Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Commentary .14 to Rule 4770 (Compliance With Regulation NMS Plan To Implement a Tick Size Pilot), 80154-80157 [2016-27368]
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80154
Federal Register / Vol. 81, No. 220 / Tuesday, November 15, 2016 / Notices
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BatsEDGA–2016–24 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.
mstockstill on DSK3G9T082PROD with NOTICES
All submissions should refer to File
Number SR–BatsEDGA–2016–24. 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–
BatsEDGA–2016–24, and should be
submitted on or before December 6,
2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.55
Brent J. Fields,
Secretary.
[FR Doc. 2016–27370 Filed 11–14–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79263; File No. SR–
NASDAQ–2016–151]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Commentary .14 to Rule 4770
(Compliance With Regulation NMS
Plan To Implement a Tick Size Pilot)
November 8, 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 October
31, 2016, The NASDAQ Stock Market
LLC (‘‘Nasdaq’’ 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
Commentary .14 to Rule 4770
(Compliance with Regulation NMS Plan
to Implement a Tick Size Pilot) to
provide the SEC with notice of its efforts
to re-program its systems to eliminate a
re-pricing functionality for certain
orders in Test Group Three securities in
connection with the Regulation NMS
Plan to Implement a Tick Size Pilot
Program (‘‘Plan’’ or ‘‘Pilot’’).3
The text of the proposed rule change
is set forth below. Proposed new
language is underlined; deleted text is
in brackets.
*
*
*
*
*
The NASDAQ Stock Market Rules
*
*
*
*
*
4770. Compliance With Regulation
NMS Plan To Implement a Tick Size
Pilot
(a) through (d) No Change.
Commentary
.01–.13 No change.
.14 Until [October 31, 2016]November
14, 2016, the treatment of Price to
Comply Orders, Price to Display Orders,
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 74892
(May 6, 2015), 80 FR 27513 (May 13, 2015)
(‘‘Approval Order’’).
2 17
55 17
CFR 200.30–3(a)(12).
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Non-Displayed Orders, and Post-Only
Orders that are entered through the
OUCH or FLITE protocols in Test Group
Three securities shall be as follows:
Following entry, and if market
conditions allow, a Price to Comply
Order in a Test Group Three Pilot
Security will be adjusted repeatedly in
accordance with changes to the NBBO
until such time as the Price to Comply
Order is able to be ranked and displayed
at its original entered limit price.
Following entry, and if market
conditions allow, a Price to Display
Order in a Test Group Three Pilot
Security will be adjusted repeatedly in
accordance with changes to the NBBO
until such time as the Price to Display
Order is able to be ranked and displayed
at its original entered limit price.
Following entry, and if market
conditions allow, a Non-Displayed
Order in a Test Group Three Pilot
Security will be adjusted repeatedly in
accordance with changes to the NBBO
up (down) to the Order’s limit price.
Following entry, and if market
conditions allow, the Post-Only Order
in a Test Group Three Pilot Security
will be adjusted repeatedly in
accordance with changes to the NBBO
or the best price on the Nasdaq Book, as
applicable until such time as the PostOnly Order is able to be ranked and
displayed at its original entered limit
price.
*
*
*
*
*
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
On September 7, 2016, The Nasdaq
Stock Market LLC (‘‘Nasdaq’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) a proposed rule change
(‘‘Proposal’’) to adopt paragraph (d) and
Commentary .12 to Exchange Rule 4770
to describe changes to system
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functionality necessary to implement
the Plan. The Exchange also proposed
amendments to Rule 4770(a) and (c) to
clarify how the Trade-at exception may
be satisfied. The SEC published the
Proposal in the Federal Register for
notice and comment on September 20,
2016.4 Nasdaq subsequently filed three
Partial Amendments to clarify aspects of
the Proposal. The Commission approved
the Proposal, as amended, on October 7,
2016.5
In SR–NASDAQ–2016–126, Nasdaq
had initially proposed a re-pricing
functionality for Price to Comply
Orders, Non-Displayed Orders, and
Post-Only Orders entered through the
OUCH and FLITE protocols in Group
Three securities.6 Nasdaq subsequently
determined that it would not offer this
re-pricing functionality for Price to
Comply Orders, Non-Displayed Orders,
and Post-Only Orders entered through
the OUCH and FLITE protocols in
Group Three securities. As part of
Partial Amendment No. 2 to SR–
NASDAQ–2016–126, Nasdaq proposed
to delete the relevant language from
Rule 4770 related to this re-pricing
functionality.
