[Federal Register Volume 83, Number 115 (Thursday, June 14, 2018)]
[Notices]
[Pages 27802-27807]
[FR Doc No: 2018-12752]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83397; File No. SR-NSCC-2018-002]

Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change To Clarify and Enhance Rules Related to Comparison and
Recording of CMU Securities

June 8, 2018.
    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 June 7, 2018, National Securities Clearing Corporation (``NSCC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II and III below, which
Items have been prepared by the clearing agency. NSCC filed the
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and
Rule

19b-4(f)(4) thereunder \4\ so that the proposal was effective upon
filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    The proposed rule change consists of modifications to the Rules and
Procedures of NSCC (``Rules'') in order to enhance the procedures that
describe the process by which Members may submit debt securities,
specifically transactions in corporate bonds, municipal bonds, and unit
investment trusts (referred to as ``CMU securities''), for comparison
and recording by (1) making certain clarifications and corrections to
these procedures, and (2) adding a comparison tolerance of 20 business
days for the trade dates of transactions submitted for comparison, as
described below.\5\
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    \5\ Terms not defined herein are defined in the Rules, available
at http://www.dtcc.com/legal/rules-and-procedures.
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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
    NSCC is proposing to make certain revisions to Procedure II,
Section C and Section D of the Rules, which describes the service
provided by NSCC that allows Members to submit transactions in CMU
securities for comparison and recording. These sections of Procedure II
describe the rules that govern comparison of submitted trade data,
including the information that must be included in these submissions
and the timing of the submission, how the resulting compared trades are
reported by NSCC, and how eligible compared trades may be processed for
clearance and settlement through NSCC's facilities, among other related
matters.
    NSCC is proposing to make a number of revisions to these sections
of Procedure II in order to (1) clarify and enhance the disclosures,
correct typographical and drafting errors, and update descriptions that
no longer reflect current processing in order to improve the
transparency of these provisions; and (2) include in the Rules a
matching tolerance of 20 business days for the trade dates of submitted
transactions in order to improve the accuracy of trade matching. Each
of these proposed changes is described below.
(i) Proposed Changes To Clarify and Enhance Transparency
    NSCC is proposing to make a number of technical, non-substantive
revisions to Sections C and D of Procedure II in order to improve the
descriptions of these procedures and enhance the transparency of the
rules that apply to the comparison and recording of CMU securities at
NSCC. These proposed changes are described below.
Proposed Rule Changes To Revise Verb Tense and Correct Typographical
Errors
    NSCC is proposing to revise the verb tense in order to use a
present verb tense rather than a future verb tense, and to correct
typographical errors. The proposed changes to revise the verb tense
used in these procedures would align Sections C and D of Procedure II
with other provisions within the Rules and, by using a present tense,
would utilize more appropriate language for the description of
procedures.
    NSCC is also proposing to correct typographical errors in order to
improve the descriptions of these procedures and avoid confusion in a
Member's understanding of these procedures. For example, NSCC is
proposing to correct a typographical error by revising the term
``insure'' to the term ``ensure'' in Procedure II, Section C, 1(a).
NSCC is also proposing to correct the reference in the renumbered
Procedure II, Section C, 1(k)(i) from ``price'' to ``amount'' to more
accurately describe the information that is reported on the
Consolidated Trade Summary (``CTS'').\6\ The information that is being
referred to in this sentence includes both price and quantity, and,
therefore, is more accurately described as ``amount.''
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    \6\ The CTS is a report provided to Members that contains
summarized trade obligation information. The CTS is described in
Procedure II (Trade Comparison and Recording Service), Procedure V
(Balance Order Accounting Operation) and Procedure VII (CNS
Accounting Operation) of the Rules. NSCC recently implemented
updates to the CTS. See Securities Exchange Act Release No. 79904
(January 31, 2017), 82 FR 9448 (February 6, 2017) (SR-NSCC-2016-
008).
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    NSCC is also proposing to change the term ``deleted'' to
``reversed'' in Procedure II, Section C, 2(e). While Members may submit
an instruction to delete an uncompared trade if the firm does not agree
with the terms of the trade, as described in Procedure II, Section C,
2(b), this sentence in Section C, 2(e) describes a different process by
which a Member may submit an instruction to reverse a previously
compared trade. As such, the proposed rule change would correct a
typographical error and avoid any confusion about these two actions
that may be caused by the misuse of this term. In connection with this
proposed change, NSCC would also add ``reversed'' to the following
Section C, 2(f), as the provisions of that section apply to both
deleted and reversed transactions. This proposed change would clarify
the applicability of this section to transactions that are reversed by
a Member.
    By correcting typographical errors in these procedures, the
proposed rule changes would make the Rules accurate and clearer to
Members regarding their rights and obligations in connection with the
use of this service.
Proposed Rule Changes To Improve and Simplify Descriptions
    NSCC is proposing rule changes that would enhance the descriptions
of these procedures by disclosing additional information, and is also
proposing rule changes that would simplify these descriptions by
removing unnecessary information, as described below.
    Enhancing Descriptions and Disclosing Additional Information.
First, NSCC is proposing to make revisions that include descriptions of
additional criteria for use of the comparison service or other
additional disclosures that would improve the descriptions and enhance
the transparency of these procedures.
    NSCC is proposing to add MPID (the market participant identifier
that is issued by the Financial Industry Regulatory Authority, Inc. and
used to report trades) to the list of identifying trade data details
required to be submitted for comparison processing in Procedure II,
Section C, 1(b). This section includes a non-exhaustive list of trade
data that NSCC may require to be submitted in connection with the use
of this service, and provides that NSCC may require or permit Members
to submit other identifying trade details. NSCC currently requires
MPIDs among the trade data details that must be submitted for
comparison purposes, and

