[Federal Register Volume 83, Number 88 (Monday, May 7, 2018)]
[Notices]
[Pages 20118-20123]
[FR Doc No: 2018-09577]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83147; File No. SR-IEX-2018-09]

Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Modify
its Fee Schedule To Charge a More Deterministic Fee of $0.0003 Per
Share for Executions at or Above $1.00 That Result From Removing
Liquidity With an Order That is Executable at the Far Side of the NBBO

May 1, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on April 20, 2018, the Investors Exchange LLC (``IEX'' or
the ``Exchange'') 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 self-regulatory
organization. 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\ 15 U.S.C. 78a.
    \3\ 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

    Pursuant to the provisions of Section 19(b)(1) under the Securities
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\
Investors Exchange LLC (``IEX'' or ``Exchange'') is filing with the
Securities and Exchange Commission (``Commission'') a proposed rule
change to modify its Fee Schedule, pursuant to IEX Rule 15.110(a) and
(c), to charge a more deterministic fee of $0.0003 per share for
executions at or above $1.00 that result from removing liquidity with
an order that is executable at the far side of the NBBO \6\ (the
``Spread-Crossing Remove Fee''). Consistent with the Exchange's
existing Fee Schedule, executions below $1.00 will be 0.30% of the
total dollar value of the transaction. Changes to the Fee Schedule
pursuant to this proposal are effective upon filing and will be
operative on May 1, 2018.
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
    \6\ As defined by Regulation NMS Rule 600(b)(42). 17 CFR
242.600.
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    The text of the proposed rule change is available at the Exchange's
website at www.iextrading.com, at the principal office of the Exchange,
and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statement may be examined at
the places specified in Item IV below. The self-regulatory organization
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 the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to modify its Fee Schedule, pursuant to IEX
Rule 15.110(a) and (c), to charge a more deterministic fee of $0.0003
per share for executions at or above $1.00 that result from removing
liquidity with an order that is executable at the far side of the NBBO
(i.e., a buy order that is executable at the NBO or higher, or a sell
order that is executable at the NBB or lower). In an effort to
incentivize Members to submit displayed orders to the Exchange, the
Exchange currently charges a fee of $0.0003 per share (or 0.30% of the
total dollar value of the transaction for securities priced below
$1.00) to Members for executions on IEX that provide or take resting
interest with displayed priority (i.e., an order or portion of a
reserve order that is booked and ranked with display priority on the
Order Book).\7\ Furthermore, the Exchange currently charges $0.0009 per
share (or 0.30% of the total dollar value of the transaction for
securities priced below $1.00) to Members for executions on IEX that
provide or take resting interest with non-displayed priority (i.e., an
order or portion of a reserve order that is booked and ranked with non-
displayed priority on the Order Book).\8\ The Exchange does not charge
any fee to Members for executions on IEX when the adding and removing
order originated from the same Exchange Member.\9\
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    \7\ This pricing is referred to by the Exchange as ``Displayed
Match Fee'' with a Fee Code of `L' provided by the Exchange on
execution reports. See the Investors Exchange Fee Schedule,
available on the Exchange public website.
    \8\ This pricing is referred to by the Exchange as ``Non-
Displayed Match Fee'' with a Fee Code of `I' provided by the
Exchange on execution reports. See the Investors Exchange Fee
Schedule, available on the Exchange public website.
    \9\ This pricing is referred to by the Exchange as
``Internalization Fee'' with a Fee Code of `S' provided by the
Exchange on execution reports. Orders from different market
participant identifiers of the same broker dealer, with the same
Central Registration Depository registration number, are treated as
originating from the same Exchange Member. See the Investors
Exchange Fee Schedule, available on the Exchange public website.
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    After informal discussions with various Members, the Exchange
recognizes that some Members may be dissuaded from seeking to access
IEX quotations at the NBBO due to the variability in execution fees
when routing orders to the Exchange that are executable at the far side
of the NBBO and intended to trade against the Exchange's displayed
quotation, but inadvertently remove non-displayed liquidity resting at
or within the spread. While such spread-crossing orders would receive
price improvement equal to the delta between the execution price and
the far side quotation (i.e., the difference between the trade price
and the NBO (NBB) for buy (sell) orders),\10\ the potential for
interacting with non-displayed liquidity resting within the spread, and
therefore being assessed the Non-Displayed Match Fee of $0.0009 versus
the Displayed Match Fee of $0.0003, makes it difficult for Members to
estimate access fees on a pre-trade basis, which the Exchange believes
thereby presents difficulties for some Members when determining which
venues to route marketable orders to.\11\
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    \10\ The Exchange notes that when handling client orders as
agent, IEX Members must ensure they are satisfying their duty of
best execution, which requires that in any transaction for or with a
customer or a customer of another broker-dealer, a member and
persons associated with a member shall use reasonable diligence to
ascertain the best market for the subject security and buy or sell
in such market so that the resultant price to the customer is as
favorable as possible under prevailing market conditions. Members
must also conduct regular and rigorous reviews of execution quality
in order to determine which market center to route customer orders,
and should explicitly consider the extent to which an order may
obtain price improvement at other venues. See FINRA Rule 5310,
including Supplementary Material .09 thereto.
    \11\ The Exchange notes that FINRA has released guidance
clarifying that firms should not allow access fees charged by venues
to inappropriately affect their routing decisions, and, in general,
a firm's routing decisions should not be unduly influenced by a
particular venue's fee or rebate structure. See FINRA Regulatory
Notice 15-46 (November 2015) at 6.
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    In order to reduce the variability in fees to access liquidity on
the Exchange and thereby incentivize Members to route more orders to
the Exchange that are executable at the far side of the NBBO, the
Exchange is proposing to offer a more deterministic Spread-Crossing
Remove Fee of $0.0003 per share to all executions at or above $1.00
that result from removing liquidity with a buy (sell) order that is
executable at the NBO (NBB). Consistent with the Exchange's existing
Fee Schedule, executions below $1.00 will be 0.30% of the total dollar
value of the transaction. Members will receive a Fee Code of ``N'' on
execution reports provided by the Exchange for transactions that
receive the Spread-Crossing Remove Fee.\12\
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    \12\ Pursuant to the Exchange's existing Fee Schedule, a Fee
Code of ``N'' applies to executions that are part of an IPO Auction.
Accordingly, the Exchange is proposing to replace the Fee Code for
executions in an IPO Auction with a Fee Code of ``P''.
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    The Exchange believes that incentivizing additional spread-crossing
interest by offering the proposed Spread-Crossing Remove Fee will
enhance public price discovery and overall execution quality on the
Exchange in several ways. First, as described above, to the extent
spread-crossing interest removes non-displayed liquidity within the
spread, the spread-crossing orders will receive price improvement equal
to the delta between the execution price and the far side quotation,
while the non-displayed resting interest will have received the benefit
of trading passively and also capturing the spread in part. Similarly,
to the extent spread-crossing interest removes displayed liquidity
resting at the NBBO, such resting displayed liquidity will have
increased opportunities to capture the full spread. If market makers
and other Members are more frequently capturing the spread when resting
displayed orders on the Exchange, such Members may be incentivized to
enter additional aggressively priced displayed orders on the Exchange,
thereby contributing to public price discovery, consistent with the
overall goal of enhancing market quality.
    Pursuant to Rules 11.190(a)(1)-(3), the Exchange offers three
general order types--market orders, limit orders, and pegged orders--
each of which have distinct functional behaviors, and are further
controlled by various User-defined order parameters that dictate
additional functional behaviors of the order within the Exchange's
System.\13\ Orders entered on the Exchange are eligible to remove
liquidity on entry pursuant to the distinct behavior of the User-
selected order type and order parameters. In addition, non-displayed
orders that are resting on the Order Book and eligible to trade at
least as aggressively as the Midpoint Price are eligible to remove
liquidity on Order Execution Recheck, or ``Book Recheck'', pursuant to
Rule 11.230(a)(4)(d). Book Recheck is a process within the IEX System
that detects new trading opportunities for resting orders upon a change
to the Order Book, the NBBO, or as part of processing inbound messages,
resulting in an invitation for non-displayed orders to attempt to
remove liquidity from the contra side.\14\
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    \13\ See Rule 11.190(b) (Order Parameters) for a full
description of the available order parameters.
    \14\ See Rule 11.230(a)(4)(d), which provides a complete
description of Book Recheck.
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    Pursuant the Exchange's Rules, in addition to the terms of each
order type and order parameter, every order is subject to various legal
and technical constraints that are designed to optimize order
interactions within the System, and to comply with the Act and the
rules and regulations thereunder. Rule

