82 FR 46554 - Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 6.45 Relating to Disaster Recovery
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 192 (October 5, 2017)
Federal Register Volume 82, Issue 192 (October 5, 2017)
| Page Range | 46554-46558 | |
| FR Document | 2017-21405 |
[Federal Register Volume 82, Number 192 (Thursday, October 5, 2017)] [Notices] [Pages 46554-46558] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-21405] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81768; File No. SR-C2-2017-025] Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 6.45 Relating to Disaster Recovery September 29, 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 September 20, 2017, C2 Options Exchange, Incorporated (``Exchange'' or ``C2'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ``non-controversial'' proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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\ 17 CFR 240.19b-4. \3\ 15 U.S.C. 78s(b)(3)(A)(iii). \4\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 6.45 relating to disaster recovery. The text of the proposed rule change is also available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the Secretary, 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 [[Page 46555]] 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 C2 adopted Rule 6.45 in 2012 for the limited purpose of providing alternative means of operation in the event C2's trading system became inoperable or otherwise unavailable for use due to a disaster or other unusual circumstance. In particular, Rule 6.45, as originally adopted, was intended to allow C2 to operate a ``Disaster Recovery Facility'' (``DRF'') to continue to trade exclusively listed option classes until C2's main trading system was again available.\5\ C2 utilizes hardware located in the Chicago Board Options Exchange, Incorporated (``CBOE'') building in Chicago, IL, for the purposes of operating the DRF. C2's main trading engine is located on the East coast. --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release No. 67357 (July 5, 2012), 77 FR 40928 (July 11, 2012) (Order Granting Approval of Proposed Rule Change to Implement a Disaster Recovery Facility) (SR- C2-2012-011). C2 notes it no longer has any exclusively listed option products. --------------------------------------------------------------------------- In 2015, Rule 6.45 was amended to add greater detail to C2's disaster recovery rules and harmonize the disaster recovery rules with newly implemented disaster recovery-related regulatory imperatives of Regulation Systems Compliance and Integrity (``Regulation SCI''), which superseded and replaced the SEC's voluntary Automation Review Policy.\6\ In doing so, C2 made certain changes to Rule 6.45 to provide additional details regarding the Exchange's back-up trading systems, business continuity and disaster recovery plans, and testing and update its disaster recovery rules to ensure consistency with Regulation SCI. --------------------------------------------------------------------------- \6\ See Securities Exchange Act Release No. 76300 (October 4, 2015), 80 FR 68343 (October 28, 2015) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Amending Rule 6.45 Relating to Disaster Recovery) (SR-C2-2015-030); see also Securities Exchange Act Release Nos. 73639 (November 19, 2014), 79 FR at 72252 (December 5, 2014) (Regulation Systems Compliance and Integrity) (File No. S7-01-13); 27445 (November 16, 1989), 54 FR 48703 (November 24, 1989) (Automated Systems of Self-Regulatory Organizations) (File No. S7-29-89); 29185 (May 9, 1991), 56 FR 22490 (May 15, 1991) (Automated Systems of Self-Regulatory Organizations) (File No. S7-12-91). --------------------------------------------------------------------------- C2 now proposes to make additional changes to its disaster recovery rules to provide C2 the authority to take additional steps necessary to preserve the C2's ability to conduct business in the event that C2's primary and/or back-up data center(s) become inoperable or otherwise unavailable for use due to a significant systems failure, disaster or other unusual circumstances and make clear in the Rules the intermediary steps that C2 may take to disable certain systems and users' connectivity while continuing to operate its primary data center. C2 believes this authority serves the interests of all investors and the general public, because it helps C2 ensure its continuous operation and ability to maintain fair and orderly markets in the event of a significant systems failure or other unusual circumstance. Proposal C2 proposes to amend Rule 6.45 relating to disaster recovery. Specifically, the Exchange proposes to make changes to Rule 6.45 to: (1) Allow C2 to establish certain additional temporary requirements applicable to particular Designated BCP/DR Participants \7\ during use of the back-up data center; (2) permit C2 to deactivate certain nonessential systems and systems functionalities in response to limited systems disruptions or malfunctions, security intrusions, systems compliance issues, or other unusual circumstances; and (3) permit C2 to restrict access of a Permit Holder or