Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To Amend NYSE Arca Equities Rule 13.2, Liability of Corporation, 26967-26969 [2017-12044]
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Federal Register / Vol. 82, No. 111 / Monday, June 12, 2017 / Notices
and the Exchange’s responses to the
comments.
Accordingly, the Commission,
pursuant to Section 19(b)(2) of the
Act,12 designates August 9, 2017 as the
date by which the Commission should
either approve or disapprove the
proposed rule change (File No. SR–
CHX–2016–20).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Brent J. Fields,
Secretary.
[FR Doc. 2017–12042 Filed 6–9–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80866; File No. SR–
NYSEArca–2017–46]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To Amend NYSE Arca
Equities Rule 13.2, Liability of
Corporation
June 6, 2017.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on May 23,
2017, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by 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 to amend
NYSE Arca Equities Rule 13.2
(‘‘Liability of Corporation’’) by (1)
aligning the scope of 13.2(a) with the
rules of other national securities
exchanges by specifying that the
Exchange is not liable to its ETP
Holders’ ‘‘successors, representatives or
customers’’; (2) eliminating the daily
caps that limit the amount the Exchange
may compensate ETP Holders for claims
arising under the rule; (3) changing the
procedural requirements for submitting
notification to the Exchange of any
claims for compensation; and (4) replace
12 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(57).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
13 17
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the words ‘‘acknowledged receipt of’’ in
Rule 13.2(b) with the word ‘‘received.’’
Additionally, the Exchange seeks to
have the proposed changes to eliminate
the daily caps function retroactively to
March 1, 2017. 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
NYSE Arca Equities Rule 13.2 (‘‘Rule
13.2’’) provides a mechanism for ETP
Holders to receive compensation for
losses sustained as a result of the
negligent acts or omissions of the
Exchange’s employees or for the failure
of Exchange systems or facilities.
Specifically, if an ETP Holder transmits
an order to or through the Exchange’s
order routing systems, electronic book,
or automatic execution systems or to
any other automated facility of the
Exchange and the Exchange has
acknowledged receipt of the order, Rule
13.2(b) permits the Exchange to
compensate ETP Holders for losses
resulting from ‘‘the negligent acts or
omissions of its employees or for the
failure of its systems or facilities.’’ The
Exchange is only permitted to
compensate an ETP Holder for losses to
the extent the Exchange’s rules
authorize such compensation. As
described below, the Exchange proposes
to:
• Align its rule with those of other
national securities exchanges by adding
that the Exchange is not liable to
‘‘successors, representatives, or
customers’’ of ETP Holders;
• eliminate the daily caps on liability;
• change the procedural requirements
for submitting notification to the
PO 00000
Frm 00065
Fmt 4703
Sfmt 4703
26967
Exchange of any claims for
compensation; and
• replace the words ‘‘acknowledged
receipt of’’ in Rule 13.2(b) with the
word ‘‘received.’’
Proposal To Align and Clarify the Scope
of 13.2(a) With Rules of Other National
Securities Exchanges
The Exchange proposes to align the
scope of 13.2(a) with the rules of other
national securities exchanges 4 by
adding rule text specifying that, except
as otherwise expressly provided in the
rules, the Exchange is not liable to ETP
Holders’ successors, representatives or
customers. Rule 13.2 does not authorize
the Exchange to compensate a
successor, representative or customer of
an ETP Holder because the rule does not
reference those entities. As such, the
Exchange believes that the proposed
text specifically referencing these
entities clarifies the scope of the rule.
Proposal To Eliminate Daily Caps on
Liability
Rule 13.2 provides the Exchange with
the authority to compensate ETP
Holders for claims arising out of the
negligent acts or omissions of its
employees or for the failure of its
systems or facilities up to specified
amounts in paragraph (b) of the Rule.
