Electronic Submission of Certain Materials Under the Securities Exchange Act of 1934; Amendments Regarding the FOCUS Report

Federal RegisterApr 18, 2023

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 202, 232, 240, 249, and 249b

[Release Nos. 33-11176; 34-97182; IC-34864; File No. S7-08-23]

RIN 3235-AL85

Electronic Submission of Certain Materials Under the Securities Exchange Act of 1934; Amendments Regarding the FOCUS Report

AGENCY:

Securities and Exchange Commission.

ACTION:

Proposed rule.

SUMMARY:

The Securities and Exchange Commission (“Commission” or “SEC”) is proposing to require electronic filing or submission of certain forms and other filings or submissions that are required to be filed with or submitted to the Commission under the Securities Exchange Act of 1934 (“Exchange Act”) and the rules and regulations under the Exchange Act. The proposal would require the electronic filing or submission on the Commission's Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system, using structured data where appropriate, for certain forms filed or submitted by self-regulatory organizations (“SROs”). The proposal would require the information currently contained in Form 19b-4(e) to be publicly posted on the SRO's website and remove the manual signature requirements for SRO proposed rule change filings. The Commission is also proposing that a clearing agency post supplemental material to its website. In addition, the proposal would amend rules under the Exchange Act and the Securities Act of 1933 (“Securities Act”) to require the electronic filing or submission on EDGAR, using structured data where appropriate, of certain forms, reports and notices provided by broker-dealers, security-based swap dealers and major security-based swap participants. The proposed amendments also would require withdrawal in certain circumstances of notices filed in connection with an exception to counting certain dealing transactions toward determining whether a person is a security-based swap dealer. Finally, the Commission is proposing to allow electronic signatures in certain broker-dealer filings, and is proposing amendments regarding the Financial and Operational Combined Uniform Single Report (“FOCUS Report”) to harmonize with other rules, make technical corrections, and provide clarifications.

DATES:

Comments should be received on or before May 22, 2023.

ADDRESSES:

Comments may be submitted by any of the following methods:

Electronic Comments

• Use the Commission's internet comment form (

https://www.sec.gov/regulatory-actions/how-to-submit-comments

); or

• Send an email to

rule-comments@sec.gov.

Please include File No. S7-08-23 on the subject line.

Paper Comments

• Send paper comments to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File No. S7-08-23. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's website (

https://www.sec.gov/rules/proposed.shtml

). Comments are also available for website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10 a.m. and 3 p.m. Operating conditions may limit access to the Commission's public reference room. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly.

Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such materials will be made available on the Commission's website. To ensure direct electronic receipt of such notifications, sign up through the “Stay Connected” option at

www.sec.gov

to receive notifications by email.

FOR FURTHER INFORMATION CONTACT:

For Form 1—Justin Pica, Assistant Director, and David Remus, Special Counsel; for Form 1-N—David Dimitrious, Senior Special Counsel, and Michou Nguyen, Special Counsel; for Form 15A—Molly Kim, Assistant Director, and David Michehl, Special Counsel; for Form CA-1—Matthew Lee, Assistant Director, and Claire Noakes, Special Counsel; for Form 19b-4(e) and technical amendment to Form 19b-4—Cristie March, Senior Special Counsel, and Edward Cho, Special Counsel; for Rule 17a-22—Matthew Lee, Assistant Director, and Susan Petersen, Special Counsel; for Form X-17A-5 Part III and related annual filings, Form X-17A-5 Parts II, IIA, and IIC, Form 17-H, and Form X-17A-19—Raymond A. Lombardo, Assistant Director, Rose Wells, Special Counsel, and Valentina Minak Deng, Special Counsel; for notices provided pursuant to Exchange Act Rules 3a71-3(d)(1)(vi) and 15fi-3(c)—Carol McGee, Associate Director, and Russell Mancuso, Special Counsel; and for reports submitted pursuant to Rule 15fk-1(c)(2)(ii)(A), Kelly Shoop, Branch Chief, and Katherine Lesker, Special Counsel, Division of Trading and Markets, at (202) 551-5500, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION:

The Commission is proposing to require the electronic filing or submission, using structured data where appropriate, of certain forms and other filings,

which are currently filed with or submitted to the Commission in paper or via email or are new filing requirements. The proposal is divided into five parts: (1) forms that are filed or submitted by or otherwise made available electronically by SROs (“Covered SRO Forms”); (2) supplementary materials (“Covered Supplementary Materials”) that are proposed to be posted on the internet websites of clearing agencies; (3) forms and related filings filed or submitted by broker-dealers and over-the-counter derivatives dealers (“OTC derivatives dealers”), as well as security-based swap dealers (“SBSDs”) and major security-based swap participants (“MSBSPs”) (each SBSD and each MSBSP also referred to as an “SBS Entity” and together referred to as “SBS Entities”); (4) other notices, filings, and reports consisting of (a) Form X-17A-19; (b) 17 CFR 240.3a71-3(d)(1)(vi) (“Rule 3a71-3(d)(1)(vi)”) Notices; (c) 17 CFR 240.15Fi-3(c) (“Rule 15fi-3(c)”) Notices; and (d) 17 CFR 240.15Fk-1(c)(2)(ii)(A) (“Rule 15fk-1(c)(2)(ii)(A)”) Compliance Reports; and (5) amendments regarding the FOCUS Report and signature requirements in Exchange Act Rules 17a-5, 17a-12, and 18a-7.

The Commission is proposing

amendments to or relating to the following rules:

For purposes of this proposing release, the term “form” means any Commission-created document labeled as a “Form” that is proposed to be submitted or filed electronically, and the term “filing” means any form, notice, report, or material proposed to be submitted or filed electronically or proposed to be posted on an internet website in lieu of being submitted or filed.

The Commission's proposal also includes proposed amendments to CFR designations in order

to ensure regulatory text conforms more consistently with section 2.13 of the Document Drafting Handbook.

See

Office of the Federal Register, Document Drafting Handbook (Aug. 2018 Edition, Revision 1.4, dated January 7, 2022),

available at https://www.archives.gov/files/federal-register/write/handbook/ddh.pdf.

For rules proposed to be amended in this release that contain an uppercase letter in their CFR citations, the Commission is proposing to amend their CFR section designations to replace each such uppercase letter with the corresponding lowercase letter, and, in one case, to also redesignate the rule numbering. For example, 17 CFR 240.15Fi-3 is proposed to be redesignated as 17 CFR 240.15fi-3, 17 CFR 240.15Fk-1 is proposed to be redesignated as 17 CFR 240.15fk-1, 17 CFR 240.15Aa-1 is proposed to be redesignated as 17 CFR 240.15aa-1, and 17 CFR 240.15Aj-1 is proposed to be redesignated as 17 CFR 240.15aa-2.

Commission reference

CFR citation

(17 CFR)

Administrative Practice and Procedure, Securities:

Rule 202.3

§ 202.3.

Securities Act of 1933 (“Securities Act”)

Regulation S-T:

Rule 100

§ 232.100.

Rule 101

§ 232.101.

Rule 201

§ 232.201.

Rule 202

§ 232.202.

Rule 405

§ 232.405.

Securities Exchange Act of 1934 (“Exchange Act”)

Rule 3a71-3

§ 240.3a71-3.

Rule 6a-1

§ 240.6a-1.

Rule 6a-2

§ 240.6a-2.

Rule 6a-3

§ 240.6a-3.

Rule 6a-4

§ 240.6a-4.

Rule 15Aa-1

§ 240.15Aa-1.

Rule 15Aa-2

§ 240.15Aa-2.

Rule 15Aj-1

§ 240.15Aj-1.

Rule 15c3-1

§ 240.15c3-1.

Rule 15fi-3

§ 240.15Fi-3.

Rule 15fk-1

§ 240.15Fk-1.

Rule 17a-5

§ 240.17a-5.

Rule 17a-12

§ 240.17a-12.

Rule 17a-19

§ 240.17a-19.

Rule 17a-22

§ 240.17a-22.

Rule 17ab2-1

§ 240.17ab2-1.

Rule 17h-2T

§ 240.17h-2T.

Rule 18a-7

§ 240.18a-7.

Rule 19b-4

§ 240.19b-4.

Rule 19b-7

§ 240.19b-7.

Rule 24b-2

§ 240.24b-2.

Form 1

§ 249.1.

Form 1-N

§ 249.10.

Form CA-1

§ 249.200.

Form 17-H

§ 249.328T.

Form X-17A-5 Part II

§ 249.617.

Form X-17A-5 Part IIA

§ 249.617.

Form X-17A-5 Part IIC

§ 249.617.

Form X-17A-5 Part III

§ 249.617.

Form X-17A-19

§ 249.635.

Form X-15AA-1

§ 249.801.

Proposed new Form 15A

§ 249.801 (as proposed to be amended).

