Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Concerning the U.S. Market Transition to a Shortened Settlement Cycle, 29598-29602 [2017-13583]

Download as PDF 29598 Federal Register / Vol. 82, No. 124 / Thursday, June 29, 2017 / Notices sradovich on DSK3GMQ082PROD with NOTICES minimum of 18 months to a minimum of six months.8 FINRA has stated that researchers and other non-dealers have been the primary subscribers to Historic TRACE Data. FINRA has attributed the lack of usage by dealers to the minimum 18-month delay period for including transactions in the Corporate and Agency Historic TRACE Data. FINRA has stated that it is not aware of any complaints regarding information leakage under the current 18-month delay, and that market participants have indicated that a reduction in the minimum delay to six months would make the product more useful. FINRA believes that a minimum sixmonth delay would promote the goal of increased transparency for transactions in TRACE-Eligible Securities while continuing to address information leakage concerns.9 In support of that belief, FINRA conducted a sampling analysis of past transactions in both corporate and agency bonds to assess whether positions or strategies of market participants could be identified if the Corporate and Agency Historic TRACE Data had included transactions that were aged only six months.10 Based on this analysis, FINRA concluded that ‘‘the proposed rule, if it had been in place, would have provided little additional information to the public relative to these positions’’ 11 and that a reduction of the delay would be ‘‘a limited risk for smaller issues that are held by a limited number of market participants.’’ 12 To further address concerns about information leakage, FINRA solicited comment from its members on an earlier iteration of the proposed rule change.13 FINRA received four comment letters and made certain revisions to its initial proposal to respond to those concerns before filing the current proposal with the Commission.14 The Commission notes that it has received no comments on the version of the proposed rule change published by the Commission. 8 FINRA has not proposed to change the 18month delay for transactions included in the Historic Securitized Product Data Set. 9 FINRA noted that the Municipal Securities Rulemaking Board (‘‘MSRB’’) disseminates in real time the exact par value on all transactions with a par value of $5 million or less, and includes an indicator (‘‘MM+’’) in place of the exact par value on transactions where the par value is greater than $5 million until the fifth business day. MSRB disseminates the exact par value for each transaction on the fifth day after the transaction. See MSRB Rule G–14. 10 See Notice, 82 FR 23387–89. 11 Id. at 23388. 12 Id. at 23389. 13 See supra note 4. 14 See Notice, 82 FR at 23389. VerDate Sep<11>2014 18:29 Jun 28, 2017 Jkt 241001 FINRA stated that it will announce the effective date of the proposed rule change in a Regulatory Notice to be published no later than 60 days following Commission approval. The effective date will be no later than 120 days following publication of the Regulatory Notice. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Eduardo A. Aleman, Assistant Secretary. III. Discussion SECURITIES AND EXCHANGE COMMISSION After carefully consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association.15 In particular, the Commission finds that the proposed rule change is consistent with Section 15A(b)(6) of the Act,16 which requires, among other things, that FINRA rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, 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 Commission notes that, because the proposed rule change does not require firms to provide FINRA with any additional data, it will not have any operational impact on firms. Furthermore, the purchase of TRACE data products is optional for members and others. Finally, in light of FINRA’s analysis of past transactions in corporate and agency debt securities and the revisions that FINRA made to its first iteration of the proposal, the Commission believes that reducing the period before which transactions in such securities are included in the Historic TRACE Data from a minimum of 18 months to six months is reasonably designed to promote transparency and respond to consumer demand for a more useful market data product, while minimizing the potential for information leakage. IV. Conclusion It is therefore ordered pursuant to Section 19(b)(2) of the Act 17 that the proposed rule change (SR–FINRA– 2017–012) be, and hereby is, approved. [FR Doc. 2017–13586 Filed 6–28–17; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–81008; File No. SR–OCC– 2017–015] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Concerning the U.S. Market Transition to a Shortened Settlement Cycle June 23, 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 June 9, 2017, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below. Items I and II have been prepared primarily by OCC. OCC filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(4)(i) 4 thereunder so that the proposal was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change This proposed rule change by OCC concerns the amendment of OCC’s ByLaws and Rules in connection with recent amendments adopted by the Commission to Rule 15c6–1(a) 5 under the Act. The amendments to Rule 15c6– 1(a) 6 shorten the standard settlement cycle for most broker-dealer securities transactions from three business days after the trade date to two business days after the trade date. The proposed changes to OCC’s ByLaws and Rules were included in Exhibits 5A and 5B of the filing, respectively. 18 17 15 In approving this proposed rule change, the Commission has considered the proposed rule change’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 16 15 U.S.C. 78o–3(b)(6). 17 15 U.S.C. 78s(b)(2). PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(4)(i). 5 17 CFR 240.15c6–1(a). 6 Id. 1 15 E:\FR\FM\29JNN1.SGM 29JNN1 Federal Register / Vol. 82, No. 124 / Thursday, June 29, 2017 / Notices II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, OCC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. OCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements. All terms with initial capitalization that are not otherwise defined herein have the same meaning as set forth in the OCC ByLaws and Rules.7 (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend OCC’s By-Laws and Rules in connection with recently adopted amendments to Commission Rule 15c6–1(a) to shorten the standard settlement cycle for most broker-dealer transactions regarding the purchase or sale of securities from three business days after the trade date (‘‘T+3’’) to two business days after the trade date (‘‘T+2’’).8 The compliance date regarding these amendments is September 5, 2017.9 sradovich on DSK3GMQ082PROD with NOTICES Background Commission Rule 15c6–1 establishes a standard settlement cycle for most purchases or sales of securities by broker-dealers. The Commission adopted Rule 15c6–1(a) 10 in 1993 to establish T+3 as the standard trade settlement cycle (instead of five business days after the trade date), and it became effective in June of 1995.11 In March of 1995, the Commission approved changes to OCC’s Rules that 7 OCC’s By-Laws and Rules can be found on OCC’s public Web site: http://optionsclearing.com/ about/publications/bylaws.jsp. 8 Securities Exchange Act Release No. 80295 (March 22, 2017), 82 FR 15564 (March 29, 2017). 9 Id. 10 17 CFR 240.15c6–1(a). Rule 15c6–1(a) provides, in relevant part, that ‘‘a broker or dealer shall not effect or enter into a contract for the purchase or sale of a security (other than an exempted security, government security, municipal security, commercial paper, bankers’ acceptances, or commercial bills) that provides for payment of funds and delivery of securities later than the third business day after the date of the contract unless otherwise expressly agreed to by the parties at the time of the transaction.’’ 