82 FR 9807 - Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Among NYSE MKT LLC, Bats BZX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, the Chicago Board Options Exchange, Incorporated, the Bats EDGX Exchange, Inc., the International Securities Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ BX, Inc., the NASDAQ PHLX, Inc., Miami International Securities Exchange, LLC, and MIAX PEARL Concerning Options-Related Market Surveillance
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 25 (February 8, 2017)
Federal Register Volume 82, Issue 25 (February 8, 2017)
| Page Range | 9807-9813 | |
| FR Document | 2017-02548 |
[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)] [Notices] [Pages 9807-9813] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-02548] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79930; File No. 4-551] Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Among NYSE MKT LLC, Bats BZX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, the Chicago Board Options Exchange, Incorporated, the Bats EDGX Exchange, Inc., the International Securities Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ BX, Inc., the NASDAQ PHLX, Inc., Miami International Securities Exchange, LLC, and MIAX PEARL Concerning Options-Related Market Surveillance February 2, 2017. Notice is hereby given that the Securities and Exchange Commission (``Commission'') has issued an Order, pursuant to Section 17(d) of the Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring effective an amendment to the plan for allocating regulatory responsibility (``Plan'') filed on January 31, 2017, pursuant to Rule 17d-2 of the Act,\2\ by NYSE MKT LLC (``MKT''), Bats BZX Exchange, Inc., (``Bats''), the BOX Options Exchange LLC (``BOX''), C2 Options Exchange, Incorporated (``C2''), the Chicago Board Options Exchange, Incorporated (``CBOE''), the Bats EDGX Exchange, Inc. (``EDGX''), the International Securities Exchange LLC (``ISE''), ISE Gemini, LLC (``Gemini''), ISE Mercury, LLC (``ISE Mercury''), Financial Industry Regulatory Authority, Inc. (``FINRA''), NYSE Arca, Inc. (``Arca''), The NASDAQ Stock Market LLC (``Nasdaq''), NASDAQ BX, Inc. (``BX''), NASDAQ PHLX, Inc. (``PHLX''), Miami International Securities Exchange (``MIAX''), and MIAX PEARL, LLC (``MIAX PEARL'') (collectively, ``Participating Organizations'' or ``parties''). --------------------------------------------------------------------------- \1\ 15 U.S.C. 78q(d). \2\ 17 CFR 240.17d-2. --------------------------------------------------------------------------- I. Introduction Section 19(g)(1) of the Act,\3\ among other things, requires every self-regulatory organization (``SRO'') registered as either a national securities exchange or national securities association to examine for, and enforce compliance by, its members and persons associated with its members with the Act, the rules and regulations thereunder, and the SRO's own rules, unless the SRO is relieved of this responsibility pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of the Act. Without this relief, the statutory obligation of each individual SRO could result in a pattern of multiple examinations of broker-dealers that maintain memberships in more than one SRO (``common members''). Such regulatory duplication would add unnecessary expenses for common members and their SROs. --------------------------------------------------------------------------- \3\ 15 U.S.C. 78s(g)(1). \4\ 15 U.S.C. 78q(d). \5\ 15 U.S.C. 78s(g)(2). --------------------------------------------------------------------------- Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate unnecessary multiple examinations and regulatory duplication.\7\ With respect to a common member, Section 17(d)(1) authorizes the Commission, by rule or order, to relieve an SRO of the responsibility to receive regulatory reports, to examine for and enforce compliance with applicable statutes, rules, and regulations, or to perform other specified regulatory functions. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78q(d)(1). \7\ See Securities Act Amendments of 1975, Report of the Senate Committee on Banking, Housing, and Urban Affairs to Accompany S. 249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975). --------------------------------------------------------------------------- To implement Section 17(d)(1), the Commission adopted two rules: Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the Commission to name a single SRO as the designated examining authority (``DEA'') to examine common members for compliance with the financial responsibility requirements imposed by the Act, or by Commission or SRO rules.\9\ When an SRO has been named as a common member's DEA, all other SROs to which the common member belongs are relieved of the responsibility to examine the firm for compliance with the applicable financial responsibility rules. On its face, Rule 17d-1 deals only with an SRO's obligations to enforce member compliance with financial responsibility requirements. Rule 17d-1 does not relieve an SRO from its obligation to examine a common member for compliance with its own rules and provisions of the federal securities laws governing matters other than financial responsibility, including sales practices and trading activities and practices. --------------------------------------------------------------------------- \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively. \9\ See Securities Exchange Act Release No. 12352 (April 20, 1976), 41 FR 18808 (May 7, 1976). --------------------------------------------------------------------------- To address regulatory duplication in these and other areas, the Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits SROs to propose joint plans for the allocation of regulatory responsibilities with respect to their common members. Under paragraph (c) of Rule 17d-2, the Commission may declare such a plan effective if, after providing for notice and comment, it determines that the plan is necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among the SROs, to remove impediments to, and foster the development of, a national market system and a national clearance and settlement system, and is in conformity with the factors set forth in Section 17(d) of the Act. Commission approval of a plan filed pursuant to Rule 17d-2 relieves an SRO of those regulatory responsibilities allocated by the plan to another SRO. --------------------------------------------------------------------------- \10\ See Securities Exchange Act Release No. 12935 (October 28, 1976), 41 FR 49091 (November 8, 1976). --------------------------------------------------------------------------- II. The Plan On December 11, 2007, the Commission declared effective the Participating Organizations' Plan for allocating regulatory responsibilities pursuant to Rule 17d-2.\11\ On April 11, 2008, the Commission approved an amendment to the Plan to include NASDAQ as a participant.\12\ On October 9, 2008, the Commission approved an amendment to the Plan to clarify that the term Regulatory Responsibility for options position limits includes the examination responsibilities for the delta hedging exemption.\13\ On February 25, 2010, the Commission approved an amendment to the Plan to add Bats and C2 as SRO participants and to reflect the name changes of the American Stock Exchange LLC to the NYSE Amex LLC, [[Page 9808]] and the Boston Stock Exchange, Inc. to the NASDAQ OMX BX, Inc.\14\ On May 11, 2012, the Commission approved an amendment to the Plan to add BOX as a participant to the Plan.\15\ On December 5, 2012, the Commission approved an amendment to the Plan to add MIAX as a participant to the Plan.\16\ On July 26, 2013, the Commission approved an amendment to the Plan to add Topaz Exchange, LLC as a Participant to the Plan.\17\ On October 29, 2015, the Commission approved an amendment to add EDGX as a Participant to the Plan and to change the name of Topaz Exchange, LLC to ISE Gemini, LLC.\18\ On February 16, 2016, the Commission approved an amendment to add ISE Mercury, LLC as a Participant to the Plan.\19\ --------------------------------------------------------------------------- \11\ See Securities Exchange Act Release No. 56941 (December 11, 2007), 72 FR 71723 (December 18, 2007) (File No. 4-551). \12\ See Securities Exchange Act Release No. 57649 (April 11, 2008), 73 FR 20976 (April 17, 2008) (File No. 4-551). \13\ See Securities Exchange Act Release No. 58765 (October 9, 2008), 73 FR 62344 (October 20, 2008) (File No. 4-551). \14\ See Securities Exchange Act Release No. 61588 (February 25, 2010), 75 FR 9970 (March 4, 2010) (File No. 4-551). \15\ See Securities Exchange Act Release No. 66975 (May 11, 2012), 77 FR 29712 (May 18, 2010) (File No. 4-551). \16\ See Securities Exchange Act Release No. 68362 (December 5, 2012), 77 FR 73719 (December 11, 2012) (File No. 4-551). \17\ See Securities Exchange Act Release No. 70052 (July 26, 2013), 78 FR 46665 (August 1, 2013) (File No. 4-551). \18\ See Securities Exchange Act Release No. 76310 (October 29, 2015), 80 FR 68354 (November 4, 2015) (File No. 4-551). \19\ See Securities Exchange Act Release No. 77149 (February 16, 2016), 81 FR 8781 (February 22, 2016) (File No. 4-551). --------------------------------------------------------------------------- The Plan is designed to reduce regulatory duplication for common members by allocating regulatory responsibility for certain options- related market surveillance matters among the Participating Organizations. Generally, under the Plan, a Participating Organization will serve as the Designated Options Surveillance Regulator (``DOSR'') for each common member assigned to it and will assume regulatory responsibility with respect to that common member's compliance with applicable common rules for certain accounts. When an SRO has been named as a common member's DOSR, all other SROs to which the common member belongs will be relieved of regulatory responsibility for that common member, pursuant to the terms of the Plan, with respect to the applicable common rules specified in Exhibit A to the Plan. III. Proposed Amendment to the Plan On January 31, 2017, the parties submitted a proposed amendment to the Plan. The primary purpose of the amendment is to add MIAX PEARL as a Participant to the Plan. The text of the proposed amended 17d-2 plan is as follows (additions are italicized; deletions are [bracketed]): * * * * * AGREEMENT BY AND AMONG NYSE MKT LLC, BATSBZX EXCHANGE, INC., EDGX EXCHANGE INC., BOX OPTIONS EXCHANGE LLC, NASDAQ[OMX] BX, INC., C2 OPTIONS EXCHANGE, INCORPORATED, THE CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED, THE INTERNATIONAL SECURITIES EXCHANGE, LLC, ISE GEMINI, LLC, ISE MERCURY, LLC, FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., NYSE ARCA, INC., THE NASDAQ STOCK MARKET LLC, NASDAQ [OMX]PHLX [INC]LLC, MIAMI INTERNATIONAL SECURITIES EXCHANGE, LLC, AND MIAX PEARL, LLC PURSUANT TO RULE 17d-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934 This agreement (this ``Agreement''), by and among NYSE MKT LLC (``MKT''), [BATS]Bats BZX Exchange, Inc., (``Bats[ATS]''), the Bats EDGX Exchange, Inc. (``EDGX''), the C2 Options Exchange, Incorporated (``C2''), the Chicago Board Options Exchange, Incorporated (``CBOE''), the International Securities Exchange, LLC (``ISE''), Financial Industry Regulatory Authority, Inc. (``FINRA''), NYSE Arca, Inc. (``Arca''), The NASDAQ Stock Market LLC (``Nasdaq''), BOX Options Exchange LLC (``BOX''), NASDAQ [OMX]BX, Inc. (``BX''), NASDAQ [OMX]PHLX [Inc.]LLC (``PHLX''), Miami International Securities Exchange, LLC (``MIAX''), ISE Gemini, LLC (``Gemini''), [and]ISE Mercury, LLC (``Mercury''), and MIAX PEARL, LLC (``MIAX PEARL''), is made this 10th day of October 2007, and as amended the 31st day of March 2008, the 1st day of October 2008, the 3rd day of February 2010, the 25th day of April 2012, and the 19th day of November 2012, and the 30th day of May 2013, and the 16th day of October 2015, and the 29th day of January 2016, and the 23rd day of January 2017, pursuant to Section 17(d) of the Securities Exchange Act of 1934, as amended (the ``Exchange Act''), and Rule 17d-2 thereunder (``Rule 17d-2''), which allows for a joint plan among self-regulatory organizations (``SROs'') to allocate regulatory obligations with respect to brokers or dealers that are members of two or more of the parties to this Agreement (``Common Members''). MKT, Bats[ATS], C2, CBOE, EDGX, ISE Gemini, ISE, ISE Mercury, FINRA, Arca, Nasdaq, BOX, BX, PHLX, [and]MIAX, and MIAX PEARL are collectively referred to herein as the ``Participants'' and individually, each a ``Participant.'' This Agreement shall be administered by a committee known as the Options Surveillance Group (the ``OSG'' or ``Group''), as described in Section V hereof. Unless defined in this Agreement or the context otherwise requires, the terms used herein shall have the meanings assigned thereto by the Exchange Act and the rules and regulations thereunder. Whereas, the Participants desire to eliminate regulatory duplication with respect to SRO market surveillance of Common Member \1\ activities with regard to certain common rules relating to listed options (``Options''); and --------------------------------------------------------------------------- \1\ In the case of the BX and BOX, members are those persons who are Options Participants (as defined in the BOX Options Exchange LLC Rules and NASDAQ [OMX] BX, Inc. Rules). --------------------------------------------------------------------------- Whereas, for this purpose, the Participants desire to execute and file this Agreement with the Securities and Exchange Commission (the ``SEC'' or ``Commission'') pursuant to Rule 17d-2. Now, therefore, in consideration of the mutual covenants contained in this Agreement, the Participants agree as follows: I. Except as otherwise provided in this Agreement, each Participant shall assume Regulatory Responsibility (as defined below) for the Common Members that are allocated or assigned to such Participant in accordance with the terms of this Agreement and shall be relieved of its Regulatory Responsibility as to the remaining Common Members. For purposes of this Agreement, a Participant shall be considered to be the Designated Options Surveillance Regulator (``DOSR'') for each Common Member that is allocated to it in accordance with Section VII. II. As used in this Agreement, the term ``Regulatory Responsibility'' shall mean surveillance, investigation and enforcement responsibilities relating to compliance by the Common Members with such Options rules of the Participants as the Participants shall determine are substantially similar and shall approve from time to time, insofar as such rules relate to market surveillance (collectively, the ``Common Rules''). For the purposes of this Agreement the list of Common Rules is attached as Exhibit A hereto, which may only be amended upon unanimous written agreement by the Participants. The DOSR assigned to each Common Member shall assume Regulatory Responsibility with regard to that Common Member's compliance with the applicable Common Rules for certain accounts.\2\ A DOSR may perform its [[Page 9809]] Regulatory Responsibility or enter an agreement to transfer or assign such responsibilities to a national securities exchange registered with the SEC under Section 6(a) of the Exchange Act or a national securities association registered with the SEC under Section 15A of the Exchange Act. A DOSR may not transfer or assign its Regulatory Responsibility to an association registered for the limited purpose of regulating the activities of members who are registered as brokers or dealers in security futures products. --------------------------------------------------------------------------- \2\ Certain accounts shall include customer (``C'' as classified by the Options Clearing Corporation (``OCC'')) and firm (``F'' as classified by OCC) accounts, as well as other accounts, such as market maker accounts as the Participants shall, from time to time, identify as appropriate to review. --------------------------------------------------------------------------- The term ``Regulatory Responsibility'' does not include, and each Participant shall retain full responsibility with respect to: (a) Surveillance, investigative and enforcement responsibilities other than those included in the definition of Regulatory Responsibility; (b) any aspects of the rules of a Participant that are not substantially similar to the Common Rules or that are allocated for a separate surveillance purpose under any other agreement made pursuant to Rule 17d-2. Any such aspects of a Common Rule will be noted as excluded on Exhibit A. With respect to options position limits, the term Regulatory Responsibility shall include examination responsibilities for the delta hedging exemption. Specifically, the Participants intend that FINRA will conduct examinations for delta hedging for all Common Members that are members of FINRA notwithstanding the fact that FINRA's position limit rule is, in some cases, limited to only firms that are not members of an options exchange (i.e., access members). In such cases, FINRA's examinations for delta hedging options position limit violations will be for the identical or substantively similar position limit rule(s) of the other Participant(s). Examinations for delta hedging for Common Members that are non-FINRA members will be conducted by the same Participant conducting position limit surveillance. The allocation of Common Members to DOSRs for surveillance of compliance with options position limits and other agreed to Common Rules is provided in Exhibit B. The allocation of Common Members to DOSRs for examinations of the delta hedging exemption under the options position limits rules is provided in Exhibit C. III. Each year within 30 days of the anniversary date of the commencement of operation of this Agreement, or more frequently if required by changes in the rules of a Participant, each Participant shall submit to the other Participants, through the Chair of the OSG, an updated list of Common Rules for review. This updated list may add Common Rules to Exhibit A, shall delete from Exhibit A rules of that Participant that are no longer identical or substantially similar to the Common Rules, and shall confirm that the remaining rules of the Participant included on Exhibit A continue to be identically or substantially similar to the Common Rules. Within 30 days from the date that each Participant has received revisions to Exhibit A from the Chair of the OSG, each Participant shall confirm in writing to the Chair of the OSG whether that Participant's rules listed in Exhibit A are Common Rules. IV. Apparent violation of another Participant's rules discovered by a DOSR, but which rules are not within the scope of the discovering DOSR's Regulatory Responsibility, shall be referred to the relevant Participant for such action as is deemed appropriate by that Participant. Notwithstanding the foregoing, nothing contained herein shall preclude a DOSR in its discretion from requesting that another Participant conduct an investigative or enforcement proceeding (``Proceeding'') on a matter for which the requesting DOSR has Regulatory Responsibility. If such other Participant agrees, the Regulatory Responsibility in such case shall be deemed transferred to the accepting Participant and confirmed in writing by the Participants involved. Additionally, nothing in this Agreement shall prevent another Participant on whose market potential violative activity took place from conducting its own Proceeding on a matter. The Participant conducting the Proceeding shall advise the assigned DOSR. Each Participant agrees, upon request, to make available promptly all relevant files, records and/or witnesses necessary to assist another Participant in a Proceeding. V. The OSG shall be composed of one representative designated by each of the Participants (a ``Representative''). Each Participant shall also designate one or more persons as its alternate representative(s) (an ``Alternate Representative''). In the absence of the Representative, the Alternate Representative shall assume the powers, duties and responsibilities of the Representative. Each Participant may at any time replace its Representative and/or its Alternate Representative to the Group.