82 FR 25639 - Self-Regulatory Organizations; NYSE Arca, 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 105 (June 2, 2017)

Page Range		25639-25642
FR Document		2017-11401
Federal Register, Volume 82 Issue 105 (Friday, June 2, 2017)
[Federal Register Volume 82, Number 105 (Friday, June 2, 2017)]
[Notices]
[Pages 25639-25642]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-11401]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80800; File No. SR-NYSEArca-2017-57]


Self-Regulatory Organizations; NYSE Arca, 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 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 15, 2017, NYSE Arca, Inc. (``NYSE Arca'' 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to delete NYSE Arca Rule 6.20 (Time 
Synchronization) and subsections (a)(1)-(13) of NYSE Arca Rule 6.68 
(Record of Orders) 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 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 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\
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    \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'').
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    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\
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    \11\ Appendix C of CAT NMS Plan, Approval Order at 85010.
    \12\ Id.
    \13\ Id.
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    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 
NYSE Arca Rule 6.20 and subsections (a)(1)-(13) of NYSE Arca Rule 6.68, 
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

[[Page 25640]]

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.
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    \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.
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    The Exchange has determined that the requirements of NYSE Arca Rule 
6.20 and subsections (a)(1)-(13) of NYSE Arca Rule 6.68, 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\
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    \15\ NYSE Arca Rule 6.20 requires OTP Holders and OTP Firms to 
synchronize, within a time frame established by the Exchange, the 
business clocks used for recording the date and time of any event 
that must be recorded pursuant to the Exchange Rules. Under the 
Rule, OTP Holders and OTP Firms may use any time provider source, 
but must ensure that its business clocks are accurate to within a 
three-second of the National Institute of Standards and Technology 
Atomic Clock in Boulder, Colorado or the United States Naval 
Observatory Master Clock in Washington, DC. The Exchange has 
determined that NYSE Arca Rule 6.20 is duplicative of CAT 
requirements and thus will no longer be necessary once the CAT is 
operational.
    NYSE Arca Rule 6.68 requires OTP Holders and OTP Firms 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.
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    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.
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    \16\ See Appendix C of CAT NMS Plan, Approval Order at 85010.
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    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 
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.
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    \17\ Id.
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    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\
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    \18\ Id.
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    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

[[Page 25641]]

believes that the CAT Data should meet specific quantitative error 
rates, as well as certain qualitative requirements.
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    \19\ Id.
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    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'').
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    \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.
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    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.
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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
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    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.
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    \23\ Approval Order at 84697.
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    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 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 Comments

     Use 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-NYSEArca-2017-57 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-NYSEArca-2017-57. This 
file number should be included on the

[[Page 25642]]

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-NYSEArca-2017-57, and should be submitted on or before 
June 23, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11401 Filed 6-1-17; 8:45 am]
BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 105 / Friday, June 2, 2017 / Notices 25639

