[Federal Register: January 5, 2006 (Volume 71, Number 3)]
[Notices]
[Page 629-632]
[DOCID:fr05ja06-57]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53036; File No. SR-FICC-2005-18]

Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To
Enhance the Repo Collateral Substitution Process of FICC's Government
Securities Division

December 29, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on September 30, 2005, the
Fixed Income Clearing Corporation (``FICC'') filed with the Securities
and Exchange Commission (``Commission'') and on December 20, 2005,
amended the proposed rule change described in Items I, II, and III
below, which items have been prepared primarily by FICC. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The purpose of this proposed rule change is to enhance the repo
collateral substitution process of FICC's Government Securities
Division (``GSD'').

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

    In its filing with the Commission, FICC 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. FICC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.\2\
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    \2\ The Commission has modified the text of the summaries
prepared by FICC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Initial Substitution Notification Without Replacement Collateral
Information
    The GSD's repo collateral substitution process provides a mechanism
for a repo dealer to process its right to substitute the original
collateral it

provided as part of a repo transaction with replacement collateral.
With respect to a brokered transaction,\3\ typically the repo dealer
notifies the relevant broker that it wishes to substitute the repo
collateral before it specifically identifies what the replacement
collateral will be. The broker then contacts the reverse repo dealer
and informs it that a repo collateral substitution process is being
initiated, at which time the reverse repo dealer sends the original
repo collateral to FICC. However, since under FICC's current system the
repo dealer's substitution notification sent to FICC must contain
information about the replacement collateral, often the substitution
notification is not delivered to FICC at the time FICC receives the
returned original repo collateral from the reverse repo dealer. When
the repo dealer does determine what securities will constitute the
replacement collateral, it often delivers the replacement collateral to
FICC before sending the repo collateral substitution notification. Thus
the parties have delivered the respective collateral to FICC, but until
FICC receives the substitution notification, it is not able to deliver
the collateral to the appropriate parties. This leaves FICC in an
overdraft position at the clearing bank(s), which can cause expense and
risk to FICC and to its members and settlement processing delays.
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    \3\ With respect to a non-brokered repo transaction, the repo
dealer would contact the reverse repo dealer directly about the repo
collateral substitution.
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    The proposed rule change will permit the repo dealer or repo
broker, as appropriate, to submit a substitution notification to FICC
without information about the replacement collateral. FICC will deliver
the original collateral to the repo party's account at its clearing
bank(s) upon receipt of the substitution notification so the original
collateral will no longer linger in FICC's account. FICC believes this
will encourage repo dealers to allocate replacement collateral more
timely since they will be financing the original collateral
intraday.\4\
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    \4\ The changes necessary to reflect this part of the rule
change are contained in GSD Rule 18, Sections 3(a), (b), (c), and
(d) and in the Schedule of Required and Accepted Data Submission
Items for a Right of Substitution. A new schedule, titled Schedule
of Required and Accepted Data Submission Items for New Securities
Collateral, is being proposed to be added to the rules to reflect
that information on the replacement collateral will be contained in
a separate submission to FICC.
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2. Revised Repo Collateral Substitution Process Deadline and Fee
Schedule
    The proposed change in repo processing requires a revision to GSD's
schedule of timeframes. Also, in order to further encourage timely
submission of collateral requests and the associated required
information, FICC is proposing to add a new late fee to the repo
substitution process. Currently, there is a two-tiered deadline and
associated late fee for a repo party to submit a substitution
notification.\5\ The proposed rule change would establish: (i) An 11:00
a.m. Eastern Time deadline \6\ for a repo party to submit a
substitution notification and (ii) a late fee of $100 for each
substitution notification that is received after the deadline. The
proposed rule change also would establish a two-tiered deadline and
