80 FR 59204 - Self-Regulatory Organizations: Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX Options Fee Schedule
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 190 (October 1, 2015)
Federal Register Volume 80, Issue 190 (October 1, 2015)
| Page Range | 59204-59207 | |
| FR Document | 2015-24883 |
[Federal Register Volume 80, Number 190 (Thursday, October 1, 2015)] [Notices] [Pages 59204-59207] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-24883] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-75986; File No. SR-MIAX-2015-55] Self-Regulatory Organizations: Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX Options Fee Schedule September 25, 2015. Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on September 21, 2015, Miami International Securities Exchange LLC (``MIAX'' or ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') a proposed rule change as described in Items I, and II, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of the Substance of the Proposed Rule Change The Exchange is filing a proposal to amend the MIAX Options Fee Schedule (the ``Fee Schedule'') to modify the Exchange's connectivity fees. The text of the proposed rule change is available on the Exchange's Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, at MIAX's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Fee Schedule regarding connectivity to the Exchange. Specifically, the Exchange proposes to (a) establish a new connectivity fee for a 10Gigabit (``Gb'') ultra-low latency (``ULL'') fiber connection; (b) establish a new connectivity testing and certification fee for the 10Gb ULL fiber connection; and (c) change the network connectivity fees so that the fees assessed to a subscriber during a trading month are pro-rated when a subscriber makes a change to the connectivity (by adding or deleting connections) with such pro-rated fees based on the number of trading days that the subscriber has been credentialed to utilize any of the Exchange application program interfaces (``APIs'') in the production environment through such connection, divided by the total number of trading days in such month multiplied by the applicable monthly rate. The Exchange currently offers various bandwidth alternatives for connectivity to the Exchange, including a 10Gb fiber connection and a 1Gb fiber connection.\3\ The Exchange now proposes to provide a second 10Gb fiber connection offering, which uses ultra-low latency switches.\4\ A switch is a type of network hardware that facilitates communication between a MIAX participant's application servers and the Exchange's application servers that service MIAX participants. Each of the Exchange's current connection offerings uses different switches, but the switches are of uniform type within each offering. As a consequence, all subscribers to a particular connection receive the same latency in terms of the capabilities of their switches. The 10Gb ULL offering uses a new ultra-low latency switch, which provides faster processing of messages sent to it in comparison to the current switch in use for other types of connectivity. As a consequence, MIAX participants that seek faster processing of their messages to the Exchange will now have the opportunity to subscribe to a faster and more efficient connection to the Exchange.\5\ --------------------------------------------------------------------------- \3\ See MIAX Fee Schedule, Section 5. \4\ The Term ``latency'' for these purposes is a measure of the time it takes for an order to enter into a switch and then exit for entry into the Exchange's system. \5\ The Exchange is not offering a low latency alternative for other bandwidth connections at this time, but may do so in the future. --------------------------------------------------------------------------- The Exchange proposes a monthly network connectivity fee of $7,500 for a 10Gb ULL connection for both members and non-members. The Exchange also proposes a network connectivity testing and certification fee of $4,000 for members and $4,200 for non-members, which is identical to the testing and certification fee for the current 10Gb fiber connection. It has been MIAX's experience that Member testing takes less time than non-Member testing because Members have more experience testing these systems with the Exchange; generally fewer questions and issues arise during the testing and certification process. Therefore, the Exchange believes that it is reasonable to charge non-Members more for testing and certification than Members. The network connectivity fee for the 10Gb ULL connectivity will be pro-rated based on the number of trading days that the member or non- member has been credentialed to utilize any of the Exchange APIs in a production environment through the 10Gb ULL connection, divided by the total number of trading days in such month multiplied by the monthly rate. MIAX participants may also be credentialed to receive market data through the 10Gb ULL connection. The Exchange believes that the pricing of the 10Gb ULL connectivity is reflective of the value it will provide and the cost to the Exchange for the necessary hardware and other infrastructure and maintenance costs to the Exchange associated with this technology. The growth in the size of consolidated and proprietary data feeds has resulted in demand for faster processing of message traffic, and ultra-low latency switches meet this demand by decreasing the time in which individual messages are processed and market data is transmitted by these new switches. The Exchange's proposal will provide MIAX participants with the opportunity to connect to the Exchange via faster switch processing. The [[Page 59205]] Exchange notes that other exchanges have adopted low-latency connectivity alternatives for their participants. For example, NASDAQ OMX PHLX LLC (``PHLX''), NYSE Arca (``Arca''), NYSE MKT LLC (``Amex'') and the International Securities Exchange LLC (``ISE'') all offer a 10Gb low latency Ethernet connectivity alternative to each of their participants, which provides a higher speed network to access their trading systems.