Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 79A To Delete Supplementary Material .20 Requiring Prior Floor Official Approval Before a Designated Market Maker Can Initiate Certain Trades More Than One or Two Dollars Away From the Last Sale, 50365-50369 [2015-20416]
Download as PDF
Federal Register / Vol. 80, No. 160 / Wednesday, August 19, 2015 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will: (a) By
order approve or disapprove such
proposed rule change; or (b) institute
proceedings to determine whether the
proposed rule change should be
disapproved.
IV. Solicitation of Comments
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–
NASDAQ–2015–089 on the subject line.
tkelley on DSK3SPTVN1PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, Station
Place, 100 F Street NE., Washington, DC
20549.
All submissions should refer to File
Number SR–NASDAQ–2015–089. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site https://www.sec.gov/
rules/sro.shtml.
Copies of the submission, all
subsequent amendments, all written
statements with respect to the proposed
rule change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
19:14 Aug 18, 2015
Jkt 235001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Brent J. Fields,
Secretary.
[FR Doc. 2015–20417 Filed 8–18–15; 8:45 am]
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:
VerDate Sep<11>2014
filing also will be available for
inspection and copying at the principal
office of NASDAQ. 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–
NASDAQ–2015–089 and should be
submitted on or before September 9,
2015.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75695; File No. SR–NYSE–
2015–33]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Amending Rule
79A To Delete Supplementary Material
.20 Requiring Prior Floor Official
Approval Before a Designated Market
Maker Can Initiate Certain Trades More
Than One or Two Dollars Away From
the Last Sale
August 13, 2015.
Pursuant to section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on July 29,
2015, New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 79A to delete Supplementary
Material .20 requiring prior Floor
Official approval before a Designated
Market Maker (‘‘DMM’’) can initiate
certain trades more than one or two
27 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
50365
dollars away from the last sale. The text
of the proposed rule change is available
on the Exchange’s Web site at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 79A to delete Supplementary
Material .20, which requires prior Floor
Official approval for certain DMM
dealer trades more than one or two
dollars away from the last sale, and to
make conforming amendments to Rules
48, 80C and 9217 to delete references to
Rule 79A.20.
Background
Currently, except with respect to
inactively traded securities the
Exchange shall from time to time
identify, Rule 79A.20(a) requires DMMs
to obtain prior Floor Official approval
for all transactions in stocks by the
DMM as dealer (when the market is
slow 4) or transactions in which the
DMM as dealer is reaching across the
market 5 (when the market is fast) that
are made at (i) $1.00 or more away from
the last sale when such last sale is under
$20 per share or (ii) $2.00 or more away
from the last sale when such last sale is
at $20 per share or over. The Rule also
provides that in unusual market
situations, a Floor Governor, Senior
Floor Official, or Executive Floor
4 For purposes of the Rule, the NYSE is
considered a ‘‘slow’’ market when displaying a bid
or offer (or both) that is not entitled to protection
of Rule 611 under Regulation NMS. See Rule
79A.20(a). DMM dealer transactions in slow
markets include the opening, reopening, and
closing transactions.
5 A DMM reaches across the market when the
DMM buys from the NYSE offer or sells to the NYSE
bid.
E:\FR\FM\19AUN1.SGM
19AUN1
50366
Federal Register / Vol. 80, No. 160 / Wednesday, August 19, 2015 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
Official 6 has the discretion to determine
that a different price parameter other
than that required in subdivision (a) of
the Rule is appropriate when the last
sale is at $100 per share or over.7
The principles embodied in Rule
79A.20 were originally aimed at
preventing undue price dislocation by
the specialist at the opening. Gradually,
the rule was extended to all trades
significantly away from the last sale.8
The rule also functioned in part as a
safeguard against market manipulation
by specialists and Floor brokers as well
as a control on price volatility by
requiring a Floor Official who was not
party to the transaction to review and
approve all proposed transactions
exceeding the rule’s parameters before
the trade was published to the
consolidated tape, thereby ensuring that
specialists were maintaining
appropriate price continuity and depth,
and that Floor brokers were not
transacting in the trading crowd at
unduly wide variations from the last
sale.9
In 2006, the Commission approved
the Exchange’s adoption of a ‘‘hybrid
market’’ under which Exchange systems
assumed the function of matching and
executing electronically-entered orders
but specialists remained the responsible
broker-dealer for orders on the
Exchange’s limit order book.10 In 2007,
as a result of the increasing automation
of trading and the accompanying
decentralization of pricing decisions
away from specialists, the Exchange
comprehensively amended Rule 79A.20.
In that filing, the Exchange virtually
eliminated Rule 79A.20 approvals in all
situations except those prescribed in the
current Rule.11
Since that time, additional, significant
market structure changes have
continued to obviate the need for Rule
79A.20. In particular, in 2008, the
6 Pursuant to Rules 46 and 46A, Floor Governors,
Senior Floor Officials and Executive Floor Officials
are one of several ranks of the broader category of
Floor Officials, including, in order of increasing
seniority, Floor Officials, Senior Floor Officials,
Executive Floor Officials, Floor Governors and
Executive Floor Governors. See Securities Exchange
Act Release No. 57627 (April 4, 2008), 73 FR 19919
(April 11, 2008) (SR–NYSE–2008–19).
7 See Rule 79A.20(b).
8 See Securities Exchange Act Release No. 56209
(August 6, 2007), 72 FR 45290, 45291 (August 13,
2007) (SR–NYSE–2007–65) (‘‘Release No. 56209’’).
9 See id.
10 See Securities Exchange Act Release No. 53539
(March 22, 2006), 71 FR 16353 (March 31, 2006)
(SR–NYSE–2004–05).
11 See Release No. 56209, supra note 8, at 45291.
At the time, the rule was set forth in Supplementary
Material .30 of Rule 79A. The rule was re-numbered
as Supplementary Material .20 in 2008. See
Securities Exchange Act Release No. 58184 (July 17,
2008), 73 FR 42853 (July 23, 2008) (SR–NYSE–
2008–46).
