81 FR 95216 - Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Exchange Rules in Connection With Business Continuity and Disaster Recovery Plans Testing Requirements
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 248 (December 27, 2016)
Federal Register Volume 81, Issue 248 (December 27, 2016)
| Page Range | 95216-95219 | |
| FR Document | 2016-31117 |
[Federal Register Volume 81, Number 248 (Tuesday, December 27, 2016)] [Notices] [Pages 95216-95219] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-31117] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79626; File No. SR-ISEGemini-2016-24] Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Exchange Rules in Connection With Business Continuity and Disaster Recovery Plans Testing Requirements December 20, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on December 15, 2016, ISE Gemini, LLC (``ISE Gemini'' or ``Exchange'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend ISE Gemini Rule 803 at Supplementary Material .02 in connection with business continuity and disaster recovery plans (``BC/DR Plans'') testing requirements for certain Members in connection with Regulation Systems Compliance and Integrity (``Regulation SCI'').\3\ --------------------------------------------------------------------------- \3\ See Securities Exchange Act Release No. 73639 (November 19, 2014), 79 FR 72252 (December 5, 2014) (``SCI Adopting Release''). --------------------------------------------------------------------------- The text of the proposed rule change is available on the Exchange's Web site at www.ise.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend ISE Gemini Rule 803 at Supplementary Material .02 to conform the current rule text regarding BC/DR Plans testing requirements with that of NASDAQ PHLX LLC (``Phlx'') Rule 926,\4\ The NASDAQ Stock Market LLC (``Nasdaq'') [[Page 95217]] Rule 1170 \5\ and NASDAQ BX, Inc. (``BX'') Rule 1170.\6\ --------------------------------------------------------------------------- \4\ Phlx Rule 926 is titled ``The Exchange's Business Continuity and Disaster Recovery Plan Testing Requirements for Member Organizations and PSX Participants Pursuant to Regulation SCI.'' \5\ Nasdaq Rule 1170 is titled ``Nasdaq's Business Continuity and Disaster Recovery Plan Testing Requirements for Members and Options Participants Pursuant to Regulation SCI.'' \6\ BX Rule 1170 is titled ``The Exchange's Business Continuity and Disaster Recovery Plan Testing Requirements for Members and Options Participants Pursuant to Regulation SCI.'' --------------------------------------------------------------------------- Background As adopted by the Commission, Regulation SCI applies to certain self-regulatory organizations (including the Exchange), alternative trading systems (``ATSs''), plan processors, and exempt clearing agencies (collectively, ``SCI entities''), and requires these SCI entities to comply with requirements with respect to the automated systems central to the performance of their regulated activities. Among the requirements of Regulation SCI is Rule 1001(a)(2)(v), which requires the Exchange and other SCI entities to maintain ``[b]usiness continuity and disaster recovery plans that include maintaining backup and recovery capabilities sufficiently resilient and geographically diverse and that are reasonably designed to achieve next business day resumption of trading and two-hour resumption of critical SCI systems following a wide-scale disruption.'' \7\ The Exchange has put extensive time and resources toward planning for system failures and already maintains robust BC/DR Plans consistent with the Rule. --------------------------------------------------------------------------- \7\ 17 CFR 242.1001(a)(2)(v). --------------------------------------------------------------------------- With respect to an SCI entity's BC/DR Plans, including its backup systems, paragraph (a) of Rule 1004 of Regulation SCI requires each SCI entity to: ``[e]stablish standards for the designation of those members or participants that the SCI entity reasonably determines are, taken as a whole, the minimum necessary for the maintenance of fair and orderly markets in the event of the activation of such plans.'' \8\ Paragraph (b) of Rule 1004 of Regulation SCI further requires each SCI entity to ``[d]esignate members or participants pursuant to the standards established in paragraph (a) of [Rule 1004] and require participation by such designated members or participants in scheduled functional and performance testing of the operation of such plans, in the manner and frequency specified by the SCI entity, provided that such frequency shall not be less than once every 12 months.'' \9\ --------------------------------------------------------------------------- \8\ 17 CFR 242.1004(a). \9\ 17 CFR 242.1004(b). --------------------------------------------------------------------------- Proposal As set forth below, in connection with Regulation SCI, the Exchange is proposing to amend ISE Gemini Rule 803 at Supplementary Material .02 to conform with Phlx Rule 926, Nasdaq Rule 1170 and BX Rule 1170. Phlx Rule 926, Nasdaq Rule 1170 and BX Rule 1170 are similar to ISE Gemini Rule 803 at Supplementary Material .02, which incorporates the requirements of Rule 1004 of Regulation SCI as part of the Exchange's rules, and sets forth the notice, selection criteria and obligations of Members with respect to BC/DR Plans testing. The Exchange proposes to adopt rule text from Phlx Rule 926(a), Nasdaq Rule 1170(a) and BX Rule 1170(a), which will set forth the Exchange's obligations with respect to the selection of Members for testing. Specifically, the proposed rule will require the Exchange to ``[e]stablish standards for the designation of those Members that the Exchange reasonably determines are, taken as a whole, the minimum necessary for the maintenance of fair and orderly markets in the event of the activation of such plans.'' The proposed rule further provides