NSCC believes that adding this criteria to the Rules would improve the
transparency of this requirement.
    NSCC is proposing to revise the reference to ``OTC'' transactions
to ``corporate bond security transactions'' and the reference to ``unit
trust fund transactions'' to ``unit investment trust transactions'' in
Procedure II, Section C, 1(f). ``OTC'' or ``over-the-counter''
securities are securities that are not traded on an exchange, and
include debt securities such as corporate bonds. Therefore, while
``OTC'' is not incorrect in this context, NSCC believes the use of this
term may imply that other transactions are being referred to in this
subsection of the Rules. Therefore, NSCC is proposing to revise the
term to more specifically refer to ``corporate bond security
transactions.'' Additionally, the term ``unit trust fund transactions''
is not a term that is commonly used to refer to unit investment trust
transactions. While these securities may be considered funds, the
correct term for describing these transactions is ``unit investment
trust transactions.'' Therefore, while these proposed revisions would
not change what is intended by these terms, they would enhance the
transparency of this section by using terminology that would be more
clearly recognizable to Members.
    NSCC is proposing to clarify the language in Procedure II, Section
C, 1(h) to make clear that trades submitted for comparison may be
identified as ``CNS-eligible,'' which would flag these trades to be
processed through the CNS Accounting System; ``non-CNS-eligible,''
which would flag these trades to be processed through the Balance Order
Accounting System; or ``Special Trade,'' which could flag these trades
either for trade-for-trade processing, which normally settle outside of
NSCC's facilitates, or for comparison-only processing. The proposed
rule changes would add transparency to the Rules regarding how these
designations impact the processing of trades submitted to NSCC.
    NSCC is proposing to add a sentence to Procedure II, Section C,
1(i)(ii) to make clear that trades submitted for comparison-only
processing are subject to the rules of the Municipal Securities
Rulemaking Board (``MSRB''). NSCC believes that this clarification is
appropriate because these submissions are not required to meet the
eligibility requirements for clearance or settlement through NSCC's
facilities, but must comply with the rules of the MSRB. Therefore, NSCC
believes this proposed change would enhance the transparency of the
Rules and would assist Members to understand the requirements that
apply to these trades.
    NSCC is proposing to add a reference to the ``Balance Order
Accounting System'' to the renumbered subsection (k)(ii) of Procedure
II, Section C, 1, which describes how eligible, compared trades may be
further processed within NSCC's facilities. Currently, this subsection
is incomplete and does not include reference to the Balance Order
Accounting System, where eligible compared trades that are not eligible
to be processed in the CNS Accounting System may be processed for
clearance and settlement. Therefore, the proposed change would enhance
this subsection by including this additional reference.
    NSCC is proposing to add a sentence to the renumbered subsection
(m) of Procedure II, Section C, 1 that would describe the process by
which NSCC would convert a bilateral trade that matches a Qualified
Special Representative (``QSR'') trade submission in all respects
(other than its designation as a bilateral trade) into a QSR trade.
NSCC is also proposing to add a new subsection (vi) to renumbered
Procedure II, Section D, 2(g) that would describe the process by which
NSCC would convert a bilateral trade that matches a syndicate takedown
trade or reversal in all respects (other than its designation as a
bilateral trade) into a syndicate takedown trade or reversal, as
appropriate. These two automatic conversions are a part of NSCC's
existing processes, but, because these conversions occur automatically
and do not require any action by Members, these processes are not
described in these sections of the Rules. NSCC believes these proposed
changes to describe these automatic conversions would improve the
transparency of the Rules and provide Members with notice that these
conversions would occur in the described circumstances.
    NSCC is proposing to revise the renumbered subsection (p) of
Procedure II, Section C, 1 to clarify that NSCC processes cash
transactions where the trade date for the submitted transaction is the
same as the settlement date for comparison-only processing. Currently,
this section of the Rules refers to these transactions as ``cash
transactions,'' and the proposed change would improve the transparency
of this section by including a further description of these
transactions. This proposed change would provide Members with
additional information regarding the types of transactions that are
referred to in this section and, therefore, would improve the
transparency of the Rules.
    NSCC is proposing to revise Procedure II, Section C, 2(g) to make
it clearer that NSCC permits certain trade details for uncompared
trades to be modified by the submitter, provided, however, that trade
details for syndicate takedown submissions are only permitted to be
modified on the submission date. The proposed rule changes would also
clarify that NSCC may limit the trade data that can be modified after a
trade is matched. Although Section C, 2(g) currently describes these
rules relating to the modification of submitted trade details, NSCC
believes that the proposed revisions would improve those descriptions
and thereby make such rules clearer to Members and improve the overall
transparency of the Rules.
    NSCC is proposing to revise Procedure II, Section C, 2(h), which
provides that transactions that compare after a cutoff time designated
by NSCC on the date the transaction was scheduled to settle are
assigned a settlement date of the next business day after the day the
transaction is compared. The proposed rule changes would clarify that
these rules apply to any transactions that compare after the set cutoff
time, and not only to transactions that compare for the first time
(meaning, transactions that have not been previously submitted and
reversed by the counterparties pursuant to the Rules). These proposed
changes, and the other marked revisions to this section would clarify
the applicability of these rules and would improve the readability,
clarity and transparency of this Section C, 2(h).
    Simplifying Descriptions and Removing Unnecessary Details. NSCC is
also proposing to make revisions that would use fewer words to describe
a procedure or otherwise remove unnecessary language that could cause
confusion in the interpretation of the procedures. By rewording certain
provisions and using simpler language in these descriptions, these
proposed changes would improve the transparency of the procedures in
Sections C and D of Procedure II.
    NSCC is proposing to remove the following sentence from Procedure
II, Section C, 1(h), ``Depending upon whether trade data is submitted
on T or T+n and the format in which output is produced with respect to
such data, the output may reflect totals.'' NSCC believes that this
sentence is unnecessary for purposes of describing the procedures
applicable to comparison and recording of CMU securities transactions.
Therefore, the proposed rule change to remove this sentence would
simplify the Rules and remove unnecessary statements that do not
provide Members with important

