80 FR 43515 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change for New Equity Trading Rules Relating to Trading Halts, Short Sales, Limit Up-Limit Down, and Odd Lots and Mixed Lots To Reflect the Implementation of Pillar, the Exchange's New Trading Technology Platform
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 140 (July 22, 2015)
Federal Register Volume 80, Issue 140 (July 22, 2015)
| Page Range | 43515-43528 | |
| FR Document | 2015-17895 |
[Federal Register Volume 80, Number 140 (Wednesday, July 22, 2015)] [Notices] [Pages 43515-43528] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-17895] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-75467; File No. SR-NYSEARCA-2015-58] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change for New Equity Trading Rules Relating to Trading Halts, Short Sales, Limit Up-Limit Down, and Odd Lots and Mixed Lots To Reflect the Implementation of Pillar, the Exchange's New Trading Technology Platform July 16, 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 July 1, 2015, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE Arca'') filed with the [[Page 43516]] 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes new equity trading rules relating to Trading Halts, Short Sales, Limit Up-Limit Down, and Odd Lots and Mixed Lots to reflect the implementation of Pillar, the Exchange's new trading technology platform. 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. 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 On April 30, 2015, the Exchange filed its first rule filing relating to the implementation of Pillar, which is an integrated trading technology platform designed to use a single specification for connecting to the equities and options markets operated by NYSE Arca and its affiliates, New York Stock Exchange LLC (``NYSE'') and NYSE MKT LLC (``NYSE MKT'').\4\ The Pillar I Filing proposed to adopt new rules relating to Trading Sessions, Order Ranking and Display, and Order Execution. On June 26, 2015, the Exchange filed the second rule filing relating to the implementation of Pillar to adopt new rules relating to Orders and Modifiers and the Retail Liquidity Program.\5\ --------------------------------------------------------------------------- \4\ See Securities Exchange Act Release No. 74951 (May 13, 2015), 80 FR 28721 (May 19, 2015) (SR-NYSEArca-2015-38) (Notice) (``Pillar I Filing''). In the Pillar I Filing, the Exchange described its proposed implementation of Pillar, including that it would be submitting more than one rule filing to correspond to the anticipated phased migration to Pillar. \5\ See SR-NYSEArca-2015-56 (``Pillar II Filing''). --------------------------------------------------------------------------- This filing is the third set of proposed rule changes to support Pillar implementation and is intended to be read together with the Pillar I Filing and Pillar II Filing. As described in the Pillar I Filing, new rules to govern trading on Pillar would have the same numbering as current rules, but with the modifier ``P'' appended to the rule number. For example, Rule 7.18, governing UTP Regulatory Halts, would remain unchanged and continue to apply to any trading in symbols on the current trading platform. Proposed Rule 7.18P would govern Trading Halts for trading in symbols migrated to the Pillar platform. In addition, the proposed new rules to support Pillar in this filing would use the terms and definitions that were proposed in the Pillar I Filing and Pillar II Filing.\6\ --------------------------------------------------------------------------- \6\ Capitalized terms not proposed to be defined in this filing are the defined terms set forth in the Pillar I Filing, Pillar II Filing, or in Exchange rules. --------------------------------------------------------------------------- In this filing, the Exchange proposes new Pillar rules relating to:Definition of ``Official Closing Price'' (NYSE Arca Equities Rule 1.1 (``Rule 1.1'')); Clearly Erroneous Executions (NYSE Arca Equities Rule 7.10P (``Rule 7.10P'')); Limit Up--Limit Down Plan and Trading Pauses in Individual Securities Due to Extraordinary Market Volatility (NYSE Arca Equities Rule 7.11P (``Rule 7.11P''));\7\ --------------------------------------------------------------------------- \7\ Rule 7.11 and proposed Rule 7.11P implement the Plan to Address Extraordinary Market Volatility pursuant to Rule 608 of Regulation NMS (``LULD Plan''). See Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012) (File No. 4- 631) (Order approving the LULD Plan). --------------------------------------------------------------------------- Short Sales (NYSE Arca Equities Rule 7.16P (``Rule 7.16P'')); Trading Halts (NYSE Arca Equities Rule 7.18P (``Rule 7.18P'')); and Odd and Mixed Lots (NYSE Arca Equities Rule 7.38P (``Rule 7.38P'')). The Exchange also proposes to amend existing definitions in Rule 1.1. Rule 1.1 Definitions Rule 1.1 sets forth definitions, and in the Pillar I Filing, the Exchange proposes to amend existing definitions and to add new definitions that would be applicable in Pillar only.\8\ The definitions intended for Pillar include the designation ``P.'' \9\ In this filing, the Exchange proposes to: --------------------------------------------------------------------------- \8\ See Pillar I Filing, supra note 4. \9\ As discussed in the Pillar I Filing, supra note 4, the Exchange proposes to append the letter ``P'' for definitions that would be applicable for symbols trading on the Pillar trading platform only. --------------------------------------------------------------------------- Amend Rule 1.1 to delete the definitions for ``UTP Plan'' and ``OTC/UTC Participant,'' and amend definitions of ``UTP Listing Market'' and ``UTP Regulatory Halt,'' which would be applicable both for the current trading platform and for Pillar; Add a new definition for the term ``UTP Security,'' which would be applicable both for the current trading platform and for Pillar; and Add a new definition for the term ``Official Closing Price,'' which would be for Pillar only. Current Rule 1.1(ii) defines the term ``UTP Plan'' to mean the Nasdaq Unlisted Trading Privileges Plan, as from time to time amended according to its provisions. Because the term ``UTP Plan'' is no longer used in Exchange rules, the Exchange proposes to delete this definition.\10\ The Exchange further proposes adding a new definition, which would be set forth in Rule 1.1(ii), as amended, to define the term ``UTP Security.'' As proposed, the term UTP Security would mean a security that is listed on a national securities exchange other than the Exchange and that trades on the NYSE Arca Marketplace pursuant to unlisted trading privileges (``UTP''). --------------------------------------------------------------------------- \10\ The Exchange proposes to make a conforming change to delete the definition of ``OTC/UTP Participant'' in Rule 1.1(hh) and replace it with ``Reserved.'' The term ``OTC/UTP Participant'' is not used in any current Exchange rules. --------------------------------------------------------------------------- Current Rule 1.1(jj) defines the term ``UTP Listing Market'' for a Nasdaq Security as having the same meaning assigned to it in the Nasdaq Unlisted Trading Privileges Plan, as amended, or for any other security shall mean the primary listing market for the security other than the Exchange. The Exchange proposes to streamline this definition and make non-substantive amendments to eliminate the references to Nasdaq Securities, which is no longer a defined term on the Exchange,\11\ and to the Nasdaq Unlisted Trading Privileges Plan, and instead refer more generally to securities that trade on a UTP basis by using the new defined term ``UTP Security.'' As proposed, the term ``UTP Listing Market'' would mean the primary listing market for a UTP Security. --------------------------------------------------------------------------- \11\ See Securities Exchange Act Release No. 75289 (June 24, 2015) (SR-NYSE-2015-54) (Notice of filing to amend Rule 1.1). --------------------------------------------------------------------------- Current Rule 1.1(kk) defines the term ``UTP Regulatory Halt'' to mean a trade suspension or halt called by the UTP Listing Market for the purpose of dissemination of material news. The Exchange proposes non-substantive amendments to this definition to refer to any circumstance when the Exchange would be required to halt trading in a UTP Security. As proposed, a ``UTP [[Page 43517]] Regulatory Halt'' would mean a trade suspension, halt, or pause called by the UTP Listing Market in a UTP Security that requires all market centers to halt trading in that security. The Exchange believes the proposed definition would better define circumstances when the Exchange would be required to halt trading in a UTP Security and would remove the limitation that a UTP Regulatory Halt only refer to halts for the purposes of dissemination of material news. The Exchange proposes to adopt a new definition in Pillar to define the term ``Official Closing Price,'' which would be set forth in proposed Rule 1.1(ggP). As proposed, the term ``Official Closing Price'' would mean the reference price to determine the closing price in a security for purposes of Rule 7 Equities Trading. In Pillar rules, the term ``Official Closing Price'' would be used in proposed Rule 7.16P (for Exchange-listed securities only) and for Market Order Trading Collars pursuant to proposed Rule 7.31P(a)(1)(B) (for both Exchange-listed and UTP Securities).\12\ --------------------------------------------------------------------------- \12\ See Pillar II Filing, supra note 5. --------------------------------------------------------------------------- Proposed Rule 1.1(ggP)(1) would describe how the Official Closing Price would be determined for securities listed on the Exchange. As proposed, the Official Closing Price would be the price established in a Closing Auction of one round lot or more on a trading day. Because there may be circumstances when there is insufficient trading interest to have a closing auction trade of one round lot or more, the Exchange proposes to specify what price the Exchange would use as its Official Closing Price when there is no auction or a closing trade of less than a round lot. As proposed, if there is no Closing Auction or if a Closing Auction trade is less than a round lot on a trading day, the Official Closing Price would be the most recent consolidated last sale eligible trade during Core Trading Hours on that trading day. The rule would further provide that if there were no consolidated last sale eligible trades during Core Trading Hours on that trading day, the Official Price would be the prior trading day's Official Closing Price. The Exchange believes that in the absence of a Closing Auction of a round lot or more, the last consolidated last sale eligible trade during Core Trading Hours best approximates the market's determination of the price of such securities. The Exchange proposes to use only those trades that occur during Core Trading Hours because the lower liquidity during the Early and Late Trading Sessions may mean that trades occurring during those sessions may not be as representative of the price of the security. The Exchange also proposes to use only last sale eligible trades to ensure that the referenced trade is a round lot or more, and therefore indicative of the security's price and not an anomalous trade. For example, assume on Monday, there is no closing auction in symbol ABC, an Exchange-listed security and the most recent consolidated last sale eligible trade was at 3:00 p.m. Eastern Time that day for $10.00. Because there was no Closing Auction, the Official Closing Price on Monday would be $10.00. Assume on Tuesday, there is no Closing Auction or consolidated last sale eligible trades in ABC during Core Trading Hours. Accordingly, the Exchange would use the prior day's Official Closing Price, which was $10.00, so Tuesday's Official Closing Price would also be $10.00. Assume on Wednesday there is again no Closing Auction or consolidated last sale eligible trades during Core Trading Hours. The Wednesday Official Closing Price would be based on Tuesday's Official Closing Price, which was $10.00. This evaluation would continue on each trading day. Proposed Rule 1.1(ggP)(2) would describe how the Exchange would determine the Official Closing Price for securities listed on an exchange other than the Exchange. The Official Closing Price would be relevant for purposes of the value that the Exchange would use to begin calculating Market Order Trading Collars pursuant to proposed Rule 7.31P(a)(1)(B). As proposed, the Official Closing Price would be the official closing price disseminated by the primary listing market for that security via a public data feed on a trading day.\13\ If the primary listing market does not disseminate an official closing price on a trading day, the Official Closing Price would be the most recent consolidated last sale eligible trade during Core Trading Hours on that trading day. If there were no consolidated last sale eligible trades during Core Trading Hours on that trading day, the Official Closing Price would be the prior day's Official Closing Price. --------------------------------------------------------------------------- \13\ Both the Consolidated Tape System and the UTP Plan Trade Data Feed provide for sale conditions that are input by the primary listing market to indicate whether a trade is a Market Center Official Close (``M''), a Market Center Closing Trade (``6''), or a Corrected Closing Price (``9''). See Consolidated Tape System CTS Participant Communications Interface Specifications, Version 2.7a, at 88, available at: https://www.ctaplan.com/ and The UTP Plan Trade Data Feed Direct Subscriber Interface Specification, Version 14.2, at 6-16, available at http://www.nasdaqtrader.com/content/technicalsupport/specifications/utp/utdfspecification.pdf. --------------------------------------------------------------------------- The Exchange also proposes that an Official Closing Price may be adjusted to reflect corporate actions or a correction to a closing price, as disseminated by the primary listing market for the security. The proposed rule would provide specificity in Pillar rules regarding what the Exchange would consider an Official Closing Price for securities that do not have a Closing Auction or for which the primary listing market does not disseminate an official closing price. Proposed New Rule 7.18P--Halts The Exchange proposes new Rule 7.18P to describe halts on the Pillar trading platform, and more specifically, how orders would be processed during halts, suspensions, or pauses in any security as well as halts related to Derivative Securities Products.\14\ The proposed rule would consolidate into a single rule text from current Rules 7.18, 7.11(b)(6), and 7.34(a)(4) and (5).