[Federal Register Volume 79, Number 161 (Wednesday, August 20, 2014)]
[Notices]
[Pages 49357-49361]
[FR Doc No: 2014-19705]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72849; File No. SR-ICEEU-2014-13]

Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing of Proposed Rule Change Relating to the 2014 ISDA Credit
Derivatives Definitions

August 14, 2014.
    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 August 14, 2014, ICE Clear Europe Limited (``ICE Clear Europe'')
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 primarily by ICE Clear Europe. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The principal purpose of the proposed changes is to amend the ICE
Clear Europe Clearing Rules (the ``Rules'') and the ICE Clear Europe
CDS Procedures (the ``CDS Procedures'') to incorporate references to
revised Credit Derivatives Definitions, as published by the
International Swaps and Derivatives Association, Inc. (``ISDA'') on
February 21, 2014 (the ``2014 ISDA Definitions''). Consistent with the
approach being taken throughout the CDS market, the industry standard
2014 ISDA Definitions will be applicable to certain products cleared by
ICE Clear Europe beginning on September 22, 2014.

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

    In its filing with the Commission, ICE Clear Europe included
statements concerning the purpose 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. ICE Clear Europe has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.

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

1. Purpose
    ICE Clear Europe proposes to amend its existing Rules and CDS
Procedures to incorporate references to the 2014 ISDA Definitions to be
effective by the industry implementation date of September 22, 2014.
ICE Clear Europe principally proposes to (i) revise the Rules and CDS
Procedures to make proper distinctions between the 2014 ISDA
Definitions and the ISDA Credit Derivatives Definitions published
previously in 2003 (as amended in 2009, the ``2003 ISDA Definitions'')
and related documentation; and (ii) make conforming changes throughout
the Rules and the CDS Procedures to reference provisions from the
proper ISDA Definitions. In addition, the ICE Clear Europe CDS Risk
Policy has been revised to reflect appropriate portfolio margin
treatment between CDS Contracts cleared under the 2003 and 2014 ISDA
Definitions.
    As described by ISDA, the 2014 Definitions make a number of changes
from the 2003 ISDA Definitions to the standard terms for CDS Contracts,

including (i) introduction of new terms applicable to credit events
involving financial reference entities and settlement of such credit
events, (ii) introduction of new terms applicable to credit events
involving sovereign reference entities and settlement of such credit
events, (iii) implementation of standard reference obligations
applicable to certain reference entities, and (iv) various other
improvements and drafting updates that reflect market experience and
developments since the 2009 amendments to the 2003 ISDA Definitions.
    Commencing on the implementation date of September 22, 2014, ICE
Clear Europe intends to accept for clearing new transactions in
eligible contracts that reference the 2014 ISDA Definitions. In
addition, the amendments will provide for the conversion of certain
existing contracts currently based on the 2003 ISDA Definitions into
contracts based on the 2014 ISDA Definitions. (This approach is
consistent with expected industry practice for similar contracts not
cleared by ICE Clear Europe, which will be subject to a multilateral
amendment ``protocol'' sponsored by ISDA.) For contracts that are not
converting automatically, ICE Clear Europe expects to continue to
accept for clearing both new transactions referencing the 2014 ISDA
Definitions and new transactions referencing the 2003 ISDA Definitions
(and such contracts based on different definitions will not be
fungible). The ISDA protocol implementation has been developed with a
high level of industry involvement and consultation. ICE Clear Europe
understands, through industry consensus, that Clearing Members plan to
adhere to the ISDA protocol and would desire ICE Clear Europe to
convert certain protocol-eligible contracts cleared at ICE Clear Europe
into contracts based on the 2014 ISDA Definitions, consistent with the
ISDA protocol. Therefore, in an effort to achieve consistency across
the CDS marketplace, ICE Clear Europe's implementation plan is intended
to be fully consistent with the planned ISDA protocol implementation.
(Consistent with the protocol, most ICE Clear Europe CDS contracts will
convert, with certain exceptions involving CDS on so-called protocol
excluded reference entities, which are principally sovereigns and
financial reference entities.)
    ICE Clear Europe proposes to amend Parts 1, 9 and 15 of the Rules
and the CDS Procedures, as well as the CDS Risk Policy. Each of these
changes is described in detail as follows. All capitalized terms not
defined herein are defined in the Rules.
    Part 1 of the Rules has been amended to provide new definitions for
``2003 Credit Derivatives Definitions'' (which replaces the existing
``Credit Derivatives Definitions'' term) and ``2014 Credit Derivatives
Definitions,'' ``2003-type CDS Contract,'' ``2014-type CDS Contract,''
``Applicable Credit Derivatives Definitions'' and ``Component
Transaction.'' The new definitions accommodate the 2014 ISDA
Definitions, provide terms that allow for distinctions between the 2014
ISDA Definitions and the 2003 ISDA Definitions and have been applied
throughout the Rules and CDS Procedures. Additionally, conforming
changes in the definitions of ``CDS Contract'' and ``Set'' have been
made. Rule 109(b)(vii) has been amended to use the new term Applicable
Credit Derivatives Definitions and to correct certain other references
to defined terms.\3\ Rule 905(b) has also been amended to take into
account the possibility that, as a result of the rule amendments, CDS
Contracts may have different Applicable Credit Derivative Definitions.
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    \3\ Similar conforming changes have been made throughout the
Rules and CDS Procedures with respect to the use of the term
``Applicable Credit Derivative Definitions.''
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    In Part 15 (Credit Default Swaps) of the Rules, Rule 1501 has been
revised to incorporate new definitions relating to the 2014 ISDA
Definitions. In connection with a new concept in the 2014 ISDA
Definitions that permits a delivery of an ``Asset Package'' in the case
of certain credit events involving financial and sovereign reference
entities, a new definition of ``Asset Package Delivery Notice'' has
been added, as well as related references that ``Asset Package
Delivery,'' ``Asset Package,'' and ``Prior Deliverable Obligation''
have the meanings assigned to them in the 2014 ISDA Definitions. The
term ``Credit Event Announcement'' has been removed as it is no longer
used. The definition of ``Determining Body'' has been revised to
clarify that relevant determinations will be made under the Applicable
Credit Derivatives Definitions. The definitions of ``Restructuring
Credit Event Notice'' and ``Triggered Restructuring CDS Contract
Portion'' have been revised to include references, as appropriate, to
the 2014 ISDA Definitions as well as the current 2003 ISDA Definitions.
Clarifying amendments with respect to defined terms are also made in
the definitions of ``Restructuring CDS Contract,'' ``Restructuring
Credit Event Announcement'' and ``Restructuring Reference Entity.''
Conforming amendments are also made throughout Part 15 to use the new
defined term ``Relevant Restructuring Credit Event'' from the CDS
Procedures.\4\ Certain typographical corrections have been made as
well.
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    \4\ Similar conforming changes have been made throughout the
Rules and Procedures with respect to ``Relevant'' Restructuring
Credit Event.
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    Rule 1505 is amended to include references to Asset Package
Delivery Notices in provisions addressing certain notices that may be
provided in connection with CDS Contracts that are Matched Pairs.
    Rules 1509 and 1510 have been amended to include delivery mechanics
with respect to Asset Packages (in circumstances where physical
settlement applies) and related procedures for delivering notices with
respect thereto, consistent with the adoption of the Asset Package
delivery concept under the 2014 ISDA Definitions. Rule 1509(g) has been
amended to provide that if Asset Package Delivery is applicable, then
in circumstances where the Asset Package is deemed to be zero, physical
settlement shall be deemed to occur on a delivery-versus-payment basis
in accordance with the timetable set out in the 2014 ISDA Definitions.
    In addition, Rules 1509(b) and (c), 1512(e), 1513(a) and (b), and
1514(a) and sections 2.3(b), 2.4(d) and (e), 2.5(e), 2.6 and 2.7 of
Exhibit 4 (Settlement and Notice Terms) are updated to make reference
to the parallel provisions of the 2014 ISDA Definitions in conjunction
with the existing references to specific provisions of the 2003 ISDA
Definitions. Paragraph 2.5(f) of Exhibit 4 has been revised to add
parallel and substantially similar provisions relating to quotations in
connection with fallback cash settlement in the context of the 2014
ISDA Definitions to those that currently apply under the 2003 ISDA
Definitions.
    The CDS Procedures are revised as applicable to implement the
definitional changes in the Rules and the 2014 ISDA Definitions. These
changes include clarification of references to provisions within the DC
Rules, clarification as to whether previous references to ``Credit
Derivatives Definitions'' are to the 2003 ISDA Definitions or the 2014
ISDA Definitions and the addition of provisions consistent with the
2014 ISDA Definitions. The revisions to the CDS Procedures are intended
to ensure that all ICE Clear Europe CDS Products are treated
consistently with the

