Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule To Adopt CHX SNAP Execution Fees, 66600-66603 [2015-27519]

Download as PDF 66600 Federal Register / Vol. 80, No. 209 / Thursday, October 29, 2015 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. 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 Exchange consents, the Commission shall: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. BILLING CODE 8011–01–P 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– NASDAQ–2015–124 on the subject line. asabaliauskas on DSK5VPTVN1PROD with NOTICES 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–NASDAQ–2015–124. 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 23:37 Oct 28, 2015 Jkt 238001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–27515 Filed 10–28–15; 8:45 am] IV. Solicitation of Comments VerDate Sep<11>2014 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 will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NASDAQ–2015–124 and should be submitted on or before November 19, 2015. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–76249; File No. SR–CHX– 2015–06] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule To Adopt CHX SNAP Execution Fees October 23, 2015. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on October 19, 2015, the Chicago Stock Exchange, Inc. (‘‘CHX’’ 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 Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change CHX proposes to amend its Schedule of Fees and Assessments (the ‘‘Fee Schedule’’) to adopt CHX SNAP execution fees. The text of this proposed rule change is available on the Exchange’s Web site at (www.chx.com) 26 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 and in 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 CHX included statements concerning the purpose of and basis for the proposed rule changes 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 CHX has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to adopt and amend fees for CHX SNAP (‘‘SNAP’’). On October 6, 2015, the SEC approved a proposed rule change to adopt SNAP, an intra-day, sub-second and ondemand auction service.3 A SNAP Cycle 4 is comprised of the following five stages: • Stage one—Initiating the SNAP Cycle; • Stage two—SNAP Order Acceptance Period; • Stage three—Pricing and Satisfaction Period; • Stage four—Order Matching Period; and • Stage five—Transition to the Open Trading State.5 In sum, SNAP Cycles will never be scheduled by the Exchange and will always be driven by market demand for bulk trading in a subject security. The key features of a SNAP Cycle are as follows: 6 • The entire SNAP Cycle is designed to be completed in less than one second. • SNAP Cycles could occur numerous times in a subject security during the regular trading session only.7 3 See Securities Exchange Act Release No. 76087 (October 6, 2015), 80 FR 61540 (October 13, 2015); see also Securities Exchange Act Release No. 75346 (July 1, 2015), 80 FR 39172 (July 8, 2015) (SR–CHX– 2015–03). The approved rule change is not yet operative and will become operative with two weeks’ notice by the Exchange to its Participants. 4 See supra note 3; see also CHX Article 18, Rule 1(b). 5 See supra note 3; see also CHX Article 1, Rule 1(qq). 6 A complete description of SNAP may be found in the Approval Order and associated rule filing. See supra note 3. 7 CHX Article 20, Rule 1(b) provides that the ‘‘regular trading session—shall begin at 8:30 a.m. E:\FR\FM\29OCN1.SGM 29OCN1 66601 Federal Register / Vol. 80, No. 209 / Thursday, October 29, 2015 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES • Order cancellations would be prohibited during a SNAP Cycle. • Only limit orders marked Start SNAP 8 that meet minimum size, price and time of receipt requirements could initiate a SNAP Cycle. Æ During the stage one Initiating the SNAP Cycle, automated trading in the subject security on the Exchange would be suspended and remain suspended for the duration of the SNAP Cycle; provided, however, automated trading in the subject security may continue to occur simultaneously elsewhere in the national market system. • During the stage two SNAP Order Acceptance Period, the Exchange will transition precedent SNAP Eligible Orders 9 to the SNAP CHX book and accept new SNAP Eligible Orders for a randomized time period for inclusion on the SNAP CHX book.10 During the stage three Pricing and Satisfaction Period, the Exchange will attempt to ascertain a single auction price (i.e., ‘‘SNAP Price’’) 11 from SNAP Eligible Orders resting on the SNAP CHX book. Æ If the SNAP Price is determined to be at a price that would require orders to be routed away, the Exchange would route away SNAP Eligible Orders resting on the SNAP CHX book.12 Immediately after the necessary orders are routed away, the SNAP Cycle would enter the Satisfaction Period, during which time the Exchange would delay proceeding to the stage four Order Matching Period for a period of time not to exceed 200 milliseconds to allow for confirmations of routed orders to be received from away markets. Æ If the SNAP Price does not require orders to be routed away, the SNAP Cycle would immediately proceed to the stage four Order Matching Period. • During the stage four Order Matching Period, SNAP Eligible Orders on the SNAP CHX book would execute at the SNAP Price within the Matching System.13 • During the stage five Transition to the Open Trading State,14 unexecuted SNAP Eligible Orders, as well as other orders and cancel messages that have been queued during the SNAP Cycle, would be