Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish a Closing Contingency Procedure, 54628-54631 [2016-19432]

Download as PDF 54628 Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices available publicly. All submissions should refer to File Number SR–FICC– 2016–004 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. 2016–19433 Filed 8–15–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78527; File No. SR– BatsBZX–2016–47] Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish a Closing Contingency Procedure August 10, 2016. 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 August 2, 2016, Bats BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated this proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6) thereunder,4 which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. asabaliauskas on DSK3SPTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange is proposing to establish a Closing Contingency Procedure that would enable the Exchange to designate a back-up exchange to provide an official closing price in the event that the Exchange’s market is impaired and unable to execute a closing auction for all or a subset of listed securities under the Exchange’s standard closing procedures. The Commission has recently approved substantially similar proposals submitted by the New York Stock 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 1 15 VerDate Sep<11>2014 18:36 Aug 15, 2016 Jkt 238001 Exchange LLC (‘‘NYSE’’) and the Nasdaq Stock Market LLC (‘‘Nasdaq’’).5 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 statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Background The Exchange has robust and resilient systems that are designed to ensure fair and orderly markets, including multiple redundancies and back-up systems. Currently, the Exchange’s Official Closing Price is defined in Rule 11.23(a)(3) as the price disseminated to the consolidated tape as the market center closing trade. In this proposal, the Exchange is proposing to amend Rule 11.23 to establish Closing Contingency Procedures. As proposed, the Exchange, as a listing market, will designate a back-up exchange to provide an official closing price in the event that the Exchange’s market is impaired and unable to execute a closing auction for all or a subset of listed securities under the standard closing procedures set forth in Rule 11.23(c). The Exchange would invoke the Closing Contingency Procedures only after it determines that 5 See Securities Exchange Act Release Nos. 78015 (June 8, 2016), 81 FR 38747 (June 14, 2016) (SR– NYSE–2016–18) (‘‘Notice of Filings of Amendment No. 1, and Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendment No. 1, To Provide for How the Exchanges Would Determine an Official Closing Price if the Exchanges Are Unable To Conduct a Closing Transaction’’); 78014 (June 8, 2016), 81 FR 38755 (June 14, 2016) (SR–NASDAQ–2016–035) (‘‘Notice of Filing of Amendment No. 1, and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Establish Secondary Contingency Procedures for the Exchange’s Closing Cross’’). PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 the standard closing procedure is unavailable due to technical difficulties. The Exchange will employ internal testing procedures to determine the availability of each set of operating procedures, and thereby position itself to make and announce such a determination as rapidly as possible. The Exchange would invoke the Closing Contingency Procedures by announcing publicly that its market is impaired and unable to execute a closing auction. If the Exchange makes that announcement prior to 3:00 p.m., Eastern Standard Time (‘‘EST’’), the official closing price from the Exchange’s designated back-up exchange would serve as the Exchange’s Official Closing Price. If the Exchange makes that announcement after 3:00 p.m., EST, the Securities Information Processor (‘‘SIP’’) would calculate a Volume Weighted Average Price (‘‘VWAP’’), described in more detail below. Whether the announcement is made before or after 3:00 p.m., EST, the SIP would publish the Exchange’s Official Closing Price on the Exchange’s behalf either: (1) Based on a message from the Exchange’s back-up exchange or (2) based on the VWAP calculation. Designation of Back-Up The Exchange proposes to designate NYSE Arca as its official back-up exchange. The Exchange believes that NYSE Arca is best positioned to serve as its back-up for two primary reasons: (1) NYSE Arca and the Exchange’s membership substantially overlaps; (2) NYSE Arca already operates an effective closing cross that it can use to execute a closing transaction in the Exchange’s listed securities.6 In the event the Exchange is unable to execute a closing auction, the Exchange’s members that are also NYSE Arca members should be technically prepared to transfer liquidity to NYSE Arca to ensure a deeply liquid closing transaction. The Operating Committees for the CQ/CT and Nasdaq UTP Plans have already voted to modify the SIPs to support this proposal. Specifically, each exchange that is designated as a back-up exchange (Nasdaq and NYSE Arca), will disseminate via the SIPs an official closing price in every listed security marked with the .M sale condition code. The SIPs will apply the following procedures: 6 The Exchange notes that quotations and executions for Exchange-listed securities are represented on Tape B, which is also where information regarding NYSE Arca and NYSE MKT listed securities is represented. The Exchange also notes that like the Exchange, NYSE Arca trades securities listed on all tapes (Tapes A, B and C), including securities listed on the Exchange. E:\FR\FM\16AUN1.SGM 16AUN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices 1. Each primary listing exchange would print a standardized Official Closing Price (‘‘OCP’’), with a sale condition ‘M,’ in each security it trades as primary. 