additional information related to this service.
    NSCC is proposing to remove from Procedure II, Section C, 2(c) a
statement that a Member may submit an instruction to delete an
uncompared trade if it finds that the trade data is incorrect. The
immediately prior Section C, 2(b) of Procedure II states that a Member
may submit an instruction to delete a trade if it does not agree with
the terms of the trade. While the fact that the data is incorrect is
most likely the basis for a Member to disagree with the terms of the
trade, NSCC does not believe the statement it is proposing to remove
from Procedure II, Section C, 2(c) adds to the rules, and believes this
statement could indicate to a Member that its ability to delete an
uncompared trade is limited to circumstances when the trade data is
incorrect. NSCC believes the proposed rule change to remove this
additional and unnecessary language would clarify Members' ability to
submit a delete instruction.
    NSCC is proposing to remove reference to comparison-only trades
from the renumbered subsection (l) of Procedure II, Section C, 1, which
incorrectly states that the rules of the MSRB are not applicable to
comparison-only trades. This subsection describes certain rules that
are applicable to trades that are designated as Special Trades,
including the fact that these trades are subject to the rules of the
MSRB. Currently, this subsection includes language that expressly
excludes comparison-only trades. NSCC believes that expressly excluding
comparison-only trades from this subsection could incorrectly imply to
Members that the rules described in this subsection, including the
applicability of the MSRB rules, do not apply to comparison-only
trades. Procedure II, Section C, 1(i)(ii) describes the rules that
apply to comparison-only trades, including the fact that these trades
are subject to the rules of the MSRB. Therefore, NSCC is proposing to
remove the express exclusion of comparison-only trades from the
renumbered subsection (l) of Procedure II, Section C, 1, which is
unnecessary and could cause confusion.
    NSCC is proposing to remove from Procedure II, Section D,
2(A)(2)(b) the description of the timing by which an eligible
transaction may enter the CNS Accounting Operation. The rules
applicable to the CNS Accounting Operation, including, as applicable,
any relevant timing of processing in that service, is described in
Procedure VII. This information is not necessary for the operation of
the comparison services, and removing this information would simplify
these rules, improving their clarity to Members.
    NSCC is also proposing to remove subsection 2(A)(2)(c) from
Procedure II, Section D, which describes information included in the
output NSCC produces in connection with the comparison service. As
currently written, this subsection is incomplete and does not list all
of the information that may be included in this output. Therefore, the
current description could create confusion among Members regarding what
information may be included in these reports. NSCC believes it is in
Members' best interest that NSCC retain flexibility to add or remove
information from these reports, for example, in response to Members'
requests. As such, NSCC does not believe it is necessary to specify for
Members the information that may be included in these reports.
Therefore, NSCC believes the proposed change to remove the unnecessary
section would simplify and improve the Rules.
    NSCC is also proposing a number of revisions to the descriptions of
the rules regarding submission and processing of syndicate takedown
trades and syndicate takedown reversals in renumbered Procedure II,
Section D, 2(A)(2)(g). The proposed revisions would not change the
rules that apply to how these trades and reversals are processed, but
would re-order the descriptions of these rules in order to simplify,
clarify and improve the transparency of these provisions.
Proposed Rule Changes To Update and Correct Descriptions
    NSCC is proposing rule changes that would update the procedures in
order to accurately describe current processing and correct
descriptions that have become outdated. Each of these proposed rule
changes would improve the Rules by correcting these errors.
    NSCC is proposing to amend Procedure II, Section C, 1(c)(1) and (2)
in order to clarify that the tolerances for comparison of contract
amounts apply only to bilateral trades, and state that the QSR's or
syndicate manager's contract amount is used for QSR and syndicate
trades for comparison purposes. Currently, these two subsections of the
Rules describe the contract amount tolerances that are applicable to
bilateral trades, but fail to specify which tolerances apply to
bilateral trades, and which tolerances apply to QSR and syndicate
trades. The proposed rule change would clarify that the tolerances
currently described in these subsections apply only to bilateral
trades, and would add to these subsections a description of the rules
for comparing contract amounts applicable to QSR and syndicate trades.
    NSCC is proposing to remove subsection (j) from Procedure II,
Section C, 1, which states that Members may override clearing agent
designations by submitting trade input for comparison using the
appropriate Trade-for-Trade Indicator. NSCC is also proposing to remove
from the renumbered Procedure II, Section C, 1(k)(i) the reference to
``any clearing agent indicated by the applicable contra party'' as an
example of information that NSCC may provide on the CTS. Members that
are Municipal Comparison Only Members may use another Member as their
``clearing agent'' to access NSCC's clearing and settlement services,
and, historically, clearing agent designations had been reported on the
CTS. However, in connection with its recent updates to the CTS, in
response to Member feedback that it is no longer necessary to report
these clearing agent designations, NSCC removed the designations from
the CTS.\7\ In error, NSCC did not remove references to the clearing
agent designation from subsection (j) or from the renumbered subsection
(k)(i) of Procedure II, Section C when it implemented these updates.
Therefore, the proposed change would correct this error by removing
from the Rules statements that are no longer accurate and could cause
Members confusion regarding the use of this service.
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    \7\ Supra note 6.
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    Finally, NSCC is proposing two changes that would correct errors
that it has identified in the Rules. The proposed changes would correct
descriptions in these sections of the Rules in order to accurately
describe processing that has been effective since this service was
implemented over 10 years ago. While these changes would revise the
Rules as written, the changes would not result in any change in the
current operation of the service. NSCC does not believe that either of
these changes would significantly affect the respective rights or
obligations of NSCC or Members using this service.
    First, NSCC is proposing to remove from Procedure II, Section C,
1(g) an incorrect statement that trades in municipal bonds must be
submitted in multiples of a thousand. Municipal bonds may be submitted
in quantities other than multiples of a thousand, and such submissions
would be subject to the other provisions of this section that are
applicable to submissions of trades in quantities other than multiples
of a thousand (specifically, that such submissions be divided into
separate

submissions of the round lot and odd lot quantity, and that odd lot
quantities are processed on a trade-for-trade basis). Therefore, in
addition to removing this incorrect statement, NSCC would add municipal
bonds to these statements within this same section. NSCC does not
believe that this change would significantly affect the respective
rights or obligations of NSCC or Members using this service because
Members that are currently submitting municipal bonds in quantities of
a thousand may continue to do so, and Members that submit municipal
bonds in quantities other than multiples of a thousand may do so
subject to the rules already described in this section.
    Second, NSCC is proposing to revise Procedure II, Section D, 2(A),
which specifically describes processing of when-issued securities. The
special processing rules within this section do not apply to when-
issued corporate bonds, which are instead processed in the same manner
as all other transactions in corporate bonds. Therefore, this Procedure
II, Section D, 2(A) incorrectly refers to corporate bonds and the
proposed change to remove references to corporate bonds would correct
this error. This proposed rule change would clarify that the provisions
of this subsection apply only to transactions in municipal securities.
NSCC does not believe that this change would significantly affect the
respective rights or obligations of NSCC or Members using this service
because Members would be able to continue to submit when-issued
corporate bonds, and such securities would be processed through the
regular processing rules.
(ii) Proposed Changes To Add a Trade Date Comparison Tolerance
    NSCC is also proposing to amend Section C of Procedure II to
include a comparison tolerance of 20 business days in order to improve
the accuracy of the matching of submitted trade data. Currently, if two
transactions are submitted that match in all other aspects as required
by the Rules, but have different trade dates, NSCC uses the earlier of
the two submitted trade dates in producing and recording a matched
trade. Members that do not agree with the terms of a matched trade may
submit an instruction to reverse a matched trade pursuant to Procedure
II, Section C, 2(e). Therefore, this procedure will result in a matched
trade if the counterparties submitted different trade dates in error,
and Members are able to reverse that trade if the different trade dates
were not submitted in error and the matched trade is incorrect.
    NSCC is now proposing to include a tolerance of 20 business days to
the comparison criteria for trade dates in order to improve the
accuracy of its trade comparison service. In order to implement this
change, NSCC is proposing to amend Procedure II, Section C, 1(d) to
make clear a trade would be deemed compared if the submitted trade data
matches in all required respects other than trade date, and the trade
dates submitted are within 20 business days of each other. Under the
proposed rule change, NSCC would continue to use the earlier of the
submitted trade dates in the resulting compared trade. The proposed
rule change would also make clear that a trade would remain uncompared
if the trade dates submitted are not within the 20 business day
tolerance. Members would still have the ability to submit instructions
to reverse a trade if they disagree with the terms of a matched trade.
    NSCC believes trade dates submitted for a trade that matches in all
other required respects but are different by more than 20 business days
are more likely submitted in error. For example, one counterparty may
enter a trade date of March 1, 2018 and the other counterparty may
enter for the same trade a trade date of March 1, 2008 by mistyping the
year of the trade date. Under the current rules, NSCC would match the
trade data and report a compared trade with a trade date of March 1,
2008, the earlier of the submitted trade dates, and the counterparties
would have to submit instructions to either delete or reverse that
trade, as appropriate. NSCC believes the proposed rule change would
result in fewer trades that are compared using an earlier trade date
that was submitted in error, and would result in more accurate
comparison processing.
2. Statutory Basis
    NSCC believes that the proposed changes are consistent with the
Section 17A(b)(3)(F) of the Act, which requires, in part, that the
rules of a registered clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions, for
the reasons described below.\8\ The proposed rule change would increase
transparency of the Rules by clarifying and enhancing the descriptions
of the CMU securities comparison service. In this way, the proposed
changes would ensure that the Rules remain transparent, accurate and
clear, which would enable Members to readily understand their rights
and obligations in connection with the use of this service.
Additionally, the proposal to add a 20 business day tolerance for
comparison of trade dates would improve the accuracy of the comparison
service. Eligible transactions that are submitted for comparison may
also be processed for clearance and settlement through NSCC's CNS
Accounting System or the Balance Order Accounting system, as
applicable. Therefore, by improving the transparency of these Rules and
the accuracy of the comparison service, resulting in fewer trades
compared at an incorrect trade date, the proposed changes would also
promote the prompt and accurate clearance and settlement of securities
transactions, consistent with Section 17A(b)(3)(F) of the Act.\9\
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
    \9\ Id.
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    Rule 17Ad-22(e)(23)(i) under the Act requires, in part, that NSCC
establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide for publicly disclosing all
relevant rules and material procedures.\10\ As described above, the
proposed rule change would improve the transparency, clarity and
accuracy of the Rules, such that these provisions of the Rules would
better disclose all relevant and material aspects of the comparison
service. Therefore, NSCC believes the proposed rule changes are
consistent with Rule 17Ad-22(e)(23)(i).\11\
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    \10\ 17 CFR 240.17Ad-22(e)(23)(i).
    \11\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    NSCC does not believe that the proposed rule changes would have any
impact, or impose any burden, on competition. The proposed rule changes
would improve Members' understanding of their rights and obligations
with respect to the use of this service, and would improve the accuracy
of the comparison service with respect to trade dates. These proposed
changes would be applicable to all Members that utilize this comparison
service, and would not alter Members' rights or obligations. Therefore,
NSCC does not believe that the proposed rule changes would have any
impact on competition.

