[Federal Register Volume 87, Number 172 (Wednesday, September 7, 2022)]
[Notices]
[Pages 54720-54727]
[FR Doc No: 2022-19226]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95646; File No. SR-NYSEAMER-2022-36]

Self-Regulatory Organizations; NYSE American, LLC.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt New
Rules 997NY, 997.1NY, 997.2NY and 997.3NY and Delete Paragraph (d) to
Rule 957NY

August 31, 2022.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on August 23, 2022, NYSE American, LLC (``NYSE American'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and
II, below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to adopt new Rules 997NY, 997.1NY, 997.2NY
and 997.3NY regarding certain position transfers, including off-floor
transfers. The Exchange also proposes to delete paragraph (d) to Rule
957NY (Reporting Duties). The proposed rule change is available on the
Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
    The purpose of this rule change is to adopt new Rules 997NY,
997.1NY, 997.2NY, and 997.3NY regarding certain position transfers,
including off-floor transfers as described herein. The proposed rules
are substantively identical to rules on other options exchanges and
would align the Exchange's rules with that of its competitors.\4\ This
proposal would benefit investors by reducing the administrative burden
of determining whether their transfers comply with multiple sets of
options exchange rules. In addition, the Exchange proposes to delete
paragraph (d) to Rule 957NY (Reporting Duties) for reason set forth
below.
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    \4\ See, e.g., Cboe Options Exchange, Inc. (``Cboe'') Rule 5.12
(Transactions Off the Exchange); Cboe Rule 6.7 (Off-Floor Transfer
of Positions); Cboe Rule 6.8 (Off-Floor RWA Transfers); and NYSE
Arca Rule 6.78A-O (In-Kind Exchange of Options Positions and ETF
Shares and UIT Units) and Cboe Rule 6.9 (same).
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Proposed Rule 997NY: Transactions Off the Exchange
    Rules 19c-1 and 19c-3 under the Securities Exchange Act of 1934
(the ``Act'') describe rule provisions that each national securities
change must include in its Rules regarding the ability of members to
engage in transactions off an exchange. While the Exchange's rules,
stated policies, and practices are consistent with these provisions of
the Act, the Exchange Rules do not currently include these provisions.
Therefore, the proposed rule change adopts these provisions in new Rule
997NY, ``Transactions Off the Exchange,'' in accordance with Rules 19c-
1 and 19c-3 under the Act. Proposed Rule 997NY is also substantively
identical to the off-floor transactions rule of another options
exchange and thus would align Exchange rules with those of its
competitors.\5\
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    \5\ See Cboe Rule 5.12 (Transactions Off the Exchange).
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    Proposed Rule 997NY(a) provides that except as otherwise provided
by this proposed Rule, no ATP Holder \6\ acting as principal or agent
may effect transactions in any class of option contracts listed on the
Exchange for a premium in excess of $1.00 other than (1) on the
Exchange, (2) on another exchange on which such option contracts are
listed and traded, or (3) in the over-the-counter market if the stock
underlying the option class, or in the case of an index option, if all
the component stocks of an index underlying the option class, was a
National Market System security under SEC Rule 600 at the time the
Exchange commenced trading in that option class, unless that ATP Holder
has first attempted to execute the transaction on the floor of the
Exchange and has reasonably ascertained that it may be executed at a
better price off the floor.
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    \6\ An ``ATP Holder'' is a natural person, sole proprietorship,
partnership, corporation, limited liability company or other
organization, in good standing, that has been issued an ATP
[American Trading Permit] by the Exchange. See Rule 900.2NY(5).
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    Proposed Rule 997NY(b) provides that, notwithstanding the
provisions of paragraph (a) of this proposed Rule, an ATP Holder acting
as agent may execute a customer's order off the Exchange floor with any
other person (except when such ATP Holder also is acting as agent for
such other person in such transaction) for the purchase or sale of an
option contract listed on the Exchange.
    Proposed Rule 997NY(c) provides that for each transaction in which
an ATP Holder acting as principal or agent executes any purchase or
sale of an option contract listed on the Exchange other than on the
Exchange or on another exchange on which such option contracts are
listed and traded, a record

of such transaction shall be maintained by such ATP Holder and shall be
available for inspection by the Exchange for a period of one year. Such
record shall include the circumstances under which the transaction was
executed in conformity with this Rule.
    Proposed Rule 997NY(d) provides that no rule, stated policy, or
practice of the Exchange may prohibit or condition, or be construed to
prohibit or condition, or otherwise limit, directly or indirectly, the
ability of any ATP Holder acting as agent to effect any transaction
otherwise than on the Exchange with another person (except when such
ATP Holder also is acting as agent for such other person in such
transaction) in any equity security listed on the Exchange or to which
unlisted trading privileges on the Exchange have been extended.
    Proposed Rule 997NY(e) provides that no rule, stated policy, or
practice of the Exchange may prohibit or condition, or be construed to
prohibit, condition, or otherwise limit, directly or indirectly, the
ability of any ATP Holder to effect any transaction otherwise than on
the Exchange in any reported security listed and registered on the
Exchange or as to which unlisted trading privileges on the Exchange
have been extended (other than a put option or call option issued by
Options Clearing Corporates or OCC) which is not a covered security.\7\
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    \7\ The ``Options Clearing Corporation'' or ``OCC'' refers to
The Options Clearing Corporation, a subsidiary of the Participating
Exchanges. See Rule 900.2NY(55). The term ``Participating
Exchanges'' refers to any national securities exchange that has
qualified for participation in the OCC pursuant to the provisions of
the Rules of the Options Clearing Corporation. See Rule 900.2NY(61).
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Proposed Rule 997.1NY: Off-Floor Transfer of Positions
    The Exchange proposes to adopt new Rule 997.1NY titled ``Off-Floor
Transfer of Positions,'' to provide a process by which ATP Holders may
transfer option positions between accounts, individuals, or entities in
limited circumstances without first exposing the order on the Exchange.
This rule would also permit off-floor transfers upon the occurrence of
significant, non-recurring events. Proposed Rule 997.1NY is
substantively identical to the rules of other option exchanges
regarding permissible off-floor transfers of options positions and
would align Exchange rules with those of its competitors.\8\
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    \8\ See Cboe Rule 6.7 (Off-Floor Transfer of Positions). See
also Nasdaq ISE LLC (``ISE'') Options 6, Section 5 (Transfer of
Positions); Miami Options Exchange (``MIAX'') Rule 1326 (Transfer of
Positions). As noted below, regarding the ``presidential''
exemption, Cboe Rule 6.7(f) does not explicitly include the Chief
Executive Officer, which reference is included in ISE Options 6,
Section 5(f); MIAX Rule 1326(f).
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    Proposed Rule 997.1NY(a) provides that, notwithstanding proposed
Rule 997NY (described above), existing positions in options listed on
the Exchange of an ATP Holder, or non-ATP Holder, that are to be
transferred on, from, or to the books of a Clearing Member \9\ may be
transferred off the Exchange (an ``off-floor transfer'') if the off-
floor transfer involves one or more of the following events:
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    \9\ A ``Clearing Member'' refers to an ATP Holder that has been
admitted to membership in the OCC pursuant to the provisions of the
Rules of the OCC. See Rule 900.2NY(11).
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     an adjustment or transfer in connection with the
correction of a bona fide error in the recording of a transaction or
the transferring of a position to another account, provided that the
original trade documentation confirms the error;
     the transfer of positions from one account to another
account where no change in ownership is involved (i.e., accounts of the
same Person (as defined in Rule 15)),\10\ provided the accounts are not
in separate aggregation units or otherwise subject to information
barrier or account segregation requirements;
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    \10\ A ``Person'' refers to a natural person, corporation,
partnership, association, joint stock company, trust, fund, or any
organized group of persons whether incorporated or not. See Rule 15.
The proposed transfers may only occur between the same individual or
legal entity.
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     the consolidation of accounts where no change in ownership
is involved;
     a merger, acquisition, consolidation, or similar non-
recurring transaction for a Person;
     the dissolution of a joint account in which the remaining
ATP Holder assumes the positions of the joint account;
     the dissolution of a corporation or partnership in which a
former nominee of the corporation or partnership assumes the positions;
     positions transferred as part of an ATP Holder's capital
contribution to a new joint account, partnership, or corporation;
     the donation of positions to a not-for-profit corporation;
     the transfer of positions to a minor under the Uniform
Gifts to Minors Act; or
     the transfer of positions through operation of law from
death, bankruptcy, or otherwise.
    The proposed rule change makes clear that the transferred positions
must be on, from, or to the books of a Clearing Member. The proposed
rule change states that existing positions of an ATP Holder or a non-
ATP Holder may be subject to an off-floor transfer, except under
specified circumstances in which a transfer may only be effected for
positions of an ATP Holder.\11\ The Exchange notes off-floor transfers
of positions in Exchange listed options may also be subject to
applicable laws, rules, and regulations, including rules of other self-
regulatory organizations.\12\ Except as explicitly provided in proposed
Rule 997.1NY, the proposed rule change is not intended to exempt off-
floor position transfers from any other applicable rules or
regulations, and proposed paragraph (h) to Rule 997.1NY makes this
clear.
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    \11\ See proposed Rule 997.1NY(a)(5) and (7).
    \12\ See proposed Rule 997.1NY(h).
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    Proposed Rule 997.1NY(b) provides that no position may net against
another position (``netting''), and no position transfer may result in
preferential margin or haircut treatment, unless otherwise permitted by
proposed paragraph (f) (described below). Netting occurs when long
positions and short positions in the same series ``offset'' against
each other, leaving no position, or a reduced position. For example, if
an ATP Holder wanted to transfer 100 long calls to another account that
contained short calls of the same options series as well as other
positions, even if the off-floor transfer is permitted pursuant to one
of the permissible events listed in proposed Rule 997.1NY(a)(1)-(10),
the ATP Holder could not transfer the offsetting series, as they would
net against each other and close the positions.
    Proposed Rule 997.1NY(c) provides that the transfer price, to the
extent it is consistent with applicable laws, rules, and regulations,
including rules of other self-regulatory organizations, and tax and
accounting rules and regulations, at which an off-floor transfer may be
effected is either: (1) the original trade prices of the positions that
appear on the books of the trading Clearing Member, in which case the
records of the off-floor transfer must indicate the original trade
dates for the positions; provided, transfers to correct bona fide
errors pursuant to proposed subparagraph (a)(1) must be transferred at
the correct original trade prices; (2) mark-to-market prices of the
positions at the close of trading on the transfer date; (3) mark-to-
market prices of the positions at the close of trading on the trade
date prior to the transfer date; \13\ or (4) the then-current market
price of the positions at the time the transfer is effected. Proposed
Rule 997.1NY(c) provides market participants that effect off-floor
transfers with flexibility to

