Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to BZX Rule 11.23, Auctions, To Amend How the Official Auction Prices Are Calculated and Add Additional Specificity Regarding the Handling of RHO Orders During an Opening Auction for a BZX Listed Security, 89176-89181 [2016-29465]

Download as PDF 89176 Federal Register / Vol. 81, No. 237 / Friday, December 9, 2016 / Notices enhancement to all OTPs, regardless of size, and would not impose a competitive burden on any participant. The Exchange does not believe that the proposed enhancement to the existing risk limitation mechanism would impose a burden on competing options exchanges. Rather, the availability of this mechanism may foster more competition. Specifically, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. When an exchange offers enhanced functionality that distinguishes it from the competition and participants find it useful, it has been the Exchange’s experience that competing exchanges will move to adopt similar functionality. Thus, the Exchange believes that this type of competition amongst exchanges is beneficial to the market place as a whole as it can result in enhanced processes, functionality, and technologies. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. mstockstill on DSK3G9T082PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 28 and Rule 19b–4(f)(6) thereunder.29 Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such 28 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 29 17 VerDate Sep<11>2014 18:13 Dec 08, 2016 Jkt 241001 action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 30 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. 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– NYSEArca–2016–155 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–NYSEArca–2016–155. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from 30 15 PO 00000 U.S.C. 78s(b)(2)(B). Frm 00135 Fmt 4703 Sfmt 4703 submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEArca–2016–155, and should be submitted on or before December 30, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.31 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2016–29467 Filed 12–8–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79467; File No. SR– BatsBZX–2016–81] Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to BZX Rule 11.23, Auctions, To Amend How the Official Auction Prices Are Calculated and Add Additional Specificity Regarding the Handling of RHO Orders During an Opening Auction for a BZX Listed Security December 5, 2016 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 30, 2016, Bats BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated this proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6) thereunder,4 which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend Exchange Rule 11.23, Auctions, to: (i) Amend how the official auction prices are calculated and make related changes to the definitions of Indicative Price and Auction Only Price; and (ii) 31 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 15 E:\FR\FM\09DEN1.SGM 09DEN1 89177 Federal Register / Vol. 81, No. 237 / Friday, December 9, 2016 / Notices Amend how the official auction prices are calculated and make related changes to the definitions of Indicative Price and Auction Only Price; and (ii) add additional specificity regarding the handling of RHO Orders during an Opening Auction for a BZX listed security by describing situations in which RHO limit orders may be modified prior to the auction and cancelled after an auction. add additional specificity regarding the handling of Regular Hours Only (‘‘RHO’’) Orders 5 during an Opening Auction for a BZX listed security 6 by describing situations in which RHO limit orders may be modified prior to the auction and cancelled after an auction. The text of the proposed rule change is available at the Exchange’s Web site at www.batstrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Exchange Rule 11.23, Auctions, to: (i) Official Auction Prices, Indicative Price, and Auction Only Price In general, the price for the Opening, Closing, IPO, Halt, and Volatility Closing auctions is established by determining the price level that maximizes the number of shares executed.7 In determining the auction price, the Exchange takes into account all buy and sell interest at each price level on the Auction Book 8 and the Continuous Book.9 Today, in the event of a volume based tie at multiple price levels, the price of the Opening and Closing auctions will be the price closest to the Volume Based Tie Breaker.10 In the event of a volume based tie at multiple price levels for an IPO, Halt, and Volatility Closing auctions, the price closest to the issuing price will be used for IPO Auctions and the price level closest to the final last sale eligible trade will be used for Halt and the Volatility Closing Auctions. The Exchange proposes to amend Exchange Rules 11.23(b)(2)(B), (c)(2)(B), (d)(2)(D), and (e)(2)(D) to state that the Total buy shares Buy shares 0 ............................................................... 500 ........................................................... 700 ........................................................... 1,200 ........................................................ ........................ 500 200 500 Price Sell shares 25.05 25.01 25.00 24.95 prices of the Opening Auction, Closing Auction, IPO Auction, Halt Auction, and Volatility Closing Auction, respectively, will also occur at a price that not only maximizes the number of shares executed, but also minimizes the total imbalance. In all auctions, the auction price will first be established by determining the price level within the Collar Price Range 11 that maximizes the number of shares executed. In the event of a volume based tie at multiple price levels, the auction price will be the price level that results in the minimum total imbalance. Lastly, should there be both a volume based tie and a tie in minimum total imbalance at multiple price levels, the auction price of the: (i) Opening and Closing auctions will be the price closest to the Volume Based Tie Breaker; (ii) Halt and Volatility Closing auctions will be the price closest to the final last sale eligible trade; and (iii) IPO auction will be the price closest to the issuing price. The below examples illustrate how the auction price, Auction Only Price and Indicative Price is selected today and how these prices will be selected under the proposed rule change. This first example illustrates current behavior. Assume that the NBBO is $24.90 × $25.10, which means that the Volume Based Tie Breaker is $25.00. Total sell shares ........................ ........................ 100 200 300 300 300 200 Paired shares 0 300 300 200 Imbalance ¥300 200 400 1,000 mstockstill on DSK3G9T082PROD with NOTICES In this example, current behavior would dictate that $25.00 would be selected as the auction price, Auction Only Price, and the Indicative Price, as applicable, because at $25.00 the maximum number of shares would be executed (300 shares, in a tie with $25.01) and of the two price levels at which 300 shares would be executed, $25.00 is closest to the Volume Based Tie Breaker. Under the same scenario described above, but using the price level that minimizes the total imbalance where there is a tie for the maximum number of shares executed in the auction at multiple price levels instead of the Volume Based Tie Breaker, the price chosen as the auction price, Auction Only Price, and Indicative Price would be $25.01. $25.01 would be used because, as noted above, 300 shares would be executed at both $25.00 and $25.01, but the imbalance at $25.01 is 200 shares while the imbalance at $25.00 is 400 shares. Stated another way, less executable interest would 5 An RHO Order is ‘‘[a] limit or market order that is designated for execution only during Regular Trading Hours, which includes the Opening Auction, the Closing Auction, and IPO/Halt Auctions for BZX listed securities and the Opening Process for non-BZX-listed securities (as such terms are defined in Rule 11.23 and 11.24). Any portion of a market RHO order will be cancelled immediately following any auction in which it is not executed.’’ See Exchange Rule 11.9(b)(7). 6 A BZX listed security is a security listed on the Exchange pursuant to Chapter 14 of the Exchange’s Rules and includes both corporate listed securities and Exchange Traded Products (‘‘ETPs’’). 7 See Exchange Rules 11.23(b)(2)(B), (c)(2)(B), (d)(2)(D), and (e)(2)(D). 8 See Exchange Rule 11.23(a)(1). 9 See Exchange Rule 11.23(a)(7). 