81 FR 63815 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4770
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 180 (September 16, 2016)
Federal Register Volume 81, Issue 180 (September 16, 2016)
| Page Range | 63815-63818 | |
| FR Document | 2016-22255 |
[Federal Register Volume 81, Number 180 (Friday, September 16, 2016)] [Notices] [Pages 63815-63818] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-22255] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78816; File No. SR-NASDAQ-2016-123] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4770 September 12, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on August 29, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' or ``Exchange'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 4770 to modify certain data collection requirements of the Regulation NMS Plan to Implement a Tick Size Pilot Program. The text of the proposed rule change is available on the Exchange's Web site at http://nasdaq.cchwallstreet.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On August 25, 2014, Nasdaq and several other self-regulatory organizations (the ``Participants'') filed with the Commission, pursuant to Section 11A of the Act \3\ and Rule 608 of Regulation NMS thereunder,\4\ the Plan to Implement a Tick Size Pilot Program (the ``Plan'').\5\ The Participants filed the Plan to comply with an order issued by the Commission on June 24, 2014.\6\ The Plan was published for comment in the Federal Register on November 7, 2014, and approved by the Commission, as modified, on May 6, 2015.\7\ --------------------------------------------------------------------------- \3\ 15 U.S.C. 78k-1. \4\ 17 CFR 242.608. \5\ See Letter from Brendon J. Weiss, Vice President, Intercontinental Exchange, Inc., to Secretary, Commission, dated August 25, 2014. \6\ See Securities Exchange Act Release No. 72460 (June 24, 2014), 79 FR 36840 (June 30, 2014). \7\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 80 FR 27513 (May 13, 2015) (``Approval Order''). --------------------------------------------------------------------------- The Plan is designed to allow the Commission, market participants, and the public to study and assess the impact of increment conventions on the liquidity and trading of the common stock of small- capitalization companies. Each Participant is required to comply, and to enforce compliance by its member organizations, as applicable, with the provisions of the Plan. The Plan provides for the creation of a group of Pilot Securities, which shall be placed in a control group and three separate test groups, with each subject to varying quoting and trading increments. Pilot Securities in the control group will be quoted at the current tick size increment of $0.01 per share and will trade at the currently permitted increments. Pilot Securities in the first test group will be quoted in $0.05 minimum increments but will continue to trade at any price increment that is currently permitted.\8\ Pilot Securities in the second test group (``Test Group Two'') will be quoted in $0.05 minimum increments and will trade at $0.05 minimum increments subject to a midpoint exception, a retail investor order exception, and a negotiated trade exception.\9\ Pilot Securities in the third test group (``Test Group Three'') will be subject to the same quoting and trading increments as Test Group Two, and also will be subject to the ``Trade- at'' requirement to prevent price matching by a market participant that is not displaying at the price of a Trading Center's ``Best Protected Bid'' or ``Best Protected Offer,'' unless an enumerated exception applies.\10\ In addition to the exceptions provided under Test Group Two, an exception for Block Size orders and exceptions that mirror those under Rule 611 of Regulation NMS \11\ will apply to the Trade-at requirement. --------------------------------------------------------------------------- \8\ See Section VI(B) of the Plan. \9\ See Section VI(C) of the Plan. \10\ See Section VI(D) of the Plan. \11\ 17 CFR 242.611. --------------------------------------------------------------------------- The Plan also requires a Trading Center \12\ or a Market Maker \13\ to collect and transmit certain data to its designated examining authority (``DEA''), and requires DEAs to transmit this data to the Commission. Participants that operate a Trading Center also are required under the Plan to collect certain data, which is then transmitted directly to the Commission. With respect to Trading Centers, Appendix B.I to the Plan (Market Quality Statistics) requires a Trading Center to submit to the Participant that is its DEA a variety of market quality statistics. Appendix B.II to the Plan (Market and Marketable Limit Order Data) requires a Trading Center to [[Page 63816]] submit information to its DEA relating to market orders and marketable limit orders, including the time of order receipt, order type, the order size, and the National Best Bid or National Best Offer (``NBBO'') quoted price. --------------------------------------------------------------------------- \12\ The Plan incorporates the definition of a ``Trading Center'' from Rule 600(b)(78) of Regulation NMS. Regulation NMS defines a ``Trading Center'' as ``a national securities exchange or national securities association that operates an SRO trading facility, an alternative trading system, an exchange market maker, an OTC market maker, or any other broker or dealer that executes orders internally by trading as principal or crossing orders as agent.'' See 17 CFR 242.600(b). \13\ The Plan defines a Market Maker as ``a dealer registered with any self-regulatory organization, in accordance with the rules thereof, as (i) a market maker or (ii) a liquidity provider with an obligation to maintain continuous, two-sided trading interest.'' --------------------------------------------------------------------------- With respect to Market Makers, Appendix B.III requires a Participant that is a national securities exchange to collect daily Market Maker Registration statistics. Appendix B.IV requires a Participant to collect data related to Market Maker participation with respect to each Market Maker engaging in trading activity on a Trading Center operated by the Participant. Appendix C.I requires a Participant to collect data related to Market Maker profitability from each Market Maker for which it is the DEA. Appendix C.II requires the Participant, as DEA, to aggregate the Appendix C.I data, and to transmit this data to the Commission. The Commission approved the Pilot on a two-year basis, with implementation to begin no later than May 6, 2016.