Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 7.35 To Specify Order Handling for an IPO Auction, 21434-21437 [2017-09194]
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Federal Register / Vol. 82, No. 87 / Monday, May 8, 2017 / Notices
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[Release No. 34–80576; File No. SR–
NYSEArca–2017–47]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending NYSE Arca
Equities Rule 7.35 To Specify Order
Handling for an IPO Auction
May 2, 2017.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’),2 and Rule 19b–4 thereunder,3
notice is hereby given that on April 21,
2017, NYSE Arca, Inc. (the ‘‘Exchange’’
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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Federal Register / Vol. 82, No. 87 / Monday, May 8, 2017 / Notices
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend
NYSE Arca Equities Rule 7.35
(Auctions) to specify order handling for
an IPO Auction. The proposed rule
change is available on the Exchange’s
website at www.nyse.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
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
asabaliauskas on DSK3SPTVN1PROD with NOTICES
1. Purpose
The Exchange proposes to amend
NYSE Arca Equities Rule 7.35
(Auctions) (‘‘Rule 7.35’’) to specify order
handling for an IPO Auction.
Under Rule 7.35(f), IPO Auctions
follow the processing rules of a Core
Open Auction, provided that: (1) The
Exchange will specify the time an IPO
Auction will be conducted; (2) there
will be no Auction Imbalance Freeze,
Auction Collars, or restrictions on the
entry or cancellation of orders for an
IPO Auction; and (3) an IPO Auction
will not be conducted if there are only
Market Orders on both sides of the
market.
The Exchange proposes to amend
Rule 7.35(f)(2) to provide that order
types that are not eligible to participate
in the IPO Auction would be rejected
until such time that the Auction
Processing Period for the IPO Auction
has concluded. Specifically, Limit
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Orders designated IOC, Limit NonDisplayed Orders, MPL Orders,
Tracking Orders, Market Pegged Orders,
Discretionary Pegged Orders, Cross
Orders, Retail Orders, and Retail Price
Improvement Orders are not eligible to
participate in auctions, including IPO
Auctions.4 Because none of these order
types are eligible to participate in an
auction and because there would be no
trading in a security before an IPO
Auction, the Exchange believes it would
be appropriate to reject such orders
until after the Auction Processing
Period concludes, at which time they
would be eligible to trade. Accordingly,
the Exchange proposes to amend Rule
7.35(f)(2) to specify that the Exchange
would reject these orders until after the
Auction Processing Period for the IPO
Auction has concluded.
In conjunction with this change, the
Exchange proposes to delete the current
text in Rule 7.32(f)(2) stating that there
will be no restriction on the entry of
orders for an IPO Auction.
As proposed, amended Rule 7.35(f)(2)
would provide (deleted text bracketed,
new text underlined):
(2) There will be no Auction Imbalance
Freeze, Auction Collars, or restrictions on the
[entry or] cancellation of orders for an IPO
Auction. Limit Orders designated IOC, Limit
Non-Displayed Orders, MPL Orders, Tracking
Orders, Market Pegged Orders, Discretionary
Pegged Orders, Cross Orders, Retail Orders,
and Retail Price Improvement Orders will be
rejected until after the Auction Processing
Period for the IPO Auction has concluded.
