81_FR_47344 81 FR 47205 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt Paragraph (c) to Exchange Rule 11.22 To Describe Changes to System Functionality Necessary To Implement the Regulation NMS Plan To Implement a Tick Size Pilot Program

81 FR 47205 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt Paragraph (c) to Exchange Rule 11.22 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 Range47205-47211
FR Document2016-17091

Federal Register, Volume 81 Issue 139 (Wednesday, July 20, 2016)
[Federal Register Volume 81, Number 139 (Wednesday, July 20, 2016)]
[Notices]
[Pages 47205-47211]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-17091]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78331; File No. SR-BatsEDGX-2016-26]


Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing of a Proposed Rule Change To Adopt Paragraph (c) to Exchange 
Rule 11.22 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 EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III 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 11.22 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(cc).
    \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 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 
BZX Exchange, Inc. (``BZX''), Bats EDGA Exchange, Inc. (``EDGA''), 
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

[[Page 47206]]

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 11.22 to 
require Members \16\ to comply with the quoting and trading provisions 
of the Plan.\17\ The Exchange also adopted paragraph (b) of Rule 11.22 
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. 77791 (May 10, 
2016), 81 FR 30375 (May 16, 2016) (SR-BatsEDGX-2016-14).
    \18\ See Securities Exchange Act Release No. 77416 (March 22, 
2016), 81 FR 17225 (March 28, 2016) (SR-BatsEDGX-2016-01).
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Proposed System Changes
    The Exchange proposes to adopt paragraph (c) of Exchange Rule 11.22 
to describe changes to System functionality necessary to implement the 
Plan. Paragraph (c) of Rule 11.22 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 11.22 
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) Market 
Orders; (ii) orders with a Market Peg instruction; (iii) MidPoint Peg 
Orders; (iii) orders with a Discretionary Range; (iv) orders with a 
Non-Displayed instruction; (v) Market Maker Peg Orders; (vi) 
Supplemental Peg Orders; and (vii) 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 changes are reasonably designed to comply with applicable 
quoting and trading requirements specified in the Plan.
Market Orders
    A 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.\19\ Market Orders shall not trade through Protected 
Quotations. Any portion of a 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 11.22(c)(1) that for purposes of determining whether a Market 
Order's execution price is more than 5 percent worse than the NBBO 
under Rule 11.8(a)(7), 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 11.8(a).
    \20\ Id.
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Market Peg Instruction
    The Exchange proposes to amend the operation of orders with a 
Market Peg instruction 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. An order with a Pegged instruction is 
automatically adjusted by the System in response to changes in the NBBO 
and will peg to the NBB or NBO or a certain amount away from the NBB or 
NBO.\21\ An order with a Market Peg instruction is pegged to the 
contra-side NBBO.\22\ A User \23\ entering an order with a Market Peg 
instruction can specify that such

[[Page 47207]]

order's price will offset the inside quote on the contra-side of the 
market by an amount (the ``Offset'') set by the User. An order with a 
Market Peg instruction is not eligible to be displayed on the Exchange.
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    \21\ See Exchange Rule 11.6(j).
    \22\ See Exchange Rule 11.6(j)(1).
    \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(ee).
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    In Test Groups One and Two, the Exchange proposes to modify the 
behavior of an order with a Market Peg instruction when it is locked by 
an incoming order with a Post Only instruction \24\ that does not 
remove liquidity pursuant to Rule 11.6(n)(4).\25\ In such case, the 
order with a Market Peg instruction would be converted to an executable 
order and will remove liquidity against such incoming order. In no case 
would an order with a Market Peg instruction execute against an 
incoming order with a Post Only instruction if an order with higher 
priority is on the EDGX Book.\26\ Specifically, if an order other than 
an order with a Market Peg instruction maintains higher priority than 
one or more orders with a Market Peg instruction, the order(s) with a 
Market Peg instruction with lower priority will not be converted, as 
described above, and the incoming order with a Post Only instruction 
will be posted or cancelled in accordance with Rule 11.6(n)(4).
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    \24\ See Exchange Rule 11.6(n)(4).
    \25\ A Post Only Order will remove contra-side liquidity from 
the EDGX Book if the order is an order to buy or sell a security 
priced below $1.00 or if the value of such execution when removing 
liquidity equals or exceeds the value of such execution if the order 
instead posted to the EDGX Book and subsequently provided liquidity, 
including the applicable fees charged or rebates provided. See 
Exchange Rule 11.6(n)(4).
    \26\ The term ``EDGX Book'' is defined as the ``System's 
electronic file of orders.'' See Exchange Rule 1.5(d).
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    The Exchange notes that orders with a Market Peg instruction are 
aggressive by nature and believes executing the order in such 
circumstance is appropriate. The Exchange also notes that the proposed 
behavior for orders with a Market Peg instruction in Test Groups One 
and Two is identical to the operation of orders with the Super 
Aggressive Routing instruction under Exchange Rule 11.6(n)(2). When an 
order with a Super Aggressive instruction is locked by an incoming 
order with a Post Only instruction that does not remove liquidity 
pursuant to Rule 11.6(n)(4), 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 order with a 
Post Only instruction if an order with higher priority is on the EDGX 
Book. The Exchange believes this change is reasonable and appropriate 
due to the limited usage of orders with a Market Peg instruction in 
Pilot Securities, to avoid unnecessary additional System complexity, 
and to ensure the order with a Market Peg instruction may execute in 
such circumstance.
    The Exchange also proposes to not accept orders with a Market Peg 
instruction 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 11.22(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,\27\ unless an enumerated exception applies.\28\ 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 orders with a Market Peg instruction in Test 
Group Three. A vast majority of orders with a Market Pegged instruction 
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, an order with a Market Peg instruction would not be 
eligible for execution at the locking price, including when a Trade-at 
Intermarket Sweep Order (``ISO'') \29\ 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. An order 
with a Market Peg instruction to buy at $10.10 with a zero Offset is 
entered on the Exchange. The order would be ranked and hidden on the 
EDGX 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 orders 
with a Market Peg instruction 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 orders with a Market 
Peg instruction due to the Trade-at Prohibition.
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    \27\ 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(y).
    \28\ See also Section VI(D) of the Plan.
    \29\ 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 
11.22(a)(7)(A)(i). These additional routed orders also must be 
marked as Trade-at Intermarket Sweep Orders. Id.
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MidPoint Peg Orders
    A MidPoint 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 
\30\ inside the same side of the NBBO as the order.\31\ 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.\32\ Consistent with previous guidance 
issued by the Participants,\33\ the Exchange proposes to amend the 
operation of MidPoint Peg Orders to explicitly state that MidPoint Peg 
Orders in Pilot Securities may not be entered in increments other than 
$0.05. The System will execute a MidPoint 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 MidPoint 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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    \30\ See Exchange Rule 11.6(i).
    \31\ See Exchange Rule 11.8(d).
    \32\ See Sections VI(B), (C), and (D) of the Plan. See also 
Exchange Rules 11.22(a)(4), (a)(5), and (a)(6).
    \33\ 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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[[Page 47208]]

Discretionary Range Instruction
    The Exchange proposes to not accept orders with a Discretionary 
Range 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, an order with a 
Discretionary Range has a displayed or non-displayed ranked price and 
size and an additional non-displayed ``discretionary price''.\34\ 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 orders with a Discretionary Range 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, orders with 
a Discretionary Range 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 orders with a Discretionary Range in Pilot 
Securities does not justify the additional System complexity that would 
be created by supporting such orders. As a result of these factors the 
Exchange proposes to not accept orders with a Discretionary Range in 
all Test Groups and the Control Group.
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    \34\ See Exchange Rule 11.6(d).
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Non-Displayed Instruction
    The Exchange proposes to re-price to the midpoint of the NBBO 
orders with a Non-Displayed instruction in Test Group Three that are 
priced in a permissible increment better than the midpoint of the NBBO. 
An order with a Non-Displayed instruction is not displayed on the 
Exchange.\35\ Exchange Rule 11.22(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, an 
order with a Non-Displayed instruction 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.\36\ Furthermore, such aggressively priced orders would not be 
able to post to the EDGX 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 orders with a Non-Displayed instruction in Test Group 
Three, the Exchange proposes to re-price to the midpoint of the NBBO 
orders with a Non-Displayed instruction that are priced in a 
permissible increment better than the midpoint of the NBBO.
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    \35\ See Exchange Rule 11.6(e)(2).
    \36\ Under Exchange Rule 11.9(a)(2)(A), 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 11.20(d)(2)(D)) 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 11.20(d).\37\ 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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    \37\ See Exchange Rule 11.8(e).
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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 EDGX 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.\38\ 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 Prohibition.\39\ Therefore, the Exchange proposes 
to not accept Supplemental Peg Orders in Test Group Three.
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    \38\ See Exchange Rule 11.8(f).
    \39\ 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 EDGX 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).\40\ 
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.\41\
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    \40\ See Exchange Rule 11.6(l)(1)(B).
    \41\ See Exchange Rule 11.6(l)(1)(B)(iii).
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    As described above, Exchange Rule 11.22(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-

