83 FR 35513 - Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Correct Certain References and Provide Transparency to Existing Processes in the Mortgage-Backed Securities Division Electronic Pool Notification Rules
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 144 (July 26, 2018)
Federal Register Volume 83, Issue 144 (July 26, 2018)
| Page Range | 35513-35516 | |
| FR Document | 2018-15943 |
[Federal Register Volume 83, Number 144 (Thursday, July 26, 2018)] [Notices] [Pages 35513-35516] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-15943] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83682; File No. SR-FICC-2018-005] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Correct Certain References and Provide Transparency to Existing Processes in the Mortgage-Backed Securities Division Electronic Pool Notification Rules July 20, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on July 13, 2018, Fixed Income Clearing Corporation (``FICC'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II and III below, which Items have been prepared by the clearing agency. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change consists of amendments to the FICC Mortgage-Backed Securities Division (``MBSD'') electronic pool notification (``EPN'') Rules (the ``EPN Rules'') \3\ as described below. --------------------------------------------------------------------------- \3\ Terms not defined herein are defined in the EPN Rules, available at http://www.dtcc.com/~/media/Files/Downloads/legal/ rules/ficc_mbsd_epnrules.pdf. --------------------------------------------------------------------------- FICC is proposing to correct the EPN Rules by amending several references in the section of the EPN Rules entitled ``FICC Mortgage- Backed Securities Division (``MBSD'') EPN Schedule of Charges.'' Specifically, FICC is proposing to replace the references to ``FICC'' with ``the Corporation.'' FICC is proposing this change because ``FICC'' is not a term that is defined in the EPN Rules. In addition, FICC is proposing to replace the reference to ``The Depository Trust Corporation'' with ``The Depository Trust & Clearing Corporation.'' FICC is proposing this change because the reference to ``The Depository Trust Corporation'' is an error. FICC is also proposing to amend Article III (EPN Users) of the EPN Rules to set forth MBSD's existing practices. Specifically, FICC is proposing to include an EPN User's ongoing obligation to notify FICC if such EPN User no longer complies with the requirements for admission to membership in the EPN Rules (i.e., as set forth in Secs. 2 (Approval of Applicants) and 3 (Agreements of EPN Users) of EPN Rule 1 (Requirements Applicable to EPN Users) of Article III (EPN Users)). In addition, FICC is proposing to amend Article III (EPN Users) to define specific circumstances where FICC would undertake action to determine the status of an EPN User and its continued access to the EPN system. The proposed change would also state that FICC may request that an EPN User provide written assurances if FICC believes such EPN User may fail to comply with the EPN Rules. The proposed changes to Article III (EPN Users) would necessitate a new defined term in Article I (Definitions and General Provisions) of the EPN Rules. II. Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. (A) Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose FICC is proposing to correct the EPN Rules by amending several references in the section of the EPN Rules entitled ``FICC Mortgage- Backed Securities Division (``MBSD'') EPN Schedule of Charges.'' Specifically, FICC is proposing to replace the references to ``FICC'' with ``the Corporation.'' FICC is proposing this change because ``FICC'' is not a term that is defined in the EPN Rules. In addition, FICC is proposing to replace the reference to ``The Depository Trust Corporation'' with ``The Depository Trust & Clearing Corporation.'' FICC is proposing this change because the reference to ``The Depository Trust Corporation'' is an error. FICC is also proposing to amend Article III (EPN Users) of the EPN Rules to set forth MBSD's existing practices. Specifically, FICC is proposing to include an EPN User's ongoing obligation to notify FICC if such EPN User no longer complies with the requirements for admission to membership in the EPN Rules (i.e., as set forth in Secs. 2 (Approval of Applicants) and 3 (Agreements of EPN Users) of EPN Rule 1 (Requirements Applicable to EPN Users) of Article III (EPN Users)). In addition, FICC is proposing to amend Article III (EPN Users) to define specific circumstances where FICC would undertake action to determine the status of an EPN User and its continued access to the EPN system. The proposed change would also state that FICC may request that an EPN User provide written assurances if FICC believes such EPN User may fail to comply with the EPN Rules. The proposed changes to Article III (EPN Users) would necessitate a new defined term in Article I (Definitions and General Provisions) of the EPN Rules. The proposed changes are described below. 