Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Adopting New Equity Trading Rules Relating to Trading Sessions, Order Ranking and Display, and Order Execution To Reflect the Implementation of Pillar, the Exchange's New Trading Technology Platform, 28721-28733 [2015-12028]
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Federal Register / Vol. 80, No. 96 / Tuesday, May 19, 2015 / Notices
the Fee Schedule is intended to make
the reference to the Exchange in the
heading of the Fee Schedule consistent
with the manner in which its affiliated
exchanges are referenced in their
respective fee schedules, thereby
removing impediments to and
perfecting the mechanism of a free and
open market and a national market
system, and, in general, protecting
investors and the public interest.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes its proposed
amendments to its Fee Schedule would
not impose any burden on competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange does not believe that the
proposed change represents a significant
departure from previous pricing offered
by the Exchange or pricing offered by
the Exchange’s competitors.
Additionally, Members may opt to
disfavor the Exchange’s pricing if they
believe that alternatives offer them
better value. Accordingly, the Exchange
does not believe that the proposed
change will impair the ability of
Members or competing venues to
maintain their competitive standing in
the financial markets.
tkelley on DSK3SPTVN1PROD with NOTICES
Fee Code BY
The Exchange believes that its
proposal to pass through the amended
rebate for orders that yield Flags BY
would increase intermarket competition
because it offers customers an
alternative means to route to BYX for
the same rebate that they would be
provided if they entered orders on that
trading center directly. The Exchange
believes that its proposal would not
burden intramarket competition because
the proposed rebate would apply
uniformly to all Members.
MidPoint Discretionary Order Add
Volume Tier
The Exchange believes that its
proposal to ease the criteria for the
MidPoint Discretionary Order Add
Volume Tier would increase intermarket
competition because it would further
incentivize Members to send an
increased amount MidPoint
Discretionary orders to the Exchange in
order to qualify for the tier’s decreased
fee. The Exchange believes that its
proposal would neither increase nor
decrease intramarket competition
because the MidPoint Discretionary
Order Add Volume Tier would apply
uniformly to all Members and the ability
of some Members to meet the tier would
only benefit other Members by
contributing to increased liquidity at the
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midpoint of the NBBO and better market
quality at the Exchange.
Non-Substantive Changes
The Exchange believes that the nonsubstantive change to the Fee Schedule
will not affect intermarket nor
intramarket competition because the
change is not designed to amend any fee
or alter the manner in which the
Exchange assesses fees or calculates
rebates.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
Members or other interested parties.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 13 and paragraph (f) of Rule
19b–4 thereunder.14 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:
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–
EDGA–2015–18 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–EDGA–2015–18. 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 will also be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–EDGA–
2015–18 and should be submitted on or
before June 9,2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–12016 Filed 5–18–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74951; File No. SR–
NYSEARCA–2015–38]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change Adopting New Equity
Trading Rules Relating to Trading
Sessions, Order Ranking and Display,
and Order Execution To Reflect the
Implementation of Pillar, the
Exchange’s New Trading Technology
Platform
May 13, 2015.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 15 CFR 240.19b–4.
1 15
13 15
14 17
PO 00000
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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Federal Register / Vol. 80, No. 96 / Tuesday, May 19, 2015 / Notices
notice is hereby given that, on April 30,
2015, 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, II, and
III 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 adopt new
equity trading rules relating to Trading
Sessions, Order Ranking and Display,
and Order Execution to reflect the
implementation of Pillar, the Exchange’s
new trading technology platform. 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
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1. Purpose
On January 29, 2015, the Exchange
announced the implementation of Pillar,
which is an integrated trading
technology platform designed to use a
single specification for connecting to the
equities and options markets operated
by NYSE Arca and its affiliates, New
York Stock Exchange LLC (‘‘NYSE’’) and
NYSE MKT LLC (‘‘NYSE MKT’’). NYSE
Arca Equities will be the first trading
system to migrate to Pillar.4 NYSE Arca
Equities trading on Pillar would be an
all-electronic price-time priority
equities trading platform.
4 See Trader Update dated January 29, 2015,
available here: https://www1.nyse.com/pdfs/
Pillar_Trader_Update_Jan_2015.pdf.
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The Exchange will be submitting
proposed rule changes to correspond to
the anticipated migration to Pillar,
which would be done in phases. During
the first phase, ETP Holders would
continue to connect to existing NYSE
Arca gateways to access the Pillar
trading platform. In the second phase,
the Exchange will introduce new
customer gateways and connectivity as
well as additional order type processing.
To implement the first phase of Pillar
migration, the Exchange will be
submitting more than one rule filing.
The Exchange will later submit rule
filings to implement the second phase of
Pillar migration.
During the first phase of Pillar
implementation, the Exchange would
roll out the new technology platform
over a period of time based on a range
of symbols. Because orders entered in
symbols not yet migrated to Pillar
would continue to operate under
current rules, the Exchange will keep its
current rules, pending complete
migration of symbols to Pillar and
retirement of the current trading system,
and add new rules that would be
applicable to symbols that trade on the
Pillar trading platform. As proposed, the
new rules governing trading on Pillar
would have the same numbering as
current rules, but with the modifier ‘‘P’’
appended to the rule number. For
example, Rule 7.34, governing Trading
Sessions, would remain unchanged and
continue to apply to any trading in
symbols on the current trading platform.
Proposed Rule 7.34P would govern
Trading Sessions for trading in symbols
migrated to the Pillar platform. Once all
symbols have migrated to the Pillar
platform, the Exchange will file a rule
proposal to delete rules that are no
longer operative.
In this filing, the Exchange proposes
to adopt new Pillar rules relating to
Trading Sessions (NYSE Arca Equities
Rule 7.34 (‘‘Rule 7.34’’)), Order Ranking
and Display (NYSE Arca Equities Rule
7.36 (‘‘Rule 7.36’’)), and Order
Execution (NYSE Arca Equities Rule
7.37 (‘‘Rule 7.37’’)). As proposed, the
new rules would be NYSE Arca Equities
Rules 7.34P (Trading Sessions) (‘‘Rule
7.34P’’), 7.36P (Order Ranking and
Display) (‘‘Rule 7.36P’’), and 7.37P
(Order Execution) (‘‘Rule 7.37P’’). These
three rules would set forth the
foundation of the Exchange’s equity
trading model in Pillar, including the
hours of operation, how orders would
be ranked and displayed, and how
orders would be executed.
As discussed in greater detail below,
the Exchange is not proposing that the
core functionality of rules applicable to
trading on Pillar would be different
PO 00000
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from rules applicable to trading on the
current NYSE Arca equities trading
system. However, with Pillar, the
Exchange would introduce new
terminology. Further, because the
Exchange would operate both its current
trading system for some symbols and
the Pillar trading platform for other
symbols, until rollout of Pillar across all
symbols is complete, the Exchange is
proposing to add all new rule text for
proposed Rules 7.34P, 7.36P, and 7.37P.
Because these rules and related
proposed terminology changes would be
the foundation for all other rule changes
that will be proposed in connection
with Pillar, the Exchange believes that
filing for these rule changes before other
rule changes will provide the public
notice of how Pillar would operate
generally.
Proposed Use of ‘‘P’’ Modifier
To reflect how the ‘‘P’’ modifier
would operate, the Exchange proposes
to add rule text immediately following
the reference to ‘‘Rule 7 Equities
Trading,’’ and before ‘‘Section 1.
General Provisions’’ that would provide
that rules with a ‘‘P’’ modifier would be
operative for symbols that are trading on
the Pillar trading platform. As further
proposed, if a symbol is trading on the
Pillar trading platform, a rule with the
same number as a rule with a ‘‘P’’
modifier would no longer be operative
for that symbol and the Exchange would
announce by Trader Update when
symbols are trading on the Pillar trading
platform.
Similarly, the Exchange proposes to
add rule text following the title ‘‘Rule 1
Definitions’’ that provides that
definitions with a paragraph designation
that includes a ‘‘P’’ modifier would be
operative for symbols trading on the
Pillar trading platform. A definition
with the same paragraph designation as
a definition with a ‘‘P’’ modifier would
not be operative for symbols trading on
Pillar. Finally, to provide clarity that
definitions that do not have a version
with a ‘‘P’’ modifier would apply across
all symbols, regardless of the trading
platform, the Exchange proposes to state
explicitly that definitions that do not
have a companion version with a ‘‘P’’
modifier would continue to be operative
for all symbols.
The Exchange believes that adding
these explanations regarding the ‘‘P’’
modifier in Exchange rules would
provide transparency regarding which
rules and definitions would be operative
depending on the trading platform on
which a symbol is trading.
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Federal Register / Vol. 80, No. 96 / Tuesday, May 19, 2015 / Notices
Trading Sessions
Rule 7.34 governs trading sessions. As
set forth in Rule 7.34(a), the Exchange
has three trading sessions:
(1) the Opening Session, which begins
at 1:00:00 a.m. Pacific Time and
concludes at the commencement of the
Core Trading Session. The Opening
Auction and Market Order Auction
occur during the Opening Session;
(2) the Core Trading Session, which
begins at 6:30:00 a.m. Pacific Time or at
the conclusion of the Market Order
Auction, whichever comes later, and
concludes at 1:00:00 p.m. Pacific Time;
and
(3) the Late Trading Session, which
begins following the conclusion of the
Core Trading Session and concludes at
5:00:00 p.m. Pacific Time.
Proposed Rule 7.34P(a)(1)–(3) would
similarly provide for three trading
sessions, but with several proposed
differences from Rule 7.34(a):
• First, the Exchange proposes nonsubstantive differences in the names of
the trading sessions on the Pillar trading
platform. Specifically, for Pillar, the
Exchange proposes to call its three
trading sessions the ‘‘Early Trading
Session,’’ the ‘‘Core Trading Session,’’
and the ‘‘Late Trading Session.’’ The
Exchange believes that the use of the
term ‘‘Early Trading Session,’’ rather
than the ‘‘Opening Session,’’ better
describes when the session occurs,
which is before the Core Trading
Session, and therefore would be clearer
to market participants. In addition, the
Exchange proposes the auction that
opens the ‘‘Early Trading Session’’
would be called the ‘‘Early Open
Auction,’’ instead of the ‘‘Opening
Auction’’ and that the auction that
opens the ‘‘Core Trading Session’’
would be called the ‘‘Core Open
Auction’’ instead of the ‘‘Market Order
Auction.’’ The Exchange believes that
the auctions that open the respective
sessions should be named to reflect both
the name of the session and that it is an
opening auction for the respective
session.
• Second, the Exchange proposes that
all time references for the trading
sessions would be to Eastern Time, and
would not include references to
seconds.5 The Exchange’s current rules
for trading sessions use references to
Pacific Time. In today’s national trading
environment, the Exchange believes that
use of Eastern Time would reduce
investor confusion by conforming
references to time to how all other
5 The Exchange also proposes to change the time
in the definition of Core Trading Hours, which is
defined in Rule 1.1(j), from Pacific to Eastern Time
references.
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Jkt 235001
exchanges denote time in their rules.
The Exchange similarly believes that
references to seconds in proposed Rule
7.34P are unnecessary, as none of the
other Exchange rules for the beginning
and end of trading sessions use seconds.
• Third, the Exchange proposes that
Rule 7.34P(a)(1) regarding Early Trading
Sessions would be more detailed than
Rule 7.34 by adding text that is
currently in Rule 7.35(a)(1), without any
substantive differences.6 Specifically,
the Exchange proposes to include in
Rule 7.34P(a)(1) that the Corporation 7
would begin accepting orders 30
minutes before the Early Trading
Session begins. Because this rule text
concerns when orders may be entered,
the Exchange believes that it should be
included in the rule governing trading
sessions for Pillar. Proposed Rule
7.34P(a)(1) would further provide that
the Early Open Auction would begin the
Early Trading Session.
• Fourth, the Exchange proposes to
provide that the Core Open Auction
would occur during the Core Trading
Session. Rule 7.34(a) currently provides
that the Market Order Auction occurs
during the Opening Session. Because
this auction is intended to open trading
for the Core Trading Session,8 the
Exchange believes it should be
considered part of the Core Trading
Session, rather than the Early Trading
Session. The Exchange therefore
proposes to specify in proposed Rule
7.34P(a)(2) that the Core Open Auction
would begin the Core Trading Session.
The Exchange further proposes to
specify that the Core Trading Session
would end at the conclusion of Core
Trading Hours or the Core Closing
Auction, whichever comes later. The
proposed cross reference to Core
Trading Hours, which is defined in Rule
1.1(j), takes into consideration that the
Core Trading Session may end earlier
than 4:00 p.m. when the Exchange has
an early scheduled close, e.g., the day
before Christmas.
• Fifth, the Exchange proposes not to
include in proposed Rule 7.34P the text
currently in Rule 7.34 relating to
extended Core Trading Session hours.
Rules 7.34(a)(3)(A) and (B) provide that
the Core Trading Session for specified
securities concludes at 1:15:00 p.m.
Pacific Time unless otherwise
6 In a separate rule filing, the Exchange will
propose Rule 7.35P, which would govern auctions
in Pillar.
7 The term ‘‘Corporation’’ is defined in Rule 1.1(k)
as NYSE Arca Equities, Inc., as described in the
NYSE Arca Equities, Inc.’s Certification of
Incorporation and Bylaws.
8 Rule 7.35 currently specifies that the Market
Order Auction occurs at 9:30 a.m., which is the
same time that the Core Trading Session begins for
securities that do not have an auction.
PO 00000
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28723
determined by the Corporation and that
the Exchange would maintain on its
Web site which securities for which the
Core Trading Session would extend to
1:15:00 p.m. Because the Exchange does
not have any securities for which the
Core Trading Session extends to 1:15:00
p.m. Pacific Time, nor does it plan to
provide for such an extended Core
Trading Session for any securities, the
Exchange proposes not to include this
provision in proposed Rule 7.34P.
• Finally, the Exchange proposes that
text currently found in Rules 7.34(a)(4),
7.34(a)(5), and 7.34(b) not be included
in proposed Rule 7.34P. Rules 7.34(a)(4)
and (5) currently describe how the
Exchange handles trading halts in
specified securities that occur during
different trading sessions. The Exchange
believes that rule text relating to halts
should be centralized in a single rule
and will be proposing in a separate rule
filing to add the text of current Rule
7.34(a)(4) and (5) to proposed Rule
7.18P. Rule 7.34(b) sets forth Market
Maker obligations to enter Q Orders for
securities in which they are registered.
The Exchange believes that this topic is
not related to trading sessions directly
and that this rule text should be
included with the definition of Q Orders
and therefore will be proposing in a
separate rule filing to add the text of
current Rule 7.34(b) to proposed Rule
7.31P.9 Because Rule 7.34(a)(4) defines
the term ‘‘Derivative Securities Product’’
and because that definition would not
be included in proposed Rule 7.34P, the
Exchange proposes to add a new
definition to Rule 1.1 to define the terms
Derivative Securities Product and UTP
Derivative Securities Product. As
proposed, the term ‘‘Derivative
Securities Product’’ would mean a
security that meets the definition of
‘‘derivative securities product’’ in Rule
19b–4(e) under the Securities Exchange
Act of 1934 10 and a ‘‘UTP Derivatives
Securities Product’’ would mean a
Derivative Securities Product that trades
on the Exchange pursuant to unlisted
trading privileges.
The Exchange proposes to include the
text of Rule 7.34(c) in proposed Rule
7.34P(b) with non-substantive
differences and to provide more detail.
Rule 7.34(c) provides that any Day
Order entered into the NYSE Arca
Marketplace 11 may remain in effect for
9 The Exchange will be submitting a separate rule
filing to propose Rule 7.31P, which would govern
orders and modifiers in Pilar.
10 17 CFR 240.19b–4(e)
11 The term ‘‘NYSE Arca Marketplace’’ is defined
in Rule 1.1(e) as the electronic securities
communication and trading facility designated by
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28724
Federal Register / Vol. 80, No. 96 / Tuesday, May 19, 2015 / Notices
one or more consecutive trading
sessions on a particular day and that for
each Day Order entered, the User 12
must designate for which trading
session(s) the order will remain in
effect. Proposed Rule 7.34P(b) would
instead provide that any order entered
into the NYSE Arca Marketplace must
include a designation for which trading
session(s) the order would remain in
effect.
Proposed new Rule 7.34P(b) would
also provide that an order would be
eligible to participate only in the
designated trading session(s) and may
remain in effect for one or more
consecutive trading sessions on a
particular day. The Exchange further
proposes to add that unless otherwise
specified, an order designated for a later
trading session would be accepted but
not eligible to trade until the designated
trading session begins. For example, if
an order is entered at 8:00 a.m. Eastern
Time and is designated for the Core
Trading Session only, it would be
accepted but would not participate in
the Early Trading Session. As discussed
in more detail below, proposed Rule
7.34P(c) would specify orders that may
not be entered either during or in
advance of a designated trading session.
In addition, the Exchange proposes to
add that an order designated solely for
a trading session that has already ended
would be rejected. For example, an
order entered at 10:00 a.m. Eastern Time
that is designated only for the Early
Trading Session would be rejected. The
Exchange believes that the proposed
changes would provide transparency in
Exchange rules of when orders may be
entered and when orders would be
rejected.
The Exchange also proposes to add in
Rule 7.34P(b)(2) and (3) that an order
with a day time-in-force instruction
entered before or during the Early
Trading Session would be deemed
designated for the Early Trading Session
and the Core Trading Session and that
an order with a day time-in-force
instruction entered during the Core
Trading session would be deemed
designated for the Core Trading Session.
The Exchange believes that the
proposed rule text provides
transparency regarding which sessions
during which an order may be eligible
to participate.
The Exchange proposes to describe
the processes currently set forth in Rule
7.34(d) in proposed Rule 7.34P(c). Rule
the Board of Directors through which orders of
Users are consolidated for execution and/or display.
12 The term ‘‘User’’ is defined in Rule 1.1(yy) as
any ETP Holder or Sponsored Participant who is
authorized to obtain access to the NYSE Arca
Marketplace pursuant to Rule 7.29.
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18:00 May 18, 2015
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7.34(d) describes which orders are
permitted in each session. The
Exchange proposes to revise how this
topic is described in proposed Rule
7.34P(c) to provide generally that orders
are eligible to participate in a session,
unless otherwise provided in the rule.
Accordingly, rule text in Rule 7.34(d)
that specifies order types that are
eligible to participate in a particular
session would not be included in new
Rule 7.34P because the proposed new
text would make it unnecessary to
specify the order types eligible to
participate in a particular session. Those
order types that would not be eligible to
participate in each of the Exchange’s
three trading sessions are described
below.
