81 FR 63532 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.22(b) Regarding the Data Collection Requirements of the Regulation NMS Plan To Implement a Tick Size Pilot Program
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 179 (September 15, 2016)
Federal Register Volume 81, Issue 179 (September 15, 2016)
| Page Range | 63532-63536 | |
| FR Document | 2016-22147 |
[Federal Register Volume 81, Number 179 (Thursday, September 15, 2016)] [Notices] [Pages 63532-63536] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-22147] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78798; File No. SR-BatsEDGX-2016-51] Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.22(b) Regarding the Data Collection Requirements of the Regulation NMS Plan To Implement a Tick Size Pilot Program September 9, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on August 26, 2016, Bats EDGX Exchange, Inc. (``Exchange'' or ``EDGX'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated this proposal as a ``non-controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ 15 U.S.C. 78s(b)(3)(A). \4\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- [[Page 63533]] I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend Exchange Rule 11.22(b) regarding the data collection requirements of the Regulation NMS Plan to Implement a Tick Size Pilot Program (``Plan'').\5\ --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 80 FR 27513 (May 13, 2015) (``Approval Order''). --------------------------------------------------------------------------- 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 On August 25, 2014, the Exchange, and several other self-regulatory organizations (the ``Participants'') filed with the Commission, pursuant to Section 11A of the Act \6\ and Rule 608 of Regulation NMS thereunder,\7\ the Plan to Implement a Tick Size Pilot Program (the ``Plan'').\8\ The Participants filed the Plan to comply with an order issued by the Commission on June 24, 2014.\9\ 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.\10\ --------------------------------------------------------------------------- \6\ 15 U.S.C. 78k-1. \7\ 17 CFR 242.608. \8\ See Letter from Brendon J. Weiss, Vice President, Intercontinental Exchange, Inc., to Secretary, Commission, dated August 25, 2014. \9\ See Securities Exchange Act Release No 72460 (June 24, 2014), 79 FR 36840 (June 30, 2014). \10\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 80 FR 27513 (May 13, 2015) (``Approval Order''). --------------------------------------------------------------------------- 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 stock 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 Plan provides for the creation of a group of Pilot Securities, which shall be placed in a control group and three separate test groups, with each subject to varying quoting and trading increments. Pilot Securities in the control group will be quoted at the current tick size increment of $0.01 per share and will trade at the currently permitted increments. Pilot Securities in the first test group 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 quoting and trading increments 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 the price of a Trading Center's ``Best Protected Bid'' or ``Best Protected Offer,'' unless an enumerated exception applies.\13\ In addition to the exceptions provided under Test Group Two, an exception for Block Size orders and exceptions that mirror those under Rule 611 of Regulation NMS \14\ will apply to the Trade-at requirement. --------------------------------------------------------------------------- \11\ See Section VI(B) of the Plan. \12\ See Section VI(C) of the Plan. \13\ See Section VI(D) of the Plan. \14\ 17 CFR 242.611. --------------------------------------------------------------------------- The Plan also requires a Trading Center \15\ or a Market Maker \16\ to collect and transmit certain data to its designated examining authority (``DEA''), and requires DEAs to transmit this data to the Commission. Participants that operate a Trading Center also are required under the Plan to collect certain data, which is then transmitted directly to the Commission. With respect to Trading Centers, Appendix B.I to the Plan (Market Quality Statistics) requires a Trading Center to submit to the Participant that is its DEA a variety of market quality statistics. Appendix B.II to the Plan (Market and Marketable Limit Order Data) requires a Trading Center to submit information to its DEA relating to market orders and marketable limit orders, including the time of order receipt, order type, the order size, and the National Best Bid and National Best Offer quoted price. --------------------------------------------------------------------------- \15\ The Plan incorporates the definition of a ``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.'' See 17 CFR 242.600(b). \16\ The Plan defines a Market Maker as ``a dealer registered with any self-regulatory organization, in accordance with the rules thereof, as (i) a market maker or (ii) a liquidity provider with an obligation to maintain continuous, two-sided trading interest.'' --------------------------------------------------------------------------- With respect to Market Makers, Appendix B.III requires a Participant that is a national securities exchange to collect daily Market Maker Registration statistics. Appendix B.IV requires a Participant to collect data related to Market Maker participation with respect to each Market Maker engaging in trading activity on a Trading Center operated by the Participant. Appendix C.I requires a Participant to collect data related to Market Maker profitability from each Market Maker for which it is the DEA. Appendix C.II requires the Participant, as DEA, to aggregate the Appendix C.I data, and to transmit this data to the Commission. The Commission approved the Pilot on a two-year basis, with implementation to begin no later than May 6, 2016.