82 FR 8548 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change, as Modified by Amendment No. 1, Amending NYSE Arca Equities Rules 7.35 (Auctions), 7.10 (Clearly Erroneous Executions), 7.31 (Orders and Modifiers), and 7.11 (Limit Up-Limit Down Plan and Trading Pauses in Individual Securities Due to Extraordinary Market Volatility)
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 16 (January 26, 2017)
Federal Register Volume 82, Issue 16 (January 26, 2017)
| Page Range | 8548-8551 | |
| FR Document | 2017-01718 |
[Federal Register Volume 82, Number 16 (Thursday, January 26, 2017)] [Notices] [Pages 8548-8551] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-01718] [[Page 8548]] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79846; File No. SR-NYSEArca-2016-130] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change, as Modified by Amendment No. 1, Amending NYSE Arca Equities Rules 7.35 (Auctions), 7.10 (Clearly Erroneous Executions), 7.31 (Orders and Modifiers), and 7.11 (Limit Up--Limit Down Plan and Trading Pauses in Individual Securities Due to Extraordinary Market Volatility) January 19, 2017. I. Introduction On October 4, 2016, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend NYSE Arca Equities Rules 7.35 (Auctions), 7.10 (Clearly Erroneous Executions), 7.31 (Orders and Modifiers), and 7.11 (Limit Up--Limit Down Plan and Trading Pauses in Individual Securities Due to Extraordinary Market Volatility). The proposed rule change was published for comment in the Federal Register on October 24, 2016.\3\ On December 6, 2016, the Commission extended the time period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change to January 22, 2017.\4\ On January 18, 2017, the Exchange filed Amendment No. 1 to the proposed rule change.\5\ The Commission received no comments on the proposed rule change. This order approves the proposed rule change, as modified by Amendment No. 1. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 79107 (October 18, 2016), 81 FR 73159 (``Notice''). \4\ See Securities Exchange Act Release No. 79480, 81 FR 89525 (December 12, 2016). \5\ In Amendment No. 1, the Exchange stated that it anticipates that it will implement the proposed rule change in the third quarter of 2017. Because Amendment No. 1 does not materially alter the substance of the proposed rule change or raise unique or novel regulatory issues, Amendment No. 1 is not subject to notice and comment. Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nysearca-2016-130/nysearca2016130-1507307-130821.pdf. --------------------------------------------------------------------------- II. Description of the Proposed Rule Change, as Modified by Amendment No. 1 In conjunction with the Twelfth Amendment to the National Market System Plan to Address Extraordinary Market Volatility (``Plan''),\6\ the Exchange proposes to revise its Trading Halt Auction procedures and to make related changes. --------------------------------------------------------------------------- \6\ See Securities Exchange Act Release No. 79845 (January 19, 2017) (File No. 4-631). --------------------------------------------------------------------------- Auction Reference Price and Auction Collar for Trading Halt Auctions The Exchange proposes to revise the Auction Reference Price and the Auction Collar for Trading Halt Auctions. Currently, the upper (lower) boundary of the Auction Collar for a Trading Halt Auction is the Auction Reference Price increased (decreased) by the price collar threshold.\7\ The price collar threshold for a Trading Halt Auction is 10% for securities with an Auction Reference Price of $25.00 or less, 5% for securities with an Auction Reference Price greater than $25.00 and less than or equal to $50.00, or 3% for securities with an Auction Reference Price greater than $50.00.\8\ The Auction Reference Price for a Trading Halt Auction is the last consolidated round-lot price of that trading day, and if none, the prior day's Official Closing Price.\9\ --------------------------------------------------------------------------- \7\ See NYSE Arca Equities Rule 7.35(a)(10)(A). \8\ See id. NYSE Arca Equities Rule 7.35(a)(10)(A) also specifies a sunset date for the price collar thresholds for Trading Halt Auctions. \9\ See NYSE Arca Equities Rule 7.35(a)(8)(A). --------------------------------------------------------------------------- Under the proposal, for a Trading Halt Auction following a trading pause under NYSE Arca Equities Rule 7.11 (``Trading Pause''), if the Limit State that preceded the Trading Pause was at the Lower (Upper) Price Band, the Auction Reference Price would be the Lower (Upper) Price Band.\10\ Moreover, for securities with an Auction Reference Price above $3.00, the Price Collar Threshold for the Trading Halt Auction would be the Auction Reference Price multiplied by 5 percent. For securities with an Auction Reference Price of $3.00 and below, the Price Collar Threshold would be $0.15.\11\ --------------------------------------------------------------------------- \10\ The proposed definition of Auction Reference Price for a Trading Pause is designed to be consistent across listing exchanges. For all other Trading Halt Auctions, the Auction Reference Price would continue to be as specified in NYSE Arca Equities Rule 7.35(a)(8). See proposed NYSE Arca Equities Rule 7.35(e)(7)(A). The Exchange also proposes to make a conforming change to NYSE Arca Equities Rule 7.35(a)(8)(A) to add the clause ``except as provided for in Rule 7.35(e)(7)(A),'' which would clarify that the Auction Reference Price for a Trading Halt Auction following a Trading Pause would be determined pursuant to NYSE Arca Equities Rule 7.35(e)(7)(A). \11\ See proposed NYSE Arca Equities Rule 7.35(e)(7). These proposed Price Collar Thresholds are designed to be consistent across listing exchanges. The Exchange also proposes to make conforming changes to NYSE Arca Equities Rule 7.35(a)(10)(A) to delete the reference to Trading Halt Auctions and to delete language that specifies the sunset date for the current price collar thresholds applicable to Trading Halt Auctions. --------------------------------------------------------------------------- As proposed, for a Trading Halt Auction following a Trading Pause, if the Auction Reference Price is the Lower (Upper) Price Band, the Lower (Upper) Auction Collar would be the Auction Reference Price decreased (increased) by the Price Collar Threshold, rounded down to the nearest MPV, and the Upper (Lower) Auction Collar would be the Upper (Lower) Price Band.