81 FR 35415 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 7.31P(e) Regarding ALO Orders

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 106 (June 2, 2016)

Page Range		35415-35419
FR Document		2016-12891
Federal Register, Volume 81 Issue 106 (Thursday, June 2, 2016)
[Federal Register Volume 81, Number 106 (Thursday, June 2, 2016)]
[Notices]
[Pages 35415-35419]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-12891]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77934; File No. SR-NYSEArca-2016-80]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Rule 7.31P(e) Regarding ALO Orders

May 26, 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 May 24, 2016, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 7.31P(e) 
(Orders and Modifiers) regarding ALO Orders. The proposed rule change 
is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend NYSE Arca Equities Rule 7.31P(e) 
(``Rule 7.31P'') regarding ALO Orders. These proposed changes would 
revise how ALO Orders would price and trade on the Pillar trading 
platform only.
    Overview
    Currently, an arriving ALO Order will trade only if its limit price 
crosses the working price of a non-displayed order, which for purposes 
of ALO Orders only, includes a displayed odd-lot sized order priced 
better than the Best Bid (BB) or Best Offer (BO).\4\ An arriving ALO 
Order will not trade with the BB or BO, even if such trade would 
provide price improvement to the ALO Order. In addition, an arriving 
ALO Order that would lock the BB or BO on the NYSE Arca Marketplace 
will be assigned a working price and display price one minimum price 
variation (``MPV'')

[[Page 35416]]

worse than the BB or BO.\5\ Because displayed odd lot orders are not 
considered the BB or BO, an arriving ALO Order to buy with a limit 
price equal to a resting displayed odd lot order to sell would lock the 
odd lot order's displayed price on the Exchange's book.\6\
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    \4\ See Rule 7.31P(e)(2)(C) (defining nondisplayed order(s) as 
sell (buy) orders priced below (above) the BO (BB)). The Exchange is 
proposing a clarifying amendment to Rule 1.1(h) to specify that the 
term ``BBO'' means the best bid or offer that is a protected 
quotation, which is defined in Rule 1.1(eee) as having the same 
meaning as that term is defined in Regulation NMS, on the NYSE Arca 
Marketplace. Adding the phrase ``that is a protected quotation'' 
clarifies that the terms BBO, BB, and BO does not include odd lots 
that do not aggregate to a round lot or more. The term ``NYSE Arca 
Marketplace'' is defined in Rule 1.1(e) as the electronic securities 
communications and trading facility designated by the Board of 
Directors through which orders of Users are consolidated for 
execution and/or display.
    \5\ See Rule 7.6 (Trading Differentials) (defining the MPV for 
quoting and entry of orders in securities traded on the NYSE Arca 
Marketplace).
    \6\ See Rule 7.31P(e)(2)(C)(ii).
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    The Exchange proposes to make two substantive changes to how ALO 
Orders would operate on Pillar:
     An ALO Order that crosses the working price of any 
displayed or non-displayed orders would trade with the resting 
order(s); and
     An ALO Order that locks the price of any-sized display 
order would be re-priced.
    The Exchange believes that these proposed changes would simplify 
the display and execution of ALO Orders on Pillar by applying 
consistent treatment of how such orders would behave. Specifically, an 
ALO Order would trade regardless of whether it crosses the price of 
displayed or non-displayed interest and would be re-priced regardless 
of whether it locks the price of a round lot or odd lot displayed 
interest. The Exchange further believes that the proposed changes would 
harmonize the behavior of ALO Orders on the Exchange with the operation 
of similar orders on other exchanges.\7\
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    \7\ See, e.g., BATS BZX Exchange, Inc. (``BZX'') Rules 
11.9(c)(6) (BZX Post Only Order removes contraside liquidity if the 
trade provides price improvement to the arriving BZX Post Only 
Order) and Nasdaq Stock Market LLC (``Nasdaq'') Rule 4702(b)(4)(A) 
(Post-Only Order that locks or crosses an order on the Nasdaq Book 
will be either repriced or trade if it receives price improvement).
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Proposed Rule Change
    To effect the rule change, the Exchange proposes to delete current 
Rules 7.31P(e)(2)(B)(i) and (B)(ii) and 7.31P(e)(2)(C), (C)(i), and 
(C)(ii) and add new subparagraphs (i)-(iv) to Rule 7.31P(e)(2)(B) that 
would merge the concepts currently set forth in Rules 7.31P(e)(2)(B) 
and (C). The Exchange also proposes to move text from current Rule 
7.31P(e)(B)(iii) and (iv) to new subsection (C), with proposed 
modifications described below. The proposed amendments would include 
both the substantive changes described above and non-substantive 
clarifying changes.
    The Exchange proposes to amend Rule 7.31P(e)(2)(B) to describe how 
ALO Orders to buy (sell) that, at the time of entry, are marketable 
against an order of any size on the NYSE Arca Book or would lock or 
cross a protected quotation, in violation of Rule 610(d) of Regulation 
NMS, would be priced and trade. The Exchange proposes to replace the 
