81 FR 69562 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Partial Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Partial Amendment No. 1, Amending Rule 7.46 Relating to the Exchange's Order Types To Implement the Tick Size Pilot Program
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 194 (October 6, 2016)
Federal Register Volume 81, Issue 194 (October 6, 2016)
| Page Range | 69562-69565 | |
| FR Document | 2016-24146 |
[Federal Register Volume 81, Number 194 (Thursday, October 6, 2016)] [Notices] [Pages 69562-69565] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-24146] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79017; File No. SR-NYSEARCA-2016-123] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Partial Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Partial Amendment No. 1, Amending Rule 7.46 Relating to the Exchange's Order Types To Implement the Tick Size Pilot Program September 30, 2016. I. Introduction On August 25, 2016, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange Commission (``Commission'') pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to: (1) Change system functionality to implement the Plan to Implement a Tick Size Pilot Program (``Plan'' or ``Pilot'') \3\ submitted to the Commission pursuant to Rule 608 of Regulation NMS \4\ under the Act; (2) clarify the operation of certain exceptions to the Trade-at Prohibition \5\ on Pilot Securities in Test Group Three; (3) amend the Limit Up/Limit Down (``LULD'') price controls pursuant to the Regulation NMS Plan to Address Extraordinary Market Volatility (``LULD Plan''); \6\ and (4) amend the Exchange's limit order price protection rule. The proposed rule change was published for comment in the Federal Register on September 15, 2016.\7\ The Commission received two comment letters in response to the Notice.\8\ On September 27, 2016, the Exchange filed a partial amendment to the proposed rule change (``Amendment No. 1'').\9\ --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 80 FR 27513 (May 13, 2015) (``Approval Order''). Unless otherwise specified, capitalized terms used in this rule filing are defined as set forth in the Plan. \4\ 17 CFR 242.608. \5\ Exchange Rule 7.46(e)(4)(A) 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. See also Plan Section I(LL) and Plan Section VI(D). \6\ See Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012) (File No. 4-631). \7\ Securities Exchange Act Release No. 78801 (September 9, 2016), 81 FR 63525 (``Notice''). \8\ See Letters from Eric Swanson, EVP, General Counsel, Bats Global Markets, Inc., Elizabeth K. King, General Counsel and Corporate Secretary, New York Stock Exchange; and Thomas A. Wittman, EVP, Global Head of Equities, Nasdaq, Inc., dated September 9, 2016 (``Comment Letter No. 1''); and Eric Swanson, EVP, General Counsel, Bats Global Markets, Inc., dated September 12, 2016 (``Comment Letter No. 2''). \9\ In Amendment No. 1, the Exchange proposes to do the following: (1) Delete the proposal to amend Rule 7.35P because the Exchange recently filed a separate proposed rule change to make the same amendment, which is now operative. See Securities Exchange Act Release No. 78861 (September 16, 2016) (SR-NYSEArca-2016-129) (``Rule 7.35P Filing''); (2) modify Rule 7.46(f)(3) to provide that Market Pegged Orders in all Pilot Securities would be rejected and delete references to Market Pegged Orders in Rule 7.46(f)(5)(H); and (3) correct typographical errors in the original proposal. --------------------------------------------------------------------------- This order provides notice of filing of Amendment No. 1 and approves the proposal, as modified by Amendment No. 1, on an accelerated basis. II. Description of the Amended Proposal The Exchange proposes to: (1) Change system functionality to implement the Plan; (2) clarify the operation of certain exceptions to the Trade-at Prohibition on Pilot Securities in Test Group Three; (3) amend the LULD price controls pursuant to the LULD Plan; and (4) amend the Exchange's limit order price protection rule. A. Amendments to System Functionality To Implement the Plan 1. Trade-at Intermarket Sweep Orders (``TA ISO'') \10\ --------------------------------------------------------------------------- \10\ See proposed Exchange Rule 7.46(f)(1). --------------------------------------------------------------------------- The Exchange proposes to accept TA ISOs in all securities. Further, TA ISOs must be designated as Immediate or Cancel (``IOC''), may be designated with a ``no midpoint execution'' modifier, may not be designated with a minimum trade size, and do not route. TA ISO would be immediately traded with contra-side displayed and non-displayed interest in the NYSE Arca Book up to its full size and limit price and the quantity not so traded will be immediately and automatically cancelled. 