82 FR 3828 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Price List
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 8 (January 12, 2017)
Federal Register Volume 82, Issue 8 (January 12, 2017)
| Page Range | 3828-3831 | |
| FR Document | 2017-00490 |
[Federal Register Volume 82, Number 8 (Thursday, January 12, 2017)] [Notices] [Pages 3828-3831] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-00490] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79748; File No. SR-NYSE-2016-93] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Price List January 6, 2017. Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that, on December 30, 2016, New York Stock Exchange LLC (``NYSE'' or the ``Exchange'') filed with the Securities and Exchange Commission (the ``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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to amend its Price List to: (1) Revise the quoting, quoted size, and adding liquidity requirements for Designated Market Makers (``DMM'') to qualify for certain rebates for providing liquidity on the Exchange; (2) introduce new rebates for DMMs for providing liquidity on the Exchange; and (3) change the monthly fees for the use of certain ports by DMMs. The Exchange proposes to implement these changes to its Price List effective January 3, 2017. The proposed rule change is available on the Exchange's Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Price List to: (1) Revise the quoting, quoted size, and adding liquidity requirements for DMMs to qualify for certain rebates for providing liquidity on the Exchange; (2) introduce new rebates for DMMs for providing liquidity on the Exchange; and (3) change the monthly fees for the use of certain ports by DMMs. The Exchange proposes to implement these changes effective January 3, 2017. DMMs Quoting, Quoted Size, and Adding Liquidity Requirements Currently, DMMs earn a rebate of $0.0027 per share when adding liquidity with orders, other than Mid-Point Liquidity Orders (``MPL Order''), in More Active Securities \4\ if the More Active Security has a stock price of $1.00 or more and the DMM meets the More Active Securities Quoting Requirement.\5\ --------------------------------------------------------------------------- \4\ ``More Active Securities'' are securities with an average daily consolidated volume (``ADV'') in the previous month equal to or greater than 1,000,000 shares per month \5\ The ``More Active Securities Quoting Requirement'' is met if the More Active Security has a stock price of $1.00 or more and the DMM quotes at the National Best Bid or Offer (``NBBO'') in the applicable security at least 10% of the time in the applicable month. --------------------------------------------------------------------------- In order to qualify for the $0.0027 rebate per share, the Exchange proposes to require that DMMs also have a DMM Quoted Size for an applicable month that is at least 5% of the NYSE Quoted Size.\6\ --------------------------------------------------------------------------- \6\ The ``NYSE Quoted Size'' is calculated by multiplying the average number of shares quoted on the NYSE at the NBBO by the percentage of time the NYSE had a quote posted at the NBBO. The ``DMM Quoted Size'' is calculated by multiplying the average number of shares of the applicable security quoted at the NBBO by the DMM by the percentage of time during which the DMM quoted at the NBBO. See Price List, n. 7. --------------------------------------------------------------------------- Currently, DMMs earn a rebate of $0.0031 per share when adding liquidity with orders, other than MPL Orders, in More Active Securities if the More Active Security has a stock price of $1.00 or more and the DMM meets (1) the More Active Securities Quoting Requirement, and (2) has a DMM Quoted Size for an applicable month that is at least 10% of the NYSE Quoted Size. In order to qualify for the $0.0031 rebate per share, the Exchange proposes to require that DMMs also quote at the NBBO in the applicable security at least 20% of the time in the applicable month and for providing liquidity that is more than 5% of the NYSE's total intraday adding liquidity in each such security for that month.\7\ --------------------------------------------------------------------------- \7\ The NYSE total intraday adding liquidity is totaled monthly and includes all NYSE adding liquidity, excluding NYSE open and NYSE close volume, by all NYSE participants, including Supplemental Liquidity Providers, customers, Floor brokers, and DMMs. --------------------------------------------------------------------------- Similarly, DMMs currently earn a rebate of $0.0034 per share when adding liquidity with orders, other than MPL Orders, in More Active Securities if the More Active Security has a stock price of $1.00 or more and the DMM meets (1) the More Active Securities Quoting Requirement and (2) has a DMM Quoted Size for an applicable month that is at least 15% of the NYSE Quoted Size, for providing liquidity that is more than 15% of the NYSE's total intraday adding liquidity in each such security for that month. In order to qualify for this $0.0034 per share rebate, the Exchange proposes to require that DMMs also quote at the NBBO in the applicable security at least [[Page 3829]] 30% of the time in the applicable month. New Adding Liquidity Rebates The Exchange also proposes to provide two additional rebates for DMMs adding liquidity to the Exchange. First, the Exchange proposes a rebate of $0.0035 per share when adding liquidity with orders, other than MPL Orders, in More Active Securities if the More Active Security has a stock price of $1.00 