Self-Regulatory Organizations; New York Stock Exchange, LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, Adopting New NYSE Rule 124 To Conduct a Midday Auction and Amending NYSE Rule 104 To Codify the Obligation of Designated Market Makers To Facilitate the Midday Auction, 30747-30752 [2015-12968]
Download as PDF
<![CDATA[
Lhorne on DSK2VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 103 / Friday, May 29, 2015 / Notices
income and employment tax purposes.
The Incentive Plan provides that the
delivery of any shares, or the lifting or
lapse of restrictions on any Award, shall
be subject to the Participant’s
satisfaction of all applicable federal,
state and local income and employment
tax withholding obligations.
3. The Incentive Plan, as amended
and restated effective June 20, 2014, was
approved by the Company’s board of
directors (‘‘Board’’), including the
required majority of the Company’s
directors with the meaning of section
57(o) of the Act. The Company states
that the Board is permitted to allow the
Company to withhold shares of
Common Stock or purchase shares of
Common stock from the Company’s
Employees to satisfy tax withholding
obligations related to the vesting of
Restricted Stock, or the exercise of
options to acquire Common Stock or
Restricted Stock granted pursuant to the
Incentive Plan. The Company states that
the Incentive Plan further provides the
Board with discretion to permit the
Company’s Employees to pay the
exercise price of options to purchase
shares of Common Stock or Restricted
Stock with shares of Common Stock
already held by them or pursuant to net
share settlement.
Applicant’s Legal Analysis:
1. Section 23(c) of the Act, which is
made applicable to BDCs by section 63
of the Act, generally prohibits a BDC
from purchasing any securities of which
it is the issuer except in the open
market, pursuant to tender offers or
under other circumstances as the
Commission may permit to ensure that
the purchase is made on a basis that
does not unfairly discriminate against
any holders of the class or classes of
securities to be purchased. The
Company states that the withholding or
purchase of shares of Restricted Stock
and Common Stock in payment of
applicable withholding tax obligations
or of Common Stock in payment for the
exercise price of a stock option might be
deemed to be purchases by the
Company of its own securities within
the meaning of section 23(c) and
therefore prohibited by the Act.
2. Section 23(c)(3) provides that the
Commission may issue an order that
would permit a BDC to purchase its
shares in circumstances in which the
purchase is made in a manner or on a
basis that does not unfairly discriminate
against any holders of the class or
classes of securities to be purchased.
The Company states that it believes that
the requested relief meets the standards
of section 23(c)(3).
3. The Company states that these
purchases will be made on a basis
VerDate Sep<11>2014
15:17 May 28, 2015
Jkt 235001
which does not unfairly discriminate
against the stockholders of the Company
because all purchases of Common Stock
will be at the closing sales price of the
Common Stock on the NASDAQ Global
Select Market on the relevant date (i.e.,
the public market price on the date of
vesting of the Restricted Shares, the date
of exercise of Non-Statutory Stock
Options, and the date of a disqualifying
disposition with respect to Incentive
Stock Options). The Company further
states that no transactions will be
conducted pursuant to the requested
order on days where there are no
reported market transactions involving
the Common Stock. The Company
submits that because all transactions
would take place at the public market
price for the Company’s common stock,
the transactions would not be
significantly different than could be
achieved by any stockholder selling in
a market transaction.
4. The Company submits that the
proposed purchases do not raise
concerns about preferential treatment of
the Company’s insiders because the
Incentive Plan is a bona fide
compensation plan of the type that is
common among corporations generally.
Further, the Company argues that the
vesting schedule is determined at the
time of the initial grant of the Restricted
Stock and the option exercise price is
determined at the time of the initial
grant of the options. The Company
represents that that all purchases may
be made only as permitted by the
Incentive Plan and in the discretion of
the Board, which is composed of at least
a majority of ‘‘non-interested’’ persons
within the meaning of section 2(a)(19) of
the Act. The Company argues that
granting the requested relief would be
consistent with policies underlying the
provisions of the Act permitting the use
of equity compensation as well as prior
exemptive relief granted by the
Commission for relief under section
23(c) of the Act.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–12970 Filed 5–28–15; 8:45 am]
BILLING CODE 8011–01–P
PO 00000
30747
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75038; File No. SR–NYSE–
2015–06]
Self-Regulatory Organizations; New
York Stock Exchange, LLC; Notice of
Filing of Amendment No. 1 and Order
Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendment No. 1, Adopting New
NYSE Rule 124 To Conduct a Midday
Auction and Amending NYSE Rule 104
To Codify the Obligation of Designated
Market Makers To Facilitate the Midday
Auction
May 22, 2015.
I. Introduction
On February 2, 2015, New York Stock
Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to institute a daily, single-price
auction during the trading day in certain
lower-volume securities (‘‘Midday
Auction’’) and to amend NYSE Rule 104
to address the responsibilities and
duties of Designated Market Makers
(‘‘DMMs’’) to facilitate the Midday
Auction. The proposed rule change was
published in the Federal Register on
February 23, 2015.3 The Commission
has received one comment letter on the
proposal.4 On April 6, 2015, pursuant to
Section 19(b)(2) of the Act,5 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.6 On May 20,
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 74281
(Feb. 17, 2015), 80 FR 9496 (‘‘Notice’’). In the
Notice, the Exchange stated its intention to submit
a request for exemptive relief, pursuant to Rule
611(d) of Regulation NMS, 17 CFR 242.611(d), from
the requirements of Rule 611 of Regulation NMS.
See Notice, 80 FR at 9497 n.21. In Amendment No.
1, see infra, note 7, the Exchange stated that it will
no longer submit a request for exemptive relief
because the Exchange believes that the proposed
Midday Auction fits within the exception provided
by Rule 611(b)(3) of Regulation NMS, 17 CFR
242.611(b)(3). See infra, Section III.
4 See Letter from Theodore R. Lazo, Managing
Director and Associate General Counsel, Securities
Industry and Financial Markets Association, to
Brent J. Fields, Secretary, Commission (Mar. 20,
2015).
5 15 U.S.C. 78s(b)(2).
6 See Securities Exchange Act Release No. 74648,
80 FR 19385 (Apr. 10, 2015). The Commission
designated May 24, 2015, as the date by which it
should approve, disapprove, or institute
2 17
Continued
Frm 00097
Fmt 4703
Sfmt 4703
E:\FR\FM\29MYN1.SGM
29MYN1
30748
Federal Register / Vol. 80, No. 103 / Friday, May 29, 2015 / Notices
2015, the Exchange filed Amendment
No. 1 to the proposed rule change.7 The
Commission is publishing this notice to
solicit comments on Amendment No. 1
from interested persons and is
approving the proposed rule change, as
modified by Amendment No. 1, on an
accelerated basis.
Lhorne on DSK2VPTVN1PROD with NOTICES
II. Description of the Proposal, as
Modified by Amendment No. 1
The Exchange proposes to adopt new
NYSE Rule 124 to conduct a daily
Midday Auction in certain lowervolume securities. Under the proposal,
the Exchange would conduct one
Midday Auction per trading day 8 for
each security that the Exchange
designates as a Midday Auction Stock.
Only NYSE-listed securities that have a
consolidated average daily trading
volume (‘‘CADV’’) of 1,000,000 shares or
less would be eligible to be designated
as a Midday Auction Stock.9
The Exchange proposes to update the
list of Midday Auction Stocks at least
quarterly.10 The Exchange would not
conduct a Midday Auction on trading
days when the Exchange is scheduled to
proceedings to determine whether to disapprove the
proposed rule change.
7 Amendment No. 1 is publicly available on the
Exchange’s Web site at: https://www.nyse.com/
publicdocs/nyse/markets/nyse/rule-filings/filings/
2015/NYSE%202015-06,%20Pt.Am.%201.pdf. In
Amendment No. 1, the Exchange proposes to: (1)
Allow a member organization to designate an order
to cancel at the beginning of the Midday Auction
Pause (see, infra, note 12 and the accompanying
text for the definition of Midday Auction Pause); (2)
allow a member organization to designate an order
to route to an away market quote that locks or
crosses the previously displayed price of the order,
during the Midday Auction Pause, in which case
the returned quantity of a routed order would also
route; (3) have the Exchange cancel, during the
Midday Auction Pause, resting and arriving NonDisplayed Reserve Orders and Non-Display Reserve
e-Quotes, which the Exchange specifies are not
eligible to participate in the Midday Auction; (4)
clarify that only orders that are eligible to
participate in the Midday Auction would continue
to be repriced during the Midday Auction Pause;
and (5) prevent the Midday Auction from executing
at a price outside of the Limit-Up-Limit-Down
Bands or the Exchange’s Trading Collars (see, infra,
note 33 and the accompanying text), whichever is
lower (for a buy imbalance) or higher (for a sell
imbalance). Furthermore, the Exchange proposes to
make a technical change to Exhibit 5 to correct an
errant cross reference in Proposed NYSE Rule
124(e). The Exchange also proposes to add
additional text to the filing to explain the revisions
contained in Amendment No. 1, to further explain
other aspects of the proposed rule change, and to
remove from the filing text stating that the
Exchange intends to submit separately a request for
exemptive relief pursuant to Rule 611(d) of
Regulation NMS.
8 See Proposed NYSE Rule 124(a)(3).
9 See Proposed NYSE Rule 124(a). The Exchange
has represented that approximately 16 percent of
the consolidated volume of all NYSE-listed
securities consists of NYSE-listed securities with a
CADV of 1,000,000 shares or less. See Notice, 80 FR
at 9496 n.4.