11.190(f)(1)(Order Collars) describes the IEX Order Collar, which
prevents any incoming order or order resting on the Order Book,
including those marked ISO, from executing at a price outside of the
Order Collar price range (i.e., prevents buy orders from trading at
prices above the collar and prevents sell orders from trading at prices
below the collar).\15\ Furthermore, Rule 11.190(h)(Price Sliding)
describes the Exchange's price sliding processes that are designed to
ensure compliance with Regulation NMS (including the Plan to Address
Extraordinary Market Volatility pursuant to Rule 608 thereunder (the
``LULD Plan''),\16\ as well as Rule 201 of Regulation SHO.\17\
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    \15\ The Order Collar price range is calculated by applying the
numerical guidelines for clearly erroneous executions to the ``Order
Collar Reference Price'', which is defined as the most current of
(i) the last sale price disseminated during the Regular Market
Session on the current trade date; (ii) last trade price
disseminated outside of the Regular Market Session (Form T, as
communicated by the relevant SIP) on trade date which other than for
the Form T designation would have been considered a valid last sale
price; or (iii) if neither of the prices above are available, the
prior days Official Closing Price from the listing exchange,
adjusted to account for corporate actions, news events, etc. In the
event there is no valid Order Collar Reference Price or Router
Constraint Reference Price, the Exchange generally rejects orders
for the security.
    \16\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012). Note, unless otherwise specified,
capitalized terms used in reference to the LULD Plan have the same
meaning as set forth in the LULD Plan or in Exchange rules. See also
Rule 11.280(e)(Limit Up-Limit Down Mechanism), which sets forth the
Exchange's methodology for re-pricing and canceling interest
pursuant to the LULD Plan.
    \17\ 17 CFR 242.201. See also Rule 11.190(h)(4)(Short Sale Price
Sliding).
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    If an order--based on market conditions, User instructions,
applicable IEX Rules and/or the Act and the rules and regulations
thereunder--is not executable at the far side of the NBBO, such order
will not be eligible for the Spread-Crossing Remove Fee. Specifically,
for a buy (sell) order to be deemed ``executable'' at the NBO (NBB), in
the case of a market order, the applicable IEX Order Collar and the
price of the Upper (Lower) LULD Price Band, as well as the result of
any other price sliding necessary pursuant to Rule 11.190(h), must be
marketable to the NBO (NBB) upon entry, because market orders, despite
not having a maximum (minimum) price at which the User is willing to
buy (sell), remain constrained by the least aggressive of the IEX Order
Collar and the LULD Price Band, as well as the result of any other
price sliding necessary pursuant to Rule 11.190(h). For example, in a
Tier 1 security, if the NBBO is $10.10 by $10.20, the IEX Order Collar
is $9.13 by $11.16, and the LULD Price Band is $9.64 by $10.65, a
market order to buy (sell) that removes liquidity from the Order Book
(against either displayed or non-displayed liquidity on the Order Book)
will receive the Spread-Crossing Remove Fee, because the Upper (Lower)
LULD Price Band of $10.65 ($9.64) (which is less aggressive than the
IEX Order Collar, and therefore controlling), is marketable to the NBO
(NBB) of $10.20 ($10.10).
    In the case of a limit order, the User-defined and System-adjusted
limit price (i.e., the price at which the order is eligible to execute
after accounting for the User-defined limit price, the IEX Order
Collar, and the LULD Price Band, as well as the result of any other
price sliding necessary pursuant to Rule 11.190(h)) must be executable
at the NBO (NBB) upon entry, or on Book Recheck. For example, in a Tier
1 security, if the NBBO is $10.10 by $10.20, the IEX Order Collar is
$9.13 by $11.16, and the LULD Price Band is $9.64 by $10.65, a limit
order to buy with a limit price of $10.20 that removes liquidity from
the Order Book (against either displayed or non-displayed liquidity on
the Order Book) will receive the Spread-Crossing Remove Fee, because
the User-defined limit price is marketable to the NBO, and less
aggressive than the IEX Order Collar and the LULD Price Band, and does
not otherwise necessitate additional price sliding pursuant to Rule
11.190(h)(4).
    As a general matter, pegged orders do not qualify for the Spread-
Crossing Remove Fee, because such orders, by their terms, are
explicitly designed to capture the spread in full or in part by
executing at prices that are equal to or more passive than the Midpoint
Price. However, pursuant to Rule 11.190(h)(3)(C)(i), in the event the
market becomes locked (i.e., the price of the NBB is equal to the price
of NBO), the Exchange considers the Midpoint Price to be equal to the
locking price. Therefore, in a locked market, Midpoint Peg \18\ and
Discretionary Peg \19\ orders that remove liquidity at the locking
price on entry or on Book Recheck will receive the Spread-Crossing
Remove Fee. For example, if the NBBO is locked at $10.10 by $10.10, a
Midpoint Peg order to buy (sell) that removes liquidity at $10.10 will
receive the Spread-Crossing Remove Fee. In contrast, Primary Peg orders
are never eligible to remove liquidity, and therefore will never
receive the Spread-Crossing Remove Fee.\20\
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    \18\ Pursuant to Rule 11.190(b)(9), upon entry and on Book
Recheck, Midpoint Peg orders attempt to remove all available
liquidity at the less aggressive of the Midpoint Price or the orders
limit price, if any.
    \19\ Pursuant to Rule 11.190(b)(10), upon entry and on Book
Recheck, Discretionary Peg orders attempt to remove all available
liquidity at the less aggressive of the Midpoint Price or the orders
limit price, if any.
    \20\ Pursuant to Rule 11.190(b)(8), upon entry, Primary Peg
orders attempt to remove liquidity at the less aggressive of one (1)
MPV less aggressive than the NBB (NBO) for buy (sell) orders or the
orders limit price, if any. Therefore, because the System will not
generate an internally locked or crossed book (as a result of
execution and price sliding logic, including the Exchange's price
sliding processes for non-displayed orders (the ``Midpoint Price
Constraint''), which restricts non-displayed orders from resting on
the Order Book at a price more aggressive than the midpoint of the
NBBO, Primary Peg orders Primary Peg orders are never eligible to
remove liquidity. Accordingly, Primary Peg orders are not eligible
for Book Recheck.
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    Similarly, when a short sale price test restriction \21\ is in
effect, short sale orders not marked short exempt that are priced at or
more aggressive than the NBB are subject to the short sale price
sliding process pursuant to Rule 11.190(h)(4) and are therefore never
executable at or below the NBB. Accordingly, when a short sale price
test restriction is in effect, short sale orders not marked short
exempt that are priced to execute at or below the NBB will not receive
the Spread-Crossing Remove Fee. For example, for a security subject to
the short sale price test restriction, if the NBBO is $10.10 by $10.20,
and IEX receives a non-displayed short sale limit order not marked
short exempt with a limit price of $10.10, such order is ineligible for
execution at its limit price pursuant to Rule 11.190(h)(4)(B), would
only be executable above the current NBB upon entry or on Book Recheck,
and would otherwise be repriced and ranked by the System on the Order
Book non-displayed pursuant to the Midpoint Price Constraint at the
current Midpoint Price.\22\ Accordingly, such order is never executable
at the NBB, and therefore would not receive the Spread-Crossing Remove
Fee.
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    \21\ Generally, if the current NBB for a covered security
decreased by 10% or more from the security's closing price as
determined by the listing market, Rule 201 of Regulation SHO
prohibits the execution or display of a short sale order not marked
short exempt at a price that is less than or equal to the NBB. See
17 CFR 242.201.
    \22\ To continue to this example, if the Exchange has non-
displayed liquidity to buy resting on the Order Book at $10.11, a
short sale order not marked short exempt would be eligible to remove
such interest upon entry (or, if such interest was entered after the
short sale order, on Book Recheck), but would not receive the
Spread-Crossing Remove Fee, because such order is not executable at
the NBB.
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    Finally, in the case of a crossed market (i.e., when the price of
the NBB is higher than the NBO), all removers of liquidity will receive
the Spread-Crossing Remove Fee. For example, if the NBBO is crossed at
$10.13 by

