Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 1.1 To Establish an Official Closing Price for Exchange-Listed Securities if the Exchange Is Unable To Conduct a Closing Auction, 48477-48482 [2016-17444]

Download as PDF Federal Register / Vol. 81, No. 142 / Monday, July 25, 2016 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.10 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: mstockstill on DSK3G9T082PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2016–096 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–2016–096. 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 (http://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 10 15 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– NASDAQ–2016–096, and should be submitted on or before August 15, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–17447 Filed 7–22–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78357; File No. SR– NYSEArca–2016–94] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 1.1 To Establish an Official Closing Price for ExchangeListed Securities if the Exchange Is Unable To Conduct a Closing Auction July 19, 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 July 6, 2016, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. U.S.C. 78s(b)(3)(A)(ii). VerDate Sep<11>2014 18:27 Jul 22, 2016 Jkt 238001 PO 00000 11 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 Frm 00103 Fmt 4703 Sfmt 4703 48477 I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to amend NYSE Arca Equities Rule 1.1(ggP) to establish an Official Closing Price for Exchange-listed securities if the Exchange is unable to conduct a Closing Auction. The proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to amend its rules to specify back-up procedures for determining an Official Closing Price for Exchange-listed securities if it is unable to conduct a Closing Auction in one or more securities due to a systems or technical issue.4 Specifically, the Exchange proposes to amend NYSE Arca Equities Rule 1.1(ggP) (‘‘Rule 1.1(ggP)’’) to establish an Official Closing Price for Exchange-listed securities if the Exchange is impaired. The proposed changes are based on approved rules of the New York Stock Exchange, LLC (‘‘NYSE’’) and NYSE MKT LLC (‘‘NYSE MKT’’).5 Those markets, together with the Exchange and the NASDAQ Stock Market LLC (‘‘Nasdaq’’), developed the back-up procedures after taking into consideration feedback from discussions with industry participants, including 4 See New York Stock Exchange press release dated July 22, 2015, available here: http:// ir.theice.com/press-and-publications/pressreleases/all-categories/2015/07-22-2015.aspx. 5 See Securities Exchange Act Release No. 78015 (June 8, 2016), 81 FR 38747 (June 14, 2016) (SR– NYSE–2016–18) and (SR–NYSEMKT–2016–31) (‘‘OCP Approval Order’’). E:\FR\FM\25JYN1.SGM 25JYN1 48478 Federal Register / Vol. 81, No. 142 / Monday, July 25, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES meeting the following key goals important to market participants: • Providing a pre-determined, consistent solution that would result in a closing print to the applicable securities information processor (‘‘SIP’’) within a reasonable time frame from the normal closing time; • Minimizing the need for industry participants to modify their processing of data from the SIPs; and • Providing advance notification of the applicable closing contingency plan to provide sufficient time for industry participants to route any closing interest to an alternate venue to participate in that venue’s closing auction. The Exchange also proposes to amend Rule 1.1(ggP) to specify that, for a UTP Security,6 the Exchange would use the official closing price as disseminated by the primary listing exchange to determine the Trading Collar 7 for such security if there is no consolidated last sale price on the same trading day, or the Auction Reference Price 8 for such security. Background Current Rule 1.1(ggP) describes how the Exchange establishes the ‘‘Official Closing Price,’’ which is the reference price to determine the closing price in a security for purposes of Rule 7 Equities Trading. Rule 1.1(ggP) provides that the Official Closing Price is determined as follows: • As provided for in Rule 1.1(ggP)(1), for securities listed on the Exchange, the Official Closing Price is the price established in a Closing Auction of one round lot or more on a trading day. If there is no Closing Auction or if a Closing Auction trade is less than a round lot on a trading day, the Official Closing Price is the most recent consolidated last sale eligible trade during Core Trading Hours on that trading day. If there were no consolidated last sale eligible trades during Core Trading Hours on that trading day, the Official Closing Price will be the prior trading day’s Official Closing Price. • As provided for in Rule 1.1(ggP)(2), for securities listed on an exchange other than the Exchange, the Official Closing Price is the official closing price disseminated by the primary listing market for that security via a public data feed on a trading day. If the primary listing market does not disseminate an 6 As defined in NYSE Arca Equities Rule 1.1(ii), the term ‘‘UTP Security’’ means a security that is listed on a national securities exchange other than the Exchange and that trades on the NYSE Arca Marketplace pursuant to unlisted trading privileges. 7 See NYSE Arca Equities Rule 7.31P(a)(1)(B)(i). 8 See NYSE Arca Equities Rule 7.35P(a)(8)(A). VerDate Sep<11>2014 18:27 Jul 22, 2016 Jkt 238001 official closing price on a trading day, the Official Closing Price is the most recent consolidated last sale eligible trade during Core Trading Hours on that trading day. If there were no consolidated last sale eligible trades during Core Trading Hours on that trading day, the Official Closing Price will be the prior trading day’s Official Closing Price. The rule further provides that an Official Closing Price may be adjusted to reflect corporate actions or a correction to a closing price, as disseminated by the primary listing market for the security. In Rule 7, the Exchange uses the Official Closing Price for three purposes: (1) To determine the Auction Reference Price for a security, as provided for in Rule 7.35P(a)(8)(A); (2) to determine the Trading Collar for a security if there is no consolidated last sale price on the same trading day, as provided for in Rule 7.31P(a)(1)(B)(i); and (3) for securities listed on the Exchange only, for purposes of determining whether to trigger a Short Sale Price Test, as defined under Rule 7.16P(f)(2).9 Proposed Amendments The Exchange proposes to amend Rule 1.1(ggP) to establish how the Exchange would determine an Official Closing Price if the Exchange is unable to conduct a Closing Auction in an NYSE Arca–listed security or securities due to a systems or technical issue. To reflect this change, the Exchange proposes to add new rule text as proposed Rules 1.1(ggP)(2)–(4) and renumber current Rule 1.1(ggP)(2) as proposed Rule 1.1ggP(5), as described in greater detail below. Proposed Rules 1.1(ggP)(2)–(4) are based on NYSE Rules 123C(1)(e)(ii)–(iv) and NYSE MKT Rules 123C(1)(e)(ii)– (iv)—Equities with non-substantive differences to use NYSE Arca Equities terminology instead of NYSE terminology, as follows: ‘‘Corporation’’ or ‘‘NYSE Arca Marketplace’’ instead of ‘‘Exchange,’’ ‘‘Closing Auction’’ instead of ‘‘closing transaction,’’ ‘‘Core Trading Hours’’ instead of ‘‘regular trading hours,’’ and ‘‘ETP Holder’’ instead of ‘‘member organization.’’ 10 In addition, 9 The Exchange disseminates to the SIP the Official Closing Price as an ‘‘M’’ value. For a description of all sale conditions that are reportable to the SIP for Exchange-listed securities, including the ‘‘M’’ value, see the Consolidated Tape System Participant Communications Interface Specification, dated November 16, 2015, at 86, available here: https://www.ctaplan.com/ publicdocs/ctaplan/notifications/trader-update/cts_ input_spec.pdf. 10 See NYSE Arca Equities Rules 1.1(k) (defining the term ‘‘Corporation’’); 1.1(e) (defining the term ‘‘NYSE Arca Marketplace’’); 7.35P(d) (defining the PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 as under the NYSE and NYSE MKT rules, the Exchange proposes that the back-up procedures specified in proposed Rules 1.1(ggP)(2)–(4) would be applicable to Exchange-listed securities only. As proposed, Rule 1.1(ggP)(2) would provide that if the Exchange determines at or before 3:00 p.m. Eastern Time that it is unable to conduct a Closing Auction in one or more NYSE Arcalisted securities due to a systems or technical issue, the Exchange would designate an alternate exchange for such security or securities. The Exchange would publicly announce the exchange designated as the alternate exchange via Trader Update. In such case, the Official Closing Price of each security would be determined on the following hierarchy: • Proposed Rule 1.1(ggP)(2)(A) would provide that the Official Closing Price would be the official closing price for such security under the rules of the designated alternate exchange. For example, if the Exchange designates Nasdaq as the alternate exchange, the Official Closing Price would be based on Nasdaq Rule 4754, which defines how Nasdaq establishes