1. MBSD's EPN Service MBSD's electronic pool notification service (referred to in the EPN Rules as the ``EPN Service'') enables users to reduce risk and streamline their operations by providing an automated manner for market participants that have an obligation to deliver pools (``pool sellers'') to transmit pool information efficiently and reliably to their counterparties (``pool buyers'') in real time. Market participants that wish to utilize the EPN Service are required to submit an application to MBSD. The application process and the use of the EPN Service are governed by the EPN Rules.\4\ MBSD's Clearing Members are required to be EPN Users; however, one can be an EPN User and not a Clearing Member.\5\ --------------------------------------------------------------------------- \4\ See EPN Rules Article III (EPN Users), EPN Rule 1 (Requirements Applicable to EPN Users), supra note 3. \5\ MBSD maintains two sets of rulebooks. The EPN Rules govern MBSD's EPN Service and the MBSD Clearing Rules (the ``MBSD Rules'') govern MBSD's clearance and settlement service. The MBSD Rules are available at http://www.dtcc.com/~/media/Files/Downloads/legal/ rules/ficc_mbsd_rules.pdf. Pursuant to the MBSD Rules, the term ``Clearing Member'' means any entity admitted into membership pursuant to MBSD Rule 2A. See MBSD Rule 1, Definitions. --------------------------------------------------------------------------- [[Page 35514]] 2. Proposed Changes To Make Corrections to the EPN Rules FICC is proposing to correct several references in the EPN Rules because the proposed changes would help to ensure that the EPN Rules are clear and accurate. Specifically, FICC is proposing to correct the section entitled ``FICC Mortgage-Backed Securities Division (``MBSD'') EPN Schedule of Charges'' in order to replace the references to ``FICC'' with ``the Corporation.'' FICC is proposing this change because ``FICC'' is not a term that is defined in the EPN Rules. In addition, FICC is also proposing to replace the reference to ``The Depository Trust Corporation'' with ``The Depository Trust & Clearing Corporation.'' FICC is proposing this change because the reference to ``The Depository Trust Corporation'' is an error. 3. Proposed Changes To Amend the EPN Rules To Include an EPN User's Ongoing Reporting Obligations FICC's existing practice is to require EPN Users to report certain information to FICC. In addition, if FICC learns of information that leads FICC to believe an EPN User is not in compliance with the EPN Rules, FICC will assess whether such EPN User is in compliance with the EPN Rules and may request that an EPN User provide written assurances that such EPN User will not violate the EPN Rules. FICC is proposing to amend the EPN Rules to reflect these practices. First, FICC is proposing to amend EPN Rule 1 (Requirements Applicable to EPN Users) of Article III (EPN Users) to include a provision that would be numbered ``Sec. 8. General Continuance Standards.'' This section would state that an EPN User shall promptly inform FICC, both orally and in writing, if such EPN User no longer complies with any of the requirements for admission to membership set forth in the EPN Rules (i.e., as set forth in Secs. 2 (Approval of Applicants) and 3 (Agreements of EPN Users) of EPN Rule 1 (Requirements Applicable to EPN Users) of Article III (EPN Users)). The referenced notification must take place within two Business Days from the date on which the EPN User first learns of its non-compliance. Next, FICC is proposing to amend the EPN Rules to have the new ``General Continuance Standards'' state that an EPN User shall notify FICC within two Business Days of learning of an investigation or proceeding to which it is, or is becoming, subject that would cause the EPN User to fall out of compliance with any of the requirements for membership set forth in the EPN Rules (i.e., as set forth in Secs. 2 (Approval of Applicants) and 3 (Agreements of EPN Users) of EPN Rule 1 (Requirements Applicable to EPN Users) of Article III (EPN Users)). However, the EPN User would not be required to notify FICC if doing so would cause the EPN User to violate an applicable law, rule, or regulation. 