associated person to the System if such access poses a significant threat to C2's ability to operate systems essential to maintain a fair and orderly market. --------------------------------------------------------------------------- \7\ Under Rule 6.45(b)(iv)(A), C2 shall designate those Permit Holders that C2 reasonably determines are, taken as a whole, the minimum necessary for the maintenance of fair and orderly markets in the event of the activation of C2's business continuity and disaster recovery plans (``Designated BCP/DR Participants''). Designated BCP/ DR Participants will include all C2 Market-Makers and all C2 Permit Holders connected to the C2 primary data center and transacting non- Participant customer business, unless a C2 Permit Holder, other than a C2 Market-Maker, can demonstrate ready access to the back-up data center through another C2 Permit Holder that is a designated participant. As further discussed below, temporary requirements may be imposed on C2 Market-Makers during use of the back-up data center. --------------------------------------------------------------------------- C2 proposes to add new Rule 6.45(b)(iv)(B) (Alternative BCP/DR Participant Obligations), which would provide that during the use of the back-up data center, C2 may, if necessary for the maintenance of fair and orderly markets, establish heightened quoting obligations for Designated BCP/DR Participants in a class in which the Designated BCP/ DR Participant is already an appointed Market-Maker up to the standards specified for Designated Primary Market-Makers (``DPMs'') in Rule 8.17(a) \8\ and/or disallow the ability to deselect an appointment intraday in a class in which the Designated BCP/DR Participant is already an appointed Market-Maker.\9\ Proposed Rule 6.45(b)(iv)(B) would also provide that C2 would notify market participants of any such additional temporary requirements prior to implementation in a reasonable manner as determined by [[Page 46556]] C2.\10\ C2 believes this extended authority would afford C2 with necessary flexibility to address unexpected contingencies that may arise if a disaster or other unusual circumstances occur, causing C2 to use the back-up data center and help ensure that C2 operates a fair and orderly market in the event of a market emergency. C2 also proposes non-substantive changes to the lettering in paragraph (b)(iv) to accommodate the addition of new Rule 6.45(b)(iv)(B). Accordingly, current Rule 6.45(b)(iv)(B) would become Rule 6.45(b)(iv)(C), and current Rule 6.45(b)(iv)(C) would become Rule 6.45(b)(iv)(D). --------------------------------------------------------------------------- \8\ Currently, under Rule 8.17(a)(i), for example, DPMs must provide continuous quotes in at least the lesser of 99% of the non- adjusted option series (as defined in Rule 8.5(a)(1)) or 100% of the non-adjusted option series minus one call-put pair with the term ``call-put pair'' referring to one call and one put that cover the same underlying instrument and have the same expiration date and exercise price, and assure that its disseminated market quotations are accurate. This obligation does not apply to intra-day add-on series on the day during which such series are added for trading. For purposes of Rule 8.17(a)(1), ``continuous'' means 90% of the time. If a technical failure or limitation of the System prevents a DPM from maintaining, or from communicating to C2, timely and accurate quotes in a series, the duration of such failure shall not be considered in determining whether that DPM has satisfied the 90% quoting standard with respect to the series. C2 may consider other exceptions to this obligation based on demonstrated legal or regulatory requirements or other mitigating circumstances. Compliance with this quoting obligation applies to all of a DPM's allocated classes collectively. C2 will determine compliance by a DPM with this quoting obligation on a monthly basis. However, determining compliance with this obligation on a monthly basis does not relieve a DPM from meeting this obligation on a daily basis, nor does it prohibit C2 from taking disciplinary action against DPM for failing to meet this obligation each trading day. See Rule 8.17(a)(1). Accordingly, under proposed Rule 6.45(b)(iv)(B), during use of the back-up data center, C2 could require that Market-Makers in AAPL provide continuous electronic quotes in up to 99% of the non-adjusted option series or 100% of the non-adjusted option serious minus one call-put pair. \9\ In accordance with Rule 1001(a)(2)(v) of Regulation SCI, C2 maintains written policies and procedures reasonably designed to ensure that its trading systems (including with respect to both C2's primary and back-up data center trading systems), have levels of capacity, integrity, resiliency, availability, and security adequate to maintain C2's operational capability and promote the maintenance of fair and orderly markets, including, but not limited to business continuity and disaster recovery plans that are reasonably designed to achieve next two-hour resumption of its critical SCI systems, as defined in Rule 1000 of Regulation SCI. See Securities Exchange Act Release No. 73639 (November 