Self-Regulatory Organizations; EDGX Exchange, Inc.; Order Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Adopt an Early Trading Session and Three New Time-In-Force Instructions, 21632-21635 [2016-08302]
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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 not
necessary or appropriate in furtherance
of the purposes of the Act. This minor
correction does not impact competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing 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 for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 6 and
subparagraph (f)(6) of Rule 19b-4
thereunder.7
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
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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–
Phlx–2016–44 on the subject line.
U.S.C. 78s(b)(3)(a)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
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.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–Phlx–2016–44. 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–Phlx–
2016–44 and should be submitted on or
before May 3, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08305 Filed 4–11–16; 8:45 am]
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Self-Regulatory Organizations; EDGX
Exchange, Inc.; Order Approving
Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, To Adopt
an Early Trading Session and Three
New Time-In-Force Instructions
April 6, 2016.
I. Introduction
On February 2, 2016, EDGX Exchange,
Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’),
pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3 a
proposed rule change to amend its rules
to: (i) Create a new trading session to be
known as the Early Trading Session,
which will run from 7:00 a.m. to 8:00
a.m. Eastern Time; and (ii) adopt three
new Time-in-Force (‘‘TIF’’) instructions.
On February 12, 2016, the Exchange
filed Amendment No. 1 to the proposed
rule change.4 The proposed rule change,
as modified by Amendment No. 1
thereto, was published for comment in
the Federal Register on February 22,
2016.5 The Commission received no
comments on the proposed rule change.
This order approves the proposed rule
change, as modified by Amendment No.
1.
II. Description of the Proposal
The Exchange proposes to amend its
rules to: (i) Create a new trading session,
the Early Trading Session, which will
run from 7:00 a.m. to 8:00 a.m. Eastern
Time; and (ii) adopt three new TIF
instructions.6
A. Early Trading Session
The Exchange trading day is currently
divided into three sessions: (i) The PreOpening Session which starts at 8:00
a.m. and ends at 9:30 a.m. Eastern Time;
(ii) Regular Trading Hours which runs
from 9:30 a.m. to 4:00 p.m. Eastern
Time; and (iii) the Post-Closing Session,
which runs from 4:00 p.m. to 8:00 p.m.
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 In Amendment No. 1, the Exchange noted that
it would subject orders that are eligible for
execution at the start of the Pre-Opening Session to
all of the Exchange’s standard regulatory checks,
including compliance with Regulation NMS,
Regulation SHO as well as other relevant Exchange
rules.
5 See Securities Exchange Act Release No. 77142
(February 16, 2016), 81 FR 8806 (‘‘Notice’’).
6 See Notice, supra note 5.
2 15
7 17
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Federal Register / Vol. 81, No. 70 / Tuesday, April 12, 2016 / Notices
Eastern Time. The Exchange proposes to
amend its rules to create the Early
Trading Session. Exchange Rule 1.5
would be amended to add a new term,
‘‘Early Trading Session,’’ under
proposed paragraph (ii). ‘‘Early Trading
Session’’ would be defined as ‘‘the time
between 7:00 a.m. and 8:00 a.m. Eastern
Time.’’
The Exchange also proposes to amend
Exchange Rule 11.1(a) to state that
orders may be entered or executed on,
or routed away from, the Exchange
during the the Early Trading Session
and to reflect the start time of the Early
Trading Session as 7:00 a.m. Eastern
Time. Other than the proposal to adopt
an Early Trading Session, the Exchange
does not propose to amend the
substance or operation of Exchange Rule
11.1(a).7
Users 8 currently designate when their
orders are eligible for execution by
selecting a desired TIF instruction.9
Orders entered between 6:00 a.m. and
8:00 a.m. Eastern Time are not eligible
for execution until the start of the PreOpening Session or Regular Trading
Hours, depending on the TIF selected by
the User. Users may enter orders in
advance of the trading session for which
the order is eligible. For example, Users
may enter orders starting at 6:00 a.m.
Eastern Time with a TIF of Regular
Hours Only (‘‘RHO’’), which designates
that the order only be eligible for
execution during Regular Trading
Hours.10 Users may enter orders as early
as 6:00 a.m. Eastern Time, but those
orders would not be eligible for
execution until the start of the PreOpening Session at 8:00 a.m. According
to the Exchange, some Users have
requested the ability for their orders to
be eligible for execution starting at 7:00
a.m. Eastern Time. Therefore, the
Exchange is proposing to adopt the
Early Trading Session.11
As amended, Exchange Rule 11.1(a)(1)
would state that orders entered between
6:00 a.m. and 7:00 a.m. Eastern Time,
rather than 6:00 a.m. and 8:00 a.m.
Eastern Time, would not be eligible for
execution until the start of the Early
Trading Session, Pre-Opening Session,
or Regular Trading Hours, depending on
the TIF selected by the User. Exchange
Rule 11.1(a)(1) will also be amended to
state that the Exchange will not accept
the following orders prior to 7:00 a.m.
Eastern Time, rather than 8:00 a.m.:
7 See
id. at 8806.
is defined as ‘‘any Member or Sponsored
Participant who is authorized to obtain access to the
System pursuant to Rule 11.3.’’ See Exchange Rule
1.5(ee).