select a transfer price based on the circumstances of the transfer and
their business. However, for corrections of bona fide errors, because
those transfers are necessary to correct processing errors that
occurred at the time of the transaction, those off-floor transfers
would occur at the original transaction price, as the purpose of the
transfer is to create the originally intended result of the
transaction.
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    \13\ For example, for a transfer that occurs on a Tuesday, the
transfer price may be based on the closing market price on Monday.
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    Proposed Rule 997.1NY(d) requires an ATP Holder and its Clearing
Member(s) (to the extent the ATP Holder is not self-clearing) to submit
to the Exchange, in a manner determined by the Exchange, written notice
prior to effecting an off-floor transfer from or to the account(s) of
an ATP Holder(s).\14\ Per proposed Rule 997.1NY(d)(1), the proposed
notice must indicate: the Exchange-listed options positions to be
transferred; the nature of the transaction; the enumerated provision(s)
under proposed Rule 997.1NY(a) pursuant to which the positions are
being transferred; the name of the counterparty(ies); the anticipated
transfer date; the method for determining the transfer price; and any
other information requested by the Exchange. The proposed notice is
designed to ensure that the Exchange is made aware of all transfers so
that the Exchange can monitor and review such transfers (including the
records that must be retained pursuant to proposed Rule 997.1NY(e)
(described below) to determine whether they are effected in accordance
with the Exchange rules. Additionally, the Exchange believes that
requiring notice from the ATP Holder(s) and its Clearing Member(s)
would ensure that both parties are in agreement with respect to the
terms of the transfer. In light of the notice requirement contained in
proposed Rule 997.1NY(d), the Exchange proposes to make a conforming
change by deleting paragraph (d) to Rule 957NY, which similarly
requires ATP Holders to report to the Exchange any off-floor
transactions, and to hold paragraph (d) as Reserved.\15\
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    \14\ This notice provision applies only to transfers involving
an ATP Holder's positions and not to positions of non-ATP Holders,
as the latter parties are not subject to Exchange rules. In
addition, no notice would be required to effect transfers to correct
bona fide errors pursuant to proposed subparagraph (a)(1) or
transfers of positions from one account to another where no change
in ownership is involved pursuant to proposed paragraph (a)(2) of
Rule 997.1NY.
    \15\ See Rule 957.NY(d) (providing that ``[f]or each transaction
in which an ATP Holder participates off-board (off a participating
Exchange) in any option pertaining to an underlying security which
is currently approved for Exchange options transactions, such ATP
Holder shall report the transaction to the Exchange in a form and
manner prescribed by the Exchange. (With the identity of
participants removed, such transaction may be made public by the
Exchange.)'').
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    Per proposed Rule 997.1NY(d)(2), however, receipt of prior notice
of an off-floor transfer would not constitute a determination by the
Exchange that such transfer was effected or reported in conformity with
the requirements of proposed Rule 997.1NY. As such, notwithstanding
submission of written notice to the Exchange, ATP Holder and Clearing
Members that effect off-floor transfers that do not conform to the
requirements of the proposed Rule would be subject to appropriate
disciplinary action in accordance with the Exchange rules.
    Similarly, proposed Rule 997.1NY(e) requires that each party to an
off-floor transfer generate and retain records of the information
provided in the written notice to the Exchange (pursuant to proposed
subparagraph (d)(1)), as well as information regarding the actual
Exchange-listed options that are ultimately transferred, the actual
transfer date, and the actual transfer price (and the original trade
dates, if applicable), and any other information the Exchange may
request the ATP Holder or Clearing Member to provide.
    Proposed 997.1NY(f) provides exemptions to the prohibition against
off-floor transfers, as approved by the Exchange's President or Chief
Executive Officer (or his or her designee(s)).\16\ Specifically, this
provision is in addition to the exemptions (to Rule 997NY) set forth in
proposed Rule 997.1NY(a)(1)-(10). The Exchange proposes that the
Exchange President or Chief Executive Officer (or his or her
designee(s)) may grant an exemption from the requirement of this
proposed Rule, on his or her own motion or upon application of the ATP
Holder (with respect to the ATP Holder's positions) or a Clearing
Member (with respect to positions carried and cleared by the Clearing
Members). The President, the Chief Executive Officer, or his or her
designee(s), may permit an off-floor transfer if necessary or
appropriate for the maintenance of a fair and orderly market and the
protection of investors and is in the public interest, including due to
unusual or extraordinary circumstances. For example, an exemption may
be granted if the market value of the Person's positions would be
compromised by having to comply with the requirement to trade on the
Exchange pursuant to the normal auction process or when, in the
judgment of the President, the Chief Executive Officer, or his or her
designee(s), market conditions make trading on the Exchange
impractical.
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    \16\ See ISE Options 6, Section 5(f); MIAX Rule 1326(f). The
Exchange notes that, unlike the rules of ISE and MIAX, which refer
to ``senior level designees,'' the Exchange proposes to instead
reference ``designees,'' which omits the potentially ambiguous
``senior'' qualifier. The Exchange believes this distinction does
not alter the or impede the authority granted in the proposed
provision and is consistent with other Exchange rules that provide
for delegated authority. See, e.g., Rule 975NY(k)(3)(A) (proving
that the appeals panel to review Obvious Errors or Catastrophic
Errors be comprised, in part of, the Exchange Chief Regulatory
Officer (``CRO''), or a designee of the CRO).
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    The Exchange proposes to state that the off-floor transfer
procedure set forth in Rule 997.1NY is intended to facilitate non-
routine, nonrecurring movements of positions, except for transfers
between accounts of the same Person pursuant to proposed subparagraph
(a)(2), and is not to be used repeatedly or routinely in circumvention
of the normal auction market process.\17\
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    \17\ See proposed Rule 997.1NY(g).
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    Lastly, proposed paragraph (h) provides that the off-floor transfer
procedure set forth in proposed Rule 997.1NY is only applicable to
positions in options listed on the Exchange; that off-floor transfers
of positions in Exchange-listed options may also be subject to
applicable laws, rules, and regulations, including rules of other self-
regulatory organizations; and that off-floor transfers of non-Exchange
listed options and other financial instruments are not governed by this
proposed Rule 997.1NY.
Proposed Rule 997.2NY: Off-Floor RWA Transfers
    The Exchange proposes to adopt Rule 997.2NY titled ``Off-Floor RWA
Transfers,'' to facilitate the reduction of risk-weighted assets
(``RWA'') attributable to open options positions. This proposal is
substantively identical to rules on other options exchanges and would
align the Exchanges rules with that of its competitors.\18\
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    \18\ See, e.g., Cboe Rule 6.8 (Off-Floor RWA Transfers); ISE
Options 6, Section 6 (Off-Exchange RWA Transfers).
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    SEC Rule 15c3-1 (Net Capital Requirements for Brokers or Dealers)
(``Net Capital Rules'') requires registered broker-dealers, unless
otherwise excepted, to maintain certain specified minimum levels of
capital.\19\ The Net Capital Rules are designed to protect securities
customers, counterparties, and creditors by requiring that broker-
dealers have sufficient liquid resources on hand, at all times, to meet
their financial obligations. Notably, hedged positions, including
offsetting futures and options contract positions, result in