phrase ``the BO (BB)'' in the current rule with the phrase ``an order 
of any size to sell (buy) on the NYSE Arca Book'' to change the scope 
of Rule 7.31P(e)(2)(B) to describe how an ALO Order would be priced and 
executed when marketable against any displayed and non-displayed orders 
on the NYSE Arca Book, and not only when marketable against the BO or 
BB. The Exchange also proposes to add the clause ``or trade, or both'' 
to the current rule to specify that this section of the rule would 
address not only how an ALO Order is priced, but also how it may trade, 
or both.
    Proposed new Rule 7.31P(e)(2)(B)(i) would provide that if there are 
no displayed or non-displayed orders on the NYSE Arca Book priced equal 
to or better than the PBO (PBB),\8\ the ALO Order to buy (sell) would 
have a working price equal to the PBO (PBB) and a display price one MPV 
below (above) the PBO (PBB). Current Rule 7.31P(e)(2)(B)(i) provides 
that if the BO (BB) is higher (lower) than the PBO (PBB), the ALO Order 
to buy (sell) will have a working price of the PBO (PBB) and a display 
price one MPV below (above) the PBO (PBB). The Exchange's proposal 
would mean that an ALO Order would have a working price at the PBO 
(PBB) and a display price one MPV worse than the PBO (PBB) if there are 
any orders on the NYSE Arca Book, even if those orders are undisplayed 
or odd lot orders and thus not part of the BO (BB).
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    \8\ See Rule 1.1(dd) (defining the terms ``Best Protected Bid'' 
or ``PBB'' as the highest Protected Bid and ``Best Protected Offer'' 
or ``PBO'' as the lowest Protected Offer).
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    Proposed new Rule 7.31P(e)(2)(B)(ii) would provide that if the 
limit price of the ALO Order to buy (sell) crosses the working price of 
any displayed or non-displayed order on the NYSE Arca Book priced equal 
to or better than the PBO (PBB), it would trade as the liquidity taker 
with such order(s). This proposed rule combines the text currently set 
forth in Rule 7.31P(e)(2)(C)(i), which provides that an ALO Order will 
trade as the liquidity taker if it crosses the working price of a non-
displayed order, with the proposed substantive change that an ALO Order 
would also trade if it crosses the price of a displayed order. This 
proposed amendment would also include a substantive change that if the 
price of an ALO Order crosses non-displayed interest priced equal to 
the Exchange's BBO, the ALO Order would trade. This proposed rule text 
differs from current Rule 7.31P(e)(2) because currently, an ALO Order 
would trade with non-displayed interest only if it is priced better 
than the BBO. The Exchange proposes to make this change because the 
participant sending the ALO Order would get the benefit of potential 
price improvement without trading through the PBBO.\9\
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    \9\ For all securities priced over $1.00, the price improvement 
that an ALO Order would receive for trading with an order under the 
proposed rule would be greater than any fee for trading as the 
liquidity taker. While this may not be true for all transactions for 
securities priced under $1.00, the Exchange proposes to apply 
consistent behavior to how an ALO Order trades, regardless of the 
fees that would be charged.
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    Because trading with both displayed and non-displayed orders would 
be addressed in this proposed rule text, the Exchange proposes to 
delete Rule 7.31P(e)(2)(C)(i), which addresses trading with non-
displayed orders only. The Exchange also proposes to add, for clarity, 
that any untraded quantity of the ALO Order would have a working price 
equal to the PBO (PBB) and a display price one MPV below (above) the 
PBO (PBB). This proposed rule text represents current functionality and 
clarifies that after trading with any interest that it crosses, the ALO 
Order would be priced consistent with proposed Rule 
7.31P(e)(2)(B)(i).\10\
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    \10\ For example, assume the PBO on an Away Market is 10.10 and 
the Exchange has an offer to sell 50 shares priced at 10.10 that is 
ranked Priority 2--Display Orders. An arriving ALO Order to buy 
priced at 10.11 for 200 shares would trade with the 50 share sell 
order at 10.10 and the remaining 150 shares of that ALO Order would 
be assigned a working price of 10.10 and a display price of 10.09.
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    Proposed Rule 7.31P(e)(2)(B)(iii) would provide that if the limit 
price of the ALO Order locks the display price of any order ranked 
Priority 2--Display Orders on the NYSE Arca Book priced equal to or 
better than the PBO (PBB), it would be assigned a working price and 
display price one MPV worse than the price of the displayed order on 
the NYSE Arca Book.\11\ This proposed rule text is based, in part, on 
current Rule 7.31P(e)(2)(B)(ii), which provides that if the BO (BB) is 
equal to the PBO (PBB), an ALO Order to buy (sell) will have a working 
price and display price one MPV below (above) the PBO (PBB). By 
proposing to refer to any order ranked Priority 2--Display Orders, the 
new rule would include the substantive change that the Exchange would 
re-price an ALO Order that locks a display order of