10 See Proposed NYSE Rule 124(a)(1).
VerDate Sep<11>2014
15:17 May 28, 2015
Jkt 235001
close before 4:00 p.m. ET, and the
Exchange would not conduct a Midday
Auction in a Midday Auction Stock if
that stock is halted, paused, suspended,
or not opened at the time of the Midday
Auction.11
To initiate the Midday Auction, the
Exchange would pause trading in
Midday Auction Stocks on the Exchange
for five minutes (‘‘Midday Auction
Pause’’) by suspending automatic
executions and publishing a zero
quote.12 The Midday Auction Pause
would occur between 11:00 a.m. ET and
2:00 p.m. ET at a time specified by the
Exchange and communicated to market
participants in advance through a
Trader Update.13 The Exchange has
stated that the Midday Auction Pause is
intended to provide market participants
with an opportunity to enter interest
intended for the auction.14
During the Midday Auction Pause, the
Exchange would: (i) Maintain resting
orders on the Exchange’s book that
would be eligible to participate in the
Midday Auction; (ii) accept new orders
that would be eligible to participate in
the Midday Auction, including Market
On-the-Open orders (‘‘MOO Orders’’) 15
and Limit On-the-Open orders (‘‘LOO
Orders’’); 16 (iii) cancel resting and
11 See Proposed NYSE Rule 124(a)(2). In the
Notice, the Exchange represents that, if trading for
a Midday Auction Stock is halted, paused,
suspended, or not opened at the time of the Midday
Auction, the Exchange would not conduct a Midday
Auction for that security. See Notice, 80 FR at 9496.
Instead, under those circumstances, the Exchange
would reopen trading for that security pursuant to
the applicable procedures, such as those for a
reopening following a National Market System Plan
to Address Extraordinary Market Volatility (‘‘LULD
Plan’’) pause or following a regulatory halt. See id.;
see also Securities Exchange Act Release No. 68876
(Feb. 8, 2013), 78 FR 10643 (Feb. 14, 2013) (SR–
NYSE–2013–09) (Notice of filing and immediate
effectiveness of proposed rule change to establish
Exchange rules to comply with the requirements of
the LULD Plan).
12 See Proposed NYSE Rule 124(b). The Exchange
has represented that it would publish a zero quote
on both the public and proprietary data feeds. See
Notice, 80 FR at 9496.
13 See Proposed NYSE Rule 124(b); see also
Notice, 80 FR at 9496 n.9.
14 See Notice, 80 FR at 9496.
15 Under the Exchange’s rules, an MOO Order is
‘‘a market order in a security that is to be executed
in its entirety on the opening or reopening trade of
the security on the Exchange. A MOO order will be
immediately and automatically cancelled if the
security opens on a quote or if it is not executed
due to tick restrictions. MOO orders can be entered
before the open to participate on the opening trade
or during a trading halt or pause to participate on
a reopening trade.’’ See NYSE Rule 13.
16 Under the Exchange’s rules, an LOO Order is
‘‘a limit order in a security that is to be executed
on the opening or reopening trade of the security
on the Exchange. A LOO order, or part thereof, will
be immediately and automatically cancelled if by
its terms it is not marketable at the opening price,
it is not executed on the opening trade of the
security on the Exchange, or if the security opens
on a quote. LOO orders can be entered before the
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
arriving Non-Displayed Reserve
Orders 17 and Non-Display Reserve eQuotes,18 which are not eligible to
participate in the Midday Auction; 19
(iv) accept and process cancellations of
new and resting orders; 20 (v) continue
to re-price sell short orders, including
MOO Orders and LOO Orders,
consistent with NYSE Rule 440B(e),
which is the NYSE rule governing short
sales; (vi) continue to re-price and/or
cancel orders eligible to participate in
the Midday Auction,21 including MOO
Orders and LOO Orders, consistent with
NYSE Rule 80C(a)(5); 22 (vii) publish
Order Imbalance Information, as defined
in NYSE Rule 15(c),23 approximately
every five seconds during the Midday
Auction Pause until the Midday
Auction Stock reopens; (viii) cancel
resting and arriving orders designated to
cancel at the start of the Midday
Auction Pause; 24 and (ix) route orders
designated to route if the order becomes
locked or crossed by an away market
quote and to route the returned quantity
of a routed order.25
At the end of the Midday Auction
Pause, the Exchange would conduct the
Midday Auction.26 DMMs registered in
open to participate on the opening trade or during
a trading halt or pause to participate on a reopening
trade.’’ See NYSE Rule 13.
17 Under Exchange Rules, a Non-Displayed
Reserve Order is a limit order that is not displayed,
but remains available for potential execution
against all incoming automatically executing orders
until executed in full or cancelled. See NYSE Rule
13.
18 Under Exchange Rules, ‘‘e-Quotes’’ are broker
agency interest files that a Floor Broker places
within the Exchange’s Display Book with respect to
orders the Floor Broker is representing. See NYSE
Rule 70(a). A Reserve e-Quote is an e-Quote with
reserve interest. See NYSE Rule 70(f). A NonDisplay Reserve e-Quote is a Reserve e-Quote
without a displayable portion. See NYSE Rule
70(f)(ii).
19 See Amendment No. 1, supra note 7.
20 The Exchange has represented that it processes
orders in the same manner during a trading halt or
a pause pursuant to the LULD Plan. See Notice, 80
FR at 9497.
21 See Amendment No. 1, supra note 7.
22 NYSE Rule 80C(a)(5) sets forth the LULD rules
for the repricing and cancellation of trading
interests.
23 Order Imbalance Information disseminated by
Exchange systems prior to the opening transaction
is the data feed disseminated by Exchange systems
of real-time order imbalances that accumulate prior
to the opening transaction on the Exchange and of
the price at which interest eligible to participate in
the opening transaction may be executed in full.
Order Imbalance Information includes all interest
eligible for execution in the opening transaction of
the security in Exchange systems. See NYSE Rule
15(c)(1). Order Imbalance Information is
disseminated on the Exchange’s proprietary data
feeds. See Securities Exchange Act Release No.
74837 (Apr. 29, 2015), 80 FR 25741, 25741 n.4 (May
5, 2015) (SR–NYSE–2015–19).
24 See Amendment No. 1, supra note 7.
25 See id. See also Proposed NYSE Rule
124(b)(1)–(9).
26 See Proposed NYSE Rule 124(c).
E:\FR\FM\29MYN1.SGM
29MYN1
Federal Register / Vol. 80, No. 103 / Friday, May 29, 2015 / Notices
Lhorne on DSK2VPTVN1PROD with NOTICES
each Midday Auction Security would be
responsible for facilitating the Midday
Auction for that security, by providing
liquidity as needed (under NYSE Rule
104(a)(2)) 27 and, under NYSE Rule
123D(1),28 by conducting the Midday
Auction either manually or
electronically.29
The Midday Auction would reopen
the Midday Auction Stocks at a single
equilibrium price in the same manner as
set forth in NYSE Rule 123D (Openings
and Halts in Trading), with two
exceptions.30 The first proposed
exception to NYSE Rule 123D would
conform the Midday Auction to the way
in which the Exchange reopens
securities following a LULD Plan pause,
as set forth in NYSE Rule 80C(b)(2)(A).31
NYSE Rule 123D(1) requires the
dissemination of an ‘‘indication’’ (i.e.,
an indication of anticipated price) in
connection with any delayed opening,
and all indications pursuant to NYSE
Rule 123D require the supervision and
approval of an Exchange Floor Official.
During a Midday Auction Pause, as with
an LULD Pause, indications would be
permitted, but not required, and prior
approval by Exchange officials would
not be required before publishing an
indication. If an indication were
published, it would not need to be
updated before the Midday Auction,
and the Midday Auction would be
permitted to occur outside of any prior
indication. Furthermore, as with
reopenings after a LULD Pause, a
Midday Auction would not be subject to
the NYSE Rule 123D requirements that:
(i) A minimum of three minutes must
elapse between the first indication and
a stock’s reopening; or (ii) if more than
one indication is published, a minimum
of one minute must elapse before a
stock’s reopening.32
27 NYSE Rule 104(a)(2) sets forth a DMM’s
responsibilities and duties to facilitate openings
and reopenings for each of the securities in which
the DMM is registered under Exchange rules. See
NYSE Rule 104(a)(2). NYSE Rule 104(a)(2) also
requires DMMs to supply liquidity on the opening
and reopening, as needed, for each security in
which the DMM is registered. See id. The Exchange
is proposing to add these liquidity provisions for
Midday Auctions to the DMM’s responsibilities and
duties under NYSE Rule 104(a)(2).
28 NYSE Rule 123D(1) provides that openings may
be effectuated manually or electronically. See NYSE
Rule 123D(1).
