Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change To Eliminate Requirements That Will Be Duplicative of CAT, 25443-25446 [2017-11369]

Download as PDF Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices 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 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 Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–NYSEMKT–2017–30 on the subject line. mstockstill on DSK30JT082PROD with NOTICES 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–NYSEMKT–2017–30. 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 such 18:32 May 31, 2017 Jkt 241001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.35 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–11370 Filed 5–31–17; 8:45 am] 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: VerDate Sep<11>2014 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– NYSEMKT–2017–30, and should be submitted on or before June 22, 2017. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80793; File No. SR– NYSEMKT–2017–29] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change To Eliminate Requirements That Will Be Duplicative of CAT May 26, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on May 15, 2017, NYSE MKT LLC (‘‘NYSE MKT’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. 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 to delete subsections (a)(1)–(13) of Rule 956NY (Record of Orders) of the Options Rules as these Rules collect information for the consolidated options audit trail system (‘‘COATS’’) that are duplicative of the data collection requirements of the CAT NMS Plan. The Exchange will announce the date for the retirement of COATS in a regulatory notice that will be published once the options exchanges determine that the thresholds for accuracy and reliability described 35 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00220 Fmt 4703 Sfmt 4703 25443 below have been met and that the Plan Processor is sufficiently meeting all of its obligations under the CAT NMS Plan. The proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, 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 Background Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, CBOE, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’), Investors’ Exchange LLC, Miami International Securities Exchange, LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC,3 NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, the Exchange, NYSE Arca, Inc. and NYSE National, Inc.4 (collectively, the ‘‘Participants’’) filed with the Commission, pursuant to Section 11A of the Exchange Act 5 and Rule 608 of Regulation NMS thereunder,6 the CAT 3 ISE Gemini, LLC, ISE Mercury, LLC and International Securities Exchange, LLC have been renamed Nasdaq GEMX, LLC, Nasdaq MRX, LLC, and Nasdaq ISE, LLC, respectively. See Securities Exchange Act Release No. 80248 (March 15, 2017), 82 FR 14547 (March 21, 2017) (SR–ISEGemini– 2017–13); Securities Exchange Act Release No. 80326 (March 29, 2017), 82 FR 16460 (April 4, 2017) (SR–ISEMercury–2017–05); and Securities Exchange Act Release No. 80325 (March 29, 2017), 82 FR 16445 (April 4, 2017) (SR–ISE–2017–25). 4 National Stock Exchange, Inc. has been renamed NYSE National, Inc. See Securities Exchange Act Release No. 79902 (January 30, 2017), 82 FR 9258 (February 3, 2017) (SR–NSX–2016–16). 5 15 U.S.C. 78k–1. 6 17 CFR 242.608. E:\FR\FM\01JNN1.SGM 01JNN1 25444 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices mstockstill on DSK30JT082PROD with NOTICES NMS Plan.7 The Participants filed the Plan to comply with Rule 613 of Regulation NMS under the Exchange Act.8 The Plan was published for comment in the Federal Register on May 17, 2016,9 and approved by the Commission, as modified, on November 15, 2016.10 The Plan is designed to create, implement and maintain a CAT that would capture customer and order event information for orders in NMS Securities and OTC Equity Securities, across all markets, from the time of order inception through routing, cancellation, modification, or execution in a single consolidated data source. Pursuant to Appendix C of the CAT NMS Plan, each Participant is required to conduct analyses of which of its existing trade and order data rules and systems require the collection of information that is duplicative of information collected for the CAT.11 In addition, among other things, Section C.9 of Appendix C to the Plan, as modified by the Commission, requires each Participant to ‘‘file with the SEC the relevant rule change filing to eliminate or modify its duplicative rules within six (6) months of the SEC’s approval of the CAT NMS Plan.’’ 12 The Plan notes that ‘‘the elimination of such rules and the retirement of such systems [will] be effective at such time as CAT Data meets minimum standards of accuracy and reliability.’’ 13 After conducting its analysis of its rules in accordance with the CAT NMS Plan, the Exchange determined that the information collected for COATS is intended to be collected by the CAT. Therefore, the Exchange believes that COATS will no longer be necessary once the CAT is operational and certain accuracy and reliability standards are met. Accordingly, the Exchange submits this proposed rule change to delete subsections (a)(1)–(13) of Rule 956NY of the Options Rules, which set forth certain requirements related to COATS. Discussed below is a description of the 7 See Letter from the Participants to Brent J. Fields, Secretary, Commission, dated September 30, 2014; and Letter from Participants to Brent J. Fields, Secretary, Commission, dated February 27, 2015. On December 24, 2015, the Participants submitted an amendment to the CAT NMS Plan. See Letter from Participants to Brent J. Fields, Secretary, Commission, dated December 23, 2015. 