82 FR 11386 - Proposed Collection; Comment Request
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 34 (February 22, 2017)
Federal Register Volume 82, Issue 34 (February 22, 2017)
| Page Range | 11386-11388 | |
| FR Document | 2017-03423 |
[Federal Register Volume 82, Number 34 (Wednesday, February 22, 2017)] [Notices] [Pages 11386-11388] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-03423] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 20549-2736. Extension: Rule 19b-1, SEC File No. 270-312, OMB Control No. 3235-0354. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange Commission (``Commission'') is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. Section 19(b) of the Investment Company Act of 1940 (the ``Act'') (15 U.S.C. 80a-19(b)) authorizes the Commission to regulate registered [[Page 11387]] investment company (``fund'') distributions of long-term capital gains made more frequently than once every twelve months. Accordingly, rule 19b-1 under the Act (17 CFR 270.19b-1) regulates the frequency of fund distributions of capital gains. Rule 19b-1(c) states that the rule does not apply to a unit investment trust (``UIT'') if it is engaged exclusively in the business of investing in certain eligible securities (generally, fixed-income securities), provided that: (i) The capital gains distribution falls within one of five categories specified in the rule \1\ and (ii) the distribution is accompanied by a report to the unitholder that clearly describes the distribution as a capital gains distribution (the ``notice requirement'').\2\ Rule 19b-1(e) permits a fund to apply to the Commission for permission to distribute long-term capital gains that would otherwise be prohibited by the rule if the fund did not foresee the circumstances that created the need for the distribution. The application must set forth the pertinent facts and explain the circumstances that justify the distribution.\3\ An application that meets those requirements is deemed to be granted unless the Commission denies the request within 15 days after the Commission receives the application. --------------------------------------------------------------------------- \1\ 17 CFR 270.19b-1(c)(1). \2\ The notice requirement in rule 19b-1(c)(2) supplements the notice requirement of section 19(a) [15 U.S.C. 80a-19(a)], which requires any distribution in the nature of a dividend payment to be accompanied by a notice disclosing the source of the distribution. \3\ Rule 19b-1(e) also requires that the application comply with rule 0-2 [17 CFR 270.02] under the Act, which sets forth the general requirements for papers and applications filed with the Commission pursuant to the Act and rules thereunder. --------------------------------------------------------------------------- Commission staff estimates that five funds will file an application under rule 19b-1(e) each year.\4\ The staff understands that if a fund files an application it generally uses outside counsel to prepare the application. The cost burden of using outside counsel is discussed below. The staff estimates that, on average, a fund's investment adviser would spend approximately 4 hours to review an application, including 3.5 hours by an assistant general counsel at a cost of $433 per hour and 0.5 hours by an administrative assistant at a cost of $74 per hour, and the fund's board of directors would spend an additional 1 hour at a cost of $4,465 per hour, for a total of 5 hours.\5\ Thus, the staff estimates that the annual hour burden of the collection of information imposed by rule 19b-1(e) would be approximately five hours per fund, at a cost of $6017.50.\6\ Because the staff estimates that, each year, five funds will file an application pursuant to rule 19b- 1(e), the total burden for the information collection is 40 hours at a cost of $30,087.50.\7\ --------------------------------------------------------------------------- \4\ This estimate is based on the average number of applications filed with the Commission pursuant to rule 19b-1(e) in the prior three-year period. \5\ The estimate for assistant general counsels is from SIFMA's Management & Professional Earnings in the Securities Industry 2013, modified by Commission staff to account for an 1800-hour work-year and inflation (as of January 2016) and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead. The estimate for administrative assistants is from SIFMA's Office Salaries in the Securities Industry 2013, modified by Commission staff to account for an 1800-hour work-year and inflation (as of January 2016) and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead. The staff previously estimated in 2009 that the average cost of board of director time was $4,000 per hour for the board as a whole, based on information received from funds and their counsel. Adjusting for inflation, the staff estimates that the current average cost of board of director time is approximately $4,465. \6\ This estimate is based on the following calculations: $1515.50 (3.5 hours x $433 = $1515.50) plus $37 (0.5 hours x $74 = $37) plus $4465 equals $6017.50 (cost of one application). \7\ This estimate is based on the following calculation: $6017.50 (cost of one application) multiplied by 5 applications = $30,087.50 total cost. --------------------------------------------------------------------------- Commission staff estimates that there is no hour burden associated with complying with the collection of information component of rule 19b-1(c). As noted above, Commission staff understands that funds that file an application under rule 19b-1(e) generally use outside counsel to prepare the application.