[Federal Register Volume 82, Number 239 (Thursday, December 14, 2017)]
[Notices]
[Pages 58884-58891]
[FR Doc No: 2017-26915]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82249; File No. SR-NYSEArca-2017-110]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 2 and Order Approving on an Accelerated Basis a
Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade
Shares of the GraniteShares Platinum Trust Under NYSE Arca Rule 8.201-E

December 8, 2017.

I. Introduction

    On September 12, 2017, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to list and trade shares of the GraniteShares
Platinum Trust under NYSE Arca Rule 8.201-E. The proposed rule change
was published for comment in the Federal Register on September 27,
2017.\3\ On October 24, 2017, the Exchange filed Amendment No. 1 to the
proposed rule change, which superseded the proposed rule change as
originally filed. On November 16, 2017, the Exchange filed Amendment
No. 2 to the proposed rule change, which superseded the proposed rule
change as modified by Amendment No. 1.\4\ The

Commission has not received any comments on the proposed rule change.
The Commission is publishing this notice to solicit comments on
Amendment No. 2 from interested persons, and is approving the proposed
rule change, as modified by Amendment No. 2, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 81675 (Sept. 21,
2017), 82 FR 45080.
    \4\ In Amendment No. 2, the Exchange: (1) Clarified the
permitted investments of the Trust (as defined herein); (2)
supplemented its description of the duties of the Trust Custodian
(as defined herein); (3) provided information about platinum
futures; (4) supplemented its description of the process of Share
(as defined herein) redemptions; (5) supplemented its description of
how the Trust's net asset value (``NAV'') will be calculated; (6)
increased the minimum number of Shares that the Exchange will
require to be outstanding at the commencement of trading; (7)
expanded the circumstances in which the Exchange would or might halt
trading in the Shares; (8) specified that the Shares would trade in
all of the Exchange's trading sessions; (9) represented that
platinum futures trade on significant exchanges, including NYMEX (as
defined herein), which is regulated by the CFTC (as defined herein)
and is a member of ISG (as defined herein); and (10) made certain
technical corrections. Amendment No. 2 is available at: https://www.sec.gov/comments/sr-nysearca-2017-110/nysearca2017110-2693353-161502.pdf.
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change, as Modified by Amendment
No. 2

    In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of 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
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the
GraniteShares Platinum Trust (the ``Trust''), under NYSE Arca Rule
8.201-E.\5\ Under NYSE Arca Rule 8.201-E, the Exchange may propose to
list and/or trade pursuant to unlisted trading privileges (``UTP'')
Commodity-Based Trust Shares.\6\
---------------------------------------------------------------------------

    \5\ On September 8, 2017, the Trust submitted to the Commission
its draft registration statement on Form S-1 (the ``Registration
Statement'') under the Securities Act of 1933 (15 U.S.C. 77a)
(``Securities Act''). The Jumpstart Our Business Startups Act,
enacted on April 5, 2012, added Section 6(e) to the Securities Act.
Section 6(e) of the Securities Act provides that an ``emerging
growth company'' may confidentially submit to the Commission a draft
registration statement for confidential, non-public review by the
Commission staff prior to public filing, provided that the initial
confidential submission and all amendments thereto shall be publicly
filed not later than 21 days before the date on which the issuer
conducts a road show, as such term is defined in Securities Act Rule
433(h)(4). An emerging growth company is defined in Section 2(a)(19)
of the Securities Act as an issuer with less than $1,000,000,000
total annual gross revenues during its most recently completed
fiscal year. The Trust meets the definition of an emerging growth
company and consequently has submitted its Form S-1 Registration
Statement on a confidential basis with the Commission.
    \6\ Commodity-Based Trust Shares are securities issued by a
trust that represents investors' discrete identifiable and undivided
beneficial ownership interest in the commodities deposited into the
Trust.
---------------------------------------------------------------------------

    The Trust will not be registered as an investment company under the
Investment Company Act of 1940, as amended,\7\ and is not required to
register under such act. The Trust is not a commodity pool for purposes
of the Commodity Exchange Act, as amended.\8\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 80a-1.
    \8\ 17 U.S.C. 1.
---------------------------------------------------------------------------

    The Sponsor of the Trust is GraniteShares LLC, a Delaware limited
liability company. The Bank of New York Mellon is the trustee of the
Trust (the ``Trustee'') \9\ and ICBC Standard Bank PLC is the custodian
of the Trust (the ``Custodian'').\10\
---------------------------------------------------------------------------

    \9\ The Trustee is responsible for the day-to-day administration
of the Trust. The responsibilities of the Trustee include (1)
processing orders for the creation and redemption of Baskets; (2)
coordinating with the Custodian the receipt and delivery of platinum
transferred to, or by, the Trust in connection with each issuance
and redemption of Baskets; (3) calculating the net asset value of
the Trust on each business day; and (4) selling the Trust's platinum
as needed to cover the Trust's expenses. The Trust does not have a
Board of Directors or persons acting in a similar capacity.
    \10\ The Custodian is responsible for safekeeping the platinum
owned by the Trust. The Custodian is appointed by the Trustee and is
responsible to the Trustee under the Trust's platinum custody
agreements. The Custodian will facilitate the transfer of platinum
in and out of the Trust through the unallocated platinum accounts it
may maintain for each Authorized Participant or unallocated platinum
accounts that may be maintained for an Authorized Participant by
another platinum-clearing bank approved by the London Platinum and
Palladium Market (``LPPM''), and through the loco London account
maintained for the Trust by the Custodian on an unallocated basis
pursuant to the trust unallocated account agreement (the ``Trust
Unallocated Account''). The Custodian is responsible for allocating
specific bars of platinum to the loco London account maintained for
the Trust by the Custodian on an allocated basis pursuant to the
Trust agreement (the ``Trust Allocated Account''). The Custodian
will provide the Trustee with regular reports detailing the platinum
transfers in and out of the Trust Unallocated Account with the
Custodian and identifying the platinum bars held in the Trust
Allocated Account.
---------------------------------------------------------------------------

    The Commission has previously approved listing on the Exchange
under NYSE Arca Rule 8.201-E of other precious metals and platinum-
based commodity trusts, including the ETFS Platinum Trust,\11\ the ETFS
Palladium Trust,\12\ and the Sprott Physical Platinum and Palladium
Trust.\13\
---------------------------------------------------------------------------

    \11\ Securities Exchange Act Release No. 61219 (December 22,
2009), 74 FR 68886 (December 29, 2009) (SR-NYSEArca-2009-95).
    \12\ Securities Exchange Act Release No. 61220 (December 22,
2009), 74 FR 68895 (December 29, 2009) (SR-NYSEArca-2009-94).
    \13\ Securities Exchange Act Release No. 68430 (December 13,
2012), 77 FR 75239 (December 13, 2012) [sic] (SR-NYSEArca-2012-111).
---------------------------------------------------------------------------

    The Exchange represents that the Shares satisfy the requirements of
NYSE Arca Rule 8.201-E and thereby qualify for listing on the
Exchange.\14\
---------------------------------------------------------------------------

    \14\ With respect to the application of Rule 10A-3 (17 CFR
240.10A-3) under the Act, the Trust relies on the exemption
contained in Rule 10A-3(c)(7).
---------------------------------------------------------------------------

