Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing of Proposed Rule Change To Adopt Limit Order Protection, 45320-45322 [2016-16485]
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Federal Register / Vol. 81, No. 134 / Wednesday, July 13, 2016 / Notices
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 members
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 either
solicited or received.
jstallworth on DSK7TPTVN1PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 42 and
subparagraph (f)(6) of Rule 19b–4
thereunder.43
42 15
U.S.C. 78s(b)(3)(a)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
43 17
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At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
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–
NASDAQ–2016–093 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2016–093. 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
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
PO 00000
Frm 00047
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Sfmt 4703
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–
NASDAQ–2016–093, and should be
submitted on or before August 3, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.44
Brent J. Fields,
Secretary.
[FR Doc. 2016–16493 Filed 7–12–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78244; File No. SR–BX–
2016–037)
Self-Regulatory Organizations;
NASDAQ BX, Inc.; Notice of Filing of
Proposed Rule Change To Adopt Limit
Order Protection
July 7, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 24,
2016, NASDAQ BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend BX
Rule 4757, entitled ‘‘Book Processing’’
to adopt a Limit Order Protection or
‘‘LOP’’ for members accessing the BX.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqbx.cchwallstreet.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
44 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 81, No. 134 / Wednesday, July 13, 2016 / Notices
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
jstallworth on DSK7TPTVN1PROD with NOTICES
1. Purpose
The Exchange proposes to adopt a
new mechanism to protect against
erroneous Limit Orders which are
entered into BX. Specifically, this new
feature addresses risks to market
participants of human error in entering
Limit Orders at unintended prices. LOP
would prevent certain Limit Orders
from executing or being placed on the
Order Book at prices outside pre-set
standard limits. The System would
reject those Limit Orders, rather than
executing them automatically. The
proposed LOP feature is similar to a risk
feature which exists today on BX 3 and
is available for Options Participants.
The Exchange proposes to adopt a
new feature, LOP for Limit Orders,
which would reject Limit Orders back to
the member when the order exceeds
certain defined logic. The Exchange
intends to apply LOP system wide. The
Exchange reserves the ability to
temporarily disable LOP for certain
securities in the event of extraordinary
market conditions in a certain symbol.4
Specifically, the LOP feature would
prevent certain Limit Orders at prices
outside of pre-set standard limits (‘‘LOP
Limit’’) from being accepted by the
System. LOP shall apply to all Quotes
and Orders, including any modified
Orders.5 LOP would not apply to Market
3 See BX Rules at Chapter VI, Section 6(c) and
Section 18.
4 For example, LOP may cause a greater number
of orders to be rejected in a very volatile market.
In the event that the Exchange were to disable LOP
in a particular symbol temporarily, the Exchange
would immediately notify market participants by
sending an alert via an Equities Trader Alert. The
Exchange would enable LOP in that symbol as soon
as is reasonably practicable and send an updated
alert notifying participants that LOP was enabled.
5 If an Order is modified, LOP will review the
order anew and, if LOP is triggered, such
modification will not take effect and the original
order will be rejected.
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Orders, Market Maker Peg Orders 6 or
Intermarket Sweep Orders (ISO).7 A
Market Maker Peg Order is a passive
order type which will not otherwise
remove liquidity from the Order Book.
This order type was designed to assist
Market Makers with meeting their
quoting obligations. Market Makers have
a diverse business model as compared
with other market participants.
Excluding the Market Maker Peg Order
from the LOP will assist Market Makers
in meeting their quoting obligations.
The Exchange believes that because
Market Makers have other risk
protections in place to prevent them
from quoting outside of their financial
means, the risk level for erroneous
trades is not the same as with other
market participants. Market Makers
have more sophisticated infrastructures
than other market participants and are
able to manage their risk, particularly
with quoting, utilizing other tools which
may not be available to other market
participants. An ISO is immediately
executable within BX against orders
against which they are marketable. The
ISO designation on an order presumes
that the market participant has satisfied
their obligation to all protected quotes
up to the limit of the ISO.