4. Proposed Changes To Amend the EPN Rules To Define Circumstances Under Which FICC May Determine an EPN User's Compliance With the EPN Rules FICC is also proposing that the new ``General Continuance Standards'' state that FICC would undertake action to determine the status of an EPN User and its continued access to the EPN system if: (a) An EPN User fails to maintain the requirements for admission to membership, including but not limited to operational testing and related reporting requirements imposed by FICC from time to time; (b) an EPN User violates any EPN Rule or other agreement with FICC; (c) an EPN User fails to satisfy in a timely manner any obligation to FICC; (d) there is a Reportable Event (as defined below); or (e) FICC otherwise deems it necessary or advisable, in order to protect FICC, its other EPN Users, or its creditors or investors, to safeguard securities and funds in the custody or control of FICC, or to promote the prompt and accurate processing, clearance or settlement of securities transactions. In connection with clause (d) above, FICC proposes to define a reportable event (``Reportable Event'') in EPN Rule 1 (Definitions) of Article I (Definitions and General Provisions) as an event that would effect a change in control of an EPN User or could have a substantial impact on such EPN User's business and/or financial condition, including, but not limited to: (i) Material organizational changes including mergers, acquisitions, changes in corporate form, name changes, changes in the ownership of an EPN User or its affiliates, and material changes in management, and (ii) status as a defendant in litigation, which could reasonably impact the EPN User's financial condition or ability to conduct business. The proposed ``General Continuance Standards'' section would also require an EPN User to submit written notice to FICC of a Reportable Event at least 90 calendar days prior to the effective date of such Reportable Event unless the EPN User demonstrates that it could not have reasonably done so, and provided notice, both orally and in writing, to FICC as soon as possible. Additionally, FICC is proposing that the proposed ``General Continuance Standards'' section state that, if FICC has reason to believe that an EPN User may fail to comply with any of the EPN Rules, FICC may require the EPN User to provide written assurances. Specifically, FICC may require such assurances, within such timeframe, in such detail, and pursuant to such manner as FICC shall determine, in writing of a credible nature that the EPN User shall not, in fact, violate any of the EPN Rules. These assurances could include, but would not be limited to, notarized statements, affidavits and/or officers' certificates. In order to accommodate the proposed ``General Continuance Standards'' section as described in this subsection 4 and in subsection 3 above, FICC is proposing to change the numbering of the existing ``Confidentiality'' provision in EPN Rule 1 (Requirements Applicable to EPN Users) of Article III (EPN Users) from ``Sec. 8'' to ``Sec. 9.'' 2. Statutory Basis Section 17A(b)(3)(F) of the Act requires, in part, that the EPN Rules be designed to promote the prompt and accurate clearance and settlement of securities transactions.\6\ --------------------------------------------------------------------------- \6\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- The proposed change to correct references in the section of the EPN Rules entitled ``FICC Mortgage-Backed Securities Division (``MBSD'') EPN Schedule of Charges'' (as described above in subsection 2 of Item II(A)1) would help to ensure that the EPN Rules are accurate and clear to EPN Users. As such, FICC believes that the proposed change would allow EPN Users to have a better understanding of the EPN Rules and thereby assist in promoting the prompt and accurate clearance and settlement of securities transactions, consistent with Section 17A(b)(3)(F) of the Act.\7\ --------------------------------------------------------------------------- \7\ Id. --------------------------------------------------------------------------- The proposed changes to (i) include an EPN User's ongoing obligation to notify FICC if such EPN User no longer complies with the requirements for admission to membership as set forth in the EPN Rules (as described above in subsection 3 of Item II(A)1), (ii) define specific circumstances where FICC would undertake action to determine the status of an EPN User and its continued access to the EPN system (as described above in subsection 4 of Item II(A)1), and (iii) state that FICC may request that an EPN User provide [[Page 35515]] written assurances if FICC believes such EPN User may fail to comply