82 FR 26147 - Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Order Granting Approval of a Proposed Rule Change To Shorten the Standard Settlement Cycle From Three Business Days After the Trade Date to Two Business Days After the Trade Date

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 107 (June 6, 2017)

Page Range		26147-26148
FR Document		2017-11609
Federal Register, Volume 82 Issue 107 (Tuesday, June 6, 2017)
[Federal Register Volume 82, Number 107 (Tuesday, June 6, 2017)]
[Notices]
[Pages 26147-26148]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-11609]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80825; File No. SR-CHX-2017-06]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Granting Approval of a Proposed Rule Change To Shorten the 
Standard Settlement Cycle From Three Business Days After the Trade Date 
to Two Business Days After the Trade Date

May 31, 2017.

I. Introduction

    On April 6, 2017, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to conform its rules to an amendment adopted by 
the Commission to Rule 15c6-1(a) under the Act \3\ to shorten the 
standard settlement cycle for most broker-dealer transactions from 
three business days after the trade date (``T+3'') to two business days 
after the trade date (``T+2'').\4\ The Commission adopted the amendment 
to Rule 15c6-1(a) under the Act to shorten the standard settlement 
cycle to T+2 on March 22, 2017 and set a compliance date of September 
5, 2017.\5\ The Exchange's proposed rule change was published for 
comment in the Federal Register on April 21, 2017.\6\ The Commission 
did not receive any comment letters on the proposed rule change. This 
order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.15c6-1.
    \4\ See Securities Exchange Act Release No. 80295 (March 22, 
2017), 82 FR 15564 (March 29, 2017) (``SEC Adopting Release'').
    \5\ See id.
    \6\ See Securities Exchange Act Release No. 80467 (April 17, 
2017), 82 FR 18800.

---------------------------------------------------------------------------

[[Page 26148]]

II. Description of the Proposal

    The Exchange proposes to amend Article 1, Rule 2(e) and Article 9, 
Rule 7 to conform to the Commission's amendment to Rule 15c6-1(a) under 
the Act \7\ which shortens the standard settlement cycle from T+3 to 
T+2 for most broker-dealer transactions.
---------------------------------------------------------------------------

    \7\ See id; see also supra note 4.
---------------------------------------------------------------------------

    Current Article 1, Rule 2(e)(1) relating to order settlement terms 
defines ``Regular Way Settlement'' as ``a transaction for delivery on 
the third full business day following the day of the contract.'' The 
Exchange proposes to shorten the ``third full business day'' time 
period to ``second full business day.''
    Current Article 1, Rule 2(e)(2)(C) defines ``Seller's Option'' as 
``a transaction for delivery within the time specified in the option, 
which time shall not be less than four (4) full business days nor more 
than 60 days following the day of the contract; except that the 
Exchange may provide otherwise in specific issues of stocks or classes 
of stocks.'' The Exchange proposes to shorten the ``four (4) full 
business days'' time period to ``three (3) full business days.''
    Current Article 9, Rule 7(a) governing ex-dividend transactions 
provides in part that transactions in stocks shall be ex-dividend or 
ex-rights two full business days immediately preceding the date of 
record fixed by the corporation for the determination of stockholders 
entitled to receive such dividends or rights, except when such record 
date occurs upon a holiday or half-holiday, transactions in the stock 
shall be ex-dividend or ex-rights three full business days immediately 
preceding the record date. The Exchange proposes amendments to shorten 
the ``two full business days'' time period to a ``business day'' under 
Rule 7(a) and the ``three full business days'' time period to ``two 
full business days'' under Rule 7(a)(1).
    The Exchange proposes similar changes to current Article 9, Rule 
7(b) pertaining to ex-warrants that provides, in pertinent part, that 
transactions in securities which have subscription warrants attached 
(except those made for ``cash'') shall be ex-warrants on the second 
full business day preceding the date of expiration of the warrants, 
except when the day of expiration occurs on a holiday or Sunday, the 
transactions shall be ex-warrants on the third full business day 
preceding the day of expiration. The Exchange proposes to shorten the 
``second full business day'' time period to a ``business day'' under 
Rule 7(b) and the ``third full business day'' time period to ``second 
full business day'' under Rule 7(b)(1).

