81 FR 14906 - Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change Consisting of Proposed Amendments to Rules G-12 and G-15 To Define Regular-Way Settlement for Municipal Securities Transactions as Occurring on a Two-Day Settlement Cycle and Technical Conforming Amendments
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 53 (March 18, 2016)
Federal Register Volume 81, Issue 53 (March 18, 2016)
| Page Range | 14906-14910 | |
| FR Document | 2016-06091 |
[Federal Register Volume 81, Number 53 (Friday, March 18, 2016)] [Notices] [Pages 14906-14910] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-06091] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77364; File No. SR-MSRB-2016-04] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change Consisting of Proposed Amendments to Rules G-12 and G-15 To Define Regular-Way Settlement for Municipal Securities Transactions as Occurring on a Two- Day Settlement Cycle and Technical Conforming Amendments March 14, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on March 1, 2016, the Municipal Securities Rulemaking Board (the ``MSRB'' or ``Board'') filed with the Securities and Exchange Commission (the ``SEC'' or ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the MSRB. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(i). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The MSRB filed with the Commission a proposed rule change consisting of proposed amendments to Rule G-12, on uniform practice, and Rule G-15, on confirmation, clearance, settlement and other uniform practice requirements with respect to transactions with customers, to define regular-way settlement for municipal securities transactions as occurring on a two-day settlement cycle (``T+2'') and technical conforming amendments (``proposed rule change''). The compliance date of the proposed rule change will be announced by the MSRB in a notice published on the MSRB Web site, which date would correspond with the industry's transition to a T+2 regular-way settlement, which would include amendments by the SEC to Exchange Act Rule 15c6-1(a). The text of the proposed rule change is available on the MSRB's Web site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2016-Filings.aspx, at the MSRB'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 MSRB 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 MSRB 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 Background Following the financial crisis in 2008, regulators implemented additional rules and regulations designed to reduce risk in the markets, achieve greater transparency and improve efficiency in the financial industry. Consistent with those goals, the securities industry launched a voluntary initiative to shorten the settlement cycle for securities transactions to reduce counterparty risk, decrease clearing capital requirements, reduce liquidity demands, and harmonize the settlement cycle globally. The industry-led initiative to shift from the current regular-way settlement cycle defined as a three-day settlement cycle (``T+3'') to a T+2 settlement cycle is being led by the Shortened Settlement Cycle Industry Steering Committee (``ISC'') which is jointly chaired by the Investment Company Institute (``ICI'') and the Securities Industry and Financial Markets Association (``SIFMA'').\3\ The ISC announced its proposal in a white paper (the ``white paper''), which outlined the timeline and activities required to move to a T+2 settlement cycle in the U.S. for equities, corporate and municipal bonds, and unit investment trust trades.\4\ The ISC's white paper identified all SEC and self-regulatory organization (``SRO'') rule changes that it believed would be necessary to support a T+2 settlement cycle. --------------------------------------------------------------------------- \3\ Shortening the Settlement Cycle: The Move to T+2, available at, http://www.ust2.com/pdfs/ssc.pdf. Other participating industry associations include: The Association of Global Custodians, The Association of Institutional Investors, The Securities Transfer Association, Inc., and The Depository Trust & Clearing Corporation (``DTCC''). \4\ Id. --------------------------------------------------------------------------- The ISC recommended a timeline calling for relevant regulatory [[Page 14907]] organizations to confirm support for a reduced settlement cycle by the third quarter of 2015, propose rule changes by the fourth quarter of 2015 and adopt rule changes by the second quarter of 2016, followed by industry implementation of the T+2 settlement cycle occurring by the third quarter of 2017. In a press release announcing the Board's actions at its July 2015 Board meeting, the MSRB publicly communicated its support of the industry's initiative to shorten the settlement cycle to T+2.\5\ On November 10, 2015, the MSRB published a Request for Comment on Changes to MSRB Rules to Facilitate Shortening the Securities Settlement Cycle (``Request for Comment'').\6\ --------------------------------------------------------------------------- \5\ See Press Release, MSRB Holds Quarterly Meeting, (August, 3 2015), available at, http://www.msrb.org/News-and-Events/Press-Releases/2015/MSRB-Holds-Quarterly-Meeting-July-2015.aspx. \6\ MSRB Notice 2015-22, Request for Comment on Changes to MSRB Rules To Facilitate Shortening the Securities Settlement Cycle (November 10, 2015). --------------------------------------------------------------------------- On June 18, 2015, concurrent with the white paper, SIFMA and ICI jointly submitted a letter to SEC Chair Mary Jo White to express support for the industry's efforts ``to shorten the settlement cycle for equities, corporate and municipal bonds, unit investment trusts and financial instruments comprised of these products traded on the secondary market.'' \7\ The ICI/SIFMA letter identified specific rules that the relevant securities regulators would need to consider amending in order to facilitate the move to T+2. In response to the ICI/SIFMA letter, Chair White stated that she ``strongly support[s] [the] efforts to shorten the settlement cycle from the third business day after the trade date to no later than the second business day'' and is ``committed to considering regulatory changes necessary for this migration to proceed on a timetable that will permit the industry to complete its essential work by no later than the proposed goal of the third quarter of 2017.'' Further, Chair White stated that she has ``requested that the SROs finalize [schedules of rule changes necessary to support a T+2 settlement cycle] by October 31, 2015.'' \8\ In light of Chair White's support of the industry initiative and the timeline set forth in the ISC's white paper, the MSRB is filing this proposed rule change. --------------------------------------------------------------------------- \7\ See Letter from Paul Schott Stevens, President & CEO, ICI (``Stevens''), and Kenneth E. Bentsen, Jr., President and CEO, SIFMA (``Bentsen''), to Mary Jo White, Chair, SEC (June 18, 2015) (``ICI/ SIFMA letter''). \8\ See Letter from Mary Jo White, Chair, SEC, to Bentsen and Stevens (September 16, 2015). --------------------------------------------------------------------------- Proposal Two MSRB rules were identified in the ICI/SIFMA letter as essential to facilitate the move to T+2, Rule G-12(b)(ii)(B)-(D) and Rule G- 15(b)(ii)(B)-(C), because these rules currently define regular-way settlement as occurring on T+3. The MSRB's proposed rule change would amend Rules G-12(b)(ii)(B)-(D) and G-15(b)(ii)(B)-(C) to define regular-way settlement as occurring on T+2. As generally noted in ISC's white paper, the migration to T+2 settlement is expected to provide significant benefits to the financial industry broadly. The benefits to the industry include the mitigation of counterparty risk, a decrease in margin requirements for National Securities Clearing Corporation's (``NSCC'') clearing members, a reduction in pro-cyclical margin and liquidity demands especially during periods of market volatility, and an increase in global settlement harmonization by aligning the U.S. markets with other major markets, such as the European Union.