Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change, Rule Change, as Modified by Amendment No. 1, Amending NYSE Rule 49-Equities Regarding: (1) The Exchange's Emergency Powers; (2) the Exchange's Disaster Recovery Plans; and (3) Exchange Backup Systems and Mandatory Testing, 53176-53180 [2016-19053]
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Federal Register / Vol. 81, No. 155 / Thursday, August 11, 2016 / Notices
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–IEX–
2016–06, and should be submitted on or
before September 1, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2016–19052 Filed 8–10–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78483; File No. SR–
NYSEMKT–2016–68]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing of Proposed
Rule Change, Rule Change, as
Modified by Amendment No. 1,
Amending NYSE Rule 49—Equities
Regarding: (1) The Exchange’s
Emergency Powers; (2) the Exchange’s
Disaster Recovery Plans; and (3)
Exchange Backup Systems and
Mandatory Testing
August 5, 2016.
sradovich on DSK3GMQ082PROD with NOTICES
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 29,
2016, NYSE MKT LLC (the ‘‘Exchange’’
or ‘‘NYSE MKT’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 49—Equities (Emergency Powers)
by (1) replacing the text of current Rule
49—Equities with the Exchange’s
16 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
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1. Purpose
under its own trading rules and would
maintain its own order book in its
disaster recovery facility. In addition,
quotes and trades would be published to
the securities information processor
(‘‘SIP’’) as quotes and trades of the
Exchange. To reflect this change, the
Exchange proposes to delete Rule 49
(Emergency Powers) in its entirety and
replace it with new proposed Rule
49(a).4
Second, the Exchange proposes to
move text from Rule 431 governing
Exchange Backup Systems and
Mandatory Testing relating to equity
member organizations, to proposed Rule
49(b)(N) with only non-substantive
changes to update sub-paragraph
numbering and cross references.
Because Rule 431 relates to mandatory
testing of the Exchange’s disaster
recovery facility, as required by Rule
1004 of Regulation SCI,5 the Exchange
believes that moving the rule text from
Rule 431 to Rule 49 for its equity
member organizations would make the
Exchange’s rules easier to navigate by
consolidating equity rules with a
common theme into a single rule. To
incorporate that proposed Rule 49
would also cover mandatory testing
requirements for its equity member
organizations, the Exchange also
proposes to change the title of Rule 49
to ‘‘Exchange Business Continuity and
The Exchange proposes to amend
Rule 49—Equities (‘‘Rule 49’’), which
addresses the Exchange’s emergency
powers, by (1) replacing the text of
current Rule 49 with the Exchange’s
proposed disaster recovery plans; and
(2) moving the text of current Rule 431
(Exchange Backup Systems and
Mandatory Testing) relating to Exchange
equity member organizations to Rule 49
with no substantive changes. The
Exchange further proposes to amend
Rules 0—Equities and 431 to specify
that Rule 431 would govern Exchange
Backup Systems and Mandatory Testing
for Exchange ATP Holders only.
The Exchange proposes to amend
Rule 49 in two ways. First, the Exchange
proposes to replace the current disaster
recovery plan, pursuant to which NYSE
Arca, Inc. (‘‘NYSE Arca’’), the
Exchange’s affiliate, will act on behalf of
and at the direction of the Exchange for
auctions and specified regulatory
messages in Exchange-listed securities,
with a new disaster recovery plan that
the Exchange would implement if the
Exchange’s primary data center is
impaired. Under the proposed disaster
recovery plan, the Exchange would no
longer rely on NYSE Arca to act on its
behalf. Rather, the Exchange would
operate as a fully electronic exchange
4 Because the Exchange would not implement
proposed Rule 49(a) until after an opportunity to
test it with Exchange member organizations, the
Exchange proposes to retain current Rule 49 on its
books and not delete it until after proposed Rule
49(a) is approved. The Exchange also proposes to
file a separate proposed rule change to establish the
operative date of paragraph (a) of proposed Rule 49
and delete the current version of the rule. To reduce
the potential for any confusion regarding which
version of the rule governs, the Exchange proposes
to add the following preamble to current Rule 49:
‘‘This version of Rule 49—equities will remain
operative until the proposed rule changes described
in SR–NYSEMKT–2016–68 are approved and the
Exchange files a separate proposed rule change to
delete this version of Rule 49—Equities and
preamble and to establish the operative date of
paragraph (a) of ‘Rule 49—Equities. Exchange
Business Continuity and Disaster Recovery Plans
and Mandatory Testing.’ Subject to such separate
proposed rule change, the Exchange will announce
via Trader Update the operative date of the deletion
of this Rule and implementation of paragraph (a) of
Rule 49—Equities. Exchange Business Continuity
and Disaster Recovery Plans and Mandatory
Testing.’’ The Exchange also proposes to add a
preamble to proposed Rule 49, which would
provide: ‘‘The Exchange will file a separate
proposed rule change to establish the operative date
of paragraph (a) of this version of Rule 49—Equities
and to delete ‘Rule 49—Equities. Emergency
Powers’ and this preamble. Until such time, ‘Rule
49—Equities. Emergency Powers’ will remain
operative. Subject to such separate proposed rule
change, the Exchange will announce via Trader
Update the operative date of paragraph (a) of this
Rule and deletion of ‘Rule 49—Equities. Emergency
Powers.’ ’’
5 17 CFR 242.1004.
proposed disaster recovery plans; and
(2) moving the text of current Rule 431
(Exchange Backup Systems and
Mandatory Testing) relating to Exchange
member organizations to Rule 49—
Equities. This Amendment No. 1
supersedes the original filing in its
entirety. 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 the
Statutory Basis for, the Proposed Rule
Change
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Disaster Recovery Plans and Mandatory
Testing.’’
Because Rule 431 would pertain only
to options trading, the Exchange
proposes to amend that rule to delete
references to the terms ‘‘member,’’
‘‘member organization,’’ and
‘‘designated market maker’’ and use the
term ‘‘ATP Holder’’ instead. The
Exchange also proposes to amend Rule
0—Equities to remove the reference to
Rule 431 as being applicable to equities
trading.
sradovich on DSK3GMQ082PROD with NOTICES
Background
In 2012, the Exchange adopted Rule
49 to provide the Exchange with the
authority to declare an Emergency
Condition with respect to trading on or
through the systems and facilities of the
Exchange and to act as necessary in the
public interest and for the protection of
investors.6 The authority in Rule 49 may
be exercised when, due to an Emergency
Condition,7 the Exchange’s systems and
facilities located at 11 Wall Street, New
York, New York, including the Trading
Floor, cannot be utilized, or if the
Exchange’s primary data center is
impaired. If such an Emergency
Condition is declared, a qualified
Exchange officer may designate NYSE
Arca to serve as a backup facility so that
the Exchange, as a self-regulatory
organization (‘‘SRO’’), can remain
operational.8 NYSE Arca also would
continue to operate simultaneously.9 In
6 See Securities Exchange Act Release No. 70822
(November 6, 2013), 78 FR 68128 (November 13,
2013) (SR–NYSEMKT–2013–66) (‘‘2013 Approval
Order’’). At the same time, NYSE Arca amended
NYSE Arca Equities Rule 2.100 to provide that
NYSE Arca Equities would receive and process bids
and offers in Exchange-listed securities on behalf of
the Exchange. See id. (SR–NYSEArca–2013–77).