With respect to the Early Trading
Session, the Exchange proposes in new
Rule 7.34P(c)(1) to provide that, unless
otherwise specified in proposed
paragraphs (c)(1)(A)—(E) of the new
rule, orders and modifiers defined in
Rule 7.31P that have been designated for
the Early Trading Session would be
eligible to participate in the Early
Trading Session. The Exchange believes
that the proposed rule text makes clear
that unless specified in paragraphs
(c)(1)(A)–(E) of new Rule 7.34P, all
orders and modifiers in Rule 7.31P, if
designated for the Early Trading
Session, would be eligible to participate
in the Early Trading Session.
Unlike under current rules, the
Exchange proposes that Tracking Orders
would be eligible to participate in the
Early Trading Session on the Pillar
trading platform. Because the Exchange
routes orders during the Early Trading
Session and because Tracking Orders
are intended to be passive liquidity on
the Exchange to interact with an order
before it is routed, the Exchange
believes that Tracking Orders should be
available in the Early Trading Session.
Accordingly, rule text from Rule
7.34(d)(1)(C) would not be included in
new Rule 7.34P(c)(1).
The Exchange proposes that the
following orders and modifiers in Rule
7.31P would not be eligible to
participate in the Early Trading Session:
• Proposed Rule 7.34P(c)(1)(A) would
provide that Market Orders, Q Orders,
and Pegged Orders would not be eligible
to participate in the Early Trading
Session, which is current functionality.
The Exchange further proposes to
specify that any Market Orders, Q
Orders, and Pegged Orders that include
a designation for the Early Trading
Session would be rejected. Such orders
would be rejected if they also include a
designation for another trading session;
the designation for the Early Trading
Session whether alone or with another
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designation would result in a rejection
of the order. The Exchange further
proposes to add that Market Pegged
Orders entered before or during the
Early Trading Session would be rejected
regardless of the session designated for
the order.13 For example, a Market
Order, Q Order, or Primary Pegged
Order designated for the Core Trading
Session only that is entered at 8:00 a.m.
Eastern Time would be accepted, but a
Market Pegged Order designated for the
Core Trading Session only entered at the
same time would be rejected.
• Proposed Rule 7.34P(c)(1)(B) would
specify that Limit Orders designated
IOC and Cross Orders would not be
eligible to participate in the Early Open
Auction and would be rejected if
entered before the Early Open Auction
concludes. The reference to Limit
Orders designated IOC includes any
order with an IOC instruction, including
MPL Orders. Limit Orders designated
IOC and Cross Orders are not currently
eligible to participate in auctions,
accordingly, this proposed rule change
does not represent new functionality.
However, the Exchange believes that the
proposed change promotes transparency
in Exchange rules regarding when an
order would be accepted or rejected.
• Proposed Rule 7.34P(c)(1)(C) would
specify that Limit Orders designated
IOC and Cross Orders entered before or
during the Early Trading Session and
designated for the Core Trading Session
only would be rejected if entered before
the Core Open Auction concludes. The
Exchange believes that this proposed
rule would provide transparency
because orders designated IOC must be
eligible for an immediate execution and
are not eligible for auctions, and an IOC
order designated with a later trading
session is by its terms inconsistent.
• Proposed Rule 7.34P(c)(1)(D) would
provide that for securities that are not
eligible for an auction on the Exchange,
Market Orders designated for Core
Trading Session and Auction-Only
Orders would be routed directly to the
primary listing market on arrival. This
proposed treatment of Market Orders
and Auction-Only Orders in securities
that are not eligible for an auction on
the Exchange would be different from
current functionality.14 Currently,
13 As set forth in proposed Rule 7.34P(b), orders
that are entered during the Early Trading Session
and designated for a later session only would be
accepted and become eligible to trade once the
designated trading session begins.
14 Proposed Rule 7.34P(c)(1)(D) would also
represent a change to current Exchange
functionality regarding MOC Orders and LOC
Orders. Currently, the Exchange does not accept
such orders before 9:30 a.m. Eastern Time. On the
Pillar trading platform, the Exchange would accept
such orders during the Early Trading Session, and
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Market Orders or Auction-Only Orders
are routed to the primary listing market
on arrival only if they include a
‘‘Primary Only’’ order designation. The
Exchange proposes that on the Pillar
trading platform, during the Early
Trading Session, a Market Order or
Auction-Only Order in a security that is
not eligible for an auction on the
Exchange would be routed to the
primary listing market regardless of
whether it includes a Primary Only
designation. The Exchange believes that
this proposed functionality would be
consistent with the expectations of a
User with respect to such orders, which
would not be eligible for an execution
on the Exchange. The Exchange
proposes to further provide that any
order routed directly to the primary
listing market on arrival, which
includes the above-described orders and
Primary Only Orders, would be
cancelled if that market is not accepting
orders.
• Proposed Rule 7.34P(c)(1)(E) would
provide that MOO Orders, MOC Orders,
LOC Orders, and Primary Only Orders
designated for the Early Trading Session
would be rejected. This represents
current functionality. LOO Orders may
be designated for the Early Trading
System in order to participate in a
reopening auction following a trading
halt. LOO Orders in securities not
eligible for an auction on the Exchange
that are designated for an Early Trading
Session would be routed to the primary
listing market, consistent with proposed
Rule 7.34P(c)(1)(D) . The Exchange
proposes to include this text in
proposed Rule 7.34P in order to provide
transparency of when an order would be
rejected.
With respect to the Core Trading
Session, the Exchange proposes in new
Rule 7.34P(c)(2) to provide that, unless
otherwise specified in proposed
paragraphs (c)(2)(A)–(B) of the new rule,
orders and modifiers defined in Rule
7.31P and 7.44P that have been
designated for the Core Trading Session
would be eligible to participate in the
Core Trading Session.15 The Exchange
believes that the proposed rule text
makes clear that, unless specified in
paragraphs (c)(2)(A)–(B) of new Rule
7.34P, all orders and modifiers in Rule
7.31P and 7.44P, if designated for the
Core Trading Session, would be eligible
if for a security that is not eligible for an auction
on the Exchange, route such orders to the primary
listing market if such market is accepting orders.
15 The Exchange notes that orders and modifiers
described in Rule 7.44 governing the Retail
Liquidity Program (‘‘RLP’’) are eligible to
participate in the Core Trading Session only. The
Exchange will submit a separate rule filing to adopt
Rule 7.44P to govern RLP in Pillar.
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to participate in the Core Trading
Session. The proposed exceptions to the
general rule would be:
• Proposed Rule 7.34P(c)(2)(A) would
provide that Market Orders in securities
that are not eligible for the Core Open
Auction would be routed to the primary
listing market until the first opening
print of any size on the primary listing
market or 10:00 a.m. Eastern Time,
whichever is earlier. This proposed rule
text is based on current Rule 7.35(c),
which states that for all exchange-listed
securities for which the Exchange does
not conduct a Market Order Auction,
‘‘the Corporation will route all Market
Orders to the primary market until the
first opening print on the primary
market.’’ This current rule makes clear
that the Exchange refrains from
processing Market Orders until the
primary listing market has printed a
transaction, and not just opened for
trading based on an opening quote.
Because this rule relates to how orders
are treated during a trading session, the
Exchange believes that it is more
appropriately included in proposed
Rule 7.34P(c) than in a rule governing
auctions.
In moving the rule text, the Exchange
is proposing two substantive
differences. First, to specify that the first
opening print may include an odd-lot
transaction, the Exchange proposes to
provide in Rule 7.34P(c)(2)(A) that
Market Orders in securities that are not
eligible for the Core Open Auction
would be routed to the primary listing
market until the first print of any size
on the primary listing market. The
Exchange believes it is appropriate to
include an odd-lot transaction print
because such a transaction indicates
that trading has begun on the primary
listing market. Second, the Exchange
proposes to provide for an outside time
frame for when the Exchange would
stop routing Market Orders to the
primary listing market and begin
processing those orders on the
Exchange. As proposed, the Exchange
would continue routing Market Orders
to the primary listing market until the
first print of any size on such market or
10:00 a.m. Eastern Time, whichever is
earlier. The Exchange believes that if the
primary listing market has not opened
for trading by 10:00 a.m. Eastern Time
and has not halted the security, the
Exchange should begin processing
Market Orders in all securities. The
proposed time of 10:00 a.m. Eastern
Time is based on NYSE Rule 123D and
NYSE MKT Rule 123D—Equities, which
provide for delayed opening procedures
for NYSE- and NYSE MKT-listed
securities. Specifically, under those
rules, a security is considered in a
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delayed opening if it is not open by
10:00 a.m. Eastern Time.
• Proposed Rule 7.34P(c)(2)(B) would
provide that Auction-Only Orders in
securities that are not eligible for an
auction on the Exchange would be
accepted and routed directly to the
primary listing market. This proposed
rule text is a continuation of the
treatment of such orders as described in
proposed Rule 7.34P(c)(1)(D) in that
during the Core Trading Session, the
Exchange would continue to accept and
route such orders directly to the primary
listing market. This proposal represents
a change from current practice, as Rule
7.31(t) currently provides that the
Exchange does not route Auction-Only
orders to other exchanges. Instead, the
Exchange currently rejects AuctionOnly Orders in securities that are not
eligible for an auction on the Exchange,
unless they include a Primary Only
Order designation. In Pillar, the
Exchange would accept such orders and
route them to the primary listing
market.16
With respect to the Late Trading
Session, the Exchange proposes in new
Rule 7.34P(c)(3) to provide that unless
otherwise specified in proposed
paragraphs (c)(3)(A)–(C) of the new rule,
orders and modifiers defined in Rule
7.31P that have been designated for the
Late Trading Session would be eligible
to participate in the Late Trading
Session. The Exchange believes that this
proposed rule text makes clear that
unless specified in paragraphs (c)(3)(A)–
(C) of new Rule 7.34P, all orders and
modifiers in Rule 7.31P, if designated
for the Late Trading Session, would be
eligible to participate in the Late
Trading Session.
Unlike under current rules, the
Exchange proposes that Tracking Orders
would be eligible to participate in the
Late Trading Session, as they would be
in the Early Trading Session, on the
Pillar trading platform. Because the
Exchange routes orders during the Late
Trading Session and because Tracking
Orders are intended to be passive
liquidity on the Exchange to interact
with an order before it is routed, the
Exchange believes that Tracking Orders
should be available in the Late Trading
Sessions. Accordingly, rule text from
current Rule 7.34(d)(3)(C) would not be
included in new Rule 7.34P(c)(3).
The Exchange proposes that the
following orders and modifiers in Rule
7.31P would not be eligible to
participate in the Late Trading Session:
16 Because the treatment of Auction-Only Orders
in securities that are not eligible for any auction on
the Exchange would be covered in proposed Rule
7.34P, the Exchange would propose that new Rule
7.31P not include this same topic.
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• Proposed Rule 7.34P(c)(3)(A) would
provide that Market Orders, Q Orders,
and Pegged Orders would not be eligible
to participate in the Late Trading
Session, which is current functionality.
The rule would further provide that
Market Orders, Q Orders, and Pegged
Orders that include a designation for the
Late Trading Session would be rejected.
For example, if a Market Order, Q
Order, or Pegged Order were entered
during the Core Trading Session and
designated for both the Core and Late
Trading Session, because it includes a
designation for the Late Trading
Session, such order would be rejected.
The Exchange believes that this
proposed rule text provides
transparency in Exchange rules of when
an order would be accepted or rejected.
• Proposed Rule 7.34P(c)(3)(B) would
provide that orders that route directly to
the primary listing market on arrival
would be cancelled if that market is not
accepting orders, which is current
functionality.
• Proposed Rule 7.34P(c)(3)(C) would
provide that MOO Orders, MOC Orders,
LOC Orders, and Primary Only Orders
designated for the Late Trading Session
would be rejected. This represents
current functionality. LOO Orders may
be designated for the Late Trading
System in order to participate in a
reopening auction following a trading
halt. LOO Orders in securities not
eligible for an auction on the Exchange
that are designated for an Early Trading
Session would be routed to the primary
listing market. The Exchange proposes
to include this text in proposed Rule
7.34P in order to provide transparency
of when an order would be rejected.
Proposed Rule 7.34P(d) regarding
customer disclosures is based on Rule
7.34(e) with non-substantive differences
to conform terminology with the
proposed changes to new Rule 7.34P,
including use of the term ‘‘Early Trading
Session’’ instead of ‘‘Opening Session,’’
‘‘Core Open Auction’’ instead of
‘‘Market Order Auction,’’ and ‘‘Limit
Order’’ instead of ‘‘Limited Price
Order.’’
Finally, proposed Rule 7.34P(e) is
based on Rule 7.34(f) without any
substantive differences and would
provide that trades on the NYSE Arca
Marketplace executed and reported
outside of the Core Trading Session
would be designated as .T trades.
Order Ranking and Display
Rule 7.36 governs order ranking and
display for the current Arca trading
system. The rule provides that the NYSE
Arca Marketplace shall display to Users
and other market participants all nonmarketable limit orders in the Display
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Order Process. The rule further provides
that the NYSE Arca Marketplace will
also disseminate current consolidated
quotation/last sale information, and
such other market information as may
be available from time to time pursuant
to agreement between the Corporation
and other market centers.
Rule 7.36(a) sets forth that orders of
Users are ranked and maintained in the
Display Order Process and/or the
Working Order Process of the NYSE
Arca Book 17 according to price-time
priority, such that within each price
level, orders are organized by the time
of entry in the manner described in the
rule.
Rule 7.36(a)(1) describes the Display
Order Process and Rule 7.36(a)(2)
describes the Working Order Process.
Rule 7.36(a)(3) sets forth that if an order
has been modified in size, the order
retains priority if the modification
involves a decrease in the size of the
order, but if the modification increases
the size of the order or changes the
price, the order will be treated as a new
order and receive a new time priority.
Rule 7.36(b) provides that, except as
provided in Rule 7.7, all orders
displayed in the Display Order Process
are displayed on an anonymous basis.
Finally, Rule 7.36(c) provides that the
best-ranked displayed orders to buy
(sell) in the NYSE Arca Book and the
aggregate size of such orders are
collected and made available to
quotation vendors for dissemination
pursuant to Rule 11Ac1–1 under the
Exchange Act. The rule further provides
that if non-marketable odd-lot sized
orders can be aggregated to equal at least
a round lot, such odd-lot sized orders
will be displayed as the best ranked
displayed orders to sell (buy) at the least
aggressive price at which such odd-lot
sized orders can be aggregated to equal
at least a round lot.
Proposed Rule 7.36P would describe
for the Pillar trading platform order
ranking and display of orders, without
any substantive differences from Rule
7.36. As discussed in detail below, the
Exchange believes that the proposed
new rule text provides transparency
with respect to how the Exchange’s
price-time priority model would operate
through the use of new terminology
applicable to all orders on the Pillar
trading platform.
Rule 7.36P(a) would set forth
definitions for purposes of all of Rule 7
Equities Trading on the Pillar trading
platform, including Rule 7.37P (Order
17 The term ‘‘NYSE Arca Book’’ is defined in Rule
1.1(a) as the NYSE Arca Marketplace’s electronic
file of orders, which contain all of the User’s orders
in each of the Display Order, Working Order, and
Tracking Order Processes.
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Execution and Routing), described
below. The Exchange believes that these
proposed definitions would provide
transparency regarding how the
Exchange operates, and would serve as
the foundation for amendments to
orders and modifiers that will be in
proposed Rule 7.31P.
• Proposed Rule 7.36P(a)(1) would
define the term ‘‘display price’’ to mean
the price at which a Limit Order is
displayed, which may be different from
the limit price or working price of the
order. For example, Rule 7.31 provides
for order types that may be displayed at
prices that are different from the limit
price, such as a PNP Blind Order.18 The
Exchange proposes to define the term
‘‘display price’’ in Pillar to explain these
existing concepts uniformly in
Exchange rules applicable to trading on
the Pillar trading platform.
• Proposed Rule 7.36P(a)(2) would
define the term ‘‘limit price’’ to mean
the highest (lowest) specified price at
which a Limit Order to buy (sell) is
eligible to trade. The limit price is
designated by the User. As noted in the
proposed definitions of display price
and working price, the limit price
designated by the User may differ from
the price at which the order would be
displayed or eligible to trade.
• Proposed Rule 7.36P(a)(3) would
define the term ‘‘working price’’ to
mean the price at which an order is
eligible to trade at any given time,
which may be different from the limit
price or display price of an order. The
new term ‘‘working price’’ identifies for
all orders the price at which an order is
eligible to trade at any given time. Some
exchanges refer to this concept as the
price at which an order is ‘‘ranked.’’ 19
The Exchange believes that the term
‘‘working price’’ would provide clarity
regarding the price at which an order
may be executed at any given time.
Specifically, the Exchange believes that
use of the term ‘‘working’’ denotes that
this is a price that is subject to change,
depending on circumstances. The
Exchange will be using this term in
connection with orders and modifiers
when it files a separate rule filing to
adopt Rule 7.31P.
• Proposed Rule 7.36P(a)(4) would
define the term ‘‘working time’’ to mean
the effective time sequence assigned to
18 See Rule 7.31(e)(4). The Exchange notes that in
connection with Pillar, the Exchange will be
renaming the PNP Blind Order as an ‘‘Arca Only
Order,’’ which will be proposed in a separate rule
filing to adopt new Rule 7.31P. See Trader Update
dated March 2, 2015, available here: https://
www.nyse.com/publicdocs/nyse/markets/nyse/
Pillar_Trader_Update_Mar_2015.pdf.
19 See, e.g., BATS Exchange, Inc. Rule
11.9(g)(1)(A) (referring to where an order is
‘‘ranked’’ as the price of an order).
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an order for purposes of determining its
priority ranking. The Exchange proposes
to use the term ‘‘working time’’ in its
rules for trading on the Pillar trading
platform instead of terms such as ‘‘time
sequence’’ or ‘‘time priority,’’ which are
used in rules governing trading on the
Exchange’s current system. The
Exchange believes that use of the term
‘‘working’’ denotes that this is a time
assigned to an order for purpose of
ranking and is subject to change,
depending on circumstances.
Proposed Rule 7.36P(b) would govern
the display of non-marketable Limit
Orders on the Pillar trading system and
is intended to be comparable to the
preamble to Rule 7.36, without any
substantive differences. As proposed,
the Exchange would display all nonmarketable Limit Orders, unless the
order or modifier instruction specifies
that all or a portion of the order is not
to be displayed.
The Exchange proposes to define in
proposed Rule 7.36P(b)(1) what it means
for an order to be displayed for ranking
purposes. As proposed, an order would
be considered displayed for ranking
purposes if the price, side, and size of
the order are disseminated via a market
data feed, which includes a proprietary
market data feed of the Exchange. As
further proposed, odd-lot sized Limit
Orders and the displayed portion of
Reserve Orders would be considered
displayed for ranking purposes. This
proposed rule text is intended to
provide transparency in Exchange rules
regarding which orders are considered
displayed for ranking purposes, and
therefore eligible to be considered
Priority 2—Display Orders (described
below). Specifically, odd-lot sized
orders are displayed on the Exchange’s
proprietary data feed and would be
displayed on the public feed if
aggregated to equal a round lot or more
would thus be considered ‘‘displayed’’
orders for purposes of priority ranking.
