Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 72-Equities Relating to Setting Interest, 23040-23043 [2016-08942]

Download as PDF 23040 Federal Register / Vol. 81, No. 75 / Tuesday, April 19, 2016 / Notices particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. In this instance, the proposed new credit provided to a member for execution of securities of each of the three Tapes do [sic] not impose a burden on competition because the Exchange’s execution services are completely voluntary and subject to extensive competition both from other exchanges and from off-exchange venues. The proposed changes are designed to reward market-improving behavior by providing a new credit tier based on various measures of such behavior, which may encourage other market venues to provide similar credits to improve their market quality. Thus, the Exchange does not believe that the proposed changes will impose any burden on competition, but may rather promote competition. In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. mstockstill on DSK4VPTVN1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.11 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 11 15 U.S.C. 78s(b)(3)(A)(ii). VerDate Sep<11>2014 18:02 Apr 18, 2016 Jkt 238001 action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2016–054 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2016–054. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal offices 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– Frm 00077 Fmt 4703 Sfmt 4703 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–08945 Filed 4–18–16; 8:45 am] BILLING CODE 8011–01–P Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: PO 00000 NASDAQ–2016–054, and should be submitted on or before May 10, 2016. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77605; File No. SR– NYSEMKT–2016–43] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 72— Equities Relating to Setting Interest April 13, 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 March 29, 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, II, and III 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 72—Equities relating to setting interest. 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, 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 E:\FR\FM\19APN1.SGM 19APN1 Federal Register / Vol. 81, No. 75 / Tuesday, April 19, 2016 / Notices 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 NYSE MKT Rule 72—Equities (‘‘Rule 72’’) relating to setting interest to provide that interest that establishes a new Exchange best bid or offer (‘‘BBO’’) would be considered setting interest even if a Limit Order designated Add Liquidity Only (‘‘ALO’’) or sell short order during a Short Sale Period, as defined in Rule 440B(d)—Equities, is repriced and displayed at the same price as such interest that became the Exchange BBO. Background Under Rule 72(a)(ii), a bid or offer, including pegging interest, is considered the ‘‘setting interest’’ when it is established as the only displayable bid or offer made at a particular price and is the only displayable interest when such price is or becomes the Exchange BBO. Setting interest is entitled to priority for allocation of executions at that price, as provided for under Rule 72. If there is no setting interest, all interest is allocated on parity pursuant to Rule 72(c).4 In 2008, when the Exchange added the current form of Rule 72, current paragraph (a)(ii)(G) of the rule provided that if, at the time non-pegging interest becomes the Exchange BBO, an e-Quote is pegging to such non-pegging interest, all such interest was considered to be entered simultaneously and, therefore, no interest was considered the setting interest.5 Because the Exchange believed that permitting pegging eQuotes to eliminate the priority to which a non-pegging e-Quote might otherwise be entitled could disincentivize aggressive displayed quoting, the Exchange amended Rule 72(a)(ii)(G) to provide that non-pegging interest that becomes the Exchange BBO will be considered the setting interest even if an e-Quote is pegging to such non-pegging interest.6 The Exchange’s goal in providing priority to setting 4 See Rule 72(c)(v). Securities Exchange Act Release No. 59022 (Nov. 26, 2008), 73 FR 73683 (Dec. 3, 2008) (SR– NYSEALTR–2008–10) (adopting the New York Stock Exchange LLC’s New Market Model rules, including Rule 72). See also Rule 70—Equities (defining e-Quotes and d-Quotes). 