Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 13-Equities Relating to Pegging Interest, 16707-16710 [2015-07135]

Download as PDF Federal Register / Vol. 80, No. 60 / Monday, March 30, 2015 / Notices from the pilot program without interruption after April 14, 2015. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because such waiver would allow the pilot to continue uninterrupted, thereby avoiding any potential investor confusion that could result from temporary interruption in the pilot program. For this reason, the Commission designates the proposal operative on April 14, 2015.15 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. 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: mstockstill on DSK4VPTVN1PROD with NOTICES 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–2015–22 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEARCA–2015–22. 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 15 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). VerDate Sep<11>2014 19:57 Mar 27, 2015 Jkt 235001 16707 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 such filing also will be available for inspection and copying at the principal offices of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEARCA–2015–22, and should be submitted on or before April 20, 2015. www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Brent J. Fields, Secretary. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change [FR Doc. 2015–07136 Filed 3–27–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–74571; File No. SR– NYSEMKT–2015–19] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 13— Equities Relating to Pegging Interest March 24, 2015. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on March 17, 2015, NYSE MKT LLC (‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 13—Equities (Orders and Modifiers) relating to pegging interest. The text of the proposed rule change is available on the Exchange’s Web site at 16 17 CFR 200.30–3(a)(12), (59). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 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. 1. Purpose The Exchange proposes to amend Rule 13—Equities (‘‘Rule 13’’) relating to pegging interest to provide that if the protected best bid or offer (‘‘PBBO’’) is not within the range of the pegging interest, the pegging interest would peg to the ‘‘next best-priced available displayable interest,’’ rather than the ‘‘next best-priced available interest.’’ This amendment would therefore exclude non-displayed interest from consideration as part of the ‘‘next bestpriced available interest’’ under the rule. Background Under current Rule 13, pegging interest pegs to prices based on (i) a PBBO, which may be available on the Exchange or an away market, or (ii) interest that establishes a price on the Exchange.4 In addition, pegging interest will peg only within a price range specified by the floor broker submitting the order. Thus, if the PBBO is not within the specified price range of the pegging interest, the pegging interest will instead peg to the next available best-priced interest that is within the specified price range.5 For example, if pegging interest to buy 100 shares has a specified price range up to $10.00, but the best protected bid (‘‘PBB’’) of 100 shares is $10.01, then such pegging interest could not peg to the $10.01 PBB because it is not within the specified price range of the pegging interest. The pegging interest would instead peg to 4 See paragraph (a)(3) to Rule 13 governing pegging interest. 5 See paragraph (a)(4) to Rule 13 governing pegging interest. E:\FR\FM\30MRN1.SGM 30MRN1 16708 Federal Register / Vol. 80, No. 60 / Monday, March 30, 2015 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES the next available best-priced interest within the specified price range of up to $10.00.6 The ‘‘next available best-priced interest’’ concept in the current rule was originally expressed in a different fashion (when pegging was based on the Exchange’s BBO, rather than the PBBO), but the basic functionality has always been the same. Specifically, when the pegging interest was introduced in 2006 on the New York Stock Exchange LLC (‘‘NYSE’’), if the Exchange BBO was higher (lower) than the price limit on the pegging interest to buy (sell), the pegging interest would peg to the highest (lowest) price at which there was other interest within the pegging price range.7 In 2008, the NYSE introduced Non-Displayed Reserve Orders, without changing the underlying functionality of pegging interest to exclude the prices of such orders from the evaluation of what constitutes the highest (lowest) price at which there is other interest available within the range of the pegging interest.8 In 2011, the Exchange amended the rule governing pegging interest to make a non-substantive change to the rule text to use the term 6 See paragraph (a)(4)(A) to Rule 13 governing pegging interest. Similarly, if pegging interest would peg to a price that would lock or cross the Exchange best offer or bid, the pegging interest would instead peg to the next available best-priced interest that would not lock or cross the Exchange best bid or offer. See paragraph (c)(1) to Rule 13 governing pegging interest. 