81 FR 63536 - Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving a Proposed Rule Change Amending the Ninth Amended and Restated Operating Agreement of the Exchange
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 179 (September 15, 2016)
Federal Register Volume 81, Issue 179 (September 15, 2016)
| Page Range | 63536-63538 | |
| FR Document | 2016-22154 |
[Federal Register Volume 81, Number 179 (Thursday, September 15, 2016)] [Notices] [Pages 63536-63538] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-22154] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78805; File No. SR-NYSE-2016-51] Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving a Proposed Rule Change Amending the Ninth Amended and Restated Operating Agreement of the Exchange September 9, 2016. I. Introduction On July 22, 2016, New York Stock Exchange LLC (``Exchange'' or ``NYSE'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend the Ninth Amended and Restated Operating Agreement of the Exchange (``Operating Agreement''). The proposed rule change was published for comment in the Federal Register on August 3, 2016.\3\ The Commission received no comments in response to the Notice. This order approves the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ Securities Exchange Act Release No. 78436 (July 28, 2016), 81 FR 51249 (``Notice''). --------------------------------------------------------------------------- II. Description of the Proposal The Exchange proposes to amend the Operating Agreement to (1) change the process for nominating non-affiliated directors; and (2) replace an obsolete reference to NYSE Market (DE), Inc. (``NYSE Market (DE)''). A. Process for Nominating Non-Affiliated Directors Pursuant to the Operating Agreement, at least 20 percent of the Exchange's Board of Directors (``Board'') is made up of ``Non- Affiliated Directors'' (commonly referred to as ``fair representation directors'').\4\ Pursuant to Section 2.03(a) of the Operating Agreement, the nominating and governance committee (``NGC'') of the board of directors of ICE, the indirect parent of the Exchange, nominates the candidates for Non-Affiliated Directors, who are then elected by NYSE Group, Inc. (``NYSE Group'') as the sole member of the Exchange. The Exchange proposes to amend Section 2.03(a) to have the Director Candidate Recommendation Committee (``DCRC'') of the Exchange assume the role currently served by the ICE NGC and to make a conforming change to Section 2.03(h)(i).\5\ --------------------------------------------------------------------------- \4\ Id. The Exchange notes that pursuant to Section 2.03(a) of the Operating Agreement, Non-Affiliated Directors are persons who are not members of the Board of Directors of Intercontinental Exchange, Inc. (``ICE'') but qualify as independent and that a person may not be a Non-Affiliated Director unless he or she is free of any statutory disqualification, as defined in Section 3(a)(39) of the Act. See id. The Exchange's independence requirements are set forth in the Company Director Independence Policy of the Exchange. See Securities Exchange Act Release No. 67564 (August 1, 2012), 77 FR 47161 (August 7, 2012) (SR-NYSE-2012-17) (approving, among other things, the Exchange's Company Director Independence Policy). \5\ See Notice, supra note 3, at 51249. --------------------------------------------------------------------------- In addition, if the Exchange's Member Organizations endorse a Petition Candidate for Non-Affiliated Director pursuant to Section 2.03(a)(iv) of the Operating Agreement, the ICE NGC currently makes the determination of whether the person is eligible.\6\ The Exchange proposes to amend Section 2.03(a)(iv) to have the Exchange make such determination instead of the ICE NGC.\7\ --------------------------------------------------------------------------- \6\ Pursuant to Section 2.02 of the Operating Agreement, ``Member Organizations'' refers to members, allied members and member organizations of the Exchange. ``Petition Candidates'' are defined in Section 2.03(a)(iv) of the Operating Agreement as alternate candidates proposed by Member Organizations by petition, pursuant to the requirements of that Section. \7\ See Notice, supra note 3, at 51249. --------------------------------------------------------------------------- The Exchange explains that currently the nomination by the ICE NGC is the final step in the process for electing a Non-Affiliated Director.\8\ First, the DCRC recommends a candidate, whose name then is announced to the Member Organizations.\9\ The Member Organizations may propose alternate candidates by petition, and if there are no Petition Candidates, the DCRC recommends its candidate(s) to the ICE NGC.\10\ If Petition Candidates are proposed, the ICE NGC makes the determination of whether the candidates are eligible to serve as a Non-Affiliated Director, and then all eligible candidates are submitted to the Member Organizations for a vote, after which the DCRC recommends to the ICE NGC the candidate receiving the highest number of votes.