83 FR 45152 - Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use on Cboe EDGX Exchange, Inc.
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 172 (September 5, 2018)
Federal Register Volume 83, Issue 172 (September 5, 2018)
| Page Range | 45152-45155 | |
| FR Document | 2018-19238 |
[Federal Register Volume 83, Number 172 (Wednesday, September 5, 2018)] [Notices] [Pages 45152-45155] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-19238] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-84000; File No. SR-CboeEDGX-2018-036] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use on Cboe EDGX Exchange, Inc. August 30, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on August 16, 2018, Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') 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 Exchange. The Exchange has designated the proposed rule change as one establishing or changing a member due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ 15 U.S.C. 78s(b)(3)(A)(ii). \4\ 17 CFR 240.19b-4(f)(2). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend fee schedule to institute a new fee for the distribution of data derived from EDGX Top on third- party websites or other electronic platforms. The text of the proposed rule change is available at the Exchange's website at www.markets.cboe.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to introduce a new pricing model to keep pace with an evolving practice. Other exchanges have pricing programs in place that allow Distributors make ``Derived Data'' available on a website or other electronic platform that is branded by a third party, or co-branded by a Distributor and a third party.\5\ The proposed rule change would implement a new pricing structure for use of Derived Data--i.e., the EDGX Derived Data White Label Service Program (the ``Program'')--that would compete with similar programs currently offered on other equities markets. --------------------------------------------------------------------------- \5\ The Nasdaq Stock Market LLC (``Nasdaq''), for example, operates a program whereby it charges Distributors that employ a hosted display solution to distribute Derived Data taken from its Nasdaq Basic product. See Securities Exchange Act Release No. 79228 (November 3, 2016), 81 FR 78890 (November 9, 2016) (SR-NASDAQ-2016- 144). --------------------------------------------------------------------------- ``Derived Data'' is pricing data or other data that (i) is created in whole or in part from Exchange Data, (ii) is not [[Page 45153]] an index or financial product, and (iii) cannot be readily reverse[hyphen]engineered to recreate Exchange Data or used to create other data that is a reasonable facsimile or substitute for Exchange Data. The type of Derived Data subject to the proposed fee is taken from EDGX Top, which is a proprietary data product that provides top of book quotations and execution information for all equity securities traded on the Exchange.\6\ --------------------------------------------------------------------------- \6\ See Rule 13.8(c). --------------------------------------------------------------------------- The Derived Data subject to the proposed fee is made available to subscribers within a White Label Service which is a type of hosted display solution in which a Distributor hosts or maintains a website or platform on behalf of a third-party entity. The service allows Distributors to make Derived Data available on a platform that is branded with a third-party brand, or co-branded with a third party and a Distributor. The Distributor maintains control of the application's data, entitlements and display. The White Label Service may be used for a number of different purposes, to be determined by the Distributor. Possible uses include the display of information or data, or the creation of derivative instruments, such as swaps,\7\ swaptions,\8\ or contracts for difference.\9\ The specific use of the data will be determined by the Distributor, as the proposed fee will not depend on the purpose for placing the Derived Data on a White Label Service. --------------------------------------------------------------------------- \7\ A swap is a derivative contract in which two parties agree to exchange financial instruments. \8\ A swaption, or swap option, is an option to enter into a swap at a specified time. \9\ A contract for difference is an agreement to exchange the difference between the current value of an asset and its future value. If the price increases, the seller pays the buyer the amount of the increase. If the price decreases, the buyer pays the seller the amount of the decrease. --------------------------------------------------------------------------- As proposed, a Distributor that provides a White Label Service for Derived Data taken from EDGX Top is liable for the following fees instead of the fees normally applicable for the distribution of EDGX Top. First, instead of the regular fee for external distribution, Distributors would be charged a tiered External Subscriber Fee based on the number of White Label Service Platforms (i.e., ``External Subscribers'') that receive Derived Data from the Distributor through a White Label Service. Specifically, Distributors would be charged a fee of: (1) $300 per month for each External Subscriber if the Distributor makes Derived Data available to 1-5 External Subscribers; (2) $250 per month for each External Subscriber if the Distributor makes Derived Data available to 6-10 External Subscribers; and (3) $200 per month for each External Subscriber if the Distributor makes Derived Data available to 11 or more External Subscribers. The External Subscriber Fee is non-progressive and, as mentioned above, is based on the number of External Subscribers that receive Derived Data from the Distributor. For example, a Distributor providing Derived Data based on EDGX Top to six External Subscribers would be charged a monthly fee of $1,500 (i.e., 6 External Subscribers x $250 each). Second, the Exchange would charge a monthly Professional User fee of $4 per month for each Professional User, which is equivalent to the current Professional User fee for external distribution of EDGX Top. There would be no monthly Non-Professional User fee for accessing Derived Data through a White Label Service. The Program is entirely optional, in that it applies only to Distributors that opt to use Derived Data from EDGX Top to create a White Label Service, as described herein. It does not impact or raise the cost of any other Exchange product, nor does it affect the cost of EDGX Top, except in instances where Derived Data is made available on a White Label Service. A Distributor that provides a White Label Service for EDGX Top data that is not Derived Data or distributes Derived Data through a platform other than a White Label Service would be liable for the fees normally applicable for the distribution of EDGX Top. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,\10\ in general, and furthers the objectives of Section 6(b)(4),\11\ in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its members and other recipients of Exchange data. The Exchange believes that the proposed rates are equitable and non-discriminatory in that they apply uniformly to all recipients of Exchange data. The Exchange believes the proposed fees are competitive with those charged by other venues and, therefore, reasonable and equitably allocated to recipients. --------------------------------------------------------------------------- \10\ 15 U.S.C. 78f. \11\ 15 U.S.C. 78f(b)(4). --------------------------------------------------------------------------- The Exchange also believes that the proposed rule change is consistent with Section 11(A) of the Act \12\ in that it supports (i) fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets and (ii) the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities. Furthermore, the proposed rule change is consistent with Rule 603 of Regulation NMS,\13\ which provides that any national securities exchange that distributes information with respect to quotations for or transactions in an NMS stock do so on terms that are not unreasonably discriminatory. In adopting Regulation NMS, the Commission granted self-regulatory organizations and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. --------------------------------------------------------------------------- \12\ 15 U.S.C. 78k-1. \13\ See 17 CFR 242.603. --------------------------------------------------------------------------- The Exchange notes that the Commission is not required to undertake a cost-of-service or rate-making approach. The Exchange believes that, even if it were possible as a matter of economic theory, cost-based pricing for non-core market data would be so complicated that it could not be done practically.\14\ --------------------------------------------------------------------------- \14\ The Exchange believes that cost-based pricing would be impractical because it would create enormous administrative burdens for all parties, including the Commission, to cost-regulate a large number of participants and standardize and analyze extraordinary amounts of information, accounts, and reports. In addition, it is impossible to regulate market data prices in isolation from prices charged by markets for other services that are joint products. Cost- based rate regulation would also lead to litigation and may distort incentives, including those to minimize costs and to innovate, leading to further waste. Under cost-based pricing, the Commission would be burdened with determining a fair rate of return, and the industry could experience frequent rate increases based on escalating expense levels. Even in industries historically subject to utility regulation, cost-based ratemaking has been discredited. As such, the Exchange believes that cost-based ratemaking would be inappropriate for proprietary market data and inconsistent with Congress's direction that the Commission use its authority to foster the development of the national market system, and that market forces will continue to provide appropriate pricing discipline. See Appendix C to NYSE's comments to the Commission's 2000 Concept Release on the Regulation of Market Information Fees and Revenues, which can be found on the Commission's website at http://www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities Exchange Act Release No. 73816 (December 11, 2014), 79 FR 75200 (December 17, 2014) (SR-NYSE-2014-64) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Establish an Access Fee for the NYSE Best Quote and Trades Data Feed, Operative December 1, 2014). --------------------------------------------------------------------------- The Exchange believes that the introduction of a fee for the use of Derived Data on White Label Services is [[Page 45154]] reasonable because: (i) All proprietary data fees are constrained by the Exchange's need to compete for order flow; and (ii) proprietary data fees are subject to market competition from substitute products. The proposed rule change would provide an alternate fee structure for providing EDGX Top market data to Distributors that make Derived Data available to External Subscribers on White Label Services. The Exchange believes that this will encourage additional Distributors to subscribe to EDGX Top market data due to the lower cost associated with Derived Data provided under the Program. Nasdaq already has a similar pricing structure in place for providing Derived Data through a hosted display solution.\15\ The Exchange believes that Distributors of EDGX Top market data would benefit from a similar solution. Furthermore, the proposed fees are lower than those currently in place on Nasdaq, which charges a fee of $400 per month for each hosted display solution under their program,\16\ and may be further lowered for Distributors of EDGX Top Derived Data based on the number of External Subscribers. --------------------------------------------------------------------------- \15\ See supra note 5. \16\ Id. --------------------------------------------------------------------------- As proposed, if a Distributor uses a White Label Service to display Derived Data, the Distributor will be charged a fee that is tiered based on the number of External Subscribers that are provided access to that data instead of the higher fee normally charged for external distribution. The Exchange believes that this fee is equitable and not unfairly discriminatory because the Exchange will apply the same fees to all similarly situated Distributors based on the number of External Subscribers provided access to Derived Data through a White Label Service. Furthermore, the proposed fees will only apply to Distributors that elect to participate in the Program by distributing Derived Data through a White