82 FR 8551 - Joint Industry Plan; Order Approving the Twelfth Amendment to the National Market System Plan To Address Extraordinary Market Volatility by Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., Investors Exchange LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The Nasdaq Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc.
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 16 (January 26, 2017)
Federal Register Volume 82, Issue 16 (January 26, 2017)
| Page Range | 8551-8554 | |
| FR Document | 2017-01717 |
[Federal Register Volume 82, Number 16 (Thursday, January 26, 2017)] [Notices] [Pages 8551-8554] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-01717] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79845; File No. 4-631] Joint Industry Plan; Order Approving the Twelfth Amendment to the National Market System Plan To Address Extraordinary Market Volatility by Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., Investors Exchange LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The Nasdaq Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. January 19, 2017. I. Introduction On September 19, 2016, NYSE Group, Inc., on behalf of the other parties \1\ to the National Market System Plan to Address Extraordinary Market Volatility (the ``Plan''), filed with the Securities and Exchange Commission (``Commission'') pursuant to Section 11A of the Securities Exchange Act of 1934 (``Act'') \2\ and Rule 608 thereunder,\3\ a proposal to amend the Plan.\4\ The proposal represents the twelfth amendment to the Plan, and reflects proposed changes unanimously approved by the Participants (``Twelfth Amendment''). The proposed Twelfth Amendment was published for comment in the Federal Register on December 2, 2016.\5\ The Commission received two comment letters regarding the amendment.\6\ On January 17, 2017, the Participants submitted a letter to the Commission related to the Twelfth Amendment, which requests that the Commission modify the Twelfth Amendment to retain provisions in the [[Page 8552]] Plan related to Straddle States.\7\ This order approves the Twelfth Amendment to the Plan, as modified. --------------------------------------------------------------------------- \1\ NYSE Group, Inc. filed on behalf of the following parties to the Plan: Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., Investors Exchange LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The Nasdaq Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (``Participants''). \2\ 15 U.S.C. 78k-1. \3\ 17 CFR 242.608. \4\ See Letter from Elizabeth King, General Counsel and Corporate Secretary, NYSE, to Brent J. Fields, Secretary, Commission, dated September 16, 2016. \5\ See Securities Exchange Act Release No. 79410 (November 28, 2016), 81 FR 87114 (``Notice''). \6\ See Letters from Mortimer J. Buckley, Chief Investment Officer, Vanguard, dated December 23, 2016 (``Vanguard Letter''); and David W. Blass, General Counsel, Investment Company Institute, dated December 22, 2016 (``ICI Letter'') to Brent J. Fields, Secretary, Commission. \7\ See Letter from Elizabeth K. King, General Counsel and Corporate Secretary, NYSE to Brent J. Fields, Secretary, Commission, dated January 13, 2017 (``Modification Letter''). --------------------------------------------------------------------------- II. Description of the Proposal In the Twelfth Amendment, the Participants propose to implement a modified reopening process following a Trading Pause.\8\ In particular, the Participants propose to amend the Plan to provide that a Trading Pause will continue until the Primary Listing Exchange has reopened trading using its established reopening procedures, even if such reopening is more than 10 minutes after the beginning of a Trading Pause, require that trading centers may not resume trading in an NMS Stock following a Trading Pause without Price Bands in such NMS Stock, and delete language made unnecessary in light of the proposed reopening procedures.\9\ In addition, the Participants propose to address the situation where there is no Reopening Price from the Primary Listing Exchange due to a systems or technology issue and make related changes regarding how the Reference Price would be determined and Price Bands calculated and disseminated following a resumption of trading. Further, the Participants propose to amend the Plan to provide that if an NMS Stock is in a Trading Pause during the last ten minutes of trading before the end of Regular Trading Hours, the Primary Listing Exchange shall attempt to execute a closing transaction using its established closing procedures. Finally, the Participants propose to clarify in the Plan the limited circumstances in which a trading center may calculate and apply Price Bands when a Reference Price is available but Price Bands have not been disseminated by the Processor (``Synthetic Price Bands''). --------------------------------------------------------------------------- \8\ Unless otherwise specified, the terms used herein have the same