Joint Industry Plan; Order Approving the Twelfth Amendment to the National Market System Plan To Address Extraordinary Market Volatility by Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., Investors Exchange LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The Nasdaq Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc., 8551-8554 [2017-01717]
Download as PDF
Federal Register / Vol. 82, No. 16 / Thursday, January 26, 2017 / Notices
jstallworth on DSK7TPTVN1PROD with NOTICES
potential for triggering another Trading
Pause.58 Also, as the Exchange noted,
widening Auction Collars only in the
direction of the imbalance would
address issues relating to the concept of
mean reversion.59 Moreover, the
Commission notes that the proposal to
conduct a Closing Auction if a security
is in a Trading Pause during the last ten
minutes of trading before the end of
Regular Trading Hours (instead of a
Trading Halt Auction) would be
consistent with the Twelfth Amendment
to the Plan.60
The Commission believes that
precluding ETP Holders from requesting
a review of a Trading Halt Auction as a
clearly erroneous execution is
appropriate. As the Exchange noted, the
proposed re-opening procedures would
allow for widened collars, which may
result in a re-opening price that would
be away from prior trading prices, but
the re-opening price would be the result
of a measured and transparent process
that reduces the potential that such
trade would be considered erroneous.61
With respect to the proposed IO
Order, as the Exchange noted, the IO
Order is designed to attract offsetting
interest for Trading Halt Auctions and
would provide an option for market
participants that are willing to
participate in an auction to offset an
imbalance, but do not want such orders
to participate in continuous trading.62
The Commission notes that, according
to the Exchange, the proposed Trading
Halt Auction Imbalance Freeze would
provide market participants with a brief
period to assess the imbalance going
into a Trading Halt Auction.63
Moreover, during the Trading Halt
Imbalance Freeze, order entry and
cancellation would be revised in a
58 See Notice, supra note 3, at 73165. The
Exchange notes that applying specific aspects of the
proposed changes to Trading Halt Auctions
following a MWCB Halt or regulatory halt would
promote consistency in how the Exchange conducts
its Trading Halt Auctions, thus reducing complexity
in the marketplace. See id.
59 See id.
60 As the Exchange noted, the proposed changes
related to the treatment of MOO Orders, LOO
Orders, and IO Orders under these circumstances
would provide transparency regarding how orders
that are designated to participate in a Trading Halt
Auction only would be handled. See Notice, supra
note 3, at 73162. Also, as the Exchange noted, if the
Exchange goes directly from an unresolved Trading
Pause, MWCB Halt, or regulatory halt to a Closing
Auction, the existing narrower price collar
thresholds applicable to the Closing Auction could
result in Auction Collars that do not correlate to the
trading condition for the stock. See id.
61 See Notice, supra note 3, at 73165.
62 See id. The Exchange notes that the proposed
IO Order is based in part on the Closing Offset
Order offered by the New York Stock Exchange
LLC. See id.
63 See Notice, supra note 3, at 73165–66.
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manner designed to reduce imbalance.64
Further, the Exchange represents that
allowing Limit Orders that do not
participate in a Trading Halt Auction,
but have a limit price within the
applicable Auction Collars, to roll into
continuous trading likely would not
impact the pricing of post-auction
trading and trigger another Trading
Pause because the limit price of such
orders would have been within the same
price range that trading would have
been permitted.65
In addition, the Commission believes
that the proposed enhancements to the
Auction Imbalance Information would
further promote transparency around
Trading Halt Auctions.66
Finally, the Exchange represents that
the proposed amendments to NYSE
Arca Equities Rule 7.11 would remove
obsolete rule text and amend the
remaining rule text to conform to the
Twelfth Amendment to the Plan.67
Based on the Exchange’s
representations mentioned above and in
the Notice, and for the foregoing
reasons, the Commission finds that the
proposed rule change, as modified by
Amendment No. 1, is consistent with
Section 6(b)(5) of the Act 68 and the
rules and regulations thereunder
applicable to a national securities
exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,69 that the
proposed rule change (SR–NYSEArca2016–130), as modified by Amendment
No. 1, be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.70
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–01718 Filed 1–25–17; 8:45 am]
BILLING CODE 8011–01–P
64 See Notice, supra note 3, at 73166. Currently,
the Exchange provides an Auction Imbalance
Freeze for the Early Open Auction, Core Open
Auction, and Closing Auction. See NYSE Arca
Equities Rule 7.35(a)(3).
65 See Notice, supra note 3, at 73166.
66 See id.
67 See Notice, supra note 3, at 73165.
68 15 U.S.C. 78f(b)(5).
69 15 U.S.C. 78s(b)(2).
70 17 CFR 200.30–3(a)(12).
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8551
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79845; File No. 4–631]
Joint Industry Plan; Order Approving
the Twelfth Amendment to the National
Market System Plan To Address
Extraordinary Market Volatility by Bats
BZX Exchange, Inc., Bats BYX
Exchange, Inc., Bats EDGA Exchange,
Inc., Bats EDGX Exchange, Inc.,
Chicago Stock Exchange, Inc.,
Financial Industry Regulatory
Authority, Inc., Investors Exchange
LLC, NASDAQ BX, Inc., NASDAQ PHLX
LLC, The Nasdaq Stock Market LLC,
National Stock Exchange, Inc., New
York Stock Exchange LLC, NYSE MKT
LLC, and NYSE Arca, Inc.
