[Federal Register Volume 76, Number 134 (Wednesday, July 13, 2011)]
[Rules and Regulations]
[Pages 41056-41063]
[FR Doc No: 2011-17524]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 240 and 249

[Release No. 34-64832; File No. S7-29-11]
RIN 3235-AL18

Amendment to Rule Filing Requirements for Dually-Registered
Clearing Agencies

AGENCY: Securities and Exchange Commission.

ACTION: Interim final rule; request for comment.

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SUMMARY: The Securities and Exchange Commission (``SEC'' or
``Commission'') is adopting an interim final rule to amend Rule 19b-4
under the Securities Exchange Act of 1934 (``Exchange Act''). The
amendment expands the list of categories that qualify for summary
effectiveness under Section 19(b)(3)(A) of the Exchange Act to include
any matter effecting a change in an existing service of a clearing
agency registered with the Commission (``Registered Clearing Agency'')
that both primarily affects the futures clearing operations of the
clearing agency with respect to futures that are not security futures
and does not significantly affect any securities clearing operations of
the clearing agency or any related rights or obligations of the
clearing agency or persons using such service. The Commission also is
making a corresponding technical modification to the General
Instructions for Form 19b-4 under the Exchange Act. The amendments to
Rule 19b-4 and Form 19b-4 are intended to streamline the rule filing
process in areas involving certain activities concerning non-security
products that may be subject to overlapping regulation as a result of,
in part, certain provisions under Section 763(b) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 (``Dodd-Frank Act'')
that would deem some clearing agencies to be registered with the
Commission as of July 16, 2011.

DATES: Effective Date: July 15, 2011.
    Comment Date: Comments on the interim final rule should be
submitted on or before September 15, 2011.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number S7-29-11 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F St., NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number S7-29-11. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (http://www.sec.gov/rules/proposed.shtml). Comments
are also available for Web site viewing and printing in the
Commission's Public Reference Room, 100 F St., NE., Washington, DC
20549 on official business days between the hours of 10 a.m. and 3 p.m.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly.

FOR FURTHER INFORMATION CONTACT: Jeffrey S. Mooney, Assistant Director;
Joseph P. Kamnik, Senior Special Counsel; and Andrew R. Bernstein,
Attorney-Adviser, Office of Clearance and Settlement, Division of
Trading and Markets, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-7010 at<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: The Commission is adopting an amendment to
Rule 19b-4 under the Exchange Act as an interim final rule to expand
the list of categories that qualify for

summary effectiveness under Section 19(b)(3)(A) of the Exchange Act.
The Commission also is making a corresponding technical modification to
the General Instructions for Form 19b-4 under the Exchange Act. We will
carefully consider the comments that we receive and intend to respond
as necessary or appropriate.