III. Discussion and Commission's Findings

    After careful review of the proposed rule change, the Commission 
finds that the proposal is consistent with the requirements of the Act 
and the rules and regulations thereunder that are applicable to a 
national securities exchange.\8\ Specifically, the Commission finds 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Act,\9\ which requires that the rules of a national securities exchange 
be designed, among other things, to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and to protect investors and the public interest.
---------------------------------------------------------------------------

    \8\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission notes that the proposed rule change would amend 
Exchange rules to conform to the amendment that the Commission has 
adopted to Rule 15c6-1(a) under the Act \10\ and support a move to a 
T+2 standard settlement cycle. In the SEC Adopting Release, the 
Commission stated its belief that shortening the standard settlement 
cycle from T+3 to T+2 will result in a reduction of credit, market, and 
liquidity risk,\11\ and as a result, a reduction in systemic risk for 
U.S. market participants.\12\ The compliance date for the amendment to 
Rule 15c6-1(a) under the Act is September 5, 2017.\13\ The Exchange has 
represented that the operative date of the proposed rule change would 
correspond to the compliance date of the amendment to Rule 15c6-1(a) 
under the Act.
---------------------------------------------------------------------------

    \10\ See SEC Adopting Release, supra note 4.
    \11\ Credit risk refers to the risk that the credit quality of 
one party to a transaction will deteriorate to the extent that it is 
unable to fulfill its obligations to its counterparty on settlement 
date. Market risk refers to the risk that the value of securities 
bought and sold will change between trade execution and settlement 
such that the completion of the trade would result in a financial 
loss. Liquidity risk describes the risk that an entity will be 
unable to meet financial obligations on time due to an inability to 
deliver funds or securities in the form required though it may 
possess sufficient financial resources in other forms. See id., 82 
FR at 15564 n. 3.
    \12\ See id., 82 FR at 15564.
    \13\ See id.
---------------------------------------------------------------------------

    For the reasons noted above, the Commission finds that the proposal 
is consistent with the requirements of the Act and would foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and protect investors and the public interest.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change, (SR-CHX-2017-06), be and hereby 
is, approved.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11609 Filed 6-5-17; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 107 / Tuesday, June 6, 2017 / Notices 26147