Specifically, Rule 13.2(b) provides that:
• As to claims made by a single ETP
Holder, with respect to a single trading
day, the Exchange will not be liable in
excess of the larger of $100,000, or the
amount of any recovery obtained by the
Exchange under any applicable
insurance;
• As to claims made by all ETP
Holders, with respect to a single trading
day, the Exchange will not be liable in
excess of the larger of $250,000 or the
amount of the recovery obtained by the
Exchange under any applicable
insurance; and
• As to claims made by all ETP
Holders, with respect to a single
calendar month, the Exchange will not
be liable in excess of the larger of
$500,000, or the amount of the recovery
obtained by the Exchange under any
applicable insurance.
The Exchange proposes to eliminate
the daily caps in paragraphs (b)(1) and
(b)(2). The Exchange would retain the
monthly cap in (b)(3) of $500,000. The
proposal to eliminate the daily caps in
paragraphs (b)(1) and (b)(2) is consistent
with the rules of other national
securities exchanges, which only have a
4 See Investors’ Exchange LLC (‘‘IEX’’) Rule
11.260, BATS BZX Exchange Inc. (‘‘BATS’’) Rule
11.16, and EDGX Exchange Inc. (‘‘EDGX’’) Rule
11.14.
E:\FR\FM\12JNN1.SGM
12JNN1
26968
Federal Register / Vol. 82, No. 111 / Monday, June 12, 2017 / Notices
monthly cap.5 In addition, the Exchange
believes that it is more appropriate and
fair to have a monthly limit on liability
rather than a daily limit on liability,
which could potentially result in
disparate treatment among ETP Holders
with claims on different days. Under the
current rules, the Exchange is liable on
any day as to the aggregate of all claims
up until $250,000. Therefore, ETP
Holders with claims on a day where
other ETP Holders also have claims are
less likely to receive full compensation
compared to an ETP Holder that has a
claim on a day when no other or fewer
other ETP Holders have claims.
Accordingly, the Exchange’s proposal
seeks to limit the possibility for
disparate treatment by proposing to
eliminate the current daily liability
caps.
Under Rule 13.2(c), if claims cannot
be fully satisfied because in the
aggregate they exceed the maximum
liability provided under paragraph (b),
the maximum amount is allocated
among all claims. In connection with its
proposal to eliminate the daily caps in
paragraphs (b)(1) and (b)(2), the
Exchange is making a conforming
change to eliminate in paragraph (c) the
reference to allocating claims arising
‘‘on a single trading day.’’
asabaliauskas on DSKBBXCHB2PROD with NOTICES
Proposal To Change Procedural
Requirements for Submitting a Claim
The Exchange proposes to clarify and
change the time frame in which ETP
Holders are required to submit
notification to the Exchange of any
claims for compensation under Rule
13.2. Rule 13.2(c) currently refers to
written notice of claims ‘‘to the
Corporation no later than the opening of
trading on the next business day
following the day on which the use or
enjoyment of the Corporation’s facilities
giving rise to the claim occurred . . .’’
The Exchange proposes to clarify the
requirement to provide written notice of
all claims. Specifically, the Exchange
proposes to delete the reference in
paragraph (c) to written notice and
replace it with new paragraph (d), the
first sentence of which would state that
all claims for compensation must be in
writing. The proposal would conform
the Exchange’s notice requirements for
claims to that of other national
securities exchanges, which require
written notice of claims.6
5 See ISE Rule 705, Nasdaq Stock Market LLC
(‘‘Nasdaq’’) Rule 4626, Nasdaq OMX PHLX LLC
(‘‘Nasdaq PHLX’’) Rule 1015, and Nasdaq BX, Inc.
(‘‘Nasdaq BX’’) Rule 4626.
6 See Nasdaq Rule 4626, Nasdaq PHLX Rule 1015,
and Nasdaq BX Rule 4626 (providing that members
must submit claims in writing by noon Eastern
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In addition, proposed new paragraph
(d) would require that ETP Holders
make such written claims by noon
Eastern Time the next business day
following the day on which the use of
the Exchange gave rise to such claims.
The Exchange believes it is appropriate
to extend the time for an ETP Holder to
submit a written claim from 9:30 a.m.