11 Securities Exchange Act Release Nos. 33023 (October 6, 1993), 58 FR 52891 (final rule adopting Rule 15c6–1); 34952 (November 9, 1994), 59 FR 59137 (changing the effective date of the final rule from June 1, 1995 to June 7, 1995). VerDate Sep<11>2014 18:29 Jun 28, 2017 Jkt 241001 were proposed to ensure consistency with the new T+3 standard settlement cycle.12 Since the change to T+3, the Commission and the financial services industry have continued to explore the idea of shortening the settlement cycle even further.13 In April 2014, DTCC published a recommendation to shorten the standard U.S. trade settlement cycle to T+2 and announced that it would partner with market participants and industry organizations to devise the necessary approach and timelines to achieve T+2.14 To improve the efficiency of the U.S. settlement system by reducing the attendant risks in the T+3 settlement of securities transactions, and to align U.S. markets with the standard settlement cycles in other major global markets that have already moved to T+2, DTCC, in collaboration with the financial services industry, formed an Industry Steering Committee (‘‘ISC’’) and an industry working group and sub-working groups to facilitate the move to T+2.15 In June of 2015, the ISC published a White Paper outlining the activities and proposed timeframes that would be required to move to T+2 in the U.S.16 Concurrently, SIFMA and the ICI jointly submitted a letter to Commission Chair White expressing support of the financial service industry’s efforts to shorten the settlement cycle and identified amendments to Rule 15c6– 1(a) that they believed would be necessary for an effective transition to T+2.17 In March 2016, the ISC announced an industry target date of 12 Securities Exchange Act Release No. 35552 (March 30, 1995), 60 FR 17600 (April 6, 1995) (SR– OCC–94–11). 13 See e.g., Securities Industry Association, ‘‘SIA T+1 Business Case Final Report’’ (July 2000); Securities Exchange Act Release No. 49405 (March 11, 2004), 69 FR 12922 (March 18, 2004) (Concept Release: Securities Transactions Settlement); The Depository Trust & Clearing Corporation (‘‘DTCC’’), ‘‘Proposal to Launch a New Cost-Benefit Analysis on Shortening the Settlement Cycle’’ (December 2011). 14 See DTCC, ‘‘DTCC Recommends Shortening the U.S. Trade Settlement Cycle’’ (April 2014). 15 The ISC includes, among other participants, DTCC, the Securities Industry and Financial Markets Association (‘‘SIFMA’’) and the Investment Company Institute (‘‘ICI’’). 16 See ‘‘Shortening the Settlement Cycle: The Move to T+2’’ (June 18, 2015). 17 See Letter from ICI and SIFMA to Mary Jo White, Chair, SEC, dated June 18, 2015; see also Letter from Mary Jo White, Chair to Kenneth E. Bentsen, Jr. President and CEO, SIFMA, and Paul Schott Stevens, President and CEO, ICI, dated September 16, 2015 (expressing support for industry efforts to shorten the trade settlement cycle to T+2 and indicating a commitment to developing a proposal to amend Rule 15c6–1(a) to require standard settlement no later than T+2). PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 29599 September 5, 2017, for the transition to T+2.18 On September 28, 2016, the Commission proposed amendments to Rule 15c6–1(a) to shorten the standard settlement cycle to T+2 on the basis that the shorter settlement cycle would reduce the risks that arise from the value and number of unsettled securities transactions prior to completion of settlement, including credit, market and liquidity risks faced by U.S. market participants.19 On March 22, the Commission adopted the amendments to Rule 15c6–1(a) as proposed.20 In light of this action by the SEC, OCC is proposing amendments to its By-Laws and Rules in connection with the T+2 settlement cycle and to do so by the Commission’s designated compliance date of September 5, 2017. Proposed Changes to OCC By-Laws and Rules OCC is proposing changes to the following By-Laws and Rules in connection with the recently-amended Rule 15c6–1(a) and the particular changes are discussed in more detail below: • OCC Rule 901 (Settlement Through Correspondent Clearing Corporations); 21 • OCC Rule 903 (Obligation to Deliver); • OCC Rule 1302 (Delivery of Underlying Securities); • OCC Rule 1503 (Exercise Settlement Date for Event Options and Range Options); • Article XXI of OCC’s By-Laws (Stock Loan/Hedge Program); • OCC Rule 2208 (Settlement Date); • OCC Rule 2209A (Termination of Market Loans); and • OCC Rule 2502 (Settlement Date for BOUNDs). First, OCC proposes to amend certain of its Rules that govern settlement of physically-settled options and futures through NSCC. Chapter IX of OCC’s 18 See ISC Media Alert: ‘‘US T+2 ISC Recommends Move to Shorter Settlement Cycle On September 5, 2017’’ (March 7, 2016). 19 Securities Exchange Act Release No. 78962 (September 28, 2016), 81 FR 69240 (October 5, 2016); see also Commission Press Release 2016– 200: ‘‘SEC Proposes Rule Amendment to Expedite Process for Settling Securities Transactions’’ (September 28, 2016). 20 Securities Exchange Act Release No. 80295, supra note 8. 21 Article I, Section 1.C.(33) of OCC’s By-Laws defines the term ‘‘correspondent clearing corporation’’ to mean National Securities Clearing Corporation (‘‘NSCC’’) or any successor thereto which, ‘‘by agreement with [OCC], provides facilities for settlements in respect of exercised option contracts or BOUNDs or in respect of delivery obligations arising from physically-settled stock futures.’’ E:\FR\FM\29JNN1.SGM 29JNN1 29600 Federal Register / Vol. 82, No. 124 / Thursday, June 29, 2017 / Notices sradovich on DSK3GMQ082PROD with NOTICES Rules addresses delivery and payment obligations arising out of the exercise of physically-settled stock option contracts and the maturity of physically-settled stock futures contracts. Rule 901 requires that certain obligations be settled through the facilities of NSCC. Rule 901(d) permits OCC to revoke a specification in any Delivery Advice that settlement be made through the facilities of NSCC at any time prior to the opening of business on the delivery date by an appropriate notice to the Receiving and Delivering Clearing Members.22 In particular, Rule 901(d) allows specified OCC senior officers to extend or postpone the time for delivery to no more than three business days after the date that OCC revokes such a settlement specification. OCC proposes to amend this provision to make such an extension or postponement consistent with the new T+2 settlement cycle. Accordingly, under the proposed rule change, the amount of time that OCC has to extend or postpone the time of delivery would be changed to two business days. Rule 903 governs the obligation of a Clearing Member to deliver when either a Delivery Advice or OCC directs that settlement be made on a broker-tobroker basis. It currently specifies the delivery date for physically-settled options as the third business day following the day on which the exercise notice was, or is deemed to have been, properly tendered to OCC. Rule 903 also generally specifies the delivery date for physically settled security futures as the third business day following the maturity date. Under the proposed rule change, these references in Rule 903 to the ‘‘third’’ business day would be changed to the ‘‘second’’ business day. Second, OCC proposes to amend Rule 1302 concerning the delivery of underlying securities for physicallysettled stock futures. With certain exceptions, Rule 1302 currently provides that the delivery date for a physically-settled stock future is the third business day following the maturity date of the applicable series. Under the proposed rule change, the reference to the ‘‘third’’ business day would be changed to ‘‘second’’ business day. 22 OCC recently proposed changes to existing Rule 901(d) in connection with advance notice and proposed rule change filings related to a new Stock Options and Futures Settlement Agreement between OCC and the National Securities Clearing Corporation. See SR–OCC–2017–013 and SR–OCC– 