Federal Register / Vol. 83, No. 160 / Friday, August 17, 2018 / Notices 41117 

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

2 17 CFR 240.19b–4. 

3 In Amendment No. 1, the Exchange proposed to 

improve the clarity of the proposal and elaborate on 

the Exchange’s statement on burden on 

competition. See Letter from Martha Redding, 

Associate General Counsel, NYSE, to Brent J. Fields, 

Secretary, Commission (Jul. 9, 2018), available at 

https://www.sec.gov/comments/sr-nyse-2018-31/ 

nyse201831-4016966-167312.pdf. 

4See Securities Exchange Act Release No. 83601 

(Jul. 6, 2018), 83 FR 32172 (Jul. 11, 2018) 

(‘‘Notice’’). 5The securities and futures exchanges have 

procedures for coordinated cross-market trading 

halts if a severe market price decline reaches levels 

that may exhaust market liquidity. These 

procedures, known as market-wide circuit breakers, 

may halt trading temporarily or, under extreme 

circumstances, close the markets before the normal 

close of the trading session. Market-wide circuit 

breakers provide for cross-market trading halts 

during a severe market decline as measured by a 

single-day decrease in the S&P 500 Index. A crossmarket trading halt can be triggered at three circuitbreaker thresholds: 7% (Level 1), 13% (Level 2), 

and 20% (Level 3). These triggers are set by the 

markets at levels that are calculated daily based on 

the prior day’s closing price of the S&P 500 Index. 

6See, e.g., https://www.nyse.com/publicdocs/ 

ctaplan/notifications/trader-update/CTS_

CQS%202018_Failover%20Testing_Q1.pdf; https://

www.nasdaqtrader.com/TraderNews.aspx?id

=utp2017-15. 

7The CTA/CQ Plans govern the collection, 

consolidation, processing, and dissemination of last 

sale and quotation information for Network A and 

Network B securities. Network A refers to securities 

listed on NYSE and Network B refers to securities 

listed on exchanges other than the Nasdaq Stock 

Market LLC (‘‘Nasdaq’’). 

8The Joint Self-Regulatory Organization Plan 

Governing the Collection, Consolidation and 

Dissemination of Quotation and Transaction 

Information for Nasdaq-Listed Securities Traded on 

Exchanges on an Unlisted Trading Privileges Basis 

(‘‘Nasdaq/UTP Plan’’) governs the collection, 

consolidation, processing, and dissemination of last 

sale and quotation information for Network C 

securities. Network C refers to securities listed on 

Nasdaq. 

9Pursuant to NYSE Rule 80B (Trading Halts Due 

to Extraordinary Market Volatility), a market-wide 

trading halt will be triggered if the S&P 500 Index 

declines in price by specified percentages from the 

prior day’s closing price of that index. Currently, 

the triggers are set at three circuit-breaker 

thresholds: 7% (Level 1), 13% (Level 2), and 20% 

(Level 3). A market decline that triggers a Level 1 

or Level 2 circuit breaker after 9:30 a.m. ET and 

before 3:25 p.m. ET would halt market-wide trading 

for 15 minutes, while a similar market decline at 

or after 3:25 p.m. ET would not halt market-wide 

trading. A market decline that triggers a Level 3 

circuit breaker, at any time during the trading day, 

would halt market-wide trading for the remainder 

of the trading day. 

10 In 2015, the Exchange adopted rules to require 

certain member organizations to participate in 

testing of the operation of the Exchange’s business 

continuity and disaster recovery plans in 

connection with Regulation Systems Compliance 

and Integrity (‘‘Regulation SCI’’). Paragraph (b)(1) of 

Rule 49 establishes standards for the designation by 

the Exchange of member organizations that are 

necessary to participate in business continuity and 

disaster recovery plans testing pursuant to 

Regulation SCI. See Securities Exchange Act 

Release No. 76346 (Nov. 4, 2015), 80 FR 69765 

(Nov. 10, 2015). The Exchange believes that, 

because member organizations required to 

participate in Regulation SCI testing have already 

been identified as essential for the maintenance of 

a fair and orderly market, these same member 

organizations should also be required to participate 

in scheduled MWCB testing. See Notice, supra note 

4, 83 FR at 32173. 

11The Exchange states that the annual Regulation 

SCI test is currently conducted in October of each 

calendar year and that it provides at least (3) 

months advance notice to member organizations 

that are required to participate in such SCI testing 

(‘‘SCI Notice’’). 

12The Exchange states that member organizations 

were notified in April 2018 of their required 

participation in the Regulation SCI testing 

scheduled for October 13, 2018. The Exchange 

notes that, while it encourages all member 

organizations to participate in MWCB testing 

voluntarily, implementing the new rule in 2019 

would provide member organizations with 

sufficient time to prepare for a scheduled MWCB 

test. See Notice, supra note 4, 83 FR at 32173 n. 

8. 

13See supra, note 6 and accompanying text. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83836; File No. SR–NYSE– 

2018–31] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Approving a Proposed Rule Change, 

as Modified by Amendment No. 1, To 

Require Certain Member Organizations 

To Participate in Scheduled MarketWide Circuit Breaker Testing 

August 13, 2018. 

I. Introduction 

On June 26, 2018, New York Stock 

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

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 require certain member 

organizations to participate in 

scheduled market-wide circuit breaker 

testing. On July 5, 2018, the Exchange 

filed Amendment No. 1 to the proposed 

rule change, which supersedes the 

original filing in its entirety.3 The 

proposed rule change, as amended by 

Amendment No. 1, was published for 

comment in the Federal Register on July 

11, 2018.4 The Commission has received 

no comment letters on the proposed rule 

change. This order approves the 

proposed rule change. 

II. Description of the Proposed Rule 

Change 

The Exchange proposes to amend 

NYSE Rule 49 to require certain member 

organizations to participate in 

scheduled Market-Wide Circuit Breaker 

(‘‘MWCB’’) testing.5

The Securities Information Processors 

(‘‘SIPs’’) for the U.S. equity markets 

have established a quarterly MWCB 

testing schedule.6 On the scheduled 

dates, the Consolidated Tape 

Association Plan (‘‘CTA Plan’’) and the 

Consolidated Quotation Plan (‘‘CQ’’ 

Plan’’) (collectively ‘‘the CTA/CQ 

Plans’’),7 along with the Nasdaq/UTP 

Plan,8 conduct MWCB testing that 

allows market participants across the 

securities industry to test their ability to 

receive messages associated with 

MWCBs, including decline status, halt, 

and resume messages. Market 

participants are also able to participate 

in testing of re-opening auctions 

following market-wide circuit breaker 

halts. 

The Exchange states that quarterly 

MWCB testing is critical to ensure that 

securities markets halt trading and 

subsequently re-open in a manner 

consistent with the MWCB rules.9 To 

that end, the Exchange states that 

certain member organizations should be 

required to participate in scheduled 

MWCB tests. The proposed rule would 

provide the Exchange with authority to 

require participation by certain member 

organizations in industry-wide tests to 

validate that their processing in the 

event of MWCB is as expected within 

their systems. 

The Exchange also proposes new Rule 

49(c)(1), which would provide that each 

member organization notified of its 

obligation to participate in mandatory 

testing pursuant to standards 

established under paragraphs (b)(1) and 

(3) of Rule 49 10 would also be required 

to participate in scheduled MWCB 

testing in the manner and frequency 

specified by the Exchange. The 

Exchange proposes that future SCI 

Notices would also include notification 

to member organizations of their 

obligation to participate in a scheduled 

MWCB test.11

Finally, proposed Rule 49(c)(2) would 

provide that member organizations not 

required to participate in a scheduled 

MWCB test pursuant to standards 

established in paragraphs (b)(1) and (3) 

of Rule 49 would be permitted to 

participate in a scheduled MWCB test. 

The Exchange proposes to implement 

the proposed rule change at the same 

time that the Exchange notifies member 

organizations of required participation 

in the 2019 Regulation SCI industry 

test.12 The 2019 SCI Notice would 

identify the member organizations that 

would be required to participate in 

scheduled MWCB testing. Member 

organizations notified in the 2019 SCI 

Notice of their obligation to participate 

in a scheduled MWCB test would be 

required to participate in that test on at 

least one of the testing dates established 

by the SIPs.13


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41118 Federal Register / Vol. 83, No. 160 / Friday, August 17, 2018 / Notices 

14 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). 

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

16 15 U.S.C. 78f(b)(8). 

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

18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Available at https://www.theice.com/ 

publicdocs/clear_credit/ICE_Clear_Credit_

Rules.pdf. Capitalized terms used herein but not 

otherwise defined have the meaning set forth in the 

ICC Rules. 

4Securities Exchange Act Release No. 34–83513 

(June 25, 2018), 83 FR 30802 (June 29, 2018) (SR– 

ICC–2018–006) (‘‘Notice’’). 

5Under the settled-to-market model, the transfer 

of Mark-to-Market Margin constitutes a settlement 

of the contract’s outstanding exposure, with the 

receiving party taking outright title to the Mark-toMarket Margin and the transferring party retaining 

no rights to such margin. Under the collateralizedto-market model, the transfer of Mark-to-Market 

Margin constitutes a pledge of collateral, such that 

the transferring party has a right to reclaim the 

collateral and the receiving party has an obligation 

to return the collateral. For further explanation of 

the settled-to-market model and collateralized-tomarket model, see Notice, 83 FR at 30803. 

6Notice, 83 FR at 30803. 

7 Id. 

8 Id. 

9 Id. 

10 Id. 

11Notice, 83 FR at 30803. 

III. Discussion and Commission’s 

Findings 

After careful review, the Commission 

finds that the proposed rule change, as 

modified by Amendment No. 1, is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.14 In particular, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

No. 1, is consistent with Section 6(b)(5) 

of the Act,15 which requires, among 

other things, that the rules of a national 

securities exchange be 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 

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, and that the rules not be 

designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. The 

Commission also finds that the 

proposed rule change, as modified by 

Amendment No. 1, is consistent with 

Section 6(b)(8) of the Act,16 which 

requires that the rules of an exchange 

not impose any burden on competition 

that is not necessary or appropriate in 

furtherance of the purposes of the Act. 

As indicated above, the Commission has 

received no comment letters addressing 

the proposed rule change. 

The Commission believes that 

amending NYSE Rule 49 to require 

certain member organizations to 

participate in scheduled MWCB testing 

would enable the Exchange, 

participating member organizations, and 

others to assess the readiness of 

participating member organizations to 

respond in the event of unanticipated 

market volatility. Member organizations 

required to participate in MWCB testing 

pursuant to the proposal would be 

designated as such using the same 

standards used by the Exchange in 

determining which member 

organizations are subject to mandatory 

Regulation SCI testing. Because these 

member organizations have been 

designated by the Exchange as essential 

to the maintenance of a fair and orderly 

market, their demonstrated ability to 

halt and subsequently re-open trading in 

a manner consistent with the MWCB 

rules should contribute to the fairness 

and orderliness of the market for the 

benefit of all market participants. The 

Commission therefore believes that the 

proposal, as modified by Amendment 

No. 1, is designed to remove 

impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system, and to 

protect investors and the public interest. 

Accordingly, for the reasons 

discussed above, the Commission 

believes that the Exchange’s proposal, as 

modified by Amendment No. 1, is 

consistent with the Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,17 that the 

proposed rule change (SR–NYSE–2018– 

31), as modified by Amendment No.1, 

be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2018–17743 Filed 8–16–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83832; File No. SR–ICC– 

2018–006] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Order Approving 

Proposed Rule Change Relating To 

Amending the ICC Clearing Rules 

Regarding Mark-to-Market Margin 

August 13, 2018. 

I. Introduction 

On June 13, 2018, ICE Clear Credit 

LLC (‘‘ICC’’) 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 the ICC Clearing Rules (the ‘‘ICC 

Rules’’) 3 to more clearly characterize 

Mark-to-Market Margin payments as 

settled-to-market rather than 

collateralized-to-market. The proposed 

rule change was published in the 

Federal Register on June 29, 2018.4 The 

Commission has not received any 

comments on the proposed rule change. 

For the reasons discussed below, the 

Commission is approving the proposed 

rule change. 

II. Description of the Proposed Rule 

Change 

The proposed rule change would 

revise Chapters 4, 8, and 20 of the ICC 

Rules to more clearly characterize Markto-Market Margin payments as 

settlement payments (‘‘settled-tomarket’’) rather than collateral 

(‘‘collateralized-to-market’’).5 The 

proposed rule change would not change 

the manner in which Mark-to-Market 

Margin is calculated, or other current 

ICC operational practices.6 Rather, the 

proposed rule change would revise 

terminology to further clarify the legal 

characterization that payments of Markto-Market Margin represent settlement 

rather than collateral payments.7 ICC 

states that these clarifying changes are 

the result of ICC’s analysis of the legal 

characterization of Mark-to-Market 

Margin payments, at the request of its 

Clearing Participants (‘‘CPs’’).8

The proposed rule change would 

revise Rule 401 to reference Mark-toMarket Margin Balance, a new term that 

is defined in Rule 404 to mean the 

aggregate amount of Mark-to-Market 

Margin paid or received.9 The new 

definition would be used in several 

calculations to describe specifics 

pertaining to the Mark-to-Market Margin 

calculation.10 For example, the 

proposed rule change would amend 

Rule 401(a), which governs House 

Margin, to state that ICC calculates a net 

amount of Mark-to-Market Margin by 

subtracting a CP’s Mark-to-Market 

Margin Balance from a CP’s Mark-toMarket Margin Requirement.11 The 

proposed rule change would make 

corresponding changes to reference 


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