Eastern Time to noon Eastern Time
because it would provide time for an
ETP Holder to evaluate what losses may
have occurred on the prior trading day,
particularly if the issue occurred later in
the day. This proposed time frame is
based on the rules of other national
securities exchanges.7
Proposed Change To Re-Word Rule
13.2(b)
The Exchange proposes to replace the
words ‘‘acknowledged receipt of’’ in
Rule 13.2(b) with the word ‘‘received.’’
The Exchange believes this language is
more concise and accurately reflects
that all orders received in Exchange
systems, whether acknowledged or not,
are eligible under the Rule.
Additionally, the Exchange notes that
this language is similar to that found in
the rules of other national securities
exchanges.8
Operability of the Proposal To Eliminate
the Daily Caps on Liability
Finally, the Exchange requests to have
the proposed changes to eliminate the
daily caps in paragraphs (b)(1) and (b)(2)
function retroactively to March 1, 2017.
Specifically, the Exchange seeks to have
the ability to compensate ETP Holders
in connection with losses incurred from
an Exchange system issue on March 20,
2017. Prior to March 20, 2017, the
Exchange had never received a claim
that exceeded the liability limits and
thus the Exchange was never prevented
from fully compensating an ETP Holder.
In connection with the March, [sic] 20,
2017, system issue, the Exchange
received claims from ETP Holders that
exceed amounts provided for in the
daily caps. The Exchange believes that
retroactively applying the monthly
liability limit promotes fairness in that
it provides the Exchange with the ability
to compensate ETP Holders equally and
reduces the potential for disparate
treatment among ETP Holders who
suffered a loss on March 20, 2017 and
those ETP Holder [sic] who suffered a
loss on a different day. Lastly, the
Exchange notes that the Commission
has approved other national securities
Time on the next business day following the system
issue).
7 Id.
8 See NYSE Rule 18(b) and NYSE MKT Rule
18(b).
PO 00000
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Fmt 4703
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exchanges rules related to limitations on
liability retroactively.9
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the
‘‘Act’’), in general, and furthers the
objectives of Section 6(b)(5),10 in
particular, because it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to 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. The Exchange believes
that the proposed rule change removes
impediments to and perfects the
mechanism of a free and open market
because it more adequately addresses
issues of liability by (1) eliminating the
daily caps on liability and rewording
13.2 (b) to reflect that all orders
‘‘received’’ are eligible under the Rule
thus increasing the Exchange’s ability to
compensate ETP Holders for losses
incurred in relation to the failure of the
Exchange’s systems or facilities or
negligent acts or omissions of Exchange
employees, (2) adding clarity and
transparency to scope of the rule and
the compensation mechanism provided
for in the rule by specifying that the
Exchange is not liable to an ETP
Holder’s successors, representatives or
customers, and (3) changing the
procedural requirements for submitting
notification of claims for compensation
to the Exchange so that ETP Holders
have a [sic] until noon Eastern Time the
next business day following the day on
which use of the Exchange’s facilities
gave rise to such claims to submit
written notice.
The Exchange further believes that the
proposed changes are reasonable and
would remove impediments to and
perfect the mechanism of a free and
open market because eliminating the
daily caps would not adversely affect
ETP Holders and would reduce the risk
that a loss is not covered by the
Exchange’s liability limits. Further, the
Exchange believes that the proposed
text specifically referencing that the
Exchange is not liable to ETP Holders’
successors, representatives or customers
aligns the scope of the rule with that of
9 See Securities Exchange Act Release No. 56085
(July 17, 2007), 72 FR 40348 (July 24, 2007) (SR–
NYSE–2007–09).
10 15 U.S.C. 78f(b)(5).
E:\FR\FM\12JNN1.SGM
12JNN1
asabaliauskas on DSKBBXCHB2PROD with NOTICES
Federal Register / Vol. 82, No. 111 / Monday, June 12, 2017 / Notices
other national securities exchanges 11
and provides transparency as to the
rule’s application.
Further, clarifying and extending by a
few hours the deadline in which ETP
Holders are required to submit written
notice of claims for compensation is
reasonable given that an ETP Holder
may not be aware of a claim or able to
file a claim before the market open on
the next business day. Additionally, the
proposed procedural provisions are
equitable because all ETP Holders are
subject to the same procedural process
for submitting claims for compensation.