2017–804. The proposed changes to Rule 901(d) currently pending Commission review in SR–OCC– 2017–013 and SR–OCC–2017–804 are indicated in Exhibit 5B with double underlined and double strikethrough text. VerDate Sep<11>2014 18:29 Jun 28, 2017 Jkt 241001 Third, OCC proposes to amend Rule 1503 concerning the exercise settlement date for credit default options and credit default basket options. With certain exceptions, Rule 1503 currently provides that the exercise settlement date for a credit default option and credit default basket option is the third business day following the date on which the option is deemed to have been exercised. Under the proposed rule change, the reference to the ‘‘third’’ business day would be changed to ‘‘second’’ business day. Fourth, OCC proposes to amend a provision of its By-Laws and certain Rules concerning its two Stock Loan Programs: The Hedge Program and Market Loan Program. In the Hedge Program, OCC acts as the guarantor for Stock Loans that are initiated bilaterally between Clearing Members through The Depository Trust Company (‘‘DTC’’). Under Article XXI, Section 2(c) of OCC’s By-Laws, OCC may terminate outstanding Hedge Loans under certain conditions. If any Hedge Loans are so terminated by OCC, it is required to provide written notice thereof to all affected Hedge Clearing Members to specify the date on which such termination is to become effective, which shall be at least three stock loan business days after the date of such notice. OCC proposes to amend this provision to make the effective date of such a termination consistent with the new T+2 settlement cycle. OCC therefore proposes to amend Section 2(c) of Article XXI to change the minimum number of days between notice and termination from three to two. Rule 2208(a) currently provides the settlement date for the termination of a Hedge Loan shall be the earlier of: (1) The date on which the Borrowing Clearing Member initiates the termination or (2) the date that is three stock loan business days after the date on which the Lending Clearing Member initiates the termination. OCC proposes to amend Rule 2208(a) to change ‘‘three’’ stock loan business days to ‘‘two’’ stock loan business days. In the Market Loan Program, OCC acts as the guarantor for Market Loans that are initiated through the matching of bids and offers that are either agreed upon by the Market Loan Clearing Members or matched anonymously through a Loan Market. Typically, a Market Loan is terminated through the process of a Market Loan Clearing Member providing notice to the Loan Market to call for the recall or return of a specified quantity of Loaned Stock. The Loan Market sends details of the matched return or recall transaction to PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 OCC, and OCC validates the transaction and sends a pair of delivery orders to DTC for settlement in connection with the recall or return. Rule 2209A(a)(3) currently provides that if a recall transaction fails to settle by the Settlement Time on the third stock loan business day following the day that the transaction was first submitted, the Lending Clearing Member may choose to execute a buy-in of the Loaned Stock. OCC proposes to change the reference to ‘‘third’’ stock loan business day to ‘‘second’’ stock loan business day. Under Rule 2209A(d), OCC may terminate outstanding Market Loans under certain conditions. If any Market Loans are so terminated by OCC, it is required to provide written notice thereof to all affected Market Loan Clearing Members to specify the date on which such termination is to become effective, which shall be at least three stock loan business days after the date of such notice. OCC proposes to amend this provision to make the effective date of such a termination consistent with the new T+2 settlement cycle. OCC therefore proposes to amend Rule 2209A(d) to change the minimum number of days between notice and termination from three to two. Fifth, OCC proposes to amend Rule 2502 concerning the settlement date for BOUNDs in Chapter XXV of OCC’s Rules. Rule 2502 currently provides the settlement date for a BOUND is the third business day following the expiration date. Under the proposed rule change, the settlement would be changed to the second business day following the expiration date. Implementation OCC would implement the proposed rule change in coordination with the Commission’s September 5, 2017, compliance date for the amendments to Rule 15c6–1(a) and the transition to T+2 and would provide advance notice to Clearing Members of the implementation through an Information Memo. OCC will include a footnote in its By-Laws and Rules with each rule that will change under this proposed rule change noting that each such rule will be updated on September 5, 2017, to reflect the transition to the new T+2 settlement cycle. As part of that footnote, OCC will also include a link to documents on OCC’s public Web site that show the updates to OCC’s rules that are being made in this proposed rule change. OCC intends for these updates to be self-executing on September 5, 2017. E:\FR\FM\29JNN1.SGM 29JNN1 Federal Register / Vol. 82, No. 124 / Thursday, June 29, 2017 / Notices sradovich on DSK3GMQ082PROD with NOTICES 2. Statutory Basis OCC believes that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act 23 and the rules thereunder applicable to OCC. Section 17A(b)(3)(F) requires, among other things, that rules of a clearing agency be designed ‘‘to foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions, to remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions, and, in general, to protect investors and the public interest[.]’’ 24 OCC believes the proposed rule change is consistent with these requirements because it would coordinate the terms of certain OCC rules with the Commission’s amendments to Rule 15c6–1(a) to support a T+2 standardized settlement cycle. Specifically, where a current OCC By-Law or Rule is based upon or otherwise references the T+3 standardized securities settlement cycle, the provision would be changed to support T+2. Harmonizing OCC’s ByLaws and Rules with the new T+2 standardized settlement cycle would also remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions by, for example, ensuring that OCC’s Bylaws and Rules that are related to T+2 are consistent with the rules concerning the standardized settlement cycle that are maintained by the exchanges for which OCC clears and settles transactions and the rules of clearing agencies, such as NSCC and DTC, that provide clearance and settlement services for securities transactions that underlie physically-settled stock option and physically-settled stock future contracts cleared by OCC. OCC believes that conforming certain of its By-Laws and Rules to the Commission’s new standardized settlement cycle would also protect investors and the public interest by ensuring that OCC provides clearance and settlement services in a manner that supports the Commission’s requirements for the T+2 standardized settlement cycle. OCC believes the proposed changes are also consistent with the requirements in Commission Rule 17Ad–22(e)(1).25 The changes are designed to modify OCC’s By-Laws and Rules that would otherwise become outdated upon the change to the T+2 23 15 standardized settlement cycle. Therefore, OCC believes that the proposed changes promote compliance and consistency with the requirements in Rule 17Ad–22(e)(1) to establish, implement, maintain and enforce written policies and procedures reasonably designed to provide for a well-founded, clear, transparent and enforceable legal basis. Maintaining provisions in OCC’s publicly available By-Laws and Rules that are consistent at all times with the standardized settlement cycle that is specified in Commission Rule 15c6–1(a) helps ensure that OCC’s By-Laws and Rules remain well-founded, clear, transparent and enforceable. The proposed rule change is not inconsistent with the existing rules of OCC, including any other rules proposed to be amended. (B) Clearing Agency’s Statement on Burden on Competition Section 17A(b)(3)(I) of the Act requires that the rules of a clearing agency not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.26 OCC does not believe that the proposed rule change would impose any burden or have any impact on competition. The proposed rule change would implement conforming changes within OCC’s ByLaws and Rules to ensure consistency with amendments recently adopted by the Commission in Rule 15c6–1(a) to change the standard securities settlement cycle to T+2. All Clearing Members would be equally subject to these conforming changes, and the proposed changes would not provide any Clearing Member with a competitive advantage over any other Clearing Member. This proposed rule change would also not inhibit access to OCC’s services or disadvantage or favor any particular user in relationship to another. As a result, OCC believes the proposed rule change would not impact or impose a burden on competition. (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were not and are not intended to be solicited with respect to the proposed rule change, and none have been received. U.S.C. 78q–1(b)(3)(F). 