80 FR 79122 - Self-Regulatory Organizations; National Stock Exchange, Inc.; Order Approving a Proposed Rule Change To Modify and Eliminate Certain Rules and To Enable Trading Activity To Resume on the Exchange

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 243 (December 18, 2015)

[Federal Register Volume 80, Number 243 (Friday, December 18, 2015)]
[Notices]
[Pages 79122-79124]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-31790]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76640; File No. SR-NSX-2015-05]


Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Order Approving a Proposed Rule Change To Modify and Eliminate Certain 
Rules and To Enable Trading Activity To Resume on the Exchange

December 14, 2015.

I. Introduction

    On November 3, 2015, the National Stock Exchange (``NSX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to the provisions of Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change proposing changes that would, 
among other things, allow trading activity to resume on the 
Exchange.\3\ The proposed rule change was published for comment in the 
Federal Register on November 13, 2015.\4\ The Commission received no 
comments on the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 782(b)(1).
    \2\ 17 CFR 249.19b-4.
    \3\ On May 1, 2014, NSX filed a proposed rule change to halt all 
trading activity on the Exchange. See Securities Exchange Act 
Release No. 72107 (May 6, 2014), 79 FR 27017 (May 12, 2014) (SR-NSX-
2014-14). There has been no trading activity on the Exchange since 
the close of business on May 30, 2014 (``Closing Date'').
    \4\ See Securities Exchange Act Release No. 76390 (November 9, 
2015), 80 FR 70261 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to amend Rule 11.1 (Hours of Trading) to 
rescind Interpretations and Policies .01 (Cessation of Trading 
Operations NSX) to permit the Exchange to resume trading activity. The 
Exchange also proposes to (i) amend Rule 11.11 (Orders and Modifiers) 
to remove descriptions of certain order types that the Exchange will 
not offer when it resumes trading and to correct the numbering of 
certain subparagraphs of the rule; (ii) delete Rule 11.12 (Cross 
Message) and make conforming changes to Rules 11.11(c) and 16.2; (iii) 
amend Rule 11.13 and Interpretations and Policies .01 to eliminate the 
order delivery mode of order interaction with the Exchange's trading 
system (``Order Delivery''); and (iv) adopt Rule 11.25 (Use of Market 
Data Feeds) to describe the Exchange's use of certain data feeds for 
order handling and execution.\5\
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    \5\ For a more detailed description of the proposed changes, see 
Notice, supra note 4.

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[[Page 79123]]

