Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing of Proposed Rule Change To Amend BX Rules 4702 and 4703, 66708-66711 [2016-23324]
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via a distribution to one or more of its
executing Clearing Trading Permit
Holders will provide Professionals with
a convenient manner in which to
receive their rebates, which perfects the
mechanism for a free and open market.
Lastly, the Exchange believes the
proposed update to the Frequent Trader
Program—Volume Corrections Form
along with the clarifying, nonsubstantive and organizational changes
maintains clarity in the Form and Fees
Schedule, respectively, and avoids
potential confusion given the proposed
changes to expand the Frequent Trader
Program. Alleviation of confusion
removes impediments to, and perfects
the mechanism for a free and open
market and a national market system,
and, in general, protects investors and
the public interest of market
participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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CBOE does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act because,
while the rebates apply only to
Customers and Professionals, the
proposed change is designed to
encourage increased Customer and
Professional VIX, SPX and RUT options
volume, which provides greater trading
opportunities for all market
participants. Additionally, the Exchange
notes that incentive programs based on
Customer and Professional volume
already exist elsewhere within the
industry.11 The Exchange believes that
the proposed rule change will not cause
an unnecessary burden on intermarket
competition because VIX and SPX
products are only traded on CBOE and
RUT products are only traded on CBOE
and C2 Options Exchange, Incorporated.
To the extent that the proposed changes
make CBOE a more attractive
marketplace for market participants at
other exchanges, such market
participants are welcome to become
CBOE market participants.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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 12 and paragraph (f) of Rule
19b–4 13 thereunder. 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 will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
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–
CBOE–2016–068 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–CBOE–2016–068. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
2016–068, and should be submitted on
or before October 19, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Brent J. Fields,
Secretary.
[FR Doc. 2016–23322 Filed 9–27–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78909; File No. SR–BX–
2016–046]
Self-Regulatory Organizations;
NASDAQ BX, Inc.; Notice of Filing of
Proposed Rule Change To Amend BX
Rules 4702 and 4703
September 22, 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
September 13, 2016, NASDAQ BX, Inc.
(‘‘BX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II 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 BX
Rules 4702, Order Types, and 4703,
Order Attributes, to change the way in
which Post Only Orders interact with
resting Non-Display orders and
preventing the execution of midpoint
pegged orders during a crossed market.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqbx.cchwallstreet.com/,
at the principal office of the Exchange,
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
12 15
U.S.C. 78s(b)(3)(A).
13 17 CFR 240.19b–4(f).
11 Id.
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Federal Register / Vol. 81, No. 188 / Wednesday, September 28, 2016 / Notices
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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange offers various Order
Types 3 and Order Attributes 4 to help
members trade effectively on behalf of
investors and themselves. This proposal
would modify the manner in which two
of those order types, Non-Display and
Post Only, interact within BX’s trading
system.
The Exchange’s Non-Display Orders,
described in Rule 4702(b)(3), help
members minimize market impact when
trading in larger-than-average size. For
example, institutions often use NonDisplay Orders that use pegging at the
midpoint (Midpoint Peg Order) 5 of the
National Best Bid and Offer (NBBO) to
reduce market impact because a
midpoint execution does not indicate a
price movement direction, as opposed
to buying at the offer or selling at the
bid (sometimes referred to as ‘‘crossing
the spread’’) which may publicly
indicate the direction of the stock price.
The Exchange also offers Post Only
Orders, described in Rule 4702(b)(4),
which members, often market makers,
use to rest liquidity on BX’s Order Book.
Resting displayed liquidity is essential
to price formation and order interaction,
two indicators of healthy and orderly
markets. BX introduced Post Only
Orders 6 to enable and encourage this
valuable behavior. A Post Only buy
(sell) order entered at a price below
3 See Exchange Rule 4702. The Exchange also
proposes a minor technical correction to add the
word ‘‘price’’ after the word ‘‘displayed’’ in the
second line of the second paragraph of Rule
4702(b)(4)(B).
4 See Exchange Rule 4703.
5 See Exchange Rule 4702(b)(3)(C).
6 See Post Only order Factsheet: https://
www.nasdaqtrader.com/content/ProductsServices/
Trading/postonly_factsheet.pdf.