2. Each primary listing exchange would include in its rules that, in the event that it is impaired and cannot conduct a closing auction, the exchange’s contingency OCP would be the OCP of a specified ‘‘back-up exchange’’ or, if the impairment is announced after 3:00 p.m., EST, a VWAP calculation. 3. In the event that a primary listing exchange publicly announces that it is impaired and unable to conduct a closing auction for all or a subset of its primary symbols, the SIP would print the primary listing exchange’s contingency OCP as the OCP of the primary listing exchange, including calculation of the VWAP. The advantages of the SIP reprinting the contingency OCP as the OCP of the primary listing exchange, rather than the back-up exchange separately sending to the SIP its OCP as the OCP of the primary exchange are that: a. The SIP provides a centralized service of which each primary listing exchange can take advantage b. Participant—line validations are retained c. There is assurance of full symbol coverage d. The SIP provides a single location for future updates or configuration changes or new primary listing exchanges e. A single source and method for VWAP calculations 4. The primary listing exchange’s contingency OCP would differ depending on what time the impaired primary market announces that it will be using the closing contingency plan. a. If announced prior to 3:00 p.m., EST, the primary listing exchange’s contingency OCP would be based on the following hierarchy: i. Official Closing Price (sale condition ‘M’) of a pre-designated backup exchange(s). An exchange that has more than 1 back-up exchange as part of its hierarchy of contingency OCPs, will announce publicly the exchange(s) that will be relied on for the contingency OCP. ii. If no such contingency OCP exists, then a VWAP calculated by the SIP of the final 5 minute regular trading session. The VWAP calculations would include all last sale eligible trades in the last 5 minutes of the normal trading day, up to the time that the VWAP is processed. The VWAP would include the closing auctions prints of all markets VerDate Sep<11>2014 18:36 Aug 15, 2016 Jkt 238001 and would take into account any trade breaks or corrections up to the time the VWAP is processed. Because the VWAP would include any last-sale eligible trades, busts, or corrections that were reported up to the time that the SIP calculates the VWAP, the Exchange believes that the VWAP price would reflect any pricing adjustments that may be reported after 4:00 p.m. EST. iii. If no last sale eligible trades are printed in the last 5 minutes of the normal trading day, then the consolidated last sale during regular trading hours. iv. If no such same day consolidated last sale eligible trades exist, then the primary listing exchange’s prior trading day’s Official Closing Price. v. If no Official Closing Price for a security can be determined under subsections (i), (ii), (iii), or (iv) above, the Exchange would not publish and Official Closing Price for such security. b. If announced after 3:00 p.m., EST, the primary listing exchange’s contingency OCP would be determined by the following hierarchy: i. Final 5 minute VWAP of regular trading session (same calculation as described above). ii. If no last sale eligible trades printed in the last 5 minutes of the normal trading day, then the consolidated last sale during regular trading hours. iii. If no such same day consolidated last sale eligible trades exist, then the primary listing exchange’s prior trading day’s Official Closing Price. iv. If no Official Closing Price for a security can be determined under subsections (i), (ii), or (iii) above, the Exchange would not publish an Official Closing Price for such security. Whenever the Exchange utilizes the Closing Contingency Procedures, it will cancel all open interest designated for the Exchange’s close residing in its systems. This is designed to give members the opportunity to route their orders to alternative execution venues. Also, in all cases involving the Closing Contingency Procedures, after hours trading will begin at 4:00 p.m. EST or upon resolution of the disruption that triggered the use of these proposed procedures. Because of the technology changes associated with this proposed rule change, the Exchange will implement the proposed back-up procedures for determining an Official Closing Price no later than 120 days after filing of this proposal and will announce the implementation of