\17\ On November 6, 2015, the SEC exempted the Participants from implementing the pilot until October 3, 2016.\18\ As set forth in Appendices B and C to the Plan, data that is reported pursuant to the appendices shall be provided for dates starting six months prior to the Pilot Period through six months after the end of the Pilot Period. Under the revised Pilot implementation date, the Pre-Pilot data collection period commenced on April 4, 2016. --------------------------------------------------------------------------- \17\ See Approval Order at 27533 and 27545. \18\ See Securities Exchange Act Release No. 76382 (November 6, 2015), 80 FR 70284 (November 13, 2015) (File No. 4-657). --------------------------------------------------------------------------- On March 16, 2016, the Exchange filed with the Commission a proposed rule change to adopt Exchange Rule 11.22(b) to implement the data collection requirements of the Plan.\19\ On December 9, 2015, FINRA, on behalf of the Plan Participants, submitted an exemptive request to the Commission, [[Page 63534]] seeking an exemption from certain data collection and reporting requirements set forth in the Plan.\20\ --------------------------------------------------------------------------- \19\ See Securities Exchange Act Release No. 77416 (March 22, 2016), 81 FR 17225 (March 28, 2016) (Notice of Filing and Immediate Effectiveness of File No. SR-BatsEDGX-2016-01). The Exchange also submitted a proposed rule change to implement the quoting and trading requirements of the Plan. See Securities Exchange Act Release No. 77791 (May 10, 2016), 81 FR 30375 (May 16, 2016) (Notice of Filing and Immediate Effectiveness of File No. SR- BatsEDGX-2016-14). \20\ See letter from Marcia E. Asquith, Senior Vice President and Corporate Secretary, FINRA dated December 9, 2015 to Robert W. Errett, Deputy Secretary, Commission (``Exemption Request''). The Commission, pursuant to its authority under Rule 608(e) of Regulation NMS, granted the Exchange a limited exemption from the requirement to comply with certain provisions of the Plan as specified in the letter and noted herein. See letter from David Shillman, Associate Director, Division of Trading and Markets, Commission to Eric Swanson, General Counsel, the Exchange, dated March 22, 2016 (``Exemption Letter''). --------------------------------------------------------------------------- The Exchange now proposes to further amend Rule 11.22(b) to modify additional data collection and reporting requirements.\21\ First, Appendix B.I.a(21) through B.I.a(27) currently requires that Trading Centers report the cumulative number of shares of cancelled orders during a specified duration of time after receipt of the order that was cancelled. The Exchange and the other Participants believe that, for purposes of reporting cancelled orders, it is appropriate to categorize unexecuted Immediate or Cancel orders separately as one bucket irrespective of the duration of time after order receipt, i.e., without a time increment, to better differentiate orders cancelled subsequent to entry from those where the customer's intent prior to order entry was to cancel the order if no execution could be immediately obtained. The Exchange, therefore, proposes to modify Supplementary Material [sic].04 to provide that unexecuted Immediate or Cancel orders shall be categorized separately for purposes of Appendix B.I.a(21) through B.I.a(27). --------------------------------------------------------------------------- \21\ The Exchange notes that, in connection with this proposed rule change, FINRA, on behalf of the Plan Participants, intends to file an exemptive request seeking relief from certain of the Plan's data collection requirements. --------------------------------------------------------------------------- The second change relates to the reporting of daily market quality statistics pursuant to Appendix B.I. Currently, Appendix B.I sets forth categories of orders, including market orders, marketable limit orders, and inside-the-quote resting limit orders, for which daily market quality statistics must be reported. The Exchange and the other Participants have determined that it is appropriate to include an order type for limit orders priced more than $0.10 away from the NBBO for purposes of Appendix B reporting. The Exchange therefore proposes to amend Supplementary Material [sic].06 to provide that limit orders priced more than $0.10 away from the NBBO shall be included as an order type for purposes of Appendix B reporting, and shall be assigned the number (22). These orders are not currently required to be reported pursuant to Appendix B, and The Exchange and the other Participants believe that requiring the reporting of such orders will produce a more comprehensive data set. The third change relates to the reporting of market quality statistics pursuant to Appendix B.I for a variety of order types, including inside-the-quote resting limit orders (12), at-the-quote resting limit orders (13), and near-the-quote resting limit orders (within $0.10 of the NBBO) (14). The Exchange and the other Participants believe that it is appropriate to require Trading Centers to report all orders that fall within these categories, and not just those orders that are ``resting.'' The Exchange, therefore, proposes to amend Supplementary Material [sic].06 to make this change. In the fourth change, the Exchange proposes to add new Supplementary Material [sic].09 to modify the manner in