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$1.00 will execute against a resting sell
(buy) order if the value of price
improvement equals or exceeds the
foregone rebate for liquidity provision
and fee for removing liquidity. If a Post
Only buy (sell) order is entered at a
price below $1.00 and is equal to the
price of a resting sell (buy) order, the
buy (sell) order is repriced one
minimum price increment (MPV),
generally $0.0001 7 lower (higher) than
the resting sell (buy) order’s price.
This repricing function, sometimes
referred to as ‘‘price-sliding,’’ often
occurs when a liquidity provider
seeking to tighten the bid/offer spread
on the Exchange encounters a NonDisplay Order on the opposite side of
market from the Post Only Order. When
this occurs, the displayed spread on the
Exchange may become wider than on
competing exchanges therefore reducing
market quality and the likelihood of
execution on the Exchange. In addition,
the member entering the Post Only
Order learns through the repricing
action both that there is a Non-Display
Order resting on the book and also the
price at which the Non-Display Order is
resting. The Exchange believes that this
interaction is inefficient and detrimental
to investors, to members, and to the
market.
Accordingly, the Exchange proposes
two changes to the manner in which
certain Post Only Orders respond to
certain Non-Display Orders resting on
the opposite side of the market. In all
other instances, there will be no change.
For example, Post-Only Orders will
continue to execute against resting NonDisplay Orders provided the price
improvement associated with the
execution equals or exceeds the
foregone rebate for liquidity provision
and fee for removing liquidity for the
member entering the Post Only Order,
as they do today.
First, a Post-Only Order that is
entered with a price below $1.00 and is
equal to the price of a resting NonDisplay Order will be posted at its limit
price (or its adjusted price if
7 Securities priced at or above $1 are quoted in
$0.01 increments, below $1, they can be quoted in
$0.0001 increments. Post Only behavior is slightly
different below $1 because the fees and economics
involved in the execution are distinct from those at
or above $1. Specifically, executions in securities
priced at or above $1 result in rebates for the
accessor of liquidity and as such it is always in the
best interest of the incoming Post-Only Order to
execute in securities at or above $1. See Exchange
Rule 4702(b)(4)(A). In contrast, executions in
securities priced below $1 result in charges to the
accessor of liquidity. Compare Rules 7018 (a) and
(b). In both cases, the Exchange system is
programmed to analyze the price improvement
offered and to execute only where permitted under
its rules.
PO 00000
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Fmt 4703
Sfmt 4703
66709
applicable),8 rather than being re-priced
as it is today. This allows the Post Only
Order to lock the resting Non-Display
Order.9 Both the displayed Post Only
order and the resting Non-Display order
will remain available for execution at
the locking price. In this way, neither
order is disadvantaged; the Exchange
Bid/Offer spread is tightened; and no
signal is sent to the member that entered
the Post Only Order. In this scenario,
efficacy is maintained or enhanced for
both the Post Only Order user and the
Non-Display Order user compared to
today. For example, under the current
rules if a Participant entered a Post-Only
Order to buy at $0.95, the Best Offer 10
was $0.97, and there was a NonDisplayed Order on the Exchange Book
to sell at $0.95, the Post-Only Order
would be ranked and displayed at
$0.9499. Using the above scenario, the
Exchange is proposing to instead rank
and display the Post-Only Order to buy
at its limit price of $0.95.
Second, the Exchange also proposes
to modify processing when a Post Only
Order, priced below $1.00, interacts
with a Non-Display Order that is a
Midpoint Peg Order. Specifically, when
a Post Only buy (sell) order is priced
higher (lower) than a resting Midpoint
Peg Order but where the difference is
less than the foregone rebate for
liquidity provision and fee for removing
liquidity, the Post Only Order will
nonetheless be posted at its limit price.
This proposal benefits investors and
members because it results in a tighter
Bid/Offer spread. Moreover, because the
Post Only order is not re-priced relative
to the resting Midpoint Peg order, as it
is today, there is no information leakage.