7 Under current Rule 49, an ‘‘Emergency
Condition’’ means an emergency as defined in
Section 12(k)(7) of the Act, which is ‘‘(A) a major
market disturbance characterized by or
constituting—(i) sudden and excessive fluctuations
of securities prices generally, or a substantial threat
thereof, that threaten fair and orderly markets; or
(ii) a substantial disruption of the safe or efficient
operation of the national system for clearance and
settlement of transactions in securities, or a
substantial threat thereof; or (B) a major disturbance
that substantially disrupts, or threatens to
substantially disrupt—(i) the functioning of
securities markets, investment companies, or any
other significant portion or segment of the securities
markets; or (ii) the transmission or processing of
securities transactions.’’ 15 U.S.C. 78l(k)(7).
8 NYSE Arca trades equity securities on the
systems and facilities of its wholly owned
subsidiary, NYSE Arca Equities, Inc., referred to as
the ‘‘NYSE Arca Marketplace.’’ For the purposes of
this filing and in the text of Rule 49, these shall be
referred to collectively as the systems and facilities
of NYSE Arca, or simply NYSE Arca.
9 The Exchange’s affiliate, New York Stock
Exchange LLC (‘‘NYSE’’), originally adopted a
version of NYSE Rule 49 under which quotes and
trades of NYSE-listed securities would continue to
be reported to the SIP as quotes and trades of the
NYSE. That plan was referred to as the ‘‘Print as
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September 2014, the Exchange further
amended Rule 49 to revise how certain
messages are disseminated.10
Under Rule 49, if the Exchange
declares an Emergency Condition, the
Exchange will halt all trading on the
Exchange’s systems and facilities and
purge any unexecuted orders from the
Exchange’s own systems and facilities
as soon as practicable following
declaration of the Emergency
Condition.11 Beginning the next trading
day, NYSE Arca, on behalf of and at the
direction of the Exchange, will
disseminate the official opening, reopening, and closing trades of
Exchange-listed securities to the
Consolidated Tape as message of the
Exchange, and any notification for
Exchange listed securities to the
Consolidated Quotation System of a
regulatory halt and resumption of
trading thereafter, trading pause and
resumption of trading thereafter, and
Short Sale Price Test trigger and lifting
thereafter, as messages of the
Exchange.12
In addition, bids and offers for
Exchange-listed securities entered on or
through the systems and facilities of
NYSE Arca during the Emergency
Condition will be reported to the
Consolidated Quotation system as bids
and offers of NYSE Arca, except that the
opening quote will be reported to the
Consolidated Quotation System as a bid
and/or offer of both the Exchange and
NYSE Arca and any re-opening quote
will be reported to the Consolidated
Quotation System as a bid and/or offer
of the Exchange only. Bids and offers for
Exchange-listed securities executed on
or through the systems and facilities of
NYSE Arca during the Emergency
Condition will be reported to the
Consolidated Tape as executions of
NYSE Arca, except for executions in the
opening, re-opening, or closing
transactions, which will be reported as
Exchange executions and Exchange
volume only.13 Because intra-day quotes
and trades in Exchange-listed securities
would be reported to the SIP as quotes
and trades of NYSE Arca (except for the
opening, reopening and closing trades),
this disaster recovery plan is referred to
the ‘‘Print as P’’ plan.
N’’ plan. NYSE MKT did not have a corollary ‘‘Print
as A’’ plan. When the NYSE amended its NYSE
Rule 49 in 2013 and 2014, the Exchange adopted
an identical version of that rule as Rule 49. See
2013 Approval Order, supra note 5 (SR–NYSE–
2013–54).
10 See Securities Exchange Act Release No. 73029
(Sept. 9, 2014), 79 FR 55061 (Sept. 15, 2014) (SR–
NYSEMKT–2014–75) (‘‘2014 Approval Order’’).
11 See Rule 49(b)(1).
12 See Rule 49(b)(2)(A)(i) and (ii).
13 See Rule 49(2)(B).
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53177
Since adopting Rule 49, the Exchange
has amended its rules to provide for
Exchange-facilitated procedures for
opening and closing securities if either
a Designated Market Maker (‘‘DMM’’) or
the Exchange’s 11 Wall Street facilities
are unavailable.14 Because the Exchange
can now operate even in the absence of
11 Wall Street facilities, and because the
Exchange’s Print as P disaster recovery
plan is available in the exchange’s
secondary data center, Rule 49 would be
invoked only if an Emergency Condition
impacted the Exchange’s primary data
center. To date, the Exchange has not
invoked Rule 49.
Proposed Rule Change
Proposed Rule 49(a) would govern the
Exchange’s Disaster Recovery Facility.
As proposed, Rule 49(a)(1) would
provide that, as part of its business
continuity and disaster recovery plans,
the Exchange maintains a ‘‘Disaster
Recovery Facility,’’ which is a
secondary data center located in a
geographically diverse location, as
required by Regulation SCI.15 This
proposed rule text is intended to be
definitional, and describes that the
Exchange maintains a secondary data
center.
Proposed Rule 49(a)(2) would specify
the procedures that the Exchange would
follow if the Exchange determines under
Rule 51—Equities (‘‘Rule 51’’) to trade
Exchange-traded securities on its
Disaster Recovery Facility. Currently,
Rule 49(a)(1) provides that a qualified
Exchange officer shall have the
authority to declare an Emergency
Condition and current Rule 49(a)(3)(B)
defines the term ‘‘qualified Exchange
officer’’ to mean the ICE Chief Executive
Officer or his or her designee, or the
Chief Regulatory Officer of the Exchange
or his or her designee. The rule further
provides that in the event that none of
these individuals is able to act due to
incapacitation, the most senior
surviving officer of ICE or the Exchange
shall be a ‘‘qualified Exchange officer’’
for purposes of Rule 49.
Rather than specifying separately in
Rule 49 who can act under that rule, the
Exchange proposes to include in Rule
14 See Rules 123D(a)(2)–(6)—Equities (describing
process for the Exchange to facilitate the open and
reopen of trading) and Supplementary Material .10
to Rule 123C—Equities (describing process for the
Exchange to facilitate the close of trading).