In addition, the Exchange notes that
other national securities exchanges have
similar requirements with respect to the
timing in which written notice of claims
must be submitted.12
Retroactively applying the proposed
changes to eliminate the daily caps on
the Exchange’s liability is reasonable
because it provides the Exchange with
the ability to adequately compensate
ETP Holders for losses incurred in
relation to the Exchange’s system failure
that occurred on March 20, 2017.
Additionally, the Exchange believes that
applying the monthly liability limit
retroactively promotes just and
equitable principles of trade because it
will apply uniformly to all ETP Holders
that suffered a loss in connection with
the March 20, 2017 system issues and
any ETP Holder that potentially suffers
a loss in connection with a future
Exchange system issue. Prior to March
20, 2017, the Exchange had never
received a claim that exceeded the
liability limits and thus the Exchange
was never prevented from fully
compensating an ETP Holder for losses
suffered in connection with the use of
the Exchange’s facilities, including
losses caused by the negligent act or
omission of an Exchange employee.
Therefore, the Exchange believes that
applying the rule retroactively would
not be unfair or discriminatory. ETP
Holders that suffered losses on March
20, 2017 and ETP Holders that
previously received compensation from
the Exchange would receive the same
benefit of a fully paid claim. Further,
the Exchange notes that the Commission
has approved similar rules
retroactively 13 and that the proposed
liability limits more closely align with
the limits of other national securities
exchanges.14 As such, the Exchange
believes retroactively applying the
proposed changes to the liability limits
promotes just and equitable principles
11 See
supra note 4.
supra note 6.
13 See supra note 9.
14 See supra note 5.
12 See
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17:28 Jun 09, 2017
of trade, fosters cooperation and
coordination with persons engaged in
facilitating transactions in securities,
removes impediments to, and perfects
the mechanism of, a free and open
market and a national market system
and, in general, better protects investors
and the public interest because it
reduces the risk that losses suffered by
a participant would be treated
differently depending on the day or
trading venue that the issue occurred
on.
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
would add transparency to the rule and
align more closely with current rules of
other national stock exchanges 15 and
provide more certainty to members that,
regardless of trading venue, losses
incurred in connection with a failure of
Exchange systems or facilities,
including losses caused by the negligent
act or omission of an Exchange
employee, will be eligible for review by
and compensation from the Exchange.
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 within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
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.
15 See
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supra notes 4, 5 and 8.
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26969
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–
NYSEArca–2017–46 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2017–46. 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–
NYSEArca–2017–46, and should be
submitted on or before July 3, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Brent J. Fields,
Secretary.
[FR Doc. 2017–12044 Filed 6–9–17; 8:45 am]
BILLING CODE 8011–01–P
16 17
E:\FR\FM\12JNN1.SGM
CFR 200.30–3(a)(12).
12JNN1
Agencies
[Federal Register Volume 82, Number 111 (Monday, June 12, 2017)]
[Notices]
[Pages 26967-26969]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12044]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80866; File No. SR-NYSEArca-2017-46]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To Amend NYSE Arca Equities Rule 13.2,
Liability of Corporation
June 6, 2017.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on May 23, 2017, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend NYSE Arca Equities Rule 13.2
(``Liability of Corporation'') by (1) aligning the scope of 13.2(a)
with the rules of other national securities exchanges by specifying
that the Exchange is not liable to its ETP Holders' ``successors,
representatives or customers''; (2) eliminating the daily caps that
limit the amount the Exchange may compensate ETP Holders for claims
arising under the rule; (3) changing the procedural requirements for
submitting notification to the Exchange of any claims for compensation;
and (4) replace the words ``acknowledged receipt of'' in Rule 13.2(b)
with the word ``received.'' Additionally, the Exchange seeks to have
the proposed changes to eliminate the daily caps function retroactively
to March 1, 2017. 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
NYSE Arca Equities Rule 13.2 (``Rule 13.2'') provides a mechanism
for ETP Holders to receive compensation for losses sustained as a
result of the negligent acts or omissions of the Exchange's employees
or for the failure of Exchange systems or facilities. Specifically, if
an ETP Holder transmits an order to or through the Exchange's order
routing systems, electronic book, or automatic execution systems or to
any other automated facility of the Exchange and the Exchange has
acknowledged receipt of the order, Rule 13.2(b) permits the Exchange to
compensate ETP Holders for losses resulting from ``the negligent acts
or omissions of its employees or for the failure of its systems or
facilities.'' The Exchange is only permitted to compensate an ETP
Holder for losses to the extent the Exchange's rules authorize such
compensation. As described below, the Exchange proposes to:
Align its rule with those of other national securities
exchanges by adding that the Exchange is not liable to ``successors,
representatives, or customers'' of ETP Holders;
eliminate the daily caps on liability;
change the procedural requirements for submitting
notification to the Exchange of any claims for compensation; and
replace the words ``acknowledged receipt of'' in Rule
13.2(b) with the word ``received.''