the procedures by issuing a Trade Desk Notice. PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 54629 2. Statutory Basis The Exchange believes that its proposal is consistent with section 6(b) of the Act 7 in general, and furthers the objectives of section 6(b)(5) of the Act 8 in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange believes the proposed rule change will 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 because it would provide transparency in how the Exchange would determine the Official Closing Price in Exchange-listed securities when the Exchange is unable to conduct a closing auction due to a systems or technical issue. The Exchange believes that the proposed amendments would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposed determination of the Exchange’s Official Closing Price was crafted in response to input from industry participants and would: • Provide a pre-determined, consistent solution that would result in a closing print to the SIP within a reasonable time frame from the normal closing time; • minimize the need for industry participants to modify their processing of data from the SIP; and • provide advance notification of the applicable closing contingency plan to provide sufficient time for industry participants to route any closing interest to an alternate venue to participate in that venue’s closing auction. More specifically, the Exchange believes the proposed hierarchy for determining the Exchange’s Official Closing Price if the Exchange determines that it is impaired before 3:00 p.m., EST, would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposal, which is based on input from market participants, would provide sufficient time for market participants to direct closing-only interest to a designated alternate exchange in time for such interest to 7 15 8 15 E:\FR\FM\16AUN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 16AUN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES 54630 Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices participate in a closing auction on such alternate venue in a meaningful manner. The Exchange further believes that relying on the official closing price of a designated alternate exchange would provide for an established hierarchy for determining an Official Closing Price for an Exchange-listed security if there is insufficient interest to conduct a closing auction on the alternate exchange. In such case, the rules of NYSE Arca and the Exchange already provide a mechanism for determining an official closing price for securities that trade on those markets. The Exchange further believes that if the Exchange determines after 3:00 p.m., EST, that it is impaired and unable the conduct a closing auction, the proposed VWAP calculation would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide for a mechanism to determine the value of an affected security for purposes of determining the Exchange’s Official Closing Price. By using a volume-weighted calculation that would include the closing transactions on an affected security on alternate exchanges as well as any busts or corrections that were reported up to the time that the SIP calculates the value, the Exchange believes that the proposed calculation would reflect the correct price of a security. In addition, by using a VWAP calculation rather than the last consolidated last-sale eligible price as of the end of regular trading hours, the Exchange would reduce the potential for an anomalous trade that may not reflect the true price of a security from being set as the Exchange’s Official Closing Price for a security. The Exchange further believes that the proposed rule change would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposal would have minimal impact on market participants. As proposed, from the perspective of market participants, even if the Exchange were impaired, the SIP would publish an Official Closing Price for Exchange-listed securities on behalf of the Exchange in a manner that would be no different than if the Exchange were not impaired. If the Exchange determines that it is impaired after 3:00 p.m., EST, market participants would not have to make any system changes. If the Exchange determines that it is impaired before 3:00 p.m., EST, and designates an alternate exchange, market participants may have to do systems work to re-direct closing-only orders to the alternate exchange. VerDate Sep<11>2014 18:36 Aug 15, 2016 Jkt 238001 However, the Exchange understands, based on input from market participants, that such changes would be feasible based on the amount of advance notice. In addition, the Exchange believes that designating an alternate exchange when there is sufficient time to do so would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would allow for the price-discovery mechanism of a closing auction to be available for impacted Exchange-listed securities. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive issues, but rather to provide for how the Exchange would determine an Official Closing Price for Exchange-listed securities if it is impaired and cannot conduct a closing auction due to a systems or technical issue. The proposal has been crafted with input from market participants, the Exchange, and the SIPs, and is designed to reduce the burden on competition by having similar back-up procedures across all primary listing exchanges if such exchange is impaired and cannot conduct a closing auction. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to section 19(b)(3)(A) of the Act and Rule 19b– 4(f)(6) thereunder.9 9 17 CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BatsBZX–2016–47 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–BatsBZX–2016–47. 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 office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from E:\FR\FM\16AUN1.SGM 16AUN1 Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– BatsBZX–2016–47, 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. 2016–19432 Filed 8–15–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [File No. 500–1] In the Matter of: Safecode Drug Technologies Corp., Dynamic Ventures Corp.; Order of Suspension of Trading asabaliauskas on DSK3SPTVN1PROD with NOTICES obligations. Dynamic Ventures did not receive the delinquency letter due to its failure to maintain a valid address on file with the Commission as required by Rule 301 of Regulation S–T under the Securities Act (17 CFR 232.301 and Section 5.4 of the EDGAR Filer Manual.) The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed companies. Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of the above-listed companies is suspended for the period from 9:30 a.m. EDT on August 12, 2016, through 11:59 p.m. EDT on August 25, 2016. and at the Commission’s Public Reference Room. By the Commission. Lynn M. Powalski, Deputy Secretary. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2016–19607 Filed 8–12–16; 4:15 pm] BILLING CODE 8011–01–P August 12, 2016. It appears to the Securities and Exchange Commission (‘‘Commission’’) that there is a lack of current and accurate information concerning the securities of Safecode Drug Technologies Corp. (‘‘Safecode’’) (CIK No. 1508470), a Delaware corporation with its principal office located in Jerusalem, Israel with stock quoted on OTC Link (previously, ‘‘Pink Sheets’’) operated by OTC Markets Group Inc. (‘‘OTC Link’’) under the symbol SAFC because it has not filed any periodic reports since the period ended June 30, 2013. On April 5, 2016, a delinquency letter was sent by the Division of Corporation Finance to Safecode requesting compliance with its periodic filing obligations. Safecode did not receive the delinquency letter due to its failure to maintain a valid address on file with the Commission as required by Rule 301 of Regulation S–T under the Securities Act of 1933 (‘‘Securities Act’’) (17 CFR 232.301 and Section 5.4 of the EDGAR Filer Manual.) It appears to the Commission that there is a lack of current and accurate information concerning the securities of Dynamic Ventures Corp. (‘‘Dynamic Ventures’’) (CIK No. 1454384) a Delaware corporation with its principal place of business listed as Scottsdale, Arizona with stock quoted on OTC Link under the symbol DYNV, because it has not filed any periodic reports since the period ended June 30, 2012. On March 1, 2016 a delinquency letter was sent by the Division of Corporation Finance to Dynamic Ventures requesting compliance with its periodic filing SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78534; File No. SR–CBOE– 2016–060] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Schedule August 10, 2016. 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 August 1, 2016, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) 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 Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Fees Schedule. The text of the proposed rule change is available on the Exchange’s Web site (https:// www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, 1 15 10 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:36 Aug 15, 2016 2 17 Jkt 238001 54631 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00082 Fmt 4703 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 1. Purpose The Exchange proposes to amend its Fees Schedule with respect to fees for the Extended Trading Hours (‘‘ETH’’) session. Specifically, in order to promote and encourage trading during the ETH session, the Exchange currently waives ETH Trading Permit and Bandwidth Packet fees for one (1) of each initial Trading Permits and one (1) of each initial Bandwidth Packet, per affiliated TPH. The Exchange notes that waiver is set to expire July 31, 2016. The Exchange also waives fees through July 31, 2016 for a CMI and FIX login ID if the CMI and/or FIX login ID is related to a waived ETH Trading Permit and/or waived Bandwidth packet. In order to continue to promote trading during ETH, the Exchange wishes to extend these waivers through December 2016. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.3 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 4 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitation [sic] transactions in securities, to remove impediments to 3 15 4 15 Sfmt 4703 E:\FR\FM\16AUN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 16AUN1