10 ‘‘Volume Based Tie Breaker’’ is defined as ‘‘the midpoint of the NBBO for a particular security where the NBBO is a Valid NBBO. A NBBO is a Valid NBBO where: (i) There is both a NBB and NBO for the security; (ii) the NBBO is not crossed; and (iii) the midpoint of the NBBO is less than the Maximum Percentage away from both the NBB and the NBO. The Maximum Percentage will be determined by the Exchange and will be published in a circular distributed to Members with reasonable advance notice prior to initial implementation and any change thereto. Where the NBBO is not a Valid NBBO, the price of the Final Last Sale Eligible Trade will be used.’’ See Exchange Rule 11.23(a)(23). 11 See Exchange Rule 11.23(a)(6). VerDate Sep<11>2014 18:13 Dec 08, 2016 Jkt 241001 PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 E:\FR\FM\09DEN1.SGM 09DEN1 89178 Federal Register / Vol. 81, No. 237 / Friday, December 9, 2016 / Notices remain unexecuted at $25.01 (200 shares) than at $25.00 (400 shares). Total buy shares Buy shares 0 ............................................................... 500 ........................................................... 700 ........................................................... 1,200 ........................................................ ........................ 500 200 500 This third example illustrates the proposed behavior when there is a tie for the maximum number of shares executed in the auction at multiple 500 ........................................................... 500 ........................................................... 500 ........................................................... 1,000 ........................................................ 1,200 ........................................................ 1,700 ........................................................ mstockstill on DSK3G9T082PROD with NOTICES Buy shares 500 ........................ ........................ 500 200 500 In this example, there is a tie for the maximum number of shares executed in the auction at 200 shares for every price level from $24.95 to $25.08. Looking at the imbalance, there is also a tie at 300 shares at each of $25.06, $25.07, and $25.08. As such, the proposed behavior would look to the Volume Based Tie Breaker to determine the auction price, Auction Only Price, and Indicative Price. Because the Volume Based Tie Breaker is $25.05, $25.06 is selected because it is the closest of $25.06, $25.07, and $25.08 to the Volume Based Tie Breaker. The Exchange believes the proposed amendments are necessary to ensure that the price selected for the auction is reasonably based on all buying and selling interest for that security and is the price at which the most orders may be matched resulting in the minimal imbalance. Selecting a price that would minimize the imbalance best reflects the value of the security based on the auction’s price discovery process because it is the price level where the amount of buy and sell interest is closest to equal. As noted above, minimizing the imbalance at the price levels at which the most shares will execute in the auction will result in the price closest to equilibrium because that price level has the least amount of executable interest that remains unexecuted. As a result, the proposed rule changes should also enhance the Exchange’s auction processes resulting in improved price discovery of BZX listed securities. As a result of the above changes to the determination of the official auction 18:13 Dec 08, 2016 Jkt 241001 Sell shares 25.05 25.01 25.00 24.95 Price Sell shares 25.08 25.07 25.06 25.05 25.00 24.95 12 See Exchange Rule 11.23(a)(10). Exchange Rule 11.23(b)(2)(A). 14 See Exchange Rule 11.23(d)(2)(A). 15 See Exchange Rule 11.23(c)(2)(A). 16 See Exchange Rule 11.23(d)(2)(A). 17 See Exchange Rule 11.23(e)(2)(A). 13 See Frm 00137 Fmt 4703 300 300 300 200 Sfmt 4703 Paired shares 0 300 300 200 Imbalance ¥300 200 400 1,000 used. Under this example, assume that the NBBO is $24.94 × $25.16, which means that the Volume Based Tie Breaker is $25.05. Total sell shares ........................ ........................ ........................ ........................ ........................ 200 price, the Exchange also proposes to make a related change to the definition of Indicative Price under paragraph (a)(10) of Rule 11.23. Indicative Price is currently defined as the price at which the most shares from the Auction Book and the Continuous Book would match.12 The Indicative Price is disseminated publicly beginning at 8:00 a.m. Eastern Time for an Opening 13 and IPO Auction,14 3:00 p.m. Eastern Time for a Closing Auction,15 five (5) minutes prior to the commencement of a Halt Auction,16 and at the time a security is halted after 3:50 p.m. Eastern Time for a Volatility Closing Auction.17 The Indicative Price is designed to facilitate price discovery and transparency while helping resolve order imbalances in the time leading up to an auction and the determination of the auction price. Today, the Exchange will publish the price at which the most shares may be executed as the Indicative Price by taking into account all buy and sell interest at each price level. Like the determination of each of the auction prices discussed above, the Indicative Price reflects the price at which the maximum number of shares may be executed, but may not reflect the price which would result in the minimum total imbalance where there are multiple price levels at which the most shares may be executed. Therefore, like the PO 00000 Total sell shares ........................ ........................ 100 200 price levels and a tie in minimum total imbalance within those price levels. In such a situation, the price level closest to the Volume Based Tie Breaker will be Total buy shares VerDate Sep<11>2014 Price 200 200 200 200 200 200 Paired shares 200 200 200 200 200 200 Imbalance 300 300 300 800 1,000 1,500 amendments to the determination of auction prices above, the Exchange proposes to amend the definition of Indicative Price to ensure that the maximum number of shares will ultimately be executed in the auction resulting in the minimum total imbalance. Indicative Price will continue to be defined as ‘‘the price at which the most shares from the Auction Book and the Continuous Book would match.’’ However, the definition of Indicative Price would be expanded to state that in the event of a volume based tie at multiple price levels, the Indicative Price will be the price which results in the minimum total imbalance. In the event of a volume based tie and a tie in minimum total imbalance at multiple price levels, the Indicative Price will be the price closest to the Volume Based Tie Breaker. Lastly, the Exchange also publishes an Auction Only Price, which is the price at which the most shares from the Auction Book would match. Currently, in the event of a volume based tie at multiple price levels, the Auction Only Price will be the price closest to the Volume Based Tie Breaker. Auction Only Price will continue to be defined under Exchange Rule 11.23(a)(2) to state that the Auction Only Price will be the price at which the most shares from the Auction Book would match. However, the definition will be expanded to harmonize the calculation of the Auction Only Price with the above changes. As amended, in the event of a volume based tie at multiple price levels, the Auction Only Price will be the price which results in the minimum E:\FR\FM\09DEN1.SGM 09DEN1 Federal Register / Vol. 81, No. 237 / Friday, December 9, 2016 / Notices total imbalance. In the event of a volume based tie and a tie in minimum total imbalance at multiple price levels, the Auction Only Price will be the price closest to the Volume Based Tie Breaker. RHO Orders An RHO Order is ‘‘[a] limit or market order that is designated for execution only during Regular Trading Hours, which includes the Opening Auction, the Closing Auction, and IPO/Halt Auctions for BZX listed securities and the Opening Process for non-BZX-listed securities (as such terms are defined in Rule 11.23 and 11.24). RHO orders are also Eligible Auction Orders 18 and may participate in the Opening Auction.19 Any Eligible Auction Orders designated for the Opening Auction will be queued until 9:30 a.m. at which time they will be eligible to be executed in the Opening Auction. Any portion of a RHO market order will be cancelled immediately following any auction in which it is not executed.’’ 