80_FR_66273 80 FR 66065 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Establishing Rules To Comply With the Requirements of the Plan To Implement a Tick Size Pilot Plan Submitted to the Commission Pursuant to Rule 608 of Regulation NMS Under the Act

80 FR 66065 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Establishing Rules To Comply With the Requirements of the Plan To Implement a Tick Size Pilot Plan Submitted to the Commission Pursuant to Rule 608 of Regulation NMS Under the Act

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 208 (October 28, 2015)

Page Range66065-66069
FR Document2015-27349

Federal Register, Volume 80 Issue 208 (Wednesday, October 28, 2015) 
[Federal Register Volume 80, Number 208 (Wednesday, October 28, 2015)]
[Notices]
[Pages 66065-66069]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-27349]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76229; File No. SR-NYSE-2015-46]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Establishing Rules To Comply 
With the Requirements of the Plan To Implement a Tick Size Pilot Plan 
Submitted to the Commission Pursuant to Rule 608 of Regulation NMS 
Under the Act

October 22, 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 October 9, 2015, New York Stock Exchange LLC (``NYSE'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to establish rules to comply with the 
requirements of the Plan to Implement a Tick Size Pilot Plan submitted 
to the Commission pursuant to Rule 608 of Regulation NMS under the Act 
(the ``Plan''). 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
    The Exchange proposes to establish rules to require its member 
organizations to comply with the requirements of the Plan to Implement 
a Tick Size Pilot Program (the ``Plan''),\4\ which is designed to study 
and assess the impact of increment conventions on the liquidity and 
trading of the common stocks of small capitalization companies. The 
Exchange proposes changes to its rules for a two-year pilot period that 
coincides with the pilot period for the Plan, which is currently 
scheduled as a two year pilot to begin on May 6, 2016.
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    \4\ See Securities and Exchange Act Release No. 74892 (May 6, 
2015), 80 FR 27513 (File No. 4-657) (``Tick Plan Approval Order'').
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Background
    On August 25, 2014, NYSE Group, Inc., on behalf of BATS Exchange, 
Inc., BATS Y-Exchange, Inc., Chicago Stock Exchange, Inc., EDGA 
Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory 
Authority, Inc. (``FINRA''), NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, 
the Nasdaq Stock Market LLC, New York Stock Exchange LLC, NYSE MKT LLC, 
and NYSE Arca, Inc. (collectively ``Participants''), filed with the 
Commission, pursuant to Section 11A of the Act \5\ and Rule 608 of 
Regulation NMS thereunder, the Plan to Implement a Tick Size Pilot 
Program.\6\ The Participants filed the Plan to comply with an order 
issued by the Commission on June 24, 2014 (the ``June 2014

[[Page 66066]]

Order'').\7\ The Plan \8\ was published for comment in the Federal 
Register on November 7, 2014,\9\ and approved by the Commission, as 
modified, on May 6, 2015.\10\
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    \5\ 15 U.S.C. 78k-1.
    \6\ See Letter from Brendon J. Weiss, Vice President, 
Intercontinental Exchange, Inc., to Secretary, Commission, dated 
August 25, 2014.
    \7\ See Securities Exchange Act Release No 72460 (June 24, 
2014), 79 FR 36840 (June 30, 2014).
    \8\ Unless otherwise specified, capitalized terms used in this 
rule filing are based on the defined terms of the Plan.
    \9\ See Securities and Exchange Act Release No. 73511 (November 
3, 2014), 79 FR 66423 (File No. 4-657) (Tick Plan Filing).
    \10\ See Tick Plan Approval Order, supra note 5.
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    The Plan is designed to allow the Commission, market participants, 
and the public to study and assess the impact of increment conventions 
on the liquidity and trading of the common stocks of small 
capitalization companies. The Commission plans to use the Tick Size 
Pilot Program to access whether wider tick sizes enhance the market 
quality of Pilot Securities for the benefit of issuers and investors. 
Each Participant is required to comply with, and to enforce compliance 
by its member organizations, as applicable, with the provisions of the 
Plan.
    On October 9, 2015, the Operating Committee approved the Exchange's 
proposed rules as model Participant rules that would require compliance 
by a Participant's members with the provisions of the Plan, as 
applicable, and would establish written policies and procedures 
reasonably designed to comply with applicable quoting and trading 
requirements specified in the Plan.\11\ As described more fully below, 
the proposed rules would require member organizations to comply with 
the Plan and provide for the widening of quoting and trading increments 
for Pilot Securities, consistent with the Plan.
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    \11\ The Operating Committee is required under Section III(C)(2) 
of the Plan to ``monitor the procedures established pursuant to the 
Plan and advise Participants with respect to any deficiencies, 
problems, or recommendations as the Operating Committee may deem 
appropriate.'' The Operating Committee is also required to 
``establish specifications and procedures for the implementation and 
operation of the Plan that are consistent with the provisions of the 
Plan.''
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    The Tick Size Pilot Program will include stocks of companies with 
$3 billion or less in market capitalization, an average daily trading 
volume of one million shares or less, and a volume weighted average 
price of at least $2.00 for every trading day. The Tick Pilot Program 
will consist of a control group of approximately 1400 Pilot Securities 
and three test groups with 400 Pilot Securities in each selected by a 
stratified sampling.\12\ During the pilot, Pilot Securities in the 
control group will be quoted at the current tick size increment of 
$0.01 per share and will trade at the currently permitted increments. 
Pilot Securities in the first test group (``Test Group One'') will be 
quoted in $0.05 minimum increments but will continue to trade at any 
price increment that is currently permitted.\13\ Pilot Securities in 
the second test group (``Test Group Two'') will be quoted in $0.05 
minimum increments and will trade at $0.05 minimum increments subject 
to a midpoint exception, a retail investor exception, and a negotiated 
trade exception.\14\ Pilot Securities in the third test group (``Test 
Group Three'') will be subject to the same terms as Test Group Two and 
also will be subject to the ``Trade-at'' requirement to prevent price 
matching by a person not displaying at a price of a Trading Center's 
``Best Protected Bid or ``Best Protected Offer,'' unless an enumerated 
exception applies.\15\ In addition to the exceptions provided under 
Test Group Two, an exception for Block Size orders and exceptions that 
mirror those under Rule 611 of Regulation NMS \16\ will apply to the 
Trade-at requirement.
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    \12\ See Section V of the Plan for identification of Pilot 
Securities, including criteria for selection and grouping.
    \13\ See Section VI(B) of the Plan. Pilot Securities in Test 
Group One will be subject to a midpoint exception and a retail 
investor exception.
    \14\ See Section VI(C) of the Plan.
    \15\ See Section VI(D) of the Plan.
    \16\ 17 CFR 242.611.
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    The Tick Pilot Program also contains requirements for the 
collection and transmission of data to the Commission and the public. A 
variety of data generated during the Tick Pilot Program will be 
released publicly on an aggregated basis to assist in analyzing the 
impact of wider tick sizes on smaller capitalization stocks.\17\
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    \17\ See Section VII of the Plan.
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Proposed Rule 67
    The Plan requires the Exchange to establish, maintain, and enforce 
written policies and procedures that are reasonably designed to comply 
with applicable quoting and trading requirements specified in the 
Plan.\18\ Accordingly, the Exchange is proposing new Rule 67 to require 
its member organizations to comply with the quoting and trading 
provisions of the Plan. The proposed Rule is also designed to ensure 
the Exchange's compliance with the Plan.
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    \18\ The Exchange is also required by the Plan to develop 
appropriate policies and procedures that provide for data collection 
and reporting to the Commission of data described in Appendixes B 
and C of the Plan. The Exchange plans to separately propose rules 
that would require compliance by its member organizations with the 
collection of data provisions of the Plan described in Section VII 
of the Plan, and has reserved Paragraph (b) for such rules.
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    Proposed paragraph (a)(1) of new Rule 67 would establish the 
following defined terms:
     ``Plan'' means the Tick Size Pilot Plan submitted to the 
Commission pursuant to Rule 608(a)(3) of Regulation NMS under the Act;
     ``Pilot Test Groups'' means the three test groups 
established under the Plan, consisting of 400 Pilot Securities each, 
which satisfy the respective criteria established by the Plan for each 
such test group.
     ``Trading Center'' would have the meaning provided in Rule 
600(b)(78) of Regulation NMS under the Exchange Act and, for purposes 
of a Trading Center operated by a broker-dealer, means an independent 
trading unit, as defined under Rule 200(f) of Regulation SHO, within 
such broker-dealer.\19\
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    \19\ 17 CFR 242.200. Independent trading unit aggregation is 
available if traders in an aggregation unit pursue only the 
particular trading objective(s) or strategy(s) of that aggregation 
unit and do not coordinate that strategy with any other aggregation 
unit. Therefore, a Trading Center cannot rely on quotations 
displayed by that broker dealer from a different independent trading 
unit. As an example, an agency desk of a broker-dealer cannot rely 
on the quotation of a proprietary desk in a separate independent 
trading unit at that same broker-dealer.
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     ``Retail Investor Order'' would mean an agency order or a 
riskless principal order that meets the criteria of FINRA Rule 5320.03 
that originates from a natural person and is submitted to the Exchange 
by a retail member organization (a member organization, or a division 
thereof, that has been approved by the Exchange under the Exchange's 
retail liquidity program rule (Rule 107C) to submit Retail Investor 
Orders), provided that no change is made to the terms of the order with 
respect to price or side of market and the order does not originate 
from a trading algorithm or any other computerized methodology. A 
Retail Investor Order is an immediate or cancel order that operates in 
accordance with the Exchange's retail liquidity program rule (Rule 
107C). A Retail Investor Order may be an odd lot, round lot, or partial 
round lot.\20\
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    \20\ This definition is the approved definition for ``Retail 
Investor Order'' as contemplated by the Plan. It is also the same 
definition as given to ``Retail Orders'' pursuant to the approved 
rules of other national securities exchanges. See NYSE Rule 
107C(a)(3). See also NYSE Arca, Inc. Rule 7.44(a)(3), BATS Y-
Exchange, Inc. Rule 11.24(a)(2) and NASDAQ Stock Market LLC Rule 
4780(a)(2).
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     Paragraph (a)(1)(E) would provide that all capitalized 
terms not otherwise defined in this rule shall have the meanings set 
forth in the Plan, Regulation NMS under the Act, or Exchange rules, as 
applicable.
    Proposed Paragraph (a)(2) would state that the Exchange is a 
Participant in,