January 19, 2017.
I. Introduction
On September 19, 2016, NYSE Group,
Inc., on behalf of the other parties 1 to
the National Market System Plan to
Address Extraordinary Market Volatility
(the ‘‘Plan’’), filed with the Securities
and Exchange Commission
(‘‘Commission’’) pursuant to Section
11A of the Securities Exchange Act of
1934 (‘‘Act’’) 2 and Rule 608
thereunder,3 a proposal to amend the
Plan.4 The proposal represents the
twelfth amendment to the Plan, and
reflects proposed changes unanimously
approved by the Participants (‘‘Twelfth
Amendment’’). The proposed Twelfth
Amendment was published for
comment in the Federal Register on
December 2, 2016.5 The Commission
received two comment letters regarding
the amendment.6 On January 17, 2017,
the Participants submitted a letter to the
Commission related to the Twelfth
Amendment, which requests that the
Commission modify the Twelfth
Amendment to retain provisions in the
1 NYSE Group, Inc. filed on behalf of the
following parties to the Plan: Bats BZX Exchange,
Inc., Bats BYX Exchange, Inc., Bats EDGA
Exchange, Inc., Bats EDGX Exchange, Inc., Chicago
Stock Exchange, Inc., Financial Industry Regulatory
Authority, Inc., Investors Exchange LLC, NASDAQ
BX, Inc., NASDAQ PHLX LLC, The Nasdaq Stock
Market LLC, National Stock Exchange, Inc., New
York Stock Exchange LLC, NYSE MKT LLC, and
NYSE Arca, Inc. (‘‘Participants’’).
2 15 U.S.C. 78k–1.
3 17 CFR 242.608.
4 See Letter from Elizabeth King, General Counsel
and Corporate Secretary, NYSE, to Brent J. Fields,
Secretary, Commission, dated September 16, 2016.
5 See Securities Exchange Act Release No. 79410
(November 28, 2016), 81 FR 87114 (‘‘Notice’’).
6 See Letters from Mortimer J. Buckley, Chief
Investment Officer, Vanguard, dated December 23,
2016 (‘‘Vanguard Letter’’); and David W. Blass,
General Counsel, Investment Company Institute,
dated December 22, 2016 (‘‘ICI Letter’’) to Brent J.
Fields, Secretary, Commission.
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Federal Register / Vol. 82, No. 16 / Thursday, January 26, 2017 / Notices
Plan related to Straddle States.7 This
order approves the Twelfth Amendment
to the Plan, as modified.
jstallworth on DSK7TPTVN1PROD with NOTICES
II. Description of the Proposal
In the Twelfth Amendment, the
Participants propose to implement a
modified reopening process following a
Trading Pause.8 In particular, the
Participants propose to amend the Plan
to provide that a Trading Pause will
continue until the Primary Listing
Exchange has reopened trading using its
established reopening procedures, even
if such reopening is more than 10
minutes after the beginning of a Trading
Pause, require that trading centers may
not resume trading in an NMS Stock
following a Trading Pause without Price
Bands in such NMS Stock, and delete
language made unnecessary in light of
the proposed reopening procedures.9 In
addition, the Participants propose to
address the situation where there is no
Reopening Price from the Primary
Listing Exchange due to a systems or
technology issue and make related
changes regarding how the Reference
Price would be determined and Price
Bands calculated and disseminated
following a resumption of trading.
Further, the Participants propose to
amend the Plan to provide that if an
NMS Stock is in a Trading Pause during
the last ten minutes of trading before the
end of Regular Trading Hours, the
Primary Listing Exchange shall attempt
to execute a closing transaction using its
established closing procedures. Finally,
the Participants propose to clarify in the
Plan the limited circumstances in which
a trading center may calculate and apply
Price Bands when a Reference Price is
available but Price Bands have not been
disseminated by the Processor
(‘‘Synthetic Price Bands’’).
Finally, in the Twelfth Amendment,
the Participants propose to remove
provisions related to Straddle States.
However, as described in the
Modification Letter, the Participants
7 See Letter from Elizabeth K. King, General
Counsel and Corporate Secretary, NYSE to Brent J.
Fields, Secretary, Commission, dated January 13,
2017 (‘‘Modification Letter’’).
8 Unless otherwise specified, the terms used
herein have the same meaning as set forth in the
Plan.
9 The Primary Listing Exchanges filed proposed
rule changes pursuant to Section 19(b)(1) of the Act,
15 U.S.C. 78s(b)(1), and Rule 19b–4 thereunder, 17
CFR 240.19b–4, relating to the changes to the
reopening procedures proposed in the Twelfth
Amendment. See Securities Exchange Act Release
Nos. 79162 (October 26, 2016), 81 FR 75875
(November 1, 2016) (SR–BatsBZX–2016–61; 79158
(October 26, 2016), 81 FR 75879 November 1, 2016)
(SR–NASDAQ–2016–131); and 79107 (October 18,
2016), 81 FR 73159 (October 24, 2016) (SR–
NYSEArca–2016–130). See also Securities
Exchange Act Release No 79846, (January 19, 2017)
(SR–NYSEArca–2016–130).
