Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Conform to Proposed Amendments to Securities Exchange Act Rule 15c6-1(a) To Shorten the Standard Settlement Cycle From Three Business Days After the Trade Date (“T+3”) to Two Business Days After the Trade Date (“T+2”), 96076-96080 [2016-31474]

Download as PDF 96076 Federal Register / Vol. 81, No. 250 / Thursday, December 29, 2016 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others under Section 19(b)(2)(B) 24 of the Act to determine whether the proposed rule change should be approved or disapproved. Written comments were neither solicited nor received. IV. Solicitation of Comments asabaliauskas on DSK3SPTVN1PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has designated this rule filing as non-controversial under Section 19(b)(3)(A) 19 of the Act and Rule 19b–4(f)(6) 20 thereunder. Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b– 4(f)(6) thereunder. A proposed rule change filed under Rule 19b–4(f)(6) 21 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),22 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay as the proposed implementation of the two-year retention of jurisdiction is consistent with the rules of other SROs and will enable the Exchange to immediately retain jurisdiction over a register representative who may have been engaged in unlawful activity. Based on the foregoing, the Commission believes that it is consistent with the protection of investors and the public interest to waive the 30-day operative date so that the proposal may take effect upon filing.23 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings 19 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 21 17 CFR 240.19b–4(f)(6). 22 17 CFR 240.19b–4(f)(6)(iii). 23 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 20 17 VerDate Sep<11>2014 18:41 Dec 28, 2016 Jkt 241001 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– IEX–2016–22 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. All submissions should refer to File Number SR–IEX–2016–22. This file number should be included in the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed 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 Section, 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 will also be available for inspection and copying at the IEX’s principal office and on its Internet Web site at www.iextrading.com. 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–IEX–2016–22 and should 24 15 PO 00000 U.S.C. 78s(b)(2)(B). Frm 00121 Fmt 4703 Sfmt 4703 be submitted on or before January 19, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–31492 Filed 12–28–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79659; File No. SR–NYSE– 2016–87] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Conform to Proposed Amendments to Securities Exchange Act Rule 15c6– 1(a) To Shorten the Standard Settlement Cycle From Three Business Days After the Trade Date (‘‘T+3’’) to Two Business Days After the Trade Date (‘‘T+2’’) December 22, 2016. 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 December 15, 2016, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) 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 by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes new Rules 14T, Dealings and SettlementsT (Rules 45—299C), 64T, 235T, 236T, 282.65T and 257T, and new Section 703.02T (part 2) of the Listed Company Manual to conform to proposed amendments to Securities Exchange Act Rule 15c6–1(a) to shorten the standard settlement cycle from three business days after the trade date (‘‘T+3’’) to two business days after the trade date (‘‘T+2’’). 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. 25 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. 1 15 E:\FR\FM\29DEN1.SGM 29DEN1 Federal Register / Vol. 81, No. 250 / Thursday, December 29, 2016 / Notices II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change of the proposed rules and to delete the current version of each rule. 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, set forth in sections A, B, and C below, of the most significant parts of such statements. In 1993, the Securities and Exchange Commission (the ‘‘SEC’’ or ‘‘Commission’’) adopted Rule 15c6– 1(a) 5 under the Act, which established three business days after trade date instead of five business days (‘‘T+5’’), as the standard trade settlement cycle for most securities transactions. The rule became effective in June 1995.6 In November 1994, the Exchange amended its rules to be consistent with the T+3 settlement cycle for securities transactions.7 On September 28, 2016, the SEC proposed amendments to Rule 15c6– 1(a) to shorten the standard settlement cycle from T+3 to T+2 on the basis that the shorter settlement cycle would reduce the risks that arise from the value and number of unsettled securities transactions prior to completion of settlement, including credit, market and liquidity risk faced by U.S. market participants.8 The proposed rule amendment was published for comment in the Federal Register on October 5, 2016.9 In light of this action by the SEC, the Exchange proposes new rules to reflect ‘‘regular way’’ settlement as occurring on T+2.10 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change asabaliauskas on DSK3SPTVN1PROD with NOTICES 1. Purpose The Exchange proposes to adopt the following new rules to conform to proposed amendments to Securities Exchange Act Rule 15c6–1(a) 4 to shorten the standard settlement cycle from T+3 to T+2: • Rule 14T (Non-Regular Way Settlement Instructions); • Dealings and SettlementsT (Rules 45–299C); • Rule 64T (Bonds, Rights and 100Share-Unit Stocks); • Rule 235T (Ex-Dividend, Ex-Rights); • Rule 236T (Ex-Warrants); • Rule 257T (Deliveries After ‘‘Ex’’ Date); • Rule 282.65T (Failure to Deliver and Liability Notice Procedures); and • Section 703.02T (part 2) of the Listed Company Manual (Stock Split/ Stock Rights/Stock Dividend Listing Process). The proposed new rules would have the same numbering as the current rules, but with the modifier ‘‘T’’ appended to the rule number. For example, Rule 14, governing non-regular way settlement instructions for orders, would remain unchanged and continue to apply to non-regular way settlements on the Exchange. Proposed Rule 14T would reflect that a regular way settlement would be two days and not the current three days. As discussed below, because the Exchange would not implement the proposed rules until after the final implementation of T+2, the Exchange proposes to retain the current versions of each rule on its books and not delete it until after the proposed rules are approved. The Exchange also proposes to file separate proposed rule changes to establish the operative date 4 See 17 CFR 240.15c6–1(a); see also notes 8–9, infra. VerDate Sep<11>2014 18:41 Dec 28, 2016 Jkt 241001 Background Proposed Rule Change The Exchange proposes the following new rules identified with the modifier ‘‘T’’ in order to reflect a T+2 settlement cycle. Except for changes reflecting the shortened settlement period, the proposed rules are the same as their current counterparts. 5 17 CFR 240.15c6–1(a). Securities Exchange Act Release Nos. 33023 (October 6, 1993), 58 FR 52891 (order adopting Rule 15c6–1) and 34952 (November 9, 1994), 59 FR 59137 (order changing the effective date from June 1, 1995, to June 7, 1995). 7 See Securities Exchange Act Release Nos. 35110 (December 16, 1994), 59 FR 0 (December 23, 1994) (SR–NYSE–94–40) (Notice) and 35506 (March 17, 1995), 60 FR 15618 (March 24, 1995) (SR–NYSE– 94–40) (Approval Order). 8 See SEC Press Release 2016–200: ‘‘SEC Proposes Rule Amendment to Expedite Process for Settling Securities Transactions’’ (September 28, 2016). 9 See Securities Exchange Act Release No. 78962 (September 28, 2016), 81 FR 69240 (October 5, 2016) (File No. S7–22–16) (‘‘SEC Proposing Release’’). 10 Earlier this year the MSRB also filed a rule change to reflect ‘‘regular way’’ settlement as occurring on T+2. See Securities Exchange Act Release Nos. 77744 (April 29, 2016), 81 FR 26851 (May 4, 2016) (SR–MSRB–2016–04) (approving proposed amendments to MSRB Rules G–12 and G– 15 to define regular-way settlement for municipal securities transactions as occurring on a two-day settlement cycle and technical conforming amendments). 6 See PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 96077 Rule 14 • Current Rule 14(a)(i) defines nonregular way settlement instructions as instructions that allow for settlement other than regular way, that is, ‘‘settlement on the third business day following trade date for securities other than U.S. Government Securities’’. The Exchange proposes a new Rule 14T that replaces ‘‘third’’ business day with ‘‘second.’’ • Current Dealings and Settlements (Rules 45–299C) defines regular way as ‘‘due on the third business day following the day of the contract.’’ The Exchange proposes a new version that changes ‘‘third’’ business day to ‘‘second’’; • Current Rule 64(a) defines ‘‘regular way’’ as ‘‘for delivery on the third business day following the day of the contract.’’ The Exchange proposes a new Rule 64T(a) that changes ‘‘third’’ business day to ‘‘second.’’ Current Rule 64(a)(ii) provides that on the second and third business days preceding the final day for subscription, bids and offers in rights to subscribe shall be made only ‘‘next day.’’ To conform with the move to a T+2 settlement cycle, proposed Rule 64T(a)(ii) would not contain a clause referring to the third business day preceding the final day for subscription because the third business day preceding the final day for subscription in a T+2 settlement cycle would simply be a regular way settlement. Finally, current Rule 64(c) requires ‘‘seller’s option’’ trades, defined as trades for delivery between two and 60 business days, to be reported to the tape only in calendar day. Proposed Rule 64T(c) would define ‘‘seller’s option’’ trades as trades for delivery between three and 60 business days to reflect the shortened settlement period. Further, the final sentence of current Rule 64 provides that the settlement date of a ‘‘seller’s option’’ transaction printed as calendar days cannot coincide with the normal three business day ‘‘regular way’’ settlement. In proposed Rule 64T, the Exchange would change the reference to ‘‘regular way’’ settlements to two business day.11 • Current Rule 235 provides that transactions in stocks, except those made for ‘‘cash’’ as prescribed in Rule 14, shall be ex-dividend or ex-rights on the second business day preceding the record date fixed by the corporation or the date of the closing of transfer books. The Exchange proposes to adopt proposed Rule 235T that would delete the word ‘‘second’’ so the reference 11 The Exchange also proposes to make a nonsubstantive change and remove the bold from the ‘‘(a)’’ in proposed Rule 64T(a). E:\FR\FM\29DEN1.SGM 29DEN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES 96078 Federal Register / Vol. 81, No. 250 / Thursday, December 29, 2016 / Notices would be to the ‘‘business day’’ preceding the record date. The current Rule further provides that if the record date or closing of transfer books occurs upon a day other than a business day, Rule 235 shall apply for the third preceding business day. The Exchange proposes to change ‘‘third preceding business day’’ to ‘‘second preceding business day’’ in proposed Rule 235T; • Current Rule 236 prescribes that exwarrant trading will begin on the second business day preceding the date of expiration of the warrants, except that when expiration occurs on a nonbusiness day, in which case it will begin on the third business day preceding date of expiration. The Exchange proposes to adopt proposed Rule 236T and change the warrant period to the business day preceding expiration of the warrants instead of the second business day. Under the proposed Rule, when warrant expiration occurs on other than a business day, the ex-warrant period will begin on the second business day preceding the expiration date instead of on the third business day; • Current Rule 257 prescribes the time frame for delivery of dividends or rights for securities sold before the ‘‘ex’’ date but delivered after the record date. The current time frame is within three days after the record date. Consistent with the T+2 initiative, proposed Rule 257T would shorten the time frame to two days; • Subdivision (1)(A) of Supplementary Material .65 to current Rule 282 sets forth the fail-to-deliver and liability notice procedures where a securities contract is for warrants, rights, convertible securities or other securities which have been called for redemption; are due to expire by their terms; are the subject of a tender or exchange offer; or are subject to other expiring events such as a record date for the underlying security and the last day on which the securities must be delivered or surrendered is the settlement date of the contract or later. Under current Rule 282.65(1)(A), the receiving member organization delivers a liability notice to the delivering member organization as an alternative to the close-out procedures set forth in the Rule. The liability notice sets a cutoff date for the delivery or surrender of the securities and provides notice to the delivering member organization of the liability attendant to its failure to deliver or surrender the securities in time. If the delivering member organization delivers or surrenders the securities in response to the liability notice, it has met its delivery obligation. If the delivering member organization fails to deliver or surrender the VerDate Sep<11>2014 18:41 Dec 28, 2016 Jkt 241001 securities on the expiration date, it will be liable for any damages that may accrue thereby. Current Rule 282.65(1)(A) further provides that when the parties to a contract are both participants in a Qualified Clearing Agency that has an automated service for notifying a failing party of the liability that will be attendant to a failure to deliver, the transmission of the liability notice must be accomplished through such automated notification service. When the parties to a contract are not both participants in a Qualified Clearing Agency 12 that has an automated service for notifying a failing party of the liability that will be attendant to a failure to deliver, such notice must be issued using written or comparable electronic media having immediate receipt capabilities no later than one business day prior to the latest time and the date of the offer or other event in order to obtain the protection provided by this Rule.13 Given the proposed shortened settlement cycle, and in order to address concerns that the requirement for the delivering member organization to deliver a liability notice to the receiving member no later than one business day prior to the latest time and the date of the offer or other event in order to obtain the protection provided by the Rule may no longer be appropriate in a T+2 environment,14 the Exchange proposes to amend Rule 282.65(1)(A) in situations where both parties to a 12 Rule 180 governs failure to deliver and provides in part that ‘‘[w]hen the parties to a contract are both participants in a registered clearing agency which has an automated service for notifying a failing party of the liability that will be attendant to a failure to deliver and that contract was to be settled through the facilities of said registered clearing agency, the transmission of the liability notification must be accomplished through use of said automated notification service.’’ Rule 180 does not address the transmission of the liability notification for parties to a contract that are not both participants in a registered clearing agency, which is governed by Rule 282.65. 13 The one-day time frame also appears in comparable provisions of other SROs. See, e.g., FINRA Rule 11810(j)(1)(A); NSCC Rules & Procedures, Procedure X (Execution of Buy-Ins) (Effective August 10, 2016); and Nasdaq Rule IM– 11810 (Buying-in). 14 See, e.g., Letter from Thomas F. Price, Managing Director, Operations, Technology & BCP, Securities Industry and Financial Markets Association, to Marcia E. Asquith, Corporate Secretary, FINRA, dated April 4, 2016 (‘‘SIFMA’’) (April 4, 2016), noting in connection with FINRA Rule 11810(j), the comparable provision to Rule 282.65(1)(A), that the ‘‘industry has identified a number of situations where one-day notice may no longer be appropriate in a T+2 environment, including (1) where the delivery obligation is transferred to another party as a result of continuous net settlement, (2) settlements outside of National Securities Clearing Corporation (the ‘‘NSCC’’) and (3) settlements where the third party is not a[n NYSE] member.’’ PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 contract are not participants of a registered clearing agency with an automated notification service by extending the time frame for delivery of the liability notice. Rule 282.65(1)(A) would accordingly be amended to provide that in such cases, the receiving member organization must send the liability notice to the delivering member organization as soon as practicable but not later than two hours prior to the cutoff time set forth in the instructions on a specific offer or other event to obtain the protection provided by the Rule. The proposed change would be the only change to the text of current Supplementary Material .65. • Current Section 703.02 (part 2) of the Listed Company Manual (Stock Split/Stock Rights/Stock Dividend Listing Process) provides that a distribution of less than 25% of a company’s common stock is traded ‘‘ex’’ (without the distribution) on and after the second business day prior to the record date based on the Exchange’s three-day delivery rule, pursuant to which contracts made on the Exchange for the purchase and sale of securities are settled by delivery on the third business day after the contract is made, unless other terms of settlement specify otherwise. Given the change to a two day delivery rule, the Exchange’s proposed Section 703.02 would change the first sentence if the rule to reflect that a distribution of less than 25% of a company’s common stock is traded ‘‘ex’’ on and after the business day prior to the record date. The second sentence in the proposed Rule would refer to the Exchange’s two-day delivery rule pursuant to which contracts made on the Exchange for the purchase and sale of securities are settled by delivery on the second business day after the contract is made. Operative Date Preambles As noted above, because the Exchange would not implement the proposed rules until after the final implementation of T+2, the Exchange proposes to retain the current versions of each rule on its books and not delete them until after the proposed rules are approved. The Exchange also proposes to file separate proposed rule changes as necessary to establish the operative date of the proposed rules and to delete the current version of each rule. To reduce the potential for confusion regarding which version of a given rule governs, the Exchange proposes to add a preamble to each current rule providing that: (1) the rule will remain operative until the Exchange files separate proposed rule changes as necessary to establish the operative date E:\FR\FM\29DEN1.SGM 29DEN1 Federal Register / Vol. 81, No. 250 / Thursday, December 29, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES of the revised rule, to delete the current rule and proposed preamble, and to remove the preamble text from the revised rule; and (2) in addition to filing the necessary proposed rule changes, the Exchange will announce via Information Memo the operative date of the deletion of the current rule and implementation of the proposed rule designated with a T. The Exchange also proposes to add a preamble to each proposed rule that would provide that: (1) The Exchange will file a separate rule change to establish the operative date of the proposed rule, delete the current version and the proposed preamble, and remove the preamble text from the revised rule; and (2) until such time, the current version of the rule will remain operative and that, in addition to filing the necessary proposed rule changes, the Exchange will announce via Information Memo the implementation of the proposed rule and the operative date of the deletion of the current rule. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,15 in general, and furthers the objectives of Section 6(b)(5) of the Act,16 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. In particular, the Exchange believes that the proposed rule change supports the industry-led initiative to shorten the settlement cycle to two business days. Moreover, the proposed rule change is consistent with the SEC’s proposed amendment to SEA Rule 15c6–1(a) to require standard settlement no later than T+2. The Exchange believes that the proposed rule change will provide the regulatory certainty to facilitate the industry-led move to a T+2 settlement cycle. Further, the Exchange believes that, by shortening the time period for settlement of most securities transactions, the proposed rule change would protect investors and the public interest by reducing the number of unsettled trades in the clearance and settlement system at any given time, thereby reducing the risk inherent in 15 15 16 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Sep<11>2014 18:41 Dec 28, 2016 settling securities transactions to clearing corporations, their members and public investors. The Exchange also believes that adding a preamble to each current rule and to each proposed rule clarifying the operative dates of the respective versions would remove impediments to and perfect the mechanism of a free and open market and a national market system by adding clarity and transparency to the Exchange’s rules, reducing potential confusion, and making the Exchange’s rules easier to navigate. (B) institute proceedings to determine whether the proposed rule change should be disapproved. B. Self-Regulatory Organization’s Statement on Burden on Competition • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SRNYSE–2016–87 on the subject line. The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed change is not designed to address any competitive issue but rather facilitate the industry’s transition to a T+2 regular-way settlement cycle. The Exchange also believes that the proposed rule change will serve to promote clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection. Moreover, the proposed rule changes are consistent with the SEC’s proposed amendment to SEA Rule 15c6–1(a) to require standard settlement no later than T+2. Accordingly, the Exchange believes that the proposed changes do not impose any burdens on the industry in addition to those necessary to implement amendments to SEA Rule 15c6–1(a) as described and enumerated in the SEC Proposing Release.17 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 Within 45 days of the date of publication of this notice in the Federal Register or 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 the proposed rule change, or 17 See Jkt 241001 96079 PO 00000 note 9, supra. Frm 00124 Fmt 4703 Sfmt 4703 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 Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSE–2016–87. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed 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– 2016–87, and should be submitted on or before January 19, 2017. E:\FR\FM\29DEN1.SGM 29DEN1 96080 Federal Register / Vol. 81, No. 250 / Thursday, December 29, 2016 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2016–31474 Filed 12–28–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79672; File No. SR– NYSEMKT–2016–63] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Amendment Nos. 2 and 3 to Proposed Rule Change Amending the CoLocation Services Offered by the Exchange To Add Certain Access and Connectivity Fees December 22, 2016. On August 16, 2016, NYSE MKT LLC (the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b-4 thereunder,2 a proposed rule change to amend the co-location services offered by the Exchange to: (1) Provide additional information regarding the access to various trading and execution services; connectivity to market data feeds and testing and certification feeds; connectivity to Third Party Systems; and connectivity to DTCC provided to Users using data center local area networks; and (2) establish fees relating to a User’s access to various trading and execution services; connectivity to market data feeds and testing and certification feeds; connectivity to DTCC; and other services. The proposed rule change was published for comment in the Federal Register on August 26, 2016.3 The Commission received no comments in response to the proposed rule change.4 On October 4, 2016, the Commission extended the time period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to approve or disapprove the 18 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 34– 78629 (August 22, 2016), 81 FR 58992. 4 The Commission notes that it did receive one comment letter on a related filing, NYSE–2016–45 (the ‘‘NYSE Companion Filing’’), which is equally relevant to this filing. See letter to Brent J. Fields, Secretary, Commission, from John Ramsay, Chief Market Policy Officer, Investors Exchange LLC (IEX), dated September 9, 2016. On September 23, 2016, the NYSE submitted a response to the IEX letter. asabaliauskas on DSK3SPTVN1PROD with NOTICES 1 15 VerDate Sep<11>2014 18:41 Dec 28, 2016 Jkt 241001 proposed rule change to November 24, 2016.5 On November 2, 2016, the Exchange filed Amendment No. 1 to the proposed rule change.6 On November 29, 2016, the Commission instituted proceedings to determine whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1.7 In response to the Order Instituting Proceedings, the Commission received additional comments letters regarding the proposed rule change.8 On December 9, 2016, the Exchange filed Amendment No. 2 to the proposed rule change as described in Items I and II below, which Items have been prepared by Exchange. On December 13, 2016 the Exchange filed Amendment No. 3 to the proposed rule change.9 The Commission is publishing this notice to solicit comments on Amendment Nos. 2 and 3 to the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Amendments The Exchange proposes to amend the co-location services offered by the Exchange to establish fees relating to Users’ access to third party trading and execution services; connectivity to third party data feeds and testing and certification feeds; access to clearing; and other services. In addition, this proposed rule change reflects changes to the NYSE MKT Equities Price List 5 See Securities Exchange Act Release No. 34– 78968 (September 28, 2016), 81 FR 68493. 6 Amendment No. 1 is available on the Commission’s Web site at https://www.sec.gov/ comments/sr-nysemkt-2016-63/nysemkt2016631.pdf. 7 See Securities Exchange Act Release 34–79378 (November 22, 2016), 81 FR 86050. 8 See letter to Brent J. Fields, Commission, from Melissa MacGregor, Managing Director and Associate General Counsel, SIFMA, dated December 12, 2016; letter to Brent J. Fields, Commission, from Joe Wald, Chief Executive Officer, Clearpool Group, dated December 16, 2016; letter to Brent J. Fields, Secretary, Commission, from John Ramsay, Chief Market Policy Officer, Investors Exchange LLC (IEX), dated December 21, 2016. All comments received by the Commission on the proposed rule change are available on the Commission’s Web site at: https://www.sec.gov/comments/sr-nysemkt2016-63/nysemkt201663.shtml. The Commission notes that it received an additional letter on the NYSE Companion Filing. See letter to Brent J. Fields, Commission, from Adam C. Cooper, Senior Managing Director and Chief Legal Officer, Citadel Securities, dated December 12, 2016. All comments received by the Commission on the NYSE Companion Filing are available on the Commission’s Web site at: https:// www.sec.gov/comments/sr-nyse-2016-45/ nyse201645.shtml. 9 The Commission notes that the Exhibit 5 filed with Amendment No. 2 contained erroneous rule text and therefore was corrected in Amendment No. 3. Amendment Nos. 2 and 3 are available at https:// www.sec.gov/comments/sr-nysemkt-2016-63/ nysemkt201663-3.pdf. PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 (‘‘Price List’’) and the NYSE Amex Options Fee Schedule (‘‘Fee Schedule’’) related to these co-location services. This Amendment No. 2 10 supersedes the original filing and Amendment 1 in their entirety.11 The proposed 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, set forth in sections A, B, and C below, of the most significant parts of such statements. 10 See supra note 9, noting that Amendment No. 2 was modified in part by Amendment No. 3. Accordingly, the Commission notes that Amendment Nos. 2 and 3 together supersede the original filing, as modified by Amendment No. 1, in its entirety. 11 The Securities and Exchange Commission (‘‘Commission’’) has issued an order instituting proceedings to determine whether to approve or disapprove the proposed rule change, as modified by amendments 1 and 2. See Securities Exchange Act Release No. 79378 (November 22, 2016), 81 FR 86050 (November 29, 2016) (SR–NYSEMKT–2016– 63) (the ‘‘November 22 Order’’). In its filing, as amended by amendment 1, the Exchange proposed adding to the Fee Schedules (a) a more detailed description of the connectivity to certain market data products (the ‘‘Included Data Products’’) that Users receive with connections to the local area networks available in the data center; and (b) connectivity fees for connecting to other market data products of the Exchange and its affiliates, New York Stock Exchange LLC and NYSE Arca, Inc. (the ‘‘Premium NYSE Data Products’’). In the November 22 Order, the Commission cites language from the proposed rule change: the Exchange also stated that the expectation of co-location was that normally Users would expect reduced latencies in . . . receiving market data from the Exchange by being colocated. Therefore, as the Exchange states in Amendment No. 2, both Included Data Products and Premium NYSE Data Products are ‘directly related to the purpose of colocation.’ Id., at 86053. It goes on to say that, if Included Data Products and Premium NYSE Data Products are ‘‘integral to co-located Users for trading on the Exchange,’’ it was questionable whether obtaining the information from another source is a viable alternative. Id. The Exchange disagrees with the Commission’s description of Included Data Products and Premium NYSE Data Products as ‘‘integral’’ to Users for trading on the Exchange. Being related to the purpose of co-location is not the same as being integral for trading. A User is not required to receive either Included Data Products or Premium NYSE Data Products in order to trade on the Exchange. E:\FR\FM\29DEN1.SGM 29DEN1

Agencies

[Federal Register Volume 81, Number 250 (Thursday, December 29, 2016)]
[Notices]
[Pages 96076-96080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31474]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79659; File No. SR-NYSE-2016-87]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Conform to Proposed 
Amendments to Securities Exchange Act Rule 15c6-1(a) To Shorten the 
Standard Settlement Cycle From Three Business Days After the Trade Date 
(``T+3'') to Two Business Days After the Trade Date (``T+2'')

December 22, 2016.
    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 December 15, 2016, New York Stock Exchange LLC (``NYSE'' 
or the ``Exchange'') 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 by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes new Rules 14T, Dealings and SettlementsT 
(Rules 45--299C), 64T, 235T, 236T, 282.65T and 257T, and new Section 
703.02T (part 2) of the Listed Company Manual to conform to proposed 
amendments to Securities Exchange Act Rule 15c6-1(a) to shorten the 
standard settlement cycle from three business days after the trade date 
(``T+3'') to two business days after the trade date (``T+2''). 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.

[[Page 96077]]

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, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to adopt the following new rules to conform 
to proposed amendments to Securities Exchange Act Rule 15c6-1(a) \4\ to 
shorten the standard settlement cycle from T+3 to T+2:
---------------------------------------------------------------------------

    \4\ See 17 CFR 240.15c6-1(a); see also notes 8-9, infra.
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     Rule 14T (Non-Regular Way Settlement Instructions);
     Dealings and SettlementsT (Rules 45-299C);
     Rule 64T (Bonds, Rights and 100-Share-Unit Stocks);
     Rule 235T (Ex-Dividend, Ex-Rights);
     Rule 236T (Ex-Warrants);
     Rule 257T (Deliveries After ``Ex'' Date);
     Rule 282.65T (Failure to Deliver and Liability Notice 
Procedures); and
     Section 703.02T (part 2) of the Listed Company Manual 
(Stock Split/Stock Rights/Stock Dividend Listing Process).
    The proposed new rules would have the same numbering as the current 
rules, but with the modifier ``T'' appended to the rule number. For 
example, Rule 14, governing non-regular way settlement instructions for 
orders, would remain unchanged and continue to apply to non-regular way 
settlements on the Exchange. Proposed Rule 14T would reflect that a 
regular way settlement would be two days and not the current three 
days. As discussed below, because the Exchange would not implement the 
proposed rules until after the final implementation of T+2, the 
Exchange proposes to retain the current versions of each rule on its 
books and not delete it until after the proposed rules are approved. 
The Exchange also proposes to file separate proposed rule changes to 
establish the operative date of the proposed rules and to delete the 
current version of each rule.
Background
    In 1993, the Securities and Exchange Commission (the ``SEC'' or 
``Commission'') adopted Rule 15c6-1(a) \5\ under the Act, which 
established three business days after trade date instead of five 
business days (``T+5''), as the standard trade settlement cycle for 
most securities transactions. The rule became effective in June 
1995.\6\ In November 1994, the Exchange amended its rules to be 
consistent with the T+3 settlement cycle for securities 
transactions.\7\
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    \5\ 17 CFR 240.15c6-1(a).
    \6\ See Securities Exchange Act Release Nos. 33023 (October 6, 
1993), 58 FR 52891 (order adopting Rule 15c6-1) and 34952 (November 
9, 1994), 59 FR 59137 (order changing the effective date from June 
1, 1995, to June 7, 1995).
    \7\ See Securities Exchange Act Release Nos. 35110 (December 16, 
1994), 59 FR 0 (December 23, 1994) (SR-NYSE-94-40) (Notice) and 
35506 (March 17, 1995), 60 FR 15618 (March 24, 1995) (SR-NYSE-94-40) 
(Approval Order).
---------------------------------------------------------------------------

    On September 28, 2016, the SEC proposed amendments to Rule 15c6-
1(a) to shorten the standard settlement cycle from T+3 to T+2 on the 
basis that the shorter settlement cycle would reduce the risks that 
arise from the value and number of unsettled securities transactions 
prior to completion of settlement, including credit, market and 
liquidity risk faced by U.S. market participants.\8\ The proposed rule 
amendment was published for comment in the Federal Register on October 
5, 2016.\9\ In light of this action by the SEC, the Exchange proposes 
new rules to reflect ``regular way'' settlement as occurring on 
T+2.\10\
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    \8\ See SEC Press Release 2016-200: ``SEC Proposes Rule 
Amendment to Expedite Process for Settling Securities Transactions'' 
(September 28, 2016).
    \9\ See Securities Exchange Act Release No. 78962 (September 28, 
2016), 81 FR 69240 (October 5, 2016) (File No. S7-22-16) (``SEC 
Proposing Release'').
    \10\ Earlier this year the MSRB also filed a rule change to 
reflect ``regular way'' settlement as occurring on T+2. See 
Securities Exchange Act Release Nos. 77744 (April 29, 2016), 81 FR 
26851 (May 4, 2016) (SR-MSRB-2016-04) (approving proposed amendments 
to MSRB Rules G-12 and G-15 to define regular-way settlement for 
municipal securities transactions as occurring on a two-day 
settlement cycle and technical conforming amendments).
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Proposed Rule Change
    The Exchange proposes the following new rules identified with the 
modifier ``T'' in order to reflect a T+2 settlement cycle. Except for 
changes reflecting the shortened settlement period, the proposed rules 
are the same as their current counterparts.
Rule 14
     Current Rule 14(a)(i) defines non-regular way settlement 
instructions as instructions that allow for settlement other than 
regular way, that is, ``settlement on the third business day following 
trade date for securities other than U.S. Government Securities''. The 
Exchange proposes a new Rule 14T that replaces ``third'' business day 
with ``second.''
     Current Dealings and Settlements (Rules 45-299C) defines 
regular way as ``due on the third business day following the day of the 
contract.'' The Exchange proposes a new version that changes ``third'' 
business day to ``second'';
     Current Rule 64(a) defines ``regular way'' as ``for 
delivery on the third business day following the day of the contract.'' 
The Exchange proposes a new Rule 64T(a) that changes ``third'' business 
day to ``second.'' Current Rule 64(a)(ii) provides that on the second 
and third business days preceding the final day for subscription, bids 
and offers in rights to subscribe shall be made only ``next day.'' To 
conform with the move to a T+2 settlement cycle, proposed Rule 
64T(a)(ii) would not contain a clause referring to the third business 
day preceding the final day for subscription because the third business 
day preceding the final day for subscription in a T+2 settlement cycle 
would simply be a regular way settlement. Finally, current Rule 64(c) 
requires ``seller's option'' trades, defined as trades for delivery 
between two and 60 business days, to be reported to the tape only in 
calendar day. Proposed Rule 64T(c) would define ``seller's option'' 
trades as trades for delivery between three and 60 business days to 
reflect the shortened settlement period. Further, the final sentence of 
current Rule 64 provides that the settlement date of a ``seller's 
option'' transaction printed as calendar days cannot coincide with the 
normal three business day ``regular way'' settlement. In proposed Rule 
64T, the Exchange would change the reference to ``regular way'' 
settlements to two business day.\11\
---------------------------------------------------------------------------

    \11\ The Exchange also proposes to make a non-substantive change 
and remove the bold from the ``(a)'' in proposed Rule 64T(a).
---------------------------------------------------------------------------

     Current Rule 235 provides that transactions in stocks, 
except those made for ``cash'' as prescribed in Rule 14, shall be ex-
dividend or ex-rights on the second business day preceding the record 
date fixed by the corporation or the date of the closing of transfer 
books. The Exchange proposes to adopt proposed Rule 235T that would 
delete the word ``second'' so the reference

[[Page 96078]]

would be to the ``business day'' preceding the record date. The current 
Rule further provides that if the record date or closing of transfer 
books occurs upon a day other than a business day, Rule 235 shall apply 
for the third preceding business day. The Exchange proposes to change 
``third preceding business day'' to ``second preceding business day'' 
in proposed Rule 235T;
     Current Rule 236 prescribes that ex-warrant trading will 
begin on the second business day preceding the date of expiration of 
the warrants, except that when expiration occurs on a non-business day, 
in which case it will begin on the third business day preceding date of 
expiration. The Exchange proposes to adopt proposed Rule 236T and 
change the warrant period to the business day preceding expiration of 
the warrants instead of the second business day. Under the proposed 
Rule, when warrant expiration occurs on other than a business day, the 
ex-warrant period will begin on the second business day preceding the 
expiration date instead of on the third business day;
     Current Rule 257 prescribes the time frame for delivery of 
dividends or rights for securities sold before the ``ex'' date but 
delivered after the record date. The current time frame is within three 
days after the record date. Consistent with the T+2 initiative, 
proposed Rule 257T would shorten the time frame to two days;
     Subdivision (1)(A) of Supplementary Material .65 to 
current Rule 282 sets forth the fail-to-deliver and liability notice 
procedures where a securities contract is for warrants, rights, 
convertible securities or other securities which have been called for 
redemption; are due to expire by their terms; are the subject of a 
tender or exchange offer; or are subject to other expiring events such 
as a record date for the underlying security and the last day on which 
the securities must be delivered or surrendered is the settlement date 
of the contract or later.
    Under current Rule 282.65(1)(A), the receiving member organization 
delivers a liability notice to the delivering member organization as an 
alternative to the close-out procedures set forth in the Rule. The 
liability notice sets a cutoff date for the delivery or surrender of 
the securities and provides notice to the delivering member 
organization of the liability attendant to its failure to deliver or 
surrender the securities in time. If the delivering member organization 
delivers or surrenders the securities in response to the liability 
notice, it has met its delivery obligation. If the delivering member 
organization fails to deliver or surrender the securities on the 
expiration date, it will be liable for any damages that may accrue 
thereby.
    Current Rule 282.65(1)(A) further provides that when the parties to 
a contract are both participants in a Qualified Clearing Agency that 
has an automated service for notifying a failing party of the liability 
that will be attendant to a failure to deliver, the transmission of the 
liability notice must be accomplished through such automated 
notification service. When the parties to a contract are not both 
participants in a Qualified Clearing Agency \12\ that has an automated 
service for notifying a failing party of the liability that will be 
attendant to a failure to deliver, such notice must be issued using 
written or comparable electronic media having immediate receipt 
capabilities no later than one business day prior to the latest time 
and the date of the offer or other event in order to obtain the 
protection provided by this Rule.\13\
---------------------------------------------------------------------------

    \12\ Rule 180 governs failure to deliver and provides in part 
that ``[w]hen the parties to a contract are both participants in a 
registered clearing agency which has an automated service for 
notifying a failing party of the liability that will be attendant to 
a failure to deliver and that contract was to be settled through the 
facilities of said registered clearing agency, the transmission of 
the liability notification must be accomplished through use of said 
automated notification service.'' Rule 180 does not address the 
transmission of the liability notification for parties to a contract 
that are not both participants in a registered clearing agency, 
which is governed by Rule 282.65.
    \13\ The one-day time frame also appears in comparable 
provisions of other SROs. See, e.g., FINRA Rule 11810(j)(1)(A); NSCC 
Rules & Procedures, Procedure X (Execution of Buy-Ins) (Effective 
August 10, 2016); and Nasdaq Rule IM-11810 (Buying-in).
---------------------------------------------------------------------------

    Given the proposed shortened settlement cycle, and in order to 
address concerns that the requirement for the delivering member 
organization to deliver a liability notice to the receiving member no 
later than one business day prior to the latest time and the date of 
the offer or other event in order to obtain the protection provided by 
the Rule may no longer be appropriate in a T+2 environment,\14\ the 
Exchange proposes to amend Rule 282.65(1)(A) in situations where both 
parties to a contract are not participants of a registered clearing 
agency with an automated notification service by extending the time 
frame for delivery of the liability notice. Rule 282.65(1)(A) would 
accordingly be amended to provide that in such cases, the receiving 
member organization must send the liability notice to the delivering 
member organization as soon as practicable but not later than two hours 
prior to the cutoff time set forth in the instructions on a specific 
offer or other event to obtain the protection provided by the Rule. The 
proposed change would be the only change to the text of current 
Supplementary Material .65.
---------------------------------------------------------------------------

    \14\ See, e.g., Letter from Thomas F. Price, Managing Director, 
Operations, Technology & BCP, Securities Industry and Financial 
Markets Association, to Marcia E. Asquith, Corporate Secretary, 
FINRA, dated April 4, 2016 (``SIFMA'') (April 4, 2016), noting in 
connection with FINRA Rule 11810(j), the comparable provision to 
Rule 282.65(1)(A), that the ``industry has identified a number of 
situations where one-day notice may no longer be appropriate in a 
T+2 environment, including (1) where the delivery obligation is 
transferred to another party as a result of continuous net 
settlement, (2) settlements outside of National Securities Clearing 
Corporation (the ``NSCC'') and (3) settlements where the third party 
is not a[n NYSE] member.''
---------------------------------------------------------------------------

     Current Section 703.02 (part 2) of the Listed Company 
Manual (Stock Split/Stock Rights/Stock Dividend Listing Process) 
provides that a distribution of less than 25% of a company's common 
stock is traded ``ex'' (without the distribution) on and after the 
second business day prior to the record date based on the Exchange's 
three-day delivery rule, pursuant to which contracts made on the 
Exchange for the purchase and sale of securities are settled by 
delivery on the third business day after the contract is made, unless 
other terms of settlement specify otherwise. Given the change to a two 
day delivery rule, the Exchange's proposed Section 703.02 would change 
the first sentence if the rule to reflect that a distribution of less 
than 25% of a company's common stock is traded ``ex'' on and after the 
business day prior to the record date. The second sentence in the 
proposed Rule would refer to the Exchange's two-day delivery rule 
pursuant to which contracts made on the Exchange for the purchase and 
sale of securities are settled by delivery on the second business day 
after the contract is made.
Operative Date Preambles
    As noted above, because the Exchange would not implement the 
proposed rules until after the final implementation of T+2, the 
Exchange proposes to retain the current versions of each rule on its 
books and not delete them until after the proposed rules are approved. 
The Exchange also proposes to file separate proposed rule changes as 
necessary to establish the operative date of the proposed rules and to 
delete the current version of each rule.
    To reduce the potential for confusion regarding which version of a 
given rule governs, the Exchange proposes to add a preamble to each 
current rule providing that: (1) the rule will remain operative until 
the Exchange files separate proposed rule changes as necessary to 
establish the operative date

[[Page 96079]]

of the revised rule, to delete the current rule and proposed preamble, 
and to remove the preamble text from the revised rule; and (2) in 
addition to filing the necessary proposed rule changes, the Exchange 
will announce via Information Memo the operative date of the deletion 
of the current rule and implementation of the proposed rule designated 
with a T.
    The Exchange also proposes to add a preamble to each proposed rule 
that would provide that: (1) The Exchange will file a separate rule 
change to establish the operative date of the proposed rule, delete the 
current version and the proposed preamble, and remove the preamble text 
from the revised rule; and (2) until such time, the current version of 
the rule will remain operative and that, in addition to filing the 
necessary proposed rule changes, the Exchange will announce via 
Information Memo the implementation of the proposed rule and the 
operative date of the deletion of the current rule.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\15\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\16\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes that the proposed rule change 
supports the industry-led initiative to shorten the settlement cycle to 
two business days. Moreover, the proposed rule change is consistent 
with the SEC's proposed amendment to SEA Rule 15c6-1(a) to require 
standard settlement no later than T+2. The Exchange believes that the 
proposed rule change will provide the regulatory certainty to 
facilitate the industry-led move to a T+2 settlement cycle. Further, 
the Exchange believes that, by shortening the time period for 
settlement of most securities transactions, the proposed rule change 
would protect investors and the public interest by reducing the number 
of unsettled trades in the clearance and settlement system at any given 
time, thereby reducing the risk inherent in settling securities 
transactions to clearing corporations, their members and public 
investors. The Exchange also believes that adding a preamble to each 
current rule and to each proposed rule clarifying the operative dates 
of the respective versions would remove impediments to and perfect the 
mechanism of a free and open market and a national market system by 
adding clarity and transparency to the Exchange's rules, reducing 
potential confusion, and making the Exchange's rules easier to 
navigate.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change is not 
designed to address any competitive issue but rather facilitate the 
industry's transition to a T+2 regular-way settlement cycle. The 
Exchange also believes that the proposed rule change will serve to 
promote clarity and consistency, thereby reducing burdens on the 
marketplace and facilitating investor protection. Moreover, the 
proposed rule changes are consistent with the SEC's proposed amendment 
to SEA Rule 15c6-1(a) to require standard settlement no later than T+2. 
Accordingly, the Exchange believes that the proposed changes do not 
impose any burdens on the industry in addition to those necessary to 
implement amendments to SEA Rule 15c6-1(a) as described and enumerated 
in the SEC Proposing Release.\17\
---------------------------------------------------------------------------

    \17\ See note 9, supra.
---------------------------------------------------------------------------

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or 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 the 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 form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR- NYSE-2016-87 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.

All submissions should refer to File Number SR-NYSE-2016-87. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed 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-2016-87, and should be 
submitted on or before January 19, 2017.


[[Page 96080]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31474 Filed 12-28-16; 8:45 am]
 BILLING CODE 8011-01-P