\9\ By shortening the time between trade and execution and settlement by one business day (from T+3 to T+2), the risk of counterparty default and the capital required to mitigate this risk would be reduced. Similarly, the ICI/SIFMA letter noted that ``[a]mong other benefits, the shorter settlement cycle will result in process and procedural improvements that will help mitigate the operational risks that can be present between trade date and settlement date.'' \10\ The MSRB believes the likely costs of the proposed rule change, including the changes in processes and technology as well as behavioral modifications by the industry and investors, are justified by the likely benefits associated with transitioning to T+2. --------------------------------------------------------------------------- \9\ See Equity Settlement Cycle for Top 10 Exchanges by Market Capitalization, Figure 2, page 9 (depicting global settlement harmonization for equities pre- and post-migration to T+2), available at, http://www.ust2.com/pdfs/ssc.pdf. \10\ See supra n.7. --------------------------------------------------------------------------- Both the ISC and the ICI/SIFMA letter identified Exchange Act Rule 15c6-1(a) as the primary SEC rule that would need to be amended to facilitate the transition to T+2. Exchange Act Rule 15c6-1 defines regular-way settlement as occurring on T+3 for equities and corporate bonds. Although Exchange Act Rule 15c6-1 does not apply to transactions in municipal securities, the MSRB has previously stated that the regular-way settlement cycle for municipal securities transactions in the secondary markets should be consistent with that for equity and corporate bond transactions.\11\ Among other reasons, this ensures that investors will not encounter differing settlement cycles when replacing equity or corporate bonds with municipal securities. --------------------------------------------------------------------------- \11\ See, e.g., ``T+3 Settlement, Amendments Filed: Rules G-12 and G-15,'' MSRB Reports, Vol. 14, No. 4 (August 1994) at 3; and ``Report of the Municipal Securities Rulemaking Board on T+3 Settlement for the Municipal Securities Market'' (March 17, 1994). --------------------------------------------------------------------------- This consistency is currently reflected in MSRB Rules G-12(b)(ii) and G-15(b)(ii), which both define regular-way settlement as occurring on T+3. These rules were last modified in 1995 in coordination with the changes made to Exchange Act Rule 15c6-1 to facilitate shortening the settlement cycle from a five-day settlement cycle (``T+5'') to T+3. In order to maintain consistency across asset classes, the MSRB's proposed rule change is necessary to support the current industry initiative to shift to a T+2 settlement cycle. The MSRB would coordinate implementation of a T+2 regular-way settlement cycle for municipal securities transactions with other securities regulators contingent on the SEC adopting amendments to Exchange Act Rule 15c6-1(a) establishing T+2 as the standard for regular-way settlement cycle for equities and corporate bonds. Proposed Amendments to MSRB Rules G-12(b)(ii)(B)-(D) and G- 15(b)(ii)(B)-(C) MSRB Rule G-12, on uniform practice, establishes uniform industry practices for processing, clearance and settlement of transactions in municipal securities between a broker, dealer or municipal securities dealer and any other broker, dealer or municipal securities dealer. Rule G-12(b)(ii), on settlement dates, defines ``regular way'' settlement as occurring on a T+3 basis. The proposed rule change would amend Rule G-12(b)(ii)(B)-(D) to define ``regular way'' settlement as occurring on a T+2 basis. MSRB Rule G-15, on confirmations, clearance, settlement and other uniform practice requirements, requires municipal securities brokers and municipal securities dealers to provide customers with written confirmations of transactions, containing specified information; and prescribes certain uniform practice procedures for dealers that transact municipal securities business with customers. Rule G- 15(b)(ii), on settlement dates, defines ``regular way'' settlement as occurring on a T+3 basis. The proposed rule change would amend Rule G- 15(b)(ii)(B)-(C) to define ``regular way'' settlement as occurring on a T+2 basis. [[Page 14908]] Technical Amendments The MSRB is also proposing technical changes to Rules G- 12(b)(i)(B), G-15(b)(i)(B) and G-15(g)(ii)(B). Rules G-12(b)(i)(B) and G-15(b)(i)(B) would both be revised by replacing the reference to ``National Association of Securities Dealers, Inc.'' with the ``Financial Industry Regulatory Authority.'' Rule G-15(g)(ii)(B) would likewise be revised to replace the reference to ``NASD Conduct Rule 2260(g),'' which is retired, and replace it with the current relevant rule cite ``FINRA Rule 2251(g).'' Compliance Date The compliance date of the proposed rule change will be announced by the MSRB in a notice published on the MSRB Web site, which date would correspond with the industry's transition to a T+2 regular-way settlement, which would include amendments by the SEC to Exchange Act Rule 15c6-1(a). 2. Statutory Basis The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Exchange Act,\12\ which provides that the MSRB's rules shall: --------------------------------------------------------------------------- \12\ 15 U.S.C. 78o-4(b)(2)(C). be 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 municipal securities and municipal financial products, to remove impediments to and perfect the mechanism of a free and open market in municipal securities and municipal financial products, and, in general, to protect investors, --------------------------------------------------------------------------- municipal entities, obligated persons, and the public interest. The MSRB believes that cooperating and coordinating with the various regulators, identified by the ISC, and the industry, shortening the time between trade execution and settlement by one business day will serve to reduce the risk of counterparty default, subsequent mandatory closeouts and, as a result, capital required to mitigate these risks would be reduced. Additionally, the MSRB believes the move to a shortened settlement cycle, as facilitated by the proposed rule change, will improve the overall efficiency of the securities markets, promote financial stability and better align U.S. securities markets with global markets. B. Self-Regulatory Organization's Statement on Burden on Competition Section 15B(b)(2)(C) of the Exchange Act \13\ requires that MSRB rules not be designed to impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. --------------------------------------------------------------------------- \13\ Id. --------------------------------------------------------------------------- In determining whether these standards have been met, the MSRB was guided by the Board's Policy on the Use of Economic Analysis in MSRB Rulemaking.