Form 19b-4

§ 249.819.

Finally, the Commission is proposing to rescind:

See

15 U.S.C. 77a through 77mm.

See

15 U.S.C. 78a through 78qq.

Commission reference

CFR citation

(17 CFR)

Exchange Act:

Form X-15AJ-1

§ 249.802.

Form X-15AJ-2

§ 249.803.

Form 19b-4(e)

§ 249.820.

In developing this proposal with regard to SBS Entities, the Commission has consulted and coordinated with the Commodity Futures Trading Commission (“CFTC”) and the prudential regulators in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).

See

Public Law 111-203, 124 Stat. 1376 (2010). Section 712(a)(2) of the Dodd-Frank Act provides in part that the Commission shall “consult and coordinate to the extent possible with the Commodity Futures Trading Commission and the prudential regulators for the purposes of assuring regulatory consistency and comparability, to the extent possible.”

Table of Contents

I. Introduction

A. Experience With Targeted Regulatory Assistance During the COVID-19 Pandemic

B. Covered SRO Forms

C. Covered Supplementary Materials

D. Filings by Broker-Dealers, OTC Derivatives Dealers, SBSDs, and MSBSPs

E. Other Forms, Reports or Notices

F. Structured Data Requirements

G. Amendments Regarding the FOCUS Report and Signature Requirements in Rule 17a-5, 17a-12, and 18a-7 Filings

II. Proposed Requirements To Electronically File Covered SRO Forms

A. Form 1

B. Form 1-N

C. Proposed Form 15A

D. Form CA-1

E. Form 19b-4(e)

F. Rule 19b-4(j) and Form 19b-4

G. Conforming Technical Amendment to Rule 202.3(b) Under the Exchange Act

III. Proposed Requirements for Clearing Agencies to Electronically File Covered Supplemental Materials

A. Current Rule 17a-22

B. Updated Staff Statement and Resulting Alternate Arrangements for Rule 17a-22 Compliance

C. Proposed Amendments to Rule 17a-22

D. Request for Comment

IV. Proposed Requirements To Electronically File Broker-Dealer, OTC Derivatives Dealer, and SBS Entity Reports

A. Rules 17a-5, 18a-7, and 17a-12

B. Rule 17h-2T and Form 17-H

V. Other Forms, Reports or Notices

A. Notices Pursuant To Rule 17a-19 and Form X-17A-19

B. Notice (and Any Withdrawal of a Notice) Filed Pursuant to Rule 3a71-3(d)(1)(vi)

C. Notice (and Any Amendment, Including Notice of Dispute Termination) Provided Pursuant to Rule 15fi-3(c)

D. Compliance Reports Submitted to the Commission Pursuant to Rule 15fk-1(c)(2)(ii)(A)

VI. Amendments Regarding the FOCUS Report and Signature Requirements in Rule 17a-5, 17a-12, and 18a-7 Filings

A. Corrective and Clarifying Amendments to the FOCUS Report Part II

B. Harmonizing FOCUS Report Part IIC With the Call Report

C. OTC Derivatives Dealer FOCUS Report Filing Requirement

D. Signature Requirements in Rule 17a-5, 17a-12, and 18a-7 Filings

VII. Proposed Amendments to Regulation S-T (Including Structured Data Requirements) and Rule 24b-2

A. Proposed Amendments to Regulation S-T (Including Structured Data Requirements)

B. Proposed Amendments to Rule 24b-2

VIII. General Request for Comments

IX. Paperwork Reduction Act

A. Summary of Collection of Information

B. Proposed Use of Information

C. Respondents

D. Total Initial and Annual Reporting and Recordkeeping Burdens

E. Collection of Information is Mandatory

F. Confidentiality of Responses to Collection of Information

G. Retention Period for Recordkeeping Requirements

H. Request for Comments

X. Economic Analysis

A. Broad Economic Considerations

B. Baseline

C. Economic Effects

D. Efficiency, Competition, and Capital Formation

E. Reasonable Alternatives

F. Request for Comment

XI. Initial Regulatory Flexibility Act Analysis

A. Regulatory Flexibility Act Certification

B. Initial Regulatory Flexibility Analysis

C. Reasons for, and Objectives of, the Proposed Action

D. Legal Basis

E. Small Entities Subject to the Proposed Rules

F. Reporting, Recordkeeping, and Other Compliance Requirements

G. Duplicative, Overlapping, or Conflicting Federal Rules

H. Significant Alternatives

I. Request for Comment

XII. Small Business Regulatory Enforcement Fairness Act

Statutory Authority

I. Introduction

A. Experience With Targeted Regulatory Assistance During the COVID-19 Pandemic

As part of its response to the COVID-19 pandemic, the Commission and its staff provided assistance and regulatory relief to market participants, as appropriate, to facilitate the continued orderly and fair functioning of the securities markets.

As part of these efforts, Division of Trading and Markets (“Division”) staff issued a statement providing that the staff would not recommend enforcement action if filers and registrants made alternative arrangements, as detailed in the statement, for delivery, execution, and notarization of certain paper filings.

More specifically, the staff stated that it would not recommend that the Commission take enforcement action with respect to any failure to comply with the paper format submission requirement or manual signature requirement of certain “Impacted Paper Submissions” (as defined in the Updated Staff Statement), which included, but were not limited to, broker-dealer audited annual reports, Form 1 filings for national securities exchanges, and Form CA-1 filings for clearing agencies.

See generally, e.g.,

An Update on the Commission's Targeted Regulatory Relief to Assist Market Participants Affected by COVID-19 and Ensure the Orderly Function of our Markets (public statement by Chairman Jay Clayton, William Hinman, Director, Division of Corporation Finance, Dalia Blass, Director, Division of Investment Management, Brett Redfearn, Director, Division (Jan. 26, 2020, updated Jan. 5, 2021)),

available at https://www.sec.gov/news/public-statement/update-commissions-targeted-regulatory-relief-assist-market-participants.

See generally

Division Updated Staff Statement Regarding Certain Paper Submissions in Light of COVID-19 Concerns (“Updated Staff Statement”),

available at https://www.sec.gov/tm/paper-submission-requirements-covid-19-updates-061820.

Staff reports, Investor Bulletins, and other staff documents cited in this release represent the views of Commission staff and are not a rule, regulation, or statement of the Commission. The Commission has neither approved nor disapproved the content of these documents and, like all staff statements, they have no legal force or effect, do not alter applicable law, and create no new or additional obligations for any person.

In general, electronic filing of Impacted Paper Submissions has been practical and efficient. It also has been the Commission's experience that electronic filing has been positively received by the various registrants that have used it. Based in part on these positive experiences with electronic filing during the COVID-19 pandemic, and as part of its efforts to modernize the methods by which it collects and analyzes information from registrants, the Commission is proposing to amend some of the rules and forms discussed in this release, as set forth in more detail below, to require that certain filings be submitted to the Commission electronically using the Commission's EDGAR system. As part of the effort to modernize its information collection and analysis methods, and as discussed more fully below, the Commission is proposing that a number of the filings submitted to the Commission electronically on EDGAR use structured data where appropriate.

B. Covered SRO Forms

The Commission is proposing to require that the following forms be filed electronically on EDGAR:

Form

Filer type

Proposed amendments

Form 1: Application for, and Amendments to Application for, Registration as a National Securities Exchange or Exemption from Registration pursuant to section 5 of the Exchange Act

Exchange

Amend 17 CFR 249.1 (“Form 1”), including the form and instructions to the form, and 17 CFR 240.6a-1 (“Rule 6a-1”), 17 CFR 240.6a-2 (“Rule 6a-2”), and 17 CFR 240.6a-3 (“Rule 6a-3”) under the Exchange Act.

Form 1-N: Form and Amendments for Notice of Registration as a National Securities Exchange for the Sole Purpose of Trading Security Future Products Pursuant to section 6(g) of the Exchange Act

Exchange

Amend 17 CFR 249.10 (“Form 1-N”), including the form and instructions to the form, and 17 CFR 240.6a-4 (“Rule 6a-4”) under the Exchange Act.

Form X-15AA-1: Application for Registration as a National Securities Association or Affiliated Securities Association, Form X-15AJ-1: Amendatory and/or Supplementary Statements to Registration Statement of a National Securities Association or an Affiliated Securities Association, and Form X-15AJ-2: Annual Consolidated Supplement of a National Securities Association or an Affiliated Securities Association

Securities Association

Form X-15AA-1 (re-numbered as Form 15A) and the instructions to the form, and corresponding Exchange Act Rule 15Aa-1 (redesignated as Rule 15aa-1).

Forms X-15AJ-1 and X-15AJ-2 (repealed and the information requirements incorporated into new Form 15A),

and corresponding Exchange Act Rule 15Aj-1 (re-numbered as Rule 15aa-2).