\12\ For a Trading Halt Auction following a trading halt due to extraordinary market volatility under NYSE Arca Equities Rule 7.12 (``MWCB Halt'') or a regulatory halt, the Lower (Upper) Auction Collar would be the Auction Reference Price decreased (increased) by the Price Collar Threshold, rounded down to the nearest MPV.\13\ --------------------------------------------------------------------------- \12\ See proposed NYSE Arca Equities Rule 7.35(e)(7)(B)(i). The proposed Auction Collars for a Trading Pause are designed to be consistent across listing exchanges. \13\ See proposed NYSE Arca Equities Rule 7.35(e)(7)(B)(ii). --------------------------------------------------------------------------- Extension of Re-Opening Time and Expansion of Auction Collars for Trading Halt Auctions Currently, NYSE Arca Equities Rule 7.35(e)(2) provides that, after trading in a security has been halted or paused, the NYSE Arca Marketplace will disseminate the estimated time at which trading in that security will re-open (``Re-Opening Time''). The Exchange proposes to add to this rule that the initial Re-Opening Time for a Trading Halt Auction following a Trading Pause or MWCB Halt would be at the scheduled end of the Trading Pause or MWCB Halt. Under the proposal, the Exchange would extend the Re-Opening Time for a Trading Halt Auction under certain circumstances. Specifically, a Trading Halt Auction would not be conducted if the Indicative Match Price,\14\ before being adjusted based on Auction Collars,\15\ is below (above) the Lower (Upper) Auction Collar or if there is a sell (buy) Market Imbalance,\16\ either of [[Page 8549]] which would be defined as an ``Impermissible Price.'' \17\ As proposed, if there is an Impermissible Price at the initial Re-Opening Time, the pause or halt would be extended an additional five minutes and a new Re-Opening Time would be disseminated (``First Extension'').\18\ If there is an Impermissible Price at the end of the First Extension, the pause or halt would be extended an additional five minutes and a new Re-Opening Time would be disseminated (``Subsequent Extension'').\19\ The trading pause or halt would continue to be extended if there is an Impermissible Price at the Re-Opening Time for a Subsequent Extension.\20\ --------------------------------------------------------------------------- \14\ NYSE Arca Equities Rule 7.35(a)(8) defines ``Indicative Match Price'' to mean the best price at which the maximum volume of shares, including the non-displayed quantity of Reserve Orders, is tradable in the applicable auction, subject to Auction Collars. The Exchange states that for purposes of proposed NYSE Arca Equities Rule 7.35(e)(5), the Indicative Match Price would not be calculated subject to Auction Collars. See Notice, supra note 3, at 73160. \15\ NYSE Arca Equities Rule 7.35(a)(10) defines ``Auction Collar'' to mean the price collar thresholds for the Indicative Match Price for the Core Open Auction, Trading Halt Auction, or Closing Auction. \16\ NYSE Arca Equities Rule 7.35(a)(7)(B) defines ``Market Imbalance'' to mean the imbalance of any remaining buy (sell) Market Orders that are not matched for trading in the applicable auction. \17\ See proposed NYSE Arca Equities Rule 7.35(e)(5). The Exchange also proposes to make conforming changes in NYSE Arca Equities Rule 7.11(b). \18\ See proposed NYSE Arca Equities Rule 7.35(e)(6)(A). The Exchange would not conduct a Trading Halt Auction before the Re- Opening Time for the First Extension. See id. \19\ See proposed NYSE Arca Equities Rule 7.35(e)(6)(B). The Exchange would conduct a Trading Halt Auction before the Re-Opening Time for a Subsequent Extension if the Indicative Match Price, before being adjusted based on Auction Collars, is within the applicable Auction Collars and there is no Market Imbalance. See id. \20\ See proposed NYSE Arca Equities Rule 7.35(e)(6)(C). --------------------------------------------------------------------------- Under the proposal, the Auction Collar on the side of the Impermissible price would be widened for each Extension, and the Auction Collar on the opposite side of the Impermissible Price would remain the same as the last-calculated Auction Collar on that side.\21\ Specifically, if the Impermissible Price is on the side of the Lower (Upper) Auction Collar, the last-calculated Lower (Upper) Auction Collar would be decreased (increased) by a Price Collar Threshold and the Upper (Lower) Auction Collar would stay the same.\22\ If the side of the Impermissible Price changes from the Lower (Upper) Auction Collar to the Upper (Lower) Auction Collar, the last-calculated Upper (Lower) Auction Collar would be widened for that Extension and the last-calculated Lower (Upper) Auction Collar would remain the same.\23\ --------------------------------------------------------------------------- \21\ See proposed NYSE Arca Equities Rule 7.35(e)(7)(C). \22\ See proposed NYSE Arca Equities Rule 7.35(e)(7)(C)(i). \23\ See proposed NYSE Arca Equities Rule 7.35(e)(7)(C)(ii). The proposed extensions and widening of the Auction Collars are designed to be consistent across listing exchanges. --------------------------------------------------------------------------- As proposed, if the Re-Opening Time for a Trading Halt Auction would be in the last ten minutes of trading before the end of Core Trading Hours, the Exchange would not conduct a Trading Halt Auction in that security and would not transition to continuous trading. Instead, the Exchange would remain paused and would conduct a Closing Auction in such security as provided for in NYSE Arca Equities Rule 7.35(d).\24\ In such circumstances, Market-on-Open (``MOO'') Orders, Limit-on-Open (``LOO'') Orders, and IO Orders (as defined below) entered during the pause or halt would not participate in the Closing Auction and would expire at the end of the Core Trading Session.