\14\ In accordance with this policy, the Board has evaluated the potential impacts on competition of the proposed rule change, including in comparison to reasonable alternative regulatory approaches, relative to the baseline. The MSRB also considered other economic impacts of the proposed rule change and has addressed any comments relevant to these impacts in other sections of this document. --------------------------------------------------------------------------- \14\ Policy on the Use of Economic Analysis in MSRB Rulemaking, available at, http://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx. --------------------------------------------------------------------------- Based on the DTCC's Cost Benefit Analysis of Shortening the Settlement Cycle,\15\ which is the only quantitative analysis of this subject of which the MSRB is aware, the MSRB believes that the cost of the systems changes that may be required to shift from a T+3 to T+2 settlement cycle may be significant. Firms with relatively smaller revenue bases and/or firms that only participate in the municipal securities market may be disproportionately impacted by changes that require significant investments. --------------------------------------------------------------------------- \15\ Cost Benefit Analysis of Shortening the Settlement Cycle (October 2012), available at, http://www.dtcc.com/~/media/Files/ Downloads/WhitePapers/ CBA_BCG_Shortening_the_Settlement_Cycle_October2012.pdf. --------------------------------------------------------------------------- Nonetheless, the MSRB believes that the changes are necessary or appropriate in furtherance of the purposes of the Exchange Act and yield important benefits for a range of market participants including, but not limited to, operational cost savings, reduced counterparty risk, decreasing clearing capital requirements, reduce pro-cyclical margin and liquidity demands and increased global securities settlement harmonization. Therefore, the MSRB does not believe that the proposed rule change will impose any additional burdens on competition, relative to the baseline, that are not necessary or appropriate in furtherance of the purposes of the Exchange Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The MSRB received nine comment letters \16\ in response to the Request for Comment on the draft amendments to Rules G-12 and G-15.\17\ Seven of the nine commenters provided comments in support of the transition to T+2, agreeing that the move to a shortened settlement cycle would improve the overall efficiency of the securities markets, promote financial stability and better align U.S. securities markets with global markets.\18\ Four of the nine commenters expressed concerns about the impact the shortened settlement cycle would have on investors--particularly senior investors--who, the commenters note, often pay for municipal securities purchases by writing a check and sending it through the mail. Several commenters requested the Board consider the impact the proposal may have on the customer disclosure obligations of brokers, dealers and municipal securities dealers (``dealers'') pursuant to MSRB Rule G-32. Finally, BDA, FSI, ICI and SIFMA encouraged the MSRB to work with other regulators on the T+2 initiative and to file any necessary rule changes by the second quarter of 2016 in order to finalize the necessary amendments and implement the change to T+2 in accordance with ISC's timeline, which called for completing the transition to T+2 by the third quarter of 2017. --------------------------------------------------------------------------- \16\ Comment letters were received in response to the Request for Comment from: Bernardi Securities, Inc., Letter from Eric Bederman, SVP, Chief Operating & Compliance Officer, dated November 17, 2015 (``Bernardi''); Bond Dealers of America, Letter from Michael Nicholas, Chief Executive Officer, dated December 10, 2015 (``BDA''); Brandis Tallman LLC, Letter from Richard Brandis, (``Brandis''); Castle Advisory Company, Email from Garth Schulz, dated November 10, 2015 (``Castle''); Coastal Securities, Email from Chris Melton, Executive Vice President, dated December 10, 2015 (``Coastal''); Financial Services Institute, Letter from David T. Bellaire, Executive Vice President & General Counsel, dated December 10, 2015 (``FSI''); Geraldine Lettieri, Email dated November 10, 2015 (``Lettieri''); Investment Company Institute, Letter from Martin A. Burns, Chief Industry Operations Officer, dated December 1, 2015 (``ICI''); and Securities Industry and Financial Markets Association, Letter from Leslie M. Norwood, Managing Director and Associate General Counsel, dated December 10, 2015 (``SIFMA''). \17\ See supra n.6. \18\ The following commenters were supportive of the amendments contained in the Request for Comment: Bernardi, BDA, Castle, FSI, ICI, Lettierie and SIFMA. --------------------------------------------------------------------------- The Impact of T+2 on Certain Retail Investors BDA, Bernardi, Brandis and Coastal each commented that retail municipal securities investors that do not utilize [[Page 14909]] payment mechanisms to ensure funds are good/cleared and available for settlement would be negatively impacted by the proposed rule change. Bernardi stated that the move to T+2 would specifically impact ``1. Customer purchases with longer settlements (i.e., 5-10 days) designed to coincide with another bond's redemption. 2. Customers who do not hold cash balances and send payment via the US Postal System. 3. Customer trades which are booked to settle on the same date as the corresponding firm street trade, if not done `regular way.' '' Brandis stated that many of the investors associated with his firm who invest in municipal securities are over the age of 50, are less tech savvy, and predominantly pay for bond purchases by writing a check and sending payment through the mail. Coastal stated, ``This proposal . . . will all but require retail clients that cannot settle DVP to transact business only with the firm that holds their assets, effectively eliminating any competition for the municipal business of many clients . . . [s]hortening of the settlement cycle should be delayed until retail commercial banking can provide investors with a cost effective manner of immediate fund transfer.'' Similarly, BDA stated that ``many retail clients still rely on sending checks, which may not clear within a two-day window.'' The MSRB recognizes that it may be difficult for certain investors to make the behavioral changes necessary for a successful transition to a T+2 settlement cycle. The MSRB believes that the vast majority of firms have access to technology that would enable their clients to deliver funds in order to settle their municipal securities trades on a T+2 basis and firms should encourage their customers to leverage electronic funds payment to streamline payment processing. Dealers with customers that fund their trade settlement using checks or ACH payments may wish to consider updating their internal control processes and educating customers to ensure that funds are available to settle a transaction on T+2, as proposed. T+2 and the Implications for Rule G-32 Two commenters, BDA and SIFMA, commented that a shortened settlement cycle bears on other MSRB rules, including Rule G-32, which governs the delivery of official documents to customers in connection with primary offerings. SIFMA stated that ``[c]oncerning the baseline legal requirement of Rule G-32, for dealers delivering paper official statements to customers, the move to T+2 will compress the timeframe dealers have to complete the delivery of offering documents in fulfillment of this disclosure obligation.'' \19\ SIFMA suggested the Board consider clarifying previous guidance with respect to the electronic delivery of official statements, but recognized that revisiting the prior guidance was not critical to transitioning to T+2 and should not impede the proposed rule change.