    In its filing, the Exchange represented to the Commission that it 
is ready to resume trading activity upon approval of this filing. To 
that end, the Exchange represents that, since the Closing Date, it has 
continued to discharge its responsibilities as a self-regulatory 
organization (``SRO'') in anticipation of resuming trading 
operations,\6\ specifically, by, among other things, (i) remaining a 
party to certain multi-party 17d-2 Plans for the Allocation of 
Regulatory Responsibilities pursuant to Section 17(d)(1) of the Act \7\ 
and Rules 17d-1 and 17d-2 thereunder \8\ relating to insider trading 
surveillance and certain Regulation NMS requirements; \9\ (ii) 
continuing to maintain the operability of its trading system and not 
modifying the system's functionality, except as necessary to comply 
with regulatory requirements; \10\ (iii) implementing and executing a 
rigorous testing program, including tests with industry participants, 
to assure that its trading system will function as designed and 
consistent with all applicable rules and regulations; \11\ (iv) testing 
connectivity to the securities information processors (``SIPs'') and 
re-certifying its connection to the Depository Trust Clearing 
Corporation; \12\ and (v) amending certain Exchange Rules to keep 
current with industry regulatory initiatives.\13\ The Exchange further 
represents that it has the capacity to be able to carry out the 
purposes of the Act and to comply with and to enforce compliance by ETP 
Holders and persons associated with ETP Holders, with the provisions of 
the Act, the rules and regulations thereunder, and the rules of the 
Exchange. The Exchange further states that it has the financial, 
technological, and personnel resources to effectively conduct 
surveillance of its marketplace and to regulate ETP Holders' trading on 
NSX upon the resumption of trading operations.\14\
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    \6\ See Notice, supra note 4, at 70262.
    \7\ 15 U.S.C. 78q(d)(1).
    \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2.
    \9\ See Notice, supra note 4, at 70264.
    \10\ See id. at 70263.
    \11\ See id.
    \12\ See id.
    \13\ See id. at 70263-64.
    \14\ See id. at 70264-65.
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    Furthermore, the Exchange represents that it will provide timely 
written notice of the date it will commence trading, and other related 
information directly to the following parties: (i) ETP Holders; (ii) 
other national securities exchanges that trade NMS securities; (iii) 
the SIPs; and, (iv) the operating committees for the various NMS plans 
(e.g., the Consolidated Tape Association Plan/Consolidated Quote Plan, 
the Plan Governing the Collection, Consolidation and Dissemination of 
Quotation and Transaction Information for Nasdaq-Listed Securities 
Traded on Exchanges on an Unlisted Trading Privileges Basis, the Plan 
to Address Extraordinary Market Volatility).\15\ NSX further states 
that it will provide timely notice to the general public by way of 
widely-disseminated press releases, notification through the Exchange's 
Web site, and communications with financial and industry press.\16\
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    \15\ See id. at 70263-64.
    \16\ See id. at 70264.
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    Finally, the Exchange represents that upon receiving Commission 
approval to resume trading, it will execute a staged roll-out plan to 
reach full operational capacity and provide notice to ETP Holders with 
the precise details of the roll-out plan before initiating the 
plan.\17\
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    \17\ See id. at 70263.
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III. Discussion and Commission Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that the proposed rule change is consistent with the requirements 
of the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\18\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\19\ 
which requires that the rules of the Exchange, among other things, be 
designed 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.
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    \18\ In approving the proposed rule change, the Commission has 
considered its impact on efficiency, competition and capital 
formation. See 15 U.S.C. 78c(f).
    \19\ 15 U.S.C. 78f(b)(5).
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    Based on the Exchange's representations, the Commission believes 
that the Exchange is positioned to resume its status as a fully 
operational national securities exchange and to commence trading 
operations consistent with the notice provisions set forth in the 
proposed rule change.\20\ The Commission notes that the Exchange will 
resume operations using the same trading system and rules (subject to 
the changes proposed herein) that were in effect on the Closing Date. 
The Commission further notes that the Exchange has committed to 
``regularly assess its regulatory resources to assure that they 
continue to be sufficient to discharge its SRO responsibilities.'' \21\ 
The Exchange's proposed staged roll-out plan should ensure that trading 
is resumed in an orderly manner. The Exchange's decision to streamline 
its trading operations by amending Rules 11.11, 11.12, 11.13, and 16.2, 
and adopting Rule 11.25, is consistent with the protection of investors 
and the public interest. These changes, which eliminate order-types 
that were not being used before the Closing Date, eliminate the order 
delivery mode of order interaction with the Exchange's trading system, 
and adopt a rule to describe the Exchange's use of certain data feeds 
for order handling and execution, will allow the exchange to resume 
trading, providing another venue to which customer orders can be 
routed. The Commission notes that it received no comments on the 
proposed rule change.
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    \20\ See Notice, supra note 4, at 70263-64.
    \21\ See id. at 70264.
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    As noted above, NSX intends to resume operations as an automated 
trading center and have its best bid and best offer be a Protected 
Quotation.\22\ To meet their regulatory responsibilities under Rule 
611(a) of Regulation NMS, market participants must have sufficient 
notice of new Protected Quotations, as well as all necessary 
information (such as final technical specifications).\23\ Therefore, 
the Commission believes that it would be a reasonable policy and 
procedure under Rule 611(a) to require that industry participants begin 
treating NSX's best bid and best offer as a Protected Quotation as soon 
as possible but no later than 60 days after the date of this order, or 
such later date as NSX resumes operations as a national securities 
exchange.
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    \22\ 17 CFR 242.600(b)(58).
    \23\ See Securities Exchange Act Release No. 53829 (May 18, 
2006), 71 FR 30038, 30041 (May 24, 2006).
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    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\24\ that the proposed rule change (SR-NSX-2015-05), be, and hereby is, 
approved.
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    \24\ 15 U.S.C. 78s(b)(2).


[[Page 79124]]


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-31790 Filed 12-17-15; 8:45 am]
 BILLING CODE 8011-01-P