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have requested the Commission to
modify the Twelfth Amendment to
retain the provisions related to Straddle
States in the Plan.
III. Summary of Comment Letters
The Commission received two
comment letters on the proposed
Twelfth Amendment, both supporting
the proposed changes to the Plan related
to the reopening process. One
commenter noted that the proposed
amendments to the Plan along with the
related proposed rule changes submitted
by the exchanges 10 ‘‘should improve
the transparency of the reopening
process, allow reopening auctions to
establish more accurate prices, and
make it less likely that trading in a
security will be halted again shortly
after trading resumes.’’ 11 This
commenter further noted that
‘‘[I]mplementing these proposals also
should increase market confidence by
reducing the likelihood of the Limit UpLimit Down Plan creating confusion
during volatile markets, when clarity
and certainty are most important.’’ 12
This commenter urged the Commission
to approve the proposed Twelfth
Amendment and corresponding rule
changes, but noted that the Twelfth
Amendment ‘‘does not address the
discordance between the rules
governing clearly erroneous executions
and the limit up-limit down price
bands, which contributes unnecessarily
to uncertainty in the equity markets in
volatile times.’’ 13 The second
commenter urged the Commission to
approve the Twelfth Amendment
‘‘without delay’’ and before considering
a change to the Plan recommended by
the Equity Market Structure Advisory
Committee in which ‘‘securities in a
limit state would not be halted pursuant
to existing rules, but would be
permitted to trade within established
price bands.’’ 14 This commenter
believes that ‘‘the Twelfth Amendment
is an important step towards improving
the equity markets and minimizing the
likelihood of an event like August 24,
2015.’’ 15
IV. Discussion and Commission
Findings
Rule 608 under Regulation NMS
provides that the Commission shall
approve an NMS plan amendment, with
such changes or subject to such
conditions as the Commission may
10 See
11 See
supra note 9.
ICI Letter, supra note 6 at 2.
12 Id.
13 Id.
14 See
Vanguard Letter, supra note 6, at 2.
15 Id.
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deem necessary or appropriate, if it
finds that the plan amendment is
‘‘necessary or appropriate in the public
interest, for the protection of investors
and the maintenance of fair and orderly
markets, to remove impediments to, and
perfect the mechanism of, a national
market system, or otherwise in
furtherance of the purposes of the
Act.’’ 16 The Commission finds that the
Twelfth Amendment, as modified, is
consistent with Section 11A of the
Act 17 and Rule 608 thereunder 18
because, for the reasons discussed
below it is appropriate in the public
interest, for the protection of investors
and the maintenance of fair and orderly
markets, and that it removes
impediments to, and perfects the
mechanism of, a national market
system. The Commission notes that the
Participants proposed the Twelfth
Amendment to address issues
experienced on August 24, 2015. In
particular, the Participants believe that
the changes to the Plan set forth in the
Twelfth Amendment should reduce the
number of repeat Trading Pauses in a
single NMS Stock and establish a more
standardized process across Primary
Listing Exchanges in reopening trading
following a Trading Pause.
A. Coordinated Reopening Procedures
After a Trading Pause
The Participants propose to remove
the language in Plan Section VII(B)(3)
that permits trading centers to begin
trading an NMS Stock ten minutes after
declaration of a Trading Pause in an
NMS Stock if the Primary Listing
Exchange has not either reported a
Reopening Price or declared a
Regulatory Halt.19 Accordingly, Trading
Pauses would continue until a Primary
Listing Market reports a Reopening
Price, except in limited circumstances
discussed below. In addition, the
Participants propose to provide that
trading centers may not resume trading
in an NMS Stock following a Trading
Pause without Price Bands in such NMS
Stock.
The Commission believes that it is
appropriate in the public interest, for
the protection of investors and the
maintenance of a fair and orderly
market to provide that a Trading Pause
16 17
CFR 242.608(b)(2).
U.S.C. 78k–1.
18 17 CFR 242.608.
19 The Participants also propose to amend Section
V(C) of the Plan to remove language, which
describes the first Reference Price in situations
when a Primary Listing Market does not reopen
within ten minutes after the beginning of a Trading
Pause. The Commission believes that with the
adoption of the proposed amendments described
above, the Plan text in Section V(C) is no longer
necessary.
17 15
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jstallworth on DSK7TPTVN1PROD with NOTICES
continue until the Primary Listing
Exchange has reopened trading using its
established reopening procedures, even
if such reopening is more than 10
minutes after the beginning of a Trading
Pause, and to require that trading
centers may not resume trading in an
NMS Stock following a Trading Pause
without Price Bands in such NMS
Stock. The Commission believes that
these two provisions together support a
more standardized process for
reopening trading after a Trading Pause
has been declared. Further, these
provisions ensure that trading would
not resume after a Trading Pause
without Price Bands.