associated late fee schedule for a repo party to submit replacement
collateral information. The proposed deadlines for submission of
replacement collateral information are: (i) 12:00 p.m. Eastern Time and
(ii) 12:30 p.m. Eastern Time. The proposed late fee assessments are:
(i) $100 for each submission of replacement collateral information that
is received after the first deadline but before the second deadline and
(ii) $250 for each submission of replacement collateral information
that is received after the second deadline.\7\
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    \5\ The current deadlines are 12:00 p.m. Eastern Time and 12:30
p.m. Eastern Time. The deadlines are extended by one hour on days
that: (i) FICC determines are high-volume days or (ii) The Bond
Market Association announces in advance will be high-volume days.
FICC assesses a late fee of: (i) $100 for each substitution
notification that is received after the first deadline but before
the second deadline and (ii) $250 for each substitution notification
that is received after the second deadline.
    \6\ The proposed 11:00 a.m. Eastern Time deadline will not be
extended on high-volume days.
    \7\ The proposed allocation of collateral deadlines will be
extended by one hour on days that: (i) FICC determines are high-
volume days or (ii) The Bond Market Association announces in advance
will be high-volume days. The rule changes necessary to affect this
part of the proposed rule are contained in the Schedule of
Timeframes and in the Fee Structure under ``Late Fees.''
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3. Risk Management Measures and Technical Changes
    As part of the proposed rule change, FICC believes it is necessary
to address the risk presented to FICC in the repo collateral
substitution process by the failure of a party to timely submit
information regarding the replacement collateral to FICC. The risk that
arises in such a situation is that by the time FICC receives the
information about the replacement collateral, the replacement
collateral may have a different market value than the original
collateral on which FICC's margin calculations were based. To address
this, FICC is proposing certain risk management measures. Specifically,
FICC will: (i) increase the clearing fund calculation of the repo
dealer and allow margining with respect to replacement collateral based
on applicable generic CUSIP numbers only; \8\ and (ii) impose mark-to-
market consequences on both the repo dealer and the reverse dealer with
respect to unknown replacement collateral.
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    \8\ Generic CUSIP numbers represent the range of permissible
securities that can constitute the replacement collateral. For
example, there is a generic CUSIP number which represents Treasury
securities with remaining maturity of fewer than thirty years.
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    A. Clearing Fund Calculation and Permissible Margin Offsets. With
respect to the calculation of the repo dealer's clearing fund
requirement, FICC will assign a value to a repo transaction where FICC
has not received information regarding the replacement collateral,
which value will be 150 percent of the contract value of the original
securities collateral.\9\ FICC will also apply the highest applicable
margin factor in its rules in connection with the repo transaction. In
GSD's rules, the highest margin factor is the factor for securities
with a remaining maturity of fewer than 30 years. Therefore, if the
generic CUSIP number that is assigned to the unknown replacement
collateral is the generic CUSIP number for Treasury securities with a
remaining maturity of under 30 years, FICC will use the existing margin
factor of 1.450 (applicable to category 1 members with positions in
non-zeros).\10\
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    \9\ New subsection 3(f) has been proposed to be added to Rule 18
in order to effect this change. It should be noted that the
application of the 150 percent for clearing fund purposes applies to
both the receive/deliver and repo volatility components of the
clearing fund calculation.
    \10\ The GSD's margin factor schedules apply different margin
factors to category 1 and category 2 dealers. In this example, if
the member were a category 2 member electing not to receive credit
forward mark adjustment payments, the applicable margin factor under
the proposed rule change would be 1.5.
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    The proposed risk management measures applicable to non-timely
allocation of replacement collateral will further affect the clearing
fund calculation of the repo dealer by limiting permissible offsets. A
regular part of the GSD's margining system is to permit offsets between
resulting margin amounts of long and short net settlement positions.
The GSD's rules contain disallowance factor tables that set forth
specific limits on these permissible offsets. For example, where a
short net settlement position in Treasury Offset Class A is to be
offset

