41454 Federal Register / Vol. 82, No. 168 / Thursday, August 31, 2017 / Notices 

23See id. at 32029. 

24 In approving this rule change, the Commission 

has considered the rule’s impact on efficiency, 

competition, and capital formation. See 15 U.S.C. 

78c(f). 

25 15 U.S.C. 78f(b)(5). 

26 15 U.S.C. 78k–1(a)(1). 

27 17 CFR 242.608. 

28The Commission notes that in this regard IEX’s 

proposal is substantially similar to Bats BZX 

Exchange, Inc. (‘‘Bats’’) Rule 11.27(c)(5). 

29See, e.g., Bats Rule 11.9(c)(16), Nasdaq Stock 

Market LLC Rule 4702(b)(7), and Bats EDGX 

Exchange, Inc. Rule 11.8(e). 

30 15 U.S.C. 78s(b)(2). 

31 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

changes during the third quarter of 

2017.23

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds 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.24

Specifically, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,25 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 

facilitating 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. The Commission finds 

that the proposed rule change also is 

designed to support the principles of 

Section 11A(a)(1) 26 of the Act in that it 

seeks to assure fair competition among 

brokers and dealers and among 

exchange markets. 

The Commission finds that the 

Exchange’s proposal is consistent with 

the Act because it provides an optional 

tool that market makers may use as a 

backstop to help maintain a continuous 

quote in satisfaction of the Exchange’s 

minimum continuous quoting 

requirements, which may assist in the 

maintenance of fair and orderly markets. 

The Commission notes, however, that 

notwithstanding the availability of the 

Market Maker Peg Order functionality, 

the market maker remains responsible 

for meeting its obligations under IEX 

Rule 11.151, including entering, 

monitoring, and re-submitting, as 

applicable, compliant quotations. At the 

same time, the Commission finds that 

the proposal is reasonably designed to 

assist market makers in complying with 

the regulatory requirements of the 

Market Access Rule and Regulation 

SHO. The Commission notes, however, 

the Market Maker Peg Order does not by 

itself ensure that the market maker is 

satisfying the requirements of the 

Market Access Rule or Regulation SHO, 

including the satisfaction of the locate 

requirements of Rule 203(b)(1) of the 

Act or any exception thereto. 

The Commission believes that the 

Exchange’s proposal to subject all 

inbound and outbound communications 

related to Market Maker Peg Orders, 

including the automatic repricing of 

such orders, to POP latency is consistent 

with the Act. In particular, this 

treatment of the Market Maker Peg 

Order places a market maker using this 

order type in the same position as 

another market maker placing and 

updating its own quote directly without 

using the Market Maker Peg Order 

type—both will be subject to the POP 

and experience the same latency. In 

addition, this approach is consistent 

with the treatment of other displayed 

orders on the Exchange, all of which are 

subject to the POP latency. 

Further, the Commission believes that 

the Exchange’s proposal to specify how 

Market Maker Peg Orders will be priced 

in order to comply with the Tick Pilot 

Plan is consistent with the Act and Rule 

608 of Regulation NMS 27 because it 

implements the Tick Pilot Plan and 

conforms Exchange rules to those 

requirements.28

Finally, the Commission notes that 

other national securities exchanges offer 

similar order types to the Exchange’s 

proposed Market Maker Peg Order,29

and the Commission received no 

comments on the Exchange’s proposed 

rule change. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,30 that the 

proposed rule change (SR–IEX–2017– 

22), be and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–18455 Filed 8–30–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81486; File No. SR–ICC– 

2017–012] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Notice of Filing of 

Proposed Rule Change Relating to 

ICC’s Liquidity Risk Management 

Framework and ICC’s Stress Testing 

Framework 

August 25, 2017. 

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

Securities Exchange Act of 1934 1 and 

Rule 19b–4,2 notice is hereby given that 

on August 22, 2017, ICE Clear Credit 

LLC (‘‘ICC’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change described in Items I, II, and III 

below, which Items have been primarily 

prepared by ICC. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The principal purpose of the 

proposed rule change is to revise the 

ICC Liquidity Risk Management 

Framework and the ICC Stress Testing 

Framework. These revisions do not 

require any changes to the ICC Clearing 

Rules (‘‘Rules’’). 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, ICC 

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. ICC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

(a) Purpose 

ICC proposes revisions to its Stress 

Testing Framework and its Liquidity 

Risk Management Framework. 