an official closing price. The proposed 3:00 p.m. cut off time was selected in part based on discussions with market participants regarding their capability to re-direct closing-only interest in Exchange-listed securities in time to participate in the closing auction of an alternate venue. By designating an alternate exchange before 3:00 p.m. Eastern Time, the Exchange believes that market participants would be more likely to have sufficient notice to direct any closing-only interest in Exchange-listed securities to the designated alternate exchange. By providing market participants sufficient time, when possible, to route closingonly interest to an alternate venue for participation in that exchange’s closing auction process, that alternate exchange’s closing auction would be more likely to result in a closing price that reflects market value for such security. If there were insufficient interest for a closing auction on the designated alternate exchange, the Exchange believes that the rules of Nasdaq provide for an appropriate hierarchy of which price to use to determine the Official Closing Price. • Proposed Rule 1.1(ggP)(2)(B) would provide if the designated alternate exchange does not have an official closing price in a security, the Official term ‘‘Closing Auction’’); 1.1(j) (defining the term ‘‘Core Trading Hours’’); and 1.1(n) (defining the term ‘‘ETP Holder’’). E:\FR\FM\25JYN1.SGM 25JYN1 mstockstill on DSK3G9T082PROD with NOTICES Federal Register / Vol. 81, No. 142 / Monday, July 25, 2016 / Notices Closing Price would be the volumeweighted average price (‘‘VWAP’’) of the consolidated last-sale eligible prices of the last five minutes of trading during Core Trading Hours up to the time that the VWAP is processed. The VWAP would include any closing transactions on an exchange and would take into account any trade breaks or corrections up to the time the VWAP is processed. Because the VWAP would include any last-sale eligible trades, busts, or corrections that were reported up to the time that the SIP calculates the VWAP, the Exchange believes that the VWAP price would reflect any pricing adjustments that may be reported after 4:00 p.m. ET. As discussed above, the manner by which exchanges calculate their respective official closing prices provide for an official closing price in the absence of a closing transaction. Accordingly, the Exchange believes that in circumstances when the Exchange designates an alternate exchange, the VWAP calculation would rarely be used to determine the Official Closing Price for an Exchange-listed security. • Proposed Rule 1.1(ggP)(2)(C) would provide that if the designated alternate exchange does not have an official closing price in a security and there were no consolidated last-sale eligible trades in the last five minutes of trading during Core Trading Hours in such security, the Official Closing Price would be the last consolidated last-sale eligible trade during Core Trading Hours on that trading day. • Proposed Rule 1.1(ggP)(2)(D) would provide that if the designated alternate exchange does not have an official closing price in a security and there were no consolidated last-sale eligible trades in a security on a trading day in such security, the Official Closing Price would be the prior day’s Official Closing Price. • Finally, proposed [sic] 1.1(ggP)(2)(E) would provide that if an Official Closing Price for a security cannot be determined under (A), (B), or (C) of proposed Rule 1.1(ggP)(2) and there is no prior day’s Official Closing Price, the Exchange would not publish an Official Closing Price for such security. The Exchange would use the hierarchy set forth in proposed Rule 1.1(ggP)(2)(B)–(E) only if the designated alternate exchange did not disseminate an official closing price in a security. In addition, the Exchange proposes to add as paragraph (E) of Rule 1.1(ggP)(2) what would happen if there were no Official Closing Price published on the prior trading day (i.e., the Exchange would not publish an Official Closing Price). VerDate Sep<11>2014 18:27 Jul 22, 2016 Jkt 238001 The Exchange believes not publishing an Official Closing Price would be a rare occurrence, and is most likely to occur for a thinly-traded security, such as a when issued security, right, or warrant, that has been listed for trading but does not have any consolidated last-sale eligible trades. If the Corporation determines that it is impaired at or before 3:00 p.m. and the Official Closing Price for an Exchangelisted security is determined pursuant to proposed Rule 1.1(ggP)(2), the SIP would publish the Official Closing Price for such security no differently than how the SIP publishes the Official Closing Price for an Exchange-listed security pursuant to Rule 1.1(ggP)(1).11 Accordingly, if the Official Closing Price is determined pursuant to proposed Rule 1.1(ggP)(2), recipients of SIP data would not have to make any changes to their systems because the SIP would publish the ‘‘M’’ last sale condition as an Exchange Official Closing Price for any impacted Exchange-listed securities. As further proposed, Rule 1.1(ggP)(3) would describe how the Corporation would determine the Official Closing Price for a security if the Corporation determines after 3:00 p.m. Eastern Time that it is unable to conduct a Closing Auction in one or more NYSE Arcalisted securities due to a systems or technical issue. Based on input from market participants, the Exchange believes that, if the Exchange were to announce after 3:00 p.m. Eastern Time that it is impaired and unable to conduct a Closing Auction, market participants would not have sufficient time to re-direct closing-only orders to an alternate venue. Accordingly, in such scenario, the Exchange proposes to use the following hierarchy for determining the Official Closing Price for a security: • Proposed Rule 1.1(ggP)(3)(A) would provide that the Official Closing Price would be the VWAP of the consolidated last-sale eligible prices of the last five minutes of trading during Core Trading Hours up to the time that the VWAP is processed, including any closing transactions on an exchange. The VWAP would take into account any trade breaks or corrections up to the time of [sic] the VWAP is processed. This 11 The Operating Committees of the CTA Plan, CQ Plan, and the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation, and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis approved the Impaired Market Contingency Plan under which the SIPs would print an impaired primary listing exchange’s contingency Official Closing Price as the Official Closing Price of that primary listing exchange as provided for in the rules of respective primary listing exchanges. PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 48479 VWAP would be calculated in the same manner as set forth in proposed in Rule 1.1(ggP)(2)(B), described above. However, if the Exchange’s determination that it is unable to conduct a Closing Auction is after 3:00 p.m. ET, the proposed VWAP calculation would be the primary means for determining the Official Closing Price for a security. In such case, the Exchange believes that the VWAP would appropriately reflect the pricing of a security because it would include, in a volume-weighted manner, the price and volume of closing transactions on other exchanges if market participants are able to route closing interest in Exchange-listed securities to an alternate venue for participation in a closing auction. • Proposed Rule 1.1(ggP)(3)(B) would provide that if there were no consolidated last-sale eligible trades in the last five minutes of trading during Core Trading Hours in such security, the Official Closing Price would be the last consolidated last-sale eligible trades [sic] during Core Trading Hours on that trading day. This proposed rule text is the same as proposed Rule 1.1(ggP)(2)(C). • Proposed Rule 1.1(ggP)(3)(C) would provide that if there were no consolidated last-sale eligible trades in such security on a trading day, the Official Closing Price would be the prior day’s Official Closing Price. This proposed rule text is the same as proposed Rule 1.1(ggP)(2)(D). • Finally, proposed Rule 1.1(ggP)(3)(D) would provide that if an Official Closing Price for a security cannot be determined under (A), (B), or (C) of proposed Rule 1.1(ggP)(3) and there is no prior day’s Official Closing Price, the Exchange would not publish an Official Closing Price for such security. This proposed rule text is based on proposed Rule 1.1(ggP)(2)(E). Similar to how the Official Closing Price would be published under proposed Rule 1.1(ggP)(2), if the Exchange determines that it is impaired after 3:00 p.m. and the Official Closing Price is determined pursuant to proposed Rule 1.1(ggP)(3), the SIP would publish the Official Closing Price for such security no differently than how the SIP publishes the Official Closing Price for an Exchange-listed security pursuant to Rule 1.1(ggP)(1). Accordingly, if the Official Closing Price is determined pursuant to proposed Rule 1.1(ggP)(3), recipients of SIP data would not have to make any changes to their systems because the SIP would publish the ‘‘M’’ last sale condition as an Exchange Official Closing Price for E:\FR\FM\25JYN1.SGM 25JYN1 mstockstill on DSK3G9T082PROD with