81 FR 69889 - Self Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rules To Describe Changes Necessary To Implement the Tick Size Pilot Program
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 195 (October 7, 2016)
Federal Register Volume 81, Issue 195 (October 7, 2016)
| Page Range | 69889-69892 | |
| FR Document | 2016-24281 |
[Federal Register Volume 81, Number 195 (Friday, October 7, 2016)] [Notices] [Pages 69889-69892] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-24281] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79027; File No. SR-CHX-2016-19] Self Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rules To Describe Changes Necessary To Implement the Tick Size Pilot Program October 3, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given that on September 30, 2016, the Chicago Stock Exchange, Inc. (``CHX'' or the ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The 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 CHX proposes to amend the Rules of the Exchange (``CHX Rules'') to describe changes to CHX Matching System \3\ functionality necessary to implement the quoting and trading provisions of the Regulation NMS Plan to Implement a Tick Size Pilot Program (``Plan'' or ``Pilot'').\4\ --------------------------------------------------------------------------- \3\ The Matching System is an automated order execution system, which is a part of the Exchange's ``Trading Facilities,'' as defined under CHX Article 1, Rule 1(z). \4\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 80 FR 27513 (May 13, 2015) (``Approval Order''). --------------------------------------------------------------------------- The Exchange has designated this proposal as ``non-controversial'' and provided the Commission with the notice required by Rule 19b- 4(f)(6)(iii) under the Act.\5\ --------------------------------------------------------------------------- \5\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- The text of this proposed rule change is available on the Exchange's Web site at (www.chx.com) and in 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 CHX included statements concerning the purpose of and basis for the proposed rule changes 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 CHX 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 Changes 1. Purpose On August 25, 2014, NYSE Group, Inc., on behalf of the Exchange, Bats BZX Exchange, Inc. f/k/a BATS Z-Exchange, Inc., Bats BYX Exchange, Inc. f/k/a BATS Y-Exchange, Inc., Bats EDGA Exchange, Inc. f/k/a EDGA Exchange, Inc., Bats EDGX Exchange, Inc. f/k/a EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc. (``FINRA''), NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, the Nasdaq Stock Market LLC, New York Stock Exchange LLC (``NYSE''), NYSE MKT LLC, and NYSE Arca, Inc. (collectively ``Plan Participants''),\6\ filed with the Commission, pursuant to Section 11A of the Act \7\ and Rule 608 of Regulation NMS \8\ thereunder, the Plan.\9\ The Plan Participants filed the Plan to comply with an order issued by the Commission on June 24, 2014.\10\ The Plan \11\ was published for comment in the Federal Register on November 7, 2014, and approved by the Commission, as modified, on May 6, 2015.\12\ --------------------------------------------------------------------------- \6\ A ``Participant'' is a ``member'' of the Exchange for purposes of the Act. See CHX Article 1, Rule 1(s). For clarity, the Exchange proposes to utilize the term ``CHX Participant'' when referring to members of the Exchange and the term ``Plan Participant'' when referring to Participants of the Plan. \7\ 15 U.S.C. 78k-1. \8\ 17 CFR 242.608. \9\ See Letter from Brendon J. Weiss, Vice President, Intercontinental Exchange, Inc., to Secretary, Commission, dated August 25, 2014. \10\ See Securities Exchange Act Release No. 72460 (June 24, 2014), 79 FR 36840 (June 30, 2014). \11\ Unless otherwise specified, capitalized terms used in this rule filing are defined as set forth in the Plan. \12\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 80 FR 27514 (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 stocks of small- capitalization companies. Each Plan Participant is required to comply with, and to enforce compliance by its member organizations, as applicable, with the provisions of the Plan. The Pilot will include stocks of companies with $3 billion or less in market capitalization, an average daily trading volume of one million shares or less, and a volume weighted average price of at least $2.00 for every trading day. The Pilot will consist of a control group of approximately 1400 Pilot Securities and three test groups (``Test Groups'') with 400 Pilot Securities in each selected by a stratified sampling.\13\ During the Pilot, Pilot Securities in the control group will be quoted and traded at the currently permissible increments. Pilot Securities in the first test group (``Test Group One'') will be quoted in $0.05 minimum increments but will continue to trade at any price increment that is currently permitted.\14\ 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.\15\ Pilot Securities in the third test group (``Test Group Three'') will be subject to the same restrictions 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 a price of a trading center's \16\ best protected bid or best protected offer (``Trade-at Prohibition''), unless an enumerated exception applies.