Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 132.30(9)-Equities To Conform the Exchange's Rules to Industry-Wide Standards for Recording the Capacity in Which a Member Organization Executes a Transaction, 3530-3532 [2016-01057]
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Federal Register / Vol. 81, No. 13 / Thursday, January 21, 2016 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76907; File No. SR–
NYSEMKT–2016–07]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending Rule
132.30(9)—Equities To Conform the
Exchange’s Rules to Industry-Wide
Standards for Recording the Capacity
in Which a Member Organization
Executes a Transaction
January 14, 2016.
Pursuant to Section 19(b)(1)1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’)2 and Rule 19b–4 thereunder,3
notice is hereby given that on January
11, 2016, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 132.30(9)—Equities to conform the
Exchange’s rules to industry-wide
standards for recording the capacity in
which a member organization executes
a transaction. The proposed rule change
is available on the Exchange’s Web site
at www.nyse.com, at the principal office
of the Exchange, and at the
Commission’s Public Reference Room.
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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18:26 Jan 20, 2016
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1. Purpose
The Exchange proposes to amend
Supplementary Material .30 of Rule
132—Equities (‘‘Rule 132’’) to conform
the Exchange’s rules to industry-wide
standards for recording the capacity in
which a member organization executes
a transaction. To effect this change, the
Exchange proposes to eliminate the
current requirement to identify the
account for which an order was
executed and require instead that
clearing members and member
organizations submit account type
indicators (‘‘ATI’’) reflecting the
capacity in which the member
organization executed a transaction
(e.g., agency, principal or riskless
principal). The Exchange believes that
the proposed rule change would align
the Exchange’s rules with industry-wide
conventions focusing on the capacity in
which a broker-dealer acts in effecting a
transaction and, by eliminating the
complex set of ATIs developed over the
years, significantly simplify order entry
on the Exchange.
Background
Rule 132 requires clearing member
organizations submitting transactions to
comparison to include the audit trail
data elements set forth in
Supplementary Material .30. Rule
132.30(9) requires that all orders
submitted to the Exchange include
specified trade data elements, including
‘‘[w]hether the account for which the
order was executed was that of a
member or member organization or of a
non-member or non-member
organization.’’ The Exchange’s affiliate,
New York Stock Exchange LLC
(‘‘NYSE’’), which has the same rule,4
has periodically published guidance
regarding the ATIs that can be used to
satisfy this requirement.5 ATIs are
included as part of the audit trail data
reported for each transaction on the
Exchange. The Exchange also uses ATIs
to capture program trade information 6
4 See NYSE Rule 132.30(9). The NYSE has filed
to amend its rule relating to ATIs to conform to
industry-wide standards for recording the capacity
in which a member organization executes a
transaction. See SR–NYSE–2016–07 (‘‘NYSE ATI
Filing’’).
5 See, e.g., Information Memos 85–37 (Nov. 12,
1985); 88–29 (Oct. 19, 1988); 92–34 (Nov. 13, 1992);
96–36 (Dec. 5, 1996); 02–59 (Dec. 17, 2002); 09–31
(June 24, 2009); 12–25 (October 9, 2012); 14–04
(January 30, 2014). The current list contains 24
distinct ATIs.
6 ‘‘Program Trading’’ means either (1) index
arbitrage, or (2) any trading strategy involving the
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for those portions of the program trades
that are submitted to and executed on
the Exchange. In connection with this
proposed rule change, the Exchange
proposes to retire the unique ATIs used
to capture program trading
information.7
Proposed Rule Change
The Exchange proposes to amend the
current requirement in subsection (9) of
Rule 132.30 that clearing member
organizations identify whether the
account for which an order was
executed was that of a member or
member organization or of a nonmember or non-member organization.
