Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Implementing the Quoting and Trading Provisions of the Plan To Implement a Tick Size Pilot Program Submitted to the Commission Pursuant to Rule 608 of Regulation NMS Under the Act, 36367-36373 [2016-13209]
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Federal Register / Vol. 81, No. 108 / Monday, June 6, 2016 / Notices
All submissions should refer to File
Number SR–NYSEARCA–2016–76. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEARCA–2016–76 and should be
submitted on or before June 27, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.51
Brent J. Fields,
Secretary.
[FR Doc. 2016–13208 Filed 6–3–16; 8:45 am]
BILLING CODE 8011–01–P
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Brent J. Fields,
Secretary.
SECURITIES AND EXCHANGE
COMMISSION
sradovich on DSK3TPTVN1PROD with NOTICES
[Release No. 34–77951; File No. SR–
NYSEMKT–2016–49]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Designation of a
Longer Period for Commission Action
on a Proposed Rule Change Amending
the Definition of ‘‘Block’’ for Purposes
of Rule 72(d)—Equities and the Size of
a Proposed Cross Transaction Eligible
for the Cross Function in Rule 76—
Equities
On April 22, 2016, NYSE MKT LLC
(‘‘Exchange’’ or ‘‘NYSE MKT’’) filed
CFR 200.30–3(a)(12).
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[FR Doc. 2016–13211 Filed 6–3–16; 8:45 am]
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77949; File No. SR–
NYSEMKT–2016–56]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Implementing the
Quoting and Trading Provisions of the
Plan To Implement a Tick Size Pilot
Program Submitted to the Commission
Pursuant to Rule 608 of Regulation
NMS Under the Act
May 31, 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 May 20,
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 implement
the quoting and trading provisions of
the Plan to Implement a Tick Size Pilot
Program submitted to the Commission
pursuant to Rule 608 of Regulation
NMS 4 under the Act (the ‘‘Plan’’). The
proposed rule change is substantially
similar to proposed rule changes
recently approved or published by the
Commission by New York Stock
Exchange LLC to adopt NYSE Rules
67(a) and 67(c)–(e), which also
implemented the quoting and trading
provisions of the Plan.5 Therefore, the
Exchange has designated this proposal
as ‘‘non-controversial’’ and provided the
Commission with the notice required by
Rule 19b–4(f)(6)(iii) under the Act.6 The
proposed rule change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 17 CFR 242.608.
5 See, Securities Exchange Act Release No. 76229
(October 22, 2015), 80 FR 66065 (October 28, 2015)
(SR–NYSE–2015–46), as amended by Partial
Amendments No. 1 and No. 2 to the Quoting &
Trading Rules Proposal. See, Securities Exchange
Act Release No. 77703 (April 25, 2016), 81 FR
25725 (April 29, 2016) (SR–NYSE–2015–46).
6 17 CFR 240.19b–4(f)(6)(iii).
2 15
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 77734
(Apr. 27, 2016), 81 FR 26598.
4 15 U.S.C. 78s(b)(2).
5 15 U.S.C. 78s(b)(2).
6 17 CFR 200.30–3(a)(31).
2 17
May 31, 2016.
51 17
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend its rules relating to
pre-opening indications and opening
procedures. The proposed rule change
was published for comment in the
Federal Register on May 3, 2016.3 The
Commission has received no comments
on the proposed rule change.
Section 19(b)(2) of the Act 4 provides
that, within 45 days of the publication
of notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is June 17, 2016.
The Commission is extending this 45day time period.
The Commission finds that it is
appropriate to designate a longer period
within which to take action on the
proposed rule change so that it has
sufficient time to consider the proposed
rule change. Accordingly, the
Commission, pursuant to Section
19(b)(2) of the Act,5 designates August
1, 2016, as the date by which the
Commission should either approve or
disapprove or institute proceedings to
determine whether to disapprove the
proposed rule change (File Number SR–
NYSEMKT–2016–49).
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Federal Register / Vol. 81, No. 108 / Monday, June 6, 2016 / Notices
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 establish
rules to require its member
organizations to comply with the
requirements of the Plan to Implement
a Tick Size Pilot Program (the ‘‘Plan’’),7
which is designed to study and assess
the impact of increment conventions on
the liquidity and trading of the common
stocks of small capitalization
companies. The Exchange proposes
changes to its rules for a two-year pilot
period that coincides with the pilot
period for the Plan, which is currently
scheduled as a two year pilot to begin
on October 3, 2016.
Background
sradovich on DSK3TPTVN1PROD with NOTICES
On August 25, 2014, NYSE Group,
Inc., on behalf of Bats BZX Exchange,
Inc. (f/k/a BATS Exchange, Inc.), Bats
BYX Exchange, Inc. (f/k/a BATS YExchange, Inc.), Chicago Stock
Exchange, Inc., EDGA Exchange, Inc.,
EDGX Exchange, Inc., Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’), NASDAQ OMX BX, Inc.,
NASDAQ OMX PHLX LLC, the Nasdaq
Stock Market LLC, New York Stock
Exchange LLC, the Exchange and NYSE
Arca, Inc. (collectively ‘‘Participants’’),
filed with the Commission, pursuant to
Section 11A of the Act 8 and Rule 608
of Regulation NMS thereunder, the Plan
to Implement a Tick Size Pilot
7 See Securities and Exchange Act Release No.
74892 (May 6, 2015), 80 FR 27513 (File No. 4–657)
(‘‘Tick Plan Approval Order’’). See, also, Securities
and Exchange Act Release No. 76382 (November 6,
2015) (File No. 4–657), 80 FR 70284 (File No. 4–
657) (November 13, 2015), which extended the pilot
period commencement date from May 6, 2015 to
October 3, 2016.
8 15 U.S.C. 78k–1.
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Program.9 The Participants filed the
Plan to comply with an order issued by
the Commission on June 24, 2014 (the
‘‘June 2014 Order’’).10 The Plan 11 was
published for comment in the Federal
Register on November 7, 2014,12 and
approved by the Commission, as
modified, on May 6, 2015.13
The Plan is designed to allow the
Commission, market participants, and
the public to study and assess the
impact of increment conventions on the
liquidity and trading of the common
stocks of small capitalization
companies. The Commission plans to
use the Tick Size Pilot Program to assess
whether wider tick sizes enhance the
market quality of Pilot Securities for the
benefit of issuers and investors. Each
Participant is required to comply with,
and to enforce compliance by its
member organizations, as applicable,
with the provisions of the Plan.
On October 9, 2015, the Operating
Committee approved the Exchange’s
proposed rules as model Participant
rules that would require compliance by
a Participant’s members with the
provisions of the Plan, as applicable,
and would establish written policies
and procedures reasonably designed to
comply with applicable quoting and
trading requirements specified in the
Plan.14 As described more fully below,
the proposed rules would require
member organizations to comply with
the Plan and provide for the widening
of quoting and trading increments for
Pilot Securities, consistent with the
Plan.
The Tick Size Pilot Program will
include stocks of companies with $3
billion or less in market capitalization,
an average daily trading volume of one
million shares or less, and a volume
weighted average price of at least $2.00
9 See
Letter from Brendon J. Weiss, Vice
President, Intercontinental Exchange, Inc., to
Secretary, Commission, dated August 25, 2014.
10 See Securities Exchange Act Release No. 72460
(June 24, 2014), 79 FR 36840 (June 30, 2014).
11 Unless otherwise specified, capitalized terms
used in this rule filing are based on the defined
terms of the Plan.
12 See Securities and Exchange Act Release No.
73511 (November 3, 2014), 79 FR 66423 (File No.
4–657) (Tick Plan Filing).
13 See Tick Plan Approval Order, supra note 7.
See, also, Securities Exchange Act Release No.
77277 (March 3, 2016), 81 FR 12162 (March 8,
2016) (File No. 4–657), which amended the Plan to
add National Stock Exchange, Inc. as a Participant.
14 The Operating Committee is required under
Section III(C)(2) of the Plan to ‘‘monitor the
procedures established pursuant to the Plan and
advise Participants with respect to any deficiencies,
problems, or recommendations as the Operating
Committee may deem appropriate.’’ The Operating
Committee is also required to ‘‘establish
specifications and procedures for the
implementation and operation of the Plan that are
consistent with the provisions of the Plan.’’
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for every trading day. The Tick Pilot
Program will consist of a control group
of approximately 1400 Pilot Securities
and three test groups with 400 Pilot
Securities in each selected by a
stratified sampling.15 During the pilot,
Pilot Securities in the control group will
be quoted at the current tick size
increment of $0.01 per share and will
trade at the currently permitted
increments. Pilot Securities in the first
test group (‘‘Test Group One’’) will be
quoted in $0.05 minimum increments
but will continue to trade at any price
increment that is currently permitted.16
Pilot Securities in the second test group
(‘‘Test Group Two’’) will be quoted in
$0.05 minimum increments and will
trade at $0.05 minimum increments
subject to a midpoint exception, a retail
investor exception, and a negotiated
trade exception.17 Pilot Securities in the
third test group (‘‘Test Group Three’’)
will be subject to the same terms as Test
Group Two and also will be subject to
the ‘‘Trade-at’’ requirement to prevent
price matching by a person not
displaying at a price of a Trading
Center’s ‘‘Best Protected Bid or ‘‘Best
Protected Offer,’’ unless an enumerated
exception applies.18 In addition to the
exceptions provided under Test Group
Two, an exception for Block Size orders
and exceptions that closely resemble
those under Rule 611 of Regulation
NMS 19 will apply to the Trade-at
requirement.
The Tick Pilot Program also contains
requirements for the collection and
transmission of data to the Commission
and the public. A variety of data
generated during the Tick Pilot Program
will be released publicly on an
aggregated basis to assist in analyzing
the impact of wider tick sizes on smaller
capitalization stocks.20
Proposed Rule 67—Equities
The Plan requires the Exchange to
establish, maintain, and enforce written
policies and procedures that are
reasonably designed to comply with
applicable quoting and trading
requirements specified in the Plan.21
15 See Section V of the Plan for identification of
Pilot Securities, including criteria for selection and
grouping.
16 See Section VI(B) of the Plan. Pilot Securities
in Test Group One will be subject to a midpoint
exception and a retail investor exception.
17 See Section VI(C) of the Plan.
18 See Section VI(D) of the Plan.
19 17 CFR 242.611.
