82 FR 42203 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Rules 431, 432, and 835 To Conform Them to Securities Exchange Act Rule 15c6-1(a), Which Shortens the Settlement Cycle to Two Dates After the Trade Date, and To Interpret the Amended Rules To Exclude September 5, 2017 as the First Ex-Dividend Date Thereunder

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 171 (September 6, 2017)

Page Range		42203-42205
FR Document		2017-18795
Federal Register, Volume 82 Issue 171 (Wednesday, September 6, 2017)
[Federal Register Volume 82, Number 171 (Wednesday, September 6, 2017)]
[Notices]
[Pages 42203-42205]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-18795]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81501; File No. SR-Phlx-2017-71]


Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Rules 431, 432, 
and 835 To Conform Them to Securities Exchange Act Rule 15c6-1(a), 
Which Shortens the Settlement Cycle to Two Dates After the Trade Date, 
and To Interpret the Amended Rules To Exclude September 5, 2017 as the 
First Ex-Dividend Date Thereunder

August 30, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 22, 2017, NASDAQ PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I and II, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend PHLX Rules 431, 432, and 825 to 
conform them to SEA Rule 15c6-1(a) to shorten the standard settlement 
cycle for most broker-dealer transactions from three business days 
after the trade date (``T+3'') to two business days after the trade 
date (``T+2'') and the industry-led initiative to shorten the 
settlement cycle from T+3 to T+2. The proposal also addresses the 
application of these Rules as they relate to establishing ex-dividend 
dates in connection with the implementation of the T+2 settlement cycle 
on September 5, 2017.
    The Exchange requests that the Commission waive the five-day pre-
filing requirement and the 30-day operative delay period contained in 
Exchange Act Rule 19b-4(f)(6)(iii).\3\ While these amendments are 
effective upon filing, the Exchange has designated the proposed 
amendments to be operative on September 5, 2017.
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    \3\ 17 CFR 240.19b-4(f)(6)(iii).
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqphlx.cchwallstreet.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 Exchange 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 these 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Background
    On March 22, 2017, the SEC adopted amendments to SEA Rule 15c6-1(a) 
to shorten the standard settlement cycle for U.S. secondary market 
transactions in equities, corporate and municipal bonds, unit 
investment trusts and financial instruments composed of these products, 
from T+3 to T+2.\4\ The industry-wide initiative is designed to reduce 
a number of risks, including credit risk, market risk, and liquidity 
risk and, as a result, reduce systemic risk for U.S. market 
participants.\5\ The compliance date for the rule amendments is 
September 5, 2017.
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    \4\ See Securities Exchange Act Release No. 80295 (March 22, 
2017), 82 FR 15564 (March 29, 2017) (Securities Transaction 
Settlement Cycle) (File No. S7-22-16) (stating that, as amended, SEA 
Rule 15c6-1(a) will prohibit broker-dealers from effecting or 
entering into a contract for the purchase or sale of a security 
(other than an exempted security, government security, municipal 
security, commercial paper, bankers' acceptances or commercial 
bills) that provides for payment of funds and delivery of securities 
later than the second business day after the date of the contract, 
unless otherwise expressly agreed to by the parties at the time of 
the transaction).
    \5\ See id.
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    The Exchange [sic] proposing changes to its Rules pertaining to 
securities settlement to conform them to SEA Rule 15c6-1(a), as 
amended, and to conform them to similar changes that other exchanges 
have made.\6\
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    \6\ See, e.g., Securities Exchange Act Release No. 34-80640 (May 
16, 2017), 82 FR 22598 (May 10, 2017) (Order Approving File No. SR-
NASDAQ-2017-13).
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    Specifically, the Exchange proposes to amend Rule 431 (Ex-dividend, 
Ex-rights), which presently provides that transactions in stocks 
(except for those made for cash) shall be ex-dividend or ex-rights on 
the second business day preceding the record date fixed by the 
corporation or the date of the closing of transfer books thereof. It 
also provides that if the record date or closing of transfer books 
occurs on a day other than a business day, the transaction will be ex-
dividend or ex-rights on the third preceding business day. The Exchange 
proposes to amend this Rule to provide that: (1) The transactions shall 
be ex-dividend or ex-rights on the first business day preceding the 
record date fixed by the corporation or the date of the closing of 
transfer books thereof; and (2) the transaction will be ex-dividend or 
ex-rights on the second preceding business day if the record date or 
closing of transfer books occurs on a day other than a business day.
    Similarly, the Exchange proposes to amend Rule 432 (Ex-warrants), 
which presently provides that transactions in securities which have 
subscription warrants attached (except those made for cash) shall be 
ex-warrants on the second business day preceding the date of expiration 
of the warrants, except that when the date of expiration occurs on a 
day other than a business day, the transactions will be ex-warrants on 
the third business day preceding the date of expiration. The proposal 
will amend this Rule to provide that transactions in securities which 
have subscription warrants attached (except those made for cash) shall 
be ex-warrants on the first business day preceding the date of 
expiration of the warrants, except that when the date of expiration 
occurs on a day other than a business day, the transactions will be ex-
warrants on the second business day preceding the date of expiration.
    Third, the Exchange proposes to amend Rule 825 (Ex-dividend 
Procedure), which sets forth the ex-dividend rules for transactions in 
securities subject to unlisted trading privileges. The Rule presently 
provides that transactions in stocks (except those made for cash) are 
ex-dividend on the second business day preceding the record date and 
that, if the record date selected is not a business day, then the stock 
will be quoted ex-dividend on the