The Exchange also proposes to amend
Rule 7.35(h)(3), which describes the
transition to continuous trading
following an auction, to specify how the
Exchange would transition to
continuous trading following an IPO
Auction. Currently, Rule 7.35(h)(3)(A)
provides that when transitioning to
continuous trading from a prior trading
session or following an auction, a quote
will be published based on unexecuted
4 See Rules 7.31(b)(2) (A Limit Order designated
IOC is not eligible to participate in any auctions);
7.31(d)(2) (Limit Non-Displayed Order does not
participate in an auction); 7.31(d)(3) (MPL Order
does not participate in an auction); 7.31(d)(4)
(Tracking Orders are not triggered to trade during
an auction because the Exchange does not route
during an auction); 7.31(h)(1) (Market Pegged
Orders will not participate in any auctions); 7.31(g)
(A Cross Order is not eligible to participate in any
auctions); and 7.44(m) (the Retail Liquidity Program
operates only during the Core Trading Session and
Retail Orders will be accepted during Core Trading
Hours only). Because Discretionary Pegged Orders
are non-displayed Pegged Orders, they are
processed similarly to Market Pegged Orders in that
they would not participate in auctions, would be
rejected if entered or cancelled if cancel/replaced
during a halt or pause in a security listed on the
Exchange, and would be rejected if entered before
or during the Early Trading Session. The Exchange
proposes to amend Rules 7.18(c)(4), 7.31(h)(3)(A),
and 7.34(c)(1)(A) to specify this behavior.
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21435
orders that were eligible to trade in the
trading sessions both before and after
the transition or auction, i.e.,
previously-live orders. To make the text
more specific, the Exchange proposes to
define the term ‘‘previously-live order’’
separately for an IPO Auction to mean
unexecuted orders that were entered
before the IPO Auction Processing
Period began. In the case of an IPO
Auction, there is no prior trading
session. In addition, as described in
detail above, the Exchange would reject
orders that are not eligible to participate
in the IPO Auction until after the
Auction Processing Period for the IPO
Auction has concluded. Therefore, the
only unexecuted orders following an
IPO Auction would be those orders that
would have been eligible to participate
in the IPO Auction. The Exchange
further proposes to specify that the
current definition of previously-live
orders would be applicable for the Core
Open Auction, Trading Halt Auction,
and Closing Auction.
In addition, the Exchange believes
that in the context of transitioning to
continuous trading, an IPO Auction is
more akin to a Trading Halt Auction
than to the Core Open Auction because
there is no trading in such security
immediately preceding the auction, but
there may be a previously-published
quote.5 Accordingly, the Exchange
proposes to amend Rule 7.35(h)(3)(A)(ii)
to provide that the procedures for
publishing a quote after an IPO Auction
would be the same as are currently
applicable for publishing a quote
following a Trading Halt Auction.6
Because all marketable orders at the
indicative match price would trade in
an IPO Auction and the Exchange
would reject orders that are not eligible
to participate in the IPO Auction,
following an IPO Auction there would
not be any previously-live orders that
would be marketable against other
orders in the NYSE Arca Book. For this
reason, the Exchange proposes to
specify that the second step specified in
5 In limited circumstances, the first day of trading
of a new listing on an exchange may not be an
initial public offering, e.g., first day of listing of a
new rights security, and therefore another exchange
that trades such security on an unlisted trading
privileges basis may begin quoting and trading in
such security before the Exchange’s IPO Auction. In
such case, there may be a quote in that symbol
before the IPO Auction, just as there would be a
previously-published quote in a security that is
subject to a Trading Halt Auction.
6 Rule 7.35(h)(3)(A)(i) currently specifies order
processing following an Early Open Auction, Core
Open Auction, and Closing Auction. Because there
is no trading in a security before an Early Open
Auction and no previously-published quote against
which to compare the new quote, the Exchange
proposes to amend this rule text to remove
reference to the Early Open Auction.
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Federal Register / Vol. 82, No. 87 / Monday, May 8, 2017 / Notices
that rule would be for the Trading Halt
Auction only. The Exchange also
proposes to amend this rule to correct
a typographical error to remove the
hyphen between ‘‘trade’’ and ‘‘through.’’
