82 FR 25374 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of Proposed Rule Change To Eliminate Requirements That Will Be Duplicative of CAT
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 104 (June 1, 2017)
Federal Register Volume 82, Issue 104 (June 1, 2017)
| Page Range | 25374-25378 | |
| FR Document | 2017-11372 |
[Federal Register Volume 82, Number 104 (Thursday, June 1, 2017)] [Notices] [Pages 25374-25378] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-11372] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80796; File No. SR-BatsBZX-2017-37] Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of Proposed Rule Change To Eliminate Requirements That Will Be Duplicative of CAT May 26, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on May 15, 2017, Bats BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') filed with the Securities and Exchange Commission (``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 filed a proposal to modify requirements for the collection of information that is duplicative of information intended to be collected for the consolidated audit trail (``CAT'') adopted pursuant to the National Market System Plan Governing the Consolidated Audit Trail (the ``CAT NMS Plan'' or ``Plan'').\3\ The Exchange will announce the implementation date of the proposed rule change and effective date of the retirement of any related systems by Regulatory Circular that will be published once the options exchanges determine the thresholds for accuracy and reliability described below have been met and that the Plan Processor for CAT is sufficiently meeting all of its obligations under the CAT NMS Plan. --------------------------------------------------------------------------- \3\ Unless otherwise specified, capitalized terms used in this rule filing are defined as set forth herein, or in the CAT Compliance Rule Series or in the CAT NMS Plan. --------------------------------------------------------------------------- The text of the proposed rule change is available at the Exchange's Web site at www.bats.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 parts of such statements. (A) Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc. (``FINRA''), Investors' Exchange LLC, Miami International Securities Exchange, LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC,\4\ NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE MKT LLC, NYSE Arca, Inc. and NYSE National, Inc.\5\ (collectively, the ``Participants'') filed with the Commission, pursuant to Section 11A of the Exchange Act \6\ and Rule 608 of Regulation NMS thereunder,\7\ the CAT NMS Plan.\8\ The Participants filed the Plan to comply with Rule 613 of Regulation NMS under the Exchange Act. The Plan was published for comment in the Federal Register on May 17, 2016,\9\ and approved by the Commission, as modified, on November 15, 2016.\10\ The Plan is designed to create, implement and maintain a CAT that would capture customer and order event information for orders in NMS Securities and OTC Equity Securities, across all markets, from the time of order inception through routing, cancellation, modification, or execution in a single consolidated data source. Pursuant to Appendix C of the CAT NMS Plan, each Participant is required to conduct analyses of which of its existing trade and order data rules and systems require the collection of information that is duplicative of information collected for the CAT.\11\ In addition, among other things, Section C.9 of Appendix C to the Plan, as modified by the Commission, requires each Participant to ``file with the SEC the relevant rule change filing to eliminate or modify its duplicative rules within six (6) months of the SEC's approval of the CAT NMS Plan.'' \12\ The Plan notes that ``the elimination of such rules and the retirement of such systems [will] be effective at such time as CAT Data meets minimum standards of accuracy and reliability.'' \13\ --------------------------------------------------------------------------- \4\ ISE Gemini, LLC, ISE Mercury, LLC and International Securities Exchange, LLC have been renamed Nasdaq GEMX, LLC, Nasdaq MRX, LLC, and Nasdaq ISE, LLC, respectively. See Securities Exchange Act Rel. No. 80248 (Mar. 15, 2017), 82 FR 14547 (Mar. 21, 2017); Securities Exchange Act Rel. No. 80326 (Mar. 29, 2017), 82 FR 16460 (Apr. 4, 2017); and Securities Exchange Act Rel. No. 80325 (Mar. 29, 2017), 82 FR 16445 (Apr. 4, 2017). \5\ National Stock Exchange, Inc. has been renamed NYSE National, Inc. See Securities Exchange Act Rel. No. 79902 (Jan. 30, 2017), 82 FR 9258 (Feb. 3, 2017). \6\ 15 U.S.C. 78k-1. \7\ 17 CFR 242.608. \8\ See Letter from the Participants to Brent J. Fields, Secretary, Commission, dated September 30, 2014; and Letter from Participants to Brent J. Fields, Secretary, Commission, dated February 27, 2015. On December 24, 2015, the Participants submitted an amendment to the CAT NMS Plan. See Letter from Participants to Brent J. Fields, Secretary, Commission, dated December 23, 2015. \9\ Securities Exchange Act Rel. No. 77724 (Apr. 27, 2016), 81 FR 30614 (May 17, 2016). \10\ Securities Exchange Act Rel. No. 79318 (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016) (``Approval Order''). \11\ Appendix C of CAT NMS Plan, Approval Order at 85010. \12\ Id. \13\ Id. --------------------------------------------------------------------------- After conducting its analysis of its rules in accordance with the CAT NMS Plan, the Exchange determined Rules 22.7 and 24.4 require the reporting of information intended to be collected by the CAT. Therefore, the Exchange believes those provisions will no longer be necessary once the CAT is operational and proposes to modify those Rules as described below. Additionally, the Exchange describes below additional reporting requirements that it may reduce for which no rule changes are necessary. These changes will be implemented in accordance with the timeline described below. [[Page 25375]] Initially, the Exchange notes that options exchanges, including the Exchange, utilize consolidated options audit trail system (``COATS'') to collect and review data regarding options orders, quotes and transactions. The Participants have provided COATS technical specifications to the Plan Processor for the CAT for use in developing the Technical Specifications for the CAT, and the Participants are working with the Plan Processor to include the necessary COATS data elements in the CAT Technical Specifications. Accordingly, although the Technical Specifications for the CAT have not yet been finalized, the Exchange and the other options exchanges propose to eliminate COATS in accordance with the proposed timeline discussed below. The Exchange notes that it does not have any specific rules or requirements related to COATS but refers to its retirement below in an effort to provide transparency. (1) Market Maker Equity Order Reports Rule 22.7(b) requires Market Makers, upon request and in the prescribed form, report to the Exchange every order entered by the Market Maker for the purchase or sale of (1) a security underlying options traded on the Exchange, or (2) a security convertible into or exchangeable for such underlying security, as well as opening and closing positions in all such securities held in each account reported pursuant to Rule 22.7(a). The report pertaining to orders must include the terms of each order, identification of the brokerage firms through which the orders were entered, the times of entry or cancellation, the times report of execution were received and, if all or part of the order was executed, the quantity and execution price. CAT will require Market Makers to report order information for such securities. Therefore, this rule provision as it relates to order reports is duplicative of CAT requirements, and the Exchange proposes to delete it. CAT does not require reporting of positions, so the Exchange will maintain the position reporting requirement in Rule 22.7(b). The Exchange also proposes a conforming change to the rule name and Interpretation and Policy .01. (2) EBS Rule 24.4 is the Exchange's rule regarding the automated submission of specific trading data to the Exchange upon request using the