82 FR 8636 - Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Give Up of a Clearing Trading Permit Holder

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 17 (January 27, 2017)

Page Range		8636-8641
FR Document		2017-01831

Federal Register, Volume 82 Issue 17 (Friday, January 27, 2017)

[Federal Register Volume 82, Number 17 (Friday, January 27, 2017)]
[Notices]
[Pages 8636-8641]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-01831]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79861; File No. SR-C2-2017-004]

Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to the Give Up of a Clearing Trading Permit Holder

January 23, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 10, 2017, C2 Options Exchange, Incorporated (the
``Exchange'' or ``C2'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule change as described
in Items I and II, 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.
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\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).
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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 its rules governing the give up of a
Clearing Participant by a Participant on Exchange Transactions. The
text of the proposed rule change is 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 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
Statutory Basis for, the Proposed Rule Change

1. Purpose
The Exchange proposes to augment its requirements in C2 Rule 6.30
related to the give up of a Clearing Participant by a Participant on
Exchange transactions. By way of background, to enter transactions on
the Exchange, a Participant must either be a Clearing Participant or
must have a Clearing Participant agree to accept financial
responsibility for all of its transactions. Additionally, Rule 6.30
currently provides that when a Participant executes a transaction on
the Exchange, it must give up the name of the Clearing Participant (the
``Give Up'') through which the transaction will be cleared (i.e.,
``give up'').
Designated Give Ups and Guarantors
The Exchange seeks to amend Rule 6.30 to provide that a Participant
may only give up a ``Designated Give Up'' or its ``Guarantor.'' The
Exchange proposes to introduce and define the term ``Designated Give
Up.'' For purposes of Rule 6.30, a ``Designated Give Up,'' is any
Clearing Participant that a Participant (other than a Market-Maker \5\)
identifies to the Exchange, in writing, as a Clearing Participant that
the Participant would like to have the ability to give up. To designate
a ``Designated Give Up'' a Participant must submit written
notification, in a form and manner determined by the Exchange, to the
Registration Services Department (``RSD''). Specifically, the Exchange
anticipates using a standardized form (``Notification Form'') that a
Participant would need to complete and submit to the RSD. A copy of the
proposed Notification Form is included with this filing in Exhibit 3.
Similarly, should a Participant no longer want the ability to give up a
particular Designated Give Up, it must submit written notification, in
a form and manner determined by the Exchange, to the RSD. The Exchanges
[sic] notes that a Participant may designate any Clearing Participant
as a Designated Give Up. Additionally, there is no minimum or maximum
number of Designated Give Ups that a Participant must identify. The
Exchange shall notify a Clearing Participant, in writing and as soon as
practicable, of each Participant that has identified it as a Designated

[[Page 8637]]

Give Up. The Exchange anticipates obtaining the contact information of
a Clearing Participant by having each Clearing Participant complete a
standardized form (``Designated Give Up Contact Form'') and submit it
to the RSD. A copy of the proposed Designated Give Up Contact Form is
included with this filing in Exhibit 3. The Exchange however, will not
accept any instructions, and not give effect to any previous
instructions, from a Clearing Participant not to permit a Participant
to designate the Clearing Participant as a Designated Give Up. The
Exchange notes that there is no subjective evaluation of a
Participant's list of proposed Designated Give Ups by the Exchange.
Rather, the Exchange intends to process each list as submitted and
ensure that the Clearing Participants identified as Designated Give Ups
are in fact current Clearing Participants, as well as confirm that the
Notification Forms are complete (e.g., contains appropriate signatures)
and the OCC numbers listed for each Clearing Participant are accurate.
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\5\ For purposes of this rule, references to ``Market-Maker''
shall refer to Participants acting in the capacity of a Market-Maker
and shall include all Exchange Market-Maker capacities (e.g.,
Designated Primary Market-Makers).
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The Exchange also proposes to define the term ``Guarantor'' in the
proposed rule text. For purposes of proposed Rule 6.30, a ``Guarantor''
shall refer to a Clearing Participant that has issued a Letter of
Guarantee or Letter of Authorization for the executing Participant
under the C2 Rule 3.10 (Letters of Guarantee and Authorization) that is
in effect at the time of the execution of the applicable trade. An
executing Participant may give up its Guarantor without having to first
designate it to the Exchange as a ``Designated Give Up.''
As noted above, the proposed rule change seeks to provide that a
Participant may give up only (i) the name of a Clearing Participant
that has previously been identified and processed by the Exchange as a
Designated Give Up for that Participant, if not a Market-Maker or (ii)
its Guarantor. This limitation shall be enforced by the Exchange's
trading systems. Specifically, the Exchange will configure its trading
systems to only accept orders from a Participant which identify a
Designated Give Up or Guarantor for that Participant and will reject
any order entered by a Participant which designates a Give Up that is
not at the time a Designated Give Up or Guarantor of the Participant.
The Exchange notes that it will notify a Participant in writing when an
identified Designated Give Up becomes ``effective'' (i.e., when a
Clearing Participant that has been identified by the Participant as a
Designated Give Up has been enabled by the Exchange's trading systems
to be given up). A Guarantor for a Participant shall be enabled to be
given up for that Participant without any further action by the
Participant (i.e., submitting its name as a Designated Give Up on the
Notification Form). The Exchange notes that this configuration (i.e.,
the trading system accepting only orders which identify a Designated
Give Up or Guarantor) is intended to help reduce ``keypunch errors''
and prevent Participants from mistakenly giving up the name of a
Clearing Participant that it had no intention of ever using as a Give
Up.
Acceptance of a Trade
The Exchange next proposes to permit a Designated Give Up and a
Guarantor to, in certain circumstances, determine not to accept a trade
on which its name was given up. If a Designated Give Up or Guarantor
determines not to accept a trade, it may reject the trade in accordance
with the procedures described more fully below.
A Designated Give Up may determine to not accept a trade on which
its name was given up so long as it believes in good faith that it has
a valid reason not to accept the trade. Examples of valid reasons may
be that the Designated Give Up does not have a customer for that
particular trade or that another Clearing Participant agrees to be the
Give Up on the trade and has notified the Exchange and executing
Participant in writing of its intent to accept the trade. If a
Designated Give Up determines to not accept (and thereby reject) a
trade on which its name was given up, the executing Participant's
Guarantor or another Clearing Participant that agrees to be the Give Up
on the trade shall become the Give Up. Next, the Exchange proposes to
provide that a Guarantor may not accept (and thereby reject) a non-
Marker-Maker trade on which its name was given up only if another
Clearing Participant agrees to be the Give Up on the trade and has
notified the Exchange and executing Participant in writing of its
intent to accept the trade. The Exchange notes that only a Designated
Give Up or Guarantor whose name was initially given up on a trade is
permitted to not accept the trade, subject to the conditions noted
above (i.e., the Clearing Participant or Guarantor that becomes the
Give Up on a rejected trade may not also reject the trade).
Rejection of a Trade
The Exchange has incorporated into proposed Rule 6.30 procedures
that must be followed in order for a Designated Give Up to reject a
trade. A trade may only be rejected on (i) the trade date or (ii) the
business day following the trade date (``T+1'') (except that
transactions in expiring options series may not be rejected on T+1).
Rejection on Trade Date
If a Designated Give Up decides to reject a trade on the trade
date, it must first notify, in writing, the executing Participant or
its designated agent, as soon as possible and attempt to resolve the
disputed give up. This requirement puts the executing Participant on
notice that the Give Up on the trade may be changed and provides the
executing Participant and Designated Give Up an opportunity to resolve
the dispute in a manner agreeable to each party. The Exchange notes
that a Designated Give Up may request from the Exchange the contact
information of the executing Participant or its designated agent for
any trade it wishes to reject.
Following notification to the executing Participant on the trade
date, a Designated Give Up may request the ability from the Exchange to
change the Give Up on the trade. This request must be made by
completing and submitting a standardized form (``Give Up Change Form'')
to the Exchange. A copy of the proposed Give Up Change Form is included
with this filing in Exhibit 3. So long as the Exchange is able to
process the request prior to the trade input cutoff time established by
the Clearing Corporation (or fifteen minutes thereafter, so long as the
Exchange receives and is able to process a request to extend its time
of final trade submission to the Clearing Corporation) (``Trade Date
Cutoff Time''), the Exchange will provide the Designated Give Up the
ability to make the change to the Give Up on the trade to either (1)
another Clearing Participant or (2) the executing Participant's
Guarantor.
A Designated Give Up may change the Give Up to another Clearing
Participant (``New Clearing Participant'') (i.e., a Clearing
Participant that is not the executing Participant's Guarantor) only if
that Clearing Participant has agreed to be the give up on the trade and
has first notified the Exchange and the executing Participant in
writing of its intent to accept the trade. To notify the Exchange, the
New Clearing Participant must complete and submit a standardized form
(i.e., the Give-Up Change Form for Accepting Clearing Trading Permit
Holders) to the Exchange. A copy of the proposed Give-Up Change Form
for Accepting Clearing Trading Permit Holders is included with this
filing in Exhibit 3. The Exchange notes that any Clearing Participant
may agree to accept a trade from the