Operation of the Trust \15\
---------------------------------------------------------------------------

    \15\ The description of the operation of the Trust, the Shares
and the platinum market contained herein are based, in part, on the
Registration Statement. See note 5, supra.
---------------------------------------------------------------------------

    The investment objective of the Trust will be for the Shares to
reflect the performance of the price of platinum, less the expenses and
liabilities of the Trust. The Trust will issue Shares which represent
units of fractional undivided beneficial interest in and ownership of
the Trust.
    The Trust will not hold or trade in any instrument or asset on any
futures exchange or over the counter (``OTC'') other than physical
platinum bullion. The Trust will take delivery of physical platinum
bullion that complies with the LPPM platinum delivery rules.
    The Shares are intended to constitute a simple and cost-effective
means of making an investment similar to an investment in platinum.
Although the Shares are not the exact equivalent of an investment in
platinum, they provide investors with an alternative that allows a
level of participation in the platinum market through the securities
market.
Operation of the Platinum Market
    The global trade in platinum consists of OTC transactions in spot,
forwards, and options and other derivatives, together with exchange
traded futures and options.
    According to the Registration Statement, most trading in physical
platinum is conducted on the OTC market, predominantly in Zurich and
London. The LPPM coordinates various OTC market activities, including
clearing and vaulting, acts as the principal intermediary between
physical platinum market participants and the relevant regulators,
promotes good trading practices and develops standard market
documentation. In addition, the LPPM promotes refining standards for
the platinum market by maintaining the ``London/Zurich Good Delivery
List,'' which are the lists of LPPM accredited melters and assayers of
platinum.
    The most significant platinum futures exchanges are the New York
Mercantile Exchange, Inc. (``NYMEX''), a subsidiary of the Chicago
Mercantile Exchange Group (the ``CME Group''), and the Tokyo Commodity
Exchange.\16\ U.S. futures exchanges are registered with the
Commodities Futures Trading Commission (``CFTC'') and seek to provide a
neutral, regulated marketplace for the trading of derivatives contracts
for commodities, such as futures,

options and certain swaps. The platinum contract market is of
significant size and liquidity.
---------------------------------------------------------------------------

    \16\ NYMEX is a member of the Intermarket Surveillance Group
(``ISG'').
---------------------------------------------------------------------------

    The basis for settlement and delivery of a spot trade is payment
(generally in US dollars) two business days after the trade date
against delivery. Delivery of the platinum can either be by physical
delivery or through the clearing systems to an unallocated account. The
unit of trade in London and Zurich is the troy ounce, whose conversion
between grams is: 1,000 grams is equivalent to 32.1507465 troy ounces,
and one troy ounce is equivalent to 31.1034768 grams.
    A good delivery platinum plate or ingot is acceptable for delivery
in settlement of a transaction on the OTC market (a ``Good Delivery
Platinum Plate or Ingot''). A Good Delivery Platinum Plate or Ingot
must contain between 32 and 192 troy ounces of platinum with a minimum
fineness (or purity) of 999.5 parts per 1,000 (99.95%). A Good Delivery
Platinum Plate or Ingot must also bear the stamp of one of the melters
and assayers who are on the LPPM approved list. Unless otherwise
specified, the platinum spot price always refers to the ``Good Delivery
Standards'' set by the LPPM.
Creation and Redemption of Shares
    The Trust will create and redeem Shares on a continuous basis in
one or more blocks of 15,000 Shares (a block of 15,000 Shares is called
a ``Basket''). As described below, the Trust will issue Shares in
Baskets to certain authorized participants (``Authorized
Participants'') on an ongoing basis. Baskets of Shares will only be
issued or redeemed in exchange for an amount of platinum represented by
the aggregate number of Shares issued or redeemed. No Shares will be
issued unless the Custodian has allocated to the Trust's account the
corresponding amount of platinum. Initially, a Basket will require
delivery of 1,500 ounces of platinum. The amount of platinum necessary
for the creation of a Basket, or to be received upon redemption of a
Basket, will decrease over the life of the Trust, due to the payment or
accrual of fees and other expenses or liabilities payable by the Trust.
    Baskets may be created or redeemed only by Authorized Participants.
Orders must be placed by 3:59 p.m. Eastern Time (``E.T.''). The day on
which a Trust receives a valid purchase or redemption order is the
order date.
    Each Authorized Participant must be a registered broker-dealer, a
participant in Depository Trust Corporation (``DTC''), have entered
into an agreement with the Trustee (the ``Authorized Participant
Agreement'') and have established a platinum unallocated account with
the Custodian or another LPPM-approved platinum clearing bank. The
Authorized Participant Agreement provides the procedures for the
creation and redemption of Baskets and for the delivery of platinum in
connection with such creations or redemptions.
    According to the Registration Statement, Authorized Participants,
acting on authority of the registered holder of Shares or on their own
account, may surrender Baskets of Shares in exchange for the
corresponding amount of platinum (measured in ounces) announced by the
Trustee (the ``Basket Amount''). Upon surrender of such Shares and
payment of the Trustee's applicable fee and of any expenses, taxes or
charges (such as stamp taxes or stock transfer taxes or fees), the
Trustee will deliver to the order of the redeeming Authorized
Participant the amount of platinum corresponding to the redeemed
Baskets. Shares can only be surrendered for redemption in Baskets of
15,000 Shares each.
    Before surrendering Baskets of Shares for redemption, an Authorized
Participant must deliver to the Trustee a written request indicating
the number of Baskets it intends to redeem. The date the Trustee
receives that order determines the Basket Amount to be received in
exchange. However, orders received by the Trustee after 3:59 p.m. E.T.
on a business day or on a business day when the London Bullion Market
Association (``LBMA'') Platinum Price PM or other applicable benchmark
price is not announced, will not be accepted.
    The redemption distribution from the Trust will consist of a credit
to the redeeming Authorized Participant's unallocated account
representing the amount of the platinum held by the Trust evidenced by
the Shares being redeemed as of the date of the redemption order.
Net Asset Value
    The NAV of the Trust will be calculated by subtracting the Trust's
expenses and liabilities on any day from the value of the platinum
owned by the Trust on that day; the NAV per Share will be obtained by
dividing the NAV of the Trust on a given day by the number of Shares
outstanding on that day. On each day on which the Exchange is open for
regular trading, the Trustee will determine the NAV as promptly as
practicable after 4:00 p.m. E.T. The Trustee will value the Trust's
platinum on the basis of LBMA Platinum Price PM. If there is no LBMA
Platinum Price PM on any day, the Trustee is authorized to use the LBMA
Platinum Price AM announced on that day. If neither price is available
for that day, the Trustee will value the Trust's platinum based on the
most recently announced LBMA Platinum Price PM or LBMA Platinum Price
AM. If the Sponsor determines that such price is inappropriate to use,
the Sponsor will identify an alternate basis for evaluation to be
employed by the Trustee by consulting other public sources of pricing
information. For instance, the Sponsor could use the platinum spot
price published by Bloomberg.
    Authorized Participants will offer Shares in the secondary market
at an offering price that will vary, depending on, among other factors,
the price of platinum and the trading price of the Shares on the
Exchange at the time of offer. Authorized Participants will not receive
from the Trust, the Sponsor, the Trustee or any of their affiliates any
fee or other compensation in connection with the offering of the
Shares.
Secondary Market Trading
    While the Trust seeks to reflect generally the performance of the
price of platinum less the Trust's expenses and liabilities, Shares may
trade at, above or below their NAV. The NAV of Shares will fluctuate
with changes in the market value of the Trust's assets. The trading
prices of Shares will fluctuate in accordance with changes in their NAV
as well as market supply and demand. The amount of the discount or
premium in the trading price relative to the NAV may be influenced by
non-concurrent trading hours between the major platinum markets and the
Exchange. While the Shares trade on the Exchange until 8:00 p.m. E.T.,
liquidity in the market for platinum may be reduced after the close of
the major world platinum markets, including London, Zurich and NYMEX.
As a result, during this time, trading spreads, and the resulting
premium or discount, on Shares may widen.
Availability of Information Regarding Platinum
    Currently, the Consolidated Tape Plan does not provide for
dissemination of the spot price of a commodity such as platinum over
the Consolidated Tape. However, there will be disseminated over the
Consolidated Tape the last sale price for the Shares, as is the case
for all equity securities traded on the Exchange (including exchange-
traded funds). In addition, there is a considerable amount of platinum
price and market information available on