$10.10, and IEX has a displayed offer at $10.10, a limit order to buy
with a limit price of $10.10 or higher that removes liquidity will
receive the Spread-Crossing Remove Fee. While the Exchange believes the
arbitrage opportunity provides a natural incentive for market
participants to resolve the crossing quotation, the Exchange intends to
further incentivize such market improving behavior by charging such
removers the proposed Spread-Crossing Remove Fee.
    The Exchange notes that executions subject to the Crumbling Quote
Remove Fee are not eligible for the Spread-Crossing Remove Fee.\23\
Accordingly, transactions that are subject to the Crumbling Quote
Remove Fee that remove liquidity with an order executable at the far
side of the NBBO will be charged the Crumbling Quote Remove Fee, rather
than the Spread-Crossing Remove Fee. Furthermore, the Exchange is not
proposing any change to the Internalization Fee whereby no fee is
charged for executions when the adding and removing order originated
from the same Exchange Member. Thus, transactions that qualify for the
Internalization Fee and the proposed Spread-Crossing Remove Fee will be
charged the Internalization Fee rather than the Spread-Crossing Remove
Fee, since the IEX Fee Schedule provides that to the extent a Member
receives multiple Fee Codes on an execution, the lower fee shall
apply.\24\
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    \23\ See Fee Code Q (Crumbling Quote Remove Fee Indicator),
along with the footnote appurtenant thereto in the Investors
Exchange Fee Schedule, available on the Exchange public website,
which together describe the applicable fee for executions that take
liquidity during periods of quote instability as defined in Rule
11.190(g) that exceed the CQRF Threshold, which is equal to is equal
to 5% of the sum of a Member's total monthly executions on IEX if at
least 1,000,000 shares during the calendar month, measured on an
MPID basis. See also Securities and Exchange Act Release No. 81484
(August 25, 2017) 82 FR 41446 (August 31, 2017) (SR-IEX-2017-27).
See also footnote three under Transaction Fees in the Investors
Exchange Fee Schedule, which specifies that, except for the
Crumbling Quote Remove Fee Code of Q, to the extent a Member
receives multiple Fee Codes on an execution, the lower fee shall
apply.
    \24\ See footnote three under Transaction Fees in the Investors
Exchange Fee Schedule, which specifies that, except for the
Crumbling Quote Remove Fee Code of Q, to the extent a Member
receives multiple Fee Codes on an execution, the lower fee shall
apply.
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2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the
provisions of Section 6(b) \25\ of the Act in general, and furthers the
objectives of Sections 6(b)(4) \26\ of the Act, in particular, in that
it is designed to provide for the equitable allocation of reasonable
dues, fees and other charges among its Members and other persons using
its facilities. The Exchange believes that the proposed fee change is
reasonable, fair and equitable, and non-discriminatory. The Exchange
operates in a highly competitive market in which market participants
can readily direct order flow to competing venues if they deem fee
levels at a particular venue to be excessive.
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    \25\ 15 U.S.C. 78f.
    \26\ 15 U.S.C. 78f(b)(4).
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    As proposed, the Spread-Crossing Remove Fee is designed to reduce
the variability in fees to access liquidity on the Exchange, therefore
making the Exchange's Fee Schedule more clear and predictable to the
benefit of all market participants. Furthermore, as discussed in the
Purpose section, the Exchange believes that to the extent the proposed
Spread-Crossing Remove Fee incentivizes additional spread-crossing
orders on the Exchange, resting displayed interest will have enhanced
opportunities to capture the spread, which may result in additional
aggressively priced orders being entered on the Exchange, thereby
contributing to public price discovery, consistent with the overall
goal of enhancing market quality.
    The Exchange does not believe that the proposed change represents a
significant departure from pricing currently offered by the Exchange.
As described in the Purpose section, the proposed Spread-Crossing
Remove Fee is equal to the Displayed Match Fee, and less than the Non-
Displayed Match Fee, thus falling within the range of transaction fees
currently charged by the Exchange. Furthermore, the proposed Spread-
Crossing Remove Fee is substantially lower than the fee for removing
liquidity on competing exchanges with a ``maker-taker'' fee structure
(i.e., that provide a rebate to liquidity adders and charge liquidity
removers).\27\
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    \27\ See, e.g., the New York Stock Exchange (``NYSE'') trading
fee schedule on its public website reflects fees to ``take''
liquidity ranging from $0.0024-$0.0030 depending on the type of
market participant, order and execution; the Nasdaq Stock Market
(``Nasdaq'') trading fee schedule on its public website reflects
fees to ``remove'' liquidity ranging from $0.0025-$0.0030 per share
for shares executed in continuous trading at or above $1.00 or 0.30%
of total dollar volume for shares executed below $1.00; the Cboe BZX
Exchange (``Cboe BZX'') trading fee schedule on its public website
reflects fees for ``removing'' liquidity ranging from $0.0025-
$0.0030, for shares executed in continuous trading at or above $1.00
or 0.30% of total dollar volume for shares executed below $1.00.
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    As proposed, Members that remove non-displayed liquidity on the
Exchange will be charged disparate fees depending on whether or not the
removing order was executable at the far side of the NBBO. For example,
a limit order with a User-defined and system-adjusted limit price that
is marketable to the Midpoint Price that removes non-displayed
liquidity at the Midpoint Price will be charged the Non-Displayed Match
Fee, whereas a limit order with a User-defined and system-adjusted
limit price that is executable at the far side of the NBBO that removes
non-displayed liquidity at the Midpoint Price will be charged the
Spread-Crossing Remove Fee. The Exchange believes it is reasonable,
equitable and not unfairly discriminatory to charge disparate fees for
removing liquidity on the Exchange depending on whether or not the
removing order was executable at the far side of the NBBO, because
spread-crossing orders are willing to interact with the Exchange's
resting displayed orders, thereby potentially incentivizing Members to
enter more aggressively priced displayed orders by enhancing
opportunities for such orders to capture the full spread.
    The Exchange believes incentivizing market makers and other Members
to enter more aggressively priced displayed orders on the Exchange by
enhancing trading opportunities at the NBBO significantly contributes
to public price discovery, consistent with the overall goal of
enhancing market quality. Furthermore, removers of non-displayed
liquidity that are not willing to cross the spread are receiving the
benefit of trading more passively and receiving price improvement,
which the Exchange believes is a substantial incentive and benefit in
and of itself.\28\ Similarly, non-displayed orders resting on the
Exchange are receiving the benefit of resting passively on the Order
Book and capturing the spread in whole or in part. Therefore, the
Exchange believes it is reasonable, equitable and not unfairly
discriminatory to charge Members that add non-displayed liquidity a
different fee then Members that remove non-displayed liquidity with an
order that is executable at the far side of the NBBO.\29\
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    \28\ The Exchange notes the spread-crossing removers may also
receive such price improvement to the extent they remove non-
displayed liquidity resting within the spread. However, such price
improvement is not guaranteed, and spread-crossing removers
consciously choose to pay the full spread with only the possibility
of price improvement.
    \29\ The Exchange also notes that it is common for Exchange's to
charge Members different fees for adding and removing liquidity, and
thus the Exchange's proposal is not novel in this regard. See, e.g.,
the New York Stock Exchange (``NYSE'') trading fee schedule on its
public website which reflects fees to ``take'' liquidity ranging
from $0.0024-$0.0030 depending on the type of market participant,
order and execution. Additionally, NYSE fees to ``add'' liquidity
range from $0.0018-$0.0030 per share for shares executed in
continuous trading; [sic]