LOP would be operational each
trading day. LOP would not be
operational during trading halts and
pauses. Also, LOP would not apply in
the event that there is no established
LOP Reference Price.8 The LOP
Reference Price shall be the current
National Best Bid or Best Offer (NBBO),
the bid for sell orders and the offer for
buy orders.
The Exchange proposes to not accept
incoming Limit Orders that exceed the
6 A ‘‘Market Maker Peg Order’’ is an Order Type
designed to allow a Market Maker to maintain a
continuous two-sided quotation at a displayed price
that is compliant with the quotation requirements
for Market Makers set forth in Rule 4613(a)(2). The
displayed price of the Market Maker Peg Order is
set with reference to a ‘‘Reference Price’’ in order
to keep the displayed price of the Market Maker Peg
Order within a bounded price range. A Market
Maker Peg Order may be entered through RASH or
FIX only. A Market Maker Peg Order must be
entered with a limit price beyond which the Order
may not be priced. The Reference Price for a Market
Maker Peg Order to buy (sell) is the then-current
National Best Bid (National Best Offer), or if no
such National Best Bid or National Best Offer, the
most recent reported last-sale eligible trade from the
responsible single plan processor for that day, or if
none, the previous closing price of the security as
adjusted to reflect any corporate actions (e.g.,
dividends or stock splits) in the security. See BX
4702(b)(7).
7 An Intermarket Sweep or ISO Order, which is
an Order that is immediately executable within BX
against Orders against which they are marketable,
is not subject to LOP. See BX Rule 6951(g).
8 For example, if there is a one-sided quote or if
the LOP Reference Price is less than the greater of
10% or $0.50.
PO 00000
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45321
LOP Reference Threshold. Limit Orders
will not be accepted if the price of the
Limit Order is greater than the LOP
Reference Threshold for a buy Limit
Order. Limit Orders will not be accepted
if the price of the Limit Order is less
than the LOP Reference Threshold for a
sell Limit Order. The LOP Reference
Threshold for buy orders will be the
LOP Reference Price (offer) plus the
applicable percentage specified [sic] in
the LOP Limit. The LOP Reference
Threshold for sell orders will be the
LOP Reference Price (bid) minus the
applicable percentage specified [sic] in
the LOP Limit. The LOP Limit shall be
the greater of 10% of the LOP Reference
Price or $0.50 for all securities across all
trading sessions. The LOP Reference
Price shall be the current National Best
Bid or Best Offer (NBBO), the bid for
sell orders and the offer for buy orders.
The Exchange also notes that LOP
will be applicable on all protocols.9 The
LOP feature will be mandatory for all
BX members. The Exchange proposes to
implement this rule within ninety (90)
days of the approval of this proposed
rule change. The Exchange will issue an
Equities Trader Alert in advance to
inform market participants of such
implementation date.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 10 in general, and furthers the
objectives of Section 6(b)(5) of the Act 11
in particular, in that it is designed 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, by
mitigating risks to market participants of
human error in entering Limit Orders at
clearly unintended prices. The
proposals are appropriate and
reasonable, because they offer
protections for Limit Orders which
should encourage price continuity and,
in turn, protect investors and the public
interest by reducing executions
occurring at dislocated prices.
The proposed LOP feature would
assist with the maintenance of fair and
orderly markets by mitigating the risks
associated with errors resulting in
executions at prices that are away from
the Best Bid or Offer and potentially
erroneous. Further the proposal protects
investors from potentially receiving
9 BX maintains several communications protocols
for members to use in entering Orders and sending
other messages to BX, such as: OUCH, RASH, FLITE
and FIX.
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(5).
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45322
Federal Register / Vol. 81, No. 134 / Wednesday, July 13, 2016 / Notices
executions away from the prevailing
prices at any given time. The Exchange
proposes LOP to avoid a series of
improperly priced aggressive orders
transacting in the Order Book. The LOP
Limit is appropriate because it seeks to
capture improperly priced Limit Orders
and reject them to reduce the risk of,
and to potentially prevent, the
automatic execution of Orders at prices
that may be considered clearly
erroneous. The System will only
execute Limit Orders priced within the
LOP Limit. The proposed limit of
greater than 10% or $0.50 is a
reasonable measure to ensure prices
remain within the reasonable limits.
