Self-Regulatory Organizations; Bats EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.21(b) Regarding the Data Collection Requirements of the Regulation NMS Plan To Implement a Tick Size Pilot Program, 63549-63552 [2016-22148]
Download as PDF
Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices
sradovich on DSK3GMQ082PROD with NOTICES
overly complex fund structures, which
are the concerns underlying the limits
in sections 12(d)(1)(A) and (B) of the
Act.
8. Applicants request an exemption
from sections 17(a)(1) and 17(a)(2) of the
Act to permit persons that are Affiliated
Persons, or Second Tier Affiliates, of the
Funds, solely by virtue of certain
ownership interests, to effectuate
purchases and redemptions in-kind. The
deposit procedures for in-kind
purchases of Creation Units and the
redemption procedures for in-kind
redemptions of Creation Units will be
the same for all purchases and
redemptions and Deposit Instruments
and Redemption Instruments will be
valued in the same manner as those
investment positions currently held by
the Funds. Applicants also seek relief
from the prohibitions on affiliated
transactions in section 17(a) to permit a
Fund to sell its shares to and redeem its
shares from a Fund of Funds, and to
engage in the accompanying in-kind
transactions with the Fund of Funds.3
The purchase of Creation Units by a
Fund of Funds directly from a Fund will
be accomplished in accordance with the
policies of the Fund of Funds and will
be based on the NAVs of the Funds.
9. Applicants also request relief to
permit a Feeder Fund to acquire shares
of another registered investment
company managed by the Adviser
having substantially the same
investment objectives as the Feeder
Fund (‘‘Master Fund’’) beyond the
limitations in section 12(d)(1)(A) and
permit the Master Fund, and any
principal underwriter for the Master
Fund, to sell shares of the Master Fund
to the Feeder Fund beyond the
limitations in section 12(d)(1)(B).
10. Section 6(c) of the Act permits the
Commission to exempt any persons or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities, or transactions, from
any provision of section 12(d)(1) if the
3 The requested relief would apply to direct sales
of shares in Creation Units by a Fund to a Fund of
Funds and redemptions of those shares. Applicants,
moreover, are not seeking relief from section 17(a)
for, and the requested relief will not apply to,
transactions where a Fund could be deemed an
Affiliated Person, or a Second-Tier Affiliate, of a
Fund of Funds because an Adviser or an entity
controlling, controlled by or under common control
with an Adviser provides investment advisory
services to that Fund of Funds.
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63549
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange filed a proposal to
amend Exchange Rule 11.21(b)
regarding the data collection
requirements of the Regulation NMS
Plan to Implement a Tick Size Pilot
Program (‘‘Plan’’).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.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Brent J. Fields,
Secretary.
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.
[FR Doc. 2016–22125 Filed 9–14–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78799; File No. SR–
BatsEDGA–2016–21]
Self-Regulatory Organizations; Bats
EDGA Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Rule
11.21(b) Regarding the Data Collection
Requirements of the Regulation NMS
Plan To Implement a Tick Size Pilot
Program
September 9, 2016.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
26, 2016, Bats EDGA Exchange, Inc.
(‘‘Exchange’’ or ‘‘EDGA’’) 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)(iii)
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.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6)(iii).
2 17
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(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On August 25, 2014, the Exchange,
and several other self-regulatory
organizations (the ‘‘Participants’’) filed
with the Commission, pursuant to
section 11A of the Act 6 and Rule 608 of
Regulation NMS thereunder,7 the Plan
to Implement a Tick Size Pilot Program
(the ‘‘Plan’’).8 The Participants filed the
Plan to comply with an order issued by
the Commission on June 24, 2014.9 The
Plan was published for comment in the
Federal Register on November 7, 2014,
and approved by the Commission, as
modified, on May 6, 2015.10
The Plan is designed to allow the
Commission, market participants, and
the public to study and assess the
impact of increment conventions on the
5 See Securities Exchange Act Release No. 74892
(May 6, 2015), 80 FR 27513 (May 13, 2015)
(‘‘Approval Order’’).
6 15 U.S.C. 78k–1.
7 17 CFR 242.608.
8 See Letter from Brendon J. Weiss, Vice
President, Intercontinental Exchange, Inc., to
Secretary, Commission, dated August 25, 2014.
9 See Securities Exchange Act Release No 72460
(June 24, 2014), 79 FR 36840 (June 30, 2014).
10 See Securities Exchange Act Release No. 74892
(May 6, 2015), 80 FR 27513 (May 13, 2015)
(‘‘Approval Order’’).
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Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices
liquidity and trading of the common
stock of small-capitalization companies.
Each Participant is required to comply,
and to enforce compliance by its
member organizations, as applicable,
with the provisions of the Plan.
