81 FR 21429 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 7.16 To Specify That Sell Short Post No Preference Orders and Sell Short PNP Blind Orders Priced At or Below the National Best Bid Will Be Rejected on Arrival During the Short Sale Period

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 69 (April 11, 2016)

[Federal Register Volume 81, Number 69 (Monday, April 11, 2016)]
[Notices]
[Pages 21429-21430]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-08180]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77520; File No. SR-NYSEArca-2016-51]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Rule 7.16 To Specify That Sell Short Post No Preference Orders 
and Sell Short PNP Blind Orders Priced At or Below the National Best 
Bid Will Be Rejected on Arrival During the Short Sale Period

April 5, 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 24, 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 NYSE Arca Equities Rule 7.16 
(``Short Sales'') to specify that Post No Preference (``PNP'') orders 
and PNP Blind orders priced at or below the national best bid will be 
rejected on arrival during the Short Sale Period. 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
    NYSE Arca Equities Rule 7.16 (``Rule 7.16'') governs the treatment 
of sell short orders on the Exchange to comply with the requirements of 
Rule 201 of Regulation SHO.\4\ Currently, 7.16(f)(v)(D)(ii) provides, 
in part, that PNP Blind Orders will be re-priced and displayed at a 
Permitted Price \5\ during the Short Sale Period.\6\ The Exchange 
recently determined that, during a Short Sale Period, if the Exchange's 
best bid is the national best bid, PNP Blind short sale orders do not 
re-price to a Permitted Price but rather, the orders execute at the 
national best bid.
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    \4\ 17 CFR 242.201.
    \5\ Rule 7.16(f)(v)(C) defines the term ``Permitted Price'' as 
one minimum price increment above the current national best bid. The 
Permitted Price for securities for which the national best bid is $1 
or more is $.01 above the national best bid; the Permitted Price for 
securities for which the national best bid is below $1 is $.0001 
above the national best bid.
    \6\ A ``Short Sale Period'' is defined in Rule 7.16(f)(iv) as 
the period during which the Short Sale Price Test is in effect. A 
Short Sale Price Test is defined in Rule 7.16(f)(ii) as the period 
when the Exchange 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 10% or more, as determined by the listing market for the 
security, from the security's closing price on the listing market as 
of the end of regular trading hours on the prior day. Rule 7.16P, 
rather than Rule 7.16, governs the treatment of sell short orders 
for symbols trading on the Exchange's Pillar trading platform.
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    To address this issue, the Exchange is proposing to amend Rule 
7.16(f)(v) by adding new subsection (H) to provide that, during a Short 
Sale Period, the Exchange would reject on arrival sell short PNP Orders 
and sell short PNP Blind Orders priced at or below the national best 
bid.\7\
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    \7\ Due to technology limitations, the Exchange is not able to 
address this issue without rejecting both sell short PNP Orders and 
sell short PNP Blind Orders priced at or below the national best bid 
during the Short Sale Period. As such, the proposed rule text 
specifies that the Exchange would reject both sell short PNP Orders 
and sell short PNP Blind Orders, received during the Short Sale 
period, priced at or below the national best bid.
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    The Exchange believes that the proposed change would eliminate the 
potential for sell short PNP Orders and PNP Blind Orders to execute at 
the national best bid during a Short Sale Period.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers 
the objectives of Section 6(b)(5),\8\ 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)(5).
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    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 eliminate the potential for 
sell short PNP Orders and PNP Blind Orders to trade at the national 
best bid during a Short Sale Period. The Exchange further believes that 
the proposed rule change is reasonable and appropriate and designed to 
prevent fraudulent and manipulative acts because it provides more 
certainty to members and the investing public of how the Exchange will 
treat incoming short sale PNP Orders and short sale PNP Blind Orders 
during a Short Sale Period.

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 eliminate the 
potential for sell short PNP Orders and PNP Blind Orders to trade at 
the national best bid during a Short Sale Period.

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

[[Page 21430]]

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 \9\ and Rule 19b-4(f)(6) 
thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \11\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ 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 the proposed rule change is designed to assure compliance 
with Rule 201 of Regulation SHO \13\ by assuring that the Exchange will 
not execute or display a sell short PNP or a sell short PNP Blind order 
at or below the national best bid during a Short Sale Period. The 
Exchange further stated that waiver of the operative delay would allow 
the Exchange to implement the rule change without delay, which would 
help eliminate potential investor confusion regarding how sell short 
PNP and PNP Blind Orders will be treated on arrival during a Short Sale 
Period. 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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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ 17 CFR 242.201.
    \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-2016-51 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-2016-51. 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-2016-51, and should 
be submitted on or before May 2, 2016.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08180 Filed 4-8-16; 8:45 am]
 BILLING CODE 8011-01-P