[Federal Register Volume 85, Number 247 (Wednesday, December 23, 2020)]
[Notices]
[Pages 84084-84087]
[FR Doc No: 2020-28304]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90697; File No. SR-NASDAQ-2020-089]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
No Longer Implement the OTTO Protocol

December 17, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 15, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit 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 remove the protocol ``Ouch to Trade
Options'' or ``OTTO'' from The Nasdaq Options Market LLC (``NOM'')
Rulebook. The Exchange previously delayed its implementation of the
OTTO protocol; the Exchange will no longer implement the OTTO protocol.
    The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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
    NOM's proposal seeks to remove the protocol ``Ouch to Trade
Options'' or ``OTTO'' from The Nasdaq Options Market LLC (``NOM'')
Rulebook. The Exchange previously delayed its implementation of the
OTTO protocol; the Exchange will no longer implement the OTTO protocol.
Background
    Nasdaq filed a rule change \3\ which adopted a new protocol ``Ouch
to Trade Options'' or ``OTTO'' \4\ and proposed to rename and modify
the current OTTO protocol as ``Quote Using Orders'' or ``QUO.'' \5\ The
Exchange subsequently filed a rule change to amend Options 3, Section
18, titled ``Detection of Loss of Communication'' which describes the
impact to NOM protocols in the event of a loss of a communication. The
Exchange accounted for both the new OTTO and renamed and modified QUO
within this rule. Similarly, the Exchange amended Options 3, Section 8,
``Nasdaq Opening and Halt Cross'' to account for the new OTTO and
renamed and modified QUO within this rule. Finally, the Exchange
amended Options 3, Section 23, ``Data Feeds and Trade Information'' to
amend ``OTTO DROP'' to ``QUO DROP'' and noted within Options 3, Section
15(a)(1) related to Order Price Protection rule or ``OPP''

