
[Federal Register Volume 82, Number 107 (Tuesday, June 6, 2017)]
[Notices]
[Pages 26147-26148]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11609]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80825; File No. SR-CHX-2017-06]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Granting Approval of a 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

May 31, 2017.

I. Introduction

    On April 6, 2017, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to conform its rules to an amendment adopted by 
the Commission to Rule 15c6-1(a) under the Act \3\ to shorten the 
standard settlement cycle for most broker-dealer transactions from 
three business days after the trade date (``T+3'') to two business days 
after the trade date (``T+2'').\4\ The Commission adopted the amendment 
to Rule 15c6-1(a) under the Act to shorten the standard settlement 
cycle to T+2 on March 22, 2017 and set a compliance date of September 
5, 2017.\5\ The Exchange's proposed rule change was published for 
comment in the Federal Register on April 21, 2017.\6\ The Commission 
did not receive any comment letters on the proposed rule change. This 
order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.15c6-1.
    \4\ See Securities Exchange Act Release No. 80295 (March 22, 
2017), 82 FR 15564 (March 29, 2017) (``SEC Adopting Release'').
    \5\ See id.
    \6\ See Securities Exchange Act Release No. 80467 (April 17, 
2017), 82 FR 18800.

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[[Page 26148]]

II. Description of the Proposal

    The Exchange proposes to amend Article 1, Rule 2(e) and Article 9, 
Rule 7 to conform to the Commission's amendment to Rule 15c6-1(a) under 
the Act \7\ which shortens the standard settlement cycle from T+3 to 
T+2 for most broker-dealer transactions.
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    \7\ See id; see also supra note 4.
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    Current Article 1, Rule 2(e)(1) relating to order settlement terms 
defines ``Regular Way Settlement'' as ``a transaction for delivery on 
the third full business day following the day of the contract.'' The 
Exchange proposes to shorten the ``third full business day'' time 
period to ``second full business day.''
    Current Article 1, Rule 2(e)(2)(C) defines ``Seller's Option'' as 
``a 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 to shorten the ``four (4) full 
business days'' time period to ``three (3) full business days.''
    Current Article 9, Rule 7(a) governing ex-dividend transactions 
provides in part that transactions in stocks 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 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 shorten 
the ``two full business days'' time period to a ``business day'' under 
Rule 7(a) and the ``three full business days'' time period to ``two 
full business days'' under Rule 7(a)(1).
    The Exchange proposes similar changes to current Article 9, Rule 
7(b) pertaining to ex-warrants that 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 when the day of expiration occurs on a holiday or Sunday, the 
transactions shall be ex-warrants on the third full business day 
preceding the day of expiration. The Exchange proposes to shorten the 
``second full business day'' time period to a ``business day'' under 
Rule 7(b) and the ``third full business day'' time period to ``second 
full business day'' under Rule 7(b)(1).

III. Discussion and Commission's Findings

    After careful review of the proposed rule change, the Commission 
finds that the proposal is consistent with the requirements of the Act 
and the rules and regulations thereunder that are applicable to a 
national securities exchange.\8\ Specifically, the Commission finds 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Act,\9\ which requires that the rules of a national securities exchange 
be designed, among other things, 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 mechanism of a free and open market and a national 
market system, and to protect investors and the public interest.
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    \8\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the proposed rule change would amend 
Exchange rules to conform to the amendment that the Commission has 
adopted to Rule 15c6-1(a) under the Act \10\ and support a move to a 
T+2 standard settlement cycle. In the SEC Adopting Release, the 
Commission stated its belief that shortening the standard settlement 
cycle from T+3 to T+2 will result in a reduction of credit, market, and 
liquidity risk,\11\ and as a result, a reduction in systemic risk for 
U.S. market participants.\12\ The compliance date for the amendment to 
Rule 15c6-1(a) under the Act is September 5, 2017.\13\ The Exchange has 
represented that the operative date of the proposed rule change would 
correspond to the compliance date of the amendment to Rule 15c6-1(a) 
under the Act.
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    \10\ See SEC Adopting Release, supra note 4.
    \11\ Credit risk refers to the risk that the credit quality of 
one party to a transaction will deteriorate to the extent that it is 
unable to fulfill its obligations to its counterparty on settlement 
date. Market risk refers to the risk that the value of securities 
bought and sold will change between trade execution and settlement 
such that the completion of the trade would result in a financial 
loss. Liquidity risk describes the risk that an entity will be 
unable to meet financial obligations on time due to an inability to 
deliver funds or securities in the form required though it may 
possess sufficient financial resources in other forms. See id., 82 
FR at 15564 n. 3.
    \12\ See id., 82 FR at 15564.
    \13\ See id.
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    For the reasons noted above, the Commission finds that the proposal 
is consistent with the requirements of the Act and would foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and protect investors and the public interest.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change, (SR-CHX-2017-06), be and hereby 
is, approved.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11609 Filed 6-5-17; 8:45 am]
 BILLING CODE 8011-01-P