7 On October 1, 2008, the Commission approved the Exchange’s rule proposal to establish new membership, member firm conduct, and equity trading rules that were based on the existing NYSE rules to reflect that equities trading on the Exchange would be supported by the NYSE’s trading system. See Securities Exchange Act Release No. 58705 (Oct. 1, 2008), 73 FR 58995 (Oct. 8, 2008) (SR– Amex–2008–63) (approval order). Because the Exchange’s rules are based on the existing NYSE rules, the Exchange believes that pre-October 1, 2008 NYSE rule filings provide guidance concerning Exchange equity rules. See Securities Exchange Act Release No. 54577 (Oct. 5, 2006), 71 FR 60208, 60210–11 (Oct. 12, 2006) (SR–NYSE– 2006–36) (‘‘Pegging Approval Order’’) (order approving, among other things, introduction of pegging functionality for Floor brokers, including ‘‘if the Exchange best bid is higher than the ceiling price of a pegging buy-side e-Quote or d-Quote, the e-Quote or d-Quote would remain at its quote price or the highest price at which there is other interest within its pegging price range, whichever is higher (consistent with the limit price of the order underlying the e-Quote or d-Quote). Similarly, if the Exchange best offer is lower than the floor price of a pegging sell-side e-Quote or d-Quote, the e-Quote or d-Quote would remain at its quote price or the lowest price at which there is other interest within its pegging price range, whichever is lower (consistent with the limit price of the order underlying the e-Quote or d-Quote).’’ (emphasis added)). 8 See Securities Exchange Act Release No. 59022 (Nov. 26, 2008), 73 FR 73683 (Dec. 3, 2008) (SR– NYSEALTR–2008–10) (introducing Non-Display Reserve Orders). VerDate Sep<11>2014 19:57 Mar 27, 2015 Jkt 235001 ‘‘next available best-priced non-pegging interest’’ to describe the highest (lowest) priced interest in the Exchange Book or a protected bid or offer on an away market to which pegging interest to buy (sell) could peg.9 Accordingly, the next available best-priced interest for pegging interest to buy (sell) is the next highest (lowest)-priced buy (sell) interest within Exchange systems or an away market protected quote that is available for an execution at any given time. That interest could be same-side nonmarketable displayable interest or sameside non-marketable non-displayable interest. Taking the above example, assume that the next price points on the Exchange’s book priced below the $10.01 PBB are a Non-Display Reserve Order to buy 100 for $9.99 and a Limit Order to buy 100 for $9.98. Because the Non-Display Reserve Order is the next available best-priced interest within the specified price range, the pegging interest would peg to the $9.99 price of the Non-Display Reserve Order. Proposed Rule Change The Exchange proposes to revise its rule to limit the type of interest to which pegging interest would peg if the PBBO is not within the specified price range of the pegging interest. As proposed, if the PBBO is not within the specified price range, the pegging interest would only peg to the next available best-priced displayable interest. The term ‘‘displayable’’ is defined in Rule 72(a)(i) as that portion of interest that could be published as, or as part of, the Exchange BBO and includes non-marketable odd-lot and round-lot orders. Using the above example, under the proposed change, the pegging interest to buy would instead peg to the Limit Order to buy for $9.98, and not the higher-priced Non-Display Reserve Order to buy for $9.99. The Exchange also proposes to make a conforming change to paragraph (c)(1) of Rule 13 to provide that if pegging 9 See Securities Exchange Act Release No. 66032 (Dec. 22, 2011), 76 FR 82009 (Dec. 29, 2011) (SR– NYSEAmex–2011–99) (‘‘Because the next available best-priced non-pegging interest may be on an away market, the Exchange further proposes to amend paragraph (vii) to Supplementary Material .26 to specify that the non-pegging interest against which pegging interest pegs may either be available on the Exchange or may be a protected bid or offer on an away market.’’) (‘‘2011 Pegging Filing’’); see also Securities Exchange Act Release No. 68305 (Nov. 28, 2012), 77 FR 71853, 71857 (Dec. 4, 2012) (SR– NYSEMKT–2012–67) (amending Exchange rule governing pegging to, among other things, consolidate rule text from separate parts of the thenexisting rule in a streamlined format, including use of the term ‘‘next available best-priced interest’’) (‘‘2012 Pegging Filing’’). PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 interest would peg to a price that is locking or crossing the Exchange best bid or offer, the