\25\ Additionally, the Auction Collars for the Closing Auction for such security would be the most recently widened Auction Collars for the Trading Halt Auction that did not occur.\26\ --------------------------------------------------------------------------- \24\ See proposed NYSE Arca Equities Rule 7.35(e)(10). The concept of holding a closing auction instead of a re-opening auction if a Trading Pause exists in the last ten minutes of trading is designed to be consistent across listing exchanges and to reflect the Twelfth Amendment to the Plan. \25\ See proposed NYSE Arca Equities Rule 7.35(e)(10)(A). \26\ See proposed NYSE Arca Equities Rule 7.35(e)(10)(B). The Exchange proposes to make a conforming change to NYSE Arca Equities Rule 7.35(a)(10)(A) to make clear that the price collar thresholds for a Closing Auction are defined in NYSE Arca Equites Rule 7.35(a)(10)(A), except as provided for in proposed NYSE Arca Equities Rule 7.35(e)(10)(B). --------------------------------------------------------------------------- Other Changes to the Trading Halt Auction The Exchange proposes to adopt an Imbalance Offset Order (``IO Order''), which would be a Limit Order to buy (sell) that is to be traded only in a Trading Halt Auction.\27\ An IO Order would be accepted only during a halt or pause, including any extensions.\28\ It would participate in a Trading Halt Auction only if: (i) There is an imbalance in the security on the opposite side of the market from the IO Order after taking into account all other orders eligible to trade at the Indicative Match Price; and (ii) the limit price of the IO Order to buy (sell) is at or above (below) the Indicative Match Price.\29\ The working price of an IO Order to buy (sell) would be adjusted to be equal to the Indicative Match Price, provided that the working price of the IO Order would not be higher (lower) than its limit price.\30\ An IO Order that participates in a Trading Halt Auction would be ranked in time priority among IO Orders after all other orders eligible to participate in the auction have been allocated.\31\ --------------------------------------------------------------------------- \27\ See proposed NYSE Arca Equities Rule 7.31(c)(5). \28\ See proposed NYSE Arca Equities Rule 7.31(c)(5)(A). \29\ See proposed NYSE Arca Equities Rule 7.31(c)(5)(B). \30\ See proposed NYSE Arca Equities Rule 7.31(c)(5)(C). \31\ See proposed NYSE Arca Equities Rule 7.31(c)(5)(D). --------------------------------------------------------------------------- The Exchange also proposes to add an Auction Imbalance Freeze before a Trading Halt Auction.\32\ As proposed, the Trading Halt Auction Imbalance Freeze would begin five seconds before the Re-Opening Time, including the Re-Opening Time for each Extension.\33\ If a pause or halt is extended, the Trading Halt Auction Imbalance Freeze for the prior period would end, new orders and order instructions received during the prior period's Trading Halt Auction Imbalance Freeze would be processed, and the Exchange would accept order entry and cancellation as provided for in NYSE Arca Equities Rule 7.18(c) until the next Trading Halt Auction Imbalance Freeze.\34\ During the Trading Halt Auction Imbalance Freeze, order entry and cancellation would be processed as follows: --------------------------------------------------------------------------- \32\ See proposed NYSE Arca Equities Rule 7.35(e)(8). See also proposed changes to NYSE Arca Equities Rule 7.35(a)(3). \33\ See proposed NYSE Arca Equities Rule 7.35(e)(8). \34\ See id. ---------------------------------------------------------------------------MOO Orders and LOO Orders that are on the same side of the Imbalance, would flip the Imbalance, or would create a new Imbalance would be rejected.\35\ --------------------------------------------------------------------------- \35\ See proposed NYSE Arca Equities Rule 7.35(e)(8)(A). --------------------------------------------------------------------------- Market Orders (other than MOO Orders) and Limit Orders would be accepted but would not be included in the calculation of the Indicative Match Price or the Trading Halt Auction Imbalance Information.\36\ Such orders would participate in the Trading Halt Auction only to offset the Imbalance that is remaining after all orders entered before the Trading Halt Auction Imbalance Freeze, including the non-display quantity of Reserve Orders, are allocated in the Trading Halt Auction, and would be allocated in price-time priority under NYSE Arca Equities Rules 7.36(c)-(g) consistent with the priority ranking associated with each order and ahead of any IO Orders.\37\ --------------------------------------------------------------------------- \36\ See proposed NYSE Arca Equities Rule 7.35(e)(8)(B). \37\ See id. --------------------------------------------------------------------------- Requests to cancel and requests to cancel and replace Market Orders, LOO Orders, Limit Orders, and IO Orders would be accepted but not processed until after the Trading Halt Auction concludes, as provided for in NYSE Arca Equities Rule 7.35(h).\38\ --------------------------------------------------------------------------- \38\ See proposed NYSE Arca Equities Rule 7.35(e)(8)(C). --------------------------------------------------------------------------- [[Page 8550]] All other order instructions would be accepted.\39\ --------------------------------------------------------------------------- \39\ See proposed NYSE Arca Equities Rule 7.35(e)(8)(D). --------------------------------------------------------------------------- The Exchange also proposes to specify that Limit Orders that were eligible to participate in the Trading Halt Auction but did not participate would transition to continuous trading as provided for in NYSE Arca Equities Rule 7.35(h).\40\ --------------------------------------------------------------------------- \40\ See proposed NYSE Arca Equities Rule 7.35(e)(9). --------------------------------------------------------------------------- The Exchange proposes to amend NYSE Arca Equities Rule 7.10(a) to provide that executions as a result of a Trading Halt Auction are not eligible for a request to review as clearly erroneous under NYSE Arca Equities Rule 7.10(b).