81 FR 21408 - Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Rules of the Exchange Related to Market Makers
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 69 (April 11, 2016)
Federal Register Volume 81, Issue 69 (April 11, 2016)
| Page Range | 21408-21415 | |
| FR Document | 2016-08186 |
[Federal Register Volume 81, Number 69 (Monday, April 11, 2016)] [Notices] [Pages 21408-21415] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-08186] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77527; File No. SR-CHX-2016-04] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Rules of the Exchange Related to Market Makers April 5, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given that on March 30, 2016, the Chicago Stock Exchange, Inc. (``CHX'' or the ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CHX proposes to amend the Rules of the Exchange (``CHX Rules'') related to Market Makers. CHX has designated this proposed rule change as non-controversial pursuant to Section 19(b)(3)(A) \3\ of the Act and Rule 19b-4(f)(6) \4\ thereunder and has provided the Commission with the notice required by Rule 19b-4(f)(6)(iii).\5\ --------------------------------------------------------------------------- \3\ 15 U.S.C. 78s(b)(3)(A). \4\ 17 CFR 240.19b-4(f)(6). \5\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- The text of this proposed rule change is available on the Exchange's Web site at (www.chx.com) and in 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 CHX included statements concerning the purpose of and basis for the proposed rule changes 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 CHX 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 Changes 1. Purpose The Exchange proposes to amend various CHX Rules related to Market Makers. The proposed rule change primarily addresses Market Maker application, registration and securities assignment procedures. Specifically, the Exchange proposes to consolidate and/or clarify certain rules under Article 16 (Market Makers); to adopt new rules under Article 16 that are similar to rules of other national securities exchanges; to make corresponding amendments to various CHX Rules impacted by the proposed amendments to Article 16; and to make other clarifying amendments throughout the CHX Rules, as described below. Notwithstanding the proposed amendments, the Exchange proposes to largely maintain the current requirements regarding Market Maker responsibilities (Article 16, Rule 8); limitation on dealings (Article 16, Rule 9); and reporting of positions (Article 16, Rule 10). Current Article 16 (Market Makers) Current Article 16 consists of the following rules:Rule 1. Registration and Appointment Rule 2. Initial Registration of Market Makers Rule 3. Approval by the Exchange Rule 4. Temporary Appointment of Market Maker Rule 5. Identification of Securities Traded as Market Maker Rule 6. Voluntary De-Registration as Market Maker Rule 7. Involuntary De-Registration as Market Maker Rule 8. Responsibilities Rule 9. Limitation on Dealings Rule 10. Reporting of Position Information Currently, a Participant may act as a Market Maker in a particular security only if it has registered with, and been approved by, the Exchange to act in that capacity, and is in good standing.\6\ A Participant who wishes to register as a Market Maker must complete a Market Maker application,\7\ which will be reviewed by the Exchange.\8\ --------------------------------------------------------------------------- \6\ See CHX Article 16, Rule 1(a). \7\ See CHX Article 16, Rule 2(b). \8\ See CHX Article 16, Rule 3. --------------------------------------------------------------------------- The Exchange will announce the names of all successful Participant applicants.\9\ However, if the Exchange denies a Participant's Market Maker application, it will provide the Participant with a summary of the Exchange's reasons for the denial.\10\ A Participant may seek review of its denied Market Maker application.\11\ The Exchange also reserves the right to expedite the Market Maker application process and appoint a Market Maker on a temporary basis.\12\ A Participant's registration as a Market Maker may be -1- involuntarily terminated or suspended by the Exchange \13\ or -2- voluntarily terminated at the request of Participant.\14\ --------------------------------------------------------------------------- \9\ See CHX Article 16, Rule 2(d). \10\ See id. \11\ See id. \12\ See CHX Article 16, Rule 4. \13\ See CHX Article 16, Rule 7. \14\ See CHX Article 16, Rules 5 and 6. --------------------------------------------------------------------------- Once approved, a Market Maker may then select securities in which it seeks to acts as Market Maker by notifying the Exchange in a manner prescribed by the Exchange.\15\ Any decision to add or drop securities from its existing selection must be communicated to the Exchange no later than 9 a.m. on the trading day immediately preceding the date on which the change is to take effect, unless the Exchange permits a later date and/or time.\16\ A Market Maker's decision to voluntarily add or drop securities from its existing selection are effective without approval; provided a Market Maker must seek prior Exchange approval for an initial request to trade more than 500 securities and each request to trade each increment of an additional 100 securities after that threshold is reached.\17\ Except for temporary and/or partial de- registrations approved by the Exchange, a Market Maker may not re- [[Page 21409]] select a security from which it voluntarily withdrew for twenty (20) calendar days after such withdrawal.\18\ A Market Maker's assignment to one or more selected securities may be involuntarily terminated or suspended by the Exchange \19\ or voluntarily terminated \20\ or suspended at the request of the Participant.\21\ --------------------------------------------------------------------------- \15\ See CHX Article 16, Rule 5. \16\ See id. \17\ See paragraph .01 of CHX Article 16, Rule 5. \18\ See paragraph .02 of CHX Article 16, Rule 5. \19\ See CHX Article 16, Rule 7. \20\ See CHX Article 16, Rules 5 and 6. \21\ See paragraph .01 of CHX Article 16, Rule 6. --------------------------------------------------------------------------- Also, a Market Maker may request that the Exchange approve one or more individuals as Market Maker Traders who would be authorized to enter bids and offers and execute transactions on behalf of a Market Maker.\22\ Prior to the Exchange approving such a request, the prospective Market Maker Trader must successfully complete the Market Maker Exam, as well as meet the Exchange's general registration requirements for associated persons.\23\ --------------------------------------------------------------------------- \22\ See paragraph .01 of CHX Article 16, Rule 1. \23\ See generally CHX Article 6. --------------------------------------------------------------------------- In addition to the aforementioned registration procedures, a Market Maker has certain responsibilities, including quotation requirements and obligations,\24\ limitation on dealings (including information barrier requirements) \25\ and position reporting obligations.