begun investigating different methods costs and City Carrier Cost System 3642 and 3632(b)(3), on May 31, 2017,
for gathering all of the data elements volumes. it filed with the Postal Regulatory
requested by the Commission.2 There, Comments on these topics are due no Commission a Request of the United
the Postal Service noted that its later than August 29, 2017. Comments States Postal Service to Add Priority
investigation into the Commission’s are to be submitted via the Mail Contract 323 to Competitive
directive would have two distinct Commission’s online filing system at Product List. Documents are available at
phases. Id. The Postal Service described http://www.prc.gov, unless a waiver is www.prc.gov, Docket Nos. MC2017–138,
the first phase as exploring whether the obtained. Information on how to obtain CP2017–196.
requisite data could be practically a waiver may be found by contacting the
Stanley F. Mires,
gathered and, if so, whether those data Commission’s dockets office at 202–
would be reliable and accurate. Id. It 789–6846. Attorney, Federal Compliance.
stated that the second phase was to [FR Doc. 2017–11581 Filed 6–5–17; 8:45 am]
determine whether it would be possible IV. Public Representative BILLING CODE 7710–12–P
to use the obtained data to construct a Pursuant to 39 U.S.C. 505, Katalin K.
single-equation city carrier letter route Clendenin, is designated as an officer of
cost model for street time. Id. The Postal the Commission (Public Representative)
Service stated that it had only recently to represent the interests of the general SECURITIES AND EXCHANGE
started to record the required data and public in this proceeding. COMMISSION
that, therefore, it had just begun the first V. Ordering Paragraphs
phase. Id. [Release No. 34–80825; File No. SR–CHX–
In Docket No. ACR2015, the Postal It is ordered: 2017–06]
Service reported that it had initiated an 1. The Commission hereby establishes
investigation into updating its city Docket No. PI2017–1 to review the Self-Regulatory Organizations;
carrier Special Purpose Route (SPR) cost Postal Service’s progress towards the Chicago Stock Exchange, Inc.; Order
model for street time.3 The Postal Commission directives in Order No. Granting Approval of a Proposed Rule
Service uses the SPR study data 2792 and to inquire about the current Change To Shorten the Standard
approved in Docket No. R97–1 in data and methodology used to estimate Settlement Cycle From Three Business
conjunction with current data from its city carrier costs and City Carrier Cost Days After the Trade Date to Two
In-Office Cost System (IOCS) to form System volumes. Business Days After the Trade Date
SPRs street time cost pools and to 2. Comments are due no later than
May 31, 2017.
develop attributable costs.4 In its August 29, 2017.
response to Order No. 2792, the Postal 3. Pursuant to 39 U.S.C. 505, the I. Introduction
Service stated that it also was Commission appoints Katalin K.
Clendenin to serve as an officer of the On April 6, 2017, the Chicago Stock
investigating the feasibility of using Exchange, Inc. (‘‘CHX’’ or ‘‘Exchange’’)
operational data to estimate variability Commission (Public Representative) to
represent the interests of the general filed with the Securities and Exchange
equations for its parcel and collection Commission (‘‘Commission’’), pursuant
route cost models.5 public in this docket.
4. The Secretary shall arrange for to Section 19(b)(1) of the Securities
III. Public Inquiry publication of this order in the Federal Exchange Act of 1934 (‘‘Act’’) 1 and Rule
The Commission establishes PI2017– Register. 19b–4 thereunder,2 a proposed rule
1 to obtain an update on the Postal change to conform its rules to an
By the Commission. amendment adopted by the Commission
Service’s progress in investigating the Stacy L. Ruble,
data required for, and the viability of, a to Rule 15c6–1(a) under the Act 3 to
Secretary. shorten the standard settlement cycle
single equation city carrier letter route
cost model as well as in reviewing the [FR Doc. 2017–11586 Filed 6–5–17; 8:45 am] for most broker-dealer transactions from
SPR cost model for street time. BILLING CODE 7710–FW–P three business days after the trade date
Chairman’s Information Request No. 1 (‘‘T+3’’) to two business days after the
is issued contemporaneously with this trade date (‘‘T+2’’).4 The Commission
Notice and Order. It seeks an update to POSTAL SERVICE adopted the amendment to Rule 15c6–
the Postal Service’s Response to Order 1(a) under the Act to shorten the
No. 2792 and further clarification on Product Change—Priority Mail standard settlement cycle to T+2 on
designated IOCS-estimated city carrier Negotiated Service Agreement March 22, 2017 and set a compliance
date of September 5, 2017.5 The
AGENCY: Postal ServiceTM. Exchange’s proposed rule change was
2 Docket No. RM2015–7, Response of the United
States Postal Service to Commission Order No. ACTION: Notice. published for comment in the Federal
2792, February 16, 2016, at 14 (Postal Service Register on April 21, 2017.6 The
Response to Order No. 2792). SUMMARY: The Postal Service gives
Commission did not receive any
3 See Docket No. ACR2015, Library Reference notice of filing a request with the Postal
comment letters on the proposed rule
USPS–FY15–9, file ‘‘USPS–FY15–9_Roadmap.pdf,’’ Regulatory Commission to add a
December 29, 2015, at 122; Docket No. R97–1, change. This order approves the
domestic shipping services contract to
Opinion and Recommended Decision, Volume 1, proposed rule change.
May 11, 1998, at 188 (Opinion and Recommended the list of Negotiated Service
Decision). Agreements in the Mail Classification
mstockstill on DSK30JT082PROD with NOTICES

1 15 U.S.C. 78s(b)(1).
4 See Opinion and Recommended Decision at Schedule’s Competitive Products List. 2 17
188. CFR 240.19b-4.
5 The Commission’s Order No. 2792 describes this
DATES: Effective date: June 6, 2017. 3 17 CFR 240.15c6–1.