meaning as set forth in the Plan. \9\ The Primary Listing Exchanges filed proposed rule changes pursuant to Section 19(b)(1) of the Act, 15 U.S.C. 78s(b)(1), and Rule 19b-4 thereunder, 17 CFR 240.19b-4, relating to the changes to the reopening procedures proposed in the Twelfth Amendment. See Securities Exchange Act Release Nos. 79162 (October 26, 2016), 81 FR 75875 (November 1, 2016) (SR-BatsBZX-2016-61; 79158 (October 26, 2016), 81 FR 75879 November 1, 2016) (SR-NASDAQ-2016-131); and 79107 (October 18, 2016), 81 FR 73159 (October 24, 2016) (SR-NYSEArca- 2016-130). See also Securities Exchange Act Release No 79846, (January 19, 2017) (SR-NYSEArca-2016-130). --------------------------------------------------------------------------- Finally, in the Twelfth Amendment, the Participants propose to remove provisions related to Straddle States. However, as described in the Modification Letter, the Participants have requested the Commission to modify the Twelfth Amendment to retain the provisions related to Straddle States in the Plan. III. Summary of Comment Letters The Commission received two comment letters on the proposed Twelfth Amendment, both supporting the proposed changes to the Plan related to the reopening process. One commenter noted that the proposed amendments to the Plan along with the related proposed rule changes submitted by the exchanges \10\ ``should improve the transparency of the reopening process, allow reopening auctions to establish more accurate prices, and make it less likely that trading in a security will be halted again shortly after trading resumes.'' \11\ This commenter further noted that ``[I]mplementing these proposals also should increase market confidence by reducing the likelihood of the Limit Up-Limit Down Plan creating confusion during volatile markets, when clarity and certainty are most important.'' \12\ This commenter urged the Commission to approve the proposed Twelfth Amendment and corresponding rule changes, but noted that the Twelfth Amendment ``does not address the discordance between the rules governing clearly erroneous executions and the limit up-limit down price bands, which contributes unnecessarily to uncertainty in the equity markets in volatile times.'' \13\ The second commenter urged the Commission to approve the Twelfth Amendment ``without delay'' and before considering a change to the Plan recommended by the Equity Market Structure Advisory Committee in which ``securities in a limit state would not be halted pursuant to existing rules, but would be permitted to trade within established price bands.'' \14\ This commenter believes that ``the Twelfth Amendment is an important step towards improving the equity markets and minimizing the likelihood of an event like August 24, 2015.'' \15\ --------------------------------------------------------------------------- \10\ See supra note 9. \11\ See ICI Letter, supra note 6 at 2. \12\ Id. \13\ Id. \14\ See Vanguard Letter, supra note 6, at 2. \15\ Id. --------------------------------------------------------------------------- IV. Discussion and Commission Findings Rule 608 under Regulation NMS provides that the Commission shall approve an NMS plan amendment, with such changes or subject to such conditions as the Commission may deem necessary or appropriate, if it finds that the plan amendment is ``necessary or appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of, a national market system, or otherwise in furtherance of the purposes of the Act.'' \16\ The Commission finds that the Twelfth Amendment, as modified, is consistent with Section 11A of the Act \17\ and Rule 608 thereunder \18\ because, for the reasons discussed below it is appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, and that it removes impediments to, and perfects the mechanism of, a national market system. The Commission notes that the Participants proposed the Twelfth Amendment to address issues experienced on August 24, 2015. In particular, the Participants believe that the changes to the Plan set forth in the Twelfth Amendment should reduce the number of repeat Trading Pauses in a single NMS Stock and establish a more standardized process across Primary Listing Exchanges in reopening trading following a Trading Pause. --------------------------------------------------------------------------- \16\ 17 CFR 242.608(b)(2). \17\ 15 U.S.C. 78k-1. \18\ 17 CFR 242.608. --------------------------------------------------------------------------- A. Coordinated Reopening Procedures After a Trading Pause The Participants propose to remove the language in Plan Section VII(B)(3) that permits trading centers to begin trading an NMS Stock ten minutes after declaration of a Trading Pause in an NMS Stock if the Primary Listing Exchange has not either reported a Reopening Price or declared a Regulatory Halt.