80 FR 61860 - Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change to Require Real-Time Trade Submission and to Prohibit Pre-Netting Practices through NSCC's Correspondent Clearing Service
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 198 (October 14, 2015)
Federal Register Volume 80, Issue 198 (October 14, 2015)
| Page Range | 61860-61863 | |
| FR Document | 2015-26028 |
[Federal Register Volume 80, Number 198 (Wednesday, October 14, 2015)] [Notices] [Pages 61860-61863] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-26028] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76099; File No. SR-NSCC-2015-004] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change to Require Real- Time Trade Submission and to Prohibit Pre-Netting Practices through NSCC's Correspondent Clearing Service October 7, 2015. Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (``Act'') and Rule 19b-4 \2\ thereunder, notice is hereby given that on September 30, 2015, National Securities Clearing Corporation (``NSCC'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II and III below, which Items have been prepared by NSCC. NSCC filed the proposed rule change pursuant to Section 19(b)(2) \3\ of the Act. 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. \3\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change consists of amendments to NSCC's Rules & Procedures (``Rules'') in order to require that trade data submitted to NSCC through its Correspondent Clearing service, other than position movements between NSCC Members that are Affiliates and Client Custody Movements, as described further below, be submitted in real-time, and to prohibit pre-netting and other practices that prevent real-time trade submission.\4\ --------------------------------------------------------------------------- \4\ Terms not defined herein are defined in the Rules, available at http://dtcc.com/~/media/Files/Downloads/legal/rules/ nscc_rules.pdf. --------------------------------------------------------------------------- II. Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NSCC 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. NSCC has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. (A) Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose \5\ --------------------------------------------------------------------------- \5\ Pursuant to a telephone call with NSCC's internal counsel on October 1, 2015, staff in the Office of Clearance and Settlement added the heading. NSCC inadvertently omitted the heading. --------------------------------------------------------------------------- Requiring trades to be submitted in real-time facilitates efficient risk management for both NSCC and its Members, enables same-day bookkeeping and reconciliation, and, therefore, significantly reduces risk to the industry. Receipt of trade data on a real-time basis permits NSCC's risk management processes to monitor trades closer to trade execution on an intra-day basis, and to identify and risk manage any issues relating to exposures earlier in the day. Contract information is currently reported out to submitting firms by NSCC's Universal Trade Capture (``UTC'') system upon trade comparison and validation, and receipt of trade data in real-time enables NSCC [[Page 61861]] to report to Members trade data as it is received, thereby promoting intra-day reconciliation of transactions at the Member level. The majority of trades submitted to NSCC for clearing are currently being submitted in real-time on a trade-by-trade basis, and NSCC is operationally capable of managing trade volumes that are multiple times larger than the historical peak volumes. NSCC is proposing to require that trade data submitted through its Correspondent Clearing service, as described below, be submitted in real-time and to prohibit pre-netting and other practices that prevent real-time trade submission (``pre-netting practices''). NSCC would exclude from this requirement position movements between NSCC Members that are Affiliates and Client Custody Movements, as described below. The term ``real-time,'' when used with respect to trade submission, is defined in Procedure XIII (Definitions) of the Rules as the submission of trade data on a trade-by-trade basis promptly after trade execution, in any format and by any communication method acceptable to NSCC. NSCC's UTC system receives and validates transactions that are submitted to it, reports trade details back out to the submitting firm, and prepares those transactions for netting and settlement by routing transactions to netting and settlement systems, such as Continuous Net Settlement Accounting Operation, the Balance Order Accounting Operation, or the Foreign Security Accounting Operation, as applicable. Transactions are submitted to UTC either on a locked-in basis by self- regulatory organizations (including national and regional exchanges and marketplaces) (``SROs'') and Qualified Special Representatives (``QSRs''),\6\ or are submitted to UTC as a part of NSCC's Correspondent Clearing service, which allows for post-execution position movements between two clearing firms. Currently all transactions submitted to NSCC on a locked-in basis by SROs and QSRs, which constitute approximately 95% of all transactions processed at NSCC,\7\ are required to be submitted in real-time and may not be pre- netted or batched prior to submission.