6 See Securities Exchange Act Release No. 65884 (Dec. 5, 2011), 76 FR 77038 (Dec. 9, 2011) (SR– NYSEAmex–2011–91) (Notice of filing and immediate effectiveness of proposed rule change amended Rule 72). mstockstill on DSK4VPTVN1PROD with NOTICES 5 See VerDate Sep<11>2014 18:02 Apr 18, 2016 Jkt 238001 interest was to create an incentive for participants to display aggressive prices. The Exchange amended Rule 72(a)(ii)(G) in 2011 because it believed a participant may be reluctant to enter such displayed interest if a non-displayed pegging eQuote could deny priority to such displayed interest.7 Because pegging interest cannot peg to other pegging interest, the current rule specifies that non-pegging interest would retain priority if pegging interest is pegging to such non-pegging interest. Proposed Rule Change The Exchange believes there are additional circumstances when orders that are re-priced due to an external pricing change may similarly disincentivize aggressive displayed quoting by permitting such re-priced interest to eliminate the setting priority to which non-pegging interest may otherwise be entitled. For example, similar to pegging interest,8 which is repriced based on changes to the PBBO, a Limit Order to buy (sell) designated ALO may be re-priced and re-displayed based on changes to the best-priced sell (buy) interest at the Exchange.9 Likewise, sell short orders that are repriced to a Permitted Price during a Short Sale Period may be re-priced and re-displayed as the national best bid (‘‘NBB’’) moves.10 In both these scenarios, the participant sending aggressive display interest would be unaware that when it sets a new Exchange BBO, existing interest on the Exchange may be eligible to be re-priced to that new Exchange BBO price. For the same reason as the Exchange filed to change Rule 72(a)(ii)(G) in 2011, the Exchange is proposing that Limit Orders designated ALO or sell short orders during a Short Sale Period that are re-priced and displayed based on changes to the best-priced sell (buy) interest or NBB would not deny priority to displayed interest that sets a new 7 Because the Exchange does not publicly identify interest as pegging interest that is eligible to re-price based on changes to the PBBO, a participant seeking to set the Exchange BBO would be unaware that one or more pegging interest could join it at the Exchange BBO. 8 Pegging interest is defined in Rule 13(f)(1)— Equities as displayable or non-displayable interest to buy or sell at a price set to track the PBBO as the PBBO changes and must be an e-Quote or dQuote. 9 See Rule 13(e)(1)—Equities (defining ALO modifier) and Supplementary Material .10 to Rule 13—Equities (defining the term ‘‘best-priced sell (buy) interest’’ to be the lowest-priced sell (highestpriced buy) interest against which incoming buy (sell) interest would be required to execute with and/or route to, including Exchange displayed offers, Non-Display Reserve Orders, Non-Display Reserve e-Quotes, odd-lot sized sell (buy) interest, and protected offers (bids) on away markets). 10 See Rule 440B(e)—Equities. PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 23041 Exchange BBO. In addition, the Exchange proposes to amend Rule 72(a)(ii)(G) to provide that if interest becomes the Exchange BBO, it would retain its priority (i.e., considered setting interest) even if pegging interest, Limit Orders designated ALO, or sell short orders during a Short Sale Period under Rule 440B(e) are re-priced and displayed at the same price as such interest. Finally, the Exchange proposes a non-substantive amendment to delete the cross-reference to Rule 13— Equities—Pegging Interest. The Exchange also proposes to amend Rule 72(a)(ii)(G) to reflect that any interest, and not just ‘‘non-pegging’’ interest, is eligible to be setting interest even if other interest re-prices and is displayed at the new Exchange BBO. As provided for in Rule 13(f)(1)(B)(iii)— Equities, pegging interest may establish an Exchange BBO, which would occur if pegging interest pegs to a PBBO that is more aggressively priced than the Exchange’s current BBO. For example, if the PBB is higher than the Exchange BB and the Exchange receives pegging interest to buy with a limit price equal to or higher than such PBB price, the pegging interest would peg to the PBB and be displayed as a new Exchange BB. If there were no other interest when the pegging interest establishes the Exchange BBO, such pegging interest would be entitled to priority under Rule 72(a)(ii).11 However, if more than one pegging interest is pegging to the PBBO and together they establish a new Exchange BBO, Rule 72(a)(ii) would not provide either pegging interest with priority. Current Rule 72(a)(ii)(G), which provides that ‘‘non-pegging interest’’ is considered setting interest if it becomes the Exchange BBO, even if pegging interest is pegging to such non-pegging interest, is consistent with Rule 72(a)(ii) because any such pegging interest would not be the only displayable interest. As discussed above, the Exchange proposes to amend Rule 72(a)(ii)(G) to specify additional interest that could reprice without denying priority to interest that sets the Exchange BBO. As a result, such non-pegging interest could be repriced to join pegging interest that establishes the Exchange BBO and that otherwise would be entitled to be setting interest. The Exchange therefore