information that you wish to make the Exchange, and at the Commission’s Plan to comply with Rule 613 of
available publicly. All submissions Public Reference Room. Regulation NMS under the Exchange
should refer to File Number SR–NYSE– Act.8 The Plan was published for
II. Self-Regulatory Organization’s
2017–23, and should be submitted on or comment in the Federal Register on
Statement of the Purpose of, and
before June 23, 2017. May 17, 2016,9 and approved by the
Statutory Basis for, the Proposed Rule
For the Commission, by the Division of Change Commission, as modified, on November
Trading and Markets, pursuant to delegated 15, 2016.10
authority.36 In its filing with the Commission, the The Plan is designed to create,
Eduardo A. Aleman, self-regulatory organization included implement and maintain a CAT that
Assistant Secretary.
statements concerning the purpose of, would capture customer and order event
and basis for, the proposed rule change information for orders in NMS
[FR Doc. 2017–11400 Filed 6–1–17; 8:45 am]
and discussed any comments it received Securities and OTC Equity Securities,
BILLING CODE 8011–01–P
on the proposed rule change. The text across all markets, from the time of
of those statements may be examined at order inception through routing,
the places specified in Item IV below. cancellation, modification, or execution
SECURITIES AND EXCHANGE
The Exchange has prepared summaries, in a single consolidated data source.
COMMISSION
set forth in sections A, B, and C below, Pursuant to Appendix C of the CAT
[Release No. 34–80800; File No. SR– of the most significant parts of such NMS Plan, each Participant is required
NYSEArca–2017–57] statements. to conduct analyses of which of its
Self-Regulatory Organizations; NYSE A. Self-Regulatory Organization’s existing trade and order data rules and
Arca, Inc.; Notice of Filing of Proposed Statement of the Purpose of, and the systems require the collection of
Rule Change To Eliminate Statutory Basis for, the Proposed Rule information that is duplicative of
Requirements That Will Be Duplicative Change information collected for the CAT.11 In
of CAT addition, among other things, Section
1. Purpose C.9 of Appendix C to the Plan, as
May 26, 2017. Background modified by the Commission, requires
Pursuant to Section 19(b)(1) of the each Participant to ‘‘file with the SEC
Bats BYX Exchange, Inc., Bats BZX
Securities Exchange Act of 1934 the relevant rule change filing to
Exchange, Inc., Bats EDGA Exchange,
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 eliminate or modify its duplicative rules
Inc., Bats EDGX Exchange, Inc., BOX
notice is hereby given that on May 15, within six (6) months of the SEC’s
Options Exchange LLC, C2 Options
2017, NYSE Arca, Inc. (‘‘NYSE Arca’’ or approval of the CAT NMS Plan.’’ 12 The
Exchange, Incorporated, CBOE, Chicago
the ‘‘Exchange’’) filed with the Plan notes that ‘‘the elimination of such
Stock Exchange, Inc., Financial Industry
Securities and Exchange Commission rules and the retirement of such systems
Regulatory Authority, Inc. (‘‘FINRA’’),
(‘‘SEC’’ or ‘‘Commission’’) the proposed [will] be effective at such time as CAT
Investors’ Exchange LLC, Miami
rule change as described in Items I, II, Data meets minimum standards of
International Securities Exchange, LLC,
and III below, which Items have been accuracy and reliability.’’ 13
MIAX PEARL, LLC, NASDAQ BX, Inc.,
prepared by the self-regulatory After conducting its analysis of its
Nasdaq GEMX, LLC, Nasdaq ISE, LLC,
organization. The Commission is rules in accordance with the CAT NMS
Nasdaq MRX, LLC,3 NASDAQ PHLX
publishing this notice to solicit Plan, the Exchange determined that the
LLC, The NASDAQ Stock Market LLC,
comments on the proposed rule change information collected for COATS is
New York Stock Exchange LLC, the
from interested persons. intended to be collected by the CAT.
Exchange, NYSE Arca, Inc. and NYSE
I. Self-Regulatory Organization’s National, Inc.4 (collectively, the Therefore, the Exchange believes that
Statement of the Terms of Substance of ‘‘Participants’’) filed with the COATS will no longer be necessary
the Proposed Rule Change Commission, pursuant to Section 11A of once the CAT is operational and certain
the Exchange Act 5 and Rule 608 of accuracy and reliability standards are
The Exchange proposes to delete met. Accordingly, the Exchange submits
NYSE Arca Rule 6.20 (Time Regulation NMS thereunder,6 the CAT
NMS Plan.7 The Participants filed the this proposed rule change to delete
Synchronization) and subsections NYSE Arca Rule 6.20 and subsections
(a)(1)–(13) of NYSE Arca Rule 6.68 3 ISE Gemini, LLC, ISE Mercury, LLC and (a)(1)–(13) of NYSE Arca Rule 6.68,
(Record of Orders) as these Rules collect International Securities Exchange, LLC have been which set forth certain requirements
information for the consolidated options renamed Nasdaq GEMX, LLC, Nasdaq MRX, LLC, related to COATS. Discussed below is a
audit trail system (‘‘COATS’’) that are and Nasdaq ISE, LLC, respectively. See Securities
description of the duplicative rule
duplicative of the data collection Exchange Act Release No. 80248 (March 15, 2017),
82 FR 14547 (March 21, 2017) (SR–ISEGemini– requirements as well as the timeline for
requirements of the CAT NMS Plan. The 2017–13); Securities Exchange Act Release No. eliminating the duplicative rule.
Exchange will announce the date for the 80326 (March 29, 2017), 82 FR 16460 (April 4, If the Commission approves the
retirement of COATS in a regulatory 2017) (SR–ISEMercury–2017–05); and Securities
Exchange Act Release No. 80325 (March 29, 2017), proposed rule change, the rule text will
notice that will be published once the 82 FR 16445 (April 4, 2017) (SR–ISE–2017–25). be effective; however, the amendments
options exchanges determine that the 4 National Stock Exchange, Inc. has been renamed
will not be implemented until the
thresholds for accuracy and reliability NYSE National, Inc. See Securities Exchange Act
described below have been met and that Release No. 79902 (January 30, 2017), 82 FR 9258 8 17
(February 3, 2017) (SR–NSX–2016–16). CFR 242.613.
the Plan Processor is sufficiently 5 15 U.S.C. 78k–1.
9 Securities Exchange Act Release No. 77724
meeting all of its obligations under the (April 27, 2016), 81 FR 30614 (May 17, 2016) (File
nlaroche on DSK30NT082PROD with NOTICES