\41\ --------------------------------------------------------------------------- \41\ The proposal to exclude re-opening auction trades from the clearly erroneous execution rule is designed to be consistent across listing exchanges. --------------------------------------------------------------------------- Trading Halt Auction Imbalance Information NYSE Arca Equities Rule 7.35(a)(4) currently defines ``Auction Imbalance Information'' to mean the information that is disseminated by the Exchange for an auction and includes, if applicable, the Total Imbalance, Market Imbalance, Indicative Match Price, and Matched Volume.\42\ The Exchange now proposes to add the following to Auction Imbalance Information: Auction Reference Price, Auction Collar, Book Clearing Price,\43\ Far Clearing Price,\44\ Imbalance Freeze Indicator,\45\ and Auction Indicator.\46\ --------------------------------------------------------------------------- \42\ See NYSE Arca Equities Rules 7.35(a)(7) (defining ``Total Imbalance'' and ``Market Imbalance''); 7.35(a)(8) (defining ``Indicative Match Price''); and 7.35(a)(9) (defining ``Matched Volume''). \43\ The Exchange proposes to define ``Book Clearing Price'' to mean the price at which all interest eligible to participate in an auction could be traded if not subject to the Auction Collar. The Book Clearing Price would be zero if a sell (buy) imbalance cannot be filled by any buy (sell) orders. See proposed NYSE Arca Equities Rule 7.35(a)(11). \44\ The Exchange proposes to define ``Far Clearing Price'' to mean the price at which Auction-Only Orders could be traded within the Auction Collar. See proposed NYSE Arca Equities Rule 7.35(a)(12). \45\ The Exchange proposes to define ``Imbalance Freeze Indicator'' to mean an indicator of whether a security is currently in an Auction Imbalance Freeze. See proposed NYSE Arca Equities Rule 7.35(a)(14). \46\ The Exchange proposes to define ``Auction Indicator'' to mean an indicator of whether an auction could be conducted, based on the applicable Auction Collar and Imbalance. See proposed NYSE Arca Equities Rule 7.35(a)(13). --------------------------------------------------------------------------- Other Changes Relating to Trading Pauses The Exchange proposes various changes to NYSE Arca Equities Rule 7.11. Specifically, the Exchange proposes to state that if a primary listing market issues a Trading Pause, the Exchange would resume trading as provided for in NYSE Arca Equities Rule 7.18(a).\47\ NYSE Arca Equities Rule 7.18(a) provides that, if a UTP Listing Market declares a UTP Regulatory Halt for a security, during Core Trading Hours, the Exchange will halt trading until it receives the first Price Band in the halted security. The Exchange also proposes to state that if the Exchange is unable to re-open trading at the end of the Trading Pause due to a systems or technology issue, it would immediately notify the single plan processor responsible for consolidation of information for the security pursuant to Rule 603 of Regulation NMS.\48\ In addition, the Exchange proposes to delete obsolete rule text that governed Trading Pauses before the Plan was fully implemented.\49\ --------------------------------------------------------------------------- \47\ See proposed NYSE Arca Equities Rule 7.11(b)(2). This change is designed to be consistent across listing exchanges and to reflect the Twelfth Amendment to the Plan. Relatedly, the Exchange proposes to delete the rule text that currently states that if a primary listing market issues a Trading Pause, the Exchange would pause trading in that security until trading has resumed on the primary listing market or notice has been received from the primary listing market that trading may resume, and that if the primary listing market does not re-open the security within 10 minutes of notification of a Trading Pause, the Exchange may resume trading in the security. See id. \48\ See proposed NYSE Arca Equities Rule 7.11(b)(1). This change is designed to be consistent across listing exchanges and to reflect the Twelfth Amendment to the Plan. \49\ See proposed changes to NYSE Arca Equities Rule 7.11(b). --------------------------------------------------------------------------- The Exchange represents that it will announce the implementation date of the proposed rule change via Trader Update to be issued after this proposed rule change is approved. The Exchange anticipates that this implementation will occur in the third quarter of 2017.\50\ --------------------------------------------------------------------------- \50\ See Amendment No. 1, supra note 5. For a more detailed description of the proposed rule change, see Notice, supra note 3. --------------------------------------------------------------------------- III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\51\ In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,\52\ which requires, among other things, that the rules of a national securities exchange be 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. As noted above, the Commission received no comment letters regarding the proposed rule change. --------------------------------------------------------------------------- \51\ 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). \52\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Commission notes that the proposed rule change is designed, together with the Twelfth Amendment to the Plan,\53\ to address the issues experienced on August 24, 2015 by reducing the number of repeat Trading Pauses in a single NMS Stock.\54\ The Commission notes that the proposed rule change is also designed to further the goal of establishing a standardized approach for how Primary Listing Exchanges would conduct certain aspects of an automated re-opening following a Trading Pause, which should provide certainty for market participants regarding how a security would re-open following a Trading Pause, regardless of the listing exchange.