pegging interest would instead peg to the next available bestpriced displayable interest that would not lock or cross the Exchange best bid or offer. Currently, under any circumstance when pegging interest cannot peg to the PBBO, whether because of a price restriction or if the PBBO does not meet a minimum size designation, pegging interest pegs instead to the next available best-priced interest. For example, pursuant to paragraph (c)(5) of Rule 13 governing pegging interest, the Exchange offers an optional feature whereby pegging interest may be designated with a minimum size of same-side volume to which such pegging interest would peg. If the PBBO does not meet the optional minimum size designation, the pegging interest pegs to the next available best-priced interest, without regard to size.10 Accordingly, the Exchange also proposes to make a related change to current paragraph (c)(5) (which is being renumbered as paragraph (b)(4)) to • specify that, if the PBBO does not meet a minimum size requirement specified by the pegging interest, the pegging interest pegs to the next available best-priced interest, without regard to size, and • modify current functionality so that only displayable interest may be pegged to in such circumstances.11 The Exchange also proposes nonsubstantive amendments to delete references to ‘‘reserved’’ paragraphs of the rule and renumber the rule accordingly. Because of the technology changes associated with this proposed rule change, the Exchange will announce by Trader Update when this change will be 10 When the NYSE adopted this feature in 2006, it only considered the NYSE BBO for purposes of determining whether the size condition was met, and specifically excluded pegging interest that was pegging to the NYSE BBO. See Pegging Approval Order, supra, n. 7 at 60211. The Exchange now evaluates the minimum size requirement based on the PBBO instead of the Exchange BBO. See 2012 Pegging Filing, supra, n. 9 at 71858. 11 The Exchange also proposes to delete the clause ‘‘which may not be the PBB or PBO’’ in current paragraph (c)(5), which is rule text that related to when primary pegging interest had an optional offset feature, in which case the minimum quantity would not have been evaluated against the PBBO because primary pegging interest with an offset would not have pegged to the PBBO. The Exchange did not implement the offset functionality and previously filed a rule change to delete the rule text relating to the optional offset. See Securities Exchange Act Release No. 71898 (April 8, 2014), 79 FR 20957 (April 14, 2014) (SR–NYSEMKT–2014– 27) (amending rules governing pegging interest to conform to functionality that is available at the Exchange). E:\FR\FM\30MRN1.SGM 30MRN1 Federal Register / Vol. 80, No. 60 / Monday, March 30, 2015 / Notices implemented, which will be within 30 days of the effective date of this filing. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Act,12 in general, and furthers the objectives of Section 6(b)(5),13 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to, and perfect the mechanism of, a free and open market and a national market system and, in general, to protect investors and the public interest. Specifically, the proposed change is intended to respond to the concern raised by the Commission 14 that the current rule permitting pegging to prices of nondisplayable same-side non-marketable interest could potentially allow the user of the pegging interest to ascertain the presence of hidden liquidity at those price levels. Eliminating that functionality to respond to the Commission concern (along with conforming changes in the relevant rule) is, therefore, consistent with the Act. Similarly, the Exchange believes that specifying in its rules how the Exchange treats pegging interest that cannot peg to the PBBO, whether because of a price or size restriction, would remove impediments to and perfect the mechanism of a free and open market because it would provide transparency regarding the Exchange’s pegging functionality. B. Self-Regulatory Organization’s Statement on Burden on Competition mstockstill on DSK4VPTVN1PROD with NOTICES 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 intended to address any competitive issues but rather to specify and amend the functionality associated with pegging interest to respond to concerns raised regarding current functionality. 12 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 14 See Securities Exchange Act Release No. 74298 (Feb. 18, 2015), 80 FR 9770, 9772–73 (Feb. 24, 2015) (SR–NYSEMKT–2014–95) (Order instituting proceedings to determine whether to approve or disapprove a proposed rule change to Rule 13). 