81 FR 12986 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change Amending Rule 123C-Equities To Provide for How the Exchange Would Determine an Official Closing Price if the Exchange Is Unable To Conduct a Closing Transaction
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 48 (March 11, 2016)
Federal Register Volume 81, Issue 48 (March 11, 2016)
| Page Range | 12986-12990 | |
| FR Document | 2016-05437 |
[Federal Register Volume 81, Number 48 (Friday, March 11, 2016)] [Notices] [Pages 12986-12990] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-05437] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77306; File No. SR-NYSEMKT-2016-31] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change Amending Rule 123C--Equities To Provide for How the Exchange Would Determine an Official Closing Price if the Exchange Is Unable To Conduct a Closing Transaction March 7, 2016. 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 February 25, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') 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. --------------------------------------------------------------------------- \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 to amend Rule 123C--Equities to provide for how the Exchange would determine an Official Closing Price if the Exchange is unable to conduct a closing transaction. 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 is proposing to amend its rules to specify back-up procedures for determining an Official Closing Price for Exchange- listed securities if it is unable to conduct a closing transaction in one or more securities due to a systems or technical issue.\4\ Specifically, the Exchange proposes to amend Rule 123C--Equities (``Rule 123C'') to provide for how the Exchange would determine an Official Closing Price if the Exchange is impaired. --------------------------------------------------------------------------- \4\ See NYSE press release dated July 22, 2015, available here: http://ir.theice.com/press-and-publications/press-releases/all-categories/2015/07-22-2015.aspx. --------------------------------------------------------------------------- The Exchange developed this proposal in consultation with its affiliated exchanges, NYSE Arca, Inc. (``NYSE Arca'') and New York Stock Exchange LLC (``NYSE''), and the NASDAQ Stock Market LLC (``Nasdaq''), and took into consideration feedback from discussions with industry participants, including meeting the following key goals important to market participants:Providing a pre-determined, consistent solution that would result in a closing print to the applicable securities information processor (``SIP'') within a reasonable time frame from the normal closing time; Minimizing the need for industry participants to modify their processing of data from the SIPs; and Providing advance notification of the applicable closing contingency plan to provide sufficient time for industry participants to route any closing interest to an alternate venue to participate in that venue's closing auction. Background The Exchange recently amended Rule 123C to add the definition of ``Official Closing Price'' for all Exchange-listed securities and, once implemented, will disseminate to the SIP the Official Closing Price as an ``M'' value.\5\ In that filing, the Exchange amended Rule 123C(1)(e)(i) to define the ``Official Closing Price'' of a security listed on the Exchange as the price established in a closing transaction under paragraphs (7) and (8) of Rule 123C of one round lot or more. If there is no closing transaction in a security or if a closing transaction is less than one round lot, the Official Closing Price will be the most recent last-sale eligible trade in such security on the Exchange on that trading day. --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release No. 76601 (Dec. 9, 2015), 80 FR 77680 (Dec. 15, 2015) (SR-NYSEMKT-2015-98). For a description of all sale conditions that are reportable to the SIP, including the ``M'' value, see the Consolidated Tape System Participant Communications Interface Specification, dated November 16, 2015, at 86, available here: https://www.ctaplan.com/publicdocs/ctaplan/notifications/trader-update/cts_input_spec.pdf. --------------------------------------------------------------------------- The Exchange further amended Rule 123C(1)(e)(ii) to provide for how the Exchange would determine an Official Closing Price if the Exchange is unable to conduct a closing transaction in a security or securities due to a systems or technical issue. In such case, the Official Closing Price will be the last consolidated last-sale eligible trade for such security during regular trading hours on that trading day. The rule further provides that if there were no consolidated last-sale eligible trades in a security on a trading day when the Exchange is unable to conduct a closing transaction in a security or securities due to a systems or technical issue, the Official Closing Price of such security will be the prior day's Official Closing Price. The Exchange also amended Rule 440B(b)--Equities to provide that Exchange systems will 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 [[Page 12987]] determined by the listing market for that security, from the security's Official Closing Price, as defined in Rule 123C as of the end of regular trading hours on the prior day (``Trigger Price''). Proposed Amendments The Exchange proposes to amend Rule 123C(1)(e)(ii) to provide for the proposed new contingency plan of how the Exchange would determine an Official Closing Price if the Exchange is unable to conduct a closing transaction in a security or securities due to a systems or technical issue. To reflect this change, the Exchange would replace the current rule text in Rule 123C(1)(e)(ii). As proposed, Rule 123C(1)(e)(ii) would provide that if the Exchange determines at or before 3:00 p.m. Eastern Time that it is unable to conduct a closing transaction in one or more securities due to a systems or technical issue, the Exchange would designate an alternate exchange for such security or securities. The Exchange would publicly announce the exchange designated as the alternate exchange via Trader Update.