Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Exchange Rule 11.21, Short Sales, To Describe the Exchange's Implementation of Rule 201 of Regulation SHO Under the Securities Exchange Act of 1934 and Relocate Certain Text From Rule 11.11, Orders and Modifiers; and Amending Rule 13.2 To Incorporate by Reference Rules 200, 203 and 204 of Regulation SHO, 46620-46625 [2015-19124]
Download as PDF
<![CDATA[
46620
Federal Register / Vol. 80, No. 150 / Wednesday, August 5, 2015 / Notices
Accordingly, pursuant to Section
19(b)(2)(A)(ii)(I) of the Act 5 and for the
reasons stated above, the Commission
designates September 21, 2015, as the
date by which the Commission should
either approve or disapprove, or
institute proceedings to determine
whether to disapprove, the proposed
rule change (File No. SR–Phlx–2015–
49).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–19136 Filed 8–4–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75554; File No. SR–NSX–
2015–04]
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change Amending
Exchange Rule 11.21, Short Sales, To
Describe the Exchange’s
Implementation of Rule 201 of
Regulation SHO Under the Securities
Exchange Act of 1934 and Relocate
Certain Text From Rule 11.11, Orders
and Modifiers; and Amending Rule
13.2 To Incorporate by Reference
Rules 200, 203 and 204 of Regulation
SHO
July 30, 2015.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Pursuant to the provisions of Section
19(b)(1) of the Securities Exchange Act
of 1934 (the ‘‘Exchange Act’’ or ‘‘Act’’) 1
and Rule 19b–4 thereunder,2 notice is
hereby given that on July 17, 2015,
National Stock Exchange, Inc. (‘‘NSX®’’
or the ‘‘Exchange’’) 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
substantially prepared by the Exchange.
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 the Substance
of the Proposed Rule Change
The Exchange is proposing to amend
Exchange Rule 11.21, Short Sales, in
order to describe the manner in which
the Exchange’s trading system (the
5 15
U.S.C. 78s(b)(2)(A)(ii)(I).
CFR 200.30–3(a)(31).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
6 17
VerDate Sep<11>2014
16:54 Aug 04, 2015
Jkt 235001
‘‘System’’) 3 handles sell short orders
under the provisions of Rule 201 of
Regulation SHO (‘‘Rule 201’’) pursuant
to the Act.4 The Exchange also proposes
to relocate to Rule 11.21 certain short
sale-related rule text currently in Rule
11.1, Orders and Modifiers, and to
amend Rule 13.2, Failure to Deliver and
Failure to Receive, to delete the existing
text and incorporate by reference Rules
200, 203 and 204 of Regulation SHO.5
The Exchange has designated this rule
proposal as ‘‘non-controversial’’
pursuant to Section 19(b)(3)(A) of the
Act 6 and provided the Commission
with the notice required by Rule 19b–
4(f)(6)(iii) under the Act.7
The text of the proposed rule change
is available on the Exchange’s Web site
at www.nsx.com, at the Exchange’s
principal office, 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
The purpose of the rule changes
proposed by the Exchange is to provide
transparency for Exchange Equity
Trading Permit (‘‘ETP’’) Holders,8 their
3 Exchange Rule 1.5, Definitions, defines the
‘‘System’’ as ‘‘. . . the electronic securities
communications and trading facility . . . through
which orders of Users are consolidated for ranking
and execution.’’
4 17 CFR 242.201. See Securities Exchange Act
Release No. 61595 (February 26, 2010), 75 FR 11232
(March 10, 2010) (‘‘Rule 201 Adopting Release’’)
and Securities Exchange Act Release No. 63247
(Nov. 4, 2010), 75 FR 68702 (Nov. 9, 2010). See also
Division of Trading and Markets: Responses to
Frequently Asked Questions Concerning Rule 201
of Regulation SHO, January 20, 2011, at https://
www.sec.gov/divisions/marketreg/
mrfaqregsho1204.htm (‘‘Rule 201 FAQs’’).
5 17 CFR 242.200, 17 CFR 242.203 and 17 CFR
242.204.
6 15 U.S.C. 78s(b)(3)(A).
7 17 CFR 240.19b–4(f)(6)(iii).
8 As defined in Exchange Rule 1.5, the term
‘‘ETP’’ refers to an Equity Trading Permit issued by
the Exchange for effecting approved securities
transactions on the Exchange’s facilities.
PO 00000
Frm 00083
Fmt 4703
Sfmt 4703
customers, and the investing public into
the operation of the System in
accordance with Rule 201.9 The
proposed rule amendments will: (i)
Consolidate the Exchange’s short sale
rules into a single rule set and make
amendments that will further enhance
the transparency of the Exchange’s
rules; (ii) clarify the System’s operation
regarding the handling of a ‘‘resting’’
sell short Market Peg Zero Display
Reserve Order under Rule 201; 10 (iii)
specify the obligations of ETP Holders
with respect to marking sell short orders
entered into the System; and (iv) amend
Rule 13.2, Failure to Deliver and Failure
to Receive, to delete the existing text
and incorporate by reference Rules 200,
203 and 204 of Regulation SHO
pursuant to the Act.11
Rule 201(b)(1)(i) requires that trading
centers such as the Exchange establish,
maintain and enforce written policies
and procedures reasonably designed to
prevent the execution or display of a
short sale order of a covered security at
a price that is less than or equal to the
current national best bid if the price of
that covered security decreases by 10%
or more from such security’s closing
price on the listing market at the close
of regular trading hours on the prior day
(the ‘‘Short Sale Price Test’’). Rule
201(b)(1)(ii) requires that trading centers
establish, maintain and enforce written
policies and procedures reasonably
designed to impose the Short Sale Price
Test for the remainder of the trading day
and the following day, when a national
best bid for the security is calculated
and disseminated on a current and
continuing basis by a plan processor
pursuant to an effective national market
system plan (the ‘‘Short Sale Price Test
Period’’).12
Rule 201(b)(1)(iii)(A) 13 provides that
a trading center’s written policies and
procedures must be reasonably designed
to permit the execution of a displayed
short sale order of a covered security
9 Pursuant to Interpretations and Policies .01
(Cessation of Trading Operations on NSX) under
Exchange Rule 11.1 (Hours of Trading), the
Exchange ceased operating its marketplace for the
trading of equity securities as of the close of
business on May 30, 2014. See Securities Exchange
Act Release No. 72107 (May 6, 2014), 79 FR 27017
(May 12, 2014) (SR–NSX–2014–14). The Exchange
is filing this proposed rule change in anticipation
of the resumption of trading activity on the System,
after all necessary regulatory approvals have been
obtained.
10 Exchange Rule 11.11(c)(2)(A) defines a Zero
Display Reserve Order as a Reserve Order with a
Zero Display Quantity and a Market Peg Zero
Display Reserve Order as a pegged Zero Display
Order that tracks the inside quote on the opposite
side of the market.
11 See footnote 5, supra.
12 17 CFR 242.201(b)(1).
13 17 CFR 242.201(b)(1)(iii)(A).
E:\FR\FM\05AUN1.SGM
05AUN1
Federal Register / Vol. 80, No. 150 / Wednesday, August 5, 2015 / Notices
during the Short Sale Price Test Period
if, at the time of initial display of the
short sale order, the order was at a price
above the current national best bid.
Further, Rule 201(b)(1)(iii)(B) requires
that such policies and procedures must
be reasonably designed to permit the
execution of a short sale order of a
covered security marked ‘‘short exempt’’
during the Short Sale Price Test Period
without regard to whether the order is
at a price that is less than or equal to
the current national best bid.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Amendments of Exchange Rule 11.21
The Exchange states that, consistent
with its obligations as a trading center
under Rule 201, it implemented,
maintains and enforces written policies
and procedures and System
functionality reasonably designed to
prevent the execution or display of a
sell short order of a covered security
subject to the Short Sale Price Test at a
price equal to or below the current
national best bid. The Exchange’s
written policies and procedures and the
System functionality are also reasonably
designed to: (i) Permit the execution of
a displayed short sale order in a covered
security that would otherwise be subject
to the Short Sale Price Test if, at the
time of initial display of the short sale
order, the order was at a price above the
current national best bid; and (ii) permit
the execution or display of a short sale
order in a covered security marked
‘‘short exempt’’ without regard to
whether the order is at a price that is
less than or equal to the current national
best bid.14
The Exchange is proposing to amend
Rule 11.21 to add provisions regarding
the operation of the System in handling
short sale orders under Rule 201 in the
event the Short Sale Price Test is
triggered and such provisions will be
part of the written policies and
procedures of the Exchange. The
Exchange states that it is proposing
these amendments to enhance
transparency in its rules and to make
explicit the obligations of ETP Holders
in ensuring that sell short orders entered
into the System are properly marked as
‘‘short’’ or ‘‘short exempt,’’ and the
Exchange’s expectations in that regard.
