Notice2023-10474
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 2.250 To Remove Obsolete Text
Primary source
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Published
May 17, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 95 (Wednesday, May 17, 2023)</title>
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[Federal Register Volume 88, Number 95 (Wednesday, May 17, 2023)]
[Notices]
[Pages 31533-31535]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-10474]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97494; File No. SR-LTSE-2023-03]
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend Rule 2.250 To Remove Obsolete Text
May 11, 2023.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on May 2, 2023, Long-Term Stock Exchange, Inc. (``LTSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend LTSE Rule 2.250 (Mandatory
Participation in Testing of Backup Systems) to remove obsolete rule
text regarding the process it employed to designate certain Members \3\
previously subject to the rule to participate in mandatory disaster
recovery testing pursuant to Regulation SCI and Rule 2.250 for calendar
year 2020.
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\3\ The term ``Member'' refers to any registered broker or
dealer that has been admitted to membership in the Exchange. A
Member will have the status of a Member of the Exchange as that term
is defined in section 3(a)(3) of the Act. Membership may be granted
to a sole proprietor, partnership, corporation, limited liability
company, or other organization that is a registered broker or dealer
pursuant to section 15 of the Act, and which has been approved by
the Exchange. See, LTSE Rule 1.160(w).
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The text of the proposed rule change is available at the Exchange's
website at <a href="https://longtermstockexchange.com/">https://longtermstockexchange.com/</a>, at the principal office
of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The self-regulatory organization has prepared summaries,
set forth in Sections A, B, and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend LTSE Rule 2.250 (Mandatory
Participation in Testing of Backup Systems) to remove obsolete rule
text regarding the process it employed to designate certain Members
previously subject to the rule to participate in mandatory disaster
recovery testing pursuant to Regulation SCI and Rule 2.250 for calendar
year 2020.
Regulation SCI requires LTSE, as an SCI entity, to maintain
business continuity and disaster recovery plans that provide for
resilient and
[[Page 31534]]
geographically diverse backup and recovery capabilities that are
reasonably designed to achieve two-hour resumption of critical SCI
systems and next business day resumption of other SCI systems following
a wide-scale disruption.\4\ Rule 1004 under Regulation SCI and LTSE
Rule 2.250 also require LTSE to designate certain Members to
participate in business continuity and disaster recovery testing in a
manner specified by LTSE and at a frequency of not less than once every
12 months.\5\ Such testing ordinarily is part of an industry-wide test
conducted annually in the month of October.
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\4\ See Securities Exchange Act Release No. 73639 (November 19,
2014), 79 FR 72252 (December 5, 2014).
\5\ See, LTSE Rule 2.250(a), (b).
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LTSE Rule 2.250 governs mandatory participation in testing of
LTSE's backup systems, and states that LTSE will designate Members that
account for a meaningful percentage of executed volume on LTSE,
measured on a quarterly basis, as required to connect to LTSE's backup
systems and participate in functional and performance testing of such
system.\6\ Rule 2.250 further provides that if a Member has not
previously been subject to the rule, such Member will have until the
next calendar quarter before such requirements are applicable.\7\
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\6\ See, LTSE Rule 2.250(a), (c).
\7\ See, LTSE Rule 2.250(c).
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In July 2020, the Exchange filed a proposed rule change, for
immediate effectiveness, to amend Rule 2.250 to provide for special
provisions to designate certain Members to participate in mandatory
disaster recovery training in calendar year 2020.\8\ The rule change
was based on the fact that the Exchange was not operational as of the
date of the rule filing, and did not become operational until September
9, 2020. As a result, for calendar year 2020, the Exchange did not have
two calendar quarters of trading data on which to base its Member
designation prior to the October 2020 test. Absent an amendment, Rule
2.250 would not have permitted the Exchange to designate any Members to
participate in the industry-wide test for 2020 because no Member would
have had a meaningful percentage of executed volume on LTSE upon which
a designation could have been made.
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\8\ See, Exchange Act Release 34-89216 (July 2, 2020), 85 FR
41259 (July 9, 2020), SR-LTSE-2020-10.