19, 2014), 79 FR 72252 (December 5, 2014) (Regulation Systems Compliance and Integrity) (File No. S7-01- 13). Notably, C2 employs business continuity and disaster recovery standards reasonably designed to achieve two-hour resumption of all trading systems that are essential to conducting business on C2 and which C2 believes are reasonably designed to support resumption in a significantly shorter amount of time, including, but not limited to with respect to those systems that are essential to the trading of proprietary products and products exclusively licensed for trading on the Exchange. \10\ C2 would make these notifications on the Systems Notification page on C2's Web site, via an Exchange-used messaging service, and/or other reasonable notification mechanisms. --------------------------------------------------------------------------- C2 also proposes to add Rule 6.45(c) (Deactivation of Certain Systems), which would provide that in the event of a systems disruption or malfunction, security intrusion, systems compliance issue, or other unusual circumstances, C2 may, in accordance with the Rules or if necessary to maintain fair and orderly markets or to protect investors, temporarily deactivate certain systems or systems functionalities that are not essential to conducting business on C2. Many of the systems and systems functionalities described in the Rules are provided optionally by C2 to enhance participants' trading experience, but are not required to be active under the Rules and are not necessary for C2 to conduct business.\11\ As is described in the Rules, many of the C2's systems functionalities may be made available (or unavailable) by C2 on a class-by-class basis. Such systems and systems functionalities that are non-essential to conducting business on C2 include, but are not limited to, the Automated Improvement Mechanism (AIM) \12\ and the Solicitation Auction Mechanism (SAM).\13\ --------------------------------------------------------------------------- \11\ See, e.g., Rules 6.10, 6.11, 6.13, 6.14, 6.17, 6.18, 6.51, and 6.52. \12\ See generally Rule 6.51. \13\ See generally Rule 6.52. --------------------------------------------------------------------------- In addition, the activation of other functionalities may not be described by the Rule, but could be suspended temporarily (e.g., until the earlier of the end of a trading session or until systems disruptions could be remedied) if disruption or malfunction of that functionality were to interfere with the C2's ability to conduct business in a fair and orderly manner. For example, if a certain order type were to cause a wider system malfunction or a certain complex order product could not be created without triggering widespread systems issues,\14\ C2 might announce, via its systems status page or otherwise, the suspension of the availability of that order type or complex product. If such an event impacts a non-essential system or system functionality, C2 may deem it necessary to maintain fair and orderly markets to deactivate that system or functionality until any issues are resolved to prevent any potential harm to investors. Proposed Rule 6.45(c) would also provide that C2 would notify market participants of any such deactivation, and subsequent reactivation, promptly and in a reasonable manner determined by the Exchange. C2 may make these notifications on the Systems Notification page on C2's Web site, via an Exchange-used messaging service such as SendWordNow,\15\ Regulatory Circular, and/or other reasonable notification mechanisms. --------------------------------------------------------------------------- \14\ For example, if the creation of a certain complex order product (e.g., the October/November calendar spread in class XYZ) were to cause significant trading disruptions in an entire class (e.g., trading in all of XYZ), C2 might determine to turn off calendar spreads or complex orders in general in the class in order to help ensure that regular trading (i.e., trading of simple orders) in the class remained available. \15\ See C2 Regulatory Circular RG15-036 RG (Send Word Now Smart Notification Services); see also C2 Regulatory Circular RG15-037. --------------------------------------------------------------------------- Finally, C2 proposes Rule 6.45(d) (Connectivity Restriction), which would permit C2 to temporarily restrict a Permit Holder's or associated person's access to the trading system if it is determined by the President (or senior-level designee) of C2, that because of a systems issue, such access threatens C2's ability to operate systems essential to the maintenance of fair and orderly markets.\16\ Such access would remain restricted until the end of the trading session or an earlier time if the President (or senior-level designee) of C2, in consultation with the affected Permit Holder(s), determines that lifting the restriction no longer poses a threat to C2's ability to operate systems essential to conducting business or continuing to maintain a fair and orderly market on C2 or to investors.