against a long net settlement position in Treasury Offset Class B, the
applicable disallowance factor table rules provides that 20 percent of
this offset will be disallowed. For offset purposes under the proposed
rule change, FICC will define two new offset classes to capture the
generic CUSIP numbers that can be assigned to unknown replacement
collateral. These new offset classes will be identified as ``H'' for
Treasury securities and ``h'' for non-mortgage-backed Agency
securities. Under the proposed rule change, as a further risk
management measure, FICC will not permit offsets: (i) Between Offset
Classes H and h or (ii) between Offset Classes H or h on the one hand
and other existing GSD Offset Classes on the other.
    B. Modified Mark-to-Market Calculation. FICC also believes that a
prudent risk management measure in the case where a generic CUSIP
number is used for underlying collateral will be to calculate a
modified mark-to-market obligation with respect to the replacement
collateral and to impose this on both the repo dealer and the reverse
repo dealer. In a typical scenario where the replacement collateral is
identified, FICC reverses any previous mark-to-market calculation for
the old collateral and recalculates, collects, and passes through a
mark-to-market associated with the actual replacement collateral. This
computation is defined as the Forward Mark Adjustment Payment.\11\ In
the scenario where the replacement collateral has not been identified,
FICC will calculate a modified Forward Mark Adjustment Payment to
protect FICC against market risk. Specifically, the definition of
Forward Mark Adjustment Payment will be amended by noting that, with
respect to a repo transaction for which a substitution request has been
made but for which replacement collateral information has not been
provided to FICC, a new Forward Unallocated Sub Mark will be applied.
This new mark will take into account repo interest that has accrued
with respect to the repo transaction to date, as well as changes in the
repo rate (to reflect the difference between the contract rate and the
market rate for the remaining term of the repo transaction).\12\
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    \11\ The Forward Mark Adjustment Payment is the sum of two
components: the Collateral Mark and the Financing Mark. The
Collateral Mark is the absolute value of the difference between the
trade's contract value and market value. The Financing Mark reflects
the financing cost that would be incurred by FICC if it replaced the
reverse side of the repo by buying securities and putting them out
on repo.
    \12\ The following new definitions have been proposed to effect
this change: Accrued Repo Interest-to-Date, Repo Interest Rate
Differential, and Forward Unallocated Sub Mark.
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    C. Technical Changes. Additionally, FICC proposes changes to its
GSD rules relating to repo collateral substitutions and repo
transactions generally to make certain technical changes and/or to
align the applicable provisions with standard internal or industry
practice. These are:
    1. Section 3(a) of Rule 18: Delete the requirement that details
regarding the rights of substitution match between counterparties.
Details regarding rights of substitution are not a required trade
reporting item and thus will not be a required match item in GSD's
system. References in this respect will be deleted to reflect actual
operating practice;
    2. Sections 3(e) and 3(f) of Rule 18: Delete the requirement that
upon receipt of either the original or the replacement collateral, FICC
will promptly redeliver the securities to the appropriate party. As
stated in the narrative above, FICC may receive securities that are the
subject of a repo collateral substitution request but may not yet have
the requisite information for delivery of those securities. These
provisions should be deleted to reflect actual operating practice and
also to make the rule consistent with the proposed changes;
    3. Section 3(h) of Rule 18: Delete the provision regarding
implications of repo collateral substitutions on margin and mark-to-
market requirements. This provision is redundant because the effects of
repo substitutions on such requirements are covered in the rules
governing these items and the rules to be modified by the proposed rule
change;
    4. Section 4 of Rule 18: Make optional a requirement that for
general collateral, forward-starting repos, the specific CUSIP and par
value be submitted prior to the repo start date. FICC typically does
not receive such allocations from its members prior to the repo start
date and thus the proposed change will align the rule with industry
practice. The proposed change further reflects operating practice as
well as industry expectations that a general collateral, forward-
starting repo will be removed from the GSD's books if FICC does not
receive the specific CUSIP by the time noted in the rule. Members
typically submit new transactions with the specific CUSIPs and expect
that the general collateral transaction will be removed from the GSD's
books.
    5. Section 5 of Rule 18: Amend the provision that addresses repo
transactions with maturing collateral. The proposed rule change
provides that the repo party in such a repo transaction must make the
required substitution of collateral by the time noted in the rule or
FICC will remove the transaction from its books. This is because the
underlying contract terminates if the collateral is not replaced in
time, and therefore, the proposed rule change reflects industry
practice. The proposed rule change further reflects industry practice
by deleting the requirement that the replacement collateral meet
certain specific criteria and replacing that requirement with a
requirement that the replacement collateral be ``in accordance with the
terms of the transaction.'' This change also reflects industry
practice.
    FICC believes the proposed rule change is consistent with the
requirements of Section 17A of the Act \13\ and the rules and
regulations thereunder applicable to FICC because it promotes timely
processing of participant transactions. As such, FICC believes the
proposed rule facilitates the prompt settlement of transactions and
assures the safeguarding of securities and funds that are in the
custody and control of FICC or for which it is responsible.
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    \13\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    FICC does not believe that the proposed rule change will have any
impact or impose any burden on competition.

