
requirements when voluntarily filed on EDGAR. For these forms, the
Commission is proposing to require the same custom XML requirements so
as to minimize the associated burdens on registrants already using
these languages for these forms.
Certain of the proposed structured documents also include
requirements to attach copies of existing documents, such as copies of
by-laws, written agreements, user manuals, and listing applications.
The Commission is proposing to require affected entities to file these
copies of documents as unstructured PDF attachments to the otherwise
structured forms. The Commission believes requiring affected entities
to retroactively structure such existing documents, which were prepared
for purposes outside of fulfilling the Commission's disclosure
requirements, could impose compliance burdens on affected entities that
may not be justified in light of the commensurate informational
benefits associated with having such documents in structured form.\25\
---------------------------------------------------------------------------
\25\ See infra sections II.A.3, II.D.5, IV.B, and VII.A.
---------------------------------------------------------------------------
Similarly, Forms 1-N and 15A (other than the cover pages--i.e.,
execution pages--of those Forms) would not be subject to structured
data requirements, given that the very limited number of Form 1-N and
Form 15A filers and filings limits the benefit that would accrue from
machine-readability of the disclosures contained therein.\26\ ANE
Exception Notices also would not be subject to structured data
requirements, as the very limited number of data points in such notices
may lessen the utility of any functionality enabled by structured data
(such as efficient retrieval of individual data points from structured
documents).\27\
---------------------------------------------------------------------------
\26\ See infra sections II.B.3, II.C.3, and VII.A.
\27\ See infra sections V.B.2 and VII.A.
---------------------------------------------------------------------------
G. Amendments Regarding the FOCUS Report and Signature Requirements in
Rule 17a-5, 17a-12, and 18a-7 Filings
Finally, the Commission is proposing amendments regarding the FOCUS
Report to harmonize with other rules, make technical changes, and
provide clarifications. In addition, the Commission is proposing to
allow electronic signatures in Rule 17a-5, 17a-12, and 18a-7 filings,
including the FOCUS Report.
II. Proposed Requirements To Electronically File Covered SRO Forms
The Commission proposes to amend certain Exchange Act rules and the
Covered SRO Forms, including their instructions, to eliminate the
current paper copy filing method and instead require electronic
submission of the Covered SRO Forms. Changing from the current method
of paper filing to electronic submission of the Covered SRO Forms
ultimately should increase efficiencies and decrease costs for Filers
with respect to their filing obligations.\28\ In addition, the
Commission believes that the electronic filing of the Covered SRO Forms
would facilitate the Commission's oversight of SROs by streamlining the
process of tracking and reviewing the filings made on the Covered SRO
Forms.
---------------------------------------------------------------------------
\28\ See infra section X.
---------------------------------------------------------------------------
The proposal would require the use of EDGAR to file the Covered SRO
Forms. The Commission is proposing to use the existing EDGAR system for
the Covered SRO Forms because the Commission believes that these
filings are similar to other filings that are currently submitted on
EDGAR. Furthermore, many of the Covered SRO Forms contain information
that must be disclosed publicly, and electronic conversion and/or
publication of these filings by Commission staff, to make them
available to the public and Commission staff, is labor intensive and
time consuming. The Commission believes that requiring the submission
of these filings on EDGAR would facilitate more efficient transmission,
analysis, dissemination, storage, and retrieval of information, and
would benefit the Commission, the submitting entities, investors, and
other market participants. As a result of the proposed amendments to
relevant Commission rules and forms as described below, any Filer of
the Covered SRO Forms who has not previously made an electronic filing
on EDGAR would need to apply for EDGAR access pursuant to the EDGAR
Filer Manual \29\ in order to file documents on EDGAR.\30\
---------------------------------------------------------------------------
\29\ See <a href="https://www.sec.gov/edgar/filermanual">https://www.sec.gov/edgar/filermanual</a>.
\30\ As discussed in more detail in the Paperwork Reduction Act
section of this release, the Commission does not believe that the
Filers of Covered SRO Forms have previously made an electronic
filing on EDGAR. See infra section IX.C (Form ID).
---------------------------------------------------------------------------
For each of the Covered SRO Forms, the Commission is proposing to
add technical requirements to the form's general instructions to
specify when a form would be considered incomplete or deficient when
filed. Specifically, each Filer would be required to provide all the
information required by the form, including the exhibits, and a filing
that is incomplete or otherwise deficient may be returned to the Filer.
The proposed general instructions for each form also would set forth
what comprises a complete filing. For instance, the proposed general
instructions for Form 1 would state that a completed form filed with
the Commission shall consist of Form 1, responses to all applicable
items, and any exhibits required in connection with the filing.
The Commission also proposes that, for each of the Covered SRO
Forms, the general instructions would require some or all of the
information reported on the forms (including, where applicable, the
exhibits to the forms) to be provided in a structured, machine-readable
data language. For Form 1 and Form CA-1, the general instructions would
require the submissions to be provided in part using Inline XBRL and in
part using custom XML data languages specific to those Forms, with
certain submissions that constitute copies of existing documents of a
Filer (such as copies of governing documents or copies of contracts) to
be included as text-searchable PDF attachments rather than structured
data.\31\ For Form 1-N and Form 15A, only the cover page (i.e.,
execution page) of each form would be structured in a custom XML data
language, while the remainder of each form would remain unstructured.
For Form X-17A-19, the entire form would be structured in a custom XML
data language. Finally, the information under proposed Rule 19b-
4(e)(2)(ii) would be required to be provided on the listing SRO's
website using a custom XML data language, thus making the information
machine-readable.
---------------------------------------------------------------------------
\31\ For example, the copies of governing documents that are
required to be attached as Exhibit A to Form 1 and as part of
Exhibit E to Form CA-1 would be included as a PDF attachment, rather
than being structured in Inline XBRL or custom XML. See infra notes
37 and 38.
[[Page 23927]]
Proposed Structured Data Requirements for Covered SRO Forms
----------------------------------------------------------------------------------------------------------------
Inline XBRL Unstructured PDF
Form requirements Custom XML requirements requirements
----------------------------------------------------------------------------------------------------------------
Form CA-1............................ Schedule A, Exhibits C, Execution page, Exhibits A (in part), E
F, H, J, K, L, M, O, Exhibits A (in part), (in part), G, P, T.
R, S. B, D, E (in part), I,
N, Q.
Form 1............................... Exhibits D, E (in Execution page, Exhibits A, B, C (in
part), I. Exhibits C (in part), part), E (in part), F,
H (in part), J, K, L, G, H (in part), 17 CFR
M, N, 17 CFR 240.6a- 240.6a-3(a)(1) (``Rule
3(b) (``Rule 6a- 6a-3(a)(1)'')
3(b)'') volume reports. supplemental
materials.
Form 1-N............................. None................... Execution page only.... Remainder of form.
Form 15A............................. None................... Execution page only.... Remainder of form.
----------------------------------------------------------------------------------------------------------------
For Form CA-1, Schedule A and Exhibits C, F, H, J, K, L, M, O, R,
and S would be filed in Inline XBRL.\32\ The execution page and
Exhibits A (in part), B, D, E (in part), I, N, and Q would be filed in
custom XML.\33\ Exhibits A (in part), E (in part), G, P, and T would be
filed as unstructured PDF documents.\34\
---------------------------------------------------------------------------
\32\ Schedule A to the execution page requires certain
descriptive responses to complement the clearing agency's execution
page disclosures. Exhibit C requires a description of the clearing
agency's organizational structure. Exhibit F requires a description
of material pending legal proceedings involving the clearing agency.
Exhibit H requires the clearing agency's financial statements.
Exhibit J requires a description of the clearing agency's services
and functions. Exhibit K requires a description of the clearing
agency's security measures and procedures. Exhibit L requires a
description of the clearing agency's safeguarding measures and
procedures. Exhibit M requires a description of the clearing
agency's backup systems. Exhibit O requires a description of
criteria governing access to the clearing agency's services and a
description of the reasons for imposing such criteria. Exhibit R
requires a schedule of prohibitions and limitations on access to the
clearing agency's services. Exhibit S requires, if applicable, a
statement explaining why the clearing agency should be exempt.
\33\ The execution page requires identifying information about
the filer and the document being filed. Exhibit A requires, in
relevant part, a list of persons controlling or directing the
management or policies of the clearing agency, and descriptions of
any unwritten agreements or arrangements through which such persons
may exercise control or direction. Exhibit B requires a list of the
clearing agency's officers, managers, and individuals occupying
similar positions. Exhibit D requires a list of persons who are
controlled by, or are under common control with, the clearing
agency, as well as a description of each control relationship.
Exhibit E requires, in relevant part, a list of dues, fees, and
other charges imposed by the clearing agency for its clearing
activities. Exhibit I requires the addresses of all offices in which
the clearing agency conducts its activities, and an identification
of the activities that are performed in each listed office. Exhibit
N requires a list of participants, or applicants for participation,
in the clearing agency. Exhibit Q requires a schedule of fees fixed
by the clearing agency for services rendered by its participants.
\34\ Exhibit A requires, in relevant part, copies of written
agreements with persons who may control or direct the management or
policies of the clearing agency. Exhibit E requires, in relevant
part, a copy of the currently effective constitution, articles of
incorporation or association, by-laws, rules, procedures and
instruments corresponding thereto, of the clearing agency. Exhibit G
requires copies of all contracts with any national securities
exchange, national securities association or clearing agency or
securities market for which the clearing agency acts as a clearing
agency or performs clearing agency functions. Exhibit P requires
copies of any forms of contracts governing the terms on which
persons may subscribe to clearing agency services provided by the
registrant. Exhibit T requires any conditions, reports, notices or
other submissions to the Commission required as directed in any
Order approving applications for exemption from registration as a
clearing agency.
---------------------------------------------------------------------------
For Form 1, Exhibits D, E (in part), and I would be filed in Inline
XBRL.\35\ The execution page, Exhibits C (in part), H (in part), J, K,
L, M, N, and the 17 CFR 240.6a-3(b) (``Rule 6a-3(b)'') volume reports
would be filed in custom XML.\36\ Exhibits A, B, C (in part), E (in
part), F, G, H (in part), and the 17 CFR 240.6a-3(a)(1) (``Rule 6a-
3(a)(1)'') supplemental materials would be filed as unstructured PDF
documents.\37\ For Forms 15A and 1-N, only the execution page would be
filed using a structured data language (custom XML).\38\
---------------------------------------------------------------------------
\35\ Exhibit D requires the unconsolidated financial statements
for the latest fiscal year for each of the exchange's subsidiaries
and affiliates. Exhibit E requires, in relevant part, a description
of the manner of operation of the electronic trading system that the
exchange uses to effect transactions. Exhibit I requires audited
financial statements for the exchange's latest fiscal year.
\36\ The execution page requires identifying information about
the filer and the document being filed. Exhibit C requires, in
relevant part, information regarding each subsidiary or affiliate of
the exchange, and each entity with whom the exchange has an
agreement relating to the operation of an electronic trading system
to be used to effect transactions on the exchange (such as the name
and address of the organization, a brief description of the nature
and extent of the affiliation, and the a brief description of the
business or functions of the organization). Exhibit H requires, in
relevant part, a schedule of listing fees and a brief description of
the criteria governing which securities may be traded on the
exchange. Exhibit J requires a list of the exchange's officers,
governors, standing committee members, or persons performing similar
functions. Exhibit K requires a list of the exchange's significant
owners, shareholders, or partners. Exhibit L requires descriptions
of the criteria, conditions, and procedures governing membership in
the exchange. Exhibit M requires a list of members, participants,
subscribers, or other users of the exchange, as well as a
description of each user's activities. Exhibit N requires schedules
of securities traded on the exchange. Rule 6a-3(b) of the Exchange
Act requires a report concerning the securities sold on the exchange
during the previous calendar month. See 17 CFR 240.6a-3(b).
\37\ Exhibit A requires copies of the constitution, articles of
incorporation or association with all subsequent amendments, and of
existing by-laws or corresponding rules or instruments, whatever the
name, of the exchange. Exhibit B requires copies of all written
rulings, settled practices having the effect of rules, and
interpretations of the Governing Board or other committee of the
exchange in respect of any provisions of the constitution, by-laws,
rules, or trading practices of the exchange which are not included
in Exhibit A. Exhibit C requires, in relevant part, copies of the
constitution, a copy of the articles of incorporation or association
including all amendments, and copies of the existing by-laws or
corresponding rules or instruments for each of the exchange's
subsidiaries or affiliates and for each entity with whom the
exchange has an agreement relating to the operation of an electronic
trading system to be used to effect transactions on the exchange.
Exhibit E requires, in relevant part, a copy of the exchange's
users' manual. Exhibit F requires a complete set of all forms
pertaining to membership, participation, or subscription to the
exchange, application for approval as a person associated with a
member, participant, or subscriber of the exchange, or any other
similar materials. Exhibit G requires a complete set of all forms of
financial statements, reports, or questionnaires required of
members, participants, subscribers, or any other users relating to
financial responsibility or minimum capital requirements for such
members, participants, or any other users. Exhibit H requires, in
relevant part, a complete set of documents comprising the exchange's
listing applications, including any agreements required to be
executed in connection with listing. Rule 6a-3(a)(1) of the Exchange
Act requires any material (including notices, circulars, bulletins,
lists, and periodicals) issued or made generally available to
members of, or participants or subscribers to, the exchange. See 17
CFR 240.6a-3(a)(1).
\38\ The execution page requires identifying information about
the filer and the document being filed.
---------------------------------------------------------------------------
Similarly, the information under proposed Rule 19b-4(e)(2)(ii)
would be required to be provided on the listing SRO's website using a
custom XML data language, thus making the information machine-readable.
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Rule 19b-4(e) Information............ None................... Entire Rule 19b-4(e) The entire posting
posting. would also be
available as a
rendered PDF document.
----------------------------------------------------------------------------------------------------------------
[[Page 23928]]
The Commission believes that the proposed requirement that the
Covered SRO Forms be filed, and information pursuant to Rule 19b-4(e)
be posted, using structured data languages would allow the Commission
and, if applicable, investors, market participants, and other
interested parties, to efficiently review and analyze the
information.\39\ In addition, the requirement to file Covered SRO Forms
on EDGAR in a structured data language would enable EDGAR to perform
technical validations (i.e., programmatic checks to ensure the
documents are appropriately standardized, formatted, and complete) upon
intake of the documents, potentially improving the quality of the filed
data by decreasing the incidence of non-substantive errors (such as the
omission of values from fields that should always be populated).