\11\ The Exchange states that the ICE NGC is obligated to designate the DCRC- recommended candidate(s) as the nominee, and that NYSE Group is obligated to elect such candidate(s) as a Non-Affiliated Director.\12\ --------------------------------------------------------------------------- \8\ Id. \9\ Id. \10\ Id. \11\ Id. \12\ Id. --------------------------------------------------------------------------- The Exchange believes that obligating the ICE NGC to nominate the candidates for Non-Affiliated Directors based on the DCRC's unalterable recommendation is neither necessary nor meaningful.\13\ The Exchange notes that, pursuant to Section 2.03(a)(iii) of the Operating Agreement, the ICE NGC is obligated to designate whomever the DCRC recommends or, if there is a Petition Candidate, whoever emerges from the petition process.\14\ According to the Exchange, the ICE NGC does not have any discretion.\15\ The Exchange believes that removing this step would make the NYSE process with respect to the nomination of Non- Affiliated Directors more efficient.\16\ Moreover, the Exchange believes that having the Exchange determine whether persons endorsed to be Petition Candidates are eligible to serve as Non-Affiliated Directors would be more efficient, as it would not require action by the ICE NGC, thereby potentially removing the possibility of any delay in the process.\17\ The Exchange further states that the proposed change would be consistent with the petition processes of the Exchange's affiliate, NYSE MKT LLC (``NYSE MKT''), and of the Nasdaq Stock Market LLC, because each of these exchanges determines the eligibility of proposed nominees.\18\ --------------------------------------------------------------------------- \13\ Id. \14\ Id. \15\ Id. \16\ Id. \17\ Id. \18\ Id. See also Article II, Section 2.03(a) of the Ninth Amended and Restated Operating Agreement of NYSE MKT LLC; Securities Exchange Act Release No. 77901 (May 25, 2016), 81 FR 35092 (June 1, 2016) (SR-NYSEMKT-2016-26) (``NYSE MKT 2016 Release''); By-Laws of the Nasdaq Stock Market LLC, Art. II, Sec. 1(b) (``The Company may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a Member Representative Director.''). --------------------------------------------------------------------------- The Exchange also believes that the proposed changes will make its process [[Page 63537]] more consistent with the process by which its affiliates, NYSE MKT and NYSE Arca, Inc. (``NYSE Arca''), designate their fair representation directors, in which the ICE NGC plays no role.\19\ --------------------------------------------------------------------------- \19\ See Notice, supra note 3, at 51249-50. See also Article II, Section 2.03(a) of the Ninth Amended and Restated Operating Agreement of NYSE MKT LLC; NYSE MKT 2016 Release, supra note 18; Article III, Section 3.02 of the NYSE Arca Bylaws and NYSE Arca Rule 3.2(b)(2). The Exchange also notes that the board of directors of The NASDAQ OMX Group, Inc., the sole member of the Nasdaq Stock Market LLC, similarly plays no role in nominating or determining the eligibility of Member Representative Directors. See By-Laws of the Nasdaq Stock Market LLC, Art. II, Sec. 1. --------------------------------------------------------------------------- Accordingly, the Exchange proposes to revise Section 2.03(a)(iii)-- (v) of the Operating Agreement to amend the process for electing Non- Affiliated Directors.\20\ First, as is currently the case, the DCRC would recommend a candidate, whose name would be announced to the Member Organizations, and the Member Organizations could propose alternate candidates by petition.\21\ Next, if there were no Petition Candidates, the DCRC would nominate the candidate(s) whom it had previously recommended.\22\ If there were Petition Candidates, the Exchange would make the eligibility determination regarding the Petition Candidates; all eligible candidates would be submitted to the Member Organizations for a vote; and the DCRC would nominate the candidate receiving the highest number of votes.\23\ Finally, NYSE Group would be obligated to elect the DCRC-nominated candidate as a Non-Affiliated Director.\24\ --------------------------------------------------------------------------- \20\ See Notice, supra note 3, at 51250. \21\ Id. \22\ Id. \23\ Id. \24\ Id. --------------------------------------------------------------------------- In addition, the Exchange would make a conforming change to Section 2.03(h)(i) to state that the DCRC ``will be responsible for nominating Non-Affiliated Director Candidates.'' \25\ Currently, the provision states that the DCRC ``will be responsible for recommending Non- Affiliated Director Candidates to the ICE NGC.'' \26\ --------------------------------------------------------------------------- \25\ Id. \26\ Id. --------------------------------------------------------------------------- B. Reference to NYSE Market (DE), Inc. Section 2.02 of the Operating Agreement sets forth the Board's general supervision