\26\ --------------------------------------------------------------------------- \24\ See CHX Article 16, Rule 8. \25\ See CHX Article 16, Rule 9. \26\ See CHX Article 16, Rule 10. --------------------------------------------------------------------------- Proposed Article 16 (Market Makers) The Exchange now proposes to reorganize Article 16 as follows: Proposed Rule 1. Registration of Market Makers Proposed Rule 2. Assignment of Securities to Market Makers Proposed Rule 3. Obligations of Market Maker Authorized Traders Proposed Rule 4. Obligations of Market Makers Proposed Rule 5. Limitation on Dealings of Market Makers Proposed Rule 6. Reporting of Position Information by Market Makers In sum, proposed Rules 1-2 consolidate, restate, clarify and/or update current Rules 1-7, whereas proposed Rule 3 significantly expands the registration requirements for Market Maker Traders in a manner consistent with the rules of another national securities exchange, as described below. As such, the Exchange proposes to delete current Rules 1-7, but to reincorporate relevant provisions throughout amended Article 16. Moreover, proposed Rules 4-6 are largely identical to current Rules 8-10, with certain amendments. Initially, the Exchange proposes to adopt two terms that are already in use throughout the CHX Rules, but are not currently defined. Proposed Article 1, Rule 1(tt) defines ``Market Maker'' as a Participant that is registered as a Market Maker pursuant to Article 16, Rule 1. Correspondingly, the Exchange proposes to amend various CHX Rules to capitalize the term ``market maker'' or ``market makers.'' \27\ Incidentally, the Exchange proposes to amend Article 11, Rule 3(e) to capitalize the term ``institutional broker,'' as it is currently defined under Article 1, Rule 1(n). --------------------------------------------------------------------------- \27\ See amended CHX Article 9, Rule 23(b); amended CHX Article 11, Rule 3(e); proposed Article 16, Rule 4(d)(2)(A) and (B); proposed CHX Article 16, Rule 4(e)-(f); proposed CHX Article 16, Rule 5(a)-(d); and proposed CHX Article 16, Rule 6. --------------------------------------------------------------------------- The Exchange also proposes to replace all references to ``Market Maker Trader'' and ``MMT'' throughout CHX Rules with the terms ``Market Maker Authorized Trader'' and ``MMAT,'' \28\ respectively, which are currently used by other national securities exchanges.\29\ Proposed Article 1, Rule 1(uu) defines MMAT as an individual trader authorized to enter bids and offers and execute transactions on behalf of a Market Maker and requires that an MMAT be registered with the Exchange pursuant to current Article 6 and proposed Article 16, Rule 3. The proposed definition is a restatement of current paragraph .01 under Article 16, Rule 1.\30\ --------------------------------------------------------------------------- \28\ See amended CHX Article 1, Rule 1(s); amended CHX Article 3, Rule 2(a); amended paragraph .01(b) of CHX Article 6, Rule 3; amended CHX Article 6, Rule 6; proposed paragraph .02 of CHX Article 16, Rule 5. \29\ See BYX Rule 11.6; see also NYSEArca Equities Rule 7.21. \30\ The portion of current paragraph .01 of Article 16, Rule 1 prohibiting an MMT from also being registered as an Institutional Broker Representative is restated under proposed Article 16, Rule 3(b)(6). --------------------------------------------------------------------------- Proposed Article 16, Rule 1 (Registration of Market Makers) Proposed Article 16, Rule 1 is largely a restatement of the current application procedure for a Participant to become registered \31\ as a Market Maker, with some minor changes to harmonize with similar procedures of other national securities exchanges.\32\ Specifically, proposed Rule 1(a) provides as follows: --------------------------------------------------------------------------- \31\ In the context of proposed Article 16, the Exchange proposes to utilize the term ``registered'' in reference to either a Participant's general registration as a Market Maker or an MMAT's registration with a Market Maker. Currently, the term ``registered'' is also used in the context of securities assigned to a Market Maker. For clarity, the Exchange now proposes to refer to such securities as being ``assigned'' to Market Makers. \32\ Incidentally, the Exchange proposes to amend current CHX Article 12, Rule 8(h)(1) to update the cross-reference to CHX Article 16, Rule 1 and to adopt an additional cross-reference to proposed CHX Article 16, Rule 3 regarding the Registration of Market Maker Authorized Traders, as the Exchange proposes to break out rules regarding Market Maker Authorized Traders under proposed CHX Article 16, Rule 3, as discussed below. The Exchange propose to make a corresponding cross-reference amendment to the Minor Rule Violation Plan chart under the CHX Fee Schedule. --------------------------------------------------------------------------- Application process. A Participant may only act as a Market Maker in a particular security if it is properly registered as a Market Maker, assigned to securities and remains in good standing pursuant to this Article 16. A Participant that wishes to register as a Market Maker shall file an application in writing on such form as the Exchange may prescribe. Applications shall be reviewed by the Exchange, which shall consider such factors including, but not limited to, the Participant's capital, operations, personnel, technical resources and disciplinary history. Notably, proposed Rule 1(a): Consolidates and simplifies current Article 16, Rules 1(a), 2(b), 2(c) and 3 \33\ concerning the Market Maker application requirements by utilizing broader language that contemplates the current requirements; \34\ --------------------------------------------------------------------------- \33\ Current paragraph .01 of Article 16, Rule 3 has been restated as proposed paragraph .01 of Article 16, Rule 2, as discussed below. \34\ While the factors listed under current Article 16, Rule 3 and proposed Article 16, Rule 1(a) largely overlap, current Article 16, Rule 3, in some respects, provide more detailed and/or different factors than those stated under proposed Article 16, Rule 1(a). --------------------------------------------------------------------------- is similar to BYX Rule 11.5(a) in that both rules would require applications be in writing on a form prescribed by the exchange and provide identical factors to be considered by the exchanges in reviewing such applications, except that under CHX Rules, the language requiring that Market Makers maintain minimum net capital in compliance with Rule 15c3-1 under the Exchange Act \35\ may be found under proposed Article 16, Rule 4(e); and --------------------------------------------------------------------------- \35\ 17 CFR 240.15c3-1. --------------------------------------------------------------------------- omits language under current Article 16, Rule 2(b) requiring the applicant to indicate the number of securities in which it wants to make a market, as that requirement is more accurately a part of the securities assignment process, described under proposed Rule 2.\36\ --------------------------------------------------------------------------- \36\ See supra note 31. --------------------------------------------------------------------------- Proposed Rule 1(b) provides as follows: Approval of application. In the event a Participant's application to become a [[Page 21410]] Market Maker has been approved by the Exchange, Participant's registration as a Market Maker shall become effective upon receipt by the Participant of a notice of approval by the Exchange. Thereafter, a Market Maker shall only be permitted to make markets in securities to which it has been assigned, pursuant to Rule 2 below. Notably, proposed Rule 1(b): Is similar to BYX Rule 11.5(b) regarding the effectiveness of an approval of a Market Maker application, as both rules require that an applicant's registration shall become effective upon receipt by the applicant of a notice of approval by the exchange. omits language under current Article 16, Rule 2(d) providing that a list of successful applicants would be announced by the Exchange, as the Exchange does not propose to continue this practice moving forward; and clarifies that the process of registering as a Market Maker is distinct from the process for assignment of securities to Market Makers, which is detailed under amended Rule 2.\37\ --------------------------------------------------------------------------- \37\ Id. --------------------------------------------------------------------------- Proposed Rule 1(c) provides as follows: Denial of application. In the event a Participant's application to become a Market Maker has been denied by the Exchange, the Exchange shall communicate the denial in writing to Participant, which will include a summary of the Exchange's reasons for the denial. An unsuccessful Participant applicant may seek review of the Exchange's decision pursuant to this paragraph (c) under the provisions of Article 15.