transitioned to the CHX book for automated trading.15 During the transition, orders may, among other things, be executed within the Matching System or be routed away in a manner consistent with how orders are currently executed and routed during automated trading.16 As such, during a SNAP Cycle, orders may execute within the Matching System during either the stage four Order Matching Period (‘‘stage four executions’’) or the stage five Transition to the Open Trading State (‘‘stage five executions’’), whereas orders may be routed away during either the stage three Pricing and Satisfaction Period or the stage five Transition to the Open Trading State.17 The Exchange now proposes the following SNAP execution fees: • All away executions resulting from orders routed away during a SNAP Cycle shall be assessed the current CHX Routing Services fee, pursuant to Section E.6 of the Fee Schedule, without amendment. • Stage four executions within the Matching System shall be assessed new fees, pursuant to proposed Section E.9.18 • Stage five executions within the Matching System shall be assessed the current CHX fees and credits pursuant to Sections E.1–4, without amendment.19 Proposed Section E.9 outlines these proposed SNAP execution fees, as discussed below. In order to incentivize Participants to initiate and participate in SNAP Cycles, the Exchange proposes to assess no fee for stage four executions.20 However, the Exchange proposes to adopt a fee structure for stage four executions so that market participants would be notified as to how the Exchange would charge fees for stage four executions if it decides to assess such fees in the future.21 To this end, proposed Section E.9(a) provides as follows: and shall end at 3:00 p.m. each day for all securities.’’ All times are in central time, unless noted otherwise. 8 See supra note 3; CHX Article 1, Rule 2(h)(1). 9 See supra note 3; see also CHX Article 1, Rule 1(ss). 10 See supra note 3; see also CHX Article 18, Rule 1(b)(2); see also CHX Article 20, Rule 8(b)(3). 11 See supra note 3; see also CHX Article 1, Rule 1(rr). 12 See supra note 3; see also CHX Article 19, Rule 3(a)(4) and (5). 13 See supra note 3; see also CHX Article 18, Rule 1(b)(4). 14 See supra note 3; see also CHX Article 1, Rule 1(qq). 15 See supra note 3; see also CHX Article 18, Rule 1(b)(5). 16 See CHX Article 19, Rule 3(a)(1)–(3); see also CHX Article 20, Rule 8(e)(1). 17 See CHX Article 19, Rule 3(a)(1)–(3). 18 The Exchange will continue to assess fees related to Section 31 of the Act for all Matching System executions, pursuant to Section E.5 of the Fee Schedule. 19 Id. 20 The Exchange would continue to assess the CHX Section 31 fees, pursuant to Section E.5 of the Fee Schedule. 21 Any change to proposed Section E.9 of the Fee Schedule would be effected through a proposed rule filing, pursuant to Rule 19b–4 under the Act. VerDate Sep<11>2014 23:37 Oct 28, 2015 Jkt 238001 Stage four executions. For all executions within the Matching System during a stage PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 four Order Matching Period, as described under Article 18, Rule 1(b)(4), the Exchange shall charge a fee for each buy order per share executed and a fee for each sell order per share executed, regardless of the original size of the orders, depending on the single SNAP Price, as defined under Article 1, Rule 1(rr), at which the orders executed relative to the National Best Bid and Offer (‘‘NBBO’’) at the time the SNAP Price was calculated. Only one of the following rows shall apply per SNAP Cycle.22 SNAP Price Buy order Sell order 1. SNAP Price < NBB .... 2. SNAP Price = NBB .... 3. NBB < SNAP Price < NBO. 4. SNAP Price = NBO ... 5. SNAP Price > NBO ... 6. SNAP Price = Locked NBBO. No Fee No Fee No Fee No Fee. No Fee. No Fee. No Fee No Fee No Fee No Fee. No Fee. No Fee. The following examples illustrate how the proposed Section E.9(a) fee would be applied: • Example 1. Assume that stage four executions occurred at a SNAP Price of $50.00/share and the relevant NBBO was 50.01 x 50.03. Under this Example 1, since the SNAP Price is less than the NBB, the Exchange would charge fees to all buy and sell orders per share executed, pursuant to proposed Section E.9(a)(1). • Example 2. Assume the same as Example 1, except that the SNAP Price was $50.01/share. Under this Example 2, since the SNAP Price is equal to the NBB, the Exchange would charge fees to all buy and sell orders per share executed, pursuant to proposed Section E.9(a)(2) • Example 3. Assume the same as Example 1, except that the SNAP Price was $50.02. Under this Example 3, since the SNAP Price is in between the NBBO, the Exchange would charge fees to all buy and sell orders per share executed, pursuant to proposed Section E.9(a)(3). • Example 4. Assume the same as Example 1, except that the SNAP Price was $50.03. Under this Example 4, since the SNAP Price is equal to the NBO, the Exchange would charge fees to all buy and sell orders per share executed, pursuant to proposed Section E.9(a)(4). • Example 5. Assume the same as Example 1, except that the SNAP Price 22 Pursuant to CHX Article 18, Rule 1(b)(2)(E), a SNAP Cycle would only proceed to the stage three Pricing and Satisfaction Period if the market snapshot taken to establish the SNAP Price shows that a two-sided NBBO exists and the CHX Routing Services are available. In calculating the NBBO for this purpose, the Exchange would utilize its current CHX NBBO calculation protocol to ascertain the first uncrossed NBBO. See supra note 3; see also paragraph .01(d) of CHX Article 20, Rule 