Form CA-1: Application for Registration or for Exemption from Registration as a Clearing Agency and for Amendment to Registration Pursuant to the Exchange Act

Clearing Agency

The form and instructions to the form, and corresponding Exchange Act Rule 17ab2-1.

The

Commission's regulatory framework currently requires an entity seeking to be registered as a national securities exchange (or seeking an exemption from such registration based on limited volume), a national securities association, a clearing agency (or seeking an exemption from such registration), and a national securities exchange solely for the purpose of trading futures on individual stocks or on narrow-based stock indexes

(“Security Futures Product Exchange”) to file, in a paper-based format, certain forms that are mandated by rules under the Exchange Act. Registered national securities exchanges, registered national securities associations, registered clearing agencies, and registered Security Futures Product Exchanges (collectively, SROs), as well as exempt exchanges and exempt clearing agencies (together with prospective SROs, “Filers”), are also required to submit paper-based amendments to their respective forms. The Commission's proposal would modernize the filing process for these various forms by requiring that the forms and information contained therein be submitted to the Commission electronically, thereby removing the burden of preparing and submitting paper forms by the Filers, and of receiving, acting upon, and maintaining the paper forms by the Commission and its staff.

See

17 CFR 249.802 and 803. The forms and instructions to the form are incorporated by reference into the Code of Federal Regulations.

Futures on individual stocks or on narrow-based stock indexes are hereinafter referred to as “security futures products.”

In particular, as required by 17 CFR 240.6a-1 (“Rule 6a-1”), 17 CFR 240.6a-2 (“Rule 6a-2”), and 17 CFR 240.6a-3 (“Rule 6a-3”) under the Exchange Act, a prospective exchange must file on 17 CFR 249.1 (“Form 1”) an application for registration as a national securities exchange (or for an exemption from the requirement to register as a national securities exchange based on limited volume), and, once registered, the exchange must file as an amendment to its Form 1 certain updating information, as well as certain supplemental material and reports. In addition, as required by 17 CFR 240.6a-4 (“Rule 6a-4”) under the Exchange Act, a prospective exchange may register as a Security Futures Product Exchange by filing 17 CFR 249.10 (“Form 1-N”) (“notice registration”) if it satisfies certain prerequisites, and must file amendments to its initial filing and certain supplemental materials on Form 1-N as well. An applicant for registration as a national securities association must file a registration statement with the Commission on Form X-15AA-1, and every association applying for registration or registered as a national securities association must file amendments and supplements to its registration statement with the Commission on Form X-15AJ-1 and annual supplements to its registration statement with the Commission on Form X-15AJ-2. Moreover, as required by Rule 17ab2-1 (“Rule 17ab2-1”) under the Exchange Act, a prospective clearing agency must file on Form CA-1 an application for registration as a clearing agency (or for an exemption from such registration), and both registered and exempt clearing agencies must file amendments to their Form CA-1 as necessary. In each of the foregoing situations, these forms are submitted to the Commission in a paper-based format. As a result, the prospective and existing SROs, exempt exchanges, and exempt clearing agencies must incur the costs of completing their respective paper-based forms, making the requisite number of copies, and submitting the original version and copies to the Commission.

The Commission also is proposing to rescind the following form and instead require that the information currently contained in the form be publicly posted on the relevant SRO's internet website:

Form

Filer type

Proposed amendment

Form 19b-4(e): Information Required of a Self-Regulatory Organization Listing and Trading a New Derivative Securities Product Pursuant to Rule 19b-4(e) Under the Exchange Act

SRO

Rescind the form and instructions to the form, and amend 17 CFR 240.19b-4(e) (“Exchange Act Rule 19b-4(e)”).

Currently, 17 CFR 240.19b-4(e) (“Rule 19b-4(e)”) under the Exchange Act requires an SRO to submit to the Commission reports regarding the listing and trading of new derivative securities products on Form 19b-4(e) in a paper-based format. As with the forms discussed above in this section, SROs must incur the costs of completing the paper-based form, making the requisite number of copies, and submitting the original version and copies to the Commission.

C. Covered Supplementary Materials

Rule 17a-22 requires a registered clearing agency to file with the Commission three copies of any material within 10 days after issuing, or making generally available, such materials to its participants or to other entities with whom it has a significant relationship.

A registered clearing agency for which the Commission is not the appropriate regulatory agency is required at the same time to file one copy of such material with its “appropriate regulatory agency” (“ARA”).

See

17 CFR 240.17a-22. Such materials are hereinafter referred to as “supplementary materials.”

See id.

When used with respect to a clearing agency, the term “appropriate regulatory authority” is defined under section 3(a)(34)(B) of the Exchange Act to mean broadly the Comptroller of the Currency, the Board of Governors of the Federal Reserve System (“Federal Reserve”), or the Federal Deposit Insurance Corporation, depending on the type of bank that is acting as a registered clearing agency.

See

15 U.S.C. 78c(a)(34).

Since the Commission adopted Rule 17a-22 in 1980, technology has evolved significantly and the internet has played an increasingly vital role in information distribution.

See, e.g.,

The Impact of Recent Technological Advances on the Securities Market (Sep. 1997),

available at https://www.sec.gov/news/studies/techrp97.htm.

In this report, the Commission stated that it was mindful of the benefits of increasing use of new technologies, such as the internet, to access information more efficiently.

During this period, the Commission has encouraged the dissemination of information electronically via the internet and other automated systems and services.

In general, transitioning from a requirement to file paper with the Commission to an electronic filing requirement can help improve efficiency and transparency in the securities markets for registered clearing agencies, its participants and the general public. Most recently, under the Updated Staff Statement described above,

registered clearing agencies have established alternate arrangements to satisfy the requirements of Rule 17a-22 that do not require the submission of paper filings.

Id; see also, e.g.,

Commission Interpretation: Use of Electronic Media, Exchange Act Release No. 42728 (Apr. 28, 2000), 65 FR 25843 (May 4, 2000),

available at https://www.sec.gov/rules/interp/34-42728.htm;

Press Release: SEC Provides Guidance to Open Up Use of Corporate websites for Disclosures to Investors (July 30, 2008),

available at https://www.sec.gov/news/press/2008/2008-158.htm.

See supra

note 5.

The Commission is now proposing to amend Rule 17a-22 to eliminate the paper filing requirement altogether and require registered clearing agencies to post any supplementary materials to its internet website, as discussed further below.

The Commission believes that the amended rule would increase efficiency in the distribution of supplementary materials required under the rule and promote transparency regarding their contents, as these supplementary materials are intended to be made generally available to participants in the clearing agency or other categories of market participants with whom the clearing agency has a significant relationship. In addition, the cost associated with the proposal is likely to be less than the costs currently incurred by clearing agencies utilizing alternative arrangements consistent with the Updated Staff Statement.

See generally infra

section III.

D. Filings by Broker-Dealers, OTC Derivatives Dealers, SBSDs, and MSBSPs

Form

Filer type

Proposed amendment

Form X-17A-5 Part III: Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Exchange Act

Broker-Dealer, Security-Based Swap Dealer, Major Security-Based Swap Participant

Require the form to be filed on EDGAR.

Form 17-H: Risk Assessment Report for Brokers and Dealers

Broker-Dealer

Require the form to be filed on EDGAR.

The Commission believes that the certain forms and other filings that are proposed to be filed on EDGAR by broker-dealers, OTC derivatives dealers, SBSDs, and MSBSPs are appropriate for electronic filing because many of them are voluminous (in number, size, or both) and some of them contain certain information that must be disclosed publicly.

Electronic conversion and/or publication of these filings by Commission staff, to make them available to the public and/or Commission staff, can be labor intensive and time consuming. The Commission believes that requiring submission of these filings on the Commission's established EDGAR filing system would facilitate more efficient transmission, analysis, dissemination, storage, and retrieval of information, and would benefit the Commission, the submitting entities, investors, and other market participants.

See generally infra

section IV.

The Commission is proposing to use the existing EDGAR system for certain filings because Form X-17A-5 Part III and Form 17-H are already permitted to be filed on EDGAR and the Commission believes that some of these filings may be readily transitioned to electronic filing on EDGAR.

E. Other Forms, Reports or Notices

Form, report or notice

Filer/submitter type

Proposed amendment

Form 17a-19: Information Required of National Securities Exchanges and Registered National Securities Associations Pursuant to Section 17 and 19 of the Securities Exchange Act of 1934 and Rule 17a-19 Thereunder, Report of Change in Membership Status

National securities exchanges, national securities associations

Require the form to be filed on EDGAR.

Notices (and any withdrawals of notices) filed pursuant to Rule 3a71-3(d)(1)(vi) under the Exchange Act

Certain registered SBSDs or registered brokers that meet certain capital and other requirements

Require the notices and withdrawals to be filed on EDGAR; require withdrawal in specified circumstances.

