[Federal Register Volume 80, Number 217 (Tuesday, November 10, 2015)]
[Notices]
[Pages 69738-69741]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28521]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76343; File No. SR-NYSEMKT-2015-82]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Requiring Certain 
Member Organizations To Participate in Business Continuity and Disaster 
Recovery Plans Testing in Connection With Regulation Systems Compliance 
and Integrity

November 4, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on October 26, 2015, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') 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 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\ 15 U.S.C. 78a.
    \3\ 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

    The Exchange proposes to require certain Exchange member 
organizations \4\ (``Members'') to participate in business continuity 
and disaster recovery plans (``BC/DR Plans'')

[[Page 69739]]

testing in connection with Regulation Systems Compliance and Integrity 
(``Regulation SCI'').\5\ The text of the proposed rule change is 
available on the Exchange's Web site at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.
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    \4\ The term ``member organization'' is defined in Rule 24 
(Office Rules) as ``a partnership, corporation or such other entity 
as the Exchange may, by Rule, permit to become a member 
organization, and which meets the qualifications specified in the 
Rules.'' The term ``member organization'' is defined in Rule 2(b)(i) 
(Equities Rules) as a registered broker or dealer (unless exempt 
pursuant to the Securities Exchange Act of 1934) (the ``Act'') that 
is a member of the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') or another registered securities exchange. Member 
organizations that transact business with public customers or 
conduct business on the Floor of the Exchange shall at all times be 
members of FINRA. A registered broker or dealer must also be 
approved by the Exchange and authorized to designate an associated 
natural person to effect transactions on the floor of the Exchange 
or any facility thereof. This term shall include a natural person so 
registered, approved and licensed who directly effects transactions 
on the floor of the Exchange or any facility thereof.'' The term 
``member organization'' also includes any registered broker or 
dealer that is a member of FINRA or a registered securities 
exchange, consistent with the requirements of section 2(b)(i) of 
this Rule, which does not own a trading license and agrees to be 
regulated by the Exchange as a member organization and which the 
Exchange has agreed to regulate.'' See Rule 2(b)(ii)--Equities.
    \5\ See Securities Exchange Act Release No. 73639 (November 19, 
2014), 79 FR 72252 (December 5, 2014) (``SCI Adopting Release'').
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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
    As adopted by the Commission, Regulation SCI applies to certain 
self-regulatory organizations (including the Exchange), alternative 
trading systems (``ATSs''), plan processors, and exempt clearing 
agencies (collectively, ``SCI entities''), and will require these SCI 
entities to comply with requirements with respect to the automated 
systems central to the performance of their regulated activities. Among 
the requirements of Regulation SCI is Rule 1001(a)(2)(v), which 
requires the Exchange and other SCI entities to maintain ``[b]usiness 
continuity and disaster recovery plans that include maintaining backup 
and recovery capabilities sufficiently resilient and geographically 
diverse and that are reasonably designed to achieve next business day 
resumption of trading and two-hour resumption of critical SCI systems 
following a wide-scale disruption.'' \6\ As a matter of course, the 
Exchange has put extensive time and resources toward planning for 
system failures and already maintains robust BC/DR plans consistent 
with the proposed rule. As set forth below, in connection with 
Regulation SCI, the Exchange is proposing to require certain Members to 
participate in testing of the operation of the Exchange's BC/DR plans.
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    \6\ 17 CFR 242.1001(a)(2)(v).
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    With respect to an SCI entity's BC/DR plans, including its backup 
systems, paragraph (a) of Rule 1004 of Regulation SCI requires each SCI 
entity to: ``[e]stablish standards for the designation of those members 
or participants that the SCI entity reasonably determines are, taken as 
a whole, the minimum necessary for the maintenance of fair and orderly 
markets in the event of the activation of such plans.'' \7\ Paragraph 
(b) of Rule 1004 further requires each SCI entity to ``[d]esignate 
members or participants pursuant to the standards established in 
paragraph (a) of [Rule 1004] and require participation by such 
designated members or participants in scheduled functional and 
performance testing of the operation of such plans, in the manner and 
frequency specified by the SCI entity, provided that such frequency 
shall not be less than once every 12 months.'' \8\
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    \7\ 17 CFR 242.1004(a).
    \8\ 17 CFR 242.1004(b).
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    To comply with Rule 1004 of Regulation SCI, the Exchange proposes 
to amend current Rule 431,\9\ governing mandatory testing of Exchange 
backup systems as described below. The requirements of revised Rule 431 
would apply to Members of the Exchange's equities and options 
markets.\10\
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    \9\ Current Rule 431 requires each member or member organization 
to participate in the testing of their computer systems to ascertain 
decimal pricing conversion compatibility of such systems. The 
Exchange proposes to delete the text of the current rule as it is 
obsolete and no longer applicable.
    \10\ A rule reference has been added to Rule 0--Equities to make 
clear that the proposed rule applies to Members that conduct 
equities transactions on the Exchange.
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    First, in paragraph (a) of revised Rule 431, the Exchange proposes 
to establish standards for the designation of Members that the Exchange 
reasonably determines are, taken as a whole, the minimum necessary for 
the maintenance of fair and orderly markets in the event of the 
activation of the Exchange's business continuity and disaster recovery 
plans.
    Second, in paragraph (b) of revised Rule 431, the Exchange proposes 
to specify that Members that are designated pursuant to paragraph (a) 
of revised Rule 431 would be required to participate in scheduled 
functional and performance testing of the Exchange's business 
continuity and disaster recovery plans, which shall not be less than 
once every 12 months.
    Third, in paragraph (c) of revised Rule 431, the Exchange proposes 
to make clear that Designated Market Makers,\11\ Specialists and e-
Specialists \12\ that have been determined by the Exchange to 
contribute a meaningful percentage of volume in securities they trade, 
measured on a quarterly or monthly basis, will be required to 
participate in scheduled functional and performance testing. The 
Exchange further proposes that it may also consider other factors in 
determining the Members that will be required to participate in 
scheduled functional and performance testing, including average daily 
volume traded on the Exchange measured on a quarterly or monthly basis, 
or Members who collectively account for a certain percentage of market 
share on the Exchange.
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    \11\ The term ``Designated Market Maker'' (``DMM'') shall mean 
an individual member, officer, partner, employee or associated 
person of a Designated Market Maker Unit who is approved by the 
Exchange to act in the capacity of a DMM. See Rule 2(i)--Equities.
    \12\ The term ``Specialist'' means an individual or entity that 
has been deemed qualified by the Exchange for the purpose of making 
transactions on the Exchange in accordance with the provisions of 
Rule 920NY, and who meets the qualification requirements of Rule 
927NY(b). Each Specialist must be registered with the Exchange as a 
Market Maker. Any ATP Holder registered as a Market Maker with the 
Exchange is eligible to be qualified as a Specialist. See Rule 
900.2NY(76). E-Specialists are Members designated by the Exchange in 
an options class to fulfill certain obligations required of 
Specialists. See Rule 927.4NY.
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    Fourth, in paragraph (d) of revised Rule 431, the Exchange proposes 
that at least three (3) months prior to a scheduled functional and 
performance testing of the Exchange's business continuity and disaster 
recovery plans, the Exchange will publish the criteria to be used by 
the Exchange to determine which Members will be required to participate 
in such testing and notify those Members that are required to 
participate based on such criteria.\13\ The Exchange believes that 
proposed notice requirements are necessary to provide Members with 
proper advance notice when they become subject to the proposed rule. 
The proposed timeframes would also provide Members with adequate time 
to prepare for the testing, including any systems changes needed, to 
connect to the Exchange's backup systems.
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    \13\ The Exchange will publish the initial notice to Members no 
later than November 3, 2015.
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    Finally, in paragraph (e) of revised Rule 431, the Exchange 
proposes to make clear that Members not designated pursuant to 
standards established in paragraph (a) of revised Rule 431 are 
permitted to connect to the Exchange's backup systems and may 
participate in testing of such systems. Proposed paragraph (e) is 
consistent with Regulation SCI, which encourages ``SCI

