Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving Proposed Rule Change, and Notice of Filing and Order Granting Accelerated Approval of Amendment Nos. 1 and 2 Thereto, Adopting New Equity Trading Rules Relating to Orders and Modifiers and the Retail Liquidity Program To Reflect the Implementation of Pillar, the Exchange's New Trading Technology Platform, 66951-66955 [2015-27656]

Download as PDF Federal Register / Vol. 80, No. 210 / Friday, October 30, 2015 / Notices tkelley on DSK3SPTVN1PROD with NOTICES reducing the likelihood of a potentially disruptive system failure in the live trading environment, which has the potential to affect all market participants. Finally, the Exchange will continue to offer Options Participants certain limited testing capabilities free of charge at Carteret through VPN. While this feature offers limited capability in terms of functionality, the Exchange continues to offer a free of charge alternative to Options Participants desiring to utilize the NTF. B. Self-Regulatory Organization’s Statement on Burden on Competition BX does not believe that the proposed rule change will result in any intramarket or inter-market burdens on competition that are not necessary or appropriate in furtherance of the purposes of the Act, as amended. The proposed fees for access to the Carteret test environment more closely approximate the live trading environment, subscribing member firms will be able to more accurately test their trading systems and avoid potentially disruptive system failures in the live trading environment. Despite the fee that will now be assessed to Options Participants for testing, the Exchange believes that Options Participants utilizing this service will benefit from the move to Carteret because the test environment is designed to closely mirror the live trading environment for Options Participants, including matching the capacity of each Options Participant’s live environment switch port. Subscribing to the test facility is optional. Also, the connectivity provided under this rule also provides connectivity to the other test environments of The NASDAQ Stock Market LLC and NASDAQ OMX PHLX LLC. Members that are already connected for equities testing would not incur an additional charge. This connectivity may be utilized for either equities or options testing. Finally, subscribing to the test facility is optional. Additionally, the Exchange does not believe that the move to Carteret and imposition of connectivity fees to the NTF creates an undue burden on competition because the Exchange will continue to offer Options Participants certain limited testing capabilities free of charge at Carteret through VPN. 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. VerDate Sep<11>2014 17:37 Oct 29, 2015 Jkt 238001 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.10 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments 66951 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–BX– 2015–059, and should be submitted on or before November 20, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–27649 Filed 10–29–15; 8:45 am] Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: BILLING CODE 8011–01–P Electronic Comments Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving Proposed Rule Change, and Notice of Filing and Order Granting Accelerated Approval of Amendment Nos. 1 and 2 Thereto, Adopting New Equity Trading Rules Relating to Orders and Modifiers and the Retail Liquidity Program To Reflect the Implementation of Pillar, the Exchange’s New Trading Technology Platform • 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– BX–2015–059 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–BX–2015–059. 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., 10 15 PO 00000 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–76267; File No. SR– NYSEArca–2015–56] October 26, 2015. I. Introduction On July 7, 2015, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt new equity trading rules relating to Orders and Modifiers, and the Retail Liquidity Program, to reflect the implementation of Pillar, the Exchange’s new trading technology platform. The proposed rule change was published for comment in the Federal Register on July 28, 2015.3 On July 29, 2015, the Exchange filed Amendment No. 1 to the proposed rule change.4 On September 1, 11 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4 3 See Securities Exchange Act Release No. 75497 (July 21, 2015), 80 FR 45022 (‘‘Notice’’). 4 Amendment No. 1 deletes references to IOC Routable Cross Orders and states that the Exchange 1 15 U.S.C. 78s(b)(3)(A)(ii). Frm 00086 Fmt 4703 Sfmt 4703 Continued E:\FR\FM\30OCN1.SGM 30OCN1 66952 Federal Register / Vol. 80, No. 210 / Friday, October 30, 2015 / Notices 2015, pursuant to Section 19(b)(2) of the Act,5 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to approve or disapprove the proposed rule change.6 On October 15, 2015, the Exchange filed Amendment No. 2 to the proposed rule change.7 The Commission received no comment letters on the proposed rule change. The Commission is publishing this notice to solicit comment on Amendment Nos. 1 and 2 from interested persons, and is approving the proposed rule change, as modified by Amendment Nos. 1 and 2, on an accelerated basis. II. Description of the Proposed Rule Change The Exchange proposes to adopt new equity trading rules relating to the implementation of Pillar, the Exchange’s new trading technology platform. The Exchange proposes to adopt two new Pillar rules: 1) NYSE Arca Equities Rule 7.31P (‘‘Rule 7.31P’’) related to orders and modifiers; and 2) NYSE Arca Equities Rule 7.44P (‘‘Rule 7.44P’’) related to the Retail Liquidity Program (‘‘RLP’’). According to the Exchange, these rules would set forth the RLP for Pillar and describe how orders and modifiers in Pillar would be priced, ranked, traded, and/or routed, using the terminology and priority categories that were approved in the Pillar I Filing.8 tkelley on DSK3SPTVN1PROD with NOTICES A. Background The Exchange represents that Pillar is an integrated trading technology platform designed to use a single specification for connecting to the equities and options markets operated by Arca and its affiliates, New York Stock Exchange LLC (‘‘NYSE’’) and NYSE MKT LLC (‘‘NYSE MKT’’).9 On July 24, 2015, the Commission approved Pillar rules relating to Trading Sessions, has determined not to offer this order type when it implements Pillar. 5 15 U.S.C. 78s(b)(2). 6 See Securities Exchange Act Release No. 75801, 80 FR 53905 (September 8, 2015). 7 In Amendment No. 2, the Exchange proposes to: (i) Correct a cross reference in proposed Rule 7.31P(a)(2)(B) from Rule 7.10 to Rule 7.10P; (ii) add a new sentence to proposed Rule 7.31P(b)(2)(A) to specify that an incoming Limit IOC Order with a minimum trade size (‘‘MTS’’) must be at least a round lot and, if the MTS is larger than the size of the Limit IOC Order, the order would be rejected on arrival; (iii) to add a hard paragraph return between proposed Rule 7.31P(i)(1) and 7.31P(i)(2); and (iv) remove an extraneous reference to ‘‘500’’ in the sixth paragraph in the first example of proposed Rule 7.44P(l). 8 See Securities Exchange Act Release No. 75494 (July 20, 2015), 80 FR 44170 (July 24, 2015) (‘‘Pillar I Filing’’); see also Notice at 45022. 