\17\ In the current electronic trading environment, if a Permit Holder's systems malfunctions or is compromised, it could disrupt C2's systems or market or harm other investors. For example, software malfunctions may pose a risk to C2's systems, investors, and the general public without proper risk controls. Proposed Rule 6.45(d) would simply give C2 the authority to activate additional risk controls to stem the access of a Permit Holder that has experienced a systems disruption or malfunction, which poses undue risk to C2. --------------------------------------------------------------------------- \16\ In such cases, C2 would make efforts to contact the affected Permit Holder immediately before or contemporaneously with the restriction of access to the system to the extent possible while protecting C2's ability to operate systems essential to the maintenance of fair and orderly markets. \17\ In determining whether a Permit Holder's access threatens C2's ability to operate systems essential to the maintenance of fair and orderly markets and/or determining that lifting the restriction no longer poses a threat to C2's ability to operate systems essential to conducting business or continuing to maintain a fair and orderly market on the Exchange or to investors, a designee of the President of C2 would only be charged with making such determinations in the President of C2's absence. In such cases, the designee would be a senior executive (i.e. Vice President or above) of C2. --------------------------------------------------------------------------- 2. Statutory Basis C2 believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to C2 and, in particular, the requirements of Section 6(b) of the Act.\18\ Specifically, C2 believes the proposed rule change is consistent with the Section 6(b)(5) \19\ requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Additionally, C2 believes the proposed rule change is consistent with the Section 6(b)(5) \20\ requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \18\ 15 U.S.C. 78f(b). \19\ 15 U.S.C. 78f(b)(5). \20\ Id. --------------------------------------------------------------------------- The proposed rule change is designed to promote C2's ability to ensure the continued operation of a fair and orderly market in the event of a systems failure, disaster, or other unusual circumstances that might threaten the ability to conduct business on C2. C2 recognizes that switching operations to the back-up data center may occur in times of uncertainty or great volatility in the markets. It is at these times that the investors may have the greatest need for viable, trustworthy marketplaces. The proposed rule change seeks to ensure that such a marketplace will exist when most needed, and thus, C2 believes that the proposed rule protects investors in the most fundamental sense. [[Page 46557]] In particular, C2 believes that proposed Rule 6.45(b)(iv)(B) allowing C2, during the use of the back-up data center to (1) establish heightened quoting obligations for Designated BCP/DR Participants in a class in which the Designated BCP/DR Participant is already an appointed Market-Maker up to the standards specified for DPMs specified in Rule 8.17(a) and/or (2) disallow the ability to deselect an appointment intraday in a class in which the Designated BCP/DR Participant is already an appointed Market-Maker would help ensure the maintenance of a fair and orderly market in the event of a disaster, which is in the interests of all market participants, investors, and the general public. C2 believes that adopting rules that help ensure that markets are open and available during times of turmoil and emergency is an important goal consistent with the Act. C2 also believes that deactivation of certain systems in proposed Rule 6.45(c), whether by rule or otherwise, in order to ensure that C2 is able to provide a fair and orderly market in the face of systems disruptions and malfunction is in the best interests of market participants, investors, and the general public. Similarly, C2 believes that the proposed connectivity restriction in proposed Rule 6.45(d) would help ensure that C2 remains open and available to all market participants. C2 notes that other connectivity restrictions are already in place on the Exchange.\21\ Furthermore, C2 believes that proposed Rule 6.45(d) is consistent with Section 6(b)(7) \22\ of the Act, which requires C2 to adopt rules that provide a fair procedure for the disciplining of members and persons associated with members, the denial of membership to any person seeking membership therein, the barring of any person from becoming associated with a member thereof, and the prohibition or limitation by the exchange of any person with respect to access to services offered by the exchange or a member thereof. C2 notes that proposed Rule 6.45(d) is not aimed at denying access to a particular Permit Holder, but rather making sure that C2 remains accessible to all other Permit Holders that do not threaten C2's ability to conduct normal business operations. C2 notes that as soon as the President of C2 (or designee), working with the Permit Holder organization that poses a threat to C2, were able to confirm that the Permit Holder organization no longer posed such a threat, access to C2 would be restored to that Permit Holder. C2 believes that