81_FR_23115 81 FR 23040 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 72-Equities Relating to Setting Interest

81 FR 23040 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 72-Equities Relating to Setting Interest

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 75 (April 19, 2016)

Page Range23040-23043
FR Document2016-08942

Federal Register, Volume 81 Issue 75 (Tuesday, April 19, 2016) 
[Federal Register Volume 81, Number 75 (Tuesday, April 19, 2016)]
[Notices]
[Pages 23040-23043]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-08942]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77605; File No. SR-NYSEMKT-2016-43]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 72--
Equities Relating to Setting Interest

April 13, 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 29, 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.
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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 Rule 72--Equities relating to 
setting interest. 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,

[[Page 23041]]

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 proposes to amend NYSE MKT Rule 72--Equities (``Rule 
72'') relating to setting interest to provide that interest that 
establishes a new Exchange best bid or offer (``BBO'') would be 
considered setting interest even if a Limit Order designated Add 
Liquidity Only (``ALO'') or sell short order during a Short Sale 
Period, as defined in Rule 440B(d)--Equities, is re-priced and 
displayed at the same price as such interest that became the Exchange 
BBO.
Background
    Under Rule 72(a)(ii), a bid or offer, including pegging interest, 
is considered the ``setting interest'' when it is established as the 
only displayable bid or offer made at a particular price and is the 
only displayable interest when such price is or becomes the Exchange 
BBO. Setting interest is entitled to priority for allocation of 
executions at that price, as provided for under Rule 72. If there is no 
setting interest, all interest is allocated on parity pursuant to Rule 
72(c).\4\
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    \4\ See Rule 72(c)(v).
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    In 2008, when the Exchange added the current form of Rule 72, 
current paragraph (a)(ii)(G) of the rule provided that if, at the time 
non-pegging interest becomes the Exchange BBO, an e-Quote is pegging to 
such non-pegging interest, all such interest was considered to be 
entered simultaneously and, therefore, no interest was considered the 
setting interest.\5\ Because the Exchange believed that permitting 
pegging e-Quotes to eliminate the priority to which a non-pegging e-
Quote might otherwise be entitled could disincentivize aggressive 
displayed quoting, the Exchange amended Rule 72(a)(ii)(G) to provide 
that non-pegging interest that becomes the Exchange BBO will be 
considered the setting interest even if an e-Quote is pegging to such 
non-pegging interest.\6\ The Exchange's goal in providing priority to 
setting interest was to create an incentive for participants to display 
aggressive prices. The Exchange amended Rule 72(a)(ii)(G) in 2011 
because it believed a participant may be reluctant to enter such 
displayed interest if a non-displayed pegging e-Quote could deny 
priority to such displayed interest.\7\ Because pegging interest cannot 
peg to other pegging interest, the current rule specifies that non-
pegging interest would retain priority if pegging interest is pegging 
to such non-pegging interest.
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    \5\ See Securities Exchange Act Release No. 59022 (Nov. 26, 
2008), 73 FR 73683 (Dec. 3, 2008) (SR-NYSEALTR-2008-10) (adopting 
the New York Stock Exchange LLC's New Market Model rules, including 
Rule 72). See also Rule 70--Equities (defining e-Quotes and d-
Quotes).
    \6\ See Securities Exchange Act Release No. 65884 (Dec. 5, 
2011), 76 FR 77038 (Dec. 9, 2011) (SR-NYSEAmex-2011-91) (Notice of 
filing and immediate effectiveness of proposed rule change amended 
Rule 72).
    \7\ Because the Exchange does not publicly identify interest as 
pegging interest that is eligible to re-price based on changes to 
the PBBO, a participant seeking to set the Exchange BBO would be 
unaware that one or more pegging interest could join it at the 
Exchange BBO.
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Proposed Rule Change
    The Exchange believes there are additional circumstances when 
orders that are re-priced due to an external pricing change may 
similarly disincentivize aggressive displayed quoting by permitting 
such re-priced interest to eliminate the setting priority to which non-