[[Page 35417]]

any size, including an odd-lot order.\12\ Because the proposed rule is 
inclusive of how an ALO order would be priced if it locks the BB or BO, 
the Exchange proposes to delete current Rule 7.31P(e)(2)(B)(ii).
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    \11\ For example, assume the PBO is 10.10 and the Exchange has 
an odd-lot order to sell ranked Priority 2--Display Order priced at 
10.09. An ALO Order to buy priced at 10.09 that locks the price of 
the odd-lot order to sell would be assigned a working price and 
display price of 10.08.
    \12\ See Rule 7.36P(b)(1) (Odd-lot sized Limit Orders and the 
displayed portion of a Reserve Orders are considered displayed for 
ranking purposes) and 7.36P(e)(2) (Priority 2--Display Orders 
defined as non-marketable Limit Orders with a displayed working 
price).
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    Proposed Rule 7.31P(e)(2)(B)(iv) would provide that if the limit 
price of the ALO Order locks the working price of any order ranked 
Priority 3--Non-Display Orders \13\ on the NYSE Arca Book priced equal 
to or better than the PBO (PBB), it would be assigned a working price 
equal to the PBO (PBB) and a display price one MPV below (above) the 
PBO (PBB). This proposed rule text is based on current Rule 
7.31P(e)(2)(C)(ii), which provides that if the limit price of the ALO 
Order to buy (sell) is equal to the working price of resting non-
displayed order(s) to sell (buy), it will post to the NYSE Arca Book 
and will not trade with such order(s). By referring to orders ranked 
Priority 3--Non-Display Orders rather than ``non-displayed orders,'' 
proposed Rule 7.31P(e)(2)(B)(iv) would not re-price ALO Orders when 
they lock the working price of displayed odd lot orders. This 
represents a substantive change from current Rule 7.31P(e)(2)(C), which 
re-prices ALO Orders when they lock the working price of displayed odd 
lot orders because such orders are not included in the BO or BB. In 
addition, the proposed rule text would specify how the ALO Order would 
be priced when it locks the non-displayed order, which is how an ALO 
Order would be priced currently, i.e., if the resting non-displayed 
order to sell (buy) equals the PBO (PBB), the ALO Order to buy (sell) 
would be priced as provided for in proposed Rule 7.31P(e)(2)(B)(i).
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    \13\ See Rule 7.36P(e)(3) (Priority 3--Non-Display Orders 
defined as Non-marketable Limit Orders for which the working price 
is not displayed, including reserve interest of Reserve Orders).
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    Proposed Rule 7.31P(e)(2)(B)(iv)(a) would further provide that if 
there are any displayed orders at the working price of an order ranked 
Priority 3--Non-Display Orders, the ALO Order would be re-priced under 
proposed Rule 7.31P(e)(2)(B)(iii). This proposed rule text clarifies 
that if an ALO locks both displayed and non-displayed orders at the 
same price, the rule governing re-pricing ALO Orders off of the resting 
displayed order trumps displaying the ALO at the locking price.
    Proposed Rule 7.31P(e)(2)(B)(iv)(b) would provide that if the 
resting order(s) is a Limit Non-Displayed Order or an Arca Only Order 
to sell (buy) that has been designated with a Non-Display Remove 
Modifier, the ALO Order will trade with such order(s) as the liquidity 
provider.\14\ This rule text is based on the second clause of current 
Rule 7.31P(e)(2)(C)(ii) with a clarifying, non-substantive change that 
in such case, the ALO Order would be considered the liquidity 
provider.\15\ Because ETP Holders have the option to include a Non-
Display Remove Modifier on Arca Only or Limit Non-Displayed Orders, and 
therefore such orders could be eligible to trade with an arriving ALO 
Order, absent such designation, if such orders are locked by an ALO 
Order, they would not trade, even after the ALO Order rests on the 
book. The Exchange therefore proposes a clarifying amendment to specify 
that unless a resting order is designated with a Non-Display Remove 
Modifier, an ALO Order would trade only with arriving interest.\16\ 
This proposed clarifying amendment is consistent with the current rule 
governing MPL-ALO Orders on the Pillar trading platform.\17\
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    \14\ Because proposed Rule 7.31P(e)(2)(B)(iv) includes when an 
order ranked Priority 3--Non-Display Orders is priced equal to the 
contra-side PBBO, if the arriving ALO Order locks the price of 
contra-side PBBO, it would trade with a resting non-displayed order 
at that price that has been designated with the Non-Display Remove 
Modifier and any remaining quantity of the ALO Order would be priced 
consistent with proposed Rule 7.31P(e)(2)(B)(i).
    \15\ See also Rules 7.31P(d)(2)(B) (a Limit Non-Displayed Order 
designated with a Non-Display Remove Modifier will trade as the 
liquidity taker) and 7.31P(e)(1)(C) (an Arca Only Order designated 
with a Non-Display Remove Modifier will trade as the liquidity 
taker).
    \16\ For example, assume the PBO is 10.10 and the Exchange has a 
Limit Non-Displayed Order to sell at 10.09 for 100 shares (Order A) 
that does not include a Non-Display Remove Modifier. An arriving ALO 
Order to buy 200 shares priced at 10.09 will lock that Limit Non-
Displayed Order. Assume the Exchange now receives another Limit Non-
Display Order to sell priced at 10.09 for 100 shares (Order B). 
Order B, as an arriving order, will trade 100 shares with the ALO 
Order. The remaining 100 shares of the ALO Order will continue to 
lock Order A.
    \17\ See NYSE Arca Equities Rule 7.31P(d)(3)(F) (``A resting 
MPL-ALO Order to buy (sell) will trade with an arriving order to 
sell (buy) that is eligible to trade at the midpoint of the PBBO.'')
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    Proposed Rule 7.31P(e)(v) would provide that an ALO Order to buy 
(sell) would not be assigned a working price or display price above 
(below) the limit price of such order. This proposed rule change makes 
clear that an ALO Order would never be priced outside of its limit 
price, regardless of the contra-side PBBO or orders on the Exchange 
book. For example, if the limit price of an ALO Order is worse than the 
contra-side PBBO or orders ranked Priority 2--Display Orders, the ALO 
Order would be assigned a display price and working price of its limit 
price, and would not be priced based off of the PBBO or displayed 
orders on the NYSE Arca Book, as provided for in proposed Rule 
7.31P(e)(2)(B)(i)-(iv).
    Current Rules 7.31P(e)(2)(B)(iii) and (B)(iv) describe what happens 
to a resting ALO Order when the PBBO re-prices. The Exchange proposes 
to describe re-pricing of a resting ALO Order in a separate subsection 
by adding a new subsection (C) to Rule 7.31P(e)(2). The Exchange also 
proposes to specify that this section of the Rule would also address 
how a resting ALO Order may trade when the PBBO re-prices. New Rule 
7.31P(e)(2)(C) would provide that once resting on the NYSE Arca Book, 
an ALO Order would be re-priced or trade, or both, as set forth in 
Rules 7.31P(e)(2)(C)(i) and (ii).
    Proposed Rule 7.31P(e)(2)(C)(i) is based on current Rule 
7.31P(e)(2)(B)(iii), which provides that if the PBO (PBB) re-prices 
higher (lower), an ALO Order to buy (sell) will be assigned a new 
working price and display price consistent with current Rules 
7.31P(e)(2)(B)(i) and (ii). The Exchange proposes to amend the rule 
text to make the following two substantive changes, discussed above: 
(1) An ALO Order that locks a displayed odd-lot would be re-priced off 
of that odd lot, and (2) if the limit price of an ALO Order crosses the 
price of any order, it would trade. Accordingly, as proposed, Rule 
7.31P(e)(2)(C)(i) would provide that if orders ranked Priority 2--
Display Order or the PBO (PBB) re-prices to a worse price, the ALO 
Order would trade or be assigned a new working price and display price, 
or both, consistent with Rules 7.31P(e)(2)(B)(i)-(iv). In other words, 
with each such re-pricing of the displayed orders on the NYSE Arca Book 
or PBBO, the Exchange would re-evaluate whether the ALO should trade 
(e.g., if its limit price crosses any orders on the NYSE Arca Book) or 
be re-priced (e.g., if its limit price locks any displayed or non-
displayed orders on the NYSE Arca Book), or both.
    Proposed Rule 7.31P(e)(2)(C)(ii) is based on current Rule 
7.31P(e)(2)(B)(iv), which provides that if the PBO (PBB) re-prices to 
be equal to or lower (higher) than its last display price or if its 
limit price no longer locks or crosses the PBO (PBB), a resting ALO 
Order will be re-priced pursuant to Rule 7.31P(e)(1)(A)(iii) and (iv). 
The Exchange proposes a non-substantive clarifying change to replace 
the second reference to ``it'' with the phrase ``the ALO Order to buy 
(sell).''
    The Exchange proposes to amend the rules governing Day ISO ALOs to

[[Page 35418]]