2. Permitted Price Increment for Pilot Securities \11\ --------------------------------------------------------------------------- \11\ See proposed Exchange Rule 7.46(f)(2). --------------------------------------------------------------------------- The Exchange proposes that references in Exchange rules to the minimum price variation (``MPV'') \12\ would mean $0.05 instead of the current $0.01 for Pilot Securities in Test Groups One, Two, and Three. Further, references to truncating to the MPV in Exchange rules would mean rounding down to the applicable quoting MPV for Pilot Securities in Test Groups One, Two, and Three. Mid-Point Liquidity Orders \13\ must be entered with a limit price in a $0.05 pricing increment. --------------------------------------------------------------------------- \12\ See Exchange Rule 7.6 for a definition of the MPV. \13\ A Mid-Point Liquidity Order is a Limit Order that is not displayed, does not route, and has with a working price at the midpoint of the PBBO. See Exchange Rule 7.31P(d)(3). --------------------------------------------------------------------------- 3. Rejection of Market Pegged Orders in Pilot Securities \14\ --------------------------------------------------------------------------- \14\ See proposed Exchange Rule 7.46(f)(3). See also Amendment No. 1. --------------------------------------------------------------------------- The Exchange proposes that Market Pegged Orders \15\ will be rejected for all Pilot Securities. --------------------------------------------------------------------------- \15\ A Market Pegged Order is an order to buy (sell) with a working price that is pegged to the PBO (PBB). See Exchange Rule 7.31P(h). A Market Pegged Order to buy (sell) will be rejected on arrival, or cancelled when resting, if there is no PBO (PBB) against which to peg. Market Pegged Orders will not participate in any auctions. Market Pegged Orders are not displayed and are ranked ``Priority 3--Non-Display Orders.'' A Market Pegged Order to buy (sell) may include an offset value that will set the working price below (above) the PBO (PBB) by a specified offset. --------------------------------------------------------------------------- 4. Retail Price Improvement Orders Increment \16\ --------------------------------------------------------------------------- \16\ See proposed Exchange Rule 7.46(f)(4). --------------------------------------------------------------------------- The Exchange proposes that for Test Group Two and Test Group Three, Retail Price Improvement Orders \17\ [[Page 69563]] must be entered in pricing increments of $0.005. --------------------------------------------------------------------------- \17\ A Retail Price Improvement Order consists of non-displayed interest in NYSE Arca-listed securities and UTP Securities, excluding NYSE-listed (Tape A) securities, that would trade at prices better than the PBB or PBO by at least $0.001 and that is identified as such. See Exchange Rule 7.44P(a)(4). --------------------------------------------------------------------------- 5. Trading in Test Group Three Pilot Securities a. Change in Priority \18\ --------------------------------------------------------------------------- \18\ See proposed Exchange Rule 7.46(f)(5)(A). --------------------------------------------------------------------------- The Exchange proposes to revise the priority of resting orders \19\ for Pilot Securities in Test Group Three, as follows: (A) First priority would be given to ``Priority 2--Display Orders,'' which are non-marketable Limit Orders with a displayed working price; (B) second priority would be given to ``protected quotations of Away Markets \20\;'' (C) third priority would be given to ``Priority 1--Market Orders,'' which are unexecuted Market Orders; and (D) fourth priority would be given to ``Priority 3--Non-Display Orders,'' which are non- marketable Limit Orders for which the working price is not displayed, including reserve interest of Reserve Orders. --------------------------------------------------------------------------- \19\ Exchange Rule 7.36P(e) sets forth the priority of orders for all securities. \20\ See Exchange Rule 1.1(ffP). --------------------------------------------------------------------------- b. Routing to Away Markets \21\ --------------------------------------------------------------------------- \21\ See proposed Exchange Rule 7.46(f)(5)(B). --------------------------------------------------------------------------- The Exchange proposes that for Pilot Securities in Test Group Three, orders would not be routed to Away Markets that are not displaying Protected Quotations. c. Repricing of Limit Orders \22\ --------------------------------------------------------------------------- \22\ See proposed Exchange Rule 7.46(f)(5)(C). --------------------------------------------------------------------------- The Exchange proposes to assign a working price equal to the re- priced display price in Test Group Three for displayed limit orders to avoid ranking orders undisplayed at the price of a Protected Quotation. The Exchange currently assigns a display price of a displayed Limit Order one MPV below (above) the contra-side PBO (PBB), and a working price equal to the contra-side PBBO to prevent locking or crossing the PBBO.\23\ --------------------------------------------------------------------------- \23\ See Exchange Rule 7.31P(a)(2)(C). --------------------------------------------------------------------------- d. Non-Displayed Portion of Reserve Orders \24\ --------------------------------------------------------------------------- \24\ See proposed Exchange Rule 7.46(f)(5)(D). --------------------------------------------------------------------------- The Exchange proposes that for Pilot Securities in Test Group Three, if a Reserve Order \25\ to buy (sell) is displayed at a price that is locked or crossed by a protected offer (bid), the non-displayed portion of the Reserve Order would be assigned a working price of $0.05 below (above) the protected offer (bid), but if routable, would route to a protected offer (bid) based on the limit price of the order. --------------------------------------------------------------------------- \25\ A Reserve Order is defined as a limit or inside limit order with a quantity of the size displayed and with a reserve quantity of the size (``reserve interest'') that is not displayed. See Exchange Rule 7.31P(d)(1). --------------------------------------------------------------------------- e. Limit Non-Displayed Orders \26\ --------------------------------------------------------------------------- \26\ See proposed Exchange Rule 7.46(f)(5)(E). --------------------------------------------------------------------------- The Exchange proposes that for Pilot Securities in Test Group Three, a Limit Non-Displayed Order would be assigned a working price one MPV away from the PBBO. Currently, if the limit price of a Limit Non-Displayed Order to buy (sell) is equal to the PBO (PBB), the order will be assigned a working price equal to the limit price, i.e., the same price as the PBO (PBB).\27\ --------------------------------------------------------------------------- \27\ See Rule 7.31P(d)(2)(A). --------------------------------------------------------------------------- f. Orders That Do Not Route \28\ --------------------------------------------------------------------------- \28\ See proposed Exchange Rule 7.46(f)(5)(F). --------------------------------------------------------------------------- The Exchange proposes changes to how orders with instructions do not route would interact with the NYSE Arca Book. These orders include: ``Arca Only Orders,'' \29\ ``ALO Orders,'' \30\ and ``Intermarket Sweep Orders.'' \31\ The Exchange proposes that on arrival, orders that do not route would trade with resting orders in the NYSE Arca Book, consistent with the terms of the order and the Trade-at Prohibition. Day ISOs, on arrival, would be eligible for the Trade-at Intermarket Sweep Orders exception to the Trade-at Prohibition. An IOC ISO to buy (sell) would not trade with orders to sell (buy) ranked ``Priority 1-- Market Orders'' or ``Priority 3--Non-Display Orders'' that are 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). --------------------------------------------------------------------------- \29\ An ``Arca Only Order'' is a limit order that does not route. See Exchange Rule 7.31P(e)(1). \30\ An ``ALO Order'' is an Arca Only Order that, with some exceptions, will not remove liquidity from the NYSE Arca Book and must have a minimum on one displayed round lot. See Exchange Rule 7.31P(e)(2). \31\ An ``Intermarket Sweep Order'' is a Limit Order that does not route and meets the requirements of Rule 600(b)(30) of Regulation NMS. See Exchange Rule 7.31P(e)(3). --------------------------------------------------------------------------- For Arca Only Order or ALO Orders, the Exchange proposes that when being added to the NYSE Arca Book, such orders to buy (sell) with a limit price equal to or above (below) the PBO (PBB) would be assigned a display price and working price one MPV below (above) the PBO (PBB). Once the Arca Only Order or ALO Order to buy (sell) is resting on the NYSE Arca Book, such orders would not be eligible to trade with later- arriving orders to sell (buy) ranked ``Priority 2--Display Orders'' priced equal to the PBO (PBB). A later-arriving order to buy (sell) that is eligible to trade with the PBO (PBB) may trade before such resting order. g. Block Size Exception to the Trade-at Prohibition \32\ --------------------------------------------------------------------------- \32\ See proposed Exchange Rule 7.46(f)(5)(G). --------------------------------------------------------------------------- The Exchange proposes that the only orders eligible for the block size exception to the Trade-at Prohibition would be Limit IOC Cross Orders \33\ that meet the Block Size definition. A Limit IOC Cross Order that is at the same price as the PBBO but does not meet the Block Size definition would be rejected in Test Group Three. --------------------------------------------------------------------------- \33\ A Limit IOC Cross Order is a two-sided order with instructions to match the buy-side with the identified sell-side at a specified price and that does not route and will cancel at the time of entry if the cross price is not between the BBO or would trade through the PBBO. See Exchange Rule 7.31P(g)(1). --------------------------------------------------------------------------- h. Rejection of Tracking Orders \34\ --------------------------------------------------------------------------- \34\ See proposed Exchange Rule 7.46(f)(5)(H). --------------------------------------------------------------------------- The Exchange proposes that Tracking Orders \35\ will be rejected for Test Group Three Pilot Securities. --------------------------------------------------------------------------- \35\ A Tracking Order is an order to buy (sell) with a limit price that is not displayed, does not route, must be entered in round lots and designated Day, and will trade only with an order to sell (buy) that is eligible to route. The working price of a Tracking Order to buy (sell) is the PBB (PBO), provided that such price is at or below (above) the limit price of the Tracking Order. See Exchange Rule 7.31P(d)(4). --------------------------------------------------------------------------- B. Limit Up-Limit Down (``LULD'') Price Bands The Exchange proposes that after the Exchange opens or reopens an Exchange-listed security but before receiving Price Bands from the Securities Information Processor (``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. C. Limit Order Price Protection The Exchange proposes to specify that the limit order price protection 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. D. Miscellaneous Changes The Exchange proposes to add the phrase ``or Intermarket Sweep Orders'' to the definition of ``Trade-at ISO'' as well as into the Trade-at ISO exception to the Trade-at Prohibition to clarify that ISOs may be routed to execute against [[Page 69564]] the full displayed size of the Protected Quotation that was traded at.