Notices (and any amendments to the notices) of Security-Based Swap Valuation Disputes pursuant to Rule 15fi-3(c)

SBS Entities

Require the notices (and any amendments to the notices) to the Commission to be submitted on EDGAR using structured data; specify that notices (including amendments) required to be provided to any applicable prudential regulator be in a form and manner acceptable to such prudential regulator.

Compliance Reports Submitted to the Commission pursuant to Rule 15fk-1(c)(2)(ii)(A)

SBS Entities

Require reports to be submitted on EDGAR in a structured data language.

The Commission is proposing to use the EDGAR system for the following notices, reports, and filings: (1) notices made pursuant to Rule 17a-19 under the Exchange Act and on accompanying Form X-17A-19; (2) notices made pursuant to Rule 3a71-3(d)(1)(vi) under the Exchange Act; (3) notices made to the Commission pursuant to Rule 15fi-3(c) under the Exchange Act; and (4) reports made pursuant to Rule 15fk-1(c)(2)(ii)(A) under the Exchange Act. Currently, the notices made pursuant to Rule 17a-19 under the Exchange Act and on accompanying Form X-17A-19 are submitted via paper.

The notices made pursuant to Rule 3a71-3(d)(1)(vi) under the Exchange Act are filed via email.

The notices made to the Commission pursuant to Rule 15fi-3(c) and the reports required under Rule 15fk-1(c)(2)(ii)(A) are either submitted via email or submitted on EDGAR, at the filer's option.

See infra

section V.A.

See infra

section V.B.

See infra

section V.C. Rule 15fi-3(c) requires that SBS Entities “

notify

the Commission” (emphasis added).

See infra

section V.C.1. Requiring these notices and amendments to be submitted to the Commission via EDGAR as proposed would not cause them to be deemed filed for purposes of the Exchange Act.

See e.g.,

section 18 of the Exchange Act. 17 CFR 240.15Fk-1(c) (“Rule 15fk-1(c)”) requires that the chief compliance officer of an SBS Entity prepare and sign an annual compliance report that “shall [b]e submitted to the Commission.” 17 CFR 240.15Fk-1(c) (emphasis added). Requiring these reports to be submitted via EDGAR as proposed would not cause the report to be deemed filed for purposes of the Exchange Act.

F. Structured Data Requirements

The Commission is proposing to require certain of the disclosures required by the following filings to be provided in a structured, machine-readable data language: (1) the Covered SRO Forms; (2) the information required under Rule 19b-4(e); (3) Form X-17A-19; (4) the annual reports (and related annual filings) filed by broker-dealers (including OTC derivatives dealers) and SBS Entities on Form X-17A-5 Part III; (5) the risk assessment reports filed by certain broker-dealers on Form 17-H; and (6) the notices and reports provided to the Commission by SBS Entities under Exchange Act Rules 15fi-3(c) and 15fk-1(c)(2)(ii)(A), respectively (together, the “Proposed Structured Documents”).

For certain affected documents, only some aspects are proposed to be provided in a structured data language. For example, only the execution pages of Form 1-N and Form 15A are proposed to be provided in a structured data language.

See infra

section VII.A.

Specifically, the Commission is proposing to require the report required by Exchange Act Rule 15fk-1(c)(2)(ii)(A) and portions of Form 1, Form CA-1, Form 17-H, and Form X-17A-5 Part III and related annual filings to be provided in the Inline eXtensible Business Reporting Language (“Inline XBRL”) structured data language. The Commission is also proposing to require Form X-17A-19, the notice to the Commission (and any amendments to the notices) required by Exchange Act Rule 15fi-3(c), and portions of Form 1-N, Form 15A, Form 1, Form CA-1, Form 17-H, and Form X-17A-5 Part III and related annual filings to be provided in machine-readable, eXtensible Markup Language (“XML”)-based data languages specific to those documents (“custom XMLs”). As noted, these structured documents would be filed or submitted on EDGAR.

The details of the proposed structured data requirements, including the specific portions of affected documents that would be structured in Inline XBRL versus custom XML, are discussed in Section VII.A below.

In addition, the Commission is proposing to require SROs to electronically post the information required under Rule 19b-4(e) using a custom XML-based data language (also referred to as a “schema”) that the Commission would create and publish on its website for SROs to use.

The Commission is also proposing to require SROs to post a rendered Portable Digital Format (“PDF”) version of the custom XML document using a PDF renderer that the Commission would also create and publish on its website for SROs to use.

This requirement would mirror the existing requirement for registered broker-dealers to electronically post reports containing order routing information using the most recent versions of the XML schema and the associated PDF renderer as published on the Commission's website.

See

17 CFR 242.606. The custom XML schema and PDF renderer for Rule 606 reports are

available at https://www.sec.gov/structureddata/dera_taxonomies.

See id.

As discussed in further detail below, the Commission believes the proposed structured data requirements would facilitate access to the disclosures by users (

e.g.,

investors, market participants, analysts, the Commission), enabling more efficient retrieval, aggregation, and comparison across different filers and time periods, as compared to an unstructured PDF, HyperText Markup Language (“HTML”), or American Standard Code for Information Interchange (“ASCII”) requirement.

See infra

sections VII.A and X.C. The addition of structured data requirements would also be generally consistent with objectives of the recently enacted Financial Data Transparency Act (“FDTA”), which concerns the manner in which the Commission collects and disseminates information. The FDTA was signed into law on Dec. 23, 2022, as Title LVIII of the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023.

See

James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, Public Law 117-263 (Dec. 23, 2022). Section 5811 of the FDTA directs the Commission and other covered agencies (

e.g.,

financial regulators) to jointly issue proposed rules for public comment that establish data standards for the collections of information reported to each covered agency by financial entities and for the data collected from covered agencies on behalf of the Financial Stability Oversight Council. The data standards must meet specified criteria relating to openness and machine-readability and promote interoperability of financial regulatory data across members of the Financial Stability Oversight Council. In addition, Section 5822 of the Financial Data Transparency Act requires that all public data assets published by the Commission under the securities laws and the Dodd-Frank Act be made available in accordance with specified criteria relating to openness and machine-readability.

See

44 U.S.C. 3502(20) (defining the term “open Government data asset” to mean, among other things, machine-readable and available (or could be made available) in an open format).

The Commission is proposing some disclosures to be structured in Inline

XBRL, and other disclosures to be structured in custom XML, because the Commission believes Inline XBRL is well-suited for certain types of content—such as financial statements and extended narrative discussions—whereas other types of content can be readily captured using custom XML data languages that yield smaller file sizes than Inline XBRL and thus facilitate more streamlined data processing. Such custom XML languages also enable EDGAR to generate fillable web forms that permit affected entities to input disclosures into form fields rather than encode their disclosures in custom XML themselves, thus likely easing compliance burdens on affected entities. Finally, certain of the proposed structured documents—Form X-17A-5 Part III and Form 17-H—are already partially subject to custom XML structured data requirements when voluntarily filed on EDGAR. For these forms, the Commission is proposing to require the same custom XML requirements so as to minimize the associated burdens on registrants already using these languages for these forms.

Certain of the proposed structured documents also include requirements to attach copies of existing documents, such as copies of by-laws, written agreements, user manuals, and listing applications. The Commission is proposing to require affected entities to file these copies of documents as unstructured PDF attachments to the otherwise structured forms. The Commission believes requiring affected entities to retroactively structure such existing documents, which were prepared for purposes outside of fulfilling the Commission's disclosure requirements, could impose compliance burdens on affected entities that may not be justified in light of the commensurate informational benefits associated with having such documents in structured form.

See infra

sections II.A.3, II.D.5, IV.B, and VII.A.

Similarly, Forms 1-N and 15A (other than the cover pages—

i.e.,

execution pages—of those Forms) would not be subject to structured data requirements, given that the very limited number of Form 1-N and Form 15A filers and filings limits the benefit that would accrue from machine-readability of the disclosures contained therein.

ANE Exception Notices also would not be subject to structured data requirements, as the very limited number of data points in such notices may lessen the utility of any functionality enabled by structured data (such as efficient retrieval of individual data points from structured documents).

See infra

sections II.B.3, II.C.3, and VII.A.

See infra

sections V.B.2 and VII.A.

G. Amendments Regarding the FOCUS Report and Signature Requirements in Rule 17a-5, 17a-12, and 18a-7 Filings

Finally, the Commission is proposing amendments regarding the FOCUS Report to harmonize with other rules, make technical changes, and provide clarifications. In addition, the Commission is proposing to allow electronic signatures in Rule 17a-5, 17a-12, and 18a-7 filings, including the FOCUS Report.

II. Proposed Requirements To Electronically File Covered SRO Forms

The Commission proposes to amend certain Exchange Act rules and the Covered SRO Forms, including their instructions, to eliminate the current paper copy filing method and instead require electronic submission of the Covered SRO Forms. Changing from the current method of paper filing to electronic submission of the Covered SRO Forms ultimately should increase efficiencies and decrease costs for Filers with respect to their filing obligations.

