81 FR 38747 - Self-Regulatory Organizations; New York Stock Exchange LLC; NYSE MKT LLC; Notice of Filings of Amendment No. 1, and Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendment No. 1, To Provide for How the Exchanges Would Determine an Official Closing Price if the Exchanges Are Unable To Conduct a Closing Transaction
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 114 (June 14, 2016)
Federal Register Volume 81, Issue 114 (June 14, 2016)
| Page Range | 38747-38751 | |
| FR Document | 2016-13964 |
[Federal Register Volume 81, Number 114 (Tuesday, June 14, 2016)] [Notices] [Pages 38747-38751] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-13964] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78015; File Nos. SR-NYSE-2016-18; SR-NYSEMKT-2016-31] Self-Regulatory Organizations; New York Stock Exchange LLC; NYSE MKT LLC; Notice of Filings of Amendment No. 1, and Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendment No. 1, To Provide for How the Exchanges Would Determine an Official Closing Price if the Exchanges Are Unable To Conduct a Closing Transaction June 8, 2016. I. Introduction On March 2, 2016, New York Stock Exchange LLC (``NYSE'') and NYSE MKT LLC (``NYSE MKT'') (each an ``Exchange,'' and together the ``Exchanges'') each filed with the Securities and Exchange Commission (``Commission''), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend, respectively, NYSE Rule 123C and NYSE MKT Rule 123C--Equities (both hereinafter ``Rule 123C'') to provide for how each Exchange will determine an Official Closing Price if it is unable to conduct a closing transaction. The proposed rule changes were published for comment in the Federal Register on March 11, 2016.\3\ The Commission received one comment letter in response to the NYSE proposal.\4\ --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 77305 (March 7, 2016), 81 FR 12977 (SR-NYSE-2016-18) (``NYSE Notice''); Securities Exchange Act Release No. 77306 (March 7, 2016), 81 FR 12986 (SR- NYSEMKT-2016-31) (``MKT Notice''). The proposals are substantially similar and the Commission is hereby noticing the Amendments No. 1 and granting accelerated approval jointly. \4\ See Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, to Brent J. Fields, Secretary, Commission, dated April 5, 2016 (submitted to File No. SR-NYSE-2016-18) (``SIFMA Letter''). The Commission notes that this comment letter was also submitted in response to a similar filing by the Nasdaq Stock Market LLC. See Securities Exchange Act Release No. 77309 (March 7, 2016), 81 FR 13007 (March 11, 2016) (SR-NASDAQ-2016-035). --------------------------------------------------------------------------- On April 21, 2016, the Commission extended the time period within which to approve the proposed rule changes, disapprove the proposed rule changes, or institute proceedings to determine whether to disapprove the proposed rule changes, to June 9, 2016.\5\ On May [[Page 38748]] 26, 2016, NYSE submitted a response to the comment letter,\6\ and each Exchange filed an Amendment No. 1 to its proposal.\7\ The Commission is publishing this notice to solicit comments on the Amendments No. 1 from interested persons, and is approving the proposed rule changes, each as modified by its respective Amendment No. 1, on an accelerated basis. --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release Nos. 77677, 81 FR 24907 (April 27, 2016) (SR-NYSE-2016-18); 77676, 81 FR 24907 (April 27, 2016) (SR-NYSEMKT-2016-31). \6\ See Letter from Elizabeth K. King, General Counsel and Corporate Secretary, New York Stock Exchange, to Brent J. Fields, Secretary, Commission, dated May 26, 2016 (``NYSE Response Letter''). \7\ In its Amendment No. 1, each Exchange amended its proposed rule text to (1) add proposed Rule 123C(1)(e)(iv), which provides that, if the Exchange determines the Official Closing Price under Rule 123C(1)(e)(ii) or (e)(iii), the Exchange will publicly announce the manner by which it will determine its Official Closing Price and the designated alternate exchange, if applicable, and will cancel all open interest designated for the Exchange close; and (2) amend Rule 123C(1)(e)(i) to specify how the Exchange will determine the Official Closing Price for a security that has transferred its listing to the Exchange or is a new listing and does not have any last-sale eligible trades on the Exchange on its first day of trading on the Exchange. The Exchanges' respective Amendments No. 1 are available at: https://www.nyse.com/publicdocs/nyse/markets/nyse/rule-filings/filings/2016/NYSE-2016-18,%20Pt.%20Am.%201.pdf and https://www.nyse.com/publicdocs/nyse/markets/nyse-mkt/rule-filings/filings/2016/NYSEMKT-2016-31,%20Pt.%20Am.%201.pdf. --------------------------------------------------------------------------- II. Description of the Proposed Rule Changes Each Exchange proposes to amend its rules to specify closing contingency procedures for determining an Official Closing Price for its listed securities if it is unable to conduct a closing transaction in one or more securities due to a systems or technical issue. Specifically, each Exchange proposes to amend its Rule 123C to provide for how it would determine an Official Closing Price if it is impaired.