8 17 CFR 242.613. 9 Securities Exchange Act Release No. 77724 (April 27, 2016), 81 FR 30614 (May 17, 2016) (File No. 4–698). 10 Securities Exchange Act Release No. 79318 (Nov. 15, 2016), 81 FR 84696 (November 23, 2016) (File No. 4–698) (‘‘Approval Order’’). 11 Appendix C of CAT NMS Plan, Approval Order at 85010. 12 Id. 13 Id. VerDate Sep<11>2014 18:32 May 31, 2017 Jkt 241001 duplicative rule requirements as well as the timeline for eliminating the duplicative rule. If the Commission approves the proposed rule change, the rule text will be effective; however, the amendments will not be implemented until the Exchange, in conjunction with the other options exchanges, publishes a notice announcing the date for the retirement of COATS. As noted below, such a notice would be published once the options exchanges determine that the thresholds for accuracy and reliability described below have been met and that the Plan Processor is sufficiently meeting all of its obligations under the CAT NMS Plan. Duplicative COATS Requirements COATS was developed to comply with an order of the Commission requiring the Exchange, in coordination with other exchanges, to ‘‘design and implement’’ COATS to ‘‘enable the options exchanges to reconstruct markets promptly, effectively surveil them and enforce order handling, firm quote, trade reporting and other rules.’’ 14 The options exchanges utilize COATS to collect and review data regarding options orders, quotes and transactions. The Exchange has determined that the requirements of subsections (a)(1)–(13) of Rule 956NY, which implement certain requirements related to COATS, are duplicative of information available in the CAT and thus will no longer be necessary once the CAT is operational.15 14 See Section IV.B.e.(v) of the Commission’s Order Instituting Public Administrative Proceedings Pursuant to Sections 19(h)(1) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions (the ‘‘Order’’). See Securities Exchange Act Release No. 43268 (September 11, 2000) and Administrative Proceeding File No. 3–10282. As noted, the Plan is designed to create, implement and maintain a CAT that would capture customer and order event information for orders in NMS Securities and OTC Equity Securities, across all markets, from the time of order inception through routing, cancellation, modification, or execution in a single consolidated data source. The Exchange has already adopted rules to enforce compliance by its Industry Members, as applicable, with the provisions of the Plan. See Securities Exchange Act Release No. 80256 (March 15, 2017), 82 FR 14526 (March 21, 2017) (SR–NYSEMKT–2017–02) (Order Approving Proposed Rule Changes to Adopt Consolidated Audit Trail Compliance Rules). Once the CAT is fully operational, it will be appropriate to delete Exchange rules implemented to comply with the Order as duplicative of the CAT. Accordingly, the Exchange believes that the Exchange would continue to be in compliance with the requirements of the Order once the CAT is fully operational and the COATS rules are deleted. 15 Rule 956NY requires ATP Holders to maintain and preserve a record of every order and of any other instructions given or received for the purchase or sale of options contracts, including the terms and conditions of the orders (such as whether PO 00000 Frm 00221 Fmt 4703 Sfmt 4703 The Participants have provided COATS technical specifications to the Plan Processor for the CAT for use in developing the Technical Specifications for the CAT, and the Participants are working with the Plan Processor to include the necessary COATS data elements in the CAT Technical Specifications. Accordingly, although the Technical Specifications for the CAT have not yet been finalized, the Exchange and the other options exchanges propose to eliminate COATS in accordance with the proposed timeline discussed below. Timeline for Elimination of Duplicative Rules The CAT NMS Plan states that the elimination of rules that are duplicative of the requirements of the CAT and the retirement of the related systems should be effective at such time as CAT Data meets minimum standards of accuracy and reliability.16 As discussed below, the Exchange and the other options exchanges believe that COATS may be retired at a date after all Industry Members are reporting to the CAT when the proposed error rate thresholds have been met, and the Exchange has determined that its usage of the CAT Data has not revealed material issues that have not been corrected, confirmed that the CAT includes all data necessary to allow the Exchange to continue to meet its surveillance obligations, and confirmed that the Plan Processor is sufficiently meeting all of its obligations under the CAT NMS Plan. The Exchange believes COATS should not be retired until all Participants and Industry Members that report data to COATS are reporting comparable data to the CAT. In this way, the Exchange will continue to have access to the necessary data to perform its regulatory duties. The CAT NMS Plan requires that a rule filing to eliminate a duplicative rule address whether ‘‘the availability of certain data from Small Industry Members two years after the Effective Date would facilitate a more expeditious retirement of duplicative systems.’’ 