conform to the proposed changes to ALO Orders discussed above. 
Specifically, the Exchange proposes to amend the second sentence of 
Rule 7.31P(e)(3)(D), which currently provides that a Day ISO ALO to buy 
(sell) that, at the time of entry, is marketable against the BO (BB) 
will not trade with orders on the NYSE Arca Book priced at the BO (BB) 
or higher (lower), but may trade through or lock or cross a protected 
quotation that was displayed at the time of arrival of the Day ISO ALO. 
Consistent with the changes to ALO Orders described above, the Exchange 
proposes to amend this second sentence to provide instead that an 
arriving Day ISO ALO to buy (sell) may trade through or lock or cross a 
protected quotation that was displayed at the time of arrival of the 
Day ISO ALO, and would be re-priced or trade, or both, as described in 
proposed Rules 7.31P(e)(3)(D)(i)-(iv).
    The Exchange proposes to delete current Rule 7.31P(e)(3)(D)(i) and 
replace it with proposed Rules 7.31P(e)(3)(D)(i)-(iii), which are based 
on proposed Rules 7.31P(e)(2)(B)(ii)-(iv). Proposed paragraphs 
(e)(3)(D)(i)-(iii), unlike proposed paragraphs (e)(2)(B)(ii)-(iv), will 
not refer to the PBBO because a Day ISO ALO may trade through or lock a 
protected quotation, as follows:
     Proposed Rule 7.31P(e)(3)(D)(i) would provide that if the 
limit price of the Day ISO ALO crosses the working price of any 
displayed or non-displayed order on the NYSE Arca Book, it would trade 
as the liquidity taker with such order(s). Any untraded quantity of the 
Day ISO ALO would have a working price and display price equal to its 
limit price.
     Proposed Rule 7.31P(e)(3)(D)(ii) would provide that if the 
limit price of the Day ISO ALO locks the display price of any order 
ranked Priority 2--Display Orders on the NYSE Arca Book, it would be 
assigned a working price and display price one MPV worse than the price 
of the displayed order on the NYSE Arca Book.
     Proposed Rule 7.31P(e)(3)(D)(iii) would provide that if 
the limit price of the Day ISO ALO locks the working price of any order 
ranked Priority 3--Non-Display Orders on the NYSE Arca Book, it would 
have a working price and display price equal to the limit price of the 
ALO Order. Similar to proposed Rule 7.31P(e)(2)(B)(iv)(a), proposed 
Rule 7.31P(e)(3)(D)(iii)(a) would provide that if there are any 
displayed orders at the working price of an order ranked Priority 3--
Non-Display Orders, the Day ISO ALO would be priced under proposed Rule 
7.31P(e)(3)(D)(ii). In addition, similar to proposed Rule 
7.31P(e)(2)(B)(iv)(b), if the resting order is a Non-Displayed Limit 
Order or Arca Only Order that has been designated with a Non-Display 
Remove Modifier, the Day ISO ALO would trade with such order(s) as the 
liquidity provider.
    Proposed Rule 7.31P(e)(3)(D)(iv) is based on current Rule 
7.31P(e)(3)(D)(ii), which provides that after being displayed, a Day 
ISO ALO will be re-priced and re-displayed or trade, or both, based on 
changes to orders ranked Priority 2--Display Orders or the PBO (PBB) 
consistent with paragraphs (e)(2)(B)(iii) and (iv) of this Rule. The 
Exchange proposes a non-substantive, clarifying amendment to replace 
the term ``it'' with the term ``a Day ISO ALO.'' The Exchange also 
proposes to update the cross references to provide that a Day ISO ALO 
would be re-priced and re-displayed based on changes to the PBO (PBB) 
consistent with Rule 7.31P(e)(2)(C)(i) and (ii).
* * * * *
    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce by Trader Update the 
implementation date.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\18\ in general, and 
furthers the objectives of Section 6(b)(5),\19\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system and, 
in general, to protect investors and the public interest.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that the proposed rule change 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system by simplifying the operation 
of ALO Orders on Pillar by applying consistent treatment of how an ALO 
Order would behave if it crosses the price of any displayed or non-
displayed interest (i.e., trade) or locks the price of any-sized 
displayed interest (i.e., re-price). Currently, an ALO Order trades on 
arrival if it would cross the price of non-displayed orders. The 
Exchange believes that the proposed substantive change to extend 
similar treatment when an ALO Order crosses the price of any displayed 
orders that are priced equal to or better than the PBBO would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because an ALO Order would have additional 
opportunities to receive price improvement. In addition, the Exchange 
believes that the proposed substantive change to re-price ALO Orders 
that lock the price of any-sized displayed orders would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system by eliminating the potential for an ALO Order 
to lock the price of a displayed odd lot order. The Exchange further 
believes that the two proposed substantive changes would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because they would harmonize the operation of 
ALO Orders with how similar orders function on other exchanges when the 
limit price of an ALO Order crosses the price of resting interest.\20\
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    \20\ See supra note 7.
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    The Exchange believes that the proposed non-substantive changes to 
the proposed rule would remove impediments to and perfect the mechanism 
of a free and open market and national market system by providing 
greater clarity to the rule text and re-organizing the rule text along 
similar functional lines. Finally, the Exchange believes that the 
proposed amendment to the definition of BBO would remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system because it would promote clarity in Exchange rules by 
specifying that the BBO is the Exchange's protected quotation, and 
therefore would not include odd lots that do not aggregate to a round 
lot or more.

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 Exchange believes that 
the proposed rule change would reduce the burden on competition for its 
ETP Holders because it would simplify the operation of ALO Orders on 
Pillar by applying consistent treatment of how an ALO Order would 
behave if it crosses the price of any displayed or non-displayed 
interest (i.e., trade) or locks the price of any-sized displayed 
interest (i.e., re-price). Currently, an ALO Order only trades if

[[Page 35419]]

it crosses a non-displayed order on the NYSE Arca Book. As proposed, 
ALO Orders would trade if the limit price of such order crosses any 
displayed or non-displayed orders on the NYSE Arca Book, thus providing 
for similar treatment regardless of whether the contra-side order is 
displayed or not. In addition, currently, an ALO Order is re-priced so 
it would not lock the price of the BO or BB. As proposed, the Exchange 
would provide for similar treatment so that an ALO Order would not lock 
the price of a displayed order of any size. The proposed rule change 
would further reduce the burden on competition for its ETP Holders by 
harmonizing the operation of ALO Orders with how similar orders 
function on other exchanges.\21\
---------------------------------------------------------------------------

    \21\ See supra note 7.
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \22\ and Rule 19b-4(f)(6) thereunder.\23\
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \24\ normally 
does not become operative for 30 days after the date of the filing. 
However Rule 19b-4(f)(6)(iii) \25\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has asked the 
Commission to waive the 30-day operative delay so that the proposal may 
become operative immediately upon filing. According to the Exchange, 
the proposed rule change would consistently treat ALO Orders if they 
cross the price of displayed or non-displayed interest (i.e., 
trade),\26\ which would increase the potential for price improvement 
for ALO Orders. Also, according to the Exchange, the proposed rule 
change would consistently treat ALO Orders if they lock the price of 
any-sized displayed interest (i.e., re-price), which would reduce the 
potential for ALO Orders to lock the displayed price of an odd lot 
order and therefore reduce confusion in the market. In addition, the 
Exchange states that it anticipates that it will be able to implement 
the technology changes supporting this proposed rule change in less 
than 30 days from the date of filing. The Commission believes the 
waiver of the operative delay is consistent with the protection of 
investors and the public interest. Therefore, the Commission hereby 
waives the operative delay and designates the proposal operative upon 
filing.\27\
---------------------------------------------------------------------------

    \24\ 17 CFR 240.19b-4(f)(6).
    \25\ 17 CFR 240.19b-4(f)(6)(iii).
    \26\ The Exchange states that this proposed change is based on 
the rules of BZX and Nasdaq. See supra note 7.
    \27\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEARCA-2016-80 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEARCA-2016-80. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEARCA-2016-80 and should 
be submitted on or before June 23, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
---------------------------------------------------------------------------

    \28\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-12891 Filed 6-1-16; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices 35415

