
[Federal Register Volume 81, Number 226 (Wednesday, November 23, 2016)]
[Notices]
[Pages 84635-84636]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28183]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79337; File No. SR-NYSEARCA-2016-145]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To Conform to Proposed Amendments to Securities 
Exchange Act Rule 15c6-1(A) 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'')

November 17, 2016.
    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 November 4, 2016, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') 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\ 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, through its wholly-owned corporation, 
NYSE Arca Equities, Inc. (``NYSE Arca Equities''), adopt new NYSE Arca 
Equities Rule 7.4T (``Rule 7.4T'') to conform to proposed amendments to 
Securities Exchange Act Rule 15c6-1(a) to shorten the standard 
settlement cycle from three business days after the trade date to two 
business days after the trade date. 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.

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 adopt a new Rule 7.4T (Ex-Dividend or Ex-
Right Dates) conform to proposed amendments to Securities Exchange Act 
Rule 15c6-1(a) \4\ to shorten the standard settlement cycle from T+3 to 
T+2.
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    \4\ See 17 CFR 240.15c6-1(a); see also notes 7-8, infra.
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    The proposed new rule would have the same numbering as the current 
rule, but with the modifier ``T'' appended to the rule number. As 
discussed below, because the Exchange would not implement the proposed 
rule until after the final implementation of T+2, the Exchange proposes 
to retain the current version of Rule 7.4 on its books and not delete 
it until after the proposed rule is approved. The Exchange also 
proposes to file separate proposed rule changes to establish the 
operative date of the proposed rule and to delete the current version 
of the rule.
Background
    In 1993, the Securities and Exchange Commission (the ``SEC'' or 
``Commission'') adopted Rule 15c6-1(a) \5\ under the Act, 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 November 1994, 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) and 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 Nos. 35110 (December 16, 
1994), 59 FR 0 (December 23, 1994) (SR-NYSE-94-40) (Notice) and 
35506 (March 17, 1995), 60 FR 15618 (March 24, 1995) (SR-NYSE-94-40) 
(Approval Order).
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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\ In light of this action by the SEC, the Exchange proposes 
new rules to reflect ``regular way'' settlement as occurring on 
T+2.\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).
    \10\ Earlier this year the MSRB also filed a rule change to 
reflect ``regular way'' settlement as occurring on T+2. See 
Securities Exchange Act Release Nos. 77744 68678 [sic] (April 29, 
2016), [sic] 81 FR 14906 (March 18, 2016) (SR-MSRB-2016-04) 
(approving proposed amendments to MSRB Rules G- 12 and G-15 to 
define regular-way settlement for municipal securities transactions 
as occurring on a two-day settlement cycle and technical conforming 
amendments).
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Proposed Rule Change
    The Exchange proposes a new Rule 7.4T to reflect a T+2 settlement 
cycle.\11\ Current Rule 7.4 provides that transactions in stocks traded 
``regular'' shall be ``ex-dividend'' or ``ex-rights'' as the case may 
be, on the second business day preceding the record date fixed by the 
company or the date of the closing of transfer books, except when the 
Board of Directors rules otherwise. Proposed Rule 7.4T would not 
include the word ``second'' so that the reference would be to the 
``business day'' preceding the record date. The current version of Rule 
7.4 further provides that if the record date or closing of transfer 
books occur upon a day other than a business day, the rule shall apply 
for the third preceding business day. Proposed Rule 7.4T would replace 
``third preceding business day'' to ``second preceding business day.''
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    \11\ Current Rule 7.4 was adopted originally as Rule 7.7 of the 
PCX Equities Exchange in 2000 and reflects a T+3 settlement cycle 
for securities transactions.
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Operative Date Preambles
    As noted above, because the Exchange would not implement the 
proposed rule until after the final implementation of T+2, the Exchange 
proposes to retain to retain the current version of Rule 7.4 on its 
books and not delete it until after the proposed rule is approved. The 
Exchange also proposes to file separate proposed rule changes as 
necessary to establish the operative date of Proposed Rule 7.4T and to 
delete the current version of the rule.
    To reduce the potential for confusion regarding which version of 
the rule governs, the Exchange proposes to add a preamble to current 
Rule 7.4 providing that: (1) The rule will remain operative until the 
Exchange files separate

[[Page 84636]]

proposed rule changes as necessary to establish the operative date of 
the revised rule, to delete the current rule and proposed preamble, and 
to remove the preamble text from the revised rule; and (2) in addition 
to filing the necessary proposed rule changes, the Exchange will 
announce via Information Memo the operative date of the deletion of the 
current rule and implementation of proposed Rule 7.4T.
    The Exchange also proposes to add a preamble to proposed Rule 7.4T 
that would provide that: (1) The Exchange will file a separate rule 
change to establish the operative date of the proposed rule, delete the 
current version and the proposed preamble, and remove the preamble text 
from the revised rule; and (2) until such time, the current version of 
the rule will remain operative and that, in addition to filing the 
necessary proposed rule changes, the Exchange will announce via 
Information Memo the implementation of the proposed rule and the 
operative date of the deletion of the current rule.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\13\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, 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. In particular, 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 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 adding a 
preamble to each current rule and to each proposed rule clarifying the 
operative dates of the respective versions would remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system by adding clarity and transparency to the Exchange's 
rules, reducing potential confusion, and making the Exchange's rules 
easier to navigate.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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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.

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 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 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-NYSEArca-2016-145 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-NYSEArca-2016-145. 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-NYSEArca-2016-145, and 
should be submitted on or before December 14, 2016.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Brent J. Fields,
Secretary.
[FR Doc. 2016-28183 Filed 11-22-16; 8:45 am]
 BILLING CODE 8011-01-P


