Federal Register / Vol. 80, No. 66 / Tuesday, April 7, 2015 / Notices 18665 

1The rule generally requires all assets to be 

deposited in the safekeeping of a ‘‘bank or other 

company whose functions and physical facilities 

are supervised by Federal or State authority.’’ The 

fund’s securities must be physically segregated at 

all times from the securities of any other person. 

2The accountant must transmit to the 

Commission promptly after each examination a 

certificate describing the examination on Form N– 

17f–2. The third (scheduled) examination may 

coincide with the annual verification required for 

every fund by section 30(g) of the Act (15 U.S.C. 

80a–29(g)). 

3The 974 responses are: 1 (one) response to draft 

and adopt the resolution and 973 notations. 

Estimates of the number of hours are based on 

conversations with individuals in the fund 

industry. The actual number of hours may vary 

significantly depending on individual fund assets. 4This estimate is based on the following 

calculation: 0.5 (burden hours per fund) × $198 

(senior accountant’s hourly rate) = $99. Unless 

otherwise indicated, the hourly wage figures used 

herein are from the Securities Industry and 

Financial Markets Association’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1800-hour work-year and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits 

and overhead. 

5The estimate for the cost of board time as a 

whole is derived from estimates made by the staff 

regarding typical board size and compensation that 

is based on information received from fund 

representatives and publicly available sources. 

6Respondents estimated that each fund makes 

974 responses on an annual basis and spends a total 

of 0.25 hours per response. The fund personnel 

involved are Accounts Payable Manager ($186 

hourly rate), Operations Manager ($334 hourly rate) 

and Accounting Manager ($265 hourly rate). The 

average hourly rate of these personnel is $262. The 

estimated cost of preparing notations is based on 

the following calculation: 974 × 0.25 × $262 = 

$63,797. 

7This estimate is based on the following 

calculation: 7 × $198 (senior accountant’s hourly 

rate) = $1386. 

8On average, each year approximately 188 funds 

filed Form N–17f–2 with the Commission during 

calendar years 2011–2013. 

9This estimate is based on the following 

calculation: 188 (funds) × 252 (total annual hourly 

burden per fund) = 47,376 hours for rule. The 

annual burden for rule 17f–2 does not include time 

spent preparing Form N–17f–2. The burden for 

Form N–17f–2 is included in a separate collection 

of information. 

10This estimate is based on the following 

calculation: $67,482 (total annual cost per fund) × 

188 funds = $12,686,616. 

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

2 17 CFR 240.19b–4. 

materially in 1947. Rule 17f–2 

establishes safeguards for arrangements 

in which a registered management 

investment company (‘‘fund’’) is 

deemed to maintain custody of its own 

assets, such as when the fund maintains 

its assets in a facility that provides 

safekeeping but not custodial services.1

The rule includes several recordkeeping 

or reporting requirements. The fund’s 

directors must prepare a resolution 

designating not more than five fund 

officers or responsible employees who 

may have access to the fund’s assets. 

The designated access persons (two or 

more of whom must act jointly when 

handling fund assets) must prepare a 

written notation providing certain 

information about each deposit or 

withdrawal of fund assets, and must 

transmit the notation to another officer 

or director designated by the directors. 

An independent public accountant must 

verify the fund’s assets three times each 

year, and two of those examinations 

must be unscheduled.2

Rule 17f–2’s requirement that 

directors designate access persons is 

intended to ensure that directors 

evaluate the trustworthiness of insiders 

who handle fund assets. The 

requirements that access persons act 

jointly in handling fund assets, prepare 

a written notation of each transaction, 

and transmit the notation to another 

designated person are intended to 

reduce the risk of misappropriation of 

fund assets by access persons, and to 

ensure that adequate records are 

prepared, reviewed by a responsible 

third person, and available for 

examination by the Commission. The 

requirement that auditors verify fund 

assets without notice twice each year is 

intended to provide an additional 

deterrent to the misappropriation of 

fund assets and to detect any 

irregularities. 

The Commission staff estimates that 

each fund makes 974 responses and 

spends an average of 252 hours annually 

in complying with the rule’s 

requirements.3 Commission staff 

estimates that on an annual basis it 

takes: (i) 0.5 hours of fund accounting 

personnel at a total cost of $99 to draft 

director resolutions; 4 (ii) 0.5 hours of 

the fund’s board of directors at a total 

cost of $2200 to adopt the resolution; 5

(iii) 244 hours for the fund’s accounting 

personnel at a total cost of $63,797 to 

prepare written notations of 

transactions; 6 and (iv) 7 hours for the 

fund’s accounting personnel at a total 

cost of $1386 to assist the independent 

public accountants when they perform 

verifications of fund assets.7

Commission staff estimates that 

approximately 188 funds file Form N– 

17f–2 each year.8 Thus, the total annual 

hour burden for rule 17f–2 is estimated 

to be 47,376 hours.9 Based on the total 

costs per fund listed above, the total 

cost of rule 17f–2’s collection of 

information requirements is estimated 

to be approximately $12.7 million.10

The estimate of average burden hours 

is made solely for the purposes of the 

Paperwork Reduction Act, and is not 

derived from a comprehensive or even 

a representative survey or study of the 

costs of Commission rules and forms. 

