[Federal Register Volume 80, Number 218 (Thursday, November 12, 2015)]
[Notices]
[Pages 69988-69990]
[FR Doc No: 2015-28688]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76371; File No. SR-BX-2015-065]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt
Business Continuity and Disaster Recovery Plans Testing Requirements

November 5, 2015.
    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 October 30, 2015, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I and II, below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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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 adopt business continuity and disaster
recovery plans (``BC/DR Plans'') testing requirements for certain
Exchange Members \3\ and BX Options Market (``BOM'') Options
Participants \4\ (``Participants'') in connection with Regulation
Systems Compliance and Integrity (``Regulation SCI'').\5\
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    \3\ The term ``Member'' is defined as ``any registered broker or
dealer that has been admitted to membership in the Exchange.'' See
Exchange Rule 0120(i).
    \4\ The term ``Options Participant'' is defined as a category of
BX Member that is authorized to ``transact business on BX Options
via the Trading System. Options Participants may trade options for
their own proprietary accounts or, if authorized to do so under
applicable law, and consistent with these BX Options Rules and with
applicable law and SEC rules and regulations, may conduct business
on behalf of Customers.'' See BOM Option Rules, Chapter II, Section
1(a).
    \5\ See Securities Exchange Act Release No. 73639 (November 19,
2014), 79 FR 72252 (December 5, 2014) (``SCI Adopting Release'').
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    The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqomxbx.cchwallstreet.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 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 is proposing to adopt new Rule 1170 to implement the
BC/DR Plans requirements of Rule 1004 of Regulation SCI. As adopted by
the Commission, Regulation SCI applies to certain self-regulatory
organizations (including the Exchange), alternative trading systems
(``ATSs''), plan processors, and exempt clearing agencies
(collectively, ``SCI entities''), and will require these SCI entities
to comply with requirements with respect to the automated systems
central to the performance of their regulated activities. Among the
requirements of Regulation SCI is Rule 1001(a)(2)(v), which requires
the Exchange and other SCI entities to maintain ``[b]usiness continuity
and disaster recovery plans that include maintaining backup and
recovery capabilities sufficiently resilient and geographically diverse
and that are reasonably designed to achieve next business day
resumption of trading and two-hour resumption of critical SCI systems
following a wide-scale disruption.'' \6\ The Exchange has put extensive
time and resources toward planning for system failures and already
maintains robust BC/DR Plans consistent with the Rule. As set forth
below, in connection with Regulation SCI, the Exchange is proposing to
require certain Members to participate in testing of the operation of
the Exchange's BC/DR Plans.
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    \6\ 17 CFR 242.1001(a)(2)(v).
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    With respect to an SCI entity's BC/DR Plans, including its backup
systems, paragraph (a) of Rule 1004 of Regulation SCI requires each SCI
entity to: ``[e]stablish standards for the designation of those members
or participants that the SCI entity reasonably determines are, taken as
a whole, the minimum necessary for the maintenance of fair and orderly
markets in the event of the activation of such plans.'' \7\ Paragraph
(b) of Rule 1004 of Regulation SCI further requires each SCI entity to
``[d]esignate members or participants pursuant to the standards
established in paragraph (a) of [Rule 1004] and require participation
by such designated members or participants in scheduled functional and
performance testing of the operation of such plans, in the manner and
frequency specified by the SCI entity, provided that such frequency
shall not be less than once every 12 months.'' \8\ In order to comply
with Rule 1004 of Regulation SCI, the Exchange proposes to adopt new
Rule 1170, which incorporates the requirements of Rule 1004 of
Regulation SCI as part of the Exchange's rules, and sets forth the
notice, selection criteria and obligations of Members and Participants
with respect to BC/DR Plans testing.
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    \7\ 17 CFR 242.1004(a).
    \8\ 17 CFR 242.1004(b).
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    BX proposes to adopt Rule 1170(a), which will set forth the
Exchange's obligations with respect to the selection of Members and
Participants for testing. Specifically, the rule will require BX to
``[e]stablish standards for the designation of those Members and
Options Participants that the Exchange reasonably determines are, taken
as a whole, the minimum necessary for the maintenance of fair and
orderly markets in the event of the activation of such plans.'' The
proposed new rule further provides that ``[s]uch standards may include
volume-based and/or market share-based criteria, and may be adjusted
from time to time by the Exchange.'' Lastly, the proposed new rule will
require BX to provide public notice of the standards that it adopts.
    BX is proposing to adopt Rule 1170(b), which will set forth the
obligations of BX and its Members and Participants with respect to
testing. Specifically, the rule will require BX to ``designate Members
and Options Participants pursuant to the standards established in
paragraph (a) of this rule and require participation by such

