[Federal Register Volume 80, Number 217 (Tuesday, November 10, 2015)]
[Notices]
[Pages 69738-69741]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28521]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76343; File No. SR-NYSEMKT-2015-82]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Requiring Certain
Member Organizations To Participate in Business Continuity and Disaster
Recovery Plans Testing in Connection With Regulation Systems Compliance
and Integrity
November 4, 2015.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on October 26, 2015, NYSE MKT LLC (the ``Exchange'' or
``NYSE MKT'') 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 require certain Exchange member
organizations \4\ (``Members'') to participate in business continuity
and disaster recovery plans (``BC/DR Plans'')
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testing in connection with Regulation Systems Compliance and Integrity
(``Regulation SCI'').\5\ The text of the proposed rule change is
available on the Exchange's Web site at www.nyse.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
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\4\ The term ``member organization'' is defined in Rule 24
(Office Rules) as ``a partnership, corporation or such other entity
as the Exchange may, by Rule, permit to become a member
organization, and which meets the qualifications specified in the
Rules.'' The term ``member organization'' is defined in Rule 2(b)(i)
(Equities Rules) as a registered broker or dealer (unless exempt
pursuant to the Securities Exchange Act of 1934) (the ``Act'') that
is a member of the Financial Industry Regulatory Authority, Inc.
(``FINRA'') or another registered securities exchange. Member
organizations that transact business with public customers or
conduct business on the Floor of the Exchange shall at all times be
members of FINRA. A registered broker or dealer must also be
approved by the Exchange and authorized to designate an associated
natural person to effect transactions on the floor of the Exchange
or any facility thereof. This term shall include a natural person so
registered, approved and licensed who directly effects transactions
on the floor of the Exchange or any facility thereof.'' The term
``member organization'' also includes any registered broker or
dealer that is a member of FINRA or a registered securities
exchange, consistent with the requirements of section 2(b)(i) of
this Rule, which does not own a trading license and agrees to be
regulated by the Exchange as a member organization and which the
Exchange has agreed to regulate.'' See Rule 2(b)(ii)--Equities.
\5\ See Securities Exchange Act Release No. 73639 (November 19,
2014), 79 FR 72252 (December 5, 2014) (``SCI Adopting Release'').
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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
As adopted by the Commission, Regulation SCI applies to certain
self-regulatory organizations (including the Exchange), alternative
trading systems (``ATSs''), plan processors, and exempt clearing
agencies (collectively, ``SCI entities''), and will require these SCI
entities to comply with requirements with respect to the automated
systems central to the performance of their regulated activities. Among
the requirements of Regulation SCI is Rule 1001(a)(2)(v), which
requires the Exchange and other SCI entities to maintain ``[b]usiness
continuity and disaster recovery plans that include maintaining backup
and recovery capabilities sufficiently resilient and geographically
diverse and that are reasonably designed to achieve next business day
resumption of trading and two-hour resumption of critical SCI systems
following a wide-scale disruption.'' \6\ As a matter of course, the
Exchange has put extensive time and resources toward planning for
system failures and already maintains robust BC/DR plans consistent
with the proposed rule. As set forth below, in connection with
Regulation SCI, the Exchange is proposing to require certain Members to
participate in testing of the operation of the Exchange's BC/DR plans.
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\6\ 17 CFR 242.1001(a)(2)(v).
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With respect to an SCI entity's BC/DR plans, including its backup
systems, paragraph (a) of Rule 1004 of Regulation SCI requires each SCI
entity to: ``[e]stablish standards for the designation of those members
or participants that the SCI entity reasonably determines are, taken as
a whole, the minimum necessary for the maintenance of fair and orderly
markets in the event of the activation of such plans.'' \7\ Paragraph
(b) of Rule 1004 further requires each SCI entity to ``[d]esignate
members or participants pursuant to the standards established in
paragraph (a) of [Rule 1004] and require participation by such
designated members or participants in scheduled functional and
performance testing of the operation of such plans, in the manner and
frequency specified by the SCI entity, provided that such frequency
shall not be less than once every 12 months.'' \8\
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\7\ 17 CFR 242.1004(a).
\8\ 17 CFR 242.1004(b).
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To comply with Rule 1004 of Regulation SCI, the Exchange proposes
to amend current Rule 431,\9\ governing mandatory testing of Exchange
backup systems as described below. The requirements of revised Rule 431
would apply to Members of the Exchange's equities and options
markets.\10\
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\9\ Current Rule 431 requires each member or member organization
to participate in the testing of their computer systems to ascertain
decimal pricing conversion compatibility of such systems. The
Exchange proposes to delete the text of the current rule as it is
obsolete and no longer applicable.
\10\ A rule reference has been added to Rule 0--Equities to make
clear that the proposed rule applies to Members that conduct
equities transactions on the Exchange.
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First, in paragraph (a) of revised Rule 431, the Exchange proposes
to establish standards for the designation of Members that the Exchange
reasonably determines are, taken as a whole, the minimum necessary for
the maintenance of fair and orderly markets in the event of the
activation of the Exchange's business continuity and disaster recovery
plans.
Second, in paragraph (b) of revised Rule 431, the Exchange proposes
to specify that Members that are designated pursuant to paragraph (a)
of revised Rule 431 would be required to participate in scheduled
functional and performance testing of the Exchange's business
continuity and disaster recovery plans, which shall not be less than
once every 12 months.