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    The Exchange also believes that it is reasonable, fair and
equitable, and non-discriminatory to not offer the proposed Spread-
Crossing Remove Fee to orders that are subject to the Crumbling Quote
Remove Fee because such executions are necessarily a part of a trading
strategy that the Exchange believes evidences a form of predatory
latency arbitrage that leverages low latency proprietary market data
feeds and connectivity along with predictive models to chase short-term
price momentum and successfully target resting orders at unstable
prices. Furthermore, if the Exchange were to apply the Spread-Crossing
Remove Fee to executions that are subject to the Crumbling Quote Remove
Fee, it would frustrate its fundamental purpose of disincentivizing
predatory trading strategies to further incentivize additional resting
liquidity, including displayed liquidity, on IEX. Thus, a Member that
removes liquidity with spread-crossing orders that are subject to the
Crumbling Quote Remove Fee, should not be afforded the benefit of the
proposed Spread-Crossing Remove Fee on such executions.
    The Exchange also notes that the Crumbling Quote Remove Fee, in
combination with the proposed Spread-Crossing Remove Fee, is designed
to incentivize spread-crossing interest that is not part of what the
Exchange believes is a predatory trading strategy, therefore
potentially increasing the entry of orders executable at the far side
of the NBBO during periods of relative market stability. If the Spread-
Crossing Remove Fee is successful in this regard, the opportunity for
execution and the resultant execution performance for non-displayed
resting orders within the spread, as well as displayed orders resting
at the NBBO, would be significantly enhanced. Consequently, enhanced
trading opportunities may incentivize the entry of non-displayed orders
resting at or within the spread, as well as displayed order resting at
the NBBO, thereby contributing to the post-trade and pre-trade public
price discovery process, respectively. Accordingly, the Exchange
believes that the Crumbling Quote Remove Fee, in combination with the
proposed Spread-Crossing Remove Fee, is reasonable, fair and equitable,
and non-discriminatory.
    Additionally, the Exchange believes that it is reasonable, fair and
equitable, and non-discriminatory to continue to charge the
Internalization Fee rather than the Spread-Crossing Remove Fee when the
adding and removing order originated from the same Exchange Member. IEX
believes that the same factors that support not charging fees for such
transactions, as described in its rule filing adopting this fee
structure, continue to be relevant.\30\ Specifically, not charging a
fee is designed to incentivize Members (and their customers) to send
orders to IEX that may otherwise be internalized off exchange, with the
goal of increasing order interaction on IEX. Internalization on IEX is
not guaranteed, and the additional order flow that does not internalize
is available to trade by all Members.
---------------------------------------------------------------------------

    \30\ See Securities Exchange Act Release No. 78550 (August 11,
2016), 81 FR 54873 (August 17, 2016) (SR-IEX-2016-09).
---------------------------------------------------------------------------

    Finally, the Exchange believes that the proposed fees are
nondiscriminatory because they will apply uniformly to all Members.

B. Self-Regulatory Organization's Statement on Burden on Competition

    IEX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
that the proposed rule change will impose any burden on intermarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The Exchange operates in a highly competitive
market in which market participants can readily favor competing venues
if fee schedules at other venues are viewed as more favorable.
Consequently, the Exchange believes that the degree to which IEX fees
could impose any burden on competition is extremely limited and does
not believe that such fees would burden competition between Members or
competing venues in a manner that is not necessary or appropriate in
furtherance of the purposes of the Act. Moreover, as noted in the
Statutory Basis section, the Exchange does not believe that the
proposed changes represent a significant departure from its current fee
structure, and competing venues are able to adopt comparable pricing.
    The Exchange does not believe that the proposed rule change will
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because, while
different fees are assessed in some circumstances, these different fees
are not based on the type of Member entering the orders that match but
on the type of order entered and the market conditions in which such
order was entered. Moreover, the proposed Spread-Crossing Remove Fee
will apply equally to all Members that remove liquidity with an order
executable at the far side of the NBBO. The Exchange notes that all
Members can submit any of the Exchange's approved order types and order
parameters, including orders that are executable at the far side of the
NBBO. Further, the proposed fee changes continue to be intended to
encourage market participants to bring increased order flow to the
Exchange, which benefits all market participants.

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

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) \31\ of the Act.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \32\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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    \32\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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 protected]. Please include
File No. SR-IEX-2018-09 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 No. SR-IEX-2018-09. 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 (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 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 No. SR-IEX-2018-09, and should be submitted on or
before May 29, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-09577 Filed 5-4-18; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 85, Number 41 (Monday, March 2, 2020)]
[Notices]
[Pages 12353-12357]
[FR Doc No: 2020-04186]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88277; File No. SR-FICC-2020-001]

Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Adopt the Interpretive Guidance With Respect to Settlement Finality

February 25, 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 13, 2020, Fixed Income Clearing Corporation (``FICC'')
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 the clearing agency. FICC filed
the proposed rule change pursuant to Section 19(b)(3)(A) \3\ of the Act
and subparagraph (f)(1) \4\ of Rule 19b-4 thereunder. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    The proposed rule change of Fixed Income Clearing Corporation
(``FICC'') is annexed [sic] hereto as Exhibit 5. The proposed rule
change would amend the FICC Government Securities Division (``GSD'')
Rulebook (the ``GSD Rules'') and the FICC Mortgage-Backed Securities
Division (``MBSD'') Clearing Rules (``MBSD Rules'' and collectively
with the GSD Rules, the ``Rules'') in order to adopt the Interpretive
Guidance with respect to Settlement Finality (``Interpretive
Guidance''), which would provide greater transparency to FICC Members
regarding settlement finality in the Rules, as described in greater
detail below.\5\
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    \5\ Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to such terms in the GSD Rules or
the MBSD Rules, as applicable, available at http://www.dtcc.com/legal/rules-and-procedures.
---------------------------------------------------------------------------

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
    The proposed rule change would add the Interpretive Guidance into
the Rules, which would provide greater transparency to FICC Members
relating to settlement finality in the Rules.
(i) Background
    FICC is a clearing agency registered with, and under the
supervision of, the Commission and it is a ``covered clearing agency''
under the Commission's Standards for Covered Clearing Agencies.\6\ Rule
17Ad-22(e)(8) of the Act requires FICC to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to define the point at which settlement is final to be no
later than the end of the day on which the payment or obligation is due
and, where necessary or appropriate, intraday or in real time.\7\ It is
FICC's policy to ensure that the point of settlement finality is
defined in the Rules in compliance with Rule 17Ad-22(e)(8) of the Act
and that the point of settlement finality is transparent to FICC's
Members. The proposed rule change would add the Interpretive Guidance
to the Rules to provide greater transparency regarding settlement
finality in the Rules.
---------------------------------------------------------------------------

    \6\ See Standards for Covered Clearing Agencies, Securities
Exchange Act Release No. 78961, 81 FR 70786 (Oct. 13, 2016).
    \7\ 17 CFR 240.17Ad-22(e)(8).
---------------------------------------------------------------------------

A. FICC Money and Securities Settlement
    Through GSD, FICC processes two types of settlements: (1) The
funds-only settlement process that consists of the transfer of cash for
(a) changes in the value of securities when they are marked to market,
(b) cash adjustments related to securities trades, (c) the pass-through
of coupon payments for term repurchase agreements (``repos'') or trade
obligations that cross a coupon date, and (d) other items, such as
billing invoices and (2) the settlement process associated with
securities deliveries and related payment obligations.
    Through MBSD, FICC processes two types of settlements: (1) The cash
settlement process that that consists of the transfer of cash for (a)
the TBA Transaction Adjustment Payment, (b) Net Pool Transaction
Adjustment Payment, (c) principal and interest payments for failing net
pool settlement obligations (to the extent that they are not handled by
the Fedwire Securities Service Automated Claims Adjustment Process),
and (d) other items, such as Factor Update Adjustments, CPR Claim
payments and billing invoices and (2) the settlement associated with
securities deliveries and related payment obligations.
B. Point of Settlement Finality for GSD Funds-Only Settlement and MBSD
Cash Settlement
1. Funds-Only/Cash Settlement Processes
    GSD funds-only settlement and MBSD cash settlement are governed by
GSD Rule 13 and MBSD Rule 11, respectively,\8\ which require the
settling banks to use the FRB's \9\ National Settlement Service
(``NSS'') \10\ to complete GSD funds-only settlement and MBSD cash
settlement.\11\
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    \8\ GSD Rule 13 and MBSD Rule 11, supra note 5.
    \9\ FRB means the Board of Governors of the Federal Reserve
System and each Federal Reserve Bank, as appropriate. GSD Rule 1 and
MBSD Rule 1, supra note 5.
    \10\ NSS is a multilateral settlement service owned and operated
by the FRB. The service is offered to depository institutions that
settle for participants in clearinghouses, financial exchanges and
other clearing and settlement groups. Settlement agents, acting on
behalf of those depository institutions in a settlement arrangement,
electronically submit settlement files to the FRB. Files are
processed on receipt, and entries are automatically posted to the
depository institutions' FRB accounts.
    \11\ GSD Rule 13, Section 5(i) and MBSD Rule 11, Section 9(i),
supra note 5.
---------------------------------------------------------------------------