I. Introduction

A. Background on Commission Process for Proposed Rule Changes

    Section 19(b)(1) of the Exchange Act \1\ requires each self-
regulatory organization (``SRO''), including any Registered Clearing
Agency,\2\ to file with the Commission copies of any proposed rule or
any proposed change in, addition to, or deletion from the rules of such
SRO (collectively, ``Proposed Rule Change''),\3\ which must be
submitted on Form 19b-4 \4\ in accordance with the General Instructions
thereto. Once a Proposed Rule Change has been filed, the Commission is
required to publish it in the Federal Register to provide an
opportunity for public comment.\5\ A Proposed Rule Change generally may
not take effect unless the Commission approves it,\6\ or it is
otherwise permitted to become effective under Section 19(b).\7\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ See Section 3(a)(26) of the Exchange Act, 15 U.S.C.
78c(a)(26) (defining the term ``self-regulatory organization'' to
mean any national securities exchange, registered securities
association, registered clearing agency, and, for purposes of
Section 19(b) and other limited purposes, the Municipal Securities
Rulemaking Board) (emphasis added).
    \3\ 15 U.S.C. 78s(b)(1). Section 3(a)(27) of the Exchange Act
defines ``rules'' to include ``the constitution, articles of
incorporation, bylaws, and rules, or instruments corresponding to
the foregoing * * * and such of the stated policies, practices, and
interpretations of such exchange, association, or clearing agency as
the Commission, by rule, may determine to be necessary or
appropriate in the public interest or for the protection of
investors to be deemed to be rules of such exchange, association, or
clearing agency.'' 15 U.S.C. 78c(a)(27). Rule 19b-4(b) under the
Exchange Act defines ``stated policy, practice, or interpretation''
to mean, in part, ``[a]ny material aspect of the operation of the
facilities of the self-regulatory organization'' or ``[a]ny
statement made generally available'' that ``establishes or changes
any standard, limit, or guideline'' with respect to the ``rights,
obligations, or privileges'' of persons or the ``meaning,
administration, or enforcement of an existing rule.'' 17 CFR
240.19b-4(b).
    \4\ See 17 CFR 249.819.
    \5\ See 15 U.S.C. 78s(b)(1). The SRO is required to prepare the
notice of its Proposed Rule Change on Exhibit 1 of Form 19b-4 that
the Commission then publishes in the Federal Register.
    \6\ See 15 U.S.C. 78s(b)(2). However, as provided in Section
19(b)(2)(D) of the Exchange Act, 15 U.S.C. 78s(b)(2)(D), a Proposed
Rule Change may be ``deemed to have been approved by the
Commission'' if the Commission fails to take action on a proposal
that is subject to Commission approval within the statutory time
frames specified in Section 19(b)(2).
    \7\ See, e.g., 15 U.S.C. 78s(b)(3)(A).
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    Section 19(b)(2) of the Exchange Act sets forth the standards and
time periods for Commission action either to approve, disapprove or
institute proceedings to determine whether the Proposed Rule Change
should be disapproved.\8\ The Commission must approve a Proposed Rule
Change if it finds that the underlying rule change is consistent with
the requirements of the Exchange Act and the rules and regulations
thereunder applicable to the SRO proposing the rule change.\9\
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    \8\ See 15 U.S.C. 78s(b)(2).
    \9\ 15 U.S.C. 78s(b)(2).
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    The SRO rule filing process for Registered Clearing Agencies serves
two important policy goals. First, the notice and comment requirement
helps assure that interested persons have an opportunity to provide
input on proposed actions by Registered Clearing Agencies that could
have a significant impact on the market, market participants (both
professionals and individual investors) and others.\10\ Second, the
rule filing process allows the Commission to review Registered Clearing
Agencies' Proposed Rule Changes to determine whether they are
consistent with the Exchange Act, including the goals of prompt and
accurate clearance and settlement of securities transactions and the
safeguarding of investors' securities and funds.\11\
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    \10\ See Securities Exchange Act Release No. 49505 (Mar. 30,
2004), 69 FR 17864 (Apr. 4, 2004) (Proposed Rules Regarding Proposed
Rule Changes of Self-Regulatory Organizations) (noting that SROs
``exercise certain quasi-governmental powers over members through
their ability to impose disciplinary sanctions, deny membership, and
require members to cease doing business entirely or in specified
ways.'').
    \11\ See 15 U.S.C. 78q-1(a)(1).
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    At the same time, Section 19(b)(3)(A) of the Exchange Act provides
that a Proposed Rule Change may become effective upon filing with the
Commission, without notice and opportunity for hearing, if it is
appropriately designated by the SRO as: (i) Constituting a stated
policy, practice or interpretation with respect to the meaning,
administration, or enforcement of an existing rule of the SRO; (ii)
establishing or changing a due, fee, or other charge imposed by the SRO
(on any person, whether or not the person is a member of the SRO) or
(iii) concerned solely with the administration of the SRO.\12\ The
Commission has the power summarily to temporarily suspend the change in
rules of the SRO within sixty days of its filing 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 Exchange Act.\13\ If the Commission takes such
action, it is then required to institute proceedings to determine
whether the Proposed Rule Change should be approved or disapproved.\14\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 15 U.S.C. 78s(b)(3)(C).
    \14\ Id. Temporary suspension of a Proposed Rule Change and any
subsequent action to approve or disapprove such change shall not
affect the validity or force of the rule change during the period it
was in effect and shall not be reviewable under Section 25 of the
Exchange Act, nor shall it be deemed to be ``final agency action''
for purposes of 5 U.S.C. 704.
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    In addition to the matters expressly set forth in the statute,
Section 19(b)(3)(A) also provides the Commission with the authority, by
rule and consistent with the public interest, to designate other types
of Proposed Rule Changes that may be effective upon filing with the
Commission.\15\ The Commission has previously utilized this authority
to designate, under Rule 19b-4 of the Exchange Act, certain rule
changes that qualify for summary effectiveness under Section
19(b)(3)(A).\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ For example, Rule 19b-4(f) under the Exchange Act currently
permits SROs to declare rule changes to be immediately effective
pursuant to Section 19(b)(3)(A) if properly designated by the SRO
as: (i) Effecting a change in an existing service of a Registered
Clearing Agency that: (A) Does not adversely affect the safeguarding
of securities or funds in the custody or control of the clearing
agency or for which it is responsible; and (B) does not
significantly affect the respective rights or obligations of the
clearing agency or persons using the service; (ii) effecting a
change in an existing order-entry or trading system of a SRO that:
(A) Does not significantly affect the protection of investors or the
public interest; (B) does not impose any significant burden on
competition; and (C) does not have the effect of limiting the access
to or availability of the system or (iii) effecting a change that:
(A) Does not significantly affect the protection of investors or the
public interest; (B) does not impose any significant burden on
competition and (C) by its terms, does not become operative for 30
days after the date of the filing, or such shorter time as the
Commission may designate if consistent with the protection of
investors and the public interest; provided that the SRO has given
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. See 17 CFR 240.19b-4(f).
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B. Clearing Agencies Deemed Registered Under the Dodd-Frank Act

    Section 763(b) of the Dodd-Frank Act \17\ provides that (i) A
depository institution registered with the Commodity Futures Trading