Proposed Rule 7.36P(b)(2) would be
comparable to Rule 7.36(b) without any
substantive differences and would
provide that except as otherwise
permitted by Rule 7.7,20 all nonmarketable displayed Limit Orders
would be displayed on an anonymous
basis. The Exchange proposes not to
include reference to the Display Order
Process in Rule 7.36P(b)(2) because, as
discussed above, the Exchange is not
proposing to use that terminology in
Pillar.
20 Rule 7.7 provides that bids and offers
disseminated by the Exchange will not include an
ETP Holder’s identify unless the ETP Holder
affirmatively elects to disclosed its identify.
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Finally, proposed Rule 7.36P(b)(3)
would be comparable to Rule 7.36(c)
regarding dissemination, without any
substantive differences. The Exchange
proposes to use the term ‘‘will’’ in
Proposed Rule 7.36P(b)(3) instead of
‘‘shall.’’ In addition, the Exchange
would not include in proposed Rule
7.36P rule text from the second sentence
of the preamble to Rule 7.36. The
Exchange is a participant in the CQ Plan
and CTA Plan for Tape A- and B-listed
securities and a participant in the
Nasdaq UTP Plan for Tape C-listed
securities. The respective governing
documents of those plans set forth the
Exchange’s obligations regarding
dissemination of quotes and last-sale
information and thus, the Exchange
does not believe it is necessary to
duplicate a subset of those requirements
in its rules. Finally, the Exchange
proposes to cite to the governing federal
rule by referencing Rule 602 of
Regulation NMS 21 instead of Rule
11Ac1–1 under the Exchange Act,
which was superseded by Regulation
NMS.
Proposed Rule 7.36P(c) would
describe the Exchange’s general process
for ranking orders and would be
comparable to the text immediately
following Rule 7.36(a), without any
substantive differences. As proposed,
Rule 7.36P(c) would provide that all
non-marketable orders would be ranked
and maintained in the NYSE Arca Book
according to price-time priority in the
following manner: (1) Price; (2) priority
category; (3) time; and (4) ranking
restrictions applicable to an order or
modifier condition. Accordingly, orders
would be first ranked by price. Next, at
each price level, orders would be
assigned a priority category. Orders in
each priority category would be
required to be exhausted before moving
to the next priority category. Within
each priority category, orders would be
ranked by time. These general
requirements for order ranking are
applicable to all orders, unless an order
or modifier has a specified exception to
this ranking methodology, as described
in more detail below. The Exchange is
proposing this ranking description
instead of using the concepts of a
Display Order Process, Working Order
Process, and Tracking Order Process in
Rule 7.36. However, substantively there
would be no difference in how the
Exchange ranks orders on the Pillar
trading platform from how it ranks
orders in in the current trading system.
For example, a non-displayed order
would always be ranked after a
displayed order at the same price, even
21 17
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if the non-displayed order has an earlier
working time.
To provide transparency regarding the
Exchange’s ranking process, the
Exchange proposes to set forth in Rule
7.36P additional detail regarding each
step. Proposed Rule 7.36P(d) would
describe how orders are ranked based
on price. Specifically, as proposed, all
orders would be ranked based on the
working price of an order. Orders to buy
would be ranked from highest working
price to lowest working price and orders
to sell would be ranked from lowest
working price to highest working price.
The rule would further provide that if
the working price of an order changes,
the price priority of an order would
change. This price priority is current
functionality, but the new rule would
use the proposed term ‘‘working price.’’
The Exchange believes the proposed
rule text provides transparency
regarding the price-ranking process at
the Exchange.
Proposed Rule 7.36P(e) would
describe the proposed priority
categories for ranking purposes. As
proposed, at each price point, all orders
would be assigned a priority category. If
at a price point there are no orders in
a priority category, the next category
would have first priority. The proposed
rules applicable to the Pillar trading
platform would not use the terms
‘‘Display Order Process,’’ ‘‘Working
Order Process’’ and ‘‘Tracking Order
Process’’ for describing priority
categories. The Exchange does not
believe that Rule 7.36P, which sets forth
the general rule regarding ranking,
should provide specifics for one or more
order types and therefore the Exchange
will address separately in new Rule
7.31P governing orders and modifiers
which priority category correlates to
order types and modifiers. Accordingly,
details regarding which proposed
priority categories would be assigned to
the display and reserve portions of
Reserve Orders, which is in Rule 7.36,
will be addressed in new Rule 7.31P
and therefore not be included in
proposed Rule 7.36P, except as
described below.
The proposed priority categories
would be:
• Proposed Rule 7.36P(e)(1) would
specify ‘‘Priority 1—Market Orders,’’
which provides that unexecuted Market
Orders would have priority over all
other same-side orders with the same
working price. This proposed priority is
the same as current Exchange priority
rules under which resting Market
Orders have priority over other orders at
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the same price.22 Circumstances when
an unexecuted Market Order would be
eligible to execute against an incoming
contra-side order include when a
Market Order has exhausted all interest
at the NBBO and is waiting for an NBBO
update before executing again, pursuant
to Rule 7.31(a), or when a Market Order
is held unexecuted because it has
reached a trading collar, pursuant to
Rule 7.31(a)(3)(A). In such
circumstances, the unexecuted Market
Order(s) would have priority over all
other resting orders at that price.
• Proposed Rule 7.36P(e)(2) would
specify ‘‘Priority 2—Display Orders.’’
This proposed priority category would
replace the ‘‘Display Order Process.’’ As
proposed, non-marketable Limit Orders
with a displayed working price would
have second priority. For an order that
has a display price that differs from the
working price of the order, if the
working price is not displayed, the
order would not be ranked Priority 2 at
the working price.
• Proposed Rule 7.36P(e)(3) would
specify ‘‘Priority 3—Non-Display
Orders.’’ This priority category would
be used in Pillar rules, rather than the
‘‘Working Order Process.’’ As proposed,
non-marketable Limit Orders for which
the working price is not displayed,
including the reserve interest of Reserve
Orders, would have third priority.
• Proposed Rule 7.36P(e)(4) would
specify ‘‘Priority 4—Tracking Orders.’’
This priority category would replace the
‘‘Tracking Order Process,’’ as discussed
in further detail below in connection
with proposed Rule 7.37P. As proposed,
Tracking Orders would have fourth
priority.
Proposed Rule 7.36P(f) would set
forth that within each priority category,
orders would be ranked based on time
priority.
• Proposed Rule 7.36P(f)(1) would
provide that an order is assigned a
working time based on its original entry
time, which is the time an order is first
placed on the NYSE Arca Book. This
proposed process of assigning a working
time to orders is current functionality
and is substantively the same as current
references to the ‘‘time of original order
entry’’ found in several places in Rule
7.36. To provide transparency in
Exchange rules, the Exchange further
proposes to include in proposed Rule
7.36P(f) how the working time would be
determined for orders that are routed.
As proposed:
Æ Proposed Rule 7.36P(f)(1)(A) would
specify that an order that is fully routed
22 This priority is currently specified in Rule
7.16(f)(viii).
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to an Away Market 23 on arrival would
not be assigned a working time unless
and until any unexecuted portion of the
order returns to the NYSE Arca Book.
The Exchange notes that this is the
current process for assigning a working
time to an order and proposes to include
it in Exchange rules to provide
transparency regarding what is
considered the working time of an order
that was fully routed on arrival.
Æ Proposed Rule 7.36P(f)(1)(B) would
specify that for an order that is partially
routed to an Away Market on arrival,
the portion that is not routed would be
assigned a working time. If any
unexecuted portion of the order returns
to the NYSE Arca Book and joins any
remaining resting portion of the original
order, the returned portion of the order
would be assigned the same working
time as the resting portion of the order.
If the resting portion of the original
order has already executed and any
unexecuted portion of the order returns
to the NYSE Arca Book, the returned
portion of the order would be assigned
a new working time. This process for
assigning a working time to partially
routed orders is the same as currently
used by the Exchange. The Exchange
proposes to include this detail in
Exchange rules to provide transparency
regarding what is considered the
working time of an order.
• Proposed Rule 7.36P(f)(2) would
provide that an order would be assigned
a new working time any time the
working price of an order changes. This
proposed rule text would be based on
the rule text in Rule 7.36(a)(3), without
any substantive differences. A change to
the working price could be because of
a User’s instruction or because the order
or modifier has a price that can change
based on a reference price, such as an
MPL Order, which is priced based on
the PBBO.
• Proposed Rule 7.36P(f)(3) would
provide that an order would be assigned
a new working time if the size of the
order increases and that an order would
retain its working time if the size of the
order is decreased. This proposed rule
text would be based on rule text in the
first and second sentences of Rule
7.36(a)(3), without any substantive
differences.
• Proposed Rule 7.36P(f)(4) would
provide that an order retains its working
time if the order marking is changed
23 The Exchange proposes Rule 1.1(ffP), which
would define the term ‘‘Away Market.’’ The
proposed definition is based on the existing
definition of ‘‘NOW Recipient,’’ which is a term
that the Exchange would not be using in Pillar. For
Pillar, the proposed definition of ‘‘Away Market’’
would reference the term ‘‘alternative trading
system’’ instead of ECN.
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from: (A) Sell to sell short; (B) sell to sell
short exempt; (C) sell short to sell; (D)
sell short to sell short exempt; (E) sell
short exempt to sell; and (F) sell short
exempt to sell short. This rule text
would use for the Pillar trading platform
rules the same rule text as in Rule
7.16(f)(viii), without any substantive
differences. The Exchange proposes to
include the text from Rule 7.16(f)(viii)
regarding order priority when changing
order marking to Rule 7.36P to
consolidate ranking in a single rule.
Proposed Rule 7.36P(g) would specify
that the Exchange would enforce
ranking restrictions applicable to
specified order or modifier instructions.
These order and modifier instructions
would be identified in proposed new
Rules 7.31P and 7.44P, which the
Exchange will submit in a rule filing
prior to implementing the Pillar trading
platform.
In addition, the Exchange proposes a
definition in Rule 1.1(aP) of NYSE Arca
Book that would be applicable to the
Pillar rules. The proposed definition
would differ from the current definition
of NYSE Arca Book in Rule 1.1(a) in that
it would not include references to the
terms ‘‘Display Order Process,’’
‘‘Working Order Process,’’ and
‘‘Tracking Order Process,’’ which as
discussed above, are terms that will not
be used in Pillar. As proposed, new
Rule 1.1(aP) would provide that the
term ‘‘NYSE Arca Book’’ refers to the
NYSE Arca Marketplace’s electronic file
of orders, which contains all orders
entered on the NYSE Arca Marketplace.
Order Execution and Routing
Current Rule 7.37, titled ‘‘Order
Execution,’’ governs order execution
and routing at the Exchange. The
preamble to the rule provides that likepriced orders, bids and offers shall be
matched for execution following steps 1
through 4 of the rule, provided,
however, for an execution to occur in
any Order Process, the price must be
equal to or better than (1) the PBBO, in
the case of a Limit Order or Q Order or
(2) the NBBO in the case of an Inside
Limit Order, a Pegged Limit Order, or a
Market order. If such an order is not
executable within those parameters, the
rule provides that it may be routed to
away markets as provided in Rule
7.37(d).
The rule then sets forth steps 1
through 4. Step 1 is the Display Order
Process, which provides that incoming
orders are first matched for execution
against other orders in the Display
Order process. The rule provides further
specificity regarding how certain orders
are ranked. The rule also sets forth that
the size of an incoming Reserve Order
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includes both the displayed and reserve
size and the size of the portion of the
Reserve Order resident in the Display
Order Process is equal to its displayed
size. If an incoming marketable order is
not executed in its entirety, the
remaining part of the order is routed to
the ‘‘Working Order’’ process. The rule
further provides that an incoming order
that is not marketable enters the
Working Order Process to execute
against any Discretionary Orders at or
better than the NBBO.
Step 2 is the Working Order Process,
which provides that incoming
marketable orders are matched against
orders in the Working Order process by
the order of ranking of the orders in the
Working Order Process. The rule sets
forth how specified orders, such as
Discretionary Orders, interact within the
Working Order Process. The rule further
provides that if the incoming marketable
order has not been executed in its
entirety, the remaining portion of the
order shall be routed to the Tracking
Order Process.
Step 3 is the Tracking Order Process,
which is currently available during Core
Trading Hours only. In the Tracking
Order Process, if an order that is eligible
to route to an away market has not been
executed in its entirety under Steps 1
through 2, the NYSE Arca Marketplace
shall match and execute any remaining
part of such order in the Tracking Order
Process in time/price priority.
Step 4 sets forth the Exchange’s
process for routing away and specifies
certain orders that are not eligible to be
routed. For orders that are eligible to be
routed, the rule specifies that if the
order is designated as a Market, Inside
Limit, or Pegged Order, the Exchange
shall utilize all available quotes in the
routing determination, or if the order is
designated as a Limit Order, the
Exchange shall utilize available
Protected Quotations in the routing
determination. The rule sets forth
additional detail that orders will be
routed as Intermarket Sweep Orders
(‘‘ISO’’) and any remaining portion of
the order will be ranked and displayed
in the NYSE Arca Book pursuant to Rule
7.36.
The rule further provides that an
order that is routed away shall remain
outside the NYSE Arca Marketplace for
a prescribed period of time and may be
executed in whole or in part subject to
the applicable trading rules of the
relevant market center or market
participant and that when an order
remains outside the NYSE Arca
Marketplace, it will have no time
standing relative to other orders
received from Users at the same price
that may be executed against the NYSE
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Arca Book. The rule also provides that
when an order is outside the NYSE Arca
Marketplace, it will not have time
standing in the NYSE Arca Book.
Finally, with respect to routing, the rule
provides that for an order that is eligible
to route away, Users may instruct NYSE
Arca to bypass any market centers that
are not posting Protected Quotations
within the meaning of Regulation NMS.
Rule 7.37(e), (f), and (g) set forth how
the Exchange operates consistent with
Regulation NMS for locking and
crossing quotations and specified
exceptions to Regulation NMS,
including the self-help exception; ISO
Exception; single price openings,
reopenings, and closing transactions;
benchmark trades; stopped orders; and
the contingent order exemption.
Commentary .01 to Rule 7.37 sets
forth the Exchange’s use of data feeds
for the handling, execution, and routing
of orders, as well as for regulatory
compliance.
The Exchange proposes Rule 7.37P to
describe the order execution and routing
rules for the Pillar trading platform.
Proposed Rule 7.37P would not be
substantively different from Rule 7.37.
The Exchange proposes that the title for
new Rule 7.37P would be ‘‘Order
Execution and Routing.’’ The title of
Rule 7.37 is ‘‘Order Execution.’’ The
Exchange believes that because Rule
7.37P, like Rule 7.37, would include the
Exchange’s routing procedures,
referencing to ‘‘Routing’’ in the rule’s
title would provide additional
transparency in Exchange rules
regarding what topics would be covered
in new Rule 7.37P.
Proposed Rule 7.37P(a) and its
subsections would set forth the
Exchange’s order execution process and
would cover the same subject as the
preamble to Rule 7.37, without any
substantive differences. As proposed, an
incoming marketable order would be
matched for execution against contraside orders in the NYSE Arca Book
according to the price-time priority
ranking of the resting orders, subject to
specified parameters. Proposed Rule
7.37P(a)(1) would provide that orders
that are routed to an Away Market on
arrival would not be assigned a working
time or be matched for execution on the
NYSE Arca Book. This provision would
apply to orders that the Exchange routes
based on the time an order is entered,
e.g., a Market Order in a security that is
not eligible for an auction on the
Exchange that is entered during the
Early Trading Session, or an order with
an instruction to route directly to the
primary market on arrival, e.g., a
Primary Only Order. The Exchange
believes that the proposed rule provides
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28729
transparency that an order that is
intended to route on arrival would not
be subject to order execution at the
Exchange.
Proposed Rule 7.37P(a)(2) would
provide that, unless an order qualifies
for an exception to the Order Protection
Rule in Rule 611 of Regulation NMS,24
orders will not trade at prices that
would trade through a protected
quotation.25 Proposed Rule 7.37P(a)(3)
would provide that Limit Orders would
be executed at prices equal to or better
than the PBBO and proposed Rule
7.37P(a)(4) would provide that Market
Orders and Inside Limit Orders would
be executed at prices equal to or better
than the NBBO. The proposed rule for
the Pillar trading platform is based on
existing requirements as set forth in the
preamble to Rule 7.37 and is consistent
with the order processing of Market
Orders, Limit Orders, and Inside Limit
Orders as set forth in Rule 7.31.
As discussed above, the Exchange
proposes to eliminate the terminology
associated with the Display Order
Process, Working Order Process, and
Tracking Order Process. Therefore,
similar to proposed Rule 7.36P, the
Exchange would not include these terms
in new Rule 7.37P. Moreover, the
Exchange does not believe that it is
necessary to restate in new Rule 7.37P
the Exchange’s ranking process, which
would be set forth in proposed Rule
7.36P. In addition, consistent with the
Exchange’s proposed approach to new
Rule 7.34P and 7.37P, the Exchange
proposes to eliminate, where feasible,
reference to specific order types and
instead state the Exchange’s general
order execution methodology. Any
exceptions to such general requirements
would be set forth in connection with
specific order or modifier definitions in
proposed Rule 7.31P. Accordingly, the
Exchange will not include in new Rule
7.37P the process currently referred to
as ‘‘Step 3’’ and instead, details
regarding how Tracking Orders would
operate would be included in proposed
Rule 7.36P(e)(3), as discussed above
regarding ranking priority assigned to
Tracking Orders, and new Rule 7.31P.
Proposed Rule 7.37P(b) would set
forth the Exchange’s order routing
process and is intended to cover the
same subject as Rule 7.37(d), which is
24 17
CFR 242.611.
term ‘‘trade through’’ is defined in Rule
1.1(fff) as the purchase or sale of an NMS stock
during regular trading hours, either as principal or
agent, at a price that is lower than a Protected Bid
or higher than a Protected Offer. The term
‘‘protected quotation’’ is defined in Rule 1.1(eee) as
a quotation that is a Protected Bid or a Protected
Offer, and those terms are defined in the rule as
well.
25 The
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currently referred to as ‘‘Step 4’’ in
order processing, without any
substantive differences. Proposed Rule
7.37P(b) would provide that unless an
order has an instruction not to route,
after being matched for execution with
any contra-side orders in the NYSE Arca
Book pursuant to proposed Rule
7.37P(a), marketable orders would be
routed to Away Markets.
