Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Clarifying the Exchange's Use of Certain Data Feeds for Order Handling and Execution, Order Routing, and Regulatory Compliance, 45572-45574 [2014-18382]

Download as PDF 45572 Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Notices identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CHX– 2014–10 and should be submitted on or before August 26, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–18385 Filed 8–4–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72708; File No. SR– NYSEArca–2014–82] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Clarifying the Exchange’s Use of Certain Data Feeds for Order Handling and Execution, Order Routing, and Regulatory Compliance July 29, 2014. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on July 18, 2014, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. mstockstill on DSK4VPTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to clarify the Exchange’s use of certain data feeds for order handling and execution, order routing, and regulatory compliance. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included 14 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 18:16 Aug 04, 2014 Jkt 232001 statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On June 5, 2014, in a speech entitled ‘‘Enhancing Our Market Equity Structure,’’ [sic] Mary Jo White, Chair of the Securities and Exchange Commission (‘‘SEC’’ or the ‘‘Commission’’) requested the equity exchanges to file with the Commission the data feeds used for purposes of (1) order handling and execution (e.g., with pegged or midpoint orders); (2) order routing, and (3) regulatory compliance, if applicable.4 Subsequent to the Chair’s speech, the Division of Trading and Markets stated that it ‘‘believes there is a need for clarity regarding whether (1) the SIP data feeds, (2) proprietary data feeds, or (3) a combination thereof,’’ are used for these purposes and requested that proposed rule changes be filed that disclose such information.5 The stated goal of disclosing this information is to provide broker-dealers and investors with enhanced transparency to better assess the quality of an exchange’s execution and routing services. The data feeds available for the purposes of order handling and execution, order routing, and regulatory compliance include the exclusive securities information processor (‘‘SIP’’) data feeds 6 or proprietary data feeds from individual market centers. 4 See Mary Jo White, Chair, Securities and Exchange Commission, Speech at the Sandler, O’Neill & Partners, L.P. Global Exchange and Brokerage Conference (June 5, 2014) (available at www.sec.gov/News/Speech/Detail/Speech/ 1370542004312#.U5HI-fmwJiw). 5 See Letter from James Burns, Deputy Director, Division of Trading and Markets, Securities and Exchange Commission, to Jeffrey C. Sprecher, Chief Executive Officer, Intercontinental Exchange, Inc., dated June 20, 2014. 6 The SIP feeds are disseminated pursuant to effective joint-industry plans as required by Rule 603(b) of Regulation NMS. 17 CFR 242.603(b). The three joint-industry plans are: (1) The CTA Plan, which is operated by the Consolidated Tape Association and disseminates transaction information for securities with the primary listing market on exchanges other than NASDAQ Stock Market LLC (‘‘Nasdaq’’): (2) The CQ Plan, which disseminates consolidated quotation information for securities with their primary listing on exchanges other than Nasdaq; and (3) the Nasdaq UTP Plan, which disseminates consolidated PO 00000 Frm 00151 Fmt 4703 Sfmt 4703 (i) Overview of Exchange Rules Governing Order Handling, Execution, and Routing The Exchange adopted its order execution and order routing rules to comply with Regulation NMS.7 As such, before executing any arriving or resting interest, the Exchange evaluates whether the execution would trade through a protected quotation 8 in violation of Rule 611 of Regulation NMS (‘‘Rule 611’’),9 and if so, whether it is eligible for an exception to Rule 611. The Exchange also evaluates whether displaying a bid or offer would result in locking or crossing a protected quotation in violation of Rule 610(d) of Regulation NMS (‘‘Rule 610(d)’’),10 or if it is eligible for an exception to Rule 610(d). If any protected quotation is superior to the Exchange’s best bid or offer, the Exchange may route a marketable order as an Intermarket Sweep Order (‘‘ISO’’) 11 (if consistent with the order’s instructions), unless a trade-through exception applies under Rule 611(b). Likewise, if the display of an order would lock or cross a protected quotation, the Exchange may route such interest to one or more protected quotations, if consistent with the order’s instructions. In addition, if consistent with an order’s instructions, the Exchange may also route an order to other available quotes in the Exchange’s routing determination.12 The Exchange further notes that its routing brokers do transaction and quotation information for securities with their primary listing on Nasdaq. 