29 See Notice, 80 FR at 9497.
30 See Proposed NYSE Rule 124(c).
31 See Notice, 80 FR at 9497.
32 See Proposed NYSE Rule 124(c)(1). See NYSE
Rule 123D(1) (‘‘Generally, a minimum of three
minutes must elapse between the first indication
and a stock’s opening as measured by the time the
indication appears on the PDU. However, when
more than one indication is disseminated, a stock
may open one minute after the last indication
provided that at least three minutes must have
elapsed from the dissemination of the first
VerDate Sep<11>2014
15:17 May 28, 2015
Jkt 235001
The second proposed exception to
NYSE Rule 123D would provide that the
Midday Auction would not execute at a
price outside (i) the LULD Price Bands
in effect at the time of the Midday
Auction, as provided for in NYSE Rule
80C(a)(4), or (ii) the Exchange’s Trading
Collars, as provided for in NYSE Rule
1000(c)(i), whichever price threshold is
lower (for a buy imbalance) or higher
(for a sell imbalance) at the time of the
Midday Auction.33
Orders would participate in the
Midday Auction in the same way they
would participate in openings or
reopenings, subject to the two
exceptions explained above.34
Additionally, as noted above, the
Exchange would cancel resting and
arriving Non-Displayed Reserve Orders
and Non-Display Reserve e-Quotes
during the Midday Auction pause.35
Orders that are not eligible to participate
in openings or reopenings pursuant to
NYSE rules would not participate in the
Midday Auction.36 Finally, if there were
a significant imbalance in a Midday
Auction Stock at the end of the Midday
Auction Pause, the Midday Auction
Pause could, with the approval of a
Floor Governor or two Floor Officials,
be converted to an order imbalance
halt.37 If a Midday Auction Pause were
converted into an order imbalance halt,
each order that had been re-priced
would be re-filed according to the
order’s original instructions, and the
security would be reopened pursuant to
the procedures set forth in NYSE Rule
123D.38
III. Summary of Comment Letter and
NYSE’s Response
The Commission has received one
comment letter on the Exchange’s
proposal. The commenter asserts that
broad-based, significant changes to
equity market structure should be
conducted through the Commission
rulemaking process, not through a single
exchange’s rulemaking process. The
indication.’’). An indication published pursuant to
NYSE Rule 123D is published to the Consolidated
Tape. See Securities Exchange Act Release No.
74837 (Apr. 29, 2015), 80 FR 25741, 25741 n.5 (May
5, 2015) (SR–NYSE–2015–19).
33 See Proposed NYSE Rule 124(c)(2); see also
Amendment No. 1, supra note 7.
34 See Proposed NYSE Rule 124(d).
35 See supra, note 19 and the accompanying text.
The Exchange also proposes to continue to re-price
sell short orders, including MOO and LOO Orders,
consistent with NYSE Rule 440B(e), see Proposed
NYSE Rule 124(b)(5), and to continue to re-price
and/or cancel orders eligible to participate in the
Midday Auction, including MOO and LOO Orders,
consistent with the LULD Plan, see Proposed NYSE
Rule 124(b)(6).
36 See Proposed NYSE Rule 124(d).
37 See Proposed NYSE Rule 124(e).
38 See Proposed NYSE Rule 124(e).
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
30749
commenter argues that the Commission
should carry out market structure
changes in a manner designed to benefit
the entire market, rather than approving
a self-regulatory organization
rulemaking proposal that is designed to
improve the market share for a single
market participant.
Further, the commenter states that the
proposal should not be approved before
both the Exchange and the Commission
confirm that a member firm that relies
on NYSE’s displayed book for
compliance with the limit order display
requirement of Rule 604 of Regulation
NMS (‘‘Limit Order Display Rule’’),39
and whose order is blacked out during
the Midday Auction Pause, would still
be considered to be in compliance with
the Limit Order Display Rule.
Finally, the commenter objects to the
Exchange’s statement that it will request
an exemption under Rule 611(d) of
Regulation NMS 40 for the Midday
Auction process. The commenter asserts
that the Midday Auction should be
designed so that it operates within and
in compliance with existing regulatory
requirements. The commenter argues
that, if the Commission determines that
periodic intraday auctions are a
beneficial way to improve trading
quality in lower-volume securities, the
Commission should apply the same
rules or relief for those auctions to all
market participants. The commenter
asserts that the Midday Auction does
not qualify for an exemption from Rule
611 of Regulation NMS because the
Midday Auction would be substantially
different than the operation of a singlepriced reopening transaction. The
commenter states that a single-priced
reopening transaction, as the term is
used in Rule 611 of Regulation NMS, is
a price discovery event on a single
venue that generally occurs when the
entire market has halted trading in that
security to address unusual market,
operational, or regulatory situations.
The commenter states that the singlepriced reopening transaction exception
under Rule 611 of Regulation NMS
would not be applicable to a daily
auction mechanism whose purpose is to
increase the market share of a single
exchange.
In Amendment No. 1, the Exchange
responds that, to address the
commenter’s concerns regarding the
Limit Order Display Rule and a member
organization’s best-execution
requirements, it has amended the
proposal. First, the Exchange has
amended the proposal to allow a
member organization to designate an
39 17
40 17
E:\FR\FM\29MYN1.SGM
CFR 242.604.
CFR 242.611(d).
29MYN1
30750
Federal Register / Vol. 80, No. 103 / Friday, May 29, 2015 / Notices
order not to participate in the Midday
Auction (by designating that order to
cancel at the beginning of the Midday
Auction Pause). The Exchange has
further amend the proposal to allow a
member organization to designate an
order to route to an away market quote
that locks or crosses the previously
displayed price of the order during the
Midday Auction Pause. To further
address concerns regarding execution
opportunities during the Midday
Auction Pause, the Exchange has
amended the proposal to cancel NonDisplayed Reserve Orders and NonDisplay Reserve e-Quotes resting on the
Exchange’s book during the Midday
Auction Pause and to reject NonDisplayed Reserve Orders and NonDisplay Reserve e-Quotes entered
during the Midday Auction Pause.
With respect to the applicability of
Rule 611 of Regulation NMS, the
Exchange states in Amendment No. 1
that it will not be submitting a request
for exemptive relief. The Exchange
states its belief that the exception under
Rule 611(b)(3) of Regulation NMS 41
would apply to the single-priced trade
at the conclusion of the Midday Auction
conducted pursuant to proposed NYSE
Rule 124, because the Midday Auction
would result in a single-priced
reopening transaction after a trading
halt conducted pursuant to Exchange
rules and, thus, would be excepted from
the Order Protection Rule pursuant to
Rule 611(b)(3) under Regulation NMS.
IV. Discussion and Commission
Findings
After careful review and
consideration of the Exchange’s
proposal and the comment letter, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with the
requirements of the Act and the rules
and regulations thereunder that are
applicable to a national securities
exchange.42 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,43 which requires,
among other things, that the rules of a
national securities exchange be
designed to promote just and equitable
principles of trade; to remove
Lhorne on DSK2VPTVN1PROD with NOTICES
41 See
17 CFR 242.611(b)(3) (providing an
exception from the Order Protection Rule under
Rule 611 of Regulation NMS when the ‘‘transaction
that constituted the trade-through was a singlepriced opening, reopening, or closing transaction by
the trading center’’).
42 In approving this proposed rule change, as
amended, the Commission notes that it has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
43 15 U.S.C. 78f(b)(5).
VerDate Sep<11>2014
15:17 May 28, 2015
Jkt 235001
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, and that the rules of a
national securities exchange not be
designed to permit unfair
discrimination between customers,
issuers, brokers or dealers.
The Commission believes that the
proposal, as modified by Amendment
No. 1, is reasonably designed to
potentially improve market quality in
thinly traded securities, including
securities issued by small-to-mediumsized issuers, by aggregating intra-day
liquidity on the Exchange through an
auction process. The Midday Auction
would be limited to NYSE-listed stocks
that have a consolidated average daily
trading volume of 1,000,000 shares or
less, and it would provide market
participants with a new alternative for
seeking liquidity in these stocks. Market
participants could participate in the
Midday Auction, but they would also be
free to route orders to participate in
continuous trading on other competing
exchanges and trading venues.
The commenter argues that broadbased, significant changes to equity
market structure should be conducted
through Commission rulemaking and
not through a single exchange’s selfregulatory organization rulemaking
process. The question before the
Commission, however, is whether the
Exchange’s proposal is consistent with
the Act. If the Commission finds that the
Exchange’s proposal is consistent with
the Act, the Commission must approve
the proposal,44 and, if the Commission
is unable to find that the Exchange’s
proposal is consistent with the Act, the
Commission must disapprove the
proposal.45
As noted above, the Exchange has
proposed an alternative means of
aggregating intra-day liquidity—
adapting an existing auction mechanism
to function during the trading day—and
the Commission believes that the Act
permits exchanges to experiment with
new trading mechanisms, so long as
those mechanisms are consistent with
the Act and the regulations thereunder.
The mere fact that a single exchange
44 See 15 U.S.C. 78s(b)(2)(C)(i) (‘‘The Commission
shall approve a proposed rule change of a selfregulatory organization if it finds that such
proposed rule change is consistent with the
requirements of this chapter and the rules and
regulations issued under this chapter that are
applicable to such organization.’’).
45 See 15 U.S.C. 78s(b)(2)(C)(ii) (‘‘The
Commission shall disapprove a proposed rule
change of a self-regulatory organization if it does
not make a finding described in clause (i) [i.e., that
the proposed rule change is consistent with the
Act].’’).
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
proposes, consistent with the Act, to
operate differently from another
exchange, or even all other exchanges,
or that it seeks to gain market share from
its competitors by doing so, does not
mean that the exchange’s proposed rule
change constitutes a broad-based change
to equity market structure that should
only be accomplished by Commission
rulemaking. The current equity market
structure features, and the Act permits,
fierce competition among numerous
national securities exchanges,
alternative trading systems, and other
trading venues, each of which seeks to
gain market share by differentiating
itself through offering, among other
things, different order types, data
products, and trading fees and rebates.