Electronic Blue Sheet (``EBS'') system. Rule 24.4 requires an Options Member \14\ to submit requested trade data elements in such automated format as may be prescribed by the Exchange from time to time, in regard to a transaction(s) that is the subject of the particular request for information. The Rule sets forth in paragraphs (b) and (c) the data elements required if the transaction was a proprietary transaction or if it was effected for a customer account, respectively. Paragraph (d) provides an Options Member must submit such other information as may from time to time be required. Paragraph (e) permits the Exchange to grant exceptions from these requirements in such cases and for such time periods as it deems appropriate. --------------------------------------------------------------------------- \14\ An Options Member is a Member of the Exchange that is registered to participate in options trading on BZX Options. See Rule 16.1(a)(38). A Member is a registered broker or dealer that has been admitted to membership in the Exchange. See Rule 1.5(n). --------------------------------------------------------------------------- The Exchange proposes to amend Rule 24.4 to state it will request information under the Rule only if the information is not available in the CAT because, for example, the transaction(s) in question occurred before the firm was reporting information to the CAT or involved securities that are not reportable to the CAT. In essence, under the proposed rule change, the Exchange will make requests under Rule 24.4 if and only if the information is not otherwise available through the CAT. Once broker-dealer reporting to the CAT has begun, the CAT will contain the data the Participants would otherwise have requested via the EBS system for purposes of NMS Securities and OTC Equity Securities. Consequently, the Exchange will not need to use the EBS system or request information pursuant to Rule 24.4 for NMS Securities or OTC Equity Securities for time periods after CAT reporting has begun if the appropriate accuracy and reliability thresholds are achieved, including an acceptable accuracy rate for customer and account information. However, Rule 24.4 cannot be completely eliminated immediately upon the CAT achieving the appropriate thresholds because Exchange staff may still need to request information pursuant to Rule 24.4 for trading activity occurring before a member was reporting to the CAT.\15\ In addition, Rule 24.4 applies to information regarding transactions involving securities that will not be reportable to the CAT, such as fixed-income securities; thus, the rule must remain in effect with respect to those transactions indefinitely or until those transactions are captured in the CAT. --------------------------------------------------------------------------- \15\ Firms are required to maintain the trade information for pre-CAT transactions in equities and options pursuant to applicable rules, such as books and records retention requirements, for the relevant time period, which is generally three or six years depending upon the record. See 17 CFR 240.17a-3(a), 240.17a-4. --------------------------------------------------------------------------- (3) Other Reports Various other Exchange Rules require Members to report information to the Exchange upon request.\16\ While the Exchange believes it is necessary to retain these Rules to ensure it has access to the necessary data to perform its regulatory duties and meet its surveillance obligations, it expects it will need to make fewer information requests pursuant to these Rule once Members begin reporting to the CAT and accuracy and reliability standards are met. --------------------------------------------------------------------------- \16\ See, e.g., Rule 4.2 (Furnishing of Records). --------------------------------------------------------------------------- (4) Timeline for Elimination of Duplicative Rules The CAT NMS Plan states that the elimination of rules that are duplicative of the requirements of the CAT and the retirement of the related systems should be effective at such time as CAT Data meets minimum standards of accuracy and reliability.\17\ As discussed in more detail below, the Exchange believes the Rule provisions and related systems described above may be retired at a date after all Industry Members are reporting to the CAT when the proposed error rate thresholds have been met, and the Exchange has determined that its usage of the CAT Data has not revealed material issues that have not been corrected, confirmed that the CAT includes all data necessary to allow the Exchange to continue to meet its surveillance obligations, and confirmed that the Plan Processor is sufficiently meeting all of its obligations under the CAT NMS Plan. --------------------------------------------------------------------------- \17\ Id. [sic] --------------------------------------------------------------------------- The Exchange believes the proposed rule changes should not be effective until all Participants and Industry Members that report data pursuant to the Rules described above are reporting comparable data to the CAT. In this way, the Exchange will continue to have access to the necessary data to perform its regulatory duties. The CAT NMS Plan requires that a rule filing to eliminate a duplicative rule address whether ``the availability of certain data from Small Industry Members two years after the Effective Date would facilitate a more expeditious retirement of duplicative systems.'' \18\ The Exchange believes COATS should not be retired until all Participants and [[Page 25376]] Industry Members that report data to COATS are reporting comparable data to the CAT. While the early submission of options data to the CAT by Small Industry Members could expedite the retirement of COATS, the Exchange believes that it premature [sic] to consider such a change and that additional analysis would be necessary to determine whether such early reporting by Small Industry Members would be feasible. --------------------------------------------------------------------------- \18\ Id. --------------------------------------------------------------------------- The CAT NMS Plan requires that this rule filing address ``whether individual Industry Members can be exempted from reporting to duplicative systems once their CAT reporting meets specified accuracy and reliability standards, including, but not limited to, ways in which establishing cross-system regulatory functionality or integrating data from existing systems and the CAT would facilitate such Individual Industry Member exemptions.'' \19\ The Exchange believes that a single cut-over from the reporting requirements described above to CAT is highly preferable to a firm-by-firm approach and is not proposing to exempt members from such reporting requirements on a firm-by-firm basis. The Exchange believes that providing such individual exemptions to Industry Members would be inefficient, more costly, and less reliable than the single cut-over. Providing individual exemptions would require the options exchanges to create, for a brief temporary period, a cross-system regulatory function and to integrate data from reports received pursuant to the above requirements and the CAT to avoid creating any regulatory gaps as a result of such exemptions. Such a function would be costly to create and would give rise to a greater likelihood of data errors or other issues. Given the limited time in which such exemptions would be necessary, the Exchange does not believe that such exemptions would be an appropriate use of limited resources. --------------------------------------------------------------------------- \19\ Id. --------------------------------------------------------------------------- The CAT NMS Plan also requires that a rule filing to eliminate a duplicative rule to provide ``specific accuracy and reliability standards that will determine when duplicative systems will be retired, including, but not limited to, whether the attainment of a certain Error Rate should determine when a system duplicative of the CAT can be retired.'' \20\ The Exchange believes that it is critical that the CAT Data be sufficiently accurate and reliable for the Exchange to perform the regulatory functions that it now performs using the information it receives pursuant to the reporting requirements described above. Accordingly, the Exchange believes that the CAT Data should meet specific quantitative error rates, as well as certain qualitative requirements. --------------------------------------------------------------------------- \20\ Id. --------------------------------------------------------------------------- The Exchange believes (and the other options exchanges with respect to COATS and EBS) believe that, before reporting requirements may be modified or eliminated, as applicable, and related systems may be retired, the CAT would need to achieve a sustained error rate for a period of at least 180 days of 5% or lower measured on a pre-correction or as-submitted basis, and 2% or lower on a post-correction basis (measured at T+5).