7 See Securities Exchange Act Release No. 54549 (Sept. 29, 2006), 71 FR 59179 (Oct. 6, 2006) (SR– NYSEArca–2006–59) (Order approving the Exchange’s rule proposal to bring its rules into conformity with Regulation NMS). 8 A ‘‘protected bid’’ or ‘‘protected offer’’ means a quotation in an NMS stock that (i) is displayed by an automated trading center; (ii) is disseminated pursuant to an effective national market system plan; and (iii) is an automated quotation that is the best bid or best offer of a national securities exchange, the best bid or best offer of The Nasdaq Stock Market, Inc., or the best bid or best offer of a national securities association other than the best bid or best offer of The Nasdaq Stock Market, Inc. 17 CFR 242.600(b)(57). A ‘‘protected quotation’’ means a protected bid or a protected offer. See 17 CRF 242.600(b)(58). The PBBO is the best-priced protected bid and the best-priced protected offer. 9 17 CFR 242.611. 10 17 CFR 242.610(d). 11 An ISO is defined as a limit order for a NMS Stock that (i) when routed to a trading center, is identified as an ISO; and (ii) simultaneously with the routing of the ISO, one or more additional limit orders, as necessary, are routed to execute against the full displayed size of any protected bid, in the case of a limit order to sell, or the full displayed size of any protected offer, in the case of a limit order to buy, for the MNMS [sic] stock with a price that is superior to the limit price of the ISO. See also Rule 7.37(d)(2)(B)(i) 12 See NYSE Arca Equities Rules 7.37(d)(2)(A) and 7.37(d)(4). E:\FR\FM\05AUN1.SGM 05AUN1 Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Notices not have any discretion about where to route such interest.13 (ii) Exchange’s Stated Policy, Practice, or Interpretation With Respect to the Meaning, Administration, or Enforcement of an Existing Rule Regarding How and for What Purpose it Uses Data Feeds The Exchange uses the following feeds to determine protected quotations on markets other than the Exchange for purposes of compliance with Rule 611 and Rule 610(d), including identifying where to route ISOs, to calculate the PBBO or NBBO for purposes of order types that are priced based on the PBBO or NBBO,14 to route interest pursuant to NYSE Arca Equities Rule 7.37(d)(2)(A), and to determine the NBB for purposes of complying with Rule 201 of Regulation SHO and NYSE Arca Equities Rule 7.16(f): 15 • BATS Y-Exchange, Inc., Chicago Stock Exchange, Inc., and NYSE MKT LLC: SIP data feeds only. • BATS Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc. NASDAQ OMX BX LLC, NASDAQ OMX PHLX LLC, NASDAQ Stock Market LLC and New York Stock Exchange LLC: A combination of proprietary data feeds from each respective exchange and the SIP data feeds. In addition, the Exchange receives data feeds directly from broker dealers for purposes of routing interest pursuant to NYSE Arca Equities Rule 7.37(d)(2)(A). 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the ‘‘Act’’),16 in general, and furthers the objectives of Section 6(b)(5),17 in particular, because it is designed to 13 See NYSE Arca Equities Rule 7.45(b)(1). NBBO is defined as the best bid and best offer of an NMS security that is calculated and disseminated on a current and continuing basis by a plan processor pursuant to an effective national market system plan. 17 CFR 242.600(b)(3). The Exchange notes that the NBBO may differ from the PBBO because the NBBO includes Manual Quotations, which are defined as any quotation other than an automated quotation. 17 CFR 242.600(b)(37). By contrast, a protected quotation is an automated quotation that is the best bid or offer of a national securities exchange. 17 CFR 242.60)(b)(57)(iii) [sic]. 15 NYSE Arca Equities Rule 7.16(f) requires that Exchange systems not execute or display a short sale order with respect to a covered security at a price that is less than or equal to the current NBB if the price of that security decreases by 10% or more, as determined by the Exchange, from the security’s closing price on the Exchange at the end of regular trading hours on the prior day. 16 15 U.S.C. 78f(b). 