82 FR 25443 - Self-Regulatory Organizations; NYSE MKT LLC; 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 | 25443-25446 | |
| FR Document | 2017-11369 |
[Federal Register Volume 82, Number 104 (Thursday, June 1, 2017)] [Notices] [Pages 25443-25446] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-11369] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80793; File No. SR-NYSEMKT-2017-29] Self-Regulatory Organizations; NYSE MKT LLC; 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 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on May 15, 2017, NYSE MKT LLC (``NYSE MKT'' or the ``Exchange'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to delete subsections (a)(1)-(13) of Rule 956NY (Record of Orders) of the Options Rules as these Rules collect information for the consolidated options audit trail system (``COATS'') that are duplicative of the data collection requirements of the CAT NMS Plan. The Exchange will announce the date for the retirement of COATS in a regulatory notice that will be published once the options exchanges determine that the thresholds for accuracy and reliability described below have been met and that the Plan Processor is sufficiently meeting all of its obligations under the CAT NMS Plan. The proposed rule change is available on the Exchange's Web site at www.nyse.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 self-regulatory organization 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 those 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose Background Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, CBOE, 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,\3\ NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, the Exchange, NYSE Arca, Inc. and NYSE National, Inc.\4\ (collectively, the ``Participants'') filed with the Commission, pursuant to Section 11A of the Exchange Act \5\ and Rule 608 of Regulation NMS thereunder,\6\ the CAT [[Page 25444]] NMS Plan.\7\ The Participants filed the Plan to comply with Rule 613 of Regulation NMS under the Exchange Act.\8\ 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\ --------------------------------------------------------------------------- \3\ 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 Release No. 80248 (March 15, 2017), 82 FR 14547 (March 21, 2017) (SR-ISEGemini-2017-13); Securities Exchange Act Release No. 80326 (March 29, 2017), 82 FR 16460 (April 4, 2017) (SR-ISEMercury-2017- 05); and Securities Exchange Act Release No. 80325 (March 29, 2017), 82 FR 16445 (April 4, 2017) (SR-ISE-2017-25). \4\ National Stock Exchange, Inc. has been renamed NYSE National, Inc. See Securities Exchange Act Release No. 79902 (January 30, 2017), 82 FR 9258 (February 3, 2017) (SR-NSX-2016-16). \5\ 15 U.S.C. 78k-1. \6\ 17 CFR 242.608. \7\ 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. \8\ 17 CFR 242.613. \9\ Securities Exchange Act Release No. 77724 (April 27, 2016), 81 FR 30614 (May 17, 2016) (File No. 4-698). \10\ Securities Exchange Act Release No. 79318 (Nov. 15, 2016), 81 FR 84696 (November 23, 2016) (File No. 4-698) (``Approval Order''). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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 that the information collected for COATS is intended to be collected by the CAT. Therefore, the Exchange believes that COATS will no longer be necessary once the CAT is operational and certain accuracy and reliability standards are met. Accordingly, the Exchange submits this proposed rule change to delete subsections (a)(1)-(13) of Rule 956NY of the Options Rules, which set forth certain requirements related to COATS. Discussed below is a description of the duplicative rule requirements as well as the timeline for eliminating the duplicative rule. If the Commission approves the proposed rule change, the rule text will be effective; however, the amendments will not be implemented until the Exchange, in conjunction with the other options exchanges, publishes a notice announcing the date for the retirement of COATS. As noted below, such a notice would be published once the options exchanges determine that the thresholds for accuracy and reliability described below have been met and that the Plan Processor is sufficiently meeting all of its obligations under the CAT NMS Plan. Duplicative COATS Requirements COATS was developed to comply with an order of the Commission requiring the Exchange, in coordination with other exchanges, to ``design and implement'' COATS to ``enable the options exchanges to reconstruct markets promptly, effectively surveil them and enforce order handling, firm quote, trade reporting and other rules.'' \14\ The options exchanges utilize COATS to collect and review data regarding options orders, quotes and transactions. --------------------------------------------------------------------------- \14\ See Section IV.B.e.(v) of the Commission's Order Instituting Public Administrative Proceedings Pursuant to Sections 19(h)(1) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions (the ``Order''). See Securities Exchange Act Release No. 43268 (September 11, 2000) and Administrative Proceeding File No. 3-10282. As noted, 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. The Exchange has already adopted rules to enforce compliance by its Industry Members, as applicable, with the provisions of the Plan. See Securities Exchange Act Release No. 80256 (March 15, 2017), 82 FR 14526 (March 21, 2017) (SR- NYSEMKT-2017-02) (Order Approving Proposed Rule Changes to Adopt Consolidated Audit Trail Compliance Rules). Once the CAT is fully operational, it will be appropriate to delete Exchange rules implemented to comply with the Order as duplicative of the CAT. Accordingly, the Exchange believes that the Exchange would continue to be in compliance with the requirements of the Order once the CAT is fully operational and the COATS rules are deleted. --------------------------------------------------------------------------- The Exchange has determined that the requirements of subsections (a)(1)-(13) of Rule 956NY, which implement certain requirements related to COATS, are duplicative of information available in the CAT and thus will no longer be necessary once the CAT is operational.\15\ --------------------------------------------------------------------------- \15\ Rule 956NY requires ATP Holders to maintain and preserve a record of every order and of any other instructions given or received for the purchase or sale of options contracts, including the terms and conditions of the orders (such as whether the order is a market or limit order), the order entry date and time, and the date and time of any modification of the terms of the order or cancellation of the order, or other specific data elements. The Exchange proposes to replace the current data elements in subsections (a)(1)-(13) with the phrase ``the elements required by the Rule 6800 Series.'' --------------------------------------------------------------------------- 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. 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.\16\ As discussed below, the Exchange and the other options exchanges believe that COATS 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. --------------------------------------------------------------------------- \16\ See Appendix C of CAT NMS Plan, Approval Order at 85010. --------------------------------------------------------------------------- The Exchange believes COATS should not be retired until all Participants and Industry Members that report data to COATS 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.'' \17\ The Exchange believes COATS should not be retired until all Participants and Industry Members that report data to COATS are reporting comparable data to the CAT. While the early submission of [[Page 25445]] options data to the CAT by Small Industry Members could expedite the retirement of COATS, the Exchange believes that it premature 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. --------------------------------------------------------------------------- \17\ 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.'' \18\ --------------------------------------------------------------------------- \18\ Id. --------------------------------------------------------------------------- The Exchange believes that a single cut-over from COATS to CAT is highly preferable to a firm-by-firm approach and is not proposing to exempt members from the COATS requirements on a firm-by-firm basis. The Exchange and the other options exchanges believe 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 COATS 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 and the other options exchanges do not believe that such exemptions would be an appropriate use of limited resources. 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.'' \19\ 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 via COATS. Accordingly, the Exchange believes that the CAT Data should meet specific quantitative error rates, as well as certain qualitative requirements. --------------------------------------------------------------------------- \19\ Id. --------------------------------------------------------------------------- The Exchange and the other options exchanges believe that, before COATS 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).\20\ 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, 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''). --------------------------------------------------------------------------- \20\ 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 COATS can 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. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,\21\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\22\ in particular, because it is designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \21\ 15 U.S.C. 78f(b). \22\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- In particular, the Exchange believes that the proposed rule change 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. --------------------------------------------------------------------------- \23\ Approval Order at 84697. --------------------------------------------------------------------------- Moreover, the purpose of the proposed rule change is to eliminate 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 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 The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed change is not designed to address any competitive issue but rather implement provisions of the CAT NMS Plan approved by the Commission regarding the elimination of rules and [[Page 25446]] systems that are duplicative the CAT, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. Similarly, all options exchanges are proposing the elimination of COATS and their rules related to COATS 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 options exchanges and/or their members. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. 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 up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the 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 proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NYSEMKT-2017-29 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSEMKT-2017-29. 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 also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEMKT-2017-29, and should be submitted on or before June 22, 2017. --------------------------------------------------------------------------- \24\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\24\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-11369 Filed 5-31-17; 8:45 am] BILLING CODE 8011-01-P
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III. Date of Effectiveness of the filing also will be available for below have been met and that the Plan
Proposed Rule Change and Timing for inspection and copying at the principal Processor is sufficiently meeting all of
Commission Action office of the Exchange. All comments its obligations under the CAT NMS
Within 45 days of the date of received will be posted without change; Plan. The proposed rule change is
publication of this notice in the Federal the Commission does not edit personal available on the Exchange’s Web site at
Register or up to 90 days (i) as the identifying information from www.nyse.com, at the principal office of
Commission may designate if it finds submissions. You should submit only the Exchange, and at the Commission’s
information that you wish to make Public Reference Room.