\8\ --------------------------------------------------------------------------- \6\ QSRs are defined in Section 3 of Rule 7 as NSCC Members that have applied to NSCC to be a Special Representative, and either (i) operate an automated execution system where they are always the contra side of every trade, (ii) are the parent or affiliate of an entity operating such an automated system, where they are the contra side of every trade, or (iii) clear for a broker/dealer that operates such a system and the subscribers to the system acknowledge the clearing Member's role in the clearance and settlement of these trades. Rules, supra note 4. \7\ Based on data from the second quarter of 2015, which show an approximate daily average of 41 million transactions processed at NSCC, with an approximate total daily value of an average of $455 billion; and an approximate average of 1.1 million submissions through Correspondent Clearing, with an approximate total daily value of an average of $57 billion. The average daily volume of submissions through Correspondent Clearing is less than 5% of NSCC's overall daily volume. \8\ Securities Exchange Act Release No. 69890 (June 28, 2013), 78 FR 40538 (July 5, 2013) (File No. SR-NSCC-2013-05). See also Rule 7 (Comparison and Trade Recording Operation), Procedure II (Trade Comparison and Recording Service), and Procedure IV (Special Representative Service), supra note 4. --------------------------------------------------------------------------- NSCC's Correspondent Clearing service is designed to provide an automated method by which a Member, acting as a Special Representative, may move a position that has been submitted to NSCC for clearing to the account of another Member (the submitting Member's correspondent) on whose behalf the original trade was executed.\9\ Members participating in the Correspondent Clearing service for post-execution position movements and those participating as a QSR for submission of original, locked-in trades are required to apply for status as a Special Representative or as a QSR, and to establish relationships with other NSCC Members that will be designated as their correspondents.\10\ While NSCC encourages Special Representatives to submit Correspondent Clearing submissions to NSCC as soon as possible following execution, currently these position movements may be sent to NSCC either in real- time, intraday, or at the end of the day. --------------------------------------------------------------------------- \9\ The term ``original trade'' is used within the Rules describing the Correspondent Clearing service solely to distinguish between trades executed in the marketplace by the Special Representative, and transactions booked for accounting purposes to accommodate the movement of positions between Members as provided for in Section C of Procedure IV. Original trades may not be submitted through NSCC's Correspondent Clearing service. Rules, supra note 4. \10\ Pursuant to a telephone call with NSCC's internal counsel on October 5, 2015, staff in the Office of Clearance and Settlement corrected an incorrect statement that Members utilizing the services of a QSR are required to apply for status as a Special Representative or as a QSR. NSCC intended to state that Members participating as a QSR are required to apply for status as a Special Representative or as a QSR. --------------------------------------------------------------------------- NSCC has continued to engage widely with its Members about the benefits of expanding the requirements to submit transactions in real- time and, as a result of these continuing discussions, is now proposing to modify its Rules to require that trade data submitted through its Correspondent Clearing service also be submitted in real-time. The proposed rule change would also prohibit pre-netting practices that prevent real-time trade submission through Correspondent Clearing. NSCC's Rules currently prohibit pre-netting practices that preclude real-time submission with respect to submissions by QSRs and SROs. Pre- netting practices that are currently prohibited include ``summarization'' (a technique in which the clearing broker nets all trades in a single CUSIP by the same correspondent broker into fewer submitted trades), ``compression'' (a technique to combine submissions of data for multiple trades to the point where the identity of the party actually responsible for the trades is masked), netting, or any other practice that combines two or more trades prior to their submission to NSCC. NSCC is proposing to extend the prohibition against pre-netting practices to submissions through Correspondent Clearing because pre- netting practices prevent the submission to NSCC of transactions on a trade-by-trade basis, and cause Special Representatives to delay submission of their trades, thereby undermining the risk mitigation benefits of real-time trade submission. Pre-netting practices disrupt NSCC's ability to accurately monitor market and credit risks as they evolve during the trading day. NSCC would exclude from the requirements of this proposal any position movements between Members that are Affiliates, as identified within NSCC's membership management records. As defined in Rule 4A, ``Affiliate'' means a person that controls or is controlled by or is under common control with another person.\11\ Position movements between Affiliates do not introduce the risk management concerns that are mitigated by real-time trade submission. As such, Members would not be required to submit these position movements in real-time, but would continue to be encouraged to do so. Positions movements between Affiliates represent fewer than 5% of trade data submitted through Correspondent Clearing to NSCC.