certain net capital requirement reductions under the Net Capital
Rules.\20\
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    \19\ 17 CFR 240.15c3-1.
    \20\ In addition, the Net Capital Rules permit various offsets
under which a percentage of an option position's gain at any one
valuation point is allowed to offset another position's loss at the
same valuation point (e.g., vertical spreads).
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    Subject to certain exceptions, Clearing Members are subject to the
Net Capital Rules.\21\ However, a subset of Clearing Members are
subsidiaries of U.S. bank holding companies, which, due to their
affiliations with their parent U.S.-bank holding companies, must comply
with additional bank regulatory capital requirements pursuant to
rulemaking required under the Dodd-Frank Wall Street Reform and
Consumer Protection Act.\22\ Pursuant to this mandate, the Board of
Governors of the Federal Reserve System, the Office of the Comptroller
of the Currency, and the Federal Deposit Insurance Corporation have
approved a regulatory capital framework for subsidiaries of U.S. bank
holding company clearing firms.\23\ Generally, these rules, among other
things, impose higher minimum capital and higher asset risk weights
than were previously mandated for Clearing Members that are
subsidiaries of U.S. bank holding companies under the Net Capital
Rules. Furthermore, the new rules do not fully permit deductions for
hedged securities or offsetting options positions.\24\ Rather, capital
charges under these standards are, in large part, based on the
aggregate notional value of short positions regardless of offsets. As a
result, in general, Clearing Members that are subsidiaries of U.S. bank
holding companies must hold substantially more bank regulatory capital
than would otherwise be required under the Net Capital Rules.
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    \21\ In the event federal regulators modify bank capital
requirements in the future, the Exchange will reevaluate the
proposed rule change at that time to determine whether any
corresponding changes to the proposed rule are appropriate.
    \22\ H.R. 4173 (amending section 3(a) of the Act) (15 U.S.C.
78c(a))).
    \23\ 12 CFR 50; 79 FR 61440 (Liquidity Coverage Ratio: Liquidity
Risk Measurement Standards).
    \24\ Many options strategies, including relatively simple
strategies often used by retail customers and more sophisticated
strategies used by broker-dealers, are risk limited strategies or
options spread strategies that employ offsets or hedges to achieve
certain investment outcomes. Such strategies typically involve the
purchase and sale of multiple options (and may be coupled with
purchases or sales of the underlying securities), executed
simultaneously as part of the same strategy. In many cases, the
potential market exposure of these strategies is limited and
defined.
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    The Exchange is concerned with the ability of Market Makers to
provide liquidity in their appointed classes. The Exchange believes
that permitting market participants to efficiently transfer existing
options positions through an off-floor transfer process would likely
have a beneficial effect on continued liquidity in the options market
without adversely affecting market quality. Liquidity in the listed
options market is critically important. The Exchange believes that the
proposed rule change provides market participants with an efficient
mechanism to transfer their open options positions from one clearing
account to another clearing account and thereby increase liquidity in
the listed options market. The Exchange currently has no mechanism that
firms may use to transfer positions between clearing accounts without
having to effect a transaction with another party and close a position.
    Proposed Rule 997.2NY provides that, notwithstanding Rule 997NY
(described above), existing positions in options listed on the Exchange
of an ATP Holder or non-ATP Holder (including an affiliate of an ATP
Holder) may be transferred on, from, or to the books of a Clearing
Member off the Exchange if the transfer establishes a net reduction of
RWA attributable to those options positions (an ``RWA Transfer'').
Proposed paragraph (a) to Rule 997.2NY provides examples of two
transfers that would be deemed to establish a net reduction of RWA, and
thus qualify as a permissible RWA Transfer:
     A transfer of options positions from Clearing Member A to
Clearing Member B that net (offset) with positions held at Clearing
Member B, and thus closes all or part of those positions (as
demonstrated in the example below); \25\ and
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    \25\ This transfer would establish a net reduction of RWA
attributable to the transferring Person, because there would be
fewer open positions and thus fewer assets subject to Net Capital
Rules.
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     A transfer of options positions from a bank-affiliated
Clearing Member to a non-bank-affiliated Clearing Member.\26\
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    \26\ This transfer would establish a net reduction of RWA
attributable to the transferring Person, because the non-bank-
affiliated Clearing Member would not be subject to Net Capital
Rules, as described above.
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    These transfers would not result in a change in ownership, as they
must occur between accounts of the same ``Person,'' as defined in Rule
15, per proposed Rule 997.2NY(e).\27\ In other words, RWA Transfers may
only occur between the same individual or legal entity. These are
merely transfers from one clearing account to another, both of which
are attributable to the same individual or legal entity. A market
participant effecting an RWA Transfer is analogous to an individual
transferring funds from a checking account to a savings account, or
from an account at one bank to an account at another bank--the money
still belongs to the same person, who is just holding it in a different
account for personal financial reasons.
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    \27\ See supra note 10 (defining Person).
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    For example, Market Maker A clears transactions on the Exchange
into an account it has with Clearing Member X, which is affiliated with
a U.S-bank holding company. Market Maker A opens a clearing account
with Clearing Member Y, which is not affiliated with a U.S.-bank
holding company. Clearing Member X has informed Market Maker A that its
open positions may not exceed a certain amount at the end of a calendar
month, or it will be subject to restrictions on new positions it may
open the following month. On August 28, Market Maker A reviews the open
positions in its Clearing Member X clearing account and determines it
must reduce its open positions to satisfy Clearing Member X's
requirements by the end of August. It determines that transferring out
1,000 short calls in class ABC will sufficiently reduce the RWA capital
requirements in the account with Clearing Member X to avoid additional
position limits in September. Market Maker A wants to retain the
positions in accordance with its risk profile. Pursuant to the proposed
rule change, on August 31, Market Maker A transfers 1,000 short calls
in class ABC to its clearing account with Clearing Member Y. As a
result, Market Maker A can continue to provide the same level of
liquidity in class ABC during September as it did in previous months.
    An ATP Holder must ``give up'' a Clearing Member for each
transaction it effects on the Exchange, which identifies the Clearing
Member through which the transaction will clear.\28\ An ATP Holder that
has the ability to change the give up for a transaction within a
specified period of time.\29\ Additionally, an ATP Holder may change
the Clearing Member for a specific transaction.\30\ The transfer of

positions from an account with one clearing firm to the account of
another clearing firm pursuant to the proposed rule change has a
similar result as changing a give up or CMTA, as it results in a
position that resulted from a transaction moving from the account of
one clearing firm to another, just at a different time and in a
different manner.\31\
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    \28\ See Rule 961 (Authorizing Give Up of a Clearing Member)
(providing process for an ATP Holder (other than a Market Maker) to
indicate each of its transactions any OCC number of a Clearing
Member through which a transaction will be cleared (i.e., the give
up), subject to the criteria set forth in the rule).
    \29\ See Rule 961(g)(1) (providing that, ``[i]f the ATP Holder
has the ability through an Exchange system to do so, the ATP Holder
may change the give up on the trade to another Clearing Member for
whom they are an Authorized ATP Holder or to its Guarantor.''; which
ability ``will end at the Trade Date Cutoff Time.'').
    \30\ The Clearing Member Trade Assignment (``CMTA'') process at
OCC facilitates the transfer of option trades/positions from one OCC
clearing member to another in an automated fashion. Changing a CMTA
for a specific transaction would allocate the trade to a different
OCC clearing member than the one initially identified on the trade.
    \31\ The transferred positions will continue to be subject to
OCC rules, as they will continue to be held in an account of an OCC
member.
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    In the above example, if Market Maker A had initially given up
Clearing Member Y rather than Clearing Member X on the transactions
that resulted in the 1,000 long calls in class ABC, or had changed the
give-up or CMTA to Clearing Member Y pursuant to Rule 961 the ultimate
result would have been the same. There are a variety of reasons why
firms give up or CMTA transactions to certain clearing firms (and not
to non-bank affiliate clearing firms) at the time of a transaction, and
the proposed rule change provides firms with a mechanism to achieve the
same result at a later time.
    Proposed paragraph (b) to Rule 997.2NY provides that RWA Transfers
may occur on a routine, recurring basis. As noted in the example above,
clearing firms may impose restrictions on the amount of open positions.
Permitting transfers on a routine, recurring basis will provide market
participants with the flexibility to comply with these restrictions
when necessary to avoid position limits on future options activity.
Additionally, proposed paragraph (f) to Rule 997.2NY provides that no
prior written notice to the Exchange is required for RWA Transfers.
Because of the potential routine basis on which RWA Transfers may
occur, and because of the need for flexibility to comply with the
restrictions described above, the Exchange believes such requirement
may interfere with the ability of ATP Holders to comply with any
Clearing Member restrictions describe above, and may be burdensome to
provide notice for these routine transfers.
    Proposed Rule 997.2NY(c) provides that RWA Transfers may result in
the netting of positions. Netting occurs when long positions and short
positions in the same series ``offset'' against each other, leaving no
or a reduced position. For example, if there were 100 long calls in one
account, and 100 short calls of the same option series were added to
that account, the positions would offset, leaving no open positions.
Firms may maintain different clearing accounts for a variety of
reasons, such as the structure of their businesses, the manner in which
they trade, their risk management procedures, and for capital purposes.
While there are times when a firm may not want to close out open
positions to reduce RWA, there are other times when a firm may
determine it is appropriate to close out positions to accomplish a
reduction in RWA.
    In the example above, suppose after making the RWA Transfer
described above, Market Maker A effects a transaction on September 25
that results in 1,000 long calls in class ABC, which clears into its
account with Clearing Member X. If Market Maker A had not effected its
RWA Transfer in August, the 1,000 long calls would have offset against
the 1,000 short calls, eliminating both positions and thus any RWA
capital requirements associated with them. At the end of August, Market
Maker A did not want to close out the 1,000 short calls when it made
its RWA Transfer. However, given changed circumstances in September,
Market Maker A has determined it no longer wants to hold those
positions. The proposed rule change would permit Market Maker A to
effect an RWA Transfer of the 1,000 short calls from its account with
Clearing Member Y to its account with Clearing Member X (or vice
versa), which results in elimination of those positions (and a
reduction in RWA associated with them). As noted above, such netting
would have occurred if Market Maker A cleared the September transaction
directly into its account with Clearing Member Y, or had not effected
an RWA Transfer in August. Netting provides market participants with
appropriate flexibility to conduct their businesses as they see fit
while having the ability to reduce RWA capital requirements when
necessary.
    Proposed Rule 997.2NY(d) provides that RWA Transfers may not result
in preferential margin or haircut treatment. Finally, per proposed Rule
997.2NY(g), RWA Transfers may only be effected for options listed on
the Exchange, as transfers of non-Exchange listed options and other
financial instruments are not governed by proposed Rule 997.2NY, and
will be subject to applicable laws, rules, and regulations, including
rules of other self-regulatory organizations (including OCC).\32\
---------------------------------------------------------------------------

