82_FR_17367 82 FR 17300 - Order Granting a Temporary Exemption to Covered Clearing Agencies From Compliance With Rule 17Ad-22(e)(3)(ii) and Certain Requirements in Rules 17Ad-22(e)(15)(i) and (ii) Under the Securities Exchange Act of 1934

82 FR 17300 - Order Granting a Temporary Exemption to Covered Clearing Agencies From Compliance With Rule 17Ad-22(e)(3)(ii) and Certain Requirements in Rules 17Ad-22(e)(15)(i) and (ii) Under the Securities Exchange Act of 1934

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 67 (April 10, 2017)

Page Range17300-17302
FR Document2017-07101

Federal Register, Volume 82 Issue 67 (Monday, April 10, 2017)
[Federal Register Volume 82, Number 67 (Monday, April 10, 2017)]
[Notices]
[Pages 17300-17302]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-07101]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80378; File No. S7-03-14]


Order Granting a Temporary Exemption to Covered Clearing Agencies 
From Compliance With Rule 17Ad-22(e)(3)(ii) and Certain Requirements in 
Rules 17Ad-22(e)(15)(i) and (ii) Under the Securities Exchange Act of 
1934

April 5, 2017.

I. Introduction

    On September 28, 2016, the Securities and Exchange Commission 
(``Commission'') adopted amendments to Rule 17Ad-22 pursuant to Section 
17A of the Securities Exchange Act of 1934 (``Exchange Act'') and Title 
VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act 
of 2010.\1\ Among other things, the amendments added new Rule 17Ad-
22(e), which establishes an enhanced regulatory framework for 
registered clearing agencies that meet the definition of a covered 
clearing agency.\2\ The amendments to Rule 17Ad-22 became effective on 
December 12, 2016, and covered clearing agencies must be in compliance 
with the amendments by April 11, 2017.\3\ For the reasons discussed 
below, the Commission is using its authority under Section 17A(b)(1) of 
the Exchange Act to grant covered clearing agencies a temporary 
exemption from compliance with Rule 17Ad-22(e)(3)(ii) and certain 
requirements in Rules 17Ad-22(e)(15)(i) and (ii) until December 31, 
2017.
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    \1\ See Exchange Act Release No. 34-78961 (Sept. 28, 2016), 81 
FR 70786 (Oct. 13, 2016) (``CCA Standards Adopting Release'').
    \2\ Under Rule 17Ad-22(a)(5), ``covered clearing agency'' means 
(i) a designated clearing agency or (ii) a clearing agency involved 
in activities with a more complex risk profile for which the 
Commodity Futures Trading Commission is not the supervisory agency 
as defined in Section 803(8) of the Payment, Clearing, and 
Settlement Supervision Act of 2010 (``Clearing Supervision Act''). 
See 17 CFR 240.17Ad-22(a)(5).
     In addition, Rule 17Ad-22(a)(6) defines ``designated clearing 
agency'' to mean a clearing agency registered with the Commission 
under Section 17A of the Exchange Act that is designated 
systemically important by the Financial Stability Oversight Council 
pursuant to the Clearing Supervision Act and for which the 
Commission is the supervisory agency as defined in Section 803(8) of 
the Clearing Supervision Act. Rule 17Ad-22(a)(4) defines ``clearing 
agency involved in activities with a more complex risk profile'' to 
mean a clearing agency registered with the Commission under Section 
17A of the Exchange Act that: (i) Provides central counterparty 
(``CCP'') services for security-based swaps; (ii) has been 
determined by the Commission to be involved in activities with a 
more complex risk profile at the time of its initial registration; 
or (iii) is subsequently determined by the Commission to be involved 
in activities with a more complex risk profile pursuant to Rule 
17Ab2-2(b) under the Exchange Act. See 17 CFR 240.17Ad-22(a)(4), 
(6).
    \3\ See CCA Standards Adopting Release at 70848.
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II. Background