\38\ --------------------------------------------------------------------------- \38\ Correspondingly, the Exchange proposes to amend Article 15, Rule 1(a) to eliminate specific cross-references to various CHX Rules and to replace such cross-references with language providing that decisions that may be reviewed pursuant to Article 15 shall be noted in the relevant CHX rule. --------------------------------------------------------------------------- Notably, proposed Rule 1(c): Restates the portion of current Article 16, Rule 2(d) addressing the denial of a Market Maker application. Proposed Rule 1(d) provides as follows: Suspension or termination of registration. The Exchange may suspend, terminate or otherwise limit a Participant's registration as a Market Maker upon a determination of any substantial or continued failure by the Market Maker to engage in dealings in accordance with Rule 4 below or failure to meet any other obligations as set forth in CHX Rules. Nothing in this paragraph (d) will limit any other power of the Exchange to discipline a Participant pursuant to CHX Rules. A Participant may terminate its status as a Market Maker voluntarily by completing the appropriate form and submitting it to the Exchange. A Participant that terminates its status as a Market Maker that wishes to re-register as a Market Maker must submit a new application pursuant to paragraph (a) above. A Participant whose Market Maker registration has been involuntarily suspended, terminated or otherwise limited pursuant to this paragraph (d) may seek review under the provisions of Article 15. The Exchange may involuntarily withdraw a Participant from one or more assigned securities pursuant to Rule 2(e) below without suspending or terminating the Participant's registration as a Market Maker pursuant to this paragraph (d). Notably, proposed Rule 1(d): Restates current Article 16, Rule 1(b), current Article 16, Rules 6 (Voluntary De-Registration as Market Maker) and 7 (Involuntary De-Registration as Market Maker), while clarifying that the Exchange may terminate a Participant's registration as a Market Maker pursuant to the Participant's failure to meet any of its obligations as set forth in CHX Rules generally in addition to any failure to meet Market Maker specific obligations provided under Article 16; restates current Article 15, Rule 1(a)(3) that a Participant whose Market Maker registration that has been involuntarily cancelled by the Exchange may review such a decision pursuant to current Article 15; and clarifies that the Exchange also has the power to involuntarily withdraw a Participant from one or more assigned securities pursuant to proposed Rule 2(e), discussed below, without affecting Participant's general status as a Market Maker, which is currently implied by current Article 16, Rule 7.\39\ --------------------------------------------------------------------------- \39\ Current CHX Article 16, Rule 7 permits the Exchange to, among other things, ``limit'' a Market Maker's registration. One way a Market Maker's registration could be limited would be for the Exchange to involuntarily withdraw a Market Maker from certain securities, but otherwise permit the Market Maker to continue making markets in other securities to which it is registered. --------------------------------------------------------------------------- Proposed Rule 1(e) provides as follows: Emergency registration and/or assignment. Where emergency circumstances require the expedited registration of a Market Maker and/ or assignment of securities thereto, the Exchange may make such registrations and/or assignments of securities on a temporary basis, at the Exchange's discretion, in the interests of maintaining fair and orderly markets. Notably, proposed Rule 1(e): Restates current Article 16, Rule 4 (Temporary Appointment of Market Maker), with a clarification that the Exchange's authority includes both the ability to temporarily register Participants as Market Makers and temporarily assign securities to Market Makers.\40\ --------------------------------------------------------------------------- \40\ See supra note 31. --------------------------------------------------------------------------- Proposed Rule 1(f) provides as follows: Market Maker as dealer. A Market Maker is designated as a dealer for all purposes under the Exchange Act and the rules and regulations thereunder. Market Makers may trade only on a proprietary basis and may not handle any agency orders, subject to Rule 5 below. A Market Maker shall establish at least one separately designated CHX Market Maker Trading Account through which all and only market making activities in securities assigned to the Market Maker shall originate. To the extent that a Participant wishes to act as a Market Maker and also handle orders from customers, it must create and strictly enforce information barrier procedures pursuant to Rule 5 below. Since Exchange-registered Market Makers are not permitted to handle agency orders, the Matching System will reject any cross orders that originate from a CHX Market Maker Trading Account. Notably, proposed Rule 1(f): Restates and updates current Article 16, Rule 1(c) and paragraph. 02 thereunder, with a clarification that a Market Maker shall conduct all and only market making activities through one or more CHX Market Maker Trading Accounts. Proposed CHX Article 16, Rule 2 (Assignment of Securities to Market Makers) Proposed Article 16, Rule 2 is a restatement of the current procedures for the assignment of securities to Market Makers with some minor changes to harmonize with similar procedures of other national securities exchanges.\41\ Specifically, proposed Rule 2(a) provides as follows: --------------------------------------------------------------------------- \41\ Id. --------------------------------------------------------------------------- Assignment of securities. The Exchange will post on its Web site a list of all issues that are, or soon will be, trading on the Exchange and that are available for assignment to a Market Maker. Prior to beginning any market making activities in a security on the Exchange, Market Maker shall communicate its selected securities and the date on which the Market Maker intends to begin market making [[Page 21411]] activities in the selected securities (``effective date''), to the Exchange in writing, on a form prescribed by the Exchange, by no later than 9 a.m. on the trading day immediately preceding the effective date; provided the Exchange may, at its discretion, (1) delay the assignment date in one or more selected securities; and/or (2) deny assignment in one or more selected securities. In the event the Exchange delays and/or denies assignment of securities pursuant to paragraph (a)(1) and/or (2) above, the Exchange shall notify the Market Maker in writing of such action(s). If the Exchange does not delay and/or deny assignment of securities pursuant to paragraph (a)(1) and/or (2) above, the selected securities shall be deemed assigned to the Market Maker as of the relevant effective date(s); provided prior written approval of assignment by the Exchange shall be required for -1- a Market Maker's initial selection of 500 or more securities or -2- each request to add 100 or more securities if the Market Marker is already assigned 500 securities. Notably, proposed Rule 2(a): Restates the portion of paragraph .01 of current Article 16, Rule 1 providing that a Participant may seek registration as a Market Maker in an issue; and restates current Article 16, Rule 5 and paragraph .01 thereunder, while clarifying that written approval of selected securities by the Exchange prior to assignment is not always required, as the assignment of securities to a Market Maker that does not meet the numerical thresholds of current Rule 5 and proposed Rule 2(a) could be effected without prior Exchange approval, and that the Exchange has the power to delay or deny assignment of securities, which is implied by current Article 16, Rules 2 and 3.