81 FR 21632 - Self-Regulatory Organizations; EDGX Exchange, Inc.; Order Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Adopt an Early Trading Session and Three New Time-In-Force Instructions
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 70 (April 12, 2016)
Federal Register Volume 81, Issue 70 (April 12, 2016)
| Page Range | 21632-21635 | |
| FR Document | 2016-08302 |
[Federal Register Volume 81, Number 70 (Tuesday, April 12, 2016)] [Notices] [Pages 21632-21635] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-08302] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77538; File No. SR-EDGX-2016-06] Self-Regulatory Organizations; EDGX Exchange, Inc.; Order Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Adopt an Early Trading Session and Three New Time-In-Force Instructions April 6, 2016. I. Introduction On February 2, 2016, EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') filed with the Securities and Exchange Commission (the ``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule change to amend its rules to: (i) Create a new trading session to be known as the Early Trading Session, which will run from 7:00 a.m. to 8:00 a.m. Eastern Time; and (ii) adopt three new Time-in- Force (``TIF'') instructions. On February 12, 2016, the Exchange filed Amendment No. 1 to the proposed rule change.\4\ The proposed rule change, as modified by Amendment No. 1 thereto, was published for comment in the Federal Register on February 22, 2016.\5\ The Commission received no comments on the proposed rule change. This order approves the proposed rule change, as modified by Amendment No. 1. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. \4\ In Amendment No. 1, the Exchange noted that it would subject orders that are eligible for execution at the start of the Pre- Opening Session to all of the Exchange's standard regulatory checks, including compliance with Regulation NMS, Regulation SHO as well as other relevant Exchange rules. \5\ See Securities Exchange Act Release No. 77142 (February 16, 2016), 81 FR 8806 (``Notice''). --------------------------------------------------------------------------- II. Description of the Proposal The Exchange proposes to amend its rules to: (i) Create a new trading session, the Early Trading Session, which will run from 7:00 a.m. to 8:00 a.m. Eastern Time; and (ii) adopt three new TIF instructions.\6\ --------------------------------------------------------------------------- \6\ See Notice, supra note 5. --------------------------------------------------------------------------- A. Early Trading Session The Exchange trading day is currently divided into three sessions: (i) The Pre-Opening Session which starts at 8:00 a.m. and ends at 9:30 a.m. Eastern Time; (ii) Regular Trading Hours which runs from 9:30 a.m. to 4:00 p.m. Eastern Time; and (iii) the Post-Closing Session, which runs from 4:00 p.m. to 8:00 p.m. [[Page 21633]] Eastern Time. The Exchange proposes to amend its rules to create the Early Trading Session. Exchange Rule 1.5 would be amended to add a new term, ``Early Trading Session,'' under proposed paragraph (ii). ``Early Trading Session'' would be defined as ``the time between 7:00 a.m. and 8:00 a.m. Eastern Time.'' The Exchange also proposes to amend Exchange Rule 11.1(a) to state that orders may be entered or executed on, or routed away from, the Exchange during the the Early Trading Session and to reflect the start time of the Early Trading Session as 7:00 a.m. Eastern Time. Other than the proposal to adopt an Early Trading Session, the Exchange does not propose to amend the substance or operation of Exchange Rule 11.1(a).\7\ --------------------------------------------------------------------------- \7\ See id. at 8806. --------------------------------------------------------------------------- Users \8\ currently designate when their orders are eligible for execution by selecting a desired TIF instruction.\9\ Orders entered between 6:00 a.m. and 8:00 a.m. Eastern Time are not eligible for execution until the start of the Pre-Opening Session or Regular Trading Hours, depending on the TIF selected by the User. Users may enter orders in advance of the trading session for which the order is eligible. For example, Users may enter orders starting at 6:00 a.m. Eastern Time with a TIF of Regular Hours Only (``RHO''), which designates that the order only be eligible for execution during Regular Trading Hours.\10\ Users may enter orders as early as 6:00 a.m. Eastern Time, but those orders would not be eligible for execution until the start of the Pre-Opening Session at 8:00 a.m. According to the Exchange, some Users have requested the ability for their orders to be eligible for execution starting at 7:00 a.m. Eastern Time. Therefore, the Exchange is proposing to adopt the Early Trading Session.