5. Thus, the NBBO utilized to establish the SNAP Price may be uncrossed or locked, but never crossed. E:\FR\FM\29OCN1.SGM 29OCN1 66602 Federal Register / Vol. 80, No. 209 / Thursday, October 29, 2015 / Notices was $50.04. Under this Example 5, since the SNAP Price is greater than the NBO, the Exchange would charge fees to all buy and sell orders per share executed, pursuant to proposed Section E.9(a)(5). • Example 6. Assume the same as Example 1, except that the relevant NBBO is locked at 50.00 x 50.00. Under this Example 5 [sic], since the SNAP Price is locked than the NBO [sic], the Exchange would charge fees to all buy and sell orders per share executed, pursuant to proposed Section E.9(a)(6). Also, the Exchange proposes to amend current Sections E.1, E.3 and E.4 to provide that each of those sections are subject to proposed Section E.9.23 The Exchange does not propose to substantively modify Sections E.1, E.3 or E.4 in any other way. Proposed Section E.9(b) provides as follows: Stage five executions. For all executions within the Matching System during a stage five Transition to the Open Trading State, as described under Article 18, Rule 1(b)(5), the Exchange shall charge fees and attribute credits, pursuant to Sections E.1–4 above. Since stage five executions within the Matching System will occur in a manner similar to the current automated execution of orders within the Matching System,24 the Exchange proposes to apply the current Matching System execution fees and credits to such executions. The Exchange notes that current Sections E.1–4 apply to all Matching System executions and, thus, Sections E.1–4 do not need to be amended to contemplate stage five executions, in particular. Proposed Section E.9(c) provides as follows: Away executions. For all away executions resulting from orders routed away during a SNAP Cycle, the Exchange shall charge the CHX Routing Services fee, pursuant to Section E.6 of the Fee Schedule. asabaliauskas on DSK5VPTVN1PROD with NOTICES The proposed language clarifies that all away executions resulting from 23 Section E.1 of the Fee Schedule provides fees and credits for Matching System executions resulting from single-sided orders submitted as at least a Round Lot. Section E.2 of the Fee Schedule provides fees and credits for Matching System executions from orders submitted by Institutional Brokers registered with the Exchange pursuant CHX Article 17, which includes fees for both single-sided and cross orders. See CHX Article 1, Rule 2(a)(2). Section E.4 of the Fee Schedule provides fees for Matching System executions resulting from singlesided orders submitted as Odd Lots. The Exchange notes that it does not propose to amend Section E.2 of the Fee Schedule, which addresses cross orders executed within the Matching System, to contemplate proposed Section E.9 because cross orders cannot be executed within the Matching System during the stage four Order Matching Period. See CHX Article 1, Rule 2(a)(2); see also supra note 3; see also CHX Article 18, Rule 1(b)(2)(C)(iv). 24 See supra note 3. VerDate Sep<11>2014 23:37 Oct 28, 2015 Jkt 238001 orders routed away during a SNAP Cycle will be subject to the current CHX Routing Services fee. 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)(4) of the Act 26 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and other persons using its facilities. Specifically, the Exchange believes that proposed Section E.9(a) equitably allocates fees among Participants in a non-discriminatory manner because no Participant will be charged an execution fee for stage four executions. Moreover, in the event that the Exchange decides to adopt stage four executions fees,27 the Exchange believes that proposed Section E.9(a) will allocate fees among Participants in a non-discriminatory manner because the same fees would be assessed to all orders executed during the stage four Order Matching Period. The Exchange also believes that applying the current Matching System execution fees and credits for stage five executions, pursuant to current Sections E.1–4 and the current CHX Routing Services fees for all away executions resulting from orders routed away during a SNAP Cycle, pursuant to current Section E.6, equitably allocates fees among Participants in a nondiscriminatory manner, as such fees and credits will continue to apply equally to all Participants that submit orders to the Matching System pursuant to current fees and credits. 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 Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels set by the Exchange to be excessive. The Exchange believes that the proposed SNAP execution fees will encourage Participants to utilize SNAP, which is an innovative trading functionality that addresses a market need.28 Thus, the proposed rule change 25 15 U.S.C. 78f. U.S.C. 78f(b)(4). 27 See supra note 21. 28 See supra note 3; see also Mary Jo White, Chair, Securities and Exchange Commission, Speech at Sandler O’Neil & Partners L.P. Global Exchange and Brokerage Conference (June 5, 2014). 26 15 PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 is a competitive proposal that is intended to add additional liquidity and order executions to the Exchange, which will, in turn, benefit the Exchange and all Participants. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A)(ii) of the Act 29 and subparagraph(f)(2) of Rule 19b–4 thereunder 30 because it establishes or changes a due, fee or other charge imposed by the Exchange. 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: 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– CHX–2015–06 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–CHX–2015–06. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will 29 15 30 17 E:\FR\FM\29OCN1.SGM U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 29OCN1 Federal Register / Vol. 80, No. 209 / Thursday, October 29, 2015 / Notices 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. Copies of the filing will also be available for inspection and copying at the Exchange’s principal office. 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–CHX–2015–06 and should be submitted on or before November 19, 2015. ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II 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. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.31 Robert W. Errett, Deputy Secretary. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2015–27519 Filed 10–28–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–76246; File No. SR– NYSEArca–2015–101] asabaliauskas on DSK5VPTVN1PROD with NOTICES Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Extending the Pilot Period Applicable to Rule 6.65A(c), Which Addresses How the Exchange Treats Obvious and Catastrophic Errors During Periods of Extreme Market Volatility To Coincide With the Pilot Period for the Plan To Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS October 23, 2015. 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 22, 2015, NYSE Arca, Inc. (the 31 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 23:37 Oct 28, 2015 Jkt 238001 I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to extend the pilot period applicable to Rule 6.65A(c), which addresses how the Exchange treats Obvious and Catastrophic Errors during periods of extreme market volatility to coincide with the pilot period for the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS. The pilot period is currently set to expire on October 23, 2015. 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. In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to extend the pilot period applicable to Rule 6.65A(c), which addresses how the Exchange treats Obvious and Catastrophic Errors during periods of extreme market volatility to coincide with the pilot period for the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS, as it may be amended from time to time (‘‘LULD Plan’’), including any extensions to the pilot period for the LULD Plan. The pilot period is currently set to expire on October 23, 2015. PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 66603 In April 2013, in connection with the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS (the ‘‘Plan’’),3 the Exchange adopted Rule 6.65A(c) to provide that options executions would not be adjusted or nullified if the execution occurs during periods of extreme market volatility.4 Specifically, Rule 6.65A(c) provides that, during the pilot period, electronic transactions in options that overlay an NMS Stock that occur during a Limit State or a Straddle State (as defined by the Plan) are not subject to review under Rule 6.87(c) for Obvious Errors or Rule 6.87(d) for Catastrophic Errors. Nothing in Rule 6.65A(c) prevents electronic transactions in options that overlay an NMS Stock that occur during a Limit State or a Straddle State from being reviewed on Exchange motion pursuant to Rule 6.87(c)(3), or a bust or adjust pursuant to paragraphs (e) through (j) of Rule 6.87.5 The Plan has been amended several times since inception and was implemented on February 24, 2014. On May 28, 2015, the Participants submitted to the Commission a Supplemental Joint Assessment that recommended that the Plan be adopted as permanent with certain modifications.6 The purpose of this proposed extension is to allow the Participants to conduct, and the Commission to consider, further analysis of data in support of the recommendations made in the Supplemental Joint Assessment, including around the attributes of limit states; the length of trading pauses; the use of an alternative reference price at the open of trading; and the alignment of the percentage parameters with the Clearly Erroneous Execution (CEE) thresholds (with the goal of largely eliminating the Participants’ CEE authority). In order to align the pilot period for Rule 6.65A(c) with the proposed pilot 3 See Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012) (File No. 4–631) (Order Approving, on a Pilot Basis, the Plan). The Plan is designed to prevent trades in individual NMS Stocks from occurring outside of specified Price Bands, which are described in more detail in the Plan. 4 See Securities and Exchange Act Release No. 69340 (April 8, 2013), 78 FR 22004 (April 12, 2013) (SR–NYSEArca–2013–10) (‘‘Approval Order’’). 5 See Rule 6.87, Commentary .03. 6 See Letter from Christopher B. Stone, Vice President, FINRA, to Brent J. Fields, Secretary, SEC, dated May 28, 2015. In addition, the Participants to the Plan recently filed to extend the Plan’s pilot period until April 22, 2016 (the ‘‘Ninth Amendment’’). See Securities Exchange Act Release No. 75917 (September 14, 2015), 80 FR 56515 (September 18, 2015) (File No. 4–631) (notice of proposed Ninth Amendment to the Plan). E:\FR\FM\29OCN1.SGM 29OCN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 80, Number 209 (Thursday, October 29, 2015)]
[Notices]
[Pages 66600-66603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27519]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76249; File No. SR-CHX-2015-06]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend the Fee Schedule To Adopt CHX SNAP Execution Fees

