82 FR 37942 - Self-Regulatory Organizations; The Depository Trust Company; Fixed Income Clearing Corporation; National Securities Clearing Corporation; Notice of Filings of Proposed Rule Changes To Adopt the Clearing Agency Operational Risk Management Framework
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 155 (August 14, 2017)
Federal Register Volume 82, Issue 155 (August 14, 2017)
| Page Range | 37942-37946 | |
| FR Document | 2017-17043 |
[Federal Register Volume 82, Number 155 (Monday, August 14, 2017)] [Notices] [Pages 37942-37946] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-17043] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81338; File Nos. SR-DTC-2017-014; SR-FICC-2017-017; SR- NSCC-2017-013] Self-Regulatory Organizations; The Depository Trust Company; Fixed Income Clearing Corporation; National Securities Clearing Corporation; Notice of Filings of Proposed Rule Changes To Adopt the Clearing Agency Operational Risk Management Framework DATE: August 8, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, as amended (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on July 25, 2017, The Depository Trust Company (``DTC''), Fixed Income Clearing Corporation (``FICC''), and National Securities Clearing Corporation (``NSCC,'' and together with DTC and FICC, the ``Clearing Agencies'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule changes as described in Items I and II below, which Items have been prepared primarily by the Clearing Agencies. The Commission is publishing this notice to solicit comments on the proposed rule changes from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Clearing Agencies' Statement of the Terms of Substance of the Proposed Rule Changes The proposed rule changes would adopt the Clearing Agency Operational Risk Management Framework (``Framework'') of the Clearing Agencies, described below. The Framework would apply to both of FICC's divisions, the Government Securities Division (``GSD'') and the Mortgage-Backed Securities Division (``MBSD''). The Framework would be maintained by the Clearing Agencies to support their compliance with Rule 17Ad-22(e)(17) under the Act, as described below.\3\ --------------------------------------------------------------------------- \3\ 17 CFR 240.17Ad-22(e)(17). --------------------------------------------------------------------------- Although the Clearing Agencies would consider the Framework to be a rule, the proposed rule changes do not require any changes to the Rules, By-laws and Organization Certificate of DTC (``DTC Rules''), the Rulebook of GSD (``GSD Rules''), the Clearing Rules of MBSD (``MBSD Rules''), or the Rules & Procedures of NSCC (``NSCC Rules''), as the Framework would be a standalone document.\4\ --------------------------------------------------------------------------- \4\ Capitalized terms not defined herein are defined in the DTC Rules, GSD Rules, MBSD Rules, or NSCC Rules, as applicable, available at http://dtcc.com/legal/rules-and-procedures. --------------------------------------------------------------------------- [[Page 37943]] II. Clearing Agencies' Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Changes In their filings with the Commission, the Clearing Agencies included statements concerning the purpose of and basis for the proposed rule changes and discussed any comments they received on the proposed rule changes. The text of these statements may be examined at the places specified in Item IV below. The Clearing Agencies have prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. (A) Clearing Agencies' Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Changes 1. Purpose The Clearing Agencies are proposing to adopt the Framework, which would describe the manner in which each of the Clearing Agencies manages operational risk, which is defined by the Clearing Agencies in the Framework as the risk of direct or indirect loss or reputational harm resulting from an event, internal or external, that is the result of inadequate or failed processes, people, and systems (``Operational Risk''). As described in more detail below, the Framework would set forth the manner in which the Clearing Agencies (1) generally manage Operational Risk; (2) more specifically manage their information technology risks; and (3) more specifically manage their business continuity risks. The processes and systems described in the Framework, and any policies, procedures or other documents created to support those processes, support the Clearing Agencies' compliance with the requirements of Rule 17Ad-22(e)(17).\5\ The Framework would be maintained by the DTCC Operational Risk Management group (``ORM''), on behalf of the Clearing Agencies.