NOTICES 48480 Federal Register / Vol. 81, No. 142 / Monday, July 25, 2016 / Notices any impacted Exchange-listed securities. For purposes of Rule 7.16P(f)(2) and determining whether to trigger a Short Sale Price Test under that rule, the Official Closing Price for Exchangelisted securities would still be determined based on Rule 1.1(ggP)(1). If the Exchange is impaired and cannot conduct a Closing Auction, similar to NYSE and NYSE MKT, the Official Closing Price as defined in proposed Rules 1.1(ggP)(2) and (3) would be used for purposes of determining whether a Short Sale Price Test is triggered under Rule 7.16P(f)(2) in an Exchange-listed security the next trading day. Proposed Rule 1.1(ggP)(4) would provide that if the Exchange determines the Official Closing Price under paragraphs (2) or (3) of proposed Rule 1.1(ggP), the Exchange would publicly announce the manner by which it would determine its Official Closing Price and the designated alternate exchange, if applicable, and all open interest designated for the Exchange close residing in the NYSE Arca Marketplace would be deemed cancelled to give ETP Holders the opportunity to route their closing interest to alternate execution venues. This proposed rule would make clear that any determination that the Exchange would make under proposed Rules 1.1(ggP)(2) or (3) would be publicly announced so that market participants would have an opportunity to route their closing interest accordingly. In addition, the proposed rule change would make clear that any interest designated for the Exchange close, i.e., MOC Orders and LOC Orders, would be cancelled by the Exchange so ETP Holders may route such interest to alternate execution venues. To reflect that the Exchange could be designated as an alternate exchange by another primary listing market, the Exchange proposes to amend Rule 1.1(ggP)(1) to specify that the rule would be applicable to Auction-Eligible Securities, as defined in Rule 7.35P(a)(1), rather than only be applicable for securities listed on NYSE Arca. With this proposed change, if NYSE, NYSE MKT, or Nasdaq designate the Exchange as its designated alternate exchange under their respective back-up rules, Rule 1.1(ggP)(1) would govern how the Exchange would determine the Official Closing Price for AuctionEligible Securities. The Exchange also proposes to amend Rule 1.1(ggP)(1) to specify how the Exchange would determine the Official Closing Price for a security that has transferred its listing to the Exchange or is a new listing and does not have any VerDate Sep<11>2014 18:27 Jul 22, 2016 Jkt 238001 consolidated last-sale eligible trades on its first day of trading on the Exchange. This proposed rule change is based on NYSE Rule 123C(1)(e)(i) and NYSE MKT Rule 123C(1)(e)(i)—Equities. As proposed, for a security that has transferred its listing to the Exchange and does not have any consolidated lastsale eligible trades on its first trading day, the Official Closing Price would be the prior day’s closing price disseminated by the primary listing market that previously listed such security. In addition, for a security that is a new listing and does not have any consolidated last-sale eligible trades on its first trading day, the Official Closing Price would be based on a derived last sale associated with the price of such security before it begins trading on the Exchange. The Exchange believes the proposed rule text would provide transparency in Exchange rules of how the Exchange would determine the Official Closing Price for a security that has transferred its listing to the Exchange, and thus did not have a prior day’s Official Closing Price on the Exchange, or is a new listing that did not have any trades on its first trading day. Finally, the Exchange proposes to amend proposed Rule 1.1(ggP)(5) (which is current Rule 1.1(ggP)(2)) to clarify that this rule text would continue to specify how the Exchange would determine the Official Closing Price for UTP Securities for purposes of establishing Trading Collars if there is no consolidated last sale price on the same trading day, or Auction Reference Prices. For these purposes only, the Exchange would continue to use the official closing price as disseminated by the primary listing market for that security via a public data feed on a trading day for these purposes. The proposed change to the rule text is designed to make clear that the Exchange would continue to use the official closing price of the primary listing market as the Official Closing Price for UTP Securities for these specific purposes, while at the same time, providing for the Exchange to publish a ‘‘M’’ value for AuctionEligible Securities based on an Official Closing Price determined pursuant to 1.1(ggP)(1), as proposed. In addition, if another primary listing market designates the Exchange as its designated alternate exchange under its official closing price rules, any Official Closing Price published by the Exchange in such securities would be published by the SIP as the official closing price of the primary listing exchange. Accordingly, proposed Rule PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 1.1(ggP)(5) would use that Official Closing Price as well. To effect this amendment, the Exchange proposes to delete the phrase ‘‘For securities listed on an exchange other than NYSE Arca,’’ and replace it with ‘‘For purposes of Rules 7.31P(a)(1)(B)(i) and 7.35P(a)(8)(A) for UTP Securities only’’. The remaining text of the rule would be unchanged. The Exchange believes that for UTP Securities, the official closing price as disseminated by the primary listing market would be a better price to use to determine the next day’s Trading Collars or Auction Reference Price rather than using the Exchangedetermined Official Closing Price under Rule 1.1(ggP)(1). Because of the technology changes associated with this proposed rule change, the Exchange will implement the proposed back-up procedures for determining an Official Closing Price no later than 120 days after the operative date of this proposed rule change and will announce the implementation date via Trader Update. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,12 in general, and furthers the objectives of Section 6(b)(5) of the Act,13 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. The Exchange believes that the proposed rule change would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide transparency in how the Exchange would determine the Official Closing Price in Exchange-listed securities when the Exchange is unable to conduct a Closing Auction due to a systems or technical issue. The Exchange believes that the proposed amendments would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposed determination of an Official Closing Price was crafted in response to input from industry participants and would: 12 15 13 15 E:\FR\FM\25JYN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 25JYN1 mstockstill on DSK3G9T082PROD with NOTICES Federal Register / Vol. 81, No. 142 / Monday, July 25, 2016 / Notices • Provide a pre-determined, consistent solution that would result in a closing print to the SIP within a reasonable time frame from the normal closing time; • minimize the need for industry participants to modify their processing of data from the SIP; and • provide advance notification of the applicable closing contingency plan to provide sufficient time for industry participants to route any closing interest to an alternate venue to participate in that venue’s closing auction More specifically, the Exchange believes the proposed hierarchy for determining the Official Closing Price if the Exchange determines that it is impaired at or before 3:00 p.m. Eastern Time would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposal, which is based on input from market participants and the approved rules of NYSE and NYSE MKT, would provide sufficient time for market participants to direct closing-only interest to a designated alternate exchange in time for such interest to participate in a closing auction on such alternate venue in a meaningful manner. The Exchange further believes that relying on the official closing price of a designated alternate exchange would provide for an established hierarchy for determining an Official Closing Price for an Exchangelisted security if there is insufficient interest to conduct a closing auction on the alternate exchange. In such case, the rules of Nasdaq already provide a mechanism for determining an official closing price for securities that trade on that market. The Exchange further believes that if the Exchange determines after 3:00 p.m. that it is impaired and unable the conduct a Closing Auction, the proposed VWAP calculation would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide for a mechanism to determine the value of an affected security for purposes of determining an Official Closing Price. By using a volume-weighted calculation that would include the closing transactions on an affected security on alternate exchanges as well as any busts or corrections that were reported up to the time that the SIP calculates the value, the Exchange believes that the proposed calculation would reflect the correct price of a security. In addition, by using a VWAP calculation rather than