The Plan provides for the creation of
a group of Pilot Securities, which shall
be placed in a control group and three
separate test groups, with each subject
to varying quoting and trading
increments. Pilot Securities in the
control group will be quoted at the
current tick size increment of $0.01 per
share and will trade at the currently
permitted increments. Pilot Securities in
the first test group will be quoted in
$0.05 minimum increments but will
continue to trade at any price increment
that is currently permitted.11 Pilot
Securities in the second test group
(‘‘Test Group Two’’) will be quoted in
$0.05 minimum increments and will
trade at $0.05 minimum increments
subject to a midpoint exception, a retail
investor order exception, and a
negotiated trade exception.12 Pilot
Securities in the third test group (‘‘Test
Group Three’’) will be subject to the
same quoting and trading increments as
Test Group Two, and also will be
subject to the ‘‘Trade-at’’ requirement to
prevent price matching by a market
participant that is not displaying at the
price of a Trading Center’s ‘‘Best
Protected Bid’’ or ‘‘Best Protected
Offer,’’ unless an enumerated exception
applies.13 In addition to the exceptions
provided under Test Group Two, an
exception for Block Size orders and
exceptions that mirror those under Rule
611 of Regulation NMS 14 will apply to
the Trade-at requirement.
The Plan also requires a Trading
Center 15 or a Market Maker 16 to collect
and transmit certain data to its
designated examining authority
(‘‘DEA’’), and requires DEAs to transmit
this data to the Commission.
Participants that operate a Trading
Center also are required under the Plan
to collect certain data, which is then
11 See
Section VI(B) of the Plan.
Section VI(C) of the Plan.
13 See Section VI(D) of the Plan.
14 17 CFR 242.611.
15 The Plan incorporates the definition of a
‘‘Trading Center’’ from Rule 600(b)(78) of
Regulation NMS. Regulation NMS defines a
‘‘Trading Center’’ as ‘‘a national securities exchange
or national securities association that operates an
SRO trading facility, an alternative trading system,
an exchange market maker, an OTC market maker,
or any other broker or dealer that executes orders
internally by trading as principal or crossing orders
as agent.’’ See 17 CFR 242.600(b).
16 The Plan defines a Market Maker as ‘‘a dealer
registered with any self-regulatory organization, in
accordance with the rules thereof, as (i) a market
maker or (ii) a liquidity provider with an obligation
to maintain continuous, two-sided trading interest.’’
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12 See
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17:34 Sep 14, 2016
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transmitted directly to the Commission.
With respect to Trading Centers,
Appendix B.I to the Plan (Market
Quality Statistics) requires a Trading
Center to submit to the Participant that
is its DEA a variety of market quality
statistics. Appendix B.II to the Plan
(Market and Marketable Limit Order
Data) requires a Trading Center to
submit information to its DEA relating
to market orders and marketable limit
orders, including the time of order
receipt, order type, the order size, and
the National Best Bid and National Best
Offer quoted price.
With respect to Market Makers,
Appendix B.III requires a Participant
that is a national securities exchange to
collect daily Market Maker Registration
statistics. Appendix B.IV requires a
Participant to collect data related to
Market Maker participation with respect
to each Market Maker engaging in
trading activity on a Trading Center
operated by the Participant. Appendix
C.I requires a Participant to collect data
related to Market Maker profitability
from each Market Maker for which it is
the DEA. Appendix C.II requires the
Participant, as DEA, to aggregate the
Appendix C.I data, and to transmit this
data to the Commission.
The Commission approved the Pilot
on a two-year basis, with
implementation to begin no later than
May 6, 2016.17 On November 6, 2015,
the SEC exempted the Participants from
implementing the pilot until October 3,
2016.18 As set forth in Appendices B
and C to the Plan, data that is reported
pursuant to the appendices shall be
provided for dates starting six months
prior to the Pilot Period through six
months after the end of the Pilot Period.
Under the revised Pilot implementation
date, the Pre-Pilot data collection period
commenced on April 4, 2016.
On March 16, 2016, the Exchange
filed with the Commission a proposed
rule change to adopt Exchange Rule
11.21(b) to implement the data
collection requirements of the Plan.19
On December 9, 2015, FINRA, on behalf
of the Plan Participants, submitted an
exemptive request to the Commission,
seeking an exemption from certain data
17 See
Approval Order at 27533 and 27545.
Securities Exchange Act Release No. 76382
(November 6, 2015), 80 FR 70284 (November 13,
2015) (File No. 4–657).
19 See Securities Exchange Act Release No. 77417
(March 22, 2016), 81 FR 17219 (March 28, 2016)
(Notice of Filing and Immediate Effectiveness of
File No. SR–BatsEDGA–2016–01).