14 17 CFR 242.201(b)(1)(iii)(B). Rule 200(g)(2), 17
CFR 242.200(g), provides that a sell order may be
marked ‘‘short exempt’’ only if the provisions of
Rules 201(c) or 201(d) are met. With respect to Rule
201(d), in order to mark an order ‘‘short exempt’’
a broker or dealer must have a reasonable basis for
believing that the order meets one of the exceptions
specified in Rule 201(d)(1) through (d)(7). With
respect to Rule 201(c), in order to mark an order
‘‘short exempt’’ the order must be entered during
the Short Sale Price Test Period and meet the
conditions specified in Rule 201(c). 17 CFR
242.201(d); 17 CFR 242.201(c).
VerDate Sep<11>2014
16:54 Aug 04, 2015
Jkt 235001
In proposed new paragraph (a) of Rule
11.21, the Exchange defines the terms
‘‘covered security,’’ ‘‘national best bid,’’
and ‘‘listing market’’ for purposes of
Rule 11.21 as having the same meaning
as the corresponding definitional
section of Rule 201 15 and applies the
definitions with respect to all of the
proposed changes to Rule 11.21.
In proposed new paragraph (b) of Rule
11.21, the Exchange explicitly states
that ETP Holders are required to mark
sell orders entered into the System as
‘‘long,’’ ‘‘short,’’ or ‘‘short exempt’’ as
required by Rule 200(g) of Regulation
SHO. Additionally, the Exchange makes
clear in paragraph (b) that it relies on
the marking of an order as ‘‘short
exempt’’ when it receives such an order
and it is the responsibility of the ETP
Holder entering the order, and not the
Exchange’s responsibility, to comply
with the requirements of Regulation
SHO relating to the marking of orders as
‘‘short exempt.’’ The Exchange believes
that, by explicitly stating these
requirements as part of the proposed
amendments to Rule 11.21, it will
enhance the transparency and
comprehensiveness of the Exchange’s
rules and provide ETP Holders with a
clear statement of their order marking
responsibilities with respect to sell short
orders.
In that regard, Interpretations and
Policies .01 of Rule 11.21, as proposed,
explicitly states that NSX Securities,
LLC (‘‘NSXS’’), an Exchange-affiliated
broker-dealer with the sole function of
acting as the outbound routing facility
of the Exchange, relies on an ETP
Holder’s marking of an order as ‘‘long,’’
‘‘short’’ or ‘‘short exempt.’’ 16 NSXS will
route an order received by NSX marked
‘‘short exempt’’ during the Short Sale
Price Test Period without
independently evaluating the
correctness of the ‘‘short exempt’’
marking under Regulation SHO Rules
201(c) and (d).17
In proposed new paragraph (c) of Rule
11.21, the Exchange states that, except
as provided in subparagraphs (c)(1) and
(c)(2) of the rule (which, as discussed
below, pertain to the two exceptions
permitting execution and display of sell
short orders of a covered security during
the Short Sale Price Test Period), the
System will not execute, display, or
route a sell short order in a covered
security at a price that is less than or
equal to the current national best bid if
the price of that security decreases by 10
15 See
17 CFR 242.201(a).
Rule 2.11, NSXS functions solely as the
Exchange’s outbound routing facility. NSXS is not
an execution venue.
17 See Reg. SHO FAQs, Question and Answer 5.3.
16 Under
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
46621
percent or more from the security’s
closing price as determined by the
listing market for the covered security as
of the end of regular trading hours on
the prior day. Proposed new
subparagraph (c)(1) states that the
System will execute and display a short
sale order during the Short Sale Price
Test Period without regard to price if, at
the time of initial display of the short
sale order, the order was at a price
above the current national best bid.
The Exchange also proposes to state
in new subparagraph (c)(1) that the
‘‘initial display’’ of the short sale order
includes the initial display through the
facilities of a securities information
processor (‘‘SIP’’) or through the
Exchange’s proprietary market data
feed.18 The Exchange believes that it is
important to define ‘‘initial display’’ in
Rule 11.21(c)(1) as including both
display through the SIP and the
Exchanges’ proprietary market data feed
so as to make explicit that the Exchange
will use of both forms of display in
determining whether a particular short
sale order of a covered security qualifies
for the exception under Rule
201(b)(1)(iii)(A).
In proposed Rule 11.21(c)(2), the
Exchange states that the System will
execute, display and route a short sale
order marked ‘‘short exempt’’ during the
Short Sale Price Test Period without
regard to whether the short sale order is
at a price above the national best bid.19
Proposed Rule 11.21(d) provides that a
Short Sale Price Test triggered by the
listing market will remain in effect for
the remainder of the trading day on
which it is triggered through the close
of regular trading on the next trading
day, when a national best bid for the
security is calculated and disseminated
on a current and continuing basis by a
plan processor pursuant to an effective
national market system plan.20
The Exchange further proposes in
Rule 11.21(e) to state that, when the
Short Sale Price Test is in effect with
respect to a covered security, the System
will evaluate all incoming sell short
orders in that security that are not
marked ‘‘short exempt’’ to determine
whether the order can be executed or
displayed at a price above the current
national best bid. A sell short order in
a covered security ‘‘resting’’ on the NSX
18 The Exchange’s proprietary market data feed,
called the ‘‘NSX Depth of Book Feed,’’ was made
available on a uniform basis to all ETP Holders
authorized to receive the feed, as well as to any
other authorized recipients. The Exchange does not
anticipate making any changes to the availability of
the NSX Depth of Book Feed upon the resumption
of trading on the Exchange.
19 See 17 CFR 242.201(b)(1)(iii)(B).
20 See footnote 12, supra.
E:\FR\FM\05AUN1.SGM
05AUN1
asabaliauskas on DSK5VPTVN1PROD with NOTICES
46622
Federal Register / Vol. 80, No. 150 / Wednesday, August 5, 2015 / Notices
Book will be evaluated by the System if
matched for execution during the Short
Sale Price Test Period and, unless the
order was initially displayed at a price
above the current national best bid, will
be canceled if at a price equal to or
below the current national best bid. The
Exchange believes that including this
provision in Rule 11.21 will enhance
clarity and transparency regarding the
Exchange’s policies, procedures, and
System controls reasonably designed to
comply with Rule 201.
Further to the goal of enhancing
transparency in the rules regarding the
operation of the System, the Exchange is
also proposing in new subparagraphs
(f)(1) through (f)(9) of Rule 11.21 to
describe the operation of the System
during the Short Sale Price Test Period
with respect to specific order types that
are not marked ‘‘short exempt,’’ as
follows:
Market and Limit Order. A sell short
market or limit order will be matched by
the System for execution at a price
above the current national best bid and,
if a limit order, within the limit price of
the sell short order. Any remaining
unfilled portion will be canceled unless,
in the case of a limit order, the limit
price of the remaining shares is above
the current national best bid; the
unfilled portion of such a limit order
will remain on the NSX Book but will
not execute unless at a price above the
current national best bid in accordance
with Rule 201(b)(1) of Regulation SHO.
Odd Lot and Mixed Lot Order. A sell
short odd lot order and a mixed lot
order, which is an order consisting of
one or more round lots combined with
a number of shares constituting an odd
lot,21 will be rejected if entered at a
price equal to or below the current
national best bid. Odd lot orders
aggregated to form a round lot and
initially displayed at a price above the
current national best bid, or a mixed lot
order initially displayed at a price above
the current national best bid, will be
eligible for execution at a price equal to
or below the national best bid in
accordance with Rule 201(b)(1)(iii)(A) of
Regulation SHO.
Immediate or Cancel (‘‘IOC’’) Order.
As defined in Rule 11.11(b)(1), an IOC
order is a limit order that is to be
executed in whole or in part as soon as
such order is received by the System
and any portion not so executed is
treated as canceled. A sell short IOC
order will, upon entry, be matched by
the System for execution at a price
above the current national best bid and
any remaining unfilled portion will be
canceled.
21 See
Rule 11.11(c)(3) and (c)(4).
VerDate Sep<11>2014
16:54 Aug 04, 2015
Jkt 235001
Midpoint-Seeker Order. A MidpointSeeker Order, which is an IOC order
that executes only against undisplayed
orders priced at the midpoint of the
protected bid and protected offer,22
when marked ‘‘sell short’’ will, upon
entry, be matched by the System for
execution at a price above the current
national best bid and any remaining
unfilled portion will be canceled.
Reserve Order. A Reserve Order is
defined in Rule 11.11(c)(2) as ‘‘[a] limit
order with a portion of the quantity
displayed (‘‘display quantity’’) and with
a reserve portion of the quantity
(‘‘reserve quantity’’) that is not
displayed.’’ A sell short Reserve Order
will be rejected by the System if it is
entered at a price equal to or below the
current national best bid. A sell short
Reserve Order that was initially
displayed at a price above the current
national best bid may execute at a price
equal to or below the current national
best bid during a Short Sale Price Test
Period, up to the full size of the order
(including any reserve quantity).23
Post Only Order,24 NSX Only
Order 25 and Destination Specific
Order.26 Sell short orders in these order
types will be rejected if entered at a
price equal to or below the current
national best bid.
