Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Establishing Rules To Comply With the Requirements of the Plan To Implement a Tick Size Pilot Plan Submitted to the Commission Pursuant to Rule 608 of Regulation NMS Under the Act, 66065-66069 [2015-27349]
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Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Notices
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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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–
ISE–2015–34 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–ISE–2015–34. 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–ISE–
2015–34, and should be submitted on or
before November 18, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Brent J. Fields,
Secretary.
[FR Doc. 2015–27352 Filed 10–27–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76229; File No. SR–NYSE–
2015–46]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change
Establishing Rules To Comply With the
Requirements of the Plan To
Implement a Tick Size Pilot Plan
Submitted to the Commission
Pursuant to Rule 608 of Regulation
NMS Under the Act
October 22, 2015.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on October
9, 2015, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory 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 establish
rules to comply with the requirements
of the Plan to Implement a Tick Size
Pilot Plan submitted to the Commission
pursuant to Rule 608 of Regulation NMS
under the Act (the ‘‘Plan’’). 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.
17 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
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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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 establish
rules to require its member
organizations to comply with the
requirements of the Plan to Implement
a Tick Size Pilot Program (the ‘‘Plan’’),4
which is designed to study and assess
the impact of increment conventions on
the liquidity and trading of the common
stocks of small capitalization
companies. The Exchange proposes
changes to its rules for a two-year pilot
period that coincides with the pilot
period for the Plan, which is currently
scheduled as a two year pilot to begin
on May 6, 2016.
Background
On August 25, 2014, NYSE Group,
Inc., on behalf of BATS Exchange, Inc.,
BATS Y-Exchange, Inc., Chicago Stock
Exchange, Inc., EDGA Exchange, Inc.,
EDGX Exchange, Inc., Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’), NASDAQ OMX BX, Inc.,
NASDAQ OMX PHLX LLC, the Nasdaq
Stock Market LLC, New York Stock
Exchange LLC, NYSE MKT LLC, and
NYSE Arca, Inc. (collectively
‘‘Participants’’), filed with the
Commission, pursuant to Section 11A of
the Act 5 and Rule 608 of Regulation
NMS thereunder, the Plan to Implement
a Tick Size Pilot Program.6 The
Participants filed the Plan to comply
with an order issued by the Commission
on June 24, 2014 (the ‘‘June 2014
4 See Securities and Exchange Act Release No.
74892 (May 6, 2015), 80 FR 27513 (File No. 4–657)
(‘‘Tick Plan Approval Order’’).
5 15 U.S.C. 78k–1.
6 See Letter from Brendon J. Weiss, Vice
President, Intercontinental Exchange, Inc., to
Secretary, Commission, dated August 25, 2014.
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Order’’).7 The Plan 8 was published for
comment in the Federal Register on
November 7, 2014,9 and approved by
the Commission, as modified, on May 6,
2015.10
The Plan is designed to allow the
Commission, market participants, and
the public to study and assess the
impact of increment conventions on the
liquidity and trading of the common
stocks of small capitalization
companies. The Commission plans to
use the Tick Size Pilot Program to
access whether wider tick sizes enhance
the market quality of Pilot Securities for
the benefit of issuers and investors.
Each Participant is required to comply
with, and to enforce compliance by its
member organizations, as applicable,
with the provisions of the Plan.
On October 9, 2015, the Operating
Committee approved the Exchange’s
proposed rules as model Participant
rules that would require compliance by
a Participant’s members with the
provisions of the Plan, as applicable,
and would establish written policies
and procedures reasonably designed to
comply with applicable quoting and
trading requirements specified in the
Plan.11 As described more fully below,
the proposed rules would require
member organizations to comply with
the Plan and provide for the widening
of quoting and trading increments for
Pilot Securities, consistent with the
Plan.
The Tick Size Pilot Program will
include stocks of companies with $3
billion or less in market capitalization,
an average daily trading volume of one
million shares or less, and a volume
weighted average price of at least $2.00
for every trading day. The Tick Pilot
Program will consist of a control group
of approximately 1400 Pilot Securities
and three test groups with 400 Pilot
Securities in each selected by a
stratified sampling.12 During the pilot,
Pilot Securities in the control group will
7 See Securities Exchange Act Release No 72460
(June 24, 2014), 79 FR 36840 (June 30, 2014).
8 Unless otherwise specified, capitalized terms
used in this rule filing are based on the defined
terms of the Plan.
9 See Securities and Exchange Act Release No.
73511 (November 3, 2014), 79 FR 66423 (File No.
4–657) (Tick Plan Filing).
10 See Tick Plan Approval Order, supra note 5.
11 The Operating Committee is required under
Section III(C)(2) of the Plan to ‘‘monitor the
procedures established pursuant to the Plan and
advise Participants with respect to any deficiencies,
problems, or recommendations as the Operating
Committee may deem appropriate.’’ The Operating
Committee is also required to ‘‘establish
specifications and procedures for the
implementation and operation of the Plan that are
consistent with the provisions of the Plan.’’
12 See Section V of the Plan for identification of
Pilot Securities, including criteria for selection and
grouping.
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be quoted at the current tick size
increment of $0.01 per share and will
trade at the currently permitted
increments. Pilot Securities in the first
test group (‘‘Test Group One’’) will be
quoted in $0.05 minimum increments
but will continue to trade at any price
increment that is currently permitted.13
Pilot Securities in the second test group
(‘‘Test Group Two’’) will be quoted in
$0.05 minimum increments and will
trade at $0.05 minimum increments
subject to a midpoint exception, a retail
investor exception, and a negotiated
trade exception.14 Pilot Securities in the
third test group (‘‘Test Group Three’’)
will be subject to the same terms as Test
Group Two and also will be subject to
the ‘‘Trade-at’’ requirement to prevent
price matching by a person not
displaying at a price of a Trading
Center’s ‘‘Best Protected Bid or ‘‘Best
Protected Offer,’’ unless an enumerated
exception applies.15 In addition to the
exceptions provided under Test Group
Two, an exception for Block Size orders
and exceptions that mirror those under
Rule 611 of Regulation NMS 16 will
apply to the Trade-at requirement.
