Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change Relating To Providing Members Certain Optional Risk Settings Under Proposed Interpretation and Policy .03 of Rule 11.13, 11421-11425 [2020-03921]
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Federal Register / Vol. 85, No. 39 / Thursday, February 27, 2020 / Notices
could also result in lower barriers to
entry for new issuers and new series of
Managed Fund Shares and Index Fund
Shares for which the Portfolio Holdings
are disclosed daily, which will result in
enhanced competition among products
and issuers of such funds, which can
lead to lower fees for investors,
encourage financial innovation, and
increase investor choice in the ETF
market.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. To the
contrary, the Exchange believes that
issuers may benefit from cost savings
and lower barriers to entry because of
the eliminated requirement to
disseminate an IIV. In turn, the
proposed rule change will enable
increased product competition among
issuers of such funds, which can lead to
lower fees for investors, encourage
financial innovation, and increase
investor choice in the ETF market.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on 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 Exchange consents, the Commission
will:
A. By order approve or disapprove
such proposed rule change, or
B. institute proceedings to determine
whether the proposed rule change
should be disapproved.
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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:
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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–
CboeBZX–2020–007 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–CboeBZX–2020–007. 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
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
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–CboeBZX–2020–007 and
should be submitted on or before March
19, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020–03920 Filed 2–26–20; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88263; File No. SR–
CboeBZX–2020–006]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing of
a Proposed Rule Change Relating To
Providing Members Certain Optional
Risk Settings Under Proposed
Interpretation and Policy .03 of Rule
11.13
February 21, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
12, 2020, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposal to
provide Members certain optional risk
settings under proposed Interpretation
and Policy .03 of Rule 11.13.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
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
Exchange 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. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
BILLING CODE 8011–01–P
1 15
25 17
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CFR 200.30–3(a)(12).
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The purpose of the proposed rule
change is to provide Members 3 the
option to utilize certain risk settings
under proposed Interpretation and
Policy .03 of Rule 11.13. In order to help
Members manage their risk, the
Exchange proposes to offer optional risk
settings that would authorize the
Exchange to take automated action if a
designated limit for a Member is
breached. Such risk settings would
provide Members with enhanced
abilities to manage their risk with
respect to orders on the Exchange.
Paragraph (a) of proposed Interpretation
and Policy .03 of Rule 11.13 sets forth
the specific risk controls the Exchange
proposes to offer. Specifically, the
Exchange proposes to offer two credit
risk settings as follows:
• The ‘‘Gross Credit Risk Limit’’,
which refers to a pre-established
maximum daily dollar amount for
purchases and sales across all symbols,
where both purchases and sales are
counted as positive values. For purposes
of calculating the Gross Credit Risk
Limit, only executed orders are
included; and
• The ‘‘Net Credit Risk Limit’’, which
refers to a pre-established maximum
daily dollar amount for purchases and
sales across all symbols, where
purchases are counted as positive values
and sales are counted as negative
values. For purposes of calculating the
Net Credit Risk Limit, only executed
orders are included.
The Gross Credit and Net Credit risk
settings are similar to credit controls
measuring both gross and net exposure
provided for in paragraph (h) of
Interpretation and Policy .01 of Rule
11.13, but with certain notable
differences. Importantly, the proposed
risk settings would be applied at a
Market Participant Identifier (‘‘MPID’’)
level, while the controls noted in
paragraph (h) of Interpretation and
Policy .01 are applied at the logical port
level.4 Therefore, the proposed risk
management functionality would allow
a Member to manage its risk more
comprehensively, instead of relying on
the more limited port level functionality
3 See
Exchange Rule 1.5(n).
logical port represents a port established by
the Exchange within the Exchange’s System for
trading and billing purposes. Each logical port
established is specific to a Member or non-Member
and grants that Member or non-Member the ability
to accomplish a specific function, such as order
entry, order cancellation, or data receipt.
4A
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offered today. Further, the proposed risk
settings would be based on a notional
execution value, while the controls
noted in paragraph (h) of Interpretation
and Policy .03 are applied based on a
combination of outstanding orders on
the Exchange’s book and notional
execution value. The Exchange notes
that the current gross and net notional
controls noted in paragraph (h) of
Interpretation and Policy .03 will
continue to be available in addition to
the proposed risk settings.
Paragraph (c) of proposed
Interpretation and Policy .03 of Rule
11.13 provides that a Member that does
not self-clear may allocate and revoke 5
the responsibility of establishing and
adjusting the risk settings identified in
proposed paragraph (a) to a Clearing
Member 6 that clears transactions on
behalf of the Member, if designated in
a manner prescribed by the Exchange.
By way of background, Exchange Rule
11.15(a) requires that all transactions
passing through the facilities of the
Exchange shall be cleared and settled
through a Qualified Clearing Agency
using a continuous net settlement
system.7 This requirement may be
satisfied by direct participation, use of
direct clearing services, or by entry into
a corresponding clearing arrangement
with another Member that clears
through a Qualified Clearing Agency
(i.e., a Clearing Member). If a Member
clears transactions through another
Member that is a Clearing Member, such
Clearing Member shall affirm to the
Exchange in writing, through letter of
authorization, letter of guarantee or
other agreement acceptable to the
Exchange, its agreement to assume
responsibility for clearing and settling
any and all trades executed by the
Member designating it as its clearing
firm.8 Thus, while not all Members are
Clearing Members, all Members are
required to either clear their own
transactions or to have in place a
relationship with a Clearing Member
5 As discussed below, if a Member revokes the
responsibility of establishing and adjusting the risk
settings identified in proposed paragraph (a), the
settings applied by the Member would be
applicable.