The Commission believes that the
Exchange’s proposal fits comfortably
within the bounds of existing
competition between trading venues
and that it is consistent with the Act.
The commenter has also raised
questions with respect to Exchange
member firms’ obligations under the
Limit Order Display Rule. The Exchange
has responded to these questions, and
broader best-execution concerns, by
filing Amendment No. 1, which would:
(1) Allow a member organization to
designate an order to cancel at the
beginning of the Midday Auction Pause;
(2) allow a member organization to
designate an order to route to an away
market quote that locks or crosses the
previously displayed price of that order
during the Midday Auction Pause; and
(3) cancel resting and arriving NonDisplayed Reserve Orders and NonDisplay Reserve e-Quotes during the
Midday Auction Pause.
The Commission notes that the
proposal, as modified by Amendment
No. 1, would allow Exchange member
organizations to affirmatively opt out of
participating in the Midday Auction by
designating orders to be canceled at the
start of the Midday Auction Pause and
to conditionally opt out of the Midday
Auction by designating an order to route
to away markets that lock or cross the
order during the Midday Auction Pause.
The Commission believes that the
operation of the Midday Auction,
including the Midday Auction Pause,
would not conflict with the ability of
member organizations to comply with
their obligations under the Limit Order
Display Rule 46 or their best-execution
obligations to their customers.
46 The Commission notes that Rule 604(b)(5)
under Regulation NMS, 17 CFR 242.604(b)(5),
exempts from the requirements of the Limit Order
Display Rule any customer limit order that is
delivered immediately upon receipt to a national
securities exchange or national securities
association-sponsored system, or an electronic
E:\FR\FM\29MYN1.SGM
29MYN1
Federal Register / Vol. 80, No. 103 / Friday, May 29, 2015 / Notices
Lhorne on DSK2VPTVN1PROD with NOTICES
Finally, the commenter asserts that
the Midday Auction does not qualify for
an exemption from the requirements of
Rule 611 of Regulation NMS because the
Midday Auction would be substantially
different from the operation of a singlepriced reopening transaction. The
commenter argues that the Rule 611
exception for reopening auctions was
intended to apply in very specific,
limited circumstances to address
unusual market, operational, or
regulatory situations, not to permit daily
auction mechanism whose purpose is to
increase the market share of a single
exchange.
In response, the Exchange has
clarified that it will not be submitting a
request for exemptive relief under Rule
611 of Regulation NMS because it
believes that the Midday Auction would
qualify for the single-priced reopening
exception of Rule 611(b)(3). The
Exchange explains, in Amendment No.
1, that ‘‘the single-priced trade at the
conclusion of the Midday Auction is a
single-priced reopening transaction after
a trading halt conducted pursuant to
Exchange rules and would be excepted
under paragraph (b)(3) of Rule 611
under Regulation NMS from the tradethrough requirements under Rule
611.’’ 47
The Commission agrees that the
proposal falls within the exception for
single-priced reopening transactions
pursuant to Rule 611(b)(3) of Regulation
NMS.48 Pursuant to Rule 611(a) under
Regulation NMS,49 the Order Protection
Rule requires a trading center to have
written policies and procedures
reasonably designed to prevent tradethroughs on that trading center of
protected quotations in NMS stocks.50
Rule 611(b)(3) under Regulation NMS
excepts from the Order Protection Rule
a single-priced opening, reopening, or
closing transaction by the trading
center.51 In adopting Regulation NMS,
the Commission directly addressed
concerns that a trading center might
attempt to use the Rule 611(b)(3)
communications network that complies with the
requirements of § 242.602(b)(5)(ii) with respect to
that order.
47 Amendment No. 1, supra note 7.
48 17 CFR 242.611(b)(3).
49 17 CFR 242.611(a).
50 A trade-through occurs when one trading
center executes an order at a price that is inferior
to the price of a protected quotation displayed by
another trading center. See Securities Exchange Act
Release No. 51808 (June 9, 2005), 70 FR 37496,
37501 (June 29, 2005) (File No. S7–10–04)
(‘‘Regulation NMS Adopting Release’’). An ‘‘NMS
stock’’ means any security or class of securities,
other than an option, for which transaction reports
are collected, processed, and made available
pursuant to an effective transaction reporting plan.
See 17 CFR 242.600(b)(46), (47).
51 See 17 CFR 242.611(b)(3).
VerDate Sep<11>2014
15:17 May 28, 2015
Jkt 235001
exception to halt trading and then
reopen solely to enable it to tradethrough other trading centers.52 The
Commission therefore specified in the
Regulation NMS Adopting Release that
the exception provided by Rule
611(b)(3) applies ‘‘only to single-priced
reopenings and therefore requires that a
trading center conduct, pursuant to its
rules or written procedures, a
formalized and transparent process for
executing orders during reopening after
a trading halt that involves the queuing
and ultimate execution of multiple
orders at a single equilibrium price.’’ 53
Neither the text of Rule 611(b)(3), nor
the Commission’s discussion in the
Regulation NMS Adopting Release,
requires that the relevant trading halt be
a market-wide regulatory halt or that it
necessarily address unusual market,
operational, or regulatory situations.
As proposed, the Midday Auction
would be conducted once per day,
pursuant to Exchange rules and at a
time that would be publicly announced
in advance. The Midday Auction would
halt trading on the Exchange in Midday
Auction Securities for five minutes to
allow market participants an
opportunity to enter, cancel, or modify
trading interest. During this five-minute
pause, the Exchange would publish
Order Imbalance Information, and
would be permitted to publish
‘‘indications,’’ to attract liquidity. At the
conclusion of the five-minute pause, the
Exchange would reopen each of the
Midday Auction Stocks, executing the
queued orders at a single equilibrium
price in the same manner as NYSE Rule
123D reopenings.
The Commission believes that the
proposal is not designed to permit the
Exchange to declare a trading halt
merely to be able to circumvent the
operation of the Order Protection Rule
upon reopening. Instead, the Exchange
has proposed a formalized and
transparent process for the Midday
Auction that would involve the queuing
and execution of multiple orders at a
single equilibrium price, pursuant to a
trading halt declared pursuant to its
own rules. The Commission therefore
believes that the proposal falls within
the exception for single-priced
reopenings pursuant to Rule 611(b)(3) of
Regulation NMS.54
52 See Regulation NMS Adopting Release, 70 FR
at 37520.
53 See Regulation NMS Adopting Release, 70 FR
at 37521. In addition, the Commission stated that
the trading center must have formally declared a
trading halt, pursuant to its rules or written
procedures, to fall within the Rule 611(b)(3)
exception. Id.
54 See 17 CFR 242.611(b)(3).
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
30751
For the above reasons, the
Commission finds that the proposal, as
modified by Amendment No. 1, is
consistent with the requirements of the
Act.
V. Solicitation of Comments on
Amendment No. 1
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether Amendment No. 1 to
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–
NYSE–2015–06 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–NYSE–2015–06. 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 such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–NYSE–
2015–06 and should be submitted on or
before June 19, 2015.
E:\FR\FM\29MYN1.SGM
29MYN1
Lhorne on DSK2VPTVN1PROD with NOTICES
30752
Federal Register / Vol. 80, No. 103 / Friday, May 29, 2015 / Notices
VI. Accelerated Approval of Proposed
Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 1, prior to
the 30th day after the date of
publication of notice of Amendment No.
1 in the Federal Register. As discussed
above, in Amendment No. 1, the
Exchange proposes to: (1) Allow a
member organization to designate an
order to cancel at the beginning of the
Midday Auction Pause; (2) allow a
member organization to designate an
order to route to an away market quote
that locks or crosses the previously
displayed price of the order during the
Midday Auction Pause, in which case
the returned quantity of a routed order
would also route; (3) have the Exchange
cancel, during the Midday Auction
Pause, resting and arriving NonDisplayed Reserve Orders and NonDisplay Reserve e-Quotes, which the
Exchange specifies are not eligible to
participate in the Midday Auction; (4)
clarify that only orders that are eligible
to participate in the Midday Auction
would continue to be repriced during
the Midday Auction Pause; (5) prevent
the Midday Auction from executing at a
price outside of the LULD Bands or the
Exchange’s Trading Collars, whichever
is lower (for a buy imbalance) or higher
(for a sell imbalance). Furthermore, the
Exchange proposes to make a technical
change to Exhibit 5 to correct an errant
cross reference in Proposed NYSE Rule
124(e). The Exchange has also added
additional text to the filing to explain
the revisions contained in Amendment
No. 1, further explained other aspects of
the proposed rule change, and removed
from the filing text stating that the
Exchange intends to submit separately a
request for exemptive relief pursuant to
Rule 611(d) of Regulation NMS.
The Commission believes that
Amendment No. 1 provides market
participants with the option to opt out
of the Midday Auction, provides that
non-displayed orders would not
participate in the Midday Auction, and
addresses the price limitations within
which the Midday Auction would
occur. In particular, the Commission
believes that permitting member
organizations to designate orders to
cancel when the Midday Auction Pause
begins, or to route when an order
becomes locked or crossed by an away
market quote during the Midday
Auction Pause, should provide
Exchange member organizations with
appropriate options to help them
comply with their best-execution duties
to their customers. Furthermore, the
VerDate Sep<11>2014
15:17 May 28, 2015
Jkt 235001
Commission believes that providing for
the cancellation or rejection of nondisplayed orders during the Midday
Auction Pause provides clarity as to
how the Exchange intends the proposed
auction to operate in regard to order
execution. Additionally, the
Commission believes that limiting the
Midday Auction execution price to the
lower (for a buy imbalance) or higher
(for a sell imbalance) of the Exchange’s
LULD Band or Trading Collar Band, at
the time of the Midday Auction, should
mitigate the risk of an execution at
prices that are too far away from the
prevailing price of a given security in
continuous trading on other national
securities exchanges and trading
venues. Finally, the Commission
believes that the Exchange’s proposed
technical revisions, and additional
explanation regarding the proposal, will
provide market participants more clarity
regarding how the proposed rule is
intended to operate.