\14\ On November 6, 2015, the SEC exempted the Participants from implementing the Pilot until October 3, 2016.\15\ As set forth in Appendices B and C to the Plan, data that is reported pursuant to the appendices shall be provided for dates starting six months prior to the Pilot Period through six months after the end of the Pilot Period. Under the revised Pilot implementation date, the Pre-Pilot data collection period commenced on April 4, 2016. --------------------------------------------------------------------------- \14\ See Approval Order at 27533 and 27545. \15\ See Securities Exchange Act Release No. 76382 (November 6, 2015), 80 FR 70284 (November 13, 2015) (File No. 4-657). --------------------------------------------------------------------------- On December 9, 2015, FINRA, on behalf of the Plan Participants, submitted an exemptive request to the Commission, seeking an exemption from certain data collection and reporting requirements set forth in the Plan.\16\ On February 17, 2016, the Commission granted Participants exemptive relief from complying with certain data collection and reporting requirements in the Plan.\17\ On March 23, 2016, the Exchange filed with the Commission a proposed rule change to adopt Rule 4770 to implement the data collection requirements of the Plan, which was effective on April 4, 2016.\18\ --------------------------------------------------------------------------- \16\ See Letter from Marcia E. Asquith, Senior Vice President and Corporate Secretary, FINRA, to Robert W. Errett, Deputy Secretary, Commission, dated December 9, 2015 (``Exemptive Request''). \17\ See Letter from David S. Shillman, Associate Director, Division of Trading and Markets, Commission, to Marcia E. Asquith, Senior Vice President and Corporate Secretary, FINRA, dated February 17, 2016. \18\ See Securities Exchange Act Release No. 77456 (March 28, 2016), 81 FR 18925 (April 1, 2016) (SR-NASDAQ-2016-023) [sic]. --------------------------------------------------------------------------- The Exchange now proposes to further amend Rule 4770 to modify additional data collection and reporting requirements.\19\ First, Appendix B.I.a(21) through B.I.a(27) currently requires that Trading Centers report the cumulative number of shares of cancelled orders during a specified duration of time after receipt of the order that was cancelled. The Exchange and the other Participants believe that, for purposes of reporting cancelled orders, it is appropriate to categorize unexecuted Immediate or Cancel orders separately as one bucket irrespective of the duration of time after order receipt, i.e., without a time increment, to better differentiate orders cancelled subsequent to entry from those where the customer's intent prior to order entry was to cancel the order if no execution could be immediately obtained. The Exchange, therefore, proposes to modify Commentary .04 to provide that unexecuted Immediate or Cancel orders shall be categorized separately for purposes of Appendix B.I.a(21) through B.I.a(27). --------------------------------------------------------------------------- \19\ In connection with this proposed rule change and others made by Participants, FINRA intends to file an exemptive request on behalf of Participants seeking relief from certain of the Plan's data collection requirements. --------------------------------------------------------------------------- The second change relates to the reporting of daily market quality statistics pursuant to Appendix B.I. Currently, Appendix B.I sets forth categories of orders, including market orders, marketable limit orders, and inside-the-quote resting limit orders, for which daily market quality statistics must be reported. The Exchange and the other Participants have determined that it is appropriate to include an order type for limit orders priced more than $0.10 away from the NBBO for purposes of Appendix B reporting. The Exchange therefore proposes to amend Commentary .06 to provide that limit orders priced more than $0.10 away from the NBBO shall be included as an order type for purposes of Appendix B reporting, and shall be assigned the number (22). These orders are not currently required to be reported pursuant to Appendix B, and the Exchange and the other Participants believe that requiring the reporting of such orders will produce a more comprehensive data set. The third change relates to the reporting of market quality statistics pursuant to Appendix B.I for a variety of order types, including inside-the-quote resting limit orders (12), at-the-quote resting limit orders (13), and near-the-quote resting limit orders (within $0.10 of the NBBO) (14). The Exchange and the other Participants believe that it is appropriate to require Trading Centers to report all orders that fall within these categories, and not just those orders that are ``resting.'' The Exchange, therefore, proposes to amend Commentary .06 to make this change. In the fourth change, the