B. Systems and Technology Issues
The Participants propose to amend
Section VII(B)(2) of the Plan to clarify
that the only time trading centers may
resume trading in an NMS Stock in the
absence of a Reopening Price from the
Primary Listing Exchange is if the
Primary Listing Exchange notifies the
Processor that it is unable to reopen
trading due to a systems or technology
issue. The Commission believes that
this change is appropriate in the public
interest, for the protection of investors
and the maintenance of a fair and
orderly market because if a Primary
Listing Exchange is unable to reopen
trading due to a systems or technology
issue, trading should be permitted to
resume in that NMS Stock on other
trading centers.
Further, the Participants propose to
add a new sentence to Section V(C)(1)
of the Plan to specify that if the Primary
Listing Exchange notifies the Processor
that it is unable to reopen an NMS Stock
due to a systems or technology issue,
the next Reference Price would be the
last effective Price Band that was in a
Limit State before the Trading Pause.
The Participants also propose to use this
process for determining a Reference
Price in situations where the Primary
Listing Exchange reopens trading with a
quotation that has a zero bid or offer, or
both. The Commission believes that it is
appropriate to use the last effective
Price Band as the new Reference Price
in these situations. As noted by the
Participants, using the last effective
Price Band that triggered the Trading
Pause should be a closer approximation
of the most recent trading in the NMS
Stock, which should help to prevent
repeat Trading Pauses.
The Participants also propose to
provide that if, under Section VII(B)(2),
the Primary Listing Exchange notifies
the Processor that it is unable to reopen
an NMS Stock due to a systems or
technology issue and it has not declared
a Regulatory Halt, the Processor will
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15:10 Jan 25, 2017
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calculate and disseminate Price Bands
by applying triple the Percentage
Parameters set forth in Appendix A to
the Plan for the first 30 seconds such
Price Bands are disseminated. The
Commission notes that the Plan
currently reflects that triple Percentage
Parameters are applied if trading
resumes ten minutes after a Trading
Pause has been declared when the
Primary Listing Exchange has not issued
a Reopening Price. Accordingly, the
Commission believes that that it is
appropriate to apply triple Percentage
Parameters to the new limited instances
when a Reopening Price is not
disseminated.
Finally, the Participants propose to
amend Section VII(B)(4) of the Plan to
clarify that the Processor shall update
the Price Bands, as set forth in Section
V(C)(1)–(2) of the Plan, after receiving
notification from the Primary Listing
Exchange of a Reopening Price
following a Trading Pause (or a resume
message in the case of a reopening quote
that has a zero bid or zero offer, or both),
or notification that the Primary Listing
Exchange is unable to reopen trading
following a Trading Pause due to a
systems or technology issue. In
instances when the Primary Listing
Exchange is unable to reopen due to a
systems or technology issue, the
Processor shall update the Price Bands
no earlier than ten minutes after the
beginning of the Trading Pause. The
Commission believes that these changes
are appropriate to clarify the
requirements of the Processor to update
the Price Bands in all situations
following a Trading Pause.
C. Trading Pauses Before the End of
Regular Trading Hours
The Participants propose to amend
Section VII(C)(1) of the Plan to provide
that if an NMS Stock is in a Trading
Pause during the last ten minutes of
trading before the end of Regular
Trading Hours, the Primary Listing
Exchange shall, rather than seek to
resume trading through its established
reopening procedures, attempt to
execute a closing transaction using its
established closing procedures. The
Commission believes that this change is
appropriate in the public interest, for
the protection of investors and the
maintenance of a fair and orderly
market to accommodate the new
standardized process for reopening
trading. As noted above, all trading
centers must wait to resume trading in
an NMS Stock subject to a Trading
Pause until the Primary Listing
Exchange has reported a Reopening
Price. It is possible that a Trading Pause
that was declared before the last ten
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8553
minutes of trading before the end of
Regular Trading Hours could be
extended until after the last ten minutes
of trading before the end of Regular
Trading Hours. The Commission
believes that it is appropriate to amend
the Plan to reflect in such case, that
trading in the NMS Stock should not
resume, and instead the Primary Listing
Exchange should attempt to execute a
closing transaction using established
closing procedures.
D. Synthetic Price Bands
The Participants propose to amend
Section V(A)(1) of the Plan to clarify
that if the Processor has not yet
disseminated Price Bands, but a
Reference Price is available, a trading
center may calculate and apply
Synthetic Price Bands based on the
same Reference Price that the Processor
would use for calculating such Price
Bands until the trading center receives
Price Bands from the Processor. The
Commission believes that this change is
appropriate in the public interest, for
the protection of investors and the
maintenance of a fair and orderly
market because it will make clear that,
while a trading center may not resume
trading in an NMS Stock following a
Trading Pause without Price Bands in
such NMS Stock, when a Reference
Price is available, a trading center is
permitted to calculate and apply its own
Synthetic Price Bands before Price
Bands have been received from the
Processor.