\11\ --------------------------------------------------------------------------- \8\ ``User'' is defined as ``any Member or Sponsored Participant who is authorized to obtain access to the System pursuant to Rule 11.3.'' See Exchange Rule 1.5(ee). \9\ See Exchange Rule 11.6(q). \10\ See Exchange Rule 11.6(q)(6). \11\ See Notice, supra note 5, at 8806. --------------------------------------------------------------------------- As amended, Exchange Rule 11.1(a)(1) would state that orders entered between 6:00 a.m. and 7:00 a.m. Eastern Time, rather than 6:00 a.m. and 8:00 a.m. Eastern Time, would not be eligible for execution until the start of the Early Trading Session, Pre-Opening Session, or Regular Trading Hours, depending on the TIF selected by the User. Exchange Rule 11.1(a)(1) will also be amended to state that the Exchange will not accept the following orders prior to 7:00 a.m. Eastern Time, rather than 8:00 a.m.: Orders with a Post Only instruction,\12\ Intermarket Sweep Orders (``ISOs''),\13\ Market Orders \14\ with a TIF other than Regular Hours Only, orders with a Minimum Execution Quantity instruction \15\ that also include a TIF of Regular Hours Only, and all orders with a TIF instruction of Immediate-or- Cancel (``IOC'') \16\ or Fill-or-Kill (``FOK'').\17\ At the commencement of the Early Trading Session, orders entered between 6:00 a.m. and 7:00 a.m. Eastern Time, rather than 6:00 a.m. and 8:00 a.m. Eastern Time, will be handled in time sequence, beginning with the order with the oldest time stamp, and will be placed on the EDGX Book,\18\ routed, cancelled, or executed in accordance with the terms of the order. As amended, Exchange Rule 11.1(a) would state that orders may be executed on the Exchange or routed away from the Exchange during Regular Trading Hours and during the Early Trading, Pre-Opening, Regular and Post Closing Sessions.\19\ --------------------------------------------------------------------------- \12\ See Exchange Rule 11.6(n)(4). \13\ See Exchange Rule 11.8(c). \14\ See Exchange Rule 11.8(a). \15\ See Exchange Rule 11.6(h). \16\ See Exchange Rule 11.6(q)(1). \17\ See Exchange Rule 11.6(q)(3). \18\ See Exchange Rule 1.5(d). \19\ The Exchange also describes how the Early Trading Session will affect its Members' operations and the Exchange's opening process, order types, routing services, order processing, data feeds, trade reporting, market surveillance, and clearly erroneous trade processing. The Exchange clarifies that these processes will operate in the same manner with the exception of changes in time to reflect the adoption of the Early Trading Session. See Notice, supra note 5, at 8807. --------------------------------------------------------------------------- The Exchange also proposes to make the changes described below to Exchange Rules 3.21, 11.8, 11.10, 11.15, 14.1, 14.2 and 14.3 to reflect the adoption of the Early Trading Session:Exchange Rule 3.21, Customer Disclosures. Exchange Rule 3.21 prohibits Members from accepting an order from a customer for execution in the Pre-Opening or Post-Closing Session without disclosing to their customer that extended hours trading involves material trading risks, including the possibility of lower liquidity, high volatility, changing prices, unlinked markets, an exaggerated effect from news announcements, wider spreads and any other relevant risk. The Exchange proposes to amend Exchange Rule 3.21 to also require such disclosures for customer orders that are to be executed during the Early Trading Session. Exchange Rules 11.8(b), (c), (d), and (f). The Exchange proposes to amend the description of Limit Orders under Exchange Rule 11.8(b), ISOs under Exchange Rule 11.8(c), MidPoint Peg Orders under Exchange Rule 11.8(d), and Supplemental Peg Orders under Exchange Rule 11.8(f) to account for the Early Trading Session. Every order type that is currently available beginning at 8:00 a.m. will be available beginning at 7:00 a.m. for inclusion in the Early Trading Session. All other order types, and all order type behaviors, will otherwise remain unchanged. Therefore, each of the above rules for Limit Orders, ISOs, MidPoint Peg Orders, and Supplemental Peg Orders would be amended to state that those order types are available during the Early Trading Session. Exchange Rules 11.8(a) and (e). Market Orders and Market Maker Peg Orders would not be eligible for execution during the Early Trading Session. Market Orders are only eligible for execution during the Regular Session.\20\ Market Maker Peg Orders may currently be submitted to the Exchange starting at the beginning of the Pre-Opening Session, but the order will not be executable or automatically priced until after the first regular way transaction on the listing exchange in the security, as reported by the responsible single plan processor. Exchange Rule 11.8(e)(7) would be amended to state that Market Maker Peg Orders may be submitted to the Exchange starting at the beginning of the Early Trading Session. Market Maker Peg Orders would continue to not be executable or automatically priced until after the first regular way transaction on the listing exchange in the security, as reported by the responsible single plan processor. --------------------------------------------------------------------------- \20\ See Exchange Rule 11.8(a)(5). --------------------------------------------------------------------------- Exchange Rule 11.10, Order Execution and Routing. Exchange Rule 11.10(a)(2) discusses compliance with Regulation NMS and Trade Through Protections and states