\55\ --------------------------------------------------------------------------- \53\ See supra note 6. \54\ See Notice, supra note 3, at 73165. \55\ See id. --------------------------------------------------------------------------- With respect to the proposed Auction Reference Price and Auction Collars, the Commission finds reasonable the Exchange's belief that the price of the limit state that preceded the Trading Pause (i.e., either the Lower or Upper Price Band price) would better reflect the most recent price of the security, and therefore should be used as the Auction Reference Price.\56\ Moreover, the Commission believes that the proposed method for calculating the initial Auction Collars (i.e., the Auction Collar on the opposite side of the trading pressure would be the Price Band in place before the Trading Pause was triggered) would address the concept of mean reversion, as well as avoid a security from trading outside of a price that it would have been permitted to trade before the Trading Pause.\57\ --------------------------------------------------------------------------- \56\ See id. \57\ See Notice, supra note 3, at 73161-62, 73165. As noted above, for MWCB Halts and regulatory halts, the Price Collar Threshold would continue to be applied on both sides of the Auction Reference Price. See supra note 13 and accompanying text. --------------------------------------------------------------------------- The Commission believes that extending the Trading Pause and widening Auction Collars on the side of the Impermissible Price would be a measured approach to provide additional time to attract offsetting interest, to help to address an imbalance that may not be resolved within the prior Auction Collars, and to reduce the [[Page 8551]] potential for triggering another Trading Pause.\58\ Also, as the Exchange noted, widening Auction Collars only in the direction of the imbalance would address issues relating to the concept of mean reversion.\59\ Moreover, the Commission notes that the proposal to conduct a Closing Auction if a security is in a Trading Pause during the last ten minutes of trading before the end of Regular Trading Hours (instead of a Trading Halt Auction) would be consistent with the Twelfth Amendment to the Plan.\60\ --------------------------------------------------------------------------- \58\ See Notice, supra note 3, at 73165. The Exchange notes that applying specific aspects of the proposed changes to Trading Halt Auctions following a MWCB Halt or regulatory halt would promote consistency in how the Exchange conducts its Trading Halt Auctions, thus reducing complexity in the marketplace. See id. \59\ See id. \60\ As the Exchange noted, the proposed changes related to the treatment of MOO Orders, LOO Orders, and IO Orders under these circumstances would provide transparency regarding how orders that are designated to participate in a Trading Halt Auction only would be handled. See Notice, supra note 3, at 73162. Also, as the Exchange noted, if the Exchange goes directly from an unresolved Trading Pause, MWCB Halt, or regulatory halt to a Closing Auction, the existing narrower price collar thresholds applicable to the Closing Auction could result in Auction Collars that do not correlate to the trading condition for the stock. See id. --------------------------------------------------------------------------- The Commission believes that precluding ETP Holders from requesting a review of a Trading Halt Auction as a clearly erroneous execution is appropriate. As the Exchange noted, the proposed re-opening procedures would allow for widened collars, which may result in a re-opening price that would be away from prior trading prices, but the re-opening price would be the result of a measured and transparent process that reduces the potential that such trade would be considered erroneous.\61\ --------------------------------------------------------------------------- \61\ See Notice, supra note 3, at 73165. --------------------------------------------------------------------------- With respect to the proposed IO Order, as the Exchange noted, the IO Order is designed to attract offsetting interest for Trading Halt Auctions and would provide an option for market participants that are willing to participate in an auction to offset an imbalance, but do not want such orders to participate in continuous trading.\62\ --------------------------------------------------------------------------- \62\ See id. The Exchange notes that the proposed IO Order is based in part on the Closing Offset Order offered by the New York Stock Exchange LLC. See id. --------------------------------------------------------------------------- The Commission notes that, according to the Exchange, the proposed Trading Halt Auction Imbalance Freeze would provide market participants with a brief period to assess the imbalance going into a Trading Halt Auction.\63\ Moreover, during the Trading Halt Imbalance Freeze, order entry and cancellation would be revised in a manner designed to reduce imbalance.\64\ Further, the Exchange represents that allowing Limit Orders that do not participate in a Trading Halt Auction, but have a limit price within the applicable Auction Collars, to roll into continuous trading likely would not impact the pricing of post-auction trading and trigger another Trading Pause because the limit price of such orders would have been within the same price range that trading would have been permitted.\65\ --------------------------------------------------------------------------- \63\ See Notice, supra note 3, at 73165-66. \64\ See Notice, supra note 3, at 73166. Currently, the Exchange provides an Auction Imbalance Freeze for the Early Open Auction, Core Open Auction, and Closing Auction. See NYSE Arca Equities Rule 7.35(a)(3). \65\ See Notice, supra note 3, at 73166. --------------------------------------------------------------------------- In addition, the Commission believes that the proposed enhancements to the Auction Imbalance Information would further promote transparency around Trading Halt Auctions.\66\ --------------------------------------------------------------------------- \66\ See id. --------------------------------------------------------------------------- Finally, the Exchange represents that the proposed amendments to NYSE Arca Equities Rule 7.11 would remove obsolete rule text and amend the remaining rule text to conform to the Twelfth Amendment to the Plan.\67\ --------------------------------------------------------------------------- \67\ See Notice, supra note 3, at 73165. --------------------------------------------------------------------------- Based on the Exchange's representations mentioned above and in the Notice, and for the foregoing reasons, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with Section 6(b)(5) of the Act \68\ and the rules and regulations thereunder applicable to a national securities exchange. --------------------------------------------------------------------------- \68\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\69\ that the proposed rule change (SR-NYSEArca-2016-130), as modified by Amendment No. 1, be, and hereby is, approved. --------------------------------------------------------------------------- \69\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\70\ --------------------------------------------------------------------------- \70\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-01718 Filed 1-25-17; 8:45 am] BILLING CODE 8011-01-P
![8548 Federal Register / Vol. 82, No. 16 / Thursday, January 26, 2017 / Notices
SECURITIES AND EXCHANGE System Plan to Address Extraordinary As proposed, for a Trading Halt
COMMISSION Market Volatility (‘‘Plan’’),6 the Auction following a Trading Pause, if
Exchange proposes to revise its Trading the Auction Reference Price is the
[Release No. 34–79846; File No. SR–
NYSEArca–2016–130]
Halt Auction procedures and to make Lower (Upper) Price Band, the Lower
related changes. (Upper) Auction Collar would be the
Self-Regulatory Organizations; NYSE Auction Reference Price decreased
Auction Reference Price and Auction (increased) by the Price Collar
Arca, Inc.; Order Granting Approval of Collar for Trading Halt Auctions
Proposed Rule Change, as Modified by Threshold, rounded down to the nearest
Amendment No. 1, Amending NYSE The Exchange proposes to revise the MPV, and the Upper (Lower) Auction
Arca Equities Rules 7.35 (Auctions), Auction Reference Price and the Collar would be the Upper (Lower) Price
7.10 (Clearly Erroneous Executions), Auction Collar for Trading Halt Band.12 For a Trading Halt Auction
7.31 (Orders and Modifiers), and 7.11 Auctions. Currently, the upper (lower) following a trading halt due to
(Limit Up—Limit Down Plan and boundary of the Auction Collar for a extraordinary market volatility under
Trading Pauses in Individual Securities Trading Halt Auction is the Auction NYSE Arca Equities Rule 7.12 (‘‘MWCB
Due to Extraordinary Market Volatility) Reference Price increased (decreased) by Halt’’) or a regulatory halt, the Lower
the price collar threshold.7 The price (Upper) Auction Collar would be the
January 19, 2017. collar threshold for a Trading Halt Auction Reference Price decreased
I. Introduction Auction is 10% for securities with an (increased) by the Price Collar
Auction Reference Price of $25.00 or Threshold, rounded down to the nearest
On October 4, 2016, NYSE Arca, Inc. MPV.13
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed less, 5% for securities with an Auction
with the Securities and Exchange Reference Price greater than $25.00 and Extension of Re-Opening Time and
Commission (‘‘Commission’’), pursuant less than or equal to $50.00, or 3% for Expansion of Auction Collars for
to Section 19(b)(1) of the Securities securities with an Auction Reference Trading Halt Auctions
Exchange Act of 1934 (‘‘Act’’) 1 and Rule Price greater than $50.00.8 The Auction
Reference Price for a Trading Halt Currently, NYSE Arca Equities Rule
19b–4 thereunder,2 a proposed rule 7.35(e)(2) provides that, after trading in
change to amend NYSE Arca Equities Auction is the last consolidated round-
lot price of that trading day, and if none, a security has been halted or paused, the
Rules 7.35 (Auctions), 7.10 (Clearly NYSE Arca Marketplace will
Erroneous Executions), 7.31 (Orders and the prior day’s Official Closing Price.9
disseminate the estimated time at which
Modifiers), and 7.11 (Limit Up—Limit Under the proposal, for a Trading Halt
trading in that security will re-open
Down Plan and Trading Pauses in Auction following a trading pause under
(‘‘Re-Opening Time’’). The Exchange
Individual Securities Due to NYSE Arca Equities Rule 7.11 (‘‘Trading
proposes to add to this rule that the
Extraordinary Market Volatility). The Pause’’), if the Limit State that preceded
initial Re-Opening Time for a Trading
proposed rule change was published for the Trading Pause was at the Lower
Halt Auction following a Trading Pause
comment in the Federal Register on (Upper) Price Band, the Auction
or MWCB Halt would be at the
October 24, 2016.3 On December 6, Reference Price would be the Lower
scheduled end of the Trading Pause or
2016, the Commission extended the (Upper) Price Band.10 Moreover, for
MWCB Halt.
time period within which to approve securities with an Auction Reference Under the proposal, the Exchange
the proposed rule change, disapprove Price above $3.00, the Price Collar would extend the Re-Opening Time for
the proposed rule change, or institute Threshold for the Trading Halt Auction a Trading Halt Auction under certain
proceedings to determine whether to would be the Auction Reference Price circumstances. Specifically, a Trading
disapprove the proposed rule change to multiplied by 5 percent. For securities Halt Auction would not be conducted if
January 22, 2017.4 On January 18, 2017, with an Auction Reference Price of the Indicative Match Price,14 before
the Exchange filed Amendment No. 1 to $3.00 and below, the Price Collar being adjusted based on Auction
the proposed rule change.5 The Threshold would be $0.15.11 Collars,15 is below (above) the Lower
Commission received no comments on (Upper) Auction Collar or if there is a
the proposed rule change. This order 6 See Securities Exchange Act Release No. 79845
sell (buy) Market Imbalance,16 either of
approves the proposed rule change, as (January 19, 2017) (File No. 4–631).
7 See NYSE Arca Equities Rule 7.35(a)(10)(A).
modified by Amendment No. 1. 8 See id. NYSE Arca Equities Rule 7.35(a)(10)(A) the sunset date for the current price collar
also specifies a sunset date for the price collar thresholds applicable to Trading Halt Auctions.