    \32\ All RWA Transfers will be subject to all recordkeeping
requirements applicable to ATP Holders and Clearing Members under
the Act, such as Rule 17a-3 and 17a-4.
---------------------------------------------------------------------------

Proposed Rule 997.3NY: In-Kind Exchange of Options Positions and ETF
Shares and UIT Units
    The Exchange proposes to adopt Rule 997.3NY regarding in-kind
exchanges of options positions and exchange-traded fund (``Fund'')
shares and unit investment trust (``UIT'') interests. As discussed
further below, the ability to effect ``in kind'' transfers is a key
component of the operational structure of a Fund and a UIT. Currently,
in general, Funds and UITs can effect in-kind transfers with respect to
equity securities and fixed-income securities. The in-kind process is
the means by which assets may be added to or removed from Funds and
UITs. The proposed rule change is substantively identical to rules on
other options exchanges and would align the Exchanges rules with that
of its competitors.\33\
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    \33\ See NYSE Arca Rule 6.78A-O and Cboe Options Rule 6.9
(except that the Cboe rule does not include a notice provision
related to the transfers that is contained in Rule 6.78A-O(b) and
proposed Rule 997.2NY(b)). See also Securities and Exchange Act
Release No. 90552 (December 2, 2020), 85 FR 79049 (December 8, 2020)
(SR-NYSEArca-2020-102) (immediately effective filing to adopt Rule
6.78A-O to allow in-kind exchange of options positions and ETF
Shares and UIT Units).
---------------------------------------------------------------------------

    Proposed Rule 997.3NY would add a circumstance under which off-
floor transfers of options positions would be permitted to occur, in
addition to the circumstances in proposed Rules 997.1NY and 997.2NY.
Specifically, Rule 997.3NY would allow positions in options listed on
the Exchange to be transferred off the Exchange by an ATP Holder in
connection with transactions (a) to purchase or redeem ``creation
units'' of Fund Shares between an ``authorized participant'' \34\ and
the issuer \35\ of such Fund Shares \36\ or (b) to create or redeem
units of a UIT between

a broker-dealer and the issuer \37\ of such UIT units, which transfers
would occur at the price used to calculate the net asset value
(``NAV'') of such Fund Shares or UIT units, respectively. Allowing the
Exchange to permit off-floor transfers of options positions in
connection with the creation and redemption process would enable the
Exchange to compete with other options exchanges that allow such
transfers.
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    \34\ The Exchange is proposing that, for purposes of proposed
Rule 997.3NY, the term ``authorized participant'' would be defined
as an entity that has a written agreement with the issuer of Fund
Shares or one of its service providers, which allows the authorized
participant to place orders for the purchase and redemption of
creation units (i.e., specified numbers of Fund Shares). See
proposed Rule 997.3NY(a)(1). While an authorized participant may be
an ATP Holder and directly effect transactions in options on the
Exchange, an authorized participant that is not an ATP Holder may
effect transactions in options on the Exchange through an ATP Holder
on its behalf.
    \35\ The Exchange proposes that, for purposes of proposed Rule
997.3NY, any issuer of Fund Shares would be registered with the
Commission as an open-end management investment company under the
Investment Company Act of 1940 (the ``1940 Act''). See proposed Rule
997.3NY(a)(2).
    \36\ A Fund Share is a share or other security traded on a
national securities exchange and defined as an NMS stock, as set
forth in in Rule 600(b)(47) of Regulation NMS, which includes open-
end management investment companies registered with the Commission.
See Rule 915, Commentary .06.
    \37\ The Exchange proposes that, for purposes of proposed Rule
997.3NY, any issuer of UIT units would be a trust registered with
the Commission as a unit investment trust under the 1940 Act. See
proposed Rule 997.3NY(a)(3).
---------------------------------------------------------------------------

    However, the Exchange believes it is appropriate to include in
proposed Rule 997.3NY(b) the requirement that ATP Holders that engage
in such transfers ``must, upon request of the Exchange, provide to the
Exchange information relating to the transfers in a form and manner
prescribed by the Exchange.'' The Exchange notes that this proposed
provision is identical to the notice provision in NYSE Arca Rule 6.78A-
O(b), and, like that provision, would help ensure that ATP Holders keep
accurate books and records relating to such transfers for review by the
Exchange, which is to the benefit of all market participants.
    The Exchange's proposal mirrors other exchange rules in that
applies solely in the context of transfers of options positions
effected in connection with transactions to purchase or redeem creation
units of Fund Shares between Funds and authorized participants,\38\ and
units of UITs between UITs and sponsors. Other than the transfers
covered by the proposed rule, transactions involving options, whether
held by a Fund or an authorized participant, or a UIT or a sponsor
would be fully subject to all applicable Exchange trading rules.
---------------------------------------------------------------------------

    \38\ See supra note 34. The term ``authorized participant'' is
specific and narrowly defined. As noted in the Investment Company
Act Release No. 33140 (June 28, 2018), 83 FR 37332 (July 31, 2018)
(the ``Proposed ETF Rule Release''), the requirement that only
authorized participants of a Fund may purchase creation units from
(or sell creation units to) a Fund ``is designed to preserve an
orderly creation unit issuance and redemption process between
[Funds] and authorized participants.'' Furthermore, an ``orderly
creation unit issuance and redemption process is of central
importance to the arbitrage mechanism.'' See Proposed ETF Rule
Release at 83 FR 37348.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\39\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\40\ in particular, because 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 because it is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. As a general matter, the proposed rules are
substantively identical to rules on other options exchanges and would
align the Exchanges rules with that of its competitors. As such, this
proposal would benefit investors by reducing the administrative burden
of determining whether their off-floor transfers comply with multiple
sets of options exchange rules.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78f(b).
    \40\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Proposed Rule 997NY: Transactions Off the Exchange
    In particular, the Exchange believes proposed Rule 997NY is
consistent with the Act, because it adopts provisions in the Rules
specifically required by Rules 19c-1 and 19c-3 under the Act, setting
forth the Exchange's general prohibition against off-floor transfers.
The proposed rule change will add transparency to the Exchange rules,
which would benefit investors. In addition, as noted herein, proposed
Rule 997NY is substantively identical to the rules of at least one
other options exchange and would therefore allow the Exchange to
compete on equal footing.
Proposed Rule 997.1NY: Off-Floor Transfer of Positions
    The Exchange believes that permitting off-floor transfers in very
limited circumstances would allow ATP Holders to accomplish certain
goals efficiently. Proposed Rule 997.1NY is also substantively
identical to the rules of other options exchanges and, consistent with
those rules, the proposed rule permits non-recurring off-floor
transfers in situations involving dissolutions of entities or accounts,
for purposes of donations, mergers or by operation of law. As noted
above for example, an ATP Holder that is undergoing a structural change
and a one-time movement of positions may require a transfer of
positions or an ATP Holder that is leaving a firm that will no longer
be in business may require a transfer of positions to another firm.
Also, an ATP Holder may require a transfer of positions to make a
capital contribution. The above-referenced circumstances are non-
recurring situations where the transferor continues to maintain some
ownership interest or manage the positions transferred. By contrast,
repeated or routine transfers between entities or accounts--even if
there is no change in beneficial ownership as a result of the
transfer--is inconsistent with the purposes for which the proposed rule
will be adopted. Accordingly, such activity would not be permitted
under the proposed rule. The proposed rule change would provide market
participants that experience these limited, non-recurring events with
an efficient and effective means to transfer positions in these
situations. The Exchange believes the proposed rule change regarding
permissible transfer prices would provide market participants with
flexibility to determine the price appropriate for their business,
which maintain cost bases in accordance with normal accounting
practices and removes impediments to a free and open market.
    The proposed rule change which requires notice and maintenance of
records would ensure the Exchange is able to review off-floor transfers
for compliance with the Exchange rules, which prevents fraudulent and
manipulative acts and practices. The requirement to retain records is
consistent with the requirements of Rule 17a-3 and 17a-4 under the Act.
    Similar to the rules of other options exchanges, the Exchange would
permit a presidential exemption.\41\ The Exchange believes that this
exemption is consistent with the Act because the Exchange's Chief
Executive Officer or President (or his or her designee(s)) would
consider an exemption in very limited circumstances (i.e., to
facilitate non-routine, nonrecurring movements of positions not
designed to circumvent the normal auction market process). Proposed
Rule 997.1NY(f) specifically provides that the Exchange's Chief
Executive Officer or President (or his or her designee(s)) may in his
or her judgment allow an off-floor transfer if it is necessary or
appropriate for the maintenance of a fair and orderly market and the
protection of investors and is in the public interest, including due to
unusual or extraordinary circumstances such as the market value of the
Person's positions will be comprised by having to comply with the
requirement to trade on the Exchange pursuant to the normal auction
process or, when in the judgment of the President, Chief Executive
Officer, or his or her designee(s), market conditions

make trading on the Exchange impractical. These standards within
paragraph (f) of the proposed rule are intended to provide guidance
concerning the use of this exemption to the benefit of investors and
the investing public for the maintenance of a fair and orderly market
and the protection of investors and is in the public interest.
---------------------------------------------------------------------------