Complying with the collections of 

information required by rule 17f–2 is 

mandatory for those funds that maintain 

custody of their own assets. Responses 

will not be kept confidential. An agency 

may not conduct or sponsor, and a 

person is not required to respond to, a 

collection of information unless it 

displays a currently valid control 

number. 

Written comments are invited on: (a) 

Whether the collection of information is 

necessary for the proper performance of 

the functions of the Commission, 

including whether the information has 

practical utility; (b) the accuracy of the 

Commission’s estimate of the burden of 

the collection of information; (c) ways to 

enhance the quality, utility, and clarity 

of the information collected; and (d) 

ways to minimize the burden of the 

collection of information on 

respondents, including through the use 

of automated collection techniques or 

other forms of information technology. 

Consideration will be given to 

comments and suggestions submitted in 

writing within 60 days of this 

publication. 

Please direct your written comments 

to Pamela Dyson, Director/Chief 

Information Officer, Securities and 

Exchange Commission, c/o Remi PavlikSimon, 100 F Street NE., Washington, 

DC 20549; or send an email to: PRA_

Mailbox@sec.gov. 

Dated: April 1, 2015. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–07852 Filed 4–6–15; 8:45 am] 

BILLING CODE CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74622; File No. SR– 

ISEGemini–2015–08] 

Self-Regulatory Organizations; ISE 

Gemini, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Share MemberDesignated Risk Settings in the 

Trading System With Clearing 

Members 

APRIL 1, 2015. 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 March 30, 2015 ISE Gemini, LLC (the 

‘‘Exchange’’ or ‘‘ISE Gemini’’) filed with 

the Securities and Exchange 

Commission the proposed rule change, 

as described in Items I, II, and III below, 

which items have been prepared by the 

self-regulatory organization. The 

Commission is publishing this notice to 

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18666 Federal Register / Vol. 80, No. 66 / Tuesday, April 7, 2015 / Notices 

3See Rule 706(a). 

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

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

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

ISE Gemini proposes to amend Rule 

706 to authorize the Exchange to share 

any Member-designated risk settings in 

the trading system with the Clearing 

Member that clears transactions on 

behalf of the Member. The text of the 

proposed rule change is available on the 

Exchange’s Web site (http://

www.ise.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 these statements may be examined at 

the places specified in Item IV below. 

The self-regulatory organization 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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Rule 706 to authorize the Exchange to 

share any Member-designated risk 

settings in the trading system with the 

Clearing Member that clears 

transactions on behalf of the Member. 

Rule 706 states that ‘‘[u]nless otherwise 

provided in the Rules, no one but a 

Member or a person associated with a 

Member shall effect any Exchange 

Transactions.’’ 3 The Exchange proposes 

to amend the current rule by adding the 

following sentence: ‘‘The Exchange may 

share any Member-designated risk 

settings in the trading system with the 

Clearing Member that clears 

transactions on behalf of the Member.’’ 

Each Member that transacts through a 

Clearing Member on the Exchange 

executes a Letter of Clearing 

Authorization, in the case of Electronic 

Access Members, or a Market Maker 

Letter of Guarantee, in the case of 

Primary Market Makers and Competitive 

Market Makers, wherein the Clearing 

Member ‘‘accepts financial 

responsibility for all Exchange 

Transactions made by the’’ Member on 

whose behalf the Clearing Member 

submits the letter of guarantee. The 

Exchange believes that because Clearing 

Members guarantee all transactions on 

behalf of a Member, and therefore, bear 

the risk associated with those 

transactions, it is appropriate for 

Clearing Members to have knowledge of 

what risk settings a Member may utilize 

within the trading system. 

The Exchange notes that while not all 

Members are Clearing Members, all 

Members require a Clearing Member’s 

consent to clear transactions on their 

behalf in order to conduct business on 

the Exchange. As the Clearing Member 

ultimately bears all the risk for a trade 

they clear on any Member’s behalf, the 

Exchange believes it is reasonable to 

provide Clearing Members with 

information relating to the risk settings 

used by each Member whose 

transactions they are clearing. To the 

extent that a Clearing Member might 

reasonably require a Member to provide 

access to its risk settings as a 

prerequisite to continue to clear trades 

on the Member’s behalf, the Exchange’s 

proposal to share those risk settings 

directly reduces the administrative 

burden on Members and ensures that 

Clearing Members are receiving 

information that is up-to-date and 

conforms to the settings active in the 

trading system. 

The Exchange further notes that any 

broker-dealer is free to become a 

Clearing Member of the Options 

Clearing Corporation (the ‘‘OCC’’), 

which would enable that Member to 

avoid sharing risk settings with any 

third party, if they so choose. For these 

reasons, the Exchange believes that the 

proposal is consistent with the Act as it 

provides Clearing Members with 

additional risk-related information that 

may aid them in complying with the 

Act, notably Rule 15c3–5 and, as noted, 

Members that do not wish to share such 

settings with a Clearing Member can do 

so by become clearing members of the 

OCC. 