applicable ISDA Definitions in effect from time to time, as is practice
today.
    In paragraph 1.2 of the CDS Procedures, cross-references to a
variety of terms defined in the 2014 ISDA Definitions have been added,
and distinctions between terms used in the 2003 ISDA Definitions and
2014 ISDA Definitions have been made. In addition, a definition of
``2014 CDD Protocol'' has been added to mean the 2014 ISDA Credit
Derivatives Definition Protocol published by ISDA. A definition has
also been added for ``Protocol Effective Date'' which is defined in the
2014 CDD Protocol. In the definition of ``Acceptance Time,'' clause (b)
has been deleted as it relates to former acceptance timing for the
weekly clearing cycle that no longer applies. (This change is not
specifically related to the 2014 ISDA Definitions but is intended to
reflect current acceptance timing.) In addition, a definition has been
added for ``Relevant Restructuring Credit Event'' to mean in respect of
a CDS contract using the 2003 ISDA Definitions, any Restructuring and
with respect to a CDS Contract using the 2014 ISDA Definitions, an
M(M)R Restructuring. (This reflects a difference between the 2003 and
2014 ISDA Definitions with respect to triggering of settlement as a
result of such Restructuring events.) A definition for ``Restructuring
Credit Event Notice'' has also been defined as a Credit Event Notice in
respect of a Relevant Restructuring Credit Event.
    In addition, a correction has been made to the definition of
``Daily Aggregate MTM Interest Amount'' to properly incorporate the
defined term Mark-to-Market Interest. The definitions of ``NEMO
Triggering Period'', ``Notification Cut-Off Time'' and ``RMP Deadline
Time'' have been amended to specify the applicable deadlines and cut-
off points under the 2014 ISDA Definitions as well as 2003 ISDA
Definitions. The definition of ``Single Name Contract'' was modified to
mean a CDS Contract having, as the Reference Entity, an Eligible Single
Name Reference Entity. A definition of ``Original Annex Date'' has been
added for purposes of distinguishing the treatment of certain iTraxx
Europe CDS contracts under the 2014 and 2003 ISDA Definitions under
revised paragraph 9.1 (based on the date of publication of the relevant
underlying index). Various conforming references to the new or revised
defined terms have been made throughout the CDS Procedures, and various
provisions have been renumbered.
    Paragraph 2.2(f) was modified to clarify that the existing
requirement that a CDS Clearing Member must have access to at least one
physical settlement system that is customary for settlement of
deliverable obligations under CDS contracts does not apply to a
settlement system only required for Asset Package delivery under the
2014 ISDA Definitions. Paragraph 4.1 was modified to change the defined
terms ``CM1'' and ``CM2'' to the terms ``protection buyer'' and
``protection seller,'' respectively. Per amendments to paragraph
4.3(c), CDS Trade Particulars relating to an Eligible Single Name
Reference Entity submitted for clearing on or after the Protocol
Effective Date must identify whether the 2003 or 2014 ISDA Definitions
apply. An incorrect reference to Acceptance Notices has been removed
from paragraph 4.4(c). Paragraph 4.6 has been revised to clarify that
certain deemed deliveries of Credit Event Notices are only relevant
under 2003-type CDS Contracts. Non-substantive changes to improve
drafting clarity have been made in paragraph 4.8. Paragraphs 4.9 and
4.10 have been revised to reflect the potentially separate treatment of
component transactions under the 2003 and 2014 ISDA Definitions, and to
make certain other conforming changes to defined terms. Paragraph 4.11
was revised to add certain parallel references to determination of
Successors under the 2014 ISDA Definitions. Amendments in paragraph
4.13(b) and (e) reference the ``NOPS Cut-off Date'' which is the
relevant defined term in the 2014 ISDA Definitions. Paragraphs 4.19-
4.21 have been renumbered. In addition, cross-references in paragraph
5.7 have been updated.
    Paragraphs 6.2, 6.3, 6.4 and 6.6 have been revised to add parallel
references to relevant provisions of the 2014 ISDA Definitions and to
incorporate the concept of Asset Package Delivery Notices, among other
conforming changes. Paragraphs 6.3(f)(xi) and 6.3(g) are amended to
clarify that the Electronic Notice Process does not apply to Asset
Package Delivery Notices. Paragraph 6.5 (Disputes Relating to
Deliverable Obligations) was amended so that the dispute resolution
mechanics therein apply in connection with Asset Packages deliverable
in lieu of Prior Deliverable Obligations or Package Observable Bonds,
in addition to other deliverable obligations.
    In paragraph 7 (Cleared CDS Products: Eligible Sets), a new
provision 7.4 was added to clarify that the determination of whether
the 2003 ISDA Definitions or 2014 ISDA Definitions applies to an index
CDS Contract is made apply separately for each Component Transaction.
    Paragraphs 8.1 and 8.2(g) are updated to make reference to the
parallel provisions of the 2014 ISDA Definitions in conjunction with
the existing references to specific provisions of the 2003 ISDA
Definitions, and to distinguish between relevant provisions of the 2003
and 2014 ISDA Definitions, as appropriate.
    Paragraph 9 of the CDS Procedures, which sets out the contract
terms for iTraxx Europe Contracts, has been revised to implement the
2014 ISDA Definitions and related definitions and provisions.
Specifically, paragraph 9.1 is amended to clarify that different sub-
provisions of paragraph 9 will apply to CDS Contracts depending on when
they are accepted for clearing in relation to the Protocol Effective
Date and the MCA/STS Changeover Time. In revised paragraph 9.2, which
applies for iTraxx Contracts with an Original Annex Date on or after
the Protocol Effective Date (i.e., for transactions in the September
2014 or later versions of the index), the definition of ``iTraxx Terms
Supplement'' in subparagraph (b) is updated to include a reference to
the new ``iTraxx Europe Untranched Standard Terms Supplement'' expected
to be published by Markit North America, Inc. on or about September 20,
2014 to incorporate the 2014 ISDA Definitions. Paragraph 9.2(c)
contains certain amendments to the Standard iTraxx 2014 CDS Supplement
and iTraxx 2014 Confirmation generally consistent with those for prior
versions of the iTraxx Terms Supplement in existing paragraph 9.
    Revised paragraph 9.3 applies to iTraxx Europe CDS Contracts that
are accepted for clearing after the Protocol Effective Date but with an
Original Annex Date before the Protocol Effective Date (i.e., for new
transactions in older versions of the index). Pursuant to the new
iTraxx Europe Legacy Untranched Standard Terms Supplement, expected to
be published on or about September 20, 2014, it is expected that
certain Component Transactions of such contracts will be 2014-type CDS
Contracts and others will remain 2003-type CDS Contracts. Paragraph 9.3
contains definitions and provisions generally similar to those in
paragraph 9.2, and makes comparable amendments to the Standard iTraxx
Legacy CDS Supplement.
    Revised paragraph 9.4 was formerly paragraph 9.2 and applies to
iTraxx Europe CDS Contracts accepted for clearing after the MCA/STS
Changeover Time and before the Protocol Effective Date. As a result of
the conversion of such existing contracts as of the Protocol Effective
Date as described in