The proposed rule would then set
forth additional details regarding
routing:
• Proposed Rule 7.37P(b)(1) would
provide that an order that cannot meet
the pricing parameters of proposed Rule
7.37P(a) may be routed to Away
Market(s) before being matched for
execution against contra-side orders in
the NYSE Arca Book. The Exchange
believes that this proposed rule text
provides transparency that an order may
be routed before being matched for
execution, for example, to prevent
locking or crossing or trading through a
protected quotation.
• Proposed Rule 7.37P(b)(2) would
provide that if an order with an
instruction not to route would trade
through or lock or cross a protected
quotation and is not eligible for an
exception to either Rule 610 or 611 of
Regulation NMS,26 it would cancel, reprice, or be held undisplayed on the
NYSE Arca Book, as provided for in
Rules 7.31P and 7.44P.
• Proposed Rule 7.37P(b)(3) would
provide that orders eligible to route
would be routed to all available Away
Markets unless the order includes an
instruction to bypass market centers that
are not displaying protected quotations.
This rule text covers the subject matter
of current Rule 7.37(d)(2)(A),
7.37(d)(2)(B), and 7.37(d)(4), with no
substantive differences. As with current
functionality, proposed Rule 7.37P(b)(1)
specifies that all Away Markets, as
defined in proposed Rule 1.1(ffP),
would be considered as part of the
routing determination unless the User
has opted out of routing to Away
Markets that do not display protected
quotations.
• Proposed Rule 7.37P(b)(4) would
provide that Limit Orders that are
routed to Away Market(s) may be routed
to more than one price level, up (down)
to the limit price of an order to buy
(sell). This represents current routing
functionality and means that a Limit
Order may be routed to more than just
the top of book bid or offer of an Away
Market, provided that the order would
not be routed to prices that are outside
of the limit price of the order and
consistent with Rule 611 of Regulation
26 17
CFR 242.610 and 17 CFR 242.611.
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NMS,27 as provided for in proposed
Rule 7.37P(a)(2). The Exchange believes
that including this level of detail in the
rule provides transparency regarding the
potential for an order to be routed to
more than one price level on an Away
Market. The Exchange believes that
routing to depth of Away Markets
provides a greater opportunity for an
order to be executed in full.
• Proposed Rule 7.37P(b)(5) would
provide that, except for orders routed to
the primary listing market on arrival
pursuant to Rule 7.34P or designated to
route to the primary listing market
pursuant to Rule 7.31P, orders routed to
Away Markets would be sent as IOC
ISOs. This routing is based on current
Rule 7.37(d)(2)(B)(i) with no substantive
differences.
• Proposed Rule 7.37P(b)(6) would
provide that after any order or portion
thereof that has been routed would not
be eligible to trade on the NYSE Arca
Book, unless all or a portion of the order
returns unexecuted. This routing
methodology is current functionality
and covers that same subject as current
Rule 7.37(d)(2)(C) and (D), with no
substantive differences. In contrast to
Rule 7.37(d)(2)(C) and (D), however, the
Exchange proposes that Rule 7.37P(b)(6)
would focus on the fact that once
routed, an order would not be eligible
to trade on the Exchange, rather than
stating the obvious that it would be
subject to the routing destination’s
trading rules once routed. In addition,
because, as discussed above, the
working time assigned to orders that are
routed is being proposed to be address
in new Rule 7.36P(f)(1)(A) and (B), the
Exchange believes it would be
duplicative to restate this information in
new Rule 7.37P.
• Proposed Rule 7.37P(b)(7) would
set forth how the Exchange would
process requests to cancel orders that
have been routed. Rule 7.37(d)(2)(E)
currently provides that requests from
Users to cancel their orders while the
order is routed away to another market
center or market participant and
remains outside the NYSE Arca
Marketplace shall be processed, subject
to the applicable trading rules of the
relevant market center or market
participant.
The Exchange proposes to specify in
new Rule 7.37P(b)(7)(A) that requests to
cancel orders that are eligible to be
matched for execution against orders in
the NYSE Arca Book would not be
processed unless and until all or a
portion of the order returns unexecuted.
New Rule 7.37P(b)(7)(B) would specify
that for orders routed to the primary
27 17
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listing market on arrival pursuant to
Rule 7.34P or designated to route to the
primary listing market pursuant to Rule
7.31P, requests to cancel would be
routed to the primary listing market,
which is current functionality.
New Rule 7.37P(b)(7)(C) would
provide, as currently set forth in Rule
7.31(x) regarding Primary Only Orders,
for MOC Orders or LOC Orders in
NYSE- or NYSE MKT-listed securities,
requests to cancel or reduce in size that
are electronically entered after the times
specified in NYSE Rules 123C(3)(b) and
NYSE MKT Rule 123C(3)(b)—Equities
and Supplementary Material .40 to
those rules would be rejected.28 The
Exchange proposes to include this text
in proposed Rule 7.37P(b)(7) because it
concerns how the Exchange would
process requests to cancel orders with
instructions to route on arrival. By
including this rule text in proposed
Rule 7.37P, the proposed processing of
electronically entered requests to cancel
MOC or LOC Orders in NYSE- or NYSE
MKT-listed securities would also apply
to such orders that do not include a
Primary Only Order designation, but
which, pursuant to Rule 7.34P, would
be routed to the primary listing market
on arrival. The Exchange believes that
the proposed changes would provide
transparency regarding how requests to
cancel orders that have been routed
would be processed in Pillar, which
would not be substantively different
from how the Exchange’s current
trading system operates.
• Proposed Rule 7.37P(b)(8) would
provide that an order marked ‘‘short’’
when a short sale price test restriction
is in effect would not be routed. Instead
of routing, the Exchange would reprice
or cancel the order consistent with Rule
7.16, which will be proposed as Rule
7.16P in a separate rule filing for Pillar.
The Exchange believes the specific
routing methodologies for an order type
or modifier should be included with
how the order type is defined, which
will be in Rule 7.31P. Accordingly, the
Exchange does not believe it needs to
specify in new Rule 7.37P whether an
order is eligible to route, and if so,
whether there are any specific routing
28 NYSE Rule 123C(3)(b) and NYSE MKT Rule
123C(3)(b)—Equities provide that between 3:45
p.m. and 3:58 p.m., MOC and LOC Orders may be
cancelled or reduced in size only to correct a
legitimate error, and NYSE Rule 123C(3)(c) and
NYSE MKT Rule 123C(3)(c) provide that MOC and
LOC Orders may not be cancelled or reduced in size
at all after 3:58 p.m. Supplementary Material .40 to
those rules provides, among other things, that the
times specified in those rules will be adjusted based
on the early scheduled closing time and references
to 4:00 p.m. mean the early scheduled close, 3:45
p.m. means 15 minutes before the early scheduled
close, and 3:58 p.m. means two minutes before the
early scheduled close.
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instructions applicable to the order and
therefore will not be carrying over such
specifics that are included in Rule 7.37.
The remaining proposed rule text of
Rule 7.37P is based on Rule 7.37, with
limited non-substantive differences:
• Proposed Rule 7.37P(c) would
provide that after executing with
eligible contra-side interest on the NYSE
Arca Book and/or returning unexecuted
after routing to Away Market(s), any
unexecuted non-marketable portion of
an order would be ranked consistent
with new Rule 7.36P. This rule
represents current functionality and is
based on Rule 7.37(d)(3) without any
substantive differences.
• Proposed Rule 7.37P(d) would set
forth the Exchange’s use of data feeds,
and includes the rule text that is
currently set forth in Commentary .01 to
Rule 7.37, without any substantive
differences. Proposed Rule 7.37P(d)(1)
would not include the clause ‘‘away
market quotes disseminated by’’ as
unnecessary language, with the
proposed rule text using the proposed
defined term ‘‘Away Markets’’ as
follows, ‘‘[t]he Exchange receives data
feeds directly from broker dealers for
purposes of routing interest to Away
Markets that are not displaying
protected quotations.’’
• Proposed Rule 7.37P(e) would set
forth the same rule text from Rule
7.37(e) regarding locking or crossing
quotations in NMS stocks with a nonsubstantive difference to update a crossreference in the rule to rule numbering
in Rule 7.37P. The Exchange proposes
an additional non-substantive difference
to specify in Rule 7.37P(e)(3) that the
prohibition against Locking and
Crossing Quotations in paragraph Rule
7.37P(e)(2) would not apply in the
circumstances specified in Rules
7.37P(e)(3)(A)–(C). Proposed Rules
7.37P(e)(3)(A)–(C) is rule text that is
identical to Rule 7.37(e)(3)(A)–(C).
• Proposed Rule 7.37P(f) would set
forth the exceptions to the Order
Protection Rule 29 and would enumerate
the self-help exception in Rule
7.37P(f)(1), which is based on Rule
7.37(f) regarding Self-Help Exceptions,
with two proposed modifications. The
Exchange would not include the second
sentence of Rule 7.37(f)(1), which
provides that the Exchange will
disregard another Trading Center’s bid
and offer if the other Trading Center has
repeatedly failed to respond within one
second to an incoming IOC order after
adjusting for order transmission time, in
new Rule 7.37P(f)(1). The self-help
exception set forth in Rule 611(b)(1) of
29 17
CFR 242.611(b).
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Regulation NMS 30 and related
Securities and Exchange Commission
staff guidance regarding this
exception 31 does not require trading
centers to use the self-help exception if
a destination trading trading center fails
to respond within one second to an
incoming IOC order, but state that such
a failure would justify use of the
exception. Rather, a trading center is
free to adopt reasonable policies and
procedures consistent with the flexible
purposes of the self-help exception.
Because the Exchange does not use the
method described in the second
sentence of current Rule 7.37(f)(1) to
determine whether to declare self-help,
the Exchange proposes not to include it
in new Rule 7.37P(f)(1). Second, Rule
7.37(f)(1)(B) provides that the Exchange
follows ‘‘published NYSE Arca policies
and procedures for electing the self-help
exception.’’ Because the Exchange
publishes those policies and procedures
internally only, to reduce investor
confusion, the Exchange proposes to
modify the text in proposed Rule
7.37P(f)(1)(B) to provide instead that the
Exchange would follow ‘‘established
NYSE Arca policies and procedures for
electing the self-help exception.’’
Proposed Rules 7.37P(f)(2)–(4) are
based on the rule text from Rule 7.37(g)
regarding Additional Exceptions to the
Order Protection Rule, with nonsubstantive differences to reflect
different rule numbering and update the
rule text to reflect current operations.
First, the Exchange proposes not to
include the first and third sentences of
Rule 7.37(g)(1) in proposed Rule
7.37P(f)(2)(A) relating to the Intermarket
Sweep Order Exception because when
executing or displaying ISOs that it
receives from ETP Holders, it is the
responsibility of the entering broker
dealer and not the Exchange to
simultaneously route ISOs. Therefore,
the current rule text does not represent
how the Exchange operates, nor does it
reflect the requirements of Regulation
NMS. The Exchange proposes
additional non-substantive differences
to the rule text relating to this exception
to update references, for example, to
refer to NYSE Arca’s best bid or best
offer rather than its own protected
quotation and remove reference to the
‘‘NYSE Arca System.’’
Second, the Exchange proposes not to
include the second sentence of Rule
7.37(g)(3) relating to how the Exchange
would conduct a single-price reopening
in proposed Rule 7.37P(f)(3). To reduce
investor confusion and promote
transparency in its rules, the Exchange
believes that its rule governing auctions
should set forth how the Exchange
conducts a single-price auction to
reopen a stock following a trading halt.
Third, the Exchange proposes not to
include current Rule 7.37(g)(5) text
regarding Stopped Orders because the
Exchange does not currently, and will
not in Pillar, support Stopped Orders on
the Exchange. Finally, the Exchange
proposes not to include current Rule
7.37(g)(6) text regarding transactions
other than ‘‘regular-way’’ contracts
because in Pillar, the Exchange would
not execute any orders on terms other
than standardized terms and conditions,
i.e., ‘‘regular way’’ contracts.
Proposed Rule 7.37P(f)(5) regarding
the Contingent Order Exemption from
the Order Protection Rule is based on
rule text from Rule 7.37(h) regarding
Exemptions with different rule
numbering and one substantive
difference. Rule 7.37(g)(2) specifies the
requirements to meet the qualified
contingent trade exemption to Rule
611(a) of Regulation NMS 32 and are
based on the requirements specified in
the Commission’s Order granting an
exemption for qualified contingent
trades.33 Rule 7.37(f)(2)(G) currently
specifies the original requirement that
the exempted transaction must be part
of a contingent trade that involves at
least 10,000 shares or has a market value
of at least $200,000. The Commission
later modified the exemption for
qualified contingent trades to remove
that size condition.34 The Exchange
therefore proposes not to include in its
proposed Rule 7.37P(f)(2)(D) the size
requirement.
*
*
*
*
*
As discussed above, because of the
technology changes associated with the
migration to the Pillar trading platform,
the Exchange will announce by Trader
Update when rules with a ‘‘P’’ modifier
will become operative and for which
symbols. The Exchange believes that
keeping existing rules on the book
32 17
30 17
CFR 611(b)(1).
31 See Question 4.07, ‘‘Responses to Frequently
Asked Questions Concerning Rule 611 and Rule 610
of Regulation NMS,’’ available at https://
www.sec.gov/divisions/marketreg/nmsfaq61011.htm (‘‘Beyond this basic parameter of repeated
failure to turn around an IOC order within one
second, trading centers are free to adopt reasonable
policies and procedures that are consistent with the
flexible purposes of the self-help exception.’’).
PO 00000
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CFR 242.611(a).
Securities Exchange Act Release No. 54389
(August 31, 2006), 71 FR 52829 (September 7, 2006)
(Order Granting an Exemption for Qualified
Contingent Trades from Rule 611(a) of Regulation
NMS under the Securities Exchange Act of 1934).
34 See Securities Exchange Act Release No. 57620
(April 4, 2008), 73 FR 19271 (April 9, 2008) (Order
Modifying the Exemption for Qualified Contingent
Trades from Rule 611(a) of Regulation NMS under
the Securities Exchange Act of 1934).
33 See
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pending the full migration of Pillar will
reduce confusion because it will ensure
that the rules governing trading on a
trading platform will continue to be
available pending the full migration.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),35 in general, and furthers the
objectives of Section 6(b)(5),36 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 rules to support Pillar
would remove impediments to and
perfect the mechanism of a free and
open market because the proposed rule
set would promote transparency in
Exchange rules by using consistent
terminology governing equities trading,
thereby ensuring that members,
regulators, and the public can more
easily navigate the Exchange’s rulebook
and better understand how equity
trading is conducted on the Exchange.
Adding new rules with the modifier ‘‘P’’
to denote those rules that would be
operative for the Pillar trading platform
would remove impediments to and
perfect the mechanism of a free and
open market by providing transparency
of which rules govern trading once a
symbol has been migrated to the Pillar
platform.
The Exchange believes that the
proposed restructuring in new Rules
7.34P, 7.36P, and 7.37P would remove
impediments to and perfect the
mechanism of a free and open market by
assuring consistency of terms used in
the Exchange’s rulebook. The proposed
revisions to the Exchange’s equity
trading rules to reflect terminology
associated with Pillar would remove
impediments to and perfect a free and
open market because the proposed
changes are designed to simplify the
structure of the Exchanges rules and
permit the use of consistent terminology
throughout numerous rules, without
changing the underlying functionality.
For example, the Exchange believes the
proposed definitions set forth in Rule
7.36P, i.e., display price, limit price,
working price, and working time,
35 15
36 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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16:53 May 18, 2015
Jkt 235001
promote transparency in Exchange rules
and make them easier to understand
because these proposed definitions will
serve as the foundation for additional
rule changes to support Pillar.
The Exchange further believes that
moving specified rule text that relates to
specific order types that is set forth in
Rules 7.34, 7.36 and 7.37 to proposed
Rule 7.31P (which will be the subject of
a separate filing), and therefore not
include such detail in proposed Rules
7.34P, 7.36P and 7.37P, would make
Exchange rules easier to navigate
because information regarding how a
specific order type would operate would
be in a single location in the Exchange’s
rule book.
With respect to proposed Rule 7.34P,
the Exchange believes that the proposed
changes to functionality would remove
impediments to and perfect the
mechanism of a fair and orderly market.
First, the Exchange believes that
because an auction that opens a trading
session should occur within that trading
session, it would remove impediments
to and perfect the mechanism of a fair
and orderly market for the Core Open
Auction to occur during the Core
Trading Session instead of the Early
Trading Session. Second, the Exchange
believes that the proposed change to
route to the primary listing market
Market Orders and Auction-Only Orders
in symbols that are not eligible for an
execution on the Exchange would
remove impediments to and perfect the
mechanism of a free and open market by
ensuring that such orders reach a
destination where they may be eligible
to obtain an execution or participate in
an auction. This is current functionality,
but it is only available for orders that
have been designated as ‘‘Primary
Only.’’ Expanding this functionality to
orders that do not include that
designation would also protect investors
and the public interest by enabling such
interest to reach a destination where it
is more likely to obtain an execution
opportunity or participate in an auction.
Finally, the Exchange believes that
making Tracking Orders available
during the Early and Late Trading
Sessions would remove impediments to
and perfect the mechanism of a free and
open market by providing additional
execution opportunities on the
Exchange through the availability of
additional passive liquidity.
With respect to proposed Rules 7.36P
and 7.37P, as discussed above, the
Exchange is not proposing any
functional changes to how it ranks,
displays, executes, or routes orders. The
Exchange believes, however, that the
proposed rule text promotes
transparency through the use of
PO 00000
Frm 00154
Fmt 4703
Sfmt 4703
consistent terminology that will serve as
the foundation for additional Pillarrelated rule proposals. The Exchange
also believes that adding more detail
regarding current functionality in new
Rules 7.34P, 7.36P, and &.37P, as
described above, would promote
transparency by providing notice of
when orders would be accepted, routed,
rejected, cancelled, or be assigned a
working time by the Exchange.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed change is not designed to
address any competitive issue but rather
to adopt new rules to support the
Exchange’s new Pillar trading platform.
As discussed in detail above, with this
rule filing, the Exchange is not
proposing to change its core
functionality regarding its price-time
priority model, and in particular, how it
would rank, display, execute or route
orders in Pillar. Rather, the Exchange
believes that the proposed rule change
would promote consistent use of
terminology to support the Pillar trading
platform making the Exchange’s rules
easier to navigate.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or up to 90 days (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be 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.