VerDate Sep<11>2014
19:14 Aug 18, 2015
Jkt 235001
Exchange adopted the New Market
Model, which transformed specialists
into DMMs, who are no longer agents
for the Exchange’s limit order book and
whose trading activity on the Exchange
is limited to proprietary trading.12 Also
in 2008, the Exchange greatly enhanced
the transparency of its marketplace and
improved the quality of the opening and
closing auctions by introducing a realtime order imbalance information data
feed (‘‘Order Imbalance Information’’).13
Further, DMMs now also have the
ability to electronically open and close
trading on the Exchange, which was not
available to specialists in 2007.14 In
2015, the Exchange eliminated Liquidity
Replenishment Points (‘‘LRP’’) and the
Gap Quote Policy and amended Rule
79A.20 to remove references to these
Exchange-specific volatility
mechanisms. Rule 79A.20 had
previously required Floor Official
review and approval of DMMs dealer
trades one or two points away from the
last sale following these intra-day
‘‘slow’’ market scenarios.15 Finally, also
in 2015, the Exchange amended Rule
1000 to reject marketable orders of over
1,000,000 shares upon arrival. Such
orders were ineligible for automatic
execution and caused the Exchange to
suspend automatic executions and
disseminate a ‘‘slow’’ quote condition.16
duplicative of other rules requiring
Floor Official approval.
As noted above, the recent
elimination of LRPs and the Gap Quote
Policy removed the remaining intra-day
events when the Exchange’s market was
‘‘slow’’ and DMM pricing decisions that
could trigger Rule 79A.20 approvals. As
such, trading circumstances warranting
Rule 79A.20 review are now limited to
manual DMM participation when a
security moves one or two dollars from
the last sale (based on whether the
security is under $20 or $20 and over)
at either the open, close or, more rarely,
intraday during reopenings.
In light of the transparency
surrounding the open and close and the
involvement of Floor Officials in those
processes, the Exchange believes that
there is no longer a need for Floor
Officials to separately approve
individual DMM transactions under
Rule 79A.20. First, as described above,
the Exchange significantly enhanced the
transparency surrounding the open and
close with the introduction of a realtime Order Imbalance Information data
feed in 2008. This proprietary data feed,
disseminated prior to the open pursuant
to Rule 15(c)(1) 17 and prior to close
pursuant to Rule 123C(6),18 reflects realtime order imbalances that accumulate
prior to the opening and closing
Proposed Rule Change
17 Pursuant to Rule 15(c)(1), Order Imbalance
Information disseminated prior to the open
includes all interest eligible for execution in the
opening transaction of the security in Exchange
systems, i.e., electronic interest, including Floor
broker electronic interest, entered into Exchange
systems prior to the opening. Pre-opening Order
Imbalance Information is disseminated
approximately every five minutes between 8:30 a.m.
Eastern Time (‘‘ET’’) and 9:00 a.m. ET;
approximately every minute between 9:00 a.m. ET
and 9:20 a.m. ET; and approximately every 15
seconds between 9:20 a.m. ET and the opening of
trading in that security. See Rule 15(c)(3).
18 Pursuant to Rule 123C(6), Order Imbalance
Information disseminated prior to the close
includes, among other things: (1) The Mandatory
Market on Close (‘‘MOC’’)/Limit on Close (‘‘LOC’’)
Imbalance Publication; (2) a data field indicating
the price at which closing-only interest (i.e., MOC
orders, marketable LOC orders, and CO orders
opposite the imbalance) may be executed in full;
and, (3) a data field indicating the price at which
interest in the Display Book (e.g., Minimum Display
Reserve Orders, Floor broker reserve e-Quotes not
designated to be excluded from the aggregated
agency interest information available to the DMM,
d-Quotes and pegged e-Quotes at the price
indicated on the order as the base price to be used
to calculate the range of discretion and Stop orders)
as well as all closing-only orders (MOC, marketable
LOC, and CO orders opposite the imbalance) may
be executed in full. Pre-closing Order Imbalance
Information is disseminated every fifteen seconds
between 3:40 p.m. and 3:50 p.m.; thereafter, it is
disseminated every five seconds between 3:50 p.m.
and 4:00 p.m. Commencing at 3:55 p.m., the Order
Imbalance Information disseminated by the
Exchange also includes d-Quotes and all other eQuotes containing pegging instructions eligible to
participate in the closing transaction and Stop
orders.
The Exchange proposes to delete Rule
79A.20. As discussed below, the
situations where the Rule would be
invoked are now limited to the open,
reopenings and the close, where market
transparency and existing safeguards
render the Rule unnecessary and
12 See Securities Exchange Act Release No.
58845(October 24, 2008), 73 FR 64379, 64381
(October 29, 2008) (SR–NYSE–2008–46).
13 See Securities Exchange Act Release No. 57861
(May 23, 2008), 73 FR 31905 (June 4, 2008) (SR–
NYSE–2008–42). See also Securities Exchange Act
Release No. 59815 (April 23, 2009), 74 FR 19609
(April 29, 2009) (SR–NYSE–2009–41) (modifying
the reference price at which the Exchange reports
Order Imbalance Information and clarifying what
information is included in and excluded from the
Order Imbalance Information Reports). In 2009, the
Exchange further enhanced the transparency of its
informational data feed for imbalances by including
d-Quotes and all other e-Quotes containing pegging
instructions eligible to participate in the closing
transaction in the Order Imbalance Information data
feed. See Rule 70(1) & Supplementary Material .25;
Securities Exchange Act Release No. 60153 (June
19, 2009), 74 FR 30656 (June 26, 2009) (SR–NYSE–
2009–49).
14 See Rule 123D (openings); Rule 123C.10
(closings). See generally Rule 104(b).
15 See Securities Exchange Act Release No. 74063
(January 15, 2015), 80 FR 3269 (January 22, 2015)
(SR–NYSE–2015–01). See also note 4, supra.
16 See Securities Exchange Act Release No. 74649
(April 6, 2015), 80 FR 19383 (April 10, 2015) (SR–
NYSE–2015–14).