which market maker participation statistics are calculated. Currently, Appendix B.IV provides that market maker participation statistics shall be calculated based on share participation, trade participation, cross-quote share (trade) participation, inside-the-quote share (trade) participation, at-the-quote share (trade) participation, and outside-the-quote share (trade) participation. The Exchange and the other Participants have determined that it is appropriate to add the count of the number of Market Makers used in the calculation of share (trade) participation to each category. The Exchange is therefore proposing this change as part of Supplementary Material [sic].09. In addition, Appendix B.IV(b) and (c) currently require that, when aggregating across Market Makers, share participation and trade participation shall be calculated using the share-weighted average and trade-weighted average, respectively. The Exchange and the other Participants believe that it is more appropriate to calculate share and trade participation by providing the total count of shares or trades, as applicable, rather than weighted averages, and the Exchange is therefore proposing this change as part of Supplementary Material [sic].09. The fifth change relates to the NBBO that a Trading Center is required to use when performing certain quote-related calculations. When calculating cross-quote share (trade) participation pursuant to Appendix B.IV(d) and inside-the-quote share (trade) participation pursuant to Appendix B.IV(e), the Plan requires the Trading Center to utilize the NBBO at the time of the trade for both share and trade participation calculations. When calculating at-the-quote share (trade) participation and outside-the-quote share (trade) participation pursuant to Appendix B.IV(f) and (g), the Plan allows the Trading Center to utilize the National Best Bid or National Best Offer (NBBO) at the time of or immediately before the trade for both share and trade participation calculations. The Exchange and the other Participants believe that it is appropriate to calculate all quote participation (cross-quote share (trade) participation, inside-the-quote share (trade) participation, at-the-quote share (trade) participation and outside-the-quote share (trade) participation) solely by reference to the NBBO in effect immediately prior to the trade. The Exchange therefore proposes to make this change as part of Supplementary Material [sic].09. Finally, the Exchange proposes to change the end date until which the Pre-Pilot Data Collection Securities shall be used to fulfill the Plan's data collection requirements. Currently, Supplementary Material [sic].10 provides that Pre-Pilot Data Collection Securities are the securities designated by the Participants for purposes of the data collection requirements described in Items I, II and IV of Appendix B and Item I of Appendix C to the Plan for the period beginning six months prior to the Pilot Period and ending on the trading day immediately preceding the Pilot Period. The Exchange and the other Participants believe that it is appropriate to use the Pilot Securities to satisfy the Plan's data collection requirements prior to the commencement of the Pilot. According, the Exchange is revising Supplementary Material [sic].10 (which will be re-numbered as Supplementary Material [sic].11) to provide that the Pre-Pilot Data Collection Securities shall be used to satisfy the Plan's data collection requirements through thirty-one days prior to the Pilot Period, after which time the Pilot Securities shall be used for purposes of the data collection requirements.\22\ --------------------------------------------------------------------------- \22\ After regular trading hours on September 2, 2016, the national securities exchanges will establish which securities will be included as Pilot Securities for purposes of the Plan. The Exchange and the other Participants have determined that members should use the Pilot Securities list for data collection purposes once it becomes available. Thus, the proposed rule change requires that, beginning thirty days prior to the first day of the Pilot Period--i.e., September 3, 2016--the Exchange and the Exchange members will comply with the data collection obligations of the Plan by collecting data on the Pilot Securities. As a result, beginning on September 3, 2016, members must migrate from using the Exchange's published Pre-Pilot Data Collection Security list and begin using the Pilot Securities list. September 2, 2016 will be the last day that members use the Pre-Pilot Data Collection Security list. --------------------------------------------------------------------------- [[Page 63535]] As noted in Item 2 of this filing, the Exchange has filed the proposed rule change for immediate effectiveness. The Exchange has requested that the SEC waive the 30-day operative period so that the proposed rule change can become operative on August 30, 2016. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act \23\ in general, and furthers the objectives of Section 6(b)(5) of the Act \24\ 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. --------------------------------------------------------------------------- \23\ 15 U.S.C. 78f(b). \24\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that this proposal is consistent with the Act because it implements and clarifies the provisions of the Plan, and is designed to assist the Exchange in meeting its regulatory obligations pursuant of 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. The Exchange believes that this proposal is in furtherance of the objectives of the Plan, as identified by the SEC, and is therefore consistent with the Act because the proposal implements and clarifies the requirements of the Plan and applies specific obligations to Members in furtherance of compliance with the Plan. (B) Self-Regulatory Organization's Statement on Burden on Competition The Exchange notes that the proposed rule change implements the provisions of the Plan, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. The Exchange also notes that, other than the change to require use of the Pilot Securities beginning thirty days prior to the beginning of the Pilot Period, the proposed changes will not affect the data collection and reporting requirements for members that operate Trading Centers; the proposed changes will only affect how the Exchange and Participants that operate Trading Centers collect and report data. The Exchange notes that, with respect to the change to require the use of the Pilot Securities beginning thirty days prior to the start of the Pilot Period, the proposed change reduces the number of securities on which affected members otherwise would have been required to collect data pursuant to the Plan and Exchange Rule 11.22(b). In addition, the proposed rule change applies equally to all similarly situated members. Therefore, 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. (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 The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act \25\ and Rule 19b-4(f)(6) \26\ thereunder because the proposal does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) by its terms, become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. --------------------------------------------------------------------------- \25\ 15 U.S.C. 78s(b)(3)(A). \26\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \27\ normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\28\ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that so that the proposed rule change can become operative on August 30, 2016. --------------------------------------------------------------------------- \27\ 17 CFR 240.19b-4(f)(6). \28\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow the Exchange to implement the proposed rules immediately thereby preventing delays in the implementation of the Plan. The Commission notes that the Plan is scheduled to start on October 3, 2016. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposed rule change to be operative upon filing with the Commission.\29\ --------------------------------------------------------------------------- \29\ For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.\30\ --------------------------------------------------------------------------- \30\ 15 U.S.C. 78s(b)(3)(C). --------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic 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-2016-51 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-2016-51. 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 [[Page 63536]] business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 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-2016-51 and should be submitted on or before October 6, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\31\ --------------------------------------------------------------------------- \31\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-22147 Filed 9-14-16; 8:45 am] BILLING CODE 8011-01-P
![63532 Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices
not be applied to Pilot Securities in Test to allow the Exchange to meet its printing in the Commission’s Public
Groups One and Two. Unlike such regulatory obligations under the Plan. Reference Room, 100 F Street NE.,
trading centers, as a self-regulatory Because the Plan will be implemented Washington, DC 20549, on official
organization, under Section 19(b)(1) of beginning on October 3, 2016, the business days between the hours of
the Act,36 the Exchange is required to Exchange believes there is good cause to 10:00 a.m. and 3:00 p.m. Copies of the
file proposed rule changes for any accelerate effectiveness so that the filing also will be available for
modifications to order behavior that it Exchange may implement the proposed inspection and copying at the principal
proposes for the Plan. The absence of changes concurrent with the office of the Exchange. All comments
Commission approval of these proposed implementation date of the Plan. received will be posted without change;
rule changes would impose a burden on Within 45 days of the date of the Commission does not edit personal
competition that is not necessary or publication of this notice in the Federal identifying information from
appropriate in furtherance of the Register or up to 90 days (i) as the submissions. You should submit only
purposes of the Act because trading Commission may designate if it finds information that you wish to make
centers that are not registered exchanges such longer period to be appropriate available publicly. All submissions
would be able to implement changes to and publishes its reasons for so finding should refer to File Number SR–
comply with the Plan, but the Exchange or (ii) as to which the self-regulatory NYSEARCA–2016–123, and should be
would not. The Exchange believes that organization consents, the Commission submitted on or before September 29,
a disapproval of the Exchange’s will: 2016.
proposed rules would therefore put the (A) By order approve or disapprove
For the Commission, by the Division of
Exchange at a competitive disadvantage the proposed rule change, or Trading and Markets, pursuant to delegated
vis-à-vis the over-the-counter markets (B) institute proceedings to determine authority.38
because such trading centers would be whether the proposed rule change Brent J. Fields,
able to modify the behavior of non- should be disapproved.