17 The Exchange believes COATS should not be retired until all Participants and Industry Members that report data to COATS are reporting comparable data to the CAT. While the early submission of the order is a market or limit order), the order entry date and time, and the date and time of any modification of the terms of the order or cancellation of the order, or other specific data elements. The Exchange proposes to replace the current data elements in subsections (a)(1)–(13) with the phrase ‘‘the elements required by the Rule 6800 Series.’’ 16 See Appendix C of CAT NMS Plan, Approval Order at 85010. 17 Id. E:\FR\FM\01JNN1.SGM 01JNN1 mstockstill on DSK30JT082PROD with NOTICES Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices options data to the CAT by Small Industry Members could expedite the retirement of COATS, the Exchange believes that it premature to consider such a change and that additional analysis would be necessary to determine whether such early reporting by Small Industry Members would be feasible. The CAT NMS Plan requires that this rule filing address ‘‘whether individual Industry Members can be exempted from reporting to duplicative systems once their CAT reporting meets specified accuracy and reliability standards, including, but not limited to, ways in which establishing cross-system regulatory functionality or integrating data from existing systems and the CAT would facilitate such Individual Industry Member exemptions.’’ 18 The Exchange believes that a single cut-over from COATS to CAT is highly preferable to a firm-by-firm approach and is not proposing to exempt members from the COATS requirements on a firm-by-firm basis. The Exchange and the other options exchanges believe that providing such individual exemptions to Industry Members would be inefficient, more costly, and less reliable than the single cut-over. Providing individual exemptions would require the options exchanges to create, for a brief temporary period, a crosssystem regulatory function and to integrate data from COATS and the CAT to avoid creating any regulatory gaps as a result of such exemptions. Such a function would be costly to create and would give rise to a greater likelihood of data errors or other issues. Given the limited time in which such exemptions would be necessary, the Exchange and the other options exchanges do not believe that such exemptions would be an appropriate use of limited resources. The CAT NMS Plan also requires that a rule filing to eliminate a duplicative rule to provide ‘‘specific accuracy and reliability standards that will determine when duplicative systems will be retired, including, but not limited to, whether the attainment of a certain Error Rate should determine when a system duplicative of the CAT can be retired.’’ 19 The Exchange believes that it is critical that the CAT Data be sufficiently accurate and reliable for the Exchange to perform the regulatory functions that it now performs via COATS. Accordingly, the Exchange believes that the CAT Data should meet specific quantitative error rates, as well as certain qualitative requirements. 18 Id. 19 Id. VerDate Sep<11>2014 18:32 May 31, 2017 Jkt 241001 25445 The Exchange and the other options exchanges believe that, before COATS may be retired, the CAT would need to achieve a sustained error rate for a period of at least 180 days of 5% or lower measured on a pre-correction or as-submitted basis, and 2% or lower on a post-correction basis (measured at T+5).20 The Exchange proposes to measure the 5% pre-correction and 2% post-correction thresholds by averaging the error rate across the period, not require a 5% pre-correction and 2% post-correction maximum each day for 180 consecutive days. The Exchange believes that measuring each of the thresholds over the course of 180 days will ensure that the CAT consistently meets minimum accuracy and reliability thresholds while also ensuring that single-day measurements do not unduly affect the overall measurements. The Exchange proposes to measure the appropriate error rates in the aggregate, rather than firm-by-firm. In addition, the Exchange proposes to measure the error rates for options only, not equity securities, as only options are subject to COATS. The 2% and 5% error rates are in line with the proposed retirement threshold for FINRA’s Order Audit Trail System (‘‘OATS’’). In addition to these minimum error rates before COATS can be retired, the Exchange believes that during the minimum 180-day period during which the thresholds are calculated, the Exchange’s use of the data in the CAT must confirm that (i) usage over that time period has not revealed material issues that have not been corrected, (ii) the CAT includes all data necessary to allow the Exchange to continue to meet its surveillance obligations, and (iii) the Plan Processor is sufficiently meeting all of its obligations under the CAT NMS Plan. The Exchange believes this time period to use the CAT Data is necessary to reveal any errors that may manifest themselves only after surveillance patterns and other queries have been run and to confirm that the Plan Processor is meeting its obligations and performing its functions adequately. 