\8\ --------------------------------------------------------------------------- \8\ According to the Exchanges, this proposal was developed in consultation with one another, their affiliated exchange, NYSE Arca, Inc. (``NYSE Arca''), and the NASDAQ Stock Market LLC (``Nasdaq''), and took into consideration feedback from discussions with industry participants. See NYSE Notice, supra note 3, at 12978; NYSE MKT Notice, supra note 3, at 12986. The Commission notes that the Nasdaq Stock Market LLC has also filed a similar proposed rule change with the Commission. See Securities Exchange Act Release No. 77309 (March 7, 2016), 81 FR 13007 (March 11, 2016) (SR-NASDAQ-2016-035). --------------------------------------------------------------------------- For each Exchange, under its current rules, the ``Official Closing Price'' of a security it lists is the price established in a closing transaction of one round lot or more.\9\ If there is no closing transaction in a security, or if a closing transaction is less than one round lot, the Official Closing Price will be the most-recent last- sale-eligible trade in that security on the Exchange on that trading day.\10\ Currently, if an Exchange is unable to conduct a closing transaction in a security due to a systems or technical issue, the Official Closing Price will be the last consolidated last-sale-eligible trade for that security during regular trading hours on that trading day, and if there were no such consolidated last-sale eligible trades, the Official Closing Price will be the prior day's Official Closing Price.\11\ --------------------------------------------------------------------------- \9\ See Rule 123C(1)(e)(i). See also Securities Exchange Act Release Nos. 76598 (Dec. 9, 2015), 80 FR 77688 (Dec. 15, 2015) (SR- NYSE-2015-62); 76601 (Dec. 9, 2015), 80 FR 77680 (Dec. 15, 2015) (SR-NYSEMKT-2015-98). \10\ See Rule 123C(1)(e)(i). \11\ See Rule 123C(1)(e)(ii). --------------------------------------------------------------------------- Each Exchange proposes to amend its Rule 123C(1)(e)(ii) to provide for a proposed new contingency plan for how it would determine an Official Closing Price if it is unable to conduct a closing transaction in a security due to a systems or technical issue.\12\ Each Exchange proposes that, if it determines at or before 3:00 p.m. Eastern Time that it is unable to conduct a closing transaction in one or more securities due to a systems or technical issue, it would designate an alternate exchange for those securities. The affected Exchange would publicly announce the exchange designated as the alternate exchange via Trader Update.\13\ In these circumstances, the Official Closing Price of each affected security on an Exchange would be determined based on the following hierarchy: --------------------------------------------------------------------------- \12\ Each Exchange states that, if it determines that it is impaired before 3:00 p.m. and the Official Closing Price for an Exchange-listed security is determined pursuant to proposed Rule 123C(1)(e)(ii), the SIP would publish the Official Closing Price for that security no differently than how the SIP publishes the Official Closing Price for an Exchange-listed security pursuant to current Rule 123C(1)(e)(i). See NYSE Notice, supra note 3, at 12979; NYSE MKT Notice, supra note 3, at 12987-88. Accordingly, if the Official Closing Price of a security is determined pursuant to proposed Rule 123C(1)(e)(ii), the Exchanges note that recipients of SIP data would not have to make any changes to their systems. See NYSE Notice, supra note 3, at 12979; NYSE MKT Notice, supra note 3, at 12987-88. \13\ See NYSE Notice, supra note 3, at 12978; NYSE MKT Notice, supra note 3, at 12987. The Exchanges represent that they expect to designate an affiliated exchange as the alternate exchange and would designate Nasdaq only if the affiliated exchanges were also impacted by the systems or technical issue. See NYSE Notice, supra note 3, at 12978 n.6; NYSE MKT Notice, supra note 3, at 12987 n.6. In its respective Amendment No. 1, each Exchange specified that this determination would be publicly announced and that, in the event of such a determination, all open interest designated for the Exchange close would be deemed canceled. See Amendments No. 1. ---------------------------------------------------------------------------The Official Closing Price would be the official closing price for that security under the rules of the designated alternate exchange.\14\ For example, if NYSE Arca is the designated alternate exchange, the Official Closing Price would be based on NYSE Arca Equities Rule 1.1(ggP), which defines how NYSE Arca establishes an official closing price.\15\ If Nasdaq were designated as the alternate exchange, the Official Closing Price would be the official closing price established in Nasdaq Rule 4754. --------------------------------------------------------------------------- \14\ See Proposed Rule 123C(1)(e)(ii)(A). \15\ According to the Exchanges, NYSE Arca will be filing a rule proposal to amend its Rule 1.1(ggP)(1) to provide that the manner by which NYSE Arca determines the Official Closing Price for securities listed on NYSE Arca would also be applicable to any securities for which NYSE Arca conducts a closing auction, including securities that trade on an unlisted-trading-privileges basis. See NYSE Notice, supra note 3, at 12978 n.7; NYSE MKT Notice, supra note 3, at 12987 n.7. --------------------------------------------------------------------------- If the designated alternate exchange does not have an official closing price in a security, the Official Closing Price would be the volume-weighted average price (``VWAP'') of the consolidated last-sale-eligible prices of the last five minutes of trading during regular trading hours up to the time that the VWAP is processed.