Additionally, the member entering the
Midpoint Peg Order benefits because the
new midpoint based on the new NBBO
would now be a better price for the
seller. Midpoint Peg orders are either
cancelled or re-adjusted based on NBBO
changes depending on the protocol used
by the member to enter the Midpoint
Peg Order.11 For example, under the
current rules if the NBBO is $0.92 ×
$0.97 and a Participant enters a
Midpoint Peg Order (which, as stated
above, is Non-Displayed) to buy 200
shares with a limit price of $0.96, the
8 If a Post-Only Order is received at a price that
would lock or cross a Protected Quotations [sic], its
price will be adjusted in the same manner as a Price
to Comply order (if it is not Attributable) or a Price
to Display Order (if it is Attributable). See Rules
4702(b)(1) and 4702(b)(4)(A).
9 The Exchange believes that this condition is
consistent with the Regulation NMS prohibition on
locked and crossed markets because the Exchange
will not be displaying a locked market.
10 The term ‘‘Best Offer’’ is defined in Exchange
Rule 4701(j).
11 See Exchange Rule 4703(d).
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mstockstill on DSK3G9T082PROD with NOTICES
Midpoint Peg Order would post to the
book at $0.945. If thereafter a Post-Only
Order to sell 200 shares at $0.9449 is
entered, the Post-Only Order would post
and display at $0.9451 and Midpoint
Peg Order would be cancelled or
readjusted depending on the protocol
used to enter the order. Under the
proposed change and using the example
above, the incoming Post-Only Order to
sell 200 shares at $0.9449 would post
and display at $0.9449 and the
Midpoint Peg Order would be cancelled
or re-adjusted depending on the
protocol used to enter the order.
In addition, the Exchange proposes to
discontinue executing midpoint pegged
orders when the NBBO is crossed.
Today, the Exchange executes midpoint
pegged orders when the NBBO is locked
by executing at the locking price and
when the NBBO is crossed by executing
at the midpoint of the crossed price.
Based upon feedback from members and
the practice of other exchanges,12 the
Exchange has determined that its
current practice of executing midpoint
pegged orders during such crossed
markets produces sub-optimal execution
prices for members and investors. The
midpoint of a crossed market is not a
clear and accurate indication of a valid
price, nor is it indicative of a fair and
orderly market. The better result is to
simply not execute midpoint orders
during crossed markets. To accomplish
this, the Exchange will program the
trading system to respond to the
creation of a crossed NBBO by
cancelling existing midpoint pegged
orders and rejecting the entry of new
midpoint pegged orders. After such
order cancellation or rejection, members
can resubmit their orders at their
discretion without limitation.
Accordingly, the Exchange proposes to
modify the rule language describing the
processing of Orders with the midpoint
pegging attribute described in Rule
4703(d).
As set forth below, the Exchange
believes the proposed changes will
benefit investors and members by
addressing certain market inefficiencies
that exist on the Exchange, and by
improving BX’s competitive position
against other exchanges that already
offer similar processing of resting and
non-displayed orders.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,13 in general, and furthers the
12 See, e.g., BATS Rule 11.9(c)(9) (no midpoint
execution during crossed market); NYSE Arca Rule
7.31(d)(4) (no midpoint execution when the market
is locked or crossed).
13 15 U.S.C. 78f(b).
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objectives of Section 6(b)(5) of the Act,14
in particular, in that it is designed to
promote just and equitable principles of
trade, 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 in
several ways.
First, the proposed changes will
benefit investors and members by
tightening bid/offer spreads, thereby
enhancing execution quality on the
Exchange. Second, members entering
Post Only Order users will be able to
execute liquidity providing strategies
more efficiently. Third, the proposed
changes will reduce the signaling
created today by the interaction of Post
Only and Non-Display Order, and
thereby minimize the market impact of
larger orders. Fourth, the cancellation or
rejection of midpoint pegged orders
when the NBBO is crossed will avoid
mispriced executions and result in
higher overall execution quality for
members.
The Exchange believes the proposed
changes have no detrimental impact on
any member or class of members, or on
users of the Post Only or Non-Display
Order types or on users of other order
types offered by the Exchange. First, the
use of Exchange Order types and
attributes is voluntary, in that no
member is required to use any specific
Order type or attribute or even to use
any Exchange Order type or attribute or
any Exchange functionality at all. If an
Exchange member believes for any
reason that the proposed rule change
will be detrimental, that perceived
detriment can be avoided by choosing
not to enter or interact with the Order
types modified by this proposed rule
change. Second, the Exchange believes
that the changes proposed herein will
not result in any diminution of market
quality (execution price, effective
spread, fill rate, etc.) for any member
entering or interacting with one of the
Order types modified by this proposed
rule change.
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. To the
contrary, the Exchange believes the
proposed rule changes are procompetitive for several reasons. First,
the proposed functionality is designed
to compete with exchanges, including
BATS and NYSE Arca, which already
14 15
PO 00000
U.S.C. 78f(b)(5).
Frm 00091
Fmt 4703
Sfmt 4703
offer order types that behave similarly to
how the Exchanges proposes Post Only
and Non-Display Orders behave in the
future. Second, the Exchange believes
that the proposed rule change will make
the Exchange a more competitive
execution venue by creating tighter bid/
offer spreads and by enhancing
execution quality (i.e., achieving
increased price improvement, reducing
effective spreads, and increasing
execution fill rates). Third, the
Exchange proposes to offer the same
functionality to all members, thereby
eliminating potential competitive
burden or differential treatment.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2016–046 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–BX–2016–046. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
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Federal Register / Vol. 81, No. 188 / Wednesday, September 28, 2016 / Notices
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml).
Copies of the submission, all
subsequent amendments, all written
statements with respect to the proposed
rule change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–BX–2016–046 and should
be submitted on or before October 19,
2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Brent J. Fields,
Secretary.
[FR Doc. 2016–23324 Filed 9–27–16; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #14854 and #14855]
Kansas Disaster #KS–00097
This is a notice of an
Administrative declaration of a disaster
for the State of Kansas dated 09/16/
2016.
Incident: Severe Storms and Flooding.
Incident Period: 08/19/2016 through
09/11/2016.
Effective Date: 09/16/2016.
Physical Loan Application Deadline
Date: 11/15/2016.
Economic Injury (EIDL) Loan
Application Deadline Date: 06/16/2017.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
mstockstill on DSK3G9T082PROD with NOTICES
SUMMARY:
Administration, Processing And
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW., Suite 6050,
Washington, DC 20416.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
Administrator’s disaster declaration,
applications for disaster loans may be
filed at the address listed above or other
locally announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Sumner
Contiguous Counties:
Kansas: Butler, Cowley, Harper,
Kingman, Sedgwick
Oklahoma: Grant, Kay
The Interest Rates are:
For Physical Damage:
Homeowners With Credit Available Elsewhere .........................
Homeowners
Without
Credit
Available Elsewhere ..................
Businesses With Credit Available
Elsewhere .................................
Businesses Without Credit Available Elsewhere .........................
Non-Profit Organizations With
Credit Available Elsewhere .......
Non-Profit Organizations Without
Credit Available Elsewhere .......
For Economic Injury:
Businesses & Small Agricultural
Cooperatives Without Credit
Available Elsewhere ..................
Non-Profit Organizations Without
Credit Available Elsewhere .......
18:04 Sep 27, 2016
4.000
2.625
Dated: September 16, 2016.
Maria Contreras-Sweet,
Administrator.
[FR Doc. 2016–23375 Filed 9–27–16; 8:45 am]
BILLING CODE 8025–01–P
Jkt 238001
Percent
For Physical Damage:
Non-Profit Organizations With
Credit Available Elsewhere .......
Non-Profit Organizations Without
Credit Available Elsewhere .......
For Economic Injury:
Non-Profit Organizations Without
Credit Available Elsewhere .......
2.625
2.625
2.625
The number assigned to this disaster
for physical damage is 148596 and for
economic injury is 148606.
(Catalog of Federal Domestic Assistance
Number 59008)
James E. Rivera,
Associate Administrator for Disaster
Assistance.
[FR Doc. 2016–23383 Filed 9–27–16; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #14859 and #14860]
SMALL BUSINESS ADMINISTRATION
Maryland Disaster #MD–00034
[Disaster Declaration # 14857 and # 14858]
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
Pennsylvania Disaster # PA–00071
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a Notice of the
Presidential declaration of a major
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
2.625
The number assigned to this disaster
for physical damage is 14854 B and for
economic injury is 14855 0.