    Rule 17Ad-22(e) generally requires a covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to address, among other things, its 
governance arrangements and risk management framework.\4\ Rule 17Ad-
22(e)(3) requires a covered clearing agency to establish, implement, 
maintain and enforce policies and procedures reasonably designed to 
maintain a sound risk management framework for comprehensively managing 
legal, credit, liquidity, operational, general business, investment, 
custody, and other risks that arise in or are borne by the covered 
clearing agency, and which, among other things, includes plans for 
recovery and orderly wind-down of the covered clearing agency 
necessitated by credit losses, liquidity shortfalls, losses from 
general business risk, or any other losses.\5\ In adopting Rule 17Ad-
22(e)(3)(ii), the Commission stated its belief that recovery and wind-
down plans, and material changes thereto, would constitute a proposed 
rule change under Section 19(b) of the Exchange Act and, for designated 
clearing agencies, an advance notice under the Clearing Supervision 
Act, subjecting them to Commission review and public comment.\6\
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    \4\ See id. at 70792.
    \5\ 17 CFR 240.17Ad-22(e)(3)(ii).
    \6\ See CCA Standards Adopting Release at 70809.
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    In addition, Rule 17Ad-22(e)(15) requires a covered clearing agency 
to establish, implement, maintain and enforce written policies and 
procedures reasonably designed to identify, monitor, and manage the 
covered clearing agency's general business risk and hold sufficient 
liquid net assets funded by equity to cover potential general business 
losses so that the covered clearing agency can continue operations and 
services as a going concern if those losses materialize, including, 
among other things, by (i) determining the amount of liquid net assets 
funded by equity based upon its general business risk profile and the 
length of time required to achieve a recovery or orderly wind-down, as 
appropriate, of its critical operations and services if such action is 
taken and (ii) holding liquid net assets funded by equity equal to the 
greater of either (x) six months of its current operating expenses or 
(y) the amount determined by the board of directors to be sufficient to 
ensure a recovery or orderly wind-down of critical operations and 
services of the covered clearing agency, as contemplated by the 
recovery and wind-down plans established under Rule 17Ad-
22(e)(3)(ii).\7\
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    \7\ 17 CFR 240.17Ad-22(e)(15)(i), (ii).
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III. Discussion

A. Background and Exemptive Request

    As noted in the CCA Standards Adopting Release, the Commission 
believes that, taken together, the policies and procedures requirements 
related to recovery and wind-down plans in Rules 17Ad-22(e)(3)(ii) and 
(15) should help ensure that a covered clearing agency is able to 
remain resilient in times of market stress and to sustain its 
operations for sufficient time to achieve orderly wind-down if such

[[Page 17301]]

action is necessary.\8\ Unlike some other aspects of Rule 17Ad-22(e), 
until now recovery and wind-down plans have not been part of the 
Commission's regulatory framework for registered clearing agencies.\9\
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    \8\ See CCA Standards Adopting Release at 70868, 70876.
    \9\ As discussed in CCA Standards Adopting Release, certain 
requirements in Rule 17Ad-22(e) contain requirements substantially 
similar to those in Rule 17Ad-22(d) or reflect current practices at 
registered clearing agencies. Certain other requirements in Rule 
17Ad-22(e) contain provisions that are similar to those in Rule 
17Ad-22(d) but would also impose additional requirements not found 
in Rule 17Ad-22(d). A few requirements have no comparable 
requirement under Rule 17Ad-22(d) and therefore may require more 
extensive changes to policies and procedures or other additional 
steps to achieve compliance. See id. at 70891.
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    Since the adoption of Rule 17Ad-22(e), Commission staff has been 
aware of the ongoing development of recovery and wind-down plans by 
covered clearing agencies in anticipation of the April 11, 2017 
compliance date. Nevertheless, the development of recovery and wind-
down plans continues to present novel and complex questions, and one 
entity, on behalf of its three subsidiaries that are covered clearing 
agencies, has requested that the Commission provide a temporary 
exemption from compliance until December 31, 2017 so that the clearing 
agencies can finalize their recovery and wind-down plans.\10\ The 
entity states its view that recovery and wind-down plans are an 
important new input into industry efforts to manage systemic risk that 
must be carefully designed to address concerns unique to each covered 
clearing agency and its members.\11\ The entity asserts that the topic 
of recovery and wind-down remains under active discussion in the 
industry, that a substantial amount of work remains to be completed, 
and that it would be prudent to provide for a longer period of time for 
consultation concerning the relevant documents and filings under the 
Rule 19b-4 and advance notice processes related to recovery and wind-
down plans.\12\ The entity believes, in particular, that covered 
clearing agencies, their members, and other interested persons would 
benefit from further thought development concerning whether and how the 
plans should address the continued provision of critical operations and 
services in the event that recovery tools fail. The entity emphasizes 
that additional time is necessary because of the complexity of the 
planning process, the need for further discussion and consultation, and 
the advisability of conducting appropriate member outreach prior to the 
submission of formal filings under the Rule 19b-4 and advance notice 
processes.\13\
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    \10\ See letter from Michael C. Bodson, President and Chief 
Executive Officer, The Depository Trust & Clearing Corporation, Feb. 
15, 2017, https://www.sec.gov/comments/s7-03-14/s70314-1594398-132354.pdf.
    \11\ See id. at 1.
    \12\ See id. at 2.
    \13\ See id.
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B. Exemptive Relief

    Section 17A(b)(1) of the Exchange Act provides that the Commission, 
by order and upon its own motion, may conditionally or unconditionally 
exempt any clearing agency or class of clearing agencies from any 
provisions of Section 17A or the rules and regulations thereunder if 
the Commission finds that such exemption is consistent with the public 
interest, the protection of investors, and the purposes of Section 17A, 
including the prompt and accurate clearance and settlement of 
securities transactions and the safeguarding of securities and 
funds.\14\
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    \14\ 15 U.S.C. 78q-1(b)(1).
---------------------------------------------------------------------------