13 15 VerDate Sep<11>2014 19:57 Mar 27, 2015 Jkt 235001 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 The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 15 and Rule 19b–4(f)(6) thereunder.16 Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 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, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder.17 A proposed rule change filed under Rule 19b–4(f)(6) 18 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),19 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange asserts that such a waiver is consistent with the protection of investors and the public interest because it would permit the Exchange to implement the proposed change as soon as the technology supporting the change is available, because it would respond to the Commission concerns that the current rule could potentially allow the user of pegging interest to ascertain the presence of hidden liquidity, and because it would provide transparency regarding the pegging functionality. The Commission believes that waiver of the operative delay is consistent with the 15 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 17 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 Exchange has satisfied this requirement. 18 17 CFR 240.19b–4(f)(6). 19 17 CFR 240.19b–4(f)(6)(iii). 16 17 PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 16709 protection of investors and the public interest. Accordingly, the Commission hereby waives the 30-day operative delay and designates the proposal operative upon filing.20 At any time within 60 days of the filing of such 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.21 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– NYSEMKT–2015–19 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEMKT–2015–19. 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 20 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 21 15 U.S.C. 78s(b)(3)(C). E:\FR\FM\30MRN1.SGM 30MRN1 16710 Federal Register / Vol. 80, No. 60 / Monday, March 30, 2015 / Notices filing will also be available for inspection and copying at the NYSE’s principal office and on its Internet Web site at www.nyse.com. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEMKT–2015–19 and should be submitted on or before April 20, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Brent J. Fields, Secretary. [FR Doc. 2015–07135 Filed 3–27–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–526, OMB Control No. 3235–0584] Submission for OMB Review; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 20549–2736. mstockstill on DSK4VPTVN1PROD with NOTICES Extension: Rule 12d1–1. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (the ‘‘Commission’’) has submitted to the Office of Management and Budget a request for extension of the previously approved collection of information discussed below. An investment company (‘‘fund’’) is generally limited in the amount of securities the fund (‘‘acquiring fund’’) can acquire from another fund (‘‘acquired fund’’). Section 12(d) of the Investment Company Act of 1940 (the ‘‘Investment Company Act’’ or ‘‘Act’’) 1 provides that a registered fund (and companies it controls) cannot: • Acquire more than three percent of another fund’s securities; • invest more than five percent of its own assets in another fund; or • invest more than ten percent of its own assets in other funds in the aggregate.2 22 17 CFR 200.30–3(a)(59). 15 U.S.C. 80a. 2 See 15 U.S.C. 80a–12(d)(1)(A). If an acquiring fund is not registered, these limitations apply only with respect to the acquiring fund’s acquisition of registered funds. 1 See VerDate Sep<11>2014 19:57 Mar 27, 2015 Jkt 235001 In addition, a registered open-end fund, its principal underwriter, and any registered broker or dealer cannot sell that fund’s shares to another fund if, as a result: • The acquiring fund (and any companies it controls) owns more than three percent of the acquired fund’s stock; or • all acquiring funds (and companies they control) in the aggregate own more than ten percent of the acquired fund’s stock.3 Rule 12d1–1 under the Act provides an exemption from these limitations for ‘‘cash sweep’’ arrangements in which a fund invests all or a portion of its available cash in a money market fund rather than directly in short-term instruments.4 An acquiring fund relying on the exemption may not pay a sales load, distribution fee, or service fee on acquired fund shares, or if it does, the acquiring fund’s investment adviser must waive a sufficient amount of its advisory fee to offset the cost of the loads or distribution fees.5 The acquired fund may be a fund in the same fund complex or in a different fund complex. In addition to providing an exemption from section 12(d)(1) of the Act, the rule provides exemptions from section 17(a) of the Act and rule 17d–1 thereunder, which restrict a fund’s ability to enter into transactions and joint arrangements with affiliated persons.6 These provisions would otherwise prohibit an acquiring fund from investing in a money market fund in the same fund complex,7 and prohibit a fund that acquires five percent or more of the securities of a money market fund in another fund complex from making any 3 See 15 U.S.C. 80a–12(d)(1)(B). 17 CFR 270.12d1–1. 5 See rule 12d1–1(b)(1). 6 See 15 U.S.C. 80a–17(a), 15 U.S.C. 80a–17(d); 17 CFR 270.17d–1. 7 An affiliated person of a fund includes any person directly or indirectly controlling, controlled by, or under common control with such other person. See 15 U.S.C. 80a–2(a)(3) (definition of ‘‘affiliated person’’). Most funds today are organized by an investment adviser that advises or provides administrative services to other funds in the same complex. Funds in a fund complex are generally under common control of an investment adviser or other person exercising a controlling influence over the management or policies of the funds. See 15 U.S.C. 80a–2(a)(9) (definition of ‘‘control’’). Not all advisers control funds they advise. The determination of whether a fund is under the control of its adviser, officers, or directors depends on all the relevant facts and circumstances. See Investment Company Mergers, Investment Company Act Release No. 25259 (Nov. 8, 2001) [66 FR 57602 (Nov. 15, 2001)], at n.11. To the extent that an acquiring fund in a fund complex is under common control with a money market fund in the same complex, the funds would rely on the rule’s exemptions from section 17(a) and rule 17d–1. 4 See PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 additional investments in the money market fund.8 The rule also permits a registered fund to rely on the exemption to invest in an unregistered money market fund that limits its investments to those in which a registered money market fund may invest under rule 2a–7 under the Act, and undertakes to comply with all the other provisions of rule 2a–7.9 In addition, the acquiring fund must reasonably believe that the unregistered money market fund (i) operates in compliance with rule 2a–7, (ii) complies with sections 17(a), (d), (e), 18, and 22(e) of the Act 10 as if it were a registered open-end fund, (iii) has adopted procedures designed to ensure that it complies with these statutory provisions, (iv) maintains the records required by rules 31a–1(b)(1), 31a– 1(b)(2)(ii), 31a–1(b)(2)(iv), and 31a– 1(b)(9); 11 and (v) preserves permanently, the first two years in an easily accessible place, all books and records required to be made under these rules. Rule 2a–7 contains certain collection of information requirements. An unregistered money market fund that complies with rule 2a–7 would be subject to these collection of information requirements. In addition, the recordkeeping requirements under rule 31a–1 with which the acquiring fund reasonably believes the unregistered money market fund complies are collections of information for the unregistered money market fund. The adoption of procedures by unregistered money market funds to ensure that they comply with sections 17(a), (d), (e), 18, and 22(e) of the Act also constitute collections of information. By allowing funds to invest in registered and unregistered money market funds, rule 12d1–1 is intended to provide funds greater options for cash management. In order for a registered fund to rely on the exemption to invest in an unregistered money market fund, the unregistered money market fund must comply with certain collection of information requirements for registered money market funds. These requirements are intended to ensure that the unregistered money market fund has established procedures for collecting the information necessary to make adequate credit reviews of securities in its portfolio, as well as other recordkeeping 8 See 15 U.S.C. 80a–2(a)(3)(A), (B). 17 CFR 270.2a–7. 10 See 15 U.S.C. 80a–17(a), 15 U.S.C. 80a–17(d), 15 U.S.C. 80a–17(e), 15 U.S.C. 80a–18, 15 U.S.C. 80a–22(e). 11 See 17 CFR 270.31a–1(b)(1), 17 CFR 270.31a– 1(b)(2)(ii), 17 CFR 270.31a–1(b)(2)(iv), 17 CFR 270.31a–1(b)(9). 9 See E:\FR\FM\30MRN1.SGM 30MRN1

Agencies

[Federal Register Volume 80, Number 60 (Monday, March 30, 2015)]
[Notices]
[Pages 16707-16710]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-07135]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74571; File No. SR-NYSEMKT-2015-19]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 13--
Equities Relating to Pegging Interest

March 24, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on March 17, 2015, NYSE MKT LLC (``Exchange'' or ``NYSE MKT'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 13--Equities (Orders and 
Modifiers) relating to pegging interest. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 13--Equities (``Rule 13'') 
relating to pegging interest to provide that if the protected best bid 
or offer (``PBBO'') is not within the range of the pegging interest, 
the pegging interest would peg to the ``next best-priced available 
displayable interest,'' rather than the ``next best-priced available 
interest.'' This amendment would therefore exclude non-displayed 
interest from consideration as part of the ``next best-priced available 
interest'' under the rule.