\19\ Accordingly, Trading Pauses would continue until a Primary Listing Market reports a Reopening Price, except in limited circumstances discussed below. In addition, the Participants propose to provide that trading centers may not resume trading in an NMS Stock following a Trading Pause without Price Bands in such NMS Stock. --------------------------------------------------------------------------- \19\ The Participants also propose to amend Section V(C) of the Plan to remove language, which describes the first Reference Price in situations when a Primary Listing Market does not reopen within ten minutes after the beginning of a Trading Pause. The Commission believes that with the adoption of the proposed amendments described above, the Plan text in Section V(C) is no longer necessary. --------------------------------------------------------------------------- The Commission believes that it is appropriate in the public interest, for the protection of investors and the maintenance of a fair and orderly market to provide that a Trading Pause [[Page 8553]] continue until the Primary Listing Exchange has reopened trading using its established reopening procedures, even if such reopening is more than 10 minutes after the beginning of a Trading Pause, and to require that trading centers may not resume trading in an NMS Stock following a Trading Pause without Price Bands in such NMS Stock. The Commission believes that these two provisions together support a more standardized process for reopening trading after a Trading Pause has been declared. Further, these provisions ensure that trading would not resume after a Trading Pause without Price Bands. B. Systems and Technology Issues The Participants propose to amend Section VII(B)(2) of the Plan to clarify that the only time trading centers may resume trading in an NMS Stock in the absence of a Reopening Price from the Primary Listing Exchange is if the Primary Listing Exchange notifies the Processor that it is unable to reopen trading due to a systems or technology issue. The Commission believes that this change is appropriate in the public interest, for the protection of investors and the maintenance of a fair and orderly market because if a Primary Listing Exchange is unable to reopen trading due to a systems or technology issue, trading should be permitted to resume in that NMS Stock on other trading centers. Further, the Participants propose to add a new sentence to Section V(C)(1) of the Plan to specify that if the Primary Listing Exchange notifies the Processor that it is unable to reopen an NMS Stock due to a systems or technology issue, the next Reference Price would be the last effective Price Band that was in a Limit State before the Trading Pause. The Participants also propose to use this process for determining a Reference Price in situations where the Primary Listing Exchange reopens trading with a quotation that has a zero bid or offer, or both. The Commission believes that it is appropriate to use the last effective Price Band as the new Reference Price in these situations. As noted by the Participants, using the last effective Price Band that triggered the Trading Pause should be a closer approximation of the most recent trading in the NMS Stock, which should help to prevent repeat Trading Pauses. The Participants also propose to provide that if, under Section VII(B)(2), the Primary Listing Exchange notifies the Processor that it is unable to reopen an NMS Stock due to a systems or technology issue and it has not declared a Regulatory Halt, the Processor will calculate and disseminate Price Bands by applying triple the Percentage Parameters set forth in Appendix A to the Plan for the first 30 seconds such Price Bands are disseminated. The Commission notes that the Plan currently reflects that triple Percentage Parameters are applied if trading resumes ten minutes after a Trading Pause has been declared when the Primary Listing Exchange has not issued a Reopening Price. Accordingly, the Commission believes that that it is appropriate to apply triple Percentage Parameters to the new limited instances when a Reopening Price is not disseminated. Finally, the Participants propose to amend Section VII(B)(4) of the Plan to clarify that the Processor shall update the Price Bands, as set forth in Section V(C)(1)-(2) of the Plan, after receiving notification from the Primary Listing Exchange of a Reopening Price following a Trading Pause (or a resume message in the case of a reopening quote that has a zero bid or zero offer, or both), or notification that the Primary Listing Exchange is unable to reopen trading following a Trading Pause due to a systems or technology issue. In instances when the Primary Listing Exchange is unable to reopen due to a systems or technology issue, the Processor shall update the Price Bands no earlier than ten minutes after the beginning of the Trading Pause. The Commission believes that these changes are appropriate to clarify the requirements of the Processor to update the Price Bands in all situations following a Trading Pause. C. Trading Pauses Before the End of Regular Trading Hours The Participants propose to amend Section VII(C)(1) of the Plan to provide that if an NMS