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Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices
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detail below, however, orders in a Security that include a parameter indicating a preference for settlement on a T+0 basis Order with a T+0
Preference or on a T+1 basis Order with a T+1 Preference would only result in executions that would actually settle more quickly than on a T+2 basis if, and only if, all of the conditions in Rule 25060h are met and the execution that is transmitted by BSTX to NSCC is eligible for T+0 or T+1 settlement under the rules, policies and procedures of a registered clearing agency.61 Any such preference included by a BSTX
Participant would only become operative if the order happens to execute against another order from a BSTX Participant that also includes a parameter indicating a preference for settlement on a T+0 or T+1 basis, as described in more detail below. This means that at the time of order entry all orders in Securities would be regularway orders that would be presumed to settle on a T+2 basis. Faster settlement consistent with the rules, policies and procedures of a registered clearing agency would occur if and only if two orders execute against each other in a manner that meets the conditions in Rule 25060h.
As proposed, an Order with a T+0
Preference will execute against any order against which it is marketable and BSTX will transmit the matched order information to a registered clearing agency for settlement on a standard settlement cycle T+2 except where: i The Order with a T+0 Preference executes against another Order with a T+0 Preference, in which case BSTX
will transmit the matched order information to a registered clearing agency for settlement on the trade date as may be permitted by the rules, policies and procedures of the registered clearing agency, or ii the Order with a T+0 Preference executes against an Order with a T+1 Preference, in which case BSTX will transmit the matched order information to a registered clearing agency for settlement on the next trading day after the trade date i.e., T+1 as may be permitted by the rules, 61 See proposed Rule 25100d. For example, the Exchange understands that under its current rules, policies and procedures NSCC accepts trades for T+0 settlement through its continuous net settlement system provided that they are received by NSCC before a cut-off time of 11:30 a.m. ET.
Matched T+0 trades on BSTX that are not received by NSCC prior to that cut-off time would not be eligible for T+0 clearance and settlement through NSCCs continuous net settlement system. DTCC
provides on its website an overview of the cut-off times and other procedural considerations under its rules, policies and procedures that are associated with processing trades for accelerated settlement on a T+0 or T+1 basis. The overview can be accessed here: https www.dtcc.com/sds.

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policies and procedures of the registered clearing agency. Similarly, as proposed, an Order with a T+1 Preference will execute against any order against which it is marketable and BSTX will transmit the matched order information to a registered clearing agency for settlement on a standard settlement cycle T+2
except where: i The Order with a T+1
Preference executes against another Order with a T+1 Preference or an Order with a T+0 Preference, in which case BSTX will transmit the matched order information to a registered clearing agency for settlement on the next trading day after the trade date i.e., T+1 as may be permitted by the rules, policies and procedures of the registered clearing agency. In all cases, an order not marked with a preference for either T+0 or T+1 settlement would be assured under the settlement timing logic in proposed Rule 25060h of settlement on T+2. The possibility of a shortened settlement time would have no impact on the Exchanges proposed price time priority structure for order matching.62
As a result of this structure, all orders in Securities would be eligible to match and execute against any order against which they are marketable with settlement to occur at the later settlement date of any two matching orders. Only where an Order with a T+1
Preference or an Order with a T+0
Preference match with another Order with a T+1 Preference or Order with a T+0 Preference will those orders or matching portions thereof be eligible to settle more quickly than the standard settlement cycle of T+2.
As previously noted in Part II.E above, the Exchange expects at the commencement of its operations that it would transmit confirmed trade details to NSCC regarding trades in Securities that occur on BSTX and that NSCC
would be the registered clearing agency that clears trades in Securities and produces related settlement obligations for settlement at DTC. The Exchange believes that NSCC and DTC already have appropriate approvals from the SEC for authority in their rules, policies and procedures to be able to clear and settle settlement obligations using such shortened settlement times.
Furthermore, the Exchange understands that NSCC and DTC in fact already are using this authority for shortened 62 For example, assume Order A is marked as an Order with a T+0 Preference and it is sent to BSTX
and is marketable against both resting Order B
standard T+2 settlement, with time priority over Order C and resting Order C marked as an Order with a T+0 Preference but with priority second to that of Order B. Order A will interact first with Order B, notwithstanding that Order C is also marketable against Order A and is also marked as an Order with a T+0 Preference.

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settlement times. For example, based on information provided by representatives of DTCC to outside counsel for BSTX, the Exchange understands that on average for each business day for the months of November and December 2019, NSCC cleared over 19,000 trades designated for T+1 settlement and over 2,000 trades designated for T+0
settlement.63 In addition, the Exchange understands that DTCC makes data regarding T+0 and T+1 clearance and settlement through NSCC and DTC
available on the DTCC website for review by the public.64 As provided in proposed Rules 26136 and 26137, all trades in Securities occurring on BSTX
that are cleared by NSCC, including those that BSTX transmits to NSCC for T+0 or T+1 settlement as may be permitted pursuant to NSCCs rules, policies and procedures, will be settled through book-entry settlement at DTC
pursuant to its rules, policies and procedures.
The Exchange is also aware of the recent announcement by DTCC, the Securities Industry and Financial Markets Association SIFMA and the Investment Company Institute ICI
that they plan to collaborate to help the industry reduce the standard settlement cycle from T+2 to T+1, identify a target timeframe for that transition e.g., by 2023 as recently suggested by DTCC,65
and support market participants in their efforts to obtain requisite regulatory approvals for such a reduction in the standard settlement cycle, including from the SEC.66 The Exchange fully supports this collaboration by SIFMA, DTCC and ICI and efforts by market participants and regulators, including the SEC, to move the standard settlement cycle to T+1. The time frame for the transition, however, remains uncertain and is likely to take years, as suggested by DTCC. The Exchange strongly believes that this proposal to allow BSTX Participants for trades in 63 Mike McClain, Managing Director and General Manager of Equity Clearing and DTC Settlement Services at DTCC provided this information to BSTXs outside counsel, Andrew Blake, Partner, Sidley Austin LLP during a telephone conference on February 13, 2020.
64 See DTCC website, Settlement by the Numbers, https www.dtcc.com/ust1/by-the-numbers.
65 DTCC White Paper, Advancing Together:
Leading the Industry to Accelerated Settlement February 2021 DTCC Accelerated Settlement White Paper, https www.dtcc.com/-/media/
Files/PDFs/White%20Paper/DTCC-AcceleratedSettle-WP-2021.pdf.
66 Sifma Press Release, Sifma, ICI and DTCC
Leading Effort to Shorten U.S. Securities Settlement Cycle to T+1, Collaborating with the Industry on Next Steps April 28, 2021, https www.sifma.org/
resources/news/sifma-ici-and-dtcc-leading-effort-toshorten-u-s-securities-settlement-cycle-to-t1collaborating-with-the-industry-on-next-steps/.

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