\8\ The staff estimates that, on average, outside counsel spends 10 hours preparing a rule 19b-1(e) application, including eight hours by an associate and two hours by a partner. Outside counsel billing arrangements and rates vary based on numerous factors, but the staff has estimated the average cost of outside counsel as $400 per hour, based on information received from funds, intermediaries, and their counsel. The staff therefore estimates that the average cost of outside counsel preparation of the rule 19b-1(e) exemptive application is $4,000.\9\ Because the staff estimates that, each year, five funds will file an application pursuant to rule 19b- 1(e), the total annual cost burden imposed by the exemptive application requirements of rule 19b-1(e) is estimated to be $20,000.\10\ --------------------------------------------------------------------------- \8\ This understanding is based on conversations with representatives from the fund industry. \9\ This estimate is based on the following calculation: 10 hours multiplied by $400 per hour equals $4,000. \10\ This estimate is based on the following calculation: $4,000 multiplied by five (funds) equals $20,000. --------------------------------------------------------------------------- The Commission staff estimates that there are approximately 2,579 UITs \11\ that may rely on rule 19b-1(c) to make capital gains distributions. The staff estimates that, on average, these UITs rely on rule 19b-1(c) once a year to make a capital gains distribution.\12\ In most cases, the trustee of the UIT is responsible for preparing and sending the notices that must accompany a capital gains distribution under rule 19b-1(c)(2). These notices require limited preparation, the cost of which accounts for only a small, indiscrete portion of the comprehensive fee charged by the trustee for its services to the UIT. The staff believes that as a matter of good business practice, and for tax preparation reasons, UITs would collect and distribute the capital gains information required to be sent to unitholders under rule 19b- 1(c) even in the absence of the rule. The staff estimates that the cost of preparing a notice for a capital gains distribution under rule 19b- 1(c)(2) is approximately $50. There is no separate cost to mail the notices because they are mailed with the capital gains distribution. Thus, the staff estimates that the capital gains distribution notice requirement imposes an annual cost on UITs of approximately $128,950.\13\ The staff therefore estimates that the total cost imposed by rule 19b-1 is $160,950 ($128,950 plus $20,000 (total cost associated with rule 19b-1(e)) equals $148,950). --------------------------------------------------------------------------- \11\ See 2016 Investment Company Fact Book, Investment Company Institute, available at https://www.ici.org/pdf/2016_factbook.pdf. \12\ The number of times UITs rely on the rule to make capital gains distributions depends on a wide range of factors and, thus, can vary greatly across years and UITs. UITs may distribute capital gains biannually, annually, quarterly, or at other intervals. Additionally, a number of UITs are organized as grantor trusts, and therefore do not generally make capital gains distributions under rule 19b-1(c), or may not rely on rule 19b-1(c) as they do not meet the rule's requirements. \13\ This estimate is based on the following calculation: 2,579 UITs multiplied by $50 equals $128,950. --------------------------------------------------------------------------- An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Written comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the functions of the Commission, including whether the information has practical utility; (b) the accuracy of the Commission's estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on [[Page 11388]] respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to Pamela Dyson, Director/Chief Information Officer, Securities and Exchange Commission, C/O Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549; or send an email to: [email protected]. Dated: February 15, 2017. Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-03423 Filed 2-21-17; 8:45 am] BILLING CODE 8011-01-P