\12\ --------------------------------------------------------------------------- \11\ Control of a person means the direct or indirect ownership or power to vote more than 50% of any class of the voting securities or other voting interests of any person. Rule 4A, supra note 4. \12\ Based on data from the second quarter of 2015, which show an approximate daily average of 1.1 million submissions through Correspondent Clearing at NSCC, with an approximate total daily value of an average of $57 billion; and an approximate average of 52,000 position movements through Correspondent Clearing between Affiliates, with an approximate total daily value of an average of $13 billion. The average daily volume of position movements through Correspondent Clearing between Affiliates is less than 1% of NSCC's overall daily volume. --------------------------------------------------------------------------- In order to submit trade data through Correspondent Clearing outside of the [[Page 61862]] real-time trade submission requirements, Special Representatives would need to identify a transaction as an Affiliate position movement. NSCC would validate the Affiliates' relationship between the counterparties by a check against the information within NSCC's membership management records as of the time of the trade submission. Members continue to be required to provide NSCC with current information regarding their corporate ownership structure. If an Affiliate relationship is not reflected on NSCC's records at the time of the trade submission, the transaction will be rejected. NSCC would also exclude from the requirements of this proposal position movements that occur between two unaffiliated clearing brokers, typically at the end of the day, on behalf of a common customer for custody purposes (``Client Custody Movements''). These movements, which today represent approximately 1% of submissions through Correspondent Clearing, would be exempt from the requirement because they necessarily take place at the end of the day, after the common client has reviewed its end of day positions and has instructed the clearing brokers as to which positions it will move for custody purposes. NSCC proposes to amend Rule 7 (Comparison and Trade Recording Operation), Procedure II (Trade Comparison and Recording Service), and Procedure IV (Special Representative Service) to require that trades submitted by Special Representatives for trade recording through NSCC's Correspondent Clearing service be submitted on a real-time basis and to make clear that trade data submitted to NSCC through Correspondent Clearing service must be submitted on a trade-by-trade basis, in the original form executed, and that pre-netting practices are prohibited. The proposed rule change would also make clear that these requirements would not apply to position movements between NSCC Members that are Affiliates or to Client Custody Movements. Implementation Timeframe Pending Commission approval of this proposed rule change, Members would be advised of the implementation date through issuance of an NSCC Important Notice. The proposed rule change would not be implemented earlier than ten business days from the date of Commission approval. 2. Statutory Basis NSCC believes that this proposal is consistent with Section 17A(b)(3)(F) of the Act, which requires that NSCC's Rules be designed to promote the prompt and accurate clearance and settlement of securities transactions and, in general, to protect investors and the public interest.\13\ --------------------------------------------------------------------------- \13\ 15 U.S.C. 78q-1(b)(3)(F). Pursuant to a telephone call with NSCC's internal counsel on October 1, 2015, staff in the Office of Clearance and Settlement corrected an incorrect reference to 5 U.S.C. 78q-1(b)(3)(F). NSCC intended to refer to 15 U.S.C. 78q- 1(b)(3)(F). --------------------------------------------------------------------------- The proposal would enable NSCC to monitor trades closer to trade execution on an intra-day basis and identify and risk manage any issues relating to exposures earlier in the day. Further, receipt of trade data in real-time would enable NSCC to report to Members trade data as it is received, promoting intra-day reconciliation of transactions at the Member level. Therefore, the proposed rule change would promote the prompt and accurate clearance and settlement of securities transactions by reducing operational, market, and credit risks faced by NSCC and its Members, consistent with the requirements of the Act, in particular Section 17A(b)(3)(F), as cited above. (B) Clearing Agency's Statement on Burden on Competition NSCC does not believe that the proposed rule change would have any impact on competition because the proposed requirements would apply an existing requirement equally to all Members that submit transactions to NSCC through its Correspondent Clearing service. (C) Clearing Agency's Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others NSCC has not received any written comments relating to this proposal. NSCC will notify the Commission of any written comments received by NSCC. III. Date of Effectiveness of the Proposed Rule Change, and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be 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 Number SR-NSCC-2015-004 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 Number SR-NSCC-2015-004. 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., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of NSCC and on DTCC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). 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 Number SR-NSCC-2015-004 and should be submitted on or before November 4, 2015. [[Page 61863]] For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\14\ --------------------------------------------------------------------------- \14\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2015-26028 Filed 10-13-15; 8:45 am] BILLING CODE 8011-01-P
![61860 Federal Register / Vol. 80, No. 198 / Wednesday, October 14, 2015 / Notices
CDSLs, subject to certain conditions. provisions of the Act. Applicants further by NSCC. NSCC filed the proposed rule
Applicants note that rule 6c–10 is submit that the relief requested change pursuant to Section 19(b)(2) 3 of
grounded in policy considerations pursuant to section 23(c)(3) will be the Act. The Commission is publishing
supporting the employment of CDSLs consistent with the protection of this notice to solicit comments on the
where there are adequate safeguards for investors and will insure that applicants proposed rule change from interested
the investor and state that the same do not unfairly discriminate against any persons.
policy considerations support holders of the class of securities to be
I. Clearing Agency’s Statement of the
imposition of EWCs in the interval fund purchased. Finally, applicants state that
Terms of Substance of the Proposed
context. In addition, applicants state the Funds’ imposition of asset-based
Rule Change
that EWCs may be necessary for the distribution fees is consistent with the
distributor to recover distribution costs provisions, policies and purposes of the The proposed rule change consists of
from shareholders who exit their Act and does not involve participation amendments to NSCC’s Rules &
investments early. Applicants represent on a basis different from or less Procedures (‘‘Rules’’) in order to require
that any EWC imposed by the Funds advantageous than that of other that trade data submitted to NSCC
will comply with rule 6c–10 under the participants. through its Correspondent Clearing
Act as if the rule were applicable to service, other than position movements
Applicants’ Condition between NSCC Members that are
closed-end investment companies. The
Funds will disclose EWCs in accordance Applicants agree that any order Affiliates and Client Custody
with the requirements of Form N–1A granting the requested relief will be Movements, as described further below,
concerning CDSLs. subject to the following condition: be submitted in real-time, and to
Each Fund relying on the order will prohibit pre-netting and other practices
Asset-Based Distribution Fees comply with the provisions of rules 6c– that prevent real-time trade
1. Section 17(d) of the Act and rule 10, 12b–1, 17d–3, 18f–3, 22d–1, and, submission.4
17d–1 under the Act prohibit an where applicable, 11a–3 under the Act,
as amended from time to time, as if II. Clearing Agency’s Statement of the
affiliated person of a registered
those rules applied to closed-end Purpose of, and Statutory Basis for, the
investment company or an affiliated
management investment companies, Proposed Rule Change
person of such person, acting as
principal, from participating in or and will comply with the NASD Sales In its filing with the Commission,
effecting any transaction in connection Charge Rule, as amended from time to NSCC included statements concerning
with any joint enterprise or joint time, as if that rule applied to all closed- the purpose of and basis for the
arrangement in which the investment end management investment proposed rule change and discussed any
company participates unless the companies. comments it received on the proposed
Commission issues an order permitting For the Commission, by the Division of
rule change. The text of these statements
the transaction. In reviewing Investment Management, under delegated may be examined at the places specified
applications submitted under section authority. in Item IV below. NSCC has prepared
17(d) and rule 17d–1, the Commission Robert W. Errett, summaries, set forth in sections A, B,
considers whether the participation of Deputy Secretary. and C below, of the most significant
the investment company in a joint aspects of such statements.
[FR Doc. 2015–26029 Filed 10–13–15; 8:45 am]
enterprise or joint arrangement is BILLING CODE 8011–01–P (A) Clearing Agency’s Statement of the
consistent with the provisions, policies Purpose of, and Statutory Basis for, the
and purposes of the Act, and the extent Proposed Rule Change
to which the participation is on a basis SECURITIES AND EXCHANGE
different from or less advantageous than COMMISSION 1. Purpose 5
that of other participants. Requiring trades to be submitted in
2. Rule 17d–3 under the Act provides [Release No. 34–76099; File No. SR–NSCC–
2015–004]
real-time facilitates efficient risk
an exemption from section 17(d) and management for both NSCC and its
rule 17d–1 to permit open-end Members, enables same-day
Self-Regulatory Organizations;
investment companies to enter into bookkeeping and reconciliation, and,
National Securities Clearing
distribution arrangements pursuant to therefore, significantly reduces risk to
Corporation; Notice of Filing of
rule 12b–1 under the Act. Applicants the industry. Receipt of trade data on a
Proposed Rule Change to Require
request an order under section 17(d) and real-time basis permits NSCC’s risk
Real-Time Trade Submission and to
rule 17d–1 under the Act to the extent management processes to monitor trades
Prohibit Pre-Netting Practices through
necessary to permit the Fund to impose closer to trade execution on an intra-day
NSCC’s Correspondent Clearing
asset-based distribution fees. Applicants basis, and to identify and risk manage
Service
have agreed to comply with rules 12b– any issues relating to exposures earlier
1 and 17d–3 as if those rules applied to October 7, 2015. in the day. Contract information is
closed-end investment companies, Pursuant to Section 19(b)(1) 1 of the currently reported out to submitting
which they believe will resolve any Securities Exchange Act of 1934 (‘‘Act’’) firms by NSCC’s Universal Trade
concerns that might arise in connection and Rule 19b–4 2 thereunder, notice is Capture (‘‘UTC’’) system upon trade
with a Fund financing the distribution hereby given that on September 30, comparison and validation, and receipt
of its shares through asset-based 2015, National Securities Clearing of trade data in real-time enables NSCC
distribution fees. Corporation (‘‘NSCC’’) filed with the
tkelley on DSK3SPTVN1PROD with NOTICES
For the reasons stated above, Securities and Exchange Commission 3 15 U.S.C. 78s(b)(2).
applicants submit that the exemptions (‘‘Commission’’) the proposed rule 4 Terms not defined herein are defined in the
requested under section 6(c) are change as described in Items I, II and III Rules, available at http://dtcc.com/∼/media/Files/
necessary and appropriate in the public Downloads/legal/rules/nscc_rules.pdf.
below, which Items have been prepared 5 Pursuant to a telephone call with NSCC’s
interest and are consistent with the internal counsel on October 1, 2015, staff in the
protection of investors and the purposes 1 15 U.S.C. 78s(b)(1). Office of Clearance and Settlement added the
fairly intended by the policy and 2 17 CFR 240.19b–4. heading. NSCC inadvertently omitted the heading.
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![Federal Register / Vol. 80, No. 198 / Wednesday, October 14, 2015 / Notices 61863
For the Commission, by the Division of II. Self-Regulatory Organization’s if such rule were part of the Rules of the
Trading and Markets, pursuant to delegated Statement of the Purpose of, and Exchange.’’
authority.14 Statutory Basis for, the Proposed Rule The Commission recently approved a
Robert W. Errett, Change proposed rule change by FINRA to
Deputy Secretary. In its filing with the Commission, the transfer NASD Rule 2711 to the FINRA
[FR Doc. 2015–26028 Filed 10–13–15; 8:45 am] Exchange included statements rulebook and redesignate it as FINRA
concerning the purpose of, and basis for, Rule 2241.5 This was proposed as part
BILLING CODE 8011–01–P
the proposed rule change and discussed of FIRNA’s process of consolidating
any comments it received on the certain NASD rules into the new FINRA
SECURITIES AND EXCHANGE proposed rule change. The text of these rulebook. To reflect the approval of this
statements may be examined at the recent FINRA proposed rule change, the
COMMISSION
places specified in Item IV below. The Exchange proposes to replace the
Exchange has prepared summaries, set reference to NASD Rule 2711 with
[Release No. 34–76093; File No. SR–EDGA– FINRA 2241 under paragraph (b)(3). The
forth in Sections A, B, and C below, of
2015–38] Exchange also proposes to delete the
the most significant parts of such
statements. provision within Rule 3.13 referencing
Self-Regulatory Organizations; EDGA the transferring of NASD Rule 2711 to
Exchange, Inc.; Notice of Filing and A. Self-Regulatory Organization’s the FINRA rulebook as NASD Rule 2711
Immediate Effectiveness of a Proposed Statement of the Purpose of, and was transferred to the FINRA rule book
Rule Change To Amend Rule 3.13 Statutory Basis for, the Proposed Rule as Rule 2241 (described above), as no
(Payments Involving Publications That Change longer necessary.
Influence the Market Price of a 1. Purpose
Security) 2. Statutory Basis
The Exchange proposes to amend
The Exchange believes that proposed
October 7, 2015. Rule 3.13 to update references to a
rule change is consistent with Section
recently amended FINRA rule and make
Pursuant to Section 19(b)(1) of the 6(b)(5) of the Act,6 which requires,
a ministerial, non-substantive change.