[[Page 47209]]

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 order 
with a Non-Displayed instruction is resting on the EDGX 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.\42\ 
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 order with a Non-
Displayed instruction is resting on the EDGX 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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    \42\ Id.
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Ministerial Change
    Currently, both Interpretation and Policy .03 to Rule 11.22(a) and 
Interpretation and Policy .11 to Rule 11.22(b) state that Rule 11.22 
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 11.22 and, therefore, proposes to delete both 
Interpretation and Policy .03 to Rule 11.22(a) and Interpretation and 
Policy .11 to Rule 11.22(b) as those provisions would be redundant and 
unnecessary. The Exchange also proposes to amend the last sentence of 
Rule 11.22(a)(4) to specify that the current permissible price 
increments are set forth under Exchange Rule 11.6(i), Minimum Price 
Variation.
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 \43\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \44\ 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.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78f(b).
    \44\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes regarding Market 
Orders, MidPoint 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 orders with 
a Market Peg instruction, orders with a Discretionary Range, orders 
with a Non-Displayed instruction, Supplemental Peg Orders, and Display-
Price Sliding are also consistent with the Act because 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.\45\ For example, during March 2016, the alternative 
pegging functionality of MidPoint Peg Orders, orders with a Market Peg 
instruction, orders with a Non-Displayed instruction, 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, BZX and 
EDGA combined. Notably, orders with a Discretionary Range accounted for 
0.00% of volume in eligible Pilot Securities on the Exchange, BYX, BZX 
and EDGA combined.
---------------------------------------------------------------------------

    \45\ 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.\46\ 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

[[Page 47210]]

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.\47\ 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.
---------------------------------------------------------------------------

    \46\ See Securities Exchange Act Release No. 73639 (November 19, 
2014), 79 FR 72251 (December 5, 2014) (``Regulation SCI Approval 
Order'').
    \47\ But for the Plan, the Exchange notes that it would not have 
proposed to amend the operation of orders with a Market Peg 
instruction, orders with a Discretionary Range, orders with a Non-
Displayed instruction, 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, orders with a Market Peg instruction, orders with a 
Discretionary Range, the alternative pegging functionality of MidPoint 
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 orders with a Non-
Displayed instruction, 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 11.6(n)(2). 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 
order with a Non-Displayed instruction is resting on the EDGX 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 11.22 
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.

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 proposed rule 
change 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.\48\ 
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.\49\ 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.\50\
---------------------------------------------------------------------------

    \48\ See Approval Order, supra note 4, at 80 FR 27515.
    \49\ Id. at 27516.
    \50\ See Section II(B) of the Plan. See also Section IV of the 
Plan.

---------------------------------------------------------------------------

[[Page 47211]]

    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.\51\ 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.'' 
\52\ 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.\53\
---------------------------------------------------------------------------

    \51\ 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.
    \52\ See supra Item II.A.2.
    \53\ 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 Number SR-BatsEDGX-2016-26 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 Number SR-BatsEDGX-2016-26. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BatsEDGX-2016-26, and should 
be submitted on or before August 10, 2016.
---------------------------------------------------------------------------

    \54\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\54\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2016-17091 Filed 7-19-16; 8:45 am]
 BILLING CODE 8011-01-P



                                                                                    Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices                                                     47205

                                                  Plan, the operation of Market Pegged                       business days between the hours of                       the Regulation NMS Plan to Implement
                                                  Orders and Non-Displayed Orders, and                       10:00 a.m. and 3:00 p.m. Copies of such                  a Tick Size Pilot Program (‘‘Plan’’ or
                                                  certain orders subject to the Display-                     filing will also be available for                        ‘‘Pilot’’).4 In determining the scope of
                                                  Price Sliding process, in some or all                      inspection and copying at the principal                  the proposed changes to implement the
                                                  Test Groups of Pilot Securities, and to                    office of the Exchange. All comments                     Pilot,5 the Exchange carefully weighed
                                                  incur the associated system change                         received will be posted without change;                  the impact on the Pilot, System
                                                  costs, in order to increase the                            the Commission does not edit personal                    complexity, and the usage of such order
                                                  ‘‘execution opportunities’’ for these                      identifying information from                             types in Pilot Securities.
                                                  order types for the duration of the Pilot                  submissions. You should submit only                         The text of the proposed rule change
                                                  Period.59                                                  information that you wish to make                        is available at the Exchange’s Web site
                                                     The Commission is concerned that                        available publicly. All submissions                      at www.batstrading.com, at the
                                                  proposed rule changes, other than those                    should refer to File No. SR–BatsBYX–                     principal office of the Exchange, and at
                                                  necessary for compliance with Plan, that                   2016–17 and should be submitted on or                    the Commission’s Public Reference
                                                  are targeted at Pilot Securities, that have                before August 10, 2016.                                  Room.
                                                  a disparate impact on different Test                          For the Commission, by the Division of
                                                  Groups and the Control Group, and that                     Trading and Markets, pursuant to delegated               II. Self-Regulatory Organization’s
                                                  are to apply temporarily only for the                      authority.60                                             Statement of the Purpose of, and
                                                  Pilot Period, could bias the results of the                Jill M. Peterson,                                        Statutory Basis for, the Proposed Rule
                                                  Pilot and undermine the value of the                       Assistant Secretary.                                     Change
                                                  data generated in informing future                         [FR Doc. 2016–17092 Filed 7–19–16; 8:45 am]
                                                  policy decisions. Accordingly, the                                                                                    In its filing with the Commission, the
                                                                                                             BILLING CODE 8011–01–P                                   Exchange included statements
                                                  Commission is concerned that the
                                                  proposed rule change may not be                                                                                     concerning the purpose of and basis for
                                                  consistent with Act, including Section                                                                              the proposed rule change and discussed
                                                                                                             SECURITIES AND EXCHANGE                                  any comments it received on the
                                                  6(b)(5) thereof and Rule 608 of                            COMMISSION
                                                  Regulation NMS, or with the Plan.                                                                                   proposed rule change. The text of these
                                                     Comments may be submitted by any                        [Release No. 34–78331; File No. SR–                      statements may be examined at the
                                                  of the following methods:                                  BatsEDGX–2016–26]                                        places specified in Item IV below. The
                                                                                                                                                                      Exchange has prepared summaries, set
                                                  Electronic Comments                                        Self-Regulatory Organizations; Bats                      forth in Sections A, B, and C below, of
                                                    • Use the Commission’s Internet                          EDGX Exchange, Inc.; Notice of Filing                    the most significant parts of such
                                                  comment form (http://www.sec.gov/                          of a Proposed Rule Change To Adopt                       statements.
                                                  rules/sro.shtml); or                                       Paragraph (c) to Exchange Rule 11.22
                                                    • Send an email to rule-comments@                        To Describe Changes to System                            A. Self-Regulatory Organization’s
                                                  sec.gov. Please include File No. SR–                       Functionality Necessary To Implement                     Statement of the Purpose of, and
                                                  BatsBYX–2016–17 on the subject line.                       the Regulation NMS Plan To Implement                     Statutory Basis for, the Proposed Rule
                                                                                                             a Tick Size Pilot Program                                Change
                                                  Paper Comments
                                                                                                             July 14, 2016.                                           1. Purpose
                                                     • Send paper comments in triplicate
                                                  to Secretary, Securities and Exchange                         Pursuant to Section 19(b)(1) of the                   Background
                                                  Commission, 100 F Street NE.,                              Securities Exchange Act of 1934 (the
                                                                                                             ‘‘Act’’),1 and Rule 19b–4 thereunder,2                      On August 25, 2014, NYSE Group,
                                                  Washington, DC 20549–1090.
                                                                                                             notice is hereby given that on June 29,                  Inc., on behalf of the Exchange, Bats
                                                  All submissions should refer to File No.                                                                            BYX Exchange, Inc. (‘‘BYX’’), Chicago
                                                                                                             2016, Bats EDGX Exchange, Inc. (the
                                                  SR–BatsBYX–2016–17. This file number                                                                                Stock Exchange, Inc., Bats BZX
                                                                                                             ‘‘Exchange’’ or ‘‘EDGX’’) filed with the
                                                  should be included on the subject line                                                                              Exchange, Inc. (‘‘BZX’’), Bats EDGA
                                                                                                             Securities and Exchange Commission
                                                  if email is used. To help the                                                                                       Exchange, Inc. (‘‘EDGA’’), Financial
                                                                                                             (‘‘Commission’’) the proposed rule
                                                  Commission process and review your                                                                                  Industry Regulatory Authority, Inc.
                                                                                                             change as described in Items I, II, and
                                                  comments more efficiently, please use                                                                               (‘‘FINRA’’), NASDAQ OMX BX, Inc.,
                                                                                                             III below, which Items have been
                                                  only one method. The Commission will                                                                                NASDAQ OMX PHLX LLC, the Nasdaq
                                                                                                             prepared by the Exchange. The
                                                  post all comments on the Commission’s                                                                               Stock Market LLC, New York Stock
                                                                                                             Commission is publishing this notice to
                                                  Internet Web site (http://www.sec.gov/                                                                              Exchange LLC (‘‘NYSE’’), NYSE MKT
                                                                                                             solicit comments on the proposed rule
                                                  rules/sro.shtml). Copies of the                                                                                     LLC, and NYSE Arca, Inc. (collectively
                                                                                                             change from interested persons.
                                                  submission, all subsequent                                                                                          ‘‘Participants’’), filed with the
                                                  amendments, all written statements                         I. Self-Regulatory Organization’s                        Commission, pursuant to Section 11A of
                                                  with respect to the proposed rule                          Statement of the Terms of Substance of                   the Act 6 and Rule 608 of Regulation
                                                  change that are filed with the                             the Proposed Rule Change                                 NMS thereunder, the Plan to implement
                                                  Commission, and all written                                   The Exchange filed a proposal to                      a tick size pilot program.7 The
                                                  communications relating to the                             adopt paragraph (c) to Exchange Rule                     Participants filed the Plan to comply
                                                  proposed rule change between the                           11.22 to describe changes to System 3                    with an order issued by the Commission
                                                  Commission and any person, other than                      functionality necessary to implement
                                                  those that may be withheld from the                                                                                    4 See Securities Exchange Act Release No. 74892
                                                  public in accordance with the
mstockstill on DSK3G9T082PROD with NOTICES