The Commission finds that
Amendment No. 1 is consistent with the
protection of investors and the public
interest. Accordingly, the Commission
finds good cause, pursuant to Section
19(b)(2) of the Act,55 to approve the
proposed rule change, as modified by
Amendment No. 1, on an accelerated
basis.
VI. Conclusion
It is therefore ordered that, pursuant
to Section 19(b)(2) of the Act,56 the
proposed rule change, as modified by
Amendment No. 1, (SR–NYSE–2015–06)
be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.57
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–12968 Filed 5–28–15; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
Agency Information Collection
Activities: Requests for Comments;
Clearance of Renewed Approval of
Information Collection: Recording of
Aircraft Conveyances and Security
Documents
Federal Aviation
Administration (FAA), DOT
AGENCY:
55 15
U.S.C. 78s(b)(2).
U.S.C. 78s(b)(2).
57 17 CFR 200.30–3(a)(12).
56 15
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
Notice and request for
comments.
ACTION:
In accordance with the
Paperwork Reduction Act of 1995, FAA
invites public comments about our
intention to request the Office of
Management and Budget (OMB)
approval to renew an information
collection. Approval is needed for
security reasons such as mortgages
submitted by the public for recording
against aircraft, engines, propellers, and
spare parts locations.
DATES: Written comments should be
submitted by July 28, 2015.
ADDRESSES: Send comments to the FAA
at the following address: Ronda
Thompson, Room 300, Federal Aviation
Administration, ASP–110, 950 L’Enfant
Plaza SW., Washington, DC 20024.
Public Comments Invited: You are
asked to comment on any aspect of this
information collection, including (a)
Whether the proposed collection of
information is necessary for FAA’s
performance; (b) the accuracy of the
estimated burden; (c) ways for FAA to
enhance the quality, utility and clarity
of the information collection; and (d)
ways that the burden could be
minimized without reducing the quality
of the collected information. The agency
will summarize and/or include your
comments in the request for OMB’s
clearance of this information collection.
FOR FURTHER INFORMATION CONTACT:
Ronda Thompson at (202) 267–1416, or
by email at: Ronda.Thompson@faa.gov.
SUPPLEMENTARY INFORMATION:
OMB Control Number: 2120–0043
Title: Recording of Aircraft
Conveyances and Security Documents
Form Numbers: FAA Form 8050–41.
Type of Review: Renewal of an
information collection.
Background: Title 49, U. S. C. Section
44108 provides for establishing and
maintaining a system for the recording
of security conveyances affecting title
to, or interest in U.S. civil aircraft, as
well as certain specifically identified
engines, propellers, or spare parts
locations, and for recording of releases
relating to those conveyances. The
original security conveyance is
examined by the Civil Aviation Registry
to insure that it meets recording
requirements as set forth in FAR Part 49.
If it does, it is given a recording number
and made a permanent part of the
aircraft record.
Respondents: Approximately 45,469
lienholders.
Frequency: Information is collected
on occasion.
Estimated Average Burden per
Response: 1 hour.
SUMMARY:
E:\FR\FM\29MYN1.SGM
29MYN1
]]>Agencies
[Federal Register Volume 80, Number 103 (Friday, May 29, 2015)]
[Notices]
[Pages 30747-30752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12968]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75038; File No. SR-NYSE-2015-06]
Self-Regulatory Organizations; New York Stock Exchange, LLC;
Notice of Filing of Amendment No. 1 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment No. 1,
Adopting New NYSE Rule 124 To Conduct a Midday Auction and Amending
NYSE Rule 104 To Codify the Obligation of Designated Market Makers To
Facilitate the Midday Auction
May 22, 2015.
I. Introduction
On February 2, 2015, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to institute a daily, single-price auction during
the trading day in certain lower-volume securities (``Midday Auction'')
and to amend NYSE Rule 104 to address the responsibilities and duties
of Designated Market Makers (``DMMs'') to facilitate the Midday
Auction. The proposed rule change was published in the Federal Register
on February 23, 2015.\3\ The Commission has received one comment letter
on the proposal.\4\ On April 6, 2015, pursuant to Section 19(b)(2) of
the Act,\5\ the Commission designated a longer period within which to
approve the proposed rule change, disapprove the proposed rule change,
or institute proceedings to determine whether to disapprove the
proposed rule change.\6\ On May 20,
[[Page 30748]]
2015, the Exchange filed Amendment No. 1 to the proposed rule
change.\7\ The Commission is publishing this notice to solicit comments
on Amendment No. 1 from interested persons and is approving the
proposed rule change, as modified by Amendment No. 1, on an accelerated
basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 74281 (Feb. 17,
2015), 80 FR 9496 (``Notice''). In the Notice, the Exchange stated
its intention to submit a request for exemptive relief, pursuant to
Rule 611(d) of Regulation NMS, 17 CFR 242.611(d), from the
requirements of Rule 611 of Regulation NMS. See Notice, 80 FR at
9497 n.21. In Amendment No. 1, see infra, note 7, the Exchange
stated that it will no longer submit a request for exemptive relief
because the Exchange believes that the proposed Midday Auction fits
within the exception provided by Rule 611(b)(3) of Regulation NMS,
17 CFR 242.611(b)(3). See infra, Section III.
\4\ See Letter from Theodore R. Lazo, Managing Director and
Associate General Counsel, Securities Industry and Financial Markets
Association, to Brent J. Fields, Secretary, Commission (Mar. 20,
2015).
\5\ 15 U.S.C. 78s(b)(2).
\6\ See Securities Exchange Act Release No. 74648, 80 FR 19385
(Apr. 10, 2015). The Commission designated May 24, 2015, as the date
by which it should approve, disapprove, or institute proceedings to
determine whether to disapprove the proposed rule change.
\7\ Amendment No. 1 is publicly available on the Exchange's Web
site at: https://www.nyse.com/publicdocs/nyse/markets/nyse/rule-filings/filings/2015/NYSE%202015-06,%20Pt.Am.%201.pdf. In Amendment
No. 1, the Exchange proposes to: (1) Allow a member organization to
designate an order to cancel at the beginning of the Midday Auction
Pause (see, infra, note 12 and the accompanying text for the
definition of Midday Auction Pause); (2) allow a member organization
to designate an order to route to an away market quote that locks or
crosses the previously displayed price of the order, during the
Midday Auction Pause, in which case the returned quantity of a
routed order would also route; (3) have the Exchange cancel, during
the Midday Auction Pause, resting and arriving Non-Displayed Reserve
Orders and Non-Display Reserve e-Quotes, which the Exchange
specifies are not eligible to participate in the Midday Auction; (4)
clarify that only orders that are eligible to participate in the
Midday Auction would continue to be repriced during the Midday
Auction Pause; and (5) prevent the Midday Auction from executing at
a price outside of the Limit-Up-Limit-Down Bands or the Exchange's
Trading Collars (see, infra, note 33 and the accompanying text),
whichever is lower (for a buy imbalance) or higher (for a sell
imbalance). Furthermore, the Exchange proposes to make a technical
change to Exhibit 5 to correct an errant cross reference in Proposed
NYSE Rule 124(e). The Exchange also proposes to add additional text
to the filing to explain the revisions contained in Amendment No. 1,
to further explain other aspects of the proposed rule change, and to
remove from the filing text stating that the Exchange intends to
submit separately a request for exemptive relief pursuant to Rule
611(d) of Regulation NMS.
---------------------------------------------------------------------------
II. Description of the Proposal, as Modified by Amendment No. 1
The Exchange proposes to adopt new NYSE Rule 124 to conduct a daily
Midday Auction in certain lower-volume securities. Under the proposal,
the Exchange would conduct one Midday Auction per trading day \8\ for
each security that the Exchange designates as a Midday Auction Stock.
Only NYSE-listed securities that have a consolidated average daily
trading volume (``CADV'') of 1,000,000 shares or less would be eligible
to be designated as a Midday Auction Stock.\9\
---------------------------------------------------------------------------
\8\ See Proposed NYSE Rule 124(a)(3).
\9\ See Proposed NYSE Rule 124(a). The Exchange has represented
that approximately 16 percent of the consolidated volume of all
NYSE-listed securities consists of NYSE-listed securities with a
CADV of 1,000,000 shares or less. See Notice, 80 FR at 9496 n.4.
---------------------------------------------------------------------------
The Exchange proposes to update the list of Midday Auction Stocks
at least quarterly.\10\ The Exchange would not conduct a Midday Auction
on trading days when the Exchange is scheduled to close before 4:00
p.m. ET, and the Exchange would not conduct a Midday Auction in a
Midday Auction Stock if that stock is halted, paused, suspended, or not
opened at the time of the Midday Auction.\11\
---------------------------------------------------------------------------
\10\ See Proposed NYSE Rule 124(a)(1).