or more and the DMM meets the More Active Securities Quoting Requirement and has a DMM Quoted Size for an applicable month that is at least 25% of the NYSE Quoted Size, for providing liquidity that is more than 15% of the NYSE's total intraday adding liquidity in each such security for that month and the DMM quotes at the NBBO in the applicable security at least 50% of the time in the applicable month. The NYSE total intraday adding liquidity would be totaled monthly and would include all NYSE adding liquidity, excluding NYSE open and NYSE close volume, by all NYSE participants, including Supplemental Liquidity Providers, customers, Floor brokers, and DMMs. Second, the Exchange proposes a rebate of $0.0045 per share when adding liquidity with orders, other than MPL orders, in Less Active Securities if the Less Active Security has a stock price of $1.00 or more and the DMM quotes at the NBBO in the applicable security at least 30% of the time in the applicable month. As with existing DMM rebates, the proposed rebates would be applied when (1) posting displayed and non-displayed orders on Display Book, including s-quote and s-quote reserve orders; (2) providing liquidity on non-displayed interest using the Capital Commitment Schedule; or, prior to the implementation of the Capital Commitment Schedule, using the following message activities: price improvement, size improvement (PRIN FILL), matching away market quotes; and (3) executing trades in the crowd and at Liquidity Replenishment Points. The proposed rebates would not apply to executions at the open.\8\ --------------------------------------------------------------------------- \8\ See Price List, n. 6. --------------------------------------------------------------------------- DMM Port Fees The Exchange proposes to amend its Price List to change the monthly fees for the use of certain ports by DMMs. The Exchange currently makes ports available that provide connectivity to the Exchange's trading systems (i.e., ports for entry of orders and/or quotes (``order/quote entry ports'')) and charges $550 per port per month, except that DMMs are not charged for ports that connect to the Exchange via the DMM Gateway.\9\ The Exchange also currently makes ports available for drop copies and charges $550 per port per month, except that DMMs are not charged for ports that connect to the Exchange via the DMM Gateway.\10\ --------------------------------------------------------------------------- \9\ The Exchange has a Common Customer Gateway (``CCG'') that accesses the equity trading systems that it shares with its affiliates, NYSE MKT LLC (``NYSE MKT'') and NYSE Arca, Inc. (``NYSE Arca''). All ports connect to the CCG. See, e.g., Securities Exchange Act Release No. 64542 (May 25, 2011), 76 FR 31659 (June 1, 2011) (SR-NYSE-2011-13). DMMs can connect to the Exchange in two ways: Via the DMM Gateway and CCG. Only DMMs may connect to the DMM Gateway and only when acting in their capacity as a DMM. DMMs are required to use the DMM Gateway for certain DMM-specific functions that relate to the DMM's role on the Exchange and the obligations attendant therewith, which are not applicable to other market participants on the Exchange. By contrast, non-DMMs as well as DMMs may use the CCG. Use of the CCG by a DMM is optional, and a DMM that connects to the Exchange via CCG can use the relevant order/quote entry port for orders and quotes both in its capacity as a DMM and for orders and quotes in other securities. \10\ Only one fee per drop copy port applies, even if receiving drop copies from multiple order/quote entry ports. --------------------------------------------------------------------------- The Exchange proposes to not charge DMMs for the first twelve ports that connect to the Exchange via the DMM Gateway and then charge DMMs $550 per port per month for additional ports above the first 12 ports. The DMMs would continue not to incur fees for ports that connect to the Exchange via the DMM Gateway for drop copies. DMMs would also, like other market participants, continue to be charged for order/entry ports that connect to the Exchange via the CCG. * * * * * The proposed changes are not otherwise intended to address any other issues, and the Exchange is not aware of any problems that member organizations would have in complying with the proposed change. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,\11\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\12\ in particular, because it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers. --------------------------------------------------------------------------- \11\ 15 U.S.C. 78f(b). \12\ 15 U.S.C. 78f(b)(4) & (5). --------------------------------------------------------------------------- DMMs Quoting, Quoted Size and Adding Liquidity Requirements The Exchange believes that the proposed additional quoting, quoted size and adding liquidity requirements in order for DMMs to qualify for the $0.0027, $0.0031 and $0.0034 rebates per share when adding liquidity on the Exchange is reasonable because the higher proposed requirement would improve quoting and increase adding liquidity across securities where there may be fewer liquidity providers. The Exchange believes that higher quoting obligations provide higher volumes of liquidity, which contributes to price discovery and benefits all market participants. Moreover, the Exchange believes that the proposed increase in the credits is equitable and not unfairly discriminatory because, as is currently the case under the existing rates, the credits are available to all DMM firms. New Adding Liquidity Rebates The Exchange believes that the proposed new rebates