E. Straddle States
In the Twelfth Amendment, the
Participants proposed to remove
provisions in the Plan related to
Straddle States. In its Modification
Letter, the Participants request that the
Commission approve the Twelfth
Amendment, as modified, to retain the
provisions related to Straddle States.20
The Participants note that they intend to
further study alternatives to eliminating
Straddle States from the Plan. The
Commission deems it necessary to
modify the Twelfth Amendment so that
the provisions related to Straddle States
are retained. The Commission believes
that further data analysis is appropriate
to evaluate alternatives to eliminating
Straddle States from the Plan.
For the reasons noted above, the
Commission finds that the Twelfth
Amendment to the Plan, as modified, is
consistent with Section 11A of the
Act 21 and Rule 608 thereunder.22
20 See
Modification Letter, supra note 7.
U.S.C. 78k–1.
22 17 CFR 242.608. Consistent with their
representations set forth in the Notice, the
21 15
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V. Conclusion
It is therefore ordered, pursuant to
Section 11A of the Act 23 and Rule 608
thereunder,24 that the Twelfth
Amendment to the Plan (File No. 4–
631), as modified, be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–01717 Filed 1–25–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–79849; File No. SR–
NASDAQ–2017–005]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Eliminate
Fees at Rule 7015(h) Assessed for VTE
Terminal Connectivity
January 19, 2017.
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 January
11, 2017, 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, 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
jstallworth on DSK7TPTVN1PROD with NOTICES
The Exchange proposes to eliminate
the Exchange’s fees at Rule 7015(h)
assessed for VTE terminal connectivity,
which is no longer offered by the
Exchange.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.cchwallstreet.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
Commission expects the Participants to implement
the Twelfth Amendment, as modified, no later than
six months after the date of this order.
23 15 U.S.C. 78k–1.
24 17 CFR 242.608.
25 17 CFR 200.30–3(a)(29).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1. Purpose
The purpose of the proposed rule
change is to eliminate VTE terminal fees
under Rule 7015(h), since the Exchange
no longer offers VTE terminal
connectivity. A VTE terminal was a
basic front-end user interface used by
Nasdaq members to connect to, and
enter orders in, The Nasdaq Market
Center. Members using VTE terminals
paid the exchanges and market centers
separately for data feeds and services
provided by Nasdaq, other exchanges or
market centers through VTE.3
Effective June 1, 2016, the Exchange
increased the fees assessed for VTE
connectivity, noting that the pricing
changes were warranted in order to
appropriately balance the decreasing
demand for the product with increasing
platform, overhead, and technology
infrastructure costs.4 The Exchange also
noted that, because VTE was based on
outdated technology and that members
have other options for connecting to,
and entering orders in, The Nasdaq
Market Center, Nasdaq planned to phase
out the service in its entirety on or
before January 31, 2017.5 There are
currently no subscribers to VTE
terminals, and the Exchange has begun
the process of decommissioning the
service. Accordingly, the Exchange is
proposing to eliminate the VTE terminal
fees and related text from its rulebook.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
3 Such fees are filed with the SEC and separately
assessed by the exchanges and market centers at the
same rate irrespective of the method of accessing
the data feeds.
4 Securities Exchange Act Release No. 78051
(June 13, 2016), 81 FR 39739 (June 17, 2016) (SR–
NASDAQ–2016–078).
5 Id.
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of the Act,6 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,7 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Exchange believes that
elimination of the fees is reasonable
because the Exchange no longer offers
the service, thus making the fees
irrelevant. The Exchange believes that
elimination of the fee and related rule
text is an equitable allocation and is not
unfairly discriminatory because there
are no longer subscribers to the service,
and elimination of the fee and related
rule text will not impact members
differently. Thus, the proposed change
will not discriminate among members in
any way and will be allocated equitably.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed change removes fees and
related text from the rules, which
applied to a connectivity service that
the Exchange no longer offers. The
Exchange notes that VTE connectivity
was entirely optional and members were
able avail themselves of numerous other
means of accessing The Nasdaq Market
Center. In fact, the Exchange determined
to decommission the connectivity
option because of declining
subscribership, the age of the
technology, and because members have
other options for connecting to, and
entering orders in, The Nasdaq Market
Center. Members recognized the limited
utility of the connectivity option in light
of more modern options, and over time
all subscribers chose to cancel their
subscriptions. Thus, the proposed
change is not burdening competition in
any way, but rather reflects the
consequences of robust competition
where trading venues are compelled to
offer superior connectivity options,
which ultimately supplant connectivity
based on old technology.
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.
6 15
7 15
E:\FR\FM\26JAN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
26JAN1
Agencies
[Federal Register Volume 82, Number 16 (Thursday, January 26, 2017)]
[Notices]
[Pages 8551-8554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-01717]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-79845; File No. 4-631]
Joint Industry Plan; Order Approving the Twelfth Amendment to the
National Market System Plan To Address Extraordinary Market Volatility
by Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Bats EDGA
Exchange, Inc., Bats EDGX Exchange, Inc., Chicago Stock Exchange, Inc.,
Financial Industry Regulatory Authority, Inc., Investors Exchange LLC,
NASDAQ BX, Inc., NASDAQ PHLX LLC, The Nasdaq Stock Market LLC, National
Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and
NYSE Arca, Inc.
January 19, 2017.