[[Page 66067]]

and subject to the applicable requirements of, the Plan; proposed 
Paragraph (a)(3) would require member organizations to establish, 
maintain and enforce written policies and procedures that are 
reasonably designed to comply with the applicable requirements of the 
Plan, which would allow the Exchange to enforce compliance by its 
member organizations with the provisions of the Plan, as required 
pursuant to Section II(B) of the Plan.
    In addition, Paragraph (a)(4) would provide that Exchange systems 
would not display, quote or trade in violation of the applicable 
quoting and trading requirements for a Pilot Security specified in the 
Plan and this proposed rule, unless such quotation or transaction is 
specifically exempted under the Plan.\21\
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    \21\ The Exchange is still evaluating its internal policies and 
procedures to ensure compliance with the Plan, and plans to 
separately propose rules that would address violations of the Plan.
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    The Exchange also proposes to add Rule 67(a)(5) to provide for the 
treatment of Pilot Securities that drop below a $1.00 value during the 
Pilot Period.\22\ The Exchange proposes that if the price of a Pilot 
Security drops below $1.00 during regular trading on any given business 
day, such Pilot Security would continue to be subject to the Plan and 
the requirements described below that necessitate member organizations 
to comply with the specific quoting and trading obligations for each 
respective Pilot Test Group under the Plan, and would continue to trade 
in accordance with the proposed rules below as if the price of the 
Pilot Security had not dropped below $1.00. However, if the Closing 
Price of a Pilot Security on any given business day is below $1.00, 
such Pilot Security would be moved out of its respective Pilot Test 
Group into the control group (which consists of Pilot Securities not 
placed into a Pilot Test Group), and may then be quoted and traded at 
any price increment that is currently permitted by Exchange rules for 
the remainder of the Pilot Period. Notwithstanding anything contained 
herein to the contrary, the Exchange proposes that, at all times during 
the Pilot Period, Pilot Securities (whether in the control group or any 
Pilot Test Group) would continue to be subject to the data collection 
rules, which will be enumerated in reserved Rule 67(b).
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    \22\ In order to provide for such treatment, the Exchange, on 
behalf of all Participants under the Plan, also plans to file a 
request for exemption under Rule 608(e) of Regulation NMS from the 
Plan.
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    The Exchange proposes Rules 67(c)-(e), which would require member 
organizations to comply with the specific quoting and trading 
obligations for each Pilot Test Group under the Plan. With regard to 
Pilot Securities in Test Group One, proposed Rule 67(c) would provide 
that no member organization may display, rank, or accept from any 
person any displayable or non-displayable bids or offers, orders, or 
indications of interest in increments other than $0.05. However, orders 
priced to trade at the midpoint of the National Best Bid and National 
Best Offer (``NBBO'') or Best Protected Bid and Best Protect Offer 
(``PBBO'') and orders entered in the Exchange's Retail Liquidity 
Program as Retail Price Improvement Orders (``Retail Price Improvement 
Order'') \23\ may be ranked and accepted in increments of less than 
$0.05. Pilot Securities in Test Group One may continue to trade at any 
price increment that is currently permitted by Rule 62.10.\24\
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    \23\ A Retail Price Improvement Order consists of non-displayed 
interest in NYSE-listed securities that is priced better than the 
Best Protected Bid or Best Protected Offer, as such terms are 
defined in Regulation NMS Rule 600(b)(57), by at least $0.001 and 
that is identified as such. See NYSE Rule 107C(a)(4).
    \24\ Rule 62.10 describes the minimum price variation for 
quoting and entry of orders in equity securities admitted to 
dealings on the Exchange.
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    With regard to Pilot Securities in Test Group Two, proposed Rule 
67(d)(1) would provide that such Pilot Securities would be subject to 
all of the same quoting requirements as described above for Pilot 
Securities in Test Group One, along with the applicable quoting 
exceptions. In addition, proposed Rule 67(d)(2) would provide that, 
absent one of the listed exceptions in proposed Rule 67(d)(3) 
enumerated below, no member organization may execute orders in any 
Pilot Security in Test Group Two in price increments other than $0.05. 
The $0.05 trading increment would apply to all trades, including 
Brokered Cross Trades.
    Paragraph (d)(3) would set forth further requirements for Pilot 
Securities in Test Group Two. Specifically, member organizations 
trading Pilot Securities in Test Group Two would be allowed to trade in 
increments less than $0.05 under the following circumstances:
    (A) Trading may occur at the midpoint between the NBBO or PBBO;
    (B) Retail Investor Orders may be provided with price improvement 
that is at least $0.005 better than the Best Protected Bid or the Best 
Protected Offer; and
    (C) Negotiated Trades may trade in increments less than $0.05.
    Paragraph (e)(1)-(e)(3) would set forth the requirements for Pilot 
Securities in Test Group Three. Member organizations quoting or trading 
such Pilot Securities would be subject to all of the same quoting and 
trading requirements as described above for Pilot Securities in Test 
Group Two, including the quoting and trading exceptions applicable to 
Test Group Two Pilot Securities. In addition, proposed Paragraph (e)(4) 
would provide for an additional prohibition on Pilot Securities in Test 
Group Three referred to as the ``Trade-at Prohibition.'' \25\ Paragraph 
(e)(4)(B) would provide that, absent one of the listed exceptions in 
proposed Rule 67(e)(4)(C) enumerated below, no member organization may 
execute a sell order for a Pilot Security in Test Group Three at the 
price of a Protected Bid or execute a buy order for a Pilot Security in 
Test Group Three at the price of a Protected Offer.
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    \25\ Proposed Rule 67(e)(4)(A) would define the ``Trade-at 
Prohibition'' to mean the prohibition against executions by a 
Trading Center of a sell order for a Pilot Security at the price of 
a Protected Bid or the execution of a buy order for a Pilot Security 
at the price of a Protected Offer during regular trading hours.
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    Proposed Rule 67(e)(4)(C) would allow member organizations to 
execute a sell order for a Pilot Security in Test Group Three at the 
price of a Protected Bid or execute a buy order for a Pilot Security in 
Test Group Three at the price of a Protected Offer if any of the 
following circumstances exist:
    (A) The order is executed by a Trading Center within a member 
organization that has a displayed quotation for the account of that 
Trading Center on a principal basis, via either a processor or an SRO 
Quotation Feed,\26\ at a price equal to the traded-at Protected 
Quotation, that was displayed before the order was received,\27\ but 
only up to the full displayed size of the Trading Center's previously 
displayed quote;
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    \26\ By requiring the displayed quotation to be for the account 
of ``that Trading Center,'' the Trading Center cannot rely on any 
quotations it may put up on an agency basis, including a riskless 
principal basis. A Trading Center that is a broker-dealer also 
cannot rely on any quotation that is not a displayed quotation for 
its own account, such as the quotation of another broker-dealer, or 
customer of such broker-dealer.
    \27\ The Exchange is proposing to adopt this limitation to 
ensure that a Trading Center does not display a quotation after the 
time of order receipt solely for the purpose of trading at the price 
of a protected quotation without routing to that protected 
quotation.
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    (B) The order consists of odd lot orders and odd lot portions of 
partial round lot (``PRL'') orders that are displayed on an SRO 
Quotation Feed, at a price equal to the traded-at Protected