15 See 17 CFR 242.1001(a)(2)(v) (requiring
policies and procedures for business continuity and
disaster recovery plans that including maintaining
backup and recovery capabilities sufficiently
resilient and geographically diverse and that are
reasonably designed to achieve next business day
resumption of trading and two-hour resumption of
critical SCI systems following a wide-scale
disruption).
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Federal Register / Vol. 81, No. 155 / Thursday, August 11, 2016 / Notices
51 the authority to determine whether to
use the Exchange’s Disaster Recovery
Facility. Rule 51(b) currently provides
that, except as may be otherwise
determined by the Exchange Board of
Directors, the Chief Executive Officer
(‘‘CEO’’) of the Exchange shall have the
power to: (i) Halt or suspend trading in
some or all securities trading on the
Exchange; (ii) extend the hours for the
transaction of business on the Exchange;
(iii) close some or all Exchange
facilities; or (iv) determine the duration
of any halt, suspension or closing
undertaken under this Rule. Rule 51(c)
specifies the circumstances under
which the CEO may take these actions,
which includes a loss or interruption of
facilities utilized by the Exchange.16
The Exchange believes that the
authority to determine to trade
Exchange-traded securities in its
Disaster Recovery Facility should
similarly be vested with the CEO of the
Exchange. Specifically, the CEO may
already take the above-specified actions
under Rule 51(b) if there is a loss or
interruption of facilities utilized by the
Exchange. The Exchange believes that a
loss or interruption of the Exchange’s
primary data center is an event
contemplated in Rule 51(c), and
therefore the authority to take an action
based on that event, whether
suspending trading or determining to
use the Disaster Recovery Facility,
should be determined by the same
person. Accordingly, the Exchange
proposes to add proposed Rule 51(b)(v)
to specify that the CEO of the Exchange
may determine to trade securities on the
Exchange’s Disaster Recovery Facility
pursuant to Rule 49.17
The Exchange also proposes nonsubstantive amendments to Rule 51(b)
to provide that the CEO ‘‘may take any
of the following actions’’ rather than to
provide that the CEO ‘‘shall have the
power to.’’ The Exchange believes the
proposed amendment makes clear that
the CEO may invoke one or more of the
actions specified in Rule 51(b)(i)–(v).
For the same reason, the Exchange
proposes to make a conforming
amendment to Rule 51(c) to specify that
the CEO shall take any of the actions
described in paragraph (b) above.
16 See
Rule 51(c)(1).
Rule 1—Equities, the CEO may formally
designate one or more qualified employees of
Intercontinental Exchange Group, Inc. to act in
place of any person named in a rule as having
authority to act under such rule in the event that
the named person in the rule is not available to
administer that rule. Because Rule 1—Equities
already provides the authority to designated
alternate qualified employees, the Exchange would
not include rule text from current Rule 49(a)(3)(B)
regarding who may be designated to act in proposed
Rule 51 in the absence of the CEO.
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17 Under
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The Exchange proposes that the
following would apply if the Exchange
determines under Rule 51 to trade
Exchange-traded securities on its
Disaster Recovery Facility:
• Proposed Rule 49(a)(2)(A) would
provide that the 11 Wall Street facilities
would not be available for trading if the
Exchange is operating from its Disaster
Recovery Facility. Because the trading
systems in the Exchange’s Disaster
Recovery Facility would not have
connectivity to DMM and Floor broker
trading systems, the Exchange would
operate as a fully electronic exchange
when operating out of its Disaster
Recovery Facility, even if 11 Wall Street
facilities were not impacted.
• Proposed Rule 49(a)(2)(B) would
provide that opening and reopening
auctions would be subject to Rule
123D(a)(2)–(6)—Equities and closing
auctions would be subject to
Supplementary Material .10 to Rule
123C—Equities. Because there would be
no Trading Floor or DMM connectivity,
the Exchange proposes that, when
operating out of its Disaster Recovery
Facility, the Exchange would facilitate
all openings, reopenings, and closings,
as provided for in the enumerated rules.
As noted above, this is the Exchange’s
current business continuity plan if the
11 Wall Street facilities were
unavailable, but the Exchange could
continue to operate out of its primary
data center.
• Proposed Rule 49(a)(2)(C) would
provide that any unexecuted orders
entered into Exchange systems before
trading on the Disaster Recovery Facility
begins would be deemed cancelled and
would be purged from Exchange
systems. This proposed rule text is
based on current Rule 49(b)(1)(B), which
provides that when an Emergency
Condition is declared, the Exchange will
purge any unexecuted orders from the
Exchange’s own systems and facilities
as soon as practicable following
declaration of the Emergency Condition.
The Exchange proposes to modify this
text in proposed Rule 49(a)(2)(C) to
make clear that any unexecuted orders
entered into Exchange systems before
trading on the Disaster Recovery Facility
begins would be deemed cancelled
because depending on the scope of the
disruption, the Exchange may not be
able to transmit cancellation messages
for unexecuted orders.
• Proposed Rule 49(a)(2)(D) would
provide that member organizations
registered as DMMs would not be
subject to any DMM obligations or
benefits under Exchange rules while
securities trade on the Disaster Recovery
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Facility.18 DMMs would not be subject
to any such obligations or benefits
because the Exchange will not maintain
systems that support DMM quoting at its
Disaster Recovery Facility. DMMs that
route orders to the Disaster Recovery
Facility would trade no differently than
other market participants that
electronically enter orders at the
Exchange, and would be subject to the
fees and credits applicable to non-DMM
transactions.
Proposed Rule 49(a)(3) would provide
that member organizations wishing to
trade on the Exchange’s Disaster
Recovery Facility would be responsible
for having contingency plans for
establishing connectivity to such facility
and changing routing instructions for
their order entry systems to send bids
and offers in Exchange-traded securities
to such facility. This proposed rule text
is based on current Rule 49(b)(3), but
references connectivity to the
Exchange’s Disaster Recovery Facility
rather than connectivity to NYSE Arca.
As noted above, because the Exchange
would no longer be designating NYSE
Arca to act on behalf of and at the
direction of the Exchange, the Exchange
would not include the provisions of
current Rule 49(a)(1) and (b) relating to
such designation. The Exchange further
proposes that the term ‘‘Emergency
Condition’’ and related definition,
described in current Rule 49(a)(1), (2),
and (3)(A), would not be included in
proposed Rule 49 because this language
has been superseded by Regulation SCI
Rule 1001(a)(2)(v).19 Likewise, the
Exchange would not retain the current
Rule 49(c)(2) requirement that the
ability to invoke Rule 49(a) would be
operative for only a ten-day period. The
Exchange believes that, in the event of
a wide-scale disruption, ten days may
not be enough time.
In addition, the Exchange is not
proposing to include the subject of
current Rule 49(b)(2)(A) and (B) in
proposed Rule 49. In the Exchange’s
proposed Disaster Recovery Facility, the
Exchange would be reporting all quotes
and trades to the SIP as quotes and
trades of the Exchange. In addition, the
Exchange would be disseminating
regulatory messages for its listed
securities, including notifications of a
regulatory halt and resumption of
trading thereafter, trading pause and
resumption of trading thereafter, and
Short Sale Price Test trigger and lifting
thereafter. Accordingly, NYSE Arca
18 See, e.g., Rules 103B(I)—Equities (quoting
requirements for allocation process of listed
securities) and 104—Equities (Dealings and
Responsibilities of DMMs).
19 See 17 CFR 242.1001(a)(2)(v).
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sradovich on DSK3GMQ082PROD with NOTICES
would not be disseminating this
information on behalf of the Exchange
in the event it determines to trade
Exchange-traded securities on its
Disaster Recovery Facility.
Finally, the Exchange does not
propose to retain the language in current
Rule 49(c)(1), regarding notification
requirements to the Commission as
these have also been superseded by the
notification requirements in Regulation
SCI.20 Accordingly, current Rule
49(c)(1) is obsolete and does not need to
be included in proposed Rule 49(a).
As discussed above, proposed Rule
49(b)(N) would include all the text of
current Rule 431, with non-substantive
differences to update sub-paragraph
numbering and rule paragraph cross
references and to reference member
organizations. The Exchange proposes
to designate this paragraph of proposed
Rule 49(b)(N) with an ‘‘N’’ to
distinguish it from current Rule 49(b), as
both would be operative at the same
time.
*
*
*
*
*
As discussed above in footnote 3,
paragraph (a) of proposed Rule 49
would not be operative until the
Exchange has an opportunity to test it
with Exchange member organizations.
The Exchange does not anticipate that
the DR Facility will be available for
testing in production until late in the
fourth quarter of 2016. The Exchange
will file a separate proposed rule change
to establish the operative date of
paragraph (a) of proposed Rule 49,
delete current ‘‘Rule 49—Equities.
Emergency Powers,’’ delete the
preamble to proposed Rule 49, and
delete the ‘‘N’’ designation to proposed
Rule 49(b). The operative date
established in such separate proposed
rule change will also be announced via
Trader Update. The proposed changes to
Rule 49(b)(N), 51, and Rule 431 will be
operative on approval of this proposed
rule change.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,21 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,22 in particular, because it is
designed to promote just and equitable
principles of trade and 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. Specifically, the
Exchange believes that the proposed
20 17
CFR 242.1002(b)(1).
U.S.C. 78f(b).
22 15 U.S.C. 78f(b)(5).
rule change will assist in facilitating
trading in Exchange-traded securities in
the event the Exchange experiences a
disruption in its primary data center.
Accordingly, the proposed rule change
is designed to protect investors and the
public interest by providing for minimal
interruption of Exchange trading if the
Exchange experiences a wide-scale
disruption. The proposed rule change
would therefore remove impediments to
and perfect the mechanism of a free and
open market and a national market
system by providing for a business
continuity and disaster recovery plan
that includes maintaining backup and
recovery capabilities sufficiently
resilient and geographically diverse and
that is reasonably designed to achieve
next business day resumption of trading
and two-hour resumption of critical
Exchange systems following a widescale disruption, as required by
Regulation SCI.23 Moreover, the
Exchange believes that the proposed
rule change would strengthen business
continuity planning for itself and its
member organizations, thereby
benefiting market participants and
investors generally.
More specifically, 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 under the proposed
disaster recovery plan, the Exchange
would maintain its own facility within
the Disaster Recovery Facility that
would disseminate to the SIP all quote
and trade information, including
opening, reopening, and closing auction
information and intra-day quotes and
trades, as well as regulatory messages,
as Exchange messages.
The Exchange further believes that the
proposed rule change to vest the
authority to determine to trade
securities on the Exchange’s Disaster
Recovery Facility pursuant to Rule 49
with the CEO, as provided for in
proposed Rule 51(b)(v), would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
would consolidate in a single rule the
individual with authority to take
specified actions. This proposed rule
change would also streamline the
Exchange’s rules and procedures by
providing for consistent authority of
who may act when there is a loss or
interruption of facilities utilized by the
Exchange.
The Exchange also believes that,
because the Exchange is now subject to
the requirements of Regulation SCI,
21 15
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17:44 Aug 10, 2016
certain elements of current Rule 49 have
been superseded, and therefore it would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system for
proposed Rule 49(a) not to include
specified provisions of the current rule.
Specifically, the Exchange does not
believe that proposed Rule 49(a) needs
to be limited to what is currently
defined as an ‘‘Emergency Condition’’ or
be invoked for only ten days because the
proposed rule would be invoked as part
of a robust business continuity and
disaster recovery plan in the event of a
wide-scale disruption, as required by
Rule 1001(a)(2)(v) of Regulation SCI.24
For similar reasons, the Exchange does
not believe that proposed Rule 49 needs
separate provisions specifying notice
requirements to the Commission
because these are now required by Rule
1002(b) of Regulation SCI.25
Finally, the Exchange believes that
moving the text of current Rule 431
relating to equity member organizations
to proposed Rule 49(b)(N), amending
Rule 431 to pertain only to ATP
Holders, and renaming Rule 49 as
‘‘Exchange Business Continuity and
Disaster Recovery Plans and Mandatory
Testing,’’ would remove impediments to
and perfect the mechanism of a free and
open market and a national market
system because it would consolidate
into a single rule related content, i.e.,
the Exchange’s proposed equity disaster
recovery plan and mandatory testing
requirements related to such plan. Thus,
the proposed rule change would make
the Exchange’s rules easier to navigate
for Exchange equity members, the
Commission, and the public.
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 designed to
facilitate trading in Exchange-listed
securities on its Disaster Recovery
Facility. As such, the Exchange believes
that the proposed rule change would
promote competition for the benefit of
market participants and investors
generally because it provides
transparency in terms of which rules
would govern trading in Exchangetraded securities if they trade on the
Exchange’s Disaster Recovery Facility.
24 17
23 See
Jkt 238001
PO 00000
supra note 4.
Frm 00062
Fmt 4703
25 17
Sfmt 4703
53179
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CFR 242.1001(a)(2)(v).
CFR 242.1002(b).
11AUN1
53180
Federal Register / Vol. 81, No. 155 / Thursday, August 11, 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 solicited
or received with respect to the proposed
rule change.
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 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
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEMKT–2016–68 on the subject line.
sradovich on DSK3GMQ082PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEMKT–2016–68. 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
17:44 Aug 10, 2016
Jkt 238001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2016–19053 Filed 8–10–16; 8:45 am]
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:
VerDate Sep<11>2014
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEMKT–2016–68, and should be
submitted on or before September 1,
2016.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78484; File No. SR–NYSE–
2016–48]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change, as
Modified by Amendment No. 1,
Amending NYSE Rule 49 Regarding:
(1) The Exchange’s Emergency
Powers; (2) the Exchange’s Disaster
Recovery Plans; and (3) Exchange
Backup Systems and Mandatory
Testing
August 5, 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 29,
2016, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) 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.