Finally, the Exchange proposes to
amend Rule 7.35(h)(3)(B). The rule
currently provides that unexecuted
orders that were not eligible to trade in
the prior trading session (or were
received during a halt or pause) or that
were received during the Auction
Processing Period, will be assigned a
new working time at the end of the
Auction Processing Period in time
sequence relative to one another based
on original entry time. The Exchange
proposes to clarify this rule text by
adding sub-numbering, specifying that
existing rule text relates to a Trading
Halt Auction, adding how orders
entered before an Early Open Auction
would be assigned a working time, and
specifying that all such unexecuted
orders would be processed in time
sequence, i.e., such orders would be
quoted, traded, or routed consistent
with Rules 7.36 and 7.37. As proposed,
the rule would provide that
‘‘unexecuted orders that (1) were not
eligible to trade in the prior trading
session, (2) for a Trading Halt Auction,
were received during a halt or pause, (3)
for the Early Open Auction, were
received before the Early Open Auction
Processing Period, or (4) that were
received during the Auction Processing
Period’’ would be assigned a new
working time at the end of the Auction
Processing Period in time sequence
relative to one another based on original
time entry [sic] and would be processed
in time sequence.7 This proposed rule
text represents current functionality.
The Exchange further proposes to
amend how the Exchange would assign
working times to previously-live orders
following an IPO Auction. The
Exchange proposes to amend Rule
7.35(h)(3)(B) to specify that for an IPO
Auction, previously-live orders (as
defined in proposed Rule 7.35(h)(3)(A)
above) that did not trade in the auction
would retain the working time assigned
at original entry time. The Exchange
proposes this difference for IPO
Auctions because, as proposed above,
the Exchange would be rejecting orders
that are not eligible to trade in an IPO
Auction until after the Auction
Processing Period concludes. Therefore,
there would not be any other orders that
7 For example, for the Early Open Auction,
unexecuted orders that either did not participate in
an auction or, if there were no auction, were not
represented in the first quote would be added to the
NYSE Arca Book in time sequence and processed
consistent with Rule 7.36 and 7.37 and the terms
of the order.
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18:27 May 05, 2017
Jkt 241001
need to be re-ranked with such
previously-live orders and therefore the
previously-live orders may retain their
previously-assigned working times as
they are processed in time sequence.
*
*
*
*
*
Because of the technology changes
associated with this proposed rule
change, the Exchange will announce by
Trader Update the implementation date,
which the Exchange anticipates will be
in the third quarter of 2017.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),8 in general, and furthers the
objectives of Section 6(b)(5),9 in
particular, because it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to remove
impediments to, and perfect the
mechanism of, a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
Specifically, the Exchange believes
that the proposed rule change would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system by
rejecting orders that are not yet eligible
to trade. Similar to how the Exchange
rejects Limit Orders designated IOC,
Cross Orders, and Market Pegged Orders
that are entered during the Early
Trading Session and designated for the
Core Trading Session, as provided for in
Rule 7.34(c)(1), the Exchange believes
that it provides greater certainty for ETP
Holders for the Exchange to reject an
order that is not yet eligible to trade.
Because Limit Orders designated IOC,
Limit Non-Displayed Orders, MPL
Orders, Tracking Orders, Market Pegged
Orders, Discretionary Pegged Orders,
Cross Orders, Retail Orders, and Retail
Price Improvement Orders are not
eligible to participate in an auction and
because there would be no trading in a
security before an IPO Auction, the
Exchange believes it would be
consistent with the protection of
investors and the public interest to
reject such orders until after the Auction
Processing Period concludes, at which
time they would be eligible to trade.
The Exchange further believes that it
would remove impediments to and
perfect the mechanism of a free and
open market and a national market
8 15
9 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00073
Fmt 4703
Sfmt 4703
system to align its rules governing how
the Exchange transitions from an IPO
Auction to continuous trading with its
proposal to reject orders that are not yet
eligible to trade. Specifically, because
immediately following an IPO Auction,
the only available orders would be
previously-entered orders that were
eligible to participate in the IPO
Auction, the proposed rule changes are
designed to reflect how this order
processing would be reflected in the
transition to continuous trading
following an IPO Auction. For example,
there would be no need to adjust the
working time of such orders. The
Exchange believes that specifying such
order processing in its rules would
promote transparency and therefore
remove impediments to and perfect the
mechanism of a free and open market
and a national market system.