\15\ --------------------------------------------------------------------------- \14\ In the Pillar I Filing, the Exchange proposes to define the term ``Derivative Securities Product'' in Rule 1.1(bbb) as a security that meets the definition of ``derivative securities product'' in Rule 19b-4(e) under the Securities Exchange Act of 1934 and a ``UTP Derivative Securities Product'' as a Derivative Securities Product that trades on the Exchange pursuant to unlisted trading privileges. See Pillar I Filing, supra note 4. \15\ As noted in the Pillar I Filing, id., the Exchange has not proposed to include the text set forth in current Rule 7.34(a)(4) and (5) in proposed Rule 7.34P. --------------------------------------------------------------------------- Current Rule 7.18 sets forth requirements relating to UTP Regulatory Halts. Current Rule 7.11(b)(6) sets forth how the Exchange processes new and existing orders during a trading pause issued by another primary listing market. Current Rule 7.34(a)(4) sets forth requirements for trading halts in Derivative Securities Products traded pursuant to UTP on the NYSE Arca Marketplace and current Rule 7.34(a)(5) sets forth requirements for trading halts in Derivative Securities Products listed on the Exchange. Current Rule 7.34(a)(4)(A) provides that if a security described in NYSE Arca Equities Rules 5.1(b)(13), 5.1(b)(18), 5.2(j)(3), 8.100, 8.200, 8.201, 8.202, 8.203, 8.204, 8.300, 8.400, 8.500, 8.600 and 8.700 (for purposes of this Rule 7.34, a ``Derivative Securities Product'') begins trading on the NYSE Arca Marketplace in the Opening Session and subsequently a temporary interruption occurs in the calculation or wide dissemination of the Intraday Indicative Value (``IIV'') or the value of the underlying index, as applicable, to such Derivative Securities Product, by a major market data vendor, NYSE Arca [[Page 43518]] may continue to trade the Derivative Securities Product for the remainder of the Opening Session. Current Rule 7.34(a)(4)(B) provides that during the Core Trading Session, if a temporary interruption occurs in the calculation or wide dissemination of the applicable IIV or value of the underlying index by a major market data vendor and the listing market halts trading in the Derivative Securities Product, NYSE Arca, upon notification by the listing market of such halt due to such temporary interruption, also shall immediately halt trading in the Derivative Securities Product on the NYSE Arca Marketplace. Current Rule 7.34(a)(4)(C) relates to the Late Trading Session and the next business day's Opening Session, and provides that if the IIV or the value of the underlying index continues not to be calculated or widely available after the close of the Core Trading Session, NYSE Arca may trade the Derivative Securities Product in the Late Trading Session only if the listing market traded such securities until the close of its regular trading session without a halt. The rule further provides that if the IIV or the value of the underlying index continues not to be calculated or widely available as of the commencement of the Opening Session on the next business day, NYSE Arca shall not commence trading of the Derivative Securities Product in the Opening Session that day. If an interruption in the calculation or wide dissemination of the IIV or the value of the underlying index continues, NYSE Arca may resume trading in the Derivative Securities Product only if calculation and wide dissemination of the IIV or the value of the underlying index resumes or trading in the Derivative Securities Product resumes in the listing market. Current Rule 7.34(a)(5) sets forth that with respect to Derivative Securities Products listed on the NYSE Arca Marketplace for which a Net Asset Value (``NAV'') (and in the case of Managed Fund Shares under NYSE Arca Equities Rule 8.600 and Managed Trust Securities under NYSE Arca Equities Rule 8.700, a Disclosed Portfolio) is disseminated, if the Exchange becomes aware that the NAV (or in the case of Managed Fund Shares, the Disclosed Portfolio) is not being disseminated to all market participants at the same time, it will halt trading in the affected Derivative Securities Product on the NYSE Arca Marketplace until such time as the NAV (or in the case of Managed Fund Shares, the Disclosed Portfolio, as applicable) is available to all market participants. Rule 7.18P(a): Proposed Rule 7.18P(a) would be based on current Rule 7.18, but with non-substantive differences to streamline the rule to reflect the proposed definition of a UTP Regulatory Halt, described above, and to address when the Exchange may reopen a security that is subject to a trading pause under the LULD Plan or a halt pursuant to Rule 7.12 (Trading Halts Due to Extraordinary Market Volatility).\16\ --------------------------------------------------------------------------- \16\ See proposed Rule 7.11P(a)(2) (providing that the Exchange would be subject to the applicable requirements of the LULD Plan, including section (VII)(B) of the LULD Plan relating to the reopening of trading following a trading pause) and Rule 7.12(c)(ii). --------------------------------------------------------------------------- As proposed, the first sentence of new Rule 7.18P(a) would provide that if the UTP Listing Market declares a UTP Regulatory Halt, the Corporation \17\ would halt or suspend trading in that security until it receives notification from the UTP Listing Market that the halt or suspension is no longer in effect or as provided for in Rules 7.11P and 7.12. This proposed text is based on the first sentence of Rule 7.18 with non-substantive differences to refer to when a UTP Listing Market ``declares'' a UTP Regulatory Halt, rather than ``determines that an UTP Regulatory Halt is appropriate,'' and consistent with the proposed new definition of UTP Regulatory Halt, to add references to Rules 7.11P and 7.12. --------------------------------------------------------------------------- \17\ The term ``Corporation'' is defined in Rule 1.1(k) as NYSE Arca Equities, Inc., as described in the NYSE Arca Equities, Inc.'s Certificate of Incorporation and Bylaws. --------------------------------------------------------------------------- The Exchange proposes a substantive difference in Pillar to add in Rule 7.18P(a) that, during Core Trading Hours, the Exchange would halt trading during a UTP Regulatory Halt until it receives the first Price Band in a UTP Security. As proposed, notwithstanding that the Exchange may have received notification from the primary listing market to reopen a security or have authority under the LULD Plan or Rule 7.12 to reopen trading in a UTP Security, the Exchange proposes that, during Core Trading Hours, the Exchange would wait until after it receives the first Price Band in that security before it begins trading. By waiting until it receives the first Price Band, the Exchange would not begin trading in a UTP Security before the protections of the LULD Plan are available. The second sentence of proposed Rule 7.18P(a) would be based on the second sentence of current Rule 7.18, without any substantive differences. Because proposed Rule 7.18P would cover halts other than regulatory halts for the purpose of dissemination of material news, the Exchange proposes a non-substantive difference to specify that the second sentence of proposed Rule 7.18P would be applicable only for halts based on dissemination of material news. Accordingly, the second sentence of proposed Rule 7.18P(a) would provide that if a UTP Regulatory Halt were issued for the purpose of dissemination of material news, the Corporation would assume that adequate publication or dissemination has occurred upon the expiration of one hour after initial publication in a national news dissemination service of the information that gave rise to an UTP Regulatory Halt and may, at its discretion, reopen trading at that time, notwithstanding notification from the UTP Listing Market that the halt or suspension is no longer in effect. Rule 7.18P(b): Proposed Rule 7.18P(b) would describe order processing during a UTP Regulatory Halt. The Exchange proposes a substantive difference in Pillar that the Exchange would not conduct any Trading Halt Auctions in UTP Securities. Accordingly, Rule 7.18P(b) would provide that the NYSE Arca Marketplace would not conduct a Trading Halt Auction in a UTP Security. Proposed Rule 7.18P(b) would further provide how the Exchange would process new and existing orders in a UTP Security during a UTP Regulatory Halt, and is based on rule text from current Rule 7.11(b)(6) regarding how the Exchange processes new and existing orders in UTP Securities during a trading pause triggered under the LULD Plan: Proposed Rule 7.18P(b)(1) would provide that the Exchange would cancel any unexecuted portion of Market Orders, which is based on rule text in current Rule 7.11(b)(6)(ii). The Exchange proposes a substantive difference in Pillar from current Rule 7.11(b)(6)(ii) because Pegged Orders would not be cancelled during a UTP Regulatory Halt. Rather, such orders would remain on the NYSE Arca Book and once the Exchange resumes trading the UTP Security, Pegged Orders would be assigned working prices based on the new PBBO and be eligible to trade. Proposed Rule 7.18P(b)(2) would provide that the Exchange would maintain all other resting orders in the NYSE Arca Book, which other than Pegged Orders, is how the Exchange currently functions and is based on rule text in current Rule 7.11(b)(6)(i). Proposed Rule 7.18P(b)(3) would provide that the Exchange would accept and process all cancellations, which is based on current Rule 7.11(b)(6)(iii). [[Page 43519]] Proposed Rule 7.18P(b)(4) would be new functionality for Pillar, and would provide that the Exchange would process a request to cancel and replace as a cancellation without replacing the order. Accordingly, if a User seeks to replace an order, the Exchange would reject that request because it would be a new order, consistent with proposed Rule 7.18P(6), described below, but the Exchange would also cancel the resting order because that would meet the intent of the User to replace an order by cancelling the resting order. Proposed Rule Rule 7.18P(b)(5) would provide that the Exchange would accept and route new Market Orders, Auction-Only Orders, Primary MOO/LOO Orders, Primary Only Day Orders, and Primary Only MOC/ LOC Order to the primary listing market. The proposed handling of Market Orders and Primary Only Orders in Pillar is based on current Rule 7.11(b)(6)(iv) and (v), which provides that the Exchange accepts and routes new Market Orders, PO Orders, and PO+ Orders to the primary market. The Exchange proposes non-substantive differences to use the term ``primary listing market'' instead of ``primary market'' and to refer to the specific Primary Only Orders, as defined in the Pillar II Filing, that would be eligible to be routed.\18\ Because the Exchange does not process IOC orders in auctions, the Exchange would not route Primary Only IOC Orders. --------------------------------------------------------------------------- \18\ See Pillar II Filing, supra note 5 at proposed Rule 7.31P(f). --------------------------------------------------------------------------- The proposed treatment of Auction-Only Orders during a UTP Regulatory Halt in new Rule 7.18P(b)(5) would be new in Pillar. The proposed processing of Auction-Only Orders during a UTP Regulatory Halt would be consistent with the proposed treatment of such orders in Pillar. As set forth in the Pillar I Filing, the Exchange proposes that before the Core Trading Session begins (and for Market Orders, until the first primary listing market print of any size or 10 a.m. Eastern Time, whichever is earlier), it would route Market Orders and Auction- Only Orders for securities that are not eligible for an auction on the Exchange to the primary listing market, even if such orders do not include a Primary Only designation.\19\ In addition, in the Pillar II Filing, the Exchange proposes to accept Auction-Only Orders in non- auction eligible securities.\20\ --------------------------------------------------------------------------- \19\ See Pillar I Filing, supra note 4 at proposed Rule 7.34P(c)(1)(D). See also Pillar II Filing, supra note 5 at proposed Rule 7.31P(c). \20\ See Pillar II Filing, supra note 5 at proposed Rule 7.31P(c). --------------------------------------------------------------------------- Proposed Rule 7.18P(b)(6) would provide that the Exchange would reject all other incoming orders until the security begins trading on the NYSE Arca Marketplace pursuant to proposed Rule 7.18P(a). This proposed rule text is based on current Rule 7.11(b)(6)(vi), which provides that the Exchange rejects all other orders until the stock has reopened, with a proposed substantive difference to reflect that the time when a stock would be reopened would be based on proposed Rule 7.18P(a), described above. Rule 7.18P(c): Proposed Rule 7.18P(c) would set forth how the Exchange would process new and existing orders for securities listed on the Exchange during a halt, suspension or pause. In Pillar, because Exchange-listed securities would be eligible to participate in a Trading Halt Auction, the Exchange proposes to process orders in Exchange-listed securities differently than how it would process orders in UTP Securities.\21\ --------------------------------------------------------------------------- \21\ The Exchange does not have a rule addressing how it processes new and existing orders during a halt, suspension, or pause in an Exchange-listed security. --------------------------------------------------------------------------- Proposed Rule 7.18P(c)(1) would provide that the Exchange would cancel any unexecuted portion of Market Orders, which is how the Exchange currently functions. The Exchange proposes a substantive difference in Pillar from current functionality because Pegged Orders would not be cancelled. Proposed Rule 7.18P(c)(2) would provide that the Exchange would maintain all other resting orders in the NYSE Arca Book, which other than Pegged Orders, is how the Exchange currently functions. The Exchange proposes to further provide in Pillar that, during a halt, suspension, or pause in Exchange-listed securities, the Exchange would assign Limit Orders on the NYSE Arca Book a working price and display price that is equal to the limit price of the such orders. For example, if an Arca Only Order or ALO Order in an Exchange-listed security has a working price different from its limit price, during a trading halt, suspension, or pause, such order would be re-priced to its limit price. The Exchange proposes to re-price such orders to their limit price so that they may participate in the Trading Halt Auction at their limit price. Consistent with the proposed processing of Pegged Orders, in Pillar, Primary Pegged Orders would remain on the NYSE Arca Book and be eligible to participate in the Trading Halt Auction at their limit price. Market Pegged Orders would remain undisplayed on the NYSE Arca Book, would not be eligible to participate in the Trading Halt Auction, but would be available to be assigned a new working price and be eligible to trade once there is a PBBO against which to peg following the Trading Halt Auction. Proposed Rule 7.18P(c)(3) would provide that the Exchange would accept and process all cancellations, which is based on current functionality. Proposed Rule 7.18P(c)(4) would provide that the Exchange would reject incoming Limit Orders designated IOC, Cross Orders, Tracking Orders, Market Pegged Orders, and Retail Orders. In addition, because the Exchange would not accept new Tracking Orders, Market Pegged Orders, or Retail Orders in Exchange-listed securities during a halt, suspension, or pause, the Exchange would process a request to cancel and replace a Tracking Order, Market Pegged Order, or Retail Order as a cancellation without replacing the order.\22\ --------------------------------------------------------------------------- \22\ Because Limit Orders designated IOC and Cross Orders would not rest on the NYSE Arca Book, a cancel and replace message submitted for such an order would not be related to a resting order, and thus would be rejected. For all other order types, during a halt, suspension or pause in an Exchange-listed security, the Exchange would accept and process a request to cancel and replace an order, which would be consistent with proposed Rule 7.18P(c)(3), pursuant to which the Exchange would accept and process all cancellations, and proposed Rule 7.18P(c)(5), pursuant to which the Exchange would accept all other incoming orders until the security has reopened. --------------------------------------------------------------------------- Proposed Rule 7.18P(c)(5) would provide that the Exchange would accept all other incoming orders until the security has reopened, which represents current functionality. Rule 7.18P(d): Proposed Rule 7.18P(d) would set forth halts in Derivative Securities Products and is based on current Rule 7.34(a)(4) and (5) without any substantive differences. Proposed Rule 7.18P(d)(1) would be based on current Rule 7.34(a)(4) and would set forth requirements for trading halts in UTP Derivative Securities Products and proposed Rule 7.18P(d)(2) would be based on current Rule 7.34(a)(5) and would set forth requirements for trading halts halts in Derivative Securities Products listed on the Exchange. Proposed Rule 7.18P(d) would have the following non-substantive differences from current Rule 7.34(a)(4) and (a)(5): To use the terms ``Derivative Securities Product'' and ``UTP Derivative Securities Product,'' which are new defined terms the Exchange has proposed to be set forth in Rule 1.1(bbb).