    Recognizing that the reasons stated by the entity may apply to 
covered clearing agencies generally, the Commission believes that all 
covered clearing agencies would benefit from additional time to 
finalize the development of their recovery and wind-down plans. As 
noted above, unlike some other aspects of Rule 17Ad-22(e), recovery and 
wind-down plans continue to present novel and complex questions. The 
recovery and wind-down plans described in Rule 17Ad-22(e)(3)(ii) are 
new requirements not previously included in the Commission's regulatory 
framework for clearing agencies, and the topics of recovery and wind-
down remain under active discussion in the industry. The Commission 
believes that providing additional time to develop recovery and wind-
down plans will facilitate further discussion, consultation, and member 
outreach by the covered clearing agencies that could help resolve the 
novel and complex questions presented. This in turn would help promote 
the development of plans that comprehensively address how a covered 
clearing agency could continue to provide critical operations and 
services in the event that recovery tools fail and that are consistent 
with the policies and procedures requirements of Rule 17Ad-
22(e)(3)(ii). Therefore, the Commission finds that a temporary 
exemption from compliance with Rule 17Ad-22(e)(3)(ii) until December 
31, 2017 is consistent with the public interest, the protection of 
investors, and the purposes of Section 17A of the Exchange Act.
    In addition, compliance with certain aspects of Rule 17Ad-22(e)(15) 
depends in part on a covered clearing agency having established 
recovery and wind-down plans under Rule 17Ad-22(e)(3)(ii). 
Specifically, these include the following: (i) The requirement in Rule 
17Ad-22(e)(15)(i) for policies and procedures for determining the 
amount of liquid net assets funded by equity based upon the length of 
time required to achieve a recovery or orderly wind-down, as 
appropriate, of its critical operations and services if such action is 
taken (``RWP clause''); and (ii) clause (y) of Rule 17Ad-22(e)(15)(ii) 
requiring policies and procedures for holding liquid net assets funded 
by equity equal to the amount determined by the board of directors to 
be sufficient to ensure a recovery or orderly wind-down of critical 
operations and services of the covered clearing agency, as contemplated 
by the plans established under Rule 17Ad-22 (e)(3)(ii). The Commission 
therefore finds that a temporary exemption from compliance with these 
subsections of Rule 17Ad-22(e)(15) until December 31, 2017 is 
consistent with the public interest, the protection of investors, and 
the purposes of Section 17A of the Exchange Act.
    The Commission is not granting relief from the April 11, 2017 
compliance date for any other provision of the amendments to Rule 17Ad-
22. In particular, the Commission notes that the temporary exemption 
from compliance does not apply to either of the following: (i) The 
requirement in Rule 17Ad-22(e)(15)(i) for policies and procedures for 
determining the amount of liquid net assets funded by equity based upon 
its general business risk profile; or (ii) clause (x) of Rule 17Ad-
22(e)(15)(ii) requiring policies and procedures for holding liquid net 
assets funded by equity equal to six months of the covered clearing 
agency's current operating expenses. Accordingly, as of the April 11, 
2017 compliance date for the amendments to Rule 17Ad-22, a covered 
clearing agency is required to have policies and procedures for 
determining the amount of liquid net assets funded by equity based upon 
its general business risk profile pursuant to Rule 17Ad-22(e)(15)(i) 
and for holding liquid net assets funded by equity equal to six months 
of the covered clearing agency's current operating expenses pursuant to 
clause (x) of Rule 17Ad-22(e)(15)(ii), regardless of whether the 
covered clearing agency has met the condition for obtaining relief 
under this temporary exemption.
    As a condition to obtaining relief under the temporary exemption, a

[[Page 17302]]

covered clearing agency must notify the Commission in writing of its 
intent to rely upon the temporary exemption no later than April 11, 
2017.

IV. Conclusion

    The Commission hereby grants, pursuant to Section 17A(b)(1) of the 
Exchange Act, covered clearing agencies a temporary exemption from 
compliance with Rule 17Ad-22(e)(3)(ii), the RWP clause of Rule 17Ad-
22(e)(15)(i), and clause (y) of Rule 17Ad-22(e)(15)(ii) until December 
31, 2017, subject to the condition contained in this order.