Third, in paragraph (c) of revised Rule 431, the Exchange proposes
to make clear that Designated Market Makers,\11\ Specialists and e-
Specialists \12\ that have been determined by the Exchange to
contribute a meaningful percentage of volume in securities they trade,
measured on a quarterly or monthly basis, will be required to
participate in scheduled functional and performance testing. The
Exchange further proposes that it may also consider other factors in
determining the Members that will be required to participate in
scheduled functional and performance testing, including average daily
volume traded on the Exchange measured on a quarterly or monthly basis,
or Members who collectively account for a certain percentage of market
share on the Exchange.
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\11\ The term ``Designated Market Maker'' (``DMM'') shall mean
an individual member, officer, partner, employee or associated
person of a Designated Market Maker Unit who is approved by the
Exchange to act in the capacity of a DMM. See Rule 2(i)--Equities.
\12\ The term ``Specialist'' means an individual or entity that
has been deemed qualified by the Exchange for the purpose of making
transactions on the Exchange in accordance with the provisions of
Rule 920NY, and who meets the qualification requirements of Rule
927NY(b). Each Specialist must be registered with the Exchange as a
Market Maker. Any ATP Holder registered as a Market Maker with the
Exchange is eligible to be qualified as a Specialist. See Rule
900.2NY(76). E-Specialists are Members designated by the Exchange in
an options class to fulfill certain obligations required of
Specialists. See Rule 927.4NY.
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Fourth, in paragraph (d) of revised Rule 431, the Exchange proposes
that at least three (3) months prior to a scheduled functional and
performance testing of the Exchange's business continuity and disaster
recovery plans, the Exchange will publish the criteria to be used by
the Exchange to determine which Members will be required to participate
in such testing and notify those Members that are required to
participate based on such criteria.\13\ The Exchange believes that
proposed notice requirements are necessary to provide Members with
proper advance notice when they become subject to the proposed rule.
The proposed timeframes would also provide Members with adequate time
to prepare for the testing, including any systems changes needed, to
connect to the Exchange's backup systems.
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\13\ The Exchange will publish the initial notice to Members no
later than November 3, 2015.
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Finally, in paragraph (e) of revised Rule 431, the Exchange
proposes to make clear that Members not designated pursuant to
standards established in paragraph (a) of revised Rule 431 are
permitted to connect to the Exchange's backup systems and may
participate in testing of such systems. Proposed paragraph (e) is
consistent with Regulation SCI, which encourages ``SCI
[[Page 69740]]
entities to permit non-designated members or participants to
participate in the testing of the SCE entity's BC/DR plans if they
request to do so.''\14\
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\14\ See SCI Adopting Release, supra note 5 at 72350.
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The Exchange notes that it encourages all Members to connect to the
Exchange's backup systems and to participate in testing of such
systems. However, in adopting the requirements of revised Rule 431, the
rule will subject only those Members to mandatory testing that the
Exchange believes are, taken as a whole, the minimum necessary to
maintain fair and orderly markets. The Exchange believes that
designating Members to participate in mandatory testing because they,
for example, account for a significant portion of the Exchange's
overall volume or maintain exclusive responsibilities with respect to
Exchange-listed securities is a reasonable means to ensure the
maintenance of a fair and orderly market on the Exchange.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\15\ in general, and furthers the
objectives of Sections 6(b)(5) of the Act,\16\ 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 mechanisms 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.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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The proposal would ensure that the Members necessary to ensure the
maintenance of a fair and orderly market are properly designated
consistent with Rule 1004 of Regulation SCI. Specifically, as proposed,
the Exchange would adopt clear and objective criteria with respect to
the designation of Members that are required to participate in the
testing of the Exchange's BC/DR plans, as well as appropriate
notification regarding such designation. As set forth in the SCI
Adopting Release, ``SROs have the authority, and legal responsibility,
under Section 6 of the Exchange Act, to adopt and enforce rules
(including rules to comply with Regulation SCI's requirements relating
to BC/DR testing) applicable to their members or participants that are
designed to, among other things, foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest.'' \17\ The Exchange believes
that this proposal is consistent with such authority and legal
responsibility.
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\17\ See SCI Adopting Release, supra note 5 at 72350.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. To the contrary, the proposal
is not a competitive proposal but rather is necessary for the
Exchange's compliance with Regulation SCI.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were 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 \18\ and Rule 19b-4(f)(6) thereunder.\19\
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. A proposed rule change filed under Rule 19b-
4(f)(6) \20\ normally does not become operative prior to 30 days after
the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),\21\
the Commission may designate a shorter time if such action is
consistent with the protection of investors and the public interest.
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\18\ 15 U.S.C. 78s(b)(3)(A)(iii).
\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest
as it will allow the Exchange to incorporate changes required under
Regulation SCI, such as establishing standards for designating BCP/DR
participants, prior to the November 3, 2015 compliance date.
Accordingly, the Commission designates the proposed rule change to be
operative upon filing.\22\
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\22\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of 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) \23\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\23\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEMKT-2015-82 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2015-82. This
file number should be included on the subject line if email is used. To
help the
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Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Section, 100 F Street NE.,
Washington, DC 20549-1090. Copies of the filing will also be available
for inspection and copying at the NYSE's principal office and on its
Internet Web site at www.nyse.com. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NYSEMKT-2015-82 and should be submitted on or before
December 1, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-28521 Filed 11-9-15; 8:45 am]
BILLING CODE 8011-01-P