20 However, any portion of an RHO limit order that is not executed in the auction will be placed on the Continuous Book at the conclusion of the auction and commencement of Regular Trading Hours (subject to the cancelling of certain RHO limit orders are described below). In general, Eligible Auction Orders designated for the Opening Auction may not be cancelled or modified between 9:28 a.m. and 9:30 a.m.21 The Exchange now proposes to add additional specificity to Rule 11.23(b)(1) regarding how RHO limit orders are handled in the Opening Auction. Specifically, the Exchange proposes to amend Rule 11.23(b)(1)(B) to describe current behavior that allows Members to modify, but not cancel, RHO limit orders designated for the Opening Auction between 9:28 a.m. and 9:30 a.m.22 The rule text currently provides that RHO limit orders submitted between 9:28 a.m. and 9:30 a.m. are treated as Late-Limit-On-Open (‘‘LLOO’’) 23 orders until the Opening Auction has concluded. The Exchange proposes to amend Rule 11.23(b)(1)(B) to state that RHO limit orders that are modified 18 See Exchange Rule 11.23(a)(8). id. 20 See Exchange Rule 11.9(b)(7). 21 See Exchange Rule 11.23(b)(1)(B). 22 Currently, RHO market orders submitted between 9:28 a.m. and 9:30 a.m. are rejected. See Exchange Rule 11.23(b)(1)(A). Modifications to RHO limit orders between 9:28 a.m. and 9:30 a.m. would not be limited by Exchange Rule 11.9(e)(3) as such orders are not active until the Opening Auction occurs at 9:30 a.m. 23 See Exchange Rule 11.23(a)(12). mstockstill on DSK3G9T082PROD with NOTICES 19 See VerDate Sep<11>2014 18:13 Dec 08, 2016 Jkt 241001 between 9:28 a.m. and 9:30 a.m. will also be treated as LLOO orders until the Opening Auction is concluded. During the Opening Auction, RHO limit orders will be priced in accordance with the operation of LLOO orders as described in Rule 11.23(a)(12),24 subject to the order’s limit price. At the conclusion of the Opening Auction, any unexecuted portion of a RHO limit order will be placed on the Continuous Book at its limit price (subject to the cancelling of certain RHO limit orders are described below). The Exchange believes that such treatment is consistent with the existing treatment of RHO limit orders submitted between 9:28 a.m. and 9:30 a.m. which are subject to the pricing restrictions applicable to LLOO orders. However, because, unlike LLOO orders, RHO limit orders will be added to the Continuous Book at the conclusion of the Opening Auction at their limit price, Members should be able to modify such orders between 9:28 a.m. and 9:30 a.m. Such functionality provides Members the price protections necessary to incentivize early entry of orders for participation in the Opening Auction while simultaneously allowing a Member to control an order that will be entered onto the Continuous Book if it is not executed in the Opening Auction. The Exchange also proposes to describe within Exchange Rule 11.23(b)(1) how RHO orders with a limit price outside of the Collar Price Range are handled. Where the Opening Auction would have occurred at a price level but for such price level being greater than (less than) the high (low) range of the Collar Price Range (i.e., outside the Collar Price Range), all buy (sell) limit RHO orders with a limit price more aggressive than the BZX Official Opening Price that are not executed in the Opening Auction will be cancelled. The Collar Price Range is utilized to help limit volatility during the auction 24 Under Exchange Rule 11.23(a)(12), LLOO orders are priced as follows: to the extent a LLOO bid or offer received by the Exchange has a limit price that is more aggressive than the NBB or NBO, the price of such bid or offer is adjusted to be equal to the NBB or NBO, respectively, at the time of receipt by the Exchange. Where the NBB or NBO becomes more aggressive, the limit price of the LLOO bid or offer will be adjusted to the more aggressive price, only to the extent that the more aggressive price is not more aggressive than the original User entered limit price. The limit price will never be adjusted to a less aggressive price. If there is no NBB or NBO, the LLOO bid or offer, respectively, will assume its entered limit price. Notwithstanding the foregoing, a LLOO order entered during the Quote-Only Period of an IPO will be converted to a limit order with a limit price equal to the original User entered limit price and any LLOO orders not executed in their entirety during the IPO Auction will be cancelled upon completion of the IPO Auction. PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 89179 process and to reduce the possibility that an auction would occur at a price that would qualify as clearly erroneous under Exchange Rule 11.17(c)(1) and that may result in cancelled executions.25 The process to select the price of an Opening Auction as described above could lead to a price that is outside of the Collar Price Range. In that case, the Exchange will then look to find a price to execute the auction within the Collar Price Range and in accordance with the price selection process set forth above. The Exchange selecting a less aggressive price for the auction within the Collar Price Range can result in the unexecuted RHO limit orders priced more aggressively than the auction price being placed on the Continuous Book upon conclusion of the Opening Auction. The Exchange believes that it is necessary and appropriate to cancel RHO orders with a limit price that is more aggressive than the auction price in such circumstances. Other than RHO limit orders, all Eligible Auction Orders will simply be cancelled if they do not execute in the Opening Auction. RHO limit orders, however, are unique in that they rest on the Auction Book until the conclusion of the Opening Auction, at which point any unexecuted portion is added to the Continuous Book. This could result in unexecuted RHO limit orders priced more aggressively than the auction price to be added to the Continuous Book, immediately applying price pressure in the direction of the price that the Opening Auction would have initially occurred but for the Exchange selecting a price within the Collar Price Range, thereby controverting the purpose of the Collar Price Range. Further, such a set of circumstances would also undermine the value of the price discovery process of the Opening Auction and could result in executions eligible for review as 25 As set forth under Exchange Rule 11.23(a)(6), the ‘‘Collar Price Range’’ is the range from a set percentage below the Collar Midpoint (as defined below) to above the Collar Midpoint, such set percentage being dependent on the value of the Collar Midpoint at the time of the auction, as described below. The Collar Midpoint will be the Volume Based Tie Breaker for all applicable auctions, except for IPO Auctions in ETPs (as defined in Rule 11.8, Interpretation and Policy .02(d)(2)), for which the Collar Midpoint will be the issue price. Specifically, the Collar Price Range will be determined as follows: Where the Collar Midpoint is $25.00 or less, the Collar Price Range shall be the range from 10% below the Collar Midpoint to 10% above the Collar Midpoint; where the Collar Midpoint is greater than $25.00 but less than or equal to $50.00, the Collar Price Range shall be the range from 5% below the Collar Midpoint to 5% above the Collar Midpoint; and where the Collar Midpoint is greater than $50.00, the Collar Price Range shall be the range from 3% below the Collar Midpoint to 3% above the Collar Midpoint. E:\FR\FM\09DEN1.SGM 09DEN1 89180 Federal Register / Vol. 81, No. 237 / Friday, December 9, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES clearly erroneous under Exchange Rule 11.17. The Exchange notes that Members whose RHO limit orders are cancelled because the price of the order is more aggressive than the Collar Price Range may always resubmit such orders at less aggressive prices or after regular trading begins. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the Act.26 Specifically, the proposed change is consistent with Section 6(b)(5) of the Act,27 because 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 proposed rule change will enhance the Exchange’s auction processes resulting in improved price discovery of BZX listed securities. Specifically, the Exchange believes amending the calculations of auction prices and the definitions of Indicative Price and Auction Only Price promotes just and equitable principles of trade by ensuring that the maximum number of shares will ultimately be executed in the auction resulting in the minimum total imbalance generally because selecting a price that would minimize the imbalance best reflects the value of the security based on the auction’s price discovery process because it is the price level where the amount of buy and sell interest is closest to equal. Further, minimizing the imbalance at the price levels at which the most shares will execute in the auction will result in the price closest to equilibrium because that price level has the least amount of executable interest that remains unexecuted. These proposed amendments are similar to auction price selection process of other exchanges 28 and would enhance the price discovery and transparency while helping resolve order imbalances in the time leading up to an auction and the determination of the ultimate auction price. The Exchange believes allowing Members to modify RHO limit orders between 9:28 a.m. and 9:30 a.m. promotes just and equitable principles of trade, removes impediments to, and 15 U.S.C. 78f(b). 