\42\ --------------------------------------------------------------------------- \42\ Current Article 16, Rule 2(d) provides procedures in the event the Exchange approves or denies a market maker registration application, whereas current Article 16, Rule 3 provides factors that the Exchange may consider when considering a market maker registration application, including the overall best interest of the Exchange. Thus, in light of these provisions, it logically flows that the Exchange may also delay approval of registration if, for example, the Exchange believes that such delay is in the best interest of the Exchange. --------------------------------------------------------------------------- Proposed Rule 2(b) provides as follows: Relevant factors. In considering whether to deny, delay and/or approve the assignment of securities pursuant to paragraph (a) above, the Exchange may consider, among other things, the: (1) Financial resources available to the Market Maker; (2) Market Maker's experience, expertise and past performance in making markets, including the Market Maker's performance in other securities; (3) Market Maker's operational capability; (4) Maintenance and enhancement of competition among Market Makers in each security in which they are registered; (5) Existence of satisfactory arrangements for clearing the Market Maker's transactions; and (6) Character of the market for the security, e.g., price, volatility, and relative liquidity. Notably, proposed Rule 2(b): Is similar to current BYX Rule 11.7(a), in that both rules articulate the same factors that may be considered by the exchange in considering the assignment of securities to Market Makers, except that unlike BYX, the Exchange has a different Market Maker securities selection process, which is described under proposed Article 16, Rule 2(a). Proposed CHX Article 16, Rule 2(c) provides that: Voluntary withdrawal in assigned securities. A Market Maker may voluntarily withdraw from an assigned security by providing the Exchange with written notice of such withdrawal, which must be received by the Exchange no later than 9 a.m. on the trading day immediately preceding the date on which the change is to take effect or as otherwise permitted by the Exchange. The Exchange may place such other conditions on voluntary withdrawal and subsequent reassignment of a security following withdrawal as it deems appropriate in the interests of maintaining fair and orderly markets. A Market Maker that voluntarily withdraws in a security may not make markets in that security for twenty (20) calendar days. A Market Maker that fails to give advanced written notice of voluntary withdrawal to the Exchange may be subject to formal disciplinary action. The Exchange may terminate a Participant's registration as a Market Maker, pursuant to Rule 1(d) above if a Market Maker voluntarily withdraws from all of its assigned securities. Notably, proposed Rule 2(c): Restates the portion of current Article 16, Rule 5 that addresses the removal of securities from a Market Maker's selection of securities; restates paragraph .02 of current Article 16, Rule 5 regarding the twenty (20) calendar days re-assignment prohibition period after voluntary withdrawal from the security; restates current Article 16, Rule 6 by permitting the Exchange to terminate a Participant's registration as a Market Maker if it is not assigned to any securities pursuant to proposed Article 16, Rule 1(d); and is similar to BYX Rule 11.7(b) with respect to following proposed provisions: [cir] Market Maker may voluntarily withdraw with prior written notice. [cir] The Exchange may place other conditions as it deems appropriate in the interests of maintaining fair and orderly markets. [cir] Failure to give advanced written notice of voluntary withdrawal to the Exchange may result in Market Maker being subject to formal disciplinary action. Proposed Rule 2(d) provides as follows: Temporary withdrawal in assigned securities. A Market Maker may receive Exchange approval for a temporary withdrawal as a Market Maker in one or more securities in the following circumstances: (1) Software, hardware, connectivity or other problems interfere with the Market Maker's ability to appropriately send bids or offers to the Exchange or otherwise act as a Market Maker; (2) Legal or regulatory considerations temporarily prevent the Participant from acting as a Market Maker in an assigned security; or (3) Other circumstances, including, but not limited to, those that are beyond a Market Maker's control or that interfere with the Participant's ability to act as a Market Maker in an assigned security. Each request for a temporary withdrawal by a Market Maker must be made in writing in a form prescribed by the Exchange and, whenever practicable, must be made prior to the condition that causes a Market Maker to be unable to continue in that role. The Exchange may grant a request for a temporary withdrawal for up to sixty (60) days, which may be extended by the Exchange at its discretion. A Participant that was denied a temporary withdrawal pursuant to this paragraph (d) may seek review under the provisions of Article 15. Notably, proposed Rule 2(d): Is virtually identical to paragraph .01 of current Article 16, Rule 6, with the clarification that a Participant that is denied a temporary withdrawal pursuant to this paragraph (d) may seek review under the provisions of Article 15. Proposed Rule 2(e) provides as follows: Involuntary withdrawal in assigned securities. The Exchange may suspend or terminate a Market Maker's [[Page 21412]] assignment to one or more securities whenever the Exchange determines that: (1) Market Maker has not met any of its obligations as set forth under CHX Rules, including Rule 4 below; or (2) Market Maker has failed to maintain fair and orderly markets. A Participant whose assignment to one or more securities has been suspended or terminated pursuant to this paragraph (e) may seek review under the provisions of Article 15. Notably, proposed Rule 2(e): Is virtually identical to BYX Rule 11.7(c), both of which permit the exchanges to involuntary withdraw Market Makers from assigned securities in the same manner; and clarifies the Exchange's implied authority under current Article 16, Rule 7 to involuntarily withdraw a Market Maker from a security. Proposed paragraph .01 of proposed Article 16, Rule 2 provides as follows: There may be more than one Market Maker assigned to a security traded on the Exchange. The Exchange may limit the number of Market Makers assigned to any security at its discretion. Notably, proposed paragraph .01: Restates paragraph .01 of current Article 16, Rule 3, with a clarification that the Exchange may limit the number of Market Makers assigned to any security at its discretion. Proposed CHX Article 16, Rule 3 (Obligations of Market Maker Authorized Traders) Proposed Article 16, Rule 3 provides rules regarding obligations of MMATs and significantly expands the registration requirements for Market Maker Traders in a manner consistent with the rules of another national securities exchange. Generally, proposed Rule 3 restates paragraph .01 of current Article 16, Rule 1 and provides additional detail as to MMAT registration and obligations.