[[Page 42204]]

third preceding business day. The proposal would amend this Rule by 
providing instead that that transactions in stocks (except those made 
for cash) are ex-dividend on the first business day preceding the 
record date and that, if the record date selected is not a business 
day, then the stock will be quoted ex-dividend on the second preceding 
business day.
    Lastly, the Exchange proposes to implement the foregoing Rules in a 
manner that avoids confusion and accords with the proposals of other 
exchanges and self-regulatory organizations (``SROs''). Consistent with 
the compliance date of the amendments to SEA Rule 15c6-1(a), the 
industry adopted Tuesday, September 5, 2017 as the transition date to 
the T+2 settlement cycle.\7\ In the lead-up to this transition date, 
however, the industry and SROs, including The Depository Trust Company 
(``DTC''), have raised concern that the September 5, 2017 industry-wide 
transition date from T+3 to T+2 will result in September 7, 2017 being 
a ``double'' settlement date for trades that occur on September 1, 2017 
(under T+3 and reflecting the Labor Day holiday on September 4, 2017) 
and trades that occur on September 5, 2017 (under T+2), which generally 
will result in investors who trade on either date being deemed a record 
holder of September 7, 2017.\8\ In order to avoid this confusion about 
the proper settlement date, the Exchange proposes to interpret its 
Rules so that the first record date to which the new ex-dividend date 
determination will be applied will be Thursday, September 7, 2017. The 
ex-dividend dates for ``regular'' distributions during the transition 
to T+2 will be as follows:
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    \7\ See Nasdaq Equity Trader Alert 2017-174 (July 28, 2017).
    \8\ See, e.g., Nasdaq Issuer Alert 2017-001, Changes to Ex-
dividend Procedures Effective September 5, 2017 to Accommodate T+2 
Settlement, http://nasdaq.cchwallstreet.com/nasdaq/pdf/nasdaq-issalerts/2017/2017-001.pdf; NYSE, NYSE MKT, NYSE ARCA: Changes 
Related to the Shortened Settlement Cycle (T+2) (July 11, 2017), 
https://www.nyse.com/trader-update/history#110000069618.
    \9\ The last day of the T+3 settlement cycle.
    \10\ The first day of the T+2 settlement cycle.
    \11\ Monday, September 4, 2017 is Labor Day, a Federal holiday.
    \12\ See id.