pegging interest may otherwise be entitled. For example, similar to 
pegging interest,\8\ which is re-priced based on changes to the PBBO, a 
Limit Order to buy (sell) designated ALO may be re-priced and re-
displayed based on changes to the best-priced sell (buy) interest at 
the Exchange.\9\ Likewise, sell short orders that are re-priced to a 
Permitted Price during a Short Sale Period may be re-priced and re-
displayed as the national best bid (``NBB'') moves.\10\ In both these 
scenarios, the participant sending aggressive display interest would be 
unaware that when it sets a new Exchange BBO, existing interest on the 
Exchange may be eligible to be re-priced to that new Exchange BBO 
price.
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    \8\ Pegging interest is defined in Rule 13(f)(1)--Equities as 
displayable or non-displayable interest to buy or sell at a price 
set to track the PBBO as the PBBO changes and must be an e-Quote or 
d-Quote.
    \9\ See Rule 13(e)(1)--Equities (defining ALO modifier) and 
Supplementary Material .10 to Rule 13--Equities (defining the term 
``best-priced sell (buy) interest'' to be the lowest-priced sell 
(highest-priced buy) interest against which incoming buy (sell) 
interest would be required to execute with and/or route to, 
including Exchange displayed offers, Non-Display Reserve Orders, 
Non-Display Reserve e-Quotes, odd-lot sized sell (buy) interest, and 
protected offers (bids) on away markets).
    \10\ See Rule 440B(e)--Equities.
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    For the same reason as the Exchange filed to change Rule 
72(a)(ii)(G) in 2011, the Exchange is proposing that Limit Orders 
designated ALO or sell short orders during a Short Sale Period that are 
re-priced and displayed based on changes to the best-priced sell (buy) 
interest or NBB would not deny priority to displayed interest that sets 
a new Exchange BBO. In addition, the Exchange proposes to amend Rule 
72(a)(ii)(G) to provide that if interest becomes the Exchange BBO, it 
would retain its priority (i.e., considered setting interest) even if 
pegging interest, Limit Orders designated ALO, or sell short orders 
during a Short Sale Period under Rule 440B(e) are re-priced and 
displayed at the same price as such interest. Finally, the Exchange 
proposes a non-substantive amendment to delete the cross-reference to 
Rule 13--Equities--Pegging Interest.
    The Exchange also proposes to amend Rule 72(a)(ii)(G) to reflect 
that any interest, and not just ``non-pegging'' interest, is eligible 
to be setting interest even if other interest re-prices and is 
displayed at the new Exchange BBO. As provided for in Rule 
13(f)(1)(B)(iii)--Equities, pegging interest may establish an Exchange 
BBO, which would occur if pegging interest pegs to a PBBO that is more 
aggressively priced than the Exchange's current BBO. For example, if 
the PBB is higher than the Exchange BB and the Exchange receives 
pegging interest to buy with a limit price equal to or higher than such 
PBB price, the pegging interest would peg to the PBB and be displayed 
as a new Exchange BB. If there were no other interest when the pegging 
interest establishes the Exchange BBO, such pegging interest would be 
entitled to priority under Rule 72(a)(ii).\11\ However, if more than 
one pegging interest is pegging to the PBBO and together they establish 
a new Exchange BBO, Rule 72(a)(ii) would not provide either pegging 
interest with priority. Current Rule 72(a)(ii)(G), which provides that 
``non-pegging interest'' is considered setting interest if it becomes 
the Exchange BBO, even if pegging interest is pegging to such non-
pegging interest, is consistent with Rule 72(a)(ii) because any such 
pegging interest would not be the only displayable interest.
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    \11\ Rule 72(a)(ii) explicitly includes pegging interest as 
being setting interest entitled to priority for allocation of 
executions, when such interest is established as the only 
displayable bid or offer made at a particular price and is the only 
displayable interest when such price is or becomes the Exchange BBO.
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    As discussed above, the Exchange proposes to amend Rule 
72(a)(ii)(G) to specify additional interest that could reprice without 
denying priority to interest that sets the Exchange BBO. As a result, 
such non-pegging interest could be repriced to join pegging interest 
that establishes the Exchange BBO and that otherwise would be entitled 
to be setting interest. The Exchange therefore proposes that if a 
single pegging interest establishes the BBO, it would be

[[Page 23042]]

entitled to priority even if a Limit Order designated ALO or short sale 
order during a Short Sale Period is re-priced and displayed at that 
same price. In such scenario, the pegging interest would be the 
aggressively-priced interest that established the new Exchange BBO, and 
other interest that re-prices at that price would be the reactive 
orders. Accordingly, to address such scenario, the Exchange proposes to 
change the references in Rule 72(a)(ii)(G) from ``non-pegging 
interest'' to ``interest.''
    Currently, in limited circumstances, Limit Orders designated ALO 
that are re-priced to a price other than its limit price to join 
interest that sets a new Exchange BBO do not deny priority to the 
interest that set the Exchange BBO.\12\ Because of technology changes 
associated with implementing this rule change for all circumstances 
when Limit Orders designated ALO and sell short orders during a Short 
Sale Period reprice to join interest that sets a new Exchange BBO, the 
Exchange will announce by Trader Update the full implementation of this 
proposed rule change.
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    \12\ See Trader Update dated February 17, 2016, available here: 
https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Trader_Update_Priority_Allocation.pdf.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\13\ in general, and 
furthers the objectives of Section 6(b)(5),\14\ 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. The Exchange 
believes that the proposed rule change meets these requirements because 
it would permit interest that sets a new Exchange BBO, including 
pegging interest that establishes an Exchange BBO, to be considered the 
setting interest and therefore retain priority, as provided for under 
Rule 72, over other interest that reacts and re-prices based on such 
interest setting a new Exchange BBO. The current rule already provides 
for non-pegging interest to retain priority if pegging interest pegs to 
such price, and the proposed rule change would afford similar treatment 
to any interest that establishes an Exchange BBO if pegging interest, 
Limit Orders designated ALO, or sell short orders during a Short Sale 
Period are re-priced and displayed at the same price as such interest. 
In addition, the proposed rule change is consistent with current rules 
in that it would allow for pegging interest that is entitled to be 
setting interest, as provided for in Rules 13(f)(1)(B)(iii)--Equities 
and 72(a)(ii), to retain priority if joined at that price by a Limit 
Order designated ALO or a sell short order during a Short Sale Period. 
Accordingly, the proposal is designed to incentivize and reward 
aggressive displayed quoting by market participants, which would remove 
impediments to and perfect the mechanism of a free and open market and 
national market system by contributing to the market quality of the 
Exchange and the national market system in general. In this regard, the 
Exchange believes that this proposed change would have positive impact 
on the Exchange's market, on the Exchange's members, and on investors 
generally by promoting the display of aggressively-priced liquidity on 
a registered exchange.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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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 promote the 
additional display of aggressively-priced liquidity on the Exchange by 
allowing interest that sets a new Exchange BBO to be considered setting 
interest even if other orders react and re-price based on such interest 
setting a new Exchange BBO.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \15\ and Rule 19b-4(f)(6) thereunder.\16\ 
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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \16\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\18\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
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    At any time within 60 days of the filing of such 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 under 
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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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-2016-43 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-NYSEMKT-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

[[Page 23043]]

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 information that you wish to make available 
publicly. All submissions should refer to File Number SR-NYSEMKT-2016-
43 and should be submitted on or before May 10, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08942 Filed 4-18-16; 8:45 am]
BILLING CODE 8011-01-P

23040 Federal Register / Vol. 81, No. 75 / Tuesday, April 19, 2016 / Notices particular venue to be excessive, or action is: (i) Necessary or appropriate in NASDAQ–2016–054, and should be rebate opportunities available at other the public interest; (ii) for the protection submitted on or before May 10, 2016. venues to be more favorable. of investors; or (iii) otherwise in For the Commission, by the Division of In such an environment, the Exchange furtherance of the purposes of the Act. Trading and Markets, pursuant to delegated must continually adjust its fees to If the Commission takes such action, the authority.12 remain competitive with other Commission shall institute proceedings Robert W. Errett, exchanges and with alternative trading to determine whether the proposed rule Deputy Secretary. systems that have been exempted from should be approved or disapproved. [FR Doc. 2016–08945 Filed 4–18–16; 8:45 am] compliance with the statutory standards applicable to exchanges. Because IV. Solicitation of Comments BILLING CODE 8011–01–P competitors are free to modify their own Interested persons are invited to fees in response, and because market submit written data, views, and SECURITIES AND EXCHANGE participants may readily adjust their arguments concerning the foregoing, COMMISSION order routing practices, the Exchange including whether the proposed rule believes that the degree to which fee change is consistent with the Act. [Release No. 34–77605; File No. SR– changes in this market may impose any Comments may be submitted by any of NYSEMKT–2016–43] burden on competition is extremely the following methods: Self-Regulatory Organizations; NYSE limited. MKT LLC; Notice of Filing and In this instance, the proposed new Electronic Comments Immediate Effectiveness of Proposed credit provided to a member for • Use the Commission’s Internet Rule Change Amending Rule 72— execution of securities of each of the comment form (http://www.sec.gov/ Equities Relating to Setting Interest three Tapes do [sic] not impose a rules/sro.shtml); or burden on competition because the • Send an email to rule-comments@ April 13, 2016. Exchange’s execution services are sec.gov. Please include File Number SR– Pursuant to Section 19(b)(1) 1 of the completely voluntary and subject to NASDAQ–2016–054 on the subject line. Securities Exchange Act of 1934 (the extensive competition both from other ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 exchanges and from off-exchange Paper Comments notice is hereby given that on March 29, venues. The proposed changes are • Send paper comments in triplicate 2016, NYSE MKT LLC (the ‘‘Exchange’’ designed to reward market-improving to Secretary, Securities and Exchange or ‘‘NYSE MKT’’) filed with the behavior by providing a new credit tier Commission, 100 F Street NE., Securities and Exchange Commission based on various measures of such Washington, DC 20549–1090. (the ‘‘Commission’’) the proposed rule behavior, which may encourage other All submissions should refer to File change as described in Items I, II, and market venues to provide similar credits Number SR–NASDAQ–2016–054. This III below, which Items have been to improve their market quality. Thus, file number should be included on the prepared by the self-regulatory the Exchange does not believe that the subject line if email is used. To help the organization. The Commission is proposed changes will impose any Commission process and review your publishing this notice to solicit burden on competition, but may rather comments more efficiently, please use comments on the proposed rule change promote competition. only one method. The Commission will from interested persons. In sum, if the changes proposed post all comments on the Commission’s herein are unattractive to market I. Self-Regulatory Organization’s Internet Web site (http://www.sec.gov/ Statement of the Terms of Substance of participants, it is likely that the rules/sro.shtml). Copies of the Exchange will lose market share as a the Proposed Rule Change submission, all subsequent result. Accordingly, the Exchange does amendments, all written statements The Exchange proposes to amend not believe that the proposed changes with respect to the proposed rule Rule 72—Equities relating to setting will impair the ability of members or change that are filed with the interest. The proposed rule change is competing order execution venues to Commission, and all written available on the Exchange’s Web site at maintain their competitive standing in communications relating to the www.nyse.com, at the principal office of the financial markets. proposed rule change between the the Exchange, and at the Commission’s Commission and any person, other than Public Reference Room. C. Self-Regulatory Organization’s Statement on Comments on the those that may be withheld from the II. Self-Regulatory Organization’s Proposed Rule Change Received From public in accordance with the Statement of the Purpose of, and Members, Participants, or Others provisions of 5 U.S.C. 552, will be Statutory Basis for, the Proposed Rule available for Web site viewing and Change No written comments were either printing in the Commission’s Public solicited or received. In its filing with the Commission, the Reference Room, 100 F Street NE., Washington, DC 20549 on official self-regulatory organization included III. Date of Effectiveness of the business days between the hours of statements concerning the purpose of, Proposed Rule Change and Timing for 10:00 a.m. and 3:00 p.m. Copies of such and basis for, the proposed rule change Commission Action filing also will be available for and discussed any comments it received The foregoing rule change has become on the proposed rule change. The text effective pursuant to Section inspection and copying at the principal offices of the Exchange. All comments of those statements may be examined at mstockstill on DSK4VPTVN1PROD with NOTICES 19(b)(3)(A)(ii) of the Act.11 the places specified in Item IV below. At any time within 60 days of the received will be posted without change; the Commission does not edit personal The Exchange has prepared summaries, filing of the proposed rule change, the set forth in sections A, B, and C below, Commission summarily may identifying information from temporarily suspend such rule change if submissions. You should submit only 12 17 CFR 200.30–3(a)(12). it appears to the Commission that such information that you wish to make 1 15 U.S.C. 78s(b)(1). available publicly. All submissions 2 15 U.S.C. 78a. 11 15 U.S.C. 78s(b)(3)(A)(ii). should refer to File Number SR– 3 17 CFR 240.19b–4. VerDate Sep<11>2014 18:02 Apr 18, 2016 Jkt 238001 PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 E:\FR\FM\19APN1.SGM 19APN1

Federal Register / Vol. 81, No. 75 / Tuesday, April 19, 2016 / Notices 23041 of the most significant parts of such interest was to create an incentive for Exchange BBO. In addition, the statements. participants to display aggressive prices. Exchange proposes to amend Rule The Exchange amended Rule 72(a)(ii)(G) 72(a)(ii)(G) to provide that if interest A. Self-Regulatory Organization’s in 2011 because it believed a participant becomes the Exchange BBO, it would Statement of the Purpose of, and the may be reluctant to enter such displayed retain its priority (i.e., considered Statutory Basis for, the Proposed Rule interest if a non-displayed pegging e- setting interest) even if pegging interest, Change Quote could deny priority to such Limit Orders designated ALO, or sell 1. Purpose displayed interest.7 Because pegging short orders during a Short Sale Period The Exchange proposes to amend interest cannot peg to other pegging under Rule 440B(e) are re-priced and NYSE MKT Rule 72—Equities (‘‘Rule interest, the current rule specifies that displayed at the same price as such 72’’) relating to setting interest to non-pegging interest would retain interest. Finally, the Exchange proposes provide that interest that establishes a priority if pegging interest is pegging to a non-substantive amendment to delete new Exchange best bid or offer (‘‘BBO’’) such non-pegging interest. the cross-reference to Rule 13— would be considered setting interest Equities—Pegging Interest. Proposed Rule Change The Exchange also proposes to amend even if a Limit Order designated Add The Exchange believes there are Rule 72(a)(ii)(G) to reflect that any Liquidity Only (‘‘ALO’’) or sell short additional circumstances when orders interest, and not just ‘‘non-pegging’’ order during a Short Sale Period, as that are re-priced due to an external interest, is eligible to be setting interest defined in Rule 440B(d)—Equities, is re- pricing change may similarly even if other interest re-prices and is priced and displayed at the same price disincentivize aggressive displayed displayed at the new Exchange BBO. As as such interest that became the quoting by permitting such re-priced provided for in Rule 13(f)(1)(B)(iii)— Exchange BBO. interest to eliminate the setting priority Equities, pegging interest may establish Background to which non-pegging interest may an Exchange BBO, which would occur Under Rule 72(a)(ii), a bid or offer, otherwise be entitled. For example, if pegging interest pegs to a PBBO that including pegging interest, is considered similar to pegging interest,8 which is re- is more aggressively priced than the the ‘‘setting interest’’ when it is priced based on changes to the PBBO, Exchange’s current BBO. For example, if established as the only displayable bid a Limit Order to buy (sell) designated the PBB is higher than the Exchange BB or offer made at a particular price and ALO may be re-priced and re-displayed and the Exchange receives pegging is the only displayable interest when based on changes to the best-priced sell interest to buy with a limit price equal such price is or becomes the Exchange (buy) interest at the Exchange.9 to or higher than such PBB price, the BBO. Setting interest is entitled to Likewise, sell short orders that are re- pegging interest would peg to the PBB priority for allocation of executions at priced to a Permitted Price during a and be displayed as a new Exchange BB. that price, as provided for under Rule Short Sale Period may be re-priced and If there were no other interest when the 72. If there is no setting interest, all re-displayed as the national best bid pegging interest establishes the interest is allocated on parity pursuant (‘‘NBB’’) moves.10 In both these Exchange BBO, such pegging interest to Rule 72(c).4 scenarios, the participant sending would be entitled to priority under Rule In 2008, when the Exchange added aggressive display interest would be 72(a)(ii).11 However, if more than one the current form of Rule 72, current unaware that when it sets a new pegging interest is pegging to the PBBO paragraph (a)(ii)(G) of the rule provided Exchange BBO, existing interest on the and together they establish a new that if, at the time non-pegging interest Exchange may be eligible to be re-priced Exchange BBO, Rule 72(a)(ii) would not becomes the Exchange BBO, an e-Quote to that new Exchange BBO price. provide either pegging interest with is pegging to such non-pegging interest, For the same reason as the Exchange priority. Current Rule 72(a)(ii)(G), which all such interest was considered to be filed to change Rule 72(a)(ii)(G) in 2011, provides that ‘‘non-pegging interest’’ is entered simultaneously and, therefore, the Exchange is proposing that Limit considered setting interest if it becomes no interest was considered the setting Orders designated ALO or sell short the Exchange BBO, even if pegging interest.5 Because the Exchange orders during a Short Sale Period that interest is pegging to such non-pegging believed that permitting pegging e- are re-priced and displayed based on interest, is consistent with Rule 72(a)(ii) Quotes to eliminate the priority to changes to the best-priced sell (buy) because any such pegging interest which a non-pegging e-Quote might interest or NBB would not deny priority would not be the only displayable otherwise be entitled could to displayed interest that sets a new interest. disincentivize aggressive displayed As discussed above, the Exchange 7 Because the Exchange does not publicly identify quoting, the Exchange amended Rule proposes to amend Rule 72(a)(ii)(G) to interest as pegging interest that is eligible to re-price 72(a)(ii)(G) to provide that non-pegging based on changes to the PBBO, a participant seeking specify additional interest that could interest that becomes the Exchange BBO to set the Exchange BBO would be unaware that one reprice without denying priority to will be considered the setting interest or more pegging interest could join it at the interest that sets the Exchange BBO. As Exchange BBO. a result, such non-pegging interest could even if an e-Quote is pegging to such 8 Pegging interest is defined in Rule 13(f)(1)— non-pegging interest.6 The Exchange’s Equities as displayable or non-displayable interest be repriced to join pegging interest that goal in providing priority to setting to buy or sell at a price set to track the PBBO as establishes the Exchange BBO and that the PBBO changes and must be an e-Quote or d- otherwise would be entitled to be 4 See Rule 72(c)(v). Quote. setting interest. The Exchange therefore 5 See 9 See Rule 13(e)(1)—Equities (defining ALO Securities Exchange Act Release No. 59022 proposes that if a single pegging interest modifier) and Supplementary Material .10 to Rule mstockstill on DSK4VPTVN1PROD with NOTICES (Nov. 26, 2008), 73 FR 73683 (Dec. 3, 2008) (SR– NYSEALTR–2008–10) (adopting the New York 13—Equities (defining the term ‘‘best-priced sell establishes the BBO, it would be Stock Exchange LLC’s New Market Model rules, (buy) interest’’ to be the lowest-priced sell (highest- including Rule 72). See also Rule 70—Equities priced buy) interest against which incoming buy 11 Rule 72(a)(ii) explicitly includes pegging (defining e-Quotes and d-Quotes). (sell) interest would be required to execute with interest as being setting interest entitled to priority 6 See Securities Exchange Act Release No. 65884 and/or route to, including Exchange displayed for allocation of executions, when such interest is (Dec. 5, 2011), 76 FR 77038 (Dec. 9, 2011) (SR– offers, Non-Display Reserve Orders, Non-Display established as the only displayable bid or offer NYSEAmex–2011–91) (Notice of filing and Reserve e-Quotes, odd-lot sized sell (buy) interest, made at a particular price and is the only immediate effectiveness of proposed rule change and protected offers (bids) on away markets). displayable interest when such price is or becomes amended Rule 72). 10 See Rule 440B(e)—Equities. the Exchange BBO. VerDate Sep<11>2014 18:02 Apr 18, 2016 Jkt 238001 PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 E:\FR\FM\19APN1.SGM 19APN1

23042 Federal Register / Vol. 81, No. 75 / Tuesday, April 19, 2016 / Notices entitled to priority even if a Limit Order similar treatment to any interest that investors or the public interest; (ii) designated ALO or short sale order establishes an Exchange BBO if pegging impose any significant burden on during a Short Sale Period is re-priced interest, Limit Orders designated ALO, competition; and (iii) become operative and displayed at that same price. In or sell short orders during a Short Sale prior to 30 days from the date on which such scenario, the pegging interest Period are re-priced and displayed at it was filed, or such shorter time as the would be the aggressively-priced the same price as such interest. In Commission may designate, if interest that established the new addition, the proposed rule change is consistent with the protection of Exchange BBO, and other interest that consistent with current rules in that it investors and the public interest, the re-prices at that price would be the would allow for pegging interest that is proposed rule change has become reactive orders. Accordingly, to address entitled to be setting interest, as effective pursuant to Section 19(b)(3)(A) such scenario, the Exchange proposes to provided for in Rules 13(f)(1)(B)(iii)— of the Act and Rule 19b–4(f)(6)(iii) change the references in Rule Equities and 72(a)(ii), to retain priority thereunder. 72(a)(ii)(G) from ‘‘non-pegging interest’’ if joined at that price by a Limit Order A proposed rule change filed under to ‘‘interest.’’ designated ALO or a sell short order Rule 19b–4(f)(6) 17 normally does not Currently, in limited circumstances, during a Short Sale Period. Accordingly, become operative prior to 30 days after Limit Orders designated ALO that are the proposal is designed to incentivize the date of the filing. However, pursuant re-priced to a price other than its limit and reward aggressive displayed to Rule 19b4(f)(6)(iii),18 the Commission price to join interest that sets a new quoting by market participants, which may designate a shorter time if such Exchange BBO do not deny priority to would remove impediments to and action is consistent with the protection the interest that set the Exchange BBO.12 perfect the mechanism of a free and of investors and the public interest. Because of technology changes open market and national market system At any time within 60 days of the associated with implementing this rule by contributing to the market quality of filing of such proposed rule change, the change for all circumstances when Limit the Exchange and the national market Commission summarily may Orders designated ALO and sell short system in general. In this regard, the temporarily suspend such rule change if orders during a Short Sale Period Exchange believes that this proposed it appears to the Commission that such reprice to join interest that sets a new change would have positive impact on action is necessary or appropriate in the Exchange BBO, the Exchange will the Exchange’s market, on the public interest, for the protection of announce by Trader Update the full Exchange’s members, and on investors investors, or otherwise in furtherance of implementation of this proposed rule generally by promoting the display of the purposes of the Act. If the change. aggressively-priced liquidity on a Commission takes such action, the 2. Statutory Basis registered exchange. Commission shall institute proceedings under Section 19(b)(2)(B) 19 of the Act to The proposed rule change is B. Self-Regulatory Organization’s determine whether the proposed rule consistent with Section 6(b) of the Statement on Burden on Competition change should be approved or Securities Exchange Act of 1934 (the The Exchange does not believe that disapproved. ‘‘Act’’),13 in general, and furthers the the proposed rule change will impose objectives of Section 6(b)(5),14 in any burden on competition that is not IV. Solicitation of Comments particular, because it is designed to necessary or appropriate in furtherance Interested persons are invited to prevent fraudulent and manipulative of the purposes of the Act. The submit written data, views, and acts and practices, to promote just and proposed change is not designed to arguments concerning the foregoing, equitable principles of trade, to foster address any competitive issue but rather including whether the proposed rule cooperation and coordination with to promote the additional display of change is consistent with the Act. persons engaged in facilitating aggressively-priced liquidity on the Comments may be submitted by any of transactions in securities, to remove Exchange by allowing interest that sets the following methods: impediments to and perfect the a new Exchange BBO to be considered mechanism of a free and open market Electronic Comments setting interest even if other orders react and a national market system and, in and re-price based on such interest • Use the Commission’s Internet general, to protect investors and the comment form (http://www.sec.gov/ setting a new Exchange BBO. public interest. The Exchange believes rules/sro.shtml); or that the proposed rule change meets C. Self-Regulatory Organization’s • Send an email to rule-comments@ these requirements because it would Statement on Comments on the sec.gov. Please include File Number SR– permit interest that sets a new Exchange Proposed Rule Change Received From NYSEMKT–2016–43 on the subject line. BBO, including pegging interest that Members, Participants, or Others establishes an Exchange BBO, to be Paper Comments No written comments were solicited considered the setting interest and or received with respect to the proposed • Send paper comments in triplicate therefore retain priority, as provided for rule change. to Brent J. Fields, Secretary, Securities under Rule 72, over other interest that and Exchange Commission, 100 F Street reacts and re-prices based on such III. Date of Effectiveness of the NE., Washington, DC 20549–1090. interest setting a new Exchange BBO. Proposed Rule Change and Timing for All submissions should refer to File The current rule already provides for Commission Action Number SR–NYSEMKT–2016–43. This non-pegging interest to retain priority if The Exchange has filed the proposed file number should be included on the mstockstill on DSK4VPTVN1PROD with NOTICES pegging interest pegs to such price, and rule change pursuant to Section subject line if email is used. To help the the proposed rule change would afford 19(b)(3)(A)(iii) of the Act 15 and Rule Commission process and review your 19b–4(f)(6) thereunder.16 Because the comments more efficiently, please use 12 See Trader Update dated February 17, 2016, proposed rule change does not: (i) only one method. The Commission will available here: https://www.nyse.com/publicdocs/ nyse/markets/nyse/NYSE_Trader_Update_Priority_ Significantly affect the protection of Allocation.pdf. 17 17 CFR 240.19b–4(f)(6). 13 15 U.S.C. 78f(b). 15 15 U.S.C. 78s(b)(3)(A)(iii). 18 17 CFR 240.19b–4(f)(6)(iii). 14 15 U.S.C. 78f(b)(5). 16 17 CFR 240.19b–4(f)(6). 19 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 18:02 Apr 18, 2016 Jkt 238001 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 E:\FR\FM\19APN1.SGM 19APN1