paragraph 9.7 below, such terms will apply only until the Protocol
Effective Date.
    Former paragraph 9.3 has been renumbered as paragraph 9.5, and
former paragraph 9.4 has been renumbered as paragraph 9.6. Consistent
with the provisions of paragraph 9.7, paragraph 9.6 was modified so
that it applies to iTraxx Europe CDS Contracts accepted for clearing
before the MCA/STS Changeover Time and will apply only until the
Protocol Effective Date.
    New paragraph 9.7 was added to provide for the conversion of
Contracts into 2014-type CDS Contracts as of the Protocol Effective
Date. iTraxx Europe CDS Contracts accepted for clearing before the
Protocol Effective Date (and thus subject to paragraph 9.4 or 9.6) will
after the Protocol Effective Date be subject to paragraph 9.3. Former
paragraph 9.5 has been renumbered as paragraph 9.8, and has been
revised to add appropriate parallel references to the 2014 ISDA
Definitions in conjunction with existing references to the 2003 ISDA
Definitions.
    Changes to paragraph 10 (Contract Terms for Single Name CDS
Contracts) reflect a variety of modifications to defined terms,
including replacing ``SNEC'' with ``Single Name'' (or, as applicable,
``STEC'' to follow the industry standard acronym). The provisions in
existing paragraph 11 of the CDS Procedures (addressing Standard
Western European Sovereign contracts) have also been combined with
those in paragraph 10, under the general category of Single Name CDS
Contracts. New paragraph 10.1 specifies the applicable contract terms
for all Single Name CDS Contracts based on the time of acceptance for
clearing. The existing subparagraphs of paragraph 10 have been
renumbered accordingly. Definitions have been moved to paragraph 10.3,
with various amendments made to incorporate the 2014 ISDA Definitions
and address the treatment of Contracts that are converting into 2014-
type CDS Contracts. The definition of ``List of Eligible Single Name
Reference Entities'' has been amended to reflect that a contract can be
either a 2003-type CDS Contract or a 2014-type CDS Contract. The
definition of ``Protocol Excluded Reference Entity'' has been added to
mean each Eligible Single Name Reference Entity that is an Excluded
Reference Entity (as defined in the 2014 CDD Protocol). Contracts on
such reference entities will not convert into 2014-type CDS Contracts,
and such reference entities are expected to consist principally of
certain financial and sovereign reference entities). Definitions have
also been added for ``Relevant Transaction Type,'' ``STEC Contract''
(CDS Single Name Contract referencing a Standard European Corporate)
and ``Non-STEC Single Name Contract'' (Single Name CDS Contract
referencing a Standard European Financial Entity, Standard Western
European Sovereign or Protocol Excluded Reference Entity). Conforming
changes to defined terms and cross references have been made in
paragraph 10.5. Paragraph 10.6 has been revised to add parallel
provisions referencing the 2014 ISDA Definitions and address certain
new features of the 2014 ISDA Definitions, including the Standard
Reference Obligation concept and specific terms for Financial Reference
Entities.
    Paragraph 10.7 has been added to address conversion of STEC
Contracts that are 2003-type CDS Contracts as of the Protocol Effective
Date. After the Protocol Effective Date, such contracts will be deemed
2014-type CDS Contracts. Paragraph 10.8 has been amended to provide
that updates to standard ISDA Confirmations will be reviewed and
implemented by the clearing house in the same manner as updates to
standard ISDA physical settlement matrices. Former paragraph 11
(Contract Terms for Sovereign Contracts) has been deleted as sovereign
CDS contracts are now included within the definition of ``Non-STEC
Single Name Contract.'' Finally, corresponding changes to provision
numbering throughout the CDS Procedures have been made as necessary.
    The ICE Clear Europe CDS Risk Policy has been revised to provide
for appropriate portfolio treatment between CDS Contracts cleared under
the 2003 and 2014 Definitions and to make certain other changes. In the
revised framework, each index, sub-index or underlying single name is
deemed a separate ``Risk Factor.'' The revisions introduce a ``Risk
Sub-Factor'' as a specific single name and any unique combination of
instrument attributes (e.g., restructuring clause, 2003 or 2014 ISDA
Definitions, debt tier, etc.) The union of all Risk Sub-Factors that
share the same underlying single name form a single name Risk Factor.
The portfolio treatment at the Risk Sub-Factor level is provided for in
the revised risk policy, as appropriate. The policy also reflects a
change in the 2014 ISDA Definitions that restructuring credit events
(including sovereign restructurings) other than M(M)R Restructuring do
not require separate triggering of each contract and are thus treated
as ``hard'' credit events such as bankruptcy and failure to pay. Other
changes are made to the risk policy regarding physical settlement,
including referencing the cash settlement fallback where physical
settlement fails.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act \5\ requires, among other things,
that the rules of a clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions, and
to the extent applicable, derivative agreements, contracts and
transactions and to comply with the provisions of the Act and the rules
and regulations thereunder. ICE Clear Europe believes that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to ICE Clear Europe, in
particular, Section 17A(b)(3)(F),\6\ because ICE Clear Europe believes
that the proposed rule change will assure the prompt and accurate
clearance and settlement of securities transactions and derivatives
agreements, contracts, and transactions. ICE Clear Europe believes the
proposed changes to the Rules and CDS Procedures and risk policy
conform to the 2014 ISDA Definitions as published by ISDA in
conjunction with an industry-wide effort. As part of this effort, CDS
market participants have developed the 2014 ISDA Definitions to reflect
market experience since the ISDA Credit Derivatives Definitions were
last significantly amended in 2009 (including credit events involving
financial and sovereign entities), and to make various related
improvements and clarifications to the terms of CDS contracts and the
operation of the CDS market. The changes to the Rules thus incorporate
references to the 2014 ISDA Definitions in order to permit clearing of
contracts referencing the new definitions, and distinguish where
applicable between the 2014 ISDA Definitions and the 2003 ISDA
Definitions. ICE Clear Europe plans to accept for clearing contracts
referencing the industry standard 2014 ISDA Definitions beginning with
the planned industry-wide implementation on September 22, 2014 (and to
convert certain existing contracts to the new definitions as of that
date). ICE Clear Europe believes the revisions to the Rules are
necessary in order to permit clearing of contracts on the new terms,
and to provide the market with the necessary assurances that ICE Clear
Europe plans to implement the 2014 ISDA Definitions consistent with

industry practice. As such, the proposed rule change is designed to
promote the prompt and accurate clearance and settlement of securities
transactions and derivatives agreements, contracts, and transactions
within the meaning of Section 17A(b)(3)(F) \7\ of the Act.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ Id.
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed changes to the Rules in order to incorporate
references to the 2014 ISDA Definitions will apply consistently across
all Participants and Non-Participant Parties and facilitate changes
sought to be made throughout the CDS market. Furthermore, the proposed
changes to the Rules in order to incorporate references to the 2014
ISDA Definitions do not preclude other market participants from making
similar changes (and indeed it is expected that other market
participants will do so, including for uncleared transactions). ICE
Clear Europe does not expect that the proposed changes will affect
access to clearing for Participants or their customers, or materially
affect the cost of clearing. As a result, ICE Clear Europe does not
believe the proposed rule change will have any impact, or impose any
burden, on competition not appropriate in furtherance of the purposes
of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others

    Written comments relating to the proposed changes to the rules have
not been solicited or received. ICE Clear Europe will notify the
Commission of any written comments received by ICE Clear Europe.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml ) or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-ICEEU-2014-13 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-ICEEU-2014-13. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filings will also be available
for inspection and copying at the principal office of ICE Clear Europe
and on ICE Clear Europe's Web site at https://www.theice.com/clear-europe/regulation.
    All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-ICEEU2014-13
and should be submitted on or before September 10, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-19705 Filed 8-19-14; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: June 22, 2006 (Volume 71, Number 120)]
[Rules and Regulations]
[Page 35810-35813]
[DOCID:fr22jn06-17]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 300

[FRL-8186-7]

National Oil and Hazardous Substance Pollution Contingency Plan;
National Priorities List Update

AGENCY: Environmental Protection Agency.

ACTION: Direct final notice of deletion of the Dixie Oil Processors,
Inc. Superfund Site from the National Priorities List.

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SUMMARY: The United States Environmental Protection Agency (EPA) Region
6 is publishing a direct final notice of deletion of the Dixie Oil
Processors, Inc. Superfund Site (Site), located in Friendswood, Texas,
from the National Priorities List (NPL). The NPL, promulgated pursuant
to section 105 of the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA) of 1980, as amended, is
appendix B of 40 CFR part 300, which is the National Oil and Hazardous
Substances Pollution Contingency Plan (NCP). This direct final notice
of deletion is being published by EPA with the concurrence of the State
of Texas, through the Texas Commission on Environmental Quality (TCEQ),
because EPA has determined that all appropriate response actions under
CERCLA have been completed and, therefore, further remedial action
pursuant to CERCLA is not appropriate.