[[Page 66068]]

Quotation, but only up to the size of the displayed quotation; \28\
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    \28\ Proposed Supplementary Material .10 to Rule 67(e)(4)(C)(ii) 
would further provide that, for purposes of sub-paragraph (ii), a 
member organization is prohibited from breaking a round lot order or 
round lot portion of a PRL into odd lot orders to avoid the 
restrictions contained in this Rule.
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    (C) The order is of Block Size \29\ at the time of origin and may 
not be:
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    \29\ ``Block Size'' is defined in the Plan as an order (1) of at 
least 5,000 shares or (2) for a quantity of stock having a market 
value of at least $100,000.
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    (i) An aggregation of non-block orders;
    (ii) broken into orders smaller than Block Size prior to submitting 
the order to a Trading Center for execution; or
    (iii) executed on multiple Trading Centers; \30\
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    \30\ Once a Block Size order or portion of such Block Size order 
is routed from one Trading Center to another Trading Center in 
compliance with Rule 611 of Regulation NMS, the Block Size order 
would lose the Trade-at exemption provided under proposed Rule 
67(e)(4)(C)(C), unless the Block Size remaining after the first 
route and execution meets the Block Size definition under the Plan 
(See footnote 28). For example, if an exchange has a Protected Bid 
of 3,000 shares, with 2,000 shares in reserve, and receives a 5,000 
share order to sell, the exchange would be able to execute the 
entire 5,000 share order without having to route to an away market 
at any other Protected Bid at the same price. If, however, that 
exchange only has 1,000 shares in reserve, the entire order would 
not be able to be executed on that exchange, and the exchange would 
only be able to execute 3,000 shares and route the rest to away 
markets at other Protected Bids at the same price, before executing 
the 1,000 shares in reserve. The same analysis would hold true at 
the next price point, if the size of the incoming order would exceed 
all available shares at the first price, and the remaining shares to 
be executed would be 5,000 shares or more.
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    (D) The order is a Retail Investor Order executed with at least 
$0.005 price improvement;
    (E) The order is executed when the Trading Center displaying the 
Protected Quotation that was traded at was experiencing a failure, 
material delay, or malfunction of its systems or equipment;
    (F) The order is executed as part of a transaction that was not a 
``regular way'' contract;
    (G) The order is executed as part of a single-priced opening, 
reopening, or closing transaction on the Exchange;
    (H) The order is executed when a Protected Bid was priced higher 
than a Protected Offer in the Pilot Security in Test Group Three;
    (I) The order is identified as a Trade-at Intermarket Sweep Order;
    (J) The order is executed by a Trading Center that simultaneously 
routed Trade-at Intermarket Sweep Orders to execute against the full 
displayed size of the Protected Quotation that was traded at;
    (K) The order is executed as part of a Negotiated Trade;
    (L) The order is executed when the Trading Center displaying the 
Protected Quotation that was traded at had displayed, within one second 
prior to execution of the transaction that constituted the Trade-at, a 
Best Protected Bid or Best Protected Offer, as applicable, for the 
Pilot Security in Test Group Three with a price that was inferior to 
the price of the Trade-at transaction;
    (M) The order is executed by a Trading Center which, at the time of 
order receipt, the Trading Center had guaranteed an execution at no 
worse than a specified price (a ``stopped order''), where:
    (i) The stopped order was for the account of a customer;
    (ii) The customer agreed to the specified price on an order-by-
order basis; and
    (iii) The price of the Trade-at transaction was, for a stopped buy 
order, equal to the National Best Bid in the Pilot Security in Test 
Group Three at the time of execution or, for a stopped sell order, 
equal to the National Best Offer in the Pilot Security in Test Group 
Three at the time of execution; or
    (N) The order is for a fractional share of a Pilot Security in Test 
Group Three, provided that such fractional share order was not the 
result of breaking an order for one or more whole shares of a Pilot 
Security in Test Group Three into orders for fractional shares or was 
not otherwise effected to evade the requirements of the Trade-at 
Prohibition or any other provisions of the Plan.
    Finally, Proposed Rule 67(e)(4)(D) would prevent member 
organizations from breaking an order into smaller orders or otherwise 
effecting or executing an order to evade the requirements of the Trade-
at Prohibition or any other provisions of the Plan.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\31\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\32\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, 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 proposed rule change is consistent with the 
Act because it ensures that the Exchange and its member organizations 
would be in compliance with a Plan approved by the Commission pursuant 
to an order issued by the Commission in reliance on Section 11A of the 
Act.\33\ Such approved Plan gives the Exchange authority to establish, 
maintain, and enforce written policies and procedures that are 
reasonably designed to comply with applicable quoting and trading 
requirements specified in the Plan. The Exchange believes that the 
proposed rule change is consistent with the authority granted to it by 
the Plan to establish specifications and procedures for the 
implementation and operation of the Plan that are consistent with the 
provisions of the Plan. Likewise, the Exchange believes that the 
proposed rule change provides interpretations of the Plan that are 
consistent with the Act, in general, and furthers the objectives of the 
Act, in particular.
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    \31\ 15 U.S.C. 78f(b).
    \32\ 15 U.S.C. 78f(b)(5).
    \33\ 15 U.S.C. 78k-1.
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    Furthermore, the Exchange is a Participant under the Plan and 
subject, itself, to the provisions of the Plan. The proposed rule 
change ensures that the Exchange's systems would not display or execute 
trading interests outside the requirements specified in such Plan. The 
proposal would also help allow market participants to continue to trade 
NMS Stocks within quoting and trading requirements that are in 
compliance with the Plan, with certainty on how certain orders and 
trading interests would be treated. This, in turn, will help encourage 
market participants to continue to provide liquidity in the 
marketplace.
    Because the Plan supports further examination and analysis on the 
impact of tick sizes on the trading and liquidity of the securities of 
small capitalization companies, and the Commission believes that 
altering tick sizes could result in significant market-wide benefits 
and improvements to liquidity and capital formation, adopting rules 
that enforce compliance by its member organizations with the provisions 
of the Plan would help promote liquidity in the marketplace and perfect 
the mechanism of a free and open market and national market system.

