81 FR 81184 - Self-Regulatory Organizations; NASDAQ BX, Inc.; The Nasdaq Stock Market LLC; Order Approving Proposed Rule Changes, as Modified by Amendments No. 1, Relating to Post-Only Orders and Orders With Midpoint Pegging
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 222 (November 17, 2016)
Federal Register Volume 81, Issue 222 (November 17, 2016)
| Page Range | 81184-81186 | |
| FR Document | 2016-27600 |
[Federal Register Volume 81, Number 222 (Thursday, November 17, 2016)] [Notices] [Pages 81184-81186] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-27600] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79290; File Nos. SR-BX-2016-046; SR-NASDAQ-2016-111] Self-Regulatory Organizations; NASDAQ BX, Inc.; The Nasdaq Stock Market LLC; Order Approving Proposed Rule Changes, as Modified by Amendments No. 1, Relating to Post-Only Orders and Orders With Midpoint Pegging November 10, 2016. I. Introduction On September 13, 2016, NASDAQ BX, Inc. (``BX'') and The Nasdaq Stock Market LLC (``Nasdaq'') (individually, an ``Exchange,'' and together, the ``Exchanges'') 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\ proposed rule changes relating to Post-Only Orders and Orders with Midpoint Pegging. The proposed rule changes were published for comment in the Federal Register on September 28, 2016.\3\ On October 5, 2016, Nasdaq filed Amendment No. 1 to its proposed rule change (``Nasdaq Amendment No. 1'') and on November 3, 2016, BX filed Amendment No. 1 to its proposed rule change (``BX Amendment No. 1'').\4\ The Commission received one comment letter on Nasdaq's proposed rule change \5\ and a response letter from Nasdaq.\6\ The Commission is approving the Exchanges' proposals, as modified by their corresponding Amendment No. 1. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release Nos. 78909 (September 22, 2016), 81 FR 66708 (``BX Notice'') and 78908 (September 22, 2016), 81 FR 66702 (``Nasdaq Notice''). \4\ In their respective Amendment No. 1, BX and Nasdaq modified the discussion of their respective proposal to reflect that, pursuant to proposed BX and Nasdaq Rules 4702(b)(4)(A), if the adjusted price of a Post-Only Order would lock or cross a non- displayed price on the respective Exchange's Book, the Post-Only Order would be posted in the same manner as a Price to Comply Order. BX Amendment No. 1 is available at: https://www.sec.gov/comments/sr-bx-2016-046/bx2016046-1.pdf and Nasdaq Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nasdaq-2016-111/nasdaq2016111-1.pdf. Because these amendments are technical in nature and do not materially alter the substance of the proposed rule changes, they are not subject to notice and comment. \5\ See Letter from Joseph Saluzzi and Sal Arnuk, Partners, Themis Trading LLC, to Brent J. Fields, Secretary, Commission, dated October 10, 2016 (``Themis Letter''). \6\ See Letter from Jeffrey S. Davis, Vice President and Deputy General Counsel, The NASDAQ Stock Market LLC, to Brent J. Fields, Secretary, Commission, dated November 8, 2016 (``Response Letter''). --------------------------------------------------------------------------- II. Description of the Proposed Rule Changes The Exchanges are proposing to amend the behavior of Post-Only Orders when they interact with resting Non-Displayed Orders, and the behavior of Orders with Midpoint Pegging in a crossed market. The Exchanges' proposals are substantively identical in many respects. Therefore, the description below describes the proposals jointly but notes material differences where applicable.\7\ --------------------------------------------------------------------------- \7\ For more details regarding the Exchanges' proposals, see Nasdaq Notice and BX Notice, supra note 3. --------------------------------------------------------------------------- Currently, BX and Nasdaq Rules 4702(b)(4)(A) provide that, if the adjusted price \8\ of a Post-Only Order would lock or cross an Order on the respective Exchange's Book, the Post-Only Order would be repriced, ranked, and displayed at one minimum price increment below the current best-priced Order to sell on the respective Exchange's Book (for bids) or above the current best-priced Order to buy on the respective Exchange's Book (for offers). Under the proposals,\9\ if the adjusted price of the Post-Only Order would lock or cross a non-displayed price on the respective Exchange's Book, the Post-Only order would be posted in the same manner as a Price to Comply Order.