\3\ A majority of the OSG shall constitute a quorum and, unless otherwise required, the affirmative vote of a majority of the Representatives present (in person, by telephone or by written consent) shall be necessary to constitute action by the Group. The Group will have a Chair, Vice Chair and Secretary. A different Participant will assume each position on a rotating basis for a one- year term. In the event that a Participant replaces a Representative who is acting as Chair, Vice Chair or Secretary, the newly appointed Representative shall assume the position of Chair, Vice Chair, or Secretary (as applicable) vacated by the Participant's former Representative. In the event a Participant cannot fulfill its duties as Chair, the Participant serving as Vice Chair shall substitute for the Chair and complete the subject unfulfilled term. All notices and other communications for the OSG are to be sent in care of the Chair and, as appropriate, to each Representative. --------------------------------------------------------------------------- \3\ A Participant must give notice to the Chair of the Group of such a change. --------------------------------------------------------------------------- VI. The OSG shall determine the times and locations of Group meetings, provided that the Chair, acting alone, may also call a meeting of the Group in the event the Chair determines that there is good cause to do so. To the extent reasonably possible, notice of any meeting shall be given at least ten business days prior to the meeting date. Representatives shall always be given the option of participating in any meeting telephonically at their own expense rather than in person. VII. No less frequently than every two years, in such manner as the Group deems appropriate, the OSG shall allocate Common Members that conduct an Options business among the Participants (``Allocation''), and the Participant to which a Common Member is allocated will serve as the DOSR for that Common Member. Any Allocation shall be based on the following principles, except to the extent all affected Participants consent to one or more different principles: (a) The OSG may not allocate a Common Member to a Participant unless the Common Member is a member of that Participant. (b) To the extent practicable, Common Members that conduct an Options business shall be allocated among the Participants of which they are members in such manner as to equalize as nearly as possible the allocation among such Participants, provided that no Common Members shall be allocated to FINRA. For example, if sixteen Common Members that conduct an Options business are members only of three Participants, none of which is FINRA, those Common Members shall be allocated among the three Participants such that no Participant is allocated [[Page 9810]] more than six such members and no Participant is allocated less than five such members. If, in the previous example, one of the three Participants is FINRA, the sixteen Common Members would be allocated evenly between the remaining Participants, so that the two non-FINRA Participants would be allocated eight Common Members each. (c) To the extent practicable, Allocation shall take into account the amount of Options activity conducted by each Common Member in order to most evenly divide the Common Members with the largest amount of activity among the Participants of which they are members. Allocation will also take into account similar allocations pursuant to other plans or agreements to which the Common Members are party to maintain consistency in oversight of the Common Members.\4\ --------------------------------------------------------------------------- \4\ For example, if one Participant was allocated a Common Member by another regulatory group that Participant would be assigned to be the DOSR of that Common Member, unless there is good cause not to make that assignment. --------------------------------------------------------------------------- (d) To the extent practicable, Allocation of Common Members to Participants will be rotated among the applicable Participants such that a Common Member shall not be allocated to a Participant to which that Common Member was allocated within the previous two years. The assignment of DOSRs pursuant to the Allocation is attached as Exhibit B hereto, and will be updated from time to time to reflect Common Member Allocation changes. (e) The Group may reallocate Common Members from time-to-time, as it deems appropriate. (f) Whenever a Common Member ceases to be a member of its DOSR, the DOSR shall promptly inform the Group, which shall review the matter and allocate the Common Member to another Participant. (g) A DOSR may request that a Common Member to which it is assigned be reallocated to another Participant by giving 30 days written notice to the Chair of the OSG. The Group, in its discretion, may approve such request and reallocate the Common Member to another Participant. (h) All determinations by the Group with respect to Allocation shall be made by the affirmative vote of a majority of the Participants that, at the time of such determination, share the applicable Common Member being allocated; a Participant shall not be entitled to vote on any Allocation relating to a Common Member unless the Common Member is a member of such Participant. VIII. Each DOSR shall conduct routine surveillance reviews to detect violations of the applicable Common Rules by each Common Member allocated to it with a frequency (daily, weekly, monthly, quarterly, semi-annually or annually as noted on Exhibit A) not less than that determined by the Group. The other Participants agree that, upon request, relevant information in their respective files relative to a Common Member will be made available to the applicable DOSR. In addition, each Participant shall provide, to the extent not otherwise already provided, information pertaining to its surveillance program that would be relevant to FINRA or the Participant(s) conducting routine examinations for the delta hedging exemption. At each meeting of the OSG, each Participant shall be prepared to report on the status of its surveillance program for the previous quarter and any period prior thereto that has not previously been reported to the Group. In the event a DOSR believes it will not be able to complete its Regulatory Responsibility for its allocated Common Members, it will so advise the Group in writing promptly. The Group will undertake to remedy this situation by reallocating the subject Common Members among the remaining Participants. In such instance, the Group may determine to impose a regulatory fee for services provided to the DOSR that was unable to fulfill its Regulatory Responsibility. IX. Each Participant will, upon request, promptly furnish a copy of the report or applicable portions thereof relating to any investigation made pursuant to the provisions of this Agreement to each other Participant of which the Common Member under investigation is a member. X. Each Participant will routinely populate a common database, to be accessed by the Group relating to any formal regulatory action taken during the course of a Proceeding with respect to the Common Rules concerning a Common Member. XI. Any written notice required or permitted to be given under this Agreement shall be deemed given if sent by certified mail, return receipt requested, to any Participant to the attention of that Participant's Representative, to the Participant's principal place of business or by email at such address as the Representative shall have filed in writing with the Chair. XII. The costs incurred by each Participant in discharging its Regulatory Responsibility under this Agreement are not reimbursable. However, any of the Participants may agree that one or more will compensate the other(s) for costs incurred. XIII. The Participants shall notify the Common Members of this Agreement by means of a uniform joint notice approved by the Group. Each Participant will notify the Common Members that have been allocated to it that such Participant will serve as DOSR for that Common Member. XIV. This Agreement shall be effective upon approval of the Commission. This Agreement may only be amended in writing duly approved by each Participant. All amendments to this Agreement, excluding changes to Exhibits A, B and C, must be filed with and approved by the Commission. XV. Any Participant may manifest its intention to cancel its participation in this Agreement at any time upon providing written notice to (i) the Group six months prior to the date of such cancellation, or such other period as all the Participants may agree, and (ii) the Commission. Upon receipt of the notice the Group shall allocate, in accordance with the provisions of this Agreement, those Common Members for which the canceling Participant was the DOSR. The canceling Participant shall retain its Regulatory Responsibility and other rights, privileges and duties pursuant to this Agreement until the Group has completed the reallocation as described above, and the Commission has approved the cancellation. XVI. The cancellation of its participation in this Agreement by any Participant shall not terminate this Agreement as to the remaining Participants. This Agreement will only terminate following notice to the Commission, in writing, by the then Participants that they intend to terminate the Agreement and the expiration of the applicable notice period. Such notice shall be given at least six months prior to the intended date of termination, or such other period as all the Participants may agree. Such termination will become effective upon Commission approval. XVII. Participation in the Group shall be strictly limited to the Participants and no other party shall have any right to attend or otherwise participate in the Group except with the unanimous approval of all Participants. Notwithstanding the foregoing, any national securities exchange registered with the SEC under Section 6(a) of the Act or any national securities association registered with the SEC under section 15A of the Act may become a Participant to this Agreement provided that: (i) Such applicant has adopted rules substantially similar to the Common Rules, and received approval thereof from the SEC; (ii) such applicant has provided each Participant [[Page 9811]] with a signed statement whereby the applicant agrees to be bound by the terms of this Agreement to the same effect as though it had originally signed this Agreement and (iii) an amended agreement reflecting the addition of such applicant as a Participant has been filed with and approved by the Commission. XVIII. This Agreement is wholly separate from the multiparty Agreement made pursuant to Rule 17d-2 by and among the NYSE MKT LLC, the [BATS]Bats BZX Exchange, Inc., BOX Options Exchange, LLC, the C2 Options Exchange, Inc., the Chicago Board Options Exchange, Inc., the International Securities Exchange, LLC, Financial Industry Regulatory Authority, The NASDAQ Stock Market LLC, the New York Stock Exchange, LLC, the NYSE Arca, Inc., the NASDAQ [OMX]BX, Inc., the NASDAQ [OMX] PHLX LLC, Miami International Securities Exchange, LLC, ISE Gemini, LLC, ISE Mercury, LLC, and Bats EDGX Exchange, Inc. involving the allocation of regulatory responsibilities with respect to common members for compliance with common rules relating to the conduct by broker-dealers of accounts for listed options or index warrants entered into on [October 8, 