In that amendment, Nasdaq noted that
this change would only impact the
treatment of Price to Comply Orders,
Non-Displayed Orders, and Post-Only
orders that are submitted through the
OUCH and FLITE protocols in Test
Group Three Pilot Securities, as these
types of Orders that are currently
submitted to Nasdaq through the RASH,
QIX or FIX protocols are already subject
to this re-pricing functionality and will
remain subject to this functionality
under the Pilot.
In the Amendment, Nasdaq further
noted that its systems are currently
programmed so that Price to Comply
Orders, Non-Displayed Orders and PostOnly Orders entered through the OUCH
and FLITE protocols in Test Group
4 See Securities Exchange Act Release No. 78837
(September 14, 2016), 81 FR 64544 (September 20,
2016) (SR–NASDAQ–2016–126).
5 See Securities Exchange Act Release No. 79075
(October 7, 2016) (SR–NASDAQ–2016–126).
6 As originally proposed, Rule 4770(d)(2) stated
that Price to Comply Orders in a Test Group Three
Pilot Security will be adjusted repeatedly in
accordance with changes to the NBBO until such
time as the Price to Comply Order is able to be
ranked and displayed at its original entered limit
price. Rule 4770(d)(3) stated that, if market
conditions allow, a Non-Displayed Order in a Test
Group Three Pilot Security will be adjusted
repeatedly in accordance with changes to the NBBO
up (down) to the Order’s limit price. Rule
4770(d)(4) stated that, if market conditions allow,
the Post-Only Order in a Test Group Three Pilot
Security will be adjusted repeatedly in accordance
with changes to the NBBO or the best price on the
Nasdaq Book, as applicable until such time as the
Post-Only Order is able to be ranked and displayed
at its original entered limit price.
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Three Securities may be adjusted
repeatedly to reflect changes to the
NBBO and/or the best price on the
Nasdaq book. Nasdaq stated that it is reprogramming its systems to remove this
functionality for Price to Comply
Orders, Non-Displayed Orders and PostOnly Orders entered through the OUCH
and FLITE protocols in Test Group
Three Securities. In the Amendment,
Nasdaq stated that it anticipated that
this re-programming shall be completed
no later than November 30, 2016. If it
appeared that this functionality would
remain operational by October 17, 2016,
Nasdaq indicated that it would file a
proposed rule change with the SEC and
will provide notice to market
participants sufficiently in advance of
that date to provide effective notice. The
rule change and the notice to market
participants would describe the current
operation of the Nasdaq systems in this
regard, and the timing related to the reprogramming.
On October 17, 2016, Nasdaq filed a
proposal to extend the date by which it
would complete the re-programing of its
systems to eliminate the re-pricing
functionality in Test Group Three
securities for Price to Comply Orders,
Price to Display Orders, Non-Displayed
Orders, and Post-Only Orders that are
entered through the OUCH or FLITE
protocols.7 In that proposal, Nasdaq
stated that it anticipated that this reprogramming shall be complete on or
before October 31, 2016.8
At this time, Nasdaq is still
determining how to modify its systems
to eliminate the current re-pricing
functionality in Test Group Three
securities for Price to Comply Orders,
Price to Display Orders, Non-Displayed
Orders, and Post-Only Orders that are
entered through the OUCH or FLITE
protocols. Nasdaq is therefore
submitting this proposal to extend the
date by which the current re-pricing
functionality will be eliminated. Nasdaq
anticipates that the re-programming to
eliminate the current re-pricing
functionality shall be completed on or
before November 14, 2016.