---------------------------------------------------------------------------
\39\ For more detailed discussions of the anticipated benefits
associated with structured data requirements, see infra sections
VII.A. and X.C.1.b.
---------------------------------------------------------------------------
Based on the Commission's experience in reviewing the Covered SRO
Forms and information posted pursuant to Rule 19b-4(e), the Commission
also believes that the proposed requirement to electronically file the
Covered SRO Forms and electronically post the information required
pursuant to Rule 19b-4(e) would allow for more efficient use of
Commission resources related to reviewing, assessing, and processing
these filings and postings. In addition, information provided on the
Covered SRO Forms would be captured automatically by EDGAR and would be
text-searchable or machine-readable. The information posted pursuant to
Rule 19b-4(e) would be machine-readable as well. As a result, the
Commission believes that these features would facilitate its oversight
of SROs.
Substantive changes would not be required to the information
required to be filed on the Covered SRO Forms or the information
required to be posted pursuant to Rule 19b-4(e). Rather, the proposal
is intended simply to require and facilitate the electronic filing of
the Covered SRO Forms and the disclosure of the information required
under Rule 19b-4(e), which the SROs currently are required to provide
to the Commission.
A. Form 1
1. Relevant Statutory Framework
Section 6(a) of the Exchange Act states, ``[a]n exchange may be
registered as a national securities exchange . . . by filing with the
Commission an application for registration in such form as the
Commission, by rule, may prescribe containing the rules of the exchange
and such other information and documents as the Commission, by rule,
may prescribe as necessary or appropriate in the public interest or for
the protection.'' \40\ Rules 6a-1, 6a-2, and 6a-3 \41\ under the
Exchange Act and Form 1 \42\ set forth the filing requirements for
registration as a national securities exchange and for exempt
exchanges, as well as requirements for the filing of supplemental
material and reports.
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\40\ See 15 U.S.C. 78f(a).
\41\ See 17 CFR 240.6a-1; 17 CFR 240.6a-2; 17 CFR 240.6a-3.
\42\ See 17 CFR 249.1.
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2. Current Requirements for Filing Form 1
Rule 6a-1 under the Exchange Act generally requires that an entity
seeking to register as a national securities exchange, or seeking an
exemption from such registration based on limited volume, file an
application on Form 1 and correct any inaccuracy therein upon
discovery.\43\ Form 1 contains an execution page as well as 14 exhibits
that must be filed by the exchange.\44\ The Form 1 execution page
requires certain basic information from the exchange, such as the name
and street and mailing addresses of the exchange; the name, title, and
telephone number of the exchange's contact employee; and the legal
status of the exchange (e.g., corporation or limited liability
company). The Form 1 exhibits require the exchange to provide, among
other things: its audited financial statements and unconsolidated
financial statements for each subsidiary or affiliate; its governing
documents and rules; the names of its members, participants,
subscribers, and users; information regarding its non-member owners,
shareholders, or partners; and the securities it lists or trades. The
instructions to Form 1 require that one original and two copies of all
the Form 1 materials be filed with the Commission in paper form.\45\
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\43\ See 17 CFR 240.6a-1.
\44\ For purposes of this paragraph, these entities are
collectively referred to as ``exchanges.''
\45\ See 17 CFR 249.1.
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Rule 6a-2 requires a registered national securities exchange or an
exempt exchange \46\ to amend its Form 1 as specified therein.
Specifically, pursuant to 17 CFR 240.6a-2(a) (``Rule 6a-2(a)''), an
exchange must file an amendment to its Form 1 within 10 days after it
takes any action that renders any part of its Form 1 execution page or
the information provided in its Form 1 Exhibits C, F, G, H, J, K, or M
inaccurate or incomplete.\47\
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\46\ For purposes of this paragraph, these entities are
collectively referred to as ``exchanges.''
\47\ See 17 CFR 240.6a-2(a).
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Pursuant to 17 CFR 240.6a-2(b) (``Rule 6a-2(b)''), on or before
June 30 of each year, a national securities exchange or an exempt
exchange \48\ must file amendments to Exhibits D, I, K, M, and N with
the Commission.\49\ Pursuant to 17 CFR 240.6a-2(c) (``Rule 6a-2(c)''),
on a triennial basis, an exchange must file complete Exhibits A, B, C,
and J with the Commission.\50\ Further, 17 CFR 240.6a-2(d) (``Rule 6a-
2(d)'') provides alternative means for satisfying the requirements to
file amendments to certain exhibits.\51\ These alternative means
require that the exchange: (i) on an annual or more frequent basis
publish the information required by the pertinent exhibits, or
cooperate in its publication; \52\ (ii) keep the information up to date
and make it available to the Commission and the public upon request;
\53\ or (iii) make the required information available continuously on
an internet website controlled by the exchange.\54\ As with Form 1
filings pursuant to Rule 6a-1, all amendments to Form 1 pursuant to
Rule 6a-2 currently are submitted in paper form in accordance with the
instructions to Form 1.\55\
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\48\ For purposes of this paragraph, these entities are
collectively referred to as ``exchanges.''
\49\ See 17 CFR 240.6a-2(b).
\50\ See 17 CFR 240.6a-2(c).
\51\ See 17 CFR 240.6a-2(d). Rule 6a-2(d) applies to information
required to be filed pursuant to paragraphs (b)(2) and (c) of Rule
6a-2. Rule 6a-2(d) sets forth alternative means of providing access
to the information contained in Exhibits A, B, C, J, K, M, and N in
lieu of filing the information with the Commission.
\52\ See The exchange would need to: (i) identify the
publication in which the information is available, the name,
address, and telephone number of the person from whom such
publication may be obtained, and the price of the publication; and
(ii) certify the accuracy of such information as of its publication
date. 17 CFR 240.6a-2(d)(1).
\53\ The exchange would need to certify that the information is
kept up to date and is available to the Commission and the public
upon request. 17 CFR 240.6a-2(d)(2).
\54\ The exchange would need to: (i) indicate the location of
the internet website where such information may be found; and (ii)
certify that the information available at such location is accurate
as of its date. 17 CFR 240.6a-2(d)(3).
\55\ See 17 CFR 249.1.
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Pursuant to Rule 6a-3, a national securities exchange or an exempt
exchange \56\ also must file certain supplemental material and reports
with the Commission.\57\ Specifically, Rule 6a-3(a)(1) requires an
exchange to file with the Commission any material issued or made
generally available to members of, or participants or
[[Page 23929]]
subscribers to, the exchange within 10 days after issuing or making
such material available to such members, participants or
subscribers.\58\ 17 CFR 240.6a-3(a)(2) (``Rule 6a-3(a)(2)'') provides
that, if information required by Rule 6a-3(a)(1) is available
continuously on a website controlled by the exchange, in lieu of filing
such information, the exchange may indicate the location of the website
where the information can be found, and certify that the information is
accurate as of its date.\59\ Rule 6a-3(b) requires an exchange to file,
within 15 days after the end of each calendar month, a volume report of
securities transactions on the exchange during the calendar month. As
with filings pursuant to Rules 6a-1 and 6a-2, all filings pursuant to
Rule 6a-3 currently are submitted in paper form.\60\
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\56\ For purposes of this paragraph, these entities are
collectively referred to as ``exchanges.''
\57\ See 17 CFR 240.6a-3.
\58\ See 17 CFR 240.6a-3(a)(1).
\59\ See 17 CFR 240.6a-3(a)(2).
\60\ See 17 CFR 240.6a-3(b). This report must set forth: (i) the
number of shares of stock sold and the aggregate dollar amount of
such stock sold; (ii) the principal amount of bonds sold and the
aggregate dollar amount of such bonds sold; and (iii) the number of
rights and warrants sold and the aggregate dollar amount of such
rights and warrants sold. Id.
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Form 1 filings are currently made available to the public.\61\ Form
1 filings made pursuant to Rule 6a-1 are scanned and the resulting PDF
documents are posted on the Commission's website. Form 1 filings made
pursuant to Rule 6a-2 are scanned and the resulting PDF documents are
uploaded to EDGAR. Form 1 filings made pursuant to Rule 6a-3 are
available for inspection in paper form in the Commission's public
reading room.
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\61\ When the Commission previously amended Form 1 and Rules 6a-
1, 6a-2, and 6a-3, it stated that ``[t]he information collected,
retained, and/or filed pursuant to the rules for registration as a
national securities exchange will not be confidential and will be
available to the public.'' Exchange Act Release No. 40760 (Dec. 8,
1998), 63 FR 70844, 70912 (Dec. 22, 1998) (Regulation of Exchanges
and Alternative Trading Systems Adopting Release). Consistent with
this statement, the Instructions to Form 1 specify that ``[n]o
assurance of confidentiality is given by the Commission with respect
to the responses made in Form 1. The public has access to the
information contained in Form 1.''
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3. Proposed Requirement To Electronically File Form 1
The Commission proposes to amend Rules 6a-1, 6a-2, and 6a-3 under
the Exchange Act, as well as Form 1 and the instructions to Form 1, to
require the electronic filing on EDGAR of all submissions required by
the rules. As explained in section II above, the Commission believes
that, among other benefits, these proposed amendments should increase
efficiencies related to the filing of these forms and the review and
analysis of the filed forms by the Commission and its staff as well as
by investors, market participants, and other interested parties. In
addition, the Commission proposes conforming changes to Rule 3(b)(2) of
its Informal and Other Procedures,\62\ discussed below,\63\ to clarify
that defective applications on Form 1 would be returned to the
applicant and, although permitted as an option under the current rule,
defective applications no longer would be held by the Commission. A
description of the Commission's proposed amendments to Rules 6a-1, 6a-
2, and 6a-3, Form 1, and the instructions to Form 1 to implement the
proposed electronic filing requirement is provided below.
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\62\ See 17 CFR 202.3(b)(2).
\63\ See infra section II.G.
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a. Proposed Amendments to Rules 6a-1, 6a-2, and 6a-3
The Commission proposes to add a new paragraph (e) to Rule 6a-1 to
require the electronic filing on EDGAR of all Form 1 filings and
amendments to such filings. The Commission also proposes to amend Rules
6a-2(a), (b), and (c) to mandate the electronic filing on EDGAR of the
Form 1 amendments under those paragraphs by requiring the electronic
filing of those amendments, in accordance with proposed 17 CFR 240.6a-
1(e) (``Rule 6a-1(e)'').\64\ Moreover, the Commission proposes to
update in Rule 6a-2(c) the due date for the next filings due pursuant
to Rule 6a-2(c), from June 30, 2001, to June 30, 2025.
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\64\ The Commission also proposes a technical amendment to
remove two extraneous commas from the text of Rule 6a-2(a). The
Commission further proposes to amend paragraph (d) of Rule 6a-2 to
clarify that any certifications and other information permitted
under that paragraph in lieu of filing the required documents as
exhibits to Form 1 must be provided using Form 1. The Commission
believes that this proposed change should facilitate compliance with
the Rule 6a-2 requirements by exchanges and exempt exchanges by
clarifying and standardizing the means to file any certifications
and other information submitted pursuant to paragraph (d) of Rule
6a-2.
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As stated earlier in this section, Rule 6a-3 requires national
securities exchanges and exempt exchanges to file certain supplemental
material and reports with the Commission after registration or being
granted an exemption from registration. The Commission proposes to
amend Rule 6a-3 to require national securities exchanges and exempt
exchanges to file on EDGAR such supplemental material and reports
electronically on Form 1, in accordance with proposed Rule 6a-1(e).
b. Proposed Amendments to Form 1 and the Form 1 Instructions
In addition to the proposed revisions to Rules 6a-1, 6a-2, and 6a-
3, the Commission proposes to revise and reformat Form 1, and the
instructions thereto, to accommodate the electronic filing on EDGAR of
initial applications, subsequent amendments, supplemental material, and
reports that are made on Form 1. The proposed changes to Form 1 to
permit electronic submission to the Commission would require minimal
modifications to the form, as described below. The Commission also
proposes to revise the Form 1 instructions to facilitate the electronic
filing and machine-readability of Form 1.\65\ As discussed below,
Commission believes that these proposed revisions to Form 1 would
facilitate the filing and use of the information mandated by Form 1 and
related Rules 6a-1, 6a-2, and 6a-3.
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\65\ In addition, the Commission proposes to remove the
definition of the word ``applicant'' from the Form 1 instructions
and replace the word ``applicant'' with the word ``exchange'' on
Form 1. Currently, Form 1 uses both the words ``exchange'' and
``applicant'' to refer to the entity filing the Form 1. The
Commission proposes this technical, non-substantive change to make
consistent the terminology used in Form 1.
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The Commission proposes that electronic Form 1 would solicit
information through prompts on the form. Proposed electronic Form 1
also would require an exchange to attach exhibits via a new exhibit
table that would be part of electronic Form 1. Where Rule 6a-2 allows
for alternative means of filing the information required under certain
exhibits, the new exhibit table would permit an exchange to
electronically provide the certifications and details necessary for an
exchange to avail itself of those alternative means. The information
required to be filed with the exhibits is not changing. Currently, Rule
6a-2 provides that in lieu of filing certain exhibits as part of a
paper Form 1 submission, an exchange may: (i) identify where such
information is published and certify its accuracy as of its publication
date; (ii) certify that the information is available to the Commission
and the public upon request; or (iii) indicate the location of the
internet website where such information may be found and certify that
the information available at such location is accurate as of its
date.\66\ The proposal would not change the availability of these
alternative means, only the method of providing the necessary
certifications and details. As described above, instead of attaching
paper exhibits, the proposal would require the exhibits to be submitted
[[Page 23930]]
electronically on EDGAR. Similarly, instead of providing on paper the
certifications and details required for an exchange to avail itself of
these alternative means, the proposal would require those
certifications and details to be provided via the electronic Form 1. In
the event an exchange indicates on Form 1 an internet website where
such information may be found, where applicable, the Commission
proposes to require the exchange to provide on Form 1 the Uniform
Resource Locator(s) (``URL(s)'') of the location(s) on the internet
website where such information may be found, and to certify that
information posted on such a website is accurate as of its date and is
free and accessible (without any encumbrances or restrictions) by the
general public.