that the price of any execution occurring during the Pre-Opening Session or the Post-Closing Session must be equal to or better than the highest Protected Bid or lowest Protected Offer, unless the order is marked ISO or a Protected Bid is crossing a Protected Offer. The Exchange proposes to amend Exchange Rule 11.10(a)(2) to expand the rule's requirements to the Early Trading Session. Exchange Rule 11.15, Clearly Erroneous Executions. Exchange Rule 11.15 outlines under which conditions the Exchange may determine that an execution is clearly erroneous. The Exchange proposes to amend Exchange Rule 11.15 to include executions that occur during the Early Trading Session. [[Page 21634]] Exchange Rule 11.15(c)(1) sets forth the numerical guidelines the Exchange is to follow when determining whether an execution was clearly erroneous during Regular Trading Hours or the Pre-Opening or Post- Closing Trading Session. Exchange Rule 11.15(c)(3) sets forth additional factors the Exchange may consider in determining whether a transaction is clearly erroneous. These factors include whether the transaction was executed during the Pre-Opening or Post-Closing Trading Sessions. The Exchange proposes to amend Exchange Rule 11.15(c)(1) and (3) to include executions occurring during the Early Trading Session. Exchange Rule 14.1, Unlisted Trading Privileges. The Exchange proposes to amend Exchange Rules 14.1(c)(2), and Interpretation and Policies .01(a) and (b) to account for the Early Trading Session. Specifically, the Exchange proposes to amend paragraph (c)(2) to state that an information circular distributed by the Exchange prior to the commencement of trading of a UTP Derivative Security \21\ will describe the risk of trading during the Early Trading Session.\22\ In addition, the Exchange proposes to amend Interpretation and Policies .01(a) to add Early Trading Session to the paragraph's title and to state that if a UTP Derivative Security begins trading on the Exchange in the Early Trading Session or Pre-Opening Session and subsequently a temporary interruption occurs in the calculation or wide dissemination of the Intraday Indicative Value (``IIV'') or the value of the underlying index, as applicable, to such UTP Derivative Security, by a major market data vendor, the Exchange may continue to trade the UTP Derivative Security for the remainder of the Early Trading Session and Pre-Opening Session. Lastly, the Exchange proposes to amend Interpretation and Policies .01(b) to add Early Trading Session to the paragraph's title and to amend subparagraph (2) of that section to state that if the IIV or the value of the underlying index continues not to be calculated or widely available as of the commencement of the Early Trading Session or Pre-Opening Session on the next business day, the Exchange shall not commence trading of the UTP Derivative Security in the Early Trading Session or Pre-Opening Session that day. --------------------------------------------------------------------------- \21\ See Exchange Rule 14.1(c). \22\ Currently, the information circular describes only those risks in the Pre-Opening and Post-Closing Trading Sessions. --------------------------------------------------------------------------- Exchange Rule 14.2, Investment Company Units. The Exchange proposes to amend Exchange Rule 14.2(g) to state that transactions in Investment Company Units may occur during the Early Trading Session. Currently, such transactions may occur during Regular Trading Hours and the Pre-Opening and Post Closing Sessions. Exchange Rule 14.3, Trust Issued Receipts. The Exchange proposes to amend Exchange Rule 14.3(d) to state that transactions in Trust Issued Receipts may occur during the Early Trading Session. Currently, such transactions may occur during Regular Trading Hours and the Pre-Opening and Post-Closing Sessions. B. TIF Instructions The Exchange proposes to adopt three new TIF instructions under Exchange Rule 11.6(q).\23\ As discussed above, a User may designate when its order is eligible for execution by selecting the desired TIF instruction under Exchange Rule 11.6(q).\24\ --------------------------------------------------------------------------- \23\ The Exchange also proposes to amend the descriptions of Good-`til Day (``GTD'') under Exchange Rule 11.6(q)(4) and Good-`til Extended Day (``GTX'') under Exchange Rule 11.6(q)(5) to replace incorrect references to the Post-Market Session with Post-Closing Session, as Post-Closing Session is the accurate term under Exchange Rule 1.5(r). \24\ See Exchange Rule 11.1(a)(1). --------------------------------------------------------------------------- Although the Exchange states that the proposal to adopt an Early Trading Session is in response to User requests for their orders to be eligible for execution starting at 7:00 a.m. Eastern Time, some Users have requested that their orders continue to not be eligible for execution until the start of the Pre-Opening Session at 8:00 a.m.