20 See Section VII of the Plan.
21 The Exchange was also required by the Plan to
develop appropriate policies and procedures that
provide for data collection and reporting to the
Commission of data described in Appendixes B and
C of the Plan. See, Securities Exchange Act Release
No. 77478 (March 30, 2016), 81 FR 19665 (April 5,
2016) (SR–NYSEMKT–2016–40.
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sradovich on DSK3TPTVN1PROD with NOTICES
Accordingly, the Exchange is proposing
new Rule 67—Equities to require its
member organizations to comply with
the quoting and trading provisions of
the Plan. The proposed Rule is also
designed to ensure the Exchange’s
compliance with the Plan.
Proposed paragraph (a)(1) of new Rule
67—Equities would establish the
following defined terms:
• ‘‘Plan’’ means the Tick Size Pilot
Plan submitted to the Commission
pursuant to Rule 608(a)(3) of Regulation
NMS under the Act;
• ‘‘Pilot Test Groups’’ means the three
test groups established under the Plan,
consisting of 400 Pilot Securities each,
which satisfy the respective criteria
established by the Plan for each such
test group.
• ‘‘Retail Investor Order’’ would
mean an agency order or a riskless
principal order that meets the criteria of
FINRA Rule 5320.03 that originates
from a natural person and is submitted
to the Exchange by a retail member
organization, provided that no change is
made to the terms of the order with
respect to price or side of market and
the order does not originate from a
trading algorithm or any other
computerized methodology. A Retail
Investor Order may be an odd lot, round
lot, or partial round lot.22
• Trade-at Intermarket Sweep
Order’’ 23 would mean a limit order for
22 This definition is the approved definition for
‘‘Retail Investor Order’’ as contemplated by the
Plan. It is also the same definition as given to
‘‘Retail Orders’’ pursuant to the approved rules of
other national securities exchanges. See Rule
107C(a)(3)—Equities. See also NYSE Rule
107C(a)(3), NYSE Arca, Inc. Rule 7.44(a)(3), BATS
Y-Exchange, Inc. Rule 11.24(a)(2) and NASDAQ
Stock Market LLC Rule 4780(a)(2). The Retail
Investor Order definition includes any order
originating from a natural person and is not limited
to orders submitted to the Exchange under the
Exchange’s retail liquidity program rule (Rule
107C—Equities). Therefore, any member
organization that operates a Trading Center may
execute against a Retail Investor Order otherwise
than on an exchange to satisfy the retail investor
order exception proposed in Rule 67—Equities.
23 The Plan defines a Trade-at Intermarket Sweep
Order (‘‘ISO’’) as a limit order for a Pilot Security
that, when routed to a Trading Center, is identified
as an ISO, and simultaneous with the routing of the
limit order identified as an ISO, one or more
additional limit orders, as necessary, are routed to
execute against the full displayed size of any
protected bid (in the case of a limit order to sell)
or the full displayed size of any protected offer (in
the case of a limit order to buy) for the Pilot
Security with a price that is equal to the limit price
of the limit order identified as an ISO. These
additional routed orders also must be marked as
ISOs. See Plan, Section I(MM). Since the Plan
allows (i) an order that is identified as an ISO to
be executed at the price of a Protected Quotation
(see, Plan, Section VI(D)(8) and proposed Rule
67(a)(e)(4)(C)(ix)—Equities) and (ii) an order to
execute at the price of a Protected Quotation that
‘‘is executed by a trading center that simultaneously
routed Trade-at ISO to execute against the full
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a Pilot Security that meets the following
requirements:
(i) When routed to a Trading Center,
the limit order is identified as a Tradeat Intermarket Sweep Order; and
(ii) Simultaneously with the routing
of the limit order identified as a Tradeat Intermarket Sweep Order, one or
more additional limit orders, as
necessary, are routed to execute against
the full size of any protected bid, in the
case of a limit order to sell, or the full
displayed size of any protected offer, in
the case of a limit order to buy, for the
Pilot Security with a price that is better
than or equal to the limit price of the
limit order identified as a Trade-at
Intermarket Sweep Order. These
additional routed orders also must be
marked as Trade-at Intermarket Sweep
Orders.
• Paragraph (a)(1)(E) would provide
that all capitalized terms not otherwise
defined in this rule shall have the
meanings set forth in the Plan,
Regulation NMS under the Act, or
Exchange rules, as applicable.
Proposed Paragraph (a)(2) would state
that the Exchange is a Participant in,
and subject to the applicable
requirements of, the Plan; proposed
Paragraph (a)(3) would require member
organizations to establish, maintain and
enforce written policies and procedures
that are reasonably designed to comply
with the applicable requirements of the
Plan, which would allow the Exchange
to enforce compliance by its member
organizations with the provisions of the
Plan, as required pursuant to Section
II(B) of the Plan.
In addition, Paragraph (a)(4) would
provide that Exchange systems would
not display, quote or trade in violation
of the applicable quoting and trading
requirements for a Pilot Security
specified in the Plan and this proposed
rule, unless such quotation or
transaction is specifically exempted
under the Plan.24
displayed size of the Protected Quotation that was
trade at’’ (see, Plan, Section VI(D)(9) and proposed
Rule 67(a)(e)(4)(C)(x)—Equities), the Exchange
proposes to clarify the use of an ISO in connection
with the Trade-at requirement by adopting, as part
of proposed Rule 67(a)(1)—Equities, a
comprehensive definition of ‘‘Trade-at ISO.’’ As set
forth in the Plan and as noted above, the definition
of a Trade-at ISO used in the Plan does not
distinguish ISOs that are compliant with Rule 611
or Regulation NMS from ISOs that are compliant
with Trade-at. The Exchange therefore proposes the
separate definition of Trade-at ISO contained in
proposed Rule 67(a)—Equities. The Exchange
believes that this proposed definition will further
clarify to recipients of ISOs in Test Group Three
securities whether the ISO satisfies the
requirements of Rule 611 of Regulation NMS or
Trade-at.
24 The Exchange is still evaluating its internal
policies and procedures to ensure compliance with
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The Exchange also proposes to add
Rule 67(a)(5)—Equities to provide for
the treatment of Pilot Securities that
drop below a $1.00 value during the
Pilot Period.25 The Exchange proposes
that if the price of a Pilot Security drops
below $1.00 during regular trading on
any given business day, such Pilot
Security would continue to be subject to
the Plan and the requirements described
below that necessitate member
organizations to comply with the
specific quoting and trading obligations
for each respective Pilot Test Group
under the Plan, and would continue to
trade in accordance with the proposed
rules below as if the price of the Pilot
Security had not dropped below $1.00.
However, if the Closing Price of a Pilot
Security on any given business day is
below $1.00, such Pilot Security would
be moved out of its respective Pilot Test
Group into the control group (which
consists of Pilot Securities not placed
into a Pilot Test Group), and may then
be quoted and traded at any price
increment that is currently permitted by
Exchange rules for the remainder of the
Pilot Period. Notwithstanding anything
contained herein to the contrary, the
Exchange proposes that, at all times
during the Pilot Period, Pilot Securities
(whether in the control group or any
Pilot Test Group) would continue to be
subject to the data collection rules,
which are enumerated in Rule 67(b)—
Equities.
The Exchange proposes Rules 67(c)–
(e)—Equities, which would require
member organizations to comply with
the specific quoting and trading
the Plan, and plans to separately propose rules that
would address violations of the Plan.
25 New York Stock Exchange LLC, on behalf of the
Participants, submitted a letter to Commission
requesting exemption from certain provisions of the
Plan related to quoting and trading. See letter from
Elizabeth K. King, NYSE, to Brent J. Fields,
Secretary, Commission, dated October 14, 2015 (the
‘‘October Exemption Request’’). FINRA, also on
behalf of the Plan Participants, submitted a separate
letter to Commission requesting additional
exemptions from certain provisions of the Plan
related to quoting and trading. See letter from
Marcia E. Asquith, Senior Vice President and
Corporate Secretary, FINRA, to Robert W. Errett,
Deputy Secretary, Commission, dated February 23,
2016 (the ‘‘February Exemption Request,’’ and
together with the October Exemption Request, the
‘‘Exemption Request Letters’’). The Commission,
pursuant to its authority under Rule 608(e) of
Regulation NMS, granted New York Stock Exchange
LLC a limited exemption from the requirement to
comply with certain provisions of the Plan as
specified in the Exemption Request Letters and
noted herein. See letter from David Shillman,
Associate Director, Division of Trading and
Markets, Commission to Sherry Sandler, Associate
General Counsel, New York Stock Exchange LLC,
dated April 25, 2016 (the ‘‘Exemption Letter’’). The
Exchange is seeking the same exemptions as
requested in the Exemption Request Letters,
including without limitation, an exemption relating
to proposed Rule 67(a)(5)—Equities.
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sradovich on DSK3TPTVN1PROD with NOTICES
obligations for each Pilot Test Group
under the Plan. With regard to Pilot
Securities in Test Group One, proposed
Rule 67(c)—Equities would provide that
no member organization may display,
rank, or accept from any person any
displayable or non-displayable bids or
offers, orders, or indications of interest
in increments other than $0.05.
However, orders priced to trade at the
midpoint of the National Best Bid and
National Best Offer (‘‘NBBO’’) or Best
Protected Bid and Best Protect Offer
(‘‘PBBO’’) and orders entered in the
Exchange’s Retail Liquidity Program as
Retail Price Improvement Orders
(‘‘Retail Price Improvement Order’’) 26
may be ranked and accepted in
increments of less than $0.05. Pilot
Securities in Test Group One may
continue to trade at any price increment
that is currently permitted by Rule
62.10—Equities.27
With regard to Pilot Securities in Test
Group Two, proposed Rule 67(d)(1)—
Equities would provide that such Pilot
Securities would be subject to all of the
same quoting requirements as described
above for Pilot Securities in Test Group
One, along with the applicable quoting
exceptions. In addition, proposed Rule
67(d)(2)—Equities would provide that,
absent one of the listed exceptions in
proposed Rule 67(d)(3)—Equities
enumerated below, no member
organization may execute orders in any
Pilot Security in Test Group Two in
price increments other than $0.05. The
$0.05 trading increment would apply to
all trades, including Brokered Cross
Trades.
