80 FR 69745 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Requiring Certain ETP Holders To Participate in Business Continuity and Disaster Recovery Plans Testing in Connection With Regulation Systems Compliance and Integrity

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 217 (November 10, 2015)

[Federal Register Volume 80, Number 217 (Tuesday, November 10, 2015)]
[Notices]
[Pages 69745-69748]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-28520]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76342; File No. SR-NYSEARCA-2015-96]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Requiring Certain 
ETP Holders To Participate in Business Continuity and Disaster Recovery 
Plans Testing in Connection With Regulation Systems Compliance and 
Integrity

November 4, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on October 26, 2015, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.

---------------------------------------------------------------------------

[[Page 69746]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to require certain ETP HoldersSec. \4\ to 
participate in business continuity and disaster recovery plans (``BC/DR 
Plans'') testing in connection with Regulation Systems Compliance and 
Integrity (``Regulation SCI'').\5\ The text of the proposed rule change 
is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.
---------------------------------------------------------------------------

    \4\ Pursuant to NYSE Arca Equities Rule 1.1(n), the term ``ETP 
Holder'' refers to a sole proprietorship, partnership, corporation, 
limited liability company or other organization in good standing 
that has been issued an ETP. An ETP Holder must be a registered 
broker or dealer pursuant to Section 15 of the Act. NYSE Arca 
Equities Rule 1.1(m) defines ``ETP'' as an Equity Trading Permit 
issued by the Exchange for effecting approved securities 
transactions on the Exchange.
    \5\ See Securities Exchange Act Release No. 73639 (November 19, 
2014), 79 FR 72252 (December 5, 2014) (``SCI Adopting Release'').
---------------------------------------------------------------------------

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 self-regulatory organization 
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 those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    As adopted by the Commission, Regulation SCI applies to certain 
self-regulatory organizations (including the Exchange), alternative 
trading systems (``ATSs''), plan processors, and exempt clearing 
agencies (collectively, ``SCI entities''), and will require these SCI 
entities to comply with requirements with respect to the automated 
systems central to the performance of their regulated activities. Among 
the requirements of Regulation SCI is Rule 1001(a)(2)(v), which 
requires the Exchange and other SCI entities to maintain ``[b]usiness 
continuity and disaster recovery plans that include maintaining backup 
and recovery capabilities sufficiently resilient and geographically 
diverse and that are reasonably designed to achieve next business day 
resumption of trading and two-hour resumption of critical SCI systems 
following a wide-scale disruption.'' \6\ As a matter of course, the 
Exchange has put extensive time and resources toward planning for 
system failures and already maintains robust BC/DR plans consistent 
with the proposed rule. As set forth below, in connection with 
Regulation SCI, the Exchange is proposing to require certain ETP 
Holders to participate in testing of the operation of the Exchange's 
BC/DR plans.
---------------------------------------------------------------------------

    \6\ 17 CFR 242.1001(a)(2)(v).
---------------------------------------------------------------------------

    With respect to an SCI entity's BC/DR plans, including its backup 
systems, paragraph (a) of Rule 1004 of Regulation SCI requires each SCI 
entity to: ``[e]stablish standards for the designation of those members 
or participants that the SCI entity reasonably determines are, taken as 
a whole, the minimum necessary for the maintenance of fair and orderly 
markets in the event of the activation of such plans.'' \7\ Paragraph 
(b) of Rule 1004 further requires each SCI entity to ``[d]esignate 
members or participants pursuant to the standards established in 
paragraph (a) of [Rule 1004] and require participation by such 
designated members or participants in scheduled functional and 
performance testing of the operation of such plans, in the manner and 
frequency specified by the SCI entity, provided that such frequency 
shall not be less than once every 12 months.'' \8\
---------------------------------------------------------------------------

    \7\ 17 CFR 242.1004(a).
    \8\ 17 CFR 242.1004(b).
---------------------------------------------------------------------------

    To comply with Rule 1004 of Regulation SCI, the Exchange proposes 
to amend current Rule 2.2,\9\ governing mandatory testing of Exchange 
backup systems as described below. The requirements of revised Rule 2.2 
would apply to ETP Holders that transact on the Exchange's equities 
market.
---------------------------------------------------------------------------

    \9\ Current Rule 2.2 requires each ETP Holder that has an 
electronic interface with the Exchange to participate in industry 
testing of computer systems designed to ascertain decimal pricing 
conversion compatibility of such computer systems for the 
implementation of decimal trading. The Exchange proposes to delete 
the text of the current rule as it is obsolete and no longer 
applicable.
---------------------------------------------------------------------------