that ``[s]uch standards may include volume-based and/or market share- based criteria, and may be adjusted from time to time by the Exchange.'' Lastly, the proposed rule will require the Exchange to provide public notice of the standards that it adopts. The Exchange is proposing to revise Rule 803 at Supplementary Material .02, which will set forth the obligations of the Exchange and its Members with respect to testing, similar to Phlx Rule 926(b), Nasdaq Rule 1170(b) and BX Rule 1170(b). Specifically, the proposed rule will require the Exchange to ``designate Members pursuant to the standards established in paragraph (a) of this rule and require participation by such designated Members in scheduled functional and performance testing of the operation of such plans, in the manner and frequency specified by the Exchange, provided that such frequency shall not be less than once every 12 months.'' Moreover, the proposed rule will require the Exchange to provide at least 6 months prior notice to Members that are designated for mandatory testing. Lastly, the proposed rule will provide notice that participation in testing is a condition of membership for Members that are designated for testing. Today, ISE Gemini's Rule similarly sets forth the Exchange's obligations with respect to the selection of Members for testing. Like the proposed rule change, these standards for the designation of those Members must be reasonably determined by the Exchange, when taken as a whole, to have the minimum necessary for the maintenance of fair and orderly markets in the event of the activation of such plans. ISE Gemini's Rule requires the Exchange to provide public notice of the standards that it adopts. Further, ISE Gemini's Rule requires Primary Market Makers (``PMMs'') to participate in scheduled functional and performance testing of the operation of such plans with a frequency of not less than once every 12 months. These standards remain substantially the same under the proposed rule change. Today, ISE Gemini's Rule requires that at least 3 months prior to a scheduled functional and performance testing of the Exchange's business continuity and disaster recovery plans, the Exchange publishes the criteria to be used by the Exchange to determine which PMMs will be required to participate in such testing, and notifies those PMMs that are required to participate based on such criteria. The Phlx, Nasdaq and BX rules require at least 6 months prior notice to Members that are designated for mandatory testing. This change would expand the notice period. Also, ISE Gemini has specific provisions for PMMs with respect to selection for testing. Today, ISE Gemini provides that PMMs that have been determined by the Exchange to contribute a meaningful percentage of the Exchange's overall volume, measured on a quarterly or monthly basis, will be required to participate in scheduled functional and performance testing. The Exchange may also consider other factors in determining the PMMs that will be required to participate in scheduled functional and performance testing, including average daily volume traded on the Exchange measured on a quarterly or monthly basis, or PMMs who collectively account for a certain percentage of market share on the Exchange. The proposed rule text does not require a different treatment for PMMs as compared to other market participants. Today, Phlx, Nasdaq and BX select market participants based on volume and/or market share, regardless of market making activity. The proposed rule text would not specifically mandate PMMs however, given the importance of market makers on the Exchange and the volume they traditionally trade, they are likely to be required to participate in business continuity and disaster recovery plans under the proposed rule change as they are today. The Exchange would continue to encourage all Members to connect to the Exchange's backup systems and to [[Page 95218]] participate in testing of such systems; \10\ however, certain Members will be obligated to participate in BC/DR Plans testing. In adopting the rule text of Phlx Rule 926, Nasdaq Rule 1170 and BX Rule 1170, the Exchange will require mandatory participation in BC/DR Plans testing by those Members that the Exchange reasonably determines are, taken as a whole, the minimum necessary for the maintenance of fair and orderly markets in the event of the activation of such plans on the Exchange. The Exchange believes that using overall participation on its markets (by volume and/or market share) as a measure to select Members for mandatory participation in BC/DR Plans testing is a reasonable means by which it can determine which Members are necessary for the maintenance of fair and orderly markets in the event of the activation of such plans. For each BC/DR Plans test cycle, the Exchange will select the top five Members on the Exchange based on the Exchange's measure of overall participation. The Exchange notes that when considering volume, it will exclude contracts traded on PrecISE[supreg].\11\ The Exchange has provided notice of the initial selection criteria and measurement period to its Members.\12\ All notices concerning BC/DR Plans testing will be posted on the Exchange's Web site. --------------------------------------------------------------------------- \10\ In this regard, the Exchange will allow any Member to participate in the testing of the Exchange's BC/DR Plans, which is consistent with the BC/DR Plans. See SCI Adopting Release, supra note 3 at 72350. The Exchange will provide instructions on how a Member must inform the Exchange of its interest in participating in an upcoming BC/DR Plans test via the announcement of the test date. A Member must provide the Exchange notice of its interest to participate at least a week prior to the test date and must have the appropriate connection for testing in place. \11\ PrecISE is [sic] front-end order and execution management system for trading options and stock-option combinations. \12\ See ISE Gemini Circular 2016-08. --------------------------------------------------------------------------- The Exchange is proposing to initially select Members with the highest levels of trading volume on the Exchange over four calendar months (``Measurement Period'') as mandatory testing for Members [sic].\13\ Specifically, the Measurement Period will be the four calendar months of trading immediately prior to the Exchange's announcement of the next BC/DR Plans test date. The Measurement Period will always begin at a point after the Exchange announces the criteria to be used in the next BC/DR Plans test. By way of example, if on October 6, 2017 the Exchange announced the BC/DR Plans test selection criteria and on March 2, 2018 the Exchange announced a BC/DR Plans test date of September 8, 2018, the Measurement Period used to select Member subject to mandatory testing would be November 2017 through February 2018. Members not obligated to participate that wish to participate in this test must inform the Exchange no later than September 1, 2018, based on the aforementioned timeline.\14\ --------------------------------------------------------------------------- \13\ The Exchange may change the total number of Members selected from time to time. \14\ See supra note 10. --------------------------------------------------------------------------- The proposed rule change is intended to provide consistency across the six options exchanges operated by Nasdaq, Inc. in regard to the standards established for the designation of Members that are required to participate in the Exchange's business continuity and disaster recovery testing. In turn, participants that are Members on multiple exchanges operated by Nasdaq, Inc. will be provided greater uniformity and ease of testing with the establishment of consistent standards across the multiple Nasdaq exchanges. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6 of the Act,\15\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\16\ in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest; and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The proposal will ensure that the Members necessary to ensure the maintenance of fair and orderly markets are properly designated consistent with Rule 1004 of Regulation SCI. Specifically, the proposal will adopt clear and objective criteria with respect to the designation of Members that are required to participate in the testing of the Exchange's BC/DR Plans, as well as appropriate notification regarding such designation. As set forth in the SCI Adopting Release, ``SROs have the authority, and legal responsibility, under Section 6 of the Exchange Act, to adopt and enforce rules (including rules to comply with Regulation SCI's requirements relating to BC/DR testing) applicable to their members or participants that are designed to, among other things, foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest.'' \17\ The Exchange believes that this proposal is consistent with such authority and legal responsibility. --------------------------------------------------------------------------- \15\ 15 U.S.C. 78f. \16\ 15 U.S.C. 78f(b)(5). \17\ See SCI Adopting Release, supra note 3 at 72350. --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. To the contrary, the proposal is not a competitive proposal but rather is necessary for the Exchange's compliance with Regulation SCI. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act \18\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\19\ --------------------------------------------------------------------------- \18\ 15 U.S.C. 78s(b)(3)(A)(iii). \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings [[Page 95219]] to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-ISEGemini-2016-24 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-ISEGemini-2016-24. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISEGemini-2016-24 and should be submitted on or before January 17, 2017. --------------------------------------------------------------------------- \20\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\20\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2016-31117 Filed 12-23-16; 8:45 am] BILLING CODE 8011-01-P
![95216 Federal Register / Vol. 81, No. 248 / Tuesday, December 27, 2016 / Notices
forego the product altogether. This All submissions should refer to File notice is hereby given that on December
competition for customers provides Number SR–NASDAQ–2016–168. This 15, 2016, ISE Gemini, LLC (‘‘ISE
another check on the price for short sale file number should be included on the Gemini’’ or ‘‘Exchange’’) filed with the
data. subject line if email is used. To help the Securities and Exchange Commission
In summary, market forces constrain Commission process and review your (‘‘SEC’’ or ‘‘Commission’’) the proposed
the price of short sale data through comments more efficiently, please use rule change as described in Items I, II,
competition for order flow, competition only one method. The Commission will and III, below, which Items have been
from substitute products, and in the post all comments on the Commission’s prepared by the Exchange. The
competition among distributors for Internet Web site (http://www.sec.gov/ Commission is publishing this notice to
customers. For these reasons, the rules/sro.shtml). Copies of the solicit comments on the proposed rule
Exchange has provided a substantial submission, all subsequent change from interested persons.
basis demonstrating that the fee is amendments, all written statements
equitable, fair, reasonable, and not with respect to the proposed rule I. Self-Regulatory Organization’s
unreasonably discriminatory, and change that are filed with the Statement of the Terms of Substance of
therefore consistent with and in Commission, and all written the Proposed Rule Change
furtherance of the purposes of the communications relating to the
proposed rule change between the The Exchange proposes to amend ISE
Exchange Act.
Commission and any person, other than Gemini Rule 803 at Supplementary
C. Self-Regulatory Organization’s those that may be withheld from the Material .02 in connection with
Statement on Comments on the public in accordance with the business continuity and disaster
Proposed Rule Change Received From provisions of 5 U.S.C. 552, will be recovery plans (‘‘BC/DR Plans’’) testing
Members, Participants, or Others available for Web site viewing and requirements for certain Members in
No written comments were either printing in the Commission’s Public connection with Regulation Systems
solicited or received. Reference Room, 100 F Street NE., Compliance and Integrity (‘‘Regulation
Washington, DC 20549, on official SCI’’).3
III. Date of Effectiveness of the business days between the hours of The text of the proposed rule change
Proposed Rule Change and Timing for 10:00 a.m. and 3:00 p.m. Copies of the is available on the Exchange’s Web site
Commission Action filing also will be available for at www.ise.com, at the principal office
The foregoing rule change has become inspection and copying at the principal of the Exchange, and at the
effective pursuant to Section office of the Exchange. All comments Commission’s Public Reference Room.
19(b)(3)(A)(ii) of the Act.10 received will be posted without change;
At any time within 60 days of the the Commission does not edit personal II. Self-Regulatory Organization’s
filing of the proposed rule change, the identifying information from Statement of the Purpose of, and
Commission summarily may submissions. You should submit only Statutory Basis for, the Proposed Rule
temporarily suspend such rule change if information that you wish to make Change
it appears to the Commission that such available publicly. All submissions
should refer to File Number SR– In its filing with the Commission, the
action is: (i) Necessary or appropriate in
NASDAQ–2016–168 and should be Exchange included statements
the public interest; (ii) for the protection
submitted on or before January 17, 2017. concerning the purpose of and basis for
of investors; or (iii) otherwise in
the proposed rule change and discussed
furtherance of the purposes of the Act. For the Commission, by the Division of
If the Commission takes such action, the any comments it received on the
Trading and Markets, pursuant to delegated
Commission shall institute proceedings authority.11
proposed rule change. The text of these
to determine whether the proposed rule statements may be examined at the
Eduardo A. Aleman,
should be approved or disapproved. places specified in Item IV below. The
Assistant Secretary.
Exchange has prepared summaries, set
IV. Solicitation of Comments [FR Doc. 2016–31109 Filed 12–23–16; 8:45 am]
forth in sections A, B, and C below, of
BILLING CODE 8011–01–P the most significant aspects of such
Interested persons are invited to
submit written data, views, and statements.
arguments concerning the foregoing, SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s
including whether the proposed rule COMMISSION Statement of the Purpose of, and
change is consistent with the Act. Statutory Basis for, the Proposed Rule
Comments may be submitted by any of [Release No. 34–79626; File No. SR–
ISEGemini–2016–24] Change
the following methods:
Self-Regulatory Organizations; ISE 1. Purpose
Electronic Comments
Gemini, LLC; Notice of Filing and
• Use the Commission’s Internet The Exchange proposes to amend ISE
Immediate Effectiveness of Proposed Gemini Rule 803 at Supplementary
comment form (http://www.sec.gov/
Rule Change To Amend Exchange Material .02 to conform the current rule
rules/sro.shtml); or
Rules in Connection With Business
• Send an email to rule-comments@ text regarding BC/DR Plans testing
Continuity and Disaster Recovery requirements with that of NASDAQ
sec.gov. Please include File Number SR–
Plans Testing Requirements PHLX LLC (‘‘Phlx’’) Rule 926,4 The
asabaliauskas on DSK3SPTVN1PROD with NOTICES
NASDAQ–2016–168 on the subject line.
December 20, 2016. NASDAQ Stock Market LLC (‘‘Nasdaq’’)
Paper Comments
Pursuant to Section 19(b)(1) of the
• Send paper comments in triplicate Securities Exchange Act of 1934 3 See Securities Exchange Act Release No. 73639
to Brent J. Fields, Secretary, Securities (November 19, 2014), 79 FR 72252 (December 5,
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 2014) (‘‘SCI Adopting Release’’).
and Exchange Commission, 100 F Street 4 Phlx Rule 926 is titled ‘‘The Exchange’s
NE., Washington, DC 20549–1090. 11 17 CFR 200.30–3(a)(12). Business Continuity and Disaster Recovery Plan
1 15 U.S.C. 78s(b)(1). Testing Requirements for Member Organizations
10 15 U.S.C. 78s(b)(3)(A)(ii). 2 17 CFR 240.19b–4. and PSX Participants Pursuant to Regulation SCI.’’
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![Federal Register / Vol. 81, No. 248 / Tuesday, December 27, 2016 / Notices 95217
Rule 1170 5 and NASDAQ BX, Inc. Proposal designation of those Members must be
(‘‘BX’’) Rule 1170.6 As set forth below, in connection with reasonably determined by the Exchange,
Regulation SCI, the Exchange is when taken as a whole, to have the
Background minimum necessary for the
proposing to amend ISE Gemini Rule
As adopted by the Commission, 803 at Supplementary Material .02 to maintenance of fair and orderly markets
Regulation SCI applies to certain self- conform with Phlx Rule 926, Nasdaq in the event of the activation of such
Rule 1170 and BX Rule 1170. Phlx Rule plans. ISE Gemini’s Rule requires the
regulatory organizations (including the
926, Nasdaq Rule 1170 and BX Rule Exchange to provide public notice of the
Exchange), alternative trading systems
1170 are similar to ISE Gemini Rule 803 standards that it adopts. Further, ISE
(‘‘ATSs’’), plan processors, and exempt
at Supplementary Material .02, which Gemini’s Rule requires Primary Market
clearing agencies (collectively, ‘‘SCI Makers (‘‘PMMs’’) to participate in
entities’’), and requires these SCI incorporates the requirements of Rule
scheduled functional and performance
entities to comply with requirements 1004 of Regulation SCI as part of the
testing of the operation of such plans
with respect to the automated systems Exchange’s rules, and sets forth the
with a frequency of not less than once
central to the performance of their notice, selection criteria and obligations
every 12 months. These standards
regulated activities. Among the of Members with respect to BC/DR Plans
remain substantially the same under the
requirements of Regulation SCI is Rule testing.
proposed rule change.
1001(a)(2)(v), which requires the The Exchange proposes to adopt rule
Today, ISE Gemini’s Rule requires
Exchange and other SCI entities to text from Phlx Rule 926(a), Nasdaq Rule that at least 3 months prior to a
maintain ‘‘[b]usiness continuity and 1170(a) and BX Rule 1170(a), which will scheduled functional and performance
disaster recovery plans that include set forth the Exchange’s obligations with testing of the Exchange’s business
maintaining backup and recovery respect to the selection of Members for continuity and disaster recovery plans,
capabilities sufficiently resilient and testing. Specifically, the proposed rule the Exchange publishes the criteria to be
geographically diverse and that are will require the Exchange to ‘‘[e]stablish used by the Exchange to determine
standards for the designation of those which PMMs will be required to
reasonably designed to achieve next
Members that the Exchange reasonably participate in such testing, and notifies
business day resumption of trading and
determines are, taken as a whole, the those PMMs that are required to
two-hour resumption of critical SCI
minimum necessary for the participate based on such criteria. The
systems following a wide-scale
maintenance of fair and orderly markets Phlx, Nasdaq and BX rules require at
disruption.’’ 7 The Exchange has put
in the event of the activation of such least 6 months prior notice to Members
extensive time and resources toward plans.’’ The proposed rule further
planning for system failures and already that are designated for mandatory
provides that ‘‘[s]uch standards may testing. This change would expand the
maintains robust BC/DR Plans include volume-based and/or market
consistent with the Rule. notice period. Also, ISE Gemini has
share-based criteria, and may be specific provisions for PMMs with
With respect to an SCI entity’s BC/DR adjusted from time to time by the respect to selection for testing. Today,
Plans, including its backup systems, Exchange.’’ Lastly, the proposed rule ISE Gemini provides that PMMs that
paragraph (a) of Rule 1004 of Regulation will require the Exchange to provide have been determined by the Exchange
SCI requires each SCI entity to: public notice of the standards that it to contribute a meaningful percentage of
‘‘[e]stablish standards for the adopts. the Exchange’s overall volume,
designation of those members or The Exchange is proposing to revise measured on a quarterly or monthly
participants that the SCI entity Rule 803 at Supplementary Material .02, basis, will be required to participate in
reasonably determines are, taken as a which will set forth the obligations of scheduled functional and performance
whole, the minimum necessary for the the Exchange and its Members with testing. The Exchange may also consider
maintenance of fair and orderly markets respect to testing, similar to Phlx Rule other factors in determining the PMMs
in the event of the activation of such 926(b), Nasdaq Rule 1170(b) and BX that will be required to participate in
plans.’’ 8 Paragraph (b) of Rule 1004 of Rule 1170(b). Specifically, the proposed scheduled functional and performance
Regulation SCI further requires each SCI rule will require the Exchange to testing, including average daily volume
entity to ‘‘[d]esignate members or ‘‘designate Members pursuant to the traded on the Exchange measured on a
participants pursuant to the standards standards established in paragraph (a) of quarterly or monthly basis, or PMMs
established in paragraph (a) of [Rule this rule and require participation by who collectively account for a certain
1004] and require participation by such such designated Members in scheduled percentage of market share on the
designated members or participants in functional and performance testing of Exchange. The proposed rule text does
scheduled functional and performance the operation of such plans, in the not require a different treatment for
testing of the operation of such plans, in manner and frequency specified by the PMMs as compared to other market
the manner and frequency specified by Exchange, provided that such frequency participants. Today, Phlx, Nasdaq and
the SCI entity, provided that such shall not be less than once every 12 BX select market participants based on
frequency shall not be less than once months.’’ Moreover, the proposed rule volume and/or market share, regardless
will require the Exchange to provide at of market making activity. The proposed
every 12 months.’’ 9
least 6 months prior notice to Members rule text would not specifically mandate
5 Nasdaq Rule 1170 is titled ‘‘Nasdaq’s Business
that are designated for mandatory PMMs however, given the importance of
testing. Lastly, the proposed rule will
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Continuity and Disaster Recovery Plan Testing market makers on the Exchange and the
Requirements for Members and Options provide notice that participation in volume they traditionally trade, they are
Participants Pursuant to Regulation SCI.’’ testing is a condition of membership for likely to be required to participate in
6 BX Rule 1170 is titled ‘‘The Exchange’s Business
Members that are designated for testing. business continuity and disaster
Continuity and Disaster Recovery Plan Testing Today, ISE Gemini’s Rule similarly
Requirements for Members and Options
recovery plans under the proposed rule
Participants Pursuant to Regulation SCI.’’ sets forth the Exchange’s obligations change as they are today.
7 17 CFR 242.1001(a)(2)(v). with respect to the selection of Members The Exchange would continue to
8 17 CFR 242.1004(a). for testing. Like the proposed rule encourage all Members to connect to the
9 17 CFR 242.1004(b). change, these standards for the Exchange’s backup systems and to
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participate in testing of such systems; 10 test date of September 8, 2018, the other things, foster cooperation and
however, certain Members will be Measurement Period used to select coordination with persons engaged in
obligated to participate in BC/DR Plans Member subject to mandatory testing regulating, clearing, settling, processing
testing. In adopting the rule text of Phlx would be November 2017 through information with respect to, and
Rule 926, Nasdaq Rule 1170 and BX February 2018. Members not obligated facilitating transactions in securities, to
Rule 1170, the Exchange will require to participate that wish to participate in remove impediments to and perfect the
mandatory participation in BC/DR Plans this test must inform the Exchange no mechanism of a free and open market
testing by those Members that the later than September 1, 2018, based on and a national market system, and, in
Exchange reasonably determines are, the aforementioned timeline.14 general, to protect investors and the
taken as a whole, the minimum The proposed rule change is intended public interest.’’ 17 The Exchange
necessary for the maintenance of fair to provide consistency across the six believes that this proposal is consistent
and orderly markets in the event of the options exchanges operated by Nasdaq, with such authority and legal
activation of such plans on the Inc. in regard to the standards responsibility.
Exchange. The Exchange believes that established for the designation of
Members that are required to participate B. Self-Regulatory Organization’s
using overall participation on its
in the Exchange’s business continuity Statement on Burden on Competition
markets (by volume and/or market
share) as a measure to select Members and disaster recovery testing. In turn, The Exchange does not believe that
for mandatory participation in BC/DR participants that are Members on the proposed rule change will result in
Plans testing is a reasonable means by multiple exchanges operated by Nasdaq, any burden on competition that is not
which it can determine which Members Inc. will be provided greater uniformity necessary or appropriate in furtherance
are necessary for the maintenance of fair and ease of testing with the of the purposes of the Act, as amended.
and orderly markets in the event of the establishment of consistent standards To the contrary, the proposal is not a
activation of such plans. For each BC/ across the multiple Nasdaq exchanges. competitive proposal but rather is
DR Plans test cycle, the Exchange will necessary for the Exchange’s
2. Statutory Basis compliance with Regulation SCI.
select the top five Members on the
Exchange based on the Exchange’s The Exchange believes that the
proposed rule change is consistent with C. Self-Regulatory Organization’s
measure of overall participation. The Statement on Comments on the
Exchange notes that when considering Section 6 of the Act,15 in general, and
furthers the objectives of Section 6(b)(5) Proposed Rule Change Received From
volume, it will exclude contracts traded Members, Participants, or Others
on PrecISE®.11 The Exchange has of the Act,16 in particular, in that it is
provided notice of the initial selection designed to prevent fraudulent and No written comments were either
criteria and measurement period to its manipulative acts and practices, to solicited or received.
Members.12 All notices concerning BC/ promote just and equitable principles of III. Date of Effectiveness of the
DR Plans testing will be posted on the trade, to foster cooperation and Proposed Rule Change and Timing for
Exchange’s Web site. coordination with persons engaged in Commission Action
The Exchange is proposing to initially regulating, clearing, settling, processing
select Members with the highest levels information with respect to, and Because the foregoing proposed rule
of trading volume on the Exchange over facilitating transactions in securities, to change does not: (i) Significantly affect
four calendar months (‘‘Measurement remove impediments to and perfect the the protection of investors or the public
Period’’) as mandatory testing for mechanism of a free and open market interest; (ii) impose any significant
Members [sic].13 Specifically, the and a national market system, and, in burden on competition; and (iii) become
Measurement Period will be the four general, to protect investors and the operative for 30 days from the date on
calendar months of trading immediately public interest; and is not designed to which it was filed, or such shorter time
prior to the Exchange’s announcement permit unfair discrimination between as the Commission may designate, it has
of the next BC/DR Plans test date. The customers, issuers, brokers, or dealers. become effective pursuant to Section
Measurement Period will always begin The proposal will ensure that the 19(b)(3)(A)(iii) of the Act 18 and
at a point after the Exchange announces Members necessary to ensure the subparagraph (f)(6) of Rule 19b–4
the criteria to be used in the next BC/ maintenance of fair and orderly markets thereunder.19
DR Plans test. By way of example, if on are properly designated consistent with At any time within 60 days of the
October 6, 2017 the Exchange Rule 1004 of Regulation SCI. filing of the proposed rule change, the
announced the BC/DR Plans test Specifically, the proposal will adopt Commission summarily may
selection criteria and on March 2, 2018 clear and objective criteria with respect temporarily suspend such rule change if
the Exchange announced a BC/DR Plans to the designation of Members that are it appears to the Commission that such
required to participate in the testing of action is: (i) Necessary or appropriate in
10 In this regard, the Exchange will allow any
the Exchange’s BC/DR Plans, as well as the public interest; (ii) for the protection
Member to participate in the testing of the appropriate notification regarding such of investors; or (iii) otherwise in
Exchange’s BC/DR Plans, which is consistent with
designation. As set forth in the SCI furtherance of the purposes of the Act.
the BC/DR Plans. See SCI Adopting Release, supra If the Commission takes such action, the
note 3 at 72350. The Exchange will provide Adopting Release, ‘‘SROs have the
instructions on how a Member must inform the authority, and legal responsibility, Commission shall institute proceedings
Exchange of its interest in participating in an
upcoming BC/DR Plans test via the announcement
under Section 6 of the Exchange Act, to 17 See SCI Adopting Release, supra note 3 at
asabaliauskas on DSK3SPTVN1PROD with NOTICES
of the test date. A Member must provide the adopt and enforce rules (including rules 72350.
Exchange notice of its interest to participate at least to comply with Regulation SCI’s 18 15 U.S.C. 78s(b)(3)(A)(iii).
a week prior to the test date and must have the requirements relating to BC/DR testing) 19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
appropriate connection for testing in place.
11 PrecISE is [sic] front-end order and execution
applicable to their members or 4(f)(6) requires a self-regulatory organization to give
participants that are designed to, among the Commission written notice of its intent to file
management system for trading options and stock- the proposed rule change at least five business days
option combinations. prior to the date of filing of the proposed rule
12 See ISE Gemini Circular 2016–08. 14 See supra note 10. change, or such shorter time as designated by the
13 The Exchange may change the total number of 15 15 U.S.C. 78f. Commission. The Exchange has satisfied this
Members selected from time to time. 16 15 U.S.C. 78f(b)(5). requirement.
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![Federal Register / Vol. 81, No. 248 / Tuesday, December 27, 2016 / Notices 95219
to determine whether the proposed rule For the Commission, by the Division of the most significant aspects of such
should be approved or disapproved. Trading and Markets, pursuant to delegated statements.
authority.20
IV. Solicitation of Comments Eduardo A. Aleman, A. Self-Regulatory Organization’s
Assistant Secretary.
Statement of the Purpose of, and the
Interested persons are invited to Statutory Basis for, the Proposed Rule
submit written data, views, and [FR Doc. 2016–31117 Filed 12–23–16; 8:45 am]
Change
arguments concerning the foregoing, BILLING CODE 8011–01–P
including whether the proposed rule 1. Purpose
change is consistent with the Act. The Exchange proposes to adopt Rule
Comments may be submitted by any of SECURITIES AND EXCHANGE 6.56 (Compression Forums) to describe
the following methods: COMMISSION the Exchange’s ‘‘compression forum’’
process. Under proposed Rule 6.56, the
Electronic Comments [Release No. 34–79610; File No. SR–CBOE– Exchange would facilitate closing-only
2016–090] transactions in series of S&P 500(R)
• Use the Commission’s Internet
Index (‘‘SPX’’) options on the final three
comment form (http://www.sec.gov/ Self-Regulatory Organizations;
trading days of each calendar month as
rules/sro.shtml); or Chicago Board Options Exchange,
described below.
• Send an email to rule-comments@ Incorporated; Notice of Filing and
sec.gov. Please include File Number SR– Immediate Effectiveness of a Proposed Background
ISEGemini–2016–24 on the subject line. Rule Change Relating to Compression The Exchange’s proposal is intended
of S&P 500(R) Index Options Positions to provide a procedure for Trading
Paper Comments Permit Holders (‘‘TPHs’’) to efficiently
December 20, 2016.
• Send paper comments in triplicate reduce open positions in series of SPX
Pursuant to Section 19(b)(1) of the
to Secretary, Securities and Exchange options at the end of each calendar
Securities Exchange Act of 1934
Commission, 100 F Street NE., month in order to mitigate the effects of
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
capital constraints on market
Washington, DC 20549–1090. notice is hereby given that on December
participants and help ensure continued
15, 2016, Chicago Board Options
All submissions should refer to File depth of liquidity in the SPX options
Exchange, Incorporated (‘‘CBOE’’ or the
Number SR–ISEGemini–2016–24. This market.
‘‘Exchange’’) filed with the Securities SEC Rule 15c3–1 (Net Capital
file number should be included on the
and Exchange Commission Requirements for Brokers or Dealers)
subject line if email is used. To help the
(‘‘Commission’’) the proposed rule (‘‘Net Capital Rules’’) requires that every
Commission process and review your
change as described in Items I and II registered broker-dealer maintain
comments more efficiently, please use
below, which Items have been prepared certain specified minimum levels of
only one method. The Commission will
by the Exchange. The Commission is capital.3 The Net Capital Rules are
post all comments on the Commission’s
publishing this notice to solicit designed to protect securities customers,
Internet Web site (http://www.sec.gov/ comments on the proposed rule change
rules/sro.shtml). Copies of the counterparties, and creditors by
from interested persons. requiring that broker-dealers have
submission, all subsequent
amendments, all written statements I. Self-Regulatory Organization’s sufficient liquid resources on hand, at
with respect to the proposed rule Statement of the Terms of Substance of all times, to meet their financial
change that are filed with the the Proposed Rule Change obligations. Notably, hedged positions,
Commission, and all written including offsetting futures and options
The Exchange proposes to adopt Rule contract positions, result in certain net
communications relating to the 6.56 regarding ‘‘compression forums.’’
proposed rule change between the capital requirement reductions under
The text of the proposed rule change is the Net Capital Rules.4
Commission and any person, other than available on the Exchange’s Web site All Options Clearing Corporation
those that may be withheld from the (http://www.cboe.com/AboutCBOE/ (‘‘OCC’’) clearing members are subject to
public in accordance with the CBOELegalRegulatoryHome.aspx), at the Net Capital Rules. However, a subset
provisions of 5 U.S.C. 552, will be the Exchange’s Office of the Secretary, of clearing members are subsidiaries of
available for Web site viewing and and at the Commission’s Public U.S. bank holding companies, which,
printing in the Commission’s Public Reference Room. due to their affiliations with their parent
Reference Room, 100 F Street NE., U.S. bank holding companies, must
Washington, DC 20549, on official II. Self-Regulatory Organization’s
Statement of the Purpose of, and comply with additional bank regulatory
business days between the hours of capital requirements pursuant to
10:00 a.m. and 3:00 p.m. Copies of the Statutory Basis for, the Proposed Rule
Change rulemaking required under the Dodd–
filing also will be available for Frank Wall Street Reform and Consumer
inspection and copying at the principal In its filing with the Commission, the Protection Act.5 Pursuant to this
office of the Exchange. All comments Exchange included statements mandate, the Board of Governors of the
received will be posted without change; concerning the purpose of and basis for Federal Reserve System, the Office of
the Commission does not edit personal the proposed rule change and discussed the Comptroller of the Currency, and the
identifying information from any comments it received on the
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Federal Deposit Insurance Corporation
submissions. You should submit only proposed rule change. The text of these
information that you wish to make statements may be examined at the 3 17 CFR 240.15c3–1.
available publicly. All submissions places specified in Item IV below. The 4 In addition, the Net Capital Rules permit various
should refer to File Number SR– Exchange has prepared summaries, set offsets under which a percentage of an option
ISEGemini–2016–24 and should be forth in sections A, B, and C below, of position’s gain at any one valuation point is
allowed to offset another position’s loss at the same
submitted on or before January 17, 2017. valuation point (e.g. vertical spreads).
1 15 U.S.C. 78s(b)(1). 5 H.R. 4173 (amending section 3(a) of the Act) (15
20 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. U.S.C. 78c(a))).
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Document Created: 2018-02-14 09:13:34
Document Modified: 2018-02-14 09:13:34
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 95216 |
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