the last consolidated last-sale eligible price as of the end of Core Trading Hours, the Exchange would reduce the potential for VerDate Sep<11>2014 18:27 Jul 22, 2016 Jkt 238001 an anomalous trade that may not reflect the true price of a security from being set as the Official Closing Price for a security. The Exchange further believes that the proposed rule change would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposal would have minimal impact on market participants. As proposed, from the perspective of market participants, even if the Exchange were impaired, the SIP would publish an Official Closing Price for Exchange-listed securities on behalf of the Exchange in a manner that would be no different than if the Exchange were not impaired. If the Exchange determines that it is impaired after 3:00 p.m., market participants would not have to make any system changes. If the Exchange determines that it is impaired before 3:00 p.m. Eastern Time and designates an alternate exchange, market participants may have to do systems work to re-direct closing-only orders to the alternate exchange. However, the Exchange understands, based on input from market participants, that such changes would be feasible based on the amount of advance notice. In addition, the Exchange believes that designating an alternate exchange when there is sufficient time to do so would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would allow for the price-discovery mechanism of a closing auction to be available for impacted Exchange-listed securities. In addition, the Exchange believes that the proposed amendments to Rule 1.1(ggP)(1) would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposed rule change would enable the Exchange to serve as a designated alternate exchange under the respective rules of NYSE, NYSE MKT, or Nasdaq. Specifically, by expanding the reach of Rule 1.1(ggP)(1) to all Auction-Eligible Securities on the Exchange, and not just Exchange-listed securities, the hierarchy for determining an Official Closing Price specified in Rule 1.1(ggP) would be available to all securities that trade on the Exchange. Because the Exchange would be determining an Official Closing Price for UTP Securities under the proposed amendments to Rule 1.1(ggP)(1) for purposes of disseminating an ‘‘M’’ value to the SIPs, the Exchange further believes that the proposed amendments to Rule 1.1(ggP)(5) would be consistent with the protection of investors and the PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 48481 public interest by using the official closing price as determined by the primary listing market for UTP Securities for purposes of determining the next day’s first Trading Collar (in the absence of a consolidated last sale price) or Auction Reference Price. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive issues, but rather to provide for how the Exchange would determine an Official Closing Price for Exchange-listed securities if it is impaired and cannot conduct a closing transaction due to a systems or technical issue. The proposal has been crafted with input from market participants, Nasdaq, and the SIPs, and is designed to reduce the burden on competition by having similar back-up procedures across all primary listing exchanges if such exchange is impaired and cannot conduct a closing auction. 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 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) of the Act and Rule 19b– 4(f)(6) thereunder.14 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 necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of 14 17 CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. E:\FR\FM\25JYN1.SGM 25JYN1 48482 Federal Register / Vol. 81, No. 142 / Monday, July 25, 2016 / Notices 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. [FR Doc. 2016–17444 Filed 7–22–16; 8:45 am] IV. Solicitation of Comments BILLING CODE 8011–01–P Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2016–94 on the subject line. Paper Comments mstockstill on DSK3G9T082PROD with NOTICES • 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–NYSEArca–2016–94. 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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal 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–2016–94, and should be submitted on or before August 15, 2016. VerDate Sep<11>2014 20:12 Jul 22, 2016 Jkt 238001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Robert W. Errett, Deputy Secretary. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78358; File No. SR–DTC– 2016–004] Self-Regulatory Organizations; The Depository Trust Company; Order Approving Proposed Rule Change To Establish a Link With Euroclear July 19, 2016. On June 3, 2016, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) proposed rule change SR–DTC–2016–004 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 to establish a link (‘‘EB Link’’) between DTC and Euroclear Bank SA/NV (‘‘EB’’). The proposed rule change was published for comment in the Federal Register on June 16, 2016.3 The Commission did not receive any comment letters on the proposed rule change. For the reasons discussed below, the Commission is granting approval of the proposed rule change. I. Description of the Proposed Rule Change The following is a description of the proposed rule change, as provided primarily by DTC: The proposed rule change consists of amendments to the Rules, By-Laws and Organization Certificate of The Depository Trust Company (the ‘‘Rules’’) 4 in order to add new Rule 34 (EB Link) to establish EB Link between DTC and EB for DTC Participants that are also EB participants (‘‘CP Participants’’) to use Securities held at DTC for EB Collateral Transactions (as defined below). The proposed Rule 34 specifies the Accounts, Free Deliveries, and the terms and conditions that together comprise collateral positioning (‘‘Collateral Positioning’’ or ‘‘CP’’) for CP Participants. The proposed rule CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 78031 (June 10, 2016), 81 FR 39303 (June 16, 2016) (SR– DTC–2016–004). 4 Each capitalized term not otherwise defined herein has its respective meaning as set forth in the Rules, available at http://www.dtcc.com/legal/rules -and-procedures.aspx. PO 00000 15 17 1 15 Frm 00108 Fmt 4703 Sfmt 4703 change will: (i) Allow CP Participants to designate a sub-account for Collateral Positioning (a ‘‘CP Sub-Account’’) of Securities selected by the CP Participant (the ‘‘CP Securities’’) to Deliver to EB; and (ii) establish the Securities Account of EB (the ‘‘EB Account’’) on the books of DTC to receive and hold such CP Securities. DTC understands that EB will then credit such CP Securities to an account it maintains on its books for such CP Participant for use in transfers on the books of EB (‘‘EB Collateral Transactions’’) in connection with EB’s collateral management services (‘‘EB CMS’’), as described below.5 (i) Background (a) New Regulations Require Better Access to and Management of Securities Collateral New and enhanced regulatory requirements are leading derivative and financing counterparties to seek increased efficiency in the availability and deployment of collateral and streamlined margin processing. More specifically, the phase-in period of the Basel III liquidity rules,6 as well as recent regulatory changes by the Commodity Futures Trading Commission,7 the U.S. prudential regulators,8 European Market Infrastructure Regulation,9 and the Basel 5 On May 9, 2016, EB filed an application with the Commission on Form CA–1, seeking to amend its existing exemption from clearing agency registration by expanding its existing exemption to authorize EB to offer EB CMS to its U.S. participants for U.S. equities (the ‘‘EB CA–1 Amendment’’). DTC understands that the EB CA– 1 Amendment is necessary for EB to offer EB CMS, and consequently, the DTCC Euroclear Global Collateral Ltd. (‘‘DEGCL’’) Inventory Management Service (‘‘DEGCL IMS’’), to U.S. participants for U.S. equities. Commission approval of this proposed rule change to add new Rule 34 (EB Link) will have no effect on the authority of EB pursuant to the EB CA–1 Amendment. In addition, this proposed rule change provides that it will not be implemented until the EB CA–1 Amendment is approved by the Commission. 6 Basel Committee on Banking Supervision, Basel III: A global framework for more resilient banks and the banking system, December 2010 and revised June 2011; Basel Committee on Banking Supervision, Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools, January 2013; Basel Committee on Banking Supervision, Basel III: The net stable funding ratio, October 2014, available at www.bis.org/bcbs/basel3.htm. 7 Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants, 81 FR 635 (January 6, 2016); 17 CFR parts 23 and 140. 8 Margin and Capital Requirements for Covered Swap Entities, 80 FR 74840 (November 30, 2015); 12 CFR parts 45, 237, 349, 624 and 1221. The U.S. prudential regulators include: Office of the Comptroller of the Currency—Treasury, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Farm Credit Administration, and the Federal Housing Finance Agency. 9 European Supervisory Authorities’ (ESAs) Final Draft Regulatory Technical Standards on risk- E:\FR\FM\25JYN1.SGM 25JYN1

