Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Among NYSE MKT LLC, BATS Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, the Chicago Board Options Exchange, Incorporated, the EDGX Exchange, Inc., the International Securities Exchange LLC, ISE Gemini, LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc., the NASDAQ OMX PHLX, Inc., and Miami International Securities Exchange, LLC Concerning Options-Related Market Surveillance
Federal Register, Volume 80 Issue 213 (Wednesday, November 4, 2015)
Federal Register Volume 80, Number 213 (Wednesday, November 4, 2015)
Notices
Pages 68354-68361
From the Federal Register Online via the Government Publishing Office www.gpo.gov
FR Doc No: 2015-28067
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SECURITIES AND EXCHANGE COMMISSION
Release No. 34-76310; File No. 4-551
Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Among NYSE MKT LLC, BATS Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, the Chicago Board Options Exchange, Incorporated, the EDGX Exchange, Inc., the International Securities Exchange LLC, ISE Gemini, LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc., the NASDAQ OMX PHLX, Inc., and Miami International Securities Exchange, LLC Concerning Options-Related Market Surveillance
October 29, 2015.
Notice is hereby given that the Securities and Exchange Commission (``Commission'') has issued an Order, pursuant to Section 17(d) of the Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring effective an amendment to the plan for allocating regulatory responsibility (``Plan'') filed on October 27, 2015, pursuant to Rule 17d-2 of the Act,\2\ by NYSE MKT LLC (``MKT''), BATS Exchange, Inc., (``BATS''), the BOX Options Exchange LLC (``BOX''), C2 Options Exchange, Incorporated (``C2''), the Chicago Board Options Exchange, Incorporated (``CBOE''), the EDGX Exchange, Inc. (``EDGX'') the International Securities Exchange LLC (``ISE''), ISE Gemini, LLC (``Gemini''), Financial Industry Regulatory Authority, Inc. (``FINRA''), NYSE Arca, Inc. (``Arca''), The NASDAQ Stock Market LLC (``Nasdaq''), NASDAQ OMX BX, Inc. (``BX''), NASDAQ OMX PHLX, Inc. (``PHLX''), and Miami International Securities Exchange (``MIAX'') (collectively, ``Participating Organizations'' or ``parties'').
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\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17d-2.
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Page 68355
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Introduction
Section 19(g)(1) of the Act,\3\ among other things, requires every self-regulatory organization (``SRO'') registered as either a national securities exchange or national securities association to examine for, and enforce compliance by, its members and persons associated with its members with the Act, the rules and regulations thereunder, and the SRO's own rules, unless the SRO is relieved of this responsibility pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of the Act. Without this relief, the statutory obligation of each individual SRO could result in a pattern of multiple examinations of broker-dealers that maintain memberships in more than one SRO (``common members''). Such regulatory duplication would add unnecessary expenses for common members and their SROs.
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\3\ 15 U.S.C. 78s(g)(1).
\4\ 15 U.S.C. 78q(d).
\5\ 15 U.S.C. 78s(g)(2).
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Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate unnecessary multiple examinations and regulatory duplication.\7\ With respect to a common member, Section 17(d)(1) authorizes the Commission, by rule or order, to relieve an SRO of the responsibility to receive regulatory reports, to examine for and enforce compliance with applicable statutes, rules, and regulations, or to perform other specified regulatory functions.
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\6\ 15 U.S.C. 78q(d)(1).
\7\ See Securities Act Amendments of 1975, Report of the Senate Committee on Banking, Housing, and Urban Affairs to Accompany S. 249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
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To implement Section 17(d)(1), the Commission adopted two rules: Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the Commission to name a single SRO as the designated examining authority (``DEA'') to examine common members for compliance with the financial responsibility requirements imposed by the Act, or by Commission or SRO rules.\9\ When an SRO has been named as a common member's DEA, all other SROs to which the common member belongs are relieved of the responsibility to examine the firm for compliance with the applicable financial responsibility rules. On its face, Rule 17d-1 deals only with an SRO's obligations to enforce member compliance with financial responsibility requirements. Rule 17d-1 does not relieve an SRO from its obligation to examine a common member for compliance with its own rules and provisions of the federal securities laws governing matters other than financial responsibility, including sales practices and trading activities and practices.
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\8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\9\ See Securities Exchange Act Release No. 12352 (April 20, 1976), 41 FR 18808 (May 7, 1976).
