[Federal Register Volume 78, Number 67 (Monday, April 8, 2013)]
[Notices]
[Pages 20960-20961]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-08100]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69281]
Order Temporarily Exempting Certain Broker-Dealers From the
Recordkeeping, Reporting, and Monitoring Requirements of Rule 13h-1
Under the Securities Exchange Act of 1934
April 3, 2013.
On July 27, 2011, the Securities and Exchange Commission
(``Commission'') adopted Rule 13h-1 under the Securities Exchange Act
of 1934 (``Exchange Act'') concerning large trader reporting to assist
the Commission in both identifying, and obtaining trade information
for, market participants that conduct a substantial amount of trading
activity, as measured by volume or market value, in U.S. securities
(such persons are referred to as ``large traders'').\1\
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\1\ See Securities Exchange Act Release No. 64976 (July 27,
2011), 76 FR 46960 (Aug. 3, 2011) (``Rule 13h-1 Adopting Release'').
The effective date of Rule 13h-1 was October 3, 2011.
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In addition to requiring large traders to register with the
Commission by filing and periodically updating Form 13H, Rule 13h-1
requires certain broker-dealers to, among other things, maintain
specified records of transactions that they effect, directly or
indirectly, for large traders, and to report to the Commission, upon
request of the Commission, such records in electronic format.
Initially, the compliance date for the broker-dealer recordkeeping
and reporting requirements of Rule 13h-1(d) and (e), respectively, as
well as the requirement under Rule 13h-1(f) for broker-dealers to
monitor their customers' accounts for activity that may trigger the
large trader identification requirements of Rule 13h-1, was April 30,
2012. The Financial Information Forum (``FIF'') \2\ and the Securities
Industry and Financial Markets Association (``SIFMA'') \3\ previously
requested that the Commission grant certain substantive relief and
temporarily exempt registered broker-dealers from the recordkeeping,
reporting, and monitoring requirements of the Rule to provide them with
additional time to comply.\4\
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\2\ See Letter from Manisha Kimmel, Executive Director,
Financial Information Forum, to Robert Cook, Director, and David
Shillman, Associate Director, Division of Trading and Markets,
Commission, dated January 25, 2012 (``FIF Letter''), available at:
http://www.sec.gov/comments/s7-10-10/s71010.shtml.
\3\ See Letter from Ann L. Vlcek, Managing Director and
Associate General Counsel, SIFMA, to David S. Shillman, Associate
Director, Division, Commission, dated March 29, 2012, available at:
http://www.sec.gov/comments/s7-10-10/s71010.shtml.
\4\ See Securities Exchange Act Release No. 66839 (April 20,
2012), 77 FR 25007 (April 26, 2012) (``April Exemptive Order'').
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Pursuant to Exchange Act Section 13(h)(6) and Rule 13h-1(g)
thereunder,\5\ the Commission, by order, may exempt from the provisions
of Rule 13h-1, upon specified terms and conditions or for stated
periods, any person or class of persons or any transaction or class of
transactions from the provisions of Rule 13h-1 to the extent that such
exemption is consistent with the purposes of the Exchange Act.
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\5\ See 15 U.S.C. 78m(h)(6) and 17 CFR 240.13h-1(g),
respectively.
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In response to FIF's and SIFMA's requests, the Commission
temporarily exempted broker-dealers from the recordkeeping, reporting,
and monitoring requirements, thereby establishing a two-phased approach
to implementation.\6\ In the first phase, the Commission provided a
temporary exemption to extend the compliance date from April 30, 2012
to November 30, 2012 for the broker-dealer recordkeeping and reporting
requirements of Rule 13h-1 with respect to a clearing broker-dealer for
a large trader where the large trader: (1) Is a U.S.-registered broker-
dealer,\7\ or (2) trades through a sponsored access arrangement \8\
(``Phase One''). In the
[[Page 20961]]
second phase, which concerned the remaining portions of the rule, the
Commission provided a temporary exemption to extend the compliance date
for the additional broker-dealer recordkeeping, reporting, and
monitoring requirements of Rule 13h-1 from April 30, 2012, to May 1,
2013 (``Phase Two'').
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\6\ The April Exemptive Order also provided an exemption for
certain transactions from the definition of the term ``transaction''
provided in Rule 13h-1(a)(6) for the purpose of determining whether
a person is a large trader. See April Exemptive Order, supra note 4.
\7\ The reportable activity would include proprietary trading by
a large trader broker-dealer where the large trader is trading for
its own account.
\8\ A ``sponsored access arrangement'' in this context refers to
an arrangement in which a broker-dealer permits a large trader
customer to enter orders directly to a trading center where such
orders are not processed through the broker-dealer's own trading
system (other than any risk management controls established for
purposes of compliance with Rule 15c3-5 under the Exchange Act) and
where the orders are routed directly to a trading center, in some
cases supported by a service bureau or other third party technology
provider. See Securities Exchange Act Release No. 63241 (November 3,
2010), 75 FR 69792 (November 15, 2010) (S7-03-10).
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With Phase One fully implemented, the Commission now is focusing
its attention on FIF's and SIFMA's relief requests concerning Phase
Two. On February 13, 2013, SIFMA submitted a supplemental letter that
outlined its members' experience in implementing Phase One and also
provided additional detail on implementation issues relating to the
Phase Two deadline.\9\ Because many of the issues presented in Phase
One also are implicated in the Phase Two relief request, such as the
issues concerning average price account processing and the transmission
of execution time information on disaggregated trades, the Commission
currently is considering the industry's experience with Phase One
implementation in evaluating the requests for relief concerning Phase
Two.
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\9\ See Letter from Theodore Lazo, Managing Director and
Associate General Counsel, SIFMA, to David S. Shillman, Associate
Director, Division, Commission, dated February 13, 2013, available
at: http://www.sec.gov/comments/s7-10-10/s71010.shtml.
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The Commission believes that it is appropriate and consistent with
the purposes of the Exchange Act to provide a temporary exemption from
the Phase Two broker-dealer recordkeeping, reporting, and monitoring
requirements of Rule 13h-1 to further extend the compliance date for
Phase Two. This temporary exemption from the Rule's requirements should
provide the Commission with the necessary time to complete its review
of the implementation issues raised by FIF and SIFMA, assess the
appropriateness of the requested exemptive relief, announce its
response thereto, and allow broker-dealers time to develop, test, and
implement any necessary systems changes once the Commission's review is
complete.
Accordingly, the Commission is providing a temporary exemption to
extend the compliance date to November 1, 2013, solely for the Phase
Two broker-dealer recordkeeping, reporting, and monitoring requirements
of Rule 13h-1.\10\
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\10\ The effective date for Rule 13h-1 remains October 3, 2011.
The compliance date for the requirement on large traders to identify
to the Commission pursuant to Rule 13h-1(b) was December 1, 2011.
The compliance date for Phase One was November 30, 2012.
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It is hereby ordered, pursuant to Exchange Act Section 13(h)(6) and
Rule 13h-1(g) thereunder, that broker-dealers subject to the
recordkeeping, reporting, and monitoring requirements of Rule 13h-1
(other than clearing broker-dealers for a large trader that either (1)
is a U.S.-registered broker-dealer, or (2) trades through a sponsored
access arrangement) are temporarily exempted from those requirements
until November 1, 2013.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-08100 Filed 4-5-13; 8:45 am]
BILLING CODE 8011-01-P