    First, in paragraph (a) of revised Rule 2.2, the Exchange proposes 
to establish standards for the designation of ETP Holders that the 
Exchange reasonably determines are, taken as a whole, the minimum 
necessary for the maintenance of fair and orderly markets in the event 
of the activation of the Exchange's business continuity and disaster 
recovery plans.
    Second, in paragraph (b) of revised Rule 2.2, the Exchange proposes 
to specify that ETP Holders that are designated pursuant to paragraph 
(a) of revised Rule 2.2 would be required to participate in scheduled 
functional and performance testing of the Exchange's business 
continuity and disaster recovery plans, which shall not be less than 
once every 12 months.
    Third, in paragraph (c) of revised Rule 2.2, the Exchange proposes 
to make clear that Lead Market Makers \10\ that have been determined by 
the Exchange to contribute a meaningful percentage of the Exchange's 
overall volume, measured on a quarterly or monthly basis, will be 
required to participate in scheduled functional and performance 
testing. The Exchange further proposes that it may also consider other 
factors in determining the ETP Holders that will be required to 
participate in scheduled functional and performance testing, including 
average daily volume traded on the Exchange measured on a quarterly or 
monthly basis, or ETP Holders who collectively account for a certain 
percentage of market share on the Exchange.
---------------------------------------------------------------------------

    \10\ The term ``Lead Market Maker'' means a registered Market 
Maker that is the exclusive Designated Market Maker in listings for 
which the Corporation is the primary market. See Rule 1.1(ccc).
---------------------------------------------------------------------------

    Fourth, in paragraph (d) of revised Rule 2.2, the Exchange proposes 
that at least three (3) months prior to a scheduled functional and 
performance testing of the Exchange's business continuity and disaster 
recovery plans, the Exchange will publish the criteria to be used by 
the Exchange to determine which ETP Holders will be required to 
participate in such testing and notify those ETP Holders that are 
required to participate based on such criteria.\11\ The Exchange 
believes that the proposed notice requirements are necessary to provide 
ETP Holders with proper advance notice in the event they become subject 
to the proposed rule. The proposed timeframes would also provide ETP 
Holders with adequate time to prepare for the testing, including any 
systems changes needed, to connect to the Exchange's backup systems.
---------------------------------------------------------------------------

    \11\ The Exchange will publish the initial notice to OTP Holders 
no later than November 3, 2015.
---------------------------------------------------------------------------

    Finally, in paragraph (e) of revised Rule 2.2, the Exchange 
proposes to make clear that ETP Holders not designated pursuant to 
standards established in paragraph (a) of revised Rule 2.2 are 
permitted to connect to the Exchange's backup systems and may 
participate in testing of such systems. Proposed paragraph (e) is 
consistent with Regulation SCI, which encourages

[[Page 69747]]

``SCI entities to permit non-designated members or participants to 
participate in the testing of the SCE entity's BC/DR plans if they 
request to do so.'' \12\
---------------------------------------------------------------------------

    \12\ See SCI Adopting Release, supra note 5 at 72350.
---------------------------------------------------------------------------

    The Exchange notes that it encourages all ETP Holders to connect to 
the Exchange's backup systems and to participate in testing of such 
systems. However, in adopting the requirements in revised Rule 2.2, the 
rule will subject only those ETP Holders to mandatory testing that the 
Exchange believes are, taken as a whole, the minimum necessary to 
maintain fair and orderly markets. The Exchange believes that 
designating ETP Holders to participate in mandatory testing because 
they, for example, account for a significant portion of the Exchange's 
overall volume or maintain exclusive responsibilities with respect to 
Exchange-listed securities is a reasonable means to ensure the 
maintenance of a fair and orderly market on the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\13\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\14\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to, and 
perfect the mechanisms of, a free and open market and a national market 
system and, in general, to protect investors and the public interest 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposal will ensure that the ETP Holders necessary to ensure 
the maintenance of a fair and orderly market are properly designated 
consistent with Rule 1004 of Regulation SCI. Specifically, as proposed, 
the Exchange will adopt clear and objective criteria with respect to 
the designation of ETP Holders that are required to participate in the 
testing of the Exchange's BC/DR plans, as well as appropriate 
notification regarding such designation. As set forth in the SCI 
Adopting Release, ``SROs have the authority, and legal responsibility, 
under Section 6 of the Exchange Act, to adopt and enforce rules 
(including rules to comply with Regulation SCI's requirements relating 
to BC/DR testing) applicable to their members or participants that are 
designed to, among other things, foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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.'' \15\ The Exchange believes 
that this proposal is consistent with such authority and legal 
responsibility.
---------------------------------------------------------------------------

    \15\ See SCI Adopting Release, supra note 5 at 72350.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. To the contrary, the proposal 
is not a competitive proposal but rather is necessary for the 
Exchange's compliance with Regulation SCI.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\19\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
---------------------------------------------------------------------------

    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest 
as it will allow the Exchange to incorporate changes required under 
Regulation SCI, such as establishing standards for designating BCP/DR 
participants, prior to the November 3, 2015 compliance date. 
Accordingly, the Commission designates the proposed rule change to be 
operative upon filing.\20\
---------------------------------------------------------------------------

    \20\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 such 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 under 
Section 19(b)(2)(B) \21\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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 Comments

     Use 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-NYSEARCA-2015-96 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-NYSEARCA-2015-96. This 
file number should be included on the

[[Page 69748]]

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 Section, 100 F Street NE., Washington, DC 20549-1090. Copies 
of the filing will also be available for inspection and copying at the 
NYSE's principal office and on its Internet Web site at www.nyse.com. 
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-NYSEARCA-2015-
96 and should be submitted on or before December 1, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-28520 Filed 11-9-15; 8:45 am]
BILLING CODE 8011-01-P