The current requirement can be satisfied
by entering the appropriate ATI from a
list of ATIs that have evolved over the
past 30 years.8
In place of this cumbersome process,
the Exchange proposes to require
member organizations to identify the
capacity in which the member
organization executed the transaction as
follows: agency, principal or riskless
principal.9 The ‘‘principal’’ category
would include proprietary trades by a
member on the trading Floor relating to
the member’s error account pursuant to
Rule 134—Equities.10
related purchase or sale of a basket or group of 15
or more stocks. See Rule 7410(m)—Equities.
7 See NYSE ATI Filing, supra note 3. Prior to
2009, NYSE member organizations reported
program trading activity to the NYSE via the Daily
Program Trading Report (‘‘DPTR’’). Following
decommissioning of the DPTR requirement in July
2009, the NYSE has used ATI data to report
program trading statistics to the Securities and
Exchange Commission (‘‘Commission’’) and the
public. See Securities Exchange Act Release No.
60179 (June 26, 2009), 74 FR 31786, 31786–87 (July
2, 2009) (SR–NYSE–2009–61). Unlike the NYSE, the
Exchange does not have a requirement to provide
weekly statistics regarding program trading activity
to either the Commission or the public. In addition,
the Exchange did not adopt the DPTR requirement
and uses ATIs to capture program trade
information.
8 See note 5, supra.
9 In general, the term ‘‘capacity’’ refers to whether
a broker-dealer acts as agent, i.e., directly on behalf
of a customer, or whether the broker-dealer acts as
principal, i.e., for its own account, in a transaction.
A riskless principal transaction is one where a
broker-dealer receives a customer order and then
immediately executes an identical order in the
marketplace, while taking on the role of principal,
in order to fill the customer order pursuant to Rule
5320—Equities.
10 Rule 134—Equities requires a member or
member organization who acquires or assumes a
security position resulting from an error transaction
to clear such error transaction in the member’s or
member organization’s error account, or in the error
account established for a group of members. Rule
123.22—Equities further requires members to enter
orders executed to offset transactions made in error
into an electronic system and sends a copy of such
order to an electronic system on the Floor within
60 seconds of execution. See also Rule 123(e)—
Equities (defining system entry). This type of
proprietary trade is currently identified by the ‘‘Q’’
account type indicator, which would be retained to
identify these trading Floor-based executions.
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21JAN1
Federal Register / Vol. 81, No. 13 / Thursday, January 21, 2016 / Notices
By requiring member organizations to
identify the capacity in which a brokerdealer enters an order, the Exchange
would be harmonizing its order entry
requirements with those of other
national securities exchanges and the
NYSE.11 The proposed change would
also simplify the order entry process at
the Exchange and eliminate the
requirement for member organizations
to use order entry requirements unique
to the Exchange, thereby reducing
complexity in the marketplace. This
proposed amendment would not alter a
member organization’s obligation to
meet order audit trail system
requirements, as set forth in the Rule
7400 Series—Equities.
The Exchange will publish an
Information Memo advising member
organizations of the proposed change
that will provide guidance of which
ATIs should be submitted in connection
with agency, principal, or riskless
principal capacity.
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,12 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,13 in particular, because it is
designed to promote just and equitable
principles of trade and to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system. The
Exchange believes that the proposed
rule change would remove impediments
to and perfect the mechanism of a free
and open market and national market
system because it would provide greater
harmonization between order entry on
the Exchange and other marketplaces,
resulting in greater uniformity and more
efficient order entry to enable member
organizations to use the same ordermarket conventions across all equities
markets. As such, the proposed rule
change would foster cooperation and
coordination with persons engaged in
facilitating transactions in securities and
would remove impediments to and
perfect the mechanism of a free and
open market and a national market
system.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
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Jkt 238001
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act14 and Rule
19b–4(f)(6) thereunder.15 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.16
A proposed rule change filed under
Rule 19b–4(f)(6)17 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),18 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
14 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
16 In addition, Rule 19b–4(f)(6)(iii) requires the
Exchange to give the Commission written notice of
the Exchange’s intent to file the proposed rule
change, along with a brief description and text of
the proposed rule change, at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
17 17 CFR 240.19b–4(f)(6).