------------------------------------------------------------------------
                Record date                            Ex-date
------------------------------------------------------------------------
Friday, September 1, 2017 \9\.............  Wednesday, August 30, 2017.
Tuesday, September 5, 2017 \10\...........  Thursday, August 31,
                                             2017.\11\
Wednesday, September 6, 2017..............  Friday, September 1,
                                             2017.\12\
Thursday, September 7, 2017 \13\..........  Wednesday, September 6,
                                             2017.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\14\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\15\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest.
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    \13\ The date on which previous trades settling on a T+3 
settlement cycle and current trades on the T+2 settlement cycle will 
be processed.
    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change supports the 
[sic] supports [sic] the industry-led initiative to shorten the 
settlement cycle to two business days. Moreover, the proposed rule 
change is consistent with the SEC's amendment to SEA Rule 15c6-1(a) to 
require standard settlement no later than T+2. The Exchange believes 
that the proposed rule change will provide the regulatory certainty to 
facilitate the industry-led move to a T+2 settlement cycle.
    Similarly, the Exchange believes that the proposal to address the 
application of Rules 341 [sic], 342 [sic], and 825 to exclude September 
5, 2017 as an ex-dividend date for distributions supports the 
collective effort among the industry and SROs to mitigate the potential 
confusion concerning proper settlement during the transition from the 
T+3 settlement cycle to the T+2 settlement cycle.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change makes 
changes to rules pertaining to securities settlement and is intended to 
facilitate the implementation of the industry-led transition to a T+2 
settlement cycle. Moreover, the proposed rule changes are consistent 
with the SEC's amendment to SEA Rule 15c6-1(a) to require standard 
settlement no later than T+2.
    Meanwhile, the proposal to interpret the Rules to exclude an ex-
dividend date of September 5, 2017 will minimize potential confusion 
about proper settlement that may arise during the transition to the T+2 
settlement cycle.\16\ The Exchange believes that the proposal would not 
impose any additional costs on the industry.
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    \16\ As a result of the September 5, 2017 transition date for 
regular-way settlement from T+3 to T+2, September 7, 2017 will be a 
``double'' settlement date for trades that occur on September 1, 
2017 (under T+3 and reflecting the Labor Day holiday on September 4, 
2017) and trades that occur on September 5, 2017 (under T+2).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-4(f)(6) 
thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Commission has waived this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\20\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative in time for the compliance date of September 5, 
2017 for the T+2 settlement cycle. The Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest so that the proposed rule change and 
interpretation will be operative as the industry moves to a T+2 
settlement cycle on September 5, 2017. The Commission notes that the 
proposed rule change would amend Exchange rules to conform to the 
amendment that the Commission has adopted to Rule 15c6-1(a) under the 
Act \21\ and support a move to a T+2 standard settlement cycle. The 
Commission further notes that the interpretation regarding the

[[Page 42205]]

proper settlement date in connection with the transition to the T+2 
settlement cycle on September 5, 2017 would help to avoid the confusion 
that could arise if ``regular'' distributions were to be ex-dividend on 
that date and is consistent with the rules of other self-regulatory 
organizations.\22\ Accordingly, the Commission hereby waives the 30-day 
operative delay requirement and designates the proposed rule change as 
operative upon filing.\23\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ See supra note 4.
    \22\ See Securities Exchange Act Release Nos. 81448 (August 21, 
2017), 82 FR 40610 (August 25, 2017) (SR-FINRA-2017-026) and 81446 
(August 21, 2017), 82 FR 40604 (August 25, 2017) (SR-NASDAQ-2017-
084).
    \23\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the 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 to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-Phlx-2017-71 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-Phlx-2017-71. 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 information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2017-71, and should be 
submitted on or before September 27, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-18795 Filed 9-5-17; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices 42203