Sweep Order, Destination Sweep
Order,27 Intermarket Sweep (‘‘ISO’’) and
Post-ISO Order.28 A sell short Sweep
22 See
Rule 11.11(c)(13).
to Rule 11.14, Priority of Orders,
Interpretations and Policies .01, the use of a
‘‘Replace Message’’ to modify the quantity of a
Reserve Order will result in a new timestamp and
the order losing time priority on the NSX Book
unless (i) both the display size of the Reserve Order
is decreased and the total order quantity is
decreased or remains the same; or (ii) both the
display size of the Reserve Order remains the same
and the total order quantity is decreased.
24 Rule 11.11(c)(5) defines a Post Only Order as
‘‘[a] limit order that is to be posted on the Exchange
and not routed away to another trading center.’’
25 Rule 11.11(c)(6) defines an NSX Only Order as
‘‘[a]n order that is to be executed on the Exchange
pursuant to Rule 11.15(a) or [canceled], without
routing away to another trading center.’’
26 Rule 11.11(c)(9) defines a Destination Specific
Order as ‘‘[a] market or limit order that instructs the
System to route the order to a specified away
trading center, after exposing the order to the NSX
Book . . . .’’
27 A Sweep Order is defined in Rule 11.11(c)(7)
as ‘‘[a] limit order that instructs the System to
‘sweep’ the market.’’ The rule provides for several
types of sweep orders, specifically a ‘‘Protected
Sweep Order,’’ a ‘‘Full Sweep Order’’ and a
‘‘Destination Sweep Order.’’ For purposes of System
functionality during the Short Sale Price Test
Period, all of such Sweep Order types are treated
in the same manner.
28 ISO is defined in Rule 600(b)(30) of Regulation
NMS pursuant to the Exchange Act, 17 CFR
242.600(b)(30). Rule 11.11(c)(8)(ii) provides that an
ISO order may be designated as a ‘‘Post-ISO’’ when
entered into the System, and the use of such
designation constitutes a representation that the
entering ETP Holder has simultaneously routed one
23 Pursuant
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
Order, Destination Sweep Order, ISO
and Post-ISO will be rejected by the
System if entered at a price equal to or
below the current national best bid. If
entered at a price above the current
national best bid, such sell short orders
will be accepted by the System and
eligible for execution. If an ISO is
marked ‘‘IOC,’’ any remaining unfilled
portion will be canceled. The unfilled
portion of ISO orders not marked ‘‘IOC’’
and Post-ISO orders will be entered on
the NSX Book if at a price above the
national best bid. A Post ISO order that
was not initially displayed at a price
above the national best bid will be
canceled if matched by the System for
execution at a price equal to or below
the national best bid.
Cancel/Replacement of Orders. As
proposed in new paragraph (g) of Rule
11.21, a cancel/replace request will be
rejected by the System if: (i) The limit
price on the replacement sell short order
is equal to or below the current national
best bid; or (ii) if the original limit price
of the sell short order is equal to or
below the current national best bid and
the cancel/replace message seeks to
increase the order size.29
To summarize, the Exchange believes
that the proposed amendments to Rule
11.21 to describe with greater
particularity the handling of specific
order types during the Short Sale Price
Test Period will further contribute to
clarity and transparency in the
Exchange’s rules, which will operate to
the benefit of ETP Holders and their
customers and market participants
generally.
Proposed Amendments Regarding Sell
Short Market Peg Zero Display Reserve
Orders
The Exchange is proposing to amend
Rule 11.11, subparagraphs (c)(2)(E)(i)–
(iii) regarding the System’s handling of
a sell short Market Peg Zero Display
Reserve Order under Rule 201by
relocating the provisions of those
subparagraphs to Rule 11.21(f)(8)(i)–
(iii), thereby consolidating the
Exchange’s short sale order handling
rules in one rule set; and amending
subparagraph (iii) to delete the
provision that any unexecuted portion
of a resting sell short Market Peg Zero
Display order will be canceled if it is
matched for execution during the Short
or more additional limit orders marked ‘‘ISO’’ as
necessary to away markets to execute against the
full displayed size of any protected quotation with
a price that is superior or equal to the price of the
Post ISO entered on NSX. If these requirements are
met, the Post ISO will be executed by sweeping the
NSX Book up to and including the order’s limit
price, without regard to protected quotations at
away markets.
29 See footnote 23, supra.
E:\FR\FM\05AUN1.SGM
05AUN1
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 150 / Wednesday, August 5, 2015 / Notices
Sale Price Test at a price at or below the
current national best bid. As proposed,
such an order or portion of an order will
remain on the NSX Book, but will not
execute in whole or in part at a price
equal to or below the current national
best bid during the Short Sale Price Test
Period. The Exchange is proposing this
amendment to align the rule text with
the operation of the System in this
circumstance.
The Exchange adopted Rule
11.11(c)(2)(E)(iii) in November 2013.30
The rule provides that a sell short
Market Peg Zero Display Reserve
Order 31 resting on the NSX Book will
track the Protected Best Bid, which is
defined in Rule 1.5P.(3) as the higher of
the protected national best bid or the
best displayed bid on the NSX Book
and, if matched by the System for
execution during a Short Sale Price Test
in the subject security, will be executed
only to the extent that the Protected Best
Bid is above the current national best
bid and the sell short order can be
executed, in whole or in part, at a price
above the current national best bid in
compliance with Rule 201 of Regulation
SHO. The rule further provides that
‘‘[a]ny such order or portion of such
order will be canceled by the System if
at a price equal to or below the current
national best bid.’’
As proposed, the Exchange seeks to
amend subparagraph (iii) to remove the
provision that specifies that a resting
Market Peg Zero Display Reserve Order
or portion of such an order will be
canceled by the System if matched for
execution during the Short Sale Price
Test at a price equal to or below the
current national best bid. As a result of
System testing, the Exchange
determined that a resting sell short
Market Peg Zero Display Reserve Order,
if matched by the System for execution
during a Short Sale Price Test in the
subject security, will be executed only
to the extent that the Protected Best Bid
is above the current national best bid
and the sell short order can be executed,
in whole or in part, at a price above the
current national best bid.
However, System testing also
indicated that, instead of canceling any
remaining unexecuted portion of such
an order, the System would leave the
remaining unexecuted portion of the
order on the NSX Book. The Exchange
notes that the behavior of the System in
this circumstance would not result in an
30 See Securities Exchange Act Release No. 70881
(November 14, 2013), 78 FR 69734 (November 20,
2013) (SR–NSX–2013–20).
31 Exchange Rule 11.11(c)(2)(A) defines a Market
Peg Zero Display Reserve Order as a Zero Display
Reserve Order with a price set, or ‘‘pegged,’’ to track
the inside quote on the opposite side of the market.
VerDate Sep<11>2014
16:54 Aug 04, 2015
Jkt 235001
execution of an order at a price equal to
or below the national best bid during
the Short Sale Price Test since the sell
short Market Peg Zero Display Reserve
Order would not execute unless the
national best bid moved and the
unfilled order or portion of the order
could be executed at a price above the
national best bid. The Exchange also
notes that it did not detect an instance
where this System behavior occurred
with respect to an actual sell short
Market Peg Zero Display Reserve Order
entered by an ETP Holder and resting on
the NSX Book during a Short Sale Price
Test.
Since the Exchange’s testing disclosed
that the behavior of the System did not
align with subparagraph (iii) and further
confirmed that no execution would
occur at a price equal to or below the
current national best bid in violation of
Regulation SHO, the Exchange
determined to amend the rule to remove
the statement regarding cancellation of
any unexecuted portion of a sell short
Market Peg Zero Display Reserve Order
if matched for execution during the
Short Sale Price Test. Additionally, the
Exchange is proposing to make nonsubstantive changes to the text of
subparagraph (iii) to align with the
language and form used in other
sections of Rule 11.21 as proposed to be
amended.
Amendment of Rule 13.2, Failure To
Deliver and Failure To Receive
The Exchange is proposing to amend
Rule 13.2 to delete the existing text and
incorporate by reference Rules 200,
Definition of ‘‘Short Sale’’ and Marking
Requirements, 203, Borrowing and
Delivery Requirements and 204, CloseOut Requirement, of Regulation SHO
pursuant to the Act.32 Currently, Rule
13.2(a) states that ‘‘[n]o ETP Holder
shall sell a security for his own account,
or buy a security as an ETP Holder for
a customer (except exempt securities), if
he has a fail to deliver in that security
60 days old or older.’’ Rule 13.2(b) states
that ‘‘[f]or good cause shown and in
exceptional circumstances, an ETP
Holder may request and receive
exemption from the provisions of the
Rule by written request to the Secretary
of the Exchange.’’