Exchange proposes to add new Commentary .09 to modify the manner in which market maker participation statistics are calculated. Currently, Appendix B.IV provides that market maker participation statistics shall be calculated based on share participation, trade participation, cross-quote share (trade) participation, inside-the-quote share (trade) participation, at-the- quote share (trade) participation, and outside-the-quote share (trade) participation. The Exchange and the other Participants have determined that it is appropriate to add the count of the number of Market Makers used in the calculation of share (trade) participation to each category. The Exchange is therefore proposing this change as part of Commentary .09. In addition, Appendix B.IV(b) and (c) currently require that, when aggregating across Market Makers, share participation and trade participation shall be calculated using the share-weighted average and trade-weighted average, respectively. The Exchange and the other Participants believe that it is more appropriate to calculate share and trade participation by providing the total count of shares or trades, as applicable, rather than weighted averages, and the Exchange is therefore proposing this change as part of Commentary .09. The fifth change relates to the NBBO that a Trading Center is required to use when performing certain quote-related calculations. When calculating cross-quote share (trade) participation pursuant to Appendix B.IV(d) and inside-the-quote share (trade) participation pursuant to Appendix B.IV(e), the Plan requires the Trading Center to utilize the NBBO at the time of the trade for both share and trade participation calculations. When calculating at-the-quote share (trade) participation and outside-the quote share (trade) participation pursuant to Appendix B.IV(f) and (g), the Plan allows the Trading Center to utilize the NBBO at the time of or immediately before the trade for both share and trade participation calculations. The Exchange and the other Participants believe that it is appropriate to calculate all quote participation (cross-quote share (trade) participation, inside-the-quote share (trade) participation, at-the-quote share (trade) participation and outside-the-quote share (trade) participation) solely by reference to the [[Page 63817]] NBBO in effect immediately prior to the trade. The Exchange, therefore, proposes to make this change as part of Commentary .09. Finally, the Exchange proposes to change the end date until which the Pre-Pilot Data Collection Securities shall be used to fulfill the Plan's data collection requirements. Currently, Commentary .10 provides that Pre-Pilot Data Collection Securities are the securities designated by the Participants for purposes of the data collection requirements described in Items I, II and IV of Appendix B and Item I of Appendix C to the Plan for the period beginning six months prior to the Pilot Period and ending on the trading day immediately preceding the Pilot Period. The Exchange and the other Participants believe that it is appropriate to use the Pilot Securities to satisfy the Plan's data collection requirements prior to the commencement of the Pilot. Accordingly, the Exchange is revising Commentary .10 (which will be re- numbered as Commentary .11) to provide that the Pre-Pilot Data Collection Securities shall be used to satisfy the Plan's data collection requirements through thirty-one days prior to the Pilot Period, after which time the Pilot Securities shall be used for purposes of the data collection requirements.\20\ As noted in Item 2 of this filing, the Exchange has filed the proposed rule change for immediate effectiveness. The Exchange has requested that the SEC waive the 30-day operative period so that the proposed rule change can become operative on August 30, 2016. --------------------------------------------------------------------------- \20\ After regular trading hours on September 2, 2016, the national securities exchanges will establish which securities will be included as Pilot Securities for purposes of the Plan. The Exchange and the other Participants have determined that members should use the Pilot Securities list for data collection purposes once it becomes available. Thus, the proposed rule change requires that, beginning thirty days prior to the first day of the Pilot Period--i.e., September 3, 2016--The Exchange and Exchange members will comply with the data collection obligations of the Plan by collecting data on the Pilot Securities. As a result, beginning on September 3, 2016, members must migrate from using the Exchange's published Pre-Pilot Data Collection Security list and begin using the Pilot Securities list. September 2, 2016 will be the last day that members use the Pre-Pilot Data Collection Security list. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\21\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\22\ in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest, and Section 6(b)(8) of the Act,\23\ which requires that the Exchange not impose any burden on competition that is not necessary or appropriate. --------------------------------------------------------------------------- \21\ 15 U.S.C. 78f(b). \22\ 15 U.S.C. 78f(b)(5). \23\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- The Exchange believes that this proposal is consistent with the Act because it implements and clarifies the provisions of the Plan, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Pilot was an appropriate, data-driven test that was designed to evaluate the impact of a wider tick size on trading, liquidity, and the market quality of securities of smaller capitalization companies, and was therefore in furtherance of the purposes of the Act. The Exchange believes that this proposal is in furtherance of the objectives of the Plan, as identified by the SEC, and is therefore consistent with the Act because the proposal implements and clarifies the requirements of the Plan. 