18 17 CFR 240.19b–4(f)(6)(iii).
15 17
11 See, e.g., BATS Exchange, Inc. (‘‘BATS’’) Rule
11.21; BATS Y-Exchange, Inc. (‘‘BATS–Y’’) Rule
11.21; EDGA Exchange, Inc. (‘‘EDGA’’) Rule 11.5;
EDGX Exchange, Inc. Rule 11.5; and NASDAQ
Stock Market LLC (‘‘NASDAQ’’) Rule 4611(a)(6).
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(5).
VerDate Sep<11>2014
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not intended to
address competitive issues, but rather it
is designed to provide greater
harmonization between Exchange and
other markets in the marking of orders,
resulting in less burdensome and more
efficient order entry.
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3531
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B)19 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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–
NYSEMKT–2016–07 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–NYSEMKT–2016–07. 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–
NYSEMKT–2016–07 and should be
19 15
E:\FR\FM\21JAN1.SGM
U.S.C. 78s(b)(2)(B).
21JAN1
3532
Federal Register / Vol. 81, No. 13 / Thursday, January 21, 2016 / Notices
submitted on or before February 11,
2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–01057 Filed 1–20–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76908; File No. SR–FINRA–
2015–036]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove Proposed Rule
Change To Amend FINRA Rule 4210
(Margin Requirements) To Establish
Margin Requirements for the TBA
Market, as Modified by Partial
Amendment No. 1
January 14, 2016.
I. Introduction
On October 6, 2015, Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Exchange Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend FINRA Rule 4210
(Margin Requirements) to establish
margin requirements for covered agency
transactions, also referred to, for
purposes of this proposed rule change,
as the To Be Announced (‘‘TBA’’)
market.
The proposed rule change was
published for comment in the Federal
Register on October 20, 2015.3 On
November 10, 2015, FINRA extended
the time period in which the
Commission must approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to approve or
disapprove the proposed rule change to
January 15, 2016. The Commission
received 109 comment letters, 4 which
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20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Exchange Act Release No. 76148 (Oct. 14,
2015), 80 FR 63603 (Oct. 20, 2015) (File No. SR–
FINRA–2015–036) (‘‘Notice’’).
4 See Letters from Margaret Allen, AGM
Financial, dated November 10, 2015 (‘‘AGM
Letter’’); Paul J. Barrese, Sandler O’Neill & Partners,
L.P., dated November 10, 2015 (‘‘Sandler O’Neill
Letter’’); Doug Bibby and Doug Culkin, National
Multifamily Housing Council and National
1 15
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18:26 Jan 20, 2016
Jkt 238001
Apartment Association, dated November 10, 2015
(‘‘NMHC/NAA Letter’’); David W. Blass, Investment
Company Institute, dated November 9, 2015 (‘‘ICI
Letter’’); Robert Cahn, Prudential Mortgage Capital
Company, LLC, dated November 10, 2015
(‘‘Prudential Letter’’); James M. Cain, Sutherland
Asbill & Brennan LLP (on behalf of the Federal
Home Loan Banks), dated November 10, 2015
(‘‘Sutherland Letter’’); Timothy W. Cameron, Esq.
and Laura Martin, Securities Industry and Financial
Markets Association, Asset Management Group,
dated November 10, 2015 (‘‘SIFMA AMG Letter’’);
Jonathan S. Camps, Love Funding, dated November
9, 2015 (‘‘Love Funding Letter’’); Richard A.
Carlson, Davis-Penn Mortgage Co., dated November
9, 2015 (‘‘Davis-Penn 1 Letter’’); Michael S. Cordes,
Columbia National Real Estate Finance, LLC, dated
November 9, 2015 (‘‘Columbia Letter’’); Carl E.
Corrado, Great Lakes Financial Group, LP, dated
January 4, 2016 (‘‘Great Lakes Letter’’); Daniel R.