\25\ Therefore, the Exchange proposes to adopt the following three new TIF instructions under Exchange Rule 11.6(q): --------------------------------------------------------------------------- \25\ See Notice, supra note 5, at 8808. --------------------------------------------------------------------------- Pre-Opening Session Plus (``PRE''). A limit order that is designated for execution during the Pre-Opening Session and Regular Trading Hours. Like the current Day TIF instruction,\26\ any portion not executed expires at the end of Regular Trading Hours. --------------------------------------------------------------------------- \26\ See Exchange Rule 11.6(q)(2). --------------------------------------------------------------------------- Pre-Opening Session `til Extended Day (``PTX''). A limit order that is designated for execution during the Pre-Opening Session, Regular Trading Hours, and the Post-Closing Session. Like the current GTX TIF instruction,\27\ any portion not executed expires at the end of the Post-Closing Session. --------------------------------------------------------------------------- \27\ See Exchange Rule 11.6(q)(5). --------------------------------------------------------------------------- Pre-Opening Session `til Day (``PTD''). A limit order that is designated for execution during the Pre-Opening Session, Regular Trading Hours, and the Post-Closing Session. Like the current GTD TIF instruction,\28\ any portion not executed will be cancelled at the expiration time assigned to the order, which can be no later than the close of the Post-Closing Trading Session. --------------------------------------------------------------------------- \28\ See Exchange Rule 11.6(q)(4). --------------------------------------------------------------------------- Under each proposed TIF instruction, Users may designate that their orders only be eligible for execution starting with the Pre-Opening Session. Users may continue to enter orders as early as 6:00 a.m., but orders with the proposed TIF instructions would not be eligible for execution until 8:00 a.m. Eastern Time, the start of the Pre-Opening Session.\29\ At the commencement of the Pre-Opening Session, orders entered between 6:00 a.m. and 8:00 a.m. Eastern Time with one of the proposed TIF instructions will be handled in time sequence, beginning with the order with the oldest time stamp, and will be placed on the EDGX Book, routed, cancelled, or executed in accordance with the terms of the order.\30\ --------------------------------------------------------------------------- \29\ Orders utilizing one of the proposed TIF instructions would not be eligible for execution during the Early Trading Session. \30\ See Exchange Rule 11.1(a). --------------------------------------------------------------------------- The Exchange proposes to amend the following order types under Exchange Rule 11.8 to account for the three proposed TIF instructions: Market Orders. The proposed TIF instruction of PRE, PTX, and PTD would not be available for Market Orders. Under Exchange Rule 11.8(a)(2), a Market Order may only include a TIF instruction of IOC, RHO, FOK, or Day. Limit Orders. Exchange Rule 11.8(b)(2) describes the TIF instructions that may be attached to a Limit Order. The Exchange proposes to amend paragraph (b)(2) to add the TIF instructions of PRE, PTX, or PTD to the list of TIF instructions that a Limit Order may include. ISOs. Exchange Rule 11.8(c)(1) describes the TIF instructions that may be attached to an incoming ISO. The Exchange proposes to amend paragraph (c)(1) to state that an incoming ISO may have a TIF instruction of PRE, PTX, or PTD, in addition to Day, GTD, RHO, GTX, and IOC. Exchange Rule 11.8(c)(1) would be further amended to state that an incoming ISO with a Post Only and TIF instruction of PRE, PTX, or PTD, like those with an TIF instruction or GTD, GTX, or Day, will be cancelled without execution if, when entered, it is immediately marketable against an order with a Displayed instruction resting in the EDGX Book unless such order removes liquidity pursuant to Exchange Rule 11.6(n)(4).\31\ --------------------------------------------------------------------------- \31\ Exchange Rule 11.6(n)(4) defines the Post Only instruction and states, in sum, that an order with a Post Only instruction and a Display-Price Sliding or Price Adjust instruction will remove contra-side liquidity from the EDGX Book if the order is an order to buy or sell a security priced below $1.00 or if the value of such execution when removing liquidity equals or exceeds the value of such execution if the order instead posted to the EDGX Book and subsequently provided liquidity, including the applicable fees charged or rebates provided. --------------------------------------------------------------------------- [[Page 21635]] MidPoint Peg Orders. Exchange Rule 11.8(d)(1) describes the TIF instructions that may be attached to a MidPoint Peg Order. The Exchange proposes to amend paragraph (d)(1) to state that a MidPoint Peg Order may have a TIF instruction of PRE, PTX, or PTD, in addition to Day, FOK, IOC, RHO, GTX and GTD. Market Maker Peg Orders. The proposed TIF instruction of PRE, PTX, and PTD would not be available to Market Maker Peg Orders. Under Exchange Rule 11.8(e)(4), a Market Maker Peg Order may only include a TIF instruction of Day, RHO, or GTD. Supplemental Peg. Exchange Rule 