Paragraph (d)(3) would set forth
further requirements for Pilot Securities
in Test Group Two. Specifically,
member organizations trading Pilot
Securities in Test Group Two would be
allowed to trade in increments less than
$0.05 under the following
circumstances:
(A) Trading may occur at the
midpoint between the NBBO or PBBO;
(B) Retail Investor Orders may be
provided with price improvement that
is at least $0.005 better than the Best
Protected Bid or the Best Protected
Offer;
(C) Negotiated Trades may trade in
increments less than $0.05; and
26 A Retail Price Improvement Order consists of
non-displayed interest in NYSE MKT-listed
securities that is priced better than the Best
Protected Bid or Best Protected Offer, as such terms
are defined in Regulation NMS Rule 600(b)(57), by
at least $0.001 and that is identified as such. See
Rule 107C(a)(4)—Equities.
27 Rule 62.10—Equities describes the minimum
price variation for quoting and entry of orders in
equity securities admitted to dealings on the
Exchange.
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(D) Execution of a customer order to
comply with Rule 5320—Equities 28
following the execution of a proprietary
trade by the member organization at an
increment other than $0.05, where such
proprietary trade was permissible
pursuant to an exception under the
Plan.29
Paragraph (e)(1)–(e)(3) would set forth
the requirements for Pilot Securities in
Test Group Three. Member
organizations quoting or trading such
Pilot Securities would be subject to all
of the same quoting and trading
requirements as described above for
Pilot Securities in Test Group Two,
including the quoting and trading
exceptions applicable to Test Group
Two Pilot Securities. In addition,
proposed Paragraph (e)(4) would
provide for an additional prohibition on
Pilot Securities in Test Group Three
referred to as the ‘‘Trade-at
Prohibition.’’ 30 Paragraph (e)(4)(B)—
Equities would provide that, absent one
of the listed exceptions in proposed
Rule 67(e)(4)(C)—Equities enumerated
below, no member organization may
28 Rule 5320—Equities is the Exchange’s
Prohibition Against Trading Ahead of Customer
Orders rule and states:
(a) Except as provided herein, a member
organization that accepts and holds an order in an
equity security from its own customer or a customer
of another broker-dealer without immediately
executing the order is prohibited from trading that
security on the same side of the market for its own
account at a price that would satisfy the customer
order, unless it immediately thereafter executes the
customer order up to the size and at the same or
better price at which it traded for its own account.
(b) A member organization must have a written
methodology in place governing the execution and
priority of all pending orders that is consistent with
the requirements of this Rule and NASD Rule 2320.
A member organization also must ensure that this
methodology is consistently applied.
29 The Exchange proposes to add this exemption
to permit member organizations to fill a customer
order in a Pilot Security at a non-nickel increment
to comply with Rule 5320—Equities under limited
circumstances. Specifically, the exception would
allow the execution of a customer order following
a proprietary trade by the member organization at
an increment other than $0.05 in the same security,
on the same side and at the same price as (or within
the prescribed amount of) a customer order owed
a fill pursuant to Rule 5320—Equities, where the
triggering proprietary trade was permissible
pursuant to an exception under the Plan. The
Commission granted New York Stock Exchange LLC
an exemption from Rule 608(c) related to this
provision. See, the Exemption Letter, supra note 25.
The Exchange is seeking the same exemptions as
requested in the Exemption Request Letters. The
Exchange believes such an exception best facilitates
the ability of member organizations to continue to
protect customer orders while retaining the
flexibility to engage in proprietary trades that
comply with an exception to the Plan.
30 Proposed Rule 67(e)(4)(A)—Equities would
define the ‘‘Trade-at Prohibition’’ to mean the
prohibition against executions by a Trading Center
of a sell order for a Pilot Security at the price of
a Protected Bid or the execution of a buy order for
a Pilot Security at the price of a Protected Offer
during regular trading hours.
PO 00000
Frm 00117
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Sfmt 4703
execute a sell order for a Pilot Security
in Test Group Three at the price of a
Protected Bid or execute a buy order for
a Pilot Security in Test Group Three at
the price of a Protected Offer.
Proposed Rule 67(e)(4)(C)—Equities
would allow member organizations to
execute a sell order for a Pilot Security
in Test Group Three at the price of a
Protected Bid or execute a buy order for
a Pilot Security in Test Group Three at
the price of a Protected Offer if any of
the following circumstances exist:
(i) The order is executed as agent or
riskless principal by an independent
trading unit, as defined under Rule
200(f) of Regulation SHO,31 of a Trading
Center within a member organization
that has a displayed quotation as agent
or riskless principal, via either a
processor or an SRO Quotation Feed, at
a price equal to the traded-at Protected
Quotation, that was displayed before the
order was received,32 but only up to the
full displayed size of that independent
trading unit’s previously displayed
quote; 33
(ii) The order is executed by an
independent trading unit, as defined
under Rule 200(f) of Regulation SHO, of
a Trading Center within a member
organization that has a displayed
quotation for the account of that Trading
Center on a principal (excluding riskless
principal 34) basis, via either a processor
or an SRO Quotation Feed, at a price
equal to the traded-at Protected
Quotation, that was displayed before the
31 The Exchange is proposing that, for proposed
Rules 67(e)(4)(C)(i) and (ii)—Equities, a Trading
Center operated by a broker-dealer would mean an
independent trading unit, as defined under Rule
200(f) of Regulation SHO, within such brokerdealer. See, 17 CFR 242.200.
Independent trading unit aggregation is available
if traders in an aggregation unit pursue only the
particular trading objective(s) or strategy(s) of that
aggregation unit and do not coordinate that strategy
with any other aggregation unit. Therefore, a
Trading Center cannot rely on quotations displayed
by that broker dealer from a different independent
trading unit. As an example, an agency desk of a
broker-dealer cannot rely on the quotation of a
proprietary desk in a separate independent trading
unit at that same broker-dealer.
32 The Exchange is proposing to adopt this
limitation to ensure that a Trading Center does not
display a quotation after the time of order receipt
solely for the purpose of trading at the price of a
protected quotation without routing to that
protected quotation.
33 This proposed exception to Trade-at would
allow a Trading Center to execute an order at the
Protected Quotation in the same capacity in which
it has displayed a quotation at a price equal to the
Protected Quotation and up to the displayed size of
such displayed quotation.
34 As described above, proposed Rule
67(e)(4)(C)(i)—Equities would establish the
circumstances in which a Trading Center displaying
an order as riskless principal would be permitted
to Trade-at the Protected Quotation. Accordingly,
the Exchange proposes that proposed Rule
67(e)(4)(C)(ii)—Equities would exclude such
circumstances.
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06JNN1
Federal Register / Vol. 81, No. 108 / Monday, June 6, 2016 / Notices
sradovich on DSK3TPTVN1PROD with NOTICES
order was received, but only up to the
full displayed size of that independent
unit’s previously displayed quote; 35
(iii) The order is of Block Size 36 at the
time of origin and may not be:
A. An aggregation of non-block
orders;
B. broken into orders smaller than
Block Size prior to submitting the order
to a Trading Center for execution; or
C. executed on multiple Trading
Centers; 37
(iv) The order is a Retail Investor
Order executed with at least $0.005
price improvement;
(v) The order is executed when the
Trading Center displaying the Protected
Quotation that was traded at was
experiencing a failure, material delay, or
malfunction of its systems or
equipment;
(vi) The order is executed as part of
a transaction that was not a ‘‘regular
way’’ contract;
35 The display exceptions to Trade-at set forth in
proposed Rules 67(e)(4)(C)(i) and (ii)—Equities
would not permit a broker-dealer to trade on the
basis of interest it is not responsible for displaying.
In particular, a broker-dealer that matches orders in
the over-the-counter market shall be deemed to
have ‘‘executed’’ such orders as a Trading Center for
purposes of proposed Rule 67—Equities.
Accordingly, if a broker-dealer is not displaying a
quotation at a price equal to the Protected
Quotation, it could not submit matched trades to an
alternative trading center (‘‘ATS’’) that was
displaying on an agency basis the quotation of
another ATS subscriber. However, a broker-dealer
that is displaying, as principal, via either a
processor or an SRO Quotation Feed, a buy order
at the protected bid, could internalize a customer
sell order up to its displayed size. The display
exceptions would not permit a non-displayed
Trading Center to submit matched trades to an ATS
that was displaying on an agency basis the
quotation of another ATS subscriber and confirmed
[sic] that a broker-dealer would not be permitted to
trade on the basis of interest that it is not
responsible for displaying.
36 ‘‘Block Size’’ is defined in the Plan as an order
(1) of at least 5,000 shares or (2) for a quantity of
stock having a market value of at least $100,000.
37 Once a Block Size order or portion of such
Block Size order is routed from one Trading Center
to another Trading Center in compliance with Rule
611 of Regulation NMS, the Block Size order would
lose the Trade-at exemption provided under
proposed Rule 67(e)(4)(C)(iii)—Equities, unless the
Block Size remaining after the first route and
execution meets the Block Size definition under the
Plan (see footnote 35). For example, if an exchange
has a Protected Bid of 3,000 shares, with 2,000
shares in reserve, and receives a 5,000 share order
to sell, the exchange would be able to execute the
entire 5,000 share order without having to route to
an away market at any other Protected Bid at the
same price. If, however, that exchange only has
1,000 shares in reserve, the entire order would not
be able to be executed on that exchange, and the
exchange would only be able to execute 3,000
shares and route the rest to away markets at other
Protected Bids at the same price, before executing
the 1,000 shares in reserve. The same analysis
would hold true at the next price point, if the size
of the incoming order would exceed all available
shares at the first price, and the remaining shares
to be executed would be 5,000 shares or more.
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(vii) The order is executed as part of
a single-priced opening, reopening, or
closing transaction on the Exchange;
(viii) The order is executed when a
Protected Bid was priced higher than a
Protected Offer in the Pilot Security in
Test Group Three;
(ix) The order is identified as a Tradeat Intermarket Sweep Order; 38
(x) The order is executed by a Trading
Center that simultaneously routed
Trade-at Intermarket Sweep Orders to
execute against the full displayed size of
the Protected Quotation that was traded
at; 39
(xi) The order is executed as part of
a Negotiated Trade;
(xii) The order is executed when the
Trading Center displaying the Protected
Quotation that was traded at had
displayed, within one second prior to
execution of the transaction that
constituted the Trade-at, a Best
Protected Bid or Best Protected Offer, as
applicable, for the Pilot Security in Test
Group Three with a price that was
inferior to the price of the Trade-at
transaction;
(xiii) The order is executed by a
Trading Center which, at the time of
order receipt, the Trading Center had
guaranteed an execution at no worse
than a specified price (a ‘‘stopped
order’’), where:
A. The stopped order was for the
account of a customer;
B. The customer agreed to the
specified price on an order-by-order
basis; and
38 In connection with the definition of a Tradeat ISO proposed in Rule 67(a)(1)(D)—Equities, this
exception refers to the ISO that is received by a
Trading Center.
