81_FR_63731 81 FR 63552 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change Amending Rule 67-Equities Relating to the Tick Size Pilot Program

81 FR 63552 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change Amending Rule 67-Equities Relating to the Tick Size Pilot Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 179 (September 15, 2016)

Page Range63552-63560
FR Document2016-22152

Federal Register, Volume 81 Issue 179 (Thursday, September 15, 2016)
[Federal Register Volume 81, Number 179 (Thursday, September 15, 2016)]
[Notices]
[Pages 63552-63560]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-22152]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78803; File No. SR-NYSEMKT-2016-83]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of 
Proposed Rule Change Amending Rule 67--Equities Relating to the Tick 
Size Pilot Program

September 9, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on August 25, 2016, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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 proposes to amend Rule 67--Equities to (1) describe 
system functionality requirements necessary to implement the Plan to 
Implement a Tick Size Pilot Program submitted to the Commission 
pursuant to Rule 608 of Regulation NMS \4\ under the Act (``Plan''), 
and (2) clarify the operation of certain exceptions to the Trade-at

[[Page 63553]]

Prohibition \5\ on Pilot Securities in the third test group. The 
proposed rule change is available on the Exchange's Web site at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.
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    \4\ 17 CFR 242.608.
    \5\ Rule 67(e)(4)(A)--Equities defines the ``Trade-at 
Prohibition'' to mean the prohibition against executions by a 
Trading Center of a sell order for a Pilot Security at the price of 
a Protected Bid or the execution of a buy order for a Pilot Security 
at the price of a Protected Offer during regular trading hours. 
Unless otherwise specified, capitalized terms used in this rule 
filing are based on the defined terms of the Plan.
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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 self-regulatory organization 
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 those 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 67--Equities (``Rule 67'') to 
(1) describe system functionality requirements necessary to implement 
the Plan \6\ and (2) clarify the operation of certain exceptions to the 
Trade-at Prohibition \7\ on Pilot Securities in the third test group 
(``Test Group Three'').\8\
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    \6\ See Securities and Exchange Act Release No. 74892 (May 6, 
2015), 80 FR 27513 (File No. 4-657) (``Tick Plan Approval Order''). 
See, also, Securities and Exchange Act Release No. 76382 (November 
6, 2015) (File No. 4-657), 80 FR 70284 (File No. 4-657) (November 
13, 2015), which extended the pilot period commencement date from 
May 6, 2015 to October 3, 2016. The Plan was submitted to the 
Commission pursuant to Rule 608 of Regulation NMS. 17 CFR 242.608.
    \7\ See note 5, supra.
    \8\ See infra notes 14-17 and accompanying text for a 
description of Test Group Three.
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    The Plan is designed to study and assess the impact of increment 
conventions on the liquidity and trading of the common stocks of small 
capitalization companies and is currently scheduled to begin on October 
3, 2016. Rule 67, adopted earlier this year to implement the quoting 
and trading requirements of the Plan, will be in effect on a two-year 
pilot period that coincides with pilot period for the Plan.
Background
    On August 25, 2014, NYSE Group, Inc., on behalf of Bats BZX 
Exchange, Inc. (f/k/a BATS Exchange, Inc.), Bats BYX Exchange, Inc. (f/
k/a BATS Y-Exchange, Inc.), Chicago Stock Exchange, Inc., Bats EDGA 
Exchange, Inc. (f/k/a EDGA Exchange, Inc.), Bats EDGX Exchange, Inc. 
(f/k/a EDGX Exchange, Inc.), the 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 Arca, 
Inc., and the Exchange (collectively ``Participants''), filed the Plan 
with the Commission, pursuant to Section 11A of the Act \9\ and Rule 
608 of Regulation NMS thereunder.\10\ The Participants filed the Plan 
to comply with an order issued by the Commission on June 24, 2014 (the 
``June 2014 Order'').\11\ The Plan was published for comment in the 
Federal Register on November 7, 2014,\12\ and approved by the 
Commission, as modified, on May 6, 2015.\13\
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    \9\ 15 U.S.C. 78k-1.
    \10\ See Letter from Brendon J. Weiss, Vice President, 
Intercontinental Exchange, Inc., to Secretary, Commission, dated 
August 25, 2014.
    \11\ See Securities Exchange Act Release No. 72460 (June 24, 
2014), 79 FR 36840 (June 30, 2014).
    \12\ See Securities and Exchange Act Release No. 73511 (November 
3, 2014), 79 FR 66423 (File No. 4-657) (Tick Plan Filing).
    \13\ See Tick Plan Approval Order, supra note 6. See also 
Securities Exchange Act Release No. 77277 (March 3, 2016), 81 FR 
12162 (March 8, 2016) (File No. 4-657), amending the Plan to add 
National Stock Exchange, Inc. as a Participant.
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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. The Tick Size Pilot Program will enable the 
Commission to assess whether wider tick sizes would enhance the market 
quality of Pilot Securities for the benefit of issuers and investors. 
Each Participant is required to comply with, and to enforce compliance 
by its member organizations, as applicable, with the provisions of the 
Plan.
    The Tick Size Pilot Program 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 Tick Pilot Program 
will consist of a control group of approximately 1400 Pilot Securities 
and three test groups with 400 Pilot Securities in each selected by a 
stratified sampling.\14\
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    \14\ See Section V of the Plan for identification of Pilot 
Securities, including criteria for selection and grouping.
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    During the pilot, 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 (``Test Group One'') will be quoted in $0.05 minimum 
increments but will continue to trade at any price increment that is 
currently permitted.\15\ 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 exception, and a negotiated trade exception.\16\ 
Pilot Securities in Test Group Three will be subject to the same terms 
as Test Group Two and also will be subject to the ``Trade-at'' 
requirement to prevent price matching by a person not displaying at a 
price of a Trading Center's ``Best Protected Bid or ``Best Protected 
Offer,'' unless an enumerated exception applies.\17\ In addition to the 
exceptions provided under Test Group Two, an exception for Block Size 
orders and exceptions that closely resemble those under Rule 611 of 
Regulation NMS (``Rule 611'') \18\ will apply to the Trade-at 
requirement.
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    \15\ See Section VI(B) of the Plan. Pilot Securities in Test 
Group One will be subject to a midpoint exception and a retail 
investor exception.
    \16\ See Section VI(C) of the Plan.
    \17\ See Section VI(D) of the Plan.
    \18\ 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 paragraphs (a) and (c)-(e) of Rule 67 
to require member organizations to comply with the quoting and trading 
provisions of the Plan.\19\ The Exchange also adopted paragraph (b) of 
Rule 67 to require member organizations to comply with the data 
collection provisions under Appendix B and C of the Plan.\20\
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    \19\ See, Securities Exchange Act Release No. 77949 (May 31, 
2016), 81 FR 36367 (June 6, 2016) (SR-NYSEMKT-2016-56) (``Quoting & 
Trading Rules Proposal'').
    \20\ See Securities Exchange Act Release No. 77478 (March 30, 
2016), 81 FR 19665 (April 5, 2016) (SR-NYSEMKT-2016-40).
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Trade-At Intermarket Sweep Orders
    The Plan defines a Trade-at Intermarket Sweep Order (``ISO'') as a 
limit order for a Pilot Security that, when routed to a Trading Center, 
is

[[Page 63554]]

identified as an ISO, and simultaneous with the routing of the limit 
order identified as an ISO, one or more additional limit orders, as 
necessary, are routed to execute against the full displayed 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 equal to the limit 
price of the limit order identified as an ISO. These additional routed 
orders also must be marked as ISOs.\21\
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    \21\ See Plan, Section I(MM).
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    The Exchange clarified the use of an ISO in connection with the 
``Trade-at'' requirement in Test Group Three by adopting a 
comprehensive definition of ``Trade-at ISO'' under Rule 
67(a)(1)(D).\22\ The Exchange now proposes to further clarify that, 
when a Trade-at ISO is routed to a Trading Center, when simultaneously 
routing additional limit orders to execute against the full displayed 
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, such additional limit orders can be routed as either 
Trade-at ISOs or ISOs. Therefore, the Exchange is proposing to 
distinguish Trade-at ISOs from ISOs by adding the phrase ``or 
Intermarket Sweep Orders'' to the end of Rule 67(a)(1)(D)(ii), so that 
any such additional routed orders sent to execute against the Trade-at 
ISO limit order would need to be marked as either Trade-at ISOs or 
ISOs.
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    \22\ Rule 67(a)(1)(D) defines Trade-at ISO to mean 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. These additional 
routed orders also must be marked as Trade-at Intermarket Sweep 
Orders.
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    Likewise, the Exchange is proposing to amend Rule 67(e)(4)(C)(x) to 
add the phrase ``or Intermarket Sweep Orders'' into the Trade-at ISO 
exemption to the Trade-at Prohibition, to clarify that a Trading Center 
can simultaneously route Trade-at ISOs or ISOs to execute against the 
full displayed size of the Protected Quotation that was traded at.
Block Size Exemption to Trade-At Prohibition
    The Plan defines Block Size as an order (1) of at least 5,000 
shares, or (2) for a quantity of stock having a market value of at 
least $100,000. The Block Size exception to the Trade-at Prohibition 
permits a Trading Center to immediately execute a Block size order 
against displayed and undisplayed liquidity at a price equal to the 
National Best Bid or National Best Offer, as applicable, without 
satisfying all Protected Quotations at the National Best Bid or 
National Best Offer, as applicable.\23\
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    \23\ See Plan, Section VI(D).
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    The Exchange proposes to amend Rule 67(e)(4)(C)(iii) to clarify how 
the Block Size exception to the Trade-at Prohibition would operate 
under the requirements of the Plan. The Exchange proposes to delete 
subparagraph (C) of Rule 67(e)(4)(C)(iii), which state that, to qualify 
for the Block Size exception, an order may not be executed on multiple 
Trading Centers. By deleting this requirement, the Block Size exception 
to the Trade At Prohibition would apply to an order received by a 
market that has sufficient liquidity to execute such Block Size, 
irrespective of whether the receiving market routes a portion of the 
Block Size order to another Trading Center to comply with Rule 611 or 
Regulation NMS. Any routed interest that returns unexecuted may be 
immediately executed under the same Block Size exception, provided such 
interest remains marketable.
Proposed Amendments to Rule 67 for Tick-Pilot Specific System Changes
    The Exchange proposes to add paragraph (f) of Rule 67 to describe 
changes to system functionality necessary to implement the Plan. 
Paragraph (f) of Rule 67 would set forth the Exchange's specific 
procedures for handling, executing, re-pricing and displaying certain 
order types and order type instructions applicable to Pilot Securities 
in Test Groups One, Two, and Three.
    In determining the scope of these proposed changes to implement the 
Plan, the Exchange reviewed its order types and identified which orders 
and instructions would be inconsistent with the Plan and propose to 
modify the operation of such order types so they will comply with the 
Plan, or, to the extent inconsistent with the Plan, eliminate them. 
These proposed changes are designed to comply with the Plan and to 
allow the Exchange to meet its regulatory obligations under the Plan.
    As part of this review, the Exchange identified order types that 
were designed to comply with the requirements of Regulation NMS. Among 
other things, Regulation NMS requires a trading center to have policies 
and procedures to reasonably avoid displaying quotations that lock or 
cross any protected quotation \24\ and to prevent trade-throughs in NMS 
stocks that do not fall within an exception enumerated in Rule 611(b) 
to Regulation NMS.\25\ As such, under Regulation NMS, an exchange may 
rank undisplayed orders at the price of a protected quotation on an 
away market and execute such non-displayed orders at the price of a 
protected quotation on an away market. By contrast, in Test Group 
Three, an undisplayed order may not trade at the price of a protected 
quotation on an away market. Accordingly, as described below, in order 
to comply with the Plan for Test Group Three securities, the Exchange 
is proposing to modify the behavior of specified orders that are 
currently permitted to trade undisplayed at the price of the PBBO or 
NBBO.
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    \24\ See 17 CFR 242.610(d).
    \25\ See 17 CFR 242.611(b).
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    As described in greater detail below, the Exchange is also 
proposing to reject specified orders in Pilot Securities in Test Group 
Three because the operation of such order types are, by their terms, 
inconsistent with the requirements of the Trade At Prohibition.
Proposed Rule 67(f)(1)--Trade-At Intermarket Sweep Orders
    Proposed Rule 67(f)(1) would describe the handling of Trade-at 
Intermarket Sweep Orders (``TA ISO'') on the Exchange. As described 
above, the requirements for a member organization that enters a TA ISO 
are specified in Rule 67(a)(1)(D)(ii) and differ from the requirements 
for a member organization that enters an IOC ISO (as specified in Rule 
13(e)(3)(A)--Equities). However, the Exchange will handle a TA ISO the 
same way it handles an IOC ISO in all securities.
    As proposed in Rule 67(f)(1)(A), the Exchange would accept TA ISOs 
in all securities. Further, TA ISOs must be designated as IOC, may 
include a minimum trade size, and do not route. These requirements are 
based on existing IOC functionality, as specified in Rule 13(b)(2)--
Equities governing IOC Modifiers.
    In addition, proposed Rule 67(f)(1)(B) would provide that the 
Exchange would immediately and automatically execute