public websites and through professional and subscription services.
    Investors may obtain platinum pricing information on a 24-hour
basis based on the spot price for an ounce of platinum from various
financial information service providers, such as Reuters and Bloomberg.
Reuters and Bloomberg provide at no charge on their websites delayed
information regarding the spot price of platinum and last sale prices
of platinum futures, as well as information about news and developments
in the platinum market. Reuters and Bloomberg also offer a professional
service to subscribers for a fee that provides information on platinum
prices directly from market participants. ICAP plc provides an
electronic trading platform called EBS for the trading of spot
platinum, as well as a feed of real-time streaming prices, delivered as
record-based digital data from the EBS platform to its customer's
market data platform via Bloomberg or Reuters.
    Complete real-time data for platinum futures and options prices
traded on the NYMEX are available by subscription from Reuters and
Bloomberg. The NYMEX also provides delayed futures and options
information on current and past trading sessions and market news free
of charge on its website. There are a variety of other public websites
providing information on platinum, ranging from those specializing in
precious metals to sites maintained by major newspapers, such as The
Wall Street Journal.
Availability of Information
    The intraday indicative value (``IIV'') per Share for the Shares
will be disseminated by one or more major market data vendors at least
every 15 seconds during the Core Trading Session. The IIV will be
calculated based on the amount of platinum held by the Trust and a
price of platinum derived from updated bids and offers indicative of
the spot price of platinum.\17\
---------------------------------------------------------------------------

    \17\ The IIV on a per Share basis disseminated during the Core
Trading Session should not be viewed as a real-time update of the
NAV, which is calculated once a day.
---------------------------------------------------------------------------

    The website for the Trust (www.graniteshares.com) will contain the
following information, on a per Share basis, for the Trust: (a) The
mid-point of the bid-ask price \18\ at the close of trading (``Bid/Ask
Price''), and a calculation of the premium or discount of such price
against such NAV; and (b) data in chart format displaying the frequency
distribution of discounts and premiums of the Bid/Ask Price against the
NAV, within appropriate ranges, for each of the four previous calendar
quarters. The website for the Trust will also provide the Trust's
prospectus. Finally, the Trust's website will provide the prior day's
closing price of the Shares as traded in the U.S. market. In addition,
information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers.
---------------------------------------------------------------------------

    \18\ The bid-ask price of the Shares will be determined using
the highest bid and lowest offer on the Consolidated Tape as of the
time of calculation of the closing day NAV.
---------------------------------------------------------------------------

Criteria for Initial and Continued Listing
    The Trust will be subject to the criteria in NYSE Arca Rule 8.201-
E(e) for initial and continued listing of the Shares.
    A minimum of two Baskets or 30,000 Shares will be required to be
outstanding at the start of trading, which is equivalent to 3,000
ounces of platinum. The Exchange believes that the anticipated minimum
number of Shares outstanding at the start of trading is sufficient to
provide adequate market liquidity.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Trading in the Shares
on the Exchange will occur during all three trading sessions in
accordance with NYSE Arca Rule 7.34-E(a). The Exchange has appropriate
rules to facilitate transactions in the Shares during all trading
sessions. As provided in NYSE Arca Rule 7.6-E, the minimum price
variation (``MPV'') for quoting and entry of orders in equity
securities traded on the NYSE Arca Marketplace is $0.01, with the
exception of securities that are priced less than $1.00 for which the
MPV for quoting and order entry is $0.0001.
    Further, NYSE Arca Rule 8.201-E sets forth certain restrictions on
ETP Holders acting as registered Market Makers in the Shares to
facilitate surveillance. Under NYSE Arca Rule 8.201-E(g), an ETP Holder
\19\ acting as a registered Market Maker in the Shares is required to
provide the Exchange with information relating to its trading in the
underlying platinum, related futures or options on futures, or any
other related derivatives. Commentary .04 of NYSE Arca Rule 11.3
requires an ETP Holder acting as a registered Market Maker in the
Shares and its affiliates to establish, maintain and enforce written
policies and procedures reasonably designed to prevent the misuse of
any material nonpublic information with respect to such products, any
components of the related products, any physical asset or commodity
underlying the product, applicable currencies, underlying indexes,
related futures or options on futures, and any related derivative
instruments (including the Shares).
---------------------------------------------------------------------------

    \19\ An ``ETP Holder'' means a sole proprietorship, partnership,
corporation, limited liability company or other organization in good
standing that is a registered broker-dealer and has been issued an
Equity Trading Permit by the Exchange. See NYSE Arca Rule 1.1(n) and
(o).
---------------------------------------------------------------------------

    As a general matter, the Exchange has regulatory jurisdiction over
its ETP Holders and their associated persons, which include any person
or entity controlling an ETP Holder. A subsidiary or affiliate of an
ETP Holder that does business only in commodities or futures contracts
would not be subject to Exchange jurisdiction, but the Exchange could
obtain information regarding the activities of such subsidiary or
affiliate through surveillance sharing agreements with regulatory
organizations of which such subsidiary or affiliate is a member.
    With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. Trading on the Exchange in the Shares may be
halted because of market conditions or for reasons that, in the view of
the Exchange, make trading in the Shares inadvisable. These may
include: (1) The extent to which conditions in the underlying platinum
market have caused disruptions and/or lack of trading, or (2) whether
other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present. In addition,
trading in Shares will be subject to trading halts caused by
extraordinary market volatility pursuant to the Exchange's ``circuit
breaker'' rule.\20\ The Exchange will halt trading in the Shares if the
NAV of the Trust is not calculated or disseminated daily or if not made
available to all participants at the same time. The Exchange may halt
trading during the day in which an interruption occurs to the
dissemination of the IIV, as described above. If the interruption to
the dissemination of the IIV persists past the trading day in which it
occurs, the Exchange will halt trading no later than the beginning of
the trading day following the interruption. The Exchange will also
consider halting trading on a business

day when the LBMA Platinum Price PM or other applicable benchmark price
is not announced.
---------------------------------------------------------------------------

    \20\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances administered by the Exchange, as
well as cross-market surveillances administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\21\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules and federal securities laws applicable to trading on
the Exchange.
---------------------------------------------------------------------------