9 See Notice at 45022. VerDate Sep<11>2014 17:37 Oct 29, 2015 Jkt 238001 Order Ranking and Display, and Order Execution.10 This filing is the second set of proposed rule changes to support Pillar implementation. As proposed, the new rules governing trading on Pillar would have the same numbering as current rules, but with the modifier ‘‘P’’ appended to the rule number. The Exchange proposes that rules with a ‘‘P’’ modifier would operate for symbols that are trading on the Pillar trading platform. If a symbol is trading on the Pillar trading platform, a rule with the same number as a rule with a ‘‘P’’ modifier would no longer operate for that symbol and the Exchange would announce by Trader Update when symbols are trading on the Pillar trading platform. Definitions that do not have a companion version with a ‘‘P’’ modifier would continue to operate for all symbols. B. Proposed Modifications As described in detail in the Notice, Rules 7.31P, and 7.44P incorporate much of the substance of current NYSE Arca Rules 7.31 and 7.44, respectively. However, with Pillar, the Exchange would introduce new terminology, reorganize and redraft certain provisions to improve clarity, and provide additional detail to other current provisions being redesignated. The Exchange also proposes to make several changes that are more substantive in nature, as follows: • Market Orders: To reduce the potential for clearly erroneous executions, Market Order Trading Collars would prevent Market Orders from executing at the Trading Collar, which are based on the clearly erroneous execution numerical guidelines, and not just through the Trading Collar as under the current trading rules; 11 • Limit Orders: Resting Limit Orders that would lock or cross a protected quotation if they become the best bid or offer (‘‘BBO’’) would be re-priced; 12 • Limit Order designated IOC: A Limit Order designated with an immediate-or-cancel (‘‘IOC’’) modifier that is not eligible to route may be designated with an optional MTS. On entry, a Limit IOC Order with an MTS must have a minimum of one round lot and will be rejected on arrival if the MTS is larger than the size of the Limit IOC Order; 13 10 See Pillar I Filing, supra note 8. proposed Rule 7.31P(a)(1)(B). See also Notice at 45023. 12 See proposed Rule 7.31P(a)(2). See also Notice at 45023. 13 See proposed Rule 7.31P(b)(2)(A). See also Notice at 45023. 11 See PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 • Auction-Only Orders: Market-onOpen (‘‘MOO’’) and Limit-on-Open (‘‘LOO’’) Orders would be eligible to participate in trading halt auctions and the Exchange would accept AuctionOnly Orders in non-auction eligible symbols; 14 • Reserve Orders: The displayed portion of Reserve Orders would be replenished following any execution that reduces the display quantity below the size designated to be displayed, at which point the replenished quantity would receive a new working time; 15 • Passive Liquidity Orders: Passive Liquidity Orders would be renamed ‘‘Limit Non-Displayed Orders,’’ would no longer be ranked behind other nondisplayed orders, and an optional NonDisplay Remove Modifier would be available for this order type; 16 • MPL Orders: Mid-point Passive Liquidity Orders would be renamed ‘‘Mid-point Liquidity Orders’’ (‘‘MPL Order’’). On arrival, MPL Orders (and MPL-Adding Liquidity Only (‘‘ALO’’ Orders) would be eligible to trade with resting non-displayed interest that provides price improvement over the midpoint of the protected best bid or offer (‘‘PBBO’’). As under current rules, an MPL Order may be designated with an MTS, but in Pillar, the MTS would have to be a minimum of a round lot instead of one share. In addition, an MPL with an MTS would be rejected if, on arrival, the MTS is larger than the size of the order and would be cancelled at any point the MTS is larger than the residual size of the order; 17 • Tracking Orders: Tracking Orders would peg to the PBBO instead of the national best bid or offer (‘‘NBBO’’) and Self-Trade Prevention (‘‘STP’’) Modifiers for Tracking Orders would no longer be ignored; 18 • PNP Orders: Post No Preference (‘‘PNP’’) Orders would no longer be offered; 19 • PNP Blind Orders: PNP Blind Orders would be renamed ‘‘Arca Only Orders’’ and an optional Non-Display Remove Modifier would be available for this order type; 20 • ALO Orders: The current form of ALO Orders, which are based on PNP Orders and are rejected on arrival if 14 See proposed Rule 7.31P(c). See also Notice at 45023. 15 See proposed Rule 7.31P(d)(1). See also Notice at 45023. 16 See proposed Rule 7.31P(d)(2). See also Notice at 45023. 17 See proposed Rule 7.31P(d)(3). See also Notice at 45023. 18 See proposed Rule 7.31P(d)(4). See also Notice at 45023. 19 See Notice at 45023. 20 See proposed Rule 7.31P(e)(1). See also Notice at 45023. E:\FR\FM\30OCN1.SGM 30OCN1 Federal Register / Vol. 80, No. 210 / Friday, October 30, 2015 / Notices tkelley on DSK3SPTVN1PROD with NOTICES marketable, would no longer be offered. ALO Orders in Pillar would no longer be rejected on arrival if marketable and instead would be re-priced both on arrival and after updates to the PBBO. In addition, an ALO Order would trade with resting contra-side non-displayed orders that would provide price improvement; 21 • Intermarket Sweep Order: Intermarket Sweep Orders (‘‘ISO’’) designated Day and IOC would be renamed ‘‘Day ISO’’ and ‘‘IOC ISO,’’ respectively, and ALO modifier functionality available for Day ISOs would be based on the proposed ALO Order in Pillar; 22 • Primary Only Orders: Primary Only Orders designated for the Core Trading Session would be accepted and routed directly to the primary listing market on arrival and the Exchange would not validate whether the primary listing market would be accepting such orders. Primary Only Orders that are designated Day may be designated as a Reserve Order; 23 • Pegged Orders: Pegged Orders would peg to the PBBO instead of the NBBO, would require a limit price, and would be accepted during a Short Sale Period, as defined in Rule 7.16(f). Market Pegged Orders would no longer be displayed and an offset value would no longer be required, and Primary Pegged Orders could not include an offset value. In addition, in Pillar, Pegged Orders would not be assigned a working price if the PBBO is locked or crossed; 24 and • Q Orders: Auto Q Orders would be eliminated.25 • In the RLP, Retail Orders may not be designated with a ‘‘No Midpoint Execution’’ Modifier.26 • All orders in the RLP would be ranked based on their priority category, pursuant to Rule 7.36P, and would not have different ranking in the Program. Accordingly, odd-lot orders ranked Priority 2—Display Orders would have priority over orders ranked Priority 3— Non-Display Orders, and Limit NonDisplayed Orders would no longer be ranked behind other non-display orders.27 21 See proposed Rule 7.31P(e)(2). See also Notice at 45023. 22 See proposed Rule 7.31P(e)(3). See also Notice at 45023. 23 See proposed Rule 7.31P(f)(1). See also Notice at 45023. 24 See proposed Rule 7.31P(h). See also Notice at 45023. 25 See Notice at 45023. 26 See proposed Rule 7.44P(k); see also Notice at 45044. 