the proposed transaction is consistent operative delay period contained in 15c6–1(a), as amended, and to conform
with the general purposes of the Act. Exchange Act Rule 19b–4(f)(6)(iii).3 them to similar changes that other
For the Commission, by the Division of While these amendments are effective exchanges have made.6
Investment Management, under delegated upon filing, the Exchange has Specifically, the Exchange proposes to
authority. designated the proposed amendments to amend Rule 431 (Ex-dividend, Ex-
Eduardo A. Aleman, be operative on September 5, 2017. rights), which presently provides that
Assistant Secretary. The text of the proposed rule change transactions in stocks (except for those
[FR Doc. 2017–18777 Filed 9–5–17; 8:45 am]
is available on the Exchange’s Web site made for cash) shall be ex-dividend or
at http://nasdaqphlx.cchwallstreet.com/, ex-rights on the second business day
BILLING CODE 8011–01–P
at the principal office of the Exchange, preceding the record date fixed by the
and at the Commission’s Public corporation or the date of the closing of
SECURITIES AND EXCHANGE Reference Room. transfer books thereof. It also provides
COMMISSION II. Self-Regulatory Organization’s that if the record date or closing of
Statement of the Purpose of, and transfer books occurs on a day other
[Release No. 34–81501; File No. SR–Phlx– than a business day, the transaction will
2017–71] Statutory Basis for, the Proposed Rule
Change be ex-dividend or ex-rights on the third
Self-Regulatory Organizations; preceding business day. The Exchange
In its filing with the Commission, the proposes to amend this Rule to provide
NASDAQ PHLX LLC; Notice of Filing Exchange included statements
and Immediate Effectiveness of that: (1) The transactions shall be ex-
concerning the purpose of and basis for dividend or ex-rights on the first
Proposed Rule Change to Rules 431, the proposed rule change and discussed
432, and 835 To Conform Them to business day preceding the record date
any comments it received on the fixed by the corporation or the date of
Securities Exchange Act Rule 15c6– proposed rule change. The text of these
1(a), Which Shortens the Settlement the closing of transfer books thereof; and
statements may be examined at the (2) the transaction will be ex-dividend
Cycle to Two Dates After the Trade places specified in Item IV below. The
Date, and To Interpret the Amended or ex-rights on the second preceding
Exchange has prepared summaries, set business day if the record date or
Rules To Exclude September 5, 2017 forth in sections A, B, and C below, of
as the First Ex-Dividend Date closing of transfer books occurs on a day
the most significant aspects of such
Thereunder other than a business day.
statements. Similarly, the Exchange proposes to
August 30, 2017. A. Self-Regulatory Organization’s amend Rule 432 (Ex-warrants), which
Pursuant to Section 19(b)(1) of the Statement of the Purpose of, and the presently provides that transactions in
Securities Exchange Act of 1934 Statutory Basis for, the Proposed Rule securities which have subscription
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 Change warrants attached (except those made
notice is hereby given that on August for cash) shall be ex-warrants on the
22, 2017, NASDAQ PHLX LLC (‘‘Phlx’’ 1. Purpose
second business day preceding the date
or ‘‘Exchange’’) filed with the Securities Background of expiration of the warrants, except that
and Exchange Commission (‘‘SEC’’ or On March 22, 2017, the SEC adopted when the date of expiration occurs on
‘‘Commission’’) the proposed rule amendments to SEA Rule 15c6–1(a) to a day other than a business day, the
change as described in Items I and II, shorten the standard settlement cycle transactions will be ex-warrants on the
below, which Items have been prepared third business day preceding the date of
for U.S. secondary market transactions
by the Exchange. The Commission is expiration. The proposal will amend
in equities, corporate and municipal
publishing this notice to solicit this Rule to provide that transactions in
bonds, unit investment trusts and
comments on the proposed rule change securities which have subscription
financial instruments composed of these
from interested persons. warrants attached (except those made
products, from T+3 to T+2.4 The
I. Self-Regulatory Organization’s industry-wide initiative is designed to for cash) shall be ex-warrants on the
Statement of the Terms of Substance of reduce a number of risks, including first business day preceding the date of
the Proposed Rule Change credit risk, market risk, and liquidity expiration of the warrants, except that
risk and, as a result, reduce systemic when the date of expiration occurs on
The Exchange proposes to amend
risk for U.S. market participants.5 The a day other than a business day, the
PHLX Rules 431, 432, and 825 to
compliance date for the rule transactions will be ex-warrants on the
conform them to SEA Rule 15c6–1(a) to
amendments is September 5, 2017. second business day preceding the date
shorten the standard settlement cycle
The Exchange [sic] proposing changes of expiration.
for most broker-dealer transactions from Third, the Exchange proposes to
three business days after the trade date to its Rules pertaining to securities
settlement to conform them to SEA Rule amend Rule 825 (Ex-dividend
(‘‘T+3’’) to two business days after the Procedure), which sets forth the ex-
trade date (‘‘T+2’’) and the industry-led 3 17 dividend rules for transactions in
CFR 240.19b–4(f)(6)(iii).
initiative to shorten the settlement cycle 4 See securities subject to unlisted trading
Securities Exchange Act Release No. 80295
from T+3 to T+2. The proposal also (March 22, 2017), 82 FR 15564 (March 29, 2017) privileges. The Rule presently provides
addresses the application of these Rules (Securities Transaction Settlement Cycle) (File No.
that transactions in stocks (except those
as they relate to establishing ex- S7–22–16) (stating that, as amended, SEA Rule
made for cash) are ex-dividend on the
asabaliauskas on DSKBBXCHB2PROD with NOTICES