\20\ BDA also recognized that the proposed rule would automatically shorten the timeframe associated with the requirement to deliver offering documents by no later than the settlement of the transaction. BDA urged the Board to address the amendments to Rules G-12 and G-15, but leave all other requirements under MSRB rules tied to the settlement date, such as Rule G-32, unchanged. --------------------------------------------------------------------------- \19\ SIFMA comment letter. \20\ SIFMA requested that the Board consider clarifying definitively that ``access equals delivery'' under Rule G-32(a)(ii) and (iii) applies to all dealers and in order to harmonize Rule G-32 with SEC Rules 172, 173 and 174 of the Securities Act of 1933, revisiting the guidance that a customer's standing request for copies of official statements applies to all municipal transactions with that dealer. The MSRB may consider SIFMA's suggested clarifications in the future. --------------------------------------------------------------------------- Timing and Implementation of the Proposed Rule Change BDA, FSI, ICI and SIFMA encouraged the Board to move forward with the T+2 initiative within ISC's proposed timeline, which outlines the activities that would be required to complete the transition to T+2 by the third quarter of 2017. The MSRB stated in the Request for Comment that the draft amendments to facilitate the transition to T+2 settlement cycle will be dependent on the SEC amendments to Exchange Act Rule 15c6-1(a), which would establish T+2 as the standard regular- way settlement cycle for equities and corporate bonds. Although, Exchange Act Rule 15c6-1 does not apply to municipal securities, the MSRB has previously stated that the regular-way settlement cycle of municipal securities transactions should be consistent with that for transactions in the equity and corporate bond markets.\21\ ICI and SIFMA both commented that the Board should not consider amendments to Exchange Act Rule 15c6-1(a) to be a ``precondition'' of filing the MSRB's proposed changes to Rules G-12 and G-15 with the SEC. SIFMA noted that the MSRB rule change will afford sufficient time, prior to the move to T+2, to implement any system and process changes and fully test those internally and with other industry participants. The MSRB agrees that the adoption of amendments to Exchange Act Rule 15c6-1(a) should not be a precondition to the Board filing proposed amendments to applicable MSRB rules. However, the MSRB will announce the compliance date of amended Rules G-12 and G-15 to correspond with applicable amendments to rules of other self-regulatory organizations as well as the SEC's implementation of changes to Exchange Act Rule 15c6-1(a). The MSRB intends to ensure that the settlement cycle for municipal securities remains consistent with the settlement cycle for equities and corporate bonds. --------------------------------------------------------------------------- \21\ See supra n.11. --------------------------------------------------------------------------- The MSRB believes that shortening the time between trade execution and settlement by one business day will serve to reduce the risk of counterparty default, subsequent mandatory closeouts and, as a result, capital required to mitigate these risks would be reduced. Additionally, the MSRB believes the move to a shortened settlement cycle will improve the overall efficiency of the securities markets, promote financial stability and better align U.S. securities markets with global markets. The majority of the commenters were supportive of the draft amendments in the Request for Comment, generally in agreement that the move to T+2 would mitigate counterparty risk, provide for more liquidity in the market and increase global harmonization. Commenters recognized that shortening the time between trade execution and settlement by one business day will reduce the risk of counterparty default, subsequent mandatory closeouts and capital required to mitigate these risks would be reduced. Several commenters stated that the move to T+2 would require process, technological and behavioral (business and client) modifications as well as coordination among regulators in order to transition to the T+2 settlement cycle. 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 of 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. [[Page 14910]] 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-MSRB-2016-04 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR-MSRB-2016-04. 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 the MSRB. 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-MSRB-2016-04 and should be submitted on or before April 8, 2016. For the Commission, pursuant to delegated authority.\22\ --------------------------------------------------------------------------- \22\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-06091 Filed 3-17-16; 8:45 am] BILLING CODE 8011-01-P
![14906 Federal Register / Vol. 81, No. 53 / Friday, March 18, 2016 / Notices
report that is prepared by PCAOB staff SECURITIES AND EXCHANGE II. Self-Regulatory Organization’s
and submitted to the Board. The COMMISSION Statement of the Purpose of, and
Commission also directs the Board Statutory Basis for, the Proposed Rule
during 2016 to continue to include in its [Release No. 34–77364; File No. SR–MSRB– Change
quarterly reports to the Commission 2016–04] In its filing with the Commission, the
information about the PCAOB’s MSRB included statements concerning
inspections program. Such information Self-Regulatory Organizations; the purpose of and basis for the
is to include: (a) Statistics relative to the Municipal Securities Rulemaking proposed rule change and discussed any
numbers and types of firms budgeted Board; Notice of Filing of a Proposed comments it received on the proposed
and expected to be inspected in 2016, Rule Change Consisting of Proposed rule change. The text of these statements
including by location and by year the Amendments to Rules G–12 and G–15 may be examined at the places specified
inspections are required to be To Define Regular-Way Settlement for in Item IV below. The MSRB has
conducted in accordance with the Municipal Securities Transactions as prepared summaries, set forth in
Occurring on a Two-Day Settlement Sections A, B, and C below, of the most
Sarbanes-Oxley Act and PCAOB rules;
Cycle and Technical Conforming significant aspects of such statements.