Commission (``CFTC'') that cleared swaps as a multilateral clearing
organization prior to the date of enactment of the Dodd-Frank Act and
(ii) a derivatives clearing organization (``DCO'') registered with the
CFTC that cleared swaps pursuant to an exemption from registration as a
clearing agency prior to the date of enactment of the Dodd-Frank Act
will be deemed registered with the Commission as a clearing agency
solely for the purpose of clearing security-based swaps (``Deemed
Registered Provision'').\18\ The Deemed Registered Provision, along
with other general provisions under Title VII of the Dodd-Frank Act,
becomes effective on July 16, 2011.\19\ Once a clearing agency is
deemed to be a Registered Clearing Agency, it will be required to
comply with all requirements of the Exchange Act, and the rules and
regulations thereunder, applicable to Registered Clearing Agencies to
the extent it clears security-based swaps after the effective date of
the Deemed Registered Provision, including, for example, the obligation
to file Proposed Rule Changes under Section 19(b) of the Exchange
Act.\20\ Clearing of futures and options on futures is generally
regulated by the CFTC in connection with its oversight and supervision
of DCOs. DCOs are generally permitted to implement rule changes by
self-certifying that the new rule complies with the Commodity Exchange
Act (``CEA'') and the CFTC's regulations.\21\ The change effected by
this interim final rule is intended to eliminate any burdens resulting
from delays that could arise due to the differences between the
Commission's rule filing process and the CFTC's self-certification
process, which generally allows rule changes to become effective
immediately upon or shortly after filing.\22\
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    \17\ The Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat. 1376 (2010).
    \18\ See Section 763(b) of the Dodd-Frank Act (adding new
Section 17A(l) to the Exchange Act, 15 U.S.C. 78q-1(1)). Under this
Deemed Registered Provision, each of the Chicago Mercantile Exchange
Inc. (``CME''), ICE Clear Europe Limited (``ICE Clear Europe'') and
ICE Trust US LLC, or a successor entity of ICE Trust (``ICE Trust'')
will become Registered Clearing Agencies solely for the purpose of
clearing security-based swaps.
    \19\ Section 774 of the Dodd-Frank Act states, ``[u]nless
otherwise provided, the provisions of this subtitle shall take
effect on the later of 360 days after the date of the enactment of
this subtitle or, to the extent a provision of this subtitle
requires a rulemaking, not less than 60 days after publication of
the final rule or regulation implementing such provision of this
subtitle.''
    \20\ The Commission anticipates that as of July 16, 2011, OCC
(formerly known as The Options Clearing Corporation), CME and ICE
Clear Europe will be the only Registered Clearing Agencies that will
be subject to new Rule 19b-4(f)(4)(ii). Although it also will be a
dually-registered clearing agency, ICE Trust does not have an
existing futures clearing business for which it would file Proposed
Rule Changes.
    \21\ See 7 U.S.C. 7a-2(c) and 17 CFR 40.6.
    \22\ See 7 U.S.C. 7a-2(c) and 17 CFR 40.6.
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    The Commission has limited time to act without exposing certain
dually registered clearing agencies to potential legal uncertainty and
market disruption caused by delays that could result from the
requirement that the Commission undertake a full review of Proposed
Rule Changes related to a Registered Clearing Agency's futures clearing
operations before these Proposed Rule Changes may be made effective.
Specifically, and as discussed in greater detail in Section IV, the
Commission only recently received urgent requests for the relief to be
provided by the interim final rule. Accordingly, and in the interest of
adopting the changes to Rule 19b-4 and the General Instructions for
Form 19b-4 prior to effective date of the Deemed Registered Provision
of the Dodd-Frank Act on July 16, 2011, the Commission finds that it
has good cause to adopt the interim final rule immediately and without
the notice and public comment procedures that would ordinarily apply to
this type of rulemaking.

II. Interim Final Rule

A. Amendment to Rule 19b-4

    The Commission is amending Rule 19b-4 to expand the list of
categories that qualify for summary effectiveness under Section
19(b)(3)(A) of the Exchange Act to include Proposed Rule Changes made
by Registered Clearing Agencies with respect to certain futures
clearing operations.\23\ Specifically, new Rule 19b-4(f)(4)(ii) will
allow a Proposed Rule Change concerning futures clearing operations
filed by a Registered Clearing Agency to take effect upon filing with
the Commission pursuant to Section 19(b)(3)(A) so long as it is
properly designated by the Registered Clearing Agency as effecting a
change in a service of the Registered Clearing Agency that meets two
conditions.\24\ The first condition, contained in new Rule 19b-
4(f)(4)(ii)(A), is that the Proposed Rule Change primarily affects the
futures clearing operations of the clearing agency with respect to
futures that are not security futures.\25\ For purposes of this
requirement, a Registered Clearing Agency's ``futures clearing
operations'' would generally include any activity that would require
the Registered Clearing Agency to register with the CFTC as a DCO in
accordance with the CEA.\26\ In addition, to ``primarily affect'' such
futures clearing operations would mean that the Proposed Rule Change is
targeted to affect matters related to the clearing of futures
specifically and that any effect on other clearing operations would be
incidental in nature and not significant in extent.\27\ However,
because a security futures product is a security for purposes of the
Exchange Act,\28\ a Registered Clearing Agency will not be permitted to
file Proposed Rule Changes related to its security futures business
pursuant to Section 19(b)(3)(A) of the Exchange Act in reliance on new
Rule 19b-4(f)(ii). Instead, such clearing agency will continue to be
required to file Proposed Rule Changes with the Commission related to
its respective security futures operations in accordance with Section
19(b)(1) of the Exchange Act, which the Commission will review in
accordance with Section 19(b)(2), unless there is another basis for the
Proposed Rule Change to be filed under Section 19(b)(3)(A).
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    \23\ When an SRO submits a Proposed Rule Change to the
Commission pursuant to Section 19(b)(3)(A) of the Exchange Act, the
Commission still reviews the filing and has the power summarily to
temporarily suspend the change in rules of the SRO within sixty days
of its filing 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
Exchange Act. If the Commission takes such action, it is then
required to institute proceedings to determine whether the Proposed
Rule Change should be approved or disapproved. Temporary suspension
of a Proposed Rule Change and any subsequent action to approve or
disapprove such change shall not affect the validity or force of the
rule change during the period it was in effect and shall not be
reviewable under Section 25 of the Exchange Act, nor shall it be
deemed to be ``final agency action'' for purposes of 5 U.S.C. 704.
See 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f)(4)(ii) (as amended by this interim
final rule).
    \25\ 17 CFR 240.19b-4(f)(4)(ii)(A) (as amended by this interim
final rule).
    \26\ See 7 U.S.C. 7a-1 (providing that it shall be unlawful for
a DCO, unless registered with the CFTC, directly or indirectly to
make use of the mails or any means or instrumentality of interstate
commerce to perform the functions of a DCO (as described in 7 U.S.C.
1a(9)) with respect to a contract of sale of a commodity for future
delivery (or option on such a contract) or option on a commodity, in
each case unless the contract or option is (i) Otherwise excluded
from registration in accordance with certain sections of the CEA or
(ii) a security futures product cleared by a Registered Clearing
Agency).
    \27\ For example, rules of general applicability that would
apply equally to securities clearing operations, including security-
based swaps, would not be considered to primarily affect such
futures clearing operations. In addition, changes to general
provisions in the constitution, articles, or bylaws of the
Registered Clearing Agency that address the operations of entire
clearing agency would not be considered to primarily affect such
futures clearing operations.
    \28\ 15 U.S.C. 78c(a)(10).
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    The second condition, contained in new Rule 19b-4(f)(4)(ii)(B), is
that the Proposed Rule Change does not significantly affect any
securities clearing operations of the clearing