Crain, Crain Mortgage Group, LLC, dated November
6, 2015 (‘‘Crain Letter’’); James F. Croft, Red
Mortgage Capital, LLC, dated November 10, 2015
(‘‘Red Mortgage Letter’’); Dan Darilek, Davis-Penn
Mortgage Co., dated November 9, 2015 (‘‘DavisPenn 2 Letter’’); Jayson F. Donaldson, NorthMarq
Capital Finance, L.L.C, dated November 10, 2015
(‘‘NorthMarq Letter’’); Robert B. Engel, CoBank,
ACB (on behalf of the Farm Credit Banks), dated
November 10, 2015 (‘‘CoBank Letter’’); Robert M.
Fine, Brean Capital, LLC, dated November 10, 2015
(‘‘Brean Capital 1 Letter’’); Tari Flannery, M&T
Realty Capital Corporation, dated November 9, 2015
(‘‘M&T Realty Letter’’); Bernard P. Gawley, The
Ziegler Financing Corporation, dated November 10,
2015 (‘‘Ziegler Letter’’); John R. Gidman,
Association of Institutional INVESTORS, dated
November 10, 2015 (‘‘AII Letter’’); Keith J. Gloeckl,
Churchill Mortgage Investment, LLC, dated
November 6, 2015 (‘‘Churchill Letter’’); Eileen Grey,
Mortgage Bankers Association & Others, dated
October 29, 2015 (‘‘MBA & Others 1 Letter’’);
Mortgage Bankers Association & Others (including
American Seniors Housing Association), dated
November 10, 2015 (‘‘MBA & Others 2 Letter’’);
Tyler Griffin, Dwight Capital, dated November 10,
2015 (‘‘Dwight Letter’’); Pete Hodo, III, Highland
Commercial Mortgage, dated November 5, 2015
(‘‘Highland 1 Letter’’); Robert H. Huntington, Credit
Suisse Securities (USA) LLC, dated November 10,
2015 (‘‘Credit Suisse Letter’’); Matthew Kane,
Centennial Mortgage, Inc., dated November 9, 2015
(‘‘Centennial Letter’’); Christopher B. Killian,
Securities Industry and Financial Markets
Association, dated November 10, 2015 (‘‘SIFMA
Letter’’); Robert T. Kirkwood, Lancaster Pollard
Holdings, LLC, dated November 10, 2015
(‘‘Lancaster Letter’’); Tony Love, Forest City Capital
Corporation, dated November 5, 2015 (‘‘Forest City
1 Letter’’); Tony Love, Forest City Capital
Corporation, dated November 10, 2015 (‘‘Forest City
2 Letter’’); Anthony Luzzi, Sims Mortgage Funding,
Inc., dated November 9, 2015 (‘‘Sims Mortgage
Letter’’); Diane N. Marshall, Prairie Mortgage
Company, dated November 10, 2015 (‘‘Prairie
Mortgage Letter’’); Matrix Applications, LLC, dated
November 10, 2015 (‘‘Matrix Letter’’); Douglas I.
McCree, CMB, First Housing, dated November 10,
2015 (‘‘First Housing Letter’’); Michael McRoberts,
DUS Peer Group, dated November 2, 2015 (‘‘DUS
Letter’’); Chris Melton, Coastal Securities, dated
November 9, 2015 (‘‘Coastal Letter’’); John O. Moore
Jr., Highland Commercial Mortgage, dated
November 6, 2015 (‘‘Highland 2 Letter’’); Dennis G.