9 See Exchange Rule 11.6(q).
10 See Exchange Rule 11.6(q)(6).
11 See Notice, supra note 5, at 8806.
8 ‘‘User’’
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Orders with a Post Only instruction,12
Intermarket Sweep Orders (‘‘ISOs’’),13
Market Orders 14 with a TIF other than
Regular Hours Only, orders with a
Minimum Execution Quantity
instruction 15 that also include a TIF of
Regular Hours Only, and all orders with
a TIF instruction of Immediate-orCancel (‘‘IOC’’) 16 or Fill-or-Kill
(‘‘FOK’’).17 At the commencement of the
Early Trading Session, orders entered
between 6:00 a.m. and 7:00 a.m. Eastern
Time, rather than 6:00 a.m. and 8:00
a.m. Eastern Time, will be handled in
time sequence, beginning with the order
with the oldest time stamp, and will be
placed on the EDGX Book,18 routed,
cancelled, or executed in accordance
with the terms of the order. As
amended, Exchange Rule 11.1(a) would
state that orders may be executed on the
Exchange or routed away from the
Exchange during Regular Trading Hours
and during the Early Trading, PreOpening, Regular and Post Closing
Sessions.19
The Exchange also proposes to make
the changes described below to
Exchange Rules 3.21, 11.8, 11.10, 11.15,
14.1, 14.2 and 14.3 to reflect the
adoption of the Early Trading Session:
• Exchange Rule 3.21, Customer
Disclosures. Exchange Rule 3.21
prohibits Members from accepting an
order from a customer for execution in
the Pre-Opening or Post-Closing Session
without disclosing to their customer
that extended hours trading involves
material trading risks, including the
possibility of lower liquidity, high
volatility, changing prices, unlinked
markets, an exaggerated effect from
news announcements, wider spreads
and any other relevant risk. The
Exchange proposes to amend Exchange
Rule 3.21 to also require such
disclosures for customer orders that are
to be executed during the Early Trading
Session.
• Exchange Rules 11.8(b), (c), (d), and
(f). The Exchange proposes to amend the
description of Limit Orders under
Exchange Rule 11.8(b), ISOs under
12 See
Exchange Rule 11.6(n)(4).
Exchange Rule 11.8(c).
14 See Exchange Rule 11.8(a).
15 See Exchange Rule 11.6(h).
16 See Exchange Rule 11.6(q)(1).
17 See Exchange Rule 11.6(q)(3).
18 See Exchange Rule 1.5(d).
19 The Exchange also describes how the Early
Trading Session will affect its Members’ operations
and the Exchange’s opening process, order types,
routing services, order processing, data feeds, trade
reporting, market surveillance, and clearly
erroneous trade processing. The Exchange clarifies
that these processes will operate in the same
manner with the exception of changes in time to
reflect the adoption of the Early Trading Session.
See Notice, supra note 5, at 8807.
13 See
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21633
Exchange Rule 11.8(c), MidPoint Peg
Orders under Exchange Rule 11.8(d),
and Supplemental Peg Orders under
Exchange Rule 11.8(f) to account for the
Early Trading Session. Every order type
that is currently available beginning at
8:00 a.m. will be available beginning at
7:00 a.m. for inclusion in the Early
Trading Session. All other order types,
and all order type behaviors, will
otherwise remain unchanged. Therefore,
each of the above rules for Limit Orders,
ISOs, MidPoint Peg Orders, and
Supplemental Peg Orders would be
amended to state that those order types
are available during the Early Trading
Session.
• Exchange Rules 11.8(a) and (e).
Market Orders and Market Maker Peg
Orders would not be eligible for
execution during the Early Trading
Session. Market Orders are only eligible
for execution during the Regular
Session.20 Market Maker Peg Orders
may currently be submitted to the
Exchange starting at the beginning of the
Pre-Opening Session, but the order will
not be executable or automatically
priced until after the first regular way
transaction on the listing exchange in
the security, as reported by the
responsible single plan processor.
Exchange Rule 11.8(e)(7) would be
amended to state that Market Maker Peg
Orders may be submitted to the
Exchange starting at the beginning of the
Early Trading Session. Market Maker
Peg Orders would continue to not be
executable or automatically priced until
after the first regular way transaction on
the listing exchange in the security, as
reported by the responsible single plan
processor.
• Exchange Rule 11.10, Order
Execution and Routing. Exchange Rule
11.10(a)(2) discusses compliance with
Regulation NMS and Trade Through
Protections and states that the price of
any execution occurring during the PreOpening Session or the Post-Closing
Session must be equal to or better than
the highest Protected Bid or lowest
Protected Offer, unless the order is
marked ISO or a Protected Bid is
crossing a Protected Offer. The
Exchange proposes to amend Exchange
Rule 11.10(a)(2) to expand the rule’s
requirements to the Early Trading
Session.
• Exchange Rule 11.15, Clearly
Erroneous Executions. Exchange Rule
11.15 outlines under which conditions
the Exchange may determine that an
execution is clearly erroneous. The
Exchange proposes to amend Exchange
Rule 11.15 to include executions that
occur during the Early Trading Session.
20 See
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Exchange Rule 11.8(a)(5).
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Exchange Rule 11.15(c)(1) sets forth the
numerical guidelines the Exchange is to
follow when determining whether an
execution was clearly erroneous during
Regular Trading Hours or the PreOpening or Post-Closing Trading
Session. Exchange Rule 11.15(c)(3) sets
forth additional factors the Exchange
may consider in determining whether a
transaction is clearly erroneous. These
factors include whether the transaction
was executed during the Pre-Opening or
Post-Closing Trading Sessions. The
Exchange proposes to amend Exchange
Rule 11.15(c)(1) and (3) to include
executions occurring during the Early
Trading Session.
• Exchange Rule 14.1, Unlisted
Trading Privileges. The Exchange
proposes to amend Exchange Rules
14.1(c)(2), and Interpretation and
Policies .01(a) and (b) to account for the
Early Trading Session. Specifically, the
Exchange proposes to amend paragraph
(c)(2) to state that an information
circular distributed by the Exchange
prior to the commencement of trading of
a UTP Derivative Security 21 will
describe the risk of trading during the
Early Trading Session.22 In addition, the
Exchange proposes to amend
Interpretation and Policies .01(a) to add
Early Trading Session to the paragraph’s
title and to state that if a UTP Derivative
Security begins trading on the Exchange
in the Early Trading Session or PreOpening Session and subsequently a
temporary interruption occurs in the
calculation or wide dissemination of the
Intraday Indicative Value (‘‘IIV’’) or the
value of the underlying index, as
applicable, to such UTP Derivative
Security, by a major market data vendor,
the Exchange may continue to trade the
UTP Derivative Security for the
remainder of the Early Trading Session
and Pre-Opening Session. Lastly, the
Exchange proposes to amend
Interpretation and Policies .01(b) to add
Early Trading Session to the paragraph’s
title and to amend subparagraph (2) of
that section to state that if the IIV or the
value of the underlying index continues
not to be calculated or widely available
as of the commencement of the Early
Trading Session or Pre-Opening Session
on the next business day, the Exchange
shall not commence trading of the UTP
Derivative Security in the Early Trading
Session or Pre-Opening Session that
day.