The States which received an EIDL
Declaration # are Kansas, Oklahoma.
SUMMARY:
15 17
disaster for Public Assistance Only for
the State of Maryland (FEMA–4279–
DR), dated 09/16/2016.
Incident: Severe Storms and Flooding.
Incident Period: 07/30/2016 through
07/31/2016.
Effective Date: 09/16/2016.
Physical Loan Application Deadline
Date: 11/15/2016.
Economic Injury (EIDL) Loan
Application Deadline Date: 06/16/2017.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing And
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW., Suite 6050,
Washington, DC 20416.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
President’s major disaster declaration on
Percent
09/16/2016, Private Non-Profit
organizations that provide essential
services of governmental nature may file
3.125 disaster loan applications at the address
listed above or other locally announced
1.563
locations.
The following areas have been
6.250
determined to be adversely affected by
4.000 the disaster:
Primary Counties: Howard
2.625
The Interest Rates are:
(Catalog of Federal Domestic Assistance
Number 59008)
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
66711
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]]>Agencies
[Federal Register Volume 81, Number 188 (Wednesday, September 28, 2016)]
[Notices]
[Pages 66708-66711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23324]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78909; File No. SR-BX-2016-046]
Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing
of Proposed Rule Change To Amend BX Rules 4702 and 4703
September 22, 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 September 13, 2016, NASDAQ BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I and II 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend BX Rules 4702, Order Types, and
4703, Order Attributes, to change the way in which Post Only Orders
interact with resting Non-Display orders and preventing the execution
of midpoint pegged orders during a crossed market.
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqbx.cchwallstreet.com/, at the principal office
of the Exchange,
[[Page 66709]]
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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange offers various Order Types \3\ and Order Attributes
\4\ to help members trade effectively on behalf of investors and
themselves. This proposal would modify the manner in which two of those
order types, Non-Display and Post Only, interact within BX's trading
system.
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\3\ See Exchange Rule 4702. The Exchange also proposes a minor
technical correction to add the word ``price'' after the word
``displayed'' in the second line of the second paragraph of Rule
4702(b)(4)(B).
\4\ See Exchange Rule 4703.
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The Exchange's Non-Display Orders, described in Rule 4702(b)(3),
help members minimize market impact when trading in larger-than-average
size. For example, institutions often use Non-Display Orders that use
pegging at the midpoint (Midpoint Peg Order) \5\ of the National Best
Bid and Offer (NBBO) to reduce market impact because a midpoint
execution does not indicate a price movement direction, as opposed to
buying at the offer or selling at the bid (sometimes referred to as
``crossing the spread'') which may publicly indicate the direction of
the stock price.
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\5\ See Exchange Rule 4702(b)(3)(C).
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The Exchange also offers Post Only Orders, described in Rule
4702(b)(4), which members, often market makers, use to rest liquidity
on BX's Order Book. Resting displayed liquidity is essential to price
formation and order interaction, two indicators of healthy and orderly
markets. BX introduced Post Only Orders \6\ to enable and encourage
this valuable behavior. A Post Only buy (sell) order entered at a price
below $1.00 will execute against a resting sell (buy) order if the
value of price improvement equals or exceeds the foregone rebate for
liquidity provision and fee for removing liquidity. If a Post Only buy
(sell) order is entered at a price below $1.00 and is equal to the
price of a resting sell (buy) order, the buy (sell) order is repriced
one minimum price increment (MPV), generally $0.0001 \7\ lower (higher)
than the resting sell (buy) order's price.
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\6\ See Post Only order Factsheet: https://www.nasdaqtrader.com/content/ProductsServices/Trading/postonly_factsheet.pdf.
\7\ Securities priced at or above $1 are quoted in $0.01
increments, below $1, they can be quoted in $0.0001 increments. Post
Only behavior is slightly different below $1 because the fees and
economics involved in the execution are distinct from those at or
above $1. Specifically, executions in securities priced at or above
$1 result in rebates for the accessor of liquidity and as such it is
always in the best interest of the incoming Post-Only Order to
execute in securities at or above $1. See Exchange Rule
4702(b)(4)(A). In contrast, executions in securities priced below $1
result in charges to the accessor of liquidity. Compare Rules 7018
(a) and (b). In both cases, the Exchange system is programmed to
analyze the price improvement offered and to execute only where
permitted under its rules.
