80790 Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Notices 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Notice of Filing infra note 4, at 88 FR 59976. 

4Securities Exchange Act Release No. 98213 

(Aug. 24, 2023), 88 FR 59968 (Aug. 30, 2023) (File 

No. SR–NSCC–2023–007) (‘‘Notice of Filing’’). 

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

6Securities Exchange Act Release No. 98508 (Sep. 

25, 2023), 88 FR 67407 (Sep. 29, 2023) (File No. SR– 

NSCC–2023–007). 

7Partial Amendment No. 1 delays 

implementation of the proposed change. As 

amended, NSCC would implement the proposed 

rule change within 90 days of receiving all 

necessary regulatory approvals and would 

announce the specific date of implementation on its 

public website at least 14 days prior to 

implementation. The delay is proposed in light of 

the technical system changes that are required to 

implement the liquidity stress testing 

enhancements and to be able to provide sufficient 

notice to Clearing Members following receipt of 

approval. 

8 15 U.S.C. 78s(b)(2)(B). 

9The term ‘‘physically-settled’’ refers to cleared 

contracts that settle into their underlying interest 

(i.e., options or futures contracts that are not cashsettled). When a contract settles into its underlying 

interest, shares of stock are sent (i.e., delivered) to 

contract holders who have the right to receive the 

shares from contract holders who are obligated to 

deliver the shares at the time of exercise/assignment 

in the case of an option and maturity in the case 

of a future. 

10See Notice of Filing, 88 FR at 59969. 

11See id. 

12See id. 

13The Required Fund Deposit is calculated 

pursuant to Rule 4 (Clearing Fund) and Procedure 

XV (Clearing Fund Formula and Other Matters) of 

the NSCC Rules. See Notice of Filing, 88 FR at 

59971, n.26. 

14Under the NSCC Rules, NSCC collects 

additional cash deposits from those Members who 

would generate the largest settlement debits in 

stressed market conditions, referred to as 

‘‘Supplemental Liquidity Deposits’’ or ‘‘SLD.’’ See 

Rule 4A of the NSCC Rules. See also Notice of 

Filing, 88 FR at 59971, n.27. 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–GEMX–2023–14 and should be 

submitted on or before December 11, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–25541 Filed 11–17–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98930; File No. SR–NSCC– 

2023–007] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing of Partial 

Amendment No. 1 and Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove a Proposed 

Rule Change, as Modified by Partial 

Amendment No. 1, Concerning 

Modifications to the Amended and 

Restated Stock Options and Futures 

Settlement Agreement Between The 

Options Clearing Corporation and the 

National Securities Clearing 

Corporation 

November 14, 2023. 

I. Introduction 

On August 10, 2023, the National 

Securities Clearing Corporation 

(‘‘NSCC’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change SR–NSCC– 

2023–007 (‘‘Proposed Rule Change’’) 

pursuant to section 19(b) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) 1 and Rule 19b–4 2

thereunder to modify the Amended and 

Restated Stock Options and Futures 

Settlement Agreement dated August 5, 

2017, between OCC and National 

Securities Clearing Corporation, NSCC’s 

related rules.3 The Proposed Rule 

Change was published for public 

comment in the Federal Register on 

August 30, 2023.4 The Commission has 

received no comments regarding the 

Proposed Rule Change. 

On September 25, 2023, pursuant to 

section 19(b)(2) of the Exchange Act,5

the Commission designated a longer 

period within which to approve, 

disapprove, or institute proceedings to 

determine whether to approve or 

disapprove the Proposed Rule Change.6

On November 8, 2023, NSCC filed a 

Partial Amendment No. 1 to the 

Proposed Rule Change.7 The 

Commission is publishing this notice to 

solicit comments on Partial Amendment 

No. 1 from interested persons and is 

instituting proceedings, pursuant to 

section 19(b)(2)(B) of the Exchange Act,8

to determine whether to approve or 

disapprove the proposed rule change, as 

modified by the Partial Amendment No. 

1 (hereinafter defined as ‘‘Proposed Rule 

Change’’). 

II. Summary of the Proposed Rule 

Change 

NSCC is a clearing agency that 

provides clearing, settlement, risk 

management, and central counterparty 

services for trades involving equity 

securities. OCC is the sole clearing 

agency for standardized equity options 

listed on national securities exchanges 

registered with the Commission, 

including options that contemplate the 

physical delivery of equities cleared by 

NSCC in exchange for cash (‘‘physically 

settled’’ options).9 OCC also clears 

certain futures contracts that, at 

maturity, require the delivery of equity 

securities cleared by NSCC in exchange 

for cash. As a result, the exercise and 

assignment of certain options or 

maturation of certain futures cleared by 

OCC effectively results in stock 

settlement obligations to be cleared by 

NSCC (‘‘E&A Activity’’). NSCC and OCC 

maintain a legal agreement, generally 

referred to by the parties as the 

‘‘Accord’’ agreement, that governs the 

processing of such E&A Activity for 

firms that are members of both OCC and 

NSCC (‘‘Common Members’’). 

