37942 Federal Register / Vol. 82, No. 155 / Monday, August 14, 2017 / Notices 

15 15 U.S.C. 78s(b)(3)(A)(ii). 16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.17Ad–22(e)(17). 

4Capitalized terms not defined herein are defined 

in the DTC Rules, GSD Rules, MBSD Rules, or 

the marketplace for violations of 

Exchange Rules. The ORF assists the 

Exchange to fund the cost of this 

regulation of the marketplace. 

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. The ORF is 

not intended to have any impact on 

competition. Rather, it is designed to 

enable the Exchange to recover a 

material portion of the Exchange’s cost 

related to its regulatory activities. The 

Exchange is obligated to ensure that the 

amount of regulatory revenue collected 

from the ORF, in combination with its 

other regulatory fees and fines, does not 

exceed regulatory costs. 

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 foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.15 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 No. SR–ISE– 

2017–71 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 No. 

SR–ISE–2017–71. 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 the 

filing also will be available for 

inspection and copying at the principal 

office 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 No. SR–ISE–2017– 

71, and should be submitted on or 

before September 5, 2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–17050 Filed 8–11–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81338; File Nos. SR–DTC– 

2017–014; SR–FICC–2017–017; SR–NSCC– 

2017–013] 

Self-Regulatory Organizations; The 

Depository Trust Company; Fixed 

Income Clearing Corporation; National 

Securities Clearing Corporation; 

Notice of Filings of Proposed Rule 

Changes To Adopt the Clearing 

Agency Operational Risk Management 

Framework 

DATE: August 8, 2017. 

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

Securities Exchange Act of 1934, as 

amended (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on July 25, 2017, The Depository Trust 

Company (‘‘DTC’’), Fixed Income 

Clearing Corporation (‘‘FICC’’), and 

National Securities Clearing Corporation 

(‘‘NSCC,’’ and together with DTC and 

FICC, the ‘‘Clearing Agencies’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule changes as described in 

Items I and II below, which Items have 

been prepared primarily by the Clearing 

Agencies. The Commission is 

publishing this notice to solicit 

comments on the proposed rule changes 

from interested persons. 

I. Clearing Agencies’ Statement of the 

Terms of Substance of the Proposed 

Rule Changes 

The proposed rule changes would 

adopt the Clearing Agency Operational 

Risk Management Framework 

(‘‘Framework’’) of the Clearing 

Agencies, described below. The 

Framework would apply to both of 

FICC’s divisions, the Government 

Securities Division (‘‘GSD’’) and the 

Mortgage-Backed Securities Division 

(‘‘MBSD’’). The Framework would be 

maintained by the Clearing Agencies to 

support their compliance with Rule 

17Ad–22(e)(17) under the Act, as 

described below.3

Although the Clearing Agencies 

would consider the Framework to be a 

rule, the proposed rule changes do not 

require any changes to the Rules, Bylaws and Organization Certificate of 

DTC (‘‘DTC Rules’’), the Rulebook of 

GSD (‘‘GSD Rules’’), the Clearing Rules 

of MBSD (‘‘MBSD Rules’’), or the Rules 

& Procedures of NSCC (‘‘NSCC Rules’’), 

as the Framework would be a 

standalone document.4


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NSCC Rules, as applicable, available at http://

dtcc.com/legal/rules-and-procedures. 

5 17 CFR 240.17Ad–22(e)(17). 

6The parent company of the Clearing Agencies is 

The Depository Trust & Clearing Corporation 

(‘‘DTCC’’). DTCC operates on a shared services 

model with respect to the Clearing Agencies. Most 

corporate functions are established and managed on 

an enterprise-wide basis pursuant to intercompany 

agreements under which it is generally DTCC that 

provides a relevant service to a Clearing Agency. 

7The Three Lines of Defense approach to risk 

management identifies the roles and responsibilities 

of different Clearing Agency Businesses or Clearing 

Agency Support Areas in identifying, assessing, 

measuring, monitoring, mitigating, and reporting 

certain key risks faced by the Clearing Agencies. 

The Three Lines of Defense approach is more fully 

described in a separate framework, the Clearing 

Agency Risk Management Framework, maintained 

by the DTCC General Counsel’s Office. See SR– 

DTC–2017–013, SR–FICC–2017–016, SR–NSCC– 

2017–012, which was filed with the Commission 

but has not yet been published in the Federal 

Register. A copy of these proposed rule change 

filings is available at http://www.dtcc.com/legal/ 

sec-rule-filings. 