such longer period to be appropriate
available publicly. All submissions
and publishes its reasons for so finding II. Self-Regulatory Organization’s
should refer to File Number SR–
or (ii) as to which the self-regulatory Statement of the Purpose of, and
NYSEMKT–2017–30, and should be
organization consents, the Commission Statutory Basis for, the Proposed Rule
submitted on or before June 22, 2017.
will: Change
(A) By order approve or disapprove For the Commission, by the Division of
the proposed rule change, or Trading and Markets, pursuant to delegated In its filing with the Commission, the
authority.35 self-regulatory organization included
(B) institute proceedings to determine
whether the proposed rule change statements concerning the purpose of,
Eduardo A. Aleman, and basis for, the proposed rule change
should be disapproved.
Assistant Secretary. and discussed any comments it received
IV. Solicitation of Comments [FR Doc. 2017–11370 Filed 5–31–17; 8:45 am] on the proposed rule change. The text
Interested persons are invited to BILLING CODE 8011–01–P of those statements may be examined at
submit written data, views, and the places specified in Item IV below.
arguments concerning the foregoing, The Exchange has prepared summaries,
including whether the proposed rule SECURITIES AND EXCHANGE set forth in sections A, B, and C below,
change is consistent with the Act. COMMISSION of the most significant parts of such
Comments may be submitted by any of [Release No. 34–80793; File No. SR– statements.
the following methods: NYSEMKT–2017–29] A. Self-Regulatory Organization’s
Electronic Comments Statement of the Purpose of, and the
Self-Regulatory Organizations; NYSE
Statutory Basis for, the Proposed Rule
• Use the Commission’s Internet MKT LLC; Notice of Filing of Proposed
Change
comment form (http://www.sec.gov/ Rule Change To Eliminate
rules/sro.shtml); or Requirements That Will Be Duplicative 1. Purpose
• Send an email to rule- of CAT Background
comments@sec.gov. Please include File
May 26, 2017. Bats BYX Exchange, Inc., Bats BZX
Number SR–NYSEMKT–2017–30 on the
Pursuant to Section 19(b)(1) of the Exchange, Inc., Bats EDGA Exchange,
subject line.
Securities Exchange Act of 1934 Inc., Bats EDGX Exchange, Inc., BOX
Paper Comments (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 Options Exchange LLC, C2 Options
• Send paper comments in triplicate notice is hereby given that on May 15, Exchange, Incorporated, CBOE, Chicago
to Brent J. Fields, Secretary, Securities 2017, NYSE MKT LLC (‘‘NYSE MKT’’ or Stock Exchange, Inc., Financial Industry
and Exchange Commission, 100 F Street the ‘‘Exchange’’) filed with the Regulatory Authority, Inc. (‘‘FINRA’’),
NE., Washington, DC 20549–1090. Securities and Exchange Commission Investors’ Exchange LLC, Miami
(‘‘SEC’’ or ‘‘Commission’’) the proposed International Securities Exchange, LLC,
All submissions should refer to File
rule change as described in Items I, II, MIAX PEARL, LLC, NASDAQ BX, Inc.,
Number SR–NYSEMKT–2017–30. This
and III below, which Items have been Nasdaq GEMX, LLC, Nasdaq ISE, LLC,
file number should be included on the
prepared by the Exchange. The Nasdaq MRX, LLC,3 NASDAQ PHLX
subject line if email is used. To help the
Commission is publishing this notice to LLC, The NASDAQ Stock Market LLC,
Commission process and review your
solicit comments on the proposed rule New York Stock Exchange LLC, the
comments more efficiently, please use
change from interested persons. Exchange, NYSE Arca, Inc. and NYSE
only one method. The Commission will
post all comments on the Commission’s I. Self-Regulatory Organization’s National, Inc.4 (collectively, the
Internet Web site (http://www.sec.gov/ Statement of the Terms of Substance of ‘‘Participants’’) filed with the
rules/sro.shtml). Copies of the the Proposed Rule Change Commission, pursuant to Section 11A of
submission, all subsequent The Exchange proposes to delete the Exchange Act 5 and Rule 608 of
amendments, all written statements subsections (a)(1)–(13) of Rule 956NY Regulation NMS thereunder,6 the CAT
with respect to the proposed rule (Record of Orders) of the Options Rules
change that are filed with the as these Rules collect information for
3 ISE Gemini, LLC, ISE Mercury, LLC and
Commission, and all written International Securities Exchange, LLC have been
the consolidated options audit trail renamed Nasdaq GEMX, LLC, Nasdaq MRX, LLC,
communications relating to the system (‘‘COATS’’) that are duplicative and Nasdaq ISE, LLC, respectively. See Securities
proposed rule change between the of the data collection requirements of Exchange Act Release No. 80248 (March 15, 2017),
Commission and any person, other than the CAT NMS Plan. The Exchange will 82 FR 14547 (March 21, 2017) (SR–ISEGemini–
those that may be withheld from the 2017–13); Securities Exchange Act Release No.
announce the date for the retirement of 80326 (March 29, 2017), 82 FR 16460 (April 4,
public in accordance with the
mstockstill on DSK30JT082PROD with NOTICES
COATS in a regulatory notice that will 2017) (SR–ISEMercury–2017–05); and Securities
provisions of 5 U.S.C. 552, will be be published once the options Exchange Act Release No. 80325 (March 29, 2017),
available for Web site viewing and exchanges determine that the thresholds 82 FR 16445 (April 4, 2017) (SR–ISE–2017–25).
4 National Stock Exchange, Inc. has been renamed
printing in the Commission’s Public for accuracy and reliability described NYSE National, Inc. See Securities Exchange Act
Reference Room, 100 F Street NE., Release No. 79902 (January 30, 2017), 82 FR 9258
Washington, DC 20549 on official 35 17 CFR 200.30–3(a)(12). (February 3, 2017) (SR–NSX–2016–16).
business days between the hours of 1 15 U.S.C. 78s(b)(1). 5 15 U.S.C. 78k–1.
10:00 a.m. and 3:00 p.m. Copies of such 2 17 CFR 240.19b–4. 6 17 CFR 242.608.
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NMS Plan.7 The Participants filed the duplicative rule requirements as well as The Participants have provided
Plan to comply with Rule 613 of the timeline for eliminating the COATS technical specifications to the
Regulation NMS under the Exchange duplicative rule. Plan Processor for the CAT for use in
Act.8 The Plan was published for If the Commission approves the developing the Technical Specifications
comment in the Federal Register on proposed rule change, the rule text will for the CAT, and the Participants are
May 17, 2016,9 and approved by the be effective; however, the amendments working with the Plan Processor to
Commission, as modified, on November will not be implemented until the include the necessary COATS data
15, 2016.10 Exchange, in conjunction with the other elements in the CAT Technical
The Plan is designed to create, options exchanges, publishes a notice Specifications. Accordingly, although
implement and maintain a CAT that announcing the date for the retirement the Technical Specifications for the
would capture customer and order event of COATS. As noted below, such a CAT have not yet been finalized, the
information for orders in NMS notice would be published once the Exchange and the other options
Securities and OTC Equity Securities, options exchanges determine that the exchanges propose to eliminate COATS
across all markets, from the time of thresholds for accuracy and reliability in accordance with the proposed
order inception through routing, described below have been met and that timeline discussed below.
cancellation, modification, or execution the Plan Processor is sufficiently
in a single consolidated data source. Timeline for Elimination of Duplicative
meeting all of its obligations under the Rules
Pursuant to Appendix C of the CAT CAT NMS Plan.