(b) information about the timing of the
Amendments
issuance of inspections reports for A. Self-Regulatory Organization’s
domestic and non-U.S. inspections; and March 14, 2016. Statement of the Purpose of, and
(c) updates on the PCAOB’s efforts to Pursuant to Section 19(b)(1) of the Statutory Basis for, the Proposed Rule
establish cooperative arrangements with Securities Exchange Act of 1934 (the Change
respective non-U.S. authorities for ‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule 1. Purpose
inspections required in those countries. 19b–4 thereunder,2 notice is hereby
given that on March 1, 2016, the Background
The Commission understands that the
Office of Management and Budget Municipal Securities Rulemaking Board Following the financial crisis in 2008,
(‘‘OMB’’) has determined the 2016 (the ‘‘MSRB’’ or ‘‘Board’’) filed with the regulators implemented additional rules
Securities and Exchange Commission and regulations designed to reduce risk
budget of the PCAOB to be sequestrable
(the ‘‘SEC’’ or ‘‘Commission’’) the in the markets, achieve greater
under the Budget Control Act of 2011.5
proposed rule change as described in transparency and improve efficiency in
Consequently, we expect the PCAOB the financial industry. Consistent with
will have approximately $1 million in Items I, II, and III below, which Items
have been prepared by the MSRB. The those goals, the securities industry
excess funds available from the 2015 launched a voluntary initiative to
Commission is publishing this notice to
sequestration for spending in 2016. shorten the settlement cycle for
solicit comments on the proposed rule
Accordingly, the PCAOB has reduced its change from interested persons. securities transactions to reduce
accounting support fee for 2016 by counterparty risk, decrease clearing
approximately $1 million. I. Self-Regulatory Organization’s capital requirements, reduce liquidity
Statement of the Terms of Substance of demands, and harmonize the settlement
The Commission has determined that
the Proposed Rule Change cycle globally. The industry-led
the PCAOB’s 2016 budget and annual
accounting support fee are consistent The MSRB filed with the Commission initiative to shift from the current
with Section 109 of the Sarbanes-Oxley a proposed rule change consisting of regular-way settlement cycle defined as
Act. Accordingly, proposed amendments to Rule G–12, on a three-day settlement cycle (‘‘T+3’’) to
uniform practice, and Rule G–15, on a T+2 settlement cycle is being led by
It is ordered, pursuant to Section 109 the Shortened Settlement Cycle Industry
of the Sarbanes-Oxley Act, that the confirmation, clearance, settlement and
other uniform practice requirements Steering Committee (‘‘ISC’’) which is
PCAOB budget and annual accounting jointly chaired by the Investment
with respect to transactions with
support fee for calendar year 2016 are Company Institute (‘‘ICI’’) and the
customers, to define regular-way
approved. Securities Industry and Financial
settlement for municipal securities
By the Commission. transactions as occurring on a two-day Markets Association (‘‘SIFMA’’).3 The
settlement cycle (‘‘T+2’’) and technical ISC announced its proposal in a white
Robert W. Errett,
conforming amendments (‘‘proposed paper (the ‘‘white paper’’), which
Deputy Secretary. outlined the timeline and activities
[FR Doc. 2016–06095 Filed 3–17–16; 8:45 am] rule change’’). The compliance date of
the proposed rule change will be required to move to a T+2 settlement
BILLING CODE 8011–01–P
announced by the MSRB in a notice cycle in the U.S. for equities, corporate
published on the MSRB Web site, which and municipal bonds, and unit
date would correspond with the investment trust trades.4 The ISC’s
industry’s transition to a T+2 regular- white paper identified all SEC and self-
way settlement, which would include regulatory organization (‘‘SRO’’) rule
amendments by the SEC to Exchange changes that it believed would be
Act Rule 15c6–1(a). necessary to support a T+2 settlement
cycle.
The text of the proposed rule change The ISC recommended a timeline
is available on the MSRB’s Web site at
asabaliauskas on DSK3SPTVN1PROD with NOTICES
calling for relevant regulatory
www.msrb.org/Rules-and-
Interpretations/SEC-Filings/2016- 3 Shortening the Settlement Cycle: The Move to
5 See
Filings.aspx, at the MSRB’s principal T+2, available at, http://www.ust2.com/pdfs/
‘‘OMB Report to the Congress on the Joint
office, and at the Commission’s Public ssc.pdf. Other participating industry associations
Committee Reductions for Fiscal Year 2016’’, include: The Association of Global Custodians, The
Appendix page 15 of 15 at: https://
Reference Room.
Association of Institutional Investors, The
www.whitehouse.gov/sites/default/files/omb/assets/ Securities Transfer Association, Inc., and The
legislative_reports/sequestration/2016_jc_ 1 15 U.S.C. 78s(b)(i). Depository Trust & Clearing Corporation (‘‘DTCC’’).
sequestration_report_speaker.pdf. 2 17 CFR 240.19b–4. 4 Id.
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![Federal Register / Vol. 81, No. 53 / Friday, March 18, 2016 / Notices 14907
organizations to confirm support for a Proposal transactions.11 Among other reasons,
reduced settlement cycle by the third this ensures that investors will not
quarter of 2015, propose rule changes by Two MSRB rules were identified in encounter differing settlement cycles
the fourth quarter of 2015 and adopt the ICI/SIFMA letter as essential to when replacing equity or corporate
rule changes by the second quarter of facilitate the move to T+2, Rule G– bonds with municipal securities.
2016, followed by industry 12(b)(ii)(B)–(D) and Rule G–15(b)(ii)(B)–
(C), because these rules currently define This consistency is currently reflected
implementation of the T+2 settlement in MSRB Rules G–12(b)(ii) and G–
cycle occurring by the third quarter of regular-way settlement as occurring on
T+3. The MSRB’s proposed rule change 15(b)(ii), which both define regular-way
2017. In a press release announcing the settlement as occurring on T+3. These
Board’s actions at its July 2015 Board would amend Rules G–12(b)(ii)(B)–(D)
and G–15(b)(ii)(B)–(C) to define regular- rules were last modified in 1995 in
meeting, the MSRB publicly coordination with the changes made to
communicated its support of the way settlement as occurring on T+2.