with the EPN Rules (as described above in subsection 4 of Item II(A)1) would provide clarity to EPN Users by setting forth in the EPN Rules FICC's existing practice. FICC believes this clarity would help to ensure that EPN Users are fully aware of their rights and obligations. The proposed changes would also help to ensure that FICC is promptly made aware in the event that an EPN User's access to the EPN Service should be reassessed due to an EPN User's possible violation of the EPN Rules. Because the proposed rule changes are designed to help ensure that EPN Users remain compliant with the EPN Rules, FICC believes that the proposed changes would help FICC protect the EPN Service. As the EPN Service is an important aspect of MBSD's clearance and settlement services, these proposed changes would promote the prompt and accurate clearance and settlement of securities transactions, consistent with Section 17A(b)(3)(F) of the Act.\8\ --------------------------------------------------------------------------- \8\ Id. --------------------------------------------------------------------------- Rule 17Ad-22(e)(18) under the Act requires, in part, that FICC establish, implement, maintain and enforce written policies and procedures reasonably designed to monitor compliance with participation requirements on an ongoing basis.\9\ As described above, the proposed rule changes to amend the EPN Rules to (i) include an EPN User's ongoing reporting obligations (as described above in subsection 3 of Item II(A)1) and (ii) define circumstances under which FICC may determine an EPN User's compliance with the EPN Rules (as described above in subsection 4 of Item II(A)1) would help to ensure that FICC is promptly made aware in the event that an EPN User's access to the EPN Service should be reassessed due to an EPN User's possible violation of EPN Rules. Because the proposed changes give FICC the ability to monitor an EPN User's compliance with the EPN Rules, FICC believes the proposed changes to (i) include an EPN User's ongoing reporting obligations and (ii) define circumstances under which FICC may determine an EPN User's compliance with the EPN Rules are consistent with Rule 17Ad-22(e)(18).\10\ --------------------------------------------------------------------------- \9\ 17 CFR 240.17Ad-22(e)(18). \10\ Id. --------------------------------------------------------------------------- Rule 17Ad-22(e)(23)(i) under the Act requires, in part, that FICC establish, implement, maintain and enforce written policies and procedures reasonably designed to provide for publicly disclosing all relevant rules and material procedures.\11\ As described above, the proposed rule changes to amend the EPN Rules to (i) make corrections (as described above in subsection 2 of Item II(A)1), (ii) include an EPN User's ongoing reporting obligations (as described above in subsection 3 of Item II(A)1), and (iii) define circumstances under which FICC may determine an EPN User's compliance with the EPN Rules (as described above in subsection 4 of Item II(A)1) would better publicly disclose all relevant and material procedures regarding the EPN Service. Therefore, FICC believes the proposed changes to correct and codify FICC's existing practices in the EPN Rules are consistent with Rule 17Ad-22(e)(23)(i).\12\ --------------------------------------------------------------------------- \11\ 17 CFR 240.17Ad-22(e)(23)(i). \12\ Id. --------------------------------------------------------------------------- (B) Clearing Agency's Statement on Burden on Competition FICC does not believe that the proposed changes to correct references in the section of the EPN Rules entitled ``FICC Mortgage- Backed Securities Division (``MBSD'') EPN Schedule of Charges'' (as described above in subsection 2 of Item II(A)1) would impact competition because the proposed changes correct errors in the EPN Rules and do not affect FICC's operations or the rights and obligations of EPN Users. FICC does not believe that the proposed changes to (i) include an EPN User's ongoing obligation to notify FICC if such EPN User no longer complies with the requirements for admission to membership in the EPN Rules (as described above in subsection 3 of Item II(A)1), (ii) define specific circumstances where FICC would undertake action to determine the status of an EPN User and its continued access to the EPN system (as described above in subsection 4 of Item II(A)1), and (iii) state that FICC may request that an EPN User provide written assurances if FICC believes such EPN User may fail to comply with the EPN Rules (as described above in subsection 4 of Item II(A)1) would impact competition because