designated Members and Options Participants in scheduled functional and
performance testing of the operation of such plans, in the manner and
frequency specified by the Exchange, provided that such frequency shall
not be less than once every 12 months.'' Moreover, the rule will
require BX to provide at least six months prior notice to Members and
Participants that are designated for mandatory testing. Lastly, the
rule will provide notice that participation in testing is a condition
of membership for Members and Participants that are designated for
testing.
    The Exchange encourages all Members and Participants to connect to
the Exchange's backup systems and to participate in testing of such
systems; \9\ however, certain Members and Participants will be
obligated to participate in BC/DR Plans testing. In adopting new Rule
1170, the Exchange will require mandatory participation in BC/DR Plans
testing by those Members and Participants that the Exchange reasonably
determines are, taken as whole, the minimum necessary for the
maintenance of fair and orderly markets in the event of the activation
of such plans on the Exchange and BOM, respectively. The Exchange
believes that using overall participation on its markets (by volume
and/or market share) as a measure to select Members and Participants
for mandatory participation in BC/DR Plans testing is a reasonable
means by which it can determine which Members and Participants are
necessary for the maintenance of fair and orderly markets in the event
of the activation of such plans.\10\ For each BC/DR Plans test cycle,
the Exchange will select the top five Members on the Exchange and the
top five Participants on BOM based on BX's measure of overall
participation on each of those markets. All notices concerning BC/DR
Plans testing will be posted on the Exchange's Web site.
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    \9\ In this regard, BX will allow any Member or Participant to
participate in the testing of the Exchange's BC/DR Plans, which is
consistent with the Plan. See SCI Adopting Release, supra note 5 at
72350. BX will provide instructions on how a Member or Participant
must inform BX of its interest in participating in an upcoming BC/DR
Plans test via the announcement of the test date. A Member or
Participant must provide BX notice of its interest to participate at
least a week prior to the test date and must have the appropriate
connection for testing in place.
    \10\ BX will provide notice of the specific selection criteria
and measurement period in a notice to Members and Participants. The
initial selection criteria and measurement period will be announced
no later than November 3, 2015.
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    The Exchange is proposing to initially select Members and
Participants with the highest levels of trading volume on the Exchange
and BOM over four calendar months (``Measurement Period'') as mandatory
testing Members and Participants, respectively.\11\ Specifically, the
Measurement Period will be the four calendar months of trading
immediately prior to the Exchange's announcement of the next BC/DR
Plans test date. The Measurement Period will always begin at a point
after the Exchange announces the criteria to be used in the next BC/DR
Plans test. By way of example, if on October 6, 2017 the Exchange
announced the BC/DR Plans test selection criteria and on March 2, 2018
the Exchange announced a BC/DR Plans test date of September 8, 2018,
the Measurement Period used to select Members and Participants subject
to mandatory testing would be November 2017 through February 2018.
Members and Participants not obligated to participate that wish to
participate in this test must inform the Exchange no later than
September 1, 2018.\12\
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    \11\ The Exchange may change the total number of Members and
Participants selected from time to time.
    \12\ See note 9.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act,\13\ in general, and further the objectives
of Section 6(b)(5) of the Act,\14\ 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 regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest; and are not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The proposal will ensure that the Members and
Participants necessary to ensure the maintenance of fair and orderly
markets are properly designated consistent with Rule 1004 of Regulation
SCI. Specifically, the proposal will adopt clear and objective criteria
with respect to the designation of Members and Participants that are
required to participate in the testing of the Exchange's BC/DR Plans,
as well as appropriate notification regarding such designation. As set
forth in the SCI Adopting Release, ``SROs have the authority, and legal
responsibility, under Section 6 of the Exchange Act, to adopt and
enforce rules (including rules to comply with Regulation SCI's
requirements relating to BC/DR testing) applicable to their members or
participants that are designed to, among other things, foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public
interest.'' \15\ The Exchange believes that this proposal is consistent
with such authority and legal responsibility.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ See SCI Adopting Release, supra note 5 at 72350.
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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
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. To
the contrary, the proposal is not a competitive proposal but rather is
necessary for the Exchange's compliance with Regulation SCI.

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

    The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \16\ and Rule 19b-4(f)(6)(iii) thereunder.\17\
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\18\ A proposed rule change

filed under Rule 19b-4(f)(6)(iii) \19\ normally does not become
operative prior to 30 days after the date of the filing. However,
pursuant to Rule 19b-4(f)(6)(iii),\20\ the Commission may designate a
shorter time if such action is consistent with the protection of
investors and the public interest.
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ In addition, Rule 19b-4(f)(6) requires a self-regulatory
organization to give the Commission written notice of its intent to
file 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. The Exchange has satisfied this
requirement.
    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest
as it will allow the Exchange to incorporate changes required under
Regulation SCI, such as establishing standards for designating BC/DR
participants, prior to the November 3, 2015 compliance date.
Accordingly, the Commission designates the proposed rule change to be
operative upon filing.\21\
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    \21\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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_ADDRESS>Please include
File Number SR-BX-2015-065 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-BX-2015-065. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
    Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; 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-BX-2015-065 and should be
submitted on or before December 3, 2015.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-28688 Filed 11-10-15; 8:45 am]
 BILLING CODE 8011-01-P