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To address regulatory duplication in these and other areas, the Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits SROs to propose joint plans for the allocation of regulatory responsibilities with respect to their common members. Under paragraph (c) of Rule 17d-2, the Commission may declare such a plan effective if, after providing for notice and comment, it determines that the plan is necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among the SROs, to remove impediments to, and foster the development of, a national market system and a national clearance and settlement system, and is in conformity with the factors set forth in Section 17(d) of the Act. Commission approval of a plan filed pursuant to Rule 17d-2 relieves an SRO of those regulatory responsibilities allocated by the plan to another SRO.
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\10\ See Securities Exchange Act Release No. 12935 (October 28, 1976), 41 FR 49091 (November 8, 1976).
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The Plan
On December 11, 2007, the Commission declared effective the Participating Organizations' Plan for allocating regulatory responsibilities pursuant to Rule 17d-2.\11\ On April 11, 2008, the Commission approved an amendment to the Plan to include NASDAQ as a participant.\12\ On October 9, 2008, the Commission approved an amendment to the Plan to clarify that the term Regulatory Responsibility for options position limits includes the examination responsibilities for the delta hedging exemption.\13\ On February 25, 2010, the Commission approved an amendment to the Plan to add BATS and C2 as SRO participants and to reflect the name changes of the American Stock Exchange LLC to the NYSE Amex LLC, and the Boston Stock Exchange, Inc. to the NASDAQ OMX BX, Inc.\14\ On May 11, 2012, the Commission approved an amendment to the Plan to add BOX as a participant to the Plan.\15\ On December 5, 2012, the Commission approved an amendment to the Plan to add MIAX as a participant to the Plan.\16\ On July 23, 2013, the Commission approved an amendment to the Plan to add Topaz Exchange, LLC as a Participant to the Plan.\17\
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\11\ See Securities Exchange Act Release No. 56941 (December 11, 2007), 72 FR 71723 (December 18, 2007) (File No. 4-551).
\12\ See Securities Exchange Act Release No. 57649 (April 11, 2008), 73 FR 20976 (April 17, 2008) (File No. 4-551).
\13\ See Securities Exchange Act Release No. 58765 (October 9, 2008), 73 FR 62344 (October 20, 2008) (File No. 4-551).
\14\ See Securities Exchange Act Release No. 61588 (February 25, 2010), 75 FR 9970 (March 4, 2010) (File No. 4-551).
\15\ See Securities Exchange Act Release No. 66975 (May 11, 2012), 77 FR 29712 (May 18, 2010) (File No. 4-551).
\16\ See Securities Exchange Act Release No. 68362 (December 5, 2012), 77 FR 73719 (December 11, 2012) (File No. 4-551).
\17\ See Securities Exchange Act Release No. 70052 (July 26, 2013), 78 FR 46665 (August 1, 2013) (File No. 4-551).
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The Plan is designed to reduce regulatory duplication for common members by allocating regulatory responsibility for certain options-
related market surveillance matters among the Participating Organizations. Generally, under the Plan, a Participating Organization will serve as the Designated Options Surveillance Regulator (``DOSR'') for each common member assigned to it and will assume regulatory responsibility with respect to that common member's compliance with applicable common rules for certain accounts. When an SRO has been named as a common member's DOSR, all other SROs to which the common member belongs will be relieved of regulatory responsibility for that common member, pursuant to the terms of the Plan, with respect to the applicable common rules specified in Exhibit A to the Plan.
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Proposed Amendment to the Plan
On October 27, 2015, the parties submitted a proposed amendment to the Plan. The primary purpose of the amendment is to add EDGX as a Participant to the Plan and to change the name of Topaz Exchange, LLC to ISE Gemini, LLC. The text of the proposed amended 17d-2 plan is as follows (additions are italicized; deletions are bracketed):
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AGREEMENT BY AND AMONG NYSE MKT LLC, BATS EXCHANGE, INC., EDGX EXCHANGE INC., BOX OPTIONS EXCHANGE LLC, NASDAQ OMX BX, INC., C2 OPTIONS EXCHANGE, INCORPORATED, THE CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED, THE INTERNATIONAL SECURITIES EXCHANGE LLC, ISE GEMINI, LLC, FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., NYSE ARCA, INC., THE NASDAQ STOCK MARKET LLC, NASDAQ OMX PHLX, INC., AND MIAMI INTERNATIONAL SECURITIES
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EXCHANGE, LLC AND TOPAZ EXCHANGE, LLC PURSUANT TO RULE 17d-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934
