Order Pursuant to Sections 15F(b)(6) and 36 of the Securities Exchange Act of 1934 Extending Certain Temporary Exemptions and a Temporary and Limited Exception Related to Security-Based Swaps, 56519-56522 [2015-23464]
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Federal Register / Vol. 80, No. 181 / Friday, September 18, 2015 / Notices
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the benefit of all members that trade
complex orders on the Exchange. The
Exchange also believes that the
corresponding increase to the complex
order taker fee and complex order maker
fee for trading against Priority Customer
orders, as well as the fee for responses
to complex crossing orders, is
reasonable and equitable as the
proposed fees are set at levels that the
Exchange believes will continue to be
attractive to market participants that
trade on ISE, and that are competitive
with fees charged by other options
exchanges.
The Exchange notes that Priority
Customer orders will continue to
receive complex order rebates,17 while
other market participants will continue
to pay a fee. The Exchange does not
believe that this is unfairly
discriminatory as a Priority Customer is
by definition not a broker or dealer in
securities, and does not place more than
390 orders in listed options per day on
average during a calendar month for its
own beneficial account(s). This
limitation does not apply to participants
whose behavior is substantially similar
to that of market professionals,
including Professional Customers, who
will generally submit a higher number
of orders (many of which do not result
in executions) than Priority Customers.
The Exchange also notes that Market
Maker orders will continue to be eligible
for lower fees than other non-Priority
Customer orders. The Exchange does
not believe that it is unfairly
discriminatory provide lower fees to
Market Maker orders as Market Makers
are subject to additional requirements
and obligations (such as quoting
requirements) that other market
participants are not.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,18 the Exchange does not believe
that the proposed rule change will
impose any burden on intermarket or
intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
complex order fees and rebates remain
competitive with fees and rebates
offered on other options exchanges. The
Exchange operates in a highly
competitive market in which market
participants can readily direct their
order flow to competing venues. In such
an environment, the Exchange must
17 With the exception of responses to complex
crossing orders where Priority Customers are
charged a fee like other market participants.
18 15 U.S.C. 78f(b)(8).
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continually review, and consider
adjusting, its fees and rebates to remain
competitive with other exchanges. For
the reasons described above, the
Exchange believes that the proposed fee
changes reflect this competitive
environment.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
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)(ii) of the Act 19 and
subparagraph (f)(2) of Rule 19b–4
thereunder,20 because it establishes a
due, fee, or other charge imposed by
ISE.
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
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ISE–2015–27 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
19
20
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15 U.S.C. 78s(b)(3)(A)(ii).
17 CFR 240.19b–4(f)(2).
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56519
All submissions should refer to File
Number SR–ISE–2015–27. 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 such
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–ISE–
2015–27, and should be submitted on or
before October 9, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Brent J. Fields,
Secretary.
[FR Doc. 2015–23398 Filed 9–17–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75919]
Order Pursuant to Sections 15F(b)(6)
and 36 of the Securities Exchange Act
of 1934 Extending Certain Temporary
Exemptions and a Temporary and
Limited Exception Related to SecurityBased Swaps
September 15, 2015.
I. Introduction
On June 15, 2011, the Securities and
Exchange Commission (‘‘Commission’’)
issued an order granting temporary
exemptions and exceptions from
compliance with certain provisions of
21
17 CFR 200.30–3(a)(12).
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Federal Register / Vol. 80, No. 181 / Friday, September 18, 2015 / Notices
the Securities Exchange Act of 1934
(‘‘Exchange Act’’) 1 applicable to
security-based swaps (‘‘SB swaps’’), that
were amended or added by the DoddFrank Wall Street Reform and Consumer
Protection Act of 2010 (‘‘Dodd-Frank
Act’’).2 The Temporary Exemptions
Order provided, among other things, a
temporary exemption from Section 3E(f)
of the Exchange Act for security-based
swap dealers and major security-based
swap participants (together, ‘‘SBS
Entities’’), a temporary and limited
exception from Section 15F(b)(6) of the
Exchange Act with respect to persons
then currently associated with SBS
Entities, and temporary exemptions
from Section 29(b) of the Exchange Act
with respect to violations of Sections
3E(f) and 15F(b)(6) in connection with
SB swap contracts entered into on or
after July 16, 2011. The Commission is
extending the exemption from Section
3E(f) and exception from Section
15F(b)(6) until the compliance date of
rules we have adopted to establish a
process by which SBS Entities can
register (and withdraw from
registration) with the Commission.3 In
addition, the Commission is specifying
when the related exemption for Section
29(b) with respect to SB swap contracts
that involve violations of Sections 3E(f)
or 15F(b)(6) will expire.
II. Background
Title VII of the Dodd-Frank Act
amended the Exchange Act to establish
a new regulatory framework for the
security-based swap markets. The
provisions of Title VII generally were
effective as of July 16, 2011, unless a
rulemaking or other Commission action
is required. The Temporary Exemptions
Order provided guidance with respect to
the compliance dates of Exchange Act
provisions added by Title VII. It also
identified those provisions with which
compliance was required by the
effective date of the Title VII
amendments to the Exchange Act and
those with which compliance is
triggered by registration, adoption of
final rules, or other action by the
Commission.4 Where compliance was
required by the effective date of Title
1 15
U.S.C. 78a et seq.