agency or any related rights or obligations of the clearing agency or
persons using such service.\29\ The Commission notes that the phrase
``significantly affect'' currently is used elsewhere in Rule 19b-4 in
the context of defining other categories of Proposed Rule Changes that
qualify for summary effectiveness under Section 19(b)(3)(A) of the
Exchange Act.\30\ Accordingly, ``significantly affect'' has the same
meaning and interpretation as that phrase has in Rules 19b-4(f)(4)(i)
(as amended by this interim final rule), 19b-4(f)(5) and 19b-4(f)(6).
Also for purposes of this requirement, a Registered Clearing Agency's
``securities clearing operations * * * or any related rights or
obligations of the clearing agency or persons using such service''
would generally include any activity that would require the Registered
Clearing Agency to register as a clearing agency in accordance with the
Exchange Act.
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    \29\ 17 CFR 240.19b-4(f)(4)(ii)(A) (as amended by this interim
final rule).
    \30\ See e.g., 17 CFR 240.19b-4(f)(4)(i) (as amended by this
interim final rule) (in respect of a Proposed Rule Change in an
existing service of a Registered Clearing Agency that: (1) Does not
adversely affect the safeguarding of securities or funds in the
custody or control of the clearing agency or for which it is
responsible and (2) does not significantly affect the respective
rights or obligations of the clearing agency or persons using the
service); 17 CFR 240.19b-4(f)(5) (in respect of a Proposed Rule
Change in an existing order-entry or trading system of a SRO that:
(1) Does not significantly affect the protection of investors or the
public interest; (2) does not impose any significant burden on
competition; and (3) does not have the effect of limiting the access
to or availability of the system); and 17 CFR 240.19b-4(f)(6) (in
respect of a Proposed Rule Change that (1) Does not significantly
affect the protection of investors or the public interest; (2) does
not impose any significant burden on competition; and (3) by its
terms, does not become operative for 30 days after the date of the
filing, or such shorter time as the Commission may designate if
consistent with the protection of investors and the public interest;
provided that the SRO has given 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).
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    The Commission believes that permitting clearing agencies to submit
Proposed Rule Changes that meet the two conditions referenced above
(i.e., (A) Primarily affects the futures clearing operations of the
clearing agency with respect to futures that are not security futures
and (B) does not significantly affect any securities clearing
operations of the clearing agency or any related rights or obligations
of the clearing agency or persons using such service) for immediate
effectiveness pursuant to Section 19(b)(3)(A) of the Exchange Act is
consistent with the public interest and the purposes of the Exchange
Act. In particular, this approach should help limit the potential for
delays by providing a streamlined process for allowing rule changes to
become effective that primarily concern the futures clearing operations
of a clearing agency which, unless such operations were linked to
securities clearing operations, would not be subject to regulation by
the Commission. In addition, the information provided to the Commission
by the Registered Clearing Agency in a filing made pursuant to Section
19(b)(1) of the Exchange Act is virtually identical to the information
required to be included in a filing made pursuant to Section
19(b)(3)(A). At the same time, the Commission would retain the power
summarily to temporarily suspend the change in rules of the Registered
Clearing Agency within sixty days of its filing 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 Exchange Act.\31\ Finally, and as discussed more
fully in Section IV of this release, changes to a clearing agency's
futures clearing operations will continue to be subject to the CFTC's
normal process for reviewing rule changes.
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    \31\ 15 U.S.C. 78s(b)(3)(C). If the Commission takes such
action, it is then required to institute proceedings to determine
whether the Proposed Rule Change should be approved or disapproved.
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B. Amendment to the General Instructions for Form 19b-4

    In order to accommodate the amendment to Rule 19b-4 being adopted
today, the Commission also is making a corresponding technical
modification to the General Instructions for Form 19b-4 under the
Exchange Act. Specifically, the Commission is amending Item 7(b) of the
General Instructions for Form 19b-4 (Information to be Included in the
Completed Form), which requires the respondent SRO to cite to the
statutory basis for filing a Proposed Rule Change pursuant to Section
19(b)(3)(A) in accordance with the existing provisions of Rule 19b-
4(f). This amendment would revise Item 7(b)(iv) to include the option
to file the form in accordance with new Rule 19b-4(f)(4)(ii), which
provides for situations where a Registered Clearing Agency is effecting
a change in an existing service that both (i) Primarily affects the
futures clearing operations of the clearing agency with respect to
futures that are not security futures and (ii) does not significantly
affect any securities clearing operations of the clearing agency or any
related rights or obligations of the clearing agency or persons using
such service.

C. Effective Date

    The amendments to Rule 19b-4 and to the General Instructions for
Form 19b-4 will be effective as of July 15, 2011.