This agreement (this ``Agreement''), by and among NYSE MKT LLC (``MKT''), BATS Exchange, Inc., (``BATS''), the EDGX Exchange, Inc (``EDGX''), the C2 Options Exchange, Incorporated (``C2''), the Chicago Board Options Exchange, Incorporated (``CBOE''), the International Securities Exchange LLC (``ISE''), Financial Industry Regulatory Authority, Inc. (``FINRA''), NYSE Arca, Inc. (``Arca''), The NASDAQ Stock Market LLC (``Nasdaq''), BOX Options Exchange LLC (``BOX''), NASDAQ OMX BX, Inc. (``BX''), NASDAQ OMX PHLX, Inc. (``PHLX''), Miami International Securities Exchange, LLC (``MIAX'') and Topaz Exchange ISE Gemini, LLC (``Topaz Gemini'') is made this 10th day of October 2007, and as amended the 31st day of March 2008, the 1st day of October 2008, the 3rd day of February 2010, the 25th day of April 2012, and the 19th day of November 2012, and the 30th day of May 2013, and the 16th day of October 2015 pursuant to Section 17(d) of the Securities Exchange Act of 1934, as amended (the ``Exchange Act''), and Rule 17d-2 thereunder (``Rule 17d-2''), which allows for a joint plan among self-
regulatory organizations (``SROs'') to allocate regulatory obligations with respect to brokers or dealers that are members of two or more of the parties to this Agreement (``Common Members''). MKT, BATS, C2, CBOE, EDGX, ISE Gemini, ISE, FINRA, Arca, Nasdaq, BOX, BX, PHLX, and MIAX and Topaz are collectively referred to herein as the ``Participants'' and individually, each a ``Participant.'' This Agreement shall be administered by a committee known as the Options Surveillance Group (the ``OSG'' or ``Group''), as described in Section V hereof. Unless defined in this Agreement or the context otherwise requires, the terms used herein shall have the meanings assigned thereto by the Exchange Act and the rules and regulations thereunder.
Whereas, the Participants desire to eliminate regulatory duplication with respect to SRO market surveillance of Common Member \1\ activities with regard to certain common rules relating to listed options (``Options''); and
Whereas, for this purpose, the Participants desire to execute and file this Agreement with the Securities and Exchange Commission (the ``SEC'' or ``Commission'') pursuant to Rule 17d-2.
Now, therefore, in consideration of the mutual covenants contained in this Agreement, the Participants agree as follows:
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\1\ In the case of the BX and BOX, members are those persons who are Options Participants (as defined in the BOX Options Exchange LLC Rules and NASDAQ OMX BX, Inc. Rules).
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Except as otherwise provided in this Agreement, each Participant shall assume Regulatory Responsibility (as defined below) for the Common Members that are allocated or assigned to such Participant in accordance with the terms of this Agreement and shall be relieved of its Regulatory Responsibility as to the remaining Common Members. For purposes of this Agreement, a Participant shall be considered to be the Designated Options Surveillance Regulator (``DOSR'') for each Common Member that is allocated to it in accordance with Section VII.
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As used in this Agreement, the term ``Regulatory Responsibility'' shall mean surveillance, investigation and enforcement responsibilities relating to compliance by the Common Members with such Options rules of the Participants as the Participants shall determine are substantially similar and shall approve from time to time, insofar as such rules relate to market surveillance (collectively, the ``Common Rules''). For the purposes of this Agreement the list of Common Rules is attached as Exhibit A hereto, which may only be amended upon unanimous written agreement by the Participants. The DOSR assigned to each Common Member shall assume Regulatory Responsibility with regard to that Common Member's compliance with the applicable Common Rules for certain accounts.\2\ A DOSR may perform its Regulatory Responsibility or enter an agreement to transfer or assign such responsibilities to a national securities exchange registered with the SEC under Section 6(a) of the Exchange Act or a national securities association registered with the SEC under Section 15A of the Exchange Act. A DOSR may not transfer or assign its Regulatory Responsibility to an association registered for the limited purpose of regulating the activities of members who are registered as brokers or dealers in security futures products.
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\2\ Certain accounts shall include customer (``C'' as classified by the Options Clearing Corporation (``OCC'')) and firm (``F'' as classified by OCC) accounts, as well as other accounts, such as market maker accounts as the Participants shall, from time to time, identify as appropriate to review.
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The term ``Regulatory Responsibility'' does not include, and each Participant shall retain full responsibility with respect to:
(a) Surveillance, investigative and enforcement responsibilities other than those included in the definition of Regulatory Responsibility;
(b) any aspects of the rules of a Participant that are not substantially similar to the Common Rules or that are allocated for a separate surveillance purpose under any other agreement made pursuant to Rule 17d-2. Any such aspects of a Common Rule will be noted as excluded on Exhibit A.