are equitably allocated and not unfairly discriminatory because they will apply equally to all DMMs. The Exchange believes that the proposed rebate of $0.0035 for intraday adding liquidity that exceeds 25% share of NYSE Quoted Size for providing liquidity that is more than 15% of the NYSE's total intraday adding liquidity in each such security for that month and the DMM quotes at the NBBO in the applicable security at least 50% of the time in the applicable month is reasonable as it would encourage greater quoting and liquidity. Similarly, the proposed rebate of $0.0045 for DMMs adding liquidity with orders, other than MPL orders, in Less Active Securities if the Less Active Security has a stock price of $1.00 or more and the DMM quotes at the NBBO in the applicable security at least 30% of the time in the applicable month is reasonable given the higher proposed quoting requirement and corresponding rebate. Moreover, the proposed requirements are equitable and not unfairly discriminatory because they would apply equally to all DMM firms. DMM Port Fees The Exchange believes that the proposal to amend the port fees constitutes an equitable allocation of fees because all similarly situated DMMs and other market participants would be charged the same port rates. The Exchange believes that the proposed change is reasonable even though DMMs are required to use the DMM Gateway for certain DMM-specific [[Page 3830]] functions that relate to the DMM's role on the Exchange and the obligations attendant therewith because the proposed port fees for DMMs are expected to permit the Exchange to offset, in part, its infrastructure costs associated with making such ports available, including costs based on gateway software and hardware enhancements and resources dedicated to gateway development, quality assurance, and support. In this regard, the Exchange believes that the proposed fees are competitive with those charged by other exchanges.\13\ The proposed change is also reasonable because the proposed per port rates would encourage DMM users to become more efficient with, and reduce the number of ports used, thereby resulting in a corresponding increase in the efficiency that the Exchange would be able to realize with respect to managing its own infrastructure. --------------------------------------------------------------------------- \13\ For example, the charge on the NASDAQ for a FIX Trading Port is $575 per port per month. See NASDAQ Rule 7015. A separate charge for Pre-Trade Risk Management ports also is applicable, which ranges from $400 to $600 and is capped at $25,000 per firm per month. See NASDAQ Rule 7016. --------------------------------------------------------------------------- Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchange's statement regarding the burden on competition. For the foregoing reasons, the Exchange believes that the proposal is consistent with the Act. B. Self-Regulatory Organization's Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,\14\ the Exchange believes that the proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the Exchange believes that the proposed change relating to DMM rebates would contribute to the Exchange's market quality by promoting price discovery and ultimately increased competition. For the same reasons, the proposed change also would not impose any burden on competition among market participants. Further, the proposed change will permit the Exchange to set fees for ports that are competitive with those charged by other exchanges.\15\ Moreover, the Exchange believes that the proposal to amend the port fees would encourage users to become more efficient with, and reduce the number of ports used. In this regard, the Exchange believes that the proposal would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because the Exchange believes that a reduction in the number of ports would result in a decrease in the infrastructure that the Exchange is required to support for connectivity to its trading systems. This would also provide incentive for users to become more efficient with their use of ports and could therefore result in such users becoming more competitive due to decreased costs. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78f(b)(8). \15\ See note 13, supra. --------------------------------------------------------------------------- Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees and rebates to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees and credits in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. As a result of all of these considerations, the Exchange does not believe that the proposed changes will impair the ability of member organizations or competing order execution venues to maintain their competitive standing in the financial markets. 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 The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) \16\ of the Act and subparagraph (f)(2) of Rule 19b-4 \17\ thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. --------------------------------------------------------------------------- \16\ 15 U.S.C. 78s(b)(3)(A). \17\ 17 CFR 240.19b-4(f)(2). --------------------------------------------------------------------------- At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \18\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NYSE-2016-93 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2016-93. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the 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 [[Page 3831]] information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2016-93, and should be submitted on or before February 2, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\19\ --------------------------------------------------------------------------- \19\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-00490 Filed 1-11-17; 8:45 am] BILLING CODE 8011-01-P