\21\ The Exchange proposes to measure the 5% pre- correction and 2% post-correction thresholds by averaging the error rate across the period, not require a 5% pre-correction and 2% post- correction maximum each day for 180 consecutive days. The Exchange believes that measuring each of the thresholds over the course of 180 days will ensure that the CAT consistently meets minimum accuracy and reliability thresholds while also ensuring that single-day measurements do not unduly affect the overall measurements. The Exchange proposes to measure the appropriate error rates in the aggregate, rather than firm- by-firm. In addition, with respect to COATS, the Exchange proposes to measure the error rates for options only, not equity securities, as only options are subject to COATS. The 2% and 5% error rates are in line with the proposed retirement threshold for FINRA's Order Audit Trail System (``OATS''). --------------------------------------------------------------------------- \21\ The Plan requires that the Plan Processor must ensure that regulators have access to corrected and linked order and Customer data by 8:00 a.m. Eastern Time on T+5. See CAT NMS Plan, at C-15. --------------------------------------------------------------------------- In addition to these minimum error rates before reporting requirements may be modified or eliminated, as applicable, and related systems may be retired, the Exchange believes that during the minimum 180-day period during which the thresholds are calculated, the Exchange's use of the data in the CAT must confirm that (i) usage over that time period has not revealed material issues that have not been corrected, (ii) the CAT includes all data necessary to allow the Exchange to continue to meet its surveillance obligations, and (iii) the Plan Processor is sufficiently meeting all of its obligations under the CAT NMS Plan. The Exchange believes this time period to use the CAT Data is necessary to reveal any errors that may manifest themselves only after surveillance patterns and other queries have been run and to confirm that the Plan Processor is meeting its obligations and performing its functions adequately. If the Commission approves the proposed rule change, the Exchange will announce the date for modification or elimination, as applicable, of reporting requirements and retirement of related systems and the implementation date of the proposed rule change via Regulatory Circular that will be published once the Exchange (and other options exchanges with respect to COATS and EBS) determines that the thresholds for accuracy and reliability described above have been met and that the Plan Processor is sufficiently meeting all of its obligations under the CAT NMS Plan. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Exchange Act,\22\ which requires, among other things, that Exchange Rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest, and not designed to permit unfair discrimination between customers, issuers, brokers and dealer. The Exchange believes that this proposal is consistent with the Exchange Act because it fulfills the obligation in the CAT NMS Plan for the Exchange to submit a proposed rule change to eliminate or modify duplicative rules. In approving the Plan, the SEC noted that the Plan ``is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.'' \23\ As this proposal implements the Plan, the Exchange believes that this proposal furthers the objectives of the Plan, as identified by the SEC, and is therefore consistent with the Exchange Act. --------------------------------------------------------------------------- \22\ 15 U.S.C. 78f(b)(5). \23\ Approval Order at 84697. --------------------------------------------------------------------------- Moreover, the purpose of the proposed rule change is to amend rules that require the submission of duplicative data to the Exchange. The elimination of such duplicative requirements will reduce unnecessary costs and other compliance burdens for the Exchange and its Members, and therefore, will enhance the efficiency of the securities markets. Furthermore, the Exchange believes that the approach set forth in the proposed rule change strikes [[Page 25377]] the appropriate balance between ensuring that the Exchange is able to continue to fulfill its statutory obligation to protect investors and the public interest by ensuring its surveillance of market activity remains accurate and effective while also establishing a reasonable timeframe for elimination or modification of its rules that will be rendered duplicative after implementation of the CAT. (B) Self-Regulatory Organization's Statement on Burden on Competition Section 6(b)(8) of the Exchange Act \24\ requires that Exchange Rules not impose any burden on competition that is not necessary or appropriate. 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 Exchange Act. The Exchange notes that the proposed rule change implements the requirements of the CAT NMS Plan approved by the Commission regarding the elimination of rules and systems that are duplicative the CAT, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. Similarly, all exchanges and FINRA are proposing the elimination of reporting requirements related to COATS and EBS, as well as other duplicative rules, to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive rule filing and, therefore, it does not raise competition issues between and among the self-regulatory organizations and/or their members. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- (C) Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Although written comments on the proposed rule change were not solicited, the Exchange received comments from two commenters, the Financial Information Forum (``FIF'') and the Securities Industry and Financial Markets Association (``SIFMA''), regarding the retirement of systems related to the CAT.\25\ In its comment letters, with regard to the retirement of duplicative systems more generally, FIF recommended that the Participants continue the effort to incorporate current reporting obligations into the CAT in order to replace existing reportable systems with the CAT. In addition, FIF further recommended that, once a CAT Reporter achieved satisfactory reporting data quality, the CAT Reporter should be exempt from reporting to any duplicative reporting systems. FIF believed that these recommendations ``would serve both an underlying regulatory objective of more immediate and accurate access to data as well as an industry objective of reduced costs and burdens of regulatory oversight.'' \26\ In its comments about EBS specifically, FIF stated that the retirement of the EBS requirements should be a high priority, and that the CAT should be designed to include the requisite data elements to permit the rapid retirement of EBS.