2015]February 16, 2016, and as may be amended from time to time. Limitation of Liability No Participant nor the Group nor any of their respective directors, governors, officers, employees or representatives shall be liable to any other Participant in this Agreement for any liability, loss or damage resulting from or claimed to have resulted from any delays, inaccuracies, errors or omissions with respect to the provision of Regulatory Responsibility as provided hereby or for the failure to provide any such Regulatory Responsibility, except with respect to such liability, loss or damages as shall have been suffered by one or more of the Participants and caused by the willful misconduct of one or more of the other Participants or its respective directors, governors, officers, employees or representatives. No warranties, express or implied, are made by the Participants, individually or as a group, or by the OSG with respect to any Regulatory Responsibility to be performed hereunder. Relief From Responsibility Pursuant to Section 17(d)(1)(A) of the Exchange Act and Rule 17d-2, the Participants join in requesting the Commission, upon its approval of this Agreement or any part thereof, to relieve the Participants that are party to this Agreement and are not the DOSR as to a Common Member of any and all Regulatory Responsibility with respect to the matters allocated to the DOSR. * * * * * Exhibit A Options Surveillance Group 17d-2 Agreement COMMON RULES as of January 23, 2017[29, 2016] Violation I--Expiring Exercise Declarations (EED)--for Listed and FLEX Equity Options ---------------------------------------------------------------------------------------------------------------- SRO Description of rule Exchange rule No. Frequency of review ---------------------------------------------------------------------------------------------------------------- [BATS]Bats........................ Exercise of Options Rule 23.1............ At Expiration. Contracts. BOX............................... Exercise of Options Rule 9000............ At Expiration. Contracts. C2................................ Exercise of Options Rule 11.1............ At Expiration. Contracts. CBOE.............................. Exercise of Options Rule 11.1............ At Expiration. Contracts. EDGX.............................. Exercise of Options Rule 23.1............ At Expiration. Contracts. FINRA............................. Exercise of Options Rule 2360(b)(23)..... At Expiration. Contracts. ISE............................... Exercise of Options Rule 1100............ At Expiration. Contracts. ISE Gemini........................ Exercise of Options Rule 1100............ At Expiration. Contracts. ISE Mercury....................... Exercise of Options Rule 1100............ At Expiration. Contracts. MIAX.............................. Exercise of Options Rule 700............. At Expiration. Contracts. MIAX PEARL........................ Exercise of Options Rule 700............. At Expiration. Contracts. Nasdaq............................ Exercise of Options Ch. VIII, Sect.1..... At Expiration. Contracts. Nasdaq [OMX]BX.................... Exercise of Options Ch. VII, Sect.1...... At Expiration. Contracts. Nasdaq [OMX]PHLX.................. Exercise of Equity Options Rule 1042............ At Expiration. Contracts. NYSE Arca......................... Exercise of Options Rule 6.24............ At Expiration. Contracts. NYSE MKT.......................... Exercise of Options Rule 980............. At Expiration. Contracts. ---------------------------------------------------------------------------------------------------------------- Violation II--Position Limits (PL)--for Listed Equity Options ---------------------------------------------------------------------------------------------------------------- Description of rule (for SRO review as they apply to Exchange rule No. Frequency of review PL) ---------------------------------------------------------------------------------------------------------------- [BATS]Bats........................ Position Limits........... Rule 18.7............ Daily. Exemptions from Position.. Rule 18.8............ As Needed. Liquidation Positions..... Rule 18.11........... As Needed. BOX............................... Position Limits........... Rule 3120............ Daily. Exemptions from Position Rule 3130............ As Needed. Limits. Liquidation Positions..... Rule 3160............ As Needed. C2................................ Position Limits........... Rule 4.11............ Daily. Liquidation of Positions.. Rule 4.14............ As Needed. CBOE.............................. Position Limits........... Rule 4.11............ Daily. Liquidation of Positions.. Rule 4.14............ As Needed. EDGX.............................. Position Limits........... Rule 18.7............ Daily. Exemptions from Position.. Rule 18.8............ As Needed. Liquidation Positions..... Rule 18.11........... As Needed. FINRA............................. Position Limits........... Rule 2860(b)(3)...... Daily. Liquidation of Positions Rule 2860(b)(6)...... As Needed. and Restrictions on Access. ISE............................... Position Limits........... Rule 412............. Daily. Exemptions from Position Rule 413............. As Needed. Limits. Liquidating Positions..... Rule 416............. As Needed. [[Page 9812]] ISE Gemini........................ Position Limits........... Rule 412............. Daily. Exemptions from Position Rule 413............. As Needed. Limits. Liquidating Positions..... Rule 416............. As Needed. ISE Mercury....................... Position Limits........... Rule 412............. Daily. Exemptions from Position Rule 413............. As Needed. Limits. Liquidating Positions..... Rule 416............. As Needed. MIAX.............................. Position Limits........... Rule 307............. Daily. Exemptions from Position Rule 308............. As Needed. Limits. Liquidating Positions..... Rule 311............. As Needed. MIAX Pearl........................ Position Limits........... Rule 307............. Daily. Exemptions from Position Rule 308............. As Needed. Limits. Liquidating Positions..... Rule 311............. As Needed. Nasdaq............................ Position Limits........... Ch. III, Sect. 7..... Daily. Exemptions from Position Ch. III, Sect. 8..... As Needed. Limits. Liquidating Positions..... Ch. III, Sect. 11.... As Needed. Nasdaq [OMX]BX.................... Position Limits........... Ch. III, Sect. 7..... Daily. Exemptions from Position Ch. III, Sect. 8..... As Needed. Limits. Liquidating Positions..... Ch. III, Sect. 11.... As Needed. Nasdaq [OMX]PHLX.................. Position Limits........... Rule 1001............ Daily. Liquidation of Position... Rule 1004............ As Needed. NYSE Arca......................... Position Limits........... Rule 6.8............. Daily. Liquidation of Position... Rule 6.7............. As Needed. NYSE MKT.......................... Position Limits........... Rule 904............. Daily. Liquidating Positions..... Rule 907............. As Needed. ---------------------------------------------------------------------------------------------------------------- Violation III--Large Options Position Report (LOPR)--for Listed and FLEX Equity Options and ETF Options ---------------------------------------------------------------------------------------------------------------- Description of rule (for SRO review as they apply to Exchange rule No. Frequency of review LOPR) ---------------------------------------------------------------------------------------------------------------- [BATS]Bats........................ Reports Related to Rule 18.10........... Yearly. Position Limits. BOX............................... Reports Related to Rule 3150............ Yearly. Position Limits. C2................................ Reports Related to Rule 4.13(a)......... Yearly. Position Limits. Reports Related to Rule 4.13(b)......... Yearly. Position Limits. Reports Related to Rule 4.13(d)......... Yearly. Position Limits. CBOE.............................. Reports Related to Rule 4.13(a)......... Yearly. Position Limits. Reports Related to Rule 4.13(b)......... Yearly. Position Limits. Reports Related to Rule 4.13(d)......... Yearly. Position Limits. EDGX.............................. Reports Related to Rule 18.10........... Yearly. Position Limits. FINRA............................. Options................... Rule 2360(b)(5)...... Yearly. ISE............................... Reports Related to Rule 415............. Yearly. Position Limits. ISE Gemini........................ Reports Related to Rule 415............. Yearly. Position Limits. ISE Mercury....................... Reports Related to Rule 415............. Yearly. Position Limits. MIAX.............................. Reports Related to Rule 310............. Yearly. Position Limits. MIAX PEARL........................ Reports Related to Rule 310............. Yearly. Position Limits. Nasdaq............................ Reports Related to Ch. III, Sect. 10.... Yearly. Position Limits. Nasdaq [OMX]BX.................... Reports Related to Ch. III, Sect. 10.... Yearly. Position Limits. Nasdaq [OMX]PHLX.................. Reporting of Options Rule 1003............ Yearly. Positions. NYSE Arca......................... Reporting of Options Rule 6.6............. Yearly. Positions. NYSE MKT.......................... Reporting of Options Rule 906............. Yearly. Positions. ---------------------------------------------------------------------------------------------------------------- Violation IV: Options Clearing Corporation (OCC) Adjustment Process ---------------------------------------------------------------------------------------------------------------- Description of rule (as they apply to OCC SRO Adjustments/By-laws Exchange rule No. Frequency of review Article V, Section 1.01(a) and .02)) ---------------------------------------------------------------------------------------------------------------- [BATS]Bats........................ Adherence to Law.......... Rule 18.1............ Yearly. BOX............................... Adherence to Law.......... Rule 3010............ Yearly. C2................................ Adherence to Law.......... Rule 4.2............. Yearly. CBOE.............................. Adherence to Law.......... Rule 4.2............. Yearly. EDGX.............................. Adherence to Law.......... Rule 18.1............ Yearly. FINRA............................. Violation of By-Laws and Rule 2360(b)(21)..... Yearly. Rules of FINRA or The OCC. ISE............................... Adherence to Law.......... Rule 401............. Yearly. ISE Gemini........................ Adherence to Law.......... Rule 401............. Yearly. ISE Mercury....................... Adherence to Law.......... Rule 401............. Yearly. MIAX.............................. Adherence to Law.......... Rule 300............. Yearly. MIAX PEARL........................ Adherence to Law.......... Rule 300............. Yearly. Nasdaq............................ Adherence to Law.......... Ch. III, Sect. 1..... Yearly. Nasdaq [OMX]BX.................... Adherence to Law.......... Ch. III, Sect. 1..... Yearly. [[Page 9813]] Nasdaq [OMX]PHLX.................. Violation of By-Laws and Rule 1050............ Yearly. Rules of OCC. NYSE Arca......................... Adherence to Law and Good Rule 11.1............ Yearly. Business Practice. NYSE MKT.......................... Business Conduct.......... Rule 16.............. Yearly. ---------------------------------------------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing. 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 4-551 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 4-551. 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 plan that are filed with the Commission, and all written communications relating to the proposed plan 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 plan also will be available for inspection and copying at the principal offices of MKT, Bats, C2, CBOE, EDGX, Gemini, ISE, ISE Mercury, FINRA, Arca, NASDAQ, BOX, BX, Phlx, MIAX, and MIAX PEARL. 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 4-551 and should be submitted on or before March 1, 2017. V. Discussion The Commission continues to believe that the Plan, as proposed to be amended, is an achievement in cooperation among the SRO participants. The Plan, as amended, will reduce unnecessary regulatory duplication by allocating to the designated SRO the responsibility for certain options-related market surveillance matters that would otherwise be performed by multiple SROs. The Plan promotes efficiency by reducing costs to firms that are members of more than one of the SRO participants. In addition, because the SRO participants coordinate their regulatory functions in accordance with the Plan, the Plan promotes, and will continue to promote, investor protection. Under paragraph (c) of Rule 17d-2, the Commission may, after appropriate notice and comment, declare a plan, or any part of a plan, effective. In this instance, the Commission believes that appropriate notice and comment can take place after the proposed amendment is effective. The primary purpose of the amendment is to add MIAX PEARL as a Participant to the Plan. By declaring it effective today, the amended Plan can become effective and be implemented without undue delay.\20\ In addition, the Commission notes that the prior version of this Plan was published for comment, and the Commission did not receive any comments thereon.\21\ Finally, the Commission does not believe that the amendment to the Plan raises any new regulatory issues that the Commission has not previously considered. --------------------------------------------------------------------------- \20\ On December 13, 2016, the Commission approved MIAX PEARL's application for registration as a national securities exchange. See Securities Exchange Act Release No. 79543, 81 FR 92901 (December 20, 2016). \21\ See Securities Exchange Act Release No. 77149 (February 16, 2016), 81 FR 8781 (February 22, 2016) (File No. 4-551). --------------------------------------------------------------------------- VI. Conclusion This order gives effect to the amended Plan submitted to the Commission that is contained in File No. 4-551. It is therefore ordered, pursuant to Section 17(d) of the Act, that the Plan, as amended by and between MKT, Bats, C2, CBOE, EDGX, Gemini, ISE, ISE Mercury, FINRA, Arca, NASDAQ, BOX, BX, Phlx, MIAX, and MIAX PEARL filed with the Commission pursuant to Rule 17d-2 on January 31, 2017 is hereby approved and declared effective. It is further ordered that those SRO participants that are not the DOSR as to a particular common member are relieved of those regulatory responsibilities allocated to the common member's DOSR under the amended Plan to the extent of such allocation. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\22\ --------------------------------------------------------------------------- \22\ 17 CFR 200.30-3(a)(34). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2017-02548 Filed 2-7-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices 9807
Number SR–BatsEDGX–2017–11, and (‘‘PHLX’’), Miami International rules. On its face, Rule 17d–1 deals only
should be submitted on or before March Securities Exchange (‘‘MIAX’’), and with an SRO’s obligations to enforce
1, 2017. MIAX PEARL, LLC (‘‘MIAX PEARL’’) member compliance with financial
For the Commission, by the Division of (collectively, ‘‘Participating responsibility requirements. Rule 17d–1
Trading and Markets, pursuant to delegated Organizations’’ or ‘‘parties’’). does not relieve an SRO from its
authority.19 obligation to examine a common
I. Introduction member for compliance with its own
Robert W. Errett,
Deputy Secretary. Section 19(g)(1) of the Act,3 among rules and provisions of the federal
[FR Doc. 2017–02545 Filed 2–7–17; 8:45 am]
other things, requires every self- securities laws governing matters other
regulatory organization (‘‘SRO’’) than financial responsibility, including
BILLING CODE 8011–01–P
registered as either a national securities sales practices and trading activities and
exchange or national securities practices.
SECURITIES AND EXCHANGE association to examine for, and enforce To address regulatory duplication in
COMMISSION compliance by, its members and persons these and other areas, the Commission
associated with its members with the adopted Rule 17d–2 under the Act.10
[Release No. 34–79930; File No. 4–551] Act, the rules and regulations Rule 17d–2 permits SROs to propose
thereunder, and the SRO’s own rules, joint plans for the allocation of
Program for Allocation of Regulatory regulatory responsibilities with respect
unless the SRO is relieved of this
Responsibilities Pursuant to Rule 17d– to their common members. Under
responsibility pursuant to Section
2; Notice of Filing and Order paragraph (c) of Rule 17d–2, the
17(d) 4 or Section 19(g)(2) 5 of the Act.
Approving and Declaring Effective an Commission may declare such a plan
Amendment to the Plan for the Without this relief, the statutory
obligation of each individual SRO could effective if, after providing for notice
Allocation of Regulatory and comment, it determines that the
Responsibilities Among NYSE MKT result in a pattern of multiple
examinations of broker-dealers that plan is necessary or appropriate in the
LLC, Bats BZX Exchange, Inc., BOX public interest and for the protection of
Options Exchange LLC, C2 Options maintain memberships in more than one
SRO (‘‘common members’’). Such investors, to foster cooperation and
Exchange, Incorporated, the Chicago coordination among the SROs, to
Board Options Exchange, regulatory duplication would add
unnecessary expenses for common remove impediments to, and foster the
Incorporated, the Bats EDGX development of, a national market
Exchange, Inc., the International members and their SROs.
Section 17(d)(1) of the Act 6 was system and a national clearance and
Securities Exchange LLC, ISE Gemini, settlement system, and is in conformity
LLC, ISE Mercury, LLC, Financial intended, in part, to eliminate
unnecessary multiple examinations and with the factors set forth in Section
Industry Regulatory Authority, Inc., 17(d) of the Act. Commission approval
NYSE Arca, Inc., The NASDAQ Stock regulatory duplication.7 With respect to
a common member, Section 17(d)(1) of a plan filed pursuant to Rule 17d–2
Market LLC, NASDAQ BX, Inc., the relieves an SRO of those regulatory
NASDAQ PHLX, Inc., Miami authorizes the Commission, by rule or
order, to relieve an SRO of the responsibilities allocated by the plan to
International Securities Exchange, another SRO.
LLC, and MIAX PEARL Concerning responsibility to receive regulatory
Options-Related Market Surveillance reports, to examine for and enforce II. The Plan
compliance with applicable statutes,
February 2, 2017. On December 11, 2007, the
rules, and regulations, or to perform
Notice is hereby given that the Commission declared effective the
other specified regulatory functions.
Securities and Exchange Commission Participating Organizations’ Plan for
To implement Section 17(d)(1), the allocating regulatory responsibilities
(‘‘Commission’’) has issued an Order, Commission adopted two rules: Rule
pursuant to Section 17(d) of the pursuant to Rule 17d–2.11 On April 11,
17d–1 and Rule 17d–2 under the Act.8 2008, the Commission approved an
Securities Exchange Act of 1934 Rule 17d–1 authorizes the Commission
(‘‘Act’’),1 approving and declaring amendment to the Plan to include
to name a single SRO as the designated NASDAQ as a participant.12 On October
effective an amendment to the plan for examining authority (‘‘DEA’’) to
allocating regulatory responsibility 9, 2008, the Commission approved an
examine common members for amendment to the Plan to clarify that
(‘‘Plan’’) filed on January 31, 2017, compliance with the financial
pursuant to Rule 17d–2 of the Act,2 by the term Regulatory Responsibility for
responsibility requirements imposed by options position limits includes the
NYSE MKT LLC (‘‘MKT’’), Bats BZX the Act, or by Commission or SRO
Exchange, Inc., (‘‘Bats’’), the BOX examination responsibilities for the
rules.9 When an SRO has been named as delta hedging exemption.13 On February
Options Exchange LLC (‘‘BOX’’), C2 a common member’s DEA, all other
Options Exchange, Incorporated (‘‘C2’’), 25, 2010, the Commission approved an
SROs to which the common member amendment to the Plan to add Bats and
the Chicago Board Options Exchange, belongs are relieved of the responsibility
Incorporated (‘‘CBOE’’), the Bats EDGX C2 as SRO participants and to reflect the
to examine the firm for compliance with name changes of the American Stock
Exchange, Inc. (‘‘EDGX’’), the the applicable financial responsibility
International Securities Exchange LLC Exchange LLC to the NYSE Amex LLC,
(‘‘ISE’’), ISE Gemini, LLC (‘‘Gemini’’), 3 15 U.S.C. 78s(g)(1). 10 See Securities Exchange Act Release No. 12935
ISE Mercury, LLC (‘‘ISE Mercury’’), 4 15 U.S.C. 78q(d). (October 28, 1976), 41 FR 49091 (November 8,
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Financial Industry Regulatory 5 15 U.S.C. 78s(g)(2).