Federal Register / Vol. 81, No. 75 / Tuesday, April 19, 2016 / Notices 23043 post all comments on the Commission’s proposed rule change as described in only apply to credits in transactions in Internet Web site (http://www.sec.gov/ Items I, II, and III below, which Items securities priced $1.00 or more. rules/sro.shtml). Copies of the have been prepared by the self- The Exchange also proposes to submission, all subsequent regulatory organization. The eliminate the fee for additional amendments, all written statements Commission is publishing this notice to electronic copies of the Merged Order with respect to the proposed rule solicit comments on the proposed rule Report. change that are filed with the change from interested persons. The Exchange proposes to implement Commission, and all written these changes effective April 1, 2016. communications relating to the I. Self-Regulatory Organization’s proposed rule change between the Statement of the Terms of Substance of Charges for Removing Liquidity Commission and any person, other than the Proposed Rule Change The Exchange currently charges a fee those that may be withheld from the The Exchange proposes to amend its of $0.00275 for non-Floor broker public in accordance with the Price List for equity transactions in transactions that remove liquidity from provisions of 5 U.S.C. 552, will be stocks with a per share stock price more the Exchange, including those of DMMs. available for Web site viewing and than $1.00 to (1) add a new default The Exchange proposes to retain this printing in the Commission’s Public charge for transactions that remove charge and introduce a slightly higher Reference Room, 100 F Street NE., liquidity from the Exchange; (2) make default charge of $0.0030 for non-Floor Washington, DC 20549 on official certain pricing changes applicable to broker transactions removing liquidity business days between the hours of Supplemental Liquidity Providers from the Exchange by member 10:00 a.m. and 3:00 p.m. Copies of the (‘‘SLPs’’) on the Exchange; and (3) organizations with an Adding ADV,4 filing also will be available for eliminate the fee for additional excluding any liquidity added by a inspection and copying at the principal electronic copies of the Merged Order DMM, of less than 250,000 ADV 5 on the office of the Exchange. All comments Report. The Exchange proposes to Exchange during the billing month. received will be posted without change; implement these changes to its Price the Commission does not edit personal Changes Applicable to SLPs List effective April 1, 2016. The identifying information from proposed rule change is available on the SLPs are eligible for certain credits submissions. You should submit only information Exchange’s Web site at www.nyse.com, when adding liquidity to the Exchange. that you wish to make available at the principal office of the Exchange, The amount of the credit is currently publicly. All submissions should refer on the Commission’s Web site at determined by the ‘‘tier’’ for which the to File Number SR–NYSEMKT–2016–43 http//www.sec.gov, and at the SLP qualifies, which is based on the and should be submitted on or before Commission’s Public Reference Room. SLP’s level of quoting and ADV of May 10, 2016. liquidity added by the SLP in assigned II. Self-Regulatory Organization’s securities. For the Commission, by the Division of Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Currently, SLP Tier 3 provides that Trading and Markets, pursuant to delegated authority.20 Change when adding liquidity to the NYSE in securities with a share price of $1.00 or Robert W. Errett, In its filing with the Commission, the more, an SLP is eligible for a credit of Deputy Secretary. self-regulatory organization included $0.0023 per share traded if the SLP (1) [FR Doc. 2016–08942 Filed 4–18–16; 8:45 am] meets the 10% average or more quoting statements concerning the purpose of, BILLING CODE 8011–01–P requirement in assigned securities and basis for, the proposed rule change and discussed any comments it received pursuant to Rule 107B and (2) adds on the proposed rule change. The text liquidity for assigned SLP securities in SECURITIES AND EXCHANGE the aggregate 6 of an ADV of more than COMMISSION of those statements may be examined at the places specified in Item IV below. 0.20% of NYSE consolidated ADV [Release No. 34–77604; File No. SR–NYSE– The Exchange has prepared summaries, (‘‘CADV’’),7 or with respect to an SLP 2016–29] set forth in sections A, B, and C below, that is also a DMM and subject to Rule of the most significant parts of such 107B(i)(2)(a),8 more than 0.15% of Self-Regulatory Organizations; New statements. York Stock Exchange LLC; Notice of 4 ‘‘Adding ADV’’ is when a member organization Filing and Immediate Effectiveness of A. Self-Regulatory Organization’s has ADV that adds liquidity to the Exchange during Proposed Rule Change Amending Its Statement of the Purpose of, and the the billing month. Adding ADV excludes any Price List for Equity Transactions in Statutory Basis for, the Proposed Rule liquidity added by a Designated Market Maker. 5 The defined term, ‘‘ADV,’’ is used here as Stocks With a per Share Stock Price Change defined in footnote 2 to the Price List. More Than $1.00 1. Purpose 6 Under Rule 107B, an SLP can be either a April 13, 2016. proprietary trading unit of a member organization The Exchange proposes to amend its (‘‘SLP-Prop’’) or a registered market maker at the Pursuant to Section 19(b)(1) 1 of the Exchange (‘‘SLMM’’). For purposes of the 10% Securities Exchange Act of 1934 (the Price List to (1) add a new default average or more quoting requirement in assigned ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 charge for transactions removing securities pursuant to Rule 107B, quotes of an SLP- notice is hereby given that, on March liquidity from the Exchange for member Prop and an SLMM of the same member firms whose adding liquidity falls below organization are not aggregated. However, for 31, 2016, New York Stock Exchange purposes of adding liquidity for assigned SLP mstockstill on DSK4VPTVN1PROD with NOTICES LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed a specified threshold; and (2) add a new securities in the aggregate, shares of both an SLP- with the Securities and Exchange SLP Tier 1A; lower the credits for Non- Prop and an SLMM of the same member Commission (the ‘‘Commission’’) the Displayed Reserve Orders for existing organization are included. SLP Tiers 1 through 3; and, for SLPs 7 NYSE CADV is defined in the Price List as the that are also Designated Market Makers consolidated average daily volume of NYSE-listed 20 17 CFR 200.30–3(a)(12). securities. 1 15 U.S.C.78s(b)(1). (‘‘DMMs’’), replace the numeric 8 Rule 107B(i)(2)(A) prohibits a DMM from acting 2 15 U.S.C. 78a. benchmark for calculating tier-based as a SLP in the same securities in which it is a 3 17 CFR 240.19b–4. credits. The proposed changes would DMM. VerDate Sep<11>2014 18:02 Apr 18, 2016 Jkt 238001 PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 E:\FR\FM\19APN1.SGM 19APN1


Document Created: 2016-04-19 00:15:59
Document Modified: 2016-04-19 00:15:59
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation81 FR 23040 
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