11.8(f)(1) describes the TIF instructions that may be attached to a Supplemental Peg Order. The Exchange proposes to amend paragraph (f)(1) to state that a Supplemental Peg Order may have a TIF instruction of PRE, PTX, or PTD, in addition to GTD, GTX, RHO and Day. III. Discussion and Commission Findings After careful consideration, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\32\ The Commission believes that the proposed rule change, as modified by Amendment No. 1, is consistent with Section 6(b)(5) \33\ 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, 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. --------------------------------------------------------------------------- \32\ In approving this rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \33\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange proposes to adopt an Early Trading Session and three new TIF instructions and to make related changes to its rules as discussed above.\34\ The Commission believes that the proposed rules would provide Users with additional options for trading on the Exchange. The Commission notes that the proposed Early Trading Session hours are similar to those of other exchanges \35\ and that the proposed TIF instructions would offer functionality similar to existing functionality available on the Exchange and other exchanges which allows Members to select when their orders become eligible for execution.\36\ --------------------------------------------------------------------------- \34\ See supra section II. \35\ For example, NYSE Arca, Inc. operates an Opening Session that starts at 4:00 a.m. Eastern Time and ends at 9:30 a.m. Eastern Time and Nasdaq Stock Market LLC operates a pre-market session that also opens at 4:00 a.m. and ends at 9:30 a.m. Eastern Time. See NYSE Arca Rule 7.34(a)(1); Nasdaq Rule 4701(g); see also Securities Exchange Act Release No. 60605 (September 1, 2009), 74 FR 46277 (September 8, 2009) (SR-CHX-2009-13) (adopting bifurcated post- trading session on the Chicago Stock Exchange, Inc.). \36\ Specifically, on the Exchange, Users may enter an order starting at 6:00 a.m. Eastern Time with a TIF of Regular Hours Only, which designates that the order only be eligible for execution during Regular Trading Hours, which begin at 9:30 a.m. Eastern Time. See Exchange Rule 11.6(q)(6); see also NASDAQ Rule 4703(a)(7). --------------------------------------------------------------------------- The Commission notes that the Exchange has represented that it would subject orders that are eligible for execution as of the start of the Pre-Opening Session to all of the Exchange's standard regulatory checks, as it currently does with all orders upon entry.\37\ Specifically, the Exchange will subject such orders to checks for compliance with, including but not limited to, Regulation NMS,\38\ Regulation SHO,\39\ and relevant Exchange rules. Moreover, the Exchange reminds its Members of their regulatory obligations when submitting an order with one of the proposed TIF instructions.\40\ In particular, the Exchange states that Members must comply with the Market Access Rule,\41\ which requires, among other things, pre-trade controls and procedures that are reasonably designed to assure compliance with Exchange trading rules and Commission rules pursuant to Regulation SHO and Regulation NMS. The Exchange also notes that a Member's procedures must be reasonably designed to ensure compliance with the applicable regulatory requirements, not just at the time the order is routed to the Exchange, but also at the time the order becomes eligible for execution.\42\ --------------------------------------------------------------------------- \37\ See Amendment No. 1, supra note 4. \38\ See 17 CFR 242.600-613. \39\ See 17 CFR 242.200-204. \40\ See Notice, supra note 5, at 8811. \41\ See 17 CFR 240.15c3-5. \42\ See Notice, supra note 5, at 8811. --------------------------------------------------------------------------- The Commission further notes the Exchange's discussion of the best execution obligations of Members utilizing the proposed TIF instructions.\43\ Specifically, the Exchange states that a Member's best execution obligations may include cancelling an order when market conditions deteriorate and could result in an inferior execution or informing customers if the execution of their order may be delayed intentionally while the Member utilizes reasonable diligence to ascertain the best market for the security.\44\ The Exchange further notes that Members will maintain the ability to cancel or modify the terms of an order utilizing any of the proposed TIF instructions at any time, including during the time from when the order is routed to the Exchange until the start of the Pre-Opening Session. As a result, the Exchange states that a Member who utilizes the proposed TIF instructions, but later determines that market conditions favor execution during the Early Trading Session, can cancel the order residing at the Exchange and enter a separate order to execute during the Early Trading Session.\45\ --------------------------------------------------------------------------- \43\ See id. at 8810-11. \44\ Id. at 8810 n.45. \45\ Id. at. 8810. --------------------------------------------------------------------------- IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act \46\ that the proposed rule change (SR-EDGX-2016-06), as modified by Amendment No. 1, be, and it hereby is, approved. --------------------------------------------------------------------------- \46\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\47\ --------------------------------------------------------------------------- \47\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-08302 Filed 4-11-16; 8:45 am] BILLING CODE 8011-01-P