With respect to options position limits, the term Regulatory Responsibility shall include examination responsibilities for the delta hedging exemption. Specifically, the Participants intend that FINRA will conduct examinations for delta hedging for all Common Members that are members of FINRA notwithstanding the fact that FINRA's position limit rule is, in some cases, limited to only firms that are not members of an options exchange (i.e., access members). In such cases, FINRA's examinations for delta hedging options position limit violations will be for the identical or substantively similar position limit rule(s) of the other Participant(s). Examinations for delta hedging for Common Members that are non-FINRA members will be conducted by the same Participant conducting position limit surveillance. The allocation of Common Members to DOSRs for surveillance of compliance with options position limits and other agreed to Common Rules is provided in Exhibit B. The allocation of Common Members to DOSRs for examinations of the delta hedging exemption under the options position limits rules is provided in Exhibit C.
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Each year within 30 days of the anniversary date of the commencement of operation of this Agreement, or more frequently if required by changes in the rules of a Participant, each Participant shall submit to the other Participants, through the Chair of the OSG, an updated list of Common Rules for review. This updated list may add Common Rules to Exhibit A, shall delete from Exhibit A rules of that Participant that are no longer identical or substantially similar to the Common Rules, and shall confirm that the remaining rules of the Participant included on Exhibit A continue to be identically or substantially similar to the Common Rules. Within 30 days from the date that each Participant has received revisions to Exhibit A from the Chair of the OSG, each Participant shall confirm in writing to the Chair of the OSG whether that Participant's rules listed in Exhibit A are Common Rules.
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Apparent violation of another Participant's rules discovered by a DOSR, but which rules are not within the scope of the discovering DOSR's
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Regulatory Responsibility, shall be referred to the relevant Participant for such action as is deemed appropriate by that Participant.
Notwithstanding the foregoing, nothing contained herein shall preclude a DOSR in its discretion from requesting that another Participant conduct an investigative or enforcement proceeding (``Proceeding'') on a matter for which the requesting DOSR has Regulatory Responsibility. If such other Participant agrees, the Regulatory Responsibility in such case shall be deemed transferred to the accepting Participant and confirmed in writing by the Participants involved. Additionally, nothing in this Agreement shall prevent another Participant on whose market potential violative activity took place from conducting its own Proceeding on a matter. The Participant conducting the Proceeding shall advise the assigned DOSR. Each Participant agrees, upon request, to make available promptly all relevant files, records and/or witnesses necessary to assist another Participant in a Proceeding.
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The OSG shall be composed of one representative designated by each of the Participants (a ``Representative''). Each Participant shall also designate one or more persons as its alternate representative(s) (an ``Alternate Representative''). In the absence of the Representative, the Alternate Representative shall assume the powers, duties and responsibilities of the Representative. Each Participant may at any time replace its Representative and/or its Alternate Representative to the Group.\3\ A majority of the OSG shall constitute a quorum and, unless otherwise required, the affirmative vote of a majority of the Representatives present (in person, by telephone or by written consent) shall be necessary to constitute action by the Group.
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\3\ A Participant must give notice to the Chair of the Group of such a change.
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The Group will have a Chair, Vice Chair and Secretary. A different Participant will assume each position on a rotating basis for a one-
year term. In the event that a Participant replaces a Representative who is acting as Chair, Vice Chair or Secretary, the newly appointed Representative shall assume the position of Chair, Vice Chair, or Secretary (as applicable) vacated by the Participant's former Representative. In the event a Participant cannot fulfill its duties as Chair, the Participant serving as Vice Chair shall substitute for the Chair and complete the subject unfulfilled term. All notices and other communications for the OSG are to be sent in care of the Chair and, as appropriate, to each Representative.
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The OSG shall determine the times and locations of Group meetings, provided that the Chair, acting alone, may also call a meeting of the Group in the event the Chair determines that there is good cause to do so. To the extent reasonably possible, notice of any meeting shall be given at least ten business days prior to the meeting date. Representatives shall always be given the option of participating in any meeting telephonically at their own expense rather than in person.
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No less frequently than every two years, in such manner as the Group deems appropriate, the OSG shall allocate Common Members that conduct an Options business among the Participants (``Allocation''), and the Participant to which a Common Member is allocated will serve as the DOSR for that Common Member. Any Allocation shall be based on the following principles, except to the extent all affected Participants consent to one or more different principles:
(a) The OSG may not allocate a Common Member to a Participant unless the Common Member is a member of that Participant.
(b) To the extent practicable, Common Members that conduct an Options business shall be allocated among the Participants of which they are members in such manner as to equalize as nearly as possible the allocation among such Participants, provided that no Common Members shall be allocated to FINRA. For example, if sixteen Common Members that conduct an Options business are members only of three Participants, none of which is FINRA, those Common Members shall be allocated among the three Participants such that no Participant is allocated more than six such members and no Participant is allocated less than five such members. If, in the previous example, one of the three Participants is FINRA, the sixteen Common Members would be allocated evenly between the remaining Participants, so that the two non-FINRA Participants would be allocated eight Common Members each.