![3828 Federal Register / Vol. 82, No. 8 / Thursday, January 12, 2017 / Notices
proposed rule change between the I. Self-Regulatory Organization’s Active Security has a stock price of
Commission and any person, other than Statement of the Terms of the Substance $1.00 or more and the DMM meets the
those that may be withheld from the of the Proposed Rule Change More Active Securities Quoting
public in accordance with the The Exchange proposes to amend its Requirement.5
provisions of 5 U.S.C. 552, will be Price List to: (1) Revise the quoting, In order to qualify for the $0.0027
available for Web site viewing and quoted size, and adding liquidity rebate per share, the Exchange proposes
printing in the Commission’s Public requirements for Designated Market to require that DMMs also have a DMM
Reference Room, 100 F Street NE., Makers (‘‘DMM’’) to qualify for certain Quoted Size for an applicable month
Washington, DC 20549, on official rebates for providing liquidity on the that is at least 5% of the NYSE Quoted
business days between the hours of Exchange; (2) introduce new rebates for Size.6
10:00 a.m. and 3:00 p.m. Copies of the DMMs for providing liquidity on the Currently, DMMs earn a rebate of
filing also will be available for Exchange; and (3) change the monthly $0.0031 per share when adding liquidity
inspection and copying at the principal fees for the use of certain ports by with orders, other than MPL Orders, in
office of the Exchange. All comments DMMs. The Exchange proposes to More Active Securities if the More
implement these changes to its Price Active Security has a stock price of
received will be posted without change;
List effective January 3, 2017. The $1.00 or more and the DMM meets (1)
the Commission does not edit personal
proposed rule change is available on the the More Active Securities Quoting
identifying information from Requirement, and (2) has a DMM
submissions. You should submit only Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange, Quoted Size for an applicable month
information that you wish to make that is at least 10% of the NYSE Quoted
available publicly. All submissions and at the Commission’s Public
Reference Room. Size.
should refer to File Number SR–Phlx– In order to qualify for the $0.0031
2017–02, and should be submitted on or II. Self-Regulatory Organization’s rebate per share, the Exchange proposes
before February 2, 2017. Statement of the Purpose of, and to require that DMMs also quote at the
Statutory Basis for, the Proposed Rule NBBO in the applicable security at least
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
Change 20% of the time in the applicable month
authority.13 In its filing with the Commission, the and for providing liquidity that is more
Eduardo A. Aleman. self-regulatory organization included than 5% of the NYSE’s total intraday
statements concerning the purpose of, adding liquidity in each such security
Assistant Secretary.
and basis for, the proposed rule change for that month.7
[FR Doc. 2017–00492 Filed 1–11–17; 8:45 am]
and discussed any comments it received Similarly, DMMs currently earn a
BILLING CODE 8011–01–P on the proposed rule change. The text rebate of $0.0034 per share when adding
of those statements may be examined at liquidity with orders, other than MPL
the places specified in Item IV below. Orders, in More Active Securities if the
SECURITIES AND EXCHANGE The Exchange has prepared summaries, More Active Security has a stock price
COMMISSION set forth in sections A, B, and C below, of $1.00 or more and the DMM meets (1)
of the most significant parts of such the More Active Securities Quoting
[Release No. 34–79748; File No. SR–NYSE– statements. Requirement and (2) has a DMM Quoted
2016–93] Size for an applicable month that is at
A. Self-Regulatory Organization’s
Statement of the Purpose of, and least 15% of the NYSE Quoted Size, for
Self-Regulatory Organizations; New providing liquidity that is more than
York Stock Exchange LLC; Notice of Statutory Basis for, the Proposed Rule
Change 15% of the NYSE’s total intraday adding
Filing and Immediate Effectiveness of liquidity in each such security for that
Proposed Rule Change Amending Its 1. Purpose month.
Price List The Exchange proposes to amend its In order to qualify for this $0.0034 per
Price List to: (1) Revise the quoting, share rebate, the Exchange proposes to
January 6, 2017.
quoted size, and adding liquidity require that DMMs also quote at the
Pursuant to Section 19(b)(1) 1 of the requirements for DMMs to qualify for NBBO in the applicable security at least
Securities Exchange Act of 1934 (the certain rebates for providing liquidity
‘‘Act’’) 2 and Rule 19b–4 thereunder,3 on the Exchange; (2) introduce new previous month equal to or greater than 1,000,000
notice is hereby given that, on December rebates for DMMs for providing shares per month
5 The ‘‘More Active Securities Quoting
30, 2016, New York Stock Exchange liquidity on the Exchange; and (3) Requirement’’ is met if the More Active Security
LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed change the monthly fees for the use of has a stock price of $1.00 or more and the DMM
with the Securities and Exchange certain ports by DMMs. quotes at the National Best Bid or Offer (‘‘NBBO’’)
Commission (the ‘‘Commission’’) the The Exchange proposes to implement in the applicable security at least 10% of the time
these changes effective January 3, 2017. in the applicable month.