the proposed changes would codify FICC's existing practices in the EPN Rules. The proposed changes would apply equally to all EPN Users and would not affect FICC's operations. As a result, FICC believes the proposed rule change would not have any impact on competition. (C) Clearing Agency's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others FICC has not received or solicited any written comments relating to this proposal. FICC will notify the Commission of any written comments received by FICC. III. Date of Effectiveness of the Proposed Rule Change, and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be 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 CommentsUse 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-FICC-2018-005 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. All submissions should refer to File Number SR-FICC-2018-005. 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 website (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 [[Page 35516]] those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website 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 FICC and on DTCC's website (http://dtcc.com/legal/sec-rule-filings.aspx). All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-FICC-2018-005 and should be submitted on or before August 16, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\13\ --------------------------------------------------------------------------- \13\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2018-15943 Filed 7-25-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 144 / Thursday, July 26, 2018 / Notices 35513
Office of the Secretary at (202) 551– Corporation.’’ FICC is proposing this change because the reference to ‘‘The
5400. change because the reference to ‘‘The Depository Trust Corporation’’ is an
Dated: July 23, 2018. Depository Trust Corporation’’ is an error.
Brent J. Fields,
error. FICC is also proposing to amend
FICC is also proposing to amend
Secretary. Article III (EPN Users) of the EPN Rules
Article III (EPN Users) of the EPN Rules
[FR Doc. 2018–16035 Filed 7–24–18; 11:15 am] to set forth MBSD’s existing practices.
to set forth MBSD’s existing practices.
BILLING CODE 8011–01–P Specifically, FICC is proposing to
Specifically, FICC is proposing to
include an EPN User’s ongoing include an EPN User’s ongoing
obligation to notify FICC if such EPN obligation to notify FICC if such EPN
SECURITIES AND EXCHANGE User no longer complies with the User no longer complies with the
COMMISSION requirements for admission to requirements for admission to
[Release No. 34–83682; File No. SR–FICC– membership in the EPN Rules (i.e., as membership in the EPN Rules (i.e., as
2018–005] set forth in Secs. 2 (Approval of set forth in Secs. 2 (Approval of
Applicants) and 3 (Agreements of EPN Applicants) and 3 (Agreements of EPN
Self-Regulatory Organizations; Fixed Users) of EPN Rule 1 (Requirements Users) of EPN Rule 1 (Requirements
Income Clearing Corporation; Notice of Applicable to EPN Users) of Article III Applicable to EPN Users) of Article III
Filing of Proposed Rule Change To (EPN Users)). In addition, FICC is (EPN Users)). In addition, FICC is
Correct Certain References and proposing to amend Article III (EPN proposing to amend Article III (EPN
Provide Transparency to Existing Users) to define specific circumstances Users) to define specific circumstances
Processes in the Mortgage-Backed where FICC would undertake action to where FICC would undertake action to
Securities Division Electronic Pool determine the status of an EPN User and determine the status of an EPN User and
Notification Rules its continued access to the EPN system. its continued access to the EPN system.
July 20, 2018. The proposed change would also state The proposed change would also state
Pursuant to Section 19(b)(1) of the that FICC may request that an EPN User that FICC may request that an EPN User
Securities Exchange Act of 1934 provide written assurances if FICC provide written assurances if FICC
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 believes such EPN User may fail to believes such EPN User may fail to
notice is hereby given that on July 13, comply with the EPN Rules. The comply with the EPN Rules. The
2018, Fixed Income Clearing proposed changes to Article III (EPN proposed changes to Article III (EPN
Corporation (‘‘FICC’’) filed with the Users) would necessitate a new defined Users) would necessitate a new defined
Securities and Exchange Commission term in Article I (Definitions and term in Article I (Definitions and
(‘‘Commission’’) the proposed rule General Provisions) of the EPN Rules. General Provisions) of the EPN Rules.