The Exchange proposes to amend
Rule 13.2 to delete the current text of
the rule and, in its place, adopt text
stating that ‘‘[b]orrowing and deliveries
shall be effected in accordance with
Rule 203 of Regulation SHO under the
Exchange Act. The Exchange
incorporates by reference Rules 200, 203
32 17 CFR 242.200, 17 CFR 242.203 and 17 CFR
242.204.
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
46623
and 204 of Regulation SHO, to Exchange
Rule 13.2, as if they were fully set forth
herein.’’ 33
The Exchange is proposing this
amendment to remove the text regarding
failure to deliver and failure to receive
a security since such rule text is
obsolete in view of the requirements set
forth in Rules 200, 203 and 204 of
Regulation SHO. Specifically, Rule 200,
Definition of ‘‘short sale’’ and marking
requirements, defines ownership of a
security for short sale purposes and
clarifies the requirement to determine a
short seller’s net aggregate position.
Rule 203, Borrowing and delivery
requirements, provides inter alia that,
subject to certain exceptions, a brokerdealer effecting a short sale order in any
equity security have reasonable grounds
to believe that the security can be
borrowed so that it can be delivered on
the date delivery is due.34 The ‘‘locate’’
requirement must be documented prior
to the broker-dealer effecting the short
sale.35 Rule 203(b)(3) requires a brokerdealer to take action to close out a
failure to deliver in a ‘‘threshold’’
security that has remained open for
thirteen consecutive settlement days by
purchasing securities of a like kind and
quantity.36 Rule 204 of Regulation
SHO 37 governs the close-out
requirements applicable to both long
and short sales of equity securities.
The Exchange believes that these
provisions of Regulation SHO, which
are intended to apply uniform rules to
address the failure to deliver or failure
to receive, render the Exchange’s rule
obsolete.
2. Statutory Basis
The Exchange believes that the
proposed rule amendments are
consistent with the provisions of
Section 6(b) of the Act 38 in general, and
further the objectives of Section 6(b)(5)
of the Act 39 in particular. The proposed
amendments to the Exchange’s rules are
designed, among other things, to
promote just and equitable principles of
trade and, in general, protect investors
and the public interest. The Exchange’s
proposal is designed to provide clarity
and transparency with respect to written
policies and procedures established by
33 The Exchange notes that other exchanges have
adopted the same approach with respect to their
rules regarding failure to deliver and failure to
receive. See, e.g., BATS Exchange Inc. Rule 13.2
(Failure to Deliver and Failure to Receive); EDGA
Exchange Inc. Rule 13.2 (Short Sale Borrowing and
Delivery Requirements).
34 17 CFR 242.203(b)(1).
35 17 CFR 242.203(b)(1)(iii).
36 17 CFR 242.203(b)(3).
37 17 CFR 242.204.
38 15 U.S.C. 78(f)(b).
39 15 U.S.C. 78(f)(b)(5).
E:\FR\FM\05AUN1.SGM
05AUN1
asabaliauskas on DSK5VPTVN1PROD with NOTICES
46624
Federal Register / Vol. 80, No. 150 / Wednesday, August 5, 2015 / Notices
the Exchange, and the System controls
it implemented, to enforce the
provisions of Rule 201. To this extent,
the Exchange believes that its proposal
furthers the requirements of Rule 201
that trading centers establish, maintain
and enforce written policies and
procedures reasonably designed to
prevent the execution or display of a
short sale order of a covered security in
violation of the short sale price
restrictions contained in Rule 201. The
proposed amendments enhance the
Exchange’s written policies and
procedures regarding the execution and
display of permissible orders and the
execution of orders marked ‘‘short
exempt’’ during the Short Sale Price
Test.
The Exchange further submits that
proposed paragraph (b) of Rule 11.21,
which describes the responsibilities of
ETP Holders with respect to marking
orders ‘‘short exempt,’’ and
Interpretations and Policies .01 of Rule
11.21, which states that NSXS, as the
Exchange’s outbound order routing
facility, relies on the ETP Holder’s
correct marking of an order as ‘‘short
exempt’’ without independently
verifying the accuracy of such marking,
are consistent with Section 6(b)(5) of the
Act. The Exchange believes that these
amendments promote just and equitable
principles of trade and further the
public interest by clearly stating the ETP
Holder’s responsibility for correct order
marking and providing transparency as
to those responsibilities in the
Exchange’s rules.
The Exchange submits that the
proposed amendment to reposition Rule
11.11(c)(2)(E)(i)–(iii) to Rule 11.21, and
delete the statement that a ‘‘resting’’ sell
short Market Peg Zero Display Reserve
Order or portion of such an order will
be canceled by the System if at a price
at or below the current national best bid,
is consistent with Section 6(b)(5) of the
Act in that it will assure that the rule
text is logically organized and correctly
describes with the operation of the
System, thereby enhancing clarity and
transparency in the Exchange’s rules
and promoting just and equitable
principles of trade and the public
interest.
The Exchange further submits that the
proposed amendment to Rule 13.2 to
incorporate by reference Rules 200, 203
and 204 of Regulation SHO is consistent
with Section 6(b)(5) of the Act in that it
is designed to impart uniformity in the
regulatory requirements governing the
failure to deliver and failure to receive
securities and close-out requirements,
thereby promoting cooperation and
coordination in the regulation of
securities transactions and enhancing
VerDate Sep<11>2014
16:54 Aug 04, 2015
Jkt 235001
investor protection and the public
interest.
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 for the
furtherance of the Act. All trading
centers are obligated to comply with the
provisions of Regulation SHO. The
proposed rule amendments provide
additional clarity and transparency into
the Exchange’s written policies and
procedures for handling sell short
orders in compliance with Regulation
SHO. The Exchange submits that the
proposed amendments impose no
unnecessary or inappropriate burden on
competition and, in fact, operate to
promote competition by providing ETP
Holders, their customers, and the
investing public with enhanced
information regarding the Exchange’s
written policies and procedures and the
System functionality for handling sell
short orders in compliance with
Regulation SHO.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received comments on the proposed
rule change from market participants or
others.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not:
A. significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. become operative for 30 days from
the date on which it was filed, or such
shorter time as the Commission may
designate,
it has become effective pursuant to
Section 19(b)(3)(A) 40 of the Exchange
Act and Rule 19b–4(f)(6) 41 thereunder.
The Exchange has requested that the
Commission waive the 30-day operative
delay so that the proposed rule change
may become effective and operative
40 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description of the text of the proposed rule change,
at least five business days prior to the date of the
filing of the proposed rule change, or such other
time as designated by the Commission. The
Exchange provided the Commission with the
required notice.
41 17
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
upon filing with the Commission
pursuant to Section 19(b)(3)(A)(iii) 42 of
the Act and Rule 19b–4(f)(6) thereunder.
In support of its request, the Exchange
stated that, because the rule
amendments are designed to provide
greater transparency and clarity into the
Exchange’s written policies and
procedures for the execution and
display of permissible orders during the
Short Sale Price Test and the execution
of orders marked ‘‘short exempt.’’ The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. The Commission
believes that the protection of investors
and the public interest will be enhanced
by making the proposed amendments
publicly available to market participants
and the investing public as soon as
practicable, and prior to the resumption
of trading on the Exchange. Therefore,
the Commission hereby waives the 30day operative delay and designates the
proposal as effective and operative upon
filing.43
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: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NSX–2015–04 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.
42 15
U.S.C. 78s(b)(3)(A)(iii).
purposes only of waiving the operative
delay for this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
43 For
E:\FR\FM\05AUN1.SGM
05AUN1
Federal Register / Vol. 80, No. 150 / Wednesday, August 5, 2015 / Notices
All submissions should refer to File No.
SR–NSX–2015–04. This file number
should be included in the subject line
if email is used. To help the
Commission process and review
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
a.m. and 3 p.m. Copies of such filings
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–NSX–
2015–04 and should be submitted on or
before August 26, 2015.