24 Id. 25 17 CFR 240.17Ad–22(e)(1). VerDate Sep<11>2014 18:29 Jun 28, 2017 26 15 Jkt 241001 PO 00000 U.S.C. 78q–1(b)(3)(I). Frm 00128 Fmt 4703 Sfmt 4703 29601 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 27 and paragraph (f)(4)(i) of Rule 19b–4 28 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.29 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– OCC–2017–015 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–OCC–2017–015. 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 27 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(4)(i). 29 Notwithstanding its immediate effectiveness, implementation of this rule change will be delayed until this change is deemed certified under CFTC Regulation § 40.6. 28 17 E:\FR\FM\29JNN1.SGM 29JNN1 29602 Federal Register / Vol. 82, No. 124 / Thursday, June 29, 2017 / Notices 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 OCC and on OCC’s Web site at http://www.theocc.com/components/ docs/legal/rules_and_bylaws/sr_occ_17_ 015.pdf. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–OCC–2017–015 and should be submitted on or before July 20,2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–13583 Filed 6–28–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81007; File No. SR–FINRA– 2017–021] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend FINRA Rule 7730 To Make Available a New TRACE Security Activity Report June 23, 2017. sradovich on DSK3GMQ082PROD with NOTICES 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 June 19, 2017, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) 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 FINRA. 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 FINRA is proposing to amend FINRA Rule 7730 to make available a new TRACE Security Activity Report. The text of the proposed rule change is available on FINRA’s Web site at http://www.finra.org, at the principal 30 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 18:29 Jun 28, 2017 Jkt 241001 office of FINRA and at the Commission’s Public Reference Room. 1. Purpose Rule 7730 (Trade Reporting and Compliance Engine (TRACE)), among other things, sets forth the TRACE data products offered by FINRA in connection with TRACE-Eligible Securities.3 FINRA is proposing to amend Rule 7730 to make available a new TRACE Security Activity Report, which would provide aggregated statistics by security for TRACE-Eligible Securities that are corporate or agency bonds (collectively ‘‘CA Bonds’’).4 The proposed TRACE Security Activity Report would contain basic descriptive security elements for each CA Bond (such as the issuer’s name and the security’s coupon and maturity date). In addition, the proposed report would provide subscribers with transaction totals, a measure of market concentration to indicate the extent to which activity in the security is concentrated within a few market participant identifiers (MPIDs),5 and more detailed aggregate par value volume information in a particular CA Bond than would be available in Real- Time TRACE transaction data. Today, the actual par value traded is available in the short-term only for transactions with sizes up to the applicable dissemination cap.6 Transactions with sizes over the capped amount become available only after 18 months as part of the Historic TRACE Data product. The proposed TRACE Security Activity Report would provide insight into the level of activity in CA Bonds during a given month. Specifically, in addition to overall aggregate par value volume, the proposed TRACE Security Activity Report would provide information on the par value volume of customer buys, the par value volume of customer sells and the par value volume of inter-dealer transactions. The proposed TRACE Security Activity Report would reflect par value volume information using either capped amounts or actual par value volume, as follows. For uncapped transactions, the proposed TRACE Security Activity Report would reflect the actual trade size of each transaction (i.e., the transaction size disseminated in RealTime TRACE transaction data). If there are six or more capped transactions disseminated during the calendar month, the aggregate par value volume would reflect the actual trade size of each transaction, as well as the par value traded that falls within specified size categories (e.g., the aggregate par value traded for transactions with a size greater than the dissemination cap up to $10 million and the aggregate par value traded for transactions with a size greater than $10 million).7 However, if there are fewer than six disseminated capped transactions during the calendar month, the TRACE Security Activity Report would reflect the capped volumes disseminated in Real-Time TRACE transaction data. Accordingly, the report would only reflect the actual par value traded (i.e., the amount reported by the member to TRACE) where there have been at least 3 Rule 6710 (Definitions) provides that a ‘‘TRACEEligible Security’’ is a debt security that is United States (‘‘U.S.’’) dollar-denominated and issued by a U.S. or foreign private issuer, and, if a ‘‘restricted security’’ as defined in Securities Act Rule 144(a)(3), sold pursuant to Securities Act Rule 144A; or is a debt security that is U.S. dollardenominated and issued or guaranteed by an Agency as defined in paragraph (k) or a Government-Sponsored Enterprise as defined in paragraph (n); or a U.S. Treasury Security as defined in paragraph (p). ‘‘TRACE-Eligible Security’’ does not include a debt security that is issued by a foreign sovereign or a Money Market Instrument as defined in paragraph (o). 4 FINRA intends to establish a fee for the TRACE Security Activity Report prior to the effective date of the instant proposed rule change. The fee will be established pursuant to a separate rule filing. 5 One member may use multiple MPIDs. 6 Due to transaction confidentiality concerns, FINRA has applied ‘‘dissemination caps’’ for purposes of dissemination. Specifically, for transactions in investment grade corporate bonds and in agency bonds over a 5 million dollar par value, TRACE disseminates the size as ‘‘5MM+.’’ For transactions in non-investment grade corporate bonds over a 1 million dollar par value, TRACE disseminates the size as ‘‘1MM+.’’ 7 If the SEC approves this proposal, the size categories will be announced in the Regulatory Notice announcing the effective date of the new TRACE Security Activity Report. The size category thresholds will be based on a multiple of the dissemination cap, e.g., up to or over $10 million, which would be two times the investment grade dissemination cap. The number of size categories also may be adjusted (e.g., up to $10 million; over $10 million up to $20 million; over $20 million) based on FINRA’s experience with the data product. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 E:\FR\FM\29JNN1.SGM 29JNN1