![21632 Federal Register / Vol. 81, No. 70 / Tuesday, April 12, 2016 / Notices
B. Self-Regulatory Organization’s Paper Comments SECURITIES AND EXCHANGE
Statement on Burden on Competition COMMISSION
• Send paper comments in triplicate
The Exchange does not believe that to Secretary, Securities and Exchange [Release No. 34–77538; File No. SR–EDGX–
the proposed rule change will impose 2016–06]
Commission, 100 F Street NE.,
any burden on competition not
necessary or appropriate in furtherance Washington, DC 20549–1090. Self-Regulatory Organizations; EDGX
of the purposes of the Act. This minor All submissions should refer to File Exchange, Inc.; Order Approving
correction does not impact competition. Number SR–Phlx–2016–44. This file Proposed Rule Change, as Modified by
number should be included on the Amendment No. 1 Thereto, To Adopt
C. Self-Regulatory Organization’s an Early Trading Session and Three
Statement on Comments on the subject line if email is used. To help the
Commission process and review your New Time-In-Force Instructions
Proposed Rule Change Received From
Members, Participants, or Others comments more efficiently, please use April 6, 2016.
No written comments were either only one method. The Commission will
post all comments on the Commission’s I. Introduction
solicited or received.
Internet Web site (http://www.sec.gov/ On February 2, 2016, EDGX Exchange,
III. Date of Effectiveness of the rules/sro.shtml). Copies of the Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed
Proposed Rule Change and Timing for submission, all subsequent with the Securities and Exchange
Commission Action amendments, all written statements Commission (the ‘‘Commission’’),
Because the foregoing proposed rule with respect to the proposed rule pursuant to Section 19(b)(1) 1 of the
change does not: (i) Significantly affect change that are filed with the Securities Exchange Act of 1934
the protection of investors or the public Commission, and all written (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 a
interest; (ii) impose any significant communications relating to the proposed rule change to amend its rules
burden on competition; and (iii) become to: (i) Create a new trading session to be
proposed rule change between the
operative for 30 days from the date on known as the Early Trading Session,
Commission and any person, other than
which it was filed, or such shorter time which will run from 7:00 a.m. to 8:00
those that may be withheld from the
as the Commission may designate, it has a.m. Eastern Time; and (ii) adopt three
public in accordance with the new Time-in-Force (‘‘TIF’’) instructions.
become effective pursuant to Section provisions of 5 U.S.C. 552, will be
19(b)(3)(A)(iii) of the Act 6 and On February 12, 2016, the Exchange
available for Web site viewing and filed Amendment No. 1 to the proposed
subparagraph (f)(6) of Rule 19b-4
thereunder.7 printing in the Commission’s Public rule change.4 The proposed rule change,
At any time within 60 days of the Reference Room, 100 F Street NE., as modified by Amendment No. 1
filing of the proposed rule change, the Washington, DC 20549, on official thereto, was published for comment in
Commission summarily may business days between the hours of the Federal Register on February 22,
temporarily suspend such rule change if 10:00 a.m. and 3:00 p.m. Copies of the 2016.5 The Commission received no
it appears to the Commission that such filing also will be available for comments on the proposed rule change.
action is: (i) Necessary or appropriate in inspection and copying at the principal This order approves the proposed rule
the public interest; (ii) for the protection office of the Exchange. All comments change, as modified by Amendment No.
of investors; or (iii) otherwise in received will be posted without change; 1.
furtherance of the purposes of the Act. the Commission does not edit personal II. Description of the Proposal
If the Commission takes such action, the identifying information from
Commission shall institute proceedings submissions. You should submit only The Exchange proposes to amend its
to determine whether the proposed rule information that you wish to make rules to: (i) Create a new trading session,
should be approved or disapproved. available publicly. All submissions the Early Trading Session, which will
run from 7:00 a.m. to 8:00 a.m. Eastern
IV. Solicitation of Comments should refer to File Number SR–Phlx–
Time; and (ii) adopt three new TIF
Interested persons are invited to 2016–44 and should be submitted on or
instructions.6
submit written data, views, and before May 3, 2016.