In addition, the Commission believes that the electronic filing of the Covered SRO Forms would facilitate the Commission's oversight of SROs by streamlining the process of tracking and reviewing the filings made on the Covered SRO Forms.

See infra

section X.

The proposal would require the use of EDGAR to file the Covered SRO Forms. The Commission is proposing to use the existing EDGAR system for the Covered SRO Forms because the Commission believes that these filings are similar to other filings that are currently submitted on EDGAR. Furthermore, many of the Covered SRO Forms contain information that must be disclosed publicly, and electronic conversion and/or publication of these filings by Commission staff, to make them available to the public and Commission staff, is labor intensive and time consuming. The Commission believes that requiring the submission of these filings on EDGAR would facilitate more efficient transmission, analysis, dissemination, storage, and retrieval of information, and would benefit the Commission, the submitting entities, investors, and other market participants. As a result of the proposed amendments to relevant Commission rules and forms as described below, any Filer of the Covered SRO Forms who has not previously made an electronic filing on EDGAR would need to apply for EDGAR access pursuant to the EDGAR Filer Manual

in order to file documents on EDGAR.

See https://www.sec.gov/edgar/filermanual.

As discussed in more detail in the Paperwork Reduction Act section of this release, the Commission does not believe that the Filers of Covered SRO Forms have previously made an electronic filing on EDGAR.

See infra

section IX.C (Form ID).

For each of the Covered SRO Forms, the Commission is proposing to add technical requirements to the form's general instructions to specify when a form would be considered incomplete or deficient when filed. Specifically, each Filer would be required to provide all the information required by the form, including the exhibits, and a filing that is incomplete or otherwise deficient may be returned to the Filer. The proposed general instructions for each form also would set forth what comprises a complete filing. For instance, the proposed general instructions for Form 1 would state that a completed form filed with the Commission shall consist of Form 1, responses to all applicable items, and any exhibits required in connection with the filing.

The Commission also proposes that, for each of the Covered SRO Forms, the general instructions would require some or all of the information reported on the forms (including, where applicable, the exhibits to the forms) to be provided in a structured, machine-readable data language. For Form 1 and Form CA-1, the general instructions would require the submissions to be provided in part using Inline XBRL and in part using custom XML data languages specific to those Forms, with certain submissions that constitute copies of existing documents of a Filer (such as copies of governing documents or copies of contracts) to be included as text-searchable PDF attachments rather than structured data.

For Form 1-N and Form 15A, only the cover page (

i.e.,

execution page) of each form would be structured in a custom XML data language, while the remainder of each form would remain unstructured. For Form X-17A-19, the entire form would be structured in a custom XML data language. Finally, the information under proposed Rule 19b-4(e)(2)(ii) would be required to be provided on the listing SRO's website using a custom XML data language, thus making the information machine-readable.

For example, the copies of governing documents that are required to be attached as Exhibit A to Form 1 and as part of Exhibit E to Form CA-1 would be included as a PDF attachment, rather than being structured in Inline XBRL or custom XML.

See infra

notes 37 and 38.

Proposed Structured Data Requirements for Covered SRO Forms

Form

Inline XBRL requirements

Custom XML requirements

Unstructured PDF requirements

Form CA-1

Schedule A, Exhibits C, F, H, J, K, L, M, O, R, S

Execution page, Exhibits A (in part), B, D, E (in part), I, N, Q

Exhibits A (in part), E (in part), G, P, T.

Form 1

Exhibits D, E (in part), I

Execution page, Exhibits C (in part), H (in part), J, K, L, M, N, 17 CFR 240.6a-3(b) (“Rule 6a-3(b)”) volume reports

Exhibits A, B, C (in part), E (in part), F, G, H (in part), 17 CFR 240.6a-3(a)(1) (“Rule 6a-3(a)(1)”) supplemental materials.

Form 1-N

None

Execution page only

Remainder of form.

Form 15A

None

Execution page only

Remainder of form.

For Form CA-1, Schedule A and Exhibits C, F, H, J, K, L, M, O, R, and S would be filed in Inline XBRL.

The execution page and Exhibits A (in part), B, D, E (in part), I, N, and Q would be filed in custom XML.

Exhibits A (in part), E (in part), G, P, and T would be filed as unstructured PDF documents.

Schedule A to the execution page requires certain descriptive responses to complement the clearing agency's execution page disclosures. Exhibit C requires a description of the clearing agency's organizational structure. Exhibit F requires a description of material pending legal proceedings involving the clearing agency. Exhibit H requires the clearing agency's financial statements. Exhibit J requires a description of the clearing agency's services and functions. Exhibit K requires a description of the clearing agency's security measures and procedures. Exhibit L requires a description of the clearing agency's safeguarding measures and procedures. Exhibit M requires a description of the clearing agency's backup systems. Exhibit O requires a description of criteria governing access to the clearing agency's services and a description of the reasons for imposing such criteria. Exhibit R requires a schedule of prohibitions and limitations on access to the clearing agency's services. Exhibit S requires, if applicable, a statement explaining why the clearing agency should be exempt.

The execution page requires identifying information about the filer and the document being filed. Exhibit A requires, in relevant part, a list of persons controlling or directing the management or policies of the clearing agency, and descriptions of any unwritten agreements or arrangements through which such persons may exercise control or direction. Exhibit B requires a list of the clearing agency's officers, managers, and individuals occupying similar positions. Exhibit D requires a list of persons who are controlled by, or are under common control with, the clearing agency, as well as a description of each control relationship. Exhibit E requires, in relevant part, a list of dues, fees, and other charges imposed by the clearing agency for its clearing activities. Exhibit I requires the addresses of all offices in which the clearing agency conducts its activities, and an identification of the activities that are performed in each listed office. Exhibit N requires a list of participants, or applicants for participation, in the clearing agency. Exhibit Q requires a schedule of fees fixed by the clearing agency for services rendered by its participants.

Exhibit A requires, in relevant part, copies of written agreements with persons who may control or direct the management or policies of the clearing agency. Exhibit E requires, in relevant part, a copy of the currently effective constitution, articles of incorporation or association, by-laws, rules, procedures and instruments corresponding thereto, of the clearing agency. Exhibit G requires copies of all contracts with any national securities exchange, national securities association or clearing agency or securities market for which the clearing agency acts as a clearing agency or performs clearing agency functions. Exhibit P requires copies of any forms of contracts governing the terms on which persons may subscribe to clearing agency services provided by the registrant. Exhibit T requires any conditions, reports, notices or other submissions to the Commission required as directed in any Order approving applications for exemption from registration as a clearing agency.

For Form 1, Exhibits D, E (in part), and I would be filed in Inline XBRL.

The execution page, Exhibits C (in part), H (in part), J, K, L, M, N, and the 17 CFR 240.6a-3(b) (“Rule 6a-3(b)”) volume reports would be filed in custom XML.

Exhibits A, B, C (in part), E (in part), F, G, H (in part), and the 17 CFR 240.6a-3(a)(1) (“Rule 6a-3(a)(1)”) supplemental materials would be filed as unstructured PDF documents.

For Forms 15A and 1-N, only the execution page would be filed using a structured data language (custom XML).

Exhibit D requires the unconsolidated financial statements for the latest fiscal year for each of the exchange's subsidiaries and affiliates. Exhibit E requires, in relevant part, a description of the manner of operation of the electronic trading system that the exchange uses to effect transactions. Exhibit I requires audited financial statements for the exchange's latest fiscal year.

The execution page requires identifying information about the filer and the document being filed. Exhibit C requires, in relevant part, information regarding each subsidiary or affiliate of the exchange, and each entity with whom the exchange has an agreement relating to the operation of an electronic trading system to be used to effect transactions on the exchange (such as the name and address of the organization, a brief description of the nature and extent of the affiliation, and the a brief description of the business or functions of the organization). Exhibit H requires, in relevant part, a schedule of listing fees and a brief description of the criteria governing which securities may be traded on the exchange. Exhibit J requires a list of the exchange's officers, governors, standing committee members, or persons performing similar functions. Exhibit K requires a list of the exchange's significant owners, shareholders, or partners. Exhibit L requires descriptions of the criteria, conditions, and procedures governing membership in the exchange. Exhibit M requires a list of members, participants, subscribers, or other users of the exchange, as well as a description of each user's activities. Exhibit N requires schedules of securities traded on the exchange. Rule 6a-3(b) of the Exchange Act requires a report concerning the securities sold on the exchange during the previous calendar month.