Agencies

[Federal Register Volume 81, Number 158 (Tuesday, August 16, 2016)]
[Notices]
[Pages 54628-54631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19432]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78527; File No. SR-BatsBZX-2016-47]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Establish a Closing Contingency Procedure

August 10, 2016.
    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 August 2, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders it effective upon filing with the 
Commission. 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is proposing to establish a Closing Contingency 
Procedure that would enable the Exchange to designate a back-up 
exchange to provide an official closing price in the event that the 
Exchange's market is impaired and unable to execute a closing auction 
for all or a subset of listed securities under the Exchange's standard 
closing procedures. The Commission has recently approved substantially 
similar proposals submitted by the New York Stock Exchange LLC 
(``NYSE'') and the Nasdaq Stock Market LLC (``Nasdaq'').\5\
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    \5\ See Securities Exchange Act Release Nos. 78015 (June 8, 
2016), 81 FR 38747 (June 14, 2016) (SR-NYSE-2016-18) (``Notice of 
Filings of Amendment No. 1, and Order Granting Accelerated Approval 
of Proposed Rule Changes, as Modified by Amendment No. 1, To Provide 
for How the Exchanges Would Determine an Official Closing Price if 
the Exchanges Are Unable To Conduct a Closing Transaction''); 78014 
(June 8, 2016), 81 FR 38755 (June 14, 2016) (SR-NASDAQ-2016-035) 
(``Notice of Filing of Amendment No. 1, and Order Granting 
Accelerated Approval of a Proposed Rule Change, as Modified by 
Amendment No. 1, To Establish Secondary Contingency Procedures for 
the Exchange's Closing Cross'').
---------------------------------------------------------------------------

    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 statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant parts of such 
statements.

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

1. Purpose
Background
    The Exchange has robust and resilient systems that are designed to 
ensure fair and orderly markets, including multiple redundancies and 
back-up systems. Currently, the Exchange's Official Closing Price is 
defined in Rule 11.23(a)(3) as the price disseminated to the 
consolidated tape as the market center closing trade. In this proposal, 
the Exchange is proposing to amend Rule 11.23 to establish Closing 
Contingency Procedures.
    As proposed, the Exchange, as a listing market, will designate a 
back-up exchange to provide an official closing price in the event that 
the Exchange's market is impaired and unable to execute a closing 
auction for all or a subset of listed securities under the standard 
closing procedures set forth in Rule 11.23(c). The Exchange would 
invoke the Closing Contingency Procedures only after it determines that 
the standard closing procedure is unavailable due to technical 
difficulties. The Exchange will employ internal testing procedures to 
determine the availability of each set of operating procedures, and 
thereby position itself to make and announce such a determination as 
rapidly as possible. The Exchange would invoke the Closing Contingency 
Procedures by announcing publicly that its market is impaired and 
unable to execute a closing auction. If the Exchange makes that 
announcement prior to 3:00 p.m., Eastern Standard Time (``EST''), the 
official closing price from the Exchange's designated back-up exchange 
would serve as the Exchange's Official Closing Price. If the Exchange 
makes that announcement after 3:00 p.m., EST, the Securities 
Information Processor (``SIP'') would calculate a Volume Weighted 
Average Price (``VWAP''), described in more detail below. Whether the 
announcement is made before or after 3:00 p.m., EST, the SIP would 
publish the Exchange's Official Closing Price on the Exchange's behalf 
either: (1) Based on a message from the Exchange's back-up exchange or 
(2) based on the VWAP calculation.
Designation of Back-Up
    The Exchange proposes to designate NYSE Arca as its official back-
up exchange. The Exchange believes that NYSE Arca is best positioned to 
serve as its back-up for two primary reasons: (1) NYSE Arca and the 
Exchange's membership substantially overlaps; (2) NYSE Arca already 
operates an effective closing cross that it can use to execute a 
closing transaction in the Exchange's listed securities.\6\ In the 
event the Exchange is unable to execute a closing auction, the 
Exchange's members that are also NYSE Arca members should be 
technically prepared to transfer liquidity to NYSE Arca to ensure a 
deeply liquid closing transaction.
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    \6\ The Exchange notes that quotations and executions for 
Exchange-listed securities are represented on Tape B, which is also 
where information regarding NYSE Arca and NYSE MKT listed securities 
is represented. The Exchange also notes that like the Exchange, NYSE 
Arca trades securities listed on all tapes (Tapes A, B and C), 
including securities listed on the Exchange.
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    The Operating Committees for the CQ/CT and Nasdaq UTP Plans have 
already voted to modify the SIPs to support this proposal. 
Specifically, each exchange that is designated as a back-up exchange 
(Nasdaq and NYSE Arca), will disseminate via the SIPs an official 
closing price in every listed security marked with the .M sale 
condition code.
    The SIPs will apply the following procedures:

[[Page 54629]]

    1. Each primary listing exchange would print a standardized 
Official Closing Price (``OCP''), with a sale condition `M,' in each 
security it trades as primary.
    2. Each primary listing exchange would include in its rules that, 
in the event that it is impaired and cannot conduct a closing auction, 
the exchange's contingency OCP would be the OCP of a specified ``back-
up exchange'' or, if the impairment is announced after 3:00 p.m., EST, 
a VWAP calculation.
    3. In the event that a primary listing exchange publicly announces 
that it is impaired and unable to conduct a closing auction for all or 
a subset of its primary symbols, the SIP would print the primary 
listing exchange's contingency OCP as the OCP of the primary listing 
exchange, including calculation of the VWAP. The advantages of the SIP 
reprinting the contingency OCP as the OCP of the primary listing 
exchange, rather than the back-up exchange separately sending to the 
SIP its OCP as the OCP of the primary exchange are that:

a. The SIP provides a centralized service of which each primary listing 
exchange can take advantage
b. Participant--line validations are retained
c. There is assurance of full symbol coverage
d. The SIP provides a single location for future updates or 
configuration changes or new primary listing exchanges
e. A single source and method for VWAP calculations

    4. The primary listing exchange's contingency OCP would differ 
depending on what time the impaired primary market announces that it 
will be using the closing contingency plan.
    a. If announced prior to 3:00 p.m., EST, the primary listing 
exchange's contingency OCP would be based on the following hierarchy:
    i. Official Closing Price (sale condition `M') of a pre-designated 
back-up exchange(s). An exchange that has more than 1 back-up exchange 
as part of its hierarchy of contingency OCPs, will announce publicly 
the exchange(s) that will be relied on for the contingency OCP.
    ii. If no such contingency OCP exists, then a VWAP calculated by 
the SIP of the final 5 minute regular trading session. The VWAP 
calculations would include all last sale eligible trades in the last 5 
minutes of the normal trading day, up to the time that the VWAP is 
processed. The VWAP would include the closing auctions prints of all 
markets and would take into account any trade breaks or corrections up 
to the time the VWAP is processed. Because the VWAP would include any 
last-sale eligible trades, busts, or corrections that were reported up 
to the time that the SIP calculates the VWAP, the Exchange believes 
that the VWAP price would reflect any pricing adjustments that may be 
reported after 4:00 p.m. EST.
    iii. If no last sale eligible trades are printed in the last 5 
minutes of the normal trading day, then the consolidated last sale 
during regular trading hours.
    iv. If no such same day consolidated last sale eligible trades 
exist, then the primary listing exchange's prior trading day's Official 
Closing Price.
    v. If no Official Closing Price for a security can be determined 
under subsections (i), (ii), (iii), or (iv) above, the Exchange would 
not publish and Official Closing Price for such security.
    b. If announced after 3:00 p.m., EST, the primary listing 
exchange's contingency OCP would be determined by the following 
hierarchy:
    i. Final 5 minute VWAP of regular trading session (same calculation 
as described above).
    ii. If no last sale eligible trades printed in the last 5 minutes 
of the normal trading day, then the consolidated last sale during 
regular trading hours.
    iii. If no such same day consolidated last sale eligible trades 
exist, then the primary listing exchange's prior trading day's Official 
Closing Price.
    iv. If no Official Closing Price for a security can be determined 
under subsections (i), (ii), or (iii) above, the Exchange would not 
publish an Official Closing Price for such security.
    Whenever the Exchange utilizes the Closing Contingency Procedures, 
it will cancel all open interest designated for the Exchange's close 
residing in its systems. This is designed to give members the 
opportunity to route their orders to alternative execution venues. 
Also, in all cases involving the Closing Contingency Procedures, after 
hours trading will begin at 4:00 p.m. EST or upon resolution of the 
disruption that triggered the use of these proposed procedures.
    Because of the technology changes associated with this proposed 
rule change, the Exchange will implement the proposed back-up 
procedures for determining an Official Closing Price no later than 120 
days after filing of this proposal and will announce the implementation 
of the procedures by issuing a Trade Desk Notice.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act \7\ in general, and furthers the objectives of section 
6(b)(5) of the Act \8\ in particular, in that it is designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, 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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change will 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 
because it would provide transparency in how the Exchange would 
determine the Official Closing Price in Exchange-listed securities when 
the Exchange is unable to conduct a closing auction due to a systems or 
technical issue. The Exchange believes that the proposed amendments 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because the proposed 
determination of the Exchange's Official Closing Price was crafted in 
response to input from industry participants and would:
     Provide a pre-determined, consistent solution that would 
result in a closing print to the SIP within a reasonable time frame 
from the normal closing time;
     minimize the need for industry participants to modify 
their processing of data from the SIP; and
     provide advance notification of the applicable closing 
contingency plan to provide sufficient time for industry participants 
to route any closing interest to an alternate venue to participate in 
that venue's closing auction.
    More specifically, the Exchange believes the proposed hierarchy for 
determining the Exchange's Official Closing Price if the Exchange 
determines that it is impaired before 3:00 p.m., EST, would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because the proposal, which is based on input 
from market participants, would provide sufficient time for market 
participants to direct closing-only interest to a designated alternate 
exchange in time for such interest to