change as described in Items I, II and III II. Clearing Agency’s Statement of the The proposed changes are described
below, which Items have been prepared Purpose of, and Statutory Basis for, the below.
by the clearing agency. The Commission Proposed Rule Change
is publishing this notice to solicit 1. MBSD’s EPN Service
In its filing with the Commission, the
comments on the proposed rule change
clearing agency included statements MBSD’s electronic pool notification
from interested persons.
concerning the purpose of and basis for service (referred to in the EPN Rules as
I. Clearing Agency’s Statement of the the proposed rule change and discussed the ‘‘EPN Service’’) enables users to
Terms of Substance of the Proposed any comments it received on the reduce risk and streamline their
Rule Change proposed rule change. The text of these operations by providing an automated
The proposed rule change consists of statements may be examined at the manner for market participants that
amendments to the FICC Mortgage- places specified in Item IV below. The have an obligation to deliver pools
Backed Securities Division (‘‘MBSD’’) clearing agency has prepared (‘‘pool sellers’’) to transmit pool
electronic pool notification (‘‘EPN’’) summaries, set forth in sections A, B, information efficiently and reliably to
Rules (the ‘‘EPN Rules’’) 3 as described and C below, of the most significant their counterparties (‘‘pool buyers’’) in
below. aspects of such statements. real time. Market participants that wish
FICC is proposing to correct the EPN (A) Clearing Agency’s Statement of the to utilize the EPN Service are required
Rules by amending several references in Purpose of, and Statutory Basis for, the to submit an application to MBSD. The
the section of the EPN Rules entitled Proposed Rule Change application process and the use of the
‘‘FICC Mortgage-Backed Securities EPN Service are governed by the EPN
Division (‘‘MBSD’’) EPN Schedule of 1. Purpose
Rules.4 MBSD’s Clearing Members are
Charges.’’ Specifically, FICC is FICC is proposing to correct the EPN required to be EPN Users; however, one
proposing to replace the references to Rules by amending several references in can be an EPN User and not a Clearing
‘‘FICC’’ with ‘‘the Corporation.’’ FICC is the section of the EPN Rules entitled Member.5
proposing this change because ‘‘FICC’’ ‘‘FICC Mortgage-Backed Securities
is not a term that is defined in the EPN Division (‘‘MBSD’’) EPN Schedule of 4 See EPN Rules Article III (EPN Users), EPN Rule
Rules. In addition, FICC is proposing to Charges.’’ Specifically, FICC is 1 (Requirements Applicable to EPN Users), supra
replace the reference to ‘‘The Depository proposing to replace the references to note 3.
Trust Corporation’’ with ‘‘The ‘‘FICC’’ with ‘‘the Corporation.’’ FICC is 5 MBSD maintains two sets of rulebooks. The EPN
sradovich on DSK3GMQ082PROD with NOTICES
Depository Trust & Clearing Rules govern MBSD’s EPN Service and the MBSD
proposing this change because ‘‘FICC’’ Clearing Rules (the ‘‘MBSD Rules’’) govern MBSD’s
is not a term that is defined in the EPN clearance and settlement service. The MBSD Rules
1 15 U.S.C. 78s(b)(1). Rules. In addition, FICC is proposing to are available at http://www.dtcc.com/∼/media/
2 17 CFR 240.19b–4. replace the reference to ‘‘The Depository Files/Downloads/legal/rules/ficc_mbsd_rules.pdf.
3 Terms not defined herein are defined in the EPN Pursuant to the MBSD Rules, the term ‘‘Clearing
Rules, available at http://www.dtcc.com/∼/media/
Trust Corporation’’ with ‘‘The Member’’ means any entity admitted into
Files/Downloads/legal/rules/ficc_mbsd_ Depository Trust & Clearing membership pursuant to MBSD Rule 2A. See MBSD
epnrules.pdf. Corporation.’’ FICC is proposing this Rule 1, Definitions.
