29148 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Notices 

‘‘A CCP shall at all times have access to adequate 

liquidity to perform its services and activities. . . . 

A CCP shall measure, on a daily basis, its potential 

liquidity needs [taking] into account the liquidity 

risk generated by the default of at least the two 

clearing members to which it has the largest 

exposures.’’ 11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

B. Clearing Agency’s Statement on 

Burden on Competition 

LCH SA does not believe the 

Proposed Rule Change would have any 

impact, or impose any burden, on 

competition. The Proposed Rule Change 

does not address any competitive issue 

or have any impact on the competition 

among central counterparties. LCH SA 

operates an open access model, and the 

Proposed Rule Change will have no 

effect on this model. 

C. Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants or Others 

Written comments relating to the 

Proposed Rule Change have not been 

solicited or received. LCH SA will 

notify the Commission of any written 

comments received by LCH SA. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

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– 

LCH SA–2018–003 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–LCH SA–2018–003. 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 such 

filings will also be available for 

inspection and copying at the principal 

office of LCH SA and on LCH SA’s 

website at http://www.lch.com/assetclasses/cdsclear. 

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–LCH SA–2018–003 

and should be submitted on or before 

July 12, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–13378 Filed 6–21–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83458; File No. SR–Phlx– 

2018–47] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Exchange 

Rule 1101A, Terms of Option Contracts 

June 18, 2018. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on June 11, 

2018, Nasdaq PHLX LLC (‘‘Phlx’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. 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 

Exchange Rule 1101A, Terms of Option 

Contracts. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://nasdaqphlx.cchwallstreet.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 aspects 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 purpose of the proposed rule 

change is to adopt new Commentary .06 

to Exchange Rules 1101A, to codify that 

the Exchange will defer to The Options 

Clearing Corporation (‘‘OCC’’) in 

determining settlement prices for index 

options when OCC elects to do so in 

accordance with its own rules and 

bylaws. Such OCC-determined 

settlement prices may be determined in 

a manner that differs from the 

settlement price procedures under the 

Exchange’s own rules. 

Exchange Rule 1101A(d) currently 

states that the Rules of the Options 

Clearing Corporation specify that, 

unless the Rules of the Exchange 

provide otherwise, the current index 


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Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Notices 29149 

3See OCC By-Laws Article XVII, Section 4(a), 

which provides in relevant part that if OCC shall 

determine that the primary market for one or more 

index components did not open or remain open for 

trading (or that any such components did not open 

or remain open for trading on such market(s)) on 

a trading day at or before the time when the current 

index value for that trading day would ordinarily 

be determined, or that a current index value or 

other value or price to be used as, or to determine, 

the exercise settlement amount (a ‘‘required value’’) 

for a trading day is otherwise unreported, 

inaccurate, unreliable, unavailable or inappropriate 

for purposes of calculating the exercise settlement 

amount, then, in addition to any other actions that 

OCC may be entitled to take under OCC’s bylaws 

and rules, the OCC is empowered to take any or all 

of a range of permitted actions with respect to any 

series of options on such index, including fixing the 

exercise settlement amount. 

4These rules generally provide that the 

exchanges’ settlement price rules will not apply 

when the settlement price is determined in 

accordance with OCC rules and bylaws. 

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

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

7OCC By-Laws Article XVII, Section 4(a)(2) 

provides in relevant part that if OCC elects to 

exercise its authority under Section 4(a), it may, 

among other actions, fix the exercise settlement 

amount using the reported price or value for the 

relevant security(ies), at the close of regular trading 

hours on the last preceding trading day for which 

such a price or value was reported by the reporting 

authority. Section 4(a)(2) provides that OCC may 

elect instead to fix the exercise settlement amount 

using other prices, such as the reported price or 

value for the relevant security(ies) at the opening 

of regular trading hours on the next trading day for 

which such an opening price or value is reported 

by the reporting authority. 

8 15 U.S.C. 78s(b)(3)(A)(iii). 

9 17 CFR 240.19b–4(f)(6). 

10 In addition, Rule 19b–4(f)(6)(iii) requires a selfregulatory organization to give the Commission 

written notice of its intent to file the proposed rule 

change at least five business days prior to the date 

of filing of the proposed rule change, or such 

shorter time as designated by the Commission. The 

Exchange has satisfied this requirement. 

11 17 CFR 240.19b–4(f)(6). 

12 17 CFR 240.19b–4(f)(6)(iii). 

13For purposes only of waiving the operative 

delay, the Commission has considered the proposed 

Continued 

value used to settle the exercise of an 

index options contract shall be the 

closing index value for the day on 

which the index options contract is 

exercised in accordance with the Rules 

of the Options Clearing Corporation or, 

if such day is not a business day, for the 

most recent business day. Exchange 

Rule 1101A(e) currently states that the 

current index value at the expiration of 

an A.M.-settled index option shall be 

determined, for all purposes under 

Exchange rules and OCC rules, on the 

last day of trading in the underlying 

securities prior to expiration, by 

reference to the reported level of such 

index as derived from first reported sale 

(opening) prices of the underlying 

securities on such day, except that in 

the event that the primary market for an 

underlying security is open for trading 

on that day, but that particular security 

does not open for trading on that day, 

the price of that security, for the 

purposes of calculating the current 

index value at expiration, shall be the 

last reported sale price of the security. 

The Exchange proposes to add new 

Commentary .06 to Rule 1101A to make 

clear that the Exchange’s settlement 

price procedures shall not be used if the 

current index value at expiration is 

fixed in accordance with OCC rules and 

by-laws. This language recognizes that 

OCC is authorized under its rules and 

by-laws to take certain actions relating 

to settlement in the event of the 

unavailability or inaccuracy of the 

current underlying interest value.3 An 

option holder’s contract with OCC is 

governed by OCC rules and by-laws. 

The proposed language makes clear that 

Exchange rules concerning settlement 

value calculation would not apply in 

the event that OCC exercises its 

authority to determine settlement prices 

under OCC rules and by-laws. In that 

case, the Exchange would defer to OCC. 

Proposed Rule 1101A Commentary 

.06 is based in part upon Chapter XIV, 

Section 10(g) of the Nasdaq rulebook, 

Chapter XIV, Section 10(g) of the BX 

rulebook, and ISE Rule 2008(g).4

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,5 in general, and furthers the 

objectives of Section 6(b)(5) of the Act,6

in particular, in that it is designed 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. 

OCC may elect to use various 

procedures in the event it exercises its 

authority to set settlement prices.7 By 

adopting the proposed rule, the 

Exchange would acknowledge clearly 

that OCC may, under its rules and bylaws, establish settlement prices for 

expiring index options that may differ 

from the settlement prices that would 

otherwise be provided for in Exchange 

rules, thereby protecting investors and 

the public interest by reducing potential 

for confusion in that regard. 

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. On the 

contrary, the Exchange believes that the 

proposed amendment will benefit 

investors, market participants, and the 

marketplace in general by stating that 

the Exchange will defer to OCC in the 

determination of settlement prices when 

and if OCC exercises its authority under 

its own settlement price procedures in 

accordance with its rules and by-laws. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

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) of the Act 8 and Rule 19b– 

4(f)(6) thereunder.9 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 

for 30 days from the date on which it 

was filed, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act and Rule 19b– 

4(f)(6) thereunder.10

A proposed rule change filed under 

Rule 19b–4(f)(6) 11 normally does not 

become operative for 30 days after the 

date of the filing. However, pursuant to 

Rule 19b–4(f)(6)(iii),12 the Commission 

may designate a shorter time if such 

action is consistent with the protection 

of investors and the public interest. In 

its filing with the Commission, the 

Exchange has asked the Commission to 

waive the 30-day operative delay so that 

the proposal may become operative 

immediately upon filing to immediately 

eliminate any perceived conflict 

between the Exchange’s settlement price 

rules and OCC’s rules and by-laws 

regarding the establishment of 

settlement prices. The Exchange noted 

that the proliferation of expiration dates 

resulting from new index option weekly 

listings has increased the possibility 

that unforeseen events may occur on an 

expiration date, thereby necessitating 

that OCC determine settlement prices. 

As such, the Commission believes that 

waiver of the 30-day operative delay is 

consistent with the protection of 

investors and the public interest and 

designates the proposed rule change 

operative upon filing.13


daltland on DSKBBV9HB2PROD with NOTICES
29150 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Notices 

rule’s impact on efficiency, competition, and capital 

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

14 15 U.S.C. 78s(b)(2)(B). 

15 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. 83222 

(May 11, 2018), 83 FR 23032 (May 17, 2018) (SR– 

FICC–2018–004) (‘‘Notice’’). 

4The GSD Rules and the MBSD Rules are 

available at http://www.dtcc.com/legal/rules-andprocedures. 

5Notice, 83 FR at 23032–34. 

6 Id. 

7See Notice, 83 FR at 23033. See also Frequently 

Asked Questions: TMPG Fails Charges (April 23, 

2018) at 1, available at https://

www.newyorkfed.org/medialibrary/microsites/ 

tmpg/files/TMPG-Fails-Charge-FAQ-04-23-2018.pdf 

(‘‘FAQ’’). 

8 GSD Rule 11; MBSD Rule 12, supra note 4. 

9 Id.; Notice, 83 FR at 23034. 

10 Id. 

11 Id. 

12 Id. 

13The TMPG was formed in 2007, under the 

sponsorship of the Federal Reserve Bank of New 

York, to help address settlement fails and other 

issues affecting the U.S. Government debt and 

mortgage-backed securities markets. The Treasury 

Market Practices Group: Creation and Early 

Initiatives (August 2017) at 3, available at https:// 

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) of the Act 14 to 

determine whether the proposed rule 

change should be approved or 

disapproved. 

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– 

Phlx–2018–47 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–Phlx–2018–47. 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 such 

filing also will 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–Phlx–2018–47, and should 

be submitted on or before July 13, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–13380 Filed 6–21–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83457; File No. SR–FICC– 

2018–004] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Approving Proposed Rule Change To 

Introduce a Floor to the Calculation of 

the Fails Charges and Make Other 

Changes 

June 18, 2018. 

On May 8, 2018, Fixed Income 

Clearing Corporation (‘‘FICC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–FICC–2018–004, 

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

Securities Exchange Act of 1934 

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

The proposed rule change was 

published for comment in the Federal 

Register on May 17, 2018.3 The 

Commission did not receive any 

comment letters on the proposed rule 

change. For the reasons discussed 

below, the Commission approves the 

proposed rule change. 

I. Description of the Proposed Rule 

Change 

The proposed rule change would 

update FICC’s Government Securities 

Division (‘‘GSD’’) Rulebook (‘‘GSD 

Rules’’) and FICC’s Mortgage-Backed 

Securities Division (‘‘MBSD’’) Clearing 

Rules (‘‘MBSD Rules’’) 4 to (i) introduce 

a floor of one percent to the calculation 

of the existing fails charge rules, (ii) 

clarify the target rate that may be used 

in the fails charge calculations under 

certain circumstances, and (iii) make 

certain technical changes to the fails 

charge provisions to ensure consistent 

use of defined terms.5 The proposed 

rule change would also update the 

MBSD Rules to clarify that a cap applies 

to the MBSD fails charge.6 Each of these 

proposed changes are described below. 

A. Proposed One Percent Floor 

In a securities transaction, a 

settlement fail occurs when the seller 

does not deliver the securities to the 

buyer on the agreed upon settlement 

date. FICC states that although 

settlement fails are generally not treated 

as contractual default events, provided 

that the failing seller delivers the 

securities soon after the settlement date, 

persistent elevated levels of settlement 

fails create market inefficiencies and 

increase credit risk for market 

participants.7

To help mitigate settlement fails, FICC 

maintains a fails charge in both the GSD 

Rules and the MBSD Rules.8 However, 

FICC states that under the current GSD 

Rules and MBSD Rules, the respective 

fails charge calculations could result in 

a zero charge.9 Specifically, under the 

GSD version of the current fails charge, 

if the federal funds target rate would 

rise to three percent, then the 

calculation of the charge would result in 

a zero charge.10 Similarly, under the 

MBSD version of the current fails 

charge, if the federal funds target rate 

would rise to two percent, then the 

calculation of the charge would result in 

a zero charge.11 To address this issue, 

FICC proposes to amend the GSD Rules 

and the MBSD Rules to add a one 

percent floor to the respective GSD and 

MBSD fails charge calculations.12

FICC’s proposal comes in response to 

a recent announcement by the Treasury 

Market Practices Group (‘‘TMPG’’),13 in 


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