For the Commission by the Division of
Trading and Markets, pursuant to the
delegated authority.44
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–19124 Filed 8–4–15; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75561; File No. SR–Phlx–
2015–66]
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Rule
3301B(a)
July 30, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 20,
2015, NASDAQ OMX PHLX LLC
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
16:54 Aug 04, 2015
Jkt 235001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 3301B(a) to remove the Market
Hours Immediate or Cancel Time in
Force and to delay implementation of
changes to the Good-til-market close
Time in Force, which were recently
adopted by Phlx but are not yet
implemented.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
nasdaqomxphlx.cchwallstreet.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
Exchange 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 these
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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
44 17
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1. Purpose
The Exchange is proposing to amend
Rule 3301B(a) to remove the Market
Hours Immediate or Cancel (‘‘Market
Hours IOC’’ or ‘‘MIOC’’) Time-in-Force
and to delay implementation of changes
to the Good-til-market close (‘‘GTMC’’)
Time-in-Force, which were recently
adopted by Phlx but are not yet
implemented in the NASDAQ OMX
PSX System (‘‘System’’ or ‘‘PSX’’).3
3 The Exchange notes that the text at issue in this
filing concerning the MIOC TIF under Rule
3301B(a)(1) is not yet implemented, but was
recently inadvertently incorporated into the PSX
rulebook when the Commission approved certain
rules governing the PSX equities market in order to
provide additional detail and clarity regarding its
order type functionality. See Securities Exchange
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
46625
Time-in-Force (‘‘TIF’’) is a characteristic
of an order that limits the period of time
that the System will hold an order for
potential execution. An Order that is
designated to deactivate immediately
after determining whether the Order is
marketable may be referred to as having
a TIF of ‘‘Immediate or Cancel’’ or
‘‘IOC’’.4 Any Order with a TIF of IOC
entered between 9:30 a.m. ET and 4:00
p.m. ET is considered as having a TIF
of MIOC.5 The MIOC TIF is very similar
to the SIOC 6 TIF, but MIOC designated
orders are limited to entry and potential
execution only during Regular Market
Hours. An order designated with a TIF
of MIOC that is entered outside of
Regular Market Hours would be
returned to the entering member firm
without attempting to execute. The
Exchange has determined that, based on
a lack of market participant desire for a
MIOC TIF and the cost that would be
incurred in developing and
implementing it on the Exchange, it will
not implement the MIOC TIF at this
juncture. Accordingly, the Exchange is
proposing to delete text under Rule
3301B(a)(1) concerning the MIOC TIF,
which is effective but not yet operative.
The Exchange is also proposing to
amend Rule 3301B(a)(6) to make it clear
that the Exchange will no longer accept
GTMC orders for execution after 4:00
p.m. Eastern Time, which are currently
accepted and converted to SIOC orders
if received after 4:00 p.m. Eastern Time.
In April 2015, the Exchange proposed
this change to the predecessor rule
concerning GTMC orders in a prior
filing with the Commission,7 and had
anticipated implementing the change at
some point in the second quarter of
2015. During that time, the Commission
approved a rule change that renumbered
and clarified the rule.8 Accordingly, the
Exchange is now amending the
renumbered rule to reflect the changes
made in the prior filing. The Exchange
Act Release No. 75293 (June 24, 2015), 80 FR 37327
(June 30, 2015) (SR–Phlx–2015–29).
Notwithstanding its inadvertent inclusion in the
rulebook, the rule text concerning the MIOC TIF is
not yet effective. The Exchange had anticipated
implementing the MIOC and GTMC changes in the
second quarter of 2015. See Securities Exchange Act
Release No. 74628 (April 1, 2015), 80 FR 18662
(April 7, 2015) (SR–Phlx–2015–32).
4 See Rule 3301B(a)(1).
5 Id.
6 An Order with a Time-in-Force of IOC that is
entered at any time between 8:00 a.m. ET and 5:00
p.m. ET may be referred to as having a Time-inForce of ‘‘System Hours Immediate or Cancel’’ or
‘‘SIOC’’. Id.
7 See Securities Exchange Act Release No. 74628
(April 1, 2015), 80 FR 18662 (April 7, 2015) (SR–
Phlx–2015–32).
8 The Exchange also made a clarifying change to
the rule, which was incorporated into the
renumbered rule. Supra note 3.
E:\FR\FM\05AUN1.SGM
05AUN1
]]>Agencies
[Federal Register Volume 80, Number 150 (Wednesday, August 5, 2015)]
[Notices]
[Pages 46620-46625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-19124]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75554; File No. SR-NSX-2015-04]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending Exchange Rule 11.21, Short Sales, To Describe the Exchange's
Implementation of Rule 201 of Regulation SHO Under the Securities
Exchange Act of 1934 and Relocate Certain Text From Rule 11.11, Orders
and Modifiers; and Amending Rule 13.2 To Incorporate by Reference Rules
200, 203 and 204 of Regulation SHO
July 30, 2015.
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ``Exchange Act'' or ``Act'') \1\ and Rule
19b-4 thereunder,\2\ notice is hereby given that on July 17, 2015,
National Stock Exchange, Inc. (``NSX[supreg]'' or the ``Exchange'')
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 substantially prepared by the Exchange. 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\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange is proposing to amend Exchange Rule 11.21, Short
Sales, in order to describe the manner in which the Exchange's trading
system (the ``System'') \3\ handles sell short orders under the
provisions of Rule 201 of Regulation SHO (``Rule 201'') pursuant to the
Act.\4\ The Exchange also proposes to relocate to Rule 11.21 certain
short sale-related rule text currently in Rule 11.1, Orders and
Modifiers, and to amend Rule 13.2, Failure to Deliver and Failure to
Receive, to delete the existing text and incorporate by reference Rules
200, 203 and 204 of Regulation SHO.\5\ The Exchange has designated this
rule proposal as ``non-controversial'' pursuant to Section 19(b)(3)(A)
of the Act \6\ and provided the Commission with the notice required by
Rule 19b-4(f)(6)(iii) under the Act.\7\
---------------------------------------------------------------------------
\3\ Exchange Rule 1.5, Definitions, defines the ``System'' as
``. . . the electronic securities communications and trading
facility . . . through which orders of Users are consolidated for
ranking and execution.''
\4\ 17 CFR 242.201. See Securities Exchange Act Release No.
61595 (February 26, 2010), 75 FR 11232 (March 10, 2010) (``Rule 201
Adopting Release'') and Securities Exchange Act Release No. 63247
(Nov. 4, 2010), 75 FR 68702 (Nov. 9, 2010). See also Division of
Trading and Markets: Responses to Frequently Asked Questions
Concerning Rule 201 of Regulation SHO, January 20, 2011, at https://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm (``Rule 201
FAQs'').
\5\ 17 CFR 242.200, 17 CFR 242.203 and 17 CFR 242.204.
\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site at www.nsx.com, at the Exchange's principal office, 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
The purpose of the rule changes proposed by the Exchange is to
provide transparency for Exchange Equity Trading Permit (``ETP'')
Holders,\8\ their customers, and the investing public into the
operation of the System in accordance with Rule 201.\9\ The proposed
rule amendments will: (i) Consolidate the Exchange's short sale rules
into a single rule set and make amendments that will further enhance
the transparency of the Exchange's rules; (ii) clarify the System's
operation regarding the handling of a ``resting'' sell short Market Peg
Zero Display Reserve Order under Rule 201; \10\ (iii) specify the
obligations of ETP Holders with respect to marking sell short orders
entered into the System; and (iv) amend Rule 13.2, Failure to Deliver
and Failure to Receive, to delete the existing text and incorporate by
reference Rules 200, 203 and 204 of Regulation SHO pursuant to the
Act.\11\
---------------------------------------------------------------------------
\8\ As defined in Exchange Rule 1.5, the term ``ETP'' refers to
an Equity Trading Permit issued by the Exchange for effecting
approved securities transactions on the Exchange's facilities.
\9\ Pursuant to Interpretations and Policies .01 (Cessation of
Trading Operations on NSX) under Exchange Rule 11.1 (Hours of
Trading), the Exchange ceased operating its marketplace for the
trading of equity securities as of the close of business on May 30,
2014. See Securities Exchange Act Release No. 72107 (May 6, 2014),
79 FR 27017 (May 12, 2014) (SR-NSX-2014-14). The Exchange is filing
this proposed rule change in anticipation of the resumption of
trading activity on the System, after all necessary regulatory
approvals have been obtained.
\10\ Exchange Rule 11.11(c)(2)(A) defines a Zero Display Reserve
Order as a Reserve Order with a Zero Display Quantity and a Market
Peg Zero Display Reserve Order as a pegged Zero Display Order that
tracks the inside quote on the opposite side of the market.
\11\ See footnote 5, supra.
---------------------------------------------------------------------------
Rule 201(b)(1)(i) requires that trading centers such as the
Exchange establish, maintain and enforce written policies and
procedures reasonably designed to prevent the execution or display of a
short sale order of a covered security at a price that is less than or
equal to the current national best bid if the price of that covered
security decreases by 10% or more from such security's closing price on
the listing market at the close of regular trading hours on the prior
day (the ``Short Sale Price Test''). Rule 201(b)(1)(ii) requires that
trading centers establish, maintain and enforce written policies and
procedures reasonably designed to impose the Short Sale Price Test for
the remainder of the trading day and the following day, when a national
best bid for the security is calculated and disseminated on a current
and continuing basis by a plan processor pursuant to an effective
national market system plan (the ``Short Sale Price Test Period'').\12\
---------------------------------------------------------------------------
\12\ 17 CFR 242.201(b)(1).