6 17 CFR 242.608.
CAT NMS Plan. The proposed change is 7 See Letter from the Participants to Brent J.
No. 4–698).
10 Securities Exchange Act Release No. 79318
available on the Exchange’s Web site at Fields, Secretary, Commission, dated September 30,
(Nov. 15, 2016), 81 FR 84696 (November 23, 2016)
www.nyse.com, at the principal office of 2014; and Letter from Participants to Brent J. Fields,
Secretary, Commission, dated February 27, 2015. (File No. 4–698) (‘‘Approval Order’’).
11 Appendix C of CAT NMS Plan, Approval Order
On December 24, 2015, the Participants submitted
36 17 CFR 200.30–3(a)(12). at 85010.
an amendment to the CAT NMS Plan. See Letter
1 15 U.S.C. 78s(b)(1). 12 Id.
from Participants to Brent J. Fields, Secretary,
2 17 CFR 240.19b–4. Commission, dated December 23, 2015. 13 Id.

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Federal Register / Vol. 82, No. 105 / Friday, June 2, 2017 / Notices 25641

believes that the CAT Data should meet of the Act,22 in particular, because it is address any competitive issue but rather
specific quantitative error rates, as well designed to prevent fraudulent and implement provisions of the CAT NMS
as certain qualitative requirements. manipulative acts and practices, Plan approved by the Commission
The Exchange and the other options promote just and equitable principles of regarding the elimination of rules and
exchanges believe that, before COATS trade, to foster cooperation and systems that are duplicative the CAT,
may be retired, the CAT would need to coordination with persons engaged in and is designed to assist the Exchange
achieve a sustained error rate for a regulating, clearing, settling, processing in meeting its regulatory obligations
period of at least 180 days of 5% or information with respect to, and remove pursuant to the Plan. Similarly, all
lower measured on a pre-correction or impediments to and perfect the options exchanges are proposing the
as-submitted basis, and 2% or lower on mechanism of a free and open market elimination of COATS and their rules
a post-correction basis (measured at and a national market system, and, in related to COATS to implement the
T+5).20 The Exchange proposes to general, to protect investors and the requirements of the CAT NMS Plan.
measure the 5% pre-correction and 2% public interest. Therefore, this is not a competitive rule
post-correction thresholds by averaging In particular, the Exchange believes filing and, therefore, it does not raise
the error rate across the period, not that the proposed rule change is competition issues between and among
require a 5% pre-correction and 2% consistent with the Exchange Act the options exchanges and/or their
post-correction maximum each day for because it fulfills the obligation in the members.
180 consecutive days. The Exchange CAT NMS Plan for the Exchange to
submit a proposed rule change to C. Self-Regulatory Organization’s
believes that measuring each of the
eliminate or modify duplicative rules. In Statement on Comments on the
thresholds over the course of 180 days
approving the Plan, the SEC noted that Proposed Rule Change Received From
will ensure that the CAT consistently
the Plan ‘‘is necessary and appropriate Members, Participants, or Others
meets minimum accuracy and reliability
thresholds while also ensuring that in the public interest, for the protection No written comments were solicited
single-day measurements do not unduly of investors and the maintenance of fair or received with respect to the proposed
affect the overall measurements. The and orderly markets, to remove rule change.
Exchange proposes to measure the impediments to, and perfect the
mechanism of a national market system, III. Date of Effectiveness of the
appropriate error rates in the aggregate, Proposed Rule Change and Timing for
rather than firm-by-firm. In addition, the or is otherwise in furtherance of the
purposes of the Act.’’ 23 As this proposal Commission Action
Exchange proposes to measure the error
rates for options only, not equity implements the Plan, the Exchange Within 45 days of the date of
securities, as only options are subject to believes that this proposal furthers the publication of this notice in the Federal
COATS. The 2% and 5% error rates are objectives of the Plan, as identified by Register or up to 90 days (i) as the
in line with the proposed retirement the SEC, and is therefore consistent with Commission may designate if it finds
threshold for FINRA’s Order Audit Trail the Exchange Act. such longer period to be appropriate
System (‘‘OATS’’). Moreover, the purpose of the and publishes its reasons for so finding
In addition to these minimum error proposed rule change is to eliminate or (ii) as to which the self-regulatory
rates before COATS can be retired, the rules that require the submission of organization consents, the Commission
Exchange believes that during the duplicative data to the Exchange. The will:
minimum 180-day period during which elimination of such duplicative (A) By order approve or disapprove
the thresholds are calculated, the requirements will reduce unnecessary the proposed rule change, or
Exchange’s use of the data in the CAT costs and other compliance burdens for (B) institute proceedings to determine
must confirm that (i) usage over that the Exchange and its members, and whether the proposed rule change
time period has not revealed material therefore, will enhance the efficiency of should be disapproved.
issues that have not been corrected, (ii) the securities markets. Furthermore, the
IV. Solicitation of Comments
the CAT includes all data necessary to Exchange believes that the approach set
forth in the proposed rule change strikes Interested persons are invited to
allow the Exchange to continue to meet submit written data, views, and
its surveillance obligations, and (iii) the the appropriate balance between
ensuring that the Exchange is able to arguments concerning the foregoing,
Plan Processor is sufficiently meeting all including whether the proposed rule
of its obligations under the CAT NMS continue to fulfill its statutory
obligation to protect investors and the change is consistent with the Act.
Plan. The Exchange believes this time Comments may be submitted by any of
period to use the CAT Data is necessary public interest by ensuring its
surveillance of market activity remains the following methods:
to reveal any errors that may manifest
themselves only after surveillance accurate and effective while also Electronic Comments
patterns and other queries have been establishing a reasonable timeframe for
elimination or modification of its rules • Use the Commission’s Internet
run and to confirm that the Plan comment form (http://www.sec.gov/
Processor is meeting its obligations and that will be rendered duplicative after
implementation of the CAT. rules/sro.shtml); or
performing its functions adequately. • Send an email to rule-comments@
B. Self-Regulatory Organization’s sec.gov. Please include File Number SR–
2. Statutory Basis
Statement on Burden on Competition NYSEArca–2017–57 on the subject line.
The Exchange believes that the
The Exchange does not believe that Paper Comments
proposed rule change is consistent with
the proposed rule change will impose
nlaroche on DSK30NT082PROD with NOTICES

Section 6(b) of the Act,21 in general, and
any burden on competition that is not • Send paper comments in triplicate
furthers the objectives of Section 6(b)(5) necessary or appropriate in furtherance to Brent J. Fields, Secretary, Securities
of the purposes of the Act. The and Exchange Commission, 100 F Street
20 The Plan requires that the Plan Processor must
proposed change is not designed to NE., Washington, DC 20549–1090.
ensure that regulators have access to corrected and
linked order and Customer data by 8:00 a.m. All submissions should refer to File
Eastern Time on T+5. See CAT NMS Plan, at C–15. 22 15 U.S.C. 78f(b)(5). Number SR–NYSEArca–2017–57. This
21 15 U.S.C. 78f(b). 23 Approval Order at 84697. file number should be included on the