\6\ --------------------------------------------------------------------------- \5\ 17 CFR 240.17Ad-22(e)(17). \6\ The parent company of the Clearing Agencies is The Depository Trust & Clearing Corporation (``DTCC''). DTCC operates on a shared services model with respect to the Clearing Agencies. Most corporate functions are established and managed on an enterprise- wide basis pursuant to intercompany agreements under which it is generally DTCC that provides a relevant service to a Clearing Agency. --------------------------------------------------------------------------- Operational Risk Management The Framework would describe how the Clearing Agencies generally manage their Operational Risks. The Framework would describe how ORM is specifically charged with establishing appropriate systems, policies, procedures, and controls to enable management to identify plausible sources of Operational Risk in order to mitigate their impact to the Clearing Agencies, including through the Risk Tolerance Statements and Risk Profiles, as described below. The Framework would describe how the Clearing Agencies identify key risks and set metrics to categorize such risks (from ``no impact'' to ``severe impact'') through ``Risk Tolerance Statements.'' The Framework would describe how the Risk Tolerance Statements document the overall risk reduction or mitigation objectives for the Clearing Agencies with respect to identified risks to the Clearing Agencies. The Framework would also describe how the Risk Tolerance Statements document the risk controls and other measures used to manage such identified risks, including escalation requirements in the event of risk metric breaches. The Framework would state that each Risk Tolerance Statement is reviewed, revised, updated, and/or created, as necessary, by ORM on an annual basis. The Framework would also describe how the Clearing Agencies monitor key risks, including Operational Risk, through ``Risk Profiles,'' which document the assessment of risk for each of the Clearing Agencies' businesses and support areas (each a ``Clearing Agency Business'' and/ or ``Clearing Agency Support Area''). The risk assessment documented in these profiles includes (1) identification and assessment of inherent risk, which is risk without any mitigating controls; (2) identification of existing controls, and, as appropriate, any new additional controls, and evaluation of the same risk against the strength of such controls; and (3) identification of any residual risk and a determination to either further mitigate such risk or accept such risk by the applicable Clearing Agency Business or Clearing Agency Support Area. The Framework would also provide a description of the responsibilities of ORM, which is a part of the second line of defense within the Clearing Agencies' Three Lines of Defense approach to risk management.\7\ The Framework would identify some of those responsibilities as including, for example, management of the Risk Tolerance Statements and working with the Clearing Agency Businesses and Clearing Agency Support Areas to create and monitor Risk Profiles. --------------------------------------------------------------------------- \7\ The Three Lines of Defense approach to risk management identifies the roles and responsibilities of different Clearing Agency Businesses or Clearing Agency Support Areas in identifying, assessing, measuring, monitoring, mitigating, and reporting certain key risks faced by the Clearing Agencies. The Three Lines of Defense approach is more fully described in a separate framework, the Clearing Agency Risk Management Framework, maintained by the DTCC General Counsel's Office. See SR-DTC-2017-013, SR-FICC-2017-016, SR- NSCC-2017-012, which was filed with the Commission but has not yet been published in the Federal Register. A copy of these proposed rule change filings is available at http://www.dtcc.com/legal/sec-rule-filings. --------------------------------------------------------------------------- Information Technology Risk The Framework would describe how the Clearing Agencies address information technology risks. The Framework would state that the DTCC Technology Risk Management group (``TRM''), on behalf of the Clearing Agencies, is responsible for establishing appropriate programs, policies, procedures, and controls with respect to the Clearing Agencies' information technology risks to help management ensure that systems have a high degree of security, resiliency, operational reliability, and adequate, scalable capacity. The Framework would identify some of the recognized information technology standards that may be used by TRM, as applicable, in support of executing its responsibilities. The Framework would also identify some of TRM's responsibilities, which include, for example, (1) performing risk assessments to, among other things, facilitate the determination of the Clearing Agencies' investment and remediation priorities; (2) facilitating annual mandatory and periodic information security awareness, education, training, and communication to personnel of Clearing Agency Businesses and Clearing Agency Support Areas and relevant external parties; and (3) creating, implementing, and managing certain programs, including programs that (i) address information security throughout a system's lifecycle, (ii) facilitate compliance with evolving and established regulatory rules and guidelines that govern protection of the information assets of the Clearing Agencies and their participants, (iii) identify, prioritize, and manage the level of cyber threats to the Clearing