\10\ However, the Post Only Order would execute: --------------------------------------------------------------------------- \8\ According to BX and Nasdaq Rules 4702(b)(4)(A), if a Post- Only Order would lock or cross a Protected Quotation, the price of the Order would first be adjusted. If the Order is Attributable, its adjusted price would be one minimum price increment lower than the current Best Offer (for bids) or higher than the current Best Bid (for offers). If the Order is not Attributable, its adjusted price would be equal to the current Best Offer (for bids) or the current Best Bid (for offers). However, the Order would not post or execute until the Order, as adjusted, is evaluated with respect to Orders on the respective Exchange's Book. \9\ The Exchanges are also proposing conforming changes throughout BX and Nasdaq Rules 4702(b)(4)(A) to reflect this change. \10\ According to BX and Nasdaq Rules 4702(b)(1)(A), if the entered limit price of a Price to Comply Order would lock or cross a Protected Quotation and the Price to Comply Order could not execute against an Order on the respective Exchange's Book at a price equal to or better than the price of the Protected Quotation, the Price to Comply Order will be displayed on the respective Exchange's Book at a price one minimum price increment lower than the current Best Offer (for a Price to Comply Order to buy) or higher than the current Best Bid (for a Price to Comply Order to sell), but will also be ranked on the respective Exchange's Book with a non- displayed price equal to the current Best Offer (for a Price to Comply Order to buy) or the current Best Bid (for a Price to Comply Order to sell). ---------------------------------------------------------------------------On Nasdaq if (i) it is priced below $1.00 and the value of price improvement associated with executing against an Order on the Nasdaq Book (as measured against the original limit price of the Order) equals or exceeds the sum of fees changed for such execution and the value of any rebate that would be provided if the Order posted to the Nasdaq Book and subsequently provided liquidity, or (ii) it is priced at $1.00 or more and the value of price improvement associated with executing against an Order on the Nasdaq Book (as measured against the original limit price of the Order) equals or exceeds $0.01 per share; \11\ and --------------------------------------------------------------------------- \11\ This behavior related to the execution of the Post-Only Order is not changed by Nasdaq's proposal. --------------------------------------------------------------------------- on BX, if (i) it is priced at $1.00 or more,\12\ or (ii) it is priced below $1.00 and the value of price improvement associated with executing against an Order on the Exchange Book (as measured against the original limit price of the Order) equals or exceeds the sum of fees charged for such execution and the value of any rebate that would be provided if the Order posted to the Exchange Book and subsequently provided liquidity.\13\ --------------------------------------------------------------------------- \12\ On BX, unlike on Nasdaq, executions in securities priced at or above $1 result in rebates for the accessor of liquidity and as such it is always in the best interest of the incoming Post-Only Order to execute in securities at or above $1. \13\ This behavior related to the execution of the Post-Only Order is not changed by BX's proposal. --------------------------------------------------------------------------- Currently, BX and Nasdaq Rules 4702(b)(4)(A) also provide that, if the Post-Only Order would not lock or cross a Protected Quotation but would lock or cross an Order on the respective Exchange's Book, the Post Only Order [[Page 81185]] would be repriced, ranked, and displayed at one minimum price increment below the current best-priced Order to sell on the respective Exchange's Book (for bids) or above the current best-priced Order to buy on the respective Exchange's Book (for offers). Under the proposals,\14\ if the Post-Only Order would not lock or cross a Protected Quotation but would lock or cross a Non-Displayed Order on the respective Exchange's Book, the Post-Only Order would be posted, ranked, and displayed at its limit price.\15\ However, the Post Only Order would execute: --------------------------------------------------------------------------- \14\ The Exchanges are also proposing conforming changes throughout BX and Nasdaq Rules 4702(b)(4)(A) to reflect this change. \15\ One effect of this proposal is that, when a Post-Only Order encounters a Non-Displayed Order that is a Midpoint Peg Order and posts at its limit price, the Post-Only Order would establish a new NBBO and the Midpoint Peg Order would either be cancelled or re- adjusted based on the change to the NBBO. --------------------------------------------------------------------------- On Nasdaq if (i) it is priced below $1.00 and the value of price improvement associated with executing against an Order on the Nasdaq Book equals or exceeds the sum of fees charged for such execution and the value of any rebate that would be provided if the Order posted to the Nasdaq Book and subsequently provided liquidity, or (ii) it is priced at $1.00 or more and the value of price improvement associated with executing against an Order on the Nasdaq Book equals or exceeds $0.01 per share; \16\ and --------------------------------------------------------------------------- \16\ This behavior related to the execution of the Post-Only Order is not changed by Nasdaq's proposal. --------------------------------------------------------------------------- on BX, if (i) it is priced at $1.00 or more,\17\ or (ii) it is priced below $1.00 and the value of price improvement associated with executing against an Order on the Exchange Book equals or exceeds the sum of fees charged for such execution and the value of any rebate that would be provided if the Order posted to the Exchange Book and subsequently provided liquidity.\18\ --------------------------------------------------------------------------- \17\ On BX, unlike on Nasdaq, executions in securities priced at or above $1 result in rebates for the accessor of liquidity and as such it is always in the best interest of the incoming Post-Only Order to execute in securities at or above $1. \18\ This behavior related to the execution of the Post-Only Order is not changed by BX's proposal. --------------------------------------------------------------------------- Currently, Nasdaq Rule 4702(b)(5)(A) provides that, if the NBBO is crossed, a Midpoint Peg Post-Only Order \19\ would nevertheless be priced at the midpoint between the NBBO. Currently, BX and Nasdaq Rules 4703(d) provide that, in the case of an Order with Midpoint Pegging,\20\ if the Inside Bid and Inside Offer are crossed, the Order would nevertheless be priced at the midpoint between the Inside Bid and the Inside Offer. Moreover, even if the Inside Bid and Inside Offer are crossed, an Order with Midpoint Pegging that crossed an Order on the respective Exchange's Book would execute. Under the proposed amendments to Nasdaq Rule 4702(b)(5)(A), if the NBBO is crossed, any existing Midpoint Peg Post-Only Order would be cancelled and any new Midpoint Peg Post-Only Order would be rejected. Similarly, under the proposed amendments to BX and Nasdaq Rules 4703(d), if the Inside Bid and Inside Offer are crossed, any existing Order with Midpoint Pegging would be rejected and any new Order with Midpoint Pegging would be cancelled. --------------------------------------------------------------------------- \19\ According to Nasdaq Rule 4702(b)(5)(A), a Midpoint Peg Post-Only Order is an Order Type with a Non-Display Order Attribute that is priced at the midpoint between the NBBO and that would execute upon entry only in circumstances where economically beneficial to the party entering the Order. \20\ According to BX and Nasdaq Rules 4703(d), Midpoint Pegging means Pegging with reference to the midpoint between the Inside Bid and the Inside Offer. The price to which an Order is pegged is referred to as the Inside Quotation, Inside Bid, or Inside Offer, as appropriate. --------------------------------------------------------------------------- III. Summary of Comments and Response to Comments The Commission received a comment letter opposing Nasdaq's proposal and a response letter from Nasdaq.\21\ --------------------------------------------------------------------------- \21\ See supra notes 5 and 6. --------------------------------------------------------------------------- Regarding Nasdaq's proposal, the commenter specifically questions whether allowing Post-Only Orders to lock Non-Displayed Orders would help or enhance price discovery.\22\ The commenter also questions whether allowing this locking behavior would undermine investors' reliance on the public market of bids, offers, and trades to reflect the true price of an asset.\23\ Moreover, the commenter questions the impact of this proposal on the ban against locked and crossed markets.\24\ Finally, the commenter questions whether allowing a non- displayed locked market would maintain fair and orderly efficient markets, facilitate capital formation, and protect and serve the interests of investors.\25\ --------------------------------------------------------------------------- \22\ See Themis Letter at 3. \23\ See id. \24\ See id. at 4. \25\ See id. This commenter also urges the Commission to eliminate all post-only order types. See id. at 1. The Commission notes that the comment urging the elimination of all post-only orders types is beyond the scope of the proposals. --------------------------------------------------------------------------- In response to these comments, Nasdaq states that its proposal to modify the processing of Post-Only Orders under a narrow set of conditions would ensure that the market operates as efficiently as possible, reduce information leakage, and improve execution quality.\26\ In addition, according to Nasdaq, posting Post-Only Orders at their limit price would result in tighter bid-ask spreads relative to the current re-pricing practice, and tighter spreads would reflect enhanced price discovery.\27\ Moreover, according to Nasdaq, many economists believe that a locked market is ``the truest reflection of the price of an asset.'' \28\ Therefore, Nasdaq believes that allowing buyers and sellers to reflect their true demand and supply prices, rather than re-pricing to an artificial price, would enhance investors' experience on Nasdaq.\29\ Nasdaq notes that the proposal does not permit a locked market as defined by Rule 610 of Regulation NMS, as Rule 610 defines a locked market as the display of bids and offers at the same price, while Nasdaq's proposal would involve only the display of a bid or an offer, but not both.\30\ Finally, Nasdaq states its belief that the proposal is consistent with maintaining fair and orderly markets, efficient capital formation, and the protection of investors.\31\ According to Nasdaq, the proposal would lead to tighter spreads, better execution prices, and lower information leakage for investors who currently quote and trade on Nasdaq.\32\ Nasdaq states that it anticipates that, as a result of the proposal, current members would quote and trade more actively and new members would commence quoting and trading, which would further enhance the quality of the Nasdaq market.\33\ --------------------------------------------------------------------------- \26\ See Response Letter at 1-2. \27\ See id. at 2. \28\ See id. at 3. \29\ See id. \30\ See id. \31\ See id. \32\ See id. \33\ See id. --------------------------------------------------------------------------- IV. Commission Findings After careful review, the Commission finds that the proposed rule changes, as modified by Amendments No. 1, are consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\34\ In particular, the Commission finds that the proposed rule changes, as modified by Amendments No. 1, are consistent with Section 6(b)(5) of the Act,\35\ which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to [[Page 81186]] 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. --------------------------------------------------------------------------- \34\ In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \35\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Commission notes that the Exchanges believe that the proposals related to the interaction between Post-Only Orders and Non-Displayed Orders would help to reduce the information leakage that can occur when a Post-Only Order re-prices to avoid locking or crossing the price of a Non-Displayed Order resting on the respective Exchange's book.\36\ Specifically, under the proposals, if a Post-Only Order would not lock or cross a Protected Quotation but would lock or cross a Non-Displayed Order on the respective Exchange's Book, the Post-Only Order would be posted, ranked, and displayed at its limit price, rather than be re- priced. In addition, if the adjusted price of a Post-Only Order would lock or cross a non-displayed price on the respective Exchange's Book, the Post-Only Order would be posted in the same manner as a Price to Comply Order (i.e., displayed at a price one minimum price increment lower than the current Best Offer (for a buy order) or higher than the current Best Bid (for a sell order); ranked with a non-displayed price equal to the current Best Offer (for a buy order) or the current Best Bid (for a sell order)). --------------------------------------------------------------------------- \36\ The Commission notes that, in conjunction with these proposals, the Exchanges are adopting the Trade Now instruction, which is an Order Attribute that would allow a resting Order that becomes locked by an incoming Displayed Order to execute against the available size of the contra-side locking Order as a liquidity taker. See Securities Exchange Act Release Nos. 79281 (November 10, 2016) (SR-BX-2016-059) and 79282 (November 10, 2016) (SR-NASDAQ- 2016-156). --------------------------------------------------------------------------- The Commission notes that the Exchanges' proposals to discontinue pricing and executing Midpoint Peg Post-Only Orders (Nasdaq only) and Orders with Midpoint Pegging when the NBBO is crossed would reflect that the midpoint of a crossed market is not a clear and accurate indication of a valid price and would avoid mispriced executions. The Commission also notes that this proposed behavior is similar to the rules of other exchanges.\37\ --------------------------------------------------------------------------- \37\ See, e.g., BatsBZX Rule 11.9(c)(9). --------------------------------------------------------------------------- Based on the foregoing and the Exchanges' representations, the Commission believes that the proposed rule changes, as modified by Amendments No. 1, are consistent with the Act. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\38\ that the proposed rule changes (SR-BX-2016-046 and SR-NASDAQ- 2016-111), as modified by their respective Amendment No. 1, be, and they hereby are, approved. --------------------------------------------------------------------------- \38\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\39\ --------------------------------------------------------------------------- \39\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-27600 Filed 11-16-16; 8:45 am] BILLING CODE 8011-01-P
![81184 Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices
Reference Room, 100 F Street NE., Amendment No. 1’’).4 The Commission Under the proposals,9 if the adjusted
Washington, DC 20549 on official received one comment letter on price of the Post-Only Order would lock
business days between the hours of Nasdaq’s proposed rule change 5 and a or cross a non-displayed price on the
10:00 a.m. and 3:00 p.m. Copies of such response letter from Nasdaq.6 The respective Exchange’s Book, the Post-
filing also will be available for Commission is approving the Only order would be posted in the same
inspection and copying at the principal Exchanges’ proposals, as modified by manner as a Price to Comply Order.10
office of the Exchange. All comments their corresponding Amendment No. 1. However, the Post Only Order would
received will be posted without change; execute:
the Commission does not edit personal II. Description of the Proposed Rule • On Nasdaq if (i) it is priced below
identifying information from Changes $1.00 and the value of price
submissions. You should submit only The Exchanges are proposing to improvement associated with executing
information that you wish to make amend the behavior of Post-Only Orders against an Order on the Nasdaq Book (as
available publicly. All submissions when they interact with resting Non- measured against the original limit price
should refer to File Number SR– Displayed Orders, and the behavior of of the Order) equals or exceeds the sum
NYSEArca–2016–144, and should be Orders with Midpoint Pegging in a of fees changed for such execution and
submitted on or before December 8, crossed market. The Exchanges’ the value of any rebate that would be
2016. proposals are substantively identical in provided if the Order posted to the
For the Commission, by the Division of many respects. Therefore, the Nasdaq Book and subsequently
Trading and Markets, pursuant to delegated description below describes the provided liquidity, or (ii) it is priced at
authority.10 proposals jointly but notes material $1.00 or more and the value of price
Brent J. Fields, differences where applicable.7 improvement associated with executing
Secretary. Currently, BX and Nasdaq Rules against an Order on the Nasdaq Book (as
[FR Doc. 2016–27602 Filed 11–16–16; 8:45 am] 4702(b)(4)(A) provide that, if the measured against the original limit price
BILLING CODE 8011–01–P
adjusted price 8 of a Post-Only Order of the Order) equals or exceeds $0.01
would lock or cross an Order on the per share; 11 and
respective Exchange’s Book, the Post- • on BX, if (i) it is priced at $1.00 or
SECURITIES AND EXCHANGE Only Order would be repriced, ranked, more,12 or (ii) it is priced below $1.00
COMMISSION and displayed at one minimum price and the value of price improvement
increment below the current best-priced associated with executing against an
[Release No. 34–79290; File Nos. SR–BX– Order on the Exchange Book (as
2016–046; SR–NASDAQ–2016–111]
Order to sell on the respective
Exchange’s Book (for bids) or above the measured against the original limit price
Self-Regulatory Organizations; current best-priced Order to buy on the of the Order) equals or exceeds the sum
NASDAQ BX, Inc.; The Nasdaq Stock respective Exchange’s Book (for offers). of fees charged for such execution and
Market LLC; Order Approving the value of any rebate that would be
Proposed Rule Changes, as Modified 4 In their respective Amendment No. 1, BX and provided if the Order posted to the
by Amendments No. 1, Relating to Nasdaq modified the discussion of their respective Exchange Book and subsequently
Post-Only Orders and Orders With
proposal to reflect that, pursuant to proposed BX provided liquidity.13
and Nasdaq Rules 4702(b)(4)(A), if the adjusted Currently, BX and Nasdaq Rules
Midpoint Pegging price of a Post-Only Order would lock or cross a
non-displayed price on the respective Exchange’s 4702(b)(4)(A) also provide that, if the
November 10, 2016. Book, the Post-Only Order would be posted in the Post-Only Order would not lock or cross
same manner as a Price to Comply Order. BX a Protected Quotation but would lock or
I. Introduction Amendment No. 1 is available at: https:// cross an Order on the respective
On September 13, 2016, NASDAQ BX, www.sec.gov/comments/sr-bx-2016-046/bx2016046-
1.pdf and Nasdaq Amendment No. 1 is available at: Exchange’s Book, the Post Only Order
Inc. (‘‘BX’’) and The Nasdaq Stock https://www.sec.gov/comments/sr-nasdaq-2016-
Market LLC (‘‘Nasdaq’’) (individually, 111/nasdaq2016111-1.pdf. Because these 9 The Exchanges are also proposing conforming
an ‘‘Exchange,’’ and together, the amendments are technical in nature and do not changes throughout BX and Nasdaq Rules
‘‘Exchanges’’) filed with the Securities materially alter the substance of the proposed rule 4702(b)(4)(A) to reflect this change.
changes, they are not subject to notice and 10 According to BX and Nasdaq Rules
and Exchange Commission comment. 4702(b)(1)(A), if the entered limit price of a Price
(‘‘Commission’’), pursuant to Section 5 See Letter from Joseph Saluzzi and Sal Arnuk, to Comply Order would lock or cross a Protected
19(b)(1) of the Securities Exchange Act Partners, Themis Trading LLC, to Brent J. Fields, Quotation and the Price to Comply Order could not
of 1934 (‘‘Act’’) 1 and Rule 19b–4 Secretary, Commission, dated October 10, 2016 execute against an Order on the respective
thereunder,2 proposed rule changes (‘‘Themis Letter’’). Exchange’s Book at a price equal to or better than
6 See Letter from Jeffrey S. Davis, Vice President the price of the Protected Quotation, the Price to
relating to Post-Only Orders and Orders Comply Order will be displayed on the respective
and Deputy General Counsel, The NASDAQ Stock
with Midpoint Pegging. The proposed Market LLC, to Brent J. Fields, Secretary, Exchange’s Book at a price one minimum price
rule changes were published for Commission, dated November 8, 2016 (‘‘Response increment lower than the current Best Offer (for a
comment in the Federal Register on Letter’’). Price to Comply Order to buy) or higher than the
7 For more details regarding the Exchanges’ current Best Bid (for a Price to Comply Order to
September 28, 2016.3 On October 5, sell), but will also be ranked on the respective
proposals, see Nasdaq Notice and BX Notice, supra
2016, Nasdaq filed Amendment No. 1 to note 3. Exchange’s Book with a non-displayed price equal
its proposed rule change (‘‘Nasdaq 8 According to BX and Nasdaq Rules to the current Best Offer (for a Price to Comply
Amendment No. 1’’) and on November 4702(b)(4)(A), if a Post-Only Order would lock or Order to buy) or the current Best Bid (for a Price
to Comply Order to sell).
3, 2016, BX filed Amendment No. 1 to
asabaliauskas on DSK3SPTVN1PROD with NOTICES
cross a Protected Quotation, the price of the Order
11 This behavior related to the execution of the
its proposed rule change (‘‘BX would first be adjusted. If the Order is Attributable,
its adjusted price would be one minimum price Post-Only Order is not changed by Nasdaq’s
increment lower than the current Best Offer (for proposal.
10 17 CFR 200.30–3(a)(12). 12 On BX, unlike on Nasdaq, executions in
bids) or higher than the current Best Bid (for offers).
1 15 U.S.C. 78s(b)(1). securities priced at or above $1 result in rebates for
If the Order is not Attributable, its adjusted price
2 17 CFR 240.19b–4. would be equal to the current Best Offer (for bids) the accessor of liquidity and as such it is always
3 See Securities Exchange Act Release Nos. 78909 or the current Best Bid (for offers). However, the in the best interest of the incoming Post-Only Order
(September 22, 2016), 81 FR 66708 (‘‘BX Notice’’) Order would not post or execute until the Order, to execute in securities at or above $1.
and 78908 (September 22, 2016), 81 FR 66702 as adjusted, is evaluated with respect to Orders on 13 This behavior related to the execution of the
(‘‘Nasdaq Notice’’). the respective Exchange’s Book. Post-Only Order is not changed by BX’s proposal.
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![81186 Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices
promote just and equitable principles of V. Conclusion II. Self-Regulatory Organization’s
trade, to remove impediments to and Statement of the Purpose of, and
perfect the mechanism of a free and It is therefore ordered, pursuant to Statutory Basis for, the Proposed Rule
open market and a national market Section 19(b)(2) of the Act,38 that the Change
system, and, in general, to protect proposed rule changes (SR–BX–2016–
In its filing with the Commission, the
investors and the public interest. 046 and SR–NASDAQ–2016–111), as Exchange included statements
modified by their respective concerning the purpose of, and basis for,
The Commission notes that the Amendment No. 1, be, and they hereby
Exchanges believe that the proposals the proposed rule change and discussed
are, approved. any comments it received on the
related to the interaction between Post-
Only Orders and Non-Displayed Orders For the Commission, by the Division of proposed rule change. The text of these
would help to reduce the information Trading and Markets, pursuant to delegated statements may be examined at the
authority.39 places specified in Item IV below. The
leakage that can occur when a Post-Only
Brent J. Fields, Exchange has prepared summaries, set
Order re-prices to avoid locking or
Secretary.
forth in sections A, B, and C below, of
crossing the price of a Non-Displayed the most significant aspects of such
Order resting on the respective [FR Doc. 2016–27600 Filed 11–16–16; 8:45 am]
statements.
Exchange’s book.36 Specifically, under BILLING CODE 8011–01–P
the proposals, if a Post-Only Order A. Self-Regulatory Organization’s
would not lock or cross a Protected Statement of the Purpose of, and the
Quotation but would lock or cross a SECURITIES AND EXCHANGE Statutory Basis for, the Proposed Rule
Non-Displayed Order on the respective COMMISSION Change
Exchange’s Book, the Post-Only Order 1. Purpose
would be posted, ranked, and displayed [Release No. 34–79286; File No. SR–NYSE– The Exchange proposes to adopt a
at its limit price, rather than be re- 2016–73]
Decommission Extension Fee for receipt
priced. In addition, if the adjusted price of the NYSE Order Imbalances market
of a Post-Only Order would lock or Self-Regulatory Organizations; New
data product,3 as set forth on the NYSE
cross a non-displayed price on the York Stock Exchange LLC; Notice of
Proprietary Market Data Fee Schedule
respective Exchange’s Book, the Post- Filing and Immediate Effectiveness of (‘‘Fee Schedule’’). Recipients of NYSE
Only Order would be posted in the same Proposed Rule Change Adopting a Order Imbalances would continue to be
manner as a Price to Comply Order (i.e., Decommission Extension Fee for subject to the already existing
displayed at a price one minimum price Receipt of the NYSE Order Imbalances subscription fees currently set forth in
increment lower than the current Best Market Data Product the Fee Schedule. The proposed
Offer (for a buy order) or higher than the November 10, 2016.
Decommission Extension Fee would
current Best Bid (for a sell order); apply only to those subscribers who
ranked with a non-displayed price equal Pursuant to Section 19(b)(1) of the decide to continue to receive the NYSE
to the current Best Offer (for a buy Securities Exchange Act of 1934 Order Imbalances feed in its legacy
order) or the current Best Bid (for a sell (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 format for up to two months after which
order)). notice is hereby given that on October the feed will be distributed exclusively
28, 2016, New York Stock Exchange in the new format explained below.
The Commission notes that the NYSE Order Imbalances is an NYSE-
LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed
Exchanges’ proposals to discontinue only market data feed of real-time order
with the Securities and Exchange
pricing and executing Midpoint Peg imbalances that accumulate prior to the
Commission (‘‘Commission’’) the
Post-Only Orders (Nasdaq only) and opening of trading on the Exchange and
proposed rule change as described in
Orders with Midpoint Pegging when the prior to the close of trading on the
Items I, II, and III below, which Items
NBBO is crossed would reflect that the Exchange. The Exchange distributes
have been prepared by the Exchange.
midpoint of a crossed market is not a information about these imbalances in
The Commission is publishing this
clear and accurate indication of a valid real-time at specified intervals prior to
notice to solicit comments on the
price and would avoid mispriced the opening and closing auction each
proposed rule change from interested
executions. The Commission also notes day.4
persons.
that this proposed behavior is similar to As part of the Exchange’s efforts to
the rules of other exchanges.37 I. Self-Regulatory Organization’s regularly upgrade systems to support
Statement of the Terms of Substance of more modern data distribution formats
Based on the foregoing and the
the Proposed Rule Change and protocols as technology evolves,
Exchanges’ representations, the
Commission believes that the proposed The Exchange proposes to adopt a 3 See Securities Exchange Act Release Nos. 59202
rule changes, as modified by Decommission Extension Fee for receipt (January 6, 2009), 74 FR 1744 (January 13, 2009)
Amendments No. 1, are consistent with of the NYSE Order Imbalances market
(SR–NYSE–2008–132—Notice of Filing of Proposed
the Act. Rule Change to Introduce a NYSE Order Imbalance
data product. The proposed change is Information Fee); and 59543 (March 9, 2009), 74 FR
available on the Exchange’s Web site at 11159 (March 16, 2009) (SR–NYSE–2008–132—
36 The Commission notes that, in conjunction Approval Order). See also Securities Exchange Act
asabaliauskas on DSK3SPTVN1PROD with NOTICES
with these proposals, the Exchanges are adopting
www.nyse.com, at the principal office of Release Nos. 72923 (Aug. 26, 2014), 79 FR 52079
the Trade Now instruction, which is an Order the Exchange, and at the Commission’s (Sept. 2, 2014) (SR–NYSE–2014–43) (establishing
Attribute that would allow a resting Order that Public Reference Room. fees for non-display use of NYSE Order
becomes locked by an incoming Displayed Order to Imbalances); and 76972 (January 26, 2016), 81 FR
execute against the available size of the contra-side 5142 (February 1, 2016) (SR–NYSE–2016–08)
locking Order as a liquidity taker. See Securities 38 15 (amending fees for NYSE Order Imbalances and
U.S.C. 78s(b)(2).
Exchange Act Release Nos. 79281 (November 10, NYSE Alerts).
39 17 CFR 200.30–3(a)(12).
2016) (SR–BX–2016–059) and 79282 (November 10, 4 See Rules 15 (Pre-Opening Indications and
1 15 U.S.C. 78s(b)(1).
2016) (SR–NASDAQ–2016–156). Opening Order Imbalance Information) and 123C
37 See, e.g., BatsBZX Rule 11.9(c)(9). 2 17 CFR 240.19b–4. (The Closing Procedures).
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Document Created: 2016-11-17 03:00:22
Document Modified: 2016-11-17 03:00:22
| 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 81184 |
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