\6\ --------------------------------------------------------------------------- \6\ See Securities Exchange Act Release Nos. 70174 (August 13, 2013), 78 FR 50477 (August 19, 2013) (SR-PHLX-2013-82); 70886 (November 15, 2013), 78 FR 69904 (November 21, 2013) (SR-NYSEMKT- 2013-92); 70982 (December 4, 2013), 78 FR 74197 (December 10, 2013) (SR-NYSEMKT -2013-97); 70887 (November 15, 2013), 78 FR 69897 (November 21, 2013) (SR-NYSEARCA-2013-123); 70981 (December 4, 2013), 78 FR 74203 (December 10, 2013) (SR-NYSEARCA-2013-131); 66525 (March 7, 2012), 77 FR 14847 (March 13, 2012) (SR-ISE-2012-09). Both NYSE Arca and NYSE Amex filed one filing to provide for the new lower-latency 10Gb connection and one filing to establish the fees associated with the connection. --------------------------------------------------------------------------- The Exchange also proposes to modify its network connectivity fees for all of its connections. Specifically, the Exchange proposes to pro- rate both member and non-member network connectivity fees assessed when a MIAX participant makes a change to its connectivity by adding or deleting connections. The pro-rated fee will be based upon the number of trading days that the MIAX participant has been credentialed to utilize any of the Exchange APIs in a production environment through the applicable connection, divided by the total number of trading days in such month multiplied by the applicable monthly rate. The Exchange believes that providing members and non-members the ability to change connectivity between the Exchange's 1Gb, 10Gb and 10Gb ULL lines and be charged accordingly will provide each MIAX participant with greater flexibility and potential cost savings. MIAX participants may also be credentialed to receive market data through such connections. The Exchange proposes to implement the proposed changes to the Fee Schedule effective as of October 1, 2015. 2. Statutory Basis MIAX believes that its proposal to amend its fee schedule is consistent with Section 6(b) of the Act \7\ in general, and furthers the objectives of Section 6(b)(4) of the Act \8\ in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which the Exchange operates or controls. The Exchange also believes the proposal furthers the objectives of Section 6(b)(5) of the Act \9\ in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest and is not designed to permit unfair discrimination between customer, issuers, brokers and dealers. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78f(b). \8\ 15 U.S.C. 78f(b)(4). \9\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that its proposal is consistent with Section 6(b)(4) of the Act because the fees assessed for 10Gb ULL connectivity fee allow the Exchange to cover the costs associated with the purchase of new, state-of-the-art switches for this new offering. The switches are priced at a premium, the cost of which the Exchange must bear. The Exchange believes that the proposal to establish fees for the 10Gb ULL connectivity is fair, equitable and not unreasonably discriminatory because the fees are assessed equally among all users of the connection. The Exchange believes that the proposed Member and non-Member Network Connectivity Testing and Certification Fees are consistent with Section 6(b)(4) of the Act because they are identical to the connectivity and certification fees currently assessed for 10Gb fiber connectivity. The Exchange notes that it will incur the same costs associated with setting up a subscriber with either 10Gb or 10Gb ULL fiber connectivity. The network connectivity testing and certification fee of $4,000 for members and $4,200 for non-Members, which is identical to the testing and certification fee for the current 10Gb fiber connection is reasonable and not unfairly discriminatory. As stated above, it has been MIAX's experience that Member testing takes less time than non-Member testing because Members have more experience testing these systems with the Exchange; generally fewer questions and issues arise during the testing and certification process. Therefore, the Exchange believes that it is reasonable to charge non-Members more for testing and certification than Members. As discussed above, PHLX and ISE each offer different connections with respect to latency, and NYSE Arca, Inc. and NYSE Amex both offer similar connectivity alternatives. Despite this, all of them charge a higher fee than the Exchange proposes to charge for the same 10Gb lower-latency connection. For these reasons, the Exchange believes the proposed fees for 10Gb ULL fiber connectivity to the Exchange are reasonable and not unfairly discriminatory. The Exchange also believes the proposed 10Gb ULL fiber connectivity testing and certification fees and connectivity fees are equitably allocated in that all Members and non-Members that voluntarily select this service option will be charged the same amount to