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
E:\FR\FM\19AUN1.SGM
19AUN1
tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 160 / Wednesday, August 19, 2015 / Notices
transactions on the Exchange and the
price at which interest eligible to
participate in the opening or closing
transactions may be executed in full.
Second, in addition to disseminating
Order Imbalance Information, the
Exchange’s Rules require the timely
communication of price dislocations
and unusual market situations,
including delayed openings, to the
marketplace. Rule 15(a) provides that if
the opening transaction in a security
will be at a price that represents a
change of more than the ‘‘applicable
price change’’ specified in the Rule
(representing a numerical or percentage
change from the security’s closing price
per share or, in the case of an IPO, the
security’s offering price), the DMM
arranging the opening transaction or the
Exchange must issue a pre-opening
indication (a ‘‘Rule 15 Indication’’),
which represents a range of where a
security may open. The Rule 15
Indication is a price range that is
published on the Exchange’s proprietary
data feeds prior to the scheduled
opening time. A Rule 15 Indication
includes the security and the price
range within which the DMM
anticipates the opening transaction will
occur, and would include any orallyrepresented Floor broker interest for the
open.
Similarly, Rule 123D Mandatory
Indications are required for an opening
that will result in a ‘‘significant’’ price
change from the previous close. For
securities priced under $10, indications
are required under Rule 123D(1) if the
price change is one dollar or more; for
securities between $10 and $99.99,
indications are required for price
movements of the lesser of 10% or three
dollars; and for securities over $100,
indications are required for price
movements of five dollars or more. Rule
123D(1) requires DMMs to disseminate
one or more indications in connection
with any delayed opening where a
security has not opened or been quoted
by 10 a.m. (‘‘Rule 123D Mandatory
Indication’’). The DMM is responsible
for publishing the Rule 123D Mandatory
Indication and, when determining the
price range for the indication, take into
consideration Floor broker interest that
has been orally entered and what, at a
given time, the DMM anticipates the
dealer participation in the opening
transaction would be. Rule 123D
Mandatory Indications are published to
the Consolidated Tape.
Importantly, all Rule 123D Mandatory
Indications require the supervision and
approval of a Floor Official. Rule 123D
approvals are therefore similar to Rule
79A.20 approvals. In fact, almost half of
Floor Official approvals under Rule
VerDate Sep<11>2014
19:14 Aug 18, 2015
Jkt 235001
79A.20 also occur in situations where a
mandatory indication was published
pursuant to Rule 123D. In these
circumstances, requiring the Floor
Official to separately approve a price
movement under Rule 79A.20 would be
duplicative.
The Exchange further notes that the
Floor Official approval requirements of
Rule 79A.20 impede the ability of a
DMM to open or close a security
electronically at the Exchange if the
security were to open one or two points
away from the last sale. As a practical
matter, the only way for Floor Officials
to approve trades more than one or two
dollars away from the last sale in the
case of an electronic open or close
would be to turn a fast market into a
‘‘slow’’ one and potentially open the
security after 9:30 a.m., which was one
of the rationales for eliminating
virtually all Rule 79A.20 approvals in
2007.19
With respect to the separate Rule
79A.20 requirement that the DMM
obtain Floor Official approvals when the
market is fast and the DMM as dealer is
reaching across the market, i.e., selling
at the bid and buying at the offer, the
Exchange similarly believes that such
approvals are unnecessary and
duplicative of other safeguards. As
noted above, the application of Rule
79A.20 is limited to the opening,
reopenings and the close, where this
scenario would not arise. Moreover, the
Exchange believes that obtaining Floor
Official approval when a DMM is
reaching across a fast market is
impractical in today’s market place
because, especially in the most actively
traded Exchange securities, the
automated marketplace simply moves
too fast.
Even if obtaining Floor Official
approvals were practical, the Exchange
believes that the combination of
volatility and system controls in place
that were unavailable in 2007 render
such approvals unnecessary. DMM
dealer trades one or two points away
from the last sale that reach across the
market would continue to be subject to
the Limit Up/Limit Down (‘‘LULD’’)
price controls, as provided for in Rule
80C(a)(4), the Trading Collars, as
provided for in Rule 1000(c), and the
numerical guidelines for determining
whether a clearly erroneous execution
has occurred under Rule 128. In
addition, as the Exchange noted in a
different context,20 as the marketplace
has become more electronic, DMM units
19 See
Release No. 56209, supra note 8 at 45291.
20 See Securities Exchange Act Release No. 71360
(January 21, 2014), 79 FR 4366, 4367 (January 27,
2014) (SR–NYSE–2014–02).
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
50367
have increased their utilization of
technology to reduce risk exposure by
using algorithms to adjust prices quickly
in response to market dynamics, which
in turn has contributed to reducing the
potential for significant and/or rapid
movements in the market and help
DMMs satisfy their obligation to
maintain a fair and orderly market in
assigned securities pursuant to Rule
104, particularly in times of market
stress. The Exchange believes that these
risk controls provide a further
significant limitation on the ability of
DMMs to initiate a move of more than
one or two dollars away from the last
sale trade in fast markets, especially in
light of the tight spreads on the
Exchange.21
Finally, DMM pricing decisions at the
open and close and during fast markets
are subject to specific DMM obligations
with respect to the quality of the
markets in securities to which they are
assigned. In general, transactions on the
Exchange by a DMM for the DMM’s
account must be effected in a reasonable
and orderly manner in relation to the
condition of the general market and the
market in the particular stock.
As noted, DMMs have affirmative
obligations under Rule 104(a) to engage
in a course of dealings for their own
account to assist in the maintenance of
a fair and orderly market insofar as
reasonably practicable. Specifically,
Rule 104(f)(ii) sets forth the DMM’s
obligation to act as reasonably necessary
to ensure appropriate depth and
maintain reasonable price variations
between transactions (also known as
price continuity) and prevent
unexpected variations in trading.
