Self-Regulatory Organizations; NYSE American LLC; Notice of Filing of Proposed Rule Change To Modify Rule 961 Regarding the Give Up of a Clearing Member by ATP Holders and Conforming Changes to Rule 933NY, 49449-49451 [2018-21233]
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Federal Register / Vol. 83, No. 190 / Monday, October 1, 2018 / Notices
Section 17A of the Act 86 and the rules
and regulations thereunder.
It Is Therefore Ordered, pursuant to
Section 19(b)(2) of the Act, that
proposed rule change SR–FICC–2018–
007 be, and hereby is, APPROVED.87
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.88
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–21235 Filed 9–28–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–84285; File No. SR–
NYSEAMER–2018–44]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing of
Proposed Rule Change To Modify Rule
961 Regarding the Give Up of a
Clearing Member by ATP Holders and
Conforming Changes to Rule 933NY
September 25, 2018.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 11, 2018, NYSE American
LLC (the ‘‘Exchange’’ or ‘‘NYSE
American’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
amozie on DSK3GDR082PROD with NOTICES
The Exchange proposes to modify
Rule 961 regarding the Give Up of a
Clearing Member by ATP Holders and
proposes conforming changes to Rule
933NY. The proposed rule change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
86 15
U.S.C. 78q–1.
approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
88 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
87 In
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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.
1. Purpose
The purpose of this filing is to modify
Rule 961 regarding the Give Up of a
Clearing Member 4 by ATP Holders and
to make conforming changes to Rule
933NY.
Rule 961: Current Process To Give Up
a Clearing Member
In 2015, the Exchange adopted its
current ‘‘give up’’ procedure for ATP
Holders executing transactions on the
Exchange.5 Per Rule 961, an ATP Holder
may give up a ‘‘Designated Give Up’’ or
its ‘‘Guarantor,’’ as defined in the Rule
and described below.
The Rule defines ‘‘Designated Give
Up’’ as any Clearing Member that an
ATP Holder (other than a Market
Maker 6) identifies to the Exchange, in
writing, as a Clearing Member the ATP
Holder requests the ability to give up.
To designate a ‘‘Designated Give Up,’’
an ATP Holder must submit written
notification to the Exchange.
Specifically, the Exchange uses a
standardized form (‘‘Notification
Form’’). An ATP Holder may currently
designate any Clearing Member as a
Designated Give Up. Additionally, there
is no minimum or maximum number of
Designated Give Ups that an ATP
4 Rule 900.2NY(11) defines ‘‘Clearing Member’’ as
an Exchange ATP Holder which has been admitted
to membership in the Options Clearing Corporation
pursuant to the provisions of the Rules of the
Options Clearing Corporation.
5 See Securities and Exchange Act Release No.
75642 (August 7, 2015), 80 FR 48594 (August 13,
2015) (SR–NYSEMKT–2015–55).
6 For purposes of this rule, references to ‘‘Market
Maker’’ refer to ATP Holders acting in the capacity
of a Market Maker and include all Exchange Market
Maker capacities e.g., Lead Market Makers. As
explained below, Market Makers give up Guarantors
that have executed a Letter of Guarantee on behalf
of the Marker Maker, pursuant to Rule 932NY;
Market Makers need not give up Designated Give
Ups.
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
49449
Holder must identify. Similarly, should
an ATP Holder no longer want the
ability to give up a particular Designated
Give Up, the ATP Holder informs the
Exchange in writing.
Rule 961 also requires that the
Exchange notify a Clearing Member, in
writing and as soon as practicable, of
each ATP Holder that has identified it
as a Designated Give Up. However, the
Exchange will not accept any
instructions from a Clearing Member to
prohibit an ATP Holder from
designating the Clearing Member as a
Designated Give Up. Additionally, there
is no subjective evaluation of an ATP
Holder’s list of Designated Give Ups by
the Exchange. The Rule does, however,
provide that a Designated Give Up may
determine to not accept a trade on
which its name was given up so long as
it believes in good faith that it has a
valid reason not to accept the trade.7
The Rule defines ‘‘Guarantor’’ as a
Clearing Member that has issued a
Letter of Guarantee or Letter of
Authorization for the executing ATP
Holder, pursuant to Rules of the
Exchange 8 that is in effect at the time
of the execution of the applicable trade.