cover the hardware, installation, testing and connection costs to maintain and manage the enhanced connection. All Members and non-Members may subscribe to this voluntary connectivity, and the Exchange is not eliminating any existing connectivity. Accordingly, a Member or non- Member may elect not to subscribe to the 10Gb ULL fiber connection and retain the connection to which it is currently subscribed. The Exchange also believes that the proposed change to pro-rate the fees in the event of a connectivity change during any trading month is fair and reasonable because such change will allow all MIAX participants to subscribe to the most effective connectivity according to their trading and data feed requirements and as a result will only be assessed fees for the connectivity for which they were credentialed to utilize any of the Exchange APIs in a production environment through the applicable connection during any trading month. MIAX participants may also be credentialed to receive market data through such connections. The Exchange's proposal to pro-rate the fees in the event of a connectivity change during any trading month is also equitable since it applies equally to all subscribers to the Exchange's connectivity. The Exchange also believes the proposals further the objectives of Section 6(b)(5) of the Act \10\ in that each proposal is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest and is not designed to permit unfair discrimination between customer, issuers, brokers and dealers. --------------------------------------------------------------------------- \10\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The 10Gb ULL fiber connectivity assists MIAX participants in making their network connectivity more efficient by reducing the time messages take to reach the Exchange once sent from their server and to be received by the MIAX participant from the Exchange. Speed and efficiency are important drivers of the U.S. securities markets and the Exchange is offering a [[Page 59206]] connectivity solution that promotes speed and efficiency by providing enhanced technology that is available to all MIAX participants. The Exchange believes the enhanced 10Gb ULL connection will remove impediments to and perfect the mechanism of a free and open market and a national market system because the Exchange will provide faster switching technology to market participants, which will improve the speed and efficiency of processing messages arriving at the market from MIAX participants' servers, and will provide a more efficient means for the Exchange's processing of executions and reports. The Exchange also believes the proposed connectivity testing and certification fees and connectivity fees for the 10Gb ULL fiber connection are consistent with Section 6(b)(5) of the Act because all MIAX participants have the opportunity to subscribe to the 10Gb ULL connection. There is no differentiation among MIAX participants with regard to the fees charged for these services. The Exchange also believes that the Exchange's pro-rating of network connectivity fees in the event of a connectivity change is consistent with Section 6(b)(5) of the Act since all subscribers will receive the benefit of being charged only for the connectivity through which it was credentialed to utilize the Exchange APIs in a production environment through the applicable connection during any trading month. MIAX participants may also be credentialed to receive market data through such connections. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule changes will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. On the contrary, the Exchange believes that the proposed changes should increase both intermarket and intramarket competition. Specifically, the Exchange believes that the changes will promote competition by offering MIAX participants more flexibility in their choice of Exchange connectivity, and that the availability of the lower-latency connectivity in turn will enhance their trading operations and ultimately bring greater speed and efficiency to trading in the marketplace. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges. The Exchange believes that the proposed changes reflect this competitive environment because they increase the types of connections available to MIAX participants and should result in potential cost savings to a market participant. Given the robust competition for a higher speed network among options markets, many of which offer the same products, enhancing the type of connectivity available on MIAX is consistent with the goals of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, it has become effective pursuant to 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) \12\ thereunder. --------------------------------------------------------------------------- \11\ 15 U.S.C. 78s(b)(3)(A). \12\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b- 4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the 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. --------------------------------------------------------------------------- A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act \13\ normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the filing can be operative on October 1, 2015. The Exchange states that the proposal would provide MIAX participants an opportunity to enhance the efficiency of their trading through the 10Gb ULL connectivity, and the Commission notes that other exchanges offer similar upgraded, low-latency hardware. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposed rule change operative on October 1, 2015.\15\ --------------------------------------------------------------------------- \13\ 17 CFR 240.19b-4(f)(6). \14\ 17 CFR 240.19b-4(f)(6)(iii). \15\ For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File No. SR-MIAX-2015-55 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File No. SR-MIAX-2015-55. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., [[Page 59207]] Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. 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. All submissions should refer to File No. SR-MIAX-2015-55, and should be submitted on or before October 22, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\16\ --------------------------------------------------------------------------- \16\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2015-24883 Filed 9-30-15; 8:45 am] BILLING CODE 8011-01-P
![59204 Federal Register / Vol. 80, No. 190 / Thursday, October 1, 2015 / Notices
declaring that it has ceased to be an II. Self-Regulatory Organization’s receive the same latency in terms of the
investment company. Applicant has Statement of the Purpose of, and capabilities of their switches. The 10Gb
transferred its assets to Ares Dynamic Statutory Basis for, the Proposed Rule ULL offering uses a new ultra-low
Credit Allocation Fund, Inc., and on Change latency switch, which provides faster
August 31, 2015, made a final In its filing with the Commission, the processing of messages sent to it in
distribution to its shareholders based on Exchange included statements comparison to the current switch in use
net asset value. Expenses of $864,442 concerning the purpose of and basis for for other types of connectivity. As a
incurred in connection with the the proposed rule change and discussed consequence, MIAX participants that
reorganization were paid by applicant any comments it received on the seek faster processing of their messages
and the acquiring fund. proposed rule change. The text of these to the Exchange will now have the
Filing Dates: The application was statements may be examined at the opportunity to subscribe to a faster and
filed on September 23, 2015. places specified in Item IV below. The more efficient connection to the
Applicant’s Address: 2000 Avenue of Exchange.5
Exchange has prepared summaries, set
the Stars, 12th Floor, Los Angeles, The Exchange proposes a monthly
forth in sections A, B, and C below, of
California 90067 the most significant aspects of such network connectivity fee of $7,500 for a
For the Commission, by the Division of statements. 10Gb ULL connection for both members
Investment Management, pursuant to and non-members. The Exchange also
delegated authority. A. Self-Regulatory Organization’s proposes a network connectivity testing
Robert W. Errett, Statement of the Purpose of, and and certification fee of $4,000 for
Deputy Secretary. Statutory Basis for, the Proposed Rule members and $4,200 for non-members,
[FR Doc. 2015–24886 Filed 9–30–15; 8:45 am]
Change which is identical to the testing and
BILLING CODE 8011–01–P 1. Purpose certification fee for the current 10Gb
fiber connection. It has been MIAX’s
The Exchange proposes to amend its experience that Member testing takes
Fee Schedule regarding connectivity to less time than non-Member testing
SECURITIES AND EXCHANGE
the Exchange. Specifically, the because Members have more experience
COMMISSION
Exchange proposes to (a) establish a testing these systems with the Exchange;
[Release No. 34–75986; File No. SR–MIAX– new connectivity fee for a 10Gigabit generally fewer questions and issues
2015–55] (‘‘Gb’’) ultra-low latency (‘‘ULL’’) fiber arise during the testing and certification
connection; (b) establish a new process. Therefore, the Exchange
Self-Regulatory Organizations: Miami connectivity testing and certification fee
International Securities Exchange LLC; believes that it is reasonable to charge
for the 10Gb ULL fiber connection; and
Notice of Filing and Immediate non-Members more for testing and
(c) change the network connectivity fees
Effectiveness of a Proposed Rule certification than Members.
so that the fees assessed to a subscriber The network connectivity fee for the
Change To Amend the MIAX Options during a trading month are pro-rated
Fee Schedule 10Gb ULL connectivity will be pro-rated
when a subscriber makes a change to the based on the number of trading days
September 25, 2015. connectivity (by adding or deleting that the member or non-member has
Pursuant to the provisions of Section connections) with such pro-rated fees been credentialed to utilize any of the
19(b)(1) of the Securities Exchange Act based on the number of trading days Exchange APIs in a production
of 1934 (‘‘Act’’) 1 and Rule 19b–4 that the subscriber has been
environment through the 10Gb ULL
thereunder,2 notice is hereby given that credentialed to utilize any of the
connection, divided by the total number
on September 21, 2015, Miami Exchange application program
of trading days in such month
International Securities Exchange LLC interfaces (‘‘APIs’’) in the production
multiplied by the monthly rate. MIAX
(‘‘MIAX’’ or ‘‘Exchange’’) filed with the environment through such connection,
participants may also be credentialed to
Securities and Exchange Commission divided by the total number of trading
receive market data through the 10Gb
(‘‘Commission’’) a proposed rule change days in such month multiplied by the
ULL connection.