proposed rule change as described in 6 The ‘‘NYSE Quoted Size’’ is calculated by
Items I, II, and III below, which Items DMMs multiplying the average number of shares quoted on
have been prepared by the self- the NYSE at the NBBO by the percentage of time
regulatory organization. The Quoting, Quoted Size, and Adding the NYSE had a quote posted at the NBBO. The
Liquidity Requirements ‘‘DMM Quoted Size’’ is calculated by multiplying
Commission is publishing this notice to the average number of shares of the applicable
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solicit comments on the proposed rule Currently, DMMs earn a rebate of security quoted at the NBBO by the DMM by the
change from interested persons. $0.0027 per share when adding liquidity percentage of time during which the DMM quoted
with orders, other than Mid-Point at the NBBO. See Price List, n. 7.
7 The NYSE total intraday adding liquidity is
Liquidity Orders (‘‘MPL Order’’), in
13 17 CFR 200.30–3(a)(12). totaled monthly and includes all NYSE adding
More Active Securities 4 if the More liquidity, excluding NYSE open and NYSE close
1 15 U.S.C. 78s(b)(1).
volume, by all NYSE participants, including
2 15 U.S.C. 78a. 4 ‘‘More Active Securities’’ are securities with an Supplemental Liquidity Providers, customers, Floor
3 17 CFR 240.19b–4. average daily consolidated volume (‘‘ADV’’) in the brokers, and DMMs.
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![Federal Register / Vol. 82, No. 8 / Thursday, January 12, 2017 / Notices 3831
information that you wish to make II. Description of the Proposed Rule terminate any positions of non-
available publicly. All submissions Change and Notice of Filing of defaulting Participants (or their
should refer to File Number SR–NYSE– Amendment No. 1 customers) that exactly offset the
2016–93, and should be submitted on or ICC has proposed changes to the ICC unsuccessfully auctioned positions in
before February 2, 2017. Rules, as modified by Amendment No. the defaulting Participant’s portfolio.
For the Commission, by the Division of 1, relating to clearing house default ICC refers to this termination of a
Trading and Markets, pursuant to delegated management, recovery, and wind-down discrete set, as opposed to all, of its
authority.19 to address uncovered losses from a outstanding positions as ‘‘partial tear-
Eduardo A. Aleman, clearing participant (‘‘Participant’’) up.’’ Separately, ICC proposes to revise
Assistant Secretary. default or series of Participant defaults. its authority to seek unlimited guaranty
The proposed changes consist of three fund assessments from its Participants
[FR Doc. 2017–00490 Filed 1–11–17; 8:45 am]
aspects. First, ICC proposes to revise its and implement a ‘‘cooling-off period,’’
BILLING CODE 8011–01–P
auction procedures and tools for during which its ability to call for
returning to a matched-book after a additional Participant contributions to
Participant default or series of the guaranty fund is capped. In
SECURITIES AND EXCHANGE
Participant defaults and to implement a addition, ICC proposes, in a highly
COMMISSION
different approach to allocating limited set of circumstances, to allocate
[Release No. 34–79750; File No. SR–ICC– uncovered losses stemming from such losses by reducing the amount of
2016–013] Participant default(s) that provides more variation margin that would otherwise
certainty to Participants by limiting be owed to Participants or their
Self-Regulatory Organizations; ICE their exposure to ICC. Second, ICC customers as a tool to assist in ICC’s
Clear Credit LLC; Notice of Filing proposes to collect additional initial recovery, which ICC refers to as
Amendment No. 1 and Order Granting margin to ensure that it maintains ‘‘reduced gains distributions.’’ These
Accelerated Approval of Proposed minimum pre-funded financial provisions are described more fully
Rule Change To Amend the ICE Clear resources in compliance with applicable below.6
Credit Clearing Rules, as Modified by regulatory requirements. Third, ICC 1. Revised Auction Procedures
Amendment No. 1, Relating to Default proposes to clarify the governance
Management, Clearing House Under the proposed changes, ICC will
requirements relating to the use of ICC’s
Recovery and Wind-Down use an auction to dispose of a defaulting
proposed default management tools,
Participant’s portfolio.7 Ordinarily, ICC
January 6, 2017. including matched-book tools and loss
will begin with an initial default auction
allocation tools, as well as clarify the
I. Introduction and if necessary or appropriate proceed
Rules to enhance transparency and
to a secondary auction. But, in
On November 4, 2016, ICE Clear specificity.