\36\ --------------------------------------------------------------------------- \36\ See proposed Exchange Rules 7.46(a)(1)(D)(ii) and 7.46(e)(4)(C)(x). --------------------------------------------------------------------------- The Exchange proposes to amend the Block Size exception to the Trade-at Prohibition to allow a Block Size order to execute on multiple Trading Centers for the purpose of compliance with Rule 611 of Regulation NMS.\37\ --------------------------------------------------------------------------- \37\ See proposed Exchange Rule 7.46(e)(4)(C)(iii). --------------------------------------------------------------------------- Finally, the Exchange proposes to correct numerous typographical errors in the proposed rule text. III. Summary of Comment Letters Both comment letters express support for the proposed rule change and suggest that the Commission should approve the proposal. In Comment Letter No. 1, the commenters stated that if the proposal is approved as proposed, then NYSE would be able to meet the October 3, 2016 implementation date. Further, in Comment Letter No. 1, the commenters stated their belief that the requirements from the Commission have been unclear. In Comment Letter No. 2, the commenter questioned Commission staff's authority. IV. Discussion and Commission's Findings After careful review of the proposed rule change, as modified by Amendment No. 1, and the comment letters, the Commission finds that the proposal, as modified by Amendment No. 1, is consistent with the requirements of the Act, Rule 608 of Regulation NMS,\38\ and the rules and regulations thereunder that are applicable to a national securities exchange.\39\ Specifically, the Commission finds that the rule change is consistent with Section 6(b)(5) of the Act,\40\ which requires that the rules of a national securities exchange be designed, among other things, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and to protect investors and the public interest; and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \38\ 17 CFR 242.608. \39\ In approving this rule change, the Commission has considered the rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \40\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- As noted in the Approval Order, the Plan is by design, an objective, data-driven test to evaluate how a wider tick size would impact trading, liquidity, and market quality of securities of smaller capitalization companies. In addition, the Plan is designed with three Test Groups and a Control Group, to allow analysis and comparison of incremental market structure changes on the Pilot Securities and is designed to produce empirical data that could inform future policy decisions. The Exchange proposes changes to modify how the Exchange will handle orders during the Pilot Period. Specifically, the Exchange proposes to accept TA ISOs in all securities, to specify how references to MPV should be considered for Pilot Securities in the Test Groups, to require that MPL Orders with a limit price must be entered in a $0.05 pricing increment for Pilot Securities in the Test Groups, to reject Market Pegged Orders \41\ and to specify the pricing increment for Retail Price Improvement Orders in Test Groups Two and Three. The Exchange further proposes changes for Pilot Securities in Test Group Three to comply with the Trade-at Prohibition, including a different priority for execution of resting orders, how display price and working price would be determined for certain Limit Orders, Reserve Orders and Non-Displayed Limit Orders, how orders that do not route would operate, and that Tracking Orders would be rejected for Test Group Three Pilot Securities. In addition, the Exchange proposes to not route to Away Markets that are not displaying Protected Quotations. Finally, the Exchange proposes to only permit Limit IOC Cross Orders that meet the Block Size definition to be eligible for the Block Size exception to the Trade-at Prohibition.\42\ --------------------------------------------------------------------------- \41\ See Amendment No. 1. The Exchange originally proposed to reject Market Pegged Orders only in Test Group Three. The Commission believes that the amendment to reject all Market Pegged Orders in Pilot Securities modifies the proposal so that it does not cause a disparate impact on different Test Groups and the Control Group. \42\ The Commission notes that the Limit IOC Cross Orders that meet the definition of Block Size must also satisfy the provisions of the Block Size exception, including that it may not be an aggregation of non-block orders, or broken into orders small than Block Size prior to submitting the order to a Trading Center for execution. See NYSE Acra Rule 7.46(e)(4)(C). --------------------------------------------------------------------------- The Commission believes that these changes are reasonably designed to comply with the Plan. Further, the Commission believes that the proposed changes that are targeted at particular