Agencies

[Federal Register Volume 82, Number 124 (Thursday, June 29, 2017)]
[Notices]
[Pages 29598-29602]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13583]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81008; File No. SR-OCC-2017-015]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Concerning the U.S. Market Transition to a Shortened Settlement Cycle

June 23, 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 June 9, 2017, The Options Clearing Corporation (``OCC'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I, II and III below. Items I and II 
have been prepared primarily by OCC. OCC filed the proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(4)(i) \4\ thereunder so that the proposal was effective upon 
filing with the Commission. 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(4)(i).
---------------------------------------------------------------------------

I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    This proposed rule change by OCC concerns the amendment of OCC's 
By-Laws and Rules in connection with recent amendments adopted by the 
Commission to Rule 15c6-1(a) \5\ under the Act. The amendments to Rule 
15c6-1(a) \6\ shorten the standard settlement cycle for most broker-
dealer securities transactions from three business days after the trade 
date to two business days after the trade date.
---------------------------------------------------------------------------

    \5\ 17 CFR 240.15c6-1(a).
    \6\ Id.
---------------------------------------------------------------------------

    The proposed changes to OCC's By-Laws and Rules were included in 
Exhibits 5A and 5B of the filing, respectively.

[[Page 29599]]

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, OCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. OCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements. All terms with initial capitalization that are not 
otherwise defined herein have the same meaning as set forth in the OCC 
By-Laws and Rules.\7\
---------------------------------------------------------------------------

    \7\ OCC's By-Laws and Rules can be found on OCC's public Web 
site: http://optionsclearing.com/about/publications/bylaws.jsp.
---------------------------------------------------------------------------

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend OCC's By-Laws 
and Rules in connection with recently adopted amendments to Commission 
Rule 15c6-1(a) to shorten the standard settlement cycle for most 
broker-dealer transactions regarding the purchase or sale of securities 
from three business days after the trade date (``T+3'') to two business 
days after the trade date (``T+2'').\8\ The compliance date regarding 
these amendments is September 5, 2017.\9\
---------------------------------------------------------------------------

    \8\ Securities Exchange Act Release No. 80295 (March 22, 2017), 
82 FR 15564 (March 29, 2017).
    \9\ Id.
---------------------------------------------------------------------------