The Exchange believes that the
proposed amendments to Rule
7.35(h)(3)(A) and (B) would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because
the proposed changes would provide
greater specificity regarding how orders
would be processed following an
auction, including defining what
constitutes a ‘‘previously-live order’’ for
different auctions, how previously-live
orders would be quoted following an
auction, and how unexecuted orders
would be processed following all
auctions, including an Early Open
Auction, thereby promoting
transparency and clarity in exchange
rules.
The Exchange further believes that the
proposed amendments to Rules
7.18(c)(4) and 7.34(c)(1)(A) would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system because
the Exchange proposes to process
Discretionary Pegged Orders, like [sic]
Market Pegged Orders are non-displayed
Pegged Orders, in the same manner as
Market Pegged Orders, which are also
non-displayed Pegged Orders.
Accordingly, the Exchange proposes
that Discretionary Pegged Orders would
not participate in auctions, would be
rejected if entered or cancelled if
cancel/replaced during a halt or pause
for an Exchange-listed security, and
would be rejected if entered before or
during the Early Trading Session.
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 that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
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Federal Register / Vol. 82, No. 87 / Monday, May 8, 2017 / Notices
Exchange believes that the proposed
rule change would not impose any
burden on competition because it is not
designed to address any competitive
issues. Rather, the proposed rule change
is designed to provide specificity in
Exchange rules regarding how the
Exchange would process orders before
and after all auctions, including the
Early Open Auction and an IPO
Auction. In addition the proposed
changes regarding Discretionary Pegged
Orders would not impose any burden on
competition because Discretionary
Pegged Orders, like Market Pegged
Orders are non-displayed orders, and
the proposed changes are based on how
Market Pegged Orders operate.
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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.
All submissions should refer to File
Number SR–NYSEArca–2017–47. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2017–47, and should be
submitted on or before May 30, 2017.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 10 and Rule 19b–
4(f)(6) thereunder.11
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
10 15
U.S.C. 78s(b)(3)(A).
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.
11 17
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18:27 May 05, 2017
Jkt 241001
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–2017–47 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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–09194 Filed 5–5–17; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80573; File No. SR–GEMX–
2017–04]
Self-Regulatory Organizations; Nasdaq
GEMX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Regarding Quote
Mitigation
May 2, 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 April 26,
2017, Nasdaq GEMX, LLC (‘‘GEMX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
GEMX Rule 804(h) regarding quote
mitigation.
The text of the proposed rule change
is available on the Exchange’s Web site
at www.ise.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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
GEMX Rule 804, entitled ‘‘Market Maker
Quotations,’’ to specifically amend Rule
804(h) which addresses the Exchange’s
quote traffic mitigation plan to adopt a
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U.S.C. 78s(b)(1).
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[Federal Register Volume 82, Number 87 (Monday, May 8, 2017)]
[Notices]
[Pages 21434-21437]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-09194]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80576; File No. SR-NYSEArca-2017-47]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Equities Rule 7.35 To Specify Order Handling for an IPO Auction
May 2, 2017.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on April 21, 2017, NYSE Arca, Inc. (the ``Exchange''
[[Page 21435]]
or ``NYSE Arca'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend NYSE Arca Equities Rule 7.35
(Auctions) to specify order handling for an IPO Auction. The proposed
rule change is available on the Exchange's website at www.nyse.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 self-regulatory organization
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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend NYSE Arca Equities Rule 7.35
(Auctions) (``Rule 7.35'') to specify order handling for an IPO
Auction.
Under Rule 7.35(f), IPO Auctions follow the processing rules of a
Core Open Auction, provided that: (1) The Exchange will specify the
time an IPO Auction will be conducted; (2) there will be no Auction
Imbalance Freeze, Auction Collars, or restrictions on the entry or
cancellation of orders for an IPO Auction; and (3) an IPO Auction will
not be conducted if there are only Market Orders on both sides of the
market.