The Exchange also submitted a proposed rule
change to implement the quoting and trading
requirements of the Plan. See Securities Exchange
Act Release No. 77792 (May 10, 2016), 81 FR 30397
(May 16, 2016) (Notice of Filing and Immediate
Effectiveness of File No. SR–BatsEDGA–2016–08).
18 See
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collection and reporting requirements
set forth in the Plan.20
The Exchange now proposes to
further amend Rule 11.21(b) to modify
additional data collection and reporting
requirements.21 First, Appendix
B.I.a(21) through B.I.a(27) currently
requires that Trading Centers report the
cumulative number of shares of
cancelled orders during a specified
duration of time after receipt of the
order that was cancelled. The Exchange
and the other Participants believe that,
for purposes of reporting cancelled
orders, it is appropriate to categorize
unexecuted Immediate or Cancel orders
separately as one bucket irrespective of
the duration of time after order receipt,
i.e., without a time increment, to better
differentiate orders cancelled
subsequent to entry from those where
the customer’s intent prior to order
entry was to cancel the order if no
execution could be immediately
obtained. The Exchange, therefore,
proposes to modify Supplementary
Material [sic].04 to provide that
unexecuted Immediate or Cancel orders
shall be categorized separately for
purposes of Appendix B.I.a(21) through
B.I.a(27).
The second change relates to the
reporting of daily market quality
statistics pursuant to Appendix B.I.
Currently, Appendix B.I sets forth
categories of orders, including market
orders, marketable limit orders, and
inside-the-quote resting limit orders, for
which daily market quality statistics
must be reported. The Exchange and the
other Participants have determined that
it is appropriate to include an order type
for limit orders priced more than $0.10
away from the NBBO for purposes of
Appendix B reporting. The Exchange
therefore proposes to amend
Supplementary Material [sic].06 to
provide that limit orders priced more
than $0.10 away from the NBBO shall be
included as an order type for purposes
of Appendix B reporting, and shall be
assigned the number (22). These orders
are not currently required to be reported
20 See letter from Marcia E. Asquith, Senior Vice
President and Corporate Secretary, FINRA dated
December 9, 2015 to Robert W. Errett, Deputy
Secretary, Commission (‘‘Exemption Request’’). The
Commission, pursuant to its authority under Rule
608(e) of Regulation NMS, granted the Exchange a
limited exemption from the requirement to comply
with certain provisions of the Plan as specified in
the letter and noted herein. See letter from David
Shillman, Associate Director, Division of Trading
and Markets, Commission to Eric Swanson, General
Counsel, the Exchange, dated March 22, 2016
(‘‘Exemption Letter’’).
21 The Exchange notes that, in connection with
this proposed rule change, FINRA, on behalf of the
Plan Participants, intends to file an exemptive
request seeking relief from certain of the Plan’s data
collection requirements.
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pursuant to Appendix B, and The
Exchange and the other Participants
believe that requiring the reporting of
such orders will produce a more
comprehensive data set.
The third change relates to the
reporting of market quality statistics
pursuant to Appendix B.I for a variety
of order types, including inside-thequote resting limit orders (12), at-thequote resting limit orders (13), and nearthe-quote resting limit orders (within
$0.10 of the NBBO) (14). The Exchange
and the other Participants believe that it
is appropriate to require Trading
Centers to report all orders that fall
within these categories, and not just
those orders that are ‘‘resting.’’ The
Exchange, therefore, proposes to amend
Supplementary Material [sic].06 to make
this change.
In the fourth change, the Exchange
proposes to add new Supplementary
Material [sic].09 to modify the manner
in which market maker participation
statistics are calculated. Currently,
Appendix B.IV provides that market
maker participation statistics shall be
calculated based on share participation,
trade participation, cross-quote share
(trade) participation, inside-the-quote
share (trade) participation, at-the-quote
share (trade) participation, and outsidethe-quote share (trade) participation.
The Exchange and the other Participants
have determined that it is appropriate to
add the count of the number of Market
Makers used in the calculation of share
(trade) participation to each category.
The Exchange is therefore proposing
this change as part of Supplementary
Material [sic].09. In addition, Appendix
B.IV(b) and (c) currently require that,
when aggregating across Market Makers,
share participation and trade
participation shall be calculated using
the share-weighted average and tradeweighted average, respectively. The
Exchange and the other Participants
believe that it is more appropriate to
calculate share and trade participation
by providing the total count of shares or
trades, as applicable, rather than
weighted averages, and the Exchange is
therefore proposing this change as part
of Supplementary Material [sic].09.