this is a fair result and is in the best interests of all market participants, investors, and the general public. --------------------------------------------------------------------------- \21\ See, e.g., Rules 6.34 (Participant Electronic Connectivity) and 6.48 (Technical Disconnect). Under Rule 6.34(b), C2 may limit the number of messages sent by Participants accessing C2 electronically in order to protect the integrity of the System. In addition, C2 may impose restrictions on the use of a computer connected through an application programming interface (``API'') if it believes such restrictions are necessary to ensure the proper performance of the system. Any such restrictions shall be objectively determined and submitted to the Commission for approval pursuant to a rule change filing under Section 19(b) of the Exchange Act. Under Rule 6.48(a), when a CBOE Application Server (``CAS'') loses communication with a Client Application such that a CAS does not receive an appropriate response to a Heartbeat Request within ``x'' period of time, the Technical Disconnect Mechanism will automatically logoff the Permit Holder's affected Client Application and automatically cancel all the Permit Holder's Market-Maker quotes, if applicable, and open orders with a time-in-force of ``day'' resting in the Book (``day orders''), if the Permit Holder enables that optional service, posted through the affected Client Application. \22\ 15 U.S.C. 78f(b)(7). --------------------------------------------------------------------------- C2 also believes that the proposed rule change promotes just and equitable principles of trade by adding detail and clarity to the Rules. The proposed rule change seeks to provide additional clarity to C2's disaster recovery rules, putting all market participants on notice as to how C2 will function in case of significant systems disruption or other disaster situation. C2 is continuously updating the Rules to provide additional detail, clarity, and transparency regarding its operations and trading systems and regulatory authority. C2 believes that the adoption of detailed, clear, and transparent rules reduces burdens on competition and promotes just and equitable principles of trade. C2 also believes that adding greater detail to the Rules regarding C2's ability to ensure the continuous operation of the market and preserve the ability to conduct business on C2 will increase confidence in the markets and encourage wider participation in the markets and greater investment. B. Self-Regulatory Organization's Statement on Burden on Competition C2 does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the proposed rule change will help ensure that competitive markets remain operative in the event of a systems failure or other disaster event. C2 notes that the proposed rule change is designed to provide C2 with authority to require market participants to participate in, and provide necessary liquidity to, the market to ensure that C2 functions in a fair and orderly manner in the event of a significant systems failure, disaster, or other unusual circumstances. Accordingly, C2 believes that the proposed rule change is designed to ensure fair and competitive markets at time when they may be most needed. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others C2 neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: A. Significantly affect the protection of investors or the public interest; B. impose any significant burden on competition; and C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act \23\ and Rule 19b-4(f)(6) \24\ thereunder. 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 will institute proceedings to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \23\ 15 U.S.C. 78s(b)(3)(A). \24\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- 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-C2-2017-025 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. [[Page 46558]] All submissions should refer to File Number SR-C2-2017-025. 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-C2-2017-025, and should be submitted on or before October 26, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\25\ --------------------------------------------------------------------------- \25\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-21405 Filed 10-4-17; 8:45 am] BILLING CODE 8011-01-P
![46554 Federal Register / Vol. 82, No. 192 / Thursday, October 5, 2017 / Notices
the implementation date for such change should be approved or For the Commission, by the Division of
amendments be extended. disapproved. Trading and Markets, pursuant to delegated
authority.13
III. Date of Effectiveness of the IV. Solicitation of Comments Eduardo A. Aleman,
Proposed Rule Change and Timing for Assistant Secretary.
Commission Action Interested persons are invited to
submit written data, views, and [FR Doc. 2017–21410 Filed 10–4–17; 8:45 am]
Because the foregoing proposed rule
change does not: (i) Significantly affect arguments concerning the foregoing, BILLING CODE 8011–01–P
the protection of investors or the public including whether the proposed rule
interest; (ii) impose any significant change is consistent with the Act.