proposes that if a single pegging interest establishes the BBO, it would be 11 Rule 72(a)(ii) explicitly includes pegging interest as being setting interest entitled to priority for allocation of executions, when such interest is established as the only displayable bid or offer made at a particular price and is the only displayable interest when such price is or becomes the Exchange BBO. E:\FR\FM\19APN1.SGM 19APN1 23042 Federal Register / Vol. 81, No. 75 / Tuesday, April 19, 2016 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES entitled to priority even if a Limit Order designated ALO or short sale order during a Short Sale Period is re-priced and displayed at that same price. In such scenario, the pegging interest would be the aggressively-priced interest that established the new Exchange BBO, and other interest that re-prices at that price would be the reactive orders. Accordingly, to address such scenario, the Exchange proposes to change the references in Rule 72(a)(ii)(G) from ‘‘non-pegging interest’’ to ‘‘interest.’’ Currently, in limited circumstances, Limit Orders designated ALO that are re-priced to a price other than its limit price to join interest that sets a new Exchange BBO do not deny priority to the interest that set the Exchange BBO.12 Because of technology changes associated with implementing this rule change for all circumstances when Limit Orders designated ALO and sell short orders during a Short Sale Period reprice to join interest that sets a new Exchange BBO, the Exchange will announce by Trader Update the full implementation of this proposed rule change. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the ‘‘Act’’),13 in general, and furthers the objectives of Section 6(b)(5),14 in particular, because 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 believes that the proposed rule change meets these requirements because it would permit interest that sets a new Exchange BBO, including pegging interest that establishes an Exchange BBO, to be considered the setting interest and therefore retain priority, as provided for under Rule 72, over other interest that reacts and re-prices based on such interest setting a new Exchange BBO. The current rule already provides for non-pegging interest to retain priority if pegging interest pegs to such price, and the proposed rule change would afford 12 See Trader Update dated February 17, 2016, available here: https://www.nyse.com/publicdocs/ nyse/markets/nyse/NYSE_Trader_Update_Priority_ Allocation.pdf. 13 15 U.S.C. 78f(b). 14 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 18:02 Apr 18, 2016 Jkt 238001 similar treatment to any interest that establishes an Exchange BBO if pegging interest, Limit Orders designated ALO, or sell short orders during a Short Sale Period are re-priced and displayed at the same price as such interest. In addition, the proposed rule change is consistent with current rules in that it would allow for pegging interest that is entitled to be setting interest, as provided for in Rules 13(f)(1)(B)(iii)— Equities and 72(a)(ii), to retain priority if joined at that price by a Limit Order designated ALO or a sell short order during a Short Sale Period. Accordingly, the proposal is designed to incentivize and reward aggressive displayed quoting by market participants, which would remove impediments to and perfect the mechanism of a free and open market and national market system by contributing to the market quality of the Exchange and the national market system in general. In this regard, the Exchange believes that this proposed change would have positive impact on the Exchange’s market, on the Exchange’s members, and on investors generally by promoting the display of aggressively-priced liquidity on a registered exchange. 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 change is not designed to address any competitive issue but rather to promote the additional display of aggressively-priced liquidity on the Exchange by allowing interest that sets a new Exchange BBO to be considered setting interest even if other orders react and re-price based on such interest setting a new Exchange BBO. 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 15 and Rule 19b–4(f)(6) thereunder.16 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. 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 19b4(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 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–2016–43 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–2016–43. 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 17 17 15 15 U.S.C. 78s(b)(3)(A)(iii). 16 17 CFR 240.19b–4(f)(6). PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 CFR 240.19b–4(f)(6). CFR 240.19b–4(f)(6)(iii). 19 15 U.S.C. 78s(b)(2)(B). 18 17 E:\FR\FM\19APN1.SGM 19APN1 Federal Register / Vol. 81, No. 75 / Tuesday, April 19, 2016 / Notices post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference 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–2016–43 and should be submitted on or before May 10, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–08942 Filed 4–18–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77604; File No. SR–NYSE– 2016–29] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Price List for Equity Transactions in Stocks With a per Share Stock Price More Than $1.00 mstockstill on DSK4VPTVN1PROD with NOTICES April 13, 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 March 31, 2016, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the 20 17 CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 18:02 Apr 18, 2016 Jkt 238001 proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory 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 its Price List for equity transactions in stocks with a per share stock price more than $1.00 to (1) add a new default charge for transactions that remove liquidity from the Exchange; (2) make certain pricing changes applicable to Supplemental Liquidity Providers (‘‘SLPs’’) on the Exchange; and (3) eliminate the fee for additional electronic copies of the Merged Order Report. The Exchange proposes to implement these changes to its Price List effective April 1, 2016. The proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, on the Commission’s Web site at http//www.sec.gov, 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 its Price List to (1) add a new default charge for transactions removing liquidity from the Exchange for member firms whose adding liquidity falls below a specified threshold; and (2) add a new SLP Tier 1A; lower the credits for NonDisplayed Reserve Orders for existing SLP Tiers 1 through 3; and, for SLPs that are also Designated Market Makers (‘‘DMMs’’), replace the numeric benchmark for calculating tier-based credits. The proposed changes would PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 23043 only apply to credits in transactions in securities priced $1.00 or more. The Exchange also proposes to eliminate the fee for additional electronic copies of the Merged Order Report. The Exchange proposes to implement these changes effective April 1, 2016. Charges for Removing Liquidity The Exchange currently charges a fee of $0.00275 for non-Floor broker transactions that remove liquidity from the Exchange, including those of DMMs. The Exchange proposes to retain this charge and introduce a slightly higher default charge of $0.0030 for non-Floor broker transactions removing liquidity from the Exchange by member organizations with an Adding ADV,4 excluding any liquidity added by a DMM, of less than 250,000 ADV 5 on the Exchange during the billing month. Changes Applicable to SLPs SLPs are eligible for certain credits when adding liquidity to the Exchange. The amount of the credit is currently determined by the ‘‘tier’’ for which the SLP qualifies, which is based on the SLP’s level of quoting and ADV of liquidity added by the SLP in assigned securities. Currently, SLP Tier 3 provides that when adding liquidity to the NYSE in securities with a share price of $1.00 or more, an SLP is eligible for a credit of $0.0023 per share traded if the SLP (1) meets the 10% average or more quoting requirement in assigned securities pursuant to Rule 107B and (2) adds liquidity for assigned SLP securities in the aggregate 6 of an ADV of more than 0.20% of NYSE consolidated ADV (‘‘CADV’’),7 or with respect to an SLP that is also a DMM and subject to Rule 107B(i)(2)(a),8 more than 0.15% of 4 ‘‘Adding ADV’’ is when a member organization has ADV that adds liquidity to the Exchange during the billing month. Adding ADV excludes any liquidity added by a Designated Market Maker. 5 The defined term, ‘‘ADV,’’ is used here as defined in footnote 2 to the Price List. 6 Under Rule 107B, an SLP can be either a proprietary trading unit of a member organization (‘‘SLP-Prop’’) or a registered market maker at the Exchange (‘‘SLMM’’). For purposes of the 10% average or more quoting requirement in assigned securities pursuant to Rule 107B, quotes of an SLPProp and an SLMM of the same member organization are not aggregated. However, for purposes of adding liquidity for assigned SLP securities in the aggregate, shares of both an SLPProp and an SLMM of the same member organization are included. 7 NYSE CADV is defined in the Price List as the consolidated average daily volume of NYSE-listed securities. 8 Rule 107B(i)(2)(A) prohibits a DMM from acting as a SLP in the same securities in which it is a DMM. E:\FR\FM\19APN1.SGM 19APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 75 (Tuesday, April 19, 2016)]
[Notices]
[Pages 23040-23043]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08942]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77605; File No. SR-NYSEMKT-2016-43]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 72--
Equities Relating to Setting Interest

April 13, 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 March 29, 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, II, 
and III 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 72--Equities relating to 
setting interest. 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,

[[Page 23041]]

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 NYSE MKT Rule 72--Equities (``Rule 
72'') relating to setting interest to provide that interest that 
establishes a new Exchange best bid or offer (``BBO'') would be 
considered setting interest even if a Limit Order designated Add 
Liquidity Only (``ALO'') or sell short order during a Short Sale 
Period, as defined in Rule 440B(d)--Equities, is re-priced and 
displayed at the same price as such interest that became the Exchange 
BBO.
Background
    Under Rule 72(a)(ii), a bid or offer, including pegging interest, 
is considered the ``setting interest'' when it is established as the 
only displayable bid or offer made at a particular price and is the 
only displayable interest when such price is or becomes the Exchange 
BBO. Setting interest is entitled to priority for allocation of 
executions at that price, as provided for under Rule 72. If there is no 
setting interest, all interest is allocated on parity pursuant to Rule 
72(c).\4\
---------------------------------------------------------------------------

    \4\ See Rule 72(c)(v).
---------------------------------------------------------------------------

    In 2008, when the Exchange added the current form of Rule 72, 
current paragraph (a)(ii)(G) of the rule provided that if, at the time 
non-pegging interest becomes the Exchange BBO, an e-Quote is pegging to 
such non-pegging interest, all such interest was considered to be 
entered simultaneously and, therefore, no interest was considered the 
setting interest.\5\ Because the Exchange believed that permitting 
pegging e-Quotes to eliminate the priority to which a non-pegging e-
Quote might otherwise be entitled could disincentivize aggressive 
displayed quoting, the Exchange amended Rule 72(a)(ii)(G) to provide 
that non-pegging interest that becomes the Exchange BBO will be 
considered the setting interest even if an e-Quote is pegging to such 
non-pegging interest.\6\ The Exchange's goal in providing priority to 
setting interest was to create an incentive for participants to display 
aggressive prices. The Exchange amended Rule 72(a)(ii)(G) in 2011 
because it believed a participant may be reluctant to enter such 
displayed interest if a non-displayed pegging e-Quote could deny 
priority to such displayed interest.\7\ Because pegging interest cannot 
peg to other pegging interest, the current rule specifies that non-
pegging interest would retain priority if pegging interest is pegging 
to such non-pegging interest.
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    \5\ See Securities Exchange Act Release No. 59022 (Nov. 26, 
2008), 73 FR 73683 (Dec. 3, 2008) (SR-NYSEALTR-2008-10) (adopting 
the New York Stock Exchange LLC's New Market Model rules, including 
Rule 72). See also Rule 70--Equities (defining e-Quotes and d-
Quotes).
    \6\ See Securities Exchange Act Release No. 65884 (Dec. 5, 
2011), 76 FR 77038 (Dec. 9, 2011) (SR-NYSEAmex-2011-91) (Notice of 
filing and immediate effectiveness of proposed rule change amended 
Rule 72).
    \7\ Because the Exchange does not publicly identify interest as 
pegging interest that is eligible to re-price based on changes to 
the PBBO, a participant seeking to set the Exchange BBO would be 
unaware that one or more pegging interest could join it at the 
Exchange BBO.
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Proposed Rule Change
    The Exchange believes there are additional circumstances when 
orders that are re-priced due to an external pricing change may 
similarly disincentivize aggressive displayed quoting by permitting 