II. Description of the Proposed Rule 12 See proposed NYSE Arca Equities Rule
thresholds for Trading Halt Auctions.
Change, as Modified by Amendment 9 See NYSE Arca Equities Rule 7.35(a)(8)(A). 7.35(e)(7)(B)(i). The proposed Auction Collars for a
No. 1 10 The proposed definition of Auction Reference Trading Pause are designed to be consistent across
listing exchanges.
In conjunction with the Twelfth Price for a Trading Pause is designed to be
13 See proposed NYSE Arca Equities Rule
Amendment to the National Market consistent across listing exchanges. For all other
Trading Halt Auctions, the Auction Reference Price 7.35(e)(7)(B)(ii).
14 NYSE Arca Equities Rule 7.35(a)(8) defines
would continue to be as specified in NYSE Arca
1 15 U.S.C. 78s(b)(1). Equities Rule 7.35(a)(8). See proposed NYSE Arca ‘‘Indicative Match Price’’ to mean the best price at
2 17 CFR 240.19b–4. which the maximum volume of shares, including
Equities Rule 7.35(e)(7)(A). The Exchange also
3 See Securities Exchange Act Release No. 79107 proposes to make a conforming change to NYSE the non-displayed quantity of Reserve Orders, is
(October 18, 2016), 81 FR 73159 (‘‘Notice’’). Arca Equities Rule 7.35(a)(8)(A) to add the clause tradable in the applicable auction, subject to
4 See Securities Exchange Act Release No. 79480, ‘‘except as provided for in Rule 7.35(e)(7)(A),’’ Auction Collars. The Exchange states that for
81 FR 89525 (December 12, 2016). which would clarify that the Auction Reference purposes of proposed NYSE Arca Equities Rule
5 In Amendment No. 1, the Exchange stated that Price for a Trading Halt Auction following a 7.35(e)(5), the Indicative Match Price would not be
jstallworth on DSK7TPTVN1PROD with NOTICES
it anticipates that it will implement the proposed Trading Pause would be determined pursuant to calculated subject to Auction Collars. See Notice,
rule change in the third quarter of 2017. Because NYSE Arca Equities Rule 7.35(e)(7)(A). supra note 3, at 73160.
11 See proposed NYSE Arca Equities Rule 15 NYSE Arca Equities Rule 7.35(a)(10) defines
Amendment No. 1 does not materially alter the
substance of the proposed rule change or raise 7.35(e)(7). These proposed Price Collar Thresholds ‘‘Auction Collar’’ to mean the price collar
unique or novel regulatory issues, Amendment No. are designed to be consistent across listing thresholds for the Indicative Match Price for the
1 is not subject to notice and comment. Amendment exchanges. The Exchange also proposes to make Core Open Auction, Trading Halt Auction, or
No. 1 is available at: https://www.sec.gov/ conforming changes to NYSE Arca Equities Rule Closing Auction.
comments/sr-nysearca-2016-130/nysearca2016130- 7.35(a)(10)(A) to delete the reference to Trading 16 NYSE Arca Equities Rule 7.35(a)(7)(B) defines
1507307-130821.pdf. Halt Auctions and to delete language that specifies ‘‘Market Imbalance’’ to mean the imbalance of any
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![Federal Register / Vol. 82, No. 16 / Thursday, January 26, 2017 / Notices 8551
potential for triggering another Trading manner designed to reduce imbalance.64 SECURITIES AND EXCHANGE
Pause.58 Also, as the Exchange noted, Further, the Exchange represents that COMMISSION
widening Auction Collars only in the allowing Limit Orders that do not
direction of the imbalance would [Release No. 34–79845; File No. 4–631]
participate in a Trading Halt Auction,
address issues relating to the concept of but have a limit price within the Joint Industry Plan; Order Approving
mean reversion.59 Moreover, the applicable Auction Collars, to roll into the Twelfth Amendment to the National
Commission notes that the proposal to continuous trading likely would not Market System Plan To Address
conduct a Closing Auction if a security impact the pricing of post-auction Extraordinary Market Volatility by Bats
is in a Trading Pause during the last ten trading and trigger another Trading BZX Exchange, Inc., Bats BYX
minutes of trading before the end of Pause because the limit price of such Exchange, Inc., Bats EDGA Exchange,
Regular Trading Hours (instead of a orders would have been within the same Inc., Bats EDGX Exchange, Inc.,
Trading Halt Auction) would be price range that trading would have Chicago Stock Exchange, Inc.,
consistent with the Twelfth Amendment
been permitted.65 Financial Industry Regulatory
to the Plan.60
In addition, the Commission believes Authority, Inc., Investors Exchange
The Commission believes that
that the proposed enhancements to the LLC, NASDAQ BX, Inc., NASDAQ PHLX
precluding ETP Holders from requesting
Auction Imbalance Information would LLC, The Nasdaq Stock Market LLC,
a review of a Trading Halt Auction as a
further promote transparency around National Stock Exchange, Inc., New
clearly erroneous execution is
York Stock Exchange LLC, NYSE MKT
appropriate. As the Exchange noted, the Trading Halt Auctions.66
LLC, and NYSE Arca, Inc.
proposed re-opening procedures would Finally, the Exchange represents that
allow for widened collars, which may the proposed amendments to NYSE January 19, 2017.