Comments may be submitted by any of SECURITIES AND EXCHANGE
burden on competition; and (iii) become COMMISSION
operative for 30 days from the date on the following methods:
which it was filed, or such shorter time [Release No. 34–81768; File No. SR–C2–
Electronic Comments 2017–025]
as the Commission may designate, it has
become effective pursuant to Section • Use the Commission’s Internet
Self-Regulatory Organizations; C2
19(b)(3)(A) of the Act and Rule 19b– comment form (http://www.sec.gov/
Options Exchange, Incorporated;
4(f)(6) thereunder.9 rules/sro.shtml); or
Notice of Filing and Immediate
A proposed rule change filed • Send an email to rule-comments@ Effectiveness of a Proposed Rule
pursuant to Rule 19b–4(f)(6) under the sec.gov. Please include File Number SR– Change To Amend Rule 6.45 Relating
Act 10 normally does not become NYSEArca–2017–115 on the subject to Disaster Recovery
operative for 30 days after the date of its line.
filing. However, Rule 19b–4(f)(6)(iii) 11 September 29, 2017.
permits the Commission to designate a Paper Comments Pursuant to Section 19(b)(1) of the
shorter time if such action is consistent Securities Exchange Act of 1934
with the protection of investors and the • Send paper comments in triplicate
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
public interest. The Exchange has asked to Secretary, Securities and Exchange
notice is hereby given that on
the Commission to waive the 30-day Commission, 100 F Street NE.,
September 20, 2017, C2 Options
operative delay so that the proposal may Washington, DC 20549–1090.
Exchange, Incorporated (‘‘Exchange’’ or
become operative immediately upon All submissions should refer to File ‘‘C2’’) filed with the Securities and
filing. The Commission notes that Number SR–NYSEArca–2017–115. This Exchange Commission (‘‘SEC’’ or
waiver of the operative delay will allow file number should be included on the ‘‘Commission’’) the proposed rule
the Exchange to immediately extend the subject line if email is used. To help the change as described in Items I, II, and
implementation date of the Proposed Commission process and review your III, below, which Items have been
Rule Change, and avoid the potential comments more efficiently, please use prepared by the Exchange. The
confusion and disruption that could only one method. The Commission will Exchange filed the proposal as a ‘‘non-
result if the extension did not become post all comments on the Commission’s controversial’’ proposed rule change
operative until after October 1, 2017. Internet Web site (http://www.sec.gov/ pursuant to Section 19(b)(3)(A)(iii) of
The Commission believes that waiver of rules/sro.shtml). Copies of the the Act 3 and Rule 19b–4(f)(6)
the 30-day operative delay is consistent submission, all subsequent thereunder.4 The Commission is
with the protection of investors and the amendments, all written statements publishing this notice to solicit
public interest. Therefore, the with respect to the proposed rule comments on the proposed rule change
Commission hereby waives the 30-day change that are filed with the from interested persons.
operative delay and designates the Commission, and all written
proposal operative upon filing.12 I. Self-Regulatory Organization’s
communications relating to the Statement of the Terms of Substance of
At any time within 60 days of the proposed rule change between the
filing of the proposed rule change, the the Proposed Rule Change
Commission and any person, other than
Commission summarily may those that may be withheld from the The Exchange proposes to amend
temporarily suspend such rule change if public in accordance with the Rule 6.45 relating to disaster recovery.
it appears to the Commission that such provisions of 5 U.S.C. 552, will be The text of the proposed rule change is
action is necessary or appropriate in the available for Web site viewing and also available on the Exchange’s Web
public interest, for the protection of printing in the Commission’s Public site (http://www.cboe.com/AboutCBOE/
investors, or otherwise in furtherance of Reference Room, 100 F Street NE., CBOELegalRegulatoryHome.aspx), at
the purposes of the Act. If the Washington, DC 20549 on official the Exchange’s Office of the Secretary,
Commission takes such action, the business days between the hours of and at the Commission’s Public
Commission shall institute proceedings 10:00 a.m. and 3:00 p.m. Copies of the Reference Room.
to determine whether the proposed rule filing also will be available for II. Self-Regulatory Organization’s
9 17
inspection and copying at the principal Statement of the Purpose of, and
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the office of the Exchange. All comments Statutory Basis for, the Proposed Rule
Commission with written notice of its intent to file received will be posted without change; Change
the proposed rule change, along with a brief the Commission does not edit personal
description and the text of the proposed rule identifying information from In its filing with the Commission, the
change, at least five business days prior to the date
ethrower on DSK3G9T082PROD with NOTICES
submissions. You should submit only Exchange included statements
of filing of the proposed rule change, or such
shorter time as designated by the Commission. information that you wish to make concerning the purpose of and basis for
10 17 CFR 240.19b–4(f)(6). available publicly. All submissions 13 17 CFR 200.30–3(a)(12).