that OPP shall not apply to orders entered through QUO.\6\
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    \3\ See Securities Exchange Act Release No. 83888 (August 20,
2018), 83 FR 42954 (August 24, 2018) (SR-NASDAQ-2018-069) (``Prior
Rule Change''). In the Prior Rule Change the Exchange stated that it
would issue an Options Trader Alert introducing the new OTTO
protocol in Q4 of 2018. The rule numbers were amended in 2019 when
the Rulebook was relocated. See Securities Exchange Act Release No.
87778 (December 17, 2019), 84 FR 70590 (December 23, 2019) (SR-
NASDAQ-2019-098).
    \4\ As modified by the Prior Rule Change, OTTO is an interface
that allows Participants and their Sponsored Customers to connect,
send, and receive messages related to orders to and from the
Exchange. Features include the following: (1) Options symbol
directory messages (e.g., underlying); (2) system event messages
(e.g., start of trading hours messages and start of opening); (3)
trading action messages (e.g., halts and resumes); (4) execution
messages; (5) order messages; and (6) risk protection triggers and
cancel notifications. See NOM Rules at Options 3, Section
7(d)(1)(C).
    \5\ QUO is an interface that allows NOM Market Makers to
connect, send, and receive messages related to single-sided orders
to and from the Exchange. Order Features include the following: (1)
Options symbol directory messages (e.g., underlying); (2) system
event messages (e.g., start of trading hours messages and start of
opening); (3) trading action messages (e.g., halts and resumes); (4)
execution messages; (5) order messages; and (6) risk protection
triggers and cancel notifications. Orders submitted by NOM Market
Makers over this interface are treated as quotes. See Options 3,
Section 7(d)(1)(D).
    \6\ See Securities Exchange Act Release No. 84559 (November 9,
2018), 83 FR 57774 (November 16, 2018) (SR-NASDAQ-2018-085)
(``Subsequent Rule Change'').
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    Both the Prior Rule Change and the Subsequent Rule Change indicated
the aforementioned rule changes would be implemented for QUO and OTTO
in Q4 of 2018 with the date announced via an Options Traders Alert. The
Exchange filed a rule change implementing QUO and delaying the
introduction of the OTTO functionality until Q3 2019 by announcing the
date of implementation via an Options Traders Alert.\7\ The Exchange
further delayed the implementation of OTTO functionality until Q3 2019
and then Q2 2020, respectively.\8\ The last rule change filed with the
Commission delayed the implementation of OTTO functionality until Q2
2021 due to market events.\9\
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    \7\ See Securities Exchange Act Release No. 84723 (December 4,
2018), 83 FR 63692 (December 11, 2018) (SR-NASDAQ-2018-097). The
Exchange proposed to immediately implement QUO as of the
effectiveness of SR-NASDAQ-2018-097 and delay the implementation of
OTTO by issuing an Options Trader Alert announcing the
implementation date in Q1 2019. The QUO implementation became
effective upon filing on November 26, 2018.
    \8\ See Securities Exchange Act Release Nos. 85386 (March 21,
2019), 84 FR 11597 (March 27, 2019) (SR-NASDAQ-2019-016); and 87160
(September 30, 2019), 84 FR 53186 (October 4, 2019) (SR-NASDAQ-2019-
078).
    \9\ See Securities Exchange Act Release Nos. 89077 (June 16,
2020), 85 FR 37486 (June 22, 2020) (SR-NASDAQ-2020-031).
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Proposal
    At this time, NOM has determined not to implement the OTTO protocol
and proposes to remove references to the OTTO protocol within its
Rulebook. As noted above, the Exchange delayed the introduction of the
OTTO functionality initially until Q3 2019.\10\ The Exchange then
further delayed the implementation of OTTO functionality until Q3 2019
and then Q2 2020, respectively.\11\ There were not a material amount of
non-Market Makers interested in the risk enhancements or the OTTO
protocol after the first two delays. The last rule change filed with
the Commission delayed the implementation of OTTO functionality until
Q2 2021 due to market events.\12\ Nasdaq was considering enhancing OTTO
features to provide Participants with other capabilities that are
currently not offered with OTTO, in the area of risk enhancements.\13\
Nasdaq has discussed certain enhancements with Participants. The
Exchange notes that it did not have a large number of Participants
interested in the enhancements it was considering.
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    \10\ See Securities Exchange Act Release No. 84723 (December 4,
2018), 83 FR 63692 (December 11, 2018) (SR-NASDAQ-2018-097). The
Exchange proposed to immediately implement QUO as of the
effectiveness of SR-NASDAQ-2018-097 and delay the implementation of
OTTO by issuing an Options Trader Alert announcing the
implementation date in Q1 2019. The QUO implementation became
effective upon filing on November 26, 2018.
    \11\ See Securities Exchange Act Release Nos. 85386 (March 21,
2019), 84 FR 11597 (March 27, 2019) (SR-NASDAQ-2019-016); and 87160
(September 30, 2019), 84 FR 53186 (October 4, 2019) (SR-NASDAQ-2019-
078).
    \12\ See Securities Exchange Act Release Nos. 89077 (June 16,
2020), 85 FR 37486 (June 22, 2020) (SR-NASDAQ-2020-031).
    \13\ Of those firms interested in the OTTO protocol in 2018, a
very low number of firms were non-market making firms. As noted in
the Prior Rule Change, the former OTTO protocol was predominately
utilized by NOM Market Makers.
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    There are differences as between the current order entry FIX
offering and the delayed OTTO offering. The OTTO offering included
options symbol directory messages (e.g., underlying); system event
messages (e.g., start of trading hours messages and start of opening);
and trading action messages (e.g., halts and resumes). The options
symbol directory messages,\14\ system event messages and trading action
messages may also be obtained through market data feeds offered by the
Exchange.\15\ Also, OTTO would not offer the ability to route, unlike
FIX which does offer the ability to route orders.
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    \14\ Further, FIX permits Participants to define their orders
utilizing industry-wide canonical information (e.g. underlying, put/
call and strike information) as compared to OTTO which would require
a Participant to read symbol directory messages and send orders with
Exchange specific instrument IDs.
    \15\ See Options 3, Section 23 for descriptions of the Nasdaq
ITCH to Trade Options (``ITTO'') and Best of Nasdaq Options
(``BONO'') data feeds. System event messages (e.g., start of trading
hours messages and start of opening); and trading action messages
(e.g., halts and resumes) are available on both of these data feeds.
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    The Exchange notes that other Nasdaq markets offer only one order
entry protocol.\16\ Both Phlx and BX offer only one quoting protocol,
SQF, on those markets.
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    \16\ Nasdaq Phlx LLC (``Phlx'') and Nasdaq BX, Inc. (``BX'')
only offer the FIX protocol for order entry.
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    At this time, in light of conversations with Participants, Nasdaq
proposes to remove the OTTO protocol from its Rulebook and not
implement this protocol. NOM will continue to offer QUO, in addition to
its FIX \17\ and SQF \18\ protocols. The Exchange proposes to make
conforming changes to the Rulebook to eliminate references to OTTO.
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    \17\ ``Financial Information eXchange'' or ``FIX'' is an
interface that allows Participants and their Sponsored Customers to
connect, send, and receive messages related to orders to and from
the Exchange. Features include the following: (1) Execution
messages; (2) order messages; and (3) risk protection triggers and
cancel notifications. See Options 3, Section 7(d)(1)(A).
    \18\ ``Specialized Quote Feed'' or ``SQF'' is an interface that
allows Market Makers to connect, send, and receive messages related
to quotes and Immediate-or- Cancel Orders into and from the
Exchange. Features include the following: (1) Options symbol
directory messages (e.g underlying instruments); (2) system event
messages (e.g., start of trading hours messages and start of
opening); (3) trading action messages (e.g., halts and resumes); (4)
execution messages; (5) quote messages; (6) Immediate-or-Cancel
Order messages; (7) risk protection triggers and purge
notifications; and (8) opening imbalance messages. The SQF Purge
Interface only receives and notifies of purge request from the
Market Maker. Market Makers may only enter interest into SQF in
their assigned options series. See Options 3, Section 7(d)(1)(B).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\19\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\20\ 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. While the Exchange will no longer implement the OTTO
functionality, it will continue to offer the FIX, QUO, and SQF
protocols on NOM.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
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    As noted above, the Exchange delayed the introduction of the OTTO
functionality initially until Q3 2019.\21\ The Exchange then further
delayed the implementation of OTTO functionality until Q3 2019 and then
Q2 2020, respectively.\22\ There were not a material amount of non-
Market Makers interested in the risk enhancements or the OTTO protocol
after the first two delays. The last rule change filed with the
Commission delayed the implementation of OTTO functionality until Q2
2021 due to market events.\23\ Nasdaq was considering enhancing OTTO
features to provide Participants with other capabilities that are
currently not offered with OTTO, in the area of

