67394 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices 

21 15 U.S.C. 78q–1(b)(3)(F). 

22 17 CFR 240.17Ad–22(e)(6)(i). 

23See supra note 15. 

24 17 CFR 240.17Ad–22(e)(6). 

25 In approving this Proposed Rule Change, the 

Commission has considered the proposed rules’ 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

26 15 U.S.C. 78s(b)(2). 

27 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 84589 

(Nov. 14, 2018), 83 FR 58633. 

4 15 U.S.C. 78s(b)(2). 

in the event of a Clearing Member 

default, OCC’s operations would not be 

disrupted and non-defaulting Clearing 

Members would not be exposed to 

losses that they cannot anticipate or 

control. In this way, the Proposed Rule 

Change is designed to help assure the 

safeguarding of securities and funds 

which are in the custody or control of 

OCC, or for which it is responsible, 

consistent with Section 17A(b)(3)(F) of 

the Exchange Act. 

Second, the Proposed Rule Change 

could reduce the likelihood that OCC’s 

margin requirements impose sudden 

and excessive stress on Clearing 

Members during times of broader 

market stress. As described above, the 

current Implied Volatility Model could 

result in dramatic increases in Clearing 

Member margin requirements in 

response to a sudden, large shock in 

market volatility. Based on its review of 

OCC’s data comparing margin 

requirements to market data on 

February 5, 2018, the Commission 

understands that the size of such an 

increase would not necessarily be 

commensurate with the risk of the 

Clearing Member’s portfolio because, as 

described above, the volatility of 

implied volatility forecasted by the 

current model on that day was 4 times 

the size of a comparable market index, 

resulting in margin requirements for 

some Clearing Members that rose by a 

factor of 10. Imposing a large, 

unexpected increase in margin 

requirements could impose a large, 

unexpected stress on a Clearing Member 

during a period of high volatility. The 

Commission believes that reducing the 

likelihood of unnecessarily large and 

unexpected stresses on Clearing 

Members could help to lessen the risk 

of Clearing Member defaults. Reducing 

the risk of Clearing Member defaults 

could also reduce the likelihood of 

contagion during times of market stress 

because Clearing Members, particularly 

large Clearing Members, tend to be 

active participants in multiple asset 

markets. Therefore, the Commission 

believes that the Proposed Rule Change 

provides for rules designed, in general, 

to protect investors and the public 

interest. 

Accordingly, and for the reasons 

stated above, the Commission believes 

that the Proposed Rule Change is 

consistent with Section 17A(b)(3)(F) of 

the Exchange Act.21

B. Consistency With Rule 17Ad–22(e)(6) 

Under the Exchange Act 

Rule 17Ad–22(e)(6)(i) under the 

Exchange Act requires that a covered 

clearing agency establish, implement, 

maintain, and enforce written policies 

and procedures reasonably designed to 

cover, if the covered clearing agency 

provides central counterparty services, 

its credit exposures to its participants by 

establishing a risk-based margin system 

that, among other things, considers, and 

produces margin levels commensurate 

with, the risks and particular attributes 

of each relevant product, portfolio, and 

market.22

The Proposed Rule Change is 

designed to better align the margin 

requirements produced by OCC’s 

margin methodology with the level of 

risk posed by changes in market 

volatility. The component of the current 

Implied Volatility Model that forecasts 

the volatility of implied volatility is 

very sensitive to sudden, large changes 

in market volatility, as evidenced by the 

model’s reaction to the large, sudden 

spike in market volatility observed on 

February 5, 2018 discussed above, 

which produced dramatic increases in 

Clearing Member margin requirements. 

The Proposed Rule Change to the 

Implied Volatility Model would reduce 

the sensitivity of the model to sudden, 

large changes in market volatility, and, 

as demonstrated by OCC’s backtesting, 

would be unlikely to reduce the level of 

coverage.23

The Commission believes that 

revising the Implied Volatility Model 

could produce margin requirements that 

are more precise and better reflect the 

risks and particular attributes of the 

products cleared by OCC. The 

Commission further believes that such 

changes could produce margin levels 

that are commensurate with the risks of 

the products being cleared. Accordingly, 

based on the foregoing, the Commission 

believes that the Proposed Rule Change 

is consistent with Exchange Act Rule 

17Ad–22(e)(6)(i).24

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the Proposed 

Rule Change is consistent with the 

requirements of the Exchange Act, and 

in particular, the requirements of 

Section 17A of the Exchange Act 25 and 

the rules and regulations thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act,26

that the Proposed Rule Change (SR– 

OCC–2018–014) be, and hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–28180 Filed 12–27–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84900; File No. SR–MIAX– 

2018–35] 

Self-Regulatory Organizations; Miami 

International Securities Exchange LLC; 

Notice of Designation of Longer Period 

for Commission Action on Proposed 

Rule Change To Amend Exchange 

Rule 100, Definitions; Rule 515, 

Execution of Orders and Quotes; and 

Rule 503, Openings on the Exchange 

December 20, 2018. 

On November 9, 2018, Miami 

International Securities Exchange, LLC 

(‘‘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 

amend Exchange Rules 100 

(Definitions), 515 (Execution of Orders 

and Quotes), and 503 (Openings on the 

Exchange). The proposed rule change 

was published for comment in the 

Federal Register on November 20, 

2018.3 The Commission has received no 

comments on the proposal. 