Stock is in a Trading Pause during the last ten minutes of trading before the end of Regular Trading Hours, the Primary Listing Exchange shall, rather than seek to resume trading through its established reopening procedures, attempt to execute a closing transaction using its established closing procedures. The Commission believes that this change is appropriate in the public interest, for the protection of investors and the maintenance of a fair and orderly market to accommodate the new standardized process for reopening trading. As noted above, all trading centers must wait to resume trading in an NMS Stock subject to a Trading Pause until the Primary Listing Exchange has reported a Reopening Price. It is possible that a Trading Pause that was declared before the last ten minutes of trading before the end of Regular Trading Hours could be extended until after the last ten minutes of trading before the end of Regular Trading Hours. The Commission believes that it is appropriate to amend the Plan to reflect in such case, that trading in the NMS Stock should not resume, and instead the Primary Listing Exchange should attempt to execute a closing transaction using established closing procedures. D. Synthetic Price Bands The Participants propose to amend Section V(A)(1) of the Plan to clarify that if the Processor has not yet disseminated Price Bands, but a Reference Price is available, a trading center may calculate and apply Synthetic Price Bands based on the same Reference Price that the Processor would use for calculating such Price Bands until the trading center receives Price Bands from the Processor. The Commission believes that this change is appropriate in the public interest, for the protection of investors and the maintenance of a fair and orderly market because it will make clear that, while a trading center may not resume trading in an NMS Stock following a Trading Pause without Price Bands in such NMS Stock, when a Reference Price is available, a trading center is permitted to calculate and apply its own Synthetic Price Bands before Price Bands have been received from the Processor. E. Straddle States In the Twelfth Amendment, the Participants proposed to remove provisions in the Plan related to Straddle States. In its Modification Letter, the Participants request that the Commission approve the Twelfth Amendment, as modified, to retain the provisions related to Straddle States.\20\ The Participants note that they intend to further study alternatives to eliminating Straddle States from the Plan. The Commission deems it necessary to modify the Twelfth Amendment so that the provisions related to Straddle States are retained. The Commission believes that further data analysis is appropriate to evaluate alternatives to eliminating Straddle States from the Plan. --------------------------------------------------------------------------- \20\ See Modification Letter, supra note 7. --------------------------------------------------------------------------- For the reasons noted above, the Commission finds that the Twelfth Amendment to the Plan, as modified, is consistent with Section 11A of the Act \21\ and Rule 608 thereunder.\22\ --------------------------------------------------------------------------- \21\ 15 U.S.C. 78k-1. \22\ 17 CFR 242.608. Consistent with their representations set forth in the Notice, the Commission expects the Participants to implement the Twelfth Amendment, as modified, no later than six months after the date of this order. --------------------------------------------------------------------------- [[Page 8554]] V. Conclusion It is therefore ordered, pursuant to Section 11A of the Act \23\ and Rule 608 thereunder,\24\ that the Twelfth Amendment to the Plan (File No. 4-631), as modified, be, and it hereby is, approved. --------------------------------------------------------------------------- \23\ 15 U.S.C. 78k-1. \24\ 17 CFR 242.608. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\25\ --------------------------------------------------------------------------- \25\ 17 CFR 200.30-3(a)(29). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-01717 Filed 1-25-17; 8:45 am] BILLING CODE 8011-01-P
![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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Plan related to Straddle States.7 This have requested the Commission to deem necessary or appropriate, if it
order approves the Twelfth Amendment modify the Twelfth Amendment to finds that the plan amendment is
to the Plan, as modified. retain the provisions related to Straddle ‘‘necessary or appropriate in the public
States in the Plan. interest, for the protection of investors
II. Description of the Proposal
and the maintenance of fair and orderly
In the Twelfth Amendment, the III. Summary of Comment Letters
markets, to remove impediments to, and
Participants propose to implement a The Commission received two perfect the mechanism of, a national
modified reopening process following a comment letters on the proposed market system, or otherwise in