15 U.S.C. 78f(b)(5). 28 See e.g., Nasdaq Stock Market LLC (‘‘Nasdaq’’) Rules 4752(a)(2)(A) and 4752(d)(2) (outlining the selection of the Nasdaq Current Reference Price and auction price). 26 27 VerDate Sep<11>2014 18:13 Dec 08, 2016 Jkt 241001 perfects the mechanism of, a free and open market and a national market system. Such functionality provides Members the price protections necessary to incentivize early entry of orders for participation in the Opening Auction while simultaneously allowing a Member to control an order that will be entered onto the Continuous Book if it is not executed in the Opening Auction. In addition, the modification of a RHO limit order between 9:28 a.m. and 9:30 a.m. would have no impact on the pricing of the Opening Auction as such order are priced in accordance with the operation of LLOO orders as described in Rule 11.23(a)(12),29 subject to the order’s limit price, on the Continuous Book. The proposal also supports the objectives of perfecting the mechanism of a free and open market and the national market system because not cancelling RHO orders with limit prices more aggressive than the Collar Price Range would result in executions vastly different from the auction price shortly after the regular trading commences. As such, the proposal also protects investors because it would prevent the executions of orders at prices not related to the current market for the security and possibly not in line with the investor’s intent at the time they entered the orders prior to the commencement of the auction process. The Exchange believes this undermines the price discovery process of the auction and could result in executions eligible for review as clearly erroneous under Exchange Rule 11.17. The Exchange notes that Members whose RHO limit orders are cancelled because the price of the order is more aggressive than the Collar Price Range may always resubmit such orders at less aggressive prices or after regular trading begins. Therefore, the Exchange believes the proposed rule change promotes just and equitable principles of trade, removes impediments to, and perfects the mechanism of, a free and open market and a national market system. 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 proposal will promote competition because the Exchange believes the proposal improves and enhances the Exchange’s auction processes, thereby attracting additional order flow to the Exchange. The 29 PO 00000 See supra note 24. Frm 00139 Fmt 4703 Sfmt 4703 proposed rule change is, in effect, procompetition as it promotes fair and orderly markets and protects investors through enhanced auction processes. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change does not (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 30 and Rule 19b– 4(f)(6) thereunder.31 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule 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 No. SR– BatsBZX–2016–81 on the subject line. 15 U.S.C. 78s(b)(3)(A). 17 CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. 30 31 E:\FR\FM\09DEN1.SGM 09DEN1 Federal Register / Vol. 81, No. 237 / Friday, December 9, 2016 / Notices 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 No. SR–BatsBZX–2016–81. 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 No. SR–BatsBZX– 2016–81, and should be submitted on or before December 30, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.32 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2016–29465 Filed 12–8–16; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF STATE [Public Notice: 9796] mstockstill on DSK3G9T082PROD with NOTICES 60-Day Notice of Proposed Information Collection: Birth Affidavit Notice of request for public comment and submission to OMB of proposed collection of information. ACTION: The Department of State is seeking Office of Management and Budget (OMB) approval for the SUMMARY: 32 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:13 Dec 08, 2016 Jkt 241001 information collection described below. In accordance with the Paperwork Reduction Act of 1995, we are requesting comments on this collection from all interested individuals and organizations. The purpose of this Notice is to allow 60 days for public comment preceding submission of the collection to OMB. DATES: The Department will accept comments from the public up to February 7, 2017. ADDRESSES: You may submit comments by any of the following methods: • Web: Persons with access to the Internet may comment on this notice by going to www.Regulations.gov. You can search for the document by entering ‘‘Docket Number: DOS–2016–0076’’ in the Search field. Then click the ‘‘Comment Now’’ button and complete the comment form. • Email: PPTFormsOfficer@state.gov. You must include the DS form number (if applicable), information collection title, and the OMB control number in any correspondence. FOR FURTHER INFORMATION CONTACT: Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, by mail to PPT Forms Officer, U.S. Department of State, CA/PPT/S/L 44132 Mercure Cir, P.O. Box 1227 , Sterling, VA 20166–1227, or PPTFormsOfficer@ state.gov. SUPPLEMENTARY INFORMATION: • Title of Information Collection: Birth Affidavit. • OMB Control Number: 1405–0132. • Type of Request: Revision of a Currently Approved Collection. • Originating Office: Department of State, Bureau of Consular Affairs, Passport Services, Office of Legal Affairs and Law Enforcement Liaison (CA/PPT/ S/L/LA). • Form Number: DS–10. • Respondents: Individuals. • Estimated Number of Respondents: 22,056. • Estimated Number of Responses: 22,056. • Average Time Per Response: 40 minutes. • Total Estimated Burden Time: 14,711 hours. • Frequency: On Occasion. • Obligation to Respond: Required to Obtain a Benefit. We are soliciting public comments to permit the Department to: • Evaluate whether the proposed information collection is necessary for the proper functions of the Department. • Evaluate the accuracy of our estimate of the time and cost burden for PO 00000 Frm 00140 Fmt 4703 Sfmt 9990 89181 this proposed collection, including the validity of the methodology and assumptions used. • Enhance the quality, utility, and clarity of the information to be collected. • Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology. Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review. Abstract of proposed collection: The Birth Affidavit is submitted in conjunction with an application for a U.S. passport, and is used by Passport Services to collect information for the purpose of establishing the U.S. nationality of a passport applicant who has not submitted an acceptable United States birth certificate with his/her passport application. The Secretary of State is authorized to issue U.S. passports under 22 U.S.C. 211a et seq., 8 U.S.C. 1104, and Executive Order 11295 (August 5, 1966). Pursuant to 22 U.S.C. 212 and 22 CFR 51.2, only U.S. nationals may be issued a U.S. passport. Most passport applicants show U.S. nationality by providing a birth certificate showing the applicant was born in the United States. Some applicants, however, may have been born in the United States (and subject to its jurisdiction), but were never issued a birth certificate. Form DS–10 is a form affidavit for completion by a witness to the birth of such an applicant; it collects information relevant to establishing the identity of the affiant, and the birth circumstances of the passport applicant. If credible, the affidavit may permit the applicant to show U.S. nationality based on the applicant’s birth in the United States, despite never having been issued a U.S. birth certificate. We use the information collected on the person completing the affidavit to confirm that individual’s identity, which is relevant to confirming his or her relationship to the applicant and the likelihood that the affiant has actual knowledge of the circumstances of the applicant’s birth. Methodology: When needed, a Birth Affidavit is completed at the time a person applies for a U.S. passport. Brenda S. Sprague, Deputy Assistant Secretary for Passport Services, Bureau of Consular Affairs, Department of State. [FR Doc. 2016–29533 Filed 12–8–16; 8:45 am] BILLING CODE 4710–06–P E:\FR\FM\09DEN1.SGM 09DEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 237 (Friday, December 9, 2016)]
[Notices]
[Pages 89176-89181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29465]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79467; File No. SR-BatsBZX-2016-81]

Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to BZX
Rule 11.23, Auctions, To Amend How the Official Auction Prices Are
Calculated and Add Additional Specificity Regarding the Handling of RHO
Orders During an Opening Auction for a BZX Listed Security

December 5, 2016
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on November 30, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
has designated this proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders it effective upon filing with the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 5 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange filed a proposal to amend Exchange Rule 11.23,
Auctions, to: (i) Amend how the official auction prices are calculated
and make related changes to the definitions of Indicative Price and
Auction Only Price; and (ii)

[[Page 89177]]

add additional specificity regarding the handling of Regular Hours Only
(``RHO'') Orders \5\ during an Opening Auction for a BZX listed
security \6\ by describing situations in which RHO limit orders may be
modified prior to the auction and cancelled after an auction.
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\5\ An RHO Order is ``[a] limit or market order that is
designated for execution only during Regular Trading Hours, which
includes the Opening Auction, the Closing Auction, and IPO/Halt
Auctions for BZX listed securities and the Opening Process for non-
BZX-listed securities (as such terms are defined in Rule 11.23 and
11.24). Any portion of a market RHO order will be cancelled
immediately following any auction in which it is not executed.'' See
Exchange Rule 11.9(b)(7).
\6\ A BZX listed security is a security listed on the Exchange
pursuant to Chapter 14 of the Exchange's Rules and includes both
corporate listed securities and Exchange Traded Products (``ETPs'').
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The text of the proposed rule change is available at the Exchange's
Web site at www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

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

In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.

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

1. Purpose
The Exchange proposes to amend Exchange Rule 11.23, Auctions, to:
(i) Amend how the official auction prices are calculated and make
related changes to the definitions of Indicative Price and Auction Only
Price; and (ii) add additional specificity regarding the handling of
RHO Orders during an Opening Auction for a BZX listed security by
describing situations in which RHO limit orders may be modified prior
to the auction and cancelled after an auction.
Official Auction Prices, Indicative Price, and Auction Only Price
In general, the price for the Opening, Closing, IPO, Halt, and
Volatility Closing auctions is established by determining the price
level that maximizes the number of shares executed.\7\ In determining
the auction price, the Exchange takes into account all buy and sell
interest at each price level on the Auction Book \8\ and the Continuous
Book.\9\ Today, in the event of a volume based tie at multiple price
levels, the price of the Opening and Closing auctions will be the price
closest to the Volume Based Tie Breaker.\10\ In the event of a volume
based tie at multiple price levels for an IPO, Halt, and Volatility
Closing auctions, the price closest to the issuing price will be used
for IPO Auctions and the price level closest to the final last sale
eligible trade will be used for Halt and the Volatility Closing
Auctions.
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\7\ See Exchange Rules 11.23(b)(2)(B), (c)(2)(B), (d)(2)(D), and
(e)(2)(D).
\8\ See Exchange Rule 11.23(a)(1).
\9\ See Exchange Rule 11.23(a)(7).
\10\ ``Volume Based Tie Breaker'' is defined as ``the midpoint
of the NBBO for a particular security where the NBBO is a Valid
NBBO. A NBBO is a Valid NBBO where: (i) There is both a NBB and NBO
for the security; (ii) the NBBO is not crossed; and (iii) the
midpoint of the NBBO is less than the Maximum Percentage away from
both the NBB and the NBO. The Maximum Percentage will be determined
by the Exchange and will be published in a circular distributed to
Members with reasonable advance notice prior to initial
implementation and any change thereto. Where the NBBO is not a Valid
NBBO, the price of the Final Last Sale Eligible Trade will be
used.'' See Exchange Rule 11.23(a)(23).
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The Exchange proposes to amend Exchange Rules 11.23(b)(2)(B),
(c)(2)(B), (d)(2)(D), and (e)(2)(D) to state that the prices of the
Opening Auction, Closing Auction, IPO Auction, Halt Auction, and
Volatility Closing Auction, respectively, will also occur at a price
that not only maximizes the number of shares executed, but also
minimizes the total imbalance. In all auctions, the auction price will
first be established by determining the price level within the Collar
Price Range \11\ that maximizes the number of shares executed. In the
event of a volume based tie at multiple price levels, the auction price
will be the price level that results in the minimum total imbalance.
Lastly, should there be both a volume based tie and a tie in minimum
total imbalance at multiple price levels, the auction price of the: (i)
Opening and Closing auctions will be the price closest to the Volume
Based Tie Breaker; (ii) Halt and Volatility Closing auctions will be
the price closest to the final last sale eligible trade; and (iii) IPO
auction will be the price closest to the issuing price.
---------------------------------------------------------------------------