    By the Commission.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07101 Filed 4-7-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                    17300                                      Federal Register / Vol. 82, No. 67 / Monday, April 10, 2017 / Notices

                                                                                                                          ESTIMATE OF ANNUAL RESPONDENT BURDEN
                                                                                                                                                                                                         Annual             Time            Burden
                                                                                                                    Form No.                                                                           responses          (minutes)         (hours)

                                                    G–139 ..........................................................................................................................................      500                60               500



                                                      Additional Information or Comments:                                      amendments to Rule 17Ad–22 became                                       losses.5 In adopting Rule 17Ad–
                                                    To request more information or to                                          effective on December 12, 2016, and                                     22(e)(3)(ii), the Commission stated its
                                                    obtain a copy of the information                                           covered clearing agencies must be in                                    belief that recovery and wind-down
                                                    collection justification, forms, and/or                                    compliance with the amendments by                                       plans, and material changes thereto,
                                                    supporting material, contact Dana                                          April 11, 2017.3 For the reasons                                        would constitute a proposed rule
                                                    Hickman at (312) 751–4981 or                                               discussed below, the Commission is                                      change under Section 19(b) of the
                                                    Dana.Hickman@RRB.GOV. Comments                                             using its authority under Section                                       Exchange Act and, for designated
                                                    regarding the information collection                                       17A(b)(1) of the Exchange Act to grant                                  clearing agencies, an advance notice
                                                    should be addressed to Brian Foster,                                       covered clearing agencies a temporary                                   under the Clearing Supervision Act,
                                                    Railroad Retirement Board, 844 North                                       exemption from compliance with Rule                                     subjecting them to Commission review
                                                    Rush Street, Chicago, Illinois 60611–                                      17Ad–22(e)(3)(ii) and certain                                           and public comment.6
                                                    1275 or emailed to Brian.Foster@rrb.gov.                                   requirements in Rules 17Ad–22(e)(15)(i)                                    In addition, Rule 17Ad–22(e)(15)
                                                    Written comments should be received                                        and (ii) until December 31, 2017.                                       requires a covered clearing agency to
                                                    within 60 days of this notice.                                                                                                                     establish, implement, maintain and
                                                                                                                               II. Background                                                          enforce written policies and procedures
                                                      For the Board.
                                                                                                                                  Rule 17Ad–22(e) generally requires a                                 reasonably designed to identify,
                                                    Martha P. Rico,                                                                                                                                    monitor, and manage the covered
                                                                                                                               covered clearing agency to establish,
                                                    Secretary to the Board.                                                                                                                            clearing agency’s general business risk
                                                                                                                               implement, maintain, and enforce
                                                    [FR Doc. 2017–07067 Filed 4–7–17; 8:45 am]                                                                                                         and hold sufficient liquid net assets
                                                                                                                               written policies and procedures
                                                    BILLING CODE 7905–01–P                                                     reasonably designed to address, among                                   funded by equity to cover potential
                                                                                                                               other things, its governance                                            general business losses so that the
                                                                                                                               arrangements and risk management                                        covered clearing agency can continue
                                                    SECURITIES AND EXCHANGE                                                    framework.4 Rule 17Ad–22(e)(3)                                          operations and services as a going
                                                    COMMISSION                                                                 requires a covered clearing agency to                                   concern if those losses materialize,
                                                                                                                               establish, implement, maintain and                                      including, among other things, by (i)
                                                    [Release No. 34–80378; File No. S7–03–14]                                  enforce policies and procedures                                         determining the amount of liquid net
                                                                                                                               reasonably designed to maintain a                                       assets funded by equity based upon its
                                                    Order Granting a Temporary                                                 sound risk management framework for                                     general business risk profile and the
                                                    Exemption to Covered Clearing                                              comprehensively managing legal, credit,                                 length of time required to achieve a
                                                    Agencies From Compliance With Rule                                         liquidity, operational, general business,                               recovery or orderly wind-down, as
                                                    17Ad–22(e)(3)(ii) and Certain                                              investment, custody, and other risks                                    appropriate, of its critical operations