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25642 Federal Register / Vol. 82, No. 105 / Friday, June 2, 2017 / Notices

subject line if email is used. To help the (‘‘Proposed Rule Change’’) pursuant to II. Description of the Proposed Rule
Commission process and review your Section 19(b)(1) of the Securities Change
comments more efficiently, please use Exchange Act of 1934 (‘‘Act’’),1 and FICC’s current liquidity resources for
only one method. The Commission will Rule 19b–4 thereunder,2 to implement a its Government Securities Division
post all comments on the Commission’s Capped Contingency Liquidity Facility (‘‘GSD’’) 8 consist of (i) cash in GSD’s
Internet Web site (http://www.sec.gov/ in FICC’s Government Securities clearing fund; (ii) cash that can be
rules/sro.shtml). Copies of the Division Rulebook.3 The Proposed Rule obtained by entering into uncommitted
submission, all subsequent Change was published for comment in repo transactions using securities in the
amendments, all written statements the Federal Register on March 20, clearing fund; (iii) cash that can be
with respect to the proposed rule obtained by entering into uncommitted
2017.4 To date, the Commission has
change that are filed with the repo transactions using the securities
received three comment letters to the
Commission, and all written that were destined for delivery to the
communications relating to the Proposed Rule Change.5 On April 25,
2017, the Commission designated a defaulting GSD member; and (iv)
proposed rule change between the uncommitted bank loans.9
Commission and any person, other than longer period within which to approve
the Proposed Rule Change, disapprove With this Proposed Rule Change,
those that may be withheld from the FICC proposes to amend its GSD
public in accordance with the the Proposed Rule Change, or institute
Rulebook (‘‘GSD Rules’’) 10 to establish
provisions of 5 U.S.C. 552, will be proceedings to determine whether to
a rules-based, committed liquidity
available for Web site viewing and approve or disapprove the Proposed resource (i.e., the Capped Contingency
printing in the Commission’s Public Rule Change.6 This order institutes Liquidity Facility® (‘‘CCLF’’)) as an
Reference Room, 100 F Street NE., proceedings under Section 19(b)(2)(B) of additional liquidity resource designed
Washington, DC 20549 on official the Act 7 to determine whether to to provide FICC with a committed
business days between the hours of approve or disapprove the Proposed liquidity resource to meet its cash
10:00 a.m. and 3:00 p.m. Copies of such Rule Change. settlement obligations in the event of a
filing also will be available for default of the GSD Netting Member or
inspection and copying at the principal 1 15 U.S.C. 78s(b)(1). family of affiliated Netting Members
office of the Exchange. All comments 2 17 CFR 240.19b–4. (‘‘Affiliated Family’’) to which FICC has
received will be posted without change; 3 FICC also filed the Proposed Rule Change as
the largest exposure in extreme but
the Commission does not edit personal advance notice SR–FICC–2017–802 (‘‘Advance plausible market conditions.11
identifying information from Notice’’) pursuant to Section 806(e)(1) of the
submissions. You should submit only Payment, Clearing, and Settlement Supervision Act A. Overview of the Proposal
of 2010, 12 U.S.C. 5465(e)(1), and Rule 19b–
information that you wish to make 4(n)(1)(i) under the Act, 17 CFR 240.19b–4(n)(1)(i). CCLF would be invoked only if FICC
available publicly. All submissions Notice of filing of the Advance Notice was declared a ‘‘CCLF Event,’’ which would
should refer to File Number SR– published for comment in the Federal Register on occur only if FICC ceased to act for a
NYSEArca–2017–57, and should be March 15, 2017. Securities Exchange Act Release Netting Member in accordance to GSD
submitted on or before June 23, 2017. No. 80191 (March 9, 2017), 82 FR 13876 (March 15, Rule 22A (referred to as a ‘‘default’’)
2017) (SR–FICC–2017–802). The Commission