The Tick Pilot Program also contains
requirements for the collection and
transmission of data to the Commission
and the public. A variety of data
generated during the Tick Pilot Program
will be released publicly on an
aggregated basis to assist in analyzing
the impact of wider tick sizes on smaller
capitalization stocks.17
Proposed Rule 67
The Plan requires the Exchange to
establish, maintain, and enforce written
policies and procedures that are
reasonably designed to comply with
applicable quoting and trading
requirements specified in the Plan.18
Accordingly, the Exchange is proposing
new Rule 67 to require its member
organizations to comply with the
quoting and trading provisions of the
Plan. The proposed Rule is also
designed to ensure the Exchange’s
compliance with the Plan.
13 See
Section VI(B) of the Plan. Pilot Securities
in Test Group One will be subject to a midpoint
exception and a retail investor exception.
14 See Section VI(C) of the Plan.
15 See Section VI(D) of the Plan.
16 17 CFR 242.611.
17 See Section VII of the Plan.
18 The Exchange is also required by the Plan to
develop appropriate policies and procedures that
provide for data collection and reporting to the
Commission of data described in Appendixes B and
C of the Plan. The Exchange plans to separately
propose rules that would require compliance by its
member organizations with the collection of data
provisions of the Plan described in Section VII of
the Plan, and has reserved Paragraph (b) for such
rules.
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Proposed paragraph (a)(1) of new Rule
67 would establish the following
defined terms:
• ‘‘Plan’’ means the Tick Size Pilot
Plan submitted to the Commission
pursuant to Rule 608(a)(3) of Regulation
NMS under the Act;
• ‘‘Pilot Test Groups’’ means the three
test groups established under the Plan,
consisting of 400 Pilot Securities each,
which satisfy the respective criteria
established by the Plan for each such
test group.
• ‘‘Trading Center’’ would have the
meaning provided in Rule 600(b)(78) of
Regulation NMS under the Exchange
Act and, for purposes of a Trading
Center operated by a broker-dealer,
means an independent trading unit, as
defined under Rule 200(f) of Regulation
SHO, within such broker-dealer.19
• ‘‘Retail Investor Order’’ would
mean an agency order or a riskless
principal order that meets the criteria of
FINRA Rule 5320.03 that originates
from a natural person and is submitted
to the Exchange by a retail member
organization (a member organization, or
a division thereof, that has been
approved by the Exchange under the
Exchange’s retail liquidity program rule
(Rule 107C) to submit Retail Investor
Orders), provided that no change is
made to the terms of the order with
respect to price or side of market and
the order does not originate from a
trading algorithm or any other
computerized methodology. A Retail
Investor Order is an immediate or
cancel order that operates in accordance
with the Exchange’s retail liquidity
program rule (Rule 107C). A Retail
Investor Order may be an odd lot, round
lot, or partial round lot.20
• Paragraph (a)(1)(E) would provide
that all capitalized terms not otherwise
defined in this rule shall have the
meanings set forth in the Plan,
Regulation NMS under the Act, or
Exchange rules, as applicable.
Proposed Paragraph (a)(2) would state
that the Exchange is a Participant in,
19 17 CFR 242.200. Independent trading unit
aggregation is available if traders in an aggregation
unit pursue only the particular trading objective(s)
or strategy(s) of that aggregation unit and do not
coordinate that strategy with any other aggregation
unit. Therefore, a Trading Center cannot rely on
quotations displayed by that broker dealer from a
different independent trading unit. As an example,
an agency desk of a broker-dealer cannot rely on the
quotation of a proprietary desk in a separate
independent trading unit at that same broker-dealer.
20 This definition is the approved definition for
‘‘Retail Investor Order’’ as contemplated by the
Plan. It is also the same definition as given to
‘‘Retail Orders’’ pursuant to the approved rules of
other national securities exchanges. See NYSE Rule
107C(a)(3). See also NYSE Arca, Inc. Rule 7.44(a)(3),
BATS Y-Exchange, Inc. Rule 11.24(a)(2) and
NASDAQ Stock Market LLC Rule 4780(a)(2).
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and subject to the applicable
requirements of, the Plan; proposed
Paragraph (a)(3) would require member
organizations to establish, maintain and
enforce written policies and procedures
that are reasonably designed to comply
with the applicable requirements of the
Plan, which would allow the Exchange
to enforce compliance by its member
organizations with the provisions of the
Plan, as required pursuant to Section
II(B) of the Plan.
In addition, Paragraph (a)(4) would
provide that Exchange systems would
not display, quote or trade in violation
of the applicable quoting and trading
requirements for a Pilot Security
specified in the Plan and this proposed
rule, unless such quotation or
transaction is specifically exempted
under the Plan.21
The Exchange also proposes to add
Rule 67(a)(5) to provide for the
treatment of Pilot Securities that drop
below a $1.00 value during the Pilot
Period.22 The Exchange proposes that if
the price of a Pilot Security drops below
$1.00 during regular trading on any
given business day, such Pilot Security
would continue to be subject to the Plan
and the requirements described below
that necessitate member organizations to
comply with the specific quoting and
trading obligations for each respective
Pilot Test Group under the Plan, and
would continue to trade in accordance
with the proposed rules below as if the
price of the Pilot Security had not
dropped below $1.00. However, if the
Closing Price of a Pilot Security on any
given business day is below $1.00, such
Pilot Security would be moved out of its
respective Pilot Test Group into the
control group (which consists of Pilot
Securities not placed into a Pilot Test
Group), and may then be quoted and
traded at any price increment that is
currently permitted by Exchange rules
for the remainder of the Pilot Period.
Notwithstanding anything contained
herein to the contrary, the Exchange
proposes that, at all times during the
Pilot Period, Pilot Securities (whether in
the control group or any Pilot Test
Group) would continue to be subject to
the data collection rules, which will be
enumerated in reserved Rule 67(b).
The Exchange proposes Rules 67(c)–
(e), which would require member
organizations to comply with the
specific quoting and trading obligations
21 The Exchange is still evaluating its internal
policies and procedures to ensure compliance with
the Plan, and plans to separately propose rules that
would address violations of the Plan.
22 In order to provide for such treatment, the
Exchange, on behalf of all Participants under the
Plan, also plans to file a request for exemption
under Rule 608(e) of Regulation NMS from the Plan.