risk enhancements.\24\ Nasdaq has discussed certain enhancements with
Participants.\25\ The Exchange notes that it did not have a large
number of Participants interested in the enhancements it was
considering. At this time, in light of conversations with Participants,
Nasdaq proposes to remove the OTTO protocol from its Rulebook and not
implement this protocol.
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    \21\ See Securities Exchange Act Release No. 84723 (December 4,
2018), 83 FR 63692 (December 11, 2018) (SR-NASDAQ-2018-097). The
Exchange proposed to immediately implement QUO as of the
effectiveness of SR-NASDAQ-2018-097 and delay the implementation of
OTTO by issuing an Options Trader Alert announcing the
implementation date in Q1 2019. The QUO implementation became
effective upon filing on November 26, 2018.
    \22\ See Securities Exchange Act Release Nos. 85386 (March 21,
2019), 84 FR 11597 (March 27, 2019) (SR-NASDAQ-2019-016); and 87160
(September 30, 2019), 84 FR 53186 (October 4, 2019) (SR-NASDAQ-2019-
078).
    \23\ See Securities Exchange Act Release Nos. 89077 (June 16,
2020), 85 FR 37486 (June 22, 2020) (SR-NASDAQ-2020-031).
    \24\ Of those firms interested in the OTTO protocol in 2018, a
very low number of firms were non-market making firms. As noted in
the Prior Rule Change, the former OTTO protocol was predominately
utilized by NOM Market Makers.
    \25\ The Exchange notes that it did not have a large number of
Participants interested in the enhancements it was considering.
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    As noted in the Prior Rule Change, the former OTTO protocol was
predominately utilized by NOM Market Makers. NOM Market Makers may
elect to utilize either the SQF or QUO \26\ quoting protocols to quote
on NOM. NOM Market Makers may enter orders to the extent they do not
exceed 25 percent of the total number of all contracts executed by the
Market Maker in any calendar quarter in options in which the NOM Market
Maker is not registered as a Market Maker.\27\ As Market Makers
primarily make markets on NOM, utilizing the quoting protocols, the FIX
offering is primarily utilized for non-market making activities by NOM
Market Makers. Further, all NOM Participants have utilized FIX since
the inception of NOM to enter orders. The differences as between the
current order entry FIX offering and the delayed OTTO offering are not
impactful in that the options symbol directory messages (e.g.,
underlying); \28\ system event messages (e.g., start of trading hours
messages and start of opening); and trading action messages (e.g.,
halts and resumes) may also be obtained through market data feeds
offered by the Exchange.\29\ Today, NOM Participants subscribe to the
market data feeds to obtain order book information. Finally, unlike
FIX, OTTO would not offer the ability to route to away markets. The
Exchange notes that other Nasdaq markets offer only one order entry
protocol.\30\ Both Phlx and BX offer only one quoting protocol, SQF, on
those markets.
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    \26\ Orders that NOM Market Makers send through QUO count toward
market maker quoting obligations.
    \27\ See Options 2, Section 6(b).
    \28\ Further, FIX permits Participants to define their orders
utilizing industry-wide canonical information (e.g. underlying, put/
call and strike information) as compared to OTTO which would require
a Participant to read symbol directory messages and send orders with
Exchange specific instrument IDs.
    \29\ See Options 3, Section 23 for descriptions of the ITTO and
BONO data feeds.
    \30\ See note 16 above.
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    Nasdaq will continue its conversations with Participants to
understand Participant needs so that it may continue to consider
changes to protocols offered on NOM in the future.