Background
    Under current Rule 13, pegging interest pegs to prices based on (i) 
a PBBO, which may be available on the Exchange or an away market, or 
(ii) interest that establishes a price on the Exchange.\4\ In addition, 
pegging interest will peg only within a price range specified by the 
floor broker submitting the order. Thus, if the PBBO is not within the 
specified price range of the pegging interest, the pegging interest 
will instead peg to the next available best-priced interest that is 
within the specified price range.\5\ For example, if pegging interest 
to buy 100 shares has a specified price range up to $10.00, but the 
best protected bid (``PBB'') of 100 shares is $10.01, then such pegging 
interest could not peg to the $10.01 PBB because it is not within the 
specified price range of the pegging interest. The pegging interest 
would instead peg to

[[Page 16708]]

the next available best-priced interest within the specified price 
range of up to $10.00.\6\
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    \4\ See paragraph (a)(3) to Rule 13 governing pegging interest.
    \5\ See paragraph (a)(4) to Rule 13 governing pegging interest.
    \6\ See paragraph (a)(4)(A) to Rule 13 governing pegging 
interest. Similarly, if pegging interest would peg to a price that 
would lock or cross the Exchange best offer or bid, the pegging 
interest would instead peg to the next available best-priced 
interest that would not lock or cross the Exchange best bid or 
offer. See paragraph (c)(1) to Rule 13 governing pegging interest.
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    The ``next available best-priced interest'' concept in the current 
rule was originally expressed in a different fashion (when pegging was 
based on the Exchange's BBO, rather than the PBBO), but the basic 
functionality has always been the same. Specifically, when the pegging 
interest was introduced in 2006 on the New York Stock Exchange LLC 
(``NYSE''), if the Exchange BBO was higher (lower) than the price limit 
on the pegging interest to buy (sell), the pegging interest would peg 
to the highest (lowest) price at which there was other interest within 
the pegging price range.\7\ In 2008, the NYSE introduced Non-Displayed 
Reserve Orders, without changing the underlying functionality of 
pegging interest to exclude the prices of such orders from the 
evaluation of what constitutes the highest (lowest) price at which 
there is other interest available within the range of the pegging 
interest.\8\ In 2011, the Exchange amended the rule governing pegging 
interest to make a non-substantive change to the rule text to use the 
term ``next available best-priced non-pegging interest'' to describe 
the highest (lowest) priced interest in the Exchange Book or a 
protected bid or offer on an away market to which pegging interest to 
buy (sell) could peg.\9\ Accordingly, the next available best-priced 
interest for pegging interest to buy (sell) is the next highest 
(lowest)-priced buy (sell) interest within Exchange systems or an away 
market protected quote that is available for an execution at any given 
time. That interest could be same-side non-marketable displayable 
interest or same-side non-marketable non-displayable interest.
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    \7\ On October 1, 2008, the Commission approved the Exchange's 
rule proposal to establish new membership, member firm conduct, and 
equity trading rules that were based on the existing NYSE rules to 
reflect that equities trading on the Exchange would be supported by 
the NYSE's trading system. See Securities Exchange Act Release No. 
58705 (Oct. 1, 2008), 73 FR 58995 (Oct. 8, 2008) (SR-Amex-2008-63) 
(approval order). Because the Exchange's rules are based on the 
existing NYSE rules, the Exchange believes that pre-October 1, 2008 
NYSE rule filings provide guidance concerning Exchange equity rules. 