See

17 CFR 240.6a-3(b).

Exhibit A requires copies of the constitution, articles of incorporation or association with all subsequent amendments, and of existing by-laws or corresponding rules or instruments, whatever the name, of the exchange. Exhibit B requires copies of all written rulings, settled practices having the effect of rules, and interpretations of the Governing Board or other committee of the exchange in respect of any provisions of the constitution, by-laws, rules, or trading practices of the exchange which are not included in Exhibit A. Exhibit C requires, in relevant part, copies of the constitution, a copy of the articles of incorporation or association including all amendments, and copies of the existing by-laws or corresponding rules or instruments for each of the exchange's subsidiaries or affiliates and for each entity with whom the exchange has an agreement relating to the operation of an electronic trading system to be used to effect transactions on the exchange. Exhibit E requires, in relevant part, a copy of the exchange's users' manual. Exhibit F requires a complete set of all forms pertaining to membership, participation, or subscription to the exchange, application for approval as a person associated with a member, participant, or subscriber of the exchange, or any other similar materials. Exhibit G requires a complete set of all forms of financial statements, reports, or questionnaires required of members, participants, subscribers, or any other users relating to financial responsibility or minimum capital requirements for such members, participants, or any other users. Exhibit H requires, in relevant part, a complete set of documents comprising the exchange's listing applications, including any agreements required to be executed in connection with listing. Rule 6a-3(a)(1) of the Exchange Act requires any material (including notices, circulars, bulletins, lists, and periodicals) issued or made generally available to members of, or participants or subscribers to, the exchange.

See

17 CFR 240.6a-3(a)(1).

The execution page requires identifying information about the filer and the document being filed.

Similarly, the information under proposed Rule 19b-4(e)(2)(ii) would be required to be provided on the listing SRO's website using a custom XML data language, thus making the information machine-readable.

Rule 19b-4(e) Information

None

Entire Rule 19b-4(e) posting

The entire posting would also be available as a rendered PDF document.

The Commission believes that the proposed requirement that the Covered SRO Forms be filed, and information pursuant to Rule 19b-4(e) be posted, using structured data languages would allow the Commission and, if applicable, investors, market participants, and other interested parties, to efficiently review and analyze the information.

In addition, the requirement to file Covered SRO Forms on EDGAR in a structured data language would enable EDGAR to perform technical validations (

i.e.,

programmatic checks to ensure the documents are appropriately standardized, formatted, and complete) upon intake of the documents, potentially improving the quality of the filed data by decreasing the incidence of non-substantive errors (such as the omission of values from fields that should always be populated).

For more detailed discussions of the anticipated benefits associated with structured data requirements,

see infra

sections VII.A. and X.C.1.b.

Based on the Commission's experience in reviewing the Covered SRO Forms and information posted pursuant to Rule 19b-4(e), the Commission also believes that the proposed requirement to electronically file the Covered SRO Forms and electronically post the information required pursuant to Rule 19b-4(e) would allow for more efficient use of Commission resources related to reviewing, assessing, and processing these filings and postings. In addition, information provided on the Covered SRO Forms would be captured automatically by EDGAR and would be text-searchable or machine-readable. The information posted pursuant to Rule 19b-4(e) would be machine-readable as well. As a result, the Commission believes that these features would facilitate its oversight of SROs.

Substantive changes would not be required to the information required to be filed on the Covered SRO Forms or the information required to be posted pursuant to Rule 19b-4(e). Rather, the proposal is intended simply to require and facilitate the electronic filing of the Covered SRO Forms and the disclosure of the information required under Rule 19b-4(e), which the SROs currently are required to provide to the Commission.

A. Form 1

1. Relevant Statutory Framework

Section 6(a) of the Exchange Act states, “[a]n exchange may be registered as a national securities exchange . . . by filing with the Commission an application for registration in such form as the Commission, by rule, may prescribe containing the rules of the exchange and such other information and documents as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection.”

Rules 6a-1, 6a-2, and 6a-3

under the Exchange Act and Form 1

set forth the filing requirements for registration as a national securities exchange and for exempt exchanges, as well as requirements for the filing of supplemental material and reports.

See

15 U.S.C. 78f(a).

See

17 CFR 240.6a-1; 17 CFR 240.6a-2; 17 CFR 240.6a-3.

See

17 CFR 249.1.

2. Current Requirements for FilingForm 1

Rule 6a-1 under the Exchange Act generally requires that an entity seeking to register as a national securities exchange, or seeking an exemption from such registration based on limited volume, file an application on Form 1 and correct any inaccuracy therein upon discovery.

Form 1 contains an execution page as well as 14 exhibits that must be filed by the exchange.

The Form 1 execution page requires certain basic information from the exchange, such as the name and street and mailing addresses of the exchange; the name, title, and telephone number of the exchange's contact employee; and the legal status of the exchange (

e.g.,

corporation or limited liability company). The Form 1 exhibits require the exchange to provide, among other things: its audited financial statements and unconsolidated financial statements for each subsidiary or affiliate; its governing documents and rules; the names of its members, participants, subscribers, and users; information regarding its non-member owners, shareholders, or partners; and the securities it lists or trades. The instructions to Form 1 require that one original and two copies of all the Form 1 materials be filed with the Commission in paper form.

See

17 CFR 240.6a-1.

For purposes of this paragraph, these entities are collectively referred to as “exchanges.”

See

17 CFR 249.1.

Rule 6a-2 requires a registered national securities exchange or an exempt exchange

to amend its Form 1 as specified therein. Specifically, pursuant to 17 CFR 240.6a-2(a) (“Rule 6a-2(a)”), an exchange must file an amendment to its Form 1 within 10 days after it takes any action that renders any part of its Form 1 execution page or the information provided in its Form 1 Exhibits C, F, G, H, J, K, or M inaccurate or incomplete.

For purposes of this paragraph, these entities are collectively referred to as “exchanges.”

See

17 CFR 240.6a-2(a).

Pursuant to 17 CFR 240.6a-2(b) (“Rule 6a-2(b)”), on or before June 30 of each year, a national securities exchange or an exempt exchange

must file amendments to Exhibits D, I, K, M, and N with the Commission.

Pursuant to 17 CFR 240.6a-2(c) (“Rule 6a-2(c)”), on a triennial basis, an exchange must file complete Exhibits A, B, C, and J with the Commission.

Further, 17 CFR 240.6a-2(d) (“Rule 6a-2(d)”) provides alternative means for satisfying the requirements to file amendments to certain exhibits.

These alternative means require that the exchange: (i) on an annual or more frequent basis publish the information required by the pertinent exhibits, or cooperate in its publication;

(ii) keep the information up to date and make it available to the Commission and the public upon request;

or (iii) make the required information available continuously on an internet website controlled by the exchange.

As with Form 1 filings pursuant to Rule 6a-1, all amendments to Form 1 pursuant to Rule 6a-2 currently are submitted in paper form in accordance with the instructions to Form 1.

For purposes of this paragraph, these entities are collectively referred to as “exchanges.”

See

17 CFR 240.6a-2(b).

See

17 CFR 240.6a-2(c).

See

17 CFR 240.6a-2(d). Rule 6a-2(d) applies to information required to be filed pursuant to paragraphs (b)(2) and (c) of Rule 6a-2. Rule 6a-2(d) sets forth alternative means of providing access to the information contained in Exhibits A, B, C, J, K, M, and N in lieu of filing the information with the Commission.

See

The exchange would need to: (i) identify the publication in which the information is available, the name, address, and telephone number of the person from whom such publication may be obtained, and the price of the publication; and (ii) certify the accuracy of such information as of its publication date. 17 CFR 240.6a-2(d)(1).

The exchange would need to certify that the information is kept up to date and is available to the Commission and the public upon request. 17 CFR 240.6a-2(d)(2).

The exchange would need to: (i) indicate the location of the internet website where such information may be found; and (ii) certify that the information available at such location is accurate as of its date. 17 CFR 240.6a-2(d)(3).

See

17 CFR 249.1.

Pursuant to Rule 6a-3, a national securities exchange or an exempt exchange

also must file certain supplemental material and reports with the Commission.

Specifically, Rule 6a-3(a)(1) requires an exchange to file with the Commission any material issued or made generally available to members of, or participants or

subscribers to, the exchange within 10 days after issuing or making such material available to such members, participants or subscribers.

17 CFR 240.6a-3(a)(2) (“Rule 6a-3(a)(2)”) provides that, if information required by Rule 6a-3(a)(1) is available continuously on a website controlled by the exchange, in lieu of filing such information, the exchange may indicate the location of the website where the information can be found, and certify that the information is accurate as of its date.

Rule 6a-3(b) requires an exchange to file, within 15 days after the end of each calendar month, a volume report of securities transactions on the exchange during the calendar month. As with filings pursuant to Rules 6a-1 and 6a-2, all filings pursuant to Rule 6a-3 currently are submitted in paper form.

For purposes of this paragraph, these entities are collectively referred to as “exchanges.”