[[Page 54630]]

participate in a closing auction on such alternate venue in a 
meaningful manner.
    The Exchange further believes that relying on the official closing 
price of a designated alternate exchange would provide for an 
established hierarchy for determining an Official Closing Price for an 
Exchange-listed security if there is insufficient interest to conduct a 
closing auction on the alternate exchange. In such case, the rules of 
NYSE Arca and the Exchange already provide a mechanism for determining 
an official closing price for securities that trade on those markets.
    The Exchange further believes that if the Exchange determines after 
3:00 p.m., EST, that it is impaired and unable the conduct a closing 
auction, the proposed VWAP calculation would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system because it would provide for a mechanism to determine the value 
of an affected security for purposes of determining the Exchange's 
Official Closing Price. By using a volume-weighted calculation that 
would include the closing transactions on an affected security on 
alternate exchanges as well as any busts or corrections that were 
reported up to the time that the SIP calculates the value, the Exchange 
believes that the proposed calculation would reflect the correct price 
of a security.
    In addition, by using a VWAP calculation rather than the last 
consolidated last-sale eligible price as of the end of regular trading 
hours, the Exchange would reduce the potential for an anomalous trade 
that may not reflect the true price of a security from being set as the 
Exchange's Official Closing Price for a security.
    The Exchange further believes that the proposed rule change would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system because the proposal would have 
minimal impact on market participants. As proposed, from the 
perspective of market participants, even if the Exchange were impaired, 
the SIP would publish an Official Closing Price for Exchange-listed 
securities on behalf of the Exchange in a manner that would be no 
different than if the Exchange were not impaired. If the Exchange 
determines that it is impaired after 3:00 p.m., EST, market 
participants would not have to make any system changes. If the Exchange 
determines that it is impaired before 3:00 p.m., EST, and designates an 
alternate exchange, market participants may have to do systems work to 
re-direct closing-only orders to the alternate exchange. However, the 
Exchange understands, based on input from market participants, that 
such changes would be feasible based on the amount of advance notice. 
In addition, the Exchange believes that designating an alternate 
exchange when there is sufficient time to do so would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because it would allow for the price-discovery 
mechanism of a closing auction to be available for impacted Exchange-
listed securities.

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

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

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\9\
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    \9\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BatsBZX-2016-47 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-BatsBZX-2016-47. 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 office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from

[[Page 54631]]

submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
BatsBZX-2016-47, 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\
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    \10\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19432 Filed 8-15-16; 8:45 am]
BILLING CODE 8011-01-P
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