[[Page 8638]]

Designated Give Up that is rejecting the trade (i.e., the New Clearing
Participant does not have to already be a Designated Give Up of the
executing Participant). The Exchange also notes that a New Clearing
Participant that has agreed to accept a trade and become the Give Up
cannot later reject the trade. Requiring the New Clearing Participant
to provide notice to the Exchange of its intent to accept the trade and
prohibiting the New Clearing Participant from later rejecting the trade
provides finality to the trade and ensures that the trade is not
repeatedly reassigned from one Clearing Participant to another.
The Exchange also seeks to provide that a Designated Give Up may
alternatively change the Give Up to the executing Participant's
Guarantor. The Guarantor does not need to notify the Exchange of its
intent to accept the trade nor does it need to submit any notification
or form. The Designated Give Up however, must first provide written
notice to the Guarantor that it will be making this change. A Guarantor
that becomes the Give Up on a trade as a result of the Designated Give
Up rejecting the trade is prohibited from not accepting the trade/
rejecting the trade. This prohibition provides finality to the trade
and ensures that the trade is not repeatedly reassigned from one
Clearing Participant to another.
A Guarantor may also reject a non-Market-Maker trade for which its
name was the initial given up by a Participant, but only if another
Clearing Participant has first agreed to be the Give Up on the trade
and has notified the Exchange and executing Participant in writing of
its intent to accept the trade. If a Guarantor of a Participant decides
to reject a trade on the trade date, it must follow the same procedures
to change the Give Up as would be followed by a Designated Give Up. The
ability to make any changes, either by the Designated Give Up or
Guarantor, to the Give Up pursuant to this procedure will end at the
Trade Date Cutoff Time.
Finally, once the Give Up has been changed, the Designated Give Up
or Guarantor making the change must immediately thereafter notify the
Exchange, the parties to the trade and the New Clearing Participant of
the change in writing.
Rejection on T+1
The Exchange next acknowledges that some clearing firms may not
reconcile their trades until after the Trade Date Cutoff Time. A
clearing firm therefore, may not realize that a valid reason exists to
not accept a particular trade until after the close of the trading day
or until the following morning. Accordingly, the Exchange seeks to
establish a procedure for a Designated Give Up or Guarantor of a
Participant that is not a Market-Maker to reject a trade on the
following trade day (``T+1''). The Exchange notes that a separate
procedure must be established for T+1 changes because to effectively
change the Give Up on a trade on T+1, an offsetting reversal has to
occur (as opposed to merely identifying a different Clearing
Participant on the trade). More specifically, a buy side must be
entered by one Clearing Participant and the sell side must be entered
by the other Clearing Participant in order to effect the moving of the
position from one Clearing Participant to another.
A Designed [sic] Give Up that wishes to reject a trade on T+1 must
first notify the executing Participant, in writing, to try to attempt
and resolve the dispute. Following notification to the Participant, a
Designated Give Up may contact the Exchange and request the ability to
enter trade records into the Exchange's trading system on behalf of
itself and either the New Clearing Participant or the executing
Participant's Guarantor, which would effect a transfer of the trade to
the new Give Up. So long as the Exchange is able to process the request
prior to 12:00 p.m. (CT) on T+1 (``T+1 Cutoff Time''), the Exchange
shall provide the Designated Give Up the ability to do so. The request
must be made in writing using a standardized form (i.e., the Give Up
Change Form) from the Exchange. In the event a New Clearing Participant
will be accepting the trade as the Give Up, the New Clearing
Participant must also complete and submit the C2 Give-Up Change Form
for Accepting Clearing Participants. A Guarantor that becomes the new
Give Up on T+1 does not need to notify the Exchange of its intent to
accept the trade nor does it need to submit any notification or form.
The Designated Give Up however, must first provide written notice to
the Guarantor that it will be making this change on T+1.
An executing Participant's Guarantor that was the initial Give Up
on a trade may also reject the trade on T+1, but may only change the
Give Up to another Clearing Participant that has first agreed to be the
Give Up on the trade and has notified the Exchange (by submitting the
Give Up Change Form) and executing Participant in writing of its intent
to accept the trade. If a Guarantor of a Participant decides to reject
a non-Market-Maker trade on T+1, it must follow the same procedures
outlined in subparagraph (f)(iii). The Exchange again notes that only a
Guarantor whose name was initially given up is permitted to reject a
trade (i.e., a Guarantor cannot reject a trade on T+1 for which it has
become the give up as a result of a Designated Give Up not accepting
the trade).
The ability for either a Designated Give Up or Guarantor to make
these changes shall end at the T+1 Cutoff Time. The Exchange notes that
that the T+1 Cutoff Time is 12:00 p.m. (CT) to provide finality and
certainty as to which Clearing Participant will be the Clearing
Participant for the trade.
Once the change to the Give Up has been made, the Designated Give
Up or Guarantor making the change must immediately thereafter notify
the Exchange, the parties to the trade and the New Clearing Participant
of the change in writing. The Exchange notes that the T+1 procedure is
not applicable to trades in expiring options series that take place on
the last trading day prior to their expiration. Rather, a Designated
Give Up and Guarantor may only reject these transactions on the trade
date until the Trade Date Cutoff Time in accordance with the trade date
procedures described above.
As discussed above, the Exchange is allowing Participant s [sic]
that are not Market-Makers to identify any Clearing Participant as a
Designated Give Up. Also as discussed, the Exchange has determined not
to take instructions from a Clearing Participant not to permit a
particular Participant from giving up their name so that the Exchange
will not be placed in the position of arbiter between a Clearing
Participant, a Participant and a customer. The Exchange recognizes,
however, that Participants should not be given the ability to give up
any Clearing Participant without also providing a method of recourse to
those Clearing Participants which, for the prescribed reasons discussed
above, should not be obligated to clear certain trades for which they
are given up. The Exchange accordingly is seeking to provide Designated
Give Ups and Guarantors the ability to, where appropriate, reject a
trade. Ultimately, however, the trade must clear with a clearing firm
and there must be finality to the trade. The Exchange believes that the
executing Participant's Guarantor, absent a Clearing Participant that
agrees to accept the trade, should become the Give Up on any trade
which a Designated Give Up determines to reject in accordance with
these proposed rule provisions, because the Guarantor, by virtue of
having issued a Letter of Guarantee or Authorization, has already
accepted financial responsibility for all Exchange transactions made by
the executing Participant. The Exchange