Securities Exchange Act of 1934 among other things, that the Exchange’s
Rule 3.13(a) prohibits Exchange
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 rules be designed to prevent fraudulent
members from ‘‘directly or indirectly,
notice is hereby given that on and manipulative acts and practices, to
giv[ing], permit[ting] to be given, or
September 23, 2015, EDGA Exchange, promote just and equitable principles of
offer[ing] to give anything of value to
Inc. (‘‘Exchange’’ or ‘‘EDGA’’) filed with trade, to foster cooperation and
any person for the purpose of
the Securities and Exchange influencing or rewarding the action of coordination with persons engaged in
Commission (‘‘Commission’’) the such person in connection with the facilitating transactions in securities,
proposed rule change as described in publication or circulation in any and to remove impediments to and
Items I and II below, which Items have electronic or other public media, perfect the mechanism of a free and
been substantially prepared by the including any investment service or open market and a national market
Exchange. The Exchange has designated similar publication, Web site, system. The Exchange does not propose
newspaper, magazine or other to amend the prohibition or exceptions
this proposal as a ‘‘non-controversial’’
periodical, radio, or television program of any of its Rule 3.13. The Exchange
proposed rule change pursuant to
of any matter that has, or is intended to believes that by updating cross
Section 19(b)(3)(A) of the Act 3 and Rule references to FINRA rules as a result of
19b–4(f)(6)(iii) thereunder,4 which have, an effect upon the market price of
any security.’’ The Exchange proposes the transfer of NASD Rule 2711 to the
renders it effective upon filing with the FINRA rulebook as FINRA Rule 2241
Commission. The Commission is to amend paragraph (a) by replacing the
term ‘‘Web site’’ with ‘‘Web site’’. and making a ministerial, non-
publishing this notice to solicit substantive change the proposed rule
comments on the proposed rule change Rule 3.13(b) sets forth exceptions to
the prohibitions under paragraph (a) set change would remove impediments to
from interested persons. and perfect the mechanism of a free and
forth above. These exceptions allow for
I. Self-Regulatory Organization’s compensation paid to a person in open market and a national market
Statement of the Terms of Substance of connection with the publication or system by avoiding potential investor
circulation of: (i) A communication that and member confusion. The Exchange
the Proposed Rule Change
is clearly distinguishable as paid believes that these clarifying changes
The Exchange filed a proposal to advertising; (ii) a communication that also would, in general, protect investors
amend EDGA Rule 3.13 to update discloses the receipt of compensation and the public interest.
references to recently amended FINRA and the amount thereof in accordance B. Self-Regulatory Organization’s
rules and make a ministerial, non- with Section 17(b) of the Securities Act Statement on Burden on Competition
substantive change. The text of the of 1933; or (iii) a research report, as that
term is defined in NASD Rule 2711. The Exchange does not believe that
proposed rule change is available at the
Rule 3.13 also states that FINRA is in the proposed rule change would impose
Exchange’s Web site at
the process of consolidating certain any burden on competition that is not
www.batstrading.com, at the principal necessary or appropriate in furtherance
office of the Exchange, and at the NASD rules into a new FINRA rulebook.
This provision also states that ‘‘[i]f the of the purposes of the Act. The
Commission’s Public Reference Room. Exchange does not propose to amend
tkelley on DSK3SPTVN1PROD with NOTICES
provisions of NASD Rule 2711 are
transferred into the FINRA rulebook, the prohibition or exceptions of any of
14 17 then Rule 2711 shall be construed to its Rule 3.13. The proposed rule change
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1). require Exchange members to comply 5 See Exchange Act Release No. 75471 (July 16,
2 17 CFR 240.19b–4. with FINRA rule corresponding to 2015), 80 FR 43482 (July 22, 2015) (SR–FINRA–
3 15 U.S.C. 78s(b)(3)(A). NASD Rule 2711 (regardless of whether 2014–047).
4 17 CFR 240.19b–4(f)(6)(iii). such rule is renumbered or amended) as 6 15 U.S.C. 78f(b)(5).
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Document Created: 2018-02-27 08:50:03
Document Modified: 2018-02-27 08:50:03
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