1976).
Authority, Inc. (‘‘FINRA’’), NYSE Arca, 6 15 U.S.C. 78q(d)(1). 11 See Securities Exchange Act Release No. 56941
7 See Securities Act Amendments of 1975, Report (December 11, 2007), 72 FR 71723 (December 18,
Inc. (‘‘Arca’’), The NASDAQ Stock
Market LLC (‘‘Nasdaq’’), NASDAQ BX, of the Senate Committee on Banking, Housing, and 2007) (File No. 4–551).
Urban Affairs to Accompany S. 249, S. Rep. No. 94– 12 See Securities Exchange Act Release No. 57649
Inc. (‘‘BX’’), NASDAQ PHLX, Inc. 75, 94th Cong., 1st Session 32 (1975). (April 11, 2008), 73 FR 20976 (April 17, 2008) (File
8 17 CFR 240.17d–1 and 17 CFR 240.17d–2, No. 4–551).
19 17 CFR 200.30–3(a)(12). respectively. 13 See Securities Exchange Act Release No. 58765
1 15 U.S.C. 78q(d). 9 See Securities Exchange Act Release No. 12352 (October 9, 2008), 73 FR 62344 (October 20, 2008)
2 17 CFR 240.17d–2. (April 20, 1976), 41 FR 18808 (May 7, 1976). (File No. 4–551).
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![9808 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices
and the Boston Stock Exchange, Inc. to follows (additions are italicized; ‘‘Participants’’ and individually, each a
the NASDAQ OMX BX, Inc.14 On May deletions are [bracketed]): ‘‘Participant.’’ This Agreement shall be
11, 2012, the Commission approved an * * * * * administered by a committee known as
amendment to the Plan to add BOX as the Options Surveillance Group (the
a participant to the Plan.15 On December AGREEMENT BY AND AMONG NYSE ‘‘OSG’’ or ‘‘Group’’), as described in
5, 2012, the Commission approved an MKT LLC, BATSBZX EXCHANGE, INC., Section V hereof. Unless defined in this
amendment to the Plan to add MIAX as EDGX EXCHANGE INC., BOX OPTIONS Agreement or the context otherwise
a participant to the Plan.16 On July 26, EXCHANGE LLC, NASDAQ[OMX] BX, requires, the terms used herein shall
2013, the Commission approved an INC., C2 OPTIONS EXCHANGE, have the meanings assigned thereto by
amendment to the Plan to add Topaz INCORPORATED, THE CHICAGO the Exchange Act and the rules and
Exchange, LLC as a Participant to the BOARD OPTIONS EXCHANGE, regulations thereunder.
Plan.17 On October 29, 2015, the INCORPORATED, THE Whereas, the Participants desire to
Commission approved an amendment to INTERNATIONAL SECURITIES eliminate regulatory duplication with
add EDGX as a Participant to the Plan EXCHANGE, LLC, ISE GEMINI, LLC, respect to SRO market surveillance of
and to change the name of Topaz ISE MERCURY, LLC, FINANCIAL Common Member 1 activities with
INDUSTRY REGULATORY regard to certain common rules relating
Exchange, LLC to ISE Gemini, LLC.18
AUTHORITY, INC., NYSE ARCA, INC., to listed options (‘‘Options’’); and
On February 16, 2016, the Commission
THE NASDAQ STOCK MARKET LLC, Whereas, for this purpose, the
approved an amendment to add ISE
NASDAQ [OMX]PHLX [INC]LLC, Participants desire to execute and file
Mercury, LLC as a Participant to the
MIAMI INTERNATIONAL SECURITIES this Agreement with the Securities and
Plan.19
EXCHANGE, LLC, AND MIAX PEARL, Exchange Commission (the ‘‘SEC’’ or
The Plan is designed to reduce LLC PURSUANT TO RULE 17d–2 ‘‘Commission’’) pursuant to Rule 17d–2.
regulatory duplication for common UNDER THE SECURITIES EXCHANGE Now, therefore, in consideration of
members by allocating regulatory ACT OF 1934 the mutual covenants contained in this
responsibility for certain options-related Agreement, the Participants agree as
market surveillance matters among the This agreement (this ‘‘Agreement’’), follows:
Participating Organizations. Generally, by and among NYSE MKT LLC I. Except as otherwise provided in this
under the Plan, a Participating (‘‘MKT’’), [BATS]Bats BZX Exchange, Agreement, each Participant shall
Organization will serve as the Inc., (‘‘Bats[ATS]’’), the Bats EDGX assume Regulatory Responsibility (as
Designated Options Surveillance Exchange, Inc. (‘‘EDGX’’), the C2 defined below) for the Common
Regulator (‘‘DOSR’’) for each common Options Exchange, Incorporated (‘‘C2’’), Members that are allocated or assigned
member assigned to it and will assume the Chicago Board Options Exchange, to such Participant in accordance with
regulatory responsibility with respect to Incorporated (‘‘CBOE’’), the the terms of this Agreement and shall be
that common member’s compliance International Securities Exchange, LLC relieved of its Regulatory Responsibility
with applicable common rules for (‘‘ISE’’), Financial Industry Regulatory as to the remaining Common Members.
Authority, Inc. (‘‘FINRA’’), NYSE Arca, For purposes of this Agreement, a
certain accounts. When an SRO has
Inc. (‘‘Arca’’), The NASDAQ Stock Participant shall be considered to be the
been named as a common member’s
Market LLC (‘‘Nasdaq’’), BOX Options Designated Options Surveillance
DOSR, all other SROs to which the
Exchange LLC (‘‘BOX’’), NASDAQ Regulator (‘‘DOSR’’) for each Common
common member belongs will be
[OMX]BX, Inc. (‘‘BX’’), NASDAQ Member that is allocated to it in
relieved of regulatory responsibility for
[OMX]PHLX [Inc.]LLC (‘‘PHLX’’), Miami accordance with Section VII.
that common member, pursuant to the
International Securities Exchange, LLC II. As used in this Agreement, the
terms of the Plan, with respect to the
(‘‘MIAX’’), ISE Gemini, LLC (‘‘Gemini’’), term ‘‘Regulatory Responsibility’’ shall
applicable common rules specified in
[and]ISE Mercury, LLC (‘‘Mercury’’), mean surveillance, investigation and
Exhibit A to the Plan.
and MIAX PEARL, LLC (‘‘MIAX enforcement responsibilities relating to
III. Proposed Amendment to the Plan PEARL’’), is made this 10th day of compliance by the Common Members
October 2007, and as amended the 31st with such Options rules of the
On January 31, 2017, the parties day of March 2008, the 1st day of Participants as the Participants shall
submitted a proposed amendment to the October 2008, the 3rd day of February determine are substantially similar and
Plan. The primary purpose of the 2010, the 25th day of April 2012, and shall approve from time to time, insofar
amendment is to add MIAX PEARL as the 19th day of November 2012, and the as such rules relate to market
a Participant to the Plan. The text of the 30th day of May 2013, and the 16th day surveillance (collectively, the ‘‘Common
proposed amended 17d–2 plan is as of October 2015, and the 29th day of Rules’’). For the purposes of this
January 2016, and the 23rd day of Agreement the list of Common Rules is
14 See Securities Exchange Act Release No. 61588
January 2017, pursuant to Section 17(d) attached as Exhibit A hereto, which may
(February 25, 2010), 75 FR 9970 (March 4, 2010) of the Securities Exchange Act of 1934, only be amended upon unanimous
(File No. 4–551).
15 See Securities Exchange Act Release No. 66975 as amended (the ‘‘Exchange Act’’), and written agreement by the Participants.
(May 11, 2012), 77 FR 29712 (May 18, 2010) (File Rule 17d–2 thereunder (‘‘Rule 17d–2’’), The DOSR assigned to each Common
No. 4–551). which allows for a joint plan among Member shall assume Regulatory
16 See Securities Exchange Act Release No. 68362
self-regulatory organizations (‘‘SROs’’) Responsibility with regard to that
(December 5, 2012), 77 FR 73719 (December 11, to allocate regulatory obligations with Common Member’s compliance with the
asabaliauskas on DSK3SPTVN1PROD with NOTICES
2012) (File No. 4–551).