See

17 CFR 240.6a-3.

See

17 CFR 240.6a-3(a)(1).

See

17 CFR 240.6a-3(a)(2).

See

17 CFR 240.6a-3(b). This report must set forth: (i) the number of shares of stock sold and the aggregate dollar amount of such stock sold; (ii) the principal amount of bonds sold and the aggregate dollar amount of such bonds sold; and (iii) the number of rights and warrants sold and the aggregate dollar amount of such rights and warrants sold.

Id.

Form 1 filings are currently made available to the public.

Form 1 filings made pursuant to Rule 6a-1 are scanned and the resulting PDF documents are posted on the Commission's website. Form 1 filings made pursuant to Rule 6a-2 are scanned and the resulting PDF documents are uploaded to EDGAR. Form 1 filings made pursuant to Rule 6a-3 are available for inspection in paper form in the Commission's public reading room.

When the Commission previously amended Form 1 and Rules 6a-1, 6a-2, and 6a-3, it stated that “[t]he information collected, retained, and/or filed pursuant to the rules for registration as a national securities exchange will not be confidential and will be available to the public.” Exchange Act Release No. 40760 (Dec. 8, 1998), 63 FR 70844, 70912 (Dec. 22, 1998) (Regulation of Exchanges and Alternative Trading Systems Adopting Release). Consistent with this statement, the Instructions to Form 1 specify that “[n]o assurance of confidentiality is given by the Commission with respect to the responses made in Form 1. The public has access to the information contained in Form 1.”

3. Proposed Requirement To Electronically File Form 1

The Commission proposes to amend Rules 6a-1, 6a-2, and 6a-3 under the Exchange Act, as well as Form 1 and the instructions to Form 1, to require the electronic filing on EDGAR of all submissions required by the rules. As explained in section II above, the Commission believes that, among other benefits, these proposed amendments should increase efficiencies related to the filing of these forms and the review and analysis of the filed forms by the Commission and its staff as well as by investors, market participants, and other interested parties. In addition, the Commission proposes conforming changes to Rule 3(b)(2) of its Informal and Other Procedures,

discussed below,

to clarify that defective applications on Form 1 would be returned to the applicant and, although permitted as an option under the current rule, defective applications no longer would be held by the Commission. A description of the Commission's proposed amendments to Rules 6a-1, 6a-2, and 6a-3, Form 1, and the instructions to Form 1 to implement the proposed electronic filing requirement is provided below.

See

17 CFR 202.3(b)(2).

See infra

section II.G.

a. Proposed Amendments to Rules 6a-1, 6a-2, and 6a-3

The Commission proposes to add a new paragraph (e) to Rule 6a-1 to require the electronic filing on EDGAR of all Form 1 filings and amendments to such filings. The Commission also proposes to amend Rules 6a-2(a), (b), and (c) to mandate the electronic filing on EDGAR of the Form 1 amendments under those paragraphs by requiring the electronic filing of those amendments, in accordance with proposed 17 CFR 240.6a-1(e) (“Rule 6a-1(e)”).

Moreover, the Commission proposes to update in Rule 6a-2(c) the due date for the next filings due pursuant to Rule 6a-2(c), from June 30, 2001, to June 30, 2025.

The Commission also proposes a technical amendment to remove two extraneous commas from the text of Rule 6a-2(a). The Commission further proposes to amend paragraph (d) of Rule 6a-2 to clarify that any certifications and other information permitted under that paragraph in lieu of filing the required documents as exhibits to Form 1 must be provided using Form 1. The Commission believes that this proposed change should facilitate compliance with the Rule 6a-2 requirements by exchanges and exempt exchanges by clarifying and standardizing the means to file any certifications and other information submitted pursuant to paragraph (d) of Rule 6a-2.

As stated earlier in this section, Rule 6a-3 requires national securities exchanges and exempt exchanges to file certain supplemental material and reports with the Commission after registration or being granted an exemption from registration. The Commission proposes to amend Rule 6a-3 to require national securities exchanges and exempt exchanges to file on EDGAR such supplemental material and reports electronically on Form 1, in accordance with proposed Rule 6a-1(e).

b. Proposed Amendments to Form 1 and the Form 1 Instructions

In addition to the proposed revisions to Rules 6a-1, 6a-2, and 6a-3, the Commission proposes to revise and reformat Form 1, and the instructions thereto, to accommodate the electronic filing on EDGAR of initial applications, subsequent amendments, supplemental material, and reports that are made on Form 1. The proposed changes to Form 1 to permit electronic submission to the Commission would require minimal modifications to the form, as described below. The Commission also proposes to revise the Form 1 instructions to facilitate the electronic filing and machine-readability of Form 1.

As discussed below, Commission believes that these proposed revisions to Form 1 would facilitate the filing and use of the information mandated by Form 1 and related Rules 6a-1, 6a-2, and 6a-3.

In addition, the Commission proposes to remove the definition of the word “applicant” from the Form 1 instructions and replace the word “applicant” with the word “exchange” on Form 1. Currently, Form 1 uses both the words “exchange” and “applicant” to refer to the entity filing the Form 1. The Commission proposes this technical, non-substantive change to make consistent the terminology used in Form 1.

The Commission proposes that electronic Form 1 would solicit information through prompts on the form. Proposed electronic Form 1 also would require an exchange to attach exhibits via a new exhibit table that would be part of electronic Form 1. Where Rule 6a-2 allows for alternative means of filing the information required under certain exhibits, the new exhibit table would permit an exchange to electronically provide the certifications and details necessary for an exchange to avail itself of those alternative means. The information required to be filed with the exhibits is not changing. Currently, Rule 6a-2 provides that in lieu of filing certain exhibits as part of a paper Form 1 submission, an exchange may: (i) identify where such information is published and certify its accuracy as of its publication date; (ii) certify that the information is available to the Commission and the public upon request; or (iii) indicate the location of the internet website where such information may be found and certify that the information available at such location is accurate as of its date.

The proposal would not change the availability of these alternative means, only the method of providing the necessary certifications and details. As described above, instead of attaching paper exhibits, the proposal would require the exhibits to be submitted

electronically on EDGAR. Similarly, instead of providing on paper the certifications and details required for an exchange to avail itself of these alternative means, the proposal would require those certifications and details to be provided via the electronic Form 1. In the event an exchange indicates on Form 1 an internet website where such information may be found, where applicable, the Commission proposes to require the exchange to provide on Form 1 the Uniform Resource Locator(s) (“URL(s)”) of the location(s) on the internet website where such information may be found, and to certify that information posted on such a website is accurate as of its date and is free and accessible (without any encumbrances or restrictions) by the general public.

See

17 CFR 240.6a-2(d).

For electronic Form 1, the Commission proposes to add prompts prior to Section I that would require the exchange to identify the basis for submitting the form. Specifically, proposed electronic Form 1 would require the exchange to check a box stating one of the following: (i) whether the filing is an initial Form 1 application and if it is, whether the exchange is applying to be a national securities exchange or an exempt exchange; (ii) whether the filing is an amendment to an initial Form 1 application prior to Commission action to grant registration or an exemption based on limited volume; (iii) whether the filing is to provide the exchange's consent to an extension of the time period within which the Commission must take action on an initial Form 1 application;

(iv) whether the filing is to withdraw an initial Form 1 application prior to the Commission taking action on the application; (v) whether the filing is an amendment to Form 1 pursuant to Rule 6a-2 following the Commission's granting of registration or an exemption; or (vi) whether the filing is supplemental material or reports pursuant to Rule 6a-3.

Currently, there is no place on Form 1 for an exchange to indicate the type of filing that it is submitting. For example, current Form 1 does not provide an exchange the ability to indicate whether an initial Form 1 filing is an application to be a national securities exchange or an exempt exchange. Accordingly, the Commission believes that capturing information regarding the type of Form 1 filing would facilitate the exchange's communication with the Commission and help the Commission more efficiently review Form 1 submissions.

Such consents to an extension of the time period within which the Commission must take action currently are submitted as letters in paper form. Adding the ability to indicate that the exchange consents to an extension of time on electronic Form 1 would streamline the process for making such a submission.

See

15 U.S.C. 78s(a)(1)(B).

The Commission also proposes to amend the instructions to Form 1 to add a new section titled “When to Use the Form,” which would explain when Form 1 filings are required.

The proposed electronic Form 1 would also capture contact information for the exchange and certain individuals. Consistent with current Form 1, the proposed electronic Form 1 would require the exchange to identify contact information for the exchange, a contact employee, and counsel for the exchange. Unlike current Form 1, proposed electronic Form 1 would additionally require an email address for the contact employee. The Commission believes that the requirement to provide an email address for the exchange contact employee would expedite communications between Commission staff and the relevant exchange.

Proposed electronic Form 1 would require an exchange to electronically attach exhibits by using an exhibit table. The proposed exhibit table would contain columns for the name of the exhibit, information required by the exhibit, whether alternative means of satisfying the filing of an exhibit are available for that particular exhibit (

e.g.,

URL(s)), if permitted by applicable Commission rule, and checkboxes to indicate whether such alternative means are being used.