III. Date of Effectiveness of the Commission and any person, other than (Orders and Modifiers) regarding ALO
Proposed Rule Change and Timing for those that may be withheld from the Orders. The proposed rule change is
Commission Action public in accordance with the available on the Exchange’s Web site at
The foregoing rule change is effective provisions of 5 U.S.C. 552, will be www.nyse.com, at the principal office of
upon filing pursuant to Section available for Web site viewing and the Exchange, and at the Commission’s
19(b)(3)(A) 20 of the Act and printing in the Commission’s Public Public Reference Room.
subparagraph (f)(2) of Rule 19b–4 21 Reference Room, 100 F Street NE.,
Washington, DC 20549 on official II. Self-Regulatory Organization’s
thereunder, because it establishes a due, Statement of the Purpose of, and
fee, or other charge imposed by the business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such Statutory Basis for, the Proposed Rule
Exchange.
At any time within 60 days of the filing also will be available for Change
filing of such proposed rule change, the inspection and copying at the principal
office of the Exchange. All comments In its filing with the Commission, the
Commission summarily may self-regulatory organization included
temporarily suspend such rule change if received will be posted without change;
the Commission does not edit personal statements concerning the purpose of,
it appears to the Commission that such and basis for, the proposed rule change
action is necessary or appropriate in the identifying information from
submissions. You should submit only and discussed any comments it received
public interest, for the protection of on the proposed rule change. The text
investors, or otherwise in furtherance of information that you wish to make
available publicly. All submissions of those statements may be examined at
the purposes of the Act. If the the places specified in Item IV below.
Commission takes such action, the should refer to File Number SR–
NYSEArca–2016–78, and should be The Exchange has prepared summaries,
Commission shall institute proceedings
submitted on or before June 23, 2016. set forth in sections A, B, and C below,
under Section 19(b)(2)(B) 22 of the Act to
of the most significant parts of such
determine whether the proposed rule For the Commission, by the Division of
statements.
change should be approved or Trading and Markets, pursuant to delegated
disapproved. authority.23 A. Self-Regulatory Organization’s
Brent J. Fields, Statement of the Purpose of, and the
IV. Solicitation of Comments
Secretary. Statutory Basis for, the Proposed Rule
Interested persons are invited to [FR Doc. 2016–12872 Filed 6–1–16; 8:45 am] Change
submit written data, views, and BILLING CODE 8011–01–P
arguments concerning the foregoing, 1. Purpose
including whether the proposed rule
change is consistent with the Act. The Exchange proposes to amend
SECURITIES AND EXCHANGE NYSE Arca Equities Rule 7.31P(e)
Comments may be submitted by any of COMMISSION
the following methods: (‘‘Rule 7.31P’’) regarding ALO Orders.
[Release No. 34–77934; File No. SR– These proposed changes would revise
Electronic Comments NYSEArca–2016–80] how ALO Orders would price and trade
• Use the Commission’s Internet on the Pillar trading platform only.
Self-Regulatory Organizations; NYSE
comment form (http://www.sec.gov/ Overview
Arca, Inc.; Notice of Filing and
rules/sro.shtml); or
• Send an email to rule-comments@ Immediate Effectiveness of Proposed Currently, an arriving ALO Order will
sec.gov. Please include File Number SR– Rule Change Amending NYSE Arca trade only if its limit price crosses the
NYSEArca–2016–78 on the subject line. Equities Rule 7.31P(e) Regarding ALO working price of a non-displayed order,
Orders which for purposes of ALO Orders only,
Paper Comments includes a displayed odd-lot sized order
May 26, 2016.
• Send paper comments in triplicate Pursuant to Section 19(b)(1) 1 of the
priced better than the Best Bid (BB) or
to Brent J. Fields, Secretary, Securities Best Offer (BO).4 An arriving ALO Order
Securities Exchange Act of 1934 (the
and Exchange Commission, 100 F Street will not trade with the BB or BO, even
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
NE., Washington, DC 20549–1090. if such trade would provide price
notice is hereby given that, on May 24,
All submissions should refer to File improvement to the ALO Order. In
2016, NYSE Arca, Inc. (the ‘‘Exchange’’
Number SR–NYSEArca–2016–78. This addition, an arriving ALO Order that
or ‘‘NYSE Arca’’) filed with the
file number should be included on the would lock the BB or BO on the NYSE
Securities and Exchange Commission
subject line if email is used. To help the Arca Marketplace will be assigned a
(the ‘‘Commission’’) the proposed rule
Commission process and review your working price and display price one
change as described in Items I and II
comments more efficiently, please use minimum price variation (‘‘MPV’’)
below, which Items have been prepared
only one method. The Commission will by the self-regulatory organization. The
post all comments on the Commission’s Commission is publishing this notice to
4 See Rule 7.31P(e)(2)(C) (defining nondisplayed

Internet Web site (http://www.sec.gov/ order(s) as sell (buy) orders priced below (above)
solicit comments on the proposed rule the BO (BB)). The Exchange is proposing a
rules/sro.shtml). Copies of the change from interested persons. clarifying amendment to Rule 1.1(h) to specify that
submission, all subsequent the term ‘‘BBO’’ means the best bid or offer that is
amendments, all written statements I. Self-Regulatory Organization’s a protected quotation, which is defined in Rule
Statement of the Terms of Substance of
asabaliauskas on DSK3SPTVN1PROD with NOTICES

with respect to the proposed rule 1.1(eee) as having the same meaning as that term
the Proposed Rule Change is defined in Regulation NMS, on the NYSE Arca
change that are filed with the Marketplace. Adding the phrase ‘‘that is a protected
Commission, and all written The Exchange proposes to amend quotation’’ clarifies that the terms BBO, BB, and BO
communications relating to the NYSE Arca Equities Rule 7.31P(e) does not include odd lots that do not aggregate to
proposed rule change between the a round lot or more. The term ‘‘NYSE Arca
23 17
Marketplace’’ is defined in Rule 1.1(e) as the
CFR 200.30–3(a)(12). electronic securities communications and trading
20 15 U.S.C. 78s(b)(3)(A). 1 15 U.S.C. 78s(b)(1). facility designated by the Board of Directors
21 17 CFR 240.19b–4(f)(2). 2 15 U.S.C. 78a.
through which orders of Users are consolidated for
22 15 U.S.C. 78s(b)(2)(B). 3 17 CFR 240.19b–4. execution and/or display.