\27\ Similarly, SIFMA stated that ``the establishment of the CAT must be accompanied by the prompt elimination of duplicative systems,'' and ``recommend[ed] that the initial technical specifications be designed to facilitate the immediate retirement of . . . duplicative reporting systems.'' \28\ --------------------------------------------------------------------------- \25\ Letter from William H. Hebert, FIF, to Participants re: Milestone for Participants' rule change filings to eliminate/modify duplicative rules (Apr. 12, 2017) (``FIF Letter''); Letter from William H. Hebert, FIF, to Brent J. Fields, SEC re: Milestone for Participants' rule change filings to eliminate/modify duplicative rules (Apr. 12, 2017); and Letter from Kenneth E. Bentsen, Jr., SIFMA, to Participants re: Selection of Thesys as CAT Processor (Apr. 4, 2017) (``SIFMA Letter'') at 2. \26\ FIF Letter at 2. \27\ FIF Letter at 2. \28\ SIFMA Letter at 2. --------------------------------------------------------------------------- As discussed above, the Exchange agrees with the commenters that the reporting requirements proposed to be modified or eliminated should be replaced by the CAT reporting requirements as soon as accurate and reliable CAT Data is available. To this end, the Exchange anticipates that the CAT will be designed to collect the data necessary to permit the modification or elimination, as applicable, of these reporting requirements and the retirement of related systems. However, as discussed above, the Exchange disagrees with the recommendation to provide individual exemptions to those CAT Reporters who obtain satisfactory data reporting quality. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposal 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-BatsBZX-2017-37 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-BatsBZX-2017-37. 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 such filing will also 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-BatsBZX-2017-37 and should be submitted on or before June 22, 2017. [[Page 25378]] For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\29\ --------------------------------------------------------------------------- \29\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-11372 Filed 5-31-17; 8:45 am] BILLING CODE 8011-01-P
![25374 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices
office of the Exchange. All comments related systems by Regulatory Circular Rule 608 of Regulation NMS
received will be posted without change; that will be published once the options thereunder,7 the CAT NMS Plan.8 The
the Commission does not edit personal exchanges determine the thresholds for Participants filed the Plan to comply
identifying information from accuracy and reliability described below with Rule 613 of Regulation NMS under
submissions. You should submit only have been met and that the Plan the Exchange Act. The Plan was
information that you wish to make Processor for CAT is sufficiently published for comment in the Federal
available publicly. All submissions meeting all of its obligations under the Register on May 17, 2016,9 and
should refer to File Number SR– CAT NMS Plan. approved by the Commission, as
NYSEArca–2017–60, and should be The text of the proposed rule change modified, on November 15, 2016.10 The
submitted on or before June 22, 2017. is available at the Exchange’s Web site Plan is designed to create, implement
at www.bats.com, at the principal office and maintain a CAT that would capture
For the Commission, by the Division of
Trading and Markets, pursuant to delegated of the Exchange, and at the customer and order event information
authority.19 Commission’s Public Reference Room. for orders in NMS Securities and OTC
Eduardo A. Aleman, II. Self-Regulatory Organization’s Equity Securities, across all markets,
Assistant Secretary. Statement of the Purpose of, and from the time of order inception through
Statutory Basis for, the Proposed Rule routing, cancellation, modification, or
[FR Doc. 2017–11357 Filed 5–31–17; 8:45 am]
Change execution in a single consolidated data
BILLING CODE 8011–01–P
source. Pursuant to Appendix C of the
In its filing with the Commission, the CAT NMS Plan, each Participant is
Exchange included statements required to conduct analyses of which
SECURITIES AND EXCHANGE concerning the purpose of and basis for of its existing trade and order data rules
COMMISSION the proposed rule change and discussed and systems require the collection of
[Release No. 34–80796; File No. SR– any comments it received on the information that is duplicative of
BatsBZX–2017–37] proposed rule change. The text of these information collected for the CAT.11 In
statements may be examined at the addition, among other things, Section
Self-Regulatory Organizations; Bats places specified in Item IV below. The C.9 of Appendix C to the Plan, as
BZX Exchange, Inc.; Notice of Filing of Exchange has prepared summaries, set modified by the Commission, requires
Proposed Rule Change To Eliminate forth in Sections A, B, and C below, of each Participant to ‘‘file with the SEC
Requirements That Will Be Duplicative the most significant parts of such the relevant rule change filing to
of CAT statements. eliminate or modify its duplicative rules
May 26, 2017. (A) Self-Regulatory Organization’s within six (6) months of the SEC’s
Statement of the Purpose of, and approval of the CAT NMS Plan.’’ 12 The
Pursuant to Section 19(b)(1) of the Plan notes that ‘‘the elimination of such
Securities Exchange Act of 1934 (the Statutory Basis for, the Proposed Rule
Change rules and the retirement of such systems
‘‘Act’’) 1 and Rule 19b–4 thereunder,2 [will] be effective at such time as CAT
notice is hereby given that on May 15, 1. Purpose Data meets minimum standards of
2017, Bats BZX Exchange, Inc. (the accuracy and reliability.’’ 13
Bats BYX Exchange, Inc., Bats BZX
‘‘Exchange’’ or ‘‘BZX’’) filed with the After conducting its analysis of its
Exchange, Inc., Bats EDGA Exchange,
Securities and Exchange Commission Inc., Bats EDGX Exchange, Inc., BOX rules in accordance with the CAT NMS
(‘‘Commission’’) the proposed rule Options Exchange LLC, C2 Options Plan, the Exchange determined Rules
change as described in Items I, II, and Exchange, Incorporated, Chicago Board 22.7 and 24.4 require the reporting of
III below, which Items have been Options Exchange, Incorporated, information intended to be collected by
prepared by the Exchange. The Chicago Stock Exchange, Inc., Financial the CAT. Therefore, the Exchange
Commission is publishing this notice to Industry Regulatory Authority, Inc. believes those provisions will no longer
solicit comments on the proposed rule (‘‘FINRA’’), Investors’ Exchange LLC, be necessary once the CAT is
change from interested persons. Miami International Securities operational and proposes to modify
I. Self-Regulatory Organization’s Exchange, LLC, MIAX PEARL, LLC, those Rules as described below.
Statement of the Terms of Substance of NASDAQ BX, Inc., Nasdaq GEMX, LLC, Additionally, the Exchange describes
the Proposed Rule Change Nasdaq ISE, LLC, Nasdaq MRX, LLC,4 below additional reporting requirements
NASDAQ PHLX LLC, The NASDAQ that it may reduce for which no rule
The Exchange filed a proposal to changes are necessary. These changes
Stock Market LLC, New York Stock
modify requirements for the collection will be implemented in accordance with
Exchange LLC, NYSE MKT LLC, NYSE
of information that is duplicative of the timeline described below.
Arca, Inc. and NYSE National, Inc.5
information intended to be collected for
(collectively, the ‘‘Participants’’) filed
the consolidated audit trail (‘‘CAT’’) 7 17 CFR 242.608.
with the Commission, pursuant to
adopted pursuant to the National 8 See Letter from the Participants to Brent J.
Section 11A of the Exchange Act 6 and Fields, Secretary, Commission, dated September 30,
Market System Plan Governing the
2014; and Letter from Participants to Brent J. Fields,
Consolidated Audit Trail (the ‘‘CAT 4 ISE Gemini, LLC, ISE Mercury, LLC and Secretary, Commission, dated February 27, 2015.
NMS Plan’’ or ‘‘Plan’’).3 The Exchange International Securities Exchange, LLC have been On December 24, 2015, the Participants submitted
will announce the implementation date renamed Nasdaq GEMX, LLC, Nasdaq MRX, LLC, an amendment to the CAT NMS Plan. See Letter
of the proposed rule change and and Nasdaq ISE, LLC, respectively. See Securities from Participants to Brent J. Fields, Secretary,
Exchange Act Rel. No. 80248 (Mar. 15, 2017), 82 FR Commission, dated December 23, 2015.
effective date of the retirement of any
mstockstill on DSK30JT082PROD with NOTICES
14547 (Mar. 21, 2017); Securities Exchange Act Rel. 9 Securities Exchange Act Rel. No. 77724 (Apr.
No. 80326 (Mar. 29, 2017), 82 FR 16460 (Apr. 4, 27, 2016), 81 FR 30614 (May 17, 2016).
19 17 CFR 200.30–3(a)(12). 2017); and Securities Exchange Act Rel. No. 80325 10 Securities Exchange Act Rel. No. 79318 (Nov.
1 15 U.S.C. 78s(b)(1). (Mar. 29, 2017), 82 FR 16445 (Apr. 4, 2017). 15, 2016), 81 FR 84696 (Nov. 23, 2016) (‘‘Approval
2 17 CFR 240.19b–4. 5 National Stock Exchange, Inc. has been renamed Order’’).
3 Unless otherwise specified, capitalized terms NYSE National, Inc. See Securities Exchange Act 11 Appendix C of CAT NMS Plan, Approval Order
used in this rule filing are defined as set forth Rel. No. 79902 (Jan. 30, 2017), 82 FR 9258 (Feb. 3, at 85010.
herein, or in the CAT Compliance Rule Series or in 2017). 12 Id.
the CAT NMS Plan. 6 15 U.S.C. 78k–1. 13 Id.
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Initially, the Exchange notes that requires an Options Member 14 to will not be reportable to the CAT, such
options exchanges, including the submit requested trade data elements in as fixed-income securities; thus, the rule
Exchange, utilize consolidated options such automated format as may be must remain in effect with respect to
audit trail system (‘‘COATS’’) to collect prescribed by the Exchange from time to those transactions indefinitely or until
and review data regarding options time, in regard to a transaction(s) that is those transactions are captured in the
orders, quotes and transactions. The the subject of the particular request for CAT.
Participants have provided COATS information. The Rule sets forth in
(3) Other Reports
technical specifications to the Plan paragraphs (b) and (c) the data elements
Processor for the CAT for use in required if the transaction was a Various other Exchange Rules require
proprietary transaction or if it was Members to report information to the
developing the Technical Specifications
effected for a customer account, Exchange upon request.16 While the
for the CAT, and the Participants are
respectively. Paragraph (d) provides an Exchange believes it is necessary to
working with the Plan Processor to
Options Member must submit such retain these Rules to ensure it has access
include the necessary COATS data to the necessary data to perform its
other information as may from time to
elements in the CAT Technical regulatory duties and meet its
time be required. Paragraph (e) permits
Specifications. Accordingly, although the Exchange to grant exceptions from surveillance obligations, it expects it
the Technical Specifications for the these requirements in such cases and for will need to make fewer information
CAT have not yet been finalized, the such time periods as it deems requests pursuant to these Rule once
Exchange and the other options appropriate. Members begin reporting to the CAT
exchanges propose to eliminate COATS The Exchange proposes to amend and accuracy and reliability standards
in accordance with the proposed Rule 24.4 to state it will request are met.
timeline discussed below. The Exchange information under the Rule only if the
notes that it does not have any specific information is not available in the CAT (4) Timeline for Elimination of
rules or requirements related to COATS because, for example, the transaction(s) Duplicative Rules
but refers to its retirement below in an in question occurred before the firm was The CAT NMS Plan states that the
effort to provide transparency. reporting information to the CAT or elimination of rules that are duplicative
involved securities that are not of the requirements of the CAT and the
(1) Market Maker Equity Order Reports reportable to the CAT. In essence, under retirement of the related systems should
Rule 22.7(b) requires Market Makers, the proposed rule change, the Exchange be effective at such time as CAT Data
upon request and in the prescribed will make requests under Rule 24.4 if meets minimum standards of accuracy
form, report to the Exchange every order and only if the information is not and reliability.17 As discussed in more
entered by the Market Maker for the otherwise available through the CAT. detail below, the Exchange believes the
Once broker-dealer reporting to the Rule provisions and related systems
purchase or sale of (1) a security
CAT has begun, the CAT will contain described above may be retired at a date
underlying options traded on the
the data the Participants would after all Industry Members are reporting
Exchange, or (2) a security convertible otherwise have requested via the EBS to the CAT when the proposed error rate
into or exchangeable for such system for purposes of NMS Securities thresholds have been met, and the
underlying security, as well as opening and OTC Equity Securities. Exchange has determined that its usage
and closing positions in all such Consequently, the Exchange will not of the CAT Data has not revealed
securities held in each account reported need to use the EBS system or request material issues that have not been
pursuant to Rule 22.7(a). The report information pursuant to Rule 24.4 for corrected, confirmed that the CAT
pertaining to orders must include the NMS Securities or OTC Equity includes all data necessary to allow the
terms of each order, identification of the Securities for time periods after CAT Exchange to continue to meet its
brokerage firms through which the reporting has begun if the appropriate surveillance obligations, and confirmed
orders were entered, the times of entry accuracy and reliability thresholds are that the Plan Processor is sufficiently
or cancellation, the times report of achieved, including an acceptable meeting all of its obligations under the
execution were received and, if all or accuracy rate for customer and account CAT NMS Plan.
part of the order was executed, the information. However, Rule 24.4 cannot The Exchange believes the proposed
quantity and execution price. CAT will be completely eliminated immediately rule changes should not be effective
require Market Makers to report order upon the CAT achieving the appropriate until all Participants and Industry
information for such securities. thresholds because Exchange staff may Members that report data pursuant to
Therefore, this rule provision as it still need to request information the Rules described above are reporting
relates to order reports is duplicative of pursuant to Rule 24.4 for trading comparable data to the CAT. In this
CAT requirements, and the Exchange activity occurring before a member was way, the Exchange will continue to have
proposes to delete it. CAT does not reporting to the CAT.15 In addition, Rule access to the necessary data to perform
require reporting of positions, so the 24.4 applies to information regarding its regulatory duties.
Exchange will maintain the position transactions involving securities that The CAT NMS Plan requires that a
reporting requirement in Rule 22.7(b). rule filing to eliminate a duplicative
The Exchange also proposes a 14 An Options Member is a Member of the rule address whether ‘‘the availability of
conforming change to the rule name and Exchange that is registered to participate in options certain data from Small Industry
trading on BZX Options. See Rule 16.1(a)(38). A
Interpretation and Policy .01. Member is a registered broker or dealer that has
Members two years after the Effective
mstockstill on DSK30JT082PROD with NOTICES
been admitted to membership in the Exchange. See Date would facilitate a more expeditious
(2) EBS Rule 1.5(n). retirement of duplicative systems.’’ 18
15 Firms are required to maintain the trade
The Exchange believes COATS should
Rule 24.4 is the Exchange’s rule information for pre-CAT transactions in equities not be retired until all Participants and
regarding the automated submission of and options pursuant to applicable rules, such as
specific trading data to the Exchange books and records retention requirements, for the
16 See, e.g., Rule 4.2 (Furnishing of Records).
relevant time period, which is generally three or six
upon request using the Electronic Blue years depending upon the record. See 17 CFR 17 Id. [sic]
Sheet (‘‘EBS’’) system. Rule 24.4 240.17a–3(a), 240.17a–4. 18 Id.
