28884 Federal Register / Vol. 83, No. 120 / Thursday, June 21, 2018 / Notices 

56 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(ii). 

4 17 CFR 240.19b–4(f)(2). 

5The term ‘‘Member’’ is defined as ‘‘any 

registered broker or dealer that has been admitted 

to membership in the Exchange.’’ See Exchange 

Rule 1.5(n). 

6See e.g., NYSE Arca Equities Fees and Charges, 

NYSE Arca Marketplace: Other Fees and Charges, 

Connectivity Fees. See also, Nasdaq Phlx LLC 

Pricing Schedule, Section XI, Direct Connectivity to 

Phlx. 

7For example, if a market participant uses a 1 

gigabyte Disaster Recovery Physical Port to connect 

to the Disaster Recovery Systems for both BYX and 

EDGX, the market participant would only be 

assessed one monthly fee of $2,000. 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

offices 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–NYSE–2018–28, and 

should be submitted on or before July 

12, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.56

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–13303 Filed 6–20–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83450; File No. SR– 

CboeEDGX–2018–016] 

Self-Regulatory Organizations; Cboe 

EDGX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change Related to 

Physical Port Fees for EDGX 

June 15, 2018. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on June 1, 

2018, Cboe EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been prepared 

by the Exchange. The Exchange has 

designated the proposed rule change as 

one establishing or changing a member 

due, fee, or other charge imposed by the 

Exchange under Section 19(b)(3)(A)(ii) 

of the Act 3 and Rule 19b–4(f)(2) 

thereunder,4 which renders the 

proposed rule change effective upon 

filing with the Commission. 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 filed a proposal to 

amend its fees and rebates applicable to 

Members 5 and non-Members of the 

Exchange pursuant to EDGX Rule 

15.1(a) and (c) to modify its fees for 

physical ports. 

The text of the proposed rule change 

is available at the Exchange’s website at 

www.markets.cboe.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 

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 these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to implement 

proposed changes to its fee schedule 

relating to physical connectivity fees, 

effective June 1, 2018. By way of 

background, a physical port is utilized 

by a Member or non-Member to connect 

to the Exchange at the data centers 

where the Exchange’s servers are 

located. The Exchange currently 

maintains a presence in two third-party 

data centers: (i) The primary data center 

where the Exchange’s business is 

primarily conducted on a daily basis, 

and (ii) a secondary data center, which 

is predominantly maintained for 

business continuity purposes. The 

Exchange currently assesses the 

following physical connectivity fees for 

Members and non-Members on a 

monthly basis: $2,000 per physical port 

for a 1 gigabyte circuit and $7,000 per 

physical port for a 10 gigabyte circuit. 

The Exchange proposes to increase the 

fees per physical ports from (i) $2,000 

to $2,500 per month, per port for a 1 

gigabyte circuit and (ii) $7,000 to $7,500 

per month, per port for a 10 gigabyte 

circuit. The Exchange notes the 

proposed fees enable it to continue to 

maintain and improve its market 

technology and services and also notes 

that the proposed fee changes are in line 

with the amounts assessed by other 

exchanges for similar connections.6

The Exchange also proposes to adopt 

separate physical port fees for 

connection to its secondary data center, 

which is predominantly maintained for 

business continuity purposes (‘‘Disaster 

Recovery Systems’’). Particularly, the 

Disaster Recovery Systems can be 

accessed via physical ports in Chicago. 

Members and Non-Members may 

maintain physical ports in order to be 

able to connect to the Disaster Recovery 

Systems in case of a disaster. Currently, 

physical ports that are used to connect 

to the Disaster Recovery Systems are 

assessed the same fees as physical ports 

used to connect to the Exchange’s 

trading system. The Exchange proposes 

to establish separate pricing for physical 

ports that are used to connect to the 

Disaster Recovery Systems (‘‘Disaster 

Recovery Physical Ports’’). Specifically, 

the Exchange proposes to assess a 

monthly fee of $2,000 per 1 gigabyte 

Disaster Recovery Physical Port and a 

monthly fee of $6,000 per 10 gigabyte 

Disaster Recovery Physical Port. This 

amount will continue to enable the 

Exchange to maintain the Disaster 

Recovery Physical Ports in case they 

become necessary. The Exchange notes 

that the Disaster Recovery Physical 

Ports may also be used to access the 

Disaster Recovery Systems for the 

following affiliate exchanges Cboe BZX 

Exchange, Inc., Cboe BYX Exchange, 

Inc., Cboe EDGA Exchange, Inc., Cboe 

C2 Exchange, Inc., Cboe Exchange, Inc. 