DATES: This direct final notice of deletion will be effective August
21, 2006 unless EPA receives adverse comments by July 24, 2006. If
adverse comments are received, EPA will publish a timely withdrawal of
the

direct final notice of deletion in the Federal Register informing the
public that the deletion will not take effect.

ADDRESSES: Comments may be mailed to: Donn Walters, Community Outreach
Team, U.S. EPA Region 6 (6SF-PO), 1445 Ross Avenue, Dallas, TX 75202-
2733,<PHONE_NUMBER> or 1-800-533-3508 (walters.donn@epa.gov).
    Information Repositories: Comprehensive information about the Site
is available for viewing and copying during central standard time at
the Site information repositories located at: U.S. EPA Region 6
Library, 7th Floor, 1445 Ross Avenue, Suite 1200, Dallas, Texas 75202-
2733,<PHONE_NUMBER>, Monday through Friday 9 a.m. to 12 p.m. and 1
p.m. to 4 p.m.; San Jacinto College, South Campus Library, 13735 Beamer
Road, Houston, Texas 77089,<PHONE_NUMBER>, Monday through Thursday 8
a.m. to 9 p.m.; Friday 8 a.m. to 3 p.m.; Saturday 10 a.m. to 1 p.m.;
Texas Commission on Environmental Quality (TCEQ), Central File Room
Customer Service Center, Building E, 12100 Park 35 Circle, Austin,
Texas 78753,<PHONE_NUMBER>, Monday through Friday 8 a.m. to 5 p.m.

FOR FURTHER INFORMATION CONTACT: John C. Meyer, Remedial Project
Manager (RPM), U.S. EPA Region 6 (6SF-LP), 1445 Ross Avenue, Dallas, TX
75202-2733,<PHONE_NUMBER> or 1-800-533-3508 (meyer.john@epa.gov).

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. NPL Deletion Criteria
III. Deletion Procedures
IV. Basis for Site Deletion
V. Deletion Action

I. Introduction

    The EPA Region 6 office is publishing this direct final notice of
deletion of the Dixie Oil Processors, Inc. Superfund Site from the NPL.
    The EPA identifies sites that appear to present a significant risk
to public health or the environment and maintains the NPL as the list
of those sites. As described in Sec.  300.425(e)(3) of the NCP, sites
deleted from the NPL remain eligible for remedial actions if conditions
at a deleted site warrant such action.
    Because EPA considers this action to be noncontroversial and
routine, EPA is taking it without prior publication of a notice of
intent to delete. This action will be effective August 21, 2006 unless
EPA receives adverse comments by July 24, 2006 on this document. If
adverse comments are received within the 30-day public comment period
on this document, EPA will publish a timely withdrawal of this direct
final notice of deletion before the effective date of the deletion and
the deletion will not take effect. The EPA will, as appropriate,
prepare a response to comments and continue with the deletion process
on the basis of the notice of intent to delete and the comments already
received. There will be no additional opportunity to comment.
    Section II of this document explains the criteria for deleting
sites from the NPL. Section III discusses procedures that EPA is using
for this action. Section IV discusses the Dixie Oil Processors, Inc.
Superfund Site and demonstrates how it meets the deletion criteria.
Section V discusses EPA's action to delete the Site from the NPL unless
adverse comments are received during the public comment period.

II. NPL Deletion Criteria

    Section 300.425(e) of the NCP provides that releases may be deleted
from the NPL where no further response is appropriate. In making a
determination to delete a release from the NPL, EPA shall consider, in
consultation with the State, whether any of the following criteria have
been met:
    i. Responsible parties or other persons have implemented all
appropriate response actions required;
    ii. All appropriate Fund-financed (Hazardous Substance Superfund
Response Trust Fund) response under CERCLA has been implemented, and no
further response action by responsible parties is appropriate; or
    iii. The remedial investigation has shown that the release poses no
significant threat to public health or the environment and, therefore,
the taking of remedial measures is not appropriate.
    Even if a site is deleted from the NPL, where hazardous substances,
pollutants, or contaminants remain at the deleted site above levels
that allow for unlimited use and unrestricted exposure, CERCLA section
121(c), 42 U.S.C. 9621(c), requires that a subsequent review of the
site be conducted at least every five years after the initiation of the
remedial action at the deleted site to ensure that the action remains
protective of public health and the environment. If new information
becomes available which indicates a need for further action, EPA may
initiate remedial actions. Whenever there is a significant release from
a site deleted from the NPL, the deleted site may be restored to the
NPL without application of the hazard ranking system.

III. Deletion Procedures

    The following procedures apply to deletion of the Site:
    (1) The EPA consulted with TCEQ on the deletion of the Site from
the NPL prior to developing this direct final notice of deletion.
    (2) TCEQ concurred with deletion of the Site from the NPL.
    (3) Concurrently with the publication of this direct final notice
of deletion, a notice of the availability of the parallel notice of
intent to delete published today in the ``Proposed Rules'' section of
the Federal Register is being published in a major local newspaper of
general circulation at or near the Site and is being distributed to
appropriate Federal, state, and local government officials and other
interested parties; the newspaper notice announces the 30-day public
comment period concerning the notice of intent to delete the Site from
the NPL.
    (4) The EPA placed copies of documents supporting the deletion in
the Site information repositories identified above.
    (5) If adverse comments are received within the 30-day public
comment period on this document, EPA will publish a timely notice of
withdrawal of this direct final notice of deletion before its effective
date and will prepare a response to comments and continue with the
deletion process on the basis of the notice of intent to delete and the
comments already received.
    Deletion of a site from the NPL does not itself create, alter, or
revoke any individual's rights or obligations. Deletion of a site from
the NPL does not in any way alter EPA's right to take enforcement
actions, as appropriate. The NPL is designed primarily for
informational purposes and to assist EPA management. Section
300.425(e)(3) of the NCP states that the deletion of a site from the
NPL does not preclude eligibility for future response actions, should
future conditions warrant such actions.

IV. Basis for Site Deletion

    The following information provides EPA's rationale for deleting
this Site from the NPL.

Site Location

    The Dixie Oil Processors (DOP) Site is located approximately 20
miles southeast of Houston, Texas, in Harris County. The Site occupies
approximately 26.6 acres. Portions of the Site occur both north and
south of Dixie Farm Road and are designated as DOP North and DOP South.
DOP North covers 19.0 acres and DOP South covers 7.6 acres.
    Mud Gully, a flood control ditch and local tributary of Clear
Creek, runs along the eastern boundary of DOP North and

the western boundary of DOP South. The Brio Refining Superfund Site
borders DOP to the northeast and an abandoned athletic field borders
DOP North to the southwest.

Site History

    Over the years, several companies conducted operations at the DOP
site. Intercoastal Chemical Company (ICC) operated a copper recovery
and hydrocarbon washing facility on the DOP North site from 1969 to
1978. A total of six surface impoundments were used by ICC to store
wastewater containing copper prior to recovery and to treat wastewater
prior to discharge. Wastewaters from the hydrocarbon washing operations
were also discharged into one of the impoundments. During a two year
period between 1975 and 1977, the impoundments were closed and
decommissioned.
    In 1978, DOP began operations on the south side of the site.
Activities occurring on the site included regeneration of cuprous
chloride catalyst; hydrocarbon washing to produce ethylbenzene,
toluene, aromatic solvents, and styrene pitch; oil recovery; and
blending and distilling residues from local chemical plants and
refineries (mainly phenolic tank bottom tars and glycol cutter stock)
to produce various petroleum products including fuel oil, creosote
extender, and a molybdenum concentrate catalyst.
    Active operations on the DOP site stopped in 1986. Approximately
6,000 cubic yards of contaminated soils were excavated in 1984 and
disposed off-site.

Remedial Investigation and Feasibility Study (RI/FS)

    A remedial investigation conducted by the potentially responsible
parties (PRPs) began at the site in 1986. This investigation identified
three potential sources of contamination: the contents of drums and
tanks comprising the process facility, soils associated with the onsite
waste pits (now closed-out), and contaminated groundwater. The
investigation found approximately 107,351 cubic yards of contaminated
soils and subsoils on the site, associated with six different pits. The
contaminants of concern included ethylbenzene, hexachlorobenzene, and
copper.
    The risk assessment concluded that the site potentially poses four
major risks to human health and the environment: ingestion of on-site
soils, direct contact with on-site soils, inhalation of dust from the
site, and ingestion of shallow ground water from the site.

