81 FR 62205 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend 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 174 (September 8, 2016)
Federal Register Volume 81, Issue 174 (September 8, 2016)
| Page Range | 62205-62208 | |
| FR Document | 2016-21650 |
[Federal Register Volume 81, Number 174 (Thursday, September 8, 2016)] [Notices] [Pages 62205-62208] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-21650] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78767; File No. SR-BatsEDGX-2016-26] Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Exchange Rule 11.22 To Describe Changes to System Functionality Necessary To Implement the Regulation NMS Plan To Implement a Tick Size Pilot Program September 2, 2016. I. Introduction On June 29, 2016, Bats EDGX Exchange, Inc. (``Exchange'' or ``EDGX'') filed with the Securities and Exchange Commission (``Commission'') pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to adopt Exchange Rule 11.22(c) to describe changes to System \3\ functionality to implement the Regulation NMS Plan to Implement a Tick Size Pilot Program (``Plan'' or ``Pilot'').\4\ The proposed rule change was published for comment in the Federal Register on July 20, 2016.\5\ The Commission received one comment letter from the Exchange in response to the Notice.\6\ On September 1, 2016, the Exchange filed an amendment to the proposed rule change (``Amendment No. 1''), which supersedes and replaces the proposal in its entirety.\7\ --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ The term ``System'' is defined as the ``electronic communications and trading facility designated by the Board of Directors of the Exchange 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''). Unless otherwise specified, capitalized terms used in this rule filing are defined as set forth in the Plan. \5\ Securities Exchange Act Release No. 78331 (July 14, 2016), 81 FR 47205 (``Notice''). \6\ See Letter to Brent J. Fields, Secretary, Commission, from Eric Swanson, General Counsel, Exchange, dated July 26, 2016 (``Exchange Letter''). \7\ In Amendment No. 1, the Exchange proposes to: (1) Apply the changes in proposed Rule 11.22(c) to all Pilot Securities; (2) clarify in Rule 11.22(c)(1) that the increment for Market Orders and Rule 11.22(c)(5) that the increment for Market Maker Peg Orders will be at ``permissible'' increments; (3) state in Rule 11.22(c)(2) that orders with a Market Peg instruction, Rule 11.22(c)(4) that orders with a Discretionary Range, and Rule 11.22(c)(6) that Supplemental Peg Orders will not be accepted in Pilot Securities; (4) clarify in Rule 11.22(c)(3) that MidPoint Peg Orders may not be alternatively pegged to one minimum price variation inside the same side of the NBBO as the order; (5) delete the proposal to amend orders with a Non-Displayed instruction; and (6) clarify how orders subject to Display-Price Sliding will operate when they are unexecutable at the locking price. --------------------------------------------------------------------------- This order provides notice of filing of Amendment No. 1 and approves the proposal, as modified by Amendment No. 1, on an accelerated basis. II. Description of the Amended Proposal Proposed Exchange Rule 11.22(c) would specify the order handling for the following order types in Pilot Securities: (i) Market Orders; (ii) orders with a Market Peg instruction; (iii) MidPoint Peg Orders; (iv) orders with a Discretionary Range instruction; (v) Market Maker Peg Orders; (vi) Supplemental Peg Orders; and (vii) orders subject to the Display-Price Sliding process. As proposed, such order handling would apply to all orders entered into the System for Pilot Securities (i.e., Test Group One, Test Group Two, Test Group Three, and the Control Group). Additionally, the Exchange 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. The Exchange proposes in Exchange Rule 11.22(c) specific procedures for handling, executing, repricing and displaying certain order types and order type instructions. The provisions in proposed Rule 11.22(c) would apply to all Pilot Securities. Further, the Exchange proposes that only the provisions in Exchange Rules 11.22(a) and (b) would be limited to the Pilot Period.\8\ --------------------------------------------------------------------------- \8\ The Exchange proposes to clarify in the introduction to Exchange Rule 11.22 that only the provisions in 11.22(a) and 11.22(b) would be in effect during the Pilot Period. --------------------------------------------------------------------------- [[Page 62206]] 1. Market Orders Proposed Exchange Rule 11.22(c)(1) provides that for purposes of determining whether the execution price of a Market Order is more than 5 percent worse than the national best bid or offer (``NBBO'') \9\ under current Exchange Rule 11.8(a)(7), the execution price for a buy (sell) will be rounded down (up) to the nearest permissible increment.