82 FR 35244 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change To Amend NYSE Arca Equities Rule 13.2, Liability of Corporation
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 144 (July 28, 2017)
Federal Register Volume 82, Issue 144 (July 28, 2017)
| Page Range | 35244-35245 | |
| FR Document | 2017-15910 |
[Federal Register Volume 82, Number 144 (Friday, July 28, 2017)] [Notices] [Pages 35244-35245] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-15910] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81197; File No. SR-NYSEArca-2017-46] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change To Amend NYSE Arca Equities Rule 13.2, Liability of Corporation July 24, 2017. I. Introduction On May 23, 2017, NYSE Arca, Inc. (``NYSE Arca'' 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 amend NYSE Arca Equities Rule 13.2, Liability of Corporation. The proposed rule change was published for comment in the Federal Register on June 12, 2017.\3\ The Commission received no comments 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\ See Securities Exchange Act Release No. 80866 (June 6, 2017), 82 FR 26967 (``Notice''). --------------------------------------------------------------------------- II. Description of the Proposed Rule Change \4\ --------------------------------------------------------------------------- \4\ For a more detailed description of the proposed rule change, see Notice, supra note 3. --------------------------------------------------------------------------- NYSE Arca Equities Rule 13.2 (``Rule 13.2'') currently provides a mechanism for ETP Holders to receive compensation for certain types of losses. The Exchange proposes to amend Rule 13.2 in several respects. First, the Exchange proposes to amend Rule 13.2(a) to specify that the limitation of liability set forth in that paragraph would apply to ETP Holders' successors, representatives, and customers. Pursuant to proposed Rule 13.2(a), except as otherwise expressly provided in the Exchange's rules, neither the Corporation nor its Directors, officers, committee members, employees, or agents shall be liable to ETP Holders of the Corporation, or successors, representatives, or customers thereof, or to persons associated therewith, for the specified types of losses, expenses, damages, or claims. Second, the Exchange proposes to amend Rule 13.2(b), which describes certain prerequisites for qualifying for compensation. Specifically, Rule 13.2(b) currently requires, among other things, that ``the Corporation has acknowledged receipt of'' the order. As proposed, Rule 13.2(b) would require, among other things, that ``the Corporation has received'' the order. Third, the Exchange proposes to amend Rule 13.2(b) to eliminate the daily liability caps. Rule 13.2(b)(1) currently provides that, as to any one or more claims made by a single ETP Holder growing out of the use or enjoyment of the facilities afforded by the Corporation on a single trading day, the Corporation will not be liable in excess of the larger of $100,000, or the amount of any recovery obtained by the Corporation under any applicable insurance maintained by the Corporation. Rule 13.2(b)(2) currently provides that, as to the aggregate of all claims made by all ETP Holders growing out of the use or enjoyment of the facilities afforded by the Corporation on a single trading day, the Corporation will not be liable in excess of the larger of $250,000, or the amount of the recovery obtained by the Corporation under any applicable insurance maintained by the Corporation. Rule 13.2(b)(3) currently provides that, as to the aggregate of all claims made by all ETP Holders growing out of the use or enjoyment of the facilities afforded by the Corporation during a single calendar month, the Corporation will not be liable in excess of the larger of $500,000, or the amount of the recovery obtained by the Corporation under any applicable insurance maintained by the Corporation.\5\ The Exchange proposes to eliminate the daily liability caps in Rules 13.2(b)(1) and (2), and retain the monthly liability cap in Rule 13.2(b)(3).\6\ The Exchange also proposes to apply the elimination of the daily liability caps retroactively to March 1, 2017, so that ETP Holders may be fully compensated for losses incurred in connection with a system issue that occurred on March 20, 2017.\7\ --------------------------------------------------------------------------- \5\ Rule 13.2(c) currently provides that, if all of the claims arising out of the use or enjoyment of the facilities afforded by the Corporation cannot be fully satisfied because in the aggregate they exceed the applicable maximum amount of liability provided for in Rule 13.2(b), then the maximum amount shall be allocated among all such claims arising on a single trading day or during a single calendar month, as applicable, based on the proportion that each such claim bears to the sum of all such claims. \6\ In connection with this change, the Exchange also proposes conforming changes in Rule 13.2(c) to eliminate the reference to allocation among claims arising ``on a single trading day.'' \7\ See Notice, supra note 3, at 26968. --------------------------------------------------------------------------- Fourth, the Exchange proposes to amend the time frame and clarify the manner in which ETP Holders are required to submit notice of claims for compensation. Rule 13.2(c) currently requires ETP Holders to provide written notice of claims no later than the opening of trading on the next business day following the day on which the use or enjoyment of the Corporation's facilities giving rise to the claims occurred. The Exchange proposes to require ETP Holders to submit written notice of claims for compensation pursuant to Rule 13.2(b) no later than noon Eastern Time on the next business day following the day on which the use or enjoyment of the Corporation's facilities gave rise to such claims.