---------------------------------------------------------------------------
Rule 201(b)(1)(iii)(A) \13\ provides that a trading center's
written policies and procedures must be reasonably designed to permit
the execution of a displayed short sale order of a covered security
[[Page 46621]]
during the Short Sale Price Test Period if, at the time of initial
display of the short sale order, the order was at a price above the
current national best bid. Further, Rule 201(b)(1)(iii)(B) requires
that such policies and procedures must be reasonably designed to permit
the execution of a short sale order of a covered security marked
``short exempt'' during the Short Sale Price Test Period without regard
to whether the order is at a price that is less than or equal to the
current national best bid.
---------------------------------------------------------------------------
\13\ 17 CFR 242.201(b)(1)(iii)(A).
---------------------------------------------------------------------------
Amendments of Exchange Rule 11.21
The Exchange states that, consistent with its obligations as a
trading center under Rule 201, it implemented, maintains and enforces
written policies and procedures and System functionality reasonably
designed to prevent the execution or display of a sell short order of a
covered security subject to the Short Sale Price Test at a price equal
to or below the current national best bid. The Exchange's written
policies and procedures and the System functionality are also
reasonably designed to: (i) Permit the execution of a displayed short
sale order in a covered security that would otherwise be subject to the
Short Sale Price Test if, at the time of initial display of the short
sale order, the order was at a price above the current national best
bid; and (ii) permit the execution or display of a short sale order in
a covered security marked ``short exempt'' without regard to whether
the order is at a price that is less than or equal to the current
national best bid.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 242.201(b)(1)(iii)(B). Rule 200(g)(2), 17 CFR
242.200(g), provides that a sell order may be marked ``short
exempt'' only if the provisions of Rules 201(c) or 201(d) are met.
With respect to Rule 201(d), in order to mark an order ``short
exempt'' a broker or dealer must have a reasonable basis for
believing that the order meets one of the exceptions specified in
Rule 201(d)(1) through (d)(7). With respect to Rule 201(c), in order
to mark an order ``short exempt'' the order must be entered during
the Short Sale Price Test Period and meet the conditions specified
in Rule 201(c). 17 CFR 242.201(d); 17 CFR 242.201(c).
---------------------------------------------------------------------------
The Exchange is proposing to amend Rule 11.21 to add provisions
regarding the operation of the System in handling short sale orders
under Rule 201 in the event the Short Sale Price Test is triggered and
such provisions will be part of the written policies and procedures of
the Exchange. The Exchange states that it is proposing these amendments
to enhance transparency in its rules and to make explicit the
obligations of ETP Holders in ensuring that sell short orders entered
into the System are properly marked as ``short'' or ``short exempt,''
and the Exchange's expectations in that regard.
In proposed new paragraph (a) of Rule 11.21, the Exchange defines
the terms ``covered security,'' ``national best bid,'' and ``listing
market'' for purposes of Rule 11.21 as having the same meaning as the
corresponding definitional section of Rule 201 \15\ and applies the
definitions with respect to all of the proposed changes to Rule 11.21.
---------------------------------------------------------------------------
\15\ See 17 CFR 242.201(a).
---------------------------------------------------------------------------
In proposed new paragraph (b) of Rule 11.21, the Exchange
explicitly states that ETP Holders are required to mark sell orders
entered into the System as ``long,'' ``short,'' or ``short exempt'' as
required by Rule 200(g) of Regulation SHO. Additionally, the Exchange
makes clear in paragraph (b) that it relies on the marking of an order
as ``short exempt'' when it receives such an order and it is the
responsibility of the ETP Holder entering the order, and not the
Exchange's responsibility, to comply with the requirements of
Regulation SHO relating to the marking of orders as ``short exempt.''
The Exchange believes that, by explicitly stating these requirements as
part of the proposed amendments to Rule 11.21, it will enhance the
transparency and comprehensiveness of the Exchange's rules and provide
ETP Holders with a clear statement of their order marking
responsibilities with respect to sell short orders.
In that regard, Interpretations and Policies .01 of Rule 11.21, as
proposed, explicitly states that NSX Securities, LLC (``NSXS''), an
Exchange-affiliated broker-dealer with the sole function of acting as
the outbound routing facility of the Exchange, relies on an ETP
Holder's marking of an order as ``long,'' ``short'' or ``short
exempt.'' \16\ NSXS will route an order received by NSX marked ``short
exempt'' during the Short Sale Price Test Period without independently
evaluating the correctness of the ``short exempt'' marking under
Regulation SHO Rules 201(c) and (d).\17\
---------------------------------------------------------------------------
\16\ Under Rule 2.11, NSXS functions solely as the Exchange's
outbound routing facility. NSXS is not an execution venue.
\17\ See Reg. SHO FAQs, Question and Answer 5.3.
---------------------------------------------------------------------------
In proposed new paragraph (c) of Rule 11.21, the Exchange states
that, except as provided in subparagraphs (c)(1) and (c)(2) of the rule
(which, as discussed below, pertain to the two exceptions permitting
execution and display of sell short orders of a covered security during
the Short Sale Price Test Period), the System will not execute,
display, or route a sell short order in a covered security at a price
that is less than or equal to the current national best bid if the
price of that security decreases by 10 percent or more from the
security's closing price as determined by the listing market for the
covered security as of the end of regular trading hours on the prior
day. Proposed new subparagraph (c)(1) states that the System will
execute and display a short sale order during the Short Sale Price Test
Period without regard to price if, at the time of initial display of
the short sale order, the order was at a price above the current
national best bid.
The Exchange also proposes to state in new subparagraph (c)(1) that
the ``initial display'' of the short sale order includes the initial
display through the facilities of a securities information processor
(``SIP'') or through the Exchange's proprietary market data feed.\18\
The Exchange believes that it is important to define ``initial
display'' in Rule 11.21(c)(1) as including both display through the SIP
and the Exchanges' proprietary market data feed so as to make explicit
that the Exchange will use of both forms of display in determining
whether a particular short sale order of a covered security qualifies
for the exception under Rule 201(b)(1)(iii)(A).
---------------------------------------------------------------------------
\18\ The Exchange's proprietary market data feed, called the
``NSX Depth of Book Feed,'' was made available on a uniform basis to
all ETP Holders authorized to receive the feed, as well as to any
other authorized recipients. The Exchange does not anticipate making
any changes to the availability of the NSX Depth of Book Feed upon
the resumption of trading on the Exchange.
---------------------------------------------------------------------------
In proposed Rule 11.21(c)(2), the Exchange states that the System
will execute, display and route a short sale order marked ``short
exempt'' during the Short Sale Price Test Period without regard to
whether the short sale order is at a price above the national best
bid.\19\ Proposed Rule 11.21(d) provides that a Short Sale Price Test
triggered by the listing market will remain in effect for the remainder
of the trading day on which it is triggered through the close of
regular trading on the next trading day, when a national best bid for
the security is calculated and disseminated on a current and continuing
basis by a plan processor pursuant to an effective national market
system plan.\20\
---------------------------------------------------------------------------
\19\ See 17 CFR 242.201(b)(1)(iii)(B).
\20\ See footnote 12, supra.
---------------------------------------------------------------------------
The Exchange further proposes in Rule 11.21(e) to state that, when
the Short Sale Price Test is in effect with respect to a covered
security, the System will evaluate all incoming sell short orders in
that security that are not marked ``short exempt'' to determine whether
the order can be executed or displayed at a price above the current
national best bid. A sell short order in a covered security ``resting''
on the NSX
[[Page 46622]]
Book will be evaluated by the System if matched for execution during
the Short Sale Price Test Period and, unless the order was initially
displayed at a price above the current national best bid, will be
canceled if at a price equal to or below the current national best bid.
The Exchange believes that including this provision in Rule 11.21 will
enhance clarity and transparency regarding the Exchange's policies,
procedures, and System controls reasonably designed to comply with Rule
201.
Further to the goal of enhancing transparency in the rules
regarding the operation of the System, the Exchange is also proposing
in new subparagraphs (f)(1) through (f)(9) of Rule 11.21 to describe
the operation of the System during the Short Sale Price Test Period
with respect to specific order types that are not marked ``short
exempt,'' as follows:
Market and Limit Order. A sell short market or limit order will be
matched by the System for execution at a price above the current
national best bid and, if a limit order, within the limit price of the
sell short order. Any remaining unfilled portion will be canceled
unless, in the case of a limit order, the limit price of the remaining
shares is above the current national best bid; the unfilled portion of
such a limit order will remain on the NSX Book but will not execute
unless at a price above the current national best bid in accordance
with Rule 201(b)(1) of Regulation SHO.
Odd Lot and Mixed Lot Order. A sell short odd lot order and a mixed
lot order, which is an order consisting of one or more round lots
combined with a number of shares constituting an odd lot,\21\ will be
rejected if entered at a price equal to or below the current national
best bid. Odd lot orders aggregated to form a round lot and initially
displayed at a price above the current national best bid, or a mixed
lot order initially displayed at a price above the current national
best bid, will be eligible for execution at a price equal to or below
the national best bid in accordance with Rule 201(b)(1)(iii)(A) of
Regulation SHO.
---------------------------------------------------------------------------
\21\ See Rule 11.11(c)(3) and (c)(4).