    \41\ See ISE Options 6, Section 5(f); MIAX Rule 1326(f). See
also Cboe Rule 6.8(f).
---------------------------------------------------------------------------

    Finally, the Exchange believes the conforming change to delete
paragraph (d) to Rule 957NY in light of the comparable notice
requirement in proposed Rule 997.1NY(d) would reduce redundancy, add
clarity, transparency and internal consistent to Exchange rules.
Proposed Rule 997.2NY: Off-Floor RWA Transfers
    The Exchange believes proposed Rule 997.2NY to permit RWA
Transfers, which is substantially the same as the rules of other
options markets, would remove impediments to and perfect the mechanism
of a free and open market and a national market system by providing
liquidity in the listed options market. The Exchange believes providing
market participants with an efficient process to reduce RWA capital
requirements attributable to open positions in clearing accounts with
U.S. bank-affiliated clearing firms may contribute to additional
liquidity in the listed options market, which, in general, protects
investors and the public interest.
    The proposal to permit RWA Transfers to occur on a routine,
recurring basis and result in netting, also provides market
participants with sufficient flexibility to reduce RWA capital
requirements at times necessary to comply with requirements imposed on
them by clearing firms. This would permit market participants to
respond to then-current market conditions, including volatility and
increased volume, by reducing the RWA capital requirements associated
with any new positions they may open while those conditions exist.
Given the additional capital that may become available to market
participants as a result of the RWA Transfers, market participants
would be able to continue to provide liquidity to the market, even
during periods of increased volume and volatility, which liquidity
ultimately benefits investors. It is not possible for market
participants to predict what market conditions will exist at a specific
time, and when volatility will occur. The proposed rule change to
permit routine, recurring RWA Transfers (without any required prior
written notice) would provide market participants with the ability to
respond to these conditions whenever they occur. Permitting such
transfers on a routine, recurring basis will provide market
participants with the flexibility to comply with applicable
restrictions when necessary to avoid position limits on future options
activity. In addition, with respect to netting, as discussed above,
firms may maintain different clearing accounts for a variety of
reasons, such as the structure of their businesses, the manner in which
they trade, their risk management procedures, and for capital purposes.
Netting may otherwise occur with respect to a firm's positions if it
structured its clearing accounts differently, such as by using a
universal account. Therefore, the proposed rule change will permit
netting while allowing firms to continue to maintain different clearing
accounts in a manner consistent with their businesses.
    The Exchange recognizes the numerous benefits of executing options
transactions on exchanges, including price transparency, potential
price improvement, and a clearing guarantee. However, the Exchange
believes it is appropriate to permit RWA Transfers to occur off the
Exchange, as these benefits are inapplicable to RWA Transfers, which
are narrow in scope and intended to achieve a limited beneficial
purpose. RWA Transfers are not intended to be a competitive trading
tool. There is no need for price discovery or improvement, as the
purpose of the transfer is to reduce RWA asset capital requirements
attributable to a market participants' positions. Unlike trades on an
exchange, the price at which an RWA Transfers occurs is immaterial--the
resulting reduction in RWA is the critical part of the transfer. RWA
Transfers will result in no change in ownership, and thus they do not
constitute trades with a counterparty (and thus eliminating the need
for a counterparty guarantee). The transactions that resulted in the
open positions to be transferred as an RWA Transfer were already
guaranteed by a Clearing Member, and the positions will continue to be
subject to OCC rules, as they will continue to be held in an account
with a Clearing Member. The narrow scope of the proposed rule change
and the limited, beneficial purpose of RWA Transfers make allowing RWA
Transfers to occur off the floor appropriate and important to support
the provision of liquidity in the listed options market.
    The proposed rule change does not unfairly discriminate against
market participants, as all ATP Holders and non-ATP Holders with open
positions in options listed on the Exchange may use the proposed off-
floor transfer process to reduce the RWA capital requirements of
Clearing Members. Finally, this proposed rule change would align
Exchange rules with those of other options exchanges, thereby allowing
the Exchange to compete on equal footing.
Proposed Rule 997.3NY: In-Kind Exchange of Options Positions and ETF
Shares and UIT Units
    The Exchange believes proposed Rule 997.3NY to permit off-floor
transfers in connection with the in-kind Fund and UIT creation and
redemption process would promote just and equitable principles of trade
as it would permit Funds and UITs that invest in options traded on the
Exchange to utilize the in-kind creation and redemption process that is
available for Funds and UITs that invest in equities and fixed-income
securities.
    The Exchange believes it is appropriate to require ATP Holders that
engage in off-floor transfers as provided in proposed Rule 997.3NY(b)
to keep records of such transactions such that this information could
be shared with the Exchange upon request. The Exchange believes this
provision, which is identical to NYSE Arca Rule 6.78A-O(b), would
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade because the provision would help
ensure that ATP Holders keep accurate books and records relating to
such transfers for review by the Exchange, which is to the benefit of
all market participants. Finally, this proposed rule change would align
Exchange rules with those of other options exchanges, thereby allowing
the Exchange to compete on equal footing.

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

    The Exchange believes that the proposal would not impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of Section 6(b)(8) of the Act.\42\ The proposed rules are
not intended to be competitive trading tools, but rather to set forth
the general prohibition against off-floor transactions and to
facilitate certain off-floor transactions in limited circumstances that
meet the enumerated criteria.
---------------------------------------------------------------------------

    \42\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange does not believe the proposed rule change regarding
off-floor position transfers set forth in the proposed rules would
impose an undue burden on intra-market competition as

the transfer procedure(s) may be utilized by any ATP Holder and the
rule would apply uniformly to all ATP Holders. Use of each off-floor
transfer procedure is voluntary and all ATP Holders may use each such
procedure to transfer positions as long as the criteria in the proposed
rule are satisfied.
    The Exchange does not believe the proposed rule change will impose
an undue burden on inter-market competition. As indicated above, it is
intended to provide an additional clearly delineated and limited
circumstance in which options positions can be transferred off an
exchange (as well as to set forth the general prohibition against such
transfers). Additionally, as discussed above, the proposed rule change
is substantively identical to the rules of other options exchanges and
would allow the Exchange to compete on equal footing. Moreover, the
Exchange believes having similar rules related to off-floor position
transfers to those of other options exchanges will reduce the
administrative burden on market participants of determining whether
their transfers comply with multiple sets of rules.

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

    No written comments were solicited or received with respect to the
proposed rule change.

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)(iii) of the Act \43\ and Rule 19b-4(f)(6) thereunder.\44\
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.\45\
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \44\ 17 CFR 240.19b-4(f)(6).
    \45\ 15 U.S.C. 78s(b)(3)(A)(iii). Rule 19b-4(f)(6)(iii) 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
Commission notes that the Exchange satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) of the Act \46\ to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-NYSEAMER-2022-36 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-NYSEAMER-2022-36. 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-NYSEAMER-2022-36 and should be submitted
on or before September 28, 2022.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\47\
---------------------------------------------------------------------------

    \47\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19226 Filed 9-6-22; 8:45 am]
BILLING CODE 8011-01-P


 Table 1. Summary of Respondant Bu Labor Cost Element Hours 1. Network Design 85,246 2. Site Installation 25,107 3. Sampling & Analysis 615,472 4. Maintenance 266,995 5. Data Management 597,789 6. Quality Assurance 512,685 7. Supervision 301,311 Totals 2,404,606 Inflation rates for each year:

Based upon OMB report:

http:// www. whitehouse. gov/ omb/ b Burden, 2003 5 1999 1999 1999 Total 2003 2003 2003 Total Labor Non labor Equipment/ 1999 Labor Non labor Equipment/ 2003 Costs O & M Contract $ Cost Costs O & M Contract $ Cost $ 4,263,543 $ 690,051 $ 0 $ 4,953,594 $ 4,621,681 $ 748,016 $ 0 $ 5,369,696 $ 890,480 $ 846,298 $ 26,474,368 $ 28,211,146 $ 965,281 $ 917,387 $ 28,698,214 $ 30,580,882 $ 24,981,087 $ 8,493,084 $ 6,970,072 $ 40,444,243 $ 27,079,498 $ 9,206,503 $ 7,555,558 $ 43,841,560 $ 7,607,841 $ 2,712,059 $ 0 $ 10,319,900 $ 8,246,900 $ 2,939,872 $ 0 $ 11,186,772 $ 31,202,757 $ 0 $ 238,256 $ 31,441,013 $ 33,823,788 $ 0 $ 258,269 $ 34,082,058 $ 19,396,430 $ 126,222 $ 1,010,804 $ 20,533,456 $ 21,025,730 $ 136,825 $ 1,095,712 $ 22,258,266 $ 15,862,275 $ 3,917,642 $ 22,163,742 $ 41,943,659 $ 17,194,706 $ 4,246,724 $ 24,025,496 $ 45,466,926 $ 104,204,413 $ 16,785,356 $ 56,857,241 $ 177,847,011 $ 112,957,584 $ 18,195,326 $ 61,633,250 $ 192,786,160 2000 2.9%