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 changes are 
being made to establish, maintain, and enforce written policies and 
procedures that are reasonably designed to comply with the trading and 
quoting requirements

[[Page 66069]]

specified in the Plan, of which other equities exchanges are also 
Participants. Other competing national securities exchanges are subject 
to the same trading and quoting requirements specified in the Plan. 
Therefore, the proposed changes would not impose any burden on 
competition, while providing certainty of treatment and execution of 
trading interests on the Exchange to market participants in NMS Stocks 
that are acting in compliance with the requirements specified in the 
Plan.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2015-46 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-NYSE-2015-46. 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 Section, 100 F Street 
NE., Washington, DC 20549-1090 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-NYSE-2015-46 and 
should be submitted on or before November 18, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
---------------------------------------------------------------------------

    \34\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-27349 Filed 10-27-15; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Notices 66065 At any time within 60 days of the received will be posted without change; II. Self-Regulatory Organization’s filing of the proposed rule change, the the Commission does not edit personal Statement of the Purpose of, and Commission summarily may identifying information from Statutory Basis for, the Proposed Rule temporarily suspend such rule change if submissions. You should submit only Change it appears to the Commission that such information that you wish to make action is necessary or appropriate in the available publicly. All submissions In its filing with the Commission, the public interest, for the protection of should refer to File Number SR–ISE– self-regulatory organization included investors, or otherwise in furtherance of 2015–34, and should be submitted on or statements concerning the purpose of, the purposes of the Act. If the before November 18, 2015. and basis for, the proposed rule change Commission takes such action, the For the Commission, by the Division of and discussed any comments it received Commission shall institute proceedings Trading and Markets, pursuant to delegated on the proposed rule change. The text to determine whether the proposed rule authority.17 of those statements may be examined at should be approved or disapproved. Brent J. Fields, the places specified in Item IV below. IV. Solicitation of Comments Secretary. The Exchange has prepared summaries, [FR Doc. 2015–27352 Filed 10–27–15; 8:45 am] set forth in sections A, B, and C below, Interested persons are invited to of the most significant parts of such BILLING CODE 8011–01–P submit written data, views, and statements. arguments concerning the foregoing, including whether the proposed rule SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s change is consistent with the Act. COMMISSION Statement of the Purpose of, and the Comments may be submitted by any of Statutory Basis for, the Proposed Rule the following methods: [Release No. 34–76229; File No. SR–NYSE– Change 2015–46] Electronic Comments 1. Purpose • Use the Commission’s Internet Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of The Exchange proposes to establish comment form (http://www.sec.gov/ Filing of Proposed Rule Change rules to require its member rules/sro.shtml); or • Send an email to rule-comments@ Establishing Rules To Comply With the organizations to comply with the sec.gov. Please include File Number SR– Requirements of the Plan To requirements of the Plan to Implement ISE–2015–34 on the subject line. Implement a Tick Size Pilot Plan a Tick Size Pilot Program (the ‘‘Plan’’),4 Submitted to the Commission which is designed to study and assess Paper Comments Pursuant to Rule 608 of Regulation the impact of increment conventions on • Send paper comments in triplicate NMS Under the Act the liquidity and trading of the common to Secretary, Securities and Exchange October 22, 2015. stocks of small capitalization Commission, 100 F Street NE., Pursuant to Section 19(b)(1) 1 of the companies. The Exchange proposes Washington, DC 20549–1090. Securities Exchange Act of 1934 (the changes to its rules for a two-year pilot All submissions should refer to File ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 period that coincides with the pilot Number SR–ISE–2015–34. This file notice is hereby given that, on October period for the Plan, which is currently number should be included on the 9, 2015, New York Stock Exchange LLC scheduled as a two year pilot to begin subject line if email is used. To help the (‘‘NYSE’’ or the ‘‘Exchange’’) filed with on May 6, 2016. Commission process and review your the Securities and Exchange comments more efficiently, please use Background Commission (the ‘‘Commission’’) the only one method. The Commission will proposed rule change as described in On August 25, 2014, NYSE Group, post all comments on the Commission’s Items I, II, and III below, which Items Inc., on behalf of BATS Exchange, Inc., Internet Web site (http://www.sec.gov/ have been prepared by the self- BATS Y-Exchange, Inc., Chicago Stock rules/sro.shtml). Copies of the regulatory organization. The Exchange, Inc., EDGA Exchange, Inc., submission, all subsequent Commission is publishing this notice to EDGX Exchange, Inc., Financial amendments, all written statements solicit comments on the proposed rule Industry Regulatory Authority, Inc. with respect to the proposed rule change from interested persons. (‘‘FINRA’’), NASDAQ OMX BX, Inc., change that are filed with the NASDAQ OMX PHLX LLC, the Nasdaq Commission, and all written I. Self-Regulatory Organization’s Statement of the Terms of Substance of Stock Market LLC, New York Stock communications relating to the the Proposed Rule Change Exchange LLC, NYSE MKT LLC, and proposed rule change between the NYSE Arca, Inc. (collectively Commission and any person, other than The Exchange proposes to establish ‘‘Participants’’), filed with the those that may be withheld from the rules to comply with the requirements Commission, pursuant to Section 11A of public in accordance with the of the Plan to Implement a Tick Size the Act 5 and Rule 608 of Regulation provisions of 5 U.S.C. 552, will be Pilot Plan submitted to the Commission available for Web site viewing and NMS thereunder, the Plan to Implement pursuant to Rule 608 of Regulation NMS printing in the Commission’s Public a Tick Size Pilot Program.6 The under the Act (the ‘‘Plan’’). The text of Reference Room, 100 F Street NE., Participants filed the Plan to comply the proposed rule change is available on Washington, DC 20549 on official with an order issued by the Commission the Exchange’s Web site at on June 24, 2014 (the ‘‘June 2014 mstockstill on DSK4VPTVN1PROD with NOTICES business days between the hours of www.nyse.com, at the principal office of 10:00 a.m. and 3:00 p.m. Copies of such the Exchange, and at the Commission’s 4 See Securities and Exchange Act Release No. filing also will be available for Public Reference Room. 74892 (May 6, 2015), 80 FR 27513 (File No. 4–657) inspection and copying at the principal (‘‘Tick Plan Approval Order’’). office of the Exchange. All comments 17 17 CFR 200.30–3(a)(12). 5 15 U.S.C. 78k–1. 1 15 U.S.C. 78s(b)(1). 6 See Letter from Brendon J. Weiss, Vice 2 15 U.S.C. 78a. efficiency, competition, and capital formation. See President, Intercontinental Exchange, Inc., to 15 U.S.C. 78c(f). 3 17 CFR 240.19b–4. Secretary, Commission, dated August 25, 2014. VerDate Sep<11>2014 19:16 Oct 27, 2015 Jkt 238001 PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 E:\FR\FM\28OCN1.SGM 28OCN1