The Exchange proposes to amend Rule 7.35(f)(2) to provide that
order types that are not eligible to participate in the IPO Auction
would be rejected until such time that the Auction Processing Period
for the IPO Auction has concluded. Specifically, Limit Orders
designated IOC, Limit Non-Displayed Orders, MPL Orders, Tracking
Orders, Market Pegged Orders, Discretionary Pegged Orders, Cross
Orders, Retail Orders, and Retail Price Improvement Orders are not
eligible to participate in auctions, including IPO Auctions.\4\ Because
none of these order types are eligible to participate in an auction and
because there would be no trading in a security before an IPO Auction,
the Exchange believes it would be appropriate to reject such orders
until after the Auction Processing Period concludes, at which time they
would be eligible to trade. Accordingly, the Exchange proposes to amend
Rule 7.35(f)(2) to specify that the Exchange would reject these orders
until after the Auction Processing Period for the IPO Auction has
concluded.
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\4\ See Rules 7.31(b)(2) (A Limit Order designated IOC is not
eligible to participate in any auctions); 7.31(d)(2) (Limit Non-
Displayed Order does not participate in an auction); 7.31(d)(3) (MPL
Order does not participate in an auction); 7.31(d)(4) (Tracking
Orders are not triggered to trade during an auction because the
Exchange does not route during an auction); 7.31(h)(1) (Market
Pegged Orders will not participate in any auctions); 7.31(g) (A
Cross Order is not eligible to participate in any auctions); and
7.44(m) (the Retail Liquidity Program operates only during the Core
Trading Session and Retail Orders will be accepted during Core
Trading Hours only). Because Discretionary Pegged Orders are non-
displayed Pegged Orders, they are processed similarly to Market
Pegged Orders in that they would not participate in auctions, would
be rejected if entered or cancelled if cancel/replaced during a halt
or pause in a security listed on the Exchange, and would be rejected
if entered before or during the Early Trading Session. The Exchange
proposes to amend Rules 7.18(c)(4), 7.31(h)(3)(A), and 7.34(c)(1)(A)
to specify this behavior.
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In conjunction with this change, the Exchange proposes to delete
the current text in Rule 7.32(f)(2) stating that there will be no
restriction on the entry of orders for an IPO Auction.
As proposed, amended Rule 7.35(f)(2) would provide (deleted text
bracketed, new text underlined):
(2) There will be no Auction Imbalance Freeze, Auction Collars,
or restrictions on the [entry or] cancellation of orders for an IPO
Auction. Limit Orders designated IOC, Limit Non-Displayed Orders,
MPL Orders, Tracking Orders, Market Pegged Orders, Discretionary
Pegged Orders, Cross Orders, Retail Orders, and Retail Price
Improvement Orders will be rejected until after the Auction
Processing Period for the IPO Auction has concluded.
The Exchange also proposes to amend Rule 7.35(h)(3), which
describes the transition to continuous trading following an auction, to
specify how the Exchange would transition to continuous trading
following an IPO Auction. Currently, Rule 7.35(h)(3)(A) provides that
when transitioning to continuous trading from a prior trading session
or following an auction, a quote will be published based on unexecuted
orders that were eligible to trade in the trading sessions both before
and after the transition or auction, i.e., previously-live orders. To
make the text more specific, the Exchange proposes to define the term
``previously-live order'' separately for an IPO Auction to mean
unexecuted orders that were entered before the IPO Auction Processing
Period began. In the case of an IPO Auction, there is no prior trading
session. In addition, as described in detail above, the Exchange would
reject orders that are not eligible to participate in the IPO Auction
until after the Auction Processing Period for the IPO Auction has
concluded. Therefore, the only unexecuted orders following an IPO
Auction would be those orders that would have been eligible to
participate in the IPO Auction. The Exchange further proposes to
specify that the current definition of previously-live orders would be
applicable for the Core Open Auction, Trading Halt Auction, and Closing
Auction.