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![25376 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices
Industry Members that report data to information it receives pursuant to the run and to confirm that the Plan
COATS are reporting comparable data to reporting requirements described above. Processor is meeting its obligations and
the CAT. While the early submission of Accordingly, the Exchange believes that performing its functions adequately.
options data to the CAT by Small the CAT Data should meet specific If the Commission approves the
Industry Members could expedite the quantitative error rates, as well as proposed rule change, the Exchange will
retirement of COATS, the Exchange certain qualitative requirements. announce the date for modification or
believes that it premature [sic] to The Exchange believes (and the other elimination, as applicable, of reporting
consider such a change and that options exchanges with respect to requirements and retirement of related
additional analysis would be necessary COATS and EBS) believe that, before systems and the implementation date of
to determine whether such early reporting requirements may be modified the proposed rule change via Regulatory
reporting by Small Industry Members or eliminated, as applicable, and related Circular that will be published once the
would be feasible. systems may be retired, the CAT would Exchange (and other options exchanges
The CAT NMS Plan requires that this need to achieve a sustained error rate for with respect to COATS and EBS)
rule filing address ‘‘whether individual a period of at least 180 days of 5% or determines that the thresholds for
Industry Members can be exempted lower measured on a pre-correction or accuracy and reliability described above
from reporting to duplicative systems as-submitted basis, and 2% or lower on have been met and that the Plan
once their CAT reporting meets a post-correction basis (measured at Processor is sufficiently meeting all of
specified accuracy and reliability T+5).21 The Exchange proposes to its obligations under the CAT NMS
standards, including, but not limited to, measure the 5% pre-correction and 2% Plan.
ways in which establishing cross-system post-correction thresholds by averaging 2. Statutory Basis
regulatory functionality or integrating the error rate across the period, not
data from existing systems and the CAT require a 5% pre-correction and 2% The Exchange believes that the
would facilitate such Individual post-correction maximum each day for proposed rule change is consistent with
Industry Member exemptions.’’ 19 The 180 consecutive days. The Exchange the provisions of Section 6(b)(5) of the
Exchange believes that a single cut-over believes that measuring each of the Exchange Act,22 which requires, among
from the reporting requirements thresholds over the course of 180 days other things, that Exchange Rules must
described above to CAT is highly will ensure that the CAT consistently be designed to prevent fraudulent and
preferable to a firm-by-firm approach meets minimum accuracy and reliability manipulative acts and practices, to
and is not proposing to exempt thresholds while also ensuring that promote just and equitable principles of
members from such reporting single-day measurements do not unduly trade, and, in general, to protect
requirements on a firm-by-firm basis. investors and the public interest, and
affect the overall measurements. The
The Exchange believes that providing not designed to permit unfair
Exchange proposes to measure the
such individual exemptions to Industry discrimination between customers,
appropriate error rates in the aggregate,
Members would be inefficient, more issuers, brokers and dealer. The
rather than firm-by-firm. In addition,
costly, and less reliable than the single Exchange believes that this proposal is
with respect to COATS, the Exchange
cut-over. Providing individual consistent with the Exchange Act
proposes to measure the error rates for
exemptions would require the options because it fulfills the obligation in the
options only, not equity securities, as
exchanges to create, for a brief CAT NMS Plan for the Exchange to
only options are subject to COATS. The
temporary period, a cross-system submit a proposed rule change to
2% and 5% error rates are in line with
regulatory function and to integrate data eliminate or modify duplicative rules. In
the proposed retirement threshold for
from reports received pursuant to the approving the Plan, the SEC noted that
FINRA’s Order Audit Trail System
above requirements and the CAT to the Plan ‘‘is necessary and appropriate
(‘‘OATS’’).
avoid creating any regulatory gaps as a In addition to these minimum error in the public interest, for the protection
result of such exemptions. Such a rates before reporting requirements may of investors and the maintenance of fair
function would be costly to create and be modified or eliminated, as and orderly markets, to remove
would give rise to a greater likelihood applicable, and related systems may be impediments to, and perfect the
of data errors or other issues. Given the retired, the Exchange believes that mechanism of a national market system,
limited time in which such exemptions during the minimum 180-day period or is otherwise in furtherance of the
would be necessary, the Exchange does during which the thresholds are purposes of the Act.’’ 23 As this proposal
not believe that such exemptions would calculated, the Exchange’s use of the implements the Plan, the Exchange
be an appropriate use of limited data in the CAT must confirm that (i) believes that this proposal furthers the
resources. usage over that time period has not objectives of the Plan, as identified by
The CAT NMS Plan also requires that the SEC, and is therefore consistent with
revealed material issues that have not
a rule filing to eliminate a duplicative the Exchange Act.
been corrected, (ii) the CAT includes all
rule to provide ‘‘specific accuracy and Moreover, the purpose of the
data necessary to allow the Exchange to
reliability standards that will determine proposed rule change is to amend rules
continue to meet its surveillance
when duplicative systems will be that require the submission of
obligations, and (iii) the Plan Processor
retired, including, but not limited to, duplicative data to the Exchange. The
is sufficiently meeting all of its
whether the attainment of a certain elimination of such duplicative
obligations under the CAT NMS Plan.
Error Rate should determine when a requirements will reduce unnecessary
The Exchange believes this time period
system duplicative of the CAT can be costs and other compliance burdens for
to use the CAT Data is necessary to
retired.’’ 20 The Exchange believes that it the Exchange and its Members, and
mstockstill on DSK30JT082PROD with NOTICES
reveal any errors that may manifest
is critical that the CAT Data be therefore, will enhance the efficiency of
themselves only after surveillance
sufficiently accurate and reliable for the the securities markets. Furthermore, the
patterns and other queries have been
Exchange to perform the regulatory Exchange believes that the approach set
functions that it now performs using the 21 The Plan requires that the Plan Processor must
forth in the proposed rule change strikes
ensure that regulators have access to corrected and
19 Id. 22 15 U.S.C. 78f(b)(5).
linked order and Customer data by 8:00 a.m.