Further, under Rule 123D(1), openings
and reopenings must be fair and orderly,
reflecting the DMM’s professional
assessment of market conditions at the
time, and appropriate consideration of
the balance of supply and demand as
reflected by orders represented in the
market. The Exchange also supplies
DMMs with suggested Depth Guidelines
for each security in which a DMM is
registered, and DMMs are expected to
quote and trade with reference to the
Depth Guidelines. Further, the DMM’s
affirmative obligation includes
obligations to re-enter the market when
reaching across to execute against
available interest. For instance, under
Rule 104(h), DMMs can engage in
conditional transactions that establish
or increase a position and that reach
across the market without restriction
21 For instance, in May 2015, the quoted spread
on the NYSE for stocks below $20 a share was
$0.048; the quoted spread for stocks above $20 was
$0.466. For all NYSE-listed securities, the quoted
spread in May 2015 was $0.314.
E:\FR\FM\19AUN1.SGM
19AUN1
50368
Federal Register / Vol. 80, No. 160 / Wednesday, August 19, 2015 / Notices
provided such transactions are followed
by appropriate re-entry on the opposite
side of the market commensurate with
the size of the DMM’s transaction.22 The
Exchange issues guidelines, called price
participation points (‘‘PPP’’), that
identify the price at or before which a
DMM is expected to re-enter the market
after effecting a conditional
transaction.23 DMM trading activity on
the Exchange is actively monitored for
compliance with each of these
obligations.
The Exchange believes that the
availability and dissemination of Order
Imbalance Information, Rule 15
Indications and 123D Mandatory
Indications, together with the DMM’s
existing affirmative and other
obligations pursuant to Rule 104,
provide an appropriate framework in
today’s market structure for ensuring
that opening or closing transactions that
occur at a price significantly away from
the last sale price are communicated to
all market participants. In particular,
because of this transparency, the open
and close are subject to greater scrutiny
by all market participants, which in of
itself serves as a check on where a DMM
opens or closes a security. The
Exchange therefore believes that the
need for a Floor Official to review a
DMM’s actions at the open or close,
which was adopted in a time when
there was no market-wide transparency
regarding pricing of the open or close,
is redundant of existing oversight of the
open and close.
For all of these reasons, the Exchange
believes that requiring separate Floor
Official approvals for one and two
dollar price movements is no longer
necessary.
The Exchange also proposes to delete
references to Rule 79A.20 from Rules
48, 80C and 9217. In the case of Rule 48,
the reference to be removed would be to
Rule 79A.30. Rule 48 was not updated
when the text of the Rule was moved
from Supplementary Material .30 to
.20.24 The Exchange believes these
proposed changes will add transparency
and clarity to the Exchange’s rules.
tkelley on DSK3SPTVN1PROD with NOTICES
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act,25 in general, and
furthers the objectives of section 6(b)(5)
of the Act,26 in particular, because it is
designed to prevent fraudulent and
22 See Rule 104(h)(iii). Immediate re-entry is
required after certain Conditional Transactions.
23 See NYSE Rule 104(h)(iii)(A).
24 See note 11 supra.
25 15 U.S.C. 78f(b).
26 15 U.S.C. 78f(b)(5).
VerDate Sep<11>2014
19:14 Aug 18, 2015
Jkt 235001
manipulative acts and practices,
promote just and equitable principles of
trade, remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and protect investors and the
public interest. In particular, the
Exchange believes that eliminating Rule
79A.20 would remove impediments to
and perfect the mechanism of a free and
open market and a national market
system by eliminating redundant
approvals from the remaining manual
processes at the open and close of
trading. The Exchange believes that
eliminating Rule 79A.20 approvals
would not be inconsistent with the
public interest and the protection of
investors because the transparency
surrounding the open and close and the
information available to the marketplace
enables investors and the public to
assess whether a security would open or
close outside the one or two point
parameter, thereby obviating the need
for a single Floor Official to oversight
the open and close. Further, the
Exchange believes that eliminating Rule
79A.20 approvals would not be
inconsistent with the public interest and
the protection of investors because other
safeguards will remain in place to
ensure that DMMs maintain appropriate
price continuity and depth and do not
transact at unduly wide price variations,
thereby establishing substantially the
same result. As noted above, pursuant to
Rule 123D, Floor Officials would remain
involved in supervising when the open
would occur at a price significantly
away from the last sale, which is when
the majority of Rule 79A.20 approvals
currently occur, and DMM trading will
also remain subject to Exchange rules,
including the obligation to maintain a
fair and orderly market under Rule 104.
The Exchange further believes that
deleting corresponding references to
Rule 79A.20 in other rules would
remove impediments to and perfects the
mechanism of a free and open market by
reducing potential confusion and
adding transparency and clarity to the
Exchange’s rules, thereby ensuring that
members, regulators and the public can
more easily navigate and understand the
Exchange’s rulebook.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not intended to
address competitive issues but rather to
eliminate redundant approvals of
manual trades on its trading Floor.
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to section
19(b)(3)(A)(iii) of the Act 27 and Rule
19b–4(f)(6) thereunder.28 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) 29 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b4(f)(6)(iii),30 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under section 19(b)(2)(B) 31 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
27 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
29 17 CFR 240.19b–4(f)(6).
30 17 CFR 240.19b–4(f)(6)(iii).
31 15 U.S.C. 78s(b)(2)(B).
28 17
E:\FR\FM\19AUN1.SGM
19AUN1
Federal Register / Vol. 80, No. 160 / Wednesday, August 19, 2015 / Notices
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2015–33 on the subject line.
Paper Comments
tkelley on DSK3SPTVN1PROD with NOTICES
All submissions should refer to File
Number SR–NYSE–2015–33. 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–
2015–33 and should be submitted on or
before September 9, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
Brent J. Fields,
Secretary.
[FR Doc. 2015–20416 Filed 8–18–15; 8:45 am]
BILLING CODE 8011–01–P
19:14 Aug 18, 2015
Nile Capital Investment Trust, et al.;
Notice of Application
August 13, 2015.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under section 6(c) of the
Investment Company Act of 1940
(‘‘Act’’) for an exemption from sections
2(a)(32), 5(a)(1), 22(d) and 22(e) of the
Act and rule 22c–1 under the Act, under
sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and
(a)(2) of the Act, and under section
12(d)(1)(J) of the Act for an exemption
from sections 12(d)(1)(A) and (B) of the
Act.