dividend dates in connection with the 15c6–1(a) will prohibit broker-dealers from
effecting or entering into a contract for the purchase second business day preceding the
implementation of the T+2 settlement or sale of a security (other than an exempted record date and that, if the record date
cycle on September 5, 2017. security, government security, municipal security,
selected is not a business day, then the
The Exchange requests that the commercial paper, bankers’ acceptances or
commercial bills) that provides for payment of stock will be quoted ex-dividend on the
Commission waive the five-day pre-
funds and delivery of securities later than the
filing requirement and the 30-day second business day after the date of the contract, 6 See, e.g., Securities Exchange Act Release No.
unless otherwise expressly agreed to by the parties 34–80640 (May 16, 2017), 82 FR 22598 (May 10,
1 15 U.S.C. 78s(b)(1). at the time of the transaction). 2017) (Order Approving File No. SR–NASDAQ–
2 17 CFR 240.19b–4. 5 See id. 2017–13).

VerDate Sep<11>2014 17:37 Sep 05, 2017 Jkt 241001 PO 00000 Frm 00148 Fmt 4703 Sfmt 4703 E:\FR\FM\06SEN1.SGM 06SEN1
42204 Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices

third preceding business day. The 2. Statutory Basis The Exchange believes that the proposal
proposal would amend this Rule by The Exchange believes that its would not impose any additional costs
providing instead that that transactions proposal is consistent with Section 6(b) on the industry.
in stocks (except those made for cash) of the Act,14 in general, and furthers the C. Self-Regulatory Organization’s
are ex-dividend on the first business day objectives of Section 6(b)(5) of the Act,15 Statement on Comments on the
preceding the record date and that, if in particular, in that it is designed to Proposed Rule Change Received From
the record date selected is not a promote just and equitable principles of
business day, then the stock will be Members, Participants, or Others
trade, to remove impediments to and
quoted ex-dividend on the second perfect the mechanism of a free and No written comments were either
preceding business day. open market and a national market solicited or received.
Lastly, the Exchange proposes to system, and, in general to protect III. Date of Effectiveness of the
implement the foregoing Rules in a investors and the public interest. Proposed Rule Change and Timing for
manner that avoids confusion and The Exchange believes that the Commission Action
accords with the proposals of other proposed rule change supports the [sic]
exchanges and self-regulatory Because the proposed rule change
supports [sic] the industry-led initiative
organizations (‘‘SROs’’). Consistent with does not (i) significantly affect the
to shorten the settlement cycle to two
the compliance date of the amendments protection of investors or the public
business days. Moreover, the proposed
to SEA Rule 15c6–1(a), the industry interest; (ii) impose any significant
rule change is consistent with the SEC’s
adopted Tuesday, September 5, 2017 as burden on competition; and (iii) become
amendment to SEA Rule 15c6–1(a) to
the transition date to the T+2 settlement operative for 30 days from the date on
require standard settlement no later
cycle.7 In the lead-up to this transition which it was filed, or such shorter time
than T+2. The Exchange believes that
date, however, the industry and SROs, as the Commission may designate, the
the proposed rule change will provide
including The Depository Trust proposed rule change has become
the regulatory certainty to facilitate the
Company (‘‘DTC’’), have raised concern effective pursuant to Section 19(b)(3)(A)
industry-led move to a T+2 settlement
that the September 5, 2017 industry- of the Act 17 and Rule 19b–4(f)(6)
cycle.
wide transition date from T+3 to T+2 Similarly, the Exchange believes that thereunder.18
will result in September 7, 2017 being A proposed rule change filed under
the proposal to address the application
a ‘‘double’’ settlement date for trades Rule 19b–4(f)(6) 19 normally does not
of Rules 341 [sic], 342 [sic], and 825 to
that occur on September 1, 2017 (under become operative for 30 days after the
exclude September 5, 2017 as an ex-
T+3 and reflecting the Labor Day date of filing. However, pursuant to
dividend date for distributions supports
holiday on September 4, 2017) and Rule 19b–4(f)(6)(iii),20 the Commission
the collective effort among the industry
trades that occur on September 5, 2017 may designate a shorter time if such
and SROs to mitigate the potential
(under T+2), which generally will result action is consistent with the protection
confusion concerning proper settlement
in investors who trade on either date of investors and the public interest. The
during the transition from the T+3
being deemed a record holder of Exchange has asked the Commission to
settlement cycle to the T+2 settlement
September 7, 2017.8 In order to avoid waive the 30-day operative delay so that
cycle.
this confusion about the proper the proposal may become operative in
settlement date, the Exchange proposes B. Self-Regulatory Organization’s time for the compliance date of
to interpret its Rules so that the first Statement on Burden on Competition September 5, 2017 for the T+2
record date to which the new ex- The Exchange does not believe that settlement cycle. The Commission
dividend date determination will be the proposed rule change will impose believes that waiving the 30-day
applied will be Thursday, September 7, any burden on competition not operative delay is consistent with the
2017. The ex-dividend dates for necessary or appropriate in furtherance protection of investors and the public
‘‘regular’’ distributions during the of the purposes of the Act. The interest so that the proposed rule change
transition to T+2 will be as follows: proposed rule change makes changes to and interpretation will be operative as
rules pertaining to securities settlement the industry moves to a T+2 settlement
Record date Ex-date
and is intended to facilitate the cycle on September 5, 2017. The
Friday, September 1, Wednesday, August 30, implementation of the industry-led Commission notes that the proposed
2017 9. 2017.
transition to a T+2 settlement cycle. rule change would amend Exchange
Tuesday, September 5, Thursday, August 31, rules to conform to the amendment that
2017 10. 2017.11 Moreover, the proposed rule changes are
Wednesday, September Friday, September 1, consistent with the SEC’s amendment to the Commission has adopted to Rule
6, 2017. 2017.12 SEA Rule 15c6–1(a) to require standard 15c6–1(a) under the Act 21 and support
Thursday, September 7, Wednesday, September
settlement no later than T+2. a move to a T+2 standard settlement
2017 13. 6, 2017. cycle. The Commission further notes
Meanwhile, the proposal to interpret
the Rules to exclude an ex-dividend that the interpretation regarding the
7 See Nasdaq Equity Trader Alert 2017–174 (July
date of September 5, 2017 will minimize
28, 2017). potential confusion about proper September 4, 2017) and trades that occur on
8 See, e.g., Nasdaq Issuer Alert 2017–001, Changes September 5, 2017 (under T+2).
to Ex-dividend Procedures Effective September 5,
settlement that may arise during the 17 15 U.S.C. 78s(b)(3)(A).