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. With this proposal, the
Exchange will not implement the OTTO protocol to any NOM Participant.
Any Participant may utilize the FIX protocol for order entry on NOM.
The Exchange does not believe the proposal imposes an undue burden on
intra-market competition. There were not a material amount of non-
Market Makers interested in the risk enhancements or the OTTO protocol
after the first two delays.
    As noted in the Prior Rule Change, the former OTTO protocol was
predominately utilized by NOM Market Makers. Non-Market Makers could
have elected to utilize OTTO, however it would not offer routing
capabilities. While NOM Market Makers may elect to utilize either the
SQF or the QUO \31\ quoting protocol, non-Market Makers must utilize
the FIX protocol. NOM Market Makers, unlike other market participants,
are required to provide liquidity to the market and are subject to
certain obligations,\32\ including a requirement to provide continuous
two-sided quotes on a daily basis.\33\ Providing multiple protocols for
NOM Market Makers to provide liquidity on NOM benefits all market
participants through the quality of order interaction.
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    \31\ Orders that NOM Market Makers send through QUO count toward
market maker quoting obligations.
    \32\ See Options 2, Section 4.
    \33\ See Options 2, Section 5.
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    The Exchange does not believe the proposal imposes an undue burden
on inter-market competition because the protocols described herein
permit market participants to enter quotes and orders on NOM. Other
options exchanges may similarly develop protocols specific to order and
quote entry on their markets which are similar to the offerings on NOM.
The Exchange notes that other Nasdaq markets offer only one order entry
protocol.\34\ Both Phlx and BX offer only one quoting protocol, SQF, on
those markets. Further, today, all options markets utilize the FIX
protocol for order entry.
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    \34\ See note 16 above.
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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

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \35\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\36\
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    \35\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \36\ 17 CFR 240.19b-4(f)(6). 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.
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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-NASDAQ-2020-089 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-NASDAQ-2020-089. This

file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2020-089 and should be submitted
on or before January 13, 2021.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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    \37\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28304 Filed 12-22-20; 8:45 am]
BILLING CODE 0811-01-P


"King, Heidi R."<EMAIL_ADDRESS> 12/17/2007 04:09 PM

To

Janet Cakir/RTP/USEPA/US@EPA

cc

Ron Evans/RTP/USEPA/US@EPA

Subject

RE: materials for our meeting today at 11:30 - call-in<PHONE_NUMBER> (Conference Code<PHONE_NUMBER>)

3pm Thu 12/20 works for us

Could you pls confirm call-in information, and I'll send out an

interagency invitation

Thank you Janet

heidi

-----Original Message-----

From<EMAIL_ADDRESS><EMAIL_ADDRESS> Sent: Monday, December 17, 2007 4:08 PM

To: King, Heidi R.