arguments concerning the foregoing, For the Commission, by the Division of
A. Early Trading Session
including whether the proposed rule Trading and Markets, pursuant to delegated The Exchange trading day is currently
change is consistent with the Act. authority.8 divided into three sessions: (i) The Pre-
Comments may be submitted by any of Robert W. Errett, Opening Session which starts at 8:00
the following methods: Deputy Secretary.
a.m. and ends at 9:30 a.m. Eastern Time;
(ii) Regular Trading Hours which runs
Electronic Comments [FR Doc. 2016–08305 Filed 4–11–16; 8:45 am]
from 9:30 a.m. to 4:00 p.m. Eastern
• Use the Commission’s Internet BILLING CODE 8011–01–P Time; and (iii) the Post-Closing Session,
comment form (http://www.sec.gov/ which runs from 4:00 p.m. to 8:00 p.m.
rules/sro.shtml); or
• Send an email to rule-comments@ 1 15 U.S.C. 78s(b)(1).
sec.gov. Please include File Number SR– 2 15 U.S.C. 78a.
Phlx–2016–44 on the subject line. 3 17 CFR 240.19b–4.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
4 In Amendment No. 1, the Exchange noted that
6 15 U.S.C. 78s(b)(3)(a)(iii). it would subject orders that are eligible for
7 17 CFR 240.19b–4(f)(6). In addition, Rule 19b- execution at the start of the Pre-Opening Session to
4(f)(6) requires a self-regulatory organization to give all of the Exchange’s standard regulatory checks,
the Commission written notice of its intent to file including compliance with Regulation NMS,
the proposed rule change at least five business days Regulation SHO as well as other relevant Exchange
prior to the date of filing of the proposed rule rules.
5 See Securities Exchange Act Release No. 77142
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this (February 16, 2016), 81 FR 8806 (‘‘Notice’’).
requirement. 8 17 CFR 200.30–3(a)(12). 6 See Notice, supra note 5.
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![Federal Register / Vol. 81, No. 70 / Tuesday, April 12, 2016 / Notices 21635
• MidPoint Peg Orders. Exchange with additional options for trading on instructions.43 Specifically, the
Rule 11.8(d)(1) describes the TIF the Exchange. The Commission notes Exchange states that a Member’s best
instructions that may be attached to a that the proposed Early Trading Session execution obligations may include
MidPoint Peg Order. The Exchange hours are similar to those of other cancelling an order when market
proposes to amend paragraph (d)(1) to exchanges 35 and that the proposed TIF conditions deteriorate and could result
state that a MidPoint Peg Order may instructions would offer functionality in an inferior execution or informing
have a TIF instruction of PRE, PTX, or similar to existing functionality customers if the execution of their order
PTD, in addition to Day, FOK, IOC, available on the Exchange and other may be delayed intentionally while the
RHO, GTX and GTD. exchanges which allows Members to Member utilizes reasonable diligence to
• Market Maker Peg Orders. The select when their orders become eligible ascertain the best market for the
proposed TIF instruction of PRE, PTX, for execution.36 security.44 The Exchange further notes
and PTD would not be available to The Commission notes that the that Members will maintain the ability
Market Maker Peg Orders. Under Exchange has represented that it would to cancel or modify the terms of an
Exchange Rule 11.8(e)(4), a Market subject orders that are eligible for order utilizing any of the proposed TIF
Maker Peg Order may only include a execution as of the start of the Pre- instructions at any time, including
TIF instruction of Day, RHO, or GTD. Opening Session to all of the Exchange’s during the time from when the order is
• Supplemental Peg. Exchange Rule standard regulatory checks, as it routed to the Exchange until the start of
11.8(f)(1) describes the TIF instructions currently does with all orders upon the Pre-Opening Session. As a result,
that may be attached to a Supplemental entry.37 Specifically, the Exchange will the Exchange states that a Member who
Peg Order. The Exchange proposes to subject such orders to checks for utilizes the proposed TIF instructions,
amend paragraph (f)(1) to state that a compliance with, including but not but later determines that market
Supplemental Peg Order may have a TIF limited to, Regulation NMS,38 conditions favor execution during the
instruction of PRE, PTX, or PTD, in Regulation SHO,39 and relevant Early Trading Session, can cancel the
addition to GTD, GTX, RHO and Day. Exchange rules. Moreover, the Exchange order residing at the Exchange and enter
reminds its Members of their regulatory a separate order to execute during the
III. Discussion and Commission obligations when submitting an order Early Trading Session.45
Findings with one of the proposed TIF
instructions.40 In particular, the IV. Conclusion
After careful consideration, the
Commission finds that the proposed Exchange states that Members must It is therefore ordered, pursuant to
rule change, as modified by Amendment comply with the Market Access Rule,41 Section 19(b)(2) of the Act 46 that the
No. 1, is consistent with the which requires, among other things, pre- proposed rule change (SR–EDGX–2016–
requirements of the Act and the rules trade controls and procedures that are 06), as modified by Amendment No. 1,
and regulations thereunder applicable to reasonably designed to assure be, and it hereby is, approved.