Specifically, ICC proposes changes to 

enhance ICC’s stress testing and 

liquidity stress testing practices 

following the clearing of Single Name 

(‘‘SN’’) credit default swaps (‘‘CDS’’) 

referencing ICC Clearing Participants 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 82, No. 168 / Thursday, August 31, 2017 / Notices 41455 

3 ‘‘Default Probability’’ as referenced throughout 

the ICC Stress Testing Framework and ICC 

Liquidity Risk Management Framework is 

calculated using the Open Source ISDA CDS 

Standard Model (available at http://

www.cdsmodel.com/cdsmodel/). 

(‘‘CPs’’). ICC also proposes changes to 

the Stress Testing Framework to 

enhance compliance with U.S. 

Commodity Futures Trading 

Commission (‘‘CFTC’’) regulations 

including 17 CFR 39.36. ICC believes 

such revisions will facilitate the prompt 

and accurate clearance and settlement of 

securities transactions and derivative 

agreements, contracts, and transactions 

for which it is responsible. The 

proposed revisions are described in 

detail as follows. 

Stress Testing Framework 

ICC proposes changes to its Stress 

Testing Framework following clearing of 

SN CDS referencing ICC CPs. ICC 

proposes amendments to the 

‘Predefined Scenarios’ section of the 

Stress Testing Framework to amend 

scenarios classified as Hypothetically 

Constructed (Forward Looking) Extreme 

but Plausible Market Scenarios to 

incorporate additional losses related to 

the Expected Loss-Given-Default 

(‘‘ELGD’’) of all names not explicitly 

assumed to enter a state of default in a 

CP’s portfolio, and not limited to those 

in the Banking or Sovereign sectors. The 

ELGD amount will accumulate the LGD 

of all of the SNs in the portfolio that do 

not explicitly enter a state of default, 

weighted by the market observed 1-year 

end-of-day Default Probability.3

ICC proposes to incorporate an 

enhanced analysis into the ‘General 

Wrong Way Risk and Contagion Stress 

Tests’ section of the Stress Testing 

Framework that estimates profits and 

losses (‘‘P/L’’) arising from general 

wrong way risk (‘‘GWWR’’) generated by 

index and SN RFs that exhibit high 

degree of association with CPs. All 

positions in the index and SN 

instruments are used to construct for 

each CP a hypothetical sub-portfolio 

subject to an additional stress test 

analysis. Under the proposed analysis, if 

the constructed sub-portfolio presents 

GWWR stemming from positions in SN 

Risk Factors (‘‘RFs’’) that belong to the 

Banking and Sovereign Sections, 

additional GWWR related stress losses, 

deemed to be ‘extreme but plausible, 

will be added. These additional GWWR 

losses are computed as the product of 

the correlation-weighted 

uncollateralized LGDs and the SNspecific Default Probabilities. The 

proposed analysis is based on ICC’s 

current GWWR P/L calculation, but 

assumes that the GWWR Kendall-Tau 

correlation (currently the greatest of the 

estimate from the full historical time 

series, the immediate 250 observations 

prior to the analysis date, or the 250 

observations associated with a relevant 

stress period) of each CP-Sovereign or 

Banking RF pair are assumed to 

approach one, modeling the 

simultaneous occurrence of losses. The 

Default Probabilities utilized under the 

proposed approach will reflect the 

greater of the average 1-year CP SN 

Default Probability and the Default 

Probability implied by a 500-bp spread 

level at the 1-year tenor. 

Further, ICC proposes moving the 

current contagion GWWR P/L 

calculation from the ‘Methodology’ 

section to the ‘General Wrong Way Risk 

and Contagion Stress Tests’ section of 

the framework. ICC proposes adding 

language to the description of the 

current contagion GWWR P/L 

calculation, consisting of the 

correlation-weighted uncollateralized 

LGDs, to clarify that such scenario is 

considered extreme (as opposed to 

extreme but plausible). The extreme 

scenario is for information purposes 

only. 

ICC proposes adding a new ‘Guaranty 

Fund Sizing Sensitivity Analysis’ 

section to the Stress Testing Framework, 

which describes ICC’s approach to 

Guaranty Fund (‘‘GF’’) sizing. ICC’s GF 

model aims to establish financial 

resources that are sufficient to cover 

hypothetical losses associated with the 

simultaneous credit events where up to 

five SNs are impacted. Currently, two of 

the selected SNs are CP SNs (i.e., 

‘‘cover-2’’ GF sizing) and the other three 

SNs are non-CP SNs. ICC proposes 

amending the framework to add an 

additional combination of impacted five 

SNs, for monitoring and comparison 

purposes. Specifically, ICC proposes 

analyzing three CP SNs (i.e., ‘‘cover-3’’ 

GF sizing) and two non-CP SNs. This 

alternative combination analysis is 

intended to provide guidance to the ICC 

Risk Department and ICC Risk 

Committee in situations when changes 

to the GF sizing approach are 

considered. For example, if a cover-2 

deficiency is observed under the current 

GF size configuration, ICC will analyze 

the results from the cover-3 analysis as 

a potential remedy to address the cover2 deficiency. Monthly summary reports 

detailing the analysis will be provided 

to the ICC Risk Committee. 