\8\ --------------------------------------------------------------------------- \8\ See proposed Rule 13.2(d). --------------------------------------------------------------------------- III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\9\ In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,\10\ which requires, among other things, that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged [[Page 35245]] in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities and, in general, to protect investors and the public interest, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \9\ 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). \10\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Commission believes that the proposal to eliminate the daily liability caps in Rules 13.2(b)(1) and (2) could result in more ETP Holders receiving fuller compensations on their claims.\11\ The proposal could also reduce the risk that losses suffered by an ETP Holder would be treated differently depending on whether other ETP Holders suffered losses on the same day.\12\ In addition, the Commission notes that, under the proposal, the maximum amount of compensation would continue to be proportionally allocated if claims arising during a single calendar month exceed the monthly liability cap.\13\ --------------------------------------------------------------------------- \11\ The Commission notes that the rules of certain other national securities exchanges also only include monthly liability caps, and no daily liability caps. See, e.g., Nasdaq Stock Market LLC (``Nasdaq'') Rule 4626. \12\ See Notice, supra note 3, at 26968. \13\ See proposed changes to Rule 13.2(c). As described above, the Exchange also proposes to make conforming changes in Rule 13.2(c) to eliminate the reference to allocation among claims arising ``on a single trading day.'' See supra notes 5-6. --------------------------------------------------------------------------- With respect to the Exchange's proposal to retroactively apply the elimination of the daily liability caps, the Commission notes that approval of the proposal would make additional funds available to compensate ETP Holders affected by the system issue on March 20, 2017. Also, as the Exchange notes, the proposal would promote equal treatment between ETP Holders who suffered a loss on March 20, 2017 and ETP Holders who suffered a loss on a different day.\14\ Specifically, according to the Exchange, the proposal would enable it to fully compensate ETP Holders for claims arising from the system issue on March 20, 2017.\15\ Moreover, according to the Exchange, prior to March 20, 2017, it has never received a claim that exceeded the liability limits, and thus it was never prevented from fully compensating an ETP Holder.\16\ --------------------------------------------------------------------------- \14\ See Notice, supra note 3, at 26968. \15\ See id. at 26969. \16\ See id. --------------------------------------------------------------------------- The Commission further believes that the other proposed changes are consistent with the Act. Specifically, the Commission believes that the addition of the text ``successors, representatives or customers thereof'' to Rule 13.2(a) would clarify the scope of the limitation of liability in that provision.\17\ As the Exchange notes, Rule 13.2 currently does not authorize the compensation of successors, representatives, or customers of ETP Holders because the rule does not currently reference them.\18\ The Commission also believes that the replacement of the words ``acknowledged receipt of'' with the word ``received'' in Rule 13.2(b) would provide transparency regarding the scope of the rule.\19\ Finally, the Commission believes that the addition of paragraph (d) to Rule 13.2 would clarify that all claims for compensation must be submitted in writing, and would provide ETP Holders additional time to evaluate losses that may have occurred on the prior trading day, particularly if an issue occurred later in the day.\20\ --------------------------------------------------------------------------- \17\ The Commission notes that this change is consistent with the rules of certain other national securities exchanges. See, e.g., Bats BZX Exchange, Inc. Rule 11.16(a). \18\ See Notice, supra note 3, at 26967. \19\ The Commission notes that this change is consistent with the rules of certain other national securities exchanges. See, e.g., New York Stock Exchange LLC Rule 18(b). \20\ The Commission notes that this change is consistent with the rules of certain other national securities exchanges. See, e.g., Nasdaq Rule 4626(b)(6). --------------------------------------------------------------------------- Based on the foregoing, the Commission believes that the proposed rule change is consistent with the Act. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\21\ that the proposed rule change (SR-NYSEArca-2017-46), be, and hereby is, approved. --------------------------------------------------------------------------- \21\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\22\ --------------------------------------------------------------------------- \22\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-15910 Filed 7-27-17; 8:45 am] BILLING CODE 8011-01-P
![35244 Federal Register / Vol. 82, No. 144 / Friday, July 28, 2017 / Notices
business days between the hours of II. Description of the Proposed Rule or the amount of the recovery obtained
10:00 a.m. and 3:00 p.m. Copies of the Change 4 by the Corporation under any applicable
filing also will be available for NYSE Arca Equities Rule 13.2 (‘‘Rule insurance maintained by the
inspection and copying at the principal 13.2’’) currently provides a mechanism Corporation.5 The Exchange proposes to
office of the Clearing Agencies, and on for ETP Holders to receive eliminate the daily liability caps in
DTCC’s Web site (http://dtcc.com/legal/ compensation for certain types of losses. Rules 13.2(b)(1) and (2), and retain the
sec-rule-filings.aspx). All comments The Exchange proposes to amend Rule monthly liability cap in Rule 13.2(b)(3).6
received will be posted without change; 13.2 in several respects. The Exchange also proposes to apply
the Commission does not edit personal First, the Exchange proposes to the elimination of the daily liability
amend Rule 13.2(a) to specify that the caps retroactively to March 1, 2017, so
identifying information from
limitation of liability set forth in that that ETP Holders may be fully
submissions. You should submit only
paragraph would apply to ETP Holders’ compensated for losses incurred in
information that you wish to make connection with a system issue that
available publicly. successors, representatives, and
customers. Pursuant to proposed Rule occurred on March 20, 2017.7
All submissions should refer to File 13.2(a), except as otherwise expressly Fourth, the Exchange proposes to
Number SR–DTC–2017–004, SR–NSCC– provided in the Exchange’s rules, amend the time frame and clarify the
2017–005, or SR–FICC–2017–008 and neither the Corporation nor its manner in which ETP Holders are
should be submitted on or before Directors, officers, committee members, required to submit notice of claims for
August 18, 2017. If comments are employees, or agents shall be liable to compensation. Rule 13.2(c) currently
received, any rebuttal comments should ETP Holders of the Corporation, or requires ETP Holders to provide written
be submitted on or before September 1, successors, representatives, or notice of claims no later than the
2017. customers thereof, or to persons opening of trading on the next business
associated therewith, for the specified day following the day on which the use
For the Commission, by the Division of or enjoyment of the Corporation’s
Trading and Markets, pursuant to delegated types of losses, expenses, damages, or
claims. facilities giving rise to the claims
authority.43 occurred. The Exchange proposes to
Second, the Exchange proposes to
Eduardo A. Aleman, amend Rule 13.2(b), which describes require ETP Holders to submit written
Assistant Secretary. certain prerequisites for qualifying for notice of claims for compensation
[FR Doc. 2017–15907 Filed 7–27–17; 8:45 am] compensation. Specifically, Rule 13.2(b) pursuant to Rule 13.2(b) no later than
BILLING CODE 8011–01–P currently requires, among other things, noon Eastern Time on the next business
that ‘‘the Corporation has acknowledged day following the day on which the use
receipt of’’ the order. As proposed, Rule or enjoyment of the Corporation’s
SECURITIES AND EXCHANGE 13.2(b) would require, among other facilities gave rise to such claims.8
COMMISSION things, that ‘‘the Corporation has III. Discussion and Commission
received’’ the order. Findings
Third, the Exchange proposes to
[Release No. 34–81197; File No. SR– After careful review, the Commission
NYSEArca–2017–46]
amend Rule 13.2(b) to eliminate the
daily liability caps. Rule 13.2(b)(1) finds that the proposed rule change is
currently provides that, as to any one or consistent with the requirements of the
Self-Regulatory Organizations; NYSE Act and the rules and regulations
Arca, Inc.; Order Approving a more claims made by a single ETP
Holder growing out of the use or thereunder applicable to a national
Proposed Rule Change To Amend securities exchange.9 In particular, the
enjoyment of the facilities afforded by
NYSE Arca Equities Rule 13.2, Liability Commission finds that the proposed
the Corporation on a single trading day,
of Corporation rule change is consistent with Section
the Corporation will not be liable in
excess of the larger of $100,000, or the 6(b)(5) of the Act,10 which requires,
July 24, 2017.