Test Groups are necessary for compliance with the Plan. Accordingly, the Commission finds that these changes are consistent with Section 6(b)(5) of the Act \43\ and Rule 608 of Regulation NMS \44\ because they implement the Plan and clarify Exchange Rules. --------------------------------------------------------------------------- \43\ 15 U.S.C. 78f(b)(5). \44\ 17 CFR 242.608. --------------------------------------------------------------------------- In addition, the Exchange proposes to adopt a rule to specify how the Exchange will calculate LULD Price Bands after the Exchange opens or reopens. The Commission believes that this change should help to ensure that trading does not occur outside of Price Bands when LULD is in effect. Finally, the Exchange proposes to specify that if Limit Order Price Protection is not in the MPV it would be rounded down to the nearest price at the applicable MPV. The Commission believes that this change should provide clarity in the Exchange's rules. For these reasons, the Commission finds that the proposed rule change, as modified by Amendment No.1, is consistent with the requirements of the Act and Rule 608 of Regulation NMS. V. Solicitation of Comments on Amendment No. 1 to the Proposed Rule Change Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether Amendment No. 1 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-NYSEArca-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- NYSEArca-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 [[Page 69565]] available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549-1090, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEArca-2016-123 and should be submitted on or before October 27, 2016. VI. Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1 The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, prior to the thirtieth day after the date of publication of notice of the proposed rule change, as modified by Amendment No. 1 in the Federal Register. As described above, the Exchange proposes to amend its rules to comply with the Plan and clarify other rules related to LULD and Limit Order Price Protection. The Commission believes that the proposals to clarify how LULD Price Bands that are calculated by the Exchange would be rounded in instances where they are not in the MPV for a security and how Limit Order Price Protection would be rounded in instances where it is not in the MPV for a security provides clarity in the Exchange rules. In addition, the Commission notes that the Pilot is scheduled to start on October 3, 2016, and accelerated approval of the proposal would ensure that the rules of the Exchange would be in place for the start of the Pilot. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Exchange Act,\45\ to approve the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. --------------------------------------------------------------------------- \45\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- VII. Conclusion It is therefore ordered that, pursuant to Section 19(b)(2) of the Act,\46\ that the proposed rule change (SR-NYSEArca-2016-123), as modified by Amendment No. 1, be and hereby is, approved on an accelerated basis. --------------------------------------------------------------------------- \46\ Id. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\47\ --------------------------------------------------------------------------- \47\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-24146 Filed 10-5-16; 8:45 am] BILLING CODE 8011-01-P
![69562 Federal Register / Vol. 81, No. 194 / Thursday, October 6, 2016 / Notices
proposed rule change between the Commission pursuant to Rule 608 of A. Amendments to System Functionality
Commission and any person, other than Regulation NMS 4 under the Act; (2) To Implement the Plan
those that may be withheld from the clarify the operation of certain 1. Trade-at Intermarket Sweep Orders
public in accordance with the exceptions to the Trade-at Prohibition 5 (‘‘TA ISO’’) 10
provisions of 5 U.S.C. 552, will be on Pilot Securities in Test Group Three;
available for Web site viewing and (3) amend the Limit Up/Limit Down The Exchange proposes to accept TA
printing in the Commission’s Public (‘‘LULD’’) price controls pursuant to the ISOs in all securities. Further, TA ISOs
Reference Room, 100 F Street NE., Regulation NMS Plan to Address must be designated as Immediate or
Washington, DC 20549, on official Cancel (‘‘IOC’’), may be designated with
Extraordinary Market Volatility (‘‘LULD
business days between the hours of a ‘‘no midpoint execution’’ modifier,
Plan’’); 6 and (4) amend the Exchange’s
10:00 a.m. and 3:00 p.m. Copies of the may not be designated with a minimum
limit order price protection rule. The trade size, and do not route. TA ISO
filing also will be available for
inspection and copying at the principal proposed rule change was published for would be immediately traded with
office of the Exchange. All comments comment in the Federal Register on contra-side displayed and non-
received will be posted without change; September 15, 2016.7 The Commission displayed interest in the NYSE Arca
the Commission does not edit personal received two comment letters in Book up to its full size and limit price
identifying information from response to the Notice.8 On September and the quantity not so traded will be
submissions. You should submit only 27, 2016, the Exchange filed a partial immediately and automatically
information that you wish to make amendment to the proposed rule change cancelled.