Agencies

[Federal Register Volume 81, Number 142 (Monday, July 25, 2016)]
[Notices]
[Pages 48477-48482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17444]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78357; File No. SR-NYSEArca-2016-94]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Rule 1.1 To Establish an Official Closing Price for Exchange-
Listed Securities if the Exchange Is Unable To Conduct a Closing 
Auction

July 19, 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 July 6, 2016, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 1.1(ggP) to 
establish an Official Closing Price for Exchange-listed securities if 
the Exchange is unable to conduct a Closing Auction. The proposed rule 
change is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend its rules to specify back-up 
procedures for determining an Official Closing Price for Exchange-
listed securities if it is unable to conduct a Closing Auction in one 
or more securities due to a systems or technical issue.\4\ 
Specifically, the Exchange proposes to amend NYSE Arca Equities Rule 
1.1(ggP) (``Rule 1.1(ggP)'') to establish an Official Closing Price for 
Exchange-listed securities if the Exchange is impaired.
---------------------------------------------------------------------------

    \4\ See New York Stock Exchange press release dated July 22, 
2015, available here: http://ir.theice.com/press-and-publications/press-releases/all-categories/2015/07-22-2015.aspx.
---------------------------------------------------------------------------

    The proposed changes are based on approved rules of the New York 
Stock Exchange, LLC (``NYSE'') and NYSE MKT LLC (``NYSE MKT'').\5\ 
Those markets, together with the Exchange and the NASDAQ Stock Market 
LLC (``Nasdaq''), developed the back-up procedures after taking into 
consideration feedback from discussions with industry participants, 
including

[[Page 48478]]

meeting the following key goals important to market participants:
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 78015 (June 8, 
2016), 81 FR 38747 (June 14, 2016) (SR-NYSE-2016-18) and (SR-
NYSEMKT-2016-31) (``OCP Approval Order'').
---------------------------------------------------------------------------

     Providing a pre-determined, consistent solution that would 
result in a closing print to the applicable securities information 
processor (``SIP'') within a reasonable time frame from the normal 
closing time;
     Minimizing the need for industry participants to modify 
their processing of data from the SIPs; and
     Providing advance notification of the applicable closing 
contingency plan to provide sufficient time for industry participants 
to route any closing interest to an alternate venue to participate in 
that venue's closing auction.
    The Exchange also proposes to amend Rule 1.1(ggP) to specify that, 
for a UTP Security,\6\ the Exchange would use the official closing 
price as disseminated by the primary listing exchange to determine the 
Trading Collar \7\ for such security if there is no consolidated last 
sale price on the same trading day, or the Auction Reference Price \8\ 
for such security.
---------------------------------------------------------------------------

    \6\ As defined in NYSE Arca Equities Rule 1.1(ii), the term 
``UTP Security'' means a security that is listed on a national 
securities exchange other than the Exchange and that trades on the 
NYSE Arca Marketplace pursuant to unlisted trading privileges.
    \7\ See NYSE Arca Equities Rule 7.31P(a)(1)(B)(i).
    \8\ See NYSE Arca Equities Rule 7.35P(a)(8)(A).
---------------------------------------------------------------------------

Background
    Current Rule 1.1(ggP) describes how the Exchange establishes the 
``Official Closing Price,'' which is the reference price to determine 
the closing price in a security for purposes of Rule 7 Equities 
Trading. Rule 1.1(ggP) provides that the Official Closing Price is 
determined as follows:
     As provided for in Rule 1.1(ggP)(1), for securities listed 
on the Exchange, the Official Closing Price is the price established in 
a Closing Auction of one round lot or more on a trading day. If there 
is no Closing Auction or if a Closing Auction trade is less than a 
round lot on a trading day, the Official Closing Price is the most 
recent consolidated last sale eligible trade during Core Trading Hours 
on that trading day. If there were no consolidated last sale eligible 
trades during Core Trading Hours on that trading day, the Official 
Closing Price will be the prior trading day's Official Closing Price.
     As provided for in Rule 1.1(ggP)(2), for securities listed 
on an exchange other than the Exchange, the Official Closing Price is 
the official closing price disseminated by the primary listing market 
for that security via a public data feed on a trading day. If the 
primary listing market does not disseminate an official closing price 
on a trading day, the Official Closing Price is the most recent 
consolidated last sale eligible trade during Core Trading Hours on that 
trading day. If there were no consolidated last sale eligible trades 
during Core Trading Hours on that trading day, the Official Closing 
Price will be the prior trading day's Official Closing Price.
    The rule further provides that an Official Closing Price may be 
adjusted to reflect corporate actions or a correction to a closing 
price, as disseminated by the primary listing market for the security.
    In Rule 7, the Exchange uses the Official Closing Price for three 
purposes: (1) To determine the Auction Reference Price for a security, 
as provided for in Rule 7.35P(a)(8)(A); (2) to determine the Trading 
Collar for a security if there is no consolidated last sale price on 
the same trading day, as provided for in Rule 7.31P(a)(1)(B)(i); and 
(3) for securities listed on the Exchange only, for purposes of 
determining whether to trigger a Short Sale Price Test, as defined 
under Rule 7.16P(f)(2).\9\
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    \9\ The Exchange disseminates to the SIP the Official Closing 
Price as an ``M'' value. For a description of all sale conditions 
that are reportable to the SIP for Exchange-listed securities, 
including the ``M'' value, see the Consolidated Tape System 
Participant Communications Interface Specification, dated November 
16, 2015, at 86, available here: https://www.ctaplan.com/publicdocs/ctaplan/notifications/trader-update/cts_input_spec.pdf.
---------------------------------------------------------------------------