\11\ See Proposed NYSE Rule 124(a)(2). In the Notice, the
Exchange represents that, if trading for a Midday Auction Stock is
halted, paused, suspended, or not opened at the time of the Midday
Auction, the Exchange would not conduct a Midday Auction for that
security. See Notice, 80 FR at 9496. Instead, under those
circumstances, the Exchange would reopen trading for that security
pursuant to the applicable procedures, such as those for a reopening
following a National Market System Plan to Address Extraordinary
Market Volatility (``LULD Plan'') pause or following a regulatory
halt. See id.; see also Securities Exchange Act Release No. 68876
(Feb. 8, 2013), 78 FR 10643 (Feb. 14, 2013) (SR-NYSE-2013-09)
(Notice of filing and immediate effectiveness of proposed rule
change to establish Exchange rules to comply with the requirements
of the LULD Plan).
---------------------------------------------------------------------------
To initiate the Midday Auction, the Exchange would pause trading in
Midday Auction Stocks on the Exchange for five minutes (``Midday
Auction Pause'') by suspending automatic executions and publishing a
zero quote.\12\ The Midday Auction Pause would occur between 11:00 a.m.
ET and 2:00 p.m. ET at a time specified by the Exchange and
communicated to market participants in advance through a Trader
Update.\13\ The Exchange has stated that the Midday Auction Pause is
intended to provide market participants with an opportunity to enter
interest intended for the auction.\14\
---------------------------------------------------------------------------
\12\ See Proposed NYSE Rule 124(b). The Exchange has represented
that it would publish a zero quote on both the public and
proprietary data feeds. See Notice, 80 FR at 9496.
\13\ See Proposed NYSE Rule 124(b); see also Notice, 80 FR at
9496 n.9.
\14\ See Notice, 80 FR at 9496.
---------------------------------------------------------------------------
During the Midday Auction Pause, the Exchange would: (i) Maintain
resting orders on the Exchange's book that would be eligible to
participate in the Midday Auction; (ii) accept new orders that would be
eligible to participate in the Midday Auction, including Market On-the-
Open orders (``MOO Orders'') \15\ and Limit On-the-Open orders (``LOO
Orders''); \16\ (iii) cancel resting and arriving Non-Displayed Reserve
Orders \17\ and Non-Display Reserve e-Quotes,\18\ which are not
eligible to participate in the Midday Auction; \19\ (iv) accept and
process cancellations of new and resting orders; \20\ (v) continue to
re-price sell short orders, including MOO Orders and LOO Orders,
consistent with NYSE Rule 440B(e), which is the NYSE rule governing
short sales; (vi) continue to re-price and/or cancel orders eligible to
participate in the Midday Auction,\21\ including MOO Orders and LOO
Orders, consistent with NYSE Rule 80C(a)(5); \22\ (vii) publish Order
Imbalance Information, as defined in NYSE Rule 15(c),\23\ approximately
every five seconds during the Midday Auction Pause until the Midday
Auction Stock reopens; (viii) cancel resting and arriving orders
designated to cancel at the start of the Midday Auction Pause; \24\ and
(ix) route orders designated to route if the order becomes locked or
crossed by an away market quote and to route the returned quantity of a
routed order.\25\
---------------------------------------------------------------------------
\15\ Under the Exchange's rules, an MOO Order is ``a market
order in a security that is to be executed in its entirety on the
opening or reopening trade of the security on the Exchange. A MOO
order will be immediately and automatically cancelled if the
security opens on a quote or if it is not executed due to tick
restrictions. MOO orders can be entered before the open to
participate on the opening trade or during a trading halt or pause
to participate on a reopening trade.'' See NYSE Rule 13.
\16\ Under the Exchange's rules, an LOO Order is ``a limit order
in a security that is to be executed on the opening or reopening
trade of the security on the Exchange. A LOO order, or part thereof,
will be immediately and automatically cancelled if by its terms it
is not marketable at the opening price, it is not executed on the
opening trade of the security on the Exchange, or if the security
opens on a quote. LOO orders can be entered before the open to
participate on the opening trade or during a trading halt or pause
to participate on a reopening trade.'' See NYSE Rule 13.
\17\ Under Exchange Rules, a Non-Displayed Reserve Order is a
limit order that is not displayed, but remains available for
potential execution against all incoming automatically executing
orders until executed in full or cancelled. See NYSE Rule 13.
\18\ Under Exchange Rules, ``e-Quotes'' are broker agency
interest files that a Floor Broker places within the Exchange's
Display Book with respect to orders the Floor Broker is
representing. See NYSE Rule 70(a). A Reserve e-Quote is an e-Quote
with reserve interest. See NYSE Rule 70(f). A Non-Display Reserve e-
Quote is a Reserve e-Quote without a displayable portion. See NYSE
Rule 70(f)(ii).
\19\ See Amendment No. 1, supra note 7.
\20\ The Exchange has represented that it processes orders in
the same manner during a trading halt or a pause pursuant to the
LULD Plan. See Notice, 80 FR at 9497.
\21\ See Amendment No. 1, supra note 7.
\22\ NYSE Rule 80C(a)(5) sets forth the LULD rules for the
repricing and cancellation of trading interests.
\23\ Order Imbalance Information disseminated by Exchange
systems prior to the opening transaction is the data feed
disseminated by Exchange systems of real-time order imbalances that
accumulate prior to the opening transaction on the Exchange and of
the price at which interest eligible to participate in the opening
transaction may be executed in full. Order Imbalance Information
includes all interest eligible for execution in the opening
transaction of the security in Exchange systems. See NYSE Rule
15(c)(1). Order Imbalance Information is disseminated on the
Exchange's proprietary data feeds. See Securities Exchange Act
Release No. 74837 (Apr. 29, 2015), 80 FR 25741, 25741 n.4 (May 5,
2015) (SR-NYSE-2015-19).
\24\ See Amendment No. 1, supra note 7.
\25\ See id. See also Proposed NYSE Rule 124(b)(1)-(9).
---------------------------------------------------------------------------
At the end of the Midday Auction Pause, the Exchange would conduct
the Midday Auction.\26\ DMMs registered in
[[Page 30749]]
each Midday Auction Security would be responsible for facilitating the
Midday Auction for that security, by providing liquidity as needed
(under NYSE Rule 104(a)(2)) \27\ and, under NYSE Rule 123D(1),\28\ by
conducting the Midday Auction either manually or electronically.\29\
---------------------------------------------------------------------------
\26\ See Proposed NYSE Rule 124(c).
\27\ NYSE Rule 104(a)(2) sets forth a DMM's responsibilities and
duties to facilitate openings and reopenings for each of the
securities in which the DMM is registered under Exchange rules. See
NYSE Rule 104(a)(2). NYSE Rule 104(a)(2) also requires DMMs to
supply liquidity on the opening and reopening, as needed, for each
security in which the DMM is registered. See id. The Exchange is
proposing to add these liquidity provisions for Midday Auctions to
the DMM's responsibilities and duties under NYSE Rule 104(a)(2).
\28\ NYSE Rule 123D(1) provides that openings may be effectuated
manually or electronically. See NYSE Rule 123D(1).
\29\ See Notice, 80 FR at 9497.
---------------------------------------------------------------------------
The Midday Auction would reopen the Midday Auction Stocks at a
single equilibrium price in the same manner as set forth in NYSE Rule
123D (Openings and Halts in Trading), with two exceptions.\30\ The
first proposed exception to NYSE Rule 123D would conform the Midday
Auction to the way in which the Exchange reopens securities following a
LULD Plan pause, as set forth in NYSE Rule 80C(b)(2)(A).\31\ NYSE Rule
123D(1) requires the dissemination of an ``indication'' (i.e., an
indication of anticipated price) in connection with any delayed
opening, and all indications pursuant to NYSE Rule 123D require the
supervision and approval of an Exchange Floor Official. During a Midday
Auction Pause, as with an LULD Pause, indications would be permitted,
but not required, and prior approval by Exchange officials would not be
required before publishing an indication. If an indication were
published, it would not need to be updated before the Midday Auction,
and the Midday Auction would be permitted to occur outside of any prior
indication. Furthermore, as with reopenings after a LULD Pause, a
Midday Auction would not be subject to the NYSE Rule 123D requirements
that: (i) A minimum of three minutes must elapse between the first
indication and a stock's reopening; or (ii) if more than one indication
is published, a minimum of one minute must elapse before a stock's
reopening.\32\
---------------------------------------------------------------------------
\30\ See Proposed NYSE Rule 124(c).
\31\ See Notice, 80 FR at 9497.
\32\ See Proposed NYSE Rule 124(c)(1). See NYSE Rule 123D(1)
(``Generally, a minimum of three minutes must elapse between the
first indication and a stock's opening as measured by the time the
indication appears on the PDU. However, when more than one
indication is disseminated, a stock may open one minute after the
last indication provided that at least three minutes must have
elapsed from the dissemination of the first indication.''). An
indication published pursuant to NYSE Rule 123D is published to the
Consolidated Tape. See Securities Exchange Act Release No. 74837
(Apr. 29, 2015), 80 FR 25741, 25741 n.5 (May 5, 2015) (SR-NYSE-2015-
19).
---------------------------------------------------------------------------
The second proposed exception to NYSE Rule 123D would provide that
the Midday Auction would not execute at a price outside (i) the LULD
Price Bands in effect at the time of the Midday Auction, as provided
for in NYSE Rule 80C(a)(4), or (ii) the Exchange's Trading Collars, as
provided for in NYSE Rule 1000(c)(i), whichever price threshold is
lower (for a buy imbalance) or higher (for a sell imbalance) at the
time of the Midday Auction.\33\
---------------------------------------------------------------------------
\33\ See Proposed NYSE Rule 124(c)(2); see also Amendment No. 1,
supra note 7.