Nile Capital Investment
Trust (the ‘‘Trust’’), Nile Capital
Management, LLC (the ‘‘Manager’’) and
Northern Lights Distributors, LLC (the
‘‘Distributor’’).
SUMMARY OF APPLICATION: Applicants
request an order (‘‘Order’’) that permits:
(a) Actively managed series of certain
open-end management investment
companies to issue shares (‘‘Shares’’)
redeemable in large aggregations only
(‘‘Creation Units’’); (b) secondary market
transactions in Shares to occur at the
next-determined net asset value plus or
minus a market-determined premium or
discount that may vary during the
trading day; (c) certain series to pay
redemption proceeds, under certain
circumstances, more than seven days
from the tender of Shares for
redemption; (d) certain affiliated
persons of the series to deposit
securities into, and receive securities
from, the series in connection with the
purchase and redemption of Creation
Units; (e) certain registered management
investment companies and unit
investment trusts outside of the same
group of investment companies as the
series to acquire Shares; and (f) certain
series to create and redeem Shares in
kind in a master-feeder structure. The
Order would incorporate by reference
terms and conditions of a previous order
granting the same relief sought by
applicants, as that order may be
amended from time to time (‘‘Reference
Order’’).1
FILING DATE: The application was filed
on June 29, 2015.
APPLICANTS:
1 Eaton Vance Management, et al., Investment
Company Act Rel. Nos. 31333 (Nov. 6, 2014)
(notice) and 31361 (Dec. 2, 2014) (order).
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
[Investment Company Act Release No.
31760; 812–14500]
AGENCY:
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
32 17
SECURITIES AND EXCHANGE
COMMISSION
Jkt 235001
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
50369
An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on September 8, 2015, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: The Commission: Brent J.
Fields, Secretary, U.S. Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090.
Applicants: Nile Capital Investment
Trust and Nile Capital Management,
LLC, 116 Village Blvd., Suite #306,
Princeton, NJ 08540, and Northern
Lights Distributors, LLC, 17605 Wright
St., Omaha, NB 68130.
FOR FURTHER INFORMATION CONTACT:
Diane L. Titus, Paralegal Specialist, or
Dalia Osman Blass, Assistant Chief
Counsel, at (202) 551–6821 (Division of
Investment Management, Chief
Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
HEARING OR NOTIFICATION OF HEARING:
Applicants
1. The Trust is registered as an openend management investment company
under the Act and is a statutory trust
organized under the laws of Delaware.
Applicants seek relief with respect to
two Funds (as defined below, and those
Funds, the ‘‘Initial Funds’’). The
portfolio positions of each Fund will
consist of securities and other assets
selected and managed by its Adviser or
Subadviser (as defined below) to pursue
the Fund’s investment objective.
2. The Adviser, a limited liability
company organized under the laws of
Delaware, will be the investment
adviser to the Initial Funds. An Adviser
(as defined below) will serve as
investment adviser to each Fund. The
Adviser is, and any other Adviser will
E:\FR\FM\19AUN1.SGM
19AUN1
Agencies
[Federal Register Volume 80, Number 160 (Wednesday, August 19, 2015)]
[Notices]
[Pages 50365-50369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-20416]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75695; File No. SR-NYSE-2015-33]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending Rule 79A To Delete Supplementary Material .20 Requiring Prior
Floor Official Approval Before a Designated Market Maker Can Initiate
Certain Trades More Than One or Two Dollars Away From the Last Sale
August 13, 2015.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on July 29, 2015, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 79A to delete Supplementary
Material .20 requiring prior Floor Official approval before a
Designated Market Maker (``DMM'') can initiate certain trades more than
one or two dollars away from the last sale. The text of the proposed
rule change is available on the Exchange's Web site at www.nyse.com, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 79A to delete Supplementary
Material .20, which requires prior Floor Official approval for certain
DMM dealer trades more than one or two dollars away from the last sale,
and to make conforming amendments to Rules 48, 80C and 9217 to delete
references to Rule 79A.20.
Background
Currently, except with respect to inactively traded securities the
Exchange shall from time to time identify, Rule 79A.20(a) requires DMMs
to obtain prior Floor Official approval for all transactions in stocks
by the DMM as dealer (when the market is slow \4\) or transactions in
which the DMM as dealer is reaching across the market \5\ (when the
market is fast) that are made at (i) $1.00 or more away from the last
sale when such last sale is under $20 per share or (ii) $2.00 or more
away from the last sale when such last sale is at $20 per share or
over. The Rule also provides that in unusual market situations, a Floor
Governor, Senior Floor Official, or Executive Floor
[[Page 50366]]
Official \6\ has the discretion to determine that a different price
parameter other than that required in subdivision (a) of the Rule is
appropriate when the last sale is at $100 per share or over.\7\
---------------------------------------------------------------------------
\4\ For purposes of the Rule, the NYSE is considered a ``slow''
market when displaying a bid or offer (or both) that is not entitled
to protection of Rule 611 under Regulation NMS. See Rule 79A.20(a).
DMM dealer transactions in slow markets include the opening,
reopening, and closing transactions.
\5\ A DMM reaches across the market when the DMM buys from the
NYSE offer or sells to the NYSE bid.
\6\ Pursuant to Rules 46 and 46A, Floor Governors, Senior Floor
Officials and Executive Floor Officials are one of several ranks of
the broader category of Floor Officials, including, in order of
increasing seniority, Floor Officials, Senior Floor Officials,
Executive Floor Officials, Floor Governors and Executive Floor
Governors. See Securities Exchange Act Release No. 57627 (April 4,
2008), 73 FR 19919 (April 11, 2008) (SR-NYSE-2008-19).
\7\ See Rule 79A.20(b).
---------------------------------------------------------------------------
The principles embodied in Rule 79A.20 were originally aimed at
preventing undue price dislocation by the specialist at the opening.
Gradually, the rule was extended to all trades significantly away from
the last sale.\8\ The rule also functioned in part as a safeguard
against market manipulation by specialists and Floor brokers as well as
a control on price volatility by requiring a Floor Official who was not
party to the transaction to review and approve all proposed
transactions exceeding the rule's parameters before the trade was
published to the consolidated tape, thereby ensuring that specialists
were maintaining appropriate price continuity and depth, and that Floor
brokers were not transacting in the trading crowd at unduly wide
variations from the last sale.\9\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 56209 (August 6,
2007), 72 FR 45290, 45291 (August 13, 2007) (SR-NYSE-2007-65)
(``Release No. 56209'').
\9\ See id.
---------------------------------------------------------------------------
In 2006, the Commission approved the Exchange's adoption of a
``hybrid market'' under which Exchange systems assumed the function of
matching and executing electronically-entered orders but specialists
remained the responsible broker-dealer for orders on the Exchange's
limit order book.\10\ In 2007, as a result of the increasing automation
of trading and the accompanying decentralization of pricing decisions
away from specialists, the Exchange comprehensively amended Rule
79A.20. In that filing, the Exchange virtually eliminated Rule 79A.20
approvals in all situations except those prescribed in the current
Rule.\11\
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 53539 (March 22,
2006), 71 FR 16353 (March 31, 2006) (SR-NYSE-2004-05).
\11\ See Release No. 56209, supra note 8, at 45291. At the time,
the rule was set forth in Supplementary Material .30 of Rule 79A.
The rule was re-numbered as Supplementary Material .20 in 2008. See
Securities Exchange Act Release No. 58184 (July 17, 2008), 73 FR
42853 (July 23, 2008) (SR-NYSE-2008-46).
---------------------------------------------------------------------------
Since that time, additional, significant market structure changes
have continued to obviate the need for Rule 79A.20. In particular, in
2008, the Exchange adopted the New Market Model, which transformed
specialists into DMMs, who are no longer agents for the Exchange's
limit order book and whose trading activity on the Exchange is limited
to proprietary trading.\12\ Also in 2008, the Exchange greatly enhanced
the transparency of its marketplace and improved the quality of the
opening and closing auctions by introducing a real-time order imbalance
information data feed (``Order Imbalance Information'').\13\ Further,
DMMs now also have the ability to electronically open and close trading
on the Exchange, which was not available to specialists in 2007.\14\ In
2015, the Exchange eliminated Liquidity Replenishment Points (``LRP'')
and the Gap Quote Policy and amended Rule 79A.20 to remove references
to these Exchange-specific volatility mechanisms. Rule 79A.20 had
previously required Floor Official review and approval of DMMs dealer
trades one or two points away from the last sale following these intra-
day ``slow'' market scenarios.\15\ Finally, also in 2015, the Exchange
amended Rule 1000 to reject marketable orders of over 1,000,000 shares
upon arrival. Such orders were ineligible for automatic execution and
caused the Exchange to suspend automatic executions and disseminate a
``slow'' quote condition.\16\
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release No. 58845(October 24,
2008), 73 FR 64379, 64381 (October 29, 2008) (SR-NYSE-2008-46).
\13\ See Securities Exchange Act Release No. 57861 (May 23,
2008), 73 FR 31905 (June 4, 2008) (SR-NYSE-2008-42). See also
Securities Exchange Act Release No. 59815 (April 23, 2009), 74 FR
19609 (April 29, 2009) (SR-NYSE-2009-41) (modifying the reference
price at which the Exchange reports Order Imbalance Information and
clarifying what information is included in and excluded from the
Order Imbalance Information Reports). In 2009, the Exchange further
enhanced the transparency of its informational data feed for
imbalances by including d-Quotes and all other e-Quotes containing
pegging instructions eligible to participate in the closing
transaction in the Order Imbalance Information data feed. See Rule
70(1) & Supplementary Material .25; Securities Exchange Act Release
No. 60153 (June 19, 2009), 74 FR 30656 (June 26, 2009) (SR-NYSE-
2009-49).
\14\ See Rule 123D (openings); Rule 123C.10 (closings). See
generally Rule 104(b).
\15\ See Securities Exchange Act Release No. 74063 (January 15,
2015), 80 FR 3269 (January 22, 2015) (SR-NYSE-2015-01). See also
note 4, supra.
\16\ See Securities Exchange Act Release No. 74649 (April 6,
2015), 80 FR 19383 (April 10, 2015) (SR-NYSE-2015-14).
---------------------------------------------------------------------------
Proposed Rule Change
The Exchange proposes to delete Rule 79A.20. As discussed below,
the situations where the Rule would be invoked are now limited to the
open, reopenings and the close, where market transparency and existing
safeguards render the Rule unnecessary and duplicative of other rules
requiring Floor Official approval.
As noted above, the recent elimination of LRPs and the Gap Quote
Policy removed the remaining intra-day events when the Exchange's
market was ``slow'' and DMM pricing decisions that could trigger Rule
79A.20 approvals. As such, trading circumstances warranting Rule 79A.20
review are now limited to manual DMM participation when a security
moves one or two dollars from the last sale (based on whether the
security is under $20 or $20 and over) at either the open, close or,
more rarely, intraday during reopenings.
In light of the transparency surrounding the open and close and the
involvement of Floor Officials in those processes, the Exchange
believes that there is no longer a need for Floor Officials to
separately approve individual DMM transactions under Rule 79A.20.
First, as described above, the Exchange significantly enhanced the
transparency surrounding the open and close with the introduction of a
real-time Order Imbalance Information data feed in 2008. This
proprietary data feed, disseminated prior to the open pursuant to Rule
15(c)(1) \17\ and prior to close pursuant to Rule 123C(6),\18\ reflects
real-time order imbalances that accumulate prior to the opening and
closing
[[Page 50367]]
transactions on the Exchange and the price at which interest eligible
to participate in the opening or closing transactions may be executed
in full.
---------------------------------------------------------------------------
\17\ Pursuant to Rule 15(c)(1), Order Imbalance Information
disseminated prior to the open includes all interest eligible for
execution in the opening transaction of the security in Exchange
systems, i.e., electronic interest, including Floor broker
electronic interest, entered into Exchange systems prior to the
opening. Pre-opening Order Imbalance Information is disseminated
approximately every five minutes between 8:30 a.m. Eastern Time
(``ET'') and 9:00 a.m. ET; approximately every minute between 9:00
a.m. ET and 9:20 a.m. ET; and approximately every 15 seconds between
9:20 a.m. ET and the opening of trading in that security. See Rule
15(c)(3).
\18\ Pursuant to Rule 123C(6), Order Imbalance Information
disseminated prior to the close includes, among other things: (1)
The Mandatory Market on Close (``MOC'')/Limit on Close (``LOC'')
Imbalance Publication; (2) a data field indicating the price at
which closing-only interest (i.e., MOC orders, marketable LOC
orders, and CO orders opposite the imbalance) may be executed in
full; and, (3) a data field indicating the price at which interest
in the Display Book (e.g., Minimum Display Reserve Orders, Floor
broker reserve e-Quotes not designated to be excluded from the
aggregated agency interest information available to the DMM, d-
Quotes and pegged e-Quotes at the price indicated on the order as
the base price to be used to calculate the range of discretion and
Stop orders) as well as all closing-only orders (MOC, marketable
LOC, and CO orders opposite the imbalance) may be executed in full.
Pre-closing Order Imbalance Information is disseminated every
fifteen seconds between 3:40 p.m. and 3:50 p.m.; thereafter, it is
disseminated every five seconds between 3:50 p.m. and 4:00 p.m.
Commencing at 3:55 p.m., the Order Imbalance Information
disseminated by the Exchange also includes d-Quotes and all other e-
Quotes containing pegging instructions eligible to participate in
the closing transaction and Stop orders.
---------------------------------------------------------------------------
Second, in addition to disseminating Order Imbalance Information,
the Exchange's Rules require the timely communication of price
dislocations and unusual market situations, including delayed openings,
to the marketplace. Rule 15(a) provides that if the opening transaction
in a security will be at a price that represents a change of more than
the ``applicable price change'' specified in the Rule (representing a
numerical or percentage change from the security's closing price per
share or, in the case of an IPO, the security's offering price), the
DMM arranging the opening transaction or the Exchange must issue a pre-
opening indication (a ``Rule 15 Indication''), which represents a range
of where a security may open. The Rule 15 Indication is a price range
that is published on the Exchange's proprietary data feeds prior to the
scheduled opening time. A Rule 15 Indication includes the security and
the price range within which the DMM anticipates the opening
transaction will occur, and would include any orally-represented Floor
broker interest for the open.
Similarly, Rule 123D Mandatory Indications are required for an
opening that will result in a ``significant'' price change from the
previous close. For securities priced under $10, indications are
required under Rule 123D(1) if the price change is one dollar or more;
for securities between $10 and $99.99, indications are required for
price movements of the lesser of 10% or three dollars; and for
securities over $100, indications are required for price movements of
five dollars or more. Rule 123D(1) requires DMMs to disseminate one or
more indications in connection with any delayed opening where a
security has not opened or been quoted by 10 a.m. (``Rule 123D
Mandatory Indication''). The DMM is responsible for publishing the Rule
123D Mandatory Indication and, when determining the price range for the
indication, take into consideration Floor broker interest that has been
orally entered and what, at a given time, the DMM anticipates the
dealer participation in the opening transaction would be. Rule 123D
Mandatory Indications are published to the Consolidated Tape.
Importantly, all Rule 123D Mandatory Indications require the
supervision and approval of a Floor Official. Rule 123D approvals are
therefore similar to Rule 79A.20 approvals. In fact, almost half of
Floor Official approvals under Rule 79A.20 also occur in situations
where a mandatory indication was published pursuant to Rule 123D. In
these circumstances, requiring the Floor Official to separately approve
a price movement under Rule 79A.20 would be duplicative.
The Exchange further notes that the Floor Official approval
requirements of Rule 79A.20 impede the ability of a DMM to open or
close a security electronically at the Exchange if the security were to
open one or two points away from the last sale. As a practical matter,
the only way for Floor Officials to approve trades more than one or two
dollars away from the last sale in the case of an electronic open or
close would be to turn a fast market into a ``slow'' one and
potentially open the security after 9:30 a.m., which was one of the
rationales for eliminating virtually all Rule 79A.20 approvals in
2007.\19\
---------------------------------------------------------------------------
\19\ See Release No. 56209, supra note 8 at 45291.
---------------------------------------------------------------------------
With respect to the separate Rule 79A.20 requirement that the DMM
obtain Floor Official approvals when the market is fast and the DMM as
dealer is reaching across the market, i.e., selling at the bid and
buying at the offer, the Exchange similarly believes that such
approvals are unnecessary and duplicative of other safeguards. As noted
above, the application of Rule 79A.20 is limited to the opening,
reopenings and the close, where this scenario would not arise.
Moreover, the Exchange believes that obtaining Floor Official approval
when a DMM is reaching across a fast market is impractical in today's
market place because, especially in the most actively traded Exchange
securities, the automated marketplace simply moves too fast.
Even if obtaining Floor Official approvals were practical, the
Exchange believes that the combination of volatility and system
controls in place that were unavailable in 2007 render such approvals
unnecessary. DMM dealer trades one or two points away from the last
sale that reach across the market would continue to be subject to the
Limit Up/Limit Down (``LULD'') price controls, as provided for in Rule
80C(a)(4), the Trading Collars, as provided for in Rule 1000(c), and
the numerical guidelines for determining whether a clearly erroneous
execution has occurred under Rule 128. In addition, as the Exchange
noted in a different context,\20\ as the marketplace has become more
electronic, DMM units have increased their utilization of technology to
reduce risk exposure by using algorithms to adjust prices quickly in
response to market dynamics, which in turn has contributed to reducing
the potential for significant and/or rapid movements in the market and
help DMMs satisfy their obligation to maintain a fair and orderly
market in assigned securities pursuant to Rule 104, particularly in
times of market stress. The Exchange believes that these risk controls
provide a further significant limitation on the ability of DMMs to
initiate a move of more than one or two dollars away from the last sale
trade in fast markets, especially in light of the tight spreads on the
Exchange.\21\
---------------------------------------------------------------------------
\20\ See Securities Exchange Act Release No. 71360 (January 21,
2014), 79 FR 4366, 4367 (January 27, 2014) (SR-NYSE-2014-02).
\21\ For instance, in May 2015, the quoted spread on the NYSE
for stocks below $20 a share was $0.048; the quoted spread for
stocks above $20 was $0.466. For all NYSE-listed securities, the
quoted spread in May 2015 was $0.314.
---------------------------------------------------------------------------
Finally, DMM pricing decisions at the open and close and during
fast markets are subject to specific DMM obligations with respect to
the quality of the markets in securities to which they are assigned. In
general, transactions on the Exchange by a DMM for the DMM's account
must be effected in a reasonable and orderly manner in relation to the
condition of the general market and the market in the particular stock.
As noted, DMMs have affirmative obligations under Rule 104(a) to
engage in a course of dealings for their own account to assist in the
maintenance of a fair and orderly market insofar as reasonably
practicable. Specifically, Rule 104(f)(ii) sets forth the DMM's
obligation to act as reasonably necessary to ensure appropriate depth
and maintain reasonable price variations between transactions (also
known as price continuity) and prevent unexpected variations in
trading. Further, under Rule 123D(1), openings and reopenings must be
fair and orderly, reflecting the DMM's professional assessment of
market conditions at the time, and appropriate consideration of the
balance of supply and demand as reflected by orders represented in the
market. The Exchange also supplies DMMs with suggested Depth Guidelines
for each security in which a DMM is registered, and DMMs are expected
to quote and trade with reference to the Depth Guidelines. Further, the
DMM's affirmative obligation includes obligations to re-enter the
market when reaching across to execute against available interest. For
instance, under Rule 104(h), DMMs can engage in conditional
transactions that establish or increase a position and that reach
across the market without restriction
[[Page 50368]]
provided such transactions are followed by appropriate re-entry on the
opposite side of the market commensurate with the size of the DMM's
transaction.\22\ The Exchange issues guidelines, called price
participation points (``PPP''), that identify the price at or before
which a DMM is expected to re-enter the market after effecting a
conditional transaction.\23\ DMM trading activity on the Exchange is
actively monitored for compliance with each of these obligations.
---------------------------------------------------------------------------
\22\ See Rule 104(h)(iii). Immediate re-entry is required after
certain Conditional Transactions.
\23\ See NYSE Rule 104(h)(iii)(A).
---------------------------------------------------------------------------
The Exchange believes that the availability and dissemination of
Order Imbalance Information, Rule 15 Indications and 123D Mandatory
Indications, together with the DMM's existing affirmative and other
obligations pursuant to Rule 104, provide an appropriate framework in
today's market structure for ensuring that opening or closing
transactions that occur at a price significantly away from the last
sale price are communicated to all market participants. In particular,
because of this transparency, the open and close are subject to greater
scrutiny by all market participants, which in of itself serves as a
check on where a DMM opens or closes a security. The Exchange therefore
believes that the need for a Floor Official to review a DMM's actions
at the open or close, which was adopted in a time when there was no
market-wide transparency regarding pricing of the open or close, is
redundant of existing oversight of the open and close.
For all of these reasons, the Exchange believes that requiring
separate Floor Official approvals for one and two dollar price
movements is no longer necessary.
The Exchange also proposes to delete references to Rule 79A.20 from
Rules 48, 80C and 9217. In the case of Rule 48, the reference to be
removed would be to Rule 79A.30. Rule 48 was not updated when the text
of the Rule was moved from Supplementary Material .30 to .20.\24\ The
Exchange believes these proposed changes will add transparency and
clarity to the Exchange's rules.
---------------------------------------------------------------------------
\24\ See note 11 supra.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\25\ in general, and furthers the
objectives of section 6(b)(5) of the Act,\26\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and protect investors and the public interest. In
particular, the Exchange believes that eliminating Rule 79A.20 would
remove impediments to and perfect the mechanism of a free and open
market and a national market system by eliminating redundant approvals
from the remaining manual processes at the open and close of trading.
The Exchange believes that eliminating Rule 79A.20 approvals would not
be inconsistent with the public interest and the protection of
investors because the transparency surrounding the open and close and
the information available to the marketplace enables investors and the
public to assess whether a security would open or close outside the one
or two point parameter, thereby obviating the need for a single Floor
Official to oversight the open and close. Further, the Exchange
believes that eliminating Rule 79A.20 approvals would not be
inconsistent with the public interest and the protection of investors
because other safeguards will remain in place to ensure that DMMs
maintain appropriate price continuity and depth and do not transact at
unduly wide price variations, thereby establishing substantially the
same result. As noted above, pursuant to Rule 123D, Floor Officials
would remain involved in supervising when the open would occur at a
price significantly away from the last sale, which is when the majority
of Rule 79A.20 approvals currently occur, and DMM trading will also
remain subject to Exchange rules, including the obligation to maintain
a fair and orderly market under Rule 104.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78f(b).
\26\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange further believes that deleting corresponding
references to Rule 79A.20 in other rules would remove impediments to
and perfects the mechanism of a free and open market by reducing
potential confusion and adding transparency and clarity to the
Exchange's rules, thereby ensuring that members, regulators and the
public can more easily navigate and understand the Exchange's rulebook.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not intended to address competitive issues but rather to eliminate
redundant approvals of manual trades on its trading Floor.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to section
19(b)(3)(A)(iii) of the Act \27\ and Rule 19b-4(f)(6) thereunder.\28\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------
\27\ 15 U.S.C. 78s(b)(3)(A)(iii).
\28\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \29\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\30\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
---------------------------------------------------------------------------
\29\ 17 CFR 240.19b-4(f)(6).
\30\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
section 19(b)(2)(B) \31\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\31\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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:
[[Page 50369]]
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-2015-33 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2015-33. 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-2015-33 and should be
submitted on or before September 9, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
---------------------------------------------------------------------------
\32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Brent J. Fields,
Secretary.
[FR Doc. 2015-20416 Filed 8-18-15; 8:45 am]
BILLING CODE 8011-01-P