\11\ See Exchange Rule 11.23(a)(6).
---------------------------------------------------------------------------

The below examples illustrate how the auction price, Auction Only
Price and Indicative Price is selected today and how these prices will
be selected under the proposed rule change. This first example
illustrates current behavior. Assume that the NBBO is $24.90 x $25.10,
which means that the Volume Based Tie Breaker is $25.00.

--------------------------------------------------------------------------------------------------------------------------------------------------------
Total sell
Total buy shares Buy shares Price Sell shares shares Paired shares Imbalance
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................................... .............. 25.05 .............. 300 0 -300
500..................................................... 500 25.01 .............. 300 300 200
700..................................................... 200 25.00 100 300 300 400
1,200................................................... 500 24.95 200 200 200 1,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

In this example, current behavior would dictate that $25.00 would
be selected as the auction price, Auction Only Price, and the
Indicative Price, as applicable, because at $25.00 the maximum number
of shares would be executed (300 shares, in a tie with $25.01) and of
the two price levels at which 300 shares would be executed, $25.00 is
closest to the Volume Based Tie Breaker.
Under the same scenario described above, but using the price level
that minimizes the total imbalance where there is a tie for the maximum
number of shares executed in the auction at multiple price levels
instead of the Volume Based Tie Breaker, the price chosen as the
auction price, Auction Only Price, and Indicative Price would be
$25.01. $25.01 would be used because, as noted above, 300 shares would
be executed at both $25.00 and $25.01, but the imbalance at $25.01 is
200 shares while the imbalance at $25.00 is 400 shares. Stated another
way, less executable interest would

[[Page 89178]]

remain unexecuted at $25.01 (200 shares) than at $25.00 (400 shares).

This third example illustrates the proposed behavior when there is
a tie for the maximum number of shares executed in the auction at
multiple price levels and a tie in minimum total imbalance within those
price levels. In such a situation, the price level closest to the
Volume Based Tie Breaker will be used. Under this example, assume that
the NBBO is $24.94 x $25.16, which means that the Volume Based Tie
Breaker is $25.05.

--------------------------------------------------------------------------------------------------------------------------------------------------------
Total sell
Total buy shares Buy shares Price Sell shares shares Paired shares Imbalance
--------------------------------------------------------------------------------------------------------------------------------------------------------
500..................................................... 500 25.08 .............. 200 200 300
500..................................................... .............. 25.07 .............. 200 200 300
500..................................................... .............. 25.06 .............. 200 200 300
1,000................................................... 500 25.05 .............. 200 200 800
1,200................................................... 200 25.00 .............. 200 200 1,000
1,700................................................... 500 24.95 200 200 200 1,500
--------------------------------------------------------------------------------------------------------------------------------------------------------

In this example, there is a tie for the maximum number of shares
executed in the auction at 200 shares for every price level from $24.95
to $25.08. Looking at the imbalance, there is also a tie at 300 shares
at each of $25.06, $25.07, and $25.08. As such, the proposed behavior
would look to the Volume Based Tie Breaker to determine the auction
price, Auction Only Price, and Indicative Price. Because the Volume
Based Tie Breaker is $25.05, $25.06 is selected because it is the
closest of $25.06, $25.07, and $25.08 to the Volume Based Tie Breaker.
The Exchange believes the proposed amendments are necessary to
ensure that the price selected for the auction is reasonably based on
all buying and selling interest for that security and is the price at
which the most orders may be matched resulting in the minimal
imbalance. Selecting a price that would minimize the imbalance best
reflects the value of the security based on the auction's price
discovery process because it is the price level where the amount of buy
and sell interest is closest to equal. As noted above, minimizing the
imbalance at the price levels at which the most shares will execute in
the auction will result in the price closest to equilibrium because
that price level has the least amount of executable interest that
remains unexecuted. As a result, the proposed rule changes should also
enhance the Exchange's auction processes resulting in improved price
discovery of BZX listed securities.
As a result of the above changes to the determination of the
official auction price, the Exchange also proposes to make a related
change to the definition of Indicative Price under paragraph (a)(10) of
Rule 11.23. Indicative Price is currently defined as the price at which
the most shares from the Auction Book and the Continuous Book would
match.\12\ The Indicative Price is disseminated publicly beginning at
8:00 a.m. Eastern Time for an Opening \13\ and IPO Auction,\14\ 3:00
p.m. Eastern Time for a Closing Auction,\15\ five (5) minutes prior to
the commencement of a Halt Auction,\16\ and at the time a security is
halted after 3:50 p.m. Eastern Time for a Volatility Closing
Auction.\17\ The Indicative Price is designed to facilitate price
discovery and transparency while helping resolve order imbalances in
the time leading up to an auction and the determination of the auction
price.
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\12\ See Exchange Rule 11.23(a)(10).
\13\ See Exchange Rule 11.23(b)(2)(A).
\14\ See Exchange Rule 11.23(d)(2)(A).
\15\ See Exchange Rule 11.23(c)(2)(A).
\16\ See Exchange Rule 11.23(d)(2)(A).
\17\ See Exchange Rule 11.23(e)(2)(A).
---------------------------------------------------------------------------

Today, the Exchange will publish the price at which the most shares
may be executed as the Indicative Price by taking into account all buy
and sell interest at each price level. Like the determination of each
of the auction prices discussed above, the Indicative Price reflects
the price at which the maximum number of shares may be executed, but
may not reflect the price which would result in the minimum total
imbalance where there are multiple price levels at which the most
shares may be executed. Therefore, like the amendments to the
determination of auction prices above, the Exchange proposes to amend
the definition of Indicative Price to ensure that the maximum number of
shares will ultimately be executed in the auction resulting in the
minimum total imbalance. Indicative Price will continue to be defined
as ``the price at which the most shares from the Auction Book and the
Continuous Book would match.'' However, the definition of Indicative
Price would be expanded to state that in the event of a volume based
tie at multiple price levels, the Indicative Price will be the price
which results in the minimum total imbalance. In the event of a volume
based tie and a tie in minimum total imbalance at multiple price
levels, the Indicative Price will be the price closest to the Volume
Based Tie Breaker.
Lastly, the Exchange also publishes an Auction Only Price, which is
the price at which the most shares from the Auction Book would match.
Currently, in the event of a volume based tie at multiple price levels,
the Auction Only Price will be the price closest to the Volume Based
Tie Breaker. Auction Only Price will continue to be defined under
Exchange Rule 11.23(a)(2) to state that the Auction Only Price will be
the price at which the most shares from the Auction Book would match.
However, the definition will be expanded to harmonize the calculation
of the Auction Only Price with the above changes. As amended, in the
event of a volume based tie at multiple price levels, the Auction Only
Price will be the price which results in the minimum

[[Page 89179]]

total imbalance. In the event of a volume based tie and a tie in
minimum total imbalance at multiple price levels, the Auction Only
Price will be the price closest to the Volume Based Tie Breaker.
RHO Orders
An RHO Order is ``[a] limit or market order that is designated for
execution only during Regular Trading Hours, which includes the Opening
Auction, the Closing Auction, and IPO/Halt Auctions for BZX listed
securities and the Opening Process for non-BZX-listed securities (as
such terms are defined in Rule 11.23 and 11.24). RHO orders are also
Eligible Auction Orders \18\ and may participate in the Opening
Auction.\19\ Any Eligible Auction Orders designated for the Opening
Auction will be queued until 9:30 a.m. at which time they will be
eligible to be executed in the Opening Auction. Any portion of a RHO
market order will be cancelled immediately following any auction in
which it is not executed.'' \20\ However, any portion of an RHO limit
order that is not executed in the auction will be placed on the
Continuous Book at the conclusion of the auction and commencement of
Regular Trading Hours (subject to the cancelling of certain RHO limit
orders are described below).
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\18\ See Exchange Rule 11.23(a)(8).
\19\ See id.
\20\ See Exchange Rule 11.9(b)(7).
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In general, Eligible Auction Orders designated for the Opening
Auction may not be cancelled or modified between 9:28 a.m. and 9:30
a.m.\21\ The Exchange now proposes to add additional specificity to
Rule 11.23(b)(1) regarding how RHO limit orders are handled in the
Opening Auction. Specifically, the Exchange proposes to amend Rule
11.23(b)(1)(B) to describe current behavior that allows Members to
modify, but not cancel, RHO limit orders designated for the Opening
Auction between 9:28 a.m. and 9:30 a.m.\22\
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\21\ See Exchange Rule 11.23(b)(1)(B).
\22\ Currently, RHO market orders submitted between 9:28 a.m.
and 9:30 a.m. are rejected. See Exchange Rule 11.23(b)(1)(A).
Modifications to RHO limit orders between 9:28 a.m. and 9:30 a.m.
would not be limited by Exchange Rule 11.9(e)(3) as such orders are
not active until the Opening Auction occurs at 9:30 a.m.
---------------------------------------------------------------------------

The rule text currently provides that RHO limit orders submitted
between 9:28 a.m. and 9:30 a.m. are treated as Late-Limit-On-Open
(``LLOO'') \23\ orders until the Opening Auction has concluded. The
Exchange proposes to amend Rule 11.23(b)(1)(B) to state that RHO limit
orders that are modified between 9:28 a.m. and 9:30 a.m. will also be
treated as LLOO orders until the Opening Auction is concluded. During
the Opening Auction, RHO limit orders will be priced in accordance with
the operation of LLOO orders as described in Rule 11.23(a)(12),\24\
subject to the order's limit price. At the conclusion of the Opening
Auction, any unexecuted portion of a RHO limit order will be placed on
the Continuous Book at its limit price (subject to the cancelling of
certain RHO limit orders are described below). The Exchange believes
that such treatment is consistent with the existing treatment of RHO
limit orders submitted between 9:28 a.m. and 9:30 a.m. which are
subject to the pricing restrictions applicable to LLOO orders. However,
because, unlike LLOO orders, RHO limit orders will be added to the
Continuous Book at the conclusion of the Opening Auction at their limit
price, Members should be able to modify such orders between 9:28 a.m.
and 9:30 a.m. Such functionality provides Members the price protections
necessary to incentivize early entry of orders for participation in the
Opening Auction while simultaneously allowing a Member to control an
order that will be entered onto the Continuous Book if it is not
executed in the Opening Auction.
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\23\ See Exchange Rule 11.23(a)(12).
\24\ Under Exchange Rule 11.23(a)(12), LLOO orders are priced as
follows: to the extent a LLOO bid or offer received by the Exchange
has a limit price that is more aggressive than the NBB or NBO, the
price of such bid or offer is adjusted to be equal to the NBB or
NBO, respectively, at the time of receipt by the Exchange. Where the
NBB or NBO becomes more aggressive, the limit price of the LLOO bid
or offer will be adjusted to the more aggressive price, only to the
extent that the more aggressive price is not more aggressive than
the original User entered limit price. The limit price will never be
adjusted to a less aggressive price. If there is no NBB or NBO, the
LLOO bid or offer, respectively, will assume its entered limit
price. Notwithstanding the foregoing, a LLOO order entered during
the Quote-Only Period of an IPO will be converted to a limit order
with a limit price equal to the original User entered limit price
and any LLOO orders not executed in their entirety during the IPO
Auction will be cancelled upon completion of the IPO Auction.
---------------------------------------------------------------------------

