81_FR_47326 81 FR 47187 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt Paragraph (c) to Exchange Rule 11.27 To Describe Changes to System Functionality Necessary To Implement the Regulation NMS Plan To Implement a Tick Size Pilot Program

81 FR 47187 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt Paragraph (c) to Exchange Rule 11.27 To Describe Changes to System Functionality Necessary To Implement the Regulation NMS Plan To Implement a Tick Size Pilot Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 139 (July 20, 2016)

Page Range47187-47193
FR Document2016-17093

Federal Register, Volume 81 Issue 139 (Wednesday, July 20, 2016)
[Federal Register Volume 81, Number 139 (Wednesday, July 20, 2016)]
[Notices]
[Pages 47187-47193]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-17093]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78334; File No. SR-BatsBZX-2016-29]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To Adopt Paragraph (c) to Exchange 
Rule 11.27 To Describe Changes to System Functionality Necessary To 
Implement the Regulation NMS Plan To Implement a Tick Size Pilot 
Program

July 14, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 29, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. 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\ 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 filed a proposal to adopt paragraph (c) to Exchange 
Rule 11.27 to describe changes to System \3\ functionality necessary to 
implement the Regulation NMS Plan to Implement a Tick Size Pilot 
Program (``Plan'' or ``Pilot'').\4\ In determining the scope of the 
proposed changes to implement the Pilot,\5\ the Exchange carefully 
weighed the impact on the Pilot, System complexity, and the usage of 
such order types in Pilot Securities.
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    \3\ The term ``System'' is defined as the ``electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away.'' See Exchange Rule 
1.5(aa).
    \4\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 
80 FR 27513 (May 13, 2015) (``Approval Order'').
    \5\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth in the Plan.
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    The text of the proposed rule change is available at the Exchange's 
Web site

[[Page 47188]]

at www.batstrading.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 Exchange 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 these 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Background
    On August 25, 2014, NYSE Group, Inc., on behalf of the Exchange, 
Bats BYX Exchange, Inc. (``BYX''), Chicago Stock Exchange, Inc., Bats 
EDGA Exchange, Inc. (``EDGA''), Bats EDGX Exchange, Inc. (``EDGX''), 
Financial Industry Regulatory Authority, Inc. (``FINRA''), NASDAQ OMX 
BX, Inc., NASDAQ OMX PHLX LLC, the Nasdaq Stock Market LLC, New York 
Stock Exchange LLC (``NYSE''), NYSE MKT LLC, and NYSE Arca, Inc. 
(collectively ``Participants''), filed with the Commission, pursuant to 
Section 11A of the Act \6\ and Rule 608 of Regulation NMS thereunder, 
the Plan to implement a tick size pilot program.\7\ The Participants 
filed the Plan to comply with an order issued by the Commission on June 
24, 2014.\8\ The Plan was published for comment in the Federal Register 
on November 7, 2014, and approved by the Commission, as modified, on 
May 6, 2015.\9\
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    \6\ 15 U.S.C. 78k-1.
    \7\ See Letter from Brendon J. Weiss, Vice President, 
Intercontinental Exchange, Inc., to Secretary, Commission, dated 
August 25, 2014.
    \8\ See Securities Exchange Act Release No. 72460 (June 24, 
2014), 79 FR 36840 (June 30, 2014).
    \9\ See Approval Order, supra note 4.
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    The Plan is designed to allow the Commission, market participants, 
and the public to study and assess the impact of increment conventions 
on the liquidity and trading of the common stocks of small-
capitalization companies. Each Participant is required to comply, and 
to enforce compliance by its member organizations, as applicable, with 
the provisions of the Plan.
    The Pilot will include stocks of companies with $3 billion or less 
in market capitalization, an average daily trading volume of one 
million shares or less, and a volume weighted average price of at least 
$2.00 for every trading day. The Pilot will consist of a Control Group 
of approximately 1400 Pilot Securities and three Test Groups with 400 
Pilot Securities in each Test Group selected by a stratified 
sampling.\10\ During the Pilot, Pilot Securities in the Control Group 
will be quoted and traded at the currently permissible increments. 
Pilot Securities in the first Test Group (``Test Group One'') will be 
quoted in $0.05 minimum increments but will continue to trade at any 
price increment that is currently permitted.\11\ Pilot Securities in 
the second Test Group (``Test Group Two'') will be quoted in $0.05 
minimum increments and will trade at $0.05 minimum increments subject 
to a midpoint exception, a retail investor order exception, and a 
negotiated trade exception.\12\ Pilot Securities in the third Test 
Group (``Test Group Three'') will be subject to the same restrictions 
as Test Group Two and also will be subject to the ``Trade-at'' 
requirement to prevent price matching by a market participant that is 
not displaying at a price of a Trading Center's \13\ ``Best Protected 
Bid'' or ``Best Protected Offer,'' unless an enumerated exception 
applies.\14\ The same exceptions provided under Test Group Two will 
also be available under the Trade-at Prohibition, with an additional 
exception for Block Size orders and exceptions that mirror those under 
Rule 611 of Regulation NMS.\15\
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    \10\ See Section V of the Plan for identification of Pilot 
Securities, including criteria for selection and grouping.
    \11\ See Section VI(B) of the Plan.
    \12\ See Section VI(C) of the Plan.
    \13\ The Plan incorporates the definition of ``Trading Center'' 
from Rule 600(b)(78) of Regulation NMS. Regulation NMS defines a 
Trading Center as ``a national securities exchange or national 
securities association that operates an SRO trading facility, an 
alternative trading system, an exchange market maker, an OTC market 
maker, or any other broker or dealer that executes orders internally 
by trading as principal or crossing orders as agent.''
    \14\ See Section VI(D) of the Plan.
    \15\ 17 CFR 242.611.
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    The Plan requires the Exchange to establish, maintain, and enforce 
written policies and procedures that are reasonably designed to comply 
with applicable quoting and trading requirements specified in the Plan. 
Accordingly, the Exchange adopted paragraph (a) of Rule 11.27 to 
require Members \16\ to comply with the quoting and trading provisions 
of the Plan.\17\ The Exchange also adopted paragraph (b) of Rule 11.27 
to require Members to comply with the data collection provisions under 
Appendix B and C of the Plan.\18\
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    \16\ The term ``Member'' is defined as ``any registered broker 
or dealer that has been admitted to membership in the Exchange.'' 
See Exchange Rule 1.5(n).
    \17\ See Securities Exchange Act Release No. 77291 (March 3, 
2016), 81 FR 12543 (March 9, 2016) (SR-BATS-2015-108).
    \18\ See Securities Exchange Act Release Nos. 77105 (February 
10, 2016), 81 FR 8112 (February 17, 2016) (SR-BATS-2015-102); and 
77310 (March 7, 2016), 81 FR 13012 (March 11, 2016) (SR-BATS-2016-
27).
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Proposed System Changes
    The Exchange proposes to adopt paragraph (c) of Exchange Rule 11.27 
to describe changes to System functionality necessary to implement the 
Plan. Paragraph (c) of Rule 11.27 would set forth the Exchange's 
specific procedures for handling, executing, re-pricing and displaying 
of certain order types and order type instructions applicable to Pilot 
Securities. Unless otherwise indicated, paragraph (c) of Rule 11.27 
would apply to order types and order type instructions in Pilot 
Securities in Test Groups One, Two, and Three and not to orders in 
Pilot Securities included in the Control Group. The proposed changes 
include select and discrete amendments to the operation of: (i) BZX 
Market Orders; (ii) Market Pegged Orders; (iii) Mid-Point Peg Orders; 
(iii) [sic] Discretionary Orders; (iv) [sic] Non-Displayed Orders; (v) 
[sic] Market Maker Peg Orders; (vi) [sic] Supplemental Peg Orders; and 
(vii) [sic] orders subject to the Display-Price Sliding process.
    In determining the scope of these proposed changes to implement the 
Plan, the Exchange carefully weighed the impact on the Pilot, System 
complexity, and the usage of such order types in Pilot Securities. 
These proposed changes are designed to directly comply with the Plan 
and to assist the Exchange in meeting its regulatory obligations 
pursuant to the Plan. As discussed below, certain of these changes are 
also intended to reduce risk in the System by eliminating unnecessary 
complexity based on infrequent current usage of certain order types in 
Pilot Securities and/or their limited ability to execute under the 
Trade-at Prohibition. Therefore, the Exchange firmly believes that 
these changes will have little or no impact on the operation and data 
collection elements of the Plan. The Exchange further believes that the 
proposed rule

[[Page 47189]]

changes are reasonably designed to comply with applicable quoting and 
trading requirements specified in the Plan.
BZX Market Orders
    A BZX Market Order is an order to buy or sell a stated amount of a 
security that is to be executed at the NBBO when the order reaches the 
Exchange. BZX Market Orders shall not trade through Protected 
Quotations.\19\ Any portion of a BZX Market Order that would execute at 
a price more than $0.50 or 5 percent worse than the NBBO at the time 
the order initially reaches the Exchange, whichever is greater, will be 
cancelled.\20\ In order to comply with the minimum quoting increments 
set forth in the Plan, the Exchange proposes to state under proposed 
Rule 11.27(c)(1) that for purposes of determining whether a BZX Market 
Order's execution price is more than 5 percent worse than the NBBO 
under Rule 11.9(a)(2), the execution price for a buy (sell) order will 
be rounded down (up) to the nearest $0.05 increment.
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    \19\ See Exchange Rule 11.9(a)(2).
    \20\ Id.
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Market Pegged Orders
    The Exchange proposes to amend the operation of Market Pegged 
Orders to reduce risk in its System by eliminating unnecessary 
complexity based on infrequent current usage in Pilot Securities and 
their limited ability to execute under the Trade-at Prohibition in Test 
Group Three. A Pegged Order is a limit order that after entry into the 
System, the price of the order is automatically adjusted by the System 
in response to changes in the NBBO. A Pegged Order will peg to the NBB 
or NBO or a certain amount away from the NBB or NBO.\21\ A Market 
Pegged Order is pegged to the contra-side NBBO.\22\ A User \23\ 
entering a Market Pegged Order can specify that such order's price will 
offset the inside quote on the contra-side of the market by an amount 
(the ``Offset'') set by the User. Market Pegged Orders are not eligible 
to be displayed on the Exchange.
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    \21\ See Exchange Rule 11.9(c)(8).
    \22\ See Exchange Rule 11.9(c)(8)(B).
    \23\ A ``User'' is defined as any member or sponsored 
participant of the Exchange who is authorized to obtain access to 
the System pursuant to Rule 11.3. See Exchange Rule 1.5(cc).
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    In Test Groups One and Two, the Exchange proposes to modify the 
behavior of Market Pegged Order when it is locked by an incoming BZX 
Post Only Order \24\ or Partial Post Only at Limit Order \25\ that does 
not remove liquidity pursuant to Rule 11.9(c)(6) or Rule 
11.9(c)(7),\26\ respectively. In such case, the Market Pegged Order 
would be converted to an executable order and will remove liquidity 
against such incoming order. In no case would a Market Pegged Order 
execute against an incoming BZX Post Only Order or Partial Post Only at 
Limit Order if an order with higher priority is on the BZX Book.\27\ 
Specifically, if an order other than a Market Pegged Order maintains 
higher priority than one or more Market Pegged Orders, the Market 
Pegged Order(s) with lower priority will not be converted, as described 
above, and the incoming BZX Post Only Order or Partial Post Only at 
Limit Order will be posted or cancelled in accordance with Rule 
11.9(c)(6) or Rule 11.9(c)(7).
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    \24\ See Exchange Rule 11.9(c)(6).
    \25\ See Exchange Rule 11.9(c)(7).
    \26\ A BZX Post Only Order will remove contra-side liquidity 
from the BZX Book if the order is an order to buy or sell a security 
priced below $1.00 or if the value of such execution when removing 
liquidity equals or exceeds the value of such execution if the order 
instead posted to the BZX Book and subsequently provided liquidity, 
including the applicable fees charged or rebates provided. See 
Exchange Rule 11.9(c)(6). A Partial Post Only at Limit Order will 
remove liquidity from the BZX Book up to the full size of the order 
if, at the time of receipt, it can be executed at prices better than 
its limit price. See Exchange Rule 11.9(c)(7).
    \27\ The term ``BZX Book'' is defined as the ``System's 
electronic file of orders.'' See Exchange Rule 1.5(e).
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    The Exchange notes that Market Pegged Orders are aggressive by 
nature and believes executing the order in such circumstance is 
appropriate. The Exchange also notes that the proposed behavior for 
Market Pegged Orders in Test Groups One and Two is identical to the 
operation of orders with the Super Aggressive Routing instruction under 
Exchange Rule 11.13(b)(4)(C). When an order with a Super Aggressive 
instruction is locked by an incoming BZX Post Only Order or Partial 
Post Only at Limit Order that does not remove liquidity pursuant to 
Rule 11.9(c)(6) or Rule 11.9(c)(7), respectively, the order is 
converted to an executable order and will remove liquidity against such 
incoming order. In addition, like as proposed above, in no case would 
an order with a Super Aggressive instruction execute against an 
incoming BZX Post Only Order or Partial Post Only at Limit Order if an 
order with higher priority is on the BZX Book. The Exchange believes 
this change is reasonable and appropriate due to the limited usage of 
Market Pegged Orders in Pilot Securities, to avoid unnecessary 
additional System complexity, and to ensure the Market Pegged Order may 
execute in such circumstance.
    The Exchange also proposes to not accept Market Pegged Orders in 
Test Group Three based on limited current usage, additional System 
complexity, and their limited ability to execute under the Trade-at 
Prohibition. Exchange Rule 11.27(a)(6)(D) sets forth the Trade-at 
Prohibition, which is the prohibition against executions by a Member 
that operates a Trading Center of a sell order for a Pilot Security in 
Test Group Three at the price of a Protected Bid or the execution of a 
buy order for a Pilot Security in Test Group Three at the price of a 
Protected Offer during Regular Trading Hours,\28\ unless an enumerated 
exception applies.\29\ The Exchange believes that their de minimis 
usage and limited ability to execute due to the Trade-at Prohibition 
does not justify the complexity that would be created by supporting 
Market Pegged Orders in Test Group Three. A vast majority of Market 
Pegged Orders are entered into the System with a zero Offset and, 
therefore, create a locked market with the contra-side NBBO. Under the 
Trade-at Prohibition, a Market Pegged Order would not be eligible for 
execution at the locking price, including when a Trade-at Intermarket 
Sweep Order (``ISO'') \30\ is entered, because of non-cleared contra-
side Protected Quotations. For example, assume the NBBO is $10.00 
(NYSE) x $10.05 (Nasdaq) in a Test Group 3 security. A Market Pegged 
Order to buy at $10.10 with a zero Offset is entered on the Exchange. 
The order would be ranked and hidden on the BZX Book at $10.05. A 
Trade-at ISO to sell at $10.05 is then entered. In this example, no 
execution occurs on the Exchange because Nasdaq is displaying an order 
to sell at $10.05. The Trade-at ISO instruction only indicates that all 
of the better and equal priced buy orders have been cleared. It does 
not indicate that the seller has cleared any Protected Offers. 
Therefore, the Exchange proposes to not accept Market Pegged

