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 (http://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 http://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 (http://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 (http://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 http:// 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]


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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.
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    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\
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    \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 (http://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 (http://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\
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    \32\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-20416 Filed 8-18-15; 8:45 am]
 BILLING CODE 8011-01-P