    \21\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares with other
markets and other entities that are members of the ISG, and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares from such markets
and other entities. In addition, the Exchange may obtain information
regarding trading in the Shares from markets and other entities that
are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.\22\
---------------------------------------------------------------------------

    \22\ For a list of the current members of ISG, see
www.isgportal.org.
---------------------------------------------------------------------------

    Also, pursuant to NYSE Arca Rule 8.201-E(g), the Exchange is able
to obtain information regarding trading in the Shares and the
underlying platinum, platinum futures contracts, options on platinum
futures, or any other platinum derivative, through ETP Holders acting
as registered Market Makers, in connection with such ETP Holders'
proprietary or customer trades through ETP Holders which they effect on
any relevant market.
    In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding
(a) the description of the portfolio or reference assets, (b)
limitations on portfolio holdings or reference assets, or (c) the
applicability of Exchange listing rules specified in this rule filing
shall constitute continued listing requirements for listing the Shares
of the Trust on the Exchange.
    The issuer has represented to the Exchange that it will advise the
Exchange of any failure by the Trust to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If the Trust is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin of the special characteristics
and risks associated with trading the Shares. Specifically, the
Information Bulletin will discuss the following: (1) The procedures for
purchases and redemptions of Shares in Baskets (including noting that
Shares are not individually redeemable); (2) NYSE Arca Rule 9.2-E(a),
which imposes a duty of due diligence on its ETP Holders to learn the
essential facts relating to every customer prior to trading the Shares;
(3) how information regarding the IIV is disseminated; (4) the
requirement that ETP Holders deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; (5) the possibility that trading spreads
and the resulting premium or discount on the Shares may widen as a
result of reduced liquidity of platinum trading during the Core and
Late Trading Sessions after the close of the major world platinum
markets; and (6) trading information. For example, the Information
Bulletin will advise ETP Holders, prior to the commencement of trading,
of the prospectus delivery requirements applicable to the Trust. The
Exchange notes that investors purchasing Shares directly from the Trust
will receive a prospectus. ETP Holders purchasing Shares from the Trust
for resale to investors will deliver a prospectus to such investors.
    In addition, the Information Bulletin will reference that the Trust
is subject to various fees and expenses as will be described in the
Registration Statement. The Information Bulletin will also reference
the fact that there is no regulated source of last sale information
regarding physical platinum, that the Commission has no jurisdiction
over the trading of platinum as a physical commodity, and that the CFTC
has regulatory jurisdiction over the trading of platinum futures
contracts and options on platinum futures contracts.
    The Information Bulletin will also discuss any relief, if granted,
by the Commission or the staff from any rules under the Act.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \23\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Rule 8.201-E. The
Exchange has in place surveillance procedures that are adequate to
properly monitor trading in the Shares in all trading sessions and to
deter and detect violations of Exchange rules and applicable federal
securities laws. The Exchange may obtain information via ISG from other
exchanges that are members of ISG or with which the Exchange has
entered into a comprehensive surveillance sharing agreement. The most
significant platinum futures exchange in the U.S. is the NYMEX, which
is a member of ISG. U.S. futures exchanges are registered with the CFTC
and seek to provide a neutral, regulated marketplace for the trading of
derivatives contracts for commodities, such as futures, options and
certain swaps. The platinum contract market is of significant size and
liquidity.
    The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that there is a considerable amount of platinum price and platinum
market information available on public websites and

through professional and subscription services. Investors may obtain
platinum pricing information on a 24-hour basis based on the spot price
for an ounce of platinum from various financial information service
providers. ICAP's EBS platform also provides an electronic trading
platform to institutions such as bullion banks and dealers for the
trading of spot platinum, as well as a feed of live streaming prices to
market data subscribers.
    The NAV of the Trust will be published by the Sponsor on each day
that the NYSE Arca is open for regular trading and will be posted on
the Trust's website. The IIV relating to the Shares will be widely
disseminated by one or more major market data vendors at least every 15
seconds during the Core Trading Session. The Trust's website will also
provide the Trust's prospectus, as well as the two most recent reports
to stockholders. In addition, information regarding market price and
trading volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other
electronic services. Information regarding the previous day's closing
price and trading volume information for the Shares will be published
daily in the financial section of newspapers.
    The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of exchange-traded product that will enhance
competition among market participants, to the benefit of investors and
the marketplace. As noted above, the Exchange has in place surveillance
procedures relating to trading in the Shares and may obtain information
via ISG from other exchanges that are members of ISG or with which the
Exchange has entered into a comprehensive surveillance sharing
agreement. In addition, as noted above, investors will have ready
access to information regarding platinum pricing.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes the
proposed rule change will enhance competition by accommodating Exchange
trading of an additional exchange-traded product relating to physical
platinum.

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. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's
proposed rule change, as modified by Amendment No. 2, to list and trade
the Shares is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange.\24\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Exchange Act,\25\ which
requires, among other things, that the Exchange's rules be designed to
prevent fraudulent and manipulative acts and practices, promote just
and equitable principles of trade, to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general, to protect investors and the public interest. The
Commission notes that the Exchange has represented that it will be able
to share surveillance information with a significant, regulated market
for trading futures on platinum.\26\ The Commission also notes that it
previously approved the listing and trading on the Exchange of other
platinum-based commodity trusts.\27\
---------------------------------------------------------------------------

    \24\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \25\ 15 U.S.C. 78f(b)(5).
    \26\ Specifically, according to the Exchange, NYMEX, which is
regulated by the CFTC, is a member of the ISG, which will allow the
Exchange to obtain surveillance information. See Amendment No. 2,
supra note 4, at 6, 14.
    \27\ See, e.g., Securities Exchange Act Release No. 61219 (Dec.
22, 2009), 74 FR 68886 (Dec. 29, 2009) (SR-NYSEArca-2009-95)
(approving the listing and trading of the ETFS Platinum Trust). See
also Securities Exchange Act Release No. 68430 (Dec. 13, 2012), 77
FR 75239 (Dec. 19, 2012) (SR-NYSEArca-2012-111) (approving the
listing and trading of the Sprott Physical Platinum and Palladium
Trust).
---------------------------------------------------------------------------

    The Commission also finds that the proposal is consistent with
Section 11A(a)(1)(C)(iii) of the Act,\28\ which sets forth Congress'
finding that it is in the public interest and appropriate for the
protection of investors and the maintenance of fair and orderly markets
to assure the availability to brokers, dealers, and investors of
information with respect to quotations for and transactions in
securities. The last-sale price of the Shares will be disseminated over
the Consolidated Tape. In addition, information regarding market price
and trading volume of the Shares will be continually available on a
real-time basis throughout the day on brokers' computer screens and
other electronic services. Information regarding the previous day's
closing price and trading volume information for the Shares will be
published daily in the financial section of newspapers.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    The Commission believes that the proposed rule change is reasonably
designed to promote fair disclosure of information that may be
necessary to price the Shares appropriately. NYSE Arca Rule 8.201-
E(e)(2)(v) requires that an IIV (which is referred to in the rule as
the ``Indicative Trust Value'') be calculated and disseminated at least
every 15 seconds. The IIV will be calculated based on the amount of
platinum held by the Trust and a price of platinum derived from updated
bids and offers indicative of the spot price of platinum.\29\ The
Exchange states that the IIV relating to the Shares will be widely
disseminated by one or more major market data vendors at least every 15
seconds during the Core Trading Session.\30\ According to the Exchange,
there is a considerable amount of information about platinum markets
available on public websites and through professional and subscription
services, and investors may obtain platinum pricing information on a
24-hour basis based on the spot price for an ounce of platinum from
various financial information service providers.\31\
---------------------------------------------------------------------------