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This repricing function, sometimes referred to as ``price-
sliding,'' often occurs when a liquidity provider seeking to tighten
the bid/offer spread on the Exchange encounters a Non-Display Order on
the opposite side of market from the Post Only Order. When this occurs,
the displayed spread on the Exchange may become wider than on competing
exchanges therefore reducing market quality and the likelihood of
execution on the Exchange. In addition, the member entering the Post
Only Order learns through the repricing action both that there is a
Non-Display Order resting on the book and also the price at which the
Non-Display Order is resting. The Exchange believes that this
interaction is inefficient and detrimental to investors, to members,
and to the market.
Accordingly, the Exchange proposes two changes to the manner in
which certain Post Only Orders respond to certain Non-Display Orders
resting on the opposite side of the market. In all other instances,
there will be no change. For example, Post-Only Orders will continue to
execute against resting Non-Display Orders provided the price
improvement associated with the execution equals or exceeds the
foregone rebate for liquidity provision and fee for removing liquidity
for the member entering the Post Only Order, as they do today.
First, a Post-Only Order that is entered with a price below $1.00
and is equal to the price of a resting Non-Display Order will be posted
at its limit price (or its adjusted price if applicable),\8\ rather
than being re-priced as it is today. This allows the Post Only Order to
lock the resting Non-Display Order.\9\ Both the displayed Post Only
order and the resting Non-Display order will remain available for
execution at the locking price. In this way, neither order is
disadvantaged; the Exchange Bid/Offer spread is tightened; and no
signal is sent to the member that entered the Post Only Order. In this
scenario, efficacy is maintained or enhanced for both the Post Only
Order user and the Non-Display Order user compared to today. For
example, under the current rules if a Participant entered a Post-Only
Order to buy at $0.95, the Best Offer \10\ was $0.97, and there was a
Non-Displayed Order on the Exchange Book to sell at $0.95, the Post-
Only Order would be ranked and displayed at $0.9499. Using the above
scenario, the Exchange is proposing to instead rank and display the
Post-Only Order to buy at its limit price of $0.95.
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\8\ If a Post-Only Order is received at a price that would lock
or cross a Protected Quotations [sic], its price will be adjusted in
the same manner as a Price to Comply order (if it is not
Attributable) or a Price to Display Order (if it is Attributable).
See Rules 4702(b)(1) and 4702(b)(4)(A).
\9\ The Exchange believes that this condition is consistent with
the Regulation NMS prohibition on locked and crossed markets because
the Exchange will not be displaying a locked market.
\10\ The term ``Best Offer'' is defined in Exchange Rule
4701(j).
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Second, the Exchange also proposes to modify processing when a Post
Only Order, priced below $1.00, interacts with a Non-Display Order that
is a Midpoint Peg Order. Specifically, when a Post Only buy (sell)
order is priced higher (lower) than a resting Midpoint Peg Order but
where the difference is less than the foregone rebate for liquidity
provision and fee for removing liquidity, the Post Only Order will
nonetheless be posted at its limit price. This proposal benefits
investors and members because it results in a tighter Bid/Offer spread.
Moreover, because the Post Only order is not re-priced relative to the
resting Midpoint Peg order, as it is today, there is no information
leakage. Additionally, the member entering the Midpoint Peg Order
benefits because the new midpoint based on the new NBBO would now be a
better price for the seller. Midpoint Peg orders are either cancelled
or re-adjusted based on NBBO changes depending on the protocol used by
the member to enter the Midpoint Peg Order.\11\ For example, under the
current rules if the NBBO is $0.92 x $0.97 and a Participant enters a
Midpoint Peg Order (which, as stated above, is Non-Displayed) to buy
200 shares with a limit price of $0.96, the
[[Page 66710]]
Midpoint Peg Order would post to the book at $0.945. If thereafter a
Post-Only Order to sell 200 shares at $0.9449 is entered, the Post-Only
Order would post and display at $0.9451 and Midpoint Peg Order would be
cancelled or readjusted depending on the protocol used to enter the
order. Under the proposed change and using the example above, the
incoming Post-Only Order to sell 200 shares at $0.9449 would post and
display at $0.9449 and the Midpoint Peg Order would be cancelled or re-
adjusted depending on the protocol used to enter the order.