\16\ The VWAP would include any closing transactions on an exchange and would take into account any trade breaks or corrections up to the time the VWAP is processed. --------------------------------------------------------------------------- \16\ See proposed Rule 123C(1)(e)(ii)(B). --------------------------------------------------------------------------- If the designated alternate exchange does not have an official closing price in a security and there were no consolidated last-sale eligible trades in the last five minutes of trading during regular trading hours in that security, the Official Closing Price would be the last consolidated last-sale-eligible trade during regular trading hours on that trading day.\17\ --------------------------------------------------------------------------- \17\ See proposed Rule 123C(1)(e)(ii)(C). --------------------------------------------------------------------------- If the designated alternate exchange does not have an official closing price in a security and there were no consolidated last-sale-eligible trades in a security on a trading day in that security, the Official Closing Price would be the prior day's Official Closing Price.\18\ --------------------------------------------------------------------------- \18\ See proposed Rule 123C(1)(e)(ii)(D). --------------------------------------------------------------------------- If an Official Closing Price for a security cannot be determined as provided above, and there is no prior day's Official Closing Price, the Exchange would not publish an Official Closing Price for that security.\19\ --------------------------------------------------------------------------- \19\ See proposed Rule 123C(1)(e)(ii)(E). --------------------------------------------------------------------------- In addition, each Exchange has proposed Rule 123C(1)(e)(iii) to describe how it would determine the Official Closing Price for a security if it determines after 3:00 p.m. Eastern Time that it is unable to conduct a closing transaction in one or more securities [[Page 38749]] due to a systems or technical issue.\20\ According to each Exchange, if an announcement were made after 3:00 p.m. Eastern Time that the Exchange was impaired and unable to conduct a closing transaction, market participants would not have sufficient time to re-direct closing-only orders to an alternate venue.\21\ Therefore, each Exchange proposes that the process for determining an Official Closing Price for a security under these circumstances would not contemplate a closing transaction on a designated alternate exchange. Accordingly, in such a scenario, each Exchange proposes to use the following hierarchy for determining the Official Closing Price for a security: --------------------------------------------------------------------------- \20\ Each Exchange states that, similar to how the Official Closing Price would be published under proposed Rule 123C(1)(e)(ii), if it determines that it is impaired after 3:00 p.m. and the Official Closing Price for a security is determined pursuant to proposed Rule 123C(1)(e)(iii), the SIP would publish the Official Closing Price for that security no differently than how the SIP publishes the Official Closing Price for an Exchange-listed security pursuant to current Rule 123C(1)(e)(i). See NYSE Notice, supra note 3, at 12980; NYSE MKT Notice, supra note 3, at 12988. Accordingly, if the Official Closing Price is determined pursuant to proposed Rule 123C(1)(e)(iii), the Exchanges note that recipients of SIP data would not have to make any changes to their systems. See NYSE Notice, supra note 3, at 12980; NYSE MKT Notice, supra note 3, at 12988. In its Amendment No. 1, each Exchange has specified that this determination would be publicly announced and that, in the event of such determination, all open interest designated for the Exchange close would be deemed canceled. See Amendment No. 1. \21\ See NYSE Notice, supra note 3, at 12979; NYSE MKT Notice, supra note 3, at 12988. --------------------------------------------------------------------------- The Official Closing Price would be the VWAP of the consolidated last-sale-eligible prices of the last five minutes of trading during regular trading hours up to the time that the VWAP is processed, including any closing transactions on an exchange.\22\ The VWAP would take into account any trade breaks or corrections up to the time the VWAP is processed. --------------------------------------------------------------------------- \22\ See proposed Rule 123C(1)(e)(iii)(A). --------------------------------------------------------------------------- If there were no consolidated last-sale eligible trades in the last five minutes of trading during regular trading hours in such security, the Official Closing Price would be the last consolidated last-sale-eligible trade during regular trading hours on that trading day.\23\ --------------------------------------------------------------------------- \23\ See proposed Rule 123C(1)(e)(iii)(B). --------------------------------------------------------------------------- If there were no consolidated last-sale-eligible trades in the security on a trading day, the Official Closing Price would be the prior day's Official Closing Price.\24\ --------------------------------------------------------------------------- \24\ See proposed Rule 123C(1)(e)(iii)(C). --------------------------------------------------------------------------- If an Official Closing Price for a security cannot be determined as provided above and there is no prior day's Official Closing Price, the Exchange would not publish an Official Closing Price for that security.