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

    NSCC has not solicited or received any written comments relating to
this proposal. NSCC will notify the

Commission of any written comments that it receives.

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) of the Act \12\ and paragraph (f) of Rule 19b-4
thereunder.\13\ 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f).
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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 email to [email protected]. Please include
File Number SR-NSCC-2018-002 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-NSCC-2018-002. 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 NSCC and on NSCC'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-NSCC-2018-002 and should be submitted on
or before July 5, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12752 Filed 6-13-18; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: July 16, 2007 (Volume 72, Number 135)]
[Notices]
[Page 38853-38858]
[DOCID:fr16jy07-62]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56034; International Series Release No. 1304; File No.
SR-Phlx-2007-34]

Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Order Granting Accelerated Approval of a Proposed
Rule Change, as Modified by Amendment No. 1 Thereto, Relating to U.S.
Dollar-Settled Foreign Currency Options

July 10, 2007.
    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 April 13, 2007, the Philadelphia Stock Exchange, Inc. (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below. On June 13, 2007, the Exchange filed Amendment No. 1 to the
proposed rule change.\3\ The Commission is publishing this notice to
solicit comments on the proposed rule change, as amended, from
interested persons and is approving the proposal, as modified by
Amendment No. 1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced the original filing in its
entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Phlx proposes to: (1) List and trade U.S. dollar-settled foreign
currency options (``FCOs'') on the Australian dollar, the Canadian
dollar, the Swiss franc and the Japanese yen (together, the ``New
Currencies''); (2) amend certain rules relating to the quoting
convention for U.S. dollar-settled FCOs for purposes of clarity; (3)
delete from Rule 1012 a requirement that the Exchange delist any series
of U.S. dollar-settled FCOs outside of a ten percent band around the
spot price that have no open interest; (4) amend the closing settlement
value rule by moving from 2 p.m. (Eastern time (``ET'')) to 5 p.m. ET
the time after which the Exchange will use the previously announced
Noon Buying Rate as the basis for the closing settlement value; (5)
extend the applicability of Rule 1064, ``Crossing, Facilitation and
Solicited Orders,'' to U.S. dollar-settled FCOs; and (6) clarify the
applicability of Rule 1092, ``Obvious Errors,'' to U.S. dollar-settled
FCOs.
    The text of the proposed rule change is available on the Exchange's
Web site at http://www.Phlx.com/exchange/phlx_rule_fil.html, at 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 III below. The Exchange 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
    On January 8, 2007, the Exchange began trading U.S. dollar-settled
options on the British pound and the Euro on the Exchange's electronic
trading platform for options, Phlx XL.\4\ These