Therefore, the current treatment of
Price to Comply Orders, Price to Display
Orders, Non-Displayed Orders, and
Post-Only Orders that are entered
7 See Securities Exchange Act Release No. 79155
(October 25, 2016) (SR–NASDAQ–2016–143).
Subsequent to the approval of SR–NASDAQ–
2016–126, Nasdaq become aware that this re-pricing
functionality also applies to Price to Display Orders
that are entered through the OUCH and FLITE
protocols in Test Group Three Securities, and
included those Orders as part of SR–NASDAQ–
2016–143 accordingly. Price to Display Orders will
be treated in the same manner as Price to Comply
Orders under the re-pricing functionality.
8 Id.
PO 00000
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80155
through the OUCH or FLITE protocols
in Test Group Three securities shall be
as follows:
Following entry, and if market
conditions allow, a Price to Comply
Order in a Test Group Three Pilot
Security will be adjusted repeatedly in
accordance with changes to the NBBO
until such time as the Price to Comply
Order is able to be ranked and displayed
at its original entered limit price.
Following entry, and if market
conditions allow, a Price to Display
Order in a Test Group Three Pilot
Security will be adjusted repeatedly in
accordance with changes to the NBBO
until such time as the Price to Display
Order is able to be ranked and displayed
at its original entered limit price.
Following entry, and if market
conditions allow, a Non-Displayed
Order in a Test Group Three Pilot
Security will be adjusted repeatedly in
accordance with changes to the NBBO
up (down) to the Order’s limit price.
Following entry, and if market
conditions allow, a Post-Only Order in
a Test Group Three Pilot Security will
be adjusted repeatedly in accordance
with changes to the NBBO or the best
price on the Nasdaq Book, as applicable
until such time as the Post-Only Order
is able to be ranked and displayed at its
original entered limit price.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,9 in general, and furthers the
objectives of Section 6(b)(5) of the Act,10
in particular, 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. The
purpose of this filing is to inform the
SEC and market participants of the
status of Nasdaq’s attempts to reprogram its systems to remove the repricing functionality in Test Group
Three securities for Price to Comply
Orders, Price to Display Orders, NonDisplayed Orders, and Post-Only Orders
that are entered through the OUCH or
FLITE protocols, and the current
treatment of such orders pending the
removal of this functionality. This
proposal is consistent with the Act
because it provides the SEC and market
participants with notice of Nasdaq’s
efforts in this regard, and is being
submitted in connection with the
statements made by Nasdaq in SR–
NASDAQ–2016–126 and SR–NASDAQ–
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 15
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Federal Register / Vol. 81, No. 220 / Tuesday, November 15, 2016 / Notices
2016–143 in proposing the removal of
this functionality.
Nasdaq also believes that the proposal
is consistent with the Act because the
re-pricing functionality will not
significantly impact the data gathered
pursuant to the Pilot. Nasdaq notes that
this re-pricing functionality only affects
Price to Comply Orders, Price to Display
Orders, Non-Displayed Orders, and
Post-Only Orders that are entered
through the OUCH or FLITE protocols
for Test Group Three securities until the
re-pricing functionality is eliminated,
and only becomes relevant when an
Order in a Test Group Three security
would cross a Protected Quotation of
another market center. Nasdaq has
analyzed data relating to the frequency
with which Orders in Test Group Three
securities are entered with a limit price
that would cross a Protected Quotation
of another market center, and believes
that the re-pricing functionality will be
triggered infrequently once Test Group
Three becomes fully operational.11 The
Exchange also notes that it is diligently
working to eliminate the current repricing functionality in Test Group
Three securities for Price to Comply
Orders, Price to Display Orders, NonDisplayed Orders, and Post-Only Orders
that are entered through the OUCH or
FLITE protocols, and that it anticipates
this re-programming to be complete on
or before November 14, 2016.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The purpose
of this proposal is to provide the SEC
and market participants with notice of
Nasdaq’s efforts to remove its re-pricing
functionality in Test Group Three
securities for Price to Comply Orders,
Price to Display Orders, Non-Displayed
Orders, and Post-Only Orders that are
entered through the OUCH or FLITE
protocols, consistent with its statements
in SR–NASDAQ–2016–126 and SR–
NASDAQ–2016–143.