Under certain circumstances, the 

Accord currently allows NSCC not to 

guaranty the settlement of securities 

arising out of E&A Activity for a 

defaulted Common Member. To the 

extent NSCC chooses not to guaranty 

such transactions, OCC would have to 

engage in an alternate method of 

settlement outside of NSCC to manage 

the default of the Common Member, 

which presents two issues. First, based 

on historical data, the cash required for 

such alternative settlement could be as 

much as $300 billion.10 Second, 

settlement outside of NSCC introduces 

significant operational complexities.11

NSCC proposes to revise the Accord 

to address the liquidity and operational 

issues that arise under the current 

Accord. Specifically, the proposed 

changes to the Accord would require 

NSCC to guaranty the positions of a 

defaulting Common Member if OCC 

makes a payment to cover the 

incremental risk posed by such 

positions (the ‘‘Guaranty Substitution 

Payment’’ or ‘‘GSP’’). Based on 

historical data, the GSP could be as 

much as $6 billion (in contrast with the 

potential $300 billion required for 

alternative settlement).12

The total amount owed by the 

Common Member would be a 

combination of the member’s unpaid 

deposit to the NSCC Clearing Fund 

(‘‘Required Fund Deposit’’) 13 and 

Supplemental Liquidity Deposit.14 The 

SLD portion of the GSP would be the 

unpaid SLD associated with any E&A 

Activity. The Required Fund Deposit 

portion of the GSP, however, would be 

estimated by reference to the day-overday change in gross market value of the 

Common Member’s positions at NSCC 


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Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Notices 80791 

15See Notice of Filing, 88 FR at 59971. OCC and 

NSCC have agreed that performing the necessary 

technology build at this time would delay the 

implementation of this proposal. Therefore, NSCC 

would consider incorporating those technology 

updates into future revisions to the Accord, for 

example in connection with a move to a shorter 

settlement cycle in the U.S. equities markets. See 

Notice of Filing, 88 FR at 59971, n.30. 

16See Notice of Filing, 88 FR at 59975. 

17 15 U.S.C. 78s(b)(2)(B). 

18 Id. 

19 15 U.S.C. 78q–1. 

20 15 U.S.C. 78q–1(b)(3)(F). 

21 17 CFR 240.17Ad–22(e)(1). 

22 17 CFR 240.17Ad–22(e)(7). 

23 17 CFR 240.17Ad–22(e)(17)(i). 

24 15 U.S.C. 78q–1(b)(3)(F). 

25 17 CFR 240.17Ad–22(e)(1), 17 CFR 240.17Ad– 

22(e)(7), and 17 CFR 240.17Ad–22(e)(20). 

26 17 CFR 240.19b–4(g). 

27Section 19(b)(2) of the Exchange Act grants to 

the Commission flexibility to determine what type 

of proceeding—either oral or notice and 

opportunity for written comments—is appropriate 

for consideration of a particular proposal by a selfregulatory organization. See Securities Act 

Amendments of 1975, Senate Comm. on Banking, 

Housing & Urban Affairs, S. Rep. No. 75, 94th 

Cong., 1st Sess. 30 (1975). 

28See Notice of Filing, supra note 4. 

as a proxy for estimating what 

percentage of the member’s Required 

Fund Deposit is attributable to E&A 

Activity. NSCC acknowledges that this 

methodology overestimates or 

underestimates the Required Fund 

Deposit attributable to a Common 

Member’s E&A activity, but states that 

current technology constraints prohibit 

NSCC from performing a precise 

calculation of the GSP on a daily basis 

for every Common Member.15 In 

addition to revising the Accord, NSCC 

also proposes changes to its rules in 

connection with the proposed changes 

to the Accord. For example, NSCC 

would amend its rules to clarify that 

NSCC’s guaranty would attach when 

NSCC receives both the Required Fund 

Deposit and Supplemental Liquidity 

Deposit.16

III. Proceedings To Determine Whether 

To Approve or Disapprove the 

Proposed Rule Change and Grounds for 

Disapproval Under Consideration 

The Commission is instituting 

proceedings pursuant to section 

19(b)(2)(B) of the Exchange Act to 

determine whether the Proposed Rule 

Change should be approved or 

disapproved.17 Institution of 

proceedings is appropriate at this time 

in view of the legal and policy issues 

raised by the Proposed Rule Change. 