Proposed Amendments
    The Exchange proposes to amend Rule 1.1(ggP) to establish how the 
Exchange would determine an Official Closing Price if the Exchange is 
unable to conduct a Closing Auction in an NYSE Arca-listed security or 
securities due to a systems or technical issue. To reflect this change, 
the Exchange proposes to add new rule text as proposed Rules 
1.1(ggP)(2)-(4) and re-number current Rule 1.1(ggP)(2) as proposed Rule 
1.1ggP(5), as described in greater detail below.
    Proposed Rules 1.1(ggP)(2)-(4) are based on NYSE Rules 
123C(1)(e)(ii)-(iv) and NYSE MKT Rules 123C(1)(e)(ii)-(iv)--Equities 
with non-substantive differences to use NYSE Arca Equities terminology 
instead of NYSE terminology, as follows: ``Corporation'' or ``NYSE Arca 
Marketplace'' instead of ``Exchange,'' ``Closing Auction'' instead of 
``closing transaction,'' ``Core Trading Hours'' instead of ``regular 
trading hours,'' and ``ETP Holder'' instead of ``member organization.'' 
\10\ In addition, as under the NYSE and NYSE MKT rules, the Exchange 
proposes that the back-up procedures specified in proposed Rules 
1.1(ggP)(2)-(4) would be applicable to Exchange-listed securities only.
---------------------------------------------------------------------------

    \10\ See NYSE Arca Equities Rules 1.1(k) (defining the term 
``Corporation''); 1.1(e) (defining the term ``NYSE Arca 
Marketplace''); 7.35P(d) (defining the term ``Closing Auction''); 
1.1(j) (defining the term ``Core Trading Hours''); and 1.1(n) 
(defining the term ``ETP Holder'').
---------------------------------------------------------------------------

    As proposed, Rule 1.1(ggP)(2) would provide that if the Exchange 
determines at or before 3:00 p.m. Eastern Time that it is unable to 
conduct a Closing Auction in one or more NYSE Arca-listed securities 
due to a systems or technical issue, the Exchange would designate an 
alternate exchange for such security or securities. The Exchange would 
publicly announce the exchange designated as the alternate exchange via 
Trader Update. In such case, the Official Closing Price of each 
security would be determined on the following hierarchy:
     Proposed Rule 1.1(ggP)(2)(A) would provide that the 
Official Closing Price would be the official closing price for such 
security under the rules of the designated alternate exchange. For 
example, if the Exchange designates Nasdaq as the alternate exchange, 
the Official Closing Price would be based on Nasdaq Rule 4754, which 
defines how Nasdaq establishes an official closing price.
    The proposed 3:00 p.m. cut off time was selected in part based on 
discussions with market participants regarding their capability to re-
direct closing-only interest in Exchange-listed securities in time to 
participate in the closing auction of an alternate venue. By 
designating an alternate exchange before 3:00 p.m. Eastern Time, the 
Exchange believes that market participants would be more likely to have 
sufficient notice to direct any closing-only interest in Exchange-
listed securities to the designated alternate exchange. By providing 
market participants sufficient time, when possible, to route closing-
only interest to an alternate venue for participation in that 
exchange's closing auction process, that alternate exchange's closing 
auction would be more likely to result in a closing price that reflects 
market value for such security.
    If there were insufficient interest for a closing auction on the 
designated alternate exchange, the Exchange believes that the rules of 
Nasdaq provide for an appropriate hierarchy of which price to use to 
determine the Official Closing Price.
     Proposed Rule 1.1(ggP)(2)(B) would provide if the 
designated alternate exchange does not have an official closing price 
in a security, the Official

[[Page 48479]]

Closing Price would be the volume-weighted average price (``VWAP'') of 
the consolidated last-sale eligible prices of the last five minutes of 
trading during Core Trading Hours up to the time that the VWAP is 
processed. The VWAP would include any closing transactions on an 
exchange and would take into account any trade breaks or corrections up 
to the time the VWAP is processed. Because the VWAP would include any 
last-sale eligible trades, busts, or corrections that were reported up 
to the time that the SIP calculates the VWAP, the Exchange believes 
that the VWAP price would reflect any pricing adjustments that may be 
reported after 4:00 p.m. ET.
    As discussed above, the manner by which exchanges calculate their 
respective official closing prices provide for an official closing 
price in the absence of a closing transaction. Accordingly, the 
Exchange believes that in circumstances when the Exchange designates an 
alternate exchange, the VWAP calculation would rarely be used to 
determine the Official Closing Price for an Exchange-listed security.
     Proposed Rule 1.1(ggP)(2)(C) would provide that if the 
designated alternate exchange does not have an official closing price 
in a security and there were no consolidated last-sale eligible trades 
in the last five minutes of trading during Core Trading Hours in such 
security, the Official Closing Price would be the last consolidated 
last-sale eligible trade during Core Trading Hours on that trading day.
     Proposed Rule 1.1(ggP)(2)(D) would provide that if the 
designated alternate exchange does not have an official closing price 
in a security and there were no consolidated last-sale eligible trades 
in a security on a trading day in such security, the Official Closing 
Price would be the prior day's Official Closing Price.
     Finally, proposed [sic] 1.1(ggP)(2)(E) would provide that 
if an Official Closing Price for a security cannot be determined under 
(A), (B), or (C) of proposed Rule 1.1(ggP)(2) and there is no prior 
day's Official Closing Price, the Exchange would not publish an 
Official Closing Price for such security.
    The Exchange would use the hierarchy set forth in proposed Rule 
1.1(ggP)(2)(B)-(E) only if the designated alternate exchange did not 
disseminate an official closing price in a security. In addition, the 
Exchange proposes to add as paragraph (E) of Rule 1.1(ggP)(2) what 
would happen if there were no Official Closing Price published on the 
prior trading day (i.e., the Exchange would not publish an Official 
Closing Price). The Exchange believes not publishing an Official 
Closing Price would be a rare occurrence, and is most likely to occur 
for a thinly-traded security, such as a when issued security, right, or 
warrant, that has been listed for trading but does not have any 
consolidated last-sale eligible trades.
    If the Corporation determines that it is impaired at or before 3:00 
p.m. and the Official Closing Price for an Exchange-listed security is 
determined pursuant to proposed Rule 1.1(ggP)(2), the SIP would publish 
the Official Closing Price for such security no differently than how 
the SIP publishes the Official Closing Price for an Exchange-listed 
security pursuant to Rule 1.1(ggP)(1).\11\ Accordingly, if the Official 
Closing Price is determined pursuant to proposed Rule 1.1(ggP)(2), 
recipients of SIP data would not have to make any changes to their 
systems because the SIP would publish the ``M'' last sale condition as 
an Exchange Official Closing Price for any impacted Exchange-listed 
securities.
---------------------------------------------------------------------------