Secretary.
displayed orders in Test Group Three
IV. Solicitation of Comments [FR Doc. 2016–22150 Filed 9–14–16; 8:45 am]
without restriction. The Exchange
further notes that the proposed rule Interested persons are invited to BILLING CODE 8011–01–P
change will apply equally to all ETP submit written data, views, and
Holders that trade Pilot Securities. arguments concerning the foregoing,
including whether the proposed rule SECURITIES AND EXCHANGE
C. Self-Regulatory Organization’s change is consistent with the Act. COMMISSION
Statement on Comments on the Comments may be submitted by any of
Proposed Rule Change Received From [Release No. 34–78798; File No. SR–
the following methods: BatsEDGX–2016–51]
Members, Participants, or Others
Electronic Comments
No written comments were solicited Self-Regulatory Organizations; Bats
or received with respect to the proposed • Use the Commission’s Internet EDGX Exchange, Inc.; Notice of Filing
rule change. comment form (http://www.sec.gov/ and Immediate Effectiveness of a
rules/sro.shtml); or Proposed Rule Change To Amend Rule
III. Date of Effectiveness of the • Send an email to rule-comments@
Proposed Rule Change and Timing for 11.22(b) Regarding the Data Collection
sec.gov. Please include File Number SR–
Commission Action Requirements of the Regulation NMS
NYSEARCA–2016–123 on the subject
Plan To Implement a Tick Size Pilot
The Exchange respectfully requests line.
Program
accelerated effectiveness of this Paper Comments
proposed rule change pursuant to September 9, 2016.
Section 19(b)(2) of the Act.37 The • Send paper comments in triplicate Pursuant to Section 19(b)(1) of the
Exchange believes that there is good to Secretary, Securities and Exchange Securities Exchange Act of 1934
cause for the Commission to accelerate Commission, 100 F Street NE., (‘‘Act’’),1 and Rule 19b–4 thereunder,2
effectiveness because the proposed rule Washington, DC 20549–1090. notice is hereby given that on August
changes are designed to specify All submissions should refer to File 26, 2016, Bats EDGX Exchange, Inc.
procedures for the handling, executing, Number SR–NYSEARCA–2016–123. (‘‘Exchange’’ or ‘‘EDGX’’) filed with the
re-pricing and displaying of certain This file number should be included on Securities and Exchange Commission
order types and order type instructions the subject line if email is used. To help (‘‘Commission’’) the proposed rule
applicable to Pilot Securities in Test the Commission process and review change as described in Items I and II
Groups One, Two, and Three. In your comments more efficiently, please below, which Items have been prepared
determining the scope of these proposed use only one method. The Commission by the Exchange. The Exchange has
changes to implement the Plan, the will post all comments on the designated this proposal as a ‘‘non-
Exchange reviewed its order types and Commission’s Internet Web site (http:// controversial’’ proposed rule change
identified which orders and instructions www.sec.gov/rules/sro.shtml). Copies of pursuant to Section 19(b)(3)(A) of the
would be inconsistent with the Plan and the submission, all subsequent Act 3 and Rule 19b–4(f)(6)(iii)
propose to modify the operation of such amendments, all written statements thereunder,4 which renders it effective
order types so they will comply with the with respect to the proposed rule upon filing with the Commission. The
Plan, or, to the extent inconsistent with change that are filed with the Commission is publishing this notice to
Commission, and all written
sradovich on DSK3GMQ082PROD with NOTICES
the Plan, eliminate them. These solicit comments on the proposed rule
proposed changes are consistent with communications relating to the change from interested persons.
the protection of investors and the proposed rule change between the
public interest because they are Commission and any person, other than 38 17 CFR 200.30–3(a)(12).
designed to comply with the Plan and those that may be withheld from the 1 15 U.S.C. 78s(b)(1).
public in accordance with the 2 17 CFR 240.19b–4.
36 15 U.S.C. 78s(b)(1). provisions of 5 U.S.C. 552, will be 3 15 U.S.C. 78s(b)(3)(A).
37 15 U.S.C. 78s(b)(2). available for Web site viewing and 4 17 CFR 240.19b–4(f)(6)(iii).
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seeking an exemption from certain data are not currently required to be reported calculating at-the-quote share (trade)
collection and reporting requirements pursuant to Appendix B, and The participation and outside-the-quote
set forth in the Plan.20 Exchange and the other Participants share (trade) participation pursuant to
The Exchange now proposes to believe that requiring the reporting of Appendix B.IV(f) and (g), the Plan
further amend Rule 11.22(b) to modify such orders will produce a more allows the Trading Center to utilize the
additional data collection and reporting comprehensive data set. National Best Bid or National Best Offer
requirements.21 First, Appendix The third change relates to the (NBBO) at the time of or immediately
B.I.a(21) through B.I.a(27) currently reporting of market quality statistics before the trade for both share and trade
requires that Trading Centers report the pursuant to Appendix B.I for a variety participation calculations. The
cumulative number of shares of of order types, including inside-the- Exchange and the other Participants
cancelled orders during a specified quote resting limit orders (12), at-the- believe that it is appropriate to calculate
duration of time after receipt of the quote resting limit orders (13), and near- all quote participation (cross-quote
order that was cancelled. The Exchange the-quote resting limit orders (within share (trade) participation, inside-the-
and the other Participants believe that, $0.10 of the NBBO) (14). The Exchange quote share (trade) participation, at-the-
for purposes of reporting cancelled and the other Participants believe that it quote share (trade) participation and
orders, it is appropriate to categorize is appropriate to require Trading outside-the-quote share (trade)
unexecuted Immediate or Cancel orders Centers to report all orders that fall participation) solely by reference to the
separately as one bucket irrespective of within these categories, and not just NBBO in effect immediately prior to the
the duration of time after order receipt, those orders that are ‘‘resting.’’ The trade. The Exchange therefore proposes
i.e., without a time increment, to better Exchange, therefore, proposes to amend to make this change as part of
differentiate orders cancelled Supplementary Material [sic].06 to make Supplementary Material [sic].09.
subsequent to entry from those where this change. Finally, the Exchange proposes to
the customer’s intent prior to order In the fourth change, the Exchange change the end date until which the Pre-
entry was to cancel the order if no proposes to add new Supplementary Pilot Data Collection Securities shall be
execution could be immediately Material [sic].09 to modify the manner used to fulfill the Plan’s data collection
obtained. The Exchange, therefore, in which market maker participation requirements. Currently, Supplementary
proposes to modify Supplementary statistics are calculated. Currently, Material [sic].10 provides that Pre-Pilot
Material [sic].04 to provide that Appendix B.IV provides that market Data Collection Securities are the
unexecuted Immediate or Cancel orders maker participation statistics shall be securities designated by the Participants
shall be categorized separately for calculated based on share participation, for purposes of the data collection
purposes of Appendix B.I.a(21) through trade participation, cross-quote share requirements described in Items I, II and
B.I.a(27). (trade) participation, inside-the-quote IV of Appendix B and Item I of
The second change relates to the share (trade) participation, at-the-quote Appendix C to the Plan for the period
reporting of daily market quality share (trade) participation, and outside- beginning six months prior to the Pilot
statistics pursuant to Appendix B.I. the-quote share (trade) participation. Period and ending on the trading day
Currently, Appendix B.I sets forth The Exchange and the other Participants immediately preceding the Pilot Period.
categories of orders, including market have determined that it is appropriate to The Exchange and the other Participants
orders, marketable limit orders, and add the count of the number of Market believe that it is appropriate to use the
inside-the-quote resting limit orders, for Makers used in the calculation of share Pilot Securities to satisfy the Plan’s data
which daily market quality statistics (trade) participation to each category. collection requirements prior to the
must be reported. The Exchange and the The Exchange is therefore proposing commencement of the Pilot. According,
other Participants have determined that this change as part of Supplementary the Exchange is revising Supplementary
it is appropriate to include an order type Material [sic].09. In addition, Appendix Material [sic].10 (which will be re-
for limit orders priced more than $0.10 B.IV(b) and (c) currently require that, numbered as Supplementary Material
away from the NBBO for purposes of when aggregating across Market Makers, [sic].11) to provide that the Pre-Pilot
Appendix B reporting. The Exchange share participation and trade Data Collection Securities shall be used
therefore proposes to amend participation shall be calculated using to satisfy the Plan’s data collection
Supplementary Material [sic].06 to the share-weighted average and trade-
requirements through thirty-one days
provide that limit orders priced more weighted average, respectively. The
prior to the Pilot Period, after which
than $0.10 away from the NBBO shall be Exchange and the other Participants
time the Pilot Securities shall be used
included as an order type for purposes believe that it is more appropriate to
for purposes of the data collection
of Appendix B reporting, and shall be calculate share and trade participation
requirements.22
assigned the number (22). These orders by providing the total count of shares or
trades, as applicable, rather than 22 After regular trading hours on September 2,
20 See letter from Marcia E. Asquith, Senior Vice weighted averages, and the Exchange is 2016, the national securities exchanges will
President and Corporate Secretary, FINRA dated therefore proposing this change as part establish which securities will be included as Pilot
December 9, 2015 to Robert W. Errett, Deputy of Supplementary Material [sic].09. Securities for purposes of the Plan. The Exchange
Secretary, Commission (‘‘Exemption Request’’). The The fifth change relates to the NBBO and the other Participants have determined that
Commission, pursuant to its authority under Rule members should use the Pilot Securities list for data
608(e) of Regulation NMS, granted the Exchange a that a Trading Center is required to use collection purposes once it becomes available.