                                                    Requirements in Rules 17Ad–                                                that arise in or are borne by the covered                               and services if such action is taken and
                                                    22(e)(15)(i) and (ii) Under the Securities                                 clearing agency, and which, among                                       (ii) holding liquid net assets funded by
                                                    Exchange Act of 1934                                                       other things, includes plans for recovery                               equity equal to the greater of either (x)
                                                                                                                               and orderly wind-down of the covered                                    six months of its current operating
                                                    April 5, 2017.                                                                                                                                     expenses or (y) the amount determined
                                                                                                                               clearing agency necessitated by credit
                                                    I. Introduction                                                            losses, liquidity shortfalls, losses from                               by the board of directors to be sufficient
                                                                                                                               general business risk, or any other                                     to ensure a recovery or orderly wind-
                                                       On September 28, 2016, the Securities                                                                                                           down of critical operations and services
                                                    and Exchange Commission                                                                                                                            of the covered clearing agency, as
                                                    (‘‘Commission’’) adopted amendments                                        (‘‘Clearing Supervision Act’’). See 17 CFR
                                                                                                                                                                                                       contemplated by the recovery and wind-
                                                    to Rule 17Ad–22 pursuant to Section                                        240.17Ad–22(a)(5).
                                                                                                                                  In addition, Rule 17Ad–22(a)(6) defines                              down plans established under Rule
                                                    17A of the Securities Exchange Act of                                      ‘‘designated clearing agency’’ to mean a clearing                       17Ad–22(e)(3)(ii).7
                                                    1934 (‘‘Exchange Act’’) and Title VIII of                                  agency registered with the Commission under
                                                    the Dodd-Frank Wall Street Reform and                                      Section 17A of the Exchange Act that is designated                      III. Discussion
                                                    Consumer Protection Act of 2010.1                                          systemically important by the Financial Stability
                                                                                                                               Oversight Council pursuant to the Clearing                              A. Background and Exemptive Request
                                                    Among other things, the amendments                                         Supervision Act and for which the Commission is
                                                    added new Rule 17Ad–22(e), which                                                                                                                     As noted in the CCA Standards
                                                                                                                               the supervisory agency as defined in Section 803(8)
                                                    establishes an enhanced regulatory                                         of the Clearing Supervision Act. Rule 17Ad–22(a)(4)
                                                                                                                                                                                                       Adopting Release, the Commission
                                                    framework for registered clearing                                          defines ‘‘clearing agency involved in activities with                   believes that, taken together, the
                                                    agencies that meet the definition of a                                     a more complex risk profile’’ to mean a clearing                        policies and procedures requirements
                                                                                                                               agency registered with the Commission under                             related to recovery and wind-down
                                                    covered clearing agency.2 The                                              Section 17A of the Exchange Act that: (i) Provides
                                                                                                                               central counterparty (‘‘CCP’’) services for security-
                                                                                                                                                                                                       plans in Rules 17Ad–22(e)(3)(ii) and
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                       1 See Exchange Act Release No. 34–78961 (Sept.                          based swaps; (ii) has been determined by the                            (15) should help ensure that a covered
                                                    28, 2016), 81 FR 70786 (Oct. 13, 2016) (‘‘CCA                              Commission to be involved in activities with a more                     clearing agency is able to remain
                                                    Standards Adopting Release’’).                                             complex risk profile at the time of its initial                         resilient in times of market stress and to
                                                       2 Under Rule 17Ad–22(a)(5), ‘‘covered clearing                          registration; or (iii) is subsequently determined by                    sustain its operations for sufficient time
                                                    agency’’ means (i) a designated clearing agency or                         the Commission to be involved in activities with a
                                                                                                                               more complex risk profile pursuant to Rule 17Ab2–                       to achieve orderly wind-down if such
                                                    (ii) a clearing agency involved in activities with a
                                                    more complex risk profile for which the Commodity                          2(b) under the Exchange Act. See 17 CFR
                                                    Futures Trading Commission is not the supervisory                          240.17Ad–22(a)(4), (6).                                                   5 17 CFR 240.17Ad–22(e)(3)(ii).
                                                                                                                                  3 See CCA Standards Adopting Release at 70848.                         6 See CCA Standards Adopting Release at 70809.
                                                    agency as defined in Section 803(8) of the Payment,
                                                    Clearing, and Settlement Supervision Act of 2010                              4 See id. at 70792.                                                    7 17 CFR 240.17Ad–22(e)(15)(i), (ii).