\43\ Specifically, proposed Rule 3 provides as follows: --------------------------------------------------------------------------- \43\ See supra note 32. --------------------------------------------------------------------------- (a) General. MMATs are permitted to enter orders only for the Market Maker Trading Account(s) of the Market Maker for which they are registered. (b) Registration of MMATs. The Exchange may, upon receiving an application in writing from a Market Maker on a form prescribed by the Exchange, register a person as an MMAT, consistent with the following minimum requirements: (1) MMATs may be officers, partners, employees or other associated persons of Participants that are registered with the Exchange as Market Makers pursuant to Rule 1 above. (2) To be eligible for registration as a MMAT, a person must be registered with the Exchange as provided in Article 6 and complete any other training and/or certification programs as may be required by the Exchange. (3) The Exchange may require a Market Maker to provide any and all additional information the Exchange deems necessary to establish whether registration should be granted. (4) The Exchange may grant a person conditional registration as an MMAT subject to any conditions it considers appropriate in the interests of maintaining a fair and orderly market. (5) A Market Maker must ensure that an MMAT is properly qualified to perform market making activities, including, but not limited to, ensuring the MMAT has met the requirements set forth under paragraph (b)(2) of this Rule. (6) A person cannot be registered both as an MMAT and as an Institutional Broker Representative, as defined under Article 1, Rule 1(gg). (c) Suspension or Termination of Registration. (1) Pursuant to Article 13, Rule 2, the Exchange may suspend or terminate the registration previously given to a person to be an MMAT if the Exchange determines that the: (A) Person has caused the Market Maker to fail to comply with the securities laws, rules and regulations or the Bylaws, Rules and procedures of the Exchange; (B) person is not properly performing the responsibilities of an MMAT; (C) person has failed to meet the conditions set forth under paragraph (b) above; or (D) MMAT has failed to maintain fair and orderly markets. (2) If the Exchange suspends or terminates the registration of an individual as an MMAT, the Market Maker must not allow the individual to submit orders into the Matching System.\44\ --------------------------------------------------------------------------- \44\ Current CHX Article 13, Rule 2(c) permits an appeal of any decision made under Rule 2 pursuant to current CHX Article 15. --------------------------------------------------------------------------- (3) The registration of an MMAT will be terminated upon the written request of the Participant for which the MMAT is registered. Such written request shall be submitted on a form prescribed by the Exchange. Notably, proposed Rule 3 is substantively similar to BYX Rule 11.6, in that both rules set forth similar obligations of MMATs, except that: Under proposed paragraph (b)(2), the Exchange proposes to continue to require MMATs to be registered with the Exchange pursuant to current Article 6, which includes a requirement that an MMAT take and pass the Exchange-administered Market Maker Authorized Trader Exam, pursuant to paragraph .01(b) of Article 6, Rule 3; \45\ --------------------------------------------------------------------------- \45\ Incidentally, the Exchange proposes to amend paragraph .01(b) of CHX Article 6, Rule 3 to harmonize with, and refer to, proposed CHX Article 16, Rule 3, which includes replacing the term ``Market Maker Exam'' with the more accurate ``Market Maker Authorized Trader Exam,'' replacing the term ``qualify'' with ``register'' and clarifying that a Participant would request that an ``individual'' be registered as an MMAT, as an MMAT refers to a single individual. See CHX Article 1, Rule 1(s) defining ``Participant.'' --------------------------------------------------------------------------- under proposed paragraph (b)(6), an MMAT cannot be also registered as an Institutional Broker Representative, which is currently prohibited under paragraph .01 of current Article 16, Rule 1; and under proposed paragraph (c)(1), the Exchange's authority to suspend or terminate the registration of an MMAT is based on current CHX Article 13, Rule 2.\46\ --------------------------------------------------------------------------- \46\ While current Article 13, Rule 2(a)(1) explicitly applies to, among others, associated persons of Market Makers and Institutional Brokers, the Exchange proposes to amend current Article 13, Rule 2(a)(1)(B) to clarify that the Exchange may suspend, limit or revoke the registration of an Institutional Broker Representative and Market Maker Authorized Trader for failure to perform its material duties. --------------------------------------------------------------------------- Proposed CHX Article 16, Rule 4 (Obligations of Market Makers) Proposed Article 16, Rule 4 is largely a restatement of current Article 16, Rule 8 (Responsibilities) with additional language clarifying general Market Maker obligations, except that the Exchange proposes to delete current Rule 8(c), which provides for heightened quoting and trading requirements, so as to be consistent with the rules of other national securities exchanges.\47\ Specifically, proposed Rule 4(a) provides: --------------------------------------------------------------------------- \47\ Current Rule 8(c) is a minimum performance standard for Market Makers that other national securities exchanges only apply to special subsets of Market Makers (known as Designated or Lead Market Makers depending on the exchange) that are eligible for special fees and rebates for meeting the minimum performance standard. See e.g., NYSEArca Equities Rule 7.24(c), which limit the minimum performance standard to Designated Market Makers; see also e.g., BATS Rule 11.8(e)(1)(D) and (e)(2). Since the Exchange's Market Maker program only includes regular Market Makers that do not receive any special financial incentives for meeting the special requirements of current Rule 8(c) and the rules of other national securities exchanges do not require regular Market Makers to meet similar performance standards in addition to the general quotation requirements and obligations consistent among the national securities exchanges, the Exchange proposes to eliminate the provisions of current Rule 8(c). --------------------------------------------------------------------------- General. Market Makers in one or more securities traded on the Exchange must engage in a course of dealings for [[Page 21413]] their own account to assist in the maintenance, insofar as reasonably practicable, of fair and orderly markets on the Exchange in accordance with CHX Rules. The responsibilities and duties of a Market Maker specifically include, but are not limited to, the following: (1) Maintain continuous quotations consistent with the requirements of paragraph (d) below; (2) Remain in good standing with the Exchange and in compliance with all CHX Rules applicable to it; (3) Inform the Exchange of any material change in financial or operational condition or in personnel; (4) Maintain a current list of MMATs who are permitted to enter orders on behalf of the Market Maker and provide an updated version of this list to the Exchange upon any change in MMATs; (5) Clear and settle transactions through the facilities of a registered clearing agency. This requirement may be satisfied by direct participation, use of direct clearing services, or by entry into a correspondent clearing arrangement with another Participant that clears trades through such agency; and (6) Comply with the requirements of Rule 5 below, as applicable. Notably, proposed Rule 4(a): Is similar to BYX Rule 11.8(a), in that both rules set forth the same general Market Maker obligations and specific Market Maker responsibilities and duties, except that proposed paragraph (a)(6) includes an additional obligation not found under BYX rules requiring Participants that conduct business other than acting as a Market Maker on the Exchange to comply with the requirements of proposed Rule 5 (i.e., current Rule 9) regarding information barriers; and restates the first paragraph of current Article 16, Rule 8 as the first paragraph of proposed Rule 4(a). Proposed Rule 4(b) and (c) provide as follows: (b) A Market Maker shall be responsible for the acts and omissions of its MMATs. (c) If the Exchange finds any substantial or continued failure by a Market Maker to engage in a course of dealings as specified under this Rule, such Market Maker may be subject to disciplinary action by the Exchange pursuant to Rule 1(d) and/or Rule 2(e) above. Nothing in this Rule 4 will limit any other power of the Exchange under the Bylaws, Rules, or procedures of the Exchange with respect to the registration of a Market Maker or MMAT or in respect of any violation by a Market Maker or MMAT of the provisions of this Rule 4. Notably, proposed Rule 4(b) and (c): Is similar to BYX Rules 11.8(b) and (c), in that both rules provide that Market Makers shall be responsible for the acts and omissions of its MMATs and provisions regarding the exchange's authority to prosecute noncompliance of Market Maker obligations, except that proposed Rule 4(c) does not refer to a review process for Exchange decisions made pursuant to proposed Rules 1(d) and/or 2(e), as those proposed rules already cite to the Article 15 review process. Proposed Rules 4(d) is virtually identical to current Article 16, Rules 8(a), with proposed amendments to capitalize the term ``Market Maker,'' as noted above.