    GSD funds-only settlement and MBSD cash settlement are each a daily
process of generating a net credit or debit cash amount for each Member
and settling those cash amounts between Members and FICC. The GSD
funds-only settlement and MBSD cash settlement processes are primarily
cash pass-through processes; i.e., those Members that are in a net
debit position are obligated to submit payments that are then used to
pay Members in a net credit position.\12\ Net debits and credits of all
Members using the same settling bank are further netted and reported
\13\ to the settling bank which is required to acknowledge the net-net
debits or credits.\14\ The settling banks then debit or credit the
Members' accounts for which they settle.\15\
---------------------------------------------------------------------------

    \12\ Certain amounts, such as billing amounts owed by Members to
FICC, are credited and paid to FICC through the funds-only/cash
settlement processes rather than passed on to other Members.
    \13\ GSD Rule 13, Sections 2 and 5(a) and MBSD Rule 11, Section
9(a), supra note 5.
    \14\ GSD Rule 13, Section 5(b) and MBSD Rule 11, Section 9(b),
supra note 5.
    \15\ Each Member is required to enter into a settling bank
agreement with the settling bank that settles its account. GSD Rule
13, Section 4 and MBSD Rule 3A, Section (a), supra note 5. In the
settling bank agreement, the settling bank undertakes to perform
settlement services on behalf of the Member which would include
debiting or crediting the Member's account upon settlement.
---------------------------------------------------------------------------

    FICC has a settlement interface with its affiliate, The Depository
Trust Company (``DTC''). DTC acts as Settlement Agent for FICC and for
the Members' settling banks with respect to GSD funds-only settlement
and MBSD cash settlement.\16\ In submitting the NSS file, DTC, as
Settlement Agent, submits instructions to cause the FRB accounts of the
settling banks to be charged for their net-net debit balances and
credited with their net-net credit balances. Members are required to
engage a settling bank that meets FICC's settling bank limited
membership criteria to effect money settlement via NSS on behalf of the
Members.\17\ Each settling bank is required to acknowledge the daily
settlement balances and their intention to settle with FICC by the
applicable deadlines or its refusal to settle by the applicable
deadlines.\18\ Once a settling bank has acknowledged the balances and
its intention to settle, it must settle such amounts pursuant to the
process set forth in the Rules by the payment deadline established by
FICC on FICC's posted time schedules.\19\
---------------------------------------------------------------------------

    \16\ GSD Rule 13, Section 5(h) and MBSD Rule 11, Section 9(h),
supra note 5.
    \17\ GSD Rule 13, Section 4(a) and MBSD Rule 3A, Section (a),
supra note 5.
    \18\ GSD Rule 13, Section 5(b) and MBSD Rule 11, Section 9(b),
supra note 5.
    \19\ GSD Rule 13, Section 5(g) and MBSD Rule 11, Section 9(g),
supra note 5.
---------------------------------------------------------------------------

    FICC processes GSD funds-only settlement debit and credit payments
via the NSS twice daily at 10:00 a.m. and 3:15 p.m.\20\ FICC processes
MBSD cash settlement debits via NSS in the morning at 10:00 a.m. daily
and settlement credits via NSS in the afternoon at 2:45 p.m. daily.\21\
---------------------------------------------------------------------------

    \20\ Schedule of Timeframes in the GSD Rules, supra note 5.
    \21\ The schedule of funds only settlement for MBSD is posted on
its website at http://www.dtcc.com. See MBSD Rule 11, Section 9(g),
supra note 5.
---------------------------------------------------------------------------

2. Interpretive Guidance With Respect to Settlement Finality--Funds-
Only/Cash Settlement
    The point of finality for GSD funds-only settlement and MBSD cash
settlement is defined by the Federal Reserve Bank Operating Circular
12,\22\

which governs NSS processing by the FRB. FICC and each Member's
settling bank is a ``Settler'' and together are in a ``Settlement
Arrangement'' (each term as defined in Operating Circular 12) for
purposes of GSD funds-only settlement and MBSD cash settlement.\23\
DTC, as the Settlement Agent (as defined in the Rules and in Operating
Circular 12), provides the Settlement File (as defined in Operating
Circular 12) to the FRB. Each Settler maintains a Master Account (as
defined in Operating Circular 12) with the FRB.\24\ The point of
finality in accordance with Operating Circular 12 is, for debits, the
time at which the Settler's Master Account is debited by the FRB,\25\
and, for credits, the time at which the Settler's Master Account is
credited by the FRB.\26\
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    \22\ Federal Reserve Bank Operating Circular 12 (Multilateral
Settlement), Effective June 30, 2016 (``Operating Circular 12''),
available at https://www.frbservices.org.
    \23\ For purposes of Operating Circular 12, the following
definitions apply:
    ``Balance'' means the amount listed on a Settlement File that a
Settler owes (debit Balance) or is due (credit Balance) as a result
of the clearing activities of the Settlement Arrangement.
    ``Master Account'' means the Master Account (as that term is
defined in the Reserve Banks' Operating Circular 1, Account
Relationships) of a Settler on the books of a Reserve Bank.
    ``Settler'' means an entity that has established an account with
a Reserve Bank and settles its own Balances, settles Balances for
the account of another Participant, or both.
    ``Settlement Agent'' means the entity authorized to act on
behalf of the Settlers under Operating Circular 12.
    ``Settlement File'' means the instructions submitted by a
Settlement Agent showing the debit and credit Balances of the
Settlers.
    See Section 1.2 of Operating Circular 12, supra note 22. See
also Federal Reserve Banks Operating Circular 1 (Account
Relationships), Effective February 1, 2013, available at https://www.frbservices.org.
    \24\ See id.
    \25\ See Section 5.4 of Operating Circular 12, supra note 22.
    \26\ See Section 5.6 of Operating Circular 12, supra note 22.
---------------------------------------------------------------------------

    Therefore, the point of finality with respect to settlement for GSD
funds-only settlement and MBSD cash settlement is the point at which
each of the Master Accounts for FICC and the settling banks designated
by each of the Members have been debited and credited through NSS
pursuant to the Settlement File provided by the Settlement Agent.
C. Point of Finality for GSD and MBSD Settlement of Securities
Deliveries and Related Payment Obligations
1. Securities Settlement Processes
(a) GSD Securities Settlement/MBSD Securities Settlement
    GSD and MBSD settlement for securities deliveries and related
payment obligations (other than GCF Repo Transactions and CCIT
Transactions) are governed by GSD Rule 12 and MBSD Rule 9,
respectively.\27\ Settlement for securities deliveries and related
payment obligations occurs on a delivery-versus-payment basis on the
books of FICC's clearing bank \28\ or via Fedwire Securities Service
(``Fedwire'').\29\
---------------------------------------------------------------------------

    \27\ GSD Rule 12 and MBSD Rule 9, supra note 5.
    \28\ FICC currently uses The Bank of New York Mellon (``BNY
Mellon'') as its clearing bank for this purpose.
    \29\ Fedwire Securities Service is an electronic securities
service owned and operated by the FRB that provides issuance,
maintenance, transfer and settlement services for all marketable
U.S. Treasury securities, as well as certain securities issued by
other federal government agencies, government-sponsored enterprises
and international organizations. See https://frbservices.org/financial-services/securities/index.html.
---------------------------------------------------------------------------

    FICC designates a clearing bank to act on its behalf in the
delivery and receipt of securities to or from the Members for
securities settlement.\30\ FICC shall notify each GSD Member and MBSD
Member, as applicable, of the clearing bank or banks that FICC will use
to deliver eligible securities to Members and to receive eligible
securities from Members, and by product, the types of securities that
each such clearing bank will so deliver and receive.\31\ In turn, each
Member (prior to activating its membership) must notify FICC of the
clearing bank or banks that the Member has designated to act on its
behalf in the delivery and receipt of securities to or from FICC.\32\
Such designation is subject to FICC's determination that such clearing
bank (a) has and will maintain access to Fedwire, (b) has and will
maintain the operational capability to interact satisfactorily with the
clearing banks that act on behalf of FICC, and (c) has agreed to act on
behalf of such Member in accordance with the Rules.\33\
---------------------------------------------------------------------------