• Exchange Rule 14.2, Investment
Company Units. The Exchange proposes
to amend Exchange Rule 14.2(g) to state
21 See
Exchange Rule 14.1(c).
the information circular describes
only those risks in the Pre-Opening and PostClosing Trading Sessions.
22 Currently,
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that transactions in Investment
Company Units may occur during the
Early Trading Session. Currently, such
transactions may occur during Regular
Trading Hours and the Pre-Opening and
Post Closing Sessions.
• Exchange Rule 14.3, Trust Issued
Receipts. The Exchange proposes to
amend Exchange Rule 14.3(d) to state
that transactions in Trust Issued
Receipts may occur during the Early
Trading Session. Currently, such
transactions may occur during Regular
Trading Hours and the Pre-Opening and
Post-Closing Sessions.
B. TIF Instructions
The Exchange proposes to adopt three
new TIF instructions under Exchange
Rule 11.6(q).23 As discussed above, a
User may designate when its order is
eligible for execution by selecting the
desired TIF instruction under Exchange
Rule 11.6(q).24
Although the Exchange states that the
proposal to adopt an Early Trading
Session is in response to User requests
for their orders to be eligible for
execution starting at 7:00 a.m. Eastern
Time, some Users have requested that
their orders continue to not be eligible
for execution until the start of the PreOpening Session at 8:00 a.m.25
Therefore, the Exchange proposes to
adopt the following three new TIF
instructions under Exchange Rule
11.6(q):
• Pre-Opening Session Plus (‘‘PRE’’).
A limit order that is designated for
execution during the Pre-Opening
Session and Regular Trading Hours.
Like the current Day TIF instruction,26
any portion not executed expires at the
end of Regular Trading Hours.
• Pre-Opening Session ‘til Extended
Day (‘‘PTX’’). A limit order that is
designated for execution during the PreOpening Session, Regular Trading
Hours, and the Post-Closing Session.
Like the current GTX TIF instruction,27
any portion not executed expires at the
end of the Post-Closing Session.
• Pre-Opening Session ‘til Day
(‘‘PTD’’). A limit order that is designated
for execution during the Pre-Opening
Session, Regular Trading Hours, and the
Post-Closing Session. Like the current
23 The Exchange also proposes to amend the
descriptions of Good-‘til Day (‘‘GTD’’) under
Exchange Rule 11.6(q)(4) and Good-‘til Extended
Day (‘‘GTX’’) under Exchange Rule 11.6(q)(5) to
replace incorrect references to the Post-Market
Session with Post-Closing Session, as Post-Closing
Session is the accurate term under Exchange Rule
1.5(r).
24 See Exchange Rule 11.1(a)(1).
25 See Notice, supra note 5, at 8808.
26 See Exchange Rule 11.6(q)(2).
27 See Exchange Rule 11.6(q)(5).
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GTD TIF instruction,28 any portion not
executed will be cancelled at the
expiration time assigned to the order,
which can be no later than the close of
the Post-Closing Trading Session.
Under each proposed TIF instruction,
Users may designate that their orders
only be eligible for execution starting
with the Pre-Opening Session. Users
may continue to enter orders as early as
6:00 a.m., but orders with the proposed
TIF instructions would not be eligible
for execution until 8:00 a.m. Eastern
Time, the start of the Pre-Opening
Session.29 At the commencement of the
Pre-Opening Session, orders entered
between 6:00 a.m. and 8:00 a.m. Eastern
Time with one of the proposed TIF
instructions will be handled in time
sequence, beginning with the order with
the oldest time stamp, and will be
placed on the EDGX Book, routed,
cancelled, or executed in accordance
with the terms of the order.30
The Exchange proposes to amend the
following order types under Exchange
Rule 11.8 to account for the three
proposed TIF instructions:
• Market Orders. The proposed TIF
instruction of PRE, PTX, and PTD
would not be available for Market
Orders. Under Exchange Rule 11.8(a)(2),
a Market Order may only include a TIF
instruction of IOC, RHO, FOK, or Day.
• Limit Orders. Exchange Rule
11.8(b)(2) describes the TIF instructions
that may be attached to a Limit Order.
The Exchange proposes to amend
paragraph (b)(2) to add the TIF
instructions of PRE, PTX, or PTD to the
list of TIF instructions that a Limit
Order may include.
• ISOs. Exchange Rule 11.8(c)(1)
describes the TIF instructions that may
be attached to an incoming ISO. The
Exchange proposes to amend paragraph
(c)(1) to state that an incoming ISO may
have a TIF instruction of PRE, PTX, or
PTD, in addition to Day, GTD, RHO,
GTX, and IOC. Exchange Rule 11.8(c)(1)
would be further amended to state that
an incoming ISO with a Post Only and
TIF instruction of PRE, PTX, or PTD,
like those with an TIF instruction or
GTD, GTX, or Day, will be cancelled
without execution if, when entered, it is
immediately marketable against an
order with a Displayed instruction
resting in the EDGX Book unless such
order removes liquidity pursuant to
Exchange Rule 11.6(n)(4).31
28 See
Exchange Rule 11.6(q)(4).
utilizing one of the proposed TIF
instructions would not be eligible for execution
during the Early Trading Session.