E:\FR\FM\19MYN1.SGM
19MYN1
Federal Register / Vol. 80, No. 96 / Tuesday, May 19, 2015 / Notices
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–74955; File No. SR–ICEEU–
2015–007]
• 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–2015–38 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.
tkelley on DSK3SPTVN1PROD with NOTICES
All submissions should refer to File
Number SR–NYSEARCA–2015–38. 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 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–
NYSEARCA–2015–38, and should be
submitted on or before June 9, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–12028 Filed 5–18–15; 8:45 am]
BILLING CODE 8011–01–P
37 17
CFR 200.30–3(a)(12).
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16:53 May 18, 2015
Jkt 235001
Self-Regulatory Organizations; ICE
Clear Europe Limited; Order Approving
Proposed Rule Change Relating to
Collateral and Haircut Policy
May 13, 2015.
I.Introduction
On March 13, 2015, ICE Clear Europe
Limited (‘‘ICE Clear Europe’’ or
‘‘Clearing House’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
to implement a new collateral and
haircut policy (the ‘‘Haircut Policy’’)
applicable to Permitted Cover posted by
Clearing Members to meet the Clearing
House’s Margin and Guaranty Fund
requirements. The proposed rule change
was published for comment in the
Federal Register on March 31, 2015.3
The Commission did not receive
comment letters regarding the proposed
change. For the reasons discussed
below, the Commission is granting
approval of the proposed rule change.
II. Description of the Proposed Rule
Change
ICE Clear Europe proposes to
implement a Haircut Policy, which
would codify and consolidate certain
existing practices of the Clearing House
with respect to Permitted Cover. The
proposed Haircut Policy is designed (i)
to set out overall principles with respect
to the assets accepted by the Clearing
House as Permitted Cover; (ii) to
establish a framework for determining
absolute and relative limits, as
applicable, on the value of the collateral
that may be posted by a Clearing
Member as Permitted Cover; (iii) to
establish a value-at-risk (‘‘VaR’’) based
methodology for determining haircuts
for all Permitted Cover; (iv) to mitigate
wrong-way risk from Permitted Cover;
(v) to address sources for pricing
Permitted Cover; and (vi) to set out
certain related monitoring, reviewing
and reporting procedures. The Haircut
Policy would apply to Permitted Cover
provided for all product classes (F&O,
CDS and FX).4 Following
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 34–74579
(Mar. 25, 2015), 80 FR 17132 (Mar. 31, 2015) (SR–
ICEEU–2015–007).
4 ICE Clear Europe notes that although the Haircut
Policy generally also applies to Permitted Cover
28733
implementation, the Clearing House
will from time to time adjust the
haircuts applicable to Permitted Cover
under the methodology set forth in the
policy.
The general aims of the proposed
Haircut Policy are to ensure that the
Clearing House can efficiently liquidate
all forms of Permitted Cover, that
appropriate prices are used for valuation
of Permitted Cover and that appropriate
haircuts (including, as applicable, crosscurrency haircuts) are used. The
proposed Haircut Policy would codify
certain general principles considered by
the Clearing House in accepting assets
as Permitted Cover, including
availability of pricing information, the
existence of liquid and active markets
for buyers and sellers of those assets, the
existence of sufficient price history, the
ability to liquidate Permitted Cover
without causing a market disruption,
compliance with legal and regulatory
requirements and sufficient operational
and technological framework to handle
deposit, liquidation and return of such
assets as Permitted Cover.
Under the proposed Haircut Policy,
cash collateral must be in one of several
specified currencies underlying
contracts cleared by the Clearing House.
Additional general requirements would
apply to financial instruments,
including prohibitions on acceptance of
instruments that have non-‘‘vanilla’’
features such as embedded options,
instruments issued by a Clearing
Member or its affiliate, instruments
issued by a CCP or by entities that
provide critical services to the Clearing
House (other than central banks) and
certain credit-based limits. Such limits
would require that the issuer is rated at
least ‘‘BBB¥’’ by S&P (or its
equivalent), the average yield on the
asset over the previous three months is
not greater than 8%, and the 5-year CDS
spread of the issuer has not exceeded
500 basis points over the previous three
months. The proposed Haircut Policy
provides that where market conditions
warrant, or where the Clearing House’s
sovereign risk model indicates
deteriorating credit below a certain
threshold (i.e., ‘‘BBB¥’’ by S&P), the
Clearing House may remove securities
from the list of Permitted Cover and/or
vary applicable haircuts. ICE Clear
Europe will notify Clearing Members
and other market participants of such
actions by Circular. ICE Clear Europe
maintains the current List of Permitted
1 15
2 17
PO 00000
Frm 00155
Fmt 4703
Sfmt 4703
posted with respect to Guaranty Fund requirements,
certain additional requirements apply to Guaranty
Fund contributions under the Rules and Finance
Procedures. Those additional requirements are not
proposed to be changed in connection with the
Haircut Policy.
E:\FR\FM\19MYN1.SGM
19MYN1
]]>Agencies
[Federal Register Volume 80, Number 96 (Tuesday, May 19, 2015)]
[Notices]
[Pages 28721-28733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12028]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74951; File No. SR-NYSEARCA-2015-38]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Adopting New Equity Trading Rules Relating to
Trading Sessions, Order Ranking and Display, and Order Execution To
Reflect the Implementation of Pillar, the Exchange's New Trading
Technology Platform
May 13, 2015.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\
[[Page 28722]]
notice is hereby given that, on April 30, 2015, 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, II, and III 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\ 15 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt new equity trading rules relating to
Trading Sessions, Order Ranking and Display, and Order Execution to
reflect the implementation of Pillar, the Exchange's new trading
technology platform. 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 January 29, 2015, the Exchange announced the implementation of
Pillar, which is an integrated trading technology platform designed to
use a single specification for connecting to the equities and options
markets operated by NYSE Arca and its affiliates, New York Stock
Exchange LLC (``NYSE'') and NYSE MKT LLC (``NYSE MKT''). NYSE Arca
Equities will be the first trading system to migrate to Pillar.\4\ NYSE
Arca Equities trading on Pillar would be an all-electronic price-time
priority equities trading platform.
---------------------------------------------------------------------------
\4\ See Trader Update dated January 29, 2015, available here:
https://www1.nyse.com/pdfs/Pillar_Trader_Update_Jan_2015.pdf.
---------------------------------------------------------------------------
The Exchange will be submitting proposed rule changes to correspond
to the anticipated migration to Pillar, which would be done in phases.
During the first phase, ETP Holders would continue to connect to
existing NYSE Arca gateways to access the Pillar trading platform. In
the second phase, the Exchange will introduce new customer gateways and
connectivity as well as additional order type processing. To implement
the first phase of Pillar migration, the Exchange will be submitting
more than one rule filing. The Exchange will later submit rule filings
to implement the second phase of Pillar migration.
During the first phase of Pillar implementation, the Exchange would
roll out the new technology platform over a period of time based on a
range of symbols. Because orders entered in symbols not yet migrated to
Pillar would continue to operate under current rules, the Exchange will
keep its current rules, pending complete migration of symbols to Pillar
and retirement of the current trading system, and add new rules that
would be applicable to symbols that trade on the Pillar trading
platform. As proposed, the new rules governing trading on Pillar would
have the same numbering as current rules, but with the modifier ``P''
appended to the rule number. For example, Rule 7.34, governing Trading
Sessions, would remain unchanged and continue to apply to any trading
in symbols on the current trading platform. Proposed Rule 7.34P would
govern Trading Sessions for trading in symbols migrated to the Pillar
platform. Once all symbols have migrated to the Pillar platform, the
Exchange will file a rule proposal to delete rules that are no longer
operative.
In this filing, the Exchange proposes to adopt new Pillar rules
relating to Trading Sessions (NYSE Arca Equities Rule 7.34 (``Rule
7.34'')), Order Ranking and Display (NYSE Arca Equities Rule 7.36
(``Rule 7.36'')), and Order Execution (NYSE Arca Equities Rule 7.37
(``Rule 7.37'')). As proposed, the new rules would be NYSE Arca
Equities Rules 7.34P (Trading Sessions) (``Rule 7.34P''), 7.36P (Order
Ranking and Display) (``Rule 7.36P''), and 7.37P (Order Execution)
(``Rule 7.37P''). These three rules would set forth the foundation of
the Exchange's equity trading model in Pillar, including the hours of
operation, how orders would be ranked and displayed, and how orders
would be executed.
As discussed in greater detail below, the Exchange is not proposing
that the core functionality of rules applicable to trading on Pillar
would be different from rules applicable to trading on the current NYSE
Arca equities trading system. However, with Pillar, the Exchange would
introduce new terminology. Further, because the Exchange would operate
both its current trading system for some symbols and the Pillar trading
platform for other symbols, until rollout of Pillar across all symbols
is complete, the Exchange is proposing to add all new rule text for
proposed Rules 7.34P, 7.36P, and 7.37P. Because these rules and related
proposed terminology changes would be the foundation for all other rule
changes that will be proposed in connection with Pillar, the Exchange
believes that filing for these rule changes before other rule changes
will provide the public notice of how Pillar would operate generally.
Proposed Use of ``P'' Modifier
To reflect how the ``P'' modifier would operate, the Exchange
proposes to add rule text immediately following the reference to ``Rule
7 Equities Trading,'' and before ``Section 1. General Provisions'' that
would provide that rules with a ``P'' modifier would be operative for
symbols that are trading on the Pillar trading platform. As further
proposed, if a symbol is trading on the Pillar trading platform, a rule
with the same number as a rule with a ``P'' modifier would no longer be
operative for that symbol and the Exchange would announce by Trader
Update when symbols are trading on the Pillar trading platform.
Similarly, the Exchange proposes to add rule text following the
title ``Rule 1 Definitions'' that provides that definitions with a
paragraph designation that includes a ``P'' modifier would be operative
for symbols trading on the Pillar trading platform. A definition with
the same paragraph designation as a definition with a ``P'' modifier
would not be operative for symbols trading on Pillar. Finally, to
provide clarity that definitions that do not have a version with a
``P'' modifier would apply across all symbols, regardless of the
trading platform, the Exchange proposes to state explicitly that
definitions that do not have a companion version with a ``P'' modifier
would continue to be operative for all symbols.
The Exchange believes that adding these explanations regarding the
``P'' modifier in Exchange rules would provide transparency regarding
which rules and definitions would be operative depending on the trading
platform on which a symbol is trading.
[[Page 28723]]
Trading Sessions
Rule 7.34 governs trading sessions. As set forth in Rule 7.34(a),
the Exchange has three trading sessions:
(1) the Opening Session, which begins at 1:00:00 a.m. Pacific Time
and concludes at the commencement of the Core Trading Session. The
Opening Auction and Market Order Auction occur during the Opening
Session;
(2) the Core Trading Session, which begins at 6:30:00 a.m. Pacific
Time or at the conclusion of the Market Order Auction, whichever comes
later, and concludes at 1:00:00 p.m. Pacific Time; and
(3) the Late Trading Session, which begins following the conclusion
of the Core Trading Session and concludes at 5:00:00 p.m. Pacific Time.
Proposed Rule 7.34P(a)(1)-(3) would similarly provide for three
trading sessions, but with several proposed differences from Rule
7.34(a):
First, the Exchange proposes non-substantive differences
in the names of the trading sessions on the Pillar trading platform.
Specifically, for Pillar, the Exchange proposes to call its three
trading sessions the ``Early Trading Session,'' the ``Core Trading
Session,'' and the ``Late Trading Session.'' The Exchange believes that
the use of the term ``Early Trading Session,'' rather than the
``Opening Session,'' better describes when the session occurs, which is
before the Core Trading Session, and therefore would be clearer to
market participants. In addition, the Exchange proposes the auction
that opens the ``Early Trading Session'' would be called the ``Early
Open Auction,'' instead of the ``Opening Auction'' and that the auction
that opens the ``Core Trading Session'' would be called the ``Core Open
Auction'' instead of the ``Market Order Auction.'' The Exchange
believes that the auctions that open the respective sessions should be
named to reflect both the name of the session and that it is an opening
auction for the respective session.
Second, the Exchange proposes that all time references for
the trading sessions would be to Eastern Time, and would not include
references to seconds.\5\ The Exchange's current rules for trading
sessions use references to Pacific Time. In today's national trading
environment, the Exchange believes that use of Eastern Time would
reduce investor confusion by conforming references to time to how all
other exchanges denote time in their rules. The Exchange similarly
believes that references to seconds in proposed Rule 7.34P are
unnecessary, as none of the other Exchange rules for the beginning and
end of trading sessions use seconds.
---------------------------------------------------------------------------
\5\ The Exchange also proposes to change the time in the
definition of Core Trading Hours, which is defined in Rule 1.1(j),
from Pacific to Eastern Time references.
---------------------------------------------------------------------------
Third, the Exchange proposes that Rule 7.34P(a)(1)
regarding Early Trading Sessions would be more detailed than Rule 7.34
by adding text that is currently in Rule 7.35(a)(1), without any
substantive differences.\6\ Specifically, the Exchange proposes to
include in Rule 7.34P(a)(1) that the Corporation \7\ would begin
accepting orders 30 minutes before the Early Trading Session begins.
Because this rule text concerns when orders may be entered, the
Exchange believes that it should be included in the rule governing
trading sessions for Pillar. Proposed Rule 7.34P(a)(1) would further
provide that the Early Open Auction would begin the Early Trading
Session.
---------------------------------------------------------------------------
\6\ In a separate rule filing, the Exchange will propose Rule
7.35P, which would govern auctions in Pillar.
\7\ The term ``Corporation'' is defined in Rule 1.1(k) as NYSE
Arca Equities, Inc., as described in the NYSE Arca Equities, Inc.'s
Certification of Incorporation and Bylaws.
---------------------------------------------------------------------------
Fourth, the Exchange proposes to provide that the Core
Open Auction would occur during the Core Trading Session. Rule 7.34(a)
currently provides that the Market Order Auction occurs during the
Opening Session. Because this auction is intended to open trading for
the Core Trading Session,\8\ the Exchange believes it should be
considered part of the Core Trading Session, rather than the Early
Trading Session. The Exchange therefore proposes to specify in proposed
Rule 7.34P(a)(2) that the Core Open Auction would begin the Core
Trading Session. The Exchange further proposes to specify that the Core
Trading Session would end at the conclusion of Core Trading Hours or
the Core Closing Auction, whichever comes later. The proposed cross
reference to Core Trading Hours, which is defined in Rule 1.1(j), takes
into consideration that the Core Trading Session may end earlier than
4:00 p.m. when the Exchange has an early scheduled close, e.g., the day
before Christmas.
---------------------------------------------------------------------------
\8\ Rule 7.35 currently specifies that the Market Order Auction
occurs at 9:30 a.m., which is the same time that the Core Trading
Session begins for securities that do not have an auction.
---------------------------------------------------------------------------
Fifth, the Exchange proposes not to include in proposed
Rule 7.34P the text currently in Rule 7.34 relating to extended Core
Trading Session hours. Rules 7.34(a)(3)(A) and (B) provide that the
Core Trading Session for specified securities concludes at 1:15:00 p.m.
Pacific Time unless otherwise determined by the Corporation and that
the Exchange would maintain on its Web site which securities for which
the Core Trading Session would extend to 1:15:00 p.m. Because the
Exchange does not have any securities for which the Core Trading
Session extends to 1:15:00 p.m. Pacific Time, nor does it plan to
provide for such an extended Core Trading Session for any securities,
the Exchange proposes not to include this provision in proposed Rule
7.34P.
Finally, the Exchange proposes that text currently found
in Rules 7.34(a)(4), 7.34(a)(5), and 7.34(b) not be included in
proposed Rule 7.34P. Rules 7.34(a)(4) and (5) currently describe how
the Exchange handles trading halts in specified securities that occur
during different trading sessions. The Exchange believes that rule text
relating to halts should be centralized in a single rule and will be
proposing in a separate rule filing to add the text of current Rule
7.34(a)(4) and (5) to proposed Rule 7.18P. Rule 7.34(b) sets forth
Market Maker obligations to enter Q Orders for securities in which they
are registered. The Exchange believes that this topic is not related to
trading sessions directly and that this rule text should be included
with the definition of Q Orders and therefore will be proposing in a
separate rule filing to add the text of current Rule 7.34(b) to
proposed Rule 7.31P.\9\ Because Rule 7.34(a)(4) defines the term
``Derivative Securities Product'' and because that definition would not
be included in proposed Rule 7.34P, the Exchange proposes to add a new
definition to Rule 1.1 to define the terms Derivative Securities
Product and UTP Derivative Securities Product. As proposed, the term
``Derivative Securities Product'' would mean a security that meets the
definition of ``derivative securities product'' in Rule 19b-4(e) under
the Securities Exchange Act of 1934 \10\ and a ``UTP Derivatives
Securities Product'' would mean a Derivative Securities Product that
trades on the Exchange pursuant to unlisted trading privileges.
---------------------------------------------------------------------------
\9\ The Exchange will be submitting a separate rule filing to
propose Rule 7.31P, which would govern orders and modifiers in
Pilar.
\10\ 17 CFR 240.19b-4(e)
---------------------------------------------------------------------------
The Exchange proposes to include the text of Rule 7.34(c) in
proposed Rule 7.34P(b) with non-substantive differences and to provide
more detail. Rule 7.34(c) provides that any Day Order entered into the
NYSE Arca Marketplace \11\ may remain in effect for
[[Page 28724]]
one or more consecutive trading sessions on a particular day and that
for each Day Order entered, the User \12\ must designate for which
trading session(s) the order will remain in effect. Proposed Rule
7.34P(b) would instead provide that any order entered into the NYSE
Arca Marketplace must include a designation for which trading
session(s) the order would remain in effect.
---------------------------------------------------------------------------
\11\ The term ``NYSE Arca Marketplace'' is defined in Rule
1.1(e) as the electronic securities communication and trading
facility designated by the Board of Directors through which orders
of Users are consolidated for execution and/or display.
\12\ The term ``User'' is defined in Rule 1.1(yy) as any ETP
Holder or Sponsored Participant who is authorized to obtain access
to the NYSE Arca Marketplace pursuant to Rule 7.29.
---------------------------------------------------------------------------
Proposed new Rule 7.34P(b) would also provide that an order would
be eligible to participate only in the designated trading session(s)
and may remain in effect for one or more consecutive trading sessions
on a particular day. The Exchange further proposes to add that unless
otherwise specified, an order designated for a later trading session
would be accepted but not eligible to trade until the designated
trading session begins. For example, if an order is entered at 8:00
a.m. Eastern Time and is designated for the Core Trading Session only,
it would be accepted but would not participate in the Early Trading
Session. As discussed in more detail below, proposed Rule 7.34P(c)
would specify orders that may not be entered either during or in
advance of a designated trading session. In addition, the Exchange
proposes to add that an order designated solely for a trading session
that has already ended would be rejected. For example, an order entered
at 10:00 a.m. Eastern Time that is designated only for the Early
Trading Session would be rejected. The Exchange believes that the
proposed changes would provide transparency in Exchange rules of when
orders may be entered and when orders would be rejected.