amount of any recovery obtained by the among other things, that the rules of a
I. Introduction Corporation under any applicable national securities exchange be
insurance maintained by the designed to promote just and equitable
On May 23, 2017, NYSE Arca, Inc. principles of trade, to foster cooperation
Corporation. Rule 13.2(b)(2) currently
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed provides that, as to the aggregate of all and coordination with persons engaged
with the Securities and Exchange claims made by all ETP Holders growing
Commission (‘‘Commission’’), pursuant out of the use or enjoyment of the
5 Rule 13.2(c) currently provides that, if all of the
to Section 19(b)(1) of the Securities claims arising out of the use or enjoyment of the
facilities afforded by the Corporation on facilities afforded by the Corporation cannot be
Exchange Act of 1934 (‘‘Act’’) 1 and Rule a single trading day, the Corporation fully satisfied because in the aggregate they exceed
19b–4 thereunder,2 a proposed rule will not be liable in excess of the larger the applicable maximum amount of liability
change to amend NYSE Arca Equities provided for in Rule 13.2(b), then the maximum
of $250,000, or the amount of the amount shall be allocated among all such claims
Rule 13.2, Liability of Corporation. The recovery obtained by the Corporation arising on a single trading day or during a single
proposed rule change was published for under any applicable insurance calendar month, as applicable, based on the
comment in the Federal Register on maintained by the Corporation. Rule proportion that each such claim bears to the sum
of all such claims.
June 12, 2017.3 The Commission 13.2(b)(3) currently provides that, as to 6 In connection with this change, the Exchange
asabaliauskas on DSKBBXCHB2PROD with NOTICES
received no comments on the proposed the aggregate of all claims made by all also proposes conforming changes in Rule 13.2(c)
rule change. This order approves the ETP Holders growing out of the use or to eliminate the reference to allocation among
proposed rule change. enjoyment of the facilities afforded by claims arising ‘‘on a single trading day.’’
7 See Notice, supra note 3, at 26968.
the Corporation during a single calendar 8 See proposed Rule 13.2(d).
43 17 CFR 200.30–3(a)(12). month, the Corporation will not be 9 In approving this proposed rule change, the
1 15 U.S.C. 78s(b)(1). liable in excess of the larger of $500,000, Commission has considered the proposed rule’s
2 17 CFR 240.19b–4. impact on efficiency, competition, and capital
3 See Securities Exchange Act Release No. 80866 4 For a more detailed description of the proposed formation. See 15 U.S.C. 78c(f).
(June 6, 2017), 82 FR 26967 (‘‘Notice’’). rule change, see Notice, supra note 3. 10 15 U.S.C. 78f(b)(5).
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![Federal Register / Vol. 82, No. 144 / Friday, July 28, 2017 / Notices 35245
in regulating, clearing, settling, Exchange notes, Rule 13.2 currently SECURITIES AND EXCHANGE
processing information with respect to, does not authorize the compensation of COMMISSION
and facilitating transactions in securities successors, representatives, or [Release No. 34–81192; File Nos. SR–DTC–
and, in general, to protect investors and customers of ETP Holders because the 2017–005; SR–FICC–2017–009; SR–NSCC–
the public interest, and not be designed rule does not currently reference 2017–006]
to permit unfair discrimination between them.18 The Commission also believes
customers, issuers, brokers, or dealers. that the replacement of the words Self-Regulatory Organizations; The
The Commission believes that the ‘‘acknowledged receipt of’’ with the Depository Trust Company; Fixed
proposal to eliminate the daily liability Income Clearing Corporation; National
word ‘‘received’’ in Rule 13.2(b) would
caps in Rules 13.2(b)(1) and (2) could Securities Clearing Corporation;
provide transparency regarding the
result in more ETP Holders receiving Notice of Filing Amendment No. 1 and
fuller compensations on their claims.11 scope of the rule.19 Finally, the
Commission believes that the addition Order Instituting Proceedings to
The proposal could also reduce the risk Determine Whether to Approve or
that losses suffered by an ETP Holder of paragraph (d) to Rule 13.2 would
Disapprove Proposed Rule Changes to
would be treated differently depending clarify that all claims for compensation
Adopt the Clearing Agency Stress
on whether other ETP Holders suffered must be submitted in writing, and Testing Framework (Market Risk)
losses on the same day.12 In addition, would provide ETP Holders additional
the Commission notes that, under the time to evaluate losses that may have July 24, 2017.