66066 Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Notices Order’’).7 The Plan 8 was published for be quoted at the current tick size Proposed paragraph (a)(1) of new Rule comment in the Federal Register on increment of $0.01 per share and will 67 would establish the following November 7, 2014,9 and approved by trade at the currently permitted defined terms: the Commission, as modified, on May 6, increments. Pilot Securities in the first • ‘‘Plan’’ means the Tick Size Pilot 2015.10 test group (‘‘Test Group One’’) will be Plan submitted to the Commission The Plan is designed to allow the quoted in $0.05 minimum increments pursuant to Rule 608(a)(3) of Regulation Commission, market participants, and but will continue to trade at any price NMS under the Act; the public to study and assess the increment that is currently permitted.13 • ‘‘Pilot Test Groups’’ means the three impact of increment conventions on the Pilot Securities in the second test group test groups established under the Plan, liquidity and trading of the common (‘‘Test Group Two’’) will be quoted in consisting of 400 Pilot Securities each, stocks of small capitalization $0.05 minimum increments and will which satisfy the respective criteria companies. The Commission plans to trade at $0.05 minimum increments established by the Plan for each such use the Tick Size Pilot Program to subject to a midpoint exception, a retail test group. access whether wider tick sizes enhance investor exception, and a negotiated • ‘‘Trading Center’’ would have the the market quality of Pilot Securities for trade exception.14 Pilot Securities in the meaning provided in Rule 600(b)(78) of the benefit of issuers and investors. third test group (‘‘Test Group Three’’) Regulation NMS under the Exchange Each Participant is required to comply will be subject to the same terms as Test Act and, for purposes of a Trading with, and to enforce compliance by its Group Two and also will be subject to Center operated by a broker-dealer, member organizations, as applicable, the ‘‘Trade-at’’ requirement to prevent means an independent trading unit, as with the provisions of the Plan. price matching by a person not defined under Rule 200(f) of Regulation On October 9, 2015, the Operating displaying at a price of a Trading SHO, within such broker-dealer.19 Committee approved the Exchange’s Center’s ‘‘Best Protected Bid or ‘‘Best • ‘‘Retail Investor Order’’ would proposed rules as model Participant Protected Offer,’’ unless an enumerated mean an agency order or a riskless rules that would require compliance by exception applies.15 In addition to the principal order that meets the criteria of a Participant’s members with the exceptions provided under Test Group FINRA Rule 5320.03 that originates provisions of the Plan, as applicable, Two, an exception for Block Size orders from a natural person and is submitted and would establish written policies and exceptions that mirror those under to the Exchange by a retail member and procedures reasonably designed to Rule 611 of Regulation NMS 16 will organization (a member organization, or comply with applicable quoting and apply to the Trade-at requirement. a division thereof, that has been trading requirements specified in the The Tick Pilot Program also contains approved by the Exchange under the Plan.11 As described more fully below, requirements for the collection and Exchange’s retail liquidity program rule the proposed rules would require transmission of data to the Commission (Rule 107C) to submit Retail Investor member organizations to comply with Orders), provided that no change is and the public. A variety of data the Plan and provide for the widening made to the terms of the order with generated during the Tick Pilot Program of quoting and trading increments for respect to price or side of market and will be released publicly on an Pilot Securities, consistent with the the order does not originate from a aggregated basis to assist in analyzing Plan. trading algorithm or any other The Tick Size Pilot Program will the impact of wider tick sizes on smaller capitalization stocks.17 computerized methodology. A Retail include stocks of companies with $3 Investor Order is an immediate or billion or less in market capitalization, Proposed Rule 67 cancel order that operates in accordance an average daily trading volume of one with the Exchange’s retail liquidity The Plan requires the Exchange to million shares or less, and a volume program rule (Rule 107C). A Retail establish, maintain, and enforce written weighted average price of at least $2.00 policies and procedures that are Investor Order may be an odd lot, round for every trading day. The Tick Pilot reasonably designed to comply with lot, or partial round lot.20 Program will consist of a control group • Paragraph (a)(1)(E) would provide of approximately 1400 Pilot Securities applicable quoting and trading requirements specified in the Plan.18 that all capitalized terms not otherwise and three test groups with 400 Pilot Accordingly, the Exchange is proposing defined in this rule shall have the Securities in each selected by a new Rule 67 to require its member meanings set forth in the Plan, stratified sampling.12 During the pilot, organizations to comply with the Regulation NMS under the Act, or Pilot Securities in the control group will quoting and trading provisions of the Exchange rules, as applicable. 7 See Securities Exchange Act Release No 72460 Plan. The proposed Rule is also Proposed Paragraph (a)(2) would state (June 24, 2014), 79 FR 36840 (June 30, 2014). designed to ensure the Exchange’s that the Exchange is a Participant in, 8 Unless otherwise specified, capitalized terms compliance with the Plan. used in this rule filing are based on the defined 19 17 CFR 242.200. Independent trading unit terms of the Plan. 13 See aggregation is available if traders in an aggregation Section VI(B) of the Plan. Pilot Securities 9 See Securities and Exchange Act Release No. unit pursue only the particular trading objective(s) in Test Group One will be subject to a midpoint 73511 (November 3, 2014), 79 FR 66423 (File No. or strategy(s) of that aggregation unit and do not exception and a retail investor exception. 4–657) (Tick Plan Filing). 14 See Section VI(C) of the Plan. coordinate that strategy with any other aggregation 10 See Tick Plan Approval Order, supra note 5. unit. Therefore, a Trading Center cannot rely on 15 See Section VI(D) of the Plan. 11 The Operating Committee is required under quotations displayed by that broker dealer from a 16 17 CFR 242.611. Section III(C)(2) of the Plan to ‘‘monitor the different independent trading unit. As an example, 17 See Section VII of the Plan. an agency desk of a broker-dealer cannot rely on the procedures established pursuant to the Plan and 18 The Exchange is also required by the Plan to quotation of a proprietary desk in a separate mstockstill on DSK4VPTVN1PROD with NOTICES advise Participants with respect to any deficiencies, problems, or recommendations as the Operating develop appropriate policies and procedures that independent trading unit at that same broker-dealer. Committee may deem appropriate.’’ The Operating provide for data collection and reporting to the 20 This definition is the approved definition for Committee is also required to ‘‘establish Commission of data described in Appendixes B and ‘‘Retail Investor Order’’ as contemplated by the specifications and procedures for the C of the Plan. The Exchange plans to separately Plan. It is also the same definition as given to implementation and operation of the Plan that are propose rules that would require compliance by its ‘‘Retail Orders’’ pursuant to the approved rules of consistent with the provisions of the Plan.’’ member organizations with the collection of data other national securities exchanges. See NYSE Rule 12 See Section V of the Plan for identification of provisions of the Plan described in Section VII of 107C(a)(3). See also NYSE Arca, Inc. Rule 7.44(a)(3), Pilot Securities, including criteria for selection and the Plan, and has reserved Paragraph (b) for such BATS Y-Exchange, Inc. Rule 11.24(a)(2) and grouping. rules. NASDAQ Stock Market LLC Rule 4780(a)(2). VerDate Sep<11>2014 19:16 Oct 27, 2015 Jkt 238001 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 E:\FR\FM\28OCN1.SGM 28OCN1

Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Notices 66067 and subject to the applicable for each Pilot Test Group under the organizations quoting or trading such requirements of, the Plan; proposed Plan. With regard to Pilot Securities in Pilot Securities would be subject to all Paragraph (a)(3) would require member Test Group One, proposed Rule 67(c) of the same quoting and trading organizations to establish, maintain and would provide that no member requirements as described above for enforce written policies and procedures organization may display, rank, or Pilot Securities in Test Group Two, that are reasonably designed to comply accept from any person any displayable including the quoting and trading with the applicable requirements of the or non-displayable bids or offers, orders, exceptions applicable to Test Group Plan, which would allow the Exchange or indications of interest in increments Two Pilot Securities. In addition, to enforce compliance by its member other than $0.05. However, orders proposed Paragraph (e)(4) would organizations with the provisions of the priced to trade at the midpoint of the provide for an additional prohibition on Plan, as required pursuant to Section National Best Bid and National Best Pilot Securities in Test Group Three II(B) of the Plan. Offer (‘‘NBBO’’) or Best Protected Bid referred to as the ‘‘Trade-at In addition, Paragraph (a)(4) would and Best Protect Offer (‘‘PBBO’’) and provide that Exchange systems would Prohibition.’’ 25 Paragraph (e)(4)(B) orders entered in the Exchange’s Retail would provide that, absent one of the not display, quote or trade in violation Liquidity Program as Retail Price of the applicable quoting and trading listed exceptions in proposed Rule Improvement Orders (‘‘Retail Price requirements for a Pilot Security 67(e)(4)(C) enumerated below, no Improvement Order’’) 23 may be ranked specified in the Plan and this proposed member organization may execute a sell and accepted in increments of less than rule, unless such quotation or order for a Pilot Security in Test Group $0.05. Pilot Securities in Test Group transaction is specifically exempted Three at the price of a Protected Bid or One may continue to trade at any price under the Plan.21 increment that is currently permitted by execute a buy order for a Pilot Security The Exchange also proposes to add Rule 62.10.24 in Test Group Three at the price of a Rule 67(a)(5) to provide for the With regard to Pilot Securities in Test Protected Offer. treatment of Pilot Securities that drop Group Two, proposed Rule 67(d)(1) Proposed Rule 67(e)(4)(C) would below a $1.00 value during the Pilot would provide that such Pilot Securities allow member organizations to execute Period.22 The Exchange proposes that if would be subject to all of the same a sell order for a Pilot Security in Test the price of a Pilot Security drops below quoting requirements as described Group Three at the price of a Protected $1.00 during regular trading on any above for Pilot Securities in Test Group Bid or execute a buy order for a Pilot given business day, such Pilot Security One, along with the applicable quoting Security in Test Group Three at the would continue to be subject to the Plan exceptions. In addition, proposed Rule price of a Protected Offer if any of the and the requirements described below 67(d)(2) would provide that, absent one following circumstances exist: that necessitate member organizations to of the listed exceptions in proposed comply with the specific quoting and (A) The order is executed by a Rule 67(d)(3) enumerated below, no trading obligations for each respective Trading Center within a member member organization may execute Pilot Test Group under the Plan, and organization that has a displayed orders in any Pilot Security in Test would continue to trade in accordance quotation for the account of that Trading Group Two in price increments other with the proposed rules below as if the than $0.05. The $0.05 trading increment Center on a principal basis, via either a price of the Pilot Security had not would apply to all trades, including processor or an SRO Quotation Feed,26 dropped below $1.00. However, if the Brokered Cross Trades. at a price equal to the traded-at Closing Price of a Pilot Security on any Paragraph (d)(3) would set forth Protected Quotation, that was displayed given business day is below $1.00, such further requirements for Pilot Securities before the order was received,27 but Pilot Security would be moved out of its in Test Group Two. Specifically, only up to the full displayed size of the respective Pilot Test Group into the member organizations trading Pilot Trading Center’s previously displayed control group (which consists of Pilot Securities in Test Group Two would be quote; Securities not placed into a Pilot Test allowed to trade in increments less than (B) The order consists of odd lot Group), and may then be quoted and $0.05 under the following orders and odd lot portions of partial traded at any price increment that is circumstances: round lot (‘‘PRL’’) orders that are currently permitted by Exchange rules (A) Trading may occur at the displayed on an SRO Quotation Feed, at for the remainder of the Pilot Period. midpoint between the NBBO or PBBO; a price equal to the traded-at Protected Notwithstanding anything contained (B) Retail Investor Orders may be herein to the contrary, the Exchange provided with price improvement that 25 Proposed Rule 67(e)(4)(A) would define the proposes that, at all times during the is at least $0.005 better than the Best ‘‘Trade-at Prohibition’’ to mean the prohibition Pilot Period, Pilot Securities (whether in Protected Bid or the Best Protected against executions by a Trading Center of a sell the control group or any Pilot Test Offer; and order for a Pilot Security at the price of a Protected Group) would continue to be subject to Bid or the execution of a buy order for a Pilot (C) Negotiated Trades may trade in Security at the price of a Protected Offer during the data collection rules, which will be increments less than $0.05. regular trading hours. enumerated in reserved Rule 67(b). Paragraph (e)(1)–(e)(3) would set forth 26 By requiring the displayed quotation to be for The Exchange proposes Rules 67(c)– the requirements for Pilot Securities in the account of ‘‘that Trading Center,’’ the Trading (e), which would require member Test Group Three. Member Center cannot rely on any quotations it may put up organizations to comply with the on an agency basis, including a riskless principal basis. A Trading Center that is a broker-dealer also specific quoting and trading obligations 23 A Retail Price Improvement Order consists of cannot rely on any quotation that is not a displayed mstockstill on DSK4VPTVN1PROD with NOTICES non-displayed interest in NYSE-listed securities quotation for its own account, such as the quotation 21 The Exchange is still evaluating its internal that is priced better than the Best Protected Bid or of another broker-dealer, or customer of such policies and procedures to ensure compliance with Best Protected Offer, as such terms are defined in broker-dealer. the Plan, and plans to separately propose rules that Regulation NMS Rule 600(b)(57), by at least $0.001 27 The Exchange is proposing to adopt this would address violations of the Plan. and that is identified as such. See NYSE Rule limitation to ensure that a Trading Center does not 22 In order to provide for such treatment, the 107C(a)(4). display a quotation after the time of order receipt Exchange, on behalf of all Participants under the 24 Rule 62.10 describes the minimum price solely for the purpose of trading at the price of a Plan, also plans to file a request for exemption variation for quoting and entry of orders in equity protected quotation without routing to that under Rule 608(e) of Regulation NMS from the Plan. securities admitted to dealings on the Exchange. protected quotation. VerDate Sep<11>2014 19:16 Oct 27, 2015 Jkt 238001 PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 E:\FR\FM\28OCN1.SGM 28OCN1