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![35516 Federal Register / Vol. 83, No. 144 / Thursday, July 26, 2018 / Notices
those that may be withheld from the the Exchange’s Retail Price the Exchange. BX members
public in accordance with the Improvement (‘‘RPI’’) Program (the (‘‘Members’’) are permitted to provide
provisions of 5 U.S.C. 552, will be ‘‘Program’’), which is set to expire the potential price improvement for Retail
available for website viewing and earlier of approval of the filing to make Orders in the form of non-displayed
printing in the Commission’s Public this rule permanent or December 31, interest that is priced more aggressively
Reference Room, 100 F Street NE, 2018. than the Protected National Best Bid or
Washington, DC 20549 on official The text of the proposed rule change Offer (‘‘Protected NBBO’’).6
business days between the hours of is available on the Exchange’s website at The Program was approved by the
10:00 a.m. and 3:00 p.m. Copies of the http://nasdaqbx.cchwallstreet.com/, at Commission on a pilot basis running
filing also will be available for the principal office of the Exchange, and one-year from the date of
inspection and copying at the principal at the Commission’s Public Reference implementation.7 The Commission
office of FICC and on DTCC’s website Room. approved the Program on November 28,
(http://dtcc.com/legal/sec-rule- II. Self-Regulatory Organization’s 2014.8 The Exchange implemented the
filings.aspx). All comments received Statement of the Purpose of, and Program on December 1, 2014 and the
will be posted without change. Persons Statutory Basis for, the Proposed Rule pilot has since been extended for a one-
submitting comments are cautioned that Change year period twice, as well as for a six-
we do not redact or edit personal month period, with it now scheduled to
identifying information from comment In its filing with the Commission, the expire the earlier of approval of the
submissions. You should submit only Exchange included statements filing to make this rule permanent or
information that you wish to make concerning the purpose of and basis for December 31, 2018.9
available publicly. All submissions the proposed rule change and discussed Specifically, BX Rule 4780(h) will be
should refer to File Number SR–FICC– any comments it received on the amended to delete that the Program is
2018–005 and should be submitted on proposed rule change. The text of these a pilot and that is scheduled to expire
or before August 16, 2018. statements may be examined at the the earlier of approval of the filing to
For the Commission, by the Division of
places specified in Item IV below. The make this rule permanent or December
Trading and Markets, pursuant to delegated Exchange has prepared summaries, set 31, 2018. BX Rule 4780(h) will continue
authority.13 forth in sections A, B, and C below, of to say that the Program will be limited
Brent J. Fields, the most significant aspects of such to securities whose Bid Price on the
Secretary. statements. Exchange is greater than or equal to
[FR Doc. 2018–15943 Filed 7–25–18; 8:45 am] A. Self-Regulatory Organization’s $1.00 per share.
BILLING CODE 8011–01–P Statement of the Purpose of, and The SEC approved the Program pilot,
Statutory Basis for, the Proposed Rule in part, because it concluded, ‘‘the
Change Program is reasonably designed to
SECURITIES AND EXCHANGE benefit retail investors by providing
COMMISSION 1. Purpose price improvement to retail order
The Exchange proposes to make flow.’’ 10 The Commission also found
[Release No. 34–83681; File No. SR–BX– that ‘‘while the Program would treat
2018–025] permanent the Exchange’s pilot RPI
Program,3 currently scheduled to expire retail order flow differently from order
Self-Regulatory Organizations; Nasdaq the earlier of approval of the filing to flow submitted by other market
BX, Inc.; Notice of Filing of Proposed make this rule permanent or December participants, such segmentation would
Rule Change To Make Permanent the 31, 2018. not be inconsistent with Section 6(b)(5)
Pilot Program for the Exchange’s of the Act, which requires that the rules
Background
Retail Price Improvement Program
In November 2014, the Commission in the case of a market order that is changed to a
July 20, 2018. approved the RPI Program on a pilot marketable limit order) or side of market and that
does not originate from a trading algorithm or any
Pursuant to Section 19(b)(1) of the basis.4 The Program is designed to other computerized methodology.