    \29\ See Amendment No. 2, supra note 4, at 9.
    \30\ See id.
    \31\ See id. The Exchange states that Reuters and Bloomberg, for
example, provide at no charge on their websites delayed information
regarding the spot price of platinum and last sale prices of
platinum, as well as information about news and developments in the
platinum market. Reuters and Bloomberg also offer a professional
service to subscribers for a fee that provides information on
platinum prices directly from market participants. ICAP plc provides
an electronic trading platform called EBS for the trading of spot
platinum, as well as a feed of real-time streaming prices, delivered
as record-based digital data from the EBS platform to its customer's
market data platform via Bloomberg or Reuters. Complete real-time
data for platinum futures and options prices traded on NYMEX are
available by subscription from Reuters and Bloomberg. There are a
variety of other public websites providing information on platinum,
ranging from those specializing in precious metals to sites
maintained by major newspapers. See id.
---------------------------------------------------------------------------

    Additionally, the NAV of the Trust will be published by the Sponsor
on each day that the NYSE Arca is open for regular trading and will be
posted on the Trust's website.\32\ The Trust also will publish the
following information on its website: (1) The mid-point of the

Bid/Ask Price, and a calculation of the premium or discount of such
price against such NAV; (2) data in chart format displaying the
frequency distribution of discounts and premiums of the Bid/Ask Price
against the NAV, within appropriate ranges, for each of the four
previous calendar quarters; (3) the Trust's prospectus, as well as the
two most recent reports to stockholders; and (4) the prior day's
closing price of the Shares as traded in the U.S. market.\33\
---------------------------------------------------------------------------

    \32\ See id. at 14.
    \33\ See id. at 10, 14.
---------------------------------------------------------------------------

    The Commission also believes that the proposal is reasonably
designed to prevent trading when a reasonable degree of transparency
cannot be assured. With respect to trading halts, the Exchange may
consider all relevant factors in exercising its discretion to halt or
suspend trading in the Shares. Trading on the Exchange in the Shares
may be halted because of market conditions or for reasons that, in the
view of the Exchange, make trading in the Shares inadvisable. These may
include: (1) The extent to which conditions in the underlying platinum
market have caused disruptions or lack of trading, or (2) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present. In addition, trading in Shares
will be subject to trading halts caused by extraordinary market
volatility pursuant to the Exchange's ``circuit breaker'' rule.\34\ The
Exchange will halt trading in the Shares if the NAV of the Trust is not
calculated or disseminated daily or if not made available to all
participants at the same time.\35\ The Exchange may halt trading during
the day in which an interruption occurs to the dissemination of the
IIV; if the interruption to the dissemination of the IIV persists past
the trading day in which it occurs, the Exchange will halt trading no
later than the beginning of the trading day following the
interruption.\36\
---------------------------------------------------------------------------

    \34\ See id. at 11, n.18 and accompanying text.
    \35\ See id. at 11.
    \36\ See id.
---------------------------------------------------------------------------

    Additionally, the Commission notes that market makers in the Shares
would be subject to the requirements of NYSE Arca Rule 8.201-E(g),
which allow the Exchange to ensure that they do not use their positions
to violate the requirements of Exchange rules or applicable federal
securities laws.\37\
---------------------------------------------------------------------------

    \37\ Commentary .04 of NYSE Arca Equities Rule 11.3 requires
that an ETP Holder acting as a registered market maker in the
Shares, and its affiliates, establish, maintain and enforce written
policies and procedures reasonably designed to prevent the misuse of
any material nonpublic information with respect to such products,
any components of the related products, any physical asset or
commodity underlying the product, applicable currencies, underlying
indexes, related futures or options on futures, and any related
derivative instruments.
---------------------------------------------------------------------------

    In support of this proposal, the Exchange has made the following
additional representations:
    (1) The Shares will be listed and traded on the Exchange pursuant
to the initial and continued listing criteria in NYSE Arca Rule 8.201-
E.\38\
---------------------------------------------------------------------------

    \38\ See Amendment No. 2, supra note 4, at 14.
---------------------------------------------------------------------------

    (2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.\39\
---------------------------------------------------------------------------

    \39\ See id. at 10.
---------------------------------------------------------------------------

    (3) The Exchange deems the Shares to be equity securities.\40\
---------------------------------------------------------------------------

    \40\ See id. The Commission notes that, as a result, trading of
the Shares will be subject to the Exchange's existing rules
governing the trading of equity securities.
---------------------------------------------------------------------------

    (4) The Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.\41\
---------------------------------------------------------------------------

    \41\ See id. at 12.
---------------------------------------------------------------------------

    (5) Trading in the Shares will be subject to the existing trading
surveillances administered by the Exchange, as well as cross-market
surveillances administered by FINRA on behalf of the Exchange, which
are designed to detect violations of Exchange rules and applicable
federal securities laws, and that these procedures are adequate to
properly monitor Exchange trading of the Shares in all trading sessions
and to deter and detect violations of Exchange rules and federal
securities laws applicable to trading on the Exchange.\42\
---------------------------------------------------------------------------

    \42\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement. See id. at 12, n.19.
---------------------------------------------------------------------------

    (6) The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares with other
markets and other entities that are members of the ISG, and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares from such markets
and other entities. In addition, the Exchange may obtain information
regarding trading in the Shares from markets and other entities that
are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.\43\
---------------------------------------------------------------------------

    \43\ See id. at 12.
---------------------------------------------------------------------------

    (7) Prior to the commencement of trading, the Exchange will inform
its ETP Holders in an Information Bulletin of the special
characteristics and risks associated with trading the Shares.
Specifically, the Information Bulletin will discuss the following: (1)
The procedures for purchases and redemptions of Shares in Baskets
(including noting that Shares are not individually redeemable); (2)
NYSE Arca Rule 9.2-E(a), which imposes a duty of due diligence on its
ETP Holders to learn the essential facts relating to every customer
prior to trading the Shares; (3) how information regarding the IIV is
disseminated; (4) ETP Holders deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; (5) the possibility that trading spreads
and the resulting premium or discount on the Shares may widen as a
result of reduced liquidity of platinum trading during the Core and
Late Trading Sessions after the close of the major world platinum
markets; and (6) trading information.\44\
---------------------------------------------------------------------------

    \44\ See id. at 13.
---------------------------------------------------------------------------

    (8) All statements and representations made in the Exchange's
filing regarding (a) the description of the portfolio or reference
assets, (b) limitations on portfolio holdings or reference assets, or
(c) the applicability of Exchange listing rules specified in this rule
filing shall constitute continued listing requirements for listing the
Shares of the Trust on the Exchange.\45\
---------------------------------------------------------------------------

    \45\ See id. at 12-13.
---------------------------------------------------------------------------

    (9) The issuer has represented to the Exchange that it will advise
the Exchange of any failure by the Trust to comply with the continued
listing requirements and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If the Trust is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under the NYSE Arca Rule 5.5-E(m).\46\
---------------------------------------------------------------------------

    \46\ See id. at 13.