17 See Securities Exchange Act Release No. 70052 respect to brokers or dealers that are applicable Common Rules for certain
(July 26, 2013), 78 FR 46665 (August 1, 2013) (File members of two or more of the parties accounts.2 A DOSR may perform its
No. 4–551). to this Agreement (‘‘Common
18 See Securities Exchange Act Release No. 76310
Members’’). MKT, Bats[ATS], C2, CBOE, 1 In the case of the BX and BOX, members are
(October 29, 2015), 80 FR 68354 (November 4, 2015) EDGX, ISE Gemini, ISE, ISE Mercury, those persons who are Options Participants (as
(File No. 4–551). defined in the BOX Options Exchange LLC Rules
19 See Securities Exchange Act Release No. 77149 FINRA, Arca, Nasdaq, BOX, BX, PHLX, and NASDAQ [OMX] BX, Inc. Rules).
(February 16, 2016), 81 FR 8781 (February 22, 2016) [and]MIAX, and MIAX PEARL are 2 Certain accounts shall include customer (‘‘C’’ as
(File No. 4–551). collectively referred to herein as the classified by the Options Clearing Corporation
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![Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices 9811
with a signed statement whereby the of regulatory responsibilities with directors, governors, officers, employees
applicant agrees to be bound by the respect to common members for or representatives. No warranties,
terms of this Agreement to the same compliance with common rules relating express or implied, are made by the
effect as though it had originally signed to the conduct by broker-dealers of Participants, individually or as a group,
this Agreement and (iii) an amended accounts for listed options or index or by the OSG with respect to any
agreement reflecting the addition of warrants entered into on [October 8, Regulatory Responsibility to be
such applicant as a Participant has been 2015]February 16, 2016, and as may be performed hereunder.
filed with and approved by the amended from time to time.
Commission. Relief From Responsibility
XVIII. This Agreement is wholly Limitation of Liability
Pursuant to Section 17(d)(1)(A) of the
separate from the multiparty Agreement No Participant nor the Group nor any Exchange Act and Rule 17d–2, the
made pursuant to Rule 17d–2 by and of their respective directors, governors, Participants join in requesting the
among the NYSE MKT LLC, the officers, employees or representatives Commission, upon its approval of this
[BATS]Bats BZX Exchange, Inc., BOX shall be liable to any other Participant Agreement or any part thereof, to relieve
Options Exchange, LLC, the C2 Options in this Agreement for any liability, loss the Participants that are party to this
Exchange, Inc., the Chicago Board or damage resulting from or claimed to Agreement and are not the DOSR as to
Options Exchange, Inc., the have resulted from any delays, a Common Member of any and all
International Securities Exchange, LLC, inaccuracies, errors or omissions with Regulatory Responsibility with respect
Financial Industry Regulatory respect to the provision of Regulatory to the matters allocated to the DOSR.
Authority, The NASDAQ Stock Market Responsibility as provided hereby or for
LLC, the New York Stock Exchange, the failure to provide any such * * * * *
LLC, the NYSE Arca, Inc., the NASDAQ Regulatory Responsibility, except with Exhibit A
[OMX]BX, Inc., the NASDAQ [OMX] respect to such liability, loss or damages
PHLX LLC, Miami International as shall have been suffered by one or Options Surveillance Group 17d–2
Securities Exchange, LLC, ISE Gemini, more of the Participants and caused by Agreement
LLC, ISE Mercury, LLC, and Bats EDGX the willful misconduct of one or more COMMON RULES as of January 23,
Exchange, Inc. involving the allocation of the other Participants or its respective 2017[29, 2016]
VIOLATION I—EXPIRING EXERCISE DECLARATIONS (EED)—FOR LISTED AND FLEX EQUITY OPTIONS
Frequency
SRO Description of rule Exchange rule No. of review
[BATS]Bats .............................. Exercise of Options Contracts ............................................... Rule 23.1 ............................... At Expiration.
BOX ......................................... Exercise of Options Contracts ............................................... Rule 9000 .............................. At Expiration.
C2 ............................................ Exercise of Options Contracts ............................................... Rule 11.1 ............................... At Expiration.
CBOE ...................................... Exercise of Options Contracts ............................................... Rule 11.1 ............................... At Expiration.
EDGX ...................................... Exercise of Options Contracts ............................................... Rule 23.1 ............................... At Expiration.
FINRA ...................................... Exercise of Options Contracts ............................................... Rule 2360(b)(23) .................... At Expiration.
ISE ........................................... Exercise of Options Contracts ............................................... Rule 1100 .............................. At Expiration.
ISE Gemini .............................. Exercise of Options Contracts ............................................... Rule 1100 .............................. At Expiration.
ISE Mercury ............................ Exercise of Options Contracts ............................................... Rule 1100 .............................. At Expiration.
MIAX ........................................ Exercise of Options Contracts ............................................... Rule 700 ................................ At Expiration.
MIAX PEARL ........................... Exercise of Options Contracts ............................................... Rule 700 ................................ At Expiration.
Nasdaq .................................... Exercise of Options Contracts ............................................... Ch. VIII, Sect.1 ...................... At Expiration.
Nasdaq [OMX]BX .................... Exercise of Options Contracts ............................................... Ch. VII, Sect.1 ....................... At Expiration.
Nasdaq [OMX]PHLX ............... Exercise of Equity Options Contracts .................................... Rule 1042 .............................. At Expiration.
NYSE Arca .............................. Exercise of Options Contracts ............................................... Rule 6.24 ............................... At Expiration.
NYSE MKT .............................. Exercise of Options Contracts ............................................... Rule 980 ................................ At Expiration.
VIOLATION II—POSITION LIMITS (PL)—FOR LISTED EQUITY OPTIONS
Description of rule Frequency
SRO Exchange rule No.
(for review as they apply to PL) of review
[BATS]Bats .............................. Position Limits ........................................................................ Rule 18.7 ............................... Daily.
Exemptions from Position ...................................................... Rule 18.8 ............................... As Needed.
Liquidation Positions .............................................................. Rule 18.11 ............................. As Needed.
BOX ......................................... Position Limits ........................................................................ Rule 3120 .............................. Daily.
Exemptions from Position Limits ............................................ Rule 3130 .............................. As Needed.
Liquidation Positions .............................................................. Rule 3160 .............................. As Needed.
C2 ............................................ Position Limits ........................................................................ Rule 4.11 ............................... Daily.
Liquidation of Positions .......................................................... Rule 4.14 ............................... As Needed.
CBOE ...................................... Position Limits ........................................................................ Rule 4.11 ............................... Daily.
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Liquidation of Positions .......................................................... Rule 4.14 ............................... As Needed.
EDGX ...................................... Position Limits ........................................................................ Rule 18.7 ............................... Daily.
Exemptions from Position ...................................................... Rule 18.8 ............................... As Needed.
Liquidation Positions .............................................................. Rule 18.11 ............................. As Needed.
FINRA ...................................... Position Limits ........................................................................ Rule 2860(b)(3) ...................... Daily.
Liquidation of Positions and Restrictions on Access ............. Rule 2860(b)(6) ...................... As Needed.
ISE ........................................... Position Limits ........................................................................ Rule 412 ................................ Daily.
Exemptions from Position Limits ............................................ Rule 413 ................................ As Needed.
Liquidating Positions .............................................................. Rule 416 ................................ As Needed.
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![9812 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices
VIOLATION II—POSITION LIMITS (PL)—FOR LISTED EQUITY OPTIONS—Continued
Description of rule Frequency
SRO Exchange rule No.
(for review as they apply to PL) of review
ISE Gemini .............................. Position Limits ........................................................................ Rule 412 ................................ Daily.
Exemptions from Position Limits ............................................ Rule 413 ................................ As Needed.
Liquidating Positions .............................................................. Rule 416 ................................ As Needed.
ISE Mercury ............................ Position Limits ........................................................................ Rule 412 ................................ Daily.
Exemptions from Position Limits ............................................ Rule 413 ................................ As Needed.
Liquidating Positions .............................................................. Rule 416 ................................ As Needed.
MIAX ........................................ Position Limits ........................................................................ Rule 307 ................................ Daily.
Exemptions from Position Limits ............................................ Rule 308 ................................ As Needed.
Liquidating Positions .............................................................. Rule 311 ................................ As Needed.
MIAX Pearl .............................. Position Limits ........................................................................ Rule 307 ................................ Daily.
Exemptions from Position Limits ............................................ Rule 308 ................................ As Needed.
Liquidating Positions .............................................................. Rule 311 ................................ As Needed.
Nasdaq .................................... Position Limits ........................................................................ Ch. III, Sect. 7 ........................ Daily.
Exemptions from Position Limits ............................................ Ch. III, Sect. 8 ........................ As Needed.
Liquidating Positions .............................................................. Ch. III, Sect. 11 ...................... As Needed.
Nasdaq [OMX]BX .................... Position Limits ........................................................................ Ch. III, Sect. 7 ........................ Daily.
Exemptions from Position Limits ............................................ Ch. III, Sect. 8 ........................ As Needed.
Liquidating Positions .............................................................. Ch. III, Sect. 11 ...................... As Needed.
Nasdaq [OMX]PHLX ............... Position Limits ........................................................................ Rule 1001 .............................. Daily.
Liquidation of Position ............................................................ Rule 1004 .............................. As Needed.
NYSE Arca .............................. Position Limits ........................................................................ Rule 6.8 ................................. Daily.
Liquidation of Position ............................................................ Rule 6.7 ................................. As Needed.
NYSE MKT .............................. Position Limits ........................................................................ Rule 904 ................................ Daily.