such re-priced interest to eliminate the setting priority to which non-
pegging interest may otherwise be entitled. For example, similar to 
pegging interest,\8\ which is re-priced based on changes to the PBBO, a 
Limit Order to buy (sell) designated ALO may be re-priced and re-
displayed based on changes to the best-priced sell (buy) interest at 
the Exchange.\9\ Likewise, sell short orders that are re-priced to a 
Permitted Price during a Short Sale Period may be re-priced and re-
displayed as the national best bid (``NBB'') moves.\10\ In both these 
scenarios, the participant sending aggressive display interest would be 
unaware that when it sets a new Exchange BBO, existing interest on the 
Exchange may be eligible to be re-priced to that new Exchange BBO 
price.
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    \8\ Pegging interest is defined in Rule 13(f)(1)--Equities as 
displayable or non-displayable interest to buy or sell at a price 
set to track the PBBO as the PBBO changes and must be an e-Quote or 
d-Quote.
    \9\ See Rule 13(e)(1)--Equities (defining ALO modifier) and 
Supplementary Material .10 to Rule 13--Equities (defining the term 
``best-priced sell (buy) interest'' to be the lowest-priced sell 
(highest-priced buy) interest against which incoming buy (sell) 
interest would be required to execute with and/or route to, 
including Exchange displayed offers, Non-Display Reserve Orders, 
Non-Display Reserve e-Quotes, odd-lot sized sell (buy) interest, and 
protected offers (bids) on away markets).
    \10\ See Rule 440B(e)--Equities.
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    For the same reason as the Exchange filed to change Rule 
72(a)(ii)(G) in 2011, the Exchange is proposing that Limit Orders 
designated ALO or sell short orders during a Short Sale Period that are 
re-priced and displayed based on changes to the best-priced sell (buy) 
interest or NBB would not deny priority to displayed interest that sets 
a new Exchange BBO. In addition, the Exchange proposes to amend Rule 
72(a)(ii)(G) to provide that if interest becomes the Exchange BBO, it 
would retain its priority (i.e., considered setting interest) even if 
pegging interest, Limit Orders designated ALO, or sell short orders 
during a Short Sale Period under Rule 440B(e) are re-priced and 
displayed at the same price as such interest. Finally, the Exchange 
proposes a non-substantive amendment to delete the cross-reference to 
Rule 13--Equities--Pegging Interest.
    The Exchange also proposes to amend Rule 72(a)(ii)(G) to reflect 
that any interest, and not just ``non-pegging'' interest, is eligible 
to be setting interest even if other interest re-prices and is 
displayed at the new Exchange BBO. As provided for in Rule 
13(f)(1)(B)(iii)--Equities, pegging interest may establish an Exchange 
BBO, which would occur if pegging interest pegs to a PBBO that is more 
aggressively priced than the Exchange's current BBO. For example, if 
the PBB is higher than the Exchange BB and the Exchange receives 
pegging interest to buy with a limit price equal to or higher than such 
PBB price, the pegging interest would peg to the PBB and be displayed 
as a new Exchange BB. If there were no other interest when the pegging 
interest establishes the Exchange BBO, such pegging interest would be 
entitled to priority under Rule 72(a)(ii).\11\ However, if more than 
one pegging interest is pegging to the PBBO and together they establish 
a new Exchange BBO, Rule 72(a)(ii) would not provide either pegging 
interest with priority. Current Rule 72(a)(ii)(G), which provides that 
``non-pegging interest'' is considered setting interest if it becomes 
the Exchange BBO, even if pegging interest is pegging to such non-
pegging interest, is consistent with Rule 72(a)(ii) because any such 
pegging interest would not be the only displayable interest.
---------------------------------------------------------------------------

    \11\ Rule 72(a)(ii) explicitly includes pegging interest as 
being setting interest entitled to priority for allocation of 
executions, when such interest is established as the only 
displayable bid or offer made at a particular price and is the only 
displayable interest when such price is or becomes the Exchange BBO.
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    As discussed above, the Exchange proposes to amend Rule 
72(a)(ii)(G) to specify additional interest that could reprice without 
denying priority to interest that sets the Exchange BBO. As a result, 
such non-pegging interest could be repriced to join pegging interest 
that establishes the Exchange BBO and that otherwise would be entitled 
to be setting interest. The Exchange therefore proposes that if a 
single pegging interest establishes the BBO, it would be

[[Page 23042]]

entitled to priority even if a Limit Order designated ALO or short sale 
order during a Short Sale Period is re-priced and displayed at that 
same price. In such scenario, the pegging interest would be the 
aggressively-priced interest that established the new Exchange BBO, and 
other interest that re-prices at that price would be the reactive 
orders. Accordingly, to address such scenario, the Exchange proposes to 
change the references in Rule 72(a)(ii)(G) from ``non-pegging 
interest'' to ``interest.''
    Currently, in limited circumstances, Limit Orders designated ALO 
that are re-priced to a price other than its limit price to join 
interest that sets a new Exchange BBO do not deny priority to the 
interest that set the Exchange BBO.\12\ Because of technology changes 
associated with implementing this rule change for all circumstances 
when Limit Orders designated ALO and sell short orders during a Short 
Sale Period reprice to join interest that sets a new Exchange BBO, the 
Exchange will announce by Trader Update the full implementation of this 
proposed rule change.
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    \12\ See Trader Update dated February 17, 2016, available here: 
https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Trader_Update_Priority_Allocation.pdf.
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\13\ in general, and 
furthers the objectives of Section 6(b)(5),\14\ in particular, because 
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 
believes that the proposed rule change meets these requirements because 
it would permit interest that sets a new Exchange BBO, including 
pegging interest that establishes an Exchange BBO, to be considered the 
setting interest and therefore retain priority, as provided for under 
Rule 72, over other interest that reacts and re-prices based on such 
interest setting a new Exchange BBO. The current rule already provides 
for non-pegging interest to retain priority if pegging interest pegs to 
such price, and the proposed rule change would afford similar treatment 
to any interest that establishes an Exchange BBO if pegging interest, 
Limit Orders designated ALO, or sell short orders during a Short Sale 
Period are re-priced and displayed at the same price as such interest. 
In addition, the proposed rule change is consistent with current rules 
in that it would allow for pegging interest that is entitled to be 
setting interest, as provided for in Rules 13(f)(1)(B)(iii)--Equities 
and 72(a)(ii), to retain priority if joined at that price by a Limit 
Order designated ALO or a sell short order during a Short Sale Period. 
Accordingly, the proposal is designed to incentivize and reward 
aggressive displayed quoting by market participants, which would remove 
impediments to and perfect the mechanism of a free and open market and 
national market system by contributing to the market quality of the 
Exchange and the national market system in general. In this regard, the 
Exchange believes that this proposed change would have positive impact 
on the Exchange's market, on the Exchange's members, and on investors 
generally by promoting the display of aggressively-priced liquidity on 
a registered exchange.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 change is not 
designed to address any competitive issue but rather to promote the 
additional display of aggressively-priced liquidity on the Exchange by 
allowing interest that sets a new Exchange BBO to be considered setting 
interest even if other orders react and re-price based on such interest 
setting a new Exchange BBO.

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 \15\ and Rule 19b-4(f)(6) thereunder.\16\ 
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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \16\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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 19b4(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.
---------------------------------------------------------------------------

    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2016-43 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-2016-43. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will

[[Page 23043]]

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-
43 and should be submitted on or before May 10, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08942 Filed 4-18-16; 8:45 am]
BILLING CODE 8011-01-P

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