over Member Organizations and approved persons in connection with their conduct with or affecting Member Organizations. It provides that the Board ``shall have supervision relating to the collection, dissemination and use of quotations and of reports of prices on NYSE Market (DE), Inc.'' \27\ The Exchange proposes to amend Section 2.02 to replace the reference to NYSE Market (DE) with a reference to ``the exchange operated by the Company.'' \28\ --------------------------------------------------------------------------- \27\ See Article II, Section 2.02 of the Operating Agreement. \28\ See Notice, supra note 3, at 51250. The Exchange notes that references to the ``Company'' in the Operating Agreement are to the Exchange. Id. --------------------------------------------------------------------------- The Exchange explains that following the merger of New York Stock Exchange, Inc. with Archipelago Holdings, Inc., the Exchange and its subsidiaries NYSE Market (DE) and NYSE Regulation, Inc. entered into a Delegation Agreement, pursuant to which the Exchange delegated its market functions to NYSE Market (DE) and its regulatory functions to NYSE Regulation, Inc.\29\ --------------------------------------------------------------------------- \29\ See id. See also Securities Exchange Act Release No. 75991 (September 28, 2015), 80 FR 59837(October 2, 2015) (SR-NYSE-2015- 27), at 59839. --------------------------------------------------------------------------- The Exchange states that the Delegation Agreement terminated in April 2016 and, accordingly, NYSE Market (DE) no longer is delegated the Exchange's market functions, making the reference to NYSE Market (DE) in Section 2.02 of the Operating Agreement obsolete.\30\ The Exchange, therefore, proposes to update the reference to NYSE Market (DE) with a reference to ``the exchange operated by the Company.'' \31\ --------------------------------------------------------------------------- \30\ See Notice, supra note 3, at 51250. \31\ Id. --------------------------------------------------------------------------- The Exchange states that the proposed change would be consistent with Article II, Section 2.02 of the operating agreement of the Exchange's affiliate NYSE MKT, which states that its board of directors ``shall have supervision relating to the collection, dissemination and use of quotations and of reports of prices on the exchange operated by the Company.'' \32\ --------------------------------------------------------------------------- \32\ Id. (citing Article II, Section 2.02 of the Ninth Amended and Restated Operating Agreement of NYSE MKT LLC). --------------------------------------------------------------------------- Finally, the Exchange proposes to make technical and conforming changes to the recitals and signature page of the Operating Agreement.\33\ --------------------------------------------------------------------------- \33\ Id. --------------------------------------------------------------------------- III. Discussion and Commission's Findings The Commission finds that the proposed rule change is consistent with the requirements of Section 6 of the Act \34\ and the rules and regulations thereunder applicable to a national securities exchange.\35\ --------------------------------------------------------------------------- \34\ 15 U.S.C. 78f. \35\ The Commission has also considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- The Commission finds that the proposed rule change is consistent with Section 6(b)(1),\36\ which requires, among other things, that a national securities exchange be so organized and have the capacity to carry out the purposes of the Act, and to comply, and to enforce compliance by its members and persons associated with its members, with the provisions of the Act, the rules and regulation thereunder, and the rules of the exchange. In addition, the Commission finds that the proposed rule change is consistent with Section 6(b)(3) of the Act,\37\ which requires, among other things, that the rules of a national securities exchange assure a fair representation of its members in the selection of its directors and administration of its affairs. --------------------------------------------------------------------------- \36\ 15 U.S.C. 78f(b)(1). \37\ 15 U.S.C. 78f(b)(3). --------------------------------------------------------------------------- The proposed rule change would remove the requirement that the ICE NGC nominate the candidates for Non-Affiliated Directors and instead have the DCRC nominate the candidates for Non-Affiliated Director directly.