17 15 U.S.C. 78f(b)(5). mstockstill on DSK4VPTVN1PROD with NOTICES 14 The VerDate Mar<15>2010 18:16 Aug 04, 2014 Jkt 232001 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. The Exchange believes that the proposed rule change removes impediments to and perfects the mechanism of a free and open market because it provides enhanced transparency to better assess the quality of an exchange’s execution and routing services. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed change is not designed to address any competitive issue but rather would provide the public and investors with information about which data feeds that the Exchange uses for execution and routing decisions. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act 18 and Rule 19b– 4(f)(6) thereunder.19 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may 18 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission deems this requirement to have been met. 19 17 PO 00000 Frm 00152 Fmt 4703 Sfmt 4703 45573 temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2014–82 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2014–82. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make E:\FR\FM\05AUN1.SGM 05AUN1 45574 Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Notices available publicly. All submissions should refer to File Number SR– NYSEArca–2014–82 and should be submitted on or before August 26, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–18382 Filed 8–4–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION I. Description of the Proposal [Release No. 34–72714; File No. SR– NYSEArca–2014–41] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings to Determine Whether to Approve or Disapprove Proposed Rule Change, as Modified by Amendment Nos. 1 and 4 Thereto, Relating to Listing and Trading of Shares of the Reality Shares DIVS Index ETF under NYSE Arca Equities Rule 5.2(j)(3) July 29, 2014. On April 11, 2014, NYSE Arca, Inc. (‘‘Exchange’’) 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 list and trade shares (‘‘Shares’’) of the Reality Shares DIVS Index ETF (‘‘Fund’’) (formerly, Reality Shares Isolated Dividend Growth Index ETF) under NYSE Arca Equities Rule 5.2(j)(3). The proposed rule change was published for comment in the Federal Register on April 30, 2014.3 On May 6, 2014, the Exchange filed Amendment No. 1 to the proposed rule change, which amended and replaced the proposed rule change in its entirety.4 On June 6, 2014, the Exchange filed Amendment No. 4 to the proposed rule change.5 On June 13, 2014, pursuant to 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 72015 (Apr. 24, 2014), 79 FR 24475 (‘‘Notice’’). 4 In Amendment No. 1, the Exchange clarified the valuation of investments for purposes of calculating net asset value, provided additional details regarding the dissemination of the Disclosed Portfolio, and made other minor technical edits to the proposed rule change. Amendment No. 1 provided clarification to the proposed rule change, and because it does not materially affect the substance of the proposed rule change or raise novel or unique regulatory issues, Amendment No. 1 is not subject to notice and comment. 5 The Exchange filed Amendment No. 2 on June 4, 2014 and withdrew it on June 5, 2014, and filed Amendment No. 3 on June 5, 2014 and withdrew it on June 6, 2014. Amendment No. 4 supersedes mstockstill on DSK4VPTVN1PROD with NOTICES 1 15 VerDate Mar<15>2010 18:16 Aug 04, 2014 Jkt 232001 Section 19(b)(2) of the Act,6 the Commission designated a longer 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.7 The Commission received no comment letters on the proposed rule change. This Order institutes proceedings under Section 19(b)(2)(B) of the Act 8 to determine whether to approve or disapprove the proposed rule change, as modified by Amendment Nos. 1 and 4 thereto. A. In General The Exchange proposes to list and trade Shares of the Fund under NYSE Arca Equities Rule 5.2(j)(3), which governs the listing and trading of Investment Company Units on the Exchange.9 The Shares of the Fund will be offered by the Reality Shares ETF Trust (formerly, the ERNY Financial ETF Trust) (‘‘Trust’’). The Trust will be registered with the Commission as an open-end management investment company.10 Reality Shares Advisors, both Amendment Nos. 2 and 3. In Amendment No. 4, the Exchange amended the proposal to reflect a name change to the Fund and the underlying index. Specifically, the Exchange replaced each reference to ‘‘Reality Shares Isolated Dividend Growth Index ETF’’ in the proposal with ‘‘Reality Shares DIVS Index ETF’’ and replaced each reference to ‘‘Reality Shares Isolated Dividend Growth Index’’ in the proposal with ‘‘Reality Shares DIVS Index.’’ Amendment No. 4 is a technical amendment and is not subject to notice and comment as it does not materially affect the substance of the filing. 6 15 U.S.C. 78s(b)(2). 7 See Securities Exchange Act Release No. 72385, 79 FR 35205 (Jun. 19, 2014). The Commission designated a longer period within which to take action on the proposed rule change and designated July 29, 2014, as the date by which it should approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change. 8 15 U.S.C. 78s(b)(2)(B). 9 NYSE Arca Equities Rule 5.2(j)(3)(A) provides that an Investment Company Unit is a security that represents an interest in a registered investment company that holds securities comprising, or otherwise based on or representing an interest in, an index or portfolio of securities (or holds securities in another registered investment company that holds securities comprising, or otherwise based on or representing an interest in, an index or portfolio of securities). 10 According to the Exchange, the Trust will be registered under the Investment Company Act of 1940 (‘‘1940 Act’’). On November 12, 2013, the Trust filed a registration statement on Form N–1A under the Securities Act of 1933 (‘‘1933 Act’’) and under the 1940 Act relating to the Fund, as amended by Pre-Effective Amendment Number 1, filed with the Commission on February 6, 2014 (File Nos. 333–192288 and 811–22911) (the ‘‘Registration Statement’’). The description of the operation of the Trust and the Fund herein is based, in part, on the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. Investment Company Act Release No. 30678 PO 00000 Frm 00153 Fmt 4703 Sfmt 4703 LLC (formerly, ERNY Financial Advisors, LLC) will serve as the investment adviser to the Fund (‘‘Adviser’’). ALPS Distributors, Inc. will be the principal underwriter and distributor of the Fund’s Shares. The Bank of New York Mellon will serve as administrator, custodian and transfer agent for the Fund. B. The Exchange’s Description of the Fund The Exchange has made the following representations concerning the Fund. The Fund will seek long-term capital appreciation by tracking the performance of the Reality Shares DIVS Index (‘‘Index’’). The Index was developed and is maintained by Reality Shares, Inc. (‘‘Index Provider’’).11 The Adviser is a wholly-owned subsidiary of the Index Provider. The Index Provider is not registered as an investment adviser or broker-dealer and is not affiliated with any broker-dealer. The Adviser is not registered as a brokerdealer and is not affiliated with any broker-dealer.12 1. Index Methodology The Index will be calculated using a proprietary, rules-based methodology designed to track market expectations for dividend growth conveyed in realtime using the mid-point of the bid-ask spread on S&P 500 Index options and options on exchange-traded funds (‘‘ETFs’’) 13 designed to track the S&P (Aug. 27, 2013) (‘‘Exemptive Order’’). The Exchange states that investments made by the Fund will comply with the conditions set forth in the Exemptive Order. 11 The Index will be calculated by International Data Corporation, which is not affiliated with the Adviser or the Index Provider, and which is not a broker-dealer or fund advisor. Commentary .01(b)(1) to NYSE Arca Equities Rule 5.2(j)(3) provides that, if the applicable index is maintained by a fund advisor or a broker-dealer, the fund advisor or broker-dealer shall erect a ‘‘fire wall’’ around the personnel who have access to information concerning changes and adjustments to the index, and the index shall be calculated by a third party who is not a broker-dealer or fund advisor. 12 The Adviser and the Index Provider have represented that a fire wall exists around the respective personnel who have access to information concerning changes and adjustments to the Index. The Exchange notes that, in the event (a) the Adviser, any sub-adviser, or the Index Provider becomes registered as a broker-dealer or newly affiliated with a broker-dealer, or (b) any new adviser, sub-adviser, or Index Provider is a registered broker-dealer or becomes affiliated with a broker-dealer, that entity will implement a fire wall with respect to their relevant personnel or broker-dealer affiliate, as applicable, regarding access to information concerning the composition of or changes to the portfolio and will be subject to procedures designed to prevent the use and dissemination of material, non-public information regarding the portfolio. 13 For purposes of this proposed rule change, such ETFs include Investment Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)) and E:\FR\FM\05AUN1.SGM 05AUN1