The information proposed to be required by the exhibits to electronic Form 1 would remain the same as current Form 1. In addition, to facilitate the electronic filing of the supplemental materials required under 17 CFR 240.6a-3(a) (“Rule 6a-3(a)”) and the volume reports required under Rule 6a-3(b), the Commission proposes to add new Sections III and IV, respectively, to Form 1. Sections III and IV would not add new requirements beyond those currently included in Rules 6a-3(a) and (b). Currently, Rule 6a-3(a) requires exchanges to file certain information with the Commission or, in the alternative, to indicate where such information can be found on an internet website controlled by the exchange. The proposal would require the filing of this information through Section III of electronic Form 1 or, in the alternative, to provide through Section III of electronic Form 1 the URL(s) of the location(s) on the internet website where such information can be found. If an exchange chooses this latter option and provides URL(s) of an internet website where such information can be found, Section III would also clarify that such website must be free and accessible (without any encumbrances or restrictions) by the general public. Likewise, Section IV would not change the substance of what must be filed; it would merely require the filing of the volume reports required under Rule 6a-3(b) to be made on electronic Form 1 instead of in paper format.

See supra

notes 69-71.

Furthermore, electronic Form 1 would continue to require an exchange to consent to service of any civil action brought by, or notice of any proceeding before, the Commission in connection with its activities. The current language under which the exchange consents to service via registered or certified mail at the main or mailing address provided on Form 1 would continue to be included in the electronic form.

The Commission also proposes to delete the outdated provision allowing for service of any civil action pursuant to confirmed telegram.

In addition, the proposed electronic Form 1 would require the individual who is submitting the form to check a box on behalf of the exchange to represent that the information and statements contained in the Form 1, including exhibits, schedules, or other documents, are current, true, and complete. The requirement to sign and notarize the form would be eliminated because it is unnecessary, not compatible with, and not required for electronic filing on EDGAR.

Finally, electronic Form 1 would require exchanges to structure Exhibits D (unconsolidated financial statements of each of the exchange's subsidiaries or affiliates), E (description of the electronic trading system's manner of operation, except for the attached copy of the users' manual), and I (audited financial statements of the exchange) in Inline XBRL. The execution page, Exhibits C (information regarding each of the exchange's subsidiaries, affiliates, and entities with whom the exchange has an agreement relating to the operation of the exchange's electronic trading system, except for the copies of existing documents listed below), H (listing fee schedule and brief description of the criteria governing which securities may be traded on the exchange, except for the copies of existing documents listed below), J (list of officers, governors, standing committee members, or persons performing similar functions), K (list of significant shareholders or partners), L (description of criteria, conditions, and procedures governing membership in the exchange), M (list of members, participants, subscribers, or other users

of the exchange and description of each user's activities), N (schedules of securities traded on the exchange), and the information required under Rule 6a-3(b) (reports regarding the securities sold on the exchange over the previous calendar month) would also be structured, albeit in a custom XML data language specific to Form 1 rather than in Inline XBRL.

Attached copies of existing documents, including those filed with Exhibits A (constitution, articles of incorporation or association, and existing by-laws or corresponding rules or instruments of the exchange), B (written rulings, settled practices having the effect of rules, and interpretations of the Governing Board or other committee of the exchange in respect of any provisions of the constitution, by-laws, rules, or trading practices of the exchange), C (written rulings, settled practices having the effect of rules, and interpretations of the Governing Board or other committee of the exchange in respect of any provisions of the constitution, by-laws, rules, or trading practices of the exchange's affiliates, subsidiaries, or entities with whom the exchange has an agreement related to the operation of the exchange's electronic trading system), E (listing applications and required agreements), F (forms pertaining to membership, participation, or subscription, application for approval as a person associated with a member, participant, or subscriber of the exchange, or any other similar materials), G (forms of financial statements, reports, or questionnaires required of members, participants, subscribers, or any other users relating to financial responsibility or minimum capital requirements for such members, participants, or any other users), H (listing applications and agreements required to be executed in connection with listing), and the information required under Rule 6a-3(a)(1) (supplemental materials issued or made available to members of, or participants or subscribers to, the exchange), would be filed as unstructured PDF documents.

Proposed Structured Data Requirements for Form 1

Inline XBRL

Exhibits D, E (in part), I.

Custom XML

Execution page, Exhibits C (in part), H (in part), J, K, L, M, N, Rule 6a-3(b) monthly reports.

Unstructured PDF

Exhibits A, B, C (in part), E (in part), F, G, H (in part), Rule 6a-3(a)(1) supplemental materials.

The proposed structuring requirements could facilitate access to the exchange's disclosures (such as by enabling efficient retrieval of only those disclosures filed by a subset of exchanges over particular reporting periods) and their analysis (such as by enabling efficient comparisons of individual disclosures or sets of disclosures across different exchanges and reporting periods). This could benefit market participants through enhanced oversight of the exchanges. For example, Commission staff could leverage the machine-readability of Exhibit I to automatically flag any atypical fluctuations in particular financial line items across every exchange's financial statements, and assess whether closer examination of any such fluctuations would be warranted. Similarly, Commission staff could leverage the machine-readability of Exhibit E by retrieving automated redline comparisons of the manner of operations description disclosed by exchanges from prior reporting periods to the current reporting period, thus pinpointing any widespread operational changes for further assessment.

Market participants (such as issuers, analysts, and other exchanges) could also benefit from direct use of the machine-readable disclosures on Form 1. For example, the structuring requirement for Exhibit H could allow issuers to more efficiently compare listing fees charged by different exchanges as they determine the exchange on which they list their securities. Without the proposed structured data requirements, these analyses, to the extent they are done, need to be performed manually, such as by gathering the current and former financial statements for each exchange and entering all financial line items of interest into databases, resulting in a significantly less efficient and precise process. In addition, the proposed structured data requirement would enable EDGAR to perform technical validations (

i.e.,

programmatic checks to ensure the documents are appropriately standardized, formatted, and complete) upon intake of the Form 1 disclosures, thus potentially improving the quality of the filed data by decreasing the incidence of non-substantive errors (such as the omission of values from fields that should always be populated).

The nature and extent of such benefits may vary based on the content of each Form 1 Exhibit. As discussed in the subsequent economic analysis, studies of XBRL requirements for public operating company financial statements indicate a number of benefits for investors and market participants.

The probability that, and extent to which, these particular benefits would arise from structured Form 1 disclosures could be heightened for Exhibits D and I, which would likewise include structured financial statements under the proposed rule amendments. In addition, the particular benefits of structuring data would likely vary based on the type of disclosures included in each particular Exhibit. Structured numerical disclosures, such as those that would be included on Exhibit I, lend themselves to mathematical functionality, such as the calculation of key ratios or the identification of extreme statistical outliers. Structured textual disclosures, such as those that would be included on Exhibit E, lend themselves to targeted keyword searching and more sophisticated sentiment analysis.

See infra

section X.C.1.b.

The Commission is proposing to require Inline XBRL for certain exhibits to Form 1 and custom XML for others because the Commission believes each data language is better suited for particular types of disclosures. Exhibits D and I require disclosure of financial statements, and Inline XBRL was designed to accommodate financial statement information, including the particular metadata (

e.g.,

the relevant fiscal period, whether the line item is on the balance sheet, whether the line item is a credit or debit) that must be linked to each data point within the financial statements to fully convey its semantic meaning to a machine reader. Exhibit E requires narrative disclosure regarding the trading system's manner of operations, and whereas custom XML data languages only have the capacity to accommodate brief narrative descriptions, Inline XBRL can accommodate longer narrative descriptions with presentation capabilities that preserve human-readability while maintaining machine-readability.

Compare, for example, the Inline XBRL requirement for the description of investment strategies that open-end funds disclose on Form N-

1A to the custom XML requirement for the brief description of the applicant's business that SBS Entities disclose on Form SBSE.

See

Item 4 of Form N-1A; Item 7 of Form SBSE.

The execution page of Form 1, Exhibits C (in part), H (in part), J, K, L, M, and N to Form 1, and the Rule 6a-3(b) reports filed on Form 1 do not require such content. For these disclosures, the Commission believes the use of custom XML data languages would be preferable to Inline XBRL, because it would yield smaller file sizes and therefore enable more streamlined processing of the information.

The Commission believes requiring custom XML rather than Inline XBRL for these disclosures would also be preferable because it would enable EDGAR to generate fillable web forms that would permit exchanges to input their disclosures into form fields rather than structure their disclosures in custom XML themselves. This added flexibility could ease the burden of compliance on exchanges in some instances, although exchanges may have the requisite sophistication to encode the disclosures in custom XML themselves without relying on fillable web forms.