Securities Exchange Act of 1934 attract retail order flow to the Exchange, 6 The term Protected Quotation is defined in
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 and allow such order flow to receive Chapter XII, Sec. 1(19) and has the same meaning
notice is hereby given that on July 9, potential price improvement. The as is set forth in Regulation NMS Rule 600(b)(58).
2018, Nasdaq BX, Inc. (‘‘BX’’ or Program is currently limited to trades The Protected NBBO is the best-priced protected
bid and offer. Generally, the Protected NBBO and
‘‘Exchange’’) filed with the Securities occurring at prices equal to or greater the national best bid and offer (‘‘NBBO’’) will be the
and Exchange Commission (‘‘SEC’’ or than $1.00 per share. Under the same. However, a market center is not required to
‘‘Commission’’) the proposed rule Program, a class of market participant route to the NBBO if that market center is subject
change as described in Items I, II, and called a Retail Member Organization to an exception under Regulation NMS Rule
611(b)(1) or if such NBBO is otherwise not available
III below, which Items have been (‘‘RMO’’) is eligible to submit certain for an automatic execution. In such case, the
prepared by the Exchange. The retail order flow (‘‘Retail Orders’’) 5 to Protected NBBO would be the best-priced protected
Commission is publishing this notice to bid or offer to which a market center must route
solicit comments on the proposed rule 3 Securities Exchange Act Release No. 73702 interest pursuant to Regulation NMS Rule 611.
7 See RPI Approval Order, supra note 3 at 72053.
change from interested persons. (November 28, 2014), 79 FR 72049 (December 4,
2014) (SR–BX–2014–048) (‘‘RPI Approval Order’’). 8 Id. at 72049.
I. Self-Regulatory Organization’s 4 See id. 9 See Securities Exchange Act Release No. 76490
Statement of the Terms of Substance of 5 A ‘‘Retail Order’’ is defined in BX Rule (November 20, 2015), 80 FR 74165 (November 27,
sradovich on DSK3GMQ082PROD with NOTICES
4780(a)(2) by referencing BX Rule 4702, and BX 2015) (SR–BX–2015–073); Securities Exchange Act
the Proposed Rule Change Release No. 79446 (December 1, 2016), 81 FR 88290
Rule 4702(b)(6) says it is an order type with a non-
The Exchange proposes to a proposal display order attribute submitted to the Exchange (December 7, 2016) (SR–BX–2016–065); Securities
by a RMO. A Retail Order must be an agency order, Exchange Act Release No. 82192 (December 1,
to make permanent the pilot program for 2017), 82 FR 57809 (December 7, 2017) (SR–BX–
or riskless principal order that satisfies the criteria
of FINRA Rule 5320.03. The Retail Order must 2017–055); and Securities Exchange Act Release
13 17 CFR 200.30–3(a)(12). reflect trading interest of a natural person with no No. 83539 (June 28, 2018), 83 FR 31203 (July 3,
1 15 U.S.C. 78s(b)(1). 2018) (SR–BX–2018–026).
change made to the terms of the underlying order
2 17 CFR 240.19b–4. of the natural person with respect to price (except 10 See RPI Approval Order, supra note 3 at 72051.
VerDate Sep<11>2014 17:25 Jul 25, 2018 Jkt 244001 PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 E:\FR\FM\26JYN1.SGM 26JYN1](https://thefederalregister.org/doc/83_FR_35657/page/4.svg)
Document Created: 2018-11-06 10:26:30
Document Modified: 2018-11-06 10:26:30
| 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 | 83 FR 35513 |
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