See Securities Exchange Act Release No. 54577 (Oct. 5, 2006), 71 FR 
60208, 60210-11 (Oct. 12, 2006) (SR-NYSE-2006-36) (``Pegging 
Approval Order'') (order approving, among other things, introduction 
of pegging functionality for Floor brokers, including ``if the 
Exchange best bid is higher than the ceiling price of a pegging buy-
side e-Quote or d-Quote, the e-Quote or d-Quote would remain at its 
quote price or the highest price at which there is other interest 
within its pegging price range, whichever is higher (consistent with 
the limit price of the order underlying the e-Quote or d-Quote). 
Similarly, if the Exchange best offer is lower than the floor price 
of a pegging sell-side e-Quote or d-Quote, the e-Quote or d-Quote 
would remain at its quote price or the lowest price at which there 
is other interest within its pegging price range, whichever is lower 
(consistent with the limit price of the order underlying the e-Quote 
or d-Quote).'' (emphasis added)).
    \8\ See Securities Exchange Act Release No. 59022 (Nov. 26, 
2008), 73 FR 73683 (Dec. 3, 2008) (SR-NYSEALTR-2008-10) (introducing 
Non-Display Reserve Orders).
    \9\ See Securities Exchange Act Release No. 66032 (Dec. 22, 
2011), 76 FR 82009 (Dec. 29, 2011) (SR-NYSEAmex-2011-99) (``Because 
the next available best-priced non-pegging interest may be on an 
away market, the Exchange further proposes to amend paragraph (vii) 
to Supplementary Material .26 to specify that the non-pegging 
interest against which pegging interest pegs may either be available 
on the Exchange or may be a protected bid or offer on an away 
market.'') (``2011 Pegging Filing''); see also Securities Exchange 
Act Release No. 68305 (Nov. 28, 2012), 77 FR 71853, 71857 (Dec. 4, 
2012) (SR-NYSEMKT-2012-67) (amending Exchange rule governing pegging 
to, among other things, consolidate rule text from separate parts of 
the then-existing rule in a streamlined format, including use of the 
term ``next available best-priced interest'') (``2012 Pegging 
Filing'').
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    Taking the above example, assume that the next price points on the 
Exchange's book priced below the $10.01 PBB are a Non-Display Reserve 
Order to buy 100 for $9.99 and a Limit Order to buy 100 for $9.98. 
Because the Non-Display Reserve Order is the next available best-priced 
interest within the specified price range, the pegging interest would 
peg to the $9.99 price of the Non-Display Reserve Order.
Proposed Rule Change
    The Exchange proposes to revise its rule to limit the type of 
interest to which pegging interest would peg if the PBBO is not within 
the specified price range of the pegging interest. As proposed, if the 
PBBO is not within the specified price range, the pegging interest 
would only peg to the next available best-priced displayable interest. 
The term ``displayable'' is defined in Rule 72(a)(i) as that portion of 
interest that could be published as, or as part of, the Exchange BBO 
and includes non-marketable odd-lot and round-lot orders.
    Using the above example, under the proposed change, the pegging 
interest to buy would instead peg to the Limit Order to buy for $9.98, 
and not the higher-priced Non-Display Reserve Order to buy for $9.99.
    The Exchange also proposes to make a conforming change to paragraph 
(c)(1) of Rule 13 to provide that if pegging interest would peg to a 
price that is locking or crossing the Exchange best bid or offer, the 
pegging interest would instead peg to the next available best-priced 
displayable interest that would not lock or cross the Exchange best bid 
or offer.
    Currently, under any circumstance when pegging interest cannot peg 
to the PBBO, whether because of a price restriction or if the PBBO does 
not meet a minimum size designation, pegging interest pegs instead to 
the next available best-priced interest. For example, pursuant to 
paragraph (c)(5) of Rule 13 governing pegging interest, the Exchange 
offers an optional feature whereby pegging interest may be designated 
with a minimum size of same-side volume to which such pegging interest 
would peg. If the PBBO does not meet the optional minimum size 
designation, the pegging interest pegs to the next available best-
priced interest, without regard to size.\10\ Accordingly, the Exchange 
also proposes to make a related change to current paragraph (c)(5) 
(which is being renumbered as paragraph (b)(4)) to
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    \10\ When the NYSE adopted this feature in 2006, it only 
considered the NYSE BBO for purposes of determining whether the size 
condition was met, and specifically excluded pegging interest that 
was pegging to the NYSE BBO. See Pegging Approval Order, supra, n. 7 
at 60211. The Exchange now evaluates the minimum size requirement 
based on the PBBO instead of the Exchange BBO. See 2012 Pegging 
Filing, supra, n. 9 at 71858.