This protection will bolster the normal
resilience and market behavior that
persistently produces robust reference
prices. This feature should create a level
of protection that prevents the Limit
Orders from entering the Order Book
outside of an acceptable range for the
Limit Order to execute.
The LOP will reduce the negative
impacts of sudden, unanticipated
volatility, and serve to preserve an
orderly market in a transparent and
uniform manner, increase overall
market confidence, and promote fair
and orderly markets and the protection
of investors. This feature is not optional
and is applicable to all members
submitting Limit Orders.
jstallworth on DSK7TPTVN1PROD with NOTICES
4. Self-Regulatory Organization’s
Statement on Burden on Competition
[sic]
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The LOP
feature will provide market participants
with additional price protection from
anomalous executions. This feature is
not optional and is applicable to all
members submitting Limit Orders.
Thus, the Exchange does not believe the
proposal creates any significant impact
on competition. This type of risk
protection is in place today for BX
Options Participants.12 Offering this
protection to the BX Market Center will
not impose any undue burden on intramarket competition, rather, it would
permit equities and options members to
be protected in a similar manner from
erroneous executions. [sic]
necessary or appropriate in furtherance
of the purposes of the Act. The LOP
feature will provide market participants
with additional price protection from
anomalous executions. This feature is
not optional and is applicable to all
members submitting Limit Orders.
Thus, the Exchange does not believe the
proposal creates any significant impact
on competition. This type of risk
protection is in place today for BX
Options Participants.13 Offering this
protection to the BX Market Center will
not impose any undue burden on intramarket competition, rather, it would
permit equities and options members to
be protected in a similar manner from
erroneous executions.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be 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:
All submissions should refer to File
Number SR–BX–2016–037. 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–BX–
2016–037 and should be submitted on
or before August 3, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Brent J. Fields,
Secretary.
[FR Doc. 2016–16485 Filed 7–12–16; 8:45 am]
BILLING CODE 8011–01–P
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–
BX–2016–037 on the subject line.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
Paper Comments
12 See BX Rules at Chapter VI, Section 6(c) and
Section 18.
13 See BX Rules at Chapter VI, Section 6(c) and
Section 18.
VerDate Sep<11>2014
15:08 Jul 12, 2016
Jkt 238001
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
PO 00000
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CFR 200.30–3(a)(12).
13JYN1
]]>Agencies
[Federal Register Volume 81, Number 134 (Wednesday, July 13, 2016)]
[Notices]
[Pages 45320-45322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16485]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78244; File No. SR-BX-2016-037)
Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing
of Proposed Rule Change To Adopt Limit Order Protection
July 7, 2016.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 24, 2016, NASDAQ BX, Inc. (``BX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend BX Rule 4757, entitled ``Book
Processing'' to adopt a Limit Order Protection or ``LOP'' for members
accessing the BX.
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqbx.cchwallstreet.com, at the principal office
of the Exchange, and at the Commission's Public Reference Room.
[[Page 45321]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to adopt a new mechanism to protect against
erroneous Limit Orders which are entered into BX. Specifically, this
new feature addresses risks to market participants of human error in
entering Limit Orders at unintended prices. LOP would prevent certain
Limit Orders from executing or being placed on the Order Book at prices
outside pre-set standard limits. The System would reject those Limit
Orders, rather than executing them automatically. The proposed LOP
feature is similar to a risk feature which exists today on BX \3\ and
is available for Options Participants.
---------------------------------------------------------------------------
\3\ See BX Rules at Chapter VI, Section 6(c) and Section 18.