Trading Pause.8 In particular, the Twelfth Amendment, both supporting furtherance of the purposes of the
Participants propose to amend the Plan the proposed changes to the Plan related Act.’’ 16 The Commission finds that the
to provide that a Trading Pause will to the reopening process. One Twelfth Amendment, as modified, is
continue until the Primary Listing commenter noted that the proposed consistent with Section 11A of the
Exchange has reopened trading using its amendments to the Plan along with the Act 17 and Rule 608 thereunder 18
established reopening procedures, even related proposed rule changes submitted because, for the reasons discussed
if such reopening is more than 10 by the exchanges 10 ‘‘should improve below it is appropriate in the public
minutes after the beginning of a Trading the transparency of the reopening interest, for the protection of investors
Pause, require that trading centers may process, allow reopening auctions to and the maintenance of fair and orderly
not resume trading in an NMS Stock establish more accurate prices, and markets, and that it removes
following a Trading Pause without Price make it less likely that trading in a impediments to, and perfects the
Bands in such NMS Stock, and delete security will be halted again shortly mechanism of, a national market
language made unnecessary in light of after trading resumes.’’ 11 This system. The Commission notes that the
the proposed reopening procedures.9 In commenter further noted that Participants proposed the Twelfth
addition, the Participants propose to ‘‘[I]mplementing these proposals also Amendment to address issues
address the situation where there is no should increase market confidence by experienced on August 24, 2015. In
Reopening Price from the Primary reducing the likelihood of the Limit Up- particular, the Participants believe that
Listing Exchange due to a systems or Limit Down Plan creating confusion the changes to the Plan set forth in the
technology issue and make related during volatile markets, when clarity Twelfth Amendment should reduce the
changes regarding how the Reference and certainty are most important.’’ 12 number of repeat Trading Pauses in a
Price would be determined and Price This commenter urged the Commission single NMS Stock and establish a more
Bands calculated and disseminated to approve the proposed Twelfth standardized process across Primary
following a resumption of trading. Amendment and corresponding rule Listing Exchanges in reopening trading
Further, the Participants propose to changes, but noted that the Twelfth following a Trading Pause.
amend the Plan to provide that if an Amendment ‘‘does not address the
NMS Stock is in a Trading Pause during A. Coordinated Reopening Procedures
discordance between the rules After a Trading Pause
the last ten minutes of trading before the governing clearly erroneous executions
end of Regular Trading Hours, the and the limit up-limit down price The Participants propose to remove
Primary Listing Exchange shall attempt bands, which contributes unnecessarily the language in Plan Section VII(B)(3)
to execute a closing transaction using its to uncertainty in the equity markets in that permits trading centers to begin
established closing procedures. Finally, volatile times.’’ 13 The second trading an NMS Stock ten minutes after
the Participants propose to clarify in the declaration of a Trading Pause in an
commenter urged the Commission to
Plan the limited circumstances in which NMS Stock if the Primary Listing
approve the Twelfth Amendment
a trading center may calculate and apply Exchange has not either reported a
‘‘without delay’’ and before considering
Price Bands when a Reference Price is Reopening Price or declared a
a change to the Plan recommended by
available but Price Bands have not been Regulatory Halt.19 Accordingly, Trading
the Equity Market Structure Advisory
disseminated by the Processor Pauses would continue until a Primary
Committee in which ‘‘securities in a
(‘‘Synthetic Price Bands’’). Listing Market reports a Reopening
Finally, in the Twelfth Amendment, limit state would not be halted pursuant
Price, except in limited circumstances
the Participants propose to remove to existing rules, but would be
discussed below. In addition, the
provisions related to Straddle States. permitted to trade within established
Participants propose to provide that
However, as described in the price bands.’’ 14 This commenter trading centers may not resume trading
Modification Letter, the Participants believes that ‘‘the Twelfth Amendment in an NMS Stock following a Trading
is an important step towards improving Pause without Price Bands in such NMS
7 See Letter from Elizabeth K. King, General the equity markets and minimizing the Stock.
Counsel and Corporate Secretary, NYSE to Brent J. likelihood of an event like August 24, The Commission believes that it is
Fields, Secretary, Commission, dated January 13, 2015.’’ 15 appropriate in the public interest, for
2017 (‘‘Modification Letter’’).