Exchange Act Rule 15c6–1 to facilitate
industry’s initiative to shorten the As generally noted in ISC’s white
shortening the settlement cycle from a
settlement cycle to T+2.5 On November paper, the migration to T+2 settlement
five-day settlement cycle (‘‘T+5’’) to
10, 2015, the MSRB published a Request is expected to provide significant
T+3. In order to maintain consistency
for Comment on Changes to MSRB benefits to the financial industry
across asset classes, the MSRB’s
Rules to Facilitate Shortening the broadly. The benefits to the industry
proposed rule change is necessary to
Securities Settlement Cycle (‘‘Request include the mitigation of counterparty
support the current industry initiative to
for Comment’’).6 risk, a decrease in margin requirements
shift to a T+2 settlement cycle. The
On June 18, 2015, concurrent with the for National Securities Clearing
MSRB would coordinate
white paper, SIFMA and ICI jointly Corporation’s (‘‘NSCC’’) clearing
implementation of a T+2 regular-way
submitted a letter to SEC Chair Mary Jo members, a reduction in pro-cyclical
settlement cycle for municipal securities
White to express support for the margin and liquidity demands
transactions with other securities
industry’s efforts ‘‘to shorten the especially during periods of market
regulators contingent on the SEC
settlement cycle for equities, corporate volatility, and an increase in global
adopting amendments to Exchange Act
and municipal bonds, unit investment settlement harmonization by aligning
Rule 15c6–1(a) establishing T+2 as the
trusts and financial instruments the U.S. markets with other major
standard for regular-way settlement
comprised of these products traded on markets, such as the European Union.9
cycle for equities and corporate bonds.
the secondary market.’’ 7 The ICI/SIFMA By shortening the time between trade
letter identified specific rules that the and execution and settlement by one Proposed Amendments to MSRB Rules
relevant securities regulators would business day (from T+3 to T+2), the risk G–12(b)(ii)(B)–(D) and G–15(b)(ii)(B)–(C)
need to consider amending in order to of counterparty default and the capital
facilitate the move to T+2. In response required to mitigate this risk would be MSRB Rule G–12, on uniform
to the ICI/SIFMA letter, Chair White reduced. Similarly, the ICI/SIFMA letter practice, establishes uniform industry
stated that she ‘‘strongly support[s] [the] noted that ‘‘[a]mong other benefits, the practices for processing, clearance and
efforts to shorten the settlement cycle shorter settlement cycle will result in settlement of transactions in municipal
from the third business day after the process and procedural improvements securities between a broker, dealer or
trade date to no later than the second that will help mitigate the operational municipal securities dealer and any
business day’’ and is ‘‘committed to risks that can be present between trade other broker, dealer or municipal
considering regulatory changes date and settlement date.’’ 10 The MSRB securities dealer. Rule G–12(b)(ii), on
necessary for this migration to proceed believes the likely costs of the proposed settlement dates, defines ‘‘regular way’’
on a timetable that will permit the rule change, including the changes in settlement as occurring on a T+3 basis.
industry to complete its essential work processes and technology as well as The proposed rule change would amend
by no later than the proposed goal of the behavioral modifications by the Rule G–12(b)(ii)(B)–(D) to define
third quarter of 2017.’’ Further, Chair industry and investors, are justified by ‘‘regular way’’ settlement as occurring
White stated that she has ‘‘requested the likely benefits associated with on a T+2 basis.
that the SROs finalize [schedules of rule transitioning to T+2. MSRB Rule G–15, on confirmations,
changes necessary to support a T+2 Both the ISC and the ICI/SIFMA letter clearance, settlement and other uniform
settlement cycle] by October 31, 2015.’’ 8 identified Exchange Act Rule 15c6–1(a) practice requirements, requires
In light of Chair White’s support of the as the primary SEC rule that would need municipal securities brokers and
industry initiative and the timeline set to be amended to facilitate the transition municipal securities dealers to provide
forth in the ISC’s white paper, the to T+2. Exchange Act Rule 15c6–1 customers with written confirmations of
MSRB is filing this proposed rule defines regular-way settlement as transactions, containing specified
change. occurring on T+3 for equities and information; and prescribes certain
corporate bonds. Although Exchange uniform practice procedures for dealers
5 See Press Release, MSRB Holds Quarterly
Act Rule 15c6–1 does not apply to that transact municipal securities
Meeting, (August, 3 2015), available at, http:// transactions in municipal securities, the business with customers. Rule G–
www.msrb.org/News-and-Events/Press-Releases/
2015/MSRB-Holds-Quarterly-Meeting-July- MSRB has previously stated that the 15(b)(ii), on settlement dates, defines
2015.aspx. regular-way settlement cycle for ‘‘regular way’’ settlement as occurring
6 MSRB Notice 2015–22, Request for Comment on municipal securities transactions in the on a T+3 basis. The proposed rule
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Changes to MSRB Rules To Facilitate Shortening secondary markets should be consistent change would amend Rule G–
the Securities Settlement Cycle (November 10, 15(b)(ii)(B)–(C) to define ‘‘regular way’’
2015).
with that for equity and corporate bond
7 See Letter from Paul Schott Stevens, President settlement as occurring on a T+2 basis.
& CEO, ICI (‘‘Stevens’’), and Kenneth E. Bentsen, Jr., 9 See Equity Settlement Cycle for Top 10
President and CEO, SIFMA (‘‘Bentsen’’), to Mary Jo Exchanges by Market Capitalization, Figure 2, page 11 See, e.g., ‘‘T+3 Settlement, Amendments Filed:
White, Chair, SEC (June 18, 2015) (‘‘ICI/SIFMA 9 (depicting global settlement harmonization for Rules G–12 and G–15,’’ MSRB Reports, Vol. 14, No.
letter’’). equities pre- and post-migration to T+2), available 4 (August 1994) at 3; and ‘‘Report of the Municipal
8 See Letter from Mary Jo White, Chair, SEC, to at, http://www.ust2.com/pdfs/ssc.pdf. Securities Rulemaking Board on T+3 Settlement for
Bentsen and Stevens (September 16, 2015). 10 See supra n.7. the Municipal Securities Market’’ (March 17, 1994).
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![Federal Register / Vol. 81, No. 53 / Friday, March 18, 2016 / Notices 14909
payment mechanisms to ensure funds documents in fulfillment of this 15c6–1(a) should not be a precondition
are good/cleared and available for disclosure obligation.’’ 19 SIFMA to the Board filing proposed
settlement would be negatively suggested the Board consider clarifying amendments to applicable MSRB rules.
impacted by the proposed rule change. previous guidance with respect to the However, the MSRB will announce the
Bernardi stated that the move to T+2 electronic delivery of official compliance date of amended Rules G–
would specifically impact ‘‘1. Customer statements, but recognized that 12 and G–15 to correspond with
purchases with longer settlements (i.e., revisiting the prior guidance was not applicable amendments to rules of other
5–10 days) designed to coincide with critical to transitioning to T+2 and self-regulatory organizations as well as
another bond’s redemption. 2. should not impede the proposed rule the SEC’s implementation of changes to
Customers who do not hold cash change.20 BDA also recognized that the Exchange Act Rule 15c6–1(a). The
balances and send payment via the US proposed rule would automatically MSRB intends to ensure that the
Postal System. 3. Customer trades which shorten the timeframe associated with settlement cycle for municipal securities
are booked to settle on the same date as the requirement to deliver offering remains consistent with the settlement
the corresponding firm street trade, if documents by no later than the cycle for equities and corporate bonds.
not done ‘regular way.’ ’’ Brandis stated settlement of the transaction. BDA urged
that many of the investors associated the Board to address the amendments to The MSRB believes that shortening
with his firm who invest in municipal Rules G–12 and G–15, but leave all the time between trade execution and
securities are over the age of 50, are less other requirements under MSRB rules settlement by one business day will
tech savvy, and predominantly pay for tied to the settlement date, such as Rule serve to reduce the risk of counterparty
bond purchases by writing a check and G–32, unchanged. default, subsequent mandatory
sending payment through the mail. closeouts and, as a result, capital
Timing and Implementation of the required to mitigate these risks would
Coastal stated, ‘‘This proposal . . . will
Proposed Rule Change be reduced. Additionally, the MSRB
all but require retail clients that cannot
settle DVP to transact business only BDA, FSI, ICI and SIFMA encouraged believes the move to a shortened
with the firm that holds their assets, the Board to move forward with the T+2 settlement cycle will improve the
effectively eliminating any competition initiative within ISC’s proposed overall efficiency of the securities
for the municipal business of many timeline, which outlines the activities markets, promote financial stability and
clients . . . [s]hortening of the that would be required to complete the better align U.S. securities markets with
settlement cycle should be delayed until transition to T+2 by the third quarter of global markets.
retail commercial banking can provide 2017. The MSRB stated in the Request The majority of the commenters were
investors with a cost effective manner of for Comment that the draft amendments supportive of the draft amendments in
immediate fund transfer.’’ Similarly, to facilitate the transition to T+2 the Request for Comment, generally in
BDA stated that ‘‘many retail clients still settlement cycle will be dependent on
agreement that the move to T+2 would
rely on sending checks, which may not the SEC amendments to Exchange Act
mitigate counterparty risk, provide for
clear within a two-day window.’’ Rule 15c6–1(a), which would establish
more liquidity in the market and
The MSRB recognizes that it may be T+2 as the standard regular-way
increase global harmonization.
difficult for certain investors to make settlement cycle for equities and
Commenters recognized that shortening
the behavioral changes necessary for a corporate bonds. Although, Exchange
Act Rule 15c6–1 does not apply to the time between trade execution and
successful transition to a T+2 settlement
municipal securities, the MSRB has settlement by one business day will
cycle. The MSRB believes that the vast
previously stated that the regular-way reduce the risk of counterparty default,
majority of firms have access to
settlement cycle of municipal securities subsequent mandatory closeouts and
technology that would enable their
transactions should be consistent with capital required to mitigate these risks
clients to deliver funds in order to settle
their municipal securities trades on a that for transactions in the equity and would be reduced. Several commenters
T+2 basis and firms should encourage corporate bond markets.21 ICI and stated that the move to T+2 would
their customers to leverage electronic SIFMA both commented that the Board require process, technological and
funds payment to streamline payment should not consider amendments to behavioral (business and client)
processing. Dealers with customers that Exchange Act Rule 15c6–1(a) to be a modifications as well as coordination
fund their trade settlement using checks ‘‘precondition’’ of filing the MSRB’s among regulators in order to transition
or ACH payments may wish to consider proposed changes to Rules G–12 and G– to the T+2 settlement cycle.
updating their internal control processes 15 with the SEC. SIFMA noted that the III. Date of Effectiveness of the
and educating customers to ensure that MSRB rule change will afford sufficient Proposed Rule Change and Timing for
funds are available to settle a time, prior to the move to T+2, to Commission Action
transaction on T+2, as proposed. implement any system and process
changes and fully test those internally Within 45 days of the date of
T+2 and the Implications for Rule G–32 and with other industry participants. publication of this notice in the Federal
Two commenters, BDA and SIFMA, The MSRB agrees that the adoption of Register or within such longer period of
commented that a shortened settlement amendments to Exchange Act Rule up to 90 days (i) as the Commission may
cycle bears on other MSRB rules, designate if it finds such longer period
including Rule G–32, which governs the 19 SIFMA comment letter. to be appropriate and publishes its
delivery of official documents to 20 SIFMA requested that the Board consider
asabaliauskas on DSK3SPTVN1PROD with NOTICES
clarifying definitively that ‘‘access equals delivery’’
reasons for so finding or (ii) as to which
customers in connection with primary the self-regulatory organization
under Rule G–32(a)(ii) and (iii) applies to all dealers
offerings. SIFMA stated that and in order to harmonize Rule G–32 with SEC consents, the Commission will:
‘‘[c]oncerning the baseline legal Rules 172, 173 and 174 of the Securities Act of
requirement of Rule G–32, for dealers 1933, revisiting the guidance that a customer’s (A) By order approve or disapprove
delivering paper official statements to standing request for copies of official statements such proposed rule change, or
applies to all municipal transactions with that
customers, the move to T+2 will dealer. The MSRB may consider SIFMA’s suggested (B) institute proceedings to determine
compress the timeframe dealers have to clarifications in the future. whether the proposed rule change
complete the delivery of offering 21 See supra n.11. should be disapproved.