\6\ In such case, the Official Closing Price of each security would be determined on the following hierarchy: --------------------------------------------------------------------------- \6\ The Exchange expects that it would designate one of its affiliated exchanges as the alternate exchange and would designate Nasdaq only if its affiliated exchanges were also impacted by the systems or technical issue. --------------------------------------------------------------------------- Proposed Rule 123C(1)(e)(ii)(A) would provide that the Official Closing Price would be the official closing price for such security under the rules of the designated alternate exchange. For example, if the Exchange designates NYSE Arca as the alternate exchange, the Official Closing Price would be based on NYSE Arca Equities Rule 1.1(ggP), which defines how NYSE Arca establishes an official closing price.\7\ If Nasdaq were designated as the alternate exchange, the Official Closing Price would be the official closing price established in Nasdaq Rule 4754. The proposed 3:00 p.m. cut off time was selected in part based on discussions with market participants regarding their capability to re- direct closing-only interest in Exchange-listed securities in time to participate in the closing auction of an alternate venue. By designating an alternate exchange before 3:00 p.m. Eastern Time, the Exchange therefore believes that market participants would be more likely to have sufficient notice to direct any closing-only interest in Exchange-listed securities to the designated alternate exchange. By providing market participants sufficient time, when possible, to route closing-only interest to an alternate venue for participation in that exchange's closing auction process, that alternate exchange's closing auction would be more likely to result in a closing price that reflects market value for such security. If there were insufficient interest for a closing auction on the designated alternate exchange, the Exchange believes that the respective rules of NYSE Arca and Nasdaq provide for an appropriate hierarchy of which price to use to determine the Official Closing Price. For example, under NYSE Arca Rule 1.1(ggP)(1), if there is no closing auction of one round lot or more on a trading day, the official closing price under that rule is the most recent consolidated last sale eligible trade during Core Trading Hours on that trading day. That rule further provides that if there were no consolidated last sale eligible trades during Core Trading Hours on that trading day, NYSE Arca's official closing price will be the prior day's Official Closing Price. This hierarchy is similar to how the Exchange determines the Official Closing Price pursuant to Rule 123C(1)(e)(i) when there is no closing transaction of a round lot or more, except that in lieu of a closing auction, NYSE Arca uses the last consolidated last sale eligible trade rather than the last Exchange last-sale eligible trade. --------------------------------------------------------------------------- \7\ NYSE Arca Equities will be filing a rule proposal to amend Rule 1.1(ggP)(1) to provide that the manner by which NYSE Arca determines the Official Closing Price under that rule for securities listed on NYSE Arca would also be applicable to any securities for which NYSE Arca conducts a closing auction, including securities that trade on an unlisted trading privileges basis. --------------------------------------------------------------------------- Proposed Rule 123C(1)(e)(ii)(B) would provide if the designated alternate exchange does not have an official closing price in a security, the Official Closing price would be the volume-weighted average price (``VWAP'') of the consolidated last-sale eligible prices of the last five minutes of trading during regular trading hours up to the time that the VWAP is processed. The VWAP would include any closing transactions on an exchange and would take into account any trade breaks or corrections up to the time the VWAP is processed. Because the VWAP would include any last-sale eligible trades, busts, or corrections that were reported up to the time that the SIP calculates the VWAP, the Exchange believes that the VWAP price would reflect any pricing adjustments that may be reported after 4:00 p.m. ET. As discussed above, the manner by which exchanges calculate their respective official closing prices provide for an official closing price in the absence of a closing transaction. Accordingly, the Exchange believes that in circumstances when the Exchange designates an alternate exchange, the VWAP calculation would rarely be used to determine the Official Closing Price for an Exchange-listed security. Proposed Rule 123C(1)(e)(ii)(C) would provide that if the designated alternate exchange does not have an official closing price in a security and there were no consolidated last-sale eligible trades in the last five minutes of trading during regular trading hours in such security, the Official Closing Price would be the last consolidated last-sale eligible trade during regular trading hours on that trading day. Proposed Rule 123C(1)(e)(ii)(D) would provide that if the designated alternate exchange does not have an official closing price in a security and there were no consolidated last-sale eligible trades in a security on a trading day in such security, the Official Closing Price would be the prior day's Official Closing Price. Finally, proposed Rule 123C(1)(e)(ii)(E) would provide that if an Official Closing Price for a security cannot be determined under (A), (B), or (C) of proposed Rule 123C(1)(e)(ii) and there is no prior day's Official Closing Price, the Exchange would not publish an Official Closing Price for such security. The Exchange would use the hierarchy set forth in proposed Rule 123C(e)(ii)(B)-(E) only if the designated alternate exchange did not disseminate an official closing price in a security. In such case, the proposed hierarchy is based on current Rule 123C(1)(e)(i), which provides that, if the Exchange is unable to conduct a closing transaction, the Official Closing Price will be the last consolidated last-sale eligible trade for such security during regular trading hours on that trading day, and if there were no consolidated last-sale eligible trades in a security, the Official Closing Price of such security will be the prior day's Official Closing Price. In addition, the Exchange proposes to add as paragraph (E) of Rule 123C(e)(ii) what would happen if there were no Official Closing Price published on the prior trading day (i.e., the Exchange would not publish an Official Closing Price). The Exchange believes not publishing an Official Closing Price would be a rare occurrence, and is most likely to occur for a thinly-traded security, such as a when issued security, right, or warrant, that has been listed for trading but does not have any consolidated last-sale eligible trades. If the Exchange determines that it is impaired before 3:00 p.m. and the [[Page 12988]] Official Closing Price for an Exchange-listed security is determined pursuant to proposed Rule 123C(1)(e)(ii), the SIP would publish the Official Closing Price for such security no differently than how the SIP publishes the Official Closing Price for an Exchange-listed security pursuant to Rule 123C(1)(e)(i).\8\ Accordingly, if the Official Closing Price is determined pursuant to proposed Rule 123C(1)(e)(ii), recipients of SIP data would not have to make any changes to their systems because the SIP would publish the ``M'' last sale condition as an Exchange Official Closing Price for any impacted Exchange-listed securities. --------------------------------------------------------------------------- \8\ The Operating Committees of the CTA Plan, CQ Plan, and the Joint Self-Regulatory Organization 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 approved the Impaired Market Contingency Plan under which the SIPs would print an impaired primary listing exchange's contingency Official Closing Price as the Official Closing Price of that primary listing exchange as provided for in the rules of respective primary listing exchanges. --------------------------------------------------------------------------- As further proposed, Rule 123C(1)(e)(iii) would describe how the Exchange would determine the Official Closing Price for a security if the Exchange determines after 3:00 p.m. Eastern Time that it is unable to conduct a closing transaction in one or more securities due to a systems or technical issue. Based on input from market participants, the Exchange believes that, if the Exchange were to announce after 3:00 p.m. Eastern Time that it is impaired and unable to conduct a closing transaction, market participants would not have sufficient time to re- direct closing-only orders to an alternate venue. The proposed hierarchy would be similar to proposed Rule 123C(1)(e)(ii), but would not contemplate a closing transaction on a designated alternate exchange. Accordingly, in such scenario, the Exchange proposes to use the following hierarchy for determining the Official Closing Price for a security: Proposed Rule 123C(1)(e)(iii)(A) would provide that the Official Closing Price would be the VWAP of the consolidated last-sale eligible prices of the last five minutes of trading during regular trading hours up to the time that the VWAP is processed, including any closing transactions on an exchange. The VWAP would take into account any trade breaks or corrections up to the time of the VWAP is processed. This VWAP would be calculated in the same manner as set forth in proposed in Rule 123C(1)(e)(ii)(B), described above. However, if the Exchange's determination that it is unable to conduct a closing transaction is after 3:00 p.m. ET, the proposed VWAP calculation would be the primary means for determining the Official Closing Price for a security. In such case, the Exchange believes that the VWAP would appropriately reflect the pricing of a security because it would include, in a volume-weighted manner, the price and volume of closing transactions on other exchanges if market participants are able to route closing interest in Exchange-listed securities to an alternate venue for participation in a closing auction. Proposed Rule 123C(1)(e)(iii)(B) would provide that if there were no consolidated last-sale eligible trades in the last five minutes of trading during regular trading hours in such security, the Official Closing Price would be the last consolidated last-sale eligible trades during regular trading hours on that trading day. This proposed rule text is the same as proposed Rule 123C(1)(e)(ii)(C). Proposed Rule 123C(1)(e)(iii)(C) would provide that if there were no consolidated last-sale eligible trades in such security on a trading day, the Official Closing Price would be the prior day's Official Closing Price. This proposed rule text is the same as proposed Rule 123C(1)(e)(ii)(D). Finally, proposed Rule 123C(1)(e)(iii)(D) would provide that if an Official Closing Price for a security cannot be determined under (A), (B), or (C) of proposed Rule 123C(1)(e)(iii) and there is no prior day's Official Closing Price, the Exchange would not publish an Official Closing Price for such security. This proposed rule text is based on proposed Rule 123C(1)(e)(ii)(E). Similar to how the Official Closing Price would be published under proposed Rule 123C(1)(e)(ii), if the Exchange determines that it is impaired after 3:00 p.m. and the Official Closing Price is determined pursuant to proposed Rule 123C(1)(e)(iii), the SIP would publish the Official Closing Price for such security no differently than how the SIP publishes the Official Closing Price for an Exchange-listed security pursuant to Rule 123C(1)(e)(i). Accordingly, if the Official Closing Price is determined pursuant to proposed Rule 123C(1)(e)(iii), recipients of SIP data would not have to make any changes to their systems because the SIP would publish the ``M'' last sale condition as an Exchange Official Closing Price for any impacted Exchange-listed securities. For purposes of Rule 440B(b)--Equities, the Official Closing Price would still be determined based on Rule 123C and if the market is impaired, the Official Closing Price as defined in proposed Rules 123C(1)(e)(ii) and (iii) would be used for purposes of determining whether a Short Sale Price Test is triggered in a security the next trading day. Because of the technology changes associated with this proposed rule change, the Exchange will implement the proposed back-up procedures for determining an Official Closing Price no later than 120 days after approval of this proposed rule change and will announce the implementation date via Trader Update. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,\9\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\10\ in particular, in that 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, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. --------------------------------------------------------------------------- \9\ 15 U.S.C. 78f(b). \10\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide transparency in how the Exchange would determine the Official Closing Price in Exchange- listed securities when the Exchange is unable to conduct a closing transaction due to a systems or technical issue. The Exchange believes that the proposed amendments would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposed determination of an Official Closing Price was crafted in response to input from industry participants and would: Provide a pre-determined, consistent solution that would result in a closing print to the SIP within a reasonable time frame from the normal closing time; minimize the need for industry participants to modify their processing of data from the SIP; and provide advance notification of the applicable closing contingency plan to provide sufficient time for industry participants to route any closing interest [[Page 12989]] to an alternate venue to participate in that venue's closing auction More specifically, the Exchange believes the proposed hierarchy for determining the Official Closing Price if the Exchange determines that it is impaired before 3:00 p.m. Eastern Time would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposal, which is based on input from market participants, would provide sufficient time for market participants to direct closing-only interest to a designated alternate exchange in time for such interest to participate in a closing auction on such alternate venue in a meaningful manner. The Exchange further believes that relying on the official closing price of a designated alternate exchange would provide for an established hierarchy for determining an Official Closing Price for an Exchange-listed security if there is insufficient interest to conduct a closing auction on the alternate exchange. In such case, the rules of NYSE Arca and Nasdaq already provide a mechanism for determining an official closing price for securities that trade on those markets. The Exchange further believes that if the Exchange determines after 3:00 p.m. that it is impaired and unable the [sic] conduct a closing transaction, the proposed VWAP calculation would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide for a mechanism to determine the value of an affected security for purposes of determining an Official Closing Price. By using a volume-weighted calculation that would include the closing transactions on an affected security on alternate exchanges as well as any busts or corrections that were reported up to the time that the SIP calculates the value, the Exchange believes that the proposed calculation would reflect the correct price of a security. In addition, by using a VWAP calculation rather than the last consolidated last-sale eligible price as of the end of regular trading hours, the Exchange would reduce the potential for an anomalous trade that may not reflect the true price of a security from being set as the Official Closing Price for a security. The Exchange further believes that the proposed rule change would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposal would have minimal impact on market participants. As proposed, from the perspective of market participants, even if the Exchange were impaired, the SIP would publish an Official Closing Price for Exchange-listed securities on behalf of the Exchange in a manner that would be no different than if the Exchange were not impaired. If the Exchange determines that it is impaired after 3:00 p.m., market participants would not have to make any system changes. If the Exchange determines that it is impaired before 3:00 p.m. Eastern Time and designates an alternate exchange, market participants may have to do systems work to re-direct closing-only orders to the alternate exchange. However, the Exchange understands, based on input from market participants, that such changes would be feasible based on the amount of advance notice. In addition, the Exchange believes that designating an alternate exchange when there is sufficient time to do so would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would allow for the price-discovery mechanism of a closing auction to be available for impacted Exchange- listed securities. 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 rule change is not designed to address any competitive issues, but rather to provide for how the Exchange would determine an Official Closing Price for Exchange-listed securities if it is impaired and cannot conduct a closing transaction due to a systems or technical issue. The proposal has been crafted with input from market participants, Nasdaq, and the SIPs, and is designed to reduce the burden on competition by having similar back-up procedures across all primary listing exchanges if such exchange is is [sic] impaired and cannot conduct a closing transaction. 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-NYSEMKT-2016-31 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-NYSEMKT-2016-31. 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 also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only [[Page 12990]] information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEMKT-2016-31 and should be submitted on or before April 1, 2016. --------------------------------------------------------------------------- \11\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\11\ Robert W. Errett, Deputy Secretary. [FR Doc. 2016-05437 Filed 3-10-16; 8:45 am] BILLING CODE 8011-01-P
![12986 Federal Register / Vol. 81, No. 48 / Friday, March 11, 2016 / Notices
those that may be withheld from the I. Self-Regulatory Organization’s within a reasonable time frame from the
public in accordance with the Statement of the Terms of Substance of normal closing time;
provisions of 5 U.S.C. 552, will be the Proposed Rule Change • Minimizing the need for industry
available for Web site viewing and participants to modify their processing
The Exchange proposes to amend
printing in the Commission’s Public of data from the SIPs; and
Rule 123C—Equities to provide for how • Providing advance notification of
Reference Room, 100 F Street NE., the Exchange would determine an
Washington, DC 20549 on official the applicable closing contingency plan
Official Closing Price if the Exchange is to provide sufficient time for industry
business days between the hours of unable to conduct a closing transaction. participants to route any closing interest
10:00 a.m. and 3:00 p.m. Copies of such The proposed rule change is available to an alternate venue to participate in
filing also will be available for on the Exchange’s Web site at that venue’s closing auction.
inspection and copying at the principal www.nyse.com, at the principal office of
office of the Exchange. All comments the Exchange, and at the Commission’s Background
received will be posted without change; Public Reference Room. The Exchange recently amended Rule
the Commission does not edit personal 123C to add the definition of ‘‘Official
II. Self-Regulatory Organization’s
identifying information from Statement of the Purpose of, and Closing Price’’ for all Exchange-listed
submissions. You should submit only Statutory Basis for, the Proposed Rule securities and, once implemented, will
information that you wish to make Change disseminate to the SIP the Official
available publicly. All submissions Closing Price as an ‘‘M’’ value.5 In that
should refer to File No. SR–NYSEMKT– In its filing with the Commission, the filing, the Exchange amended Rule
2016–17, and should be submitted on or self-regulatory organization included 123C(1)(e)(i) to define the ‘‘Official
before April 1, 2016. statements concerning the purpose of, Closing Price’’ of a security listed on the
and basis for, the proposed rule change Exchange as the price established in a
For the Commission, by the Division of and discussed any comments it received closing transaction under paragraphs (7)
Trading and Markets, pursuant to delegated on the proposed rule change. The text and (8) of Rule 123C of one round lot
authority.21 of those statements may be examined at or more. If there is no closing
Robert W. Errett, the places specified in Item IV below. transaction in a security or if a closing
Deputy Secretary. The Exchange has prepared summaries, transaction is less than one round lot,
[FR Doc. 2016–05435 Filed 3–10–16; 8:45 am] set forth in sections A, B, and C below, the Official Closing Price will be the
BILLING CODE 8011–01–P
of the most significant parts of such most recent last-sale eligible trade in
statements. such security on the Exchange on that
A. Self-Regulatory Organization’s trading day.
SECURITIES AND EXCHANGE The Exchange further amended Rule
Statement of the Purpose of, and the
COMMISSION 123C(1)(e)(ii) to provide for how the
Statutory Basis for, the Proposed Rule
Exchange would determine an Official
Change
Closing Price if the Exchange is unable
[Release No. 34–77306; File No. SR–
1. Purpose to conduct a closing transaction in a
NYSEMKT–2016–31]
The Exchange is proposing to amend security or securities due to a systems
Self-Regulatory Organizations; NYSE or technical issue. In such case, the
its rules to specify back-up procedures
Official Closing Price will be the last
MKT LLC; Notice of Filing of Proposed for determining an Official Closing Price
consolidated last-sale eligible trade for
Rule Change Amending Rule 123C— for Exchange-listed securities if it is
such security during regular trading
Equities To Provide for How the unable to conduct a closing transaction
hours on that trading day. The rule
Exchange Would Determine an Official in one or more securities due to a
further provides that if there were no
Closing Price if the Exchange Is systems or technical issue.4 Specifically,
consolidated last-sale eligible trades in
Unable To Conduct a Closing the Exchange proposes to amend Rule
a security on a trading day when the
Transaction 123C—Equities (‘‘Rule 123C’’) to
Exchange is unable to conduct a closing
provide for how the Exchange would
March 7, 2016.
transaction in a security or securities
determine an Official Closing Price if due to a systems or technical issue, the
Pursuant to Section 19(b)(1) 1 of the the Exchange is impaired. Official Closing Price of such security
Securities Exchange Act of 1934 (the The Exchange developed this will be the prior day’s Official Closing
‘‘Act’’) 2 and Rule 19b–4 thereunder,3 proposal in consultation with its Price.
notice is hereby given that on February affiliated exchanges, NYSE Arca, Inc. The Exchange also amended Rule
25, 2016, NYSE MKT LLC (the (‘‘NYSE Arca’’) and New York Stock 440B(b)—Equities to provide that
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with Exchange LLC (‘‘NYSE’’), and the Exchange systems will not execute or
NASDAQ Stock Market LLC (‘‘Nasdaq’’), display a short sale order with respect
the Securities and Exchange
and took into consideration feedback to a covered security at a price that is
Commission (the ‘‘Commission’’) the
from discussions with industry less than or equal to the current national
proposed rule change as described in
participants, including meeting the best bid if the price of that security
Items I, II, and III below, which Items
following key goals important to market decreases by 10% or more, as
have been prepared by the self- participants:
asabaliauskas on DSK3SPTVN1PROD with NOTICES
regulatory organization. The • Providing a pre-determined, 5 See Securities Exchange Act Release No. 76601
Commission is publishing this notice to consistent solution that would result in (Dec. 9, 2015), 80 FR 77680 (Dec. 15, 2015) (SR–
solicit comments on the proposed rule a closing print to the applicable NYSEMKT–2015–98). For a description of all sale
change from interested persons. securities information processor (‘‘SIP’’) conditions that are reportable to the SIP, including
the ‘‘M’’ value, see the Consolidated Tape System
21 17
Participant Communications Interface
CFR 200.30–3(a)(12). 4 See NYSE press release dated July 22, 2015, Specification, dated November 16, 2015, at 86,
1 15 U.S.C.78s(b)(1). available here: http://ir.theice.com/press-and- available here: https://www.ctaplan.com/
2 15 U.S.C. 78a.
publications/press-releases/all-categories/2015/07- publicdocs/ctaplan/notifications/trader-update/
3 17 CFR 240.19b–4. 22-2015.aspx. cts_input_spec.pdf.
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![Federal Register / Vol. 81, No. 48 / Friday, March 11, 2016 / Notices 12989
to an alternate venue to participate in Exchange were impaired, the SIP would Commission may designate if it finds
that venue’s closing auction publish an Official Closing Price for such longer period to be appropriate
More specifically, the Exchange Exchange-listed securities on behalf of and publishes its reasons for so finding
believes the proposed hierarchy for the Exchange in a manner that would be or (ii) as to which the self-regulatory
determining the Official Closing Price if no different than if the Exchange were organization consents, the Commission
the Exchange determines that it is not impaired. If the Exchange will:
impaired before 3:00 p.m. Eastern Time determines that it is impaired after 3:00 (A) By order approve or disapprove
would remove impediments to and p.m., market participants would not the proposed rule change, or
perfect the mechanism of a free and have to make any system changes. If the (B) institute proceedings to determine
open market and a national market Exchange determines that it is impaired whether the proposed rule change
system because the proposal, which is before 3:00 p.m. Eastern Time and should be disapproved.
based on input from market designates an alternate exchange, IV. Solicitation of Comments
participants, would provide sufficient market participants may have to do
time for market participants to direct systems work to re-direct closing-only Interested persons are invited to
closing-only interest to a designated orders to the alternate exchange. submit written data, views, and
alternate exchange in time for such However, the Exchange understands, arguments concerning the foregoing,
interest to participate in a closing based on input from market including whether the proposed rule
auction on such alternate venue in a participants, that such changes would change is consistent with the Act.
meaningful manner. The Exchange be feasible based on the amount of Comments may be submitted by any of
further believes that relying on the advance notice. In addition, the the following methods:
official closing price of a designated Exchange believes that designating an Electronic Comments
alternate exchange would provide for an alternate exchange when there is
established hierarchy for determining an sufficient time to do so would remove • Use the Commission’s Internet
Official Closing Price for an Exchange- impediments to and perfect the comment form (http://www.sec.gov/
listed security if there is insufficient mechanism of a free and open market rules/sro.shtml); or
interest to conduct a closing auction on • Send an email to rule-
and a national market system because it
the alternate exchange. In such case, the comments@sec.gov. Please include File
would allow for the price-discovery
rules of NYSE Arca and Nasdaq already Number SR–NYSEMKT–2016–31 on the
mechanism of a closing auction to be
provide a mechanism for determining subject line.
available for impacted Exchange-listed
an official closing price for securities securities. Paper Comments
that trade on those markets. • Send paper comments in triplicate
The Exchange further believes that if B. Self-Regulatory Organization’s
Statement on Burden on Competition to Brent J. Fields, Secretary, Securities
the Exchange determines after 3:00 p.m.
and Exchange Commission, 100 F Street
that it is impaired and unable the [sic] The Exchange does not believe that
conduct a closing transaction, the NE., Washington, DC 20549–1090.
the proposed rule change will impose
proposed VWAP calculation would any burden on competition that is not All submissions should refer to File
remove impediments to and perfect the necessary or appropriate in furtherance Number SR–NYSEMKT–2016–31. This
mechanism of a free and open market of the purposes of the Act. The file number should be included on the
and a national market system because it proposed rule change is not designed to subject line if email is used. To help the
would provide for a mechanism to address any competitive issues, but Commission process and review your
determine the value of an affected rather to provide for how the Exchange comments more efficiently, please use
security for purposes of determining an would determine an Official Closing only one method. The Commission will
Official Closing Price. By using a Price for Exchange-listed securities if it post all comments on the Commission’s
volume-weighted calculation that would is impaired and cannot conduct a Internet Web site (http://www.sec.gov/
include the closing transactions on an closing transaction due to a systems or rules/sro.shtml). Copies of the
affected security on alternate exchanges technical issue. The proposal has been submission, all subsequent
as well as any busts or corrections that crafted with input from market amendments, all written statements
were reported up to the time that the participants, Nasdaq, and the SIPs, and with respect to the proposed rule
SIP calculates the value, the Exchange is designed to reduce the burden on change that are filed with the
believes that the proposed calculation competition by having similar back-up Commission, and all written
would reflect the correct price of a procedures across all primary listing communications relating to the
security. In addition, by using a VWAP exchanges if such exchange is is [sic] proposed rule change between the
calculation rather than the last impaired and cannot conduct a closing Commission and any person, other than
consolidated last-sale eligible price as of transaction. those that may be withheld from the
the end of regular trading hours, the public in accordance with the
Exchange would reduce the potential for C. Self-Regulatory Organization’s provisions of 5 U.S.C. 552, will be
an anomalous trade that may not reflect Statement on Comments on the available for Web site viewing and
the true price of a security from being Proposed Rule Change Received From printing in the Commission’s Public
set as the Official Closing Price for a Members, Participants, or Others Reference Room, 100 F Street NE.,
security. No written comments were solicited Washington, DC 20549, on official
The Exchange further believes that the business days between the hours of
asabaliauskas on DSK3SPTVN1PROD with NOTICES
or received with respect to the proposed
proposed rule change would remove rule change. 10:00 a.m. and 3:00 p.m. Copies of the
impediments to and perfect the filing also will be available for
mechanism of a free and open market III. Date of Effectiveness of the inspection and copying at the principal
and a national market system because Proposed Rule Change and Timing for office of the Exchange. All comments
the proposal would have minimal Commission Action received will be posted without change;
impact on market participants. As Within 45 days of the date of the Commission does not edit personal
proposed, from the perspective of publication of this notice in the Federal identifying information from
market participants, even if the Register or up to 90 days (i) as the submissions. You should submit only
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![12990 Federal Register / Vol. 81, No. 48 / Friday, March 11, 2016 / Notices
information that you wish to make collectively referred to herein as the Virtus ETF Advisers LLC will be the
available publicly. All submissions ‘‘Shares.’’ investment adviser (‘‘Adviser’’) to the
should refer to File Number SR– Fund. iSectors, LLC will be the
II. Self-Regulatory Organization’s
NYSEMKT–2016–31 and should be investment sub-adviser (‘‘Sub-Adviser’’)
Statement of the Purpose of, and
submitted on or before April 1, 2016. to the Fund. ETF Distributors LLC (the
Statutory Basis for, the Proposed Rule
For the Commission, by the Division of ‘‘Distributor’’) will be the principal
Change
Trading and Markets, pursuant to delegated underwriter and distributor of the
authority.11 In its filing with the Commission, Fund’s Shares. The Bank of New York
Nasdaq included statements concerning Mellon (‘‘BNY Mellon’’) will act as the
Robert W. Errett,
the purpose of, and basis for, the administrator, accounting agent,
Deputy Secretary.
proposed rule change. The text of these custodian, and transfer agent to the
[FR Doc. 2016–05437 Filed 3–10–16; 8:45 am] statements may be examined at the Fund.
BILLING CODE 8011–01–P places specified in Item IV below. Paragraph (g) of Rule 5735 provides
Nasdaq has prepared summaries, set that if the investment adviser to the
forth in Sections A, B, and C below, of investment company issuing Managed
SECURITIES AND EXCHANGE the most significant aspects of such Fund Shares is affiliated with a broker-
COMMISSION statements. dealer, such investment adviser shall
A. Self-Regulatory Organization’s erect a ‘‘fire wall’’ between the
[Release No. 34–77301; File No. SR– investment adviser and the broker-
NASDAQ–2016–028] Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule dealer with respect to access to
Change information concerning the composition
Self-Regulatory Organizations; The and/or changes to such investment
NASDAQ Stock Market LLC; Notice of 1. Purpose company portfolio.7 In addition,
Filing of Proposed Rule Change paragraph (g) further requires that
Relating to the Listing and Trading of The Exchange proposes to list and
trade the Shares of the Fund under personnel who make decisions on the
the Shares of the iSectors Post-MPT open-end fund’s portfolio composition
Growth ETF of ETFis Series Trust I Nasdaq Rule 5735, which governs the
listing and trading of Managed Fund must be subject to procedures designed
March 7, 2016. Shares 4 on the Exchange. The Fund will to prevent the use and dissemination of
be an actively managed exchange-traded material, non-public information
Pursuant to Section 19(b)(1) of the
fund (‘‘ETF’’). The Shares will be regarding the open-end fund’s portfolio.
Securities Exchange Act of 1934
offered by the Trust, which was Rule 5735(g) is similar to Nasdaq Rule
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
established as a Delaware statutory trust 5705(b)(5)(A)(i); however, paragraph (g)
notice is hereby given that on February
on September 20, 2012.5 The Trust is in connection with the establishment of
23, 2016, The NASDAQ Stock Market
registered with the Commission as an a ‘‘fire wall’’ between the investment
LLC (‘‘Nasdaq’’ or the ‘‘Exchange’’) filed
investment company and has filed a adviser and the broker-dealer reflects
with the Securities and Exchange the applicable open-end fund’s
Commission (‘‘Commission’’) the registration statement on Form N–1A
(‘‘Registration Statement’’) with the portfolio, not an underlying benchmark
proposed rule change as described in in index, as is the case with index-based
Items I and II below, which Items have Commission.6 The Fund is a series of
the Trust. funds. The Adviser and Sub-Adviser are
been prepared by Nasdaq. The not registered as broker-dealers;
Commission is publishing this notice to 4 A Managed Fund Share is a security that however the Adviser (but not the Sub-
solicit comments on the proposed rule represents an interest in an investment company Adviser) is affiliated with a broker-
change from interested persons. registered under the Investment Company Act of dealer and has implemented a fire wall
1940 (15 U.S.C. 80a–1)(the ‘‘1940 Act’’) organized
I. Self-Regulatory Organization’s as an open-end investment company or similar with respect to such broker-dealer
Statement of the Terms of Substance of entity that invests in a portfolio of securities
the Proposed Rule Change selected by its investment adviser consistent with 7 An investment adviser to an open-end fund is
its investment objectives and policies. In contrast, required to be registered under the Investment
Nasdaq proposes to list and trade the an open-end investment company that issues Index Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
Fund Shares, listed and traded on the Exchange result, the Adviser, the Sub-Adviser and their
shares of the iSectors Post-MPT Growth under Nasdaq Rule 5705, seeks to provide related personnel are subject to the provisions of
ETF (the ‘‘Fund’’), a series of ETFis investment results that correspond generally to the Rule 204A–1 under the Advisers Act relating to
Series Trust I (the ‘‘Trust’’), under price and yield performance of a specific foreign or codes of ethics. This Rule requires investment
domestic stock index, fixed income securities index advisers to adopt a code of ethics that reflects the
Nasdaq Rule 5735 (‘‘Managed Fund or combination thereof. fiduciary nature of the relationship to clients as
Shares’’).3 The shares of the Fund are 5 The Commission has issued an order, upon well as compliance with other applicable securities
which the Trust may rely, granting certain laws. Accordingly, procedures designed to prevent
11 17 CFR 200.30–3(a)(12). exemptive relief under the 1940 Act. See the communication and misuse of non-public
1 15 Investment Company Act Release No. 30607 (July information by an investment adviser must be
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
23, 2013). In compliance with Nasdaq Rule consistent with Rule 204A–1 under the Advisers
5735(b)(5), which applies to Managed Fund Shares Act. In addition, Rule 206(4)–7 under the Advisers
3 The Commission approved Nasdaq Rule 5735 in
based on an international or global portfolio, the Act makes it unlawful for an investment adviser to
Securities Exchange Act Release No. 57962 (June Trust’s application for exemptive relief under the provide investment advice to clients unless such
13, 2008) 73 FR 35175 (June 20, 2008) (SR– 1940 Act states that the Fund will comply with the investment adviser has (i) adopted and
NASDAQ–2008–039). There are already multiple federal securities laws in accepting securities for implemented written policies and procedures
asabaliauskas on DSK3SPTVN1PROD with NOTICES
actively-managed funds listed on the Exchange; see deposits and satisfying redemptions with reasonably designed to prevent violation, by the
e.g., Securities Exchange Act Release No. 72411 redemption securities, including that the securities investment adviser and its supervised persons, of
(June 17, 2014), 79 FR 35598 (June 23, 2014) (SR– accepted for deposits and the securities used to the Advisers Act and the Commission rules adopted
NASDAQ–2014–40) (order approving listing and satisfy redemption requests are sold in transactions thereunder; (ii) implemented, at a minimum, an
trading of Calamos Focus Growth ETF). The that would be exempt from registration under the annual review regarding the adequacy of the
Exchange believes the proposed rule change raises Securities Act of 1933 (15 U.S.C. 77a). policies and procedures established pursuant to
no significant issues not previously addressed in 6 See Registration Statement on Form N–1A for subparagraph (i) above and the effectiveness of their
those prior Commission orders. The Exchange the Trust filed on December 2, 2015 (File Nos. 333– implementation; and (iii) designated an individual
believes the proposed rule change raises no 187668 and 811–22819). The descriptions of the (who is a supervised person) responsible for
significant issues not previously addressed in those Fund and the Shares contained herein are based, in administering the policies and procedures adopted
prior Commission orders. part, on information in the Registration Statement. under subparagraph (i) above.
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Document Created: 2016-03-11 01:50:38
Document Modified: 2016-03-11 01:50:38
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 12986 |
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