\23\ Accordingly, unlike current Rule 7.34(a)(4), the Exchange would not [[Page 43520]] define these terms in proposed Rule 7.18P. --------------------------------------------------------------------------- \23\ See Pillar I Filing, supra note 4. --------------------------------------------------------------------------- To use the terms ``Early Trading Session'' instead of ``Opening Session'' and ``primary listing market'' instead of ``listing market.'' Proposed New Rule 7.16P--Short Sales Rule 7.16 sets forth requirements relating to short sales. The Exchange proposes to adopt new Rule 7.16P to address short sales in Pillar. As proposed, new Rule 7.16P would be based on the same rule numbering as current Rule 7.16, but with proposed substantive differences to the rule text that correlates to current Rule 7.16(f). Specifically, in Pillar, because of proposed substantive differences to how certain orders and modifiers would operate, the Exchange proposes different handling of certain orders in Pillar to comply with the requirements of Rule 201 of Regulation SHO (``Rule 201'').\24\ --------------------------------------------------------------------------- \24\ 17 CFR 242.201. --------------------------------------------------------------------------- Rule 7.16P(a)-(e): Current Rule 7.16(a)-(e) sets forth various requirements relating to Regulation SHO, 17 CFR 242.200 et seq. Proposed Rule 7.16P(a)-(e) would be based on current Rule 7.16(a)-(e) with minor non-substantive differences to replace the term ``shall'' with ``will'' in paragraphs (a), (d), and (e) of proposed Rule 7.16P and replace the term ``shall'' with ``may'' in paragraph (b) of proposed Rule 7.16P. Rule 7.16P(f)(1)-(4): Current Rule 7.16(f) sets forth Exchange requirements in compliance with the Short Sale Price Test under Rule 201.\25\ Proposed Rule 7.16P(f) would be based on current Rule 7.16(f), with a non-substantive difference to renumber paragraph (f) with sub- paragraphs (1), (2), (3), etc., instead of (i), (ii), (iii), etc. --------------------------------------------------------------------------- \25\ Capitalized terms are based on the defined terms in Rule 7.16. --------------------------------------------------------------------------- Proposed Rules 7.16P(f)(1)-(4) would be based on the rule text in current Rules 7.16(f)(i) (Definitions), 7.17(f)(ii) (Short Sale Price Test), 7.16(f)(iii) (Determination of Trigger Price), and Rule 7.16(f)(iv) (Duration of Short Sale Price Test), with minor non- substantive differences to replace the term ``shall'' with ``will,'' add the short-hand definition of ``NBB,'' replace references to ``national best bid'' with references to ``NBB,'' and update cross- references based on the proposed different sub-numbering for paragraph (f) of proposed Rule 7.16P. The Exchange proposes substantive differences in Rules 7.16P(f)(2) and (f)(3) from current Rules 7.16(f)(ii) and (f)(iii) regarding which price the Exchange would use in Pillar to determine a Trigger Price. Current Rule 7.16(f)(ii) provides that except as provided in subparagraphs (vi) and (vii) of Rule 7.16(f), Corporation systems shall not execute or display a short sale order with respect to a covered security at a price that is less than or equal to the current national best bid if the price of that security decreases by 10% or more, as determined by the listing market for the security, from the security's closing price on the listing market as of the end of regular trading hours on the prior day (``Trigger Price''). Rule 7.16(f)(iii)(B) further provides that if a covered security did not trade on the Corporation on the prior trading day (due to a trading halt, trading suspension, or otherwise), the Corporation's determination of the Trigger Price will be based on the last sale price on the Corporation for that security on the most recent day on which the security traded. As discussed above, the Exchange proposes to adopt a new definition in Pillar for the term ``Official Closing Price.'' The Exchange proposes to use this term in proposed Rule 7.16P(f)(2) for purposes of determining the Trigger Price in Exchange-listed securities, which would be a substantive difference from current Rule 7.16(f)(ii), which uses the security's closing price on the listing market. By using the proposed definition of ``Official Closing Price,'' if there is no closing auction of a round lot or more, the Exchange would use the most recent consolidated last sale price to determine the Trigger Price, rather than the last price of the security on the Exchange. While this would be a substantive difference for Pillar, the proposal is consistent with NYSE Rule 440B(c)(3), which provides that under specified circumstances, the NYSE may use the consolidated last sale price for a security on the most recent day on which the security traded for purposes of determining a Trigger Price. Similar to the NYSE, the Exchange believes that in the absence of a closing auction of a round lot or more, using the consolidated last sale price available as of the end of Core Trading Hours on the prior day (or most recent day when there is a consolidated last sale price) best approximates the market's determination of the appropriate price of such securities.\26\ --------------------------------------------------------------------------- \26\ See Securities Exchange Act Release No. 68724 (Jan. 24, 2013), 78 FR 6389, 6390 (Jan. 30, 2013) (SR-NYSE-2013-03) (Notice of Filing to amend NYSE Rule 440B to use the consolidated last sale price for purposes of determining the Trigger Price in specified circumstances). --------------------------------------------------------------------------- Using the term ``Official Closing Price'' in proposed Rule 7.16(f)(2), which would incorporate scenarios when there is no closing auction on the Exchange, would obviate the need to include text from current Rule 7.16(f)(iii)(B) in proposed Rule 7.16P. Specifically, the proposed definition of ``Official Closing Price,'' which defines how the Exchange would determine an Official Closing Price in the absence of a Closing Auction or consolidated last sale eligible trade on the prior trading day, would cover the scenario described in current Rule 7.16(f)(iii)(B), i.e., if a security does not trade on the Corporation on the prior trading day. The Exchange's proposed modification in Pillar to how it would determine the Trigger Price is consistent with Rule 201.\27\ Rule 201 provides that the listing market is responsible for determining the closing price of a covered security, but does not require that the Exchange use the closing price from an auction on the Exchange or a last sale on the primary listing market for determining that price.\28\ The proposed use of the new defined term of ``Official Closing Price'' would provide for a closer approximation of the most recent trading price of a security for purposes of determining the Trigger Price because it would include consolidated last sale prices, and not just last sale prices on the Exchange. --------------------------------------------------------------------------- \27\ 17 CFR 242.201. \28\ 17 CFR 242.201(b)(1)(i). See also Division of Trading and Markets: Responses to Frequently Asked Questions Concerning Rule 201 of Regulation SHO, at Question 3.1 (providing guidance that when there is a trading halt or suspension and therefore no closing price, the primary listing market could use the last sale as the prior day's closing price). See also NYSE Rule 440B(c)(3). --------------------------------------------------------------------------- Rule 7.16P(f)(5): Current Rule 7.16(f)(v) sets forth how short sale orders are processed during a Short Sale Period. Proposed Rule 7.16P(f)(5)(A)-(J) would set forth how the Exchange would process short sale orders during a Short Sale Period in Pillar and includes proposed substantive differences from the current rule. Proposed Rule 7.16P(f)(5)(A) would set forth how the Exchange would re-price orders in Pillar and is based on current Rule 7.16(f)(v)(C), which provides that marketable short sale orders will be re-priced by the Corporation one minimum price increment above the current national best bid (the ``Permitted Price'') and defines the Permitted Price for securities priced $1.00 or more or under a $1.00. The first sentence of proposed Rule 7.16P(f)(5)(A) would be based on the first sentence of Rule 7.16(f)(v)(C) with non-substantive differences to define the orders that would be re-priced as ``short sale orders with a working price [[Page 43521]] and/or display price equal to the NBB,'' rather than refer to such orders as ``marketable short sale orders.'' The proposed rule would further provide that such orders would have the working and/or display price adjusted one minimum price increment above the current NBB (``Permitted Price'') and use the term ``NBB'' instead of ``national best bid.'' The Exchange proposes to use Pillar terminology to refer to the price at which an order is eligible to trade (working price) or be displayed (display price) \29\ so that the proposed rule would cover orders and modifiers that may have a working price that is different from the display price (e.g., an Arca Only Order).\30\ Accordingly, pursuant to proposed Rule 7.16P(f)(5)(A), the Exchange would re-price short sale orders so that they would neither trade at the NBB (i.e., reference to the working price being re-priced) or be displayed at the NBB (i.e., reference to the display price being re-priced), unless the order is a permissible short sale order. This proposed rule text would therefore cover all orders and modifiers at the Exchange in Pillar, unless otherwise provided for in paragraphs (f)(5)(B)-(J) of proposed Rule 7.16P. --------------------------------------------------------------------------- \29\ See Pillar I Filing, supra note 4 at proposed Rule 7.36P(a)(1) and (3). \30\ See Pillar II Filing, supra, note 5. By referring to both the display price and the working price of an order being adjusted to a Permitted Price in proposed Rule 7.16P(f)(5)(A), the Exchange does not believe it needs to separately provide for how Arca Only Orders would be re-priced in Pillar, and therefore rule text currently in Rule 7.16(f)(v)(D)(ii), which provides that PNP Blind Orders will be re-priced at a Permitted Price and are displayed once they are re-priced, and therefore will re-price down when the national best bid moves down but will not move up in price if the national best bid moves up and will instead remain at the price displayed, would not be included in proposed Rule 7.16P(f)(5). Because an Arca Only Order has a display price, if such display price is a Permitted Price pursuant to proposed Rule 7.16P(f)(6), the Arca Only Order would not need to be adjusted to a price higher than that display price, which is provided for in the current rule. If the working price of an Arca Only Order is undisplayed, it would be adjusted pursuant to proposed Rule 7.16P(f)(5)(C) as an order that is ranked Priority 3--Non-Display Order. --------------------------------------------------------------------------- The second and third sentences of proposed Rule 7.16P(f)(5)(A) would be based on the second and third sentences of current Rule 7.16(f)(v)(C) with minor non-substantive differences to use the term ``NBB'' instead of ``national best bid'' and use the term ``adjust'' instead of ``reprice.'' Proposed Rule 7.16P(f)(5)(B) would set forth the reject option for sell short orders that would be required to be re-priced during a Short Sale Price Test. The proposed rule is based on current Rule 7.16(f)(v)(A), which provides that an ETP Holder may mark individual short sale orders to be rejected back if entered while a symbol is subject to the short sale price test. In Pillar, the Exchange is proposing a substantive difference to provide that the reject instruction would apply not only to orders on arrival, but also to resting orders. As proposed, if the ETP Holder chooses the reject option, a resting order that would be required to be adjusted to a Permitted Price while a symbol is subject to the Short Sale Price Test would instead cancel. Allowing ETP Holders to elect that their resting interest be cancelled if it would be required to re- price is consistent with the intent of the current rule, which is to reject an order rather than re-price. In addition, the Exchange proposes a minor non-substantive difference to use the term ``adjust'' rather than ``re-price.'' Proposed Rule 7.16P(f)(5)(C) would provide how the Exchange would process sell short Priority 1, Priority 2 odd lot orders, and Priority 3 orders during a Short Sale Price Test. This proposed rule text is based on current Rule 7.16(f)(v)(D)(i) relating to short sale orders that are not displayed on entry, which provides that Market Orders and Passive Liquidity orders will be re-priced at a Permitted Price and will continuously re-price at a Permitted Price as the national best bid moves both up and down. The Exchange proposes to use Pillar terminology to refer to Priority categories to ensure that all sell short orders that would be subject to re-pricing both up and down during a Short Sale Period would be subject to the rule. As proposed, Market Orders, orders and reserve interest ranked Priority 3--Non-Display Orders, and odd lot orders ranked Priority 2--Display Orders would have a working price adjusted to a Permitted Price and would continuously adjust to a Permitted Price as the NBB moves both up and down. The rule would further provide that reserve interest that replenishes the displayed quantity of a Reserve Order would be replenished at a Permitted Price. The Exchange proposes non-substantive differences to use the term ``adjust'' instead of ``reprice,'' and ``NBB'' instead of ``national best bid.'' In Pillar, the Exchange is proposing a substantive difference to treat odd lot orders ranked Priority 2--Display Orders in the same manner as Market Orders and other non-displayed orders. As discussed in the Pillar I Filing, the Exchange proposes that odd lot orders that are ranked Priority 2--Display Orders would be considered ``displayed'' for purposes of ranking because such orders are available via the Exchange's proprietary data feeds.\31\ However, because Rule 201 refers to displayed in the context of an order displayed via the public data feeds, for purposes of proposed Rule 7.16P, the Exchange proposes to process all sell short odd lot orders the same as sell short orders that are ranked Priority 3--Non-Display Orders in that such orders would be re-priced as the NBB moves both up and down. The Exchange would extend this treatment to all odd lot sell short orders, regardless of whether they were previously included in a displayed quote that was at a price above the then current NBB and the NBB moves into the price of the odd lot order and therefore eligible to remain displayed at the price of the NBB under proposed Rule 7.16P(f)(6). --------------------------------------------------------------------------- \31\ See Pillar I Filing, supra note 4. --------------------------------------------------------------------------- The last sentence of proposed Rule 7.16P(f)(5)(C) would provide that reserve interest that replenishes the displayed quantity of a Reserve Order would be replenished at a Permitted Price. This represents current functionality regarding reserve interest pursuant to current Rule 7.16(f)(v)(C) in that all marketable orders other than those specified in the rule are re-priced to one MPV above the current NBB, which includes reserve interest that replenishes the display quantity of a Reserve Order. The Exchange proposes to specify this requirement separately in proposed Rule 7.16P(f)(5)(C) in order to promote clarity regarding at what price reserve interest would replenish any depleted display quantity of a Reserve Order. Because the reserve interest would already be re-priced to a Permitted Price, the Exchange would replenish display quantity at the Permitted Price, even if the previously displayed quantity were eligible to be displayed at the NBB pursuant to proposed Rule 7.16P(f)(6). Proposed Rule 7.16P(f)(5)(D) would set forth how the Exchange would process sell short Pegged Orders and MPL Orders during a Short Sale Price Test. The proposed rule is based on current Rule 7.16(f)(v)(B), which provides that MPL Orders will continue to be priced at the mid-point of the national best bid and national best offer, including situations where the midpoint is not one minimum price increment above the national best bid. The Exchange proposes to add Pegged Orders to this paragraph to describe new functionality in Pillar that the Exchange would not reject or cancel Pegged Orders during a Short Sale Period.