Institution of proceedings does not 

indicate that the Commission has 

reached any conclusions with respect to 

any of the issues involved. Rather, the 

Commission seeks and encourages 

interested persons to comment on the 

Proposed Rule Change, which would 

provide the Commission with 

arguments to support the Commission’s 

analysis as to whether to approve or 

disapprove the Proposed Rule Change. 

Pursuant to section 19(b)(2)(B) of the 

Exchange Act,18 the Commission is 

providing notice of the grounds for 

disapproval under consideration. The 

Commission is instituting proceedings 

to allow for additional analysis of, and 

input from commenters with respect to, 

the Proposed Rule Change’s consistency 

with Section 17A of the Exchange Act,19

and the rules thereunder, including the 

following provisions: 

• Section 17A(b)(3)(F) of the 

Exchange Act,20 which requires, among 

other things, that the rules of a clearing 

agency are designed to promote the 

prompt and accurate clearance and 

settlement of securities transactions and 

derivative agreements, contracts, and 

transactions; to assure the safeguarding 

of securities and funds which are in the 

custody or control of the clearing agency 

or for which it is responsible; to foster 

cooperation and coordination with 

persons engaged in the clearance and 

settlement of securities transactions; 

and, in general, to protect investors and 

the public interest; 

• Rule 17Ad–22(e)(1) under the 

Exchange Act,21 which requires that a 

covered clearing agency establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to provide for a 

well-founded, clear, transparent, and 

enforceable legal basis for each aspect of 

its activities in all relevant jurisdictions; 

• Rule 17Ad–22(e)(7) under the 

Exchange Act,22 which requires, in part, 

that a covered clearing agency establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to effectively 

measure, monitor, and manage the 

liquidity risk that arises in or is borne 

by the covered clearing agency, 

including measuring, monitoring, and 

managing its settlement and funding 

flows on an ongoing and timely basis, 

and its use of intraday liquidity; and 

• Rule 17Ad-22(e)(20) under the 

Exchange Act,23 which requires that a 

covered clearing agency establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to identify, 

monitor, and manage risks related to 

any link the covered clearing agency 

establishes with one or more other 

clearing agencies, financial market 

utilities, or trading markets. 

IV. Procedure: Request for Written 

Comments 

The Commission requests that 

interested persons provide written 

submissions of their views, data, and 

arguments with respect to the issues 

identified above, as well as any other 

concerns they may have with the 

Proposed Rule Change. In particular, the 

Commission invites the written views of 

interested persons concerning whether 

the Proposed Rule Change is consistent 

with section 17A(b)(3)(F) 24 and Rules 

17Ad–22(e)(1), (e)(7), and (e)(20) 25 of 

the Exchange Act, or any other 

provision of the Exchange Act, or the 

rules and regulations thereunder. 

Although there do not appear to be any 

issues relevant to approval or 

disapproval that would be facilitated by 

an oral presentation of views, data, and 

arguments, the Commission will 

consider, pursuant to Rule 19b–4(g) 

under the Exchange Act,26 any request 

for an opportunity to make an oral 

presentation.27

The Commission asks that 

commenters address the sufficiency of 

OCC’s statements in support of the 

Proposed Rule Change, which are set 

forth in the Notice of Filing 28 in 

addition to any other comments they 

may wish to submit about 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 rule-comments@

sec.gov. Please include file number SR– 

NSCC–2023–007 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–NSCC–2023–007. 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 (https://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 


ddrumheller on DSK120RN23PROD with NOTICES1
80792 Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Notices 

29 17 CFR 200.30–3(a)(31). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 98643 

(September 29, 2023), 88 FR 68843 (‘‘Notice’’). 

4See Notice, supra note 3 at 68842. 

5See id. 

6See id. 

7See Options 3, Section 3, Minimum Increments. 

8See Options 4A, Section 12(c)(1). 

9The Exchange proposes the same expiration 

month options for NDXP as are permitted for the 

Nasdaq–100 Index, since both options classes are 

derived from the Nasdaq–100 Index. 

10See Options 4A, Section 12(b)(1). 

11For a more detailed description of the proposed 

Third Friday NDXP contract, see Notice, supra note 

3. 

12See Notice, supra note 3 at 68842. 

13See Supplementary Material .07(a) to Options 

4, Section 5. 

14See Options 3, Section 6(c) and (d). 

15See Notice, supra note 3 at 68843. 

16The Exchange notes that trading in NDXP will 

ordinarily cease at 4:00 p.m. on the day on which 

the exercise-settlement value is calculated. See 

Notice, supra note 3 at 68843, n. 16. 

17 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). 

18 15 U.S.C. 78f(b)(5). 