[[Page 63555]]

a TA ISO against the displayed and non-displayed bid (offer) up to its 
full size in accordance with and to the extent provided by Exchange 
Rules 1000--Equities-1004--Equities and will then sweep the Exchange's 
book as provided in Rule 1000(d)(iii)--Equities. Any portion of the TA 
ISO that is not executed would be immediately and automatically 
cancelled. This proposed rule text is based on current Rule 
13(e)(3)(B)--Equities.
    As with Limit Orders designated IOC, proposed Rule 67(f)(1)(C) 
would provide that TA ISOs would be accepted before the Exchange opens 
and would be eligible to participate in the opening transaction at its 
limit price, but would not be accepted during a trading halt or pause 
for participation in a reopening transaction. This proposed rule text 
is based on current Rule 13(b)(2)(D)--Equities governing IOC Order 
participation in the opening transaction.
    As noted, TA ISOs would not be accepted during a trading halt or 
pause of participation in a reopening transaction, which represents a 
change from the way the Exchange currently handles NYSE IOC Orders, 
which are also Limit Orders designated IOC.\26\ Currently, NYSE IOC 
Orders received during a trading halt are held for participation in the 
reopening trade and, if not executed as part of the reopening trade, 
are fully or partially cancelled.\27\
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    \26\ NYSE IOC Orders automatically execute against the displayed 
quotation up to its full size and sweep the Exchange book, as 
provided in Rule 1000--Equities to the extent possible, with 
portions of the order routed to other markets if necessary. See Rule 
13(b)(2)(B)--Equities.
    \27\ See Rule 13(b)(2)(E)--Equities.
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    Finally, proposed Rule 67(f)(1)(D) would provide that TA ISOs may 
not be entered as e-Quotes, d-Quotes, or g-Quotes. This proposed rule 
text is based on current Rule 70(a)(i)--Equities, which provides that 
Floor broker agency interest files (i.e., e-Quotes, d-Quotes, and g-
Quotes) do not include ISOs.
Proposed Rule 67(f)(2)--Pilot Securities in Test Groups One, Two, and 
Three
    Proposed Rule 67(f)(2) would describe the procedures for handling, 
executing, re-pricing and displaying of certain order types and order 
type instructions applicable to Pilot Securities in Test Groups One, 
Two and Three.
     Proposed Rule 67(f)(2)(A) would provide that references in 
Exchange rules to the minimum price variation (``MPV''), as defined in 
Supplementary Material .10 to Rule 62--Equities, would instead mean the 
quoting minimum price variation specified in paragraphs (c), (d), and 
(e) of this Rule. This proposed rule text promotes transparency in 
Exchange rules to be clear that if a rule specifies that an order will 
be priced based off of the MPV, for Pilot Securities in Test Groups 
One, Two, and Three, the applicable MPV will be the quoting MPV 
required by the Plan.\28\ For example, Rule 13(e)(1)(B)--Equities 
provides that if a Limit Order designated with an Add Liquidity Only 
(``ALO'') modifier is marketable against Exchange interest or would 
lock or cross a protected quotation in violation of Rule 610(d) of 
Regulation NMS, the order will be re-priced and displayed one MPV, as 
defined in Supplementary Material .10 to Rule 62--Equities, below the 
best-priced sell interest (for bids) or above the best-priced buy 
interest (for offers). As provided for in proposed Rule 67(f)(2)(A), on 
arrival, the MPV applicable for Limit Orders designated ALO in Test 
Groups One, Two, and Three would be $0.05.
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    \28\ See, e.g., Rules 13(a)(1)(A)(iv)--Equities, 13(e)(1)(B)--
Equities, and 13(e)(3)(C)(ii)--Equities.
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     Consistent with the Plan, proposed Rule 67(f)(2)(B) would 
provide that pre-opening indications, as defined in Rule 15(a)--
Equities,\29\ would be published in $0.05 pricing increments for Pilot 
Securities in Test Groups One, Two, and Three.
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    \29\ Rule 15(a)--Equities provides that pre-opening indications 
will include the security and the price range within which the 
opening price is anticipated to occur and will be published via the 
securities information processor and proprietary data feeds.
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     Proposed Rule 67(f)(2)(C) would provide that Mid-Point 
Passive Liquidity (``MPL'') Orders, which are undisplayed limit orders 
that automatically execute at the mid-point of the protected best bid 
(``PBB'') and the protected best offer (``PBO''),\30\ must be entered 
with a limit price in a $0.05 pricing increment consistent with the 
Plan. While MPL Orders in all Test Groups would be eligible to trade at 
the midpoint of the PBBO, which may not be in a $0.05 pricing 
increment, the Exchange proposes that the limit price specified for 
such orders must be in the quoting MPV for Test Groups One, Two, and 
Three.
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    \30\ See Rule 13(d)(1)(A)--Equities.
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     Proposed Rule 67(f)(2)(D) would clarify that trading 
collars that are not in the trading MPV for the security would be moved 
to the nearest price in the trading MPV for that security. Trading 
collars applicable to incoming Market Orders and marketable Limit 
Orders are specified in Rule 1000(c). As specified in that rule, Trade 
Collars are calculated as a specified percentage above the NBO (for buy 
orders) or below the NBB (for sell orders). As described in greater 
detail below, if the application of the percentage against the NBBO 
results in a price that is not in the applicable MPV, the Exchange will 
round the result down to the nearest MPV. For Pilot Securities in Test 
Groups One and Two, because the trading MPV is $0.01, the Exchange will 
use the $0.01 MPV when rounding down the Trading Collar. For Pilot 
Securities in Test Group Three, the Exchange will use the $0.05 MPV 
when rounding down the Trading Collar.
Proposed Rule 67(f)(3)--Pilot Securities in Test Groups Two and Three
    Proposed Rule 67(f)(3) would specify procedures for handling, 
executing, and re-pricing of Retail Price Improvement Orders (``RPI'') 
applicable to Pilot Securities in Test Groups Two and Three. An RPI is 
a non-displayed order that is priced better than the best protected bid 
or offer (``PBBO'') utilized by Retail Liquidity Providers (``RLPs'') 
and non-RLP member organizations to provide potential price improvement 
to retail investor orders.\31\ Consistent with the requirements of the 
Plan, which requires a minimum of $0.005 price improvement in retail 
programs in Test Groups Two and Three instead of the $0.001 price 
improvement specified in Rule 107C--Equities, proposed Rule 67(f)(3) 
would provide that RPIs must be entered with a limit price and an 
offset in a $0.005 increment.
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    \31\ See Rule 107C--Equities. In July 2012, the Commission 
approved the Retail Liquidity Program on a pilot basis. See 
Securities Exchange Act Release No. 67347 (July 3, 2012), 77 FR 
40673 (July 10, 2012) (``RLP Approval Order'') (SR-NYSEAmex-2011-
84). See also Securities Exchange Act Release No. 78602 (August 17, 
2016), 81 FR 57639 (August 23, 2016) (SR-NYSEMKT-2016-76) (extending 
pilot to December 31, 2016). The Exchange established the Program to 
attract retail order flow to the Exchange, and allow such order flow 
to receive potential price improvement. See RLP Approval Order, 77 
FR at 40674.
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Proposed Rule 67(f)(4)--Pilot Securities in Test Group Three
    Proposed Rule 67(f)(4) would specify procedures for handling, 
executing, re-pricing and displaying of certain order types and order 
type instructions applicable to Pilot Securities in Test Group Three. 
The proposed changes to order behavior for Pilot Securities in Test 
Group Three are designed to comply with the Trade-at prohibition by 
changing the ranking of orders that trade at non-displayed prices 
unless the execution is eligible for an exception.
     Under Rule 72(c)(i)--Equities, an automatically executing 
order will trade first with any unexecuted Market Orders, allocated on 
time priority, and then with displayable bids (offers). If there is 
insufficient displayable volume to fill the order, an automatically

[[Page 63556]]

executing order will trade next with non-displayable interest on 
parity. The Exchange proposes to modify these requirements for Pilot 
Securities in Test Group Three. Under proposed Rule 67(f)(4)(A), an 
incoming automatically executing order to sell (buy) will trade with 
displayable bids (offers) and route to protected bids (offers) before 
trading with an unexecuted Market Order held undisplayed at the same 
price. Further, proposed Rule 67(f)(4)(A) would provide that, after 
trading or routing, or both, any remaining balance of such an incoming 
automatically executing order would satisfy any unexecuted Market 
Orders in time priority before trading with non-displayable interest on 
parity. As such, proposed Rule 67(f)(4)(A) would specify the ranking of 
orders for Pilot Securities in Test Group Three and is designed to 
assure that non-displayed orders, including unexecuted Market Orders, 
will not price match protected quotations. Instead, the Exchange will 
either route or cancel an incoming order, consistent with the order's 
instructions, before trading with either unexecuted Market Orders or 
non-displayed orders.\32\
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    \32\ For example, a Do Not Ship (DNS) Order will cancel if 
compliance with Exchange rules or federal securities laws requires 
that all or part of such order be routed to another market center 
for execution. See Rule 13(e)(2)--Equities.
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     Proposed Rule 67(f)(4)(B) would set forth the trading 
restrictions applicable to ISOs in Test Group Three.
    [cir] Proposed Rule 67(f)(4)(B)(i) would provide that, on entry, 
Day ISOs would be eligible for the Trade-at ISO exception set forth in 
proposed Rule 67(e)(4)(C)(x). Because a member organization that enters 
a Day ISO to buy (sell) must simultaneously route one or more limit 
orders to execute against the full displayed size of any protected 
offer (bid), a member organization entering a Day ISO would have met 
the obligations specified in Rule 67(e)(4)(C)(x). Accordingly, proposed 
Rule 67(f)(4)(B)(i) would provide that on entry, Day ISOs would be 
eligible for the exception set forth in Rule 67(e)(4)(C)(x).
    [cir] Proposed Rule 67(f)(4)(B)(ii) would provide that an IOC ISO 
to buy (sell) would not trade with non-displayed interest to sell (buy) 
that is the same price as a protected offer (bid) unless the limit 
price of such IOC ISO is higher (lower) than the price of the protected 
offer (bid). As such, an arriving IOC ISO would be permitted to trade 
with undisplayed orders resting on the NYSE order book only if the 
limit price of the arriving IOC ISO order is better than the PBBO. This 
would be permitted under the Trade-at Prohibition because to enter an 
IOC ISO to buy (sell) at a price higher (lower) than PBO (PBB), the 
entering firm would have been required to simultaneously route limit 
orders to execute against the full size of the PBO (PBB).
     Proposed Rule 67(f)(4)(C) would set forth the restrictions 
applicable to resting non-displayed interest, i.e., a resting order to 
buy (sell) that is not displayed at the price at which it is eligible 
to trade. Resting non-displayed interest on the Exchange could include 
Non-Display Reserve Orders,\33\ Non-Display Reserve e-Quotes,\34\ the 
reserve interest of Minimum Display Reserve Orders and Minimum Display 
Reserve e-Quotes,\35\ and pegging interest that is not displayed.\36\ 
The proposed rule changes are designed to assure that these orders 
would not price match a protected quotation.
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    \33\ A ``Non Displayed Reserve Order'' is a Limit Order that is 
not displayed, but remains available for potential execution against 
all incoming automatically executing orders until executed in full 
or cancelled. See Rule 13(d)(1)(A)--Equities.
    \34\ See Rule 70(f)(ii)--Equities.
    \35\ A ``Minimum Display Reserve Order'' is a Limit Order that 
will have a portion of the interest displayed when the order is or 
becomes the Exchange BBO and a portion of the interest (``reserve 
interest'') that is not displayed. See Rules 13(d)(2)(C)--Equities 
and 70(f)(i)--Equities.
    \36\ See Rule 13(f)(1)(A)--Equities (Pegging interest includes 
non-displayable interest to buy or sell at a price to track the 
same-side PBBO). d-Quotes enable Floor brokers to enter 
discretionary instructions as to the price at which the d-Quote may 
trade and the number of shares to which the discretionary price 
instructions apply. Executions of d-Quotes within a discretionary 
pricing instruction range are considered non-displayable interest 
for purposes of Rule 72--Equities. See Rule 70.25(a)(ii)--Equities.
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    [cir] Proposed Rule 67(f)(4)(C)(i) would provide that resting non-
displayed interest to buy (sell) would not trade at the price of a 
protected offer (bid).
    [cir] Proposed Rule 67(f)(4)(C)(ii) would provide that resting non-
displayed interest to buy (sell) would not trade at the price of a 
protected bid (offer) unless the incoming order to sell (buy) is a TA 
ISO, Day ISO, or IOC ISO that has a limit price lower (higher) than the 
price of the non-displayed interest. In such case, the arriving TA ISO, 
Day ISO, or IOC ISO would be eligible to trade with resting contra-side 
non-displayed interest that is priced equal to a same-side protected 
quote because the entering firm would have met its obligation to 
simultaneously route additional limit orders to trade with such 
protected quotation. Proposed Rule 67(f)(4)(C)(iii) would provide that, 
in order to avoid trading with an arriving order at the price of a 
protected quotation, resting non-displayed interest will either be 
routed, cancelled, or re-priced, consistent with the terms of the 
order.
     Proposed Rule 67(f)(4)(D) would provide that d-Quotes in 
Pilot Securities in Test Group Three would not exercise discretion as 
provided for in Rule 70.25--Equities if (i) exercising such discretion 
would result in an execution at the price of a protected quotation, or 
(ii) the price of a protected bid (offer) is equal to or higher (lower) 
than the filed price of the d-Quote. As defined in Rule 70.25--
Equities, a d-Quote is an e-Quote, i.e., a Floor broker agency interest 
file, that has discretionary instructions as to size or price, or both. 
The discretionary price or size at which a d-Quote may trade is not 
displayed. If the discretionary instructions of a d-Quote cannot be 
met, it will trade as a regular e-Quote at its filed price.\37\ As 
provided for in Rule 70.25(e)(v)(A)(1)--Equities, to determine whether 
to exercise discretion for d-Quotes on the Exchange's book, the 
Exchange will use the amount of discretion necessary to permit a trade 
on the Exchange consistent with Rule 611. Therefore, a d-Quote may 
exercise discretion to trade at the price of a protected quotation, but 
not through the price of a protected quotation. Because interest that 
is non-displayed cannot price match protected quotations under the 
Trade-at Prohibition, the Exchange proposes to amend the operation of 
d-Quotes in Pilot Securities in Test Group Three to prevent the 
possibility that exercising discretion, i.e., a trade at a non-
displayed price, would result in a trade at the price of a protected 
quotation. To effect this change, the Exchange proposes that the 
Exchange would not exercise discretion for a d-Quote if exercising 
discretion would result in an execution at the price of a protected 
quotation. In addition, the Exchange proposes that if the protected bid 
(offer) is equal to or higher (lower) than the filed price of the d-
Quote, the Exchange would not exercise discretion for that d-Quote.\38\ 
The Exchange believes that restricting d-Quote discretion in these 
circumstances would reduce the potential for non-displayed interest to

[[Page 63557]]

execute at the price of a protected quotation, in violation of the 
Trade-at Prohibition.
---------------------------------------------------------------------------

    \37\ See Rule 70.25(a)(iv)--Equities.
    \38\ For example, assume the Exchange has a resting d-Quote to 
buy with $0.10 of price discretion that is filed at $10.05 and there 
is a protected bid of $10.05 and a protected offer of $10.20. Assume 
that the Exchange receives a sell order priced at $10.10. Under Rule 
70.25, the resting d-Quote to buy could exercise price discretion to 
trade with that incoming order. However, under proposed Rule 
67(f)(4)(D), for Pilot Securities in Test Group Three, that resting 
d-Quote order to buy would not exercise price discretion because it 
would result in a trade based on a non-displayed price that would be 
ahead of the same-side protected bid.
---------------------------------------------------------------------------

     Proposed Rule 67(f)(4)(E) would provide that only buy and 
sell orders that are entered into the Cross Function pursuant to 
Supplementary Material .10 to Rule 76--Equities \39\ would be eligible 
for the Block Size exception to the Trade-at Prohibition set forth in 
Rule 67(e)(4)(C)(iii), as amended. Rule 67(e)(4)(C)(iii), described in 
more detail above, sets forth the Block Size exception to the Trade-at 
Prohibition. The Exchange believes that orders that meet the Block Size 
definition and that are entered pursuant to Rule 76.10--Equities would 
meet this exception because the Cross Function identifies when eligible 
orders can be executed at a price.\40\
---------------------------------------------------------------------------

    \39\ Supplementary Material .10 to Rule 76--Equities provides 
for a ``Cross Function'' that Floor brokers may use to monitor 
compliance with Rule 611 of Regulation NMS. To be eligible for this 
Cross Function, the proposed cross transaction must be for at least 
10,000 shares or a quantity of stock having a market value of 
$200,000 or more.
    \40\ See Rule 76.10(a)--Equities.
---------------------------------------------------------------------------