limited exemption from the requirement to comply when performing certain quote-related Thus, the proposed rule change requires that,
with certain provisions of the Plan as specified in calculations. When calculating cross- beginning thirty days prior to the first day of the
the letter and noted herein. See letter from David quote share (trade) participation Pilot Period—i.e., September 3, 2016—the Exchange
sradovich on DSK3GMQ082PROD with NOTICES
Shillman, Associate Director, Division of Trading and the Exchange members will comply with the
and Markets, Commission to Eric Swanson, General pursuant to Appendix B.IV(d) and data collection obligations of the Plan by collecting
Counsel, the Exchange, dated March 22, 2016 inside-the-quote share (trade) data on the Pilot Securities. As a result, beginning
(‘‘Exemption Letter’’). participation pursuant to Appendix on September 3, 2016, members must migrate from
21 The Exchange notes that, in connection with using the Exchange’s published Pre-Pilot Data
B.IV(e), the Plan requires the Trading
this proposed rule change, FINRA, on behalf of the Collection Security list and begin using the Pilot
Plan Participants, intends to file an exemptive
Center to utilize the NBBO at the time Securities list. September 2, 2016 will be the last
request seeking relief from certain of the Plan’s data of the trade for both share and trade day that members use the Pre-Pilot Data Collection
collection requirements. participation calculations. When Security list.
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![63536 Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices
business days between the hours of A. Process for Nominating Non- recommends its candidate(s) to the ICE
10:00 a.m. and 3:00 p.m. Copies of such Affiliated Directors NGC.10 If Petition Candidates are
filing also will be available for Pursuant to the Operating Agreement, proposed, the ICE NGC makes the
inspection and copying at the principal at least 20 percent of the Exchange’s determination of whether the candidates
office of the Exchange. All comments Board of Directors (‘‘Board’’) is made up are eligible to serve as a Non-Affiliated
received will be posted without change; of ‘‘Non-Affiliated Directors’’ Director, and then all eligible candidates
the Commission does not edit personal (commonly referred to as ‘‘fair are submitted to the Member
identifying information from representation directors’’).4 Pursuant to Organizations for a vote, after which the
submissions. You should submit only Section 2.03(a) of the Operating DCRC recommends to the ICE NGC the
information that you wish to make Agreement, the nominating and candidate receiving the highest number
available publicly. All submissions governance committee (‘‘NGC’’) of the of votes.11 The Exchange states that the
should refer to File Number SR– board of directors of ICE, the indirect ICE NGC is obligated to designate the
BatsEDGX–2016–51 and should be parent of the Exchange, nominates the DCRC-recommended candidate(s) as the
submitted on or before October 6, 2016. candidates for Non-Affiliated Directors, nominee, and that NYSE Group is
For the Commission, by the Division of who are then elected by NYSE Group, obligated to elect such candidate(s) as a
Trading and Markets, pursuant to delegated Inc. (‘‘NYSE Group’’) as the sole Non-Affiliated Director.12
authority.31 member of the Exchange. The Exchange The Exchange believes that obligating
Brent J. Fields, proposes to amend Section 2.03(a) to the ICE NGC to nominate the candidates
have the Director Candidate for Non-Affiliated Directors based on
Secretary.