result in a re-opening price that would Arca Equities Rule 7.11 would remove
be away from prior trading prices, but I. Introduction
obsolete rule text and amend the
the re-opening price would be the result remaining rule text to conform to the On September 19, 2016, NYSE Group,
of a measured and transparent process Inc., on behalf of the other parties 1 to
Twelfth Amendment to the Plan.67
that reduces the potential that such the National Market System Plan to
trade would be considered erroneous.61 Based on the Exchange’s Address Extraordinary Market Volatility
With respect to the proposed IO representations mentioned above and in (the ‘‘Plan’’), filed with the Securities
Order, as the Exchange noted, the IO the Notice, and for the foregoing and Exchange Commission
Order is designed to attract offsetting reasons, the Commission finds that the (‘‘Commission’’) pursuant to Section
interest for Trading Halt Auctions and proposed rule change, as modified by 11A of the Securities Exchange Act of
would provide an option for market Amendment No. 1, is consistent with 1934 (‘‘Act’’) 2 and Rule 608
participants that are willing to Section 6(b)(5) of the Act 68 and the thereunder,3 a proposal to amend the
participate in an auction to offset an rules and regulations thereunder Plan.4 The proposal represents the
imbalance, but do not want such orders applicable to a national securities twelfth amendment to the Plan, and
to participate in continuous trading.62 exchange. reflects proposed changes unanimously
The Commission notes that, according approved by the Participants (‘‘Twelfth
to the Exchange, the proposed Trading IV. Conclusion Amendment’’). The proposed Twelfth
Halt Auction Imbalance Freeze would Amendment was published for
It is therefore ordered, pursuant to
provide market participants with a brief comment in the Federal Register on
Section 19(b)(2) of the Act,69 that the
period to assess the imbalance going December 2, 2016.5 The Commission
proposed rule change (SR–NYSEArca-
into a Trading Halt Auction.63 received two comment letters regarding
Moreover, during the Trading Halt 2016–130), as modified by Amendment the amendment.6 On January 17, 2017,
Imbalance Freeze, order entry and No. 1, be, and hereby is, approved. the Participants submitted a letter to the
cancellation would be revised in a For the Commission, by the Division of Commission related to the Twelfth
Trading and Markets, pursuant to delegated Amendment, which requests that the
58 See Notice, supra note 3, at 73165. The
authority.70 Commission modify the Twelfth
Exchange notes that applying specific aspects of the Amendment to retain provisions in the
proposed changes to Trading Halt Auctions
Eduardo A. Aleman,
following a MWCB Halt or regulatory halt would Assistant Secretary.
promote consistency in how the Exchange conducts [FR Doc. 2017–01718 Filed 1–25–17; 8:45 am]
1 NYSE Group, Inc. filed on behalf of the
its Trading Halt Auctions, thus reducing complexity following parties to the Plan: Bats BZX Exchange,
in the marketplace. See id. BILLING CODE 8011–01–P Inc., Bats BYX Exchange, Inc., Bats EDGA
59 See id. Exchange, Inc., Bats EDGX Exchange, Inc., Chicago
60 As the Exchange noted, the proposed changes Stock Exchange, Inc., Financial Industry Regulatory
related to the treatment of MOO Orders, LOO Authority, Inc., Investors Exchange LLC, NASDAQ
Orders, and IO Orders under these circumstances BX, Inc., NASDAQ PHLX LLC, The Nasdaq Stock
would provide transparency regarding how orders Market LLC, National Stock Exchange, Inc., New
that are designated to participate in a Trading Halt York Stock Exchange LLC, NYSE MKT LLC, and
Auction only would be handled. See Notice, supra NYSE Arca, Inc. (‘‘Participants’’).
2 15 U.S.C. 78k–1.
note 3, at 73162. Also, as the Exchange noted, if the 64 See Notice, supra note 3, at 73166. Currently,
Exchange goes directly from an unresolved Trading 3 17 CFR 242.608.
Pause, MWCB Halt, or regulatory halt to a Closing the Exchange provides an Auction Imbalance 4 See Letter from Elizabeth King, General Counsel
Auction, the existing narrower price collar Freeze for the Early Open Auction, Core Open and Corporate Secretary, NYSE, to Brent J. Fields,
jstallworth on DSK7TPTVN1PROD with NOTICES
thresholds applicable to the Closing Auction could Auction, and Closing Auction. See NYSE Arca Secretary, Commission, dated September 16, 2016.
result in Auction Collars that do not correlate to the Equities Rule 7.35(a)(3). 5 See Securities Exchange Act Release No. 79410
trading condition for the stock. See id. 65 See Notice, supra note 3, at 73166. (November 28, 2016), 81 FR 87114 (‘‘Notice’’).
61 See Notice, supra note 3, at 73165. 6 See Letters from Mortimer J. Buckley, Chief
66 See id.
62 See id. The Exchange notes that the proposed
67 See Notice, supra note 3, at 73165. Investment Officer, Vanguard, dated December 23,
IO Order is based in part on the Closing Offset 2016 (‘‘Vanguard Letter’’); and David W. Blass,
68 15 U.S.C. 78f(b)(5).
Order offered by the New York Stock Exchange General Counsel, Investment Company Institute,
69 15 U.S.C. 78s(b)(2).
LLC. See id. dated December 22, 2016 (‘‘ICI Letter’’) to Brent J.
63 See Notice, supra note 3, at 73165–66. 70 17 CFR 200.30–3(a)(12). Fields, Secretary, Commission.
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Document Created: 2017-01-26 00:05:15
Document Modified: 2017-01-26 00:05:15
| 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 8548 |
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