Background
    Commission Rule 15c6-1 establishes a standard settlement cycle for 
most purchases or sales of securities by broker-dealers. The Commission 
adopted Rule 15c6-1(a) \10\ in 1993 to establish T+3 as the standard 
trade settlement cycle (instead of five business days after the trade 
date), and it became effective in June of 1995.\11\ In March of 1995, 
the Commission approved changes to OCC's Rules that were proposed to 
ensure consistency with the new T+3 standard settlement cycle.\12\
---------------------------------------------------------------------------

    \10\ 17 CFR 240.15c6-1(a). Rule 15c6-1(a) provides, in relevant 
part, that ``a broker or dealer shall not effect or enter into a 
contract for the purchase or sale of a security (other than an 
exempted security, government security, municipal security, 
commercial paper, bankers' acceptances, or commercial bills) that 
provides for payment of funds and delivery of securities later than 
the third business day after the date of the contract unless 
otherwise expressly agreed to by the parties at the time of the 
transaction.''
    \11\ Securities Exchange Act Release Nos. 33023 (October 6, 
1993), 58 FR 52891 (final rule adopting Rule 15c6-1); 34952 
(November 9, 1994), 59 FR 59137 (changing the effective date of the 
final rule from June 1, 1995 to June 7, 1995).
    \12\ Securities Exchange Act Release No. 35552 (March 30, 1995), 
60 FR 17600 (April 6, 1995) (SR-OCC-94-11).
---------------------------------------------------------------------------

    Since the change to T+3, the Commission and the financial services 
industry have continued to explore the idea of shortening the 
settlement cycle even further.\13\ In April 2014, DTCC published a 
recommendation to shorten the standard U.S. trade settlement cycle to 
T+2 and announced that it would partner with market participants and 
industry organizations to devise the necessary approach and timelines 
to achieve T+2.\14\ To improve the efficiency of the U.S. settlement 
system by reducing the attendant risks in the T+3 settlement of 
securities transactions, and to align U.S. markets with the standard 
settlement cycles in other major global markets that have already moved 
to T+2, DTCC, in collaboration with the financial services industry, 
formed an Industry Steering Committee (``ISC'') and an industry working 
group and sub-working groups to facilitate the move to T+2.\15\ In June 
of 2015, the ISC published a White Paper outlining the activities and 
proposed timeframes that would be required to move to T+2 in the 
U.S.\16\ Concurrently, SIFMA and the ICI jointly submitted a letter to 
Commission Chair White expressing support of the financial service 
industry's efforts to shorten the settlement cycle and identified 
amendments to Rule 15c6-1(a) that they believed would be necessary for 
an effective transition to T+2.\17\ In March 2016, the ISC announced an 
industry target date of September 5, 2017, for the transition to 
T+2.\18\
---------------------------------------------------------------------------

    \13\ See e.g., Securities Industry Association, ``SIA T+1 
Business Case Final Report'' (July 2000); Securities Exchange Act 
Release No. 49405 (March 11, 2004), 69 FR 12922 (March 18, 2004) 
(Concept Release: Securities Transactions Settlement); The 
Depository Trust & Clearing Corporation (``DTCC''), ``Proposal to 
Launch a New Cost-Benefit Analysis on Shortening the Settlement 
Cycle'' (December 2011).
    \14\ See DTCC, ``DTCC Recommends Shortening the U.S. Trade 
Settlement Cycle'' (April 2014).
    \15\ The ISC includes, among other participants, DTCC, the 
Securities Industry and Financial Markets Association (``SIFMA'') 
and the Investment Company Institute (``ICI'').
    \16\ See ``Shortening the Settlement Cycle: The Move to T+2'' 
(June 18, 2015).
    \17\ See Letter from ICI and SIFMA to Mary Jo White, Chair, SEC, 
dated June 18, 2015; see also Letter from Mary Jo White, Chair to 
Kenneth E. Bentsen, Jr. President and CEO, SIFMA, and Paul Schott 
Stevens, President and CEO, ICI, dated September 16, 2015 
(expressing support for industry efforts to shorten the trade 
settlement cycle to T+2 and indicating a commitment to developing a 
proposal to amend Rule 15c6-1(a) to require standard settlement no 
later than T+2).
    \18\ See ISC Media Alert: ``US T+2 ISC Recommends Move to 
Shorter Settlement Cycle On September 5, 2017'' (March 7, 2016).
---------------------------------------------------------------------------

    On September 28, 2016, the Commission proposed amendments to Rule 
15c6-1(a) to shorten the standard settlement cycle to T+2 on the basis 
that the shorter settlement cycle would reduce the risks that arise 
from the value and number of unsettled securities transactions prior to 
completion of settlement, including credit, market and liquidity risks 
faced by U.S. market participants.\19\ On March 22, the Commission 
adopted the amendments to Rule 15c6-1(a) as proposed.\20\ In light of 
this action by the SEC, OCC is proposing amendments to its By-Laws and 
Rules in connection with the T+2 settlement cycle and to do so by the 
Commission's designated compliance date of September 5, 2017.
---------------------------------------------------------------------------

    \19\ Securities Exchange Act Release No. 78962 (September 28, 
2016), 81 FR 69240 (October 5, 2016); see also Commission Press 
Release 2016-200: ``SEC Proposes Rule Amendment to Expedite Process 
for Settling Securities Transactions'' (September 28, 2016).
    \20\ Securities Exchange Act Release No. 80295, supra note 8.
---------------------------------------------------------------------------

Proposed Changes to OCC By-Laws and Rules
    OCC is proposing changes to the following By-Laws and Rules in 
connection with the recently-amended Rule 15c6-1(a) and the particular 
changes are discussed in more detail below:
     OCC Rule 901 (Settlement Through Correspondent Clearing 
Corporations); \21\
---------------------------------------------------------------------------

    \21\ Article I, Section 1.C.(33) of OCC's By-Laws defines the 
term ``correspondent clearing corporation'' to mean National 
Securities Clearing Corporation (``NSCC'') or any successor thereto 
which, ``by agreement with [OCC], provides facilities for 
settlements in respect of exercised option contracts or BOUNDs or in 
respect of delivery obligations arising from physically-settled 
stock futures.''
---------------------------------------------------------------------------