The Exchange proposed an exemption to the
Trade-at Prohibition for Trade-at ISOs to clarify that
an ISO that is received by a Trading Center (and
which could form the basis of an execution at the
price of a Protected Quotation pursuant to Section
VI(D)(8) of the Plan), is identified as a Trade-at ISO.
Depending on whether Rule 611 of Regulation NMS
or the Trade-at requirement applies, an ISO may
mean that the sender of the ISO has swept betterpriced Protected Quotations, so that the recipient of
that ISO may trade through the price of the
Protected Quotation (Rule 611 of Regulation NMS),
or it could mean that the sender of the ISO has
swept Protected Quotations at the same price that
it wishes to execute at (in addition to any betterpriced quotations), so the recipient of that ISO may
trade at the price of the Protected Quotation (Tradeat). Given that the meaning of an ISO may differ
under Rule 611 of Regulation NMS and Trade-at,
the Exchange proposed an exemption to the Tradeat Prohibition for Trade-at ISOs so that the recipient
of an ISO in a Test Group Three security would
know, upon receipt of that ISO, that the Trading
Center that sent the ISO had already executed
against the full size of displayed quotations at that
price, e.g., the recipient of that ISO could
permissibly trade at the price of the Protected
Quotation.
39 In connection with the definition of a Tradeat ISO proposed in Rule 67(a)(1)(D)—Equities, this
exception refers to the Trading Center that routed
the ISO.
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36371
C. The price of the Trade-at
transaction was, for a stopped buy
order, equal to or less than the National
Best Bid in the Pilot Security in Test
Group Three at the time of execution or,
for a stopped sell order, equal to or
greater than the National Best Offer in
the Pilot Security in Test Group Three
at the time of execution, as long as such
order is priced at an acceptable
increment; 40
(xiv) The order is for a fractional share
of a Pilot Security in Test Group Three,
provided that such fractional share
order was not the result of breaking an
order for one or more whole shares of
a Pilot Security in Test Group Three
into orders for fractional shares or was
not otherwise effected to evade the
requirements of the Trade-at Prohibition
or any other provisions of the Plan; or
(xv) The order is to correct a bona fide
error, which is recorded by the Trading
Center in its error account.41 A bond
fide error is defined as:
40 The stopped order exemption in Rule 611 of
Regulation NMS applies where ‘‘[t]he price of the
trade-through transaction was, for a stopped buy
order, lower than the national best bid in the NMS
stock at the time of execution or, for a stopped sell
order, higher than the national best offer in the
NMS stock at the time of execution’’ (see, 17 CFR
242.611(b)(9)). The Trade-at stopped order
exception applies where ‘‘the price of the Trade-at
transaction was, for a stopped buy order, equal to
the national best bid in the Pilot Security at the
time of execution or, for a stopped sell order, equal
to the national best offer in the Pilot Security at the
time of execution’’ (see, Plan, Section VI(D)(12)).
To illustrate the application of the stopped order
exemption as it currently operates under Rule 611
of Regulation NMS and as it is currently proposed
for Trade-at, assume the National Best Bid is $10.00
and another protected quote is at $9.95. Under Rule
611 of Regulation NMS, a stopped order to buy can
be filled at $9.95 and the firm does not have to send
an ISO to access the protected quote at $10.00 since
the price of the stopped order must be lower than
the National Best Bid. For the stopped order to also
be executed at $9.95 and satisfy the Trade-at
requirements, the Trade-at exception would have to
be revised to allow an order to execute at the price
of a protected quote which, in this case, could be
$9.95.
Based on the fact that a stopped order would be
treated differently under the Rule 611 of Regulation
NMS exception than under the Trade-at exception
in the Plan, the Exchange believes that it is
appropriate to amend the Trade-at stopped order
exception in the Plan to ensure that the application
of this exception would produce a consistent result
under both Regulation NMS and the Plan.
Therefore, the Exchange proposes in this proposed
Rule 67(e)(4)(C)(xiii)—Equities to allow a
transaction to satisfy the Trade-at requirement if the
stopped order price, for a stopped buy order, is
equal to or less than the National Best Bid, and for
a stopped sell order, is equal to or greater than the
National Best Offer, as long as such order is priced
at an acceptable increment. The Commission
granted New York Stock Exchange LLC an
exemption from Rule 608(c) related to this
provision. See, the Exemption Letter, supra note 25.
The Exchange is seeking the same exemptions as
requested in the Exemption Request Letters.
41 The exceptions to the Trade-at requirement set
forth in the Plan and in the Exchange’s proposed
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Continued
06JNN1
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sradovich on DSK3TPTVN1PROD with NOTICES
A. The inaccurate conveyance or
execution of any term of an order
including, but not limited to, price,
number of shares or other unit of
trading; identification of the security;
identification of the account for which
securities are purchased or sold; lost or
otherwise misplaced order tickets; short
sales that were instead sold long or vice
versa; or the execution of an order on
the wrong side of a market;
B. The unauthorized or unintended
purchase, sale, or allocation of
securities, or the failure to follow
specific client instructions;
C. The incorrect entry of data into
relevant systems, including reliance on
incorrect cash positions, withdrawals,
or securities positions reflected in an
account; or
D. A delay, outage, or failure of a
communication system used to transmit
market data prices or to facilitate the
delivery or execution of an order.
Finally, Proposed Rule 67(e)(4)(D)—
Equities would prevent member
organizations from breaking an order
Rule 67(e)(4)(C)—Equities are, in part, based on the
exceptions to the trade-through requirement set
forth in Rule 611 of Regulation NMS, including
exceptions for an order that is executed as part of
a transaction that was not a ‘‘regular way’’ contract,
and an order that is executed as part of a singlepriced opening, reopening, or closing transaction by
the Trading Center (see, 17 CFR 242.611(b)(2) and
(b)(3)). Following the adoption of Rule 611 of
Regulation NMS and its exceptions, the
Commission issued exemptive relief that created
exceptions from Rule 611 of Regulation NMS for
certain error correction transactions. See, Securities
Exchange Act Release No. 55884 (June 8, 2007), 72
FR 32926 (June 14, 2007); Securities Exchange Act
Release No. 55883 (June 8, 2007), 72 FR 32927 (June
14, 2007). The Exchange has determined that it is
appropriate to incorporate this additional exception
to the Trade-at Prohibition, as this exception is
equally applicable in the Trade-at context.
Accordingly, the Exchange is proposing to
exempt certain transactions to correct bona fide
errors in the execution of customer orders from the
Trade-at Prohibition, subject to the conditions set
forth by the SEC’s order exempting these
transactions from Rule 611 of Regulation NMS. The
Commission granted New York Stock Exchange LLC
an exemption from Rule 608(c) related to this
provision. See, the Exemption Letter, supra note 25.
The Exchange is seeking the same exemptions as
requested in the Exemption Request Letters.
As with the corresponding exception under Rule
611 of Regulation NMS, the bona fide error would
have to be evidenced by objective facts and
circumstances, the Trading Center would have to
maintain documentation of such facts and
circumstances and record the transaction in its error
account. To avail itself of the exemption, the
Trading Center would have to establish, maintain,
and enforce written policies and procedures
reasonably designed to address the occurrence of
errors and, in the event of an error, the use and
terms of a transaction to correct the error in
compliance with this exemption. Finally, the
Trading Center would have to regularly surveil to
ascertain the effectiveness of its policies and
procedures to address errors and transactions to
correct errors and take prompt action to remedy
deficiencies in such policies and procedures. See,
Securities Exchange Act Release No. 55884 (June 8,
2007), 72 FR 32926 (June 14, 2007).
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16:36 Jun 03, 2016
Jkt 238001
into smaller orders or otherwise
effecting or executing an order to evade
the requirements of the Trade-at
Prohibition or any other provisions of
the Plan.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,42 in general, and furthers the
objectives of Section 6(b)(5) of the Act,43
in particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, 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 is
consistent with the Act because it
ensures that the Exchange and its
member organizations would be in
compliance with a Plan approved by the
Commission pursuant to an order issued
by the Commission in reliance on
Section 11A of the Act.44 Such
approved Plan gives the Exchange
authority to establish, maintain, and
enforce written policies and procedures
that are reasonably designed to comply
with applicable quoting and trading
requirements specified in the Plan. The
Exchange believes that the proposed
rule change is consistent with the
authority granted to it by the Plan to
establish specifications and procedures
for the implementation and operation of
the Plan that are consistent with the
provisions of the Plan. Likewise, the
Exchange believes that the proposed
rule change provides interpretations of
the Plan that are consistent with the
Act, in general, and furthers the
objectives of the Act, in particular.
Furthermore, the Exchange is a
Participant under the Plan and subject,
itself, to the provisions of the Plan. The
proposed rule change ensures that the
Exchange’s systems would not display
or execute trading interests outside the
requirements specified in such Plan.
The proposal would also help allow
market participants to continue to trade
NMS Stocks within quoting and trading
requirements that are in compliance
with the Plan, with certainty on how
certain orders and trading interests
would be treated. This, in turn, will
help encourage market participants to
continue to provide liquidity in the
marketplace.
Because the Plan supports further
examination and analysis on the impact
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
44 15 U.S.C. 78k–1.
of tick sizes on the trading and liquidity
of the securities of small capitalization
companies, and the Commission
believes that altering tick sizes could
result in significant market-wide
benefits and improvements to liquidity
and capital formation, adopting rules
that enforce compliance by its member
organizations with the provisions of the
Plan would help promote liquidity in
the marketplace and perfect the
mechanism of a free and open market
and national market system.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed changes are being made to
establish, maintain, and enforce written
policies and procedures that are
reasonably designed to comply with the
trading and quoting requirements
specified in the Plan, of which other
equities exchanges are also Participants.
Other competing national securities
exchanges are subject to the same
trading and quoting requirements
specified in the Plan. Therefore, the
proposed changes would not impose
any burden on competition, while
providing certainty of treatment and
execution of trading interests on the
Exchange to market participants in NMS
Stocks that are acting in compliance
with the requirements specified in the
Plan.
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 45 and Rule
19b–4(f)(6) thereunder.46 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
42 15
43 15
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45 15
46 17
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E:\FR\FM\06JNN1.SGM
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
06JNN1
Federal Register / Vol. 81, No. 108 / Monday, June 6, 2016 / Notices
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) 47 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b4(f)(6)(iii),48 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) 49 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:
sradovich on DSK3TPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEMKT–2016–56 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEMKT–2016–56. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
47 17
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6)(iii).