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 not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that the proposed rule change implements the provisions of the Plan, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. The Exchange also notes that, other than the change to require use of the Pilot Securities beginning thirty days prior to the beginning of the Pilot Period, the proposed changes will not affect the data collection and reporting requirements for members that operate Trading Centers; the proposed changes will only affect how the Exchange and Participants that operate Trading Centers collect and report data. The Exchange notes that, with respect to the change to require the use of the Pilot Securities beginning thirty days prior to the start of the Pilot Period, the proposed change reduces the number of securities on which affected members otherwise would have been required to collect data pursuant to the Plan and Rule 4770. In addition, the proposed rule change applies equally to all similarly situated members. Therefore, the Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act \24\ and Rule 19b-4(f)(6) \25\ thereunder because the proposal does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) by its terms, become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78s(b)(3)(A). \25\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \26\ normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\27\ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that so that the proposed rule change can become operative on August 30, 2016. --------------------------------------------------------------------------- \26\ 17 CFR 240.19b-4(f)(6). \27\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow the Exchange to implement the proposed rules immediately thereby preventing delays in the implementation of the Plan. The Commission notes that the Plan is scheduled to start on October 3, 2016. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposed rule change to be operative upon filing with the Commission.\28\ --------------------------------------------------------------------------- \28\ For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such [[Page 63818]] action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.\29\ --------------------------------------------------------------------------- \29\ 15 U.S.C. 78s(b)(3)(C). --------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NASDAQ-2016-123 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-NASDAQ-2016-123. 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 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASDAQ-2016-123 and should be submitted on or before October 7, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\30\ --------------------------------------------------------------------------- \30\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-22255 Filed 9-15-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 180 / Friday, September 16, 2016 / Notices 63815
public in accordance with the Regulation NMS Plan to Implement a separate test groups, with each subject
provisions of 5 U.S.C. 552, will be Tick Size Pilot Program. to varying quoting and trading
available for Web site viewing and The text of the proposed rule change increments. Pilot Securities in the
printing in the Commission’s Public is available on the Exchange’s Web site control group will be quoted at the
Reference Room, 100 F Street NE., at http://nasdaq.cchwallstreet.com, at current tick size increment of $0.01 per
Washington, DC 20549 on official the principal office of the Exchange, and share and will trade at the currently
business days between the hours of at the Commission’s Public Reference permitted increments. Pilot Securities in
10:00 a.m. and 3:00 p.m. Copies of the Room. the first test group will be quoted in
filing also will be available for II. Self-Regulatory Organization’s $0.05 minimum increments but will
inspection and copying at the principal Statement of the Purpose of, and continue to trade at any price increment
office of the Exchange. Statutory Basis for, the Proposed Rule that is currently permitted.8 Pilot
All comments received will be posted Change Securities in the second test group
without change; the Commission does (‘‘Test Group Two’’) will be quoted in
not edit personal identifying In its filing with the Commission, the $0.05 minimum increments and will
information from submissions. You Exchange included statements trade at $0.05 minimum increments
should submit only information that concerning the purpose of and basis for subject to a midpoint exception, a retail
you wish to make available publicly. All the proposed rule change and discussed investor order exception, and a
submissions should refer to File any comments it received on the negotiated trade exception.9 Pilot
Number SR–NYSEMKT–2016–84 and proposed rule change. The text of these Securities in the third test group (‘‘Test
should be submitted on or before statements may be examined at the Group Three’’) will be subject to the
October 7, 2016. places specified in Item IV below. The same quoting and trading increments as
Exchange has prepared summaries, set Test Group Two, and also will be
For the Commission, by the Division of forth in sections A, B, and C below, of
Trading and Markets, pursuant to delegated
subject to the ‘‘Trade-at’’ requirement to
the most significant aspects of such prevent price matching by a market
authority.29
statements. participant that is not displaying at the
Robert W. Errett,
A. Self-Regulatory Organization’s price of a Trading Center’s ‘‘Best
Deputy Secretary.