30 See Exchange Rule 11.1(a).
31 Exchange Rule 11.6(n)(4) defines the Post Only
instruction and states, in sum, that an order with
a Post Only instruction and a Display-Price Sliding
29 Orders
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• MidPoint Peg Orders. Exchange
Rule 11.8(d)(1) describes the TIF
instructions that may be attached to a
MidPoint Peg Order. The Exchange
proposes to amend paragraph (d)(1) to
state that a MidPoint Peg Order may
have a TIF instruction of PRE, PTX, or
PTD, in addition to Day, FOK, IOC,
RHO, GTX and GTD.
• Market Maker Peg Orders. The
proposed TIF instruction of PRE, PTX,
and PTD would not be available to
Market Maker Peg Orders. Under
Exchange Rule 11.8(e)(4), a Market
Maker Peg Order may only include a
TIF instruction of Day, RHO, or GTD.
• Supplemental Peg. Exchange Rule
11.8(f)(1) describes the TIF instructions
that may be attached to a Supplemental
Peg Order. The Exchange proposes to
amend paragraph (f)(1) to state that a
Supplemental Peg Order may have a TIF
instruction of PRE, PTX, or PTD, in
addition to GTD, GTX, RHO and Day.
III. Discussion and Commission
Findings
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After careful consideration, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.32 The
Commission believes that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Section
6(b)(5) 33 in particular, in that it is
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.
The Exchange proposes to adopt an
Early Trading Session and three new
TIF instructions and to make related
changes to its rules as discussed
above.34 The Commission believes that
the proposed rules would provide Users
or Price Adjust instruction will remove contra-side
liquidity from the EDGX Book if the order is an
order to buy or sell a security priced below $1.00
or if the value of such execution when removing
liquidity equals or exceeds the value of such
execution if the order instead posted to the EDGX
Book and subsequently provided liquidity,
including the applicable fees charged or rebates
provided.
32 In approving this rule change, the Commission
notes that it has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
33 15 U.S.C. 78f(b)(5).
34 See supra section II.
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with additional options for trading on
the Exchange. The Commission notes
that the proposed Early Trading Session
hours are similar to those of other
exchanges 35 and that the proposed TIF
instructions would offer functionality
similar to existing functionality
available on the Exchange and other
exchanges which allows Members to
select when their orders become eligible
for execution.36
The Commission notes that the
Exchange has represented that it would
subject orders that are eligible for
execution as of the start of the PreOpening Session to all of the Exchange’s
standard regulatory checks, as it
currently does with all orders upon
entry.37 Specifically, the Exchange will
subject such orders to checks for
compliance with, including but not
limited to, Regulation NMS,38
Regulation SHO,39 and relevant
Exchange rules. Moreover, the Exchange
reminds its Members of their regulatory
obligations when submitting an order
with one of the proposed TIF
instructions.40 In particular, the
Exchange states that Members must
comply with the Market Access Rule,41
which requires, among other things, pretrade controls and procedures that are
reasonably designed to assure
compliance with Exchange trading rules
and Commission rules pursuant to
Regulation SHO and Regulation NMS.
The Exchange also notes that a
Member’s procedures must be
reasonably designed to ensure
compliance with the applicable
regulatory requirements, not just at the
time the order is routed to the Exchange,
but also at the time the order becomes
eligible for execution.42
The Commission further notes the
Exchange’s discussion of the best
execution obligations of Members
utilizing the proposed TIF
35 For example, NYSE Arca, Inc. operates an
Opening Session that starts at 4:00 a.m. Eastern
Time and ends at 9:30 a.m. Eastern Time and
Nasdaq Stock Market LLC operates a pre-market
session that also opens at 4:00 a.m. and ends at 9:30
a.m. Eastern Time. See NYSE Arca Rule 7.34(a)(1);
Nasdaq Rule 4701(g); see also Securities Exchange
Act Release No. 60605 (September 1, 2009), 74 FR
46277 (September 8, 2009) (SR–CHX–2009–13)
(adopting bifurcated post-trading session on the
Chicago Stock Exchange, Inc.).
36 Specifically, on the Exchange, Users may enter
an order starting at 6:00 a.m. Eastern Time with a
TIF of Regular Hours Only, which designates that
the order only be eligible for execution during
Regular Trading Hours, which begin at 9:30 a.m.
Eastern Time. See Exchange Rule 11.6(q)(6); see
also NASDAQ Rule 4703(a)(7).
37 See Amendment No. 1, supra note 4.
38 See 17 CFR 242.600–613.
39 See 17 CFR 242.200–204.
40 See Notice, supra note 5, at 8811.
41 See 17 CFR 240.15c3–5.
42 See Notice, supra note 5, at 8811.
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
21635
instructions.43 Specifically, the
Exchange states that a Member’s best
execution obligations may include
cancelling an order when market
conditions deteriorate and could result
in an inferior execution or informing
customers if the execution of their order
may be delayed intentionally while the
Member utilizes reasonable diligence to
ascertain the best market for the
security.44 The Exchange further notes
that Members will maintain the ability
to cancel or modify the terms of an
order utilizing any of the proposed TIF
instructions at any time, including
during the time from when the order is
routed to the Exchange until the start of
the Pre-Opening Session. As a result,
the Exchange states that a Member who
utilizes the proposed TIF instructions,
but later determines that market
conditions favor execution during the
Early Trading Session, can cancel the
order residing at the Exchange and enter
a separate order to execute during the
Early Trading Session.45
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 46 that the
proposed rule change (SR–EDGX–2016–
06), as modified by Amendment No. 1,
be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.47
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08302 Filed 4–11–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission Investor Advisory
Committee will hold a meeting on
Thursday, April 14, 2016, in MultiPurpose Room LL–006 at the
Commission’s headquarters, 100 F
Street NE., Washington, DC. The
meeting will begin at 9:30 a.m. (ET) and
will be open to the public. Seating will
be on a first-come, first-served basis.
Doors will open at 9:00 a.m. Visitors
will be subject to security checks. The
meeting will be webcast on the
Commission’s Web site at www.sec.gov.
43 See
id. at 8810–11.
at 8810 n.45.