49 15 U.S.C. 78s(b)(2)(B).
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–2016–56 and should be
submitted on or before June 27, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.50
Brent J. Fields,
Secretary.
[FR Doc. 2016–13209 Filed 6–3–16; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #14730 and #14731]
Oklahoma Disaster #OK–00103
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a notice of an
Administrative declaration of a disaster
for the State of Oklahoma dated 05/26/
2016.
Incident: Tornadoes, Severe Storms,
Flooding and Straight-line Winds.
Incident Period: 05/09/2016 through
05/13/2016.
Effective Date: 05/26/2016.
Physical Loan Application Deadline
Date: 07/25/2016.
Economic Injury (EIDL) Loan
Application Deadline Date: 02/27/2017.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW., Suite 6050,
Washington, DC 20416.
SUMMARY:
48 17
VerDate Sep<11>2014
19:13 Jun 03, 2016
50 17
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CFR 200.30–3(a)(12).
Frm 00120
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36373
Notice is
hereby given that as a result of the
Administrator’s disaster declaration,
applications for disaster loans may be
filed at the address listed above or other
locally announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Murray.
Contiguous Counties:
Oklahoma: Carter, Garvin, Johnston,
Pontotoc.
SUPPLEMENTARY INFORMATION:
The Interest Rates are:
Percent
For Physical Damage:
Homeowners With Credit Available Elsewhere ......................
Homeowners Without Credit
Available Elsewhere ..............
Businesses With Credit Available Elsewhere ......................
Businesses
Without
Credit
Available Elsewhere ..............
Non-Profit Organizations With
Credit Available Elsewhere ...
Non-Profit Organizations Without Credit Available Elsewhere .....................................
For Economic Injury
Businesses & Small Agricultural
Cooperatives Without Credit
Available Elsewhere ..............
Non-Profit Organizations Without Credit Available Elsewhere .....................................
3.250
1.625
6.250
4.000
2.625
2.625
4.000
2.625
The number assigned to this disaster
for physical damage is 14730 B and for
economic injury is 14731 0.
The State which received an EIDL
Declaration # is Oklahoma.
(Catalog of Federal Domestic Assistance
Number 59008)
Maria Contreras-Sweet,
Administrator.
[FR Doc. 2016–13174 Filed 6–3–16; 8:45 am]
BILLING CODE 8025–01–P
SOCIAL SECURITY ADMINISTRATION
[Docket No: SSA–2016–0025]
Agency Information Collection
Activities: Proposed Request and
Comment Request
The Social Security Administration
(SSA) publishes a list of information
collection packages requiring clearance
by the Office of Management and
Budget (OMB) in compliance with
Public Law 104–13, the Paperwork
Reduction Act of 1995, effective October
1, 1995. This notice includes revisions
of OMB-approved information
collections.
E:\FR\FM\06JNN1.SGM
06JNN1
]]>Agencies
[Federal Register Volume 81, Number 108 (Monday, June 6, 2016)]
[Notices]
[Pages 36367-36373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-13209]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77949; File No. SR-NYSEMKT-2016-56]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Implementing the
Quoting and Trading Provisions of the Plan To Implement a Tick Size
Pilot Program Submitted to the Commission Pursuant to Rule 608 of
Regulation NMS Under the Act
May 31, 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 May 20, 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.
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\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 implement the quoting and trading
provisions of the Plan to Implement a Tick Size Pilot Program submitted
to the Commission pursuant to Rule 608 of Regulation NMS \4\ under the
Act (the ``Plan''). The proposed rule change is substantially similar
to proposed rule changes recently approved or published by the
Commission by New York Stock Exchange LLC to adopt NYSE Rules 67(a) and
67(c)-(e), which also implemented the quoting and trading provisions of
the Plan.\5\ Therefore, the Exchange has designated this proposal as
``non-controversial'' and provided the Commission with the notice
required by Rule 19b-4(f)(6)(iii) under the Act.\6\ The proposed rule
change is available on the Exchange's Web site at www.nyse.com, at the
principal office of the Exchange,
[[Page 36368]]
and at the Commission's Public Reference Room.
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\4\ 17 CFR 242.608.
\5\ See, Securities Exchange Act Release No. 76229 (October 22,
2015), 80 FR 66065 (October 28, 2015) (SR-NYSE-2015-46), as amended
by Partial Amendments No. 1 and No. 2 to the Quoting & Trading Rules
Proposal. See, Securities Exchange Act Release No. 77703 (April 25,
2016), 81 FR 25725 (April 29, 2016) (SR-NYSE-2015-46).
\6\ 17 CFR 240.19b-4(f)(6)(iii).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
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 establish rules to require its member
organizations to comply with the requirements of the Plan to Implement
a Tick Size Pilot Program (the ``Plan''),\7\ which is designed to study
and assess the impact of increment conventions on the liquidity and
trading of the common stocks of small capitalization companies. The
Exchange proposes changes to its rules for a two-year pilot period that
coincides with the pilot period for the Plan, which is currently
scheduled as a two year pilot to begin on October 3, 2016.
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\7\ See Securities and Exchange Act Release No. 74892 (May 6,
2015), 80 FR 27513 (File No. 4-657) (``Tick Plan Approval Order'').
See, also, Securities and Exchange Act Release No. 76382 (November
6, 2015) (File No. 4-657), 80 FR 70284 (File No. 4-657) (November
13, 2015), which extended the pilot period commencement date from
May 6, 2015 to October 3, 2016.
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Background
On August 25, 2014, NYSE Group, Inc., on behalf of Bats BZX
Exchange, Inc. (f/k/a BATS Exchange, Inc.), Bats BYX Exchange, Inc. (f/
k/a BATS Y-Exchange, Inc.), Chicago Stock Exchange, Inc., EDGA
Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory
Authority, Inc. (``FINRA''), NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC,
the Nasdaq Stock Market LLC, New York Stock Exchange LLC, the Exchange
and NYSE Arca, Inc. (collectively ``Participants''), filed with the
Commission, pursuant to Section 11A of the Act \8\ and Rule 608 of
Regulation NMS thereunder, the Plan to Implement a Tick Size Pilot
Program.\9\ The Participants filed the Plan to comply with an order
issued by the Commission on June 24, 2014 (the ``June 2014
Order'').\10\ The Plan \11\ was published for comment in the Federal
Register on November 7, 2014,\12\ and approved by the Commission, as
modified, on May 6, 2015.\13\
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\8\ 15 U.S.C. 78k-1.
\9\ See Letter from Brendon J. Weiss, Vice President,
Intercontinental Exchange, Inc., to Secretary, Commission, dated
August 25, 2014.
\10\ See Securities Exchange Act Release No. 72460 (June 24,
2014), 79 FR 36840 (June 30, 2014).
\11\ Unless otherwise specified, capitalized terms used in this
rule filing are based on the defined terms of the Plan.
\12\ See Securities and Exchange Act Release No. 73511 (November
3, 2014), 79 FR 66423 (File No. 4-657) (Tick Plan Filing).
\13\ See Tick Plan Approval Order, supra note 7. See, also,
Securities Exchange Act Release No. 77277 (March 3, 2016), 81 FR
12162 (March 8, 2016) (File No. 4-657), which amended the Plan to
add National Stock Exchange, Inc. as a Participant.
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The Plan is designed to allow the Commission, market participants,
and the public to study and assess the impact of increment conventions
on the liquidity and trading of the common stocks of small
capitalization companies. The Commission plans to use the Tick Size
Pilot Program to assess whether wider tick sizes enhance the market
quality of Pilot Securities for the benefit of issuers and investors.
Each Participant is required to comply with, and to enforce compliance
by its member organizations, as applicable, with the provisions of the
Plan.
On October 9, 2015, the Operating Committee approved the Exchange's
proposed rules as model Participant rules that would require compliance
by a Participant's members with the provisions of the Plan, as
applicable, and would establish written policies and procedures
reasonably designed to comply with applicable quoting and trading
requirements specified in the Plan.\14\ As described more fully below,
the proposed rules would require member organizations to comply with
the Plan and provide for the widening of quoting and trading increments
for Pilot Securities, consistent with the Plan.
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\14\ The Operating Committee is required under Section III(C)(2)
of the Plan to ``monitor the procedures established pursuant to the
Plan and advise Participants with respect to any deficiencies,
problems, or recommendations as the Operating Committee may deem
appropriate.'' The Operating Committee is also required to
``establish specifications and procedures for the implementation and
operation of the Plan that are consistent with the provisions of the
Plan.''
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The Tick Size Pilot Program will include stocks of companies with
$3 billion or less in market capitalization, an average daily trading
volume of one million shares or less, and a volume weighted average
price of at least $2.00 for every trading day. The Tick Pilot Program
will consist of a control group of approximately 1400 Pilot Securities
and three test groups with 400 Pilot Securities in each selected by a
stratified sampling.\15\ During the pilot, Pilot Securities in the
control group will be quoted at the current tick size increment of
$0.01 per share and will trade at the currently permitted increments.
Pilot Securities in the first test group (``Test Group One'') will be
quoted in $0.05 minimum increments but will continue to trade at any
price increment that is currently permitted.\16\ Pilot Securities in
the second test group (``Test Group Two'') will be quoted in $0.05
minimum increments and will trade at $0.05 minimum increments subject
to a midpoint exception, a retail investor exception, and a negotiated
trade exception.\17\ Pilot Securities in the third test group (``Test
Group Three'') will be subject to the same terms as Test Group Two and
also will be subject to the ``Trade-at'' requirement to prevent price
matching by a person not displaying at a price of a Trading Center's
``Best Protected Bid or ``Best Protected Offer,'' unless an enumerated
exception applies.\18\ In addition to the exceptions provided under
Test Group Two, an exception for Block Size orders and exceptions that
closely resemble those under Rule 611 of Regulation NMS \19\ will apply
to the Trade-at requirement.
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\15\ See Section V of the Plan for identification of Pilot
Securities, including criteria for selection and grouping.
\16\ See Section VI(B) of the Plan. Pilot Securities in Test
Group One will be subject to a midpoint exception and a retail
investor exception.
\17\ See Section VI(C) of the Plan.
\18\ See Section VI(D) of the Plan.
\19\ 17 CFR 242.611.
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The Tick Pilot Program also contains requirements for the
collection and transmission of data to the Commission and the public. A
variety of data generated during the Tick Pilot Program will be
released publicly on an aggregated basis to assist in analyzing the
impact of wider tick sizes on smaller capitalization stocks.\20\
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\20\ See Section VII of the Plan.