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 is consistent with the Exchange Act because it fulfills the obligation in the CAT NMS Plan for the Exchange to submit a proposed rule change to eliminate or modify duplicative rules. In approving the Plan, the SEC noted that the Plan ‘‘is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.’’ 23 As this proposal implements the Plan, the Exchange believes that this proposal furthers the objectives of the Plan, as identified by the SEC, and is therefore consistent with the Exchange Act. Moreover, the purpose of the proposed rule change is to eliminate rules that require the submission of duplicative data to the Exchange. The elimination of such duplicative requirements will reduce unnecessary costs and other compliance burdens for the Exchange and its members, and therefore, will enhance the efficiency of the securities markets. Furthermore, the Exchange believes that the approach set forth in the proposed rule change strikes the appropriate balance between ensuring that the Exchange is able to continue to fulfill its statutory obligation to protect investors and the public interest by ensuring its surveillance of market activity remains accurate and effective while also establishing a reasonable timeframe for elimination or modification of its rules that will be rendered duplicative after implementation of the CAT. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,21 in general, and furthers the objectives of Section 6(b)(5) of the Act,22 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, 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 implement provisions of the CAT NMS Plan approved by the Commission regarding the elimination of rules and 20 The Plan requires that the Plan Processor must ensure that regulators have access to corrected and linked order and Customer data by 8:00 a.m. Eastern Time on T+5. See CAT NMS Plan, at C–15. 21 15 U.S.C. 78f(b). 22 15 U.S.C. 78f(b)(5). PO 00000 Frm 00222 Fmt 4703 Sfmt 4703 23 Approval E:\FR\FM\01JNN1.SGM Order at 84697. 01JNN1 25446 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices systems that are duplicative the CAT, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. Similarly, all options exchanges are proposing the elimination of COATS and their rules related to COATS to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive rule filing and, therefore, it does not raise competition issues between and among the options exchanges and/or their members. 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 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: mstockstill on DSK30JT082PROD with NOTICES 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– NYSEMKT–2017–29 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–NYSEMKT–2017–29. 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 VerDate Sep<11>2014 18:32 May 31, 2017 Jkt 241001 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 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– NYSEMKT–2017–29, and should be submitted on or before June 22, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–11369 Filed 5–31–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 32662; 812–14747] Northern Lights Fund Trust IV and Main Management ETF Advisors, LLC May 25, 2017. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice. AGENCY: Notice of an application for an order under section 6(c) of the Investment Company Act of 1940 (the ‘‘Act’’) for an exemption from sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c–1 under the Act, under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act. The requested order would permit (a) actively-managed series of 24 17 PO 00000 CFR 200.30–3(a)(12). Frm 00223 Fmt 4703 Sfmt 4703 certain open-end management investment companies (‘‘Funds’’) to issue shares redeemable in large aggregations only (‘‘Creation Units’’); (b) secondary market transactions in Fund shares to occur at negotiated market prices rather than at net asset value (‘‘NAV’’); (c) certain Funds to pay redemption proceeds, under certain circumstances, more than seven days after the tender of shares for redemption; (d) certain affiliated persons of a Fund to deposit securities into, and receive securities from, the Fund in connection with the purchase and redemption of Creation Units; (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the Funds (‘‘Funds of Funds’’) to acquire shares of the Funds; and (f) certain Funds (‘‘Feeder Funds’’) to create and redeem Creation Units in-kind in a master-feeder structure. APPLICANTS: Northern Lights Fund Trust IV (the ‘‘Trust’’), a Delaware statutory trust registered under the Act as an open-end management investment company with multiple series, and Main Management ETF Advisors, LLC, a Delaware limited liability company registered as an investment adviser under the Investment Advisers Act of 1940. FILING DATE: The application was filed on February 22, 2017. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission’s Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on June 19, 2017, and should be accompanied by proof of service on applicants, in the form of an affidavit, or for lawyers, a certificate of service. Pursuant to rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission’s Secretary. ADDRESSES: Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090; Applicants: the Trust, 17605 Wright Street, Omaha, NE 68130; the Initial Adviser, 601 California Street, Suite 620, San Francisco, CA 94108. FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at (202) E:\FR\FM\01JNN1.SGM 01JNN1

