Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Proposed Rule Change To Amend Its Policy Statement Adopted Under Rule 205 Entitled “Back-up Communication Channel to Internet Access”, 54707-54710 [2013-21537]
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Federal Register / Vol. 78, No. 172 / Thursday, September 5, 2013 / Notices
similar to services available on other
markets. In this regard, the Exchange
notes that The NASDAQ Stock Market
LLC (‘‘NASDAQ’’) similarly makes a 40
Gb fiber connection available to users of
its co-location facilities.13
Finally, the Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing venues if they
deem fee levels at a particular venue to
be excessive. In such an environment,
the Exchange must continually review,
and consider adjusting, its fees and
credits to remain competitive with other
exchanges. For the reasons described
above, the Exchange believes that the
proposed rule change reflects this
competitive environment.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 14 of the Act and
subparagraph (f)(2) of Rule 19b–4 15
thereunder, because it establishes a due,
fee, or other charge imposed by NYSE.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 16 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2013–60 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSE–2013–60. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–NYSE–
2013–60 and should be submitted on or
before September 26, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–21574 Filed 9–4–13; 8:45 am]
BILLING CODE 8011–01–P
13 See
NASDAQ Rule 7034.
14 15 U.S.C. 78s(b)(3)(A).
15 17 CFR 240.19b–4(f)(2).
16 15 U.S.C. 78s(b)(2)(B).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70289; File No. SR–OCC–
2013–10]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing of Proposed Rule Change To
Amend Its Policy Statement Adopted
Under Rule 205 Entitled ‘‘Back-up
Communication Channel to Internet
Access’’
August 29, 2013.
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 August
23, 2013, The Options Clearing
Corporation (‘‘OCC’’ or ‘‘Corporation’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by OCC. The Commission
is publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
OCC proposes to make certain
changes to its Policy Statement adopted
under Rule 205 entitled ‘‘Back-up
Communication Channel to Internet
Access’’ requiring clearing members that
use the Internet as their primary means
to access OCC’s information and data
systems to maintain a secure back-up
means of communication in order to
provide for business continuance in the
event of an Internet outage.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission,
OCC 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. OCC 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
OCC Rule 205 prescribes that OCC
clearing members are required to submit
instructions, notices, reports, data and
1 15
17 17
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54707
2 17
E:\FR\FM\05SEN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 78, No. 172 / Thursday, September 5, 2013 / Notices
other items to the Corporation
electronically in accordance with
procedures prescribed by the
Corporation. The Rule is designed to
promote operational efficiency and
effectiveness and reduce input errors.
Position-related post-trade (e.g., exercise
notices, position adjustments) and
collateral transactions are common
examples of instructions submitted by
clearing members electronically.
OCC supports the submission of these
instructions through use of an Internet
connection to OCC’s secured Web site.
In 2006, OCC adopted a Policy
Statement under Rule 205 requiring
clearing members that primarily use the
Internet to access OCC’s systems to
maintain a secure back-up means of
communication as a contingency to
perform on a timely basis critical
business activities in the event of an
Internet outage, as well as to maintain
service arrangements with two
independent internet service providers.3
The Policy Statement adopted at the
time required clearing members to
maintain: (i) Separate service
agreements with two (2) independent
service providers, and (ii) an OCCapproved method for accessing OCC’s
information and data systems even in
the case of an Internet outage (the
‘‘Back-Up Communication Channel’’).
Guidelines were established so that
the Back-Up Communication Channel
authorized for a particular clearing
member was determined in accordance
with the firm’s business profile using
certain criteria. For example, a clearing
member that: (i) ranked among the top
twenty-five of cleared volume during a
calendar year; (ii) cleared more than one
account type as defined in OCC’s ByLaws and Rules; (iii) cleared two or
more product types; (iv) conducted
Clearing Member Trade Assignment
(‘‘CMTA’’) business; (v) input a high
volume of daily post-trade activity; (vi)
generally utilized multiple forms of
collateral; (vii) utilized most ancillary
services offered by OCC; (viii) used a
lease line for data transmissions, would
generally be designated as a ‘‘Category
A’’ firm. ‘‘Category A’’ firms were
required to maintain a T1 line as an
acceptable form of back-up
communication channel.
A clearing member that: (i) Transacted
mid-level cleared volume during a
calendar year; (ii) cleared only one or
more account types as defined in OCC’s
By-Laws and Rules; (iii) cleared one or
more product types; (iv) input a
moderate to small volume of post-trade
3 Securities
Exchange Act Release No. 53980
(June 14, 2006), 71 FR 36155 (June 23, 2006)(SR–
OCC–2006–04).
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activity; (v) generally utilized one or
two forms of collateral; (vi) may have
utilized a lease line for data
transmissions, were generally
designated as a ‘‘Category B’’ firm.
Under the Policy Statement, ‘‘Category
B’’ firms were provided the option to
either maintain a T1 line or ISDN
connection as acceptable forms of a
back-up communication channel.
A clearing member that: (i) Transacted
low-level cleared volume during a
calendar year; (ii) cleared no more than
one account type as defined in OCC’s
By-Laws and Rules; (iii) cleared no more
than one product type; (iv) generally
utilized one or two forms of collateral;
(v) input minimal amounts of post-trade
activity, would generally be designated
as a ‘‘Category C’’ firm. ‘‘Category C’’
firms were given the option to maintain
an ISDN connection, utilize OCC
equipment if the clearing member was
located in or near a city where OCC
maintains operational center(s), or rely
upon fax transmission in the event an
internet connection was not available.
Recent denial of service attacks on
financial institutions, along with
changes in technology since the Policy
Statement was first adopted, have
prompted OCC to reassess the risk to
operations should Internet connections
supporting clearing member access to
OCC’s information and data systems be
interrupted. Through this assessment,
OCC has determined that its existing
policy should be modified to ensure it
is easily understood and properly
implemented by the clearing
membership.
OCC is now proposing to make
updates to the Policy Statement
intended to simplify the criteria applied
to a given firm in determining the
appropriate Back-Up Communication
Channel. Instead of having three
categories of Business Profiles that
include several criteria to be applied,
and offering multiple communication
options available to a particular firm,
the updated Policy Statement will
contain two profiles. Clearing Members
that rank in the top-25 of cleared
volume during a calendar year or act as
a facilities manager to one or more
Clearing firms will be designated as a
‘‘Category A’’ firm, and will be required
to maintain a T1 line as its Back-Up
Communication Channel. All other
firms will be designated as ‘‘Category B’’
firms, and will be required to maintain
a T1 line or utilize a fax line, telephone
or have ready access to an OCC office
location.
OCC believes the proposed changes
will present minimal to no impact to
clearing members. In particular, all
firms that were previously designated as
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‘‘Category A’’ firms under the former
policy will continue to be designated as
‘‘Category A’’ firms under the revised
policy being proposed, and they will
still be required to maintain a T1 line,
as previously required. Those firms that
will be designated as Category B firms
under the proposed policy will now
have increased flexibility under the
back-up options being made available to
them, in that they can select between a
T1 Line, fax, telephone, or use an OCC
office if they are located in a city where
OCC maintains an operational center. In
preparation for the revisions to the
Policy Statement, OCC has acquired
new fax servers that have increased
bandwidth to support multiple users
that may select facsimile transmission
as their available back-up
communication method. Meanwhile,
the telephone features used by OCC’s
Member Service staff are equipped so
that calls are automatically routed to an
available representative in the event a
firm’s designated contact is unavailable.
Finally, OCC has confirmed that: (i) The
number of Category B firms who are
located in a city where OCC maintains
an office; and (ii) do not currently
maintain a T1 line, is sufficiently small
enough so that OCC will be able to
accommodate those firms who may
need to utilize OCC’s equipment in the
event of an internet outage.
OCC also proposes to clarify the
Policy Statement by expressly adding a
requirement for each clearing member to
provide OCC with an annual statement
that the Clearing Member: (i) Has been
and continues to be in compliance with
the Policy Statement; (ii) has
successfully tested its ability to access
OCC’s information and data systems
using its Back-Up Communication
Channel since the last reporting period;
and (iii) will notify OCC within a
reasonable period of any changes to
their Internet Service Providers since
the date of the last notice provided to
OCC. While OCC believes that the
existing policy reasonably and fairly
implies that clearing members would
not only remain in compliance with its
requirements, but that clearing members
would perform periodic testing of its
Back-Up Communication Channel, we
believe that the proposed modifications
eliminate any ambiguity that may exist
and help ensure that OCC has sufficient
information to troubleshoot in case of an
Internet outage, thereby helping to
ensure that critical business activities
can still be performed in a timely
manner in such instances.
(2) Statutory Basis
The proposed changes to OCC’s Rules
are consistent with the purposes and
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requirements of Section 17A(b)(3)(F) of
the Securities Exchange Act of 1934
(‘‘Act’’) 4 and the rules and regulations
thereunder because they are designed to
promote the prompt and accurate
clearance and settlement of securities
transactions by simplifying the criteria
used to determine the authorized BackUp Communication Channel(s) that may
be used by a given clearing member in
the event the Internet is not available,
and reducing the administrative
oversight associated with making such
determinations. The updates to OCC’s
Policy Statement further clarify the
means by which clearing members are
required to notify OCC of the Back-Up
Communication Channel(s) adopted by
each clearing member, along with the
internet service providers being used,
and confirmation that each clearing
member has successfully tested its
ability to access OCC’s systems, thereby
helping to ensure that critical business
activities can still be performed in a
timely manner even in the event of an
Internet outage. The proposed rule
change is not inconsistent with the
existing rules of OCC, including any
rules proposed to be amended.
(B) Clearing Agency’s Statement on
Burden on Competition
OCC believes that the proposed rule
change will impose little to no burden
on competition and in no way impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. While the
updates to the Policy Statement now
expressly provide for clearing members
to: (i) Notify OCC of the Back-Up
Communication Channel(s) adopted by
each clearing member; (ii) provide OCC
with the names of its internet service
providers, and (iii) confirm for OCC that
it has successfully tested its ability to
access OCC’s systems, OCC believes that
each of these measures impose little to
no burden on competition, individually
or collectively, and any such burden
imposed will facilitate the prompt and
accurate clearance and settlement of
securities transactions at all times.
In particular, Clearing Members are
already required to maintain a secure
back-up means of communication under
OCC’s existing Policy Statement, as well
as, maintain service arrangements with
two independent internet service
providers. Clearing Members are also
already required under OCC Rule 215 to
provide information as OCC may from
time to time require. As such, OCC
believes that requiring Clearing
Members to provide OCC with
information they are already required to
4 15
U.S.C. 78q–1(b)(3)(F).
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maintain imposes little to no additional
burden on competition.
In addition, while the updated Policy
Statement now expressly requires
Clearing Members to confirm that it has
successfully tested its ability to access
OCC’s systems, OCC also believes that
such requirement imposes little to no
additional burden on competition and is
consistent with existing regulatory
requirements pertaining to business
continuity planning and disaster
recovery. First, OCC believes that the
testing requirement itself was already
implied in the existing Policy Statement
to ensure the Back-Up Communication
Channel was effective and operational,
so the only additional requirement
being imposed is an obligation to notify
OCC. Again, given Clearing Members’
existing obligation to provide
information that OCC may request, OCC
believes such requirement imposes little
to no additional burden on competition.
Second, to the extent a particular
Clearing Member may not have
understood the existing Policy
Statement to include an obligation to
test its Back-Up Communication
Channel, then OCC believes the Policy
Statement clarifies the obligations
applicable to all Clearing Members and
is consistent with existing regulatory
requirements pertaining to business
continuity planning and disaster
recovery applicable to Clearing
Members.
Collectively, the updates to the Policy
Statement are consistent with
requirements of the Act applicable to
clearing agencies and are designed to
promote the prompt and accurate
clearance and settlement of securities
transactions at all times. The updates
ensure that OCC has sufficient
information to troubleshoot in case of an
Internet outage, and clarifies Clearing
Members’ obligations to confirm their
ability to successfully access OCC’s
information and data systems using
their Back-Up Communication Channel
in the event of an Internet outage.
Accordingly, OCC believes that that [sic]
updates will impose little to no burden
on competition and in no way impose
a burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
Written comments were not and are
not intended to be solicited with respect
to the proposed rule change and none
have been received.
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54709
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 Comments
• Use the Commission’s Internet
comment for (https://www.sec.gov/rules/
sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
OCC–2013–10 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–OCC–2013–10. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
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filing also will be available for
inspection and copying at the principal
office of OCC and on OCC’s Web site at
https://www.theocc.com/about/
publications/bylaws.jsp. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–OCC–
2013–10 and should be submitted on or
before September 26, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.5
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–21537 Filed 9–4–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70286; File No. SR–
NYSEARCA–2013–82]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the NYSE Arca
Options Fee Schedule and NYSE Arca
Equities Fee Schedule To Provide for
Fees for a 40 Gigabit Liquidity Center
Network Connection in the Exchange
Data Center
August 29, 2013.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on August
21, 2013, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Fee Schedules in order to provide for
fees for a 40 Gb LCN connection in the
Exchange’s data center.4 The Exchange
proposes to implement the fee change
effective September 3, 2013.
Users are currently able to purchase
access to the Exchange’s LCN, a local
area network that is available in the data
center and that provides Users with
access to the Exchange’s trading and
execution systems via the Common
Customer Gateway (‘‘CCG’’) and to the
Exchanges’ proprietary market data
products.5 LCN access is currently
available in one and 10 Gb capacities,
for which Users incur an initial and
monthly fee per connection. The
Exchange also recently submitted a
proposal to expand its co-location
services to include 40 Gb LCN
connections.6 This higher-capacity LCN
access is designed to have lower latency
in the transmission of data between
Users and the Exchange. The Exchange
proposed to expand its co-location
services to include 40 Gb LCN
connections in order to make an
additional service available to its colocation Users and thereby satisfy
demand for more efficient, lowerlatency connections.
The Exchange hereby proposes to
establish the following fees for 40 Gb
LCN connections:
The Exchange proposes to amend the
NYSE Arca Options Fee Schedule and,
through its wholly owned subsidiary
NYSE Arca Equities, Inc. (‘‘NYSE Arca
Equities’’), proposes to amend the NYSE
Arca Equities Schedule of Fees and
Charges for Exchange Services (the
‘‘Equities Fee Schedule’’ and, together
with the Options Fee Schedule, the ‘‘Fee
Schedules’’) in order to provide for fees
for a 40 gigabit (‘‘Gb’’) Liquidity Center
Network (‘‘LCN’’) connection in the
Exchange’s data center. The text of the
proposed rule change is available on the
Exchange’s Web site at www.nyse.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
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Type of service
Description
Amount of charge
LCN Access ........................................................
40 Gb Circuit ....................................................
$15,000 per connection initial charge plus
$20,000 monthly per connection.
5 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 The Securities and Exchange Commission
(‘‘Commission’’) initially approved the Exchange’s
co-location services in Securities Exchange Act
Release No. 63275 (November 8, 2010), 75 FR 70048
(November 16, 2010) (SR–NYSEArca–2010–100)
(the ‘‘Original Co-location Approval’’). The
Exchange operates a data center in Mahwah, New
Jersey (the ‘‘data center’’) from which it provides
co-location services to Users. The Exchange’s colocation services allow Users to rent space in the
data center so they may locate their electronic
servers in close physical proximity to the
Exchange’s trading and execution system. See id. at
70049.
5 For purposes of the Exchange’s co-location
services, the term ‘‘User’’ includes (i) ETP Holders
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1 15
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and Sponsored Participants that are authorized to
obtain access to the NYSE Arca Marketplace
pursuant to NYSE Arca Equities Rule 7.29 (see
NYSE Arca Equities Rule 1.1(yy)); (ii) OTP Holders,
OTP Firms and Sponsored Participants that are
authorized to obtain access to the NYSE Arca
System pursuant to NYSE Arca Options Rule 6.2A
(see NYSE Arca Options Rule 6.1A(a)(19)); and (iii)
non-ETP Holder, non-OTP Holder and non-OTP
Firm broker-dealers and vendors that request to
receive co-location services directly from the
Exchange. See, e.g., Securities Exchange Act
Release Nos. 65970 (December 15, 2011), 76 FR
79242 (December 21, 2011) (SR–NYSEArca–2011–
74) and 65971 (December 15, 2011), 76 FR 79267
(December 21, 2011) (SR–NYSEArca–2011–75).
6 See Securities Exchange Act Release No. 70173
(August 13, 2013) (SR–NYSEArca–2013–80). The
Exchange did not propose making LCN content
service provider access (‘‘LCN CSP Access’’)
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available at a 40 Gb bandwidth because, at least
initially, User demand was not anticipated to exist.
Also, the Exchange noted that, for a 40 Gb
‘‘Bundle,’’ SFTI and optic connections would be at
10 Gb and only the LCN connections would be at
40 Gb, because 40 Gb bandwidths are not currently
offered for SFTI and optic connections. The
Exchange proposes to include language in the Fee
Schedules to reflect this fact. The Exchange’s
affiliates, NYSE MKT LLC (‘‘NYSE MKT’’) and New
York Stock Exchange LLC (‘‘NYSE,’’ and together
with NYSE MKT, ‘‘Affiliates’’) have filed
substantially the same proposed rule change to
expand their co-location services to include 40 Gb
LCN connections. See Securities Exchange Act
Release No. 70176 (August 13, 2013) (SR–
NYSEMKT–2013–67) and Securities Exchange Act
Release No. 70206 (August 15, 2013) (SR–NYSE–
2013–59).
E:\FR\FM\05SEN1.SGM
05SEN1
]]>Agencies
[Federal Register Volume 78, Number 172 (Thursday, September 5, 2013)]
[Notices]
[Pages 54707-54710]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-21537]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70289; File No. SR-OCC-2013-10]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change To Amend Its Policy Statement
Adopted Under Rule 205 Entitled ``Back-up Communication Channel to
Internet Access''
August 29, 2013.
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 August 23, 2013, The Options Clearing Corporation (``OCC'' or
``Corporation'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by OCC. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
OCC proposes to make certain changes to its Policy Statement
adopted under Rule 205 entitled ``Back-up Communication Channel to
Internet Access'' requiring clearing members that use the Internet as
their primary means to access OCC's information and data systems to
maintain a secure back-up means of communication in order to provide
for business continuance in the event of an Internet outage.
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, OCC 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. OCC 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
OCC Rule 205 prescribes that OCC clearing members are required to
submit instructions, notices, reports, data and
[[Page 54708]]
other items to the Corporation electronically in accordance with
procedures prescribed by the Corporation. The Rule is designed to
promote operational efficiency and effectiveness and reduce input
errors. Position-related post-trade (e.g., exercise notices, position
adjustments) and collateral transactions are common examples of
instructions submitted by clearing members electronically.
OCC supports the submission of these instructions through use of an
Internet connection to OCC's secured Web site. In 2006, OCC adopted a
Policy Statement under Rule 205 requiring clearing members that
primarily use the Internet to access OCC's systems to maintain a secure
back-up means of communication as a contingency to perform on a timely
basis critical business activities in the event of an Internet outage,
as well as to maintain service arrangements with two independent
internet service providers.\3\
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\3\ Securities Exchange Act Release No. 53980 (June 14, 2006),
71 FR 36155 (June 23, 2006)(SR-OCC-2006-04).
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The Policy Statement adopted at the time required clearing members
to maintain: (i) Separate service agreements with two (2) independent
service providers, and (ii) an OCC-approved method for accessing OCC's
information and data systems even in the case of an Internet outage
(the ``Back-Up Communication Channel'').
Guidelines were established so that the Back-Up Communication
Channel authorized for a particular clearing member was determined in
accordance with the firm's business profile using certain criteria. For
example, a clearing member that: (i) ranked among the top twenty-five
of cleared volume during a calendar year; (ii) cleared more than one
account type as defined in OCC's By-Laws and Rules; (iii) cleared two
or more product types; (iv) conducted Clearing Member Trade Assignment
(``CMTA'') business; (v) input a high volume of daily post-trade
activity; (vi) generally utilized multiple forms of collateral; (vii)
utilized most ancillary services offered by OCC; (viii) used a lease
line for data transmissions, would generally be designated as a
``Category A'' firm. ``Category A'' firms were required to maintain a
T1 line as an acceptable form of back-up communication channel.
A clearing member that: (i) Transacted mid-level cleared volume
during a calendar year; (ii) cleared only one or more account types as
defined in OCC's By-Laws and Rules; (iii) cleared one or more product
types; (iv) input a moderate to small volume of post-trade activity;
(v) generally utilized one or two forms of collateral; (vi) may have
utilized a lease line for data transmissions, were generally designated
as a ``Category B'' firm. Under the Policy Statement, ``Category B''
firms were provided the option to either maintain a T1 line or ISDN
connection as acceptable forms of a back-up communication channel.
A clearing member that: (i) Transacted low-level cleared volume
during a calendar year; (ii) cleared no more than one account type as
defined in OCC's By-Laws and Rules; (iii) cleared no more than one
product type; (iv) generally utilized one or two forms of collateral;
(v) input minimal amounts of post-trade activity, would generally be
designated as a ``Category C'' firm. ``Category C'' firms were given
the option to maintain an ISDN connection, utilize OCC equipment if the
clearing member was located in or near a city where OCC maintains
operational center(s), or rely upon fax transmission in the event an
internet connection was not available.
Recent denial of service attacks on financial institutions, along
with changes in technology since the Policy Statement was first
adopted, have prompted OCC to reassess the risk to operations should
Internet connections supporting clearing member access to OCC's
information and data systems be interrupted. Through this assessment,
OCC has determined that its existing policy should be modified to
ensure it is easily understood and properly implemented by the clearing
membership.
OCC is now proposing to make updates to the Policy Statement
intended to simplify the criteria applied to a given firm in
determining the appropriate Back-Up Communication Channel. Instead of
having three categories of Business Profiles that include several
criteria to be applied, and offering multiple communication options
available to a particular firm, the updated Policy Statement will
contain two profiles. Clearing Members that rank in the top-25 of
cleared volume during a calendar year or act as a facilities manager to
one or more Clearing firms will be designated as a ``Category A'' firm,
and will be required to maintain a T1 line as its Back-Up Communication
Channel. All other firms will be designated as ``Category B'' firms,
and will be required to maintain a T1 line or utilize a fax line,
telephone or have ready access to an OCC office location.
OCC believes the proposed changes will present minimal to no impact
to clearing members. In particular, all firms that were previously
designated as ``Category A'' firms under the former policy will
continue to be designated as ``Category A'' firms under the revised
policy being proposed, and they will still be required to maintain a T1
line, as previously required. Those firms that will be designated as
Category B firms under the proposed policy will now have increased
flexibility under the back-up options being made available to them, in
that they can select between a T1 Line, fax, telephone, or use an OCC
office if they are located in a city where OCC maintains an operational
center. In preparation for the revisions to the Policy Statement, OCC
has acquired new fax servers that have increased bandwidth to support
multiple users that may select facsimile transmission as their
available back-up communication method. Meanwhile, the telephone
features used by OCC's Member Service staff are equipped so that calls
are automatically routed to an available representative in the event a
firm's designated contact is unavailable. Finally, OCC has confirmed
that: (i) The number of Category B firms who are located in a city
where OCC maintains an office; and (ii) do not currently maintain a T1
line, is sufficiently small enough so that OCC will be able to
accommodate those firms who may need to utilize OCC's equipment in the
event of an internet outage.
OCC also proposes to clarify the Policy Statement by expressly
adding a requirement for each clearing member to provide OCC with an
annual statement that the Clearing Member: (i) Has been and continues
to be in compliance with the Policy Statement; (ii) has successfully
tested its ability to access OCC's information and data systems using
its Back-Up Communication Channel since the last reporting period; and
(iii) will notify OCC within a reasonable period of any changes to
their Internet Service Providers since the date of the last notice
provided to OCC. While OCC believes that the existing policy reasonably
and fairly implies that clearing members would not only remain in
compliance with its requirements, but that clearing members would
perform periodic testing of its Back-Up Communication Channel, we
believe that the proposed modifications eliminate any ambiguity that
may exist and help ensure that OCC has sufficient information to
troubleshoot in case of an Internet outage, thereby helping to ensure
that critical business activities can still be performed in a timely
manner in such instances.
(2) Statutory Basis
The proposed changes to OCC's Rules are consistent with the
purposes and
[[Page 54709]]
requirements of Section 17A(b)(3)(F) of the Securities Exchange Act of
1934 (``Act'') \4\ and the rules and regulations thereunder because
they are designed to promote the prompt and accurate clearance and
settlement of securities transactions by simplifying the criteria used
to determine the authorized Back-Up Communication Channel(s) that may
be used by a given clearing member in the event the Internet is not
available, and reducing the administrative oversight associated with
making such determinations. The updates to OCC's Policy Statement
further clarify the means by which clearing members are required to
notify OCC of the Back-Up Communication Channel(s) adopted by each
clearing member, along with the internet service providers being used,
and confirmation that each clearing member has successfully tested its
ability to access OCC's systems, thereby helping to ensure that
critical business activities can still be performed in a timely manner
even in the event of an Internet outage. The proposed rule change is
not inconsistent with the existing rules of OCC, including any rules
proposed to be amended.
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\4\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Clearing Agency's Statement on Burden on Competition
OCC believes that the proposed rule change will impose little to no
burden on competition and in no way impose any burden on competition
not necessary or appropriate in furtherance of the purposes of the Act.
While the updates to the Policy Statement now expressly provide for
clearing members to: (i) Notify OCC of the Back-Up Communication
Channel(s) adopted by each clearing member; (ii) provide OCC with the
names of its internet service providers, and (iii) confirm for OCC that
it has successfully tested its ability to access OCC's systems, OCC
believes that each of these measures impose little to no burden on
competition, individually or collectively, and any such burden imposed
will facilitate the prompt and accurate clearance and settlement of
securities transactions at all times.
In particular, Clearing Members are already required to maintain a
secure back-up means of communication under OCC's existing Policy
Statement, as well as, maintain service arrangements with two
independent internet service providers. Clearing Members are also
already required under OCC Rule 215 to provide information as OCC may
from time to time require. As such, OCC believes that requiring
Clearing Members to provide OCC with information they are already
required to maintain imposes little to no additional burden on
competition.
In addition, while the updated Policy Statement now expressly
requires Clearing Members to confirm that it has successfully tested
its ability to access OCC's systems, OCC also believes that such
requirement imposes little to no additional burden on competition and
is consistent with existing regulatory requirements pertaining to
business continuity planning and disaster recovery. First, OCC believes
that the testing requirement itself was already implied in the existing
Policy Statement to ensure the Back-Up Communication Channel was
effective and operational, so the only additional requirement being
imposed is an obligation to notify OCC. Again, given Clearing Members'
existing obligation to provide information that OCC may request, OCC
believes such requirement imposes little to no additional burden on
competition. Second, to the extent a particular Clearing Member may not
have understood the existing Policy Statement to include an obligation
to test its Back-Up Communication Channel, then OCC believes the Policy
Statement clarifies the obligations applicable to all Clearing Members
and is consistent with existing regulatory requirements pertaining to
business continuity planning and disaster recovery applicable to
Clearing Members.
Collectively, the updates to the Policy Statement are consistent
with requirements of the Act applicable to clearing agencies and are
designed to promote the prompt and accurate clearance and settlement of
securities transactions at all times. The updates ensure that OCC has
sufficient information to troubleshoot in case of an Internet outage,
and clarifies Clearing Members' obligations to confirm their ability to
successfully access OCC's information and data systems using their
Back-Up Communication Channel in the event of an Internet outage.
Accordingly, OCC believes that that [sic] updates will impose little to
no burden on competition and in no way impose a burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
Written comments were not and are not intended to be solicited with
respect to the proposed rule change and none have been received.
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 Comments
Use the Commission's Internet comment for (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-OCC-2013-10 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-OCC-2013-10. 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 (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
[[Page 54710]]
filing also will be available for inspection and copying at the
principal office of OCC and on OCC's Web site at https://www.theocc.com/about/publications/bylaws.jsp. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-OCC-2013-10 and should be submitted on or before
September 26, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\5\
Kevin M. O'Neill,
Deputy Secretary.
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\5\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-21537 Filed 9-4-13; 8:45 am]
BILLING CODE 8011-01-P