NMS Plan, each Participant is required The CAT NMS Plan states that the
to conduct analyses of which of its Duplicative COATS Requirements elimination of rules that are duplicative
existing trade and order data rules and COATS was developed to comply of the requirements of the CAT and the
systems require the collection of with an order of the Commission retirement of the related systems should
information that is duplicative of requiring the Exchange, in coordination be effective at such time as CAT Data
information collected for the CAT.11 In with other exchanges, to ‘‘design and meets minimum standards of accuracy
addition, among other things, Section implement’’ COATS to ‘‘enable the and reliability.16 As discussed below,
C.9 of Appendix C to the Plan, as options exchanges to reconstruct the Exchange and the other options
modified by the Commission, requires markets promptly, effectively surveil exchanges believe that COATS may be
each Participant to ‘‘file with the SEC them and enforce order handling, firm retired at a date after all Industry
the relevant rule change filing to quote, trade reporting and other Members are reporting to the CAT when
eliminate or modify its duplicative rules rules.’’ 14 The options exchanges utilize the proposed error rate thresholds have
within six (6) months of the SEC’s COATS to collect and review data been met, and the Exchange has
approval of the CAT NMS Plan.’’ 12 The regarding options orders, quotes and determined that its usage of the CAT
Plan notes that ‘‘the elimination of such transactions. Data has not revealed material issues
rules and the retirement of such systems The Exchange has determined that the that have not been corrected, confirmed
[will] be effective at such time as CAT requirements of subsections (a)(1)–(13) that the CAT includes all data necessary
Data meets minimum standards of of Rule 956NY, which implement to allow the Exchange to continue to
accuracy and reliability.’’ 13 certain requirements related to COATS, meet its surveillance obligations, and
After conducting its analysis of its are duplicative of information available confirmed that the Plan Processor is
rules in accordance with the CAT NMS in the CAT and thus will no longer be sufficiently meeting all of its obligations
Plan, the Exchange determined that the necessary once the CAT is operational.15 under the CAT NMS Plan.
information collected for COATS is The Exchange believes COATS should
intended to be collected by the CAT. 14 See Section IV.B.e.(v) of the Commission’s not be retired until all Participants and
Therefore, the Exchange believes that Order Instituting Public Administrative Proceedings Industry Members that report data to
COATS will no longer be necessary Pursuant to Sections 19(h)(1) of the Securities COATS are reporting comparable data to
once the CAT is operational and certain Exchange Act of 1934, Making Findings and the CAT. In this way, the Exchange will
Imposing Remedial Sanctions (the ‘‘Order’’). See
accuracy and reliability standards are Securities Exchange Act Release No. 43268
continue to have access to the necessary
met. Accordingly, the Exchange submits (September 11, 2000) and Administrative data to perform its regulatory duties.
this proposed rule change to delete Proceeding File No. 3–10282. As noted, the Plan is The CAT NMS Plan requires that a
subsections (a)(1)–(13) of Rule 956NY of designed to create, implement and maintain a CAT rule filing to eliminate a duplicative
that would capture customer and order event rule address whether ‘‘the availability of
the Options Rules, which set forth information for orders in NMS Securities and OTC
certain requirements related to COATS. Equity Securities, across all markets, from the time certain data from Small Industry
Discussed below is a description of the of order inception through routing, cancellation, Members two years after the Effective
modification, or execution in a single consolidated Date would facilitate a more expeditious
7 See Letter from the Participants to Brent J. data source. The Exchange has already adopted retirement of duplicative systems.’’ 17
rules to enforce compliance by its Industry
Fields, Secretary, Commission, dated September 30,
Members, as applicable, with the provisions of the The Exchange believes COATS should
2014; and Letter from Participants to Brent J. Fields, not be retired until all Participants and
Plan. See Securities Exchange Act Release No.
Secretary, Commission, dated February 27, 2015.