6 The term ‘‘Clearing Member’’ refers to a Member
that is a member of a Qualified Clearing Agency and
clears transactions on behalf of another Member.
See Exchange Rule 11.15(a).
7 The term ‘‘Qualified Clearing Agency’’ means a
clearing agency registered with the Commission
pursuant to Section 17A of the Act that is deemed
qualified by the Exchange. See Exchange Rule
1.5(u). The rules of any such clearing agency shall
govern with the respect to the clearance and
settlement of any transactions executed by the
Member on the Exchange.
8 A Member can designate one Clearing Member
per Market Participant Identifier (‘‘MPID’’)
associated with the Member.
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that has agreed to clear transactions on
their behalf in order to conduct business
on the Exchange. Therefore, the Clearing
Member that guarantees the Member’s
transactions on the Exchange has a
financial interest in the risk settings
utilized within the System 9 by the
Member.
Paragraph (c) is proposed by the
Exchange in order to offer Clearing
Members an opportunity to manage
their risk of clearing on behalf of other
Members, if authorized to do so by the
Member trading on the Exchange.
Specifically, the Exchange believes such
functionality would help Clearing
Members to better monitor and manage
the potential risks that they assume
when clearing for Members of the
Exchange. A Member may allocate or
revoke the responsibility of establishing
and adjusting the risk settings identified
in proposed paragraph (a) to its Clearing
Member via the risk management tool
available on the web portal at any time.
By allocating such responsibility, a
Member would thereby cede all control
and ability to establish and adjust such
risk settings to its Clearing Member
unless and until such responsibility is
revoked by the Member, as discussed in
further detail below. Because the
Member is responsible for its own
trading activity, the Exchange will not
provide a Clearing Member
authorization to establish and adjust
risk settings on behalf of a Member
without first receiving consent from the
Member. The Exchange would consider
a Member to have provided such
consent if it allocates the responsibility
to establish and adjust risk settings to its
Clearing Member via the risk
management tool available on the web
portal. By allocating such
responsibilities to its Clearing Member,
the Member consents to the Exchange
taking action, as set forth in proposed
paragraph (d) of Interpretation and
Policy .03, with respect to the Member’s
trading activity. Specifically, if the risk
setting(s) established by the Clearing
Member are breached, the Member
consents that the Exchange will
automatically block new orders
submitted and cancel open orders 10
until such time that the applicable risk
setting is adjusted to a higher limit by
the Clearing Member. A Member may
9 System is defined as ‘‘the electronic
communications and trading facility designated by
the Board through which securities orders of
Members are consolidated for ranking, execution
and, when applicable, routing away.’’ See Exchange
Rule 1.5(aa).
10 As discussed in further detail below, in the
event of a risk setting breach certain orders entered
for participation in an auction will not be canceled
by the Exchange after the applicable cut-off period.
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also revoke responsibility allocated to
its Clearing Member pursuant to this
paragraph at any time via the risk
management tool available on the web
portal.
Paragraph (b) of proposed
Interpretation and Policy .03 of Rule
11.13 provides that either a Member or
its Clearing Member, if allocated such
responsibility pursuant to paragraph (c)
of the proposed Interpretation and
Policy, may establish and adjust limits
for the risk settings provided in
proposed paragraph (a) of Interpretation
and Policy .03. A Member or Clearing
Member may establish and adjust limits
for the risk settings through the
Exchange’s risk management tool
available on the web portal. The risk
management web portal page will also
provide a view of all applicable limits
for each Member, which will be made
available to the Member and its Clearing
Member, as discussed in further detail
below.
Proposed paragraph (d) of
Interpretation and Policy .03 of Rule
11.13 would provide optional alerts to
signal when a Member is approaching
its designated limit. If enabled, the
alerts would generate when the Member
breaches certain percentage thresholds
of its designated risk limit, as
determined by the Exchange. Based on
current industry standards, the
Exchange anticipates initially setting
these thresholds at fifty, seventy, or
ninety percent of the designated risk
limit. Both the Member and Clearing
Member 11 would have the option to
enable the alerts via the risk
management tool on the web portal and
designate email recipients of the
notification.12 The proposed alert
system is meant to warn a Member and
Clearing Member of the Member’s
trading activity, and will have no
impact on the Member’s order and trade
activity if a warning percentage is
breached. Proposed paragraph (e) of
Interpretation and Policy .03 of Rule
11.13 would authorize the Exchange to
automatically block new orders
submitted and cancel all open orders in
the event that a risk setting is
breached.13 The Exchange will continue
11 A Clearing Member would have the ability to
enable alerts regardless of whether it was allocated
responsibilities pursuant to proposed paragraph (c).
12 The Member and Clearing Member may input
any email address for which an alert will be sent
via the risk management tool on the web portal.
13 Orders entered for participation in the Opening
or Closing Auction cannot be canceled or modified
after the applicable ‘‘cut-off’’ time, but will be
marked for cancellation. See Exchange Rules
11.23(b)(1)(B) and 11.23(c)(1)(B). Therefore, if a risk
setting breach occurs after the applicable cut-off
time for an Opening or Closing Auction, the auction
orders will not be canceled by the Exchange.
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to block new orders submitted until the
Member or Clearing Member, if
allocated such responsibility pursuant
to paragraph (c) of proposed
Interpretation and Policy .03, adjusts the
risk settings to a higher threshold. The
proposed functionality is designed to
assist Members and Clearing Members
in the management of, and risk control
over, their credit risk. Further, the
proposed functionality would allow the
Member to seamlessly avoid unintended
executions that exceed their stated risk
tolerance.
The Exchange does not guarantee that
the proposed risk settings described in
proposed Interpretation and Policy .03,
are sufficiently comprehensive to meet
all of a Member’s risk management
needs. Pursuant to Rule 15c3–5 under
the Act,14 a broker-dealer with market
access must perform appropriate due
diligence to assure that controls are
reasonably designed to be effective, and
otherwise consistent with the rule.15
Use of the Exchange’s risk settings
included in proposed Interpretation and
Policy .03 will not automatically
constitute compliance with Exchange or
federal rules and responsibility for
compliance with all Exchange and SEC
rules remains with the Member.
Additionally, as the Exchange
currently has the authority to share any
of a Member’s risk settings specified in
Interpretation and Policy .01 of Rule
11.13 under Exchange Rule 11.15(f)
with the Clearing Member that clears
transactions on behalf of the Member,
the Exchange also seeks such authority
as it pertains to risk settings specified in
proposed Interpretation and Policy .03.
Existing Rule 11.15(f) provides the
Exchange with authority to directly
provide Clearing Members, that clear
transactions on behalf of a Member, to
share any of the Member’s risk settings
set forth under Interpretation and Policy
.01 to Rule 11.13.16 The purpose of such
Similarly, orders entered for participation in the
Cboe Market Close (‘‘CMC’’) will be matched for
execution at the applicable cut-off time, and cannot
be canceled or modified after the cut-off time. See
Exchange Rule 11.28(a) and (b). Therefore, if a risk
setting breach occurs after the CMC cut-off time, the
CMC auction orders will not be canceled by the
Exchange.
14 17 CFR 240.15c3–5.
15 See Division of Trading and Markets,
Responses to Frequently Asked Questions
Concerning Risk Management Controls for Brokers
or Dealers with Market Access, available at https://
www.sec.gov/divisions/marketreg/faq-15c-5-riskmanagement-controls-bd.htm.
16 By using the optional risk settings provided in
Interpretation and Policy .01, a Member opts-in to
the Exchange sharing its risk settings with its
Clearing Member. Any Member that does not wish
to share such risk settings with its Clearing Member
can avoid sharing such settings by becoming a
Clearing Member. See Securities Exchange Act
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11423
a provision under Rule 11.15(f) was
implemented in order to reduce the
administrative burden on participants
on the Exchange, including both
Clearing Members and Members, and to
ensure that Clearing Members receive
information that is up to date and
conforms to the settings active in the
System. Further, the provision was
implemented because the Exchange
believed such functionality would help
Clearing Members to better monitor and
manage the potential risks that they
assume when clearing for Members of
the Exchange. Now, the Exchange also
proposes to amend paragraph (f) of
Exchange Rule 11.15 to authorize the
Exchange to share any of a Member’s
risk settings specified in proposed
Interpretation and Policy .03 to Rule
11.13 with the Clearing Member that
clears transactions on behalf of the
Member. The Exchange notes that the
use by a Member of the risk settings
offered by the Exchange is optional. By
using these proposed optional risk
settings, a Member therefore also optsin to the Exchange sharing its
designated risk settings with its Clearing
Member. The Exchange believes that its
proposal to offer additional risk settings
will allow Members to better manage
their credit risk. Further, by allowing
Members to allocate the responsibility
for establishing and adjusting such risk
settings to its Clearing Member, the
Exchange believes Clearing Members
may reduce potential risks that they
assume when clearing for Members of
the Exchange. The Exchange also
believes that its proposal to share a
Member’s risk settings set forth under
proposed Interpretation and Policy .03
to Rule 11.13 directly with Clearing
Members reduces the administrative
burden on participants on the Exchange,
including both Clearing Members and
Members, and ensures that Clearing
Members are receiving information that
is up to date and conforms to the
settings active in the System.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.17 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 18 requirements that the rules of
an exchange be designed to prevent
Release No. 80611 (May 5, 2017) 82 FR 22045 (May
11, 2017) (SR–BatsBZX–2017–24).
17 15 U.S.C. 78f(b).
18 15 U.S.C. 78f(b)(5).
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fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Specifically, the Exchange believes
the proposed amendment will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
provides additional functionality for a
Member to manage its credit risk. In
addition, the proposed risk settings
could provide Clearing Members, who
have assumed certain risks of Members,
greater control over risk tolerance and
exposure on behalf of their
correspondent Members, if allocated
responsibility pursuant to proposed
paragraph (c), while also providing an
alert system that would help to ensure
that both Members and its Clearing
Member are aware of developing issues.
As such, the Exchange believes that the
proposed risk settings would provide a
means to address potentially marketimpacting events, helping to ensure the
proper functioning of the market.
In addition, the Exchange believes
that the proposed rule change is
designed to protect investors and the
public interest because the proposed
functionality is a form of risk mitigation
that will aid Members and Clearing
Members in minimizing their financial
exposure and reduce the potential for
disruptive, market-wide events. In turn,
the introduction of such risk
management functionality could
enhance the integrity of trading on the
securities markets and help to assure the
stability of the financial system.
Further, the Exchange believes that
the proposed rule will foster
cooperation and coordination with
persons facilitating transactions in
securities because the Exchange will
provide alerts when a Member’s trading
activity reaches certain thresholds,
which will be available to both the
Member and Clearing Member. As such,
the Exchange may help Clearing
Members monitor the risk levels of
correspondent Members and provide
tools for Clearing Members, if allocated
such responsibility, to take action.
The proposal will permit Clearing
Members who have a financial interest
in the risk settings of Members to better
monitor and manage the potential risks
assumed by Clearing Members, thereby
providing Clearing Members with
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greater control and flexibility over
setting their own risk tolerance and
exposure. To the extent a Clearing
Member might reasonably require a
Member to provide access to its risk
settings as a prerequisite to continuing
to clear trades on the Member’s behalf,
the Exchange’s proposal to share those
risk settings directly reduces the
administrative burden on participants
on the Exchange, including both
Clearing Members and Members.
Moreover, providing Clearing Members
with the ability to see the risk settings
established for Members for which they
clear will foster efficiencies in the
market and remove impediments to and
perfect the mechanism of a free and
open market and a national market
system. The proposal also ensures that
Clearing Members are receiving
information that is up to date and
conforms to the settings active in the
System. The Exchange believes that the
proposal is consistent with the Act,
particularly Section 6(b)(5),19 because it
will foster cooperation and coordination
with persons engaged in facilitating
transactions in securities and more
generally, will protect investors and the
public interest, by allowing Clearing
Members to better monitor their risk
exposure and by fostering efficiencies in
the market and removing impediments
to and perfect the mechanism of a free
and open market and a national market
system.
Finally, the Exchange believes that
the proposed rule change does not
unfairly discriminate among the
Exchange’s Members because use of the
risk settings are optional and are not a
prerequisite for participation on the
Exchange. The proposed risk settings
are completely voluntary and, as they
relate solely to optional risk
management functionality, no Member
is required or under any regulatory
obligation to utilize them.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. In fact, the
Exchange believes that the proposal may
have a positive effect on competition
because it would allow the Exchange to
offer risk management functionality that
is comparable to functionality proposed
to be offered by other national securities
exchanges.20 Further, by providing
19 15
U.S.C. 78f(b)(5).
Securities Exchange Act Release No. 87715
(December 11, 2019) 84 FR 68995 (December 17,
2019) (SR–NYSE–2019–68).
20 See
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Members and their Clearing Members
additional means to monitor and control
risk, the proposed rule may increase
confidence in the proper functioning of
the markets and contribute to additional
competition among trading venues and
broker-dealers. Rather than impede
competition, the proposal is designed to
facilitate more robust risk management
by Members and Clearing Members,
which, in turn, could enhance the
integrity of trading on the securities
markets and help to assure the stability
of the financial system.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
II. 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 Exchange consents, the Commission
will:
A. By order approve or disapprove
such proposed rule change, or
B. institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2020–006 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–CboeBZX–2020–006. 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
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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
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
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–CboeBZX–2020–006 and
should be submitted on or before March
19, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020–03921 Filed 2–26–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88260; File No. SR–NSCC–
2020–004]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Establish
Implementation Date of National
Securities Clearing Corporation’s
Enhancements to the Haircut-Based
Volatility Charge Applicable to
Municipal Bonds
lotter on DSKBCFDHB2PROD with NOTICES
February 21, 2020.
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 February
21 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
17:26 Feb 26, 2020
Jkt 250001
20, 2020, National Securities Clearing
Corporation (‘‘NSCC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the clearing agency. NSCC filed the
proposed rule change pursuant to
Section 19(b)(3)(A) 3 of the Act and
subparagraph (f)(4) 4 of Rule 19b–4
thereunder. 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
The proposed rule change consists of
amendments to the NSCC Rules &
Procedures (the ‘‘Rules’’) 5 in order to
establish February 28, 2020 as the
implementation date of rule changes
submitted pursuant to rule filing SR–
NSCC–2019–004 (‘‘Rule Filing’’) 6 and
advance notice SR–NSCC–2019–801
(‘‘Advance Notice’’).7
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency 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. The
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
On February 13, 2020, the
Commission issued an order approving
the Rule Filing,8 which was filed by
NSCC pursuant to Section 19(b)(2) of
the Act.9 The Commission also issued a
notice of no objection to the Advance
3 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(4).
5 Capitalized terms not defined herein are defined
in the Rules, available at https://dtcc.com/∼/media/
Files/Downloads/legal/rules/nscc_rules.pdf.
6 See Securities Exchange Act Release No. 87858
(December 26, 2019), 85 FR 149 (January 2, 2020)
(SR–NSCC–2019–004).
7 See Securities Exchange Act Release No. 87911
(January 8, 2020), 85 FR 2197 (January 14, 2020)
(File No. SR–NSCC–2019–801).
8 See Securities Exchange Act Release No. 88191
(February 13, 2020) (SR–NSCC–2019–004).]
9 15 U.S.C. 78s(b)(2).
4 17
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
11425
Notice,10 which was filed with the
Commission pursuant to Section
806(e)(1) of Title VIII of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act entitled the Payment,
Clearing, and Settlement Supervision
Act of 2010 11 and Rule 19b–4(n)(1)(i) of
the Act.12
The purpose of the Rule Filing and
the Advance Notice is to amend the
Rules to enhance the methodology
NSCC uses for calculating the haircutbased margin charge applicable to
municipal bonds.
NSCC is filing this proposed rule
change to establish February 28, 2020 as
the implementation date of the rule
changes submitted pursuant to the Rule
Filing and the Advance Notice.
Specifically, NSCC would add a legend
to Procedure XV (Clearing Fund
Formula and Other Matters) of the Rules
(‘‘Procedure XV’’) 13 to state that the rule
changes submitted pursuant to the Rule
Filing and the Advance Notice have
been approved and not objected to,
respectively, but are not yet
implemented. The legend would
provide February 28, 2020 as the date
on which these rule changes would be
implemented and include the file
numbers of the Rule Filing and the
Advance Notice. The legend would also
state that when the rule changes are
implemented the legend would
automatically be removed from
Procedure XV.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act
requires, in part, that the Rules be
designed to (i) promote the prompt and
accurate clearance and settlement of
securities transactions and (ii) 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.14 The proposed rule
change would establish the
implementation date of rule changes
described above and provide Members
with an understanding of when these
rule changes will begin to affect them.
Knowing when the rule changes will
begin to affect Members would enable
them to timely fulfill their obligations to
NSCC, which would in turn ensure
NSCC’s processes work as intended.
Therefore, NSCC believes that the
proposed rule change would promote
10 See Securities Exchange Act Release No. 88162
(February 11, 2020) (SR–NSCC–2019–801).
11 12 U.S.C. 5465(e)(1).
12 17 CFR 240.19b–4(n)(1)(i).
13 Procedure XV, supra note 5.
14 15 U.S.C. 78q–1(b)(3)(F).
E:\FR\FM\27FEN1.SGM
27FEN1
]]>Agencies
[Federal Register Volume 85, Number 39 (Thursday, February 27, 2020)]
[Notices]
[Pages 11421-11425]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03921]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88263; File No. SR-CboeBZX-2020-006]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change Relating To Providing Members Certain
Optional Risk Settings Under Proposed Interpretation and Policy .03 of
Rule 11.13
February 21, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on February 12, 2020, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') is filing
with the Securities and Exchange Commission (the ``Commission'') a
proposal to provide Members certain optional risk settings under
proposed Interpretation and Policy .03 of Rule 11.13.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, 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 Exchange 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. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
[[Page 11422]]
A. Self-Regulatory Organization'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 provide Members \3\
the option to utilize certain risk settings under proposed
Interpretation and Policy .03 of Rule 11.13. In order to help Members
manage their risk, the Exchange proposes to offer optional risk
settings that would authorize the Exchange to take automated action if
a designated limit for a Member is breached. Such risk settings would
provide Members with enhanced abilities to manage their risk with
respect to orders on the Exchange. Paragraph (a) of proposed
Interpretation and Policy .03 of Rule 11.13 sets forth the specific
risk controls the Exchange proposes to offer. Specifically, the
Exchange proposes to offer two credit risk settings as follows:
---------------------------------------------------------------------------
\3\ See Exchange Rule 1.5(n).
---------------------------------------------------------------------------
The ``Gross Credit Risk Limit'', which refers to a pre-
established maximum daily dollar amount for purchases and sales across
all symbols, where both purchases and sales are counted as positive
values. For purposes of calculating the Gross Credit Risk Limit, only
executed orders are included; and
The ``Net Credit Risk Limit'', which refers to a pre-
established maximum daily dollar amount for purchases and sales across
all symbols, where purchases are counted as positive values and sales
are counted as negative values. For purposes of calculating the Net
Credit Risk Limit, only executed orders are included.
The Gross Credit and Net Credit risk settings are similar to credit
controls measuring both gross and net exposure provided for in
paragraph (h) of Interpretation and Policy .01 of Rule 11.13, but with
certain notable differences. Importantly, the proposed risk settings
would be applied at a Market Participant Identifier (``MPID'') level,
while the controls noted in paragraph (h) of Interpretation and Policy
.01 are applied at the logical port level.\4\ Therefore, the proposed
risk management functionality would allow a Member to manage its risk
more comprehensively, instead of relying on the more limited port level
functionality offered today. Further, the proposed risk settings would
be based on a notional execution value, while the controls noted in
paragraph (h) of Interpretation and Policy .03 are applied based on a
combination of outstanding orders on the Exchange's book and notional
execution value. The Exchange notes that the current gross and net
notional controls noted in paragraph (h) of Interpretation and Policy
.03 will continue to be available in addition to the proposed risk
settings.
---------------------------------------------------------------------------
\4\ A logical port represents a port established by the Exchange
within the Exchange's System for trading and billing purposes. Each
logical port established is specific to a Member or non-Member and
grants that Member or non-Member the ability to accomplish a
specific function, such as order entry, order cancellation, or data
receipt.
---------------------------------------------------------------------------
Paragraph (c) of proposed Interpretation and Policy .03 of Rule
11.13 provides that a Member that does not self-clear may allocate and
revoke \5\ the responsibility of establishing and adjusting the risk
settings identified in proposed paragraph (a) to a Clearing Member \6\
that clears transactions on behalf of the Member, if designated in a
manner prescribed by the Exchange.
---------------------------------------------------------------------------
\5\ As discussed below, if a Member revokes the responsibility
of establishing and adjusting the risk settings identified in
proposed paragraph (a), the settings applied by the Member would be
applicable.
\6\ The term ``Clearing Member'' refers to a Member that is a
member of a Qualified Clearing Agency and clears transactions on
behalf of another Member. See Exchange Rule 11.15(a).
---------------------------------------------------------------------------
By way of background, Exchange Rule 11.15(a) requires that all
transactions passing through the facilities of the Exchange shall be
cleared and settled through a Qualified Clearing Agency using a
continuous net settlement system.\7\ This requirement may be satisfied
by direct participation, use of direct clearing services, or by entry
into a corresponding clearing arrangement with another Member that
clears through a Qualified Clearing Agency (i.e., a Clearing Member).
If a Member clears transactions through another Member that is a
Clearing Member, such Clearing Member shall affirm to the Exchange in
writing, through letter of authorization, letter of guarantee or other
agreement acceptable to the Exchange, its agreement to assume
responsibility for clearing and settling any and all trades executed by
the Member designating it as its clearing firm.\8\ Thus, while not all
Members are Clearing Members, all Members are required to either clear
their own transactions or to have in place a relationship with a
Clearing Member that has agreed to clear transactions on their behalf
in order to conduct business on the Exchange. Therefore, the Clearing
Member that guarantees the Member's transactions on the Exchange has a
financial interest in the risk settings utilized within the System \9\
by the Member.
---------------------------------------------------------------------------
\7\ The term ``Qualified Clearing Agency'' means a clearing
agency registered with the Commission pursuant to Section 17A of the
Act that is deemed qualified by the Exchange. See Exchange Rule
1.5(u). The rules of any such clearing agency shall govern with the
respect to the clearance and settlement of any transactions executed
by the Member on the Exchange.
\8\ A Member can designate one Clearing Member per Market
Participant Identifier (``MPID'') associated with the Member.
\9\ System is defined as ``the electronic communications and
trading facility designated by the Board through which securities
orders of Members are consolidated for ranking, execution and, when
applicable, routing away.'' See Exchange Rule 1.5(aa).
---------------------------------------------------------------------------
Paragraph (c) is proposed by the Exchange in order to offer
Clearing Members an opportunity to manage their risk of clearing on
behalf of other Members, if authorized to do so by the Member trading
on the Exchange. Specifically, the Exchange believes such functionality
would help Clearing Members to better monitor and manage the potential
risks that they assume when clearing for Members of the Exchange. A
Member may allocate or revoke the responsibility of establishing and
adjusting the risk settings identified in proposed paragraph (a) to its
Clearing Member via the risk management tool available on the web
portal at any time. By allocating such responsibility, a Member would
thereby cede all control and ability to establish and adjust such risk
settings to its Clearing Member unless and until such responsibility is
revoked by the Member, as discussed in further detail below. Because
the Member is responsible for its own trading activity, the Exchange
will not provide a Clearing Member authorization to establish and
adjust risk settings on behalf of a Member without first receiving
consent from the Member. The Exchange would consider a Member to have
provided such consent if it allocates the responsibility to establish
and adjust risk settings to its Clearing Member via the risk management
tool available on the web portal. By allocating such responsibilities
to its Clearing Member, the Member consents to the Exchange taking
action, as set forth in proposed paragraph (d) of Interpretation and
Policy .03, with respect to the Member's trading activity.
Specifically, if the risk setting(s) established by the Clearing Member
are breached, the Member consents that the Exchange will automatically
block new orders submitted and cancel open orders \10\ until such time
that the applicable risk setting is adjusted to a higher limit by the
Clearing Member. A Member may
[[Page 11423]]
also revoke responsibility allocated to its Clearing Member pursuant to
this paragraph at any time via the risk management tool available on
the web portal.
---------------------------------------------------------------------------
\10\ As discussed in further detail below, in the event of a
risk setting breach certain orders entered for participation in an
auction will not be canceled by the Exchange after the applicable
cut-off period.
---------------------------------------------------------------------------
Paragraph (b) of proposed Interpretation and Policy .03 of Rule
11.13 provides that either a Member or its Clearing Member, if
allocated such responsibility pursuant to paragraph (c) of the proposed
Interpretation and Policy, may establish and adjust limits for the risk
settings provided in proposed paragraph (a) of Interpretation and
Policy .03. A Member or Clearing Member may establish and adjust limits
for the risk settings through the Exchange's risk management tool
available on the web portal. The risk management web portal page will
also provide a view of all applicable limits for each Member, which
will be made available to the Member and its Clearing Member, as
discussed in further detail below.
Proposed paragraph (d) of Interpretation and Policy .03 of Rule
11.13 would provide optional alerts to signal when a Member is
approaching its designated limit. If enabled, the alerts would generate
when the Member breaches certain percentage thresholds of its
designated risk limit, as determined by the Exchange. Based on current
industry standards, the Exchange anticipates initially setting these
thresholds at fifty, seventy, or ninety percent of the designated risk
limit. Both the Member and Clearing Member \11\ would have the option
to enable the alerts via the risk management tool on the web portal and
designate email recipients of the notification.\12\ The proposed alert
system is meant to warn a Member and Clearing Member of the Member's
trading activity, and will have no impact on the Member's order and
trade activity if a warning percentage is breached. Proposed paragraph
(e) of Interpretation and Policy .03 of Rule 11.13 would authorize the
Exchange to automatically block new orders submitted and cancel all
open orders in the event that a risk setting is breached.\13\ The
Exchange will continue to block new orders submitted until the Member
or Clearing Member, if allocated such responsibility pursuant to
paragraph (c) of proposed Interpretation and Policy .03, adjusts the
risk settings to a higher threshold. The proposed functionality is
designed to assist Members and Clearing Members in the management of,
and risk control over, their credit risk. Further, the proposed
functionality would allow the Member to seamlessly avoid unintended
executions that exceed their stated risk tolerance.
---------------------------------------------------------------------------
\11\ A Clearing Member would have the ability to enable alerts
regardless of whether it was allocated responsibilities pursuant to
proposed paragraph (c).
\12\ The Member and Clearing Member may input any email address
for which an alert will be sent via the risk management tool on the
web portal.
\13\ Orders entered for participation in the Opening or Closing
Auction cannot be canceled or modified after the applicable ``cut-
off'' time, but will be marked for cancellation. See Exchange Rules
11.23(b)(1)(B) and 11.23(c)(1)(B). Therefore, if a risk setting
breach occurs after the applicable cut-off time for an Opening or
Closing Auction, the auction orders will not be canceled by the
Exchange. Similarly, orders entered for participation in the Cboe
Market Close (``CMC'') will be matched for execution at the
applicable cut-off time, and cannot be canceled or modified after
the cut-off time. See Exchange Rule 11.28(a) and (b). Therefore, if
a risk setting breach occurs after the CMC cut-off time, the CMC
auction orders will not be canceled by the Exchange.
---------------------------------------------------------------------------
The Exchange does not guarantee that the proposed risk settings
described in proposed Interpretation and Policy .03, are sufficiently
comprehensive to meet all of a Member's risk management needs. Pursuant
to Rule 15c3-5 under the Act,\14\ a broker-dealer with market access
must perform appropriate due diligence to assure that controls are
reasonably designed to be effective, and otherwise consistent with the
rule.\15\ Use of the Exchange's risk settings included in proposed
Interpretation and Policy .03 will not automatically constitute
compliance with Exchange or federal rules and responsibility for
compliance with all Exchange and SEC rules remains with the Member.
---------------------------------------------------------------------------
\14\ 17 CFR 240.15c3-5.
\15\ See Division of Trading and Markets, Responses to
Frequently Asked Questions Concerning Risk Management Controls for
Brokers or Dealers with Market Access, available at https://www.sec.gov/divisions/marketreg/faq-15c-5-risk-management-controls-bd.htm.
---------------------------------------------------------------------------
Additionally, as the Exchange currently has the authority to share
any of a Member's risk settings specified in Interpretation and Policy
.01 of Rule 11.13 under Exchange Rule 11.15(f) with the Clearing Member
that clears transactions on behalf of the Member, the Exchange also
seeks such authority as it pertains to risk settings specified in
proposed Interpretation and Policy .03. Existing Rule 11.15(f) provides
the Exchange with authority to directly provide Clearing Members, that
clear transactions on behalf of a Member, to share any of the Member's
risk settings set forth under Interpretation and Policy .01 to Rule
11.13.\16\ The purpose of such a provision under Rule 11.15(f) was
implemented in order to reduce the administrative burden on
participants on the Exchange, including both Clearing Members and
Members, and to ensure that Clearing Members receive information that
is up to date and conforms to the settings active in the System.
Further, the provision was implemented because the Exchange believed
such functionality would help Clearing Members to better monitor and
manage the potential risks that they assume when clearing for Members
of the Exchange. Now, the Exchange also proposes to amend paragraph (f)
of Exchange Rule 11.15 to authorize the Exchange to share any of a
Member's risk settings specified in proposed Interpretation and Policy
.03 to Rule 11.13 with the Clearing Member that clears transactions on
behalf of the Member. The Exchange notes that the use by a Member of
the risk settings offered by the Exchange is optional. By using these
proposed optional risk settings, a Member therefore also opts-in to the
Exchange sharing its designated risk settings with its Clearing Member.
The Exchange believes that its proposal to offer additional risk
settings will allow Members to better manage their credit risk.
Further, by allowing Members to allocate the responsibility for
establishing and adjusting such risk settings to its Clearing Member,
the Exchange believes Clearing Members may reduce potential risks that
they assume when clearing for Members of the Exchange. The Exchange
also believes that its proposal to share a Member's risk settings set
forth under proposed Interpretation and Policy .03 to Rule 11.13
directly with Clearing Members reduces the administrative burden on
participants on the Exchange, including both Clearing Members and
Members, and ensures that Clearing Members are receiving information
that is up to date and conforms to the settings active in the System.
---------------------------------------------------------------------------
\16\ By using the optional risk settings provided in
Interpretation and Policy .01, a Member opts-in to the Exchange
sharing its risk settings with its Clearing Member. Any Member that
does not wish to share such risk settings with its Clearing Member
can avoid sharing such settings by becoming a Clearing Member. See
Securities Exchange Act Release No. 80611 (May 5, 2017) 82 FR 22045
(May 11, 2017) (SR-BatsBZX-2017-24).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\17\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \18\ requirements that the rules of an exchange be
designed to prevent
[[Page 11424]]
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Specifically, the Exchange believes the proposed amendment will
remove impediments to and perfect the mechanism of a free and open
market and a national market system because it provides additional
functionality for a Member to manage its credit risk. In addition, the
proposed risk settings could provide Clearing Members, who have assumed
certain risks of Members, greater control over risk tolerance and
exposure on behalf of their correspondent Members, if allocated
responsibility pursuant to proposed paragraph (c), while also providing
an alert system that would help to ensure that both Members and its
Clearing Member are aware of developing issues. As such, the Exchange
believes that the proposed risk settings would provide a means to
address potentially market-impacting events, helping to ensure the
proper functioning of the market.
In addition, the Exchange believes that the proposed rule change is
designed to protect investors and the public interest because the
proposed functionality is a form of risk mitigation that will aid
Members and Clearing Members in minimizing their financial exposure and
reduce the potential for disruptive, market-wide events. In turn, the
introduction of such risk management functionality could enhance the
integrity of trading on the securities markets and help to assure the
stability of the financial system.
Further, the Exchange believes that the proposed rule will foster
cooperation and coordination with persons facilitating transactions in
securities because the Exchange will provide alerts when a Member's
trading activity reaches certain thresholds, which will be available to
both the Member and Clearing Member. As such, the Exchange may help
Clearing Members monitor the risk levels of correspondent Members and
provide tools for Clearing Members, if allocated such responsibility,
to take action.
The proposal will permit Clearing Members who have a financial
interest in the risk settings of Members to better monitor and manage
the potential risks assumed by Clearing Members, thereby providing
Clearing Members with greater control and flexibility over setting
their own risk tolerance and exposure. To the extent a Clearing Member
might reasonably require a Member to provide access to its risk
settings as a prerequisite to continuing to clear trades on the
Member's behalf, the Exchange's proposal to share those risk settings
directly reduces the administrative burden on participants on the
Exchange, including both Clearing Members and Members. Moreover,
providing Clearing Members with the ability to see the risk settings
established for Members for which they clear will foster efficiencies
in the market and remove impediments to and perfect the mechanism of a
free and open market and a national market system. The proposal also
ensures that Clearing Members are receiving information that is up to
date and conforms to the settings active in the System. The Exchange
believes that the proposal is consistent with the Act, particularly
Section 6(b)(5),\19\ because it will foster cooperation and
coordination with persons engaged in facilitating transactions in
securities and more generally, will protect investors and the public
interest, by allowing Clearing Members to better monitor their risk
exposure and by fostering efficiencies in the market and removing
impediments to and perfect the mechanism of a free and open market and
a national market system.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Finally, the Exchange believes that the proposed rule change does
not unfairly discriminate among the Exchange's Members because use of
the risk settings are optional and are not a prerequisite for
participation on the Exchange. The proposed risk settings are
completely voluntary and, as they relate solely to optional risk
management functionality, no Member is required or under any regulatory
obligation to utilize them.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. In fact, the Exchange
believes that the proposal may have a positive effect on competition
because it would allow the Exchange to offer risk management
functionality that is comparable to functionality proposed to be
offered by other national securities exchanges.\20\ Further, by
providing Members and their Clearing Members additional means to
monitor and control risk, the proposed rule may increase confidence in
the proper functioning of the markets and contribute to additional
competition among trading venues and broker-dealers. Rather than impede
competition, the proposal is designed to facilitate more robust risk
management by Members and Clearing Members, which, in turn, could
enhance the integrity of trading on the securities markets and help to
assure the stability of the financial system.
---------------------------------------------------------------------------
\20\ See Securities Exchange Act Release No. 87715 (December 11,
2019) 84 FR 68995 (December 17, 2019) (SR-NYSE-2019-68).
---------------------------------------------------------------------------
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
II. 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 Exchange consents, the Commission will:
A. By order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBZX-2020-006 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-CboeBZX-2020-006. 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
[[Page 11425]]
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 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. 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-CboeBZX-2020-006 and should be submitted
on or before March 19, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-03921 Filed 2-26-20; 8:45 am]
BILLING CODE 8011-01-P