Agencies, and (iv) assure that access to Clearing Agency information assets is appropriately authorized and authenticated based on current business need. The Framework would state that TRM's risk strategy is closely aligned to the Clearing Agencies' business drivers and future strategic direction, such that efforts to achieve information security threat mitigation objectives, resiliency of infrastructure supporting Clearing Agency critical business applications, [[Page 37944]] and operational reliability are prioritized. The Framework would state this is also accomplished through TRM's early and consistent involvement in initiatives to develop new products and systems. The Framework would state that, by involving TRM from the initial planning phase, through the design, build and operative phases of those initiatives, resiliency, operational effectiveness, reliability, and availability requirements are addressed and incorporated into design and execution from both a technology and cyber security perspective. The Framework would also describe the Clearing Agencies' security strategy and defense, and would state that the Clearing Agencies' network security framework and preventive controls are designed to support a reliable and robust tiered security strategy and defense. These controls include modern and technically advanced security firewalls, intrusion detection, system and data monitoring, and data protection tools. The Framework would describe the Clearing Agencies' enhanced security features and the standards they use to assess vulnerabilities and potential threats. Business Continuity Risk Finally, the Framework would describe how the Clearing Agencies have established and maintain business continuity plans to address events that may pose a significant risk of disrupting their operations. The Framework would describe how the business continuity process for each Clearing Agency Business and Clearing Agency Support Area is ranked within a range of tiers, from 0 to 5, based on criticality to each applicable Clearing Agency's operations (each a ``Tier''), where Tier 0 equates to critical operations or support of such operations for which virtually no downtime is permitted under applicable regulatory standards, and Tier 5 equates to non-essential operations or support of such operations for which recovery times of greater than five days is permitted. The Framework would state that, on an annual basis, each Clearing Agency Business and Clearing Agency Support Area updates its own business continuity plan and reviews and ratifies its business impact analysis. These analyses are used by the DTCC Business Continuity Management department (``BCM''), on behalf of the Clearing Agencies, to validate that business' or area's current Tier ranking. The Framework would identify the key elements of these business impact analyses, which include (1) an assessment of the criticality of the applicable Clearing Agency Business or Clearing Agency Support Area, based on potential impact to the Clearing Agency; (2) an estimation of the maximum allowable downtime for the applicable Clearing Agency Business or Clearing Agency Support Area; and (3) the identification of dependencies, and ranking such dependencies to align with the process criticality for recovery, of the applicable Clearing Agency Business or Clearing Agency Support Area. The Framework would describe the Clearing Agencies' multiple data centers, and the emergency monitoring and back up systems available at each site. The Framework would describe the capacity of the various data centers. The Framework would also describe the Clearing Agencies' operating centers, and would describe how each Clearing Agency Business and Clearing Agency Support Area creates and deploys its own work area recovery strategy to mitigate the loss of primary workspace and/or associated desktop technology, as well as for purposes of social distancing among personnel. The Framework would describe how each of these work area recovery strategies is developed and executed, based on the applicable Clearing Agency Business' and Clearing Agency Support Area's current Tier ranking, as described above. The Framework would describe the responsibilities of BCM in managing a disruptive business event, which includes coordination with a team of representatives from each Clearing Agency Business and Clearing Agency Support Area. Finally, the Framework would describe how the Clearing Agencies conduct regular exercises used to simulate loss of Clearing Agency locations, and would describe some of the preventive measures the Clearing Agencies take with respect to business continuity risk management. 2. Statutory Basis The Clearing Agencies believe that the proposed rule changes are consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. In particular, the Clearing Agencies believe that the Framework is consistent with Section 17A(b)(3)(F) of the Act \8\ and the subsections cited below of Rule 17Ad-22(e)(17),\9\ promulgated under the Act, for the reasons described below. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78q-1(b)(3)(F). \9\ 17 CFR 240.17Ad-22(e)(17). --------------------------------------------------------------------------- Section 17A(b)(3)(F) of the Act requires, in part, that the rules of a registered clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions, and to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible.\10\ As described above, the Framework would describe how the Clearing Agencies manage their Operational Risk, technology and information security risks, and their business continuity risks. The processes, systems, and controls used by the Clearing Agencies to identify, manage, and mitigate these risks, as described in the Framework, and the policies and procedures that support these activities, assist the Clearing Agencies to continue the prompt and accurate clearance and settlement of securities transactions and continue to assure the safeguarding of securities and funds which are in their custody or control or for which they are responsible notwithstanding the realization of these risks. Therefore, the Clearing Agencies believe the Framework is consistent with the requirements of Section 17A(b)(3)(F) of the Act.\11\ --------------------------------------------------------------------------- \10\ 15 U.S.C. 78q-1(b)(3)(F). \11\ Id. --------------------------------------------------------------------------- The Clearing Agencies believe that the Framework is consistent with the requirements of each of the subsections of Rule 17Ad-22(e)(17),\12\ cited below, for the reasons described below. --------------------------------------------------------------------------- \12\ 17 CFR 240.17Ad-22(e)(17). --------------------------------------------------------------------------- Rule 17Ad-22(e)(17)(i) under the Act requires, in part, that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to manage the covered clearing agency's operational risks by identifying the plausible sources of operational risk, both internal and external, and mitigating their impact through the use of appropriate systems, policies, procedures, and controls.\13\ The Framework would describe how the Risk Tolerance Statements and the Risk Profiles both assist the Clearing Agencies to identify the plausible sources of Operational Risk, both internal and external. As described above, the Risk Tolerance Statements identify both internal and external Clearing Agency risks, categorize the respective Clearing Agencies' tolerance for those risks, and then identify governance process applicable to any breach of those tolerances. In this way, the Risk Tolerance Statements allow the Clearing Agencies to identify and manage the risks they face. As described above, the Risk Profiles serve a similar [[Page 37945]] function, by serving as a tool for identifying and assessing inherent risks, and evaluating the controls around those risks. The Framework also describes the role of ORM, which includes oversight of the Risk Tolerance Statements and Risk Profiles. By describing the functions of the Risk Tolerance Statements and Risk Profiles, which, together, assist the Clearing Agencies in effectively managing their operational risks by identifying the plausible sources of operational risk, both internal and external, and by assisting the Clearing Agencies in mitigating the impact of those risks, and by describing the role of ORM in facilitating these tools, the Clearing Agencies believe the Framework is consistent with the requirements of Rule 17Ad- 22(e)(17)(i).\14\ --------------------------------------------------------------------------- \13\ 17 CFR 240.17Ad-22(e)(17)(i). \14\ Id. --------------------------------------------------------------------------- Rule 17Ad-22(e)(17)(ii) under the Act requires, in part, that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to manage the covered clearing agency's operational risks by ensuring that systems have a high degree of security, resiliency, operational reliability, and adequate, scalable capacity.\15\ The Framework would describe the role, and some of the responsibilities, of TRM, in managing the Clearing Agencies' information technology risks and in helping the Clearing Agencies maintain systems with a high degree of security, resiliency, operational reliability, and adequate, scalable capacity. The Framework would also describe the programs, systems, and controls used by TRM in performing this function, and would identify some of the standards on information technology risk management that may be used by TRM in support of its responsibilities. The Framework would also describe TRM's role in product and project initiatives to address security issues through the lifecycle of an initiative. Therefore, by describing the role and responsibilities of TRM in managing the Clearing Agencies' information technology risks and in helping the Clearing Agencies maintain systems with a high degree of security, resiliency, operational reliability, and adequate, scalable capacity, the Clearing Agencies believe the Framework is consistent with the requirements of Rule 17Ad-22(e)(17)(ii).