81 FR 79540 - Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make a Number of Non-Controversial and Technical Changes
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 219 (November 14, 2016)
Federal Register Volume 81, Issue 219 (November 14, 2016)
| Page Range | 79540-79543 | |
| FR Document | 2016-27237 |
[Federal Register Volume 81, Number 219 (Monday, November 14, 2016)] [Notices] [Pages 79540-79543] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-27237] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79253; File No. SR-ISEGemini-2016-13] Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make a Number of Non-Controversial and Technical Changes November 7, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on October 26, 2016, ISE Gemini, LLC (``ISE Gemini'' or ``Exchange'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I and II 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 The Exchange proposes to make a number of non-controversial and technical changes to its rules as described in more detail below. The text of the proposed rule change is available on the Exchange's Web site at www.ise.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to make a number of non-controversial changes and technical corrections to its rules. Specifically, these changes are all to correct typographical errors and delete obsolete rule text.\3\ The changes are described in more detail below. --------------------------------------------------------------------------- \3\ See also Securities Exchange Act Release No. 73808 (December 10, 2014), 79 FR 74797 (December 16, 2014) (SR-ISE-2014-54) (order approving the same proposed rule changes to the International Securities Exchange, LLC (``ISE'') rulebook). --------------------------------------------------------------------------- 1. No Bid Options/Limit Price Rule 713(b), which deals with priority of orders, provides that if the lowest offer for any options contract is $0.05 then no member shall enter a market order to sell that series, and any such market order shall be considered a limit order to sell at a price of $0.05. This provision is intended to prevent members from submitting market orders to sell in no bid series, which could execute at a price of $0.00, and to instead convert those orders to limit orders with a limit price equal to the minimum trading increment, i.e., $0.05 for most option classes.\4\ A ``no bid'' or ``zero bid'' series refers to an option where the bid price is $0.00. Series of options quoted no bid are usually deep out-of-the-money series that are perceived as having little if any chance of expiring in-the-money. For options that trade in regular nickel increments, a best offer of $0.05 corresponds to a best bid of $0.00, i.e. one minimum trading increment below the offer. However, option series may be no bid with other offer prices as well. For example, an option class would be considered no bid if it is quoted at $0.00 (bid)-$0.15 (offer). In order to avoid having these orders execute at a price of $0.00, the Exchange proposes to clarify that Rule 713(b) applies to all option classes that are quoted no bid, rather than just those option classes that have an offer of $0.05. Currently, options exchanges have in place a pilot (the ``Penny Pilot'') to quote and trade options in one cent increments, lowering the minimum trading increment from $0.05 in certain symbols. The Exchange therefore [[Page 79541]] proposes to amend Rule 713(b) to clarify that the Exchange will put a limit price equal to the minimum trading increment on market orders to sell a no bid option series. For example, if the deep out-of-the-money SPY December $230.00 call, which is traded in penny increments, is quoted at $0.00 (bid)-$0.03 (offer), a market order to sell would instead be treated as a limit order to sell at a price of $0.01. --------------------------------------------------------------------------- \4\ Symbols not included in the Penny Pilot generally trade in $0.05 increments if the options contract is trading at less than $3.00 per option, and $0.10 increments if the options contract is trading at $3.00 per option or higher. See Rule 710. --------------------------------------------------------------------------- 2. Non-Displayed Penny Orders and Quotes The Exchange currently has rules in place that allow members to enter non-displayed orders and quotes in penny increments in designated options with a minimum trading increment greater than one cent (``non- displayed penny orders and quotes'').\5\ A non-displayed penny order or quote is available for execution at its penny price but is displayed at the closest minimum trading increment that does not violate the limit price.\6\ The Exchange does not offer non-displayed penny orders or quotes and therefore proposes to delete obsolete references to this order type from its rules. First, the Exchange proposes to delete Rule 715(b)(4), which defines non-displayed penny orders. Second, the Exchange proposes to delete language in Rule 804(b)(1) and Rule 805(a) that permits market makers to enter non-displayed penny quotes and orders, respectively. Third, the Exchange proposes to delete language in Supplementary Material .06 to Rule 716 concerning split prices for non-displayed penny orders and quotes entered into the Facilitation and Solicitation Mechanisms. Finally, the Exchange proposes to delete language in Supplementary Material .03 to Rule 717 concerning the execution of non-displayed penny orders that an Electronic Access Member represents as agent against principal orders and orders solicited from other broker dealers. --------------------------------------------------------------------------- \5\ See Rule 715(b)(4), Rule 804(b)(1) and Rule 805(a). \6\ See Rule 715(b)(4) and Rule 804(b)(1). --------------------------------------------------------------------------- 3. Customer Participation Orders A customer participation order (``CPO'') is an order type that can be used by Public Customers \7\ to participate in the Price Improvement Mechanism (``PIM'').\8\ Upon entry of a Crossing Transaction into the PIM,\9\ a broadcast message is sent to all members, who then have 500 milliseconds to enter orders that indicate the size and price at which they want to participate in the execution (``Improvement Orders'').\10\ The CPO is an instruction to the member to enter an Improvement Order on behalf of a Public Customer. Specifically, a CPO is a limit order on behalf of a Public Customer that, in addition to the limit order price in standard increments, includes a price stated in one cent increments at which the Public Customer wishes to participate in trades executed in the same options series in penny increments through the PIM.\11\ The Exchange does not offer CPOs and therefore proposes to delete obsolete references to this order type from its rules. The Exchange first proposes to delete Rule 715(f), which defines CPOs. Furthermore, the Exchange proposes to remove two references to CPOs in other rules. Specifically, the Exchange proposes to remove references to CPOs in Supplementary Material .06 to Rule 723, which explains when Improvement Orders can be entered with respect to CPOs,\12\ and in Rule 723(d), which notes that the agency side of an order entered into the Price Improvement Mechanism may execute against CPOs at the end of the exposure period. --------------------------------------------------------------------------- \7\ The term ``Public Customer'' means a person or entity that is not a broker or dealer in securities. See Rule 100(a)(38). \8\ The PIM is a process by which an Electronic Access Member can provide price improvement opportunities for a transaction wherein the Electronic Access Member seeks to facilitate an order it represents as agent, and/or a transaction wherein the Electronic Access Member solicited interest to execute against an order it represents as agent (a ``Crossing Transaction''). See Rule 723(a). \9\ A Crossing Transaction is comprised of the order the Electronic Access Member represents as agent (the ``Agency Order'') and a counter-side order for the full size of the Agency Order (the ``Counter-Side Order''). The Counter-Side Order may represent interest for the Member's own account, or interest the Member has solicited from one or more other parties, or a combination of both. See Rule 723(b). \10\ See Rule 723(c)(1). \11\ See Rule 715(f). \12\ Although CPOs are no longer available, members will continue to be able to enter Improvement Orders for the account of Public Customers. --------------------------------------------------------------------------- 4. Linkage Rules The Exchange proposes to delete Supplementary Material .04 and .05 to Rule 803, which contains duplicative and obsolete provisions relevant to away market routing. In particular, the content of Supplementary Material .04 and .05 to Rule 803 is now contained in Supplementary Material .06 and .07 to Rule 1901 \13\ because linkage handling is performed by unaffiliated broker dealers (i.e., Linkage Handlers) on the Exchange. Therefore as described above, the Exchange proposes to delete this language from Rule 803, which concerns the obligations of market makers. --------------------------------------------------------------------------- \13\ See Securities Exchange Act Release No. 73808 (December 10, 2014), 79 FR 74797 (December 16, 2014) (SR-ISE-2014-54) (order approving the proposed changes to move Supplementary Material .04 and .05 to Rule 803 to Supplementary Material .06 and .07 to Rule 1901 in the ISE rulebook). Chapter 19 of the Exchange's rulebook incorporates Chapter 19 of the ISE rulebook by reference. --------------------------------------------------------------------------- 5. Supplementary Material The Exchange notes that certain supplementary material is mistakenly labelled as ``supplemental'' material in the Exchange's rulebook.\14\ In order to achieve consistency with how other rules are labelled, the Exchange proposes to change these to instead refer to ``supplementary'' material. Finally, the Exchange proposes to make a non-substantive change to Supplementary Material to Rule 803, which concerns the obligations of market makers, by updating the word ``To'' to lower case. --------------------------------------------------------------------------- \14\ See ``Supplemental'' Material to Rules 717 and 809. See also reference in Rule 721(a)(3) to ``Supplemental'' Material .01 to Rule 717. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the Act.\15\ In particular, the proposal is consistent with Section 6(b)(5) of the Act \16\ because it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanisms of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange believes it is appropriate to make the proposed technical corrections to its rules so that Exchange members and investors have a clear and accurate understanding of the meaning of the ISE Gemini rules. --------------------------------------------------------------------------- \15\ 15 U.S.C. 78f(b). \16\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- 1. No Bid Options/Limit Price The Exchange currently operates a pilot program to permit designated options classes to be quoted and traded in increments as low as one cent. The Exchange is proposing to amend Rule 713(b) to account for the fact that option classes selected for inclusion in the Penny Pilot are permitted to trade in penny increments. For penny classes that are quoted no bid, the Exchange will convert a market order to sell to a limit order with a price of one cent. In addition, the proposed rule change clarifies that Rule 713(b) applies to all series with a bid of $0.00, and not just those series that also have an offer of $0.05. The proposed rule change is necessary to account for options trading in multiple trading increments, [[Page 79542]] including under the Penny Pilot, and will ensure that market orders to sell are not inadvertently executed at a price of zero. The Exchange believes that these changes more accurately reflect the intent of Rule 713(b), as described above, and will eliminate investor confusion with respect to the operation of this rule by more accurately describing the functionality provided by the Exchange. 2. Non-Displayed Penny Orders and Quotes/Customer Participation Orders As explained above, the Exchange does not offer non-displayed penny orders and quotes or customer participation orders, and thus proposes to remove obsolete definitions and other outdated references to these order types. The Exchange believes that these changes will eliminate investor confusion regarding order types available for trading on ISE Gemini to the benefit of members and investors. 3. Linkage Rules The proposed changes to the linkage rules are non-substantive and intended to reduce investor confusion. As explained above, the Exchange is deleting duplicative and obsolete rule text from Chapter 8 of its rulebook because linkage handling is handled by Linkage Handlers. Therefore, the Exchange believes that these rules are more appropriately located in Chapter 19 of the Exchange's rulebook, which incorporates by reference Chapter 19 of the ISE rulebook. 4. Supplementary Material The proposed change to label supplementary material correctly is non-substantive and is intended to achieve consistency in how these rules are labelled to the benefit of members and investors. B. Self-Regulatory Organization's Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,\17\ the Exchange does not believe that the proposed rule change will impose any burden on intermarket or intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change makes technical, non-substantive amendments to the Exchange's rules in order to eliminate investor confusion, and is not designed to have any competitive impact. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing 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, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act \18\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\19\ --------------------------------------------------------------------------- \18\ 15 U.S.C. 78s(b)(3)(A)(iii). \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file 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) normally does not become operative prior to 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) \20\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In its filing with the Commission, the Exchange requests that the Commission waive the 30-day operative delay. The Exchange asserts that waiver of the operative delay is consistent with the protection of investors and the public interest because the proposed rule change makes non-substantive, technical changes to the Exchange's rules. The Exchange also believes that the proposed rule change increases the clarity of ISE Gemini rules to the benefit of members and investors that trade on the Exchange. For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission designates the proposed rule change to be operative upon filing.\21\ --------------------------------------------------------------------------- \20\ 17 CFR 240.19b-4(f)(6)(iii). \21\ For purposes only of waiving the 30-day operative delay, the Commission also has 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 CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-ISEGemini-2016-13 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-ISEGemini-2016-13. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the 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- [[Page 79543]] ISEGemini-2016-13 and should be submitted on or before December 5, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\22\ Brent J. Fields, Secretary. --------------------------------------------------------------------------- \22\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- [FR Doc. 2016-27237 Filed 11-10-16; 8:45 am] BILLING CODE 8011-01-P
![79540 Federal Register / Vol. 81, No. 219 / Monday, November 14, 2016 / Notices
Commission shall institute proceedings For the Commission, by the Division of the most significant aspects of such
to determine whether the proposed rule Trading and Markets, pursuant to delegated statements.
should be approved or disapproved. authority.23
Brent J. Fields, A. Self-Regulatory Organization’s
IV. Solicitation of Comments Secretary.
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Interested persons are invited to [FR Doc. 2016–27235 Filed 11–10–16; 8:45 am]
Change
submit written data, views, and BILLING CODE 8011–01–P
arguments concerning the foregoing, 1. Purpose
including whether the proposed rule The Exchange is proposing to make a
change is consistent with the Act. SECURITIES AND EXCHANGE number of non-controversial changes
Comments may be submitted by any of COMMISSION and technical corrections to its rules.
the following methods: Specifically, these changes are all to
[Release No. 34–79253; File No. SR– correct typographical errors and delete
Electronic Comments ISEGemini–2016–13] obsolete rule text.3 The changes are
• Use the Commission’s Internet Self-Regulatory Organizations; ISE
described in more detail below.
comment form (http://www.sec.gov/ Gemini, LLC; Notice of Filing and 1. No Bid Options/Limit Price
rules/sro.shtml); or Immediate Effectiveness of Proposed Rule 713(b), which deals with priority
• Send an email to rule-comments@ Rule Change To Make a Number of of orders, provides that if the lowest
sec.gov. Please include File Number SR– Non-Controversial and Technical offer for any options contract is $0.05
NASDAQ–2016–149 on the subject line. Changes then no member shall enter a market
Paper Comments order to sell that series, and any such
November 7, 2016.
market order shall be considered a limit
• Send paper comments in triplicate Pursuant to Section 19(b)(1) of the order to sell at a price of $0.05. This
to Brent J. Fields, Secretary, Securities Securities Exchange Act of 1934 provision is intended to prevent
and Exchange Commission, 100 F Street (‘‘Act’’),1 and Rule 19b–4 thereunder,2 members from submitting market orders
NE., Washington, DC 20549–1090. notice is hereby given that on October to sell in no bid series, which could
26, 2016, ISE Gemini, LLC (‘‘ISE execute at a price of $0.00, and to
All submissions should refer to File Gemini’’ or ‘‘Exchange’’) filed with the instead convert those orders to limit
Number SR–NASDAQ–2016–149. This Securities and Exchange Commission orders with a limit price equal to the
file number should be included on the (‘‘SEC’’ or ‘‘Commission’’) the proposed minimum trading increment, i.e., $0.05
subject line if email is used. To help the rule change as described in Items I and for most option classes.4 A ‘‘no bid’’ or
Commission process and review your II below, which Items have been
comments more efficiently, please use ‘‘zero bid’’ series refers to an option
prepared by the Exchange. The
only one method. The Commission will where the bid price is $0.00. Series of
Commission is publishing this notice to
post all comments on the Commission’s options quoted no bid are usually deep
solicit comments on the proposed rule
Internet Web site (http://www.sec.gov/ out-of-the-money series that are
change from interested persons.
rules/sro.shtml). perceived as having little if any chance
I. Self-Regulatory Organization’s of expiring in-the-money. For options
Copies of the submission, all Statement of the Terms of Substance of that trade in regular nickel increments,
subsequent amendments, all written the Proposed Rule Change a best offer of $0.05 corresponds to a
statements with respect to the proposed best bid of $0.00, i.e. one minimum
rule change that are filed with the The Exchange proposes to make a
trading increment below the offer.
Commission, and all written number of non-controversial and
However, option series may be no bid
communications relating to the technical changes to its rules as
with other offer prices as well. For
proposed rule change between the described in more detail below.
example, an option class would be
Commission and any person, other than The text of the proposed rule change
considered no bid if it is quoted at $0.00
those that may be withheld from the is available on the Exchange’s Web site
(bid)–$0.15 (offer). In order to avoid
public in accordance with the at www.ise.com, at the principal office
having these orders execute at a price of
provisions of 5 U.S.C. 552, will be of the Exchange, and at the
$0.00, the Exchange proposes to clarify
available for Web site viewing and Commission’s Public Reference Room.
that Rule 713(b) applies to all option
printing in the Commission’s Public II. Self-Regulatory Organization’s classes that are quoted no bid, rather
Reference Room, 100 F Street NE., Statement of the Purpose of, and than just those option classes that have
Washington, DC 20549, on official Statutory Basis for, the Proposed Rule an offer of $0.05. Currently, options
business days between the hours of Change exchanges have in place a pilot (the
10:00 a.m. and 3:00 p.m. Copies of the ‘‘Penny Pilot’’) to quote and trade
filing also will be available for In its filing with the Commission, the
Exchange included statements options in one cent increments,
inspection and copying at the principal lowering the minimum trading
office of the Exchange. All comments concerning the purpose of and basis for
the proposed rule change and discussed increment from $0.05 in certain
received will be posted without change; symbols. The Exchange therefore
the Commission does not edit personal any comments it received on the
identifying information from proposed rule change. The text of these 3 See also Securities Exchange Act Release No.
mstockstill on DSK3G9T082PROD with NOTICES
submissions. You should submit only statements may be examined at the 73808 (December 10, 2014), 79 FR 74797 (December
information that you wish to make places specified in Item IV below. The 16, 2014) (SR–ISE–2014–54) (order approving the
available publicly. Exchange has prepared summaries, set same proposed rule changes to the International
forth in sections A, B, and C below, of Securities Exchange, LLC (‘‘ISE’’) rulebook).
All submissions should refer to File 4 Symbols not included in the Penny Pilot
Number SR–NASDAQ–2016–149 and generally trade in $0.05 increments if the options
23 17 CFR 200.30–3(a)(12). contract is trading at less than $3.00 per option, and
should be submitted on or before 1 15 U.S.C. 78s(b)(1). $0.10 increments if the options contract is trading
December 5, 2016. 2 17 CFR 240.19b–4. at $3.00 per option or higher. See Rule 710.
VerDate Sep<11>2014 17:26 Nov 10, 2016 Jkt 241001 PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 E:\FR\FM\14NON1.SGM 14NON1](https://thefederalregister.org/doc/81_FR_79759/page/1.svg)
![Federal Register / Vol. 81, No. 219 / Monday, November 14, 2016 / Notices 79543
ISEGemini–2016–13 and should be Custody Service (‘‘Custody Eligibility manual processing of Custody Eligibility
submitted on or before December 5, Requests’’) and (ii) add functionality for requests, as more fully described below.
2016. Participants to inquire as to whether a
Background
For the Commission, by the Division of particular issue is eligible for the
Trading and Markets, pursuant to delegated Custody Service. Upon its The Custody Service enables
authority.22 implementation, the proposed rule Participants that hold (i) Securities that
Brent J. Fields, change would enhance efficiencies for (A) are not presently eligible for book-
Secretary. Participants and DTC by providing a entry services at DTC and/or (B) would
secure, centralized environment for the otherwise be eligible for DTC book-entry
[FR Doc. 2016–27237 Filed 11–10–16; 8:45 am]
submission of Custody Eligibility services but are not registered in the
BILLING CODE 8011–01–P
Requests. name of DTC’s nominee, Cede & Co.,
and/or (ii) certain Non-Security Assets,
II. Clearing Agency’s Statement of the to deposit those Securities and/or Non-
SECURITIES AND EXCHANGE Purpose of, and Statutory Basis for, the
COMMISSION Security Assets with DTC for safe-
Proposed Rule Change keeping, in accordance with
[Release No. 34–79252; File No. SR–DTC– In its filing with the Commission, the requirements set forth in the Custody
2016–011] clearing agency included statements Guide.10 Securities and Non-Security
concerning the purpose of and basis for Assets deposited through the Custody
Self-Regulatory Organizations; The Service are maintained in DTC’s secure
the proposed rule change and discussed
Depository Trust Company; Notice of vault in a Participant’s name or a
any comments it received on the
Filing and Immediate Effectiveness of Participant’s customer’s name (i.e., they
proposed rule change. The text of these
a Proposed Rule Change To Allow DTC are not transferred into DTC’s nominee
statements may be examined at the
To Automate the Process for name, Cede & Co).11 In addition, once a
places specified in Item IV below. The
Participants To Submit Eligibility Security is deposited into the Custody
clearing agency has prepared
Requests for the DTC Custody Service Service, DTC may perform limited
summaries, set forth in sections A, B,
November 7, 2016. and C below, of the most significant depository services relating to the
Pursuant to Section 19(b)(1) of the aspects of such statements. Security including physical processing
Securities Exchange Act of 1934 for the Security on a Participant’s
(A) Clearing Agency’s Statement of the behalf, such as facilitating the transfer of
(‘‘Act’’) 1 and Rule 19b–4,2 notice is Purpose of, and Statutory Basis for, the
hereby given that on October 28, 2016, Security Certificates, and providing
Proposed Rule Change services available through the Custody
The Depository Trust Company (‘‘DTC’’)
filed with the Securities and Exchange 1. Purpose Reorganization Service.12
Commission (‘‘Commission’’) the The proposed rule change would
In order for DTC to accept a Security
proposed rule change as described in amend the Custody Guide to allow DTC
or a Non-Security Asset, as applicable,
Items I, II and III below, which Items to implement the Enhanced Process by
for deposit into the Custody Service,
have been prepared by the clearing moving the processing of Custody
DTC requires that the Security or Non-
agency. DTC filed the proposed rule Eligibility Requests to the Application
Security Asset be made eligible for the
change pursuant to Section 19(b)(3)(A) 3 and replacing certain manual processes,
Custody Service pursuant to a Custody
of the Act and Rule 19b–4(f)(4) 4 as more fully described below.
Eligibility Request.7 The proposed rule
thereunder. The proposed rule change change would allow DTC to transfer the Existing Process
was effective upon filing with the existing request method for Custody
Commission. The Commission is In order for an issue to be made
Eligibility Requests by which eligible for deposit to the Custody
publishing this notice to solicit Participants submit requests via email,
comments on the proposed rule change Service, a Participant must submit a
to an Internet-based application Custody Eligibility Request to DTC. The
from interested persons. (‘‘Application’’), as more fully described Custody Eligibility Request is submitted
I. Clearing Agency’s Statement of the below (‘‘Enhanced Process’’).8 Upon by email and must include certain data
Terms of Substance of the Proposed implementation, the Enhanced Process elements (‘‘Data Elements’’) 13 and a
Rule Change would (i) promote a more secure
environment by providing for the 10 See Custody Guide for the types of Securities
The proposed rule change 5 would submission and processing of Custody and Non-Security Assets eligible for deposit to the
amend the DTC Custody Service Guide Eligibility Requests through the Custody Service (‘‘Custody Eligible Security
(‘‘Custody Guide’’) 6 to allow DTC to (i) Application,9 and (ii) enhance Types’’), supra note 6, at 5,12.
enhance the process by which efficiencies for DTC by reducing the
11 Cede & Co. is the holder of record of Securities
Participants submit requests to make eligible for DTC’s book-entry services.
12 See Custody Guide, supra note 6, 14–17
Securities, and assets that are not 7 Once the Security or Non-Security Asset subject
(providing Procedures for the Custody
Securities (‘‘Non-Security Assets’’), as of the Custody Eligibility Request is made eligible Reorganization Service). The limited depository
applicable, eligible for deposit into the by DTC for deposit into the Custody Service, services provided by DTC as described above relate
additional deposits of that Security or Non-Security only to securities processing functions and do not
22 17 Asset by the requesting Participant or other apply to Non-Security Assets.
CFR 200.30–3(a)(12).
1 15
Participants may be made without requiring 13 Data Elements include DTC Participant
U.S.C. 78s(b)(1). submission of another Custody Eligibility Request.
2 17 CFR 240.19b–4. Number (to identify the Participant making the
8 The Custody Guide provides that Custody
Custody Eligibility Request), CUSIP (if available);
mstockstill on DSK3G9T082PROD with NOTICES
3 15 U.S.C. 78s(b)(3)(A).
Service functions may become accessible via web- Sub-Issue Type (required); description of the
4 17 CFR 240.19b–4(f)(4).
based services as announced by DTC via Important Security or Non-Security Asset (‘‘Security
5 Capitalized terms not otherwise defined herein Notice from time to time. See Custody Guide, supra Description’’) (required); U.S/Non U.S. (This field is
have the respective meanings set forth in the DTC note 6 at 4. DTC would announce the proposed rule required for corporate debt and equity issues. All
Rules, By-laws and Organization Certificate change via Important Notice. certificates of deposit and collateralized mortgage
(‘‘Rules’’), available at http://www.dtcc.com/legal/ 9 The Application has been designed to provide obligations must be U.S. issues. For municipal
rules-and-procedures.aspx. a secure, centralized online system managed by securities, this field is set to U.S. and is not
6 Available at http://www.dtcc.com/∼/media/ DTC, whereas Participant security protocols for the updateable); Issuer Country of Origin (required for
Files/Downloads/legal/service-guides/Custody.pdf. transmission of emails may vary. Continued
VerDate Sep<11>2014 17:26 Nov 10, 2016 Jkt 241001 PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 E:\FR\FM\14NON1.SGM 14NON1](https://thefederalregister.org/doc/81_FR_79759/page/4.svg)
Document Created: 2018-10-24 10:48:41
Document Modified: 2018-10-24 10:48:41
| 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 79540 |
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