III. Request for Comment

    We are requesting comments from all members of the public. We will
carefully consider the comments that we receive. We seek comment
generally on all aspects of the interim final rule. In addition, we
seek comment on the following:
    1. Do the amendments contemplated by this interim final rule
adequately address concerns regarding the application of the
Commission's process for reviewing Proposed Rule Changes once the
Deemed Registered Provision becomes effective?
    2. Given that the objectives and statutory authority of the CFTC
differ from the Commission's, does the degree to which the interim
final rule uses a process that is similar to the CFTC's process for
reviewing rule changes by a Registered Clearing Agency that primarily
affect its futures clearing operations and do not significantly affect
its securities clearing operations provide for sufficient protection
for investors and the securities markets? Why or why not?
    3. Are there other amendments the Commission should consider making
to Rule 19b-4, such as further expanding the list of categories that
qualify for summary effectiveness under Section 19(b)(3)(A) of the
Exchange Act? If so, please describe any amendments the Commission
should consider and reasons why.
    4. Should any additional restrictions be placed on the ability of a
Registered Clearing Agency to file Proposed Rule Changes under Exchange
Act Section 19(b)(3)(A)?

IV. Other Matters

    The Administrative Procedure Act (``APA'') \32\ generally requires
an agency to publish, before adopting a rule, notice of a proposed
rulemaking in the Federal Register.\33\ This requirement does not
apply, however, if the agency ``for good cause finds * * * that notice
and public procedure are impracticable, unnecessary, or contrary to the
public interest.'' \34\ Further, the APA also generally requires that
an agency

publish a rule in the Federal Register 30 days before the rule becomes
effective.\35\ This requirement, however, does not apply if the agency
finds good cause for making the rule effective sooner.\36\
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    \32\ 5 U.S.C. 551 et seq.
    \33\ See 5 U.S.C. 553(b).
    \34\ Id.
    \35\ See 5 U.S.C. 553(d).
    \36\ Id.
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    The Commission finds that it has good cause to have these rules
take effect on July 15, 2011, on an interim final basis and that notice
and solicitation of comment before the effective date of the proposed
amendments to Rule 19b-4 and to the General Instructions for Form 19b-4
is impracticable, unnecessary, or contrary to the public interest.
    Specifically, Section 763(b) of the Dodd-Frank Act provides that
both (i) A depository institution registered with the CFTC that cleared
swaps as a multilateral clearing organization prior to the date of
enactment of the Dodd-Frank Act and (ii) a DCO registered with the CFTC
that cleared swaps pursuant to an exemption from registration as a
clearing agency prior to the date of enactment of the Dodd-Frank Act
will be deemed registered with the Commission as a clearing agency
solely for the purpose of clearing security-based swaps.\37\ The Deemed
Registered Provision, along with other general provisions under Title
VII of the Dodd-Frank Act, becomes effective on July 16, 2011.\38\
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    \37\ See Section 763(b) of the Dodd-Frank Act (adding new
Section 17A(l) to the Exchange Act, 15 U.S.C. 78q-1(1)).
    \38\ Section 774 of the Dodd-Frank Act states, ``[u]nless
otherwise provided, the provisions of this subtitle shall take
effect on the later of 360 days after the date of the enactment of
this subtitle or, to the extent a provision of this subtitle
requires a rulemaking, not less than 60 days after publication of
the final rule or regulation implementing such provision of this
subtitle.''
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    The Commission recognizes that the differences between the
Commission's rule filing process for Registered Clearing Agencies and
the CFTC's process for reviewing rule changes by DCOs could result in
additional burdens on certain clearing agencies subject to the Deemed
Registered Provision, which are discussed in greater detail below.\39\
Specifically, DCOs are generally permitted to implement new rules or
rule amendments by filing with the CFTC a certification that the new
rule or rule amendment complies with the CEA and the CFTC's
regulations.\40\ Alternatively, DCOs may request direct CFTC approval
of a rule or amendment thereunder after it has been filed with the CFTC
pursuant either to its self-certification process or as a request for
direct approval of a rule or amendment.\41\ Because of the differences
between the CFTC's process and the Commission's rules for reviewing
Proposed Rule Changes, a rule or rule amendment proposed by a dually-
registered clearing agency related exclusively to its futures clearing
operations could be delayed by the Commission's rule filing process
despite being permitted to become effective by the CFTC immediately
upon or shortly after filing.\42\
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    \39\ The CFTC's requirements and procedures for self-
certification filings and approval requests for new and amended
rules and the clearing of new products are set forth in 17 CFR 40.6,
17 CFR 40.5 and 17 CFR 40.2.
    \40\ See 7 U.S.C. 7a-2(c). Unless designated by the DCO as an
emergency rule certification, rule changes submitted to the CFTC
pursuant to the self-certification process may take effect
immediately so long as the CFTC receives the submission by the open
of business on the business day preceding implementation of the
rule. See 17 CFR 40.6. However, Section 745 of the Dodd-Frank Act
amended Section 5c(c) of the CEA to include a new 10-day
certification review period for all rules and rule amendments
submitted to the CFTC and to permit the CFTC to stay the
certification of rules or rule amendments that, among other things,
present novel or complex issues that require additional time to
analyze. Pursuant to Section 754 of the Dodd-Frank Act, this change
to the timing of the self-certification process takes effect on the
later of 360 days after the date of the enactment of the statute or
not less than 60 days after publication of the final rule or
regulation implementing such provision.
    \41\ See 7 U.S.C. 7a-2(c) and 17 CFR 40.5.
    \42\ During 2010, CME self-certified 11 rule changes with the
CFTC related to its activities as a DCO. ICE Clear Europe, which
became a registered DCO on January 22, 2010, did not self-certify
any rule changes during 2010, but has self-certified 11 rule changes
with the CFTC since January 1, 2011. Currently, OCC, which is
registered with the Commission as a clearing agency with respect to
its clearing services for options and security futures listed and
traded on its participant exchanges, also is registered with the
CFTC as a DCO with respect to its clearing services for transactions
in futures and options on futures. During 2010, OCC filed 19
Proposed Rule Changes with the Commission and 19 rule changes with
the CFTC, of which 15 were resolved through the CFTC's self-
certification process and four were resolved or are pending pursuant
to the CFTC's direct approval process.
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    This interim final rule takes effect on July 15, 2011. For several
reasons, including those discussed above, we have acted on an interim
final basis. Specifically, affected clearing agencies requested action
with respect to Registered Clearing Agencies' obligations under Section
19(b) of the Exchange Act only shortly before the effective date of the
Deemed Registered Provision. Based on discussions with these affected
clearing agencies, the Commission understands that market participants
believe that the Commission needs to provide relief prior to the
effective date of the Deemed Registered Provision of the Dodd-Frank Act
on July 16, 2011 in order to avoid operational problems, legal
uncertainty and market disruptions.
    Specifically, one clearing agency subject to the Deemed Registered
Provision contacted staff in late April 2011 to alert the Commission
that it had determined that, absent the approach set out in the interim
final rule we are adopting today, the clearing agency would encounter a
number of negative consequences.\43\ For example, delays resulting from
the requirement that the Commission undertake a full review of Proposed
Rule Changes related to a Registered Clearing Agency's futures clearing
operations before these Proposed Rule Changes may be made effective
could impair a clearing agency's ability to bring beneficial
enhancements or other changes into the futures markets, such as those
related to improving the operational efficiency of its futures clearing
business. These delays could also lead to legal uncertainty regarding
the status of Proposed Rule Changes after they have been self-certified
with the CFTC but prior to the date on which the Commission makes a
final determination in accordance with Section 19(b) of the Exchange
Act. As a result, both the clearing agency and market participants
could potentially be required to develop contingency plans with
alternative approaches related to the clearing of futures which would
likely result in substantial operational burdens and increased costs.
As a result, the clearing agency requested that the Commission provide
relief on the basis that subjecting Proposed Rule Changes that relate
primarily to its futures clearing operations to the routine Commission
approval process would needlessly delay effectiveness of these Proposed
Rule Changes and could affect the clearing agency's operations as well
as ability to provide enhancements that promote efficiencies with
respect to its futures related activities. In May 2011, another
clearing agency contacted the Commission to convey the need for urgent
rulemaking by the Commission to address these same issues.
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    \43\ The Commission's staff discussed with this clearing agency
in late February 2011, among other things, the regulatory
requirements for Registered Clearing Agencies under the Exchange Act
in light of the Deemed Registered Provision including with respect
to Proposed Rule Changes. Subsequently, in late April 2011, that
clearing agency articulated an urgent need for relief prior to the
effectiveness of the Deemed Registered Provision.
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    Notwithstanding the limited amount of time before the Deemed
Registered Provision becomes effective, and therefore the limited time
the Commission has to act, these clearing agencies expressed their
strong view that the Commission should provide relief immediately in
order to prevent the above-described potential operational problems,
legal uncertainty

and market disruptions from manifesting into actual issues for
Registered Clearing Agencies once the Deemed Registered Provision
becomes effective on July 16, 2011.
    In light of the concerns raised by these clearing agencies, the
Commission believes that adopting an interim final rule to immediately
amend Rule 19b-4 in the manner as set forth above would benefit the
public interest by eliminating any undue delays and operational
inefficiencies that could result from the requirement that the
Commission review changes to rules primarily concerning futures
clearing operations before they become effective. This could
potentially benefit market participants (including investors) by, among
other things, preventing delays to beneficial enhancements within the
futures markets. Accordingly, the Commission finds that there is good
cause to have the rule effective as an interim final rule on July 15,
2011, and that notice and public procedure in advance of effectiveness
of the interim final rule are impracticable, unnecessary and contrary
to the public interest.\44\ The Commission is requesting comments on
the interim final rule and will carefully consider any comments
received and respond to them as necessary or appropriate.
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    \44\ This finding also satisfies the requirements of 5 U.S.C.
808(2), allowing the rules to become effective notwithstanding the
requirement of 5 U.S.C. 801 (if a federal agency finds that notice
and public comment are ``impractical, unnecessary or contrary to the
public interest,'' a rule ``shall take effect at such time as the
federal agency promulgating the rule determines.'')
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V. Paperwork Reduction Act

    The Commission does not believe that the amendments to Rule 19b-4
and to the General Instructions for Form 19b-4 adopted pursuant to the
interim final rule contain any ``collection of information''
requirements as defined by the Paperwork Reduction Act of 1995, as
amended (``PRA'').\45\ The interim final rule amends Rule 19b-4 under
the Exchange Act to expand the list of categories that qualify for
summary effectiveness under Section 19(b)(3)(A) of the Exchange Act to
include any matter effecting a change in an existing service of a
Registered Clearing Agency that both primarily affects the futures
clearing operations of the clearing agency with respect to futures that
are not security futures and does not significantly affect any
securities clearing operations of the clearing agency or any related
rights or obligations of the clearing agency or persons using such
service. The interim final rule also makes a corresponding technical
modification to the General Instructions for Form 19b-4 under the
Exchange Act. The Commission does not believe that these amendments
would require any new or additional collection of information, as such
term is defined in the PRA.\46\
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    \45\ 44 U.S.C. 3501, et seq.
    \46\ The PRA defines a ``collection of information'' as ``the
obtaining, causing to be obtained, soliciting or requiring the
disclosure to third parties or the public, of facts or opinions by
or for an agency, regardless of form or format, calling for * * *
answers to identical questions posed to, or identical reporting or
recordkeeping requirements imposed on, ten or more persons * * * ''
44 U.S.C. 3502(3)(A). The Commission preliminarily does not believe
that the reporting and recordkeeping provisions in this interim
final rule contain ``collection of information requirements'' within
the meaning of the PRA because fewer than ten persons are expected
to rely on Rule 19b-4(f)(4)(ii). Based on discussions with market
participants, the Commission believes that only three Registered
Clearing Agencies will maintain a futures clearing business
regulated by the CFTC as of the effective date of the Deemed
Registered Provision.
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VI. Cost-Benefit Analysis