Morton, AJM First Capital, LLC, dated November
10, 2015 (‘‘AJM Letter’’); Michael Nicholas, Bond
Dealers of America, dated November 10, 2015
(‘‘BDA Letter’’); Lee Oller, Draper and Kramer,
Incorporated, dated November 10, 2015 (‘‘Draper
Letter’’); Roderick D. Owens, Committee on
Healthcare Financing, dated November 6, 2015
(‘‘CHF Letter’’); Jose A. Perez, Perez, dated
November 9, 2015 (‘‘Perez Letter’’); David F. Perry,
Century Health Capital, Inc., dated November 9,
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include 50 Type A comment letters and
four Type B comment letters in response
to the proposed rule change. On January
13, 2016, FINRA responded to the
comments and filed Partial Amendment
No. 1 to the proposal.5 The Commission
is publishing this order to solicit
comments on Partial Amendment No. 1
from interested persons and to institute
proceedings pursuant to Exchange Act
Section 19(b)(2)(B) 6 to determine
whether to approve or disapprove the
proposed rule change, as modified by
Partial Amendment No. 1.
Institution of proceedings does not
indicate that the Commission has
reached any conclusions with respect to
the proposed rule change, not does it
mean that the Commission will
ultimately disapprove the proposed rule
change. Rather, as discussed below, the
Commission seeks additional input on
the proposed rule change, as modified
by Partial Amendment No. 1, and on the
issues presented by the proposal.
II. Description of the Proposed Rule
Change 7
In its filing, FINRA proposed
amendments to FINRA Rule 4210
(Margin Requirements) to establish
requirements for: (1) TBA transactions,8
2015 (‘‘Century Letter’’); Deborah Rogan, Bellwether
Enterprise Real Estate Capital, LLC, dated
November 10, 2015 (‘‘Bellwether Letter’’); Bruce
Sandweiss, Gershman Mortgage, dated November
18, 2015 (‘‘Gershman 1 Letter’’); Craig Singer and
James Hussey, RICHMAC Funding LLC, dated
November 9, 2015 (‘‘Richmac Letter’’); David H.
Stevens, Mortgage Bankers Association, dated
November 10, 2015 (‘‘MBA Letter’’); Stephen P.
Theobald, Walker & Dunlop, LLC, dated November
10, 2015 (‘‘W&D Letter’’); Robert Tirschwell, Brean
Capital, LLC, dated November 10, 2015 (‘‘Brean
Capital 2 Letter’’); Mark C. Unangst, Gershman
Mortgage, dated November 23, 2015 (‘‘Gershman 2
Letter’’); Charles M. Weber, Robert W. Baird & Co.
Incorporated, dated November 10, 2015 (‘‘Robert
Baird Letter’’); Steve Wendel, CBRE, Inc., dated
November 10, 2015 (‘‘CBRE Letter’’); Carl B.
Wilkerson, American Council of Life Insurers, dated
November 10, 2015 (‘‘ACLI Letter’’); David H.
Stevens, Mortgage Bankers Association, dated
January 11, 2016 (‘‘MBA Supplemental Letter’’).
The Type A and B form letters generally contain
language opposing the inclusion of multifamily
housing and project loan securities within the scope
of the proposed rule change. The Commission staff
also participated in numerous meetings and
conference calls with some commenters and other
market participants.
5 See Partial Amendment No. 1, dated January 13,
2016 (‘‘Partial Amendment No. 1’’). FINRA’s
responses to comments received and proposed
amendments are included in Partial Amendment
No. 1. The text of Partial Amendment No. 1 is
available on FINRA’s Web site at https://
www.finra.org, at the principal office of FINRA, and
at the Commission’s Public Reference Room.
6 15 U.S.C. 78s(b)(2)(B).
7 The proposed rule change, as described in this
Item II, is excerpted, in part, from the Notice, which
was substantially prepared by FINRA. See supra
note 3.
8 See FINRA Rule 6710(u) defines TBA to mean
a transaction in an Agency Pass-Through Mortgage-
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21JAN1
]]>Agencies
[Federal Register Volume 81, Number 13 (Thursday, January 21, 2016)]
[Notices]
[Pages 3530-3532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01057]
[[Page 3530]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76907; File No. SR-NYSEMKT-2016-07]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending Rule
132.30(9)--Equities To Conform the Exchange's Rules to Industry-Wide
Standards for Recording the Capacity in Which a Member Organization
Executes a Transaction
January 14, 2016.