\16\ --------------------------------------------------------------------------- \15\ 17 CFR 240.17Ad-22(e)(17)(ii). \16\ Id. --------------------------------------------------------------------------- Rule 17Ad-22(e)(17)(iii) under the Act requires, in part, that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to manage the covered clearing agency's operational risks by establishing and maintaining a business continuity plan that addresses events posing a significant risk of disrupting operations.\17\ The Framework would describe how the Clearing Agencies have established and maintain business continuity plans, and would describe the critical features of those plans to demonstrate how such plans address events posing a significant risk of disrupting the Clearing Agencies' operations. The Framework would also describe how each Clearing Agency Business and Clearing Agency Support Area reviews and ratifies its respective plan and its business impact analysis, relative to its assigned Tier. Therefore, through this description of the establishment, management and maintenance of the business continuity plans of the Clearing Agencies, the Clearing Agencies believe the Framework is consistent with the requirements of Rule 17Ad-22(e)(17)(iii).\18\ --------------------------------------------------------------------------- \17\ 17 CFR 240.17Ad-22(e)(17)(iii). \18\ Id. --------------------------------------------------------------------------- (B) Clearing Agencies' Statement on Burden on Competition None of the Clearing Agencies believe that the Framework would have any impact, or impose any burden, on competition because the proposed rule changes reflect some of the existing methods by which the Clearing Agencies manage Operational Risk, including their management of information technology and business continuity risks, and would not effectuate any changes to the Clearing Agencies' processes described therein as they currently apply to their respective participants. (C) Clearing Agencies' Statement on Comments on the Proposed Rule Changes Received From Members, Participants, or Others The Clearing Agencies have not solicited or received any written comments relating to this proposal. The Clearing Agencies will notify the Commission of any written comments received by the Clearing Agencies. III. Date of Effectiveness of the Proposed Rule Changes, and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period 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 clearing agency consents, the Commission will: (A) By order approve or disapprove such proposed rule changes, or (B) institute proceedings to determine whether the proposed rule changes 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 changes are consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-DTC-2017-014, SR-FICC-2017-017, or SR-NSCC-2017-013 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR-DTC-2017-014, SR-FICC- 2017-017, or SR-NSCC-2017-013. One of these file numbers should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule changes that are filed with the Commission, and all written communications relating to the proposed rule changes 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 the filing also will be available for inspection and copying at the principal office of the Clearing Agencies and on DTCC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only [[Page 37946]] information that you wish to make available publicly. All submissions should refer to File Number SR-DTC-2017-014, SR-FICC-2017-017, or SR- NSCC-2017-013 and should be submitted on or before September 5, 2017. --------------------------------------------------------------------------- \19\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\19\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-17043 Filed 8-11-17; 8:45 am] BILLING CODE 8011-01-P
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the marketplace for violations of Paper Comments SECURITIES AND EXCHANGE
Exchange Rules. The ORF assists the COMMISSION
Exchange to fund the cost of this • Send paper comments in triplicate
to Secretary, Securities and Exchange [Release No. 34–81338; File Nos. SR–DTC–
regulation of the marketplace. 2017–014; SR–FICC–2017–017; SR–NSCC–
Commission, 100 F Street NE.,
B. Self-Regulatory Organization’s 2017–013]
Washington, DC 20549–1090.
Statement on Burden on Competition
All submissions should refer to File No. Self-Regulatory Organizations; The
The Exchange does not believe that SR–ISE–2017–71. This file number Depository Trust Company; Fixed
the proposed rule change will impose should be included on the subject line Income Clearing Corporation; National
any burden on competition not Securities Clearing Corporation;
if email is used. To help the
necessary or appropriate in furtherance Notice of Filings of Proposed Rule
Commission process and review your
of the purposes of the Act. The ORF is Changes To Adopt the Clearing
not intended to have any impact on comments more efficiently, please use Agency Operational Risk Management
competition. Rather, it is designed to only one method. The Commission will Framework
enable the Exchange to recover a post all comments on the Commission’s
material portion of the Exchange’s cost Internet Web site (http://www.sec.gov/ DATE: August 8, 2017.