Agencies

[Federal Register Volume 79, Number 150 (Tuesday, August 5, 2014)]
[Notices]
[Pages 45572-45574]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18382]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72708; File No. SR-NYSEArca-2014-82]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Clarifying the 
Exchange's Use of Certain Data Feeds for Order Handling and Execution, 
Order Routing, and Regulatory Compliance

July 29, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on July 18, 2014, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to clarify the Exchange's use of certain data 
feeds for order handling and execution, order routing, and regulatory 
compliance. The text of the proposed rule change is available on the 
Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    On June 5, 2014, in a speech entitled ``Enhancing Our Market Equity 
Structure,'' [sic] Mary Jo White, Chair of the Securities and Exchange 
Commission (``SEC'' or the ``Commission'') requested the equity 
exchanges to file with the Commission the data feeds used for purposes 
of (1) order handling and execution (e.g., with pegged or midpoint 
orders); (2) order routing, and (3) regulatory compliance, if 
applicable.\4\ Subsequent to the Chair's speech, the Division of 
Trading and Markets stated that it ``believes there is a need for 
clarity regarding whether (1) the SIP data feeds, (2) proprietary data 
feeds, or (3) a combination thereof,'' are used for these purposes and 
requested that proposed rule changes be filed that disclose such 
information.\5\ The stated goal of disclosing this information is to 
provide broker-dealers and investors with enhanced transparency to 
better assess the quality of an exchange's execution and routing 
services.
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    \4\ See Mary Jo White, Chair, Securities and Exchange 
Commission, Speech at the Sandler, O'Neill & Partners, L.P. Global 
Exchange and Brokerage Conference (June 5, 2014) (available at 
www.sec.gov/News/Speech/Detail/Speech/1370542004312#.U5HI-fmwJiw).
    \5\ See Letter from James Burns, Deputy Director, Division of 
Trading and Markets, Securities and Exchange Commission, to Jeffrey 
C. Sprecher, Chief Executive Officer, Intercontinental Exchange, 
Inc., dated June 20, 2014.
---------------------------------------------------------------------------

    The data feeds available for the purposes of order handling and 
execution, order routing, and regulatory compliance include the 
exclusive securities information processor (``SIP'') data feeds \6\ or 
proprietary data feeds from individual market centers.
---------------------------------------------------------------------------

    \6\ The SIP feeds are disseminated pursuant to effective joint-
industry plans as required by Rule 603(b) of Regulation NMS. 17 CFR 
242.603(b). The three joint-industry plans are: (1) The CTA Plan, 
which is operated by the Consolidated Tape Association and 
disseminates transaction information for securities with the primary 
listing market on exchanges other than NASDAQ Stock Market LLC 
(``Nasdaq''): (2) The CQ Plan, which disseminates consolidated 
quotation information for securities with their primary listing on 
exchanges other than Nasdaq; and (3) the Nasdaq UTP Plan, which 
disseminates consolidated transaction and quotation information for 
securities with their primary listing on Nasdaq.
---------------------------------------------------------------------------

(i) Overview of Exchange Rules Governing Order Handling, Execution, and 
Routing
    The Exchange adopted its order execution and order routing rules to 
comply with Regulation NMS.\7\ As such, before executing any arriving 
or resting interest, the Exchange evaluates whether the execution would 
trade through a protected quotation \8\ in violation of Rule 611 of 
Regulation NMS (``Rule 611''),\9\ and if so, whether it is eligible for 
an exception to Rule 611. The Exchange also evaluates whether 
displaying a bid or offer would result in locking or crossing a 
protected quotation in violation of Rule 610(d) of Regulation NMS 
(``Rule 610(d)''),\10\ or if it is eligible for an exception to Rule 
610(d).
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    \7\ See Securities Exchange Act Release No. 54549 (Sept. 29, 
2006), 71 FR 59179 (Oct. 6, 2006) (SR-NYSEArca-2006-59) (Order 
approving the Exchange's rule proposal to bring its rules into 
conformity with Regulation NMS).
    \8\ A ``protected bid'' or ``protected offer'' means a quotation 
in an NMS stock that (i) is displayed by an automated trading 
center; (ii) is disseminated pursuant to an effective national 
market system plan; and (iii) is an automated quotation that is the 
best bid or best offer of a national securities exchange, the best 
bid or best offer of The Nasdaq Stock Market, Inc., or the best bid 
or best offer of a national securities association other than the 
best bid or best offer of The Nasdaq Stock Market, Inc. 17 CFR 
242.600(b)(57). A ``protected quotation'' means a protected bid or a 
protected offer. See 17 CRF 242.600(b)(58). The PBBO is the best-
priced protected bid and the best-priced protected offer.
    \9\ 17 CFR 242.611.
    \10\ 17 CFR 242.610(d).
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    If any protected quotation is superior to the Exchange's best bid 
or offer, the Exchange may route a marketable order as an Intermarket 
Sweep Order (``ISO'') \11\ (if consistent with the order's 
instructions), unless a trade-through exception applies under Rule 
611(b). Likewise, if the display of an order would lock or cross a 
protected quotation, the Exchange may route such interest to one or 
more protected quotations, if consistent with the order's instructions. 
In addition, if consistent with an order's instructions, the Exchange 
may also route an order to other available quotes in the Exchange's 
routing determination.\12\ The Exchange further notes that its routing 
brokers do

[[Page 45573]]

not have any discretion about where to route such interest.\13\
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    \11\ An ISO is defined as a limit order for a NMS Stock that (i) 
when routed to a trading center, is identified as an ISO; and (ii) 
simultaneously with the routing of the ISO, one or more additional 
limit orders, as necessary, are routed to execute against the full 
displayed size of any protected bid, in the case of a limit order to 
sell, or the full displayed size of any protected offer, in the case 
of a limit order to buy, for the MNMS [sic] stock with a price that 
is superior to the limit price of the ISO. See also Rule 
7.37(d)(2)(B)(i)
    \12\ See NYSE Arca Equities Rules 7.37(d)(2)(A) and 7.37(d)(4).
    \13\ See NYSE Arca Equities Rule 7.45(b)(1).
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(ii) Exchange's Stated Policy, Practice, or Interpretation With Respect 
to the Meaning, Administration, or Enforcement of an Existing Rule 
Regarding How and for What Purpose it Uses Data Feeds
    The Exchange uses the following feeds to determine protected 
quotations on markets other than the Exchange for purposes of 
compliance with Rule 611 and Rule 610(d), including identifying where 
to route ISOs, to calculate the PBBO or NBBO for purposes of order 
types that are priced based on the PBBO or NBBO,\14\ to route interest 
pursuant to NYSE Arca Equities Rule 7.37(d)(2)(A), and to determine the 
NBB for purposes of complying with Rule 201 of Regulation SHO and NYSE 
Arca Equities Rule 7.16(f): \15\
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    \14\ The NBBO is defined as the best bid and best offer of an 
NMS security that is calculated and disseminated on a current and 
continuing basis by a plan processor pursuant to an effective 
national market system plan. 17 CFR 242.600(b)(3). The Exchange 
notes that the NBBO may differ from the PBBO because the NBBO 
includes Manual Quotations, which are defined as any quotation other 
than an automated quotation. 17 CFR 242.600(b)(37). By contrast, a 
protected quotation is an automated quotation that is the best bid 
or offer of a national securities exchange. 17 CFR 
242.60)(b)(57)(iii) [sic].
    \15\ NYSE Arca Equities Rule 7.16(f) requires that Exchange 
systems not execute or display a short sale order with respect to a 
covered security at a price that is less than or equal to the 
current NBB if the price of that security decreases by 10% or more, 
as determined by the Exchange, from the security's closing price on 
the Exchange at the end of regular trading hours on the prior day.
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     BATS Y-Exchange, Inc., Chicago Stock Exchange, Inc., and 
NYSE MKT LLC: SIP data feeds only.
     BATS Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, 
Inc. NASDAQ OMX BX LLC, NASDAQ OMX PHLX LLC, NASDAQ Stock Market LLC 
and New York Stock Exchange LLC: A combination of proprietary data 
feeds from each respective exchange and the SIP data feeds.
    In addition, the Exchange receives data feeds directly from broker 
dealers for purposes of routing interest pursuant to NYSE Arca Equities 
Rule 7.37(d)(2)(A).
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\16\ in general, and 
furthers the objectives of Section 6(b)(5),\17\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system and, 
in general, to protect investors and the public interest. The Exchange 
believes that the proposed rule change removes impediments to and 
perfects the mechanism of a free and open market because it provides 
enhanced transparency to better assess the quality of an exchange's 
execution and routing services.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change is not 
designed to address any competitive issue but rather would provide the 
public and investors with information about which data feeds that the 
Exchange uses for execution and routing decisions.

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

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

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \18\ and Rule 19b-
4(f)(6) thereunder.\19\
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Commission deems this requirement to have been met.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2014-82 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2014-82. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make

[[Page 45574]]

available publicly. All submissions should refer to File Number SR-
NYSEArca-2014-82 and should be submitted on or before August 26, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18382 Filed 8-4-14; 8:45 am]
BILLING CODE 8011-01-P
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