Record of Decision

    A Record of Decision (ROD) was issued for the DOP site by the EPA
on March 31, 1988 selecting limited action and monitoring, including
fluids stabilization and a site cover with institutional controls. In
accordance with the requirements of the Unilateral Administrative
Order, Docket Number 6-23-91, signed by the EPA on July 10, 1991, a
group of PRPs known as the DOP Task Force was directed to design and
implement the remedial action as specified in the ROD.

Response Actions

    The remedy was broken into two phases for implementation. The Phase
I activities included:
     Removal of surface contamination;
     Improvement of surface water controls;
     Reconstruction of Mud Gully;
     Revegetation and installation of security fencing.

Phase II activities included:
     Removal and off-site disposal of tank residuals;
     Dismantlement of the process tanks and drums;
     Disposal of process equipment.
    Phase I field activities began on March 26, 1992. Surficial
deposits of contamination were removed, stored in roll-off containers
and sent off-site for disposal. Approximately 1750 tons of contaminated
soils and sludges from storage tanks were sent off-site for disposal.
All off-site facilities were in compliance with EPA's Off-Site Disposal
Policy.
    Phase II activities began in August 1992. This phase entailed
removal of liquids and sludges stored in process vessels left on the
site. Approximately 250,000 gallons of material were removed from the
vessels and sent off-site for disposal. The vessels were removed and
sent to a smelting facility.
    The DOP Task Force notified EPA that Phase I and Phase II
activities were completed on March 27, 1993. A pre-certification
inspection was conducted by EPA on April 20, 1993. The DOP Task Force
certified that the Remedial Action was complete in a letter dated April
27, 1993. The DOP Task Force prepared a Remedial Action Report that
contained a certification by a Texas Professional Engineer that all the
requirements of the Remedial Design were met. EPA approved the report
on August 6, 1993.

Operation and Maintenance (O&M)

    In July 1993, the DOP Task Force submitted a Monitoring, Operation
and Maintenance (MO&M) Plan for the DOP site. The plan was revised in
January 1999. The purpose of the MO&M Plan is to document procedures to
be used to assess the long-term success of the site remedy while
minimizing adverse natural or man-made impacts on the DOP site. The
plan requires (i) monthly inspections and maintenance, (ii) a five-year
review as required by the EPA, and (iii) semi-annual monitoring of the
environmental media (soil, ground water, and air).
    The DOP Task Force conducts monthly site inspections to identify
any damage to the site facilities, and monitors the general health and
integrity of the soil cover.
    Since monitoring began in May 1993, the DOP Task Force has kept
records of site activities and submitted them to the EPA on an annual
basis. The reports include specific maintenance activities completed
during the past year, dates that maintenance activities were performed,
names of people and companies performing the maintenance activities,
and any replacements or redesigns of deficient materials or equipment.
    The institutional control plan for the Site was revised in February
2006 and included deed restrictions filed by the landowner in 2005. The
deed restrictions provide long-term assurance of the protectiveness of
the remedy by limiting the future uses of the site.

Five-Year Review

    Consistent with section 121(c) of CERCLA and requirements of the
OSWER Directive 9355.7-03B-P (``Comprehensive Five-Year Review
Guidance'', June 2001), a five-year review is required at the Site. The
Directive requires EPA to conduct statutory five-year reviews at sites
where, upon attainment of ROD cleanup levels, hazardous substances
remaining within restricted areas onsite do not allow unlimited use of
the entire site.
    Since hazardous substances remain onsite, this Site is subject to
five-year reviews to ensure the continued protectiveness of the remedy.
Based on the five-year results, EPA will determine whether human health
and the environment continues to be adequately protected by the
implemented remedy. Five-year reviews were completed on September 24,
1998 and September 4, 2003. The reviews found that the remedy remains
protective of human health and the environment. The MO&M plan was
revised in January 1999, and continues to be implemented by the DOP
Task Force to ensure the remedy remains protective.

Community Involvement

    Public participation activities have been satisfied as required in
CERCLA section 113(k), 42 U.S.C. 9613(k), and CERCLA section 117, 42
U.S.C. 9617. Documents in the deletion docket which EPA relied on for
recommendation of the deletion from the NPL are available to the public
in the information repositories.

V. Deletion Action

    The EPA, with concurrence of the State of Texas, has determined
that all appropriate responses under CERCLA have been completed, and
that no further response actions under CERCLA, other than O&M and five-
year reviews, are necessary. Therefore, EPA is deleting the Site from
the NPL.
    Because EPA considers this action to be noncontroversial and
routine, EPA is taking it without prior publication. This action will
be effective August 21, 2006 unless EPA receives adverse comments by
July 24, 2006. If adverse comments are received within the 30-day
public comment period, EPA will publish a timely withdrawal of this
direct final notice of deletion before the effective date of the
deletion and it will not take effect. The EPA will prepare a response
to comments and continue with the deletion process on the basis of the
notice of intent to delete and the comments already received. There
will be no additional opportunity to comment.

List of Subjects in 40 CFR Part 300

    Environmental protection, Air pollution control, Chemicals,
Hazardous substances, Hazardous waste, Intergovernmental relations,
Penalties, Reporting and recordkeeping requirements, Superfund, Water
pollution control, Water supply.

    Dated: May 5, 2006.
Lawrence E. Starfield,
Deputy Regional Administrator, Region 6.

0
For the reasons set out in this document, 40 CFR part 300 is amended as
follows:

PART 300--[AMENDED]

0
1. The authority citation for part 300 continues to read as follows:

    Authority: 33 U.S.C. 1321(c)(2); 42 U.S.C. 9601-9657; E.O.
12777, 56 FR 54757, 3 CFR, 1991 Comp., p. 351; E.O. 12580, 52 FR
2923, 3 CFR, 1987 Comp., p. 193.

Appendix B--[Amended]

0
2. Table 1 of Appendix B to Part 300 is amended under Texas (``TX'') by
removing the entry for ``Dixie Oil Processors, Inc.''.

[FR Doc. E6-9748 Filed 6-21-06; 8:45 am]

BILLING CODE 6560-50-P


[Federal Register Volume 81, Number 248 (Tuesday, December 27, 2016)]
[Notices]
[Pages 95238-95241]
[FR Doc No: 2016-31100]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79608; File No. SR-CHX-2016-16]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Order Instituting Proceedings To Determine Whether To Approve or
Disapprove a Proposed Rule Change To Adopt the CHX Liquidity Taking
Access Delay

December 20, 2016.