\17\ In addition to the exceptions provided under Test Group Two, an exception for Block Size orders and exceptions that mirror those under Rule [[Page 69890]] 611 of Regulation NMS \18\ will apply to the Trade-at Prohibition. --------------------------------------------------------------------------- \13\ See Section V of the Plan for identification of Pilot Securities, including criteria for selection and grouping. \14\ See Section VI(B) of the Plan. \15\ See Section VI(C) of the Plan. \16\ The Plan incorporates the definition of ``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.'' \17\ See Section VI(D) of the Plan. \18\ 17 CFR 242.611. --------------------------------------------------------------------------- The Plan requires the Exchange to establish, maintain, and enforce written policies and procedures that are reasonably designed to comply with applicable quoting and trading requirements specified in the Plan. Accordingly, the Exchange adopted Article 20, Rule 13(a) to require CHX Participants to comply with the quoting and trading provisions of the Plan.\19\ The Exchange also adopted Article 20, Rule 13(b) to require CHX Participants to comply with the data collection provisions under Appendix B and C of the Plan.\20\ --------------------------------------------------------------------------- \19\ See Securities Exchange Act Release No. 78146 (June 23, 2016), 81 FR 42380 (June 29, 2016) (SR-CHX-2016-09). \20\ See Exchange Act Release No. 78812 (September 12, 2016) (SR-CHX-2016-17); see also Exchange Act Release No. 77469 (March 29, 2016), 81 FR 19275 (April 4, 2016) (SR-CHX-2016-03). --------------------------------------------------------------------------- Proposed Operation of Certain Order Types and Modifiers for Pilot Securities Current Article 20, Rule 13(a)(2) provides that the Matching System will not display, quote or trade in violation of the applicable quoting and trading requirements for a Pilot Security specified in the Plan and Article 20, Rule 13, unless such quotation or transaction is specifically exempted under the Plan. The Exchange now proposes to adopt Article 20, Rule 13(c) (Operation of Certain Order Types and Modifiers for Pilot Securities) to describe specific changes to existing Matching System functionality necessary to implement the applicable quoting and trading requirements of the Plan or to clarify the operation of certain functionality in light of the Plan.\21\ --------------------------------------------------------------------------- \21\ The Exchange notes that, in connection with this proposed rule change, the Exchange intends to file an exemptive request seeking relief from certain of the Plan's trading and quoting requirements. --------------------------------------------------------------------------- Initially, the Exchange proposes to amend current CHX Article 20, Rule 13(a)(2) to adopt an additional sentence that provides that ``The operation of certain order types and modifiers applicable to the Pilot Securities are set forth under paragraph (c) below.'' CHX Only \22\ --------------------------------------------------------------------------- \22\ See CHX Article 1, Rule 2(b)(1)(C). --------------------------------------------------------------------------- The CHX Only modifier is a limit order modifier that instructs the Exchange to reprice the CHX Only order pursuant to the CHX Only Price Sliding Processes \23\ under certain circumstances, including for Rule 610(d) of Regulation NMS \24\ (NMS Price Sliding \25\) and Rule 201 of Regulation SHO \26\ (Short Sale Price Sliding \27\) compliance purposes.\28\ Pursuant to NMS Price Sliding, a CHX Only order that, at the time of entry, would lock or cross a protected quotation of an external market in violation of Rule 610(d) would be repriced to be executable at the locking price in the Matching System and, if not marked Do Not Display,\29\ displayable at one minimum price variation below the current NBO (for bids) or at one minimum price variation above the current NBB (for offers).\30\ CHX Only orders subject to the CHX Only Price Sliding Processes may be price slid once or multiple times depending on changes to the prevailing NBBO.\31\ --------------------------------------------------------------------------- \23\ See id. \24\ 17 CFR 242.610(d). \25\ See CHX Article 1, Rule 2(b)(1)(C)(i). \26\ See 17 CFR 242.201. \27\ See CHX Article 1, Rule 2(b)(1)(C)(ii). \28\ See CHX Article 1, Rule 2(b)(1)(C). \29\ See CHX Article 1, Rule 2(c)(2). Price slid undisplayed CHX Only orders (i.e., CHX Only orders marked Do Not Display) would only be executable at the locking price and not displayable at any price. \30\ See CHX Article 1, Rule 2(b)(1)(C). \31\ See CHX Article 1, Rule 2(b)(1)(D). --------------------------------------------------------------------------- Assuming no changes to the CHX Only modifier, the Trade-at Prohibition would result in CHX Only price slid orders in Test Group 3 securities to only be executable at the locking price pursuant to an exception or exemption to the Trade-at Prohibition. In order to avoid the order cancellations that could result from CHX Only price slid orders being ranked at the locking price, the Exchange now proposes to adopt proposed paragraph (c)(1) to adopt a modification to the current CHX Only Price Sliding processes