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\66\ See 17 CFR 240.6a-2(d).
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For electronic Form 1, the Commission proposes to add prompts prior
to Section I that would require the exchange to identify the basis for
submitting the form. Specifically, proposed electronic Form 1 would
require the exchange to check a box stating one of the following: (i)
whether the filing is an initial Form 1 application and if it is,
whether the exchange is applying to be a national securities exchange
or an exempt exchange; (ii) whether the filing is an amendment to an
initial Form 1 application prior to Commission action to grant
registration or an exemption based on limited volume; (iii) whether the
filing is to provide the exchange's consent to an extension of the time
period within which the Commission must take action on an initial Form
1 application; \67\ (iv) whether the filing is to withdraw an initial
Form 1 application prior to the Commission taking action on the
application; (v) whether the filing is an amendment to Form 1 pursuant
to Rule 6a-2 following the Commission's granting of registration or an
exemption; or (vi) whether the filing is supplemental material or
reports pursuant to Rule 6a-3.\68\ Currently, there is no place on Form
1 for an exchange to indicate the type of filing that it is submitting.
For example, current Form 1 does not provide an exchange the ability to
indicate whether an initial Form 1 filing is an application to be a
national securities exchange or an exempt exchange. Accordingly, the
Commission believes that capturing information regarding the type of
Form 1 filing would facilitate the exchange's communication with the
Commission and help the Commission more efficiently review Form 1
submissions.
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\67\ Such consents to an extension of the time period within
which the Commission must take action currently are submitted as
letters in paper form. Adding the ability to indicate that the
exchange consents to an extension of time on electronic Form 1 would
streamline the process for making such a submission. See 15 U.S.C.
78s(a)(1)(B).
\68\ The Commission also proposes to amend the instructions to
Form 1 to add a new section titled ``When to Use the Form,'' which
would explain when Form 1 filings are required.
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The proposed electronic Form 1 would also capture contact
information for the exchange and certain individuals. Consistent with
current Form 1, the proposed electronic Form 1 would require the
exchange to identify contact information for the exchange, a contact
employee, and counsel for the exchange. Unlike current Form 1, proposed
electronic Form 1 would additionally require an email address for the
contact employee. The Commission believes that the requirement to
provide an email address for the exchange contact employee would
expedite communications between Commission staff and the relevant
exchange.
Proposed electronic Form 1 would require an exchange to
electronically attach exhibits by using an exhibit table. The proposed
exhibit table would contain columns for the name of the exhibit,
information required by the exhibit, whether alternative means of
satisfying the filing of an exhibit are available for that particular
exhibit (e.g., URL(s)), if permitted by applicable Commission rule, and
checkboxes to indicate whether such alternative means are being
used.\69\ The information proposed to be required by the exhibits to
electronic Form 1 would remain the same as current Form 1. In addition,
to facilitate the electronic filing of the supplemental materials
required under 17 CFR 240.6a-3(a) (``Rule 6a-3(a)'') and the volume
reports required under Rule 6a-3(b), the Commission proposes to add new
Sections III and IV, respectively, to Form 1. Sections III and IV would
not add new requirements beyond those currently included in Rules 6a-
3(a) and (b). Currently, Rule 6a-3(a) requires exchanges to file
certain information with the Commission or, in the alternative, to
indicate where such information can be found on an internet website
controlled by the exchange. The proposal would require the filing of
this information through Section III of electronic Form 1 or, in the
alternative, to provide through Section III of electronic Form 1 the
URL(s) of the location(s) on the internet website where such
information can be found. If an exchange chooses this latter option and
provides URL(s) of an internet website where such information can be
found, Section III would also clarify that such website must be free
and accessible (without any encumbrances or restrictions) by the
general public. Likewise, Section IV would not change the substance of
what must be filed; it would merely require the filing of the volume
reports required under Rule 6a-3(b) to be made on electronic Form 1
instead of in paper format.
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\69\ See supra notes 69-71.
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Furthermore, electronic Form 1 would continue to require an
exchange to consent to service of any civil action brought by, or
notice of any proceeding before, the Commission in connection with its
activities. The current language under which the exchange consents to
service via registered or certified mail at the main or mailing address
provided on Form 1 would continue to be included in the electronic
form.\70\
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\70\ The Commission also proposes to delete the outdated
provision allowing for service of any civil action pursuant to
confirmed telegram.
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In addition, the proposed electronic Form 1 would require the
individual who is submitting the form to check a box on behalf of the
exchange to represent that the information and statements contained in
the Form 1, including exhibits, schedules, or other documents, are
current, true, and complete. The requirement to sign and notarize the
form would be eliminated because it is unnecessary, not compatible
with, and not required for electronic filing on EDGAR.
Finally, electronic Form 1 would require exchanges to structure
Exhibits D (unconsolidated financial statements of each of the
exchange's subsidiaries or affiliates), E (description of the
electronic trading system's manner of operation, except for the
attached copy of the users' manual), and I (audited financial
statements of the exchange) in Inline XBRL. The execution page,
Exhibits C (information regarding each of the exchange's subsidiaries,
affiliates, and entities with whom the exchange has an agreement
relating to the operation of the exchange's electronic trading system,
except for the copies of existing documents listed below), H (listing
fee schedule and brief description of the criteria governing which
securities may be traded on the exchange, except for the copies of
existing documents listed below), J (list of officers, governors,
standing committee members, or persons performing similar functions), K
(list of significant shareholders or partners), L (description of
criteria, conditions, and procedures governing membership in the
exchange), M (list of members, participants, subscribers, or other
users
[[Page 23931]]
of the exchange and description of each user's activities), N
(schedules of securities traded on the exchange), and the information
required under Rule 6a-3(b) (reports regarding the securities sold on
the exchange over the previous calendar month) would also be
structured, albeit in a custom XML data language specific to Form 1
rather than in Inline XBRL.
Attached copies of existing documents, including those filed with
Exhibits A (constitution, articles of incorporation or association, and
existing by-laws or corresponding rules or instruments of the
exchange), B (written rulings, settled practices having the effect of
rules, and interpretations of the Governing Board or other committee of
the exchange in respect of any provisions of the constitution, by-laws,
rules, or trading practices of the exchange), C (written rulings,
settled practices having the effect of rules, and interpretations of
the Governing Board or other committee of the exchange in respect of
any provisions of the constitution, by-laws, rules, or trading
practices of the exchange's affiliates, subsidiaries, or entities with
whom the exchange has an agreement related to the operation of the
exchange's electronic trading system), E (listing applications and
required agreements), F (forms pertaining to membership, participation,
or subscription, application for approval as a person associated with a
member, participant, or subscriber of the exchange, or any other
similar materials), G (forms of financial statements, reports, or
questionnaires required of members, participants, subscribers, or any
other users relating to financial responsibility or minimum capital
requirements for such members, participants, or any other users), H
(listing applications and agreements required to be executed in
connection with listing), and the information required under Rule 6a-
3(a)(1) (supplemental materials issued or made available to members of,
or participants or subscribers to, the exchange), would be filed as
unstructured PDF documents.
Proposed Structured Data Requirements for Form 1
------------------------------------------------------------------------
------------------------------------------------------------------------
Inline XBRL.................. Exhibits D, E (in part), I.
Custom XML................... Execution page, Exhibits C (in part), H
(in part), J, K, L, M, N, Rule 6a-3(b)
monthly reports.
Unstructured PDF............. Exhibits A, B, C (in part), E (in part),
F, G, H (in part), Rule 6a-3(a)(1)
supplemental materials.
------------------------------------------------------------------------
The proposed structuring requirements could facilitate access to
the exchange's disclosures (such as by enabling efficient retrieval of
only those disclosures filed by a subset of exchanges over particular
reporting periods) and their analysis (such as by enabling efficient
comparisons of individual disclosures or sets of disclosures across
different exchanges and reporting periods). This could benefit market
participants through enhanced oversight of the exchanges. For example,
Commission staff could leverage the machine-readability of Exhibit I to
automatically flag any atypical fluctuations in particular financial
line items across every exchange's financial statements, and assess
whether closer examination of any such fluctuations would be warranted.
Similarly, Commission staff could leverage the machine-readability of
Exhibit E by retrieving automated redline comparisons of the manner of
operations description disclosed by exchanges from prior reporting
periods to the current reporting period, thus pinpointing any
widespread operational changes for further assessment.
Market participants (such as issuers, analysts, and other
exchanges) could also benefit from direct use of the machine-readable
disclosures on Form 1. For example, the structuring requirement for
Exhibit H could allow issuers to more efficiently compare listing fees
charged by different exchanges as they determine the exchange on which
they list their securities. Without the proposed structured data
requirements, these analyses, to the extent they are done, need to be
performed manually, such as by gathering the current and former
financial statements for each exchange and entering all financial line
items of interest into databases, resulting in a significantly less
efficient and precise process. In addition, the proposed structured
data requirement would enable EDGAR to perform technical validations
(i.e., programmatic checks to ensure the documents are appropriately
standardized, formatted, and complete) upon intake of the Form 1
disclosures, thus potentially improving the quality of the filed data
by decreasing the incidence of non-substantive errors (such as the
omission of values from fields that should always be populated).
The nature and extent of such benefits may vary based on the
content of each Form 1 Exhibit. As discussed in the subsequent economic
analysis, studies of XBRL requirements for public operating company
financial statements indicate a number of benefits for investors and
market participants.\71\ The probability that, and extent to which,
these particular benefits would arise from structured Form 1
disclosures could be heightened for Exhibits D and I, which would
likewise include structured financial statements under the proposed
rule amendments. In addition, the particular benefits of structuring
data would likely vary based on the type of disclosures included in
each particular Exhibit. Structured numerical disclosures, such as
those that would be included on Exhibit I, lend themselves to
mathematical functionality, such as the calculation of key ratios or
the identification of extreme statistical outliers. Structured textual
disclosures, such as those that would be included on Exhibit E, lend
themselves to targeted keyword searching and more sophisticated
sentiment analysis.
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\71\ See infra section X.C.1.b.
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The Commission is proposing to require Inline XBRL for certain
exhibits to Form 1 and custom XML for others because the Commission
believes each data language is better suited for particular types of
disclosures. Exhibits D and I require disclosure of financial
statements, and Inline XBRL was designed to accommodate financial
statement information, including the particular metadata (e.g., the
relevant fiscal period, whether the line item is on the balance sheet,
whether the line item is a credit or debit) that must be linked to each
data point within the financial statements to fully convey its semantic
meaning to a machine reader. Exhibit E requires narrative disclosure
regarding the trading system's manner of operations, and whereas custom
XML data languages only have the capacity to accommodate brief
narrative descriptions, Inline XBRL can accommodate longer narrative
descriptions with presentation capabilities that preserve human-
readability while maintaining machine-readability.\72\
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\72\ Compare, for example, the Inline XBRL requirement for the
description of investment strategies that open-end funds disclose on
Form N-1A to the custom XML requirement for the brief description of
the applicant's business that SBS Entities disclose on Form SBSE.
See Item 4 of Form N-1A; Item 7 of Form SBSE.
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[[Page 23932]]
The execution page of Form 1, Exhibits C (in part), H (in part), J,
K, L, M, and N to Form 1, and the Rule 6a-3(b) reports filed on Form 1
do not require such content. For these disclosures, the Commission
believes the use of custom XML data languages would be preferable to
Inline XBRL, because it would yield smaller file sizes and therefore
enable more streamlined processing of the information.\73\ The
Commission believes requiring custom XML rather than Inline XBRL for
these disclosures would also be preferable because it would enable
EDGAR to generate fillable web forms that would permit exchanges to
input their disclosures into form fields rather than structure their
disclosures in custom XML themselves. This added flexibility could ease
the burden of compliance on exchanges in some instances, although
exchanges may have the requisite sophistication to encode the
disclosures in custom XML themselves without relying on fillable web
forms.\74\
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\73\ See also infra section X.E.4 (discussing other structured
data languages that would result in smaller file sizes than Inline
XBRL).
\74\ See infra note 458, as well as the text accompanying note
654.
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The proposed approach of requiring Inline XBRL for some Form 1
exhibits and custom XML for others would entail drawbacks for users of
the information (including Commission staff and market participants).
Specifically, data users would be unable to incorporate the Inline XBRL
disclosures filed on Form 1 into the same datasets and applications as
the custom XML disclosures filed on Form 1, and run analyses across the
differently formatted Form 1 disclosures, without undertaking data
conversion processes that are frequently burdensome and imprecise.
Similarly, any technical validations programmed into EDGAR would be
unable to check for any inappropriate inconsistencies between
disclosures on Inline XBRL exhibits and disclosures on custom XML
exhibits on a given Form 1, thus reducing the benefit of improved data
quality that would be likely to result from structured data
requirements. Finally, some Form 1 filers may already be using Inline
XBRL to structure similar data for internal business purposes, such as
through the use of Enterprise Resource Planning (``ERP'') systems;
these filers may prefer to use Inline XBRL for all proposed structured
data requirements of Form 1, rather than using a combination of Inline
XBRL and custom XML.\75\ Nonetheless, the Commission believes the
streamlined data processing associated with the smaller sizes of the
proposed custom XML exhibits, as described earlier in this section,
would justify any such drawbacks.
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\75\ See infra note 570 (discussing the prevalence of XBRL
integration into ERP systems).
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The Commission is proposing to require exchanges to file copies of
existing documents, such as copies of by-laws, written agreements, and
listing applications, as unstructured PDF attachments. The Commission
believes an unstructured PDF requirement would be preferable to a
structured data requirement for these documents, because requiring
exchanges to retroactively structure these existing documents, which
were prepared for purposes outside of fulfilling the Commission's
disclosure requirements, would likely impose costly compliance burdens
on exchanges that may not be justified in light of the commensurate
informational benefits associated with more efficient disclosure use.
Thus, the Commission does not believe structured data requirements are
warranted for these copies of existing documents.
4. Request for Comment
1. The Commission requests comment on all aspects of the proposed
revisions to Form 1 to facilitate electronic filing on EDGAR. Are there
any aspects of transitioning the form to electronic filing that the
Commission has not addressed above? Please explain.
2. Would electronic filing of Form 1 on EDGAR and use of Inline
XBRL and custom XML for certain elements of Form 1 filings improve the
usefulness of Form 1 by members of the public? Would any market
participants derive benefit from regulatory use of the Inline XBRL and
custom XML disclosures on Form 1? Please explain why or why not.