The Exchange also proposes to add in Rule 7.34P(b)(2) and (3) that
an order with a day time-in-force instruction entered before or during
the Early Trading Session would be deemed designated for the Early
Trading Session and the Core Trading Session and that an order with a
day time-in-force instruction entered during the Core Trading session
would be deemed designated for the Core Trading Session. The Exchange
believes that the proposed rule text provides transparency regarding
which sessions during which an order may be eligible to participate.
The Exchange proposes to describe the processes currently set forth
in Rule 7.34(d) in proposed Rule 7.34P(c). Rule 7.34(d) describes which
orders are permitted in each session. The Exchange proposes to revise
how this topic is described in proposed Rule 7.34P(c) to provide
generally that orders are eligible to participate in a session, unless
otherwise provided in the rule. Accordingly, rule text in Rule 7.34(d)
that specifies order types that are eligible to participate in a
particular session would not be included in new Rule 7.34P because the
proposed new text would make it unnecessary to specify the order types
eligible to participate in a particular session. Those order types that
would not be eligible to participate in each of the Exchange's three
trading sessions are described below.
With respect to the Early Trading Session, the Exchange proposes in
new Rule 7.34P(c)(1) to provide that, unless otherwise specified in
proposed paragraphs (c)(1)(A)--(E) of the new rule, orders and
modifiers defined in Rule 7.31P that have been designated for the Early
Trading Session would be eligible to participate in the Early Trading
Session. The Exchange believes that the proposed rule text makes clear
that unless specified in paragraphs (c)(1)(A)-(E) of new Rule 7.34P,
all orders and modifiers in Rule 7.31P, if designated for the Early
Trading Session, would be eligible to participate in the Early Trading
Session.
Unlike under current rules, the Exchange proposes that Tracking
Orders would be eligible to participate in the Early Trading Session on
the Pillar trading platform. Because the Exchange routes orders during
the Early Trading Session and because Tracking Orders are intended to
be passive liquidity on the Exchange to interact with an order before
it is routed, the Exchange believes that Tracking Orders should be
available in the Early Trading Session. Accordingly, rule text from
Rule 7.34(d)(1)(C) would not be included in new Rule 7.34P(c)(1).
The Exchange proposes that the following orders and modifiers in
Rule 7.31P would not be eligible to participate in the Early Trading
Session:
Proposed Rule 7.34P(c)(1)(A) would provide that Market
Orders, Q Orders, and Pegged Orders would not be eligible to
participate in the Early Trading Session, which is current
functionality. The Exchange further proposes to specify that any Market
Orders, Q Orders, and Pegged Orders that include a designation for the
Early Trading Session would be rejected. Such orders would be rejected
if they also include a designation for another trading session; the
designation for the Early Trading Session whether alone or with another
designation would result in a rejection of the order. The Exchange
further proposes to add that Market Pegged Orders entered before or
during the Early Trading Session would be rejected regardless of the
session designated for the order.\13\ For example, a Market Order, Q
Order, or Primary Pegged Order designated for the Core Trading Session
only that is entered at 8:00 a.m. Eastern Time would be accepted, but a
Market Pegged Order designated for the Core Trading Session only
entered at the same time would be rejected.
---------------------------------------------------------------------------
\13\ As set forth in proposed Rule 7.34P(b), orders that are
entered during the Early Trading Session and designated for a later
session only would be accepted and become eligible to trade once the
designated trading session begins.
---------------------------------------------------------------------------
Proposed Rule 7.34P(c)(1)(B) would specify that Limit
Orders designated IOC and Cross Orders would not be eligible to
participate in the Early Open Auction and would be rejected if entered
before the Early Open Auction concludes. The reference to Limit Orders
designated IOC includes any order with an IOC instruction, including
MPL Orders. Limit Orders designated IOC and Cross Orders are not
currently eligible to participate in auctions, accordingly, this
proposed rule change does not represent new functionality. However, the
Exchange believes that the proposed change promotes transparency in
Exchange rules regarding when an order would be accepted or rejected.
Proposed Rule 7.34P(c)(1)(C) would specify that Limit
Orders designated IOC and Cross Orders entered before or during the
Early Trading Session and designated for the Core Trading Session only
would be rejected if entered before the Core Open Auction concludes.
The Exchange believes that this proposed rule would provide
transparency because orders designated IOC must be eligible for an
immediate execution and are not eligible for auctions, and an IOC order
designated with a later trading session is by its terms inconsistent.
Proposed Rule 7.34P(c)(1)(D) would provide that for
securities that are not eligible for an auction on the Exchange, Market
Orders designated for Core Trading Session and Auction-Only Orders
would be routed directly to the primary listing market on arrival. This
proposed treatment of Market Orders and Auction-Only Orders in
securities that are not eligible for an auction on the Exchange would
be different from current functionality.\14\ Currently,
[[Page 28725]]
Market Orders or Auction-Only Orders are routed to the primary listing
market on arrival only if they include a ``Primary Only'' order
designation. The Exchange proposes that on the Pillar trading platform,
during the Early Trading Session, a Market Order or Auction-Only Order
in a security that is not eligible for an auction on the Exchange would
be routed to the primary listing market regardless of whether it
includes a Primary Only designation. The Exchange believes that this
proposed functionality would be consistent with the expectations of a
User with respect to such orders, which would not be eligible for an
execution on the Exchange. The Exchange proposes to further provide
that any order routed directly to the primary listing market on
arrival, which includes the above-described orders and Primary Only
Orders, would be cancelled if that market is not accepting orders.
---------------------------------------------------------------------------
\14\ Proposed Rule 7.34P(c)(1)(D) would also represent a change
to current Exchange functionality regarding MOC Orders and LOC
Orders. Currently, the Exchange does not accept such orders before
9:30 a.m. Eastern Time. On the Pillar trading platform, the Exchange
would accept such orders during the Early Trading Session, and if
for a security that is not eligible for an auction on the Exchange,
route such orders to the primary listing market if such market is
accepting orders.
---------------------------------------------------------------------------
Proposed Rule 7.34P(c)(1)(E) would provide that MOO
Orders, MOC Orders, LOC Orders, and Primary Only Orders designated for
the Early Trading Session would be rejected. This represents current
functionality. LOO Orders may be designated for the Early Trading
System in order to participate in a reopening auction following a
trading halt. LOO Orders in securities not eligible for an auction on
the Exchange that are designated for an Early Trading Session would be
routed to the primary listing market, consistent with proposed Rule
7.34P(c)(1)(D) . The Exchange proposes to include this text in proposed
Rule 7.34P in order to provide transparency of when an order would be
rejected.
With respect to the Core Trading Session, the Exchange proposes in
new Rule 7.34P(c)(2) to provide that, unless otherwise specified in
proposed paragraphs (c)(2)(A)-(B) of the new rule, orders and modifiers
defined in Rule 7.31P and 7.44P that have been designated for the Core
Trading Session would be eligible to participate in the Core Trading
Session.\15\ The Exchange believes that the proposed rule text makes
clear that, unless specified in paragraphs (c)(2)(A)-(B) of new Rule
7.34P, all orders and modifiers in Rule 7.31P and 7.44P, if designated
for the Core Trading Session, would be eligible to participate in the
Core Trading Session. The proposed exceptions to the general rule would
be:
---------------------------------------------------------------------------
\15\ The Exchange notes that orders and modifiers described in
Rule 7.44 governing the Retail Liquidity Program (``RLP'') are
eligible to participate in the Core Trading Session only. The
Exchange will submit a separate rule filing to adopt Rule 7.44P to
govern RLP in Pillar.
---------------------------------------------------------------------------
Proposed Rule 7.34P(c)(2)(A) would provide that Market
Orders in securities that are not eligible for the Core Open Auction
would be routed to the primary listing market until the first opening
print of any size on the primary listing market or 10:00 a.m. Eastern
Time, whichever is earlier. This proposed rule text is based on current
Rule 7.35(c), which states that for all exchange-listed securities for
which the Exchange does not conduct a Market Order Auction, ``the
Corporation will route all Market Orders to the primary market until
the first opening print on the primary market.'' This current rule
makes clear that the Exchange refrains from processing Market Orders
until the primary listing market has printed a transaction, and not
just opened for trading based on an opening quote. Because this rule
relates to how orders are treated during a trading session, the
Exchange believes that it is more appropriately included in proposed
Rule 7.34P(c) than in a rule governing auctions.
In moving the rule text, the Exchange is proposing two substantive
differences. First, to specify that the first opening print may include
an odd-lot transaction, the Exchange proposes to provide in Rule
7.34P(c)(2)(A) that Market Orders in securities that are not eligible
for the Core Open Auction would be routed to the primary listing market
until the first print of any size on the primary listing market. The
Exchange believes it is appropriate to include an odd-lot transaction
print because such a transaction indicates that trading has begun on
the primary listing market. Second, the Exchange proposes to provide
for an outside time frame for when the Exchange would stop routing
Market Orders to the primary listing market and begin processing those
orders on the Exchange. As proposed, the Exchange would continue
routing Market Orders to the primary listing market until the first
print of any size on such market or 10:00 a.m. Eastern Time, whichever
is earlier. The Exchange believes that if the primary listing market
has not opened for trading by 10:00 a.m. Eastern Time and has not
halted the security, the Exchange should begin processing Market Orders
in all securities. The proposed time of 10:00 a.m. Eastern Time is
based on NYSE Rule 123D and NYSE MKT Rule 123D--Equities, which provide
for delayed opening procedures for NYSE- and NYSE MKT-listed
securities. Specifically, under those rules, a security is considered
in a delayed opening if it is not open by 10:00 a.m. Eastern Time.
Proposed Rule 7.34P(c)(2)(B) would provide that Auction-
Only Orders in securities that are not eligible for an auction on the
Exchange would be accepted and routed directly to the primary listing
market. This proposed rule text is a continuation of the treatment of
such orders as described in proposed Rule 7.34P(c)(1)(D) in that during
the Core Trading Session, the Exchange would continue to accept and
route such orders directly to the primary listing market. This proposal
represents a change from current practice, as Rule 7.31(t) currently
provides that the Exchange does not route Auction-Only orders to other
exchanges. Instead, the Exchange currently rejects Auction-Only Orders
in securities that are not eligible for an auction on the Exchange,
unless they include a Primary Only Order designation. In Pillar, the
Exchange would accept such orders and route them to the primary listing
market.\16\
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\16\ Because the treatment of Auction-Only Orders in securities
that are not eligible for any auction on the Exchange would be
covered in proposed Rule 7.34P, the Exchange would propose that new
Rule 7.31P not include this same topic.
---------------------------------------------------------------------------
With respect to the Late Trading Session, the Exchange proposes in
new Rule 7.34P(c)(3) to provide that unless otherwise specified in
proposed paragraphs (c)(3)(A)-(C) of the new rule, orders and modifiers
defined in Rule 7.31P that have been designated for the Late Trading
Session would be eligible to participate in the Late Trading Session.
The Exchange believes that this proposed rule text makes clear that
unless specified in paragraphs (c)(3)(A)-(C) of new Rule 7.34P, all
orders and modifiers in Rule 7.31P, if designated for the Late Trading
Session, would be eligible to participate in the Late Trading Session.
Unlike under current rules, the Exchange proposes that Tracking
Orders would be eligible to participate in the Late Trading Session, as
they would be in the Early Trading Session, on the Pillar trading
platform. Because the Exchange routes orders during the Late Trading
Session and because Tracking Orders are intended to be passive
liquidity on the Exchange to interact with an order before it is
routed, the Exchange believes that Tracking Orders should be available
in the Late Trading Sessions. Accordingly, rule text from current Rule
7.34(d)(3)(C) would not be included in new Rule 7.34P(c)(3).
The Exchange proposes that the following orders and modifiers in
Rule 7.31P would not be eligible to participate in the Late Trading
Session:
[[Page 28726]]
Proposed Rule 7.34P(c)(3)(A) would provide that Market
Orders, Q Orders, and Pegged Orders would not be eligible to
participate in the Late Trading Session, which is current
functionality. The rule would further provide that Market Orders, Q
Orders, and Pegged Orders that include a designation for the Late
Trading Session would be rejected. For example, if a Market Order, Q
Order, or Pegged Order were entered during the Core Trading Session and
designated for both the Core and Late Trading Session, because it
includes a designation for the Late Trading Session, such order would
be rejected. The Exchange believes that this proposed rule text
provides transparency in Exchange rules of when an order would be
accepted or rejected.
Proposed Rule 7.34P(c)(3)(B) would provide that orders
that route directly to the primary listing market on arrival would be
cancelled if that market is not accepting orders, which is current
functionality.
Proposed Rule 7.34P(c)(3)(C) would provide that MOO
Orders, MOC Orders, LOC Orders, and Primary Only Orders designated for
the Late Trading Session would be rejected. This represents current
functionality. LOO Orders may be designated for the Late Trading System
in order to participate in a reopening auction following a trading
halt. LOO Orders in securities not eligible for an auction on the
Exchange that are designated for an Early Trading Session would be
routed to the primary listing market. The Exchange proposes to include
this text in proposed Rule 7.34P in order to provide transparency of
when an order would be rejected.
Proposed Rule 7.34P(d) regarding customer disclosures is based on
Rule 7.34(e) with non-substantive differences to conform terminology
with the proposed changes to new Rule 7.34P, including use of the term
``Early Trading Session'' instead of ``Opening Session,'' ``Core Open
Auction'' instead of ``Market Order Auction,'' and ``Limit Order''
instead of ``Limited Price Order.''
Finally, proposed Rule 7.34P(e) is based on Rule 7.34(f) without
any substantive differences and would provide that trades on the NYSE
Arca Marketplace executed and reported outside of the Core Trading
Session would be designated as .T trades.
Order Ranking and Display
Rule 7.36 governs order ranking and display for the current Arca
trading system. The rule provides that the NYSE Arca Marketplace shall
display to Users and other market participants all non-marketable limit
orders in the Display Order Process. The rule further provides that the
NYSE Arca Marketplace will also disseminate current consolidated
quotation/last sale information, and such other market information as
may be available from time to time pursuant to agreement between the
Corporation and other market centers.
Rule 7.36(a) sets forth that orders of Users are ranked and
maintained in the Display Order Process and/or the Working Order
Process of the NYSE Arca Book \17\ according to price-time priority,
such that within each price level, orders are organized by the time of
entry in the manner described in the rule.
---------------------------------------------------------------------------
\17\ The term ``NYSE Arca Book'' is defined in Rule 1.1(a) as
the NYSE Arca Marketplace's electronic file of orders, which contain
all of the User's orders in each of the Display Order, Working
Order, and Tracking Order Processes.
---------------------------------------------------------------------------
Rule 7.36(a)(1) describes the Display Order Process and Rule
7.36(a)(2) describes the Working Order Process. Rule 7.36(a)(3) sets
forth that if an order has been modified in size, the order retains
priority if the modification involves a decrease in the size of the
order, but if the modification increases the size of the order or
changes the price, the order will be treated as a new order and receive
a new time priority. Rule 7.36(b) provides that, except as provided in
Rule 7.7, all orders displayed in the Display Order Process are
displayed on an anonymous basis. Finally, Rule 7.36(c) provides that
the best-ranked displayed orders to buy (sell) in the NYSE Arca Book
and the aggregate size of such orders are collected and made available
to quotation vendors for dissemination pursuant to Rule 11Ac1-1 under
the Exchange Act. The rule further provides that if non-marketable odd-
lot sized orders can be aggregated to equal at least a round lot, such
odd-lot sized orders will be displayed as the best ranked displayed
orders to sell (buy) at the least aggressive price at which such odd-
lot sized orders can be aggregated to equal at least a round lot.
Proposed Rule 7.36P would describe for the Pillar trading platform
order ranking and display of orders, without any substantive
differences from Rule 7.36. As discussed in detail below, the Exchange
believes that the proposed new rule text provides transparency with
respect to how the Exchange's price-time priority model would operate
through the use of new terminology applicable to all orders on the
Pillar trading platform.
Rule 7.36P(a) would set forth definitions for purposes of all of
Rule 7 Equities Trading on the Pillar trading platform, including Rule
7.37P (Order Execution and Routing), described below. The Exchange
believes that these proposed definitions would provide transparency
regarding how the Exchange operates, and would serve as the foundation
for amendments to orders and modifiers that will be in proposed Rule
7.31P.
Proposed Rule 7.36P(a)(1) would define the term ``display
price'' to mean the price at which a Limit Order is displayed, which
may be different from the limit price or working price of the order.
For example, Rule 7.31 provides for order types that may be displayed
at prices that are different from the limit price, such as a PNP Blind
Order.\18\ The Exchange proposes to define the term ``display price''
in Pillar to explain these existing concepts uniformly in Exchange
rules applicable to trading on the Pillar trading platform.
---------------------------------------------------------------------------
\18\ See Rule 7.31(e)(4). The Exchange notes that in connection
with Pillar, the Exchange will be renaming the PNP Blind Order as an
``Arca Only Order,'' which will be proposed in a separate rule
filing to adopt new Rule 7.31P. See Trader Update dated March 2,
2015, available here: https://www.nyse.com/publicdocs/nyse/markets/nyse/Pillar_Trader_Update_Mar_2015.pdf.
---------------------------------------------------------------------------
Proposed Rule 7.36P(a)(2) would define the term ``limit
price'' to mean the highest (lowest) specified price at which a Limit
Order to buy (sell) is eligible to trade. The limit price is designated
by the User. As noted in the proposed definitions of display price and
working price, the limit price designated by the User may differ from
the price at which the order would be displayed or eligible to trade.
Proposed Rule 7.36P(a)(3) would define the term ``working
price'' to mean the price at which an order is eligible to trade at any
given time, which may be different from the limit price or display
price of an order. The new term ``working price'' identifies for all
orders the price at which an order is eligible to trade at any given
time. Some exchanges refer to this concept as the price at which an
order is ``ranked.'' \19\ The Exchange believes that the term ``working
price'' would provide clarity regarding the price at which an order may
be executed at any given time. Specifically, the Exchange believes that
use of the term ``working'' denotes that this is a price that is
subject to change, depending on circumstances. The Exchange will be
using this term in connection with orders and modifiers when it files a
separate rule filing to adopt Rule 7.31P.
---------------------------------------------------------------------------
\19\ See, e.g., BATS Exchange, Inc. Rule 11.9(g)(1)(A)
(referring to where an order is ``ranked'' as the price of an
order).
---------------------------------------------------------------------------
Proposed Rule 7.36P(a)(4) would define the term ``working
time'' to mean the effective time sequence assigned to
[[Page 28727]]
an order for purposes of determining its priority ranking. The Exchange
proposes to use the term ``working time'' in its rules for trading on
the Pillar trading platform instead of terms such as ``time sequence''
or ``time priority,'' which are used in rules governing trading on the
Exchange's current system. The Exchange believes that use of the term
``working'' denotes that this is a time assigned to an order for
purpose of ranking and is subject to change, depending on
circumstances.
Proposed Rule 7.36P(b) would govern the display of non-marketable
Limit Orders on the Pillar trading system and is intended to be
comparable to the preamble to Rule 7.36, without any substantive
differences. As proposed, the Exchange would display all non-marketable
Limit Orders, unless the order or modifier instruction specifies that
all or a portion of the order is not to be displayed.
The Exchange proposes to define in proposed Rule 7.36P(b)(1) what
it means for an order to be displayed for ranking purposes. As
proposed, an order would be considered displayed for ranking purposes
if the price, side, and size of the order are disseminated via a market
data feed, which includes a proprietary market data feed of the
Exchange. As further proposed, odd-lot sized Limit Orders and the
displayed portion of Reserve Orders would be considered displayed for
ranking purposes. This proposed rule text is intended to provide
transparency in Exchange rules regarding which orders are considered
displayed for ranking purposes, and therefore eligible to be considered
Priority 2--Display Orders (described below). Specifically, odd-lot
sized orders are displayed on the Exchange's proprietary data feed and
would be displayed on the public feed if aggregated to equal a round
lot or more would thus be considered ``displayed'' orders for purposes
of priority ranking.
Proposed Rule 7.36P(b)(2) would be comparable to Rule 7.36(b)
without any substantive differences and would provide that except as
otherwise permitted by Rule 7.7,\20\ all non-marketable displayed Limit
Orders would be displayed on an anonymous basis. The Exchange proposes
not to include reference to the Display Order Process in Rule
7.36P(b)(2) because, as discussed above, the Exchange is not proposing
to use that terminology in Pillar.
---------------------------------------------------------------------------
\20\ Rule 7.7 provides that bids and offers disseminated by the
Exchange will not include an ETP Holder's identify unless the ETP
Holder affirmatively elects to disclosed its identify.
---------------------------------------------------------------------------
Finally, proposed Rule 7.36P(b)(3) would be comparable to Rule
7.36(c) regarding dissemination, without any substantive differences.
The Exchange proposes to use the term ``will'' in Proposed Rule
7.36P(b)(3) instead of ``shall.'' In addition, the Exchange would not
include in proposed Rule 7.36P rule text from the second sentence of
the preamble to Rule 7.36. The Exchange is a participant in the CQ Plan
and CTA Plan for Tape A- and B-listed securities and a participant in
the Nasdaq UTP Plan for Tape C-listed securities. The respective
governing documents of those plans set forth the Exchange's obligations
regarding dissemination of quotes and last-sale information and thus,
the Exchange does not believe it is necessary to duplicate a subset of
those requirements in its rules. Finally, the Exchange proposes to cite
to the governing federal rule by referencing Rule 602 of Regulation NMS
\21\ instead of Rule 11Ac1-1 under the Exchange Act, which was
superseded by Regulation NMS.
---------------------------------------------------------------------------
\21\ 17 CFR 242.602.
---------------------------------------------------------------------------
Proposed Rule 7.36P(c) would describe the Exchange's general
process for ranking orders and would be comparable to the text
immediately following Rule 7.36(a), without any substantive
differences. As proposed, Rule 7.36P(c) would provide that all non-
marketable orders would be ranked and maintained in the NYSE Arca Book
according to price-time priority in the following manner: (1) Price;
(2) priority category; (3) time; and (4) ranking restrictions
applicable to an order or modifier condition. Accordingly, orders would
be first ranked by price. Next, at each price level, orders would be
assigned a priority category. Orders in each priority category would be
required to be exhausted before moving to the next priority category.
Within each priority category, orders would be ranked by time. These
general requirements for order ranking are applicable to all orders,
unless an order or modifier has a specified exception to this ranking
methodology, as described in more detail below. The Exchange is
proposing this ranking description instead of using the concepts of a
Display Order Process, Working Order Process, and Tracking Order
Process in Rule 7.36. However, substantively there would be no
difference in how the Exchange ranks orders on the Pillar trading
platform from how it ranks orders in in the current trading system. For
example, a non-displayed order would always be ranked after a displayed
order at the same price, even if the non-displayed order has an earlier
working time.
To provide transparency regarding the Exchange's ranking process,
the Exchange proposes to set forth in Rule 7.36P additional detail
regarding each step. Proposed Rule 7.36P(d) would describe how orders
are ranked based on price. Specifically, as proposed, all orders would
be ranked based on the working price of an order. Orders to buy would
be ranked from highest working price to lowest working price and orders
to sell would be ranked from lowest working price to highest working
price. The rule would further provide that if the working price of an
order changes, the price priority of an order would change. This price
priority is current functionality, but the new rule would use the
proposed term ``working price.'' The Exchange believes the proposed
rule text provides transparency regarding the price-ranking process at
the Exchange.
Proposed Rule 7.36P(e) would describe the proposed priority
categories for ranking purposes. As proposed, at each price point, all
orders would be assigned a priority category. If at a price point there
are no orders in a priority category, the next category would have
first priority. The proposed rules applicable to the Pillar trading
platform would not use the terms ``Display Order Process,'' ``Working
Order Process'' and ``Tracking Order Process'' for describing priority
categories. The Exchange does not believe that Rule 7.36P, which sets
forth the general rule regarding ranking, should provide specifics for
one or more order types and therefore the Exchange will address
separately in new Rule 7.31P governing orders and modifiers which
priority category correlates to order types and modifiers. Accordingly,
details regarding which proposed priority categories would be assigned
to the display and reserve portions of Reserve Orders, which is in Rule
7.36, will be addressed in new Rule 7.31P and therefore not be included
in proposed Rule 7.36P, except as described below.
The proposed priority categories would be:
Proposed Rule 7.36P(e)(1) would specify ``Priority 1--
Market Orders,'' which provides that unexecuted Market Orders would
have priority over all other same-side orders with the same working
price. This proposed priority is the same as current Exchange priority
rules under which resting Market Orders have priority over other orders
at
[[Page 28728]]
the same price.\22\ Circumstances when an unexecuted Market Order would
be eligible to execute against an incoming contra-side order include
when a Market Order has exhausted all interest at the NBBO and is
waiting for an NBBO update before executing again, pursuant to Rule
7.31(a), or when a Market Order is held unexecuted because it has
reached a trading collar, pursuant to Rule 7.31(a)(3)(A). In such
circumstances, the unexecuted Market Order(s) would have priority over
all other resting orders at that price.
---------------------------------------------------------------------------
\22\ This priority is currently specified in Rule 7.16(f)(viii).
---------------------------------------------------------------------------
Proposed Rule 7.36P(e)(2) would specify ``Priority 2--
Display Orders.'' This proposed priority category would replace the
``Display Order Process.'' As proposed, non-marketable Limit Orders
with a displayed working price would have second priority. For an order
that has a display price that differs from the working price of the
order, if the working price is not displayed, the order would not be
ranked Priority 2 at the working price.
Proposed Rule 7.36P(e)(3) would specify ``Priority 3--Non-
Display Orders.'' This priority category would be used in Pillar rules,
rather than the ``Working Order Process.'' As proposed, non-marketable
Limit Orders for which the working price is not displayed, including
the reserve interest of Reserve Orders, would have third priority.
Proposed Rule 7.36P(e)(4) would specify ``Priority 4--
Tracking Orders.'' This priority category would replace the ``Tracking
Order Process,'' as discussed in further detail below in connection
with proposed Rule 7.37P. As proposed, Tracking Orders would have
fourth priority.
Proposed Rule 7.36P(f) would set forth that within each priority
category, orders would be ranked based on time priority.
Proposed Rule 7.36P(f)(1) would provide that an order is
assigned a working time based on its original entry time, which is the
time an order is first placed on the NYSE Arca Book. This proposed
process of assigning a working time to orders is current functionality
and is substantively the same as current references to the ``time of
original order entry'' found in several places in Rule 7.36. To provide
transparency in Exchange rules, the Exchange further proposes to
include in proposed Rule 7.36P(f) how the working time would be
determined for orders that are routed. As proposed:
[cir] Proposed Rule 7.36P(f)(1)(A) would specify that an order that
is fully routed to an Away Market \23\ on arrival would not be assigned
a working time unless and until any unexecuted portion of the order
returns to the NYSE Arca Book. The Exchange notes that this is the
current process for assigning a working time to an order and proposes
to include it in Exchange rules to provide transparency regarding what
is considered the working time of an order that was fully routed on
arrival.
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\23\ The Exchange proposes Rule 1.1(ffP), which would define the
term ``Away Market.'' The proposed definition is based on the
existing definition of ``NOW Recipient,'' which is a term that the
Exchange would not be using in Pillar. For Pillar, the proposed
definition of ``Away Market'' would reference the term ``alternative
trading system'' instead of ECN.
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[cir] Proposed Rule 7.36P(f)(1)(B) would specify that for an order
that is partially routed to an Away Market on arrival, the portion that
is not routed would be assigned a working time. If any unexecuted
portion of the order returns to the NYSE Arca Book and joins any
remaining resting portion of the original order, the returned portion
of the order would be assigned the same working time as the resting
portion of the order. If the resting portion of the original order has
already executed and any unexecuted portion of the order returns to the
NYSE Arca Book, the returned portion of the order would be assigned a
new working time. This process for assigning a working time to
partially routed orders is the same as currently used by the Exchange.
The Exchange proposes to include this detail in Exchange rules to
provide transparency regarding what is considered the working time of
an order.
Proposed Rule 7.36P(f)(2) would provide that an order
would be assigned a new working time any time the working price of an
order changes. This proposed rule text would be based on the rule text
in Rule 7.36(a)(3), without any substantive differences. A change to
the working price could be because of a User's instruction or because
the order or modifier has a price that can change based on a reference
price, such as an MPL Order, which is priced based on the PBBO.
Proposed Rule 7.36P(f)(3) would provide that an order
would be assigned a new working time if the size of the order increases
and that an order would retain its working time if the size of the
order is decreased. This proposed rule text would be based on rule text
in the first and second sentences of Rule 7.36(a)(3), without any
substantive differences.
Proposed Rule 7.36P(f)(4) would provide that an order
retains its working time if the order marking is changed from: (A) Sell
to sell short; (B) sell to sell short exempt; (C) sell short to sell;
(D) sell short to sell short exempt; (E) sell short exempt to sell; and
(F) sell short exempt to sell short. This rule text would use for the
Pillar trading platform rules the same rule text as in Rule
7.16(f)(viii), without any substantive differences. The Exchange
proposes to include the text from Rule 7.16(f)(viii) regarding order
priority when changing order marking to Rule 7.36P to consolidate
ranking in a single rule.
Proposed Rule 7.36P(g) would specify that the Exchange would
enforce ranking restrictions applicable to specified order or modifier
instructions. These order and modifier instructions would be identified
in proposed new Rules 7.31P and 7.44P, which the Exchange will submit
in a rule filing prior to implementing the Pillar trading platform.
In addition, the Exchange proposes a definition in Rule 1.1(aP) of
NYSE Arca Book that would be applicable to the Pillar rules. The
proposed definition would differ from the current definition of NYSE
Arca Book in Rule 1.1(a) in that it would not include references to the
terms ``Display Order Process,'' ``Working Order Process,'' and
``Tracking Order Process,'' which as discussed above, are terms that
will not be used in Pillar. As proposed, new Rule 1.1(aP) would provide
that the term ``NYSE Arca Book'' refers to the NYSE Arca Marketplace's
electronic file of orders, which contains all orders entered on the
NYSE Arca Marketplace.
Order Execution and Routing
Current Rule 7.37, titled ``Order Execution,'' governs order
execution and routing at the Exchange. The preamble to the rule
provides that like-priced orders, bids and offers shall be matched for
execution following steps 1 through 4 of the rule, provided, however,
for an execution to occur in any Order Process, the price must be equal
to or better than (1) the PBBO, in the case of a Limit Order or Q Order
or (2) the NBBO in the case of an Inside Limit Order, a Pegged Limit
Order, or a Market order. If such an order is not executable within
those parameters, the rule provides that it may be routed to away
markets as provided in Rule 7.37(d).
The rule then sets forth steps 1 through 4. Step 1 is the Display
Order Process, which provides that incoming orders are first matched
for execution against other orders in the Display Order process. The
rule provides further specificity regarding how certain orders are
ranked. The rule also sets forth that the size of an incoming Reserve
Order
[[Page 28729]]
includes both the displayed and reserve size and the size of the
portion of the Reserve Order resident in the Display Order Process is
equal to its displayed size. If an incoming marketable order is not
executed in its entirety, the remaining part of the order is routed to
the ``Working Order'' process. The rule further provides that an
incoming order that is not marketable enters the Working Order Process
to execute against any Discretionary Orders at or better than the NBBO.
Step 2 is the Working Order Process, which provides that incoming
marketable orders are matched against orders in the Working Order
process by the order of ranking of the orders in the Working Order
Process. The rule sets forth how specified orders, such as
Discretionary Orders, interact within the Working Order Process. The
rule further provides that if the incoming marketable order has not
been executed in its entirety, the remaining portion of the order shall
be routed to the Tracking Order Process.
Step 3 is the Tracking Order Process, which is currently available
during Core Trading Hours only. In the Tracking Order Process, if an
order that is eligible to route to an away market has not been executed
in its entirety under Steps 1 through 2, the NYSE Arca Marketplace
shall match and execute any remaining part of such order in the
Tracking Order Process in time/price priority.
Step 4 sets forth the Exchange's process for routing away and
specifies certain orders that are not eligible to be routed. For orders
that are eligible to be routed, the rule specifies that if the order is
designated as a Market, Inside Limit, or Pegged Order, the Exchange
shall utilize all available quotes in the routing determination, or if
the order is designated as a Limit Order, the Exchange shall utilize
available Protected Quotations in the routing determination. The rule
sets forth additional detail that orders will be routed as Intermarket
Sweep Orders (``ISO'') and any remaining portion of the order will be
ranked and displayed in the NYSE Arca Book pursuant to Rule 7.36.
The rule further provides that an order that is routed away shall
remain outside the NYSE Arca Marketplace for a prescribed period of
time and may be executed in whole or in part subject to the applicable
trading rules of the relevant market center or market participant and
that when an order remains outside the NYSE Arca Marketplace, it will
have no time standing relative to other orders received from Users at
the same price that may be executed against the NYSE Arca Book. The
rule also provides that when an order is outside the NYSE Arca
Marketplace, it will not have time standing in the NYSE Arca Book.
Finally, with respect to routing, the rule provides that for an order
that is eligible to route away, Users may instruct NYSE Arca to bypass
any market centers that are not posting Protected Quotations within the
meaning of Regulation NMS.
Rule 7.37(e), (f), and (g) set forth how the Exchange operates
consistent with Regulation NMS for locking and crossing quotations and
specified exceptions to Regulation NMS, including the self-help
exception; ISO Exception; single price openings, reopenings, and
closing transactions; benchmark trades; stopped orders; and the
contingent order exemption.
Commentary .01 to Rule 7.37 sets forth the Exchange's use of data
feeds for the handling, execution, and routing of orders, as well as
for regulatory compliance.
The Exchange proposes Rule 7.37P to describe the order execution
and routing rules for the Pillar trading platform. Proposed Rule 7.37P
would not be substantively different from Rule 7.37. The Exchange
proposes that the title for new Rule 7.37P would be ``Order Execution
and Routing.'' The title of Rule 7.37 is ``Order Execution.'' The
Exchange believes that because Rule 7.37P, like Rule 7.37, would
include the Exchange's routing procedures, referencing to ``Routing''
in the rule's title would provide additional transparency in Exchange
rules regarding what topics would be covered in new Rule 7.37P.
Proposed Rule 7.37P(a) and its subsections would set forth the
Exchange's order execution process and would cover the same subject as
the preamble to Rule 7.37, without any substantive differences. As
proposed, an incoming marketable order would be matched for execution
against contra-side orders in the NYSE Arca Book according to the
price-time priority ranking of the resting orders, subject to specified
parameters. Proposed Rule 7.37P(a)(1) would provide that orders that
are routed to an Away Market on arrival would not be assigned a working
time or be matched for execution on the NYSE Arca Book. This provision
would apply to orders that the Exchange routes based on the time an
order is entered, e.g., a Market Order in a security that is not
eligible for an auction on the Exchange that is entered during the
Early Trading Session, or an order with an instruction to route
directly to the primary market on arrival, e.g., a Primary Only Order.
The Exchange believes that the proposed rule provides transparency that
an order that is intended to route on arrival would not be subject to
order execution at the Exchange.
Proposed Rule 7.37P(a)(2) would provide that, unless an order
qualifies for an exception to the Order Protection Rule in Rule 611 of
Regulation NMS,\24\ orders will not trade at prices that would trade
through a protected quotation.\25\ Proposed Rule 7.37P(a)(3) would
provide that Limit Orders would be executed at prices equal to or
better than the PBBO and proposed Rule 7.37P(a)(4) would provide that
Market Orders and Inside Limit Orders would be executed at prices equal
to or better than the NBBO. The proposed rule for the Pillar trading
platform is based on existing requirements as set forth in the preamble
to Rule 7.37 and is consistent with the order processing of Market
Orders, Limit Orders, and Inside Limit Orders as set forth in Rule
7.31.
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\24\ 17 CFR 242.611.
\25\ The term ``trade through'' is defined in Rule 1.1(fff) as
the purchase or sale of an NMS stock during regular trading hours,
either as principal or agent, at a price that is lower than a
Protected Bid or higher than a Protected Offer. The term ``protected
quotation'' is defined in Rule 1.1(eee) as a quotation that is a
Protected Bid or a Protected Offer, and those terms are defined in
the rule as well.
---------------------------------------------------------------------------
As discussed above, the Exchange proposes to eliminate the
terminology associated with the Display Order Process, Working Order
Process, and Tracking Order Process. Therefore, similar to proposed
Rule 7.36P, the Exchange would not include these terms in new Rule
7.37P. Moreover, the Exchange does not believe that it is necessary to
restate in new Rule 7.37P the Exchange's ranking process, which would
be set forth in proposed Rule 7.36P. In addition, consistent with the
Exchange's proposed approach to new Rule 7.34P and 7.37P, the Exchange
proposes to eliminate, where feasible, reference to specific order
types and instead state the Exchange's general order execution
methodology. Any exceptions to such general requirements would be set
forth in connection with specific order or modifier definitions in
proposed Rule 7.31P. Accordingly, the Exchange will not include in new
Rule 7.37P the process currently referred to as ``Step 3'' and instead,
details regarding how Tracking Orders would operate would be included
in proposed Rule 7.36P(e)(3), as discussed above regarding ranking
priority assigned to Tracking Orders, and new Rule 7.31P.