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Proposed Rule 67--Equities
The Plan requires the Exchange to establish, maintain, and enforce
written policies and procedures that are reasonably designed to comply
with applicable quoting and trading requirements specified in the
Plan.\21\
[[Page 36369]]
Accordingly, the Exchange is proposing new Rule 67--Equities to require
its member organizations to comply with the quoting and trading
provisions of the Plan. The proposed Rule is also designed to ensure
the Exchange's compliance with the Plan.
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\21\ The Exchange was also required by the Plan to develop
appropriate policies and procedures that provide for data collection
and reporting to the Commission of data described in Appendixes B
and C of the Plan. See, Securities Exchange Act Release No. 77478
(March 30, 2016), 81 FR 19665 (April 5, 2016) (SR-NYSEMKT-2016-40.
---------------------------------------------------------------------------
Proposed paragraph (a)(1) of new Rule 67--Equities would establish
the following defined terms:
``Plan'' means the Tick Size Pilot Plan submitted to the
Commission pursuant to Rule 608(a)(3) of Regulation NMS under the Act;
``Pilot Test Groups'' means the three test groups
established under the Plan, consisting of 400 Pilot Securities each,
which satisfy the respective criteria established by the Plan for each
such test group.
``Retail Investor Order'' would mean an agency order or a
riskless principal order that meets the criteria of FINRA Rule 5320.03
that originates from a natural person and is submitted to the Exchange
by a retail member organization, provided that no change is made to the
terms of the order with respect to price or side of market and the
order does not originate from a trading algorithm or any other
computerized methodology. A Retail Investor Order may be an odd lot,
round lot, or partial round lot.\22\
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\22\ This definition is the approved definition for ``Retail
Investor Order'' as contemplated by the Plan. It is also the same
definition as given to ``Retail Orders'' pursuant to the approved
rules of other national securities exchanges. See Rule 107C(a)(3)--
Equities. See also NYSE Rule 107C(a)(3), NYSE Arca, Inc. Rule
7.44(a)(3), BATS Y-Exchange, Inc. Rule 11.24(a)(2) and NASDAQ Stock
Market LLC Rule 4780(a)(2). The Retail Investor Order definition
includes any order originating from a natural person and is not
limited to orders submitted to the Exchange under the Exchange's
retail liquidity program rule (Rule 107C--Equities). Therefore, any
member organization that operates a Trading Center may execute
against a Retail Investor Order otherwise than on an exchange to
satisfy the retail investor order exception proposed in Rule 67--
Equities.
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Trade-at Intermarket Sweep Order'' \23\ would mean a limit
order for a Pilot Security that meets the following requirements:
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\23\ The Plan defines a Trade-at Intermarket Sweep Order
(``ISO'') as a limit order for a Pilot Security that, when routed to
a Trading Center, is identified as an ISO, and simultaneous with the
routing of the limit order identified as an ISO, one or more
additional limit orders, as necessary, are routed to execute against
the full displayed size of any protected bid (in the case of a limit
order to sell) or the full displayed size of any protected offer (in
the case of a limit order to buy) for the Pilot Security with a
price that is equal to the limit price of the limit order identified
as an ISO. These additional routed orders also must be marked as
ISOs. See Plan, Section I(MM). Since the Plan allows (i) an order
that is identified as an ISO to be executed at the price of a
Protected Quotation (see, Plan, Section VI(D)(8) and proposed Rule
67(a)(e)(4)(C)(ix)--Equities) and (ii) an order to execute at the
price of a Protected Quotation that ``is executed by a trading
center that simultaneously routed Trade-at ISO to execute against
the full displayed size of the Protected Quotation that was trade
at'' (see, Plan, Section VI(D)(9) and proposed Rule
67(a)(e)(4)(C)(x)--Equities), the Exchange proposes to clarify the
use of an ISO in connection with the Trade-at requirement by
adopting, as part of proposed Rule 67(a)(1)--Equities, a
comprehensive definition of ``Trade-at ISO.'' As set forth in the
Plan and as noted above, the definition of a Trade-at ISO used in
the Plan does not distinguish ISOs that are compliant with Rule 611
or Regulation NMS from ISOs that are compliant with Trade-at. The
Exchange therefore proposes the separate definition of Trade-at ISO
contained in proposed Rule 67(a)--Equities. The Exchange believes
that this proposed definition will further clarify to recipients of
ISOs in Test Group Three securities whether the ISO satisfies the
requirements of Rule 611 of Regulation NMS or Trade-at.
---------------------------------------------------------------------------
(i) When routed to a Trading Center, the limit order is identified
as a Trade-at Intermarket Sweep Order; and
(ii) Simultaneously with the routing of the limit order identified
as a Trade-at Intermarket Sweep Order, one or more additional limit
orders, as necessary, are routed to execute against the full size of
any protected bid, in the case of a limit order to sell, or the full
displayed size of any protected offer, in the case of a limit order to
buy, for the Pilot Security with a price that is better than or equal
to the limit price of the limit order identified as a Trade-at
Intermarket Sweep Order. These additional routed orders also must be
marked as Trade-at Intermarket Sweep Orders.
Paragraph (a)(1)(E) would provide that all capitalized
terms not otherwise defined in this rule shall have the meanings set
forth in the Plan, Regulation NMS under the Act, or Exchange rules, as
applicable.
Proposed Paragraph (a)(2) would state that the Exchange is a
Participant in, and subject to the applicable requirements of, the
Plan; proposed Paragraph (a)(3) would require member organizations to
establish, maintain and enforce written policies and procedures that
are reasonably designed to comply with the applicable requirements of
the Plan, which would allow the Exchange to enforce compliance by its
member organizations with the provisions of the Plan, as required
pursuant to Section II(B) of the Plan.
In addition, Paragraph (a)(4) would provide that Exchange systems
would not display, quote or trade in violation of the applicable
quoting and trading requirements for a Pilot Security specified in the
Plan and this proposed rule, unless such quotation or transaction is
specifically exempted under the Plan.\24\
---------------------------------------------------------------------------
\24\ The Exchange is still evaluating its internal policies and
procedures to ensure compliance with the Plan, and plans to
separately propose rules that would address violations of the Plan.
---------------------------------------------------------------------------
The Exchange also proposes to add Rule 67(a)(5)--Equities to
provide for the treatment of Pilot Securities that drop below a $1.00
value during the Pilot Period.\25\ The Exchange proposes that if the
price of a Pilot Security drops below $1.00 during regular trading on
any given business day, such Pilot Security would continue to be
subject to the Plan and the requirements described below that
necessitate member organizations to comply with the specific quoting
and trading obligations for each respective Pilot Test Group under the
Plan, and would continue to trade in accordance with the proposed rules
below as if the price of the Pilot Security had not dropped below
$1.00. However, if the Closing Price of a Pilot Security on any given
business day is below $1.00, such Pilot Security would be moved out of
its respective Pilot Test Group into the control group (which consists
of Pilot Securities not placed into a Pilot Test Group), and may then
be quoted and traded at any price increment that is currently permitted
by Exchange rules for the remainder of the Pilot Period.
Notwithstanding anything contained herein to the contrary, the Exchange
proposes that, at all times during the Pilot Period, Pilot Securities
(whether in the control group or any Pilot Test Group) would continue
to be subject to the data collection rules, which are enumerated in
Rule 67(b)--Equities.
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\25\ New York Stock Exchange LLC, on behalf of the Participants,
submitted a letter to Commission requesting exemption from certain
provisions of the Plan related to quoting and trading. See letter
from Elizabeth K. King, NYSE, to Brent J. Fields, Secretary,
Commission, dated October 14, 2015 (the ``October Exemption
Request''). FINRA, also on behalf of the Plan Participants,
submitted a separate letter to Commission requesting additional
exemptions from certain provisions of the Plan related to quoting
and trading. See letter from Marcia E. Asquith, Senior Vice
President and Corporate Secretary, FINRA, to Robert W. Errett,
Deputy Secretary, Commission, dated February 23, 2016 (the
``February Exemption Request,'' and together with the October
Exemption Request, the ``Exemption Request Letters''). The
Commission, pursuant to its authority under Rule 608(e) of
Regulation NMS, granted New York Stock Exchange LLC a limited
exemption from the requirement to comply with certain provisions of
the Plan as specified in the Exemption Request Letters and noted
herein. See letter from David Shillman, Associate Director, Division
of Trading and Markets, Commission to Sherry Sandler, Associate
General Counsel, New York Stock Exchange LLC, dated April 25, 2016
(the ``Exemption Letter''). The Exchange is seeking the same
exemptions as requested in the Exemption Request Letters, including
without limitation, an exemption relating to proposed Rule
67(a)(5)--Equities.
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The Exchange proposes Rules 67(c)-(e)--Equities, which would
require member organizations to comply with the specific quoting and
trading
[[Page 36370]]
obligations for each Pilot Test Group under the Plan. With regard to
Pilot Securities in Test Group One, proposed Rule 67(c)--Equities would
provide that no member organization may display, rank, or accept from
any person any displayable or non-displayable bids or offers, orders,
or indications of interest in increments other than $0.05. However,
orders priced to trade at the midpoint of the National Best Bid and
National Best Offer (``NBBO'') or Best Protected Bid and Best Protect
Offer (``PBBO'') and orders entered in the Exchange's Retail Liquidity
Program as Retail Price Improvement Orders (``Retail Price Improvement
Order'') \26\ may be ranked and accepted in increments of less than
$0.05. Pilot Securities in Test Group One may continue to trade at any
price increment that is currently permitted by Rule 62.10--
Equities.\27\
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\26\ A Retail Price Improvement Order consists of non-displayed
interest in NYSE MKT-listed securities that is priced better than
the Best Protected Bid or Best Protected Offer, as such terms are
defined in Regulation NMS Rule 600(b)(57), by at least $0.001 and
that is identified as such. See Rule 107C(a)(4)--Equities.
\27\ Rule 62.10--Equities describes the minimum price variation
for quoting and entry of orders in equity securities admitted to
dealings on the Exchange.
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With regard to Pilot Securities in Test Group Two, proposed Rule
67(d)(1)--Equities would provide that such Pilot Securities would be
subject to all of the same quoting requirements as described above for
Pilot Securities in Test Group One, along with the applicable quoting
exceptions. In addition, proposed Rule 67(d)(2)--Equities would provide
that, absent one of the listed exceptions in proposed Rule 67(d)(3)--
Equities enumerated below, no member organization may execute orders in
any Pilot Security in Test Group Two in price increments other than
$0.05. The $0.05 trading increment would apply to all trades, including
Brokered Cross Trades.
Paragraph (d)(3) would set forth further requirements for Pilot
Securities in Test Group Two. Specifically, member organizations
trading Pilot Securities in Test Group Two would be allowed to trade in
increments less than $0.05 under the following circumstances:
(A) Trading may occur at the midpoint between the NBBO or PBBO;
(B) Retail Investor Orders may be provided with price improvement
that is at least $0.005 better than the Best Protected Bid or the Best
Protected Offer;
(C) Negotiated Trades may trade in increments less than $0.05; and
(D) Execution of a customer order to comply with Rule 5320--
Equities \28\ following the execution of a proprietary trade by the
member organization at an increment other than $0.05, where such
proprietary trade was permissible pursuant to an exception under the
Plan.\29\
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\28\ Rule 5320--Equities is the Exchange's Prohibition Against
Trading Ahead of Customer Orders rule and states:
(a) Except as provided herein, a member organization that
accepts and holds an order in an equity security from its own
customer or a customer of another broker-dealer without immediately
executing the order is prohibited from trading that security on the
same side of the market for its own account at a price that would
satisfy the customer order, unless it immediately thereafter
executes the customer order up to the size and at the same or better
price at which it traded for its own account.
(b) A member organization must have a written methodology in
place governing the execution and priority of all pending orders
that is consistent with the requirements of this Rule and NASD Rule
2320. A member organization also must ensure that this methodology
is consistently applied.
\29\ The Exchange proposes to add this exemption to permit
member organizations to fill a customer order in a Pilot Security at
a non-nickel increment to comply with Rule 5320--Equities under
limited circumstances. Specifically, the exception would allow the
execution of a customer order following a proprietary trade by the
member organization at an increment other than $0.05 in the same
security, on the same side and at the same price as (or within the
prescribed amount of) a customer order owed a fill pursuant to Rule
5320--Equities, where the triggering proprietary trade was
permissible pursuant to an exception under the Plan. The Commission
granted New York Stock Exchange LLC an exemption from Rule 608(c)
related to this provision. See, the Exemption Letter, supra note 25.
The Exchange is seeking the same exemptions as requested in the
Exemption Request Letters. The Exchange believes such an exception
best facilitates the ability of member organizations to continue to
protect customer orders while retaining the flexibility to engage in
proprietary trades that comply with an exception to the Plan.
---------------------------------------------------------------------------
Paragraph (e)(1)-(e)(3) would set forth the requirements for Pilot
Securities in Test Group Three. Member organizations quoting or trading
such Pilot Securities would be subject to all of the same quoting and
trading requirements as described above for Pilot Securities in Test
Group Two, including the quoting and trading exceptions applicable to
Test Group Two Pilot Securities. In addition, proposed Paragraph (e)(4)
would provide for an additional prohibition on Pilot Securities in Test
Group Three referred to as the ``Trade-at Prohibition.'' \30\ Paragraph
(e)(4)(B)--Equities would provide that, absent one of the listed
exceptions in proposed Rule 67(e)(4)(C)--Equities enumerated below, no
member organization may execute a sell order for a Pilot Security in
Test Group Three at the price of a Protected Bid or execute a buy order
for a Pilot Security in Test Group Three at the price of a Protected
Offer.
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\30\ Proposed Rule 67(e)(4)(A)--Equities would define the
``Trade-at Prohibition'' to mean the prohibition against executions
by a Trading Center of a sell order for a Pilot Security at the
price of a Protected Bid or the execution of a buy order for a Pilot
Security at the price of a Protected Offer during regular trading
hours.
---------------------------------------------------------------------------
Proposed Rule 67(e)(4)(C)--Equities would allow member
organizations to execute a sell order for a Pilot Security in Test
Group Three at the price of a Protected Bid or execute a buy order for
a Pilot Security in Test Group Three at the price of a Protected Offer
if any of the following circumstances exist:
(i) The order is executed as agent or riskless principal by an
independent trading unit, as defined under Rule 200(f) of Regulation
SHO,\31\ of a Trading Center within a member organization that has a
displayed quotation as agent or riskless principal, via either a
processor or an SRO Quotation Feed, at a price equal to the traded-at
Protected Quotation, that was displayed before the order was
received,\32\ but only up to the full displayed size of that
independent trading unit's previously displayed quote; \33\
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\31\ The Exchange is proposing that, for proposed Rules
67(e)(4)(C)(i) and (ii)--Equities, a Trading Center operated by a
broker-dealer would mean an independent trading unit, as defined
under Rule 200(f) of Regulation SHO, within such broker-dealer. See,
17 CFR 242.200.
Independent trading unit aggregation is available if traders in
an aggregation unit pursue only the particular trading objective(s)
or strategy(s) of that aggregation unit and do not coordinate that
strategy with any other aggregation unit. Therefore, a Trading
Center cannot rely on quotations displayed by that broker dealer
from a different independent trading unit. As an example, an agency
desk of a broker-dealer cannot rely on the quotation of a
proprietary desk in a separate independent trading unit at that same
broker-dealer.
\32\ The Exchange is proposing to adopt this limitation to
ensure that a Trading Center does not display a quotation after the
time of order receipt solely for the purpose of trading at the price
of a protected quotation without routing to that protected
quotation.
\33\ This proposed exception to Trade-at would allow a Trading
Center to execute an order at the Protected Quotation in the same
capacity in which it has displayed a quotation at a price equal to
the Protected Quotation and up to the displayed size of such
displayed quotation.
---------------------------------------------------------------------------
(ii) The order is executed by an independent trading unit, as
defined under Rule 200(f) of Regulation SHO, of a Trading Center within
a member organization that has a displayed quotation for the account of
that Trading Center on a principal (excluding riskless principal \34\)
basis, via either a processor or an SRO Quotation Feed, at a price
equal to the traded-at Protected Quotation, that was displayed before
the
[[Page 36371]]
order was received, but only up to the full displayed size of that
independent unit's previously displayed quote; \35\
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\34\ As described above, proposed Rule 67(e)(4)(C)(i)--Equities
would establish the circumstances in which a Trading Center
displaying an order as riskless principal would be permitted to
Trade-at the Protected Quotation. Accordingly, the Exchange proposes
that proposed Rule 67(e)(4)(C)(ii)--Equities would exclude such
circumstances.
\35\ The display exceptions to Trade-at set forth in proposed
Rules 67(e)(4)(C)(i) and (ii)--Equities would not permit a broker-
dealer to trade on the basis of interest it is not responsible for
displaying. In particular, a broker-dealer that matches orders in
the over-the-counter market shall be deemed to have ``executed''
such orders as a Trading Center for purposes of proposed Rule 67--
Equities. Accordingly, if a broker-dealer is not displaying a
quotation at a price equal to the Protected Quotation, it could not
submit matched trades to an alternative trading center (``ATS'')
that was displaying on an agency basis the quotation of another ATS
subscriber. However, a broker-dealer that is displaying, as
principal, via either a processor or an SRO Quotation Feed, a buy
order at the protected bid, could internalize a customer sell order
up to its displayed size. The display exceptions would not permit a
non-displayed Trading Center to submit matched trades to an ATS that
was displaying on an agency basis the quotation of another ATS
subscriber and confirmed [sic] that a broker-dealer would not be
permitted to trade on the basis of interest that it is not
responsible for displaying.
---------------------------------------------------------------------------
(iii) The order is of Block Size \36\ at the time of origin and may
not be:
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\36\ ``Block Size'' is defined in the Plan as an order (1) of at
least 5,000 shares or (2) for a quantity of stock having a market
value of at least $100,000.
---------------------------------------------------------------------------
A. An aggregation of non-block orders;
B. broken into orders smaller than Block Size prior to submitting
the order to a Trading Center for execution; or
C. executed on multiple Trading Centers; \37\
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\37\ Once a Block Size order or portion of such Block Size order
is routed from one Trading Center to another Trading Center in
compliance with Rule 611 of Regulation NMS, the Block Size order
would lose the Trade-at exemption provided under proposed Rule
67(e)(4)(C)(iii)--Equities, unless the Block Size remaining after
the first route and execution meets the Block Size definition under
the Plan (see footnote 35). For example, if an exchange has a
Protected Bid of 3,000 shares, with 2,000 shares in reserve, and
receives a 5,000 share order to sell, the exchange would be able to
execute the entire 5,000 share order without having to route to an
away market at any other Protected Bid at the same price. If,
however, that exchange only has 1,000 shares in reserve, the entire
order would not be able to be executed on that exchange, and the
exchange would only be able to execute 3,000 shares and route the
rest to away markets at other Protected Bids at the same price,
before executing the 1,000 shares in reserve. The same analysis
would hold true at the next price point, if the size of the incoming
order would exceed all available shares at the first price, and the
remaining shares to be executed would be 5,000 shares or more.
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(iv) The order is a Retail Investor Order executed with at least
$0.005 price improvement;
(v) The order is executed when the Trading Center displaying the
Protected Quotation that was traded at was experiencing a failure,
material delay, or malfunction of its systems or equipment;
(vi) The order is executed as part of a transaction that was not a
``regular way'' contract;
(vii) The order is executed as part of a single-priced opening,
reopening, or closing transaction on the Exchange;
(viii) The order is executed when a Protected Bid was priced higher
than a Protected Offer in the Pilot Security in Test Group Three;
(ix) The order is identified as a Trade-at Intermarket Sweep Order;
\38\
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\38\ In connection with the definition of a Trade-at ISO
proposed in Rule 67(a)(1)(D)--Equities, this exception refers to the
ISO that is received by a Trading Center.
The Exchange proposed an exemption to the Trade-at Prohibition
for Trade-at ISOs to clarify that an ISO that is received by a
Trading Center (and which could form the basis of an execution at
the price of a Protected Quotation pursuant to Section VI(D)(8) of
the Plan), is identified as a Trade-at ISO. Depending on whether
Rule 611 of Regulation NMS or the Trade-at requirement applies, an
ISO may mean that the sender of the ISO has swept better-priced
Protected Quotations, so that the recipient of that ISO may trade
through the price of the Protected Quotation (Rule 611 of Regulation
NMS), or it could mean that the sender of the ISO has swept
Protected Quotations at the same price that it wishes to execute at
(in addition to any better-priced quotations), so the recipient of
that ISO may trade at the price of the Protected Quotation (Trade-
at). Given that the meaning of an ISO may differ under Rule 611 of
Regulation NMS and Trade-at, the Exchange proposed an exemption to
the Trade-at Prohibition for Trade-at ISOs so that the recipient of
an ISO in a Test Group Three security would know, upon receipt of
that ISO, that the Trading Center that sent the ISO had already
executed against the full size of displayed quotations at that
price, e.g., the recipient of that ISO could permissibly trade at
the price of the Protected Quotation.
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(x) The order is executed by a Trading Center that simultaneously
routed Trade-at Intermarket Sweep Orders to execute against the full
displayed size of the Protected Quotation that was traded at; \39\
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\39\ In connection with the definition of a Trade-at ISO
proposed in Rule 67(a)(1)(D)--Equities, this exception refers to the
Trading Center that routed the ISO.
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(xi) The order is executed as part of a Negotiated Trade;
(xii) The order is executed when the Trading Center displaying the
Protected Quotation that was traded at had displayed, within one second
prior to execution of the transaction that constituted the Trade-at, a
Best Protected Bid or Best Protected Offer, as applicable, for the
Pilot Security in Test Group Three with a price that was inferior to
the price of the Trade-at transaction;
(xiii) The order is executed by a Trading Center which, at the time
of order receipt, the Trading Center had guaranteed an execution at no
worse than a specified price (a ``stopped order''), where:
A. The stopped order was for the account of a customer;
B. The customer agreed to the specified price on an order-by-order
basis; and
C. The price of the Trade-at transaction was, for a stopped buy
order, equal to or less than the National Best Bid in the Pilot
Security in Test Group Three at the time of execution or, for a stopped
sell order, equal to or greater than the National Best Offer in the
Pilot Security in Test Group Three at the time of execution, as long as
such order is priced at an acceptable increment; \40\
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\40\ The stopped order exemption in Rule 611 of Regulation NMS
applies where ``[t]he price of the trade-through transaction was,
for a stopped buy order, lower than the national best bid in the NMS
stock at the time of execution or, for a stopped sell order, higher
than the national best offer in the NMS stock at the time of
execution'' (see, 17 CFR 242.611(b)(9)). The Trade-at stopped order
exception applies where ``the price of the Trade-at transaction was,
for a stopped buy order, equal to the national best bid in the Pilot
Security at the time of execution or, for a stopped sell order,
equal to the national best offer in the Pilot Security at the time
of execution'' (see, Plan, Section VI(D)(12)).
To illustrate the application of the stopped order exemption as
it currently operates under Rule 611 of Regulation NMS and as it is
currently proposed for Trade-at, assume the National Best Bid is
$10.00 and another protected quote is at $9.95. Under Rule 611 of
Regulation NMS, a stopped order to buy can be filled at $9.95 and
the firm does not have to send an ISO to access the protected quote
at $10.00 since the price of the stopped order must be lower than
the National Best Bid. For the stopped order to also be executed at
$9.95 and satisfy the Trade-at requirements, the Trade-at exception
would have to be revised to allow an order to execute at the price
of a protected quote which, in this case, could be $9.95.
Based on the fact that a stopped order would be treated
differently under the Rule 611 of Regulation NMS exception than
under the Trade-at exception in the Plan, the Exchange believes that
it is appropriate to amend the Trade-at stopped order exception in
the Plan to ensure that the application of this exception would
produce a consistent result under both Regulation NMS and the Plan.
Therefore, the Exchange proposes in this proposed Rule
67(e)(4)(C)(xiii)--Equities to allow a transaction to satisfy the
Trade-at requirement if the stopped order price, for a stopped buy
order, is equal to or less than the National Best Bid, and for a
stopped sell order, is equal to or greater than the National Best
Offer, as long as such order is priced at an acceptable increment.
The Commission granted New York Stock Exchange LLC an exemption from
Rule 608(c) related to this provision. See, the Exemption Letter,
supra note 25. The Exchange is seeking the same exemptions as
requested in the Exemption Request Letters.
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(xiv) The order is for a fractional share of a Pilot Security in
Test Group Three, provided that such fractional share order was not the
result of breaking an order for one or more whole shares of a Pilot
Security in Test Group Three into orders for fractional shares or was
not otherwise effected to evade the requirements of the Trade-at
Prohibition or any other provisions of the Plan; or
(xv) The order is to correct a bona fide error, which is recorded
by the Trading Center in its error account.\41\ A bond fide error is
defined as:
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\41\ The exceptions to the Trade-at requirement set forth in the
Plan and in the Exchange's proposed Rule 67(e)(4)(C)--Equities are,
in part, based on the exceptions to the trade-through requirement
set forth in Rule 611 of Regulation NMS, including exceptions for an
order that is executed as part of a transaction that was not a
``regular way'' contract, and an order that is executed as part of a
single-priced opening, reopening, or closing transaction by the
Trading Center (see, 17 CFR 242.611(b)(2) and (b)(3)). Following the
adoption of Rule 611 of Regulation NMS and its exceptions, the
Commission issued exemptive relief that created exceptions from Rule
611 of Regulation NMS for certain error correction transactions.
See, Securities Exchange Act Release No. 55884 (June 8, 2007), 72 FR
32926 (June 14, 2007); Securities Exchange Act Release No. 55883
(June 8, 2007), 72 FR 32927 (June 14, 2007). The Exchange has
determined that it is appropriate to incorporate this additional
exception to the Trade-at Prohibition, as this exception is equally
applicable in the Trade-at context.
Accordingly, the Exchange is proposing to exempt certain
transactions to correct bona fide errors in the execution of
customer orders from the Trade-at Prohibition, subject to the
conditions set forth by the SEC's order exempting these transactions
from Rule 611 of Regulation NMS. The Commission granted New York
Stock Exchange LLC an exemption from Rule 608(c) related to this
provision. See, the Exemption Letter, supra note 25. The Exchange is
seeking the same exemptions as requested in the Exemption Request
Letters.
As with the corresponding exception under Rule 611 of Regulation
NMS, the bona fide error would have to be evidenced by objective
facts and circumstances, the Trading Center would have to maintain
documentation of such facts and circumstances and record the
transaction in its error account. To avail itself of the exemption,
the Trading Center would have to establish, maintain, and enforce
written policies and procedures reasonably designed to address the
occurrence of errors and, in the event of an error, the use and
terms of a transaction to correct the error in compliance with this
exemption. Finally, the Trading Center would have to regularly
surveil to ascertain the effectiveness of its policies and
procedures to address errors and transactions to correct errors and
take prompt action to remedy deficiencies in such policies and
procedures. See, Securities Exchange Act Release No. 55884 (June 8,
2007), 72 FR 32926 (June 14, 2007).
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[[Page 36372]]
A. The inaccurate conveyance or execution of any term of an order
including, but not limited to, price, number of shares or other unit of
trading; identification of the security; identification of the account
for which securities are purchased or sold; lost or otherwise misplaced
order tickets; short sales that were instead sold long or vice versa;
or the execution of an order on the wrong side of a market;
B. The unauthorized or unintended purchase, sale, or allocation of
securities, or the failure to follow specific client instructions;
C. The incorrect entry of data into relevant systems, including
reliance on incorrect cash positions, withdrawals, or securities
positions reflected in an account; or
D. A delay, outage, or failure of a communication system used to
transmit market data prices or to facilitate the delivery or execution
of an order.
Finally, Proposed Rule 67(e)(4)(D)--Equities would prevent member
organizations from breaking an order into smaller orders or otherwise
effecting or executing an order to evade the requirements of the Trade-
at Prohibition or any other provisions of the Plan.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\42\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\43\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, 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 is consistent with the
Act because it ensures that the Exchange and its member organizations
would be in compliance with a Plan approved by the Commission pursuant
to an order issued by the Commission in reliance on Section 11A of the
Act.\44\ Such approved Plan gives the Exchange authority to establish,
maintain, and enforce written policies and procedures that are
reasonably designed to comply with applicable quoting and trading
requirements specified in the Plan. The Exchange believes that the
proposed rule change is consistent with the authority granted to it by
the Plan to establish specifications and procedures for the
implementation and operation of the Plan that are consistent with the
provisions of the Plan. Likewise, the Exchange believes that the
proposed rule change provides interpretations of the Plan that are
consistent with the Act, in general, and furthers the objectives of the
Act, in particular.
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\42\ 15 U.S.C. 78f(b).
\43\ 15 U.S.C. 78f(b)(5).
\44\ 15 U.S.C. 78k-1.
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Furthermore, the Exchange is a Participant under the Plan and
subject, itself, to the provisions of the Plan. The proposed rule
change ensures that the Exchange's systems would not display or execute
trading interests outside the requirements specified in such Plan. The
proposal would also help allow market participants to continue to trade
NMS Stocks within quoting and trading requirements that are in
compliance with the Plan, with certainty on how certain orders and
trading interests would be treated. This, in turn, will help encourage
market participants to continue to provide liquidity in the
marketplace.
Because the Plan supports further examination and analysis on the
impact of tick sizes on the trading and liquidity of the securities of
small capitalization companies, and the Commission believes that
altering tick sizes could result in significant market-wide benefits
and improvements to liquidity and capital formation, adopting rules
that enforce compliance by its member organizations with the provisions
of the Plan would help promote liquidity in the marketplace and perfect
the mechanism of a free and open market and national market system.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed changes are
being made to establish, maintain, and enforce written policies and
procedures that are reasonably designed to comply with the trading and
quoting requirements specified in the Plan, of which other equities
exchanges are also Participants. Other competing national securities
exchanges are subject to the same trading and quoting requirements
specified in the Plan. Therefore, the proposed changes would not impose
any burden on competition, while providing certainty of treatment and
execution of trading interests on the Exchange to market participants
in NMS Stocks that are acting in compliance with the requirements
specified in the Plan.
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 \45\ and Rule 19b-4(f)(6) thereunder.\46\
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
[[Page 36373]]
proposed rule change has become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b-4(f)(6)(iii) thereunder.
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\45\ 15 U.S.C. 78s(b)(3)(A)(iii).
\46\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \47\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\48\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\47\ 17 CFR 240.19b-4(f)(6).
\48\ 17 CFR 240.19b-4(f)(6)(iii).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \49\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\49\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEMKT-2016-56 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2016-56. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of 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-2016-56 and should
be submitted on or before June 27, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\50\
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\50\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-13209 Filed 6-3-16; 8:45 am]
BILLING CODE 8011-01-P