The fifth change relates to the NBBO
that a Trading Center is required to use
when performing certain quote-related
calculations. When calculating crossquote share (trade) participation
pursuant to Appendix B.IV(d) and
inside-the-quote share (trade)
participation pursuant to Appendix
B.IV(e), the Plan requires the Trading
Center to utilize the NBBO at the time
of the trade for both share and trade
participation calculations. When
calculating at-the-quote share (trade)
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17:34 Sep 14, 2016
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participation and outside-the-quote
share (trade) participation pursuant to
Appendix B.IV(f) and (g), the Plan
allows the Trading Center to utilize the
National Best Bid or National Best Offer
(NBBO) at the time of or immediately
before the trade for both share and trade
participation calculations. The
Exchange and the other Participants
believe that it is appropriate to calculate
all quote participation (cross-quote
share (trade) participation, inside-thequote share (trade) participation, at-thequote share (trade) participation and
outside-the-quote share (trade)
participation) solely by reference to the
NBBO in effect immediately prior to the
trade. The Exchange therefore proposes
to make this change as part of
Supplementary Material [sic].09.
Finally, the Exchange proposes to
change the end date until which the PrePilot Data Collection Securities shall be
used to fulfill the Plan’s data collection
requirements. Currently, Supplementary
Material [sic].10 provides that Pre-Pilot
Data Collection Securities are the
securities designated by the Participants
for purposes of the data collection
requirements described in Items I, II and
IV of Appendix B and Item I of
Appendix C to the Plan for the period
beginning six months prior to the Pilot
Period and ending on the trading day
immediately preceding the Pilot Period.
The Exchange and the other Participants
believe that it is appropriate to use the
Pilot Securities to satisfy the Plan’s data
collection requirements prior to the
commencement of the Pilot. According,
the Exchange is revising Supplementary
Material [sic].10 (which will be renumbered as Supplementary Material
[sic].11) to provide that the Pre-Pilot
Data Collection Securities shall be used
to satisfy the Plan’s data collection
requirements through thirty-one days
prior to the Pilot Period, after which
time the Pilot Securities shall be used
for purposes of the data collection
requirements.22
22 After regular trading hours on September 2,
2016, the national securities exchanges will
establish which securities will be included as Pilot
Securities for purposes of the Plan. The Exchange
and the other Participants have determined that
members should use the Pilot Securities list for data
collection purposes once it becomes available.
Thus, the proposed rule change requires that,
beginning thirty days prior to the first day of the
Pilot Period—i.e., September 3, 2016—the Exchange
and the Exchange members will comply with the
data collection obligations of the Plan by collecting
data on the Pilot Securities. As a result, beginning
on September 3, 2016, members must migrate from
using the Exchange’s published Pre-Pilot Data
Collection Security list and begin using the Pilot
Securities list. September 2, 2016 will be the last
day that members use the Pre-Pilot Data Collection
Security list.
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63551
As noted in Item 2 of this filing, the
Exchange has filed the proposed rule
change for immediate effectiveness. The
Exchange has requested that the SEC
waive the 30-day operative period so
that the proposed rule change can
become operative on August 30, 2016.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with section 6(b)
of the Act 23 in general, and furthers the
objectives of section 6(b)(5) of the Act 24
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 that this
proposal is consistent with the Act
because it implements and clarifies the
provisions of the Plan, and is designed
to assist the Exchange in meeting its
regulatory obligations pursuant of the
Plan. In approving the Plan, the SEC
noted that the Pilot was an appropriate,
data-driven test that was designed to
evaluate the impact of a wider tick size
on trading, liquidity, and the market
quality of securities of smaller
capitalization companies, and was
therefore in furtherance of the purposes
of the Act. The Exchange believes that
this proposal is in furtherance of the
objectives of the Plan, as identified by
the SEC, and is therefore consistent with
the Act because the proposal
implements and clarifies the
requirements of the Plan and applies
specific obligations to Members in
furtherance of compliance with the
Plan.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange notes that the proposed
rule change implements the provisions
of the Plan, and is designed to assist the
Exchange in meeting its regulatory
obligations pursuant to the Plan. The
Exchange also notes that, other than the
change to require use of the Pilot
Securities beginning thirty days prior to
the beginning of the Pilot Period, the
proposed changes will not affect the
data collection and reporting
requirements for members that operate
Trading Centers; the proposed changes
will only affect how the Exchange and
Participants that operate Trading
Centers collect and report data. The
23 15
24 15
E:\FR\FM\15SEN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices
Exchange notes that, with respect to the
change to require the use of the Pilot
Securities beginning thirty days prior to
the start of the Pilot Period, the
proposed change reduces the number of
securities on which affected members
otherwise would have been required to
collect data pursuant to the Plan and
Exchange Rule 11.21(b). In addition, the
proposed rule change applies equally to
all similarly situated members.
Therefore, the Exchange does not
believe that the proposed rule change
will result in any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
sradovich on DSK3GMQ082PROD with NOTICES
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to section 19(b)(3)(A)
of the Act 25 and Rule 19b–4(f)(6) 26
thereunder because the proposal does
not: (i) Significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) by its
terms, become operative for 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.