45 Id. at. 8810.
46 15 U.S.C. 78s(b)(2).
47 17 CFR 200.30–3(a)(12).
44 Id.
E:\FR\FM\12APN1.SGM
12APN1
]]>Agencies
[Federal Register Volume 81, Number 70 (Tuesday, April 12, 2016)]
[Notices]
[Pages 21632-21635]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08302]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77538; File No. SR-EDGX-2016-06]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Order
Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto,
To Adopt an Early Trading Session and Three New Time-In-Force
Instructions
April 6, 2016.
I. Introduction
On February 2, 2016, EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission (the
``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ a
proposed rule change to amend its rules to: (i) Create a new trading
session to be known as the Early Trading Session, which will run from
7:00 a.m. to 8:00 a.m. Eastern Time; and (ii) adopt three new Time-in-
Force (``TIF'') instructions. On February 12, 2016, the Exchange filed
Amendment No. 1 to the proposed rule change.\4\ The proposed rule
change, as modified by Amendment No. 1 thereto, was published for
comment in the Federal Register on February 22, 2016.\5\ The Commission
received no comments on the proposed rule change. This order approves
the proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ In Amendment No. 1, the Exchange noted that it would subject
orders that are eligible for execution at the start of the Pre-
Opening Session to all of the Exchange's standard regulatory checks,
including compliance with Regulation NMS, Regulation SHO as well as
other relevant Exchange rules.
\5\ See Securities Exchange Act Release No. 77142 (February 16,
2016), 81 FR 8806 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposes to amend its rules to: (i) Create a new
trading session, the Early Trading Session, which will run from 7:00
a.m. to 8:00 a.m. Eastern Time; and (ii) adopt three new TIF
instructions.\6\
---------------------------------------------------------------------------
\6\ See Notice, supra note 5.
---------------------------------------------------------------------------
A. Early Trading Session
The Exchange trading day is currently divided into three sessions:
(i) The Pre-Opening Session which starts at 8:00 a.m. and ends at 9:30
a.m. Eastern Time; (ii) Regular Trading Hours which runs from 9:30 a.m.
to 4:00 p.m. Eastern Time; and (iii) the Post-Closing Session, which
runs from 4:00 p.m. to 8:00 p.m.
[[Page 21633]]
Eastern Time. The Exchange proposes to amend its rules to create the
Early Trading Session. Exchange Rule 1.5 would be amended to add a new
term, ``Early Trading Session,'' under proposed paragraph (ii). ``Early
Trading Session'' would be defined as ``the time between 7:00 a.m. and
8:00 a.m. Eastern Time.''
The Exchange also proposes to amend Exchange Rule 11.1(a) to state
that orders may be entered or executed on, or routed away from, the
Exchange during the the Early Trading Session and to reflect the start
time of the Early Trading Session as 7:00 a.m. Eastern Time. Other than
the proposal to adopt an Early Trading Session, the Exchange does not
propose to amend the substance or operation of Exchange Rule
11.1(a).\7\
---------------------------------------------------------------------------
\7\ See id. at 8806.
---------------------------------------------------------------------------
Users \8\ currently designate when their orders are eligible for
execution by selecting a desired TIF instruction.\9\ Orders entered
between 6:00 a.m. and 8:00 a.m. Eastern Time are not eligible for
execution until the start of the Pre-Opening Session or Regular Trading
Hours, depending on the TIF selected by the User. Users may enter
orders in advance of the trading session for which the order is
eligible. For example, Users may enter orders starting at 6:00 a.m.
Eastern Time with a TIF of Regular Hours Only (``RHO''), which
designates that the order only be eligible for execution during Regular
Trading Hours.\10\ Users may enter orders as early as 6:00 a.m. Eastern
Time, but those orders would not be eligible for execution until the
start of the Pre-Opening Session at 8:00 a.m. According to the
Exchange, some Users have requested the ability for their orders to be
eligible for execution starting at 7:00 a.m. Eastern Time. Therefore,
the Exchange is proposing to adopt the Early Trading Session.\11\
---------------------------------------------------------------------------
\8\ ``User'' is defined as ``any Member or Sponsored Participant
who is authorized to obtain access to the System pursuant to Rule
11.3.'' See Exchange Rule 1.5(ee).
\9\ See Exchange Rule 11.6(q).
\10\ See Exchange Rule 11.6(q)(6).
\11\ See Notice, supra note 5, at 8806.
---------------------------------------------------------------------------
As amended, Exchange Rule 11.1(a)(1) would state that orders
entered between 6:00 a.m. and 7:00 a.m. Eastern Time, rather than 6:00
a.m. and 8:00 a.m. Eastern Time, would not be eligible for execution
until the start of the Early Trading Session, Pre-Opening Session, or
Regular Trading Hours, depending on the TIF selected by the User.
Exchange Rule 11.1(a)(1) will also be amended to state that the
Exchange will not accept the following orders prior to 7:00 a.m.
Eastern Time, rather than 8:00 a.m.: Orders with a Post Only
instruction,\12\ Intermarket Sweep Orders (``ISOs''),\13\ Market Orders
\14\ with a TIF other than Regular Hours Only, orders with a Minimum
Execution Quantity instruction \15\ that also include a TIF of Regular
Hours Only, and all orders with a TIF instruction of Immediate-or-
Cancel (``IOC'') \16\ or Fill-or-Kill (``FOK'').\17\ At the
commencement of the Early Trading Session, orders entered between 6:00
a.m. and 7:00 a.m. Eastern Time, rather than 6:00 a.m. and 8:00 a.m.
Eastern Time, will be handled in time sequence, beginning with the
order with the oldest time stamp, and will be placed on the EDGX
Book,\18\ routed, cancelled, or executed in accordance with the terms
of the order. As amended, Exchange Rule 11.1(a) would state that orders
may be executed on the Exchange or routed away from the Exchange during
Regular Trading Hours and during the Early Trading, Pre-Opening,
Regular and Post Closing Sessions.\19\
---------------------------------------------------------------------------
\12\ See Exchange Rule 11.6(n)(4).