II. Clearing Agencies’ Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Changes 

In their filings with the Commission, 

the Clearing Agencies included 

statements concerning the purpose of 

and basis for the proposed rule changes 

and discussed any comments they 

received on the proposed rule changes. 

The text of these statements may be 

examined at the places specified in Item 

IV below. The Clearing Agencies have 

prepared summaries, set forth in 

sections A, B, and C below, of the most 

significant aspects of such statements. 

(A) Clearing Agencies’ Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Changes 

1. Purpose 

The Clearing Agencies are proposing 

to adopt the Framework, which would 

describe the manner in which each of 

the Clearing Agencies manages 

operational risk, which is defined by the 

Clearing Agencies in the Framework as 

the risk of direct or indirect loss or 

reputational harm resulting from an 

event, internal or external, that is the 

result of inadequate or failed processes, 

people, and systems (‘‘Operational 

Risk’’). As described in more detail 

below, the Framework would set forth 

the manner in which the Clearing 

Agencies (1) generally manage 

Operational Risk; (2) more specifically 

manage their information technology 

risks; and (3) more specifically manage 

their business continuity risks. The 

processes and systems described in the 

Framework, and any policies, 

procedures or other documents created 

to support those processes, support the 

Clearing Agencies’ compliance with the 

requirements of Rule 17Ad–22(e)(17).5

The Framework would be maintained 

by the DTCC Operational Risk 

Management group (‘‘ORM’’), on behalf 

of the Clearing Agencies.6

Operational Risk Management 

The Framework would describe how 

the Clearing Agencies generally manage 

their Operational Risks. The Framework 

would describe how ORM is specifically 

charged with establishing appropriate 

systems, policies, procedures, and 

controls to enable management to 

identify plausible sources of 

Operational Risk in order to mitigate 

their impact to the Clearing Agencies, 

including through the Risk Tolerance 

Statements and Risk Profiles, as 

described below. 

The Framework would describe how 

the Clearing Agencies identify key risks 

and set metrics to categorize such risks 

(from ‘‘no impact’’ to ‘‘severe impact’’) 

through ‘‘Risk Tolerance Statements.’’ 

The Framework would describe how the 

Risk Tolerance Statements document 

the overall risk reduction or mitigation 

objectives for the Clearing Agencies 

with respect to identified risks to the 

Clearing Agencies. The Framework 

would also describe how the Risk 

Tolerance Statements document the risk 

controls and other measures used to 

manage such identified risks, including 

escalation requirements in the event of 

risk metric breaches. The Framework 

would state that each Risk Tolerance 

Statement is reviewed, revised, updated, 

and/or created, as necessary, by ORM on 

an annual basis. 

The Framework would also describe 

how the Clearing Agencies monitor key 

risks, including Operational Risk, 

through ‘‘Risk Profiles,’’ which 

document the assessment of risk for 

each of the Clearing Agencies’ 

businesses and support areas (each a 

‘‘Clearing Agency Business’’ and/or 

‘‘Clearing Agency Support Area’’). The 

risk assessment documented in these 

profiles includes (1) identification and 

assessment of inherent risk, which is 

risk without any mitigating controls; (2) 

identification of existing controls, and, 

as appropriate, any new additional 

controls, and evaluation of the same risk 

against the strength of such controls; 

and (3) identification of any residual 

risk and a determination to either 

further mitigate such risk or accept such 

risk by the applicable Clearing Agency 

Business or Clearing Agency Support 

Area. 

The Framework would also provide a 

description of the responsibilities of 

ORM, which is a part of the second line 

of defense within the Clearing Agencies’ 

Three Lines of Defense approach to risk 

management.7 The Framework would 

identify some of those responsibilities 

as including, for example, management 

of the Risk Tolerance Statements and 

working with the Clearing Agency 

Businesses and Clearing Agency 

Support Areas to create and monitor 

Risk Profiles. 

Information Technology Risk 

The Framework would describe how 

the Clearing Agencies address 

information technology risks. The 

Framework would state that the DTCC 

Technology Risk Management group 

(‘‘TRM’’), on behalf of the Clearing 

Agencies, is responsible for establishing 

appropriate programs, policies, 

procedures, and controls with respect to 

the Clearing Agencies’ information 

technology risks to help management 

ensure that systems have a high degree 

of security, resiliency, operational 

reliability, and adequate, scalable 

capacity. The Framework would 

identify some of the recognized 

information technology standards that 

may be used by TRM, as applicable, in 

support of executing its responsibilities. 

The Framework would also identify 

some of TRM’s responsibilities, which 

include, for example, (1) performing risk 

assessments to, among other things, 

facilitate the determination of the 

Clearing Agencies’ investment and 

remediation priorities; (2) facilitating 

annual mandatory and periodic 

information security awareness, 

education, training, and communication 

to personnel of Clearing Agency 

Businesses and Clearing Agency 

Support Areas and relevant external 

parties; and (3) creating, implementing, 

and managing certain programs, 

including programs that (i) address 

information security throughout a 

system’s lifecycle, (ii) facilitate 

compliance with evolving and 

established regulatory rules and 

guidelines that govern protection of the 

information assets of the Clearing 

Agencies and their participants, (iii) 

identify, prioritize, and manage the 

level of cyber threats to the Clearing 

Agencies, and (iv) assure that access to 

Clearing Agency information assets is 

appropriately authorized and 

authenticated based on current business 

need. 

The Framework would state that 

TRM’s risk strategy is closely aligned to 

the Clearing Agencies’ business drivers 

and future strategic direction, such that 

efforts to achieve information security 

threat mitigation objectives, resiliency 

of infrastructure supporting Clearing 

Agency critical business applications, 


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8 15 U.S.C. 78q–1(b)(3)(F). 

9 17 CFR 240.17Ad–22(e)(17). 

10 15 U.S.C. 78q–1(b)(3)(F). 

11 Id. 

12 17 CFR 240.17Ad–22(e)(17). 

13 17 CFR 240.17Ad–22(e)(17)(i). 

and operational reliability are 

prioritized. The Framework would state 

this is also accomplished through 

TRM’s early and consistent involvement 

in initiatives to develop new products 

and systems. The Framework would 

state that, by involving TRM from the 

initial planning phase, through the 

design, build and operative phases of 

those initiatives, resiliency, operational 

effectiveness, reliability, and availability 

requirements are addressed and 

incorporated into design and execution 

from both a technology and cyber 

security perspective. 

The Framework would also describe 

the Clearing Agencies’ security strategy 

and defense, and would state that the 

Clearing Agencies’ network security 

framework and preventive controls are 

designed to support a reliable and 

robust tiered security strategy and 

defense. These controls include modern 

and technically advanced security 

firewalls, intrusion detection, system 

and data monitoring, and data 

protection tools. The Framework would 

describe the Clearing Agencies’ 

enhanced security features and the 

standards they use to assess 

vulnerabilities and potential threats. 

Business Continuity Risk 

Finally, the Framework would 

describe how the Clearing Agencies 

have established and maintain business 

continuity plans to address events that 

may pose a significant risk of disrupting 

their operations. The Framework would 

describe how the business continuity 

process for each Clearing Agency 

Business and Clearing Agency Support 

Area is ranked within a range of tiers, 

from 0 to 5, based on criticality to each 

applicable Clearing Agency’s operations 

(each a ‘‘Tier’’), where Tier 0 equates to 

critical operations or support of such 

operations for which virtually no 

downtime is permitted under applicable 

regulatory standards, and Tier 5 equates 

to non-essential operations or support of 

such operations for which recovery 

times of greater than five days is 

permitted. 

The Framework would state that, on 

an annual basis, each Clearing Agency 

Business and Clearing Agency Support 

Area updates its own business 

continuity plan and reviews and ratifies 

its business impact analysis. These 

analyses are used by the DTCC Business 

Continuity Management department 

(‘‘BCM’’), on behalf of the Clearing 

Agencies, to validate that business’ or 

area’s current Tier ranking. The 

Framework would identify the key 

elements of these business impact 

analyses, which include (1) an 

assessment of the criticality of the 

applicable Clearing Agency Business or 

Clearing Agency Support Area, based on 

potential impact to the Clearing Agency; 

(2) an estimation of the maximum 

allowable downtime for the applicable 

Clearing Agency Business or Clearing 

Agency Support Area; and (3) the 

identification of dependencies, and 

ranking such dependencies to align with 

the process criticality for recovery, of 

the applicable Clearing Agency Business 

or Clearing Agency Support Area. 