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for each Pilot Test Group under the
Plan. With regard to Pilot Securities in
Test Group One, proposed Rule 67(c)
would provide that no member
organization may display, rank, or
accept from any person any displayable
or non-displayable bids or offers, orders,
or indications of interest in increments
other than $0.05. However, orders
priced to trade at the midpoint of the
National Best Bid and National Best
Offer (‘‘NBBO’’) or Best Protected Bid
and Best Protect Offer (‘‘PBBO’’) and
orders entered in the Exchange’s Retail
Liquidity Program as Retail Price
Improvement Orders (‘‘Retail Price
Improvement Order’’) 23 may be ranked
and accepted in increments of less than
$0.05. Pilot Securities in Test Group
One may continue to trade at any price
increment that is currently permitted by
Rule 62.10.24
With regard to Pilot Securities in Test
Group Two, proposed Rule 67(d)(1)
would provide that such Pilot Securities
would be subject to all of the same
quoting requirements as described
above for Pilot Securities in Test Group
One, along with the applicable quoting
exceptions. In addition, proposed Rule
67(d)(2) would provide that, absent one
of the listed exceptions in proposed
Rule 67(d)(3) enumerated below, no
member organization may execute
orders in any Pilot Security in Test
Group Two in price increments other
than $0.05. The $0.05 trading increment
would apply to all trades, including
Brokered Cross Trades.
Paragraph (d)(3) would set forth
further requirements for Pilot Securities
in Test Group Two. Specifically,
member organizations trading Pilot
Securities in Test Group Two would be
allowed to trade in increments less than
$0.05 under the following
circumstances:
(A) Trading may occur at the
midpoint between the NBBO or PBBO;
(B) Retail Investor Orders may be
provided with price improvement that
is at least $0.005 better than the Best
Protected Bid or the Best Protected
Offer; and
(C) Negotiated Trades may trade in
increments less than $0.05.
Paragraph (e)(1)–(e)(3) would set forth
the requirements for Pilot Securities in
Test Group Three. Member
23 A Retail Price Improvement Order consists of
non-displayed interest in NYSE-listed securities
that is priced better than the Best Protected Bid or
Best Protected Offer, as such terms are defined in
Regulation NMS Rule 600(b)(57), by at least $0.001
and that is identified as such. See NYSE Rule
107C(a)(4).
24 Rule 62.10 describes the minimum price
variation for quoting and entry of orders in equity
securities admitted to dealings on the Exchange.
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66067
organizations quoting or trading such
Pilot Securities would be subject to all
of the same quoting and trading
requirements as described above for
Pilot Securities in Test Group Two,
including the quoting and trading
exceptions applicable to Test Group
Two Pilot Securities. In addition,
proposed Paragraph (e)(4) would
provide for an additional prohibition on
Pilot Securities in Test Group Three
referred to as the ‘‘Trade-at
Prohibition.’’ 25 Paragraph (e)(4)(B)
would provide that, absent one of the
listed exceptions in proposed Rule
67(e)(4)(C) enumerated below, no
member organization may execute a sell
order for a Pilot Security in Test Group
Three at the price of a Protected Bid or
execute a buy order for a Pilot Security
in Test Group Three at the price of a
Protected Offer.
Proposed Rule 67(e)(4)(C) would
allow member organizations to execute
a sell order for a Pilot Security in Test
Group Three at the price of a Protected
Bid or execute a buy order for a Pilot
Security in Test Group Three at the
price of a Protected Offer if any of the
following circumstances exist:
(A) The order is executed by a
Trading Center within a member
organization that has a displayed
quotation for the account of that Trading
Center on a principal basis, via either a
processor or an SRO Quotation Feed,26
at a price equal to the traded-at
Protected Quotation, that was displayed
before the order was received,27 but
only up to the full displayed size of the
Trading Center’s previously displayed
quote;
(B) The order consists of odd lot
orders and odd lot portions of partial
round lot (‘‘PRL’’) orders that are
displayed on an SRO Quotation Feed, at
a price equal to the traded-at Protected
25 Proposed Rule 67(e)(4)(A) would define the
‘‘Trade-at Prohibition’’ to mean the prohibition
against executions by a Trading Center of a sell
order for a Pilot Security at the price of a Protected
Bid or the execution of a buy order for a Pilot
Security at the price of a Protected Offer during
regular trading hours.
26 By requiring the displayed quotation to be for
the account of ‘‘that Trading Center,’’ the Trading
Center cannot rely on any quotations it may put up
on an agency basis, including a riskless principal
basis. A Trading Center that is a broker-dealer also
cannot rely on any quotation that is not a displayed
quotation for its own account, such as the quotation
of another broker-dealer, or customer of such
broker-dealer.
27 The Exchange is proposing to adopt this
limitation to ensure that a Trading Center does not
display a quotation after the time of order receipt
solely for the purpose of trading at the price of a
protected quotation without routing to that
protected quotation.
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Quotation, but only up to the size of the
displayed quotation; 28
(C) The order is of Block Size 29 at the
time of origin and may not be:
(i) An aggregation of non-block orders;
(ii) broken into orders smaller than
Block Size prior to submitting the order
to a Trading Center for execution; or
(iii) executed on multiple Trading
Centers; 30
(D) The order is a Retail Investor
Order executed with at least $0.005
price improvement;
(E) The order is executed when the
Trading Center displaying the Protected
Quotation that was traded at was
experiencing a failure, material delay, or
malfunction of its systems or
equipment;
(F) The order is executed as part of a
transaction that was not a ‘‘regular way’’
contract;
(G) The order is executed as part of a
single-priced opening, reopening, or
closing transaction on the Exchange;
(H) The order is executed when a
Protected Bid was priced higher than a
Protected Offer in the Pilot Security in
Test Group Three;
(I) The order is identified as a Tradeat Intermarket Sweep Order;
(J) The order is executed by a Trading
Center that simultaneously routed
Trade-at Intermarket Sweep Orders to
execute against the full displayed size of
the Protected Quotation that was traded
at;
(K) The order is executed as part of a
Negotiated Trade;
28 Proposed Supplementary Material .10 to Rule
67(e)(4)(C)(ii) would further provide that, for
purposes of sub-paragraph (ii), a member
organization is prohibited from breaking a round lot
order or round lot portion of a PRL into odd lot
orders to avoid the restrictions contained in this
Rule.
29 ‘‘Block Size’’ is defined in the Plan as an order
(1) of at least 5,000 shares or (2) for a quantity of
stock having a market value of at least $100,000.
30 Once a Block Size order or portion of such
Block Size order is routed from one Trading Center
to another Trading Center in compliance with Rule
611 of Regulation NMS, the Block Size order would
lose the Trade-at exemption provided under
proposed Rule 67(e)(4)(C)(C), unless the Block Size
remaining after the first route and execution meets
the Block Size definition under the Plan (See
footnote 28). For example, if an exchange has a
Protected Bid of 3,000 shares, with 2,000 shares in
reserve, and receives a 5,000 share order to sell, the
exchange would be able to execute the entire 5,000
share order without having to route to an away
market at any other Protected Bid at the same price.
If, however, that exchange only has 1,000 shares in
reserve, the entire order would not be able to be
executed on that exchange, and the exchange would
only be able to execute 3,000 shares and route the
rest to away markets at other Protected Bids at the
same price, before executing the 1,000 shares in
reserve. The same analysis would hold true at the
next price point, if the size of the incoming order
would exceed all available shares at the first price,
and the remaining shares to be executed would be
5,000 shares or more.
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(L) The order is executed when the
Trading Center displaying the Protected
Quotation that was traded at had
displayed, within one second prior to
execution of the transaction that
constituted the Trade-at, a Best
Protected Bid or Best Protected Offer, as
applicable, for the Pilot Security in Test
Group Three with a price that was
inferior to the price of the Trade-at
transaction;
(M) The order is executed by a
Trading Center which, at the time of
order receipt, the Trading Center had
guaranteed an execution at no worse
than a specified price (a ‘‘stopped
order’’), where:
(i) The stopped order was for the
account of a customer;
(ii) The customer agreed to the
specified price on an order-by-order
basis; and
(iii) The price of the Trade-at
transaction was, for a stopped buy
order, equal to the National Best Bid in
the Pilot Security in Test Group Three
at the time of execution or, for a stopped
sell order, equal to the National Best
Offer in the Pilot Security in Test Group
Three at the time of execution; or
(N) The order is for a fractional share
of a Pilot Security in Test Group Three,
provided that such fractional share
order was not the result of breaking an
order for one or more whole shares of
a Pilot Security in Test Group Three
into orders for fractional shares or was
not otherwise effected to evade the
requirements of the Trade-at Prohibition
or any other provisions of the Plan.
Finally, Proposed Rule 67(e)(4)(D)
would prevent member organizations
from breaking an order into smaller
orders or otherwise effecting or
executing an order to evade the
requirements of the Trade-at Prohibition
or any other provisions of the Plan.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,31 in general, and furthers the
objectives of Section 6(b)(5) of the Act,32
in particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The Exchange believes
that the proposed rule change is
consistent with the Act because it
ensures that the Exchange and its
member organizations would be in
31 15
32 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00086
Fmt 4703
compliance with a Plan approved by the
Commission pursuant to an order issued
by the Commission in reliance on
Section 11A of the Act.33 Such
approved Plan gives the Exchange
authority to establish, maintain, and
enforce written policies and procedures
that are reasonably designed to comply
with applicable quoting and trading
requirements specified in the Plan. The
Exchange believes that the proposed
rule change is consistent with the
authority granted to it by the Plan to
establish specifications and procedures
for the implementation and operation of
the Plan that are consistent with the
provisions of the Plan. Likewise, the
Exchange believes that the proposed
rule change provides interpretations of
the Plan that are consistent with the
Act, in general, and furthers the
objectives of the Act, in particular.
Furthermore, the Exchange is a
Participant under the Plan and subject,
itself, to the provisions of the Plan. The
proposed rule change ensures that the
Exchange’s systems would not display
or execute trading interests outside the
requirements specified in such Plan.
The proposal would also help allow
market participants to continue to trade
NMS Stocks within quoting and trading
requirements that are in compliance
with the Plan, with certainty on how
certain orders and trading interests
would be treated. This, in turn, will
help encourage market participants to
continue to provide liquidity in the
marketplace.
Because the Plan supports further
examination and analysis on the impact
of tick sizes on the trading and liquidity
of the securities of small capitalization
companies, and the Commission
believes that altering tick sizes could
result in significant market-wide
benefits and improvements to liquidity
and capital formation, adopting rules
that enforce compliance by its member
organizations with the provisions of the
Plan would help promote liquidity in
the marketplace and perfect the
mechanism of a free and open market
and national market system.
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 changes are being made to
establish, maintain, and enforce written
policies and procedures that are
reasonably designed to comply with the
trading and quoting requirements
33 15
Sfmt 4703
E:\FR\FM\28OCN1.SGM
U.S.C. 78k–1.
28OCN1
Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Notices
specified in the Plan, of which other
equities exchanges are also Participants.
Other competing national securities
exchanges are subject to the same
trading and quoting requirements
specified in the Plan. Therefore, the
proposed changes would not impose
any burden on competition, while
providing certainty of treatment and
execution of trading interests on the
Exchange to market participants in NMS
Stocks that are acting in compliance
with the requirements specified in the
Plan.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or up to 90 days (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
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 Section, 100 F Street NE.,
Washington, DC 20549–1090 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing will also be available for
inspection and copying at the NYSE’s
principal office and on its Internet Web
site at www.nyse.com. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–NYSE–2015–46 and should
be submitted on or before November 18,
2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
Brent J. Fields,
Secretary.
[FR Doc. 2015–27349 Filed 10–27–15; 8:45 am]
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–2015–46 on the subject line.
mstockstill on DSK4VPTVN1PROD with NOTICES
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:
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Rule 20.6, Nullification
and Adjustment of Options
Transactions Including Obvious Errors
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2015–46. 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
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
20, 2015, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
VerDate Sep<11>2014
19:16 Oct 27, 2015
Jkt 238001
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76231; File No. SR–BATS–
2015–91]
October 22, 2015.
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange has
designated this proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A) of the
Act 3 and Rule 19b–4(f)(6)(iii)
thereunder,4 which renders it effective
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange filed a proposal for the
Exchange’s equity options platform
(‘‘BATS Options’’) to extend the pilot
program that suspends certain obvious
error provisions of Rule 20.6 during
limit up-limit down states in securities
that underlie options traded on the
Exchange.
The text of the proposed rule change
is available at the Exchange’s Web site
at www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Earlier this year, the Exchange
adopted new Rule 20.6 related to the
adjustment and nullification of
transactions that occur on the
Exchange’s equity options platform
(‘‘BATS Options’’).5 Interpretation and
Policy .01 to Rule 20.6 is designed to
address certain issues related to the Plan
to Address Extraordinary Market
Volatility Pursuant to Rule 608 of
3 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6)(iii).
5 See Securities Exchange Act Release No. 74556
(March 20, 2015), 80 FR 16031 (March 26, 2015)
(SR–BATS–2014–067).
4 17
34 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
66069
E:\FR\FM\28OCN1.SGM
28OCN1
]]>Agencies
[Federal Register Volume 80, Number 208 (Wednesday, October 28, 2015)]
[Notices]
[Pages 66065-66069]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27349]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76229; File No. SR-NYSE-2015-46]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Establishing Rules To Comply
With the Requirements of the Plan To Implement a Tick Size Pilot Plan
Submitted to the Commission Pursuant to Rule 608 of Regulation NMS
Under the Act
October 22, 2015.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on October 9, 2015, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been 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 establish rules to comply with the
requirements of the Plan to Implement a Tick Size Pilot Plan submitted
to the Commission pursuant to Rule 608 of Regulation NMS under the Act
(the ``Plan''). 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 establish rules to require its member
organizations to comply with the requirements of the Plan to Implement
a Tick Size Pilot Program (the ``Plan''),\4\ which is designed to study
and assess the impact of increment conventions on the liquidity and
trading of the common stocks of small capitalization companies. The
Exchange proposes changes to its rules for a two-year pilot period that
coincides with the pilot period for the Plan, which is currently
scheduled as a two year pilot to begin on May 6, 2016.
---------------------------------------------------------------------------
\4\ See Securities and Exchange Act Release No. 74892 (May 6,
2015), 80 FR 27513 (File No. 4-657) (``Tick Plan Approval Order'').
---------------------------------------------------------------------------
Background
On August 25, 2014, NYSE Group, Inc., on behalf of BATS Exchange,
Inc., BATS Y-Exchange, Inc., Chicago Stock Exchange, Inc., EDGA
Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory
Authority, Inc. (``FINRA''), NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC,
the Nasdaq Stock Market LLC, New York Stock Exchange LLC, NYSE MKT LLC,
and NYSE Arca, Inc. (collectively ``Participants''), filed with the
Commission, pursuant to Section 11A of the Act \5\ and Rule 608 of
Regulation NMS thereunder, the Plan to Implement a Tick Size Pilot
Program.\6\ The Participants filed the Plan to comply with an order
issued by the Commission on June 24, 2014 (the ``June 2014
[[Page 66066]]
Order'').\7\ The Plan \8\ was published for comment in the Federal
Register on November 7, 2014,\9\ and approved by the Commission, as
modified, on May 6, 2015.\10\
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78k-1.
\6\ See Letter from Brendon J. Weiss, Vice President,
Intercontinental Exchange, Inc., to Secretary, Commission, dated
August 25, 2014.
\7\ See Securities Exchange Act Release No 72460 (June 24,
2014), 79 FR 36840 (June 30, 2014).
\8\ Unless otherwise specified, capitalized terms used in this
rule filing are based on the defined terms of the Plan.
\9\ See Securities and Exchange Act Release No. 73511 (November
3, 2014), 79 FR 66423 (File No. 4-657) (Tick Plan Filing).
\10\ See Tick Plan Approval Order, supra note 5.
---------------------------------------------------------------------------
The Plan is designed to allow the Commission, market participants,
and the public to study and assess the impact of increment conventions
on the liquidity and trading of the common stocks of small
capitalization companies. The Commission plans to use the Tick Size
Pilot Program to access whether wider tick sizes enhance the market
quality of Pilot Securities for the benefit of issuers and investors.
Each Participant is required to comply with, and to enforce compliance
by its member organizations, as applicable, with the provisions of the
Plan.
On October 9, 2015, the Operating Committee approved the Exchange's
proposed rules as model Participant rules that would require compliance
by a Participant's members with the provisions of the Plan, as
applicable, and would establish written policies and procedures
reasonably designed to comply with applicable quoting and trading
requirements specified in the Plan.\11\ As described more fully below,
the proposed rules would require member organizations to comply with
the Plan and provide for the widening of quoting and trading increments
for Pilot Securities, consistent with the Plan.
---------------------------------------------------------------------------
\11\ The Operating Committee is required under Section III(C)(2)
of the Plan to ``monitor the procedures established pursuant to the
Plan and advise Participants with respect to any deficiencies,
problems, or recommendations as the Operating Committee may deem
appropriate.'' The Operating Committee is also required to
``establish specifications and procedures for the implementation and
operation of the Plan that are consistent with the provisions of the
Plan.''
---------------------------------------------------------------------------
The Tick Size Pilot Program will include stocks of companies with
$3 billion or less in market capitalization, an average daily trading
volume of one million shares or less, and a volume weighted average
price of at least $2.00 for every trading day. The Tick Pilot Program
will consist of a control group of approximately 1400 Pilot Securities
and three test groups with 400 Pilot Securities in each selected by a
stratified sampling.\12\ During the pilot, Pilot Securities in the
control group will be quoted at the current tick size increment of
$0.01 per share and will trade at the currently permitted increments.
Pilot Securities in the first test group (``Test Group One'') will be
quoted in $0.05 minimum increments but will continue to trade at any
price increment that is currently permitted.\13\ Pilot Securities in
the second test group (``Test Group Two'') will be quoted in $0.05
minimum increments and will trade at $0.05 minimum increments subject
to a midpoint exception, a retail investor exception, and a negotiated
trade exception.\14\ Pilot Securities in the third test group (``Test
Group Three'') will be subject to the same terms as Test Group Two and
also will be subject to the ``Trade-at'' requirement to prevent price
matching by a person not displaying at a price of a Trading Center's
``Best Protected Bid or ``Best Protected Offer,'' unless an enumerated
exception applies.\15\ In addition to the exceptions provided under
Test Group Two, an exception for Block Size orders and exceptions that
mirror those under Rule 611 of Regulation NMS \16\ will apply to the
Trade-at requirement.