mstockstill on DSK3G9T082PROD with NOTICES
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
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 12 and
subparagraph (f)(6) of Rule 19–4
thereunder.13
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative prior to 30 days after
the date of filing. Rule 19b–4(f)(6)(iii),
however, permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange requests that the Commission
waive the 30-day operative delay
contained in Rule 19b–4(f)(6)(iii) so that
this proposed change will be in
operative as of October 31, 2016, the
date that Test Group Three securities are
fully implemented and are subject to the
quoting and trading restrictions of the
Plan and, therefore, the relevant
language in Rule 4770.
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 Pilot started
implementation on October 3, 2016,
Test Group Three securities were fully
phased into the Pilot on October 31,
2016, and waiving the 30-day operative
delay would ensure that the rules of the
Exchange would be in place during
implementation. Therefore, the
Commission hereby waives the 30-day
operative delay and designates the
proposed rule change to be operative
upon filing with the Commission.14
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: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
12 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
14 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).
13 17
11 For example, on October 31, 2016, in the one
hundred Test Group Three securities that are
currently live, 0.06% of orders that were entered on
Nasdaq in those securities were entered at a price
that crossed the NBBO.
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furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2016–151 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–NASDAQ–2016–151. 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–
NASDAQ–2016–151, and should be
E:\FR\FM\15NON1.SGM
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Federal Register / Vol. 81, No. 220 / Tuesday, November 15, 2016 / Notices
submitted on or before December 6,
2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Brent J. Fields,
Secretary.
[FR Doc. 2016–27368 Filed 11–14–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736.
Extension:
Rule 602, SEC File No. 270–404, OMB
Control No. 3235–0461.
mstockstill on DSK3G9T082PROD with NOTICES
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the previously approved
collection of information provided for in
Rule 602 of Regulation NMS (17 CFR
240.602), under the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.).
Rule 602 of Regulation NMS,
Dissemination of Quotations in NMS
securities, contains two related
collections. The first collection of
information is found in Rule 602(a).1
This third-party disclosure requirement
obligates each national securities
exchange and national securities
association to make available to
quotation vendors for dissemination to
the public the best bid, best offer, and
aggregate quotation size for each
‘‘subject security,’’ as defined under the
Rule. The second collection of
information is found in Rule 602(b).2
This disclosure requirement obligates
any exchange member and over-thecounter (‘‘OTC’’) market maker that is a
‘‘responsible broker or dealer,’’ as
defined under the Rule, to communicate
to an exchange or association their best
bids, best offers, and quotation sizes for
subject securities.3
15 17
CFR 200.30–3(a)(12).
CFR 242.602(a).
2 17 CFR 242.602(b).
3 Under Rule 602(b)(5), electronic
communications networks (‘‘ECNs’’) have the
option of reporting to an exchange or association for
public dissemination, on behalf of customers that
are OTC market makers or exchange market makers,
the best-priced orders and the full size for such
1 17
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It is anticipated that twenty
respondents, consisting of nineteen
national securities exchanges and one
national securities association, will
collectively respond approximately
2,184,303,485,488 times per year
pursuant to Rule 602(a) at 18.22
microseconds per response, resulting in
a total annual burden of approximately
11,640 hours. It is anticipated that no
respondents will have a reporting
burden pursuant to Rule 602(b).4
Thus, the aggregate third-party
disclosure burden under Rule 602 is
11,640 hours annually which is
comprised of 11,640 hours relating to
Rule 602(a) and 0 hours relating to Rule
602(b).
Compliance with Rule 602 of
Regulation NMS is mandatory and the
information collected is made available
to the public.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following Web site:
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela C.
Dyson, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street NE., Washington, DC
20549, or by sending an email to: PRA_
Mailbox@sec.gov. Comments must be
submitted to OMB within 30 days of
this notice.
Dated: November 8, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016–27377 Filed 11–14–16; 8:45 am]
BILLING CODE 8011–01–P
orders entered by market makers on the ECN, to
satisfy such market makers’ reporting obligation
under Rule 602(b). Since this reporting requirement
is an alternative method of meeting the market
makers’ reporting obligation, and because it is
directed to nine or fewer persons (ECNs), this
collection of information is not subject to OMB
review under the Paperwork Reduction Act
(‘‘PRA’’).
4 For the reporting obligation under Rule 602(b),
the respondents are exchange members and OTC
market makers. The Commission believes that
communication of quotations through an
exchange’s electronic trading system effectively
means that exchange members currently have no
reporting burden under Rule 602(b) for these
quotations. The Commission also believes that there
are presently no OTC market makers that quote
other than on an exchange.
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80157
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79268; File No. SR–CBOE–
2016–076]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of a
Proposed Rule Change in Connection
With a Proposed Corporate
Transaction Involving CBOE Holdings,
Inc. and Bats Global Markets, Inc.
November 8, 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 November
4, 2016, Chicago Board Options
Exchange, Incorporated (‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by the Exchange.
The 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 submits this rule filing
in connection with a proposed corporate
transaction (the ‘‘Transaction’’)
involving its ultimate parent company,
CBOE Holdings, Inc. (‘‘CBOE
Holdings’’), two wholly owned
subsidiaries of CBOE Holdings, CBOE
Corporation and CBOE V, LLC (‘‘CBOE
V’’), and Bats Global Markets, Inc.
(‘‘BGM’’). BGM is the ultimate parent
company of Bats BZX Exchange, Inc.
(‘‘Bats BZX’’), Bats BYX Exchange, Inc.
(‘‘Bats BYX’’), Bats EDGX Exchange, Inc.
(‘‘Bats EDGX’’), and Bats EDGA
Exchange, Inc. (‘‘Bats EDGA’’ and,
together with Bats BZX, Bats BYX, and
Bats EDGX, the ‘‘Bats Exchanges’’).
Upon completion of the Transaction
(the ‘‘Closing’’), CBOE Holdings will
become the ultimate parent of the Bats
Exchanges.
On September 25, 2016, CBOE
Holdings, CBOE Corporation, CBOE V,
and BGM entered into an Agreement
and Plan of Merger, as it may be
amended from time to time (the ‘‘Merger
Agreement’’). In connection with the
Transaction, the Exchange seeks the
Commission’s approval of a provision in
the Merger Agreement regarding the
composition of the CBOE Holdings
Board of Directors (‘‘CBOE Holdings
Board’’) upon the Closing. There are no
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
E:\FR\FM\15NON1.SGM
15NON1
]]>Agencies
[Federal Register Volume 81, Number 220 (Tuesday, November 15, 2016)]
[Notices]
[Pages 80154-80157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27368]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-79263; File No. SR-NASDAQ-2016-151]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Commentary .14 to Rule 4770 (Compliance With Regulation NMS Plan
To Implement a Tick Size Pilot)
November 8, 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 October 31, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Commentary .14 to Rule 4770
(Compliance with Regulation NMS Plan to Implement a Tick Size Pilot) to
provide the SEC with notice of its efforts to re-program its systems to
eliminate a re-pricing functionality for certain orders in Test Group
Three securities in connection with the Regulation NMS Plan to
Implement a Tick Size Pilot Program (``Plan'' or ``Pilot'').\3\
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\3\ 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 set forth below. Proposed
new language is underlined; deleted text is in brackets.