---------------------------------------------------------------------------
Orders would participate in the Midday Auction in the same way they
would participate in openings or reopenings, subject to the two
exceptions explained above.\34\ Additionally, as noted above, the
Exchange would cancel resting and arriving Non-Displayed Reserve Orders
and Non-Display Reserve e-Quotes during the Midday Auction pause.\35\
Orders that are not eligible to participate in openings or reopenings
pursuant to NYSE rules would not participate in the Midday Auction.\36\
Finally, if there were a significant imbalance in a Midday Auction
Stock at the end of the Midday Auction Pause, the Midday Auction Pause
could, with the approval of a Floor Governor or two Floor Officials, be
converted to an order imbalance halt.\37\ If a Midday Auction Pause
were converted into an order imbalance halt, each order that had been
re-priced would be re-filed according to the order's original
instructions, and the security would be reopened pursuant to the
procedures set forth in NYSE Rule 123D.\38\
---------------------------------------------------------------------------
\34\ See Proposed NYSE Rule 124(d).
\35\ See supra, note 19 and the accompanying text. The Exchange
also proposes to continue to re-price sell short orders, including
MOO and LOO Orders, consistent with NYSE Rule 440B(e), see Proposed
NYSE Rule 124(b)(5), and to continue to re-price and/or cancel
orders eligible to participate in the Midday Auction, including MOO
and LOO Orders, consistent with the LULD Plan, see Proposed NYSE
Rule 124(b)(6).
\36\ See Proposed NYSE Rule 124(d).
\37\ See Proposed NYSE Rule 124(e).
\38\ See Proposed NYSE Rule 124(e).
---------------------------------------------------------------------------
III. Summary of Comment Letter and NYSE's Response
The Commission has received one comment letter on the Exchange's
proposal. The commenter asserts that broad-based, significant changes
to equity market structure should be conducted through the Commission
rulemaking process, not through a single exchange's rulemaking process.
The commenter argues that the Commission should carry out market
structure changes in a manner designed to benefit the entire market,
rather than approving a self-regulatory organization rulemaking
proposal that is designed to improve the market share for a single
market participant.
Further, the commenter states that the proposal should not be
approved before both the Exchange and the Commission confirm that a
member firm that relies on NYSE's displayed book for compliance with
the limit order display requirement of Rule 604 of Regulation NMS
(``Limit Order Display Rule''),\39\ and whose order is blacked out
during the Midday Auction Pause, would still be considered to be in
compliance with the Limit Order Display Rule.
---------------------------------------------------------------------------
\39\ 17 CFR 242.604.
---------------------------------------------------------------------------
Finally, the commenter objects to the Exchange's statement that it
will request an exemption under Rule 611(d) of Regulation NMS \40\ for
the Midday Auction process. The commenter asserts that the Midday
Auction should be designed so that it operates within and in compliance
with existing regulatory requirements. The commenter argues that, if
the Commission determines that periodic intraday auctions are a
beneficial way to improve trading quality in lower-volume securities,
the Commission should apply the same rules or relief for those auctions
to all market participants. The commenter asserts that the Midday
Auction does not qualify for an exemption from Rule 611 of Regulation
NMS because the Midday Auction would be substantially different than
the operation of a single-priced reopening transaction. The commenter
states that a single-priced reopening transaction, as the term is used
in Rule 611 of Regulation NMS, is a price discovery event on a single
venue that generally occurs when the entire market has halted trading
in that security to address unusual market, operational, or regulatory
situations. The commenter states that the single-priced reopening
transaction exception under Rule 611 of Regulation NMS would not be
applicable to a daily auction mechanism whose purpose is to increase
the market share of a single exchange.
---------------------------------------------------------------------------
\40\ 17 CFR 242.611(d).
---------------------------------------------------------------------------
In Amendment No. 1, the Exchange responds that, to address the
commenter's concerns regarding the Limit Order Display Rule and a
member organization's best-execution requirements, it has amended the
proposal. First, the Exchange has amended the proposal to allow a
member organization to designate an
[[Page 30750]]
order not to participate in the Midday Auction (by designating that
order to cancel at the beginning of the Midday Auction Pause). The
Exchange has further amend the proposal to allow a member organization
to designate an order to route to an away market quote that locks or
crosses the previously displayed price of the order during the Midday
Auction Pause. To further address concerns regarding execution
opportunities during the Midday Auction Pause, the Exchange has amended
the proposal to cancel Non-Displayed Reserve Orders and Non-Display
Reserve e-Quotes resting on the Exchange's book during the Midday
Auction Pause and to reject Non-Displayed Reserve Orders and Non-
Display Reserve e-Quotes entered during the Midday Auction Pause.
With respect to the applicability of Rule 611 of Regulation NMS,
the Exchange states in Amendment No. 1 that it will not be submitting a
request for exemptive relief. The Exchange states its belief that the
exception under Rule 611(b)(3) of Regulation NMS \41\ would apply to
the single-priced trade at the conclusion of the Midday Auction
conducted pursuant to proposed NYSE Rule 124, because the Midday
Auction would result in a single-priced reopening transaction after a
trading halt conducted pursuant to Exchange rules and, thus, would be
excepted from the Order Protection Rule pursuant to Rule 611(b)(3)
under Regulation NMS.
---------------------------------------------------------------------------
\41\ See 17 CFR 242.611(b)(3) (providing an exception from the
Order Protection Rule under Rule 611 of Regulation NMS when the
``transaction that constituted the trade-through was a single-priced
opening, reopening, or closing transaction by the trading center'').
---------------------------------------------------------------------------
IV. Discussion and Commission Findings
After careful review and consideration of the Exchange's proposal
and the comment letter, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and the rules and regulations thereunder that
are applicable to a national securities exchange.\42\ In particular,
the Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\43\ which requires, among other things,
that the rules of a national securities exchange be designed to promote
just and equitable principles of trade; 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,
and that the rules of a national securities exchange not be designed to
permit unfair discrimination between customers, issuers, brokers or
dealers.
---------------------------------------------------------------------------
\42\ In approving this proposed rule change, as amended, the
Commission notes that it has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\43\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that the proposal, as modified by Amendment
No. 1, is reasonably designed to potentially improve market quality in
thinly traded securities, including securities issued by small-to-
medium-sized issuers, by aggregating intra-day liquidity on the
Exchange through an auction process. The Midday Auction would be
limited to NYSE-listed stocks that have a consolidated average daily
trading volume of 1,000,000 shares or less, and it would provide market
participants with a new alternative for seeking liquidity in these
stocks. Market participants could participate in the Midday Auction,
but they would also be free to route orders to participate in
continuous trading on other competing exchanges and trading venues.
The commenter argues that broad-based, significant changes to
equity market structure should be conducted through Commission
rulemaking and not through a single exchange's self-regulatory
organization rulemaking process. The question before the Commission,
however, is whether the Exchange's proposal is consistent with the Act.
If the Commission finds that the Exchange's proposal is consistent with
the Act, the Commission must approve the proposal,\44\ and, if the
Commission is unable to find that the Exchange's proposal is consistent
with the Act, the Commission must disapprove the proposal.\45\
---------------------------------------------------------------------------
\44\ See 15 U.S.C. 78s(b)(2)(C)(i) (``The Commission shall
approve a proposed rule change of a self-regulatory organization if
it finds that such proposed rule change is consistent with the
requirements of this chapter and the rules and regulations issued
under this chapter that are applicable to such organization.'').
\45\ See 15 U.S.C. 78s(b)(2)(C)(ii) (``The Commission shall
disapprove a proposed rule change of a self-regulatory organization
if it does not make a finding described in clause (i) [i.e., that
the proposed rule change is consistent with the Act].'').
---------------------------------------------------------------------------
As noted above, the Exchange has proposed an alternative means of
aggregating intra-day liquidity--adapting an existing auction mechanism
to function during the trading day--and the Commission believes that
the Act permits exchanges to experiment with new trading mechanisms, so
long as those mechanisms are consistent with the Act and the
regulations thereunder. The mere fact that a single exchange proposes,
consistent with the Act, to operate differently from another exchange,
or even all other exchanges, or that it seeks to gain market share from
its competitors by doing so, does not mean that the exchange's proposed
rule change constitutes a broad-based change to equity market structure
that should only be accomplished by Commission rulemaking. The current
equity market structure features, and the Act permits, fierce
competition among numerous national securities exchanges, alternative
trading systems, and other trading venues, each of which seeks to gain
market share by differentiating itself through offering, among other
things, different order types, data products, and trading fees and
rebates. The Commission believes that the Exchange's proposal fits
comfortably within the bounds of existing competition between trading
venues and that it is consistent with the Act.
The commenter has also raised questions with respect to Exchange
member firms' obligations under the Limit Order Display Rule. The
Exchange has responded to these questions, and broader best-execution
concerns, by filing Amendment No. 1, which would: (1) Allow a member
organization to designate an order to cancel at the beginning of the
Midday Auction Pause; (2) allow a member organization to designate an
order to route to an away market quote that locks or crosses the
previously displayed price of that order during the Midday Auction
Pause; and (3) cancel resting and arriving Non-Displayed Reserve Orders
and Non-Display Reserve e-Quotes during the Midday Auction Pause.