    \30\ GSD Rule 12, Section 2 and MBSD Rule 9, Section 2, supra
note 5.
    \31\ Id.
    \32\ Id.
    \33\ Id.
---------------------------------------------------------------------------

    If the Member's designated clearing bank for securities settlement
is the same as FICC's clearing bank, obligations for securities
deliveries and related payment obligations will be settled for a Member
on the books of FICC's designated clearing bank. If the Member's
designated clearing bank is not the same as FICC's clearing bank,
obligations for securities deliveries and related payment obligations
will be settled between the clearing banks using Fedwire. All
deliveries are made against full payment.\34\
---------------------------------------------------------------------------

    \34\ GSD Rule 12, Section 1 and MBSD Rule 9, Section 1, supra
note 5.
---------------------------------------------------------------------------

(b) GCF Repo[supreg] Service and the CCIT Service Settlement
    Settlement for securities deliveries and related payment
obligations relating to the GCF Repo[supreg] Service and the CCIT
Service are governed by GSD Rule 20 and GSD Rule 3B.\35\ FICC and each
Member settling transactions through the GCF Repo Service and CCIT
Service maintain accounts at FICC's designated clearing bank for
settlement of securities deliveries and related payment obligations
with respect to the GCF Repo Service and the CCIT Service.\36\
Settlement for securities deliveries and related payment obligations
\37\ for the GCF Repo Service and the CCIT Service occurs on the books
of FICC's designated clearing bank.\38\
---------------------------------------------------------------------------

    \35\ The GCF Repo service is primarily governed by GSD Rule 20
and enables Netting Members to trade general collateral finance
repurchase agreement transactions based on rate, term, and
underlying product throughout the day with brokers on a blind basis.
GSD Rule 20, supra note 5. The CCIT Service is governed by GSD Rule
3B and enables tri-party repurchase agreement transactions in GCF
Repo Securities between Netting Members that participate in the GCF
Repo Service and institutional cash lenders (other than investment
companies registered under the Investment Company Act of 1940, as
amended). GSD Rule 3B, supra note 5. Section 11 of GSD Rule 3B
provides that GSD Rule 20 shall apply to the netting and settlement
obligations of FICC and each party to a CCIT Transaction in the same
way in which such provisions apply to GCF Repo Transactions. GSD
Rule 3B, Section 11, supra note 5.
    \36\ See GSD Rule 3B, Section 9(b), supra note 5 (requiring each
CCIT Member to maintain two accounts at the GCF Clearing Agent Bank,
one of which, the CCIT Account, is for the CCIT Member's activity in
respect of CCIT Transactions).
    \37\ GSD Rule 3B, Section 13 provides that certain payment
obligations relating to CCIT Transactions are processed pursuant to
GSD funds-only settlement described in Item II.(A)(1)(i)B. above.
See GSD Rule 3B, Section 13, supra note 5.
    \38\ The clearing bank for this purpose is defined as the GCF
Clearing Agent Bank. See GSD Rule 3B and GSD Rule 20, supra note 5.
FICC currently uses BNY Mellon as the GCF Clearing Agent Bank.
---------------------------------------------------------------------------

2. Interpretive Guidance With Respect to Settlement Finality--
Settlement for Securities Deliveries and Related Payment Obligations
    Settlement for securities deliveries and related payment
obligations occurs (i) on the books of FICC's designated clearing bank
for each Member whose designated clearing bank for such settlement is
the same as FICC's designated clearing bank and (ii) through the
Fedwire system, for each Member whose designated clearing bank for such
settlement is not the same as FICC's designated clearing bank.
(a) Point of Finality on the Books of FICC's Clearing Bank
    The point of finality relating to settlement of securities
deliveries and related payment obligations that occurs

on the books of FICC's clearing bank is the point at which FICC's
clearing bank has acted upon a settlement instruction from FICC.
    Pursuant to the agreement between FICC and FICC's clearing bank, a
settlement instruction is an instruction by FICC to the clearing bank
in respect of settlement that: (1)(a) Instructs the clearing bank to
direct delivery, from the FICC account to the Member account(s)
designated in such settlement instruction, of securities specified for
each such Member account and (b) specifies the dollar amounts that the
clearing bank is simultaneously to take collection of from each of the
respective Member accounts designated in the settlement instruction for
the FICC account; or (2)(a) instructs the clearing bank to direct
payment, from the FICC account to the designated Member account(s), of
the dollar amounts specified in the settlement instruction for each
such Member account and (b) specifies the securities that the clearing
bank is simultaneously to take receipt of from each of the Member
accounts designated in the settlement instruction for the FICC account.
    FICC's clearing bank has acted upon such instructions when the
clearing bank (i)(a) directs delivery, from the FICC account to the
Member account(s) designated in such settlement instruction, of
securities specified for each such Member account and (b)
simultaneously collects the dollar amounts from each of the respective
Member accounts designated in the settlement instruction for the FICC
account; or (ii)(a) directs payment, from the FICC account to the
designated Member account(s), of the dollar amounts specified in the
settlement instruction for each such Member account and (b)
simultaneously takes receipt of securities from each of the Member
accounts designated in the settlement instruction for the FICC account.
    Therefore, the point of finality of settlement of securities
deliveries and related payment obligations that occur on the books of
FICC's clearing bank is when each of the accounts held by FICC and the
Members at the clearing bank for purposes of securities settlement have
been debited and credited in accordance with the settlement
instructions provided by FICC.
(b) Point of Finality on the Fedwire System
    The point of finality relating to settlement of securities
deliveries and related payment obligations that occurs through the
Fedwire system is defined by the Federal Reserve Banks Operating
Circular No. 7,\39\ which governs book entry security account
maintenance and transfers. FICC's clearing bank and each Member's
clearing bank is a ``Participant'' and maintains a ``Securities
Account'' and a ``Master Account'' with the FRB (each term as defined
in Operating Circular 7).\40\ Operating Circular 7 states that
``[u]nless a Transfer is rejected in accordance with this Circular, all
debits and credits in connection with a Transfer become final at the
time the debits and credits are posted to the Sender's and Receiver's
Securities Accounts and, in case of Transfer Against Payment, their
corresponding Master Accounts.'' \41\ For purposes of settlement of
securities deliveries and related payment obligations, the clearing
banks designated by FICC and each Member to deliver and receive
securities and related funds on behalf of FICC and each Member,
respectively, are the Senders and Receivers described in Operating
Circular 7. Therefore, the point of finality of settlement of
securities deliveries and related payment obligations is when each of
the Securities Accounts and the Master Accounts of the clearing banks
designated by FICC and each of the Members have been debited and
credited through the Fedwire system in accordance with the settlement
instructions provided by FICC.\42\
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    \39\ Federal Reserve Banks Operating Circular 7 (Book-Entry
Securities Account Maintenance and Transfer Services), Effective
October 29, 2017 (``Operating Circular 7''), available at https://www.frbservices.org.
    \40\ For purposes of Operating Circular 7, the following
definitions apply:
    ``Book-Entry Security'' means a marketable security issued in
electronic form by the United States Government (the ``Treasury''),
any agency or instrumentality thereof, certain international
organizations, or others, that the Reserve Banks have determined is
eligible to be held in a Securities Account and is eligible for
Transfer.
    ``Free Transfer'' means a Transfer that does not involve any
credit or debit to a Master Account other than a transaction fee.
    ``Master Account'' means a ``Master Account'' (as defined in the
Reserve Banks' Operating Circular 1, Account Relationships) on the
books of a Reserve Bank. A Master Account is a Funds Account for
purposes of the regulations listed in Appendix A of Operating
Circular 7. A Master Account does not contain Book-Entry Securities.
    ``Participant'' means an entity that maintains a Securities
Account with a Reserve Bank in the entity's name.
    ``Receiver'' means the Participant receiving a Book-Entry
Security as a result of a Transfer.
    ``Securities Account'' means an account at a Reserve Bank
containing Book-Entry Securities.
    ``Sender'' means the Participant sending a Transfer Message.
    ``Transfer'' means the electronic movement over the
Fedwire[supreg] Securities Service of a par amount of Book-Entry
Securities by debit to the designated Securities Account of the
Sender and by credit to the designated Securities Account of the
Receiver, or by debit to one Securities Account of a Participant and
credit to another Securities Account of that same Participant, in
which case that Participant is both a Sender and a Receiver. A
Transfer is either a Free Transfer or a Transfer Against Payment.
    ``Transfer Against Payment'' means a Transfer that is effected
with a credit to the Master Account of the Sender and a debit to the
Master Account of the Receiver, for the amount of the payment.
    ``Transfer Message'' means an instruction of a Participant to a
Reserve Bank to effect a Transfer.
    See Operating Agreement Circular 7, Section 3.0, supra note 39.
    \41\ Operating Circular 7, Section 9.1.1, supra note 39.
Capitalized terms are defined as set forth in Operating Circular 7.
See supra note 40.
    \42\ Each Business Day, FICC makes available to each Member a
Report that provides settlement information that FICC deems
sufficient to enable each such Member to be able to settle its
securities deliveries and related payment obligations and each
Member is obligated to provide the appropriate instructions to its
clearing bank to deliver and/or receive securities and related
payments as set forth in the Report. GSD Rule 12, Section 3 and MBSD
Rule 9, Section 3, supra note 5.
---------------------------------------------------------------------------