An executing ATP Holder may give up
its Guarantor without such Guarantor
being a ‘‘Designated Give Up.’’
Additionally, Rule 924NY provides that
a Letter of Guarantee is required to be
issued and filed by each Clearing
Member through which a Market Maker
clears transactions. Accordingly, a
Market Maker is enabled to give up only
a Guarantor that had executed a Letter
of Guarantee on its behalf pursuant to
Rule 924NY; a Market Maker does not
need to identify any Designated Give
Ups. Like Designated Give Ups,
Guarantors likewise have the ability to
reject a trade.9
Beginning in early 2018, certain
Clearing Firms (in conjunction with the
Securities Industry and Financial
Markets Association (‘‘SIFMA’’))
expressed concerns related to the
process by which executing brokers on
U.S. options exchanges (the
‘‘Exchanges’’) are allowed to designate
or ‘give up’ a clearing firm for purposes
of clearing particular transactions. The
SIFMA-affiliated Clearing Members
indicated that the Federal Reserve has
7 See Rule 961(f)(1) (setting forth procedures for
rejecting a trade). An example of a valid reason to
reject a trade may be that the Designated Give Up
does not have a customer for that particular trade.
8 See Rule 924NY (Letters of Guarantees); Rule
932NY (Letters of Authorization).
9 See Rule 961(f)(2) (providing that a Guarantor
may ‘‘change the give up to another Clearing
Member that has agreed to be the give up on the
subject trade, provided such Clearing Member has
notified the Exchange and the executing ATP
Holder in writing of its intent to accept the trade’’).
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Federal Register / Vol. 83, No. 190 / Monday, October 1, 2018 / Notices
recently identified the current give-up
process as a significant source of risk for
clearing firms. SIFMA-affiliated
Clearing Members subsequently
requested that the Exchanges alleviate
this risk by amending Exchange rules
governing the give up process.10
Proposed Amendment to Rules 961 and
933NY
The Exchange proposes to amend
Rule 961 to provide a means for a
Designated Give Up to opt out of acting
as the give up for certain ATP Holders.
As proposed, Rule 961(b)(4) would be
revised to provide that the Exchange
would ‘‘accept instruction from a
Clearing Member not to permit an ATP
Holder to designate the Clearing
Member as the Designated Give Up.’’
The Exchange further proposes to add
language to Rule 961(b)(7) to provide
that ‘‘[i]f a Clearing Member no longer
wants to be a Designated Give Up of a
particular ATP Holder, the Clearing
Member must notify the Exchange, in a
form and manner prescribed by the
Exchange.’’ In practice, a Clearing
Member that has been designated as the
Designated Give Up need only tell the
Exchange that it refuses this
designation.
Consistent with this proposed change,
the Exchange also proposes to amend
Rule 933NY(f) regarding the
responsibilities of Floor Brokers to
maintain error accounts ‘‘for the
purposes of correcting bona fide errors,
as provided in Rule 960.’’ As proposed,
the Exchange would specify that ‘‘it will
not be a violation of this provision if a
trade is transferred away from an error
account through the CMTA process at
OCC.’’ 11 This additional language
would enable an executing ATP Holder
that has executed an order to CMTA that
order through its own clearing
relationship. For example, assume a
Floor Broker executes a trade giving up
Firm A (a Clearing Member that is one
of its Designated Give Ups) and, after
the execution, the Floor Broker is
informed that a portion of the trade
needs to be changed to give-up Firm B
(a Clearing Member that is not one of
the Floor Broker’s Designated Give Ups).
The proposed language would enable
the Floor Broker to CMTA the trade to
amozie on DSK3GDR082PROD with NOTICES
10 Cboe
Exchange, Inc. (‘‘CBOE’’) recently filed to
amend its give up procedure to require CBOE
Trading Permit Holders (each a ‘‘TPH’’) to receive
written authorization from a Clearing TPH
(‘‘CTPH’’) before it may give up that CTPH. See
Securities and Exchange Act Release No. 83872
(August 17, 2018), 83 FR 42751 (August 23, 2018)
(SR–CBOE–2018–55). The Exchange’s proposal
leads to the same result of providing Clearing
Members the ability to control risk, but it differs in
process.