(c) To the extent practicable, Allocation shall take into account the amount of Options activity conducted by each Common Member in order to most evenly divide the Common Members with the largest amount of activity among the Participants of which they are members. Allocation will also take into account similar allocations pursuant to other plans or agreements to which the Common Members are party to maintain consistency in oversight of the Common Members.\4\
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\4\ For example, if one Participant was allocated a Common Member by another regulatory group that Participant would be assigned to be the DOSR of that Common Member, unless there is good cause not to make that assignment.
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(d) To the extent practicable, Allocation of Common Members to Participants will be rotated among the applicable Participants such that a Common Member shall not be allocated to a Participant to which that Common Member was allocated within the previous two years. The assignment of DOSRs pursuant to the Allocation is attached as Exhibit B hereto, and will be updated from time to time to reflect Common Member Allocation changes.
(e) The Group may reallocate Common Members from time-to-time, as it deems appropriate.
(f) Whenever a Common Member ceases to be a member of its DOSR, the DOSR shall promptly inform the Group, which shall review the matter and allocate the Common Member to another Participant.
(g) A DOSR may request that a Common Member to which it is assigned be reallocated to another Participant by giving 30 days written notice to the Chair of the OSG. The Group, in its discretion, may approve such request and reallocate the Common Member to another Participant.
(h) All determinations by the Group with respect to Allocation shall be made by the affirmative vote of a majority of the Participants that, at the time of such determination, share the applicable Common Member being allocated; a Participant shall not be entitled to vote on any Allocation relating to a Common Member unless the Common Member is a member of such Participant.
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Each DOSR shall conduct routine surveillance reviews to detect violations of the applicable Common Rules by each Common Member allocated to it with a frequency (daily, weekly, monthly, quarterly, semi-annually or annually as noted on Exhibit A) not less than that determined by the Group. The other Participants agree that, upon request, relevant information in their respective files relative to a Common Member will be made available to the applicable DOSR. In addition, each Participant shall provide, to the extent not otherwise already provided, information pertaining to its surveillance program that would be relevant to FINRA or the Participant(s) conducting routine examinations for the delta hedging exemption.
At each meeting of the OSG, each Participant shall be prepared to report on the status of its surveillance program
Page 68358
for the previous quarter and any period prior thereto that has not previously been reported to the Group. In the event a DOSR believes it will not be able to complete its Regulatory Responsibility for its allocated Common Members, it will so advise the Group in writing promptly. The Group will undertake to remedy this situation by reallocating the subject Common Members among the remaining Participants. In such instance, the Group may determine to impose a regulatory fee for services provided to the DOSR that was unable to fulfill its Regulatory Responsibility.
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Each Participant will, upon request, promptly furnish a copy of the report or applicable portions thereof relating to any investigation made pursuant to the provisions of this Agreement to each other Participant of which the Common Member under investigation is a member.
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Each Participant will routinely populate a common database, to be accessed by the Group relating to any formal regulatory action taken during the course of a Proceeding with respect to the Common Rules concerning a Common Member.
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Any written notice required or permitted to be given under this Agreement shall be deemed given if sent by certified mail, return receipt requested, to any Participant to the attention of that Participant's Representative, to the Participant's principal place of business or by email at such address as the Representative shall have filed in writing with the Chair.
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The costs incurred by each Participant in discharging its Regulatory Responsibility under this Agreement are not reimbursable. However, any of the Participants may agree that one or more will compensate the other(s) for costs incurred.
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The Participants shall notify the Common Members of this Agreement by means of a uniform joint notice approved by the Group. Each Participant will notify the Common Members that have been allocated to it that such Participant will serve as DOSR for that Common Member.
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This Agreement shall be effective upon approval of the Commission. This Agreement may only be amended in writing duly approved by each Participant. All amendments to this Agreement, excluding changes to Exhibits A, B and C, must be filed with and approved by the Commission.
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Any Participant may manifest its intention to cancel its participation in this Agreement at any time upon providing written notice to (i) the Group six months prior to the date of such cancellation, or such other period as all the Participants may agree, and (ii) the Commission. Upon receipt of the notice the Group shall allocate, in accordance with the provisions of this Agreement, those Common Members for which the canceling Participant was the DOSR. The canceling Participant shall retain its Regulatory Responsibility and other rights, privileges and duties pursuant to this Agreement until the Group has completed the reallocation as described above, and the Commission has approved the cancellation.