[[Page 8639]]

however, does not want to prevent a Clearing Participant that agrees to
accept the trade from being able to do so, and accordingly, the
Exchange also provides that a New Clearing Participant may become the
Give Up on a trade in accordance with the procedure discussed above.
Other Give Up Changes
The Exchange seeks to codify in its proposed rule three scenarios
in which a Give Up on a transaction may be changed without Exchange
involvement. First, if an executing Participant has the ability through
an Exchange system to do so, it may change the Give Up on a trade to
another Designated Give Up or its Guarantor. The Exchange notes that
Participants often make these changes when, for example, there was a
keypunch error (i.e. an error that involves the erroneous entry of an
intended clearing firm's OCC clearing number). The ability of the
executing Participant to make any such change will end at the Trade
Date Cutoff Time.\6\
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\6\ After that time, the Participant will no longer have the
ability to make this type of change as the trade will have been
submitted to OCC.
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Next, the proposed rule provides that, if a Designated Give Up has
the ability to do so, it may change the Give Up on a transaction for
which it was given up to (i) another Clearing Participant affiliated
with the Designated Give Up or (ii) a Clearing Participant that is a
back office agent for the Designated Give Up. The ability to make such
a change will end at the Trade Date Cutoff Time. The procedures in
proposed subparagraph (f) of Rule 6.30 that were previously described
will not apply in these instances. The Exchange notes that often
Clearing Participants themselves have the ability to change a Give Up
on a trade for which it was given up to another Clearing Participant
affiliate or Clearing Participant for which the Designated Give Up is a
back office agent. Therefore, Exchange involvement in these instances
is not necessary.
Lastly, the proposed rule provides that if both a Designated Give
Up and a Clearing Participant have the ability through an Exchange
system to do so, the Designated Give Up and Clearing Participant may
each enter trade records into the Exchange's systems on T+1 that would
effect a transfer of the trade in a non-expired option series from that
Designated Give Up to that Clearing Participant. Likewise, if a
Guarantor of a Participant trade that is not a Market-Maker trade and a
Clearing Participant have the ability through an Exchange system to do
so, the Guarantor and Clearing Participant may each enter trade records
into the Exchange's systems on T+1 that would effect a transfer of the
trade in a non-expired option series from that Guarantor to that
Clearing Participant. The Designated Give Up or Guarantor shall not
make any such change after the T+1 Cutoff Time. The Exchange notes that
a Designated Give Up (or Guarantor) must notify, in writing, the
Exchange and all the parties to the trade, of any such change made
pursuant to this provision. This notification alerts the parties and
the Exchange that a change to the Give Up has been made. Finally, the
Designated Give Up (or Guarantor) will be responsible for monitoring
the trade and ensuring that the other Clearing Participant has entered
its side of the transaction timely and correctly. If either a
Designated Give Up (or Guarantor) or Clearing Participant cannot
themselves enter trade records into the Exchange's systems to effect a
transfer of the trade from one to the other, the Designated Give Up (or
Guarantor) may request the ability from the Exchange to enter both
sides of the transaction in accordance with this amended Rule 6.30 and
pursuant to the procedures set forth in subparagraph (f)(iii) of that
Rule.
Responsibility
For purposes of the Rules of the Exchange, a Clearing Participant
will be financially responsible for all trades for which it is the Give
Up at the Applicable Cutoff Time (for purposes of the proposed rule,
the ``Applicable Cutoff Time'' shall refer to the T+1 Cutoff Time for
non-expiring option series and to the Trade Date Cutoff Time for
expiring option series). The Exchange notes however, that nothing in
the proposed rule shall preclude a different party from being
responsible for the trade outside of the Rules of the Exchange pursuant
to OCC Rules, any agreement between the applicable parties, other
applicable rules and regulations, arbitration, court proceedings or
otherwise. Moreover, in processing a request to provide a Designated
Give Up the ability to change a Give Up on a trade, the Exchange will
not consider or validate whether the Designated Give Up has satisfied
the requirements of this Rule in relation to having a good faith belief
that it has a valid reason not to accept a trade or having notified the
executing Participant and attempting to resolve the disputed Give Up
prior to changing the Give Up. Rather, upon request, the Exchange shall
always provide a Designated Give Up or Guarantor the ability to change
the give up or to reject a trade pursuant to the proposed rule so long
as the Designated Give Up or Guarantor, and New Clearing Participant if
applicable, have provided a completed Give Up Change Forms within the
prescribed time period. The Exchange notes that given the inherent time
constraints in making a change to a Give Up on a transaction, the
Exchange would not be able to adequately consider the above-mentioned
requirements and make a determination within the prescribed period of
time. Rather, the Exchange will examine trades for which a Give Up was
changed pursuant to subparagraphs (e) and (f) after the fact to ensure
that requirements set forth in amended Rule 6.30 were complied with.
Particularly, the Exchange notes that the Give Up Change Forms that
Designated Give Ups, Guarantors and New Clearing Participants must
submit, will help to ensure that the Exchange obtains, in a uniform
format, the information that it needs to monitor and regulate this rule
and these give up changes in particular. This information, for example,
will better allow the Exchange to determine whether the Designated Give
Up had a valid reason to reject the trade, as well as assist the
Exchange in cross checking and confirming that what the Designated Give
Up or Guarantor said it was going to do is what it actually did (e.g.,
check that the New Clearing Participant identified in the Give Up
Change Form was the Clearing Participant that actually was identified
on the trade as the Give Up). Additionally, the proposed rule does not
preclude these factors from being considered in a different forum
(e.g., court or arbitration) nor does it preclude any Clearing
Participant that violates any provision of amended Rule 6.30 from being
subject to discipline in accordance with Exchange rules.
The Exchange proposes to announce the implementation date of the
proposed rule change in a Regulatory Circular, to be published no later
than thirty (30) days following the date of filing. The implementation
date will be no later than ninety (90) days following publication of
the Regulatory Circular. The Exchange notes this additional time gives
Participants time to provide their lists of all Clearing Participants
that they would like to designate as ``Designated Give Ups'' and gives
the Exchange time to process those lists and configure its system
accordingly.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the

[[Page 8640]]

``Act'') and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\7\ Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \8\ 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, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \9\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ Id.
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First, detailing in the rules how Participants will give up
Clearing Participants and how Clearing Participants may ``reject'' a
trade provides transparency and operational certainty. The Exchange
believes additional transparency removes a potential impediment to, and
will contribute to perfecting, the mechanism for a free and open market
and a national market system, and, in general, will protect investors
and the public interest. Moreover, the Exchange notes that amended Rule
6.30 requires standardized forms to be used in the designation of
Designated Give Ups to ensure a seamless administration of the Rule.
The Rule also requires that Clearing Participants submit standardized
forms when requesting the ability to reject a trade and that all
notifications relating to a change in Give Up are in writing. These
requirements will aid the Exchange's efforts to monitor and regulate
Participants and Clearing Participants as they relate to amended Rule
6.30 and changes in give ups, thereby protecting investors and the
public interest.
Additionally, the Exchange notes that in evaluating its give up
rule provisions, it solicited feedback from a variety of market
participants. The Exchange believes that its proposed give up rule
strikes the right balance between the various views and interests
across the industry. For example, although the rule allows Participants
that are not Market-Makers to identify any Clearing Participant as a
Designated Give Up, it also provides that Clearing Participants will
receive notice of any Participant that has designated it as a
Designated Give Up and provides for a procedure for a Clearing
Participant to ``reject'' a trade in accordance with the Rules, both on
the trade date and T+1. The Exchange recognizes that Participants
should not be given the ability to give up any Clearing Participant
without also providing a method of recourse to those Clearing
Participants which, for the prescribed reasons discussed above, should
not be obligated to clear certain trades for which they are given up.
The Exchange believes that providing Designated Give Ups the ability to
reject a trade within a reasonable amount of time is consistent with
the Act as, pursuant to the proposed rule, the Designated Give Ups may
only do so if they have a valid reason and because ultimately, the
trade can always be assigned to the Guarantor of the executing
Participant. A trade must clear with a clearing firm and there must be
finality to the trade. The Exchange believes that the executing
Participant's Guarantor, absent a Clearing Participant that agrees to
accept the trade, should become the Give Up on any trade which a
Designated Give Up determines to reject in accordance with the proposed
rule provisions, because the Guarantor, by virtue of having issued a
Letter of Guarantee or Authorization, has already accepted financial
responsibility for all Exchange transactions made by the executing
Participant. Therefore, amended Rule 6.30 is reasonable and provides
certainty that a Clearing Participant will always be responsible for a
trade, which protects investors and the public interest.
Lastly, the Exchange notes that amended Rule 6.30 does not preclude
a different party than the party given up from being responsible for
the trade outside of the Rules of the Exchange pursuant to OCC Rules,
any agreement between the applicable parties, other applicable rules
and regulations, arbitration, court proceedings or otherwise. The
Exchange acknowledges that it will not consider whether the Designated
Give Up has satisfied the requirements of this Rule in relation to
having a good faith belief that it has a valid reason not to accept a
trade or having notified the executing Participant and attempting to
resolve the disputed Give Up prior to changing the Give Up, due to
inherent time restrictions. However, the Exchange believes investor and
public interest are still protected as the Exchange will still examine
trades for which a Give Up was changed pursuant to subparagraphs (e)
and (f) of amended Rule 6.30 after the fact to ensure that the
requirements set forth in the Rule were complied with. As noted above,
the use of standardized forms and the requirement that certain notices
be in writing will assist monitoring any give up changes and enforcing
amended Rule 6.30. Finally, the Exchange notes that the Rule does not
preclude these factors from being considered in a different forum
(e.g., court or arbitration) nor does it preclude any Participant or
Clearing Participant that violates any provision of amended Rule 6.30
from being subject to discipline by the Exchange.

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. The Exchange does not believe
that the proposed rule change will impose an unnecessary burden on
intramarket competition because it will apply equally to all similarly
situated Participants. The Exchange also notes that, should the
proposed changes make C2 more attractive for trading, market
participants trading on other exchanges can always elect to become
Participants on C2 to take advantage of the trading opportunities.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

The Exchange neither solicited nor received 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: (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, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) \11\ thereunder.
---------------------------------------------------------------------------

\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally
does not become operative for 30 days after the date of filing.
However, Rule 19b-

[[Page 8641]]

4(f)(6)(iii) \13\ permits the Commission to designate a shorter time if
such action is consistent with the protection of investors and the
public interest. The Exchange has requested that the Commission waive
the 30-day operative delay so that it can implement the proposed rule
change as early as the last week in January. The Commission believes
that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest. The Commission notes
that the Exchange's proposed rule change is based on a substantially
similar proposed rule change submitted by CBOE, which the Commission
approved after receiving no comments.\14\ The Commission also notes
that the filing raises no novel issues apart from those already
considered in the earlier CBOE filing. Therefore, the Commission waives
the 30-day operative delay and designates the proposed rule change
operative upon filing.\15\
---------------------------------------------------------------------------

\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
\14\ See Securities Exchange Act Release No. 72668 (July 24,
2014), 79 FR 44229 (July 30, 2014) (SR-CBOE-2014-048).
\15\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

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.

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 rule-comments@sec.gov. Please include
File Number SR-C2-2017-004 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-C2-2017-004. 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-C2-2017-004 and should be
submitted on or before February 17, 2017.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-01831 Filed 1-26-17; 8:45 am]
BILLING CODE 8011-01-P

8636 Federal Register / Vol. 82, No. 17 / Friday, January 27, 2017 / Notices

• Send an email to rule-comments@ SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s
sec.gov. Please include File Number SR– COMMISSION Statement of the Purpose of, and
NASDAQ–2017–004 on the subject line. Statutory Basis for, the Proposed Rule
[Release No. 34–79861; File No. SR–C2–
Change
Paper Comments 2017–004]
1. Purpose
• Send paper comments in triplicate Self-Regulatory Organizations; C2
The Exchange proposes to augment its
to Secretary, Securities and Exchange Options Exchange, Incorporated;
requirements in C2 Rule 6.30 related to
Commission, 100 F Street NE., Notice of Filing and Immediate
the give up of a Clearing Participant by
Washington, DC 20549–1090. Effectiveness of a Proposed Rule
a Participant on Exchange transactions.
Change Relating to the Give Up of a
All submissions should refer to File By way of background, to enter
Clearing Trading Permit Holder
Number SR–NASDAQ–2017–004. This transactions on the Exchange, a
file number should be included on the January 23, 2017. Participant must either be a Clearing
subject line if email is used. To help the Pursuant to Section 19(b)(1) of the Participant or must have a Clearing
Securities Exchange Act of 1934 (the Participant agree to accept financial
Commission process and review your
‘‘Act’’),1 and Rule 19b–4 thereunder,2 responsibility for all of its transactions.
comments more efficiently, please use Additionally, Rule 6.30 currently
only one method. The Commission will notice is hereby given that on January
10, 2017, C2 Options Exchange, provides that when a Participant
post all comments on the Commission’s executes a transaction on the Exchange,
Incorporated (the ‘‘Exchange’’ or ‘‘C2’’)
Internet Web site (http://www.sec.gov/ it must give up the name of the Clearing
filed with the Securities and Exchange
rules/sro.shtml). Copies of the Participant (the ‘‘Give Up’’) through
Commission (the ‘‘Commission’’) the
submission, all subsequent proposed rule change as described in which the transaction will be cleared
amendments, all written statements Items I and II, below, which Items have (i.e., ‘‘give up’’).
with respect to the proposed rule been prepared by the Exchange. The Designated Give Ups and Guarantors
change that are filed with the Exchange filed the proposal as a ‘‘non-
Commission, and all written The Exchange seeks to amend Rule
controversial’’ proposed rule change
communications relating to the 6.30 to provide that a Participant may
pursuant to Section 19(b)(3)(A)(iii) of
proposed rule change between the only give up a ‘‘Designated Give Up’’ or
the Act 3 and Rule 19b–4(f)(6)
Commission and any person, other than its ‘‘Guarantor.’’ The Exchange proposes
thereunder.4 The Commission is
those that may be withheld from the to introduce and define the term
publishing this notice to solicit
public in accordance with the ‘‘Designated Give Up.’’ For purposes of
comments on the proposed rule change
Rule 6.30, a ‘‘Designated Give Up,’’ is
provisions of 5 U.S.C. 552, will be from interested persons.
any Clearing Participant that a
available for Web site viewing and
I. Self-Regulatory Organization’s Participant (other than a Market-
printing in the Commission’s Public Maker 5) identifies to the Exchange, in
Statement of the Terms of Substance of
Reference Room, 100 F Street NE., the Proposed Rule Change writing, as a Clearing Participant that
Washington, DC 20549, on official the Participant would like to have the
business days between the hours of The Exchange proposes to amend its
rules governing the give up of a Clearing ability to give up. To designate a
10:00 a.m. and 3:00 p.m. Copies of the ‘‘Designated Give Up’’ a Participant
filing also will be available for Participant by a Participant on Exchange
Transactions. The text of the proposed must submit written notification, in a
inspection and copying at the principal form and manner determined by the
rule change is available on the
office of the Exchange. All comments Exchange, to the Registration Services
Exchange’s Web site (http://
received will be posted without change; Department (‘‘RSD’’). Specifically, the
www.cboe.com/AboutCBOE/
the Commission does not edit personal Exchange anticipates using a
CBOELegalRegulatoryHome.aspx), at
identifying information from standardized form (‘‘Notification Form’’)
the Exchange’s Office of the Secretary,
submissions. You should submit only that a Participant would need to
and at the Commission’s Public
information that you wish to make complete and submit to the RSD. A copy
Reference Room.
available publicly. All submissions of the proposed Notification Form is
should refer to File Number SR– II. Self-Regulatory Organization’s included with this filing in Exhibit 3.
NASDAQ–2017–004 and should be Statement of the Purpose of, and Similarly, should a Participant no
submitted on or before February 17, Statutory Basis for, the Proposed Rule longer want the ability to give up a
2017. Change particular Designated Give Up, it must
In its filing with the Commission, the submit written notification, in a form
For the Commission, by the Division of and manner determined by the
Trading and Markets, pursuant to delegated Exchange included statements
concerning the purpose of and basis for Exchange, to the RSD. The Exchanges
authority.12 [sic] notes that a Participant may
the proposed rule change and discussed
Eduardo A. Aleman,
any comments it received on the designate any Clearing Participant as a
Assistant Secretary. Designated Give Up. Additionally, there
proposed rule change. The text of these
[FR Doc. 2017–01833 Filed 1–26–17; 8:45 am] is no minimum or maximum number of
statements may be examined at the
Designated Give Ups that a Participant
BILLING CODE 8011–01–P places specified in Item IV below. The
must identify. The Exchange shall notify
Exchange has prepared summaries, set
a Clearing Participant, in writing and as
jstallworth on DSK7TPTVN1PROD with NOTICES

forth in sections A, B, and C below, of
soon as practicable, of each Participant
the most significant aspects of such
that has identified it as a Designated
statements.
5 For purposes of this rule, references to ‘‘Market-
1 15 U.S.C. 78s(b)(1). Maker’’ shall refer to Participants acting in the
2 17 CFR 240.19b–4. capacity of a Market-Maker and shall include all
3 15 U.S.C. 78s(b)(3)(A)(iii).
Exchange Market-Maker capacities (e.g., Designated
12 17 CFR 200.30–3(a)(12). 4 17 CFR 240.19b–4(f)(6). Primary Market-Makers).

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Federal Register / Vol. 82, No. 17 / Friday, January 27, 2017 / Notices 8637

Give Up. The Exchange anticipates trading systems to be given up). A trade may only be rejected on (i) the
obtaining the contact information of a Guarantor for a Participant shall be trade date or (ii) the business day
Clearing Participant by having each enabled to be given up for that following the trade date (‘‘T+1’’) (except
Clearing Participant complete a Participant without any further action that transactions in expiring options
standardized form (‘‘Designated Give Up by the Participant (i.e., submitting its series may not be rejected on T+1).
Contact Form’’) and submit it to the name as a Designated Give Up on the
Rejection on Trade Date
RSD. A copy of the proposed Designated Notification Form). The Exchange notes
Give Up Contact Form is included with that this configuration (i.e., the trading If a Designated Give Up decides to
this filing in Exhibit 3. The Exchange system accepting only orders which reject a trade on the trade date, it must
however, will not accept any identify a Designated Give Up or first notify, in writing, the executing
instructions, and not give effect to any Guarantor) is intended to help reduce Participant or its designated agent, as
previous instructions, from a Clearing ‘‘keypunch errors’’ and prevent soon as possible and attempt to resolve
Participant not to permit a Participant to Participants from mistakenly giving up the disputed give up. This requirement
designate the Clearing Participant as a the name of a Clearing Participant that puts the executing Participant on notice
Designated Give Up. The Exchange it had no intention of ever using as a that the Give Up on the trade may be
notes that there is no subjective Give Up. changed and provides the executing
evaluation of a Participant’s list of Participant and Designated Give Up an
Acceptance of a Trade opportunity to resolve the dispute in a
proposed Designated Give Ups by the
Exchange. Rather, the Exchange intends The Exchange next proposes to permit manner agreeable to each party. The
to process each list as submitted and a Designated Give Up and a Guarantor Exchange notes that a Designated Give
ensure that the Clearing Participants to, in certain circumstances, determine Up may request from the Exchange the
identified as Designated Give Ups are in not to accept a trade on which its name contact information of the executing
fact current Clearing Participants, as was given up. If a Designated Give Up Participant or its designated agent for
well as confirm that the Notification or Guarantor determines not to accept a any trade it wishes to reject.
Forms are complete (e.g., contains trade, it may reject the trade in Following notification to the
appropriate signatures) and the OCC accordance with the procedures executing Participant on the trade date,
numbers listed for each Clearing described more fully below. a Designated Give Up may request the
Participant are accurate. A Designated Give Up may determine ability from the Exchange to change the
The Exchange also proposes to define to not accept a trade on which its name Give Up on the trade. This request must
the term ‘‘Guarantor’’ in the proposed was given up so long as it believes in be made by completing and submitting
rule text. For purposes of proposed Rule good faith that it has a valid reason not a standardized form (‘‘Give Up Change
6.30, a ‘‘Guarantor’’ shall refer to a to accept the trade. Examples of valid Form’’) to the Exchange. A copy of the
Clearing Participant that has issued a reasons may be that the Designated Give proposed Give Up Change Form is
Letter of Guarantee or Letter of Up does not have a customer for that included with this filing in Exhibit 3. So
Authorization for the executing particular trade or that another Clearing long as the Exchange is able to process
Participant under the C2 Rule 3.10 Participant agrees to be the Give Up on the request prior to the trade input
(Letters of Guarantee and Authorization) the trade and has notified the Exchange cutoff time established by the Clearing
that is in effect at the time of the and executing Participant in writing of Corporation (or fifteen minutes
execution of the applicable trade. An its intent to accept the trade. If a thereafter, so long as the Exchange
executing Participant may give up its Designated Give Up determines to not receives and is able to process a request
Guarantor without having to first accept (and thereby reject) a trade on to extend its time of final trade
designate it to the Exchange as a which its name was given up, the submission to the Clearing Corporation)
‘‘Designated Give Up.’’ executing Participant’s Guarantor or (‘‘Trade Date Cutoff Time’’), the
As noted above, the proposed rule another Clearing Participant that agrees Exchange will provide the Designated
change seeks to provide that a to be the Give Up on the trade shall Give Up the ability to make the change
Participant may give up only (i) the become the Give Up. Next, the Exchange to the Give Up on the trade to either (1)
name of a Clearing Participant that has proposes to provide that a Guarantor another Clearing Participant or (2) the
previously been identified and may not accept (and thereby reject) a executing Participant’s Guarantor.
processed by the Exchange as a non-Marker-Maker trade on which its A Designated Give Up may change the
Designated Give Up for that Participant, name was given up only if another Give Up to another Clearing Participant
if not a Market-Maker or (ii) its Clearing Participant agrees to be the (‘‘New Clearing Participant’’) (i.e., a
Guarantor. This limitation shall be Give Up on the trade and has notified Clearing Participant that is not the
enforced by the Exchange’s trading the Exchange and executing Participant executing Participant’s Guarantor) only
systems. Specifically, the Exchange will in writing of its intent to accept the if that Clearing Participant has agreed to
configure its trading systems to only trade. The Exchange notes that only a be the give up on the trade and has first
accept orders from a Participant which Designated Give Up or Guarantor whose notified the Exchange and the executing
identify a Designated Give Up or name was initially given up on a trade Participant in writing of its intent to
Guarantor for that Participant and will is permitted to not accept the trade, accept the trade. To notify the
reject any order entered by a Participant subject to the conditions noted above Exchange, the New Clearing Participant
which designates a Give Up that is not (i.e., the Clearing Participant or must complete and submit a
at the time a Designated Give Up or Guarantor that becomes the Give Up on standardized form (i.e., the Give-Up
Guarantor of the Participant. The Change Form for Accepting Clearing
jstallworth on DSK7TPTVN1PROD with NOTICES