2001 2.1%

b/ budget/ fy2003/ msr03. html 2002 1.3%

2003 1.9%

Total adj. 8.4% Table 1. Summary of Respondant Bu Labor Cost Element Hours 1. Network Design 85,246 2. Site Installation 25,107 3. Sampling & Analysis 615,472 4. Maintenance 266,995 5. Data Management 597,789 6. Quality Assurance 512,685 7. Supervision 301,311 Totals 2,404,606 Inflation rates for each year:

Based upon OMB report:

http:// www. whitehouse. gov/ omb/ b 2004 2004 2004 Total 2005 2005 2005 Total Labor Non labor Equipment/ 2004 Labor Non labor Equipment/ 2005 Costs O & M Contract $ Cost Costs O & M Contract $ Cost $ 4,709,492 $ 762,228 $ 0 $ 5,471,720 $ 4,794,263 $ 775,948 $ 0 $ 5,570,211 $ 983,621 $ 934,817 $ 29,243,480 $ 31,161,919 $ 1,001,326 $ 951,644 $ 29,769,863 $ 31,722,833 $ 27,594,009 $ 9,381,427 $ 7,699,114 $ 44,674,550 $ 28,090,701 $ 9,550,293 $ 7,837,698 $ 45,478,691 $ 8,403,591 $ 2,995,729 $ 0 $ 11,399,320 $ 8,554,856 $ 3,049,652 $ 0 $ 11,604,508 $ 34,466,440 $ 0 $ 263,177 $ 34,729,617 $ 35,086,836 $ 0 $ 267,914 $ 35,354,750 $ 21,425,219 $ 139,424 $ 1,116,530 $ 22,681,174 $ 21,810,873 $ 141,934 $ 1,136,628 $ 23,089,435 $ 17,521,405 $ 4,327,412 $ 24,481,980 $ 46,330,797 $ 17,836,791 $ 4,405,305 $ 24,922,656 $ 47,164,752 $ 115,103,778 $ 18,541,038 $ 62,804,281 $ 196,449,097 $ 117,175,646 $ 18,874,776 $ 63,934,758 $ 199,985,181 2004 1.9% 2005 1.8% Table 1. Summary of Respondant Bu Labor Cost Element Hours 1. Network Design 85,246 2. Site Installation 25,107 3. Sampling & Analysis 615,472 4. Maintenance 266,995 5. Data Management 597,789 6. Quality Assurance 512,685 7. Supervision 301,311 Totals 2,404,606 Inflation rates for each year:

Based upon OMB report:

http:// www. whitehouse. gov/ omb/ b Ave. 2003 5 Ave. 2003 5 Ave. 2003 5 Total Labor Non labor Equipment/ Ave. 2003 5 Costs O & M Contract $ Cost $ 4,708,479 $ 762,064 $ 0 $ 5,470,543 $ 983,409 $ 934,616 $ 29,237,186 $ 31,155,211 $ 27,588,069 $ 9,379,408 $ 7,697,457 $ 44,664,934 $ 8,401,782 $ 2,995,084 $ 0 $ 11,396,867 $ 34,459,022 $ 0 $ 263,120 $ 34,722,142 $ 21,420,607 $ 139,394 $ 1,116,290 $ 22,676,292 $ 17,517,634 $ 4,326,480 $ 24,476,711 $ 46,320,825 $ 115,079,003 $ 18,537,047 $ 62,790,763 $ 196,406,813


[Federal Register Volume 87, Number 113 (Monday, June 13, 2022)]
[Rules and Regulations]
[Pages 35654-35656]
[FR Doc No: 2022-12615]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Part 165

[Docket Number USCG-2022-0134]
RIN 1625-AA00

Safety Zone; Falls Bridge Project, Blue Hill, ME

AGENCY: Coast Guard, Department of Homeland Security (DHS).

ACTION: Temporary final rule.

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SUMMARY: The Coast Guard is establishing a temporary safety zone for
the navigable waters within a 50-yard radius from the center of the
Falls Bridge in Blue Hill, ME. This action is necessary to protect
personnel, vessels, and marine environment from potential hazards
created by the demolition, subsequent removal, and replacement of the
Falls Bridge. This regulation prohibits entry of vessels or persons
into the safety zone unless authorized by the Captain of the Port
Northern New England or a designated representative.

DATES: This rule is effective from July 1, 2022, through June 30, 2024.

ADDRESSES: To view documents mentioned in this preamble as being
available in the docket, go to https://www.regulations.gov, type USCG-
2022-0134 in the search box and click ``Search.'' Next, in the Document
Type column, select ``Supporting & Related Material.''

FOR FURTHER INFORMATION CONTACT: If you have questions on this rule,
call or email Chief Marine Science Technician Zachary Wetzel, Waterways
Management Division, Sector Northern New England, U.S. Coast Guard;
telephone<PHONE_NUMBER>, email [email protected].

SUPPLEMENTARY INFORMATION:

I. Table of Abbreviations

CFR Code of Federal Regulations
COTP Captain of the Port Northern New England
DHS Department of Homeland Security
FR Federal Register
NPRM Notice of proposed rulemaking
Sec.  Section
U.S.C. United States Code

II. Background Information and Regulatory History

    On January 6, 2022, the Maine Department of Transportation notified
Sector Northern New England of an upcoming construction project on the
Falls Bridge in Blue Hill, ME. In response, on April 22, 2022, the
Coast Guard published a notice of purposed rulemaking (NPRM) titled
``Safety Zone; Falls Bridge Project, Blue Hill, ME'' (87 FR 24088).
There we stated why we issued the NPRM, and invited comments on our
proposed regulatory action related to this construction project. During
the comment period that ended May 23, 2022, we received one comment.
    Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause
exists for making this rule effective less than 30 days after
publication in the Federal Register. The comment period for the NPRM
associated with the Falls Bridge in Blue Hill, ME, Bridge replacement
project ended on May 23, 2022. The construction project is scheduled to
begin on July 1, 2022. Thus, there is now insufficient time for a 30
day effective period before the need to enforce the safety zone on July
1, 2022. The Maine Department of Transportation has awarded the job to
a contractor and work is ready to begin. Delaying the enforcement of
this safety zone to allow a 30 day effective period

will be impractical and contrary to the public interest because it
would inhibit the Coast Guard's ability to fulfill its mission to keep
the ports and waterways safe.

III. Legal Authority and Need for Rule

    The Coast Guard is issuing this rule under authority in 46 U.S.C.
70034 (previously 33 U.S.C. 1231). The Captain of the Port Northern New
England (COTP) has determined that potential hazards associated with
the bridge construction from July 1, 2022, through June 30, 2024, will
be a safety concern for anyone within a 50-yard radius of the bridge.
The purpose of this rule is to ensure safety of vessels and the
navigable waters in the safety zone during bridge construction.

IV. Discussion of Comments, Changes, and the Rule

    As noted above, we received one comment on our NPRM published April
22, 2022. The comment was in favor of the rule. There are no changes in
the regulatory text of this rule from the proposed rule in the NPRM.
    This rule establishes a safety zone from July 1, 2022, through June
30, 2024. The safety zone will cover all navigable waters within 50
yards of the Falls Bridge located in Blue Hill, Maine. The duration of
the zone is intended to ensure the safety of vessels and these
navigable waters during bridge replacement. No vessel or person will be
permitted to enter the safety zone without obtaining permission from
the COTP or a designated representative.

V. Regulatory Analyses

    We developed this rule after considering numerous statutes and
Executive orders related to rulemaking. Below we summarize our analyses
based on a number of these statutes and Executive orders, and we
discuss First Amendment rights of protestors.

A. Regulatory Planning and Review

    Executive Orders 12866 and 13563 direct agencies to assess the
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits. This rule has not been designated a ``significant
regulatory action,'' under Executive Order 12866. Accordingly, this
rule has not been reviewed by the Office of Management and Budget
(OMB).
    This regulatory action determination is based on the size and
location of the safety zone. The safety zone would only impact a 50-
yard radius from the center of the Falls Bridge in Blue Hill, ME. Local
waterway use is normally recreational and public outreach performed by
Maine Department of Transportation has not identified any commercial
vessel use. Proper public notice of enforcement will be given through
appropriate means, which may include, but are not limited to,
publication in the Local Notice to Mariners and Broadcast Notice to
Mariners via VHF-FM marine channel 16.