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                                                                                   Federal Register / Vol. 82, No. 67 / Monday, April 10, 2017 / Notices                                                17301

                                                    action is necessary.8 Unlike some other                 emphasizes that additional time is                          In addition, compliance with certain
                                                    aspects of Rule 17Ad–22(e), until now                   necessary because of the complexity of                   aspects of Rule 17Ad–22(e)(15) depends
                                                    recovery and wind-down plans have not                   the planning process, the need for                       in part on a covered clearing agency
                                                    been part of the Commission’s                           further discussion and consultation, and                 having established recovery and wind-
                                                    regulatory framework for registered                     the advisability of conducting                           down plans under Rule 17Ad–
                                                    clearing agencies.9                                     appropriate member outreach prior to                     22(e)(3)(ii). Specifically, these include
                                                       Since the adoption of Rule 17Ad–                     the submission of formal filings under                   the following: (i) The requirement in
                                                    22(e), Commission staff has been aware                  the Rule 19b–4 and advance notice                        Rule 17Ad–22(e)(15)(i) for policies and
                                                    of the ongoing development of recovery                  processes.13                                             procedures for determining the amount
                                                    and wind-down plans by covered                                                                                   of liquid net assets funded by equity
                                                    clearing agencies in anticipation of the                B. Exemptive Relief
                                                                                                                                                                     based upon the length of time required
                                                    April 11, 2017 compliance date.                            Section 17A(b)(1) of the Exchange Act                 to achieve a recovery or orderly wind-
                                                    Nevertheless, the development of                        provides that the Commission, by order                   down, as appropriate, of its critical
                                                    recovery and wind-down plans                            and upon its own motion, may                             operations and services if such action is
                                                    continues to present novel and complex                  conditionally or unconditionally                         taken (‘‘RWP clause’’); and (ii) clause (y)
                                                    questions, and one entity, on behalf of                 exempt any clearing agency or class of                   of Rule 17Ad–22(e)(15)(ii) requiring
                                                    its three subsidiaries that are covered                 clearing agencies from any provisions of                 policies and procedures for holding
                                                    clearing agencies, has requested that the               Section 17A or the rules and regulations                 liquid net assets funded by equity equal
                                                    Commission provide a temporary                          thereunder if the Commission finds that                  to the amount determined by the board
                                                    exemption from compliance until                         such exemption is consistent with the                    of directors to be sufficient to ensure a
                                                    December 31, 2017 so that the clearing                  public interest, the protection of                       recovery or orderly wind-down of
                                                    agencies can finalize their recovery and                investors, and the purposes of Section                   critical operations and services of the
                                                    wind-down plans.10 The entity states its                17A, including the prompt and accurate                   covered clearing agency, as
                                                    view that recovery and wind-down                        clearance and settlement of securities                   contemplated by the plans established
                                                    plans are an important new input into                   transactions and the safeguarding of                     under Rule 17Ad–22 (e)(3)(ii). The
                                                    industry efforts to manage systemic risk                securities and funds.14                                  Commission therefore finds that a
                                                    that must be carefully designed to                         Recognizing that the reasons stated by                temporary exemption from compliance
                                                    address concerns unique to each                         the entity may apply to covered clearing                 with these subsections of Rule 17Ad–
                                                    covered clearing agency and its                         agencies generally, the Commission                       22(e)(15) until December 31, 2017 is
                                                    members.11 The entity asserts that the                  believes that all covered clearing                       consistent with the public interest, the
                                                    topic of recovery and wind-down                         agencies would benefit from additional                   protection of investors, and the
                                                    remains under active discussion in the                  time to finalize the development of their                purposes of Section 17A of the
                                                    industry, that a substantial amount of                  recovery and wind-down plans. As                         Exchange Act.
                                                    work remains to be completed, and that                  noted above, unlike some other aspects                      The Commission is not granting relief
                                                    it would be prudent to provide for a                    of Rule 17Ad–22(e), recovery and wind-                   from the April 11, 2017 compliance date
                                                    longer period of time for consultation                  down plans continue to present novel                     for any other provision of the
                                                    concerning the relevant documents and                   and complex questions. The recovery                      amendments to Rule 17Ad–22. In
                                                    filings under the Rule 19b–4 and                        and wind-down plans described in Rule                    particular, the Commission notes that
                                                    advance notice processes related to                     17Ad–22(e)(3)(ii) are new requirements                   the temporary exemption from
                                                    recovery and wind-down plans.12 The                     not previously included in the                           compliance does not apply to either of
                                                    entity believes, in particular, that                    Commission’s regulatory framework for                    the following: (i) The requirement in
                                                    covered clearing agencies, their                        clearing agencies, and the topics of                     Rule 17Ad–22(e)(15)(i) for policies and
                                                    members, and other interested persons                   recovery and wind-down remain under                      procedures for determining the amount
                                                    would benefit from further thought                      active discussion in the industry. The                   of liquid net assets funded by equity
                                                    development concerning whether and                      Commission believes that providing                       based upon its general business risk
                                                    how the plans should address the                        additional time to develop recovery and                  profile; or (ii) clause (x) of Rule 17Ad–
                                                    continued provision of critical                         wind-down plans will facilitate further                  22(e)(15)(ii) requiring policies and
                                                    operations and services in the event that               discussion, consultation, and member                     procedures for holding liquid net assets
                                                    recovery tools fail. The entity                         outreach by the covered clearing                         funded by equity equal to six months of
                                                                                                            agencies that could help resolve the                     the covered clearing agency’s current
                                                      8 See CCA Standards Adopting Release at 70868,        novel and complex questions presented.                   operating expenses. Accordingly, as of
                                                    70876.                                                  This in turn would help promote the                      the April 11, 2017 compliance date for
                                                      9 As discussed in CCA Standards Adopting
                                                                                                            development of plans that                                the amendments to Rule 17Ad–22, a
                                                    Release, certain requirements in Rule 17Ad–22(e)
                                                    contain requirements substantially similar to those     comprehensively address how a covered                    covered clearing agency is required to
                                                    in Rule 17Ad–22(d) or reflect current practices at      clearing agency could continue to                        have policies and procedures for
                                                    registered clearing agencies. Certain other             provide critical operations and services                 determining the amount of liquid net
                                                    requirements in Rule 17Ad–22(e) contain                 in the event that recovery tools fail and                assets funded by equity based upon its
                                                    provisions that are similar to those in Rule 17Ad–
                                                    22(d) but would also impose additional                  that are consistent with the policies and                general business risk profile pursuant to
                                                    requirements not found in Rule 17Ad–22(d). A few        procedures requirements of Rule 17Ad–                    Rule 17Ad–22(e)(15)(i) and for holding
                                                    requirements have no comparable requirement             22(e)(3)(ii). Therefore, the Commission                  liquid net assets funded by equity equal
                                                    under Rule 17Ad–22(d) and therefore may require
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                                                    more extensive changes to policies and procedures
                                                                                                            finds that a temporary exemption from                    to six months of the covered clearing
                                                    or other additional steps to achieve compliance. See    compliance with Rule 17Ad–22(e)(3)(ii)                   agency’s current operating expenses
                                                    id. at 70891.                                           until December 31, 2017 is consistent                    pursuant to clause (x) of Rule 17Ad–
                                                      10 See letter from Michael C. Bodson, President
                                                                                                            with the public interest, the protection                 22(e)(15)(ii), regardless of whether the
                                                    and Chief Executive Officer, The Depository Trust       of investors, and the purposes of Section                covered clearing agency has met the
                                                    & Clearing Corporation, Feb. 15, 2017, https://
                                                    www.sec.gov/comments/s7-03-14/s70314-1594398-           17A of the Exchange Act.                                 condition for obtaining relief under this
                                                    132354.pdf.                                                                                                      temporary exemption.
                                                      11 See id. at 1.                                        13 See   id.                                              As a condition to obtaining relief
                                                      12 See id. at 2.                                        14 15   U.S.C. 78q–1(b)(1).                            under the temporary exemption, a


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                                                    17302                           Federal Register / Vol. 82, No. 67 / Monday, April 10, 2017 / Notices

                                                    covered clearing agency must notify the                  Web site at www.nyse.com, at the                        maintain a telephone line or use
                                                    Commission in writing of its intent to                   principal office of the Exchange, and at                Exchange authorized and provided
                                                    rely upon the temporary exemption no                     the Commission’s Public Reference                       portable phones, which permit a non-
                                                    later than April 11, 2017.                               Room.                                                   member off the Floor to communicate
                                                                                                             II. Self-Regulatory Organization’s                      with a member or member organization
                                                    IV. Conclusion
                                                                                                             Statement of the Purpose of, and                        on the Floor. Subject to the exception
                                                       The Commission hereby grants,                                                                                 contained in Rule 36.23, discussed
                                                    pursuant to Section 17A(b)(1) of the                     Statutory Basis for, the Proposed Rule
                                                                                                             Change                                                  below, Rule 36.20(a) expressly prohibits
                                                    Exchange Act, covered clearing agencies                                                                          the use of a portable telephone on the
                                                    a temporary exemption from                                  In its filing with the Commission, the               Floor other than one authorized and
                                                    compliance with Rule 17Ad–22(e)(3)(ii),                  self-regulatory organization included                   issued by the Exchange.6
                                                    the RWP clause of Rule 17Ad–                             statements concerning the purpose of,                      The use of Exchange authorized and
                                                    22(e)(15)(i), and clause (y) of Rule                     and basis for, the proposed rule change                 issued portable phones is governed by
                                                    17Ad–22(e)(15)(ii) until December 31,                    and discussed any comments it received                  Rule 36.21, which provides that when
                                                    2017, subject to the condition contained                 on the proposed rule change. The text                   using an Exchange authorized and
                                                    in this order.                                           of those statements may be examined at                  provided portable phone, a Floor broker:
                                                      By the Commission.                                     the places specified in Item IV below.
                                                                                                                                                                        (i) May engage in direct voice
                                                    Eduardo A. Aleman,                                       The Exchange has prepared summaries,
                                                                                                                                                                     communications from the point of sale on the
                                                                                                             set forth in sections A, B, and C below,                Floor to an off-Floor location;
                                                    Assistant Secretary.
                                                                                                             of the most significant parts of such                      (ii) may provide status and oral execution
                                                    [FR Doc. 2017–07101 Filed 4–7–17; 8:45 am]
                                                                                                             statements.                                             reports as to orders previously received, as
                                                    BILLING CODE 8011–01–P
                                                                                                             A. Self-Regulatory Organization’s                       well as ‘‘market look’’ observations as
                                                                                                                                                                     historically have been routinely transmitted
                                                                                                             Statement of the Purpose of, and the                    from a broker’s booth location;
                                                    SECURITIES AND EXCHANGE                                  Statutory Basis for, the Proposed Rule                     (iii) must comply with Exchange Rule
                                                    COMMISSION                                               Change                                                  123(e)—Equities;
                                                    [Release No. 34–80375; File No. SR–                      1. Purpose                                                 (iv) must comply with all other rules,
                                                    NYSEMKT–2017–16]                                                                                                 policies, and procedures of both the
                                                                                                                The Exchange proposes to amend                       Exchange and the federal securities law,
                                                    Self-Regulatory Organizations; NYSE                      Rule 36—Equities (Communication                         including the record retention requirements,
                                                    MKT LLC; Notice of Filing of Proposed                    Between Exchange and Members’                           as set forth in Exchange Rule 440—Equities
                                                                                                             Offices) (‘‘Rule 36’’) to permit Exchange               and SEC Rules 17a–3 and 17a–4; 7 and
                                                    Rule Change Amending Rule 36—                                                                                      (v) may not use call-forwarding or
                                                    Equities To Permit Exchange Floor                        Floor brokers to use non-Exchange
                                                                                                             provided telephones on the Floor (the                   conference calling. Exchange authorized and
                                                    Brokers To Use Non-Exchange                                                                                      provided portable phones used by Floor
                                                    Provided Telephones on the Floor                         ‘‘Floor’’) 4 and make related changes
                                                                                                                                                                     brokers shall not have these capabilities.
                                                                                                             modeled on the rules governing
                                                    April 4, 2017.                                           telephone use on the Exchange’s options                   Rule 36.21(b) further provides that
                                                       Pursuant to Section 19(b)(1) 1 of the                 trading floor and on the options trading                Floor brokers and their member
                                                    Securities Exchange Act of 1934 (the                     floor of its affiliate NYSE Arca, Inc.                  organizations must implement
                                                    ‘‘Act’’) 2 and Rule 19b–4 thereunder,3                   (‘‘NYSE Arca’’).                                        procedures designed to deter anyone
                                                    notice is hereby given that, on March                                                                            calling their portable phones from using
                                                                                                             Background                                              caller ID block or other means to
                                                    22, 2017, NYSE MKT LLC (the
                                                    ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with                 Overview of Rule 36 Requirements                        conceal the phone number from which
                                                    the Securities and Exchange                                 Rule 36 governs the establishment of                 a call is being made. Members and
                                                    Commission (the ‘‘Commission’’) the                      telephone or electronic communications                  member organizations are required to
                                                    proposed rule change as described in                     between the Floor and any other                         make and retain records demonstrating
                                                    Items I, II, and III below, which Items                  location, which requires Exchange                       compliance with such procedures.
                                                    have been prepared by the self-                          approval. Supplementary Material .20,                     Rule 36.21(c) provides that Floor
                                                    regulatory organization. The                             .21 and .23 to Rule 36 outline the                      brokers may not use an Exchange
                                                    Commission is publishing this notice to                  conditions under which Floor brokers                    authorized and issued portable phone
                                                    solicit comments on the proposed rule                    are permitted to use Exchange                           used to trade equities while on the
                                                    change from interested persons.                          authorized and provided portable                        NYSE Amex Options Trading Floor.
                                                                                                             telephones with the approval of the                       Rule 36.23 provides that,
                                                    I. Self-Regulatory Organization’s                                                                                notwithstanding any other provision of
                                                    Statement of the Terms of Substance of                   Exchange. The Exchange adopted these
                                                                                                             provisions of Rule 36 in 2008 when it                   Rule 36, members and employees of
                                                    the Proposed Rule Change                                                                                         member organizations may use personal
                                                                                                             was acquired by NYSE Euronext.5
                                                       The Exchange proposes to amend                           Pursuant to Rule 36.20(a), with                      portable communications devices
                                                    Rule 36—Equities to permit Exchange                      Exchange approval, Floor brokers may                    outside the Trading Floor 8 consistent
                                                    Floor brokers to use non-Exchange
                                                    provided telephones on the Floor and                        4 Rule 6—Equities defines the Floor as the trading
                                                                                                                                                                        6 The last sentence of Rule 36.20(a) provides that