(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 rule change have not been
solicited or received. 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

    Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period: (i) as the
Commission may designate up to ninety days of such date 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 such proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
) or     Send an e-mail to<EMAIL_ADDRESS>Please include

File Number SR-FICC-2005-18 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-FICC-2005-18. This
file number should be included on the subject line if e-mail 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 inspection
and copying in the Commission's Public Reference Section, 100 F Street,
NE., Washington, DC 20549. Copies of such filings also will be
available for inspection and copying at the principal office of FICC
and on FICC's Web site at http://www.ficc.com. 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-FICC-2005-18 and should be submitted on
or before January 20, 2005.

    For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E5-8299 Filed 1-4-06; 8:45 am]

BILLING CODE 8010-01-P


Hazardous Substance Database (HSDB).  (2010) Beryllium and Beryllium
compounds.    HYPERLINK "http://toxnet.nlm.nih.gov"
http://toxnet.nlm.nih.gov

Attachment 1.  Beryllium chloride

Attachment 2. Beryllium Oxide

Attachment 3.  Beryllium Sulphate

Attachment 4.  Elemental Beyllium


[Federal Register Volume 83, Number 12 (Thursday, January 18, 2018)]
[Notices]
[Pages 2692-2694]
[FR Doc No: 2018-00725]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82491; File No. SR-BOX-2018-01]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend BOX Rule 3030 To Establish Rules Related to the Use of Floor
Broker Error Accounts

January 11, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 2, 2018, BOX Options Exchange LLC (the ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the self-regulatory organization. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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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 the
Substance of the Proposed Rule Change

    The Exchange proposes to amend BOX Rule 3030 to establish rules
related to the use of Floor Broker error accounts. The text of the
proposed rule change is available from the principal office of the
Exchange, at the Commission's Public Reference Room and also on the
Exchange's internet website at http://boxoptions.com.

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 statements 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
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend BOX Rule 3030 to establish rules
related to the use of Floor Broker error accounts. First, the Exchange
proposes that each Participant who conducts a business as a Floor
Broker on the Exchange and who is not self-clearing must establish and
maintain an account with a clearing Participant of the Exchange, for
the sole purpose of carrying positions resulting from bona fide errors
made in the course of its floor brokerage business.\3\ Further, with
respect to Floor Brokers only, such an account for option transactions
must be maintained with an entity that is also a member of the Options
Clearing Corporation.
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    \3\ A ``Bona fide Error'' is defined as (i) the inaccurate
conveyance or execution of any term of an order including, but not
limited to, price, number of shares or other unit of trading;
identification of the security; identification of the account for
which securities are purchased or sold; lost or otherwise misplaced
order tickets; short sales that were instead sold long or vice
versa; or the execution of an order on the wrong side of a market;
(ii) the unauthorized or unintended purchase, sale, or allocation of
securities, or the failure to follow specific client instructions;
(iii) the incorrect entry of data into relevant systems, including
reliance on incorrect cash positions, withdrawals, or securities
positions reflected in an account; or (iv) a delay, outage, or
failure of a communication system used to transmit market data
prices or to facilitate the delivery or execution of an order. See
Securities Exchange Act Release No. 55884 (June 8, 2007), 72 FR
32926 (June 14, 2007) (Order Exempting Certain Error Correction
Transactions from Rule 611 of Regulation NMS under the Securities
Exchange Act of 1934).
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    In practice, a Floor Broker will remedy a bona fide error by
entering a subsequent trade on behalf of the customer on the correct
terms of the original order. These types of transactions are
transactions which broker-dealers place to remedy the execution of
customer orders that have been placed in error or mishandled due to an
error involving any term of an order, including but not limited to, for
example, price, number of contracts, identification of security, or
execution of a transaction on the wrong side of the market.
    Next, the Exchange proposes that each Participant which conducts
business as a Floor Broker must make available to the Exchange, upon
request, accurate and complete records of all trades cleared in such
Participant's error account. These records must include the following
audit trail data elements: (1) Name or identifying symbol of the
security; (2) number of shares or quantity of security; (3) transaction
price; (4) time of trade execution; (5) executing Floor Broker badge
number, or alpha symbol as may be used from time to time, in regard to
its side of the contract; (6) executing Floor Broker badge number, or
alpha symbol as may be used from time to time, of the contra side to
the contract; (7) clearing firm number, or alpha symbol as may be used
from time to time, in regard to its side of the contract; (8) clearing
firm number, or alpha symbol as may be used from time to time, in
regard to the contra side of the contract; (9) designation of whether
the account for which the order was executed was that of a Participant;
(10) the nature and amount of the error; (11) the Participant that
cleared the error trade on the Participant's behalf; (12) an
explanation of the means by which the Participant resolved the error;
(13) the aggregate amount of liability that the Participant

