Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
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)
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.
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)
In 1993, the Commission adopted Securities Exchange Act Rule 15c6–1(a),
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.
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.
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.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
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
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.
No written comments were solicited or received with respect to the proposed rule change.
Within 45 days of the date of publication of this notice in the
A. By order approve or disapprove the proposed rule change, or
B. Institute proceedings to determine whether the proposed rule change should be disapproved.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.