\32\ --------------------------------------------------------------------------- \32\ See Pillar II Filing, supra note 5. --------------------------------------------------------------------------- As proposed, during a Short Sale Period, both Pegged Orders and MPL [[Page 43522]] Orders would use the NBBO instead of the PBBO as the reference price for determining the working price of such orders. Proposed Rule 7.16P(f)(5)(C) would further provide that the working price of MPL Orders would be the mid-point of the NBBO, including situations where the midpoint is less than one minimum price increment above the NBB. This rule text is based on current Rule 7.16(f)(v)(B) with minor non- substantive differences to use Pillar terms by referring to the ``working price'' rather than refer to the order being ``priced'' and describing the price of an MPL Order in a less than one MPV market as a midpoint being ``less than one minimum price increment'' rather than ``not one minimum price increment.'' For Primary Pegged Orders, being pegged to the NBBO during a Short Sale Price Test would eliminate the possibility for a sell short Primary Pegged Order to be displayed at the NBB unless it was previously displayed at a price above the then NBB, consistent with proposed Rule 7.16P(f)(6), discussed below. As described in the Pillar II Filing, pursuant to proposed Rule 7.31P(h)(2)(A), if the PBBO becomes locked or crossed, a resting Primary Pegged Order would wait for the PBBO that is not locked or crossed before the working price would be adjusted, but would remain eligible to trade at its then displayed price.\33\ In addition, the Exchange would reject an arriving Primary Pegged Order if the PBBO is locked or crossed. During a Short Sale Period, by using the NBBO instead of the PBBO, the Exchange would reject newly arriving sell short Primary Pegged Orders if the NBBO is locked or crossed, and therefore such orders would not be displayed at the NBB. For resting Primary Pegged Orders, if the NBBO becomes locked or crossed, a resting sell short Primary Pegged Order pegged to the then NBO would remain at its previously displayed price, which would be permitted pursuant to proposed Rule 7.16P(f)(6), and would not be re- priced until there is an NBBO that is not locked or crossed.\34\ --------------------------------------------------------------------------- \33\ See Pillar II Filing, supra note. 5. \34\ For example, assume that during a Short Sale Period, a sell short Primary Pegged Order is pegged to the NBO of 10.00 and there is an NBB of 9.99. If the NBB moves up and locks the NBO, pursuant to proposed Rule 7.16P(f)(6), the sell short Primary Pegged Order would have been displayed at a price that was above then then current NBB and would be eligible to remain displayed at 10.00. If, alternately, the sell short Primary Pegged Order was pegged to an NBO of 10.00 when there is an NBB of 9.99, and then the NBO moves down to lock the 9.99 NBB, the Primary Pegged Order would not have its working price adjusted from 10.00 to 9.99, and therefore would remain displayed and eligible to trade at a Permitted Price of 10.00. --------------------------------------------------------------------------- For Market Pegged Orders, because such orders are ranked Priority 3--Non-Display Orders, a sell short Market Pegged Order that is pegged to the NBBO during a Short Sale Price Test would be adjusted to a Permitted Price pursuant to proposed Rule 7.16P(f)(5)(C). For example, assume a sell short Market Pegged Order is pegged to the PBB, with no offset. If a Short Sale Price Test is triggered in that security, the Market Pegged Order would begin pegging to the NBB and its working price would be adjusted to a Permitted Price. Accordingly, the Market Pegged Order, which would be undisplayed, would never be permitted to trade at the NBB. Proposed Rule 7.16P(f)(5)(E) would set forth how the Exchange would process sell short Tracking Orders during a Short Sale Price Test, which would be new in Pillar.\35\ As proposed, during a Short Sale Price Test, the working price of a sell short Tracking Order, which is based on the PBO, would not be adjusted. However, such order would not be eligible to trade at or below the NBB. Accordingly, if the PBO were equal to or lower than the NBB, a sell short Tracking Order would not be eligible to trade until such time that the PBO is equal to a Permitted Price or higher. --------------------------------------------------------------------------- \35\ As undisplayed orders, Tracking Orders are currently priced to a Permitted Price, consistent with Rule 7.16(f)(v)(D). --------------------------------------------------------------------------- Proposed Rule 7.16P(f)(5)(F) would set forth how the Exchange would process sell short IOC Orders during a Short Sale Price Test. The proposed rule is based on current Rule 7.16(f)(v)(E), which provides that IOC orders requiring that all or part of the order be executed immediately will be executed to the extent possible at a Permitted Price and higher and then cancelled, and will not be re- priced. The Exchange proposes non-substantive differences in proposed Rule 7.16P(f)(5)(F) to use the term ``traded'' instead of ``executed'' and use proposed Pillar terminology to state that the working price would not be adjusted instead of saying ``will not be re-priced.'' Proposed Rule 7.16P(f)(5)(G) would set forth how the Exchange would process sell short Day ISOs during a Short Sale Price Test. The proposed rule is based on current Rule 7.16(f)(v)(F), which provides that PNP ISO Orders are rejected if the price is at or below the current national best bid. The Exchange proposes non-substantive differences in proposed Rule 7.16(P)(5)(G) to refer to this order as a ``Day ISO'' instead of a ``PNP ISO Order,'' reference the ``limit price'' and not just the ``price,'' and use the term ``NBB'' instead of ``national best bid.'' Proposed Rule 7.16P(f)(5)(H) would set forth how the Exchange would process Cross Orders for which the sell side is a short sale order and are received during a Short Sale Price Test. Currently, Cross Orders, which are an IOC Order, are subject to Rule 7.16(f)(v)(E) and if the proposed cross price is not at a Permitted Price or higher, the Cross Order is not re-priced but would instead cancel. Proposed Rule 7.16P(f)(5)(H) would provide that Cross Orders with a cross price at or below the NBB would be rejected. Accordingly, Cross Orders in Pillar would be processed the same as provided for in Rule 7.16(f)(v)(E).\36\ --------------------------------------------------------------------------- \36\ Proposed Rule 7.16P(f)(5)(H) would also describe how the Exchange would process Limit IOC Routable Cross Orders, which is a new form of Cross Order proposed in Pillar that would be eligible to trade at prices other than its cross price. See Pillar II Filing, supra note 5 at proposed Rule 7.31P(g)(2). If a Limit IOC Routable Cross Order has a sell short order and the cross price is not at a Permitted Price or higher, the entire order would be rejected and it would not trade at prices other than the cross price. --------------------------------------------------------------------------- Proposed Rule 7.16P(f)(5)(I) would provide how the Exchange would process sell short orders for which a Short Sale Price Test is triggered after the order is routed. The proposed rule text represents new functionality for Pillar. As proposed, if a Short Sale Price Test is triggered after an order has routed, any returned quantity of the order and the order it joins on the NYSE Arca Book would be adjusted to a Permitted Price. The Exchange proposes to re- price the resting quantity, even if it were eligible to remain displayed at the NBB price pursuant to proposed Rule 7.16P(f)(6), to conform to the general requirement in Pillar that the returned quantity of a partially routed order would join the resting quantity.\37\ If the returned quantity would be required to be re-priced to a Permitted Price, then the resting quantity that it joins would similarly be re- priced to a Permitted Price and the order would rest on the NYSE Arca Book at a single price rather than two prices. --------------------------------------------------------------------------- \37\ See Pillar I Filing, supra note 4 at proposed Rule 7.36P(f)(1)(B). --------------------------------------------------------------------------- Proposed Rule 7.16P(f)(5)(I) would further provide that if the order that was routed was a Reserve Order, the returned quantity of the order would first join the reserve interest at a Permitted Price and be assigned a new working time before being evaluated for replenishing the display quantity of the Reserve Order. This proposed functionality would ensure that the [[Page 43523]] returned quantity of the Reserve Order would be priced at a Permitted Price and would not join any previously displayed quantity that might be eligible to remain displayed at a price equal to or below the NBB pursuant to proposed Rule 7.16P(f)(6). The Exchange proposes to include this level of detail regarding how sell short Reserve Orders would be processed in order to provide transparency in the Exchange's rules regarding how orders operate during a Short Sale Period. Proposed Rule 7.16P(f)(5)(J) would provide how orders with a Proactive if Locked/Crossed Modifier would operate during a Short Sale Period and is based on current Rule 7.16(f)(v)(G), which provides that proactive if locked modifiers will be ignored for short sale orders. The Exchange proposes a non-substantive difference to rename the modifier as a ``Proactive if Locked/Crossed Modifier,'' consistent with the proposed name of the modifier in Pillar.\38\ --------------------------------------------------------------------------- \38\ See Pillar I Filing, supra note 5 at proposed Rule 7.31P(i)(1). --------------------------------------------------------------------------- Proposed Rule 7.16P(f)(6) would provide for the execution of permissible orders during the Short Sale Period. The proposed rule text is based on current Rule 7.16(f)(vi), which provides that during the Short Sale Period, Corporation systems will execute and display a short sale order without regard to price if, at the time of initial display of the short sale order, the order was at a price above the then current national best bid. Except as specifically noted in subparagraph (v), short sale orders that are entered into the Corporation prior to the Short Sale Period but are not displayed will be re-priced to a Permitted Price. The Exchange proposes minor non-substantive differences to replace the reference to ``national best bid'' with a reference to ``NBB,'' update the cross reference from subparagraph (f)(v) to subparagraph (f)(5), and replace the term ``re-priced'' with the term ``adjusted.'' Proposed Rule 7.16P(f)(7) would provide for short exempt orders. The proposed rule text is based on current Rule 7.16(f)(vii) with no differences. Proposed New Rule 7.11P--LULD Rule 7.11 sets forth rule provisions relating to the LULD Plan and trading pauses in individual securities due to extraordinary market activity. The Exchange proposes new Rule 7.11P for Pillar to address the same topic. As proposed, new Rule 7.11P would be based on the same rule numbering as current Rule 7.11, but with proposed substantive differences to the paragraph that correlates to current Rule 7.11(a)(6). Specifically, in Pillar, the Exchange would expand the number of order types that would be eligible for optional re-pricing instructions. Rule 7.11P(a)(1)-(4): Current Rule 7.11 is a pilot rule in effect during a pilot period to coincide with the pilot period for the LULD Plan. Proposed Rule 7.11P(a)(1)-(4) for Pillar would be based on current Rule 7.11(a)(1)-(4) with minor non-substantive differences to replace the term ``shall'' with ``will'' and ``execute'' with ``trade.'' Rule 7.11P(a)(5): Current Rule 7.11(a)(5) provides that Exchange systems shall cancel buy (sell) interest that is priced or could be executed above (below) the Upper (Lower) Price Band, except as specified in Rule 7.11(a)(6). Accordingly, cancelling orders that are priced or could be executed through the bands is the default functionality on the Exchange. Rule 7.11(a)(5) further provides that incoming marketable interest, including market orders, IOC orders, and limit orders, shall be executed, or if applicable, routed to an away market, to the fullest extent possible, subject to Rules 7.31(a)(1)-(3) (Trading Collars for market orders) and 7.31(b)(2) (price check for limit orders), at prices at or within the Price Bands. Any unexecuted portion of such incoming marketable interest that cannot be executed at prices at or within the Price Bands shall be cancelled and the ETP Holder shall be notified of the reason for the cancellation. The Exchange proposes to maintain the current default to cancel orders that would be priced or traded through the Price Bands. Proposed Rule 7.11P(a)(5) would therefore provide that Exchange systems would cancel buy (sell) interest that is priced or could be traded above (below) the Upper (Lower) Price Band, except as specified in proposed Rule 7.11P(a)(6). This proposed rule text is based on current Rule 7.11(a)(5) with non-substantive difference to change the term ``shall'' to ``will'' and ``executed'' to ``traded.'' Proposed Rule 7.11P(a)(5)(A) would further provide that incoming marketable interest, including Market Orders, Limit Orders, and Limit Orders designated IOC would be traded, or if applicable, routed to an Away Market, to the fullest extent possible, subject to Rules 7.31P(a)(1)(B) (Trading Collars for Market Orders) and 7.31P(a)(2)(B) (price check for Limit Orders), at prices at or within the Price Bands. Any unexecuted quantity of such incoming marketable interest that cannot be traded at prices at or within the Price Bands would be cancelled and the ETP Holder would be notified of the reason for the cancellation. This proposed rule text is based on current Rule 7.11(a)(5)(A) with non-substantive differences to capitalize ``Away Market,'' ``Market Order,'' ``Limit Order,'' and ``Limit Orders designated IOC,'' use the term ``will'' instead of ``shall,'' use the term ``traded'' instead of ``executed,'' and update cross references to proposed Rule 7.31P. The Exchange also proposes to add proposed Rule 7.11P(a)(5)(B), which would provide that Cross Orders with a cross price above the Upper Price Band or below the Lower Price Band would be rejected. This would be new rule text in Pillar. Cross Orders, which are IOC, are currently subject to current Rule 7.11(a)(5), which provides that IOC Orders execute to the fullest extent possible at prices at or within the Price Bands, and any unexecuted portion that cannot be executed at prices at or within the Price Bands shall be cancelled. Accordingly, if the cross price of a Cross Order cannot be executed at prices at or within the Price Bands, the Cross Order will be cancelled. Proposed Rule 7.11P(a)(5)(B) is based on this rule text, but would also address how the Exchange would process in Pillar the proposed new Limit IOC Routable Cross Orders, which are eligible to trade at prices other than their cross price.\39\ In Pillar, both the Limit IOC Cross Order and the Limit IOC Routable Cross Order would cancel if the cross price were outside the Price Bands, and therefore the proposed Limit IOC Routable Cross Order would not trade with any interest on the NYSE Arca Book or route to Away Market interest that is within the Price Bands. --------------------------------------------------------------------------- \39\ See Pillar II Filing, supra note 5 at proposed Rule 7.31P(g)(2). --------------------------------------------------------------------------- Rule 7.11(a)(6): Current Rule 7.11(a)(6) sets forth the discretionary instruction to re-price eligible Limit Orders and provides that for specified limit orders, ETP Holders may enter an instruction for the Exchange to re-price a buy (sell) order that is priced above (below) the Upper (Lower) Price Band to the Upper (Lower) Price Band rather than cancel the order, provided, however, that if a Discretionary Order includes a discretionary price that is priced above (below) the Upper (Lower) Price Band, the Exchange shall cancel such order. Current Rule 7.11(a)(6)(A) further provides that instructions to re-price eligible orders shall be applicable to both incoming and resting orders and if the Price Bands move and the original limit price of a re-priced order if at or within the Price Bands, Exchange [[Page 43524]] systems shall re-price such limit order to its original limit price. Current Rule 7.11(a)(6)(B) provides that each time an eligible order is re-priced, it shall receive a new time priority. Current Rule 7.11(a)(6)(C) sets forth the order types eligible for re-pricing instructions, which are Adding Liquidity Only Orders, Discretionary Orders, Inside Limit Orders, Limit Orders, PNP ISO, PNP Orders, Proactive if Locked Reserve Orders, Reserve Orders, Primary Until 9:45 Orders, Primary After 3:55 Orders, and Primary Sweep Orders. Finally, current Rule 7.11(a)(6)(D) provides that for an order type eligible for re-pricing instructions under Rule 7.11(a)(6)(C) that is also a short sell order, during a Short Sale Price Test, as set forth in Rule 7.16(f), a short sale order priced below the Lower Price Band shall be re-priced to the higher of the Lower Price Band or the Permitted Price, as defined in Rule 7.16(f)(ii), and that Sell short orders that are not eligible for re- pricing instructions will be treated as any other order pursuant to Rule 7.11(a)(5). In Pillar, the Exchange proposes substantive differences to expand the number of order types eligible for re-pricing instructions. In addition, rather than specifying which order types would be eligible for re-pricing instructions, the Exchange would enumerate which order types would not be eligible for re-pricing instructions. Accordingly, as proposed, Rule 7.11P(a)(6) would provide that ETP Holders may enter an instruction for the working price of a Limit Order to buy (sell) with a limit price above (below) the Upper (Lower) Price Band to be adjusted to a price that is equal to the Upper (Lower) Price Band rather than cancel the order. The proposed rule text is based on current Rule 7.11(a)(6) with both substantive differences to reference that Limit Orders are eligible for re-pricing instructions and non- substantive differences to use Pillar terminology.