A proposed rule change filed under
Rule 19b–4(f)(6) 27 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),28 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 so that the
proposed rule change can become
operative on August 30, 2016.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest
because it will allow the Exchange to
implement the proposed rules
immediately thereby preventing delays
in the implementation of the Plan. The
Commission notes that the Plan is
25 15
U.S.C. 78s(b)(3)(A).
26 17 CFR 240.19b–4(f)(6).
27 17 CFR 240.19b–4(f)(6).
28 17 CFR 240.19b–4(f)(6)(iii).
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scheduled to start on October 3, 2016.
Therefore, the Commission hereby
waives the 30-day operative delay and
designates the proposed rule change to
be operative upon filing with the
Commission.29
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.30
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–
BatsEDGA–2016–21 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–BatsEDGA–2016–21. 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
29 For purposes only of waiving the operative
delay for this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
30 15 U.S.C. 78s(b)(3)(C).
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business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
BatsEDGA–2016–21 and should be
submitted on or before October 6, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Brent J. Fields,
Secretary.
[FR Doc. 2016–22148 Filed 9–14–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78803; File No. SR–
NYSEMKT–2016–83]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing of Proposed
Rule Change Amending Rule 67—
Equities Relating to the Tick Size Pilot
Program
September 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 August
25, 2016, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, 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 67—Equities to (1) describe system
functionality requirements necessary to
implement the Plan to Implement a Tick
Size Pilot Program submitted to the
Commission pursuant to Rule 608 of
Regulation NMS 4 under the Act
(‘‘Plan’’), and (2) clarify the operation of
certain exceptions to the Trade-at
31 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 17 CFR 242.608.
1 15
E:\FR\FM\15SEN1.SGM
15SEN1
Agencies
[Federal Register Volume 81, Number 179 (Thursday, September 15, 2016)]
[Notices]
[Pages 63549-63552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22148]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78799; File No. SR-BatsEDGA-2016-21]
Self-Regulatory Organizations; Bats EDGA Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Rule 11.21(b) Regarding the Data Collection Requirements of the
Regulation NMS Plan To Implement a Tick Size Pilot Program
September 9, 2016.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 26, 2016, Bats EDGA Exchange, Inc. (``Exchange'' or ``EDGA'')
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)(iii)
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)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to amend Exchange Rule 11.21(b)
regarding the data collection requirements of the Regulation NMS Plan
to Implement a Tick Size Pilot Program (``Plan'').\5\
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\5\ See Securities Exchange Act Release No. 74892 (May 6, 2015),
80 FR 27513 (May 13, 2015) (``Approval Order'').
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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
On August 25, 2014, the Exchange, and several other self-regulatory
organizations (the ``Participants'') filed with the Commission,
pursuant to section 11A of the Act \6\ and Rule 608 of Regulation NMS
thereunder,\7\ the Plan to Implement a Tick Size Pilot Program (the
``Plan'').\8\ The Participants filed the Plan to comply with an order
issued by the Commission on June 24, 2014.\9\ The Plan was published
for comment in the Federal Register on November 7, 2014, and approved
by the Commission, as modified, on May 6, 2015.\10\
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\6\ 15 U.S.C. 78k-1.
\7\ 17 CFR 242.608.
\8\ See Letter from Brendon J. Weiss, Vice President,
Intercontinental Exchange, Inc., to Secretary, Commission, dated
August 25, 2014.
\9\ See Securities Exchange Act Release No 72460 (June 24,
2014), 79 FR 36840 (June 30, 2014).
\10\ See Securities Exchange Act Release No. 74892 (May 6,
2015), 80 FR 27513 (May 13, 2015) (``Approval Order'').
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The Plan is designed to allow the Commission, market participants,
and the public to study and assess the impact of increment conventions
on the
[[Page 63550]]
liquidity and trading of the common stock of small-capitalization
companies. Each Participant is required to comply, and to enforce
compliance by its member organizations, as applicable, with the
provisions of the Plan.
The Plan provides for the creation of a group of Pilot Securities,
which shall be placed in a control group and three separate test
groups, with each subject to varying quoting and trading increments.
Pilot Securities in the control group will be quoted at the current
tick size increment of $0.01 per share and will trade at the currently
permitted increments. Pilot Securities in the first test group will be
quoted in $0.05 minimum increments but will continue to trade at any
price increment that is currently permitted.\11\ Pilot Securities in
the second test group (``Test Group Two'') will be quoted in $0.05
minimum increments and will trade at $0.05 minimum increments subject
to a midpoint exception, a retail investor order exception, and a
negotiated trade exception.\12\ Pilot Securities in the third test
group (``Test Group Three'') will be subject to the same quoting and
trading increments as Test Group Two, and also will be subject to the
``Trade-at'' requirement to prevent price matching by a market
participant that is not displaying at the price of a Trading Center's
``Best Protected Bid'' or ``Best Protected Offer,'' unless an
enumerated exception applies.\13\ In addition to the exceptions
provided under Test Group Two, an exception for Block Size orders and
exceptions that mirror those under Rule 611 of Regulation NMS \14\ will
apply to the Trade-at requirement.
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\11\ See Section VI(B) of the Plan.
\12\ See Section VI(C) of the Plan.
\13\ See Section VI(D) of the Plan.
\14\ 17 CFR 242.611.
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The Plan also requires a Trading Center \15\ or a Market Maker \16\
to collect and transmit certain data to its designated examining
authority (``DEA''), and requires DEAs to transmit this data to the
Commission. Participants that operate a Trading Center also are
required under the Plan to collect certain data, which is then
transmitted directly to the Commission. With respect to Trading
Centers, Appendix B.I to the Plan (Market Quality Statistics) requires
a Trading Center to submit to the Participant that is its DEA a variety
of market quality statistics. Appendix B.II to the Plan (Market and
Marketable Limit Order Data) requires a Trading Center to submit
information to its DEA relating to market orders and marketable limit
orders, including the time of order receipt, order type, the order
size, and the National Best Bid and National Best Offer quoted price.
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\15\ The Plan incorporates the definition of a ``Trading
Center'' from Rule 600(b)(78) of Regulation NMS. Regulation NMS
defines a ``Trading Center'' as ``a national securities exchange or
national securities association that operates an SRO trading
facility, an alternative trading system, an exchange market maker,
an OTC market maker, or any other broker or dealer that executes
orders internally by trading as principal or crossing orders as
agent.'' See 17 CFR 242.600(b).
\16\ The Plan defines a Market Maker as ``a dealer registered
with any self-regulatory organization, in accordance with the rules
thereof, as (i) a market maker or (ii) a liquidity provider with an
obligation to maintain continuous, two-sided trading interest.''
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With respect to Market Makers, Appendix B.III requires a
Participant that is a national securities exchange to collect daily
Market Maker Registration statistics. Appendix B.IV requires a
Participant to collect data related to Market Maker participation with
respect to each Market Maker engaging in trading activity on a Trading
Center operated by the Participant. Appendix C.I requires a Participant
to collect data related to Market Maker profitability from each Market
Maker for which it is the DEA. Appendix C.II requires the Participant,
as DEA, to aggregate the Appendix C.I data, and to transmit this data
to the Commission.
The Commission approved the Pilot on a two-year basis, with
implementation to begin no later than May 6, 2016.\17\ On November 6,
2015, the SEC exempted the Participants from implementing the pilot
until October 3, 2016.\18\ As set forth in Appendices B and C to the
Plan, data that is reported pursuant to the appendices shall be
provided for dates starting six months prior to the Pilot Period
through six months after the end of the Pilot Period. Under the revised
Pilot implementation date, the Pre-Pilot data collection period
commenced on April 4, 2016.
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\17\ See Approval Order at 27533 and 27545.
\18\ See Securities Exchange Act Release No. 76382 (November 6,
2015), 80 FR 70284 (November 13, 2015) (File No. 4-657).
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On March 16, 2016, the Exchange filed with the Commission a
proposed rule change to adopt Exchange Rule 11.21(b) to implement the
data collection requirements of the Plan.\19\ On December 9, 2015,
FINRA, on behalf of the Plan Participants, submitted an exemptive
request to the Commission, seeking an exemption from certain data
collection and reporting requirements set forth in the Plan.\20\
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\19\ See Securities Exchange Act Release No. 77417 (March 22,
2016), 81 FR 17219 (March 28, 2016) (Notice of Filing and Immediate
Effectiveness of File No. SR-BatsEDGA-2016-01).
The Exchange also submitted a proposed rule change to implement
the quoting and trading requirements of the Plan. See Securities
Exchange Act Release No. 77792 (May 10, 2016), 81 FR 30397 (May 16,
2016) (Notice of Filing and Immediate Effectiveness of File No. SR-
BatsEDGA-2016-08).
\20\ See letter from Marcia E. Asquith, Senior Vice President
and Corporate Secretary, FINRA dated December 9, 2015 to Robert W.
Errett, Deputy Secretary, Commission (``Exemption Request''). The
Commission, pursuant to its authority under Rule 608(e) of
Regulation NMS, granted the Exchange a limited exemption from the
requirement to comply with certain provisions of the Plan as
specified in the letter and noted herein. See letter from David
Shillman, Associate Director, Division of Trading and Markets,
Commission to Eric Swanson, General Counsel, the Exchange, dated
March 22, 2016 (``Exemption Letter'').