For the Commission, by the Division of extended the deadline for its review period of the
and, subsequent to such default, FICC
Trading and Markets, pursuant to delegated Advance Notice from April 30, 2017 to June 29, determined that its other, above-
authority.24 2017. Securities Exchange Act Release No. 80520 described liquidity resources could not
Eduardo A. Aleman, (April 25, 2017), 82 FR 20404 (May 1, 2017) (SR– generate sufficient cash to statisfy
FICC–2017–802). The proposal in the Proposed FICC’s payment obligations to the non-
Assistant Secretary. Rule Change and the Advance Notice shall not take
[FR Doc. 2017–11401 Filed 6–1–17; 8:45 am] effect until all regulatory actions required with
defaulting Netting Members. Once FICC
BILLING CODE 8011–01–P respect to the proposal are completed. declares a CCLF Event, each Netting
4 Securities Exchange Act Release No. 80234 Member could be called upon to enter
(March 14, 2017), 82 FR 14401 (March 20, 2017) into repurchase transactions with FICC
(SR–FICC–2017–002). (‘‘CCLF Transactions’’) up to a pre-
SECURITIES AND EXCHANGE 5 See letter from Robert E. Pooler, Chief Financial
COMMISSION determined capped dollar amount, as
Officer, Ronin Capital LLC, dated April 10, 2017,
described below.
[Release No. 34–80812; File No. SR–FICC– to Robert W. Errett, Deputy Secretary, Commission;
2017–002] letter from Alan B. Levy, Managing Director, 1. Declaration of a CCLF Event
Industrial and Commercial Bank of China Financial
Services LLC (‘‘ICBC’’), Philip Vandermause, Following a default, FICC would first
Self-Regulatory Organizations; Fixed
Director, Aardvark Securities LLC, David Rutter, obtain liquidity through its other
Income Clearing Corporation; Order Chief Executive Officer, LiquidityEdge LLC, Robert available non-CCLF liquidity resources.
Instituting Proceedings To Determine Pooler, Chief Financial Officer, Ronin Capital LLC,
Whether To Approve or Disapprove a Jason Manumaleuna, Chief Financial Officer and 8 FICC operates two divisions—GSD and the
Proposed Rule Change To Implement EVP, Rosenthal Collins Group LLC, and Scott
Mortgage-Backed Securities Division (‘‘MBSD’’).
the Capped Contingency Liquidity Skyrm, Managing Director, Wedbush Securities Inc.
GSD provides trade comparison, netting, risk
(‘‘ICBC Letter’’); and letter from Timothy J. management, settlement and central counterparty
Facility in the Government Securities Cuddihy, Managing Director, FICC, dated March 8, services for the U.S. government securities market,
Division Rulebook 2017, to Robert W. Errett, Deputy Secretary, while MBSD provides the same services for the U.S.
Commission (‘‘FICC Letter’’), available at https:// mortgage-backed securities market. Because GSD
May 30, 2017. www.sec.gov/comments/sr-ficc-2017-002/ and MBSD are separate divisions of FICC, each
ficc2017002.htm. Since the proposal contained in division maintains its own rules, members, margin
I. Introduction the Proposed Rule Change was also filed as an from their respective members, clearing fund, and
nlaroche on DSK30NT082PROD with NOTICES

On March 1, 2017, Fixed Income Advance Notice, Release No. 80191, supra note 3, liquid resources.
Clearing Corporation (‘‘FICC’’) filed the Commission is considering all public comments 9 See Notice, 82 at 14402.
received on the proposal regardless of whether the 10 GSD Rules, available at www.dtcc.com/legal/
with the Securities and Exchange comments are submitted to the Proposed Rule rules-and-procedures.aspx.
Commission (‘‘Commission’’) proposed Change or the Advance Notice. 11 As defined in the GSD Rules, the term ‘‘Netting
rule change SR–FICC–2017–002 6 See Securities Exchange Act Release No. 80524
Member’’ means a GSD member that is a member
(April 25, 2017), 82 FR 20685 (May 3, 2017). of the GSD Comparison System and the Netting
24 17 CFR 200.30–3(a)(12). 7 15 U.S.C. 78s(b)(2)(B). System. Id.

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Document Created: 2017-06-02 00:38:00
Document Modified: 2017-06-02 00:38:00
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 25639