I. Introduction
On September 19, 2016, NYSE Group, Inc., on behalf of the other
parties \1\ to the National Market System Plan to Address Extraordinary
Market Volatility (the ``Plan''), filed with the Securities and
Exchange Commission (``Commission'') pursuant to Section 11A of the
Securities Exchange Act of 1934 (``Act'') \2\ and Rule 608
thereunder,\3\ a proposal to amend the Plan.\4\ The proposal represents
the twelfth amendment to the Plan, and reflects proposed changes
unanimously approved by the Participants (``Twelfth Amendment''). The
proposed Twelfth Amendment was published for comment in the Federal
Register on December 2, 2016.\5\ The Commission received two comment
letters regarding the amendment.\6\ On January 17, 2017, the
Participants submitted a letter to the Commission related to the
Twelfth Amendment, which requests that the Commission modify the
Twelfth Amendment to retain provisions in the
[[Page 8552]]
Plan related to Straddle States.\7\ This order approves the Twelfth
Amendment to the Plan, as modified.
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\1\ NYSE Group, Inc. filed on behalf of the following parties to
the Plan: Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Bats
EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Chicago Stock
Exchange, Inc., Financial Industry Regulatory Authority, Inc.,
Investors Exchange LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The Nasdaq
Stock Market LLC, National Stock Exchange, Inc., New York Stock
Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (``Participants'').
\2\ 15 U.S.C. 78k-1.
\3\ 17 CFR 242.608.
\4\ See Letter from Elizabeth King, General Counsel and
Corporate Secretary, NYSE, to Brent J. Fields, Secretary,
Commission, dated September 16, 2016.
\5\ See Securities Exchange Act Release No. 79410 (November 28,
2016), 81 FR 87114 (``Notice'').
\6\ See Letters from Mortimer J. Buckley, Chief Investment
Officer, Vanguard, dated December 23, 2016 (``Vanguard Letter'');
and David W. Blass, General Counsel, Investment Company Institute,
dated December 22, 2016 (``ICI Letter'') to Brent J. Fields,
Secretary, Commission.
\7\ See Letter from Elizabeth K. King, General Counsel and
Corporate Secretary, NYSE to Brent J. Fields, Secretary, Commission,
dated January 13, 2017 (``Modification Letter'').
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II. Description of the Proposal
In the Twelfth Amendment, the Participants propose to implement a
modified reopening process following a Trading Pause.\8\ In particular,
the Participants propose to amend the Plan to provide that a Trading
Pause will continue until the Primary Listing Exchange has reopened
trading using its established reopening procedures, even if such
reopening is more than 10 minutes after the beginning of a Trading
Pause, require that trading centers may not resume trading in an NMS
Stock following a Trading Pause without Price Bands in such NMS Stock,
and delete language made unnecessary in light of the proposed reopening
procedures.\9\ In addition, the Participants propose to address the
situation where there is no Reopening Price from the Primary Listing
Exchange due to a systems or technology issue and make related changes
regarding how the Reference Price would be determined and Price Bands
calculated and disseminated following a resumption of trading. Further,
the Participants propose to amend the Plan to provide that if an NMS
Stock is in a Trading Pause during the last ten minutes of trading
before the end of Regular Trading Hours, the Primary Listing Exchange
shall attempt to execute a closing transaction using its established
closing procedures. Finally, the Participants propose to clarify in the
Plan the limited circumstances in which a trading center may calculate
and apply Price Bands when a Reference Price is available but Price
Bands have not been disseminated by the Processor (``Synthetic Price
Bands'').
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\8\ Unless otherwise specified, the terms used herein have the
same meaning as set forth in the Plan.
\9\ The Primary Listing Exchanges filed proposed rule changes
pursuant to Section 19(b)(1) of the Act, 15 U.S.C. 78s(b)(1), and
Rule 19b-4 thereunder, 17 CFR 240.19b-4, relating to the changes to
the reopening procedures proposed in the Twelfth Amendment. See
Securities Exchange Act Release Nos. 79162 (October 26, 2016), 81 FR
75875 (November 1, 2016) (SR-BatsBZX-2016-61; 79158 (October 26,
2016), 81 FR 75879 November 1, 2016) (SR-NASDAQ-2016-131); and 79107
(October 18, 2016), 81 FR 73159 (October 24, 2016) (SR-NYSEArca-
2016-130). See also Securities Exchange Act Release No 79846,
(January 19, 2017) (SR-NYSEArca-2016-130).
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Finally, in the Twelfth Amendment, the Participants propose to
remove provisions related to Straddle States. However, as described in
the Modification Letter, the Participants have requested the Commission
to modify the Twelfth Amendment to retain the provisions related to
Straddle States in the Plan.