Cc<EMAIL_ADDRESS> Subject: RE: materials for our meeting today at 11:30 - call-in

866-299-3188 (Conference Code<PHONE_NUMBER>)

How about 3:00?

-Janet

_______________________________________

Janet F. Cakir, Ph.D.

Environmental Protection Specialist

Air Benefits Cost Group

109 TW Alexander Dr., (C439-02)

Research Triangle Park, NC 27711

Tel:<PHONE_NUMBER>

Fax:<PHONE_NUMBER>

email<EMAIL_ADDRESS>

             "King, Heidi R."

             <Heidi_R._King@o

             mb.eop.gov>                                             To

                                      Janet Cakir/RTP/USEPA/US@EPA

             12/17/2007 03:37                                        cc

             PM                       Ron Evans/RTP/USEPA/US@EPA

                                                                Subject

                                      RE: materials for our meeting

                                      today at 11:30 - call-in

<PHONE_NUMBER> (Conference Code

<PHONE_NUMBER>)

Could we meet after 2:30?  Several of us have a Pb NAAQS Risk Assessment

briefing, rescheduled from last Friday morning.

Thanks,

heidi

-----Original Message-----

From<EMAIL_ADDRESS><EMAIL_ADDRESS> Sent: Monday, December 17, 2007 2:42 PM

To: King, Heidi R.

Cc<EMAIL_ADDRESS> Subject: RE: materials for our meeting today at 11:30 - call-in

866-299-3188 (Conference Code<PHONE_NUMBER>)

I have our key people availabe at 1:00 on Thursday.  Will that work for

you?  We would use the same call-in information.

_______________________________________

Janet F. Cakir, Ph.D.

Environmental Protection Specialist

Air Benefits Cost Group

109 TW Alexander Dr., (C439-02)

Research Triangle Park, NC 27711

Tel:<PHONE_NUMBER>

Fax:<PHONE_NUMBER>

email<EMAIL_ADDRESS>              "King, Heidi R."

             <Heidi_R._King@o

             mb.eop.gov>                                             To

                                      Janet Cakir/RTP/USEPA/US@EPA

             12/17/2007 02:18                                        cc

             PM

                                                                Subject

                                      RE: materials for our meeting

                                      today at 11:30 - call-in

<PHONE_NUMBER> (Conference Code

<PHONE_NUMBER>)

Hi Janet,

Would your team be available either Wed morning or Thu afternoon to

discuss Stefan's extrap costs proposal?

Thank you --

heidi

-----Original Message-----

From<EMAIL_ADDRESS><EMAIL_ADDRESS> Sent: Monday, December 17, 2007 10:14 AM

To: Johansson, Robert; King, Heidi R.

Cc<EMAIL_ADDRESS> Subject: materials for our meeting today at 11:30 - call-in<PHONE_NUMBER>

(Conference Code<PHONE_NUMBER>)

Heidi,

     Below is a powerpoint briefing that we'll be talking from today at

11:30 for our meeting on Extrapolated Costs.  Let me know if you have

any trouble with the file.

Thanks,

Janet

(See attached file: Extrapolated Costs for OMB 12-17-07.ppt)

_______________________________________

Janet F. Cakir, Ph.D.

Environmental Protection Specialist

Air Benefits Cost Group

109 TW Alexander Dr., (C439-02)

Research Triangle Park, NC 27711

Tel:<PHONE_NUMBER>

Fax:<PHONE_NUMBER>

email<EMAIL_ADDRESS>


[Federal Register Volume 88, Number 157 (Wednesday, August 16, 2023)]
[Notices]
[Pages 55685-55686]
[FR Doc No: 2023-17610]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Notice of Staff Attendance at North American Electric Reliability
Corporation Meetings

    The Federal Energy Regulatory Commission hereby gives notice that
members of the Commission and/or Commission staff may attend the
following meetings:

North American Electric Reliability Corporation: Member Representatives
Committee and Board of Trustees Meetings, Board of Trustees Corporate
Governance and Human Resources Committee, Finance and Audit Committee,
Compliance Committee, and Technology and Security Committee Meetings
Westin Ottawa Hotel, 11 Colonel By Dr., Ottawa, ON K1N 9H4, Canada
August 16, 2023 (8:30 a.m.-6:00 p.m. Eastern)
August 17, 2023 (9:00 a.m.-12:00 p.m. Eastern)

    Further information regarding these meetings may be found at:
https://www.nerc.com/gov/bot/Pages/Calendar.aspx.
    The discussions at the meetings, which are open to the public, may
address matters at issue in the following Commission proceeding:

Docket No. EL23-69-000 Petition for Rulemaking
Docket No. EL21-99-000 Complaint
Docket No. RR23-1-000 North American Electric Reliability Corp.

    For further information, please contact Leigh Anne Faugust, 202-
502-6396, or [email protected].

    Dated: August 10, 2023.
Debbie-Anne A. Reese,
Deputy Secretary.
[FR Doc. 2023-17610 Filed 8-15-23; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 82, Number 89 (Wednesday, May 10, 2017)]
[Notices]
[Pages 21837-21839]
[FR Doc No: 2017-09426]

=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80598; File No. SR-DTC-2017-001]

Self-Regulatory Organizations; The Depository Trust Company;
Order Granting Approval of Proposed Rule Change To Establish a Sub-
Account for Use With the DTCC Euroclear Global Collateral Ltd
Collateral Management Service and Provide for the Authorization of a
Representative To Receive Information About the Sub-Account

May 4, 2017.
    On March 9, 2017, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission'') proposed rule
change SR-DTC-2017-001 pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder.\2\ The
proposed rule change was published for comment in the Federal Register
on March 24, 2017.\3\ The Commission did not receive any comment
letters on the proposed rule change. For the reasons discussed below,
the Commission is granting approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 80280 (March 20,
2017), 82 FR 15081 (March 24, 2017) (SR-DTC-2017-001) (``Notice'').
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I. Description of the Proposed Rule Change

    The proposed rule change consists of amendments to the Rules, By-
Laws and Organization Certificate of The Depository Trust Company
(``DTC Rules'') \4\ in order to add new Rule 35 (CMS Reporting). The
proposed rule would provide that any DTC participant that is, or is
acting on behalf of, a user of certain collateral management services
(``CMS'') \5\ of DTCC Euroclear Global Collateral Ltd. (``DEGCL'') \6\
may establish one or more sub-Accounts at DTC in connection with CMS
(each, a ``CMS Sub-Account''). A DTC participant that establishes a CMS
Sub-Account pursuant to the proposed rule (``CMS Participant'') would
thereby: (i) Authorize DEGCL to receive account and transactional
information and reports with respect to the CMS Sub-Account, and (ii)
direct DTC to provide such information and reports to DEGCL, as
described below.
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    \4\ Available at http://www.dtcc.com/legal/rules-and-procedures.aspx.
    \5\ In particular, there would be a CMS option authorizing
DEGCL, on behalf of the CMS User, to propose collateral allocations
to satisfy counterparty obligations of the CMS User, referred to by
DEGCL as the ``Allocation Option'' and further explained below.
    \6\ DEGCL is a joint venture of The Depository Trust & Clearing
Corporation (``DTCC''), the corporate parent of DTC, and Euroclear
S.A./N.V. (``Euroclear''), the corporate parent of Euroclear Bank,
described further below. DTC understands that CMS will be operated
by Euroclear Bank and other entities in the Euroclear group, as
service providers to DEGCL, in accordance with appropriate
agreements between them.
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A. DEGCL Background

    DTC states that DEGCL performs information and record-keeping
services for CMS users that have entered into user agreements with
DEGCL for this purpose (``CMS Users'').\7\ CMS Users are financial
institutions that are counterparties to agreements establishing
obligations between them to provide securities collateral with respect
to swaps or other types of financing transactions.\8\ These bilateral
swap or other financing agreements are entered into by such
counterparties outside and independent of DEGCL or DTC.\9\
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    \7\ Notice, 82 FR at 15082.
    \8\ Id.
    \9\ DTC states that a CMS User will typically be a major
financial institution or buy-side investor that is a bank, broker
dealer, or investment company. CMS Users will enter into a
Collateral Management Service Agreement with DEGCL, which includes
general terms of conditions and operating procedures (``CMS
Agreement''). Id.
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    This proposed rule change relates to one of the services that DEGCL
proposes to offer, the DEGCL ``Allocation Option'' (also referred to as
``auto-select''). DTC states that the Allocation Option would only be
used with DTC eligible securities held in a CMS Sub-Account by a CMS
Participant (``CMS

Securities'').\10\ The Allocation Option is dependent on DEGCL
receiving certain information from DTC for the applicable CMS Sub-
Account of the applicable CMS Participant.\11\ The proposed rule change
would provide a mechanism for a CMS Participant to authorize DEGCL as
the CMS Participant's ``CMS Representative'' to receive the necessary
information from DTC, and to direct DTC to provide DEGCL with that
information, as described below.
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    \10\ Id.
    \11\ The CMS Participant may be a CMS User acting for itself or
a DTC participant acting on behalf of a CMS User as the CMS
Participant. Id.
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B. The Proposed Rule Change

    The proposed rule change would allow a CMS Participant to establish
one or more CMS Sub-Accounts. Upon doing so, a CMS Participant would be
able to instruct DTC to transfer securities to the CMS Participant's
CMS Sub-Account. Such securities (i.e., CMS Securities) would then be
available for allocation by DEGCL for delivery or pledge by book-entry
at DTC in accordance with DTC Rules and Procedures (including risk
management controls),\12\ in satisfaction of the various collateral
obligations of the CMS Participant or the CMS User on behalf of which
the CMS Participant is acting.\13\
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    \12\ DTC states that its risk management controls, including
Collateral Monitor and Net Debit Cap (as defined in Rule 1, Section
1 of the DTC Rules, supra note 4), are designed so that DTC may
complete system-wide settlement notwithstanding the failure to
settle of its largest participant or affiliated family of
participants. The Collateral Monitor tests whether a DTC participant
has sufficient collateral for DTC to pledge or liquidate if that
participant were to fail to meet its settlement obligation. Id.
Pursuant to these controls under applicable DTC Rules and
Procedures, any delivery instruction order to a CMS Sub-Account that
would cause the CMS Participant to exceed its Net Debit Cap or to
have insufficient DTC Collateral to secure its obligations to DTC,
would not be processed by DTC. Id. Deliveries would be processed in
the same order and with the same priority as otherwise provided in
the DTC Rules and Procedures, i.e., such deliveries would not take
precedence over any other type of delivery in the DTC system. Id.
    \13\ Id. at 15082-83.
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    By establishing a CMS Sub-Account, a CMS Participant would be (i)
authorizing DEGCL, as its CMS Representative, to receive in report
form, the information defined below regarding CMS Securities credited
to the CMS Sub-Account at the time of the report (``CMS Report''), and
regarding any delivery or pledge from, or delivery or release to, the
CMS Sub-Account (``CMS Delivery Information''); \14\ (ii) representing
and warranting that it is duly authorized to instruct DTC to provide
the CMS Reports and CMS Delivery Information about such CMS Sub-Account
to DEGCL; (iii) directing DTC to provide the CMS Reports and CMS
Delivery Information to DEGCL; \15\ and (iv) representing and
warranting that it would conduct business in such CMS Sub-Account as
provided in proposed Rule 35, and otherwise pursuant to the DTC Rules
and Procedures, and in compliance with applicable law.
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    \14\ Each CMS Participant would continue to be liable as
principal for the actions of its CMS Representative and would
indemnify DTC against any claim or loss arising from any act or
omission of its CMS Representative, or arising from DTC's provision
of the CMS Report and CMS Delivery Information to DEGCL or the
receipt and use thereof by DEGCL, except to the extent caused
directly by DTC's gross negligence or willful misconduct. Id. at
15083.
    \15\ The CMS Report and CMS Delivery Information would be
transmitted to DEGCL using DTCC's existing Common Data Transfer
Service (``CDTS'') over a dedicated BT Radianz link. See CDTS User
Guide and Schemas, available at http://www.dtcc.com/~/media/Files/
Downloads/Settlement-Asset-Services/Underwriting/CDTS.zip. BT
Radianz is an existing DTCC network service provider. CDTS is DTCC's
proprietary file input and output management system. Id. It enables
DTCC to securely and reliably automate the exchange of files over a
network link with its Participants, Members, and third-parties. Id.
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    The CMS Report would include, with respect to the CMS Securities
credited to a CMS Sub-Account of such CMS Participant at the time of
such report, (i) the Committee on Uniform Securities Identification
Procedures (``CUSIP'') number, International Securities Identification
Number (``ISIN''), or other identification number of the CMS
Securities; and (ii) the number of shares or other units or principal
amount of the CMS Securities. CMS Delivery Information would be
provided in real time, and would include, with respect to each delivery
or pledge of CMS Securities from, or delivery or release of CMS
Securities to a CMS Sub-Account, a copy of any delivery, pledge, or
release message with respect to the CMS Sub-Account, including (i) the
CUSIP, ISIN, or other identification number of such CMS Securities, and
(ii) the number of shares or other units or principal amount of such
CMS Securities.

II. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \16\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that such proposed rule change is consistent with the
requirements of the Act and rules and regulations thereunder applicable
to such organization. The Commission believes the proposal is
consistent with the Act, specifically Section 17A(b)(3)(F) of the Act
and Rule 17Ad-22(e)(20) under the Act, as discussed below.\17\
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    \16\ 15 U.S.C. 78s(b)(2)(C).
    \17\ 15 U.S.C. 78q-1(b)(3)(F); 17 CFR 240.17Ad-22(20).
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A. Consistency With Section 17A

    Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of the clearing agency be designed to promote the prompt and
accurate clearance and settlement of securities transactions.\18\ As
described above, the proposed rule change would permit a CMS
Participant (i.e., a DTC participant acting for itself or on behalf of
a CMS User) to establish a CMS Sub-Account at DTC. Securities
transferred to the CMS Sub-Account would then be available for
allocation by DEGCL, via DTC, to satisfy various collateral obligations
through the DEGCL Allocation Option. By monitoring transactions of a
CMS User with multiple counterparties, the Allocation Option could
offer efficiency by automating the selection of appropriate securities
collateral to satisfy applicable collateral obligations. The proposed
rule change could allow CMS Participants to avail themselves of the
efficiency of the Allocation Option, such as not needing to transmit
delivery and position information to DEGCL, by providing a mechanism
for DTC to provide information on behalf of CMS Participants to DEGCL.
Therefore, the Commission believes that the proposed rule change could
help streamline the settlement of collateral transactions, thereby
promoting the prompt and accurate clearance and settlement, consistent
Section 17A(b)(3)(F), cited above.
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    \18\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(e)(20)

    Rule 17Ad-22(e)(20) under the Act requires a clearing agency, such
as DTC, to establish, implement, maintain and enforce written policies
and procedures reasonably designed to identify, monitor, and manage
risks related to any link DTC establishes with one or more other
clearing agencies, financial market utilities, or trading markets.\19\
In developing the proposed rule change, DTC states that it evaluated
the risks that could arise by establishing a link with DEGCL.\20\ In
particular, DTC identified the risk of data error from the
communication link or the external communication of a CMS Participant's
proprietary information.\21\ DTC determined that the identified risks
could be mitigated because (i) the

Allocation Option would not require any material change to DTC's
settlement framework, technology, or operating procedures including
existing settlement cycles and risk management controls; (ii) DTCC's
Technology Risk Management existing control procedures could manage
data integrity and authorization provisioning to mitigate information
and technology risk; and (iii) DEGCL is only receiving CMS Reports and
CMS Delivery Information from a CMS Sub-Account specifically designated
for this purpose by a CMS Participant.\22\ Therefore, the Commission
believes that DTC has sought to identify, monitor, and manage the
relevant risks associated with the proposed rule change, consistent
with Rule 17Ad-22(e)(20), cited above.
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    \19\ 17 CFR 240.17Ad-22(e)(20).
    \20\ Notice, 82 FR at 15084.
    \21\ Id.
    \22\ Id.
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act, in particular
the requirements of Section 17A of the Act \23\ and the rules and
regulations thereunder.
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    \23\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that proposed rule change SR-DTC-2017-001 be, and hereby is,
approved.\24\
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    \24\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
    \25\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09426 Filed 5-9-17; 8:45 am]
BILLING CODE P