[[Page 69740]]

entities to permit non-designated members or participants to 
participate in the testing of the SCE entity's BC/DR plans if they 
request to do so.''\14\
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    \14\ See SCI Adopting Release, supra note 5 at 72350.
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    The Exchange notes that it encourages all Members to connect to the 
Exchange's backup systems and to participate in testing of such 
systems. However, in adopting the requirements of revised Rule 431, the 
rule will subject only those Members to mandatory testing that the 
Exchange believes are, taken as a whole, the minimum necessary to 
maintain fair and orderly markets. The Exchange believes that 
designating Members to participate in mandatory testing because they, 
for example, account for a significant portion of the Exchange's 
overall volume or maintain exclusive responsibilities with respect to 
Exchange-listed securities is a reasonable means to ensure the 
maintenance of a fair and orderly market on the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\15\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\16\ in particular, because 
it is 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 regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to, and 
perfect the mechanisms of, a free and open market and a national market 
system and, in general, to protect investors and the public interest 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
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    The proposal would ensure that the Members necessary to ensure the 
maintenance of a fair and orderly market are properly designated 
consistent with Rule 1004 of Regulation SCI. Specifically, as proposed, 
the Exchange would adopt clear and objective criteria with respect to 
the designation of Members that are required to participate in the 
testing of the Exchange's BC/DR plans, as well as appropriate 
notification regarding such designation. As set forth in the SCI 
Adopting Release, ``SROs have the authority, and legal responsibility, 
under Section 6 of the Exchange Act, to adopt and enforce rules 
(including rules to comply with Regulation SCI's requirements relating 
to BC/DR testing) applicable to their members or participants that are 
designed to, among other things, foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and 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.'' \17\ The Exchange believes 
that this proposal is consistent with such authority and legal 
responsibility.
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    \17\ See SCI Adopting Release, supra note 5 at 72350.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. To the contrary, the proposal 
is not a competitive proposal but rather is necessary for the 
Exchange's compliance with Regulation SCI.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \18\ and Rule 19b-4(f)(6) thereunder.\19\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder. A proposed rule change filed under Rule 19b-
4(f)(6) \20\ normally does not become operative prior to 30 days after 
the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),\21\ 
the Commission may designate a shorter time if such action is 
consistent with the protection of investors and the public interest.
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    \18\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest 
as it will allow the Exchange to incorporate changes required under 
Regulation SCI, such as establishing standards for designating BCP/DR 
participants, prior to the November 3, 2015 compliance date. 
Accordingly, the Commission designates the proposed rule change to be 
operative upon filing.\22\
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    \22\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \23\ 15 U.S.C. 78s(b)(2)(B).
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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 [email protected]. Please include 
File Number SR-NYSEMKT-2015-82 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-NYSEMKT-2015-82. This 
file number should be included on the subject line if email is used. To 
help the

[[Page 69741]]

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 20549-1090. Copies of the filing will also be available 
for inspection and copying at the NYSE's principal office and on its 
Internet Web site at www.nyse.com. 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-NYSEMKT-2015-82 and should be submitted on or before 
December 1, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-28521 Filed 11-9-15; 8:45 am]
 BILLING CODE 8011-01-P