                                                                                                                  60 17
                                                                                                                      CFR 200.30–3(a)(12).                            (May 6, 2015), 80 FR 27513 (May 13, 2015)
                                                  provisions of 5 U.S.C. 552, will be                          1 15 U.S.C. 78s(b)(1).                                 (‘‘Approval Order’’).
                                                  available for Web site viewing and                           2 17 CFR 240.19b–4.                                       5 Unless otherwise specified, capitalized terms

                                                  printing in the Commission’s Public                          3 The term ‘‘System’’ is defined as the ‘‘electronic   used in this rule filing are defined as set forth in
                                                                                                             communications and trading facility designated by        the Plan.
                                                  Reference Room, 100 F Street NE.,                                                                                      6 15 U.S.C. 78k–1.
                                                                                                             the Board through which securities orders of Users
                                                  Washington, DC 20549, on official                          are consolidated for ranking, execution and, when           7 See Letter from Brendon J. Weiss, Vice

                                                                                                             applicable, routing away.’’ See Exchange Rule            President, Intercontinental Exchange, Inc., to
                                                    59 See   supra Item II.A.1–2.                            1.5(cc).                                                 Secretary, Commission, dated August 25, 2014.



                                             VerDate Sep<11>2014     18:24 Jul 19, 2016   Jkt 238001   PO 00000     Frm 00051   Fmt 4703   Sfmt 4703   E:\FR\FM\20JYN1.SGM   20JYN1


                                                  47206                         Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices

                                                  on June 24, 2014.8 The Plan was                          same exceptions provided under Test                     regulatory obligations pursuant to the
                                                  published for comment in the Federal                     Group Two will also be available under                  Plan. As discussed below, certain of
                                                  Register on November 7, 2014, and                        the Trade-at Prohibition, with an                       these changes are also intended to
                                                  approved by the Commission, as                           additional exception for Block Size                     reduce risk in the System by eliminating
                                                  modified, on May 6, 2015.9                               orders and exceptions that mirror those                 unnecessary complexity based on
                                                     The Plan is designed to allow the                     under Rule 611 of Regulation NMS.15                     infrequent current usage of certain order
                                                  Commission, market participants, and                       The Plan requires the Exchange to                     types in Pilot Securities and/or their
                                                  the public to study and assess the                       establish, maintain, and enforce written                limited ability to execute under the
                                                  impact of increment conventions on the                   policies and procedures that are                        Trade-at Prohibition. Therefore, the
                                                  liquidity and trading of the common                      reasonably designed to comply with                      Exchange firmly believes that these
                                                  stocks of small-capitalization                           applicable quoting and trading                          changes will have little or no impact on
                                                  companies. Each Participant is required                  requirements specified in the Plan.                     the operation and data collection
                                                  to comply, and to enforce compliance                     Accordingly, the Exchange adopted                       elements of the Plan. The Exchange
                                                  by its member organizations, as                          paragraph (a) of Rule 11.22 to require                  further believes that the proposed rule
                                                  applicable, with the provisions of the                   Members 16 to comply with the quoting                   changes are reasonably designed to
                                                  Plan.                                                    and trading provisions of the Plan.17                   comply with applicable quoting and
                                                     The Pilot will include stocks of                      The Exchange also adopted paragraph                     trading requirements specified in the
                                                  companies with $3 billion or less in                     (b) of Rule 11.22 to require Members to                 Plan.
                                                  market capitalization, an average daily                  comply with the data collection
                                                  trading volume of one million shares or                  provisions under Appendix B and C of                    Market Orders
                                                  less, and a volume weighted average                      the Plan.18                                               A Market Order is an order to buy or
                                                  price of at least $2.00 for every trading                                                                        sell a stated amount of a security that is
                                                  day. The Pilot will consist of a Control                 Proposed System Changes                                 to be executed at the NBBO when the
                                                  Group of approximately 1400 Pilot                           The Exchange proposes to adopt                       order reaches the Exchange.19 Market
                                                  Securities and three Test Groups with                    paragraph (c) of Exchange Rule 11.22 to                 Orders shall not trade through Protected
                                                  400 Pilot Securities in each Test Group                  describe changes to System                              Quotations. Any portion of a Market
                                                  selected by a stratified sampling.10                     functionality necessary to implement                    Order that would execute at a price
                                                  During the Pilot, Pilot Securities in the                the Plan. Paragraph (c) of Rule 11.22                   more than $0.50 or 5 percent worse than
                                                  Control Group will be quoted and                         would set forth the Exchange’s specific                 the NBBO at the time the order initially
                                                  traded at the currently permissible                      procedures for handling, executing, re-                 reaches the Exchange, whichever is
                                                  increments. Pilot Securities in the first                pricing and displaying of certain order                 greater, will be cancelled.20 In order to
                                                  Test Group (‘‘Test Group One’’) will be                  types and order type instructions                       comply with the minimum quoting
                                                  quoted in $0.05 minimum increments                       applicable to Pilot Securities. Unless                  increments set forth in the Plan, the
                                                  but will continue to trade at any price                  otherwise indicated, paragraph (c) of                   Exchange proposes to state under
                                                  increment that is currently permitted.11                 Rule 11.22 would apply to order types                   proposed Rule 11.22(c)(1) that for
                                                  Pilot Securities in the second Test                      and order type instructions in Pilot                    purposes of determining whether a
                                                  Group (‘‘Test Group Two’’) will be                       Securities in Test Groups One, Two, and                 Market Order’s execution price is more
                                                  quoted in $0.05 minimum increments                       Three and not to orders in Pilot                        than 5 percent worse than the NBBO
                                                  and will trade at $0.05 minimum                          Securities included in the Control                      under Rule 11.8(a)(7), the execution
                                                  increments subject to a midpoint                         Group. The proposed changes include                     price for a buy (sell) order will be
                                                  exception, a retail investor order                       select and discrete amendments to the                   rounded down (up) to the nearest $0.05
                                                  exception, and a negotiated trade                        operation of: (i) Market Orders; (ii)                   increment.
                                                  exception.12 Pilot Securities in the third               orders with a Market Peg instruction;
                                                                                                           (iii) MidPoint Peg Orders; (iii) orders                 Market Peg Instruction
                                                  Test Group (‘‘Test Group Three’’) will be
                                                  subject to the same restrictions as Test                 with a Discretionary Range; (iv) orders                    The Exchange proposes to amend the
                                                  Group Two and also will be subject to                    with a Non-Displayed instruction; (v)                   operation of orders with a Market Peg
                                                  the ‘‘Trade-at’’ requirement to prevent                  Market Maker Peg Orders; (vi)                           instruction to reduce risk in its System
                                                  price matching by a market participant                   Supplemental Peg Orders; and (vii)                      by eliminating unnecessary complexity
                                                  that is not displaying at a price of a                   orders subject to the Display-Price                     based on infrequent current usage in
                                                  Trading Center’s 13 ‘‘Best Protected Bid’’               Sliding process.                                        Pilot Securities and their limited ability
                                                  or ‘‘Best Protected Offer,’’ unless an                      In determining the scope of these                    to execute under the Trade-at
                                                  enumerated exception applies.14 The                      proposed changes to implement the                       Prohibition in Test Group Three. An
                                                                                                           Plan, the Exchange carefully weighed                    order with a Pegged instruction is
                                                     8 See Securities Exchange Act Release No. 72460       the impact on the Pilot, System                         automatically adjusted by the System in
                                                  (June 24, 2014), 79 FR 36840 (June 30, 2014).            complexity, and the usage of such order                 response to changes in the NBBO and
                                                     9 See Approval Order, supra note 4.
                                                                                                           types in Pilot Securities. These                        will peg to the NBB or NBO or a certain
                                                     10 See Section V of the Plan for identification of
                                                                                                           proposed changes are designed to                        amount away from the NBB or NBO.21
                                                  Pilot Securities, including criteria for selection and
                                                  grouping.                                                directly comply with the Plan and to                    An order with a Market Peg instruction
                                                     11 See Section VI(B) of the Plan.                     assist the Exchange in meeting its                      is pegged to the contra-side NBBO.22 A
                                                     12 See Section VI(C) of the Plan.                                                                             User 23 entering an order with a Market
                                                                                                                15 17
                                                                                                                   CFR 242.611.
                                                     13 The Plan incorporates the definition of
                                                                                                                                                                   Peg instruction can specify that such
                                                  ‘‘Trading Center’’ from Rule 600(b)(78) of                    16 The
                                                                                                                    term ‘‘Member’’ is defined as ‘‘any
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                                                  Regulation NMS. Regulation NMS defines a Trading         registered broker or dealer that has been admitted        19 See
                                                  Center as ‘‘a national securities exchange or            to membership in the Exchange.’’ See Exchange                      Exchange Rule 11.8(a).
                                                                                                                                                                     20 Id.
                                                  national securities association that operates an SRO     Rule 1.5(n).
                                                                                                                                                                     21 See Exchange Rule 11.6(j).
                                                  trading facility, an alternative trading system, an        17 See Securities Exchange Act Release No. 77791

