82 FR 1419 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 7.35(a)(10)(A)

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 3 (January 5, 2017)

[Federal Register Volume 82, Number 3 (Thursday, January 5, 2017)]
[Notices]
[Pages 1419-1421]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-31937]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79705; File No. SR-NYSEArca-2016-169]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Rule 7.35(a)(10)(A)

December 29, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on December 22, 2016, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 
7.35(a)(10)(A) to extend the period for the current Trading Halt 
Auction Collar price collar. The proposed rule change is available on 
the Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend NYSE Arca Equities Rule 
7.35(a)(10)(A) (``Rule 7.35'') to extend the period for

[[Page 1420]]

the current Trading Halt price collar thresholds.
    As specified in Rule 7.35(a)(10)(A), the price collar thresholds 
for Trading Halt Auctions are currently set at 10% for securities with 
an Auction Reference Price \4\ of $25.00 or less, 5% for securities 
with an Auction Reference Price greater than $25.00 but less than or 
equal to $50.00, and 3% for securities with an Auction Reference Price 
greater than $50.00. These price collar thresholds were adopted on an 
interim basis and sunset on January 31, 2017.\5\
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    \4\ As set forth in Rule 7.35(a)(8)(A), the Auction Reference 
Price for Trading Halt Auctions is the last consolidated round-lot 
price of that trading day and, if none, the prior trading day's 
Official Closing Price.
    \5\ See Securities Exchange Act Release No. 78734 (July 20, 
2016), 81 FR 48876 (July 26, 2016) (SR-NYSEArca-2016-98) (Notice of 
Filing and Immediate Effectiveness to extend the period for the 
interim Trading Halt Auction Collar thresholds to January 31, 2017). 
Effective September 28, 2016, the Exchange has deleted former Rule 
1.1(s) and eliminated the ``P'' modifier from Rule 7.35. See 
Securities Exchange Act Release No. 79078 (October 11, 2016), 81 FR 
71559 (October 17, 2016) (SR-NYSEArca-2016-135) (Notice of Filing 
and Immediate Effectiveness of proposed rule change).
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    When approving the current price collar thresholds for Trading Halt 
Auctions, the Commission noted that they were appropriate as an interim 
measure to protect investors and the public interest.\6\ The Exchange 
committed to use the period while the interim price collar thresholds 
are in place to conduct an analysis to determine whether to make the 
proposed price collar thresholds permanent or to propose other or 
additional changes to its re-opening process. Since that time, the 
Participants of the Regulation NMS Plan to Address Extraordinary Market 
Volatility (``LULD Plan'') (which includes the Exchange),\7\ with input 
from the Advisory Committee to the LULD Plan, have filed to amend the 
LULD Plan to require, among other things, that a Trading Pause would 
continue until the Primary Listing Exchange has reopened trading using 
its established reopening procedures and reports a Reopening Price.\8\ 
In connection with the Twelfth Amendment to the LULD Plan, the Exchange 
has filed a proposed rule change to amend its Trading Halt Auction 
procedures to provide for automated reopening processes that would be 
uniform across the Primary Listing Exchanges.\9\ The Exchange's 
proposed enhancements to the Trading Halt Auction include eliminating 
the current interim price collar thresholds and replacing them with 
Auction Collars that are aligned with the LULD Plan Price Bands and 
providing for extensions of a Trading Pause and related widening of 
Auction Collars for each such extension.
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    \6\ See Securities Exchange Act Release Nos. 76994 (Jan. 28, 
2016), 81 FR 5809 (Feb. 3, 2016) (SR-NYSEArca-2015-121) (Approval 
Order) and 77140 (Feb. 16, 2016), 81 FR 8812 (SR-NYSEArca-2016-27) 
(Notice of Filing).
    \7\ See Securities Exchange Act Release No. 77679 (April 21, 
2016), 81 FR 24908 (April 27, 2016) (File No. 4-631) (Order 
approving 10th Amendment to the LULD Plan). Unless otherwise 
specified, capitalized terms used herein have the same meaning as 
set forth in the Plan or in Exchange rules.
    \8\ See Securities Exchange Act Release No. 79410 (November 28, 
2016), 81 FR 87114 (December 2, 2016) (File No. 4-631) (Notice of 
Filing of the Twelfth Amendment to the LULD Plan) (``Twelfth 
Amendment to the LULD Plan'').
    \9\ See Securities Exchange Act Release Nos. 79107 (October 18, 
2016), 81 FR 73519 (October 24, 2016) (SR-NYSEArca-2016-130) (Notice 
of Filing) (``Trading Halt Auction Filing'') and 79480 (December 6, 
2016), 81 FR 89525 (December 12, 2016) (SR-NYSEArca-2016-130) 
(Notice of Designation of a Longer Period for Commission Action 
extending time for Commission action on the Trading Halt Auction 
Filing to January 22, 2017).
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    The Exchange proposes that the current interim price collar 
thresholds should remain in effect until the Trading Halt Auction 
Filing is approved and operative.\10\ To effect this change, the 
Exchange proposes to amend Rule 7.35(a)(10)(A) to provide that the 
price collar thresholds specified in that paragraph applicable to 
Trading Halt Auctions would be in effect until SR-NYSEArca-2016-130 is 
both approved and operative. This extension of the time period would 
also provide additional time for the Commission to review the Twelfth 
Amendment to the LULD Plan. The Exchange continues to believe that it 
is appropriate to have protections in place for Trading Halt Auctions 
to assure that a reopening trade will not deviate significantly from 
prior prices, even taking into consideration natural price movements 
for a security. The Exchange believes that it is appropriate to 
maintain price collar thresholds for Trading Halt Auctions based on the 
clearly erroneous execution guidelines because an auction trade is 
subject to these guidelines for purposes of determining whether such 
execution is clearly erroneous. In addition, the Exchange's interim 
price collar thresholds are similar to how BATS BZX Exchange, Inc. 
(``BATS'') prices its Halt Auctions for ETPs. Like BATS, the Exchange 
is the primary listing market only for ETPs and would, therefore only 
have Trading Halt Auctions for ETPs. BATS Rule 11.23(d)(2)(D) provides 
that BATS executes orders in ETPs in a Halt auction at a price level 
within a ``Collar Price Range'' that maximizes the number of shares 
executed in the auction. Similar to the Exchange's rule, BATS uses 
Collar Price Ranges that are based on the numerical guidelines set 
forth in the market-wide clearly erroneous execution rules.\11\ The 
Exchange's Auction Collars differ from BATS's pricing mechanism because 
the Exchange would use the consolidated last sale price as the 
reference price, rather than the midpoint of a ``Valid NBBO.'' The 
Exchange believes that using the consolidated last sale price tracks 
the market-wide clearly erroneous execution rules, which similarly use 
the consolidated last sale price for determining whether an execution 
is clearly erroneous.
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    \10\ As provided for in the Trading Halt Auction Filing, supra 
id., the Exchange proposes to implement the proposed rule changes 
following Commission approval of the Twelfth Amendment to the LULD 
Plan.
    \11\ As set forth in BATS Rule 11.23(a)(6), the Collar Price 
Range is 10% for securities with a Collar Midpoint of $25.00 or 
less, 5% for securities with a Collar Midpoint greater than $25.00 
but less than or equal to $50.00, and 3% for securities with a 
Collar Midpoint greater than $50.00. BATS Rule 11.23(a)(6) defines 
the Collar Midpoint as the Volume Based Tie Breaker, which is 
defined in BATS Rule 11.23(a)(23) as the midpoint of the NBBO if it 
is a Valid NBBO, with a Valid NBBO defined as where: (i) There is 
both a NBB and NBO for the security; (ii) the NBBO is not crossed; 
and (iii) the midpoint of the NBBO is less than the Maximum 
Percentage away from both the NBB and the NBO.
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    The Exchange will announce by Trader Update when the interim 
collars will no longer be operative and the changes proposed in the 
Trading Halt Auction Collar Filing will be operative.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\12\ in general, and 
furthers the objectives of Section 6(b)(5),\13\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, 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.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that extending the interim period for the 
current Trading Halt Auction price collar thresholds would remove 
impediments to and perfect the mechanism of a fair and orderly market 
by providing for Auctions Collars at the Exchange pending Commission 
review of the

[[Page 1421]]

Twelfth Amendment to the LULD Plan and the Exchange's Trading Halt 
Auction Filing. Until such time as these proposed changes have been 
approved and operative, the price collar thresholds for Trading Halt 
Auctions would continue to be aligned with the clearly erroneous 
execution guidelines and therefore continuing with these price collar 
thresholds would reduce the potential for a Trading Halt Auction to be 
a clearly erroneous execution. In addition, the Exchange believes that 
extending the Exchange's interim measure pending Commission approval of 
the Twelfth Amendment to the LULD Plan and the Trading Halt Auction 
Filing would be consistent with the protection of investors and the 
public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change is not 
designed to address any competitive issue but rather to provide for the 
interim price collar thresholds for Trading Halt Auctions on the 
Exchange to remain in effect until the Trading Halt Auction Filing is 
approved and operative.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change does not: (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and the text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2016-169 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2016-169. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 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 Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2016-169 and should 
be submitted on or before January 26, 2017.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31937 Filed 1-4-17; 8:45 am]
 BILLING CODE 8011-01-P