\25\ --------------------------------------------------------------------------- \25\ See proposed Rule 123C(1)(e)(iii)(D). --------------------------------------------------------------------------- The Exchanges propose to implement the closing contingency procedures for determining an Official Closing Price no later than 120 days after approval, on a date to be announced via Trader Update.\26\ --------------------------------------------------------------------------- \26\ See NYSE Notice, supra note 3, at 12980; NYSE MKT Notice, supra note 3, at 12988. Each Exchange further notes that, under the proposed rule change, for purposes of NYSE Rule 440B(b) and NYSE MKT Rule 440B(b)--Equities, the Official Closing Price would continue to be determined based on Rule 123C and that, if the Exchange is impaired, the Official Closing Price as defined in proposed Rules 123C(1)(e)(ii) and (iii) would be used for purposes of determining whether a Short Sale Price Test is triggered in a security the next trading day. See NYSE Notice, supra note 3, at 12980; NYSE MKT Notice, supra note 3, at 12988. Each Exchange also proposes to specify in Rule 123C(1)(e)(i) that, for a security that has transferred its listing to the Exchange and does not have any last- sale-eligible trades on the Exchange on its first trading day, the Official Closing Price would be the prior day's closing price disseminated by the primary listing market that previously listed such security. See Amendments No. 1. In addition, for a new listing that does not have any last-sale eligible trades on an Exchange on its first trading day, the Official Closing Price would be based on a derived last sale associated with the price of that security before it begins trading. See id. --------------------------------------------------------------------------- III. Summary of Comments As noted above, the Commission received one comment letter on the NYSE proposal and a response letter from NYSE.\27\ The commenter generally supports the proposal but suggests certain modifications to the proposal.\28\ The Commission notes that, while this comment letter was submitted in response only to the NYSE proposal, the Exchanges' proposals are substantively similar and the comments raised are equally relevant to both. --------------------------------------------------------------------------- \27\ See SIFMA Letter, supra note 4; NYSE Response Letter, supra note 6. \28\ See SIFMA Letter, supra note 4, at 1. The commenter also encourages NYSE and Nasdaq to continue to work with industry participants on this issue and to refine the backup mechanism as a next step. See id. at 3. --------------------------------------------------------------------------- First, the commenter suggests that NYSE's rules should specify that any designation of an alternate exchange would be publicly announced at or before 3:00 p.m. and that the announcement would be made through the SIP feed in addition to any other forms of communication.\29\ According to the commenter, if a determination is made at 3:00 p.m., then the time between 3:00 p.m. and when member firms actually receive notice of the designation would cut into the time needed to re-direct closing interest to the designated alternate exchange.\30\ NYSE agreed with the commenter's suggestion that it should publicly announce the designation of an alternate exchange.\31\ As a result, each Exchange amended its proposal to specify that any designation of an alternate exchange will be publicly announced at or before 3:00 p.m.\32\ --------------------------------------------------------------------------- \29\ See id. at 2-3. \30\ See id. \31\ The public announcement of an alternate exchange designation, however, would not be disseminated through the SIP feed. \32\ See NYSE Response Letter, supra note 6, at 1. See also Amendments No. 1. --------------------------------------------------------------------------- Second, the commenter suggests that, if NYSE determines not to carry out its own closing transaction, it should expressly assume responsibility for the cancellation of all closing interest that NYSE has already received.\33\ According to the commenter, this would allow market participants to treat their closing interest as canceled even if they have not received an official notification of the cancellation.\34\ The commenter also suggests that NYSE's rules should state that the official closing transaction will be canceled once NYSE determines that it is unable to conduct its own closing transaction, so as to avoid uncertainty regarding whether NYSE might change course if it determines before 4:00 p.m. that it can, in fact, conduct its own closing transaction.\35\ NYSE agreed with the commenter's suggestion that it provide members with certainty that their open interest will not be executed if NYSE determines to employ the closing contingency procedures. As a result, each Exchange has amended its proposal to expressly state that it would cancel all open interest designated for the Exchange close if it determines to employ the closing contingency procedures.\36\ The Commission also notes that, under the proposals, once an Exchange publicly announces that it will employ the closing contingency procedures, it will not revert to its ordinary closing procedures, and the Official Closing Price would be determined according to the hierarchies discussed above.