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The Exchange now proposes to further amend Rule 11.21(b) to modify
additional data collection and reporting requirements.\21\ First,
Appendix B.I.a(21) through B.I.a(27) currently requires that Trading
Centers report the cumulative number of shares of cancelled orders
during a specified duration of time after receipt of the order that was
cancelled. The Exchange and the other Participants believe that, for
purposes of reporting cancelled orders, it is appropriate to categorize
unexecuted Immediate or Cancel orders separately as one bucket
irrespective of the duration of time after order receipt, i.e., without
a time increment, to better differentiate orders cancelled subsequent
to entry from those where the customer's intent prior to order entry
was to cancel the order if no execution could be immediately obtained.
The Exchange, therefore, proposes to modify Supplementary Material
[sic].04 to provide that unexecuted Immediate or Cancel orders shall be
categorized separately for purposes of Appendix B.I.a(21) through
B.I.a(27).
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\21\ The Exchange notes that, in connection with this proposed
rule change, FINRA, on behalf of the Plan Participants, intends to
file an exemptive request seeking relief from certain of the Plan's
data collection requirements.
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The second change relates to the reporting of daily market quality
statistics pursuant to Appendix B.I. Currently, Appendix B.I sets forth
categories of orders, including market orders, marketable limit orders,
and inside-the-quote resting limit orders, for which daily market
quality statistics must be reported. The Exchange and the other
Participants have determined that it is appropriate to include an order
type for limit orders priced more than $0.10 away from the NBBO for
purposes of Appendix B reporting. The Exchange therefore proposes to
amend Supplementary Material [sic].06 to provide that limit orders
priced more than $0.10 away from the NBBO shall be included as an order
type for purposes of Appendix B reporting, and shall be assigned the
number (22). These orders are not currently required to be reported
[[Page 63551]]
pursuant to Appendix B, and The Exchange and the other Participants
believe that requiring the reporting of such orders will produce a more
comprehensive data set.
The third change relates to the reporting of market quality
statistics pursuant to Appendix B.I for a variety of order types,
including inside-the-quote resting limit orders (12), at-the-quote
resting limit orders (13), and near-the-quote resting limit orders
(within $0.10 of the NBBO) (14). The Exchange and the other
Participants believe that it is appropriate to require Trading Centers
to report all orders that fall within these categories, and not just
those orders that are ``resting.'' The Exchange, therefore, proposes to
amend Supplementary Material [sic].06 to make this change.
In the fourth change, the Exchange proposes to add new
Supplementary Material [sic].09 to modify the manner in which market
maker participation statistics are calculated. Currently, Appendix B.IV
provides that market maker participation statistics shall be calculated
based on share participation, trade participation, cross-quote share
(trade) participation, inside-the-quote share (trade) participation,
at-the-quote share (trade) participation, and outside-the-quote share
(trade) participation. The Exchange and the other Participants have
determined that it is appropriate to add the count of the number of
Market Makers used in the calculation of share (trade) participation to
each category. The Exchange is therefore proposing this change as part
of Supplementary Material [sic].09. In addition, Appendix B.IV(b) and
(c) currently require that, when aggregating across Market Makers,
share participation and trade participation shall be calculated using
the share-weighted average and trade-weighted average, respectively.
The Exchange and the other Participants believe that it is more
appropriate to calculate share and trade participation by providing the
total count of shares or trades, as applicable, rather than weighted
averages, and the Exchange is therefore proposing this change as part
of Supplementary Material [sic].09.
The fifth change relates to the NBBO that a Trading Center is
required to use when performing certain quote-related calculations.
When calculating cross-quote share (trade) participation pursuant to
Appendix B.IV(d) and inside-the-quote share (trade) participation
pursuant to Appendix B.IV(e), the Plan requires the Trading Center to
utilize the NBBO at the time of the trade for both share and trade
participation calculations. When calculating at-the-quote share (trade)
participation and outside-the-quote share (trade) participation
pursuant to Appendix B.IV(f) and (g), the Plan allows the Trading
Center to utilize the National Best Bid or National Best Offer (NBBO)
at the time of or immediately before the trade for both share and trade
participation calculations. The Exchange and the other Participants
believe that it is appropriate to calculate all quote participation
(cross-quote share (trade) participation, inside-the-quote share
(trade) participation, at-the-quote share (trade) participation and
outside-the-quote share (trade) participation) solely by reference to
the NBBO in effect immediately prior to the trade. The Exchange
therefore proposes to make this change as part of Supplementary
Material [sic].09.