     OCC Rule 903 (Obligation to Deliver);
     OCC Rule 1302 (Delivery of Underlying Securities);
     OCC Rule 1503 (Exercise Settlement Date for Event Options 
and Range Options);
     Article XXI of OCC's By-Laws (Stock Loan/Hedge Program);
     OCC Rule 2208 (Settlement Date);
     OCC Rule 2209A (Termination of Market Loans); and
     OCC Rule 2502 (Settlement Date for BOUNDs).
    First, OCC proposes to amend certain of its Rules that govern 
settlement of physically-settled options and futures through NSCC. 
Chapter IX of OCC's

[[Page 29600]]

Rules addresses delivery and payment obligations arising out of the 
exercise of physically-settled stock option contracts and the maturity 
of physically-settled stock futures contracts. Rule 901 requires that 
certain obligations be settled through the facilities of NSCC. Rule 
901(d) permits OCC to revoke a specification in any Delivery Advice 
that settlement be made through the facilities of NSCC at any time 
prior to the opening of business on the delivery date by an appropriate 
notice to the Receiving and Delivering Clearing Members.\22\ In 
particular, Rule 901(d) allows specified OCC senior officers to extend 
or postpone the time for delivery to no more than three business days 
after the date that OCC revokes such a settlement specification. OCC 
proposes to amend this provision to make such an extension or 
postponement consistent with the new T+2 settlement cycle. Accordingly, 
under the proposed rule change, the amount of time that OCC has to 
extend or postpone the time of delivery would be changed to two 
business days.
---------------------------------------------------------------------------

    \22\ OCC recently proposed changes to existing Rule 901(d) in 
connection with advance notice and proposed rule change filings 
related to a new Stock Options and Futures Settlement Agreement 
between OCC and the National Securities Clearing Corporation. See 
SR-OCC-2017-013 and SR-OCC-2017-804. The proposed changes to Rule 
901(d) currently pending Commission review in SR-OCC-2017-013 and 
SR-OCC-2017-804 are indicated in Exhibit 5B with double underlined 
and double strikethrough text.
---------------------------------------------------------------------------

    Rule 903 governs the obligation of a Clearing Member to deliver 
when either a Delivery Advice or OCC directs that settlement be made on 
a broker-to-broker basis. It currently specifies the delivery date for 
physically-settled options as the third business day following the day 
on which the exercise notice was, or is deemed to have been, properly 
tendered to OCC. Rule 903 also generally specifies the delivery date 
for physically settled security futures as the third business day 
following the maturity date. Under the proposed rule change, these 
references in Rule 903 to the ``third'' business day would be changed 
to the ``second'' business day.
    Second, OCC proposes to amend Rule 1302 concerning the delivery of 
underlying securities for physically-settled stock futures. With 
certain exceptions, Rule 1302 currently provides that the delivery date 
for a physically-settled stock future is the third business day 
following the maturity date of the applicable series. Under the 
proposed rule change, the reference to the ``third'' business day would 
be changed to ``second'' business day.
    Third, OCC proposes to amend Rule 1503 concerning the exercise 
settlement date for credit default options and credit default basket 
options. With certain exceptions, Rule 1503 currently provides that the 
exercise settlement date for a credit default option and credit default 
basket option is the third business day following the date on which the 
option is deemed to have been exercised. Under the proposed rule 
change, the reference to the ``third'' business day would be changed to 
``second'' business day.
    Fourth, OCC proposes to amend a provision of its By-Laws and 
certain Rules concerning its two Stock Loan Programs: The Hedge Program 
and Market Loan Program. In the Hedge Program, OCC acts as the 
guarantor for Stock Loans that are initiated bilaterally between 
Clearing Members through The Depository Trust Company (``DTC''). Under 
Article XXI, Section 2(c) of OCC's By-Laws, OCC may terminate 
outstanding Hedge Loans under certain conditions. If any Hedge Loans 
are so terminated by OCC, it is required to provide written notice 
thereof to all affected Hedge Clearing Members to specify the date on 
which such termination is to become effective, which shall be at least 
three stock loan business days after the date of such notice. OCC 
proposes to amend this provision to make the effective date of such a 
termination consistent with the new T+2 settlement cycle. OCC therefore 
proposes to amend Section 2(c) of Article XXI to change the minimum 
number of days between notice and termination from three to two.
    Rule 2208(a) currently provides the settlement date for the 
termination of a Hedge Loan shall be the earlier of: (1) The date on 
which the Borrowing Clearing Member initiates the termination or (2) 
the date that is three stock loan business days after the date on which 
the Lending Clearing Member initiates the termination. OCC proposes to 
amend Rule 2208(a) to change ``three'' stock loan business days to 
``two'' stock loan business days.
    In the Market Loan Program, OCC acts as the guarantor for Market 
Loans that are initiated through the matching of bids and offers that 
are either agreed upon by the Market Loan Clearing Members or matched 
anonymously through a Loan Market. Typically, a Market Loan is 
terminated through the process of a Market Loan Clearing Member 
providing notice to the Loan Market to call for the recall or return of 
a specified quantity of Loaned Stock. The Loan Market sends details of 
the matched return or recall transaction to OCC, and OCC validates the 
transaction and sends a pair of delivery orders to DTC for settlement 
in connection with the recall or return. Rule 2209A(a)(3) currently 
provides that if a recall transaction fails to settle by the Settlement 
Time on the third stock loan business day following the day that the 
transaction was first submitted, the Lending Clearing Member may choose 
to execute a buy-in of the Loaned Stock. OCC proposes to change the 
reference to ``third'' stock loan business day to ``second'' stock loan 
business day.
    Under Rule 2209A(d), OCC may terminate outstanding Market Loans 
under certain conditions. If any Market Loans are so terminated by OCC, 
it is required to provide written notice thereof to all affected Market 
Loan Clearing Members to specify the date on which such termination is 
to become effective, which shall be at least three stock loan business 
days after the date of such notice. OCC proposes to amend this 
provision to make the effective date of such a termination consistent 
with the new T+2 settlement cycle. OCC therefore proposes to amend Rule 
2209A(d) to change the minimum number of days between notice and 
termination from three to two.
    Fifth, OCC proposes to amend Rule 2502 concerning the settlement 
date for BOUNDs in Chapter XXV of OCC's Rules. Rule 2502 currently 
provides the settlement date for a BOUND is the third business day 
following the expiration date. Under the proposed rule change, the 
settlement would be changed to the second business day following the 
expiration date.
Implementation
    OCC would implement the proposed rule change in coordination with 
the Commission's September 5, 2017, compliance date for the amendments 
to Rule 15c6-1(a) and the transition to T+2 and would provide advance 
notice to Clearing Members of the implementation through an Information 
Memo. OCC will include a footnote in its By-Laws and Rules with each 
rule that will change under this proposed rule change noting that each 
such rule will be updated on September 5, 2017, to reflect the 
transition to the new T+2 settlement cycle. As part of that footnote, 
OCC will also include a link to documents on OCC's public Web site that 
show the updates to OCC's rules that are being made in this proposed 
rule change. OCC intends for these updates to be self-executing on 
September 5, 2017.

[[Page 29601]]

2. Statutory Basis
    OCC believes that the proposed rule change is consistent with 
Section 17A(b)(3)(F) of the Act \23\ and the rules thereunder 
applicable to OCC. Section 17A(b)(3)(F) requires, among other things, 
that rules of a clearing agency be designed ``to foster cooperation and 
coordination with persons engaged in the clearance and settlement of 
securities transactions, to remove impediments to and perfect the 
mechanism of a national system for the prompt and accurate clearance 
and settlement of securities transactions, and, in general, to protect 
investors and the public interest[.]'' \24\ OCC believes the proposed 
rule change is consistent with these requirements because it would 
coordinate the terms of certain OCC rules with the Commission's 
amendments to Rule 15c6-1(a) to support a T+2 standardized settlement 
cycle. Specifically, where a current OCC By-Law or Rule is based upon 
or otherwise references the T+3 standardized securities settlement 
cycle, the provision would be changed to support T+2. Harmonizing OCC's 
By-Laws and Rules with the new T+2 standardized settlement cycle would 
also remove impediments to and perfect the mechanism of a national 
system for the prompt and accurate clearance and settlement of 
securities transactions by, for example, ensuring that OCC's By-laws 
and Rules that are related to T+2 are consistent with the rules 
concerning the standardized settlement cycle that are maintained by the 
exchanges for which OCC clears and settles transactions and the rules 
of clearing agencies, such as NSCC and DTC, that provide clearance and 
settlement services for securities transactions that underlie 
physically-settled stock option and physically-settled stock future 
contracts cleared by OCC. OCC believes that conforming certain of its 
By-Laws and Rules to the Commission's new standardized settlement cycle 
would also protect investors and the public interest by ensuring that 
OCC provides clearance and settlement services in a manner that 
supports the Commission's requirements for the T+2 standardized 
settlement cycle.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78q-1(b)(3)(F).
    \24\ Id.
---------------------------------------------------------------------------

    OCC believes the proposed changes are also consistent with the 
requirements in Commission Rule 17Ad-22(e)(1).\25\ The changes are 
designed to modify OCC's By-Laws and Rules that would otherwise become 
outdated upon the change to the T+2 standardized settlement cycle. 
Therefore, OCC believes that the proposed changes promote compliance 
and consistency with the requirements in Rule 17Ad-22(e)(1) to 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to provide for a well-founded, clear, 
transparent and enforceable legal basis. Maintaining provisions in 
OCC's publicly available By-Laws and Rules that are consistent at all 
times with the standardized settlement cycle that is specified in 
Commission Rule 15c6-1(a) helps ensure that OCC's By-Laws and Rules 
remain well-founded, clear, transparent and enforceable.
---------------------------------------------------------------------------

    \25\ 17 CFR 240.17Ad-22(e)(1).
---------------------------------------------------------------------------

    The proposed rule change is not inconsistent with the existing 
rules of OCC, including any other rules proposed to be amended.

(B) Clearing Agency's Statement on Burden on Competition

    Section 17A(b)(3)(I) of the Act requires that the rules of a 
clearing agency not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\26\ OCC does not 
believe that the proposed rule change would impose any burden or have 
any impact on competition. The proposed rule change would implement 
conforming changes within OCC's By-Laws and Rules to ensure consistency 
with amendments recently adopted by the Commission in Rule 15c6-1(a) to 
change the standard securities settlement cycle to T+2. All Clearing 
Members would be equally subject to these conforming changes, and the 
proposed changes would not provide any Clearing Member with a 
competitive advantage over any other Clearing Member. This proposed 
rule change would also not inhibit access to OCC's services or 
disadvantage or favor any particular user in relationship to another. 
As a result, OCC believes the proposed rule change would not impact or 
impose a burden on competition.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    Written comments were not and are not intended to be solicited with 
respect to the proposed rule change, and none have been received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) of the Act \27\ and paragraph (f)(4)(i) of Rule 19b-4 
\28\ thereunder. At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.\29\
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \28\ 17 CFR 240.19b-4(f)(4)(i).
    \29\ Notwithstanding its immediate effectiveness, implementation 
of this rule change will be delayed until this change is deemed 
certified under CFTC Regulation Sec.  40.6.
---------------------------------------------------------------------------

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-OCC-2017-015 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-OCC-2017-015. 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

[[Page 29602]]

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 OCC and on OCC's Web site at http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_17_015.pdf.
    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly.
    All submissions should refer to File Number SR-OCC-2017-015 and 
should be submitted on or before July 20, 2017.
---------------------------------------------------------------------------

    \30\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-13583 Filed 6-28-17; 8:45 am]
 BILLING CODE 8011-01-P