2017 to Accommodate T+2 Settlement, http:// transition to the T+2 settlement cycle.16 18 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
nasdaq.cchwallstreet.com/nasdaq/pdf/nasdaq- 4(f)(6)(iii) requires the Exchange to give the
asabaliauskas on DSKBBXCHB2PROD with NOTICES

issalerts/2017/2017-001.pdf; NYSE, NYSE MKT, 13 The date on which previous trades settling on Commission written notice of the Exchange’s intent
NYSE ARCA: Changes Related to the Shortened a T+3 settlement cycle and current trades on the to file the proposed rule change, along with a brief
Settlement Cycle (T+2) (July 11, 2017), https:// T+2 settlement cycle will be processed. description and text of the proposed rule change,
www.nyse.com/trader-update/ 14 15 U.S.C. 78f(b). at least five business days prior to the date of filing
history#110000069618. 15 15 U.S.C. 78f(b)(5). of the proposed rule change, or such shorter time
9 The last day of the T+3 settlement cycle. as designated by the Commission. The Commission
16 As a result of the September 5, 2017 transition
10 The first day of the T+2 settlement cycle.
date for regular-way settlement from T+3 to T+2, has waived this requirement.
11 Monday, September 4, 2017 is Labor Day, a 19 17 CFR 240.19b–4(f)(6).
September 7, 2017 will be a ‘‘double’’ settlement
Federal holiday. date for trades that occur on September 1, 2017 20 17 CFR 240.19b–4(f)(6)(iii).
12 See id. (under T+3 and reflecting the Labor Day holiday on 21 See supra note 4.

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Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices 42205