October 23, 2015.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on October 19, 2015, the Chicago Stock Exchange, Inc. (``CHX'' 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 Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

CHX proposes to amend its Schedule of Fees and Assessments (the
``Fee Schedule'') to adopt CHX SNAP execution fees. The text of this
proposed rule change is available on the Exchange's Web site at
(www.chx.com) and in 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 CHX included statements
concerning the purpose of and basis for the proposed rule changes 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 CHX has prepared summaries, set forth in sections A,
B and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
The Exchange proposes to adopt and amend fees for CHX SNAP
(``SNAP''). On October 6, 2015, the SEC approved a proposed rule change
to adopt SNAP, an intra-day, sub-second and on-demand auction
service.\3\ A SNAP Cycle \4\ is comprised of the following five stages:
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\3\ See Securities Exchange Act Release No. 76087 (October 6,
2015), 80 FR 61540 (October 13, 2015); see also Securities Exchange
Act Release No. 75346 (July 1, 2015), 80 FR 39172 (July 8, 2015)
(SR-CHX-2015-03). The approved rule change is not yet operative and
will become operative with two weeks' notice by the Exchange to its
Participants.
\4\ See supra note 3; see also CHX Article 18, Rule 1(b).
---------------------------------------------------------------------------

Stage one--Initiating the SNAP Cycle;
Stage two--SNAP Order Acceptance Period;
Stage three--Pricing and Satisfaction Period;
Stage four--Order Matching Period; and
Stage five--Transition to the Open Trading State.\5\
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\5\ See supra note 3; see also CHX Article 1, Rule 1(qq).
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In sum, SNAP Cycles will never be scheduled by the Exchange and
will always be driven by market demand for bulk trading in a subject
security. The key features of a SNAP Cycle are as follows: \6\
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\6\ A complete description of SNAP may be found in the Approval
Order and associated rule filing. See supra note 3.
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The entire SNAP Cycle is designed to be completed in less
than one second.
SNAP Cycles could occur numerous times in a subject
security during the regular trading session only.\7\
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\7\ CHX Article 20, Rule 1(b) provides that the ``regular
trading session--shall begin at 8:30 a.m. and shall end at 3:00 p.m.
each day for all securities.'' All times are in central time, unless
noted otherwise.

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[[Page 66601]]

Order cancellations would be prohibited during a SNAP
Cycle.
Only limit orders marked Start SNAP \8\ that meet minimum
size, price and time of receipt requirements could initiate a SNAP
Cycle.
---------------------------------------------------------------------------

\8\ See supra note 3; CHX Article 1, Rule 2(h)(1).
---------------------------------------------------------------------------

[cir] During the stage one Initiating the SNAP Cycle, automated
trading in the subject security on the Exchange would be suspended and
remain suspended for the duration of the SNAP Cycle; provided, however,
automated trading in the subject security may continue to occur
simultaneously elsewhere in the national market system.
During the stage two SNAP Order Acceptance Period, the
Exchange will transition precedent SNAP Eligible Orders \9\ to the SNAP
CHX book and accept new SNAP Eligible Orders for a randomized time
period for inclusion on the SNAP CHX book.\10\ During the stage three
Pricing and Satisfaction Period, the Exchange will attempt to ascertain
a single auction price (i.e., ``SNAP Price'') \11\ from SNAP Eligible
Orders resting on the SNAP CHX book.
---------------------------------------------------------------------------

\9\ See supra note 3; see also CHX Article 1, Rule 1(ss).
\10\ See supra note 3; see also CHX Article 18, Rule 1(b)(2);
see also CHX Article 20, Rule 8(b)(3).
\11\ See supra note 3; see also CHX Article 1, Rule 1(rr).
---------------------------------------------------------------------------

[cir] If the SNAP Price is determined to be at a price that would
require orders to be routed away, the Exchange would route away SNAP
Eligible Orders resting on the SNAP CHX book.\12\ Immediately after the
necessary orders are routed away, the SNAP Cycle would enter the
Satisfaction Period, during which time the Exchange would delay
proceeding to the stage four Order Matching Period for a period of time
not to exceed 200 milliseconds to allow for confirmations of routed
orders to be received from away markets.
---------------------------------------------------------------------------

\12\ See supra note 3; see also CHX Article 19, Rule 3(a)(4) and
(5).
---------------------------------------------------------------------------

[cir] If the SNAP Price does not require orders to be routed away,
the SNAP Cycle would immediately proceed to the stage four Order
Matching Period.
During the stage four Order Matching Period, SNAP Eligible
Orders on the SNAP CHX book would execute at the SNAP Price within the
Matching System.\13\
---------------------------------------------------------------------------

\13\ See supra note 3; see also CHX Article 18, Rule 1(b)(4).
---------------------------------------------------------------------------

During the stage five Transition to the Open Trading
State,\14\ unexecuted SNAP Eligible Orders, as well as other orders and
cancel messages that have been queued during the SNAP Cycle, would be
transitioned to the CHX book for automated trading.\15\ During the
transition, orders may, among other things, be executed within the
Matching System or be routed away in a manner consistent with how
orders are currently executed and routed during automated trading.\16\
---------------------------------------------------------------------------

\14\ See supra note 3; see also CHX Article 1, Rule 1(qq).
\15\ See supra note 3; see also CHX Article 18, Rule 1(b)(5).
\16\ See CHX Article 19, Rule 3(a)(1)-(3); see also CHX Article
20, Rule 8(e)(1).
---------------------------------------------------------------------------

As such, during a SNAP Cycle, orders may execute within the
Matching System during either the stage four Order Matching Period
(``stage four executions'') or the stage five Transition to the Open
Trading State (``stage five executions''), whereas orders may be routed
away during either the stage three Pricing and Satisfaction Period or
the stage five Transition to the Open Trading State.\17\
---------------------------------------------------------------------------

\17\ See CHX Article 19, Rule 3(a)(1)-(3).
---------------------------------------------------------------------------

The Exchange now proposes the following SNAP execution fees:
All away executions resulting from orders routed away
during a SNAP Cycle shall be assessed the current CHX Routing Services
fee, pursuant to Section E.6 of the Fee Schedule, without amendment.
Stage four executions within the Matching System shall be
assessed new fees, pursuant to proposed Section E.9.\18\
---------------------------------------------------------------------------

\18\ The Exchange will continue to assess fees related to
Section 31 of the Act for all Matching System executions, pursuant
to Section E.5 of the Fee Schedule.
---------------------------------------------------------------------------

Stage five executions within the Matching System shall be
assessed the current CHX fees and credits pursuant to Sections E.1-4,
without amendment.\19\
---------------------------------------------------------------------------

\19\ Id.
---------------------------------------------------------------------------

Proposed Section E.9 outlines these proposed SNAP execution fees,
as discussed below.
In order to incentivize Participants to initiate and participate in
SNAP Cycles, the Exchange proposes to assess no fee for stage four
executions.\20\ However, the Exchange proposes to adopt a fee structure
for stage four executions so that market participants would be notified
as to how the Exchange would charge fees for stage four executions if
it decides to assess such fees in the future.\21\ To this end, proposed
Section E.9(a) provides as follows:
---------------------------------------------------------------------------

\20\ The Exchange would continue to assess the CHX Section 31
fees, pursuant to Section E.5 of the Fee Schedule.
\21\ Any change to proposed Section E.9 of the Fee Schedule
would be effected through a proposed rule filing, pursuant to Rule
19b-4 under the Act.