related to its regulatory activities. The rules/sro.shtml). Copies of the Pursuant to Section 19(b)(1) of the
Exchange is obligated to ensure that the submission, all subsequent Securities Exchange Act of 1934, as
amount of regulatory revenue collected amendments, all written statements amended (‘‘Act’’) 1 and Rule 19b–4
from the ORF, in combination with its with respect to the proposed rule thereunder,2 notice is hereby given that
other regulatory fees and fines, does not change that are filed with the on July 25, 2017, The Depository Trust
exceed regulatory costs. Commission, and all written Company (‘‘DTC’’), Fixed Income
communications relating to the Clearing Corporation (‘‘FICC’’), and
C. Self-Regulatory Organization’s National Securities Clearing Corporation
proposed rule change between the
Statement on Comments on the (‘‘NSCC,’’ and together with DTC and
Commission and any person, other than
Proposed Rule Change Received From FICC, the ‘‘Clearing Agencies’’) filed
Members, Participants, or Others those that may be withheld from the
with the Securities and Exchange
public in accordance with the Commission (‘‘Commission’’) the
No written comments were either provisions of 5 U.S.C. 552, will be proposed rule changes as described in
solicited or received. available for Web site viewing and Items I and II below, which Items have
III. Date of Effectiveness of the printing in the Commission’s Public been prepared primarily by the Clearing
Proposed Rule Change and Timing for Reference Room, 100 F Street NE., Agencies. The Commission is
Commission Action Washington, DC 20549, on official publishing this notice to solicit
business days between the hours of comments on the proposed rule changes
The foregoing rule change has become 10:00 a.m. and 3:00 p.m. Copies of the from interested persons.
effective pursuant to Section
filing also will be available for
19(b)(3)(A)(ii) of the Act.15 At any time I. Clearing Agencies’ Statement of the
inspection and copying at the principal Terms of Substance of the Proposed
within 60 days of the filing of the
office of the Exchange. All comments Rule Changes
proposed rule change, the Commission
summarily may temporarily suspend received will be posted without change;
the Commission does not edit personal The proposed rule changes would
such rule change if it appears to the adopt the Clearing Agency Operational
Commission that such action is: (i) identifying information from
Risk Management Framework
necessary or appropriate in the public submissions. You should submit only
(‘‘Framework’’) of the Clearing
interest; (ii) for the protection of information that you wish to make
Agencies, described below. The
investors; or (iii) otherwise in available publicly. All submissions Framework would apply to both of
furtherance of the purposes of the Act. should refer to File No. SR–ISE–2017– FICC’s divisions, the Government
If the Commission takes such action, the 71, and should be submitted on or Securities Division (‘‘GSD’’) and the
Commission shall institute proceedings before September 5, 2017. Mortgage-Backed Securities Division
to determine whether the proposed rule For the Commission, by the Division of (‘‘MBSD’’). The Framework would be
should be approved or disapproved. Trading and Markets, pursuant to delegated maintained by the Clearing Agencies to
IV. Solicitation of Comments authority.16 support their compliance with Rule
Eduardo A. Aleman, 17Ad–22(e)(17) under the Act, as
Interested persons are invited to described below.3
Assistant Secretary.
submit written data, views, and Although the Clearing Agencies
arguments concerning the foregoing, [FR Doc. 2017–17050 Filed 8–11–17; 8:45 am] would consider the Framework to be a
including whether the proposed rule BILLING CODE 8011–01–P rule, the proposed rule changes do not
change is consistent with the Act. require any changes to the Rules, By-
Comments may be submitted by any of laws and Organization Certificate of
the following methods: DTC (‘‘DTC Rules’’), the Rulebook of
GSD (‘‘GSD Rules’’), the Clearing Rules
Electronic Comments
of MBSD (‘‘MBSD Rules’’), or the Rules
• Use the Commission’s Internet & Procedures of NSCC (‘‘NSCC Rules’’),
sradovich on DSK3GMQ082PROD with NOTICES
comment form (http://www.sec.gov/ as the Framework would be a
rules/sro.shtml); or standalone document.4
• Send an email to rule-comments@
1 15 U.S.C. 78s(b)(1).
sec.gov. Please include File No. SR–ISE– 2 17 CFR 240.19b–4.
2017–71 on the subject line. 3 17 CFR 240.17Ad–22(e)(17).
4 Capitalized terms not defined herein are defined
15 15 U.S.C. 78s(b)(3)(A)(ii). 16 17 CFR 200.30–3(a)(12). in the DTC Rules, GSD Rules, MBSD Rules, or
VerDate Sep<11>2014 16:45 Aug 11, 2017 Jkt 241001 PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 E:\FR\FM\14AUN1.SGM 14AUN1](https://thefederalregister.org/doc/82_FR_38097/page/1.svg)
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information that you wish to make II. Self-Regulatory Organization’s its regulatory costs, while not exceeding
available publicly. All submissions Statement of the Purpose of, and regulatory costs.
should refer to File Number SR–DTC– Statutory Basis for, the Proposed Rule The Exchange notified its Participants
2017–014, SR–FICC–2017–017, or SR– Change of this ORF adjustment thirty (30)
NSCC–2017–013 and should be calendar days prior to the proposed
submitted on or before September 5, In its filing with the Commission, the operative date.5
2017. Exchange included statements
concerning the purpose of and basis for Proposal 2—Reflect the Manner in
For the Commission, by the Division of the proposed rule change and discussed Which BX Assesses and Collects its ORF
Trading and Markets, pursuant to delegated any comments it received on the
authority.19
Currently, BX assesses its ORF for
proposed rule change. The text of these each Customer option transaction that is
Eduardo A. Aleman, statements may be examined at the either: (1) Executed by a Participant on
Assistant Secretary. places specified in Item IV below. The BX; or (2) cleared by a BX Participant
[FR Doc. 2017–17043 Filed 8–11–17; 8:45 am] Exchange has prepared summaries, set at The Options Clearing Corporation
BILLING CODE 8011–01–P forth in sections A, B, and C below, of (‘‘OCC’’) in the Customer range,6 even if
the most significant aspects of such the transaction was executed by a non-
statements. member of BX, regardless of the
SECURITIES AND EXCHANGE exchange on which the transaction
COMMISSION A. Self-Regulatory Organization’s
occurs.7 If the OCC clearing member is
Statement of the Purpose of, and the
a BX Participant, ORF is assessed and
Statutory Basis for, the Proposed Rule
[Release No. 34–81341; File No. SR–BX– collected on all cleared Customer
Change
2017–032] contracts (after adjustment for CMTA 8);
1. Purpose and (2) if the OCC clearing member is
Self-Regulatory Organizations; not a BX Participant, ORF is collected
NASDAQ BX, Inc.; Notice of Filing and BX initially filed to establish its ORF only on the cleared Customer contracts
Immediate Effectiveness of Proposed in 2016.3 The Exchange has amended its executed at BX, taking into account any
Rule Change To Revise the Rules ORF several times since the inception of CMTA instructions which may result in
Regarding the Exchange’s Options this fee.4 At this time, the Exchange collecting the ORF from a non-member.
Regulatory Fee proposes to: (i) Amend the amount of its By way of example, if Broker A, a BX
ORF; and (ii) revise BX Rules at Chapter Participant, routes a Customer order to
DATES: August 8, 2017. XV, Section 5 to more closely reflect the CBOE and the transaction executes on
Pursuant to Section 19(b)(1) of the manner in which BX assesses and CBOE and clears in Broker A’s OCC
Securities Exchange Act of 1934 collects its ORF. Clearing account, ORF will be collected
(‘‘Act’’) 1, and Rule 19b–4 thereunder,2 The Exchange supports a common by BX from Broker A’s clearing account
notice is hereby given that on July 26, approach for the assessment and at OCC via direct debit. While this
2017, NASDAQ BX, Inc. (‘‘BX’’ or collection of ORF among the various transaction was executed on a market
‘‘Exchange’’) filed with the Securities options exchanges that assess such a fee. other than BX, it was cleared by a BX
and Exchange Commission (‘‘SEC’’ or Furthermore, the Exchange supports Participant in the Participant’s OCC
‘‘Commission’’) the proposed rule guidance from the Commission clearing account in the Customer range,
change as described in Items I, II, and regarding regulatory cost structures to therefore there is a regulatory nexus
III, below, which Items have been ensure equal knowledge and treatment between BX and the transaction. If
prepared by the Exchange. The among options markets assessing ORF. Broker A was not a BX Participant, then
Commission is publishing this notice to no ORF should be assessed and
solicit comments on the proposed rule Proposal 1—Amend the Amount of the
ORF collected because there is no nexus; the
change from interested persons. transaction did not execute on BX nor
I. Self-Regulatory Organization’s The Exchange assesses an ORF of was it cleared by a BX Participant.
Statement of the Terms of Substance of $0.0004 per contract side. The Exchange In the case where a Participant both
the Proposed Rule Change proposes to increase the ORF from executes a transaction and clears the
$0.0004 per contract side to $0.0005 per transaction, the ORF is assessed to and
The Exchange proposes to revise BX contract side as of August 1, 2017 to collected from the Participant only
Rules at Chapter XV, Section 5 to: (i) account for a reduction in market once. In the case where a Participant
Make adjustments to the amount of its volume. The Exchange’s proposed executes a transaction and a different
Options Regulatory Fee (‘‘ORF’’); and change to the ORF should balance the Participant clears the transaction, the
(ii) more closely reflect the manner in Exchange’s regulatory cost [sic] against ORF is assessed to and collected from
which BX assesses and collects its ORF. the anticipated revenue. The Exchange the Participant who clears the
While the changes proposed herein regularly reviews its ORF to ensure that transaction and not the Participant who
are effective upon filing, the Exchange the ORF, in combination with its other executes the transaction. In the case
has designated the amendments [sic] regulatory fees and fines, does not
become operative on August 1, 2017. exceed regulatory costs. The Exchange 5 See Options Trader Alert #2017–54.
The text of the proposed rule change believes this adjustment will permit the 6 Exchange Rules require each member to record
is available on the Exchange’s Web site the appropriate account origin code on all orders at
Exchange to cover a material portion of the time of entry in order to allow the Exchange to
sradovich on DSK3GMQ082PROD with NOTICES
at http://nasdaqbx.cchwallstreet.com/, properly prioritize and route orders and assess
at the principal office of the Exchange, 3 See Securities Exchange Act Release Nos. 77053 transaction fees pursuant to the Rules of the
and at the Commission’s Public (February 4, 3016), 81 FR 7163 (February 10, 2016) Exchange and report resulting transactions to OCC.
Reference Room. (SR–BX–2016–007); (Notice of Filing and 7 The Exchange uses reports from OCC to
Immediate Effectiveness of Proposed Rule Change determine the identity of the executing clearing
Relating To Adopt an Options Regulatory Fee). firm and ultimate clearing firm.
19 17 CFR 200.30–3(a)(12). 4 See Securities Exchange Act Release No. 78361 8 CMTA or Clearing Member Trade Assignment is
1 15 U.S.C. 78s(b)(1). (July 19, 2016), 81 FR 48485 (July 25, 2016) (SR– a form of ‘‘give-up’’ whereby the position will be
2 17 CFR 240.19b–4. BX–2016–043). assigned to a specific clearing firm at OCC.
VerDate Sep<11>2014 16:45 Aug 11, 2017 Jkt 241001 PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 E:\FR\FM\14AUN1.SGM 14AUN1](https://thefederalregister.org/doc/82_FR_38097/page/5.svg)
Document Created: 2018-10-24 11:52:12
Document Modified: 2018-10-24 11:52:12
| 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 | |
| Dates | August 8, 2017. | |
| FR Citation | 82 FR 37942 |
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