proper settlement date in connection with respect to the proposed rule certain affiliated persons thereof.’’ It
with the transition to the T+2 settlement change that are filed with the provides an exemption from section
cycle on September 5, 2017 would help Commission, and all written 17(a) of the Act for purchases and sales
to avoid the confusion that could arise communications relating to the of securities between registered
if ‘‘regular’’ distributions were to be ex- proposed rule change between the investment companies (‘‘funds’’), that
dividend on that date and is consistent Commission and any person, other than are affiliated persons (‘‘first-tier
with the rules of other self-regulatory those that may be withheld from the affiliates’’) or affiliated persons of
organizations.22 Accordingly, the public in accordance with the affiliated persons (‘‘second-tier
Commission hereby waives the 30-day provisions of 5 U.S.C. 552, will be affiliates’’), or between a fund and a
operative delay requirement and available for Web site viewing and first- or second-tier affiliate other than
designates the proposed rule change as printing in the Commission’s Public another fund, when the affiliation arises
operative upon filing.23 Reference Room, 100 F Street NE., solely because of a common investment
At any time within 60 days of the Washington, DC 20549, on official adviser, director, or officer. Rule 17a–7
filing of the proposed rule change, the business days between the hours of requires funds to keep various records
Commission summarily may 10:00 a.m. and 3:00 p.m. Copies of the in connection with purchase or sale
temporarily suspend such rule change if filing also will be available for transactions effected in reliance on the
it appears to the Commission that such inspection and copying at the principal rule. The rule requires the fund’s board
action is necessary or appropriate in the office of the Exchange. All comments of directors to establish procedures
public interest, for the protection of received will be posted without change; reasonably designed to ensure that the
investors, or otherwise in furtherance of the Commission does not edit personal rule’s conditions have been satisfied.
the purposes of the Act. If the identifying information from The board is also required to determine,
Commission takes such action, the submissions. You should submit only at least on a quarterly basis, that all
Commission shall institute proceedings information that you wish to make affiliated transactions effected during
to determine whether the proposed rule available publicly. All submissions the preceding quarter in reliance on the
should be approved or disapproved. should refer to File Number SR–Phlx– rule were made in compliance with
IV. Solicitation of Comments 2017–71, and should be submitted on or these established procedures. If a fund
before September 27, 2017. enters into a purchase or sale
Interested persons are invited to transaction with an affiliated person, the
For the Commission, by the Division of
submit written data, views, and Trading and Markets, pursuant to delegated rule requires the fund to compile and
arguments concerning the foregoing, authority.24 maintain written records of the
including whether the proposed rule Eduardo A. Aleman, transaction.1 The Commission’s
change is consistent with the Act. examination staff uses these records to
Assistant Secretary.
Comments may be submitted by any of evaluate for compliance with the rule.
[FR Doc. 2017–18795 Filed 9–5–17; 8:45 am]
the following methods: While most funds do not commonly
BILLING CODE 8011–01–P
Electronic Comments engage in transactions covered by rule
17a–7, the Commission staff estimates
• Use the Commission’s Internet that nearly all funds have adopted
comment form (http://www.sec.gov/ SECURITIES AND EXCHANGE
COMMISSION procedures for complying with the
rules/sro.shtml); or rule.2 Of the approximately 3,243
• Send an email to rule-comments@ currently active funds, the staff
sec.gov. Please include File Number SR– Proposed Collection; Comment
Request estimates that virtually all have already
Phlx–2017–71 on the subject line. adopted procedures for compliance with
Paper Comments Upon Written Request, Copies Available rule 17a–7. This is a one-time burden,
From: Securities and Exchange and the staff therefore does not estimate
• Send paper comments in triplicate Commission, Office of FOIA Services,
to Secretary, Securities and Exchange an ongoing burden related to the
100 F Street NE., Washington, DC policies and procedures requirement of
Commission, 100 F Street NE., 20549–2736.
Washington, DC 20549–1090. the rule for funds.3 The staff estimates
Extension: that there are approximately 97 new
All submissions should refer to File Rule 17a–7, SEC File No. 270–238, OMB funds that register each year, and that
Number SR–Phlx–2017–71. This file Control No. 3235–0214. each of these funds adopts the relevant
number should be included on the
Notice is hereby given that, pursuant policies and procedures. The staff
subject line if email is used. To help the
to the Paperwork Reduction Act of 1995 estimates that it takes approximately 4
Commission process and review your
(44 U.S.C. 3501–3520), the Securities hours to develop and adopt these
comments more efficiently, please use
and Exchange Commission policies and procedures. Therefore, the
only one method. The Commission will
(‘‘Commission’’) is soliciting comments
post all comments on the Commission’s
on the collections of information 1 The written records are required to set forth a
Internet Web site (http://www.sec.gov/ description of the security purchased or sold, the
summarized below. The Commission
rules/sro.shtml). Copies of the identity of the person on the other side of the
plans to submit the existing collection transaction, and the information or materials upon
submission, all subsequent
of information to the Office of which the board of directors’ determination that the
amendments, all written statements
Management and Budget for extension transaction was in compliance with the procedures
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and approval. was made.
22 See Securities Exchange Act Release Nos. 2 Unless stated otherwise, these estimates are
81448 (August 21, 2017), 82 FR 40610 (August 25, Rule 17a–7 (17 CFR 270.17a–7) (the based on conversations with the examination and
2017) (SR–FINRA–2017–026) and 81446 (August ‘‘rule’’) under the Investment Company inspections staff of the Commission and fund
21, 2017), 82 FR 40604 (August 25, 2017) (SR– Act of 1940 (15 U.S.C. 80a–1 et seq.) representatives.
NASDAQ–2017–084). (the ‘‘Act’’) is entitled ‘‘Exemption of 3 Based on our reviews and conversations with
23 For purposes only of waiving the 30-day fund representatives, we understand that funds
certain purchase or sale transactions
operative delay, the Commission has also rarely, if ever, need to make changes to these
considered the proposed rule’s impact on between an investment company and policies and procedures once adopted, and
efficiency, competition, and capital formation. See therefore we do not estimate a paperwork burden
15 U.S.C. 78c(f). 24 17 CFR 200.30–3(a)(12). for such updates.

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Document Created: 2017-09-06 00:56:40
Document Modified: 2017-09-06 00:56:40
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 42203