\37\ --------------------------------------------------------------------------- \33\ See SIFMA Letter, supra note 4, at 3. The commenter also asserts that, if NYSE executes the closing interest despite canceling the closing transaction, NYSE should be responsible under its own rules for any resulting losses to the member firms. See id. The Exchanges have not revised their proposals to assume this liability. \34\ See SIFMA Letter, supra note 4, at 3. \35\ See id. \36\ See NYSE Response Letter, supra note 6, at 2. See also Amendments No. 1. \37\ See supra notes 14-25 and accompanying text. --------------------------------------------------------------------------- Third, the commenter suggests that, when using the VWAP methodology, NYSE not include any other exchange's closing transaction in the calculation.\38\ According to the commenter, a five-minute VWAP methodology should [[Page 38750]] result in a price that is largely tradable and achievable.\39\ However, according to the commenter, if a VWAP used as the official closing price included auction prints from other exchanges' closing transactions, the ability to trade and achieve the official closing price process would be reduced.\40\ The Exchanges have not amended the proposals to exclude closing transactions from the VWAP calculation, but have stated that they would consider whether to do so at a later date.\41\ --------------------------------------------------------------------------- \38\ See SIFMA Letter, supra note 4, at 3. \39\ See id. \40\ See id. \41\ See NYSE Response Letter, supra note 6, at 2. --------------------------------------------------------------------------- IV. Discussion and Commission Findings After careful review of the proposals, as modified by the respective Amendments No. 1, and of the comment letter, the Commission finds that the proposed rule changes are consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\42\ In particular, the Commission finds that the proposed rule changes are consistent with section 6(b)(5) of the Act,\43\ which requires, among other things, that the rules of a national securities exchange be 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. --------------------------------------------------------------------------- \42\ In approving these proposed rule changes, the Commission has considered the proposed rules' impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \43\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Commission believes that the proposed rule changes would provide transparency regarding how the Exchanges would determine the Official Closing Price in Exchange-listed securities when the Exchanges are unable to conduct a closing transaction due to a systems or technical issue. The Commission notes that the primary listing market's closing price for a security is relied upon by market participants for a variety of reasons, including, but not limited to, calculation of index values, calculation of the net asset value of mutual funds and exchange-traded products, and the price of derivatives that are based on the security. As the Exchanges note, the proposed closing contingency procedures would provide a pre-determined, consistent solution that would result in the SIP disseminating an official closing price for securities on behalf of the listing Exchange within a reasonable time frame relative to the normal closing time; would minimize the need for industry participants to modify their processing of data from the SIP; and would provide advance notification of the initiation of a closing contingency plan to provide sufficient time for industry participants to route any closing interest to an alternate venue to participate in that venue's closing auction.\44\ The Commission believes that each Exchange's proposal is reasonably designed to achieve these important goals and to prevent any issues that may result if the Exchange were unable to provide a closing price for its listed securities due to a systems or technical issue. For these reasons, the Commission finds that the proposed rule change is consistent with the Act. --------------------------------------------------------------------------- \44\ See NYSE Notice, supra note 3, at 12978, 12980; NYSE MKT Notice, supra note 3, at 12986, 12988-89. --------------------------------------------------------------------------- V. Solicitation of Comments on Amendment No. 1 Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether each Exchange's respective Amendment No. 1 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 Numbers SR-NYSE-2016-18 and SR-NYSEMKT-2016-31 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 Numbers SR-NYSE-2016-18 and SR- NYSEMKT-2016-31. These file numbers 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 Numbers SR-NYSE-2016-18 and SR-NYSEMKT-2016-31 and should be submitted on or before July 5, 2016. VI. Accelerated Approval of Proposed Rule Changes, as Modified by Their Respective Amendments No. 1 The Commission finds good cause to approve the proposed rule changes, as modified by their respective Amendments No. 1, prior to the 30th day after the date of publication of the notices of each Amendment No. 1 in the Federal Register. As noted above, in its respective Amendment No. 1, each Exchange amended the proposed rule text to add Rule 123C(1)(e)(iv), which provides that if the Exchange determines the Official Closing Price under Rule 123C(1)(e)(ii) or (e)(iii), the Exchange will publicly announce the manner by which it will determine the Official Closing Price and the designated alternate exchange, if applicable, and will cancel all open interest designated for the Exchange close. As noted above, the Exchanges made these amendments in response to comments received on the NYSE proposal. In addition, in its respective Amendment No. 1, each Exchange amended its Rule 123C(1)(e)(i) to specify how it will determine the Official Closing Price for a security that has transferred its listing to the Exchange or that is a new listing and does not have any last- sale-eligible trades on the Exchange on its first day of trading on the Exchange. Specifically, for a security that has transferred its listing to the Exchange and does not have any last-sale-eligible trades on the Exchange on its first trading day, the Official Closing Price would be the prior day's closing price disseminated by the [[Page 38751]] primary listing market that previously listed that security.\45\ For a new listing that does not have any last-sale eligible trades on the Exchange on its first trading day, the Official Closing Price would be based on a derived last sale associated with the price of such security before it begins trading.\46\ Each Exchange states that its Amendment No. 1 is intended to provide increased transparency in the Exchange's rules as to how the Exchange would determine the Official Closing Price for such new or transferred listings.\47\ --------------------------------------------------------------------------- \45\ See Amendments No. 1. \46\ See id. \47\ See id. --------------------------------------------------------------------------- Because each Amendment No. 1 responded to the comments received on the original proposal, and provided additional transparency to the operation of the closing contingency procedures for transferred and newly listed securities, the Commission finds good cause for approving the proposed rule changes, as modified by the respective Amendments No. 1, on an accelerated basis, pursuant to section 19(b)(2) of the Act.\48\ --------------------------------------------------------------------------- \48\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- VII. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act,\49\ that the proposed rule changes (SR-NYSE-2016-18 and SR- NYSEMKT-2016-31), as modified by their respective Amendments No. 1, be, and hereby are, approved on an accelerated basis. --------------------------------------------------------------------------- \49\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\50\ --------------------------------------------------------------------------- \50\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-13964 Filed 6-13-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 114 / Tuesday, June 14, 2016 / Notices 38747
opportunities, which should prevent The purchase of Creation Units by a SECURITIES AND EXCHANGE
shares from trading at a material Fund of Funds directly from a Fund will COMMISSION
discount or premium from NAV. be accomplished in accordance with the
6. With respect to Funds that hold [Release No. 34–78015; File Nos. SR–NYSE–
policies of the Fund of Funds and will 2016–18; SR–NYSEMKT–2016–31]
non-U.S. Portfolio Positions and that be based on the NAVs of the Funds.
effect creations and redemptions of Self-Regulatory Organizations; New
Creation Units in kind, applicants 9. Applicants also request relief to
permit a Feeder Fund to acquire shares York Stock Exchange LLC; NYSE MKT
request relief from the requirement LLC; Notice of Filings of Amendment
imposed by section 22(e) in order to of another registered investment
company managed by the Adviser No. 1, and Order Granting Accelerated
allow such Funds to pay redemption Approval of Proposed Rule Changes,
proceeds within fifteen calendar days having substantially the same
as Modified by Amendment No. 1, To
following the tender of Creation Units investment objectives as the Feeder
Provide for How the Exchanges Would
for redemption. Applicants assert that Fund (‘‘Master Fund’’) beyond the
Determine an Official Closing Price if
the requested relief would not be limitations in section 12(d)(1)(A) and the Exchanges Are Unable To Conduct
inconsistent with the spirit and intent of permit the Master Fund, and any a Closing Transaction
section 22(e) to prevent unreasonable, principal underwriter for the Master
undisclosed or unforeseen delays in the Fund, to sell shares of the Master Fund June 8, 2016.
actual payment of redemption proceeds. to the Feeder Fund beyond the
7. Applicants request an exemption to I. Introduction
limitations in section 12(d)(1)(B).
permit Funds of Funds to acquire Fund On March 2, 2016, New York Stock
shares beyond the limits of section 10. Section 6(c) of the Act permits the Exchange LLC (‘‘NYSE’’) and NYSE
12(d)(1)(A) of the Act; and the Funds, Commission to exempt any persons or MKT LLC (‘‘NYSE MKT’’) (each an
and any principal underwriter for the transactions from any provision of the ‘‘Exchange,’’ and together the
Funds, and/or any broker or dealer Act if such exemption is necessary or ‘‘Exchanges’’) each filed with the
registered under the Exchange Act, to appropriate in the public interest and Securities and Exchange Commission
sell shares to Funds of Funds beyond consistent with the protection of (‘‘Commission’’), pursuant to section
the limits of section 12(d)(1)(B) of the investors and the purposes fairly 19(b)(1) of the Securities Exchange Act
Act. The application’s terms and intended by the policy and provisions of of 1934 (‘‘Act’’) 1 and Rule 19b–4
conditions are designed to, among other the Act. Section 12(d)(1)(J) of the Act thereunder,2 a proposed rule change to
things, help prevent any potential (i) provides that the Commission may amend, respectively, NYSE Rule 123C
undue influence over a Fund through exempt any person, security, or and NYSE MKT Rule 123C—Equities
control or voting power, or in transaction, or any class or classes of (both hereinafter ‘‘Rule 123C’’) to
connection with certain services, persons, securities, or transactions, from provide for how each Exchange will
transactions, and underwritings, (ii) any provision of section 12(d)(1) if the determine an Official Closing Price if it
excessive layering of fees, and (iii) exemption is consistent with the public is unable to conduct a closing
overly complex fund structures, which interest and the protection of investors. transaction. The proposed rule changes
are the concerns underlying the limits Section 17(b) of the Act authorizes the were published for comment in the
in sections 12(d)(1)(A) and (B) of the Commission to grant an order Federal Register on March 11, 2016.3
Act. permitting a transaction otherwise The Commission received one comment
8. Applicants request an exemption letter in response to the NYSE
from sections 17(a)(1) and 17(a)(2) of the prohibited by section 17(a) if it finds
proposal.4
Act to permit persons that are Affiliated that (a) the terms of the proposed On April 21, 2016, the Commission
Persons, or Second Tier Affiliates, of the transaction are fair and reasonable and extended the time period within which
Funds, solely by virtue of certain do not involve overreaching on the part to approve the proposed rule changes,
ownership interests, to effectuate of any person concerned; (b) the disapprove the proposed rule changes,
purchases and redemptions in-kind. The proposed transaction is consistent with or institute proceedings to determine
deposit procedures for in-kind the policies of each registered whether to disapprove the proposed
purchases of Creation Units and the investment company involved; and (c) rule changes, to June 9, 2016.5 On May
redemption procedures for in-kind the proposed transaction is consistent
redemptions of Creation Units will be with the general purposes of the Act. 1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
the same for all purchases and For the Commission, by the Division of 3 See Securities Exchange Act Release No. 77305
redemptions and Deposit Instruments Investment Management, under delegated (March 7, 2016), 81 FR 12977 (SR–NYSE–2016–18)
and Redemption Instruments will be authority. (‘‘NYSE Notice’’); Securities Exchange Act Release
valued in the same manner as those Robert W. Errett, No. 77306 (March 7, 2016), 81 FR 12986 (SR–
Portfolio Positions currently held by the NYSEMKT–2016–31) (‘‘MKT Notice’’). The
Funds. Applicants also seek relief from Deputy Secretary. proposals are substantially similar and the
[FR Doc. 2016–13967 Filed 6–13–16; 8:45 am] Commission is hereby noticing the Amendments
the prohibitions on affiliated No. 1 and granting accelerated approval jointly.
transactions in section 17(a) to permit a BILLING CODE 8011–01–P 4 See Letter from Theodore R. Lazo, Managing
Fund to sell its shares to and redeem its Director and Associate General Counsel, Securities
shares from a Fund of Funds, and to Industry and Financial Markets Association, to
Brent J. Fields, Secretary, Commission, dated April
engage in the accompanying in-kind 5, 2016 (submitted to File No. SR–NYSE–2016–18)
srobinson on DSK5SPTVN1PROD with NOTICES
transactions with the Fund of Funds.2 (‘‘SIFMA Letter’’). The Commission notes that this
comment letter was also submitted in response to
2 The requested relief would apply to direct sales a similar filing by the Nasdaq Stock Market LLC.
of shares in Creation Units by a Fund to a Fund of See Securities Exchange Act Release No. 77309
Funds and redemptions of those shares. Applicants, (March 7, 2016), 81 FR 13007 (March 11, 2016) (SR–
moreover, are not seeking relief from section 17(a) Fund of Funds because an Adviser or an entity NASDAQ–2016–035).
for, and the requested relief will not apply to, controlling, controlled by or under common control 5 See Securities Exchange Act Release Nos. 77677,
transactions where a Fund could be deemed an with an Adviser provides investment advisory 81 FR 24907 (April 27, 2016) (SR–NYSE–2016–18);
Affiliated Person, or a Second-Tier Affiliate, of a services to that Fund of Funds. Continued
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![Federal Register / Vol. 81, No. 114 / Tuesday, June 14, 2016 / Notices 38751
primary listing market that previously certified that, in her opinion, one or I. Self-Regulatory Organization’s
listed that security.45 For a new listing more of the exemptions set forth in 5 Statement of the Terms of the Substance
that does not have any last-sale eligible U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) of the Proposed Rule Change
trades on the Exchange on its first and 17 CFR 200.402(a)(3), (5), (7), 9(ii) The Exchange is filing a proposal to
trading day, the Official Closing Price and (10), permit consideration of the adopt Exchange Rule 519C, Mass
would be based on a derived last sale scheduled matter at the Closed Meeting. Cancellation of Trading Interest.
associated with the price of such Chair White, as duty officer, voted to The text of the proposed rule change
security before it begins trading.46 Each consider the items listed for the Closed is available on the Exchange’s Web site
Exchange states that its Amendment No. Meeting in closed session. at http://www.miaxoptions.com/filter/
1 is intended to provide increased wotitle/rule_filing, at MIAX’s principal
The subject matter of the Closed
transparency in the Exchange’s rules as office, and at the Commission’s Public
Meeting will be:
to how the Exchange would determine Reference Room.
the Official Closing Price for such new Institution and Settlement of
or transferred listings.47 injunctive actions; II. Self-Regulatory Organization’s
Because each Amendment No. 1 Institution and settlement of Statement of the Purpose of, and
responded to the comments received on administrative proceedings; Statutory Basis for, the Proposed Rule
the original proposal, and provided Adjudicatory matters; Change
additional transparency to the operation Opinion; and In its filing with the Commission, the
of the closing contingency procedures
Other matters relating to enforcement Exchange included statements
for transferred and newly listed
proceedings. concerning the purpose of and basis for
securities, the Commission finds good
At times, changes in Commission the proposed rule change and discussed
cause for approving the proposed rule
priorities require alterations in the any comments it received on the
changes, as modified by the respective
scheduling of meeting items. proposed rule change. The text of these
Amendments No. 1, on an accelerated
statements may be examined at the
basis, pursuant to section 19(b)(2) of the For further information and to
places specified in Item IV below. The
Act.48 ascertain what, if any, matters have been
Exchange has prepared summaries, set
VII. Conclusion added, deleted or postponed, please
forth in sections A, B, and C below, of
contact Brent J. Fields from the Office of
It is therefore ordered, pursuant to the most significant aspects of such
the Secretary at (202) 551–5400.
section 19(b)(2) of the Act,49 that the statements.
proposed rule changes (SR–NYSE– Brent J. Fields,
A. Self-Regulatory Organization’s
2016–18 and SR–NYSEMKT–2016–31), Secretary. Statement of the Purpose of, and
as modified by their respective [FR Doc. 2016–14080 Filed 6–10–16; 11:15 am] Statutory Basis for, the Proposed Rule
Amendments No. 1, be, and hereby are, BILLING CODE 8011–01–P Change
approved on an accelerated basis.
1. Purpose
For the Commission, by the Division of
Trading and Markets, pursuant to delegated SECURITIES AND EXCHANGE The Exchange proposes to adopt new
authority.50 COMMISSION Rule 519C, Mass Cancellation of
Robert W. Errett, Trading Interest, to codify the
Deputy Secretary. [Release No. 34–78023; File No. SR–MIAX– Exchange’s current practice of
[FR Doc. 2016–13964 Filed 6–13–16; 8:45 am] 2016–14] cancelling quotes and/or orders upon
BILLING CODE 8011–01–P the receipt of a verbal or an electronic
Self-Regulatory Organizations; Miami request from a Member.3
International Securities Exchange LLC; Proposed Rule 519C would codify the
SECURITIES AND EXCHANGE Notice of Filing and Immediate current process by which Members may
COMMISSION Effectiveness of a Proposed Rule call or send an electronic message to the
Change To Adopt Exchange Rule Exchange’s designated staff and to direct
Sunshine Act Meeting 519C, Mass Cancellation of Trading them to cancel all quotations and/or
Interest orders they have in the System.4 All of
Notice is hereby given, pursuant to
the provisions of the Government in the June 8, 2016. the directing Member’s quotations then
Sunshine Act, Public Law 94–409, that in the System will be cancelled; a
Pursuant to the provisions of Section Member may submit a request to cancel
the Securities and Exchange 19(b)(1) of the Securities Exchange Act
Commission will hold a Closed Meeting all or any subset of its orders in the
of 1934 (‘‘Act’’) 1 and Rule 19b–4 System.
on Thursday, June 16, 2016 at 2:00 p.m. thereunder,2 notice is hereby given that
Commissioners, Counsel to the Currently, Exchange Members may
on May 27, 2016, Miami International cancel all quotations and/or open orders
Commissioners, the Secretary to the Securities Exchange LLC (‘‘MIAX’’ or
Commission, and recording secretaries in the System electronically or, in the
‘‘Exchange’’) filed with the Securities alternative, may request Exchange staff
will attend the Closed Meeting. Certain and Exchange Commission
staff members who have an interest in to do so verbally by phone or via
(‘‘Commission’’) a proposed rule change electronic message. The proposed rule
the matters also may be present. as described in Items I, II, and III below,
The General Counsel of the would codify the current process of
which Items have been prepared by the
srobinson on DSK5SPTVN1PROD with NOTICES
Commission, or her designee, has
Exchange. The Commission is 3 The term ‘‘Member’’ means an individual or
45 See
publishing this notice to solicit organization approved to exercise trading rights
Amendments No. 1.
46 See id. comments on the proposed rule change associated with a Trading Permit. Members are
from interested persons. deemed ‘‘members’’ under the Act. See Exchange
47 See id.
Rule 100.
48 15 U.S.C. 78s(b)(2). 4 The term ‘‘System’’ means the automated
49 15 U.S.C. 78s(b)(2). 1 15 U.S.C. 78s(b)(1). trading system used by the Exchange for the trading
50 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. of securities. See Exchange Rule 100.
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Document Created: 2016-06-14 02:58:21
Document Modified: 2016-06-14 02:58:21
| 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 38747 |
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