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The cancellation of its participation in this Agreement by any Participant shall not terminate this Agreement as to the remaining Participants. This Agreement will only terminate following notice to the Commission, in writing, by the then Participants that they intend to terminate the Agreement and the expiration of the applicable notice period. Such notice shall be given at least six months prior to the intended date of termination, or such other period as all the Participants may agree. Such termination will become effective upon Commission approval.
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Participation in the Group shall be strictly limited to the Participants and no other party shall have any right to attend or otherwise participate in the Group except with the unanimous approval of all Participants. Notwithstanding the foregoing, any national securities exchange registered with the SEC under Section 6(a) of the Act or any national securities association registered with the SEC under section 15A of the Act may become a Participant to this Agreement provided that: (i) Such applicant has adopted rules substantially similar to the Common Rules, and received approval thereof from the SEC; (ii) such applicant has provided each Participant with a signed statement whereby the applicant agrees to be bound by the terms of this Agreement to the same effect as though it had originally signed this Agreement and (iii) an amended agreement reflecting the addition of such applicant as a Participant has been filed with and approved by the Commission.
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This Agreement is wholly separate from the multiparty Agreement made pursuant to Rule 17d-2 by and among the NYSE MKT LLC, the BATS Exchange, Inc., the Boston Stock Exchange, Inc., the C2 Options Exchange, the Chicago Board Options Exchange, Inc., the International Securities Exchange, LLC, Financial Industry Regulatory Authority, The NASDAQ Stock Market LLC, Inc., the New York Stock Exchange, LLC, the NYSE Arca, Inc., the Philadelphia Stock Exchange, Inc., Miami International Securities Exchange, LLC and the Topaz Exchange, LLC involving the allocation of regulatory responsibilities with respect to common members for compliance with common rules relating to the conduct by broker-dealers of accounts for listed options or index warrants entered into on November 19, 2012 June 21, 2013, and as may be amended from time to time.
Limitation of Liability
No Participant nor the Group nor any of their respective directors, governors, officers, employees or representatives shall be liable to any other Participant in this Agreement for any liability, loss or damage resulting from or claimed to have resulted from any delays, inaccuracies, errors or omissions with respect to the provision of Regulatory Responsibility as provided hereby or for the failure to provide any such Regulatory Responsibility, except with respect to such liability, loss or damages as shall have been suffered by one or more of the Participants and caused by the willful misconduct of one or more of the other Participants or its respective directors, governors, officers, employees or representatives. No warranties, express or implied, are made by the Participants, individually or as a group, or by the OSG with respect to any Regulatory Responsibility to be performed hereunder.
Relief From Responsibility
Pursuant to Section 17(d)(1)(A) of the Exchange Act and Rule 17d-2, the Participants join in requesting the Commission, upon its approval of this Agreement or any part thereof, to relieve the Participants that are party to this Agreement and are not the DOSR as to a Common Member of any and all Regulatory Responsibility with respect to the matters allocated to the DOSR.
This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.
In Witness Whereof, the Participants hereto have executed this Agreement as of the date and year first above written.
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Exhibit A
Options Surveillance Group 17d-2 Agreement
COMMON RULES as of July 1, 2013 September 1, 2015
Page 68359
Violation I--Expiring Exercise Declarations (EED)--For Listed and FLEX Equity Options Expiring: The Third
Saturday Following the Third Friday of a Month, Quarterly, AND for Listed FLEX Options.
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SRO Description of rule Exchange rule No. Frequency of review
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BATS..................... Exercise of Options Rule 23.1.............. At Expiration.
Contracts.
BOX...................... Exercise of Options Rule 9000.............. At Expiration.
Contracts.
C2....................... Exercise of Options Rule 11.1.............. At Expiration.
Contracts.
CBOE..................... Exercise of Options Rule 11.1.............. At Expiration.
Contracts.
EDGX..................... Exercise of Options Rule 23.1.............. At Expiration.
Contracts.
FINRA.................... Exercise of Options Rule 2360(b)(23)....... At Expiration.
Contracts.
ISE...................... Exercise of Options Rule 1100.............. At Expiration.
Contracts.
ISE Gemini Topaz....... Exercise of Options Rule 1100.............. At Expiration.
Contracts.
MIAX..................... Exercise of Options Rule 700............... At Expiration.
Contracts.
Nasdaq................... Exercise of Options Ch. VIII, Sect.1....... At Expiration.
Contracts.
Nasdaq OMX BX............ Exercise of Options Ch. VII, Sect.1........ At Expiration.
Contracts.
