81 FR 85657 - Order Granting Limited Exemption From Exchange Act Rule 15c2-11 to Certain Interdealer Quotation Systems Pursuant to Exchange Act Rule 15c2-11(h)
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 228 (November 28, 2016)
Federal Register Volume 81, Issue 228 (November 28, 2016)
| Page Range | 85657-85659 | |
| FR Document | 2016-28457 |
[Federal Register Volume 81, Number 228 (Monday, November 28, 2016)] [Notices] [Pages 85657-85659] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-28457] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79360; File No. TP 16-16] Order Granting Limited Exemption From Exchange Act Rule 15c2-11 to Certain Interdealer Quotation Systems Pursuant to Exchange Act Rule 15c2-11(h) November 21, 2016. By letter dated November 21, 2016 (the ``Letter''), Global OTC requested that the Securities and Exchange Commission (the ``Commission'') grant a limited exemption from rule 15c2-11 under the Securities Exchange Act of 1934, as amended (the ``Exchange Act''), in connection with the publication or submission for publication of quotations for a covered over-the-counter (``OTC'') equity security (an ``OTC Security'' or, plural, ``OTC Securities'') in the interdealer quotation system (``IDQS'') operated by Global OTC (``Global OTC IDQS''). Specifically, Global OTC seeks an exemption to permit broker- dealers, consistent with the approach described below, to publish or submit for [[Page 85658]] publication quotations in Global OTC IDQS for an OTC Security that is already ``piggyback'' qualified, or ``piggyback'' eligible, under rule 15c2-11(f)(3), in another IDQS, without the broker-dealer separately complying with the requirements of rule 15c2-11, subject to certain conditions. Rule 15c2-11, with certain exceptions, requires that a broker- dealer that publishes or submits for publication quotations for OTC Securities in a quotation medium gather, review, and preserve certain specified information and have a reasonable basis under the circumstances for believing that the information is accurate in all material respects and was obtained from reliable sources.\1\ Rule 15c2- 11 includes an exception to the rule's requirements--the ``piggyback'' exception--for when a broker-dealer publishes, in an IDQS \2\ that specifically identifies as such unsolicited customer indications of interest, a quotation for an OTC Security that was already the subject of regular and frequent quotations in compliance with rule 15c2- 11(f)(3)(i).\3\ For this piggyback exception to apply, the security must have been the subject of quotations (exclusive of any identified customer interests) in the IDQS on each of at least 12 days within the previous 30 calendar days, with no more than 4 business days in succession without a quotation.\4\ Thus, if a publication or submission for publication of a quotation for an OTC Security meets all of the requirements of this exception, a broker-dealer can ``piggyback'' on either its own or other broker-dealers' previously published quotations in an IDQS. --------------------------------------------------------------------------- \1\ See 17 CFR 240.15c2-11(a)-(c). \2\ Paragraph (e)(2) of rule 15c2-11 defines an IDQS to mean ``any system of general circulation to brokers or dealers which regularly disseminates quotations of identified brokers or dealers.'' 17 CFR 240.15c2-11(e)(2). Global OTC represents that it qualifies as an IDQS because Global OTC IDQS does not accept or maintain dark orders and fully attributes to the broker-dealer representing the quotation all quotations submitted on Global OTC IDQS. \3\ See 17 CFR 240.15c2-11(f)(3)(i) (providing frequency of quotation requirements for a security to meet the piggyback exception). \4\ Id. --------------------------------------------------------------------------- The Letter represents that the concerns the Commission raised in adopting rule 15c2-11 would not be implicated if exemptive relief, subject to the conditions below, were granted to broker-dealers publishing or submitting for publication quotations in Global OTC IDQS. Specifically, Global OTC describes in the Letter an approach based on transferability of piggyback eligibility from one IDQS to another IDQS to allow a broker-dealer to avail itself of the piggyback exception when quoting in Global OTC IDQS any OTC Security that (1) qualifies for the piggyback exception in another IDQS, or (2) is initially quoted in Global OTC IDQS based on the relief provided in this Order and then establishes and maintains piggyback eligibility under rule 15c2- 11(f)(3)(i) based on quotations (exclusive of any identified customer interests) in Global OTC IDQS. Global OTC represents that this approach would assist investors in OTC Securities by increasing competition, promoting fair and orderly markets, and providing redundancy in the event of systems failures by having an additional IDQS in which to continuously quote OTC Securities that already are eligible for the piggyback exception in another IDQS. Based on the facts and representations made in the Letter, we find that it is appropriate in the public interest, and is consistent with the protection of investors, to grant, and hereby grant, broker-dealers a limited exemption from rule 15c2-11 to permit a broker-dealer to publish or submit for publication quotations in Global OTC IDQS, or in any other IDQS,\5\ for an OTC Security that is piggyback eligible under rule 15c2-11(f)(3) in another IDQS, without the broker-dealer separately complying with the requirements of rule 15c2-11, subject to the conditions of this Order. --------------------------------------------------------------------------- \5\ Based on the facts and representations, we believe it is appropriate to expand the scope of the exemptive relief to include publishing or submitting for publication quotations in any IDQS, not just Global OTC IDQS, provided that the conditions of this Order are satisfied. --------------------------------------------------------------------------- The conditions of this Order are designed to extend the rule 15c2- 11(f)(3)(i) exception to broker-dealers that are publishing or submitting for publication quotations for already-quoted OTC Securities that are currently piggyback eligible under rule 15c2-11(f)(3) in an IDQS other than an IDQS in which piggyback eligibility has been established, while at the same time limiting the scope of relief by excluding from eligibility certain OTC Securities. The first condition limits the applicability of relief to an IDQS that meets the requirements to be an IDQS as defined in the rule \6\ and that meets the requirements of rule 15c2-11(f)(3)(i). Conditions two, three, and four are designed to help ensure that the relief is limited to quotations in an IDQS that has established, maintains, and enforces monitoring and review requirements to verify that the OTC Security is piggyback eligible in another IDQS (or has established piggyback eligibility in the IDQS) and that there are current quotations for that OTC Security in that other IDQS, and that the issuer of the OTC Security is not delinquent in its required filing obligations under the federal securities laws, on the day that a broker-dealer commences publishing or submitting for publication quotations for that OTC Security in the IDQS. Finally, condition five is designed to ensure that the IDQS maintains adequate books and records to demonstrate compliance with this Order. --------------------------------------------------------------------------- \6\ See 17 CFR 240.15c2-11(e)(2); supra note 2. --------------------------------------------------------------------------- This Order does not expand the number of OTC Securities that are already quoted pursuant to the exception from the requirements of rule 15c2-11 contained in rule 15c2-11(f)(3); rather, this Order extends the rule 15c2-11(f)(3)(i) exception to quotations for these already-quoted OTC Securities published by broker-dealers in an IDQS other than the IDQS in which piggyback eligibility is established if, and only if, the requirements of Rule 15c2-11(f)(3)(i) are otherwise satisfied and the conditions of this Order are met. As such, we do not believe that the transfer of piggyback eligibility for these already-quoted OTC Securities under rule 15c2-11(f)(3), from one IDQS to another IDQS, as conditioned in this Order, constitutes a fraudulent, manipulative, or deceptive practice comprehended within the purpose of rule 15c2-11. Conclusion It is hereby ordered, pursuant to Exchange Act rule 15c2-11(h), that broker-dealers are exempt from the requirements of rule 15c2-11 solely to permit broker-dealers to publish or submit for publication quotations in Global OTC IDQS or in any similarly situated IDQS for an OTC Security that is piggyback eligible under rule 15c2-11(f)(3) in another IDQS, subject to the following conditions: 1. The IDQS meets the requirements to be an IDQS as defined in the rule \7\ and specifically identifies as such unsolicited indications of customer interest of the kind described in paragraph (f)(2) of rule 15c2-11. --------------------------------------------------------------------------- \7\ See 17 CFR 240.15c2-11(e)(2); supra note 2. --------------------------------------------------------------------------- 2. The IDQS permits a broker-dealer to commence publishing or submitting for publication quotations in such IDQS for the OTC Security, in reliance on this Order, only if (a) the OTC Security is piggyback eligible under rule 15c2-11(f)(3) in another IDQS; and (b) the OTC Security has current quotations in that other IDQS, and the symbol for the OTC Security does not contain the fifth letter identifier appended by FINRA to [[Page 85659]] the symbols of OTC Securities to identify issuers that are delinquent in their required filings, on the day the broker-dealer commences quoting in such IDQS. 3. Once a broker-dealer commences publishing or submitting for publication quotations in the IDQS for the OTC Security in accordance with condition 2, such IDQS permits broker-dealers to continue publishing or submitting for publication quotations in such IDQS for the OTC Security only if the OTC Security continues to be piggyback eligible under rule 15c2-11(f)(3) in another IDQS or has established and maintains piggyback eligibility under rule 15c2-11(f)(3)(i) based on quotations (exclusive of any identified customer interests) in such IDQS. 4. The IDQS establishes, maintains, and enforces policies and procedures reasonably designed to ensure compliance with this Order. 5. The IDQS maintains books and records sufficient to demonstrate that such IDQS is complying with the terms of this Order, and such IDQS promptly provides such records to Commission staff upon request. This Order is subject to modification or revocation at any time the Commission determines that such action is necessary or appropriate in furtherance of the purposes of the Exchange Act. In addition, persons relying on this Order are directed to the anti-fraud and anti- manipulation provisions of the federal securities laws, particularly section 10(b) of the Exchange Act and rule 10b-5 thereunder. Responsibility for compliance with these and any other applicable provisions of the federal securities laws must rest with the persons relying on this Order. This Order should not be considered a view with respect to any other question that the publication or submission for publication of quotations in reliance on this Order may raise, including, but not limited to, the applicability of other federal or state laws to such activity. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\8\ Robert W. Errett, Deputy Secretary. --------------------------------------------------------------------------- \8\ 17 CFR 200.30-3(a)(6). --------------------------------------------------------------------------- [FR Doc. 2016-28457 Filed 11-25-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 228 / Monday, November 28, 2016 / Notices 85657
Improvement Order percentage opportunities and improves competition amendments, all written statements
thresholds are reasonable, equitable and on the Exchange. with respect to the proposed rule
not unfairly discriminatory. The change that are filed with the
C. Self-Regulatory Organization’s
proposed changes to the thresholds are Commission, and all written
Statement on Comments on the
equitable and not unfairly communications relating to the
discriminatory as they are available to Proposed Rule Change Received From
proposed rule change between the
all BOX Participants that initiate Members, Participants, or Others
Commission and any person, other than
Auction Transactions, and Participants No written comments were either those that may be withheld from the
may choose whether or not to take solicited or received. public in accordance with the
advantage of the percentage thresholds III. Date of Effectiveness of the provisions of 5 U.S.C. 552, will be
and their applicable discounted fees. available for Web site viewing and
Proposed Rule Change and Timing for
Further, the Exchange believes that the printing in the Commission’s Public
Commission Action
proposed changes are reasonable and Reference Room, 100 F Street NE.,
competitive as they will further The foregoing rule change has become Washington, DC 20549 on official
incentivize Participants to direct order effective pursuant to Section business days between the hours of
flow to the Exchange, benefiting all 19(b)(3)(A)(ii) of the Exchange Act 8 and 10:00 a.m. and 3:00 p.m. Copies of such
market participants. Rule 19b–4(f)(2) thereunder,9 because it filing also will be available for
The Exchange also believes the establishes or changes a due, or fee. inspection and copying at the principal
proposed amendments to the BVR in At any time within 60 days of the office of the Exchange. All comments
Section I.B.2 of the BOX Fee Schedule filing of the proposed rule change, the received will be posted without change;
are reasonable, equitable and not Commission summarily may the Commission does not edit personal
unfairly discriminatory. The BVR was temporarily suspend the rule change if identifying information from
adopted to attract Public Customer order it appears to the Commission that the submissions. You should submit only
flow to the Exchange by offering these action is necessary or appropriate in the information that you wish to make
Participants incentives to submit their public interest, for the protection of available publicly. All submissions
Public Customer PIP and COPIP Orders investors, or would otherwise further should refer to File Number SR–BOX–
to the Exchange and the Exchange the purposes of the Act. If the 2016–53, and should be submitted on or
believes it is appropriate to now amend Commission takes such action, the before December 19, 2016.
the BVR. The Exchange believes it is Commission shall institute proceedings
equitable and not unfairly to determine whether the proposed rule For the Commission, by the Division of
Trading and Markets, pursuant to delegated
discriminatory to amend the BVR, as all should be approved or disapproved.
authority.10
Participants have the ability to qualify
IV. Solicitation of Comments Robert W. Errett,
for a rebate, and rebates are provided
equally to qualifying Participants. Other Interested persons are invited to Deputy Secretary.
exchanges employ similar incentive submit written data, views, and [FR Doc. 2016–28459 Filed 11–25–16; 8:45 am]
programs; 7 and the Exchange believes arguments concerning the foregoing, BILLING CODE 8011–01–P
that the proposed changes to the volume including whether the proposed rule
thresholds are reasonable and change is consistent with the Act.
competitive when compared to Comments may be submitted by any of SECURITIES AND EXCHANGE
incentive structures at other exchanges. the following methods: COMMISSION
Finally, the Exchange believes it is [Release No. 34–79360; File No. TP 16–16]
Electronic Comments
reasonable and appropriate to continue
to provide incentives for Public • Use the Commission’s Internet Order Granting Limited Exemption
Customers, which will result in greater comment form (http://www.sec.gov/ From Exchange Act Rule 15c2–11 to
liquidity and ultimately benefit all rules/sro.shtml); or Certain Interdealer Quotation Systems
Participants trading on the Exchange. • Send an email to rule- Pursuant to Exchange Act Rule 15c2–
comments@sec.gov. Please include File 11(h)
B. Self-Regulatory Organization’s Number SR–BOX–2016–53 on the
Statement on Burden on Competition subject line. November 21, 2016.
The Exchange does not believe that By letter dated November 21, 2016
the proposed rule change will impose Paper Comments (the ‘‘Letter’’), Global OTC requested
any burden on competition not • Send paper comments in triplicate that the Securities and Exchange
necessary or appropriate in furtherance to Secretary, Securities and Exchange Commission (the ‘‘Commission’’) grant a
of the purposes of the Act. The Commission, 100 F Street NE., limited exemption from rule 15c2–11
Exchange is simply proposing to amend Washington, DC 20549–1090. under the Securities Exchange Act of
certain percentage thresholds for All submissions should refer to File 1934, as amended (the ‘‘Exchange Act’’),
Auction Transaction fees and rebates in Number SR–BOX–2016–53. This file in connection with the publication or
the BOX Fee Schedule. The Exchange number should be included on the submission for publication of quotations
believes that the volume based rebates subject line if email is used. To help the for a covered over-the-counter (‘‘OTC’’)
and fees increase intermarket and Commission process and review your equity security (an ‘‘OTC Security’’ or,
intramarket competition by incenting comments more efficiently, please use plural, ‘‘OTC Securities’’) in the
Participants to direct their order flow to interdealer quotation system (‘‘IDQS’’)
mstockstill on DSK3G9T082PROD with NOTICES
only one method. The Commission will
the exchange, which benefits all post all comments on the Commission’s operated by Global OTC (‘‘Global OTC
participants by providing more trading Internet Web site (http://www.sec.gov/ IDQS’’). Specifically, Global OTC seeks
rules/sro.shtml). Copies of the an exemption to permit broker-dealers,
7 See Section B of the PHLX Pricing Schedule
submission, all subsequent consistent with the approach described
entitled ‘‘Customer Rebate Program;’’ ISE Gemini’s
Qualifying Tier Thresholds (page 6 of the ISE
below, to publish or submit for
8 15 U.S.C. 78s(b)(3)(A)(ii).
Gemini Fee Schedule); and CBOE’s Volume
Incentive Program (VIP). 9 17 CFR 240.19b–4(f)(2). 10 17 CFR 200.30–3(a)(12).
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![Federal Register / Vol. 81, No. 228 / Monday, November 28, 2016 / Notices 85659
the symbols of OTC Securities to SECURITIES AND EXCHANGE the places specified in Item IV below.
identify issuers that are delinquent in COMMISSION The Exchange has prepared summaries,
their required filings, on the day the set forth in sections A, B, and C below,
[Release No. 34–79363; File No. SR–
broker-dealer commences quoting in of the most significant parts of such
NYSEArca-2016–148]
such IDQS. statements.
3. Once a broker-dealer commences Self-Regulatory Organizations; NYSE A. Self-Regulatory Organization’s
publishing or submitting for publication Arca, Inc.; Notice of Filing and Statement of the Purpose of, and the
quotations in the IDQS for the OTC Immediate Effectiveness of Proposed Statutory Basis for, the Proposed Rule
Security in accordance with condition Rule Change Amending NYSE Arca Change
2, such IDQS permits broker-dealers to Rules 7.1 and 7.2, and NYSE Arca
Equities Rules 7.1 and 7.2 1. Purpose
continue publishing or submitting for
The Exchange proposes to amend (a)
publication quotations in such IDQS for November 21, 2016. NYSE Arca Rule 7.1 (Trading Sessions)
the OTC Security only if the OTC Pursuant to Section 19(b)(1) 1 of the to permit the Chief Executive Officer
Security continues to be piggyback Securities Exchange Act of 1934 (the (‘‘CEO’’) of the Exchange or his or her
eligible under rule 15c2–11(f)(3) in ‘‘Act’’),2 and Rule 19b–4 thereunder,3 designee to take certain actions in
another IDQS or has established and notice is hereby given that on November connection with the trading of securities
maintains piggyback eligibility under 10, 2016, NYSE Arca, Inc. (the on the Exchange; (b) NYSE Arca
rule 15c2–11(f)(3)(i) based on quotations ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with Equities Rule 7.1 (Hours of Business) to
(exclusive of any identified customer the Securities and Exchange permit the President of NYSE Arca
interests) in such IDQS. Commission (the ‘‘Commission’’) the Equities or his or her designee to take
proposed rule change as described in certain actions in connection with the
4. The IDQS establishes, maintains,
Items I and II below, which Items have trading of securities on the NYSE Arca
and enforces policies and procedures been prepared by the self-regulatory
reasonably designed to ensure Equities marketplace; and (c) NYSE
organization. The Commission is Arca Rule 7.2 (Holidays) and NYSE
compliance with this Order. publishing this notice to solicit Arca Equities Rule 7.2 (Holidays) to
5. The IDQS maintains books and comments on the proposed rule change remove a reference to presidential
records sufficient to demonstrate that from interested persons. election days.
such IDQS is complying with the terms I. Self-Regulatory Organization’s The Exchange believes the proposed
of this Order, and such IDQS promptly Statement of the Terms of Substance of changes to NYSE Arca Rule 7.1 and
provides such records to Commission the Proposed Rule Change NYSE Arca Equities Rule 7.1 would
staff upon request. make such rules more reflective of the
The Exchange proposes to amend
This Order is subject to modification organizational structure of the Exchange
NYSE Arca Rule 7.1 (Trading Sessions)
or revocation at any time the and NYSE Arca Equities. At the same
to permit the Chief Executive Officer of
Commission determines that such time, the proposed rule changes would
the Exchange or his or her designee to
action is necessary or appropriate in ensure that the Boards of Directors of
take certain actions in connection with
furtherance of the purposes of the NYSE Arca and of NYSE Arca Equities
the trading of securities on the
Exchange Act. In addition, persons (each, a ‘‘Board’’) continue to have the
Exchange; (b) NYSE Arca Equities Rule
authority to take action they deem
relying on this Order are directed to the 7.1 (Hours of Business) to permit the
necessary or appropriate in particular
anti-fraud and anti-manipulation President of NYSE Arca Equities or his
situations.
provisions of the federal securities laws, or her designee to take certain actions in
particularly section 10(b) of the connection with the trading of securities NYSE Arca Rule 7.1 and NYSE Arca
Exchange Act and rule 10b-5 on the NYSE Arca Equities marketplace; Equities Rule 7.1
thereunder. Responsibility for and (c) NYSE Arca Rule 7.2 (Holidays) Proposed Changes to NYSE Arca Rule
compliance with these and any other and NYSE Arca Equities Rule 7.2 7.1
applicable provisions of the federal (Holidays) to remove a reference to
presidential election days. The The first paragraph of NYSE Arca
securities laws must rest with the Rule 7.1 provides that, unless otherwise
persons relying on this Order. This proposed rule change is available on the
Exchange’s Web site at www.nyse.com, ruled by the Board of the Exchange or
Order should not be considered a view its designee, the Exchange shall be open
with respect to any other question that at the principal office of the Exchange,
and at the Commission’s Public for the transaction of business daily
the publication or submission for except on Saturdays and Sundays, and
Reference Room.
publication of quotations in reliance on that the hours at which trading sessions
this Order may raise, including, but not II. Self-Regulatory Organization’s shall open and close shall be established
limited to, the applicability of other Statement of the Purpose of, and by the Board or its designee.
federal or state laws to such activity. Statutory Basis for, the Proposed Rule Commentary .01 to Rule 7.1 notes that,
Change except under unusual conditions as may
For the Commission, by the Division of
Trading and Markets, pursuant to delegated In its filing with the Commission, the be determined by the Board or its
authority.8 self-regulatory organization included designee, hours during which
Robert W. Errett, statements concerning the purpose of, transactions in options on individual
securities may be made on the Exchange
mstockstill on DSK3G9T082PROD with NOTICES
and basis for, the proposed rule change
Deputy Secretary. shall correspond to the normal hours for
and discussed any comments it received
[FR Doc. 2016–28457 Filed 11–25–16; 8:45 am] business set forth in the rules of the
on the proposed rule change. The text
BILLING CODE 8011–01–P of those statements may be examined at primary exchange listing the securities
underlying the options.
1 15 U.S.C. 78s(b)(1). The Exchange proposes to amend the
2 15 U.S.C. 78a. first paragraph of NYSE Arca Rule 7.1
8 17 CFR 200.30–3(a)(6). 3 17 CFR 240.19b–4. to provide that, except as may be
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Document Created: 2018-02-14 08:35:43
Document Modified: 2018-02-14 08:35:43
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