26 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
PO 00000
Frm 00063
Fmt 4703
Sfmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
NYSE Rule 49 (Emergency Powers) by
(1) replacing the text of current Rule 49
with the Exchange’s proposed disaster
recovery plans; and (2) moving the text
of current Rule 438 (Exchange Backup
Systems and Mandatory Testing) to Rule
49. This Amendment No. 1 supersedes
the original filing in its entirety. 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 49, which addresses the
Exchange’s emergency powers, by (1)
replacing the text of current Rule 49
with the Exchange’s proposed disaster
recovery plans; and (2) moving the text
of current Rule 438 (Exchange Backup
Systems and Mandatory Testing) to Rule
49 with no substantive changes.
The Exchange proposes to amend
Rule 49 in two ways. First, the Exchange
proposes to replace the current disaster
recovery plan, pursuant to which NYSE
Arca, Inc. (‘‘NYSE Arca’’), the
Exchange’s affiliate, acts on behalf of
and at the direction of the Exchange for
auctions and specified regulatory
messages in Exchange-listed securities,
with a new disaster recovery plan that
the Exchange would implement if the
Exchange’s primary data center is
impaired. Under the proposed disaster
recovery plan, the Exchange would no
longer rely on NYSE Arca to act on its
behalf. Rather, the Exchange would
operate as a fully electronic exchange
under its own trading rules and would
maintain its own order book in its
E:\FR\FM\11AUN1.SGM
11AUN1
]]>Agencies
[Federal Register Volume 81, Number 155 (Thursday, August 11, 2016)]
[Notices]
[Pages 53176-53180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19053]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78483; File No. SR-NYSEMKT-2016-68]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of
Proposed Rule Change, Rule Change, as Modified by Amendment No. 1,
Amending NYSE Rule 49--Equities Regarding: (1) The Exchange's Emergency
Powers; (2) the Exchange's Disaster Recovery Plans; and (3) Exchange
Backup Systems and Mandatory Testing
August 5, 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 29, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE
MKT'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I 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 Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 49--Equities (Emergency Powers)
by (1) replacing the text of current Rule 49--Equities with the
Exchange's proposed disaster recovery plans; and (2) moving the text of
current Rule 431 (Exchange Backup Systems and Mandatory Testing)
relating to Exchange member organizations to Rule 49--Equities. This
Amendment No. 1 supersedes the original filing in its entirety. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 49--Equities (``Rule 49''),
which addresses the Exchange's emergency powers, by (1) replacing the
text of current Rule 49 with the Exchange's proposed disaster recovery
plans; and (2) moving the text of current Rule 431 (Exchange Backup
Systems and Mandatory Testing) relating to Exchange equity member
organizations to Rule 49 with no substantive changes. The Exchange
further proposes to amend Rules 0--Equities and 431 to specify that
Rule 431 would govern Exchange Backup Systems and Mandatory Testing for
Exchange ATP Holders only.
The Exchange proposes to amend Rule 49 in two ways. First, the
Exchange proposes to replace the current disaster recovery plan,
pursuant to which NYSE Arca, Inc. (``NYSE Arca''), the Exchange's
affiliate, will act on behalf of and at the direction of the Exchange
for auctions and specified regulatory messages in Exchange-listed
securities, with a new disaster recovery plan that the Exchange would
implement if the Exchange's primary data center is impaired. Under the
proposed disaster recovery plan, the Exchange would no longer rely on
NYSE Arca to act on its behalf. Rather, the Exchange would operate as a
fully electronic exchange under its own trading rules and would
maintain its own order book in its disaster recovery facility. In
addition, quotes and trades would be published to the securities
information processor (``SIP'') as quotes and trades of the Exchange.
To reflect this change, the Exchange proposes to delete Rule 49
(Emergency Powers) in its entirety and replace it with new proposed
Rule 49(a).\4\
---------------------------------------------------------------------------
\4\ Because the Exchange would not implement proposed Rule 49(a)
until after an opportunity to test it with Exchange member
organizations, the Exchange proposes to retain current Rule 49 on
its books and not delete it until after proposed Rule 49(a) is
approved. The Exchange also proposes to file a separate proposed
rule change to establish the operative date of paragraph (a) of
proposed Rule 49 and delete the current version of the rule. To
reduce the potential for any confusion regarding which version of
the rule governs, the Exchange proposes to add the following
preamble to current Rule 49: ``This version of Rule 49--equities
will remain operative until the proposed rule changes described in
SR-NYSEMKT-2016-68 are approved and the Exchange files a separate
proposed rule change to delete this version of Rule 49--Equities and
preamble and to establish the operative date of paragraph (a) of
`Rule 49--Equities. Exchange Business Continuity and Disaster
Recovery Plans and Mandatory Testing.' Subject to such separate
proposed rule change, the Exchange will announce via Trader Update
the operative date of the deletion of this Rule and implementation
of paragraph (a) of Rule 49--Equities. Exchange Business Continuity
and Disaster Recovery Plans and Mandatory Testing.'' The Exchange
also proposes to add a preamble to proposed Rule 49, which would
provide: ``The Exchange will file a separate proposed rule change to
establish the operative date of paragraph (a) of this version of
Rule 49--Equities and to delete `Rule 49--Equities. Emergency
Powers' and this preamble. Until such time, `Rule 49--Equities.
Emergency Powers' will remain operative. Subject to such separate
proposed rule change, the Exchange will announce via Trader Update
the operative date of paragraph (a) of this Rule and deletion of
`Rule 49--Equities. Emergency Powers.' ''
---------------------------------------------------------------------------
Second, the Exchange proposes to move text from Rule 431 governing
Exchange Backup Systems and Mandatory Testing relating to equity member
organizations, to proposed Rule 49(b)(N) with only non-substantive
changes to update sub-paragraph numbering and cross references. Because
Rule 431 relates to mandatory testing of the Exchange's disaster
recovery facility, as required by Rule 1004 of Regulation SCI,\5\ the
Exchange believes that moving the rule text from Rule 431 to Rule 49
for its equity member organizations would make the Exchange's rules
easier to navigate by consolidating equity rules with a common theme
into a single rule. To incorporate that proposed Rule 49 would also
cover mandatory testing requirements for its equity member
organizations, the Exchange also proposes to change the title of Rule
49 to ``Exchange Business Continuity and
[[Page 53177]]
Disaster Recovery Plans and Mandatory Testing.''
---------------------------------------------------------------------------
\5\ 17 CFR 242.1004.
---------------------------------------------------------------------------
Because Rule 431 would pertain only to options trading, the
Exchange proposes to amend that rule to delete references to the terms
``member,'' ``member organization,'' and ``designated market maker''
and use the term ``ATP Holder'' instead. The Exchange also proposes to
amend Rule 0--Equities to remove the reference to Rule 431 as being
applicable to equities trading.