8 Unless otherwise specified, the terms used IV. Discussion and Commission the protection of investors and the
herein have the same meaning as set forth in the Findings maintenance of a fair and orderly
Plan. market to provide that a Trading Pause
9 The Primary Listing Exchanges filed proposed Rule 608 under Regulation NMS
rule changes pursuant to Section 19(b)(1) of the Act, provides that the Commission shall 16 17 CFR 242.608(b)(2).
15 U.S.C. 78s(b)(1), and Rule 19b–4 thereunder, 17 approve an NMS plan amendment, with 17 15
CFR 240.19b–4, relating to the changes to the U.S.C. 78k–1.
reopening procedures proposed in the Twelfth such changes or subject to such 18 17 CFR 242.608.
jstallworth on DSK7TPTVN1PROD with NOTICES
Amendment. See Securities Exchange Act Release conditions as the Commission may 19 The Participants also propose to amend Section
Nos. 79162 (October 26, 2016), 81 FR 75875 V(C) of the Plan to remove language, which
(November 1, 2016) (SR–BatsBZX–2016–61; 79158 10 See supra note 9. describes the first Reference Price in situations
(October 26, 2016), 81 FR 75879 November 1, 2016) 11 See when a Primary Listing Market does not reopen
ICI Letter, supra note 6 at 2.
(SR–NASDAQ–2016–131); and 79107 (October 18, 12 Id.
within ten minutes after the beginning of a Trading
2016), 81 FR 73159 (October 24, 2016) (SR– Pause. The Commission believes that with the
13 Id.
NYSEArca–2016–130). See also Securities adoption of the proposed amendments described
14 See Vanguard Letter, supra note 6, at 2.
Exchange Act Release No 79846, (January 19, 2017) above, the Plan text in Section V(C) is no longer
(SR–NYSEArca–2016–130). 15 Id. necessary.
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V. Conclusion II. Self-Regulatory Organization’s of the Act,6 in general, and furthers the
It is therefore ordered, pursuant to Statement of the Purpose of, and objectives of Sections 6(b)(4) and 6(b)(5)
Section 11A of the Act 23 and Rule 608 Statutory Basis for, the Proposed Rule of the Act,7 in particular, in that it
thereunder,24 that the Twelfth Change provides for the equitable allocation of
Amendment to the Plan (File No. 4– In its filing with the Commission, the reasonable dues, fees and other charges
631), as modified, be, and it hereby is, Exchange included statements among members and issuers and other
concerning the purpose of and basis for persons using any facility, and is not
approved.
the proposed rule change and discussed designed to permit unfair
For the Commission, by the Division of discrimination between customers,
Trading and Markets, pursuant to delegated any comments it received on the
proposed rule change. The text of these issuers, brokers, or dealers.
authority.25 The Exchange believes that
Eduardo A. Aleman, statements may be examined at the
elimination of the fees is reasonable
Assistant Secretary. places specified in Item IV below. The
because the Exchange no longer offers
Exchange has prepared summaries, set
[FR Doc. 2017–01717 Filed 1–25–17; 8:45 am] the service, thus making the fees
forth in sections A, B, and C below, of
BILLING CODE 8011–01–P irrelevant. The Exchange believes that
the most significant aspects of such
elimination of the fee and related rule
statements. text is an equitable allocation and is not
SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s unfairly discriminatory because there
COMMISSION Statement of the Purpose of, and are no longer subscribers to the service,
Statutory Basis for, the Proposed Rule and elimination of the fee and related
[Release No. 34–79849; File No. SR– Change rule text will not impact members
NASDAQ–2017–005] differently. Thus, the proposed change
1. Purpose will not discriminate among members in
Self-Regulatory Organizations; The The purpose of the proposed rule any way and will be allocated equitably.