III. Summary of Comment Letters
The Commission received two comment letters on the proposed Twelfth
Amendment, both supporting the proposed changes to the Plan related to
the reopening process. One commenter noted that the proposed amendments
to the Plan along with the related proposed rule changes submitted by
the exchanges \10\ ``should improve the transparency of the reopening
process, allow reopening auctions to establish more accurate prices,
and make it less likely that trading in a security will be halted again
shortly after trading resumes.'' \11\ This commenter further noted that
``[I]mplementing these proposals also should increase market confidence
by reducing the likelihood of the Limit Up-Limit Down Plan creating
confusion during volatile markets, when clarity and certainty are most
important.'' \12\ This commenter urged the Commission to approve the
proposed Twelfth Amendment and corresponding rule changes, but noted
that the Twelfth Amendment ``does not address the discordance between
the rules governing clearly erroneous executions and the limit up-limit
down price bands, which contributes unnecessarily to uncertainty in the
equity markets in volatile times.'' \13\ The second commenter urged the
Commission to approve the Twelfth Amendment ``without delay'' and
before considering a change to the Plan recommended by the Equity
Market Structure Advisory Committee in which ``securities in a limit
state would not be halted pursuant to existing rules, but would be
permitted to trade within established price bands.'' \14\ This
commenter believes that ``the Twelfth Amendment is an important step
towards improving the equity markets and minimizing the likelihood of
an event like August 24, 2015.'' \15\
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\10\ See supra note 9.
\11\ See ICI Letter, supra note 6 at 2.
\12\ Id.
\13\ Id.
\14\ See Vanguard Letter, supra note 6, at 2.
\15\ Id.
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IV. Discussion and Commission Findings
Rule 608 under Regulation NMS provides that the Commission shall
approve an NMS plan amendment, with such changes or subject to such
conditions as the Commission may deem necessary or appropriate, if it
finds that the plan amendment is ``necessary or appropriate in the
public interest, for the protection of investors and the maintenance of
fair and orderly markets, to remove impediments to, and perfect the
mechanism of, a national market system, or otherwise in furtherance of
the purposes of the Act.'' \16\ The Commission finds that the Twelfth
Amendment, as modified, is consistent with Section 11A of the Act \17\
and Rule 608 thereunder \18\ because, for the reasons discussed below
it is appropriate in the public interest, for the protection of
investors and the maintenance of fair and orderly markets, and that it
removes impediments to, and perfects the mechanism of, a national
market system. The Commission notes that the Participants proposed the
Twelfth Amendment to address issues experienced on August 24, 2015. In
particular, the Participants believe that the changes to the Plan set
forth in the Twelfth Amendment should reduce the number of repeat
Trading Pauses in a single NMS Stock and establish a more standardized
process across Primary Listing Exchanges in reopening trading following
a Trading Pause.
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\16\ 17 CFR 242.608(b)(2).
\17\ 15 U.S.C. 78k-1.
\18\ 17 CFR 242.608.
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A. Coordinated Reopening Procedures After a Trading Pause
The Participants propose to remove the language in Plan Section
VII(B)(3) that permits trading centers to begin trading an NMS Stock
ten minutes after declaration of a Trading Pause in an NMS Stock if the
Primary Listing Exchange has not either reported a Reopening Price or
declared a Regulatory Halt.\19\ Accordingly, Trading Pauses would
continue until a Primary Listing Market reports a Reopening Price,
except in limited circumstances discussed below. In addition, the
Participants propose to provide that trading centers may not resume
trading in an NMS Stock following a Trading Pause without Price Bands
in such NMS Stock.
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\19\ The Participants also propose to amend Section V(C) of the
Plan to remove language, which describes the first Reference Price
in situations when a Primary Listing Market does not reopen within
ten minutes after the beginning of a Trading Pause. The Commission
believes that with the adoption of the proposed amendments described
above, the Plan text in Section V(C) is no longer necessary.
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The Commission believes that it is appropriate in the public
interest, for the protection of investors and the maintenance of a fair
and orderly market to provide that a Trading Pause
[[Page 8553]]
continue until the Primary Listing Exchange has reopened trading using
its established reopening procedures, even if such reopening is more
than 10 minutes after the beginning of a Trading Pause, and to require
that trading centers may not resume trading in an NMS Stock following a
Trading Pause without Price Bands in such NMS Stock. The Commission
believes that these two provisions together support a more standardized
process for reopening trading after a Trading Pause has been declared.
Further, these provisions ensure that trading would not resume after a
Trading Pause without Price Bands.
B. Systems and Technology Issues
The Participants propose to amend Section VII(B)(2) of the Plan to
clarify that the only time trading centers may resume trading in an NMS
Stock in the absence of a Reopening Price from the Primary Listing
Exchange is if the Primary Listing Exchange notifies the Processor that
it is unable to reopen trading due to a systems or technology issue.
The Commission believes that this change is appropriate in the public
interest, for the protection of investors and the maintenance of a fair
and orderly market because if a Primary Listing Exchange is unable to
reopen trading due to a systems or technology issue, trading should be
permitted to resume in that NMS Stock on other trading centers.
Further, the Participants propose to add a new sentence to Section
V(C)(1) of the Plan to specify that if the Primary Listing Exchange
notifies the Processor that it is unable to reopen an NMS Stock due to
a systems or technology issue, the next Reference Price would be the
last effective Price Band that was in a Limit State before the Trading
Pause. The Participants also propose to use this process for
determining a Reference Price in situations where the Primary Listing
Exchange reopens trading with a quotation that has a zero bid or offer,
or both. The Commission believes that it is appropriate to use the last
effective Price Band as the new Reference Price in these situations. As
noted by the Participants, using the last effective Price Band that
triggered the Trading Pause should be a closer approximation of the
most recent trading in the NMS Stock, which should help to prevent
repeat Trading Pauses.
The Participants also propose to provide that if, under Section
VII(B)(2), the Primary Listing Exchange notifies the Processor that it
is unable to reopen an NMS Stock due to a systems or technology issue
and it has not declared a Regulatory Halt, the Processor will calculate
and disseminate Price Bands by applying triple the Percentage
Parameters set forth in Appendix A to the Plan for the first 30 seconds
such Price Bands are disseminated. The Commission notes that the Plan
currently reflects that triple Percentage Parameters are applied if
trading resumes ten minutes after a Trading Pause has been declared
when the Primary Listing Exchange has not issued a Reopening Price.
Accordingly, the Commission believes that that it is appropriate to
apply triple Percentage Parameters to the new limited instances when a
Reopening Price is not disseminated.
Finally, the Participants propose to amend Section VII(B)(4) of the
Plan to clarify that the Processor shall update the Price Bands, as set
forth in Section V(C)(1)-(2) of the Plan, after receiving notification
from the Primary Listing Exchange of a Reopening Price following a
Trading Pause (or a resume message in the case of a reopening quote
that has a zero bid or zero offer, or both), or notification that the
Primary Listing Exchange is unable to reopen trading following a
Trading Pause due to a systems or technology issue. In instances when
the Primary Listing Exchange is unable to reopen due to a systems or
technology issue, the Processor shall update the Price Bands no earlier
than ten minutes after the beginning of the Trading Pause. The
Commission believes that these changes are appropriate to clarify the
requirements of the Processor to update the Price Bands in all
situations following a Trading Pause.
C. Trading Pauses Before the End of Regular Trading Hours
The Participants propose to amend Section VII(C)(1) of the Plan to
provide that if an NMS Stock is in a Trading Pause during the last ten
minutes of trading before the end of Regular Trading Hours, the Primary
Listing Exchange shall, rather than seek to resume trading through its
established reopening procedures, attempt to execute a closing
transaction using its established closing procedures. The Commission
believes that this change is appropriate in the public interest, for
the protection of investors and the maintenance of a fair and orderly
market to accommodate the new standardized process for reopening
trading. As noted above, all trading centers must wait to resume
trading in an NMS Stock subject to a Trading Pause until the Primary
Listing Exchange has reported a Reopening Price. It is possible that a
Trading Pause that was declared before the last ten minutes of trading
before the end of Regular Trading Hours could be extended until after
the last ten minutes of trading before the end of Regular Trading
Hours. The Commission believes that it is appropriate to amend the Plan
to reflect in such case, that trading in the NMS Stock should not
resume, and instead the Primary Listing Exchange should attempt to
execute a closing transaction using established closing procedures.
D. Synthetic Price Bands
The Participants propose to amend Section V(A)(1) of the Plan to
clarify that if the Processor has not yet disseminated Price Bands, but
a Reference Price is available, a trading center may calculate and
apply Synthetic Price Bands based on the same Reference Price that the
Processor would use for calculating such Price Bands until the trading
center receives Price Bands from the Processor. The Commission believes
that this change is appropriate in the public interest, for the
protection of investors and the maintenance of a fair and orderly
market because it will make clear that, while a trading center may not
resume trading in an NMS Stock following a Trading Pause without Price
Bands in such NMS Stock, when a Reference Price is available, a trading
center is permitted to calculate and apply its own Synthetic Price
Bands before Price Bands have been received from the Processor.
E. Straddle States
In the Twelfth Amendment, the Participants proposed to remove
provisions in the Plan related to Straddle States. In its Modification
Letter, the Participants request that the Commission approve the
Twelfth Amendment, as modified, to retain the provisions related to
Straddle States.\20\ The Participants note that they intend to further
study alternatives to eliminating Straddle States from the Plan. The
Commission deems it necessary to modify the Twelfth Amendment so that
the provisions related to Straddle States are retained. The Commission
believes that further data analysis is appropriate to evaluate
alternatives to eliminating Straddle States from the Plan.
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\20\ See Modification Letter, supra note 7.
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For the reasons noted above, the Commission finds that the Twelfth
Amendment to the Plan, as modified, is consistent with Section 11A of
the Act \21\ and Rule 608 thereunder.\22\
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\21\ 15 U.S.C. 78k-1.
\22\ 17 CFR 242.608. Consistent with their representations set
forth in the Notice, the Commission expects the Participants to
implement the Twelfth Amendment, as modified, no later than six
months after the date of this order.
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[[Page 8554]]
V. Conclusion
It is therefore ordered, pursuant to Section 11A of the Act \23\
and Rule 608 thereunder,\24\ that the Twelfth Amendment to the Plan
(File No. 4-631), as modified, be, and it hereby is, approved.
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\23\ 15 U.S.C. 78k-1.
\24\ 17 CFR 242.608.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(29).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-01717 Filed 1-25-17; 8:45 am]
BILLING CODE 8011-01-P