3. What, if any, costs would be associated with preparing Form 1
filings for electronic filing through EDGAR? Are those costs more, less
or the same as those currently expended under the current Form 1 filing
process?
4. Form 1 filers would be required to prepare certain elements of
Form 1 filings using Inline XBRL and custom XML. Would Form 1 filers
experience practical difficulties or incur significant costs in
preparing and submitting those elements of Form 1 using Inline XBRL and
custom XML? If so, please explain the nature of those difficulties and
costs as well as any alternative approaches the Commission should
adopt.
5. Would requiring different structured data languages for
different Exhibits of Form 1 provide benefits to data users or filers
that justify any drawbacks associated such an approach? Please explain
the nature of such benefits and drawbacks, and why the benefits would
justify the drawbacks (or vice versa).
6. If a mix of structured data languages would be appropriate,
should the specific data languages proposed for each Form 1 Exhibit be
modified? For example, are there Form 1 Exhibits proposed as custom XML
documents that would be better suited as Inline XBRL documents, or vice
versa? Please explain why or why not.
7. Are there other structured data languages (i.e., data languages
other than Inline XBRL and custom XML) that would be more appropriate
for some or all of the Form 1 disclosures? Please explain why or why
not, and, if another structured data language is deemed more
appropriate, please identify.
8. Would requiring exchanges to file copies of existing documents
as unstructured PDF attachments, rather than requiring exchanges to
retroactively structure those documents in machine-readable data
languages, ease compliance burdens on exchanges? If so, would the
reduced compliance burden on exchanges justify foregoing the benefits
to data users of structuring these existing documents? Please explain
why or why not.
B. Form 1-N
1. Relevant Statutory Framework
Section 6 of the Exchange Act \76\ sets out a framework for the
registration and regulation of national securities exchanges. The
Exchange Act was amended by the Commodity Futures Modernization Act of
2000 (``CFMA'') \77\ to allow the trading of security futures products.
Under the CFMA, markets that wish to trade security futures products
are regulated jointly by the SEC and the CFTC. The Exchange Act, as
amended by the CFMA, provides that futures exchanges that meet certain
criteria and that wish to trade security futures products may file
notice with the SEC to become a ``Security Futures Product Exchange.''
\78\
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\76\ See 15 U.S.C. 78f.
\77\ See Public Law 106-554, Appendix E, 114 Stat. 2763.
\78\ See 15 U.S.C. 78f(g).
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2. Current Requirements for Filing Form 1-N
Rule 6a-4 under the Exchange Act \79\ sets forth the notice
registration procedures for Security Futures Product Exchanges and
permits futures
[[Page 23933]]
exchanges to submit a notice registration on Form 1-N.\80\ Form 1-N
requires information regarding how the futures exchange operates, its
rules and procedures, corporate governance, its criteria for
membership, its subsidiaries and affiliates, and the security futures
products it intends to trade. Rule 6a-4 also requires entities that
have submitted an initial Form 1-N to file: (1) amendments to Form 1-N
in the event any information provided in the initial Form 1-N is
rendered inaccurate or incomplete; (2) periodic updates of certain
information provided in the initial Form 1-N; (3) certain information
that is provided to the Security Futures Product Exchange's members;
and (4) a monthly report summarizing the Security Futures Product
Exchange's trading of security futures products. The information
required to be filed with the Commission pursuant to Rule 6a-4 is
designed to enable the Commission to carry out its statutorily mandated
oversight functions and to ensure that Security Futures Product
Exchanges continue to be in compliance with the Exchange Act.
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\79\ See 17 CFR 240.6a-4.
\80\ See 17 CFR 249.10.
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3. Proposed Requirement To Electronically File Form 1-N
The Commission proposes to amend Rule 6a-4 under the Exchange Act,
as well as Form 1-N and the instructions to Form 1-N, to require the
electronic filing on EDGAR of all submissions required by the rule and
forms. As explained in section II above, the Commission believes that,
among other benefits, these proposed amendments should increase
efficiencies and decrease overall costs \81\ related to the filing of
these forms and the review of the filed forms by the Commission and its
staff. A description of the Commission's proposed amendments to Rule
6a-4, Form 1-N, and the instructions to Form 1-N to implement this
proposed electronic filing requirement is provided below.
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\81\ As discussed in more detail in the Economic Analysis, some
entities that currently do not use EDGAR may incur relatively small
initial costs to submit filings on EDGAR and there are some
potential costs associated with structuring certain information.
However, the Commission believes that savings from filing these
forms electronically rather than in paper will be greater than the
costs. See infra X.C.1.a.
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a. Proposed Amendments to Rule 6a-4
The Commission proposes to add a new paragraph (d) to Rule 6a-4 to
require the electronic filing of Form 1-N on EDGAR for exchange notice
registrations and amendments made under Rule 6a-4 in accordance with
the requirements of Regulation S-T.
The Commission also proposes changes to the text of Rule 6a-4 to
accommodate electronic filing, as well as to make minor corrections and
clarifications. Specifically, the Commission proposes to modify Rules
6a-4(a)(1) and 6a-4(c)(2) to resolve existing typographical errors and
Rule 6a-4(b)(1)(i) to refer to the appropriate section of Form 1-N,
rather than the ``Execution Page,'' to reflect the shift to electronic
filing. The Commission proposes to modify Rules 6a-4(b)(5)(i), (ii) and
(iii) to delete the phrase ``satisfy this filing requirement by''
because the language is superfluous. The Commission further proposes to
make conforming changes to Rules 6a-4(b)(5)(i)(A) and (B), and 6a-
4(b)(5)(ii) and (iii)(A) and (B) to make clear that certain
certifications by the exchange and listing of websites containing
information required by Rule 6a-4 would be required to be made on
electronic Form 1-N. The Commission further proposes to update the due
dates in Rules 6a-4(b)(3) and (4) for the next annual and triennial
filings from June 30, 2002, and June 30, 2004, to June 30, 2023, and
June 30, 2025, respectively. Finally, the Commission proposes to make
non-substantive changes to Rules 6a-4(a)(1)(i), 6a-4(a)(1)(i)(B) and
6a-4(a)(1)(ii)(B) to update cross-references in those rules to the
Commodities Exchange Act to reflect changes to the Commodities Exchange
Act resulting from the Dodd-Frank Act.
b. Proposed Amendments to Form 1-N and the Form 1-N Instructions
In addition to the proposed revisions to Rule 6a-4, the Commission
proposes to revise and reformat Form 1-N, and the instructions thereto,
to accommodate the electronic filing of initial notices, subsequent
amendments, supplemental material, and reports that are made on Form 1-
N. The proposed changes to Form 1-N to permit electronic filing to the
Commission would require minimal modifications to the form, as
described below. The Commission also proposes to revise the Form 1-N
instructions to facilitate the electronic filing of Form 1-N. As
explained in the introduction to this section,\82\ these revisions
would address when a form would be considered incomplete or deficient
when filed and use of a custom XML data language for the cover page.
The Commission believes that these proposed revisions to Form 1-N and
the Form 1-N instructions would facilitate the filing of the
information mandated by Form 1-N and Rule 6a-4.
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\82\ See supra introductory text to section II.
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The Commission proposes that electronic Form 1-N would solicit
information through prompts on the form that would better organize the
information collected. Proposed electronic Form 1-N also would require
an exchange to electronically attach exhibits (or provide website
URL(s) where applicable) via a new exhibit table that would be part of
electronic Form 1-N. The proposed exhibit table would contain columns
for the name of the exhibit, information required by the exhibit,
whether alternative means of satisfying the filing of an exhibit are
available for that particular exhibit (e.g., URL(s)), if permitted by
applicable Commission rule, and checkboxes to indicate whether such
alternative means are being used. Where Rule 6a-4 allows for
alternative means of filing the information required under certain
exhibits, the new exhibit table would permit an exchange to
electronically provide the certifications and details necessary for an
exchange to avail itself of these alternative means. The information
required to be filed with the exhibits is not changing. Currently, Rule
6a-4 provides that in lieu of filing certain exhibits as part of a
paper Form 1-N submission, an exchange may either: (i) identify where
such information is published and certify its accuracy as of its
publication date; (ii) certify that the information is available to the
Commission and the public upon request; or (iii) indicate the location
of the internet website where such information may be found and certify
that the information available at such location is accurate as of its
date.\83\ The proposal rule would not change the availability of these
alternative means, only the method of providing the necessary
certifications and details. As described above, instead of attaching
paper exhibits, the proposal would require those exhibits to be
submitted electronically. Similarly, instead of providing on paper the
certifications and details required for an exchange to avail itself of
these alternative means, the proposal would require those
certifications and details to be provided via the electronic Form 1-N.
In the event an exchange indicates on Form 1-N the location(s) of an
internet website where such information may be found, where applicable,
the Commission proposes to require the exchange to provide the URL(s)
of the location(s) on the internet website where such information may
be found, to certify that the information posted on such
[[Page 23934]]
website(s) is accurate as of its date and is free and accessible
(without any encumbrances or restrictions) to the general public, as an
alternative to filing certain exhibits required by electronic Form 1-N.
---------------------------------------------------------------------------
\83\ See 17 CFR 240.6a-2(b)(5).
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For electronic Form 1-N, the Commission proposes to add prompts
prior to Section I that would require the exchange to identify the
basis for submitting Form 1-N. Specifically, proposed electronic Form
1-N would require the exchange to check a box stating one of the
following: (i) whether the filing is an initial notice of registration;
(ii) whether the filing is an amendment to the notice of registration;
(iii) whether the exchange is providing its annual filing for the year;
(iv) whether the exchange is providing a triennial filing; (v) whether
the exchange is providing supplemental materials; or (vi) whether the
exchange is providing a report of security futures products traded
during the prior calendar month.
The Commission also proposes to amend the instructions to Form 1-N
to add a new section titled ``When to Use the Form,'' which would
explain when Form 1-N filings are required, and which of the six types
of Form 1-N filing is required (e.g., initial registration,
supplemental material). Currently, there is no place on Form 1-N for an
exchange to indicate the type of filing that it is submitting, other
than whether it is an application or an amendment. Accordingly, the
Commission believes that capturing information regarding the type of
Form 1-N filing would: (1) enhance the exchange's communication with
the Commission; (2) help the Commission more efficiently review Form 1-
N submissions; and (3) facilitate the searching and sorting through of
Form 1-N submissions by other potential users such as market
participants and investors.
The proposed electronic Form 1-N would also capture contact
information for the exchange and certain individuals. Consistent with
current Form 1-N, the proposed electronic Form 1-N would require the
exchange to identify contact information for the exchange, a contact
employee, and counsel for the exchange. Unlike current Form 1-N,
proposed electronic Form 1-N would additionally require an email
address for the contact employee and an email address for the
exchange's counsel. The Commission believes that the requirement to
provide an email address for the exchange contact employee and the
exchange's counsel will expedite any subsequent communications between
Commission staff and the relevant exchange.
In addition, to facilitate the electronic filing of the
supplemental materials and monthly reports required under Rule 6a-4(c),
the Commission proposes to add new Sections III and IV, respectively,
to Form 1-N. Sections III and IV would require such materials and
reports to be attached to Form 1-N via the new exhibit table in the
same manner as exhibits to Form 1-N, and Section III would provide the
exchange with the ability to enter URL(s) to the website location of
the supplemental materials in lieu of its filing the supplemental
materials via Form 1-N. Sections III and IV would not add new
requirements beyond those currently included in Rule 6a-4(c).
Currently, Rule 6a-4(c)(1) requires exchanges to file certain
information with the Commission or in the alternative to indicate where
such information can be found on an internet website controlled by the
exchange. The proposed rule would require the filing of this
information through Section III of electronic Form 1-N or, in the
alternative, to provide through Section III of electronic Form 1-N the
URL(s) of the location(s) on the internet website where such
information can be found. Section III would also clarify that such
website must be free and accessible (without any encumbrances or
restrictions) by the general public. Likewise, Section IV would not
change the substance of what must be reported; it would merely require
the reporting of information required under Rule 6a-4(c) to be made on
electronic Form 1-N instead of in paper format.
Furthermore, the Commission proposes that electronic Form 1-N would
continue to require an exchange to consent to service of any civil
action brought by, or notice of any proceeding before, the Commission
in connection with its activities. The current language under which the
Security Futures Product Exchange consents to service via registered or
certified mail at the main or mailing address provided on Form 1-N
would continue to be included in the electronically filed form.\84\
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\84\ The Commission also proposes to delete the provision
allowing for service of any civil action pursuant to confirmed
telegram.
---------------------------------------------------------------------------
In addition, the proposed electronic Form 1-N would require the
individual who is submitting the form to check a box on behalf of the
Security Futures Product Exchange to represent that the information and
statements contained in the Form 1-N, including exhibits, schedules, or
other documents, are current, true, and complete. The requirement to
sign and notarize the form would be eliminated because it is
unnecessary, not compatible with, and not required for electronic for
electronic filing through EDGAR.
Finally, the proposed electronic Form 1-N would require filers to
submit the execution page in a custom XML data language specific to
Form 1-N. As with the other Covered SRO Forms, filers would be able to
input their execution page disclosures into a fillable web form that
EDGAR would subsequently convert to custom XML. The Commission believes
structuring the execution page in custom XML would improve the ability
to sort, filter, and otherwise organize Form 1-N filings without
creating significant additional burden on Form 1-N filers. The
remainder of Form 1-N would not be structured, however, because the
very limited number of Form 1-N filers and filings could mitigate much
of the benefit derived from machine-readability of the disclosures
contained therein.\85\
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\85\ See infra Section IX.C.3.
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4. Request for Comment
9. The Commission requests comment on all aspects of the proposed
revisions to Form 1-N to facilitate electronic filing on EDGAR. Are
there any aspects of transitioning the form to electronic filing that
the Commission has not addressed above? Please explain.
10. Would allowing for the attachment of exhibits electronically on
Form 1-N or to provide through Section III of electronic Form 1-N the
internet website where such information can be found offer the most
efficient means of complying with the requirements of Form 1-N and Rule
6a-4?
11. Do commenters agree with the Commission's belief that the
proposed amendments would increase efficiencies and decrease costs
compared to current requirements?
12. What, if any, costs would be associated with preparing Form 1-N
filings for electronic filing through EDGAR? Are those costs more, less
or the same as those currently expended under the current Form 1-N
filing process?
13. Do commenters agree with the Commission's belief that
structuring the execution page in custom XML would improve the ability
to sort, filter, and otherwise organize Form 1-N filings without
creating significant additional burden on Form 1-N filers?
14. Should the Commission require structuring other portions of
Form 1-N (or the entirety of Form 1-N) rather than
[[Page 23935]]
only structuring the execution page? Please explain why or why not. If
so, which structured data language or languages should be used for
structuring the other portions of Form 1-N?
C. Proposed Form 15A
1. Relevant Statutory Framework
Section 15A of the Exchange Act sets forth the statutory standards
for registration as a national securities association or as an
affiliated securities association.\86\ Section 15A(b) states that the
Commission shall not approve registration as a national securities
association unless the Commission determines that the applicant meets
specified statutory criteria.\87\ Under Exchange Act Rule 15Aa-1, an
applicant for registration as a national securities association must
file a registration statement with the Commission on Form X-15AA-1.\88\
The information required to be provided on Form X-15AA-1 includes,
among other things, lists of officers, governors, and committee
members, as well as membership lists.\89\ The Commission reviews the
completed Form X-15AA-1 to evaluate whether the applicant meets the
standards set forth in section 15A(b) for registration as a national
securities association.
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\86\ See 15 U.S.C. 78o-3.
\87\ See 15 U.S.C. 78o-3(b).
\88\ See Exchange Act Rule 15Aa-1 (17 CFR 240.15Aa-1) and Form
X-15AA-1 (17 CFR 249.801). Currently, FINRA is the only national
securities association registered with the Commission. The National
Futures Association (``NFA''), as specified in Section 15A(k) of the
Exchange Act, is also registered as a national securities
association, but only for the limited purpose of regulating the
activities of NFA members that are registered as brokers or dealers
in security futures products under section 15(b)(11) of the Exchange
Act.
\89\ See 17 CFR 249.801.
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Furthermore, under Exchange Act Rule 15Aj-1(a), every association
applying for registration or registered as a national securities
association must file with the Commission an amendment to its
registration statement or any amendment or supplement thereto promptly
after discovering any inaccuracy therein. Similarly, under Exchange Act
Rule 15Aj-1(b), every association applying for registration or
registered as a national securities association, promptly after any
change which renders no longer accurate any information contained or
incorporated in its registration statement or in any amendment or
supplement thereto, must file with the Commission a current supplement
to its registration statement setting forth such change.\90\
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\90\ See Exchange Act Rule 15Aj-1(a) and (b), 17 CFR 240.15Aj-
1(a) and (b). These filings are submitted on Form X-15AJ-1, 17 CFR
249.802. See 17 CFR 240.15Aj-1(d) (requiring that such filings be
made on Form X-15Aj-1).
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Finally, under Exchange Act Rule 15Aj-1(c), every association
applying for registration or registered as a national securities
association must file annual amendments to its registration statement
with the Commission.\91\
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\91\ See Exchange Act Rule 15Aj-1(c), 17 CFR 240.15Aj-1(c).
These filings are submitted on Form X-15AJ-2, 17 CFR 249.803. See 17
CFR 240.15Aj-1(d) (requiring that such filings be made on Form X-
15Aj-2). Rule 15Aj-1(c)(1)(ii) also requires the filing of complete
sets of the constitution, by-laws, rules, and related documents of
the association, once every three years.
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2. Current Requirements for Filing Forms X-15AA-1, X-15AJ-1, and X-
15AJ-2
An applicant for registration as a national securities association
is required to file a registration statement and exhibits with the
Commission on Form X-15AA-1 in triplicate.\92\ Every association
applying for registration or registered as a national securities
association is required to file with the Commission an amendment or
supplement to its registration statement on Form X-15AJ-1 and an annual
consolidated supplement to its registration statement on Form X-15AJ-2.
These filings also must be made in triplicate, at least one copy of
which must be signed and attested in the same manner as required in the
case of the original registration statement.\93\ Every association
applying for registration or registered as a national securities
association is required to file Form X-15AJ-2 with the Commission
promptly after March 1 of each year.\94\
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\92\ See 17 CFR 240.15Aa-1.
\93\ See 17 CFR 240.15Aj-1.
\94\ See 17 CFR 240.15Aj-1(c).
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Currently, the information collected by these forms is
substantially similar: Form X-15AA-1, the registration statement for
registration as a national securities association, requests 29 items of
information and includes 3 exhibits; \95\ Form X-15AJ-1, for filing any
amendments or supplements to the registration statement, requests no
information beyond that requested by Form X-15AA-1; \96\ and Form X-
15AJ-2, for filing the annual consolidated supplement to the
registration statement, only requires one additional item of
information, the inclusion of the date of the filing, which currently
is not required by Form X-15AA-1.\97\
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\95\ See 17 CFR 249.801.
\96\ See 17 CFR 249.802. Form X-15AJ-1 and Form X-15AA-1 both
require that if the association is registered, or applying for
registration, as an affiliated securities association, the
respondent list the registered national securities association to
which the applicant or reporting association is affiliated. In
addition, Form X-15AA-1 asks the applicant to state its reasons for
believing that such affiliation will be granted. Form X-15AA-1 also
requires the applicant to estimate the annual dollar volume of
transactions effected by members of the applicant association.
\97\ See 17 CFR 249.803. Form 15A would require the inclusion of
the date of the filing. Capturing the date (in a structured manner)
would assist the Commission in determining compliance with the rule
requirement that annual supplements be filed promptly after Mar. 1
of each year (17 CFR 240.15Aj-1(c)).
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3. Proposed Requirements To Electronically File on Form 15A Information
Currently Filed on Forms X-15AA-1, X-15AJ-1, and X-15AJ-2
a. Proposed Amendments to Rules 15Aa-1 and 15Aj-1
As discussed in detail below, the Commission proposes to amend Rule
15Aa-1 and redesignate it as Rule 15aa-1,\98\ redesignate Rule 15Aj-1
\99\ as Rule 15aa-2, redesignate Form X-15AA-1 as Form 15A, amend the
instructions to proposed Form 15A, and repeal Forms X-15AJ-1 and X-
15AJ-2 in connection with the Commission's proposal to require
applicants and national securities associations to electronically file
on a duly executed Form 15A the information currently filed on Forms X-
15AA-1, X-15AJ-1, and X-15AJ-2. As stated above in the introduction to
this section II, the Commission believes that, among other benefits,
its proposal to revise the forms relating to registration as a national
securities association should increase efficiencies and decrease costs
incurred by applicants for registration as a national securities
association and by national securities associations.\100\ In addition,
the proposal should facilitate Commission review of the information to
be provided on proposed Form 15A.
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\98\ See 17 CFR 240.15Aa-1.
\99\ See 17 CFR 240.15Aj-1.
\100\ See supra section II.
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To facilitate electronic filing of proposed Form 15A, the
Commission is proposing to amend Rule 15Aa-1 to require electronic
filing. The proposed amendments to Rule 15Aa-1 would require that
filing submitted pursuant to Rule 15Aa-1 be filed electronically on
EDGAR in accordance with the requirements of Regulation S-T (17 CFR
part 232). The proposed amendments to Rule 15Aa-1 would align the
electronic filings requirements with changes being proposed under Rule
6a-1 (regarding Form 1 submissions) as well as the proposed amendments
to Rule 17ab2-1, which would set forth the proposed electronic filing
requirements for Form CA-1 submissions.\101\ As stated above,
[[Page 23936]]
the Commission further proposes to redesignate Rule 15Aj-1 \102\ as
Rule 15aa-2.
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\101\ See also proposed amendments to Rule 6a-4.
\102\ See 17 CFR 240.15Aj-1. The proposed amendments to Rule
15Aj-1 would include updated references to relevant forms as well as
updates to take into account electronic filing.
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b. Proposed Form 15A
The Commission proposes to redesignate Form X-15AA-1 as Form 15A
and to incorporate in proposed Form 15A information related to
amendments and supplements to the registration statement currently
filed on Form X-15AJ-1 and information related to the annual
consolidated supplement to the registration statement currently filed
on Form X-15AJ-2. The Commission proposes that new Form 15A would
solicit information through prompts on the form that would better
organize the information that is currently collected through Forms X-
15AA-1, X-15AJ-1, and X-15AJ-2, which would make it easier for
respondents to comply with the filing requirements. Furthermore,
exhibits would be required to be electronically uploaded to EDGAR. The
Commission believes that, among other benefits as detailed in the
Economic Analysis,\103\ the proposal should increase efficiencies and
decrease costs by consolidating substantially similar information
currently filed on three paper forms into one electronic form. Because
the information currently filed on the three forms would be captured
entirely on proposed Form 15A, the Commission also proposes to repeal
Forms X-15AJ-1 and X-15AJ-2.\104\
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\103\ See infra Section X.C.1 (discussing benefits such as
reducing the risk that non-electronic submissions are delayed or
increasing the ability to run comparisons across reporting periods).
\104\ The Commission proposed in 2004 to simplify and streamline
the disclosure process for national securities associations by,
among other things, redesignating Form X-15AA-1 and combining it
with Forms X-15AJ-1 and X-15AJ-2. See Exchange Act Release No. 50699
(Nov. 18, 2004), See 69 FR 71126, 71155 (Dec. 8, 2004) (File No. S7-
39-04). The Commission did not adopt any final rule based on that
proposal.
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Proposed Form 15A would contain eleven sections. Preceding Section
I of proposed Form 15A, the proposed form would contain prompts that
would require the association to note the basis for submitting the
form. The prompts would indicate whether the submission is an initial
application filed pursuant to Rule 15aa-1 or an amendment or
supplement--which currently would be filed on Form X-15AJ-1 or X-15AJ-
2, respectively--pursuant to proposed Rule 15aa-2. Section I would be
titled ``Organization,'' and it would solicit the following information
about the association: (i) its name; (ii) its statutory address,
principal executive office address, and the addresses of its branch or
district offices (or if there are no such branch or district offices,
the association would check the ``Not Applicable'' box); (iii) the
contact information of each person authorized to receive service of
process and notices on behalf of the association from the Commission;
(iv) the contact information for the association's counsel; (v) the
association's form of organization (e.g., corporation, sole
proprietorship), date of organization, and name of state and reference
to any statute thereof under which the association is organized; and
(vi) information about its directors, officers, and certain other
persons, and information about the members of its standing committees,
or, in lieu of providing such information on proposed Form 15A, the
association could provide a certification that the information can be
obtained in a publication.\105\ The information solicited in Section I
would be the same as that solicited in Items 1 through 6 on current
Form X-15AA-1.
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\105\ See proposed 17 CFR 240.15aa-2(c)(1)(ii)(A).
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Section I also would require the association to attach Exhibits A
through D. Exhibit A would require the association to attach copies of
its corporate governance documents (e.g., constitution, by-laws), or in
lieu of filing such documents, the association could provide a
certification that the information may be obtained in a publication
\106\ or that the information is kept up to date and available to the
Commission and the public upon request.\107\ Exhibit A of proposed Form
15A would solicit the same information as Exhibit A of current Form X-
15AA-1 but would reflect additional ways that the association could
satisfy its filing obligation. Exhibit B would require the association
to attach a balance sheet of the association as of a date within 30
days of the filing of an initial application, or promptly after the
close of each fiscal year if the filing is a supplement, together with
an income and expense statement for the year preceding such date or, if
the association was organized during such year, for the period from the
date of such organization to the date of such balance sheet. Exhibit B
of proposed Form 15A would solicit the same information as Exhibit B of
current Form X-15AA-1. Exhibit C would require the association to
provide a list, as of the latest practical date, of all of its members,
and in lieu of supplementing the disclosed information regarding the
names of members and their principal places of business when there is a
change to that information--as is required under current Rule 15Aj-
1(b)--the association would be able to certify that changes in that
information are reported in a record which is published at least once a
month and promptly filed with the Commission, reflecting an additional
way that the association could satisfy its filing obligation.\108\
Exhibit C of proposed Form 15A would solicit the same information as
Exhibit C of current Form X-15AA-1, and would add the requirement that
the association set forth the date of election to membership for each
member elected to membership after December 31, 1994, which is
currently required on Exhibit C of Form X-15Aj-2. Exhibit D of proposed
Form 15A would solicit the same information as Exhibit D of current
Form X-15AA-1, requiring the association to electronically file any
notices, reports, circulars, loose-leaf insertions, riders, new
additions, lists or other records of changes when, as, and if such
records are made available to members of the association, as required
by proposed Rule 15aa-2(d)(2).
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\106\ See id.
\107\ See proposed 17 CFR 240.15aa-2(c)(1)(ii)(B).
\108\ See proposed 17 CFR 240.15aa-2(b)(3).
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Sections II through IX of proposed Form 15A would solicit
information about specific association rules and other information that
is currently solicited on Form X-15AA-1. Section II would be titled
``Membership'' and require the association to cite the specific rule(s)
of the association addressing membership requirements, such as any rule
restricting membership. Section II would pose the same questions about
the association's membership rules as Items 7 through 10 of current
Form X-15AA-1. Section III would be titled ``Representation of
Membership'' and require the association to cite the specific rule(s)
of the association that assures fair representation of its members,
which information is currently solicited in Item 11 of Form X-15AA-1.
Section IV would be titled ``Dues and Expenses'' and require the
association to cite the specific rule(s) of the association that
provides for the equitable allocation of dues among its members to
defray reasonable expenses of administration, which information is
currently solicited in Item 12 of Form X-15AA-1.
Section V would be titled ``Business Conduct and Protection of
Members.'' This section would require the association to cite specific
rule(s) of the association addressing the protection of members and
member conduct with regard to principles of fair trade and
[[Page 23937]]
dealing, such as the association rule(s) designed to prevent fraudulent
and manipulative acts and practices and the rule(s) designed to provide
safeguards against unreasonable profits or unreasonable rates of
commissions or other charges. Section V also would solicit information
about association rule(s) addressing the disclosure of financial
information or other business conduct requirements, such as the types
of financial statements the association requires from its members,
rules with respect to member insolvency, and rules requiring the
keeping and preserving of books and records. Section V would pose the
same questions about business conduct and the protection of members as
Items 13 through 23 of current Form X-15AA-1.
Section VI would be titled ``Disciplining of Members'' and would
require the association to cite the specific rule(s) of the association
that addresses member discipline. Section VI would pose the same
questions about member discipline as Items 24 and 25 of current Form X-
15AA-1. Section VII would be titled ``Affiliated Associations'' and
would require the association to cite the specific rule(s) of the
association that provide for the admission of registered affiliated
securities associations. Section VII would pose the same question as
Item 26 of current Form X-15AA-1. Section VIII would be titled
``Miscellaneous'' and require the association to cite the specific
rule(s) of the association that (i) regulate the dealings of a member
with any nonmember broker or dealer and (ii) provide a method for
enforcing compliance on the part of its members with the rules of the
association. Section VIII of proposed Form 15A would pose the same
questions as Items 27 and 28 of current Form X-15AA-1. Section IX would
be titled ``Additional Information for Registration as an Affiliated
Securities Association'' and would apply only to applications submitted
for registration as an affiliated securities association. Section IX
would require the applicant to provide the registered national
securities association with which it seeks to be affiliated, its
reasons for believing that such affiliation will be granted, and the
estimated dollar volume of transactions effected by members of the
applicant. Section IX of proposed Form 15A would pose the same
questions as Items 29 and 30 of current Form X-15AA-1.
Section X would require the association to provide the contact
information for its contact employee, and Section XI would provide the
signature block and attestation. Consistent with the proposed
amendments to Form 1, Form 1-N, and Form CA-1, the entity filing the
proposed Form 15A would consent to service of process to the
individuals listed in Section I, item 3, which service of process could
be via registered or certified mail. Section XI would also require the
filer to represent that the information and statements contained in the
form, including exhibits, schedules, or other documents, are current,
true, and complete.
In addition, the Commission proposes to amend the instructions for
proposed Form 15A to include general directions for preparing and
filing the form, describe the seven types of submissions that may be
made under proposed Rules 15aa-1 and 15aa-2, and set forth the items,
exhibits, and schedules required to be filed for each type of
submission.
Finally, proposed Form 15A would require the execution page to be
filed in a custom XML data language specific to Form 15A. As with the
other Covered SRO Forms, filers would be able to input their execution
page disclosures into a fillable web form that EDGAR would subsequently
convert to custom XML. The Commission believes structuring the
execution page in custom XML would improve the ability to sort, filter,
and otherwise organize Form 15A filings, enhancing the ability of the
Commission to compare filings from year to year without creating
significant additional burden on filers. The remainder of Form 15A
would not be structured, however, because the very limited number of
Form 15A filers and filings could mitigate the benefit derived from
machine-readability of the disclosures contained therein.\109\
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\109\ See infra Section IX.C.4.
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4. Request for Comment
15. The Commission requests comment on all aspects of the proposed
revisions to Form 15A to facilitate electronic filing in EDGAR. Are
there any aspects of transitioning the form to electronic filing that
the Commission has not addressed above? Please explain.
16. Do commenters agree with the Commission's belief that the
proposed amendments would increase efficiencies and decrease costs
compared to current requirements?
17. Do commenters agree that the additional ways that the
association could satisfy its filing obligations under the rule would
be beneficial? Are there additional methods of satisfying the filing
obligation that the Commission should adopt?
18. Do commenters agree with the Commission's belief that
structuring the execution page in custom XML would improve the ability
to sort, filter, and otherwise organize Form 15A filings without
creating significant additional burden on filers?
19. Should the Commission require structuring other portions of
Form 15A (or the entirety of Form 15A) rather than only structuring the
execution page? Please explain why or why not. If so, which structured
data language or languages should be used for structuring the other
portions of Form 15A?
D. Form CA-1
1. Relevant Statutory Framework
Section 17A of the Exchange Act governs the establishment of a
national system for the prompt and accurate clearance and settlement of
securities transactions.\110\ Section 17A(b)(2) of the Exchange Act
\111\ states that a clearing agency may be registered under the terms
and conditions provided thereunder and in accordance with the
provisions of section 19(a) of the Exchange Act \112\ by filing with
the Commission an application for registration in such forms as the
Commission, by rule, may prescribe containing the rules of the clearing
agency and such other information and documents as the Commission, by
rule, may prescribe as necessary or appropriate in the public interest
or for the prompt and accurate clearance and settlement of securities
transactions. The Commission adopted Rule 17ab2-1 \113\ and Form CA-
1,\114\ pursuant to section 17A(b)(2) of the Exchange Act, in order to
set forth the requirements for registration as a clearing agency or for
an exemption from registration as a clearing agency under section 17A.
---------------------------------------------------------------------------
\110\ See 15 U.S.C. 78q-1.
\111\ See 15 U.S.C. 78q-1(b)(2).
\112\ See 15 U.S.C. 78s(a).
\113\ See 17 CFR 240.17ab2-1.
\114\ See 17 CFR 249b.200.
---------------------------------------------------------------------------
2. Current Requirements for Filing Form CA-1
Rule 17ab2-1(a) states that an application for registration or for
exemption from registration as a clearing agency or an amendment to any
such application shall be filed with the Commission on Form CA-1, in
accordance with the instructions thereto.\115\ Form CA-1 contains
general instructions for preparing and filing Form CA-1 and
instructions relating to the filing of amendments to a Form CA-1. It
also includes an execution page and 19 exhibits. The Form CA-1
execution page requests general information from the applicant, as well
as information
[[Page 23938]]
regarding whether the clearing agency is exposed to loss if a
participant fails to perform its obligations to the clearing agency.
The exhibits to Form CA-1 also require an applicant clearing agency to
provide information regarding business organization, financial
position, operational capacity, access to its services, and, for those
seeking an exemption from registration, a statement demonstrating why
granting an exemption from registration would be consistent with the
public interest, the protection of investors, and the purposes of
section 17A, including the prompt and accurate clearance and settlement
of securities transactions and the safeguarding of securities and
funds. The instructions to Form CA-1 require that an applicant clearing
agency file four completed copies of Form CA-1 with the
Commission.\116\
---------------------------------------------------------------------------
\115\ See 17 CFR 240.17ab2-1(a).
\116\ See 17 CFR 249b.200.
---------------------------------------------------------------------------
Rule 17ab2-1(e) requires that if responses to items 1-3 of Form CA-
1 become inaccurate, misleading or incomplete, the registrant shall
promptly file an amendment on Form CA-1 to correct the inaccurate,
misleading or incomplete information.\117\ The execution page of Form
CA-1 further states that, by submitting Form CA-1 along with any
schedules, exhibits, and attachments thereto, the registrant and the
person executing for the registrant represents that all information
contained in Form CA-1 is true, current, and complete, and that
submission of any amendment after registration has become effective
represents that items 1-3 and any schedules, exhibits, and attachments
related to items 1-3 remain true, current, and complete as previously
submitted.\118\ Further, in accordance with the instructions to Form
CA-1, if an item is amended, the registrant must repeat all unamended
items as they last appeared on the page on which the amended item
appears and must file four copies of the new page, each with updated
and properly completed cover and execution pages.\119\
---------------------------------------------------------------------------
\117\ See 17 CFR 240.17ab2-1(e).
\118\ See 17 CFR 249b.200.
\119\ See id.
---------------------------------------------------------------------------
3. Proposed Requirement To Electronically File Form CA-1
The Commission is proposing to revise certain aspects of Rule
17ab2-1, Form CA-1, and the instructions to Form CA-1 to require
electronic filing of applications on Form CA-1 and subsequent
amendments thereto by applicants, registered clearing agencies, and
exempt clearing agencies. The proposed revisions therefore would
require: (i) an applicant to file electronically its initial
application on Form CA-1 for registration or for an exemption from
registration and any subsequent amendments thereto; (ii) a registered
clearing agency to file electronically any amendments to its Form CA-1
after being granted registration as a clearing agency; and (iii) an
exempt clearing agency to file electronically any amendments to its
Form CA-1 after being granted an exemption from registration as a
clearing agency. As explained above in the introduction to Section II,
the Commission believes that the proposed rule and form revisions
should increase efficiencies and decrease costs related to the filing
of Form CA-1 and amendments thereto by both registered and exempt
clearing agencies, and the Commission's review of filed Forms CA-1 and
amendments thereto.\120\ In addition, while exempt clearing agencies
are not subject to the SRO rule filing process under section 19(b) of
the Exchange Act,\121\ certain exempt clearing agencies are currently
subject to electronic filing requirements under Regulation SCI,\122\
and so the electronic filing of Form CA-1 and amendments thereto would
not conflict with existing requirements for these entities under
Regulation SCI, and therefore would simplify the process into only
electronic filing procedures, rather than a mix of electronic and paper
filing procedures.
---------------------------------------------------------------------------
\120\ See supra section I.B.
\121\ See 15 U.S.C. 78s(a) and (b).
\122\ See 17 CFR 242.1006; see also Exchange Act Release No.
73639 (Nov. 19, 2014), 79 FR 72251, 72258 (Dec. 5, 2014) (listing
categories of SCI entities under Regulation SCI).
---------------------------------------------------------------------------
4. Proposed Amendments to Rule 17ab2-1
To facilitate electronic filing of Form CA-1, the Commission is
proposing to revise Rule 17ab2-1 to require electronic filing.
Specifically, the Commission is proposing to revise paragraphs (a),
(d), (e), and (f) to reference the method of filing as being
electronic, and is adding paragraph (g) to provide specific
instructions on the method of filing electronically, including a
requirement for an electronic signature (defined as an electronic entry
in the form of a magnetic impulse or other form of computer data
compilation of any letter or series of letters or characters comprising
a name, executed, adopted or authorized as a signature). Additionally,
new paragraph (g) would specify a cutoff time of 5:30 p.m. eastern
standard time or eastern daylight saving time for purposes of deeming
which business day (defined to exclude certain days of the week,
holidays, and closures) that a filing occurred. It would also specify
that a filing would be deemed timely filed if it is required to be
filed on a day that is not a business day and is filed on the next
available business day. As stated above in the introduction to Section
II, the Commission believes that, among other benefits, its proposal to
revise the forms relating to registration as a clearing agency should
increase efficiencies and decrease costs incurred by applicants for
registration as a clearing agency.
5. Proposed Amendments to Form CA-1 and the Form CA-1 Instructions
The Commission proposes that electronic Form CA-1 would solicit
information through prompts on the form that would better structure the
information collected. In addition, the Commission proposes that
electronic Form CA-1 would require exhibits to be attached through a
new exhibit table that would be part of electronic Form CA-1. The
Commission further proposes that all information posted on a website
pursuant to electronic Form CA-1 must be free and accessible (without
any encumbrances or restrictions) by the general public. The Commission
proposes to add prompts prior to Section I of the form that would
require the registrant to note the basis for submitting Form CA-1.
Specifically, proposed electronic Form CA-1 would require the
registrant to check a box stating one of the following: (i) whether the
filing is an application pursuant to Rule 17ab2-1(a) and if it is,
whether the registrant is applying for registration as a clearing
agency \123\ or requesting an exemption from registration as a clearing
agency; (ii) whether the filing is an amendment to an initial Form CA-1
application pursuant to Rule 17ab2-1(d) prior to the Commission's grant
of registration or an exemption from registration, or an update to an
initial Form CA-1 application correcting information that is
inaccurate, misleading, or incomplete, pursuant to Rule 17ab2-1(e);
(iii) whether the filing is to provide the registrant's consent to an
extension of the time period within which the Commission must take
action on an initial Form CA-1 application and the date the extension
expires; \124\ (iv) whether the filing is to withdraw an
[[Page 23939]]
initial Form CA-1 application prior to the Commission taking action on
the application; (v) whether the filing is an amendment to Form CA-1
pursuant to Rule 17ab2-1(e) following Commission action to grant
registration or an exemption; or (vi) whether the filing is required by
a Commission order approving an application for exemption from
registration as a clearing agency pursuant to section 17A(b)(1) of the
Exchange Act. The Commission believes that requiring a registrant to
indicate the type of filing would help facilitate the electronic filing
of, and the Commission's review of, Form CA-1 submissions, including
information required of an exempt clearing agency by an exemptive
order.
---------------------------------------------------------------------------
\123\ If the registrant is applying for registration as a
clearing agency, the proposed changes to Form CA-1 would require the
registrant to indicate whether it requests the Commission to
consider granting exemption from specified clearing agency
requirements during a temporary registration period, in accordance
with paragraph (c)(1) of Rule 17ab2-1 under the Exchange Act.
\124\ See 15 U.S.C. 78s(a)(1)(B).
---------------------------------------------------------------------------
The Commission also proposes to modify Form CA-1 to add a
requirement for information about a contact employee. The proposed Form
CA-1 would require the name, title, email address and telephone number
of an employee prepared to respond to questions about the Form CA-1
submission. The Commission believes that including information about a
contact employee would facilitate communication between the registrant
and the Commission. Similarly, the Commission proposes to require the
email address of the person in charge of the registrant's clearing
agency activities. The Commission believes that obtaining that
individual's email address would also facilitate communication between
the registrant and the Commission.
In addition, the proposed Form CA-1 would require a registrant to
electronically attach exhibits by using an exhibit table for all of the
exhibits required by the current form, broken down into sections.\125\
There are also sections in the proposed form that may be applicable to
only certain filings, with Section VIII covering requests for an
exemption from registration under exhibit S, and Section IX covering
submission of any conditions, reports, notices or other submissions to
the Commission required as directed in any Order approving an
application for exemption from registration as a clearing agency, under
exhibit T. Furthermore, the proposed Form CA-1 would preserve the
current ability for a registrant to indicate that it is requesting
confidential treatment with respect to certain of the disclosed
information, and make a request for confidential treatment, under
Section X. In addition, as discussed further below in Section VII, the
Commission is proposing new paragraph (j) to Rule 24b-2 to require that
a filer not omit the confidential portion from the material filed in
electronic format on Form CA-1, but rather request confidential
treatment of information provided in electronic format by completing
Section X of Form CA-1.
---------------------------------------------------------------------------
\125\ Sections III through VII of proposed Form CA-1 would
consist of exhibits relating to General Information, Business
Organization, Financial Information, Operational Capacity, and
Access to Services, respectively.
---------------------------------------------------------------------------
The Commission also is proposing to omit item 7(b) from the current
Form CA-1. Item 7(b) solicits the following information: as of
September 30, 1975, the dollar amount of the potential exposure of
registrant, if any, as a result of differences (without offsetting long
differences against short differences and without offsetting any
suspense account items) in its clearing agency activities not resolved
after 20 business days. On December 1, 1975, it became unlawful for any
clearing agency--not subject to temporary exemptive relief under Rule
17ab2-1(b) that has since expired--to perform the functions of a
clearing agency unless registered or exempt.\126\ Before December 1,
1975, however, applicant clearing agencies may have performed the
functions of a clearing agency prior to registering with the Commission
or obtaining an exemption from registration. Therefore, to facilitate
review by the Commission of applications on Form CA-1 by such clearing
agencies, item 7(b) of Form CA-1 requires disclosure, as of September
30, 1975, of the dollar amount of the potential exposure of the
clearing agency from differences in its clearing agency activities not
resolved after 20 business days. Information provided pursuant to this
provision is no longer useful to the Commission because information on
potential exposures to the clearing agency as of September 30, 1975, is
stale data. Accordingly, the Commission believes that it is no longer
necessary to include item 7(b) on Form CA-1.
---------------------------------------------------------------------------
\126\ Rule 17ab2-1(b) provides any clearing agency that filed an
application with the Commission on or before Nov. 24, 1975, with a
temporary exemption from the registration provisions of section
17A(b) of the Exchange Act and the rules and regulations thereunder
until the Commission either grants registration, denies
registration, or grants an exemption from registration. See 17 CFR
240.17ab2-1(b).
---------------------------------------------------------------------------
The Commission also is proposing to revise the instructions to Form
CA-1 to facilitate the electronic filing of Form CA-1. The proposed
form instructions would not contain the language in paragraph 2 under
Part I of the current form stating that clearing agencies are required
to file four completed copies of Form CA-1 with the Commission, or the
language in paragraph 4 under Part I of the current form providing
instructions relating to the requirements for copies of Form CA-1.
Further, the proposed instructions would not contain the language of
paragraph 3 under Part I of the current form, which states that ``[t]he
date on which a Form CA-1 is received by the Commission shall be the
date of filing thereof if all the requirements with respect to filing
have been complied with.'' This language would be inconsistent with the
proposed date-of-filing provision to be added to Rule 17ab2-1, which
would provide for a 5:30 p.m. eastern standard time or eastern daylight
saving time, whichever is currently in effect, on a business day,
cutoff for a filing to be deemed filed on the day on which it is
submitted.
In addition, existing paragraph 13 under Part III of the current
form states that, if an item is amended, the registrant must repeat all
unamended items as they last appeared on the page on which the amended
item appears and must file four copies of the new page, each with
updated and properly completed cover and execution pages. The
requirement to repeat unamended items on certain pages relates solely
to the filing of amended paper copies and, therefore, the Commission
believes it would not be relevant to the proposed electronic filing
process. The Commission believes that requiring a registered or exempt
clearing agency to electronically file a full exhibit would help
facilitate the performance of the Commission's regulatory functions
because the Commission would be able to review an amended exhibit to
Form CA-1 in its entirety and more easily compare the revised exhibit
against the prior version, particularly if numerous, non-consecutive
pages are being amended. The proposed Inline XBRL requirement for
certain Form CA-1 exhibits would further facilitate this comparison
process, because Inline XBRL would allow reviewers to create automated
redline comparisons of an exhibit (or specific portion thereof) to a
prior version of the same exhibit (or specific portion thereof).
Accordingly, the Commission proposes to delete the reference to
pagination that is currently in Item III, paragraph 13.
In addition, Form CA-1 and the instructions to Form CA-1 would
continue to require a registered or exempt clearing agency to consent
to the service of notice of a proceeding under sections 17A or 19 of
the Exchange Act involving the registrant. The current language under
which the registrant consents to service via registered or certified
mail at the address provided on Form CA-1 would continue to be
[[Page 23940]]
included in the electronically filed form.\127\
---------------------------------------------------------------------------
\127\ The provision allowing for service of any civil action
pursuant to confirmed telegram would be deleted.
---------------------------------------------------------------------------
Finally, Form CA-1 would require a registered or exempt clearing
agency to structure Schedule A (descriptive responses complementing the
clearing agency's execution page disclosures) and Exhibits C
(description of organizational structure), F (description of material
pending legal proceedings), H (financial statements), J (description of
services and functions), K (description of security measures and
procedures), L (description of safeguarding measures and procedures), M
(description of backup systems), O (description of, and reasons for,
criteria governing access to services), R (prohibitions and limitations
on access to services), and S (explanation of requested exemption) in
Inline XBRL. The execution page and Exhibits A (persons controlling
management or policies, but not the copies of written agreements with
such persons), B (officers, managers, and individuals occupying similar
positions), D (persons controlled by or under common control with the
clearing agency, and description of control relationship), E (dues,
fees, and other charges for clearing activities, but not the copies of
the constitution, articles of incorporation or association, by-laws,
rules procedures, and instruments corresponding thereto), I (office
addresses and activities performed in each office), N (participants or
applicants for participation), and Q (schedule of fees for services
rendered by participants) would also be structured, albeit in a custom
XML data language specific to Form CA-1 rather than in Inline XBRL.
The copies of existing documents filed with Exhibits A (copies of
written agreements with control persons), E (copies of the
constitution, articles of incorporation or association, by-laws, rules,
procedures, and instruments corresponding thereto), G (copies of
contracts with exchanges, national securities associations, and
securities markets), P (copies of contracts governing subscription
terms), and T (submissions to the Commission required as directed in
any approval order) would be filed as unstructured PDF documents.
Proposed Structured Data Requirements for Form CA-1
------------------------------------------------------------------------
------------------------------------------------------------------------
Inline XBRL............................... Schedule A, Exhibits C, F,
H, J, K, L, M, O, R, S.
Custom XML................................ Execution page, Exhibits A
(in part), B, D, E (in
part), I, N, Q.
Unstructured PDF.......................... Exhibits A (in part), E (in
part), G, P, T.
------------------------------------------------------------------------
The Commission believes the proposed structuring requirements would
facilitate access to the clearing agency's disclosures (enabling, for
example, more efficient retrieval of only those disclosures filed by a
subset of clearing agencies over particular reporting periods) and
analysis (such as by comparing individual disclosures or sets of
disclosures across clearing agencies and time periods). This could
benefit market participants through enhanced oversight of clearing
agencies. Market participants (such as broker-dealers, analysts, and
other clearing agencies) could also benefit from direct use of the
machine-readable disclosures on Form CA-1. For example, institutional
investors could leverage the machine-readability of Exhibit J to run
automated redlines of a clearing agency's safeguarding procedure
descriptions from prior periods, thereby detecting any significant
procedural changes that could raise concern.
Without the proposed structured data requirements, performing these
types of analyses would need to be done manually, such as by gathering
the current and former descriptions of safeguarding procedures for each
exchange and entering them all into databases, resulting in a
significantly less efficient and precise process. In addition, the
proposed structured data requirement would enable EDGAR to perform
technical validations (i.e., programmatic checks to ensure the
documents are appropriately standardized, formatted, and complete) upon
intake of the Form CA-1 disclosures, thus potentially improving the
quality of the filed data by decreasing the incidence of non-
substantive errors (such as the omission of values from fields that
should always be populated).
The nature and extent of such benefits may vary based on the
content of each Form CA-1 Exhibit. As discussed in the Economic
Analysis, studies of XBRL requirements for public operating company
financial statements indicate a number of benefits for investors and
market participants.\128\ The probability that, and extent to which,
these particular benefits would arise from structured Form CA-1
disclosures could be heightened for Exhibit H, which would likewise
include structured financial statements. In addition, the particular
benefits of structuring data would likely vary based on the type of
disclosures included in each particular Exhibit. Structured numerical
disclosures, such as those that would be included on Exhibit H, lend
themselves to mathematical functionality, such as the calculation of
key ratios or the identification of extreme statistical outliers.
Structured textual disclosures, such as those that would be included on
Exhibit K, lend themselves to period-over-period redline comparisons,
targeted keyword searching, and more sophisticated sentiment analysis.
---------------------------------------------------------------------------
\128\ See infra section X.C.1.b.
---------------------------------------------------------------------------
The Commission is proposing to require Inline XBRL for certain
exhibits to Form CA-1 and custom XML for others, because the Commission
believes each data language is better suited for particular types of
disclosures. Exhibit H requires disclosure of financial statements, and
Inline XBRL was designed to accommodate financial statement
information, including the particular metadata (e.g., the relevant
fiscal period, whether the line item is on the balance sheet, whether
the line item is a credit or debit) that must be linked to each data
point within the financial statements to fully convey its semantic
meaning to a machine reader. Exhibits C, F, J, K, L, M, O, R, and S
require narrative disclosures on topics such as the clearing agency's
services, security, backup systems, and criteria governing access to
services; whereas custom XML data languages only have the capacity to
accommodate brief narrative descriptions, Inline XBRL can accommodate
longer narrative descriptions with presentation capabilities that
preserve human-readability while maintaining machine-readability.\129\
---------------------------------------------------------------------------
\129\ See supra note 89.
---------------------------------------------------------------------------
The execution page of Form CA-1, Exhibits A (in part), B, D, E (in
part), I, N, and Q do not require such content. For these disclosures,
the Commission believes the use of custom XML data languages would be
preferable to Inline XBRL, because it would yield smaller file sizes
and therefore enable more streamlined processing of the
information.\130\ The Commission believes requiring custom XML rather
than Inline XBRL for these disclosures would also be preferable because
it would enable EDGAR to generate fillable web forms that would permit
[[Page 23941]]
clearing agencies to manually input their disclosures into the form
fields, rather than structure their disclosure in the custom XML data
language themselves. This added flexibility could ease the burden of
compliance on clearing agencies in some instances, although clearing
agencies may have the requisite sophistication to encode the
disclosures in custom XML themselves without relying on fillable web
forms.
---------------------------------------------------------------------------
\130\ See also infra section X.E.4 (discussing other structured
data languages that would result in smaller file sizes than Inline
XBRL).
---------------------------------------------------------------------------
The proposed approach of requiring Inline XBRL for some Form CA-1
exhibits and custom XML for others would entail drawbacks for users of
the information (including Commission staff and market participants).
Specifically, data users would be unable to incorporate the Inline XBRL
disclosures on Form CA-1 into the same datasets and applications as the
custom XML disclosures on Form CA-1, and run analyses that incorporate
both types of information, without undertaking data conversion
processes that are frequently burdensome and imprecise. Similarly, any
technical validations programmed into EDGAR would be unable to check
for any inappropriate inconsistencies between disclosures on Inline
XBRL exhibits and disclosures on custom XML exhibits on a given Form
CA-1, thus reducing the benefit of improved data quality that would be
likely to result from structured data requirements. Finally, some Form
CA-1 filers may already be using Inline XBRL to structure similar data
for internal business purposes, such as through the use of ERP systems;
these filers may prefer to use Inline XBRL for all proposed structured
data requirements of Form CA-1, rather than using a combination of
Inline XBRL and custom XML.\131\ Nonetheless, the Commission believes
the streamlined data processing associated with the smaller file sizes
of the proposed custom XML exhibits, as described earlier in this
section, would justify any such drawbacks.
---------------------------------------------------------------------------
\131\ See infra note 570 (discussing the prevalence of XBRL
integration into ERP systems).
---------------------------------------------------------------------------
The Commission is proposing to require clearing agencies to file
copies of existing documents, such as copies of by-laws, written
agreements, and contracts governing subscription terms, as unstructured
PDF attachments. The Commission believes requiring clearing agencies to
retroactively structure these existing documents, which were prepared
for purposes outside of fulfilling the Commission's disclosure
requirements, would likely impose costly compliance burdens on clearing
agencies that may not be justified in light of the commensurate
informational benefits associated with more efficient disclosure use.
Thus, the Commission does not believe structured data requirements are
warranted for these copies of existing documents.
6. Request for Comment
20. The Commission requests comment on all aspects of the proposed
revisions to Form CA-1 to facilitate electronic filing in EDGAR. Are
there any aspects of transitioning the form to electronic filing that
the Commission has not addressed above? Please explain.
21. The Commission has proposed new Section IX to address the
submission of any conditions, reports, notices or other submissions to
the Commission required as directed in any Order approving an
application for exemption from registration as a clearing agency, under
Exhibit T. Do the proposed modifications, as described above,
appropriately address the wide range of submissions that these types of
materials encompass, or is there a type of submission under any Order
that would be technologically infeasible to require to be submitted
under Section IX in EDGAR? Please explain why or why not.
22. Clearing agencies would be required to prepare certain elements
of Form CA-1 filings using Inline XBRL and custom XML. Would clearing
agencies experience practical difficulties or incur significant costs
in preparing and submitting those elements of Form CA-1 using Inline
XBRL and custom XML? If so, please explain the nature of those
difficulties and costs as well as any alternative approaches the
Commission should adopt.
23. Would requiring different structured data languages for
different Exhibits of Form CA-1 provide benefits to data users or
filers that justify any drawbacks associated such an approach? Please
explain the nature of such benefits and drawbacks, and why the benefits
would justify the drawbacks (or vice versa).
24. If a mix of structured data languages would be appropriate,
should the specific data languages proposed for each Form CA-1 Exhibit
be modified? For example, are there Form CA-1 Exhibits proposed as
custom XML documents that would be better suited as Inline XBRL
documents, or vice versa? Please explain why or why not.
25. Are there other structured data languages (i.e., data languages
other than Inline XBRL and custom XML) that would be more appropriate
for some or all of the Form CA-1 disclosures? Please explain why or why
not, and, if the former, please identify the structured data language
or languages that would be more suitable.
26. Would requiring clearing agencies to file copies of existing
documents as unstructured PDF attachments, rather than requiring
clearing agencies to retroactively structure those documents in
machine-readable data languages, ease compliance burdens on clearing
agencies? If so, would the reduced compliance burden on clearing
agencies justify forgoing the benefits to data users of structuring
these existing documents? Please explain why or why not.