available publicly. All submissions (‘‘Amendment No. 1’’).9
2. Permitted Price Increment for Pilot
should refer to File Number SR–ISE– This order provides notice of filing of
2016–24 and should be submitted on or Securities 11
Amendment No. 1 and approves the
before October 27, 2016. proposal, as modified by Amendment The Exchange proposes that
For the Commission, by the Division of references in Exchange rules to the
No. 1, on an accelerated basis.
Trading and Markets, pursuant to delegated minimum price variation (‘‘MPV’’) 12
authority.19 II. Description of the Amended would mean $0.05 instead of the current
Robert W. Errett, Proposal $0.01 for Pilot Securities in Test Groups
Deputy Secretary. One, Two, and Three. Further,
The Exchange proposes to: (1) Change references to truncating to the MPV in
[FR Doc. 2016–24147 Filed 10–5–16; 8:45 am]
system functionality to implement the Exchange rules would mean rounding
BILLING CODE 8011–01–P
Plan; (2) clarify the operation of certain down to the applicable quoting MPV for
exceptions to the Trade-at Prohibition Pilot Securities in Test Groups One,
SECURITIES AND EXCHANGE on Pilot Securities in Test Group Three; Two, and Three. Mid-Point Liquidity
COMMISSION (3) amend the LULD price controls Orders 13 must be entered with a limit
pursuant to the LULD Plan; and (4) price in a $0.05 pricing increment.
[Release No. 34–79017; File No. SR– amend the Exchange’s limit order price
NYSEARCA–2016–123] 3. Rejection of Market Pegged Orders in
protection rule. Pilot Securities 14
Self-Regulatory Organizations; NYSE
4 17 CFR 242.608.
The Exchange proposes that Market
Arca, Inc.; Notice of Filing of Partial
5 Exchange Rule 7.46(e)(4)(A) defines the ‘‘Trade- Pegged Orders 15 will be rejected for all
Amendment No. 1 and Order Granting
at Prohibition’’ to mean the prohibition against Pilot Securities.
Accelerated Approval of a Proposed
executions by a Trading Center of a sell order for
Rule Change, as Modified by Partial a Pilot Security at the price of a Protected Bid or
4. Retail Price Improvement Orders
Amendment No. 1, Amending Rule 7.46 the execution of a buy order for a Pilot Security at Increment 16
Relating to the Exchange’s Order the price of a Protected Offer during regular trading The Exchange proposes that for Test
Types To Implement the Tick Size Pilot hours. See also Plan Section I(LL) and Plan Section
Group Two and Test Group Three,
Program VI(D).
6 See Securities Exchange Act Release No. 67091 Retail Price Improvement Orders 17
September 30, 2016. (May 31, 2012), 77 FR 33498 (June 6, 2012) (File
10 See proposed Exchange Rule 7.46(f)(1).
No. 4–631).
I. Introduction 7 Securities Exchange Act Release No. 78801 11 See proposed Exchange Rule 7.46(f)(2).
12 See Exchange Rule 7.6 for a definition of the
On August 25, 2016, NYSE Arca, Inc. (September 9, 2016), 81 FR 63525 (‘‘Notice’’).
MPV.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed 8 See Letters from Eric Swanson, EVP, General
13 A Mid-Point Liquidity Order is a Limit Order
with the Securities and Exchange Counsel, Bats Global Markets, Inc., Elizabeth K.
King, General Counsel and Corporate Secretary, that is not displayed, does not route, and has with
Commission (‘‘Commission’’) pursuant New York Stock Exchange; and Thomas A.
a working price at the midpoint of the PBBO. See
to Section 19(b)(1) of the Securities Exchange Rule 7.31P(d)(3).
Wittman, EVP, Global Head of Equities, Nasdaq, 14 See proposed Exchange Rule 7.46(f)(3). See also
Exchange Act of 1934 (‘‘Act’’) 1 and Rule Inc., dated September 9, 2016 (‘‘Comment Letter
Amendment No. 1.
19b–4 thereunder,2 a proposed rule No. 1’’); and Eric Swanson, EVP, General Counsel, 15 A Market Pegged Order is an order to buy (sell)
change to: (1) Change system Bats Global Markets, Inc., dated September 12, 2016
with a working price that is pegged to the PBO
functionality to implement the Plan to (‘‘Comment Letter No. 2’’).
(PBB). See Exchange Rule 7.31P(h). A Market
9 In Amendment No. 1, the Exchange proposes to
Implement a Tick Size Pilot Program Pegged Order to buy (sell) will be rejected on
do the following: (1) Delete the proposal to amend arrival, or cancelled when resting, if there is no
(‘‘Plan’’ or ‘‘Pilot’’) 3 submitted to the Rule 7.35P because the Exchange recently filed a PBO (PBB) against which to peg. Market Pegged
sradovich on DSK3GMQ082PROD with NOTICES
separate proposed rule change to make the same Orders will not participate in any auctions. Market
19 17 CFR 200.30–3(a)(12). amendment, which is now operative. See Securities Pegged Orders are not displayed and are ranked
1 15 U.S.C. 78s(b)(1). Exchange Act Release No. 78861 (September 16, ‘‘Priority 3—Non-Display Orders.’’ A Market Pegged
2 17 CFR 240.19b–4. 2016) (SR–NYSEArca–2016–129) (‘‘Rule 7.35P Order to buy (sell) may include an offset value that
3 See Securities Exchange Act Release No. 74892 Filing’’); (2) modify Rule 7.46(f)(3) to provide that will set the working price below (above) the PBO
(May 6, 2015), 80 FR 27513 (May 13, 2015) Market Pegged Orders in all Pilot Securities would (PBB) by a specified offset.
be rejected and delete references to Market Pegged 16 See proposed Exchange Rule 7.46(f)(4).
(‘‘Approval Order’’). Unless otherwise specified,
capitalized terms used in this rule filing are defined Orders in Rule 7.46(f)(5)(H); and (3) correct 17 A Retail Price Improvement Order consists of
as set forth in the Plan. typographical errors in the original proposal. non-displayed interest in NYSE Arca-listed
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![Federal Register / Vol. 81, No. 194 / Thursday, October 6, 2016 / Notices 69565
available for Web site viewing and For the Commission, by the Division of statements may be examined at the
printing in the Commission’s Public Trading and Markets, pursuant to delegated places specified in Item IV below. The
Reference Room, 100 F Street NE., authority.47 Exchange has prepared summaries, set
Washington, DC 20549–1090, on official Robert W. Errett, forth in sections A, B, and C below, of
business days between the hours of Deputy Secretary. the most significant aspects of such
10:00 a.m. and 3:00 p.m. Copies of such [FR Doc. 2016–24146 Filed 10–5–16; 8:45 am] statements.
filing will also be available for BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s
inspection and copying at the principal Statement of the Purpose of, and
office of the Exchange. All comments Statutory Basis for, the Proposed Rule
received will be posted without change; SECURITIES AND EXCHANGE
Change
the Commission does not edit personal COMMISSION
identifying information from 1. Purpose
[Release No. 34–79012; File No. SR–
submissions. You should submit only ISEMercury–2016–18] The purpose of the proposed rule
information that you wish to make change is to collect undisputed or final
available publicly. All submissions Self-Regulatory Organizations; ISE fees, fines, charges and/or other
should refer to File Number SR– Mercury, LLC; Notice of Filing and monetary sanctions or monies due and
NYSEArca–2016–123 and should be Immediate Effectiveness of Proposed owing to the Exchange through NSCC.3
submitted on or before October 27, Rule Change To Adopt a New Rule 209 This proposal will provide a cost
2016. savings to the Exchange in that it will
September 30, 2016.
VI. Accelerated Approval of Proposed alleviate administrative processes
Pursuant to Section 19(b)(1) of the related to the collection of monies owed
Rule Change, as Modified by Securities Exchange Act of 1934
Amendment No. 1 to the Exchange.4 Collection matters
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 divert staff resources away from the
notice is hereby given that on Exchange’s regulatory and business
The Commission finds good cause to
September 28, 2016, ISE Mercury, LLC purposes. In addition, the debiting
approve the proposed rule change, as
(‘‘ISE Mercury’’ or ‘‘Exchange’’) filed process will prevent Member accounts
modified by Amendment No. 1, prior to
with the Securities and Exchange from becoming overdue. The Exchange
the thirtieth day after the date of
Commission (‘‘Commission’’) the notes that it has a billing dispute policy.
publication of notice of the proposed
proposed rule change as described in The Exchange proposes to adopt new
rule change, as modified by Amendment
Items I and II below, which Items have Rule 209 and require Members, and all
No. 1 in the Federal Register. As
been prepared by the Exchange. The applicants for registration as such to
described above, the Exchange proposes
Commission is publishing this notice to provide a clearing account number for
to amend its rules to comply with the
solicit comments on the proposed rule an account at NSCC for purposes of
Plan and clarify other rules related to
change from interested persons. permitting the Exchange to debit any
LULD and Limit Order Price Protection.
I. Self-Regulatory Organization’s undisputed or final fees, fines, charges
The Commission believes that the and/or other monetary sanctions or
proposals to clarify how LULD Price Statement of the Terms of Substance of
the Proposed Rule Change monies due and owing to the Exchange
Bands that are calculated by the or other charges related to Rules 205
Exchange would be rounded in The Exchange proposes to adopt a and 206.5
instances where they are not in the MPV new Rule 209 entitled, ‘‘Collection of The Exchange will send a monthly
for a security and how Limit Order Price Exchange Fees and Other Claims’’ to invoice 6 to each Member on
Protection would be rounded in require Members to provide a clearing approximately the 4th–6th business day
instances where it is not in the MPV for account number at the National of the following month.7 The Exchange
a security provides clarity in the Securities Clearing Corporation will also send a file to NSCC each
Exchange rules. (‘‘NSCC’’) for purposes of permitting the month on approximately the 23rd of the
In addition, the Commission notes Exchange to debit any undisputed or following month to initiate the debit of
that the Pilot is scheduled to start on final fees, fines, charges and/or other the appropriate amount stated on the
October 3, 2016, and accelerated monetary sanctions or monies due and Member’s invoice for the prior month.
approval of the proposal would ensure owing to the Exchange. Because the Members will receive an
that the rules of the Exchange would be The text of the proposed rule change invoice well before any monies are
in place for the start of the Pilot. is available on the Exchange’s Web site debited (normally within two weeks),
Accordingly, the Commission finds at www.ise.com, at the principal office the Members will have adequate time to
good cause, pursuant to Section 19(b)(2) of the Exchange, and at the
of the Exchange Act,45 to approve the Commission’s Public Reference Room. 3 The Exchange will not debit accounts for fees
that are unusually large or for special
proposed rule change, as modified by II. Self-Regulatory Organization’s circumstances, unless such debiting is requested by
Amendment No. 1, on an accelerated Statement of the Purpose of, and the Member.
basis. Statutory Basis for, the Proposed Rule 4 Today, some fees are collected through The
Options Clearing Corporation, but not all fees.
VII. Conclusion Change 5 See ISE Mercury Rules 205 (Participant Fees)
In its filing with the Commission, the and 206 (Liability for Payment of Fees).
It is therefore ordered that, pursuant Exchange included statements 6 The monthly invoice will indicate that the
to Section 19(b)(2) of the Act,46 that the amount on the invoice will be debited from the
sradovich on DSK3GMQ082PROD with NOTICES
concerning the purpose of and basis for designated NSCC account. Each month, the
proposed rule change (SR–NYSEArca– the proposed rule change and discussed Exchange will send a file to the Member’s clearing
2016–123), as modified by Amendment any comments it received on the firm which will indicate the amounts to be debited
No. 1, be and hereby is, approved on an proposed rule change. The text of these from each Member. If a Member is ‘‘self-clearing’’,
accelerated basis. no such file would be sent as the Member would
receive the invoice, as noted above, which would
47 17 CFR 200.30–3(a)(12). indicate the amount to be debited.
45 15 U.S.C. 78s(b)(2). 1 15 U.S.C. 78s(b)(1). 7 By way of example, October invoices would be
46 Id. 2 17 CFR 240.19b–4. sent on November 7th.
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Document Created: 2016-10-06 02:38:12
Document Modified: 2016-10-06 02:38:12
| 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 69562 |
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