Statement of the Purpose of, and Protected Bid’’ or ‘‘Best Protected
[FR Doc. 2016–22256 Filed 9–15–16; 8:45 am] Offer,’’ unless an enumerated exception
Statutory Basis for, the Proposed Rule
BILLING CODE 8011–01–P
Change applies.10 In addition to the exceptions
provided under Test Group Two, an
1. Purpose exception for Block Size orders and
SECURITIES AND EXCHANGE exceptions that mirror those under Rule
On August 25, 2014, Nasdaq and
COMMISSION 611 of Regulation NMS 11 will apply to
several other self-regulatory
[Release No. 34–78816; File No. SR– organizations (the ‘‘Participants’’) filed the Trade-at requirement.
NASDAQ–2016–123] with the Commission, pursuant to The Plan also requires a Trading
Section 11A of the Act 3 and Rule 608 Center 12 or a Market Maker 13 to collect
Self-Regulatory Organizations; The of Regulation NMS thereunder,4 the and transmit certain data to its
NASDAQ Stock Market LLC; Notice of Plan to Implement a Tick Size Pilot designated examining authority
Filing and Immediate Effectiveness of Program (the ‘‘Plan’’).5 The Participants (‘‘DEA’’), and requires DEAs to transmit
Proposed Rule Change To Amend Rule filed the Plan to comply with an order this data to the Commission.
4770 issued by the Commission on June 24, Participants that operate a Trading
2014.6 The Plan was published for Center also are required under the Plan
September 12, 2016. to collect certain data, which is then
comment in the Federal Register on
Pursuant to Section 19(b)(1) of the November 7, 2014, and approved by the transmitted directly to the Commission.
Securities Exchange Act of 1934 Commission, as modified, on May 6, With respect to Trading Centers,
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 2015.7 Appendix B.I to the Plan (Market
notice is hereby given that on August The Plan is designed to allow the Quality Statistics) requires a Trading
29, 2016, The NASDAQ Stock Market Commission, market participants, and Center to submit to the Participant that
LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed the public to study and assess the is its DEA a variety of market quality
with the Securities and Exchange impact of increment conventions on the statistics. Appendix B.II to the Plan
Commission (‘‘SEC’’ or ‘‘Commission’’) liquidity and trading of the common (Market and Marketable Limit Order
the proposed rule change as described stock of small-capitalization companies. Data) requires a Trading Center to
in Items I and II below, which Items Each Participant is required to comply,
have been prepared by the Exchange. and to enforce compliance by its
8 See Section VI(B) of the Plan.
The Commission is publishing this member organizations, as applicable,
9 See Section VI(C) of the Plan.
10 See Section VI(D) of the Plan.
notice to solicit comments on the with the provisions of the Plan. 11 17 CFR 242.611.
proposed rule change from interested The Plan provides for the creation of 12 The Plan incorporates the definition of a
persons. a group of Pilot Securities, which shall ‘‘Trading Center’’ from Rule 600(b)(78) of
I. Self-Regulatory Organization’s be placed in a control group and three Regulation NMS. Regulation NMS defines a
‘‘Trading Center’’ as ‘‘a national securities exchange
Statement of the Terms of Substance of or national securities association that operates an
3 15 U.S.C. 78k–1.
the Proposed Rule Change SRO trading facility, an alternative trading system,
mstockstill on DSK3G9T082PROD with NOTICES
4 17 CFR 242.608. an exchange market maker, an OTC market maker,
The Exchange proposes to amend 5 See Letter from Brendon J. Weiss, Vice
or any other broker or dealer that executes orders
Rule 4770 to modify certain data President, Intercontinental Exchange, Inc., to internally by trading as principal or crossing orders
collection requirements of the Secretary, Commission, dated August 25, 2014. as agent.’’ See 17 CFR 242.600(b).
6 See Securities Exchange Act Release No. 72460 13 The Plan defines a Market Maker as ‘‘a dealer
(June 24, 2014), 79 FR 36840 (June 30, 2014). registered with any self-regulatory organization, in
29 17 CFR 200.30–3(a)(12). 7 See Securities Exchange Act Release No. 74892 accordance with the rules thereof, as (i) a market
1 15 U.S.C. 78s(b)(1). (May 6, 2015), 80 FR 27513 (May 13, 2015) maker or (ii) a liquidity provider with an obligation
2 17 CFR 240.19b–4. (‘‘Approval Order’’). to maintain continuous, two-sided trading interest.’’