Agencies

[Federal Register Volume 82, Number 104 (Thursday, June 1, 2017)]
[Notices]
[Pages 25443-25446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11369]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80793; File No. SR-NYSEMKT-2017-29]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of 
Proposed Rule Change To Eliminate Requirements That Will Be Duplicative 
of CAT

May 26, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 15, 2017, NYSE MKT LLC (``NYSE MKT'' or the ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to delete subsections (a)(1)-(13) of Rule 
956NY (Record of Orders) of the Options Rules as these Rules collect 
information for the consolidated options audit trail system (``COATS'') 
that are duplicative of the data collection requirements of the CAT NMS 
Plan. The Exchange will announce the date for the retirement of COATS 
in a regulatory notice that will be published once the options 
exchanges determine that the thresholds for accuracy and reliability 
described below have been met and that the Plan Processor is 
sufficiently meeting all of its obligations under the CAT NMS Plan. The 
proposed rule change is available on the Exchange's Web site at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, 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
Background
    Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA 
Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 
Options Exchange, Incorporated, CBOE, Chicago Stock Exchange, Inc., 
Financial Industry Regulatory Authority, Inc. (``FINRA''), Investors' 
Exchange LLC, Miami International Securities Exchange, LLC, MIAX PEARL, 
LLC, NASDAQ BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, 
LLC,\3\ NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, New York Stock 
Exchange LLC, the Exchange, NYSE Arca, Inc. and NYSE National, Inc.\4\ 
(collectively, the ``Participants'') filed with the Commission, 
pursuant to Section 11A of the Exchange Act \5\ and Rule 608 of 
Regulation NMS thereunder,\6\ the CAT

[[Page 25444]]

NMS Plan.\7\ The Participants filed the Plan to comply with Rule 613 of 
Regulation NMS under the Exchange Act.\8\ The Plan was published for 
comment in the Federal Register on May 17, 2016,\9\ and approved by the 
Commission, as modified, on November 15, 2016.\10\
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    \3\ ISE Gemini, LLC, ISE Mercury, LLC and International 
Securities Exchange, LLC have been renamed Nasdaq GEMX, LLC, Nasdaq 
MRX, LLC, and Nasdaq ISE, LLC, respectively. See Securities Exchange 
Act Release No. 80248 (March 15, 2017), 82 FR 14547 (March 21, 2017) 
(SR-ISEGemini-2017-13); Securities Exchange Act Release No. 80326 
(March 29, 2017), 82 FR 16460 (April 4, 2017) (SR-ISEMercury-2017-
05); and Securities Exchange Act Release No. 80325 (March 29, 2017), 
82 FR 16445 (April 4, 2017) (SR-ISE-2017-25).
    \4\ National Stock Exchange, Inc. has been renamed NYSE 
National, Inc. See Securities Exchange Act Release No. 79902 
(January 30, 2017), 82 FR 9258 (February 3, 2017) (SR-NSX-2016-16).
    \5\ 15 U.S.C. 78k-1.
    \6\ 17 CFR 242.608.
    \7\ See Letter from the Participants to Brent J. Fields, 
Secretary, Commission, dated September 30, 2014; and Letter from 
Participants to Brent J. Fields, Secretary, Commission, dated 
February 27, 2015. On December 24, 2015, the Participants submitted 
an amendment to the CAT NMS Plan. See Letter from Participants to 
Brent J. Fields, Secretary, Commission, dated December 23, 2015.
    \8\ 17 CFR 242.613.
    \9\ Securities Exchange Act Release No. 77724 (April 27, 2016), 
81 FR 30614 (May 17, 2016) (File No. 4-698).
    \10\ Securities Exchange Act Release No. 79318 (Nov. 15, 2016), 
81 FR 84696 (November 23, 2016) (File No. 4-698) (``Approval 
Order'').
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    The Plan is designed to create, implement and maintain a CAT that 
would capture customer and order event information for orders in NMS 
Securities and OTC Equity Securities, across all markets, from the time 
of order inception through routing, cancellation, modification, or 
execution in a single consolidated data source. Pursuant to Appendix C 
of the CAT NMS Plan, each Participant is required to conduct analyses 
of which of its existing trade and order data rules and systems require 
the collection of information that is duplicative of information 
collected for the CAT.\11\ In addition, among other things, Section C.9 
of Appendix C to the Plan, as modified by the Commission, requires each 
Participant to ``file with the SEC the relevant rule change filing to 
eliminate or modify its duplicative rules within six (6) months of the 
SEC's approval of the CAT NMS Plan.'' \12\ The Plan notes that ``the 
elimination of such rules and the retirement of such systems [will] be 
effective at such time as CAT Data meets minimum standards of accuracy 
and reliability.'' \13\
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    \11\ Appendix C of CAT NMS Plan, Approval Order at 85010.
    \12\ Id.
    \13\ Id.
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    After conducting its analysis of its rules in accordance with the 
CAT NMS Plan, the Exchange determined that the information collected 
for COATS is intended to be collected by the CAT. Therefore, the 
Exchange believes that COATS will no longer be necessary once the CAT 
is operational and certain accuracy and reliability standards are met. 
Accordingly, the Exchange submits this proposed rule change to delete 
subsections (a)(1)-(13) of Rule 956NY of the Options Rules, which set 
forth certain requirements related to COATS. Discussed below is a 
description of the duplicative rule requirements as well as the 
timeline for eliminating the duplicative rule.
    If the Commission approves the proposed rule change, the rule text 
will be effective; however, the amendments will not be implemented 
until the Exchange, in conjunction with the other options exchanges, 
publishes a notice announcing the date for the retirement of COATS. As 
noted below, such a notice would be published once the options 
exchanges determine that the thresholds for accuracy and reliability 
described below have been met and that the Plan Processor is 
sufficiently meeting all of its obligations under the CAT NMS Plan.
Duplicative COATS Requirements
    COATS was developed to comply with an order of the Commission 
requiring the Exchange, in coordination with other exchanges, to 
``design and implement'' COATS to ``enable the options exchanges to 
reconstruct markets promptly, effectively surveil them and enforce 
order handling, firm quote, trade reporting and other rules.'' \14\ The 
options exchanges utilize COATS to collect and review data regarding 
options orders, quotes and transactions.
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    \14\ See Section IV.B.e.(v) of the Commission's Order 
Instituting Public Administrative Proceedings Pursuant to Sections 
19(h)(1) of the Securities Exchange Act of 1934, Making Findings and 
Imposing Remedial Sanctions (the ``Order''). See Securities Exchange 
Act Release No. 43268 (September 11, 2000) and Administrative 
Proceeding File No. 3-10282. As noted, the Plan is designed to 
create, implement and maintain a CAT that would capture customer and 
order event information for orders in NMS Securities and OTC Equity 
Securities, across all markets, from the time of order inception 
through routing, cancellation, modification, or execution in a 
single consolidated data source. The Exchange has already adopted 
rules to enforce compliance by its Industry Members, as applicable, 
with the provisions of the Plan. See Securities Exchange Act Release 
No. 80256 (March 15, 2017), 82 FR 14526 (March 21, 2017) (SR-
NYSEMKT-2017-02) (Order Approving Proposed Rule Changes to Adopt 
Consolidated Audit Trail Compliance Rules). Once the CAT is fully 
operational, it will be appropriate to delete Exchange rules 
implemented to comply with the Order as duplicative of the CAT. 
Accordingly, the Exchange believes that the Exchange would continue 
to be in compliance with the requirements of the Order once the CAT 
is fully operational and the COATS rules are deleted.
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    The Exchange has determined that the requirements of subsections 
(a)(1)-(13) of Rule 956NY, which implement certain requirements related 
to COATS, are duplicative of information available in the CAT and thus 
will no longer be necessary once the CAT is operational.\15\
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    \15\ Rule 956NY requires ATP Holders to maintain and preserve a 
record of every order and of any other instructions given or 
received for the purchase or sale of options contracts, including 
the terms and conditions of the orders (such as whether the order is 
a market or limit order), the order entry date and time, and the 
date and time of any modification of the terms of the order or 
cancellation of the order, or other specific data elements. The 
Exchange proposes to replace the current data elements in 
subsections (a)(1)-(13) with the phrase ``the elements required by 
the Rule 6800 Series.''
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    The Participants have provided COATS technical specifications to 
the Plan Processor for the CAT for use in developing the Technical 
Specifications for the CAT, and the Participants are working with the 
Plan Processor to include the necessary COATS data elements in the CAT 
Technical Specifications. Accordingly, although the Technical 
Specifications for the CAT have not yet been finalized, the Exchange 
and the other options exchanges propose to eliminate COATS in 
accordance with the proposed timeline discussed below.
Timeline for Elimination of Duplicative Rules
    The CAT NMS Plan states that the elimination of rules that are 
duplicative of the requirements of the CAT and the retirement of the 
related systems should be effective at such time as CAT Data meets 
minimum standards of accuracy and reliability.\16\ As discussed below, 
the Exchange and the other options exchanges believe that COATS may be 
retired at a date after all Industry Members are reporting to the CAT 
when the proposed error rate thresholds have been met, and the Exchange 
has determined that its usage of the CAT Data has not revealed material 
issues that have not been corrected, confirmed that the CAT includes 
all data necessary to allow the Exchange to continue to meet its 
surveillance obligations, and confirmed that the Plan Processor is 
sufficiently meeting all of its obligations under the CAT NMS Plan.
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    \16\ See Appendix C of CAT NMS Plan, Approval Order at 85010.
---------------------------------------------------------------------------

    The Exchange believes COATS should not be retired until all 
Participants and Industry Members that report data to COATS are 
reporting comparable data to the CAT. In this way, the Exchange will 
continue to have access to the necessary data to perform its regulatory 
duties.
    The CAT NMS Plan requires that a rule filing to eliminate a 
duplicative rule address whether ``the availability of certain data 
from Small Industry Members two years after the Effective Date would 
facilitate a more expeditious retirement of duplicative systems.'' \17\ 
The Exchange believes COATS should not be retired until all 
Participants and Industry Members that report data to COATS are 
reporting comparable data to the CAT. While the early submission of

[[Page 25445]]

options data to the CAT by Small Industry Members could expedite the 
retirement of COATS, the Exchange believes that it premature to 
consider such a change and that additional analysis would be necessary 
to determine whether such early reporting by Small Industry Members 
would be feasible.
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    \17\ Id.
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    The CAT NMS Plan requires that this rule filing address ``whether 
individual Industry Members can be exempted from reporting to 
duplicative systems once their CAT reporting meets specified accuracy 
and reliability standards, including, but not limited to, ways in which 
establishing cross-system regulatory functionality or integrating data 
from existing systems and the CAT would facilitate such Individual 
Industry Member exemptions.'' \18\
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    \18\ Id.
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    The Exchange believes that a single cut-over from COATS to CAT is 
highly preferable to a firm-by-firm approach and is not proposing to 
exempt members from the COATS requirements on a firm-by-firm basis. The 
Exchange and the other options exchanges believe that providing such 
individual exemptions to Industry Members would be inefficient, more 
costly, and less reliable than the single cut-over. Providing 
individual exemptions would require the options exchanges to create, 
for a brief temporary period, a cross-system regulatory function and to 
integrate data from COATS and the CAT to avoid creating any regulatory 
gaps as a result of such exemptions. Such a function would be costly to 
create and would give rise to a greater likelihood of data errors or 
other issues. Given the limited time in which such exemptions would be 
necessary, the Exchange and the other options exchanges do not believe 
that such exemptions would be an appropriate use of limited resources. 
The CAT NMS Plan also requires that a rule filing to eliminate a 
duplicative rule to provide ``specific accuracy and reliability 
standards that will determine when duplicative systems will be retired, 
including, but not limited to, whether the attainment of a certain 
Error Rate should determine when a system duplicative of the CAT can be 
retired.'' \19\ The Exchange believes that it is critical that the CAT 
Data be sufficiently accurate and reliable for the Exchange to perform 
the regulatory functions that it now performs via COATS. Accordingly, 
the Exchange believes that the CAT Data should meet specific 
quantitative error rates, as well as certain qualitative requirements.
---------------------------------------------------------------------------

    \19\ Id.
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    The Exchange and the other options exchanges believe that, before 
COATS may be retired, the CAT would need to achieve a sustained error 
rate for a period of at least 180 days of 5% or lower measured on a 
pre-correction or as-submitted basis, and 2% or lower on a post-
correction basis (measured at T+5).\20\ The Exchange proposes to 
measure the 5% pre-correction and 2% post-correction thresholds by 
averaging the error rate across the period, not require a 5% pre-
correction and 2% post-correction maximum each day for 180 consecutive 
days. The Exchange believes that measuring each of the thresholds over 
the course of 180 days will ensure that the CAT consistently meets 
minimum accuracy and reliability thresholds while also ensuring that 
single-day measurements do not unduly affect the overall measurements. 
The Exchange proposes to measure the appropriate error rates in the 
aggregate, rather than firm-by-firm. In addition, the Exchange proposes 
to measure the error rates for options only, not equity securities, as 
only options are subject to COATS. The 2% and 5% error rates are in 
line with the proposed retirement threshold for FINRA's Order Audit 
Trail System (``OATS'').
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    \20\ The Plan requires that the Plan Processor must ensure that 
regulators have access to corrected and linked order and Customer 
data by 8:00 a.m. Eastern Time on T+5. See CAT NMS Plan, at C-15.
---------------------------------------------------------------------------

    In addition to these minimum error rates before COATS can be 
retired, the Exchange believes that during the minimum 180-day period 
during which the thresholds are calculated, the Exchange's use of the 
data in the CAT must confirm that (i) usage over that time period has 
not revealed material issues that have not been corrected, (ii) the CAT 
includes all data necessary to allow the Exchange to continue to meet 
its surveillance obligations, and (iii) the Plan Processor is 
sufficiently meeting all of its obligations under the CAT NMS Plan. The 
Exchange believes this time period to use the CAT Data is necessary to 
reveal any errors that may manifest themselves only after surveillance 
patterns and other queries have been run and to confirm that the Plan 
Processor is meeting its obligations and performing its functions 
adequately.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\21\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\22\ 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.
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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes that the proposed rule change 
is consistent with the Exchange Act because it fulfills the obligation 
in the CAT NMS Plan for the Exchange to submit a proposed rule change 
to eliminate or modify duplicative rules. In approving the Plan, the 
SEC noted that the Plan ``is necessary and appropriate in the public 
interest, for the protection of investors and the maintenance of fair 
and orderly markets, to remove impediments to, and perfect the 
mechanism of a national market system, or is otherwise in furtherance 
of the purposes of the Act.'' \23\ As this proposal implements the 
Plan, the Exchange believes that this proposal furthers the objectives 
of the Plan, as identified by the SEC, and is therefore consistent with 
the Exchange Act.
---------------------------------------------------------------------------

    \23\ Approval Order at 84697.
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    Moreover, the purpose of the proposed rule change is to eliminate 
rules that require the submission of duplicative data to the Exchange. 
The elimination of such duplicative requirements will reduce 
unnecessary costs and other compliance burdens for the Exchange and its 
members, and therefore, will enhance the efficiency of the securities 
markets. Furthermore, the Exchange believes that the approach set forth 
in the proposed rule change strikes the appropriate balance between 
ensuring that the Exchange is able to continue to fulfill its statutory 
obligation to protect investors and the public interest by ensuring its 
surveillance of market activity remains accurate and effective while 
also establishing a reasonable timeframe for elimination or 
modification of its rules that will be rendered duplicative after 
implementation of the CAT.

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 implement 
provisions of the CAT NMS Plan approved by the Commission regarding the 
elimination of rules and

[[Page 25446]]

systems that are duplicative the CAT, and is designed to assist the 
Exchange in meeting its regulatory obligations pursuant to the Plan. 
Similarly, all options exchanges are proposing the elimination of COATS 
and their rules related to COATS to implement the requirements of the 
CAT NMS Plan. Therefore, this is not a competitive rule filing and, 
therefore, it does not raise competition issues between and among the 
options exchanges and/or their members.

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 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-NYSEMKT-2017-29 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-NYSEMKT-2017-29. 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 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-NYSEMKT-2017-29, and should 
be submitted on or before June 22, 2017.
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    \24\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11369 Filed 5-31-17; 8:45 am]
 BILLING CODE 8011-01-P