Proposed Rule 7.37P(b) would set forth the Exchange's order routing
process and is intended to cover the same subject as Rule 7.37(d),
which is
[[Page 28730]]
currently referred to as ``Step 4'' in order processing, without any
substantive differences. Proposed Rule 7.37P(b) would provide that
unless an order has an instruction not to route, after being matched
for execution with any contra-side orders in the NYSE Arca Book
pursuant to proposed Rule 7.37P(a), marketable orders would be routed
to Away Markets.
The proposed rule would then set forth additional details regarding
routing:
Proposed Rule 7.37P(b)(1) would provide that an order that
cannot meet the pricing parameters of proposed Rule 7.37P(a) may be
routed to Away Market(s) before being matched for execution against
contra-side orders in the NYSE Arca Book. The Exchange believes that
this proposed rule text provides transparency that an order may be
routed before being matched for execution, for example, to prevent
locking or crossing or trading through a protected quotation.
Proposed Rule 7.37P(b)(2) would provide that if an order
with an instruction not to route would trade through or lock or cross a
protected quotation and is not eligible for an exception to either Rule
610 or 611 of Regulation NMS,\26\ it would cancel, re-price, or be held
undisplayed on the NYSE Arca Book, as provided for in Rules 7.31P and
7.44P.
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\26\ 17 CFR 242.610 and 17 CFR 242.611.
---------------------------------------------------------------------------
Proposed Rule 7.37P(b)(3) would provide that orders
eligible to route would be routed to all available Away Markets unless
the order includes an instruction to bypass market centers that are not
displaying protected quotations. This rule text covers the subject
matter of current Rule 7.37(d)(2)(A), 7.37(d)(2)(B), and 7.37(d)(4),
with no substantive differences. As with current functionality,
proposed Rule 7.37P(b)(1) specifies that all Away Markets, as defined
in proposed Rule 1.1(ffP), would be considered as part of the routing
determination unless the User has opted out of routing to Away Markets
that do not display protected quotations.
Proposed Rule 7.37P(b)(4) would provide that Limit Orders
that are routed to Away Market(s) may be routed to more than one price
level, up (down) to the limit price of an order to buy (sell). This
represents current routing functionality and means that a Limit Order
may be routed to more than just the top of book bid or offer of an Away
Market, provided that the order would not be routed to prices that are
outside of the limit price of the order and consistent with Rule 611 of
Regulation NMS,\27\ as provided for in proposed Rule 7.37P(a)(2). The
Exchange believes that including this level of detail in the rule
provides transparency regarding the potential for an order to be routed
to more than one price level on an Away Market. The Exchange believes
that routing to depth of Away Markets provides a greater opportunity
for an order to be executed in full.
---------------------------------------------------------------------------
\27\ 17 CFR 242.611.
---------------------------------------------------------------------------
Proposed Rule 7.37P(b)(5) would provide that, except for
orders routed to the primary listing market on arrival pursuant to Rule
7.34P or designated to route to the primary listing market pursuant to
Rule 7.31P, orders routed to Away Markets would be sent as IOC ISOs.
This routing is based on current Rule 7.37(d)(2)(B)(i) with no
substantive differences.
Proposed Rule 7.37P(b)(6) would provide that after any
order or portion thereof that has been routed would not be eligible to
trade on the NYSE Arca Book, unless all or a portion of the order
returns unexecuted. This routing methodology is current functionality
and covers that same subject as current Rule 7.37(d)(2)(C) and (D),
with no substantive differences. In contrast to Rule 7.37(d)(2)(C) and
(D), however, the Exchange proposes that Rule 7.37P(b)(6) would focus
on the fact that once routed, an order would not be eligible to trade
on the Exchange, rather than stating the obvious that it would be
subject to the routing destination's trading rules once routed. In
addition, because, as discussed above, the working time assigned to
orders that are routed is being proposed to be address in new Rule
7.36P(f)(1)(A) and (B), the Exchange believes it would be duplicative
to restate this information in new Rule 7.37P.
Proposed Rule 7.37P(b)(7) would set forth how the Exchange
would process requests to cancel orders that have been routed. Rule
7.37(d)(2)(E) currently provides that requests from Users to cancel
their orders while the order is routed away to another market center or
market participant and remains outside the NYSE Arca Marketplace shall
be processed, subject to the applicable trading rules of the relevant
market center or market participant.
The Exchange proposes to specify in new Rule 7.37P(b)(7)(A) that
requests to cancel orders that are eligible to be matched for execution
against orders in the NYSE Arca Book would not be processed unless and
until all or a portion of the order returns unexecuted. New Rule
7.37P(b)(7)(B) would specify that for orders routed to the primary
listing market on arrival pursuant to Rule 7.34P or designated to route
to the primary listing market pursuant to Rule 7.31P, requests to
cancel would be routed to the primary listing market, which is current
functionality.
New Rule 7.37P(b)(7)(C) would provide, as currently set forth in
Rule 7.31(x) regarding Primary Only Orders, for MOC Orders or LOC
Orders in NYSE- or NYSE MKT-listed securities, requests to cancel or
reduce in size that are electronically entered after the times
specified in NYSE Rules 123C(3)(b) and NYSE MKT Rule 123C(3)(b)--
Equities and Supplementary Material .40 to those rules would be
rejected.\28\ The Exchange proposes to include this text in proposed
Rule 7.37P(b)(7) because it concerns how the Exchange would process
requests to cancel orders with instructions to route on arrival. By
including this rule text in proposed Rule 7.37P, the proposed
processing of electronically entered requests to cancel MOC or LOC
Orders in NYSE- or NYSE MKT-listed securities would also apply to such
orders that do not include a Primary Only Order designation, but which,
pursuant to Rule 7.34P, would be routed to the primary listing market
on arrival. The Exchange believes that the proposed changes would
provide transparency regarding how requests to cancel orders that have
been routed would be processed in Pillar, which would not be
substantively different from how the Exchange's current trading system
operates.
---------------------------------------------------------------------------
\28\ NYSE Rule 123C(3)(b) and NYSE MKT Rule 123C(3)(b)--Equities
provide that between 3:45 p.m. and 3:58 p.m., MOC and LOC Orders may
be cancelled or reduced in size only to correct a legitimate error,
and NYSE Rule 123C(3)(c) and NYSE MKT Rule 123C(3)(c) provide that
MOC and LOC Orders may not be cancelled or reduced in size at all
after 3:58 p.m. Supplementary Material .40 to those rules provides,
among other things, that the times specified in those rules will be
adjusted based on the early scheduled closing time and references to
4:00 p.m. mean the early scheduled close, 3:45 p.m. means 15 minutes
before the early scheduled close, and 3:58 p.m. means two minutes
before the early scheduled close.
---------------------------------------------------------------------------
Proposed Rule 7.37P(b)(8) would provide that an order
marked ``short'' when a short sale price test restriction is in effect
would not be routed. Instead of routing, the Exchange would reprice or
cancel the order consistent with Rule 7.16, which will be proposed as
Rule 7.16P in a separate rule filing for Pillar.
The Exchange believes the specific routing methodologies for an
order type or modifier should be included with how the order type is
defined, which will be in Rule 7.31P. Accordingly, the Exchange does
not believe it needs to specify in new Rule 7.37P whether an order is
eligible to route, and if so, whether there are any specific routing
[[Page 28731]]
instructions applicable to the order and therefore will not be carrying
over such specifics that are included in Rule 7.37.
The remaining proposed rule text of Rule 7.37P is based on Rule
7.37, with limited non-substantive differences:
Proposed Rule 7.37P(c) would provide that after executing
with eligible contra-side interest on the NYSE Arca Book and/or
returning unexecuted after routing to Away Market(s), any unexecuted
non-marketable portion of an order would be ranked consistent with new
Rule 7.36P. This rule represents current functionality and is based on
Rule 7.37(d)(3) without any substantive differences.
Proposed Rule 7.37P(d) would set forth the Exchange's use
of data feeds, and includes the rule text that is currently set forth
in Commentary .01 to Rule 7.37, without any substantive differences.
Proposed Rule 7.37P(d)(1) would not include the clause ``away market
quotes disseminated by'' as unnecessary language, with the proposed
rule text using the proposed defined term ``Away Markets'' as follows,
``[t]he Exchange receives data feeds directly from broker dealers for
purposes of routing interest to Away Markets that are not displaying
protected quotations.''
Proposed Rule 7.37P(e) would set forth the same rule text
from Rule 7.37(e) regarding locking or crossing quotations in NMS
stocks with a non-substantive difference to update a cross-reference in
the rule to rule numbering in Rule 7.37P. The Exchange proposes an
additional non-substantive difference to specify in Rule 7.37P(e)(3)
that the prohibition against Locking and Crossing Quotations in
paragraph Rule 7.37P(e)(2) would not apply in the circumstances
specified in Rules 7.37P(e)(3)(A)-(C). Proposed Rules 7.37P(e)(3)(A)-
(C) is rule text that is identical to Rule 7.37(e)(3)(A)-(C).
Proposed Rule 7.37P(f) would set forth the exceptions to
the Order Protection Rule \29\ and would enumerate the self-help
exception in Rule 7.37P(f)(1), which is based on Rule 7.37(f) regarding
Self-Help Exceptions, with two proposed modifications. The Exchange
would not include the second sentence of Rule 7.37(f)(1), which
provides that the Exchange will disregard another Trading Center's bid
and offer if the other Trading Center has repeatedly failed to respond
within one second to an incoming IOC order after adjusting for order
transmission time, in new Rule 7.37P(f)(1). The self-help exception set
forth in Rule 611(b)(1) of Regulation NMS \30\ and related Securities
and Exchange Commission staff guidance regarding this exception \31\
does not require trading centers to use the self-help exception if a
destination trading trading center fails to respond within one second
to an incoming IOC order, but state that such a failure would justify
use of the exception. Rather, a trading center is free to adopt
reasonable policies and procedures consistent with the flexible
purposes of the self-help exception. Because the Exchange does not use
the method described in the second sentence of current Rule 7.37(f)(1)
to determine whether to declare self-help, the Exchange proposes not to
include it in new Rule 7.37P(f)(1). Second, Rule 7.37(f)(1)(B) provides
that the Exchange follows ``published NYSE Arca policies and procedures
for electing the self-help exception.'' Because the Exchange publishes
those policies and procedures internally only, to reduce investor
confusion, the Exchange proposes to modify the text in proposed Rule
7.37P(f)(1)(B) to provide instead that the Exchange would follow
``established NYSE Arca policies and procedures for electing the self-
help exception.''
---------------------------------------------------------------------------
\29\ 17 CFR 242.611(b).
\30\ 17 CFR 611(b)(1).
\31\ See Question 4.07, ``Responses to Frequently Asked
Questions Concerning Rule 611 and Rule 610 of Regulation NMS,''
available at https://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm (``Beyond this basic parameter of repeated failure to turn
around an IOC order within one second, trading centers are free to
adopt reasonable policies and procedures that are consistent with
the flexible purposes of the self-help exception.'').
---------------------------------------------------------------------------
Proposed Rules 7.37P(f)(2)-(4) are based on the rule text from Rule
7.37(g) regarding Additional Exceptions to the Order Protection Rule,
with non-substantive differences to reflect different rule numbering
and update the rule text to reflect current operations. First, the
Exchange proposes not to include the first and third sentences of Rule
7.37(g)(1) in proposed Rule 7.37P(f)(2)(A) relating to the Intermarket
Sweep Order Exception because when executing or displaying ISOs that it
receives from ETP Holders, it is the responsibility of the entering
broker dealer and not the Exchange to simultaneously route ISOs.
Therefore, the current rule text does not represent how the Exchange
operates, nor does it reflect the requirements of Regulation NMS. The
Exchange proposes additional non-substantive differences to the rule
text relating to this exception to update references, for example, to
refer to NYSE Arca's best bid or best offer rather than its own
protected quotation and remove reference to the ``NYSE Arca System.''
Second, the Exchange proposes not to include the second sentence of
Rule 7.37(g)(3) relating to how the Exchange would conduct a single-
price reopening in proposed Rule 7.37P(f)(3). To reduce investor
confusion and promote transparency in its rules, the Exchange believes
that its rule governing auctions should set forth how the Exchange
conducts a single-price auction to reopen a stock following a trading
halt. Third, the Exchange proposes not to include current Rule
7.37(g)(5) text regarding Stopped Orders because the Exchange does not
currently, and will not in Pillar, support Stopped Orders on the
Exchange. Finally, the Exchange proposes not to include current Rule
7.37(g)(6) text regarding transactions other than ``regular-way''
contracts because in Pillar, the Exchange would not execute any orders
on terms other than standardized terms and conditions, i.e., ``regular
way'' contracts.
Proposed Rule 7.37P(f)(5) regarding the Contingent Order Exemption
from the Order Protection Rule is based on rule text from Rule 7.37(h)
regarding Exemptions with different rule numbering and one substantive
difference. Rule 7.37(g)(2) specifies the requirements to meet the
qualified contingent trade exemption to Rule 611(a) of Regulation NMS
\32\ and are based on the requirements specified in the Commission's
Order granting an exemption for qualified contingent trades.\33\ Rule
7.37(f)(2)(G) currently specifies the original requirement that the
exempted transaction must be part of a contingent trade that involves
at least 10,000 shares or has a market value of at least $200,000. The
Commission later modified the exemption for qualified contingent trades
to remove that size condition.\34\ The Exchange therefore proposes not
to include in its proposed Rule 7.37P(f)(2)(D) the size requirement.
---------------------------------------------------------------------------
\32\ 17 CFR 242.611(a).
\33\ See Securities Exchange Act Release No. 54389 (August 31,
2006), 71 FR 52829 (September 7, 2006) (Order Granting an Exemption
for Qualified Contingent Trades from Rule 611(a) of Regulation NMS
under the Securities Exchange Act of 1934).
\34\ See Securities Exchange Act Release No. 57620 (April 4,
2008), 73 FR 19271 (April 9, 2008) (Order Modifying the Exemption
for Qualified Contingent Trades from Rule 611(a) of Regulation NMS
under the Securities Exchange Act of 1934).
---------------------------------------------------------------------------
* * * * *
As discussed above, because of the technology changes associated
with the migration to the Pillar trading platform, the Exchange will
announce by Trader Update when rules with a ``P'' modifier will become
operative and for which symbols. The Exchange believes that keeping
existing rules on the book
[[Page 28732]]
pending the full migration of Pillar will reduce confusion because it
will ensure that the rules governing trading on a trading platform will
continue to be available pending the full migration.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\35\ in general, and
furthers the objectives of Section 6(b)(5),\36\ 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 rules to support Pillar would remove
impediments to and perfect the mechanism of a free and open market
because the proposed rule set would promote transparency in Exchange
rules by using consistent terminology governing equities trading,
thereby ensuring that members, regulators, and the public can more
easily navigate the Exchange's rulebook and better understand how
equity trading is conducted on the Exchange. Adding new rules with the
modifier ``P'' to denote those rules that would be operative for the
Pillar trading platform would remove impediments to and perfect the
mechanism of a free and open market by providing transparency of which
rules govern trading once a symbol has been migrated to the Pillar
platform.
---------------------------------------------------------------------------
\35\ 15 U.S.C. 78f(b).
\36\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed restructuring in new Rules
7.34P, 7.36P, and 7.37P would remove impediments to and perfect the
mechanism of a free and open market by assuring consistency of terms
used in the Exchange's rulebook. The proposed revisions to the
Exchange's equity trading rules to reflect terminology associated with
Pillar would remove impediments to and perfect a free and open market
because the proposed changes are designed to simplify the structure of
the Exchanges rules and permit the use of consistent terminology
throughout numerous rules, without changing the underlying
functionality. For example, the Exchange believes the proposed
definitions set forth in Rule 7.36P, i.e., display price, limit price,
working price, and working time, promote transparency in Exchange rules
and make them easier to understand because these proposed definitions
will serve as the foundation for additional rule changes to support
Pillar.
The Exchange further believes that moving specified rule text that
relates to specific order types that is set forth in Rules 7.34, 7.36
and 7.37 to proposed Rule 7.31P (which will be the subject of a
separate filing), and therefore not include such detail in proposed
Rules 7.34P, 7.36P and 7.37P, would make Exchange rules easier to
navigate because information regarding how a specific order type would
operate would be in a single location in the Exchange's rule book.
With respect to proposed Rule 7.34P, the Exchange believes that the
proposed changes to functionality would remove impediments to and
perfect the mechanism of a fair and orderly market. First, the Exchange
believes that because an auction that opens a trading session should
occur within that trading session, it would remove impediments to and
perfect the mechanism of a fair and orderly market for the Core Open
Auction to occur during the Core Trading Session instead of the Early
Trading Session. Second, the Exchange believes that the proposed change
to route to the primary listing market Market Orders and Auction-Only
Orders in symbols that are not eligible for an execution on the
Exchange would remove impediments to and perfect the mechanism of a
free and open market by ensuring that such orders reach a destination
where they may be eligible to obtain an execution or participate in an
auction. This is current functionality, but it is only available for
orders that have been designated as ``Primary Only.'' Expanding this
functionality to orders that do not include that designation would also
protect investors and the public interest by enabling such interest to
reach a destination where it is more likely to obtain an execution
opportunity or participate in an auction. Finally, the Exchange
believes that making Tracking Orders available during the Early and
Late Trading Sessions would remove impediments to and perfect the
mechanism of a free and open market by providing additional execution
opportunities on the Exchange through the availability of additional
passive liquidity.
With respect to proposed Rules 7.36P and 7.37P, as discussed above,
the Exchange is not proposing any functional changes to how it ranks,
displays, executes, or routes orders. The Exchange believes, however,
that the proposed rule text promotes transparency through the use of
consistent terminology that will serve as the foundation for additional
Pillar-related rule proposals. The Exchange also believes that adding
more detail regarding current functionality in new Rules 7.34P, 7.36P,
and &.37P, as described above, would promote transparency by providing
notice of when orders would be accepted, routed, rejected, cancelled,
or be assigned a working time by the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed change is not
designed to address any competitive issue but rather to adopt new rules
to support the Exchange's new Pillar trading platform. As discussed in
detail above, with this rule filing, the Exchange is not proposing to
change its core functionality regarding its price-time priority model,
and in particular, how it would rank, display, execute or route orders
in Pillar. Rather, the Exchange believes that the proposed rule change
would promote consistent use of terminology to support the Pillar
trading platform making the Exchange's rules easier to navigate.
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
Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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.
[[Page 28733]]
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-2015-38 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-2015-38. 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 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-NYSEARCA-2015-38, and should be
submitted on or before June 9, 2015.
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\37\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12028 Filed 5-18-15; 8:45 am]
BILLING CODE 8011-01-P