VerDate Sep<11>2014 17:55 Sep 15, 2016 Jkt 238001 PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 E:\FR\FM\16SEN1.SGM 16SEN1](https://thefederalregister.org/doc/81_FR_63995/page/1.svg)
![63816 Federal Register / Vol. 81, No. 180 / Friday, September 16, 2016 / Notices
submit information to its DEA relating The Exchange now proposes to is appropriate to require Trading
to market orders and marketable limit further amend Rule 4770 to modify Centers to report all orders that fall
orders, including the time of order additional data collection and reporting within these categories, and not just
receipt, order type, the order size, and requirements.19 First, Appendix those orders that are ‘‘resting.’’ The
the National Best Bid or National Best B.I.a(21) through B.I.a(27) currently Exchange, therefore, proposes to amend
Offer (‘‘NBBO’’) quoted price. requires that Trading Centers report the Commentary .06 to make this change.
With respect to Market Makers, cumulative number of shares of In the fourth change, the Exchange
Appendix B.III requires a Participant cancelled orders during a specified proposes to add new Commentary .09 to
that is a national securities exchange to duration of time after receipt of the modify the manner in which market
collect daily Market Maker Registration order that was cancelled. The Exchange maker participation statistics are
statistics. Appendix B.IV requires a and the other Participants believe that, calculated. Currently, Appendix B.IV
Participant to collect data related to for purposes of reporting cancelled provides that market maker
Market Maker participation with respect orders, it is appropriate to categorize participation statistics shall be
to each Market Maker engaging in unexecuted Immediate or Cancel orders calculated based on share participation,
trading activity on a Trading Center separately as one bucket irrespective of trade participation, cross-quote share
operated by the Participant. Appendix the duration of time after order receipt, (trade) participation, inside-the-quote
C.I requires a Participant to collect data i.e., without a time increment, to better share (trade) participation, at-the-quote
related to Market Maker profitability differentiate orders cancelled share (trade) participation, and outside-
from each Market Maker for which it is subsequent to entry from those where the-quote share (trade) participation.
the DEA. Appendix C.II requires the the customer’s intent prior to order The Exchange and the other Participants
Participant, as DEA, to aggregate the entry was to cancel the order if no have determined that it is appropriate to
Appendix C.I data, and to transmit this execution could be immediately add the count of the number of Market
data to the Commission. obtained. The Exchange, therefore, Makers used in the calculation of share
The Commission approved the Pilot proposes to modify Commentary .04 to (trade) participation to each category.
on a two-year basis, with provide that unexecuted Immediate or The Exchange is therefore proposing
implementation to begin no later than Cancel orders shall be categorized this change as part of Commentary .09.
May 6, 2016.14 On November 6, 2015, separately for purposes of Appendix In addition, Appendix B.IV(b) and (c)
the SEC exempted the Participants from B.I.a(21) through B.I.a(27). currently require that, when aggregating
implementing the Pilot until October 3, The second change relates to the across Market Makers, share
2016.15 As set forth in Appendices B reporting of daily market quality participation and trade participation
and C to the Plan, data that is reported statistics pursuant to Appendix B.I. shall be calculated using the share-
pursuant to the appendices shall be Currently, Appendix B.I sets forth weighted average and trade-weighted
provided for dates starting six months categories of orders, including market average, respectively. The Exchange and
prior to the Pilot Period through six orders, marketable limit orders, and the other Participants believe that it is
months after the end of the Pilot Period. inside-the-quote resting limit orders, for more appropriate to calculate share and
Under the revised Pilot implementation which daily market quality statistics trade participation by providing the
date, the Pre-Pilot data collection period must be reported. The Exchange and the total count of shares or trades, as
commenced on April 4, 2016. other Participants have determined that applicable, rather than weighted
On December 9, 2015, FINRA, on it is appropriate to include an order type averages, and the Exchange is therefore
behalf of the Plan Participants, for limit orders priced more than $0.10 proposing this change as part of
submitted an exemptive request to the away from the NBBO for purposes of Commentary .09.
Commission, seeking an exemption Appendix B reporting. The Exchange The fifth change relates to the NBBO
from certain data collection and therefore proposes to amend that a Trading Center is required to use
reporting requirements set forth in the Commentary .06 to provide that limit when performing certain quote-related
Plan.16 On February 17, 2016, the orders priced more than $0.10 away calculations. When calculating cross-
Commission granted Participants from the NBBO shall be included as an quote share (trade) participation
order type for purposes of Appendix B pursuant to Appendix B.IV(d) and
exemptive relief from complying with
reporting, and shall be assigned the inside-the-quote share (trade)
certain data collection and reporting
number (22). These orders are not participation pursuant to Appendix
requirements in the Plan.17 On March
currently required to be reported B.IV(e), the Plan requires the Trading
23, 2016, the Exchange filed with the
pursuant to Appendix B, and the Center to utilize the NBBO at the time
Commission a proposed rule change to
Exchange and the other Participants of the trade for both share and trade
adopt Rule 4770 to implement the data
believe that requiring the reporting of participation calculations. When
collection requirements of the Plan,
such orders will produce a more calculating at-the-quote share (trade)
which was effective on April 4, 2016.18
comprehensive data set. participation and outside-the quote
14 See
The third change relates to the share (trade) participation pursuant to
Approval Order at 27533 and 27545.
15 See Securities Exchange Act Release No. 76382
reporting of market quality statistics Appendix B.IV(f) and (g), the Plan
(November 6, 2015), 80 FR 70284 (November 13, pursuant to Appendix B.I for a variety allows the Trading Center to utilize the
2015) (File No. 4–657). of order types, including inside-the- NBBO at the time of or immediately
16 See Letter from Marcia E. Asquith, Senior Vice
quote resting limit orders (12), at-the- before the trade for both share and trade
President and Corporate Secretary, FINRA, to quote resting limit orders (13), and near- participation calculations. The
Robert W. Errett, Deputy Secretary, Commission,
the-quote resting limit orders (within Exchange and the other Participants
mstockstill on DSK3G9T082PROD with NOTICES
dated December 9, 2015 (‘‘Exemptive Request’’).
17 See Letter from David S. Shillman, Associate $0.10 of the NBBO) (14). The Exchange believe that it is appropriate to calculate
Director, Division of Trading and Markets, and the other Participants believe that it all quote participation (cross-quote
Commission, to Marcia E. Asquith, Senior Vice share (trade) participation, inside-the-
President and Corporate Secretary, FINRA, dated 19 In connection with this proposed rule change
quote share (trade) participation, at-the-
February 17, 2016. and others made by Participants, FINRA intends to
18 See Securities Exchange Act Release No. 77456 file an exemptive request on behalf of Participants
quote share (trade) participation and
(March 28, 2016), 81 FR 18925 (April 1, 2016) (SR– seeking relief from certain of the Plan’s data outside-the-quote share (trade)
NASDAQ–2016–023) [sic]. collection requirements. participation) solely by reference to the
VerDate Sep<11>2014 17:55 Sep 15, 2016 Jkt 238001 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 E:\FR\FM\16SEN1.SGM 16SEN1](https://thefederalregister.org/doc/81_FR_63995/page/2.svg)
![63818 Federal Register / Vol. 81, No. 180 / Friday, September 16, 2016 / Notices
action is necessary or appropriate in the For the Commission, by the Division of of those statements may be examined at
public interest, for the protection of Trading and Markets, pursuant to delegated the places specified in Item IV below.
investors, or otherwise in furtherance of authority.30 The Exchange has prepared summaries,
the purposes of the Act.29 Robert W. Errett, set forth in sections A, B, and C below,
Deputy Secretary. of the most significant parts of such
IV. Solicitation of Comments
[FR Doc. 2016–22255 Filed 9–15–16; 8:45 am] statements.
Interested persons are invited to BILLING CODE 8011–01–P
submit written data, views and A. Self-Regulatory Organization’s
arguments concerning the foregoing, Statement of the Purpose of, and the
including whether the proposed rule SECURITIES AND EXCHANGE Statutory Basis for, the Proposed Rule
change is consistent with the Act. COMMISSION Change
Comments may be submitted by any of [Release No. 34–78814; File No. SR– 1. Purpose
the following methods: NYSEARCA–2016–124] On August 25, 2014, NYSE Arca, and
Electronic Comments several other self-regulatory
Self-Regulatory Organizations; NYSE organizations (the ‘‘Participants’’) filed
• Use the Commission’s Internet Arca, Inc.; Notice of Filing and
comment form (http://www.sec.gov/ with the Commission, pursuant to
Immediate Effectiveness of Proposed Section 11A of the Act 4 and Rule 608
rules/sro.shtml); or Rule Change To Amend Rule 7.46 To of Regulation NMS thereunder,5 the
• Send an email to rule-comments@ Modify Certain Data Collection Plan to Implement a Tick Size Pilot
sec.gov. Please include File Number SR– Requirements of the Regulation NMS Program (the ‘‘Plan’’).6 The Participants
NASDAQ–2016–123 on the subject line. Plan To Implement a Tick Size Pilot filed the Plan to comply with an order
Paper Comments Program issued by the Commission on June 24,
• Send paper comments in triplicate September 12, 2016. 2014.7 The Plan was published for
to Secretary, Securities and Exchange Pursuant to Section 19(b)(1) 1 of the comment in the Federal Register on
Commission, 100 F Street NE., Securities Exchange Act of 1934 (the November 7, 2014, and approved by the
Washington, DC 20549–1090. ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 Commission, as modified, on May 6,
notice is hereby given that, on August 2015.8
All submissions should refer to File The Plan is designed to allow the
Number SR–NASDAQ–2016–123. This 29, 2016, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with Commission, market participants, and
file number should be included on the the public to study and assess the
subject line if email is used. To help the the Securities and Exchange
Commission (the ‘‘Commission’’) the impact of increment conventions on the
Commission process and review your liquidity and trading of the common
comments more efficiently, please use proposed rule change as described in
Items I and II below, which Items have stock of small-capitalization companies.
only one method. The Commission will Each Participant is required to comply,
post all comments on the Commission’s been prepared by the self-regulatory
organization. The Commission is and to enforce compliance by its
Internet Web site (http://www.sec.gov/ member organizations, as applicable,
rules/sro.shtml). Copies of the publishing this notice to solicit
comments on the proposed rule change with the provisions of the Plan.
submission, all subsequent
from interested persons. The Plan provides for the creation of
amendments, all written statements
a group of Pilot Securities, which shall
with respect to the proposed rule I. Self-Regulatory Organization’s be placed in a control group and three
change that are filed with the Statement of the Terms of Substance of separate test groups, with each subject
Commission, and all written the Proposed Rule Change to varying quoting and trading
communications relating to the
The Exchange proposes to amend increments. Pilot Securities in the
proposed rule change between the
Rule 7.46 to modify certain data control group will be quoted at the
Commission and any person, other than
collection requirements of the current tick size increment of $0.01 per
those that may be withheld from the
Regulation NMS Plan to Implement a share and will trade at the currently
public in accordance with the
Tick Size Pilot Program. The proposed permitted increments. Pilot Securities in
provisions of 5 U.S.C. 552, will be
rule change is available on the the first test group will be quoted in
available for Web site viewing and
Exchange’s Web site at www.nyse.com, $0.05 minimum increments but will
printing in the Commission’s Public
at the principal office of the Exchange, continue to trade at any price increment
Reference Room, 100 F Street NE.,
and at the Commission’s Public that is currently permitted.9 Pilot
Washington, DC 20549, on official
Reference Room. Securities in the second test group
business days between the hours of 10
(‘‘Test Group Two’’) will be quoted in
a.m. and 3 p.m. Copies of such filing II. Self-Regulatory Organization’s
$0.05 minimum increments and will
also will be available for inspection and Statement of the Purpose of, and
trade at $0.05 minimum increments
copying at the principal office of the Statutory Basis for, the Proposed Rule
subject to a midpoint exception, a retail
Exchange. All comments received will Change
investor order exception, and a
be posted without change; the
In its filing with the Commission, the
Commission does not edit personal
self-regulatory organization included 4 15 U.S.C. 78k–1.
identifying information from
statements concerning the purpose of, 5 17 CFR 242.608.
submissions. You should submit only
mstockstill on DSK3G9T082PROD with NOTICES
and basis for, the proposed rule change 6 See Letter from Brendon J. Weiss, Vice
information that you wish to make President, Intercontinental Exchange, Inc., to
and discussed any comments it received
available publicly. All submissions Secretary, Commission, dated August 25, 2014.
on the proposed rule change. The text
should refer to File Number SR– 7 See Securities Exchange Act Release No 72460
NASDAQ–2016–123 and should be (June 24, 2014), 79 FR 36840 (June 30, 2014).
30 17 CFR 200.30–3(a)(12). 8 See Securities Exchange Act Release No. 74892
submitted on or before October 7, 2016. 1 15 U.S.C. 78s(b)(1). (May 6, 2015), 80 FR 27513 (May 13, 2015)
2 15 U.S.C. 78a. (‘‘Approval Order’’).
29 15 U.S.C. 78s(b)(3)(C). 3 17 CFR 240.19b–4. 9 See Section VI(B) of the Plan.
VerDate Sep<11>2014 17:55 Sep 15, 2016 Jkt 238001 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 E:\FR\FM\16SEN1.SGM 16SEN1](https://thefederalregister.org/doc/81_FR_63995/page/4.svg)
Document Created: 2016-09-16 00:25:01
Document Modified: 2016-09-16 00:25:01
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 63815 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR