Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 123D Relating to When a DMM May Reopen a Security Electronically, 54149-54152 [2016-19317]

Download as PDF Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices Rule 19b–4(f)(2) thereunder,9 because it establishes or changes a due, or fee. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further 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: sradovich on DSK3GMQ082PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BOX–2016–38 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–BOX–2016–38. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal 9 17 CFR 240.19b–4(f)(2). VerDate Sep<11>2014 19:23 Aug 12, 2016 Jkt 238001 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–BOX– 2016–38, and should be submitted on or before September 6, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–19319 Filed 8–12–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78512; File No. SR–NYSE– 2016–53] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 123D Relating to When a DMM May Reopen a Security Electronically August 9, 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 28, 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, II, and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 123D relating to when a DMM may reopen a security electronically. 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. 10 17 CFR 200.30–3(a)(12). 1 15 U.S.C.78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 54149 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 123D relating to when a DMM may reopen a security electronically. The proposed rule changes would provide greater specificity regarding the applicable reference price for determining when a DMM may effect a reopening transaction electronically. Background The Exchange recently amended Rule 123D to specify when DMMs may effect an opening of a security electronically.4 Rule 123D(a)(1)(B) provides that openings may be effectuated manually or electronically (as provided for in Rule 104(b)(ii)) and that Exchange systems will not permit a DMM to open a security electronically if a DMM has manually entered Floor interest. Rule 123D(a)(1)(B)(i) further provides that, except under the conditions set forth in paragraph (a)(1)(B)(ii) of Rule 123D, a DMM may not effect an opening electronically if the opening transaction will be at a price more than 4% away from the Official Closing Price, as defined in Rule 123C(1)(e), or the matched volume will be more than: (a) 150,000 shares for securities with an average opening volume of 100,000 shares or fewer in the previous calendar quarter; or (b) 500,000 shares for securities with an average opening volume of over 100,000 shares in the previous calendar quarter. Rule 123D(a)(1)(B)(ii) provides that if as of 9:00 a.m. Eastern Time, the E-mini S&P 500 Futures are ± 2% from the prior day’s closing price of the E-mini S&P 4 See Securities Exchange Act Release Nos. 78228 (July 5, 2016), 81 FR 44907(July 11, 2016) (SR– NYSE–2016–24) (Approval Order) and 77491 (March 31, 2016), 81 FR 20030 (April 6, 2016) (SR– NYSE–2016–24) (Notice of Filing) (‘‘Opening Filing’’). E:\FR\FM\15AUN1.SGM 15AUN1 54150 Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices 500 Futures, or if the Exchange determines that it is necessary or appropriate for the maintenance of a fair and orderly market, a DMM may effect an opening electronically if the opening transaction will be at a price of up to 8% away from the Official Closing Price, as defined in Rule 123C(1)(e), without any volume limitations. The current rule is silent on the reference price for when a DMM may effect a reopening of a security electronically. Proposed Rule Change sradovich on DSK3GMQ082PROD with NOTICES The Exchange proposes to amend Rule 123D(a)(1) to provide for how the Exchange would determine when a DMM may effect a reopening of a security electronically. First, because Rule 123D(a)(1) is applicable to reopenings, the Exchange proposes to add to Rule 123D(a) that unless otherwise specified, references to an open or opening in Rule 123D(a) also mean a reopening following a trading halt or pause in a security. This proposed rule text is based on the last sentence of Rule 123D(a)(2).5 As proposed, this text would be applicable to Rules 123D(a)(1) and (a)(2) in addition to Rules 123D(a)(3)–(6), as currently provided for in Rule 123D(a)(2). The Exchange proposes to delete the last sentence of Rule 123D(a)(2) as duplicative of the proposed new rule text. Second, because Rule 123D has always governed the reopening process, in addition to the opening process, the Exchange proposes to add language to paragraph (1) of Rule 123D(a) to provide for DMM responsibilities regarding the reopening process. As proposed, Rule 123D(a)(1) would explicitly state that it is the responsibility of each DMM to ensure that registered securities open as close to the end of a halt or pause, while at the same time not unduly hasty, particularly when at a price disparity from the last price on the Exchange. Third, the Exchange proposes to amend Rule 123D(a)(1)(B)(i) to provide for the reference price that the Exchange would use to determine whether a DMM may effect a reopening electronically. As proposed, a DMM may not effect a reopening electronically if the reopening transaction would be at a price more than 4% away from the last price on the Exchange, rather than 4% 5 See Rule 123D(a)(2) (‘‘Unless otherwise specified, references to an open or opening in paragraphs (a)(3)–(a)(6) of this Rule also mean a reopening following a trading halt or pause.’’). See also Supplementary Material .10 to Rule 15 (‘‘Unless otherwise specified in this Rule, references to an opening transaction include a reopening transaction following a trading halt or pause in a security.’’) VerDate Sep<11>2014 19:23 Aug 12, 2016 Jkt 238001 away from the Official Closing Price. The Exchange also proposes to specify that the Official Closing Price would be used as the reference price for openings, but not reopenings. The Exchange believes that when reopening a security, the Official Closing Price from the prior day would no longer be a relevant reference price because the security has already opened for trading. Rather, because the security has been subject to a halt or pause before reopening, the Exchange believes that using the last sale price on the Exchange would be more representative of the most recent price of a security. A reopening price that would be more than 4% away from the last Exchange sale price demonstrates a level of price movement in a security during the halt or pause that warrants the manual price discovery process for the reopening. If the reopening price were to be within 4% away from the last Exchange sale price, that security likely has not experienced as much price movement, and therefore an electronic reopening may be more appropriate. To effect this proposed rule change, the Exchange proposes to break current Rule 123D(a)(1)(B)(i) into subsections in order to specify the applicable parameters for determining whether to open or reopen a security electronically. The proposed amended rule text would provide (new text underlined, deletions bracketed): (i) Except under the conditions set forth in paragraphs (a)(1)(B)(ii) and (iii) of this Rule, a DMM may not effect an opening electronically if: (a) the opening (but not reopening) transaction will be at a price more than 4% away from the Official Closing Price, as defined in Rule 123C(1)(e), (b) the reopening transaction will be at a price more than 4% away from the last price on the Exchange, or (c) the matched volume for the opening transaction will be more than: [(a)](1) 150,000 shares for securities with an average opening volume of 100,000 shares or fewer in the previous calendar quarter; or [(b)](2) 500,000 shares for securities with an average opening volume of over 100,000 shares in the previous calendar quarter. Fourth, the Exchange proposes to amend Rule 123D(a)(1)(B)(ii) to similarly provide that the reference price that the Exchange would use to determine whether a DMM may effect a reopening electronically on more volatile trading days would be based on the last sale price on the Exchange.6 The 6 The first clause of Rule 123D(a)(1)(B)(ii) specifically governs assessing volatility before the PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 proposed amended rule text would provide (new text underlined): (ii) If as of 9:00 a.m. Eastern Time, the E-mini S&P 500 Futures are +/¥2% from the prior day’s closing price of the E-mini S&P 500 Futures, or if the Exchange determines that it is necessary or appropriate for the maintenance of a fair and orderly market, a DMM may effect an opening electronically if the opening transaction will be at a price of up to 8% away from the Official Closing Price, as defined in Rule 123C(1)(e), (for openings, but not reopenings) or the last sale price on the Exchange (for reopenings), without any volume limitations.7 Finally, the Exchange proposes to add new Rule 123D(a)(1)(B)(iii) to specify the reference price that the Exchange would use when reopening a security following a trading pause under Rule 80C or a market-wide halt under Rule 80B and a pre-opening indication has been published in a security under Rule 15. As proposed, under such circumstances, a DMM may not reopen such security electronically if the reopening transaction would be at a price outside of the last-published preopening indication. The Exchange believes that because price volatility was likely the cause of such trading pause or halt, if the DMM publishes a pre-opening indication in a security for a reopening following such trading pause or halt, the reopening price should be within such pre-opening indication price range, regardless of whether the security is reopened manually or electronically. If the price moves away from the last pre-opening indication, the DMM should publish a new pre-opening indication to provide notice of the new price range.8 Because the DMM would need to reopen a security within such price indication opening of trading i.e., assessing volatility based on the E-mini S&P 500 Futures before 9:00 a.m. Eastern Time to determine whether to widen the opening parameters. Based on the proposed changes to Rule 123D(a), discussed above, to specify that reference to the opening also refers to a reopening, the second clause of the current rule, i.e., that the Exchange may widen the opening parameters if it determines that it is necessary or appropriate for the maintenance of a fair and orderly market, would also apply to reopenings. For example, during a market-wide halt under Rule 80B, the futures markets may also halt trading in related securities. However, because of the market-wide volatility that triggered such halt, the Exchange may determine that it is appropriate to widen the parameters for when a DMM may effect a reopening electronically, even in the absence of a benchmark index to measure volatility. 7 The Exchange proposes a non-substantive, technical amendment to change the phrase ‘‘fair and order market’’ to provide instead ‘‘fair and orderly market’’ in Rule 123D(a)(1)(B)(ii). 8 See Rule 15(e)(2) (a pre-opening indication must be updated if the opening transaction would be at a price outside of a published pre-opening indication). E:\FR\FM\15AUN1.SGM 15AUN1 Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices sradovich on DSK3GMQ082PROD with NOTICES range, the Exchange believes it is appropriate to prohibit a DMM from reopening electronically if the reopening price were to be outside of the last-published pre-opening indication. The proposed new rule text would provide (new text underlined): (iii) When reopening a security following a trading pause under Rule 80C or a marketwide halt under Rule 80B, if a pre-opening indication has been published in a security under Rule 15, a DMM may not reopen such security electronically if the reopening transaction will be at a price outside of the last-published pre-opening indication. * * * * * Because of the technology changes associated with the proposed rule change, the Exchange will announce by Trader Update the implementation date of the changes. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,9 in general, and furthers the objectives of Section 6(b)(5) of the Act,10 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and protect investors and the public interest. The Exchange believes that amending Rule 123D(a) to specify that unless otherwise provided, all of Rule 123D(a) is applicable to both openings and reopenings would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would promote transparency regarding the scope of the rule. The proposed change is also consistent with current Rule 123D(a)(2) and Supplementary Material .10 to Rule 15, which similarly provide that references to an opening also refers to a reopening, unless otherwise specified. The Exchange further believes that amending Rule 123D to specify when a DMM may effect a reopening electronically would remove impediments to and perfect the mechanism of a free and open market and a national market system by promoting transparency in Exchange rules regarding under what circumstances a DMM may effect a reopening electronically. The Exchange believes that using the last Exchange sale price as a reference price would promote just and equitable principles of trade and remove impediments to and 9 15 19:23 Aug 12, 2016 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 intended to address competitive issues but rather promote greater efficiency and transparency at the reopen of trading on the Exchange. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section U.S.C. 78f(b). U.S.C. 78f(b)(5). 10 15 VerDate Sep<11>2014 perfect the mechanism of a free and open market and a national market system because using the last sale price on the Exchange would be more representative of the most recent price of a security from before the halt or pause. In addition, the Exchange believes that if a security were to reopen more than 4% (or 8% on a more volatile trading day) from that reference price, such reopening would likely benefit from the manual price discovery process. The Exchange further believes that it would remove impediments to and perfect the mechanism of a free and open market to double the parameters for when a DMM may reopen a security electronically if the Exchange believes that it is necessary or appropriate for the maintenance of a fair and orderly reopening of a security. The Exchange also believes that it would remove impediments to and perfect the mechanism of a free and open market to provide that a DMM may reopen a security electronically if the reopening transaction would be at a price outside of the last-published preopening indication when reopening a security following a trading pause under Rule 80C or a market-wide halt under Rule 80B and a pre-opening indication has been published under Rule 15. Finally, the Exchange believes that the proposal would advance the efficiency and transparency of the reopening process, thereby fostering accurate price discovery at the reopen of trading. For the same reasons, the proposal is also designed to protect investors as well as the public interest. Jkt 238001 PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 54151 19(b)(3)(A)(iii) of the Act 11 and Rule 19b–4(f)(6) thereunder.12 Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder. A proposed rule change filed under Rule 19b–4(f)(6) 13 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),14 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange notes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. The Exchange believes that waiver will provide clarification to its updated Disaster Recovery Plan, which has been filed with the Commission. The Commission hereby waives the 30-day operative delay and designates the proposal operative upon filing.15 At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 16 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. 11 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 13 17 CFR 240.19b–4(f)(6). 14 17 CFR 240.19b–4(f)(6)(iii). 15 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 16 15 U.S.C. 78s(b)(2)(B). 12 17 E:\FR\FM\15AUN1.SGM 15AUN1 54152 Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–78522; File No. SRBatsEDGX–2016–40] • 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– NYSE–2016–53 on the subject line. Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of the Exchange’s Options Platform August 9, 2016. • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on July 29, 2016, Bats EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Exchange has designated the proposed rule change as one establishing or changing a member due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. sradovich on DSK3GMQ082PROD with NOTICES For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–19317 Filed 8–12–16; 8:45 am] BILLING CODE 8011–01–P 17 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 19:23 Aug 12, 2016 Jkt 238001 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Paper Comments All submissions should refer to File Number SR–NYSE–2016–53. 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–NYSE– 2016–53, and should be submitted on or before September 6, 2016. 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend the fee schedule applicable to Members 5 and non-Members of the Exchange pursuant to EDGX Rules 15.1(a) and (c). The text of the proposed rule change is available at the Exchange’s Web site at www.batstrading.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 Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 5 The term ‘‘Member’’ is defined as ‘‘any registered broker or dealer that has been admitted to membership in the Exchange.’’ See Exchange Rule 1.5(n). The Exchange proposes to amend its fee schedule for its equity options platform (‘‘EDGX Options’’) to: (i) Modify the criteria necessary to achieve Customer Volume Tier 5; (ii) modify criteria necessary to achieve Market Maker Volume Tier 7 and decrease the corresponding rate; and (iii) adopt a new tier entitled the ‘‘Firm Penny Pilot Cross-Asset Tier’’. The Exchange determines the reduced fee or enhanced rebate using a tiered pricing structure offering two tiers under footnotes 1 and 2 of the fee schedule, Customer Volume Tiers and Market Maker Volume Tiers, respectively. Under the tiers, Members that achieve certain volume criteria may qualify for reduced fees or enhanced rebates for Customer 6 and Market Maker 7 orders. The Exchange proposes to modify the criteria necessary to achieve Customer Volume Tier 5 under footnote 1, and modify the corresponding rate and criteria necessary to achieve Market Maker Volume Tier 7 under footnote 2. The Exchange also proposes to adopt a new tier entitled the ‘‘Firm Penny Pilot Cross-Asset Tier’’ under a new footnote 4. Customer Volume Tier 5. Fee codes PC and NC are currently appended to all Customer orders in Penny Pilot Securities 8 and Non-Penny Pilot Securities,9 respectively, and result in a standard rebate of $0.05 per contract. The Customer Volume Tiers in footnote 1 consist of five separate tiers, each providing an enhanced rebate to a Member’s Customer order that yields fee codes PC or NC upon satisfying monthly volume criteria required by the respective tier. For instance, pursuant to Customer Volume Tier 1, the lowest volume tier, a Member will receive a rebate of $0.10 per contract where the Member has an ADV 10 in Customer 1 15 2 17 PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 6 As defined in the Exchange’s fee schedule available at https://www.batsoptions.com/support/ fee_schedule/edgx/. 7 Id. 8 Id. 9 Id. 10 Id. E:\FR\FM\15AUN1.SGM 15AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 157 (Monday, August 15, 2016)]
[Notices]
[Pages 54149-54152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19317]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78512; File No. SR-NYSE-2016-53]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Rule 123D Relating to When a DMM May Reopen a Security 
Electronically

August 9, 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 28, 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, 
II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 123D relating to when a DMM may 
reopen a security electronically. 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 123D relating to when a DMM may 
reopen a security electronically. The proposed rule changes would 
provide greater specificity regarding the applicable reference price 
for determining when a DMM may effect a reopening transaction 
electronically.
Background
    The Exchange recently amended Rule 123D to specify when DMMs may 
effect an opening of a security electronically.\4\ Rule 123D(a)(1)(B) 
provides that openings may be effectuated manually or electronically 
(as provided for in Rule 104(b)(ii)) and that Exchange systems will not 
permit a DMM to open a security electronically if a DMM has manually 
entered Floor interest. Rule 123D(a)(1)(B)(i) further provides that, 
except under the conditions set forth in paragraph (a)(1)(B)(ii) of 
Rule 123D, a DMM may not effect an opening electronically if the 
opening transaction will be at a price more than 4% away from the 
Official Closing Price, as defined in Rule 123C(1)(e), or the matched 
volume will be more than: (a) 150,000 shares for securities with an 
average opening volume of 100,000 shares or fewer in the previous 
calendar quarter; or (b) 500,000 shares for securities with an average 
opening volume of over 100,000 shares in the previous calendar quarter.
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    \4\ See Securities Exchange Act Release Nos. 78228 (July 5, 
2016), 81 FR 44907(July 11, 2016) (SR-NYSE-2016-24) (Approval Order) 
and 77491 (March 31, 2016), 81 FR 20030 (April 6, 2016) (SR-NYSE-
2016-24) (Notice of Filing) (``Opening Filing'').
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    Rule 123D(a)(1)(B)(ii) provides that if as of 9:00 a.m. Eastern 
Time, the E-mini S&P 500 Futures are  2% from the prior 
day's closing price of the E-mini S&P

[[Page 54150]]

500 Futures, or if the Exchange determines that it is necessary or 
appropriate for the maintenance of a fair and orderly market, a DMM may 
effect an opening electronically if the opening transaction will be at 
a price of up to 8% away from the Official Closing Price, as defined in 
Rule 123C(1)(e), without any volume limitations. The current rule is 
silent on the reference price for when a DMM may effect a reopening of 
a security electronically.
Proposed Rule Change
    The Exchange proposes to amend Rule 123D(a)(1) to provide for how 
the Exchange would determine when a DMM may effect a reopening of a 
security electronically. First, because Rule 123D(a)(1) is applicable 
to reopenings, the Exchange proposes to add to Rule 123D(a) that unless 
otherwise specified, references to an open or opening in Rule 123D(a) 
also mean a reopening following a trading halt or pause in a security. 
This proposed rule text is based on the last sentence of Rule 
123D(a)(2).\5\ As proposed, this text would be applicable to Rules 
123D(a)(1) and (a)(2) in addition to Rules 123D(a)(3)-(6), as currently 
provided for in Rule 123D(a)(2). The Exchange proposes to delete the 
last sentence of Rule 123D(a)(2) as duplicative of the proposed new 
rule text.
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    \5\ See Rule 123D(a)(2) (``Unless otherwise specified, 
references to an open or opening in paragraphs (a)(3)-(a)(6) of this 
Rule also mean a reopening following a trading halt or pause.''). 
See also Supplementary Material .10 to Rule 15 (``Unless otherwise 
specified in this Rule, references to an opening transaction include 
a reopening transaction following a trading halt or pause in a 
security.'')
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    Second, because Rule 123D has always governed the reopening 
process, in addition to the opening process, the Exchange proposes to 
add language to paragraph (1) of Rule 123D(a) to provide for DMM 
responsibilities regarding the reopening process. As proposed, Rule 
123D(a)(1) would explicitly state that it is the responsibility of each 
DMM to ensure that registered securities open as close to the end of a 
halt or pause, while at the same time not unduly hasty, particularly 
when at a price disparity from the last price on the Exchange.
    Third, the Exchange proposes to amend Rule 123D(a)(1)(B)(i) to 
provide for the reference price that the Exchange would use to 
determine whether a DMM may effect a reopening electronically. As 
proposed, a DMM may not effect a reopening electronically if the 
reopening transaction would be at a price more than 4% away from the 
last price on the Exchange, rather than 4% away from the Official 
Closing Price. The Exchange also proposes to specify that the Official 
Closing Price would be used as the reference price for openings, but 
not reopenings.
    The Exchange believes that when reopening a security, the Official 
Closing Price from the prior day would no longer be a relevant 
reference price because the security has already opened for trading. 
Rather, because the security has been subject to a halt or pause before 
reopening, the Exchange believes that using the last sale price on the 
Exchange would be more representative of the most recent price of a 
security. A reopening price that would be more than 4% away from the 
last Exchange sale price demonstrates a level of price movement in a 
security during the halt or pause that warrants the manual price 
discovery process for the reopening. If the reopening price were to be 
within 4% away from the last Exchange sale price, that security likely 
has not experienced as much price movement, and therefore an electronic 
reopening may be more appropriate.
    To effect this proposed rule change, the Exchange proposes to break 
current Rule 123D(a)(1)(B)(i) into subsections in order to specify the 
applicable parameters for determining whether to open or reopen a 
security electronically. The proposed amended rule text would provide 
(new text underlined, deletions bracketed):
    (i) Except under the conditions set forth in paragraphs 
(a)(1)(B)(ii) and (iii) of this Rule, a DMM may not effect an opening 
electronically if:
    (a) the opening (but not reopening) transaction will be at a price 
more than 4% away from the Official Closing Price, as defined in Rule 
123C(1)(e),
    (b) the reopening transaction will be at a price more than 4% away 
from the last price on the Exchange, or
    (c) the matched volume for the opening transaction will be more 
than:
    [(a)](1) 150,000 shares for securities with an average opening 
volume of 100,000 shares or fewer in the previous calendar quarter; or
    [(b)](2) 500,000 shares for securities with an average opening 
volume of over 100,000 shares in the previous calendar quarter.
    Fourth, the Exchange proposes to amend Rule 123D(a)(1)(B)(ii) to 
similarly provide that the reference price that the Exchange would use 
to determine whether a DMM may effect a reopening electronically on 
more volatile trading days would be based on the last sale price on the 
Exchange.\6\ The proposed amended rule text would provide (new text 
underlined):
---------------------------------------------------------------------------

    \6\ The first clause of Rule 123D(a)(1)(B)(ii) specifically 
governs assessing volatility before the opening of trading i.e., 
assessing volatility based on the E-mini S&P 500 Futures before 9:00 
a.m. Eastern Time to determine whether to widen the opening 
parameters. Based on the proposed changes to Rule 123D(a), discussed 
above, to specify that reference to the opening also refers to a 
reopening, the second clause of the current rule, i.e., that the 
Exchange may widen the opening parameters if it determines that it 
is necessary or appropriate for the maintenance of a fair and 
orderly market, would also apply to reopenings. For example, during 
a market-wide halt under Rule 80B, the futures markets may also halt 
trading in related securities. However, because of the market-wide 
volatility that triggered such halt, the Exchange may determine that 
it is appropriate to widen the parameters for when a DMM may effect 
a reopening electronically, even in the absence of a benchmark index 
to measure volatility.
---------------------------------------------------------------------------

    (ii) If as of 9:00 a.m. Eastern Time, the E-mini S&P 500 Futures 
are +/-2% from the prior day's closing price of the E-mini S&P 500 
Futures, or if the Exchange determines that it is necessary or 
appropriate for the maintenance of a fair and orderly market, a DMM may 
effect an opening electronically if the opening transaction will be at 
a price of up to 8% away from the Official Closing Price, as defined in 
Rule 123C(1)(e), (for openings, but not reopenings) or the last sale 
price on the Exchange (for reopenings), without any volume 
limitations.\7\
---------------------------------------------------------------------------

    \7\ The Exchange proposes a non-substantive, technical amendment 
to change the phrase ``fair and order market'' to provide instead 
``fair and orderly market'' in Rule 123D(a)(1)(B)(ii).
---------------------------------------------------------------------------

    Finally, the Exchange proposes to add new Rule 123D(a)(1)(B)(iii) 
to specify the reference price that the Exchange would use when 
reopening a security following a trading pause under Rule 80C or a 
market-wide halt under Rule 80B and a pre-opening indication has been 
published in a security under Rule 15. As proposed, under such 
circumstances, a DMM may not reopen such security electronically if the 
reopening transaction would be at a price outside of the last-published 
pre-opening indication. The Exchange believes that because price 
volatility was likely the cause of such trading pause or halt, if the 
DMM publishes a pre-opening indication in a security for a reopening 
following such trading pause or halt, the reopening price should be 
within such pre-opening indication price range, regardless of whether 
the security is reopened manually or electronically. If the price moves 
away from the last pre-opening indication, the DMM should publish a new 
pre-opening indication to provide notice of the new price range.\8\ 
Because the DMM would need to reopen a security within such price 
indication

[[Page 54151]]

range, the Exchange believes it is appropriate to prohibit a DMM from 
reopening electronically if the reopening price were to be outside of 
the last-published pre-opening indication. The proposed new rule text 
would provide (new text underlined):
---------------------------------------------------------------------------

    \8\ See Rule 15(e)(2) (a pre-opening indication must be updated 
if the opening transaction would be at a price outside of a 
published pre-opening indication).
---------------------------------------------------------------------------

    (iii) When reopening a security following a trading pause under 
Rule 80C or a market-wide halt under Rule 80B, if a pre-opening 
indication has been published in a security under Rule 15, a DMM may 
not reopen such security electronically if the reopening transaction 
will be at a price outside of the last-published pre-opening 
indication.
* * * * *
    Because of the technology changes associated with the proposed rule 
change, the Exchange will announce by Trader Update the implementation 
date of the changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\10\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and protect investors and the public interest. The 
Exchange believes that amending Rule 123D(a) to specify that unless 
otherwise provided, all of Rule 123D(a) is applicable to both openings 
and reopenings would remove impediments to and perfect the mechanism of 
a free and open market and a national market system because it would 
promote transparency regarding the scope of the rule. The proposed 
change is also consistent with current Rule 123D(a)(2) and 
Supplementary Material .10 to Rule 15, which similarly provide that 
references to an opening also refers to a reopening, unless otherwise 
specified.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange further believes that amending Rule 123D to specify 
when a DMM may effect a reopening electronically would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system by promoting transparency in Exchange rules 
regarding under what circumstances a DMM may effect a reopening 
electronically. The Exchange believes that using the last Exchange sale 
price as a reference price would promote just and equitable principles 
of trade and remove impediments to and perfect the mechanism of a free 
and open market and a national market system because using the last 
sale price on the Exchange would be more representative of the most 
recent price of a security from before the halt or pause. In addition, 
the Exchange believes that if a security were to reopen more than 4% 
(or 8% on a more volatile trading day) from that reference price, such 
reopening would likely benefit from the manual price discovery process. 
The Exchange further believes that it would remove impediments to and 
perfect the mechanism of a free and open market to double the 
parameters for when a DMM may reopen a security electronically if the 
Exchange believes that it is necessary or appropriate for the 
maintenance of a fair and orderly reopening of a security.
    The Exchange also believes that it would remove impediments to and 
perfect the mechanism of a free and open market to provide that a DMM 
may reopen a security electronically if the reopening transaction would 
be at a price outside of the last-published pre-opening indication when 
reopening a security following a trading pause under Rule 80C or a 
market-wide halt under Rule 80B and a pre-opening indication has been 
published under Rule 15. Finally, the Exchange believes that the 
proposal would advance the efficiency and transparency of the reopening 
process, thereby fostering accurate price discovery at the reopen of 
trading. For the same reasons, the proposal is also designed to protect 
investors as well as the public interest.

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 intended to address competitive issues but rather promote greater 
efficiency and transparency at the reopen of trading on the Exchange.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\14\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Exchange notes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest. The Exchange believes that waiver 
will provide clarification to its updated Disaster Recovery Plan, which 
has been filed with the Commission. The Commission hereby waives the 
30-day operative delay and designates the proposal operative upon 
filing.\15\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act.

[[Page 54152]]

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-NYSE-2016-53 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-NYSE-2016-53. 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-NYSE-2016-53, and should be 
submitted on or before September 6, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19317 Filed 8-12-16; 8:45 am]
 BILLING CODE 8011-01-P

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