for Test Group Three securities (``Trade-at price sliding'') which provides as follows: In Test Group Three, an incoming CHX Only buy order priced at or through the current NBO shall be price slid to be executable and displayable at one minimum price variation below the current NBO and an incoming CHX Only sell order priced at or through the current NBB shall be price slid to be executable and displayable at one minimum price variation above the current NBB. Thereafter, in Test Group Three, a price slid CHX Only order shall continue to be price slid and executable at its displayed price pursuant to Article 1, Rule 2(b)(1)(C)(i)(b) or Rule 2(b)(1)(C)(ii)(b), as applicable. The result of Trade-at price sliding is that the executable and displayable price of a CHX Only order that is price slid upon initial receipt and continually thereafter will always be the same.\32\ CHX Only orders in non-Test Group Three securities that would lock or cross a protected quotation of an external market in violation of Rule 610(d) would continue to be repriced pursuant to Article 1, Rule 2(b)(1)(C), as described above. --------------------------------------------------------------------------- \32\ CHX Only sell orders subject to Short Sale Price Sliding are similarly repriced to one minimum price variation above the current NBB. See CHX Article 1, Rule 2(b)(1)(C)(ii). --------------------------------------------------------------------------- Cross Orders \33\ --------------------------------------------------------------------------- \33\ See CHX Article 1, Rule 2(a)(2) defining ``cross order.'' --------------------------------------------------------------------------- The Exchange proposes the following amendments regarding the operation of cross orders in certain Pilot Securities. Block Size Exception for Cross Orders Only Section VI(D)(2) of the Plan provides that trading centers will be permitted to execute Block Size \34\ orders for a Pilot Security at a price equal to a protected bid or protected offer (``Block Size exception''). The Exchange now proposes to adopt paragraph (c)(2), which provides that only cross orders received by the Matching System shall be eligible for the Block Size exception to the Trade-at Prohibition.\35\ Thus, limit \36\ and market \37\ orders for Test Group Three securities shall not be eligible for the Block Size exception at CHX. In the event the Exchange receives a limit or market order of Block Size that is subject to the Trade-at Prohibition, the Exchange will either (1) price slide the order if it is marked CHX Only, as described above, or (2) cancel the order. --------------------------------------------------------------------------- \34\ ``Block Size'' is defined in the Plan as an order (1) of at least 5,000 shares or (2) with a market value of at least $100,000. \35\ Given that cross orders are always handled IOC, cross orders can never be routed away and can never be ranked on the CHX book. Moreover, cross orders can only execute as a clean cross and cannot execute against resting orders on the CHX book. See id. \36\ See CHX Article 1, Rule 2(a)(1) defining ``limit orders.'' \37\ See CHX Article 1, Rule 2(a)(3) defining ``market orders.'' --------------------------------------------------------------------------- Cross Order Exemption From Minimum Increment Requirement Section VI(B) of the Plan prohibits the Exchange from, among other things, accepting orders in any Pilot Security in Test Group One in price increments other than $0.05 (``$0.05 minimum order increment requirement''); provided that orders priced to execute at the midpoint and orders entered in a Plan Participant-operated retail liquidity program may be ranked and accepted in increments of less than $0.05. The $0.05 minimum order increment requirement and related exceptions also apply to Pilot Securities in Test Group Two and Test Group Three.\38\ --------------------------------------------------------------------------- \38\ Section VI(C) of the Plan provides that Pilot Securities in Test Group Two will be subject to the same quoting requirements as Test Group One. Moreover, Section VI(D) of the Plan provides that Pilot Securities in Test Group Three will be subject to the same quoting and trading requirements as Test Group Two, along with the applicable quoting and trading exceptions. --------------------------------------------------------------------------- [[Page 69891]] Following the adoption of Rule 612 of Regulation NMS,\39\ the Commission granted the national securities exchanges a limited exemption from Rule 612 to permit the exchanges to accept cross orders priced in sub-penny increments if (1) the orders are immediately executed against each other and (2) the cross transaction is effected in accordance with exchange rules approved or established pursuant to Section 19(b) of the Exchange Act \40\ (``cross order exemption'').