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Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices 35417

any size, including an odd-lot order.12 order(s) is a Limit Non-Displayed Order be assigned a display price and working
Because the proposed rule is inclusive or an Arca Only Order to sell (buy) that price of its limit price, and would not
of how an ALO order would be priced has been designated with a Non-Display be priced based off of the PBBO or
if it locks the BB or BO, the Exchange Remove Modifier, the ALO Order will displayed orders on the NYSE Arca
proposes to delete current Rule trade with such order(s) as the liquidity Book, as provided for in proposed Rule
7.31P(e)(2)(B)(ii). provider.14 This rule text is based on the 7.31P(e)(2)(B)(i)–(iv).
Proposed Rule 7.31P(e)(2)(B)(iv) second clause of current Rule Current Rules 7.31P(e)(2)(B)(iii) and
would provide that if the limit price of 7.31P(e)(2)(C)(ii) with a clarifying, non- (B)(iv) describe what happens to a
the ALO Order locks the working price substantive change that in such case, the resting ALO Order when the PBBO re-
of any order ranked Priority 3—Non- ALO Order would be considered the prices. The Exchange proposes to
Display Orders 13 on the NYSE Arca liquidity provider.15 Because ETP describe re-pricing of a resting ALO
Book priced equal to or better than the Holders have the option to include a Order in a separate subsection by
PBO (PBB), it would be assigned a Non-Display Remove Modifier on Arca adding a new subsection (C) to Rule
working price equal to the PBO (PBB) Only or Limit Non-Displayed Orders, 7.31P(e)(2). The Exchange also proposes
and a display price one MPV below and therefore such orders could be to specify that this section of the Rule
(above) the PBO (PBB). This proposed eligible to trade with an arriving ALO would also address how a resting ALO
rule text is based on current Rule Order, absent such designation, if such Order may trade when the PBBO re-
7.31P(e)(2)(C)(ii), which provides that if orders are locked by an ALO Order, they prices. New Rule 7.31P(e)(2)(C) would
the limit price of the ALO Order to buy would not trade, even after the ALO provide that once resting on the NYSE
(sell) is equal to the working price of Order rests on the book. The Exchange Arca Book, an ALO Order would be re-
resting non-displayed order(s) to sell therefore proposes a clarifying priced or trade, or both, as set forth in
(buy), it will post to the NYSE Arca amendment to specify that unless a Rules 7.31P(e)(2)(C)(i) and (ii).
Book and will not trade with such resting order is designated with a Non- Proposed Rule 7.31P(e)(2)(C)(i) is
order(s). By referring to orders ranked Display Remove Modifier, an ALO based on current Rule 7.31P(e)(2)(B)(iii),
Priority 3—Non-Display Orders rather Order would trade only with arriving which provides that if the PBO (PBB) re-
than ‘‘non-displayed orders,’’ proposed interest.16 This proposed clarifying prices higher (lower), an ALO Order to
Rule 7.31P(e)(2)(B)(iv) would not re- amendment is consistent with the buy (sell) will be assigned a new
price ALO Orders when they lock the current rule governing MPL–ALO working price and display price
working price of displayed odd lot Orders on the Pillar trading platform.17 consistent with current Rules
orders. This represents a substantive Proposed Rule 7.31P(e)(v) would 7.31P(e)(2)(B)(i) and (ii). The Exchange
change from current Rule 7.31P(e)(2)(C), provide that an ALO Order to buy (sell) proposes to amend the rule text to make
which re-prices ALO Orders when they would not be assigned a working price the following two substantive changes,
or display price above (below) the limit discussed above: (1) An ALO Order that
lock the working price of displayed odd
price of such order. This proposed rule locks a displayed odd-lot would be re-
lot orders because such orders are not
change makes clear that an ALO Order priced off of that odd lot, and (2) if the
included in the BO or BB. In addition,
would never be priced outside of its limit price of an ALO Order crosses the
the proposed rule text would specify
limit price, regardless of the contra-side price of any order, it would trade.
how the ALO Order would be priced
PBBO or orders on the Exchange book. Accordingly, as proposed, Rule
when it locks the non-displayed order,
For example, if the limit price of an 7.31P(e)(2)(C)(i) would provide that if
which is how an ALO Order would be
ALO Order is worse than the contra-side orders ranked Priority 2—Display Order
priced currently, i.e., if the resting non-
PBBO or orders ranked Priority 2— or the PBO (PBB) re-prices to a worse
displayed order to sell (buy) equals the
Display Orders, the ALO Order would price, the ALO Order would trade or be
PBO (PBB), the ALO Order to buy (sell) assigned a new working price and
would be priced as provided for in 14 Because proposed Rule 7.31P(e)(2)(B)(iv) display price, or both, consistent with
proposed Rule 7.31P(e)(2)(B)(i). includes when an order ranked Priority 3—Non- Rules 7.31P(e)(2)(B)(i)–(iv). In other
Proposed Rule 7.31P(e)(2)(B)(iv)(a) Display Orders is priced equal to the contra-side
words, with each such re-pricing of the
would further provide that if there are PBBO, if the arriving ALO Order locks the price of
contra-side PBBO, it would trade with a resting displayed orders on the NYSE Arca
any displayed orders at the working non-displayed order at that price that has been Book or PBBO, the Exchange would re-
price of an order ranked Priority 3— designated with the Non-Display Remove Modifier evaluate whether the ALO should trade
Non-Display Orders, the ALO Order and any remaining quantity of the ALO Order
(e.g., if its limit price crosses any orders
would be re-priced under proposed Rule would be priced consistent with proposed Rule
7.31P(e)(2)(B)(i). on the NYSE Arca Book) or be re-priced
7.31P(e)(2)(B)(iii). This proposed rule 15 See also Rules 7.31P(d)(2)(B) (a Limit Non- (e.g., if its limit price locks any
text clarifies that if an ALO locks both Displayed Order designated with a Non-Display displayed or non-displayed orders on
displayed and non-displayed orders at Remove Modifier will trade as the liquidity taker)
the NYSE Arca Book), or both.
the same price, the rule governing re- and 7.31P(e)(1)(C) (an Arca Only Order designated
with a Non-Display Remove Modifier will trade as Proposed Rule 7.31P(e)(2)(C)(ii) is
pricing ALO Orders off of the resting the liquidity taker). based on current Rule 7.31P(e)(2)(B)(iv),
displayed order trumps displaying the 16 For example, assume the PBO is 10.10 and the which provides that if the PBO (PBB) re-
ALO at the locking price. Exchange has a Limit Non-Displayed Order to sell prices to be equal to or lower (higher)
Proposed Rule 7.31P(e)(2)(B)(iv)(b) at 10.09 for 100 shares (Order A) that does not
include a Non-Display Remove Modifier. An than its last display price or if its limit
would provide that if the resting arriving ALO Order to buy 200 shares priced at price no longer locks or crosses the PBO
(PBB), a resting ALO Order will be re-
asabaliauskas on DSK3SPTVN1PROD with NOTICES

10.09 will lock that Limit Non-Displayed Order.
12 See Rule 7.36P(b)(1) (Odd-lot sized Limit
Assume the Exchange now receives another Limit priced pursuant to Rule
Orders and the displayed portion of a Reserve Non-Display Order to sell priced at 10.09 for 100
Orders are considered displayed for ranking shares (Order B). Order B, as an arriving order, will 7.31P(e)(1)(A)(iii) and (iv). The
purposes) and 7.36P(e)(2) (Priority 2—Display trade 100 shares with the ALO Order. The Exchange proposes a non-substantive
Orders defined as non-marketable Limit Orders remaining 100 shares of the ALO Order will clarifying change to replace the second
with a displayed working price). continue to lock Order A.
13 See Rule 7.36P(e)(3) (Priority 3—Non-Display 17 See NYSE Arca Equities Rule 7.31P(d)(3)(F) (‘‘A
reference to ‘‘it’’ with the phrase ‘‘the
Orders defined as Non-marketable Limit Orders for resting MPL–ALO Order to buy (sell) will trade ALO Order to buy (sell).’’
which the working price is not displayed, including with an arriving order to sell (buy) that is eligible The Exchange proposes to amend the
reserve interest of Reserve Orders). to trade at the midpoint of the PBBO.’’) rules governing Day ISO ALOs to