11 See proposed Rule 933NY(f).
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17:50 Sep 28, 2018
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Firm B through its own clearing
arrangement (i.e., error account/Letter of
Authorization) rather than nullifying or
busting the trade.
Implementation
The Exchange proposes to announce
the implementation date of the
proposed rule change via Trader Notice,
to be published no later than thirty (30)
days following Commission approval.
The implementation date will be no
later than sixty (60) days following
Commission approval. This additional
time would afford the Exchange and
ATP Holders the time to make any
changes current give up designations.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) 12 of the
Act, in general, and furthers the
objectives of Section 6(b)(5),13 in
particular, in that 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, and to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system.
Particularly, as discussed above,
several Clearing Firms affiliated with
SIFMA have recently expressed
concerns relating to the current give up
process that permits ATP Holders to
identify any Clearing Members as a
Designated Give Up for purposes of
clearing particular transactions. Also, as
noted above, the Clearing Members have
relayed that the Federal Reserve has
recently identified the current give-up
process (i.e., a process that lacks
authorization) as a significant source of
risk for clearing firms. The Exchange
believes the proposed changes to Rule
961 would help alleviate this risk by
enabling Clearing Members to refuse to
act as a Designated Give Up for certain
ATP Holders, which would afford
Clearing Members a measure of control.
The Exchange believes its proposal
addresses concerns raised by Clearing
Members, while maintaining the basic
give up process. The Exchange does not
anticipate Clearing Members to
routinely refuse the role of Designated
Give Up, but rather to utilize this option
only when there is a valid reason and
good faith basis to do so. The Exchange
notes that Clearing Member would still
have the ability to reject trades on an ad
hoc basis for ATP Holders for which it
has not refused to be a Designated Give
12 15
13 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00098
Fmt 4703
Sfmt 4703
Up. Accordingly, the Exchange believes
the proposed rule change is reasonable
and continues to provide certainty that
a Clearing Member would be
responsible for a trade, which protects
investors and the public interest.
The Exchange also believes that the
proposed change to Rule 933NY would
protect investors because it would
permit an executing ATP Holder to
utilize its error account to CMTA an
order through its own clearing
relationship. This would preserve
executions while accommodating the
proposed rule change that could result
in an executing ATP Holder not being
permissioned to for a particular give-up.
Thus, this proposal would foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, and remove
impediments to and perfect the
mechanism of a free and open market
and a national market system.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
this proposed rule change would
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule change would impose an
unnecessary burden on intramarket
competition because it would apply
equally to all similarly situated ATP
Holders. The Exchange also notes that,
should the proposed changes make the
Exchange more attractive for trading,
market participants trading on other
exchanges can always elect to become
ATP Holders on the Exchange to take
advantage of the trading opportunities.
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
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Federal Register / Vol. 83, No. 190 / Monday, October 1, 2018 / Notices
(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:
amozie on DSK3GDR082PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEAMER–2018–44 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–NYSEAMER–2018–44. 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 website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website 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
a.m. and 3 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. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEAMER–2018–44, and should be
submittedon or before October 22, 2018.
14 17
CFR 200.30–3(a)(12).
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–21233 Filed 9–28–18; 8:45 am]
BILLING CODE 8011–01–P
[Disaster Declaration #15696 and #15697;
NORTH CAROLINA Disaster Number NC–
00099]
Presidential Declaration Amendment of
a Major Disaster for the State of North
Carolina
U.S. Small Business
Administration.
ACTION: Amendment 2.
AGENCY:
This is an amendment of the
Presidential declaration of a major
disaster for the State of North Carolina
(FEMA—4393—DR), dated 09/14/2018.
Incident: Hurricane Florence.
Incident Period: 09/07/2018 and
continuing.
Issued on 09/24/2018.
Physical Loan Application Deadline
Date: 11/13/2018.
Economic Injury (EIDL) Loan
Application Deadline Date: 06/14/2019.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT:
A. Escobar, Office of Disaster
Assistance, U.S. Small Business
Administration, 409 3rd Street SW,
Suite 6050, Washington, DC 20416,
(202) 205–6734.