new U.S. dollar-settled FCOs were in addition to the Exchange's
existing physical delivery FCOs. The Exchange now proposes to list U.S.
dollar-settled FCOs on the New Currencies. U.S. dollar-settled FCOs on
the New Currencies will be subject to the same rules that now apply to
existing U.S. dollar-settled options on foreign currencies.\5\ In
addition, a number of rules are being amended to specifically apply to
U.S. dollar-settled options on the New Currencies, as described below.
Like the British pound and the Euro, physical delivery options on the
four New Currencies are already traded on the Exchange. These existing,
physical delivery options on the New Currencies will not be affected by
this proposal and will continue to trade as they do today, by open
outcry.
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    \4\ See Securities Exchange Act Release No. 54989 (December 21,
2006), 71 FR 78506 (December 29, 2006) (SR-Phlx-2006-34) (``Pound/
Euro FCO Approval Order''). In approving the listing and trading of
U.S. dollar-settled FCOs on the British pound and the Euro, the
Commission's approval order stated that the listing and trading of
additional U.S. dollar-settled FCOs on other foreign currencies
would require the Exchange to file additional proposed rule changes
on Form 19b-4. Id.
    \5\ See Pound/Euro FCO Approval Order, supra note 4, for a
description of the rules applicable to U.S. dollar-settled FCOs.
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    The Exchange proposes to disseminate, over the facilities of the
Consolidated Tape Association, at least once every fifteen seconds
while the Exchange is open for trading, a modified spot rate for the
four New Currencies like the modified spot rate currently disseminated
for the British pound and the Euro.\6\ The modified spot rate will be
calculated by the Exchange based on spot prices (bids and asks) it
receives from Thomson Financial LLC (``Thomson''). For the Australian
dollar, the Exchange will determine the midpoint between the bid and
the ask and will modify that rate by multiplying it by 100.\7\ However,
because the Thomson spot rate selected by the Exchange \8\ is expressed
differently for the Canadian dollar, the Japanese yen and the Swiss
franc than for the Australian dollar, the British pound and the Euro
(in foreign currency units per U.S. dollar rather than in U.S. dollars
per unit of foreign currency) the modified spot rate Phlx will
disseminate for the Canadian dollar, the Japanese yen and the Swiss
franc will be one divided by the midpoint between the bid and ask of
the Thomson spot rate, rounded up to the nearest millionth if the
result ends in values greater than or equal to five ten-millionths, and
rounded down if less than five ten-millionths, multiplied by the
appropriate modifier.\9\ For the Canadian dollar and the Swiss franc,
the modifier will be 100. For the Japanese yen, the modifier will be
10,000.\10\ The Exchange believes that sufficient other venues exist
for obtaining reliable spot market information on the New Currencies so
that investors in U.S. dollar-settled FCOs can monitor the underlying
spot market in the New Currencies.
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    \6\ See Securities Exchange Act Release No. 55513 (March 22,
2007), 72 FR 14636 (March 28, 2007) (SR-Phlx-2007-28). The modified
spot rate disseminated by the Exchange will not otherwise amend or
affect the Exchange's existing rules governing U.S. dollar-settled
FCOs.
    \7\ For example, if .8688 U.S. dollars buys 1 Australian dollar,
a modifier of 100 would be used so that the modified spot rate would
become 86.88.
    \8\ Telephone conversation between Carla Behnfeldt, Director,
Phlx, David Hsu, Special Counsel, and Sara Gillis, Attorney,
Division of Market Regulation, Commission, on June 20, 2007.
    \9\ Premiums and spot rates for the Canadian dollar, the
Japanese yen, and the Swiss franc have been quoted in foreign
currency units per U.S. dollar for years in connection with the
Exchange's physical delivery FCOs. The Exchange also represents that
other major market data vendors also quote spot rates in terms of
foreign currency units per U.S. dollar for these currencies as well.
    \10\ For example, if 115.84 Japanese yen buys one U.S. dollar,
the Exchange will divide that amount into one to determine that
.008632596 dollars will buy one Japanese yen. The Exchange would
then multiply the rounded figure, .008633, by 10,000, so that the
modified spot rate to be disseminated would be 86.33.
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    Rule 1012, ``Series Of Options Open For Trading,'' Commentary .06,
currently provides that the Exchange will initially list exercise
strike prices for each expiration of U.S. dollar-settled options on the
Euro and the British pound within a ten percent band around the current
spot price at half-cent ($.005) intervals. This rule is being expanded
to cover all U.S. dollar-settled foreign currency options, including
options on the New Currencies. The Exchange also is proposing to amend
the rule by deleting a current requirement that the Exchange delist any
previously-listed series outside of the current ten percent band that
have no open interest. The Exchange has found that this requirement is
an administrative burden and does not believe that the restriction is
justified. For example, the Exchange has found that approximately once
a week, it is required to delete a series only to have it be listed
again in a day or two due to movement in the currency. Delisting and
relisting various exercise prices with no advance notice on a daily
basis has the potential to confuse investors and complicate their
trading strategies and decisions.
    Rule 1033, ``Bids and Offers--Premium,'' will apply to U.S. dollar-
settled options on the New Currencies as well as to the existing U.S.
dollar-settled options on the British pound and the Euro. Pursuant to
Rule 1033(b)(ii)(A), bids and offers are to be expressed in terms of
U.S. dollars per unit of the underlying foreign currency, provided that
the first two decimal places shall be omitted from all bid and offer
quotations for the Swiss franc, the Canadian dollar, and the Australian
dollar, and the first four decimal places shall be omitted from all bid
and offer quotations for the Japanese yen. Thus, for example, a bid of
``1.60'' for an option contract on the Japanese yen shall represent a
bid to pay $.000160 per yen.\11\
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    \11\ Rule 1014, ``Obligations and Restrictions Applicable to
Specialists and Registered Options Traders,'' and Options Floor
Procedure Advice F-6, ``Option Quote Parameters,'' are being revised
to provide an illustration of the different option quote spread
parameters for U.S. dollar-settled options on the Japanese yen,
which differ from the other U.S. dollar-settled FCOs in that four
decimal places, rather than two, are to be disregarded when the
quote parameters are expressed.
    Rules 1014 and 1034 are also being amended by removing the
dollar sign before the ``expressed as'' values for quotes and quote
spread parameters. Similarly, dollar signs are being added to
Options Floor Procedure Advice F-6 in front of the maximum quote
spreads (but not in front of the ``expressed as'' values for the
maximum quote spreads). The Exchange believes that these changes
will make the quoting convention (i.e., disregarding the first four
decimal places for the Japanese yen and the first two decimal places
for the other currencies underlying the U.S. dollar-settled FCOs)
less confusing to the investing public. The changes will also make
Rules 1014 and 1034 more consistent with Rule 1033.
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    Rule 1034, ``Minimum Increments,'' currently prescribes the minimum
trading increment for all U.S. dollar-settled FCOs. This rule will now
apply to the New Currencies as well. However, the rule is being amended
to add an example of the minimum trading increment in the case of U.S.
dollar-settled options on the Japanese yen, which differs from the
other U.S. dollar-settled currencies options in that four decimal
places, rather than two, are to be disregarded.\12\
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    \12\ Thus, the amended rule provides that all U.S. dollar-
settled FCOs on the Japanese yen quoting at $.000300 (expressed as
3.00) or higher shall have a minimum trading increment of $.000010
per unit of the foreign currency, expressed as .10 per unit of the
foreign currency, which equals a $10.00 minimum increment per
contract consisting of 1,000,000 Japanese yen. The minimum increment
for U.S. dollar-settled FCOs on the Japanese yen quoting under
$.000300 (expressed as 3.00) shall be $.000005 per unit of the
foreign currency, expressed as .05 per unit of the foreign currency,
which equals a $5.00 minimum increment per contract consisting of
1,000,000 Japanese yen.
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    Rule 1057, ``U.S. Dollar-Settled Foreign Currency Option Closing
Settlement Value,'' currently provides for the determination of the
closing settlement value for U.S. dollar-settled options on the British
pound and the Euro. The rule is being amended to provide for the
closing settlement value for U.S. dollar settled options on the New
Currencies. Because the Noon Buying Rate is expressed differently for