Stage four executions. For all executions within the Matching System
during a stage four Order Matching Period, as described under
Article 18, Rule 1(b)(4), the Exchange shall charge a fee for each
buy order per share executed and a fee for each sell order per share
executed, regardless of the original size of the orders, depending
on the single SNAP Price, as defined under Article 1, Rule 1(rr), at
which the orders executed relative to the National Best Bid and
Offer (``NBBO'') at the time the SNAP Price was calculated. Only one
of the following rows shall apply per SNAP Cycle.\22\

------------------------------------------------------------------------
SNAP Price Buy order Sell order
------------------------------------------------------------------------
1. SNAP Price < NBB................ No Fee........... No Fee.
2. SNAP Price = NBB................ No Fee........... No Fee.
3. NBB < SNAP Price < NBO.......... No Fee........... No Fee.
4. SNAP Price = NBO................ No Fee........... No Fee.
5. SNAP Price > NBO................ No Fee........... No Fee.
6. SNAP Price = Locked NBBO........ No Fee........... No Fee.
------------------------------------------------------------------------

The following examples illustrate how the proposed Section E.9(a)
fee would be applied:
---------------------------------------------------------------------------

\22\ Pursuant to CHX Article 18, Rule 1(b)(2)(E), a SNAP Cycle
would only proceed to the stage three Pricing and Satisfaction
Period if the market snapshot taken to establish the SNAP Price
shows that a two-sided NBBO exists and the CHX Routing Services are
available. In calculating the NBBO for this purpose, the Exchange
would utilize its current CHX NBBO calculation protocol to ascertain
the first uncrossed NBBO. See supra note 3; see also paragraph
.01(d) of CHX Article 20, Rule 5. Thus, the NBBO utilized to
establish the SNAP Price may be uncrossed or locked, but never
crossed.
---------------------------------------------------------------------------

Example 1. Assume that stage four executions occurred at a
SNAP Price of $50.00/share and the relevant NBBO was 50.01 x 50.03.
Under this Example 1, since the SNAP Price is less than the NBB, the
Exchange would charge fees to all buy and sell orders per share
executed, pursuant to proposed Section E.9(a)(1).
Example 2. Assume the same as Example 1, except that the
SNAP Price was $50.01/share. Under this Example 2, since the SNAP Price
is equal to the NBB, the Exchange would charge fees to all buy and sell
orders per share executed, pursuant to proposed Section E.9(a)(2)
Example 3. Assume the same as Example 1, except that the
SNAP Price was $50.02. Under this Example 3, since the SNAP Price is in
between the NBBO, the Exchange would charge fees to all buy and sell
orders per share executed, pursuant to proposed Section E.9(a)(3).
Example 4. Assume the same as Example 1, except that the
SNAP Price was $50.03. Under this Example 4, since the SNAP Price is
equal to the NBO, the Exchange would charge fees to all buy and sell
orders per share executed, pursuant to proposed Section E.9(a)(4).
Example 5. Assume the same as Example 1, except that the
SNAP Price

[[Page 66602]]

was $50.04. Under this Example 5, since the SNAP Price is greater than
the NBO, the Exchange would charge fees to all buy and sell orders per
share executed, pursuant to proposed Section E.9(a)(5).
Example 6. Assume the same as Example 1, except that the
relevant NBBO is locked at 50.00 x 50.00. Under this Example 5 [sic],
since the SNAP Price is locked than the NBO [sic], the Exchange would
charge fees to all buy and sell orders per share executed, pursuant to
proposed Section E.9(a)(6).
Also, the Exchange proposes to amend current Sections E.1, E.3 and
E.4 to provide that each of those sections are subject to proposed
Section E.9.\23\ The Exchange does not propose to substantively modify
Sections E.1, E.3 or E.4 in any other way.
---------------------------------------------------------------------------