Recommendation Committee (‘‘DCRC’’) the DCRC’s unalterable recommendation
[FR Doc. 2016–22147 Filed 9–14–16; 8:45 am] is neither necessary nor meaningful.13
of the Exchange assume the role
BILLING CODE 8011–01–P
currently served by the ICE NGC and to The Exchange notes that, pursuant to
make a conforming change to Section Section 2.03(a)(iii) of the Operating
2.03(h)(i).5 Agreement, the ICE NGC is obligated to
SECURITIES AND EXCHANGE designate whomever the DCRC
COMMISSION In addition, if the Exchange’s Member
Organizations endorse a Petition recommends or, if there is a Petition
Candidate for Non-Affiliated Director Candidate, whoever emerges from the
[Release No. 34–78805; File No. SR–NYSE– petition process.14 According to the
2016–51] pursuant to Section 2.03(a)(iv) of the
Operating Agreement, the ICE NGC Exchange, the ICE NGC does not have
currently makes the determination of any discretion.15 The Exchange believes
Self-Regulatory Organizations; New that removing this step would make the
York Stock Exchange LLC; Order whether the person is eligible.6 The
Exchange proposes to amend Section NYSE process with respect to the
Approving a Proposed Rule Change nomination of Non-Affiliated Directors
Amending the Ninth Amended and 2.03(a)(iv) to have the Exchange make
such determination instead of the ICE more efficient.16 Moreover, the
Restated Operating Agreement of the Exchange believes that having the
Exchange NGC.7
The Exchange explains that currently Exchange determine whether persons
September 9, 2016. the nomination by the ICE NGC is the endorsed to be Petition Candidates are
final step in the process for electing a eligible to serve as Non-Affiliated
I. Introduction Directors would be more efficient, as it
Non-Affiliated Director.8 First, the
On July 22, 2016, New York Stock DCRC recommends a candidate, whose would not require action by the ICE
Exchange LLC (‘‘Exchange’’ or ‘‘NYSE’’) name then is announced to the Member NGC, thereby potentially removing the
filed with the Securities and Exchange Organizations.9 The Member possibility of any delay in the process.17
Commission (‘‘Commission’’), pursuant Organizations may propose alternate The Exchange further states that the
to Section 19(b)(1) of the Securities candidates by petition, and if there are proposed change would be consistent
Exchange Act of 1934 (‘‘Act’’) 1 and Rule with the petition processes of the
no Petition Candidates, the DCRC
19b–4 thereunder,2 a proposed rule Exchange’s affiliate, NYSE MKT LLC
change to amend the Ninth Amended 4 Id. The Exchange notes that pursuant to Section
(‘‘NYSE MKT’’), and of the Nasdaq
and Restated Operating Agreement of 2.03(a) of the Operating Agreement, Non-Affiliated Stock Market LLC, because each of these
the Exchange (‘‘Operating Agreement’’). Directors are persons who are not members of the exchanges determines the eligibility of
Board of Directors of Intercontinental Exchange, proposed nominees.18
The proposed rule change was Inc. (‘‘ICE’’) but qualify as independent and that a
published for comment in the Federal The Exchange also believes that the
person may not be a Non-Affiliated Director unless
Register on August 3, 2016.3 The he or she is free of any statutory disqualification, proposed changes will make its process
Commission received no comments in as defined in Section 3(a)(39) of the Act. See id. The
Exchange’s independence requirements are set forth 10 Id.
response to the Notice. This order in the Company Director Independence Policy of 11 Id.
approves the proposed rule change. the Exchange. See Securities Exchange Act Release 12 Id.
No. 67564 (August 1, 2012), 77 FR 47161 (August 13 Id.
II. Description of the Proposal 7, 2012) (SR–NYSE–2012–17) (approving, among 14 Id.
The Exchange proposes to amend the other things, the Exchange’s Company Director 15 Id.
Independence Policy).
Operating Agreement to (1) change the 5 See Notice, supra note 3, at 51249.
16 Id.
17 Id.
process for nominating non-affiliated 6 Pursuant to Section 2.02 of the Operating
18 Id. See also Article II, Section 2.03(a) of the
directors; and (2) replace an obsolete Agreement, ‘‘Member Organizations’’ refers to
sradovich on DSK3GMQ082PROD with NOTICES
Ninth Amended and Restated Operating Agreement
reference to NYSE Market (DE), Inc. members, allied members and member
of NYSE MKT LLC; Securities Exchange Act
(‘‘NYSE Market (DE)’’). organizations of the Exchange. ‘‘Petition
Release No. 77901 (May 25, 2016), 81 FR 35092
Candidates’’ are defined in Section 2.03(a)(iv) of the
(June 1, 2016) (SR–NYSEMKT–2016–26) (‘‘NYSE
Operating Agreement as alternate candidates MKT 2016 Release’’); By-Laws of the Nasdaq Stock
31 17 CFR 200.30–3(a)(12). proposed by Member Organizations by petition, Market LLC, Art. II, Sec. 1(b) (‘‘The Company may
1 15 U.S.C. 78s(b)(1). pursuant to the requirements of that Section. require any proposed nominee to furnish such other
2 17 CFR 240.19b–4. 7 See Notice, supra note 3, at 51249.
information as it may reasonably require to
3 Securities Exchange Act Release No. 78436 (July 8 Id.
determine the eligibility of such proposed nominee
28, 2016), 81 FR 51249 (‘‘Notice’’). 9 Id. to serve as a Member Representative Director.’’).
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Document Created: 2018-02-09 13:18:25
Document Modified: 2018-02-09 13:18:25
| 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 63532 |
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