the Canadian dollar, the Japanese yen, and the Swiss franc than for the
Australian dollar, the British pound, and the Euro--in foreign currency
units per U. S. dollar rather than in U. S. dollars per unit of foreign
currency--the closing settlement value for the Canadian dollar, the
Japanese yen, and the Swiss franc will be an amount equal to one
divided by the day's announced Noon Buying Rate, as determined by the
Federal Reserve Bank of New York on the trading day prior to
expiration, rounded to the nearest .0001 (except in the case of the
Japanese yen where the amount shall be rounded to the nearest .000001).
    In addition, Rule 1057 provides that if the Noon Buying Rate is not
announced by 2 p.m. ET, the closing settlement value will be based upon
the most recently announced Noon Buying Rate, unless the Exchange
determines to apply an alternative closing settlement value as a result
of extraordinary circumstances. The Exchange is proposing to amend Rule
1057 to provide that the closing settlement value will be based upon
the most recently announced Noon Buying Rate if the Noon Buying Rate is
not announced by 5 p.m. ET (rather than 2 p.m. ET). The Exchange
believes that moving the deadline to 5 p.m. ET should decrease the
likelihood that it may be required to base the closing settlement value
on the previously announced Noon Buying Rate, which is likely not to be
current. The rule will continue to permit the Exchange to apply an
alternative closing settlement value as a result of extraordinary
circumstances.
    Rule 1001, ``Position Limits,'' provides that the position limits
shall be 200,000 put or call option contracts (aggregating both U.S.
dollar-settled and physical delivery contracts) on the same side of the
market relating to the same underlying foreign currency. Rule 1001 is
being amended, however, to provide that one U.S. dollar-settled
Australian dollar option contract shall count as one-fifth of a
contract, one U.S. dollar-settled Canadian dollar option contract shall
count as one-fifth of a contract, one U.S. dollar-settled Swiss Franc
option contract shall count as one-sixth of a contract, and one U.S.
dollar-settled Japanese yen option contract shall count as one-sixth of
a contract.\13\ The counting of U.S. dollar-settled option contracts as
less than one full contract reflects the fact that the size of the U.S.
dollar-settled option contract is smaller than the Exchange's physical
delivery contract on the same currencies.\14\ The position limit rules
were originally adopted for the larger physical delivery contracts.
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    \13\ Currently, Rule 1001 provides that one U.S. dollar-settled
British pound option contract shall count as one-third of a
contract, and that one U.S. dollar-settled Euro option contract
shall count as one-sixth of a contract.
    \14\ The size of the U.S. dollar-settled Australian dollar
option contract is 10,000 Australian dollars, which is one-fifth the
size of the physical delivery contract size of 50,000 Australian
dollars. The size of the U.S. dollar-settled Canadian dollar option
contract is 10,000 Canadian dollars, which is one-fifth the size of
the physical delivery contract size of 50,000 Canadian dollars. The
size of the U.S. dollar-settled Swiss franc option contract is
10,000 Swiss francs, which is approximately one-sixth the size of
the physical delivery contract size of 62,500 Swiss francs. The size
of the U.S. dollar-settled Japanese yen option contract is 1,000,000
Japanese yen, which is approximately one-sixth the size of the
physical delivery contract size of 6,250,000 Japanese yen.
---------------------------------------------------------------------------

    Rule 1014, Commentary .13 is being revised to delete the
requirement that the Options Committee and the Foreign Currency Options
Committee each establish separate in-person amounts for equity and
index options and foreign currency options, respectively. For purposes
of Rule 1014, Commentary .13, the Exchange believes that there is no
useful reason to establish separate requirements for equity and index
options on the one hand, and U.S. dollar-settled FCOs on the other.\15\
This amendment will permit the Options Committee to establish one in-
person requirement applicable to all ROTs and permit any ROT to satisfy
that in-person requirement by trading any kind of option, be it equity,
index or FCOs.
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    \15\ Currently, Options Floor Procedure Advice B-3 provides that
a ROT (other than a Remote Streaming Quote Trader (``RSQT'')) is
required to trade in-person, and not through the use of orders, the
greater of 1,000 contracts or 50% of his contract volume on the
Exchange each quarter. ROTs may satisfy this requirement in any
option traded on the Exchange. Floor Procedure Advice B-3 also
contains a separate requirement that at least 50% of a ROT's trading
activity in each quarter must be in assigned options. This
requirement will continue to apply to ROTs assigned to equity and
index options and FCOs.
---------------------------------------------------------------------------

    The Exchange also is proposing to amend Rule 1064, ``Crossing,
Facilitation and Solicited Orders,'' to extend the applicability of the
rule to U.S. dollar-settled FCOs. Rule 1064 sets forth, among other
things, the procedures by which a floor broker holding an equity or
index option order (``original order'') may cross it with another order
or orders he or she is holding, or, in the case of a public customer
order, with a contra side order provided by the originating firm from
its own proprietary account (``facilitation order''). Under certain
conditions, Rule 1064 provides ``participation guarantees'' in such
crossing or facilitation transactions, entitling the floor broker to
cross a certain percentage of the original order with the other order
or orders ahead of members of the trading crowd. These participation
guarantees currently apply to transactions in equity and index options
only. The Exchange proposes to amend Rule 1064, Commentary .02, to
provide a participation guarantee for trading in U.S. dollar-settled
options that is the same as the participation guarantee for index
options.
    The Exchange also is proposing to amend Rule 1092, ``Obvious
Errors,'' to clarify that the obvious error amounts stated in the
existing rule are the amounts by which the amount is ``expressed'' and
not the actual amounts. This is merely a technical correction.
    Exchange rules designed to protect public customers trading in FCOs
will apply to U.S. dollar-settled FCOs on the New Currencies.
Specifically, Phlx Rule 1024(b) relating to approval of customer
accounts to trade options, Phlx Rule 1026 relating to suitability, Phlx
Rule 1027 relating to discretionary power over customer accounts
trading in options, Phlx Rule 1025 relating to the supervision of
accounts, Phlx Rule 1028 relating to confirmations, and Phlx Rule 1029
relating to delivery of options disclosure documents will apply to
trading in U.S. dollar-settled FCOs, including FCOs on the New
Currencies.
    The Exchange represents that it has an adequate surveillance
program in place for FCOs. The Exchange is also a member of the
Intermarket Surveillance Group (``ISG'') and may obtain trading
information via the ISG from other exchanges who are members or
affiliated members of the ISG.\16\ Futures on the New Currencies trade
on the Chicago Mercantile Exchange (``CME'') and the New York Board of
Trade (``NYBOT''). The New York Stock Exchange (``NYSE'') and NYSE Arca
list the following exchange traded funds: CurrencyShares Australian
Dollar Trust, CurrencyShares Canadian Dollar Trust, and CurrencyShares
Swiss Franc Trust. The Exchange represents that, to the best of the
Exchange's knowledge, these U.S. markets are the primary trading
markets in the world for exchange-traded futures, options on futures
and trust shares on these currencies. Phlx can obtain surveillance
information from the NYSE, NYSE Arca, CME and NYBOT, as they are
members of the ISG. In addition, Phlx is able to obtain