incurred and: (i) Had outstanding as of the time each such error trade
entry was recorded or (ii) had cleared by other Participant. The
Exchange believes that it is important for the Participant to provide
the above information because it will aid the Exchange in the
surveillance of error account activity. The Exchange notes that the
proposed change is substantially similar to rules at another options
exchange with an open outcry trading floor.\4\
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    \4\ See NYSE Arca, Inc. (``NYSE Arca'') Rule 11.17.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\5\ in general, and Section 6(b)(5) of the Act,\6\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general to protect investors and the
public interest. Additionally, the Exchange believes that the proposed
rule is consistent with the Act because it does not unfairly
discriminate between Public Customers, Professional Customers, Broker
Dealers and Market Makers as the rule applies to all Participants
equally. The Exchange believes that the proposal allows Floor Brokers
the flexibility to execute orders that correct bona fide errors out of
the Floor Broker's error account, ensuring that customer orders (which
were previously entered in error) are executed, thereby protecting
investors and the public interest by ensuring that customer orders are
executed properly. Further, the Exchange believes the proposed rule
promotes just and equitable principles of trade by ensuring customer
orders are not harmed for order entry errors. The Exchange does not
believe the proposed rule is unfairly discriminatory toward customers,
issuers, or brokers because the proposed rule simply sets forth the
process for floor brokers to correct certain bona fide errors. As
discussed above, the Exchange believes that the proposed change is
appropriate as it is similar to rules in place at another options
exchange with an open outcry trading floor.\7\
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ See supra note 4.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. More specifically, the Exchange
does not believe that the proposed rule change will impose any burden
on intramarket competition because it will be applicable to all Floor
Brokers. In addition, the Exchange does not believe that the proposed
change will impose any burden on intermarket competition because
proposed Rule 3030 simply provides a mechanism for correcting errors.
Further, the Exchange believes that the proposed change does not impose
a burden on competition because it simply sets forth the process for
Floor Brokers to correct bone fide errors on the Trading Floor.

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

    The Exchange has neither solicited nor received comments on the
proposed rule change.

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

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\8\
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    \8\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
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    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 to
determine whether the proposed rule should be approved or 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 protected]. Please include
File Number SR-BOX-2018-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2018-01. 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 such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BOX-2018-01, and should be submitted on
or before February 8, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00725 Filed 1-17-18; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register: November 20, 2008 (Volume 73, Number 225)]
[Notices]
[Page 70400-70402]
[DOCID:fr20no08-108]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58953; File No. SR-NSX-2008-20]

Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend NSX Rule 11.23(a) Which Defines the Phrase ``Riskless Principal
Transaction''

November 14, 2008.
    Pursuant to section 19(b)(3)(A) of the Securities Exchange Act of
1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on November 13, 2008, National Stock Exchange, Inc.
(``NSX[supreg]'' or the ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change, as
described in Items I, II, and III below, which Items have been prepared
by the Exchange. The Commission is publishing this notice to solicit
comment 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 Exchange proposes to amend NSX Rule 11.23(a), which defines the
phrase ``riskless principal transaction,'' to make clear that the
definition includes transactions where an ETP Holder receives orders
that may be executed in whole or in part in other market venues. As
explained in further detail below, this amendment will clarify the
scope of the exception to NSX's Customer Priority rule contained in
Rule 12.6(d), and will more closely align NSX's rules with those used
by other self-regulatory organizations (``SROs'').

    The text of the proposed rule change is available on the Exchange's
Web site at http://www.nsx.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 Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.

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

1. Purpose
    NSX Rule 12.6 prohibits an ETP Holder from placing an order for its
own account (or an account in which it or one of its associated persons
is interested) while it holds an unexecuted, marketable customer order
for the same security, unless an exception applies. Specifically, Rule
12.6 provides:
    (a) No ETP Holder shall (i) personally buy or initiate the purchase
of any security traded on the Exchange for its own account or for any
account in which it or any associated person of the ETP Holder is
directly or indirectly interested while such an ETP Holder holds or has
knowledge that any person associated with it holds an unexecuted market
order to buy such security in the unit of trading for a customer, or
(ii) sell or initiate the sale of any such security for any such
account while it personally holds or has knowledge that any person
associated with it holds an unexecuted market order to sell such
security in the unit of trading for a customer.
    (b) No ETP Holder shall (i) buy or initiate the purchase of any
such security for any account in which it or any associated person of
the ETP Holder is directly or indirectly interested at or below the
price at which it personally holds or has knowledge that any person
associated with it holds an unexecuted limited price order to buy such
security in the unit of trading for a customer or (ii) sell or initiate
the sale of any such security for any such account at or above the
price at which it personally holds or has knowledge that any person
associated with it holds an unexecuted limited price order to sell such
security in the unit of trading for a customer.
    Rule 12.6(d) provides an exception to provisions (a) and (b) where
``an ETP Holder engages in trading activity to facilitate the
execution, on a riskless principal basis, of another order from its
customer * * * provided that the requirements of Rule 11.23 are
satisfied * * * .'' (emphasis added.) Thus, to meet the exception in
Rule 12.6(d), an ETP Holder also must comply with Rule 11.23. In turn,
Rule 11.23(a) defines the phrase ``riskless principal transaction'' to
mean:

    Two offsetting principal transaction legs in which an ETP
Holder, (i) after having received an order to buy a security that it
holds for execution on the Exchange, purchases the security as
principal at the same price, exclusive of markups, markdowns,
commissions and other fees, to satisfy all or a portion of the order
to buy or (ii) after having received an order to sell a security
that it holds for execution on the Exchange, sells the security as
principal at the same price, exclusive of markups, markdowns,
commissions and other fees, to satisfy all or a portion of the order
to sell.

(emphasis added.)

    Therefore, if an ETP Holder receives an order to buy or sell a
security, but does not hold that order for execution on the Exchange,
any resulting transaction might not meet the definition of a riskless
principal transaction in Rule 11.23(a). For the same reason, such a
transaction also might not meet the exception in Rule 12.6(d).
    In addition, it is unclear whether an order submitted to a ETP
Holder without a designated marketplace for execution could be ``[held]
for execution on the Exchange,'' particularly where the ETP Holder
executes the first leg of what generally would be considered a riskless
principal transaction on a market other than the Exchange and completes
the transaction with its customer on the Exchange. Because the customer
has not designated where the order should be executed, and because the
first leg of the order was in fact executed off the Exchange, such an
order might not be viewed as being ``[held] for execution on the
Exchange.'' Accordingly, the transaction might not be a ``riskless
principal transaction'' within the meaning of Rule 11.23(a) and,
therefore, might not satisfy the exception contained in Rule 12.6(d),
even if the transaction was done to facilitate a customer order.
    NSX proposes to remove the requirement that an order be ``[held]
for execution on the Exchange'' from the definition of a ``riskless
principal transaction'' in Rule 11.23(a) to permit the type of
transaction described above to qualify as a ``riskless principal
transaction'' and, where the other requirements are met, to meet the
exception in Rule 12.6(d). The exception in Rule 12.6(d) is designed to
allow ETP Holders to place proprietary trades ahead of customer orders
only where such proprietary trades are for the benefit of a customer.
This exception recognizes that, in some instances, an ETP Holder's
nominal trading ahead may nevertheless benefit, rather than harm, a
customer. It makes no difference to this analysis whether the customer
specified that its order was to be executed on the Exchange, or whether
the order can be characterized as being ``[held] for execution on the
Exchange.''
    Amended Rule 11.23(a) also would be consistent with other SRO
rules. For example, Financial Industry Regulatory Authority (``FINRA'')
NASD Rule 2111 and IM-2110-2 both allow a firm to trade ahead of a
customer order if, among other things, the member's proprietary trade
is a riskless principal transaction, as defined in various NASD rules,
that is used to facilitate a customer order. The definition of a
riskless principal transaction in NASD rules is substantially similar
to the definition in NSX Rule 11.23(a) except, of course, that it is
not limited to orders held for execution on any particular securities
exchange or in any particular venue.\3\ New York Stock Exchange
(``NYSE'') Rule 92 also allows firms to trade ahead of customer orders
where the firm's proprietary order is a riskless principal transaction
designed to facilitate a customer order. NYSE Rule 92 does not require
that an order be held for execution on the NYSE or any other venue or
securities exchange to qualify for this exception.\4\ Amending Rule
11.23(a) will therefore make NSX rules consistent with analogous SRO
rules.
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    \3\ See, e.g., NASD Rule 4632(d)(3)(B) (defining a riskless
principal transaction as a ``transaction in which a member after
having received an order to buy a security, purchases the security
as principal at the same price to satisfy the order to buy or, after
having received an order to sell, sells the security as principal at
the same price to satisfy the order to sell'') (cited in NASD Rule
2111(f)(1) and IM-2110-2).
    \4\ NYSE Rule 92(c)(1) (``The facilitated order must be a
`riskless principal transaction,' which is when a member or member
organization, after having received an order to buy a security,
purchases the security as principal at the same price to satisfy the
order to buy or, after having received an order to sell, sells the
security as principal at the same price to satisfy the order to
sell.'')
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Statutory Basis

    The Exchange believes that the proposed rule change is consistent
with

the provisions of Section 6(b) of the Securities Exchange Act of 1934
(``Act''),\5\ which requires, among other things, that NSX Rules be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, and, in general, to
protect investors and the public interest. The proposed rule change
will clarify the application of Rule 12.6(d) and will more closely
align that rule with the rules of other SROs.
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    \5\ 78 U.S.C. 78f(b).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition.

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

    The Exchange has neither solicited nor received written comments on
the proposed rule change.

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

    The proposed rule change will take effect 30 days from the date of
filing (or such shorter time as the Commission may designate) pursuant
to Section 19(b)(3)(A)(ii) of the Act \6\ and subparagraph (f)(6) of
Rule 19b-4 \7\ thereunder, because the proposal: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) does not become operative for 30 days from the date of filing,
or such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest; provided that the
self-regulatory organization has given the Commission written notice of
its intent to file the proposed rule change at least five business days
prior to the filing date of the proposed rule change.\8\
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    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \7\ 17 CFR 240.19b-4.
    \8\ As required under Rule 19b-4(f)(6)(iii), NSX provided the
Commission with written notice of its intent to file the proposed
rule change at least five business days prior to the filing date.
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    At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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.\9\
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    \9\ 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-NSX-2008-20 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-NSX-2008-20. This file
number should be included on the subject line if e-mail 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 inspection and
copying in the Commission's Public Reference Room on official business
days between the hours of 10 a.m. and 3 p.m. Copies of such filing also
will be available for inspection and copying at the principal office of
NSX. 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-NSX-
2008-20 and should be submitted on or before December 11, 2008.
    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).

Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-27579 Filed 11-19-08; 8:45 am]

BILLING CODE 8011-01-P