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35418 Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices

conform to the proposed changes to addition, similar to proposed Rule Order crosses the price of any displayed
ALO Orders discussed above. 7.31P(e)(2)(B)(iv)(b), if the resting order orders that are priced equal to or better
Specifically, the Exchange proposes to is a Non-Displayed Limit Order or Arca than the PBBO would remove
amend the second sentence of Rule Only Order that has been designated impediments to and perfect the
7.31P(e)(3)(D), which currently provides with a Non-Display Remove Modifier, mechanism of a free and open market
that a Day ISO ALO to buy (sell) that, the Day ISO ALO would trade with such and a national market system because
at the time of entry, is marketable order(s) as the liquidity provider. an ALO Order would have additional
against the BO (BB) will not trade with Proposed Rule 7.31P(e)(3)(D)(iv) is opportunities to receive price
orders on the NYSE Arca Book priced at based on current Rule 7.31P(e)(3)(D)(ii), improvement. In addition, the Exchange
the BO (BB) or higher (lower), but may which provides that after being believes that the proposed substantive
trade through or lock or cross a displayed, a Day ISO ALO will be re- change to re-price ALO Orders that lock
protected quotation that was displayed priced and re-displayed or trade, or the price of any-sized displayed orders
at the time of arrival of the Day ISO both, based on changes to orders ranked would remove impediments to and
ALO. Consistent with the changes to Priority 2—Display Orders or the PBO perfect the mechanism of a free and
ALO Orders described above, the (PBB) consistent with paragraphs open market and a national market
Exchange proposes to amend this (e)(2)(B)(iii) and (iv) of this Rule. The system by eliminating the potential for
second sentence to provide instead that Exchange proposes a non-substantive, an ALO Order to lock the price of a
an arriving Day ISO ALO to buy (sell) clarifying amendment to replace the displayed odd lot order. The Exchange
may trade through or lock or cross a term ‘‘it’’ with the term ‘‘a Day ISO further believes that the two proposed
protected quotation that was displayed ALO.’’ The Exchange also proposes to substantive changes would remove
at the time of arrival of the Day ISO update the cross references to provide impediments to and perfect the
ALO, and would be re-priced or trade, that a Day ISO ALO would be re-priced mechanism of a free and open market
or both, as described in proposed Rules and re-displayed based on changes to and a national market system because
7.31P(e)(3)(D)(i)–(iv). the PBO (PBB) consistent with Rule they would harmonize the operation of
The Exchange proposes to delete 7.31P(e)(2)(C)(i) and (ii). ALO Orders with how similar orders
current Rule 7.31P(e)(3)(D)(i) and * * * * * function on other exchanges when the
replace it with proposed Rules Because of the technology changes limit price of an ALO Order crosses the
7.31P(e)(3)(D)(i)–(iii), which are based associated with this proposed rule price of resting interest.20
on proposed Rules 7.31P(e)(2)(B)(ii)– change, the Exchange will announce by The Exchange believes that the
(iv). Proposed paragraphs (e)(3)(D)(i)– Trader Update the implementation date. proposed non-substantive changes to
(iii), unlike proposed paragraphs the proposed rule would remove
(e)(2)(B)(ii)–(iv), will not refer to the 2. Statutory Basis impediments to and perfect the
PBBO because a Day ISO ALO may The proposed rule change is mechanism of a free and open market
trade through or lock a protected consistent with Section 6(b) of the and national market system by
quotation, as follows: Securities Exchange Act of 1934 (the providing greater clarity to the rule text
• Proposed Rule 7.31P(e)(3)(D)(i) ‘‘Act’’),18 in general, and furthers the and re-organizing the rule text along
would provide that if the limit price of objectives of Section 6(b)(5),19 in similar functional lines. Finally, the
the Day ISO ALO crosses the working particular, because it is designed to Exchange believes that the proposed
price of any displayed or non-displayed prevent fraudulent and manipulative amendment to the definition of BBO
order on the NYSE Arca Book, it would acts and practices, to promote just and would remove impediments to and
trade as the liquidity taker with such equitable principles of trade, to foster perfect the mechanism of a free and
order(s). Any untraded quantity of the cooperation and coordination with open market and a national market
Day ISO ALO would have a working persons engaged in facilitating system because it would promote clarity
price and display price equal to its limit transactions in securities, to remove in Exchange rules by specifying that the
price. impediments to, and perfect the BBO is the Exchange’s protected
• Proposed Rule 7.31P(e)(3)(D)(ii) mechanism of, a free and open market quotation, and therefore would not
would provide that if the limit price of and a national market system and, in include odd lots that do not aggregate to
the Day ISO ALO locks the display price general, to protect investors and the a round lot or more.
of any order ranked Priority 2—Display public interest.
Orders on the NYSE Arca Book, it Specifically, the Exchange believes B. Self-Regulatory Organization’s
would be assigned a working price and that the proposed rule change would Statement on Burden on Competition
display price one MPV worse than the remove impediments to and perfect the The Exchange does not believe that
price of the displayed order on the mechanism of a free and open market the proposed rule change will impose
NYSE Arca Book. and a national market system by any burden on competition that is not
• Proposed Rule 7.31P(e)(3)(D)(iii) simplifying the operation of ALO Orders necessary or appropriate in furtherance
would provide that if the limit price of on Pillar by applying consistent of the purposes of the Act. The
the Day ISO ALO locks the working treatment of how an ALO Order would Exchange believes that the proposed
price of any order ranked Priority 3— behave if it crosses the price of any rule change would reduce the burden on
Non-Display Orders on the NYSE Arca displayed or non-displayed interest (i.e., competition for its ETP Holders because
Book, it would have a working price and trade) or locks the price of any-sized it would simplify the operation of ALO
display price equal to the limit price of Orders on Pillar by applying consistent
asabaliauskas on DSK3SPTVN1PROD with NOTICES

displayed interest (i.e., re-price).
the ALO Order. Similar to proposed Currently, an ALO Order trades on treatment of how an ALO Order would
Rule 7.31P(e)(2)(B)(iv)(a), proposed Rule arrival if it would cross the price of non- behave if it crosses the price of any
7.31P(e)(3)(D)(iii)(a) would provide that displayed orders. The Exchange believes displayed or non-displayed interest (i.e.,
if there are any displayed orders at the that the proposed substantive change to trade) or locks the price of any-sized
working price of an order ranked extend similar treatment when an ALO displayed interest (i.e., re-price).
Priority 3—Non-Display Orders, the Day Currently, an ALO Order only trades if
ISO ALO would be priced under 18 15 U.S.C. 78f(b).
proposed Rule 7.31P(e)(3)(D)(ii). In 19 15 U.S.C. 78f(b)(5). 20 See supra note 7.