as described in Items I, and II, below, applicable monthly rate. The Exchange believes that the
The Exchange currently offers various
which Items have been prepared by the pricing of the 10Gb ULL connectivity is
bandwidth alternatives for connectivity
Exchange. The Commission is reflective of the value it will provide
to the Exchange, including a 10Gb fiber
publishing this notice to solicit and the cost to the Exchange for the
connection and a 1Gb fiber connection.3
comments on the proposed rule change necessary hardware and other
The Exchange now proposes to provide
from interested persons. a second 10Gb fiber connection offering, infrastructure and maintenance costs to
which uses ultra-low latency switches.4 the Exchange associated with this
I. Self-Regulatory Organization’s
A switch is a type of network hardware technology. The growth in the size of
Statement of the Terms of the Substance
that facilitates communication between consolidated and proprietary data feeds
of the Proposed Rule Change
a MIAX participant’s application servers has resulted in demand for faster
The Exchange is filing a proposal to processing of message traffic, and ultra-
amend the MIAX Options Fee Schedule and the Exchange’s application servers
that service MIAX participants. Each of low latency switches meet this demand
(the ‘‘Fee Schedule’’) to modify the by decreasing the time in which
Exchange’s connectivity fees. the Exchange’s current connection
offerings uses different switches, but the individual messages are processed and
The text of the proposed rule change market data is transmitted by these new
mstockstill on DSK4VPTVN1PROD with NOTICES6
is available on the Exchange’s Web site switches are of uniform type within
each offering. As a consequence, all switches. The Exchange’s proposal will
at http://www.miaxoptions.com/filter/ provide MIAX participants with the
wotitle/rule_filing, at MIAX’s principal subscribers to a particular connection
opportunity to connect to the Exchange
office, and at the Commission’s Public 3 See via faster switch processing. The
MIAX Fee Schedule, Section 5.
Reference Room. 4 The Term ‘‘latency’’ for these purposes is a
measure of the time it takes for an order to enter 5 The Exchange is not offering a low latency
1 15 U.S.C. 78s(b)(1). into a switch and then exit for entry into the alternative for other bandwidth connections at this
2 17 CFR 240.19b–4. Exchange’s system. time, but may do so in the future.
VerDate Sep<11>2014 21:04 Sep 30, 2015 Jkt 238001 PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 E:\FR\FM\01OCN1.SGM 01OCN1](https://thefederalregister.org/doc/80_FR_59394/page/1.svg)
![Federal Register / Vol. 80, No. 190 / Thursday, October 1, 2015 / Notices 59207
Washington, DC 20549 on official Discovery Policy’’) to make certain ICE Clear Europe has proposed to
business days between the hours of enhancements to the end-of-day impose certain consequences under the
10:00 a.m. and 3:00 p.m. Copies of such submission and firm trade process for Firm Trade methodology for Clearing
filing also will be available for CDS contracts. ICE Clear Europe also Members providing price discovery
inspection and copying at the principal proposed to adopt a new Price submissions deemed to be obvious
office of the Exchange. All comments Submission Disciplinary Framework errors. ICE Clear Europe has represented
received will be posted without change; (the ‘‘Disciplinary Framework’’) that that, as revised, the process for
the Commission does not edit personal addresses missed price submissions by determining potential Firm Trades will
identifying information from Clearing Members for CDS contracts. now include all standardized
submissions. You should submit only ICE Clear Europe did not otherwise submissions, including those classified
information that you wish to make propose to change its Clearing Rules or as obvious errors (and as a result
available publicly. All submissions Procedures in connection with these submissions that are obvious errors may
should refer to File No. SR–MIAX– amendments. result in Firm Trades). However,
2015–55, and should be submitted on or As described by ICE Clear Europe, obvious errors will not be used in the
before October 22, 2015. under the EOD Price Discovery Policy, calculation of the final EOD level, as
ICE Clear Europe currently utilizes a under the current framework. Thus, ICE
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
‘‘cross and lock’’ algorithm as part of its Clear Europe has represented that it will
authority.16 CDS price discovery process. Under this effectively execute its current EOD
Robert W. Errett,
algorithm, standardized bids and offers algorithm twice: initially in the same
derived from Clearing Member way it does today (eliminating obvious
Deputy Secretary.