as the cost model used to assign the costs of Sunday FOR FURTHER INFORMATION CONTACT: 4 See Securities Exchange Act Release No. 80295

delivery hours and parcel routes. See Order No. Elizabeth A. Reed, 202–268–3179. (March 22, 2017), 82 FR 15564 (March 29, 2017)
2792 at 66. The Postal Service describes this as the (‘‘SEC Adopting Release’’).
SUPPLEMENTARY INFORMATION: The 5 See id.
Parcel and Collection Route Models which are
limited to non-Sunday city carrier SPR costs. Postal United States Postal Service® hereby 6 See Securities Exchange Act Release No. 80467

Service Response to Order No. 2792 at 16. gives notice that, pursuant to 39 U.S.C. (April 17, 2017), 82 FR 18800.

VerDate Sep<11>2014 20:52 Jun 05, 2017 Jkt 241001 PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 E:\FR\FM\06JNN1.SGM 06JNN1
26148 Federal Register / Vol. 82, No. 107 / Tuesday, June 6, 2017 / Notices

II. Description of the Proposal ‘‘business day’’ under Rule 7(b) and the correspond to the compliance date of
The Exchange proposes to amend ‘‘third full business day’’ time period to the amendment to Rule 15c6–1(a) under
Article 1, Rule 2(e) and Article 9, Rule ‘‘second full business day’’ under Rule the Act.
7 to conform to the Commission’s 7(b)(1). For the reasons noted above, the
amendment to Rule 15c6–1(a) under the Commission finds that the proposal is
III. Discussion and Commission’s
Act 7 which shortens the standard consistent with the requirements of the
Findings
Act and would foster cooperation and
settlement cycle from T+3 to T+2 for After careful review of the proposed coordination with persons engaged in
most broker-dealer transactions. rule change, the Commission finds that
Current Article 1, Rule 2(e)(1) relating regulating, clearing, settling, processing
the proposal is consistent with the information with respect to, and
to order settlement terms defines requirements of the Act and the rules
‘‘Regular Way Settlement’’ as ‘‘a facilitating transactions in securities,
and regulations thereunder that are remove impediments to and perfect the
transaction for delivery on the third full applicable to a national securities
business day following the day of the mechanism of a free and open market
exchange.8 Specifically, the and a national market system, and
contract.’’ The Exchange proposes to Commission finds that the proposed
shorten the ‘‘third full business day’’ protect investors and the public interest.
rule change is consistent with Section
time period to ‘‘second full business 6(b)(5) of the Act,9 which requires that IV. Conclusion
day.’’ the rules of a national securities It is therefore ordered, pursuant to
Current Article 1, Rule 2(e)(2)(C) exchange be designed, among other Section 19(b)(2) of the Act,14 that the
defines ‘‘Seller’s Option’’ as ‘‘a things, to prevent fraudulent and proposed rule change, (SR–CHX–2017–
transaction for delivery within the time manipulative acts and practices, to 06), be and hereby is, approved.
specified in the option, which time shall promote just and equitable principles of
not be less than four (4) full business For the Commission, by the Division of
trade, to foster cooperation and Trading and Markets, pursuant to delegated
days nor more than 60 days following coordination with persons engaged in authority.15
the day of the contract; except that the regulating, clearing, settling, processing Eduardo A. Aleman,
Exchange may provide otherwise in information with respect to, and
specific issues of stocks or classes of Assistant Secretary.
facilitating transactions in securities, to
stocks.’’ The Exchange proposes to [FR Doc. 2017–11609 Filed 6–5–17; 8:45 am]
remove impediments to and perfect the
shorten the ‘‘four (4) full business days’’ mechanism of a free and open market BILLING CODE 8011–01–P
time period to ‘‘three (3) full business and a national market system, and to
days.’’ protect investors and the public interest.
Current Article 9, Rule 7(a) governing SECURITIES AND EXCHANGE
The Commission notes that the
ex-dividend transactions provides in proposed rule change would amend COMMISSION
part that transactions in stocks shall be Exchange rules to conform to the [Release No. 34–80822; File No. SR–
ex-dividend or ex-rights two full amendment that the Commission has BatsBZX–2017–38] Self-Regulatory
business days immediately preceding adopted to Rule 15c6–1(a) under the
the date of record fixed by the Act 10 and support a move to a T+2 Organizations; Bats BZX Exchange,
corporation for the determination of standard settlement cycle. In the SEC Inc.; Notice of Filing and Immediate
stockholders entitled to receive such Adopting Release, the Commission Effectiveness of a Proposed Rule
dividends or rights, except when such stated its belief that shortening the Change Related to Fees for Use on
record date occurs upon a holiday or standard settlement cycle from T+3 to Bats BZX Exchange, Inc.
half-holiday, transactions in the stock T+2 will result in a reduction of credit, May 31, 2017.
shall be ex-dividend or ex-rights three market, and liquidity risk,11 and as a Pursuant to Section 19(b)(1) of the
full business days immediately result, a reduction in systemic risk for Securities Exchange Act of 1934 (the
preceding the record date. The U.S. market participants.12 The ‘‘Act’’),1 and Rule 19b–4 thereunder,2
Exchange proposes amendments to compliance date for the amendment to notice is hereby given that on May 23,
shorten the ‘‘two full business days’’ Rule 15c6–1(a) under the Act is 2017, Bats BZX Exchange, Inc. (the
time period to a ‘‘business day’’ under September 5, 2017.13 The Exchange has
‘‘Exchange’’ or ‘‘Bats’’) filed with the
Rule 7(a) and the ‘‘three full business represented that the operative date of
Securities and Exchange Commission
days’’ time period to ‘‘two full business the proposed rule change would
(‘‘Commission’’) the proposed rule
days’’ under Rule 7(a)(1).
change as described in Items I, II and III
The Exchange proposes similar 8 In approving this proposed rule change the

Commission has considered the proposed rule’s below, which Items have been prepared
changes to current Article 9, Rule 7(b)
impact on efficiency, competition, and capital by the Exchange. The Exchange has
pertaining to ex-warrants that provides, formation. See 15 U.S.C. 78c(f). designated the proposed rule change as
in pertinent part, that transactions in 9 15 U.S.C. 78f(b)(5).
one establishing or changing a member
securities which have subscription 10 See SEC Adopting Release, supra note 4.
due, fee, or other charge imposed by the
warrants attached (except those made 11 Credit risk refers to the risk that the credit

quality of one party to a transaction will deteriorate Exchange under Section 19(b)(3)(A)(ii)
for ‘‘cash’’) shall be ex-warrants on the
to the extent that it is unable to fulfill its obligations of the Act 3 and Rule 19b–4(f)(2)
second full business day preceding the to its counterparty on settlement date. Market risk thereunder,4 which renders the
date of expiration of the warrants, refers to the risk that the value of securities bought
and sold will change between trade execution and proposed rule change effective upon
except when the day of expiration
settlement such that the completion of the trade filing with the Commission. The
occurs on a holiday or Sunday, the
mstockstill on DSK30JT082PROD with NOTICES

would result in a financial loss. Liquidity risk Commission is publishing this notice to
transactions shall be ex-warrants on the describes the risk that an entity will be unable to
third full business day preceding the meet financial obligations on time due to an 14 15 U.S.C. 78s(b)(2).
day of expiration. The Exchange inability to deliver funds or securities in the form
15 17 CFR 200.30–3(a)(12).
required though it may possess sufficient financial
proposes to shorten the ‘‘second full resources in other forms. See id., 82 FR at 15564 1 15 U.S.C. 78s(b)(1).

business day’’ time period to a n. 3. 2 17 CFR 240.19b–4.

12 See id., 82 FR at 15564. 3 15 U.S.C. 78s(b)(3)(A)(ii).
7 See id; see also supra note 4. 13 See id. 4 17 CFR 240.19b–4(f)(2).

VerDate Sep<11>2014 23:20 Jun 05, 2017 Jkt 241001 PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 E:\FR\FM\06JNN1.SGM 06JNN1
Document Created: 2017-06-06 06:21:46
Document Modified: 2017-06-06 06:21:46
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 26147