Proposal To Align and Clarify the Scope of 13.2(a) With Rules of Other
National Securities Exchanges
The Exchange proposes to align the scope of 13.2(a) with the rules
of other national securities exchanges \4\ by adding rule text
specifying that, except as otherwise expressly provided in the rules,
the Exchange is not liable to ETP Holders' successors, representatives
or customers. Rule 13.2 does not authorize the Exchange to compensate a
successor, representative or customer of an ETP Holder because the rule
does not reference those entities. As such, the Exchange believes that
the proposed text specifically referencing these entities clarifies the
scope of the rule.
---------------------------------------------------------------------------
\4\ See Investors' Exchange LLC (``IEX'') Rule 11.260, BATS BZX
Exchange Inc. (``BATS'') Rule 11.16, and EDGX Exchange Inc.
(``EDGX'') Rule 11.14.
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Proposal To Eliminate Daily Caps on Liability
Rule 13.2 provides the Exchange with the authority to compensate
ETP Holders for claims arising out of the negligent acts or omissions
of its employees or for the failure of its systems or facilities up to
specified amounts in paragraph (b) of the Rule. Specifically, Rule
13.2(b) provides that:
As to claims made by a single ETP Holder, with respect to
a single trading day, the Exchange will not be liable in excess of the
larger of $100,000, or the amount of any recovery obtained by the
Exchange under any applicable insurance;
As to claims made by all ETP Holders, with respect to a
single trading day, the Exchange will not be liable in excess of the
larger of $250,000 or the amount of the recovery obtained by the
Exchange under any applicable insurance; and
As to claims made by all ETP Holders, with respect to a
single calendar month, the Exchange will not be liable in excess of the
larger of $500,000, or the amount of the recovery obtained by the
Exchange under any applicable insurance.
The Exchange proposes to eliminate the daily caps in paragraphs
(b)(1) and (b)(2). The Exchange would retain the monthly cap in (b)(3)
of $500,000. The proposal to eliminate the daily caps in paragraphs
(b)(1) and (b)(2) is consistent with the rules of other national
securities exchanges, which only have a
[[Page 26968]]
monthly cap.\5\ In addition, the Exchange believes that it is more
appropriate and fair to have a monthly limit on liability rather than a
daily limit on liability, which could potentially result in disparate
treatment among ETP Holders with claims on different days. Under the
current rules, the Exchange is liable on any day as to the aggregate of
all claims up until $250,000. Therefore, ETP Holders with claims on a
day where other ETP Holders also have claims are less likely to receive
full compensation compared to an ETP Holder that has a claim on a day
when no other or fewer other ETP Holders have claims. Accordingly, the
Exchange's proposal seeks to limit the possibility for disparate
treatment by proposing to eliminate the current daily liability caps.
---------------------------------------------------------------------------
\5\ See ISE Rule 705, Nasdaq Stock Market LLC (``Nasdaq'') Rule
4626, Nasdaq OMX PHLX LLC (``Nasdaq PHLX'') Rule 1015, and Nasdaq
BX, Inc. (``Nasdaq BX'') Rule 4626.