Liquidating Positions .............................................................. Rule 907 ................................ As Needed.
VIOLATION III—LARGE OPTIONS POSITION REPORT (LOPR)—FOR LISTED AND FLEX EQUITY OPTIONS AND ETF OPTIONS
Description of rule Frequency
SRO Exchange rule No.
(for review as they apply to LOPR) of review
[BATS]Bats .............................. Reports Related to Position Limits ......................................... Rule 18.10 ............................. Yearly.
BOX ......................................... Reports Related to Position Limits ......................................... Rule 3150 .............................. Yearly.
C2 ............................................ Reports Related to Position Limits ......................................... Rule 4.13(a) ........................... Yearly.
Reports Related to Position Limits ......................................... Rule 4.13(b) ........................... Yearly.
Reports Related to Position Limits ......................................... Rule 4.13(d) ........................... Yearly.
CBOE ...................................... Reports Related to Position Limits ......................................... Rule 4.13(a) ........................... Yearly.
Reports Related to Position Limits ......................................... Rule 4.13(b) ........................... Yearly.
Reports Related to Position Limits ......................................... Rule 4.13(d) ........................... Yearly.
EDGX ...................................... Reports Related to Position Limits ......................................... Rule 18.10 ............................. Yearly.
FINRA ...................................... Options ................................................................................... Rule 2360(b)(5) ...................... Yearly.
ISE ........................................... Reports Related to Position Limits ......................................... Rule 415 ................................ Yearly.
ISE Gemini .............................. Reports Related to Position Limits ......................................... Rule 415 ................................ Yearly.
ISE Mercury ............................ Reports Related to Position Limits ......................................... Rule 415 ................................ Yearly.
MIAX ........................................ Reports Related to Position Limits ......................................... Rule 310 ................................ Yearly.
MIAX PEARL ........................... Reports Related to Position Limits ......................................... Rule 310 ................................ Yearly.
Nasdaq .................................... Reports Related to Position Limits ......................................... Ch. III, Sect. 10 ...................... Yearly.
Nasdaq [OMX]BX .................... Reports Related to Position Limits ......................................... Ch. III, Sect. 10 ...................... Yearly.
Nasdaq [OMX]PHLX ............... Reporting of Options Positions .............................................. Rule 1003 .............................. Yearly.
NYSE Arca .............................. Reporting of Options Positions .............................................. Rule 6.6 ................................. Yearly.
NYSE MKT .............................. Reporting of Options Positions .............................................. Rule 906 ................................ Yearly.
VIOLATION IV: OPTIONS CLEARING CORPORATION (OCC) ADJUSTMENT PROCESS
Description of rule Frequency
SRO (as they apply to OCC Adjustments/By-laws Exchange rule No. of review
Article V, Section 1.01(a) and .02))
[BATS]Bats .............................. Adherence to Law .................................................................. Rule 18.1 ............................... Yearly.
BOX ......................................... Adherence to Law .................................................................. Rule 3010 .............................. Yearly.
C2 ............................................ Adherence to Law .................................................................. Rule 4.2 ................................. Yearly.
CBOE ...................................... Adherence to Law .................................................................. Rule 4.2 ................................. Yearly.
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EDGX ...................................... Adherence to Law .................................................................. Rule 18.1 ............................... Yearly.
FINRA ...................................... Violation of By-Laws and Rules of FINRA or The OCC ........ Rule 2360(b)(21) .................... Yearly.
ISE ........................................... Adherence to Law .................................................................. Rule 401 ................................ Yearly.
ISE Gemini .............................. Adherence to Law .................................................................. Rule 401 ................................ Yearly.
ISE Mercury ............................ Adherence to Law .................................................................. Rule 401 ................................ Yearly.
MIAX ........................................ Adherence to Law .................................................................. Rule 300 ................................ Yearly.
MIAX PEARL ........................... Adherence to Law .................................................................. Rule 300 ................................ Yearly.
Nasdaq .................................... Adherence to Law .................................................................. Ch. III, Sect. 1 ........................ Yearly.
Nasdaq [OMX]BX .................... Adherence to Law .................................................................. Ch. III, Sect. 1 ........................ Yearly.
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![Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices 9813
VIOLATION IV: OPTIONS CLEARING CORPORATION (OCC) ADJUSTMENT PROCESS—Continued
Description of rule Frequency
SRO (as they apply to OCC Adjustments/By-laws Exchange rule No. of review
Article V, Section 1.01(a) and .02))
Nasdaq [OMX]PHLX ............... Violation of By-Laws and Rules of OCC ................................ Rule 1050 .............................. Yearly.
NYSE Arca .............................. Adherence to Law and Good Business Practice ................... Rule 11.1 ............................... Yearly.
NYSE MKT .............................. Business Conduct .................................................................. Rule 16 .................................. Yearly.
IV. Solicitation of Comments MKT, Bats, C2, CBOE, EDGX, Gemini, undue delay.20 In addition, the
Interested persons are invited to ISE, ISE Mercury, FINRA, Arca, Commission notes that the prior version
submit written data, views, and NASDAQ, BOX, BX, Phlx, MIAX, and of this Plan was published for comment,
arguments concerning the foregoing. MIAX PEARL. All comments received and the Commission did not receive any
Comments may be submitted by any of will be posted without change; the comments thereon.21 Finally, the
the following methods: Commission does not edit personal Commission does not believe that the
identifying information from amendment to the Plan raises any new
Electronic Comments submissions. You should submit only regulatory issues that the Commission
• Use the Commission’s Internet information that you wish to make has not previously considered.
comment form (http://www.sec.gov/ available publicly. All submissions
VI. Conclusion
rules/sro.shtml); or should refer to File Number 4–551 and
• Send an email to rule- should be submitted on or before March This order gives effect to the amended
comments@sec.gov. Please include File 1, 2017. Plan submitted to the Commission that
Number 4–551 on the subject line. V. Discussion is contained in File No. 4–551.
Paper Comments It is therefore ordered, pursuant to
The Commission continues to believe Section 17(d) of the Act, that the Plan,
• Send paper comments in triplicate that the Plan, as proposed to be as amended by and between MKT, Bats,
to Secretary, Securities and Exchange amended, is an achievement in C2, CBOE, EDGX, Gemini, ISE, ISE
Commission, 100 F Street NE., cooperation among the SRO Mercury, FINRA, Arca, NASDAQ, BOX,
Washington, DC 20549–1090. participants. The Plan, as amended, will BX, Phlx, MIAX, and MIAX PEARL filed
All submissions should refer to File reduce unnecessary regulatory with the Commission pursuant to Rule
Number 4–551. This file number should duplication by allocating to the 17d–2 on January 31, 2017 is hereby
be included on the subject line if email designated SRO the responsibility for approved and declared effective.
is used. To help the Commission certain options-related market
surveillance matters that would It is further ordered that those SRO
process and review your comments participants that are not the DOSR as to
more efficiently, please use only one otherwise be performed by multiple
SROs. The Plan promotes efficiency by a particular common member are
method. The Commission will post all
reducing costs to firms that are members relieved of those regulatory
comments on the Commission’s Internet
of more than one of the SRO responsibilities allocated to the common
Web site (http://www.sec.gov/rules/
participants. In addition, because the member’s DOSR under the amended
sro.shtml). Copies of the submission, all
SRO participants coordinate their Plan to the extent of such allocation.
subsequent amendments, all written
statements with respect to the proposed regulatory functions in accordance with For the Commission, by the Division of
plan that are filed with the Commission, the Plan, the Plan promotes, and will Trading and Markets, pursuant to delegated
and all written communications relating continue to promote, investor authority.22
to the proposed plan between the protection. Under paragraph (c) of Rule Robert W. Errett,
Commission and any person, other than 17d–2, the Commission may, after Deputy Secretary.
those that may be withheld from the appropriate notice and comment, [FR Doc. 2017–02548 Filed 2–7–17; 8:45 am]
public in accordance with the declare a plan, or any part of a plan, BILLING CODE 8011–01–P
provisions of 5 U.S.C. 552, will be effective. In this instance, the
available for Web site viewing and Commission believes that appropriate 20 On December 13, 2016, the Commission
printing in the Commission’s Public notice and comment can take place after approved MIAX PEARL’s application for
Reference Room, 100 F Street NE., the proposed amendment is effective. registration as a national securities exchange. See
Washington, DC 20549, on official The primary purpose of the amendment Securities Exchange Act Release No. 79543, 81 FR
92901 (December 20, 2016).
business days between the hours of is to add MIAX PEARL as a Participant 21 See Securities Exchange Act Release No. 77149
10:00 a.m. and 3:00 p.m. Copies of the to the Plan. By declaring it effective (February 16, 2016), 81 FR 8781 (February 22, 2016)
plan also will be available for inspection today, the amended Plan can become (File No. 4–551).
and copying at the principal offices of effective and be implemented without 22 17 CFR 200.30–3(a)(34).
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Document Created: 2017-02-08 02:59:40
Document Modified: 2017-02-08 02:59:40
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| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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