ICC also proposes changes to the 

Stress Testing Framework to ensure 

compliance with CFTC Regulation 17 

CFR 39.36. Specifically, ICC proposes 

adding an ‘Interest Rate Sensitivity 

Analysis’ section to the Stress Testing 

Framework to ensure compliance with 

CFTC Regulation 17 CFR 39.36(b). 

Under the proposed analysis, ICC would 

shock the Euro and USD interest rate 

curves up and down to see which 

scenario lead to further erosion of the 

GF under the two worst spread based 

stress test scenarios. The addition of the 

interest rate sensitivity analysis will 

have no impact on ICC’s GF sizing 

methodology. ICC also proposes changes 

to the ‘Methodology’ section of the 

Stress Testing Framework related to the 

calculation of the P/L attributable to 

sequential or simultaneous defaults, to 

ensure compliance with 17 CFR 

39.36(a). Under the current framework, 

for each CP Affiliate Group (‘‘AG’’), the 

Specific Wrong Way Risk (‘‘SWWR’’) 

P/L shows losses associated with 

positions that are self referencing to that 

CP AG; the remaining GF is then 

calculated for each CP AG. Under the 

proposed changes, the SWWR P/L will 

be expanded to also reflect the 

accumulation of losses associated with 

defaulted CP specific exposure and relabeled ‘‘CP–WWR P/L’’, where the new 

CP–WWR P/L for each CP AG will 

include losses associated with exposure 

to itself, i.e., SWWR P/L, as well as on 

previously defaulted CP AG(s). Finally, 

ICC proposes edits to the ‘Portfolio 

Selection’ section of the Stress Testing 

Framework, to incorporate a description 

of ICC’s current client stress testing 

practices. There are no changes being 

proposed to ICC’s client stress testing 

practices; rather the proposed edits are 

designed to explicitly state and 

document ICC’s current client stress 

testing practices. Specifically, ICC 

applies the stress test scenarios to all 

currently cleared portfolios consisting of 

a CP’s House and/or Client accounts. 

ICC executes individual client legal 

entity stress testing at least monthly, 

and the results are reported on a 

monthly basis to the Risk Committee. 

The clients selected for analysis exhibit 

the largest stress loss over financial 

resources being tested for each of the 

top Futures Commission Merchants 

(‘‘FCMs’’) and Broker Dealers (‘‘BDs’’) 

with the largest client Initial Margin. 

This selection is designed to capture the 

clients with the largest risk exposure, 

who are deemed to be ‘‘large traders.’’ 

Liquidity Risk Management Framework 

ICC proposes revisions to its Liquidity 

Risk Management Framework to ensure 

unification of the stress testing scenarios 

in the Liquidity Risk Management 

Framework and the Stress Testing 

Framework. ICC operates its stress 

testing and liquidity stress testing on a 

unified set of stress testing scenarios 

and system. As such, revisions to the 

liquidity stress testing scenarios are 


sradovich on DSK3GMQ082PROD with NOTICES
41456 Federal Register / Vol. 82, No. 168 / Thursday, August 31, 2017 / Notices 

4 15 U.S.C. 78q–1(b)(3)(F). 

5 Id. 

6 Id. 

7 17 CFR 240.17Ad–22. 

8 17 CFR 240.17Ad–22(b)(3). 

9 Id. 

necessary to ensure scenario unification, 

in light of the proposed changes to the 

stress testing scenarios related to ICC’s 

clearing of SN CDS on its CPs. 

Specifically, ICC proposes to revise 

the ‘‘Hypothetically Constructed 

(Forward Looking) Extreme but 

Plausible Market Scenarios’’ to ensure 

consistency with the proposed changes 

to the Stress Testing Framework to 

incorporate additional losses related to 

the ELGD of all names in a CP’s 

portfolio, not limited to those in the 

Banking or Sovereign sectors. The ELGD 

amount will accumulate the LGD of all 

of the SNs in the portfolio that do not 

explicitly enter a state of default, 

weighted by the market observed 1-year 

end-of-day Default Probability. 

(b) Statutory Basis 

Section 17A(b)(3)(F) of the Act 4

requires, among other things, that the 

rules of a clearing agency be designed to 

promote the prompt and accurate 

clearance and settlement of securities 

transactions, and to the extent 

applicable, derivative agreements, 

contracts and transactions and to 

comply with the provisions of the Act 

and the rules and regulations 

thereunder. ICC believes that the 

proposed rule changes are consistent 

with the requirements of the Act and the 

rules and regulations thereunder 

applicable to ICC, in particular, to 

Section 17(A)(b)(3)(F),5 because ICC 

believes that the proposed rule changes 

will promote the prompt and accurate 

clearance and settlement of securities 

transactions, derivatives agreements, 

contracts, and transactions. ICC’s Stress 

Testing Framework describes ICC’s 

stress testing practices, which are 

designed to ensure the adequacy of 

systemic risk protections. The Stress 

Testing Framework sets forth the 

methodology by which ICC evaluates 

potential portfolio profits/losses, 

compared to the Initial Margin and GF 

funds maintained, in order to identify 

any potential weakness in the risk 

methodology. The proposed changes to 

the Stress Testing Framework enhance 

ICC’s approach to identifying potential 

weaknesses in the risk methodology. As 

such, the proposed rule changes are 

designed to promote the prompt and 

accurate clearance and settlement of 

securities transactions, derivatives 

agreements, contracts, and transactions 

within the meaning of Section 

17A(b)(3)(F) 6 of the Act. The proposed 

changes will also satisfy the 

requirements of Rule 17Ad–22.7 In 

particular, the proposed changes to the 

stress testing practices set forth in the 

Stress Testing Framework ensure that 

ICC maintains sufficient financial 

resources to withstand a default by the 

CP family to which it has the largest 

exposure in extreme but plausible 

market conditions, consistent with the 

requirements of Rule 17Ad–22(b)(3).8

Finally, the proposed changes to the 

Stress Testing Framework ensure 

regulatory compliance with CFTC 

regulations, including 17 CFR 39.36. 

Further, the changes to the Liquidity 

Risk Management Framework to unify 

the liquidity stress testing scenarios 

with the stress testing scenarios set forth 

in Stress Testing Framework are 

necessary given the proposed changes to 

the Stress Testing Framework, as ICC 

operates its stress testing and liquidity 

stress testing on a unified set of stress 

testing scenarios and system. ICC’s 

liquidity stress testing practices will 

continue to ensure the sufficiency of 

ICC’s liquidity resources. As such, the 

proposed rule changes are designed to 

promote the prompt and accurate 

clearance and settlement of securities 

transactions, derivatives agreements, 

contracts, and transactions within the 

meaning of Section 17A(b)(3)(F) 9 of the 

Act. 

(B) Clearing Agency’s Statement on 

Burden on Competition 

ICC does not believe the proposed 

rule changes would have any impact, or 

impose any burden, on competition. To 

the extent the Stress Testing Framework 

and Liquidity Risk Management 

Framework changes impact CPs, the 

Stress Testing Framework and Liquidity 

Risk Management Framework apply 

uniformly across all CPs. Therefore, ICC 

does not believe the proposed rule 

changes impose any burden on 

competition that is inappropriate in 

furtherance of the purposes of the Act. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Received From Members, Participants or 

Others 

Written comments relating to the 

proposed rule change have not been 

solicited or received. ICC will notify the 

Commission of any written comments 

received by ICC. 

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– 

ICC–2017–012 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–ICC–2017–012. 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 Section, 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 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 82, No. 168 / Thursday, August 31, 2017 / Notices 41457 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See https://www.theocc.com/webapps/delosearch. 

4By virtue of Exchange Rule 4.12, Interpretation 

and Policy .02, which is not being amended by this 

filing, the exercise limit for FXI, EEM, IWM, EFA, 

EWZ, TLT, VXX, QQQQ, and EWJ options would 

be similarly increased. 

The Exchange also proposed to make nonsubstantive corrections to the names of IWM and 

EEM in Rule 4.11, Interpretation and Policy .07. 

inspection and copying at the principal 

office of ICE Clear Credit and on ICE 

Clear Credit’s Web site at https://

www.theice.com/clear-credit/regulation. 

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–ICC–2017–012 and should 

be submitted on or before September 21, 

2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–18449 Filed 8–30–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81483; File No. SR–CBOE– 

2017–057] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing of a 

Proposed Rule Change To Amend 

Interpretation and Policy .07 of 

Exchange Rule 4.11, Position Limits, 

To Increase the Position Limits for 

Options on Certain ETFs 

August 25, 2017. 

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 August 

15, 2017, Chicago Board Options 

Exchange, Incorporated (the ‘‘Exchange’’ 

or ‘‘CBOE’’) filed with the Securities 

and Exchange Commission (the 

‘‘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 purpose of this filing is to amend 

Interpretation and Policy .07 of 

Exchange Rule 4.11, Position Limits, to 

increase the position limits for options 

on the following exchange traded funds 

(‘‘ETFs’’) and exchange traded notes 

(‘‘ETNs’’): iShares China Large-Cap ETF 

(‘‘FXI’’), iShares MSCI EAFE ETF 

(‘‘EFA’’), iShares MSCI Emerging 

Markets ETF (‘‘EEM’’), iShares Russell 

2000 ETF (‘‘IWM’’), iShares MSCI EAFE 

ETF (‘‘EFA’’), iShares MSCI Brazil 

Capped ETF (‘‘EWZ’’), iShares 20+ Year 

Treasury Bond Fund ETF (‘‘TLT’’), iPath 

S&P 500 VIX Short-Term Futures ETN 

(‘‘VXX’’), PowerShares QQQ Trust 

(‘‘QQQQ’’), and iShares MSCI Japan 

Index [sic] (‘‘EWJ’’). 

The text of the proposed rule change 

is also available on the Exchange’s Web 

site (http://www.cboe.com/AboutCBOE/ 

CBOELegalRegulatoryHome.aspx), at 

the Exchange’s Office of the Secretary, 

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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Position limits are designed to 

address potential manipulative schemes 

and adverse market impact surrounding 

the use of options, such as disrupting 

the market in the security underlying 

the options. The potential manipulative 

schemes and adverse market impact are 

balanced against the potential of setting 

the limits so low as to discourage 

participation in the options market. 

Position limits for options on ETFs and 

ETNs, such as those subject to this 

proposal, are determined pursuant to 

Exchange Rule 4.11, and vary according 

to the number of outstanding shares and 

the trading volume of the underlying 

stocks, ETFs, or ETNs over the past sixmonths. Pursuant to Exchange Rule 

4.11, the largest in capitalization and 

the most frequently traded stocks, ETFs, 

and ETNs have an option position limit 

of 250,000 contracts (with adjustments 

for splits, re-capitalizations, etc.) on the 

same side of the market; and smaller 

capitalization stocks, ETFs, and ETNs 

have position limits of 200,000, 75,000, 

50,000 or 25,000 contracts (with 

adjustments for splits, re-capitalizations, 

etc.) on the same side of the market. 

Options on FXI, EFA, EWZ, TLT, VXX, 

and EWJ are currently subject to the 

standard position limit of 250,000 

contracts as set forth in Exchange Rule 

4.11.3 Interpretation and Policy .07 of 

Exchange Rule 4.11 sets forth separate 

position limits for options on specific 

ETFs and ETNs as follows: 

• Options on EEM are 500,000 

contracts; 

• Options on IWM are 500,000 

contracts; and 

• Options on QQQQ are 900,000 

contracts. 

The purpose of this proposal is to 

amend Interpretation and Policy .07 to 

Exchange Rule 4.11 to double the 

position and exercise limits for FXI, 

EEM, IWM, EFA, EWZ, TLT, VXX, 

QQQQ, and EWJ.4 As such, options on 

FXI, EFA, EWZ, TLT, VXX, and EWJ 

would no longer be subject to the 

standard position limits set forth under 

Exchange Rule 4.11. Accordingly, 

Interpretation and Policy .07 to 

Exchange Rule 4.11 would be amended 

to set forth that the position limits for 

option on FXI, EFA, EWZ, TLT, VXX, 

and EWJ would be 500,000 contracts. 

These position limits equal the current 

position limits for option on IWM and 

EMM and are similar to the current 

position limit for options on QQQQ set 

forth in Interpretation and Policy .07 to 

Exchange Rule 4.11. Interpretation and 

Policy .07 to Exchange Rule 4.11 would 

be further amended to increase the 

position limits for the remaining options 

subject to this proposal as follows: 

• The position limits for options on 

EEM would be increased from 500,000 

contracts to 1,000,000 contracts; 

• The position limits on options on 

IWM would be increased from 500,000 

contracts to 1,000,000 contracts; and 

• The position limits on options on 

QQQQ would be increased from 900,000 

contracts to 1,800,000 contracts. 

In support of this proposal, the 

Exchange represents that the above 

listed ETFs and ETNs qualify for either: 

(i) The initial listing criteria set forth in 

Exchange Rule 5.3.06(C) for ETFs 

holding non-U.S. component securities; 

or (ii) for ETFs and ETNs listed 

pursuant to generic listing standards for 

series of portfolio depository receipts 

and index fund shares based on 


sradovich on DSK3GMQ082PROD with NOTICES