[[Page 47190]]

Orders in Test Group Three in an effort to reduce unnecessary System 
complexity, avoid an internally locked book, and due to the limited 
execution opportunities for Market Pegged Orders due to the Trade-at 
Prohibition.
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    \28\ The term ``Regular Trading Hours'' is defined as ``the time 
between 9:30 a.m. and 4:00 p.m. Eastern Time.'' See Exchange Rule 
1.5(w).
    \29\ See also Section VI(D) of the Plan.
    \30\ A Trade-at ISO is a Limit Order for a Pilot Security that 
meets the following requirements: (i) When routed to a Trading 
Center, the limit order is identified as a Trade-at Intermarket 
Sweep Order; and (ii) simultaneously with the routing of the limit 
order identified as a Trade-at Intermarket Sweep Order, one or more 
additional limit orders, as necessary, are routed to execute against 
the full size of any protected bid, in the case of a limit order to 
sell, or the full displayed size of any protected offer, in the case 
of a limit order to buy, for the Pilot Security with a price that is 
better than or equal to the limit price of the limit order 
identified as a Trade-at Intermarket Sweep Order. See Exchange Rule 
11.27(a)(7)(A)(i). These additional routed orders also must be 
marked as Trade-at Intermarket Sweep Orders. Id.
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Mid-Point Peg Orders
    A Mid-Point Peg Order is an order whose price is automatically 
adjusted by the System in response to changes in the NBBO to be pegged 
to the midpoint of the NBBO, or, alternatively, pegged to the less 
aggressive of the midpoint of the NBBO or one minimum price variation 
\31\ inside the same side of the NBBO as the order.\32\ The Plan and 
current Exchange rules permit the acceptance of orders priced to 
execute at the midpoint of the NBBO to be ranked and accepted in 
increments of less than $0.05.\33\ Consistent with previous guidance 
issued by the Participants,\34\ the Exchange proposes to amend the 
operation of Mid-Point Peg Orders to explicitly state that Mid-Point 
Peg Orders in Pilot Securities may not be entered in increments other 
than $0.05. The System will execute a Mid-Point Peg Order: (i) In $0.05 
increments priced better than the midpoint of the NBBO; or (ii) at the 
midpoint of the NBBO, regardless of whether the midpoint of the NBBO is 
in an increment of $0.05. In order to comply with the minimum quoting 
and trading increments of the Plan and reduce unnecessary System 
complexity, a Mid-Point Peg Order will not be permitted to 
alternatively peg to one minimum price variation inside the same side 
of the NBBO as the order in Pilot Securities. The Exchange believes 
that the current de minimis usage of the alternative pegging 
functionality in Pilot Securities does not justify the complexity and 
risk that would be created by re-programming the System to support this 
functionality under the Plan.
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    \31\ See Exchange Rule 11.11.
    \32\ See Exchange Rule 11.9(c)(9).
    \33\ See Sections VI(B), (C), and (D) of the Plan. See also 
Exchange Rules 11.27(a)(4), (a)(5), and (a)(6).
    \34\ See e.g., Question 42 of the Tick Size Pilot Program 
Trading and Quoting FAQs available at http://www.finra.org/sites/default/files/TSPP-Trading-and-Quoting-FAQs.pdf.
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Discretionary Orders
    The Exchange proposes to not accept Discretionary Orders in all 
Test Groups, including the Control Group, to reduce risk in the System 
by eliminating unnecessary complexity based on infrequent current usage 
in Pilot Securities. In sum, a Discretionary Order is a Limit Order 
with a displayed or non-displayed ranked price and size and an 
additional non-displayed ``discretionary price''.\35\ The discretionary 
price is a non-displayed upward offset at which a User is willing to 
buy, if necessary, or a non-displayed downward offset at which a User 
is willing to sell, if necessary. The System changes necessary for a 
Discretionary Order to comply with the Plan become increasingly complex 
because both the displayed price and discretionary price must comply 
with the Plan's minimum quoting and trading increments as well as the 
Trade-at restriction in Test Group Three. In addition, Users do not 
currently set discretionary prices less than $0.05 away from the 
order's displayed price and the Exchange does not anticipate Users 
doing so under the Plan. To date, Discretionary Orders are rarely 
entered in Pilot Securities and the Exchange anticipates their usage to 
further decrease due to the Plan's minimum quoting increments. The 
Exchange believes that the current extremely limited usage of 
Discretionary Orders in Pilot Securities does not justify the 
additional System complexity that would be created by supporting 
Discretionary Orders. As a result of these factors the Exchange 
proposes to not accept Discretionary Orders in all Test Groups and the 
Control Group.
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    \35\ See Exchange Rule 11.9(c)(10).
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Non-Displayed Orders
    The Exchange proposes to re-price to the midpoint of the NBBO Non-
Displayed Orders in Test Group Three that are priced in a permissible 
increment better than the midpoint of the NBBO. A Non-Displayed Order 
is a Market or Limit Order that is not displayed on the Exchange.\36\ 
Exchange Rule 11.27(a)(6)(D) incorporates the Trade-at Prohibition in 
the Exchange's rules. The Trade-at Prohibition prevents the execution 
of a sell order for a Pilot Security in Test Group Three at the price 
of a Protected Bid or the execution of a buy order for a Pilot Security 
in Test Group Three at the price of a Protected Offer during Regular 
Trading Hours, unless an exception applies. A Trading Center that is 
displaying a quotation, via either a processor or an SRO quotation 
feed, that is a Protected Bid or Protected Offer is permitted to 
execute orders at that level, but only up to the amount of its 
displayed size. Unless an exception applies, a Non-Displayed Order that 
is able to execute at the price of the Protected Quotation would not be 
able to do so in Test Group Three due to the Trade-at Prohibition and 
the Exchange's priority rule.\37\ Furthermore, such aggressively priced 
orders would not be able to post to the BZX Book at the contra-side 
Protected Quotation, and re-pricing the order to the midpoint of the 
NBBO would increase execution opportunities under normal market 
conditions. However, orders that are priced to execute at the midpoint 
of the NBBO are exempt from the Trade-at Prohibition. Therefore, to 
increase the execution opportunities for Non-Displayed Orders in Test 
Group Three, the Exchange proposes to re-price to the midpoint of the 
NBBO Non-Displayed Orders that are priced in a permissible increment 
better than the midpoint of the NBBO.
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    \36\ See Exchange Rule 11.9(c)(11).
    \37\ Under Exchange Rule 11.12(a)(2), displayed Limit Orders 
have priority over Non-Displayed Limit Orders.
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Market Maker Peg Orders
    A Market Maker Peg Order is a Limit Order that is automatically 
priced by the System at the Designated Percentage (as defined in 
Exchange Rule 11.8) away from the then current NBB and NBO, or if no 
NBB or NBO, at the Designated Percentage away from the last reported 
sale from the responsible single plan processor in order to comply with 
the quotation requirements for Market Makers set forth in Exchange Rule 
11.8(d).\38\ Should the above pricing result in a Market Maker Peg 
Order being priced at an increment other than $0.05, the Exchange 
proposes to round an order to buy (sell) up (down) to the nearest $0.05 
increment in order to comply with the minimum quoting increments of the 
Plan.
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    \38\ See Exchange Rule 11.9(c)(16).
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Supplemental Peg Orders
    The Exchange proposes to not accept Supplemental Peg Orders in Test 
Group Three in order to reduce risk in the System by eliminating 
unnecessary complexity based on infrequent current usage in Pilot 
Securities and their limited ability to execute under the Trade-at 
Prohibition. A Supplemental Peg Order is a non-displayed Limit Order 
that posts to the BZX Book, and thereafter is eligible for execution at 
the NBB for buy orders and NBO for sell orders against routable orders 
that are equal to or less than the aggregate size of the Supplemental 
Peg Order interest available at that price.\39\ In sum, Supplemental 
Peg Orders are only executable at the NBBO against an order that is in 
the process of being routed away. In such case, the Exchange is not 
displaying a Protected Quotation and, therefore, the Supplemental Peg 
Order would be unable to execute in Test Group Three due to the Trade-
at

[[Page 47191]]

Prohibition.\40\ Therefore, the Exchange proposes to not accept 
Supplemental Peg Orders in Test Group Three.
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    \39\ See Exchange Rule 11.9(c)(19).
    \40\ The Exchange notes that the likelihood of a Supplemental 
Peg Order qualifying for an exception to the Trade-at Prohibition is 
small. For example, Supplemental Peg Orders are only executable 
against orders that are to be routed away and would not be eligible 
to execute against an incoming ISO or Trade-at ISO. Also, the 
Exchange would not be displaying a Protected Quotation. In addition, 
the Exchange does not frequently receive orders of Block Size and, 
in order to qualify for the Block exception, the contra-side Block 
Order must be routable and the Supplemental Peg Order be of Block 
Size.
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Display-Price Sliding
    Under the Display-Price Sliding process, an order eligible for 
display by the Exchange that, at the time of entry, would create a 
violation of Rule 610(d) of Regulation NMS by locking or crossing a 
Protected Quotation of an external market, will be ranked at the 
locking price in the BZX Book and displayed by the System at one 
minimum price variation (i.e., $0.05) below the current NBO (for bids) 
or one minimum price variation above the current NBB (for offers).\41\ 
The ranked and displayed prices of an order subject to the Display-
Price Sliding process may be adjusted once or multiple times depending 
upon the instructions of a User and changes to the prevailing NBBO.\42\
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    \41\ See Exchange Rule 11.9(g)(1)(A).
    \42\ See Exchange Rule 11.9(g)(1)(C).
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    As described above, Exchange Rule 11.27(a)(6)(D) sets forth the 
Trade-at Prohibition, which is the prohibition against executions by a 
Member that operates a Trading Center of a sell order for a Pilot 
Security in Test Group Three at the price of a Protected Bid or the 
execution of a buy order for a Pilot Security in Test Group Three at 
the price of a Protected Offer during Regular Trading Hours, unless an 
exception applies. Orders that are priced to execute at the midpoint of 
the NBBO are exempt from the Trade-at Prohibition. Therefore, to 
increase the execution opportunities and qualify for the mid-point 
exception to the Trade-at Prohibition, the Exchange proposes to rank 
orders in Test Group Three that are subject to the Display-Price 
Sliding process at the midpoint of the NBBO in the BZX Book and display 
such orders one minimum price variation below the current NBO (for 
bids) or one minimum price variation above the current NBB (for 
offers).
    The Exchange also proposes to cancel orders subject to Display-
Price Sliding in Test Group Three that are only to be adjusted once and 
not multiple times in the event the NBBO widens and a contra-side Non-
Displayed Order is resting on the BZX Book at the price to which the 
order subject to Display-Price Sliding would be adjusted. Due to the 
increased minimum quoting increments under the Plan, the Exchange is 
unable to safely re-price an order subject to single Display-Price 
Sliding in Test Group Three to the original locking price in such 
circumstances and doing so would add additional System complexity and 
risk. As discussed above, the Exchange proposes to rank orders in Test 
Group Three subject to the Display-Price Sliding process at the 
midpoint of the NBBO. In the event the NBBO changes such that an order 
subject to Display-Price Sliding would not lock or cross a Protected 
Quotation of an external market, the order will receive a new 
timestamp, and will be displayed at the order's limit price.\43\ Due to 
technological limitations arising from the increased minimum quoting 
increments under the Plan, however, the Exchange is unable to safely 
re-program its System to re-price such order to the original locking 
price when the NBBO widens and a contra-side Non-Displayed Order is 
resting on the BZX Book at the price to which the order subject to 
Display-Price Sliding would be adjusted. Therefore, the Exchange 
proposes to cancel orders subject to the single Display-Price Sliding 
process in such circumstances. Users who prefer an execution in such a 
scenario may elect to use the multiple Display-Price Sliding process.
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    \43\ Id.
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Ministerial Change
    Currently, both Interpretation and Policy .03 to Rule 11.27(a) and 
Interpretation and Policy .11 to Rule 11.27(b) state that Rule 11.27 
shall be in effect during a pilot period to coincide with the pilot 
period for the Plan (including any extensions to the pilot period for 
the Plan). The Exchange proposes to include this language at the 
beginning of Rule 11.27 and, therefore, proposes to delete both 
Interpretation and Policy .03 to Rule 11.27(a) and Interpretation and 
Policy .11 to Rule 11.27(b) as those provisions would be redundant and 
unnecessary. The Exchange also proposes to amend the last sentence of 
Rule 11.27(a)(4) to specify that the current permissible price 
increments are set forth under Exchange Rule 11.11, Price Variations.
Implementation Date
    If the Commission approves the proposed rule change, the proposed 
rule change will be effective upon Commission approval and shall become 
operative upon the commencement of the Pilot Period.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \44\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \45\ in particular, in that it is designed to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest. The Plan requires the 
Exchange to establish, maintain, and enforce written policies and 
procedures that are reasonably designed to comply with applicable 
quoting and trading requirements specified in the Plan. The proposed 
rule change is designed to comply with the Plan, reduce complexity and 
enhance System resiliency while not adversely affecting the data 
collected under the Plan. Therefore, the Exchange believes that the 
proposed rule changes are reasonably designed to comply with applicable 
quoting and trading requirements specified in the Plan and, as 
discussed further below, other applicable regulations.
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 78f(b).
    \45\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes regarding BZX 
Market Orders, Mid-Point Peg Orders, Market Maker Peg Orders, and 
Display-Price Sliding are consistent with the Act because they are 
intended to modify the Exchange's System to comply with the provisions 
of the Plan, and are designed to assist the Exchange in meeting its 
regulatory obligations pursuant to the Plan. In approving the Plan, the 
SEC noted that the Pilot was an appropriate, data-driven test that was 
designed to evaluate the impact of a wider tick size on trading, 
liquidity, and the market quality of securities of smaller 
capitalization companies, and was therefore in furtherance of the 
purposes of the Act. To the extent that these proposals are intended to 
comply with the Plan, the Exchange believes that these proposals are in 
furtherance of the objectives of the Plan, as identified by the 
Commission, and is therefore consistent with the Act.
    The Exchange also believes that its proposed changes to Market 
Pegged Orders, Discretionary Orders, Non-Displayed Orders, Supplemental 
Peg Orders, and Display-Price Sliding are also consistent with the Act 
because

[[Page 47192]]

they are intended to eliminate unnecessary System complexity and risk 
based on the de minimis current usage of such order types and 
instructions in Pilot Securities and/or their limited ability to 
execute under the Plan's minimum trading and quoting increments or 
Trade-at Prohibition.\46\ For example, during March 2016, the 
alternative pegging functionality of Mid-Point Peg Orders, Market 
Pegged Orders, Non-Displayed Orders, and Supplemental Peg Orders 
accounted for 0.01%, 0.02%, 0.92%, and 0.01%, respectively, of volume 
in eligible Pilot Securities on the Exchange, BYX, EDGA and EDGX 
combined. Notably, Discretionary Orders accounted for 0.00% of volume 
in eligible Pilot Securities on the Exchange, BYX, EDGA and EDGX 
combined.
---------------------------------------------------------------------------

    \46\ The Commission has also expressed concern regarding 
potential market instability caused by technological risks. See 
e.g., Chair Mary Jo White, Commission, Enhancing Our Equity Market 
Structure (June 5, 2014) available at https://www.sec.gov/News/Speech/Detail/Speech/1370542004312#.VD2HW610w6Y.
---------------------------------------------------------------------------

    The Commission adopted Regulation Systems Compliance and Integrity 
(``Regulation SCI'') in November 2014 to strengthen the technology 
infrastructure of the U.S. securities markets.\47\ Regulation SCI is 
designed to reduce the occurrence of systems issues, improve resiliency 
when systems problems do occur, and enhance the Commission's oversight 
and enforcement of securities market technology infrastructure. 
Regulation SCI required the Exchange to establish written policies and 
procedures reasonably designed to ensure that their systems have levels 
of capacity, integrity, resiliency, availability, and security adequate 
to maintain their operational capability and promote the maintenance of 
fair and orderly markets, and that they operate in a manner that 
complies with the Exchange Act. Each of these proposed changes are 
intended to reduce complexity and risk in the System to ensure the 
Exchange's technology remains robust and resilient. In determining the 
scope of the proposed changes, the Exchange carefully weighed the 
impact on the Pilot, System complexity, and the usage of such order 
types in Pilot Securities.\48\ The potential complexity results from 
code changes for a majority of the Exchange's order types, which 
requires the implementation and testing of a separate branch of code 
for each Test Group. For example, the Exchange currently utilizes one 
branch of code for which to implement and test changes. Development 
work for the Pilot results in the creation of four additional branches 
of code that are to be developed and tested (e.g., Control Group + 
three Test Groups). The Exchange determined that the changes proposed 
herein are necessary to ensure continued System resiliency in 
accordance with the requirements of Regulation SCI. Therefore, the 
Exchange believes the proposed rule change promotes just and equitable 
principles of trade, removes impediments to and perfects the mechanism 
of a free and open market and a national market system and, in general, 
to protect investors and the public interest.
---------------------------------------------------------------------------

    \47\ See Securities Exchange Act Release No. 73639 (November 19, 
2014), 79 FR 72251 (December 5, 2014) (``Regulation SCI Approval 
Order'').
    \48\ But for the Plan, the Exchange notes that it would not have 
proposed to amend the operation of Market Pegged Orders, 
Discretionary Orders, Non-Displayed Orders, Supplemental Peg Orders, 
and Display-Price Sliding as described herein.
---------------------------------------------------------------------------

    In addition, each of these proposed changes would have a de minimis 
to zero impact on the data reported pursuant to the Plan. As evidenced 
above, Market Pegged Orders, Discretionary Orders, the alternative 
pegging functionality of Mid-Point Peg Orders, and Supplemental Peg 
Orders are infrequently used in Pilot Securities or the execution of 
such orders would be scarce due to the Plan's minimum trading and 
quoting requirement and Trade-at Prohibition. The limited usage and 
execution scenarios do not justify the additional system complexity 
which would be created by modifying the System to support such order 
types in order to comply with the Plan. Therefore, the Exchange 
believes each proposed change is a reasonable means to ensure that the 
System's integrity, resiliency, and availability continues to promote 
the maintenance of fair and orderly markets. Due to the additional 
complexity, limited usage and execution opportunities, the Exchange 
believes it is not unfairly discriminatory to apply the changes 
proposed herein to only Pilot Securities as such changes are necessary 
to reduce complexity and ensure continued System resiliency in 
accordance with the requirements of Regulation SCI. The Exchange also 
believes the proposed changes to Non-Displayed Orders, and orders 
subject to the Display-Price Sliding process in Test Group Three are 
consistent with the Act because they are designed to increase the 
execution opportunities for such order types in compliance with the 
mid-point exception to the Trade-at Prohibition. The Exchange also 
believes the proposed change to Market Pegged Orders in Test Groups One 
and Two is consistent with the Act because it is identical to the 
operation of the Super Aggressive instruction under Exchange Rule 
11.13(b)(4)(C). The Exchange notes that Market Pegged Orders are 
aggressive by nature and believes executing the order in such 
circumstance is reasonable and appropriate.
    The Exchange also believes it is reasonable and appropriate to 
cancel an order subject to the single Display-Price Sliding process in 
Test Group Three in the event that the NBBO widens and a contra-side 
Non-Displayed Order is resting on the BZX Book at the price to which 
the order subject to Display-Price Sliding would be adjusted. Due to 
technological limitations and the Plan's increased minimum quoting 
increments, the Exchange is unable to safely re-program its System to 
re-price such orders to the original locking price in such 
circumstances. The Exchange also anticipates that the scenario under 
which it proposes to cancel the Display-Price Sliding order will be 
infrequent in Tick Pilot Securities. Users who prefer an execution in 
such a scenario may elect to use the multiple Display-Price Sliding 
process. Therefore, the Exchange believes it is consistent with the Act 
to set forth this scenario in its rules so that Users will understand 
how the System operates and how their orders would be handled in this 
discrete scenario.
    Lastly, the Exchange believes the ministerial changes to Rule 11.27 
are also consistent with the Act as they would: (i) Clarify a provision 
under paragraph (a)(4); and (ii) remove redundant provisions from the 
rule.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
notes that the proposed rule change is designed to assist the Exchange 
in meeting its regulatory obligations pursuant to the Plan, reduce 
System complexity and enhance resiliency. The Exchange also notes that 
the proposed rule change will apply equally to all Members that trade 
Pilot Securities.

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

    Written comments were neither solicited nor received.

[[Page 47193]]

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. In particular, the Commission seeks comment on 
the issue described below.
    In the Approval Order, the Commission stressed the importance of 
testing the impact of wider tick sizes on the trading and liquidity of 
the securities of small capitalization companies, and doing so in a way 
that produces robust results that inform future policy decisions.\49\ 
The Commission acknowledged the complexity of the Pilot and the costs 
that its implementation would create for market participants, but 
concluded that the benefits of the empirical data that would be 
produced by the Pilot warranted incurring those costs.\50\ As a result, 
the Plan requires that each Participant, including the Exchange, adopt 
rules that are necessary for compliance with the provisions of the 
Plan.\51\
---------------------------------------------------------------------------

    \49\ See Approval Order, supra note 4, at 80 FR 27515.
    \50\ Id at 27516.
    \51\ See Section II(B) of the Plan. See also Section IV of the 
Plan.
---------------------------------------------------------------------------

    While the Exchange states that the proposed rule change describes 
the system changes necessary to implement the Pilot, the Commission 
notes that the scope of the proposed changes extends beyond those 
required for compliance with the Plan, and would eliminate certain 
order types for Pilot Securities during the Pilot Period, or modify 
their operation in ways not required by the Plan. For example, the 
Exchange proposes not to accept Market Pegged Orders, Discretionary 
Orders, and Supplemental Peg Orders, and certain types of Mid-Point Peg 
Orders, in some or all Test Groups of Pilot Securities for the duration 
of the Pilot Period.\52\ These proposals appear designed to permit the 
Exchange to avoid the costs of modifying these order types to comply 
with the Plan. The Exchange notes that these order types are 
infrequently used in Pilot Securities, and takes the position that 
``[t]he limited usage and execution scenarios do not justify the 
additional system complexity which would be created by modifying the 
System to support such order types in order to comply with the Plan.'' 
\53\ At the same time, the Exchange also does not appear prepared to 
propose to eliminate these order types indefinitely. By contrast, the 
Exchange proposes to modify, in ways not required by the Plan, the 
operation of Market Pegged Orders and Non-Displayed Orders, and certain 
orders subject to the Display-Price Sliding process, in some or all 
Test Groups of Pilot Securities, and to incur the associated system 
change costs, in order to increase the ``execution opportunities'' for 
these order types for the duration of the Pilot Period.\54\
---------------------------------------------------------------------------

    \52\ The Exchange also proposes to cancel certain orders subject 
to the Display-Price Sliding process in certain Pilot Securities for 
the duration of the Pilot Period.
    \53\ See supra Item II.A.2.
    \54\ See supra Item II.A.1-2.
---------------------------------------------------------------------------

    The Commission is concerned that proposed rule changes, other than 
those necessary for compliance with Plan, that are targeted at Pilot 
Securities, that have a disparate impact on different Test Groups and 
the Control Group, and that are to apply temporarily only for the Pilot 
Period, could bias the results of the Pilot and undermine the value of 
the data generated in informing future policy decisions. Accordingly, 
the Commission is concerned that the proposed rule change may not be 
consistent with Act, including Section 6(b)(5) thereof and Rule 608 of 
Regulation NMS, or with the Plan.
    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 No. SR-BatsBZX-2016-29 on the subject line.

Paper Comments

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

All submissions should refer to File No. SR-BatsBZX-2016-29. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also 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 No. SR-BatsBZX-2016-29 and should be 
submitted on or before August 10, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\55\
---------------------------------------------------------------------------

    \55\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2016-17093 Filed 7-19-16; 8:45 am]
 BILLING CODE 8011-01-P



                                                                                 Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices                                                         47187

                                                  members who satisfy the Exchange’s                         noted in the comment letter, among                         For the Commission, by the Division of
                                                  independence requirements.56 The                           other things, would be contrary to just                 Trading and Markets, pursuant to delegated
                                                  Delegation Agreement recently was                          and equitable principles of trade.58 The                authority.62
                                                  terminated in connection with the                          Commission previously found that                        Jill M. Peterson,
                                                  Exchange’s reorganization of its                           Section 4.05 is consistent with the Act 59              Assistant Secretary.
                                                  regulatory structure that had resulted in                  and continues to believe that it is                     [FR Doc. 2016–17096 Filed 7–19–16; 8:45 am]
                                                  the creation of the ROC. Because the                       consistent with the Act, and that it is                 BILLING CODE 8011–01–P
                                                  Fine Income Procedures were instituted                     substantially similar to requirements
                                                  in connection with the delegation of                       relating to the use of regulatory assets,
                                                  certain of the Exchange’s regulatory                       fees, fines and penalties that were                     SECURITIES AND EXCHANGE
                                                  functions to NYSE Regulation, the                          approved by the Commission with                         COMMISSION
                                                  Commission believes that it is                             respect to other exchanges, including                   [Release No. 34–78334; File No. SR–
                                                  appropriate for the Exchange to remove                     the Exchange’s affiliates—NYSE MKT                      BatsBZX–2016–29]
                                                  the Procedures because NYSE                                LLC and NYSE Arca, Inc.60
                                                  Regulation no longer performs any                             The commenter also expresses the                     Self-Regulatory Organizations; Bats
                                                  regulatory services on behalf of the                       view that deleting the Fine Income                      BZX Exchange, Inc.; Notice of Filing of
                                                  Exchange. Further, given that the                          Procedures would remove rules that                      a Proposed Rule Change To Adopt
                                                  Exchange has reintegrated its regulatory                   serve to separate the Exchange’s                        Paragraph (c) to Exchange Rule 11.27
                                                  functions under the oversight of the                       business function from its regulatory                   To Describe Changes to System
                                                  ROC, the Commission believes that                          obligations, and that the Exchange’s                    Functionality Necessary To Implement
                                                  Section 4.05 should continue to help                       disciplinary process did not provide an                 the Regulation NMS Plan To Implement
                                                  ensure that the Exchange does not                          adequate safeguard against ‘‘regulator                  a Tick Size Pilot Program
                                                  inappropriately use its regulatory assets,                 misbehavior.’’ The Commission believes
                                                  fees, fines or penalties for commercial                                                                            July 14, 2016.
                                                                                                             that the Exchange has adopted several                      Pursuant to Section 19(b)(1) of the
                                                  purposes or to distribute such assets,                     measures to ensure the independence of
                                                  fees, fines or penalties to its direct                                                                             Securities Exchange Act of 1934 (the
                                                                                                             its regulatory functions including,                     ‘‘Act’’),1 and Rule 19b–4 thereunder,2
                                                  parent, NYSE Group, Inc., or to any                        among other things, creating a ROC,
                                                  other entity. Finally, the Commission                                                                              notice is hereby given that on June 29,
                                                                                                             which is composed entirely of directors                 2016, Bats BZX Exchange, Inc. (the
                                                  believes that creation of the ROC, along                   of the Exchange who satisfy the
                                                  with its responsibilities under Section                                                                            ‘‘Exchange’’ or ‘‘BZX’’) filed with the
                                                                                                             Exchange’s independence requirements,                   Securities and Exchange Commission
                                                  2.03(h)(ii) of the Operating Agreement,                    and the CFR, which is composed of
                                                  should help to ensure the proper                                                                                   (‘‘Commission’’) the proposed rule
                                                                                                             Exchange members and directors who                      change as described in Items I and II
                                                  oversight of the Exchange’s regulatory                     satisfy the Exchange’s independence
                                                  program, including the exercise by the                                                                             below, which Items have been prepared
                                                                                                             requirements.61                                         by the Exchange. The Commission is
                                                  Exchange’s regulatory staff of its power                      The commenter further expresses
                                                  to fine member organizations, and the                                                                              publishing this notice to solicit
                                                                                                             concern that deleting the Fine Income                   comments on the proposed rule change
                                                  use of regulatory assets, fees, fines and                  Procedures may imply that the conduct
                                                  penalties collected by the Exchange’s                                                                              from interested persons.
                                                                                                             banned by the Procedures no longer is
                                                  regulatory staff.                                          prohibited. The Commission believes,                    I. Self-Regulatory Organization’s
                                                     As noted above, the commenter raises                                                                            Statement of the Terms of Substance of
                                                                                                             however, that even with the deletion of
                                                  several concerns regarding the                                                                                     the Proposed Rule Change
                                                                                                             the Fine Income Procedures, given the
                                                  Exchange’s proposal, including by
                                                                                                             scope of Section 4.05, the Exchange                        The Exchange filed a proposal to
                                                  asserting that the proposal was
                                                  insufficient because it did not include                    would continue to be prohibited from                    adopt paragraph (c) to Exchange Rule
                                                  rule text indicating the deletion of the                   using regulatory assets, fees, fines or                 11.27 to describe changes to System 3
                                                  Procedures. The Exchange responds that                     penalties for other than regulatory                     functionality necessary to implement
                                                  the Procedures are available in the                        purposes.                                               the Regulation NMS Plan to Implement
                                                  Exchange’s filing and on the Exchange’s                       Finally, the commenter states that                   a Tick Size Pilot Program (‘‘Plan’’ or
                                                  Web site. The Commission believes that,                    Exchange did not adequately describe                    ‘‘Pilot’’).4 In determining the scope of
                                                  because the Fine Income Procedures                         why the circumstances that existed at                   the proposed changes to implement the
                                                  were internal procedures of the                            the time the Fine Income Procedures                     Pilot,5 the Exchange carefully weighed
                                                  Exchange and were not part of the                          were adopted no longer exist. The                       the impact on the Pilot, System
                                                  Exchange’s rulebook or governing                           Commission notes that the Exchange’s                    complexity, and the usage of such order
                                                                                                             proposal states that NYSE Regulation no                 types in Pilot Securities.
                                                  documents, it was appropriate for the
                                                                                                             longer performs regulatory services on                     The text of the proposed rule change
                                                  Exchange to include the Procedures in
                                                                                                             behalf of the Exchange.                                 is available at the Exchange’s Web site
                                                  its Form 19b–4 describing the proposed
                                                  rule change, which were published by                       IV. Conclusion                                            62 17  CFR 200.30–3(a)(12).
                                                  the Commission as part of the Notice.57                                                                              1 15  U.S.C. 78s(b)(1).
                                                     The commenter remarks that the                            It is therefore ordered, pursuant to                     2 17 CFR 240.19b–4.

                                                  NYSE should be ‘‘held to a higher                          Section 19(b)(2) of the Act, that the                      3 The term ‘‘System’’ is defined as the ‘‘electronic

                                                  standard’’ than other exchanges. In                        proposed rule change (SR–NYSE–2016–                     communications and trading facility designated by
                                                                                                             37) is approved.                                        the Board through which securities orders of Users
mstockstill on DSK3G9T082PROD with NOTICES




                                                  response, the Exchange states that, as a                                                                           are consolidated for ranking, execution and, when
                                                  national securities exchange, treating it                                                                          applicable, routing away.’’ See Exchange Rule
                                                                                                                  58 See
                                                                                                                      NYSE Response Letter, supra note 6, at 5.
                                                  differently than any other national                                                                                1.5(aa).
                                                                                                                  59 See
                                                                                                                      NYSE Approval Order, supra note 10, at            4 See Securities Exchange Act Release No. 74892
                                                  securities exchange based on its size,                     59842–43.                                               (May 6, 2015), 80 FR 27513 (May 13, 2015)
                                                  prominence or any of the other factors                       60 See Notice, supra note 4, at 34395–96 nn.18–
                                                                                                                                                                     (‘‘Approval Order’’).
                                                                                                             26 and accompanying text.                                  5 Unless otherwise specified, capitalized terms
                                                    56 See   NYSE Approval Order, supra note 10.               61 See NYSE Approval Order, supra note 10, at         used in this rule filing are defined as set forth in
                                                    57 See   Notice, supra note 4, at 34394.                 59838–41.                                               the Plan.



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                                                  47188                        Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices

                                                  at www.batstrading.com, at the                           applicable, with the provisions of the                   Members 16 to comply with the quoting
                                                  principal office of the Exchange, and at                 Plan.                                                    and trading provisions of the Plan.17
                                                  the Commission’s Public Reference                           The Pilot will include stocks of                      The Exchange also adopted paragraph
                                                  Room.                                                    companies with $3 billion or less in                     (b) of Rule 11.27 to require Members to
                                                                                                           market capitalization, an average daily                  comply with the data collection
                                                  II. Self-Regulatory Organization’s
                                                                                                           trading volume of one million shares or                  provisions under Appendix B and C of
                                                  Statement of the Purpose of, and
                                                                                                           less, and a volume weighted average                      the Plan.18
                                                  Statutory Basis for, the Proposed Rule
                                                  Change                                                   price of at least $2.00 for every trading                Proposed System Changes
                                                     In its filing with the Commission, the                day. The Pilot will consist of a Control                    The Exchange proposes to adopt
                                                  Exchange included statements                             Group of approximately 1400 Pilot                        paragraph (c) of Exchange Rule 11.27 to
                                                  concerning the purpose of and basis for                  Securities and three Test Groups with                    describe changes to System
                                                  the proposed rule change and discussed                   400 Pilot Securities in each Test Group                  functionality necessary to implement
                                                  any comments it received on the                          selected by a stratified sampling.10                     the Plan. Paragraph (c) of Rule 11.27
                                                  proposed rule change. The text of these                  During the Pilot, Pilot Securities in the                would set forth the Exchange’s specific
                                                  statements may be examined at the                        Control Group will be quoted and                         procedures for handling, executing, re-
                                                  places specified in Item IV below. The                   traded at the currently permissible                      pricing and displaying of certain order
                                                  Exchange has prepared summaries, set                     increments. Pilot Securities in the first                types and order type instructions
                                                  forth in Sections A, B, and C below, of                  Test Group (‘‘Test Group One’’) will be                  applicable to Pilot Securities. Unless
                                                  the most significant parts of such                       quoted in $0.05 minimum increments                       otherwise indicated, paragraph (c) of
                                                  statements.                                              but will continue to trade at any price                  Rule 11.27 would apply to order types
                                                                                                           increment that is currently permitted.11                 and order type instructions in Pilot
                                                  (A) Self-Regulatory Organization’s                       Pilot Securities in the second Test                      Securities in Test Groups One, Two, and
                                                  Statement of the Purpose of, and                         Group (‘‘Test Group Two’’) will be                       Three and not to orders in Pilot
                                                  Statutory Basis for, the Proposed Rule                   quoted in $0.05 minimum increments                       Securities included in the Control
                                                  Change                                                   and will trade at $0.05 minimum                          Group. The proposed changes include
                                                  1. Purpose                                               increments subject to a midpoint                         select and discrete amendments to the
                                                                                                           exception, a retail investor order                       operation of: (i) BZX Market Orders; (ii)
                                                  Background
                                                                                                           exception, and a negotiated trade                        Market Pegged Orders; (iii) Mid-Point
                                                     On August 25, 2014, NYSE Group,                       exception.12 Pilot Securities in the third               Peg Orders; (iii) [sic] Discretionary
                                                  Inc., on behalf of the Exchange, Bats                    Test Group (‘‘Test Group Three’’) will be                Orders; (iv) [sic] Non-Displayed Orders;
                                                  BYX Exchange, Inc. (‘‘BYX’’), Chicago                    subject to the same restrictions as Test                 (v) [sic] Market Maker Peg Orders; (vi)
                                                  Stock Exchange, Inc., Bats EDGA                          Group Two and also will be subject to                    [sic] Supplemental Peg Orders; and (vii)
                                                  Exchange, Inc. (‘‘EDGA’’), Bats EDGX                     the ‘‘Trade-at’’ requirement to prevent                  [sic] orders subject to the Display-Price
                                                  Exchange, Inc. (‘‘EDGX’’), Financial                     price matching by a market participant                   Sliding process.
                                                  Industry Regulatory Authority, Inc.                      that is not displaying at a price of a                      In determining the scope of these
                                                  (‘‘FINRA’’), NASDAQ OMX BX, Inc.,                        Trading Center’s 13 ‘‘Best Protected Bid’’               proposed changes to implement the
                                                  NASDAQ OMX PHLX LLC, the Nasdaq                          or ‘‘Best Protected Offer,’’ unless an                   Plan, the Exchange carefully weighed
                                                  Stock Market LLC, New York Stock                         enumerated exception applies.14 The                      the impact on the Pilot, System
                                                  Exchange LLC (‘‘NYSE’’), NYSE MKT                        same exceptions provided under Test                      complexity, and the usage of such order
                                                  LLC, and NYSE Arca, Inc. (collectively                   Group Two will also be available under                   types in Pilot Securities. These
                                                  ‘‘Participants’’), filed with the                        the Trade-at Prohibition, with an                        proposed changes are designed to
                                                  Commission, pursuant to Section 11A of                   additional exception for Block Size                      directly comply with the Plan and to
                                                  the Act 6 and Rule 608 of Regulation                     orders and exceptions that mirror those                  assist the Exchange in meeting its
                                                  NMS thereunder, the Plan to implement                    under Rule 611 of Regulation NMS.15                      regulatory obligations pursuant to the
                                                  a tick size pilot program.7 The                                                                                   Plan. As discussed below, certain of
                                                  Participants filed the Plan to comply                       The Plan requires the Exchange to
                                                                                                                                                                    these changes are also intended to
                                                  with an order issued by the Commission                   establish, maintain, and enforce written
                                                                                                                                                                    reduce risk in the System by eliminating
                                                  on June 24, 2014.8 The Plan was                          policies and procedures that are
                                                                                                                                                                    unnecessary complexity based on
                                                  published for comment in the Federal                     reasonably designed to comply with
                                                                                                                                                                    infrequent current usage of certain order
                                                  Register on November 7, 2014, and                        applicable quoting and trading
                                                                                                                                                                    types in Pilot Securities and/or their
                                                  approved by the Commission, as                           requirements specified in the Plan.                      limited ability to execute under the
                                                  modified, on May 6, 2015.9                               Accordingly, the Exchange adopted                        Trade-at Prohibition. Therefore, the
                                                     The Plan is designed to allow the                     paragraph (a) of Rule 11.27 to require                   Exchange firmly believes that these
                                                  Commission, market participants, and                                                                              changes will have little or no impact on
                                                                                                              10 See Section V of the Plan for identification of
                                                  the public to study and assess the                                                                                the operation and data collection
                                                                                                           Pilot Securities, including criteria for selection and
                                                  impact of increment conventions on the                   grouping.                                                elements of the Plan. The Exchange
                                                  liquidity and trading of the common                         11 See Section VI(B) of the Plan.                     further believes that the proposed rule
                                                  stocks of small-capitalization                              12 See Section VI(C) of the Plan.

                                                  companies. Each Participant is required                     13 The Plan incorporates the definition of               16 The term ‘‘Member’’ is defined as ‘‘any

                                                  to comply, and to enforce compliance                     ‘‘Trading Center’’ from Rule 600(b)(78) of               registered broker or dealer that has been admitted
                                                                                                           Regulation NMS. Regulation NMS defines a Trading         to membership in the Exchange.’’ See Exchange
                                                  by its member organizations, as
mstockstill on DSK3G9T082PROD with NOTICES




                                                                                                           Center as ‘‘a national securities exchange or            Rule 1.5(n).
                                                                                                           national securities association that operates an SRO        17 See Securities Exchange Act Release No. 77291
                                                    6 15  U.S.C. 78k–1.                                    trading facility, an alternative trading system, an      (March 3, 2016), 81 FR 12543 (March 9, 2016) (SR–
                                                    7 See  Letter from Brendon J. Weiss, Vice              exchange market maker, an OTC market maker, or           BATS–2015–108).
                                                  President, Intercontinental Exchange, Inc., to           any other broker or dealer that executes orders             18 See Securities Exchange Act Release Nos.
                                                  Secretary, Commission, dated August 25, 2014.            internally by trading as principal or crossing orders    77105 (February 10, 2016), 81 FR 8112 (February
                                                     8 See Securities Exchange Act Release No. 72460       as agent.’’                                              17, 2016) (SR–BATS–2015–102); and 77310 (March
                                                  (June 24, 2014), 79 FR 36840 (June 30, 2014).               14 See Section VI(D) of the Plan.
                                                                                                                                                                    7, 2016), 81 FR 13012 (March 11, 2016) (SR–BATS–
                                                     9 See Approval Order, supra note 4.                      15 17 CFR 242.611.                                    2016–27).



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                                                                                 Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices                                                        47189

                                                  changes are reasonably designed to                         liquidity pursuant to Rule 11.9(c)(6) or                  The Exchange also proposes to not
                                                  comply with applicable quoting and                         Rule 11.9(c)(7),26 respectively. In such               accept Market Pegged Orders in Test
                                                  trading requirements specified in the                      case, the Market Pegged Order would be                 Group Three based on limited current
                                                  Plan.                                                      converted to an executable order and                   usage, additional System complexity,
                                                                                                             will remove liquidity against such                     and their limited ability to execute
                                                  BZX Market Orders
                                                                                                             incoming order. In no case would a                     under the Trade-at Prohibition.
                                                     A BZX Market Order is an order to                       Market Pegged Order execute against an                 Exchange Rule 11.27(a)(6)(D) sets forth
                                                  buy or sell a stated amount of a security                  incoming BZX Post Only Order or                        the Trade-at Prohibition, which is the
                                                  that is to be executed at the NBBO when                    Partial Post Only at Limit Order if an                 prohibition against executions by a
                                                  the order reaches the Exchange. BZX                        order with higher priority is on the BZX               Member that operates a Trading Center
                                                  Market Orders shall not trade through                      Book.27 Specifically, if an order other                of a sell order for a Pilot Security in Test
                                                  Protected Quotations.19 Any portion of                     than a Market Pegged Order maintains                   Group Three at the price of a Protected
                                                  a BZX Market Order that would execute                      higher priority than one or more Market                Bid or the execution of a buy order for
                                                  at a price more than $0.50 or 5 percent                    Pegged Orders, the Market Pegged                       a Pilot Security in Test Group Three at
                                                  worse than the NBBO at the time the                        Order(s) with lower priority will not be               the price of a Protected Offer during
                                                  order initially reaches the Exchange,                      converted, as described above, and the                 Regular Trading Hours,28 unless an
                                                  whichever is greater, will be                              incoming BZX Post Only Order or                        enumerated exception applies.29 The
                                                  cancelled.20 In order to comply with the                   Partial Post Only at Limit Order will be               Exchange believes that their de minimis
                                                  minimum quoting increments set forth                       posted or cancelled in accordance with                 usage and limited ability to execute due
                                                  in the Plan, the Exchange proposes to                      Rule 11.9(c)(6) or Rule 11.9(c)(7).                    to the Trade-at Prohibition does not
                                                  state under proposed Rule 11.27(c)(1)                                                                             justify the complexity that would be
                                                                                                                The Exchange notes that Market
                                                  that for purposes of determining                                                                                  created by supporting Market Pegged
                                                                                                             Pegged Orders are aggressive by nature
                                                  whether a BZX Market Order’s                                                                                      Orders in Test Group Three. A vast
                                                                                                             and believes executing the order in such
                                                  execution price is more than 5 percent                                                                            majority of Market Pegged Orders are
                                                                                                             circumstance is appropriate. The
                                                  worse than the NBBO under Rule                                                                                    entered into the System with a zero
                                                                                                             Exchange also notes that the proposed
                                                  11.9(a)(2), the execution price for a buy                                                                         Offset and, therefore, create a locked
                                                                                                             behavior for Market Pegged Orders in
                                                  (sell) order will be rounded down (up)                                                                            market with the contra-side NBBO.
                                                                                                             Test Groups One and Two is identical
                                                  to the nearest $0.05 increment.                                                                                   Under the Trade-at Prohibition, a
                                                                                                             to the operation of orders with the
                                                                                                                                                                    Market Pegged Order would not be
                                                  Market Pegged Orders                                       Super Aggressive Routing instruction
                                                                                                                                                                    eligible for execution at the locking
                                                     The Exchange proposes to amend the                      under Exchange Rule 11.13(b)(4)(C).
                                                                                                                                                                    price, including when a Trade-at
                                                  operation of Market Pegged Orders to                       When an order with a Super Aggressive
                                                                                                                                                                    Intermarket Sweep Order (‘‘ISO’’) 30 is
                                                  reduce risk in its System by eliminating                   instruction is locked by an incoming
                                                                                                                                                                    entered, because of non-cleared contra-
                                                  unnecessary complexity based on                            BZX Post Only Order or Partial Post
                                                                                                                                                                    side Protected Quotations. For example,
                                                                                                             Only at Limit Order that does not
                                                  infrequent current usage in Pilot                                                                                 assume the NBBO is $10.00 (NYSE) ×
                                                  Securities and their limited ability to                    remove liquidity pursuant to Rule
                                                                                                                                                                    $10.05 (Nasdaq) in a Test Group 3
                                                  execute under the Trade-at Prohibition                     11.9(c)(6) or Rule 11.9(c)(7),                         security. A Market Pegged Order to buy
                                                  in Test Group Three. A Pegged Order is                     respectively, the order is converted to                at $10.10 with a zero Offset is entered
                                                  a limit order that after entry into the                    an executable order and will remove                    on the Exchange. The order would be
                                                  System, the price of the order is                          liquidity against such incoming order.                 ranked and hidden on the BZX Book at
                                                  automatically adjusted by the System in                    In addition, like as proposed above, in                $10.05. A Trade-at ISO to sell at $10.05
                                                  response to changes in the NBBO. A                         no case would an order with a Super                    is then entered. In this example, no
                                                  Pegged Order will peg to the NBB or                        Aggressive instruction execute against                 execution occurs on the Exchange
                                                  NBO or a certain amount away from the                      an incoming BZX Post Only Order or                     because Nasdaq is displaying an order
                                                  NBB or NBO.21 A Market Pegged Order                        Partial Post Only at Limit Order if an                 to sell at $10.05. The Trade-at ISO
                                                  is pegged to the contra-side NBBO.22 A                     order with higher priority is on the BZX               instruction only indicates that all of the
                                                  User 23 entering a Market Pegged Order                     Book. The Exchange believes this                       better and equal priced buy orders have
                                                  can specify that such order’s price will                   change is reasonable and appropriate                   been cleared. It does not indicate that
                                                  offset the inside quote on the contra-                     due to the limited usage of Market                     the seller has cleared any Protected
                                                  side of the market by an amount (the                       Pegged Orders in Pilot Securities, to                  Offers. Therefore, the Exchange
                                                  ‘‘Offset’’) set by the User. Market Pegged                 avoid unnecessary additional System                    proposes to not accept Market Pegged
                                                  Orders are not eligible to be displayed                    complexity, and to ensure the Market
                                                  on the Exchange.                                           Pegged Order may execute in such                          28 The term ‘‘Regular Trading Hours’’ is defined

                                                     In Test Groups One and Two, the                         circumstance.                                          as ‘‘the time between 9:30 a.m. and 4:00 p.m.
                                                                                                                                                                    Eastern Time.’’ See Exchange Rule 1.5(w).
                                                  Exchange proposes to modify the                                                                                      29 See also Section VI(D) of the Plan.
                                                                                                                26 A BZX Post Only Order will remove contra-side
                                                  behavior of Market Pegged Order when                                                                                 30 A Trade-at ISO is a Limit Order for a Pilot
                                                                                                             liquidity from the BZX Book if the order is an order
                                                  it is locked by an incoming BZX Post                       to buy or sell a security priced below $1.00 or if
                                                                                                                                                                    Security that meets the following requirements: (i)
                                                  Only Order 24 or Partial Post Only at                                                                             When routed to a Trading Center, the limit order
                                                                                                             the value of such execution when removing
                                                                                                                                                                    is identified as a Trade-at Intermarket Sweep Order;
                                                  Limit Order 25 that does not remove                        liquidity equals or exceeds the value of such          and (ii) simultaneously with the routing of the limit
                                                                                                             execution if the order instead posted to the BZX       order identified as a Trade-at Intermarket Sweep
                                                    19 See   Exchange Rule 11.9(a)(2).                       Book and subsequently provided liquidity,              Order, one or more additional limit orders, as
                                                                                                             including the applicable fees charged or rebates
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                                                    20 Id.                                                                                                          necessary, are routed to execute against the full size
                                                    21 See
                                                                                                             provided. See Exchange Rule 11.9(c)(6). A Partial      of any protected bid, in the case of a limit order to
                                                           Exchange Rule 11.9(c)(8).                         Post Only at Limit Order will remove liquidity from
                                                    22 See                                                                                                          sell, or the full displayed size of any protected offer,
                                                           Exchange Rule 11.9(c)(8)(B).                      the BZX Book up to the full size of the order if, at
                                                    23 A ‘‘User’’ is defined as any member or
                                                                                                                                                                    in the case of a limit order to buy, for the Pilot
                                                                                                             the time of receipt, it can be executed at prices      Security with a price that is better than or equal to
                                                  sponsored participant of the Exchange who is               better than its limit price. See Exchange Rule         the limit price of the limit order identified as a
                                                  authorized to obtain access to the System pursuant         11.9(c)(7).                                            Trade-at Intermarket Sweep Order. See Exchange
                                                  to Rule 11.3. See Exchange Rule 1.5(cc).                      27 The term ‘‘BZX Book’’ is defined as the          Rule 11.27(a)(7)(A)(i). These additional routed
                                                    24 See Exchange Rule 11.9(c)(6).
                                                                                                             ‘‘System’s electronic file of orders.’’ See Exchange   orders also must be marked as Trade-at Intermarket
                                                    25 See Exchange Rule 11.9(c)(7).                         Rule 1.5(e).                                           Sweep Orders. Id.



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                                                  47190                         Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices

                                                  Orders in Test Group Three in an effort                   ‘‘discretionary price’’.35 The                            rule.37 Furthermore, such aggressively
                                                  to reduce unnecessary System                              discretionary price is a non-displayed                    priced orders would not be able to post
                                                  complexity, avoid an internally locked                    upward offset at which a User is willing                  to the BZX Book at the contra-side
                                                  book, and due to the limited execution                    to buy, if necessary, or a non-displayed                  Protected Quotation, and re-pricing the
                                                  opportunities for Market Pegged Orders                    downward offset at which a User is                        order to the midpoint of the NBBO
                                                  due to the Trade-at Prohibition.                          willing to sell, if necessary. The System                 would increase execution opportunities
                                                                                                            changes necessary for a Discretionary                     under normal market conditions.
                                                  Mid-Point Peg Orders
                                                                                                            Order to comply with the Plan become                      However, orders that are priced to
                                                    A Mid-Point Peg Order is an order                       increasingly complex because both the                     execute at the midpoint of the NBBO are
                                                  whose price is automatically adjusted                     displayed price and discretionary price                   exempt from the Trade-at Prohibition.
                                                  by the System in response to changes in                                                                             Therefore, to increase the execution
                                                                                                            must comply with the Plan’s minimum
                                                  the NBBO to be pegged to the midpoint                                                                               opportunities for Non-Displayed Orders
                                                                                                            quoting and trading increments as well
                                                  of the NBBO, or, alternatively, pegged to                                                                           in Test Group Three, the Exchange
                                                                                                            as the Trade-at restriction in Test Group
                                                  the less aggressive of the midpoint of                                                                              proposes to re-price to the midpoint of
                                                  the NBBO or one minimum price                             Three. In addition, Users do not
                                                                                                            currently set discretionary prices less                   the NBBO Non-Displayed Orders that
                                                  variation 31 inside the same side of the                                                                            are priced in a permissible increment
                                                  NBBO as the order.32 The Plan and                         than $0.05 away from the order’s
                                                                                                                                                                      better than the midpoint of the NBBO.
                                                  current Exchange rules permit the                         displayed price and the Exchange does
                                                  acceptance of orders priced to execute at                 not anticipate Users doing so under the                   Market Maker Peg Orders
                                                  the midpoint of the NBBO to be ranked                     Plan. To date, Discretionary Orders are                      A Market Maker Peg Order is a Limit
                                                  and accepted in increments of less than                   rarely entered in Pilot Securities and the                Order that is automatically priced by the
                                                  $0.05.33 Consistent with previous                         Exchange anticipates their usage to                       System at the Designated Percentage (as
                                                  guidance issued by the Participants,34                    further decrease due to the Plan’s                        defined in Exchange Rule 11.8) away
                                                  the Exchange proposes to amend the                        minimum quoting increments. The                           from the then current NBB and NBO, or
                                                  operation of Mid-Point Peg Orders to                      Exchange believes that the current                        if no NBB or NBO, at the Designated
                                                  explicitly state that Mid-Point Peg                       extremely limited usage of Discretionary                  Percentage away from the last reported
                                                  Orders in Pilot Securities may not be                     Orders in Pilot Securities does not                       sale from the responsible single plan
                                                  entered in increments other than $0.05.                   justify the additional System complexity                  processor in order to comply with the
                                                  The System will execute a Mid-Point                       that would be created by supporting                       quotation requirements for Market
                                                  Peg Order: (i) In $0.05 increments                        Discretionary Orders. As a result of                      Makers set forth in Exchange Rule
                                                  priced better than the midpoint of the                    these factors the Exchange proposes to                    11.8(d).38 Should the above pricing
                                                  NBBO; or (ii) at the midpoint of the                      not accept Discretionary Orders in all                    result in a Market Maker Peg Order
                                                  NBBO, regardless of whether the                           Test Groups and the Control Group.                        being priced at an increment other than
                                                  midpoint of the NBBO is in an                                                                                       $0.05, the Exchange proposes to round
                                                  increment of $0.05. In order to comply                    Non-Displayed Orders                                      an order to buy (sell) up (down) to the
                                                  with the minimum quoting and trading                         The Exchange proposes to re-price to                   nearest $0.05 increment in order to
                                                  increments of the Plan and reduce                         the midpoint of the NBBO Non-                             comply with the minimum quoting
                                                  unnecessary System complexity, a Mid-                                                                               increments of the Plan.
                                                                                                            Displayed Orders in Test Group Three
                                                  Point Peg Order will not be permitted to                  that are priced in a permissible                          Supplemental Peg Orders
                                                  alternatively peg to one minimum price                    increment better than the midpoint of
                                                  variation inside the same side of the                                                                                 The Exchange proposes to not accept
                                                                                                            the NBBO. A Non-Displayed Order is a                      Supplemental Peg Orders in Test Group
                                                  NBBO as the order in Pilot Securities.                    Market or Limit Order that is not
                                                  The Exchange believes that the current                                                                              Three in order to reduce risk in the
                                                                                                            displayed on the Exchange.36 Exchange                     System by eliminating unnecessary
                                                  de minimis usage of the alternative                       Rule 11.27(a)(6)(D) incorporates the
                                                  pegging functionality in Pilot Securities                                                                           complexity based on infrequent current
                                                                                                            Trade-at Prohibition in the Exchange’s                    usage in Pilot Securities and their
                                                  does not justify the complexity and risk
                                                                                                            rules. The Trade-at Prohibition prevents                  limited ability to execute under the
                                                  that would be created by re-
                                                                                                            the execution of a sell order for a Pilot                 Trade-at Prohibition. A Supplemental
                                                  programming the System to support this
                                                                                                            Security in Test Group Three at the                       Peg Order is a non-displayed Limit
                                                  functionality under the Plan.
                                                                                                            price of a Protected Bid or the execution                 Order that posts to the BZX Book, and
                                                  Discretionary Orders                                      of a buy order for a Pilot Security in                    thereafter is eligible for execution at the
                                                     The Exchange proposes to not accept                    Test Group Three at the price of a                        NBB for buy orders and NBO for sell
                                                  Discretionary Orders in all Test Groups,                  Protected Offer during Regular Trading                    orders against routable orders that are
                                                  including the Control Group, to reduce                    Hours, unless an exception applies. A                     equal to or less than the aggregate size
                                                  risk in the System by eliminating                         Trading Center that is displaying a                       of the Supplemental Peg Order interest
                                                  unnecessary complexity based on                           quotation, via either a processor or an                   available at that price.39 In sum,
                                                  infrequent current usage in Pilot                         SRO quotation feed, that is a Protected                   Supplemental Peg Orders are only
                                                  Securities. In sum, a Discretionary                       Bid or Protected Offer is permitted to                    executable at the NBBO against an order
                                                  Order is a Limit Order with a displayed                   execute orders at that level, but only up                 that is in the process of being routed
                                                  or non-displayed ranked price and size                    to the amount of its displayed size.                      away. In such case, the Exchange is not
                                                  and an additional non-displayed                           Unless an exception applies, a Non-                       displaying a Protected Quotation and,
                                                                                                            Displayed Order that is able to execute                   therefore, the Supplemental Peg Order
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                                                    31 See Exchange Rule 11.11.                             at the price of the Protected Quotation                   would be unable to execute in Test
                                                    32 See Exchange Rule 11.9(c)(9).                        would not be able to do so in Test                        Group Three due to the Trade-at
                                                    33 See Sections VI(B), (C), and (D) of the Plan. See
                                                                                                            Group Three due to the Trade-at
                                                  also Exchange Rules 11.27(a)(4), (a)(5), and (a)(6).                                                                  37 Under Exchange Rule 11.12(a)(2), displayed
                                                                                                            Prohibition and the Exchange’s priority
                                                    34 See e.g., Question 42 of the Tick Size Pilot                                                                   Limit Orders have priority over Non-Displayed
                                                  Program Trading and Quoting FAQs available at                                                                       Limit Orders.
                                                                                                                 35 See   Exchange Rule 11.9(c)(10).                    38 See Exchange Rule 11.9(c)(16).
                                                  http://www.finra.org/sites/default/files/TSPP-
                                                  Trading-and-Quoting-FAQs.pdf.                                  36 See   Exchange Rule 11.9(c)(11).                    39 See Exchange Rule 11.9(c)(19).




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                                                                               Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices                                               47191

                                                  Prohibition.40 Therefore, the Exchange                   contra-side Non-Displayed Order is                      operative upon the commencement of
                                                  proposes to not accept Supplemental                      resting on the BZX Book at the price to                 the Pilot Period.
                                                  Peg Orders in Test Group Three.                          which the order subject to Display-Price
                                                                                                                                                                   2. Statutory Basis
                                                                                                           Sliding would be adjusted. Due to the
                                                  Display-Price Sliding                                                                                               The Exchange believes that its
                                                                                                           increased minimum quoting increments
                                                     Under the Display-Price Sliding                       under the Plan, the Exchange is unable                  proposal is consistent with Section 6(b)
                                                  process, an order eligible for display by                to safely re-price an order subject to                  of the Act 44 in general, and furthers the
                                                  the Exchange that, at the time of entry,                 single Display-Price Sliding in Test                    objectives of Section 6(b)(5) of the Act 45
                                                  would create a violation of Rule 610(d)                  Group Three to the original locking                     in particular, in that it is designed to
                                                  of Regulation NMS by locking or                          price in such circumstances and doing                   promote just and equitable principles of
                                                  crossing a Protected Quotation of an                     so would add additional System                          trade, to foster cooperation and
                                                  external market, will be ranked at the                   complexity and risk. As discussed                       coordination with persons engaged in
                                                  locking price in the BZX Book and                        above, the Exchange proposes to rank                    facilitating transactions in securities, to
                                                  displayed by the System at one                           orders in Test Group Three subject to                   remove impediments to and perfect the
                                                  minimum price variation (i.e., $0.05)                    the Display-Price Sliding process at the                mechanism of a free and open market
                                                  below the current NBO (for bids) or one                  midpoint of the NBBO. In the event the                  and a national market system and, in
                                                  minimum price variation above the                        NBBO changes such that an order                         general, to protect investors and the
                                                  current NBB (for offers).41 The ranked                   subject to Display-Price Sliding would                  public interest. The Plan requires the
                                                  and displayed prices of an order subject                 not lock or cross a Protected Quotation                 Exchange to establish, maintain, and
                                                  to the Display-Price Sliding process may                 of an external market, the order will                   enforce written policies and procedures
                                                  be adjusted once or multiple times                       receive a new timestamp, and will be                    that are reasonably designed to comply
                                                  depending upon the instructions of a                     displayed at the order’s limit price.43                 with applicable quoting and trading
                                                  User and changes to the prevailing                       Due to technological limitations arising                requirements specified in the Plan. The
                                                  NBBO.42                                                  from the increased minimum quoting                      proposed rule change is designed to
                                                     As described above, Exchange Rule                     increments under the Plan, however, the                 comply with the Plan, reduce
                                                  11.27(a)(6)(D) sets forth the Trade-at                   Exchange is unable to safely re-program                 complexity and enhance System
                                                  Prohibition, which is the prohibition                    its System to re-price such order to the                resiliency while not adversely affecting
                                                  against executions by a Member that                      original locking price when the NBBO                    the data collected under the Plan.
                                                  operates a Trading Center of a sell order                widens and a contra-side Non-Displayed                  Therefore, the Exchange believes that
                                                  for a Pilot Security in Test Group Three                 Order is resting on the BZX Book at the                 the proposed rule changes are
                                                  at the price of a Protected Bid or the                   price to which the order subject to                     reasonably designed to comply with
                                                  execution of a buy order for a Pilot                     Display-Price Sliding would be                          applicable quoting and trading
                                                  Security in Test Group Three at the                      adjusted. Therefore, the Exchange                       requirements specified in the Plan and,
                                                  price of a Protected Offer during Regular                proposes to cancel orders subject to the                as discussed further below, other
                                                  Trading Hours, unless an exception                       single Display-Price Sliding process in                 applicable regulations.
                                                                                                           such circumstances. Users who prefer                       The Exchange believes that the
                                                  applies. Orders that are priced to
                                                                                                           an execution in such a scenario may                     proposed changes regarding BZX Market
                                                  execute at the midpoint of the NBBO are
                                                                                                           elect to use the multiple Display-Price                 Orders, Mid-Point Peg Orders, Market
                                                  exempt from the Trade-at Prohibition.
                                                                                                           Sliding process.                                        Maker Peg Orders, and Display-Price
                                                  Therefore, to increase the execution
                                                                                                                                                                   Sliding are consistent with the Act
                                                  opportunities and qualify for the mid-                   Ministerial Change                                      because they are intended to modify the
                                                  point exception to the Trade-at
                                                                                                              Currently, both Interpretation and                   Exchange’s System to comply with the
                                                  Prohibition, the Exchange proposes to
                                                                                                           Policy .03 to Rule 11.27(a) and                         provisions of the Plan, and are designed
                                                  rank orders in Test Group Three that are
                                                                                                           Interpretation and Policy .11 to Rule                   to assist the Exchange in meeting its
                                                  subject to the Display-Price Sliding
                                                                                                           11.27(b) state that Rule 11.27 shall be in              regulatory obligations pursuant to the
                                                  process at the midpoint of the NBBO in
                                                                                                           effect during a pilot period to coincide                Plan. In approving the Plan, the SEC
                                                  the BZX Book and display such orders
                                                                                                           with the pilot period for the Plan                      noted that the Pilot was an appropriate,
                                                  one minimum price variation below the
                                                                                                           (including any extensions to the pilot                  data-driven test that was designed to
                                                  current NBO (for bids) or one minimum
                                                                                                           period for the Plan). The Exchange                      evaluate the impact of a wider tick size
                                                  price variation above the current NBB
                                                                                                           proposes to include this language at the                on trading, liquidity, and the market
                                                  (for offers).
                                                                                                           beginning of Rule 11.27 and, therefore,                 quality of securities of smaller
                                                     The Exchange also proposes to cancel
                                                                                                           proposes to delete both Interpretation                  capitalization companies, and was
                                                  orders subject to Display-Price Sliding
                                                                                                           and Policy .03 to Rule 11.27(a) and                     therefore in furtherance of the purposes
                                                  in Test Group Three that are only to be
                                                                                                           Interpretation and Policy .11 to Rule                   of the Act. To the extent that these
                                                  adjusted once and not multiple times in
                                                                                                           11.27(b) as those provisions would be                   proposals are intended to comply with
                                                  the event the NBBO widens and a
                                                                                                           redundant and unnecessary. The                          the Plan, the Exchange believes that
                                                    40 The Exchange notes that the likelihood of a         Exchange also proposes to amend the                     these proposals are in furtherance of the
                                                  Supplemental Peg Order qualifying for an exception       last sentence of Rule 11.27(a)(4) to                    objectives of the Plan, as identified by
                                                  to the Trade-at Prohibition is small. For example,       specify that the current permissible                    the Commission, and is therefore
                                                  Supplemental Peg Orders are only executable              price increments are set forth under                    consistent with the Act.
                                                  against orders that are to be routed away and would
                                                  not be eligible to execute against an incoming ISO       Exchange Rule 11.11, Price Variations.                     The Exchange also believes that its
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                                                  or Trade-at ISO. Also, the Exchange would not be                                                                 proposed changes to Market Pegged
                                                                                                           Implementation Date                                     Orders, Discretionary Orders, Non-
                                                  displaying a Protected Quotation. In addition, the
                                                  Exchange does not frequently receive orders of             If the Commission approves the                        Displayed Orders, Supplemental Peg
                                                  Block Size and, in order to qualify for the Block        proposed rule change, the proposed rule
                                                  exception, the contra-side Block Order must be
                                                                                                                                                                   Orders, and Display-Price Sliding are
                                                  routable and the Supplemental Peg Order be of            change will be effective upon                           also consistent with the Act because
                                                  Block Size.                                              Commission approval and shall become
                                                    41 See Exchange Rule 11.9(g)(1)(A).                                                                              44 15   U.S.C. 78f(b).
                                                    42 See Exchange Rule 11.9(g)(1)(C).                         43 Id.                                               45 15   U.S.C. 78f(b)(5).



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                                                  47192                        Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices

                                                  they are intended to eliminate                           the implementation and testing of a                   Aggressive instruction under Exchange
                                                  unnecessary System complexity and                        separate branch of code for each Test                 Rule 11.13(b)(4)(C). The Exchange notes
                                                  risk based on the de minimis current                     Group. For example, the Exchange                      that Market Pegged Orders are
                                                  usage of such order types and                            currently utilizes one branch of code for             aggressive by nature and believes
                                                  instructions in Pilot Securities and/or                  which to implement and test changes.                  executing the order in such
                                                  their limited ability to execute under the               Development work for the Pilot results                circumstance is reasonable and
                                                  Plan’s minimum trading and quoting                       in the creation of four additional                    appropriate.
                                                  increments or Trade-at Prohibition.46                    branches of code that are to be
                                                  For example, during March 2016, the                      developed and tested (e.g., Control                     The Exchange also believes it is
                                                  alternative pegging functionality of Mid-                Group + three Test Groups). The                       reasonable and appropriate to cancel an
                                                  Point Peg Orders, Market Pegged Orders,                  Exchange determined that the changes                  order subject to the single Display-Price
                                                  Non-Displayed Orders, and                                proposed herein are necessary to ensure               Sliding process in Test Group Three in
                                                  Supplemental Peg Orders accounted for                    continued System resiliency in                        the event that the NBBO widens and a
                                                  0.01%, 0.02%, 0.92%, and 0.01%,                          accordance with the requirements of                   contra-side Non-Displayed Order is
                                                  respectively, of volume in eligible Pilot                Regulation SCI. Therefore, the Exchange               resting on the BZX Book at the price to
                                                  Securities on the Exchange, BYX, EDGA                    believes the proposed rule change                     which the order subject to Display-Price
                                                  and EDGX combined. Notably,                              promotes just and equitable principles                Sliding would be adjusted. Due to
                                                  Discretionary Orders accounted for                       of trade, removes impediments to and                  technological limitations and the Plan’s
                                                  0.00% of volume in eligible Pilot                        perfects the mechanism of a free and                  increased minimum quoting increments,
                                                  Securities on the Exchange, BYX, EDGA                    open market and a national market                     the Exchange is unable to safely re-
                                                  and EDGX combined.                                       system and, in general, to protect                    program its System to re-price such
                                                     The Commission adopted Regulation                     investors and the public interest.                    orders to the original locking price in
                                                  Systems Compliance and Integrity                            In addition, each of these proposed                such circumstances. The Exchange also
                                                  (‘‘Regulation SCI’’) in November 2014 to                 changes would have a de minimis to                    anticipates that the scenario under
                                                  strengthen the technology infrastructure                 zero impact on the data reported                      which it proposes to cancel the Display-
                                                  of the U.S. securities markets.47                        pursuant to the Plan. As evidenced                    Price Sliding order will be infrequent in
                                                  Regulation SCI is designed to reduce the                 above, Market Pegged Orders,                          Tick Pilot Securities. Users who prefer
                                                  occurrence of systems issues, improve                    Discretionary Orders, the alternative                 an execution in such a scenario may
                                                  resiliency when systems problems do                      pegging functionality of Mid-Point Peg                elect to use the multiple Display-Price
                                                  occur, and enhance the Commission’s                      Orders, and Supplemental Peg Orders
                                                  oversight and enforcement of securities                                                                        Sliding process. Therefore, the
                                                                                                           are infrequently used in Pilot Securities             Exchange believes it is consistent with
                                                  market technology infrastructure.                        or the execution of such orders would
                                                  Regulation SCI required the Exchange to                                                                        the Act to set forth this scenario in its
                                                                                                           be scarce due to the Plan’s minimum                   rules so that Users will understand how
                                                  establish written policies and                           trading and quoting requirement and
                                                  procedures reasonably designed to                                                                              the System operates and how their
                                                                                                           Trade-at Prohibition. The limited usage               orders would be handled in this discrete
                                                  ensure that their systems have levels of                 and execution scenarios do not justify
                                                  capacity, integrity, resiliency,                                                                               scenario.
                                                                                                           the additional system complexity which
                                                  availability, and security adequate to                   would be created by modifying the                       Lastly, the Exchange believes the
                                                  maintain their operational capability                    System to support such order types in                 ministerial changes to Rule 11.27 are
                                                  and promote the maintenance of fair                      order to comply with the Plan.                        also consistent with the Act as they
                                                  and orderly markets, and that they                       Therefore, the Exchange believes each                 would: (i) Clarify a provision under
                                                  operate in a manner that complies with                   proposed change is a reasonable means                 paragraph (a)(4); and (ii) remove
                                                  the Exchange Act. Each of these                          to ensure that the System’s integrity,                redundant provisions from the rule.
                                                  proposed changes are intended to                         resiliency, and availability continues to
                                                  reduce complexity and risk in the                                                                              (B) Self-Regulatory Organization’s
                                                                                                           promote the maintenance of fair and
                                                  System to ensure the Exchange’s                                                                                Statement on Burden on Competition
                                                                                                           orderly markets. Due to the additional
                                                  technology remains robust and resilient.                 complexity, limited usage and execution                 The Exchange does not believe that
                                                  In determining the scope of the                          opportunities, the Exchange believes it
                                                  proposed changes, the Exchange                                                                                 the proposed rule change will result in
                                                                                                           is not unfairly discriminatory to apply               any burden on competition that is not
                                                  carefully weighed the impact on the                      the changes proposed herein to only
                                                  Pilot, System complexity, and the usage                                                                        necessary or appropriate in furtherance
                                                                                                           Pilot Securities as such changes are                  of the purposes of the Act. The
                                                  of such order types in Pilot Securities.48               necessary to reduce complexity and
                                                  The potential complexity results from                                                                          Exchange notes that the proposed rule
                                                                                                           ensure continued System resiliency in                 change is designed to assist the
                                                  code changes for a majority of the                       accordance with the requirements of
                                                  Exchange’s order types, which requires                                                                         Exchange in meeting its regulatory
                                                                                                           Regulation SCI. The Exchange also                     obligations pursuant to the Plan, reduce
                                                                                                           believes the proposed changes to Non-
                                                    46 The Commission has also expressed concern                                                                 System complexity and enhance
                                                                                                           Displayed Orders, and orders subject to
                                                  regarding potential market instability caused by                                                               resiliency. The Exchange also notes that
                                                  technological risks. See e.g., Chair Mary Jo White,      the Display-Price Sliding process in Test
                                                                                                                                                                 the proposed rule change will apply
                                                  Commission, Enhancing Our Equity Market                  Group Three are consistent with the Act
                                                  Structure (June 5, 2014) available at https://           because they are designed to increase                 equally to all Members that trade Pilot
                                                  www.sec.gov/News/Speech/Detail/Speech/
                                                                                                           the execution opportunities for such                  Securities.
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                                                  1370542004312#.VD2HW610w6Y.
                                                    47 See Securities Exchange Act Release No. 73639       order types in compliance with the mid-               (C) Self-Regulatory Organization’s
                                                  (November 19, 2014), 79 FR 72251 (December 5,            point exception to the Trade-at                       Statement on Comments on the
                                                  2014) (‘‘Regulation SCI Approval Order’’).               Prohibition. The Exchange also believes               Proposed Rule Change Received From
                                                    48 But for the Plan, the Exchange notes that it
                                                                                                           the proposed change to Market Pegged                  Members, Participants or Others
                                                  would not have proposed to amend the operation
                                                  of Market Pegged Orders, Discretionary Orders,
                                                                                                           Orders in Test Groups One and Two is
                                                  Non-Displayed Orders, Supplemental Peg Orders,           consistent with the Act because it is                   Written comments were neither
                                                  and Display-Price Sliding as described herein.           identical to the operation of the Super               solicited nor received.


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                                                                                 Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices                                                  47193

                                                  III. Date of Effectiveness of the                          the duration of the Pilot Period.52 These             if email is used. To help the
                                                  Proposed Rule Change and Timing for                        proposals appear designed to permit the               Commission process and review your
                                                  Commission Action                                          Exchange to avoid the costs of                        comments more efficiently, please use
                                                                                                             modifying these order types to comply                 only one method. The Commission will
                                                     Within 45 days of the date of                           with the Plan. The Exchange notes that                post all comments on the Commission’s
                                                  publication of this notice in the Federal                  these order types are infrequently used               Internet Web site (http://www.sec.gov/
                                                  Register or within such longer period (i)                  in Pilot Securities, and takes the                    rules/sro.shtml). Copies of the
                                                  as the Commission may designate up to                      position that ‘‘[t]he limited usage and               submission, all subsequent
                                                  90 days of such date if it finds such                      execution scenarios do not justify the                amendments, all written statements
                                                  longer period to be appropriate and                        additional system complexity which                    with respect to the proposed rule
                                                  publishes its reasons for so finding or                    would be created by modifying the                     change that are filed with the
                                                  (ii) as to which the Exchange consents,                    System to support such order types in                 Commission, and all written
                                                  the Commission will: (a) By order                          order to comply with the Plan.’’ 53 At                communications relating to the
                                                  approve or disapprove such proposed                        the same time, the Exchange also does                 proposed rule change between the
                                                  rule change, or (b) institute proceedings                  not appear prepared to propose to                     Commission and any person, other than
                                                  to determine whether the proposed rule                     eliminate these order types indefinitely.             those that may be withheld from the
                                                  change should be disapproved.                              By contrast, the Exchange proposes to                 public in accordance with the
                                                                                                             modify, in ways not required by the                   provisions of 5 U.S.C. 552, will be
                                                  IV. Solicitation of Comments
                                                                                                             Plan, the operation of Market Pegged                  available for Web site viewing and
                                                     Interested persons are invited to                       Orders and Non-Displayed Orders, and                  printing in the Commission’s Public
                                                  submit written data, views and                             certain orders subject to the Display-                Reference Room, 100 F Street NE.,
                                                  arguments concerning the foregoing,                        Price Sliding process, in some or all                 Washington, DC 20549, on official
                                                  including whether the proposal is                          Test Groups of Pilot Securities, and to               business days between the hours of
                                                  consistent with the Act. In particular,                    incur the associated system change                    10:00 a.m. and 3:00 p.m. Copies of such
                                                  the Commission seeks comment on the                        costs, in order to increase the                       filing will also be available for
                                                  issue described below.                                     ‘‘execution opportunities’’ for these                 inspection and copying at the principal
                                                                                                             order types for the duration of the Pilot             office of the Exchange. All comments
                                                     In the Approval Order, the                              Period.54
                                                  Commission stressed the importance of                                                                            received will be posted without change;
                                                                                                                The Commission is concerned that                   the Commission does not edit personal
                                                  testing the impact of wider tick sizes on                  proposed rule changes, other than those
                                                  the trading and liquidity of the                                                                                 identifying information from
                                                                                                             necessary for compliance with Plan, that              submissions. You should submit only
                                                  securities of small capitalization                         are targeted at Pilot Securities, that have
                                                  companies, and doing so in a way that                                                                            information that you wish to make
                                                                                                             a disparate impact on different Test                  available publicly. All submissions
                                                  produces robust results that inform                        Groups and the Control Group, and that
                                                  future policy decisions.49 The                                                                                   should refer to File No. SR–BatsBZX–
                                                                                                             are to apply temporarily only for the                 2016–29 and should be submitted on or
                                                  Commission acknowledged the                                Pilot Period, could bias the results of the
                                                  complexity of the Pilot and the costs                                                                            before August 10, 2016.
                                                                                                             Pilot and undermine the value of the
                                                  that its implementation would create for                   data generated in informing future                       For the Commission, by the Division of
                                                  market participants, but concluded that                    policy decisions. Accordingly, the                    Trading and Markets, pursuant to delegated
                                                  the benefits of the empirical data that                                                                          authority.55
                                                                                                             Commission is concerned that the
                                                  would be produced by the Pilot                             proposed rule change may not be                       Jill M. Peterson,
                                                  warranted incurring those costs.50 As a                    consistent with Act, including Section                Assistant Secretary.
                                                  result, the Plan requires that each                        6(b)(5) thereof and Rule 608 of                       [FR Doc. 2016–17093 Filed 7–19–16; 8:45 am]
                                                  Participant, including the Exchange,                       Regulation NMS, or with the Plan.                     BILLING CODE 8011–01–P
                                                  adopt rules that are necessary for                            Comments may be submitted by any
                                                  compliance with the provisions of the                      of the following methods:
                                                  Plan.51                                                                                                          SECURITIES AND EXCHANGE
                                                                                                             Electronic Comments                                   COMMISSION
                                                     While the Exchange states that the
                                                                                                               • Use the Commission’s Internet
                                                  proposed rule change describes the                                                                               [Release No. 34–78332; File No. TP 16–10]
                                                                                                             comment form (http://www.sec.gov/
                                                  system changes necessary to implement
                                                                                                             rules/sro.shtml); or                                  Order Granting Limited Exemptions
                                                  the Pilot, the Commission notes that the                     • Send an email to rule-comments@
                                                  scope of the proposed changes extends                                                                            From Exchange Act Rule 10b–17 and
                                                                                                             sec.gov. Please include File No. SR–                  Rules 101 and 102 of Regulation M to
                                                  beyond those required for compliance                       BatsBZX–2016–29 on the subject line.
                                                  with the Plan, and would eliminate                                                                               Janus Detroit Street Trust, the Janus
                                                  certain order types for Pilot Securities                   Paper Comments                                        Velocity Tail Risk Hedged Large Cap
                                                  during the Pilot Period, or modify their                     • Send paper comments in triplicate                 ETF, and the Janus Velocity Volatility
                                                  operation in ways not required by the                      to Secretary, Securities and Exchange                 Hedged Large Cap ETF
                                                  Plan. For example, the Exchange                            Commission, 100 F Street NE.,                         July 14, 2016.
                                                  proposes not to accept Market Pegged                       Washington, DC 20549–1090.
                                                  Orders, Discretionary Orders, and                                                                                   By letter dated July 14, 2016 (the
                                                                                                             All submissions should refer to File No.              ‘‘Letter’’), as supplemented by
                                                  Supplemental Peg Orders, and certain                       SR–BatsBZX–2016–29. This file number                  conversations with the staff of the
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                                                  types of Mid-Point Peg Orders, in some                     should be included on the subject line
                                                  or all Test Groups of Pilot Securities for                                                                       Division of Trading and Markets,
                                                                                                                                                                   counsel for Janus Detroit Street Trust
                                                                                                               52 The Exchange also proposes to cancel certain
                                                    49 See
                                                                                                                                                                   (the ‘‘Trust’’) on behalf of the Trust, the
                                                             Approval Order, supra note 4, at 80 FR          orders subject to the Display-Price Sliding process
                                                  27515.                                                     in certain Pilot Securities for the duration of the   Janus Velocity Tail Risk Hedged Large
                                                    50 Id at 27516.                                          Pilot Period.                                         Cap ETF and the Janus Velocity
                                                    51 See Section II(B) of the Plan. See also Section         53 See supra Item II.A.2.

                                                  IV of the Plan.                                              54 See supra Item II.A.1–2.                           55 17   CFR 200.30–3(a)(12).



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Document Created: 2018-02-08 07:56:58
Document Modified: 2018-02-08 07:56:58
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation81 FR 47187 

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