and Cboe Futures Exchange, LLC as 

well. The Exchange proposes to provide 

that market participants will only be 

assessed a single fee for any Disaster 

Recovery Physical Port that also 

accesses the Disaster Recover Systems 

for these exchanges.7


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Federal Register / Vol. 83, No. 120 / Thursday, June 21, 2018 / Notices 28885 

8 15 U.S.C. 78f. 

9 15 U.S.C. 78f(b)(4). 

10See e.g., NYSE Arca Equities Fees and Charges, 

NYSE Arca Marketplace: Other Fees and Charges, 

Connectivity Fees. See also, Nasdaq Phlx LLC 

Pricing Schedule, Section XI, Direct Connectivity to 

Phlx. 

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f). 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the objectives of Section 6 of the Act,8

in general, and furthers the objectives of 

Section 6(b)(4),9 in particular, as it is 

designed to provide for the equitable 

allocation of reasonable dues, fees and 

other charges among its Members and 

other persons using its facilities. The 

Exchange also notes that it operates in 

a highly-competitive market in which 

market participants can readily direct 

order flow to competing venues if they 

deem fee levels at a particular venue to 

be excessive. The proposed rule change 

reflects a competitive pricing structure 

designed to incent market participants 

to direct their order flow to the 

Exchange. 

The Exchange believes that the 

proposed changes are equitable and 

non-discriminatory in that it applies 

uniformly to all Members. Members and 

non-Members will continue to choose 

whether they want more than one 

physical port and/or Disaster Recovery 

Physical Port and choose the method of 

connectivity based on their specific 

needs. All Members that voluntarily 

select various service options will be 

charged the same amount for the same 

services. 

The Exchange believes that the 

proposal represents an equitable 

allocation of reasonable dues, fees, and 

other charges as its fees for physical 

connectivity are reasonably constrained 

by competitive alternatives. If a 

particular exchange charges excessive 

fees for connectivity, affected Members 

and non-Members may opt to terminate 

their connectivity arrangements with 

that exchange, and adopt a possible 

range of alternative strategies, including 

routing to the applicable exchange 

through another participant or market 

center or taking that exchange’s data 

indirectly. Accordingly, if the Exchange 

charges excessive fees, it would stand to 

lose not only connectivity revenues but 

also revenues associated with the 

execution of orders routed to it, and, to 

the extent applicable, market data 

revenues. The Exchange believes that 

this competitive dynamic imposes 

powerful restraints on the ability of any 

exchange to charge unreasonable fees 

for connectivity. 

Furthermore, the proposed rule 

change is also an equitable allocation of 

reasonable dues, fees, and other charges 

as the Exchange believes that the 

proposed increased physical port fees 

will enable it to cover its infrastructure 

costs associated with establishing 

physical ports to connect to the 

Exchange’s systems. The additional 

revenue from the increased fees will 

also enable the Exchange to continue to 

maintain and improve its market 

technology and services. Similarly, the 

Exchange believes the proposed fees for 

the Disaster Recovery Physical Ports 

will allow the Exchange to maintain the 

Disaster Recovery Physical Ports in case 

they become necessary. 

Lastly, the Exchange believes the fees 

remain competitive with those charged 

by other venues and therefore continue 

to be reasonable and equitably allocated 

to Members.10

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 not 

necessary or appropriate in furtherance 

of the purposes of the Act. As discussed 

above, the Exchange believes that fees 

for connectivity are constrained by the 

robust competition for order flow among 

exchanges and non-exchange markets. 

The Exchange does not believe that the 

proposed changes represent a significant 

departure from previous pricing offered 

by the Exchange or pricing offered by 

the Exchange’s competitors. 

Additionally, Members may opt to 

disfavor the Exchange’s pricing if they 

believe that alternatives offer them 

better value. Further, excessive fees for 

connectivity would serve to impair an 

exchange’s ability to compete for order 

flow rather than burdening competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

Members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 11 and paragraph (f) of Rule 

19b–4 thereunder.12 At any time within 

60 days of the filing of the 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. 

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 rule-comments@

sec.gov. Please include File Number SR– 

CboeEDGX–2018–016 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–CboeEDGX–2018–016. 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–CboeEDGX–2018–016 and 


amozie on DSK3GDR082PROD with NOTICES1
28886 Federal Register / Vol. 83, No. 120 / Thursday, June 21, 2018 / Notices 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 34–82316 

(Dec. 13, 2017), 82 FR 60246 (Dec. 19, 2017) (SR– 

LCH–SA–2017–012) (‘‘Notice 012’’). 

4Capitalized terms used in this order but not 

defined herein have the same meanings specified in 

LCH SA’s rules. 

5Securities Exchange Act Release No. 34–82317 

(Dec. 13, 2017), 82 FR 60238 (Dec. 19, 2017) (SR– 

LCH SA–2017–013) (‘‘Notice 013’’). 

6 15 U.S.C. 78s(b)(2). 

7Securities Exchange Act Release No. 34–82570 

(Jan. 23, 2018), 83 FR 4088 (Jan. 29, 2018) (SR– 

LCH–SA–2017–012) and Securities Exchange Act 

Release No. 34–82571 (Jan. 23, 2018), 83 FR 4081 

(Jan. 29, 2018) (SR–LCH SA–2017–013). 

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

9Securities Exchange Act Release No. 34–82901 

(March 19, 2018), 83 FR 12833 (March 23, 2018) 

(SR–LCH SA–2017–012; SR–LCH SA–2017–013). 

10The descriptions of the proposed rule changes 

are substantially excerpted from Notice 012 and 

Notice 013. 

11The term ‘‘covered clearing agency’’ is defined 

in SEC Rule 17Ad–22(a)(5), 17 CFR 240.17Ad– 

22(a)(5). 

12 17 CFR 240.17Ad–22(e)(3)(ii). 

13Standards for Covered Clearing Agencies, 

Securities Exchange Act Release No. 34–78961 

(Sep. 28, 2016), 81 FR 70786, 70809 (Oct. 13, 2016). 

14See Notice 012, 82 FR at 60247. 

15 Id. 

16 Id. at 60249. 

17 Id. at 60249–60250. 

18 Id. at 60249. 

19 Id. 

20 Id. 

21 Id. 

should be submitted on or before July 

12, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–13299 Filed 6–20–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83451; File Nos. SR–LCH 

SA–2017–012 and SR–LCH SA–2017–013] 

Self-Regulatory Organizations; LCH 

SA; Order Approving Proposed Rule 

Changes Related to LCH SA’s 

Recovery and Wind Down Plans 

June 15, 2018. 

I. Introduction 

On November 30, 2017, Banque 

Centrale de Compensation, which 

conducts business under the name LCH 

SA (‘‘LCH SA’’), 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 

(LCH SA–2017–012) to adopt a recovery 

plan (the ‘‘RP’’). The proposed rule 

change was published for comment in 

the Federal Register on December 19, 

2017.3 On December 7, 2017, LCH SA 

filed with the Commission a proposed 

rule change (LCH SA–2017–013) to 

adopt a wind down plan (‘‘WDP’’).4 The 

proposed rule change was published for 

comment in the Federal Register on 

December 19, 2017.5 On January 23, 

2018, pursuant to Section 19(b)(2) of the 

Act,6 the Commission designated a 

longer period for Commission action on 

both proposed rule changes.7 On March 

19, 2018 the Commission instituted 

proceedings under Section 19(b)(2)(B) of 

the Act 8 to determine whether to 

approve or disapprove the proposed 

rule changes.9 To date, the Commission 

has not received any comments on the 

proposed rule changes. For the reasons 

discussed below, the Commission is 

approving the proposed rule changes. 

II. Description of the Proposed Rule 

Changes 10

As a ‘‘covered clearing agency,’’ 11

LCH SA is required to, among other 

things, ‘‘establish, implement, maintain 

and enforce written policies and 

procedures reasonably designed to . . . 

maintain a sound risk management 

framework for comprehensively 

managing legal, credit, liquidity, 

operational, general business, 

investment, custody, and other risks 

that arise in or are borne by the covered 

clearing agency, which . . . includes 

plans for the recovery and orderly winddown of the covered clearing agency 

necessitated by credit losses, liquidity 

shortfalls, losses from general business 

risk, or any other losses.’’ 12 The 

Commission has previously clarified 

that it believes that such recovery and 

wind-down plans are ‘‘rules’’ within the 

meaning of Exchange Act Section 19(b) 

and Rule 19b–4 because such plans 

would constitute changes to a stated 

policy, practice or interpretation of a 

covered clearing agency.13 Accordingly, 

a covered clearing agency, such as LCH 

SA, must file its RP and WDP with the 

Commission. 

A. The RP (LCH SA–2017–012) 

LCH SA’s RP seeks to maintain the 

continuity of critical services in times of 

extreme stress and to facilitate the 

recovery of LCH SA from such stress. In 

particular, the RP describes (i) the 

scenarios and triggers for initiating 

recovery measures; (ii) various recovery 

tools used in such recovery; and (iii) the 

governance framework for managing the 

RP. Each of those aspects of the RP are 

discussed in more detail below. 

The scenarios that could necessitate 

the implementation of the RP include 

the default of one or more clearing 

members, liquidity shortfalls as a result 

of the default of an investment 

counterparty of LCH SA or any other 

investment losses resulting from 

changes in the market value on the 

investments, a loss resulting from an 

event which impacts the critical 

services provided by LCH SA (e.g., 

failure in the provision of service by a 

third party), loss of critical contracts 

with exchanges, or the operational or 

financial failure of a financial market 

infrastructure such as an allied clearing 

house or trade repository.14

The default management process is 

used to re-establish a matched book and 

return to business as usual and therefore 

LCH SA considers it to be a recovery 

tool.15 When pre-funded resources, such 

as defaulter’s margin, defaulter’s default 

fund contributions, LCH SA’s capital, 

and non-defaulters’ default fund 

contributions, are no longer available to 

meet obligations due to member and 

non-member losses, the RP lists various 

measures and tools that LCH SA can use 

to return to business as usual.16 The RP 

is organized to discuss each tool 

according to the nature of the loss the 

tool is designed to address (e.g., clearing 

member default losses, liquidity 

shortfalls, operational, business, and 

investment risks). The RP also discusses 

the sequence in which these tools 

would be used and the relative strength 

of each.17

When pre-funded resources have been 

exhausted after a clearing member 

default, LCH SA can call a default fund 

assessment up to a cap, request 

voluntary payments from all nondefaulting members, and effectuate 

service closure.18 In the event such tools 

are unavailable, certain other businessas-usual tools, such as default fund 

additional margin, may enable LCH SA 

to collect additional resources. 

In the event of a liquidity shortfall, 

LCH SA may use its central bank credit 

line to deposit securities received on 

behalf of defaulting clearing members 

and obtain liquidity.19 Other potential 

tools to manage a liquidity stress 

situation include limits with respect to 

illiquid collateral, the application of 

increased haircuts on certain types of 

collateral to incentivize the use of more 

liquid collateral, and specific liquidity 

margins.20 LCH SA also could defer 

funding for the settlement platform for 

a limited period of time, but views this 

as a tool of last resort.21

For most investment, business, and 

operational losses, LCH SA can allocate 


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