proposal, the maximum amount of occurred on the prior trading day, I. Introduction
compensation would continue to be particularly if an issue occurred later in
proportionally allocated if claims the day.20 On April 7, 2017, The Depository
arising during a single calendar month Trust Company (‘‘DTC’’), Fixed Income
Based on the foregoing, the Clearing Corporation (‘‘FICC’’), and
exceed the monthly liability cap.13 Commission believes that the proposed
With respect to the Exchange’s National Securities Clearing Corporation
rule change is consistent with the Act. (‘‘NSCC,’’ each a ‘‘Clearing Agency,’’
proposal to retroactively apply the
elimination of the daily liability caps, IV. Conclusion and collectively, the ‘‘Clearing
the Commission notes that approval of Agencies’’), filed with the Securities and
the proposal would make additional It is therefore ordered, pursuant to Exchange Commission (‘‘Commission’’)
funds available to compensate ETP Section 19(b)(2) of the Act,21 that the proposed rule changes SR–DTC–2017–
Holders affected by the system issue on proposed rule change (SR–NYSEArca- 005, SR–FICC–2017–009, and SR–
March 20, 2017. Also, as the Exchange 2017–46), be, and hereby is, approved. NSCC–2017–006, respectively, pursuant
notes, the proposal would promote to Section 19(b)(1) of the Securities
For the Commission, by the Division of Exchange Act of 1934 (‘‘Act’’) 1 and Rule
equal treatment between ETP Holders Trading and Markets, pursuant to delegated
who suffered a loss on March 20, 2017 19b–4 thereunder.2 The proposed rule
authority.22 changes were published for comment in
and ETP Holders who suffered a loss on
Eduardo A. Aleman, the Federal Register on April 25, 2017.3
a different day.14 Specifically, according
to the Exchange, the proposal would Assistant Secretary. The Commission did not receive any
enable it to fully compensate ETP [FR Doc. 2017–15910 Filed 7–27–17; 8:45 am] comment letters on the proposed rule
Holders for claims arising from the BILLING CODE 8011–01–P
changes. On June 7, 2017, the
system issue on March 20, 2017.15 Commission designated a longer period
Moreover, according to the Exchange, for Commission Action on the proposed
prior to March 20, 2017, it has never rule changes.4 On July 19, 2017, the
received a claim that exceeded the Clearing Agencies each filed
liability limits, and thus it was never Amendment No. 1 to their respective
prevented from fully compensating an proposed rule changes (hereinafter,
ETP Holder.16 ‘‘Proposed Rule Change’’). Amendments
The Commission further believes that No. 1 would clarify how the Clearing
the other proposed changes are Agencies would use scenarios to
consistent with the Act. Specifically, the estimate the profits and losses (‘‘P&L’’)
Commission believes that the addition of a member closeout. This order
of the text ‘‘successors, representatives institutes proceedings under Section
or customers thereof’’ to Rule 13.2(a) 19(b)(2)(B) of the Act 5 to determine
would clarify the scope of the limitation whether to approve or disapprove the
of liability in that provision.17 As the Proposed Rule Changes.
11 The Commission notes that the rules of certain
II. Description of the Proposed Rule
other national securities exchanges also only
Changes
include monthly liability caps, and no daily The Proposed Rule Changes would
liability caps. See, e.g., Nasdaq Stock Market LLC securities exchanges. See, e.g., Bats BZX Exchange,
(‘‘Nasdaq’’) Rule 4626. Inc. Rule 11.16(a). adopt the Clearing Agency Stress
12 See Notice, supra note 3, at 26968. 18 See Notice, supra note 3, at 26967.
13 See proposed changes to Rule 13.2(c). As 19 The Commission notes that this change is 1 15 U.S.C. 78s(b)(1).
asabaliauskas on DSKBBXCHB2PROD with NOTICES
2 17 CFR 240.19b–4.
described above, the Exchange also proposes to consistent with the rules of certain other national
make conforming changes in Rule 13.2(c) to securities exchanges. See, e.g., New York Stock 3 See Securities Exchange Act Release No. 80485
eliminate the reference to allocation among claims Exchange LLC Rule 18(b). (April 19, 2017), 82 FR 19131 (April 25, 2017) (SR–
arising ‘‘on a single trading day.’’ See supra notes 20 The Commission notes that this change is DTC–2017–005; SR–FICC–2017–009; SR–NSCC–
5–6. 2017–006) (‘‘Notice’’).
14 See Notice, supra note 3, at 26968. consistent with the rules of certain other national 4 See Securities Exchange Act Release No. 80876
15 See id. at 26969. securities exchanges. See, e.g., Nasdaq Rule (June 7, 2017), 82 FR 27091 (June 13, 2017) (SR–
16 See id. 4626(b)(6). DTC–2017–005; SR–FICC–2017–009; SR–NSCC–
21 15 U.S.C. 78s(b)(2).
17 The Commission notes that this change is 2017–006).
consistent with the rules of certain other national 22 17 CFR 200.30–3(a)(12). 5 15 U.S.C. 78s(b)(2)(B).
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Document Created: 2017-07-28 03:09:54
Document Modified: 2017-07-28 03:09:54
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 82 FR 35244 |
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