Background
In 2012, the Exchange adopted Rule 49 to provide the Exchange with
the authority to declare an Emergency Condition with respect to trading
on or through the systems and facilities of the Exchange and to act as
necessary in the public interest and for the protection of
investors.\6\ The authority in Rule 49 may be exercised when, due to an
Emergency Condition,\7\ the Exchange's systems and facilities located
at 11 Wall Street, New York, New York, including the Trading Floor,
cannot be utilized, or if the Exchange's primary data center is
impaired. If such an Emergency Condition is declared, a qualified
Exchange officer may designate NYSE Arca to serve as a backup facility
so that the Exchange, as a self-regulatory organization (``SRO''), can
remain operational.\8\ NYSE Arca also would continue to operate
simultaneously.\9\ In September 2014, the Exchange further amended Rule
49 to revise how certain messages are disseminated.\10\
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 70822 (November 6,
2013), 78 FR 68128 (November 13, 2013) (SR-NYSEMKT-2013-66) (``2013
Approval Order''). At the same time, NYSE Arca amended NYSE Arca
Equities Rule 2.100 to provide that NYSE Arca Equities would receive
and process bids and offers in Exchange-listed securities on behalf
of the Exchange. See id. (SR-NYSEArca-2013-77).
\7\ Under current Rule 49, an ``Emergency Condition'' means an
emergency as defined in Section 12(k)(7) of the Act, which is ``(A)
a major market disturbance characterized by or constituting--(i)
sudden and excessive fluctuations of securities prices generally, or
a substantial threat thereof, that threaten fair and orderly
markets; or (ii) a substantial disruption of the safe or efficient
operation of the national system for clearance and settlement of
transactions in securities, or a substantial threat thereof; or (B)
a major disturbance that substantially disrupts, or threatens to
substantially disrupt--(i) the functioning of securities markets,
investment companies, or any other significant portion or segment of
the securities markets; or (ii) the transmission or processing of
securities transactions.'' 15 U.S.C. 78l(k)(7).
\8\ NYSE Arca trades equity securities on the systems and
facilities of its wholly owned subsidiary, NYSE Arca Equities, Inc.,
referred to as the ``NYSE Arca Marketplace.'' For the purposes of
this filing and in the text of Rule 49, these shall be referred to
collectively as the systems and facilities of NYSE Arca, or simply
NYSE Arca.
\9\ The Exchange's affiliate, New York Stock Exchange LLC
(``NYSE''), originally adopted a version of NYSE Rule 49 under which
quotes and trades of NYSE-listed securities would continue to be
reported to the SIP as quotes and trades of the NYSE. That plan was
referred to as the ``Print as N'' plan. NYSE MKT did not have a
corollary ``Print as A'' plan. When the NYSE amended its NYSE Rule
49 in 2013 and 2014, the Exchange adopted an identical version of
that rule as Rule 49. See 2013 Approval Order, supra note 5 (SR-
NYSE-2013-54).
\10\ See Securities Exchange Act Release No. 73029 (Sept. 9,
2014), 79 FR 55061 (Sept. 15, 2014) (SR-NYSEMKT-2014-75) (``2014
Approval Order'').
---------------------------------------------------------------------------
Under Rule 49, if the Exchange declares an Emergency Condition, the
Exchange will halt all trading on the Exchange's systems and facilities
and purge any unexecuted orders from the Exchange's own systems and
facilities as soon as practicable following declaration of the
Emergency Condition.\11\ Beginning the next trading day, NYSE Arca, on
behalf of and at the direction of the Exchange, will disseminate the
official opening, re-opening, and closing trades of Exchange-listed
securities to the Consolidated Tape as message of the Exchange, and any
notification for Exchange listed securities to the Consolidated
Quotation System of a regulatory halt and resumption of trading
thereafter, trading pause and resumption of trading thereafter, and
Short Sale Price Test trigger and lifting thereafter, as messages of
the Exchange.\12\
---------------------------------------------------------------------------
\11\ See Rule 49(b)(1).
\12\ See Rule 49(b)(2)(A)(i) and (ii).
---------------------------------------------------------------------------
In addition, bids and offers for Exchange-listed securities entered
on or through the systems and facilities of NYSE Arca during the
Emergency Condition will be reported to the Consolidated Quotation
system as bids and offers of NYSE Arca, except that the opening quote
will be reported to the Consolidated Quotation System as a bid and/or
offer of both the Exchange and NYSE Arca and any re-opening quote will
be reported to the Consolidated Quotation System as a bid and/or offer
of the Exchange only. Bids and offers for Exchange-listed securities
executed on or through the systems and facilities of NYSE Arca during
the Emergency Condition will be reported to the Consolidated Tape as
executions of NYSE Arca, except for executions in the opening, re-
opening, or closing transactions, which will be reported as Exchange
executions and Exchange volume only.\13\ Because intra-day quotes and
trades in Exchange-listed securities would be reported to the SIP as
quotes and trades of NYSE Arca (except for the opening, reopening and
closing trades), this disaster recovery plan is referred to the ``Print
as P'' plan.
---------------------------------------------------------------------------
\13\ See Rule 49(2)(B).
---------------------------------------------------------------------------
Since adopting Rule 49, the Exchange has amended its rules to
provide for Exchange-facilitated procedures for opening and closing
securities if either a Designated Market Maker (``DMM'') or the
Exchange's 11 Wall Street facilities are unavailable.\14\ Because the
Exchange can now operate even in the absence of 11 Wall Street
facilities, and because the Exchange's Print as P disaster recovery
plan is available in the exchange's secondary data center, Rule 49
would be invoked only if an Emergency Condition impacted the Exchange's
primary data center. To date, the Exchange has not invoked Rule 49.
---------------------------------------------------------------------------
\14\ See Rules 123D(a)(2)-(6)--Equities (describing process for
the Exchange to facilitate the open and reopen of trading) and
Supplementary Material .10 to Rule 123C--Equities (describing
process for the Exchange to facilitate the close of trading).
---------------------------------------------------------------------------
Proposed Rule Change
Proposed Rule 49(a) would govern the Exchange's Disaster Recovery
Facility. As proposed, Rule 49(a)(1) would provide that, as part of its
business continuity and disaster recovery plans, the Exchange maintains
a ``Disaster Recovery Facility,'' which is a secondary data center
located in a geographically diverse location, as required by Regulation
SCI.\15\ This proposed rule text is intended to be definitional, and
describes that the Exchange maintains a secondary data center.
---------------------------------------------------------------------------
\15\ See 17 CFR 242.1001(a)(2)(v) (requiring policies and
procedures for business continuity and disaster recovery plans that
including maintaining backup and recovery capabilities sufficiently
resilient and geographically diverse and that are reasonably
designed to achieve next business day resumption of trading and two-
hour resumption of critical SCI systems following a wide-scale
disruption).