\40\ The Exchange proposes to reference the working price of an order to be clear that for order types that may have a working price that is more aggressive than the display price, it would be the working price that would be adjusted. For example, an Arca Only Order or ALO Order to buy that would have a working price equal to the PBO, if the PBO were above the Upper Price Band, the working price would be adjusted to be equal to the Upper Price Band. --------------------------------------------------------------------------- \40\ The Exchange will not reference Discretionary Orders in proposed Rule 7.11P(a)(6) because the Exchange will not be offering Discretionary Orders in Pillar. See Pillar II Filing, supra note 5. --------------------------------------------------------------------------- Proposed Rule 7.11P(a)(6)(A) would be new rule text that enumerates which orders would not be eligible for re-pricing instructions in Pillar.\41\ As proposed, re-pricing instructions would not be available for Market Orders, Auction-Only Orders, Q Orders, Primary Only Orders, or any Limit Order that includes an IOC modifier, including Cross Orders. The rule would also provide that instructions to re-price included with a Primary Until 9:45 Order or Primary After 3:55 Order would only be enforced when such orders are entered on or resting on the NYSE Arca Book.\42\ The Exchange believes that proposed Rule 7.11P(a)(6)(A) would provide additional clarity in Exchange rules regarding which orders would be eligible for re-pricing instructions, and if eligible, when they would be re-priced. --------------------------------------------------------------------------- \41\ Because in Pillar the Exchange would enumerate which orders are not eligible for re-pricing instructions rather than list orders that would be eligible for re-pricing instructions, the Exchange would not include rule text based on current Rule 7.11(a)(6)(C) in the Pillar rule. \42\ This proposed rule text in Rule 7.11P(a)(6)(A) regarding Primary Until 9:45 Orders and Primary After 3:55 Orders is consistent with current Rule 7.11(a)(7) and proposed Rule 7.11P(a)(7), which provide that the Exchange routes these orders to the primary listing market regardless of price. --------------------------------------------------------------------------- Proposed Rule 7.11P(a)(6)(B) would provide that instructions to re- price eligible Limit Orders would be applicable to both incoming and resting orders and that if the Price Bands move and the original limit price of a re-priced order is at or within the Price Bands, such a Limit Order would be adjusted to its limit price. This proposed rule text is based on current Rule 7.11(a)(6)(A) with non-substantive differences to refer to ``Limit Orders'' instead of ``orders'' and to use the term ``adjust'' rather than ``reprice.'' Proposed Rule 7.11P(a)(6)(C) would set forth proposed new functionality in Pillar regarding how MPL Orders would be processed. Currently, MPL Orders are not eligible for re-pricing instructions, and therefore would cancel if they would trade outside the Price Bands. In Pillar, MPL Orders would be eligible for re-pricing instructions. If such instruction were included on an MPL Order, such order would not cancel if the midpoint of the PBBO were outside the Price Bands, but nor would it re-price. Accordingly, as proposed, Rule 7.11P(a)(6)(C) would provide that an MPL Order that has an instruction to re-price would not cancel, but would not be re-priced or eligible to trade if the midpoint of the PBBO is below the Lower Price Band or above the Upper Price Band. The Exchange believes that the proposed functionality would provide more options for ETP Holders entering MPL Orders so that such orders would not be cancelled if they would trade through a Price Band, but also to honor the intent of the order to trade only at the midpoint of the PBBO. Proposed Rule 7.11P(a)(6)(D) would be based on current Rule 7.11(a)(6)(D) relating to Sell Short Orders with non-substantive differences to update cross references to proposed Rule 7.16P instead of Rule 7.16. In addition, to reflect the proposed substantive difference of which orders would be eligible for re-pricing instructions in Pillar, the Exchange proposes a non-substantive difference to the first sentence of the proposed rule so that it begins with ``[i]f an eligible order includes repricing instructions and is also a sell short order,'' instead of the current first sentence of Rule 7.11(a)(6)(D), which states, ``[f]or an order type eligible for repricing instructions under (6)(C) above that is also a short sell order.'' Finally, the Exchange would not be including in Rule 7.11P(a)(6) rule text currently set forth in Rule 7.11(a)(6)(A) regarding time priority. As discussed in greater detail in the Pillar I Filing, pursuant to proposed Rule 7.36P(f)(2), an order would be assigned a new working time any time the working price of the order changes and orders re-priced pursuant to proposed Rule 7.11P(a)(6) would be subject to this requirement.\43\ Therefore, the Exchange would not restate this same requirement in proposed Rule 7.11P. --------------------------------------------------------------------------- \43\ See Pillar I Filing, supra note 4. --------------------------------------------------------------------------- Rule 7.11P(a)(7)-(8): Current Rule 7.11(a)(7) provides that Exchange systems shall not route buy (sell) interest to an away market displaying a sell (buy) quote that is above (below) the Upper (Lower) Price Band, provided that the Exchange shall route Primary Only Orders (Rule 7.31(x)), Primary Until 9:45 Orders (Rule 7.31(oo)), Primary After 3:55 Orders (Rule 7.31(pp)), and Primary Sweep Orders (Rule 7.31(kk)) to the primary listing market regardless of price. Proposed Rule 7.11P(a)(7) would be based on current Rule 7.11(a)(7) with non- substantive differences to use the term ``will'' instead of ``shall,'' use the term ``orders'' instead of ``interest,'' capitalize the term ``Away Market,'' use the term ``primary listing market'' instead of ``primary market'', remove rule cite cross references, and delete reference to Primary Sweep Orders.\44\ --------------------------------------------------------------------------- \44\ The Exchange eliminated Primary Sweep Orders in 2015. See Securities Exchange Act Release No. 74796 (April 23, 2015), 80 FR 12537 (March 9, 2015) (SR-NYSEArca-2015-08) (Approval order). --------------------------------------------------------------------------- [[Page 43525]] Current Rule 7.11(a)(8) provides that the Exchange may declare a Trading Pause for an NMS Stock listed on the Exchange when (i) the National Best Bid (Offer) is below (above) the Lower (Upper) Price Band and the NMS Stock is not in a Limit State; and (ii) trading in that NMS Stock deviates from normal trading characteristics. Proposed Rule 7.11P(a)(8) would be based on current Rule 7.11(a)(8) without any differences. Rule 7.11P(b): Current Rule 7.11(b) sets forth how Trading Pauses operate on the Exchange. Because the LULD Plan has been fully implemented across all Tier 1 and Tier 2 NMS Stocks, the Exchange no longer pauses trading in securities as provided for in current Rules 7.11(b)(1) and (3)-(5). However, the Exchange proposes to maintain this rule text while the LULD Plan is a pilot. Accordingly, proposed Rule 7.11P(b)(1)-(5) would be based on current Rule 7.11(b)(1)-(5) with non- substantive differences to replace the term ``will'' with ``shall,'' replace time references from Pacific Time to Eastern Time, and replace a cross-reference from Rule 7.35 to Rule 7.35P. Current Rule 7.11(b)(6) provides for how the Exchange processes new and existing orders during a trading pause issued by another primary listing market. As described above, proposed Rule 7.18P(b) would set forth in Pillar how the Exchange would process new and existing orders during a UTP Regulatory Halt, which would include a trading pause issued by another primary listing market. Accordingly, the Exchange would not include rule text from current Rule 7.11(b)(6) in the proposed Rule 7.11P(b). Proposed New Rule 7.38P--Odd Lots and Mixed Lots Rule 7.38 sets forth requirements relating to odd lots and mixed lots, which are terms defined in Rule 7.6. The Exchange proposes new Rule 7.38P to address odd lots and mixed lots in Pillar, including circumstances when odd lot orders would be treated differently than round lot orders. Proposed Rule 7.38P(a) would provide that Rules 7.31P and 7.44P would specify whether an order may be entered as an odd lot or mixed lot. Unlike current Rule 7.38, the Exchange proposes that in Pillar, whether an order would be eligible to be entered as an odd lot or mixed lot would be covered in proposed Rules 7.31P and 7.44P.\45\ Accordingly, rule text set forth in current Rules 7.38(a)(1) and (2) would not be included in proposed Rule 7.38P(a).\46\ --------------------------------------------------------------------------- \45\ See Pillar II Filing, supra note 5 at proposed Rules 7.31P(d)(1)(A) (Reserve Orders must be entered in round lots, and therefore cannot be entered as odd lots or mixed lots); 7.31P(c)(3)(E) (MPL-IOC Orders must be entered with a minimum of one round lot, and therefore may not be entered in odd lots); 7.31P(d)(4) (Tracking Orders must be in entered in round lots, and therefore cannot be entered as odd lots or mixed lots); 7.31P(e)(2) (Arca Only ALO Orders must have a minimum of one displayed round lot on entry, and therefore cannot be entered as an odd lot); 7.31P(h)(2)(A) (Primary Pegged Orders must be entered with a minimum of one round a [sic] lot); and 7.31P(j)(1) (Q Orders must be entered with a minimum of one round lot displayed, and therefore cannot be entered as an odd lot). Proposed Rule 7.44P(1)(3) would provide that Retail Orders may be entered as an odd lot, round lot, or mixed lot. \46\ Current Rule 7.38(a)(1) provides that all orders submitted by Users to the NYSE Arca Marketplace must be Market Orders or Limit Orders and the following orders may not be entered in odd lots: Reserve Orders, MPL-IOC Orders, Tracking Orders, or Q Orders. Current Rule 7.38(a)(2) provides that Mixed lot orders submitted by Users to the NYSE Arca Marketplace may be any order type supported by the NYSE Arca Marketplace, unless inconsistent with the order type descriptions found in Rule 7.31. --------------------------------------------------------------------------- Proposed Rule 7.38P(b) would provide that round lot, mixed lot, and odd lots would be treated in the same manner in the NYSE Arca Marketplace. This rule text is based on current Rule 7.38(b), without any differences. The Exchange proposes that the general rule in Rule 7.38P(b) would be subject to specific requirements in certain cases, as set forth in proposed Rules 7.38P(b)(1) and (b)(2). Proposed Rule 7.38P(b)(1) would provide that the working price of an odd lot order would be adjusted both on arrival and when resting on the NYSE Arca Book based on the limit price of the order. If the limit price of such odd lot order to buy (sell) is at or below (above) the PBO (PBB), it would have a working price equal to the limit price. If the limit price of such odd lot order to buy (sell) is above (below) the PBO (PBB), it would have a working price equal to the PBO (PBB). The proposed rule text uses Pillar terminology to describe how the Exchange would price odd-lot orders that are not displayed as part of the BBO so that they would not trade through the PBBO.\47\ --------------------------------------------------------------------------- \47\ See, e.g., Pillar II Filing, supra note 5 at proposed Rule 7.31P(d)(2)(A) (describing the working price assigned to Limit Non- Displayed Orders). --------------------------------------------------------------------------- Proposed Rule 7.38P(b)(2) would set forth the working time that would be assigned to the returned quantity of an order that create [sic] a new BBO when it joins resting quantity of the order. As proposed, the rule would provide that for an order that is partially routed to an Away Market on arrival, if any returned quantity of the order joins resting odd-lot quantity of the original order and the returned and resting quantity, either alone or together with other odd- lot orders, would be displayed as a new BBO, both the returned and resting quantity would be assigned a new working time. As set forth in the Pillar I Filing, proposed Rule 7.36P(f)(1)(B) would provide that for an order that is partially routed to an Away Market on arrival, the portion that is not routed would be assigned a working time.