a rejected trade may not also reject the
Exchange notes that it will notify a trade). Trading Permit Holders) to the
Participant in writing when an Exchange. A copy of the proposed Give-
identified Designated Give Up becomes Rejection of a Trade Up Change Form for Accepting Clearing
‘‘effective’’ (i.e., when a Clearing The Exchange has incorporated into Trading Permit Holders is included with
Participant that has been identified by proposed Rule 6.30 procedures that this filing in Exhibit 3. The Exchange
the Participant as a Designated Give Up must be followed in order for a notes that any Clearing Participant may
has been enabled by the Exchange’s Designated Give Up to reject a trade. A agree to accept a trade from the

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Federal Register / Vol. 82, No. 17 / Friday, January 27, 2017 / Notices 8639

however, does not want to prevent a system to do so, the Guarantor and ability to change the give up or to reject
Clearing Participant that agrees to Clearing Participant may each enter a trade pursuant to the proposed rule so
accept the trade from being able to do trade records into the Exchange’s long as the Designated Give Up or
so, and accordingly, the Exchange also systems on T+1 that would effect a Guarantor, and New Clearing
provides that a New Clearing Participant transfer of the trade in a non-expired Participant if applicable, have provided
may become the Give Up on a trade in option series from that Guarantor to that a completed Give Up Change Forms
accordance with the procedure Clearing Participant. The Designated within the prescribed time period. The
discussed above. Give Up or Guarantor shall not make Exchange notes that given the inherent
any such change after the T+1 Cutoff time constraints in making a change to
Other Give Up Changes Time. The Exchange notes that a a Give Up on a transaction, the
The Exchange seeks to codify in its Designated Give Up (or Guarantor) must Exchange would not be able to
proposed rule three scenarios in which notify, in writing, the Exchange and all adequately consider the above-
a Give Up on a transaction may be the parties to the trade, of any such mentioned requirements and make a
changed without Exchange change made pursuant to this provision. determination within the prescribed
involvement. First, if an executing This notification alerts the parties and period of time. Rather, the Exchange
Participant has the ability through an the Exchange that a change to the Give will examine trades for which a Give Up
Exchange system to do so, it may change Up has been made. Finally, the was changed pursuant to subparagraphs
the Give Up on a trade to another Designated Give Up (or Guarantor) will (e) and (f) after the fact to ensure that
Designated Give Up or its Guarantor. be responsible for monitoring the trade requirements set forth in amended Rule
The Exchange notes that Participants and ensuring that the other Clearing 6.30 were complied with. Particularly,
often make these changes when, for Participant has entered its side of the the Exchange notes that the Give Up
example, there was a keypunch error transaction timely and correctly. If Change Forms that Designated Give
(i.e. an error that involves the erroneous either a Designated Give Up (or Ups, Guarantors and New Clearing
entry of an intended clearing firm’s OCC Guarantor) or Clearing Participant Participants must submit, will help to
clearing number). The ability of the cannot themselves enter trade records ensure that the Exchange obtains, in a
executing Participant to make any such into the Exchange’s systems to effect a uniform format, the information that it
change will end at the Trade Date Cutoff transfer of the trade from one to the needs to monitor and regulate this rule
Time.6 other, the Designated Give Up (or and these give up changes in particular.
Next, the proposed rule provides that, Guarantor) may request the ability from This information, for example, will
if a Designated Give Up has the ability the Exchange to enter both sides of the better allow the Exchange to determine
to do so, it may change the Give Up on transaction in accordance with this whether the Designated Give Up had a
a transaction for which it was given up amended Rule 6.30 and pursuant to the valid reason to reject the trade, as well
to (i) another Clearing Participant procedures set forth in subparagraph as assist the Exchange in cross checking
affiliated with the Designated Give Up (f)(iii) of that Rule. and confirming that what the
or (ii) a Clearing Participant that is a Designated Give Up or Guarantor said it
Responsibility
back office agent for the Designated Give was going to do is what it actually did
Up. The ability to make such a change For purposes of the Rules of the (e.g., check that the New Clearing
will end at the Trade Date Cutoff Time. Exchange, a Clearing Participant will be Participant identified in the Give Up
The procedures in proposed financially responsible for all trades for Change Form was the Clearing
subparagraph (f) of Rule 6.30 that were which it is the Give Up at the Participant that actually was identified
previously described will not apply in Applicable Cutoff Time (for purposes of on the trade as the Give Up).
these instances. The Exchange notes the proposed rule, the ‘‘Applicable Additionally, the proposed rule does
that often Clearing Participants Cutoff Time’’ shall refer to the T+1 not preclude these factors from being
themselves have the ability to change a Cutoff Time for non-expiring option considered in a different forum (e.g.,
Give Up on a trade for which it was series and to the Trade Date Cutoff Time court or arbitration) nor does it preclude
given up to another Clearing Participant for expiring option series). The any Clearing Participant that violates
affiliate or Clearing Participant for Exchange notes however, that nothing any provision of amended Rule 6.30
which the Designated Give Up is a back in the proposed rule shall preclude a from being subject to discipline in
office agent. Therefore, Exchange different party from being responsible accordance with Exchange rules.
involvement in these instances is not for the trade outside of the Rules of the The Exchange proposes to announce
necessary. Exchange pursuant to OCC Rules, any the implementation date of the
Lastly, the proposed rule provides agreement between the applicable proposed rule change in a Regulatory
that if both a Designated Give Up and parties, other applicable rules and Circular, to be published no later than
a Clearing Participant have the ability regulations, arbitration, court thirty (30) days following the date of
through an Exchange system to do so, proceedings or otherwise. Moreover, in filing. The implementation date will be
the Designated Give Up and Clearing processing a request to provide a no later than ninety (90) days following
Participant may each enter trade records Designated Give Up the ability to publication of the Regulatory Circular.
into the Exchange’s systems on T+1 that change a Give Up on a trade, the The Exchange notes this additional time
would effect a transfer of the trade in a Exchange will not consider or validate gives Participants time to provide their
non-expired option series from that whether the Designated Give Up has lists of all Clearing Participants that
Designated Give Up to that Clearing satisfied the requirements of this Rule in they would like to designate as
relation to having a good faith belief that
jstallworth on DSK7TPTVN1PROD with NOTICES

Participant. Likewise, if a Guarantor of ‘‘Designated Give Ups’’ and gives the
a Participant trade that is not a Market- it has a valid reason not to accept a Exchange time to process those lists and
Maker trade and a Clearing Participant trade or having notified the executing configure its system accordingly.
have the ability through an Exchange Participant and attempting to resolve
the disputed Give Up prior to changing 2. Statutory Basis
6 After that time, the Participant will no longer the Give Up. Rather, upon request, the The Exchange believes the proposed
have the ability to make this type of change as the Exchange shall always provide a rule change is consistent with the
trade will have been submitted to OCC. Designated Give Up or Guarantor the Securities Exchange Act of 1934 (the

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8640 Federal Register / Vol. 82, No. 17 / Friday, January 27, 2017 / Notices

‘‘Act’’) and the rules and regulations Participant as a Designated Give Up, it examine trades for which a Give Up was
thereunder applicable to the Exchange also provides that Clearing Participants changed pursuant to subparagraphs (e)
and, in particular, the requirements of will receive notice of any Participant and (f) of amended Rule 6.30 after the
Section 6(b) of the Act.7 Specifically, that has designated it as a Designated fact to ensure that the requirements set
the Exchange believes the proposed rule Give Up and provides for a procedure forth in the Rule were complied with.
change is consistent with the Section for a Clearing Participant to ‘‘reject’’ a As noted above, the use of standardized
6(b)(5) 8 requirements that the rules of trade in accordance with the Rules, both forms and the requirement that certain
an exchange be designed to prevent on the trade date and T+1. The notices be in writing will assist
fraudulent and manipulative acts and Exchange recognizes that Participants monitoring any give up changes and
practices, to promote just and equitable should not be given the ability to give enforcing amended Rule 6.30. Finally,
principles of trade, to foster cooperation up any Clearing Participant without also the Exchange notes that the Rule does
and coordination with persons engaged providing a method of recourse to those not preclude these factors from being
in regulating, clearing, settling, Clearing Participants which, for the considered in a different forum (e.g.,
processing information with respect to, prescribed reasons discussed above, court or arbitration) nor does it preclude
and facilitating transactions in should not be obligated to clear certain any Participant or Clearing Participant
securities, to remove impediments to trades for which they are given up. The that violates any provision of amended
and perfect the mechanism of a free and Exchange believes that providing Rule 6.30 from being subject to
open market and a national market Designated Give Ups the ability to reject discipline by the Exchange.
system, and, in general, to protect a trade within a reasonable amount of
investors and the public interest. B. Self-Regulatory Organization’s
time is consistent with the Act as,
Additionally, the Exchange believes the Statement on Burden on Competition
pursuant to the proposed rule, the
proposed rule change is consistent with Designated Give Ups may only do so if C2 does not believe that the proposed
the Section 6(b)(5) 9 requirement that they have a valid reason and because rule change will impose any burden on
the rules of an exchange not be designed ultimately, the trade can always be competition that is not necessary or
to permit unfair discrimination between assigned to the Guarantor of the appropriate in furtherance of the
customers, issuers, brokers, or dealers. executing Participant. A trade must purposes of the Act. The Exchange does
First, detailing in the rules how clear with a clearing firm and there not believe that the proposed rule
Participants will give up Clearing must be finality to the trade. The change will impose an unnecessary
Participants and how Clearing Exchange believes that the executing burden on intramarket competition
Participants may ‘‘reject’’ a trade Participant’s Guarantor, absent a because it will apply equally to all
provides transparency and operational Clearing Participant that agrees to similarly situated Participants. The
certainty. The Exchange believes accept the trade, should become the Exchange also notes that, should the
additional transparency removes a Give Up on any trade which a proposed changes make C2 more
potential impediment to, and will Designated Give Up determines to reject attractive for trading, market
contribute to perfecting, the mechanism in accordance with the proposed rule participants trading on other exchanges
for a free and open market and a provisions, because the Guarantor, by can always elect to become Participants
national market system, and, in general, virtue of having issued a Letter of on C2 to take advantage of the trading
will protect investors and the public Guarantee or Authorization, has already opportunities.
interest. Moreover, the Exchange notes accepted financial responsibility for all
that amended Rule 6.30 requires C. Self-Regulatory Organization’s
Exchange transactions made by the Statement on Comments on the
standardized forms to be used in the
executing Participant. Therefore, Proposed Rule Change Received From
designation of Designated Give Ups to
amended Rule 6.30 is reasonable and Members, Participants, or Others
ensure a seamless administration of the
provides certainty that a Clearing
Rule. The Rule also requires that The Exchange neither solicited nor
Participant will always be responsible
Clearing Participants submit received comments on the proposed
for a trade, which protects investors and
standardized forms when requesting the rule change.
the public interest.
ability to reject a trade and that all
notifications relating to a change in Give Lastly, the Exchange notes that III. Date of Effectiveness of the
Up are in writing. These requirements amended Rule 6.30 does not preclude a Proposed Rule Change and Timing for
will aid the Exchange’s efforts to different party than the party given up Commission Action
monitor and regulate Participants and from being responsible for the trade Because the foregoing proposed rule
Clearing Participants as they relate to outside of the Rules of the Exchange change does not: (i) Significantly affect
amended Rule 6.30 and changes in give pursuant to OCC Rules, any agreement the protection of investors or the public
ups, thereby protecting investors and between the applicable parties, other interest; (ii) impose any significant
the public interest. applicable rules and regulations, burden on competition; and (iii) become
Additionally, the Exchange notes that arbitration, court proceedings or operative for 30 days from the date on
in evaluating its give up rule provisions, otherwise. The Exchange acknowledges which it was filed, or such shorter time
it solicited feedback from a variety of that it will not consider whether the as the Commission may designate, it has
market participants. The Exchange Designated Give Up has satisfied the become effective pursuant to Section
believes that its proposed give up rule requirements of this Rule in relation to 19(b)(3)(A) of the Act 10 and Rule 19b–
strikes the right balance between the having a good faith belief that it has a 4(f)(6) 11 thereunder.
valid reason not to accept a trade or
jstallworth on DSK7TPTVN1PROD with NOTICES

various views and interests across the A proposed rule change filed under
industry. For example, although the rule having notified the executing Rule 19b–4(f)(6) 12 normally does not
allows Participants that are not Market- Participant and attempting to resolve become operative for 30 days after the
Makers to identify any Clearing the disputed Give Up prior to changing date of filing. However, Rule 19b–
the Give Up, due to inherent time
7 15 U.S.C. 78f(b). restrictions. However, the Exchange 10 15 U.S.C. 78s(b)(3)(A).
8 15 U.S.C. 78f(b)(5). believes investor and public interest are 11 17 CFR 240.19b–4(f)(6).
9 Id. still protected as the Exchange will still 12 17 CFR 240.19b–4(f)(6).

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Federal Register / Vol. 82, No. 17 / Friday, January 27, 2017 / Notices 8641

4(f)(6)(iii) 13 permits the Commission to Commission, 100 F Street NE., Commission (‘‘Commission’’), pursuant
designate a shorter time if such action Washington, DC 20549–1090. to Section 19(b)(1) of the Securities
is consistent with the protection of All submissions should refer to File Exchange Act of 1934 (‘‘Act’’) 1 and Rule
investors and the public interest. The Number SR–C2–2017–004. This file 19b–4 thereunder,2 a proposed rule
Exchange has requested that the number should be included on the change to list and trade shares of the
Commission waive the 30-day operative subject line if email is used. To help the PowerShares Government Collateral
delay so that it can implement the Commission process and review your Pledge Portfolio. The proposed rule
proposed rule change as early as the last comments more efficiently, please use change was published for comment in
week in January. The Commission only one method. The Commission will the Federal Register on July 26, 2016.3
believes that waiver of the 30-day post all comments on the Commission’s On September 1, 2016, pursuant to
operative delay is consistent with the Internet Web site (http://www.sec.gov/ Section 19(b)(2) of the Act,4 the
protection of investors and the public rules/sro.shtml). Copies of the Commission designated a longer period
interest. The Commission notes that the submission, all subsequent within which to approve the proposed
Exchange’s proposed rule change is amendments, all written statements rule change, disapprove the proposed
based on a substantially similar with respect to the proposed rule rule change, or institute proceedings to
proposed rule change submitted by change that are filed with the determine whether to disapprove the
CBOE, which the Commission approved Commission, and all written proposed rule change.5 On October 21,
after receiving no comments.14 The communications relating to the 2016, the Commission instituted
Commission also notes that the filing proposed rule change between the proceedings to determine whether to
raises no novel issues apart from those Commission and any person, other than approve or disapprove the proposed
already considered in the earlier CBOE those that may be withheld from the rule change.6 The Commission has
filing. Therefore, the Commission public in accordance with the received no comments on the proposed
waives the 30-day operative delay and provisions of 5 U.S.C. 552, will be rule change.
designates the proposed rule change available for Web site viewing and On January 17, 2017, the Exchange
operative upon filing.15 printing in the Commission’s Public withdrew the proposed rule change
At any time within 60 days of the Reference Room, 100 F Street NE., (SR–NYSEArca–2016–97).
filing of the proposed rule change, the Washington, DC 20549 on official For the Commission, by the Division of
Commission summarily may business days between the hours of Trading and Markets, pursuant to delegated
temporarily suspend such rule change if 10:00 a.m. and 3:00 p.m. Copies of the authority.7
it appears to the Commission that such filing also will be available for Eduardo A. Aleman,
action is necessary or appropriate in the inspection and copying at the principal Assistant Secretary.
public interest, for the protection of office of the Exchange. All comments [FR Doc. 2017–01834 Filed 1–26–17; 8:45 am]
investors, or otherwise in furtherance of received will be posted without change; BILLING CODE 8011–01–P
the purposes of the Act. If the the Commission does not edit personal
Commission takes such action, the identifying information from
Commission will institute proceedings submissions. You should submit only SECURITIES AND EXCHANGE
to determine whether the proposed rule information that you wish to make COMMISSION
change should be approved or available publicly. All submissions
disapproved. should refer to File Number SR–C2– Submission for OMB Review;
IV. Solicitation of Comments 2017–004 and should be submitted on Comment Request
or before February 17, 2017.
Interested persons are invited to Upon Written Request, Copies Available
For the Commission, by the Division of From: Securities and Exchange
submit written data, views, and Trading and Markets, pursuant to delegated
arguments concerning the foregoing, Commission, Office of Investor
authority.16
including whether the proposed rule Education and Advocacy,
Eduardo A. Aleman,
change is consistent with the Act. Washington, DC 20549–0213
Assistant Secretary.
Comments may be submitted by any of Extension:
[FR Doc. 2017–01831 Filed 1–26–17; 8:45 am]
the following methods: Rule 12d3–1 SEC File No. 270–504, OMB
BILLING CODE 8011–01–P Control No. 3235–0561
Electronic Comments
Notice is hereby given that, pursuant
• Use the Commission’s Internet
SECURITIES AND EXCHANGE to the Paperwork Reduction Act of 1995
comment form (http://www.sec.gov/
COMMISSION (44 U.S.C. 3501 et seq.), the Securities
rules/sro.shtml); or
and Exchange Commission (the
• Send an email to rule-comments@ [Release No. 34–79864; File No. SR– ‘‘Commission’’) has submitted to the
sec.gov. Please include File Number SR– NYSEArca–2016–97]
Office of Management and Budget
C2–2017–004 on the subject line.
Self-Regulatory Organizations; NYSE (‘‘OMB’’) a request for extension of the
Paper Comments Arca, Inc.; Notice of Withdrawal of a previously approved collection of
• Send paper comments in triplicate Proposed Rule Change Relating to the information discussed below.
to Secretary, Securities and Exchange Listing and Trading of Shares of the
1 15 U.S.C. 78s(b)(1).
PowerShares Government Collateral
jstallworth on DSK7TPTVN1PROD with NOTICES

2 17 CFR 240.19b–4.
13 17 CFR 240.19b–4(f)(6)(iii). Pledge Portfolio Under NYSE Arca 3 See Securities Exchange Act Release No. 78373
14 See Securities Exchange Act Release No. 72668
Equities Rule 8.600 (July 20, 2016), 81 FR 48869.
(July 24, 2014), 79 FR 44229 (July 30, 2014) (SR–
4 15 U.S.C. 78s(b)(2).
CBOE–2014–048). January 23, 2017.
15 For purposes only of waiving the 30-day 5 See Securities Exchange Act Release No. 78750,
On July 6, 2016, NYSE Arca, Inc. filed 81 FR 62233 (September 8, 2016).
operative delay, the Commission also has
considered the proposed rule’s impact on with the Securities and Exchange 6 See Securities Exchange Act Release No. 79131,

efficiency, competition, and capital formation. See 81 FR 74840 (October 27, 2016).
15 U.S.C. 78c(f). 16 17 CFR 200.30–3(a)(12). 7 17 CFR 200.30–3(a)(12).

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Document Created: 2017-01-27 00:11:12
Document Modified: 2017-01-27 00:11:12

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 8636