(ii) Description of the Proposed Rule Change
    In order to provide Members greater transparency regarding
settlement finality, FICC is proposing to amend the Rules to include
the Interpretive Guidance. The Interpretive Guidance would describe
settlement finality as set forth above in Items II.(A)(1)(i)B.2. and
II.(A)(1)(i)C.2. above.
(2) Statutory Basis
    Section 17A(b)(3)(F) of the Act \43\ requires, in part, that the
Rules be designed to promote the prompt and accurate clearance and
settlement of securities transactions. The proposed rule change would
provide additional transparency to FICC Members regarding settlement
finality with respect to securities transactions processed through
FICC. Accordingly, the proposed rule change would ensure that the Rules
are transparent and clear, which would enable all stakeholders to
readily understand their respective rights and obligations in
connection with FICC's clearance and settlement of securities
transactions. Therefore, FICC believes that the proposed rule change
would promote the prompt and accurate clearance and settlement of
securities transactions, consistent with Section 17A(b)(3)(F) of the
Act.\44\
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78q-1(b)(3)(F).
    \44\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(8) under the Act \45\ requires FICC to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to define the point at which settlement is final to
be no later than the end of the day on which the payment or obligation
is due and, where necessary or

appropriate, intraday or in real time. The proposed rule change to add
the Interpretive Guidance would enhance the transparency with respect
to the point at which settlement is final with respect to transactions
processed through FICC. Having clear provisions in this regard would
enable FICC Members to better identify the point at which settlement is
final with respect to their cash and securities transactions. As such,
FICC believes the proposed rule change is consistent with Rule 17Ad-
22(e)(8) of the Act.\46\
---------------------------------------------------------------------------

    \45\ 17 CFR 240.17Ad-22(e)(8).
    \46\ Id.
---------------------------------------------------------------------------

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

    FICC does not believe that the proposed rule change would impact
competition.\47\ The proposed rule change would provide interpretive
guidance with respect to settlement finality relating to transactions
processed through FICC. The proposed rule change would not change
current practices of FICC and would not affect FICC Members' rights or
obligations. As such, FICC believes that the proposed rule change would
not impact FICC Members or have any impact on competition.
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

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

    FICC has not received or solicited any written comments relating to
this proposal. FICC will notify the Commission of any written comments
received by FICC.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) \48\ of the Act and paragraph (f) \49\ of Rule 19b-4
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78s(b)(3)(A).
    \49\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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 for (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-FICC-2020-001 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-FICC-2020-001. 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 (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 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 FICC and on DTCC's website
(http://dtcc.com/legal/sec-rule-filings.aspx). 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-FICC-2020-001 and should be submitted on
or before March 23, 2020.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\50\
---------------------------------------------------------------------------

    \50\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-04186 Filed 2-28-20; 8:45 am]
 BILLING CODE 8011-01-P


PAPERWORK REDUCTION ACT SUBMISSION Please read the instructions before completing this form. For additional forms or assistance in completing this form, contact your agency's Paperwork Clearance Officer. Send two copies of this form, the collection instrument to be reviewed, the Supporting Statement and any additional documentation to: Office of Information and Regulatory Affairs, Office of Management and Budget, Docket Library, Room 10102, 725 17th Street NW Washington, DC 20503.

1. Agency/ Subagency originating request U. S. EPA, Office of Administration and Resources Management, Office of Acquisition Management 2. OMB control number b. G None a. 2030 0005 __ __ __ __

3. Type of information collection ( check one) a. G New collection b. G Revision of a currently approved collection c. X Extension of a currently approved collection d. G Reinstatement, without change, of a previously approved collection for which approval has expired e. G Reinstatement, with change, of a previously approved collection for which approval has expired f. G Existing collection in use without an OMB control number 4. Type of review requested ( check one) a. X Regular b. G Emergency  Approval requested by: / / c. G Delegated 5. Small entities Will this information collection have a significant economic impact on a substantial number of small entities? G Yes X No For b f, note item A2 of Supporting Statement Instructions 6. Requested expiration date a. X Three years from approval date b. G Other Specify: / /___

7. Title Monthly Progress Reports 8. Agency form number( s) ( If applicable) EPA ICR No. 1039.10 9. Keywords Procurement, Government 10. Abstract Agency contractors with cost reimbursable, time and material, labor hour, or indefinite quantity/ indefinite delivery fixed rate contracts report the technical and financial progress of the contract on a monthly basis. EPA uses this information to monitor the contractor's progress under the contract.

11. Affected public ( Mark primary with " P" and all others that apply with " X")

a. Individuals or households d. Farms b. P Business or other for profit e. Federal Government c. X Not for profit institutions f. State, Local or Tribal Government 12. Obligation to respond ( Mark primary with " P" and all others that apply with " X") a. G Voluntary b. X Required to obtain or retain benefits c. G Mandatory 13. Annual reporting and recordkeeping hour burden a. Number of respondents 324 b. Total annual responses 3888 1. Percentage of these responses collected electronically 0 % c. Total hours requested 140,940 d. Current OMB inventory 177,045 e. Difference  36,105 f. Explanation of difference 1. Program Change 0 2. Adjustment  36,105 14. Annual reporting and recordkeeping cost burden ( in thousands of dollars)

a. Total annualized capital/ startup costs $ 0 b. Total annual costs ( O& M) $ 39 c. Total annualized cost requested $ 39 d. Current OMB inventory $ 49 e. Difference $ 10 f. Explanation of difference 1. Program change $ 0 2. Adjustment $  10 15. Purpose of information collection ( Mark Primary With " P" and all others that apply with " X")

a. P Application for benefits e. __ Program planning or management b. __ Program evaluation f. __ Research c. __ General purpose statistics g. __ Regulatory or compliance d. X Audit 16. Frequency of recordkeeping or reporting ( check all that apply) a. X Recordkeeping b. Q Third party disclosure c. X Reporting 1. Q On occasion 2. Q Weekly 3. X Monthly 4. Q Quarterly 5. Q Semi annually 6. Q Annually 7. Q Biannually 8. Other ( describe)

17. Statistical methods Does this information collection employ statistical methods?

Q Yes X No 18. Agency contact ( person who can best answer questions regarding the content of this submission) Name: Brian K. Long Phone: ( 202) 564 4737 OMB 83 I 10/ 95 19. Certification for Paperwork Reduction Act Submissions On behalf of this Federal agency, 1 certify that the collection of information encompassed by this request complies with' 5 CFR 1320.9.

NOTE: The text of 5 CFR 1320.9, and the related provisions of 5 CFR 1320.8( b)( 3), appear at the end of the instructions. The certification is to be made with reference to those regulatory provisions as set forth in the instructions.