\48\ If any unexecuted portion of the order returns and joins any remaining resting portion of the original order, the returned portion of the order would be assigned the same working time as the resting portion of the order. --------------------------------------------------------------------------- \48\ Id. The display price of an odd lot order may differ from the working price of the order. --------------------------------------------------------------------------- Proposed Rule 7.38P(b)(2) would provide for an exception to this general requirement and is intended to prevent the Exchange from displaying a new BBO that would lock or cross an Away Market PBBO. Without this exception, if the returned quantity joined the resting quantity's working time and is then displayed as a new BBO, it would be considered to have an earlier working time than an updated PBBO, even though the new BBO may be displayed after the PBBO was updated. By assigning a new working time to the new displayed BBO, the Exchange would evaluate it for routing as if it were a newly arriving order. For example, assume the PBBO is 9.98 x 10.00 and the 10.00 PBO is on an Away Market for 100 shares. The Exchange receives a Limit Order to buy ``A'' for 120 shares priced at 10.00 and would route 100 shares of A to the Away Market, and 20 shares would be entered on the NYSE Arca Book and assigned a working time. Because 20 shares is an odd lot quantity, the Exchange could enter it onto the NYSE Arca Book without locking the PBO. Assume that the returned quantity of A is 80 shares, and between the time the order was routed and it returns unexecuted, a second Away Market displays an offer of 10.00, which is the new PBO. The returned quantity of A together with the resting quantity of A would equal 100 shares, and therefore would constitute the best ranked non-marketable displayed Limit Order on the Exchange and would become the BB. As proposed, the entire quantity of A would be assigned a new working time, which would be the time the returned quantity returns to the Exchange. The Exchange would then evaluate whether the order should be routed, and in this case, because it would create a new BB that would lock [[Page 43526]] an existing PBO, the Exchange would route the 100 shares to the new PBO. The Exchange would only have to assign a new working time if the returning quantity would join resting odd-lot interest that would result in a new BBO. If the resting quantity of the order were a round lot or more, and therefore already displayed as the best ranked non- marketable interest, the returned quantity could join that resting interest at the working time of the resting interest pursuant to proposed Rule 7.36P(f)(1)(B). Proposed New Rule 7.10P--Clearly Erroneous Executions The Exchange proposes to adopt new Rule 7.10P for Pillar in order to reflect terminology changes proposed in the Pillar I Filing and to replace obsolete terms. As proposed, new Rule 7.10P would have the same rule text and paragraph numbering as Rule 7.10 and would not have any substantive differences from Rule 7.10. The Exchange proposes the following non-substantive differences for proposed Rule 7.10P. To replace the term ``shall'' with ``will'' throughout the rule and replace the term ``shall mean'' in proposed Rule 7.10P(i) with ``means.'' To use the terms ``Early Trading Session'' instead of ``Opening Session'' and ``Late Trading Session'' instead of ``Late Session'' in proposed Rules 7.10P(c)(1) and 7.10P(c)(3), which would reflect the new terms proposed in the Pillar I Filing in proposed Rule 7.34P and are based on current Rule 7.10(c)(1) and 7.10(c)(3). To replace the term ``ie.'' with the term ``e.g.,'' in proposed Rule 7.10P(c)(2). To capitalize the term ``Cross Order'' and delete an obsolete reference to the Portfolio Crossing Service \49\ in proposed Rule 7.10P(e)(1), which is based on current Rule 7.10(e)(1). --------------------------------------------------------------------------- \49\ The Exchange eliminated the Portfolio Crossing Service in 2014. See Securities Exchange Act Release No. 72942 (Aug. 28, 2014), 79 FR 52784 (Sept. 4, 2014) (SR-NYSEArca-2014-75) (Approval order for filing that eliminated specified order types, modifiers, and related references). --------------------------------------------------------------------------- To replace the term ``NYSE Arca Equities'' with ``Exchange'' as the modifier for Chief Regulatory Officer in proposed Rule 7.10P(e)(3), which is based on current Rule 7.10(e)(3). The Chief Regulatory Officer is an officer of NYSE Arca, which is the Exchange, and not its wholly-owned subsidiary NYSE Arca Equities. Therefore, changing the term to ``Exchange'' more accurately reflects the entity for which the Chief Regulatory Officer is an officer. To replace the term ``3:00 ET'' with the term ``3:00 p.m. Eastern Time'' in proposed Rule 7.10P(e)(3), which is based on current Rule 7.10(e)(3) and is consistent with the proposed manner to describe time in the Pillar I Filing. To replace the term ``Member'' with ``ETP Holder'' in proposed Rule 7.10P(i), which is based on current Rule 7.10(i). The Exchange also proposes non-substantive differences to update cross references in the Rule from Rule 7.10 to Rule 7.10P. * * * * * As discussed in the Pillar I Filing, because of the technology changes associated with the migration to the Pillar trading platform, the Exchange will announce by Trader Update when rules with a ``P'' modifier will become operative and for which symbols. The Exchange believes that keeping existing rules pending the full migration of Pillar is necessary because they would continue to govern trading on the current trading platform pending the full migration. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the ``Act''),\50\ in general, and furthers the objectives of Section 6(b)(5),\51\ 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 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. The Exchange believes that the rules proposed in this filing, together with the rules proposed in the Pillar I Filing and the Pillar II Filing, would remove impediments to and perfect the mechanism of a free and open market because they would promote transparency by using consistent terminology for rules governing equities trading, thereby ensuring that members, regulators, and the public can more easily navigate the Exchange's rulebook and better understand how equity trading would be conducted on the Pillar trading platform. Adding new rules with the modifier ``P'' to denote those rules that would be operative for the Pillar trading platform would remove impediments to and perfect the mechanism of a free and open market by providing transparency of which rules govern trading once a symbol has been migrated to the Pillar platform. In addition, the proposed use of new Pillar terminology would promote consistency in the Exchange's rulebook regarding how the Exchange would process new and existing orders during a trading halt, how sell short orders would be processed during a Short Sale Period, how orders would be processed consistent with the requirements of the LULD Plan, and when odd-lot orders would be treated differently than round-lot orders. --------------------------------------------------------------------------- \50\ 15 U.S.C. 78f(b). \51\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed amendments to existing definitions in Rule 1.1 would remove impediments to and perfect the mechanism of a fair and orderly market because they would not make any substantive changes to Exchange rules, but rather are designed to reduce confusion by eliminating obsolete references and terms and therefore streamline the Exchange's rules. The Exchange further believes that the proposed new definition for the term ``Official Closing Price'' would remove impediments to and perfect the mechanism of a fair and orderly market because the proposed definition would promote transparency regarding the reference price the Exchange would use in Pillar for purposes of calculating Trading Collars, pursuant to proposed Rule 7.31P(a)(1)(B), and for purposes of determining a Trigger Price pursuant to proposed Rule 7.16P(f)(2). For determining the Official Closing Price, the Exchange believes that in the absence of a Closing Auction of a round lot or more, the most recent consolidated last sale eligible trade during Core Trading Hours best approximates the market's determination of the appropriate price of such securities. In addition, using only those trades that occur during Core Trading Hours that are last sale eligible would remove impediments to and perfect the mechanism of a fair and orderly market because the lower liquidity during the Early and Late Trading Sessions may mean that trades occurring during those sessions may not be as representative of the price of the security and odd-lot trades may indicate an anomalous trade. The Exchange believes that proposed Rule 7.18P would remove impediments to and perfect the mechanism of a fair and orderly market because it would set forth in a single rule the requirements for trading halts on the Exchange in both UTP Securities and Exchange- listed securities, which are currently set forth in Rules 7.11(b)(6), 7.18, and 7.34(a)(4) and (a)(5). The Exchange [[Page 43527]] believes that the proposed substantive differences for Rule 7.18P as compared to the current rules would remove impediments to and perfect the mechanism of a fair and orderly market for the following reasons: Waiting until receipt of a Price Band in a UTP Security before resuming trading following a UTP Regulatory Halt would assure that the Exchange would not begin trading in a UTP Security before the protections of the LULD Plan would be available. In addition, not holding a Trading Halt Auction on the Exchange in a UTP Security, together with rejecting new orders and routing Primary Only Orders received during a UTP Regulatory Halt to the primary listing market, would protect investors and the public by promoting price discovery and liquidity on the primary listing market for its re-opening auction. Processing new and existing orders for UTP Securities differently from new and existing orders in Exchange-listed securities during a halt, suspension, or trading pause would complement the proposal not to conduct a Trading Halt Auction in a UTP Security, as discussed above. For Exchange-listed securities, because the Exchange would be conducting a Trading Halt Auction, the Exchange would accept new orders that would be eligible to participate in such auction. In addition, to facilitate such auction, the Exchange would not cancel resting Pegged Orders and would adjust the working price of resting Limit Orders (including Pegged Orders) to their limit price so that such orders could participate in a Trading Halt Auction at their limit prices. The Exchange believes such proposed processing of new and existing orders would promote liquidity and price discovery for Trading Halt Auctions in Exchange-listed securities. With respect to Short Sales, the Exchange believes that proposed Rule 7.16P would remove impediments to and perfect the mechanism of a fair and orderly market because it would use Pillar terminology to describe how the Exchange would process sell short orders during a Short Sale Period, consistent with Rule 201 of Regulation SHO. More specifically, the Exchange believes that using the new term ``Official Closing Price'' for determining the Trigger Price of a security in Rule 7.16P(f)(2) is consistent with Rule 201(b)(1)(i) of Regulation SHO, which requires that the listing market determine the closing price of a covered security, but does not require that the Exchange use the closing auction on the Exchange to determine that closing price. The Exchange believes that using the Official Closing Price would provide for a closer approximation of determining the Trigger Price because in the absence of a closing auction of a round lot or more, it would include consolidated last sale prices, and not just last sale prices on the Exchange, which is consistent with how other markets operate.\52\ --------------------------------------------------------------------------- \52\ See supra notes 26 and 28. --------------------------------------------------------------------------- The Exchange believes that how it would process sell short orders during a Short Sale Period, set forth in proposed Rule 7.16P(f)(5), would remove impediments to and perfect the mechanism of a fair and orderly market because the proposed processing would assure that sell short orders would neither trade at the NBB or be displayed at the NBB, unless an order is eligible for an exemption pursuant to proposed Rule 7.16P(f)(6) or (f)(7). More specifically, the Exchange believes that the proposal to expand the existing reject option for sell short orders that would be required to be re-priced to apply also to resting orders would remove impediments to and perfect the mechanism of a fair and orderly market because it would be consistent with the intent of the instruction, which is to not have such orders re-price. The Exchange further believes that the proposed processing in Pillar of odd-lot orders that are ranked Priority 2, Pegged Orders, Cross Orders, and Tracking Orders would remove impediments to and perfect the mechanism of a fair and orderly market and is consistent with Rule 201 of Regulation SHO because the proposed processing would assure that such orders would not trade at the NBB or be displayed at the NBB as the NBB moves both up and down. With respect to proposed Rule 7.11P, the Exchange believes that the proposed substantive difference to expand the number of Limit Orders eligible for re-pricing instructions would be consistent with the LULD Plan, and therefore would remove impediments to and perfect the mechanism of a fair and orderly market, because the proposed re-pricing of such orders would assure that such orders would not trade at or be displayed at prices outside of the Price Bands. The Exchange further believes that expanding the number of orders eligible for re-pricing instructions would provide ETP Holders with more options regarding how orders would be processed in compliance with the LULD Plan. With respect to MPL Orders, the Exchange believes that proposed Rule 7.11P(a)(6)(C) would remove impediments to and perfect the mechanism of a fair and orderly market because the proposal would provide ETP Holders with the choice for such orders not to be cancelled, and instead remain on the NYSE Arca Book until such time that the working price would be at a price eligible to trade consistent with the LULD Plan. The Exchange further believes that using Pillar terminology to describe how orders would be re-priced would promote consistency in Exchange rules, making them easier to navigate. With respect to proposed Rule 7.38P, the Exchange believes that the proposed rule would promote consistency in the Exchange's rule book by using Pillar terminology to describe how the Exchange would price odd lot orders so that they would not trade through the PBBO. The Exchange further believes that proposed Rule 7.38P(b)(2) would remove impediments to and perfect the mechanism of a fair and orderly market because it would promote transparency in Exchange rules regarding the working time that would be assigned to an order that has been partially routed and if when it returns, would be displayed as a new BBO. The proposed assignment of the working time of the returned order would assure that such new BBO, which would be comprised of the returned quantity together with the resting odd-lot quantity, would be evaluated for whether it would lock or cross a protected quotation. Finally, the Exchange believes that proposed Rule 7.10P, regarding clearly erroneous executions, would remove impediments to and perfect the mechanism of a fair and orderly market because it would use Pillar terminology, without any substantive differences from current Rule 7.10. 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 to adopt new rules to support the Exchange's new Pillar trading platform. As discussed in detail above, the Exchange proposes new rules for Pillar to address trading halts, Short Sales, the LULD Plan, and odd lots, which would be based on current rules with both substantive and non-substantive differences. The proposed substantive differences would promote competition because the Exchange would be offering functionality that is consistent with the proposed new orders and modifiers, as discussed in the Pillar II Filing, in a manner consistent with Rule 201 of Regulation SHO and the LULD Plan and to assure that odd lot orders would not [[Page 43528]] trade through the PBBO. With respect to trading halts, the Exchange believes that proposed Rule 7.18P would promote price discovery and liquidity on the primary listing market for re-opening auctions following a halt, suspension, or trading pause, thereby supporting competition. The proposed non-substantive differences would be to use new Pillar terminology, which would promote consistent use of terminology to support the Pillar trading platform making the Exchange's rules easier to navigate. 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 [email protected]. Please include File Number SR-NYSEARCA-2015-58 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-NYSEARCA-2015-58. 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 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-NYSEARCA-2015-58 and should be submitted on or before August 12, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\53\ --------------------------------------------------------------------------- \53\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2015-17895 Filed 7-21-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 140 / Wednesday, July 22, 2015 / Notices 43515
in leveraged or inverse leveraged ETFs be submitted by any of the following and the valuation of OTC-traded
or ETNs (e.g., 2X or 3X).28 methods: derivative assets, and to limit the
(7) The Portfolio may invest up to percentage of the Portfolio that may be
20% of its assets in derivatives.29 Electronic Comments
comprised of options that are listed on
(8) The Portfolio may invest up to • Use the Commission’s Internet markets that are not members of the ISG
25% of its total assets in one or more comment form (http://www.sec.gov/ or with which the Exchange does not
ETPs that are QPTPs and whose rules/sro.shtml); or have a CSSA.36
principal activities are the buying and • Send an email to rule-comments@ This information is useful for
selling of commodities or options, sec.gov. Please include File Number SR– evaluating the likelihood of market
futures, or forwards with respect to NYSEArca–2015–44 on the subject line. participants engaging in effective
commodities.30 Paper Comments arbitrage and the Exchange’s ability to
(9) The Portfolio may invest up to detect improper trading activity that
10% of its net assets in high yield debt • Send paper comments in triplicate
impacts the price of the Shares.
securities.31 to Secretary, Securities and Exchange
Accordingly, the Commission believes
(10) Not more than 10% of the net Commission, 100 F Street NE.,
that Amendment Nos. 1, 2, and 3 are
assets of the Fund will consist of equity Washington, DC 20549–1090.
consistent with the provisions of
securities that trade in markets that are All submissions should refer to File Section 6(b)(5) of the Act,37 and
not members of the ISG or are not Number SR–NYSEArca–2015–44. This therefore finds good cause, pursuant to
parties to CSSA with the Exchange.32 file number should be included on the Section 19(b)(2) of the Act,38 for
(11) The Fund may hold up to an subject line if email is used. To help the approving the proposed rule change, as
aggregate amount of 15% of its net Commission process and review your modified by Amendment Nos. 1, 2, and
assets in illiquid assets (calculated at comments more efficiently, please use 3, on an accelerated basis.
the time of investment), including Rule only one method. The Commission will
144A securities deemed illiquid by the post all comments on the Commission’s VI. Conclusion
Adviser, consistent with Commission Internet Web site (http://www.sec.gov/ It is therefore ordered, pursuant to
guidance. The Fund will monitor its rules/sro.shtml). Copies of the Section 19(b)(2) of the Exchange Act,
portfolio liquidity on an ongoing basis submission, all subsequent that the proposed rule change (SR–
to determine whether, in light of current amendments, all written statements NYSEArca–2015–44), as modified by
circumstances, an adequate level of with respect to the proposed rule Amendment Nos. 1, 2, and 3, is hereby
liquidity is being maintained, and will change that are filed with the approved on an accelerated basis.
consider taking appropriate steps in Commission, and all written
communications relating to the For the Commission, by the Division of
order to maintain adequate liquidity if, Trading and Markets, pursuant to delegated
through a change in values, net assets, proposed rule change between the
authority.39
or other circumstances, more than 15% Commission and any person, other than
Robert W. Errett,
of the Fund’s net assets are held in those that may be withheld from the
public in accordance with the Deputy Secretary.
illiquid assets.33
provisions of 5 U.S.C. 552, will be [FR Doc. 2015–17898 Filed 7–21–15; 8:45 am]
(12) A minimum of 100,000 Shares
will be outstanding at the available for Web site viewing and BILLING CODE 8011–01–P
commencement of trading on the printing in the Commission’s Public
Exchange.34 Reference Room, 100 F Street NE.,
This approval order is based on all of Washington, DC 20549, on official SECURITIES AND EXCHANGE
the Exchange’s representations, business days between the hours of COMMISSION
including those set forth above and in 10:00 a.m. and 3:00 p.m. Copies of such [Release No. 34–75467; File No. SR–
the Notice. filing will also be available for NYSEARCA–2015–58]
For the foregoing reasons, the inspection and copying at the principal
Commission finds that the proposed office of the Exchange. All comments Self-Regulatory Organizations; NYSE
rule change, as modified by Amendment received will be posted without change; Arca, Inc.; Notice of Filing of Proposed
Nos. 1, 2, and 3, is consistent with the Commission does not edit personal Rule Change for New Equity Trading
Section 6(b)(5) of the Act 35 and the identifying information from Rules Relating to Trading Halts, Short
rules and regulations thereunder submissions. You should submit only Sales, Limit Up-Limit Down, and Odd
applicable to a national securities information that you wish to make Lots and Mixed Lots To Reflect the
exchange. available publicly. All submissions Implementation of Pillar, the
should refer to File Number SR– Exchange’s New Trading Technology
IV. Solicitation of Comments on Platform
Amendment Nos. 1, 2 and 3 NYSEArca–2015–44 and should be
submitted on or before August 12, 2015. July 16, 2015.
Interested persons are invited to
submit written data, views, and V. Accelerated Approval of Proposed Pursuant to Section 19(b)(1) 1 of the
arguments concerning whether Rule Change as Modified by Securities Exchange Act of 1934 (the
Amendment Nos. 1, 2, and 3 is Amendment Nos. 1, 2, and 3 ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
consistent with the Act. Comments may The Commission finds good cause to notice is hereby given that, on July 1,
approve the proposed rule change, as 2015, NYSE Arca, Inc. (the ‘‘Exchange’’
28 See Amendment No. 2, supra note 5. modified by Amendment Nos. 1, 2, and or ‘‘NYSE Arca’’) filed with the
tkelley on DSK3SPTVN1PROD with NOTICES
29 See Amendment No. 1, supra note 4, at 12, 3, prior to the 30th day after the date of
n.24. 36 See Amendment No. 1, supra note 4.
30 See id. at 9.
publication of notice of the amendment 37 15 U.S.C. 78f(b)(5).
31 See id. at 11. in the Federal Register. The Exchange 38 15 U.S.C. 78s(b)(2).
32 See id. at 10. submitted Amendment Nos. 1, 2, and 3 39 17 CFR 200.30–3(a)(12).
33 See id. at 14. to, among other things, provide 1 15 U.S.C. 78s(b)(1).
34 See id. at 23. clarifying details about the investments 2 15 U.S.C. 78a.
35 15 U.S.C. 78f(b)(5). the Portfolio would be permitted to hold 3 17 CFR 240.19b–4.
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![43524 Federal Register / Vol. 80, No. 140 / Wednesday, July 22, 2015 / Notices
systems shall re-price such limit order the working price would be adjusted to Price Band. The Exchange believes that
to its original limit price. be equal to the Upper Price Band. the proposed functionality would
• Current Rule 7.11(a)(6)(B) provides Proposed Rule 7.11P(a)(6)(A) would provide more options for ETP Holders
that each time an eligible order is re- be new rule text that enumerates which entering MPL Orders so that such orders
priced, it shall receive a new time orders would not be eligible for re- would not be cancelled if they would
priority. pricing instructions in Pillar.41 As trade through a Price Band, but also to
proposed, re-pricing instructions would honor the intent of the order to trade
• Current Rule 7.11(a)(6)(C) sets forth
not be available for Market Orders, only at the midpoint of the PBBO.
the order types eligible for re-pricing
Auction-Only Orders, Q Orders, Primary Proposed Rule 7.11P(a)(6)(D) would
instructions, which are Adding
Only Orders, or any Limit Order that be based on current Rule 7.11(a)(6)(D)
Liquidity Only Orders, Discretionary
includes an IOC modifier, including relating to Sell Short Orders with non-
Orders, Inside Limit Orders, Limit
Cross Orders. The rule would also substantive differences to update cross
Orders, PNP ISO, PNP Orders, Proactive references to proposed Rule 7.16P
provide that instructions to re-price
if Locked Reserve Orders, Reserve included with a Primary Until 9:45 instead of Rule 7.16. In addition, to
Orders, Primary Until 9:45 Orders, Order or Primary After 3:55 Order reflect the proposed substantive
Primary After 3:55 Orders, and Primary would only be enforced when such difference of which orders would be
Sweep Orders. orders are entered on or resting on the eligible for re-pricing instructions in
• Finally, current Rule 7.11(a)(6)(D) NYSE Arca Book.42 The Exchange Pillar, the Exchange proposes a non-
provides that for an order type eligible believes that proposed Rule substantive difference to the first
for re-pricing instructions under Rule 7.11P(a)(6)(A) would provide additional sentence of the proposed rule so that it
7.11(a)(6)(C) that is also a short sell clarity in Exchange rules regarding begins with ‘‘[i]f an eligible order
order, during a Short Sale Price Test, as which orders would be eligible for re- includes repricing instructions and is
set forth in Rule 7.16(f), a short sale pricing instructions, and if eligible, also a sell short order,’’ instead of the
order priced below the Lower Price when they would be re-priced. current first sentence of Rule
Band shall be re-priced to the higher of Proposed Rule 7.11P(a)(6)(B) would 7.11(a)(6)(D), which states, ‘‘[f]or an
the Lower Price Band or the Permitted provide that instructions to re-price order type eligible for repricing
Price, as defined in Rule 7.16(f)(ii), and eligible Limit Orders would be instructions under (6)(C) above that is
that Sell short orders that are not applicable to both incoming and resting also a short sell order.’’
eligible for re-pricing instructions will orders and that if the Price Bands move Finally, the Exchange would not be
be treated as any other order pursuant and the original limit price of a re- including in Rule 7.11P(a)(6) rule text
to Rule 7.11(a)(5). priced order is at or within the Price currently set forth in Rule 7.11(a)(6)(A)
In Pillar, the Exchange proposes Bands, such a Limit Order would be regarding time priority. As discussed in
substantive differences to expand the adjusted to its limit price. This greater detail in the Pillar I Filing,
number of order types eligible for re- proposed rule text is based on current pursuant to proposed Rule 7.36P(f)(2),
pricing instructions. In addition, rather Rule 7.11(a)(6)(A) with non-substantive an order would be assigned a new
than specifying which order types differences to refer to ‘‘Limit Orders’’ working time any time the working
would be eligible for re-pricing instead of ‘‘orders’’ and to use the term price of the order changes and orders re-
instructions, the Exchange would ‘‘adjust’’ rather than ‘‘reprice.’’ priced pursuant to proposed Rule
enumerate which order types would not Proposed Rule 7.11P(a)(6)(C) would 7.11P(a)(6) would be subject to this
be eligible for re-pricing instructions. set forth proposed new functionality in requirement.43 Therefore, the Exchange
Accordingly, as proposed, Rule Pillar regarding how MPL Orders would would not restate this same requirement
7.11P(a)(6) would provide that ETP be processed. Currently, MPL Orders are in proposed Rule 7.11P.
Holders may enter an instruction for the not eligible for re-pricing instructions, Rule 7.11P(a)(7)–(8): Current Rule
working price of a Limit Order to buy and therefore would cancel if they 7.11(a)(7) provides that Exchange
(sell) with a limit price above (below) would trade outside the Price Bands. In systems shall not route buy (sell)
the Upper (Lower) Price Band to be Pillar, MPL Orders would be eligible for interest to an away market displaying a
adjusted to a price that is equal to the re-pricing instructions. If such sell (buy) quote that is above (below) the
Upper (Lower) Price Band rather than instruction were included on an MPL Upper (Lower) Price Band, provided
cancel the order. The proposed rule text Order, such order would not cancel if that the Exchange shall route Primary
is based on current Rule 7.11(a)(6) with the midpoint of the PBBO were outside Only Orders (Rule 7.31(x)), Primary
both substantive differences to reference the Price Bands, but nor would it re- Until 9:45 Orders (Rule 7.31(oo)),
that Limit Orders are eligible for re- price. Accordingly, as proposed, Rule Primary After 3:55 Orders (Rule
pricing instructions and non-substantive 7.11P(a)(6)(C) would provide that an 7.31(pp)), and Primary Sweep Orders
differences to use Pillar terminology.40 MPL Order that has an instruction to re- (Rule 7.31(kk)) to the primary listing
The Exchange proposes to reference the price would not cancel, but would not market regardless of price. Proposed
working price of an order to be clear be re-priced or eligible to trade if the Rule 7.11P(a)(7) would be based on
that for order types that may have a midpoint of the PBBO is below the current Rule 7.11(a)(7) with non-
working price that is more aggressive Lower Price Band or above the Upper substantive differences to use the term
than the display price, it would be the ‘‘will’’ instead of ‘‘shall,’’ use the term
41 Because in Pillar the Exchange would
working price that would be adjusted. ‘‘orders’’ instead of ‘‘interest,’’ capitalize
enumerate which orders are not eligible for re-
For example, an Arca Only Order or pricing instructions rather than list orders that the term ‘‘Away Market,’’ use the term
ALO Order to buy that would have a would be eligible for re-pricing instructions, the ‘‘primary listing market’’ instead of
tkelley on DSK3SPTVN1PROD with NOTICES
working price equal to the PBO, if the Exchange would not include rule text based on ‘‘primary market’’, remove rule cite
current Rule 7.11(a)(6)(C) in the Pillar rule. cross references, and delete reference to
PBO were above the Upper Price Band, 42 This proposed rule text in Rule 7.11P(a)(6)(A)
regarding Primary Until 9:45 Orders and Primary
Primary Sweep Orders.44
40 The Exchange will not reference Discretionary After 3:55 Orders is consistent with current Rule
43 SeePillar I Filing, supra note 4.
Orders in proposed Rule 7.11P(a)(6) because the 7.11(a)(7) and proposed Rule 7.11P(a)(7), which
Exchange will not be offering Discretionary Orders provide that the Exchange routes these orders to the 44 The Exchange eliminated Primary Sweep
in Pillar. See Pillar II Filing, supra note 5. primary listing market regardless of price. Orders in 2015. See Securities Exchange Act
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![Federal Register / Vol. 80, No. 140 / Wednesday, July 22, 2015 / Notices 43525
Current Rule 7.11(a)(8) provides that Accordingly, rule text set forth in returned and resting quantity, either
the Exchange may declare a Trading current Rules 7.38(a)(1) and (2) would alone or together with other odd-lot
Pause for an NMS Stock listed on the not be included in proposed Rule orders, would be displayed as a new
Exchange when (i) the National Best Bid 7.38P(a).46 BBO, both the returned and resting
(Offer) is below (above) the Lower Proposed Rule 7.38P(b) would quantity would be assigned a new
(Upper) Price Band and the NMS Stock provide that round lot, mixed lot, and working time.
is not in a Limit State; and (ii) trading odd lots would be treated in the same As set forth in the Pillar I Filing,
in that NMS Stock deviates from normal manner in the NYSE Arca Marketplace. proposed Rule 7.36P(f)(1)(B) would
trading characteristics. Proposed Rule This rule text is based on current Rule provide that for an order that is partially
7.11P(a)(8) would be based on current 7.38(b), without any differences. routed to an Away Market on arrival,
Rule 7.11(a)(8) without any differences. The Exchange proposes that the the portion that is not routed would be
Rule 7.11P(b): Current Rule 7.11(b) general rule in Rule 7.38P(b) would be assigned a working time.48 If any
sets forth how Trading Pauses operate subject to specific requirements in unexecuted portion of the order returns
on the Exchange. Because the LULD certain cases, as set forth in proposed and joins any remaining resting portion
Plan has been fully implemented across Rules 7.38P(b)(1) and (b)(2). of the original order, the returned
all Tier 1 and Tier 2 NMS Stocks, the • Proposed Rule 7.38P(b)(1) would portion of the order would be assigned
Exchange no longer pauses trading in provide that the working price of an odd the same working time as the resting
securities as provided for in current lot order would be adjusted both on portion of the order.