20 Id. Eastern Time on T+5. See CAT NMS Plan, at C–15. 23 Approval Order at 84697.
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![Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices 25377
the appropriate balance between current reporting obligations into the IV. Solicitation of Comments
ensuring that the Exchange is able to CAT in order to replace existing
continue to fulfill its statutory reportable systems with the CAT. In Interested persons are invited to
obligation to protect investors and the addition, FIF further recommended that, submit written data, views, and
public interest by ensuring its once a CAT Reporter achieved arguments concerning the foregoing,
surveillance of market activity remains satisfactory reporting data quality, the including whether the proposal is
accurate and effective while also CAT Reporter should be exempt from consistent with the Act. Comments may
establishing a reasonable timeframe for reporting to any duplicative reporting be submitted by any of the following
elimination or modification of its rules systems. FIF believed that these methods:
that will be rendered duplicative after recommendations ‘‘would serve both an
implementation of the CAT. Electronic Comments
underlying regulatory objective of more
(B) Self-Regulatory Organization’s immediate and accurate access to data • Use the Commission’s Internet
Statement on Burden on Competition as well as an industry objective of comment form (http://www.sec.gov/
reduced costs and burdens of regulatory rules/sro.shtml); or
Section 6(b)(8) of the Exchange Act 24 oversight.’’ 26 In its comments about
requires that Exchange Rules not impose EBS specifically, FIF stated that the • Send an email to rule-
any burden on competition that is not retirement of the EBS requirements comments@sec.gov. Please include File
necessary or appropriate. The Exchange should be a high priority, and that the Number SR–BatsBZX–2017–37 on the
does not believe that the proposed rule CAT should be designed to include the subject line.
change will result in any burden on requisite data elements to permit the
competition that is not necessary or Paper Comments
rapid retirement of EBS.27 Similarly,
appropriate in furtherance of the SIFMA stated that ‘‘the establishment of • Send paper comments in triplicate
purposes of the Exchange Act. The the CAT must be accompanied by the to Secretary, Securities and Exchange
Exchange notes that the proposed rule prompt elimination of duplicative
change implements the requirements of Commission, 100 F Street NE.,
systems,’’ and ‘‘recommend[ed] that the Washington, DC 20549–1090.
the CAT NMS Plan approved by the initial technical specifications be
Commission regarding the elimination designed to facilitate the immediate All submissions should refer to File
of rules and systems that are duplicative retirement of . . . duplicative reporting Number SR–BatsBZX–2017–37. This file
the CAT, and is designed to assist the systems.’’ 28 number should be included on the
Exchange in meeting its regulatory subject line if email is used. To help the
obligations pursuant to the Plan. As discussed above, the Exchange
agrees with the commenters that the Commission process and review your
Similarly, all exchanges and FINRA are comments more efficiently, please use
proposing the elimination of reporting reporting requirements proposed to be
modified or eliminated should be only one method. The Commission will
requirements related to COATS and
replaced by the CAT reporting post all comments on the Commission’s
EBS, as well as other duplicative rules,
to implement the requirements of the requirements as soon as accurate and Internet Web site (http://www.sec.gov/
CAT NMS Plan. Therefore, this is not a reliable CAT Data is available. To this rules/sro.shtml). Copies of the
competitive rule filing and, therefore, it end, the Exchange anticipates that the submission, all subsequent
does not raise competition issues CAT will be designed to collect the data amendments, all written statements
between and among the self-regulatory necessary to permit the modification or with respect to the proposed rule
organizations and/or their members. elimination, as applicable, of these change that are filed with the
reporting requirements and the Commission, and all written
(C) Self-Regulatory Organization’s retirement of related systems. However, communications relating to the
Statement on Comments on the as discussed above, the Exchange proposed rule change between the
Proposed Rule Change Received From disagrees with the recommendation to Commission and any person, other than
Members, Participants, or Others provide individual exemptions to those those that may be withheld from the
Although written comments on the CAT Reporters who obtain satisfactory public in accordance with the
proposed rule change were not solicited, data reporting quality. provisions of 5 U.S.C. 552, will be
the Exchange received comments from available for Web site viewing and
III. Date of Effectiveness of the
two commenters, the Financial printing in the Commission’s Public
Proposed Rule Change and Timing for
Information Forum (‘‘FIF’’) and the
Commission Action Reference Room, 100 F Street NE.,
Securities Industry and Financial
Washington, DC 20549, on official
Markets Association (‘‘SIFMA’’), Within 45 days of the date of
regarding the retirement of systems business days between the hours of
publication of this notice in the Federal
related to the CAT.25 In its comment 10:00 a.m. and 3:00 p.m. Copies of such
Register or within such longer period (i)
letters, with regard to the retirement of filing will also be available for
as the Commission may designate up to
duplicative systems more generally, FIF 90 days of such date if it finds such inspection and copying at the principal
recommended that the Participants longer period to be appropriate and office of the Exchange. All comments
continue the effort to incorporate publishes its reasons for so finding or received will be posted without change;
(ii) as to which the Exchange consents, the Commission does not edit personal
24 15 U.S.C. 78f(b)(8). the Commission will: (a) By order identifying information from
25 Letter from William H. Hebert, FIF, to approve or disapprove such proposed submissions. You should submit only
mstockstill on DSK30JT082PROD with NOTICES
Participants re: Milestone for Participants’ rule information that you wish to make
change filings to eliminate/modify duplicative rules rule change, or (b) institute proceedings
(Apr. 12, 2017) (‘‘FIF Letter’’); Letter from William to determine whether the proposed rule available publicly. All submissions
H. Hebert, FIF, to Brent J. Fields, SEC re: Milestone change should be disapproved. should refer to File Number SR–
for Participants’ rule change filings to eliminate/ BatsBZX–2017–37 and should be
modify duplicative rules (Apr. 12, 2017); and Letter
from Kenneth E. Bentsen, Jr., SIFMA, to
26 FIFLetter at 2. submitted on or before June 22, 2017.
27 FIFLetter at 2.
Participants re: Selection of Thesys as CAT
Processor (Apr. 4, 2017) (‘‘SIFMA Letter’’) at 2. 28 SIFMA Letter at 2.
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![25378 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices
For the Commission, by the Division of Exchange to generically list Investment Equities Rule 5.2(j)(3) the percentage
Trading and Markets, pursuant to delegated Company Units (‘‘Units’’) that overlie an weighting requirements would apply
authority.29 index or portfolio of US Component only to the Fixed Income Securities
Eduardo A. Aleman, Stocks,6 Non-US Component Stocks,7 portion of the underlying index or
Assistant Secretary. US Component Stocks and Non-US portfolio.