submissions are matched by sorting errors) to generate the final EOD levels,
[FR Doc. 2015–24883 Filed 9–30–15; 8:45 am] them from highest to lowest and lowest and again, without excluding obvious
BILLING CODE 8011–01–P to highest levels, respectively. This errors, to generate Firm Trades and
sorting process pairs the Clearing related reversing transactions.4
Member submitting the highest bid To limit the potential exposure
SECURITIES AND EXCHANGE price with the Clearing Member created through Firm Trades that
COMMISSION submitting the lowest offer price, the include a bid or offer from an obvious
[Release No. 34–75983; File No. SR–ICEEU– Clearing Member submitting the second error submission, ICE Clear Europe has
2015–013] highest bid price with the Clearing represented that it will adjust Firm
Member submitting the second-lowest Trade prices, where appropriate, to fall
Self-Regulatory Organizations; ICE offer price, and so on. The algorithm within a predefined band on either side
Clear Europe Limited; Order Approving then identifies crossed and/or locked of the EOD price such that the potential
Proposed Rule Change Relating to markets. Crossed markets are the profit or loss (‘‘P/L’’) realized by
CDS End-of-Day Price Discovery Clearing Member pairs generated by the unwinding the trade at the EOD level is
Policy sorting and ranking process for which capped.
the bid price of one Clearing Member is To prevent Clearing Members from
September 25, 2015. receiving Firm Trades with large P/L
above the offer price of the matched
I. Introduction Clearing Member. The algorithm impact in certain index instruments that
identifies locked markets, where the bid are less actively traded, and for which
On July 24, 2015, ICE Clear Europe it is therefore more difficult and/or more
and the offer are equal, in a similar
Limited (‘‘ICE Clear Europe’’) filed with expensive to manage the associated risk,
fashion.
the Securities and Exchange According to ICE Clear Europe, ICE Clear Europe has represented that it
Commission (‘‘Commission’’), pursuant whenever there are crossed and/or will automatically generate reversing
to Section 19(b)(1) of the Securities locked matched markets, the algorithm transactions at the end-of-day price
Exchange Act of 1934 (‘‘Act’’) 1 and Rule applies a set of rules designed to level for specific index CDS instruments
19b–4 thereunder,2 a proposed rule identify standardized submissions that (i.e., for specific combinations of index/
change to amend its end-of-day price are ‘‘obvious errors.’’ The algorithm sets sub-index and series determined by the
discovery policies and procedures for a high bid threshold equal to the ICE Clear Europe risk department in
credit default swap (‘‘CDS’’) contracts to preliminary end-of-day (‘‘EOD’’) level consultation with the trading advisory
incorporate certain enhancements (SR– plus one bid-offer width (‘‘BOW’’), and committee). Currently, reversing
ICEEU–2015–013). The proposed rule a low offer threshold equal to the transactions are only available for
change was published for comment in preliminary EOD level minus one BOW. eligible single name CDS instruments.
the Federal Register on August 12, The algorithm considers a Clearing ICE Clear Europe has also proposed
2015.3 The Commission did not receive Member’s standardized submission to revising the EOD Price Discovery Policy
comments on the proposed rule change. be an ‘‘obvious error’’ if the bid is higher to remove the option for Clearing
The Commission is approving the than the high bid threshold, or the offer Members to provide end-of-day price
proposed rule change. is lower than the low offer threshold. submissions for single name CDS
II. Description of the Proposed Rule Clearing Member pairs identified by instruments in terms of spread and
Change the algorithm as crossed or locked associated recovery rate. Under the
markets may be required from time to revised approach, Clearing Members
ICE Clear Europe has proposed to time, under the EOD Price Discovery will be required to provide price
mstockstill on DSK4VPTVN1PROD with NOTICES6
amend its CDS End-of-Day Price Policy, to enter into cleared CDS trades submissions (or equivalent ‘‘points
Discovery Policy (the ‘‘EOD Price with each other (‘‘Firm Trades’’). upfront’’ submissions) for all single
Currently, ICE Clear Europe excludes name CDS instruments. Clearing
16 17 CFR 200.30–3(a)(12).
1 15
standardized submissions it identifies as
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
obvious errors from potential Firm 4 A reversing transaction is a second cleared
Trades and does not use these transaction with identical attributes to the initial
3 Securities Exchange Act Release No. 34–75624 Firm Trade, but with the buyer and seller
(Aug. 6, 2015), 80 FR 48369 (Aug. 12, 2015) (SR– submissions in its determination of counterparties reversed, and at that day’s EOD price
ICEEU–2015–013). published EOD levels. rather than the initial Firm Trade price.
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Document Created: 2015-12-15 08:40:15
Document Modified: 2015-12-15 08:40:15
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 59204 |
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