---------------------------------------------------------------------------
Immediate or Cancel (``IOC'') Order. As defined in Rule
11.11(b)(1), an IOC order is a limit order that is to be executed in
whole or in part as soon as such order is received by the System and
any portion not so executed is treated as canceled. A sell short IOC
order will, upon entry, be matched by the System for execution at a
price above the current national best bid and any remaining unfilled
portion will be canceled.
Midpoint-Seeker Order. A Midpoint-Seeker Order, which is an IOC
order that executes only against undisplayed orders priced at the
midpoint of the protected bid and protected offer,\22\ when marked
``sell short'' will, upon entry, be matched by the System for execution
at a price above the current national best bid and any remaining
unfilled portion will be canceled.
---------------------------------------------------------------------------
\22\ See Rule 11.11(c)(13).
---------------------------------------------------------------------------
Reserve Order. A Reserve Order is defined in Rule 11.11(c)(2) as
``[a] limit order with a portion of the quantity displayed (``display
quantity'') and with a reserve portion of the quantity (``reserve
quantity'') that is not displayed.'' A sell short Reserve Order will be
rejected by the System if it is entered at a price equal to or below
the current national best bid. A sell short Reserve Order that was
initially displayed at a price above the current national best bid may
execute at a price equal to or below the current national best bid
during a Short Sale Price Test Period, up to the full size of the order
(including any reserve quantity).\23\
---------------------------------------------------------------------------
\23\ Pursuant to Rule 11.14, Priority of Orders, Interpretations
and Policies .01, the use of a ``Replace Message'' to modify the
quantity of a Reserve Order will result in a new timestamp and the
order losing time priority on the NSX Book unless (i) both the
display size of the Reserve Order is decreased and the total order
quantity is decreased or remains the same; or (ii) both the display
size of the Reserve Order remains the same and the total order
quantity is decreased.
---------------------------------------------------------------------------
Post Only Order,\24\ NSX Only Order \25\ and Destination Specific
Order.\26\ Sell short orders in these order types will be rejected if
entered at a price equal to or below the current national best bid.
---------------------------------------------------------------------------
\24\ Rule 11.11(c)(5) defines a Post Only Order as ``[a] limit
order that is to be posted on the Exchange and not routed away to
another trading center.''
\25\ Rule 11.11(c)(6) defines an NSX Only Order as ``[a]n order
that is to be executed on the Exchange pursuant to Rule 11.15(a) or
[canceled], without routing away to another trading center.''
\26\ Rule 11.11(c)(9) defines a Destination Specific Order as
``[a] market or limit order that instructs the System to route the
order to a specified away trading center, after exposing the order
to the NSX Book . . . .''
---------------------------------------------------------------------------
Sweep Order, Destination Sweep Order,\27\ Intermarket Sweep
(``ISO'') and Post-ISO Order.\28\ A sell short Sweep Order, Destination
Sweep Order, ISO and Post-ISO will be rejected by the System if entered
at a price equal to or below the current national best bid. If entered
at a price above the current national best bid, such sell short orders
will be accepted by the System and eligible for execution. If an ISO is
marked ``IOC,'' any remaining unfilled portion will be canceled. The
unfilled portion of ISO orders not marked ``IOC'' and Post-ISO orders
will be entered on the NSX Book if at a price above the national best
bid. A Post ISO order that was not initially displayed at a price above
the national best bid will be canceled if matched by the System for
execution at a price equal to or below the national best bid.
---------------------------------------------------------------------------
\27\ A Sweep Order is defined in Rule 11.11(c)(7) as ``[a] limit
order that instructs the System to `sweep' the market.'' The rule
provides for several types of sweep orders, specifically a
``Protected Sweep Order,'' a ``Full Sweep Order'' and a
``Destination Sweep Order.'' For purposes of System functionality
during the Short Sale Price Test Period, all of such Sweep Order
types are treated in the same manner.
\28\ ISO is defined in Rule 600(b)(30) of Regulation NMS
pursuant to the Exchange Act, 17 CFR 242.600(b)(30). Rule
11.11(c)(8)(ii) provides that an ISO order may be designated as a
``Post-ISO'' when entered into the System, and the use of such
designation constitutes a representation that the entering ETP
Holder has simultaneously routed one or more additional limit orders
marked ``ISO'' as necessary to away markets to execute against the
full displayed size of any protected quotation with a price that is
superior or equal to the price of the Post ISO entered on NSX. If
these requirements are met, the Post ISO will be executed by
sweeping the NSX Book up to and including the order's limit price,
without regard to protected quotations at away markets.
---------------------------------------------------------------------------
Cancel/Replacement of Orders. As proposed in new paragraph (g) of
Rule 11.21, a cancel/replace request will be rejected by the System if:
(i) The limit price on the replacement sell short order is equal to or
below the current national best bid; or (ii) if the original limit
price of the sell short order is equal to or below the current national
best bid and the cancel/replace message seeks to increase the order
size.\29\
---------------------------------------------------------------------------
\29\ See footnote 23, supra.
---------------------------------------------------------------------------
To summarize, the Exchange believes that the proposed amendments to
Rule 11.21 to describe with greater particularity the handling of
specific order types during the Short Sale Price Test Period will
further contribute to clarity and transparency in the Exchange's rules,
which will operate to the benefit of ETP Holders and their customers
and market participants generally.
Proposed Amendments Regarding Sell Short Market Peg Zero Display
Reserve Orders
The Exchange is proposing to amend Rule 11.11, subparagraphs
(c)(2)(E)(i)-(iii) regarding the System's handling of a sell short
Market Peg Zero Display Reserve Order under Rule 201by relocating the
provisions of those subparagraphs to Rule 11.21(f)(8)(i)-(iii), thereby
consolidating the Exchange's short sale order handling rules in one
rule set; and amending subparagraph (iii) to delete the provision that
any unexecuted portion of a resting sell short Market Peg Zero Display
order will be canceled if it is matched for execution during the Short
[[Page 46623]]
Sale Price Test at a price at or below the current national best bid.
As proposed, such an order or portion of an order will remain on the
NSX Book, but will not execute in whole or in part at a price equal to
or below the current national best bid during the Short Sale Price Test
Period. The Exchange is proposing this amendment to align the rule text
with the operation of the System in this circumstance.
The Exchange adopted Rule 11.11(c)(2)(E)(iii) in November 2013.\30\
The rule provides that a sell short Market Peg Zero Display Reserve
Order \31\ resting on the NSX Book will track the Protected Best Bid,
which is defined in Rule 1.5P.(3) as the higher of the protected
national best bid or the best displayed bid on the NSX Book and, if
matched by the System for execution during a Short Sale Price Test in
the subject security, will be executed only to the extent that the
Protected Best Bid is above the current national best bid and the sell
short order can be executed, in whole or in part, at a price above the
current national best bid in compliance with Rule 201 of Regulation
SHO. The rule further provides that ``[a]ny such order or portion of
such order will be canceled by the System if at a price equal to or
below the current national best bid.''
---------------------------------------------------------------------------
\30\ See Securities Exchange Act Release No. 70881 (November 14,
2013), 78 FR 69734 (November 20, 2013) (SR-NSX-2013-20).
\31\ Exchange Rule 11.11(c)(2)(A) defines a Market Peg Zero
Display Reserve Order as a Zero Display Reserve Order with a price
set, or ``pegged,'' to track the inside quote on the opposite side
of the market.
---------------------------------------------------------------------------
As proposed, the Exchange seeks to amend subparagraph (iii) to
remove the provision that specifies that a resting Market Peg Zero
Display Reserve Order or portion of such an order will be canceled by
the System if matched for execution during the Short Sale Price Test at
a price equal to or below the current national best bid. As a result of
System testing, the Exchange determined that a resting sell short
Market Peg Zero Display Reserve Order, if matched by the System for
execution during a Short Sale Price Test in the subject security, will
be executed only to the extent that the Protected Best Bid is above the
current national best bid and the sell short order can be executed, in
whole or in part, at a price above the current national best bid.
However, System testing also indicated that, instead of canceling
any remaining unexecuted portion of such an order, the System would
leave the remaining unexecuted portion of the order on the NSX Book.
The Exchange notes that the behavior of the System in this circumstance
would not result in an execution of an order at a price equal to or
below the national best bid during the Short Sale Price Test since the
sell short Market Peg Zero Display Reserve Order would not execute
unless the national best bid moved and the unfilled order or portion of
the order could be executed at a price above the national best bid. The
Exchange also notes that it did not detect an instance where this
System behavior occurred with respect to an actual sell short Market
Peg Zero Display Reserve Order entered by an ETP Holder and resting on
the NSX Book during a Short Sale Price Test.