information regarding trading in these products through Phlx members,
in connection with such members' proprietary or customer trades which
they effect on any relevant market.\17\
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    \16\ The members of the ISG include all of the U.S. registered
stock and options markets. The ISG members work together to
coordinate surveillance and investigative information sharing in the
stock and options markets. In addition, the major futures exchanges
are affiliated members of the ISG, which allows for the sharing of
surveillance information for potential intermarket trading abuses.
    \17\ See Equity Floor Procedure Advice F-8 and Options Floor
Procedure F-8, ``Failure to Comply with an Exchange Inquiry.''
Pursuant to Phlx Rule 1022, specialists and Registered Options
Traders (``ROTs'') are required to identify all accounts maintained
for foreign currency trading in which the specialist or ROT engages
in trading activity or over which he exercises investment
discretion, and no specialist or ROT may engage in foreign currency
trading in any account not reported pursuant to the rule. Phlx Rule
1022 also requires every specialist and ROT to make available to
Phlx upon request all books, records and other information relating
to transactions for their own account or accounts of associated
persons with respect to the foreign currency underlying U.S. dollar-
settled FCOs, including transactions in the cash market as well as
the futures, options and options on futures markets. Rule 1022(d)
includes ``other foreign currency derivatives'' in the list of
currency related transactions with respect to which specialists and
ROTs must provide information to the Exchange.
---------------------------------------------------------------------------

    Finally, the Exchange represents that it has the necessary systems
capacity to support new options series that will result from the
introduction of U.S. dollar-settled options on the New Currencies.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \18\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\19\ in particular, in that it is designed to
promote just and equitable principles of trade, 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, by offering investors the ability to invest in U.S. dollar-
settled FCOs on the New Currencies and by simplifying existing rules
relating to the expression of strike prices and quotes in the U.S.
dollar-settled FCO products.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

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

    No written comments were either solicited or received.

III. 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-Phlx-2007-34 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 20549-1090.

All submissions should refer to File Number SR-Phlx-2007-34. 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. 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; 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-Phlx-2007-34 and should be submitted on or before August
6, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change

    After careful consideration, the Commission finds that the proposed
rule change, as amended, is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to a national
securities exchange.\20\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\21\
which requires that an exchange have rules designed, among other
things, to promote just and equitable principles of trade, 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. Significant aspects of the proposal are discussed
below.
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    \20\ In approving this rule change, the Commission notes that it
has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
    \21\ 15 U.S.C. 78f(b)(5).
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A. U.S. Dollar-Settled FCOs on the New Currencies

    The Commission notes that it recently approved rules governing the
listing and trading on Phlx of U.S. dollar-settled options on the
British pound and the Euro,\22\ and that such rules will be applicable
to U.S. dollar-settled options on the New Currencies.\23\ The
Commission believes that these rules provide for regulation of the
listing and trading of FCOs on the New Currencies on Phlx consistent
with the Act, as discussed further below.
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    \22\ See Pound/Euro FCO Approval Order, supra note 4.
    \23\ The Commission notes that the Exchange is making certain
technical and clarifying amendments to a number of the existing
rules to specifically apply those rules to, and reflect certain
differences in, U.S. dollar-settled options on each currency.
---------------------------------------------------------------------------

1. Settlement Value and Dissemination of Information
    The Commission believes that sufficient venues exist for obtaining
reliable information on the New Currencies so that investors in U.S.
dollar-settled FCOs can monitor the underlying spot market in the New
Currencies. The Commission notes that, in addition to other major
market vendors providing such information, Phlx will disseminate a
modified spot rate for the New Currencies at least once every fifteen
seconds while the Exchange is open for trading, which will give
investors an additional means to track the value of the New Currencies
underlying the FCOs. The Commission also believes that Phlx's
procedures and the competitive nature of the spot market for the New
Currencies should help to ensure that the settlement values for U.S.
dollar-settled FCO contracts will accurately reflect the spot price for
the New Currencies. Finally, the closing settlement value, as
calculated pursuant

to Phlx rules, will be posted on the Exchange's Web site, where it will
be publicly available to all visitors on an equal basis, without the
need to enter any kind of password.\24\
---------------------------------------------------------------------------

    \24\ Telephone conversation between Carla Behnfeldt, Director,
Phlx, and Sara Gillis, Attorney, Division of Market Regulation,
Commission, on July 3, 2007.
---------------------------------------------------------------------------

2. Customer Protection
    The Commission believes that a regulatory system designed to
protect public customers must be in place before the trading of
sophisticated financial instruments, such as U.S. dollar-settled FCOs
on the New Currencies, can commence on a national securities exchange.
The Commission believes this goal has been satisfied by the application
of Phlx customer protection rules to U.S. dollar-settled FCOs on the
New Currencies.
3. Surveillance
    The Commission notes that Phlx will integrate U.S. dollar-settled
FCOs on the New Currencies into existing Phlx market surveillance
programs for equity and index options, physical delivery foreign
currency options, and other U.S. dollar-settled FCOs, and that Phlx
intends to apply those same program procedures to U.S. dollar-settled
FCOs on the New Currencies. The Commission also notes that Phlx Rule
1022, Equity Floor Procedure Advice F-8, and Options Floor Procedure F-
8 provide Phlx with the authority to obtain information regarding
trading in CurrencyShares Australian Dollar Trust shares,
CurrencyShares Canadian Dollar Trust shares, CurrencyShares Swiss Franc
Trust shares, options on the New Currencies, and futures and options on
futures on the New Currencies through Phlx members, in connection with
such members' proprietary or customer trades which they effect on any
relevant market. In addition, Phlx may obtain trading information
through the ISG from other exchanges who are members or affiliates of
the ISG. Specifically, Phlx can obtain such information from the NYSE
and NYSE Arca in connection with trading in the CurrencyShares
Australian Dollar Trust, CurrencyShares Canadian Dollar Trust, and
CurrencyShares Swiss Franc Trust on the NYSE and NYSE Arca, and from
the CME and NYBOT in connection with trading of futures on the New
Currencies on those exchanges. Therefore, the Commission believes that
Phlx should have the tools necessary to adequately surveil trading in
U.S. dollar-settled FCOs on the New Currencies.
4. Position and Exercise Limits
    Like other U.S. dollar-settled FCOs, U.S. dollar-settled FCO
contracts on the New Currencies will be aggregated with physical
delivery contracts for position and exercise limit purposes. The
Commission believes that aggregation of U.S. dollar-settled FCOs on the
New Currencies with the physical delivery contracts for position and
exercise limit purposes is prudent and minimizes concerns regarding
manipulations or disruptions of the markets for U.S. dollar-settled FCO
contracts and physical delivery contracts.
5. Other Rules
    The Commission believes that the other rule changes proposed by
Phlx to accommodate the trading of U.S. dollar-settled FCOs on the New
Currencies are consistent with the Act. In particular, the Commission
believes it is reasonable for Phlx to initially list exercise strike
prices for each expiration around the current spot price at half-cent
($0.005) intervals up to five percent on each side, as it currently
does for other U.S. dollar-settled FCOs.\25\ The Commission notes that
Phlx has represented that it has the system capacity to support the
additional quotations and messages that will result from listing
options on U.S. dollar-settled FCOs on the New Currencies.\26\
---------------------------------------------------------------------------