Rules 7.11(b)(1) and (3)–(5). However, arrival and when resting on the NYSE Proposed Rule 7.38P(b)(2) would
the Exchange proposes to maintain this Arca Book based on the limit price of provide for an exception to this general
rule text while the LULD Plan is a pilot. the order. If the limit price of such odd requirement and is intended to prevent
Accordingly, proposed Rule lot order to buy (sell) is at or below the Exchange from displaying a new
7.11P(b)(1)–(5) would be based on (above) the PBO (PBB), it would have a BBO that would lock or cross an Away
current Rule 7.11(b)(1)–(5) with non- working price equal to the limit price. Market PBBO. Without this exception, if
substantive differences to replace the If the limit price of such odd lot order the returned quantity joined the resting
term ‘‘will’’ with ‘‘shall,’’ replace time to buy (sell) is above (below) the PBO quantity’s working time and is then
references from Pacific Time to Eastern (PBB), it would have a working price displayed as a new BBO, it would be
Time, and replace a cross-reference from equal to the PBO (PBB). The proposed considered to have an earlier working
Rule 7.35 to Rule 7.35P. rule text uses Pillar terminology to time than an updated PBBO, even
Current Rule 7.11(b)(6) provides for describe how the Exchange would price though the new BBO may be displayed
how the Exchange processes new and odd-lot orders that are not displayed as after the PBBO was updated. By
existing orders during a trading pause part of the BBO so that they would not assigning a new working time to the
issued by another primary listing trade through the PBBO.47 new displayed BBO, the Exchange
market. As described above, proposed • Proposed Rule 7.38P(b)(2) would would evaluate it for routing as if it
Rule 7.18P(b) would set forth in Pillar set forth the working time that would be were a newly arriving order.
how the Exchange would process new assigned to the returned quantity of an For example, assume the PBBO is 9.98
and existing orders during a UTP order that create [sic] a new BBO when x 10.00 and the 10.00 PBO is on an
Regulatory Halt, which would include a it joins resting quantity of the order. As Away Market for 100 shares. The
trading pause issued by another primary proposed, the rule would provide that Exchange receives a Limit Order to buy
listing market. Accordingly, the for an order that is partially routed to an ‘‘A’’ for 120 shares priced at 10.00 and
Exchange would not include rule text Away Market on arrival, if any returned would route 100 shares of A to the
from current Rule 7.11(b)(6) in the quantity of the order joins resting odd- Away Market, and 20 shares would be
proposed Rule 7.11P(b). lot quantity of the original order and the entered on the NYSE Arca Book and
assigned a working time. Because 20
Proposed New Rule 7.38P—Odd Lots
entered as odd lots or mixed lots); 7.31P(c)(3)(E) shares is an odd lot quantity, the
and Mixed Lots
(MPL–IOC Orders must be entered with a minimum Exchange could enter it onto the NYSE
Rule 7.38 sets forth requirements of one round lot, and therefore may not be entered Arca Book without locking the PBO.
relating to odd lots and mixed lots, in odd lots); 7.31P(d)(4) (Tracking Orders must be Assume that the returned quantity of A
which are terms defined in Rule 7.6. in entered in round lots, and therefore cannot be
entered as odd lots or mixed lots); 7.31P(e)(2) (Arca is 80 shares, and between the time the
The Exchange proposes new Rule 7.38P Only ALO Orders must have a minimum of one order was routed and it returns
to address odd lots and mixed lots in displayed round lot on entry, and therefore cannot unexecuted, a second Away Market
Pillar, including circumstances when be entered as an odd lot); 7.31P(h)(2)(A) (Primary displays an offer of 10.00, which is the
odd lot orders would be treated Pegged Orders must be entered with a minimum of
one round a [sic] lot); and 7.31P(j)(1) (Q Orders new PBO. The returned quantity of A
differently than round lot orders. must be entered with a minimum of one round lot together with the resting quantity of A
Proposed Rule 7.38P(a) would displayed, and therefore cannot be entered as an would equal 100 shares, and therefore
provide that Rules 7.31P and 7.44P odd lot). Proposed Rule 7.44P(1)(3) would provide would constitute the best ranked non-
would specify whether an order may be that Retail Orders may be entered as an odd lot,
round lot, or mixed lot. marketable displayed Limit Order on
entered as an odd lot or mixed lot. 46 Current Rule 7.38(a)(1) provides that all orders the Exchange and would become the
Unlike current Rule 7.38, the Exchange submitted by Users to the NYSE Arca Marketplace BB. As proposed, the entire quantity of
proposes that in Pillar, whether an order must be Market Orders or Limit Orders and the A would be assigned a new working
would be eligible to be entered as an following orders may not be entered in odd lots:
time, which would be the time the
odd lot or mixed lot would be covered Reserve Orders, MPL–IOC Orders, Tracking Orders,
or Q Orders. Current Rule 7.38(a)(2) provides that returned quantity returns to the
tkelley on DSK3SPTVN1PROD with NOTICES
in proposed Rules 7.31P and 7.44P.45 Mixed lot orders submitted by Users to the NYSE Exchange. The Exchange would then
Arca Marketplace may be any order type supported evaluate whether the order should be
Release No. 74796 (April 23, 2015), 80 FR 12537 by the NYSE Arca Marketplace, unless inconsistent
(March 9, 2015) (SR–NYSEArca–2015–08) with the order type descriptions found in Rule 7.31.
routed, and in this case, because it
(Approval order). 47 See, e.g., Pillar II Filing, supra note 5 at would create a new BB that would lock
45 See Pillar II Filing, supra note 5 at proposed proposed Rule 7.31P(d)(2)(A) (describing the
Rules 7.31P(d)(1)(A) (Reserve Orders must be working price assigned to Limit Non-Displayed 48 Id. The display price of an odd lot order may
entered in round lots, and therefore cannot be Orders). differ from the working price of the order.
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![43528 Federal Register / Vol. 80, No. 140 / Wednesday, July 22, 2015 / Notices
trade through the PBBO. With respect to comments more efficiently, please use of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and
trading halts, the Exchange believes that only one method. The Commission will Rule 19b–4 thereunder,2 a proposed rule
proposed Rule 7.18P would promote post all comments on the Commission’s to adopt new FINRA Rule 2242 (Debt
price discovery and liquidity on the Internet Web site (http://www.sec.gov/ Research Analysts and Debt Research
primary listing market for re-opening rules/sro.shtml). Copies of the Reports) to address conflicts of interest
auctions following a halt, suspension, or submission, all subsequent relating to the publication and
trading pause, thereby supporting amendments, all written statements distribution of debt research reports.
competition. The proposed non- with respect to the proposed rule The proposal was published for
substantive differences would be to use change that are filed with the comment in the Federal Register on
new Pillar terminology, which would Commission, and all written November 24, 2014.3 The Commission
promote consistent use of terminology communications relating to the received five comments on the
to support the Pillar trading platform proposed rule change between the proposal.4 On February 19, 2015, FINRA
making the Exchange’s rules easier to Commission and any person, other than
filed Amendment No. 1 responding to
navigate. those that may be withheld from the
the comments received to the proposal
public in accordance with the
C. Self-Regulatory Organization’s as well as to propose amendments in
provisions of 5 U.S.C. 552, will be
Statement on Comments on the response to these comments. The
available for Web site viewing and
Proposed Rule Change Received From proposal, as amended by Amendment
printing in the Commission’s Public
Members, Participants, or Others No. 1, was published for comment in
Reference Room, 100 F Street NE.,
No written comments were solicited Washington, DC 20549 on official the Federal Register on March 18,
or received with respect to the proposed business days between the hours of 2015.5 On February 20, 2015, the
rule change. 10:00 a.m. and 3:00 p.m. Copies of the Commission issued an order instituting
filing will also be available for proceedings pursuant to section
III. Date of Effectiveness of the
inspection and copying at the NYSE’s 19(b)(2)(B) of the Act 6 to determine
Proposed Rule Change and Timing for
Commission Action principal office and on its Internet Web whether to approve or disapprove the
site at www.nyse.com. All comments proposal. The order was published for
Within 45 days of the date of received will be posted without change; comment in the Federal Register on
publication of this notice in the Federal the Commission does not edit personal February 26, 2015.7 The Commission
Register or up to 90 days (i) as the identifying information from received a further four comments
Commission may designate if it finds submissions. You should submit only regarding the proceedings or in response
such longer period to be appropriate information that you wish to make
and publishes its reasons for so finding available publicly. All submissions 1 15 U.S.C. 78s(b)(1).
or (ii) as to which the self-regulatory should refer to File Number SR– 2 17 CFR 240.19b–4.
organization consents, the Commission NYSEARCA–2015–58 and should be 3 Exchange Act Release No. 73623 (Nov. 18,
will: submitted on or before August 12, 2015. 2014); 79 FR 69905 (Nov. 24, 2014) (‘‘Notice’’). On
(A) By order approve or disapprove January 6, 2015, FINRA consented to extending the
the proposed rule change, or For the Commission, by the Division of
time period for the Commission to either approve
(B) institute proceedings to determine Trading and Markets, pursuant to delegated
or disapprove the proposed rule change, or to
authority.53
whether the proposed rule change institute proceedings to determine whether to
should be disapproved. Robert W. Errett, approve or disapprove the proposed rule change, to
Deputy Secretary. February 20, 2015.
IV. Solicitation of Comments [FR Doc. 2015–17895 Filed 7–21–15; 8:45 am]
4 See Letter from Kevin Zambrowicz, Associate
Interested persons are invited to General Counsel & Managing Director and Sean
BILLING CODE 8011–01–P
Davy, Managing Director, SIFMA, dated Dec. 15,
submit written data, views, and 2014 (‘‘SIFMA’’), Letter from Hugh D. Berkson,
arguments concerning the foregoing, President-Elect, Public Investors Arbitration Bar
including whether the proposed rule SECURITIES AND EXCHANGE Association, dated Dec. 15, 2014 (‘‘PIABA Debt’’),
change is consistent with the Act. COMMISSION Letter from Yoon-Young Lee, WilmerHale, dated
Comments may be submitted by any of Dec. 16, 2014 (‘‘WilmerHale Debt One’’), Letter from
[Release No. 34–75472; File No. SR–FINRA– William Beatty, President and Washington (State)
the following methods: 2014–048] Securities Administrator, North American
Electronic Comments Securities Administrators Association, Inc., dated
Self-Regulatory Organizations; Dec. 19, 2014 (‘‘NASAA Debt One’’), and Letter
• Use the Commission’s Internet Financial Industry Regulatory from Kurt N. Schacht, CFA, Managing Director,
comment form (http://www.sec.gov/ Authority, Inc.; Order Approving a Standards and Financial Market Integrity and Linda
rules/sro.shtml); or Proposed Rule Change, as Modified by L. Rittenhouse, Director, Capital Markets Policy,
• Send an email to rule-comments@ Amendment No. 1 Thereto, To Adopt
CFA Institute, dated Feb. 9, 2015 (‘‘CFA Institute
sec.gov. Please include File Number SR– One’’).
FINRA Rule 2242 (Debt Research 5 Exchange Act Release No. 74490 (Mar. 12,
NYSEARCA–2015–58 on the subject Analysts and Debt Research Reports) 2015); 80 FR 14198 (Mar. 18, 2015) (‘‘Amendment
line.
Notice’’).
July 16, 2015.
Paper Comments 6 15 U.S.C. 78s(b)(2)(B).
• Send paper comments in triplicate I. Introduction 7 Exchange Act Release No. 74340 (Feb. 20, 2015);
80 FR 10538 (Feb. 26, 2015). Specifically, the
to Brent J. Fields, Secretary, Securities On November 14, 2014, Financial Commission instituted proceedings to allow for
tkelley on DSK3SPTVN1PROD with NOTICES
and Exchange Commission, 100 F Street Industry Regulatory Authority, Inc. additional analysis of the proposed rule change’s
NE., Washington, DC 20549–1090. (‘‘FINRA’’) filed with the Securities and consistency with section 15A(b)(9) of the Act,
All submissions should refer to File Exchange Commission (‘‘SEC’’ or which requires that FINRA’s rules be designed to,
among other things, promote just and equitable
Number SR–NYSEARCA–2015–58. This ‘‘Commission’’), pursuant to section
principles of trade, remove impediments to and
file number should be included on the 19(b)(1) of the Securities Exchange Act perfect the mechanism of a free and open market
subject line if email is used. To help the and a national market system, and, in general, to
Commission process and review your 53 17 CFR 200.30–3(a)(12). protect investors and the public interest. See id.
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Document Created: 2015-12-15 12:54:55
Document Modified: 2015-12-15 12:54:55
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| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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