Notice2023-25668
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Shorten the Standard Settlement Cycle
Primary source
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Published
November 21, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 223 (Tuesday, November 21, 2023)</title>
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[Federal Register Volume 88, Number 223 (Tuesday, November 21, 2023)]
[Notices]
[Pages 81161-81163]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-25668]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98955; File No. SR-Phlx-2023-49]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change to Shorten the
Standard Settlement Cycle
November 15, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 14, 2023, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. 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 Phlx Rules at Equity 11, Sections 6
(Ex-dividend, Ex-rights) and Section 7 (Ex-warrants) to conform them to
the Commission's amendment to Rule 15c6-1(a) of the Act \3\ to shorten
the standard settlement cycle for most broker-dealer transactions from
two business days after the trade date (``T+2'') to one business days
after the trade date (``T+1'').
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\3\ See Securities Exchange Act Release No. 96930, Investment
Advisers Act Release No. 6239 (February 15, 2023), 88 FR 13872
(March 6, 2023) (``T+1 Adopting Release'').
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The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rules">https://listingcenter.nasdaq.com/rulebook/phlx/rules</a>, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, 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 Exchange 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
Effective May 5, 2023, the Commission adopted rule amendments to
shorten the standard settlement cycle for most broker-dealer
transactions from T+2 to T+1.\4\ In light of the recently adopted rule
amendments to Rule 15c6-1(a) of the Act to require standard settlement
no later than T+1, Phlx proposes to amend its rules pertaining to
securities settlement by, among other things, amending the definition
of ``standard'' settlement as occurring on T+1.
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\4\ See supra note 3.
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Specifically, Phlx proposes to amend Equity 11, Sections 6 (Ex-
dividend, Ex-rights) and Section 7 (Ex-warrants). The details of the
proposed rule changes are described below.
Equity 11, Section 6
Equity 11, Section 6, Ex-dividend, Ex-rights, currently provides
that transactions in stocks (except for those made for cash) shall be
ex-dividend or ex-rights on the first business day preceding the record
date fixed by the corporation or the date of the closing of transfer
books thereof. It also provides that if the record date or closing of
transfer books occurs on a day other than a business day, the
transaction will be ex-dividend or ex-rights on the second preceding
business day.
The Exchange proposes to amend Equity 11, Section 6 to shorten the
time frames by one business day. With this change the ex-dividend or
ex-right date would be the same business day as the record date if the
record date falls on a business day, or the first business day
preceding the record date if the record date falls on a day other than
a business day. Additionally, transactions in stocks made for ``cash''
would be ex-divided or ex-rights on the same business day as the record
date or date of closing of transfer books.
Equity 11, Section 7
Equity 11, Section 7, Ex-warrants, currently provides that
transactions in securities which have subscription warrants attached
(except those made for cash) shall be ex-warrants on the first business
day preceding the date of expiration of the warrants, except that when
the date of expiration occurs on a day other than a business day, the
transactions will be ex-warrants on the second business day preceding
the date of expiration.
The Exchange proposes to amend Equity 11, Section 7 to shorten the
time frames by one business day. With this change, transactions in
securities which have subscription warrants attached (except those made
for ``cash'') shall be ex-warrants on the same business day preceding
the date of expiration of the warrants, except that when the date of
expiration occurs on a day other than a business day, said transactions
shall be ex-warrants on the first business day preceding said date of
expiration.
Implementation
The operative date of this proposed rule change will be Tuesday,
May 28, 2024, which is the compliance date specified in the
Commission's amendment to Rule 15c6-1(a) of the Act \5\ to require
standard settlement no later than T+1.\6\ With the implementation of
the T+1 settlement cycle, the ex-dividend date for ``normal''
distributions pursuant to Equity 11, Section 6 will be the same
business day as the record date. Accordingly, Phlx proposes to
interpret Equity 11, Section 6 so that the first record date to which
this new ex-dividend date rationale will be applied will be Wednesday,
May 29, 2024. During the implementation of the T+2 settlement cycle,
the ``regular'' ex-dividend dates will be as follows:
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\5\ See supra note 3.