Nasdaq OMX PHLX.......... Exercise of Equity Options Rule 1042.............. At Expiration.
Contracts.
NYSE Arca................ Exercise of Options Rule 6.24.............. At Expiration.
Contracts.
NYSE MKT................. Exercise of Options Rule 980............... At Expiration.
Contracts.
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Violation II--Position Limits (PL)--For Listed Equity Options Expiring: The Third Saturday Following the Third
Friday of a Month, Quarterly
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Description of rule (For
SRO review as they apply to PL) Exchange rule No. Frequency of review
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BATS..................... Position Limits............. Rule 18.7.............. Daily.
Exemptions from Position.... Rule 18.8.............. As Needed.
Liquidation Positions....... Rule 18.11............. As Needed.
BOX...................... Position Limits............. Rule 3120.............. Daily.
Exemptions from Position Rule 3130.............. As Needed.
Limits.
Liquidation Positions....... Rule 3160.............. As Needed.
C2....................... Position Limits............. Rule 4.11.............. Daily.
Liquidation of Positions.... Rule 4.14.............. As Needed.
CBOE..................... Position Limits............. Rule 4.11.............. Daily.
Liquidation of Positions.... Rule 4.14.............. As Needed.
EDGX..................... Position Limits............. Rule 18.7.............. Daily.
Exemptions from Position.... Rule 18.8.............. As Needed.
Liquidation Positions....... Rule 18.11............. As Needed.
FINRA.................... Position Limits............. Rule 2860(b)(3)........ Daily.
Liquidation of Positions and Rule 2860(b)(6)........ As Needed.
Restrictions on Access.
ISE...................... Position Limits............. Rule 412............... Daily.
Exemptions from Position Rule 413............... As Needed.
Limits.
Liquidating Positions....... Rule 416............... As Needed.
ISE Gemini Topaz....... Position Limits............. Rule 412............... Daily.
Exemptions from Position Rule 413............... As Needed.
Limits.
Liquidating Positions....... Rule 416............... As Needed.
MIAX..................... Position Limits............. Rule 307............... Daily.
Exemptions from Position Rule 308............... As Needed.
Limits.
Liquidating Positions....... Rule 311............... As Needed.
Nasdaq................... Position Limits............. Ch. III, Sect. 7....... Daily.
Exemptions from Position Ch. III, Sect. 8....... As Needed.
Limits.
Liquidating Positions....... Ch. III, Sect. 11...... As Needed.
Nasdaq OMX BX............ Position Limits............. Ch. III, Sect. 7....... Daily.
Exemptions from Position Ch. III, Sect. 8....... As Needed.
Limits.
Liquidating Positions....... Ch. III, Sect. 11...... As Needed.
Nasdaq OMX PHLX.......... Position Limits............. Rule 1001.............. Daily.
Liquidation of Position..... Rule 1004.............. As Needed.
NYSE Arca................ Position Limits............. Rule 6.8............... Daily.
Liquidation of Position..... Rule 6.7............... As Needed.
NYSE MKT................. Position Limits............. Rule 904............... Daily.
Liquidating Positions....... Rule 907............... As Needed.
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Page 68360
Violation III--Large Options Position Report (LOPR)--For Listed and FLEX Equity Options and ETF Options
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Description of rule (For
SRO review as they apply to Exchange rule No. Frequency of review
LOPR)
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BATS..................... Reports Related to Position Rule 18.10............. Yearly.
Limits.
BOX...................... Reports Related to Position Rule 3150.............. Yearly.
Limits.
C2....................... Reports Related to Position Rule 4.13(a)........... Yearly.
Limits.
Reports Related to Position Rule 4.13(b)........... Yearly.
Limits.
Reports Related to Position Rule 4.13(d)........... Yearly.
Limits.
CBOE..................... Reports Related to Position Rule 4.13(a)........... Yearly.
Limits.
Reports Related to Position Rule 4.13(b)........... Yearly.
Limits.
Reports Related to Position Rule 4.13(d)........... Yearly.
Limits.
EDGX..................... Reports Related to Position Rule 18.10............. Yearly.
Limits.
FINRA.................... Options..................... Rule 2360(b)(5)........ Yearly.
ISE...................... Reports Related to Position Rule 415............... Yearly.
Limits.
ISE Gemini Topaz....... Reports Related to Position Rule 415............... Yearly.
Limits.
MIAX..................... Reports Related to Position Rule 310............... Yearly.
Limits.
Nasdaq................... Reports Related to Position Ch. III, Sect. 10...... Yearly.
Limits.
Nasdaq OMX BX............ Reports Related to Position Ch. III, Sect. 10...... Yearly.
Limits.
Nasdaq OMX PHLX.......... Reporting of Options Rule 1003.............. Yearly.
Positions.
NYSE Arca................ Reporting of Options Rule 6.6............... Yearly.
Positions.
NYSE MKT................. Reporting of Options Rule 906............... Yearly.
Positions.
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Violation IV--Options Clearing Corporation (OCC) Adjustment Process
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Description of rule (as they
apply to OCC adjustments/by-
SRO laws Article V, Section 1 Exchange rule No. Frequency of review
.01(a) and .02))
----------------------------------------------------------------------------------------------------------------
BATS..................... Adherence to Law............ Rule 18.1.............. Yearly.
BOX...................... Adherence to Law............ Rule 3010.............. Yearly.
C2....................... Adherence to Law............ Rule 4.2............... Yearly.
CBOE..................... Adherence to Law............ Rule 4.2............... Yearly.
EDGX..................... Adherence to Law............ Rule 18.1.............. Yearly.
FINRA.................... Violation of By-Laws and Rule 2360(b)(21)....... Yearly.
Rules of FINRA or The OCC.
ISE...................... Adherence to Law............ Rule 401............... Yearly.
ISE Gemini Topaz....... Adherence to Law............ Rule 401............... Yearly.
MIAX..................... Adherence to Law............ Rule 300............... Yearly.
Nasdaq................... Adherence to Law............ Ch. III, Sect. 1....... Yearly.
Nasdaq OMX BX............ Adherence to Law............ Ch. III, Sect. 1....... Yearly.
Nasdaq OMX PHLX.......... Violation of By-Laws And Rule 1050.............. Yearly.
Rules Of OCC.
NYSE Arca................ Adherence to Law and Good Rule 11.1.............. Yearly.
Business Practice.
NYSE MKT................. Business Conduct............ Rule 16................ Yearly.
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Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning the foregoing. 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 4-551 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 4-551. 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 plan that are filed with the Commission, and all written communications relating to the proposed plan 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 plan also will be available for inspection and copying at the principal offices of MKT, BATS, C2, CBOE, EDGX, Gemini, ISE, FINRA, Arca, NASDAQ, BOX, BX, Phlx, and MIAX. 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 4-551 and should be submitted on or before November 25, 2015.
Page 68361
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Discussion
The Commission continues to believe that the Plan, as proposed to be amended, is an achievement in cooperation among the SRO participants. The Plan, as amended, will reduce unnecessary regulatory duplication by allocating to the designated SRO the responsibility for certain options-related market surveillance matters that would otherwise be performed by multiple SROs. The Plan promotes efficiency by reducing costs to firms that are members of more than one of the SRO participants. In addition, because the SRO participants coordinate their regulatory functions in accordance with the Plan, the Plan promotes, and will continue to promote, investor protection. Under paragraph (c) of Rule 17d-2, the Commission may, after appropriate notice and comment, declare a plan, or any part of a plan, effective. In this instance, the Commission believes that appropriate notice and comment can take place after the proposed amendment is effective. The primary purpose of the amendment is to add EDGX as a Participant to the Plan and to change the name of Topaz Exchange, LLC to ISE Gemini, LLC. By declaring it effective today, the amended Plan can become effective and be implemented without undue delay.\17\ In addition, the Commission notes that the prior version of this Plan was published for comment, and the Commission did not receive any comments thereon.\18\ Finally, the Commission does not believe that the amendment to the Plan raises any new regulatory issues that the Commission has not previously considered.
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\17\ On August 7, 2015, the Commission approved EDGX's rules governing options trading on the EDGX Options Market. See Securities Exchange Act Release No. 75650, 80 FR 48600 (August 13, 2015).
\18\ See supra note 17 (citing to Securities Exchange Act Release No. 70052).
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Conclusion
This order gives effect to the amended Plan submitted to the Commission that is contained in File No. 4-551.
It is therefore ordered, pursuant to Section 17(d) of the Act, that the Plan, as amended by and between MKT, BATS, C2, CBOE, EDGX, Gemini, ISE, FINRA, Arca, NASDAQ, BOX, BX, Phlx, and MIAX, filed with the Commission pursuant to Rule 17d-2 on October 27, 2015 is hereby approved and declared effective.
It is further ordered that those SRO participants that are not the DOSR as to a particular common member are relieved of those regulatory responsibilities allocated to the common member's DOSR under the amended Plan to the extent of such allocation.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(34).
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Jill M. Peterson,
Assistant Secretary.
FR Doc. 2015-28067 Filed 11-3-15; 8:45 am
BILLING CODE 8011-01-P