\13\ See Exchange Rule 11.8(c).
\14\ See Exchange Rule 11.8(a).
\15\ See Exchange Rule 11.6(h).
\16\ See Exchange Rule 11.6(q)(1).
\17\ See Exchange Rule 11.6(q)(3).
\18\ See Exchange Rule 1.5(d).
\19\ The Exchange also describes how the Early Trading Session
will affect its Members' operations and the Exchange's opening
process, order types, routing services, order processing, data
feeds, trade reporting, market surveillance, and clearly erroneous
trade processing. The Exchange clarifies that these processes will
operate in the same manner with the exception of changes in time to
reflect the adoption of the Early Trading Session. See Notice, supra
note 5, at 8807.
---------------------------------------------------------------------------
The Exchange also proposes to make the changes described below to
Exchange Rules 3.21, 11.8, 11.10, 11.15, 14.1, 14.2 and 14.3 to reflect
the adoption of the Early Trading Session:
Exchange Rule 3.21, Customer Disclosures. Exchange Rule
3.21 prohibits Members from accepting an order from a customer for
execution in the Pre-Opening or Post-Closing Session without disclosing
to their customer that extended hours trading involves material trading
risks, including the possibility of lower liquidity, high volatility,
changing prices, unlinked markets, an exaggerated effect from news
announcements, wider spreads and any other relevant risk. The Exchange
proposes to amend Exchange Rule 3.21 to also require such disclosures
for customer orders that are to be executed during the Early Trading
Session.
Exchange Rules 11.8(b), (c), (d), and (f). The Exchange
proposes to amend the description of Limit Orders under Exchange Rule
11.8(b), ISOs under Exchange Rule 11.8(c), MidPoint Peg Orders under
Exchange Rule 11.8(d), and Supplemental Peg Orders under Exchange Rule
11.8(f) to account for the Early Trading Session. Every order type that
is currently available beginning at 8:00 a.m. will be available
beginning at 7:00 a.m. for inclusion in the Early Trading Session. All
other order types, and all order type behaviors, will otherwise remain
unchanged. Therefore, each of the above rules for Limit Orders, ISOs,
MidPoint Peg Orders, and Supplemental Peg Orders would be amended to
state that those order types are available during the Early Trading
Session.
Exchange Rules 11.8(a) and (e). Market Orders and Market
Maker Peg Orders would not be eligible for execution during the Early
Trading Session. Market Orders are only eligible for execution during
the Regular Session.\20\ Market Maker Peg Orders may currently be
submitted to the Exchange starting at the beginning of the Pre-Opening
Session, but the order will not be executable or automatically priced
until after the first regular way transaction on the listing exchange
in the security, as reported by the responsible single plan processor.
Exchange Rule 11.8(e)(7) would be amended to state that Market Maker
Peg Orders may be submitted to the Exchange starting at the beginning
of the Early Trading Session. Market Maker Peg Orders would continue to
not be executable or automatically priced until after the first regular
way transaction on the listing exchange in the security, as reported by
the responsible single plan processor.
---------------------------------------------------------------------------
\20\ See Exchange Rule 11.8(a)(5).
---------------------------------------------------------------------------
Exchange Rule 11.10, Order Execution and Routing. Exchange
Rule 11.10(a)(2) discusses compliance with Regulation NMS and Trade
Through Protections and states that the price of any execution
occurring during the Pre-Opening Session or the Post-Closing Session
must be equal to or better than the highest Protected Bid or lowest
Protected Offer, unless the order is marked ISO or a Protected Bid is
crossing a Protected Offer. The Exchange proposes to amend Exchange
Rule 11.10(a)(2) to expand the rule's requirements to the Early Trading
Session.
Exchange Rule 11.15, Clearly Erroneous Executions.
Exchange Rule 11.15 outlines under which conditions the Exchange may
determine that an execution is clearly erroneous. The Exchange proposes
to amend Exchange Rule 11.15 to include executions that occur during
the Early Trading Session.
[[Page 21634]]
Exchange Rule 11.15(c)(1) sets forth the numerical guidelines the
Exchange is to follow when determining whether an execution was clearly
erroneous during Regular Trading Hours or the Pre-Opening or Post-
Closing Trading Session. Exchange Rule 11.15(c)(3) sets forth
additional factors the Exchange may consider in determining whether a
transaction is clearly erroneous. These factors include whether the
transaction was executed during the Pre-Opening or Post-Closing Trading
Sessions. The Exchange proposes to amend Exchange Rule 11.15(c)(1) and
(3) to include executions occurring during the Early Trading Session.
Exchange Rule 14.1, Unlisted Trading Privileges. The
Exchange proposes to amend Exchange Rules 14.1(c)(2), and
Interpretation and Policies .01(a) and (b) to account for the Early
Trading Session. Specifically, the Exchange proposes to amend paragraph
(c)(2) to state that an information circular distributed by the
Exchange prior to the commencement of trading of a UTP Derivative
Security \21\ will describe the risk of trading during the Early
Trading Session.\22\ In addition, the Exchange proposes to amend
Interpretation and Policies .01(a) to add Early Trading Session to the
paragraph's title and to state that if a UTP Derivative Security begins
trading on the Exchange in the Early Trading Session or Pre-Opening
Session and subsequently a temporary interruption occurs in the
calculation or wide dissemination of the Intraday Indicative Value
(``IIV'') or the value of the underlying index, as applicable, to such
UTP Derivative Security, by a major market data vendor, the Exchange
may continue to trade the UTP Derivative Security for the remainder of
the Early Trading Session and Pre-Opening Session. Lastly, the Exchange
proposes to amend Interpretation and Policies .01(b) to add Early
Trading Session to the paragraph's title and to amend subparagraph (2)
of that section to state that if the IIV or the value of the underlying
index continues not to be calculated or widely available as of the
commencement of the Early Trading Session or Pre-Opening Session on the
next business day, the Exchange shall not commence trading of the UTP
Derivative Security in the Early Trading Session or Pre-Opening Session
that day.
---------------------------------------------------------------------------
\21\ See Exchange Rule 14.1(c).
\22\ Currently, the information circular describes only those
risks in the Pre-Opening and Post-Closing Trading Sessions.
---------------------------------------------------------------------------
Exchange Rule 14.2, Investment Company Units. The Exchange
proposes to amend Exchange Rule 14.2(g) to state that transactions in
Investment Company Units may occur during the Early Trading Session.
Currently, such transactions may occur during Regular Trading Hours and
the Pre-Opening and Post Closing Sessions.
Exchange Rule 14.3, Trust Issued Receipts. The Exchange
proposes to amend Exchange Rule 14.3(d) to state that transactions in
Trust Issued Receipts may occur during the Early Trading Session.
Currently, such transactions may occur during Regular Trading Hours and
the Pre-Opening and Post-Closing Sessions.
B. TIF Instructions
The Exchange proposes to adopt three new TIF instructions under
Exchange Rule 11.6(q).\23\ As discussed above, a User may designate
when its order is eligible for execution by selecting the desired TIF
instruction under Exchange Rule 11.6(q).\24\
---------------------------------------------------------------------------
\23\ The Exchange also proposes to amend the descriptions of
Good-`til Day (``GTD'') under Exchange Rule 11.6(q)(4) and Good-`til
Extended Day (``GTX'') under Exchange Rule 11.6(q)(5) to replace
incorrect references to the Post-Market Session with Post-Closing
Session, as Post-Closing Session is the accurate term under Exchange
Rule 1.5(r).
\24\ See Exchange Rule 11.1(a)(1).
---------------------------------------------------------------------------
Although the Exchange states that the proposal to adopt an Early
Trading Session is in response to User requests for their orders to be
eligible for execution starting at 7:00 a.m. Eastern Time, some Users
have requested that their orders continue to not be eligible for
execution until the start of the Pre-Opening Session at 8:00 a.m.\25\
Therefore, the Exchange proposes to adopt the following three new TIF
instructions under Exchange Rule 11.6(q):
---------------------------------------------------------------------------
\25\ See Notice, supra note 5, at 8808.
---------------------------------------------------------------------------
Pre-Opening Session Plus (``PRE''). A limit order that is
designated for execution during the Pre-Opening Session and Regular
Trading Hours. Like the current Day TIF instruction,\26\ any portion
not executed expires at the end of Regular Trading Hours.
---------------------------------------------------------------------------
\26\ See Exchange Rule 11.6(q)(2).
---------------------------------------------------------------------------
Pre-Opening Session `til Extended Day (``PTX''). A limit
order that is designated for execution during the Pre-Opening Session,
Regular Trading Hours, and the Post-Closing Session. Like the current
GTX TIF instruction,\27\ any portion not executed expires at the end of
the Post-Closing Session.
---------------------------------------------------------------------------
\27\ See Exchange Rule 11.6(q)(5).
---------------------------------------------------------------------------
Pre-Opening Session `til Day (``PTD''). A limit order that
is designated for execution during the Pre-Opening Session, Regular
Trading Hours, and the Post-Closing Session. Like the current GTD TIF
instruction,\28\ any portion not executed will be cancelled at the
expiration time assigned to the order, which can be no later than the
close of the Post-Closing Trading Session.
---------------------------------------------------------------------------
\28\ See Exchange Rule 11.6(q)(4).
---------------------------------------------------------------------------
Under each proposed TIF instruction, Users may designate that their
orders only be eligible for execution starting with the Pre-Opening
Session. Users may continue to enter orders as early as 6:00 a.m., but
orders with the proposed TIF instructions would not be eligible for
execution until 8:00 a.m. Eastern Time, the start of the Pre-Opening
Session.\29\ At the commencement of the Pre-Opening Session, orders
entered between 6:00 a.m. and 8:00 a.m. Eastern Time with one of the
proposed TIF instructions will be handled in time sequence, beginning
with the order with the oldest time stamp, and will be placed on the
EDGX Book, routed, cancelled, or executed in accordance with the terms
of the order.\30\
---------------------------------------------------------------------------
\29\ Orders utilizing one of the proposed TIF instructions would
not be eligible for execution during the Early Trading Session.
\30\ See Exchange Rule 11.1(a).
---------------------------------------------------------------------------
The Exchange proposes to amend the following order types under
Exchange Rule 11.8 to account for the three proposed TIF instructions:
Market Orders. The proposed TIF instruction of PRE, PTX,
and PTD would not be available for Market Orders. Under Exchange Rule
11.8(a)(2), a Market Order may only include a TIF instruction of IOC,
RHO, FOK, or Day.
Limit Orders. Exchange Rule 11.8(b)(2) describes the TIF
instructions that may be attached to a Limit Order. The Exchange
proposes to amend paragraph (b)(2) to add the TIF instructions of PRE,
PTX, or PTD to the list of TIF instructions that a Limit Order may
include.
ISOs. Exchange Rule 11.8(c)(1) describes the TIF
instructions that may be attached to an incoming ISO. The Exchange
proposes to amend paragraph (c)(1) to state that an incoming ISO may
have a TIF instruction of PRE, PTX, or PTD, in addition to Day, GTD,
RHO, GTX, and IOC. Exchange Rule 11.8(c)(1) would be further amended to
state that an incoming ISO with a Post Only and TIF instruction of PRE,
PTX, or PTD, like those with an TIF instruction or GTD, GTX, or Day,
will be cancelled without execution if, when entered, it is immediately
marketable against an order with a Displayed instruction resting in the
EDGX Book unless such order removes liquidity pursuant to Exchange Rule
11.6(n)(4).\31\
---------------------------------------------------------------------------
\31\ Exchange Rule 11.6(n)(4) defines the Post Only instruction
and states, in sum, that an order with a Post Only instruction and a
Display-Price Sliding or Price Adjust instruction will remove
contra-side liquidity from the EDGX Book if the order is an order to
buy or sell a security priced below $1.00 or if the value of such
execution when removing liquidity equals or exceeds the value of
such execution if the order instead posted to the EDGX Book and
subsequently provided liquidity, including the applicable fees
charged or rebates provided.