\10\ --------------------------------------------------------------------------- \9\ See Exchange Rule 1.5(o). \10\ See Amendment No. 1. --------------------------------------------------------------------------- 2. Market Peg Instruction Under Exchange Rule 11.6(j)(1), an order with a Market Peg instruction is pegged to the contra-side NBBO. EDGX Users can specify that such an order will offset the inside quote on the contra side of the market by an amount (``Offset Amount''). Under proposed Exchange Rule 11.22(c)(2), the Exchange proposes not to accept orders with a Market Peg instruction, regardless of price, in any Pilot Security.\11\ --------------------------------------------------------------------------- \11\ Id. --------------------------------------------------------------------------- 3. MidPoint Peg Orders Under Exchange Rule 11.8(d), the System automatically adjusts the price of a MidPoint Peg Order in response to changes in the NBBO to be pegged to the mid-point of the NBBO, or, alternatively, pegged to the less aggressive midpoint of the NBBO, or one minimum price variation inside the same side of the NBBO as the MidPoint Peg Order. Under proposed Exchange Rule 11.22(c)(3), the Exchange proposes that MidPoint Peg Orders for Pilot Securities would not be permitted to alternatively peg to one minimum price variation inside the same side of the NBBO as the order.\12\ --------------------------------------------------------------------------- \12\ Id. --------------------------------------------------------------------------- 4. Discretionary Range Instruction Under Exchange Rule 11.6(d), an order with a Discretionary Range instruction is a limit order with a displayed or non-displayed ranked price and size and an additional non-displayed ``discretionary price.'' The Exchange proposes to not accept orders with a Discretionary Range instruction, regardless of price, in any Pilot Security.\13\ --------------------------------------------------------------------------- \13\ Id. --------------------------------------------------------------------------- 5. Market Maker Peg Orders Under Exchange Rule 11.8(e), 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 national best bid (``NBB'') or national best offer (``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). The Exchange proposes that Market Marker Peg Orders to buy (sell) be rounded up (down) to the nearest permissible increment when the pricing results in an impermissible increment. 6. Supplemental Peg Orders Under Exchange Rule 11.8(f), a Supplemental Peg Order is a non- displayed limit order that posts to the Exchange 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. The Exchange proposes not to accept Supplemental Peg Orders, regardless of price, for any Pilot Security.\14\ --------------------------------------------------------------------------- \14\ Id. --------------------------------------------------------------------------- 7. Display-Price Sliding Under Exchange Rule 11.6(l)(1)(B), 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, would be ranked at the locking price in the Exchange Book and displayed by the System at one minimum price variation below the current NBO (for bids) or one minimum price variation above the current NBB (for offers). The ranked and displayed prices of an order subject to Display-Price Sliding may be adjusted once or multiple times depending on the instructions of a User and changes to the prevailing NBBO. The Exchange proposes that orders subject to the Display-Price Sliding that are unexecutable at the locking price will be ranked at the midpoint of the NBBO, and displayed one minimum price variation below (above) the current NBO (NBB) for bids (for offers) for all Pilot Securities. In the Control Group, Test Group One, and Test Group Two, these orders would be initially ranked at the locking price and displayed one minimum price variation away. If a subsequent incoming Post-Only Order arrives on the Exchange book on the opposite side, then the orders subject to Display-Price Sliding would be adjusted to rank at the midpoint of the NBBO and continue to be displayed at one minimum price variation away. In Test Group Three, orders subject to Display- Price Sliding would be ranked at the midpoint of the NBBO and displayed at one minimum price variation away. In addition, the Exchange proposes to cancel orders subject to Display-Price Sliding when the NBBO widens and a contra-side Non-Displayed Order is resting on the Exchange Book at a price that such order would adjust, and the User has selected a single price adjustment. Like today, if the User has selected multiple price adjustments an order subject to Display-Price Sliding would not cancel in this scenario. III. Discussion and Commission's Findings After careful review of the proposed rule change, as modified by Amendment No. 1, the Commission finds that the proposal, as modified by Amendment No. 1,\15\ is consistent with the requirements of the Exchange Act and the rules and regulations thereunder that are applicable to a national securities exchange.