\48\ The Exchange does not propose to substantively modify any obligations provided thereunder. --------------------------------------------------------------------------- \48\ See supra note 27. --------------------------------------------------------------------------- Proposed Rule 4(e) is a restatement of current Article 16, Rule 8(b), with a clarification that each Market Maker must have and maintain minimum net capital of at least the amount required under Rule 15c3-1 under the Exchange Act \49\ and Article 7 (Financial Responsibility and Reporting Requirements).\50\ --------------------------------------------------------------------------- \49\ 17 CFR 240.15c3-1. \50\ The Exchange notes that current CHX Article 7, Rule 3(a)(1)(A) provides, in pertinent part, that Participant shall at all times maintain net capital not less than that prescribed by SEC 15c3-1 (17 CFR 240.15c3-1). --------------------------------------------------------------------------- Proposed CHX Article 16, Rule 5 (Limitation on Dealings of Market Makers) Proposed Rule 5 is virtually identical to current Article 16, Rule 9, with the following clarifying amendments: The term ``Market Maker'' is capitalized.\51\ --------------------------------------------------------------------------- \51\ See supra note 27. --------------------------------------------------------------------------- Proposed Rule 5(a) clarifies that affected Market Makers must meet information barrier requirements ``that comport to the requirements of this Rule 5.'' Proposed Rule 5(c), which addresses the approval of information barrier procedures by the Exchange, is substantively identical to current Rule 9(c), with the following clarifications: [cir] Participants must promptly notify the Exchange of any material changes to a Participant's organizational structure or compliance and audit procedures that were previously approved by the Exchange pursuant to Rule 5(c). [cir] The Exchange must approve any material changes to a Participant's organizational structure or compliance and audit procedures that were previously approved by the Exchange pursuant to Rule 5(c) and must notify such approval to the Participant in writing. [cir] Explicitly state that absent approval of the information barrier procedures pursuant to proposed Rule 5(c), a Participant may not conduct any business activities other than making markets in assigned securities pursuant to Article 16, as opposed to merely stating that such a Participant may not conduct any ``other'' business activities. Paragraph .02(c)(2) of proposed Rule 5 is amended to replace ``a'' with ``an'' before the acronym ``MMAT'' for grammatical correctness and stylistic consistency. Proposed CHX Article 16, Rule 6 (Reporting of Position Information by Market Makers) Proposed Rule 6 is virtually identical to current Article 16, Rule 10, with amendments to capitalize the term ``Market Maker,'' as noted above.\52\ Incidentally, the Exchange proposes to amend Article 12, Rule 8(h)(1)(U) and the Minor Rule Violation chart under the CHX Fee Schedule to update cross-references to proposed CHX Article 16, Rule 6. --------------------------------------------------------------------------- \52\ See id. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act \53\ in general and furthers the objectives of Sections 6(b)(1) \54\ in particular, in that it further enables the Exchange to be so organized as to have the capacity to be able to carry out the purposes of the Act and to comply, and to enforce compliance by its Participants and persons associated with its Participants, with the provisions of the Act, the rules and regulations thereunder, and the rules of the Exchange, in furtherance of the objectives of Section 6(b)(1). Specifically, the Exchange believes that the proposed rule change, notably amended Article 16, would promote clarity of CHX Rules related to the Market Maker application, registration and securities assignment procedures, which furthers the objectives of Section 6(b)(1). --------------------------------------------------------------------------- \53\ 15 U.S.C. 78f(b). \54\ 15 U.S.C. 78f(b)(1). --------------------------------------------------------------------------- The Exchange also believes that the proposed rule change furthers the objectives of Section 6(b)(5) in particular,\55\ in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in [[Page 21414]] facilitating transactions in securities, to remove impediments and perfect the mechanisms of a free and open market, and, in general, to protect investors and the public interest. Generally, the Exchange believes that harmonizing certain proposed rules with the rules of other national securities exchanges, such as BYX, would remove impediments and perfect the mechanisms of a free and open market, which furthers the objectives of Section 6(b)(5). --------------------------------------------------------------------------- \55\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Specifically, the Exchange believes that proposed Article 16, Rule 3 would promote just and equitable principles of trade and protect investors and the public investors by expanding the requirements of MMATs. The Exchange believes that heightened MMAT requirements would enhance oversight of market making on the Exchange. Similarly, the Exchange believes that proposed Article 16, Rule 4 would promote just and equitable principles of trade and protect investors and the public investors by providing more detailed Market Maker obligations and explicitly stating that the Market Maker shall be responsible for the acts and omissions of its MMATs, which would further incentivize Market Makers to maintain robust oversight over its MMATs. B. Self-Regulatory Organization's Statement of Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the Exchange believes that the proposed rule change will enhance competition through clarifying and updating CHX Market Maker-related rules. C. Self-Regulatory Organization's Statement on Comments Regarding the Proposed Rule Changes Received From Members, Participants or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Changes and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \56\ and Rule 19b-4(f)(6) thereunder.\57\ 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 for 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 \58\ and Rule 19b- 4(f)(6) thereunder.\59\ --------------------------------------------------------------------------- \56\ 15 U.S.C. 78s(b)(3)(A)(iii). \57\ 17 CFR 240.19b-4(f)(6). \58\ 15 U.S.C. 78s(b)(3)(A). \59\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange's intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) under the Act \60\ normally does not become operative for 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) \61\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange states that although its Market Maker program is currently dormant, it anticipates restarting the program shortly and is currently in the process of reviewing new Market Maker applications. The Exchange also notes that without a waiver of the operative delay, newly approved Market Makers would be required to begin making markets pursuant to a set of rules that have been amended by the proposed rule change and then later modify their procedures to comport to the proposed rule change when it becomes operative; the Exchange believes such a requirement would be unnecessarily burdensome. Based on the foregoing, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest.\62\ The Commission hereby grants the Exchange's request and designates the proposal operative upon filing. --------------------------------------------------------------------------- \60\ 17 CFR 240.19b-4(f)(6). \61\ 17 CFR 240.19b-4(f)(6)(iii). \62\ 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 the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic 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-CHX-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 20549-1090. All submissions should refer to File Number SR-CHX-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 such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CHX-2016-04 and should be submitted on or before May 2, 2016. [[Page 21415]] For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\63\ Robert W. Errett, Deputy Secretary. --------------------------------------------------------------------------- \63\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- [FR Doc. 2016-08186 Filed 4-8-16; 8:45 am] BILLING CODE 8011-01-P
![21408 Federal Register / Vol. 81, No. 69 / Monday, April 11, 2016 / Notices
Reference Room, 100 F Street NE., the Commission with the notice • Rule 7. Involuntary De-Registration as
Washington, DC 20549, on official required by Rule 19b–4(f)(6)(iii).5 Market Maker
business days between the hours of The text of this proposed rule change • Rule 8. Responsibilities
10:00 a.m. and 3:00 p.m. Copies of such is available on the Exchange’s Web site • Rule 9. Limitation on Dealings
filing will also be available for at (www.chx.com) and in the • Rule 10. Reporting of Position
inspection and copying at the principal Commission’s Public Reference Room. Information
office of the Exchange. All comments Currently, a Participant may act as a
II. Self-Regulatory Organization’s
received will be posted without change; Market Maker in a particular security
Statement of the Purpose of, and
the Commission does not edit personal only if it has registered with, and been
Statutory Basis for, the Proposed Rule
identifying information from approved by, the Exchange to act in that
Change
submissions. You should submit only capacity, and is in good standing.6 A
information that you wish to make In its filing with the Commission, the Participant who wishes to register as a
available publicly. All submissions CHX included statements concerning Market Maker must complete a Market
should refer to File Number SR– the purpose of and basis for the Maker application,7 which will be
BatsEDGX–2016–05 and should be proposed rule changes and discussed reviewed by the Exchange.8
submitted on or before May 2, 2016. any comments it received on the The Exchange will announce the
proposed rule change. The text of these names of all successful Participant
For the Commission, by the Division of statements may be examined at the
Trading and Markets, pursuant to delegated
applicants.9 However, if the Exchange
authority.18
places specified in Item IV below. The denies a Participant’s Market Maker
CHX has prepared summaries, set forth application, it will provide the
Robert W. Errett,
in sections A, B and C below, of the Participant with a summary of the
Deputy Secretary. most significant aspects of such Exchange’s reasons for the denial.10 A
[FR Doc. 2016–08185 Filed 4–8–16; 8:45 am] statements. Participant may seek review of its
BILLING CODE 8011–01–P denied Market Maker application.11 The
A. Self-Regulatory Organization’s
Statement of the Purpose of, and Exchange also reserves the right to
Statutory Basis for, the Proposed Rule expedite the Market Maker application
SECURITIES AND EXCHANGE process and appoint a Market Maker on
COMMISSION Changes
a temporary basis.12 A Participant’s
[Release No. 34–77527; File No. SR–CHX– 1. Purpose registration as a Market Maker may be
2016–04] The Exchange proposes to amend -1- involuntarily terminated or
various CHX Rules related to Market suspended by the Exchange 13 or -2-
Self-Regulatory Organizations; voluntarily terminated at the request of
Makers. The proposed rule change
Chicago Stock Exchange, Inc.; Notice Participant.14
primarily addresses Market Maker
of Filing and Immediate Effectiveness Once approved, a Market Maker may
application, registration and securities
of Proposed Rule Change To Amend then select securities in which it seeks
assignment procedures. Specifically, the
the Rules of the Exchange Related to to acts as Market Maker by notifying the
Exchange proposes to consolidate and/
Market Makers Exchange in a manner prescribed by the
or clarify certain rules under Article 16
April 5, 2016. (Market Makers); to adopt new rules Exchange.15 Any decision to add or
Pursuant to Section 19(b)(1) of the under Article 16 that are similar to rules drop securities from its existing
of other national securities exchanges; selection must be communicated to the
Securities Exchange Act of 1934
to make corresponding amendments to Exchange no later than 9 a.m. on the
(‘‘Act’’),1 and Rule 19b–4 2 thereunder,
various CHX Rules impacted by the trading day immediately preceding the
notice is hereby given that on March 30,
proposed amendments to Article 16; date on which the change is to take
2016, the Chicago Stock Exchange, Inc.
and to make other clarifying effect, unless the Exchange permits a
(‘‘CHX’’ or the ‘‘Exchange’’) filed with
amendments throughout the CHX Rules, later date and/or time.16 A Market
the Securities and Exchange
as described below. Notwithstanding Maker’s decision to voluntarily add or
Commission (‘‘Commission’’) the
the proposed amendments, the drop securities from its existing
proposed rule change as described in
Exchange proposes to largely maintain selection are effective without approval;
Items I and III below, which Items have
the current requirements regarding provided a Market Maker must seek
been prepared by the Exchange. The
Market Maker responsibilities (Article prior Exchange approval for an initial
Commission is publishing this notice to
16, Rule 8); limitation on dealings request to trade more than 500 securities
solicit comments on the proposed rule
(Article 16, Rule 9); and reporting of and each request to trade each
change from interested persons.
positions (Article 16, Rule 10). increment of an additional 100
I. Self-Regulatory Organization’s securities after that threshold is
Statement of the Terms of Substance of Current Article 16 (Market Makers) reached.17 Except for temporary and/or
the Proposed Rule Change Current Article 16 consists of the partial de-registrations approved by the
CHX proposes to amend the Rules of following rules: Exchange, a Market Maker may not re-
the Exchange (‘‘CHX Rules’’) related to • Rule 1. Registration and Appointment
• Rule 2. Initial Registration of Market
6 See CHX Article 16, Rule 1(a).
Market Makers. CHX has designated this 7 See CHX Article 16, Rule 2(b).
proposed rule change as non- Makers 8 See CHX Article 16, Rule 3.
controversial pursuant to Section • Rule 3. Approval by the Exchange 9 See CHX Article 16, Rule 2(d).
mstockstill on DSK4VPTVN1PROD with NOTICES
19(b)(3)(A) 3 of the Act and Rule 19b– • Rule 4. Temporary Appointment of 10 See id.
4(f)(6) 4 thereunder and has provided Market Maker 11 See id.
• Rule 5. Identification of Securities 12 See CHX Article 16, Rule 4.
18 17 CFR 200.30–3(a)(12). Traded as Market Maker 13 See CHX Article 16, Rule 7.
1 15 U.S.C. 78s(b)(1). • Rule 6. Voluntary De-Registration as 14 See CHX Article 16, Rules 5 and 6.
2 17 CFR 240.19b–4. Market Maker 15 See CHX Article 16, Rule 5.
3 15 U.S.C. 78s(b)(3)(A). 16 See id.
4 17 CFR 240.19b–4(f)(6). 5 17 CFR 240.19b–4(f)(6)(iii). 17 See paragraph .01 of CHX Article 16, Rule 5.