The following is a summary of the topics, regarding the proposed collection of information, that the certification covers:

( a) It is necessary for the proper performance of agency functions;

( b) It avoids unnecessary duplication;

( c) It reduces burden on small entities;

( d) It uses plain, coherent, and unambiguous terminology that is understandable to respondents;

( e) Its implementation will be consistent and compatible with current reporting and recordkeeping practices;

( f) It indicates the retention periods for recordkeeping requirements;

( g) It informs respondents of the information called for under 5 CFR 1320.8( b)( 3): ( I) Why the information is being collected' ( ii) Use of information; ( iii) Burden estimate; ( iv) Nature of response ( voluntary, required for a benefit, or mandatory); ( v) Nature and extent of confidentiality; and ( vi) Need to display currently valid OMB control number;

( h) It was developed by an office that has planned and allocated resources for the efficient and effective management and use of the information to be collected ( see note in Item 19 of the instructions);

( I) It uses effective and efficient statistical survey methodology; and ( j) It makes appropriate use of information technology.

If you are unable to certify compliance with any of these provisions, identify the item below and explain the reason in Item 18 of the Supporting Statement.

Signature of Program Official Leigh Pomponio, Manager Policy Service Center Office of Acquisition Management Date Signature of Senior Official or designee Oscar Morales, Director Collection Strategies Division Office of Information Collection Office of Environmental Information Date OMB 83 I 10/ 95 Certification Requirement for Paperwork Reduction Act Submissions 5 CFR 1320.9 reads " As part of the agency submission to OMB of a proposed collection of information, the agency ( through the head of the agency, the Senior Official or their designee) shall certify ( and provide a record supporting such certification) that the proposed collection of information

"( a) is necessary for the proper performance of the functions of the agency, including that the information to be collected will have practical utility;

"( b) is not unnecessarily duplicative of information otherwise reasonably accessible to the agency;

"( c) reduces to the extent practicable and appropriate the burden on persons who shall provide information to or for the agency, including with respect to small entities, as defined in the Regulatory Flexibility Act 5 U. S. C § 601( 6)), the use of such techniques as:

"( 1) establishing differing compliance or reporting requirements or timetables that take into account the resources available to those who are to respond; "( 2) the clarification, consolidation, or simplification of compliance and reporting requirements; or collection of information , or any part thereof; "( 3) an exemption from coverage of the collection of information, or any part thereof;

"( d) is written using plain, coherent, and unambiguous terminology and is understandable to those who are to respond;

"( e) is to be implemented in ways consistent and compatible, to the maximum extent practicable, with the existing reporting and recordkeeping practices of those who are to respond;

"( f) indicates for each recordkeeping requirement the length of time persons are required to maintain the records specified;

"( g) informs potential respondents of the information called for under § 1320.8( b)( 3); [ see below]

"( h) has been developed by an office that has planned and allocated resources for the efficient and effective management and use of the information to be collected, including the processing of the information in a manner which shall enhance, where appropriate, the utility of the information to agencies and the public;

"( I) uses effective and efficient statistical survey methodology appropriate to the purpose for which the information is to be collected; and "( j) to the maximum extent practicable, uses appropriate information technology to reduce burden and improve data quality, agency efficiency and responsiveness to the public."

NOTE: 5 CFR 1320.8( b)( 3) requires that each collection of information:

"( 3) informs and provides reasonable notice to the potential persons to whom the collection of information is addressed of: "( I) the reasons the information is planned to be and/ or has been used to further the proper performance of the functions of the agency; "( ii) the way such information is planned to be and/ or has been used to further the proper performance of the functions of the agency; "( iii) an estimate, to the extent practicable, of the average burden of the collection ( together with a request that the public direct to the agency any comments concerning the accuracy of this burden estimate and any suggestions for reducing this burden); "( iv) whether responses to the collection of information are voluntary, required to obtain or retain a benefit ( citing authority), or mandatory ( citing authority); "( v) the nature and extent of confidentiality to be provided, if any ( citing authority); and "( vi) the fact that any agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number."

OMB 83 I ( Instructions) 10/ 95


[Federal Register Volume 76, Number 145 (Thursday, July 28, 2011)]
[Notices]
[Pages 45332-45333]
[FR Doc No: 2011-18839]

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DEPARTMENT OF TRANSPORTATION

Pipeline and Hazardous Materials Safety Administration

Office of Hazardous Materials Safety; Notice of Applications for
Modification of Special Permit

AGENCY: Pipeline and Hazardous Materials Safety Administration (PHMSA),
DOT.

ACTION: List of Applications for Modification of Special Permits.

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

SUMMARY: In accordance with the procedures governing the application
for, and the processing of, special permits from the Department of
Transportation's Hazardous Material Regulations (49 CFR part 107,
subpart B), notice is hereby given that the Office of Hazardous
Materials Safety has received the applications described herein. This
notice is abbreviated to expedite docketing and public notice. Because
the sections affected, modes of transportation, and the nature of
application have been shown in earlier Federal Register publications,
they are not repeated here. Requests for modification of special
permits (e.g. to provide for additional hazardous materials, packaging
design changes, additional mode of transportation, etc.) are described
in footnotes to the application number. Application numbers with the
suffix ``M'' denote a modification request. These applications have
been separated from the new application for special permits to
facilitate processing.

DATES: Comments must be received on or before August 12, 2011.

ADDRESSES:  Record Center, Pipeline and Hazardous Materials Safety
Administration, U.S. Department of Transportation, Washington, DC
20590. Comments should refer to the application number and be submitted
in triplicate. If confirmation of receipt of comments is desired,
include a self-addressed stamped postcard showing the special permit
number.

FOR FURTHER INFORMATION CONTACT: Copies of the applications are
available for inspection in the Records Center, East Building, PHH-30,
1200 New Jersey Ave., SE, Washington, DC or at http://regulations.gov.
    This notice of receipt of applications for modification of special
permit is published in accordance with part 107 of the Federal
hazardous materials transportation law (49 U.S.C. 5117(b); 49 CFR
1.53(b)).

    Issued in Washington, DC, on July 21, 2011.
Donald Burger,
Chief, General Approvals and Permits.

----------------------------------------------------------------------------------------------------------------
                                                   Applicant
   Application No.          Docket No.            Regulations       Nature of special
                                                    affected         permits thereof
---------------------------------------------------------------------------------------
                             MODIFICATION SPECIAL PERMITS
----------------------------------------------------------------------------------------------------------------
9168-M..............                          All-Pak Dangerous    49 CFR Part 172;     To modify the special
                                               Goods, a Berlin      Subpart E;           permit to authorize an
                                               Packaging (Former    173.118; 173.244;    additional mode of
                                               Grantee All-Pak,     173.345; 173.346;    transportation (cargo
                                               Inc.),               173.359; 173.370;    vessel.)
                                               Bridgeville, PA.     173.377; 175.3;
                                                                    175.33; 172.504;
                                                                    173.3.
12092-M.............                          KMR Industries,      49 CFR 173.34(e)...  To modify the special
                                               LLC, Columbia, MD.                        permit to authorize
                                                                                additional modes of
                                                                                transportation (rail
                                                                                and cargo vessel).
14743-M.............                          TIER Environmental   49 CFR 173.24b and   To modify the special
                                               Services, Inc.       173.244.             permit to authorize one-
                                               (Former Grantee                           time, one-way
                                               TIER DE, Inc.),                           transportation in
                                               Gap, PA.                                  commerce of an
                                                                                additional non-DOT
                                                                                specification metal
                                                                                tank containing
                                                                                approximately 1320 lbs.
                                                                                of sodium by motor
                                                                                vehicle.

14778-M.............  PHMSA-08-0275.........  Metalcraft/Sea Fire  49 CFR 173.301(f)..  To modify the special
                                               Marine Inc.,                              permit to authorize the
                                               Baltimore, MD.                            transportation in
                                                                                commerce of additional
                                                                                non-DOT specification
                                                                                cylinders containing a
                                                                                Division 2.2 compressed
                                                                                gas for export only.
14924-M.............                          Explosive Service    49 CFR 176.144(e),   To modify the special
                                               International        176.145(b),          permit to authorize the
                                               Ltd., Baton Rouge,   176.137(b)(7),       transportation in
                                               LA.                  176.63(e), 176.83    commerce of certain
                                                                    and 176.138(b).      Division 1.1D and 1.4B
                                                                                explosives by vessel in
                                                                                an alternative
                                                                                configuration.
----------------------------------------------------------------------------------------------------------------

[FR Doc. 2011-18839 Filed 7-27-11; 8:45 am]
BILLING CODE 4910-60-M