\16\ Specifically, the Commission finds that the rule change is consistent with Section 6(b)(5) of the Exchange Act, which requires that the rules of a national securities exchange be designed, among other things, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and to protect investors and the public interest; and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \15\ The Commission notes that the Exchange Letter was submitted in connection with the Exchange's original proposal. Because the Exchange has filed Amendment No. 1, which supersedes and replaces the Exchange's original proposal in its entirety, the Commission does not believe it is necessary to summarize or respond to the Exchange Letter. \16\ In approving this rule change, the Commission has considered the rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- As noted in the Approval Order, the Plan is by design, an objective, data-driven test to evaluate how a wider tick size would impact trading, liquidity, and market quality of securities of smaller capitalization companies. In addition, the Plan is designed with three Test Groups and a Control Group, to allow analysis and comparison of incremental market structure changes on the Pilot Securities and is designed to produce empirical data that could inform future policy decisions. The Exchange proposes certain changes to modify the operation of the [[Page 62207]] System for compliance with the Plan. For example, the Exchange proposes to clarify how Market Orders and Market Maker Peg Orders would be rounded to permissible increments under the Plan. The Commission finds that these changes are consistent with the Section 6(b)(5) of the Exchange Act \17\ and Rule 608 of Regulation NMS \18\ because they implement the Plan and clarify Exchange rules. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78f(b)(5). \18\ 17 CFR 242.608. --------------------------------------------------------------------------- In addition, the Exchange proposes to eliminate certain order types and modify certain order handling functions for Pilot Securities. Specifically, the Exchange proposes to no longer accept three order types: Orders with a Market Peg instruction, orders with a Discretionary Range instruction, and Supplemental Peg Orders. The Exchange noted that these orders are infrequently used in Pilot Securities. The Exchange stated that eliminating these order types for Pilot Securities could reduce System complexity and maintain consistent functionality among all Pilot Securities. Finally, the Exchange noted that these order types would have limited ability to execute under Test Group Three. The Exchange also proposes to change the handling of orders subject to Display-Price Sliding in Pilot Securities. Orders that are subject to Display Price-Sliding in Pilot Securities that are unexecutable at the locking price will be ranked at the midpoint of the NBBO and displayed one minimum variation away. Finally, the Exchange proposes to modify the handling of MidPoint Peg Orders in Pilot Securities. As proposed, MidPoint Peg Orders would not be able to alternatively peg to one minimum price variation inside the same side of the NBBO as the order. The Exchange noted that there is a de minimis usage of the alternative pegging function in Pilot Securities that does not justify the complexity and risk to the System that would be created by re-programming the System to support the function. In the Notice, the Commission noted 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. The Commission notes that the Exchange has modified its proposal so that those proposed changes that are not necessary for compliance with the Plan apply equally to all three Test Groups and the Control Group, and their duration is not limited to the Pilot Period. Thus, the Commission believes that the incremental design of the Pilot is maintained such that the data generated by the Test Groups and the Control Group could allow the Commission and interested parties to compare the change in market structure of each group vis-[agrave]-vis the other groups. Further, the Commission does not believe that the changes would bias the results of the Pilot or undermine the value of the data generated in informing future policy decisions. Accordingly, the Commission finds that the proposed rule change, as modified by Amendment No.1, is consistent with the requirements of the Exchange Act. IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule Change Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposal, as modified by Amendment No. 1, is consistent with the Exchange Act. Comments may be submitted by any of the following methods: Electronic CommentsUse 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 20549-1090, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR- BatsEDGX-2016-26 and should be submitted on or before September 29, 2016. V. Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1 The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, prior to the thirtieth day after the date of publication of notice of Amendment No. 1 in the Federal Register. In Amendment No. 1, the Exchange proposes to: (1) Apply the changes in proposed Rule 11.22(c) to all Pilot Securities; (2) clarify in Rule 11.22(c)(1) that the increment for Market Orders and Rule 11.22(c)(5) that the increment for Market Maker Peg Orders will be at ``permissible'' increments; (3) state in Rule 11.22(c)(2) that orders with a Market Peg instruction, Rule 11.22(c)(4) that orders with a Discretionary Range, and Rule 11.22(c)(6) that Supplemental Peg Orders will not be accepted in Pilot Securities; (4) clarify in Rule 11.22(c)(3) that MidPoint Peg Orders may not be alternatively pegged to one minimum price variation inside the same side of the NBBO as the order; (5) delete the proposal to amend orders with a Non-Displayed instruction; and (6) clarify how orders subject to Display-Price Sliding will operate when they are unexecutable at the locking price. The Commission believes that Amendment No. 1 modifies the proposal so that it does not cause a disparate impact on different Test Groups and the Control Group. In addition, the Commission notes that the Pilot is scheduled to start on October 3, 2016, and accelerated approval would ensure that the rules of the Exchange would be in place for the start of the Pilot. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Exchange Act,\19\ to approve the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. --------------------------------------------------------------------------- \19\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- [[Page 62208]] VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,\20\ that the proposed rule change (SR-BatsEDGX-2016-26), as modified by Amendment No. 1, be and hereby is approved on an accelerated basis. --------------------------------------------------------------------------- \20\ Id. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\21\ --------------------------------------------------------------------------- \21\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-21650 Filed 9-7-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 174 / Thursday, September 8, 2016 / Notices 62205
fee, or other charge imposed by the 10:00 a.m. and 3:00 p.m. Copies of such the Federal Register on July 20, 2016.5
Exchange. filing also will be available for The Commission received one comment
At any time within 60 days of the inspection and copying at the principal letter from the Exchange in response to
filing of such proposed rule change, the office of the Exchange. All comments the Notice.6 On September 1, 2016, the
Commission summarily may received will be posted without change; Exchange filed an amendment to the
temporarily suspend such rule change if the Commission does not edit personal proposed rule change (‘‘Amendment No.
it appears to the Commission that such identifying information from 1’’), which supersedes and replaces the
action is necessary or appropriate in the submissions. You should submit only proposal in its entirety.7
public interest, for the protection of information that you wish to make This order provides notice of filing of
investors, or otherwise in furtherance of available publicly. All submissions Amendment No. 1 and approves the
the purposes of the Act. If the should refer to File No. SR–NYSEArca– proposal, as modified by Amendment
Commission takes such action, the 2016–122, and should be submitted on No. 1, on an accelerated basis.
Commission shall institute proceedings or before September 29, 2016. II. Description of the Amended
under section 19(b)(2)(B) 20 of the Act to For the Commission, by the Division of Proposal
determine whether the proposed rule Trading and Markets, pursuant to delegated
change should be approved or authority.21 Proposed Exchange Rule 11.22(c)
disapproved. Robert W. Errett,
would specify the order handling for the
following order types in Pilot Securities:
IV. Solicitation of Comments Deputy Secretary.
(i) Market Orders; (ii) orders with a
[FR Doc. 2016–21495 Filed 9–7–16; 8:45 am]
Interested persons are invited to Market Peg instruction; (iii) MidPoint
BILLING CODE 8011–01–P Peg Orders; (iv) orders with a
submit written data, views, and
arguments concerning the foregoing, Discretionary Range instruction; (v)
including whether the proposed rule Market Maker Peg Orders; (vi)
SECURITIES AND EXCHANGE
change is consistent with the Act. Supplemental Peg Orders; and (vii)
COMMISSION
Comments may be submitted by any of orders subject to the Display-Price
the following methods: [Release No. 34–78767; File No. SR– Sliding process. As proposed, such
BatsEDGX–2016–26] order handling would apply to all
Electronic Comments orders entered into the System for Pilot
• Use the Commission’s Internet Self-Regulatory Organizations; Bats Securities (i.e., Test Group One, Test
comment form (http://www.sec.gov/ EDGX Exchange, Inc.; Notice of Filing Group Two, Test Group Three, and the
rules/sro.shtml); or of Amendment No. 1 and Order Control Group). Additionally, the
• Send an email to rule-comments@ Granting Accelerated Approval of a Exchange proposes to amend the last
sec.gov. Please include File No. SR– Proposed Rule Change, as Modified by sentence of Rule 11.22(a)(4) to specify
NYSEArca–2016–122 on the subject Amendment No. 1, To Amend that the current permissible price
line. Exchange Rule 11.22 To Describe increments are set forth under Exchange
Changes to System Functionality Rule 11.6(i), Minimum Price Variation.