consultation with the Risk Committee, if
Credit LLC (‘‘ICC’’ or ‘‘clearing house’’) A. Revised Auction Procedures, Tools practicable, and upon a majority vote of
filed with the Securities and Exchange for Returning ICC to a Matched-Book ICC’s Board, ICC may bypass the initial
Commission (‘‘Commission’’), pursuant and Tools for Default Loss Allocation auction and proceed directly to a
to Section 19(b)(1) of the Securities secondary auction.
ICC proposes substantial changes in
Exchange Act of 1934 (‘‘Act’’) 1 and Rule In the initial auction, ICC
the way it returns to a matched-book
19b–4 thereunder,2 a proposed rule management will divide the defaulting
following a Participant default or series
change (SR–ICC–2016–013) to amend Participant’s portfolio into one or more
of defaults. Specifically, ICC proposes to
the ICC Clearing Rules (‘‘ICC Rules’’ or maintain its existing default lots, and each non-defaulting
‘‘Rules’’) relating to clearing house management practices,5 such as the Participant will be subject to a
default management, recovery, and practice of auctioning a defaulting minimum bid requirement for each lot.
wind-down, and to adopt certain related Participant’s positions to its non- In addition, ICC proposes to permit
default auction procedures. The defaulting Participants, but proposes to customers of Participants to participate
proposed rule change was published for eliminate its ability to forcibly allocate in the initial auction either by bidding
comment in the Federal Register on a defaulting Participant’s positions to indirectly through a Participant or by
November 22, 2016.3 The Commission other non-defaulting Participants, in the bidding directly in the auction,
received one comment letter to the event an auction is unsuccessful. In lieu provided that such customers (1) agree
proposed rule change.4 On December of these forced allocations, ICC has to the terms of the auction, (2) accept
19, 2016, ICC filed Amendment No. 1 to proposed a revised set of auction the same confidentiality agreements
the proposed rule change. The procedures and an additional matched- concerning the auction as a Participant;
Commission is publishing this notice to book tool. The revised auction and (3) make a minimum deposit to be
solicit comment on Amendment No. 1 procedures include initial and applied by ICC in the same manner as
from interested persons and, for the secondary auctions, each of which Participants’ guaranty fund
reasons stated below, is approving the include a number of features designed contributions. ICC will use all available
proposed rule change, as modified by to incentivize Participants and their default resources to cover the costs
Amendment No. 1, on an accelerated customers to bid competitively. In the associated with the initial default
basis. event that the default management 6 See Notice, 81 FR at 83906–10, unless otherwise
auctions are unsuccessful in returning noted.
mstockstill on DSK3G9T082PROD with NOTICES
19 17 CFR 200.30–3(a)(12). ICC to a matched-book, ICC proposes to 7 Although the auction procedures will not be
1 15 U.S.C. 78s(b)(1).
published, ICC will make such procedures available
2 17 CFR 240.19b–4.
5 ICC’s existing default remedies, as amended by to all Participants, subject to existing confidentiality
3 Securities Exchange Act Release No. 34–79324
this proposed rule change, are referred to as arrangements between ICC and Participants and the
(Nov. 16, 2016), 81 FR 83906 (Nov. 22, 2016) (SR– ‘‘Standard Default Management Actions.’’ By confidentiality provisions set forth in the auction
ICC–2016–013) (‘‘Notice’’). contrast, additional, new default management tools procedures. ICC will also make such procedures
4 See letter from Jacqueline H. Mesa, Senior Vice adopted as part of this proposed rule change are available to customers of Participants at the request
President of Global Policy, FIA (Dec. 2, 2016) (‘‘FIA referred to as ‘‘Secondary Default Management of such customers (and/or permit Participants to do
Comment’’). Actions.’’ See Notice, 81 FR at 83906. so), subject to confidentiality arrangements.
VerDate Sep<11>2014 18:28 Jan 11, 2017 Jkt 241001 PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 E:\FR\FM\12JAN1.SGM 12JAN1](https://thefederalregister.org/doc/82_FR_3836/page/4.svg)
Document Created: 2017-03-21 14:40:12
Document Modified: 2017-03-21 14:40:12
| 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 | |
| FR Citation | 82 FR 3828 |
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