27 See proposed Rule 7.44P(l); see also Notice at 45044. VerDate Sep<11>2014 17:37 Oct 29, 2015 Jkt 238001 • Retail Price Improvement Orders (‘‘RPIs’’) would be accepted before the start of Core Trading Hours.28 III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act 29 and the rules and regulations thereunder applicable to a national securities exchange.30 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,31 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, 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 and that the rules are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Commission notes that the Exchange believes that the proposed rules would remove impediments to and perfect the mechanism of a free and open market because the proposed rule set would promote transparency by using consistent terminology governing equities trading, and by clearly denoting the rules that govern once a symbol has been migrated to the Pillar platform.32 With respect to proposed Rule 7.31P, the Exchange states that it believes that the proposed substantive differences to functionality being proposed for Pillar would remove impediments to and perfect the mechanism of a fair and orderly market for the following reasons: 33 • Market Orders: The proposed substantive difference to prevent Market Orders from trading at the Trading Collar, and not just through the Trading Collar, would reduce the potential for Market Orders to trade at prices that would be considered clearly erroneous executions. • Limit Orders: The proposed substantive difference to re-price resting 28 See proposed Rule 7.44P(m); see also Notice at 45047. 29 15 U.S.C. 78f. 30 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 31 15 U.S.C. 78f(b)(5). 32 See Notice at 45047. 33 See Notice at 45047–45049 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 66953 Limit Orders would reduce the potential for the Exchange to publish a BBO that would lock or cross an Away Market PBBO that was locking or crossing a prior BBO of the Exchange. • Limit Order Designated IOC: The proposed substantive difference to add optional MTS functionality for Limit IOC Orders would provide ETP Holders with greater certainty regarding the trade size of an IOC Order, and is based on existing order types available on another market. • Auction-Only Orders: The proposed substantive difference to accept Auction-Only Orders in non-auctioneligible symbols and route them to the primary listing market would promote liquidity on the primary listing markets for their respective auctions. The proposed change would also protect investors and the public interest by enabling such orders to reach a destination where it is more likely to obtain an execution opportunity or participate in an auction. In addition, the proposed substantive difference to accept Auction-Only Orders for Trading Halt Auctions on the Exchange would promote liquidity for Exchange Trading Halt Auctions by adding additional order types that an ETP Holder could use that would participate only in an auction. • Reserve Orders: The proposed substantive difference to replenish the display quantity of a Reserve Order after any trade that depletes the display quantity would promote the display of liquidity on the Exchange, because the Exchange would not wait for the display quantity to be depleted before replenishing from reserve interest. In addition, this proposed functionality is similar to how Reserve Orders function on another market. • Limit Non-Displayed Orders: The proposed substantive difference to rank Limit Non-Displayed Orders with all other orders ranked Priority 3—NonDisplay Orders would streamline the Exchange’s priority and allocation methodology and eliminate a separate allocation category for a single order type. In addition, the proposed substantive difference to add an optional Non-Display Remove Modifier would provide ETP Holders with a tool to enable a Limit Non-Displayed Order to trade with an incoming ALO Order rather than have its working price be locked by the display price of an ALO Order. The proposed Non-Display Remove Modifier would also provide price improvement to the contra-side ALO Order with which it would trade. • MPL Orders: The proposed substantive difference to provide that arriving MPL and MPL–ALO Orders E:\FR\FM\30OCN1.SGM 30OCN1 tkelley on DSK3SPTVN1PROD with NOTICES 66954 Federal Register / Vol. 80, No. 210 / Friday, October 30, 2015 / Notices would trade with contra-side orders priced better than the midpoint of the PBBO would provide price improvement opportunities for MPL Orders and is consistent with how orders priced at the midpoint operate on other markets. In addition, the proposed substantive differences to the optional MTS functionality to cancel or reject an MPL Order with an MTS smaller than the size of the order would eliminate the possibility for an MPL Order to trade in a size smaller than the MTS. Finally, the proposed substantive difference to require a minimum of a round lot for the MTS would align the MTS functionality with the proposed MTS functionality for Limit IOC Orders, thereby streamlining the Exchange’s rules and making the available modifiers consistent across multiple order types. • Tracking Orders: The proposed substantive difference to price Tracking Orders based on the PBBO instead of the NBBO would conform how Tracking Orders are priced to how other orders at the Exchange are priced in Pillar, e.g., Limit Orders, MPL Orders, and Pegged Orders. In addition, this proposed change may increase the opportunity for Tracking Orders to trade because by being priced based on the same-side PBBO, a Tracking Order would not be restricted from trading because a price based on the NBBO would tradethrough the PBBO. The proposed substantive difference to allow STP Modifiers for Tracking Orders would provide additional tools for ETP Holders to prevent wash sales between orders entered from the same ETP ID. • Arca Only Orders: The proposed substantive difference to add an optional Non-Display Remove Modifier for Arca Only Orders would provide ETP Holders with a tool to enable an Arca Only Order to trade with an incoming ALO Order rather than have its working price be locked by the display price of an ALO Order. The proposed Non-Display Remove Modifier would also provide price improvement to the contra-side ALO Order with which it would trade. The proposed substantive difference to not offer PNP Orders in Pillar would streamline the order types available at the Exchange. • ALO Orders: The proposed substantive difference to re-price ALO Orders that would trade with the BBO or lock or cross the PBBO, rather than reject such orders if marketable, would promote additional displayed liquidity on a publicly registered exchange, and therefore promote price discovery. The Exchange further believes that the proposed re-pricing and re-displaying of an ALO Order would remove impediments to and perfect the VerDate Sep<11>2014 17:37 Oct 29, 2015 Jkt 238001 mechanism of a free and open market because it assures that such order would meet its intended goal to be available on the Exchange’s NYSE Arca Book as displayed liquidity without locking or crossing a protected quotation in violation of Rule 610(d) of Regulation NMS.34 The proposed re-pricing and redisplaying of ALO Orders is consistent with how other exchanges currently operate. In addition, any time the working price of an order changes, it receives a new working time.35 The proposed re-pricing of ALO Orders would be subject to this general requirement, and therefore re-priced ALO Orders would not have time priority over orders in the same priority category that may have an earlier working time. The Exchange further believes that the proposed substantive differences for ALO Orders to trade on arrival with non-displayed orders that would provide price improvement over the limit price of the ALO Order, but not trade with non-displayed orders priced equal to the limit price of the ALO Order, is consistent with how other exchanges operate, and therefore offering this functionality in Pillar would promote competition. • ISO: The proposed substantive difference to use the ALO Order functionality proposed for Pillar for ISOs would similarly promote additional displayed liquidity on the Exchange by allowing Day ISO ALO Orders to be re-priced for display rather than rejected if they are marketable against the BBO on arrival and is consistent with functionality on another exchange. • Primary Only Orders: The proposed substantive difference to route all Primary Only Orders to the primary listing market would promote liquidity on the primary listing market and provide an opportunity for ETP Holders to participate in trading on the primary listing market. In addition, the proposed substantive difference to permit Primary Only Day Orders to be designated as a Reserve Order would provide ETP Holders with more options of order types that could be routed directly to the primary listing market, which would promote liquidity on the primary listing market. • Pegged Orders: The proposed substantive difference to use the PBBO instead of the NBBO as the dynamic reference price for Pegged Orders would conform how Pegged Orders are priced consistent with how other orders are priced in Pillar, e.g., Limit Orders, MPL Orders, and Tracking Orders. The 34 17 CFR 242.610(d). Rule 7.36P(f)(2). 36 See 35 See PO 00000 Frm 00089 Fmt 4703 proposed substantive differences for Market Pegged Orders in Pillar, to provide that they would be undisplayed and no longer require an offset, would be consistent with how other exchanges operate. Finally, the proposed substantive difference for Market Pegged Orders—not to assign a working price to such orders or have them eligible to trade when the PBBO is locked or crossed—would reduce the potential for a Market Pegged Order to trade when the market is locked or crossed. The proposed substantive difference for Primary Pegged Orders to no longer permit an offset value would promote the additional display of liquidity at the PBBO, rather than at prices inferior to the PBBO. The additional proposed substantive difference for Primary Pegged Orders to reject an arrival when the PBBO is locked or crossed, or to not assign a new working price to a resting Primary Pegged Order if the market becomes locked or crossed, would reduce the potential for the Exchange to display an order that would lock or cross the PBBO. Because Primary Pegged Orders would be displayed orders, the Exchange further proposes that if the PBBO locks or crosses, a resting Primary Pegged Order could remain displayed at its prior working price, which is consistent with how displayed orders that are locked or crossed by another market function on the Exchange. • Q Orders: The proposed substantive difference to eliminate Auto Q Orders would streamline the Exchange’s rules and reduce complexity regarding how orders and modifiers function on the Exchange. With respect to proposed Rule 7.44P, the Commission notes that the Exchange represents that proposed substantive difference to the priority and allocation of orders that trade against Retail Orders in proposed Rule 7.44P(l) would remove impediments to and perfect the mechanism of a fair and orderly market because it would align the priority and allocation of orders in the RLP with the priority and allocation of orders outside of the RLP.36 The Exchange further states the proposed substantive difference would therefore promote transparency in Exchange rules and reduce potential confusion because the RLP would no longer operate differently from the priority and allocation of orders outside the RLP.37 The Exchange also states that the proposed substantive difference for proposed Rule 7.44P(m), to accept RPIs before the Core Trading Session begins, would remove Notice at 45049. 37 Id. Sfmt 4703 E:\FR\FM\30OCN1.SGM 30OCN1 Federal Register / Vol. 80, No. 210 / Friday, October 30, 2015 / Notices impediments to and perfect the mechanism and a free and open market by allowing the entry of RPIs to build a book of liquidity that would be available to provide price improvement to incoming Retail Orders as soon as the Core Trading Session begins.38 Based on the Exchange’s representations, the Commission believes that the proposed rule change does not raise any novel regulatory considerations and should provide greater specificity with respect to the functionality available on the Exchange as symbols are migrated to the Pillar platform. For these reasons, the Commission believes that the proposal should help to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest. tkelley on DSK3SPTVN1PROD with NOTICES IV. Accelerated Approval of Amendment Nos. 1 and 2 In Amendment No. 1, the Exchange proposes to delete references to IOC Routable Cross Orders because the Exchange has determined not to offer this order type when it implements Pillar. In Amendment No. 2, the Exchange proposes to: (i) Correct a cross reference in proposed Rule 7.31P(a)(2)(B) from Rule 7.10 to Rule 7.10P; (ii) add a new sentence to proposed Rule 7.31P(b)(2)(A) to specify that an incoming Limit IOC Order with a MTS must be at least a round lot and, if the MTS is larger than the size of the Limit IOC Order, the order would be rejected on arrival; (iii) to add a hard paragraph return between proposed Rule 7.31P(i)(1) and 7.31P(i)(2); and (iv) remove an extraneous reference to ‘‘500’’ in the sixth paragraph in the first example of proposed Rule 7.44P(l). The Commission believes that the changes proposed in Amendment Nos. 1 and 2 are non-substantive and further clarify the operation of the proposed rules governing Pillar. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,39 to approve the proposed rule change, as modified by Amendment Nos. 1 and 2, on an accelerated basis. V. Solicitation of Comments on Amendment Nos. 1 and 2 Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether Amendment Nos. 1 and 2 are 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– NYSEArca-2015–56 on the subject line. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.41 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–27656 Filed 10–29–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–76260; File No. SR–Phlx– 2015–81] 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–NYSEArca–2015–56. 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– NYSEArca–2015–56, and should be submitted on or before November 20, 2015. Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Options Testing Facility October 26, 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 16, 2015, NASDAQ OMX PHLX LLC (‘‘Phlx’’ 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 the Substance of the Proposed Rule Change The Exchange proposes to amend its Pricing Schedule at Chapter VII to adopt a new Section E, entitled ‘‘Testing Facilities’’ which describes fees in connection with the use of the Testing Facility (‘‘NTF’’) test environment located in Carteret, New Jersey. While the changes proposed herein are effective upon filing, the Exchange has designated that the amendments be operative on October 26, 2015. The text of the proposed rule change is available on the Exchange’s Web site at https:// nasdaqomxphlx.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,40 that the proposed rule change (SR–NYSEArca– 2015–56), as modified by Amendment Nos. 1 and 2 thereto, be, and hereby is, approved on an accelerated basis. 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 38 Id. 39 15 41 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 U.S.C. 78s(b)(2). VerDate Sep<11>2014 17:37 Oct 29, 2015 40 15 Jkt 238001 66955 PO 00000 U.S.C. 78s(b)(2). Frm 00090 Fmt 4703 Sfmt 4703 E:\FR\FM\30OCN1.SGM 30OCN1