\6\ See supra note 3. Transactions with a trade date of Friday,
May 24, 2024 would settle on Wednesday, May 29, 2024 because these
transactions occurred before the rule was effective and continue to
settle two days after the trade date. Additionally, transactions
with a trade date of Tuesday, May 28, 2024 would also settle on
Wednesday, May 29, 2024 because these transactions occurred when the
T+1 rule was effective and would settle one day after the trade
date. Of note, May 27, 2024 is Memorial Day and not a business day
counted for purposes of settlement.
[[Page 81162]]
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Record Date May 24, 2024.................. Ex date May 23, 2024.
Record Date May 28, 2024.................. Ex date May 24, 2024.
Record Date May 29, 2024.................. Ex date May 29, 2024.*
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* May 27, 2024 is Memorial Day and not a business day.
By way of explanation, a record date of Friday, May 24, 2024 would
be a date prior to the effective date of the adopted T+1 rules. Current
Rule 1140(b) [sic] would apply to this record date, and, therefore, the
``ex-dividend date'' would be the first business day preceding the
record date or Thursday, May 23, 2024. Monday, May 27, 2024 is Memorial
Day is a federal holiday and not a business day; there would be no
record date on a holiday. As noted above, Phlx proposes to interpret
Rule 11140(b)(1) so that the first record date to which this new ex-
dividend date rationale will be applied would be Wednesday, May 29,
2024. Therefore, a record date of Tuesday, May 28, 2024 would fall
under current Rule 1140(b) [sic] and the first business day preceding
the record date would be Friday, May 24, 2024. Finally, as noted above,
Wednesday, May 29, 2024 is the first record date pursuant to the new
T+1 rules, therefore, proposed Rule 1140(b) [sic] applies to this date
and the ``ex-dividend date'' would be the same business day as the
record date (May, 29, 2024).
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\8\ in particular, in that it is designed to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, and, in general, to protect investors and the public
interest. The proposed rule change seeks to conform Phlx's rules with
the adopted rule amendments to shorten the standard settlement cycle
for most broker-dealer transactions from T+2 to T+1.\9\ The proposal is
consistent with the Commission's amendment to Rule 15c6-1(a) of the Act
to require standard settlement no later than T+1. This proposal will
provide Phlx members with regulatory certainty as to the settlement
cycle that will be utilized to settle transactions executed on the
Exchange.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ See supra note 3.
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As noted herein, Phlx will announce the operative date of the
proposed rule change in an Equity Regulatory Alert, which date would
correspond with the industry-led transition to a T+1 standard
settlement, and the compliance date of the Commission's amendment to
Rule 15c6-1(a) of the Act to require standard settlement no later than
T+1.
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 not necessary or appropriate in
furtherance of the purposes of the Act. The proposal amends Phlx's
rules pertaining to securities settlement and is intended to facilitate
the implementation of the industry-led transition to a T+1 settlement
cycle. The shortened settlement cycle will apply uniformly to all
contracts for the purchase or sale of a security (other than exempted
securities) that provide for payment of funds and delivery of
securities that occur on Phlx or other self-regulatory
organizations.\10\ Moreover, the proposal is consistent with the
Commission's amendment to Rule 15c6-1(a) of the Act to require standard
settlement no later than T+1. Accordingly, Phlx believes that the
proposed amendments do not impose any intra-market or inter-market
burdens on competition because the amendments conform Phlx's rules with
the adopted rule amendments to shorten the standard settlement cycle
for most broker-dealer transactions from T+2 to T+1.\11\ Specifically,
the proposed amendments include changes to rules that specifically
establish the settlement cycle as well as rules that establish time
frames based on settlement dates, including for certain post-settlement
rights and obligations.
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\10\ Of note, pursuant to (a) and (d) of Rule 15c6-1, the
parties may expressly agree to a different settlement date at the
time of the transaction.
\11\ See supra note 3.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments:
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#384a4d545d155b5755555d564c4b784b5d5b165f574e"><span class="__cf_email__" data-cfemail="f785829b92da94989a9a92998384b7849294d9909881">[email protected]</span></a>. Please include
file number SR-Phlx-2023-49 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-Phlx-2023-49. 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="https://www.sec.gov/rules/sro.shtml">https://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
[[Page 81163]]
public in accordance with the provisions of 5 U.S.C. 552, will be
available for website viewing and printing in the Commission's Public
Reference Room, 100 F Street NE, Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 p.m. Copies of 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-Phlx-2023-49 and should be submitted on or before December 12, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25668 Filed 11-20-23; 8:45 am]
BILLING CODE 8011-01-P
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