SUPPLEMENTARY INFORMATION: The notice
of the President’s major disaster
declaration for the State of NORTH
CAROLINA, dated 09/14/2018, is
hereby amended to include the
following areas as adversely affected by
the disaster:
Primary Counties (Physical Damage and
Economic Injury Loans): Hoke,
Hyde, Johnston, Lee, Moore, Pitt,
Richmond, Scotland, Wilson.
Contiguous Counties (Economic Injury
Loans Only):
North Carolina: Anson, Dare,
Edgecombe, Franklin, Montgomery,
Nash, Randolph, Stanly, Tyrrell.
South Carolina: Chesterfield.
All other information in the original
declaration remains unchanged.
DATES:
Fmt 4703
James Rivera,
Associate Administrator for Disaster
Assistance.
[FR Doc. 2018–21251 Filed 9–28–18; 8:45 am]
Sfmt 4703
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #15698 and #15699;
South Carolina Disaster Number SC–00054]
Presidential Declaration of a Major
Disaster for the State of South Carolina
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a Notice of the
Presidential declaration of a major
disaster for the State of South Carolina
(FEMA–4394–DR), dated 09/21/2018.
Incident: Hurricane Florence.
Incident Period: 09/08/2018 and
continuing.
SUMMARY:
SUMMARY:
Frm 00099
(Catalog of Federal Domestic Assistance
Number 59008)
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
PO 00000
49451
Issued on 09/21/2018.
Physical Loan Application Deadline
Date: 11/20/2018.
Economic Injury (EIDL) Loan
Application Deadline Date: 06/21/2019.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT:
A. Escobar, Office of Disaster
Assistance, U.S. Small Business
Administration, 409 3rd Street SW,
Suite 6050, Washington, DC 20416,
(202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
President’s major disaster declaration on
09/21/2018, applications for disaster
loans may be filed at the address listed
above or other locally announced
locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties (Physical Damage and
Economic Injury Loans): Dillon,
Horry, Marion, Marlboro.
Contiguous Counties (Economic Injury
Loans Only):
South Carolina: Chesterfield,
Darlington, Florence, Georgetown,
Williamsburg.
North Carolina: Anson, Brunswick,
Columbus, Richmond, Robeson,
Scotland.
The Interest Rates are:
DATES:
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Agencies
[Federal Register Volume 83, Number 190 (Monday, October 1, 2018)]
[Notices]
[Pages 49449-49451]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21233]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84285; File No. SR-NYSEAMER-2018-44]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing of Proposed Rule Change To Modify Rule 961 Regarding the Give Up
of a Clearing Member by ATP Holders and Conforming Changes to Rule
933NY
September 25, 2018.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on September 11, 2018, NYSE American LLC (the ``Exchange''
or ``NYSE American'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\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 modify Rule 961 regarding the Give Up of a
Clearing Member by ATP Holders and proposes conforming changes to Rule
933NY. The proposed rule change is available on the Exchange's website
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
The purpose of this filing is to modify Rule 961 regarding the Give
Up of a Clearing Member \4\ by ATP Holders and to make conforming
changes to Rule 933NY.
---------------------------------------------------------------------------
\4\ Rule 900.2NY(11) defines ``Clearing Member'' as an Exchange
ATP Holder which has been admitted to membership in the Options
Clearing Corporation pursuant to the provisions of the Rules of the
Options Clearing Corporation.
---------------------------------------------------------------------------
Rule 961: Current Process To Give Up a Clearing Member
In 2015, the Exchange adopted its current ``give up'' procedure for
ATP Holders executing transactions on the Exchange.\5\ Per Rule 961, an
ATP Holder may give up a ``Designated Give Up'' or its ``Guarantor,''
as defined in the Rule and described below.
---------------------------------------------------------------------------
\5\ See Securities and Exchange Act Release No. 75642 (August 7,
2015), 80 FR 48594 (August 13, 2015) (SR-NYSEMKT-2015-55).
---------------------------------------------------------------------------
The Rule defines ``Designated Give Up'' as any Clearing Member that
an ATP Holder (other than a Market Maker \6\) identifies to the
Exchange, in writing, as a Clearing Member the ATP Holder requests the
ability to give up. To designate a ``Designated Give Up,'' an ATP
Holder must submit written notification to the Exchange. Specifically,
the Exchange uses a standardized form (``Notification Form''). An ATP
Holder may currently designate any Clearing Member as a Designated Give
Up. Additionally, there is no minimum or maximum number of Designated
Give Ups that an ATP Holder must identify. Similarly, should an ATP
Holder no longer want the ability to give up a particular Designated
Give Up, the ATP Holder informs the Exchange in writing.