\23\ Section E.1 of the Fee Schedule provides fees and credits
for Matching System executions resulting from single-sided orders
submitted as at least a Round Lot. Section E.2 of the Fee Schedule
provides fees and credits for Matching System executions from orders
submitted by Institutional Brokers registered with the Exchange
pursuant CHX Article 17, which includes fees for both single-sided
and cross orders. See CHX Article 1, Rule 2(a)(2). Section E.4 of
the Fee Schedule provides fees for Matching System executions
resulting from single-sided orders submitted as Odd Lots.
The Exchange notes that it does not propose to amend Section E.2
of the Fee Schedule, which addresses cross orders executed within
the Matching System, to contemplate proposed Section E.9 because
cross orders cannot be executed within the Matching System during
the stage four Order Matching Period. See CHX Article 1, Rule
2(a)(2); see also supra note 3; see also CHX Article 18, Rule
1(b)(2)(C)(iv).
---------------------------------------------------------------------------

Proposed Section E.9(b) provides as follows:

Stage five executions. For all executions within the Matching
System during a stage five Transition to the Open Trading State, as
described under Article 18, Rule 1(b)(5), the Exchange shall charge
fees and attribute credits, pursuant to Sections E.1-4 above.

Since stage five executions within the Matching System will occur in a
manner similar to the current automated execution of orders within the
Matching System,\24\ the Exchange proposes to apply the current
Matching System execution fees and credits to such executions. The
Exchange notes that current Sections E.1-4 apply to all Matching System
executions and, thus, Sections E.1-4 do not need to be amended to
contemplate stage five executions, in particular.
---------------------------------------------------------------------------

\24\ See supra note 3.
---------------------------------------------------------------------------

Proposed Section E.9(c) provides as follows:

Away executions. For all away executions resulting from orders
routed away during a SNAP Cycle, the Exchange shall charge the CHX
Routing Services fee, pursuant to Section E.6 of the Fee Schedule.

The proposed language clarifies that all away executions resulting
from orders routed away during a SNAP Cycle will be subject to the
current CHX Routing Services fee.
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)(4) of the Act \26\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and other persons using its facilities.
---------------------------------------------------------------------------

\25\ 15 U.S.C. 78f.
\26\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

Specifically, the Exchange believes that proposed Section E.9(a)
equitably allocates fees among Participants in a non-discriminatory
manner because no Participant will be charged an execution fee for
stage four executions. Moreover, in the event that the Exchange decides
to adopt stage four executions fees,\27\ the Exchange believes that
proposed Section E.9(a) will allocate fees among Participants in a non-
discriminatory manner because the same fees would be assessed to all
orders executed during the stage four Order Matching Period.
---------------------------------------------------------------------------

\27\ See supra note 21.
---------------------------------------------------------------------------

The Exchange also believes that applying the current Matching
System execution fees and credits for stage five executions, pursuant
to current Sections E.1-4 and the current CHX Routing Services fees for
all away executions resulting from orders routed away during a SNAP
Cycle, pursuant to current Section E.6, equitably allocates fees among
Participants in a non-discriminatory manner, as such fees and credits
will continue to apply equally to all Participants that submit orders
to the Matching System pursuant to current fees and credits.

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 Exchange operates in a
highly competitive market in which market participants can readily
direct order flow to competing venues if they deem fee levels set by
the Exchange to be excessive. The Exchange believes that the proposed
SNAP execution fees will encourage Participants to utilize SNAP, which
is an innovative trading functionality that addresses a market
need.\28\ Thus, the proposed rule change is a competitive proposal that
is intended to add additional liquidity and order executions to the
Exchange, which will, in turn, benefit the Exchange and all
Participants.
---------------------------------------------------------------------------

\28\ See supra note 3; see also Mary Jo White, Chair, Securities
and Exchange Commission, Speech at Sandler O'Neil & Partners L.P.
Global Exchange and Brokerage Conference (June 5, 2014).
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A)(ii) of the Act \29\ and subparagraph(f)(2) of Rule
19b-4 thereunder \30\ because it establishes or changes a due, fee or
other charge imposed by the Exchange.
---------------------------------------------------------------------------

\29\ 15 U.S.C. 78s(b)(3)(A)(ii).
\30\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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:

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-CHX-2015-06 on the subject line.

Paper Comments

Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CHX-2015-06. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will

[[Page 66603]]

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. Copies
of the filing will also be available for inspection and copying at the
Exchange's principal office. 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-CHX-2015-06 and should be submitted on or before
November 19, 2015.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
Robert W. Errett,
Deputy Secretary.
---------------------------------------------------------------------------

\31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2015-27519 Filed 10-28-15; 8:45 am]
BILLING CODE 8011-01-P

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