The Commission notes that the proposal, as modified by Amendment
No. 1, would allow Exchange member organizations to affirmatively opt
out of participating in the Midday Auction by designating orders to be
canceled at the start of the Midday Auction Pause and to conditionally
opt out of the Midday Auction by designating an order to route to away
markets that lock or cross the order during the Midday Auction Pause.
The Commission believes that the operation of the Midday Auction,
including the Midday Auction Pause, would not conflict with the ability
of member organizations to comply with their obligations under the
Limit Order Display Rule \46\ or their best-execution obligations to
their customers.
---------------------------------------------------------------------------
\46\ The Commission notes that Rule 604(b)(5) under Regulation
NMS, 17 CFR 242.604(b)(5), exempts from the requirements of the
Limit Order Display Rule any customer limit order that is delivered
immediately upon receipt to a national securities exchange or
national securities association-sponsored system, or an electronic
communications network that complies with the requirements of Sec.
242.602(b)(5)(ii) with respect to that order.
---------------------------------------------------------------------------
[[Page 30751]]
Finally, the commenter asserts that the Midday Auction does not
qualify for an exemption from the requirements of Rule 611 of
Regulation NMS because the Midday Auction would be substantially
different from the operation of a single-priced reopening transaction.
The commenter argues that the Rule 611 exception for reopening auctions
was intended to apply in very specific, limited circumstances to
address unusual market, operational, or regulatory situations, not to
permit daily auction mechanism whose purpose is to increase the market
share of a single exchange.
In response, the Exchange has clarified that it will not be
submitting a request for exemptive relief under Rule 611 of Regulation
NMS because it believes that the Midday Auction would qualify for the
single-priced reopening exception of Rule 611(b)(3). The Exchange
explains, in Amendment No. 1, that ``the single-priced trade at the
conclusion of the Midday Auction is a single-priced reopening
transaction after a trading halt conducted pursuant to Exchange rules
and would be excepted under paragraph (b)(3) of Rule 611 under
Regulation NMS from the trade-through requirements under Rule 611.''
\47\
---------------------------------------------------------------------------
\47\ Amendment No. 1, supra note 7.
---------------------------------------------------------------------------
The Commission agrees that the proposal falls within the exception
for single-priced reopening transactions pursuant to Rule 611(b)(3) of
Regulation NMS.\48\ Pursuant to Rule 611(a) under Regulation NMS,\49\
the Order Protection Rule requires a trading center to have written
policies and procedures reasonably designed to prevent trade-throughs
on that trading center of protected quotations in NMS stocks.\50\ Rule
611(b)(3) under Regulation NMS excepts from the Order Protection Rule a
single-priced opening, reopening, or closing transaction by the trading
center.\51\ In adopting Regulation NMS, the Commission directly
addressed concerns that a trading center might attempt to use the Rule
611(b)(3) exception to halt trading and then reopen solely to enable it
to trade-through other trading centers.\52\ The Commission therefore
specified in the Regulation NMS Adopting Release that the exception
provided by Rule 611(b)(3) applies ``only to single-priced reopenings
and therefore requires that a trading center conduct, pursuant to its
rules or written procedures, a formalized and transparent process for
executing orders during reopening after a trading halt that involves
the queuing and ultimate execution of multiple orders at a single
equilibrium price.'' \53\ Neither the text of Rule 611(b)(3), nor the
Commission's discussion in the Regulation NMS Adopting Release,
requires that the relevant trading halt be a market-wide regulatory
halt or that it necessarily address unusual market, operational, or
regulatory situations.
---------------------------------------------------------------------------
\48\ 17 CFR 242.611(b)(3).
\49\ 17 CFR 242.611(a).
\50\ A trade-through occurs when one trading center executes an
order at a price that is inferior to the price of a protected
quotation displayed by another trading center. See Securities
Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37501
(June 29, 2005) (File No. S7-10-04) (``Regulation NMS Adopting
Release''). An ``NMS stock'' means any security or class of
securities, other than an option, for which transaction reports are
collected, processed, and made available pursuant to an effective
transaction reporting plan. See 17 CFR 242.600(b)(46), (47).
\51\ See 17 CFR 242.611(b)(3).
\52\ See Regulation NMS Adopting Release, 70 FR at 37520.
\53\ See Regulation NMS Adopting Release, 70 FR at 37521. In
addition, the Commission stated that the trading center must have
formally declared a trading halt, pursuant to its rules or written
procedures, to fall within the Rule 611(b)(3) exception. Id.
---------------------------------------------------------------------------
As proposed, the Midday Auction would be conducted once per day,
pursuant to Exchange rules and at a time that would be publicly
announced in advance. The Midday Auction would halt trading on the
Exchange in Midday Auction Securities for five minutes to allow market
participants an opportunity to enter, cancel, or modify trading
interest. During this five-minute pause, the Exchange would publish
Order Imbalance Information, and would be permitted to publish
``indications,'' to attract liquidity. At the conclusion of the five-
minute pause, the Exchange would reopen each of the Midday Auction
Stocks, executing the queued orders at a single equilibrium price in
the same manner as NYSE Rule 123D reopenings.
The Commission believes that the proposal is not designed to permit
the Exchange to declare a trading halt merely to be able to circumvent
the operation of the Order Protection Rule upon reopening. Instead, the
Exchange has proposed a formalized and transparent process for the
Midday Auction that would involve the queuing and execution of multiple
orders at a single equilibrium price, pursuant to a trading halt
declared pursuant to its own rules. The Commission therefore believes
that the proposal falls within the exception for single-priced
reopenings pursuant to Rule 611(b)(3) of Regulation NMS.\54\
---------------------------------------------------------------------------
\54\ See 17 CFR 242.611(b)(3).
---------------------------------------------------------------------------
For the above reasons, the Commission finds that the proposal, as
modified by Amendment No. 1, is consistent with the requirements of the
Act.
V. Solicitation of Comments on Amendment No. 1
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
to 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-NYSE-2015-06 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-NYSE-2015-06. 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 such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSE-2015-06 and should be
submitted on or before June 19, 2015.
[[Page 30752]]
VI. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the 30th day after the
date of publication of notice of Amendment No. 1 in the Federal
Register. As discussed above, in Amendment No. 1, the Exchange proposes
to: (1) Allow a member organization to designate an order to cancel at
the beginning of the Midday Auction Pause; (2) allow a member
organization to designate an order to route to an away market quote
that locks or crosses the previously displayed price of the order
during the Midday Auction Pause, in which case the returned quantity of
a routed order would also route; (3) have the Exchange cancel, during
the Midday Auction Pause, resting and arriving Non-Displayed Reserve
Orders and Non-Display Reserve e-Quotes, which the Exchange specifies
are not eligible to participate in the Midday Auction; (4) clarify that
only orders that are eligible to participate in the Midday Auction
would continue to be repriced during the Midday Auction Pause; (5)
prevent the Midday Auction from executing at a price outside of the
LULD Bands or the Exchange's Trading Collars, whichever is lower (for a
buy imbalance) or higher (for a sell imbalance). Furthermore, the
Exchange proposes to make a technical change to Exhibit 5 to correct an
errant cross reference in Proposed NYSE Rule 124(e). The Exchange has
also added additional text to the filing to explain the revisions
contained in Amendment No. 1, further explained other aspects of the
proposed rule change, and removed from the filing text stating that the
Exchange intends to submit separately a request for exemptive relief
pursuant to Rule 611(d) of Regulation NMS.
The Commission believes that Amendment No. 1 provides market
participants with the option to opt out of the Midday Auction, provides
that non-displayed orders would not participate in the Midday Auction,
and addresses the price limitations within which the Midday Auction
would occur. In particular, the Commission believes that permitting
member organizations to designate orders to cancel when the Midday
Auction Pause begins, or to route when an order becomes locked or
crossed by an away market quote during the Midday Auction Pause, should
provide Exchange member organizations with appropriate options to help
them comply with their best-execution duties to their customers.
Furthermore, the Commission believes that providing for the
cancellation or rejection of non-displayed orders during the Midday
Auction Pause provides clarity as to how the Exchange intends the
proposed auction to operate in regard to order execution. Additionally,
the Commission believes that limiting the Midday Auction execution
price to the lower (for a buy imbalance) or higher (for a sell
imbalance) of the Exchange's LULD Band or Trading Collar Band, at the
time of the Midday Auction, should mitigate the risk of an execution at
prices that are too far away from the prevailing price of a given
security in continuous trading on other national securities exchanges
and trading venues. Finally, the Commission believes that the
Exchange's proposed technical revisions, and additional explanation
regarding the proposal, will provide market participants more clarity
regarding how the proposed rule is intended to operate.
The Commission finds that Amendment No. 1 is consistent with the
protection of investors and the public interest. Accordingly, the
Commission finds good cause, pursuant to Section 19(b)(2) of the
Act,\55\ to approve the proposed rule change, as modified by Amendment
No. 1, on an accelerated basis.
---------------------------------------------------------------------------
\55\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
VI. Conclusion
It is therefore ordered that, pursuant to Section 19(b)(2) of the
Act,\56\ the proposed rule change, as modified by Amendment No. 1, (SR-
NYSE-2015-06) be, and hereby is, approved on an accelerated basis.
---------------------------------------------------------------------------
\56\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\57\
---------------------------------------------------------------------------
\57\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12968 Filed 5-28-15; 8:45 am]
BILLING CODE 8011-01-P