I. Introduction

    On September 6, 2016, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt the CHX Liquidity Taking
Access Delay (``LTAD''). The proposed rule change was published for
comment in the Federal Register on September 22, 2016.\3\ On November
1, 2016, pursuant to Section 19(b)(2) of the Exchange Act,\4\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\ The Commission received 20 comments on the proposed rule
change, including a response to certain comment letters by the
Exchange.\6\ This order institutes proceedings under Section
19(b)(2)(B) of the Exchange Act \7\ to determine whether to approve or
disapprove the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 78860 (September 16,
2016), 81 FR 65442 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 79216, 81 FR 78228
(November 7, 2016). The Commission designated December 21, 2016, as
the date by which the Commission shall either approve or disapprove,
or institute proceedings to determine whether to disapprove, the
proposed rule change.
    \6\ See letters from: (1) Douglas A. Cifu, Chief Executive
Officer, Virtu Financial, dated September 21, 2016 (``Virtu
Letter''); (2) R.T. Leuchtkafer, dated September 29, 2016
(``Leuchtkafer Letter 1''); (3) Adam Nunes, Head of Business
Development, Hudson River Trading LLC, dated October 6, 2016
(``Hudson River Trading Letter''); (4) Beste Bidd, Trader, dated
October 9, 2016 (``Beste Bidd Letter''); (5) Joanna Mallers,
Secretary, FIA Principal Traders Group, dated October 13, 2016
(``FIA PTG Letter''); (6) John L. Thornton, Co-Chair, Hal S. Scott,
Director, and R. Glenn Hubbard, Co-Chair, Committee on Capital
Markets Regulation, dated October 13, 2016 (``Committee on Capital
Markets Letter''); (7) Adam C. Cooper, Senior Managing Director and
Chief Legal Officer, Citadel Securities, dated October 13, 2016
(``Citadel Letter''); (8) Tyler Gellasch, Executive Director,
Healthy Markets Association, dated October 13, 2016 (``HMA
Letter''); (9) Eric Budish, Professor of Economics, University of
Chicago Booth School of Business, dated October 13, 2016 (``Budish
Letter''); (10) Elizabeth K. King, General Counsel and Corporate
Secretary, New York Stock Exchange, dated October 14, 2016 (``NYSE
Letter''); (11) James J. Angel, Associate Professor, McDonough
School of Business, Georgetown University, dated October 16, 2016
(``Angel Letter''); (12) Eric Swanson, EVP, General Counsel and
Secretary, Bats Global Markets, Inc., dated October 25, 2016 (``Bats
Letter''); (13) Eric Pritchett, Chief Executive Officer, Potamus
Trading LLC, dated October 26, 2016 (``Potamus Letter''); (14) James
Ongena, Executive Vice President and General Counsel, CHX, dated
October 28, 2016 (``CHX Response''); (15) Steve Crutchfield, Head of
Market Structure, CTC Trading Group, L.L.C., dated November 1, 2016
(``CTC Letter''); (16) Boris Ilyevsky, Brokerage Director,
Interactive Brokers LLC, dated November 7, 2016 (``IB Letter'');
(17) Alex Jacobson, dated November 9, 2016 (``Jacobson Letter'');
(18) Brian Donnelly, Founder and Chief Executive Officer, Volant
Trading, dated November 28, 2016 (``Volant Letter''); (19) R.T.
Leuchtkafer, dated December 14, 2016 (``Leuchtkafer Letter 2''); and
(20) Theodore R. Lazo, Managing Director and Associate General
Counsel, Securities Industry and Financial Markets Association,
dated December 16, 2016 (``SIFMA Letter''). All of the comment
letters are available at: https://www.sec.gov/comments/sr-chx-2016-16/chx201616.shtml.
    \7\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

II. Summary of the Proposal

A. Description

    The LTAD would require all new incoming orders \8\ received during
the Open Trading State \9\ that could immediately execute against one
or more resting orders on the CHX book, as well as certain related
cancel messages, to be intentionally delayed for 350 microseconds
before such delayed messages would be processed \10\ by the Matching
System.\11\ All other messages, including liquidity providing orders
(i.e., orders that would not immediately execute against resting
orders) and cancel messages for resting orders, would be immediately
processed without delay.
---------------------------------------------------------------------------

    \8\ ``New incoming orders'' are orders received by the Matching
System for the first time. The LTAD would not apply to other
situations where existing orders or portions thereof are treated as
incoming orders, such as (1) resting orders that are price slid into
a new price point pursuant to the CHX Only Price Sliding or Limit
Up-Limit Down Price Sliding Processes and (2) unexecuted remainders
of routed orders released into the Matching System. See Notice,
supra note 3, 81 FR at 65443, n.5.
    \9\ ``Open Trading State'' means the period of time during the
regular trading session when orders are eligible for automatic
execution. See CHX Article 1, Rule 1(qq).
    \10\ ``Processed'' means executing instructions contained in a
message, including, but not limited to, permitting an order to
execute within the Matching System pursuant to the terms of the
order or cancelling an existing order. See Notice, supra note 3, 81
FR at 65443, n.7.
    \11\ ``Matching System'' means the automated order execution
system, which is part of CHX's ``Trading Facilities'' as defined
under CHX Article 1, Rule 1(z). See id. at 65443, n.8.
---------------------------------------------------------------------------

    Each delayable message would be diverted into the LTAD queue and
would remain delayed until it is released for processing. A delayed
message would become releasable 350 microseconds after initial receipt
by the Exchange (``Fixed LTAD Period''), and would be processed only
after the Matching System has evaluated and processed, if applicable,
all messages in the security received by the Exchange during the Fixed
LTAD Period for the delayed message.\12\ A message may be delayed for
longer than the Fixed LTAD Period depending on the then-current
messaging volume in the security, according to the Exchange.\13\
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    \12\ See id. at 65444.
    \13\ See id. at 65444, text accompanying n.35.
---------------------------------------------------------------------------

B. Purpose of the LTAD

    The Exchange states that it designed and proposed the LTAD to
respond to declines in CHX volume and size at the national best bid or
offer (``NBBO'') in the SPDR S&P 500 trust exchange-traded fund
(``SPY'') between January 2016 and July 2016, which it attributes to
latency arbitrage activity in SPY.\14\ CHX defines ``latency
arbitrage'' as the practice of exploiting disparities in the price of a
security or related securities that are being traded in different
markets by taking advantage of the time it takes to access and respond
to market information.\15\
---------------------------------------------------------------------------

    \14\ See id. at 65443.
    \15\ See id. at 65443, n.3.
---------------------------------------------------------------------------

    The Exchange asserts that much of the CHX liquidity in SPY and
other S&P 500-correlated securities is provided as part of an arbitrage
strategy between CHX and the futures markets, whereby liquidity
providers utilize, among other things, proprietary algorithms to price
and size resting orders on CHX to track index market data from a
derivatives market (e.g., E-Mini S&P traded on the Chicago Mercantile
Exchange's Globex trading platform).\16\ According to the Exchange,
prior to the beginning of the SPY latency arbitrage activity, which CHX
first observed in January of 2016, CHX volume and liquidity in SPY

constituted a material portion of overall volume and liquidity in SPY
market-wide. Specifically, CHX states that: (1) Its market share in SPY
as a percentage of total volume decreased from 5.73% in January 2016 to
0.57% in July 2016, while certain control securities (``Control
Securities'') did not experience similar declines; \17\ and (2) the
time-weighted average CHX size at the NBBO in SPY relative to the total
NMS size at the NBBO in SPY decreased from 44.36% in January 2016 to
3.39% of the total NMS size at the NBBO in SPY in July 2016, while the
Control Securities did not experience similar declines.\18\
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    \16\ See id. at 65443, n.10.
    \17\ CHX states that it designated DIA, IWM, and QQQ as Control
Securities because they share the following similarities to SPY: (1)
Highly correlated in price movements with a well-known equity market
index; (2) ETFs; (3) traded in CHX's Chicago data center; (4)
actively traded in the NMS; and (5) highly correlated with a futures
contract traded electronically on the Globex trading platform. See
id. at 65448, n.59 and accompanying text.
    \18\ See id. at 65443, n.11.
---------------------------------------------------------------------------

    The Exchange asserts that the LTAD would enhance displayed
liquidity and price discovery in NMS securities without adversely
affecting the ability of virtually all market participants, other than
latency arbitrageurs, to access liquidity at CHX.\19\ In support of
this conclusion, CHX offers an analysis of cancel activity in SPY at
CHX for the period starting in May 2016 through July 2016, and asserts
that, if the LTAD had been implemented during that time period, out of
a total of 18,316 at least partially-executed orders in SPY, only 20
liquidity taking orders not attributed to latency arbitrage activity
would have not been executed.\20\
---------------------------------------------------------------------------

    \19\ See id. at 65456.
    \20\ See id. at 65444, n.19.
---------------------------------------------------------------------------

III. Summary of Comments

    Commenters both supportive of and opposing the proposed rule change
have opined on a number of aspects of the proposed rule change and
whether the proposal is consistent with the requirements of the
Exchange Act and the rules thereunder.
    Some commenters question whether latency arbitrage as asserted by
CHX is to blame for the decline in CHX's market share and whether the
LTAD would solve the purported problem.\21\ Other commenters assert
that the proposed rule change is overbroad because the proposed LTAD is
a systemic solution to a problem--namely a decline in CHX's market
share in one security--that CHX has not demonstrated to be market-
wide.\22\ One commenter states that based on CHX's assertion that
latency arbitrage is a market-wide issue caused by a structural bias,
the Commission should not address the issue in isolation, but should
instead consider a market-wide solution.\23\
---------------------------------------------------------------------------

    \21\ See Hudson River Trading Letter, supra note 6, at 2; HMA
Letter, supra note 6, at 5.
    \22\ See Citadel Letter, supra note 6, at 11; HMA Letter, supra
note 6, at 4.
    \23\ See SIFMA Letter, supra note 6, at 5.
---------------------------------------------------------------------------

    One commenter asserts that the LTAD might enable latency arbitrage
among correlated instruments by applying its speed bump to some but not
all related securities.\24\ Another commenter states that applying the
LTAD on a security-by-security basis would add unnecessary market
complexity and give CHX unreasonable flexibility while requiring market
participants to develop symbol specific routing strategies to meet
their obligations under Rule 611 of Regulation NMS.\25\
---------------------------------------------------------------------------

    \24\ See Leuchtkafer Letter 1, supra note 6, at 2; Leuchtkafer
Letter 2, supra note 6, at 5.
    \25\ See SIFMA Letter, supra note 6, at 4.
---------------------------------------------------------------------------

    One commenter asserts that what CHX describes as latency arbitrage
could be another firm or firms engaging in a similar arbitrage strategy
between CHX and the futures markets that are faster and/or more skilled
than CHX's liquidity providers.\26\ CHX responds by insisting that
utilization of algorithms by liquidity providers to price and size
resting orders on CHX to track index market data from a derivatives
market is different than latency arbitrage and provides additional data
that it asserts supports that conclusion.\27\ Another commenter
questions whether CHX could address what it perceives as latency
arbitrage by improving its technology to reduce the time to cancel for
liquidity providers.\28\
---------------------------------------------------------------------------

    \26\ See Hudson River Trading Letter, supra note 6, at 2.
    \27\ See CHX Response, supra note 6, at 6. Specifically, CHX
submits the following additional data regarding SPY for the period
of May through July 2016: (1) Latency arbitrage resulted in no
liquidity in SPY at CHX as all orders that CHX attributes to latency
arbitrage were Immediate Or Cancel orders; and (2) while 77% of the
trades that CHX attributes to latency arbitrage were followed by
late cancel messages for the provide order soon after the execution,
only 2.7% of the trades the CHX does not attribute to latency
arbitrage were followed by late cancel messages from the liquidity
provider.
    \28\ See SIFMA Letter, supra note 6, at 4-5.
---------------------------------------------------------------------------

    A number of commenters assert that the proposed LTAD would increase
displayed liquidity.\29\ One commenter, however, asserts that, while
the LTAD would enhance displayed liquidity, the increased liquidity
would be more conditional and less accessible.\30\ Another commenter
argues that the Investors Exchange LLC (``IEX'') delay, which the
Commission approved, also makes protected quotes less accessible.\31\
---------------------------------------------------------------------------

    \29\ See, e.g., Virtu Letter, supra note 6, at 2 (the LTAD would
improve price discovery in NMS securities on lit, protected
exchanges); Potamus Letter, supra note 6, at 1; Beste Bidd Letter,
supra note 6 (the proposal would enhance liquidity in the public
markets by helping market-makers and long-term investors meet on-
exchange); Jacobson Letter, supra note 6, at 2; Volant Letter, supra
note 6, at 1; Angel Letter, supra note 6, at 2 (the proposal would
incentivize market makers to post more liquidity, which would lead
to deeper quotes and tighter bid-ask spreads); Budish Letter, supra
note 6, at 2. Another commenter states that the LTAD has the
potential to enhance liquidity. See Bats Letter, supra note 6, at 2.
    \30\ See Hudson River Trading Letter, supra note 6, at 3.
Similarly, another commenter states that the proposal has the
potential to distort the market view of available liquidity if such
liquidity proves to be ephemeral. See Bats Letter, supra note 6, at
2.
    \31\ See Volant Letter, supra note 6, at 2.
---------------------------------------------------------------------------

    Commenters also opined on the competitive effect of the LTAD. Some
commenters assert that the LTAD would unduly burden competition among
CHX's members and among national securities exchanges.\32\
Alternatively, other commenters assert that approval of the proposal
would introduce greater competition among the national securities
exchanges, and that the Commission should regard the LTAD as an
innovation that could allow CHX to better compete with other
exchanges.\33\ Additionally, another commenter asserts that the LTAD
would lower the cost of entry for new liquidity providers because they
would not have to invest in technology to be faster than the fastest
latency arbitrageur.\34\
---------------------------------------------------------------------------

    \32\ See Hudson River Trading Letter, supra note 6, at 3; FIA
PTG Letter supra note 6, at 4-5; Citadel Letter, supra note 6, at
10-11.
    \33\ See Angel Letter, supra note 6, at 2; CTC Trading Letter,
supra note 6, at 4-5; Potamus Letter, supra note 6, at 2.
    \34\ See Volant Letter, supra note 6, at 3.
---------------------------------------------------------------------------

    Commenters disagree about whether the LTAD would be unfairly
discriminatory. A number of commenters state that the LTAD would be
unfairly discriminatory because it would delay only liquidity taking
orders.\35\ Another commenter states that the LTAD is unfairly
discriminatory because it would provide CHX liquidity providers with a
``last look'' whereby they could back away from their displayed
quotations, and may result so that liquidity takers would be unable to
reliably access quotations provided by

CHX liquidity providers.\36\ One commenter asserts that the LTAD would
unfairly discriminate in favor of market makers who have the resources
to respond to price changes on the futures market ahead of all other
market participants.\37\
---------------------------------------------------------------------------

    \35\ See, e.g., Citadel Letter, supra note 6, at 6-8; Hudson
River Trading Letter, supra note 6, at 2-3; FIA PTG Letter, supra
note 6, at 3. See also SIFMA Letter, supra note 6, at 3 (asserting
that any intentional delay should be universally applied to all
market participants in a non-discriminatory manner). Another
commenter asserts that intentionally delaying the orders of only
some market participants could distort markets and may not be
beneficial for long-term investors, and that any intentional delays
should be equally applied to all market participants. See Committee
on Capital Markets Letter, supra note 6, at 2.
    \36\ See Citadel Letter, supra note 6, at 6.
    \37\ See Leuchtkafer Letter 1, supra note 6, at 1; Leuchtkafer
Letter 2, supra note 6, at 3.
---------------------------------------------------------------------------

    Supporters of the proposed rule change assert that, because all
liquidity taking orders would be treated the same, the LTAD would not
be unfairly discriminatory.\38\ The Exchange asserts that the LTAD is
narrowly tailored to address latency arbitrage by giving liquidity
providers a tiny head start to cancel stale quotes in the race to react
to symmetric public information, and that it could not effectively
address latency arbitrage without distinguishing between liquidity
taking and liquidity providing orders.\39\ One commenter states that
the LTAD could benefit any market participant who posts an order to the
extent they would otherwise be traded against by another participant
with identical information but a slightly faster data feed.\40\ The
commenter argues that the LTAD's discrimination is necessary to
disincentivize a technological arms race that is contrary to investor
protection and the public interest.\41\ Both the commenter and the
Exchange assert that the proposed discrimination is fair because it
would make the market structure fairer by leveling the playing field,
which currently is tilted against liquidity providers.\42\
---------------------------------------------------------------------------

    \38\ See Angel Letter, supra note 6, at 2; CHX Response, supra
note 6, at 2.
    \39\ See CHX Response, supra note 6, at 2, 8. See also Budish
Letter, supra note 6, at 2.
    \40\ See CTC Trading Letter, supra note 6, at 5.
    \41\ See id. at 2.
    \42\ See id. at 3; CHX Response, supra note 6, at 2. See also IB
Letter, supra note 6, at 2.
---------------------------------------------------------------------------

    One commenter asserts that the LTAD would damage the efficiency of
the market by undermining the ability of exchange-traded fund (``ETF'')
market makers' ability to engage in arbitrage transactions.\43\ In
response, the Exchange states that no evidence has been offered to
support the conclusion that the LTAD would negatively impact ETF
trading, and that the LTAD would not have a material impact on
liquidity taking orders that are not submitted as part of a latency
arbitrage strategy.\44\
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    \43\ See Citadel Letter, supra note 6, at 12-13. See also Beste
Bidd Letter, supra note 6 (stating that ETPs could be severely
affected during periods of elevated volatility if market makers are
forced to hedge on unreliable markets).
    \44\ See CHX Response, supra note 6, at 9.
---------------------------------------------------------------------------

    Commenters disagree about whether the LTAD would be consistent with
Rule 602 of Regulation NMS (``Quote Rule''). Two commenters assert that
adoption of the LTAD may be inconsistent with the Quote Rule.\45\ Two
other commenters state that the LTAD could violate the Quote Rule
because it is designed to allow liquidity providers to back away from
their quotes.\46\
---------------------------------------------------------------------------

    \45\ See NYSE Letter, supra note 6, at 3 (stating that CHX would
not be enforcing its members' obligations under the Quote Rule);
Bats Letter, supra note 6, at 1 (stating that, absent new
interpretative guidance, the proposal likely violates the Quote
Rule).
    \46\ See FIA PTG Letter, supra note 6, at 4; Citadel Letter,
supra note 6, at 5-6.
---------------------------------------------------------------------------

    Another commenter and the Exchange, however, argue that the LTAD
would not violate the Quote Rule. They argue that, under the rule, the
duty of a broker or dealer to stand behind its quote would not vest
because the LTAD would prevent the liquidity provider from receiving
(i.e., being presented with) a marketable contra-side order.\47\
---------------------------------------------------------------------------

    \47\ See CTC Trading Letter, supra note 6, at 5-6; CHX Response,
supra note 6, at 11-12.
---------------------------------------------------------------------------

    Commenters also disagree about whether adoption of the LTAD would
be consistent with CHX's protected quotation status under Regulation
NMS.\48\ One commenter asserts that allowing some market participants
to have an advantage over others frustrates the purposes of Rule 611 of
Regulation NMS by impairing fair and efficient access to an exchange's
quotations.\49\ Another commenter argues that exchanges with asymmetric
access delays should not be considered to have ``protected quotations''
under Rule 611 of Regulation NMS.\50\ Other commenters assert that the
LTAD would impair a market participant's ability to fairly and
efficiently access a quote, and therefore it is inconsistent with the
goals of Rule 611.\51\
---------------------------------------------------------------------------

    \48\ 17 CFR 242.611.
    \49\ See FIA PTG Letter, supra note 6, at 3.
    \50\ See Beste Bidd Letter, supra note 6. See also SIFMA Letter,
supra note 6, at 3 (questioning the implications of market
participants' obligation under Rule 611 of Regulation NMS to access
protected CHX quotes when the CHX liquidity providers' quotes may
not be accessible as a result of the LTAD).
    \51\ See Hudson River Trading Letter, supra note 6, at 4;
Citadel Letter, supra note 6, at 12-13; NYSE Letter, supra note 6,
at 4. See also SIFMA Letter, supra note 6, at 4 (questioning the
effect of an access delay coupled with existing geographic or
technological latencies on the fair and efficient access to an
exchange's protected quotations).
---------------------------------------------------------------------------

    In response, the Exchange argues that the LTAD is consistent with
Rule 611 of Regulation NMS because the Commission does not interpret
``immediate'' to prohibit implementation of a de minimis intentional
access delay, and the delay imposed by the LTAD would not impair fair
and efficient access to the Exchange's quotations because: (1) The LTAD
would apply to all liquidity taking orders submitted by any CHX
participant and would only delay such orders by 350 microseconds, the
same length as the IEX speed bump; (2) the 350-microsecond delay is so
short that it would only neutralize a structural bias that permits
latency arbitrageurs to profit from symmetric public information; (3)
it would not provide an incremental advantage to a liquidity provider
other than to neutralize the structural bias to latency arbitrageurs;
and (4) the LTAD is narrowly-tailored to address latency arbitrage
strategies at CHX.\52\
---------------------------------------------------------------------------

    \52\ See CHX Response, supra note 6, at 14.
---------------------------------------------------------------------------

    Certain commenters assert that the LTAD would result in unfair
allocation of SIP market data revenue by generating an increase in
quoting, but not necessarily trading, on the Exchange.\53\ The Exchange
responds that the LTAD would not encourage non-bona fide quote activity
for the purpose of earning rebates because quotes cancelled within the
350-microsecond LTAD would not be eligible for market data revenue
rebates, and cancellation of such quotes could result in the CHX
participant being assessed an order cancellation fee.\54\
---------------------------------------------------------------------------

    \53\ See Hudson River Trading Letter, supra note 6, at 5; FIA
PTG Letter, supra note 6, at 3; SIFMA Letter, supra note 6, at 4.
Another commenter argues that in conjunction with CHX's market data
revenue sharing program, the LTAD would harm overall market
transparency, quality, and efficiency. See Citadel Letter, supra
note 6, at 3-4.
    \54\ See CHX Response, supra note 6, at 10-11.
---------------------------------------------------------------------------

    One commenter asserts that the LTAD may encourage spoofing by
decreasing the risk of executions.\55\ Another commenter states that
the LTAD would facilitate market manipulation by allowing liquidity
providers a means for setting the NBBO with a quotation that they do
not intend to honor.\56\ In response, the Exchange states that the LTAD
would be too short to introduce any incremental risk of manipulative
practices, and that the Exchange has in place surveillances to detect,
and rules to deter, these practices.\57\
---------------------------------------------------------------------------

    \55\ See FIA PTG Letter, supra note 6, at 3-4.
    \56\ See Citadel Letter, supra note 6, at 4.
    \57\ See CHX Response, supra note 6, at 10.
---------------------------------------------------------------------------

    Two commenters assert that the LTAD would confer special benefits
on market participants without imposing any new obligation or
responsibility to contribute to market quality.\58\ One commenter
suggests that the LTAD could be more narrowly tailored to apply only to
orders that would take liquidity from

market makers that meet heightened quoting obligations.\59\
---------------------------------------------------------------------------

    \58\ See Citadel Letter, supra note 6, at 8; Leuchtkafer Letter
2, supra note 6, at 4.
    \59\ See CTC Letter, supra note 6, at 6.
---------------------------------------------------------------------------

    Finally, a commenter asserts that due to the implementation of the
LTAD through software, rather than hardware, the indeterminacy of the
delay may result in the LTAD producing delays inconsistent with the
Commission's ``speed bump guidelines.'' \60\ In response, the Exchange
states that system messaging delays and variable message queuing are
irrelevant, stating that they exist today in every market that utilizes
a continuous limit order book to rank and match orders and are a
function of finite network and processing resources.\61\ The commenter
responds in turn that implementing the LTAD through software could
create opportunities for delays and queuing, and that the Exchange
should outline how it plans to surveil for and remediate any
implementation issues.\62\
---------------------------------------------------------------------------

    \60\ See Leuchtkafer Letter 1, supra note 6, at 1.
    \61\ See CHX Response, supra note 6, at 15.
    \62\ See Leuchtkafer Letter 2, supra note 6, at 2.
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove SR-CHX-
2016-16 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Exchange Act \63\ to determine whether the proposed
rule change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as stated below, the
Commission seeks and encourages interested persons to provide comments
on the proposed rule change.
---------------------------------------------------------------------------

    \63\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Exchange Act,\64\ the
Commission is providing notice of the grounds for disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis of the proposed rule change's consistency with
Section 6(b)(5) of the Exchange Act, which requires, among other
things, that the rules of a national securities exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers \65\ and Section 6(b)(8) of the Exchange Act, which
requires that the rules of a national securities exchange not impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Exchange Act.
---------------------------------------------------------------------------

    \64\ Id.
    \65\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
consistent with Sections 6(b)(5), 6(b)(8), or any other provision of
the Exchange Act, or the rules and regulations thereunder. Although
there do not appear to be any issues relevant to approval or
disapproval that would be facilitated by an oral presentation of views,
data, and arguments, the Commission will consider, pursuant to Rule
19b-4, any request for an opportunity to make an oral presentation.\66\
---------------------------------------------------------------------------

    \66\ Section 19(b)(2) of the Exchange Act, as amended by the
Securities Act Amendments of 1975, Public Law 94-29 (June 4, 1975),
grants the Commission flexibility to determine what type of
proceeding--either oral or notice and opportunity for written
comments--is appropriate for consideration of a particular proposal
by a self-regulatory organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by January 17, 2017. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
January 31, 2017. The Commission asks that commenters address the
sufficiency of the Exchange's statements in support of the proposal, in
addition to any other comments they may wish to submit about the
proposed rule change.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-CHX-2016-16 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 Numbers SR-CHX-2016-16. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of these filings also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-CHX-2016-16 and should be
submitted on or before January 17, 2017]. Rebuttal comments should be
submitted by January 31, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\67\
---------------------------------------------------------------------------

    \67\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31100 Filed 12-23-16; 8:45 am]
 BILLING CODE 8011-01-P