The Framework would describe the 

Clearing Agencies’ multiple data 

centers, and the emergency monitoring 

and back up systems available at each 

site. The Framework would describe the 

capacity of the various data centers. The 

Framework would also describe the 

Clearing Agencies’ operating centers, 

and would describe how each Clearing 

Agency Business and Clearing Agency 

Support Area creates and deploys its 

own work area recovery strategy to 

mitigate the loss of primary workspace 

and/or associated desktop technology, 

as well as for purposes of social 

distancing among personnel. The 

Framework would describe how each of 

these work area recovery strategies is 

developed and executed, based on the 

applicable Clearing Agency Business’ 

and Clearing Agency Support Area’s 

current Tier ranking, as described 

above. 

The Framework would describe the 

responsibilities of BCM in managing a 

disruptive business event, which 

includes coordination with a team of 

representatives from each Clearing 

Agency Business and Clearing Agency 

Support Area. Finally, the Framework 

would describe how the Clearing 

Agencies conduct regular exercises used 

to simulate loss of Clearing Agency 

locations, and would describe some of 

the preventive measures the Clearing 

Agencies take with respect to business 

continuity risk management. 

2. Statutory Basis 

The Clearing Agencies believe that the 

proposed rule changes are consistent 

with the requirements of the Act and the 

rules and regulations thereunder 

applicable to a registered clearing 

agency. In particular, the Clearing 

Agencies believe that the Framework is 

consistent with Section 17A(b)(3)(F) of 

the Act 8 and the subsections cited 

below of Rule 17Ad–22(e)(17),9

promulgated under the Act, for the 

reasons described below. 

Section 17A(b)(3)(F) of the Act 

requires, in part, that the rules of a 

registered clearing agency be designed 

to promote the prompt and accurate 

clearance and settlement of securities 

transactions, and 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.10 As described above, the 

Framework would describe how the 

Clearing Agencies manage their 

Operational Risk, technology and 

information security risks, and their 

business continuity risks. The 

processes, systems, and controls used by 

the Clearing Agencies to identify, 

manage, and mitigate these risks, as 

described in the Framework, and the 

policies and procedures that support 

these activities, assist the Clearing 

Agencies to continue the prompt and 

accurate clearance and settlement of 

securities transactions and continue to 

assure the safeguarding of securities and 

funds which are in their custody or 

control or for which they are 

responsible notwithstanding the 

realization of these risks. Therefore, the 

Clearing Agencies believe the 

Framework is consistent with the 

requirements of Section 17A(b)(3)(F) of 

the Act.11

The Clearing Agencies believe that the 

Framework is consistent with the 

requirements of each of the subsections 

of Rule 17Ad–22(e)(17),12 cited below, 

for the reasons described below. 

Rule 17Ad–22(e)(17)(i) under the Act 

requires, in part, that each covered 

clearing agency establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

manage the covered clearing agency’s 

operational risks by identifying the 

plausible sources of operational risk, 

both internal and external, and 

mitigating their impact through the use 

of appropriate systems, policies, 

procedures, and controls.13 The 

Framework would describe how the 

Risk Tolerance Statements and the Risk 

Profiles both assist the Clearing 

Agencies to identify the plausible 

sources of Operational Risk, both 

internal and external. As described 

above, the Risk Tolerance Statements 

identify both internal and external 

Clearing Agency risks, categorize the 

respective Clearing Agencies’ tolerance 

for those risks, and then identify 

governance process applicable to any 

breach of those tolerances. In this way, 

the Risk Tolerance Statements allow the 

Clearing Agencies to identify and 

manage the risks they face. As described 

above, the Risk Profiles serve a similar 


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14 Id. 

15 17 CFR 240.17Ad–22(e)(17)(ii). 

16 Id. 

17 17 CFR 240.17Ad–22(e)(17)(iii). 

18 Id. 

function, by serving as a tool for 

identifying and assessing inherent risks, 

and evaluating the controls around 

those risks. The Framework also 

describes the role of ORM, which 

includes oversight of the Risk Tolerance 

Statements and Risk Profiles. By 

describing the functions of the Risk 

Tolerance Statements and Risk Profiles, 

which, together, assist the Clearing 

Agencies in effectively managing their 

operational risks by identifying the 

plausible sources of operational risk, 

both internal and external, and by 

assisting the Clearing Agencies in 

mitigating the impact of those risks, and 

by describing the role of ORM in 

facilitating these tools, the Clearing 

Agencies believe the Framework is 

consistent with the requirements of Rule 

17Ad–22(e)(17)(i).14

Rule 17Ad–22(e)(17)(ii) under the Act 

requires, in part, that each covered 

clearing agency establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

manage the covered clearing agency’s 

operational risks by ensuring that 

systems have a high degree of security, 

resiliency, operational reliability, and 

adequate, scalable capacity.15 The 

Framework would describe the role, and 

some of the responsibilities, of TRM, in 

managing the Clearing Agencies’ 