B. Impact on Small Entities

    The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as
amended, requires Federal agencies to consider the potential impact of
regulations on small entities during rulemaking. The term ``small
entities'' comprises small businesses, not-for-profit organizations
that are independently owned and operated and are not dominant in their
fields, and governmental jurisdictions with populations of less than
50,000. The Coast Guard received no comments from the Small Business
Administration on this rulemaking. The Coast Guard certifies under 5
U.S.C. 605(b) that this rule will not have a significant economic
impact on a substantial number of small entities.
    While some owners or operators of vessels intending to transit the
safety zone may be small entities, for the reasons stated in section
V.A above, this rule will not have a significant economic impact on any
vessel owner or operator.
    Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996 (Pub. L. 104-121), we want to assist small
entities in understanding this rule. If the rule would affect your
small business, organization, or governmental jurisdiction and you have
questions concerning its provisions or options for compliance, please
call or email the person listed in the FOR FURTHER INFORMATION CONTACT
section.
    Small businesses may send comments on the actions of Federal
employees who enforce, or otherwise determine compliance with, Federal
regulations to the Small Business and Agriculture Regulatory
Enforcement Ombudsman and the Regional Small Business Regulatory
Fairness Boards. The Ombudsman evaluates these actions annually and
rates each agency's responsiveness to small business. If you wish to
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR
(1-888-734-3247). The Coast Guard will not retaliate against small
entities that question or complain about this rule or any policy or
action of the Coast Guard.

C. Collection of Information

    This rule will not call for a new collection of information under
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

D. Federalism and Indian Tribal Governments

    A rule has implications for federalism under Executive Order 13132,
Federalism, if it has a substantial direct effect on the States, on the
relationship between the National Government and the States, or on the
distribution of power and responsibilities among the various levels of
government. We have analyzed this rule under that order and have
determined that it is consistent with the fundamental federalism
principles and preemption requirements described in Executive Order
13132.
    Also, this rule does not have tribal implications under Executive
Order 13175, Consultation and Coordination with Indian Tribal
Governments, because it does not have a substantial direct effect on
one or more Indian tribes, on the relationship between the Federal
Government and Indian tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian tribes.

E. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
requires Federal agencies to assess the effects of their discretionary
regulatory actions. In particular, the Act addresses actions that may
result in the expenditure by a State, local, or tribal government, in
the aggregate, or by the private sector of $100,000,000 (adjusted for
inflation) or more in any one year. Though this rule will not result in
such an expenditure, we do discuss the effects of this rule elsewhere
in this preamble.

F. Environment

    We have analyzed this rule under Department of Homeland Security
Directive 023-01, Rev. 1, associated implementing instructions, and
Environmental Planning COMDTINST 5090.1 (series), which guide the Coast
Guard in complying with the National Environmental Policy Act of 1969
(42 U.S.C. 4321-4370f), and have determined that this action is one of
a category of actions that do not individually or cumulatively have a
significant effect on the human environment. This rule involves
establishing a safety zone that would be enforced 24 hours a day from
July 1, 2022, through June 30, 2024, that would prohibit entry within a
50-yard radius from the center of the Falls Bridge in Blue Hill, ME. It
is categorically

excluded from further review under paragraph L60(a) of Appendix A,
Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of
Environmental Consideration supporting this determination is available
in the docket. For instructions on locating the docket, see the
ADDRESSES section of this preamble.

G. Protest Activities

    The Coast Guard respects the First Amendment rights of protesters.
Protesters are asked to call or email the person listed in the FOR
FURTHER INFORMATION CONTACT section to coordinate protest activities so
that your message can be received without jeopardizing the safety or
security of people, places or vessels.

List of Subjects in 33 CFR Part 165

    Harbors, Marine safety, Navigation (water), Reporting and
recordkeeping requirements, Security measures, Waterways.

    For the reasons discussed in the preamble, the Coast Guard amends
33 CFR part 165 as follows:

PART 165--REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS

0
1. The authority citation for part 165 continues to read as follows:

    Authority:  46 U.S.C. 70034, 70051; 33 CFR 1.05-1, 6.04-1, 6.04-
6, and 160.5; Department of Homeland Security Delegation No.
00170.1, Revision No. 01.2.

0
2. Add Sec.  165.T01-0134 to read as follows:

Sec.  165.T01-0134  Safety Zone; Falls Bridge Project, Blue Hill, ME.

    (a) Locations. The following area is a safety zone: All navigable
waters, from surface to bottom, within a 50-yard radius from the center
of the Falls Bridge in Blue Hill, ME.
    (b) Definitions. As used in this section, designated representative
means a Coast Guard Patrol Commander, including a Coast Guard coxswain,
petty officer, or other officer operating a Coast Guard vessel and a
Federal, State, and local officer designated by or assisting the
Captain of the Port Northern New England (COTP) in the enforcement of
the safety zone.
    (c) Regulations. (1) Under the general safety zone regulations in
subpart C of this part, you may not enter the safety zone described in
paragraph (a) of this section unless authorized by the COTP or the
COTP's designated representative.
    (2) To seek permission to enter, contact the COTP or the COTP's
representative via VHF-FM marine channel 16 or by contacting the Coast
Guard Sector Northern New England Command Center at<PHONE_NUMBER>.
Those in the safety zone must comply with all lawful orders or
directions given to them by the COTP or the COTP's designated
representative.
    (d) Enforcement period. This section is effective from July 1,
2022, through June 30, 2024, and subject to enforcement 24 hours a day.
The Coast Guard will use Broadcast Notice to Mariners and Local Notice
to Mariners to notify the public of this safety zone.

    Dated: June 6, 2022.
A.E. Florentino,
Captain, U.S. Coast Guard, Captain of the Port Northern New England.
[FR Doc. 2022-12615 Filed 6-10-22; 8:45 am]
BILLING CODE 9110-04-P


[Federal Register Volume 82, Number 215 (Wednesday, November 8, 2017)]
[Notices]
[Pages 51892-51894]
[FR Doc No: 2017-24257]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82006; File Nos. SR-DTC-2017-016; SR-NSCC-2017-016; SR-
FICC-2017-020]

Self-Regulatory Organizations; The Depository Trust Company;
National Securities Clearing Corporation; Fixed Income Clearing
Corporation; Order Approving Proposed Rule Changes To Adopt the
Clearing Agency Securities Valuation Framework

November 2, 2017.

I. Introduction

    On September 8, 2017, The Depository Trust Company (``DTC''),
National Securities Clearing Corporation (``NSCC''), and Fixed Income
Clearing Corporation (``FICC,'' each a ``Clearing Agency,'' and
together with DTC and NSCC, the ``Clearing Agencies''), filed with the
Securities and Exchange Commission (``Commission'') proposed rule
changes SR-DTC-2017-016, SR-NSCC-2017-016, and SR-FICC-2017-020,
respectively, pursuant to Section 19(b)(1) of the Securities Exchange
Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The proposed
rule changes were published for comment in the Federal Register on
September 27, 2017.\3\ The Commission did not receive any comment
letters on the proposed rule changes. For the reasons discussed below,
the Commission approves the proposed rule changes.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 81667 (September 21,
2017), 82 FR 45106 (September 27, 2017) (SR-DTC-2017-016; SR-NSCC-
2017-016; SR-FICC-2017-020) (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Changes

    The Clearing Agencies propose to adopt the Clearing Agency
Securities Valuation Framework (``Framework'') of the Clearing
Agencies, as described below.

A. Overview of the Framework

    The Framework would address the manner in which the Clearing
Agencies select and review ``Pricing Vendors'' and value securities
that the Clearing Agencies process or otherwise hold. The proposed rule
changes would set forth the securities valuation practices adopted by
the Clearing Agencies for securities eligible for clearance and
settlement processing by the applicable Clearing Agency; and in the
case of FICC and NSCC, as central counterparties (``CCPs''), securities
eligible to be held in their respective clearing funds.\4\
---------------------------------------------------------------------------

    \4\ Id.
---------------------------------------------------------------------------

B. Selection of Pricing Vendors

    Each Clearing Agency would price securities for both end-of-day and
intraday value primarily through pricing data supplied by third-party
pricing vendors (``Pricing Vendors'').\5\ For most securities, Pricing
Vendors would supply the Clearing Agencies with intraday pricing data
on at least an hourly basis.\6\ Pricing Vendors would be selected by
each Clearing Agency based on a review of their service, including, at
a minimum, a review of Pricing Vendors' securities coverage and a price
quality check.\7\
---------------------------------------------------------------------------

    \5\ Id. at 45107.
    \6\ Certain securities may not be priced daily, and others may
only be priced once each business day. Id.
    \7\ Id.
---------------------------------------------------------------------------

    The Framework would provide that each security be assigned a
primary source Pricing Vendor (``Primary Pricing Vendor'') and a
secondary source Pricing Vendor (``Secondary Pricing Vendor'').\8\ In
the event that the Primary Pricing Vendor becomes unavailable,
unreliable, or otherwise unusable with respect to a security, the
Secondary Pricing Vendor would be designated as the replacement for the
Primary Pricing Vendor with respect to such security.\9\
---------------------------------------------------------------------------

    \8\ Id.
    \9\ Id.
---------------------------------------------------------------------------

    Each Clearing Agency would perform due diligence on each Pricing
Vendor prior to engagement, and at least annually thereafter, to assess
the

reliability of such Pricing Vendor.\10\ Reliability of a Pricing Vendor
would be determined by each Clearing Agency based on a range of
factors, including whether such Pricing Vendor can provide accurate and
timely pricing data with respect to each security.\11\
---------------------------------------------------------------------------

    \10\ Id.
    \11\ Id.
---------------------------------------------------------------------------

C. Monitoring and Pricing

    Each Clearing Agency would monitor and review each applicable
Pricing Vendor's pricing at least once each business day to determine
(i) whether any security's price has remained unchanged for an extended
period; (ii) whether a security has been dropped from the Pricing
Vendor's file; and (iii) whether any other circumstances exist that may
call into question the reliability of any security's price.\12\
---------------------------------------------------------------------------

    \12\ Id.
---------------------------------------------------------------------------

    Each security's end-of-day price would be date stamped, and each
intraday price would be time and date stamped. Both end-of-day and
intraday prices would be identified with a Pricing Vendor source.\13\
In the event that both a Primary Pricing Vendor and a Secondary Pricing
Vendor become unavailable, unreliable, or otherwise unusable with
respect to a security, the applicable Clearing Agency would assign such
security its last available price.\14\ If pricing data for a security
is unavailable from a Pricing Vendor, or if the last available price is
deemed to be unreliable or unusable, the applicable Clearing Agency
would establish a price for the security based on valuation models,
where applicable, and in accordance with the policies and procedures
that support the Framework.\15\
---------------------------------------------------------------------------

    \13\ Id.
    \14\ Id.
    \15\ Id.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act 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.\16\ After carefully considering the proposed rule
changes, the Commission finds that the proposed rule changes are
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to the Clearing Agencies.
Specifically, the Commission finds that the proposed rule changes are
consistent with Section 17A(b)(3)(F) of the Act \17\ as well as Rules
17Ad-22(e)(4)(i) \18\ and (e)(6)(iv) \19\ under the Act.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2)(C).
    \17\ 15 U.S.C. 78q-1(b)(3)(F).
    \18\ 17 CFR 240.17Ad-22(e)(4)(i).
    \19\ 17 CFR 240.17Ad-22(e)(6)(iv).
---------------------------------------------------------------------------

A. Consistency With Section 17A(b)(3)(F)

    Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a registered clearing agency be designed to promote prompt and
accurate clearance and settlement, and assure the safeguarding of
securities and funds which are in the custody or control of the
Clearing Agencies or for which they are responsible.\20\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    As described above, the Framework would describe the manner in
which the Clearing Agencies select and review their Pricing Vendors,
and how the Clearing Agencies value securities that the Clearing
Agencies process or otherwise hold. By describing the Clearing
Agencies' Pricing Vendors selection process and securities valuation
practices in a clear and comprehensive manner, the Framework is
designed to provide (i) reliable sources of timely price data, and (ii)
a sound valuation practice when pricing data is not readily available.
In doing so, the Framework would help the Clearing Agencies to promptly
and accurately value (i) the securities that the Clearing Agencies
process for clearance and settlement purposes; (ii) for DTC, the
available collateral for a participant's net settlement obligation,
which DTC monitors to help mitigate the credit risk that participants
\21\ present to DTC; \22\ and (iii) for NSCC and FICC, the securities
held in their respective clearing funds, which are maintained to help
mitigate the credit risk that participants present to NSCC and FICC, as
applicable.\23\ By establishing a framework for accurately valuing
securities that the Clearing Agencies process and hold for risk
management purposes, the Framework would better position the Clearing
Agencies to continue their critical operations and services, promptly
and accurately, and mitigate the risk of financial loss to the Clearing
Agencies and their non-defaulting participants due to a participant
default.
---------------------------------------------------------------------------

    \21\ DTC refers to its participants as ``Participants,'' while
NSCC and FICC refer to their participants as ``Members.'' These
terms are defined in the rules of each of the Clearing Agencies. In
this order, ``participant'' or ``participants'' refers to both the
Participants of DTC and the Members of FICC and NSCC.
    \22\ DTC: Disclosure under the Principles for Financial Market
Infrastructures, available at http://www.dtcc.com/legal/policy-and-compliance.
    \23\ NSCC: Disclosure under the Principles for Financial Market
Infrastructures, and FICC: Disclosure under the Principles for
Financial Market Infrastructures, available at http://www.dtcc.com/legal/policy-and-compliance.
---------------------------------------------------------------------------

    Therefore, the Commission finds that the proposed rule changes are
designed to help promote prompt and accurate clearance and settlement,
and assure the safeguarding of securities and funds which are in the
custody or control of the Clearing Agencies or for which they are
responsible, consistent with Section 17A(b)(3)(F) of the Act.\24\
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

B. Consistency With Rule 17Ad-22(e)(4)(i)

    Rule 17Ad-22(e)(4)(i) under the Act requires that each covered
clearing agency establish, implement, maintain and enforce written
policies and procedures reasonably designed to effectively identify,
measure, monitor, and manage its credit exposures to participants and
those arising from its payment, clearing, and settlement processes by
maintaining sufficient financial resources to cover its credit exposure
to each participant fully with a high degree of confidence.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 240.17Ad-22(e)(4)(i).
---------------------------------------------------------------------------

    As described above, the Framework would describe how the Clearing
Agencies select and review their Pricing Vendors, and how the Clearing
Agencies price securities that the Clearing Agencies process or
otherwise hold, even when pricing data becomes unavailable or
unreliable. In doing so, the Framework would help ensure that each
Clearing Agency uses (i) reliable sources of timely price data when
pricing securities processed or otherwise held by the Clearing Agency
and (ii) clear valuation procedures when pricing data is not readily
available or reliable. The Framework would further provide that the
prices provided by each Pricing Vendor would be reviewed at least
daily, which would help ensure that prices are accurate and reliable.
    By codifying these aforementioned practices in the Framework, the
Framework is designed to help ensure that securities are priced
appropriately. By appropriately pricing securities, the Clearing
Agencies can more accurately calculate the value of the securities that
the Clearing Agencies monitor or held for risk management purposes, as
described above. Based on the value of the securities, a Clearing
Agency may require a participant to provide more financial resources or
limit the participants' activities pursuant to the Clearing Agency's
rules, in order to better manage the credit risk presented

by the participant.\26\ Therefore, the Commission finds that the
proposed rule changes are designed to help ensure that the Clearing
Agencies maintain sufficient financial resources to cover their credit
exposure to each participant with a high degree of confidence,
consistent with Rule 17Ad-22(e)(4)(i) under the Act.\27\
---------------------------------------------------------------------------

    \26\ See the GSD Rulebook of FICC, Rule 4--Clearing Fund and
Loss Allocation; the MBSD Clearing Rules of FICC, Rule 4--Clearing
Fund and Loss Allocation; Rules and Procedures of NSCC, Procedure
XV--Clearing Fund Formula and Other Matters; By-Laws and
Organizational Certificate of DTC, Rule 4--Participants Fund and
Participants Investment, available at http://dtcc.com/legal/rules-and-procedures.
    \27\ 17 CFR 240.17Ad-22(e)(4)(i).
---------------------------------------------------------------------------

C. Consistency With Rule 17Ad-22(e)(6)(iv)

    Rule 17Ad-22(e)(6)(iv) under the Act requires that each covered
clearing agency that is a CCP to establish, implement, maintain and
enforce written policies and procedures reasonably designed to cover
its credit exposures to its participants by establishing a risk-based
margin system that, at a minimum, uses reliable sources of timely price
data and uses procedures and sound valuation models for addressing
circumstances in which pricing data are not readily available or
reliable.\28\
---------------------------------------------------------------------------

    \28\ 17 CFR 240.17Ad-22(e)(6)(iv).
---------------------------------------------------------------------------

    As described above, the Framework provides that NSCC and FICC, each
a CCP, would perform due diligence on each Pricing Vendor prior to
engagement, and at least annually thereafter, to assess the reliability
of such Pricing Vendor. The Framework also describes how NSCC and FICC
would select two Pricing Vendors for each security in case one becomes
unavailable, unreliable, or otherwise unusable. In the event that both
Primary and Secondary Pricing Vendors become unavailable, unreliable,
or unusable, the Framework provides that NSCC and FICC would assign
each affected security its last available price. The Framework would
further provide that, if the last available price is unavailable,
unreliable, or otherwise unusable for a security, NSCC and FICC would
establish a price for that security based on valuation models (where
applicable) and in accordance with the policies and procedures that
support the Framework. By setting forth how NSCC and FICC would select
Pricing Vendors that can provide timely and reliable pricing data, and
how NSCC and FICC would price securities when pricing data is not
readily available or reliable, the Commission finds that the proposed
rule changes are consistent with Rule 17Ad-22(e)(6)(iv) under the
Act.\29\
---------------------------------------------------------------------------

    \29\ Id.
---------------------------------------------------------------------------

III. Conclusion

    On the basis of the foregoing, the Commission finds that the
proposed rule changes are consistent with the requirements of the Act
and in particular with Section 17A(b)(3)(F) \30\ of the Act and the
rules and regulations thereunder.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that proposed rule changes SR-DTC-2017-016, SR-NSCC-2017-016, or SR-
FICC-2017-020 be, and hereby are, APPROVED.\31\
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    \31\ In approving the Proposed Rule Changes, the Commission
considered the proposals' impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-24257 Filed 11-7-17; 8:45 am]
 BILLING CODE 8011-01-P