This approval order is based on all of the Exchange's representations--
including those set forth above and in Amendment No. 2--and the
Exchange's description of the Trust.
    For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 2, is consistent with Section
6(b)(5) of the Act \47\ and the rules and regulations thereunder
applicable to a national securities exchange.
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule
Change

    Interested persons are invited to submit written data, views, and
arguments concerning Amendment No.

2 to the proposed rule change. 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-NYSEArca-2017-110 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-NYSEArca-2017-110. 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 this filing will also 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-NYSEArca-2017-110 and should be
submitted on or before January 4, 2018.

V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 2

    The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 2, prior to the 30th day after the
date of publication of notice of Amendment No. 2 in the Federal
Register. Amendment No. 2 supplements the proposal by providing
additional information regarding the Trust and the platinum futures
market, and by expanding the circumstances in which the Exchange would
or might halt trading in the Shares. These changes assisted the
Commission in evaluating the Shares' susceptibility to manipulation,
and in determining that the listing and trading of the Shares is
consistent with the protection of investors and the public interest.
Accordingly, the Commission finds good cause, pursuant to Section
19(b)(2) of the Exchange Act,\48\ to approve the proposed rule change,
as modified by Amendment No. 2, on an accelerated basis.
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\49\ that the proposed rule change (SR-NYSEArca-2017-110),
as modified by Amendment No. 2, be, and it hereby is, approved on an
accelerated basis.
---------------------------------------------------------------------------

    \49\ Id.
    \50\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\50\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26915 Filed 12-13-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 215 (Wednesday, November 6, 2013)]
[Notices]
[Pages 66791-66794]
[FR Doc No: 2013-26555]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70791; File No. SR-CHX-2013-16]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Order Approving a Proposed Rule Change To Adopt Standards for the
Cancellation or Adjustment of Bona Fide Error Trades, the Submission of
Error Correction Transactions, and the Cancellation or Adjustment of
Stock Leg Trades of Stock-Option or Stock-Future Orders

October 31, 2013.

I. Introduction

    On September 4, 2013, Chicago Stock Exchange, Inc. (``Exchange'' or
``CHX'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend CHX Article 20, Rule 9 to outline and
clarify the Exchange's current requirements for the cancellation of
trades based on Bona Fide Error and to establish new requirements for
the adjustment of trades based on Bona Fide Error; to adopt CHX Article
20, Rule 9A to detail the Exchange's current requirements for Error
Correction Transactions; and to adopt CHX Article 20, Rule 11 to amend

the Exchange's current requirements for the cancellation of the stock
leg trade of a Stock-Option order, to establish new requirements for
the adjustment of the stock leg trade of a Stock-Option order, and to
allow the stock leg trade of Stock-Future orders to be cancelled or
adjusted. The proposed rule change was published for comment in the
Federal Register on September 18, 2013.\3\ The Commission received no
comments on the proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 70381 (September 12,
2013), 78 FR 57431 (SR-CHX-2013-16) (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change \4\
---------------------------------------------------------------------------

    \4\ A more detailed description of the proposal is contained in
the Notice. See id.
---------------------------------------------------------------------------

    Current Article 20, Rule 9 governs the cancellation of both trades
based on demonstrable error and stock legs of Stock-Option orders.
Among other things, the Exchange proposes to separate current Article
20, Rule 9 into two different rules: proposed Rule 9 sets forth the
requirements for the cancellation of trades based on demonstrable
error, and proposed Rule 11 sets forth the requirements for the
cancellation of the stock leg of a Stock-Option order.

A. Proposed Article 20, Rule 9: Cancellation or Adjustment of Bona Fide
Error Trades

    Proposed Rule 9(a) states that a trade executed on the Exchange in
``Bona Fide Error'' \5\ may be cancelled or adjusted pursuant to this
Rule, subject to the approval of the Exchange. The Exchange notes that
proposed Rule 9 only applies to Bona Fide Error trades that were
executed on the Exchange and, as such, orders that are routed to other
market centers and executed at such away market centers are not within
the purview of proposed Rule 9.\6\
---------------------------------------------------------------------------

    \5\ Proposed Article 1, Rule 1(hh) defines ``Bona Fide Error''
as: (1) The inaccurate conveyance or execution of any term of an
order, including, but not limited to, price, number of shares or
other unit of trading; identification of the security;
identification of the account for which securities are purchased or
sold; lost or otherwise misplaced order tickets; or the execution of
an order on the wrong side of a market; (2) the unauthorized or
unintended purchase, sale, or allocation of securities, or the
failure to follow specific client instructions; (3) the incorrect
entry of data into relevant systems, including reliance on incorrect
cash positions, withdrawals, or securities positions reflected in an
account; or (4) a delay, outage, or failure of a communication
system used to transmit market data prices or to facilitate the
delivery or execution of an order. Proposed paragraph .01 provides
that proposed Rule 9 applies only to Bona Fide Errors committed by
the Participant that submitted the order to the Matching System or
the customer of the Participant that submitted the order to the
Matching System.
    \6\ Although the Exchange anticipates implementing it in the
near future, the Exchange does not currently offer order routing.
See Notice, supra note 3, 78 FR at 57432 n.10.
---------------------------------------------------------------------------

    Proposed paragraph (b) states that the Exchange may approve a
request for a trade cancellation or adjustment pursuant to this Rule
and take the corrective action(s) necessary to effectuate such a
cancellation or adjustment, provided that the items listed thereunder
are submitted to the Exchange, in a form prescribed by the Exchange, by
the Participant that submitted the erroneous trade. Proposed Rule 9
requires the Participant that submitted the erroneous trade to: (1)
Submit a written request for cancellation or adjustment, including all
information and supporting documentation required by proposed Rule 9,
no later than 4:30 p.m. CST on T+1, except such a request may be
submitted after T+1 in extraordinary circumstances with the approval of
an officer of the Exchange; (2) identify the error that is a ``Bona
Fide Error'' and the source of the Bona Fide Error, and provide
supporting documentation showing the objective facts and circumstances
concerning the Bona Fide Error; and (3) provide supporting
documentation evidencing that all parties consent to the requested
cancellation or adjustment.
    Proposed Rule 9(c) provides that a trade adjustment will be made
only to the extent necessary to correct the Bona Fide Error (i.e., to
reflect the original terms of the order).\7\ Under proposed Rule 9(d),
if the Exchange approves a request for a trade cancellation or
adjustment, Exchange operations personnel will effect all corrective
action(s) necessary to effectuate the cancellation or adjustment.
Finally, proposed Rule 9(e) mirrors current Article 20, Rule 9(b)(5)
which provides that failure to comply with the provisions of this Rule
will be considered conduct inconsistent with just and equitable
principles of trade and a violation of Article 9, Rule 2.
---------------------------------------------------------------------------

    \7\ Proposed Rule 9(c) states that, prior to approving an
adjustment, the Exchange will validate that the proposed adjusted
trade could have been executed in the Matching System at the time
the trade was initially executed, in compliance with all applicable
CHX and Commission rules.
---------------------------------------------------------------------------