11 17 CFR 240.19b–4(f)(6)(iii).
should refer to File Number SR– 1 15
12 For purposes only of waiving the 30-day U.S.C. 78s(b)(1).
NYSEArca–2017–115 and should be 2 17 CFR 240.19b–4.
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
submitted on or before October 26, 3 15 U.S.C. 78s(b)(3)(A)(iii).
and capital formation. See 15 U.S.C. 78c(f). 2017. 4 17 CFR 240.19b–4(f)(6).
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![46558 Federal Register / Vol. 82, No. 192 / Thursday, October 5, 2017 / Notices
All submissions should refer to File 015, pursuant to Section 19(b)(1) of the based on the Member’s credit rating, as
Number SR–C2–2017–025. This file Securities Exchange Act of 1934 derived from NSCC’s internal credit risk
number should be included on the (‘‘Act’’) 1 and Rule 19b–4 thereunder.2 analysis (i.e., the Credit Risk Rating
subject line if email is used. To help the The proposed rule change was Matrix or ‘‘CRRM’’),11 in order to reflect
Commission process and review your published for comment in the Federal the potential increase in credit risk from
comments more efficiently, please use Register on August 24, 2017.3 The Members with a higher risk of default.12
only one method. The Commission will Commission did not receive any NSCC is exposed to credit and market
post all comments on the Commission’s comment letters on the proposed rule risks when a Member does not satisfy its
Internet Web site (http://www.sec.gov/ change. For the reasons discussed obligation to either pay its net
rules/sro.shtml). Copies of the below, the Commission is granting settlement proceeds or deliver its
submission, all subsequent approval of the proposed rule change. securities due by the applicable
amendments, all written statements Settlement Date.13 Such exposures
I. Description of the Proposed Rule
with respect to the proposed rule generally increase when the Member’s
Change
change that are filed with the risk of default increases, as reflected by
Commission, and all written NSCC proposed to change its Rules & the Member’s credit rating derived from
communications relating to the Procedures (‘‘Rules’’) 4 to (1) amend an the CRRM.14 Therefore, NSCC asserts
proposed rule change between the existing fails charge (‘‘CNS Fails that to reduce NSCC’s credit risk
Commission and any person, other than Charge’’) that applies to each NSCC exposures and to incentivize Members
those that may be withheld from the member (‘‘Member’’) as part of each to satisfy their obligations relating to
public in accordance with the Member’s required deposit (‘‘Required their outstanding trades on Settlement
provisions of 5 U.S.C. 552, will be Deposit’’) 5 to the NSCC Clearing Fund; Date, NSCC collects the CNS Fails
available for Web site viewing and and (2) clarify NSCC’s current practices Charge as part of each Member’s
printing in the Commission’s Public with respect to the assessment and Required Deposit.15
Reference Room, 100 F Street NE., collection of the CNS Fails Charge.6 This proposed rule change would
Washington, DC 20549, on official A. The Required Deposit and the CNS amend the Rules regarding the CNS
business days between the hours of Fails Charge Fails Charge. Specifically, the proposed
10:00 a.m. and 3:00 p.m. Copies of the rule change would amend the Rules to
NSCC collects Required Deposits from add transparency and clarify NSCC’s
filing also will be available for all Members in order to mitigate
inspection and copying at the principal current practices with respect to the
potential losses to NSCC associated with assessment and collection of this
office of the Exchange. All comments the liquidation of a Member’s portfolio,
received will be posted without change; existing daily margin charge.16
if NSCC ceases to act for such Member.7
the Commission does not edit personal In order to calculate each Member’s B. Calculation of the CNS Fails Charge
identifying information from Required Deposit, NSCC uses a risk- Currently, for a Member with CNS
submissions. You should submit only based margin methodology comprised of Fails Positions, the CNS Fails Charge is
information that you wish to make a number of risk-based component calculated by multiplying the current
available publicly. All submissions charges, including the CNS Fails market value of such Member’s
should refer to File Number SR–C2– Charge.8 aggregate CNS Fails Positions by a
2017–025, and should be submitted on NSCC currently calculates and percentage determined by the Member’s
or before October 26, 2017. collects the CNS Fails Charge from CRRM rating.17 For a Member that is
For the Commission, by the Division of Members with positions that did not rated 1 through 4 on the CRRM, the CNS
Trading and Markets, pursuant to delegated settle on the applicable settlement date Fails Charge is 5 percent of the
authority.25 (‘‘Settlement Date’’) 9 (‘‘CNS Fails Member’s aggregate CNS Fails
Eduardo A. Aleman, Positions’’).10 According to NSCC, Positions.18 For a Member that is rated
Assistant Secretary. NSCC imposes the CNS Fails Charge 5 or 6 on the CRRM, the CNS Fails
[FR Doc. 2017–21405 Filed 10–4–17; 8:45 am] Charge is 10 percent of the Member’s
1 15 U.S.C. 78s(b)(1).
BILLING CODE 8011–01–P aggregate CNS Fails Positions.19 For a
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 81439
11 The CRRM is a tool to help measure the credit
(August 18, 2017), 82 FR 40176 (August 24, 2017)
SECURITIES AND EXCHANGE risk that Members pose to NSCC. See Securities
(SR–NSCC–2017–015) (‘‘Notice’’).
Exchange Act Release No. 80734 (May 19, 2017), 82
COMMISSION 4 Available at http://www.dtcc.com/en/legal/
FR 24177 (May 25, 2017) (SR–FICC–2017–006). The
rules-and-procedures. CRRM produces a rating based on a scale from 1
[Release No. 34–81774; File No. SR–NSCC– 5 A Member’s Required Deposit is the daily
(the strongest) to 7 (the weakest). Id. Members that
2017–015] margin deposit that Members are required to make fall within the weakest three rating categories (i.e.,
to NSCC’s clearing fund (‘‘Clearing Fund’’). 5, 6, and 7) are placed on NSCC’s ‘‘Watch List’’ and
Self-Regulatory Organizations; Additional information on Required Deposits and may be subject to enhanced surveillance or
the Clearing Fund can be found in NSCC’s Rules. additional margin charges. Id. The CRRM considers
National Securities Clearing Id. factors that are designed to collectively reflect the
Corporation; Order Approving 6 Notice, 82 FR at 40176.
financial and operational condition of a Member.
Proposed Rule Change To Amend and 7 When NSCC restricts a Member’s access to
Id. These factors include (i) quantitative factors,
Clarify a Margin Charge Relating to services generally, NSCC is said to have ‘‘ceased to such as capital, assets, earnings, and liquidity; and
CNS Fails Positions act’’ for the Member. Rule 46 (Restrictions on (ii) qualitative factors, such as management quality,
Access to Services) of the Rules sets out the market position/environment, and capital and
circumstances under which NSCC may cease to act liquidity risk management. Id.
September 29, 2017.
ethrower on DSK3G9T082PROD with NOTICES
for a Member and the types of actions that NSCC 12 Notice, 82 FR at 40176.
On August 11, 2017, National may take. Rules, supra note 4. 13 Id.
Securities Clearing Corporation 8 Notice, 82 FR at 40176.
14 Id.
(‘‘NSCC’’) filed with the Securities and 9 The Settlement Date refers to the standard
15 Id.
Exchange Commission (‘‘Commission’’) settlement cycle, as set by the U.S. Securities and
16 Id.
Exchange Commission, which is T+2. See Securities
proposed rule change SR–NSCC–2017– Exchange Act Release No. 80295 (March 22, 2017), 17 Id.
82 FR 15564 (March 29, 2017). 18 Id.
25 17 CFR 200.30–3(a)(12). 10 Notice, 82 FR at 40176. 19 Id.
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Document Created: 2017-10-05 00:53:16
Document Modified: 2017-10-05 00:53:16
| 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 46554 |
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