Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change, and Notice of Filing and Order Granting Accelerated Approval of Amendment Nos. 1 and 3 Thereto, Relating to Auctions for Pillar, the Exchange's New Trading Technology Platform, 2276-2282 [2016-00645]
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have been widely adopted by equities
and options exchanges and are equitable
because they are open to all Members on
an equal basis and provide additional
benefits or discounts that are reasonably
related to the value to an exchange’s
market quality associated with higher
levels of market activity, such as higher
levels of liquidity provision and/or
growth patterns, and introduction of
higher volumes of orders into the price
and volume discovery processes. Easing
the criteria for the Customer Step-Up
Volume Tier is intended to incentivize
Members to send additional orders to
the Exchange in an effort to qualify for
the enhanced rebate available by the
respective tier.
The Exchange believes that this
change is reasonable, fair and equitable
and non-discriminatory, for the reasons
set forth with respect to volume-based
pricing generally and because such
change will either incentivize
participants to further contribute to
market quality on the Exchange or will
allow the Exchange to earn additional
revenue that can be used to offset the
addition of new pricing incentives. The
Exchange also believes that the
proposed rebate remains consistent with
pricing previously offered by the
Exchange as well as competitors of the
Exchange and does not represent a
significant departure from the
Exchange’s general pricing structure.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes the proposed
amendment to its fee schedule would
not impose any burden on competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange does not believe that the
proposed change represents a significant
departure from previous pricing offered
by the Exchange or pricing offered by
the Exchange’s competitors.
Additionally, Members may opt to
disfavor the Exchange’s pricing if they
believe that alternatives offer them
better value. Accordingly, the Exchange
does not believe that the proposed
change will impair the ability of
Members or competing venues to
maintain their competitive standing in
the financial markets. The Exchange
does not believe that the proposed
change to the Exchange’s tiered pricing
structure burdens competition, but
instead, enhances competition as it is
intended to increase the
competitiveness of the Exchange by
easing the criteria necessary to qualify
for the Customer Step-Up Volume tier.
Also, the Exchange believes that the
decrease to the tier’s threshold
contributes to, rather than burdens
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competition, as such change is intended
to incentivize participants to increase
their participation on the Exchange.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any written
comments from members or other
interested parties.
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)
of the Act 9 and paragraph (f) of Rule
19b–4 thereunder.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 necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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 No. SR–
BATS–2015–120 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File No.
SR–BATS–2015–120. 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 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 No. SR–BATS–
2015–120 and should be submitted on
or before February 5, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–00640 Filed 1–14–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76869; File No. SR–
NYSEArca–2015–86]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change, and Notice of
Filing and Order Granting Accelerated
Approval of Amendment Nos. 1 and 3
Thereto, Relating to Auctions for Pillar,
the Exchange’s New Trading
Technology Platform
January 11, 2016.
I. Introduction
On September 22, 2015, NYSE Arca,
Inc. (‘‘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 auctions for Pillar, the
Exchange’s new trading technology
platform. The proposed rule change was
published for comment in the Federal
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
9 15
U.S.C. 78s(b)(3)(A).
10 17 CFR 240.19b–4(f).
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Register on October 13, 2015.3 The
Commission received no comments on
the proposed rule change. On November
20, 2015, 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.4 On December 22, 2015,
the Exchange filed Amendment No. 1 to
the proposed rule change.5 On January
7, 2016, the Exchange filed Amendment
No. 3 to the proposed rule change.6 The
Commission is publishing this notice to
solicit comment on Amendment Nos. 1
and 3 from interested persons, and is
approving the proposed rule change, as
modified by Amendment Nos. 1 and 3,
on an accelerated basis.
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II. Description of the Proposed Rule
Change
The Exchange proposes to adopt Rule
7.35P, which relates to auctions for
Pillar, the Exchange’s new trading
technology platform. The Exchange also
proposes to amend existing definitions
in Rule 1.1.7
3 See Securities Exchange Act Release No. 76085
(October 6, 2015), 80 FR 61513 (‘‘Notice’’).
4 See Securities Exchange Act Release No. 76493,
80 FR 74169 (November 27, 2015).
5 In Amendment No. 1, the Exchange: (i) Amends
proposed Rule 7.35P(h) to provide that the rule
would address how orders would be handled not
only in the transition to continuous trading
following an auction, but also when transitioning
from one trading session to the next trading session;
(ii) amends proposed Rule 7.35P(h)(3)(B) to provide
that, before continuous trading following a prior
trading session or an auction begins, the display
price and working price of orders would be
adjusted as provided for in Rule 7.31P, and that
when transitioning to continuous trading, the
display price and working price of Day ISOs would
be adjusted in the same manner as Arca Only
Orders until the Day ISO is either traded in full or
displayed at its limit price; and (iii) provides
additional discussions related to certain proposed
rules.
6 Amendment No. 3 superseded Amendment No.
2 in its entirety. In Amendment No. 3, the
Exchange: (i) Specifies the percentages for the
Auction Collar thresholds; (ii) removes the
reference to the Trading Halt Auction in the
definition of Auction Collar; (iii) states that the
Exchange would provide prior notice to ETP
Holders if additional UTP Securities are to be
designated as Auction-Eligible Securities; (iv)
includes cross-references to Rule 7.16P in
Commentary .01 to proposed Rule 7.35P to clarify
where certain terms are defined; and (v) provides
additional discussions related to certain proposed
rules.
7 The Exchange proposes to amend Rules 1.1(r)
and (s) to specify that the definition of ‘‘Imbalance’’
and ‘‘Indicative Match Price’’ in those rules would
be applicable only for auctions conducted on the
current trading platform. The Exchange states that
these changes would remove impediments to and
perfect the mechanism of a fair and orderly market
because they would not make any substantive
changes, but rather are designed to reduce
confusion by specifying that Rules 1.1(r) and (s)
would be applicable to auctions on the current
trading platform only. See Notice at 61525.
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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’’).8 On
April 30, 2015, the Exchange filed the
first rule filing relating to the
implementation of Pillar, which
adopted rules relating to Trading
Sessions, Order Ranking and Display,
and Order Execution.9 On July 7, 2015,
the Exchange filed the second rule filing
relating to the implementation of Pillar,
which adopted rules relating to Orders
and Modifiers and the Retail Liquidity
Program.10 On July 1, 2015, the
Exchange filed the third rule filing
relating to the implementation of Pillar,
which adopted rules relating to Trading
Halts, Short Sales, Limit Up-Limit
Down, and Odd Lots and Mixed Lots.11
This filing is the fourth set of
proposed rule changes to support Pillar
implementation. As proposed, the new
rule governing trading on Pillar would
have the same numbering as the current
rule, but with the modifier ‘‘P’’
appended to the rule number.
Specifically, Rule 7.35, which governs
auctions, would remain unchanged and
continue to apply to any trading in
symbols on the current trading platform.
Proposed Rule 7.35P would govern
auctions for trading in symbols migrated
to the Pillar platform.
B. Proposed Modifications
As stated in the Notice, the Exchange
proposes new Rule 7.35P to describe
auctions on Pillar, which would be
based on Rule 7.35 and Rules 1.1(r) and
(s).12 The Exchange states that auctions
on Pillar would function similarly to
auctions on the current trading
8 See
Notice at 61513.
Securities Exchange Act Release No. 74951
(May 13, 2015), 80 FR 28721 (May 19, 2015) (SR–
NYSEArca–2015–38) (‘‘Pillar I Filing’’). The
Commission approved the Pillar I Filing on July 20,
2015. See Securities Exchange Act Release No.
75494 (July 20, 2015), 80 FR 44170 (July 24, 2015).
10 See Securities Exchange Act Release No. 75497
(July 21, 2015), 80 FR 45022 (July 28, 2015) (SR–
NYSEArca–2015–56) (‘‘Pillar II Filing’’). The
Commission approved the Pillar II Filing on
October 26, 2015. See Securities Exchange Act
Release No. 76267 (October 26, 2015), 80 FR 66951
(October 30, 2015).
11 See Securities Exchange Act Release No. 75467
(July 16, 2015), 80 FR 43515 (July 22, 2015) (SR–
NYSEArca–2015–58) (‘‘Pillar III Filing’’). The
Commission approved the Pillar III Filing on
October 20, 2015. See Securities Exchange Act
Release No. 76198 (October 20, 2015), 80 FR 65274
(October 26, 2015). See also Securities Exchange
Act Release No. 76198A (October 28, 2015), 80 FR
67822 (November 3, 2015).
12 See Notice at 61513.
9 See
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platform.13 According to the Exchange,
proposed Rule 7.35P would use Pillar
terminology and include both
substantive and non-substantive
differences and clarifications from the
current rule text.14 The proposed
changes that are more substantive in
nature are noted in Section III below
and are discussed in the Notice.
III. Discussion and Commission
Findings
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.15 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,16 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, in the
proposal, the Exchange states its belief
that proposed Rule 7.35P, together with
rules from the three previous Pillar
filings, would remove impediments to
and perfect the mechanism of a free and
open market because they would
promote transparency by using
consistent terminology for rules
governing equities trading, thereby
ensuring that members, regulators, and
the public can more easily navigate the
Exchange’s rulebook and better
understand how equity trading would
be conducted on Pillar.17 The Exchange
also states that the proposed use of
Pillar terminology would promote
consistency in the Exchange’s rulebook
regarding how the Exchange would
process orders during an auction.18
Moreover, the Exchange states that
adding new rules with the modifier ‘‘P’’
to denote the rules that would be
13 See
Notice at 61513–14.
Notice at 61514.
15 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).