Agencies

[Federal Register Volume 80, Number 210 (Friday, October 30, 2015)]
[Notices]
[Pages 66951-66955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27656]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76267; File No. SR-NYSEArca-2015-56]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving 
Proposed Rule Change, and Notice of Filing and Order Granting 
Accelerated Approval of Amendment Nos. 1 and 2 Thereto, Adopting New 
Equity Trading Rules Relating to Orders and Modifiers and the Retail 
Liquidity Program To Reflect the Implementation of Pillar, the 
Exchange's New Trading Technology Platform

October 26, 2015.

I. Introduction

    On July 7, 2015, NYSE Arca, Inc. (the ``Exchange'' or ``Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
adopt new equity trading rules relating to Orders and Modifiers, and 
the Retail Liquidity Program, to reflect the implementation of Pillar, 
the Exchange's new trading technology platform. The proposed rule 
change was published for comment in the Federal Register on July 28, 
2015.\3\ On July 29, 2015, the Exchange filed Amendment No. 1 to the 
proposed rule change.\4\ On September 1,

[[Page 66952]]

2015, pursuant to Section 19(b)(2) of the Act,\5\ the Commission 
designated a longer period within which to approve the proposed rule 
change, disapprove the proposed rule change, or institute proceedings 
to determine whether to approve or disapprove the proposed rule 
change.\6\ On October 15, 2015, the Exchange filed Amendment No. 2 to 
the proposed rule change.\7\ The Commission received no comment letters 
on the proposed rule change. The Commission is publishing this notice 
to solicit comment on Amendment Nos. 1 and 2 from interested persons, 
and is approving the proposed rule change, as modified by Amendment 
Nos. 1 and 2, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4
    \3\ See Securities Exchange Act Release No. 75497 (July 21, 
2015), 80 FR 45022 (``Notice'').
    \4\ Amendment No. 1 deletes references to IOC Routable Cross 
Orders and states that the Exchange has determined not to offer this 
order type when it implements Pillar.
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 75801, 80 FR 53905 
(September 8, 2015).
    \7\ In Amendment No. 2, the Exchange proposes to: (i) Correct a 
cross reference in proposed Rule 7.31P(a)(2)(B) from Rule 7.10 to 
Rule 7.10P; (ii) add a new sentence to proposed Rule 7.31P(b)(2)(A) 
to specify that an incoming Limit IOC Order with a minimum trade 
size (``MTS'') must be at least a round lot and, if the MTS is 
larger than the size of the Limit IOC Order, the order would be 
rejected on arrival; (iii) to add a hard paragraph return between 
proposed Rule 7.31P(i)(1) and 7.31P(i)(2); and (iv) remove an 
extraneous reference to ``500'' in the sixth paragraph in the first 
example of proposed Rule 7.44P(l).
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II. Description of the Proposed Rule Change

    The Exchange proposes to adopt new equity trading rules relating to 
the implementation of Pillar, the Exchange's new trading technology 
platform. The Exchange proposes to adopt two new Pillar rules: 1) NYSE 
Arca Equities Rule 7.31P (``Rule 7.31P'') related to orders and 
modifiers; and 2) NYSE Arca Equities Rule 7.44P (``Rule 7.44P'') 
related to the Retail Liquidity Program (``RLP''). According to the 
Exchange, these rules would set forth the RLP for Pillar and describe 
how orders and modifiers in Pillar would be priced, ranked, traded, 
and/or routed, using the terminology and priority categories that were 
approved in the Pillar I Filing.\8\
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    \8\ See Securities Exchange Act Release No. 75494 (July 20, 
2015), 80 FR 44170 (July 24, 2015) (``Pillar I Filing''); see also 
Notice at 45022.
---------------------------------------------------------------------------

A. Background

    The Exchange represents that Pillar is an integrated trading 
technology platform designed to use a single specification for 
connecting to the equities and options markets operated by Arca and its 
affiliates, New York Stock Exchange LLC (``NYSE'') and NYSE MKT LLC 
(``NYSE MKT'').\9\ On July 24, 2015, the Commission approved Pillar 
rules relating to Trading Sessions, Order Ranking and Display, and 
Order Execution.\10\
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    \9\ See Notice at 45022.
    \10\ See Pillar I Filing, supra note 8.
---------------------------------------------------------------------------

    This filing is the second set of proposed rule changes to support 
Pillar implementation. As proposed, the new rules governing trading on 
Pillar would have the same numbering as current rules, but with the 
modifier ``P'' appended to the rule number. The Exchange proposes that 
rules with a ``P'' modifier would operate for symbols that are trading 
on the Pillar trading platform. If a symbol is trading on the Pillar 
trading platform, a rule with the same number as a rule with a ``P'' 
modifier would no longer operate for that symbol and the Exchange would 
announce by Trader Update when symbols are trading on the Pillar 
trading platform. Definitions that do not have a companion version with 
a ``P'' modifier would continue to operate for all symbols.

