Document ID: SEC-2017-0644-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2017-04-21T04:00Z

[Federal Register Volume 82, Number 76 (Friday, April 21, 2017)]
[Notices]
[Pages 18800-18802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-08057]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80467; File No. SR-CHX-2017-06]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change To Shorten the Standard 
Settlement Cycle From Three Business Days After the Trade Date to Two 
Business Days After the Trade Date

April 17, 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 April 6, 2017, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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 solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CHX proposes to amend Articles 1 and 9 of the Rules of the Exchange 
(``CHX Rules'') to conform to an amendment to Securities Exchange Act 
Rule 15c6-1(a) \3\ to shorten the standard settlement cycle from three 
business days after the trade date (``T+3'') to two business days after 
the trade date (``T+2''). The text of this proposed rule change is 
available on the Exchange's Web site at http://www.chx.com/regulatory-operations/rule-filings/, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.
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    \3\ 17 CFR 240.15c6-1(a).

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[[Page 18801]]

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 those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Article 1, Rule 2(e) and Article 9, 
Rule 7 to conform to an amendment to Securities Exchange Act Rule 15c6-
1(a) \4\ to shorten the standard settlement cycle from T+3 to T+2. The 
operative date of the proposed rule change is September 5, 2017.
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    \4\ See id; see also infra notes 8 and 9.
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Background
    In 1993, the Commission adopted Securities Exchange Act Rule 15c6-
1(a),\5\ which established three business days after trade date instead 
of five business days (``T+5''), as the standard trade settlement cycle 
for most securities transactions. The rule became effective in June 
1995.\6\ In March 1995, the Exchange amended its rules to be consistent 
with the T+3 settlement cycle for securities transactions.\7\
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    \5\ 17 CFR 240.15c6-1(a).
    \6\ See Securities Exchange Act Release Nos. 33023 (October 6, 
1993), 58 FR 52891 (order adopting Rule 15c6-1); see also Securities 
Exchange Act Release No. 34952 (November 9, 1994), 59 FR 59137 
(order changing the effective date from June 1, 1995, to June 7, 
1995).
    \7\ See Securities Exchange Act Release No. 35554 (March 31, 
1995), 60 FR 17597 (April 6, 1995); see also Securities Exchange Act 
Release No. 35155 (December 27, 1994), 60 FR 517 (January 4, 1995) 
(SR-CHX-94-26).
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    On September 28, 2016, the SEC proposed amendments to Rule 15c6-
1(a) to shorten the standard settlement cycle from T+3 to T+2 on the 
basis that the shorter settlement cycle would reduce the risks that 
arise from the value and number of unsettled securities transactions 
prior to completion of settlement, including credit, market and 
liquidity risk faced by U.S. market participants.\8\ The proposed rule 
amendment was published for comment in the Federal Register on October 
5, 2016.\9\ On March 22, 2017, the SEC adopted the proposed rule 
amendment and set a Rule 15c6-1(a) compliance date of September 5, 
2017.\10\
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    \8\ See SEC Press Release 2016-200: ``SEC Proposes Rule 
Amendment to Expedite Process for Settling Securities Transactions'' 
(September 28, 2016).
    \9\ See Securities Exchange Act Release No. 78962 (September 28, 
2016), 81 FR 69240 (October 5, 2016) (File No. S7-22-16) (``SEC 
Proposing Release'').
    \10\ See Securities Exchange Act Relesae [sic] No. 80295 (March 
22, 2017), 82 FR 15564 (March 29, 2017) (``SEC Adopting Release'').
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    In light of this action by the SEC, the Exchange proposes to amend 
CHX Rules to reflect ``regular way'' settlement as occurring on 
T+2.\11\
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    \11\ In December 2016, the New York Stock Exchange (``NYSE'') 
also filed a rule change to reflect ``regular way'' settlement as 
occurring on T+2. See Securities Exchange Act Release No. 80021 
(February 10, 2017), 82 FR 10931 (February 16, 2017); see also 
Securities Exchange Act Release No. 79659 (December 22, 2016), 81 FR 
96076 (December 29, 2016) (SR-NYSE-2016-87).
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Proposed Rule Change
    The Exchange proposes to amend Article 1, Rule 2(e) and Article 9, 
Rule 7 to reflect a T+2 settlement cycle. Except for changes reflecting 
the shortened settlement period, the Exchange does not propose any 
other amendments to the CHX Rules.
    Current Article 1, Rule 2(e)(1) provides, in pertinent part, that 
``Regular Way Settlement'' means a transaction for delivery on the 
third full business day following the day of the contract. The Exchange 
proposes an amendment to change ``third full business day'' to ``second 
full business day.''
    Current Article 1, Rule 2(e)(2)(C) provides that ``Seller's 
Option'' means transaction for delivery within the time specified in 
the option, which time shall not be less than four (4) full business 
days nor more than 60 days following the day of the contract; except 
that the Exchange may provide otherwise in specific issues of stocks or 
classes of stocks. The Exchange proposes an amendment to change ``four 
(4) full business days'' to ``three (3) full business days.''
    Current Article 9, Rule 7(a) provides, in pertinent part, that 
transactions in stocks, except as provided below, shall be ex-dividend 
or ex-rights two full business days immediately preceding the date of 
record fixed by the corporation for the determination of stockholders 
entitled to receive such dividends or rights, except: (1) When such 
record date occurs upon a holiday or half-holiday, transactions in the 
stock shall be ex-dividend or ex-rights three full business days 
immediately preceding the record date. The Exchange proposes amendments 
to change ``two full business days'' to ``business day'' under Rule 
7(a) and ``three full business days'' to ``two full business days'' 
under Rule 7(a)(1).
    Current Article 9, Rule 7(b) provides, in pertinent part, that 
transactions in securities which have subscription warrants attached 
(except those made for ``cash'') shall be ex-warrants on the second 
full business day preceding the date of expiration of the warrants, 
except: (1) When the day of expiration occurs on a holiday or Sunday, 
said transactions shall be ex-warrants on the third full business day 
preceding said day of expiration. The Exchange proposes amendments to 
change ``second full business day'' to ``business day'' under Rule 7(b) 
and ``third full business day'' to ``second full business day'' under 
Rule 7(b)(1).
    As noted above, the Exchange proposes to make the proposed rule 
change operative on September 5, 2017, which is the compliance date for 
the amendment to Rule 15c6-1(a) set by the SEC.\12\
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    \12\ See supra note 10.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\13\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\14\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and 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.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that the proposed rule change 
supports the industry-led initiative to shorten the settlement cycle to 
two business days. Moreover, the proposed rule change is consistent 
with the SEC's amendment to Securities Exchange Act Rule 15c6-1(a) to 
require standard settlement no later than T+2. The Exchange believes 
that the proposed rule change will provide the regulatory certainty to 
facilitate the industry-led move to a T+2 settlement cycle. Further, 
the Exchange believes that, by shortening the time period for 
settlement of most securities transactions, the proposed rule change 
would protect investors and the public

[[Page 18802]]

interest by reducing the number of unsettled trades in the clearance 
and settlement system at any given time, thereby reducing the risk 
inherent in settling securities transactions to clearing corporations, 
their members and public investors. The Exchange also believes that the 
proposed operative date for the proposed rule change of September 5, 
2017 would remove impediments to and perfect the mechanisms of a free 
and open market and a national market system as it is identical to the 
compliance date for the amendment to Rule 15c6-1(a) set by the SEC.\15\
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    \15\ See supra note 10.
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change is not 
designed to address any competitive issue, but rather facilitate the 
industry's transition to a T+2 regular way settlement cycle. The 
Exchange also believes that the proposed rule change will serve to 
promote clarity and consistency, thereby reducing burdens on the 
marketplace and facilitating investor protection. Moreover, the 
proposed rule change is consistent with the SEC's amendment to 
Securities Exchange Act Rule 15c6-1(a) to require standard settlement 
no later than T+2. Accordingly, the Exchange believes that the proposed 
changes do not impose any burdens on the industry in addition to those 
necessary to implement amendments to Securities Exchange Act Rule 15c6-
1(a) as described and enumerated in the SEC Proposing Release.\16\
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    \16\ See supra note 9.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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 (i) as the Commission may 
designate up to 90 days of such date 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 the 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-CHX-2017-06 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CHX-2017-06. 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 Number SR-CHX-2017-06, and should be 
submitted on or before May 12, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2017-08057 Filed 4-20-17; 8:45 am]
BILLING CODE 8011-01-P