Pursuant to Section 19(b)(1)\1\ of the Securities Exchange Act of
1934 (the ``Act'')\2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on January 11, 2016, NYSE MKT LLC (the ``Exchange'' or
``NYSE MKT'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 132.30(9)--Equities to conform
the Exchange's rules to industry-wide standards for recording the
capacity in which a member organization executes a transaction. The
proposed rule change is available on the Exchange's Web site at
www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Supplementary Material .30 of Rule
132--Equities (``Rule 132'') to conform the Exchange's rules to
industry-wide standards for recording the capacity in which a member
organization executes a transaction. To effect this change, the
Exchange proposes to eliminate the current requirement to identify the
account for which an order was executed and require instead that
clearing members and member organizations submit account type
indicators (``ATI'') reflecting the capacity in which the member
organization executed a transaction (e.g., agency, principal or
riskless principal). The Exchange believes that the proposed rule
change would align the Exchange's rules with industry-wide conventions
focusing on the capacity in which a broker-dealer acts in effecting a
transaction and, by eliminating the complex set of ATIs developed over
the years, significantly simplify order entry on the Exchange.
Background
Rule 132 requires clearing member organizations submitting
transactions to comparison to include the audit trail data elements set
forth in Supplementary Material .30. Rule 132.30(9) requires that all
orders submitted to the Exchange include specified trade data elements,
including ``[w]hether the account for which the order was executed was
that of a member or member organization or of a non-member or non-
member organization.'' The Exchange's affiliate, New York Stock
Exchange LLC (``NYSE''), which has the same rule,\4\ has periodically
published guidance regarding the ATIs that can be used to satisfy this
requirement.\5\ ATIs are included as part of the audit trail data
reported for each transaction on the Exchange. The Exchange also uses
ATIs to capture program trade information \6\ for those portions of the
program trades that are submitted to and executed on the Exchange. In
connection with this proposed rule change, the Exchange proposes to
retire the unique ATIs used to capture program trading information.\7\
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\4\ See NYSE Rule 132.30(9). The NYSE has filed to amend its
rule relating to ATIs to conform to industry-wide standards for
recording the capacity in which a member organization executes a
transaction. See SR-NYSE-2016-07 (``NYSE ATI Filing'').
\5\ See, e.g., Information Memos 85-37 (Nov. 12, 1985); 88-29
(Oct. 19, 1988); 92-34 (Nov. 13, 1992); 96-36 (Dec. 5, 1996); 02-59
(Dec. 17, 2002); 09-31 (June 24, 2009); 12-25 (October 9, 2012); 14-
04 (January 30, 2014). The current list contains 24 distinct ATIs.
\6\ ``Program Trading'' means either (1) index arbitrage, or (2)
any trading strategy involving the related purchase or sale of a
basket or group of 15 or more stocks. See Rule 7410(m)--Equities.
\7\ See NYSE ATI Filing, supra note 3. Prior to 2009, NYSE
member organizations reported program trading activity to the NYSE
via the Daily Program Trading Report (``DPTR''). Following
decommissioning of the DPTR requirement in July 2009, the NYSE has
used ATI data to report program trading statistics to the Securities
and Exchange Commission (``Commission'') and the public. See
Securities Exchange Act Release No. 60179 (June 26, 2009), 74 FR
31786, 31786-87 (July 2, 2009) (SR-NYSE-2009-61). Unlike the NYSE,
the Exchange does not have a requirement to provide weekly
statistics regarding program trading activity to either the
Commission or the public. In addition, the Exchange did not adopt
the DPTR requirement and uses ATIs to capture program trade
information.
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Proposed Rule Change
The Exchange proposes to amend the current requirement in
subsection (9) of Rule 132.30 that clearing member organizations
identify whether the account for which an order was executed was that
of a member or member organization or of a non-member or non-member
organization. The current requirement can be satisfied by entering the
appropriate ATI from a list of ATIs that have evolved over the past 30
years.\8\
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\8\ See note 5, supra.
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In place of this cumbersome process, the Exchange proposes to
require member organizations to identify the capacity in which the
member organization executed the transaction as follows: agency,
principal or riskless principal.\9\ The ``principal'' category would
include proprietary trades by a member on the trading Floor relating to
the member's error account pursuant to Rule 134--Equities.\10\
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\9\ In general, the term ``capacity'' refers to whether a
broker-dealer acts as agent, i.e., directly on behalf of a customer,
or whether the broker-dealer acts as principal, i.e., for its own
account, in a transaction. A riskless principal transaction is one
where a broker-dealer receives a customer order and then immediately
executes an identical order in the marketplace, while taking on the
role of principal, in order to fill the customer order pursuant to
Rule 5320--Equities.
\10\ Rule 134--Equities requires a member or member organization
who acquires or assumes a security position resulting from an error
transaction to clear such error transaction in the member's or
member organization's error account, or in the error account
established for a group of members. Rule 123.22--Equities further
requires members to enter orders executed to offset transactions
made in error into an electronic system and sends a copy of such
order to an electronic system on the Floor within 60 seconds of
execution. See also Rule 123(e)--Equities (defining system entry).
This type of proprietary trade is currently identified by the ``Q''
account type indicator, which would be retained to identify these
trading Floor-based executions.
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[[Page 3531]]
By requiring member organizations to identify the capacity in which
a broker-dealer enters an order, the Exchange would be harmonizing its
order entry requirements with those of other national securities
exchanges and the NYSE.\11\ The proposed change would also simplify the
order entry process at the Exchange and eliminate the requirement for
member organizations to use order entry requirements unique to the
Exchange, thereby reducing complexity in the marketplace. This proposed
amendment would not alter a member organization's obligation to meet
order audit trail system requirements, as set forth in the Rule 7400
Series--Equities.
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\11\ See, e.g., BATS Exchange, Inc. (``BATS'') Rule 11.21; BATS
Y-Exchange, Inc. (``BATS-Y'') Rule 11.21; EDGA Exchange, Inc.
(``EDGA'') Rule 11.5; EDGX Exchange, Inc. Rule 11.5; and NASDAQ
Stock Market LLC (``NASDAQ'') Rule 4611(a)(6).
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The Exchange will publish an Information Memo advising member
organizations of the proposed change that will provide guidance of
which ATIs should be submitted in connection with agency, principal, or
riskless principal capacity.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\12\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\13\ in particular, because it
is designed to promote just and equitable principles of trade and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system. The Exchange believes that the
proposed rule change would remove impediments to and perfect the
mechanism of a free and open market and national market system because
it would provide greater harmonization between order entry on the
Exchange and other marketplaces, resulting in greater uniformity and
more efficient order entry to enable member organizations to use the
same order-market conventions across all equities markets. As such, the
proposed rule change would foster cooperation and coordination with
persons engaged in facilitating transactions in securities and would
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not intended to address competitive issues, but rather it is designed
to provide greater harmonization between Exchange and other markets in
the marking of orders, resulting in less burdensome and more efficient
order entry.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act\14\ and Rule 19b-4(f)(6) thereunder.\15\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\16\
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
\16\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to
give the Commission written notice of the Exchange's intent to file
the proposed rule change, along with a brief description and text of
the proposed rule change, at least five business days prior to the
date of filing of the proposed rule change, or such shorter time as
designated by the Commission. The Exchange has satisfied this
requirement.
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A proposed rule change filed under Rule 19b-4(f)(6)\17\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\17\ 17 CFR 240.19b-4(f)(6).
\18\ 17 CFR 240.19b-4(f)(6)(iii).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B)\19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\19\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEMKT-2016-07 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-NYSEMKT-2016-07. 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-NYSEMKT-2016-07 and should
be
[[Page 3532]]
submitted on or before February 11, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01057 Filed 1-20-16; 8:45 am]
BILLING CODE 8011-01-P