    As noted above, the Deemed Registered Provision, along with other
general provisions under Title VII of the Dodd-Frank Act, becomes
effective on July 16, 2011. At such time, the Commission expects that
there will be three Registered Clearing Agencies that maintain a
futures clearing business regulated by the CFTC.\47\Accordingly, these
entities will be required to file Proposed Rule Changes with the
Commission under Section 19(b) of the Exchange Act, and to comply
separately with the CFTC's process for self-certification or direct
approval of rules or rule amendments. The Commission is sensitive to
the increased burdens these obligations will impose and agrees that it
is in the public interest to eliminate any potential inefficiencies and
undue delays that could result from the requirement that the Commission
review changes to rules primarily concerning futures clearing
operations before they may be considered effective.
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    \47\ These include OCC, CME and ICE Clear Europe.
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A. Benefits

    New Rule 19b-4(f)(4)(ii) will eliminate the requirement for
Registered Clearing Agencies to submit a significant number of Proposed
Rule Changes that primarily affect their futures clearing operations
with the Commission for pre-approval pursuant to Section 19(b)(1) of
the Exchange Act. As a result, the rule would eliminate any potential
inefficiencies and undue delays that could result from the requirement
that the Commission review the Proposed Rule Change before it may be
considered effective. At the same time, the Commission would retain the
power summarily to temporarily suspend the change in rules of the
Registered Clearing Agency within sixty days of its filing 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 Exchange Act.\48\
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    \48\ 15 U.S.C. 78s(b)(3)(C). If the Commission takes such
action, it is then required to institute proceedings to determine
whether the Proposed Rule Change should be approved or disapproved.
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    As a result, the Commission would be providing the Registered
Clearing Agency with the ability to declare the Proposed Rule Change
immediately effective, thereby limiting potential delays to activities
related to its futures operations that may be beneficial to both the
clearing agency and market participants, in a manner that does not
impair the Commission's ability to review the filing and to determine
whether it would be necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Exchange Act, to conduct a more thorough analysis of
the issues.

B. Costs

    As noted above, the amendments to Rule 19b-4 would expand the list
of categories that qualify for summary effectiveness under Section
19(b)(3)(A) of the Exchange Act. These amendments will not materially
increase or decrease the costs of complying with Rule 19b-4, nor will
they modify an SRO's obligation to submit a Proposed Rule Change to the
Commission; rather, the amendments will change the statutory basis
under which a rule change is filed. As a result, new Rule 19b-
4(f)(4)(ii) would impose minimal, if any, costs on a Registered
Clearing Agency, which would consist solely of the time spent
determining whether a Proposed Rule Change qualifies for summary
effectiveness pursuant to new Rule 19b-4(f)(4)(ii).
    The Commission requests that commenters provide views and
supporting information regarding the costs and benefits associated with
the proposals. The Commission seeks estimates of these costs and
benefits, as well as any costs and benefits not already identified.

VII. Consideration of Burden on Competition and Promotion of
Efficiency, Competition and Capital Formation

    Section 23(a) \49\ of the Exchange Act requires the Commission,
when making rules and regulations under the Exchange Act, to consider
the impact a new rule would have on competition. Section 23(a)(2) of
the Exchange Act prohibits the Commission from adopting any rule that
would impose a burden on competition not necessary or appropriate in
furtherance of the purposes of the Exchange Act. Section 3(f) of the
Exchange Act \50\ requires the Commission, when engaging in rulemaking
that requires it to consider whether an action is necessary or
appropriate in the public interest, to consider, in addition to the
protection of investors, whether the action would promote efficiency,
competition, and capital formation.
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    \49\ 15 U.S.C. 78w(a).
    \50\ 15 U.S.C. 78c(f).
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    As discussed above, the amendment to Rule 19b-4 will expand the
list of categories that qualify for summary effectiveness under Section
19(b)(3)(A) of the Exchange Act to include any matter that both (i)
Primarily affects the futures clearing operations of the clearing
agency with respect to futures that are not security futures and (ii)
does not significantly affect any securities clearing operations of the
clearing agency or any related rights or obligations of the clearing
agency or persons using such service. Specifically, new Rule 19b-
4(f)(4)(ii) is intended to avoid undue delays that could result from
the requirement that the Commission review changes to rules primarily
concerning futures clearing operations before they may be considered
effective. Without new Rule 19b-4(f)(4)(ii), certain clearing agencies
would be required to submit a significant number of Proposed Rule
Changes to the Commission for consideration and approval pursuant to
Section 19(b)(1) that relate primarily to their futures clearing
operations. Accordingly, the Commission believes such changes would not
result in any burden to competition and would instead contribute to a
better capital formation and more efficient markets by limiting the
potential for any undue delays for services or changes that may benefit
market participants.

VIII. Regulatory Flexibility Certification

    The Regulatory Flexibility Act (``RFA'') \51\ requires the
Commission, in promulgating rules, to consider the impact of those
rules on small entities. Section 603(a) of the APA,\52\ as amended by
the RFA, generally requires the Commission to undertake a regulatory
flexibility analysis of all proposed rules to determine the impact of
such rulemaking on ``small entities.'' \53\ Section 605(b) of the RFA
states that this requirement shall not apply to any proposed rule
which, if adopted, would not have a significant economic impact on a
substantial number of small entities.\54\
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    \51\ 5 U.S.C. 601 et seq.
    \52\ 5 U.S.C. 603(a).
    \53\ Section 601(b) of the RFA permits agencies to formulate
their own definitions of ``small entities.'' The Commission has
adopted definitions for the term ``small entity'' for the purposes
of rulemaking in accordance with the RFA. These definitions, as
relevant to this proposed rulemaking, are set forth in Rule 0-10, 17
CFR 240.0-10.
    \54\ See 5 U.S.C. 605(b).
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    For the purposes of Commission rulemaking in connection with the
RFA, a small entity includes, when used with reference to a clearing
agency, a clearing agency that: (i) Compared, cleared and settled less
than $500 million in securities transactions during the preceding
fiscal year; (ii) had less than $200 million of funds and securities in
its custody or control at all times during the preceding fiscal year
(or at any time that it has been in business, if shorter) and (iii) is
not affiliated with any person (other than a natural person) that is
not a small business or small organization.\55\ Under the standards
adopted by the Small Business Administration, small entities in the
finance industry include the following: (i) For entities engaged in
investment banking, securities dealing and securities brokerage
activities, entities with $6.5 million or less in annual receipts; (ii)
for entities engaged in trust, fiduciary and custody activities,
entities with $6.5 million or less in annual receipts and (iii) funds,
trusts and other financial vehicles with $6.5 million or less in annual
receipts.\56\
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    \55\ 17 CFR 240.0-10(d).
    \56\ 13 CFR 121.201, Sector 52.
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    The amendments to Rule 19b-4 and to the General Instructions for
Form 19b-4 would apply to all Registered Clearing Agencies. As of July
16, 2011, there likely will be seven clearing agencies with active
operations registered with the Commission. Of the seven Registered
Clearing Agencies with active operations, three currently maintain a
futures clearing business. Based on the Commission's existing
information about these three Registered Clearing Agencies, as well as
on the entities likely to register with the Commission in the future,
the Commission preliminarily believes that such entities will not be
small entities, but rather part of large business entities that exceed
the thresholds defining ``small entities'' set out above.
    For the reasons stated above, the Commission certifies that the
proposed amendments to Rule 19b-4 and to the General Instructions for
Form 19b-4 would not have a significant economic impact on a
substantial number of small entities for the purposes of the RFA. The
Commission encourages written comments regarding this certification.
The Commission requests that commenters describe the nature of any
impact on small entities, including clearing agencies, and provide
empirical data to support the extent of the impact.

IX. Statutory Basis and Text of Amendments

    Pursuant to the Exchange Act, and particularly Section 19(b)
thereof, 15 U.S.C. 78s(b), the Commission proposes to amend Rule 19b-4
as set forth below.

List of Subjects in 17 CFR Parts 240 and 249

    Brokers, Reporting and recordkeeping requirements, Securities.

Text of Rule

    In accordance with the foregoing, Title 17, chapter II of the Code
of Federal Regulations is amended as follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
1. The general authority citation for part 240 continues to read as
follows:

    Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 78p, 78q,
78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37,
80b-3, 80b-4, 80b-11, and 7210 et seq., 18 U.S.C. 1350, and 12
U.S.C. 5221(e)(3), unless otherwise noted.
* * * * *

0
2. Amend Sec.  240.19b-4 by:
0
a. Adding the word ``either'' before the colon in the introductory text
in paragraph (f)(4);
0
b. Redesignating paragraph (f)(4)(i) as paragraph (f)(4)(i)(A);
0
c. Redesignating paragraph (f)(4)(ii) as paragraph (f)(4)(i)(B);
0
d. Adding the word ``or'' after the semicolon after newly designated
paragraph (f)(4)(i)(B);
0
e. Adding new paragraph (f)(4)(ii)(A); and
0
f. Adding new paragraph (f)(4)(ii)(B).

0
3. The additions read as follows:

Sec.  240.19b-4  Filings with respect to proposed rule changes by self-
regulatory organizations.

* * * * *
    (f) * * *
    (4) * * *
    (ii)(A) Primarily affects the futures clearing operations of the
clearing agency with respect to futures that are not security futures;
and
    (B) Does not significantly affect any securities clearing
operations of the clearing agency or any related rights or obligations
of the clearing agency or persons using such service;
* * * * *

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
4. The general authority citation for part 249 continues to read in
part as follows:

    Authority:  15 U.S.C. 78a et seq. and 7201 et seq.; and 18
U.S.C. 1350, unless otherwise noted.
* * * * *

0
5. Amend Form 19b-4 (referenced in Sec.  249.819) by:
0
a. Amending paragraph (b)(iv) in Item 7 of the General Instructions
(Information to be Included in the Completed Form (``Form 19b-4
Information'')) as follows:

    Note:  The text of Form 19b-4 does not, and the amendments will
not, appear in the Code of Federal Regulations.

Form 19b-4

* * * * *

GENERAL INSTRUCTIONS FOR FORM 19b-4

* * * * *

Information to be Included in the Completed Form (``Form 19b-4
Information'')

* * * * *

7. Basis for Summary Effectiveness Pursuant to Section 19(b)(3) or for
Accelerated Effectiveness Pursuant to Section 19(b)(2) or Section
19(b)(7)(D)

* * * * *
    (b) * * *
    (iv) effects a change in an existing service of a registered
clearing agency that either (A)(1) does not adversely affect the
safeguarding of securities or funds in the custody or control of the
clearing agency or for which it is responsible and (2) does not
significantly affect the respective rights or obligations of the
clearing agency or persons using the service or (B)(1) primarily
affects the futures clearing operations of the clearing agency with
respect to futures that are not security futures and (2) does not
significantly affect any securities clearing operations of the clearing
agency or any related rights or obligations of the clearing agency or
persons using such service, and set forth the basis on which such
designation is made,
* * * * *

    Dated: July 7, 2011.

    By the Commission.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-17524 Filed 7-12-11; 8:45 am]
BILLING CODE 8011-01-P