In addition, the Exchange believes that in the context of
transitioning to continuous trading, an IPO Auction is more akin to a
Trading Halt Auction than to the Core Open Auction because there is no
trading in such security immediately preceding the auction, but there
may be a previously-published quote.\5\ Accordingly, the Exchange
proposes to amend Rule 7.35(h)(3)(A)(ii) to provide that the procedures
for publishing a quote after an IPO Auction would be the same as are
currently applicable for publishing a quote following a Trading Halt
Auction.\6\ Because all marketable orders at the indicative match price
would trade in an IPO Auction and the Exchange would reject orders that
are not eligible to participate in the IPO Auction, following an IPO
Auction there would not be any previously-live orders that would be
marketable against other orders in the NYSE Arca Book. For this reason,
the Exchange proposes to specify that the second step specified in
[[Page 21436]]
that rule would be for the Trading Halt Auction only. The Exchange also
proposes to amend this rule to correct a typographical error to remove
the hyphen between ``trade'' and ``through.''
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\5\ In limited circumstances, the first day of trading of a new
listing on an exchange may not be an initial public offering, e.g.,
first day of listing of a new rights security, and therefore another
exchange that trades such security on an unlisted trading privileges
basis may begin quoting and trading in such security before the
Exchange's IPO Auction. In such case, there may be a quote in that
symbol before the IPO Auction, just as there would be a previously-
published quote in a security that is subject to a Trading Halt
Auction.
\6\ Rule 7.35(h)(3)(A)(i) currently specifies order processing
following an Early Open Auction, Core Open Auction, and Closing
Auction. Because there is no trading in a security before an Early
Open Auction and no previously-published quote against which to
compare the new quote, the Exchange proposes to amend this rule text
to remove reference to the Early Open Auction.
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Finally, the Exchange proposes to amend Rule 7.35(h)(3)(B). The
rule currently provides that unexecuted orders that were not eligible
to trade in the prior trading session (or were received during a halt
or pause) or that were received during the Auction Processing Period,
will be assigned a new working time at the end of the Auction
Processing Period in time sequence relative to one another based on
original entry time. The Exchange proposes to clarify this rule text by
adding sub-numbering, specifying that existing rule text relates to a
Trading Halt Auction, adding how orders entered before an Early Open
Auction would be assigned a working time, and specifying that all such
unexecuted orders would be processed in time sequence, i.e., such
orders would be quoted, traded, or routed consistent with Rules 7.36
and 7.37. As proposed, the rule would provide that ``unexecuted orders
that (1) were not eligible to trade in the prior trading session, (2)
for a Trading Halt Auction, were received during a halt or pause, (3)
for the Early Open Auction, were received before the Early Open Auction
Processing Period, or (4) that were received during the Auction
Processing Period'' would be assigned a new working time at the end of
the Auction Processing Period in time sequence relative to one another
based on original time entry [sic] and would be processed in time
sequence.\7\ This proposed rule text represents current functionality.
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\7\ For example, for the Early Open Auction, unexecuted orders
that either did not participate in an auction or, if there were no
auction, were not represented in the first quote would be added to
the NYSE Arca Book in time sequence and processed consistent with
Rule 7.36 and 7.37 and the terms of the order.
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The Exchange further proposes to amend how the Exchange would
assign working times to previously-live orders following an IPO
Auction. The Exchange proposes to amend Rule 7.35(h)(3)(B) to specify
that for an IPO Auction, previously-live orders (as defined in proposed
Rule 7.35(h)(3)(A) above) that did not trade in the auction would
retain the working time assigned at original entry time. The Exchange
proposes this difference for IPO Auctions because, as proposed above,
the Exchange would be rejecting orders that are not eligible to trade
in an IPO Auction until after the Auction Processing Period concludes.
Therefore, there would not be any other orders that need to be re-
ranked with such previously-live orders and therefore the previously-
live orders may retain their previously-assigned working times as they
are processed in time sequence.