66068 Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Notices Quotation, but only up to the size of the (L) The order is executed when the compliance with a Plan approved by the displayed quotation; 28 Trading Center displaying the Protected Commission pursuant to an order issued (C) The order is of Block Size 29 at the Quotation that was traded at had by the Commission in reliance on time of origin and may not be: displayed, within one second prior to Section 11A of the Act.33 Such (i) An aggregation of non-block orders; execution of the transaction that approved Plan gives the Exchange (ii) broken into orders smaller than constituted the Trade-at, a Best authority to establish, maintain, and Block Size prior to submitting the order Protected Bid or Best Protected Offer, as enforce written policies and procedures to a Trading Center for execution; or applicable, for the Pilot Security in Test that are reasonably designed to comply (iii) executed on multiple Trading Group Three with a price that was with applicable quoting and trading Centers; 30 inferior to the price of the Trade-at requirements specified in the Plan. The (D) The order is a Retail Investor transaction; Exchange believes that the proposed Order executed with at least $0.005 (M) The order is executed by a rule change is consistent with the price improvement; Trading Center which, at the time of authority granted to it by the Plan to (E) The order is executed when the order receipt, the Trading Center had establish specifications and procedures Trading Center displaying the Protected guaranteed an execution at no worse for the implementation and operation of Quotation that was traded at was than a specified price (a ‘‘stopped the Plan that are consistent with the experiencing a failure, material delay, or order’’), where: provisions of the Plan. Likewise, the malfunction of its systems or (i) The stopped order was for the Exchange believes that the proposed equipment; account of a customer; rule change provides interpretations of (F) The order is executed as part of a (ii) The customer agreed to the the Plan that are consistent with the transaction that was not a ‘‘regular way’’ specified price on an order-by-order Act, in general, and furthers the contract; basis; and objectives of the Act, in particular. (G) The order is executed as part of a (iii) The price of the Trade-at Furthermore, the Exchange is a single-priced opening, reopening, or transaction was, for a stopped buy Participant under the Plan and subject, closing transaction on the Exchange; order, equal to the National Best Bid in itself, to the provisions of the Plan. The (H) The order is executed when a the Pilot Security in Test Group Three proposed rule change ensures that the Protected Bid was priced higher than a at the time of execution or, for a stopped Exchange’s systems would not display Protected Offer in the Pilot Security in sell order, equal to the National Best or execute trading interests outside the Test Group Three; Offer in the Pilot Security in Test Group requirements specified in such Plan. (I) The order is identified as a Trade- Three at the time of execution; or The proposal would also help allow at Intermarket Sweep Order; (N) The order is for a fractional share market participants to continue to trade (J) The order is executed by a Trading of a Pilot Security in Test Group Three, NMS Stocks within quoting and trading Center that simultaneously routed provided that such fractional share requirements that are in compliance Trade-at Intermarket Sweep Orders to order was not the result of breaking an with the Plan, with certainty on how execute against the full displayed size of order for one or more whole shares of certain orders and trading interests the Protected Quotation that was traded a Pilot Security in Test Group Three would be treated. This, in turn, will at; into orders for fractional shares or was help encourage market participants to (K) The order is executed as part of a not otherwise effected to evade the continue to provide liquidity in the Negotiated Trade; requirements of the Trade-at Prohibition marketplace. or any other provisions of the Plan. Because the Plan supports further 28 Proposed Supplementary Material .10 to Rule Finally, Proposed Rule 67(e)(4)(D) examination and analysis on the impact 67(e)(4)(C)(ii) would further provide that, for would prevent member organizations of tick sizes on the trading and liquidity purposes of sub-paragraph (ii), a member from breaking an order into smaller of the securities of small capitalization organization is prohibited from breaking a round lot orders or otherwise effecting or companies, and the Commission order or round lot portion of a PRL into odd lot orders to avoid the restrictions contained in this executing an order to evade the believes that altering tick sizes could Rule. requirements of the Trade-at Prohibition result in significant market-wide 29 ‘‘Block Size’’ is defined in the Plan as an order or any other provisions of the Plan. benefits and improvements to liquidity (1) of at least 5,000 shares or (2) for a quantity of and capital formation, adopting rules stock having a market value of at least $100,000. 2. Statutory Basis that enforce compliance by its member 30 Once a Block Size order or portion of such Block Size order is routed from one Trading Center The Exchange believes that its organizations with the provisions of the to another Trading Center in compliance with Rule proposal is consistent with Section 6(b) Plan would help promote liquidity in 611 of Regulation NMS, the Block Size order would of the Act,31 in general, and furthers the the marketplace and perfect the lose the Trade-at exemption provided under objectives of Section 6(b)(5) of the Act,32 mechanism of a free and open market proposed Rule 67(e)(4)(C)(C), unless the Block Size remaining after the first route and execution meets in particular, in that it is designed to and national market system. the Block Size definition under the Plan (See prevent fraudulent and manipulative acts and practices, to promote just and B. Self-Regulatory Organization’s footnote 28). For example, if an exchange has a Protected Bid of 3,000 shares, with 2,000 shares in equitable principles of trade, to remove Statement on Burden on Competition reserve, and receives a 5,000 share order to sell, the The Exchange does not believe that exchange would be able to execute the entire 5,000 impediments to and perfect the share order without having to route to an away mechanism of a free and open market the proposed rule change will impose market at any other Protected Bid at the same price. and a national market system, and, in any burden on competition that is not If, however, that exchange only has 1,000 shares in general, to protect investors and the necessary or appropriate in furtherance reserve, the entire order would not be able to be mstockstill on DSK4VPTVN1PROD with NOTICES public interest. The Exchange believes of the purposes of the Act. The executed on that exchange, and the exchange would only be able to execute 3,000 shares and route the that the proposed rule change is proposed changes are being made to rest to away markets at other Protected Bids at the consistent with the Act because it establish, maintain, and enforce written same price, before executing the 1,000 shares in ensures that the Exchange and its policies and procedures that are reserve. The same analysis would hold true at the reasonably designed to comply with the next price point, if the size of the incoming order member organizations would be in would exceed all available shares at the first price, trading and quoting requirements 31 15 U.S.C. 78f(b). and the remaining shares to be executed would be 5,000 shares or more. 32 15 U.S.C. 78f(b)(5). 33 15 U.S.C. 78k–1. VerDate Sep<11>2014 19:16 Oct 27, 2015 Jkt 238001 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 E:\FR\FM\28OCN1.SGM 28OCN1

Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Notices 66069 specified in the Plan, of which other only one method. The Commission will change as described in Items I and II equities exchanges are also Participants. post all comments on the Commission’s below, which Items have been prepared Other competing national securities Internet Web site (http://www.sec.gov/ by the Exchange. The Exchange has exchanges are subject to the same rules/sro.shtml). Copies of the designated this proposal as a ‘‘non- trading and quoting requirements submission, all subsequent controversial’’ proposed rule change specified in the Plan. Therefore, the amendments, all written statements pursuant to Section 19(b)(3)(A) of the proposed changes would not impose with respect to the proposed rule Act 3 and Rule 19b–4(f)(6)(iii) any burden on competition, while change that are filed with the thereunder,4 which renders it effective providing certainty of treatment and Commission, and all written upon filing with the Commission. The execution of trading interests on the communications relating to the Commission is publishing this notice to Exchange to market participants in NMS proposed rule change between the solicit comments on the proposed rule Stocks that are acting in compliance Commission and any person, other than change from interested persons. with the requirements specified in the those that may be withheld from the public in accordance with the I. Self-Regulatory Organization’s Plan. provisions of 5 U.S.C. 552, will be Statement of the Terms of the Substance C. Self-Regulatory Organization’s available for Web site viewing and of the Proposed Rule Change Statement on Comments on the printing in the Commission’s Public The Exchange filed a proposal for the Proposed Rule Change Received From Reference Section, 100 F Street NE., Exchange’s equity options platform Members, Participants, or Others Washington, DC 20549–1090 on official (‘‘BATS Options’’) to extend the pilot No written comments were solicited business days between the hours of program that suspends certain obvious or received with respect to the proposed 10:00 a.m. and 3:00 p.m. Copies of the error provisions of Rule 20.6 during rule change. filing will also be available for limit up-limit down states in securities inspection and copying at the NYSE’s that underlie options traded on the III. Date of Effectiveness of the principal office and on its Internet Web Exchange. Proposed Rule Change and Timing for site at www.nyse.com. All comments The text of the proposed rule change Commission Action received will be posted without change; is available at the Exchange’s Web site Within 45 days of the date of the Commission does not edit personal at www.batstrading.com, at the publication of this notice in the Federal identifying information from principal office of the Exchange, and at Register or up to 90 days (i) as the submissions. You should submit only the Commission’s Public Reference Commission may designate if it finds information that you wish to make Room. such longer period to be appropriate available publicly. All submissions should refer to File II. Self-Regulatory Organization’s and publishes its reasons for so finding Number SR–NYSE–2015–46 and should Statement of the Purpose of, and or (ii) as to which the self-regulatory be submitted on or before November 18, Statutory Basis for, the Proposed Rule organization consents, the Commission 2015. Change will: (A) By order approve or disapprove For the Commission, by the Division of In its filing with the Commission, the the proposed rule change, or Trading and Markets, pursuant to delegated Exchange included statements (B) institute proceedings to determine authority.34 concerning the purpose of and basis for whether the proposed rule change Brent J. Fields, the proposed rule change and discussed should be disapproved. Secretary. any comments it received on the [FR Doc. 2015–27349 Filed 10–27–15; 8:45 am] proposed rule change. The text of these IV. Solicitation of Comments BILLING CODE 8011–01–P statements may be examined at the Interested persons are invited to places specified in Item IV below. The submit written data, views, and Exchange has prepared summaries, set arguments concerning the foregoing, SECURITIES AND EXCHANGE forth in Sections A, B, and C below, of including whether the proposed rule COMMISSION the most significant parts of such change is consistent with the Act. statements. Comments may be submitted by any of [Release No. 34–76231; File No. SR–BATS– the following methods: 2015–91] A. Self-Regulatory Organization’s Statement of the Purpose of, and Electronic Comments Self-Regulatory Organizations; BATS Statutory Basis for, the Proposed Rule • Use the Commission’s Internet Exchange, Inc.; Notice of Filing and Change comment form (http://www.sec.gov/ Immediate Effectiveness of a Proposed Rule Change to Rule 20.6, Nullification 1. Purpose rules/sro.shtml); or • Send an email to rule-comments@ and Adjustment of Options Earlier this year, the Exchange sec.gov. Please include File Number SR– Transactions Including Obvious Errors adopted new Rule 20.6 related to the NYSE–2015–46 on the subject line. adjustment and nullification of October 22, 2015. transactions that occur on the Paper Comments Pursuant to Section 19(b)(1) of the Exchange’s equity options platform Securities Exchange Act of 1934 (the • Send paper comments in triplicate ‘‘Act’’),1 and Rule 19b–4 thereunder,2 (‘‘BATS Options’’).5 Interpretation and to Brent J. Fields, Secretary, Securities Policy .01 to Rule 20.6 is designed to notice is hereby given that on October address certain issues related to the Plan and Exchange Commission, 100 F Street mstockstill on DSK4VPTVN1PROD with NOTICES 20, 2015, BATS Exchange, Inc. (the to Address Extraordinary Market NE., Washington, DC 20549–1090. ‘‘Exchange’’ or ‘‘BATS’’) filed with the All submissions should refer to File Volatility Pursuant to Rule 608 of Securities and Exchange Commission Number SR–NYSE–2015–46. This file (‘‘Commission’’) the proposed rule 3 15 U.S.C. 78s(b)(3)(A). number should be included on the 4 17 CFR 240.19b–4(f)(6)(iii). subject line if email is used. To help the 34 17 CFR 200.30–3(a)(12). 5 See Securities Exchange Act Release No. 74556 Commission process and review your 1 15 U.S.C. 78s(b)(1). (March 20, 2015), 80 FR 16031 (March 26, 2015) comments more efficiently, please use 2 17 CFR 240.19b–4. (SR–BATS–2014–067). VerDate Sep<11>2014 19:16 Oct 27, 2015 Jkt 238001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\28OCN1.SGM 28OCN1


Document Created: 2018-02-27 08:57:57
Document Modified: 2018-02-27 08:57:57
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation80 FR 66065 
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