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     specify that, if the PBBO does not meet a minimum size 
requirement specified by the pegging interest, the pegging interest 
pegs to the next available best-priced interest, without regard to 
size, and
     modify current functionality so that only displayable 
interest may be pegged to in such circumstances.\11\
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    \11\ The Exchange also proposes to delete the clause ``which may 
not be the PBB or PBO'' in current paragraph (c)(5), which is rule 
text that related to when primary pegging interest had an optional 
offset feature, in which case the minimum quantity would not have 
been evaluated against the PBBO because primary pegging interest 
with an offset would not have pegged to the PBBO. The Exchange did 
not implement the offset functionality and previously filed a rule 
change to delete the rule text relating to the optional offset. See 
Securities Exchange Act Release No. 71898 (April 8, 2014), 79 FR 
20957 (April 14, 2014) (SR-NYSEMKT-2014-27) (amending rules 
governing pegging interest to conform to functionality that is 
available at the Exchange).
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    The Exchange also proposes non-substantive amendments to delete 
references to ``reserved'' paragraphs of the rule and renumber the rule 
accordingly.
    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce by Trader Update when this 
change will be

[[Page 16709]]

implemented, which will be within 30 days of the effective date of this 
filing.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\12\ in general, and furthers the objectives of Section 
6(b)(5),\13\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system and, in general, to protect 
investors and the public interest. Specifically, the proposed change is 
intended to respond to the concern raised by the Commission \14\ that 
the current rule permitting pegging to prices of non-displayable same-
side non-marketable interest could potentially allow the user of the 
pegging interest to ascertain the presence of hidden liquidity at those 
price levels. Eliminating that functionality to respond to the 
Commission concern (along with conforming changes in the relevant rule) 
is, therefore, consistent with the Act. Similarly, the Exchange 
believes that specifying in its rules how the Exchange treats pegging 
interest that cannot peg to the PBBO, whether because of a price or 
size restriction, would remove impediments to and perfect the mechanism 
of a free and open market because it would provide transparency 
regarding the Exchange's pegging functionality.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ See Securities Exchange Act Release No. 74298 (Feb. 18, 
2015), 80 FR 9770, 9772-73 (Feb. 24, 2015) (SR-NYSEMKT-2014-95) 
(Order instituting proceedings to determine whether to approve or 
disapprove a proposed rule change to Rule 13).
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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 
intended to address any competitive issues but rather to specify and 
amend the functionality associated with pegging interest to respond to 
concerns raised regarding current functionality.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \15\ and Rule 19b-4(f)(6) thereunder.\16\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
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, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\17\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 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 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\19\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Exchange asserts that 
such a waiver is consistent with the protection of investors and the 
public interest because it would permit the Exchange to implement the 
proposed change as soon as the technology supporting the change is 
available, because it would respond to the Commission concerns that the 
current rule could potentially allow the user of pegging interest to 
ascertain the presence of hidden liquidity, and because it would 
provide transparency regarding the pegging functionality. The 
Commission believes that waiver of the operative delay is consistent 
with the protection of investors and the public interest. Accordingly, 
the Commission hereby waives the 30-day operative delay and designates 
the proposal operative upon filing.\20\
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    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
    \20\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such 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.\21\
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    \21\ 15 U.S.C. 78s(b)(3)(C).
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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-NYSEMKT-2015-19 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEMKT-2015-19. 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

[[Page 16710]]

filing will also be available for inspection and copying at the NYSE's 
principal office and on its Internet Web site at www.nyse.com. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEMKT-2015-19 and should 
be submitted on or before April 20, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(59).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-07135 Filed 3-27-15; 8:45 am]
 BILLING CODE 8011-01-P
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