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![14910 Federal Register / Vol. 81, No. 53 / Friday, March 18, 2016 / Notices
IV. Solicitation of Comments For the Commission, pursuant to delegated A. Self-Regulatory Organization’s
authority.22 Statement of the Purpose of, and
Interested persons are invited to Robert W. Errett, Statutory Basis for, the Proposed Rule
submit written data, views, and Deputy Secretary. Change
arguments concerning the foregoing, [FR Doc. 2016–06091 Filed 3–17–16; 8:45 am]
including whether the proposed rule 1. Purpose
BILLING CODE 8011–01–P
change is consistent with the Act. The Exchange proposes to amend the
Comments may be submitted by any of Fees Schedule.3
the following methods: SECURITIES AND EXCHANGE On March 2, 2015 and March 9, 2015,
COMMISSION the Exchange commenced Extended
Electronic Comments Trading Hours 4 (‘‘ETH’’) for VIX and
[Release No. 34–77365; File No. SR–CBOE– SPX/SPXW options, respectively. The
• Use the Commission’s Internet 2016–018] Exchange also established fees for the
comment form (http://www.sec.gov/ ETH session as well as adopted a rebate
rules/sro.shtml); or Self-Regulatory Organizations; for Lead Market-Markers (‘‘LMMs’’).5
Chicago Board Options Exchange,
• Send an email to rule-comments@ By way of background, ETH LMMs,
Incorporated; Notice of Filing and like any ETH Market-Maker, must
sec.gov. Please include File Number SR–
Immediate Effectiveness of a Proposed maintain continuous two-sided quotes
MSRB–2016–04 on the subject line. Rule To Amend the Fees Schedule in 60% of the series with less than nine
Paper Comments March 14, 2016. months to expiration in their appointed
Pursuant to Section 19(b)(1) of the products for at least 90% of the time
• Send paper comments in triplicate they are quoting during ETH (to be
to Secretary, Securities and Exchange Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 determined on a monthly basis) and
Commission, 100 F Street NE., satisfy all other Market-Maker
Washington, DC 20549. notice is hereby given that on March 11,
2016, Chicago Board Options Exchange, obligations set forth in Rule 8.7 during
All submissions should refer to File Incorporated (‘‘Exchange’’ or ‘‘CBOE’’) ETH (see CBOE Rule 8.7). Additionally,
Number SR–MSRB–2016–04. This file filed with the Securities and Exchange for SPX and VIX, if an LMM (1)
number should be included on the Commission (‘‘Commission’’) the provides continuous electronic quotes
subject line if email is used. To help the proposed rule change as described in in at least the lesser of 99% of the non-
Commission process and review your Items I, II, and III below, which Items adjusted series or 100% of the non-
comments more efficiently, please use have been prepared by the Exchange. adjusted series minus one call-put pair
The Commission is publishing this in an ETH allocated class (excluding
only one method. The Commission will
notice to solicit comments on the intra-day add-on series on the day
post all comments on the Commission’s
proposed rule change from interested during which such series are added for
Internet Web site (http://www.sec.gov/ trading) during ETH in a given month
rules/sro.shtml). Copies of the persons.
and (2) ensures an opening of the same
submission, all subsequent I. Self-Regulatory Organization’s percentage of series by 2:05 a.m. for at
amendments, all written statements Statement of the Terms of Substance of least 90% of the trading days during
with respect to the proposed rule the Proposed Rule Change ETH in a given month, the LMM will
change that are filed with the The Exchange proposes to amend the receive a rebate for that month and will
Commission, and all written Fees Schedule. The text of the proposed receive a pro-rata share of a
communications relating to the rule change is available on the compensation pool equal to $25,000
proposed rule change between the Exchange’s Web site (http:// times the number of LMMs in that class.
Commission and any person, other than www.cboe.com/AboutCBOE/ For example, if three LMMs are
those that may be withheld from the CBOELegalRegulatoryHome.aspx), at appointed in SPX, a compensation pool
public in accordance with the the Exchange’s Office of the Secretary, will be established each month totaling
provisions of 5 U.S.C. 552, will be and at the Commission’s Public $75,000. If each LMM meets the
available for Web site viewing and Reference Room. heightened continuous quoting standard
printing in the Commission’s Public in SPX during a month, each will
II. Self-Regulatory Organization’s
Reference Room, 100 F Street NE.,
Statement of the Purpose of, and 3 The Exchange initially filed the proposed fee
Washington, DC 20549 on official
Statutory Basis for, the Proposed Rule changes on February 29, 2016 (SR–CBOE–2016–
business days between the hours of Change 015). On March 11, 2016, the Exchange withdrew
10:00 a.m. and 3:00 p.m. Copies of the that filing and submitted this filing.
filing also will be available for In its filing with the Commission, the 4 The Extended Trading Hours session is from
inspection and copying at the principal Exchange included statements 2:00 a.m. to 8:15 a.m. Chicago time, Monday
concerning the purpose of and basis for through Friday.
office of the MSRB. All comments 5 Pursuant to subparagraph (e)(iii)(A) of Rule 6.1A
received will be posted without change; the proposed rule change and discussed
(Extended Trading Hours), the Exchange may
any comments it received on the
the Commission does not edit personal approve one or more Market-Makers to act as LMMs
proposed rule change. The text of these in each class during Extended Trading Hours in
identifying information from
statements may be examined at the accordance with Rule 8.15A for terms of at least one
submissions. You should submit only
asabaliauskas on DSK3SPTVN1PROD with NOTICES
places specified in Item IV below. The month. On September 22, 2014, the Exchange
information that you wish to make Exchange has prepared summaries, set
issued Regulatory Circular RG14–134, which
available publicly. All submissions announced that the Exchange had appointed 3
forth in sections A, B, and C below, of LMMs in SPX options and 3 LMMs in VIX options
should refer to File Number SR–MSRB– the most significant aspects of such during ETH. The LMM appointments are effective
2016–04 and should be submitted on or statements. for a one-year period and began on the launch date
before April 8, 2016. for ETH trading of the applicable class. On February
24, 2016, the Exchange issued Regulatory Circular
22 17 CFR 200.30–3(a)(12). RG16–038, which announced that the Exchange
1 15 U.S.C. 78s(b)(1). made new LMM appointments for a one-year period
2 17 CFR 240.19b–4. beginning after the current one-year period ends.
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Document Created: 2018-02-02 15:14:02
Document Modified: 2018-02-02 15:14:02
| 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 | 81 FR 14906 |
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