\38\ Because the ICE NGC currently is required to nominate the candidate recommended to it by the DCRC, this proposed change would remove an additional step in the process of nominating candidates for Non-Affiliated Director positions and thus may improve the efficiency of the nomination process. --------------------------------------------------------------------------- \38\ The Commission notes that the DCRC is appointed by the Board. See Section 2.03(h)(i) of the Operating Agreement. --------------------------------------------------------------------------- In addition, the proposed rule change would remove the requirement that the ICE NGC make the determination of whether persons endorsed to be Petition Candidates are eligible to be a Non-Affiliated Director, and would have the Exchange make such determination instead. The proposed process would maintain an independent review of the eligibility of any Petition Candidates, while avoiding the potential conflict of interest that could arise if, for example, the DCRC were to be responsible for both proposing and nominating candidates and making eligibility determinations of Petition Candidates proposed by Member Organizations. The Commission previously considered and approved rules of other exchanges that similarly provide for those exchanges to determine the eligibility of proposed Petition Candidates.\39\ --------------------------------------------------------------------------- \39\ See supra note 18. See generally Securities Exchange Act Release No. 56876 (November 30, 2007), 72 FR 70357 (December 11, 2007) (SR-NASDAQ-2007-068) (approving process for electing Member Representative Directors). --------------------------------------------------------------------------- Finally, replacing the reference to NYSE Market (DE) in Section 2.02 of the Operating Agreement with a reference to [[Page 63538]] ``the exchange operated by the Company'' would remove an obsolete reference to NYSE Market (DE) from the Operating Agreement. The Exchange explains that the Delegation Agreement pursuant to which the Exchange delegated its market functions to NYSE Market (DE) has expired, thereby making the reference to NYSE Market (DE) in Section 2.02 obsolete.\40\ The Commission finds that eliminating such an obsolete reference would add clarity to the Exchange's rules and is consistent with the public interest and the protection of investors. The proposed addition of a reference to ``the exchange operated by the Company'' in Section 2.02 would clarify that the Board has general supervision relating to the collection, dissemination and use of quotations and of reports of prices on the Exchange. --------------------------------------------------------------------------- \40\ See Notice, supra note 3, at 51250. --------------------------------------------------------------------------- The Commission finds that the foregoing revisions to the Operating Agreement are consistent with the Act. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\41\ that the proposed rule change (SR-NYSE-2016-51) be, and it hereby is, approved. --------------------------------------------------------------------------- \41\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\42\ --------------------------------------------------------------------------- \42\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-22154 Filed 9-14-16; 8:45 am] BILLING CODE 8011-01-P
![63536 Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices
business days between the hours of A. Process for Nominating Non- recommends its candidate(s) to the ICE
10:00 a.m. and 3:00 p.m. Copies of such Affiliated Directors NGC.10 If Petition Candidates are
filing also will be available for Pursuant to the Operating Agreement, proposed, the ICE NGC makes the
inspection and copying at the principal at least 20 percent of the Exchange’s determination of whether the candidates
office of the Exchange. All comments Board of Directors (‘‘Board’’) is made up are eligible to serve as a Non-Affiliated
received will be posted without change; of ‘‘Non-Affiliated Directors’’ Director, and then all eligible candidates
the Commission does not edit personal (commonly referred to as ‘‘fair are submitted to the Member
identifying information from representation directors’’).4 Pursuant to Organizations for a vote, after which the
submissions. You should submit only Section 2.03(a) of the Operating DCRC recommends to the ICE NGC the
information that you wish to make Agreement, the nominating and candidate receiving the highest number
available publicly. All submissions governance committee (‘‘NGC’’) of the of votes.11 The Exchange states that the
should refer to File Number SR– board of directors of ICE, the indirect ICE NGC is obligated to designate the
BatsEDGX–2016–51 and should be parent of the Exchange, nominates the DCRC-recommended candidate(s) as the
submitted on or before October 6, 2016. candidates for Non-Affiliated Directors, nominee, and that NYSE Group is
For the Commission, by the Division of who are then elected by NYSE Group, obligated to elect such candidate(s) as a
Trading and Markets, pursuant to delegated Inc. (‘‘NYSE Group’’) as the sole Non-Affiliated Director.12
authority.31 member of the Exchange. The Exchange The Exchange believes that obligating
Brent J. Fields, proposes to amend Section 2.03(a) to the ICE NGC to nominate the candidates
have the Director Candidate for Non-Affiliated Directors based on
Secretary.
Recommendation Committee (‘‘DCRC’’) the DCRC’s unalterable recommendation
[FR Doc. 2016–22147 Filed 9–14–16; 8:45 am] is neither necessary nor meaningful.13
of the Exchange assume the role
BILLING CODE 8011–01–P
currently served by the ICE NGC and to The Exchange notes that, pursuant to
make a conforming change to Section Section 2.03(a)(iii) of the Operating
2.03(h)(i).5 Agreement, the ICE NGC is obligated to
SECURITIES AND EXCHANGE designate whomever the DCRC
COMMISSION In addition, if the Exchange’s Member
Organizations endorse a Petition recommends or, if there is a Petition
Candidate for Non-Affiliated Director Candidate, whoever emerges from the
[Release No. 34–78805; File No. SR–NYSE– petition process.14 According to the
2016–51] pursuant to Section 2.03(a)(iv) of the
Operating Agreement, the ICE NGC Exchange, the ICE NGC does not have
currently makes the determination of any discretion.15 The Exchange believes
Self-Regulatory Organizations; New that removing this step would make the
York Stock Exchange LLC; Order whether the person is eligible.6 The
Exchange proposes to amend Section NYSE process with respect to the
Approving a Proposed Rule Change nomination of Non-Affiliated Directors
Amending the Ninth Amended and 2.03(a)(iv) to have the Exchange make
such determination instead of the ICE more efficient.16 Moreover, the
Restated Operating Agreement of the Exchange believes that having the
Exchange NGC.7
The Exchange explains that currently Exchange determine whether persons
September 9, 2016. the nomination by the ICE NGC is the endorsed to be Petition Candidates are
final step in the process for electing a eligible to serve as Non-Affiliated
I. Introduction Directors would be more efficient, as it
Non-Affiliated Director.8 First, the
On July 22, 2016, New York Stock DCRC recommends a candidate, whose would not require action by the ICE
Exchange LLC (‘‘Exchange’’ or ‘‘NYSE’’) name then is announced to the Member NGC, thereby potentially removing the
filed with the Securities and Exchange Organizations.9 The Member possibility of any delay in the process.17
Commission (‘‘Commission’’), pursuant Organizations may propose alternate The Exchange further states that the
to Section 19(b)(1) of the Securities candidates by petition, and if there are proposed change would be consistent
Exchange Act of 1934 (‘‘Act’’) 1 and Rule with the petition processes of the
no Petition Candidates, the DCRC
19b–4 thereunder,2 a proposed rule Exchange’s affiliate, NYSE MKT LLC
change to amend the Ninth Amended 4 Id. The Exchange notes that pursuant to Section
(‘‘NYSE MKT’’), and of the Nasdaq
and Restated Operating Agreement of 2.03(a) of the Operating Agreement, Non-Affiliated Stock Market LLC, because each of these
the Exchange (‘‘Operating Agreement’’). Directors are persons who are not members of the exchanges determines the eligibility of
Board of Directors of Intercontinental Exchange, proposed nominees.18
The proposed rule change was Inc. (‘‘ICE’’) but qualify as independent and that a
published for comment in the Federal The Exchange also believes that the
person may not be a Non-Affiliated Director unless
Register on August 3, 2016.3 The he or she is free of any statutory disqualification, proposed changes will make its process
Commission received no comments in as defined in Section 3(a)(39) of the Act. See id. The
Exchange’s independence requirements are set forth 10 Id.
response to the Notice. This order in the Company Director Independence Policy of 11 Id.
approves the proposed rule change. the Exchange. See Securities Exchange Act Release 12 Id.
No. 67564 (August 1, 2012), 77 FR 47161 (August 13 Id.
II. Description of the Proposal 7, 2012) (SR–NYSE–2012–17) (approving, among 14 Id.
The Exchange proposes to amend the other things, the Exchange’s Company Director 15 Id.
Independence Policy).
Operating Agreement to (1) change the 5 See Notice, supra note 3, at 51249.
16 Id.
17 Id.
process for nominating non-affiliated 6 Pursuant to Section 2.02 of the Operating
18 Id. See also Article II, Section 2.03(a) of the
directors; and (2) replace an obsolete Agreement, ‘‘Member Organizations’’ refers to
sradovich on DSK3GMQ082PROD with NOTICES
Ninth Amended and Restated Operating Agreement
reference to NYSE Market (DE), Inc. members, allied members and member
of NYSE MKT LLC; Securities Exchange Act
(‘‘NYSE Market (DE)’’). organizations of the Exchange. ‘‘Petition
Release No. 77901 (May 25, 2016), 81 FR 35092
Candidates’’ are defined in Section 2.03(a)(iv) of the
(June 1, 2016) (SR–NYSEMKT–2016–26) (‘‘NYSE
Operating Agreement as alternate candidates MKT 2016 Release’’); By-Laws of the Nasdaq Stock
31 17 CFR 200.30–3(a)(12). proposed by Member Organizations by petition, Market LLC, Art. II, Sec. 1(b) (‘‘The Company may
1 15 U.S.C. 78s(b)(1). pursuant to the requirements of that Section. require any proposed nominee to furnish such other
2 17 CFR 240.19b–4. 7 See Notice, supra note 3, at 51249.
information as it may reasonably require to
3 Securities Exchange Act Release No. 78436 (July 8 Id.
determine the eligibility of such proposed nominee
28, 2016), 81 FR 51249 (‘‘Notice’’). 9 Id. to serve as a Member Representative Director.’’).
VerDate Sep<11>2014 17:34 Sep 14, 2016 Jkt 238001 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 E:\FR\FM\15SEN1.SGM 15SEN1](https://thefederalregister.org/doc/81_FR_63715/page/1.svg)
![63538 Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices
‘‘the exchange operated by the have been prepared by the clearing these existing charges, as described in
Company’’ would remove an obsolete agency. The Commission is publishing greater detail below.
reference to NYSE Market (DE) from the this notice to solicit comments on the
II. Clearing Agency’s Statement of the
Operating Agreement. The Exchange proposed rule change from interested
Purpose of, and Statutory Basis for, the
explains that the Delegation Agreement persons.
Proposed Rule Change
pursuant to which the Exchange
I. Clearing Agency’s Statement of the In its filing with the Commission, the
delegated its market functions to NYSE
Terms of Substance of the Proposed clearing agency included statements
Market (DE) has expired, thereby
Rule Change concerning the purpose of and basis for
making the reference to NYSE Market
(DE) in Section 2.02 obsolete.40 The The proposed rule change consists of the proposed rule change and discussed
Commission finds that eliminating such amendments to the Government any comments it received on the
an obsolete reference would add clarity Securities Division (‘‘GSD’’) Rulebook proposed rule change. The text of these
to the Exchange’s rules and is consistent (the ‘‘GSD Rules’’) and the Mortgage- statements may be examined at the
with the public interest and the Backed Securities Division (‘‘MBSD’’) places specified in Item IV below. The
protection of investors. The proposed Clearing Rules (the ‘‘MBSD Rules’’) 3 in clearing agency has prepared
addition of a reference to ‘‘the exchange order to include two margin charges (the summaries, set forth in sections A, B,
operated by the Company’’ in Section ‘‘Backtesting Charge’’ and ‘‘Holiday and C below, of the most significant
2.02 would clarify that the Board has Charge’’ as further described below) that aspects of such statements.
general supervision relating to the may be imposed on Netting Members of (A) Clearing Agency’s Statement of the
collection, dissemination and use of GSD and Clearing Members of MBSD Purpose of, and Statutory Basis for, the
quotations and of reports of prices on (for purposes of this filing, GSD Netting Proposed Rule Change
the Exchange. Members and MBSD Clearing Members
The Commission finds that the will be referred to as ‘‘Members’’ and 1. Purpose
foregoing revisions to the Operating each of the GSD and the MBSD shall be The proposed rule change provides
Agreement are consistent with the Act. referred to as a ‘‘Division’’ and together transparency in the GSD Rules and
IV. Conclusion as the ‘‘Divisions’’). The Backtesting MBSD Rules with respect to the
Charge is assessed for those Members Backtesting Charge and Holiday Charge,
It is therefore ordered, pursuant to whose portfolios experience backtesting two margin charges that each Division
Section 19(b)(2) of the Act,41 that the deficiencies over the prior 12-month may temporarily impose on a Member
proposed rule change (SR–NYSE–2016– period, as described further below. The as part of such Member’s Required Fund
51) be, and it hereby is, approved. Backtesting Charge is calculated by each Deposit.
For the Commission, by the Division of Division to mitigate exposures to the A Division may impose the
Trading and Markets, pursuant to delegated Division caused by settlement risks that Backtesting Charge on a Member when
authority.42 may not be adequately captured by the the Division has observed deficiencies
Brent J. Fields, Division’s portfolio volatility model. in the backtesting of such Member’s
Secretary. The Holiday Charge is applied to all Required Fund Deposit over the prior
[FR Doc. 2016–22154 Filed 9–14–16; 8:45 am] Members on the Business Day prior to 12-month period, such that the Division
BILLING CODE 8011–01–P any day on which the Corporation is determines the VaR Charge being
closed, but the day is not observed as a calculated for that Member may not
holiday by the Securities Industry and fully address the projected liquidation
SECURITIES AND EXCHANGE Financial Markets Association and the losses estimated from that Member’s
COMMISSION bond markets are open (‘‘Holiday’’). The settlement activity.
[Release No. 34–78807; File No. SR–FICC– Holiday Charge addresses the risk The Holiday Charge addresses the risk
2016–006] exposure that a Member’s portfolio on exposure that occurs on Holidays when
the applicable Holiday poses to the the Divisions are unable to collect
Self-Regulatory Organizations; Fixed Corporation. The proposed rule change Clearing Fund from Members. The
Income Clearing Corporation; Notice of would amend GSD Rule 1 (Definitions) Divisions impose the Holiday Charge on
Filing of Proposed Rule Change To and MBSD Rule 1 (Definitions) to add all Members to cover the additional day
Describe the Backtesting Charge and the Backtesting Charge and the Holiday of exposure that is not contemplated in
the Holiday Charge That May Be Charge as defined terms, including the the prior day’s VaR Charge.
Imposed on Members manner and circumstances in which (i) Background
FICC calculates and imposes such
September 9, 2016. A. Backtesting and the Required Fund
charges, and would amend Section 1b of
Pursuant to Section 19(b)(1) of the GSD Rule 4 (Clearing Fund and Loss Deposit
Securities Exchange Act of 1934 Allocation) and Section 2(c) of MBSD The GSD’s Clearing Fund and the
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 Rule 4 (Clearing Fund and Loss MBSD’s Clearing Fund each address
notice is hereby given that on Allocation) to include these charges as potential Member exposure through a
September 2, 2016, Fixed Income additional components of the Required number of risk-based component
Clearing Corporation (‘‘FICC’’) filed Fund Deposit when applicable. FICC is charges (as margin) calculated and
with the Securities and Exchange filing this proposed rule change in order assessed daily. Each of the component
Commission (‘‘Commission’’) the to provide transparency in the GSD charges collectively constitute [sic] a
sradovich on DSK3GMQ082PROD with NOTICES
proposed rule change as described in Rules and MBSD Rules with respect to Member’s Required Fund Deposit with
Items I, II and III below, which Items
respect to each Division. The objective
40 See Notice, supra note 3, at 51250.
3 The GSD Rules and MBSD Rules are available of the Required Fund Deposit is to
41 15
at http://www.dtcc.com/legal/rules-and-procedures. mitigate potential losses to FICC
U.S.C. 78s(b)(2). Capitalized terms used herein and not otherwise
42 17 CFR 200.30–3(a)(12).
defined shall have the meaning assigned to such
associated with liquidation of the
1 15 U.S.C. 78s(b)(1).
terms in the GSD Rules and MBSD Rules, as Member’s portfolio in the event that the
2 17 CFR 240.19b–4. applicable. GSD and/or the MBSD ceases to act for
VerDate Sep<11>2014 17:34 Sep 14, 2016 Jkt 238001 PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 E:\FR\FM\15SEN1.SGM 15SEN1](https://thefederalregister.org/doc/81_FR_63715/page/3.svg)
Document Created: 2018-02-09 13:18:04
Document Modified: 2018-02-09 13:18:04
| 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 63536 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR