81 FR 8781 - Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Among NYSE MKT LLC, BATS Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, the Chicago Board Options Exchange, Incorporated, the EDGX Exchange, Inc., the International Securities Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc., the NASDAQ OMX PHLX, Inc., and Miami International Securities Exchange, LLC Concerning Options-Related Market Surveillance
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 34 (February 22, 2016)
Federal Register Volume 81, Issue 34 (February 22, 2016)
| Page Range | 8781-8787 | |
| FR Document | 2016-03534 |
[Federal Register Volume 81, Number 34 (Monday, February 22, 2016)] [Notices] [Pages 8781-8787] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-03534] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77149; File No. 4-551] Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Among NYSE MKT LLC, BATS Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, the Chicago Board Options Exchange, Incorporated, the EDGX Exchange, Inc., the International Securities Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc., the NASDAQ OMX PHLX, Inc., and Miami International Securities Exchange, LLC Concerning Options-Related Market Surveillance February 16, 2016. Notice is hereby given that the Securities and Exchange Commission (``Commission'') has issued an Order, pursuant to Section 17(d) of the Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring effective an amendment to the plan for allocating regulatory responsibility (``Plan'') filed on February 9, 2016, pursuant to Rule 17d-2 of the Act,\2\ by NYSE MKT LLC (``MKT''), BATS Exchange, Inc., (``BATS''), the BOX Options Exchange LLC (``BOX''), C2 Options Exchange, Incorporated (``C2''), the Chicago Board Options Exchange, Incorporated (``CBOE''), the EDGX Exchange, Inc. (``EDGX'') the International Securities Exchange LLC (``ISE''), ISE Gemini, LLC (``Gemini''), ISE Mercury, LLC (``ISE Mercury''), Financial Industry Regulatory Authority, Inc. (``FINRA''), NYSE Arca, Inc. (``Arca''), The NASDAQ Stock Market LLC (``Nasdaq''), NASDAQ OMX BX, Inc. (``BX''), NASDAQ OMX PHLX, Inc. (``PHLX''), and Miami International Securities Exchange (``MIAX'') (collectively, ``Participating Organizations'' or ``parties''). --------------------------------------------------------------------------- \1\ 15 U.S.C. 78q(d). \2\ 17 CFR 240.17d-2. --------------------------------------------------------------------------- I. Introduction Section 19(g)(1) of the Act,\3\ among other things, requires every self-regulatory organization (``SRO'') registered as either a national securities exchange or national securities association to examine for, and enforce compliance by, its members and persons associated with its members with the Act, the rules and regulations thereunder, and the SRO's own rules, unless the SRO is relieved of this responsibility pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of the Act. Without this relief, the statutory obligation of each individual SRO could result in a pattern of multiple examinations of broker-dealers that maintain memberships in more than one SRO (``common members''). Such regulatory duplication would add unnecessary expenses for common members and their SROs. --------------------------------------------------------------------------- \3\ 15 U.S.C. 78s(g)(1). \4\ 15 U.S.C. 78q(d). \5\ 15 U.S.C. 78s(g)(2). --------------------------------------------------------------------------- Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate unnecessary multiple examinations and regulatory duplication.\7\ With respect to a common member, Section 17(d)(1) authorizes the Commission, by rule or order, to relieve an SRO of the responsibility to receive regulatory reports, to examine for and enforce compliance with applicable statutes, rules, and regulations, or to perform other specified regulatory functions. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78q(d)(1). \7\ See Securities Act Amendments of 1975, Report of the Senate Committee on Banking, Housing, and Urban Affairs to Accompany S. 249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975). --------------------------------------------------------------------------- To implement Section 17(d)(1), the Commission adopted two rules: Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the Commission to name a single SRO as the designated examining authority (``DEA'') to examine common members for compliance with the financial responsibility requirements imposed by the Act, or by Commission or SRO rules.\9\ When an SRO has been named as a common member's DEA, all other SROs to which the common member belongs are relieved of the responsibility to examine the firm for compliance with the applicable financial responsibility rules. On its face, Rule 17d-1 deals only with an SRO's obligations to enforce member compliance with financial responsibility requirements. Rule 17d-1 does not relieve an SRO from its obligation to examine a common member for compliance with its own rules and provisions of the federal securities laws governing matters other than financial responsibility, including sales practices and trading activities and practices. --------------------------------------------------------------------------- \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively. \9\ See Securities Exchange Act Release No. 12352 (April 20, 1976), 41 FR 18808 (May 7, 1976). --------------------------------------------------------------------------- To address regulatory duplication in these and other areas, the Commission [[Page 8782]] adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits SROs to propose joint plans for the allocation of regulatory responsibilities with respect to their common members. Under paragraph (c) of Rule 17d- 2, the Commission may declare such a plan effective if, after providing for notice and comment, it determines that the plan is necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among the SROs, to remove impediments to, and foster the development of, a national market system and a national clearance and settlement system, and is in conformity with the factors set forth in Section 17(d) of the Act. Commission approval of a plan filed pursuant to Rule 17d-2 relieves an SRO of those regulatory responsibilities allocated by the plan to another SRO. --------------------------------------------------------------------------- \10\ See Securities Exchange Act Release No. 12935 (October 28, 1976), 41 FR 49091 (November 8, 1976). --------------------------------------------------------------------------- II. The Plan On December 11, 2007, the Commission declared effective the Participating Organizations' Plan for allocating regulatory responsibilities pursuant to Rule 17d-2.\11\ On April 11, 2008, the Commission approved an amendment to the Plan to include NASDAQ as a participant.\12\ On October 9, 2008, the Commission approved an amendment to the Plan to clarify that the term Regulatory Responsibility for options position limits includes the examination responsibilities for the delta hedging exemption.\13\ On February 25, 2010, the Commission approved an amendment to the Plan to add BATS and C2 as SRO participants and to reflect the name changes of the American Stock Exchange LLC to the NYSE Amex LLC, and the Boston Stock Exchange, Inc. to the NASDAQ OMX BX, Inc.\14\ On May 11, 2012, the Commission approved an amendment to the Plan to add BOX as a participant to the Plan.\15\ On December 5, 2012, the Commission approved an amendment to the Plan to add MIAX as a participant to the Plan.\16\ On July 23, 2013, the Commission approved an amendment to the Plan to add Topaz Exchange, LLC as a Participant to the Plan.\17\ On October 27, 2015, the Commission approved an amendment to add EDGX as a Participant to the Plan and to change the name of Topaz Exchange, LLC to ISE Gemini, LLC.\18\ --------------------------------------------------------------------------- \11\ See Securities Exchange Act Release No. 56941 (December 11, 2007), 72 FR 71723 (December 18, 2007) (File No. 4-551). \12\ See Securities Exchange Act Release No. 57649 (April 11, 2008), 73 FR 20976 (April 17, 2008) (File No. 4-551). \13\ See Securities Exchange Act Release No. 58765 (October 9, 2008), 73 FR 62344 (October 20, 2008) (File No. 4-551). \14\ See Securities Exchange Act Release No. 61588 (February 25, 2010), 75 FR 9970 (March 4, 2010) (File No. 4-551). \15\ See Securities Exchange Act Release No. 66975 (May 11, 2012), 77 FR 29712 (May 18, 2010) (File No. 4-551). \16\ See Securities Exchange Act Release No. 68362 (December 5, 2012), 77 FR 73719 (December 11, 2012) (File No. 4-551). \17\ See Securities Exchange Act Release No. 70052 (July 26, 2013), 78 FR 46665 (August 1, 2013) (File No. 4-551). \18\ See Securities Exchange Act Release No. 76310 (October 29, 2015), 80 FR 68354 (November 4, 2015) (File No. 4-551). --------------------------------------------------------------------------- The Plan is designed to reduce regulatory duplication for common members by allocating regulatory responsibility for certain options- related market surveillance matters among the Participating Organizations. Generally, under the Plan, a Participating Organization will serve as the Designated Options Surveillance Regulator (``DOSR'') for each common member assigned to it and will assume regulatory responsibility with respect to that common member's compliance with applicable common rules for certain accounts. When an SRO has been named as a common member's DOSR, all other SROs to which the common member belongs will be relieved of regulatory responsibility for that common member, pursuant to the terms of the Plan, with respect to the applicable common rules specified in Exhibit A to the Plan. III. Proposed Amendment to the Plan On February 9, 2016, the parties submitted a proposed amendment to the Plan. The primary purpose of the amendment is to add ISE Mercury as a Participant to the Plan. The text of the proposed amended 17d-2 plan is as follows (additions are italicized; deletions are [bracketed]): * * * * * AGREEMENT BY AND AMONG NYSE MKT LLC, BATS EXCHANGE, INC., EDGX EXCHANGE INC., BOX OPTIONS EXCHANGE LLC, NASDAQ OMX BX, INC., C2 OPTIONS EXCHANGE, INCORPORATED, THE CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED, THE INTERNATIONAL SECURITIES EXCHANGE LLC, ISE GEMINI, LLC, ISE MERCURY, LLC, FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., NYSE ARCA, INC., THE NASDAQ STOCK MARKET LLC, NASDAQ OMX PHLX, INC., AND MIAMI INTERNATIONAL SECURITIES EXCHANGE, LLC PURSUANT TO RULE 17d-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934 This agreement (this ``Agreement''), by and among NYSE MKT LLC (``MKT''), BATS Exchange, Inc., (``BATS''), the EDGX Exchange, Inc (``EDGX''), the C2 Options Exchange, Incorporated (``C2''), the Chicago Board Options Exchange, Incorporated (``CBOE''), the International Securities Exchange LLC (``ISE''), Financial Industry Regulatory Authority, Inc. (``FINRA''), NYSE Arca, Inc. (``Arca''), The NASDAQ Stock Market LLC (``Nasdaq''), BOX Options Exchange LLC (``BOX''), NASDAQ OMX BX, Inc. (``BX''), NASDAQ OMX PHLX, Inc. (``PHLX''), Miami International Securities Exchange, LLC (``MIAX'') [and], ISE Gemini, LLC (``Gemini''), and ISE Mercury, LLC (``Mercury'') is made this 10th day of October 2007, and as amended the 31st day of March 2008, the 1st day of October 2008, the 3rd day of February 2010, the 25th day of April 2012, and the 19th day of November 2012, and the 30th day of May 2013, and the 16th day of October 2015, and the 29th day of January 2016, pursuant to Section 17(d) of the Securities Exchange Act of 1934, as amended (the ``Exchange Act''), and Rule 17d-2 thereunder (``Rule 17d-2''), which allows for a joint plan among self-regulatory organizations (``SROs'') to allocate regulatory obligations with respect to brokers or dealers that are members of two or more of the parties to this Agreement (``Common Members''). MKT, BATS, C2, CBOE, EDGX, ISE Gemini, ISE, ISE Mercury, FINRA, Arca, Nasdaq, BOX, BX, PHLX, and MIAX are collectively referred to herein as the ``Participants'' and individually, each a ``Participant.'' This Agreement shall be administered by a committee known as the Options Surveillance Group (the ``OSG'' or ``Group''), as described in Section V hereof. Unless defined in this [[Page 8783]] Agreement or the context otherwise requires, the terms used herein shall have the meanings assigned thereto by the Exchange Act and the rules and regulations thereunder. Whereas, the Participants desire to eliminate regulatory duplication with respect to SRO market surveillance of Common Member \1\ activities with regard to certain common rules relating to listed options (``Options''); and --------------------------------------------------------------------------- \1\ In the case of the BX and BOX, members are those persons who are Options Participants (as defined in the BOX Options Exchange LLC Rules and NASDAQ OMX BX, Inc. Rules). --------------------------------------------------------------------------- Whereas, for this purpose, the Participants desire to execute and file this Agreement with the Securities and Exchange Commission (the ``SEC'' or ``Commission'') pursuant to Rule 17d-2. Now, therefore, in consideration of the mutual covenants contained in this Agreement, the Participants agree as follows: I. Except as otherwise provided in this Agreement, each Participant shall assume Regulatory Responsibility (as defined below) for the Common Members that are allocated or assigned to such Participant in accordance with the terms of this Agreement and shall be relieved of its Regulatory Responsibility as to the remaining Common Members. For purposes of this Agreement, a Participant shall be considered to be the Designated Options Surveillance Regulator (``DOSR'') for each Common Member that is allocated to it in accordance with Section VII. II. As used in this Agreement, the term ``Regulatory Responsibility'' shall mean surveillance, investigation and enforcement responsibilities relating to compliance by the Common Members with such Options rules of the Participants as the Participants shall determine are substantially similar and shall approve from time to time, insofar as such rules relate to market surveillance (collectively, the ``Common Rules''). For the purposes of this Agreement the list of Common Rules is attached as Exhibit A hereto, which may only be amended upon unanimous written agreement by the Participants. The DOSR assigned to each Common Member shall assume Regulatory Responsibility with regard to that Common Member's compliance with the applicable Common Rules for certain accounts.\2\ A DOSR may perform its Regulatory Responsibility or enter an agreement to transfer or assign such responsibilities to a national securities exchange registered with the SEC under Section 6(a) of the Exchange Act or a national securities association registered with the SEC under Section 15A of the Exchange Act. A DOSR may not transfer or assign its Regulatory Responsibility to an association registered for the limited purpose of regulating the activities of members who are registered as brokers or dealers in security futures products. --------------------------------------------------------------------------- \2\ Certain accounts shall include customer (``C'' as classified by the Options Clearing Corporation (``OCC'')) and firm (``F'' as classified by OCC) accounts, as well as other accounts, such as market maker accounts as the Participants shall, from time to time, identify as appropriate to review. --------------------------------------------------------------------------- The term ``Regulatory Responsibility'' does not include, and each Participant shall retain full responsibility with respect to: (a) Surveillance, investigative and enforcement responsibilities other than those included in the definition of Regulatory Responsibility; (b) any aspects of the rules of a Participant that are not substantially similar to the Common Rules or that are allocated for a separate surveillance purpose under any other agreement made pursuant to Rule 17d-2. Any such aspects of a Common Rule will be noted as excluded on Exhibit A. With respect to options position limits, the term Regulatory Responsibility shall include examination responsibilities for the delta hedging exemption. Specifically, the Participants intend that FINRA will conduct examinations for delta hedging for all Common Members that are members of FINRA notwithstanding the fact that FINRA's position limit rule is, in some cases, limited to only firms that are not members of an options exchange (i.e., access members). In such cases, FINRA's examinations for delta hedging options position limit violations will be for the identical or substantively similar position limit rule(s) of the other Participant(s). Examinations for delta hedging for Common Members that are non-FINRA members will be conducted by the same Participant conducting position limit surveillance. The allocation of Common Members to DOSRs for surveillance of compliance with options position limits and other agreed to Common Rules is provided in Exhibit B. The allocation of Common Members to DOSRs for examinations of the delta hedging exemption under the options position limits rules is provided in Exhibit C. III. Each year within 30 days of the anniversary date of the commencement of operation of this Agreement, or more frequently if required by changes in the rules of a Participant, each Participant shall submit to the other Participants, through the Chair of the OSG, an updated list of Common Rules for review. This updated list may add Common Rules to Exhibit A, shall delete from Exhibit A rules of that Participant that are no longer identical or substantially similar to the Common Rules, and shall confirm that the remaining rules of the Participant included on Exhibit A continue to be identically or substantially similar to the Common Rules. Within 30 days from the date that each Participant has received revisions to Exhibit A from the Chair of the OSG, each Participant shall confirm in writing to the Chair of the OSG whether that Participant's rules listed in Exhibit A are Common Rules. IV. Apparent violation of another Participant's rules discovered by a DOSR, but which rules are not within the scope of the discovering DOSR's Regulatory Responsibility, shall be referred to the relevant Participant for such action as is deemed appropriate by that Participant. Notwithstanding the foregoing, nothing contained herein shall preclude a DOSR in its discretion from requesting that another Participant conduct an investigative or enforcement proceeding (``Proceeding'') on a matter for which the requesting DOSR has Regulatory Responsibility. If such other Participant agrees, the Regulatory Responsibility in such case shall be deemed transferred to the accepting Participant and confirmed in writing by the Participants involved. Additionally, nothing in this Agreement shall prevent another Participant on whose market potential violative activity took place from conducting its own Proceeding on a matter. The Participant conducting the Proceeding shall advise the assigned DOSR. Each Participant agrees, upon request, to make available promptly all relevant files, records and/or witnesses necessary to assist another Participant in a Proceeding. V. The OSG shall be composed of one representative designated by each of the Participants (a ``Representative''). Each Participant shall also designate one or more persons as its alternate representative(s) (an ``Alternate Representative''). In the absence of the Representative, the Alternate Representative shall assume the powers, duties and responsibilities of the Representative. Each Participant may at any time replace its Representative and/or its Alternate Representative to the Group.\3\ A majority of the OSG shall constitute a quorum and, unless otherwise required, the affirmative vote of a majority of the Representatives present (in person, by telephone or by written consent) shall be necessary to constitute action by the Group. The Group will have a Chair, Vice Chair and [[Page 8784]] Secretary. A different Participant will assume each position on a rotating basis for a one-year term. In the event that a Participant replaces a Representative who is acting as Chair, Vice Chair or Secretary, the newly appointed Representative shall assume the position of Chair, Vice Chair, or Secretary (as applicable) vacated by the Participant's former Representative. In the event a Participant cannot fulfill its duties as Chair, the Participant serving as Vice Chair shall substitute for the Chair and complete the subject unfulfilled term. All notices and other communications for the OSG are to be sent in care of the Chair and, as appropriate, to each Representative. --------------------------------------------------------------------------- \3\ A Participant must give notice to the Chair of the Group of such a change. --------------------------------------------------------------------------- VI. The OSG shall determine the times and locations of Group meetings, provided that the Chair, acting alone, may also call a meeting of the Group in the event the Chair determines that there is good cause to do so. To the extent reasonably possible, notice of any meeting shall be given at least ten business days prior to the meeting date. Representatives shall always be given the option of participating in any meeting telephonically at their own expense rather than in person. VII. No less frequently than every two years, in such manner as the Group deems appropriate, the OSG shall allocate Common Members that conduct an Options business among the Participants (``Allocation''), and the Participant to which a Common Member is allocated will serve as the DOSR for that Common Member. Any Allocation shall be based on the following principles, except to the extent all affected Participants consent to one or more different principles: (a) The OSG may not allocate a Common Member to a Participant unless the Common Member is a member of that Participant. (b) To the extent practicable, Common Members that conduct an Options business shall be allocated among the Participants of which they are members in such manner as to equalize as nearly as possible the allocation among such Participants, provided that no Common Members shall be allocated to FINRA. For example, if sixteen Common Members that conduct an Options business are members only of three Participants, none of which is FINRA, those Common Members shall be allocated among the three Participants such that no Participant is allocated more than six such members and no Participant is allocated less than five such members. If, in the previous example, one of the three Participants is FINRA, the sixteen Common Members would be allocated evenly between the remaining Participants, so that the two non-FINRA Participants would be allocated eight Common Members each. (c) To the extent practicable, Allocation shall take into account the amount of Options activity conducted by each Common Member in order to most evenly divide the Common Members with the largest amount of activity among the Participants of which they are members. Allocation will also take into account similar allocations pursuant to other plans or agreements to which the Common Members are party to maintain consistency in oversight of the Common Members.\4\ --------------------------------------------------------------------------- \4\ For example, if one Participant was allocated a Common Member by another regulatory group that Participant would be assigned to be the DOSR of that Common Member, unless there is good cause not to make that assignment. --------------------------------------------------------------------------- (d) To the extent practicable, Allocation of Common Members to Participants will be rotated among the applicable Participants such that a Common Member shall not be allocated to a Participant to which that Common Member was allocated within the previous two years. The assignment of DOSRs pursuant to the Allocation is attached as Exhibit B hereto, and will be updated from time to time to reflect Common Member Allocation changes. (e) The Group may reallocate Common Members from time-to-time, as it deems appropriate. (f) Whenever a Common Member ceases to be a member of its DOSR, the DOSR shall promptly inform the Group, which shall review the matter and allocate the Common Member to another Participant. (g) A DOSR may request that a Common Member to which it is assigned be reallocated to another Participant by giving 30 days written notice to the Chair of the OSG. The Group, in its discretion, may approve such request and reallocate the Common Member to another Participant. (h) All determinations by the Group with respect to Allocation shall be made by the affirmative vote of a majority of the Participants that, at the time of such determination, share the applicable Common Member being allocated; a Participant shall not be entitled to vote on any Allocation relating to a Common Member unless the Common Member is a member of such Participant. VIII. Each DOSR shall conduct routine surveillance reviews to detect violations of the applicable Common Rules by each Common Member allocated to it with a frequency (daily, weekly, monthly, quarterly, semi-annually or annually as noted on Exhibit A) not less than that determined by the Group. The other Participants agree that, upon request, relevant information in their respective files relative to a Common Member will be made available to the applicable DOSR. In addition, each Participant shall provide, to the extent not otherwise already provided, information pertaining to its surveillance program that would be relevant to FINRA or the Participant(s) conducting routine examinations for the delta hedging exemption. At each meeting of the OSG, each Participant shall be prepared to report on the status of its surveillance program for the previous quarter and any period prior thereto that has not previously been reported to the Group. In the event a DOSR believes it will not be able to complete its Regulatory Responsibility for its allocated Common Members, it will so advise the Group in writing promptly. The Group will undertake to remedy this situation by reallocating the subject Common Members among the remaining Participants. In such instance, the Group may determine to impose a regulatory fee for services provided to the DOSR that was unable to fulfill its Regulatory Responsibility. IX. Each Participant will, upon request, promptly furnish a copy of the report or applicable portions thereof relating to any investigation made pursuant to the provisions of this Agreement to each other Participant of which the Common Member under investigation is a member. X. Each Participant will routinely populate a common database, to be accessed by the Group relating to any formal regulatory action taken during the course of a Proceeding with respect to the Common Rules concerning a Common Member. XI. Any written notice required or permitted to be given under this Agreement shall be deemed given if sent by certified mail, return receipt requested, to any Participant to the attention of that Participant's Representative, to the Participant's principal place of business or by email at such address as the Representative shall have filed in writing with the Chair. XII. The costs incurred by each Participant in discharging its Regulatory Responsibility under this Agreement are not reimbursable. However, any of the Participants may agree that one or more will compensate the other(s) for costs incurred. XIII. The Participants shall notify the Common Members of this Agreement by means of a uniform joint notice approved by the Group. Each Participant will notify the Common Members that have been allocated to it [[Page 8785]] that such Participant will serve as DOSR for that Common Member. XIV. This Agreement shall be effective upon approval of the Commission. This Agreement may only be amended in writing duly approved by each Participant. All amendments to this Agreement, excluding changes to Exhibits A, B and C, must be filed with and approved by the Commission. XV. Any Participant may manifest its intention to cancel its participation in this Agreement at any time upon providing written notice to (i) the Group six months prior to the date of such cancellation, or such other period as all the Participants may agree, and (ii) the Commission. Upon receipt of the notice the Group shall allocate, in accordance with the provisions of this Agreement, those Common Members for which the canceling Participant was the DOSR. The canceling Participant shall retain its Regulatory Responsibility and other rights, privileges and duties pursuant to this Agreement until the Group has completed the reallocation as described above, and the Commission has approved the cancellation. XVI. The cancellation of its participation in this Agreement by any Participant shall not terminate this Agreement as to the remaining Participants. This Agreement will only terminate following notice to the Commission, in writing, by the then Participants that they intend to terminate the Agreement and the expiration of the applicable notice period. Such notice shall be given at least six months prior to the intended date of termination, or such other period as all the Participants may agree. Such termination will become effective upon Commission approval. XVII. Participation in the Group shall be strictly limited to the Participants and no other party shall have any right to attend or otherwise participate in the Group except with the unanimous approval of all Participants. Notwithstanding the foregoing, any national securities exchange registered with the SEC under Section 6(a) of the Act or any national securities association registered with the SEC under section 15A of the Act may become a Participant to this Agreement provided that: (i) Such applicant has adopted rules substantially similar to the Common Rules, and received approval thereof from the SEC; (ii) such applicant has provided each Participant with a signed statement whereby the applicant agrees to be bound by the terms of this Agreement to the same effect as though it had originally signed this Agreement and (iii) an amended agreement reflecting the addition of such applicant as a Participant has been filed with and approved by the Commission. XVIII. This Agreement is wholly separate from the multiparty Agreement made pursuant to Rule 17d-2 by and among the NYSE MKT LLC, the BATS Exchange, Inc., [the Boston Stock Exchange, Inc.] BOX Options Exchange, LLC, the C2 Options Exchange, Inc., the Chicago Board Options Exchange, Inc., the International Securities Exchange, LLC, Financial Industry Regulatory Authority, The NASDAQ Stock Market LLC, [Inc.,] the New York Stock Exchange, LLC, the NYSE Arca, Inc., [the Philadelphia Stock Exchange, Inc.] the NASDAQ OMX BX, Inc., the NASDAQ OMX PHLX, LLC, Miami International Securities Exchange, LLC, ISE Gemini, LLC [and the Topaz Exchange, LLC] and EDGX Exchange, Inc. involving the allocation of regulatory responsibilities with respect to common members for compliance with common rules relating to the conduct by broker-dealers of accounts for listed options or index warrants entered into on [June 21, 2013] October 8, 2015, and as may be amended from time to time. LIMITATION OF LIABILITY No Participant nor the Group nor any of their respective directors, governors, officers, employees or representatives shall be liable to any other Participant in this Agreement for any liability, loss or damage resulting from or claimed to have resulted from any delays, inaccuracies, errors or omissions with respect to the provision of Regulatory Responsibility as provided hereby or for the failure to provide any such Regulatory Responsibility, except with respect to such liability, loss or damages as shall have been suffered by one or more of the Participants and caused by the willful misconduct of one or more of the other Participants or its respective directors, governors, officers, employees or representatives. No warranties, express or implied, are made by the Participants, individually or as a group, or by the OSG with respect to any Regulatory Responsibility to be performed hereunder. RELIEF FROM RESPONSIBILITY Pursuant to Section 17(d)(1)(A) of the Exchange Act and Rule 17d-2, the Participants join in requesting the Commission, upon its approval of this Agreement or any part thereof, to relieve the Participants that are party to this Agreement and are not the DOSR as to a Common Member of any and all Regulatory Responsibility with respect to the matters allocated to the DOSR. * * * * * EXHIBIT A Options Surveillance Group 17d-2 Agreement COMMON RULES as of [January 1] January 29, 2016 Violation I--Expiring Exercise Declarations (EED)--For Listed and FLEX Equity Options ---------------------------------------------------------------------------------------------------------------- SRO Description of rule Exchange rule No. Frequency of review ---------------------------------------------------------------------------------------------------------------- BATS.............................. Exercise of Options Rule 23.1............ At Expiration. Contracts. BOX............................... Exercise of Options Rule 9000............ At Expiration. Contracts. C2................................ Exercise of Options Rule 11.1............ At Expiration. Contracts. CBOE.............................. Exercise of Options Rule 11.1............ At Expiration. Contracts. EDGX.............................. Exercise of Options Rule 23.1............ At Expiration. Contracts. FINRA............................. Exercise of Options Rule 2360(b)(23)..... At Expiration. Contracts. ISE............................... Exercise of Options Rule 1100............ At Expiration. Contracts. ISE Gemini........................ Exercise of Options Rule 1100............ At Expiration. Contracts. ISE Mercury....................... Exercise of Options Rule 1100............ At Expiration. Contracts. MIAX.............................. Exercise of Options Rule 700............. At Expiration. Contracts. Nasdaq............................ Exercise of Options Ch. VIII, Sect. 1.... At Expiration. Contracts. Nasdaq OMX BX..................... Exercise of Options Ch. VII, Sect. 1..... At Expiration. Contracts. Nasdaq OMX PHLX................... Exercise of Equity Options Rule 1042............ At Expiration. Contracts. NYSE Arca......................... Exercise of Options Rule 6.24............ At Expiration. Contracts. NYSE MKT.......................... Exercise of Options Rule 980............. At Expiration. Contracts. ---------------------------------------------------------------------------------------------------------------- [[Page 8786]] Violation II--Position Limits (PL)--For Listed Equity Options ---------------------------------------------------------------------------------------------------------------- Description of rule (for SRO review as they apply to Exchange rule No. Frequency of review PL) ---------------------------------------------------------------------------------------------------------------- BATS.............................. Position Limits........... Rule 18.7............ Daily. Exemptions from Position.. Rule 18.8............ As Needed. Liquidation Positions..... Rule 18.11........... As Needed. BOX............................... Position Limits........... Rule 3120............ Daily. Exemptions from Position Rule 3130............ As Needed. Limits. Liquidation Positions..... Rule 3160............ As Needed. C2................................ Position Limits........... Rule 4.11............ Daily. Liquidation of Positions.. Rule 4.14............ As Needed. CBOE.............................. Position Limits........... Rule 4.11............ Daily. Liquidation of Positions.. Rule 4.14............ As Needed. EDGX.............................. Position Limits........... Rule 18.7............ Daily. Exemptions from Position.. Rule 18.8............ As Needed. Liquidation Positions..... Rule 18.11........... As Needed. FINRA............................. Position Limits........... Rule 2860(b)(3)...... Daily. Liquidation of Positions Rule 2860(b)(6)...... As Needed. and Restrictions on Access. ISE............................... Position Limits........... Rule 412............. Daily. Exemptions from Position Rule 413............. As Needed. Limits. Liquidating Positions..... Rule 416............. As Needed. ISE Gemini........................ Position Limits........... Rule 412............. Daily. Exemptions from Position Rule 413............. As Needed. Limits. Liquidating Positions..... Rule 416............. As Needed. ISE Mercury....................... Position Limits........... Rule 412............. Daily. Exemptions from Position Rule 413............. As Needed. Limits. Liquidating Positions..... Rule 416............. As Needed. MIAX.............................. Position Limits........... Rule 307............. Daily. Exemptions from Position Rule 308............. As Needed. Limits. Liquidating Positions..... Rule 311............. As Needed. Nasdaq............................ Position Limits........... Ch. III, Sect. 7..... Daily. Exemptions from Position Ch. III, Sect. 8..... As Needed. Limits. Liquidating Positions..... Ch. III, Sect. 11.... As Needed. Nasdaq OMX BX..................... Position Limits........... Ch. III, Sect. 7..... Daily. Exemptions from Position Ch. III, Sect. 8..... As Needed. Limits. Liquidating Positions..... Ch. III, Sect. 11.... As Needed. Nasdaq OMX PHLX................... Position Limits........... Rule 1001............ Daily. Liquidation of Position... Rule 1004............ As Needed. NYSE Arca......................... Position Limits........... Rule 6.8............. Daily. Liquidation of Position... Rule 6.7............. As Needed. NYSE MKT.......................... Position Limits........... Rule 904............. Daily. Liquidating Positions..... Rule 907............. As Needed. ---------------------------------------------------------------------------------------------------------------- Violation III--Large Options Position Report (LOPR)--For Listed and FLEX Equity Options and ETF Options ---------------------------------------------------------------------------------------------------------------- Description of rule (for SRO review as they apply to Exchange rule No. Frequency of review LOPR) ---------------------------------------------------------------------------------------------------------------- BATS.............................. Reports Related to Rule 18.10........... Yearly. Position Limits. BOX............................... Reports Related to Rule 3150............ Yearly. Position Limits. C2................................ Reports Related to Rule 4.13(a)......... Yearly. Position Limits. Reports Related to Rule 4.13(b)......... Yearly. Position Limits. Reports Related to Rule 4.13(d)......... Yearly. Position Limits. CBOE.............................. Reports Related to Rule 4.13(a)......... Yearly. Position Limits. Reports Related to Rule 4.13(b)......... Yearly. Position Limits. Reports Related to Rule 4.13(d)......... Yearly. Position Limits. EDGX.............................. Reports Related to Rule 18.10........... Yearly. Position Limits. FINRA............................. Options................... Rule 2360(b)(5)...... Yearly. ISE............................... Reports Related to Rule 415............. Yearly. Position Limits. ISE Gemini........................ Reports Related to Rule 415............. Yearly. Position Limits. ISE Mercury....................... Reports Related to Rule 415............. Yearly. Position Limits. MIAX.............................. Reports Related to Rule 310............. Yearly. Position Limits. Nasdaq............................ Reports Related to Ch. III, Sect. 10.... Yearly. Position Limits. Nasdaq OMX BX..................... Reports Related to Ch. III, Sect. 10.... Yearly. Position Limits. Nasdaq OMX PHLX................... Reporting of Options Rule 1003............ Yearly. Positions. NYSE Arca......................... Reporting of Options Rule 6.6............. Yearly. Positions. NYSE MKT.......................... Reporting of Options Rule 906............. Yearly. Positions. ---------------------------------------------------------------------------------------------------------------- [[Page 8787]] Violation IV--Options Clearing Corporation (OCC) Adjustment Process ---------------------------------------------------------------------------------------------------------------- Description of rule (as they apply to OCC SRO Adjustments/By-laws Exchange rule No. Frequency of review (Article V, Section 1.01(a) and .02)) ---------------------------------------------------------------------------------------------------------------- BATS.............................. Adherence to Law.......... Rule 18.1............ Yearly. BOX............................... Adherence to Law.......... Rule 3010............ Yearly. C2................................ Adherence to Law.......... Rule 4.2............. Yearly. CBOE.............................. Adherence to Law.......... Rule 4.2............. Yearly. EDGX.............................. Adherence to Law.......... Rule 18.1............ Yearly. FINRA............................. Violation of By-Laws and Rule 2360(b)(21)..... Yearly. Rules of FINRA or The OCC. ISE............................... Adherence to Law.......... Rule 401............. Yearly. ISE Gemini........................ Adherence to Law.......... Rule 401............. Yearly. ISE Mercury....................... Adherence to Law.......... Rule 401............. Yearly. MIAX.............................. Adherence to Law.......... Rule 300............. Yearly. Nasdaq............................ Adherence to Law.......... Ch. III, Sect. 1..... Yearly. Nasdaq OMX BX..................... Adherence to Law.......... Ch. III, Sect. 1..... Yearly. Nasdaq OMX PHLX................... Violation of By-Laws and Rule 1050............ Yearly. Rules of OCC. NYSE Arca......................... Adherence to Law and Good Rule 11.1............ Yearly. Business Practice. NYSE MKT.......................... Business Conduct.......... Rule 16.............. Yearly. ---------------------------------------------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing. 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 4-551 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 4-551. 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 plan that are filed with the Commission, and all written communications relating to the proposed plan 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 plan also will be available for inspection and copying at the principal offices of MKT, BATS, C2, CBOE, EDGX, Gemini, ISE, ISE Mercury, FINRA, Arca, NASDAQ, BOX, BX, Phlx, and MIAX. 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 4-551 and should be submitted on or before March 14, 2016. V. Discussion The Commission continues to believe that the Plan, as proposed to be amended, is an achievement in cooperation among the SRO participants. The Plan, as amended, will reduce unnecessary regulatory duplication by allocating to the designated SRO the responsibility for certain options-related market surveillance matters that would otherwise be performed by multiple SROs. The Plan promotes efficiency by reducing costs to firms that are members of more than one of the SRO participants. In addition, because the SRO participants coordinate their regulatory functions in accordance with the Plan, the Plan promotes, and will continue to promote, investor protection. Under paragraph (c) of Rule 17d-2, the Commission may, after appropriate notice and comment, declare a plan, or any part of a plan, effective. In this instance, the Commission believes that appropriate notice and comment can take place after the proposed amendment is effective. The primary purpose of the amendment is to add ISE Mercury as a Participant to the Plan. By declaring it effective today, the amended Plan can become effective and be implemented without undue delay.\19\ In addition, the Commission notes that the prior version of this Plan was published for comment, and the Commission did not receive any comments thereon. Finally, the Commission does not believe that the amendment to the Plan raises any new regulatory issues that the Commission has not previously considered. --------------------------------------------------------------------------- \19\ On January 29, 2016, the Commission approved ISE Mercury's application for registration as a national securities exchange. See Securities Exchange Act Release No. 76998, 81 FR 6066 (February 4, 2016). --------------------------------------------------------------------------- VI. Conclusion This order gives effect to the amended Plan submitted to the Commission that is contained in File No. 4-551. It is therefore ordered, pursuant to Section 17(d) of the Act, that the Plan, as amended by and between MKT, BATS, C2, CBOE, EDGX, Gemini, ISE, ISE Mercury, FINRA, Arca, NASDAQ, BOX, BX, Phlx, and MIAX, filed with the Commission pursuant to Rule 17d-2 on February 9, 2016 is hereby approved and declared effective. It is further ordered that those SRO participants that are not the DOSR as to a particular common member are relieved of those regulatory responsibilities allocated to the common member's DOSR under the amended Plan to the extent of such allocation. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\20\ --------------------------------------------------------------------------- \20\ 17 CFR 200.30-3(a)(34). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-03534 Filed 2-19-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 34 / Monday, February 22, 2016 / Notices 8781
performed by multiple SROs. The plan SECURITIES AND EXCHANGE compliance by, its members and persons
promotes efficiency by reducing costs to COMMISSION associated with its members with the
firms that are members of more than one Act, the rules and regulations
[Release No. 34–77149; File No. 4–551]
of the SRO participants. In addition, thereunder, and the SRO’s own rules,
because the SRO participants coordinate Program for Allocation of Regulatory unless the SRO is relieved of this
their regulatory functions in accordance Responsibilities Pursuant to Rule 17d– responsibility pursuant to Section
with the plan, the plan promotes, and 2; Notice of Filing and Order 17(d) 4 or Section 19(g)(2) 5 of the Act.
will continue to promote, investor Approving and Declaring Effective an Without this relief, the statutory
protection. Amendment to the Plan for the obligation of each individual SRO could
Allocation of Regulatory result in a pattern of multiple
Under paragraph (c) of Rule 17d–2, examinations of broker-dealers that
the Commission may, after appropriate Responsibilities Among NYSE MKT
LLC, BATS Exchange, Inc., BOX maintain memberships in more than one
notice and comment, declare a plan, or SRO (‘‘common members’’). Such
Options Exchange LLC, C2 Options
any part of a plan, effective. In this regulatory duplication would add
Exchange, Incorporated, the Chicago
instance, the Commission believes that Board Options Exchange, unnecessary expenses for common
appropriate notice and comment can Incorporated, the EDGX Exchange, members and their SROs.
take place after the proposed Inc., the International Securities Section 17(d)(1) of the Act 6 was
amendment is effective. The primary Exchange LLC, ISE Gemini, LLC, ISE intended, in part, to eliminate
purpose of the amendment is to add ISE Mercury, LLC, Financial Industry unnecessary multiple examinations and
Mercury as a Participant, and remove Regulatory Authority, Inc., NYSE Arca, regulatory duplication.7 With respect to
the NYSE as a Participant, to the Plan. Inc., The NASDAQ Stock Market LLC, a common member, Section 17(d)(1)
By declaring it effective today, the NASDAQ OMX BX, Inc., the NASDAQ authorizes the Commission, by rule or
amended Plan can become effective and OMX PHLX, Inc., and Miami order, to relieve an SRO of the
be implemented without undue delay.22 International Securities Exchange, LLC responsibility to receive regulatory
The Commission notes that the prior Concerning Options-Related Market reports, to examine for and enforce
version of this plan immediately prior to Surveillance compliance with applicable statutes,
this proposed amendment was rules, and regulations, or to perform
February 16, 2016. other specified regulatory functions.
published for comment and the Notice is hereby given that the To implement Section 17(d)(1), the
Commission did not receive any Securities and Exchange Commission Commission adopted two rules: Rule
comments thereon. Furthermore, the (‘‘Commission’’) has issued an Order, 17d–1 and Rule 17d–2 under the Act.8
Commission does not believe that the pursuant to Section 17(d) of the Rule 17d–1 authorizes the Commission
amendment to the plan raises any new Securities Exchange Act of 1934 to name a single SRO as the designated
regulatory issues that the Commission (‘‘Act’’),1 approving and declaring examining authority (‘‘DEA’’) to
has not previously considered. effective an amendment to the plan for examine common members for
allocating regulatory responsibility compliance with the financial
VI. Conclusion
(‘‘Plan’’) filed on February 9, 2016, responsibility requirements imposed by
This order gives effect to the amended pursuant to Rule 17d–2 of the Act,2 by the Act, or by Commission or SRO
Plan submitted to the Commission that NYSE MKT LLC (‘‘MKT’’), BATS rules.9 When an SRO has been named as
is contained in File No. S7–966. Exchange, Inc., (‘‘BATS’’), the BOX a common member’s DEA, all other
Options Exchange LLC (‘‘BOX’’), C2 SROs to which the common member
It is therefore ordered, pursuant to Options Exchange, Incorporated (‘‘C2’’), belongs are relieved of the responsibility
Section 17(d) of the Act, that the Plan, the Chicago Board Options Exchange, to examine the firm for compliance with
as amended, filed with the Commission Incorporated (‘‘CBOE’’), the EDGX the applicable financial responsibility
pursuant to Rule 17d–2 on February 3, Exchange, Inc. (‘‘EDGX’’) the rules. On its face, Rule 17d–1 deals only
2016, is hereby approved and declared International Securities Exchange LLC with an SRO’s obligations to enforce
effective. (‘‘ISE’’), ISE Gemini, LLC (‘‘Gemini’’), member compliance with financial
It is further ordered that those SRO ISE Mercury, LLC (‘‘ISE Mercury’’), responsibility requirements. Rule 17d–1
participants that are not the DOEA as to Financial Industry Regulatory does not relieve an SRO from its
a particular common member are Authority, Inc. (‘‘FINRA’’), NYSE Arca, obligation to examine a common
relieved of those regulatory Inc. (‘‘Arca’’), The NASDAQ Stock member for compliance with its own
responsibilities allocated to the common Market LLC (‘‘Nasdaq’’), NASDAQ OMX rules and provisions of the federal
member’s DOEA under the amended BX, Inc. (‘‘BX’’), NASDAQ OMX PHLX, securities laws governing matters other
Plan to the extent of such allocation. Inc. (‘‘PHLX’’), and Miami International than financial responsibility, including
Securities Exchange (‘‘MIAX’’) sales practices and trading activities and
For the Commission, by the Division of (collectively, ‘‘Participating practices.
Trading and Markets, pursuant to delegated Organizations’’ or ‘‘parties’’). To address regulatory duplication in
authority.23 these and other areas, the Commission
Brent J. Fields,
I. Introduction
Secretary. Section 19(g)(1) of the Act,3 among 4 15 U.S.C. 78q(d).
[FR Doc. 2016–03533 Filed 2–19–16; 8:45 am]
other things, requires every self- 5 15 U.S.C. 78s(g)(2).
mstockstill on DSK4VPTVN1PROD with NOTICES
regulatory organization (‘‘SRO’’) 6 15 U.S.C. 78q(d)(1).
BILLING CODE 8011–01–P
registered as either a national securities 7 See Securities Act Amendments of 1975, Report
exchange or national securities of the Senate Committee on Banking, Housing, and
22 On January 29, 2016, the Commission approved Urban Affairs to Accompany S. 249, S. Rep. No. 94–
ISE Mercury’s application for registration as a
association to examine for, and enforce 75, 94th Cong., 1st Session 32 (1975).
national securities exchange. See Securities 8 17 CFR 240.17d–1 and 17 CFR 240.17d–2,
1 15 U.S.C. 78q(d).
Exchange Act Release No. 76998, 81 FR 6066 respectively.
(February 4, 2016). 2 17 CFR 240.17d–2. 9 See Securities Exchange Act Release No. 12352
23 17 CFR 200.30–3(a)(34). 3 15 U.S.C. 78s(g)(1). (April 20, 1976), 41 FR 18808 (May 7, 1976).
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![8782 Federal Register / Vol. 81, No. 34 / Monday, February 22, 2016 / Notices
adopted Rule 17d–2 under the Act.10 to the Plan.16 On July 23, 2013, the AGREEMENT BY AND AMONG NYSE
Rule 17d–2 permits SROs to propose Commission approved an amendment to MKT LLC, BATS EXCHANGE, INC.,
joint plans for the allocation of the Plan to add Topaz Exchange, LLC as EDGX EXCHANGE INC., BOX
regulatory responsibilities with respect a Participant to the Plan.17 On October OPTIONS EXCHANGE LLC, NASDAQ
to their common members. Under 27, 2015, the Commission approved an OMX BX, INC., C2 OPTIONS
paragraph (c) of Rule 17d–2, the amendment to add EDGX as a EXCHANGE, INCORPORATED, THE
Commission may declare such a plan Participant to the Plan and to change the CHICAGO BOARD OPTIONS
effective if, after providing for notice name of Topaz Exchange, LLC to ISE EXCHANGE, INCORPORATED, THE
and comment, it determines that the Gemini, LLC.18 INTERNATIONAL SECURITIES
plan is necessary or appropriate in the EXCHANGE LLC, ISE GEMINI, LLC,
public interest and for the protection of The Plan is designed to reduce ISE MERCURY, LLC, FINANCIAL
investors, to foster cooperation and regulatory duplication for common INDUSTRY REGULATORY
coordination among the SROs, to members by allocating regulatory AUTHORITY, INC., NYSE ARCA, INC.,
remove impediments to, and foster the responsibility for certain options-related THE NASDAQ STOCK MARKET LLC,
development of, a national market market surveillance matters among the NASDAQ OMX PHLX, INC., AND
system and a national clearance and Participating Organizations. Generally, MIAMI INTERNATIONAL
settlement system, and is in conformity under the Plan, a Participating SECURITIES EXCHANGE, LLC
with the factors set forth in Section Organization will serve as the PURSUANT TO RULE 17d–2 UNDER
17(d) of the Act. Commission approval Designated Options Surveillance THE SECURITIES EXCHANGE ACT OF
of a plan filed pursuant to Rule 17d–2 Regulator (‘‘DOSR’’) for each common 1934
relieves an SRO of those regulatory member assigned to it and will assume This agreement (this ‘‘Agreement’’),
responsibilities allocated by the plan to regulatory responsibility with respect to by and among NYSE MKT LLC
another SRO. that common member’s compliance (‘‘MKT’’), BATS Exchange, Inc.,
II. The Plan with applicable common rules for (‘‘BATS’’), the EDGX Exchange, Inc
certain accounts. When an SRO has (‘‘EDGX’’), the C2 Options Exchange,
On December 11, 2007, the been named as a common member’s Incorporated (‘‘C2’’), the Chicago Board
Commission declared effective the DOSR, all other SROs to which the Options Exchange, Incorporated
Participating Organizations’ Plan for common member belongs will be (‘‘CBOE’’), the International Securities
allocating regulatory responsibilities relieved of regulatory responsibility for Exchange LLC (‘‘ISE’’), Financial
pursuant to Rule 17d–2.11 On April 11, that common member, pursuant to the Industry Regulatory Authority, Inc.
2008, the Commission approved an terms of the Plan, with respect to the (‘‘FINRA’’), NYSE Arca, Inc. (‘‘Arca’’),
amendment to the Plan to include The NASDAQ Stock Market LLC
applicable common rules specified in
NASDAQ as a participant.12 On October (‘‘Nasdaq’’), BOX Options Exchange LLC
Exhibit A to the Plan.
9, 2008, the Commission approved an (‘‘BOX’’), NASDAQ OMX BX, Inc.
amendment to the Plan to clarify that III. Proposed Amendment to the Plan (‘‘BX’’), NASDAQ OMX PHLX, Inc.
the term Regulatory Responsibility for (‘‘PHLX’’), Miami International
options position limits includes the On February 9, 2016, the parties Securities Exchange, LLC (‘‘MIAX’’)
examination responsibilities for the submitted a proposed amendment to the [and], ISE Gemini, LLC (‘‘Gemini’’), and
delta hedging exemption.13 On February Plan. The primary purpose of the ISE Mercury, LLC (‘‘Mercury’’) is made
25, 2010, the Commission approved an amendment is to add ISE Mercury as a this 10th day of October 2007, and as
amendment to the Plan to add BATS Participant to the Plan. The text of the amended the 31st day of March 2008,
and C2 as SRO participants and to proposed amended 17d–2 plan is as the 1st day of October 2008, the 3rd day
reflect the name changes of the follows (additions are italicized; of February 2010, the 25th day of April
American Stock Exchange LLC to the deletions are [bracketed]): 2012, and the 19th day of November
NYSE Amex LLC, and the Boston Stock * * * * * 2012, and the 30th day of May 2013,
Exchange, Inc. to the NASDAQ OMX and the 16th day of October 2015, and
BX, Inc.14 On May 11, 2012, the the 29th day of January 2016, pursuant
Commission approved an amendment to to Section 17(d) of the Securities
the Plan to add BOX as a participant to Exchange Act of 1934, as amended (the
the Plan.15 On December 5, 2012, the ‘‘Exchange Act’’), and Rule 17d–2
Commission approved an amendment to thereunder (‘‘Rule 17d–2’’), which
the Plan to add MIAX as a participant allows for a joint plan among self-
regulatory organizations (‘‘SROs’’) to
10 See Securities Exchange Act Release No. 12935
allocate regulatory obligations with
(October 28, 1976), 41 FR 49091 (November 8, respect to brokers or dealers that are
1976).
11 See Securities Exchange Act Release No. 56941 members of two or more of the parties
(December 11, 2007), 72 FR 71723 (December 18, to this Agreement (‘‘Common
2007) (File No. 4–551). Members’’). MKT, BATS, C2, CBOE,
12 See Securities Exchange Act Release No. 57649
EDGX, ISE Gemini, ISE, ISE Mercury,
(April 11, 2008), 73 FR 20976 (April 17, 2008) (File FINRA, Arca, Nasdaq, BOX, BX, PHLX,
No. 4–551). 16 See Securities Exchange Act Release No. 68362
mstockstill on DSK4VPTVN1PROD with NOTICES
13 See Securities Exchange Act Release No. 58765 and MIAX are collectively referred to
(December 5, 2012), 77 FR 73719 (December 11,
(October 9, 2008), 73 FR 62344 (October 20, 2008) herein as the ‘‘Participants’’ and
2012) (File No. 4–551).
(File No. 4–551). 17 See Securities Exchange Act Release No. 70052
individually, each a ‘‘Participant.’’ This
14 See Securities Exchange Act Release No. 61588
(July 26, 2013), 78 FR 46665 (August 1, 2013) (File
Agreement shall be administered by a
(February 25, 2010), 75 FR 9970 (March 4, 2010) committee known as the Options
(File No. 4–551). No. 4–551).
15 See Securities Exchange Act Release No. 66975 18 See Securities Exchange Act Release No. 76310 Surveillance Group (the ‘‘OSG’’ or
(May 11, 2012), 77 FR 29712 (May 18, 2010) (File (October 29, 2015), 80 FR 68354 (November 4, 2015) ‘‘Group’’), as described in Section V
No. 4–551). (File No. 4–551). hereof. Unless defined in this
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![Federal Register / Vol. 81, No. 34 / Monday, February 22, 2016 / Notices 8785
that such Participant will serve as DOSR Group except with the unanimous entered into on [June 21, 2013] October
for that Common Member. approval of all Participants. 8, 2015, and as may be amended from
XIV. This Agreement shall be effective Notwithstanding the foregoing, any time to time.
upon approval of the Commission. This national securities exchange registered
Agreement may only be amended in LIMITATION OF LIABILITY
with the SEC under Section 6(a) of the
writing duly approved by each Act or any national securities No Participant nor the Group nor any
Participant. All amendments to this association registered with the SEC of their respective directors, governors,
Agreement, excluding changes to under section 15A of the Act may officers, employees or representatives
Exhibits A, B and C, must be filed with become a Participant to this Agreement shall be liable to any other Participant
and approved by the Commission. provided that: (i) Such applicant has in this Agreement for any liability, loss
XV. Any Participant may manifest its adopted rules substantially similar to or damage resulting from or claimed to
intention to cancel its participation in the Common Rules, and received have resulted from any delays,
this Agreement at any time upon approval thereof from the SEC; (ii) such inaccuracies, errors or omissions with
providing written notice to (i) the Group applicant has provided each Participant respect to the provision of Regulatory
six months prior to the date of such with a signed statement whereby the Responsibility as provided hereby or for
cancellation, or such other period as all applicant agrees to be bound by the the failure to provide any such
the Participants may agree, and (ii) the terms of this Agreement to the same Regulatory Responsibility, except with
Commission. Upon receipt of the notice effect as though it had originally signed respect to such liability, loss or damages
the Group shall allocate, in accordance this Agreement and (iii) an amended as shall have been suffered by one or
with the provisions of this Agreement, agreement reflecting the addition of more of the Participants and caused by
those Common Members for which the such applicant as a Participant has been the willful misconduct of one or more
canceling Participant was the DOSR. of the other Participants or its respective
filed with and approved by the
The canceling Participant shall retain its directors, governors, officers, employees
Commission.
Regulatory Responsibility and other or representatives. No warranties,
rights, privileges and duties pursuant to XVIII. This Agreement is wholly
express or implied, are made by the
this Agreement until the Group has separate from the multiparty Agreement
Participants, individually or as a group,
completed the reallocation as described made pursuant to Rule 17d–2 by and
or by the OSG with respect to any
above, and the Commission has among the NYSE MKT LLC, the BATS
Regulatory Responsibility to be
approved the cancellation. Exchange, Inc., [the Boston Stock
performed hereunder.
XVI. The cancellation of its Exchange, Inc.] BOX Options Exchange,
participation in this Agreement by any LLC, the C2 Options Exchange, Inc., the RELIEF FROM RESPONSIBILITY
Participant shall not terminate this Chicago Board Options Exchange, Inc.,
Pursuant to Section 17(d)(1)(A) of the
Agreement as to the remaining the International Securities Exchange,
Exchange Act and Rule 17d–2, the
Participants. This Agreement will only LLC, Financial Industry Regulatory
Participants join in requesting the
terminate following notice to the Authority, The NASDAQ Stock Market
Commission, upon its approval of this
Commission, in writing, by the then LLC, [Inc.,] the New York Stock
Agreement or any part thereof, to relieve
Participants that they intend to Exchange, LLC, the NYSE Arca, Inc.,
the Participants that are party to this
terminate the Agreement and the [the Philadelphia Stock Exchange, Inc.]
Agreement and are not the DOSR as to
expiration of the applicable notice the NASDAQ OMX BX, Inc., the
a Common Member of any and all
period. Such notice shall be given at NASDAQ OMX PHLX, LLC, Miami
Regulatory Responsibility with respect
least six months prior to the intended International Securities Exchange, LLC,
to the matters allocated to the DOSR.
date of termination, or such other period ISE Gemini, LLC [and the Topaz
as all the Participants may agree. Such Exchange, LLC] and EDGX Exchange, * * * * *
termination will become effective upon Inc. involving the allocation of EXHIBIT A
Commission approval. regulatory responsibilities with respect
XVII. Participation in the Group shall to common members for compliance Options Surveillance Group 17d–2
be strictly limited to the Participants with common rules relating to the Agreement
and no other party shall have any right conduct by broker-dealers of accounts COMMON RULES as of [January 1]
to attend or otherwise participate in the for listed options or index warrants January 29, 2016
VIOLATION I—EXPIRING EXERCISE DECLARATIONS (EED)—FOR LISTED AND FLEX EQUITY OPTIONS
Frequency of
SRO Description of rule Exchange rule No. review
BATS ....................................... Exercise of Options Contracts ............................................... Rule 23.1 ............................... At Expiration.
BOX ......................................... Exercise of Options Contracts ............................................... Rule 9000 .............................. At Expiration.
C2 ............................................ Exercise of Options Contracts ............................................... Rule 11.1 ............................... At Expiration.
CBOE ...................................... Exercise of Options Contracts ............................................... Rule 11.1 ............................... At Expiration.
EDGX ...................................... Exercise of Options Contracts ............................................... Rule 23.1 ............................... At Expiration.
FINRA ...................................... Exercise of Options Contracts ............................................... Rule 2360(b)(23) .................... At Expiration.
ISE ........................................... Exercise of Options Contracts ............................................... Rule 1100 .............................. At Expiration.
mstockstill on DSK4VPTVN1PROD with NOTICES
ISE Gemini .............................. Exercise of Options Contracts ............................................... Rule 1100 .............................. At Expiration.
ISE Mercury ............................ Exercise of Options Contracts ............................................... Rule 1100 .............................. At Expiration.
MIAX ........................................ Exercise of Options Contracts ............................................... Rule 700 ................................ At Expiration.
Nasdaq .................................... Exercise of Options Contracts ............................................... Ch. VIII, Sect. 1 ..................... At Expiration.
Nasdaq OMX BX ..................... Exercise of Options Contracts ............................................... Ch. VII, Sect. 1 ...................... At Expiration.
Nasdaq OMX PHLX ................ Exercise of Equity Options Contracts .................................... Rule 1042 .............................. At Expiration.
NYSE Arca .............................. Exercise of Options Contracts ............................................... Rule 6.24 ............................... At Expiration.
NYSE MKT .............................. Exercise of Options Contracts ............................................... Rule 980 ................................ At Expiration.
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![Federal Register / Vol. 81, No. 34 / Monday, February 22, 2016 / Notices 8787
VIOLATION IV—OPTIONS CLEARING CORPORATION (OCC) ADJUSTMENT PROCESS
Description of rule Frequency of
SRO (as they apply to OCC Adjustments/By-laws Exchange rule No. review
(Article V, Section 1.01(a) and .02))
BATS ....................................... Adherence to Law .................................................................. Rule 18.1 ............................... Yearly.
BOX ......................................... Adherence to Law .................................................................. Rule 3010 .............................. Yearly.
C2 ............................................ Adherence to Law .................................................................. Rule 4.2 ................................. Yearly.
CBOE ...................................... Adherence to Law .................................................................. Rule 4.2 ................................. Yearly.
EDGX ...................................... Adherence to Law .................................................................. Rule 18.1 ............................... Yearly.
FINRA ...................................... Violation of By-Laws and Rules of FINRA or The OCC ........ Rule 2360(b)(21) .................... Yearly.
ISE ........................................... Adherence to Law .................................................................. Rule 401 ................................ Yearly.
ISE Gemini .............................. Adherence to Law .................................................................. Rule 401 ................................ Yearly.
ISE Mercury ............................ Adherence to Law .................................................................. Rule 401 ................................ Yearly.
MIAX ........................................ Adherence to Law .................................................................. Rule 300 ................................ Yearly.
Nasdaq .................................... Adherence to Law .................................................................. Ch. III, Sect. 1 ........................ Yearly.
Nasdaq OMX BX ..................... Adherence to Law .................................................................. Ch. III, Sect. 1 ........................ Yearly.
Nasdaq OMX PHLX ................ Violation of By-Laws and Rules of OCC ................................ Rule 1050 .............................. Yearly.
NYSE Arca .............................. Adherence to Law and Good Business Practice ................... Rule 11.1 ............................... Yearly.
NYSE MKT .............................. Business Conduct .................................................................. Rule 16 .................................. Yearly.
IV. Solicitation of Comments MKT, BATS, C2, CBOE, EDGX, Gemini, undue delay.19 In addition, the
Interested persons are invited to ISE, ISE Mercury, FINRA, Arca, Commission notes that the prior version
submit written data, views, and NASDAQ, BOX, BX, Phlx, and MIAX. of this Plan was published for comment,
arguments concerning the foregoing. All comments received will be posted and the Commission did not receive any
Comments may be submitted by any of without change; the Commission does comments thereon. Finally, the
the following methods: not edit personal identifying Commission does not believe that the
information from submissions. You amendment to the Plan raises any new
Electronic Comments should submit only information that regulatory issues that the Commission
• Use the Commission’s Internet you wish to make available publicly. All has not previously considered.
comment form (http://www.sec.gov/ submissions should refer to File
rules/sro.shtml); or Number 4–551 and should be submitted VI. Conclusion
• Send an email to rule-comments@ on or before March 14, 2016.
sec.gov. Please include File Number 4– This order gives effect to the amended
551 on the subject line. V. Discussion Plan submitted to the Commission that
is contained in File No. 4–551.
Paper Comments The Commission continues to believe
that the Plan, as proposed to be It is therefore ordered, pursuant to
• Send paper comments in triplicate Section 17(d) of the Act, that the Plan,
to Secretary, Securities and Exchange amended, is an achievement in
cooperation among the SRO as amended by and between MKT,
Commission, 100 F Street NE., BATS, C2, CBOE, EDGX, Gemini, ISE,
Washington, DC 20549–1090. participants. The Plan, as amended, will
reduce unnecessary regulatory ISE Mercury, FINRA, Arca, NASDAQ,
All submissions should refer to File BOX, BX, Phlx, and MIAX, filed with
duplication by allocating to the
Number 4–551. This file number should the Commission pursuant to Rule 17d–
be included on the subject line if email designated SRO the responsibility for
certain options-related market 2 on February 9, 2016 is hereby
is used. To help the Commission approved and declared effective.
process and review your comments surveillance matters that would
more efficiently, please use only one otherwise be performed by multiple It is further ordered that those SRO
method. The Commission will post all SROs. The Plan promotes efficiency by participants that are not the DOSR as to
comments on the Commission’s Internet reducing costs to firms that are members a particular common member are
Web site (http://www.sec.gov/rules/ of more than one of the SRO relieved of those regulatory
sro.shtml). Copies of the submission, all participants. In addition, because the responsibilities allocated to the common
subsequent amendments, all written SRO participants coordinate their member’s DOSR under the amended
statements with respect to the proposed regulatory functions in accordance with Plan to the extent of such allocation.
plan that are filed with the Commission, the Plan, the Plan promotes, and will
continue to promote, investor For the Commission, by the Division of
and all written communications relating Trading and Markets, pursuant to delegated
to the proposed plan between the protection. Under paragraph (c) of Rule
authority.20
Commission and any person, other than 17d–2, the Commission may, after
appropriate notice and comment, Brent J. Fields,
those that may be withheld from the
public in accordance with the declare a plan, or any part of a plan, Secretary.
provisions of 5 U.S.C. 552, will be effective. In this instance, the [FR Doc. 2016–03534 Filed 2–19–16; 8:45 am]
Commission believes that appropriate
mstockstill on DSK4VPTVN1PROD with NOTICES
available for Web site viewing and BILLING CODE 8011–01–P
printing in the Commission’s Public notice and comment can take place after
Reference Room, 100 F Street NE., the proposed amendment is effective.
19 On January 29, 2016, the Commission approved
Washington, DC 20549, on official The primary purpose of the amendment
ISE Mercury’s application for registration as a
business days between the hours of is to add ISE Mercury as a Participant
national securities exchange. See Securities
10:00 a.m. and 3:00 p.m. Copies of the to the Plan. By declaring it effective Exchange Act Release No. 76998, 81 FR 6066
plan also will be available for inspection today, the amended Plan can become (February 4, 2016).
and copying at the principal offices of effective and be implemented without 20 17 CFR 200.30–3(a)(34).
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Document Created: 2016-02-19 23:56:42
Document Modified: 2016-02-19 23:56:42
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 81 FR 8781 |
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