\41\ This exception is not set forth in the Plan, and thus does not currently apply to cross orders for securities in the Test Groups (``Test Groups securities''). The Exchange has determined that it is appropriate to incorporate the cross order exemption to the $0.05 minimum order increment requirement, as this exemption is equally applicable to cross orders for Test Groups securities. Accordingly, the Exchange is proposing to adopt CHX Article 20, Rule 13(c)(4), which provides as follows: --------------------------------------------------------------------------- \39\ 17 CFR 242.612. \40\ 15 U.S.C. 78s(b)(1). \41\ Currently, the Exchange permits any type of cross order in any security, whether the order is priced less than or at or above $1.00, to be submitted in an increment as small as $0.000001. See CHX Article 20, Rule 4(a)(7)(B). This rule is based on exemptive relief from Rule 612 granted by the Commission to the national securities exchanges in 2006. See Securities Exchange Act Release No. 54714 (November 6, 2006), 71 FR 66352 (November 14, 2006) (``Rule 612 Exemptive Relief Order''). In Test Group One, the Exchange shall accept cross orders in increments less than $0.05, subject to Article 20, Rule 4(a)(7)(B).\42\ In Test Groups Two and Three, the Exchange shall accept cross orders in increments less than $0.05 only if the cross orders would qualify as Negotiated Trades, subject to Article 20, --------------------------------------------------------------------------- Rule 4(a)(7)(B). \42\ See id. --------------------------------------------------------------------------- In connection with this proposed amendment, the Exchange is seeking exemptive relief from complying with the $0.05 minimum order increment requirement as currently set forth in the Plan, which does not contain this exception.43 44 --------------------------------------------------------------------------- \43\ See supra note 21. \44\ The Exchange notes that cross orders in Test Group Two and Three securities would continue to be subject to the $0.05 minimum trading increment requirement set forth under Section VI(C) of the Plan. --------------------------------------------------------------------------- Special Handling of Certain Intermarket Sweep Orders (``ISOs'') \45\ --------------------------------------------------------------------------- \45\ See 17 CFR 242.600(b)(30); see also CHX Article 1, Rule 2(b)(3)(B) defining ``ISO.'' The Exchange recently amended the operation of the Exchange's various ISO modifiers and thus changes to CHX Article 1, Rule 2(b)(3)(B) are currently effective, but not yet operative. See Securities Exchange Act Release No. 78684 (August 25, 2016), 81 FR 60034 (August 31, 2016) (SR-CHX-2016-15). Changes effected pursuant to SR-CHX-2016-15 will be operative upon, or prior to, the commencement of the Pilot Period. --------------------------------------------------------------------------- The Exchange proposes to clarify how it will handle certain ISOs received by the Exchange in Test Group Three securities. Specifically, in Test Group Three, the Exchange proposes to handle an ISO with a Time-In-Force of Day \46\ or GTD \47\ (``Day ISO'') as a Trade-at ISO,\48\ as an order sender that submits a Day ISO to the Exchange would be representing that it has swept protected quotations priced better than or equal to the limit price of the Day ISO,\49\ which would be the same representation made by an order sender submitting a Trade- at ISO to the Exchange.\50\ However, an ISO with a Time-In-Force of IOC \51\ (``IOC ISO'') would not be handled as a Trade-at ISO (i.e., the Exchange will not ignore protected quotations priced at the limit price of the IOC ISO when processing the IOC ISO), as the sender of an IOC ISO would only be representing that it has swept protected quotations priced better than the limit price of the IOC ISO. --------------------------------------------------------------------------- \46\ See CHX Article 1, Rule 2(d)(1) defining ``Day.'' \47\ See CHX Article 1, Rule 2(d)(3) defining ``GTD.'' \48\ CHX Article 20, Rule 13(a)(7)(A)(i) defines ``Trade-at Intermarket Sweep Order'' as follows: (i) '' Trade-at Intermarket Sweep Order'' means a limit order for a Pilot Security that meets the following requirements: (1) When routed to a Trading Center, the limit order is identified as a Trade-at Intermarket Sweep Order; and (2) Simultaneously with the routing of the limit order identified as a Trade-at Intermarket Sweep Order, one or more additional limit orders, as necessary, are routed to execute against the full size of any Protected Bid, in the case of a limit order to sell, or the full displayed size of any Protected Offer, in the case of a limit order to buy, for the Pilot Security with a price that is better than or equal to the limit price of the limit order identified as a Trade-at Intermarket Sweep Order. These additional routed orders also must be marked as Trade- at Intermarket Sweep Orders. \49\ See CHX Article 20, Rule 6(c)(3); see also Question 5.02 of ``Division of Trading and Markets: Responses to Frequency Asked Questions Concerning Rule 611 and Rule 610 of Regulation NMS.'' U.S. Securities and Exchange Commission, 4 April 2008. Web. 21 May 2015. http://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm \50\ See id.; see also CHX Article 20, Rule 6(c)(3). \51\ See CHX Article 1, Rule 2 (d)(4) defining ``IOC.'' --------------------------------------------------------------------------- Thus, proposed paragraph (c)(3) provides that in Test Group Three, an Intermarket Sweep Order with a Time-In-Force of Day or GTD shall be treated as a Trade-at Intermarket Sweep Order. Moreover, as the Trade- at Prohibition does not apply to non-Test Group Three securities, proposed paragraph (c)(3) also provides that in non-Test Group Three securities, a Trade-at Intermarket Sweep Order shall be treated as an Intermarket Sweep Order. Proposed CHX Routing Services Changes Currently, the Exchange routes away Routable Orders \52\ received by the Exchange that trigger a Routing Event, which are listed and described under Article 19, Rule 3(a). For example, Article 19, Rule 3(a)(1) (``Routing Event #1'') provides that the Exchange will route away orders to the extent necessary to permit the display and/or execution of an incoming Routable Order on the Exchange in compliance with Rules 610(d) and 611. --------------------------------------------------------------------------- \52\ See CHX Article 1, Rule 1(oo) defining ``Routable Order.'' --------------------------------------------------------------------------- In light of the Trade-at Prohibition, the Exchange proposes to amend Article 19, Rule 3(a)(1) to provide that that the Exchange will route away orders to the extent necessary to permit the display and/or execution of an incoming Routable Order on the Exchange in compliance with Rules 610(d) and 611 and, for the duration of the pilot period to coincide with the pilot period for the Plan, the Trade-at Prohibition described under the Plan. The Exchange will continue to route orders pursuant to amended Routing Event #1 as IOC ISOs. For example, assume that the NBBO for security XYZ, a Test Group Three security, is 20.00--20.05. Assume that the CHX has one undisplayed buy order for 100 shares of security XYZ priced at 20.00. Assume that two away markets are displaying protected bids for security XYZ at the NBB, each for 100 shares. Assume then that the Exchange receives a Routable Order to sell 300 shares of security XYZ at 20.00/ share. Pursuant to amended Routing Event #1, the Exchange would route away two IOC ISOs, each for 100 shares of security XYZ priced at 20.00, to satisfy the full displayed size of the two protected bids at the NBB. The Exchange would then fully execute the remaining 100 shares of the incoming sell order against the resting undisplayed order at 20.00/ share. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act \53\ in general, and furthers the objectives of Section 6(b)(5) of the Act \54\ [[Page 69892]] in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \53\ 15 U.S.C. 78f(b). \54\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that this proposal is consistent with the Act because it implements, interprets, and clarifies the provisions of the Plan and CHX Rules, and is designed to assist the Exchange and CHX Participants in meeting 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. To the extent that this proposal implements, interprets, and clarifies the Plan and applies specific requirements to CHX Participants, 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. B. Self-Regulatory Organization's Statement of Burden on Competition 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. 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 the quoting and trading requirements of the Plan will apply equally to all CHX Participants that trade Pilot Securities. C. Self-Regulatory Organization's Statement on Comments Regarding the Proposed Rule Changes Received From Members, Participants or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Changes and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) \55\ of the Act and Rule 19b-4(f)(6) \56\ 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. --------------------------------------------------------------------------- \55\ 15 U.S.C. 78s(b)(3)(A). \56\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \57\ normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\58\ 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 September 30, 2016. --------------------------------------------------------------------------- \57\ 17 CFR 240.19b-4(f)(6). \58\ 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.\59\ --------------------------------------------------------------------------- \59\ 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). --------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal 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 No. SR-CHX-2016-19 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File No. SR-CHX-2016-19. 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 changes between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the CHX. 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 No. SR-CHX-2016-19 and should be submitted on or before October 28, 2016. --------------------------------------------------------------------------- \60\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\60\ Robert W. Errett, Deputy Secretary. [FR Doc. 2016-24281 Filed 10-6-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 195 / Friday, October 7, 2016 / Notices 69889
participation is on a basis different from The text of this proposed rule change approved by the Commission, as
or less advantageous than that of the is available on the Exchange’s Web site modified, on May 6, 2015.12
other participants. at (www.chx.com) and in the The Plan is designed to allow the
For the Commission, by the Division of Commission’s Public Reference Room. Commission, market participants, and
Investment Management, under delegated the public to study and assess the
II. Self-Regulatory Organization’s impact of increment conventions on the
authority.
Statement of the Purpose of, and liquidity and trading of the common
Robert W. Errett,
Statutory Basis for, the Proposed Rule stocks of small-capitalization
Deputy Secretary. Change companies. Each Plan Participant is
[FR Doc. 2016–24286 Filed 10–6–16; 8:45 am]
required to comply with, and to enforce
BILLING CODE 8011–01–P In its filing with the Commission, the compliance by its member
CHX included statements concerning organizations, as applicable, with the
the purpose of and basis for the provisions of the Plan.
SECURITIES AND EXCHANGE proposed rule changes and discussed The Pilot will include stocks of
COMMISSION any comments it received on the companies with $3 billion or less in
proposed rule change. The text of these market capitalization, an average daily
[Release No. 34–79027; File No. SR–CHX– statements may be examined at the
2016–19]
trading volume of one million shares or
places specified in Item IV below. The less, and a volume weighted average
Self Regulatory Organizations; CHX has prepared summaries, set forth price of at least $2.00 for every trading
Chicago Stock Exchange, Inc.; Notice in sections A, B and C below, of the day. The Pilot will consist of a control
of Filing and Immediate Effectiveness most significant aspects of such group of approximately 1400 Pilot
of a Proposed Rule Change To Amend statements. Securities and three test groups (‘‘Test
Rules To Describe Changes Necessary Groups’’) with 400 Pilot Securities in
A. Self-Regulatory Organization’s each selected by a stratified sampling.13
To Implement the Tick Size Pilot Statement of the Purpose of, and
Program During the Pilot, Pilot Securities in the
Statutory Basis for, the Proposed Rule control group will be quoted and traded
October 3, 2016. Changes at the currently permissible increments.
Pursuant to Section 19(b)(1) of the 1. Purpose Pilot Securities in the first test group
Securities Exchange Act of 1934 (‘‘Test Group One’’) will be quoted in
(‘‘Act’’),1 and Rule 19b–4 2 thereunder, On August 25, 2014, NYSE Group, $0.05 minimum increments but will
notice is hereby given that on Inc., on behalf of the Exchange, Bats continue to trade at any price increment
September 30, 2016, the Chicago Stock BZX Exchange, Inc. f/k/a BATS Z- that is currently permitted.14 Pilot
Exchange, Inc. (‘‘CHX’’ or the Exchange, Inc., Bats BYX Exchange, Inc. Securities in the second test group
‘‘Exchange’’) filed with the Securities f/k/a BATS Y-Exchange, Inc., Bats (‘‘Test Group Two’’) will be quoted in
and Exchange Commission EDGA Exchange, Inc. f/k/a EDGA $0.05 minimum increments and will
(‘‘Commission’’) the proposed rule Exchange, Inc., Bats EDGX Exchange, trade at $0.05 minimum increments
change as described in Items I and II Inc. f/k/a EDGX Exchange, Inc., subject to a midpoint exception, a retail
below, which Items have been prepared Financial Industry Regulatory investor order exception, and a
by the Exchange. The Commission is Authority, Inc. (‘‘FINRA’’), NASDAQ negotiated trade exception.15 Pilot
publishing this notice to solicit OMX BX, Inc., NASDAQ OMX PHLX Securities in the third test group (‘‘Test
comments on the proposed rule change LLC, the Nasdaq Stock Market LLC, Group Three’’) will be subject to the
from interested persons. New York Stock Exchange LLC same restrictions as Test Group Two
(‘‘NYSE’’), NYSE MKT LLC, and NYSE and also will be subject to the ‘‘trade-at’’
I. Self-Regulatory Organization’s requirement to prevent price matching
Statement of the Terms of Substance of Arca, Inc. (collectively ‘‘Plan
Participants’’),6 filed with the by a market participant that is not
the Proposed Rule Change displaying at a price of a trading
Commission, pursuant to Section 11A of
CHX proposes to amend the Rules of the Act 7 and Rule 608 of Regulation center’s 16 best protected bid or best
the Exchange (‘‘CHX Rules’’) to describe NMS 8 thereunder, the Plan.9 The Plan protected offer (‘‘Trade-at Prohibition’’),
changes to CHX Matching System 3 Participants filed the Plan to comply unless an enumerated exception
functionality necessary to implement with an order issued by the Commission applies.17 In addition to the exceptions
the quoting and trading provisions of on June 24, 2014.10 The Plan 11 was provided under Test Group Two, an
the Regulation NMS Plan to Implement published for comment in the Federal exception for Block Size orders and
a Tick Size Pilot Program (‘‘Plan’’ or exceptions that mirror those under Rule
Register on November 7, 2014, and
‘‘Pilot’’).4
12 See Securities Exchange Act Release No. 74892
The Exchange has designated this 6A ‘‘Participant’’ is a ‘‘member’’ of the Exchange (May 6, 2015), 80 FR 27514 (May 13, 2015)
proposal as ‘‘non-controversial’’ and for purposes of the Act. See CHX Article 1, Rule (‘‘Approval Order’’).
provided the Commission with the 1(s). For clarity, the Exchange proposes to utilize 13 See Section V of the Plan for identification of
notice required by Rule 19b–4(f)(6)(iii) the term ‘‘CHX Participant’’ when referring to Pilot Securities, including criteria for selection and
members of the Exchange and the term ‘‘Plan grouping.
under the Act.5 Participant’’ when referring to Participants of the 14 See Section VI(B) of the Plan.
Plan. 15 See Section VI(C) of the Plan.
1 15 U.S.C. 78s(b)(1). 7 15 U.S.C. 78k–1.
16 The Plan incorporates the definition of ‘‘trading
mstockstill on DSK3G9T082PROD with NOTICES
2 17 CFR 240.19b–4. 8 17 CFR 242.608.
center’’ from Rule 600(b)(78) of Regulation NMS.
3 The Matching System is an automated order 9 See Letter from Brendon J. Weiss, Vice
Regulation NMS defines a ‘‘trading center’’ as ‘‘a
execution system, which is a part of the Exchange’s President, Intercontinental Exchange, Inc., to national securities exchange or national securities
‘‘Trading Facilities,’’ as defined under CHX Article Secretary, Commission, dated August 25, 2014. association that operates an SRO trading facility, an
1, Rule 1(z). 10 See Securities Exchange Act Release No. 72460 alternative trading system, an exchange market
4 See Securities Exchange Act Release No. 74892 (June 24, 2014), 79 FR 36840 (June 30, 2014). maker, an OTC market maker, or any other broker
(May 6, 2015), 80 FR 27513 (May 13, 2015) 11 Unless otherwise specified, capitalized terms or dealer that executes orders internally by trading
(‘‘Approval Order’’). used in this rule filing are defined as set forth in as principal or crossing orders as agent.’’
5 17 CFR 240.19b–4(f)(6)(iii). the Plan. 17 See Section VI(D) of the Plan.
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![69892 Federal Register / Vol. 81, No. 195 / Friday, October 7, 2016 / Notices
in particular, in that it is designed to proposal does not: (i) Significantly affect All submissions should refer to File No.
promote just and equitable principles of the protection of investors or the public SR–CHX–2016–19. This file number
trade, to foster cooperation and interest; (ii) impose any significant should be included on the subject line
coordination with persons engaged in burden on competition; and (iii) by its if email is used. To help the
facilitating transactions in securities, to terms, become operative for 30 days Commission process and review your
remove impediments to and perfect the from the date on which it was filed, or comments more efficiently, please use
mechanism of a free and open market such shorter time as the Commission only one method. The Commission will
and a national market system and, in may designate if consistent with the post all comments on the Commission’s
general, to protect investors and the protection of investors and the public Internet Web site (http://www.sec.gov/
public interest. interest. rules/sro.shtml). Copies of the
The Exchange believes that this A proposed rule change filed under submission, all subsequent
proposal is consistent with the Act Rule 19b–4(f)(6) 57 normally does not amendments, all written statements
because it implements, interprets, and become operative prior to 30 days after with respect to the proposed rule
clarifies the provisions of the Plan and the date of the filing. However, pursuant change that are filed with the
CHX Rules, and is designed to assist the to Rule 19b–4(f)(6)(iii),58 the Commission, and all written
Exchange and CHX Participants in Commission may designate a shorter communications relating to the
meeting regulatory obligations pursuant time if such action is consistent with the proposed rule changes between the
to the Plan. In approving the Plan, the protection of investors and the public Commission and any person, other than
SEC noted that the Pilot was an interest. The Exchange has asked the those that may be withheld from the
appropriate, data-driven test that was Commission to waive the 30-day public in accordance with the
designed to evaluate the impact of a operative delay so that so that the provisions of 5 U.S.C. 552, will be
wider tick size on trading, liquidity, and proposed rule change can become available for Web site viewing and
the market quality of securities of operative on September 30, 2016. printing in the Commission’s Public
smaller capitalization companies, and The Commission believes that Reference Room, 100 F Street NE.,
was therefore in furtherance of the waiving the 30-day operative delay is Washington, DC 20549 on official
purposes of the Act. To the extent that consistent with the protection of business days between the hours of
this proposal implements, interprets, investors and the public interest 10:00 a.m. and 3:00 p.m. Copies of the
and clarifies the Plan and applies because it will allow the Exchange to filing also will be available for
specific requirements to CHX implement the proposed rules inspection and copying at the principal
Participants, the Exchange believes that immediately thereby preventing delays office of the CHX. All comments
this proposal is in furtherance of the in the implementation of the Plan. The received will be posted without change;
objectives of the Plan, as identified by Commission notes that the Plan is the Commission does not edit personal
the SEC, and is therefore consistent with scheduled to start on October 3, 2016. identifying information from
the Act. Therefore, the Commission hereby submissions. You should submit only
B. Self-Regulatory Organization’s waives the 30-day operative delay and information that you wish to make
Statement of Burden on Competition designates the proposed rule change to available publicly. All submissions
be operative upon filing with the should refer to File No. SR–CHX–2016–
The Exchange does not believe that Commission.59 19 and should be submitted on or before
the proposed rule change will result in October 28, 2016.
any burden on competition that is not IV. Solicitation of Comments
For the Commission, by the Division of
necessary or appropriate in furtherance Interested persons are invited to Trading and Markets, pursuant to delegated
of the purposes of the Act. The submit written data, views and authority.60
Exchange notes that the proposed rule arguments concerning the foregoing, Robert W. Errett,
change implements the provisions of the including whether the proposal is Deputy Secretary.
Plan, and is designed to assist the consistent with the Act. Comments may
Exchange in meeting its regulatory [FR Doc. 2016–24281 Filed 10–6–16; 8:45 am]
be submitted by any of the following
obligations pursuant to the Plan. The methods:
BILLING CODE 8011–01–P
Exchange also notes that the quoting
and trading requirements of the Plan Electronic Comments
will apply equally to all CHX SECURITIES AND EXCHANGE
• Use the Commission’s Internet COMMISSION
Participants that trade Pilot Securities. comment form (http://www.sec.gov/
C. Self-Regulatory Organization’s rules/sro.shtml); or [Release No. 34–79024; File No. SR–Phlx–
• Send an email to rule-comments@ 2016–79]
Statement on Comments Regarding the
Proposed Rule Changes Received From sec.gov. Please include File No. SR– Self-Regulatory Organizations;
Members, Participants or Others CHX–2016–19 on the subject line. NASDAQ PHLX LLC; Notice of
No written comments were either Paper Comments Designation of a Longer Period for
solicited or received. Commission Action on a Proposed
• Send paper comments in triplicate
Rule Change To Amend Rule 1017,
III. Date of Effectiveness of the to Brent J. Fields, Secretary, Securities
Openings in Options
Proposed Rule Changes and Timing for and Exchange Commission, 100 F Street
Commission Action NE., Washington, DC 20549–1090. October 3, 2016.
mstockstill on DSK3G9T082PROD with NOTICES
The foregoing rule change has become On August 4, 2016, NASDAQ PHLX
effective pursuant to Section 57 17 CFR 240.19b–4(f)(6). LLC (‘‘Exchange’’) filed with the
58 17 CFR 240.19b–4(f)(6)(iii).
19(b)(3)(A) 55 of the Act and Rule 19b– Securities and Exchange Commission
59 For purposes only of waiving the operative
4(f)(6) 56 thereunder because the (‘‘Commission’’), pursuant to Section
delay for this proposal, the Commission has
considered the proposed rule’s impact on 19(b)(1) of the Securities Exchange Act
55 15 U.S.C. 78s(b)(3)(A). efficiency, competition, and capital formation. See
56 17 CFR 240.19b–4(f)(6). 15 U.S.C. 78c(f). 60 17 CFR 200.30–3(a)(12).
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Document Created: 2018-02-13 16:31:39
Document Modified: 2018-02-13 16:31:39
| 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 69889 |
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