The risk settings that would be shared 

pursuant to the proposed rule are 

currently codified in Rule 804. The risk 

settings are designed to mitigate the 

potential risks of multiple executions 

against a Member’s trading interest that, 

in today’s highly automated and 

electronic trading environment, can 

occur simultaneously across multiple 

series and multiple option classes. The 

proposed rule will allow the Exchange 

to share a Member’s risk settings with 

the Clearing Member that guarantees the 

Member’s transactions, and therefore 

has a financial interesting [sic] in 

understanding the risk tolerance of a 

Member. 

Because the Letter of Clearing 

Authorization and the Market Maker 

Letter of Guarantee codifies 

relationships between a Member and the 

Clearing Member, the Exchange is on 

notice of which Clearing Members have 

relationships with which Members. The 

proposed rule change would simply 

provide the Exchange with authority to 

directly provide Clearing Members with 

information that may otherwise be 

available to such Clearing Members by 

virtue of their relationship with the 

respective Member. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder that 

are applicable to a national securities 

exchange, and, in particular, with the 

requirements of Section 6(b) of the Act.4

In particular, the proposal is consistent 

with Section 6(b)(5) of the Act,5 because 

it is designed to promote just and 

equitable principles of trade, to remove 

impediments to and perfect the 

mechanisms of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. 

The Exchange believes that the 

proposed rule change removes 

impediments to and perfects the 

mechanism of a free and open market by 

codifying that the Exchange can directly 

provide to Clearing Members that 

guarantee that Member’s transactions on 

the Exchange the Member-designated 

risk settings in the trading system, 

which are designed to mitigate the 

potential risk of multiple executions 

against a Member’s trading interest that, 

in today’s highly automated and 

electronic trading environment, can 

occur simultaneously across multiple 

series and multiple option classes. The 

Exchange believes that the proposed 

rule change is consistent with the 

protection of investors and the public 

interests because it will permit Clearing 

Members with a financial interest in a 

Member’s risk settings to better monitor 

and manage the potential risks assumed 

by Members with whom the Clearing 

Member has entered into a letter of 

guarantee, thereby providing Clearing 

Members with greater control and 

flexibility over setting their own risk 

tolerance and exposure. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 66 / Tuesday, April 7, 2015 / Notices 18667 

6 15 U.S.C. 78f(b)(8). 

7 15 U.S.C. 78s(b)(3)(A). 

8 17 CFR 240.19b-4(f)(6). 

9 17 CFR 200.30–3(a)(12). 

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

2See 17 CFR 240.19b–4. 

3A Registered Options Trader or ROT is a regular 

member or a foreign currency options participant of 

the Exchange located on the trading floor who has 

received permission from the Exchange to trade in 

options for his own account. See Exchange Rule 

1014(b)(i). 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange believes the proposal is 

consistent with Section 6(b)(8) of the 

Act 6 in that it does not impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

proposed rule change is not designed to 

address any aspect of competition, but 

would provide authority for the 

Exchange to directly share risk settings 

with Clearing Members regarding the 

Members with whom the Clearing 

Member has executed a letter of 

guarantee so the Clearing Member can 

better monitor and manage the potential 

risks assumed by the Members, thereby 

providing them with greater control and 

flexibility over setting their own risk 

tolerance and exposure. The proposed 

rule change does not pose an undue 

burden on non-Clearing Members 

because, unlike Clearing Members, nonClearing Members do not guarantee the 

execution of the Member transactions 

on the Exchange. The proposed rule 

change is structured to offer the same 

enhancement to all Clearing Members, 

regardless of size, and would not 

impose a competitive burden on any 

participant. 

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 Exchange believes that the 

foregoing proposed rule change may 

take effect upon filing with the 

Commission pursuant to 

Section19(b)(3)(A) 7 of the Act and Rule 

19b–4(f)(6) thereunder 8 because the 

foregoing 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 after its filing date, or such 

shorter time as the Commission may 

designate. 

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: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

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– 

ISEGemini 2015–08 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–ISEGemini–2015–08. 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 Web site (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 Web site 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 

offices of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

ISEGemini–2015–08, and should be 

submitted on or before April 28, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–07849 Filed 4–6–15; 8:45 am] 

BILLING CODE CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74627; File No. SR–Phlx– 

2015–30] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend 

Section (a)(iv) of Rule 703, Financial 

Responsibility and Reporting 

April 1, 2015. 

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 March 23, 

2015, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I, II, 

and III, below, which Items have been 

substantially 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 

section (a)(iv) of Rule 703, Financial 

Responsibility and Reporting, as 

described below.3

The text of the proposed rule change 

is below. Proposed new language is in 

italics; proposed deletions are in 

brackets. 

* * * * * 

Rule 703. Financial Responsibility and 

Reporting 

(a) Financial Responsibility Standards.— 

Each member organization effecting 

securities transactions shall comply with 

the capital requirements set forth below: 

(i) each member organization subject to SEC 

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