---------------------------------------------------------------------------
The Exchange proposes to adopt a new feature, LOP for Limit Orders,
which would reject Limit Orders back to the member when the order
exceeds certain defined logic. The Exchange intends to apply LOP system
wide. The Exchange reserves the ability to temporarily disable LOP for
certain securities in the event of extraordinary market conditions in a
certain symbol.\4\ Specifically, the LOP feature would prevent certain
Limit Orders at prices outside of pre-set standard limits (``LOP
Limit'') from being accepted by the System. LOP shall apply to all
Quotes and Orders, including any modified Orders.\5\ LOP would not
apply to Market Orders, Market Maker Peg Orders \6\ or Intermarket
Sweep Orders (ISO).\7\ A Market Maker Peg Order is a passive order type
which will not otherwise remove liquidity from the Order Book. This
order type was designed to assist Market Makers with meeting their
quoting obligations. Market Makers have a diverse business model as
compared with other market participants. Excluding the Market Maker Peg
Order from the LOP will assist Market Makers in meeting their quoting
obligations. The Exchange believes that because Market Makers have
other risk protections in place to prevent them from quoting outside of
their financial means, the risk level for erroneous trades is not the
same as with other market participants. Market Makers have more
sophisticated infrastructures than other market participants and are
able to manage their risk, particularly with quoting, utilizing other
tools which may not be available to other market participants. An ISO
is immediately executable within BX against orders against which they
are marketable. The ISO designation on an order presumes that the
market participant has satisfied their obligation to all protected
quotes up to the limit of the ISO.
---------------------------------------------------------------------------
\4\ For example, LOP may cause a greater number of orders to be
rejected in a very volatile market. In the event that the Exchange
were to disable LOP in a particular symbol temporarily, the Exchange
would immediately notify market participants by sending an alert via
an Equities Trader Alert. The Exchange would enable LOP in that
symbol as soon as is reasonably practicable and send an updated
alert notifying participants that LOP was enabled.
\5\ If an Order is modified, LOP will review the order anew and,
if LOP is triggered, such modification will not take effect and the
original order will be rejected.
\6\ A ``Market Maker Peg Order'' is an Order Type designed to
allow a Market Maker to maintain a continuous two-sided quotation at
a displayed price that is compliant with the quotation requirements
for Market Makers set forth in Rule 4613(a)(2). The displayed price
of the Market Maker Peg Order is set with reference to a ``Reference
Price'' in order to keep the displayed price of the Market Maker Peg
Order within a bounded price range. A Market Maker Peg Order may be
entered through RASH or FIX only. A Market Maker Peg Order must be
entered with a limit price beyond which the Order may not be priced.
The Reference Price for a Market Maker Peg Order to buy (sell) is
the then-current National Best Bid (National Best Offer), or if no
such National Best Bid or National Best Offer, the most recent
reported last-sale eligible trade from the responsible single plan
processor for that day, or if none, the previous closing price of
the security as adjusted to reflect any corporate actions (e.g.,
dividends or stock splits) in the security. See BX 4702(b)(7).
\7\ An Intermarket Sweep or ISO Order, which is an Order that is
immediately executable within BX against Orders against which they
are marketable, is not subject to LOP. See BX Rule 6951(g).
---------------------------------------------------------------------------
LOP would be operational each trading day. LOP would not be
operational during trading halts and pauses. Also, LOP would not apply
in the event that there is no established LOP Reference Price.\8\ The
LOP Reference Price shall be the current National Best Bid or Best
Offer (NBBO), the bid for sell orders and the offer for buy orders.
---------------------------------------------------------------------------
\8\ For example, if there is a one-sided quote or if the LOP
Reference Price is less than the greater of 10% or $0.50.