---------------------------------------------------------------------------
[[Page 21635]]
MidPoint Peg Orders. Exchange Rule 11.8(d)(1) describes
the TIF instructions that may be attached to a MidPoint Peg Order. The
Exchange proposes to amend paragraph (d)(1) to state that a MidPoint
Peg Order may have a TIF instruction of PRE, PTX, or PTD, in addition
to Day, FOK, IOC, RHO, GTX and GTD.
Market Maker Peg Orders. The proposed TIF instruction of
PRE, PTX, and PTD would not be available to Market Maker Peg Orders.
Under Exchange Rule 11.8(e)(4), a Market Maker Peg Order may only
include a TIF instruction of Day, RHO, or GTD.
Supplemental Peg. Exchange Rule 11.8(f)(1) describes the
TIF instructions that may be attached to a Supplemental Peg Order. The
Exchange proposes to amend paragraph (f)(1) to state that a
Supplemental Peg Order may have a TIF instruction of PRE, PTX, or PTD,
in addition to GTD, GTX, RHO and Day.
III. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\32\ The Commission
believes that the proposed rule change, as modified by Amendment No. 1,
is consistent with Section 6(b)(5) \33\ in particular, in that it is
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.
---------------------------------------------------------------------------
\32\ In approving this rule change, the Commission notes that it
has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\33\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange proposes to adopt an Early Trading Session and three
new TIF instructions and to make related changes to its rules as
discussed above.\34\ The Commission believes that the proposed rules
would provide Users with additional options for trading on the
Exchange. The Commission notes that the proposed Early Trading Session
hours are similar to those of other exchanges \35\ and that the
proposed TIF instructions would offer functionality similar to existing
functionality available on the Exchange and other exchanges which
allows Members to select when their orders become eligible for
execution.\36\
---------------------------------------------------------------------------
\34\ See supra section II.
\35\ For example, NYSE Arca, Inc. operates an Opening Session
that starts at 4:00 a.m. Eastern Time and ends at 9:30 a.m. Eastern
Time and Nasdaq Stock Market LLC operates a pre-market session that
also opens at 4:00 a.m. and ends at 9:30 a.m. Eastern Time. See NYSE
Arca Rule 7.34(a)(1); Nasdaq Rule 4701(g); see also Securities
Exchange Act Release No. 60605 (September 1, 2009), 74 FR 46277
(September 8, 2009) (SR-CHX-2009-13) (adopting bifurcated post-
trading session on the Chicago Stock Exchange, Inc.).
\36\ Specifically, on the Exchange, Users may enter an order
starting at 6:00 a.m. Eastern Time with a TIF of Regular Hours Only,
which designates that the order only be eligible for execution
during Regular Trading Hours, which begin at 9:30 a.m. Eastern Time.
See Exchange Rule 11.6(q)(6); see also NASDAQ Rule 4703(a)(7).
---------------------------------------------------------------------------
The Commission notes that the Exchange has represented that it
would subject orders that are eligible for execution as of the start of
the Pre-Opening Session to all of the Exchange's standard regulatory
checks, as it currently does with all orders upon entry.\37\
Specifically, the Exchange will subject such orders to checks for
compliance with, including but not limited to, Regulation NMS,\38\
Regulation SHO,\39\ and relevant Exchange rules. Moreover, the Exchange
reminds its Members of their regulatory obligations when submitting an
order with one of the proposed TIF instructions.\40\ In particular, the
Exchange states that Members must comply with the Market Access
Rule,\41\ which requires, among other things, pre-trade controls and
procedures that are reasonably designed to assure compliance with
Exchange trading rules and Commission rules pursuant to Regulation SHO
and Regulation NMS. The Exchange also notes that a Member's procedures
must be reasonably designed to ensure compliance with the applicable
regulatory requirements, not just at the time the order is routed to
the Exchange, but also at the time the order becomes eligible for
execution.\42\
---------------------------------------------------------------------------
\37\ See Amendment No. 1, supra note 4.
\38\ See 17 CFR 242.600-613.
\39\ See 17 CFR 242.200-204.
\40\ See Notice, supra note 5, at 8811.
\41\ See 17 CFR 240.15c3-5.
\42\ See Notice, supra note 5, at 8811.
---------------------------------------------------------------------------
The Commission further notes the Exchange's discussion of the best
execution obligations of Members utilizing the proposed TIF
instructions.\43\ Specifically, the Exchange states that a Member's
best execution obligations may include cancelling an order when market
conditions deteriorate and could result in an inferior execution or
informing customers if the execution of their order may be delayed
intentionally while the Member utilizes reasonable diligence to
ascertain the best market for the security.\44\ The Exchange further
notes that Members will maintain the ability to cancel or modify the
terms of an order utilizing any of the proposed TIF instructions at any
time, including during the time from when the order is routed to the
Exchange until the start of the Pre-Opening Session. As a result, the
Exchange states that a Member who utilizes the proposed TIF
instructions, but later determines that market conditions favor
execution during the Early Trading Session, can cancel the order
residing at the Exchange and enter a separate order to execute during
the Early Trading Session.\45\
---------------------------------------------------------------------------
\43\ See id. at 8810-11.
\44\ Id. at 8810 n.45.
\45\ Id. at. 8810.
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\46\ that the proposed rule change (SR-EDGX-2016-06), as modified by
Amendment No. 1, be, and it hereby is, approved.
---------------------------------------------------------------------------
\46\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\47\
---------------------------------------------------------------------------
\47\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08302 Filed 4-11-16; 8:45 am]
BILLING CODE 8011-01-P