information technology risks and in 

helping the Clearing Agencies maintain 

systems with a high degree of security, 

resiliency, operational reliability, and 

adequate, scalable capacity. The 

Framework would also describe the 

programs, systems, and controls used by 

TRM in performing this function, and 

would identify some of the standards on 

information technology risk 

management that may be used by TRM 

in support of its responsibilities. The 

Framework would also describe TRM’s 

role in product and project initiatives to 

address security issues through the 

lifecycle of an initiative. Therefore, by 

describing the role and responsibilities 

of TRM in managing the Clearing 

Agencies’ information technology risks 

and in helping the Clearing Agencies 

maintain systems with a high degree of 

security, resiliency, operational 

reliability, and adequate, scalable 

capacity, the Clearing Agencies believe 

the Framework is consistent with the 

requirements of Rule 17Ad– 

22(e)(17)(ii).16

Rule 17Ad–22(e)(17)(iii) under the 

Act requires, in part, that each covered 

clearing agency establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

manage the covered clearing agency’s 

operational risks by establishing and 

maintaining a business continuity plan 

that addresses events posing a 

significant risk of disrupting 

operations.17 The Framework would 

describe how the Clearing Agencies 

have established and maintain business 

continuity plans, and would describe 

the critical features of those plans to 

demonstrate how such plans address 

events posing a significant risk of 

disrupting the Clearing Agencies’ 

operations. The Framework would also 

describe how each Clearing Agency 

Business and Clearing Agency Support 

Area reviews and ratifies its respective 

plan and its business impact analysis, 

relative to its assigned Tier. Therefore, 

through this description of the 

establishment, management and 

maintenance of the business continuity 

plans of the Clearing Agencies, the 

Clearing Agencies believe the 

Framework is consistent with the 

requirements of Rule 17Ad– 

22(e)(17)(iii).18

(B) Clearing Agencies’ Statement on 

Burden on Competition 

None of the Clearing Agencies believe 

that the Framework would have any 

impact, or impose any burden, on 

competition because the proposed rule 

changes reflect some of the existing 

methods by which the Clearing 

Agencies manage Operational Risk, 

including their management of 

information technology and business 

continuity risks, and would not 

effectuate any changes to the Clearing 

Agencies’ processes described therein as 

they currently apply to their respective 

participants. 

(C) Clearing Agencies’ Statement on 

Comments on the Proposed Rule 

Changes Received From Members, 

Participants, or Others 

The Clearing Agencies have not 

solicited or received any written 

comments relating to this proposal. The 

Clearing Agencies will notify the 

Commission of any written comments 

received by the Clearing Agencies. 

III. Date of Effectiveness of the 

Proposed Rule Changes, 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 clearing agency consents, the 

Commission will: 

(A) By order approve or disapprove 

such proposed rule changes, or 

(B) institute proceedings to determine 

whether the proposed rule changes 

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 

changes are 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– 

DTC–2017–014, SR–FICC–2017–017, or 

SR–NSCC–2017–013 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–DTC–2017–014, SR–FICC– 

2017–017, or SR–NSCC–2017–013. One 

of these file numbers 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 

changes that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule changes 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 the 

filing also will be available for 

inspection and copying at the principal 

office of the Clearing Agencies and on 

DTCC’s Web site (http://dtcc.com/legal/ 

sec-rule-filings.aspx). All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 


sradovich on DSK3GMQ082PROD with NOTICES
37946 Federal Register / Vol. 82, No. 155 / Monday, August 14, 2017 / Notices 

19 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 Nos. 77053 

(February 4, 3016), 81 FR 7163 (February 10, 2016) 

(SR–BX–2016–007); (Notice of Filing and 

Immediate Effectiveness of Proposed Rule Change 

Relating To Adopt an Options Regulatory Fee). 

4See Securities Exchange Act Release No. 78361 

(July 19, 2016), 81 FR 48485 (July 25, 2016) (SR– 

BX–2016–043). 

5See Options Trader Alert #2017–54. 

6Exchange Rules require each member to record 

the appropriate account origin code on all orders at 

the time of entry in order to allow the Exchange to 

properly prioritize and route orders and assess 

transaction fees pursuant to the Rules of the 

Exchange and report resulting transactions to OCC. 

7The Exchange uses reports from OCC to 

determine the identity of the executing clearing 

firm and ultimate clearing firm. 

8CMTA or Clearing Member Trade Assignment is 

a form of ‘‘give-up’’ whereby the position will be 

assigned to a specific clearing firm at OCC. 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–DTC– 

2017–014, SR–FICC–2017–017, or SR– 

NSCC–2017–013 and should be 

submitted on or before September 5, 

2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–17043 Filed 8–11–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81341; File No. SR–BX– 

2017–032] 

Self-Regulatory Organizations; 

NASDAQ BX, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Revise the Rules 

Regarding the Exchange’s Options 

Regulatory Fee 

DATES: August 8, 2017. 

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 July 26, 

2017, NASDAQ BX, Inc. (‘‘BX’’ 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 

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 revise BX 

Rules at Chapter XV, Section 5 to: (i) 

Make adjustments to the amount of its 

Options Regulatory Fee (‘‘ORF’’); and 

(ii) more closely reflect the manner in 

which BX assesses and collects its ORF. 

While the changes proposed herein 

are effective upon filing, the Exchange 

has designated the amendments [sic] 

become operative on August 1, 2017. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://nasdaqbx.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 

BX initially filed to establish its ORF 

in 2016.3 The Exchange has amended its 

ORF several times since the inception of 

this fee.4 At this time, the Exchange 

proposes to: (i) Amend the amount of its 

ORF; and (ii) revise BX Rules at Chapter 

XV, Section 5 to more closely reflect the 

manner in which BX assesses and 

collects its ORF. 

The Exchange supports a common 

approach for the assessment and 

collection of ORF among the various 

options exchanges that assess such a fee. 

Furthermore, the Exchange supports 

guidance from the Commission 

regarding regulatory cost structures to 

ensure equal knowledge and treatment 

among options markets assessing ORF. 

Proposal 1—Amend the Amount of the 

ORF 

The Exchange assesses an ORF of 

$0.0004 per contract side. The Exchange 

proposes to increase the ORF from 

$0.0004 per contract side to $0.0005 per 

contract side as of August 1, 2017 to 

account for a reduction in market 

volume. The Exchange’s proposed 

change to the ORF should balance the 

Exchange’s regulatory cost [sic] against 

the anticipated revenue. The Exchange 

regularly reviews its ORF to ensure that 

the ORF, in combination with its other 

regulatory fees and fines, does not 

exceed regulatory costs. The Exchange 

believes this adjustment will permit the 

Exchange to cover a material portion of 

its regulatory costs, while not exceeding 

regulatory costs. 

The Exchange notified its Participants 

of this ORF adjustment thirty (30) 

calendar days prior to the proposed 

operative date.5

Proposal 2—Reflect the Manner in 

Which BX Assesses and Collects its ORF 

Currently, BX assesses its ORF for 

each Customer option transaction that is 

either: (1) Executed by a Participant on 

BX; or (2) cleared by a BX Participant 

at The Options Clearing Corporation 

(‘‘OCC’’) in the Customer range,6 even if 

the transaction was executed by a nonmember of BX, regardless of the 

exchange on which the transaction 

occurs.7 If the OCC clearing member is 

a BX Participant, ORF is assessed and 

collected on all cleared Customer 

contracts (after adjustment for CMTA 8); 

and (2) if the OCC clearing member is 

not a BX Participant, ORF is collected 

only on the cleared Customer contracts 

executed at BX, taking into account any 

CMTA instructions which may result in 

collecting the ORF from a non-member. 

By way of example, if Broker A, a BX 

Participant, routes a Customer order to 

CBOE and the transaction executes on 

CBOE and clears in Broker A’s OCC 

Clearing account, ORF will be collected 

by BX from Broker A’s clearing account 

at OCC via direct debit. While this 

transaction was executed on a market 

other than BX, it was cleared by a BX 

Participant in the Participant’s OCC 

clearing account in the Customer range, 

therefore there is a regulatory nexus 

between BX and the transaction. If 

Broker A was not a BX Participant, then 

no ORF should be assessed and 

collected because there is no nexus; the 

transaction did not execute on BX nor 

was it cleared by a BX Participant. 

In the case where a Participant both 

executes a transaction and clears the 

transaction, the ORF is assessed to and 

collected from the Participant only 

once. In the case where a Participant 

executes a transaction and a different 

Participant clears the transaction, the 

ORF is assessed to and collected from 

the Participant who clears the 

transaction and not the Participant who 

executes the transaction. In the case 


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