                                                  exchange market maker, an OTC market maker, or           (May 10, 2016), 81 FR 30375 (May 16, 2016) (SR–           22 See Exchange Rule 11.6(j)(1).
                                                  any other broker or dealer that executes orders          BatsEDGX–2016–14).                                        23 A ‘‘User’’ is defined as any member or
                                                  internally by trading as principal or crossing orders      18 See Securities Exchange Act Release No. 77416      sponsored participant of the Exchange who is
                                                  as agent.’’                                              (March 22, 2016), 81 FR 17225 (March 28, 2016)          authorized to obtain access to the System pursuant
                                                     14 See Section VI(D) of the Plan.                     (SR–BatsEDGX–2016–01).                                  to Rule 11.3. See Exchange Rule 1.5(ee).



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                                                                                Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices                                                          47207

                                                  order’s price will offset the inside quote               Exchange believes this change is                           sell at $10.05 is then entered. In this
                                                  on the contra-side of the market by an                   reasonable and appropriate due to the                      example, no execution occurs on the
                                                  amount (the ‘‘Offset’’) set by the User.                 limited usage of orders with a Market                      Exchange because Nasdaq is displaying
                                                  An order with a Market Peg instruction                   Peg instruction in Pilot Securities, to                    an order to sell at $10.05. The Trade-at
                                                  is not eligible to be displayed on the                   avoid unnecessary additional System                        ISO instruction only indicates that all of
                                                  Exchange.                                                complexity, and to ensure the order                        the better and equal priced buy orders
                                                     In Test Groups One and Two, the                       with a Market Peg instruction may                          have been cleared. It does not indicate
                                                  Exchange proposes to modify the                          execute in such circumstance.                              that the seller has cleared any Protected
                                                  behavior of an order with a Market Peg                      The Exchange also proposes to not                       Offers. Therefore, the Exchange
                                                  instruction when it is locked by an                      accept orders with a Market Peg                            proposes to not accept orders with a
                                                  incoming order with a Post Only                          instruction in Test Group Three based                      Market Peg instruction in Test Group
                                                  instruction 24 that does not remove                      on limited current usage, additional                       Three in an effort to reduce unnecessary
                                                  liquidity pursuant to Rule 11.6(n)(4).25                 System complexity, and their limited                       System complexity, avoid an internally
                                                  In such case, the order with a Market                    ability to execute under the Trade-at                      locked book, and due to the limited
                                                  Peg instruction would be converted to                    Prohibition. Exchange Rule                                 execution opportunities for orders with
                                                  an executable order and will remove                      11.22(a)(6)(D) sets forth the ‘‘Trade-at                   a Market Peg instruction due to the
                                                  liquidity against such incoming order.                   Prohibition,’’ which is the prohibition                    Trade-at Prohibition.
                                                  In no case would an order with a Market                  against executions by a Member that
                                                  Peg instruction execute against an                       operates a Trading Center of a sell order                  MidPoint Peg Orders
                                                  incoming order with a Post Only                          for a Pilot Security in Test Group Three
                                                                                                                                                                         A MidPoint Peg Order is an order
                                                  instruction if an order with higher                      at the price of a Protected Bid or the
                                                                                                                                                                      whose price is automatically adjusted
                                                  priority is on the EDGX Book.26                          execution of a buy order for a Pilot
                                                                                                                                                                      by the System in response to changes in
                                                  Specifically, if an order other than an                  Security in Test Group Three at the
                                                                                                                                                                      the NBBO to be pegged to the midpoint
                                                  order with a Market Peg instruction                      price of a Protected Offer during Regular
                                                                                                                                                                      of the NBBO, or, alternatively, pegged to
                                                  maintains higher priority than one or                    Trading Hours,27 unless an enumerated
                                                                                                                                                                      the less aggressive of the midpoint of
                                                  more orders with a Market Peg                            exception applies.28 The Exchange
                                                                                                                                                                      the NBBO or one Minimum Price
                                                  instruction, the order(s) with a Market                  believes that their de minimis usage and
                                                                                                                                                                      Variation 30 inside the same side of the
                                                  Peg instruction with lower priority will                 limited ability to execute due to the
                                                                                                                                                                      NBBO as the order.31 The Plan and
                                                  not be converted, as described above,                    Trade-at Prohibition does not justify the
                                                  and the incoming order with a Post                       complexity that would be created by                        current Exchange rules permit the
                                                  Only instruction will be posted or                       supporting orders with a Market Peg                        acceptance of orders priced to execute at
                                                  cancelled in accordance with Rule                        instruction in Test Group Three. A vast                    the midpoint of the NBBO to be ranked
                                                  11.6(n)(4).                                              majority of orders with a Market Pegged                    and accepted in increments of less than
                                                     The Exchange notes that orders with                   instruction are entered into the System                    $0.05.32 Consistent with previous
                                                  a Market Peg instruction are aggressive                  with a zero Offset and, therefore, create                  guidance issued by the Participants,33
                                                  by nature and believes executing the                     a locked market with the contra-side                       the Exchange proposes to amend the
                                                  order in such circumstance is                            NBBO. Under the Trade-at Prohibition,                      operation of MidPoint Peg Orders to
                                                  appropriate. The Exchange also notes                     an order with a Market Peg instruction                     explicitly state that MidPoint Peg
                                                  that the proposed behavior for orders                    would not be eligible for execution at                     Orders in Pilot Securities may not be
                                                  with a Market Peg instruction in Test                    the locking price, including when a                        entered in increments other than $0.05.
                                                  Groups One and Two is identical to the                   Trade-at Intermarket Sweep Order                           The System will execute a MidPoint Peg
                                                  operation of orders with the Super                       (‘‘ISO’’) 29 is entered, because of non-                   Order: (i) In $0.05 increments priced
                                                  Aggressive Routing instruction under                     cleared contra-side Protected                              better than the midpoint of the NBBO;
                                                  Exchange Rule 11.6(n)(2). When an                        Quotations. For example, assume the                        or (ii) at the midpoint of the NBBO,
                                                  order with a Super Aggressive                            NBBO is $10.00 (NYSE) × $10.05                             regardless of whether the midpoint of
                                                  instruction is locked by an incoming                     (Nasdaq) in a Test Group 3 security. An                    the NBBO is in an increment of $0.05.
                                                  order with a Post Only instruction that                  order with a Market Peg instruction to                     In order to comply with the minimum
                                                  does not remove liquidity pursuant to                    buy at $10.10 with a zero Offset is                        quoting and trading increments of the
                                                  Rule 11.6(n)(4), the order is converted to               entered on the Exchange. The order                         Plan and reduce unnecessary System
                                                  an executable order and will remove                      would be ranked and hidden on the                          complexity, a MidPoint Peg Order will
                                                  liquidity against such incoming order.                   EDGX Book at $10.05. A Trade-at ISO to                     not be permitted to alternatively peg to
                                                  In addition, like as proposed above, in                                                                             one Minimum Price Variation inside the
                                                  no case would an order with a Super                         27 The term ‘‘Regular Trading Hours’’ is defined        same side of the NBBO as the order in
                                                  Aggressive instruction execute against                   as ‘‘the time between 9:30 a.m. and 4:00 p.m.              Pilot Securities. The Exchange believes
                                                                                                           Eastern Time.’’ See Exchange Rule 1.5(y).                  that the current de minimis usage of the
                                                  an incoming order with a Post Only                          28 See also Section VI(D) of the Plan.
                                                  instruction if an order with higher                         29 A Trade-at ISO is a Limit Order for a Pilot
                                                                                                                                                                      alternative pegging functionality in Pilot
                                                  priority is on the EDGX Book. The                        Security that meets the following requirements: (i)        Securities does not justify the
                                                                                                           When routed to a Trading Center, the limit order           complexity and risk that would be
                                                    24 See                                                 is identified as a Trade-at Intermarket Sweep Order;       created by re-programming the System
                                                            Exchange Rule 11.6(n)(4).
                                                                                                           and (ii) simultaneously with the routing of the limit
                                                    25 A  Post Only Order will remove contra-side          order identified as a Trade-at Intermarket Sweep
                                                                                                                                                                      to support this functionality under the
                                                  liquidity from the EDGX Book if the order is an          Order, one or more additional limit orders, as             Plan.
                                                  order to buy or sell a security priced below $1.00
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                                                                                                           necessary, are routed to execute against the full size
                                                  or if the value of such execution when removing          of any protected bid, in the case of a limit order to        30 See Exchange Rule 11.6(i).
                                                  liquidity equals or exceeds the value of such            sell, or the full displayed size of any protected offer,     31 See Exchange Rule 11.8(d).
                                                  execution if the order instead posted to the EDGX        in the case of a limit order to buy, for the Pilot
                                                  Book and subsequently provided liquidity,                Security with a price that is better than or equal to
                                                                                                                                                                        32 See Sections VI(B), (C), and (D) of the Plan. See

