81 FR 14500 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rules 7.31P(j) and 7.34P(c) To Allow Q Orders To Participate in the Early Trading Session and Late Trading Session

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 52 (March 17, 2016)

[Federal Register Volume 81, Number 52 (Thursday, March 17, 2016)]
[Notices]
[Pages 14500-14502]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-05973]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77349; File No. SR-NYSEArca-2016-43]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Rules 
7.31P(j) and 7.34P(c) To Allow Q Orders To Participate in the Early 
Trading Session and Late Trading Session

March 11, 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 March 9, 2016, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
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 amend Rules 7.31P(j) (Orders and 
Modifiers) and 7.34P(c) (Trading Sessions) to allow Q Orders to 
participate in the Early Trading Session and Late Trading Session. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rules 7.31P(j) and 7.34P(c), which 
govern the operation of Q Orders on the Exchange's Pillar trading 
platform. A Q Order is a limit order submitted to the NYSE Arca 
Marketplace by a Market Maker, and designated by a Market Maker as a 
``Q Order'' through such means as the Corporation shall specify.\4\
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    \4\ See Rule 7.31P(j). The term ``NYSE Arca Marketplace'' is 
defined in Rule 1.1(e) as the electronic securities communications 
and trading facility designated by the Board of Directors through 
which orders of Users are consolidated for execution and/or display. 
The term ``Market Maker'' is defined in Rule 1.1(v) as an ETP Holder 
that acts as a Market Maker pursuant to Rule 7, which includes Lead 
Market Makers. The term ``Corporation'' is defined in Rule 1.1(k) to 
mean NYSE Arca Equities.
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    Rule 7.34(b)(1) describes the operation of Q orders on the current, 
or legacy, platform and states that Q Orders may be entered beginning 
at the start of the Core Trading Session or at such earlier time during 
the Opening Session as determined from time to time by the Corporation, 
and continuing until the end of the Core Trading Session. Further, Rule 
7.34(d)(1), which describes which orders are permitted in

[[Page 14501]]