B. Proposed Modifications

    As described in detail in the Notice, Rules 7.31P, and 7.44P 
incorporate much of the substance of current NYSE Arca Rules 7.31 and 
7.44, respectively. However, with Pillar, the Exchange would introduce 
new terminology, reorganize and redraft certain provisions to improve 
clarity, and provide additional detail to other current provisions 
being redesignated. The Exchange also proposes to make several changes 
that are more substantive in nature, as follows:
     Market Orders: To reduce the potential for clearly 
erroneous executions, Market Order Trading Collars would prevent Market 
Orders from executing at the Trading Collar, which are based on the 
clearly erroneous execution numerical guidelines, and not just through 
the Trading Collar as under the current trading rules; \11\
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    \11\ See proposed Rule 7.31P(a)(1)(B). See also Notice at 45023.
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     Limit Orders: Resting Limit Orders that would lock or 
cross a protected quotation if they become the best bid or offer 
(``BBO'') would be re-priced; \12\
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    \12\ See proposed Rule 7.31P(a)(2). See also Notice at 45023.
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     Limit Order designated IOC: A Limit Order designated with 
an immediate-or-cancel (``IOC'') modifier that is not eligible to route 
may be designated with an optional MTS. On entry, a Limit IOC Order 
with an MTS must have a minimum of one round lot and will be rejected 
on arrival if the MTS is larger than the size of the Limit IOC Order; 
\13\
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    \13\ See proposed Rule 7.31P(b)(2)(A). See also Notice at 45023.
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     Auction-Only Orders: Market-on-Open (``MOO'') and Limit-
on-Open (``LOO'') Orders would be eligible to participate in trading 
halt auctions and the Exchange would accept Auction-Only Orders in non-
auction eligible symbols; \14\
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    \14\ See proposed Rule 7.31P(c). See also Notice at 45023.
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     Reserve Orders: The displayed portion of Reserve Orders 
would be replenished following any execution that reduces the display 
quantity below the size designated to be displayed, at which point the 
replenished quantity would receive a new working time; \15\
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    \15\ See proposed Rule 7.31P(d)(1). See also Notice at 45023.
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     Passive Liquidity Orders: Passive Liquidity Orders would 
be renamed ``Limit Non-Displayed Orders,'' would no longer be ranked 
behind other non-displayed orders, and an optional Non-Display Remove 
Modifier would be available for this order type; \16\
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    \16\ See proposed Rule 7.31P(d)(2). See also Notice at 45023.
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     MPL Orders: Mid-point Passive Liquidity Orders would be 
renamed ``Mid-point Liquidity Orders'' (``MPL Order''). On arrival, MPL 
Orders (and MPL-Adding Liquidity Only (``ALO'' Orders) would be 
eligible to trade with resting non-displayed interest that provides 
price improvement over the midpoint of the protected best bid or offer 
(``PBBO''). As under current rules, an MPL Order may be designated with 
an MTS, but in Pillar, the MTS would have to be a minimum of a round 
lot instead of one share. In addition, an MPL with an MTS would be 
rejected if, on arrival, the MTS is larger than the size of the order 
and would be cancelled at any point the MTS is larger than the residual 
size of the order; \17\
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    \17\ See proposed Rule 7.31P(d)(3). See also Notice at 45023.
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     Tracking Orders: Tracking Orders would peg to the PBBO 
instead of the national best bid or offer (``NBBO'') and Self-Trade 
Prevention (``STP'') Modifiers for Tracking Orders would no longer be 
ignored; \18\
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    \18\ See proposed Rule 7.31P(d)(4). See also Notice at 45023.
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     PNP Orders: Post No Preference (``PNP'') Orders would no 
longer be offered; \19\
---------------------------------------------------------------------------

    \19\ See Notice at 45023.
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     PNP Blind Orders: PNP Blind Orders would be renamed ``Arca 
Only Orders'' and an optional Non-Display Remove Modifier would be 
available for this order type; \20\
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    \20\ See proposed Rule 7.31P(e)(1). See also Notice at 45023.
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     ALO Orders: The current form of ALO Orders, which are 
based on PNP Orders and are rejected on arrival if

[[Page 66953]]

marketable, would no longer be offered. ALO Orders in Pillar would no 
longer be rejected on arrival if marketable and instead would be re-
priced both on arrival and after updates to the PBBO. In addition, an 
ALO Order would trade with resting contra-side non-displayed orders 
that would provide price improvement; \21\
---------------------------------------------------------------------------

    \21\ See proposed Rule 7.31P(e)(2). See also Notice at 45023.
---------------------------------------------------------------------------

     Intermarket Sweep Order: Intermarket Sweep Orders 
(``ISO'') designated Day and IOC would be renamed ``Day ISO'' and ``IOC 
ISO,'' respectively, and ALO modifier functionality available for Day 
ISOs would be based on the proposed ALO Order in Pillar; \22\
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    \22\ See proposed Rule 7.31P(e)(3). See also Notice at 45023.
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     Primary Only Orders: Primary Only Orders designated for 
the Core Trading Session would be accepted and routed directly to the 
primary listing market on arrival and the Exchange would not validate 
whether the primary listing market would be accepting such orders. 
Primary Only Orders that are designated Day may be designated as a 
Reserve Order; \23\
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    \23\ See proposed Rule 7.31P(f)(1). See also Notice at 45023.
---------------------------------------------------------------------------

     Pegged Orders: Pegged Orders would peg to the PBBO instead 
of the NBBO, would require a limit price, and would be accepted during 
a Short Sale Period, as defined in Rule 7.16(f). Market Pegged Orders 
would no longer be displayed and an offset value would no longer be 
required, and Primary Pegged Orders could not include an offset value. 
In addition, in Pillar, Pegged Orders would not be assigned a working 
price if the PBBO is locked or crossed; \24\ and
---------------------------------------------------------------------------

    \24\ See proposed Rule 7.31P(h). See also Notice at 45023.
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     Q Orders: Auto Q Orders would be eliminated.\25\
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    \25\ See Notice at 45023.
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     In the RLP, Retail Orders may not be designated with a 
``No Midpoint Execution'' Modifier.\26\
---------------------------------------------------------------------------

    \26\ See proposed Rule 7.44P(k); see also Notice at 45044.
---------------------------------------------------------------------------