[FR Doc. 2017–11372 Filed 5–31–17; 8:45 am] Component Stocks, and Fixed Income The Exchange does not propose any
BILLING CODE 8011–01–P Securities 8 that meets specified criteria. limit to the weighting of cash in an
While ‘‘Investment Companies,’’ 9 like index or portfolio underlying a series of
mutual funds, may hold cash, currently, Units.10 The Commission notes that,
SECURITIES AND EXCHANGE the generic listing criteria of NYSE Arca under a provision of its current rule, the
COMMISSION Equities Rule 5.2(j)(3) do not Exchange may generically list Units
[Release No. 34–80777; File No. SR– contemplate the generic listing Units overlying a combination of indexes so
NYSEArca–2017–30] overlying an index or portfolio with a long as each index satisfies the generic
cash component. listing criteria.11
Self-Regulatory Organizations; NYSE The Exchange proposes to amend
Arca, Inc.; Order Approving a Commentary .01 and Commentary .02 to III. Discussion and Commission
Proposed Rule Change, as Modified by NYSE Arca Equities Rule 5.2(j)(3) to Findings
Amendment No. 1 Thereto, To Amend permit the generic listing and trading of After careful review, the Commission
Commentary .01 and Commentary .02 Units overlying an index or portfolio of finds that the proposed rule change, as
to NYSE Arca Equities Rule 5.2(j)(3) To cash and: (1) US Component Stocks; (2) modified by Amendment No. 1, is
Provide for the Inclusion of Cash in an Non-US Component Stocks; (3) US consistent with the requirements of the
Index Underlying a Series of Component Stocks and Non-US Act and the rules and regulations
Investment Company Units Component Stocks; and (4) Fixed thereunder applicable to a national
Income Securities. Additionally, the securities exchange.12 In particular, the
May 25, 2017. Exchange is not proposing to otherwise Commission finds that the proposed
I. Introduction amend the applicable generic listing rule change is consistent with Section
criteria, except to specify that the 6(b)(5) of the Act,13 which requires,
On March 29, 2017, NYSE Arca, Inc.
following generic listing criteria will not among other things, that the rules of a
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
apply to the cash portion of the index national securities exchange be
with the Securities and Exchange
or portfolio: designed to prevent fraudulent and
Commission (‘‘Commission’’), pursuant • Under proposed Commentary
to Section 19(b)(1) 1 of the Securities manipulative acts and practices, to
.01(a)(A)(1) through (4) to NYSE Arca promote just and equitable principles of
Exchange Act of 1934 (‘‘Act’’ or Equities Rule 5.2(j)(3), the percentage
‘‘Exchange Act’’) 2 and Rule 19b–4 trade, to remove impediments to and
weighting requirements would apply perfect the mechanism of a free and
thereunder,3 a proposed rule change to only to the US Component Stocks
amend Commentary .01 and open market and a national market
portion of the underlying index or system and, in general, to protect
Commentary .02 to NYSE Arca Equities portfolio.
Rule 5.2(j)(3) to provide for the investors and the public interest.
• Under proposed Commentary .01 The Commission believes that
inclusion of cash in an index underlying (a)(B)(1) through (4) to NYSE Arca
a series of Investment Company Units. permitting the Exchange to generically
Equities Rule 5.2(j)(3), the percentage list Units that overlie an index or
The proposed rule change was weighting requirements would not
published for comment in the Federal portfolio with a cash component may
apply to the cash component of the enhance competition among generically
Register on April 14, 2017.4 On May 10, underlying index or portfolio. listed Units, to the benefit of investors
2017, the Exchange filed Amendment • Under proposed Commentary and the marketplace. Additionally, the
No. 1 to the proposed rule change.5 The .02(a)(2), (a)(4), and (a)(6) to NYSE Arca
Commission received no comments on Commission believes that the generic
the proposed rule change. This order 6 ‘‘US Component Stock’’ is defined in NYSE
listing criteria referenced above,
approves the proposed rule change, as Arca Equities Rule 5.2(j)(3) as an equity security
applicable only to the non-cash
modified by Amendment No. 1 thereto. that is registered under Sections 12(b) or 12(g) of portion(s) of the index or portfolio will
the Securities Exchange Act of 1934 or an American neither dilute the generic listing criteria
II. Description of the Proposal Depositary Receipt, the underlying equity security nor render the indexes or portfolios
of which is registered under Sections 12(b) or 12(g)
Commentary .01(a)(A), Commentary of the Securities Exchange Act of 1934.
underlying generically listed Units more
.01 (a)(B), and Commentary .02 to NYSE 7 ‘‘Non-US Component Stock’’ is defined in NYSE susceptible to manipulation.14
Arca Equities Rule 5.2(j)(3) permit the Arca Equities Rule 5.2(j)(3) as an equity security For the foregoing reasons, the
that is not registered under Sections 12(b) or 12(g) Commission finds that the proposed
29 17
of the Securities Exchange Act of 1934 and that is rule change, as modified by Amendment
CFR 200.30–3(a)(12). issued by an entity that (a) is not organized,
1 15 U.S.C. 78s(b)(1). domiciled or incorporated in the United States, and
2 15 U.S.C. 78a. 10 See Amendment No. 1, supra note 5, at 6.
(b) is an operating company (including Real Estate
3 17 CFR 240.19b–4. 11 See Commentary .03 to NYSE Arca Equities
Investment Trusts and income trusts, but excluding
4 See Securities Exchange Act Release No. 80415 investment trusts, unit trusts, mutual funds, and Rule 5.2(j)(3).
(April 10, 2017), 82 FR 18067. derivatives). 12 In approving this proposed rule change, the
5 In Amendment No. 1, which amended and 8 Commentary .02 to NYSE Arca Equities Rule Commission has considered the proposed rule’s
replaced the proposed rule change in its entirety, 5.2(j)(3) defines Fixed Income Securities as debt impact on efficiency, competition, and capital
mstockstill on DSK30JT082PROD with NOTICES
the Exchange made a technical change to the securities that are notes, bonds, debentures or formation. See 15 U.S.C. 78c(f).
proposed rule text. Amendment No. 1 to the evidence of indebtedness that include, but are not 13 15 U.S.C. 78f(b)(5).
proposed rule change is available at: https:// limited to, U.S. Department of Treasury securities, 14 The Commission also notes that the Exchange
www.sec.gov/comments/sr-nysearca-2017-30/ government-sponsored entity securities, municipal represents that it has in place surveillance
nysearca201730-1749397-151677.pdf. Amendment securities, trust preferred securities, supranational procedures that are adequate to properly monitor
No. 1 is not subject to notice and comment because debt and debt of a foreign country or a subdivision trading in Units in all trading sessions and to deter
it is a technical amendment that does not materially thereof. and detect violations of Exchange rules and
alter the described substance of the proposed rule 9 The term ‘‘Investment Company’’ is defined in applicable federal securities laws. See Amendment
change or raise any novel regulatory issues. NYSE Arca Equities Rule 5.2(j)(3). No. 1, supra note 5, at 7.
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Document Created: 2017-06-01 03:04:53
Document Modified: 2017-06-01 03:04:53
| 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 | 82 FR 25374 |
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