The Exchange also proposes to describe within Exchange Rule
11.23(b)(1) how RHO orders with a limit price outside of the Collar
Price Range are handled. Where the Opening Auction would have occurred
at a price level but for such price level being greater than (less
than) the high (low) range of the Collar Price Range (i.e., outside the
Collar Price Range), all buy (sell) limit RHO orders with a limit price
more aggressive than the BZX Official Opening Price that are not
executed in the Opening Auction will be cancelled.
The Collar Price Range is utilized to help limit volatility during
the auction process and to reduce the possibility that an auction would
occur at a price that would qualify as clearly erroneous under Exchange
Rule 11.17(c)(1) and that may result in cancelled executions.\25\ The
process to select the price of an Opening Auction as described above
could lead to a price that is outside of the Collar Price Range. In
that case, the Exchange will then look to find a price to execute the
auction within the Collar Price Range and in accordance with the price
selection process set forth above. The Exchange selecting a less
aggressive price for the auction within the Collar Price Range can
result in the unexecuted RHO limit orders priced more aggressively than
the auction price being placed on the Continuous Book upon conclusion
of the Opening Auction.
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\25\ As set forth under Exchange Rule 11.23(a)(6), the ``Collar
Price Range'' is the range from a set percentage below the Collar
Midpoint (as defined below) to above the Collar Midpoint, such set
percentage being dependent on the value of the Collar Midpoint at
the time of the auction, as described below. The Collar Midpoint
will be the Volume Based Tie Breaker for all applicable auctions,
except for IPO Auctions in ETPs (as defined in Rule 11.8,
Interpretation and Policy .02(d)(2)), for which the Collar Midpoint
will be the issue price. Specifically, the Collar Price Range will
be determined as follows: Where the Collar Midpoint is $25.00 or
less, the Collar Price Range shall be the range from 10% below the
Collar Midpoint to 10% above the Collar Midpoint; where the Collar
Midpoint is greater than $25.00 but less than or equal to $50.00,
the Collar Price Range shall be the range from 5% below the Collar
Midpoint to 5% above the Collar Midpoint; and where the Collar
Midpoint is greater than $50.00, the Collar Price Range shall be the
range from 3% below the Collar Midpoint to 3% above the Collar
Midpoint.
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The Exchange believes that it is necessary and appropriate to
cancel RHO orders with a limit price that is more aggressive than the
auction price in such circumstances. Other than RHO limit orders, all
Eligible Auction Orders will simply be cancelled if they do not execute
in the Opening Auction. RHO limit orders, however, are unique in that
they rest on the Auction Book until the conclusion of the Opening
Auction, at which point any unexecuted portion is added to the
Continuous Book. This could result in unexecuted RHO limit orders
priced more aggressively than the auction price to be added to the
Continuous Book, immediately applying price pressure in the direction
of the price that the Opening Auction would have initially occurred but
for the Exchange selecting a price within the Collar Price Range,
thereby controverting the purpose of the Collar Price Range. Further,
such a set of circumstances would also undermine the value of the price
discovery process of the Opening Auction and could result in executions
eligible for review as

[[Page 89180]]

clearly erroneous under Exchange Rule 11.17. The Exchange notes that
Members whose RHO limit orders are cancelled because the price of the
order is more aggressive than the Collar Price Range may always
resubmit such orders at less aggressive prices or after regular trading
begins.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder that are applicable to a national securities exchange, and,
in particular, with the requirements of Section 6(b) of the Act.\26\
Specifically, the proposed change is consistent with Section 6(b)(5) of
the Act,\27\ because 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 proposed
rule change will enhance the Exchange's auction processes resulting in
improved price discovery of BZX listed securities. Specifically, the
Exchange believes amending the calculations of auction prices and the
definitions of Indicative Price and Auction Only Price promotes just
and equitable principles of trade by ensuring that the maximum number
of shares will ultimately be executed in the auction resulting in the
minimum total imbalance generally because selecting a price that would
minimize the imbalance best reflects the value of the security based on
the auction's price discovery process because it is the price level
where the amount of buy and sell interest is closest to equal. Further,
minimizing the imbalance at the price levels at which the most shares
will execute in the auction will result in the price closest to
equilibrium because that price level has the least amount of executable
interest that remains unexecuted. These proposed amendments are similar
to auction price selection process of other exchanges \28\ and would
enhance the price discovery and transparency while helping resolve
order imbalances in the time leading up to an auction and the
determination of the ultimate auction price.
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\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
\28\ See e.g., Nasdaq Stock Market LLC (``Nasdaq'') Rules
4752(a)(2)(A) and 4752(d)(2) (outlining the selection of the Nasdaq
Current Reference Price and auction price).
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The Exchange believes allowing Members to modify RHO limit orders
between 9:28 a.m. and 9:30 a.m. promotes just and equitable principles
of trade, removes impediments to, and perfects the mechanism of, a free
and open market and a national market system. Such functionality
provides Members the price protections necessary to incentivize early
entry of orders for participation in the Opening Auction while
simultaneously allowing a Member to control an order that will be
entered onto the Continuous Book if it is not executed in the Opening
Auction. In addition, the modification of a RHO limit order between
9:28 a.m. and 9:30 a.m. would have no impact on the pricing of the
Opening Auction as such order are priced in accordance with the
operation of LLOO orders as described in Rule 11.23(a)(12),\29\ subject
to the order's limit price, on the Continuous Book.
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\29\ See supra note 24.
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The proposal also supports the objectives of perfecting the
mechanism of a free and open market and the national market system
because not cancelling RHO orders with limit prices more aggressive
than the Collar Price Range would result in executions vastly different
from the auction price shortly after the regular trading commences. As
such, the proposal also protects investors because it would prevent the
executions of orders at prices not related to the current market for
the security and possibly not in line with the investor's intent at the
time they entered the orders prior to the commencement of the auction
process. The Exchange believes this undermines the price discovery
process of the auction and could result in executions eligible for
review as clearly erroneous under Exchange Rule 11.17. The Exchange
notes that Members whose RHO limit orders are cancelled because the
price of the order is more aggressive than the Collar Price Range may
always resubmit such orders at less aggressive prices or after regular
trading begins. Therefore, the Exchange believes the proposed rule
change promotes just and equitable principles of trade, removes
impediments to, and perfects the mechanism of, a free and open market
and a national market system.

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 proposal
will promote competition because the Exchange believes the proposal
improves and enhances the Exchange's auction processes, thereby
attracting additional order flow to the Exchange. The proposed rule
change is, in effect, pro-competition as it promotes fair and orderly
markets and protects investors through enhanced auction processes.

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

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

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

Because the proposed rule change does not (i) significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \30\ and Rule 19b-4(f)(6) thereunder.\31\
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\30\ 15 U.S.C. 78s(b)(3)(A).
\31\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule 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 No. SR-BatsBZX-2016-81 on the subject line.

[[Page 89181]]

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 No. SR-BatsBZX-2016-81. 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 No. SR-BatsBZX-2016-81, and should be
submitted on or before December 30, 2016.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

\32\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-29465 Filed 12-8-16; 8:45 am]
BILLING CODE 8011-01-P

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