Label Service. EDGX Top market data is distributed and purchased on a voluntary basis, in that neither the Exchange nor market data distributors are required by any rule or regulation to make this data available. Distributors of EDGX Top are not required to participate in the proposed Program, which is merely an alternative option being proposed by the Exchange to potentially lower costs for market data that is Derived Data. Accordingly, Distributors can discontinue use at any time and for any reason, including due to an assessment of the reasonableness of fees charged. Firms have a wide variety of alternative market data products from which to choose, such as similar proprietary data products offered by other exchanges and consolidated data. Moreover, the Exchange is not required to make any proprietary data products available or to offer any specific pricing alternatives to any customers. In addition to the tiered distribution fee described above, the Exchange will continue to charge a small fee for Professional Users but would eliminate Non-Professional User fees for data provided under the Program. The Exchange believes that it is equitable and not unfairly discriminatory to charge a fee for Professional Users but no fee for Non-Professional Users. Non-Professional Users are already subject to a heavily discounted fee for EDGX Top market data relative to Professional Users. Differential fees for Professional and Non- Professional Users are widely used by the Exchange and other exchanges for their proprietary market data as this reduces costs for retail investors and makes market data more broadly available. In addition, the fees that are the subject of this rule filing are constrained by competition. As explained below in the Exchange's Statement on Burden on Competition, the existence of alternatives to the proposed program further ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when subscribers can elect such alternatives. That is, the Exchange competes with other exchanges and their affiliates that provide similar market data products. If another exchange or its affiliate were to charge less for a similar product than the Exchange charges under the proposed fee structure, prospective subscribers likely would not subscribe to, or would cease subscribing to, the Program. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. The Exchange's ability to price this data product is constrained by: (i) Competition among exchanges, other trading platforms, and Trade Reporting Facilities (``TRF'') that compete with each other in a variety of dimensions; (ii) the existence of inexpensive real-time consolidated data and market-specific data and free delayed data; and (iii) the inherent contestability of the market for proprietary data. The Exchange and its market data products are subject to significant competitive forces and the proposed fees represent responses to that competition. To start, the Exchange competes intensely for order flow. It competes with the other national securities exchanges that currently trade equities, with electronic communication networks, with quotes posted in FINRA's Alternative Display Facility, with alternative trading systems, and with securities firms that primarily trade as principal with their customer order flow. The proposed fees apply to data derived from EDGX Top, which is subject to competition from the Nasdaq, NYSE, and other exchanges that offer similar products, including exchanges that provide similar pricing options for Derived Data made available on a White Label Service. In sum, the availability of a variety of alternative sources of information imposes significant competitive pressures on Exchange data products and the Exchange's compelling need to attract order flow imposes significant competitive pressure on the Exchange to act equitably, fairly, and reasonably in setting the proposed data product fees. The proposed data product fees are, in part, responses to that pressure. The Exchange believes that the proposed fees would reflect an equitable allocation of its overall costs to users of its facilities. In addition, when establishing the proposed fees, the Exchange considered the competitiveness of the market for proprietary data and all of the implications of that competition. The Exchange believes that it has considered all relevant factors and has not considered irrelevant factors in order to establish fair, reasonable, and not unreasonably discriminatory fees and an equitable allocation of fees among all subscribers. The existence of alternatives to EDGX Top, including existing similar feeds by other exchanges, consolidated data, and proprietary data from other sources, ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if its cost to purchase is not justified by the returns any particular vendor or subscriber would achieve through the purchase. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. [[Page 45155]] III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act \17\ and paragraph (f) of Rule 19b-4 thereunder.\18\ At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78s(b)(3)(A). \18\ 17 CFR 240.19b-4(f). --------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-CboeEDGX-2018-036 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number SR-CboeEDGX-2018-036. 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 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 this filing will also be available for inspection and copying at the principal office of the Exchange. 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-CboeEDGX-2018-036 and should be submitted on or before September 26, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\19\ --------------------------------------------------------------------------- \19\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-19238 Filed 9-4-18; 8:45 am] BILLING CODE 8011-01-P
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purchase is not justified by the returns Commission and any person, other than proposed rule change effective upon
any particular vendor or subscriber those that may be withheld from the filing with the Commission. The
would achieve through the purchase. public in accordance with the Commission is publishing this notice to
provisions of 5 U.S.C. 552, will be solicit comments on the proposed rule
C. Self-Regulatory Organization’s
available for website viewing and change from interested persons.
Statement on Comments on the printing in the Commission’s Public
Proposed Rule Change Received From I. Self-Regulatory Organization’s
Reference Room, 100 F Street NE,
Members, Participants, or Others Statement of the Terms of Substance of
Washington, DC 20549, on official
No written comments were either the Proposed Rule Change
business days between the hours of
solicited or received. 10:00 a.m. and 3:00 p.m. Copies of this The Exchange filed a proposal to
filing will also be available for amend fee schedule to institute a new
III. Date of Effectiveness of the fee for the distribution of data derived
inspection and copying at the principal
Proposed Rule Change and Timing for from EDGX Top on third-party websites
office of the Exchange. All comments
Commission Action or other electronic platforms.
received will be posted without change.
The foregoing rule change has become Persons submitting comments are The text of the proposed rule change
effective pursuant to Section 19(b)(3)(A) cautioned that we do not redact or edit is available at the Exchange’s website at
of the Act 17 and paragraph (f) of Rule personal identifying information from www.markets.cboe.com, at the principal
19b–4 thereunder.18 At any time within comment submissions. You should office of the Exchange, and at the
60 days of the filing of the proposed rule submit only information that you wish Commission’s Public Reference Room.
change, the Commission summarily may to make available publicly. All II. Self-Regulatory Organization’s
temporarily suspend such rule change if submissions should refer to File Statement of the Purpose of, and
it appears to the Commission that such Number SR–CboeBZX–2018–065 and Statutory Basis for, the Proposed Rule
action is necessary or appropriate in the should be submitted on or before Change
public interest, for the protection of September 26, 2018.
investors, or otherwise in furtherance of In its filing with the Commission, the
For the Commission, by the Division of Exchange included statements
the purposes of the Act. Trading and Markets, pursuant to delegated concerning the purpose of and basis for
IV. Solicitation of Comments authority.19
the proposed rule change and discussed
Eduardo A. Aleman,
Interested persons are invited to any comments it received on the
Assistant Secretary. proposed rule change. The text of these
submit written data, views, and
[FR Doc. 2018–19240 Filed 9–4–18; 8:45 am] statements may be examined at the
arguments concerning the foregoing,
including whether the proposed rule BILLING CODE 8011–01–P places specified in Item IV below. The
change is consistent with the Act. Exchange has prepared summaries, set
Comments may be submitted by any of forth in Sections A, B, and C below, of
SECURITIES AND EXCHANGE the most significant parts of such
the following methods: COMMISSION statements.
Electronic Comments [Release No. 34–84000; File No. SR– A. Self-Regulatory Organization’s
• Use the Commission’s internet CboeEDGX–2018–036]
Statement of the Purpose of, and the
comment form (http://www.sec.gov/ Statutory Basis for, the Proposed Rule
rules/sro.shtml); or Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing Change
• Send an email to rule-comments@
sec.gov. Please include File Number SR– and Immediate Effectiveness of a 1. Purpose
CboeBZX–2018–065 on the subject line. Proposed Rule Change Related to Fees
The purpose of the proposed rule
for Use on Cboe EDGX Exchange, Inc.
Paper Comments change is to introduce a new pricing
August 30, 2018. model to keep pace with an evolving
• Send paper comments in triplicate practice. Other exchanges have pricing
Pursuant to Section 19(b)(1) of the
to Secretary, Securities and Exchange programs in place that allow
Securities Exchange Act of 1934 (the
Commission, 100 F Street NE, Distributors make ‘‘Derived Data’’
‘‘Act’’),1 and Rule 19b–4 thereunder,2
Washington, DC 20549–1090. available on a website or other
notice is hereby given that on August
All submissions should refer to File 16, 2018, Cboe EDGX Exchange, Inc. electronic platform that is branded by a
Number SR–CboeBZX–2018–065. This (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with third party, or co-branded by a
file number should be included on the the Securities and Exchange Distributor and a third party.5 The
subject line if email is used. To help the Commission (‘‘Commission’’) the proposed rule change would implement
Commission process and review your proposed rule change as described in a new pricing structure for use of
comments more efficiently, please use Items I, II and III below, which Items Derived Data—i.e., the EDGX Derived
only one method. The Commission will have been prepared by the Exchange. Data White Label Service Program (the
post all comments on the Commission’s The Exchange has designated the ‘‘Program’’)—that would compete with
internet website (http://www.sec.gov/ proposed rule change as one similar programs currently offered on
rules/sro.shtml). Copies of the establishing or changing a member due, other equities markets.
submission, all subsequent fee, or other charge imposed by the ‘‘Derived Data’’ is pricing data or
amendments, all written statements Exchange under Section 19(b)(3)(A)(ii) other data that (i) is created in whole or
with respect to the proposed rule of the Act 3 and Rule 19b–4(f)(2) in part from Exchange Data, (ii) is not
daltland on DSKBBV9HB2PROD with NOTICES
change that are filed with the thereunder,4 which renders the
Commission, and all written 5 The Nasdaq Stock Market LLC (‘‘Nasdaq’’), for
communications relating to the 19 17 example, operates a program whereby it charges
CFR 200.30–3(a)(12).
Distributors that employ a hosted display solution
proposed rule change between the 1 15 U.S.C. 78s(b)(1).
to distribute Derived Data taken from its Nasdaq
2 17 CFR 240.19b–4.
Basic product. See Securities Exchange Act Release
17 15 U.S.C. 78s(b)(3)(A). 3 15 U.S.C. 78s(b)(3)(A)(ii).
No. 79228 (November 3, 2016), 81 FR 78890
18 17 CFR 240.19b–4(f). 4 17 CFR 240.19b–4(f)(2). (November 9, 2016) (SR–NASDAQ–2016–144).
VerDate Sep<11>2014 17:04 Sep 04, 2018 Jkt 244001 PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 E:\FR\FM\05SEN1.SGM 05SEN1](https://thefederalregister.org/doc/83_FR_45324/page/1.svg)
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III. Date of Effectiveness of the filing will also be available for exercise of options by Clearing Members
Proposed Rule Change and Timing for inspection and copying at the principal and their Clients. The text of the
Commission Action office of the Exchange. All comments proposed rule change has been annexed
The foregoing rule change has become received will be posted without change. as Exhibit 5.3
effective pursuant to Section 19(b)(3)(A) Persons submitting comments are
cautioned that we do not redact or edit II. Clearing Agency’s Statement of the
of the Act 17 and paragraph (f) of Rule Purpose of, and Statutory Basis for, the
19b–4 thereunder.18 At any time within personal identifying information from
comment submissions. You should Proposed Rule Change
60 days of the filing of the proposed rule
change, the Commission summarily may submit only information that you wish In its filing with the Commission,
temporarily suspend such rule change if to make available publicly. All LCH SA included statements concerning
it appears to the Commission that such submissions should refer to File the purpose of and basis for the
action is necessary or appropriate in the Number SR–CboeEDGX–2018–036 and proposed rule change and discussed any
public interest, for the protection of should be submitted on or before comments it received on the proposed
investors, or otherwise in furtherance of September 26, 2018. rule change. The text of these statements
the purposes of the Act. For the Commission, by the Division of may be examined at the places specified
Trading and Markets, pursuant to delegated in Item IV below. LCH SA has prepared
IV. Solicitation of Comments authority.19 summaries, set forth in sections A, B,
Interested persons are invited to Eduardo A. Aleman, and C below, of the most significant
submit written data, views, and Assistant Secretary. aspects of these statements.
arguments concerning the foregoing, [FR Doc. 2018–19238 Filed 9–4–18; 8:45 am] A. Clearing Agency’s Statement of the
including whether the proposed rule BILLING CODE 8011–01–P Purpose of, and Statutory Basis for, the
change is consistent with the Act.
Proposed Rule Change
Comments may be submitted by any of
the following methods: SECURITIES AND EXCHANGE 1. Purpose
Electronic Comments COMMISSION LCH SA is proposing to create an EEP
• Use the Commission’s internet [Release No. 34–83983; File No. SR–LCH for credit index options or swaptions to
comment form (http://www.sec.gov/ SA–2018–004] capture and support swaption exercise
rules/sro.shtml); or decisions by Clearing Members and
Self-Regulatory Organizations; LCH
• Send an email to rule-comments@ Clients. Currently, the exercise of
SA; Notice of Filing of Proposed Rule swaptions is effected through a manual
sec.gov. Please include File Number SR–
Change Relating to Implementation of bilateral notification process. The
CboeEDGX–2018–036 on the subject
Electronic Exercise Platform swaption exercise decisions are
line.
August 29, 2018. communicated bilaterally via email
Paper Comments from the swaption buyer to the swaption
Pursuant to Section 19(b)(1) of the
• Send paper comments in triplicate Securities Exchange Act of 1934 seller of a matched pair transaction
to Secretary, Securities and Exchange (‘‘Act’’) 1 and Rule 19b–4 thereunder 2 created by LCH SA for the purpose of
Commission, 100 F Street NE, notice is hereby given that on August the exercise or abandonment of the
Washington, DC 20549–1090. 24, 2018, Banque Centrale de swaption transaction. The swaption
All submissions should refer to File Compensation, which conducts buyer must then inform LCH SA that the
Number SR–CboeEDGX–2018–036. This business under the name LCH SA (‘‘LCH exercise notice has been successfully
file number should be included on the SA’’), filed with the Securities and delivered. LCH SA then manually
subject line if email is used. To help the Exchange Commission (‘‘Commission’’) effects the exercise decisions
Commission process and review your the proposed rule change described in accordingly and updates its risk system.
comments more efficiently, please use Items I, II and III below, which Items The proposed EEP will provide
only one method. The Commission will have been prepared primarily by LCH Clearing Members and their Clients with
post all comments on the Commission’s SA. The Commission is publishing this an electronic process that will reduce
internet website (http://www.sec.gov/ notice to solicit comments on the the operational risk caused by manual
rules/sro.shtml). Copies of the proposed rule change from interested exercise and provide an effective system
submission, all subsequent persons. to monitor and manage the exercise of
amendments, all written statements swaptions. The proposed rule change
with respect to the proposed rule I. Clearing Agency’s Statement of the will require Clearing Members and
change that are filed with the Terms of Substance of the Proposed Clients to use the EEP system to initiate
Commission, and all written Rule Change the exercise of swaptions and will
communications relating to the Banque Centrale de Compensation, enable Clients to directly exercise
proposed rule change between the which conducts business under the swaptions through delegation by
Commission and any person, other than name LCH SA (‘‘LCH SA’’), is proposing Clearing Members and receive reports.
those that may be withheld from the to amend its (i) CDS Clearing Rule Book The EEP system will capture the
public in accordance with the (‘‘Rule Book’’), (ii) CDS Clearing exercise decisions in real time and
provisions of 5 U.S.C. 552, will be Supplement (‘‘Supplement’’) and (iii) notify the relevant swaptions sellers in
available for website viewing and CDS Clearing Procedures (‘‘Procedures’’) real time. In addition, the EEP system
printing in the Commission’s Public to incorporate new terms and to make will provide validation checks and
daltland on DSKBBV9HB2PROD with NOTICES
Reference Room, 100 F Street NE, conforming, clarifying and clean-up exercise decision-making assistance and
Washington, DC 20549, on official changes to implement a new electronic support, and will facilitate and support
business days between the hours of exercise platform (‘‘EEP’’) for the an anonymous exercise decision process
10:00 a.m. and 3:00 p.m. Copies of this
19 17 CFR 200.30–3(a)(12). 3 All capitalized terms not defined herein have
17 15 U.S.C. 78s(b)(3)(A). 1 15 U.S.C. 78s(b)(1). the same definition as the Rule Book, Supplement
18 17 CFR 240.19b–4(f). 2 17 CFR 240.19b–4. or Procedures, as applicable.
VerDate Sep<11>2014 17:04 Sep 04, 2018 Jkt 244001 PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 E:\FR\FM\05SEN1.SGM 05SEN1](https://thefederalregister.org/doc/83_FR_45324/page/4.svg)
Document Created: 2018-09-05 01:58:56
Document Modified: 2018-09-05 01:58:56
| 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 45152 |
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