     Proposed Rule 67(f)(4)(G) would specify behavior of 
certain Self-Trade Prevention (``STP) Modifiers in Test Group Three and 
would provide that incoming orders designated with an STPN Modifier 
would cancel before routing or trading with non-displayed orders if the 
opposite-side resting interest marked with an STP modifier with the 
same market participant identifier (``MPID'') is a displayed order. 
Rule 13(f)(3)--Equities describes the Exchange's STP Modifiers. As 
provided for in Rule 13(f)(3)(A)--Equities, an incoming order 
designated with an STP modifier will be prevented from executing 
against a resting opposite-side order also designated with an STP 
modifier with the same MPID. Such incoming order will execute against 
all available opposite-side interest, displayed and non-displayed, and 
will be evaluated for cancellation only to the extent it would execute 
against opposite-side interest with an STP modifier with the same MPID. 
Rule 13(f)(3)(C)(i)--Equities further describes the STP Cancel Newest 
(``STPN'') modifier, pursuant to which, after executing with all other 
opposite-side interest that does not have an STP modifier with the same 
MPID, the remaining balance of the incoming order would cancel. For 
Pilot Securities in Test Group Three, because an incoming order cannot 
trade with non-displayed interest before routing to protected 
quotations, orders with an STP modifier will first be evaluated against 
displayed orders, then routed to protected quotations, if applicable. 
Only then would an incoming order with an STP modifier be evaluated 
against resting non-displayed orders with an STP modifier from the same 
MPID. However, for Pilot Securities in Test Group Three with an STPN 
modifier, the Exchange proposes that if there are opposite-side 
displayed orders with an STP modifier from the same MPID, consistent 
with the STPN instruction, such incoming order with an STPN modifier 
would cancel in order to prevent an execution of that order against the 
resting displayed order with the matching STP modifier. As such, an 
order with an STPN modifier will not route or trade with resting non-
displayed orders that do not include an STP modifier from the same MPID 
if there is a resting displayed order with an STP modifier from the 
same MPID.
     Finally, proposed Rule 67(f)(4)(G) would provide that g-
Quotes and Buy Minus/Zero Plus Orders, as defined in Rule 13--Equities, 
would be rejected.
    [cir] A g-Quote is an electronic method for Floor brokers to 
represent orders that yield priority, parity and precedence based on 
size to displayed and non-displayed orders on the Exchange's book, in 
compliance with Section 11(a)(1)(G) of the Act.\41\ Under the Trade-at 
Prohibition, however, because incoming orders would route to protected 
quotations before trading with non-displayed interest, a resting g-
Quote would be required to yield not only to non-displayed orders on 
the Exchange's book, but also protected quotations, even if the g-Quote 
were displayed. Because the Exchange believes that yielding to away 
protected quotations does not further the goals of Section 11(a)(1)(G) 
of the Act and Rule 11a1-1(T) thereunder,\42\ the Exchange has 
determined to reject G-quotes in Pilot Securities in Test Group Three. 
The Exchange notes that making g-Quotes unavailable in Test Group Three 
would not disadvantage member organizations from effecting transactions 
for their own account, the account of an associated person, or any 
other account of which it or an associated person exercises discretion 
at the Exchange. Such orders could be routed to an unaffiliated Floor 
broker for entry on the Exchange or entered electronically into 
Exchange systems from an off-Floor location.
---------------------------------------------------------------------------

    \41\ Section 11(a)(1) of the Act, 15 U.S.C. 78k(a)(1), generally 
prohibits a member of a national securities exchange from effecting 
transactions on that exchange for its own account, the account of an 
associated person, or any account over which it or an associated 
person exercises discretion. Subsection (G) of Section 11(a)(1) and 
provides an exemption allowing an exchange member to have its own 
floor broker execute a proprietary transaction, also known as a ``G 
order'' provided such order yields priority, parity, and precedence.
    \42\ See 15 U.S.C. 78k(a)(1); 17 CFR 240.11a2-2(T).
---------------------------------------------------------------------------

    [cir] An order with a ``Buy Minus Zero Plus'' instruction will not 
trade at a price that is higher than the last sale, subject to its 
limit price, if applicable.\43\ As such, Buy Minus/Zero Plus Orders 
assist member organizations with compliance with the ``safe harbor'' 
provisions of Rule 10b-18 under the Act (``Rule 10b-18'') for issuer 
repurchases.\44\ Under regular processing, an incoming order that 
trades with both displayed and non-displayed resting orders is reported 
as a single transaction to the Consolidated Tape. Under Rule 1004--
Equities, that bundled reported transaction would be used to determine 
whether to elect a Buy Minus/Zero Plus Order. However, for Pilot 
Securities in Test Group Three, because the Exchange would trade an 
incoming order first with displayed orders and then route to protected 
quotations before trading with non-displayed orders, any executions 
against displayed orders and non-displayed orders at the same price 
would be reported as separate transactions to the Consolidated Tape. As 
such, under Rule 1004--Equities, that first print of the displayed 
orders could elect a Buy Minus/Zero Plus Order. The Exchange does not 
believe that this processing would be consistent with how Buy Minus/
Zero Plus Orders function on the Exchange as it would result in the 
elected Buy Minus/Zero Plus Order, which would trade as a Market Order, 
interrupting the allocation process of that incoming order. To prevent 
this result, the Exchange proposes not to make this order type 
available for Pilot Securities in Test Group Three. As proposed, Buy 
Minus/Zero Plus Orders would therefore be rejected if entered in Pilot 
Securities in Test Group Three.
---------------------------------------------------------------------------

    \43\ The Exchange recently filed to amend Rule 13--Equities to 
eliminate orders with a sell ``plus'' and buy ``minus'' instruction 
and retain the ``Buy Minus Zero Plus'' instruction. See SR-NYSEMKT-
2016-81.
    \44\ See 17 CFR 240.10b-18.
---------------------------------------------------------------------------

Proposed Amendments to Other Exchange Rules
    The Exchange also proposes to amend Rule 80C governing the Limit 
Up/Limit Down (``LULD'') price controls pursuant to the NMS Plan to 
Address Extraordinary Market Volatility (``LULD Plan'') \45\ and Rule 
1000(c)--Equities governing Trading Collars in order to facilitate 
compliance with the Plan. These proposed rule changes are designed to 
facilitate compliance with

[[Page 63558]]

the Plan and would be applicable across all securities that trade at 
the Exchange, regardless of the applicable MPV.
---------------------------------------------------------------------------

    \45\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631).
---------------------------------------------------------------------------

    In particular, the Exchange proposes to add a new subsection (8) to 
Rule 80C(a)--Equities that would specify that, after the Exchange opens 
or reopens an Exchange-listed security but before receiving Price Bands 
from the SIP under the LULD Plan, the Exchange would calculate Price 
Bands based on the first Reference Price provided to the SIP and, if 
such Price Bands are not in the MPV for the security, round such Price 
Bands to the nearest price at the applicable MPV. The Exchange would 
apply this standard rounding calculation regardless of the MPV of the 
security.
    The Exchange also proposes to amend Rule 1000(c)(i)--Equities, 
which describes the calculation of Trading Collars, to specify that 
Trading Collars for both buy and sell orders that are not in the MPV 
for the security, as defined in Supplemental Material .10 to Rule 62--
Equities, would be rounded down to the nearest price at the applicable 
MPV.
Proposed Non-Substantive Amendments to Rule 67
    Finally, the Exchange proposes to make non-substantive, technical 
amendments to Rule 67. First, the Exchange proposes to amend Rule 
67(a)(1)(D)(ii) to add the word ``displayed'' between the words 
``full'' and ``size'' so that the full clause would provide ``are 
routed to execute against the full displayed size of any protected 
bid.'' This proposed amendment makes the rule text parallel with the 
existing rule text that provides ``or the full displayed size of any 
protected offer.'' Second, the Exchange proposes to amend Rule 
67(e)(4)(C)(xv) to correct a typographical error and change the word 
``bond'' to ``bona'' when using the phrase ``bona fide error.''
Implementation Date
    If the Commission approves the proposed rule changes, the proposed 
rule changes will be effective upon Commission approval and shall 
become operative upon commencement of the Pilot Period.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \46\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \47\ 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.
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78f(b).
    \47\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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. The Exchange believes that the 
proposed rule changes are thus reasonably designed to comply with 
applicable quoting and trading requirements specified in the Plan and, 
as discussed further below, other applicable regulations.
    The Exchange believes that the proposed changes to order behavior 
for Pilot Securities in Test Group Three would remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system because they are designed, and necessary, to modify order 
behavior to comply with the Trade-at Prohibition by eliminating the 
ability for orders that can trade at a non-displayed price to price 
match protected quotations. As the Commission noted in the Tick Plan 
Approval Order, the Plan is reasonably designed to provide measurable 
data that should facilitate the ability of the Commission, the public, 
and market participants to review and analyze the effect of tick size 
on the trading, liquidity, and market quality of securities of smaller 
capitalization companies.\48\ The Plan thus provides for a mechanism to 
provide a data-driven approach to evaluate whether certain changes to 
market structure for Pilot Securities would be consistent with the 
Commission's mission to protect investors, maintain fair and orderly 
and efficient markets, and facilitate capital formation.\49\ By having 
three test groups, the data that will be collected will demonstrate how 
behavior will change based on the differing requirements of the test 
groups. Because there are different requirements for the three Test 
Groups, a logical consequence is that order behavior will change 
depending on the requirements of each Test Group, which is the purpose 
of having a pilot with three test groups.
---------------------------------------------------------------------------

    \48\ See Tick Plan Approval Order, supra note 6, at 27529.
    \49\ Id.
---------------------------------------------------------------------------

    With respect to Pilot Securities in Test Group Three, the 
Commission recognized the particular complexity of implementing and 
complying with the Trade-at Prohibition, including that trading centers 
would need to ``monitor protected quotations on other trading centers 
and prevent an execution that would match the price of any such 
quotation unless the trading center itself was displaying a protected 
quotation'' and that ``compliance with the Trade-at Prohibition would 
require systems changes by trading centers.''\50\ Trading centers that 
are not registered exchanges will be able to implement compliance with 
the Trade-at Prohibition by modifying the behavior of order types that 
currently price match protected quotations and without public notice 
and without filing any rule changes with the Commission. Such modified 
behavior would be applicable, and indeed required, only for Pilot 
Securities in Test Group Three. Applying the modified order behavior 
for compliance with the Trade-at Prohibition to Pilot Securities in 
other Test Groups would moot the differences between the Test Groups, 
which would thwart the ability to assess any meaningful differences in 
order behavior for the three Test Groups.
---------------------------------------------------------------------------

    \50\ Id. at 27530.
---------------------------------------------------------------------------

    As a trading center, the Exchange must also modify behavior of 
order types to comply with the Trade-at Prohibition. However, as a 
registered exchange, the Exchange has rules that are filed with the 
Commission that describe in detail order behavior, including current 
order behavior that is designed in compliance with Rules 610(d) and 611 
of Regulation NMS. These existing rules provide for non-displayed order 
types to price match protected quotations even if not displaying a 
quote at that price. Unlike a trading center that is not a registered 
exchange, the Exchange is required to file a proposed rule change to 
describe how it would modify order behavior in compliance with the 
Plan.\51\ For the Exchange to implement compliance with the Plan, and 
specifically the requirements of the Trade-at Prohibition, the Exchange 
assessed its order type behavior and identified those changes that 
would be necessary to prevent an execution on a non-

[[Page 63559]]

displayed order that would match the price of protected quotation 
unless that Away Market is displaying a protected quotation.
---------------------------------------------------------------------------

    \51\ Section 19(b)(1) of the Act requires that each self-
regulatory organization shall file with the Commission, in 
accordance with Rule 19b-4 thereunder, copies of any proposed rule 
or any proposed change in, addition to, or deletion from the rules 
of such self-regulatory organization. 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes regarding ISOs, MPL 
Orders, RPI Orders, resting non-displayed interest, d-Quotes, buy and 
sell orders entered into the Cross Function, STPN Modifiers, Buy Minus/
Zero Plus Orders, and g-Quotes and how the Exchange allocates and 
routes incoming orders are consistent with the Act because they are 
intended to modify the Exchange's system to comply with the provisions 
of the Plan and the different requirements for the three Test Groups 
and are designed to assist the Exchange in meeting its regulatory 
obligations pursuant to the Plan. For Pilot Securities in Test Group 
Three, the Exchange believes that the proposed modifications to order 
behavior are designed to prevent executions of orders with a non-
displayed working price from price matching a protected quotation. 
These are precisely the type of order behavior changes contemplated by 
the Plan; complying with the Trade-at Prohibition by definition 
requires differing order behavior as compared to the other Test Groups 
or the control group. For example, the Exchange proposes that order 
types that are eligible to trade at non-displayed prices that would be 
equal to the PBBO would be re-priced, cancelled, or routed to assure 
that such orders would not price match a protected quotation in 
violation of the Trade-at Prohibition. Likewise, for d-Quotes, for 
Pilot Securities in Test Group Three only, the Exchange would not 
exercise discretion if it could result in a violation of the Trade-at 
Prohibition. The Exchange would not apply these order behavior changes 
to Pilot Securities in Test Groups One and Two because to do so would 
subvert the quality of data collected; Test Groups One and Two do not 
have the Trade-at Prohibition and therefore non-displayed orders in 
those Test Groups may price match a protected quotation, provided such 
executions are in the applicable MPV for the security.
    In addition, the Exchange proposes to reject g-Quotes and Buy 
Minus/Zero Plus Orders and modifying the behavior of incoming orders 
with an STPN modifier in Test Group Three only because application of 
the Trade-at Prohibition to these order types would impair the function 
of those order types. For g-Quotes, in order to meet the requirement to 
yield to all orders on the Exchange's book, including non-displayed 
orders, to comply with the Trade-at Prohibition, g-Quotes would also 
have to yield to protected quotations, even if the g-Quote were 
displayed. The Exchange believes that this processing would be 
inconsistent with the purpose of g-Quotes. The Exchange notes that 
making g-Quotes unavailable in Test Group Three would not disadvantage 
member organizations from effecting transactions for their own account, 
the account of an associated person, or any other account of which it 
or an associated person exercises discretion at the Exchange. Such 
orders could be routed to an unaffiliated Floor broker for entry on the 
Exchange or entered electronically into Exchange systems from an off-
Floor location. For Buy Minus/Zero Plus Orders, such orders are 
currently elected based on a bundled transaction that is reported to 
the Tape that includes executions of both displayed and non-displayed 
orders. Under the Trade-at Prohibition, because executions against 
displayed interest would be reported to the Consolidated Tape 
separately from executions against non-displayed interest, under Rule 
1004, a Buy Minus/Zero Plus Order would be elected and converted to a 
Market Order in the middle of processing an incoming order. The 
Exchange believes that this would undermine the purpose of a Buy Minus/
Zero Plus Order and would introduce unnecessary complexity into the 
processing of orders. The Exchange notes that no other exchange offers 
an instruction similar to the Buy Minus/Zero Plus Order. Because these 
proposed rule changes 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 are 
therefore consistent with the Act.
    The Exchange further believes that that rejecting g-Quotes and Buy 
Minus/Zero Plus Orders for Pilot Securities in Test Group Three is 
consistent with the Act because the proposed changes are designed to 
eliminate unnecessary trading system complexity and risk. Regulation 
SCI required the Exchange to establish written policies and procedures 
reasonably designed to ensure that their systems have levels of 
capacity, integrity, resiliency, availability, and security adequate to 
maintain their operational capability and promote the maintenance of 
fair and orderly markets, and that they operate in a manner that 
complies with the Exchange Act. The proposed change is intended to 
reduce trading system complexity and risk to ensure the Exchange's 
technology remains robust and resilient.\52\ Specifically, as noted 
above, to comply with the Trade-at Prohibition, both g-Quotes and Buy 
Minus/Zero Plus Orders would not function in the same manner as 
currently provided for, and the Exchange believes that applying the 
Trade-at Prohibition to these order types would introduce unnecessary 
complexity and risk that would not further the objectives of how these 
order types are intended to function.
---------------------------------------------------------------------------

    \52\ The Commission has expressed concern regarding potential 
market instability caused by technological risks. See 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.
---------------------------------------------------------------------------

    Lastly, the Exchange believes that the proposed amendments to Rules 
80C and 1000(c) would remove impediments to and perfect the mechanism 
of a free and open market and a national market system as they provide 
transparency regarding (1) how the Exchange would calculate and round 
Price Bands under the LULD Plan after the Exchange opens or reopens an 
Exchange-listed security but before receiving Price Bands from the SIP, 
and (2) that Trading Collars for both buy and sell orders that are not 
in the MPV for the security would be rounded down to the nearest price 
at the applicable MPV.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
intended to assist the Exchange in meeting its regulatory obligations 
pursuant to the Plan, reduce system complexity, and enhance resiliency. 
The Plan requires all trading centers, including over-the-counter 
markets, to implement changes to comply with the requirements of the 
Plan and specifically the Trade-at Prohibition. The Exchange fully 
expects that, in order to comply with the Trade-at Prohibition, trading 
centers other than registered exchanges will modify the behavior of 
orders for Pilot Securities in Test Group Three that will not be 
applied to Pilot Securities in Test Groups One and Two. Unlike such 
trading centers, as a self-regulatory organization, under Section 
19(b)(1) of the Act,\53\ the Exchange is required to file proposed rule 
changes for any modifications to order behavior that it proposes for 
the Plan. The absence of Commission approval of these proposed rule 
changes would impose a burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because trading

[[Page 63560]]

centers that are not registered exchanges would be able to implement 
changes to comply with the Plan, but the Exchange would not. The 
Exchange believes that a disapproval of the Exchange's proposed rules 
would therefore put the Exchange at a competitive disadvantage vis-
[agrave]-vis the over-the-counter markets because such trading centers 
would be able to modify the behavior of non-displayed orders in Test 
Group Three without restriction. The Exchange further notes that the 
proposed rule change will apply equally to all member organizations 
that trade Pilot Securities.
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The Exchange respectfully requests accelerated effectiveness of 
this proposed rule change pursuant to Section 19(b)(2) of the Act.\54\ 
The Exchange believes that there is good cause for the Commission to 
accelerate effectiveness because the proposed rule changes are designed 
to specify procedures for the handling, executing, re-pricing and 
displaying of certain order types and order type instructions 
applicable to Pilot Securities in Test Groups One, Two, and Three. In 
determining the scope of these proposed changes to implement the Plan, 
the Exchange reviewed its order types and identified which orders and 
instructions would be inconsistent with the Plan and propose to modify 
the operation of such order types so they will comply with the Plan, 
or, to the extent inconsistent with the Plan, eliminate them. These 
proposed changes are consistent with the protection of investors and 
the public interest because they are designed to comply with the Plan 
and to allow the Exchange to meet its regulatory obligations under the 
Plan. Because the Plan will be implemented beginning on October 3, 
2016, the Exchange believes there is good cause to accelerate 
effectiveness so that the Exchange may implement the proposed changes 
concurrent with the implementation date of the Plan.
---------------------------------------------------------------------------

    \54\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the 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. 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-NYSEMKT-2016-83 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-NYSEMKT-2016-83. 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-NYSEMKT-2016-83, and should 
be submitted on or before September 29, 2016.

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

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

Brent J. Fields,
Secretary.
[FR Doc. 2016-22152 Filed 9-14-16; 8:45 am]
BILLING CODE 8011-01-P



                                                63552                      Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices

                                                Exchange notes that, with respect to the                scheduled to start on October 3, 2016.                business days between the hours of
                                                change to require the use of the Pilot                  Therefore, the Commission hereby                      10:00 a.m. and 3:00 p.m. Copies of such
                                                Securities beginning thirty days prior to               waives the 30-day operative delay and                 filing also will be available for
                                                the start of the Pilot Period, the                      designates the proposed rule change to                inspection and copying at the principal
                                                proposed change reduces the number of                   be operative upon filing with the                     office of the Exchange. All comments
                                                securities on which affected members                    Commission.29                                         received will be posted without change;
                                                otherwise would have been required to                      At any time within 60 days of the                  the Commission does not edit personal
                                                collect data pursuant to the Plan and                   filing of the proposed rule change, the               identifying information from
                                                Exchange Rule 11.21(b). In addition, the                Commission summarily may                              submissions. You should submit only
                                                proposed rule change applies equally to                 temporarily suspend such rule change if               information that you wish to make
                                                all similarly situated members.                         it appears to the Commission that such                available publicly. All submissions
                                                Therefore, the Exchange does not                        action is necessary or appropriate in the             should refer to File Number SR–
                                                believe that the proposed rule change                   public interest, for the protection of                BatsEDGA–2016–21 and should be
                                                will result in any burden on                            investors, or otherwise in furtherance of             submitted on or before October 6, 2016.
                                                competition that is not necessary or                    the purposes of the Act.30
                                                                                                                                                                For the Commission, by the Division of
                                                appropriate in furtherance of the                       IV. Solicitation of Comments                          Trading and Markets, pursuant to delegated
                                                purposes of the Act.                                                                                          authority.31
                                                                                                          Interested persons are invited to
                                                                                                                                                              Brent J. Fields,
                                                (C) Self-Regulatory Organization’s                      submit written data, views, and
                                                Statement on Comments on the                                                                                  Secretary.
                                                                                                        arguments concerning the foregoing,
                                                Proposed Rule Change Received From                      including whether the proposed rule                   [FR Doc. 2016–22148 Filed 9–14–16; 8:45 am]
                                                Members, Participants or Others                         change is consistent with the Act.                    BILLING CODE 8011–01–P

                                                  Written comments were neither                         Comments may be submitted by any of
                                                solicited nor received.                                 the following methods:
                                                                                                                                                              SECURITIES AND EXCHANGE
                                                III. Date of Effectiveness of the                       Electronic Comments                                   COMMISSION
                                                Proposed Rule Change and Timing for                       • Use the Commission’s Internet                     [Release No. 34–78803; File No. SR–
                                                Commission Action                                       comment form (http://www.sec.gov/                     NYSEMKT–2016–83]
                                                   The foregoing rule change has become                 rules/sro.shtml); or
                                                effective pursuant to section 19(b)(3)(A)                 • Send an email to rule-comments@                   Self-Regulatory Organizations; NYSE
                                                of the Act 25 and Rule 19b–4(f)(6) 26                   sec.gov. Please include File Number SR–               MKT LLC; Notice of Filing of Proposed
                                                thereunder because the proposal does                    BatsEDGA–2016–21 on the subject line.                 Rule Change Amending Rule 67—
                                                not: (i) Significantly affect the                                                                             Equities Relating to the Tick Size Pilot
                                                                                                        Paper Comments
                                                protection of investors or the public                                                                         Program
                                                                                                           • Send paper comments in triplicate
                                                interest; (ii) impose any significant                   to Secretary, Securities and Exchange                 September 9, 2016.
                                                burden on competition; and (iii) by its                 Commission, 100 F Street NE.,                            Pursuant to Section 19(b)(1) 1 of the
                                                terms, become operative for 30 days                     Washington, DC 20549–1090.                            Securities Exchange Act of 1934 (the
                                                from the date on which it was filed, or                                                                       ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
                                                                                                        All submissions should refer to File
                                                such shorter time as the Commission                                                                           notice is hereby given that, on August
                                                                                                        Number SR–BatsEDGA–2016–21. This
                                                may designate if consistent with the                                                                          25, 2016, NYSE MKT LLC (the
                                                                                                        file number should be included on the
                                                protection of investors and the public                                                                        ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
                                                                                                        subject line if email is used. To help the
                                                interest.                                                                                                     the Securities and Exchange
                                                                                                        Commission process and review your
                                                   A proposed rule change filed under                                                                         Commission (the ‘‘Commission’’) the
                                                                                                        comments more efficiently, please use
                                                Rule 19b–4(f)(6) 27 normally does not                                                                         proposed rule change as described in
                                                                                                        only one method. The Commission will
                                                become operative prior to 30 days after                                                                       Items I, II, and III below, which Items
                                                                                                        post all comments on the Commission’s
                                                the date of the filing. However, pursuant                                                                     have been prepared by the self-
                                                                                                        Internet Web site (http://www.sec.gov/
                                                to Rule 19b–4(f)(6)(iii),28 the                                                                               regulatory organization. The
                                                                                                        rules/sro.shtml). Copies of the
                                                Commission may designate a shorter                                                                            Commission is publishing this notice to
                                                                                                        submission, all subsequent
                                                time if such action is consistent with the                                                                    solicit comments on the proposed rule
                                                                                                        amendments, all written statements
                                                protection of investors and the public                                                                        change from interested persons.
                                                                                                        with respect to the proposed rule
                                                interest. The Exchange has asked the
                                                                                                        change that are filed with the                        I. Self-Regulatory Organization’s
                                                Commission to waive the 30-day
                                                                                                        Commission, and all written                           Statement of the Terms of Substance of
                                                operative delay so that so that the
                                                                                                        communications relating to the                        the Proposed Rule Change
                                                proposed rule change can become
                                                                                                        proposed rule change between the
                                                operative on August 30, 2016.                                                                                    The Exchange proposes to amend
                                                   The Commission believes that                         Commission and any person, other than
                                                                                                                                                              Rule 67—Equities to (1) describe system
                                                waiving the 30-day operative delay is                   those that may be withheld from the
                                                                                                                                                              functionality requirements necessary to
                                                consistent with the protection of                       public in accordance with the
                                                                                                                                                              implement the Plan to Implement a Tick
                                                investors and the public interest                       provisions of 5 U.S.C. 552, will be
                                                                                                                                                              Size Pilot Program submitted to the
                                                because it will allow the Exchange to                   available for Web site viewing and
                                                                                                                                                              Commission pursuant to Rule 608 of
                                                implement the proposed rules                            printing in the Commission’s Public
                                                                                                                                                              Regulation NMS 4 under the Act
                                                                                                        Reference Room, 100 F Street NE.,
sradovich on DSK3GMQ082PROD with NOTICES




                                                immediately thereby preventing delays                                                                         (‘‘Plan’’), and (2) clarify the operation of
                                                in the implementation of the Plan. The                  Washington, DC 20549, on official
                                                                                                                                                              certain exceptions to the Trade-at
                                                Commission notes that the Plan is                          29 For purposes only of waiving the operative
                                                                                                                                                                31 17 CFR 200.30–3(a)(12).
                                                                                                        delay for this proposal, the Commission has
                                                  25 15 U.S.C. 78s(b)(3)(A).                                                                                    1 15 U.S.C. 78s(b)(1).
                                                                                                        considered the proposed rule’s impact on
                                                  26 17 CFR 240.19b–4(f)(6).                                                                                    2 15 U.S.C. 78a.
                                                                                                        efficiency, competition, and capital formation. See
                                                  27 17 CFR 240.19b–4(f)(6).                            15 U.S.C. 78c(f).                                       3 17 CFR 240.19b–4.
                                                  28 17 CFR 240.19b–4(f)(6)(iii).                          30 15 U.S.C. 78s(b)(3)(C).                           4 17 CFR 242.608.




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                                                                          Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices                                                    63553

                                                Prohibition 5 on Pilot Securities in the                Background                                            Securities in each selected by a
                                                third test group. The proposed rule                                                                           stratified sampling.14
                                                change is available on the Exchange’s                      On August 25, 2014, NYSE Group,                       During the pilot, Pilot Securities in
                                                Web site at www.nyse.com, at the                        Inc., on behalf of Bats BZX Exchange,                 the control group will be quoted at the
                                                principal office of the Exchange, and at                Inc. (f/k/a BATS Exchange, Inc.), Bats                current tick size increment of $0.01 per
                                                the Commission’s Public Reference                       BYX Exchange, Inc. (f/k/a BATS Y-                     share and will trade at the currently
                                                Room.                                                   Exchange, Inc.), Chicago Stock                        permitted increments. Pilot Securities in
                                                                                                        Exchange, Inc., Bats EDGA Exchange,                   the first test group (‘‘Test Group One’’)
                                                II. Self-Regulatory Organization’s                                                                            will be quoted in $0.05 minimum
                                                                                                        Inc. (f/k/a EDGA Exchange, Inc.), Bats
                                                Statement of the Purpose of, and                                                                              increments but will continue to trade at
                                                                                                        EDGX Exchange, Inc. (f/k/a EDGX
                                                Statutory Basis for, the Proposed Rule                                                                        any price increment that is currently
                                                                                                        Exchange, Inc.), the Financial Industry
                                                Change                                                                                                        permitted.15 Pilot Securities in the
                                                                                                        Regulatory Authority, Inc. (‘‘FINRA’’),
                                                   In its filing with the Commission, the               NASDAQ OMX BX, Inc., NASDAQ                           second test group (‘‘Test Group Two’’)
                                                self-regulatory organization included                   OMX PHLX LLC, the Nasdaq Stock                        will be quoted in $0.05 minimum
                                                statements concerning the purpose of,                   Market LLC, New York Stock Exchange                   increments and will trade at $0.05
                                                and basis for, the proposed rule change                 LLC, NYSE Arca, Inc., and the Exchange                minimum increments subject to a
                                                and discussed any comments it received                  (collectively ‘‘Participants’’), filed the            midpoint exception, a retail investor
                                                on the proposed rule change. The text                                                                         exception, and a negotiated trade
                                                                                                        Plan with the Commission, pursuant to
                                                of those statements may be examined at                                                                        exception.16 Pilot Securities in Test
                                                                                                        Section 11A of the Act 9 and Rule 608
                                                the places specified in Item IV below.                                                                        Group Three will be subject to the same
                                                The Exchange has prepared summaries,                    of Regulation NMS thereunder.10 The
                                                                                                                                                              terms as Test Group Two and also will
                                                set forth in sections A, B, and C below,                Participants filed the Plan to comply
                                                                                                                                                              be subject to the ‘‘Trade-at’’ requirement
                                                of the most significant parts of such                   with an order issued by the Commission                to prevent price matching by a person
                                                statements.                                             on June 24, 2014 (the ‘‘June 2014                     not displaying at a price of a Trading
                                                                                                        Order’’).11 The Plan was published for                Center’s ‘‘Best Protected Bid or ‘‘Best
                                                A. Self-Regulatory Organization’s                       comment in the Federal Register on
                                                Statement of the Purpose of, and the                                                                          Protected Offer,’’ unless an enumerated
                                                                                                        November 7, 2014,12 and approved by                   exception applies.17 In addition to the
                                                Statutory Basis for, the Proposed Rule                  the Commission, as modified, on May 6,
                                                Change                                                                                                        exceptions provided under Test Group
                                                                                                        2015.13                                               Two, an exception for Block Size orders
                                                1. Purpose                                                 The Plan is designed to allow the                  and exceptions that closely resemble
                                                   The Exchange proposes to amend                       Commission, market participants, and                  those under Rule 611 of Regulation
                                                Rule 67—Equities (‘‘Rule 67’’) to (1)                   the public to study and assess the                    NMS (‘‘Rule 611’’) 18 will apply to the
                                                describe system functionality                           impact of increment conventions on the                Trade-at requirement.
                                                requirements necessary to implement                     liquidity and trading of the common                      The Plan requires the Exchange to
                                                the Plan 6 and (2) clarify the operation                stocks of small capitalization                        establish, maintain, and enforce written
                                                of certain exceptions to the Trade-at                   companies. The Tick Size Pilot Program                policies and procedures that are
                                                Prohibition 7 on Pilot Securities in the                                                                      reasonably designed to comply with
                                                                                                        will enable the Commission to assess
                                                third test group (‘‘Test Group Three’’).8                                                                     applicable quoting and trading
                                                                                                        whether wider tick sizes would enhance
                                                   The Plan is designed to study and                                                                          requirements specified in the Plan.
                                                                                                        the market quality of Pilot Securities for            Accordingly, the Exchange adopted
                                                assess the impact of increment                          the benefit of issuers and investors.
                                                conventions on the liquidity and trading                                                                      paragraphs (a) and (c)–(e) of Rule 67 to
                                                                                                        Each Participant is required to comply                require member organizations to comply
                                                of the common stocks of small                           with, and to enforce compliance by its
                                                capitalization companies and is                                                                               with the quoting and trading provisions
                                                                                                        member organizations, as applicable,                  of the Plan.19 The Exchange also
                                                currently scheduled to begin on October
                                                                                                        with the provisions of the Plan.                      adopted paragraph (b) of Rule 67 to
                                                3, 2016. Rule 67, adopted earlier this
                                                year to implement the quoting and                          The Tick Size Pilot Program will                   require member organizations to comply
                                                trading requirements of the Plan, will be               include stocks of companies with $3                   with the data collection provisions
                                                in effect on a two-year pilot period that               billion or less in market capitalization,             under Appendix B and C of the Plan.20
                                                coincides with pilot period for the Plan.               an average daily trading volume of one                Trade-At Intermarket Sweep Orders
                                                                                                        million shares or less, and a volume
                                                                                                                                                                The Plan defines a Trade-at
                                                   5 Rule 67(e)(4)(A)—Equities defines the ‘‘Trade-at   weighted average price of at least $2.00
                                                Prohibition’’ to mean the prohibition against                                                                 Intermarket Sweep Order (‘‘ISO’’) as a
                                                                                                        for every trading day. The Tick Pilot
                                                executions by a Trading Center of a sell order for                                                            limit order for a Pilot Security that,
                                                a Pilot Security at the price of a Protected Bid or     Program will consist of a control group               when routed to a Trading Center, is
                                                the execution of a buy order for a Pilot Security at    of approximately 1400 Pilot Securities
                                                the price of a Protected Offer during regular trading   and three test groups with 400 Pilot                    14 See Section V of the Plan for identification of
                                                hours. Unless otherwise specified, capitalized terms
                                                used in this rule filing are based on the defined                                                             Pilot Securities, including criteria for selection and
                                                terms of the Plan.                                        9 15  U.S.C. 78k–1.                                 grouping.
                                                                                                          10 See                                                15 See Section VI(B) of the Plan. Pilot Securities
                                                   6 See Securities and Exchange Act Release No.                  Letter from Brendon J. Weiss, Vice
                                                74892 (May 6, 2015), 80 FR 27513 (File No. 4–657)       President, Intercontinental Exchange, Inc., to        in Test Group One will be subject to a midpoint
                                                (‘‘Tick Plan Approval Order’’). See, also, Securities   Secretary, Commission, dated August 25, 2014.         exception and a retail investor exception.
                                                                                                                                                                16 See Section VI(C) of the Plan.
                                                and Exchange Act Release No. 76382 (November 6,            11 See Securities Exchange Act Release No. 72460
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                                                                                                                                                                17 See Section VI(D) of the Plan.
                                                2015) (File No. 4–657), 80 FR 70284 (File No. 4–        (June 24, 2014), 79 FR 36840 (June 30, 2014).
                                                657) (November 13, 2015), which extended the pilot         12 See Securities and Exchange Act Release No.       18 17 CFR 242.611.

                                                period commencement date from May 6, 2015 to            73511 (November 3, 2014), 79 FR 66423 (File No.         19 See, Securities Exchange Act Release No. 77949
                                                October 3, 2016. The Plan was submitted to the          4–657) (Tick Plan Filing).                            (May 31, 2016), 81 FR 36367 (June 6, 2016) (SR–
                                                Commission pursuant to Rule 608 of Regulation              13 See Tick Plan Approval Order, supra note 6.     NYSEMKT–2016–56) (‘‘Quoting & Trading Rules
                                                NMS. 17 CFR 242.608.                                    See also Securities Exchange Act Release No. 77277    Proposal’’).
                                                   7 See note 5, supra.
                                                                                                        (March 3, 2016), 81 FR 12162 (March 8, 2016) (File      20 See Securities Exchange Act Release No. 77478
                                                   8 See infra notes 14–17 and accompanying text for    No. 4–657), amending the Plan to add National         (March 30, 2016), 81 FR 19665 (April 5, 2016) (SR–
                                                a description of Test Group Three.                      Stock Exchange, Inc. as a Participant.                NYSEMKT–2016–40).



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                                                63554                      Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices

                                                identified as an ISO, and simultaneous                     Block Size Exemption to Trade-At                      meet its regulatory obligations under the
                                                with the routing of the limit order                        Prohibition                                           Plan.
                                                identified as an ISO, one or more                                                                                   As part of this review, the Exchange
                                                                                                              The Plan defines Block Size as an                  identified order types that were
                                                additional limit orders, as necessary, are
                                                                                                           order (1) of at least 5,000 shares, or (2)            designed to comply with the
                                                routed to execute against the full
                                                                                                           for a quantity of stock having a market               requirements of Regulation NMS.
                                                displayed size of any protected bid (in                    value of at least $100,000. The Block
                                                the case of a limit order to sell) or the                                                                        Among other things, Regulation NMS
                                                                                                           Size exception to the Trade-at                        requires a trading center to have policies
                                                full displayed size of any protected offer                 Prohibition permits a Trading Center to               and procedures to reasonably avoid
                                                (in the case of a limit order to buy) for                  immediately execute a Block size order                displaying quotations that lock or cross
                                                the Pilot Security with a price that is                    against displayed and undisplayed                     any protected quotation 24 and to
                                                equal to the limit price of the limit order                liquidity at a price equal to the National            prevent trade-throughs in NMS stocks
                                                identified as an ISO. These additional                     Best Bid or National Best Offer, as                   that do not fall within an exception
                                                routed orders also must be marked as                       applicable, without satisfying all                    enumerated in Rule 611(b) to Regulation
                                                ISOs.21                                                    Protected Quotations at the National                  NMS.25 As such, under Regulation
                                                   The Exchange clarified the use of an                    Best Bid or National Best Offer, as                   NMS, an exchange may rank
                                                ISO in connection with the ‘‘Trade-at’’                    applicable.23                                         undisplayed orders at the price of a
                                                requirement in Test Group Three by                            The Exchange proposes to amend                     protected quotation on an away market
                                                adopting a comprehensive definition of                     Rule 67(e)(4)(C)(iii) to clarify how the              and execute such non-displayed orders
                                                ‘‘Trade-at ISO’’ under Rule 67(a)(1)(D).22                 Block Size exception to the Trade-at                  at the price of a protected quotation on
                                                The Exchange now proposes to further                       Prohibition would operate under the                   an away market. By contrast, in Test
                                                clarify that, when a Trade-at ISO is                       requirements of the Plan. The Exchange                Group Three, an undisplayed order may
                                                routed to a Trading Center, when                           proposes to delete subparagraph (C) of                not trade at the price of a protected
                                                simultaneously routing additional limit                    Rule 67(e)(4)(C)(iii), which state that, to           quotation on an away market.
                                                orders to execute against the full                         qualify for the Block Size exception, an              Accordingly, as described below, in
                                                                                                           order may not be executed on multiple                 order to comply with the Plan for Test
                                                displayed size of any protected bid, in
                                                                                                           Trading Centers. By deleting this                     Group Three securities, the Exchange is
                                                the case of a limit order to sell, or the
                                                                                                           requirement, the Block Size exception to              proposing to modify the behavior of
                                                full displayed size of any protected
                                                                                                           the Trade At Prohibition would apply to               specified orders that are currently
                                                offer, in the case of a limit order to buy,                an order received by a market that has                permitted to trade undisplayed at the
                                                such additional limit orders can be                        sufficient liquidity to execute such                  price of the PBBO or NBBO.
                                                routed as either Trade-at ISOs or ISOs.                    Block Size, irrespective of whether the                  As described in greater detail below,
                                                Therefore, the Exchange is proposing to                    receiving market routes a portion of the              the Exchange is also proposing to reject
                                                distinguish Trade-at ISOs from ISOs by                     Block Size order to another Trading                   specified orders in Pilot Securities in
                                                adding the phrase ‘‘or Intermarket                         Center to comply with Rule 611 or                     Test Group Three because the operation
                                                Sweep Orders’’ to the end of Rule                          Regulation NMS. Any routed interest                   of such order types are, by their terms,
                                                67(a)(1)(D)(ii), so that any such                          that returns unexecuted may be                        inconsistent with the requirements of
                                                additional routed orders sent to execute                   immediately executed under the same                   the Trade At Prohibition.
                                                against the Trade-at ISO limit order                       Block Size exception, provided such                   Proposed Rule 67(f)(1)—Trade-At
                                                would need to be marked as either                          interest remains marketable.                          Intermarket Sweep Orders
                                                Trade-at ISOs or ISOs.
                                                                                                           Proposed Amendments to Rule 67 for                      Proposed Rule 67(f)(1) would describe
                                                   Likewise, the Exchange is proposing                     Tick-Pilot Specific System Changes                    the handling of Trade-at Intermarket
                                                to amend Rule 67(e)(4)(C)(x) to add the                                                                          Sweep Orders (‘‘TA ISO’’) on the
                                                phrase ‘‘or Intermarket Sweep Orders’’                        The Exchange proposes to add
                                                                                                           paragraph (f) of Rule 67 to describe                  Exchange. As described above, the
                                                into the Trade-at ISO exemption to the                                                                           requirements for a member organization
                                                Trade-at Prohibition, to clarify that a                    changes to system functionality
                                                                                                           necessary to implement the Plan.                      that enters a TA ISO are specified in
                                                Trading Center can simultaneously                                                                                Rule 67(a)(1)(D)(ii) and differ from the
                                                                                                           Paragraph (f) of Rule 67 would set forth
                                                route Trade-at ISOs or ISOs to execute                                                                           requirements for a member organization
                                                                                                           the Exchange’s specific procedures for
                                                against the full displayed size of the                                                                           that enters an IOC ISO (as specified in
                                                                                                           handling, executing, re-pricing and
                                                Protected Quotation that was traded at.                    displaying certain order types and order              Rule 13(e)(3)(A)—Equities). However,
                                                                                                           type instructions applicable to Pilot                 the Exchange will handle a TA ISO the
                                                  21 See  Plan, Section I(MM).
                                                                                                           Securities in Test Groups One, Two, and               same way it handles an IOC ISO in all
                                                  22 Rule  67(a)(1)(D) defines Trade-at ISO to mean
                                                                                                           Three.                                                securities.
                                                a limit order for a Pilot Security that meets the                                                                  As proposed in Rule 67(f)(1)(A), the
                                                following requirements:                                       In determining the scope of these                  Exchange would accept TA ISOs in all
                                                   (i) When routed to a Trading Center, the limit          proposed changes to implement the                     securities. Further, TA ISOs must be
                                                order is identified as a Trade-at Intermarket Sweep        Plan, the Exchange reviewed its order                 designated as IOC, may include a
                                                Order; and                                                 types and identified which orders and
                                                   (ii) Simultaneously with the routing of the limit
                                                                                                                                                                 minimum trade size, and do not route.
                                                                                                           instructions would be inconsistent with               These requirements are based on
                                                order identified as a Trade-at Intermarket Sweep
                                                Order, one or more additional limit orders, as
                                                                                                           the Plan and propose to modify the                    existing IOC functionality, as specified
                                                                                                           operation of such order types so they
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                                                necessary, are routed to execute against the full size                                                           in Rule 13(b)(2)—Equities governing
                                                of any protected bid, in the case of a limit order to      will comply with the Plan, or, to the                 IOC Modifiers.
                                                sell, or the full displayed size of any protected offer,   extent inconsistent with the Plan,                      In addition, proposed Rule 67(f)(1)(B)
                                                in the case of a limit order to buy, for the Pilot         eliminate them. These proposed
                                                Security with a price that is better than or equal to
                                                                                                                                                                 would provide that the Exchange would
                                                                                                           changes are designed to comply with                   immediately and automatically execute
                                                the limit price of the limit order identified as a
                                                Trade-at Intermarket Sweep Order. These additional
                                                                                                           the Plan and to allow the Exchange to
                                                                                                                                                                   24 See   17 CFR 242.610(d).
                                                routed orders also must be marked as Trade-at
                                                Intermarket Sweep Orders.                                   23 See   Plan, Section VI(D).                          25 See   17 CFR 242.611(b).



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                                                                         Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices                                                   63555

                                                a TA ISO against the displayed and non-                 transparency in Exchange rules to be                  NBBO results in a price that is not in the
                                                displayed bid (offer) up to its full size               clear that if a rule specifies that an order          applicable MPV, the Exchange will
                                                in accordance with and to the extent                    will be priced based off of the MPV, for              round the result down to the nearest
                                                provided by Exchange Rules 1000—                        Pilot Securities in Test Groups One,                  MPV. For Pilot Securities in Test
                                                Equities–1004—Equities and will then                    Two, and Three, the applicable MPV                    Groups One and Two, because the
                                                sweep the Exchange’s book as provided                   will be the quoting MPV required by the               trading MPV is $0.01, the Exchange will
                                                in Rule 1000(d)(iii)—Equities. Any                      Plan.28 For example, Rule 13(e)(1)(B)—                use the $0.01 MPV when rounding
                                                portion of the TA ISO that is not                       Equities provides that if a Limit Order               down the Trading Collar. For Pilot
                                                executed would be immediately and                       designated with an Add Liquidity Only                 Securities in Test Group Three, the
                                                automatically cancelled. This proposed                  (‘‘ALO’’) modifier is marketable against              Exchange will use the $0.05 MPV when
                                                rule text is based on current Rule                      Exchange interest or would lock or cross              rounding down the Trading Collar.
                                                13(e)(3)(B)—Equities.                                   a protected quotation in violation of
                                                   As with Limit Orders designated IOC,                 Rule 610(d) of Regulation NMS, the                    Proposed Rule 67(f)(3)—Pilot Securities
                                                proposed Rule 67(f)(1)(C) would provide                 order will be re-priced and displayed                 in Test Groups Two and Three
                                                that TA ISOs would be accepted before                   one MPV, as defined in Supplementary                    Proposed Rule 67(f)(3) would specify
                                                the Exchange opens and would be                         Material .10 to Rule 62—Equities, below               procedures for handling, executing, and
                                                eligible to participate in the opening                  the best-priced sell interest (for bids) or           re-pricing of Retail Price Improvement
                                                transaction at its limit price, but would               above the best-priced buy interest (for               Orders (‘‘RPI’’) applicable to Pilot
                                                not be accepted during a trading halt or                offers). As provided for in proposed                  Securities in Test Groups Two and
                                                pause for participation in a reopening                  Rule 67(f)(2)(A), on arrival, the MPV                 Three. An RPI is a non-displayed order
                                                transaction. This proposed rule text is                 applicable for Limit Orders designated                that is priced better than the best
                                                based on current Rule 13(b)(2)(D)—                      ALO in Test Groups One, Two, and                      protected bid or offer (‘‘PBBO’’) utilized
                                                Equities governing IOC Order                            Three would be $0.05.                                 by Retail Liquidity Providers (‘‘RLPs’’)
                                                participation in the opening transaction.                  • Consistent with the Plan, proposed               and non-RLP member organizations to
                                                   As noted, TA ISOs would not be                       Rule 67(f)(2)(B) would provide that pre-              provide potential price improvement to
                                                accepted during a trading halt or pause                 opening indications, as defined in Rule               retail investor orders.31 Consistent with
                                                of participation in a reopening                         15(a)—Equities,29 would be published                  the requirements of the Plan, which
                                                transaction, which represents a change                  in $0.05 pricing increments for Pilot                 requires a minimum of $0.005 price
                                                from the way the Exchange currently                     Securities in Test Groups One, Two, and               improvement in retail programs in Test
                                                handles NYSE IOC Orders, which are                      Three.                                                Groups Two and Three instead of the
                                                also Limit Orders designated IOC.26                        • Proposed Rule 67(f)(2)(C) would                  $0.001 price improvement specified in
                                                Currently, NYSE IOC Orders received                     provide that Mid-Point Passive                        Rule 107C—Equities, proposed Rule
                                                during a trading halt are held for                      Liquidity (‘‘MPL’’) Orders, which are                 67(f)(3) would provide that RPIs must be
                                                participation in the reopening trade and,               undisplayed limit orders that                         entered with a limit price and an offset
                                                if not executed as part of the reopening                automatically execute at the mid-point                in a $0.005 increment.
                                                trade, are fully or partially cancelled.27              of the protected best bid (‘‘PBB’’) and
                                                   Finally, proposed Rule 67(f)(1)(D)                   the protected best offer (‘‘PBO’’),30 must            Proposed Rule 67(f)(4)—Pilot Securities
                                                would provide that TA ISOs may not be                   be entered with a limit price in a $0.05              in Test Group Three
                                                entered as e-Quotes, d-Quotes, or g-                    pricing increment consistent with the                    Proposed Rule 67(f)(4) would specify
                                                Quotes. This proposed rule text is based                Plan. While MPL Orders in all Test                    procedures for handling, executing, re-
                                                on current Rule 70(a)(i)—Equities,                      Groups would be eligible to trade at the              pricing and displaying of certain order
                                                which provides that Floor broker agency                 midpoint of the PBBO, which may not                   types and order type instructions
                                                interest files (i.e., e-Quotes, d-Quotes,               be in a $0.05 pricing increment, the                  applicable to Pilot Securities in Test
                                                and g-Quotes) do not include ISOs.                      Exchange proposes that the limit price                Group Three. The proposed changes to
                                                                                                        specified for such orders must be in the              order behavior for Pilot Securities in
                                                Proposed Rule 67(f)(2)—Pilot Securities                 quoting MPV for Test Groups One, Two,
                                                in Test Groups One, Two, and Three                                                                            Test Group Three are designed to
                                                                                                        and Three.                                            comply with the Trade-at prohibition by
                                                   Proposed Rule 67(f)(2) would describe                   • Proposed Rule 67(f)(2)(D) would                  changing the ranking of orders that trade
                                                the procedures for handling, executing,                 clarify that trading collars that are not             at non-displayed prices unless the
                                                re-pricing and displaying of certain                    in the trading MPV for the security                   execution is eligible for an exception.
                                                order types and order type instructions                 would be moved to the nearest price in                   • Under Rule 72(c)(i)—Equities, an
                                                applicable to Pilot Securities in Test                  the trading MPV for that security.                    automatically executing order will trade
                                                Groups One, Two and Three.                              Trading collars applicable to incoming                first with any unexecuted Market
                                                   • Proposed Rule 67(f)(2)(A) would                    Market Orders and marketable Limit                    Orders, allocated on time priority, and
                                                provide that references in Exchange                     Orders are specified in Rule 1000(c). As              then with displayable bids (offers). If
                                                rules to the minimum price variation                    specified in that rule, Trade Collars are             there is insufficient displayable volume
                                                (‘‘MPV’’), as defined in Supplementary                  calculated as a specified percentage                  to fill the order, an automatically
                                                Material .10 to Rule 62—Equities, would                 above the NBO (for buy orders) or below
                                                instead mean the quoting minimum                        the NBB (for sell orders). As described                 31 See Rule 107C—Equities. In July 2012, the

                                                price variation specified in paragraphs                 in greater detail below, if the                       Commission approved the Retail Liquidity Program
                                                (c), (d), and (e) of this Rule. This                    application of the percentage against the             on a pilot basis. See Securities Exchange Act
                                                                                                                                                              Release No. 67347 (July 3, 2012), 77 FR 40673 (July
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                                                proposed rule text promotes                                                                                   10, 2012) (‘‘RLP Approval Order’’) (SR–
                                                                                                          28 See, e.g., Rules 13(a)(1)(A)(iv)—Equities,
                                                                                                                                                              NYSEAmex–2011–84). See also Securities
                                                  26 NYSE  IOC Orders automatically execute             13(e)(1)(B)—Equities, and 13(e)(3)(C)(ii)—Equities.   Exchange Act Release No. 78602 (August 17, 2016),
                                                against the displayed quotation up to its full size       29 Rule 15(a)—Equities provides that pre-opening
                                                                                                                                                              81 FR 57639 (August 23, 2016) (SR–NYSEMKT–
                                                and sweep the Exchange book, as provided in Rule        indications will include the security and the price   2016–76) (extending pilot to December 31, 2016).
                                                1000—Equities to the extent possible, with portions     range within which the opening price is anticipated   The Exchange established the Program to attract
                                                of the order routed to other markets if necessary.      to occur and will be published via the securities     retail order flow to the Exchange, and allow such
                                                See Rule 13(b)(2)(B)—Equities.                          information processor and proprietary data feeds.     order flow to receive potential price improvement.
                                                  27 See Rule 13(b)(2)(E)—Equities.                       30 See Rule 13(d)(1)(A)—Equities.                   See RLP Approval Order, 77 FR at 40674.



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                                                63556                      Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices

                                                executing order will trade next with                      enter an IOC ISO to buy (sell) at a price                 priced, consistent with the terms of the
                                                non-displayable interest on parity. The                   higher (lower) than PBO (PBB), the                        order.
                                                Exchange proposes to modify these                         entering firm would have been required                       • Proposed Rule 67(f)(4)(D) would
                                                requirements for Pilot Securities in Test                 to simultaneously route limit orders to                   provide that d-Quotes in Pilot Securities
                                                Group Three. Under proposed Rule                          execute against the full size of the PBO                  in Test Group Three would not exercise
                                                67(f)(4)(A), an incoming automatically                    (PBB).                                                    discretion as provided for in Rule
                                                executing order to sell (buy) will trade                     • Proposed Rule 67(f)(4)(C) would set                  70.25—Equities if (i) exercising such
                                                with displayable bids (offers) and route                  forth the restrictions applicable to                      discretion would result in an execution
                                                to protected bids (offers) before trading                 resting non-displayed interest, i.e., a                   at the price of a protected quotation, or
                                                with an unexecuted Market Order held                      resting order to buy (sell) that is not                   (ii) the price of a protected bid (offer) is
                                                undisplayed at the same price. Further,                   displayed at the price at which it is                     equal to or higher (lower) than the filed
                                                proposed Rule 67(f)(4)(A) would                           eligible to trade. Resting non-displayed                  price of the d-Quote. As defined in Rule
                                                provide that, after trading or routing, or                interest on the Exchange could include                    70.25—Equities, a d-Quote is an e-
                                                both, any remaining balance of such an                    Non-Display Reserve Orders,33 Non-                        Quote, i.e., a Floor broker agency
                                                incoming automatically executing order                    Display Reserve e-Quotes,34 the reserve                   interest file, that has discretionary
                                                would satisfy any unexecuted Market                       interest of Minimum Display Reserve                       instructions as to size or price, or both.
                                                Orders in time priority before trading                    Orders and Minimum Display Reserve                        The discretionary price or size at which
                                                with non-displayable interest on parity.                  e-Quotes,35 and pegging interest that is                  a d-Quote may trade is not displayed. If
                                                As such, proposed Rule 67(f)(4)(A)                        not displayed.36 The proposed rule                        the discretionary instructions of a d-
                                                would specify the ranking of orders for                   changes are designed to assure that                       Quote cannot be met, it will trade as a
                                                Pilot Securities in Test Group Three and                  these orders would not price match a                      regular e-Quote at its filed price.37 As
                                                is designed to assure that non-displayed                  protected quotation.                                      provided for in Rule 70.25(e)(v)(A)(1)—
                                                orders, including unexecuted Market                          Æ Proposed Rule 67(f)(4)(C)(i) would                   Equities, to determine whether to
                                                Orders, will not price match protected                    provide that resting non-displayed                        exercise discretion for d-Quotes on the
                                                quotations. Instead, the Exchange will                    interest to buy (sell) would not trade at                 Exchange’s book, the Exchange will use
                                                either route or cancel an incoming                        the price of a protected offer (bid).                     the amount of discretion necessary to
                                                order, consistent with the order’s                                                                                  permit a trade on the Exchange
                                                                                                             Æ Proposed Rule 67(f)(4)(C)(ii) would
                                                instructions, before trading with either                                                                            consistent with Rule 611. Therefore, a d-
                                                                                                          provide that resting non-displayed
                                                unexecuted Market Orders or non-                                                                                    Quote may exercise discretion to trade
                                                                                                          interest to buy (sell) would not trade at
                                                displayed orders.32                                                                                                 at the price of a protected quotation, but
                                                   • Proposed Rule 67(f)(4)(B) would set                  the price of a protected bid (offer) unless
                                                                                                          the incoming order to sell (buy) is a TA                  not through the price of a protected
                                                forth the trading restrictions applicable                                                                           quotation. Because interest that is non-
                                                to ISOs in Test Group Three.                              ISO, Day ISO, or IOC ISO that has a
                                                                                                          limit price lower (higher) than the price                 displayed cannot price match protected
                                                   Æ Proposed Rule 67(f)(4)(B)(i) would
                                                                                                          of the non-displayed interest. In such                    quotations under the Trade-at
                                                provide that, on entry, Day ISOs would
                                                                                                          case, the arriving TA ISO, Day ISO, or                    Prohibition, the Exchange proposes to
                                                be eligible for the Trade-at ISO
                                                                                                          IOC ISO would be eligible to trade with                   amend the operation of d-Quotes in
                                                exception set forth in proposed Rule
                                                                                                          resting contra-side non-displayed                         Pilot Securities in Test Group Three to
                                                67(e)(4)(C)(x). Because a member
                                                                                                          interest that is priced equal to a same-                  prevent the possibility that exercising
                                                organization that enters a Day ISO to
                                                                                                          side protected quote because the                          discretion, i.e., a trade at a non-
                                                buy (sell) must simultaneously route
                                                                                                          entering firm would have met its                          displayed price, would result in a trade
                                                one or more limit orders to execute
                                                                                                          obligation to simultaneously route                        at the price of a protected quotation. To
                                                against the full displayed size of any
                                                protected offer (bid), a member                           additional limit orders to trade with                     effect this change, the Exchange
                                                organization entering a Day ISO would                     such protected quotation. Proposed Rule                   proposes that the Exchange would not
                                                have met the obligations specified in                     67(f)(4)(C)(iii) would provide that, in                   exercise discretion for a d-Quote if
                                                Rule 67(e)(4)(C)(x). Accordingly,                         order to avoid trading with an arriving                   exercising discretion would result in an
                                                proposed Rule 67(f)(4)(B)(i) would                        order at the price of a protected                         execution at the price of a protected
                                                provide that on entry, Day ISOs would                     quotation, resting non-displayed interest                 quotation. In addition, the Exchange
                                                be eligible for the exception set forth in                will either be routed, cancelled, or re-                  proposes that if the protected bid (offer)
                                                Rule 67(e)(4)(C)(x).                                                                                                is equal to or higher (lower) than the
                                                   Æ Proposed Rule 67(f)(4)(B)(ii) would                     33 A ‘‘Non Displayed Reserve Order’’ is a Limit        filed price of the d-Quote, the Exchange
                                                provide that an IOC ISO to buy (sell)                     Order that is not displayed, but remains available        would not exercise discretion for that d-
                                                would not trade with non-displayed                        for potential execution against all incoming              Quote.38 The Exchange believes that
                                                                                                          automatically executing orders until executed in          restricting d-Quote discretion in these
                                                interest to sell (buy) that is the same                   full or cancelled. See Rule 13(d)(1)(A)—Equities.
                                                price as a protected offer (bid) unless                      34 See Rule 70(f)(ii)—Equities.                        circumstances would reduce the
                                                the limit price of such IOC ISO is higher                    35 A ‘‘Minimum Display Reserve Order’’ is a Limit      potential for non-displayed interest to
                                                (lower) than the price of the protected                   Order that will have a portion of the interest
                                                offer (bid). As such, an arriving IOC ISO                 displayed when the order is or becomes the                  37 See Rule 70.25(a)(iv)—Equities.
                                                                                                          Exchange BBO and a portion of the interest                  38 For example, assume the Exchange has a
                                                would be permitted to trade with                          (‘‘reserve interest’’) that is not displayed. See Rules   resting d-Quote to buy with $0.10 of price
                                                undisplayed orders resting on the NYSE                    13(d)(2)(C)—Equities and 70(f)(i)—Equities.               discretion that is filed at $10.05 and there is a
                                                order book only if the limit price of the                    36 See Rule 13(f)(1)(A)—Equities (Pegging interest     protected bid of $10.05 and a protected offer of
                                                arriving IOC ISO order is better than the                 includes non-displayable interest to buy or sell at       $10.20. Assume that the Exchange receives a sell
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                                                                                                          a price to track the same-side PBBO). d-Quotes            order priced at $10.10. Under Rule 70.25, the
                                                PBBO. This would be permitted under                       enable Floor brokers to enter discretionary               resting d-Quote to buy could exercise price
                                                the Trade-at Prohibition because to                       instructions as to the price at which the d-Quote         discretion to trade with that incoming order.
                                                                                                          may trade and the number of shares to which the           However, under proposed Rule 67(f)(4)(D), for Pilot
                                                  32 For example, a Do Not Ship (DNS) Order will          discretionary price instructions apply. Executions        Securities in Test Group Three, that resting d-Quote
                                                cancel if compliance with Exchange rules or federal       of d-Quotes within a discretionary pricing                order to buy would not exercise price discretion
                                                securities laws requires that all or part of such order   instruction range are considered non-displayable          because it would result in a trade based on a non-
                                                be routed to another market center for execution.         interest for purposes of Rule 72—Equities. See Rule       displayed price that would be ahead of the same-
                                                See Rule 13(e)(2)—Equities.                               70.25(a)(ii)—Equities.                                    side protected bid.



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                                                                          Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices                                                       63557

                                                execute at the price of a protected                     quotations, if applicable. Only then                      entered electronically into Exchange
                                                quotation, in violation of the Trade-at                 would an incoming order with an STP                       systems from an off-Floor location.
                                                Prohibition.                                            modifier be evaluated against resting                        Æ An order with a ‘‘Buy Minus Zero
                                                  • Proposed Rule 67(f)(4)(E) would                     non-displayed orders with an STP                          Plus’’ instruction will not trade at a
                                                provide that only buy and sell orders                   modifier from the same MPID. However,                     price that is higher than the last sale,
                                                that are entered into the Cross Function                for Pilot Securities in Test Group Three                  subject to its limit price, if applicable.43
                                                pursuant to Supplementary Material .10                  with an STPN modifier, the Exchange                       As such, Buy Minus/Zero Plus Orders
                                                to Rule 76—Equities 39 would be eligible                proposes that if there are opposite-side                  assist member organizations with
                                                for the Block Size exception to the                     displayed orders with an STP modifier                     compliance with the ‘‘safe harbor’’
                                                Trade-at Prohibition set forth in Rule                  from the same MPID, consistent with                       provisions of Rule 10b–18 under the Act
                                                67(e)(4)(C)(iii), as amended. Rule                      the STPN instruction, such incoming                       (‘‘Rule 10b–18’’) for issuer
                                                67(e)(4)(C)(iii), described in more detail              order with an STPN modifier would                         repurchases.44 Under regular
                                                above, sets forth the Block Size                        cancel in order to prevent an execution                   processing, an incoming order that
                                                exception to the Trade-at Prohibition.                  of that order against the resting                         trades with both displayed and non-
                                                The Exchange believes that orders that                  displayed order with the matching STP                     displayed resting orders is reported as a
                                                meet the Block Size definition and that                 modifier. As such, an order with an                       single transaction to the Consolidated
                                                are entered pursuant to Rule 76.10—                     STPN modifier will not route or trade                     Tape. Under Rule 1004—Equities, that
                                                Equities would meet this exception                      with resting non-displayed orders that                    bundled reported transaction would be
                                                because the Cross Function identifies                   do not include an STP modifier from the                   used to determine whether to elect a
                                                when eligible orders can be executed at                 same MPID if there is a resting                           Buy Minus/Zero Plus Order. However,
                                                a price.40                                              displayed order with an STP modifier                      for Pilot Securities in Test Group Three,
                                                  • Proposed Rule 67(f)(4)(G) would                     from the same MPID.                                       because the Exchange would trade an
                                                specify behavior of certain Self-Trade                     • Finally, proposed Rule 67(f)(4)(G)                   incoming order first with displayed
                                                Prevention (‘‘STP) Modifiers in Test                    would provide that g-Quotes and Buy                       orders and then route to protected
                                                Group Three and would provide that                      Minus/Zero Plus Orders, as defined in                     quotations before trading with non-
                                                incoming orders designated with an                      Rule 13—Equities, would be rejected.                      displayed orders, any executions against
                                                STPN Modifier would cancel before                          Æ A g-Quote is an electronic method                    displayed orders and non-displayed
                                                routing or trading with non-displayed                   for Floor brokers to represent orders that                orders at the same price would be
                                                orders if the opposite-side resting                     yield priority, parity and precedence                     reported as separate transactions to the
                                                interest marked with an STP modifier                    based on size to displayed and non-                       Consolidated Tape. As such, under Rule
                                                with the same market participant                        displayed orders on the Exchange’s                        1004—Equities, that first print of the
                                                identifier (‘‘MPID’’) is a displayed order.             book, in compliance with Section                          displayed orders could elect a Buy
                                                Rule 13(f)(3)—Equities describes the                    11(a)(1)(G) of the Act.41 Under the                       Minus/Zero Plus Order. The Exchange
                                                Exchange’s STP Modifiers. As provided                   Trade-at Prohibition, however, because                    does not believe that this processing
                                                for in Rule 13(f)(3)(A)—Equities, an                    incoming orders would route to                            would be consistent with how Buy
                                                incoming order designated with an STP                   protected quotations before trading with                  Minus/Zero Plus Orders function on the
                                                modifier will be prevented from                         non-displayed interest, a resting g-Quote                 Exchange as it would result in the
                                                executing against a resting opposite-side               would be required to yield not only to                    elected Buy Minus/Zero Plus Order,
                                                order also designated with an STP                       non-displayed orders on the Exchange’s                    which would trade as a Market Order,
                                                modifier with the same MPID. Such                       book, but also protected quotations,                      interrupting the allocation process of
                                                incoming order will execute against all                 even if the g-Quote were displayed.                       that incoming order. To prevent this
                                                available opposite-side interest,                       Because the Exchange believes that                        result, the Exchange proposes not to
                                                displayed and non-displayed, and will                   yielding to away protected quotations                     make this order type available for Pilot
                                                be evaluated for cancellation only to the               does not further the goals of Section                     Securities in Test Group Three. As
                                                extent it would execute against                         11(a)(1)(G) of the Act and Rule 11a1–                     proposed, Buy Minus/Zero Plus Orders
                                                opposite-side interest with an STP                      1(T) thereunder,42 the Exchange has                       would therefore be rejected if entered in
                                                modifier with the same MPID. Rule                       determined to reject G-quotes in Pilot                    Pilot Securities in Test Group Three.
                                                13(f)(3)(C)(i)—Equities further describes               Securities in Test Group Three. The
                                                the STP Cancel Newest (‘‘STPN’’)                        Exchange notes that making g-Quotes                       Proposed Amendments to Other
                                                modifier, pursuant to which, after                      unavailable in Test Group Three would                     Exchange Rules
                                                executing with all other opposite-side                  not disadvantage member organizations                       The Exchange also proposes to amend
                                                interest that does not have an STP                      from effecting transactions for their own                 Rule 80C governing the Limit Up/Limit
                                                modifier with the same MPID, the                        account, the account of an associated                     Down (‘‘LULD’’) price controls pursuant
                                                remaining balance of the incoming order                 person, or any other account of which                     to the NMS Plan to Address
                                                would cancel. For Pilot Securities in                   it or an associated person exercises                      Extraordinary Market Volatility (‘‘LULD
                                                Test Group Three, because an incoming                   discretion at the Exchange. Such orders                   Plan’’) 45 and Rule 1000(c)—Equities
                                                order cannot trade with non-displayed                   could be routed to an unaffiliated Floor                  governing Trading Collars in order to
                                                interest before routing to protected                    broker for entry on the Exchange or                       facilitate compliance with the Plan.
                                                quotations, orders with an STP modifier                                                                           These proposed rule changes are
                                                                                                           41 Section 11(a)(1) of the Act, 15 U.S.C. 78k(a)(1),
                                                will first be evaluated against displayed                                                                         designed to facilitate compliance with
                                                                                                        generally prohibits a member of a national
                                                orders, then routed to protected                        securities exchange from effecting transactions on
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                                                                                                                                                                    43 The Exchange recently filed to amend Rule
                                                                                                        that exchange for its own account, the account of
                                                  39 Supplementary    Material .10 to Rule 76—          an associated person, or any account over which it        13—Equities to eliminate orders with a sell ‘‘plus’’
                                                Equities provides for a ‘‘Cross Function’’ that Floor   or an associated person exercises discretion.             and buy ‘‘minus’’ instruction and retain the ‘‘Buy
                                                brokers may use to monitor compliance with Rule         Subsection (G) of Section 11(a)(1) and provides an        Minus Zero Plus’’ instruction. See SR–NYSEMKT–
                                                611 of Regulation NMS. To be eligible for this Cross    exemption allowing an exchange member to have             2016–81.
                                                Function, the proposed cross transaction must be        its own floor broker execute a proprietary                  44 See 17 CFR 240.10b–18.

                                                for at least 10,000 shares or a quantity of stock       transaction, also known as a ‘‘G order’’ provided           45 See Securities Exchange Act Release No. 67091
                                                having a market value of $200,000 or more.              such order yields priority, parity, and precedence.       (May 31, 2012), 77 FR 33498 (June 6, 2012) (File
                                                  40 See Rule 76.10(a)—Equities.                           42 See 15 U.S.C. 78k(a)(1); 17 CFR 240.11a2–2(T).      No. 4–631).



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                                                63558                       Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices

                                                the Plan and would be applicable across                  trade, to foster cooperation and                      which is the purpose of having a pilot
                                                all securities that trade at the Exchange,               coordination with persons engaged in                  with three test groups.
                                                regardless of the applicable MPV.                        facilitating transactions in securities, to              With respect to Pilot Securities in
                                                   In particular, the Exchange proposes                  remove impediments to and perfect the                 Test Group Three, the Commission
                                                to add a new subsection (8) to Rule                      mechanism of a free and open market                   recognized the particular complexity of
                                                80C(a)—Equities that would specify                       and a national market system and, in                  implementing and complying with the
                                                that, after the Exchange opens or                        general, to protect investors and the                 Trade-at Prohibition, including that
                                                reopens an Exchange-listed security but                  public interest.                                      trading centers would need to ‘‘monitor
                                                before receiving Price Bands from the                       The Plan requires the Exchange to                  protected quotations on other trading
                                                SIP under the LULD Plan, the Exchange                    establish, maintain, and enforce written              centers and prevent an execution that
                                                would calculate Price Bands based on                     policies and procedures that are                      would match the price of any such
                                                the first Reference Price provided to the                reasonably designed to comply with                    quotation unless the trading center itself
                                                SIP and, if such Price Bands are not in                  applicable quoting and trading                        was displaying a protected quotation’’
                                                the MPV for the security, round such                     requirements specified in the Plan. The               and that ‘‘compliance with the Trade-at
                                                Price Bands to the nearest price at the                  proposed rule change is designed to                   Prohibition would require systems
                                                applicable MPV. The Exchange would                       comply with the Plan, reduce                          changes by trading centers.’’
                                                apply this standard rounding                             complexity and enhance system                         centers that are not registered exchanges
                                                calculation regardless of the MPV of the                 resiliency while not adversely affecting              will be able to implement compliance
                                                security.                                                the data collected under the Plan. The                with the Trade-at Prohibition by
                                                   The Exchange also proposes to amend                                                                         modifying the behavior of order types
                                                                                                         Exchange believes that the proposed
                                                Rule 1000(c)(i)—Equities, which                                                                                that currently price match protected
                                                                                                         rule changes are thus reasonably
                                                describes the calculation of Trading                                                                           quotations and without public notice
                                                                                                         designed to comply with applicable
                                                Collars, to specify that Trading Collars                                                                       and without filing any rule changes
                                                                                                         quoting and trading requirements
                                                for both buy and sell orders that are not                                                                      with the Commission. Such modified
                                                                                                         specified in the Plan and, as discussed
                                                in the MPV for the security, as defined                                                                        behavior would be applicable, and
                                                                                                         further below, other applicable
                                                in Supplemental Material .10 to Rule                                                                           indeed required, only for Pilot
                                                                                                         regulations.
                                                62—Equities, would be rounded down                                                                             Securities in Test Group Three.
                                                                                                            The Exchange believes that the                     Applying the modified order behavior
                                                to the nearest price at the applicable
                                                                                                         proposed changes to order behavior for                for compliance with the Trade-at
                                                MPV.
                                                                                                         Pilot Securities in Test Group Three                  Prohibition to Pilot Securities in other
                                                Proposed Non-Substantive Amendments                      would remove impediments to and                       Test Groups would moot the differences
                                                to Rule 67                                               perfect the mechanism of a free and                   between the Test Groups, which would
                                                   Finally, the Exchange proposes to                     open market and a national market                     thwart the ability to assess any
                                                make non-substantive, technical                          system because they are designed, and                 meaningful differences in order
                                                amendments to Rule 67. First, the                        necessary, to modify order behavior to                behavior for the three Test Groups.
                                                Exchange proposes to amend Rule                          comply with the Trade-at Prohibition by                  As a trading center, the Exchange
                                                67(a)(1)(D)(ii) to add the word                          eliminating the ability for orders that               must also modify behavior of order
                                                ‘‘displayed’’ between the words ‘‘full’’                 can trade at a non-displayed price to                 types to comply with the Trade-at
                                                and ‘‘size’’ so that the full clause would               price match protected quotations. As the              Prohibition. However, as a registered
                                                provide ‘‘are routed to execute against                  Commission noted in the Tick Plan                     exchange, the Exchange has rules that
                                                the full displayed size of any protected                 Approval Order, the Plan is reasonably                are filed with the Commission that
                                                bid.’’ This proposed amendment makes                     designed to provide measurable data                   describe in detail order behavior,
                                                the rule text parallel with the existing                 that should facilitate the ability of the             including current order behavior that is
                                                rule text that provides ‘‘or the full                    Commission, the public, and market                    designed in compliance with Rules
                                                displayed size of any protected offer.’’                 participants to review and analyze the                610(d) and 611 of Regulation NMS.
                                                Second, the Exchange proposes to                         effect of tick size on the trading,                   These existing rules provide for non-
                                                amend Rule 67(e)(4)(C)(xv) to correct a                  liquidity, and market quality of                      displayed order types to price match
                                                typographical error and change the                       securities of smaller capitalization                  protected quotations even if not
                                                word ‘‘bond’’ to ‘‘bona’’ when using the                 companies.48 The Plan thus provides for               displaying a quote at that price. Unlike
                                                phrase ‘‘bona fide error.’’                              a mechanism to provide a data-driven                  a trading center that is not a registered
                                                                                                         approach to evaluate whether certain                  exchange, the Exchange is required to
                                                Implementation Date                                      changes to market structure for Pilot                 file a proposed rule change to describe
                                                  If the Commission approves the                         Securities would be consistent with the               how it would modify order behavior in
                                                proposed rule changes, the proposed                      Commission’s mission to protect                       compliance with the Plan.51 For the
                                                rule changes will be effective upon                      investors, maintain fair and orderly and              Exchange to implement compliance
                                                Commission approval and shall become                     efficient markets, and facilitate capital             with the Plan, and specifically the
                                                operative upon commencement of the                       formation.49 By having three test groups,             requirements of the Trade-at
                                                Pilot Period.                                            the data that will be collected will                  Prohibition, the Exchange assessed its
                                                                                                         demonstrate how behavior will change                  order type behavior and identified those
                                                2. Statutory Basis                                       based on the differing requirements of                changes that would be necessary to
                                                   The Exchange believes that its                        the test groups. Because there are                    prevent an execution on a non-
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                                                proposal is consistent with Section 6(b)                 different requirements for the three Test
                                                of the Act 46 in general, and furthers the               Groups, a logical consequence is that                   50 Id.at 27530.
                                                objectives of Section 6(b)(5) of the Act 47              order behavior will change depending                    51 Section  19(b)(1) of the Act requires that each
                                                in particular, in that it is designed to                 on the requirements of each Test Group,               self-regulatory organization shall file with the
                                                                                                                                                               Commission, in accordance with Rule 19b–4
                                                promote just and equitable principles of                                                                       thereunder, copies of any proposed rule or any
                                                                                                           48 See Tick Plan Approval Order, supra note 6, at
                                                                                                                                                               proposed change in, addition to, or deletion from
                                                  46 15 U.S.C. 78f(b).                                   27529.                                                the rules of such self-regulatory organization. 15
                                                  47 15 U.S.C. 78f(b)(5).                                  49 Id.                                              U.S.C. 78s(b)(1).



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                                                                         Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices                                                       63559

                                                displayed order that would match the                    quotations, even if the g-Quote were                  above, to comply with the Trade-at
                                                price of protected quotation unless that                displayed. The Exchange believes that                 Prohibition, both g-Quotes and Buy
                                                Away Market is displaying a protected                   this processing would be inconsistent                 Minus/Zero Plus Orders would not
                                                quotation.                                              with the purpose of g-Quotes. The                     function in the same manner as
                                                   The Exchange believes that the                       Exchange notes that making g-Quotes                   currently provided for, and the
                                                proposed changes regarding ISOs, MPL                    unavailable in Test Group Three would                 Exchange believes that applying the
                                                Orders, RPI Orders, resting non-                        not disadvantage member organizations                 Trade-at Prohibition to these order types
                                                displayed interest, d-Quotes, buy and                   from effecting transactions for their own             would introduce unnecessary
                                                sell orders entered into the Cross                      account, the account of an associated                 complexity and risk that would not
                                                Function, STPN Modifiers, Buy Minus/                    person, or any other account of which                 further the objectives of how these order
                                                Zero Plus Orders, and g-Quotes and how                  it or an associated person exercises                  types are intended to function.
                                                the Exchange allocates and routes                       discretion at the Exchange. Such orders                 Lastly, the Exchange believes that the
                                                incoming orders are consistent with the                 could be routed to an unaffiliated Floor              proposed amendments to Rules 80C and
                                                Act because they are intended to modify                 broker for entry on the Exchange or                   1000(c) would remove impediments to
                                                the Exchange’s system to comply with                    entered electronically into Exchange                  and perfect the mechanism of a free and
                                                the provisions of the Plan and the                      systems from an off-Floor location. For               open market and a national market
                                                different requirements for the three Test               Buy Minus/Zero Plus Orders, such                      system as they provide transparency
                                                Groups and are designed to assist the                   orders are currently elected based on a               regarding (1) how the Exchange would
                                                Exchange in meeting its regulatory                      bundled transaction that is reported to               calculate and round Price Bands under
                                                obligations pursuant to the Plan. For                   the Tape that includes executions of                  the LULD Plan after the Exchange opens
                                                Pilot Securities in Test Group Three, the               both displayed and non-displayed                      or reopens an Exchange-listed security
                                                Exchange believes that the proposed                     orders. Under the Trade-at Prohibition,               but before receiving Price Bands from
                                                modifications to order behavior are                     because executions against displayed                  the SIP, and (2) that Trading Collars for
                                                designed to prevent executions of orders                interest would be reported to the                     both buy and sell orders that are not in
                                                with a non-displayed working price                      Consolidated Tape separately from                     the MPV for the security would be
                                                from price matching a protected                         executions against non-displayed                      rounded down to the nearest price at the
                                                quotation. These are precisely the type                 interest, under Rule 1004, a Buy Minus/               applicable MPV.
                                                of order behavior changes contemplated                  Zero Plus Order would be elected and                  B. Self-Regulatory Organization’s
                                                by the Plan; complying with the Trade-                  converted to a Market Order in the                    Statement on Burden on Competition
                                                at Prohibition by definition requires                   middle of processing an incoming order.
                                                differing order behavior as compared to                 The Exchange believes that this would                    The Exchange does not believe that
                                                the other Test Groups or the control                    undermine the purpose of a Buy Minus/                 the proposed rule change will impose
                                                group. For example, the Exchange                        Zero Plus Order and would introduce                   any burden on competition that is not
                                                proposes that order types that are                      unnecessary complexity into the                       necessary or appropriate in furtherance
                                                eligible to trade at non-displayed prices               processing of orders. The Exchange                    of the purposes of the Act. The
                                                that would be equal to the PBBO would                   notes that no other exchange offers an                proposed rule change is intended to
                                                be re-priced, cancelled, or routed to                   instruction similar to the Buy Minus/                 assist the Exchange in meeting its
                                                assure that such orders would not price                 Zero Plus Order. Because these                        regulatory obligations pursuant to the
                                                match a protected quotation in violation                proposed rule changes are intended to                 Plan, reduce system complexity, and
                                                of the Trade-at Prohibition. Likewise,                  comply with the Plan, the Exchange                    enhance resiliency. The Plan requires
                                                for d-Quotes, for Pilot Securities in Test              believes that these proposals are in                  all trading centers, including over-the-
                                                Group Three only, the Exchange would                    furtherance of the objectives of the Plan,            counter markets, to implement changes
                                                not exercise discretion if it could result              as identified by the Commission, and                  to comply with the requirements of the
                                                in a violation of the Trade-at                          are therefore consistent with the Act.                Plan and specifically the Trade-at
                                                Prohibition. The Exchange would not                        The Exchange further believes that                 Prohibition. The Exchange fully expects
                                                apply these order behavior changes to                   that rejecting g-Quotes and Buy Minus/                that, in order to comply with the Trade-
                                                Pilot Securities in Test Groups One and                 Zero Plus Orders for Pilot Securities in              at Prohibition, trading centers other
                                                Two because to do so would subvert the                  Test Group Three is consistent with the               than registered exchanges will modify
                                                quality of data collected; Test Groups                  Act because the proposed changes are                  the behavior of orders for Pilot
                                                One and Two do not have the Trade-at                    designed to eliminate unnecessary                     Securities in Test Group Three that will
                                                Prohibition and therefore non-displayed                 trading system complexity and risk.                   not be applied to Pilot Securities in Test
                                                orders in those Test Groups may price                   Regulation SCI required the Exchange to               Groups One and Two. Unlike such
                                                match a protected quotation, provided                   establish written policies and                        trading centers, as a self-regulatory
                                                such executions are in the applicable                   procedures reasonably designed to                     organization, under Section 19(b)(1) of
                                                MPV for the security.                                   ensure that their systems have levels of              the Act,53 the Exchange is required to
                                                   In addition, the Exchange proposes to                capacity, integrity, resiliency,                      file proposed rule changes for any
                                                reject g-Quotes and Buy Minus/Zero                      availability, and security adequate to                modifications to order behavior that it
                                                Plus Orders and modifying the behavior                  maintain their operational capability                 proposes for the Plan. The absence of
                                                of incoming orders with an STPN                         and promote the maintenance of fair                   Commission approval of these proposed
                                                modifier in Test Group Three only                       and orderly markets, and that they                    rule changes would impose a burden on
                                                because application of the Trade-at                     operate in a manner that complies with                competition that is not necessary or
                                                                                                                                                              appropriate in furtherance of the
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                                                Prohibition to these order types would                  the Exchange Act. The proposed change
                                                impair the function of those order types.               is intended to reduce trading system                  purposes of the Act because trading
                                                For g-Quotes, in order to meet the                      complexity and risk to ensure the
                                                requirement to yield to all orders on the               Exchange’s technology remains robust                  technological risks. See Chair Mary Jo White,
                                                Exchange’s book, including non-                                                                               Commission, ‘‘Enhancing Our Equity Market
                                                                                                        and resilient.52 Specifically, as noted               Structure’’ (June 5, 2014), available at https://
                                                displayed orders, to comply with the                                                                          www.sec.gov/News/Speech/Detail/Speech/
                                                Trade-at Prohibition, g-Quotes would                      52 The Commission has expressed concern             1370542004312#.VD2HW610w6Y.
                                                also have to yield to protected                         regarding potential market instability caused by        53 15 U.S.C. 78s(b)(1).




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                                                63560                         Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices

                                                centers that are not registered exchanges                  and publishes its reasons for so finding              NYSEMKT–2016–83, and should be
                                                would be able to implement changes to                      or (ii) as to which the self-regulatory               submitted on or before September 29,
                                                comply with the Plan, but the Exchange                     organization consents, the Commission                 2016.
                                                would not. The Exchange believes that                      will:                                                   For the Commission, by the Division of
                                                a disapproval of the Exchange’s                              (A) By order approve or disapprove                  Trading and Markets, pursuant to delegated
                                                proposed rules would therefore put the                     the proposed rule change, or                          authority.55
                                                Exchange at a competitive disadvantage                       (B) institute proceedings to determine              Brent J. Fields,
                                                vis-à-vis the over-the-counter markets                    whether the proposed rule change                      Secretary.
                                                because such trading centers would be                      should be disapproved.
                                                                                                                                                                 [FR Doc. 2016–22152 Filed 9–14–16; 8:45 am]
                                                able to modify the behavior of non-                        IV. Solicitation of Comments                          BILLING CODE 8011–01–P
                                                displayed orders in Test Group Three
                                                without restriction. The Exchange                            Interested persons are invited to
                                                further notes that the proposed rule                       submit written data, views, and
                                                                                                           arguments concerning the foregoing,                   SECURITIES AND EXCHANGE
                                                change will apply equally to all member                                                                          COMMISSION
                                                organizations that trade Pilot Securities.                 including whether the proposed rule
                                                                                                           change is consistent with the Act.                    Submission for OMB Review;
                                                C. Self-Regulatory Organization’s                          Comments may be submitted by any of
                                                Statement on Comments on the                                                                                     Comment Request
                                                                                                           the following methods:
                                                Proposed Rule Change Received From                                                                               Upon Written Request, Copies Available
                                                Members, Participants, or Others                           Electronic Comments                                    From: Securities and Exchange
                                                  No written comments were solicited                         • Use the Commission’s Internet                      Commission, Office of FOIA Services,
                                                or received with respect to the proposed                   comment form (http://www.sec.gov/                      100 F Street NE., Washington, DC
                                                rule change.                                               rules/sro.shtml); or                                   20549–2736.
                                                                                                             • Send an email to rule-comments@                   Extension:
                                                III. Date of Effectiveness of the                          sec.gov. Please include File Number SR–                 Rule 15Bc3–1 and Form MSDW, SEC File
                                                Proposed Rule Change and Timing for                        NYSEMKT–2016–83 on the subject line.                      No. 270–93, OMB Control No. 3235–
                                                Commission Action                                                                                                    0087.
                                                                                                           Paper Comments
                                                   The Exchange respectfully requests                                                                               Notice is hereby given that, pursuant
                                                accelerated effectiveness of this                             • Send paper comments in triplicate
                                                                                                           to Secretary, Securities and Exchange                 to the Paperwork Reduction Act of 1995
                                                proposed rule change pursuant to                                                                                 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
                                                Section 19(b)(2) of the Act.54 The                         Commission, 100 F Street NE.,
                                                                                                                                                                 Securities and Exchange Commission
                                                Exchange believes that there is good                       Washington, DC 20549–1090.
                                                                                                                                                                 (‘‘Commission’’) has submitted to the
                                                cause for the Commission to accelerate                     All submissions should refer to File                  Office of Management and Budget
                                                effectiveness because the proposed rule                    Number SR–NYSEMKT–2016–83. This                       (‘‘OMB’’) a request for approval of
                                                changes are designed to specify                            file number should be included on the                 extension of the previously approved
                                                procedures for the handling, executing,                    subject line if email is used. To help the            collection of information provided for in
                                                re-pricing and displaying of certain                       Commission process and review your                    Rule 15Bc3–1 (17 CFR 240.15Bc3–1)
                                                order types and order type instructions                    comments more efficiently, please use                 and Form MSDW (17 CFR 249.1110)
                                                applicable to Pilot Securities in Test                     only one method. The Commission will                  under the Securities Exchange Act of
                                                Groups One, Two, and Three. In                             post all comments on the Commission’s                 1934 (17 U.S.C. 78a et seq.).
                                                determining the scope of these proposed                    Internet Web site (http://www.sec.gov/                   Rule 15Bc3–1 provides that a notice
                                                changes to implement the Plan, the                         rules/sro.shtml). Copies of the                       of withdrawal from registration with the
                                                Exchange reviewed its order types and                      submission, all subsequent                            Commission as a bank municipal
                                                identified which orders and instructions                   amendments, all written statements                    securities dealer must be filed on Form
                                                would be inconsistent with the Plan and                    with respect to the proposed rule                     MSDW. The Commission uses the
                                                propose to modify the operation of such                    change that are filed with the                        information contained in Form MSDW
                                                order types so they will comply with the                   Commission, and all written                           in determining whether it is in the
                                                Plan, or, to the extent inconsistent with                  communications relating to the                        public interest to permit a bank
                                                the Plan, eliminate them. These                            proposed rule change between the                      municipal securities dealer to withdraw
                                                proposed changes are consistent with                       Commission and any person, other than                 its registration. This information is also
                                                the protection of investors and the                        those that may be withheld from the                   important to the municipal securities
                                                public interest because they are                           public in accordance with the                         dealer’s customers and to the public,
                                                designed to comply with the Plan and                       provisions of 5 U.S.C. 552, will be                   because it provides, among other things,
                                                to allow the Exchange to meet its                          available for Web site viewing and                    the name and address of a person to
                                                regulatory obligations under the Plan.                     printing in the Commission’s Public                   contact regarding any of the municipal
                                                Because the Plan will be implemented                       Reference Room, 100 F Street NE.,                     securities dealer’s unfinished business.
                                                beginning on October 3, 2016, the                          Washington, DC 20549, on official                        Based upon past submissions, the
                                                Exchange believes there is good cause to                   business days between the hours of                    staff estimates that, on an annual basis,
                                                accelerate effectiveness so that the                       10:00 a.m. and 3:00 p.m. Copies of the                approximately five bank municipal
                                                Exchange may implement the proposed                        filing also will be available for                     securities dealers will file a notice of
                                                changes concurrent with the                                inspection and copying at the principal               withdrawal from registration with the
                                                                                                           office of the Exchange. All comments
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                                                implementation date of the Plan.                                                                                 Commission as a bank municipal
                                                   Within 45 days of the date of                           received will be posted without change;               securities dealer on Form MSDW. The
                                                publication of this notice in the Federal                  the Commission does not edit personal                 staff estimates that the average number
                                                Register or up to 90 days (i) as the                       identifying information from                          of hours necessary to comply with the
                                                Commission may designate if it finds                       submissions. You should submit only                   notice requirements set out in Rule
                                                such longer period to be appropriate                       information that you wish to make                     15Bc3–1 and Form MSDW is 0.5 per
                                                                                                           available publicly. All submissions
                                                  54 15   U.S.C. 78s(b)(2).                                should refer to File Number SR–                         55 17   CFR 200.30–3(a)(12).



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Document Created: 2018-02-09 13:18:05
Document Modified: 2018-02-09 13:18:05
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 63552 

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