Paper Comments Necessary To Implement the The Exchange proposes in Exchange
• Send paper comments in triplicate Regulation NMS Plan To Implement a Rule 11.22(c) specific procedures for
to Brent J. Fields, Secretary, Securities Tick Size Pilot Program handling, executing, repricing and
and Exchange Commission, 100 F Street displaying certain order types and order
September 2, 2016.
NE., Washington, DC 20549–1090. type instructions. The provisions in
All submissions should refer to File No. I. Introduction proposed Rule 11.22(c) would apply to
SR–NYSEArca–2016–122. This file On June 29, 2016, Bats EDGX all Pilot Securities. Further, the
number should be included on the Exchange, Inc. (‘‘Exchange’’ or ‘‘EDGX’’) Exchange proposes that only the
subject line if email is used. To help the filed with the Securities and Exchange provisions in Exchange Rules 11.22(a)
Commission process and review your Commission (‘‘Commission’’) pursuant and (b) would be limited to the Pilot
comments more efficiently, please use to Section 19(b)(1) of the Securities Period.8
only one method. The Commission will Exchange Act of 1934 (‘‘Exchange Act’’
post all comments on the Commission’s or ‘‘Act’’) 1 and Rule 19b–4 thereunder,2
5 Securities Exchange Act Release No. 78331 (July
Internet Web site (http://www.sec.gov/ 14, 2016), 81 FR 47205 (‘‘Notice’’).
a proposed rule change to adopt 6 See Letter to Brent J. Fields, Secretary,
rules/sro.shtml). Copies of the Exchange Rule 11.22(c) to describe Commission, from Eric Swanson, General Counsel,
submission, all subsequent changes to System 3 functionality to Exchange, dated July 26, 2016 (‘‘Exchange Letter’’).
amendments, all written statements implement the Regulation NMS Plan to 7 In Amendment No. 1, the Exchange proposes to:
with respect to the proposed rule (1) Apply the changes in proposed Rule 11.22(c) to
Implement a Tick Size Pilot Program all Pilot Securities; (2) clarify in Rule 11.22(c)(1)
change that are filed with the (‘‘Plan’’ or ‘‘Pilot’’).4 The proposed rule that the increment for Market Orders and Rule
Commission, and all written change was published for comment in 11.22(c)(5) that the increment for Market Maker Peg
communications relating to the Orders will be at ‘‘permissible’’ increments; (3) state
proposed rule change between the 21 17 in Rule 11.22(c)(2) that orders with a Market Peg
CFR 200.30–3(a)(12).
instruction, Rule 11.22(c)(4) that orders with a
Commission and any person, other than 1 15 U.S.C. 78s(b)(1). Discretionary Range, and Rule 11.22(c)(6) that
those that may be withheld from the 2 17 CFR 240.19b–4.
Supplemental Peg Orders will not be accepted in
3 The term ‘‘System’’ is defined as the ‘‘electronic
public in accordance with the Pilot Securities; (4) clarify in Rule 11.22(c)(3) that
communications and trading facility designated by MidPoint Peg Orders may not be alternatively
provisions of 5 U.S.C. 552, will be
mstockstill on DSK3G9T082PROD with NOTICES
the Board of Directors of the Exchange through pegged to one minimum price variation inside the
available for Web site viewing and which securities orders of Users are consolidated same side of the NBBO as the order; (5) delete the
printing in the Commission’s Public for ranking, execution and, when applicable, proposal to amend orders with a Non-Displayed
Reference Room, 100 F Street NE., routing away.’’ See Exchange Rule 1.5(cc). instruction; and (6) clarify how orders subject to
Washington, DC 20549 on official 4 See Securities Exchange Act Release No. 74892 Display-Price Sliding will operate when they are
(May 6, 2015), 80 FR 27513 (May 13, 2015) unexecutable at the locking price.