the Opening Session at the Exchange on the current trading platform, 
does not restrict the entry of Q Orders during the Opening Session (the 
Early Trading Session in Pillar).\5\ While Q Orders are not required 
for the Opening or Late Trading Session, on the current trading 
platform, Market Makers are permitted to enter such orders during those 
sessions.
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    \5\ Rule 7.34(d)(3)(A), however, provides that Orders eligible 
for the Display Order Process (other than Q Orders) and for the 
Working Order Process, including NOW Orders and PNP Orders, that 
have been designated as available for the Late Trading Session are 
eligible for entry into and execution on the NYSE Arca Markeplace 
[sic].
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    As the Exchange described when it adopted Rule 7.31P(j)(2), Q 
Orders on the Pillar trading platform operate in a similar manner as 
they do on the trading platform that Pillar will replace.\6\ However, 
for Pillar, Rule 7.34P provides that a Q Order is not eligible to 
participate in either the Early Trading Session or the Late Trading 
Session, and if a Q Order includes a designation for one of those 
sessions, it will be rejected.\7\
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    \6\ See Securities Exchange Act Release Nos. 75497 (July 21, 
2015), 80 FR 45022 (July 28, 2015) (Notice of Filing of SR-NYSEArca-
2015-56); and 76267 (October 26, 2015), 80 FR 66951 (October 30, 
2015) (Order Approving SR-NYSEArca-2015-56).
    \7\ See Rule 7.34P(c)(1)(A) and 7.34P(c)(3)(A).
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    The Exchange understands that Market Makers registered on the 
Exchange currently enter Q Orders for participation in the Opening 
Session so that they may begin assessing pricing in Exchange-listed 
securities. To assist Market Makers with meeting their obligations to 
make two-sided markets in Exchange-listed securities, and to facilitate 
the price-discovery process and ability of Market Makers to price the 
security for the Core Trading Session, the Exchange proposes to amend 
the Pillar rules so that Q Orders can be entered during the Early 
Trading Session. With this change, Q Orders would function in Pillar no 
differently than they do on the current trading platform in terms of 
when they can be entered on the Exchange.
    Additionally, while there is limited use for Market Makers to 
submit Q Orders during the Late Trading Session, the Exchange currently 
accepts Q Orders designated for the Late Trading Session, and proposes 
to continue to allow Market Makers to enter Q Orders designated for the 
Late Trading Session, to the extent they choose to do so, in order to 
ensure that the migration to Pillar is seamless and minimally 
disruptive for Market Makers. In addition, the Exchange believes that 
permitting Market Makers to include a designation for the Late Trading 
Session for Q Orders would promote the display of liquidity on the 
Exchange during all trading sessions, and not just when a Market Maker 
has obligations to display liquidity during the Core Trading Session.
    To effect this change, the Exchange proposes to amend Rule 
7.31P(j)(2) to delete the first sentence of that rule, which provides 
that Q Orders are only eligible to participate in the Core Trading 
Session. The Exchange also proposes to amend the third sentence of the 
current rule to provide that Market Makers are not obligated to but may 
enter Q Orders during the Early or Late Trading Session. The Exchange 
further proposes to amend Rules 7.34P(c)(1)(A) and (c)(3)(A) to remove 
any reference to Q Orders as not being eligible to participate in the 
Early Trading Session or Late Trading Session or that if a Q Orders is 
designated for either the Early or Late Trading Session, it will be 
rejected. The proposed amendments to current Rules 7.34P(c)(1)(A) and 
7.34P(c)(3)(A) would make clear that Q Orders are eligible to 
participate in the Early Trading Session and the Late Trading Session, 
respectively, and if such orders are submitted with a designation for 
the Early Trading Session or the Late Trading Session, they would not 
be rejected.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\8\ in general, and 
furthers the objectives of Section 6(b)(5),\9\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system and, 
in general, to protect investors and the public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    Specifically, 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 by assisting Market Makers in 
Exchange-listed securities to meet their obligation to make markets in 
their registered securities by using Q Orders during the Early Trading 
Session to gauge market interest in securities so that they may be 
priced appropriately for the Core Trading Session. In addition, the 
Exchange believes that permitting Market Makers to include a 
designation for the Late Trading Session for Q Orders would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because it would promote the display of 
liquidity on the Exchange during all trading sessions, and not just 
when a Market Maker has obligations to display liquidity during the 
Core Trading Session. To this end, the proposed rule change would allow 
Pillar to operate no differently than the trading platform Pillar will 
replace, in terms of when Q Orders can be entered on the Exchange. 
Accordingly, the proposed rule change would provide that on Pillar, 
Market Makers would not be obligated to enter Q Orders in securities in 
which they are registered during the Early or Late Trading Sessions, 
but would be permitted to do so.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change is not 
designed to address any competitive issue but rather to make amendments 
to Rules 7.31P and 7.34P relating to Q Orders so that they may be 
entered during the Early Trading Session and Late Trading Session.

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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.

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[[Page 14502]]

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \12\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \13\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
stated that it intends to begin migrating symbols to the Pillar 
platform within thirty days from the date of this filing. According to 
the Exchange, waiver of the operative delay will allow Market Makers 
registered on the Exchange to enter Q Orders designated for the Early 
and Late Trading Sessions on the Pillar platform, which the Exchange 
believes will facilitate the price discovery process on the Exchange. 
The Commission believes the waiver of the operative delay is consistent 
with the protection of investors and the public interest. Therefore, 
the Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\14\
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2016-43 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2016-43. 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 such 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 information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2016-43, and should 
be submitted on or before April 7, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Lynn M. Powalski,
Deputy Secretary.
[FR Doc. 2016-05973 Filed 3-16-16; 8:45 am]
BILLING CODE 8011-01-P