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![Federal Register / Vol. 81, No. 69 / Monday, April 11, 2016 / Notices 21415
For the Commission, by the Division of and discussed any comments it received particular, the Exchange was required
Trading and Markets, pursuant to delegated on the proposed rule change. The text incorporate into the audit trail all non-
authority.63 of those statements may be examined at electronic orders ‘‘such that the audit
Robert W. Errett, the places specified in Item IV below. trail provides an accurate, time-
Deputy Secretary. The Exchange has prepared summaries, sequenced record of electronic and
[FR Doc. 2016–08186 Filed 4–8–16; 8:45 am] set forth in sections A, B, and C below, other orders, quotations and
BILLING CODE 8011–01–P of the most significant parts of such transactions on such respondent
statements. exchange, beginning with the receipt of
an order by such respondent exchange
SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s and further documenting the life of the
COMMISSION Statement of the Purpose of, and order through the process of execution,
Statutory Basis for, the Proposed Rule partial execution, or cancellation of that
[Release No. 34–77518; File No. SR– Change
NYSEMKT–2016–13] order, which audit trail shall be readily
1. Purpose retrievable in the common computer
Self-Regulatory Organizations; NYSE format.’’ 8
The Exchange proposes to amend Current Rule 955NY(c) sets forth the
MKT LLC; Notice of Filing of Proposed
Exchange Rule 955NY(c) by revising the EOC entry requirements and mandates
Rule Change, as Modified by
requirements for entering an order into that every ATP Holder that receives an
Amendment No. 1, To Amend Rule
the EOC. Specifically, the Exchange order for execution on the Exchange
955NY(c) by Revising the Clearing
proposes to eliminate the pre-trade EOC ‘‘must immediately, prior to
Member Requirements for Entering an
requirement that ATP Holders give up representation in the trading crowd,
Order Into the Electronic Order
the name of the Clearing Member 4 record the details of the order (including
Capture System (‘‘EOC’’)
responsible for clearing each trade any modification of the terms of the
April 5, 2016. before representing a trade in open order or cancellation of the order) into
Pursuant to Section 19(b)(1) 1 of the outcry. 5 the EOC, unless such order has been
Securities Exchange Act of 1934 (the The EOC is the Exchange’s floor-based entered into the Exchange’s other
‘‘Act’’) 2 and Rule 19b–4 thereunder,3 electronic audit trail and order tracking electronic order processing facilities
notice is hereby given that, on March system that provides an accurate time- (e.g., orders sent electronically through
22, 2016, NYSE MKT LLC (the sequenced record of all orders and the Exchange’s Member Firm
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with transactions entered and executed on Interface).’’ 9 Among other pre-trade
the Securities and Exchange the floor of the Exchange.6 This process, EOC requirements under current Rule
Commission (the ‘‘Commission’’) the commonly referred to as the 955NY(c)(1), every ATP Holder must
proposed rule change as described in ‘‘systemization’’ of an order, is provide ‘‘the name of the clearing ATP
Items I and II below, which Items have composed of the contractual terms of an Holder’’ (the ‘‘Give Up Requirement’’) 10
been prepared by the self-regulatory order that are required to be disclosed Rule 955NY(c)(1) also provides that
organization. On March 30, 2016, the in order to effect a trade. The EOC was ‘‘[t]he remaining elements prescribed in
Exchange filed Amendment No. 1 to the developed to comply with an order of Rule 956NY and any additional
proposed rule change. The Commission the Commission, which required that information with respect to the order
is publishing this notice to solicit the Exchange, in coordination with shall be recorded as the events occur
comments on the proposed rule change, other exchanges, ‘‘design and and/or during trade reporting
as modified by Amendment No. 1, from implement a consolidated options audit procedures which may occur after the
interested persons. trail system (‘COATS’),’’ that would representation and execution of the
‘‘enable the options exchanges to order.’’ 11
I. Self-Regulatory Organization’s
reconstruct markets promptly,
Statement of the Terms of the Substance (September 11, 2000) and Administrative
effectively surveil them and enforce
of the Proposed Rule Change Proceeding File No. 3–10282.
order handling, firm quote, trade 8 See id.
The Exchange proposes to amend reporting and other rules.’’ 7 In 9 See Rule 955NY(c).
Rule 955NY(c) by revising the 10 See Rule 955NY(c)(1)(vii). Rule 955NY(c)(1)
requirements for entering an order into 4 Rule 900.2NY defines ‘‘Clearing Member’’ as an
also requires the following data points to be entered
the Electronic Order Capture System Exchange ATP Holder which has been admitted to upon receipt of an order: (i) The option symbol; (ii)
membership in the Options Clearing Corporation the expiration date of the option; (iii) the exercise
(‘‘EOC’’). The proposed rule change is pursuant to the provisions of the Rules of the price; (iv) buy or sell with applicable limit or stop
available on the Exchange’s Web site at Options Clearing Corporation. price or special instructions; (v) call or put; (vi) the
www.nyse.com, at the principal office of 5 In Amendment No. 1, the Exchange clarified
quantity of contracts; as well as such other
the Exchange, and at the Commission’s that it is proposing to amend the timing in which information as may be required by the Exchange
Public Reference Room. Clearing Member information will be entered into from time to time. Rule 955NY(c)(1) also provides
the EOC. More specifically, the Exchange noted that that the Exchange may also require additional
II. Self-Regulatory Organization’s Rule 955NY(c)(1) requires the other items included information if needed and provides that the
in Rule 956NY(a), including the ‘‘CMTA remaining data elements prescribed in Rule 956NY
Statement of the Purpose of, and Information and the name of the clearing OTP [see infra n. 10] are to be recorded as the events
Statutory Basis for, the Proposed Rule Holder or Firm,’’ to be included in the EOC ‘‘as the occur and/or during trade reporting procedures.
Change events occur and/or during trade reporting The Exchange proposes to add the words ‘‘in the
procedures which may occur after the EOC’’ to Rule 955NY(c)(1) to make clear where the
In its filing with the Commission, the representation and execution of the order.’’ additional information would be recorded. See
mstockstill on DSK4VPTVN1PROD with NOTICES
self-regulatory organization included 6 This system includes the electronic proposed Rule 955NY(c)(1).
statements concerning the purpose of, communications interface between booth terminals 11 See Rule 955NY (c)(1). The Exchange notes that
and basis for, the proposed rule change and the Floor Broker work stations. one such element prescribed in Rule 956NY(a) to
7 See Section IV.B.e.(v) of the Commission’s be recorded by each ATP Holder is ‘‘CMTA
63 17
Order Instituting Public Administrative Proceedings Information and the name of the clearing ATP
CFR 200.30–3(a)(12). Pursuant to Sections 19(h)(1) of the Securities Holder,’’ and therefore, per Rule 955NY(c)(1), this
1 15 U.S.C.78s(b)(1). Exchange Act of 1934, Making Findings and information would still be disclosed ‘‘as the events
2 15 U.S.C. 78a.
Imposing Remedial Sanctions (the ‘‘Order’’). See occur and/or during trade reporting procedures
3 17 CFR 240.19b–4. Securities Exchange Act Release No. 43268 Continued
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Document Created: 2016-04-09 00:11:36
Document Modified: 2016-04-09 00:11:36
| 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 21408 |
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