---------------------------------------------------------------------------
Proposed Rule 49(a)(2) would specify the procedures that the
Exchange would follow if the Exchange determines under Rule 51--
Equities (``Rule 51'') to trade Exchange-traded securities on its
Disaster Recovery Facility. Currently, Rule 49(a)(1) provides that a
qualified Exchange officer shall have the authority to declare an
Emergency Condition and current Rule 49(a)(3)(B) defines the term
``qualified Exchange officer'' to mean the ICE Chief Executive Officer
or his or her designee, or the Chief Regulatory Officer of the Exchange
or his or her designee. The rule further provides that in the event
that none of these individuals is able to act due to incapacitation,
the most senior surviving officer of ICE or the Exchange shall be a
``qualified Exchange officer'' for purposes of Rule 49.
Rather than specifying separately in Rule 49 who can act under that
rule, the Exchange proposes to include in Rule
[[Page 53178]]
51 the authority to determine whether to use the Exchange's Disaster
Recovery Facility. Rule 51(b) currently provides that, except as may be
otherwise determined by the Exchange Board of Directors, the Chief
Executive Officer (``CEO'') of the Exchange shall have the power to:
(i) Halt or suspend trading in some or all securities trading on the
Exchange; (ii) extend the hours for the transaction of business on the
Exchange; (iii) close some or all Exchange facilities; or (iv)
determine the duration of any halt, suspension or closing undertaken
under this Rule. Rule 51(c) specifies the circumstances under which the
CEO may take these actions, which includes a loss or interruption of
facilities utilized by the Exchange.\16\
---------------------------------------------------------------------------
\16\ See Rule 51(c)(1).
---------------------------------------------------------------------------
The Exchange believes that the authority to determine to trade
Exchange-traded securities in its Disaster Recovery Facility should
similarly be vested with the CEO of the Exchange. Specifically, the CEO
may already take the above-specified actions under Rule 51(b) if there
is a loss or interruption of facilities utilized by the Exchange. The
Exchange believes that a loss or interruption of the Exchange's primary
data center is an event contemplated in Rule 51(c), and therefore the
authority to take an action based on that event, whether suspending
trading or determining to use the Disaster Recovery Facility, should be
determined by the same person. Accordingly, the Exchange proposes to
add proposed Rule 51(b)(v) to specify that the CEO of the Exchange may
determine to trade securities on the Exchange's Disaster Recovery
Facility pursuant to Rule 49.\17\
---------------------------------------------------------------------------
\17\ Under Rule 1--Equities, the CEO may formally designate one
or more qualified employees of Intercontinental Exchange Group, Inc.
to act in place of any person named in a rule as having authority to
act under such rule in the event that the named person in the rule
is not available to administer that rule. Because Rule 1--Equities
already provides the authority to designated alternate qualified
employees, the Exchange would not include rule text from current
Rule 49(a)(3)(B) regarding who may be designated to act in proposed
Rule 51 in the absence of the CEO.
---------------------------------------------------------------------------
The Exchange also proposes non-substantive amendments to Rule 51(b)
to provide that the CEO ``may take any of the following actions''
rather than to provide that the CEO ``shall have the power to.'' The
Exchange believes the proposed amendment makes clear that the CEO may
invoke one or more of the actions specified in Rule 51(b)(i)-(v). For
the same reason, the Exchange proposes to make a conforming amendment
to Rule 51(c) to specify that the CEO shall take any of the actions
described in paragraph (b) above.
The Exchange proposes that the following would apply if the
Exchange determines under Rule 51 to trade Exchange-traded securities
on its Disaster Recovery Facility:
Proposed Rule 49(a)(2)(A) would provide that the 11 Wall
Street facilities would not be available for trading if the Exchange is
operating from its Disaster Recovery Facility. Because the trading
systems in the Exchange's Disaster Recovery Facility would not have
connectivity to DMM and Floor broker trading systems, the Exchange
would operate as a fully electronic exchange when operating out of its
Disaster Recovery Facility, even if 11 Wall Street facilities were not
impacted.
Proposed Rule 49(a)(2)(B) would provide that opening and
reopening auctions would be subject to Rule 123D(a)(2)-(6)--Equities
and closing auctions would be subject to Supplementary Material .10 to
Rule 123C--Equities. Because there would be no Trading Floor or DMM
connectivity, the Exchange proposes that, when operating out of its
Disaster Recovery Facility, the Exchange would facilitate all openings,
reopenings, and closings, as provided for in the enumerated rules. As
noted above, this is the Exchange's current business continuity plan if
the 11 Wall Street facilities were unavailable, but the Exchange could
continue to operate out of its primary data center.
Proposed Rule 49(a)(2)(C) would provide that any
unexecuted orders entered into Exchange systems before trading on the
Disaster Recovery Facility begins would be deemed cancelled and would
be purged from Exchange systems. This proposed rule text is based on
current Rule 49(b)(1)(B), which provides that when an Emergency
Condition is declared, the Exchange will purge any unexecuted orders
from the Exchange's own systems and facilities as soon as practicable
following declaration of the Emergency Condition. The Exchange proposes
to modify this text in proposed Rule 49(a)(2)(C) to make clear that any
unexecuted orders entered into Exchange systems before trading on the
Disaster Recovery Facility begins would be deemed cancelled because
depending on the scope of the disruption, the Exchange may not be able
to transmit cancellation messages for unexecuted orders.
Proposed Rule 49(a)(2)(D) would provide that member
organizations registered as DMMs would not be subject to any DMM
obligations or benefits under Exchange rules while securities trade on
the Disaster Recovery Facility.\18\ DMMs would not be subject to any
such obligations or benefits because the Exchange will not maintain
systems that support DMM quoting at its Disaster Recovery Facility.
DMMs that route orders to the Disaster Recovery Facility would trade no
differently than other market participants that electronically enter
orders at the Exchange, and would be subject to the fees and credits
applicable to non-DMM transactions.
---------------------------------------------------------------------------
\18\ See, e.g., Rules 103B(I)--Equities (quoting requirements
for allocation process of listed securities) and 104--Equities
(Dealings and Responsibilities of DMMs).
---------------------------------------------------------------------------
Proposed Rule 49(a)(3) would provide that member organizations
wishing to trade on the Exchange's Disaster Recovery Facility would be
responsible for having contingency plans for establishing connectivity
to such facility and changing routing instructions for their order
entry systems to send bids and offers in Exchange-traded securities to
such facility. This proposed rule text is based on current Rule
49(b)(3), but references connectivity to the Exchange's Disaster
Recovery Facility rather than connectivity to NYSE Arca.