![11386 Federal Register / Vol. 82, No. 34 / Wednesday, February 22, 2017 / Notices
November 21, 2016.9 However, III. Date of Effectiveness of the submission, all subsequent
following testing, BX has decided to Proposed Rule Change and Timing for amendments, all written statements
delay the implementation of these new Commission Action with respect to the proposed rule
functionalities to provide additional Because the foregoing proposed rule change that are filed with the
time for systems testing. The new change does not: (i) Significantly affect Commission, and all written
functionality shall be implemented no the protection of investors or the public communications relating to the
later than March 31, 2017. BX will interest; (ii) impose any significant proposed rule change between the
announce the new implementation date burden on competition; and (iii) become Commission and any person, other than
by an Equity Trader Alert, which shall operative for 30 days from the date on those that may be withheld from the
be issued prior to the implementation which it was filed, or such shorter time public in accordance with the
date. as the Commission may designate, it has provisions of 5 U.S.C. 552, will be
become effective pursuant to Section available for Web site viewing and
2. Statutory Basis 19(b)(3)(A) of the Act 13 and Rule 19b– printing in the Commission’s Public
Reference Room, 100 F Street NE.,
The Exchange believes that its 4(f)(6) thereunder.14
At any time within 60 days of the Washington, DC 20549, on official
proposal is consistent with Section 6(b) business days between the hours of
of the Act,10 in general, and furthers the filing of the proposed rule change, the
Commission summarily may 10:00 a.m. and 3:00 p.m. Copies of the
objectives of Section 6(b)(5) of the Act,11 filing also will be available for
temporarily suspend such rule change if
in particular, in that it is designed to inspection and copying at the principal
it appears to the Commission that such
promote just and equitable principles of office of the Exchange. All comments
action is: (i) Necessary or appropriate in
trade, to remove impediments to and received will be posted without change;
the public interest; (ii) for the protection
perfect the mechanism of a free and the Commission does not edit personal
of investors; or (iii) otherwise in
open market and a national market identifying information from
furtherance of the purposes of the Act.
system, and, in general to protect submissions. You should submit only
If the Commission takes such action, the
investors and the public interest. The information that you wish to make
Commission shall institute proceedings
purpose of this proposal is to inform the available publicly. All submissions
to determine whether the proposed rule
SEC and market participants of the new should refer to File Number SR–BX–
should be approved or disapproved.
implementation date for the Post-Only, 2017–008 and should be submitted on
Midpoint Pegging, and Trade Now IV. Solicitation of Comments or before March 15, 2017.
functionalities. The functionalities Interested persons are invited to For the Commission, by the Division of
themselves were previously proposed in submit written data, views, and Trading and Markets, pursuant to delegated
rule filings that were submitted to the arguments concerning the foregoing, authority.15
SEC, and this proposal does not change including whether the proposed rule Eduardo A. Aleman,
the substance of those functionalities.12 change is consistent with the Act. Assistant Secretary.
BX is delaying the implementation date Comments may be submitted by any of [FR Doc. 2017–03401 Filed 2–21–17; 8:45 am]
of these functionalities to provide for the following methods: BILLING CODE 8011–01–P
further systems testing prior to Electronic Comments
implementing these functionalities.
• Use the Commission’s Internet SECURITIES AND EXCHANGE
B. Self-Regulatory Organization’s comment form (http://www.sec.gov/ COMMISSION
Statement on Burden on Competition rules/sro.shtml); or
• Send an email to rule-comments@ Proposed Collection; Comment
The Exchange does not believe that sec.gov. Please include File Number SR– Request
the proposed rule change will impose BX–2017–008 on the subject line. Upon Written Request, Copies Available
any burden on competition not
Paper Comments From: Securities and Exchange
necessary or appropriate in furtherance
• Send paper comments in triplicate Commission, Office of FOIA Services,
of the purposes of the Act. As noted
100 F Street NE., Washington, DC
above, the purpose of this proposal is to to Brent J. Fields, Secretary, Securities
20549–2736.
extend the implementation date for and Exchange Commission, 100 F Street
Post-Only, Midpoint Pegging and Trade- NE., Washington, DC 20549–1090. Extension:
Rule 19b–1, SEC File No. 270–312, OMB
Now functionalities so that BX may All submissions should refer to File Control No. 3235–0354.
perform additional systems testing prior Number SR–BX–2017–008. This file
to implementing these functionalities. number should be included on the Notice is hereby given that, pursuant
subject line if email is used. To help the to the Paperwork Reduction Act of 1995
C. Self-Regulatory Organization’s Commission process and review your (44 U.S.C. 3501–3520), the Securities
Statement on Comments on the comments more efficiently, please use and Exchange Commission
Proposed Rule Change Received From only one method. The Commission will (‘‘Commission’’) is soliciting comments
Members, Participants, or Others post all comments on the Commission’s on the collection of information
Internet Web site (http://www.sec.gov/ summarized below. The Commission
No written comments were either plans to submit this existing collection
solicited or received. rules/sro.shtml). Copies of the
of information to the Office of
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13 15 U.S.C. 78s(b)(3)(A). Management and Budget for extension
9 See Equity Trader Alert #2016–291. 14 17 CFR 240.19b–4(f)(6). As required under Rule and approval.
10 15 U.S.C. 78f(b). 19b–4(f)(6)(iii), the Exchange provided the Section 19(b) of the Investment
11 15 U.S.C. 78f(b)(5).
Commission with written notice of its intent to file Company Act of 1940 (the ‘‘Act’’) (15
12 BX notes that the Trade-Now functionality was the proposed rule change, along with a brief U.S.C. 80a–19(b)) authorizes the
submitted to the SEC as an immediately effective description and the text of the proposed rule
filing, while the Post-Only and Midpoint Pegging change, at least five business days prior to the date Commission to regulate registered
functionalities were the subject of an SEC approval of filing of the proposed rule change, or such
order. See supra notes 3 and 4. shorter time as designated by the Commission. 15 17 CFR 200.30–3(a)(12).
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![Federal Register / Vol. 82, No. 34 / Wednesday, February 22, 2017 / Notices 11387
investment company (‘‘fund’’) Thus, the staff estimates that the annual The Commission staff estimates that
distributions of long-term capital gains hour burden of the collection of there are approximately 2,579 UITs 11
made more frequently than once every information imposed by rule 19b–1(e) that may rely on rule 19b–1(c) to make
twelve months. Accordingly, rule 19b– would be approximately five hours per capital gains distributions. The staff
1 under the Act (17 CFR 270.19b–1) fund, at a cost of $6017.50.6 Because the estimates that, on average, these UITs
regulates the frequency of fund staff estimates that, each year, five funds rely on rule 19b–1(c) once a year to
distributions of capital gains. Rule 19b– will file an application pursuant to rule make a capital gains distribution.12 In
1(c) states that the rule does not apply 19b–1(e), the total burden for the most cases, the trustee of the UIT is
to a unit investment trust (‘‘UIT’’) if it information collection is 40 hours at a responsible for preparing and sending
is engaged exclusively in the business of cost of $30,087.50.7 the notices that must accompany a
investing in certain eligible securities capital gains distribution under rule
(generally, fixed-income securities), Commission staff estimates that there 19b–1(c)(2). These notices require
provided that: (i) The capital gains is no hour burden associated with limited preparation, the cost of which
distribution falls within one of five complying with the collection of accounts for only a small, indiscrete
categories specified in the rule 1 and (ii) information component of rule 19b–1(c). portion of the comprehensive fee
the distribution is accompanied by a As noted above, Commission staff charged by the trustee for its services to
report to the unitholder that clearly understands that funds that file an the UIT. The staff believes that as a
describes the distribution as a capital application under rule 19b–1(e) matter of good business practice, and for
gains distribution (the ‘‘notice generally use outside counsel to prepare tax preparation reasons, UITs would
requirement’’).2 Rule 19b–1(e) permits a the application.8 The staff estimates collect and distribute the capital gains
fund to apply to the Commission for that, on average, outside counsel spends information required to be sent to
permission to distribute long-term 10 hours preparing a rule 19b–1(e) unitholders under rule 19b–1(c) even in
capital gains that would otherwise be application, including eight hours by an the absence of the rule. The staff
prohibited by the rule if the fund did estimates that the cost of preparing a
associate and two hours by a partner.
not foresee the circumstances that notice for a capital gains distribution
Outside counsel billing arrangements
created the need for the distribution. under rule 19b–1(c)(2) is approximately
The application must set forth the and rates vary based on numerous $50. There is no separate cost to mail
pertinent facts and explain the factors, but the staff has estimated the the notices because they are mailed with
circumstances that justify the average cost of outside counsel as $400 the capital gains distribution. Thus, the
distribution.3 An application that meets per hour, based on information received staff estimates that the capital gains
those requirements is deemed to be from funds, intermediaries, and their distribution notice requirement imposes
granted unless the Commission denies counsel. The staff therefore estimates an annual cost on UITs of
the request within 15 days after the that the average cost of outside counsel approximately $128,950.13 The staff
Commission receives the application. preparation of the rule 19b–1(e) therefore estimates that the total cost
Commission staff estimates that five exemptive application is $4,000.9 imposed by rule 19b–1 is $160,950
funds will file an application under rule Because the staff estimates that, each ($128,950 plus $20,000 (total cost
19b–1(e) each year.4 The staff year, five funds will file an application associated with rule 19b–1(e)) equals
understands that if a fund files an pursuant to rule 19b–1(e), the total $148,950).
application it generally uses outside annual cost burden imposed by the An agency may not conduct or
counsel to prepare the application. The exemptive application requirements of sponsor, and a person is not required to
cost burden of using outside counsel is rule 19b–1(e) is estimated to be respond to, a collection of information
discussed below. The staff estimates $20,000.10 unless it displays a currently valid
that, on average, a fund’s investment control number.
adviser would spend approximately 4 year and inflation (as of January 2016) and Written comments are invited on: (a)
hours to review an application, multiplied by 5.35 to account for bonuses, firm size, Whether the collection of information is
including 3.5 hours by an assistant employee benefits and overhead. The estimate for necessary for the proper performance of
administrative assistants is from SIFMA’s Office the functions of the Commission,
general counsel at a cost of $433 per Salaries in the Securities Industry 2013, modified
hour and 0.5 hours by an administrative by Commission staff to account for an 1800-hour including whether the information has
assistant at a cost of $74 per hour, and work-year and inflation (as of January 2016) and practical utility; (b) the accuracy of the
the fund’s board of directors would multiplied by 2.93 to account for bonuses, firm size, Commission’s estimate of the burden of
employee benefits and overhead. The staff the collection of information; (c) ways to
spend an additional 1 hour at a cost of previously estimated in 2009 that the average cost
$4,465 per hour, for a total of 5 hours.5 of board of director time was $4,000 per hour for enhance the quality, utility, and clarity
the board as a whole, based on information received of the information collected; and (d)
1 17 CFR 270.19b–1(c)(1). from funds and their counsel. Adjusting for ways to minimize the burden of the
2 The notice requirement in rule 19b–1(c)(2) inflation, the staff estimates that the current average collection of information on
supplements the notice requirement of section 19(a) cost of board of director time is approximately
[15 U.S.C. 80a–19(a)], which requires any $4,465.
11 See 2016 Investment Company Fact Book,
6 This estimate is based on the following
distribution in the nature of a dividend payment to Investment Company Institute, available at https://
be accompanied by a notice disclosing the source calculations: $1515.50 (3.5 hours × $433 =
www.ici.org/pdf/2016_factbook.pdf.
of the distribution. $1515.50) plus $37 (0.5 hours × $74 = $37) plus 12 The number of times UITs rely on the rule to
3 Rule 19b–1(e) also requires that the application $4465 equals $6017.50 (cost of one application).
7 This estimate is based on the following
make capital gains distributions depends on a wide
comply with rule 0–2 [17 CFR 270.02] under the range of factors and, thus, can vary greatly across
Act, which sets forth the general requirements for calculation: $6017.50 (cost of one application) years and UITs. UITs may distribute capital gains
sradovich on DSK3GMQ082PROD with NOTICES
papers and applications filed with the Commission multiplied by 5 applications = $30,087.50 total cost. biannually, annually, quarterly, or at other
pursuant to the Act and rules thereunder. 8 This understanding is based on conversations
intervals. Additionally, a number of UITs are
4 This estimate is based on the average number of with representatives from the fund industry. organized as grantor trusts, and therefore do not
applications filed with the Commission pursuant to 9 This estimate is based on the following
generally make capital gains distributions under
rule 19b–1(e) in the prior three-year period. calculation: 10 hours multiplied by $400 per hour rule 19b–1(c), or may not rely on rule 19b–1(c) as
5 The estimate for assistant general counsels is equals $4,000. they do not meet the rule’s requirements.
from SIFMA’s Management & Professional Earnings 10 This estimate is based on the following 13 This estimate is based on the following
in the Securities Industry 2013, modified by calculation: $4,000 multiplied by five (funds) calculation: 2,579 UITs multiplied by $50 equals
Commission staff to account for an 1800-hour work- equals $20,000. $128,950.
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![11388 Federal Register / Vol. 82, No. 34 / Wednesday, February 22, 2017 / Notices
respondents, including through the use 2017, the time period in which to Exchange during the last ten minutes
of automated collection techniques or approve the proposal, disapprove the can rapidly evaporate following trades
other forms of information technology. proposal, or institute proceedings to in away markets. Because DMMs do not
Consideration will be given to determine whether to approve or have the ability to direct or influence
comments and suggestions submitted in disapprove the proposal.4 The trading, or to control intra-day prices,
writing within 60 days of this Commission has received no comments that specialists had before the
publication. on the proposal. This order institutes implementation of Regulation NMS, the
Please direct your written comments proceedings under Section 19(b)(2)(B) of Exchange asserts, the Rule
to Pamela Dyson, Director/Chief the Act to determine whether to approve 104(g)(i)(A)(III) Prohibition is
Information Officer, Securities and or disapprove the proposal. anachronistic.9
Exchange Commission, C/O Remi
II. Description of the Proposal III. Proceedings To Determine Whether
Pavlik-Simon, 100 F Street NE.,
Currently, under Exchange Rule To Disapprove SR–NYSE–2016–71 and
Washington, DC 20549; or send an email
104(g)(i)(A)(III), a DMM with a long Grounds for Disapproval Under
to: PRA_Mailbox@sec.gov. Consideration
(short) position in a security cannot,
Dated: February 15, 2017.
during the last ten minutes before the The Commission is instituting
Eduardo A. Aleman, close of trading, make a purchase (sale) proceedings pursuant to Section
Assistant Secretary. in that security that results in a new 19(b)(2)(B) of the Act 10 to determine
[FR Doc. 2017–03423 Filed 2–21–17; 8:45 am] high (low) price on the Exchange for whether the proposal should be
BILLING CODE 8011–01–P that day.5 The Exchange proposes to disapproved. Institution of such
remove this prohibition from its proceedings is appropriate at this time
rulebook. in view of the legal and policy issues
SECURITIES AND EXCHANGE The Exchange asserts that, in light of raised by the proposal, as discussed
COMMISSION developments in the equity markets and below. Institution of disapproval
[Release No. 34–80044; File No. SR–NYSE– in the Exchange’s own trading model, proceedings does not indicate that the
2016–71] Rule 104(g)(i)(A)(III) has lost its original Commission has reached any
purpose and utility.6 Specifically, the conclusions with respect to any of the
Self-Regulatory Organizations; New Exchange asserts that, in today’s issues involved. Rather, as described in
York Stock Exchange LLC; Order electronic marketplace, where DMMs greater detail below, the Commission
Instituting Proceedings To Determine have replaced specialists, and control of seeks and encourages interested persons
Whether To Approve or Disapprove a pricing decisions has moved away from to provide additional comment on the
Proposed Rule Change Amending Rule market participants on the Exchange proposal.
104 To Delete Subsection (g)(i)(A)(III) trading floor, the purpose behind the Pursuant to Section 19(b)(2)(B) of the
Prohibiting Designated Market Makers Rule 104(g)(i)(A)(III) Prohibition is no Act, the Commission is providing notice
From Establishing a New High (Low) longer necessary, and eliminating the of the grounds for disapproval under
Price on the Exchange in a Security prohibition would not eliminate other consideration. The Commission is
the DMM Has a Long (Short) Position existing safeguards that prevent DMMs instituting proceedings to allow for
During the Last Ten Minutes Prior to from inappropriately influencing or additional analysis of the proposed rule
the Close of Trading manipulating the close.7 change’s consistency with Section
The Exchange argues that the 6(b)(5) of the Act,11 which requires that
February 15, 2017. rationale behind preventing specialists the rules of an exchange be designed,
I. Introduction from setting the price of a security on among other things, to prevent
the Exchange in the final ten minutes of fraudulent and manipulative acts and
On October 27, 2016, New York Stock trading was to prevent specialists from practices, to promote just and equitable
Exchange LLC (‘‘Exchange’’ or ‘‘NYSE’’) inappropriately influencing the price of principles of trade, to remove
filed with the Securities and Exchange a security at the close to advantage a impediments to and perfect the
Commission (‘‘Commission’’) pursuant specialist’s proprietary position.8 In mechanism of a free and open market
to Section 19(b)(1) of the Securities today’s fragmented marketplace, and a national market system and, in
Exchange Act of 1934 (‘‘Act’’) 1 and Rule according to the Exchange, a new high general, to protect investors and the
19b–4 thereunder,2 a proposed rule or low price for a security on the public interest. In addition, Section
change amending Rule 104 to delete Exchange in the last ten minutes of 6(b)(5) of the Act prohibits the rules of
subsection (g)(i)(A)(III), which prohibits trading does not have a significant effect an exchange from being designed to
Designated Market Makers (‘‘DMMs’’) on the market price for that security, permit unfair discrimination between
from establishing, during the last ten because a new high or low price on the customers, issuers, brokers, or dealers.
minutes of trading before the close, a Exchange may not be the new high or The Rule 104(g)(i)(A)(III) Prohibition
new high (low) price for the day on the low for a security—prices may be higher was originally approved as part of the
Exchange in a security in which the or lower in away markets, where the NYSE pilot program called the ‘‘New
DMM has a long (short) position (‘‘Rule majority of intra-day trading in NYSE- Market Model.12 As the Commission
104(g)(i)(A)(III) Prohibition’’). The listed securities takes place—and stated when approving the NYSE
proposed rule change was published for because any advantage to a DMM by proposal to conduct the New Market
comment in the Federal Register on establishing a new high or low on the Model pilot, ‘‘[w]e carefully review
November 17, 2016.3 trading rule proposals that seek to offer
sradovich on DSK3GMQ082PROD with NOTICES
On December, 20, 1016, the 4 See Securities Exchange Act Release No. 79612
Commission extended to February 15, (Dec. 20, 2016), 81 FR 95205 (Dec. 27, 2016). 9 See id.
5 See Exchange Rule 104(g)(i)(A)(III). Exchange 10 15 U.S.C. 78s(b)(2)(B).
1 15 U.S.C. 78s(b)(1). Rule 104(g)(i)(A)(III)(2) provides two exceptions to 11 15 U.S.C. 78f(b)(5).
2 17 CFR 240.19b–4. this general prohibition. 12 See Securities Exchange Act Release No. 58845
3 See Securities Exchange Act Release No. 79284 6 See Notice, 81 FR at 81223.
(Oct. 24, 2008), 73 FR 64379 (Oct. 29, 2008) (SR–
7 See id. at 81222–81223.
(Nov. 10, 2016), 81 FR 81222 (Nov. 17, 2016) NYSE–2008–46) (approving NYSE New Market
(‘‘Notice’’). 8 See id. at 81223. Model pilot program).
VerDate Sep<11>2014 16:05 Feb 21, 2017 Jkt 241001 PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 E:\FR\FM\22FEN1.SGM 22FEN1](https://thefederalregister.org/doc/82_FR_11420/page/3.svg)
Document Created: 2017-02-22 00:08:47
Document Modified: 2017-02-22 00:08:47
| 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 | 82 FR 11386 |
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