16 15 U.S.C. 78f(b)(5).
17 See Notice at 61525.
18 See id.
14 See
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operative for Pillar would remove
impediments to and perfect the
mechanism of a free and open market by
providing transparency regarding which
rules govern trading once a symbol has
been migrated to Pillar.19
The Commission also notes that, with
respect to the substantive differences
between proposed Rule 7.35P and the
current rules, the Exchange states that
they would remove impediments to and
perfect the mechanism of a fair and
orderly market.20 In particular, the
Exchange proposes to make several
changes that are more substantive in
nature, which include:
Definitions
Auction-Eligible Security: The
Exchange proposes a new definition for
the term ‘‘Auction-Eligible Security.’’ 21
According to the Exchange, as with the
current rule, all securities for which the
Exchange is the primary listing market
would be Auction-Eligible Securities.22
However, for Pillar, the Exchange would
designate UTP Securities 23 that would
be Auction-Eligible Securities for the
Early Open Auction, the Core Open
Auction, and the Closing Auction.24
According to the Exchange, this
approach would support the initiatives
of the Exchange, NYSE, and the
NASDAQ Stock Market LLC (‘‘Nasdaq’’)
to increase resiliency by having auctions
on Arca serve as a backup to either
NYSE or Nasdaq if one of those markets
is unable to conduct an auction.25
Auction Imbalance Information: The
Exchange proposes to define ‘‘Auction
Imbalance Information’’ to mean the
information that is disseminated by the
Corporation 26 for an auction.27 As
proposed, Auction Imbalance
Information would be updated at least
every second (unless there is no change
to the information), rather than on a
real-time basis.28 According to the
Exchange, by updating Auction
Imbalance Information on a one-second
basis, ETP Holders that are interested in
entering offsetting interest during an
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19 See
id.
20 See id.
21 See proposed Rule 7.35P(a)(1).
22 See Notice at 61515.
23 The term ‘‘UTP Security’’ means a security that
is listed on a national securities exchange other
than the Exchange and that trades on the NYSE
Arca Marketplace pursuant to unlisted trading
privileges. See Rule 1.1(ii).
24 See Notice at 61515. According to the
Exchange, consistent with Rule 7.18P(b), for the
Trading Halt Auction, Auction-Eligible Securities
means securities for which Arca is the primary
listing market. See id.
25 See id.
26 The term ‘‘Corporation’’ means NYSE Arca
Equities, Inc. See Rule 1.1(k).
27 See proposed Rule 7.35P(a)(4).
28 See proposed Rule 7.35P(a)(4)(A).
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Auction Imbalance Freeze would have
greater certainty of the Imbalance in
effect at the time of order entry.29
Auction NBBO: The Exchange
proposes to define ‘‘Auction NBBO’’ to
mean an NBBO that is used for purposes
of pricing an auction. As proposed, an
NBBO is an Auction NBBO when (i)
there is an NBB above zero and NBO for
the security and (ii) the NBBO is not
crossed.30 In addition, for the Core Open
Auction, an NBBO is an Auction NBBO
when the midpoint of the NBBO, when
multiplied by a designated percentage,
is greater than or equal to the spread of
that NBBO.31 According to the
Exchange, this approach would promote
transparency regarding how the
Exchange determines pricing for its
auctions.32 Moreover, according to the
Exchange, the proposed method for
determining the Auction NBBO for the
Core Open Auction is designed to
validate whether an NBBO bears a
relation to the value of the security.33
Auction Ranking: The Exchange
proposes to define ‘‘Auction Ranking’’
to mean how orders on the side of an
Imbalance would be ranked for
allocation in an Auction. Specifically,
orders on the side of the Imbalance
would be ranked in price-time priority
under Rule 7.36P(c)–(g) consistent with
the priority ranking associated with
each order, provided that: (i) MOO and
MOC Orders would be ranked Priority
1—Market Orders; (ii) LOO and LOC
Orders would be ranked Priority 2—
Display Orders; and (iii) the limit price
of Limit, LOO, and LOC orders would
be used for ranking purposes.34
According to the Exchange, the only
order ranked Priority 3—Non-Display
Orders that would be eligible to
participate in an auction would be the
non-displayed quantity of a Reserve
Order.35 The Exchange states that the
proposed approach would promote
transparency in Exchange rules by
consolidating into a single location how
orders would be ranked for auctions.36
The Exchange also states that using the
same methodology to rank and allocate
orders on the side of the Imbalance for
all auctions based on the priority
ranking described in Rule 7.36P would
promote consistency in how the
Exchange would rank orders on Pillar,
whether for continuous trading or for
29 See
Amendment No. 1.
proposed Rule 7.35P(a)(5).
31 See id. The designated percentage would be
determined by the Corporation from time to time
upon prior notice to ETP Holders. See id.
32 See Notice at 61516 and 61526.
33 See Notice at 61516.
34 See proposed Rule 7.35P(a)(6).
35 See Notice at note 29.
36 See Notice at 61526.
30 See
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auctions.37 In addition, during a Short
Sale Period (as defined in Rule
7.16P(f)(4)), for purposes of pricing an
auction and ranking orders for
allocation in an auction, sell short
Market Orders that are adjusted to a
Permitted Price (as defined in Rule
7.16P(f)(5)(A)) would be processed as
Limit Orders ranked Priority 2—Display
Orders, and would not be included in
the Market Imbalance.38 The Exchange
states that, once adjusted to a Permitted
Price, a sell short Market Order has a
price and such price could be used for
purposes of determining the price of the
auction.39 As such, the Exchange
believes that it is appropriate to treat
these re-priced Market Orders as Limit
Orders for purposes of determining
allocation in an auction, and that this
approach would promote transparency
by processing all orders that have a
price similarly in an auction.40
Market Orders: The Exchange
proposes that, for purposes of Rule
7.35P, unless otherwise specified, the
term ‘‘Market Orders’’ would include
MOO Orders (for the Core Open Auction
and Trading Halt Auction) and MOC
Orders (for the Closing Auction).41
According to the Exchange, consistent
with Rule 7.31P(c)(2), the term ‘‘Market
Orders’’ in proposed Rule 7.35P would
include MOO Orders for the Trading
Halt Auction.42 Also, the Exchange
states that because unexecuted Market
Orders that are held at a Trading Collar
or NBBO would be eligible to
participate in the Closing Auction and
would be included in Closing Auction
Imbalance Information, proposed Rule
7.35P would refer to Market Orders
generally for the Closing Auction, which
would include MOC Orders.43
Market Imbalance: As proposed, the
term ‘‘Market Imbalance’’ would mean
the imbalance of any remaining buy
(sell) Market Orders that are not
matched for trading in an auction
against any interest, and not just Market
Orders not matched for trading against
37 See
id.
proposed Rule 7.35P, Commentary .01(a).
As proposed, sell short orders that are included in
the Auction Imbalance Information, but are not
eligible for continuous trading before the applicable
auction, would be adjusted to a Permitted Price as
the NBB moves both up and down. See proposed
Rule 7.35P, Commentary .01(b). The Exchange
states that continuously re-pricing sell short orders
consistent with Rule 7.16P(f)(5), even though they
are not yet eligible to trade, would provide greater
transparency regarding the price at which such
orders would be included in the Auction Imbalance
Information. See Notice at 61525 and Amendment
No. 1.
39 See Notice at 61525 and Amendment No. 1.
40 See Notice at 61526.
41 See proposed Rule 7.35P(a).
42 See Notice at 61514–15.
43 See Notice at 61515.
38 See
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other Market Orders.44 The Exchange
states its belief that the proposed
approach would provide transparency
regarding the volume of Market Orders
not paired up against any interest.45
Indicative Match Price: As proposed,
the term ‘‘Indicative Match Price’’
would mean the best price at which the
maximum volume of shares, including
the non-displayed quantity of Reserve
Orders, is tradable in the applicable
auction, subject to the Auction
Collars.46 If there are two or more prices
at which the maximum volume of
shares is tradable, the Indicative Match
Price would be the price closest to the
‘‘Auction Reference Price’’ (provided
that the Indicative Match Price would
not be lower (higher) than the price of
an order to buy (sell) ranked Priority 2
that was eligible to participate in the
auction).47 If the Matched Volume for an
auction consists of Market Orders only,
the Indicative Match Price would be: (i)
for the Core open Auction, the Auction
Reference Price; (ii) for the Closing
Auction, the midpoint of the Auction
NBBO as of the time the auction is
conducted, provided that if the Auction
NBBO is locked, the locked price, and
if there is no Auction NBBO, the
Auction Reference Price; and (iii) for the
Trading Halt Auction, the Auction
Reference Price.48 In addition, if there is
a BBO but no Matched Volume, the
Indicative Match Price and Total
Imbalance for the Auction Imbalance
Information would be the side of the
BBO that has the higher volume, and if
the volume of BB equals the volume of
BO, the BB.49 As proposed, if there is no
Matched Volume and Market Orders on
only one side of the market, the
Indicative Match Price would be zero.50
Auction Reference Price: The Auction
Reference Price for the Core Open
Auction would be the midpoint of an
Auction NBBO or, if the Auction NBBO
is locked, the locked price. If there is no
Auction NBBO, the Exchange would use
the prior trading day’s Official Closing
Price.51 The Exchange states its belief
that using the midpoint of the Auction
NBBO for the Core Open Auction would
better reflect the most recent value of
the security, as compared to a closing
price from the prior trading day.52 The
Auction Reference Price for the Trading
Halt Auction and the Closing Auction
would be the last consolidated round-lot
price of that trading day and, if none,
the prior trading day’s Official Closing
Price.53 The Exchange states that the
Auction Reference Price for the Trading
Halt Auction and the Closing Auction is
based on Rule 1.1(s), with additional
specificity that it would be a last
consolidated round-lot price of that
trading day, and to specify the reference
price if there were no last consolidated
round-lot trades that day.54 The
Exchange states its belief that the last
consolidated round-lot price prior to a
Trading Halt Auction would reflect the
most recent value for a security, and
that the last consolidated round-lot
price would be representative of the
value of the security going into the
Closing Auction.55 With respect to the
IPO Auction, the Exchange proposes
that the Auction Reference Price would
be zero, unless the Corporation is
provided with a price for the security.56
The Exchange states that it proposes to
use zero (unless the Corporation is
provided with a price for the security)
because there would not be any prior
trading in that security.57
Auction Collar: The Exchange
proposes to define ‘‘Auction Collar’’ to
mean the price collar thresholds for the
Indicative Match Price for the Core
Open Auction and Closing Auction.58
As proposed, the Auction Collar would
be based on a price that is a specified
percentage away from the Auction
Reference Price.59 An Indicative Match
Price that is equal to or outside the
Auction Collar would be adjusted to be
one minimum price variation (‘‘MPV’’)
inside the Auction Collar, and orders
eligible to participate in the applicable
auction would trade at the collared
Indicative Match Price.60 According to
the Exchange, if the Auction Collars are
based on the clearly erroneous
execution thresholds (which is currently
the case for the Core Open Auction),
pricing an auction one MPV inside the
Auction Collar would potentially
prevent an auction from being a clearly
erroneous execution.61 Under the
proposal, the specified percentages for
the Auction Collar would be:62
Core open
auction
(%)
Auction reference price
$25.00 or less ..........................................................................................................................................................
Greater than $25.00 but less than or equal to $50.00 ............................................................................................
Greater than $50.00 ................................................................................................................................................
Early Open Auction
Similar to the Core Open Auction, the
non-displayed quantity of Reserve
Orders eligible to participate in the
Early Open Auction would not be
included in the Matched Volume or
44 See
proposed Rule 7.35P(a)(7)(B).
Notice at 61517.
46 See proposed Rule 7.35P(a)(8). As proposed,
the Indicative Match Price would be determined for
all securities in the same manner, regardless of
whether the Exchange is the primary listing market
for a security or the security is a UTP Security. See
Notice at 61514. The Exchange states that this
would promote clarity and transparency in
Exchange rules and streamline how auctions would
be processed. See Notice at 61526.
47 See proposed Rule 7.35P(a)(8)(A). If there are
two prices at which the maximum volume of shares
is tradable and both prices are equidistant to the
Auction Reference Price, the Indicative Match Price
mstockstill on DSK4VPTVN1PROD with NOTICES
45 See
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Closing
auction
(%)
10
5
3
5
2
1
Total Imbalance until the Early Open
Auction Imbalance Freeze begins.63
There would not be any order entry or
cancellation restrictions during the oneminute Auction Imbalance Freeze before
the Early Open Auction. According to
the Exchange, there is not any trading
occurring before the Early Open
Auction, and therefore the risk to
manipulate market prices before the
Early Open Auction is minimal.64 The
Exchange also notes that, because an
would be the Auction Reference Price. See
proposed Rule 7.35P(a)(8)(B).
48 See proposed Rule 7.35P(a)(8)(C).
49 See proposed Rule 7.35P(a)(8)(D). According to
the Exchange, while there would be no Matched
Volume, the Indicative Match Price would be a
benchmark price that could attract more interest for
participation in the auction, thereby promoting
price discovery. See Notice at 61526.
50 See proposed Rule 7.35P(a)(8)(E).
51 See proposed Rule 7.35P(a)(8).
52 See Amendment No. 1.
53 See proposed Rule 7.35P(a)(8).
54 See Notice at 61518.
55 See Amendment No. 1.
56 See proposed Rule 7.35P(a)(8).
57 See Notice at 61518. As with the current rule,
the Auction Reference Price for the Early Open
Auction would be the prior day’s Official Closing
Price. See proposed Rule 7.35P(a)(8).
58 See proposed Rule 7.35P(a)(10) and
Amendment No. 3.
59 See proposed Rule 7.35P(a)(10)(A).
60 See proposed Rule 7.35P(a)(10)(B).
61 See Notice at 61526.
62 See proposed Rule 7.35P(a)(10) and
Amendment No. 3. These thresholds are the same
as the current price collar thresholds for the Market
Order Auction and the Closing Auction.
63 See proposed Rule 7.35P(b)(1) and discussion
below regarding the Core Open Auction.
64 See Notice at 61526.
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price discovery for the auction.71 The
Exchange also states its belief that, with
today’s faster technology, five seconds
provides sufficient time for industry
participants to respond to a published
Imbalance and enter offsetting interest,
if applicable.72
Under the proposal, because of the
shorter Freeze period, MOO and LOO
Orders entered during the Freeze would
be rejected regardless of side.73 The
Exchange states its belief that rejecting
all MOO and LOO Orders would remove
the potential for such orders to impact
Core Open Auction
the Imbalance.74 As proposed, during
the Freeze, the Exchange would accept
As proposed, the non-displayed
Market Orders (other than MOO Orders)
quantity of Reserve Orders eligible to
and Limit Orders designated for the
participate in the Core Open Auction
Core Trading Session on both sides of
would not be included in the Matched
the market, but such orders would be
Volume, Total Imbalance, or Market
eligible to participate in the auction
Imbalance until the Core Open Auction
only to offset the Imbalance that
Imbalance Freeze begins.67 The
remains after all orders entered before
Exchange states its belief that it is
the Freeze are allocated in the Core
appropriate to exclude the volume of
Open Auction.75 The Exchange states
the non-displayed portion of Reserve
that this approach would eliminate the
Orders until the Core Open Auction
possibility for these orders to create or
Imbalance Freeze begins because it
increase an Imbalance.76 The Exchange
reduces the potential for market
also states that it proposes to process
participants to identify the volume of
Market Orders (other than MOO Orders)
interest that is intended to be nondisplayed.68 The Exchange also states its and Limit Orders differently from MOO
and LOO Orders because Market Orders
belief that it is appropriate to include
(other than MOO Orders) and Limit
this information once the Core Open
Auction Imbalance Freeze begins so that Orders would not expire at the end of
the auction.77 Therefore, rather than
market participants can have greater
rejecting these orders upon entry, they
certainty of the full size of the
would be accepted and would be
Imbalance in order to assess whether to
eligible to be offsetting interest for the
enter offsetting interest and to promote
78
transparency regarding the pricing of an auction. If these orders do not
participate in the Core Open Auction,
69
auction.
they would become eligible to
As proposed, the Core Open Auction
participate in the Core Trading
Imbalance Freeze would be five
Session.79 As proposed, during the
seconds, instead of one minute.70
Freeze, requests to cancel and requests
According to the Exchange, this shorter
to cancel and replace Market Orders
Freeze period would provide additional
(other than MOO Orders) and Limit
time for market participants to enter
Orders designated for the Core Trading
orders for the Core Open Auction
Session only would be accepted but
without restriction, thereby promoting
would not be processed until after the
Core Open Auction concludes.80 All
65 See Amendment No. 1.
other order instructions would be
66 See id.
accepted during the Freeze.81
67 See proposed Rule 7.35P(c)(1).
mstockstill on DSK4VPTVN1PROD with NOTICES
Early Open Auction would occur at 4:00
a.m. Eastern Time, which is well before
regular market hours, the Exchange
generally does not receive sufficient
buying and selling interest to warrant
conducting such an auction in the vast
majority of Exchange-listed securities.65
The Exchange notes that, because it
generally conducts an Early Open
Auction in fewer than 20 securities on
a given trading day, the need for order
entry or cancellation restrictions in
advance of such auctions is abated.66
68 See Amendment No. 1. According to the
Exchange, the Indicative Match Price would
include the volume of the non-displayed portion of
Reserve Orders at all times because that data point
only provides pricing information, and not volume
of shares eligible to trade. See id.
69 See Amendment No. 3. Also, according to the
Exchange, because the proposed rule would specify
that reserve interest would be included in specified
Auction Imbalance Information, ETP Holders that
enter these orders would be on notice that certain
information about the reserve quantity of their
orders would be included in the information
provided in advance of an auction. See id.
70 See proposed Rule 7.35P(c)(3). However,
similar to the current rule, the Exchange would
reject requests to cancel and requests to cancel and
replace MOO and LOO Orders beginning one
minute before the scheduled time for the Core Open
Auction. See proposed Rule 7.35P(c)(2).
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Closing Auction
As with the Core Open Auction, the
non-displayed quantity of Reserve
Orders eligible to participate in the
Closing Auction would not be included
71 See
Notice at 61521 and 61526.
Amendment No. 1.
73 See proposed Rule 7.35P(c)(3)(A).
74 See Notice at 61526.
75 See proposed Rule 7.35P(c)(3)(B).
76 See Notice at 61526.
77 See Notice at 61521.
78 See id.
79 See id.
80 See proposed Rule 7.35P(c)(3)(C).
81 See proposed Rule 7.35P(c)(3)(D).
72 See
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in the Matched Volume, Total
Imbalance, or Market Imbalance until
the Closing Auction Imbalance Freeze
begins.82
As proposed, the Exchange would
conduct a Closing Auction in Pillar even
if there are only Market Orders eligible
to participate in the Closing Auction.83
According to the Exchange, this
proposal would increase the potential
for market participants that have
entered MOC Orders to receive an
execution in an auction that is priced
based on the prevailing value of the
security.84
Trading Halt Auction
As proposed, a Trading Halt Auction
would be conducted to re-open trading
in an Auction-Eligible Security
following a halt or pause of trading in
that security in the Early Trading
Session, Core Trading Session, or Late
Trading Session, as applicable.85 As
proposed, during a trading halt or pause
in an Auction-Eligible Security, entry
and cancellation of orders eligible to
participate in the Trading Halt Auction
would be processed as provided for in
Rule 7.18P(c).86
Under current Rule 7.35(f)(3)(C), the
Corporation, if it deems such action
necessary, will disseminate the time,
prior to the time that orders are matched
pursuant to the Trading Halt Auction, at
which orders may no longer be
cancelled. The Exchange states that, on
the current trading platform, it has not
invoked this authority, and it proposes
to not include it in the Pillar rules.87
IPO Auction
As proposed, an IPO Auction would
be conducted during the Core Trading
Session on the first day of trading for
any security, including a Derivative
Securities Product,88 for which Arca is
82 See
proposed Rule 7.35P(d)(1).
discussion above regarding the
determination of Indicative Match Price where the
Matched Volume for an auction consists of Market
Orders only.
84 See Notice at 61526. The Exchange states that
the midpoint of the Auction NBBO in effect as of
the scheduled time of the Closing Auction as bound
by Auction Collars that would be based on the last
consolidated round-lot price of that trading day
would reflect the most recent quoting activity and
price in a stock. See Amendment No. 3. In addition,
the Exchange states that pricing an auction with
only Market Orders on both sides of the market
based on the midpoint of an uncrossed NBBO is not
novel. See id.
85 See proposed Rule 7.35P(e).
86 See proposed Rule 7.35P(e)(3).
87 See Amendment No. 1.
88 The Exchange notes that although the first day
of trading of a Derivative Securities Product may
not technically be an initial public offering, it
proposes to use the term IPO as signifying that this
would be the auction on the first day of trading of
a new listing on the Exchange. See Notice at 61523.
83 See
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the primary listing market, excluding
transfers.89 As proposed, an IPO
Auction would follow the processing
rules of a Core Open Auction, provided
that NYSE Arca Marketplace would
specify the time that an IPO Auction
would be conducted.90 Also, there
would be no Auction Imbalance Freeze,
Auction Collars, or restrictions on the
entry or cancellation of orders for an
IPO Auction.91 According to the
Exchange, because an IPO Auction
would not be set at a specific time, nor
would there be any trading in the
security before the IPO Auction, the
Exchange does not believe that an
Auction Imbalance Freeze or Auction
Collars would assist in the price
discovery process or would be necessary
to prevent fraudulent and manipulative
acts and practices.92 Moreover,
according to the Exchange, because the
time of an IPO Auction may change, the
Exchange does not believe that there
needs to be any restrictions on the entry
or cancellation of orders before an IPO
Auction.93 The Exchange states that if
there is an Imbalance going into an IPO
Auction, the Exchange could extend the
time for the IPO Auction in order to
attract additional offsetting interest or
allow ETP Holders to cancel orders that
are on the side of the Imbalance.94
Finally, an IPO Auction would not be
conducted if there are only Market
Orders on both sides of the market.95
According to the Exchange, if there are
only Market Orders on both sides of the
market, the Exchange has the flexibility
to change the time in order to attract
more interest for the auction.96
Auction Processing Period
As proposed, new orders, requests to
cancel, and requests to cancel and
replace an order that are received during
the Auction Processing Period 97 would
be accepted but would not be processed
until after the auction concludes.98 The
Exchange states its belief that it is
appropriate to wait to process such new
order instructions until after the auction
processing concludes in order to
provide certainty regarding the timing
and pricing of an auction.99 Moreover,
89 See
proposed Rule 7.35P(f).
proposed Rule 7.35P(f)(1).
91 See proposed Rule 7.35P(f)(2).
92 See Notice at 61523.
93 See id.
94 See Amendment No. 1.
95 See proposed Rule 7.35P(f)(3).
96 See Notice at 61523–24.
97 The Exchange proposes to define ‘‘Auction
Processing Period’’ to mean the period during
which the applicable auction is being processed.
See proposed Rule 7.35P(a)(2).
98 See proposed Rule 7.35P(g).
99 See Amendment No. 1.
mstockstill on DSK4VPTVN1PROD with NOTICES
90 See
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as proposed, a request to cancel and
replace an order that was entered during
the Auction Processing Period for an
order that was also entered during the
Auction Processing Period would be
rejected.100
Transition to Continuous Trading
As proposed, after auction processing
concludes, including if there is no
Matched Volume and an auction is not
conducted, or when transitioning from
one trading session to another, orders
that are no longer eligible to trade
would expire.101 Orders that are
designated for a trading session and that
were received during a prior trading
session or during the Auction
Processing Period and that did not
participate in the auction would become
eligible to trade.102 Also, before
continuous trading following a prior
trading session or an auction begins, any
order instructions received during either
the Auction Imbalance Freeze or
Auction Processing Period that were not
processed would be processed.103 The
display price and working price of
orders would be adjusted based on the
PBBO or NBBO as provided in Rule
7.31P.104 Moreover, when transitioning
to continuous trading, the display price
and working price of Day ISOs would be
adjusted in the same manner as Arca
Only Orders until the Day ISO is either
traded in full or displayed at its limit
price.105
As proposed, if orders eligible to trade
in the next trading session are
marketable, such orders would trade
and/or route based on price-time
priority of individual orders, as
provided in Rule 7.37P.106 According to
the Exchange, if such orders are
marketable, they would trade or route,
as applicable, rather than publishing a
locked or crossed quote from the NYSE
Arca Book.107 After marketable orders
have traded or routed, the NYSE Arca
Marketplace would publish a quote for
the next trading session.108
Based on the Exchange’s
representations, the Commission
100 See
proposed Rule 7.35P(g).
proposed Rule 7.35P(h)(1) and
Amendment No. 1.
102 See proposed Rule 7.35P(h)(2) and
Amendment No. 1.
103 See proposed Rule 7.35P(h)(3)(A) and
Amendment No. 1.
104 See proposed Rule 7.35P(h)(3)(B) and
Amendment No. 1.
105 See proposed Rule 7.35P(h)(3)(B) and
Amendment No. 1. The Exchange states its belief
that this proposed treatment of Day ISO orders
would be consistent with the original terms of the
order. See Amendment No. 1.
106 See proposed Rule 7.35(h)(3)(C) and
Amendment No. 1.
107 See Amendment No. 1.
108 See proposed Rule 7.35(h)(3)(D).
101 See
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2281
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 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 3
As noted above, in Amendment No. 1,
the Exchange: (i) Amends proposed
Rule 7.35P(h) to provide that the rule
would address how orders would be
handled not only in the transition to
continuous trading following an
auction, but also when transitioning
from one trading session to the next
trading session; (ii) amends proposed
Rule 7.35P(h)(3)(B) to provide that,
before continuous trading following a
prior trading session or an auction
begins, the display price and working
price of orders would be adjusted as
provided for in Rule 7.31P, and that
when transitioning to continuous
trading, the display price and working
price of Day ISOs would be adjusted in
the same manner as Arca Only Orders
until the Day ISO is either traded in full
or displayed at its limit price; and (iii)
provides additional discussions related
to certain proposed rules. In addition, in
Amendment No. 3, the Exchange: (i)
Specifies the percentages for the
Auction Collar thresholds; (ii) removes
the reference to the Trading Halt
Auction in the definition of Auction
Collar; (iii) states that the Exchange
would provide prior notice to ETP
Holders if additional UTP Securities are
to be designated as Auction-Eligible
Securities; (iv) includes cross-references
to Rule 7.16P in Commentary .01 to
proposed Rule 7.35P to clarify where
certain terms are defined; and (v)
provides additional discussions related
to certain proposed rules. The
Commission believes that the changes
proposed in Amendment Nos. 1 and 3
do not raise novel regulatory issues and
provide further discussions regarding
the proposed rules governing Pillar.
Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2)
of the Act,109 to approve the proposed
109 15
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U.S.C. 78s(b)(2).
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rule change, as modified by Amendment
Nos. 1 and 3, on an accelerated basis.
V. Solicitation of Comments on
Amendment Nos. 1 and 3
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether Amendment Nos. 1
and 3 are consistent with the Act.
Comments may be submitted by any of
the following methods:
mstockstill on DSK4VPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2015–86 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–2015–86. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
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–2015–86 and should be
submitted on or before February 5, 2016.
VI. Conclusion
IT IS THEREFORE ORDERED,
pursuant to Section 19(b)(2) of the
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Act,110 that the proposed rule change
(SR–NYSEArca–2015–86), as modified
by Amendment Nos. 1 and 3, be, and
hereby is, approved on an accelerated
basis.
For the Commission, by the Division
of Trading and Markets, pursuant to
delegated authority.111
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–00645 Filed 1–14–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76862; File No. SR–BATS–
2015–94]
Self-Regulatory Organizations; BATS
Exchange, Inc., Notice of Filing of
Proposed Rule Change To List and
Trade Shares of the SPDR DoubleLine
Emerging Markets Fixed Income ETF
of the SSgA Active Trust
January 11, 2016.
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 December
28, 2015, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) 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 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
The Exchange is proposing a rule
change to list and trade shares of the
SPDR® DoubleLine® Emerging Markets
Fixed Income ETF (the ‘‘Fund’’) of the
SSgA Active Trust (the ‘‘Trust’’) under
BATS Rule 14.11(i) (‘‘Managed Fund
Shares’’). The shares of the Fund are
collectively referred to herein as the
‘‘Shares.’’
The text of the proposed rule change
is available at the Exchange’s Web site
at www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
110 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
111 17
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade the Shares under BATS Rule
14.11(i), which governs the listing and
trading of Managed Fund Shares on the
Exchange.3 The Fund will be an actively
managed fund. The Shares will be
offered by the Trust, which was
established as a Massachusetts business
trust on March 30, 2011. The Trust is
registered with the Commission as an
open-end investment company and has
filed a registration statement on behalf
of the Fund on Form N–1A
(‘‘Registration Statement’’) with the
Commission.4
Description of the Shares and the Fund
SSGA Funds Management, Inc. will
be the investment adviser (‘‘SSGA FM’’
or ‘‘Adviser’’) to the Fund. The Adviser
will serve as the administrator for the
Fund (the ‘‘Administrator’’). DoubleLine
Capital LP will be the Fund’s subadviser (‘‘Sub-Adviser’’). State Street
Global Markets, LLC (the ‘‘Distributor’’)
will be the principal underwriter and
distributor of the Fund’s Shares. State
Street Bank and Trust Company (the
‘‘Sub-Administrator’’, ‘‘Custodian’’,
‘‘Transfer Agent’’ or ‘‘Lending Agent’’)
will serve as sub-administrator,
custodian, transfer agent, and, where
applicable, lending agent for the Fund.
3 The Commission approved BATS Rule 14.11(i)
in Securities Exchange Act Release No. 65225
(August 30, 2011), 76 FR 55148 (September 6, 2011)
(SR–BATS–2011–018).
4 See Registration Statement on Form N–1A for
the Trust, dated October 8, 2015 (File Nos. 333–
173276 and 811–22542). The descriptions of the
Fund and the Shares contained herein are based, in
part, on information in the Registration Statement.
The Commission has issued an order granting
certain exemptive relief to the Trust under the
Investment Company Act of 1940 (15 U.S.C. 80a–
1) (‘‘1940 Act’’) (the ‘‘Exemptive Order’’). See
Investment Company Act Release No. 29524
(December 13, 2010) (File No. 812–13487).
E:\FR\FM\15JAN1.SGM
15JAN1
]]>Agencies
[Federal Register Volume 81, Number 10 (Friday, January 15, 2016)]
[Notices]
[Pages 2276-2282]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00645]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76869; File No. SR-NYSEArca-2015-86]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change, and Notice of Filing and Order
Granting Accelerated Approval of Amendment Nos. 1 and 3 Thereto,
Relating to Auctions for Pillar, the Exchange's New Trading Technology
Platform
January 11, 2016.
I. Introduction
On September 22, 2015, NYSE Arca, Inc. (``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 auctions for Pillar, the
Exchange's new trading technology platform. The proposed rule change
was published for comment in the Federal
[[Page 2277]]
Register on October 13, 2015.\3\ The Commission received no comments on
the proposed rule change. On November 20, 2015, 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.\4\ On December 22, 2015, the Exchange filed Amendment No. 1 to
the proposed rule change.\5\ On January 7, 2016, the Exchange filed
Amendment No. 3 to the proposed rule change.\6\ The Commission is
publishing this notice to solicit comment on Amendment Nos. 1 and 3
from interested persons, and is approving the proposed rule change, as
modified by Amendment Nos. 1 and 3, on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 76085 (October 6,
2015), 80 FR 61513 (``Notice'').
\4\ See Securities Exchange Act Release No. 76493, 80 FR 74169
(November 27, 2015).
\5\ In Amendment No. 1, the Exchange: (i) Amends proposed Rule
7.35P(h) to provide that the rule would address how orders would be
handled not only in the transition to continuous trading following
an auction, but also when transitioning from one trading session to
the next trading session; (ii) amends proposed Rule 7.35P(h)(3)(B)
to provide that, before continuous trading following a prior trading
session or an auction begins, the display price and working price of
orders would be adjusted as provided for in Rule 7.31P, and that
when transitioning to continuous trading, the display price and
working price of Day ISOs would be adjusted in the same manner as
Arca Only Orders until the Day ISO is either traded in full or
displayed at its limit price; and (iii) provides additional
discussions related to certain proposed rules.
\6\ Amendment No. 3 superseded Amendment No. 2 in its entirety.
In Amendment No. 3, the Exchange: (i) Specifies the percentages for
the Auction Collar thresholds; (ii) removes the reference to the
Trading Halt Auction in the definition of Auction Collar; (iii)
states that the Exchange would provide prior notice to ETP Holders
if additional UTP Securities are to be designated as Auction-
Eligible Securities; (iv) includes cross-references to Rule 7.16P in
Commentary .01 to proposed Rule 7.35P to clarify where certain terms
are defined; and (v) provides additional discussions related to
certain proposed rules.
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to adopt Rule 7.35P, which relates to
auctions for Pillar, the Exchange's new trading technology platform.
The Exchange also proposes to amend existing definitions in Rule
1.1.\7\
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\7\ The Exchange proposes to amend Rules 1.1(r) and (s) to
specify that the definition of ``Imbalance'' and ``Indicative Match
Price'' in those rules would be applicable only for auctions
conducted on the current trading platform. The Exchange states that
these changes would remove impediments to and perfect the mechanism
of a fair and orderly market because they would not make any
substantive changes, but rather are designed to reduce confusion by
specifying that Rules 1.1(r) and (s) would be applicable to auctions
on the current trading platform only. See Notice at 61525.
---------------------------------------------------------------------------
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'').\8\ On April 30, 2015, the Exchange filed the first rule
filing relating to the implementation of Pillar, which adopted rules
relating to Trading Sessions, Order Ranking and Display, and Order
Execution.\9\ On July 7, 2015, the Exchange filed the second rule
filing relating to the implementation of Pillar, which adopted rules
relating to Orders and Modifiers and the Retail Liquidity Program.\10\
On July 1, 2015, the Exchange filed the third rule filing relating to
the implementation of Pillar, which adopted rules relating to Trading
Halts, Short Sales, Limit Up-Limit Down, and Odd Lots and Mixed
Lots.\11\
---------------------------------------------------------------------------
\8\ See Notice at 61513.
\9\ See Securities Exchange Act Release No. 74951 (May 13,
2015), 80 FR 28721 (May 19, 2015) (SR-NYSEArca-2015-38) (``Pillar I
Filing''). The Commission approved the Pillar I Filing on July 20,
2015. See Securities Exchange Act Release No. 75494 (July 20, 2015),
80 FR 44170 (July 24, 2015).
\10\ See Securities Exchange Act Release No. 75497 (July 21,
2015), 80 FR 45022 (July 28, 2015) (SR-NYSEArca-2015-56) (``Pillar
II Filing''). The Commission approved the Pillar II Filing on
October 26, 2015. See Securities Exchange Act Release No. 76267
(October 26, 2015), 80 FR 66951 (October 30, 2015).
\11\ See Securities Exchange Act Release No. 75467 (July 16,
2015), 80 FR 43515 (July 22, 2015) (SR-NYSEArca-2015-58) (``Pillar
III Filing''). The Commission approved the Pillar III Filing on
October 20, 2015. See Securities Exchange Act Release No. 76198
(October 20, 2015), 80 FR 65274 (October 26, 2015). See also
Securities Exchange Act Release No. 76198A (October 28, 2015), 80 FR
67822 (November 3, 2015).
---------------------------------------------------------------------------
This filing is the fourth set of proposed rule changes to support
Pillar implementation. As proposed, the new rule governing trading on
Pillar would have the same numbering as the current rule, but with the
modifier ``P'' appended to the rule number. Specifically, Rule 7.35,
which governs auctions, would remain unchanged and continue to apply to
any trading in symbols on the current trading platform. Proposed Rule
7.35P would govern auctions for trading in symbols migrated to the
Pillar platform.
B. Proposed Modifications
As stated in the Notice, the Exchange proposes new Rule 7.35P to
describe auctions on Pillar, which would be based on Rule 7.35 and
Rules 1.1(r) and (s).\12\ The Exchange states that auctions on Pillar
would function similarly to auctions on the current trading
platform.\13\ According to the Exchange, proposed Rule 7.35P would use
Pillar terminology and include both substantive and non-substantive
differences and clarifications from the current rule text.\14\ The
proposed changes that are more substantive in nature are noted in
Section III below and are discussed in the Notice.
---------------------------------------------------------------------------
\12\ See Notice at 61513.
\13\ See Notice at 61513-14.
\14\ See Notice at 61514.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\15\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\16\ 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.
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\15\ 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).
\16\ 15 U.S.C. 78f(b)(5).
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The Commission notes that, in the proposal, the Exchange states its
belief that proposed Rule 7.35P, together with rules from the three
previous Pillar filings, would remove impediments to and perfect the
mechanism of a free and open market because they would promote
transparency by using consistent terminology for rules governing
equities trading, thereby ensuring that members, regulators, and the
public can more easily navigate the Exchange's rulebook and better
understand how equity trading would be conducted on Pillar.\17\ The
Exchange also states that the proposed use of Pillar terminology would
promote consistency in the Exchange's rulebook regarding how the
Exchange would process orders during an auction.\18\ Moreover, the
Exchange states that adding new rules with the modifier ``P'' to denote
the rules that would be
[[Page 2278]]
operative for Pillar would remove impediments to and perfect the
mechanism of a free and open market by providing transparency regarding
which rules govern trading once a symbol has been migrated to
Pillar.\19\
---------------------------------------------------------------------------
\17\ See Notice at 61525.
\18\ See id.
\19\ See id.
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The Commission also notes that, with respect to the substantive
differences between proposed Rule 7.35P and the current rules, the
Exchange states that they would remove impediments to and perfect the
mechanism of a fair and orderly market.\20\ In particular, the Exchange
proposes to make several changes that are more substantive in nature,
which include:
---------------------------------------------------------------------------
\20\ See id.
---------------------------------------------------------------------------
Definitions
Auction-Eligible Security: The Exchange proposes a new definition
for the term ``Auction-Eligible Security.'' \21\ According to the
Exchange, as with the current rule, all securities for which the
Exchange is the primary listing market would be Auction-Eligible
Securities.\22\ However, for Pillar, the Exchange would designate UTP
Securities \23\ that would be Auction-Eligible Securities for the Early
Open Auction, the Core Open Auction, and the Closing Auction.\24\
According to the Exchange, this approach would support the initiatives
of the Exchange, NYSE, and the NASDAQ Stock Market LLC (``Nasdaq'') to
increase resiliency by having auctions on Arca serve as a backup to
either NYSE or Nasdaq if one of those markets is unable to conduct an
auction.\25\
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\21\ See proposed Rule 7.35P(a)(1).
\22\ See Notice at 61515.
\23\ The term ``UTP Security'' means a security that is listed
on a national securities exchange other than the Exchange and that
trades on the NYSE Arca Marketplace pursuant to unlisted trading
privileges. See Rule 1.1(ii).
\24\ See Notice at 61515. According to the Exchange, consistent
with Rule 7.18P(b), for the Trading Halt Auction, Auction-Eligible
Securities means securities for which Arca is the primary listing
market. See id.
\25\ See id.
---------------------------------------------------------------------------
Auction Imbalance Information: The Exchange proposes to define
``Auction Imbalance Information'' to mean the information that is
disseminated by the Corporation \26\ for an auction.\27\ As proposed,
Auction Imbalance Information would be updated at least every second
(unless there is no change to the information), rather than on a real-
time basis.\28\ According to the Exchange, by updating Auction
Imbalance Information on a one-second basis, ETP Holders that are
interested in entering offsetting interest during an Auction Imbalance
Freeze would have greater certainty of the Imbalance in effect at the
time of order entry.\29\
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\26\ The term ``Corporation'' means NYSE Arca Equities, Inc. See
Rule 1.1(k).
\27\ See proposed Rule 7.35P(a)(4).
\28\ See proposed Rule 7.35P(a)(4)(A).
\29\ See Amendment No. 1.
---------------------------------------------------------------------------
Auction NBBO: The Exchange proposes to define ``Auction NBBO'' to
mean an NBBO that is used for purposes of pricing an auction. As
proposed, an NBBO is an Auction NBBO when (i) there is an NBB above
zero and NBO for the security and (ii) the NBBO is not crossed.\30\ In
addition, for the Core Open Auction, an NBBO is an Auction NBBO when
the midpoint of the NBBO, when multiplied by a designated percentage,
is greater than or equal to the spread of that NBBO.\31\ According to
the Exchange, this approach would promote transparency regarding how
the Exchange determines pricing for its auctions.\32\ Moreover,
according to the Exchange, the proposed method for determining the
Auction NBBO for the Core Open Auction is designed to validate whether
an NBBO bears a relation to the value of the security.\33\
---------------------------------------------------------------------------
\30\ See proposed Rule 7.35P(a)(5).
\31\ See id. The designated percentage would be determined by
the Corporation from time to time upon prior notice to ETP Holders.
See id.
\32\ See Notice at 61516 and 61526.
\33\ See Notice at 61516.
---------------------------------------------------------------------------
Auction Ranking: The Exchange proposes to define ``Auction
Ranking'' to mean how orders on the side of an Imbalance would be
ranked for allocation in an Auction. Specifically, orders on the side
of the Imbalance would be ranked in price-time priority under Rule
7.36P(c)-(g) consistent with the priority ranking associated with each
order, provided that: (i) MOO and MOC Orders would be ranked Priority
1--Market Orders; (ii) LOO and LOC Orders would be ranked Priority 2--
Display Orders; and (iii) the limit price of Limit, LOO, and LOC orders
would be used for ranking purposes.\34\ According to the Exchange, the
only order ranked Priority 3--Non-Display Orders that would be eligible
to participate in an auction would be the non-displayed quantity of a
Reserve Order.\35\ The Exchange states that the proposed approach would
promote transparency in Exchange rules by consolidating into a single
location how orders would be ranked for auctions.\36\ The Exchange also
states that using the same methodology to rank and allocate orders on
the side of the Imbalance for all auctions based on the priority
ranking described in Rule 7.36P would promote consistency in how the
Exchange would rank orders on Pillar, whether for continuous trading or
for auctions.\37\ In addition, during a Short Sale Period (as defined
in Rule 7.16P(f)(4)), for purposes of pricing an auction and ranking
orders for allocation in an auction, sell short Market Orders that are
adjusted to a Permitted Price (as defined in Rule 7.16P(f)(5)(A)) would
be processed as Limit Orders ranked Priority 2--Display Orders, and
would not be included in the Market Imbalance.\38\ The Exchange states
that, once adjusted to a Permitted Price, a sell short Market Order has
a price and such price could be used for purposes of determining the
price of the auction.\39\ As such, the Exchange believes that it is
appropriate to treat these re-priced Market Orders as Limit Orders for
purposes of determining allocation in an auction, and that this
approach would promote transparency by processing all orders that have
a price similarly in an auction.\40\
---------------------------------------------------------------------------
\34\ See proposed Rule 7.35P(a)(6).
\35\ See Notice at note 29.
\36\ See Notice at 61526.
\37\ See id.
\38\ See proposed Rule 7.35P, Commentary .01(a). As proposed,
sell short orders that are included in the Auction Imbalance
Information, but are not eligible for continuous trading before the
applicable auction, would be adjusted to a Permitted Price as the
NBB moves both up and down. See proposed Rule 7.35P, Commentary
.01(b). The Exchange states that continuously re-pricing sell short
orders consistent with Rule 7.16P(f)(5), even though they are not
yet eligible to trade, would provide greater transparency regarding
the price at which such orders would be included in the Auction
Imbalance Information. See Notice at 61525 and Amendment No. 1.
\39\ See Notice at 61525 and Amendment No. 1.
\40\ See Notice at 61526.
---------------------------------------------------------------------------
Market Orders: The Exchange proposes that, for purposes of Rule
7.35P, unless otherwise specified, the term ``Market Orders'' would
include MOO Orders (for the Core Open Auction and Trading Halt Auction)
and MOC Orders (for the Closing Auction).\41\ According to the
Exchange, consistent with Rule 7.31P(c)(2), the term ``Market Orders''
in proposed Rule 7.35P would include MOO Orders for the Trading Halt
Auction.\42\ Also, the Exchange states that because unexecuted Market
Orders that are held at a Trading Collar or NBBO would be eligible to
participate in the Closing Auction and would be included in Closing
Auction Imbalance Information, proposed Rule 7.35P would refer to
Market Orders generally for the Closing Auction, which would include
MOC Orders.\43\
---------------------------------------------------------------------------
\41\ See proposed Rule 7.35P(a).
\42\ See Notice at 61514-15.
\43\ See Notice at 61515.
---------------------------------------------------------------------------
Market Imbalance: As proposed, the term ``Market Imbalance'' would
mean the imbalance of any remaining buy (sell) Market Orders that are
not matched for trading in an auction against any interest, and not
just Market Orders not matched for trading against
[[Page 2279]]
other Market Orders.\44\ The Exchange states its belief that the
proposed approach would provide transparency regarding the volume of
Market Orders not paired up against any interest.\45\
---------------------------------------------------------------------------
\44\ See proposed Rule 7.35P(a)(7)(B).
\45\ See Notice at 61517.
---------------------------------------------------------------------------
Indicative Match Price: As proposed, the term ``Indicative Match
Price'' would mean the best price at which the maximum volume of
shares, including the non-displayed quantity of Reserve Orders, is
tradable in the applicable auction, subject to the Auction Collars.\46\
If there are two or more prices at which the maximum volume of shares
is tradable, the Indicative Match Price would be the price closest to
the ``Auction Reference Price'' (provided that the Indicative Match
Price would not be lower (higher) than the price of an order to buy
(sell) ranked Priority 2 that was eligible to participate in the
auction).\47\ If the Matched Volume for an auction consists of Market
Orders only, the Indicative Match Price would be: (i) for the Core open
Auction, the Auction Reference Price; (ii) for the Closing Auction, the
midpoint of the Auction NBBO as of the time the auction is conducted,
provided that if the Auction NBBO is locked, the locked price, and if
there is no Auction NBBO, the Auction Reference Price; and (iii) for
the Trading Halt Auction, the Auction Reference Price.\48\ In addition,
if there is a BBO but no Matched Volume, the Indicative Match Price and
Total Imbalance for the Auction Imbalance Information would be the side
of the BBO that has the higher volume, and if the volume of BB equals
the volume of BO, the BB.\49\ As proposed, if there is no Matched
Volume and Market Orders on only one side of the market, the Indicative
Match Price would be zero.\50\
---------------------------------------------------------------------------
\46\ See proposed Rule 7.35P(a)(8). As proposed, the Indicative
Match Price would be determined for all securities in the same
manner, regardless of whether the Exchange is the primary listing
market for a security or the security is a UTP Security. See Notice
at 61514. The Exchange states that this would promote clarity and
transparency in Exchange rules and streamline how auctions would be
processed. See Notice at 61526.
\47\ See proposed Rule 7.35P(a)(8)(A). If there are two prices
at which the maximum volume of shares is tradable and both prices
are equidistant to the Auction Reference Price, the Indicative Match
Price would be the Auction Reference Price. See proposed Rule
7.35P(a)(8)(B).
\48\ See proposed Rule 7.35P(a)(8)(C).
\49\ See proposed Rule 7.35P(a)(8)(D). According to the
Exchange, while there would be no Matched Volume, the Indicative
Match Price would be a benchmark price that could attract more
interest for participation in the auction, thereby promoting price
discovery. See Notice at 61526.
\50\ See proposed Rule 7.35P(a)(8)(E).
---------------------------------------------------------------------------
Auction Reference Price: The Auction Reference Price for the Core
Open Auction would be the midpoint of an Auction NBBO or, if the
Auction NBBO is locked, the locked price. If there is no Auction NBBO,
the Exchange would use the prior trading day's Official Closing
Price.\51\ The Exchange states its belief that using the midpoint of
the Auction NBBO for the Core Open Auction would better reflect the
most recent value of the security, as compared to a closing price from
the prior trading day.\52\ The Auction Reference Price for the Trading
Halt Auction and the Closing Auction would be the last consolidated
round-lot price of that trading day and, if none, the prior trading
day's Official Closing Price.\53\ The Exchange states that the Auction
Reference Price for the Trading Halt Auction and the Closing Auction is
based on Rule 1.1(s), with additional specificity that it would be a
last consolidated round-lot price of that trading day, and to specify
the reference price if there were no last consolidated round-lot trades
that day.\54\ The Exchange states its belief that the last consolidated
round-lot price prior to a Trading Halt Auction would reflect the most
recent value for a security, and that the last consolidated round-lot
price would be representative of the value of the security going into
the Closing Auction.\55\ With respect to the IPO Auction, the Exchange
proposes that the Auction Reference Price would be zero, unless the
Corporation is provided with a price for the security.\56\ The Exchange
states that it proposes to use zero (unless the Corporation is provided
with a price for the security) because there would not be any prior
trading in that security.\57\
---------------------------------------------------------------------------
\51\ See proposed Rule 7.35P(a)(8).
\52\ See Amendment No. 1.
\53\ See proposed Rule 7.35P(a)(8).
\54\ See Notice at 61518.
\55\ See Amendment No. 1.
\56\ See proposed Rule 7.35P(a)(8).
\57\ See Notice at 61518. As with the current rule, the Auction
Reference Price for the Early Open Auction would be the prior day's
Official Closing Price. See proposed Rule 7.35P(a)(8).
---------------------------------------------------------------------------
Auction Collar: The Exchange proposes to define ``Auction Collar''
to mean the price collar thresholds for the Indicative Match Price for
the Core Open Auction and Closing Auction.\58\ As proposed, the Auction
Collar would be based on a price that is a specified percentage away
from the Auction Reference Price.\59\ An Indicative Match Price that is
equal to or outside the Auction Collar would be adjusted to be one
minimum price variation (``MPV'') inside the Auction Collar, and orders
eligible to participate in the applicable auction would trade at the
collared Indicative Match Price.\60\ According to the Exchange, if the
Auction Collars are based on the clearly erroneous execution thresholds
(which is currently the case for the Core Open Auction), pricing an
auction one MPV inside the Auction Collar would potentially prevent an
auction from being a clearly erroneous execution.\61\ Under the
proposal, the specified percentages for the Auction Collar would
be:\62\
---------------------------------------------------------------------------
\58\ See proposed Rule 7.35P(a)(10) and Amendment No. 3.
\59\ See proposed Rule 7.35P(a)(10)(A).
\60\ See proposed Rule 7.35P(a)(10)(B).
\61\ See Notice at 61526.
\62\ See proposed Rule 7.35P(a)(10) and Amendment No. 3. These
thresholds are the same as the current price collar thresholds for
the Market Order Auction and the Closing Auction.
------------------------------------------------------------------------
Core open Closing
Auction reference price auction (%) auction (%)
------------------------------------------------------------------------
$25.00 or less.......................... 10 5
Greater than $25.00 but less than or 5 2
equal to $50.00........................
Greater than $50.00..................... 3 1
------------------------------------------------------------------------
Early Open Auction
Similar to the Core Open Auction, the non-displayed quantity of
Reserve Orders eligible to participate in the Early Open Auction would
not be included in the Matched Volume or Total Imbalance until the
Early Open Auction Imbalance Freeze begins.\63\
---------------------------------------------------------------------------
\63\ See proposed Rule 7.35P(b)(1) and discussion below
regarding the Core Open Auction.
---------------------------------------------------------------------------
There would not be any order entry or cancellation restrictions
during the one-minute Auction Imbalance Freeze before the Early Open
Auction. According to the Exchange, there is not any trading occurring
before the Early Open Auction, and therefore the risk to manipulate
market prices before the Early Open Auction is minimal.\64\ The
Exchange also notes that, because an
[[Page 2280]]
Early Open Auction would occur at 4:00 a.m. Eastern Time, which is well
before regular market hours, the Exchange generally does not receive
sufficient buying and selling interest to warrant conducting such an
auction in the vast majority of Exchange-listed securities.\65\ The
Exchange notes that, because it generally conducts an Early Open
Auction in fewer than 20 securities on a given trading day, the need
for order entry or cancellation restrictions in advance of such
auctions is abated.\66\
---------------------------------------------------------------------------
\64\ See Notice at 61526.
\65\ See Amendment No. 1.
\66\ See id.
---------------------------------------------------------------------------
Core Open Auction
As proposed, the non-displayed quantity of Reserve Orders eligible
to participate in the Core Open Auction would not be included in the
Matched Volume, Total Imbalance, or Market Imbalance until the Core
Open Auction Imbalance Freeze begins.\67\ The Exchange states its
belief that it is appropriate to exclude the volume of the non-
displayed portion of Reserve Orders until the Core Open Auction
Imbalance Freeze begins because it reduces the potential for market
participants to identify the volume of interest that is intended to be
non-displayed.\68\ The Exchange also states its belief that it is
appropriate to include this information once the Core Open Auction
Imbalance Freeze begins so that market participants can have greater
certainty of the full size of the Imbalance in order to assess whether
to enter offsetting interest and to promote transparency regarding the
pricing of an auction.\69\
---------------------------------------------------------------------------
\67\ See proposed Rule 7.35P(c)(1).
\68\ See Amendment No. 1. According to the Exchange, the
Indicative Match Price would include the volume of the non-displayed
portion of Reserve Orders at all times because that data point only
provides pricing information, and not volume of shares eligible to
trade. See id.
\69\ See Amendment No. 3. Also, according to the Exchange,
because the proposed rule would specify that reserve interest would
be included in specified Auction Imbalance Information, ETP Holders
that enter these orders would be on notice that certain information
about the reserve quantity of their orders would be included in the
information provided in advance of an auction. See id.
---------------------------------------------------------------------------
As proposed, the Core Open Auction Imbalance Freeze would be five
seconds, instead of one minute.\70\ According to the Exchange, this
shorter Freeze period would provide additional time for market
participants to enter orders for the Core Open Auction without
restriction, thereby promoting price discovery for the auction.\71\ The
Exchange also states its belief that, with today's faster technology,
five seconds provides sufficient time for industry participants to
respond to a published Imbalance and enter offsetting interest, if
applicable.\72\
---------------------------------------------------------------------------
\70\ See proposed Rule 7.35P(c)(3). However, similar to the
current rule, the Exchange would reject requests to cancel and
requests to cancel and replace MOO and LOO Orders beginning one
minute before the scheduled time for the Core Open Auction. See
proposed Rule 7.35P(c)(2).
\71\ See Notice at 61521 and 61526.
\72\ See Amendment No. 1.
---------------------------------------------------------------------------
Under the proposal, because of the shorter Freeze period, MOO and
LOO Orders entered during the Freeze would be rejected regardless of
side.\73\ The Exchange states its belief that rejecting all MOO and LOO
Orders would remove the potential for such orders to impact the
Imbalance.\74\ As proposed, during the Freeze, the Exchange would
accept Market Orders (other than MOO Orders) and Limit Orders
designated for the Core Trading Session on both sides of the market,
but such orders would be eligible to participate in the auction only to
offset the Imbalance that remains after all orders entered before the
Freeze are allocated in the Core Open Auction.\75\ The Exchange states
that this approach would eliminate the possibility for these orders to
create or increase an Imbalance.\76\ The Exchange also states that it
proposes to process Market Orders (other than MOO Orders) and Limit
Orders differently from MOO and LOO Orders because Market Orders (other
than MOO Orders) and Limit Orders would not expire at the end of the
auction.\77\ Therefore, rather than rejecting these orders upon entry,
they would be accepted and would be eligible to be offsetting interest
for the auction.\78\ If these orders do not participate in the Core
Open Auction, they would become eligible to participate in the Core
Trading Session.\79\ As proposed, during the Freeze, requests to cancel
and requests to cancel and replace Market Orders (other than MOO
Orders) and Limit Orders designated for the Core Trading Session only
would be accepted but would not be processed until after the Core Open
Auction concludes.\80\ All other order instructions would be accepted
during the Freeze.\81\
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\73\ See proposed Rule 7.35P(c)(3)(A).
\74\ See Notice at 61526.
\75\ See proposed Rule 7.35P(c)(3)(B).
\76\ See Notice at 61526.
\77\ See Notice at 61521.
\78\ See id.
\79\ See id.
\80\ See proposed Rule 7.35P(c)(3)(C).
\81\ See proposed Rule 7.35P(c)(3)(D).
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Closing Auction
As with the Core Open Auction, the non-displayed quantity of
Reserve Orders eligible to participate in the Closing Auction would not
be included in the Matched Volume, Total Imbalance, or Market Imbalance
until the Closing Auction Imbalance Freeze begins.\82\
---------------------------------------------------------------------------
\82\ See proposed Rule 7.35P(d)(1).
---------------------------------------------------------------------------
As proposed, the Exchange would conduct a Closing Auction in Pillar
even if there are only Market Orders eligible to participate in the
Closing Auction.\83\ According to the Exchange, this proposal would
increase the potential for market participants that have entered MOC
Orders to receive an execution in an auction that is priced based on
the prevailing value of the security.\84\
---------------------------------------------------------------------------
\83\ See discussion above regarding the determination of
Indicative Match Price where the Matched Volume for an auction
consists of Market Orders only.
\84\ See Notice at 61526. The Exchange states that the midpoint
of the Auction NBBO in effect as of the scheduled time of the
Closing Auction as bound by Auction Collars that would be based on
the last consolidated round-lot price of that trading day would
reflect the most recent quoting activity and price in a stock. See
Amendment No. 3. In addition, the Exchange states that pricing an
auction with only Market Orders on both sides of the market based on
the midpoint of an uncrossed NBBO is not novel. See id.
---------------------------------------------------------------------------
Trading Halt Auction
As proposed, a Trading Halt Auction would be conducted to re-open
trading in an Auction-Eligible Security following a halt or pause of
trading in that security in the Early Trading Session, Core Trading
Session, or Late Trading Session, as applicable.\85\ As proposed,
during a trading halt or pause in an Auction-Eligible Security, entry
and cancellation of orders eligible to participate in the Trading Halt
Auction would be processed as provided for in Rule 7.18P(c).\86\
---------------------------------------------------------------------------
\85\ See proposed Rule 7.35P(e).
\86\ See proposed Rule 7.35P(e)(3).
---------------------------------------------------------------------------
Under current Rule 7.35(f)(3)(C), the Corporation, if it deems such
action necessary, will disseminate the time, prior to the time that
orders are matched pursuant to the Trading Halt Auction, at which
orders may no longer be cancelled. The Exchange states that, on the
current trading platform, it has not invoked this authority, and it
proposes to not include it in the Pillar rules.\87\
---------------------------------------------------------------------------
\87\ See Amendment No. 1.
---------------------------------------------------------------------------
IPO Auction
As proposed, an IPO Auction would be conducted during the Core
Trading Session on the first day of trading for any security, including
a Derivative Securities Product,\88\ for which Arca is
[[Page 2281]]
the primary listing market, excluding transfers.\89\ As proposed, an
IPO Auction would follow the processing rules of a Core Open Auction,
provided that NYSE Arca Marketplace would specify the time that an IPO
Auction would be conducted.\90\ Also, there would be no Auction
Imbalance Freeze, Auction Collars, or restrictions on the entry or
cancellation of orders for an IPO Auction.\91\ According to the
Exchange, because an IPO Auction would not be set at a specific time,
nor would there be any trading in the security before the IPO Auction,
the Exchange does not believe that an Auction Imbalance Freeze or
Auction Collars would assist in the price discovery process or would be
necessary to prevent fraudulent and manipulative acts and
practices.\92\ Moreover, according to the Exchange, because the time of
an IPO Auction may change, the Exchange does not believe that there
needs to be any restrictions on the entry or cancellation of orders
before an IPO Auction.\93\ The Exchange states that if there is an
Imbalance going into an IPO Auction, the Exchange could extend the time
for the IPO Auction in order to attract additional offsetting interest
or allow ETP Holders to cancel orders that are on the side of the
Imbalance.\94\ Finally, an IPO Auction would not be conducted if there
are only Market Orders on both sides of the market.\95\ According to
the Exchange, if there are only Market Orders on both sides of the
market, the Exchange has the flexibility to change the time in order to
attract more interest for the auction.\96\
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\88\ The Exchange notes that although the first day of trading
of a Derivative Securities Product may not technically be an initial
public offering, it proposes to use the term IPO as signifying that
this would be the auction on the first day of trading of a new
listing on the Exchange. See Notice at 61523.
\89\ See proposed Rule 7.35P(f).
\90\ See proposed Rule 7.35P(f)(1).
\91\ See proposed Rule 7.35P(f)(2).
\92\ See Notice at 61523.
\93\ See id.
\94\ See Amendment No. 1.
\95\ See proposed Rule 7.35P(f)(3).
\96\ See Notice at 61523-24.
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Auction Processing Period
As proposed, new orders, requests to cancel, and requests to cancel
and replace an order that are received during the Auction Processing
Period \97\ would be accepted but would not be processed until after
the auction concludes.\98\ The Exchange states its belief that it is
appropriate to wait to process such new order instructions until after
the auction processing concludes in order to provide certainty
regarding the timing and pricing of an auction.\99\ Moreover, as
proposed, a request to cancel and replace an order that was entered
during the Auction Processing Period for an order that was also entered
during the Auction Processing Period would be rejected.\100\
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\97\ The Exchange proposes to define ``Auction Processing
Period'' to mean the period during which the applicable auction is
being processed. See proposed Rule 7.35P(a)(2).
\98\ See proposed Rule 7.35P(g).
\99\ See Amendment No. 1.
\100\ See proposed Rule 7.35P(g).
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Transition to Continuous Trading
As proposed, after auction processing concludes, including if there
is no Matched Volume and an auction is not conducted, or when
transitioning from one trading session to another, orders that are no
longer eligible to trade would expire.\101\ Orders that are designated
for a trading session and that were received during a prior trading
session or during the Auction Processing Period and that did not
participate in the auction would become eligible to trade.\102\ Also,
before continuous trading following a prior trading session or an
auction begins, any order instructions received during either the
Auction Imbalance Freeze or Auction Processing Period that were not
processed would be processed.\103\ The display price and working price
of orders would be adjusted based on the PBBO or NBBO as provided in
Rule 7.31P.\104\ Moreover, when transitioning to continuous trading,
the display price and working price of Day ISOs would be adjusted in
the same manner as Arca Only Orders until the Day ISO is either traded
in full or displayed at its limit price.\105\
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\101\ See proposed Rule 7.35P(h)(1) and Amendment No. 1.
\102\ See proposed Rule 7.35P(h)(2) and Amendment No. 1.
\103\ See proposed Rule 7.35P(h)(3)(A) and Amendment No. 1.
\104\ See proposed Rule 7.35P(h)(3)(B) and Amendment No. 1.
\105\ See proposed Rule 7.35P(h)(3)(B) and Amendment No. 1. The
Exchange states its belief that this proposed treatment of Day ISO
orders would be consistent with the original terms of the order. See
Amendment No. 1.
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As proposed, if orders eligible to trade in the next trading
session are marketable, such orders would trade and/or route based on
price-time priority of individual orders, as provided in Rule
7.37P.\106\ According to the Exchange, if such orders are marketable,
they would trade or route, as applicable, rather than publishing a
locked or crossed quote from the NYSE Arca Book.\107\ After marketable
orders have traded or routed, the NYSE Arca Marketplace would publish a
quote for the next trading session.\108\
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\106\ See proposed Rule 7.35(h)(3)(C) and Amendment No. 1.
\107\ See Amendment No. 1.
\108\ See proposed Rule 7.35(h)(3)(D).
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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 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 3
As noted above, in Amendment No. 1, the Exchange: (i) Amends
proposed Rule 7.35P(h) to provide that the rule would address how
orders would be handled not only in the transition to continuous
trading following an auction, but also when transitioning from one
trading session to the next trading session; (ii) amends proposed Rule
7.35P(h)(3)(B) to provide that, before continuous trading following a
prior trading session or an auction begins, the display price and
working price of orders would be adjusted as provided for in Rule
7.31P, and that when transitioning to continuous trading, the display
price and working price of Day ISOs would be adjusted in the same
manner as Arca Only Orders until the Day ISO is either traded in full
or displayed at its limit price; and (iii) provides additional
discussions related to certain proposed rules. In addition, in
Amendment No. 3, the Exchange: (i) Specifies the percentages for the
Auction Collar thresholds; (ii) removes the reference to the Trading
Halt Auction in the definition of Auction Collar; (iii) states that the
Exchange would provide prior notice to ETP Holders if additional UTP
Securities are to be designated as Auction-Eligible Securities; (iv)
includes cross-references to Rule 7.16P in Commentary .01 to proposed
Rule 7.35P to clarify where certain terms are defined; and (v) provides
additional discussions related to certain proposed rules. The
Commission believes that the changes proposed in Amendment Nos. 1 and 3
do not raise novel regulatory issues and provide further discussions
regarding the proposed rules governing Pillar. Accordingly, the
Commission finds good cause, pursuant to Section 19(b)(2) of the
Act,\109\ to approve the proposed
[[Page 2282]]
rule change, as modified by Amendment Nos. 1 and 3, on an accelerated
basis.
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\109\ 15 U.S.C. 78s(b)(2).
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V. Solicitation of Comments on Amendment Nos. 1 and 3
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment Nos. 1
and 3 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-2015-86 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-2015-86. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the 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-2015-86 and should
be submitted on or before February 5, 2016.
VI. Conclusion
IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the
Act,\110\ that the proposed rule change (SR-NYSEArca-2015-86), as
modified by Amendment Nos. 1 and 3, be, and hereby is, approved on an
accelerated basis.
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\110\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\111\
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\111\ 17 CFR 200.30-3(a)(12).
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-00645 Filed 1-14-16; 8:45 am]
BILLING CODE 8011-01-P