B. Proposed Article 20, Rule 9A ``Error Correction Transactions''

    Proposed Rule 9A adopts requirements for Error Correction
Transactions (``ECTs''). Proposed 9A(a) provides that a Participant may
submit an ECT to remedy the execution of customer orders that have been
placed in error, provided that the following requirements are
satisfied: (1) The erroneous transaction was the result of a ``Bona
Fide Error,'' as defined under proposed Article 1, Rule 1(hh); (2) the
Bona Fide Error is evidenced by objective facts and circumstances and
the Participant maintains documentation of such facts and
circumstances; (3) the Participant recorded the ECT in its error
account; (4) the Participant established, maintained, and enforced
written policies and procedures that were reasonably designed to
address the occurrence of errors and, in the event of an error, the use
and terms of an ECT to correct the error in compliance with this Rule;
and (5) the Participant regularly surveilled to ascertain the
effectiveness of its policies and procedures to address errors and
transactions to correct errors and took prompt action to remedy
deficiencies in such policies and procedures.
    Proposed Rule 9A(b) states that an ECT may execute without the
restrictions of the trade-through prohibition of Rule 611, provided
that the ECT is marked with a special Bona Fide Error trade indicator.
Proposed Rule 9A(b) further states that this exemption applies only to
the ECT itself and does not, for example, apply to any subsequent
trades made by a Participant to eliminate a proprietary position
connected with the ECT. Proposed Rule 9A(c) provides that failure to
comply with the provisions of this Rule will be considered conduct
inconsistent with just and equitable principles of trade and a
violation of Article 9, Rule 2.

C. Proposed Article 20, Rule 11: Cancelation or Adjustment of Stock Leg
Trades

    Proposed Rule 11(a) states that, unless otherwise expressly
prohibited by the Exchange's rules, a trade representing the stock leg
of a Stock-Option order, as defined under proposed
    Article 1, Rule 1(ii) \8\ or a Stock-Future order, as defined under
proposed Article 1, Rule 1(jj),\9\ may be subject to

cancellation or adjustment by the Exchange pursuant to proposed Rule
11, if the stock leg trade was marked by a special trade indicator when
it was originally submitted to the Matching System.\10\ Proposed Rule
11(a) clarifies that if the stock leg trade was not originally marked
by a special trade indicator, the trade will not be eligible for
cancellation or adjustment, notwithstanding compliance with the other
requirements of this Rule.
---------------------------------------------------------------------------

    \8\ Proposed Article 1, Rule 1(ii) provides that a ``Stock-
Option'' order is a combination order where at least one component
is a cross order for a stated number of units of an underlying or
related security coupled with the purchase or sale of options
contract(s) on the opposite side of the market representing at least
the same number of units as the underlying or related security
portion of the order.
    \9\ Proposed Article 1, Rule 1(jj) provides that a ``Stock-
Future'' order is a combination order where at least one component
is a cross order for a stated number of units of an underlying or a
related security coupled with the purchase or sale of futures
contract(s) on the opposite side of the market representing at least
the same number of units of the underlying or related security
portion of the order.
    \10\ This special trade indicator requirement is in current
Article 20, Rule 9(b)(6). The Exchange notes that the purpose of the
special trade indicator is to mark a stock leg trade as being part
of a Stock-Option order and consequently notifies the market after
execution that the trade may be cancelled, as the trade is
contingent upon the execution of non-stock legs that comprise the
total Stock-Option order.
---------------------------------------------------------------------------

Cancellation of Stock Leg Trades
    Proposed Rule 11(b) outlines the requirements for cancelling a
stock leg trade that is a component of a Stock-Option/Stock-Future
order. Proposed Rule 11(b)(1) provides that the Exchange may approve a
request to cancel a stock leg trade that was originally marked by a
special trade indicator and take the corrective action(s) necessary to
effectuate such a cancellation, provided that certain items are
submitted to the Exchange, in a form prescribed by the Exchange, by the
Participant that submitted the stock leg trade. Proposed Rule 11(b)
requires the Participant that submitted the stock leg trade to: (1)
Submit a written request for cancellation, including all information
and supporting documentation required by proposed Rule 9, no later than
4:30 p.m. CST on T+1, except such a request may be submitted after T+1
in extraordinary circumstances with the approval of an officer of the
Exchange; (2) identify the Qualified Cancellation Basis \11\ and
provide supporting documentation showing the objective facts and
circumstances supporting the Qualified Cancellation Basis; and (3)
provide supporting documentation evidencing that all parties consent to
the requested cancellation.
---------------------------------------------------------------------------

    \11\ Proposed Rule 11(b)(2) defines the ``Qualified Cancellation
Basis'' as follows: (A) A non-stock leg executed at a price/quantity
or was adjusted to a price/quantity other than the price/quantity
originally agreed upon by all of the parties to the Stock-Option or
Stock-Future order; (B) a non-stock leg could not be executed; or
(C) a non-stock leg was cancelled by the exchange on which it was
executed.
---------------------------------------------------------------------------

Adjustments of Stock Leg Trades
    Proposed Rule 11(c) adopts new requirements that allow under
specified circumstances adjustments to a stock leg trade that is a
component of a Stock-Option or Stock-Future order. Proposed Rule
11(c)(1) provides that the Exchange may approve a request to adjust a
stock leg trade that was originally marked by a special trade indicator
and take the corrective action(s) necessary to effectuate such an
adjustment, provided that certain items are submitted to the Exchange,
in a form prescribed by the Exchange, by the Participant that submitted
the stock leg trade. It further states that the requirements of
proposed Rule 11(c) must be complied with, to the satisfaction of the
Exchange, before a stock leg trade adjustment pursuant to this Rule may
be approved or any corrective action may be taken.
    Proposed Rule 11(c) requires the Participant that submitted the
stock leg trade to: (1) submit a written request for adjustment,
including all information and supporting documentation required by
proposed Rule 9, no later than 4:30 p.m. CST on T+1, except such a
request may be submitted after T+1 in extraordinary circumstances with
the approval of an officer of the Exchange; (2) identify the Qualified
Cancellation Basis \12\ and provide supporting documentation showing
the objective facts and circumstances supporting the Qualified
Cancellation Basis; (3) provide supporting documentation evidencing
that all parties consent to the requested adjustment; and (4) submit a
proposed Adjusted Stock Price or Adjusted Stock Quantity, as detailed
under proposed Rule 11(c)(3).
---------------------------------------------------------------------------

    \12\ Proposed Rule 11(c)(2) defines the ``Qualified Adjustment
Basis'' as when a non-stock leg executed at a price/quantity or was
adjusted to a price/quantity other than the price/quantity
originally agreed upon by all of the parties to the Stock-Option or
Stock-Future order.
---------------------------------------------------------------------------

    Proposed Rule 11(c)(3) provides that the Participant that submitted
the stock leg trade may request only one of the following adjustments
per Stock-Option or Stock-Future order: Adjusted Stock Price; Adjusted
Stock Quantity; or Adjusted Stock Quantity (Stock-Option trade only).
Proposed Rule 11(c)(3)(A) details the necessary calculations for
Adjusted Stock Price, where a non-stock leg executed at a price or was
adjusted to a price other than the price originally agreed upon by all
of the parties to the Stock-Option or Stock-Future order and the
parties wish to maintain the original aggregate cash flow of the Stock-
Option or Stock-Future order. Proposed Rule 11(c)(3)(B) details the
necessary calculations for Adjusted Stock Quantity, where a non-stock
leg executed at a quantity or was adjusted to a quantity other than the
quantity originally agreed upon by all of the parties to the Stock-
Option or Stock-Future order. Proposed Rule 11(c)(3)(C) details the
necessary calculations for Adjusted Stock Quantity for a Stock-Option
order only, where an options leg trade executed at a price or was
adjusted to a price other than the price originally agreed upon by all
of the parties to the Stock-Option order and the parties wish to
maintain the original delta-based hedge ratio.
    Once the Adjusted Stock Quantity or Adjusted Stock Price has been
presented to the Exchange pursuant to proposed Rule 11(c)(3), pursuant
to proposed Rule 11(c)(4), the Exchange will ascertain whether the
proposed adjusted stock leg trade could have been executed in the
Matching System at the time the trade was initially executed, in
compliance with all applicable CHX and Commission rules. Proposed Rule
11(c)(4) provides that, if the trade adjustment is approved, the
adjustment will be accepted, recorded, and submitted to a Qualified
Clearing Agency, without regard to orders residing in the Matching
System at the time the adjustment is made.
    Proposed Rule 11(d) provides that if the Exchange approves a
request for a stock leg trade cancellation or adjustment, any
corrective action(s) necessary to effectuate the cancellation or
adjustment, including, but not limited to, corrective entries into the
Exchange's records and/or corrective clearing submissions to a
Qualified Clearing Agency, will be taken only by Exchange operations
personnel. Finally, proposed Rule 11(e) provides that failure to comply
with the provisions of this Rule will be considered conduct
inconsistent with just and equitable principles of trade and a
violation of Article 9, Rule 2.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's
proposal is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange.\13\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\14\ which requires that the
rules of a national securities exchange be designed, among other
things, to prevent fraudulent and manipulative acts and practices; to
promote just and equitable principles of trade; to remove impediments
to and perfect the mechanism of a free and open market and a national
market

system, and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \13\ In approving the CHX proposed rule change, the Commission
has considered its impact on efficiency, competition and capital
formation. 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As discussed above, the Exchange proposes to expand Article 20,
Rule 9 to permit the adjustment of Bona Fide Error trades and to
clarify the requirements for cancelling a Bona Fide Error trade. The
Commission finds that proposed Rule 9 is consistent with Section
6(b)(5) of the Act because it should allow the Exchange, through the
cancellation and adjustment of Bona Fide Error trades, to promote the
proper execution of trades, to promote the accurate reporting of
trades, and to potentially prevent excessive reporting of trade
activity to the Consolidated Tape.
    Proposed Rule 9(b) enumerates the specific requirements that must
be met by the executing broker Participant before the Exchange can
consider a request to cancel or adjust an erroneous trade. The
Commission believes that these requirements, which are designed to
ensure that Participants can cancel or adjust erroneous trades while
also creating the necessary filters to ensure that the Exchange only
acts upon truly erroneous trades, are reasonable and provide a fair,
objective process by which the Exchange may review requests to cancel
or adjust an erroneous trade. Specifically, the Commission believes
that the requirement that the written request for cancellation or
adjustment be submitted no later than 4:30 p.m. CST on T+1 except in
extraordinary circumstances is reasonable because it affords
Participants with adequate time to identify an erroneous trade and to
prepare its submission request. Additionally, the Commission believes
that the requirements that all parties to a Bona Fide Error trade must
consent to the Participant's request to cancel or adjust the erroneous
trade and that the request to cancel or adjust be supported with
documentation showing the objective facts and circumstances evidencing
the Bona Fide Error should protect all parties to a trade and should
prevent unfair or fraudulent cancellations or adjustments of trades
from taking place. Similarly, the Commission believes that the
requirement in proposed Rule 9(c), that the any potential trade
adjustment will only be taken to the extent necessary to correct the
Bona Fide Error and only if the proposed adjusted trade could have been
executed in the Matching System at the time the trade was initially
executed, should promote the integrity of the market system by ensuring
that all adjusted trades comply with Exchange and Commission rules.
    The Commission also finds that proposed Rule 9A, which codifies in
CHX's rules the requirements that a Participant must follow when
submitting an ECT, is consistent with the Act. The Exchange currently
accepts ECTs to remedy the execution of customer orders that have been
placed in error, but does not explain these requirements in its rules.
The Commission believes that the inclusion of these requirements in
CHX's rules should provide clarity and guidance to Participants and
thereby promote the efficient functioning of the securities
markets.\15\
---------------------------------------------------------------------------

    \15\ The Commission also notes that that the language of
proposed Rule 9A is substantially similar to the key portions of the
Commission order exempting certain error correction transactions
From Rule 611 of Regulation NMS. See Securities Exchange Act Release
No. 55884 (June 8, 2007), 72 FR 32926 (June 14, 2007).
---------------------------------------------------------------------------

    As discussed in further detail above, proposed Rule 11 expands
situations where a stock leg of a Stock-Option order or Stock-Future
order stock leg may be cancelled and to permit the adjustment of stock
leg trades if the stock leg trade was marked by a special trade
indicator when it was originally submitted to the Matching System. This
proposal allows Participants to adapt to changes to the options or
futures leg of a trade and thereby facilitate the execution of Stock-
Option or Stock-Future orders in ratios as originally agreed by the
parties to the order, which the Commission believes should promote the
efficient functioning of the securities market.
    The Commission also finds that the requirements in proposed Rule
11(b) that a Participant must satisfy to request cancellation of a
stock leg trade are consistent with the Act. The requirements contained
in Rule 11(b)--that all parties submit a timely request no later than
4:30 p.m. CST on T+1, that the submitting Participant supports its
request with appropriate documentation, and that all parties consent to
the submission of the cancellation request--track those of Rule 9(b),
and the Commission believes they are consistent with the Act for the
reasons discussed above. In addition, the Commission believes that
requiring the submitting Participant to identify the Qualified
Adjustment Basis is reasonable because it should allow the Exchange to
more quickly act upon the Participant's request for cancellation under
proposed Rule 11(b).
    Further, the Commission believes that proposed Rule 11(c), which
proposes to allow adjustments of the stock leg trade, should prevent
excessive reporting of activity to the Consolidated Tape and thereby
should enhance the integrity of the securities markets by removing
duplicative trade reports. As with proposed Rules 9(b) and 11(b), the
Commission believes that the requirements of proposed Rule 11(c)--that
a submitting Participant must comply with T+1 requirement, identify the
qualified adjustment basis, ensure that all parties consent to the
request, and support its submission with a proposed Adjusted Stock
Price or Adjusted Stock Quantity--are consistent with the Act for the
reasons discussed above. The Commission also believes that the
Exchange's detailed methodology for determining and verifying the exact
adjusted terms of a trade are adequate to effect the intent of the
parties to the trade and ensure that any adjustments will be consistent
with the rules of the Exchange and the Commission, including Rule 611
of Regulation NMS.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\16\ that the proposed rule change (SR-CHX-2013-16) be, and it
hereby is, approved.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

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

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-26555 Filed 11-5-13; 8:45 am]
BILLING CODE 8011-01-P