---------------------------------------------------------------------------
\6\ For purposes of this rule, references to ``Market Maker''
refer to ATP Holders acting in the capacity of a Market Maker and
include all Exchange Market Maker capacities e.g., Lead Market
Makers. As explained below, Market Makers give up Guarantors that
have executed a Letter of Guarantee on behalf of the Marker Maker,
pursuant to Rule 932NY; Market Makers need not give up Designated
Give Ups.
---------------------------------------------------------------------------
Rule 961 also requires that the Exchange notify a Clearing Member,
in writing and as soon as practicable, of each ATP Holder that has
identified it as a Designated Give Up. However, the Exchange will not
accept any instructions from a Clearing Member to prohibit an ATP
Holder from designating the Clearing Member as a Designated Give Up.
Additionally, there is no subjective evaluation of an ATP Holder's list
of Designated Give Ups by the Exchange. The Rule does, however, provide
that a Designated Give Up may determine to not accept a trade on which
its name was given up so long as it believes in good faith that it has
a valid reason not to accept the trade.\7\
---------------------------------------------------------------------------
\7\ See Rule 961(f)(1) (setting forth procedures for rejecting a
trade). An example of a valid reason to reject a trade may be that
the Designated Give Up does not have a customer for that particular
trade.
---------------------------------------------------------------------------
The Rule defines ``Guarantor'' as a Clearing Member that has issued
a Letter of Guarantee or Letter of Authorization for the executing ATP
Holder, pursuant to Rules of the Exchange \8\ that is in effect at the
time of the execution of the applicable trade. An executing ATP Holder
may give up its Guarantor without such Guarantor being a ``Designated
Give Up.'' Additionally, Rule 924NY provides that a Letter of Guarantee
is required to be issued and filed by each Clearing Member through
which a Market Maker clears transactions. Accordingly, a Market Maker
is enabled to give up only a Guarantor that had executed a Letter of
Guarantee on its behalf pursuant to Rule 924NY; a Market Maker does not
need to identify any Designated Give Ups. Like Designated Give Ups,
Guarantors likewise have the ability to reject a trade.\9\
---------------------------------------------------------------------------
\8\ See Rule 924NY (Letters of Guarantees); Rule 932NY (Letters
of Authorization).
\9\ See Rule 961(f)(2) (providing that a Guarantor may ``change
the give up to another Clearing Member that has agreed to be the
give up on the subject trade, provided such Clearing Member has
notified the Exchange and the executing ATP Holder in writing of its
intent to accept the trade'').
---------------------------------------------------------------------------
Beginning in early 2018, certain Clearing Firms (in conjunction
with the Securities Industry and Financial Markets Association
(``SIFMA'')) expressed concerns related to the process by which
executing brokers on U.S. options exchanges (the ``Exchanges'') are
allowed to designate or `give up' a clearing firm for purposes of
clearing particular transactions. The SIFMA-affiliated Clearing Members
indicated that the Federal Reserve has
[[Page 49450]]
recently identified the current give-up process as a significant source
of risk for clearing firms. SIFMA-affiliated Clearing Members
subsequently requested that the Exchanges alleviate this risk by
amending Exchange rules governing the give up process.\10\
---------------------------------------------------------------------------
\10\ Cboe Exchange, Inc. (``CBOE'') recently filed to amend its
give up procedure to require CBOE Trading Permit Holders (each a
``TPH'') to receive written authorization from a Clearing TPH
(``CTPH'') before it may give up that CTPH. See Securities and
Exchange Act Release No. 83872 (August 17, 2018), 83 FR 42751
(August 23, 2018) (SR-CBOE-2018-55). The Exchange's proposal leads
to the same result of providing Clearing Members the ability to
control risk, but it differs in process.