                                                  including the applicable fees charged or rebates         the limit price of the limit order identified as a         also Exchange Rules 11.22(a)(4), (a)(5), and (a)(6).
                                                  provided. See Exchange Rule 11.6(n)(4).                  Trade-at Intermarket Sweep Order. See Exchange               33 See e.g., Question 42 of the Tick Size Pilot
                                                     26 The term ‘‘EDGX Book’’ is defined as the           Rule 11.22(a)(7)(A)(i). These additional routed            Program Trading and Quoting FAQs available at
                                                  ‘‘System’s electronic file of orders.’’ See Exchange     orders also must be marked as Trade-at Intermarket         http://www.finra.org/sites/default/files/TSPP-
                                                  Rule 1.5(d).                                             Sweep Orders. Id.                                          Trading-and-Quoting-FAQs.pdf.



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                                                  47208                          Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices

                                                  Discretionary Range Instruction                            exception applies. A Trading Center that              Order that posts to the EDGX Book, and
                                                     The Exchange proposes to not accept                     is displaying a quotation, via either a               thereafter is eligible for execution at the
                                                  orders with a Discretionary Range in all                   processor or an SRO quotation feed, that              NBB for buy orders and NBO for sell
                                                  Test Groups, including the Control                         is a Protected Bid or Protected Offer is              orders against routable orders that are
                                                  Group, to reduce risk in the System by                     permitted to execute orders at that level,            equal to or less than the aggregate size
                                                                                                             but only up to the amount of its                      of the Supplemental Peg Order interest
                                                  eliminating unnecessary complexity
                                                                                                             displayed size. Unless an exception                   available at that price.38 In sum,
                                                  based on infrequent current usage in
                                                                                                             applies, an order with a Non-Displayed                Supplemental Peg Orders are only
                                                  Pilot Securities. In sum, an order with
                                                                                                             instruction that is able to execute at the            executable at the NBBO against an order
                                                  a Discretionary Range has a displayed or
                                                                                                             price of the Protected Quotation would                that is in the process of being routed
                                                  non-displayed ranked price and size
                                                                                                             not be able to do so in Test Group Three              away. In such case, the Exchange is not
                                                  and an additional non-displayed
                                                                                                             due to the Trade-at Prohibition and the               displaying a Protected Quotation and,
                                                  ‘‘discretionary price’’.34 The
                                                                                                             Exchange’s priority rule.36 Furthermore,              therefore, the Supplemental Peg Order
                                                  discretionary price is a non-displayed
                                                                                                             such aggressively priced orders would                 would be unable to execute in Test
                                                  upward offset at which a User is willing
                                                                                                             not be able to post to the EDGX Book at               Group Three due to the Trade-at
                                                  to buy, if necessary, or a non-displayed
                                                                                                             the contra-side Protected Quotation, and              Prohibition.39 Therefore, the Exchange
                                                  downward offset at which a User is                                                                               proposes to not accept Supplemental
                                                  willing to sell, if necessary. The System                  re-pricing the order to the midpoint of
                                                                                                             the NBBO would increase execution                     Peg Orders in Test Group Three.
                                                  changes necessary for orders with a
                                                  Discretionary Range to comply with the                     opportunities under normal market                     Display-Price Sliding
                                                  Plan become increasingly complex                           conditions. However, orders that are
                                                                                                             priced to execute at the midpoint of the                 Under the Display-Price Sliding
                                                  because both the displayed price and                                                                             process, an order eligible for display by
                                                  discretionary price must comply with                       NBBO are exempt from the Trade-at
                                                                                                             Prohibition. Therefore, to increase the               the Exchange that, at the time of entry,
                                                  the Plan’s minimum quoting and trading                                                                           would create a violation of Rule 610(d)
                                                  increments as well as the Trade-at                         execution opportunities for orders with
                                                                                                             a Non-Displayed instruction in Test                   of Regulation NMS by locking or
                                                  restriction in Test Group Three. In                                                                              crossing a Protected Quotation of an
                                                  addition, Users do not currently set                       Group Three, the Exchange proposes to
                                                                                                             re-price to the midpoint of the NBBO                  external market, will be ranked at the
                                                  discretionary prices less than $0.05                                                                             locking price in the EDGX Book and
                                                  away from the order’s displayed price                      orders with a Non-Displayed instruction
                                                                                                             that are priced in a permissible                      displayed by the System at one
                                                  and the Exchange does not anticipate                                                                             minimum price variation (i.e., $0.05)
                                                  Users doing so under the Plan. To date,                    increment better than the midpoint of
                                                                                                                                                                   below the current NBO (for bids) or one
                                                  orders with a Discretionary Range are                      the NBBO.
                                                                                                                                                                   minimum price variation above the
                                                  rarely entered in Pilot Securities and the                 Market Maker Peg Orders                               current NBB (for offers).40 The ranked
                                                  Exchange anticipates their usage to                                                                              and displayed prices of an order subject
                                                                                                               A Market Maker Peg Order is a Limit
                                                  further decrease due to the Plan’s                                                                               to the Display-Price Sliding process may
                                                                                                             Order that is automatically priced by the
                                                  minimum quoting increments. The                                                                                  be adjusted once or multiple times
                                                                                                             System at the Designated Percentage (as
                                                  Exchange believes that the current                                                                               depending upon the instructions of a
                                                                                                             defined in Exchange Rule
                                                  extremely limited usage of orders with                                                                           User and changes to the prevailing
                                                                                                             11.20(d)(2)(D)) away from the then
                                                  a Discretionary Range in Pilot Securities                                                                        NBBO.41
                                                                                                             current NBB and NBO, or if no NBB or
                                                  does not justify the additional System                                                                              As described above, Exchange Rule
                                                                                                             NBO, at the Designated Percentage away
                                                  complexity that would be created by                                                                              11.22(a)(6)(D) sets forth the Trade-at
                                                                                                             from the last reported sale from the
                                                  supporting such orders. As a result of                                                                           Prohibition, which is the prohibition
                                                                                                             responsible single plan processor in                  against executions by a Member that
                                                  these factors the Exchange proposes to
                                                                                                             order to comply with the quotation                    operates a Trading Center of a sell order
                                                  not accept orders with a Discretionary
                                                                                                             requirements for Market Makers set                    for a Pilot Security in Test Group Three
                                                  Range in all Test Groups and the
                                                                                                             forth in Exchange Rule 11.20(d).37                    at the price of a Protected Bid or the
                                                  Control Group.
                                                                                                             Should the above pricing result in a                  execution of a buy order for a Pilot
                                                  Non-Displayed Instruction                                  Market Maker Peg Order being priced at                Security in Test Group Three at the
                                                     The Exchange proposes to re-price to                    an increment other than $0.05, the                    price of a Protected Offer during Regular
                                                  the midpoint of the NBBO orders with                       Exchange proposes to round an order to                Trading Hours, unless an exception
                                                  a Non-Displayed instruction in Test                        buy (sell) up (down) to the nearest $0.05             applies. Orders that are priced to
                                                  Group Three that are priced in a                           increment in order to comply with the                 execute at the midpoint of the NBBO are
                                                  permissible increment better than the                      minimum quoting increments of the                     exempt from the Trade-at Prohibition.
                                                  midpoint of the NBBO. An order with                        Plan.                                                 Therefore, to increase the execution
                                                  a Non-Displayed instruction is not                         Supplemental Peg Orders                               opportunities and qualify for the mid-
                                                  displayed on the Exchange.35 Exchange
                                                                                                               The Exchange proposes to not accept
                                                  Rule 11.22(a)(6)(D) incorporates the                                                                               38 See Exchange Rule 11.8(f).
                                                                                                             Supplemental Peg Orders in Test Group                   39 The Exchange notes that the likelihood of a
                                                  ‘‘Trade-at Prohibition’’ in the
                                                                                                             Three in order to reduce risk in the                  Supplemental Peg Order qualifying for an exception
                                                  Exchange’s rules. The Trade-at                                                                                   to the Trade-at Prohibition is small. For example,
                                                                                                             System by eliminating unnecessary
                                                  Prohibition prevents the execution of a                                                                          Supplemental Peg Orders are only executable
                                                                                                             complexity based on infrequent current
                                                  sell order for a Pilot Security in Test                                                                          against orders that are to be routed away and would
                                                                                                             usage in Pilot Securities and their                   not be eligible to execute against an incoming ISO
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                                                  Group Three at the price of a Protected
                                                                                                             limited ability to execute under the                  or Trade-at ISO. Also, the Exchange would not be
                                                  Bid or the execution of a buy order for                                                                          displaying a Protected Quotation. In addition, the
                                                                                                             Trade-at Prohibition. A Supplemental
                                                  a Pilot Security in Test Group Three at                                                                          Exchange does not frequently receive orders of
                                                                                                             Peg Order is a non-displayed Limit                    Block Size and, in order to qualify for the Block
                                                  the price of a Protected Offer during
                                                                                                                                                                   exception, the contra-side Block Order must be
                                                  Regular Trading Hours, unless an                             36 Under Exchange Rule 11.9(a)(2)(A), displayed     routable and the Supplemental Peg Order be of
                                                                                                             Limit Orders have priority over non-displayed         Block Size.
                                                    34 See   Exchange Rule 11.6(d).                          Limit Orders.                                           40 See Exchange Rule 11.6(l)(1)(B).
                                                    35 See   Exchange Rule 11.6(e)(2).                         37 See Exchange Rule 11.8(e).                         41 See Exchange Rule 11.6(l)(1)(B)(iii).




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                                                                               Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices                                                         47209

                                                  point exception to the Trade-at                          proposes to delete both Interpretation                     on trading, liquidity, and the market
                                                  Prohibition, the Exchange proposes to                    and Policy .03 to Rule 11.22(a) and                        quality of securities of smaller
                                                  rank orders in Test Group Three that are                 Interpretation and Policy .11 to Rule                      capitalization companies, and was
                                                  subject to the Display-Price Sliding                     11.22(b) as those provisions would be                      therefore in furtherance of the purposes
                                                  process at the midpoint of the NBBO in                   redundant and unnecessary. The                             of the Act. To the extent that these
                                                  the BZX Book and display such orders                     Exchange also proposes to amend the                        proposals are intended to comply with
                                                  one minimum price variation below the                    last sentence of Rule 11.22(a)(4) to                       the Plan, the Exchange believes that
                                                  current NBO (for bids) or one minimum                    specify that the current permissible                       these proposals are in furtherance of the
                                                  price variation above the current NBB                    price increments are set forth under                       objectives of the Plan, as identified by
                                                  (for offers).                                            Exchange Rule 11.6(i), Minimum Price                       the Commission, and is therefore
                                                     The Exchange also proposes to cancel                  Variation.                                                 consistent with the Act.
                                                  orders subject to Display-Price Sliding                                                                                The Exchange also believes that its
                                                  in Test Group Three that are only to be                  Implementation Date
                                                                                                                                                                      proposed changes to orders with a
                                                  adjusted once and not multiple times in                    If the Commission approves the                           Market Peg instruction, orders with a
                                                  the event the NBBO widens and a                          proposed rule change, the proposed rule                    Discretionary Range, orders with a Non-
                                                  contra-side order with a Non-Displayed                   change will be effective upon                              Displayed instruction, Supplemental
                                                  instruction is resting on the EDGX Book                  Commission approval and shall become                       Peg Orders, and Display-Price Sliding
                                                  at the price to which the order subject                  operative upon the commencement of                         are also consistent with the Act because
                                                  to Display-Price Sliding would be                        the Pilot Period.                                          they are intended to eliminate
                                                  adjusted. Due to the increased minimum                   2. Statutory Basis                                         unnecessary System complexity and
                                                  quoting increments under the Plan, the                                                                              risk based on the de minimis current
                                                  Exchange is unable to safely re-price an                    The Exchange believes that its
                                                                                                           proposal is consistent with Section 6(b)                   usage of such order types and
                                                  order subject to single Display-Price                                                                               instructions in Pilot Securities and/or
                                                  Sliding in Test Group Three to the                       of the Act 43 in general, and furthers the
                                                                                                           objectives of Section 6(b)(5) of the Act 44                their limited ability to execute under the
                                                  original locking price in such                                                                                      Plan’s minimum trading and quoting
                                                  circumstances and doing so would add                     in particular, in that it is designed to
                                                                                                           promote just and equitable principles of                   increments or Trade-at Prohibition.45
                                                  additional System complexity and risk.                                                                              For example, during March 2016, the
                                                  As discussed above, the Exchange                         trade, to foster cooperation and
                                                                                                           coordination with persons engaged in                       alternative pegging functionality of
                                                  proposes to rank orders in Test Group                                                                               MidPoint Peg Orders, orders with a
                                                  Three subject to the Display-Price                       facilitating transactions in securities, to
                                                                                                           remove impediments to and perfect the                      Market Peg instruction, orders with a
                                                  Sliding process at the midpoint of the                                                                              Non-Displayed instruction, and
                                                  NBBO. In the event the NBBO changes                      mechanism of a free and open market
                                                                                                           and a national market system and, in                       Supplemental Peg Orders accounted for
                                                  such that an order subject to Display-                                                                              0.01%, 0.02%, 0.92%, and 0.01%,
                                                  Price Sliding would not lock or cross a                  general, to protect investors and the
                                                                                                           public interest. The Plan requires the                     respectively, of volume in eligible Pilot
                                                  Protected Quotation of an external                                                                                  Securities on the Exchange, BYX, BZX
                                                  market, the order will receive a new                     Exchange to establish, maintain, and
                                                                                                           enforce written policies and procedures                    and EDGA combined. Notably, orders
                                                  timestamp, and will be displayed at the                                                                             with a Discretionary Range accounted
                                                  order’s limit price.42 Due to                            that are reasonably designed to comply
                                                                                                           with applicable quoting and trading                        for 0.00% of volume in eligible Pilot
                                                  technological limitations arising from                                                                              Securities on the Exchange, BYX, BZX
                                                  the increased minimum quoting                            requirements specified in the Plan. The
                                                                                                           proposed rule change is designed to                        and EDGA combined.
                                                  increments under the Plan, however, the
                                                                                                           comply with the Plan, reduce                                  The Commission adopted Regulation
                                                  Exchange is unable to safely re-program
                                                                                                           complexity and enhance System                              Systems Compliance and Integrity
                                                  its System to re-price such order to the
                                                                                                           resiliency while not adversely affecting                   (‘‘Regulation SCI’’) in November 2014 to
                                                  original locking price when the NBBO
                                                                                                           the data collected under the Plan.                         strengthen the technology infrastructure
                                                  widens and a contra-side order with a
                                                                                                           Therefore, the Exchange believes that                      of the U.S. securities markets.46
                                                  Non-Displayed instruction is resting on
                                                                                                           the proposed rule changes are                              Regulation SCI is designed to reduce the
                                                  the EDGX Book at the price to which the
                                                                                                           reasonably designed to comply with                         occurrence of systems issues, improve
                                                  order subject to Display-Price Sliding
                                                                                                           applicable quoting and trading                             resiliency when systems problems do
                                                  would be adjusted. Therefore, the
                                                                                                           requirements specified in the Plan and,                    occur, and enhance the Commission’s
                                                  Exchange proposes to cancel orders
                                                                                                           as discussed further below, other                          oversight and enforcement of securities
                                                  subject to the single Display-Price
                                                                                                           applicable regulations.                                    market technology infrastructure.
                                                  Sliding process in such circumstances.
                                                                                                              The Exchange believes that the                          Regulation SCI required the Exchange to
                                                  Users who prefer an execution in such
                                                                                                           proposed changes regarding Market                          establish written policies and
                                                  a scenario may elect to use the multiple
                                                                                                           Orders, MidPoint Peg Orders, Market                        procedures reasonably designed to
                                                  Display-Price Sliding process.
                                                                                                           Maker Peg Orders, and Display-Price                        ensure that their systems have levels of
                                                  Ministerial Change                                       Sliding are consistent with the Act                        capacity, integrity, resiliency,
                                                     Currently, both Interpretation and                    because they are intended to modify the                    availability, and security adequate to
                                                  Policy .03 to Rule 11.22(a) and                          Exchange’s System to comply with the                       maintain their operational capability
                                                  Interpretation and Policy .11 to Rule                    provisions of the Plan, and are designed                   and promote the maintenance of fair
                                                  11.22(b) state that Rule 11.22 shall be in               to assist the Exchange in meeting its                        45 The Commission has also expressed concern
                                                  effect during a pilot period to coincide
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                                                                                                           regulatory obligations pursuant to the                     regarding potential market instability caused by
                                                  with the pilot period for the Plan                       Plan. In approving the Plan, the SEC                       technological risks. See e.g., Chair Mary Jo White,
                                                  (including any extensions to the pilot                   noted that the Pilot was an appropriate,                   Commission, Enhancing Our Equity Market
                                                  period for the Plan). The Exchange                       data-driven test that was designed to                      Structure (June 5, 2014) available at https://
                                                                                                                                                                      www.sec.gov/News/Speech/Detail/Speech/
                                                  proposes to include this language at the                 evaluate the impact of a wider tick size                   1370542004312#.VD2HW610w6Y.
                                                  beginning of Rule 11.22 and, therefore,                                                                               46 See Securities Exchange Act Release No. 73639
                                                                                                                43 15   U.S.C. 78f(b).                                (November 19, 2014), 79 FR 72251 (December 5,
                                                    42 Id.                                                      44 15   U.S.C. 78f(b)(5).                             2014) (‘‘Regulation SCI Approval Order’’).



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                                                  47210                        Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices

                                                  and orderly markets, and that they                       opportunities, the Exchange believes it               necessary or appropriate in furtherance
                                                  operate in a manner that complies with                   is not unfairly discriminatory to apply               of the purposes of the Act. The
                                                  the Exchange Act. Each of these                          the changes proposed herein to only                   Exchange notes that the proposed rule
                                                  proposed changes are intended to                         Pilot Securities as such changes are                  change is designed to assist the
                                                  reduce complexity and risk in the                        necessary to reduce complexity and                    Exchange in meeting its regulatory
                                                  System to ensure the Exchange’s                          ensure continued System resiliency in                 obligations pursuant to the Plan, reduce
                                                  technology remains robust and resilient.                 accordance with the requirements of                   System complexity and enhance
                                                  In determining the scope of the                          Regulation SCI. The Exchange also                     resiliency. The Exchange also notes that
                                                  proposed changes, the Exchange                           believes the proposed changes to orders               the proposed rule change will apply
                                                  carefully weighed the impact on the                      with a Non-Displayed instruction, and                 equally to all Members that trade Pilot
                                                  Pilot, System complexity, and the usage                  orders subject to the Display-Price                   Securities.
                                                  of such order types in Pilot Securities.47               Sliding process in Test Group Three are
                                                                                                                                                                 C. Self-Regulatory Organization’s
                                                  The potential complexity results from                    consistent with the Act because they are
                                                                                                                                                                 Statement on Comments on the
                                                  code changes for a majority of the                       designed to increase the execution
                                                                                                                                                                 Proposed Rule Change Received From
                                                  Exchange’s order types, which requires                   opportunities for such order types in
                                                                                                                                                                 Members, Participants or Others
                                                  the implementation and testing of a                      compliance with the mid-point
                                                  separate branch of code for each Test                    exception to the Trade-at Prohibition.                  Written comments were neither
                                                  Group. For example, the Exchange                         The Exchange also believes the                        solicited nor received.
                                                  currently utilizes one branch of code for                proposed change to Market Pegged                      III. Date of Effectiveness of the
                                                  which to implement and test changes.                     Orders in Test Groups One and Two is                  Proposed Rule Change and Timing for
                                                  Development work for the Pilot results                   consistent with the Act because it is                 Commission Action
                                                  in the creation of four additional                       identical to the operation of the Super
                                                  branches of code that are to be                          Aggressive instruction under Exchange                    Within 45 days of the date of
                                                  developed and tested (e.g., Control                      Rule 11.6(n)(2). The Exchange notes that              publication of this notice in the Federal
                                                  Group + three Test Groups). The                          Market Pegged Orders are aggressive by                Register or within such longer period (i)
                                                  Exchange determined that the changes                     nature and believes executing the order               as the Commission may designate up to
                                                  proposed herein are necessary to ensure                  in such circumstance is reasonable and                90 days of such date if it finds such
                                                  continued System resiliency in                           appropriate.                                          longer period to be appropriate and
                                                  accordance with the requirements of                         The Exchange also believes it is                   publishes its reasons for so finding or
                                                  Regulation SCI. Therefore, the Exchange                  reasonable and appropriate to cancel an               (ii) as to which the Exchange consents,
                                                  believes the proposed rule change                        order subject to the single Display-Price             the Commission will: (a) By order
                                                  promotes just and equitable principles                   Sliding process in Test Group Three in                approve or disapprove such proposed
                                                  of trade, removes impediments to and                     the event that the NBBO widens and a                  rule change, or (b) institute proceedings
                                                  perfects the mechanism of a free and                     contra-side order with a Non-Displayed                to determine whether the proposed rule
                                                  open market and a national market                        instruction is resting on the EDGX Book               change should be disapproved.
                                                  system and, in general, to protect                       at the price to which the order subject               IV. Solicitation of Comments
                                                  investors and the public interest.                       to Display-Price Sliding would be
                                                     In addition, each of these proposed                   adjusted. Due to technological                          Interested persons are invited to
                                                  changes would have a de minimis to                       limitations and the Plan’s increased                  submit written data, views, and
                                                  zero impact on the data reported                         minimum quoting increments, the                       arguments concerning the foregoing,
                                                  pursuant to the Plan. As evidenced                       Exchange is unable to safely re-program               including whether the proposed rule
                                                  above, orders with a Market Peg                          its System to re-price such orders to the             change is consistent with the Act. In
                                                  instruction, orders with a Discretionary                 original locking price in such                        particular, the Commission seeks
                                                  Range, the alternative pegging                           circumstances. The Exchange also                      comment on the issue described below.
                                                                                                                                                                   In the Approval Order, the
                                                  functionality of MidPoint Peg Orders,                    anticipates that the scenario under
                                                                                                                                                                 Commission stressed the importance of
                                                  and Supplemental Peg Orders are                          which it proposes to cancel the Display-
                                                                                                                                                                 testing the impact of wider tick sizes on
                                                  infrequently used in Pilot Securities or                 Price Sliding order will be infrequent in
                                                                                                                                                                 the trading and liquidity of the
                                                  the execution of such orders would be                    Tick Pilot Securities. Users who prefer
                                                                                                                                                                 securities of small capitalization
                                                  scarce due to the Plan’s minimum                         an execution in such a scenario may                   companies, and doing so in a way that
                                                  trading and quoting requirement and                      elect to use the multiple Display-Price               produces robust results that inform
                                                  Trade-at Prohibition. The limited usage                  Sliding process. Therefore, the                       future policy decisions.48 The
                                                  and execution scenarios do not justify                   Exchange believes it is consistent with               Commission acknowledged the
                                                  the additional system complexity which                   the Act to set forth this scenario in its             complexity of the Pilot and the costs
                                                  would be created by modifying the                        rules so that Users will understand how               that its implementation would create for
                                                  System to support such order types in                    the System operates and how their                     market participants, but concluded that
                                                  order to comply with the Plan.                           orders would be handled in this discrete              the benefits of the empirical data that
                                                  Therefore, the Exchange believes each                    scenario.                                             would be produced by the Pilot
                                                  proposed change is a reasonable means                       Lastly, the Exchange believes the
                                                                                                                                                                 warranted incurring those costs.49 As a
                                                  to ensure that the System’s integrity,                   ministerial changes to Rule 11.22 are
                                                                                                                                                                 result, the Plan requires that each
                                                  resiliency, and availability continues to                also consistent with the Act as they
                                                                                                                                                                 Participant, including the Exchange,
                                                  promote the maintenance of fair and                      would: (i) Clarify a provision under
                                                                                                                                                                 adopt rules that are necessary for
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                                                  orderly markets. Due to the additional                   paragraph (a)(4); and (ii) remove
                                                                                                                                                                 compliance with the provisions of the
                                                  complexity, limited usage and execution                  redundant provisions from the rule.
                                                                                                                                                                 Plan.50
                                                    47 But for the Plan, the Exchange notes that it        B. Self-Regulatory Organization’s
                                                  would not have proposed to amend the operation           Statement on Burden on Competition                      48 See Approval Order, supra note 4, at 80 FR

                                                  of orders with a Market Peg instruction, orders with                                                           27515.
                                                  a Discretionary Range, orders with a Non-Displayed
                                                                                                             The Exchange does not believe that                    49 Id. at 27516.

                                                  instruction, Supplemental Peg Orders, and Display-       the proposed rule change will result in                 50 See Section II(B) of the Plan. See also Section

                                                  Price Sliding as described herein.                       any burden on competition that is not                 IV of the Plan.



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                                                                               Federal Register / Vol. 81, No. 139 / Wednesday, July 20, 2016 / Notices                                                47211

                                                     While the Exchange states that the                    Electronic Comments                                       SECURITIES AND EXCHANGE
                                                  proposed rule change describes the                                                                                 COMMISSION
                                                  system changes necessary to implement                      • Use the Commission’s Internet
                                                  the Pilot, the Commission notes that the                 comment form (http://www.sec.gov/
                                                                                                                                                                     [Release No. 34–78323; File No. SR–MSRB–
                                                  scope of the proposed changes extends                    rules/sro.shtml); or
                                                                                                                                                                     2016–09]
                                                  beyond those required for compliance                       • Send an email to rule-comments@
                                                  with the Plan, and would eliminate                       sec.gov. Please include File Number SR–                   Self-Regulatory Organizations;
                                                  certain order types for Pilot Securities                 BatsEDGX–2016–26 on the subject line.                     Municipal Securities Rulemaking
                                                  during the Pilot Period, or modify their                                                                           Board; Notice of Filing of a Proposed
                                                  operation in ways not required by the                    Paper Comments
                                                                                                                                                                     Rule Change To Establish the MSRB
                                                  Plan. For example, the Exchange
                                                                                                             • Send paper comments in triplicate                     Academic Historical Transaction Data
                                                  proposes not to accept Market Pegged                                                                               Product
                                                                                                           to Secretary, Securities and Exchange
                                                  Orders, Discretionary Orders, and
                                                  Supplemental Peg Orders, and certain                     Commission, 100 F Street NE.,
                                                                                                                                                                     July 14, 2016.
                                                  types of Mid-Point Peg Orders, in some                   Washington, DC 20549–1090.
                                                                                                                                                                        Pursuant to Section 19(b)(1) of the
                                                  or all Test Groups of Pilot Securities for               All submissions should refer to File
                                                  the duration of the Pilot Period.51 These                                                                          Securities Exchange Act of 1934 (the
                                                                                                           Number SR–BatsEDGX–2016–26. This                          ‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule
                                                  proposals appear designed to permit the                  file number should be included on the
                                                  Exchange to avoid the costs of                                                                                     19b–4 thereunder,2 notice is hereby
                                                                                                           subject line if email is used. To help the                given that on June 30, 2016, the
                                                  modifying these order types to comply                    Commission process and review your
                                                  with the Plan. The Exchange notes that                                                                             Municipal Securities Rulemaking Board
                                                                                                           comments more efficiently, please use                     (the ‘‘MSRB’’ or ‘‘Board’’) filed with the
                                                  these order types are infrequently used                  only one method. The Commission will
                                                  in Pilot Securities, and takes the                                                                                 Securities and Exchange Commission
                                                                                                           post all comments on the Commission’s                     (the ‘‘SEC’’ or ‘‘Commission’’) the
                                                  position that ‘‘[t]he limited usage and
                                                                                                           Internet Web site (http://www.sec.gov/                    proposed rule change as described in
                                                  execution scenarios do not justify the
                                                                                                           rules/sro.shtml). Copies of the                           Items I, II, and III below, which Items
                                                  additional system complexity which
                                                                                                           submission, all subsequent                                have been prepared by the MSRB. The
                                                  would be created by modifying the
                                                  System to support such order types in                    amendments, all written statements                        Commission is publishing this notice to
                                                  order to comply with the Plan.’’ 52 At                   with respect to the proposed rule                         solicit comments on the proposed rule
                                                  the same time, the Exchange also does                    change that are filed with the                            change from interested persons.
                                                  not appear prepared to propose to                        Commission, and all written
                                                  eliminate these order types indefinitely.                communications relating to the                            I. Self-Regulatory Organization’s
                                                  By contrast, the Exchange proposes to                    proposed rule change between the                          Statement of the Terms of Substance of
                                                  modify, in ways not required by the                      Commission and any person, other than                     the Proposed Rule Change
                                                  Plan, the operation of Market Pegged                     those that may be withheld from the
                                                                                                           public in accordance with the                                The MSRB filed with the Commission
                                                  Orders and Non-Displayed Orders, and
                                                                                                           provisions of 5 U.S.C. 552, will be                       a proposed rule change to the MSRB’s
                                                  certain orders subject to the Display-
                                                  Price Sliding process, in some or all                    available for Web site viewing and                        facility for the Real-Time Transaction
                                                  Test Groups of Pilot Securities, and to                  printing in the Commission’s Public                       Reporting System (‘‘RTRS’’) to establish
                                                  incur the associated system change                       Reference Room, 100 F Street NE.,                         an historical data product to provide
                                                  costs, in order to increase the                          Washington, DC 20549, on official                         institutions of higher education
                                                  ‘‘execution opportunities’’ for these                    business days between the hours of                        (‘‘academic institutions’’) with post-
                                                  order types for the duration of the Pilot                10:00 a.m. and 3:00 p.m. Copies of the                    trade municipal securities transaction
                                                  Period.53                                                filing also will be available for                         data collected through RTRS (‘‘MSRB
                                                     The Commission is concerned that                      inspection and copying at the principal                   Academic Historical Transaction Data
                                                  proposed rule changes, other than those                  office of the Exchange. All comments                      Product,’’ hereafter referred to as ‘‘RTRS
                                                  necessary for compliance with Plan, that                 received will be posted without change;                   Academic Data Product’’) for purchase
                                                  are targeted at Pilot Securities, that have              the Commission does not edit personal                     (‘‘proposed rule change’’). If approved
                                                  a disparate impact on different Test                     identifying information from                              by the Commission, the MSRB will
                                                  Groups and the Control Group, and that                                                                             announce the effective date of the
                                                                                                           submissions. You should submit only
                                                  are to apply temporarily only for the                                                                              proposed rule change in a regulatory
                                                                                                           information that you wish to make
                                                  Pilot Period, could bias the results of the                                                                        notice to be published no later than 90
                                                  Pilot and undermine the value of the                     available publicly. All submissions
                                                                                                           should refer to File Number SR–                           days following Commission approval.
                                                  data generated in informing future                                                                                 The effective date will be no later than
                                                  policy decisions. Accordingly, the                       BatsEDGX–2016–26, and should be
                                                                                                           submitted on or before August 10, 2016.                   270 days following publication of the
                                                  Commission is concerned that the                                                                                   regulatory notice announcing
                                                  proposed rule change may not be                             For the Commission, by the Division of                 Commission approval.
                                                  consistent with Act, including Section                   Trading and Markets, pursuant to delegated
                                                  6(b)(5) thereof and Rule 608 of                          authority.54                                                 The text of the proposed rule change
                                                  Regulation NMS, or with the Plan.                                                                                  is available on the MSRB’s Web site at
                                                                                                           Jill M. Peterson,
                                                     Comments may be submitted by any                                                                                www.msrb.org/Rules-and-
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                                                                                                           Assistant Secretary.
                                                  of the following methods:                                                                                          Interpretations/SEC-Filings/2016-
                                                                                                           [FR Doc. 2016–17091 Filed 7–19–16; 8:45 am]
                                                                                                                                                                     Filings.aspx, at the MSRB’s principal
                                                    51 The  Exchange also proposes to cancel certain
                                                                                                           BILLING CODE 8011–01–P                                    office, and at the Commission’s Public
                                                  orders subject to the Display-Price Sliding process                                                                Reference Room.
                                                  in certain Pilot Securities for the duration of the
                                                  Pilot Period.
                                                    52 See supra Item II.A.2.                                                                                          1 15   U.S.C. 78s(b)(i).
                                                    53 See supra Item II.A.1–2.                                 54 17   CFR 200.30–3(a)(12).                           2 17   CFR 240.19b–4.



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Document Created: 2018-02-08 07:57:26
Document Modified: 2018-02-08 07:57:26
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 47205 

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