Finally, the Exchange proposes to change the end date until which
the Pre-Pilot Data Collection Securities shall be used to fulfill the
Plan's data collection requirements. Currently, Supplementary Material
[sic].10 provides that Pre-Pilot Data Collection Securities are the
securities designated by the Participants for purposes of the data
collection requirements described in Items I, II and IV of Appendix B
and Item I of Appendix C to the Plan for the period beginning six
months prior to the Pilot Period and ending on the trading day
immediately preceding the Pilot Period. The Exchange and the other
Participants believe that it is appropriate to use the Pilot Securities
to satisfy the Plan's data collection requirements prior to the
commencement of the Pilot. According, the Exchange is revising
Supplementary Material [sic].10 (which will be re-numbered as
Supplementary Material [sic].11) to provide that the Pre-Pilot Data
Collection Securities shall be used to satisfy the Plan's data
collection requirements through thirty-one days prior to the Pilot
Period, after which time the Pilot Securities shall be used for
purposes of the data collection requirements.\22\
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\22\ After regular trading hours on September 2, 2016, the
national securities exchanges will establish which securities will
be included as Pilot Securities for purposes of the Plan. The
Exchange and the other Participants have determined that members
should use the Pilot Securities list for data collection purposes
once it becomes available. Thus, the proposed rule change requires
that, beginning thirty days prior to the first day of the Pilot
Period--i.e., September 3, 2016--the Exchange and the Exchange
members will comply with the data collection obligations of the Plan
by collecting data on the Pilot Securities. As a result, beginning
on September 3, 2016, members must migrate from using the Exchange's
published Pre-Pilot Data Collection Security list and begin using
the Pilot Securities list. September 2, 2016 will be the last day
that members use the Pre-Pilot Data Collection Security list.
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As noted in Item 2 of this filing, the Exchange has filed the
proposed rule change for immediate effectiveness. The Exchange has
requested that the SEC waive the 30-day operative period so that the
proposed rule change can become operative on August 30, 2016.
2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act \23\ in general, and furthers the objectives of section
6(b)(5) of the Act \24\ 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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\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that this proposal is consistent with the Act
because it implements and clarifies the provisions of the Plan, and is
designed to assist the Exchange in meeting its regulatory obligations
pursuant of the Plan. In approving the Plan, the SEC noted that the
Pilot was an appropriate, data-driven test that was designed to
evaluate the impact of a wider tick size on trading, liquidity, and the
market quality of securities of smaller capitalization companies, and
was therefore in furtherance of the purposes of the Act. The Exchange
believes that this proposal is in furtherance of the objectives of the
Plan, as identified by the SEC, and is therefore consistent with the
Act because the proposal implements and clarifies the requirements of
the Plan and applies specific obligations to Members in furtherance of
compliance with the Plan.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange notes that the proposed rule change implements the
provisions of the Plan, and is designed to assist the Exchange in
meeting its regulatory obligations pursuant to the Plan. The Exchange
also notes that, other than the change to require use of the Pilot
Securities beginning thirty days prior to the beginning of the Pilot
Period, the proposed changes will not affect the data collection and
reporting requirements for members that operate Trading Centers; the
proposed changes will only affect how the Exchange and Participants
that operate Trading Centers collect and report data. The
[[Page 63552]]
Exchange notes that, with respect to the change to require the use of
the Pilot Securities beginning thirty days prior to the start of the
Pilot Period, the proposed change reduces the number of securities on
which affected members otherwise would have been required to collect
data pursuant to the Plan and Exchange Rule 11.21(b). In addition, the
proposed rule change applies equally to all similarly situated members.
Therefore, the Exchange does not believe that the proposed rule change
will result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A) of the Act \25\ and Rule 19b-4(f)(6) \26\ thereunder
because the proposal does not: (i) Significantly affect the protection
of investors or the public interest; (ii) impose any significant burden
on competition; and (iii) by its terms, become operative for 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.
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\25\ 15 U.S.C. 78s(b)(3)(A).
\26\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \27\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\28\ 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 so that the
proposed rule change can become operative on August 30, 2016.
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\27\ 17 CFR 240.19b-4(f)(6).
\28\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
because it will allow the Exchange to implement the proposed rules
immediately thereby preventing delays in the implementation of the
Plan. The Commission notes that the Plan is scheduled to start on
October 3, 2016. Therefore, the Commission hereby waives the 30-day
operative delay and designates the proposed rule change to be operative
upon filing with the Commission.\29\
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\29\ For purposes only of waiving the operative delay for this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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.\30\
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\30\ 15 U.S.C. 78s(b)(3)(C).
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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-BatsEDGA-2016-21 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-BatsEDGA-2016-21. 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 submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BatsEDGA-2016-21 and should
be submitted on or before October 6, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-22148 Filed 9-14-16; 8:45 am]
BILLING CODE 8011-01-P