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To address the unique circumstances for disaster recovery testing
in 2020, the Exchange amended Rule 2.250 to add new paragraph (d),
which provided that for calendar year 2020, notwithstanding paragraphs
(b) and (c), which assign the Exchange responsibility of ``identifying
Members that account for a meaningful percentage of the Exchange's
overall volume,'' the Exchange would instead designate at least three
Members who have a meaningful percentage of trading volumes in NMS
stocks across the other equity exchanges. This rule change allowed the
Exchange to identify Members for industry-wide disaster recovery
testing in the absence of the LTSE-specific volume metrics that would
be used in the ordinary course to designate such firms.
By its terms, Rule 2.250(d) was limited to the special
circumstances existing in calendar year 2020 given that the Exchange
did not become operational until September 2020, approximately one
month prior to the industry test. The special provisions of paragraph
(d) were not employed in the 2021 and 2022 industry-wide disaster
recovery testing and the Exchange instead relied on the provisions of
paragraphs (a) through (c) of the rule in establishing the standards to
be used for determining which Members contribute a meaningful
percentage of the Exchange's overall volume and thus are required to
participate in functional and performance testing.
Accordingly, the Exchange is now proposing to delete paragraph (d)
of Rule 2.250 in its entirety as obsolete and unnecessary rule text.
b. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of section 6 of the Act,\9\ in general, and
furthers the objectives of section 6(b)(5) of the Act,\10\ in
particular, in that it is designed to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(5).
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The Exchange states that its proposed deletion of Rule 2.250(d),
which was limited by its terms to the required Regulation SCI testing
for calendar year 2020, is obsolete and was only followed for the 2020
testing. The Exchange's participation in the 2021 and 2022 industry
testing was based on the process outlined in paragraphs (a) through (c)
of Rule 2.250, as was the original intent of the rule. Paragraph (d)
was only added to account for the unique circumstances of industry-wide
testing occurring within a short time of when the Exchange commenced
trading operations and, as a result, the Exchange would not have had
the data to conduct the testing under the process outlined in Rule
2.250(a) through (c). The Exchange believes that its proposed deletion
of this obsolete text is consistent with section 6(b)(5) of the Act
\11\ in that it assures that the Exchange's rules are current and up-
to-date, which operates to perfect the mechanism of a free and open
market and national market system and in general with the protection of
investors and the public interest.
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\11\ See, supra, note 6.
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Moreover, as set forth in the SCI Adopting Release, ``SROs have the
authority, and legal responsibility, under section 6 of the Exchange
Act, to adopt and enforce rules (including rules to comply with
Regulation SCI's requirements relating to BC/DR testing) applicable to
their members or participants that are designed to, among other things,
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public
interest.'' \12\ The Exchange believes that this proposal is consistent
with such authority and legal responsibility in that it removes
obsolete text from Rule 2.250 and assures that the Exchange's rule
aligns with the requirements of Regulation SCI.
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\12\ See supra note 4, at 72350.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed amendment is
intended solely to remove obsolete text from Rule 2.250 relating to
unique circumstances surrounding the Exchange's participation in
industry-wide Regulation SCI testing for calendar year 2020.
Consequently, the Exchange does not believe that the proposed rule
change would impose any burden on intramarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
[[Page 31535]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to section 19(b)(3)(A)(iii) of the Act \13\ and Rule
19b-4(f)(6) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of its
intent to file the proposed rule change, along with a brief
description and text of the proposed rule change, at least five
business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#5624233a337b35393b3b333822251625333578313920"><span class="__cf_email__" data-cfemail="1e6c6b727b337d7173737b706a6d5e6d7b7d30797168">[email protected]</span></a>. Please include
File Number SR-LTSE-2023-03 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-LTSE-2023-03. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange.
Do not include personal identifiable information in submissions;
you should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to File Number SR-LTSE-2023-03 and should
be submitted on or before June 7, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10474 Filed 5-16-23; 8:45 am]
BILLING CODE 8011-01-P
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