19See Securities Exchange Act Release No. 98450 

(September 20, 2023), 88 FR 66 111 (September 26, 

2023) (SR–ISE–2023–08) (Order Granting Approval 

of a Proposed Rule Change, as Modified by 

Amendment No. 1, to Make Permanent Certain 

P.M.-Settled Pilots) (‘‘ISE Pilot Approval’’). 

20See Notice, supra note 3 at 68843. 

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 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of NSCC 

and on the Depository Trust Company’s 

website (http://dtcc.com/legal/sec-rulefilings.aspx). 

Do not include personal identifiable 

information in submissions; you should 

submit only information that you wish 

to make available publicly. We may 

redact in part or withhold entirely from 

publication submitted material that is 

obscene or subject to copyright 

protection. 

All submissions should refer to File 

Number SR–NSCC–2023–007 and 

should be submitted on or before 

December 11, 2023. Rebuttal comments 

should be submitted by December 26, 

2023. 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.29

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–25544 Filed 11–17–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98935; File No. SR–ISE– 

2023–20] 

Self-Regulatory Organizations; Nasdaq 

ISE, LLC; Order Approving a Proposed 

Rule Change To Permit the Listing and 

Trading of P.M.-Settled Nasdasq–100 

Index® Options With a Third-Friday-ofthe-Month Expiration 

November 14, 2023. 

I. Introduction 

On September 28, 2023, Nasdaq ISE, 

LLC (‘‘ISE’’ 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 permit the listing and trading 

of p.m.-settled Nasdaq–100 Index 

options with a third-Friday-of-themonth (‘‘Third Friday’’) expiration. The 

proposed rule change was published for 

comment in the Federal Register on 

October 4, 2023.3 The Commission did 

not receive any comment letters and is 

approving the proposed rule change. 

II. Description of the Proposal 

ISE proposes to amend its rules to 

permit the listing and trading of p.m.- 

settled Nasdaq–100 Index (‘‘NDXP’’) 

options with a Third Friday expiration. 

The Exchange currently can list a.m.- 

settled Third Friday expirations on 

Nasdaq–100 Index (‘‘NDX’’) options.4

With this proposal, the Exchange would 

have Third Friday expirations on NDX 

options that are both a.m.-settled and 

p.m.-settled on the same day.5 The 

Exchange states that the conditions for 

listing options on NDXP with Third 

Friday expirations will be similar to the 

a.m.-settled NDX Third Friday 

expirations.6 The Exchange proposes to 

amend Options 4A, Section 12(a)(6) to 

provide that in addition to a.m.-settled 

Nasdaq–100 Index options approved for 

trading on the Exchange, the Exchange 

may also list options on the Nasdaq–100 

Index whose exercise settlement value 

is the closing value of the Nasdaq–100 

Index on the expiration day. 

The proposed contract would use a 

$100 multiplier, and the minimum 

trading increment would be $0.05 for 

options trading below $3.00 and $0.10 

for all other series.7 Strike price 

intervals would be set at no less than 

$2.50.8 Consistent with existing rules 

for index options, the Exchange would 

allow up to nine near-term expiration 

months 9 as well as LEAPS.10 The 

product would have European-style 

exercise. Because the product is based 

on NDX, there would be no position 

limits.11

NDXP options are series of the NDX 

options class.12 Currently, these NDXP 

options may expire any day of the week: 

Mondays, Tuesdays, Wednesdays, 

Thursdays, Fridays, as applicable (other 

than third-Friday-of-the-month), and the 

last trading day of the month.13 Third 

Friday p.m.-settled options trading 

under the NDXP symbol will be a new 

type of series under the Nasdaq–100 

Index options class and not a new 

options class—therefore all ThirdFriday NDXP options will be aggregated 

together with all other standard 

expirations for applicable reporting and 

other requirements.14

As with NDX, whenever the Exchange 

determines that additional margin is 

warranted in light of the risks associated 

with an under-hedged NDXP option 

position, including Third Friday NDXP, 

the Exchange may consider imposing 

additional margin upon the account 

maintaining such under-hedged 

position pursuant to its authority 

pursuant to Exchange Rules Options 6E, 

Section 2.15 The trading hours for 

NDXP, including Third Friday NDXP, 

will be from 9:30 a.m. to 4:15 p.m. 

Eastern Time.16

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.17 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,18 which 

requires, among other things, that the 

Exchange’s rules be 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 a national market system, and, in 

general, to protect investors and the 

public interest. 

In support of its proposal, the 

Exchange notes that the Commission 

recently approved trading of Third 

Friday expirations for options based on 

1⁄5 the value of the Nasdaq–100 Index 

(‘‘NQX’’).19 The Exchange states that the 

introduction of Third Friday NDXP will 

attract order flow to the Exchange, 

increase the variety of listed options to 

investors, and provide a valuable hedge 

tool to investors.20 The Exchange 


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