                                                    make related changes modeled on the                      Floor of the Exchange and the premises                  the Exchange will approve the maintenance of
                                                                                                                                                                     telephone lines only at the booth location of a
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                                                    rules governing telephone use on the                     immediately adjacent thereto, such as the various
                                                                                                             entrances and lobbies of the 11 Wall Street, 18 New     member or member organization.
                                                    Exchange’s options trading floor and on                  Street, 8 Broad Street, 12 Broad Street and 18 Broad       7 See 17 CFR 240.17a–3; 17 CFR 240.17a–4.

                                                    the options trading floor of its affiliate               Street Buildings, and also means the telephone             8 Rule 6A—Equities defines the Trading Floor as

                                                    NYSE Arca, Inc. The proposed rule                        facilities available in these locations.                the restricted-access physical areas designated by
                                                    change is available on the Exchange’s                       5 See Securities Exchange Act Release No. 58705      the Exchange for the trading of securities,
                                                                                                             (October 1, 2008), 73 FR 58995 (October 8, 2008)        commonly known as the Main Room and the
                                                                                                             (SR–Amex–2008–63). The Exchange’s Rule 36 was           Buttonwood Room but does not include the areas
                                                      1 15 U.S.C. 78s(b)(1).                                 modeled on the New York Stock Exchange LLC’s            in the Buttonwood Room designated by the
                                                      2 15 U.S.C. 78a.                                       (the ‘‘NYSE’’) version of Rule 36. See id., 73 FR at    Exchange for the trading of its listed options
                                                      3 17 CFR 240.19b–4.                                    58996 & n.24.                                           securities, which, for the purposes of the



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Document Created: 2017-04-08 03:30:44
Document Modified: 2017-04-08 03:30:44
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 17300 

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