---------------------------------------------------------------------------
Under Rule 13.2(c), if claims cannot be fully satisfied because in
the aggregate they exceed the maximum liability provided under
paragraph (b), the maximum amount is allocated among all claims. In
connection with its proposal to eliminate the daily caps in paragraphs
(b)(1) and (b)(2), the Exchange is making a conforming change to
eliminate in paragraph (c) the reference to allocating claims arising
``on a single trading day.''
Proposal To Change Procedural Requirements for Submitting a Claim
The Exchange proposes to clarify and change the time frame in which
ETP Holders are required to submit notification to the Exchange of any
claims for compensation under Rule 13.2. Rule 13.2(c) currently refers
to written notice of claims ``to the Corporation no later than the
opening of trading on the next business day following the day on which
the use or enjoyment of the Corporation's facilities giving rise to the
claim occurred . . .'' The Exchange proposes to clarify the requirement
to provide written notice of all claims. Specifically, the Exchange
proposes to delete the reference in paragraph (c) to written notice and
replace it with new paragraph (d), the first sentence of which would
state that all claims for compensation must be in writing. The proposal
would conform the Exchange's notice requirements for claims to that of
other national securities exchanges, which require written notice of
claims.\6\
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\6\ See Nasdaq Rule 4626, Nasdaq PHLX Rule 1015, and Nasdaq BX
Rule 4626 (providing that members must submit claims in writing by
noon Eastern Time on the next business day following the system
issue).
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In addition, proposed new paragraph (d) would require that ETP
Holders make such written claims by noon Eastern Time the next business
day following the day on which the use of the Exchange gave rise to
such claims. The Exchange believes it is appropriate to extend the time
for an ETP Holder to submit a written claim from 9:30 a.m. Eastern Time
to noon Eastern Time because it would provide time for an ETP Holder to
evaluate what losses may have occurred on the prior trading day,
particularly if the issue occurred later in the day. This proposed time
frame is based on the rules of other national securities exchanges.\7\
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\7\ Id.
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Proposed Change To Re-Word Rule 13.2(b)
The Exchange proposes to replace the words ``acknowledged receipt
of'' in Rule 13.2(b) with the word ``received.'' The Exchange believes
this language is more concise and accurately reflects that all orders
received in Exchange systems, whether acknowledged or not, are eligible
under the Rule. Additionally, the Exchange notes that this language is
similar to that found in the rules of other national securities
exchanges.\8\
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\8\ See NYSE Rule 18(b) and NYSE MKT Rule 18(b).
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Operability of the Proposal To Eliminate the Daily Caps on Liability
Finally, the Exchange requests to have the proposed changes to
eliminate the daily caps in paragraphs (b)(1) and (b)(2) function
retroactively to March 1, 2017. Specifically, the Exchange seeks to
have the ability to compensate ETP Holders in connection with losses
incurred from an Exchange system issue on March 20, 2017. Prior to
March 20, 2017, the Exchange had never received a claim that exceeded
the liability limits and thus the Exchange was never prevented from
fully compensating an ETP Holder. In connection with the March, [sic]
20, 2017, system issue, the Exchange received claims from ETP Holders
that exceed amounts provided for in the daily caps. The Exchange
believes that retroactively applying the monthly liability limit
promotes fairness in that it provides the Exchange with the ability to
compensate ETP Holders equally and reduces the potential for disparate
treatment among ETP Holders who suffered a loss on March 20, 2017 and
those ETP Holder [sic] who suffered a loss on a different day. Lastly,
the Exchange notes that the Commission has approved other national
securities exchanges rules related to limitations on liability
retroactively.\9\
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\9\ See Securities Exchange Act Release No. 56085 (July 17,
2007), 72 FR 40348 (July 24, 2007) (SR-NYSE-2007-09).
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers
the objectives of Section 6(b)(5),\10\ in particular, because it is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, to 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. The Exchange believes that
the proposed rule change removes impediments to and perfects the
mechanism of a free and open market because it more adequately
addresses issues of liability by (1) eliminating the daily caps on
liability and rewording 13.2 (b) to reflect that all orders
``received'' are eligible under the Rule thus increasing the Exchange's
ability to compensate ETP Holders for losses incurred in relation to
the failure of the Exchange's systems or facilities or negligent acts
or omissions of Exchange employees, (2) adding clarity and transparency
to scope of the rule and the compensation mechanism provided for in the
rule by specifying that the Exchange is not liable to an ETP Holder's
successors, representatives or customers, and (3) changing the
procedural requirements for submitting notification of claims for
compensation to the Exchange so that ETP Holders have a [sic] until
noon Eastern Time the next business day following the day on which use
of the Exchange's facilities gave rise to such claims to submit written
notice.
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\10\ 15 U.S.C. 78f(b)(5).
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The Exchange further believes that the proposed changes are
reasonable and would remove impediments to and perfect the mechanism of
a free and open market because eliminating the daily caps would not
adversely affect ETP Holders and would reduce the risk that a loss is
not covered by the Exchange's liability limits. Further, the Exchange
believes that the proposed text specifically referencing that the
Exchange is not liable to ETP Holders' successors, representatives or
customers aligns the scope of the rule with that of
[[Page 26969]]
other national securities exchanges \11\ and provides transparency as
to the rule's application.
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\11\ See supra note 4.
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Further, clarifying and extending by a few hours the deadline in
which ETP Holders are required to submit written notice of claims for
compensation is reasonable given that an ETP Holder may not be aware of
a claim or able to file a claim before the market open on the next
business day. Additionally, the proposed procedural provisions are
equitable because all ETP Holders are subject to the same procedural
process for submitting claims for compensation. In addition, the
Exchange notes that other national securities exchanges have similar
requirements with respect to the timing in which written notice of
claims must be submitted.\12\
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\12\ See supra note 6.
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Retroactively applying the proposed changes to eliminate the daily
caps on the Exchange's liability is reasonable because it provides the
Exchange with the ability to adequately compensate ETP Holders for
losses incurred in relation to the Exchange's system failure that
occurred on March 20, 2017. Additionally, the Exchange believes that
applying the monthly liability limit retroactively promotes just and
equitable principles of trade because it will apply uniformly to all
ETP Holders that suffered a loss in connection with the March 20, 2017
system issues and any ETP Holder that potentially suffers a loss in
connection with a future Exchange system issue. Prior to March 20,
2017, the Exchange had never received a claim that exceeded the
liability limits and thus the Exchange was never prevented from fully
compensating an ETP Holder for losses suffered in connection with the
use of the Exchange's facilities, including losses caused by the
negligent act or omission of an Exchange employee. Therefore, the
Exchange believes that applying the rule retroactively would not be
unfair or discriminatory. ETP Holders that suffered losses on March 20,
2017 and ETP Holders that previously received compensation from the
Exchange would receive the same benefit of a fully paid claim. Further,
the Exchange notes that the Commission has approved similar rules
retroactively \13\ and that the proposed liability limits more closely
align with the limits of other national securities exchanges.\14\ As
such, the Exchange believes retroactively applying the proposed changes
to the liability limits promotes just and equitable principles of
trade, fosters cooperation and coordination with persons engaged in
facilitating transactions in securities, removes impediments to, and
perfects the mechanism of, a free and open market and a national market
system and, in general, better protects investors and the public
interest because it reduces the risk that losses suffered by a
participant would be treated differently depending on the day or
trading venue that the issue occurred on.
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\13\ See supra note 9.
\14\ See supra note 5.
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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 would add
transparency to the rule and align more closely with current rules of
other national stock exchanges \15\ and provide more certainty to
members that, regardless of trading venue, losses incurred in
connection with a failure of Exchange systems or facilities, including
losses caused by the negligent act or omission of an Exchange employee,
will be eligible for review by and compensation from the Exchange.
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\15\ See supra notes 4, 5 and 8.
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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 within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove 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-NYSEArca-2017-46 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2017-46. 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-NYSEArca-2017-46, and should
be submitted on or before July 3, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Brent J. Fields,
Secretary.
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\16\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2017-12044 Filed 6-9-17; 8:45 am]
BILLING CODE 8011-01-P