Since the Exchange's testing disclosed that the behavior of the
System did not align with subparagraph (iii) and further confirmed that
no execution would occur at a price equal to or below the current
national best bid in violation of Regulation SHO, the Exchange
determined to amend the rule to remove the statement regarding
cancellation of any unexecuted portion of a sell short Market Peg Zero
Display Reserve Order if matched for execution during the Short Sale
Price Test. Additionally, the Exchange is proposing to make non-
substantive changes to the text of subparagraph (iii) to align with the
language and form used in other sections of Rule 11.21 as proposed to
be amended.
Amendment of Rule 13.2, Failure To Deliver and Failure To Receive
The Exchange is proposing to amend Rule 13.2 to delete the existing
text and incorporate by reference Rules 200, Definition of ``Short
Sale'' and Marking Requirements, 203, Borrowing and Delivery
Requirements and 204, Close-Out Requirement, of Regulation SHO pursuant
to the Act.\32\ Currently, Rule 13.2(a) states that ``[n]o ETP Holder
shall sell a security for his own account, or buy a security as an ETP
Holder for a customer (except exempt securities), if he has a fail to
deliver in that security 60 days old or older.'' Rule 13.2(b) states
that ``[f]or good cause shown and in exceptional circumstances, an ETP
Holder may request and receive exemption from the provisions of the
Rule by written request to the Secretary of the Exchange.''
The Exchange proposes to amend Rule 13.2 to delete the current text
of the rule and, in its place, adopt text stating that ``[b]orrowing
and deliveries shall be effected in accordance with Rule 203 of
Regulation SHO under the Exchange Act. The Exchange incorporates by
reference Rules 200, 203 and 204 of Regulation SHO, to Exchange Rule
13.2, as if they were fully set forth herein.'' \33\
---------------------------------------------------------------------------
\32\ 17 CFR 242.200, 17 CFR 242.203 and 17 CFR 242.204.
\33\ The Exchange notes that other exchanges have adopted the
same approach with respect to their rules regarding failure to
deliver and failure to receive. See, e.g., BATS Exchange Inc. Rule
13.2 (Failure to Deliver and Failure to Receive); EDGA Exchange Inc.
Rule 13.2 (Short Sale Borrowing and Delivery Requirements).
---------------------------------------------------------------------------
The Exchange is proposing this amendment to remove the text
regarding failure to deliver and failure to receive a security since
such rule text is obsolete in view of the requirements set forth in
Rules 200, 203 and 204 of Regulation SHO. Specifically, Rule 200,
Definition of ``short sale'' and marking requirements, defines
ownership of a security for short sale purposes and clarifies the
requirement to determine a short seller's net aggregate position. Rule
203, Borrowing and delivery requirements, provides inter alia that,
subject to certain exceptions, a broker-dealer effecting a short sale
order in any equity security have reasonable grounds to believe that
the security can be borrowed so that it can be delivered on the date
delivery is due.\34\ The ``locate'' requirement must be documented
prior to the broker-dealer effecting the short sale.\35\ Rule 203(b)(3)
requires a broker-dealer to take action to close out a failure to
deliver in a ``threshold'' security that has remained open for thirteen
consecutive settlement days by purchasing securities of a like kind and
quantity.\36\ Rule 204 of Regulation SHO \37\ governs the close-out
requirements applicable to both long and short sales of equity
securities.
---------------------------------------------------------------------------
\34\ 17 CFR 242.203(b)(1).
\35\ 17 CFR 242.203(b)(1)(iii).
\36\ 17 CFR 242.203(b)(3).
\37\ 17 CFR 242.204.
---------------------------------------------------------------------------
The Exchange believes that these provisions of Regulation SHO,
which are intended to apply uniform rules to address the failure to
deliver or failure to receive, render the Exchange's rule obsolete.
2. Statutory Basis
The Exchange believes that the proposed rule amendments are
consistent with the provisions of Section 6(b) of the Act \38\ in
general, and further the objectives of Section 6(b)(5) of the Act \39\
in particular. The proposed amendments to the Exchange's rules are
designed, among other things, to promote just and equitable principles
of trade and, in general, protect investors and the public interest.
The Exchange's proposal is designed to provide clarity and transparency
with respect to written policies and procedures established by
[[Page 46624]]
the Exchange, and the System controls it implemented, to enforce the
provisions of Rule 201. To this extent, the Exchange believes that its
proposal furthers the requirements of Rule 201 that trading centers
establish, maintain and enforce written policies and procedures
reasonably designed to prevent the execution or display of a short sale
order of a covered security in violation of the short sale price
restrictions contained in Rule 201. The proposed amendments enhance the
Exchange's written policies and procedures regarding the execution and
display of permissible orders and the execution of orders marked
``short exempt'' during the Short Sale Price Test.
---------------------------------------------------------------------------
\38\ 15 U.S.C. 78(f)(b).
\39\ 15 U.S.C. 78(f)(b)(5).
---------------------------------------------------------------------------
The Exchange further submits that proposed paragraph (b) of Rule
11.21, which describes the responsibilities of ETP Holders with respect
to marking orders ``short exempt,'' and Interpretations and Policies
.01 of Rule 11.21, which states that NSXS, as the Exchange's outbound
order routing facility, relies on the ETP Holder's correct marking of
an order as ``short exempt'' without independently verifying the
accuracy of such marking, are consistent with Section 6(b)(5) of the
Act. The Exchange believes that these amendments promote just and
equitable principles of trade and further the public interest by
clearly stating the ETP Holder's responsibility for correct order
marking and providing transparency as to those responsibilities in the
Exchange's rules.
The Exchange submits that the proposed amendment to reposition Rule
11.11(c)(2)(E)(i)-(iii) to Rule 11.21, and delete the statement that a
``resting'' sell short Market Peg Zero Display Reserve Order or portion
of such an order will be canceled by the System if at a price at or
below the current national best bid, is consistent with Section 6(b)(5)
of the Act in that it will assure that the rule text is logically
organized and correctly describes with the operation of the System,
thereby enhancing clarity and transparency in the Exchange's rules and
promoting just and equitable principles of trade and the public
interest.
The Exchange further submits that the proposed amendment to Rule
13.2 to incorporate by reference Rules 200, 203 and 204 of Regulation
SHO is consistent with Section 6(b)(5) of the Act in that it is
designed to impart uniformity in the regulatory requirements governing
the failure to deliver and failure to receive securities and close-out
requirements, thereby promoting cooperation and coordination in the
regulation of securities transactions and enhancing investor protection
and the public interest.
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
for the furtherance of the Act. All trading centers are obligated to
comply with the provisions of Regulation SHO. The proposed rule
amendments provide additional clarity and transparency into the
Exchange's written policies and procedures for handling sell short
orders in compliance with Regulation SHO. The Exchange submits that the
proposed amendments impose no unnecessary or inappropriate burden on
competition and, in fact, operate to promote competition by providing
ETP Holders, their customers, and the investing public with enhanced
information regarding the Exchange's written policies and procedures
and the System functionality for handling sell short orders in
compliance with Regulation SHO.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received comments on the
proposed rule change from market participants or others.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not:
A. significantly affect the protection of investors or the public
interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate,
it has become effective pursuant to Section 19(b)(3)(A) \40\ of the
Exchange Act and Rule 19b-4(f)(6) \41\ thereunder.
---------------------------------------------------------------------------
\40\ 15 U.S.C. 78s(b)(3)(A).
\41\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description of the text of the proposed rule change, at least
five business days prior to the date of the filing of the proposed
rule change, or such other time as designated by the Commission. The
Exchange provided the Commission with the required notice.
---------------------------------------------------------------------------
The Exchange has requested that the Commission waive the 30-day
operative delay so that the proposed rule change may become effective
and operative upon filing with the Commission pursuant to Section
19(b)(3)(A)(iii) \42\ of the Act and Rule 19b-4(f)(6) thereunder. In
support of its request, the Exchange stated that, because the rule
amendments are designed to provide greater transparency and clarity
into the Exchange's written policies and procedures for the execution
and display of permissible orders during the Short Sale Price Test and
the execution of orders marked ``short exempt.'' The Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest. The Commission
believes that the protection of investors and the public interest will
be enhanced by making the proposed amendments publicly available to
market participants and the investing public as soon as practicable,
and prior to the resumption of trading on the Exchange. Therefore, the
Commission hereby waives the 30-day operative delay and designates the
proposal as effective and operative upon filing.\43\
---------------------------------------------------------------------------
\42\ 15 U.S.C. 78s(b)(3)(A)(iii).
\43\ For purposes only of waiving the operative delay for this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NSX-2015-04 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.
[[Page 46625]]
All submissions should refer to File No. SR-NSX-2015-04. This file
number should be included in the subject line if email is used. To help
the Commission process and review 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 a.m. and 3
p.m. Copies of such filings 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-NSX-2015-04 and should be submitted on
or before August 26, 2015.
For the Commission by the Division of Trading and Markets,
pursuant to the delegated authority.\44\
---------------------------------------------------------------------------
\44\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-19124 Filed 8-4-15; 8:45 am]
BILLING CODE 8011-01-P