a national securities exchange.32 The compliance with Exchange trading rules For the Commission, by the Division of
Commission believes that the proposed and Commission rules pursuant to Trading and Markets, pursuant to delegated
rule change, as modified by Amendment Regulation SHO and Regulation NMS. authority.47
No. 1, is consistent with Section The Exchange also notes that a Robert W. Errett,
6(b)(5) 33 in particular, in that it is Member’s procedures must be Deputy Secretary.
designed to prevent fraudulent and reasonably designed to ensure [FR Doc. 2016–08302 Filed 4–11–16; 8:45 am]
manipulative acts and practices, to compliance with the applicable BILLING CODE 8011–01–P
promote just and equitable principles of regulatory requirements, not just at the
trade, to foster cooperation and time the order is routed to the Exchange,
coordination with persons engaged in but also at the time the order becomes SECURITIES AND EXCHANGE
facilitating transactions in securities, to eligible for execution.42 COMMISSION
remove impediments to and perfect the The Commission further notes the
mechanism of a free and open market Exchange’s discussion of the best Sunshine Act Meeting
and a national market system, and, in execution obligations of Members
utilizing the proposed TIF Notice is hereby given, pursuant to
general, to protect investors and the the provisions of the Government in the
public interest. 35 For example, NYSE Arca, Inc. operates an Sunshine Act, Public Law 94–409, that
The Exchange proposes to adopt an Opening Session that starts at 4:00 a.m. Eastern the Securities and Exchange
Early Trading Session and three new Time and ends at 9:30 a.m. Eastern Time and Commission Investor Advisory
TIF instructions and to make related Nasdaq Stock Market LLC operates a pre-market Committee will hold a meeting on
changes to its rules as discussed session that also opens at 4:00 a.m. and ends at 9:30
a.m. Eastern Time. See NYSE Arca Rule 7.34(a)(1); Thursday, April 14, 2016, in Multi-
above.34 The Commission believes that Nasdaq Rule 4701(g); see also Securities Exchange Purpose Room LL–006 at the
the proposed rules would provide Users Act Release No. 60605 (September 1, 2009), 74 FR Commission’s headquarters, 100 F
46277 (September 8, 2009) (SR–CHX–2009–13) Street NE., Washington, DC. The
or Price Adjust instruction will remove contra-side (adopting bifurcated post-trading session on the
Chicago Stock Exchange, Inc.). meeting will begin at 9:30 a.m. (ET) and
liquidity from the EDGX Book if the order is an
order to buy or sell a security priced below $1.00
36 Specifically, on the Exchange, Users may enter will be open to the public. Seating will
or if the value of such execution when removing an order starting at 6:00 a.m. Eastern Time with a be on a first-come, first-served basis.
liquidity equals or exceeds the value of such TIF of Regular Hours Only, which designates that Doors will open at 9:00 a.m. Visitors
asabaliauskas on DSK3SPTVN1PROD with NOTICES
execution if the order instead posted to the EDGX the order only be eligible for execution during
Regular Trading Hours, which begin at 9:30 a.m.
will be subject to security checks. The
Book and subsequently provided liquidity, meeting will be webcast on the
including the applicable fees charged or rebates Eastern Time. See Exchange Rule 11.6(q)(6); see
provided. also NASDAQ Rule 4703(a)(7). Commission’s Web site at www.sec.gov.
37 See Amendment No. 1, supra note 4.
32 In approving this rule change, the Commission
38 See 17 CFR 242.600–613. 43 See id. at 8810–11.
notes that it has considered the proposed rule’s
39 See 17 CFR 242.200–204. 44 Id. at 8810 n.45.
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f). 40 See Notice, supra note 5, at 8811. 45 Id. at. 8810.
33 15 U.S.C. 78f(b)(5). 41 See 17 CFR 240.15c3–5. 46 15 U.S.C. 78s(b)(2).
34 See supra section II. 42 See Notice, supra note 5, at 8811. 47 17 CFR 200.30–3(a)(12).
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Document Created: 2016-04-12 00:46:30
Document Modified: 2016-04-12 00:46:30
| 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 21632 |
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