---------------------------------------------------------------------------
\12\ See Section V of the Plan for identification of Pilot
Securities, including criteria for selection and grouping.
\13\ See Section VI(B) of the Plan. Pilot Securities in Test
Group One will be subject to a midpoint exception and a retail
investor exception.
\14\ See Section VI(C) of the Plan.
\15\ See Section VI(D) of the Plan.
\16\ 17 CFR 242.611.
---------------------------------------------------------------------------
The Tick Pilot Program also contains requirements for the
collection and transmission of data to the Commission and the public. A
variety of data generated during the Tick Pilot Program will be
released publicly on an aggregated basis to assist in analyzing the
impact of wider tick sizes on smaller capitalization stocks.\17\
---------------------------------------------------------------------------
\17\ See Section VII of the Plan.
---------------------------------------------------------------------------
Proposed Rule 67
The Plan requires the Exchange to establish, maintain, and enforce
written policies and procedures that are reasonably designed to comply
with applicable quoting and trading requirements specified in the
Plan.\18\ Accordingly, the Exchange is proposing new Rule 67 to require
its member organizations to comply with the quoting and trading
provisions of the Plan. The proposed Rule is also designed to ensure
the Exchange's compliance with the Plan.
---------------------------------------------------------------------------
\18\ The Exchange is also required by the Plan to develop
appropriate policies and procedures that provide for data collection
and reporting to the Commission of data described in Appendixes B
and C of the Plan. The Exchange plans to separately propose rules
that would require compliance by its member organizations with the
collection of data provisions of the Plan described in Section VII
of the Plan, and has reserved Paragraph (b) for such rules.
---------------------------------------------------------------------------
Proposed paragraph (a)(1) of new Rule 67 would establish the
following defined terms:
``Plan'' means the Tick Size Pilot Plan submitted to the
Commission pursuant to Rule 608(a)(3) of Regulation NMS under the Act;
``Pilot Test Groups'' means the three test groups
established under the Plan, consisting of 400 Pilot Securities each,
which satisfy the respective criteria established by the Plan for each
such test group.
``Trading Center'' would have the meaning provided in Rule
600(b)(78) of Regulation NMS under the Exchange Act and, for purposes
of a Trading Center operated by a broker-dealer, means an independent
trading unit, as defined under Rule 200(f) of Regulation SHO, within
such broker-dealer.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 242.200. Independent trading unit aggregation is
available if traders in an aggregation unit pursue only the
particular trading objective(s) or strategy(s) of that aggregation
unit and do not coordinate that strategy with any other aggregation
unit. Therefore, a Trading Center cannot rely on quotations
displayed by that broker dealer from a different independent trading
unit. As an example, an agency desk of a broker-dealer cannot rely
on the quotation of a proprietary desk in a separate independent
trading unit at that same broker-dealer.
---------------------------------------------------------------------------
``Retail Investor Order'' would mean an agency order or a
riskless principal order that meets the criteria of FINRA Rule 5320.03
that originates from a natural person and is submitted to the Exchange
by a retail member organization (a member organization, or a division
thereof, that has been approved by the Exchange under the Exchange's
retail liquidity program rule (Rule 107C) to submit Retail Investor
Orders), provided that no change is made to the terms of the order with
respect to price or side of market and the order does not originate
from a trading algorithm or any other computerized methodology. A
Retail Investor Order is an immediate or cancel order that operates in
accordance with the Exchange's retail liquidity program rule (Rule
107C). A Retail Investor Order may be an odd lot, round lot, or partial
round lot.\20\
---------------------------------------------------------------------------
\20\ This definition is the approved definition for ``Retail
Investor Order'' as contemplated by the Plan. It is also the same
definition as given to ``Retail Orders'' pursuant to the approved
rules of other national securities exchanges. See NYSE Rule
107C(a)(3). See also NYSE Arca, Inc. Rule 7.44(a)(3), BATS Y-
Exchange, Inc. Rule 11.24(a)(2) and NASDAQ Stock Market LLC Rule
4780(a)(2).
---------------------------------------------------------------------------
Paragraph (a)(1)(E) would provide that all capitalized
terms not otherwise defined in this rule shall have the meanings set
forth in the Plan, Regulation NMS under the Act, or Exchange rules, as
applicable.
Proposed Paragraph (a)(2) would state that the Exchange is a
Participant in,
[[Page 66067]]
and subject to the applicable requirements of, the Plan; proposed
Paragraph (a)(3) would require member organizations to establish,
maintain and enforce written policies and procedures that are
reasonably designed to comply with the applicable requirements of the
Plan, which would allow the Exchange to enforce compliance by its
member organizations with the provisions of the Plan, as required
pursuant to Section II(B) of the Plan.
In addition, Paragraph (a)(4) would provide that Exchange systems
would not display, quote or trade in violation of the applicable
quoting and trading requirements for a Pilot Security specified in the
Plan and this proposed rule, unless such quotation or transaction is
specifically exempted under the Plan.\21\
---------------------------------------------------------------------------
\21\ The Exchange is still evaluating its internal policies and
procedures to ensure compliance with the Plan, and plans to
separately propose rules that would address violations of the Plan.
---------------------------------------------------------------------------
The Exchange also proposes to add Rule 67(a)(5) to provide for the
treatment of Pilot Securities that drop below a $1.00 value during the
Pilot Period.\22\ The Exchange proposes that if the price of a Pilot
Security drops below $1.00 during regular trading on any given business
day, such Pilot Security would continue to be subject to the Plan and
the requirements described below that necessitate member organizations
to comply with the specific quoting and trading obligations for each
respective Pilot Test Group under the Plan, and would continue to trade
in accordance with the proposed rules below as if the price of the
Pilot Security had not dropped below $1.00. However, if the Closing
Price of a Pilot Security on any given business day is below $1.00,
such Pilot Security would be moved out of its respective Pilot Test
Group into the control group (which consists of Pilot Securities not
placed into a Pilot Test Group), and may then be quoted and traded at
any price increment that is currently permitted by Exchange rules for
the remainder of the Pilot Period. Notwithstanding anything contained
herein to the contrary, the Exchange proposes that, at all times during
the Pilot Period, Pilot Securities (whether in the control group or any
Pilot Test Group) would continue to be subject to the data collection
rules, which will be enumerated in reserved Rule 67(b).
---------------------------------------------------------------------------
\22\ In order to provide for such treatment, the Exchange, on
behalf of all Participants under the Plan, also plans to file a
request for exemption under Rule 608(e) of Regulation NMS from the
Plan.
---------------------------------------------------------------------------
The Exchange proposes Rules 67(c)-(e), which would require member
organizations to comply with the specific quoting and trading
obligations for each Pilot Test Group under the Plan. With regard to
Pilot Securities in Test Group One, proposed Rule 67(c) would provide
that no member organization may display, rank, or accept from any
person any displayable or non-displayable bids or offers, orders, or
indications of interest in increments other than $0.05. However, orders
priced to trade at the midpoint of the National Best Bid and National
Best Offer (``NBBO'') or Best Protected Bid and Best Protect Offer
(``PBBO'') and orders entered in the Exchange's Retail Liquidity
Program as Retail Price Improvement Orders (``Retail Price Improvement
Order'') \23\ may be ranked and accepted in increments of less than
$0.05. Pilot Securities in Test Group One may continue to trade at any
price increment that is currently permitted by Rule 62.10.\24\
---------------------------------------------------------------------------
\23\ A Retail Price Improvement Order consists of non-displayed
interest in NYSE-listed securities that is priced better than the
Best Protected Bid or Best Protected Offer, as such terms are
defined in Regulation NMS Rule 600(b)(57), by at least $0.001 and
that is identified as such. See NYSE Rule 107C(a)(4).
\24\ Rule 62.10 describes the minimum price variation for
quoting and entry of orders in equity securities admitted to
dealings on the Exchange.
---------------------------------------------------------------------------
With regard to Pilot Securities in Test Group Two, proposed Rule
67(d)(1) would provide that such Pilot Securities would be subject to
all of the same quoting requirements as described above for Pilot
Securities in Test Group One, along with the applicable quoting
exceptions. In addition, proposed Rule 67(d)(2) would provide that,
absent one of the listed exceptions in proposed Rule 67(d)(3)
enumerated below, no member organization may execute orders in any
Pilot Security in Test Group Two in price increments other than $0.05.
The $0.05 trading increment would apply to all trades, including
Brokered Cross Trades.
Paragraph (d)(3) would set forth further requirements for Pilot
Securities in Test Group Two. Specifically, member organizations
trading Pilot Securities in Test Group Two would be allowed to trade in
increments less than $0.05 under the following circumstances:
(A) Trading may occur at the midpoint between the NBBO or PBBO;
(B) Retail Investor Orders may be provided with price improvement
that is at least $0.005 better than the Best Protected Bid or the Best
Protected Offer; and
(C) Negotiated Trades may trade in increments less than $0.05.
Paragraph (e)(1)-(e)(3) would set forth the requirements for Pilot
Securities in Test Group Three. Member organizations quoting or trading
such Pilot Securities would be subject to all of the same quoting and
trading requirements as described above for Pilot Securities in Test
Group Two, including the quoting and trading exceptions applicable to
Test Group Two Pilot Securities. In addition, proposed Paragraph (e)(4)
would provide for an additional prohibition on Pilot Securities in Test
Group Three referred to as the ``Trade-at Prohibition.'' \25\ Paragraph
(e)(4)(B) would provide that, absent one of the listed exceptions in
proposed Rule 67(e)(4)(C) enumerated below, no member organization may
execute a sell order for a Pilot Security in Test Group Three at the
price of a Protected Bid or execute a buy order for a Pilot Security in
Test Group Three at the price of a Protected Offer.
---------------------------------------------------------------------------
\25\ Proposed Rule 67(e)(4)(A) would define the ``Trade-at
Prohibition'' to mean the prohibition against executions by a
Trading Center of a sell order for a Pilot Security at the price of
a Protected Bid or the execution of a buy order for a Pilot Security
at the price of a Protected Offer during regular trading hours.
---------------------------------------------------------------------------
Proposed Rule 67(e)(4)(C) would allow member organizations to
execute a sell order for a Pilot Security in Test Group Three at the
price of a Protected Bid or execute a buy order for a Pilot Security in
Test Group Three at the price of a Protected Offer if any of the
following circumstances exist:
(A) The order is executed by a Trading Center within a member
organization that has a displayed quotation for the account of that
Trading Center on a principal basis, via either a processor or an SRO
Quotation Feed,\26\ at a price equal to the traded-at Protected
Quotation, that was displayed before the order was received,\27\ but
only up to the full displayed size of the Trading Center's previously
displayed quote;
---------------------------------------------------------------------------
\26\ By requiring the displayed quotation to be for the account
of ``that Trading Center,'' the Trading Center cannot rely on any
quotations it may put up on an agency basis, including a riskless
principal basis. A Trading Center that is a broker-dealer also
cannot rely on any quotation that is not a displayed quotation for
its own account, such as the quotation of another broker-dealer, or
customer of such broker-dealer.
\27\ The Exchange is proposing to adopt this limitation to
ensure that a Trading Center does not display a quotation after the
time of order receipt solely for the purpose of trading at the price
of a protected quotation without routing to that protected
quotation.
---------------------------------------------------------------------------
(B) The order consists of odd lot orders and odd lot portions of
partial round lot (``PRL'') orders that are displayed on an SRO
Quotation Feed, at a price equal to the traded-at Protected
[[Page 66068]]
Quotation, but only up to the size of the displayed quotation; \28\
---------------------------------------------------------------------------
\28\ Proposed Supplementary Material .10 to Rule 67(e)(4)(C)(ii)
would further provide that, for purposes of sub-paragraph (ii), a
member organization is prohibited from breaking a round lot order or
round lot portion of a PRL into odd lot orders to avoid the
restrictions contained in this Rule.
---------------------------------------------------------------------------
(C) The order is of Block Size \29\ at the time of origin and may
not be:
---------------------------------------------------------------------------
\29\ ``Block Size'' is defined in the Plan as an order (1) of at
least 5,000 shares or (2) for a quantity of stock having a market
value of at least $100,000.
---------------------------------------------------------------------------
(i) An aggregation of non-block orders;
(ii) broken into orders smaller than Block Size prior to submitting
the order to a Trading Center for execution; or
(iii) executed on multiple Trading Centers; \30\
---------------------------------------------------------------------------
\30\ Once a Block Size order or portion of such Block Size order
is routed from one Trading Center to another Trading Center in
compliance with Rule 611 of Regulation NMS, the Block Size order
would lose the Trade-at exemption provided under proposed Rule
67(e)(4)(C)(C), unless the Block Size remaining after the first
route and execution meets the Block Size definition under the Plan
(See footnote 28). For example, if an exchange has a Protected Bid
of 3,000 shares, with 2,000 shares in reserve, and receives a 5,000
share order to sell, the exchange would be able to execute the
entire 5,000 share order without having to route to an away market
at any other Protected Bid at the same price. If, however, that
exchange only has 1,000 shares in reserve, the entire order would
not be able to be executed on that exchange, and the exchange would
only be able to execute 3,000 shares and route the rest to away
markets at other Protected Bids at the same price, before executing
the 1,000 shares in reserve. The same analysis would hold true at
the next price point, if the size of the incoming order would exceed
all available shares at the first price, and the remaining shares to
be executed would be 5,000 shares or more.
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(D) The order is a Retail Investor Order executed with at least
$0.005 price improvement;
(E) The order is executed when the Trading Center displaying the
Protected Quotation that was traded at was experiencing a failure,
material delay, or malfunction of its systems or equipment;
(F) The order is executed as part of a transaction that was not a
``regular way'' contract;
(G) The order is executed as part of a single-priced opening,
reopening, or closing transaction on the Exchange;
(H) The order is executed when a Protected Bid was priced higher
than a Protected Offer in the Pilot Security in Test Group Three;
(I) The order is identified as a Trade-at Intermarket Sweep Order;
(J) The order is executed by a Trading Center that simultaneously
routed Trade-at Intermarket Sweep Orders to execute against the full
displayed size of the Protected Quotation that was traded at;
(K) The order is executed as part of a Negotiated Trade;
(L) The order is executed when the Trading Center displaying the
Protected Quotation that was traded at had displayed, within one second
prior to execution of the transaction that constituted the Trade-at, a
Best Protected Bid or Best Protected Offer, as applicable, for the
Pilot Security in Test Group Three with a price that was inferior to
the price of the Trade-at transaction;
(M) The order is executed by a Trading Center which, at the time of
order receipt, the Trading Center had guaranteed an execution at no
worse than a specified price (a ``stopped order''), where:
(i) The stopped order was for the account of a customer;
(ii) The customer agreed to the specified price on an order-by-
order basis; and
(iii) The price of the Trade-at transaction was, for a stopped buy
order, equal to the National Best Bid in the Pilot Security in Test
Group Three at the time of execution or, for a stopped sell order,
equal to the National Best Offer in the Pilot Security in Test Group
Three at the time of execution; or
(N) The order is for a fractional share of a Pilot Security in Test
Group Three, provided that such fractional share order was not the
result of breaking an order for one or more whole shares of a Pilot
Security in Test Group Three into orders for fractional shares or was
not otherwise effected to evade the requirements of the Trade-at
Prohibition or any other provisions of the Plan.
Finally, Proposed Rule 67(e)(4)(D) would prevent member
organizations from breaking an order into smaller orders or otherwise
effecting or executing an order to evade the requirements of the Trade-
at Prohibition or any other provisions of the Plan.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\31\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\32\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general, to protect investors and the public interest. The
Exchange believes that the proposed rule change is consistent with the
Act because it ensures that the Exchange and its member organizations
would be in compliance with a Plan approved by the Commission pursuant
to an order issued by the Commission in reliance on Section 11A of the
Act.\33\ Such approved Plan gives the Exchange authority to establish,
maintain, and enforce written policies and procedures that are
reasonably designed to comply with applicable quoting and trading
requirements specified in the Plan. The Exchange believes that the
proposed rule change is consistent with the authority granted to it by
the Plan to establish specifications and procedures for the
implementation and operation of the Plan that are consistent with the
provisions of the Plan. Likewise, the Exchange believes that the
proposed rule change provides interpretations of the Plan that are
consistent with the Act, in general, and furthers the objectives of the
Act, in particular.
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\31\ 15 U.S.C. 78f(b).
\32\ 15 U.S.C. 78f(b)(5).
\33\ 15 U.S.C. 78k-1.
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Furthermore, the Exchange is a Participant under the Plan and
subject, itself, to the provisions of the Plan. The proposed rule
change ensures that the Exchange's systems would not display or execute
trading interests outside the requirements specified in such Plan. The
proposal would also help allow market participants to continue to trade
NMS Stocks within quoting and trading requirements that are in
compliance with the Plan, with certainty on how certain orders and
trading interests would be treated. This, in turn, will help encourage
market participants to continue to provide liquidity in the
marketplace.
Because the Plan supports further examination and analysis on the
impact of tick sizes on the trading and liquidity of the securities of
small capitalization companies, and the Commission believes that
altering tick sizes could result in significant market-wide benefits
and improvements to liquidity and capital formation, adopting rules
that enforce compliance by its member organizations with the provisions
of the Plan would help promote liquidity in the marketplace and perfect
the mechanism of a free and open market and national market system.
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 changes are
being made to establish, maintain, and enforce written policies and
procedures that are reasonably designed to comply with the trading and
quoting requirements
[[Page 66069]]
specified in the Plan, of which other equities exchanges are also
Participants. Other competing national securities exchanges are subject
to the same trading and quoting requirements specified in the Plan.
Therefore, the proposed changes would not impose any burden on
competition, while providing certainty of treatment and execution of
trading interests on the Exchange to market participants in NMS Stocks
that are acting in compliance with the requirements specified in the
Plan.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSE-2015-46 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2015-46. 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 Section, 100 F Street
NE., Washington, DC 20549-1090 on official business days between the
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be
available for inspection and copying at the NYSE's principal office and
on its Internet Web site at www.nyse.com. All comments received will be
posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly.
All submissions should refer to File Number SR-NYSE-2015-46 and
should be submitted on or before November 18, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-27349 Filed 10-27-15; 8:45 am]
BILLING CODE 8011-01-P