As noted above, because the Exchange would no longer be designating
NYSE Arca to act on behalf of and at the direction of the Exchange, the
Exchange would not include the provisions of current Rule 49(a)(1) and
(b) relating to such designation. The Exchange further proposes that
the term ``Emergency Condition'' and related definition, described in
current Rule 49(a)(1), (2), and (3)(A), would not be included in
proposed Rule 49 because this language has been superseded by
Regulation SCI Rule 1001(a)(2)(v).\19\ Likewise, the Exchange would not
retain the current Rule 49(c)(2) requirement that the ability to invoke
Rule 49(a) would be operative for only a ten-day period. The Exchange
believes that, in the event of a wide-scale disruption, ten days may
not be enough time.
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\19\ See 17 CFR 242.1001(a)(2)(v).
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In addition, the Exchange is not proposing to include the subject
of current Rule 49(b)(2)(A) and (B) in proposed Rule 49. In the
Exchange's proposed Disaster Recovery Facility, the Exchange would be
reporting all quotes and trades to the SIP as quotes and trades of the
Exchange. In addition, the Exchange would be disseminating regulatory
messages for its listed securities, including notifications of a
regulatory halt and resumption of trading thereafter, trading pause and
resumption of trading thereafter, and Short Sale Price Test trigger and
lifting thereafter. Accordingly, NYSE Arca
[[Page 53179]]
would not be disseminating this information on behalf of the Exchange
in the event it determines to trade Exchange-traded securities on its
Disaster Recovery Facility.
Finally, the Exchange does not propose to retain the language in
current Rule 49(c)(1), regarding notification requirements to the
Commission as these have also been superseded by the notification
requirements in Regulation SCI.\20\ Accordingly, current Rule 49(c)(1)
is obsolete and does not need to be included in proposed Rule 49(a).
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\20\ 17 CFR 242.1002(b)(1).
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As discussed above, proposed Rule 49(b)(N) would include all the
text of current Rule 431, with non-substantive differences to update
sub-paragraph numbering and rule paragraph cross references and to
reference member organizations. The Exchange proposes to designate this
paragraph of proposed Rule 49(b)(N) with an ``N'' to distinguish it
from current Rule 49(b), as both would be operative at the same time.
* * * * *
As discussed above in footnote 3, paragraph (a) of proposed Rule 49
would not be operative until the Exchange has an opportunity to test it
with Exchange member organizations. The Exchange does not anticipate
that the DR Facility will be available for testing in production until
late in the fourth quarter of 2016. The Exchange will file a separate
proposed rule change to establish the operative date of paragraph (a)
of proposed Rule 49, delete current ``Rule 49--Equities. Emergency
Powers,'' delete the preamble to proposed Rule 49, and delete the ``N''
designation to proposed Rule 49(b). The operative date established in
such separate proposed rule change will also be announced via Trader
Update. The proposed changes to Rule 49(b)(N), 51, and Rule 431 will be
operative on approval of this proposed rule change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\21\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\22\ in particular, because it
is designed to promote just and equitable principles of trade and 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. Specifically, the Exchange believes
that the proposed rule change will assist in facilitating trading in
Exchange-traded securities in the event the Exchange experiences a
disruption in its primary data center. Accordingly, the proposed rule
change is designed to protect investors and the public interest by
providing for minimal interruption of Exchange trading if the Exchange
experiences a wide-scale disruption. The proposed rule change would
therefore remove impediments to and perfect the mechanism of a free and
open market and a national market system by providing for a business
continuity and disaster recovery plan that includes maintaining backup
and recovery capabilities sufficiently resilient and geographically
diverse and that is reasonably designed to achieve next business day
resumption of trading and two-hour resumption of critical Exchange
systems following a wide-scale disruption, as required by Regulation
SCI.\23\ Moreover, the Exchange believes that the proposed rule change
would strengthen business continuity planning for itself and its member
organizations, thereby benefiting market participants and investors
generally.
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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(5).
\23\ See supra note 4.
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More specifically, 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 under the proposed
disaster recovery plan, the Exchange would maintain its own facility
within the Disaster Recovery Facility that would disseminate to the SIP
all quote and trade information, including opening, reopening, and
closing auction information and intra-day quotes and trades, as well as
regulatory messages, as Exchange messages.
The Exchange further believes that the proposed rule change to vest
the authority to determine to trade securities on the Exchange's
Disaster Recovery Facility pursuant to Rule 49 with the CEO, as
provided for in proposed Rule 51(b)(v), would remove impediments to and
perfect the mechanism of a free and open market and a national market
system because it would consolidate in a single rule the individual
with authority to take specified actions. This proposed rule change
would also streamline the Exchange's rules and procedures by providing
for consistent authority of who may act when there is a loss or
interruption of facilities utilized by the Exchange.
The Exchange also believes that, because the Exchange is now
subject to the requirements of Regulation SCI, certain elements of
current Rule 49 have been superseded, and therefore it would remove
impediments to and perfect the mechanism of a free and open market and
a national market system for proposed Rule 49(a) not to include
specified provisions of the current rule. Specifically, the Exchange
does not believe that proposed Rule 49(a) needs to be limited to what
is currently defined as an ``Emergency Condition'' or be invoked for
only ten days because the proposed rule would be invoked as part of a
robust business continuity and disaster recovery plan in the event of a
wide-scale disruption, as required by Rule 1001(a)(2)(v) of Regulation
SCI.\24\ For similar reasons, the Exchange does not believe that
proposed Rule 49 needs separate provisions specifying notice
requirements to the Commission because these are now required by Rule
1002(b) of Regulation SCI.\25\
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\24\ 17 CFR 242.1001(a)(2)(v).
\25\ 17 CFR 242.1002(b).
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Finally, the Exchange believes that moving the text of current Rule
431 relating to equity member organizations to proposed Rule 49(b)(N),
amending Rule 431 to pertain only to ATP Holders, and renaming Rule 49
as ``Exchange Business Continuity and Disaster Recovery Plans and
Mandatory Testing,'' would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because it would consolidate into a single rule related content, i.e.,
the Exchange's proposed equity disaster recovery plan and mandatory
testing requirements related to such plan. Thus, the proposed rule
change would make the Exchange's rules easier to navigate for Exchange
equity members, the Commission, and the public.
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
designed to facilitate trading in Exchange-listed securities on its
Disaster Recovery Facility. As such, the Exchange believes that the
proposed rule change would promote competition for the benefit of
market participants and investors generally because it provides
transparency in terms of which rules would govern trading in Exchange-
traded securities if they trade on the Exchange's Disaster Recovery
Facility.
[[Page 53180]]
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
Within 45 days of the date of publication of this notice in the
Federal Register or 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 the 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-NYSEMKT-2016-68 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2016-68. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEMKT-2016-68, and should
be submitted on or before September 1, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2016-19053 Filed 8-10-16; 8:45 am]
BILLING CODE 8011-01-P