Section 19(b)(2) of the Act 4 provides 

that within 45 days of the publication of 

notice of the filing of a proposed rule 

change, or within such longer period up 

to 90 days as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or as to which the 

self-regulatory organization consents, 

the Commission shall either approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether the 

proposed rule change should be 

disapproved. The 45th day for this filing 

is January 4, 2019. 

The Commission is extending the 45- 

day time period for Commission action 

on the proposed rule change. The 

Commission finds that it is appropriate 


amozie on DSK3GDR082PROD with NOTICES1
Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices 67395 

5 15 U.S.C. 78s(b)(2). 

6 17 CFR 200.30–3(a)(31). 

1 15 U.S.C.78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The Exchange initially filed to adopt the fee 

waiver and waive the BTL fee in 2015. See 

Securities Exchange Act Release No. 74031 (January 

12, 2015), 80 FR 2462 (January 16, 2015) (SR– 

NYSE–2014–78). The Exchange subsequently filed 

to extend the fee waiver and waive the BTL fee in 

2017 and 2018. See Securities Exchange Act Release 

Nos. 79710 (December 29, 2016), 82 FR 1395 

(January 5, 2017) (SR–NYSE–2016–89); and 82418 

(December 28, 2017), 83 FR 568 (January 4, 2018) 

(SR–NYSE–2017–70). 

5 15 U.S.C. 78f(b). 

6 15 U.S.C. 78f(b)(4), (5). 

to designate a longer period within 

which to take action on the proposed 

rule change so that it has sufficient time 

to consider the proposed rule change. 

Accordingly, pursuant to Section 

19(b)(2) of the Act 5 and for the reasons 

stated above, the Commission 

designates February 18, 2019, as the 

date by which the Commission shall 

either approve or disapprove, or 

institute proceedings to determine 

whether to disapprove, the proposed 

rule change (File No. SR–MIAX–2018– 

35). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–28197 Filed 12–27–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84899; File No. SR–NYSE– 

2018–65] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend Its 

Price List Regarding Certain Bond 

Trading License Fee Waivers 

December 20, 2018. 

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 December 

19, 2018, New York Stock Exchange 

LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend its 

Price List to (i) extend a fee waiver for 

new firm application fees for applicants 

seeking only to obtain a bond trading 

license (‘‘BTL’’) for 2019; and (ii) waive 

the BTL fee for 2019. The Exchange 

proposes to implement the fee changes 

effective January 2, 2019. The proposed 

rule change is available on the 

Exchange’s website at www.nyse.com, at 

the principal office of the Exchange, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend its 

Price List to (i) extend a fee waiver for 

new firm application fees for applicants 

seeking only to obtain a BTL for 2019; 4

and (iii) waive the BTL fee for 2019. The 

Exchange proposes to implement the fee 

changes effective January 2, 2019. 

The Exchange currently charges a 

New Firm Fee ranging from $2,500 to 

$20,000, depending on the type of firm, 

which is charged per application for any 

broker-dealer that applies to be 

approved as an Exchange member 

organization. The Exchange proposes to 

waive the New Firm Fee for 2019 for 

new member organization applicants 

that are seeking only to obtain a BTL 

and not trade equities at the Exchange. 

The proposed waiver of the New Firm 

Fee would be available only to 

applicants seeking approval as a new 

member organization, including 

carrying firms, introducing firms, or 

non-public organizations, which would 

be seeking to obtain a BTL at the 

Exchange and not trade equities. 

Further, if a new firm that is approved 

as a member organization and has had 

the New Firm Fee waived converts a 

BTL to a full trading license within one 

year of approval, the New Firm Fee 

would be charged in full retroactively. 

The Exchange believes that charging the 

New Firm Fee retroactively within a 

year of approval is appropriate because 

it would discourage applicants to claim 

that they are applying for a BTL solely 

to avoid New Firm Fees. 

Additionally, the Exchange currently 

charges a BTL fee of $1,000 per year. 

The Exchange proposes to amend the 

Price List to waive the BTL fee for 2019 

for all member organizations. 

The Exchange believes that the 

proposed fee changes would provide 

increased incentives for bond trading 

firms that are not currently Exchange 

member organizations to apply for 

Exchange membership and a BTL. The 

Exchange believes that having more 

member organizations trading on the 

Exchange’s bond platform would benefit 

investors through the additional display 

of liquidity and increased execution 

opportunities in Exchange-traded bonds 

at the Exchange. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,5 in general, and 

furthers the objectives of Sections 

6(b)(4) and 6(b)(5) of the Act,6 in 

particular, because it provides for the 

equitable allocation of reasonable dues, 

fees, and other charges among its 

members, issuers and other persons 

using its facilities and does not unfairly 

discriminate between customers, 

issuers, brokers or dealers. 

The Exchange believes that it is 

reasonable to waive the New Firm Fee 

and the annual BTL fee for 2019 to 

provide an incentive for bond trading 

firms to apply for Exchange membership 

and a BTL. The Exchange believes that 

providing an incentive for bond trading 

firms that are not currently Exchange 

member organizations to apply for 

membership and a BTL would 

encourage market participants to 

become members of the Exchange and 

bring additional liquidity to a 

transparent bond market. To the extent 

the existing New Firm Fees or the BTL 

fee serves as a disincentive for bond 

trading firms to become Exchange 

member organizations, the Exchange 

believes that the proposed fee change 

could expand the number of firms 

eligible to trade bonds on the Exchange. 

The Exchange believes creating 

incentives for bond trading firms to 

trade bonds on the Exchange protects 

investors and the public interest by 

increasing the competition and liquidity 


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