* * * * *
The NASDAQ Stock Market Rules
* * * * *
4770. Compliance With Regulation NMS Plan To Implement a Tick Size
Pilot
(a) through (d) No Change.
Commentary
.01-.13 No change.
.14 Until [October 31, 2016]November 14, 2016, the treatment of
Price to Comply Orders, Price to Display Orders, Non-Displayed Orders,
and Post-Only Orders that are entered through the OUCH or FLITE
protocols in Test Group Three securities shall be as follows:
Following entry, and if market conditions allow, a Price to Comply
Order in a Test Group Three Pilot Security will be adjusted repeatedly
in accordance with changes to the NBBO until such time as the Price to
Comply Order is able to be ranked and displayed at its original entered
limit price.
Following entry, and if market conditions allow, a Price to Display
Order in a Test Group Three Pilot Security will be adjusted repeatedly
in accordance with changes to the NBBO until such time as the Price to
Display Order is able to be ranked and displayed at its original
entered limit price.
Following entry, and if market conditions allow, a Non-Displayed
Order in a Test Group Three Pilot Security will be adjusted repeatedly
in accordance with changes to the NBBO up (down) to the Order's limit
price.
Following entry, and if market conditions allow, the Post-Only
Order in a Test Group Three Pilot Security will be adjusted repeatedly
in accordance with changes to the NBBO or the best price on the Nasdaq
Book, as applicable until such time as the Post-Only Order is able to
be ranked and displayed at its original entered limit price.
* * * * *
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
On September 7, 2016, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') a proposed rule change (``Proposal'') to
adopt paragraph (d) and Commentary .12 to Exchange Rule 4770 to
describe changes to system
[[Page 80155]]
functionality necessary to implement the Plan. The Exchange also
proposed amendments to Rule 4770(a) and (c) to clarify how the Trade-at
exception may be satisfied. The SEC published the Proposal in the
Federal Register for notice and comment on September 20, 2016.\4\
Nasdaq subsequently filed three Partial Amendments to clarify aspects
of the Proposal. The Commission approved the Proposal, as amended, on
October 7, 2016.\5\
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\4\ See Securities Exchange Act Release No. 78837 (September 14,
2016), 81 FR 64544 (September 20, 2016) (SR-NASDAQ-2016-126).
\5\ See Securities Exchange Act Release No. 79075 (October 7,
2016) (SR-NASDAQ-2016-126).
---------------------------------------------------------------------------
In SR-NASDAQ-2016-126, Nasdaq had initially proposed a re-pricing
functionality for Price to Comply Orders, Non-Displayed Orders, and
Post-Only Orders entered through the OUCH and FLITE protocols in Group
Three securities.\6\ Nasdaq subsequently determined that it would not
offer this re-pricing functionality for Price to Comply Orders, Non-
Displayed Orders, and Post-Only Orders entered through the OUCH and
FLITE protocols in Group Three securities. As part of Partial Amendment
No. 2 to SR-NASDAQ-2016-126, Nasdaq proposed to delete the relevant
language from Rule 4770 related to this re-pricing functionality.
---------------------------------------------------------------------------
\6\ As originally proposed, Rule 4770(d)(2) stated that Price to
Comply Orders in a Test Group Three Pilot Security will be adjusted
repeatedly in accordance with changes to the NBBO until such time as
the Price to Comply Order is able to be ranked and displayed at its
original entered limit price. Rule 4770(d)(3) stated that, if market
conditions allow, a Non-Displayed Order in a Test Group Three Pilot
Security will be adjusted repeatedly in accordance with changes to
the NBBO up (down) to the Order's limit price. Rule 4770(d)(4)
stated that, if market conditions allow, the Post-Only Order in a
Test Group Three Pilot Security will be adjusted repeatedly in
accordance with changes to the NBBO or the best price on the Nasdaq
Book, as applicable until such time as the Post-Only Order is able
to be ranked and displayed at its original entered limit price.
---------------------------------------------------------------------------
In that amendment, Nasdaq noted that this change would only impact
the treatment of Price to Comply Orders, Non-Displayed Orders, and
Post-Only orders that are submitted through the OUCH and FLITE
protocols in Test Group Three Pilot Securities, as these types of
Orders that are currently submitted to Nasdaq through the RASH, QIX or
FIX protocols are already subject to this re-pricing functionality and
will remain subject to this functionality under the Pilot.
In the Amendment, Nasdaq further noted that its systems are
currently programmed so that Price to Comply Orders, Non-Displayed
Orders and Post-Only Orders entered through the OUCH and FLITE
protocols in Test Group Three Securities may be adjusted repeatedly to
reflect changes to the NBBO and/or the best price on the Nasdaq book.
Nasdaq stated that it is re-programming its systems to remove this
functionality for Price to Comply Orders, Non-Displayed Orders and
Post-Only Orders entered through the OUCH and FLITE protocols in Test
Group Three Securities. In the Amendment, Nasdaq stated that it
anticipated that this re-programming shall be completed no later than
November 30, 2016. If it appeared that this functionality would remain
operational by October 17, 2016, Nasdaq indicated that it would file a
proposed rule change with the SEC and will provide notice to market
participants sufficiently in advance of that date to provide effective
notice. The rule change and the notice to market participants would
describe the current operation of the Nasdaq systems in this regard,
and the timing related to the re-programming.
On October 17, 2016, Nasdaq filed a proposal to extend the date by
which it would complete the re-programing of its systems to eliminate
the re-pricing functionality in Test Group Three securities for Price
to Comply Orders, Price to Display Orders, Non-Displayed Orders, and
Post-Only Orders that are entered through the OUCH or FLITE
protocols.\7\ In that proposal, Nasdaq stated that it anticipated that
this re-programming shall be complete on or before October 31, 2016.\8\
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 79155 (October 25,
2016) (SR-NASDAQ-2016-143).
Subsequent to the approval of SR-NASDAQ-2016-126, Nasdaq become
aware that this re-pricing functionality also applies to Price to
Display Orders that are entered through the OUCH and FLITE protocols
in Test Group Three Securities, and included those Orders as part of
SR-NASDAQ-2016-143 accordingly. Price to Display Orders will be
treated in the same manner as Price to Comply Orders under the re-
pricing functionality.
\8\ Id.
---------------------------------------------------------------------------
At this time, Nasdaq is still determining how to modify its systems
to eliminate the current re-pricing functionality in Test Group Three
securities for Price to Comply Orders, Price to Display Orders, Non-
Displayed Orders, and Post-Only Orders that are entered through the
OUCH or FLITE protocols. Nasdaq is therefore submitting this proposal
to extend the date by which the current re-pricing functionality will
be eliminated. Nasdaq anticipates that the re-programming to eliminate
the current re-pricing functionality shall be completed on or before
November 14, 2016.
Therefore, the current treatment of Price to Comply Orders, Price
to Display Orders, Non-Displayed Orders, and Post-Only Orders that are
entered through the OUCH or FLITE protocols in Test Group Three
securities shall be as follows:
Following entry, and if market conditions allow, a Price to Comply
Order in a Test Group Three Pilot Security will be adjusted repeatedly
in accordance with changes to the NBBO until such time as the Price to
Comply Order is able to be ranked and displayed at its original entered
limit price.
Following entry, and if market conditions allow, a Price to Display
Order in a Test Group Three Pilot Security will be adjusted repeatedly
in accordance with changes to the NBBO until such time as the Price to
Display Order is able to be ranked and displayed at its original
entered limit price.
Following entry, and if market conditions allow, a Non-Displayed
Order in a Test Group Three Pilot Security will be adjusted repeatedly
in accordance with changes to the NBBO up (down) to the Order's limit
price.