* * * * *
Because of the technology changes associated with this proposed
rule change, the Exchange will announce by Trader Update the
implementation date, which the Exchange anticipates will be in the
third quarter of 2017.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\8\ in general, and
furthers the objectives of Section 6(b)(5),\9\ in particular, because
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to, and perfect the
mechanism of, a free and open market and a national market system and,
in general, to protect investors and the public interest.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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Specifically, the Exchange believes that the proposed rule change
would remove impediments to and perfect the mechanism of a free and
open market and a national market system by rejecting orders that are
not yet eligible to trade. Similar to how the Exchange rejects Limit
Orders designated IOC, Cross Orders, and Market Pegged Orders that are
entered during the Early Trading Session and designated for the Core
Trading Session, as provided for in Rule 7.34(c)(1), the Exchange
believes that it provides greater certainty for ETP Holders for the
Exchange to reject an order that is not yet eligible to trade. Because
Limit Orders designated IOC, Limit Non-Displayed Orders, MPL Orders,
Tracking Orders, Market Pegged Orders, Discretionary Pegged Orders,
Cross Orders, Retail Orders, and Retail Price Improvement Orders are
not eligible to participate in an auction and because there would be no
trading in a security before an IPO Auction, the Exchange believes it
would be consistent with the protection of investors and the public
interest to reject such orders until after the Auction Processing
Period concludes, at which time they would be eligible to trade.
The Exchange further believes that it would remove impediments to
and perfect the mechanism of a free and open market and a national
market system to align its rules governing how the Exchange transitions
from an IPO Auction to continuous trading with its proposal to reject
orders that are not yet eligible to trade. Specifically, because
immediately following an IPO Auction, the only available orders would
be previously-entered orders that were eligible to participate in the
IPO Auction, the proposed rule changes are designed to reflect how this
order processing would be reflected in the transition to continuous
trading following an IPO Auction. For example, there would be no need
to adjust the working time of such orders. The Exchange believes that
specifying such order processing in its rules would promote
transparency and therefore remove impediments to and perfect the
mechanism of a free and open market and a national market system.
The Exchange believes that the proposed amendments to Rule
7.35(h)(3)(A) and (B) would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because the proposed changes would provide greater specificity
regarding how orders would be processed following an auction, including
defining what constitutes a ``previously-live order'' for different
auctions, how previously-live orders would be quoted following an
auction, and how unexecuted orders would be processed following all
auctions, including an Early Open Auction, thereby promoting
transparency and clarity in exchange rules.
The Exchange further believes that the proposed amendments to Rules
7.18(c)(4) and 7.34(c)(1)(A) would remove impediments to and perfect
the mechanism of a free and open market and a national market system
because the Exchange proposes to process Discretionary Pegged Orders,
like [sic] Market Pegged Orders are non-displayed Pegged Orders, in the
same manner as Market Pegged Orders, which are also non-displayed
Pegged Orders. Accordingly, the Exchange proposes that Discretionary
Pegged Orders would not participate in auctions, would be rejected if
entered or cancelled if cancel/replaced during a halt or pause for an
Exchange-listed security, and would be rejected if entered before or
during the Early Trading Session.
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 that is not necessary or appropriate
in furtherance of the purposes of the Act. The
[[Page 21437]]
Exchange believes that the proposed rule change would not impose any
burden on competition because it is not designed to address any
competitive issues. Rather, the proposed rule change is designed to
provide specificity in Exchange rules regarding how the Exchange would
process orders before and after all auctions, including the Early Open
Auction and an IPO Auction. In addition the proposed changes regarding
Discretionary Pegged Orders would not impose any burden on competition
because Discretionary Pegged Orders, like Market Pegged Orders are non-
displayed orders, and the proposed changes are based on how Market
Pegged Orders operate.
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.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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 Number SR-NYSEArca-2017-47 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-2017-47. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2017-47, and should
be submitted on or before May 30, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09194 Filed 5-5-17; 8:45 am]
BILLING CODE 8011-01-P