On December 24, 2015, the Participants submitted
80256 (March 15, 2017), 82 FR 14526 (March 21, Industry Members that report data to
an amendment to the CAT NMS Plan. See Letter 2017) (SR–NYSEMKT–2017–02) (Order Approving COATS are reporting comparable data to
Proposed Rule Changes to Adopt Consolidated
from Participants to Brent J. Fields, Secretary,
Audit Trail Compliance Rules). Once the CAT is
the CAT. While the early submission of
Commission, dated December 23, 2015.
8 17 CFR 242.613.
fully operational, it will be appropriate to delete
Exchange rules implemented to comply with the the order is a market or limit order), the order entry
9 Securities Exchange Act Release No. 77724
Order as duplicative of the CAT. Accordingly, the date and time, and the date and time of any
mstockstill on DSK30JT082PROD with NOTICES
(April 27, 2016), 81 FR 30614 (May 17, 2016) (File Exchange believes that the Exchange would modification of the terms of the order or
No. 4–698). continue to be in compliance with the requirements cancellation of the order, or other specific data
10 Securities Exchange Act Release No. 79318
of the Order once the CAT is fully operational and elements. The Exchange proposes to replace the
(Nov. 15, 2016), 81 FR 84696 (November 23, 2016) the COATS rules are deleted. current data elements in subsections (a)(1)–(13)
(File No. 4–698) (‘‘Approval Order’’). 15 Rule 956NY requires ATP Holders to maintain with the phrase ‘‘the elements required by the Rule
11 Appendix C of CAT NMS Plan, Approval Order 6800 Series.’’
and preserve a record of every order and of any
at 85010. other instructions given or received for the 16 See Appendix C of CAT NMS Plan, Approval
12 Id. Order at 85010.
purchase or sale of options contracts, including the
13 Id. terms and conditions of the orders (such as whether 17 Id.
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![25446 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices
systems that are duplicative the CAT, post all comments on the Commission’s certain open-end management
and is designed to assist the Exchange Internet Web site (http://www.sec.gov/ investment companies (‘‘Funds’’) to
in meeting its regulatory obligations rules/sro.shtml). Copies of the issue shares redeemable in large
pursuant to the Plan. Similarly, all submission, all subsequent aggregations only (‘‘Creation Units’’); (b)
options exchanges are proposing the amendments, all written statements secondary market transactions in Fund
elimination of COATS and their rules with respect to the proposed rule shares to occur at negotiated market
related to COATS to implement the change that are filed with the prices rather than at net asset value
requirements of the CAT NMS Plan. Commission, and all written (‘‘NAV’’); (c) certain Funds to pay
Therefore, this is not a competitive rule communications relating to the redemption proceeds, under certain
filing and, therefore, it does not raise proposed rule change between the circumstances, more than seven days
competition issues between and among Commission and any person, other than after the tender of shares for
the options exchanges and/or their those that may be withheld from the redemption; (d) certain affiliated
members. public in accordance with the persons of a Fund to deposit securities
provisions of 5 U.S.C. 552, will be into, and receive securities from, the
C. Self-Regulatory Organization’s available for Web site viewing and Fund in connection with the purchase
Statement on Comments on the printing in the Commission’s Public and redemption of Creation Units; (e)
Proposed Rule Change Received From Reference Room, 100 F Street NE., certain registered management
Members, Participants, or Others Washington, DC 20549 on official investment companies and unit
No written comments were solicited business days between the hours of investment trusts outside of the same
or received with respect to the proposed 10:00 a.m. and 3:00 p.m. Copies of such group of investment companies as the
rule change. filing also will be available for Funds (‘‘Funds of Funds’’) to acquire
inspection and copying at the principal shares of the Funds; and (f) certain
III. Date of Effectiveness of the office of the Exchange. All comments Funds (‘‘Feeder Funds’’) to create and
Proposed Rule Change and Timing for received will be posted without change; redeem Creation Units in-kind in a
Commission Action the Commission does not edit personal master-feeder structure.
Within 45 days of the date of identifying information from APPLICANTS: Northern Lights Fund Trust
publication of this notice in the Federal submissions. You should submit only IV (the ‘‘Trust’’), a Delaware statutory
Register or up to 90 days (i) as the information that you wish to make trust registered under the Act as an
Commission may designate if it finds available publicly. All submissions open-end management investment
such longer period to be appropriate should refer to File Number SR– company with multiple series, and Main
and publishes its reasons for so finding NYSEMKT–2017–29, and should be Management ETF Advisors, LLC, a
or (ii) as to which the self-regulatory submitted on or before June 22, 2017. Delaware limited liability company
organization consents, the Commission For the Commission, by the Division of registered as an investment adviser
will: Trading and Markets, pursuant to delegated under the Investment Advisers Act of
(A) By order approve or disapprove authority.24 1940.
the proposed rule change, or Eduardo A. Aleman, FILING DATE: The application was filed
(B) institute proceedings to determine Assistant Secretary. on February 22, 2017.
whether the proposed rule change [FR Doc. 2017–11369 Filed 5–31–17; 8:45 am] HEARING OR NOTIFICATION OF HEARING: An
should be disapproved.
BILLING CODE 8011–01–P order granting the requested relief will
IV. Solicitation of Comments be issued unless the Commission orders
Interested persons are invited to a hearing. Interested persons may
SECURITIES AND EXCHANGE request a hearing by writing to the
submit written data, views, and
COMMISSION Commission’s Secretary and serving
arguments concerning the foregoing,
including whether the proposed rule [Investment Company Act Release No. applicants with a copy of the request,
change is consistent with the Act. 32662; 812–14747] personally or by mail. Hearing requests
Comments may be submitted by any of should be received by the Commission
the following methods: Northern Lights Fund Trust IV and by 5:30 p.m. on June 19, 2017, and
Main Management ETF Advisors, LLC should be accompanied by proof of
Electronic Comments service on applicants, in the form of an
May 25, 2017.
• Use the Commission’s Internet affidavit, or for lawyers, a certificate of
AGENCY: Securities and Exchange service. Pursuant to rule 0–5 under the
comment form (http://www.sec.gov/ Commission (‘‘Commission’’).
rules/sro.shtml); or Act, hearing requests should state the
ACTION: Notice.
• Send an email to rule-comments@ nature of the writer’s interest, any facts
sec.gov. Please include File Number SR– Notice of an application for an order bearing upon the desirability of a
NYSEMKT–2017–29 on the subject line. under section 6(c) of the Investment hearing on the matter, the reason for the
Company Act of 1940 (the ‘‘Act’’) for an request, and the issues contested.
Paper Comments Persons who wish to be notified of a
exemption from sections 2(a)(32),
• Send paper comments in triplicate 5(a)(1), 22(d), and 22(e) of the Act and hearing may request notification by
to Brent J. Fields, Secretary, Securities rule 22c–1 under the Act, under writing to the Commission’s Secretary.
and Exchange Commission, 100 F Street sections 6(c) and 17(b) of the Act for an ADDRESSES: Brent J. Fields, Secretary,
NE., Washington, DC 20549–1090. exemption from sections 17(a)(1) and Securities and Exchange Commission,
mstockstill on DSK30JT082PROD with NOTICES
All submissions should refer to File 17(a)(2) of the Act, and under section 100 F Street NE., Washington, DC
Number SR–NYSEMKT–2017–29. This 12(d)(1)(J) for an exemption from 20549–1090; Applicants: the Trust,
file number should be included on the sections 12(d)(1)(A) and 12(d)(1)(B) of 17605 Wright Street, Omaha, NE 68130;
subject line if email is used. To help the the Act. The requested order would the Initial Adviser, 601 California Street,
Commission process and review your permit (a) actively-managed series of Suite 620, San Francisco, CA 94108.
comments more efficiently, please use FOR FURTHER INFORMATION CONTACT:
only one method. The Commission will 24 17 CFR 200.30–3(a)(12). Laura J. Riegel, Senior Counsel, at (202)
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Document Created: 2017-06-01 03:05:28
Document Modified: 2017-06-01 03:05:28
| 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 25443 |
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