E. Form 19b-4(e)
1. Relevant Statutory Framework
Section 19(b) of the Exchange Act, as amended, requires each SRO to
file with the Commission, in accordance with such rules as the
Commission may prescribe, copies of any proposed rule, or any proposed
change in, addition to, or deletion from the rules of such SRO
(collectively, a ``proposed rule change'') accompanied by a concise
general statement of the basis and purpose of such proposed rule
change.\132\ Rule 19b-4(e)(1) provides that the listing and trading of
a new derivative securities product by an SRO shall not be deemed a
proposed rule change under the Exchange Act if the Commission has
approved, pursuant to section 19(b) of the Exchange Act,\133\ the SRO's
trading rules, procedures, and listing standards for the product class
that would include the new derivative securities product, and the SRO
has a surveillance program in place for such product class.\134\
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\132\ See 15 U.S.C. 78s(b).
\133\ See 15 U.S.C. 78s(b).
\134\ See 17 CFR 240.19b-4(e)(1).
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2. Background of Rule 19b-4(e)
As discussed above, Rule 19b-4(e)(1) under the Exchange Act
provides that the listing and trading of a new derivative securities
product \135\ by an SRO shall not be deemed a proposed rule change
subject to certain conditions. The Commission determined that, when it
has approved an SRO's trading rules, procedures, and listing standards
for the product class that would include the new derivative securities
product, and the SRO has an adequate surveillance program in place for
such product class, the listing and trading of the new derivative
securities product would be ``reasonably and fairly
[[Page 23942]]
implied'' by the SRO's existing trading rules, procedures, and listing
standards, and therefore, would not be deemed a proposed rule change
under Rule 19b-4(c)(1).\136\
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\135\ Rule 19b-4(e) defines a new derivative securities product
as ``any type of option, warrant, hybrid securities product or any
other security, other than a single equity option or a security
futures product, whose value is based, in whole or in part, upon the
performance of, or interest in, an underlying instrument.'' See 17
CFR 240.19b-4(e).
\136\ See Exchange Act Release No. 40761 (Dec. 8, 1998), 63 FR
70952 (Dec. 22, 1998) (``Rule 19b-4(e) Adopting Release''). See also
17 CFR 240.19b-4(c)(1).
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For purposes of Rule 19b-4(e)(1), SROs have submitted, and the
Commission has approved pursuant to section 19(b)(2) of the Exchange
Act, trading rules, procedures, and listing standards for several types
of new derivative securities products including, for example, exchange-
traded funds, index-linked securities and other exchange-traded
structured products, and narrow and broad-based index options.\137\
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\137\ See, e.g., Exchange Act Release Nos. 42787 (May 15, 2000),
65 FR 33598 (May 24, 2000) (SR-Amex-2000-14) (approving generic
listing standards for exchange traded funds called Portfolio
Depositary Receipts and Index Fund Shares); 45718 (Apr. 9, 2002), 67
FR 18965 (Apr. 17, 2002) (SR-NYSE-2002-07) (approving generic
listing standards for Trust Issued Receipts); 55687 (May 1, 2007),
72 FR 25824 (May 7, 2007) (SR-NYSE-2007-27) (approving generic
listing standards for Index-Linked Securities); 48405 (Aug. 25,
2003), 68 FR 52257 (Sep. 2, 2003) (SR-ISE-2003-05) (approving
generic listing standards for narrow-based index options); 78397
(June 22, 2016), 81 FR 49320 (July 27, 2016) (SR-NYSEArca-2015-110)
(approving generic listing standards for Managed Fund Shares); and
88566 (Apr. 6, 2020), 85 FR 20312 (Apr. 10, 2020) (SR-CboeBZX-2019-
097) (approving generic listing standards for Exchange-Traded Fund
Shares).
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As expressed in the Rule 19b-4(e) Adopting Release, the Commission
adopted Form 19b-4(e) in order for the Commission to maintain an
accurate record of all new derivative securities products traded on the
SROs in order to notify the Commission when an SRO begins to trade a
new derivatives securities product not required to be submitted as a
proposed rule change to the Commission for approval.\138\ The
Commission also stated that it would make Forms 19b-4(e) public.\139\
At the time of the adoption of Rule 19b-4(e), the Commission estimated
the new rule would eliminate approximately 45 SRO rule filings each
year,\140\ and the information regarding new derivative securities
products required pursuant to Rule 19b-4(e) was required to be
submitted using a paper Form 19b-4(e).
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\138\ See Rule 19b-4(e) Adopting Release, 63 FR at 70963.
\139\ See id. at 70964, fn. 139 (``Form 19b-4(e) will be
publicly available through the Commission's Public Reference Room.
In addition, the Commission will endeavor to make the Forms
available on the Commission's website.'').
\140\ See Rule 19b-4(e) Adopting Release, 63 FR at 70964.
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3. Current Requirements for Filing Form 19b-4(e)
Under Rule 19b-4(e)(2)(ii), SROs are required to submit Form 19b-
4(e) \141\ to the Commission within five business days after
commencement of trading a new derivative securities product.\142\ In
addition, pursuant to the instructions for completing Form 19b-4(e),
SROs are required to submit an original and nine paper copies of a duly
executed Form 19b-4(e) with the Commission.\143\
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\141\ See 17 CFR 249.820.
\142\ See Rule 19b-4(e)(2)(ii). Although Rule 19b-4(e) relates
to the listing and trading of new derivative products by SROs, the
only SROs that list and trade new derivative products and file Forms
19b-4(e) to the Commission are national securities exchanges.
\143\ See Items II and III of the Instructions for Completing
Form 19b-4(e), 17 CFR 249.820.
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4. Proposed Rescission of Form 19b-4(e)
The Commission proposes to amend Rule 19b-4 to rescind Form 19b-
4(e) and instead require SROs to post on their internet websites the
information currently included on Form 19b-4(e). More specifically,
under the proposal, an SRO would be required to post on its public
internet website, within five business days after commencing the
trading of a new derivatives securities product, the information
required in current Part I, Items 2 through 9 of Form 19b-4(e) for that
product:\144\ (a) type of issuer of new derivatives securities product
(e.g., clearinghouse, broker-dealer, corporation, etc.); (b) class of
new derivative securities product; (c) name of underlying instrument;
(d) if the underlying instrument is an index, state whether it is
broad-based or narrow-based; (e) ticker symbol(s) of new derivative
securities product; (f) market(s) upon which securities comprising the
underlying instrument trades; (g) settlement methodology of new
derivative securities product; and (h) position limits of new
derivative securities product (if applicable). The Commission proposes
that this information be provided using the most recent versions of an
XML schema and the associated PDF renderer that would be published on
the Commission's website.\145\ The Commission believes that this
information should be available at a prominently posted hyperlink on
the SRO's website that is free and accessible (without any encumbrances
or restrictions) by the general public.
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\144\ Part I, Item 1, ``Name of Self-Regulatory Organization
Listing New Derivative Securities Product,'' would not be necessary
to include because the table of new derivative securities products
would be on the website of the SRO that has listed and is trading
the new derivatives securities product, so the identity of the
listing SRO will be self-evident.
\145\ See proposed 17 CFR 240.19b-4(e)(2)(ii).
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As is required currently in Part II of Form 19b-4(e), an SRO would
be required to provide on its website a representation by a duly
authorized SRO official that the governing body of the SRO has duly
approved, or has duly delegated its approval to such official for, the
listing and trading of the new derivative securities product according
to its relevant trading rules, procedures, surveillance programs, and
listing standards to assure that such products are being listed and
traded in accordance with the SRO's obligations under Rule 19b-4(e), as
well as an email address to contact that official. The Commission
believes that the requirement to provide an email address for the
exchange contact employee will expedite communications between
Commission staff and the relevant exchange. Any SRO that relies on Rule
19b-4(e) to list and trade a new derivative securities product would
continue to be subject to Rule 19b-4(e)(2)(i), which requires the SRO
to maintain at its principal place of business a file, available to
Commission staff for inspection, of all relevant records and
information pertaining to each new derivatives securities product
traded pursuant to Rule 19b-4(e) for a period of not less than five
years, the first two years in an easily accessible place, as prescribed
in Rule 17a-1 under the Exchange Act.\146\ Thus, the SRO trading a new
derivative securities product would need to maintain the relevant
records and information regarding the new derivative securities product
to comply with the recordkeeping and reporting requirements of Rule
19b-4(e). As under the current rule, and as contemplated in the
adoption of the current rule, the Commission will review SRO compliance
through its routine inspections of SROs.\147\
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\146\ See 17 CFR 240.17a-1.
\147\ See Rule 19b-4(e) Adopting Release, 63 FR at 70963.
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The Commission believes that its proposal will provide the same
information for the Commission and the public as is provided via
current Form 19b-4(e) without necessitating the additional steps of
submitting a paper form containing that information with the
Commission. The Commission believes that, among other benefits, this
proposal should increase efficiencies and decrease costs related to
both the submission of Form 19b-4(e) by an SRO and the Commission's
processing of submitted Forms 19b-4(e). As discussed above, since the
Commission adopted
[[Page 23943]]
Rule 19b-4(e), technology has evolved significantly and the internet
has played an increasingly vital role in information distribution.\148\
During this period, the Commission has encouraged the dissemination of
information electronically via the internet and other automated systems
and services.\149\ In addition, the Commission now receives thousands
of Forms 19b-4(e) per year from the SROs, rather than the 45 per year
as stated in the Form 19b-4(e) Adopting Release, each of which is
submitted to the Commission and then must be made public individually
by the Commission,\150\ and therefore require, in the aggregate,
additional time to process before the information contained in those
Forms becomes available for Commission review and also publicly
available.\151\ The Commission believes that requiring SROs to post the
information contained in the current Form 19b-4(e) on its website would
accomplish the goal outlined in the Rule 19b-4(e) Adopting Release, for
the Commission to maintain accurate information regarding these new
derivatives securities products, while ensuring that information
remains publicly available.\152\ In addition, the Commission believes
that requiring SROs to post that information within 5 business days
after commencement of trading a new derivatives product, as the current
rule requires, will continue to allow the Commission to determine that
an SRO has properly relied on the rule and continue to do so in a
timely fashion.\153\ The Commission believes this is appropriate given
the large number of Forms 19b-4(e) that are submitted currently as well
as the nature of the information contained in those Forms, which is
highly standardized. Providing that information on the relevant SRO's
publicly available website would render that information in a more
readily accessible format by both the Commission and the public than
submitting numerous Forms 19b-4(e) does currently, and would have the
added benefit of eliminating the two-step process of an SRO submitting
a Form 19b-4(e) and then that Form being made public through the
Commission. In addition, because that information would be subject to
the relevant SRO's books and records obligations \154\ and subject to
the Commission's examination and inspection authority,\155\ the
Commission believes that the accuracy of the records for Commission
review would be commensurate with the accuracy of the information on
the Forms 19b-4(e) submitted to the Commission under the current rule.
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\148\ See supra note 13.
\149\ Id. See also supra note 14.
\150\ See id. at 70964, n. 139.
\151\ See FR Doc. 2022-17308, 87 FR 49894 (Aug. 12, 2022)
(Request to OMB for extension of Rule 19b-4(e) and Form 19b-4(e);
SEC File No. 270-447; OMB Control No. 3235-0504) (identifying 2,331
Forms 19b-4(e) submitted to the Commission based on the average
annual number of Forms 19b-4(e) submitted in 2019, 2020, and 2021).
\152\ See Rule 19b-4(e) Adopting Release, 63 FR at 70963, 70964,
n. 139.
\153\ See 17 CFR 240.19b-4(e)(2)(ii).
\154\ See 17 CFR 240.17a-1.
\155\ See Rule 19b-4(e) Adopting Release, 63 FR at 70963.
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5. Request for Comment
27. Would it be appropriate to require the information submitted on
current Form 19b-4(e) instead to be posted on the relevant SRO's
publicly available internet website? Would there be particular
compliance or oversight concerns such a requirement would raise even
though the relevant SRO publication of that information would remain
subject to existing books and records requirements and the Commission's
examination and inspection authority? If so, explain what those
concerns are, and why.
28. Should the Commission instead amend Rule 19b-4(e), Form 19b-
4(e), and the instructions thereunder to require Form 19b-4(e) to be
submitted electronically on EDGAR? If so, explain why.
29. Is there an alternative method for submitting Form 19b-4(e)
that the Commission should use instead? If so, explain what such an
alternative method would be, and why.
30. What, if any, costs would be associated with posting the
information required under proposed Rule 19b-4(e) on the SRO's website?
Are those costs more, less, or the same as those currently expended
under the current Form 19b-4(e) filing process? Similarly, what costs
would be associated with requiring SROs to post Rule 19b-4(e)
information using a custom XML data language and associated PDF
renderer? Would such costs not justify the benefits associated with
such requirements? Please explain why or why not.
31. Would requiring a different structured data language, such as
Inline XBRL, for the Rule 19b-4(e) information provide benefits to data
users justify any drawbacks associated such an approach? If so, please
identify the more appropriate data language, explain the nature of such
benefits and drawbacks, and why the benefits would not justify the
drawbacks (or vice versa).
32. Should the Commission also amend Rule 19b-4(e) to require that
the information submitted on current Form 19b-4(e) be posted on the
relevant SRO's publicly available internet website sooner than five
business days after commencement of trading a new derivative securities
product? Please explain why or why not. Are there any issues, concerns
or burdens with shortening the timeframe? If so, please describe. Is
there another timeframe earlier than five business days (e.g., one
business day, two business days, three business days) within which it
would be appropriate to require such information be posted? If so,
please explain what that timeframe should be, and why.
F. Rule 19b-4(j) and Form 19b-4
1. Relevant Statutory Framework
Section 19(b) of the Exchange Act, as amended, requires each SRO to
file with the Commission, in accordance with such rules as the
Commission may prescribe, copies of any proposed rule, or any proposed
change in, addition to, or deletion from the rules of such SRO
(collectively, a ``proposed rule change'') accompanied by a concise
general statement of the basis and purpose of such proposed rule
change.\156\ Rule 19b-4, subject to certain exceptions, requires an SRO
to submit each proposed rule change by electronically filing Form 19b-
4.\157\
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\156\ See 15 U.S.C. 78s.
\157\ See 17 CFR 240.19b-4(b).
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2. Proposed Rule Change
The Commission proposes to remove the requirement under 17 CFR
240.19b-4(j) (``Rule 19b-4(j)'') \158\ that the signatory to an
electronically submitted Form 19b-4 manually sign a signature page or
other document authenticating, acknowledging, or otherwise adopting his
or her signature that appears in ty
[…truncated; see source link]Indexed from Federal Register on April 18, 2023.
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