    \11\ The Operating Committees of the CTA Plan, CQ Plan, and the 
Joint Self-Regulatory Organization Plan Governing the Collection, 
Consolidation, and Dissemination of Quotation and Transaction 
Information for Nasdaq-Listed Securities Traded on Exchanges on an 
Unlisted Trading Privileges Basis approved the Impaired Market 
Contingency Plan under which the SIPs would print an impaired 
primary listing exchange's contingency Official Closing Price as the 
Official Closing Price of that primary listing exchange as provided 
for in the rules of respective primary listing exchanges.
---------------------------------------------------------------------------

    As further proposed, Rule 1.1(ggP)(3) would describe how the 
Corporation would determine the Official Closing Price for a security 
if the Corporation determines after 3:00 p.m. Eastern Time that it is 
unable to conduct a Closing Auction in one or more NYSE Arca-listed 
securities due to a systems or technical issue. Based on input from 
market participants, the Exchange believes that, if the Exchange were 
to announce after 3:00 p.m. Eastern Time that it is impaired and unable 
to conduct a Closing Auction, market participants would not have 
sufficient time to re-direct closing-only orders to an alternate venue. 
Accordingly, in such scenario, the Exchange proposes to use the 
following hierarchy for determining the Official Closing Price for a 
security:
     Proposed Rule 1.1(ggP)(3)(A) would provide that the 
Official Closing Price would be the VWAP of the consolidated last-sale 
eligible prices of the last five minutes of trading during Core Trading 
Hours up to the time that the VWAP is processed, including any closing 
transactions on an exchange. The VWAP would take into account any trade 
breaks or corrections up to the time of [sic] the VWAP is processed. 
This VWAP would be calculated in the same manner as set forth in 
proposed in Rule 1.1(ggP)(2)(B), described above. However, if the 
Exchange's determination that it is unable to conduct a Closing Auction 
is after 3:00 p.m. ET, the proposed VWAP calculation would be the 
primary means for determining the Official Closing Price for a 
security. In such case, the Exchange believes that the VWAP would 
appropriately reflect the pricing of a security because it would 
include, in a volume-weighted manner, the price and volume of closing 
transactions on other exchanges if market participants are able to 
route closing interest in Exchange-listed securities to an alternate 
venue for participation in a closing auction.
     Proposed Rule 1.1(ggP)(3)(B) would provide that if there 
were no consolidated last-sale eligible trades in the last five minutes 
of trading during Core Trading Hours in such security, the Official 
Closing Price would be the last consolidated last-sale eligible trades 
[sic] during Core Trading Hours on that trading day. This proposed rule 
text is the same as proposed Rule 1.1(ggP)(2)(C).
     Proposed Rule 1.1(ggP)(3)(C) would provide that if there 
were no consolidated last-sale eligible trades in such security on a 
trading day, the Official Closing Price would be the prior day's 
Official Closing Price. This proposed rule text is the same as proposed 
Rule 1.1(ggP)(2)(D).
     Finally, proposed Rule 1.1(ggP)(3)(D) would provide that 
if an Official Closing Price for a security cannot be determined under 
(A), (B), or (C) of proposed Rule 1.1(ggP)(3) and there is no prior 
day's Official Closing Price, the Exchange would not publish an 
Official Closing Price for such security. This proposed rule text is 
based on proposed Rule 1.1(ggP)(2)(E).
    Similar to how the Official Closing Price would be published under 
proposed Rule 1.1(ggP)(2), if the Exchange determines that it is 
impaired after 3:00 p.m. and the Official Closing Price is determined 
pursuant to proposed Rule 1.1(ggP)(3), the SIP would publish the 
Official Closing Price for such security no differently than how the 
SIP publishes the Official Closing Price for an Exchange-listed 
security pursuant to Rule 1.1(ggP)(1). Accordingly, if the Official 
Closing Price is determined pursuant to proposed Rule 1.1(ggP)(3), 
recipients of SIP data would not have to make any changes to their 
systems because the SIP would publish the ``M'' last sale condition as 
an Exchange Official Closing Price for

[[Page 48480]]

any impacted Exchange-listed securities.
    For purposes of Rule 7.16P(f)(2) and determining whether to trigger 
a Short Sale Price Test under that rule, the Official Closing Price for 
Exchange-listed securities would still be determined based on Rule 
1.1(ggP)(1). If the Exchange is impaired and cannot conduct a Closing 
Auction, similar to NYSE and NYSE MKT, the Official Closing Price as 
defined in proposed Rules 1.1(ggP)(2) and (3) would be used for 
purposes of determining whether a Short Sale Price Test is triggered 
under Rule 7.16P(f)(2) in an Exchange-listed security the next trading 
day.
    Proposed Rule 1.1(ggP)(4) would provide that if the Exchange 
determines the Official Closing Price under paragraphs (2) or (3) of 
proposed Rule 1.1(ggP), the Exchange would publicly announce the manner 
by which it would determine its Official Closing Price and the 
designated alternate exchange, if applicable, and all open interest 
designated for the Exchange close residing in the NYSE Arca Marketplace 
would be deemed cancelled to give ETP Holders the opportunity to route 
their closing interest to alternate execution venues. This proposed 
rule would make clear that any determination that the Exchange would 
make under proposed Rules 1.1(ggP)(2) or (3) would be publicly 
announced so that market participants would have an opportunity to 
route their closing interest accordingly. In addition, the proposed 
rule change would make clear that any interest designated for the 
Exchange close, i.e., MOC Orders and LOC Orders, would be cancelled by 
the Exchange so ETP Holders may route such interest to alternate 
execution venues.
    To reflect that the Exchange could be designated as an alternate 
exchange by another primary listing market, the Exchange proposes to 
amend Rule 1.1(ggP)(1) to specify that the rule would be applicable to 
Auction-Eligible Securities, as defined in Rule 7.35P(a)(1), rather 
than only be applicable for securities listed on NYSE Arca. With this 
proposed change, if NYSE, NYSE MKT, or Nasdaq designate the Exchange as 
its designated alternate exchange under their respective back-up rules, 
Rule 1.1(ggP)(1) would govern how the Exchange would determine the 
Official Closing Price for Auction-Eligible Securities.
    The Exchange also proposes to amend Rule 1.1(ggP)(1) to specify how 
the Exchange would determine the Official Closing Price for a security 
that has transferred its listing to the Exchange or is a new listing 
and does not have any consolidated last-sale eligible trades on its 
first day of trading on the Exchange. This proposed rule change is 
based on NYSE Rule 123C(1)(e)(i) and NYSE MKT Rule 123C(1)(e)(i)--
Equities. As proposed, for a security that has transferred its listing 
to the Exchange and does not have any consolidated last-sale eligible 
trades on its first trading day, the Official Closing Price would be 
the prior day's closing price disseminated by the primary listing 
market that previously listed such security. In addition, for a 
security that is a new listing and does not have any consolidated last-
sale eligible trades on its first trading day, the Official Closing 
Price would be based on a derived last sale associated with the price 
of such security before it begins trading on the Exchange. The Exchange 
believes the proposed rule text would provide transparency in Exchange 
rules of how the Exchange would determine the Official Closing Price 
for a security that has transferred its listing to the Exchange, and 
thus did not have a prior day's Official Closing Price on the Exchange, 
or is a new listing that did not have any trades on its first trading 
day.
    Finally, the Exchange proposes to amend proposed Rule 1.1(ggP)(5) 
(which is current Rule 1.1(ggP)(2)) to clarify that this rule text 
would continue to specify how the Exchange would determine the Official 
Closing Price for UTP Securities for purposes of establishing Trading 
Collars if there is no consolidated last sale price on the same trading 
day, or Auction Reference Prices. For these purposes only, the Exchange 
would continue to use the official closing price as disseminated by the 
primary listing market for that security via a public data feed on a 
trading day for these purposes. The proposed change to the rule text is 
designed to make clear that the Exchange would continue to use the 
official closing price of the primary listing market as the Official 
Closing Price for UTP Securities for these specific purposes, while at 
the same time, providing for the Exchange to publish a ``M'' value for 
Auction-Eligible Securities based on an Official Closing Price 
determined pursuant to 1.1(ggP)(1), as proposed. In addition, if 
another primary listing market designates the Exchange as its 
designated alternate exchange under its official closing price rules, 
any Official Closing Price published by the Exchange in such securities 
would be published by the SIP as the official closing price of the 
primary listing exchange. Accordingly, proposed Rule 1.1(ggP)(5) would 
use that Official Closing Price as well.
    To effect this amendment, the Exchange proposes to delete the 
phrase ``For securities listed on an exchange other than NYSE Arca,'' 
and replace it with ``For purposes of Rules 7.31P(a)(1)(B)(i) and 
7.35P(a)(8)(A) for UTP Securities only''. The remaining text of the 
rule would be unchanged. The Exchange believes that for UTP Securities, 
the official closing price as disseminated by the primary listing 
market would be a better price to use to determine the next day's 
Trading Collars or Auction Reference Price rather than using the 
Exchange-determined Official Closing Price under Rule 1.1(ggP)(1).
    Because of the technology changes associated with this proposed 
rule change, the Exchange will implement the proposed back-up 
procedures for determining an Official Closing Price no later than 120 
days after the operative date of this proposed rule change and will 
announce the implementation date via Trader Update.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\13\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because it would provide transparency in how 
the Exchange would determine the Official Closing Price in Exchange-
listed securities when the Exchange is unable to conduct a Closing 
Auction due to a systems or technical issue. The Exchange believes that 
the proposed amendments would remove impediments to and perfect the 
mechanism of a free and open market and a national market system 
because the proposed determination of an Official Closing Price was 
crafted in response to input from industry participants and would:

[[Page 48481]]

     Provide a pre-determined, consistent solution that would 
result in a closing print to the SIP within a reasonable time frame 
from the normal closing time;
     minimize the need for industry participants to modify 
their processing of data from the SIP; and
     provide advance notification of the applicable closing 
contingency plan to provide sufficient time for industry participants 
to route any closing interest to an alternate venue to participate in 
that venue's closing auction
    More specifically, the Exchange believes the proposed hierarchy for 
determining the Official Closing Price if the Exchange determines that 
it is impaired at or before 3:00 p.m. Eastern Time would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because the proposal, which is based on input 
from market participants and the approved rules of NYSE and NYSE MKT, 
would provide sufficient time for market participants to direct 
closing-only interest to a designated alternate exchange in time for 
such interest to participate in a closing auction on such alternate 
venue in a meaningful manner. The Exchange further believes that 
relying on the official closing price of a designated alternate 
exchange would provide for an established hierarchy for determining an 
Official Closing Price for an Exchange-listed security if there is 
insufficient interest to conduct a closing auction on the alternate 
exchange. In such case, the rules of Nasdaq already provide a mechanism 
for determining an official closing price for securities that trade on 
that market.
    The Exchange further believes that if the Exchange determines after 
3:00 p.m. that it is impaired and unable the conduct a Closing Auction, 
the proposed VWAP calculation would remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
because it would provide for a mechanism to determine the value of an 
affected security for purposes of determining an Official Closing 
Price. By using a volume-weighted calculation that would include the 
closing transactions on an affected security on alternate exchanges as 
well as any busts or corrections that were reported up to the time that 
the SIP calculates the value, the Exchange believes that the proposed 
calculation would reflect the correct price of a security. In addition, 
by using a VWAP calculation rather than the last consolidated last-sale 
eligible price as of the end of Core Trading Hours, the Exchange would 
reduce the potential for an anomalous trade that may not reflect the 
true price of a security from being set as the Official Closing Price 
for a security.
    The Exchange further believes that the proposed rule change would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system because the proposal would have 
minimal impact on market participants. As proposed, from the 
perspective of market participants, even if the Exchange were impaired, 
the SIP would publish an Official Closing Price for Exchange-listed 
securities on behalf of the Exchange in a manner that would be no 
different than if the Exchange were not impaired. If the Exchange 
determines that it is impaired after 3:00 p.m., market participants 
would not have to make any system changes. If the Exchange determines 
that it is impaired before 3:00 p.m. Eastern Time and designates an 
alternate exchange, market participants may have to do systems work to 
re-direct closing-only orders to the alternate exchange. However, the 
Exchange understands, based on input from market participants, that 
such changes would be feasible based on the amount of advance notice. 
In addition, the Exchange believes that designating an alternate 
exchange when there is sufficient time to do so would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because it would allow for the price-discovery 
mechanism of a closing auction to be available for impacted Exchange-
listed securities.
    In addition, the Exchange believes that the proposed amendments to 
Rule 1.1(ggP)(1) would remove impediments to and perfect the mechanism 
of a free and open market and a national market system because the 
proposed rule change would enable the Exchange to serve as a designated 
alternate exchange under the respective rules of NYSE, NYSE MKT, or 
Nasdaq. Specifically, by expanding the reach of Rule 1.1(ggP)(1) to all 
Auction-Eligible Securities on the Exchange, and not just Exchange-
listed securities, the hierarchy for determining an Official Closing 
Price specified in Rule 1.1(ggP) would be available to all securities 
that trade on the Exchange. Because the Exchange would be determining 
an Official Closing Price for UTP Securities under the proposed 
amendments to Rule 1.1(ggP)(1) for purposes of disseminating an ``M'' 
value to the SIPs, the Exchange further believes that the proposed 
amendments to Rule 1.1(ggP)(5) would be consistent with the protection 
of investors and the public interest by using the official closing 
price as determined by the primary listing market for UTP Securities 
for purposes of determining the next day's first Trading Collar (in the 
absence of a consolidated last sale price) or Auction Reference Price.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not designed to address any competitive issues, but rather to provide 
for how the Exchange would determine an Official Closing Price for 
Exchange-listed securities if it is impaired and cannot conduct a 
closing transaction due to a systems or technical issue. The proposal 
has been crafted with input from market participants, Nasdaq, and the 
SIPs, and is designed to reduce the burden on competition by having 
similar back-up procedures across all primary listing exchanges if such 
exchange is impaired and cannot conduct a closing auction.

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

    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) of the Act and Rule 19b-
4(f)(6) thereunder.\14\
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    \14\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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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 necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of

[[Page 48482]]

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2016-94 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-NYSEArca-2016-94. 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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal 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-2016-94, and should 
be submitted on or before August 15, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-17444 Filed 7-22-16; 8:45 am]
 BILLING CODE 8011-01-P