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it crosses a non-displayed order on the displayed interest (i.e., trade),26 which All submissions should refer to File
NYSE Arca Book. As proposed, ALO would increase the potential for price Number SR–NYSEARCA–2016–80. This
Orders would trade if the limit price of improvement for ALO Orders. Also, file number should be included on the
such order crosses any displayed or according to the Exchange, the proposed subject line if email is used. To help the
non-displayed orders on the NYSE Arca rule change would consistently treat Commission process and review your
Book, thus providing for similar ALO Orders if they lock the price of comments more efficiently, please use
treatment regardless of whether the any-sized displayed interest (i.e., re- only one method. The Commission will
contra-side order is displayed or not. In price), which would reduce the post all comments on the Commission’s
addition, currently, an ALO Order is re- potential for ALO Orders to lock the Internet Web site (http://www.sec.gov/
priced so it would not lock the price of displayed price of an odd lot order and rules/sro.shtml). Copies of the
the BO or BB. As proposed, the therefore reduce confusion in the submission, all subsequent
Exchange would provide for similar market. In addition, the Exchange states amendments, all written statements
treatment so that an ALO Order would that it anticipates that it will be able to with respect to the proposed rule
not lock the price of a displayed order implement the technology changes change that are filed with the
of any size. The proposed rule change supporting this proposed rule change in Commission, and all written
would further reduce the burden on less than 30 days from the date of filing. communications relating to the
competition for its ETP Holders by The Commission believes the waiver of proposed rule change between the
harmonizing the operation of ALO the operative delay is consistent with Commission and any person, other than
Orders with how similar orders function the protection of investors and the those that may be withheld from the
on other exchanges.21 public interest. Therefore, the public in accordance with the
Commission hereby waives the provisions of 5 U.S.C. 552, will be
C. Self-Regulatory Organization’s
operative delay and designates the available for Web site viewing and
Statement on Comments on the
proposal operative upon filing.27 printing in the Commission’s Public
Proposed Rule Change Received From
At any time within 60 days of the Reference Room, 100 F Street NE.,
Members, Participants, or Others
filing of such proposed rule change, the Washington, DC 20549 on official
No written comments were solicited business days between the hours of
Commission summarily may
or received with respect to the proposed 10:00 a.m. and 3:00 p.m. Copies of the
temporarily suspend such rule change if
rule change. filing also will be available for
it appears to the Commission that such
III. Date of Effectiveness of the action is necessary or appropriate in the inspection and copying at the principal
Proposed Rule Change and Timing for public interest, for the protection of office of the Exchange. All comments
Commission Action investors, or otherwise in furtherance of received will be posted without change;
the purposes of the Act. If the the Commission does not edit personal
Because the proposed rule change identifying information from
does not (i) significantly affect the Commission takes such action, the
Commission shall institute proceedings submissions. You should submit only
protection of investors or the public information that you wish to make
interest; (ii) impose any significant to determine whether the proposed rule
available publicly. All submissions
burden on competition; and (iii) become change should be approved or
should refer to File Number SR–
operative for 30 days from the date on disapproved.
NYSEARCA–2016–80 and should be
which it was filed, or such shorter time IV. Solicitation of Comments submitted on or before June 23, 2016.
as the Commission may designate, it has
become effective pursuant to Section Interested persons are invited to For the Commission, by the Division of
submit written data, views, and Trading and Markets, pursuant to delegated
19(b)(3)(A) of the Act 22 and Rule 19b– authority.28
4(f)(6) thereunder.23 arguments concerning the foregoing,
including whether the proposed rule Brent J. Fields,
A proposed rule change filed under
Rule 19b–4(f)(6) 24 normally does not change is consistent with the Act. Secretary.
become operative for 30 days after the Comments may be submitted by any of [FR Doc. 2016–12891 Filed 6–1–16; 8:45 am]
date of the filing. However Rule 19b– the following methods: BILLING CODE 8011–01–P
4(f)(6)(iii) 25 permits the Commission to
Electronic Comments
designate a shorter time if such action
is consistent with the protection of • Use the Commission’s Internet SECURITIES AND EXCHANGE
investors and the public interest. The comment form (http://www.sec.gov/ COMMISSION
Exchange has asked the Commission to rules/sro.shtml); or [Investment Company Act Release No.
waive the 30-day operative delay so that • Send an email to rule-comments@ 32127; 812–14399]
the proposal may become operative sec.gov. Please include File Number SR–
immediately upon filing. According to NYSEARCA–2016–80 on the subject Ares Capital Corporation, et al.; Notice
the Exchange, the proposed rule change line. of Application
would consistently treat ALO Orders if May 26, 2016.
they cross the price of displayed or non- Paper Comments
AGENCY: Securities and Exchange
• Send paper comments in triplicate Commission (‘‘Commission’’).
21 See supra note 7. to Brent J. Fields, Secretary, Securities ACTION: Notice of an application for an
22 15 U.S.C. 78s(b)(3)(A).
and Exchange Commission, 100 F Street
asabaliauskas on DSK3SPTVN1PROD with NOTICES

23 17 CFR 240.19b–4(f)(6). As required under Rule order under section 6(c) of the
19b–4(f)(6)(iii), the Exchange provided the
NE., Washington, DC 20549–1090. Investment Company Act of 1940 (the
Commission with written notice of its intent to file ‘‘Act’’) for an exemption from sections
the proposed rule change, along with a brief 26 The Exchange states that this proposed change
description and the text of the proposed rule
18(a) and 61(a) of the Act.
is based on the rules of BZX and Nasdaq. See supra
change, at least five business days prior to the date note 7.
of filing of the proposed rule change, or such 27 For purposes only of waiving the 30-day
Applicants: Ares Capital Corporation
shorter time as designated by the Commission. operative delay, the Commission has considered the (the ‘‘Company’’), Ares Capital
24 17 CFR 240.19b–4(f)(6).
proposed rule’s impact on efficiency, competition,
25 17 CFR 240.19b–4(f)(6)(iii). and capital formation. See 15 U.S.C. 78c(f). 28 17 CFR 200.30–3(a)(12).

VerDate Sep<11>2014 18:30 Jun 01, 2016 Jkt 238001 PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 E:\FR\FM\02JNN1.SGM 02JNN1
Document Created: 2016-06-02 01:23:09
Document Modified: 2016-06-02 01:23:09
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 35415