NASDAQ Stock Market LLC; Notice of change is to eliminate VTE terminal fees
Filing and Immediate Effectiveness of under Rule 7015(h), since the Exchange B. Self-Regulatory Organization’s
Proposed Rule Change To Eliminate no longer offers VTE terminal Statement on Burden on Competition
Fees at Rule 7015(h) Assessed for VTE connectivity. A VTE terminal was a The Exchange does not believe that
Terminal Connectivity basic front-end user interface used by the proposed rule change will impose
Nasdaq members to connect to, and any burden on competition not
January 19, 2017.
enter orders in, The Nasdaq Market necessary or appropriate in furtherance
Pursuant to Section 19(b)(1) of the of the purposes of the Act. The
Securities Exchange Act of 1934 Center. Members using VTE terminals
paid the exchanges and market centers proposed change removes fees and
(‘‘Act’’), 1 and Rule 19b–4 thereunder,2 related text from the rules, which
notice is hereby given that on January separately for data feeds and services
provided by Nasdaq, other exchanges or applied to a connectivity service that
11, 2017, The NASDAQ Stock Market the Exchange no longer offers. The
LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed market centers through VTE.3
Effective June 1, 2016, the Exchange Exchange notes that VTE connectivity
with the Securities and Exchange was entirely optional and members were
increased the fees assessed for VTE
Commission (‘‘SEC’’ or ‘‘Commission’’) able avail themselves of numerous other
connectivity, noting that the pricing
the proposed rule change as described means of accessing The Nasdaq Market
changes were warranted in order to
in Items I, II, and III, below, which Items Center. In fact, the Exchange determined
appropriately balance the decreasing
have been prepared by the Exchange. to decommission the connectivity
demand for the product with increasing
The Commission is publishing this option because of declining
platform, overhead, and technology
notice to solicit comments on the subscribership, the age of the
infrastructure costs.4 The Exchange also
proposed rule change from interested technology, and because members have
noted that, because VTE was based on
persons. other options for connecting to, and
outdated technology and that members
I. Self-Regulatory Organization’s have other options for connecting to, entering orders in, The Nasdaq Market
Statement of the Terms of Substance of and entering orders in, The Nasdaq Center. Members recognized the limited
the Proposed Rule Change Market Center, Nasdaq planned to phase utility of the connectivity option in light
out the service in its entirety on or of more modern options, and over time
The Exchange proposes to eliminate
before January 31, 2017.5 There are all subscribers chose to cancel their
the Exchange’s fees at Rule 7015(h)
currently no subscribers to VTE subscriptions. Thus, the proposed
assessed for VTE terminal connectivity,
terminals, and the Exchange has begun change is not burdening competition in
which is no longer offered by the
the process of decommissioning the any way, but rather reflects the
Exchange.
service. Accordingly, the Exchange is consequences of robust competition
The text of the proposed rule change
proposing to eliminate the VTE terminal where trading venues are compelled to
is available on the Exchange’s Web site
fees and related text from its rulebook. offer superior connectivity options,
at http://nasdaq.cchwallstreet.com, at
which ultimately supplant connectivity
the principal office of the Exchange, and 2. Statutory Basis based on old technology.
at the Commission’s Public Reference
The Exchange believes that its
Room. C. Self-Regulatory Organization’s
proposal is consistent with Section 6(b)
Statement on Comments on the
jstallworth on DSK7TPTVN1PROD with NOTICES
Commission expects the Participants to implement 3 Such fees are filed with the SEC and separately Proposed Rule Change Received From
the Twelfth Amendment, as modified, no later than assessed by the exchanges and market centers at the Members, Participants, or Others
six months after the date of this order. same rate irrespective of the method of accessing
23 15 U.S.C. 78k–1.
the data feeds.
No written comments were either
24 17 CFR 242.608. 4 Securities Exchange Act Release No. 78051 solicited or received.
25 17 CFR 200.30–3(a)(29).
(June 13, 2016), 81 FR 39739 (June 17, 2016) (SR–
1 15 U.S.C. 78s(b)(1). NASDAQ–2016–078). 6 15 U.S.C. 78f(b).
2 17 CFR 240.19b–4. 5 Id. 7 15 U.S.C. 78f(b)(4) and (5).
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Document Created: 2017-01-26 00:05:06
Document Modified: 2017-01-26 00:05:06
| 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 8551 |
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