Following entry, and if market conditions allow, a Post-Only Order
in a Test Group Three Pilot Security will be adjusted repeatedly in
accordance with changes to the NBBO or the best price on the Nasdaq
Book, as applicable until such time as the Post-Only Order is able to
be ranked and displayed at its original entered limit price.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\10\ in particular, 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. The purpose of this filing is to inform the SEC and market
participants of the status of Nasdaq's attempts to re-program its
systems to remove the re-pricing functionality in Test Group Three
securities for Price to Comply Orders, Price to Display Orders, Non-
Displayed Orders, and Post-Only Orders that are entered through the
OUCH or FLITE protocols, and the current treatment of such orders
pending the removal of this functionality. This proposal is consistent
with the Act because it provides the SEC and market participants with
notice of Nasdaq's efforts in this regard, and is being submitted in
connection with the statements made by Nasdaq in SR-NASDAQ-2016-126 and
SR-NASDAQ-
[[Page 80156]]
2016-143 in proposing the removal of this functionality.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Nasdaq also believes that the proposal is consistent with the Act
because the re-pricing functionality will not significantly impact the
data gathered pursuant to the Pilot. Nasdaq notes that this re-pricing
functionality only affects Price to Comply Orders, Price to Display
Orders, Non-Displayed Orders, and Post-Only Orders that are entered
through the OUCH or FLITE protocols for Test Group Three securities
until the re-pricing functionality is eliminated, and only becomes
relevant when an Order in a Test Group Three security would cross a
Protected Quotation of another market center. Nasdaq has analyzed data
relating to the frequency with which Orders in Test Group Three
securities are entered with a limit price that would cross a Protected
Quotation of another market center, and believes that the re-pricing
functionality will be triggered infrequently once Test Group Three
becomes fully operational.\11\ The Exchange also notes that it is
diligently working to eliminate the current re-pricing functionality in
Test Group Three securities for Price to Comply Orders, Price to
Display Orders, Non-Displayed Orders, and Post-Only Orders that are
entered through the OUCH or FLITE protocols, and that it anticipates
this re-programming to be complete on or before November 14, 2016.
---------------------------------------------------------------------------
\11\ For example, on October 31, 2016, in the one hundred Test
Group Three securities that are currently live, 0.06% of orders that
were entered on Nasdaq in those securities were entered at a price
that crossed the NBBO.
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The purpose of this proposal is
to provide the SEC and market participants with notice of Nasdaq's
efforts to remove its re-pricing functionality in Test Group Three
securities for Price to Comply Orders, Price to Display Orders, Non-
Displayed Orders, and Post-Only Orders that are entered through the
OUCH or FLITE protocols, consistent with its statements in SR-NASDAQ-
2016-126 and SR-NASDAQ-2016-143.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and
subparagraph (f)(6) of Rule 19-4 thereunder.\13\
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of filing. Rule
19b-4(f)(6)(iii), however, permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange requests that the
Commission waive the 30-day operative delay contained in Rule 19b-
4(f)(6)(iii) so that this proposed change will be in operative as of
October 31, 2016, the date that Test Group Three securities are fully
implemented and are subject to the quoting and trading restrictions of
the Plan and, therefore, the relevant language in Rule 4770.
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 Pilot started implementation on
October 3, 2016, Test Group Three securities were fully phased into the
Pilot on October 31, 2016, and waiving the 30-day operative delay would
ensure that the rules of the Exchange would be in place during
implementation. Therefore, the Commission hereby waives the 30-day
operative delay and designates the proposed rule change to be operative
upon filing with the Commission.\14\
---------------------------------------------------------------------------
\14\ 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).
---------------------------------------------------------------------------
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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2016-151 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-NASDAQ-2016-151. 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-NASDAQ-2016-151, and should
be
[[Page 80157]]
submitted on or before December 6, 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. 2016-27368 Filed 11-14-16; 8:45 am]
BILLING CODE 8011-01-P