     All orders in the RLP would be ranked based on their 
priority category, pursuant to Rule 7.36P, and would not have different 
ranking in the Program. Accordingly, odd-lot orders ranked Priority 2--
Display Orders would have priority over orders ranked Priority 3--Non-
Display Orders, and Limit Non-Displayed Orders would no longer be 
ranked behind other non-display orders.\27\
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    \27\ See proposed Rule 7.44P(l); see also Notice at 45044.
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     Retail Price Improvement Orders (``RPIs'') would be 
accepted before the start of Core Trading Hours.\28\
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    \28\ See proposed Rule 7.44P(m); see also Notice at 45047.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act \29\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.\30\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\31\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, 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 and that the 
rules are not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f.
    \30\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \31\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission notes that the Exchange believes that the proposed 
rules would remove impediments to and perfect the mechanism of a free 
and open market because the proposed rule set would promote 
transparency by using consistent terminology governing equities 
trading, and by clearly denoting the rules that govern once a symbol 
has been migrated to the Pillar platform.\32\
---------------------------------------------------------------------------

    \32\ See Notice at 45047.
---------------------------------------------------------------------------

    With respect to proposed Rule 7.31P, the Exchange states that it 
believes that the proposed substantive differences to functionality 
being proposed for Pillar would remove impediments to and perfect the 
mechanism of a fair and orderly market for the following reasons: \33\
---------------------------------------------------------------------------

    \33\ See Notice at 45047-45049
---------------------------------------------------------------------------

     Market Orders: The proposed substantive difference to 
prevent Market Orders from trading at the Trading Collar, and not just 
through the Trading Collar, would reduce the potential for Market 
Orders to trade at prices that would be considered clearly erroneous 
executions.
     Limit Orders: The proposed substantive difference to re-
price resting Limit Orders would reduce the potential for the Exchange 
to publish a BBO that would lock or cross an Away Market PBBO that was 
locking or crossing a prior BBO of the Exchange.
     Limit Order Designated IOC: The proposed substantive 
difference to add optional MTS functionality for Limit IOC Orders would 
provide ETP Holders with greater certainty regarding the trade size of 
an IOC Order, and is based on existing order types available on another 
market.
     Auction-Only Orders: The proposed substantive difference 
to accept Auction-Only Orders in non-auction-eligible symbols and route 
them to the primary listing market would promote liquidity on the 
primary listing markets for their respective auctions. The proposed 
change would also protect investors and the public interest by enabling 
such orders to reach a destination where it is more likely to obtain an 
execution opportunity or participate in an auction. In addition, the 
proposed substantive difference to accept Auction-Only Orders for 
Trading Halt Auctions on the Exchange would promote liquidity for 
Exchange Trading Halt Auctions by adding additional order types that an 
ETP Holder could use that would participate only in an auction.
     Reserve Orders: The proposed substantive difference to 
replenish the display quantity of a Reserve Order after any trade that 
depletes the display quantity would promote the display of liquidity on 
the Exchange, because the Exchange would not wait for the display 
quantity to be depleted before replenishing from reserve interest. In 
addition, this proposed functionality is similar to how Reserve Orders 
function on another market.
     Limit Non-Displayed Orders: The proposed substantive 
difference to rank Limit Non-Displayed Orders with all other orders 
ranked Priority 3--Non-Display Orders would streamline the Exchange's 
priority and allocation methodology and eliminate a separate allocation 
category for a single order type. In addition, the proposed substantive 
difference to add an optional Non-Display Remove Modifier would provide 
ETP Holders with a tool to enable a Limit Non-Displayed Order to trade 
with an incoming ALO Order rather than have its working price be locked 
by the display price of an ALO Order. The proposed Non-Display Remove 
Modifier would also provide price improvement to the contra-side ALO 
Order with which it would trade.
     MPL Orders: The proposed substantive difference to provide 
that arriving MPL and MPL-ALO Orders

[[Page 66954]]

would trade with contra-side orders priced better than the midpoint of 
the PBBO would provide price improvement opportunities for MPL Orders 
and is consistent with how orders priced at the midpoint operate on 
other markets. In addition, the proposed substantive differences to the 
optional MTS functionality to cancel or reject an MPL Order with an MTS 
smaller than the size of the order would eliminate the possibility for 
an MPL Order to trade in a size smaller than the MTS. Finally, the 
proposed substantive difference to require a minimum of a round lot for 
the MTS would align the MTS functionality with the proposed MTS 
functionality for Limit IOC Orders, thereby streamlining the Exchange's 
rules and making the available modifiers consistent across multiple 
order types.
     Tracking Orders: The proposed substantive difference to 
price Tracking Orders based on the PBBO instead of the NBBO would 
conform how Tracking Orders are priced to how other orders at the 
Exchange are priced in Pillar, e.g., Limit Orders, MPL Orders, and 
Pegged Orders. In addition, this proposed change may increase the 
opportunity for Tracking Orders to trade because by being priced based 
on the same-side PBBO, a Tracking Order would not be restricted from 
trading because a price based on the NBBO would trade-through the PBBO. 
The proposed substantive difference to allow STP Modifiers for Tracking 
Orders would provide additional tools for ETP Holders to prevent wash 
sales between orders entered from the same ETP ID.
     Arca Only Orders: The proposed substantive difference to 
add an optional Non-Display Remove Modifier for Arca Only Orders would 
provide ETP Holders with a tool to enable an Arca Only Order to trade 
with an incoming ALO Order rather than have its working price be locked 
by the display price of an ALO Order. The proposed Non-Display Remove 
Modifier would also provide price improvement to the contra-side ALO 
Order with which it would trade. The proposed substantive difference to 
not offer PNP Orders in Pillar would streamline the order types 
available at the Exchange.
     ALO Orders: The proposed substantive difference to re-
price ALO Orders that would trade with the BBO or lock or cross the 
PBBO, rather than reject such orders if marketable, would promote 
additional displayed liquidity on a publicly registered exchange, and 
therefore promote price discovery. The Exchange further believes that 
the proposed re-pricing and re-displaying of an ALO Order would remove 
impediments to and perfect the mechanism of a free and open market 
because it assures that such order would meet its intended goal to be 
available on the Exchange's NYSE Arca Book as displayed liquidity 
without locking or crossing a protected quotation in violation of Rule 
610(d) of Regulation NMS.\34\ The proposed re-pricing and re-displaying 
of ALO Orders is consistent with how other exchanges currently operate. 
In addition, any time the working price of an order changes, it 
receives a new working time.\35\ The proposed re-pricing of ALO Orders 
would be subject to this general requirement, and therefore re-priced 
ALO Orders would not have time priority over orders in the same 
priority category that may have an earlier working time. The Exchange 
further believes that the proposed substantive differences for ALO 
Orders to trade on arrival with non-displayed orders that would provide 
price improvement over the limit price of the ALO Order, but not trade 
with non-displayed orders priced equal to the limit price of the ALO 
Order, is consistent with how other exchanges operate, and therefore 
offering this functionality in Pillar would promote competition.
---------------------------------------------------------------------------

    \34\ 17 CFR 242.610(d).
    \35\ See Rule 7.36P(f)(2).
---------------------------------------------------------------------------

     ISO: The proposed substantive difference to use the ALO 
Order functionality proposed for Pillar for ISOs would similarly 
promote additional displayed liquidity on the Exchange by allowing Day 
ISO ALO Orders to be re-priced for display rather than rejected if they 
are marketable against the BBO on arrival and is consistent with 
functionality on another exchange.
     Primary Only Orders: The proposed substantive difference 
to route all Primary Only Orders to the primary listing market would 
promote liquidity on the primary listing market and provide an 
opportunity for ETP Holders to participate in trading on the primary 
listing market. In addition, the proposed substantive difference to 
permit Primary Only Day Orders to be designated as a Reserve Order 
would provide ETP Holders with more options of order types that could 
be routed directly to the primary listing market, which would promote 
liquidity on the primary listing market.
     Pegged Orders: The proposed substantive difference to use 
the PBBO instead of the NBBO as the dynamic reference price for Pegged 
Orders would conform how Pegged Orders are priced consistent with how 
other orders are priced in Pillar, e.g., Limit Orders, MPL Orders, and 
Tracking Orders. The proposed substantive differences for Market Pegged 
Orders in Pillar, to provide that they would be undisplayed and no 
longer require an offset, would be consistent with how other exchanges 
operate. Finally, the proposed substantive difference for Market Pegged 
Orders--not to assign a working price to such orders or have them 
eligible to trade when the PBBO is locked or crossed--would reduce the 
potential for a Market Pegged Order to trade when the market is locked 
or crossed. The proposed substantive difference for Primary Pegged 
Orders to no longer permit an offset value would promote the additional 
display of liquidity at the PBBO, rather than at prices inferior to the 
PBBO. The additional proposed substantive difference for Primary Pegged 
Orders to reject an arrival when the PBBO is locked or crossed, or to 
not assign a new working price to a resting Primary Pegged Order if the 
market becomes locked or crossed, would reduce the potential for the 
Exchange to display an order that would lock or cross the PBBO. Because 
Primary Pegged Orders would be displayed orders, the Exchange further 
proposes that if the PBBO locks or crosses, a resting Primary Pegged 
Order could remain displayed at its prior working price, which is 
consistent with how displayed orders that are locked or crossed by 
another market function on the Exchange.
     Q Orders: The proposed substantive difference to eliminate 
Auto Q Orders would streamline the Exchange's rules and reduce 
complexity regarding how orders and modifiers function on the Exchange.
    With respect to proposed Rule 7.44P, the Commission notes that the 
Exchange represents that proposed substantive difference to the 
priority and allocation of orders that trade against Retail Orders in 
proposed Rule 7.44P(l) would remove impediments to and perfect the 
mechanism of a fair and orderly market because it would align the 
priority and allocation of orders in the RLP with the priority and 
allocation of orders outside of the RLP.\36\ The Exchange further 
states the proposed substantive difference would therefore promote 
transparency in Exchange rules and reduce potential confusion because 
the RLP would no longer operate differently from the priority and 
allocation of orders outside the RLP.\37\ The Exchange also states that 
the proposed substantive difference for proposed Rule 7.44P(m), to 
accept RPIs before the Core Trading Session begins, would remove

[[Page 66955]]

impediments to and perfect the mechanism and a free and open market by 
allowing the entry of RPIs to build a book of liquidity that would be 
available to provide price improvement to incoming Retail Orders as 
soon as the Core Trading Session begins.\38\
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    \36\ See Notice at 45049.
    \37\ Id.
    \38\ Id.
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    Based on the Exchange's representations, the Commission believes 
that the proposed rule change does not raise any novel regulatory 
considerations and should provide greater specificity with respect to 
the functionality available on the Exchange as symbols are migrated to 
the Pillar platform. For these reasons, the Commission believes that 
the proposal should help to prevent fraudulent and manipulative acts 
and practices, promote just and equitable principles of trade, remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, protect investors and the 
public interest.

IV. Accelerated Approval of Amendment Nos. 1 and 2

    In Amendment No. 1, the Exchange proposes to delete references to 
IOC Routable Cross Orders because the Exchange has determined not to 
offer this order type when it implements Pillar. In Amendment No. 2, 
the Exchange proposes to: (i) Correct a cross reference in proposed 
Rule 7.31P(a)(2)(B) from Rule 7.10 to Rule 7.10P; (ii) add a new 
sentence to proposed Rule 7.31P(b)(2)(A) to specify that an incoming 
Limit IOC Order with a MTS must be at least a round lot and, if the MTS 
is larger than the size of the Limit IOC Order, the order would be 
rejected on arrival; (iii) to add a hard paragraph return between 
proposed Rule 7.31P(i)(1) and 7.31P(i)(2); and (iv) remove an 
extraneous reference to ``500'' in the sixth paragraph in the first 
example of proposed Rule 7.44P(l).
    The Commission believes that the changes proposed in Amendment Nos. 
1 and 2 are non-substantive and further clarify the operation of the 
proposed rules governing Pillar. Accordingly, the Commission finds good 
cause, pursuant to Section 19(b)(2) of the Act,\39\ to approve the 
proposed rule change, as modified by Amendment Nos. 1 and 2, on an 
accelerated basis.
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    \39\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Solicitation of Comments on Amendment Nos. 1 and 2

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment Nos. 1 
and 2 are 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-NYSEArca-2015-56 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-NYSEArca-2015-56. 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-NYSEArca-2015-56, and should 
be submitted on or before November 20, 2015.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\40\ that the proposed rule change (SR-NYSEArca-2015-56), as 
modified by Amendment Nos. 1 and 2 thereto, be, and hereby is, approved 
on an accelerated basis.
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    \40\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\41\
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    \41\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-27656 Filed 10-29-15; 8:45 am]
BILLING CODE 8011-01-P
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