business days between the hours of (‘‘Approval Order’’). Unless otherwise specified, 8 The Exchange proposes to clarify in the
capitalized terms used in this rule filing are defined introduction to Exchange Rule 11.22 that only the
20 15 U.S.C. 78s(b)(2)(B). as set forth in the Plan. Continued
VerDate Sep<11>2014 19:34 Sep 07, 2016 Jkt 238001 PO 00000 Frm 00134 Fmt 4703 Sfmt 4703 E:\FR\FM\08SEN1.SGM 08SEN1](https://thefederalregister.org/doc/81_FR_62379/page/1.svg)
![62208 Federal Register / Vol. 81, No. 174 / Thursday, September 8, 2016 / Notices
VI. Conclusion rule change, or institute proceedings to The following discussion is a summary
It is therefore ordered, pursuant to determine whether to disapprove the of the Exchange’s description of its
Section 19(b)(2) of the Exchange Act,20 proposed rule change.4 On August 25, proposed listing criteria for the FTSE
that the proposed rule change (SR– 2016, the Exchange filed Amendment Developed Europe and FTSE Emerging
BatsEDGX–2016–26), as modified by No. 1 to the proposed rule change.5 The Index options.7
Amendment No. 1, be and hereby is Commission received no comments on According to the Exchange, the FTSE
approved on an accelerated basis. the proposed rule change. The Developed Europe Index is a weighted
Commission is publishing this notice to index representing the performance of
For the Commission, by the Division of solicit comment on Amendment No. 1
Trading and Markets, pursuant to delegated large- and mid-cap companies in
authority.21 to the proposed rule change from Developed European markets. The FTSE
interested persons and is approving the Developed Europe Index is comprised of
Brent J. Fields,
proposed rule change, as modified by over 500 securities from 15 countries.
Secretary.
Amendment No. 1, on an accelerated According to the Exchange, the FTSE
[FR Doc. 2016–21650 Filed 9–7–16; 8:45 am] basis. Emerging Index is a weighted index
BILLING CODE 8011–01–P
II. Description of the Proposed Rule representing the performance of large-
Change and mid-cap companies in advanced
SECURITIES AND EXCHANGE and secondary emerging markets. The
A. Listing and Trading of FTSE FTSE Emerging Index is comprised of
COMMISSION Developed Europe Index and FTSE approximately 950 securities from 22
[Release No. 34–78760; File No. SR–CBOE– Emerging Index Options countries.8 The Exchange states that the
2016–049] The Exchange proposes to list and indexes are monitored and maintained
Self-Regulatory Organizations; trade P.M. cash-settled, European-style by FTSE International Limited
Chicago Board Options Exchange, options on the FTSE Developed Europe (‘‘FTSE’’).9 Adjustments to the indexes
Incorporated; Notice of Filing of Index and the FTSE Emerging Index.6 can be made on a daily basis, and FTSE
Amendment No. 1 and Order Granting reviews the indexes semi-annually.
4 See Securities Exchange Act Release No. 78511,
Accelerated Approval of a Proposed According to the Exchange, the FTSE
81 FR 54173 (Aug. 15, 2016).
Rule Change, as Modified by 5 Pursuant to Amendment No. 1, the Exchange
Developed Europe Index is calculated
Amendment No. 1, To List and Trade proposes to (i) retain the current CSA percentages and published in U.S. dollars on a real-
Options That Overlie the FTSE applicable to the initial and continued listing of time basis during U.S. trading hours
MSCI EAFE and MSCI Emerging Markets Index from 2:00 a.m. to 10:30 a.m. (Chicago
Developed Europe Index and the FTSE options at 25% and 27.5%, respectively (the
Emerging Index and To Amend the original proposal would have raised such CSA
time). At 10:30 a.m. (Chicago time) the
Maintenance Listing Criteria percentages to 50%) and (ii) decrease the proposed real-time index closes using the closing
Applicable to Certain Index Options CSA percentages applicable to the initial and prices from the London Stock Exchange
continued listing of FTSE Developed Europe and and between 10:30 a.m. and 3:15 p.m.