    \25\ When listing additional strikes, the Commission expects the
Exchange to consider whether the listing of such strikes will be
consistent with the maintenance of a fair and orderly market.
    \26\ See letter dated June 21, 2007 from Thomas A. Whitman,
Senior Vice President, Phlx, to Heather Seidel, Assistant Director,
Division of Market Regulation (``Division''), Commission.
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    The Commission also believes that it is consistent with the Act for
the Exchange to apply the current minimum trading increments for other
U.S. dollar-settled FCOs provided in Rule 1034 to U.S. dollar-settled
FCOs on the New Currencies. The Commission notes that the Exchange has
made appropriate clarifying changes to the rule to account for U.S.
dollar-settled options on the Japanese yen, which differ from the other
U.S. dollar-settled FCOs in that four decimal places, rather than two,
are disregarded.\27\
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    \27\ See infra note 12 and accompanying text. The Commission
notes that the Exchange is also making similar clarifying changes to
other rules to account for differences in U.S. dollar-settled
options on the Japanese yen. See e.g., Rule 1014, Rule 1033, and
Options Floor Procedure Advice F-6.
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B. Other Rule Changes Relating to All U.S. Dollar-Settled FCOs

    The Commission believes that the other rule changes proposed by
Phlx applicable to all U.S. dollar-settled FCOs listed and traded on
Phlx (including U.S. dollar-settled FCOs on the New Currencies) are
consistent with the Act. First, the Commission believes that it is
reasonable for Phlx to remove the requirement that the Exchange delist
any series of U.S. dollar-settled FCOs outside of the current ten
percent band that has no open interest. The Commission notes that the
Exchange has found this requirement to be an administrative burden and
does not believe the restriction is justified.\28\
---------------------------------------------------------------------------

    \28\ Nonetheless, the Commission expects the Exchange to
consider whether the continued listing of such series would be
consistent with the maintenance of a fair and orderly market.
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    The Commission also believes that it is reasonable for the Exchange
to change from 2 p.m. ET to 5 p.m. ET the time up to which the Exchange
will use the previously announced Noon Buying Rate as the basis for the
closing settlement value, because this will give the Exchange a greater
opportunity to use the Noon Buying Rate on the trading day prior to
expiration instead of having to rely on a less-current previously
announced Noon Buying Rate.
    Further, the Commission believes that it is reasonable for the
Exchange to extend the application of Rule 1064 governing crossing,
facilitation and solicited orders to U.S. dollar-settled FCOs. The
Commission notes the Exchange's existing rule provides participation
guarantees in crossing or facilitation transactions for trading in
equity and index options, and the Commission believes that it is
consistent with the Act to provide the same participation guarantee for
trading in U.S. dollar-settled FCOs as for index options.

C. Accelerated Approval

    Pursuant to Section 19(b)(2) of the Act, the Commission finds good
cause to approve the proposal, as amended, prior to the thirtieth day
after the amended proposal is published for comment in the Federal
Register. The Commission notes that U.S. dollar-settled FCOs on the New
Currencies will be subject to the same Phlx rules and requirements as
other U.S. dollar-settled FCOs, with technical changes where
appropriate to account for U.S. dollar-settled FCOs on the New
Currencies. The Commission also notes that it recently approved rules
for the listing and trading of cash-settled FCOs on the New Currencies
on the International Securities Exchange, LLC.\29\ Further, the
Commission notes that it has previously approved Phlx's rule governing
crossing, facilitation, and

solicited orders and providing for participation guarantees for equity
and index options, and it believes that extending the applicability of
such provisions to U.S. dollar-settled FCOs raises no new or novel
issues.\30\ The Commission also believes that the other proposed
clarifications to Phlx's rules serve to enhance the proposal and raise
no new regulatory issues. Therefore, the Commission believes that the
proposed rule changes relating to the listing and trading of U.S.
dollar-settled FCOs on the New Currencies on Phlx do not raise
additional significant regulatory issues that have not been previously
considered by the Commission. As such, the Commission believes that it
is appropriate to allow the Exchange to immediately list and trade U.S.
dollar-settled FCOs on the New Currencies.
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    \29\ See Securities Exchange Act Release No. 55515 (April 3,
2007), 72 FR 17963 (April 10, 2007) (SR-ISE-2006-59).
    \30\ The Commission notes that the participation guarantee
percentage for U.S. dollar-settled FCOs will be the same as the
current participation guarantee percentage for index options.
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    Accordingly, the Commission finds good cause to accelerate approval
of the amended proposal prior to the thirtieth day after publication in
the Federal Register.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\31\ that the proposed rule change (SR-Phlx-2007-34), as modified
by Amendment No. 1, be, and hereby is, approved on an accelerated
basis.
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    \31\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-13695 Filed 7-13-07; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 84, Number 169 (Friday, August 30, 2019)]
[Notices]
[Page 45769]
[FR Doc No: 2019-18730]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2017-D-2991]

Pediatric Rare Diseases--A Collaborative Approach for Drug
Development Using Gaucher Disease as a Model; Draft Guidance for
Industry; Availability; Correction

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice; correction.

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SUMMARY: The Food and Drug Administration is correcting a notice
entitled ``Pediatric Rare Diseases--A Collaborative Approach for Drug
Development Using Gaucher Disease as a Model; Draft Guidance for
Industry; Availability'' that appeared in the Federal Register of
December 7, 2017. The document announced the availability of a draft
guidance focusing on drug development for pediatric patients with
Gaucher disease. The document was published with the incorrect docket
number. This document corrects that error.

FOR FURTHER INFORMATION CONTACT: Lisa Granger, Office of Policy, Food
and Drug Administration, 10903 New Hampshire Ave., Bldg. 32, Rm. 3330,
Silver Spring, MD 20993-0002,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: In the Federal Register of Thursday,
December 7, 2017 (82 FR 57759), in FR Doc. 2017-26357, the following
correction is made:
    On page 57759, in the first column, in the document heading and in
the third column under Instructions, the docket number ``FDA-2017-N-
6476'' is corrected to read ``FDA-2017-D-2991''.

    Dated: August 26, 2019.
Lowell J. Schiller,
Principal Associate Commissioner for Policy.
[FR Doc. 2019-18730 Filed 8-29-19; 8:45 am]
BILLING CODE 4164-01-P