Temporary Exemptions and Other
Temporary Relief, Together With Information on
Compliance Dates for New Provisions of the
Securities Exchange Act of 1934 Applicable to
Security-Based Swaps, Exchange Act Release No.
64678 (June 15, 2011), 76 FR 36287 (June 22, 2011)
(‘‘Temporary Exemptions Order’’).
3 See Registration Process for Security-Based
Swap Dealers and Major Security-Based Swap
Participants, Exchange Act Release No. 75611 (Aug.
5, 2015), 80 FR 48964 (Aug.14, 2015) (‘‘Registration
Adopting Release’’).
4 See Temporary Exemptions Order.
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2 See
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VII, the Temporary Exemptions Order
granted certain temporary exemptions
and exceptions where necessary or
appropriate in the public interest, and
consistent with the protection of
investors.5 The Temporary Exemptions
Order included temporary exemptions
from Sections 3E(f) and 29(b), and a
temporary and limited exception from
Section 15F(b)(6).6
Section 3E of the Exchange Act,
added by Section 763(d) of the DoddFrank Act, regulates the collection and
handling of collateral for SB swaps, and
sets out certain rights of the
counterparties who deliver such
collateral.7 Section 3E(f) requires SBS
Entities to segregate initial margin
amounts delivered by their
counterparties in uncleared SB swap
transactions if requested to do so by
such counterparties.8 The statutory
compliance date for Section 3E(f) was
July 16, 2011. As explained in the
Temporary Exemptions Order, the
segregation required under Section 3E(f)
will require expenditures of resources
and time, such as the establishment of
accounts and the adoption of policies
and procedures setting forth the proper
collection and maintenance of
collateral. The Commission found that a
temporary exemption from Section 3E(f)
for SBS Entities was necessary or
appropriate in the public interest, and
was consistent with the protection of
investors because it would allow
persons to register as an SBS Entity in
accordance with the applicable
registration requirements, once
established, prior to expending
resources to comply with the provisions
of Section 3E(f), and because it would
give SBS Entities additional time to
establish the necessary accounts and
adopt the policies and procedures
required by Section 3E(f).9 Under the
Temporary Exemption Order, the
temporary exemption from Section 3E(f)
would expire on the date upon which
the rules adopted by the Commission to
register SBS Entities become effective.
5 See
id.
6 Section
36(c) of the Exchange Act, 15 U.S.C.
78mm(c), limits the Commission’s exemptive
authority with respect to certain provisions of the
Exchange Act added by Title VII, including Section
15F. However, Section 15F(b)(6) expressly
authorizes the Commission to establish exceptions
to this provision by rule, regulation, or order.
7 15 U.S.C. 78c–5.
8 15 U.S.C. 78c–5(f).
9 See Temporary Exemptions Order n. 98
(providing that, ‘‘Notwithstanding the exemption
granted, market participants in uncleared SB swaps
may continue to voluntarily negotiate for and
receive similar protections to those provided in
section 3E(f) of the Exchange Act, 15 U.S.C. 78c–
5(f), until compliance with such section 3E(f) is
required.’’).
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Section 15F of the Exchange Act,
added by Section 764(a) of the DoddFrank Act, establishes the regulatory
framework for SBS Entities.10 Section
15F(b)(6) provides that ‘‘except to the
extent otherwise provided by rule,
regulation or order of the Commission,’’
it shall be unlawful for an SBS Entity to
permit an associated person who is
subject to a statutory disqualification to
effect or be involved in effecting
security-based swaps on its behalf, if the
SBS Entity knew or should have known
of the statutory disqualification.11 In the
Temporary Exemptions Order, the
Commission exercised its authority
under Section 15F(b)(6) to provide a
temporary and limited exception for
SBS Entities from the application of the
prohibition in that section. Specifically,
the Temporary Exemptions Order
provides that persons subject to a
statutory disqualification who were, as
of July 16, 2011, associated with an SBS
Entity and who effected or were
involved in effecting security-based
swaps on behalf of such SBS Entity
could continue to be associated with an
SBS Entity until the date upon which
rules adopted by the Commission to
register SBS Entities become effective.
In providing this exception, the
Commission explained that it intended
to separately consider issues related to
how an associated person that is subject
to a statutory disqualification may be
involved in the security-based swap
business of the SBS Entity.12 The
Commission also noted that existing
business relationships and market
activity could be unnecessarily
disrupted if market participants were
required to comply with Section
15F(b)(6) before the Commission
considers, through notice and comment
rulemaking, whether to adopt a
procedure for potential modifications of
the effect of statutory disqualifications
under Title VII of the Dodd-Frank Act
for SBS Entities and what any such
procedure would require.13
Section 29(b) of the Exchange Act
generally provides that contracts made
in violation of any provision of the
Exchange Act, or the rules thereunder,
shall be void ‘‘(1) as regards the rights
of any person who, in violation of any
such provision, . . . shall have made or
engaged in the performance of any such
contract, and (2) as regards the rights of
any person who, not being a party to
such contracts, shall have acquired any
right thereunder with actual knowledge
of the facts by reason of which the
10 15
U.S.C. 78o–10.
U.S.C. 78o–10(b)(6).
12 See Temporary Exemptions Order at 36301.
13 See id.
11 15
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Federal Register / Vol. 80, No. 181 / Friday, September 18, 2015 / Notices
making or performance of such
contracts in violation of any such
provision . . . .’’ 14 In the Temporary
Exemptions Order, the Commission
temporarily exempted any SB swap
contract entered into on or after July 16,
2011 from being void or considered
voidable by reason of Section 29(b)
because any person that is a party to a
contract violated a provision of the
Exchange Act that was amended or
added by Title VII of Dodd-Frank and
for which the Commission has taken the
view that compliance will be triggered
by registration of a person or by
adoption of final rules by the
Commission, or has provided an
exception or exemption in the
Temporary Exemptions Order, until
such date as the Commission specifies.
The temporary exemption from Section
29(b) applies to contracts that would
otherwise involve violations of, among
other provisions, Sections 3E(f) or
15F(b)(6) of the Exchange Act.
The Commission received several
comments in response to the Temporary
Exemptions Order.15 Although none of
the commenters specifically referred to
Sections 3E(f), 15F(b)(6), or 29(b), one
commenter noted that the Temporary
Exemptions Order was, in general,
reasonable in terms of its scope and
duration.16 In particular, the commenter
stated that the exemption from specific
requirements under the Dodd-Frank Act
was appropriate where the Commission
had not completed ‘‘other steps, such as
finalizing rules, setting up the
registration regime, or establishing
infrastructure.’’ 17 Another commenter
urged the Commission ‘‘to align the
implementation of the self-operative
provisions with the provisions that are
dependent on rulemaking to ensure a
coherent realization of the new swaps
regulatory regime.’’ 18
14 15
U.S.C. 78cc(b).
Letter from American Bankers Association,
Financial Services Roundtable, Futures Industry
Association, Institute of International Bankers,
International Swaps and Derivatives Association,
Investment Company Institute, Securities Industry
and Financial Markets Association, and U.S.
Chamber of Commerce, (June 10, 2011); Letter from
´ ´
Jirı Krol, Alternative Investment Management
Association Limited (July 1, 2011); Letter from
Bruce C. Bennett, Covington and Burling LLP (July
1, 2011); Letter from Dennis M. Kelleher, Stephen
W. Hall, Better Markets, Inc. (July 6, 2011); Letter
from Jeff Gooch, MarkitSERV (July 15, 2011); Letter
from Kevin Gould, Markit North America, Inc. (July
26, 2011), available at https://www.sec.gov/
comments/s7-24-11/s72411.shtml.
16 See Letter from Dennis M. Kelleher, Stephen
W. Hall, Better Markets, Inc. (July 6, 2011), at 2,
available at https://www.sec.gov/comments/s7-2411/s72411-3.pdf.
17 See id.
18 See Letter from American Bankers Association,
Financial Services Roundtable, Futures Industry
Association, Institute of International Bankers,
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15 See
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III. Discussion
In August, 2015, the Commission
adopted rules to establish a process by
which SBS Entities can register (and
withdraw from registration) with the
Commission (‘‘Registration Rules’’).19
These rules will become effective
October 13, 2015, but compliance with
the Registration Rules will not be
required until the later of: Six months
after the date of publication in the
Federal Register of final rules
establishing capital, margin and
segregation requirements for SBS
Entities; 20 the compliance date of final
rules establishing recordkeeping and
reporting requirements for SBS
Entities; 21 the compliance date of final
rules establishing business conduct
requirements under Sections 15F(h) and
15F(k) of the Exchange Act; 22 or the
compliance date for final rules
establishing a process for a registered
SBS Entity to make an application to the
Commission to allow an associated
person who is subject to a statutory
disqualification to effect or be involved
in effecting security-based swaps on the
SBS Entity’s behalf (‘‘Registration
Compliance Date’’). At the same time,
the Commission also proposed rules
that would, if adopted, establish a
process for an SBS Entity to make an
application to the Commission to allow
an associated person subject to statutory
disqualification to effect or be involved
in effecting security-based swaps on
behalf of the SBS Entity.23
International Swaps and Derivatives Association,
Investment Company Institute, Securities Industry
and Financial Markets Association, and U.S.
Chamber of Commerce (June 10, 2011).
19 See Registration Adopting Release.
20 The Commission previously has proposed rules
to establish capital, margin and segregation
requirements for SBS Entities. See Capital, Margin,
and Segregation Requirements for Security-Based
Swap Dealers and Major Security-Based Swap
Participants and Capital Requirements for BrokerDealers, Exchange Act Release No. 68071 (Oct. 18,
2012), 77 FR 70213 (Nov. 23, 2012).
21 The Commission previously has proposed rules
to establish recordkeeping and reporting
requirements for SBS Entities. See Recordkeeping
and Reporting Requirements for Security-Based
Swap Dealers, Major Security-Based Swap
Participants, and Broker-Dealers; Capital Rule for
Certain Security-Based Swap Dealers, Exchange Act
Release No. 71958 (Apr. 17, 2014), 79 FR 25193
(May 2, 2014).
22 The Commission previously has proposed rules
to establish business conduct standards for SBS
Entities. See Business Conduct Standards for
Security-Based Swap Dealers and Major SecurityBased Swap Participants, Exchange Act Release No.
64766 (June 29, 2011), 76 FR 42395 (July 18, 2011).
23 Applications by Security-Based Swap Dealers
or Major Security-Based Swap Participants for
Consent for Associated Persons to Effect or Be
Involved in Effecting Security-Based Swaps,
Exchange Act Release No. 75612 (Aug. 5, 2105), 80
FR 51683 (Aug. 25, 2015) (proposing new Rule of
Practice 194).
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56521
Under the terms of the Temporary
Exemptions Order, the temporary
exemption from Section 3E(f) of the
Exchange Act and exception from
Section 15F(b)(6) of the Exchange Act
will expire when rules adopted by the
Commission to register SBS Entities
become effective. Accordingly, absent
an extension, the temporary exemption
from the segregation requirements in
Section 3E(f) and exception from the
prohibition in Section 15F(b)(6) in the
Temporary Exemptions Order will
expire upon the effective date of the
Registration Rules, even though SBS
Entities would not be required to
register until the Registration
Compliance Date. As stated in the
Temporary Exemptions Order, the
Commission continues to believe that
persons should be able to register in
accordance with the applicable
registration requirements prior to
expending resources to comply with
Section 3E(f). Therefore, the
Commission is extending the temporary
exemption from the requirements of
Section 3E(f) until the Registration
Compliance Date.24
The Commission also continues to
believe that existing business
relationships and market activity may
be unnecessarily disrupted if market
participants were required to comply
with Section 15F(b)(6) of the Exchange
Act before the Commission considered,
through notice and comment
rulemaking, whether to adopt a
procedure for potential modifications of
the effect of statutory disqualifications
under Title VII for SBS Entities, and
what any such procedure would
require.25 As noted above, the
Commission has proposed rules relating
to the requirements of Section 15F(b)(6).
The Registration Compliance Date will
occur no earlier than final rules
establishing a process for a registered
24 The Commission also notes that this extension
will allow persons to have the ability to review the
final capital, margin and segregation rules before
being required to comply with the requirements of
Section 3E(f), as the compliance date of the
Registration Rules will occur no earlier than six
months after the date of publication in the Federal
Register of final rules establishing capital, margin
and segregation requirements for SBS Entities.
25 See supra note 23. The Commission has
provided guidance in the Registration Adopting
Release regarding the dates on which SBS Entities
will become subject to registration requirements
based on their status as either a SBS Dealer or Major
SBS Participant. See Registration Adopting Release,
80 FR at 48988. In accordance with this guidance,
we do not believe that any entity will have the
status of an SBS Entity prior to the Registration
Compliance Date. However, for the avoidance of
doubt and possible legal uncertainty, the
Commission is extending the previously granted
temporary exemption from Section 3E(f) and the
temporary and limited exception from Section
15F(b)(6) until the Registration Compliance Date.
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Federal Register / Vol. 80, No. 181 / Friday, September 18, 2015 / Notices
SBS Entity to make an application to the
Commission to allow an associated
person who is subject to a statutory
disqualification to effect or be involved
in effecting security-based swaps on the
SBS Entity’s behalf. Accordingly, the
Commission is extending the temporary
and limited exception from the
requirements of Section 15F(b)(6) until
the Registration Compliance Date.
As discussed in the Temporary
Exemptions Order, the Commission
does not believe that Section 29(b) of
the Exchange Act would apply to the
provisions of Title VII for which the
Commission has taken the view that
compliance will either be triggered by
registration of a person or by adoption
of final rules by the Commission, or for
which the Commission has provided an
exception or exemption in that order.
For the avoidance of doubt and to avoid
possible legal uncertainty or market
disruption, the Temporary Exemptions
Order granted a temporary exemption
from Section 29(b) until such date as the
Commission specifies.26 The
Commission believes that the exemption
from Section 29(b) provided under the
Temporary Exemptions Order with
respect to Sections 3E(f) and 15F(b)(6) of
the Exchange Act will continue to apply
during the period of time covered by the
extensions in this Order. However, to
avoid any doubt or possible legal
uncertainty regarding the continuing
availability of the temporary exemption
from Section 29(b) with respect to
Sections 3E(f) and 15(b)(6), the
Commission is exercising its authority
under Section 36 of the Exchange Act to
continue the exemption from Section
29(b) with respect to Sections 3E(f) and
15(b)(6) until the Registration
Compliance Date.
to a statutory disqualification who were
associated with an SBS Entity as of July
16, 2011, and who effect or are involved
in effecting SB swaps on behalf of such
SBS Entity until the Registration
Compliance Date.
It is hereby further ordered, pursuant
to Section 36 of the Exchange Act, that
no SB swap contract entered into on or
after July 16, 2011 shall be void or
considered voidable by reason of
Section 29(b) of the Exchange Act
because any person that is a party to the
contract violated Section 3E(f) of the
Exchange Act prior to the Registration
Compliance Date.
It is hereby further ordered, pursuant
to Section 36 of the Exchange Act, that
no SB swap contract entered into on or
after July 16, 2011 shall be void or
considered voidable by reason of
Section 29(b) of the Exchange Act
because any person that is a party to the
contract violated Section 15F(b)(6) of
the Exchange Act prior to the
Registration Compliance.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2015–23464 Filed 9–17–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75914; File No. SR–CBOE–
2015–079]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To List Two Additional
Products During Extended Trading
Hours
IV. Conclusion
September 14, 2015.
It is hereby ordered, pursuant to
Section 36 of the Exchange Act, that
SBS Entities are exempt from the
requirements of Section 3E(f) of the
Exchange Act until the Registration
Compliance Date.
It is hereby further ordered, pursuant
to Section 15F(b)(6) of the Exchange
Act, that SBS Entities are temporarily
excepted from the prohibition of Section
15F(b)(6) with respect to persons subject
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
September 10, 2015, Chicago Board
Options Exchange, Incorporated (the
‘‘Exchange’’ or ‘‘CBOE’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
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Tier
•
•
•
•
Options
Options
Options
Options
Temporary Exemptions Order at 36305–06.
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list two
additional products during extended
trading hours (‘‘ETH’’). The text of the
proposed rule change is provided
below.
(additions are italicized; deletions are
[bracketed])
*
*
*
*
*
Chicago Board Options Exchange,
Incorporated
Rules
*
*
*
*
*
Rule 6.1A. Extended Trading Hours
(a)–(b) No change.
(c) Eligibility. The Exchange may designate
as eligible for trading during Extended
Trading Hours any exclusively listed index
option designated for trading under Rules
24.2 and 24.9. The following options are
approved for trading on the Exchange during
Extended Trading Hours:
(i) Standard & Poor’s 500 Stock Index
(SPX)
(ii) CBOE Volatility Index® (VIX®)
(iii) Standard & Poor’s 500 Stock Index
(P.M.-Settled) (SPXPM)
(iv) Mini-SPX Index (XSP)
Any series in these classes that are
expected to be open for trading during
Regular Trading Hours will be open for
trading during Extended Trading Hours on
that same trading day (subject to Rules 6.2B
and 24.13, Interpretation and Policy .03).
FLEX options (pursuant to Chapters XXIVA
and XXIVB) will not be eligible for trading
during Extended Trading Hours.
(d) No change.
(e) Market-Makers.
(i) Appointments. A Market-Maker’s
appointment to a class during Regular
Trading Hours does not apply during
Extended Trading Hours. Market-Makers may
request appointments for Extended Trading
Hours in accordance with Rule 8.3 and this
subparagraph (i). Notwithstanding Rule
8.3(c), a Market-Maker can create a Virtual
Trading Crowd (‘‘VTC’’) appointment, which
confers the right to quote electronically
during Extended Trading Hours in the
appropriate number of classes selected from
the Extended Trading Hours tier and related
appointment costs as follows:
Appointment
cost
Classes
Extended Trading Hours ............................
26 See
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
Jkt 235001
PO 00000
on
on
on
on
the
the
the
the
CBOE Volatility Index (VIX) ...............................................................
Standard & Poor’s 500 (SPX) ............................................................
Standard & Poor’s 500 Stock Index (P.M.-Settled) (SPXPM) ...........
Mini-SPX Index (XSP) ........................................................................
U.S.C. 78s(b)(1).
Frm 00086
Fmt 4703
2 17
Sfmt 4703
E:\FR\FM\18SEN1.SGM
CFR 240.19b–4.
18SEN1
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[.5].4
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.1
]]>Agencies
[Federal Register Volume 80, Number 181 (Friday, September 18, 2015)]
[Notices]
[Pages 56519-56522]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23464]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75919]
Order Pursuant to Sections 15F(b)(6) and 36 of the Securities
Exchange Act of 1934 Extending Certain Temporary Exemptions and a
Temporary and Limited Exception Related to Security-Based Swaps
September 15, 2015.
I. Introduction
On June 15, 2011, the Securities and Exchange Commission
(``Commission'') issued an order granting temporary exemptions and
exceptions from compliance with certain provisions of
[[Page 56520]]
the Securities Exchange Act of 1934 (``Exchange Act'') \1\ applicable
to security-based swaps (``SB swaps''), that were amended or added by
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
(``Dodd-Frank Act'').\2\ The Temporary Exemptions Order provided, among
other things, a temporary exemption from Section 3E(f) of the Exchange
Act for security-based swap dealers and major security-based swap
participants (together, ``SBS Entities''), a temporary and limited
exception from Section 15F(b)(6) of the Exchange Act with respect to
persons then currently associated with SBS Entities, and temporary
exemptions from Section 29(b) of the Exchange Act with respect to
violations of Sections 3E(f) and 15F(b)(6) in connection with SB swap
contracts entered into on or after July 16, 2011. The Commission is
extending the exemption from Section 3E(f) and exception from Section
15F(b)(6) until the compliance date of rules we have adopted to
establish a process by which SBS Entities can register (and withdraw
from registration) with the Commission.\3\ In addition, the Commission
is specifying when the related exemption for Section 29(b) with respect
to SB swap contracts that involve violations of Sections 3E(f) or
15F(b)(6) will expire.
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\1\ 15 U.S.C. 78a et seq.
\2\ See Temporary Exemptions and Other Temporary Relief,
Together With Information on Compliance Dates for New Provisions of
the Securities Exchange Act of 1934 Applicable to Security-Based
Swaps, Exchange Act Release No. 64678 (June 15, 2011), 76 FR 36287
(June 22, 2011) (``Temporary Exemptions Order'').
\3\ See Registration Process for Security-Based Swap Dealers and
Major Security-Based Swap Participants, Exchange Act Release No.
75611 (Aug. 5, 2015), 80 FR 48964 (Aug.14, 2015) (``Registration
Adopting Release'').
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II. Background
Title VII of the Dodd-Frank Act amended the Exchange Act to
establish a new regulatory framework for the security-based swap
markets. The provisions of Title VII generally were effective as of
July 16, 2011, unless a rulemaking or other Commission action is
required. The Temporary Exemptions Order provided guidance with respect
to the compliance dates of Exchange Act provisions added by Title VII.
It also identified those provisions with which compliance was required
by the effective date of the Title VII amendments to the Exchange Act
and those with which compliance is triggered by registration, adoption
of final rules, or other action by the Commission.\4\ Where compliance
was required by the effective date of Title VII, the Temporary
Exemptions Order granted certain temporary exemptions and exceptions
where necessary or appropriate in the public interest, and consistent
with the protection of investors.\5\ The Temporary Exemptions Order
included temporary exemptions from Sections 3E(f) and 29(b), and a
temporary and limited exception from Section 15F(b)(6).\6\
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\4\ See Temporary Exemptions Order.
\5\ See id.
\6\ Section 36(c) of the Exchange Act, 15 U.S.C. 78mm(c), limits
the Commission's exemptive authority with respect to certain
provisions of the Exchange Act added by Title VII, including Section
15F. However, Section 15F(b)(6) expressly authorizes the Commission
to establish exceptions to this provision by rule, regulation, or
order.
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Section 3E of the Exchange Act, added by Section 763(d) of the
Dodd-Frank Act, regulates the collection and handling of collateral for
SB swaps, and sets out certain rights of the counterparties who deliver
such collateral.\7\ Section 3E(f) requires SBS Entities to segregate
initial margin amounts delivered by their counterparties in uncleared
SB swap transactions if requested to do so by such counterparties.\8\
The statutory compliance date for Section 3E(f) was July 16, 2011. As
explained in the Temporary Exemptions Order, the segregation required
under Section 3E(f) will require expenditures of resources and time,
such as the establishment of accounts and the adoption of policies and
procedures setting forth the proper collection and maintenance of
collateral. The Commission found that a temporary exemption from
Section 3E(f) for SBS Entities was necessary or appropriate in the
public interest, and was consistent with the protection of investors
because it would allow persons to register as an SBS Entity in
accordance with the applicable registration requirements, once
established, prior to expending resources to comply with the provisions
of Section 3E(f), and because it would give SBS Entities additional
time to establish the necessary accounts and adopt the policies and
procedures required by Section 3E(f).\9\ Under the Temporary Exemption
Order, the temporary exemption from Section 3E(f) would expire on the
date upon which the rules adopted by the Commission to register SBS
Entities become effective.
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\7\ 15 U.S.C. 78c-5.
\8\ 15 U.S.C. 78c-5(f).
\9\ See Temporary Exemptions Order n. 98 (providing that,
``Notwithstanding the exemption granted, market participants in
uncleared SB swaps may continue to voluntarily negotiate for and
receive similar protections to those provided in section 3E(f) of
the Exchange Act, 15 U.S.C. 78c-5(f), until compliance with such
section 3E(f) is required.'').
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Section 15F of the Exchange Act, added by Section 764(a) of the
Dodd-Frank Act, establishes the regulatory framework for SBS
Entities.\10\ Section 15F(b)(6) provides that ``except to the extent
otherwise provided by rule, regulation or order of the Commission,'' it
shall be unlawful for an SBS Entity to permit an associated person who
is subject to a statutory disqualification to effect or be involved in
effecting security-based swaps on its behalf, if the SBS Entity knew or
should have known of the statutory disqualification.\11\ In the
Temporary Exemptions Order, the Commission exercised its authority
under Section 15F(b)(6) to provide a temporary and limited exception
for SBS Entities from the application of the prohibition in that
section. Specifically, the Temporary Exemptions Order provides that
persons subject to a statutory disqualification who were, as of July
16, 2011, associated with an SBS Entity and who effected or were
involved in effecting security-based swaps on behalf of such SBS Entity
could continue to be associated with an SBS Entity until the date upon
which rules adopted by the Commission to register SBS Entities become
effective. In providing this exception, the Commission explained that
it intended to separately consider issues related to how an associated
person that is subject to a statutory disqualification may be involved
in the security-based swap business of the SBS Entity.\12\ The
Commission also noted that existing business relationships and market
activity could be unnecessarily disrupted if market participants were
required to comply with Section 15F(b)(6) before the Commission
considers, through notice and comment rulemaking, whether to adopt a
procedure for potential modifications of the effect of statutory
disqualifications under Title VII of the Dodd-Frank Act for SBS
Entities and what any such procedure would require.\13\
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\10\ 15 U.S.C. 78o-10.
\11\ 15 U.S.C. 78o-10(b)(6).
\12\ See Temporary Exemptions Order at 36301.
\13\ See id.
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Section 29(b) of the Exchange Act generally provides that contracts
made in violation of any provision of the Exchange Act, or the rules
thereunder, shall be void ``(1) as regards the rights of any person
who, in violation of any such provision, . . . shall have made or
engaged in the performance of any such contract, and (2) as regards the
rights of any person who, not being a party to such contracts, shall
have acquired any right thereunder with actual knowledge of the facts
by reason of which the
[[Page 56521]]
making or performance of such contracts in violation of any such
provision . . . .'' \14\ In the Temporary Exemptions Order, the
Commission temporarily exempted any SB swap contract entered into on or
after July 16, 2011 from being void or considered voidable by reason of
Section 29(b) because any person that is a party to a contract violated
a provision of the Exchange Act that was amended or added by Title VII
of Dodd-Frank and for which the Commission has taken the view that
compliance will be triggered by registration of a person or by adoption
of final rules by the Commission, or has provided an exception or
exemption in the Temporary Exemptions Order, until such date as the
Commission specifies. The temporary exemption from Section 29(b)
applies to contracts that would otherwise involve violations of, among
other provisions, Sections 3E(f) or 15F(b)(6) of the Exchange Act.
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\14\ 15 U.S.C. 78cc(b).
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The Commission received several comments in response to the
Temporary Exemptions Order.\15\ Although none of the commenters
specifically referred to Sections 3E(f), 15F(b)(6), or 29(b), one
commenter noted that the Temporary Exemptions Order was, in general,
reasonable in terms of its scope and duration.\16\ In particular, the
commenter stated that the exemption from specific requirements under
the Dodd-Frank Act was appropriate where the Commission had not
completed ``other steps, such as finalizing rules, setting up the
registration regime, or establishing infrastructure.'' \17\ Another
commenter urged the Commission ``to align the implementation of the
self-operative provisions with the provisions that are dependent on
rulemaking to ensure a coherent realization of the new swaps regulatory
regime.'' \18\
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\15\ See Letter from American Bankers Association, Financial
Services Roundtable, Futures Industry Association, Institute of
International Bankers, International Swaps and Derivatives
Association, Investment Company Institute, Securities Industry and
Financial Markets Association, and U.S. Chamber of Commerce, (June
10, 2011); Letter from Jir[iacute] Kr[oacute]l, Alternative
Investment Management Association Limited (July 1, 2011); Letter
from Bruce C. Bennett, Covington and Burling LLP (July 1, 2011);
Letter from Dennis M. Kelleher, Stephen W. Hall, Better Markets,
Inc. (July 6, 2011); Letter from Jeff Gooch, MarkitSERV (July 15,
2011); Letter from Kevin Gould, Markit North America, Inc. (July 26,
2011), available at https://www.sec.gov/comments/s7-24-11/s72411.shtml.
\16\ See Letter from Dennis M. Kelleher, Stephen W. Hall, Better
Markets, Inc. (July 6, 2011), at 2, available at https://www.sec.gov/comments/s7-24-11/s72411-3.pdf.
\17\ See id.
\18\ See Letter from American Bankers Association, Financial
Services Roundtable, Futures Industry Association, Institute of
International Bankers, International Swaps and Derivatives
Association, Investment Company Institute, Securities Industry and
Financial Markets Association, and U.S. Chamber of Commerce (June
10, 2011).
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III. Discussion
In August, 2015, the Commission adopted rules to establish a
process by which SBS Entities can register (and withdraw from
registration) with the Commission (``Registration Rules'').\19\ These
rules will become effective October 13, 2015, but compliance with the
Registration Rules will not be required until the later of: Six months
after the date of publication in the Federal Register of final rules
establishing capital, margin and segregation requirements for SBS
Entities; \20\ the compliance date of final rules establishing
recordkeeping and reporting requirements for SBS Entities; \21\ the
compliance date of final rules establishing business conduct
requirements under Sections 15F(h) and 15F(k) of the Exchange Act; \22\
or the compliance date for final rules establishing a process for a
registered SBS Entity to make an application to the Commission to allow
an associated person who is subject to a statutory disqualification to
effect or be involved in effecting security-based swaps on the SBS
Entity's behalf (``Registration Compliance Date''). At the same time,
the Commission also proposed rules that would, if adopted, establish a
process for an SBS Entity to make an application to the Commission to
allow an associated person subject to statutory disqualification to
effect or be involved in effecting security-based swaps on behalf of
the SBS Entity.\23\
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\19\ See Registration Adopting Release.
\20\ The Commission previously has proposed rules to establish
capital, margin and segregation requirements for SBS Entities. See
Capital, Margin, and Segregation Requirements for Security-Based
Swap Dealers and Major Security-Based Swap Participants and Capital
Requirements for Broker-Dealers, Exchange Act Release No. 68071
(Oct. 18, 2012), 77 FR 70213 (Nov. 23, 2012).
\21\ The Commission previously has proposed rules to establish
recordkeeping and reporting requirements for SBS Entities. See
Recordkeeping and Reporting Requirements for Security-Based Swap
Dealers, Major Security-Based Swap Participants, and Broker-Dealers;
Capital Rule for Certain Security-Based Swap Dealers, Exchange Act
Release No. 71958 (Apr. 17, 2014), 79 FR 25193 (May 2, 2014).
\22\ The Commission previously has proposed rules to establish
business conduct standards for SBS Entities. See Business Conduct
Standards for Security-Based Swap Dealers and Major Security-Based
Swap Participants, Exchange Act Release No. 64766 (June 29, 2011),
76 FR 42395 (July 18, 2011).
\23\ Applications by Security-Based Swap Dealers or Major
Security-Based Swap Participants for Consent for Associated Persons
to Effect or Be Involved in Effecting Security-Based Swaps, Exchange
Act Release No. 75612 (Aug. 5, 2105), 80 FR 51683 (Aug. 25, 2015)
(proposing new Rule of Practice 194).
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Under the terms of the Temporary Exemptions Order, the temporary
exemption from Section 3E(f) of the Exchange Act and exception from
Section 15F(b)(6) of the Exchange Act will expire when rules adopted by
the Commission to register SBS Entities become effective. Accordingly,
absent an extension, the temporary exemption from the segregation
requirements in Section 3E(f) and exception from the prohibition in
Section 15F(b)(6) in the Temporary Exemptions Order will expire upon
the effective date of the Registration Rules, even though SBS Entities
would not be required to register until the Registration Compliance
Date. As stated in the Temporary Exemptions Order, the Commission
continues to believe that persons should be able to register in
accordance with the applicable registration requirements prior to
expending resources to comply with Section 3E(f). Therefore, the
Commission is extending the temporary exemption from the requirements
of Section 3E(f) until the Registration Compliance Date.\24\
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\24\ The Commission also notes that this extension will allow
persons to have the ability to review the final capital, margin and
segregation rules before being required to comply with the
requirements of Section 3E(f), as the compliance date of the
Registration Rules will occur no earlier than six months after the
date of publication in the Federal Register of final rules
establishing capital, margin and segregation requirements for SBS
Entities.
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The Commission also continues to believe that existing business
relationships and market activity may be unnecessarily disrupted if
market participants were required to comply with Section 15F(b)(6) of
the Exchange Act before the Commission considered, through notice and
comment rulemaking, whether to adopt a procedure for potential
modifications of the effect of statutory disqualifications under Title
VII for SBS Entities, and what any such procedure would require.\25\ As
noted above, the Commission has proposed rules relating to the
requirements of Section 15F(b)(6). The Registration Compliance Date
will occur no earlier than final rules establishing a process for a
registered
[[Page 56522]]
SBS Entity to make an application to the Commission to allow an
associated person who is subject to a statutory disqualification to
effect or be involved in effecting security-based swaps on the SBS
Entity's behalf. Accordingly, the Commission is extending the temporary
and limited exception from the requirements of Section 15F(b)(6) until
the Registration Compliance Date.
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\25\ See supra note 23. The Commission has provided guidance in
the Registration Adopting Release regarding the dates on which SBS
Entities will become subject to registration requirements based on
their status as either a SBS Dealer or Major SBS Participant. See
Registration Adopting Release, 80 FR at 48988. In accordance with
this guidance, we do not believe that any entity will have the
status of an SBS Entity prior to the Registration Compliance Date.
However, for the avoidance of doubt and possible legal uncertainty,
the Commission is extending the previously granted temporary
exemption from Section 3E(f) and the temporary and limited exception
from Section 15F(b)(6) until the Registration Compliance Date.
---------------------------------------------------------------------------
As discussed in the Temporary Exemptions Order, the Commission does
not believe that Section 29(b) of the Exchange Act would apply to the
provisions of Title VII for which the Commission has taken the view
that compliance will either be triggered by registration of a person or
by adoption of final rules by the Commission, or for which the
Commission has provided an exception or exemption in that order. For
the avoidance of doubt and to avoid possible legal uncertainty or
market disruption, the Temporary Exemptions Order granted a temporary
exemption from Section 29(b) until such date as the Commission
specifies.\26\ The Commission believes that the exemption from Section
29(b) provided under the Temporary Exemptions Order with respect to
Sections 3E(f) and 15F(b)(6) of the Exchange Act will continue to apply
during the period of time covered by the extensions in this Order.
However, to avoid any doubt or possible legal uncertainty regarding the
continuing availability of the temporary exemption from Section 29(b)
with respect to Sections 3E(f) and 15(b)(6), the Commission is
exercising its authority under Section 36 of the Exchange Act to
continue the exemption from Section 29(b) with respect to Sections
3E(f) and 15(b)(6) until the Registration Compliance Date.
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\26\ See Temporary Exemptions Order at 36305-06.
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IV. Conclusion
It is hereby ordered, pursuant to Section 36 of the Exchange Act,
that SBS Entities are exempt from the requirements of Section 3E(f) of
the Exchange Act until the Registration Compliance Date.
It is hereby further ordered, pursuant to Section 15F(b)(6) of the
Exchange Act, that SBS Entities are temporarily excepted from the
prohibition of Section 15F(b)(6) with respect to persons subject to a
statutory disqualification who were associated with an SBS Entity as of
July 16, 2011, and who effect or are involved in effecting SB swaps on
behalf of such SBS Entity until the Registration Compliance Date.
It is hereby further ordered, pursuant to Section 36 of the
Exchange Act, that no SB swap contract entered into on or after July
16, 2011 shall be void or considered voidable by reason of Section
29(b) of the Exchange Act because any person that is a party to the
contract violated Section 3E(f) of the Exchange Act prior to the
Registration Compliance Date.
It is hereby further ordered, pursuant to Section 36 of the
Exchange Act, that no SB swap contract entered into on or after July
16, 2011 shall be void or considered voidable by reason of Section
29(b) of the Exchange Act because any person that is a party to the
contract violated Section 15F(b)(6) of the Exchange Act prior to the
Registration Compliance.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2015-23464 Filed 9-17-15; 8:45 am]
BILLING CODE 8011-01-P