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Proposed Amendment to Rules 961 and 933NY
The Exchange proposes to amend Rule 961 to provide a means for a
Designated Give Up to opt out of acting as the give up for certain ATP
Holders. As proposed, Rule 961(b)(4) would be revised to provide that
the Exchange would ``accept instruction from a Clearing Member not to
permit an ATP Holder to designate the Clearing Member as the Designated
Give Up.'' The Exchange further proposes to add language to Rule
961(b)(7) to provide that ``[i]f a Clearing Member no longer wants to
be a Designated Give Up of a particular ATP Holder, the Clearing Member
must notify the Exchange, in a form and manner prescribed by the
Exchange.'' In practice, a Clearing Member that has been designated as
the Designated Give Up need only tell the Exchange that it refuses this
designation.
Consistent with this proposed change, the Exchange also proposes to
amend Rule 933NY(f) regarding the responsibilities of Floor Brokers to
maintain error accounts ``for the purposes of correcting bona fide
errors, as provided in Rule 960.'' As proposed, the Exchange would
specify that ``it will not be a violation of this provision if a trade
is transferred away from an error account through the CMTA process at
OCC.'' \11\ This additional language would enable an executing ATP
Holder that has executed an order to CMTA that order through its own
clearing relationship. For example, assume a Floor Broker executes a
trade giving up Firm A (a Clearing Member that is one of its Designated
Give Ups) and, after the execution, the Floor Broker is informed that a
portion of the trade needs to be changed to give-up Firm B (a Clearing
Member that is not one of the Floor Broker's Designated Give Ups). The
proposed language would enable the Floor Broker to CMTA the trade to
Firm B through its own clearing arrangement (i.e., error account/Letter
of Authorization) rather than nullifying or busting the trade.
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\11\ See proposed Rule 933NY(f).
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Implementation
The Exchange proposes to announce the implementation date of the
proposed rule change via Trader Notice, to be published no later than
thirty (30) days following Commission approval. The implementation date
will be no later than sixty (60) days following Commission approval.
This additional time would afford the Exchange and ATP Holders the time
to make any changes current give up designations.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \12\ of
the Act, in general, and furthers the objectives of Section
6(b)(5),\13\ in particular, in that 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, and to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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Particularly, as discussed above, several Clearing Firms affiliated
with SIFMA have recently expressed concerns relating to the current
give up process that permits ATP Holders to identify any Clearing
Members as a Designated Give Up for purposes of clearing particular
transactions. Also, as noted above, the Clearing Members have relayed
that the Federal Reserve has recently identified the current give-up
process (i.e., a process that lacks authorization) as a significant
source of risk for clearing firms. The Exchange believes the proposed
changes to Rule 961 would help alleviate this risk by enabling Clearing
Members to refuse to act as a Designated Give Up for certain ATP
Holders, which would afford Clearing Members a measure of control. The
Exchange believes its proposal addresses concerns raised by Clearing
Members, while maintaining the basic give up process. The Exchange does
not anticipate Clearing Members to routinely refuse the role of
Designated Give Up, but rather to utilize this option only when there
is a valid reason and good faith basis to do so. The Exchange notes
that Clearing Member would still have the ability to reject trades on
an ad hoc basis for ATP Holders for which it has not refused to be a
Designated Give Up. Accordingly, the Exchange believes the proposed
rule change is reasonable and continues to provide certainty that a
Clearing Member would be responsible for a trade, which protects
investors and the public interest.
The Exchange also believes that the proposed change to Rule 933NY
would protect investors because it would permit an executing ATP Holder
to utilize its error account to CMTA an order through its own clearing
relationship. This would preserve executions while accommodating the
proposed rule change that could result in an executing ATP Holder not
being permissioned to for a particular give-up.
Thus, this proposal would foster cooperation and coordination with
persons engaged in facilitating transactions in securities, and remove
impediments to and perfect the mechanism of a free and open market and
a national market system.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that this proposed rule change would
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
that the proposed rule change would impose an unnecessary burden on
intramarket competition because it would apply equally to all similarly
situated ATP Holders. The Exchange also notes that, should the proposed
changes make the Exchange more attractive for trading, market
participants trading on other exchanges can always elect to become ATP
Holders on the Exchange to take advantage of the trading opportunities.
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
[[Page 49451]]
(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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEAMER-2018-44 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-NYSEAMER-2018-44. 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 website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website 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 a.m. and 3
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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEAMER-2018-44, and should be
submitted on or before October 22, 2018.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-21233 Filed 9-28-18; 8:45 am]
BILLING CODE 8011-01-P