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\11\ See Exchange Rule 4703(d).
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In addition, the Exchange proposes to discontinue executing
midpoint pegged orders when the NBBO is crossed. Today, the Exchange
executes midpoint pegged orders when the NBBO is locked by executing at
the locking price and when the NBBO is crossed by executing at the
midpoint of the crossed price. Based upon feedback from members and the
practice of other exchanges,\12\ the Exchange has determined that its
current practice of executing midpoint pegged orders during such
crossed markets produces sub-optimal execution prices for members and
investors. The midpoint of a crossed market is not a clear and accurate
indication of a valid price, nor is it indicative of a fair and orderly
market. The better result is to simply not execute midpoint orders
during crossed markets. To accomplish this, the Exchange will program
the trading system to respond to the creation of a crossed NBBO by
cancelling existing midpoint pegged orders and rejecting the entry of
new midpoint pegged orders. After such order cancellation or rejection,
members can resubmit their orders at their discretion without
limitation. Accordingly, the Exchange proposes to modify the rule
language describing the processing of Orders with the midpoint pegging
attribute described in Rule 4703(d).
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\12\ See, e.g., BATS Rule 11.9(c)(9) (no midpoint execution
during crossed market); NYSE Arca Rule 7.31(d)(4) (no midpoint
execution when the market is locked or crossed).
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As set forth below, the Exchange believes the proposed changes will
benefit investors and members by addressing certain market
inefficiencies that exist on the Exchange, and by improving BX's
competitive position against other exchanges that already offer similar
processing of resting and non-displayed orders.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\13\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\14\ in particular, in that it is designed to
promote just and equitable principles of trade, 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 in several ways.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
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First, the proposed changes will benefit investors and members by
tightening bid/offer spreads, thereby enhancing execution quality on
the Exchange. Second, members entering Post Only Order users will be
able to execute liquidity providing strategies more efficiently. Third,
the proposed changes will reduce the signaling created today by the
interaction of Post Only and Non-Display Order, and thereby minimize
the market impact of larger orders. Fourth, the cancellation or
rejection of midpoint pegged orders when the NBBO is crossed will avoid
mispriced executions and result in higher overall execution quality for
members.
The Exchange believes the proposed changes have no detrimental
impact on any member or class of members, or on users of the Post Only
or Non-Display Order types or on users of other order types offered by
the Exchange. First, the use of Exchange Order types and attributes is
voluntary, in that no member is required to use any specific Order type
or attribute or even to use any Exchange Order type or attribute or any
Exchange functionality at all. If an Exchange member believes for any
reason that the proposed rule change will be detrimental, that
perceived detriment can be avoided by choosing not to enter or interact
with the Order types modified by this proposed rule change. Second, the
Exchange believes that the changes proposed herein will not result in
any diminution of market quality (execution price, effective spread,
fill rate, etc.) for any member entering or interacting with one of the
Order types modified by this proposed rule change.
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. To the contrary, the Exchange
believes the proposed rule changes are pro-competitive for several
reasons. First, the proposed functionality is designed to compete with
exchanges, including BATS and NYSE Arca, which already offer order
types that behave similarly to how the Exchanges proposes Post Only and
Non-Display Orders behave in the future. Second, the Exchange believes
that the proposed rule change will make the Exchange a more competitive
execution venue by creating tighter bid/offer spreads and by enhancing
execution quality (i.e., achieving increased price improvement,
reducing effective spreads, and increasing execution fill rates).
Third, the Exchange proposes to offer the same functionality to all
members, thereby eliminating potential competitive burden or
differential treatment.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BX-2016-046 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-BX-2016-046. This file
number should be included on the subject line if email is used. To help
the Commission process and review your
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comments more efficiently, please use only one method. The Commission
will post all comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly.
All submissions should refer to File Number SR-BX-2016-046 and
should be submitted on or before October 19, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-23324 Filed 9-27-16; 8:45 am]
BILLING CODE 8011-01-P