---------------------------------------------------------------------------
The Exchange proposes to not accept incoming Limit Orders that
exceed the LOP Reference Threshold. Limit Orders will not be accepted
if the price of the Limit Order is greater than the LOP Reference
Threshold for a buy Limit Order. Limit Orders will not be accepted if
the price of the Limit Order is less than the LOP Reference Threshold
for a sell Limit Order. The LOP Reference Threshold for buy orders will
be the LOP Reference Price (offer) plus the applicable percentage
specified [sic] in the LOP Limit. The LOP Reference Threshold for sell
orders will be the LOP Reference Price (bid) minus the applicable
percentage specified [sic] in the LOP Limit. The LOP Limit shall be the
greater of 10% of the LOP Reference Price or $0.50 for all securities
across all trading sessions. The LOP Reference Price shall be the
current National Best Bid or Best Offer (NBBO), the bid for sell orders
and the offer for buy orders.
The Exchange also notes that LOP will be applicable on all
protocols.\9\ The LOP feature will be mandatory for all BX members. The
Exchange proposes to implement this rule within ninety (90) days of the
approval of this proposed rule change. The Exchange will issue an
Equities Trader Alert in advance to inform market participants of such
implementation date.
---------------------------------------------------------------------------
\9\ BX maintains several communications protocols for members to
use in entering Orders and sending other messages to BX, such as:
OUCH, RASH, FLITE and FIX.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \10\ in general, and furthers the objectives of Section
6(b)(5) of the Act \11\ in particular, in that it is designed 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, by mitigating risks to market participants of human error in
entering Limit Orders at clearly unintended prices. The proposals are
appropriate and reasonable, because they offer protections for Limit
Orders which should encourage price continuity and, in turn, protect
investors and the public interest by reducing executions occurring at
dislocated prices.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The proposed LOP feature would assist with the maintenance of fair
and orderly markets by mitigating the risks associated with errors
resulting in executions at prices that are away from the Best Bid or
Offer and potentially erroneous. Further the proposal protects
investors from potentially receiving
[[Page 45322]]
executions away from the prevailing prices at any given time. The
Exchange proposes LOP to avoid a series of improperly priced aggressive
orders transacting in the Order Book. The LOP Limit is appropriate
because it seeks to capture improperly priced Limit Orders and reject
them to reduce the risk of, and to potentially prevent, the automatic
execution of Orders at prices that may be considered clearly erroneous.
The System will only execute Limit Orders priced within the LOP Limit.
The proposed limit of greater than 10% or $0.50 is a reasonable measure
to ensure prices remain within the reasonable limits. This protection
will bolster the normal resilience and market behavior that
persistently produces robust reference prices. This feature should
create a level of protection that prevents the Limit Orders from
entering the Order Book outside of an acceptable range for the Limit
Order to execute.
The LOP will reduce the negative impacts of sudden, unanticipated
volatility, and serve to preserve an orderly market in a transparent
and uniform manner, increase overall market confidence, and promote
fair and orderly markets and the protection of investors. This feature
is not optional and is applicable to all members submitting Limit
Orders.
4. Self-Regulatory Organization's Statement on Burden on Competition
[sic]
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The LOP feature will provide
market participants with additional price protection from anomalous
executions. This feature is not optional and is applicable to all
members submitting Limit Orders. Thus, the Exchange does not believe
the proposal creates any significant impact on competition. This type
of risk protection is in place today for BX Options Participants.\12\
Offering this protection to the BX Market Center will not impose any
undue burden on intra-market competition, rather, it would permit
equities and options members to be protected in a similar manner from
erroneous executions. [sic]
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\12\ See BX Rules at Chapter VI, Section 6(c) and Section 18.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The LOP feature will provide
market participants with additional price protection from anomalous
executions. This feature is not optional and is applicable to all
members submitting Limit Orders. Thus, the Exchange does not believe
the proposal creates any significant impact on competition. This type
of risk protection is in place today for BX Options Participants.\13\
Offering this protection to the BX Market Center will not impose any
undue burden on intra-market competition, rather, it would permit
equities and options members to be protected in a similar manner from
erroneous executions.
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\13\ See BX Rules at Chapter VI, Section 6(c) and Section 18.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BX-2016-037 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2016-037. 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-BX-2016-037 and should be
submitted on or before August 3, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-16485 Filed 7-12-16; 8:45 am]
BILLING CODE 8011-01-P