September 2, 2016. FTSE Emerging Index options to 32.5% and 35%,
respectively (the original proposal would have set (Chicago time) the FTSE Developed
I. Introduction such CSA percentages at 50%). Thus, as amended Europe Index level is a static value that
by Amendment No. 1, proposed Rule 24.2, market participants can access via data
On June 15, 2016, the Chicago Board Interpretation and Policy .01(a)(7) provides that vendors. The FTSE Emerging Index is
Options Exchange, Incorporated ‘‘non-U.S. component securities (stocks or ADRs)
calculated and published in U.S. dollars
(‘‘Exchange’’ or ‘‘CBOE’’) filed with the that are not subject to comprehensive surveillance
agreements do not, in the aggregate, represent more on a real-time basis during U.S. trading
Securities and Exchange Commission than: (i) Twenty-five percent (25%) of the weight hours from 6:30 p.m. (Chicago time,
(‘‘Commission’’), pursuant to Section of the [MSCI] EAFE Index, (ii) twenty-seven and a prior day) to 3:10 p.m. (Chicago time,
19(b)(1) of the Securities Exchange Act half percent (27.5%) of the weight of the [MSCI
next day). At 3:10 p.m. (Chicago time)
of 1934 (‘‘Act’’) 1 and Rule 19b–4 Emerging Markets] Index, (iii) thirty-two and a half
percent (32.5%) of the weight of the FTSE the real-time index closes using the
thereunder,2 a proposed rule change to Developed [Europe] Index, and (iv) thirty-five closing prices from Brazil, Chile, Peru,
list and trade options that overlie the percent (35%) of the weight of the FTSE Emerging
and Mexico and between 3:10 p.m. and
FTSE Developed Europe Index and the Index.’’ In addition, Amendment No. 1 amends the
proposed maintenance listing criteria applicable to 3:15 p.m. (Chicago time) the FTSE
FTSE Emerging Index, to raise the FTSE Developed Europe, FTSE Emerging, MSCI Emerging Index level is a static value
comprehensive surveillance agreement EAFE, MSCI Emerging Markets, FTSE 100, and that market participants can access via
(‘‘CSA’’) percentages applicable to FTSE China 50 Index options to require that the
data vendors.
options that overlie the MSCI EAFE CSA percentages applicable to such products be
satisfied as of the first day of the month following The methodologies used to calculate
Index and the MSCI Emerging Markets the Reporting Authority’s review of the weighting the FTSE Developed Europe Index and
Index, and to amend the maintenance of the constituents in the applicable index, but in
the FTSE Emerging Index are similar to
listing criteria applicable to MSCI EAFE, no case less than on a quarterly basis (the original
proposal would have provided that the CSA the methodology used to calculate the
MSCI Emerging Markets, FTSE 100, and
requirements for such products must only be value of other benchmark market-
FTSE China 50 Index options. The satisfied as of the first day of the January and July
proposed rule change was published for in each year). Amendment No. 1 is available at:
Exchange proposes to designate the FTSE
comment in the Federal Register on July http://www.cboe.com/publish/RuleFilingsSEC/SR-
Developed Europe Index and the FTSE Emerging
1, 2016.3 On August 9, 2016, the CBOE-2016-049.a1.pdf.
6 The Exchange proposes to list up to twelve near- Index as eligible for trading as FLEX options.
Commission extended the time period term expiration months for the FTSE Developed
7 For a more complete description of the FTSE
within which to approve the proposed Europe and FTSE Emerging Index options. The Developed Europe Index and the FTSE Emerging
mstockstill on DSK3G9T082PROD with NOTICES
rule change, disapprove the proposed Exchange also proposes to list LEAPS on the FTSE Index, and CBOE’s proposed listing criteria for
Developed Europe Index and the FTSE Emerging options on these indexes, see Notice, supra note 3.
8 The Exchange states that the FTSE Developed
20 Id. Index. The Exchange proposes that options on the
FTSE Developed Europe Index and the FTSE Europe Index and the FTSE Emerging Index each
21 17 CFR 200.30–3(a)(12). Emerging Index would be eligible for all other meet the definition of a broad-based index as set
1 15 U.S.C. 78s(b)(1). expirations permitted for other broad-based indexes forth in Exchange Rule 24.1(i)(1).
2 17 CFR 240.19b–4. 9 The Exchange proposes to designate FTSE as the
(e.g., End of Week/End of Month/Wednesday
3 See Securities Exchange Act Release No. 78177 Expirations, Short Term Option Series, and reporting authority for the FTSE Developed Europe
(Jun. 28, 2016), 81 FR 43308 (‘‘Notice’’). Quarterly Options Series). In addition, the Index and the FTSE Emerging Index.
VerDate Sep<11>2014 19:34 Sep 07, 2016 Jkt 238001 PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 E:\FR\FM\08SEN1.SGM 08SEN1](https://thefederalregister.org/doc/81_FR_62379/page/4.svg)
Document Created: 2018-02-09 13:12:59
Document Modified: 2018-02-09 13:12:59
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 62205 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR