Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Introduce Bats Market Close, a Closing Match Process for Non-BZX Listed Securities Under New Exchange Rule 11.28, 40202-40212 [2017-17909]
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Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices
No. 1, on efficiency, competition, and
capital formation.48 The Commission
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 Commission
believes the proposed rule change
would apply equally to all municipal
fund securities dealers and may reduce
inefficiencies and confusion for dealers
by harmonizing MSRB rule
requirements with comparable SEC
requirements on advertising. The
Commission believes that investors
should benefit from better information
in the form of more consistent and
accurate advertising through updated
requirements for certain municipal fund
security advertisements, as investors
generally value ease of comparison of
different financial products.
As noted above, the Commission
received two comment letters on the
filing. The Commission believes that the
MSRB, through its responses and
through Amendment No. 1, has
addressed commenters’ concerns.
For the reasons noted above, the
Commission believes that the proposed
rule change, as modified by Amendment
No. 1, is consistent with the Act.
V. Solicitation of Comments on
Amendment No. 1
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether Amendment No. 1 to
the proposed rule change is consistent
with the Act. Comments may be
submitted by any of the following
methods:
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Electronic Comments
• Use of 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–
MSRB–2017–04 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549.
All submissions should refer to File
Number SR–MSRB–2017–04. 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
48 15
U.S.C. 78c(f).
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15:29 Aug 23, 2017
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the MSRB. 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–MSRB–
2017–04 and should be submitted on or
before September 14, 2017.
VI. Accelerated Approval of Proposed
Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause for
approving the proposed rule change, as
amended by Amendment No. 1, prior to
the 30th day after the date of
publication of notice of Amendment No.
1 in the Federal Register. As noted by
the MSRB, Amendment No. 1 does not
raise any significant issues with respect
to the proposed rule change and only
provides a minor technical change that
clarifies that the proposed rule change
to Rule G–21(e)(i)(A)(2)(c) would apply
to an advertisement of a municipal fund
security ‘‘that has an investment option
that invests solely in a money market
fund.’’
For the foregoing reasons, the
Commission finds good cause for
approving the proposed rule change, as
modified by Amendment No. 1, on an
accelerated basis, pursuant to Section
19(b)(2) of the Act.
VIII. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,49 that the
proposed rule change, as modified by
Amendment No. 1 (SR–MSRB–2017–04)
be, and hereby is, approved on an
accelerated basis.
49 15
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For the Commission, pursuant to delegated
authority.50
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017–17905 Filed 8–23–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81437; File No. SR–
BatsBZX–2017–34]
Self-Regulatory Organizations; Bats
BZX Exchange, Inc.; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change To Introduce Bats Market
Close, a Closing Match Process for
Non-BZX Listed Securities Under New
Exchange Rule 11.28
August 18, 2017.
I. Introduction
On May 5, 2017, Bats BZX Exchange,
Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to adopt Bats
Market Close, a closing match process
for non-BZX listed securities. The
Commission published notice of filing
of the proposed rule change in the
Federal Register on May 22, 2017.3 On
July 3, 2017, the Commission designated
a longer period within which to approve
the proposed rule change, disapprove
the proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved.4 As of August 16, 2017,
the Commission has received forty-six
comment letters on the Exchange’s
proposed rule change, including a
response from the Exchange.5 This order
50 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 80683
(May 16, 2017), 82 FR 23320 (‘‘Notice’’).
4 See Securities Exchange Act Release No. 81072,
82 FR 31792 (July 10, 2017).
5 See Letters to Brent J. Fields, Secretary,
Commission, from: (1) Donald K. Ross, Jr.,
Executive Chairman, PDQ Enterprise, LLC, dated
June 6, 2017 (‘‘PDQ Letter’’); (2) Edward S. Knight,
Executive Vice President and General Counsel,
Nasdaq, Inc., dated June 12, 2017 (‘‘NASDAQ
Letter’’); (3) Ray Ross, Chief Technology Officer,
Clearpool Group, dated June 12, 2017 (‘‘Clearpool
Letter’’); (4) Venu Palaparthi, SVP, Compliance,
Regulatory and Government Affairs, Virtu
Financial, dated June 12, 2017 (‘‘Virtu Letter’’); (5)
Theodore R. Lazo, Managing Director and Associate
General Counsel, SIFMA, dated June 13, 2017
(‘‘SIFMA Letter’’); (6) Elizabeth K. King, General
Counsel and Corporate Secretary, New York Stock
Exchange, dated June 13, 2017 (‘‘NYSE Letter 1’’);
1 15
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Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices
(7) John M. Bowers, Bowers Securities, dated June
14, 2017 (‘‘Bowers Letter’’); (8) Jonathan D. Corpina,
Senior Managing Partner, Meridian Equity Partners,
dated June 16, 2017 (‘‘Meridian Letter’’); (9) Fady
Tanios, Chief Executive Officer, and Brian Fraioli,
Chief Compliance Officer, Americas Executions,
LLC, dated June 16, 2017 (‘‘Americas Executions
Letter’’); (10) Ari M. Rubenstein, Co-Founder and
Chief Executive Officer, GTS Securities LLC, dated
June 22, 2017 (‘‘GTS Securities Letter’’); (11) John
Ramsay, Chief Market Policy Officer, Investors
Exchange LLC, dated June 23, 2017 (‘‘IEX Letter’’);
(12) Jay S. Sidhu, Chairman, Chief Executive
Officer, Customers Bancorp, Inc., dated June 27,
2017 (‘‘Customers Bancorp Letter’’); (13) Joanne
Freiberger, Vice President, Treasurer, Masonite
International Corporation, dated June 27, 2017
(‘‘Masonite International Letter’’); (14) David B.
Griffith, Investor Relations Manager, Orion Group
Holdings, Inc., dated June 27, 2017 (‘‘Orion Group
Letter’’); (15) Kieran O’Sullivan, Chairman,
President and CEO, CTS Corporation, dated June
28, 2017 (‘‘CTS Corporation Letter’’); (16) Sherri
Brillon, Executive Vice-President and Chief
Financial Officer, Encana Corporation, dated June
29, 2017 (‘‘Encana Letter’’); (17) Steven C. Lilly,
Chief Financial Officer, Triangle Capital
Corporation, dated June 29, 2017 (‘‘Triangle Capital
Letter’’); (18) Robert F. McCadden, Executive Vice
President and Chief Financial Officer, Pennsylvania
Real Estate Investment Trust, dated June 29, 2017
(‘‘Pennsylvania REIT Letter’’); (19) Andrew Stevens,
General Counsel, IMC Financial Markets, dated
June 30, 2017 (‘‘IMC Letter’’); (20) Daniel S. Tucker,
Senior Vice President and Treasurer, Southern
Company, dated July 5, 2017 (‘‘Southern Company
Letter’’); (21) Cole Stevens, Investor Relations
Associate, Nobilis Health, dated July 6, 2017
(‘‘Nobilis Health Letter’’); (22) Mehmet Kinak, Head
of Global Equity Market Structure & Electronic
Trading, et al., T. Rowe Price Associates, Inc., dated
July 7, 2017 (‘‘T. Rowe Price Letter’’); (23) David L.
Dragics, Senior Vice President, Investor Relations,
CACI International Inc., dated July 7, 2017 (‘‘CACI
Letter’’); (24) Mark A. Stegeman, Senior Vice
President & CFO, Turning Point Brands, Inc., dated
July 12, 2017 (‘‘Turning Point Letter’’); (25) Jon R.
Moeller, Vice Chair and Chief Financial Officer, and
Deborah J. Majoras, Chief Legal Officer and
Secretary, The Proctor & Gamble Company, dated
July 12, 2017 (‘‘P&G Letter’’); (26) Christopher A.
Iacovella, Chief Executive Officer, Equity Dealers of
America, dated July 12, 2017 (‘‘EDA Letter’’); (27)
Rob Bernshteyn, Chief Executive Officer, Chairman
Board of Directors, Coupa Software, Inc., dated July
12, 2017 (‘‘Coupa Software Letter’’); (28) Sally J.
Curley, Senior Vice President, Investor Relations,
Cardinal Health, Inc., dated July 14, 2017
(‘‘Cardinal Health Letter’’); (29) Mickey Foster, Vice
President, Investor Relations, FedEx Corporation,
dated July 14, 2017 (‘‘FedEx Letter’’); (30)
Alexander J. Matturri, CEO, S&P Dow Jones Indices,
dated July 18, 2017 (‘‘SPDJI Letter’’); (31) John L.
Killea, Chief Legal Officer, Stewart Information
Services, dated July 19, 2017 (‘‘Stewart Letter’’);
(32) M. Farooq Kathwari, Chairman, President &
CEO, Ethan Allen Interiors, Inc., dated July 24, 2017
(‘‘Ethan Allen Letter’’); (33) Jeff Green, Founder,
Chief Executive Officer and Chairman of the Board
of Directors, The Trade Desk Inc., dated July 26,
2017 (‘‘Trade Desk Letter’’); (34) James J. Angel,
Associate Professor, McDonough School of
Business, Georgetown University, dated July 30,
2017 (‘‘Angel Letter’’); (35) Jon Stonehouse, CEO,
and Tom Staab, CFO, BioCryst Pharmaceuticals,
Inc., dated July 31, 2017 (‘‘BioCryst Letter’’); (36)
Peter Campbell, Chief Financial Officer, Mimecast,
dated July 31, 2017 (‘‘Mimecast Letter’’); (37) Joanne
Moffic-Silver, Executive Vice President, General
Counsel, and Corporate Secretary, Bats Global
Markets, Inc., dated August 2, 2017 (‘‘BZX Letter’’);
(38) David M. Weisberger, Head of Equities,
ViableMkts, dated August 3, 2017 (‘‘ViableMkts
Letter’’); (39) Charles Beck, Chief Financial Officer,
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institutes proceedings under Section
19(b)(2)(B) of the Exchange Act 6 to
determine whether to approve or
disapprove the proposed rule change.
II. Summary of the Proposed Rule
Change
As described in more detail in the
Notice, the Exchange proposes to
introduce Bats Market Close, a closing
match process for non-BZX listed
securities. For non-BZX listed securities
only, the Exchange’s System 7 would
seek to match buy and sell Market-OnClose (‘‘MOC’’) 8 orders designated for
participation in Bats Market Close at the
official closing price for such security
published by the primary listing market.
Members 9 would be able to enter,
cancel or replace MOC orders
designated for participation in Bats
Market Close beginning at 6:00 a.m.
Eastern Time up until 3:35 p.m. Eastern
Time (‘‘MOC Cut-Off Time’’).10
Members would not be able to enter,
cancel or replace MOC orders
designated for participation in the
proposed Bats Market Close after the
MOC Cut-Off Time.
Digimarc Corporation, dated August 3, 2017
(‘‘Digimarc Letter’’); (40) Elizabeth K. King, General
Counsel and Corporate Secretary, New York Stock
Exchange, dated August 9, 2017 (‘‘NYSE Letter 2’’);
(41) Representative Sean P. Duffy and
Representative Gregory W. Meeks, dated August 9,
2017 (‘‘Duffy/Meeks Letter’’); (42) Michael J.
Chewens, Senior Executive Vice President & Chief
Financial Officer, NBT Bancorp Inc., dated August
11, 2017 (‘‘NBT Bancorp Letter’’); (43) Barry
Zwarenstein, Chief Financial Officer, Five9, Inc.,
dated August 11, 2017 (‘‘Five9 Letter’’); (44)
William A. Backus, Chief Financial Officer &
Treasurer, Balchem Corporation, dated August 15,
2017 (‘‘Balchem Letter’’); (45) Raiford Garrabrant,
Director, Investor Relations, Cree, Inc., dated
August 15, 2017 (‘‘Cree Letter’’); and (46) Steven
Paladino, Executive Vice President & Chief
Financial Officer, Henry Schein, Inc., dated August
16, 2017 (‘‘Henry Schein Letter’’). All comments on
the proposed rule change are available at: https://
www.sec.gov/comments/sr-batsbzx-2017-34/
batsbzx201734.htm.
6 15 U.S.C. 78s(b)(2)(B).
7 The term ‘‘System’’ is defined as ‘‘the electronic
communications and trading facility designated by
the Board through which securities orders of Users
are consolidated for ranking, execution and, when
applicable, routing away.’’ See Exchange Rule
1.5(aa).
8 The term ‘‘Market-On-Close’’ or ‘‘MOC’’ means
a BZX market order that is designated for execution
only in the Closing Auction. See Exchange Rule
11.23(a)(15). The Exchange proposed to amend the
description of Market-On-Close orders to include
orders designated to execute in the proposed Bats
Market Close.
9 The term ‘‘Member’’ is defined as ‘‘any
registered broker or dealer that has been admitted
to membership in the Exchange.’’ See Exchange
Rule 1.5(n).
10 Currently, the NYSE designates the cut-off time
for the entry of Market At-the-Close Orders as 3:45
p.m. Eastern Time. See NYSE Rule 123C. Nasdaq,
in turn, designates the ‘‘end of the order entry
period’’ as 3:50 p.m. Eastern Time. See Nasdaq Rule
4754.
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40203
At the MOC Cut-Off Time, the System
would match for execution all buy and
sell MOC orders entered into the System
based on time priority.11 Any remaining
balance of unmatched shares would be
cancelled back to the Member(s). The
System would disseminate, via the Bats
Auction Feed,12 the total size of all buy
and sell orders matched per security via
Bats Market Close. All matched buy and
sell MOC orders would remain on the
System until the publication of the
official closing price by the primary
listing market. Upon publication of the
official closing price by the primary
listing market, the System would
execute all previously matched buy and
sell MOC orders at that official closing
price.13
The Exchange would utilize the
official closing price published by the
exchange designated by the primary
listing market in the case where the
primary listing market suffers an
impairment and is unable to perform its
closing auction process.14 In addition,
proposed Interpretation and Policy .03,
specifies that up until the closing of the
applicable securities information
processor at 8:00 p.m. Eastern Time, the
Exchange intends to monitor the initial
publication of the official closing price,
and any subsequent changes to the
published official closing price, and
adjust the price of such trades
accordingly. If there is no initial official
closing price published by 8:00 p.m.
Eastern Time for any security, the
Exchange would cancel all matched
MOC orders in such security.
The Exchange states that it is
proposing to adopt Bats Market Close in
response to requests from market
participants, particularly buy-side firms,
11 As set forth in proposed Interpretation and
Policy .02, the Exchange would cancel all MOC
orders designated to participate in Bats Market
Close in the event the Exchange becomes impaired
prior to the MOC Cut-Off Time and is unable to
recover within 5 minutes from the MOC Cut-Off
Time. The Exchange states that this would provide
Members time to route their orders to the primary
listing market’s closing auction. Should the
Exchange become impaired after the MOC Cut-Off
Time, proposed Interpretation and Policy .02 states
that it would retain all matched MOC orders and
execute those orders at the official closing price
once it is operational.
12 The Bats Auction Feed disseminates
information regarding the current status of price
and size information related to auctions conducted
by the Exchange and is provided at no charge. See
Exchange Rule 11.22(i). The Exchange also
proposed to amend Exchange Rule 11.22(i) to reflect
that the Bats Auction Feed would also include the
total size of all buy and sell orders matched via Bats
Market Close.
13 The Exchange would report the execution of all
previously matched buy and sell orders to
applicable securities information processor and will
designate such trades as ‘‘.P’’, Prior Reference Price.
See Notice, supra note 3, at 23321.
14 See proposed Interpretation and Policy .01.
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Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices
for an alternative to the primary listing
markets’ closing auctions that still
provides an execution at a security’s
official closing price.15 Moreover, the
Exchange contends that the proposal
would not compromise the price
discovery function performed by the
primary listing markets’ closing
auctions because Bats Market Close
would only accept MOC orders, and not
limit orders, and the Exchange would
only execute those matched MOC orders
that naturally pair off and effectively
cancel each other out.16
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III. Summary of the Comments
As of August 16, 2017, the
Commission has received forty-six
comment letters on the proposal,
including a response from the
Exchange.17 Six commenters supported
the proposal,18 and thirty-six
commenters opposed the proposal.19
Six commenters supported the
proposal and stated that it would
15 See Notice, supra note 3, at 23321. The
Exchange represented that should the Commission
approve the proposed rule change, it would file a
separate proposal to offer executions of MOC orders
at the official closing price, to the extent matched
on the Exchange, at a rate less than the fee charged
by the applicable primary listing market. The
Exchange also represented that it intends for such
fee to remain lower than the fee charged by the
applicable primary listing market. See id.
16 See id.
17 See supra note 5.
18 See PDQ Letter, supra note 5; Clearpool Letter,
supra note 5; Virtu Letter, supra note 5; SIFMA
Letter, supra note 5; IEX Letter, supra note 5; and
ViableMkts Letter, supra note 5.
19 See NASDAQ Letter, supra note 5; NYSE Letter
1, supra note 5; Bowers Letter, supra note 5;
Meridian Letter, supra note 5; Americas Executions
Letter, supra note 5; GTS Securities Letter, supra
note 5; Customers Bancorp Letter, supra note 5;
Masonite International Letter, supra note 5; Orion
Group Letter, supra note 5; CTS Corporation Letter,
supra note 5; Encana Letter, supra note 5; Triangle
Capital Letter, supra note 5; Pennsylvania REIT
Letter, supra note 5; IMC Letter, supra note 5;
Southern Company Letter, supra note 5; Nobilis
Health Letter, supra note 5; T. Rowe Price Letter,
supra note 5; CACI Letter, supra note 5; Turning
Point Letter, supra note 5; P&G Letter, supra note
5; EDA Letter, supra note 5; Coupa Software Letter,
supra note 5; Cardinal Health Letter, supra note 5;
FedEx Letter, supra note 5; SPDJI Letter, supra note
5; Stewart Letter, supra note 5; Ethan Allen Letter,
supra note 5; Trade Desk Letter, supra note 5;
BioCryst Letter, supra note 5; Mimecast Letter,
supra note 5; Digimarc Letter, supra note 5; NYSE
Letter 2, supra note 5; NBT Bancorp Letter, supra
note 5; Five9 Letter, supra note 5; Balchem Letter,
supra note 5; Cree Letter, supra note 5; and Henry
Schein Letter, supra note 5. In addition, one
commenter urged the Commission to conduct a
close analysis of the proposal and stated that if the
Bats proposal would seriously degrade the quality
of the closing price, then it should be rejected. See
Angel Letter, supra note 5. Other commenters
expressed concern that the proposal could disrupt
the closing auction process on the primary listing
markets and asked the Commission to carefully
consider the impacts of the proposal and whether
such impacts would be necessary and helpful to
public companies. See Duffy/Meeks Letter, supra
note 5, at 1–2.
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increase competition among exchanges
for executions of orders at the close.20
These commenters asserted that
increased competition could result in
reduced fees for market participants.21
Three commenters characterized the
primary listing markets as maintaining a
‘‘monopoly’’ on orders seeking a closing
price with no market competition,
which they argued has, and would
continue to, result in a continual
increase in fees for such orders if the
proposal were not approved.22 In
addition, IEX argued that the proposal
does not unduly burden competition as
exchanges often attempt to compete by
adopting functionality or fee schedules
developed by competitors.23 ViableMkts
also asserted that the proposal is not
fully competitive with closing auctions,
as it does not accept priced orders or
disseminate imbalance information.24
Rather, the proposal competes with
other un-priced orders in closing
auctions, which in its view, is not
destructive to the mission of the closing
auction.25
In contrast, other commenters argued
that the proposal would impede fair
competition, including by ‘‘free-riding’’
on the investments the primary listing
markets have made in their closing
auctions.26 Specifically, NYSE asserted
that the proposal is an unnecessary and
inappropriate burden on competition as
it would allow BZX to use the closing
prices established through the auction
of a primary listing market, without
bearing any of the costs or risks
associated with conducting a closing
20 See PDQ Letter, supra note 5; Clearpool Letter,
supra note 5, at 2; Virtu Letter, supra note 5, at 2;
SIFMA Letter, supra note 5, at 2; IEX Letter, supra
note 5, at 1; and ViableMkts Letter, supra note 5,
at 1–2.
21 See PDQ Letter, supra note 5; Clearpool Letter,
supra note 5, at 2; Virtu Letter, supra note 5, at 2;
SIFMA Letter, supra note 5, at 2; IEX Letter, supra
note 5, at 1; and ViableMkts Letter, supra note 5,
at 1.
22 See IEX Letter, supra note 5, at 3; Clearpool
Letter, supra note 5, at 2; and ViableMkts Letter,
supra note 5, at 1–2. However, one commenter also
stated that it believes the fees charged by NYSE and
NASDAQ for participating in their closing auctions
are not excessive and there is no need for additional
fee competition for executing orders at the official
closing price. See GTS Letter, supra note 5, at 5.
23 See IEX Letter, supra note 5, at 3.
24 See ViableMkts Letter, supra note 5, at 5.
25 See id. ViableMkts also argued that the effect
of this competition will most likely be increased
volumes at the closing price because of lower
marginal costs and the potential to attract new types
of investors to transact at the closing price. See id.
26 See NYSE Letter 1, supra note 5, at 9–10;
NASDAQ Letter, supra note 5, at 6 & 9; BioCryst
Letter, supra note 5, at 2; Digimarc Letter, supra
note 5, at 1–2; NBT Bancorp Letter, supra note 5,
at 2; Balchem Letter, supra note 5, at 2; and Cree
Letter, supra note 5, at 2. See also Angel Letter,
supra note 5, at 3 (calling for a rationalization of
intellectual property protection in order to foster
productive innovation).
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auction.27 NYSE added that the existing
exchange fees for closing auctions
reflect the value created by the primary
listing exchange’s complex procedures
and technology to determine the official
closing price of a security.28 NYSE
emphasized that it has invested
significantly in intellectual property and
software to implement systems that
facilitate orderly price discovery in the
closing auction, as well as surveillance
tools necessary to monitor activity
leading up to, and in, the closing
process.29 NYSE also noted that the
proposal differs from the NASDAQ and
NYSE Arca competing auctions in
securities not listed on their exchanges
in that such auctions compete on a level
playing field because they do not rely
on prices established by the primary
listing exchange and they serve as an
alternative method of establishing an
official closing price if a primary listing
exchange is unable to conduct a closing
auction due to a technology issue.30
NASDAQ also argued that the
proposal would burden competition.
Specifically, NASDAQ believed that the
proposal undermines intra-market
competition, by removing orders from
NASDAQ’s auction book and
prohibiting those orders from competing
on NASDAQ, which NASDAQ argued is
necessary for the exchange to arrive at
the most accurate closing price.31
NASDAQ also stated that, by diverting
orders away from NYSE and NASDAQ,
the proposal would detract from robust
price competition and discovery that
closing auctions ensure.32 NASDAQ
further argued that in order for BZX to
meaningfully enhance competition, it
would have to generate its own closing
price, as opposed to merely utilizing the
closing price generated by a primary
listing market.33
27 See NYSE Letter 1, supra note 5, at 9 and NYSE
Letter 2, supra note 5, at 1–3 (adding that the
proposal is anti-competitive because it is proposing
to sell at a lower price the closing prices produced
through resources expended by NYSE).
28 See NYSE Letter 1, supra note 5, at 9. NYSE
also argued that the proposal impacts competition
for listings, as issuers choose where to list their
securities based on how primary listing exchanges
are able to centralize liquidity and perform closing
auctions. See infra note 116 and accompanying text.
29 See NYSE Letter 2, supra note 5, at 2.
Moreover, NYSE stated that it dedicates resources
to providing systems to designated market makers
(‘‘DMMs’’) necessary to facilitate the closing of
trading as well as to floor brokers to enter and
manage their customers’ closing interest. See id.
30 See NYSE Letter 1, supra note 5, at 6 and NYSE
Letter 2, supra note 5, at 3–4.
31 See NASDAQ Letter, supra note 5, at 9.
32 See NASDAQ Letter, supra note 5, at 10. See
also infra notes 45–81 and accompanying text
(discussing comments on the proposal’s impact on
price discovery).
33 See id., at 13.
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In addition, both NYSE and NASDAQ
referenced the Commission’s
disapproval of NASDAQ’s proposal to
create a Benchmark Order as support
that BZX has not sufficiently satisfied
its obligation to justify that the proposal
is consistent with the Act and not an
inappropriate burden on competition.
NYSE argued that BZX essentially
proposes to compete with broker-dealer
agency order matching services.34 NYSE
asserted that the Commission
disapproved NASDAQ’s Benchmark
Order, in part because it would provide
an exchange with an unfair advantage
over competing broker-dealers, which
was not consistent with Section 6(b)(8)
of the Act.35 NASDAQ further argued
that the disapproval of its Benchmark
Order proposal supports the assertion
that an exchange must articulate how a
proposed service is consistent with the
policy goals of the Act with respect to
national securities exchanges.36
In response to commenters’
contentions that the proposal would
burden competition, BZX asserted that
the proposal would enhance rather than
burden competition.37 In this regard,
BZX argued that its proposal would
promote competition in the use of MOC
orders at the official closing price.38
Further, it asserted that the Commission
has approved the operation of
competing closing auctions, noting in
particular the closing auctions on
NASDAQ, NYSE Arca, and the
American Stock Exchange.39 BZX
further argued that there is precedent for
an exchange to execute orders solely at
reference prices while not also
displaying priced orders for that
security.40
34 See
NYSE Letter 1, supra note 5, at 8.
id.
36 See NASDAQ Letter, supra note 5, at 5.
37 See BZX Letter, supra note 5, at 10–11.
38 See id., at 10. BZX further argued that
NASDAQ’s assertion that the proposal would
undermine competition amongst orders is
misplaced because BZX believes that paired MOC
orders, which are beneficiaries of price discovery
and not price-setting orders do not impact
interactions that take place on another exchange.
See id., at 11.
39 See BZX Letter, supra note 5, at 6. In addition,
in response to NASDAQ’s contention that it is
aware of no regulator in any jurisdiction that has
sanctioned a diversion of orders from the primary
market close, BZX noted the Ontario Securities
Commission’s approval of a similar proposal by
Chi-X Canada ATS, which it said is currently
owned by NASDAQ, to match MOC orders at the
closing price established by the Toronto Stock
Exchange. See NASDAQ Letter, supra note 5, at 10;
BZX Letter, supra note 5, at 7 (stating that the
Ontario Securities Commission stated that the
proposal would not threaten the integrity of the
price formation process and would pressure the
Toronto Stock Exchange to competitively price
executions during their closing auction).
40 See id. at 6 (describing NYSE’s after hours
crossing sessions which executes orders at the
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35 See
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BZX also argued that, rather than
looking to compete with broker-dealer
services, it is seeking to compete on
price with the primary listing markets’
closing auctions.41 In addition, BZX
argued that, contrary to the assertions by
NYSE and NASDAQ, its proposal does
not implicate the same issues as
NASDAQ’s Benchmark Order
proposal.42
BZX also challenged the assertion that
it was ‘‘free-riding’’ on the primary
listing exchanges’ closing auctions.43 In
this regard, BZX argued that instead it
was, on balance, providing a ‘‘a
materially better value to the
marketplace’’ in two ways: By not
diverting price-forming limit orders
away from the primary listing market;
and by providing users with the official
closing price because any other price
would be undesirable to market
participants and potentially harmful to
price formation.44
The majority of commenters
addressed the potential impacts of the
proposal on price discovery in the
closing auctions on the primary listing
markets. Seven commenters stated that
the proposal would not negatively
impact price discovery in the primary
listing markets’ closing auctions.45
These commenters asserted that because
Bats Market Close would only execute
paired MOC orders, and not limit-onclose orders, it would not impede the
price discovery mechanisms of the
primary listing markets’ closing
auctions. Three commenters referenced
the current NASDAQ and NYSE Arca
closing auction processes for securities
listed on other exchanges, stating that
these competing closing auction
processes, which have been permitted
by the Commission, may attract limit
orders from the primary listing market
and impede price discovery, unlike the
BZX proposal which is limited to
market orders.46 In addition, five
commenters argued that, because BZX
will publish the size of matched MOC
orders in advance of the primary
market’s cut-off time, market
NYSE official closing price and the ISE Stock
Exchange functionality that only executed orders at
the midpoint of the NBBO and did not display
orders).
41 See BZX Letter, supra note 5, at 10.
42 See id., at 11 (asserting that the disapproval of
that proposal was primarily because it raised issues
under the Market Access Rule).
43 See BZX Letter, supra note 5, at 5.
44 See id.
45 See PDQ Letter, supra note 5; Clearpool Letter,
supra note 5, at 3; Virtu Letter, supra note 5, at 2;
SIFMA Letter, supra note 5, at 2; IEX Letter, supra
note 5, at 1–2; Angel Letter, supra note 5, at 4; and
ViableMkts Letter, supra note 5, at 3–4.
46 See Clearpool, supra note 5, at 3; IEX Letter,
supra note 5, at 2; and Angel Letter, supra note 5,
at 4.
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participants would have available
information needed to make further
decisions regarding order execution and
thus price discovery would not be
impaired.47 Two commenters also
asserted that many brokers already
provide market-on-close pricing to
customers through products that match
orders internally, and the proposal may
provide incentives for these brokers to
send such orders to an exchange,
thereby increasing transparency,
reliability and price discovery at the
close.48
Thirty-two commenters stated that the
proposal would further fragment the
markets and harm price discovery in the
closing auctions on the primary listing
markets.49 For example, NASDAQ
argued that BZX’s MOC orders would be
incapable of contributing to price
discovery, and instead would further
fragment the market by drawing orders
and quotations away from primary
closing auctions and undermine the
mechanisms used to set closing prices.50
Specifically, NASDAQ expressed
concern that the availability of Bats
Market Close could cause a reduction in
the number of limit-on-close orders
47 See Clearpool Letter, supra note 5, at 3; SIFMA
Letter, supra note 5, at 2; IEX Letter, supra note 5,
at 2; Angel Letter, supra note 5, at 4; and
ViableMkts Letter, supra note 5, at 3.
48 See Clearpool, supra note 5, at 3; and
ViableMkts Letter, supra note 5, at 4–5. One
commenter further argued that to the extent BZX
accrues market share as a result of the proposal it
will likely result from less MOC pairing executed
off-exchange. See Angel Letter, supra note 5, at 4.
49 See NASDAQ Letter, supra note 5; NYSE Letter
1, supra note 5; Bowers Letter, supra note 5;
Meridian Letter, supra note 5; Americas Executions
Letter, supra note 5; GTS Securities Letter, supra
note 5; Customers Bancorp Letter, supra note 5;
Masonite International Letter, supra note 5; Orion
Group Letter, supra note 5; CTS Corporation Letter,
supra note 5; Encana Letter, supra note 5; Triangle
Capital Letter, supra note 5; Pennsylvania REIT
Letter, supra note 5; IMC Letter, supra note 5;
Southern Company Letter, supra note 5; Nobilis
Health Letter, supra note 5; T. Rowe Price Letter,
supra note 5; CACI Letter, supra note 5; Turning
Point Letter, supra note 5; P&G Letter, supra note
5; EDA Letter, supra note 5; Coupa Software Letter,
supra note 5; Cardinal Health Letter, supra note 5;
FedEx Letter, supra note 5; Trade Desk Letter, supra
note 5; BioCryst Letter, supra note 5; Mimecast
Letter, supra note 5; Digimarc Letter, supra note 5;
NBT Bancorp Letter, supra note 5; Balchem Letter,
supra note 5; Cree Letter, supra note 5; and Henry
Schein Letter, supra note 5. See also Duffy/Meeks
Letter, supra note 5, at 1 (noting that public
companies are expressing concern that the proposal
will further fragment the market and cause harm to
the pricing of their companies’ shares at the close,
and as such, they are concerned the proposal may
disrupt the process for determining the closing
price on the primary listing market, which is
viewed as ‘‘an incredibly well-functioning part of
the capital markets’’).
50 See NASDAQ Letter, supra note 5, at 8 (noting
that, for this reason NASDAQ did not believe the
proposal promotes fair and orderly markets in
accordance with Sections 6 and 11A of the
Exchange Act).
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submitted to the primary listing
markets’ closing auctions, which
NASDAQ asserted would harm price
discovery at the market close.51
Moreover, NASDAQ argued that even if
the proposal only resulted in fewer
market-on-close orders submitted to
NASDAQ closing auctions, investors
would be harmed because the official
closing price could potentially represent
a stale or undermined price.52 NASDAQ
asserted that its closing cross is
designed to maximize the number of
shares that can be executed at a single
price and that the number of market-onclose orders impacts the number of
shares able to execute in a closing
cross.53 Accordingly, NASDAQ argued
that any attempt to divert trading
interest, including market-on-close
orders, from its closing auction would
be detrimental to investors as it would
inhibit NASDAQ’s closing auction from
functioning as intended and would
negatively affect the quality of the
official closing price.54 In addition,
NASDAQ stated that it considered, but
chose not to, disclose segmented
information, such as matched MOC or
LOC shares, for its closing auction in a
piece-meal fashion, because NASDAQ
believed it would lead to unintended
consequences and undermine price
discovery in the closing auction.55
NYSE similarly argued that even
though Bats Market Close would only
accept MOC orders, it could materially
impact official closing prices
determined through a NYSE closing
auction.56 First, NYSE emphasized the
importance of the centralization of
orders during the closing auction on the
primary listing exchange, noting that it
allows for investors to find contra-side
liquidity and assess whether to offset
imbalances, and for orders to be priced
based on the true supply and demand in
the market.57 NYSE explained that its
designated market makers (‘‘DMMs’’),
which have an obligation to facilitate
the close of trading in their assigned
securities, factor in the size of paired-off
51 See NASDAQ Letter, supra note 5, at 5 and 11.
NASDAQ asserted that the impact of the proposal
on the use of limit-on-close orders that may be
submitted to NYSE and NASDAQ should be studied
and carefully analyzed.
52 See NASDAQ Letter, supra note 5, at 12.
NASDAQ also stated that a credible independent
study of the potential risk to price discovery is
essential in order to consider whether the proposal
is consistent with the Act. See id.
53 See id., at 11.
54 See id. NASDAQ also notes that while BZX
does not have a responsibility to contribute to price
discovery in NASDAQ’s closing auction, it also is
obligated to avoid affirmatively undermining price
discovery. See id., at 5.
55 See id., at 4.
56 See NYSE Letter 1, supra note 5, at 3.
57 See NYSE Letter 1, supra note 5, at 4.
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volume, and the composition of the
closing interest, in assessing the
appropriate closing price.58 NYSE
asserted that under the proposal, DMMs
would lose full visibility into the size
and composition of MOC interest, and
thus would likely have to make more
risk-adverse closing decisions, resulting
in inferior price formation.59
Second, NYSE argued that the
proposal would also detrimentally
impact price discovery on the NYSE
Arca and NYSE American automated
closing auctions. NYSE stated that in
the last six months there were 130
instances where the official closing
price determined through a NYSE Arca
closing auction was based entirely on
paired-off market order volume.60 In
those instances, pursuant to NYSE Arca
rules, the official closing price is the
midpoint of the auction NBBO as of the
time the auction is conducted. NYSE
stated that if all market orders for a
NYSE Arca listed security were sent to
BZX, the official closing price would
instead be the consolidated last sale
price, which can differ from the
midpoint of the auction NBBO by as
much as 3.2%.61
Several other commenters similarly
explained how the proposal may impact
the integrity of official closing prices. In
particular, GTS, a DMM on NYSE,
argued that market-on-close orders are a
vital component of closing prices and,
should those orders be diverted away
from the primary listing markets as a
result of the proposal, it could
undermine the official closing prices.62
Multiple commenters stated that one of
the benefits of a centralized closing
auction conducted by the primary
listing market is that it allows market
participants to fairly assess supply and
demand such that the closing prices
reflect both market sentiment and total
market participation.63 Because the
proposal may cause orders to be
58 See NYSE Letter 1, supra note 5, at 4. In
response to this assertion, ViableMkts argues that
use of Bats Market Close is voluntary. Accordingly,
if a market participant wanted a DMM to be aware
of their closing activity they could still send their
orders to the NYSE closing auction. See ViableMkts
Letter, supra note 5, at 4.
59 See NYSE Letter 1, supra note 5, at 4.
60 See NYSE Letter 1, supra note 5, at 5. NYSE
represented that once NYSE American transitions to
Pillar technology, it will conduct a closing auction
in an identical manner to NYSE Arca.
61 See id.
62 See GTS Securities Letter, supra note 5, at 2–
3.
63 See Bowers Letter, supra note 5; Americas
Executions Letter, supra note 5; and FedEx Letter,
supra note 5. See also Coupa Software Letter, supra
note 5; Trade Desk Letter, supra note 5; and
Mimecast Letter, supra note 5 (arguing that
gathering liquidity in a single venue ensures that
the market reaches an accurate and reliable closing
price for their stocks).
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diverted away from the primary listing
exchanges, these commenters argued
that it would negatively affect the
reliability and value of closing auction
prices.
Some commenters further argued that
because the proposal undermines the
reliability of the closing process and/or
the official closing price it also poses a
risk to listed companies and its
shareholders.64 In addition, one
commenter, SPDJI, argued that the
proposal may also impact confidence in
the pricing of benchmark indices as
confidence in closing prices is a
prerequisite for market participants to
maintain confidence in the pricing of
benchmark indices.65 Accordingly,
SPDJI asserted that because the closing
price is a critical data point for
investors, great caution should be taken
in any changes to the closing auction.66
Moreover, some commenters argued
that the centralization of liquidity at the
open and close of trading, and how
primary listing markets perform during
the opening and closing, are important
factors for issuers in determining where
to list their securities, and the
additional risk posed to listed
64 See NYSE Letter 1, supra note 5, at 3 (arguing
that the proposal is indifferent to the potential risks
to public companies and that the closing is the most
important data point for shareholders); IMC
Financial Letter, supra note 5, at 1–2; Nobilis
Health Letter, supra note 5; EDA Letter, supra note
5, at 1–2; Coupa Software Letter, supra note 5;
Ethan Allen Letter, supra note 5; Trade Desk Letter,
supra note 5; BioCryst Letter, supra note 5;
Digimarc Letter, supra note 5; Duffy/Meeks Letter,
supra note 5, at 1–2 (stating that public companies
are concerned the proposal will have an unforeseen
effect on the pricing of their companies’ shares at
the close, ultimately harming a critical measure of
the company’s value and harming its shareholders);
NBT Bancorp Letter, supra note 5; Five9 Letter,
supra note 5; Balchem Letter, supra note 5; Cree
Letter, supra note 5; and Henry Schein Letter, supra
note 5. Several issuers also asserted that
decentralizing closing auctions will increase
volatility, reduce visibility, and negatively impact
liquidity for equity securities. See e.g., Customers
Bancorp Letter, supra note 5; Orion Group Letter,
supra note 5; Nobilis Health Letter, supra note 5;
Cardinal Health Letter, supra note 5; and Stewart
Letter, supra note 5.
65 See SPDJI Letter, supra note 5, at 3 (stating that
it relies solely on primary market auction prices to
calculate the official closing index values, and that
these closing index values play an important role
in the markets, including use by portfolio managers
to measure their funds’ value and for use in
calculating settlement prices for certain products);
see also Coupa Software Letter, supra note 5; Trade
Desk Letter, supra note 5; and Henry Schein Letter,
supra note 5 (stating that the official closing price
is used to value their stocks for purposes of various
indexes and mutual funds).
66 See SPDJI Letter, supra note 5, at 2. In contrast,
one commenter acknowledged that while impacting
the quality of the closing price is an objection that
deserves close analysis, as the closing price is ‘‘the
most important price of the day,’’ and would
warrant rejection of the proposal, the commenter
does not believe the proposal would harm the
quality of the closing price. See Angel Letter, supra
note 5, at 4.
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companies from an unreliable or
unrepresentative closing price and/or
process could impact an issuer’s
decision where to list and/or cause
companies to forgo going public.67
In response to concerns regarding the
impact of the proposal on the price
discovery process, BZX argued that,
because the proposal would only match
MOC orders and would require the
Exchange to publish the number of
matched shares in advance of the
primary listing markets’ cut-off times,
BZX believes it would avoid any impact
on price discovery.68 In addition, BZX
offered to disseminate more information
with regard to Bats Market Close and to
disseminate such information via the
applicable securities information
processor, in addition to the Bats
Auction Feed.69 BZX further challenged
commenters’ concerns that Bats Market
Close could pull all MOC orders away
from the primary listing markets and
alter the calculation of the closing price,
noting that such a scenario could occur
today as a result of competing closing
auctions and broker-dealers that offer
internal MOC order matching
solutions.70 Furthermore, BZX argued
that the competing auctions run by
NASDAQ and NYSE Arca could not
only pull all MOC interest away from
the primary listing markets but could
also divert all price-setting limit-onclose interest from those markets as
well.71 BZX also asserted that such
67 See NYSE Letter 1, supra note 5, at 3 and 9
(noting that no single data point is more important
than the closing price to the company or its
shareholders); GTS Securities Letter, supra note 5,
at 3–5; EDA Letter, supra note 5, at 1; Duffy/Meeks
Letter, supra note 5, at 1 (stating that the closing
price is a critical measure of a company’s value and
that public companies view the closing auction on
the listing exchange as a critical aspect of listing).
See also infra note 116 and accompanying text.
68 See BZX Letter, supra note 5, at 3–4.
69 See id., at 4 and 12. BZX further asserted that
it believed modern software can easily and simply
add this data to data disseminated by the primary
listing markets. See id., at 4.
70 See id., at 4–5 (noting that neither NYSE nor
NASDAQ prohibits their members from
withholding MOC orders from their closing
auctions). In response, NYSE stated that it believed
such broker-dealer services degrade the public price
and size discovery of the primary listing exchanges’
closing auctions, but that such activities are not
held to the same standards under the Act as
national securities exchanges and against which the
BZX proposal must be evaluated. See NYSE Letter
2, supra note 5, at 4.
71 See BZX Letter, supra note 5, at 5. BZX
provided evidence of 14 instances in June 2017
where a NASDAQ-listed security had no volume in
NASDAQ’s closing auction but did have volume in
NYSE Arca’s closing auction. See id. In response,
NYSE argued that it believed it was misleading to
compare the proposal to the competing closing
auctions because BZX would be offering neither a
competing closing auction nor a facility to establish
the official closing price should a primary listing
exchange invoke its closing auction contingency
plan. See NYSE Letter 2, supra note 5, at 3.
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competing closing auctions often may
produce bad auction prices on the nonprimary market, as compared to the
proposed Bats Market Close which
would ensure that market participants
receive the official closing price.72
Accordingly, BZX contends that the
proposal would not impose
fragmentation on the market at the close
that does not already exist today.73
In response to NYSE’s arguments
regarding the impact on a DMM’s ability
to price the close, BZX argued that this
point highlights what it believes to be
an additional benefit of allowing it to
compete with NYSE’s closing auction.74
Specifically, BZX argued that its
proposal would provide an alternative
liquidity pool that would allow users to
avoid the ‘‘subjective decision making
of the DMMs.’’ 75
With regard to concerns about the
impact of the proposal on issuers and
their shareholders, BZX reaffirmed that
the proposal is designed not to impact
the trading environment for issuers and
their securities or the price discovery
function of the primary listing markets’
closing auction.76
In arguing that the proposal would
cause fragmentation and thus impair the
closing price, NYSE and NASDAQ also
asserted that the proposal contradicts
the Commission’s approval of recent
amendments to the National Market
System Plan to Address Extraordinary
Market Volatility (the ‘‘LULD Plan’’)
which, they argue, centralize re-opening
auction liquidity at the primary listing
exchange by prohibiting other market
centers from re-opening following a
trading pause until the primary listing
exchange conducts a re-opening
auction.77 Specifically, these
commenters asserted that it would be
inconsistent for the Commission to find
it in the public interest to consolidate
trading in a re-opening auction, while
sanctioning fragmentation of trading in
a closing auction.78
72 See id. at 4. BZX asserted that 86% of closing
auctions conducted by NASDAQ for NYSE-listed
securities in June 2017 resulted in closing prices
different from the official closing price and 84% of
competing closing auctions conducted by NYSE
Arca for NASDAQ-listed securities in June 2017
resulted in closing prices different from the official
closing price.
73 See id. at 7–8.
74 See id. at 10.
75 Id. In response, NYSE argued that BZX’s claims
regarding the role of the DMM were not germane
to whether the proposal is consistent with the Act
and stated that it believed the scale of its closing
auction and the low levels of volatility observed in
the auction demonstrate its effectiveness. See NYSE
Letter 2, supra note 5, at 4.
76 See BZX Letter, supra note 5, at 2 and 4.
77 See NASDAQ Letter, supra note 5, at 6; NYSE
Letter 1, supra note 5, at 3.
78 See NYSE Letter 1, supra note 5, at 3.
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In response, BZX argued that this
comparison is misplaced.79 Specifically,
BZX said the amendment to the LULD
Plan cited by NYSE and NASDAQ
granted the primary listing market the
ability set the re-opening price but did
not mandate the consolidation of orders
at the primary listing market following
a trading halt.80 Accordingly, BZX
believes the proposal is consistent with
the LULD Plan as it seeks to avoid
producing a ‘‘bad’’ or ‘‘outlier’’ closing
price and does not affect the
centralization of price-setting closing
auction orders.81
Several commenters addressed the
potential impact of the proposal on
market complexity and operational risk
as a result of increased market
fragmentation. Some of these
commenters believed that the proposal
would not introduce significant
additional complexity or operational
risk. For example, two commenters
argued that the proposal could enhance
the resiliency of the closing auction
process by providing market
participants an additional mechanism
through which to execute orders at the
official closing price in the event of a
disruption at a primary listing market.82
Another commenter argued that
exchanges already have many market
data feeds that firms must purchase to
ensure that they have all of the
information necessary to make informed
execution decisions and that adding
another data feed will not add
complexity given the small amount of
information that goes into the closing
data feed and the current capabilities of
market participants to re-aggregate
multiple data feeds.83
In contrast, other commenters argued
that the proposal would add
unnecessary market complexity and
operational risk. In particular, two
commenters noted that the proposal
would require market participants to
monitor an additional data feed, the
Bats Auction Feed, one noting that if
additional exchanges adopted similar
functionality to Bats Market Close, it
would require monitoring of even more
data feeds.84 These commenters argued
that monitoring an additional data feed
could increase operational risk by
creating another point of failure at a
79 See
BZX Letter, supra note 5, at 8–9.
id.
81 See id.
82 See SIFMA Letter, supra note 5, at 2 and
ViableMkts Letter, supra note 5, at 3 (further noting
that once BZX is able to process MOC orders, they
would be in a position to develop the capability to
offer a full backup closing auction process).
83 See Clearpool Letter, supra note 5, at 2.
84 See NYSE Letter 1, supra note 5, at 7; IMC
Letter, supra note 5, at 1.
80 See
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critical time of the trading day.85 One
commenter also noted the increased
complexity involved in sending order
flow to more than one exchange in short
periods of time near the close of the
trading day.86 This commenter argued
that the proposal increases operational
risk and complexity at a critical point of
the trading day by forcing market
participants whose orders did not match
in Bats Market Close to quickly send
MOC orders from one exchange to
another before the cut-off time at the
primary market closing auction.87 This
added complexity, GTS argued, puts
additional stress on the systems of
exchanges and increases the potential
for disruptions.88 Lastly, two
commenters argued that the proposal
could encourage other exchanges,
broker-dealers, and alternative trading
systems to offer similar processes,
which would introduce undesirable
fragmentation to the market and lead to
operational challenges for investors and
traders.89
In response, BZX argued that the
proposal would not increase operational
risks, but rather would provide a way to
address the single point of failure risk
that exists for closing auctions
conducted on the primary listing
markets.90 BZX argued that despite the
current system of designated auction
backups, market participants can be
confused about whether an exchange is
in fact able to conduct a closing
auction.91 BZX believes Bats Market
Close could provide an alternative
option for market participants to route
orders, in the event there is an
impairment at the primary listing
market, and still receive the official
closing price.92
85 See IMC Letter, supra note 5, at 1 and NYSE
Letter 1, supra note 5, at 7. See also Ethan Allen
Letter, supra note 5 (arguing the proposal would
add a layer of complexity).
86 See GTS Letter, supra note 5, at 6.
87 See GTS Letter, supra note 5, at 6. Furthermore,
NYSE argued that in certain situations, investors
may not be able to participate in a closing auction
on NYSE American or NYSE Arca if they wait until
after their order was cancelled by BZX to send in
a market-on-close order to closing auctions on
NYSE Arca and NYSE American. NYSE explained
that in situations where there is an order imbalance
priced outside the Auction Collars, orders on the
side of the imbalance are not guaranteed to
participate in the closing auctions on those two
exchanges. Earlier submitted market-on-close orders
have priority. See NYSE Letter 1, supra note 5, at
8.
88 See GTS Letter, supra note 5, at 6.
89 See T. Rowe Price Letter, supra note 5, at 1–
2. See also NASDAQ Letter, supra note 5, at 8
(noting that other exchanges may propose similar
offerings but choose different pairing cut-off times
which could further complicate investors’ decisions
and programming requirements).
90 See BZX Letter, supra note 5, at 12.
91 See id.
92 See id.
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In addition, as noted above, BZX
stated that it would be willing to
disseminate information regarding
matched MOC orders, not only via the
Bats Auction Feed, but also via the
applicable securities information
processor, if permissible.93 BZX added
that modern software can easily and
simply add volume data disseminated
by the primary listing markets regarding
the closing auction and data regarding
matched MOC orders from the Bats
Market Close.94
Several commenters addressed the
issue of whether the proposal would
facilitate manipulation of both the
closing auctions on the primary listing
markets, as well as continuous trading
during the final minutes of the trading
day. Some commenters did not believe
it would do so. For example, one
commenter noted that incentives to
manipulate the closing price already
exist and it is unlikely the proposal
would result in increased manipulation
of the market close.95 In addition, IEX
argued that the proposal would make
manipulation of closing crosses more
conspicuous.96 IEX also claimed that the
Consolidated Audit Trail would provide
a new tool for detecting any such
manipulation.97
In contrast, several commenters
asserted that the proposal raises a risk
of manipulation, in part due to the
asymmetry of information that would be
disseminated, which would allow
market participants to utilize
informational advantages to their own
benefit. For example, NASDAQ argued
that information concerning the amount
of orders matched through Bats Market
Close, would represent tradable
information that market participants
could use to ‘‘game’’ the closing crosses
on the primary listing markets and
undermine fair and orderly markets.98
In particular, NASDAQ argued that its
closing auction was designed to
carefully balance the amount and timing
of data released so as to reduce the risk
of gaming, but that this new information
regarding paired MOC orders could be
used to gauge the depth of the market,
the direction of existing imbalances, and
the likely depth remaining at NASDAQ,
creating gaming opportunities.99 NYSE
similarly argued that the proposal
would increase potential
manipulation.100 First, NYSE asserted
93 See
id., at 4 and 12.
id., at 4.
95 See Angel Letter, supra note 5, at 5.
96 See IEX Letter, supra note 5, at 2.
97 See id., at 2–3.
98 See NASDAQ Letter, supra note 5, at 8.
99 See NASDAQ Letter, supra note 5, at 8.
100 See NYSE Letter 1, supra note 5, at 6. See also
Americas Executions Letter, supra note 5 (stating
94 See
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that the potential for manipulative
activity at the close would increase
because primary listing exchange
auctions would decrease in size and
thus be easier to manipulate.101 NYSE
also argued that the proposal facilitates
manipulative activity by providing an
incentive for market participants to
inappropriately influence the closing
price when they know they have been
successfully paired-off on BZX.102
NYSE further asserted that the proposal
could potentially provide some market
participants, such as professional
traders, with useful information that
other market participants do not have,
such as the direction of an imbalance,
which could be used to influence the
official closing price.103
Although not citing concerns
regarding manipulation specifically, T.
Rowe Price similarly argued that the
proposal would lead to information
asymmetries that could result in
changes in continuous trading behavior
leading into the market close as some
market participants could be trading on
information gathered from Bats Market
Close pairing results.104 T. Rowe Price
asserted that a market participant that is
aware of the composition of volume
paired through Bats Market Close at 3:35
p.m. would be in a position to use that
information to influence its trading
behavior over the next ten to fifteen
minutes leading in to the closing
auction cut-off times on NYSE and
NASDAQ respectively.105 T. Rowe Price
argued that, as a result, the proposal
could not only impact price discovery
in closing auctions on the primary
listing markets it could also impact
continuous trading behavior.106
NYSE also stated that identifying
manipulative activity would also
become more difficult under the
proposal due to the time difference
between the Bats Market Close and
primary market closing auctions and the
cross-market nature of the
manipulation.107 GTS similarly argued
that the proposal would make
surveillance of the market close more
difficult and expensive due to
that the proposal creates new opportunities to
possibly manipulate the close).
101 See NYSE Letter 1, supra note 5, at 6.
102 See NYSE Letter 1, supra note 5, at 6.
103 See id. However, ViableMkts argued that
because these market participants would not know
the full magnitude of the imbalance, it does not
believe the proposal creates an incremental risk of
manipulation. See ViableMkts Letter, supra note 5,
at 5.
104 See T. Rowe Price Letter, supra note 5, at 2–
3.
105 See id.
106 See id.
107 See NYSE Letter 1, supra note 5, at 6.
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fragmentation of order flow across
multiple markets.108
In response, BZX argued that it does
not believe that the proposal creates a
potential for increased manipulation.109
Should the Commission approve the
proposal, BZX notes that both it and
FINRA as well as other exchanges
would continue to surveil for
manipulative activity and ‘‘seek to
punish those that engage in such
behavior.’’ 110 Furthermore, BZX argued
that information asymmetries are
inherent in trading, including the
primary listing markets closing
auctions.111 For example, BZX argued
that the current operation of d-Quotes
on NYSE carries a risk of manipulation
as it provides an informational
advantage to NYSE DMMs and floor
brokers, and allows d-Quotes to be
entered, modified or cancelled up until
3:59:50 p.m. while other market
participants are prohibited from
entering, modifying or cancelling onclose orders after 3:45 p.m.112 Lastly,
BZX argued that the information
disseminated through the Bats Auction
Feed would not provide an indication of
whether the cancelling of a particular
side of an order is meaningful, which
limits its potential to impact the official
closing price.113
Several commenters also addressed
the potential impacts of the proposal on
market participants that they assert play
important roles in facilitating closing
auctions on NYSE. Specifically, three
commenters asserted that the proposal
would have potentially detrimental
impacts on NYSE floor brokers.114
Eighteen commenters asserted that the
proposal would make it more difficult
for Designated Market Makers to
facilitate an orderly close of NYSE listed
securities as they would lose the ability
to continually assess the composition of
market-on-close interest.115 Many of
108 See
GTS Securities Letter, supra note 5, at 6.
BZX Letter, supra note 5, at 11–12.
110 See id., at 11
111 See id., at 11–12.
112 See id., at 12. BZX also requested that the
Commission review the appropriateness of NYSE’s
use of the d-Quote and its potential for price
manipulation of NYSE’s closing prices. See id., at
9.
113 See id.
114 See Bowers Letter, supra note 5; Meridian
Letter, supra note 5; and Americas Executions
Letter, supra note 5.
115 See NYSE Letter 1, supra note 5, at 4; GTS
Securities Letter, supra note 5, at 2–3; Customers
Bancorp Letter, supra note 5; Masonite
International Letter, supra note 5; Orion Group
Letter, supra note 5; CTS Corporation Letter, supra
note 5; Encana Letter, supra note 5; Triangle Capital
Letter, supra note 5; Pennsylvania REIT Letter,
supra note 5; IMC Letter, supra note 5, at 1–2;
Southern Company Letter, supra note 5; Nobilis
Health Letter, supra note 5; CACI Letter, supra note
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these commenters that are issuers
asserted that one of the reasons they
chose to list on NYSE was the ability to
have access to a DMM that is
responsible for facilitating an orderly
closing auction.116
Several commenters stated that the
proposal could harm issuers,
particularly small and mid-cap
companies.117 Many of these
commenters, some of which are issuers,
stated that the current centralized
closing auctions on the primary listing
markets contribute meaningful liquidity
to a company’s stock, facilitates
investment in the company, and helps
to lower the cost of capital. Accordingly,
these commenters expressed concern
that potential fragmentation caused by
the proposal could negatively impact
liquidity during the closing auction,
causing detrimental effects to listed
issuers.118 Several commenters further
argued that centralized closing auctions
provide better opportunities to fill large
orders with relatively little price
impact.119
In contrast, one commenter argued
that the proposal would improve
aggregate liquidity at the official closing
price.120 Specifically, this commenter
asserted that the lower aggregate cost of
trading would likely spur incremental
increases in trading volumes.121 In
5; Turning Point Letter, supra note 5; P&G Letter,
supra note 5; Cardinal Health Letter, supra note 5;
FedEx Letter, supra note 5; and Stewart Letter,
supra note 5. See also supra notes 57–59 and
accompanying text.
116 See GTS Securities Letter, supra note 5, at 2–
3; Masonite International Letter, supra note 5;
Encana Letter, supra note 5; Triangle Capital Letter,
supra note 5; Pennsylvania REIT Letter, supra note
5; Nobilis Health Letter, supra note 5; CACI Letter,
supra note 5; Turning Point Letter, supra note 5;
P&G Letter, supra note 5; Cardinal Health Letter,
supra note 5; FedEx Letter, supra note 5; and
Stewart Letter, supra note 5.
117 See NASDAQ Letter, supra note 5, at 6–7;
NYSE Letter 1, supra note 5, at 3; GTS Securities
Letter, supra note 5, at 2–5; Customers Bancorp
Letter, supra note 5; Orion Group Letter, supra note
5; CTS Corporation Letter, supra note 5; IMC
Financial Letter, supra note 5, at 1–2; Southern
Company Letter, supra note 5; Nobilis Health
Letter, supra note 5; EDA Letter, supra note 5, at
1–2; Coupa Software Letter, supra note 5; Trade
Desk Letter, supra note 5; Duffy/Meeks Letter, supra
note 5, at 1; and Henry Schein Letter, supra note
5.
118 See Customers Bancorp Letter, supra note 5;
Orion Group Letter, supra note 5; CTS Corporation
Letter, supra note 5; Southern Company Letter,
supra note 5; Duffy/Meeks Letter, supra note 5, at
1–2 (noting that the proposal could cause a
disruption to the closing auction process, which
could lead to discouraging investors from
participating in and having confidence in our
markets); and Five9 Letter, supra note 5.
119 See e.g., Bowers Letter, supra note 5; Americas
Executions Letter, supra note 5; Customers Bancorp
Letter, supra note 5; Orion Group Letter, supra note
5; and Southern Company Letter, supra note 5.
120 See ViableMkts Letter, supra note 5, at 2.
121 See id.
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addition, this commenter stated that the
ability to enter MOC orders into Bats
Market Close with little risk of
information leakage may attract an
additional source of liquidity.122
Finally, some commenters identified
areas that they believed were not
adequately addressed by the proposal
and/or made suggestions for
modifications to the Exchange’s
proposal. For example, one commenter
suggested that BZX extend the proposed
MOC Cut-Off Time to closer to the
primary market close.123 Another
commenter suggested that, as an
alternative, NYSE and NASDAQ should
voluntarily review and reduce their
auction fee structures, or, alternatively,
the Commission should impose a cap on
transaction fees for closing auctions.124
Lastly, NASDAQ also noted several
areas, or scenarios, that it believed were
not adequately explained by the
proposal.125
IV. Proceedings To Determine Whether
To Approve or Disapprove the BZX
Proposal
The Commission hereby institutes
proceedings pursuant to Section 19(b)(2)
of the Act 126 to determine whether the
Exchange’s proposed rule change
should be approved or disapproved.
Further, pursuant to Section 19(b)(2)(B)
of the Act,127 the Commission is hereby
providing notice of the grounds for
disapproval under consideration. The
Commission believes it is appropriate to
institute proceedings at this time in
view of the legal and policy issues
raised by the proposal. Institution of
proceedings does not indicate, however,
that the Commission has reached any
122 See
id.
Clearpool Letter, supra note 5, at 4.
124 See T. Rowe Price Letter, supra note 5, at 3.
125 See NASDAQ Letter, supra note 5, at 13.
Specifically, NASDAQ provides several scenarios to
illustrate areas in which it believes how the Bats
Market Close would operate is unclear, including
where: (1) NASDAQ does not conduct a closing
cross; (2) the official closing price for a NASDAQlisted security is the consolidated last sale price,
which is an inferior price to the NBBO at 4:00 p.m.;
and (3) the official closing price would trade
through the Bats resting limit order book. In
addition, NASDAQ argues that BZX did not
adequately explain how it would avoid using a
possibly ‘‘stale’’ price if there were no orders and
thus no auction on a primary listing market, but
there were MOC orders in Bats Market Close.
126 15 U.S.C. 78s(b)(2).
127 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of
the Act also provides that proceedings to determine
whether to disapprove a proposed rule change must
be concluded within 180 days of the date of
publication of notice of the filing of the proposed
rule change. See id. The time for conclusion of the
proceedings may be extended for up to 60 days if
the Commission finds good cause for such
extension and publishes its reasons for so finding,
or if the exchange consents to the longer period. See
id.
123 See
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conclusions with respect to any of the
issues involved.
In particular, the Commission is
instituting proceedings to allow for
additional analysis of the proposed rule
change’s consistency with: (1) Section
6(b)(5) of the Act which requires, among
other things, that the rules of a national
securities exchange be designed ‘‘to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, . . . to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest;’’ 128 and (2) Section
6(b)(8) of the Act, which requires that
the rules of a national securities
exchange ‘‘not impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of [the Act].’’ 129
As described above, BZX proposes to
introduce Bats Market Close, a closing
match process for non-BZX listed
securities that would match MOC orders
submitted to the Bats Market Close at
the official closing price for such
security published by the primary
listing market. Under the proposal,
Members would be able to submit,
cancel, and replace MOC orders
designated for the Bats Market Close up
until the MOC Cut-Off Time at 3:35
p.m., after which time orders would be
matched for execution and any
remaining imbalance would be
cancelled back to the Member(s). BZX
would disseminate, via the Bats Auction
Feed, the total size of all buy and sell
orders matched for each security. The
Exchange asserts that its proposal would
increase competition and decrease fees
for market participants, without
impacting the price discovery process.
The Commission has consistently
recognized the importance of closing
auctions of the primary listing markets.
For example, in its adoption of
Regulation SCI, the Commission
identified systems used to support
closings on the primary market as
‘‘critical SCI systems,’’ stating that
‘‘reliable . . . closings on the primary
listing markets are key to the
establishment of fair and orderly
markets,’’ and noting that ‘‘closing
auctions at the primary listing markets
attract widespread participation, and
the closing prices they establish are
commonly used as benchmarks.’’ 130
Accordingly, the Commission is
128 15
U.S.C. 78f(b)(5).
U.S.C. 78f(b)(8).
130 Securities Exchange Act Release No. 73639
(November 19, 2014), 79 FR 72255, 72278
(December 5, 2014).
129 15
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considering whether the proposal
removes impediments to and perfects
the mechanism of a free and open
market and a national market system,
and what its impact would be on the
primary listing markets’ closing
auctions, including their important
price discovery functions, or the
reliability and integrity of the closing
prices that they establish. Further, the
Commission is considering whether the
proposal imposes any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act, including the
potential competitive burdens that may
be created when an exchange offers
market participants the ability to
execute orders at a lower cost at the
closing price established by another
exchange, without incurring the costs of
developing and operating the closing
auctions from which the price is
derived. In addition, the Commission is
considering whether the proposal is
designed to prevent fraudulent and
manipulative acts and practices and, in
particular, whether it would provide
increased incentives or opportunities for
inappropriate utilization of information
to manipulate the closing price. Finally,
the Commission is considering whether
the proposal would have additional
impacts on the markets, including
increased complexity and operational
risk, that would be inconsistent with the
protection of investors and the public
interest.
V. Commission’s Solicitation of
Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
identified above, as well as any other
relevant concerns they may have with
the proposal. In particular, the
Commission invites the written views of
interested persons concerning whether
the proposal is consistent with Sections
6(b)(5) and 6(b)(8) of the Act, or any
other provision of the Act or rule or
regulation thereunder. Although there
do not appear to be any issues relevant
to approval or disapproval which would
be facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4, any request for an
opportunity to make an oral
presentation.131
131 Section 19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Public Law
94–29 (June 4, 1975), grants the Commission
flexibility to determine what type of proceeding—
either oral or notice and opportunity for written
comments—is appropriate for consideration of a
particular proposal by a self-regulatory
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Such comments should be submitted
by September 14, 2017. Rebuttal
comments should be submitted by
September 28, 2017. The Commission
asks that commenters address the
sufficiency and merit of the Exchange’s
statements in support of the proposal,
which are set forth in the Notice,132 in
addition to any other comments they
may wish to submit about the proposed
rule change. In particular, the
Commission seeks comment, including,
where relevant, any specific data,
statistics, or studies, on the following:
1. Would the proposed rule change
affect price discovery in the closing
auction process on each primary listing
exchange? If so, how? Would any such
impact be the same at each of the
primary listing exchanges? What
information do market participants need
going into the closing auction? Would
the proposed rule change affect the
information available to market
participants during the closing auction
process? If so, how? If commenters
believe the proposal would harm price
discovery in the closing auction process,
to the extent possible please provide
specific data, analyses, or studies for
support.
2. To what extent, if at all, would the
availability of the Bats Market Close
impact market participants’ use of limiton-close orders in the closing auction
processes on the primary listing
exchanges, including with respect to
size and price? Please explain. Would
market participants use MOC orders in
the Bats Market Close as a substitute for
using limit orders to participate in the
closing auction processes at the primary
listing exchanges? Would any such
impacts be the same for each of the
primary listing exchanges? Are there
differences between the closing auction
processes at each of the primary listing
exchanges whereby the proposed Bats
Market Close would have differing
effects on each primary listing
exchange? If so, please explain. How
does information available in the
closing auction process affect market
participants’ order submissions and/or
determination of the closing price?
Would the proposed rule change affect
market participants’ trading strategies in
closing auctions? If so, how? If
commenters believe the proposal would
impact the use of limit-on-close orders
in closing auctions, to the extent
possible please provide specific data,
analyses, or studies for support.
organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
132 See Notice, supra note 3.
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3. What analyses of available data
could provide information about
relationships between information
disseminated during closing auctions,
trading strategies in closing auctions,
and closing prices? How would such
analyses help estimate the impact, if
any, of any changes in the availability
of information under the proposed rule
change on trading strategies and closing
prices? In this regard, to the extent
possible, please provide specific data,
analyses, or studies in support.
4. What amount of trading volume at
the close occurs on venues other than
the primary listing exchanges (such as
competing closing auctions and/or
broker-dealer internal matching
processes for MOC orders) and how
does such closing volume compare with
that of the primary listing exchanges?
How does that volume impact the
closing auction process on each of the
primary listing exchanges? If
commenters believe the proposal would
impact volume in the closing auction
process, to the extent possible please
provide specific data, analyses, or
studies for support. How does the Bats
Market Close proposal differ from such
existing processes (i.e., competing
closing auctions and/or broker-dealer
internal MOC matching processes)?
Would the proposal affect the existing
level of fragmentation in the market? If
so, how? Please describe. Would the
proposal impact the aggregate liquidity
at the primary listing markets during the
closing auctions? If so, how? If
commenters believe the proposal would
impact the existing level of
fragmentation in the market or aggregate
liquidity at the primary listing markets
during the closing auction, to the extent
possible please provide specific data,
analyses, or studies for support. Would
the matching of a significant amount of
MOC orders at a venue other than the
primary listing market affect the
integrity or reliability of the official
closing auction and the resulting closing
price? If so, how? Please describe in
detail and provide examples if possible.
Further, if commenters believe the
proposal would affect the integrity or
reliability of the official closing auction
and the resulting closing price, to the
extent possible please provide specific
data, analyses, or studies for support.
5. Would the proposal have a positive,
negative, or neutral impact on
competition? Please explain. How
would any impact on competition from
the proposal benefit or harm the
national market system and/or the
various market participants? Please
describe and explain how, if at all,
aspects of the national market system
and/or different market participants
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would be affected. What are the current
costs associated with a primary listing
market developing and operating a
closing auction, and to what extent (and
if so, how) are these costs passed on to
market participants today? How do the
fixed costs associated with developing
closing auctions compare to the variable
costs of conducting closing auctions?
How do the revenues collected from
closing auctions compare to these costs?
Would the proposal impact the current
fees charged by the primary listing
markets for participation in their closing
auctions? If so, how? If commenters
believe the proposal would impact
competition, to the extent possible
please provide specific data, analyses,
or studies for support.
6. What effect would the proposal
have on market complexity and/or
operational risk, if any? If commenters
believe the proposal would impact
market complexity and operational risk,
to the extent possible, please provide
specific data, analyses, or studies for
support. Would the daily process of
cancelling unmatched MOC orders back
to members so that they can be routed
to the primary listing markets before the
closing auction cut-off times create
operational or other risks for the
markets or market participants? If so,
please describe. Would any such risks
be different than the risks that currently
exist now for market participants? Are
there alternative ways of managing
unmatched orders that would have
different implications for the
operational risks of the proposal? If so,
please describe. Would the monitoring
of an additional data feed be difficult or
increase risk for market participants?
Why or why not?
7. Would the proposal affect the
potential for manipulation and, if so,
what types of manipulative activity
might result from, or be decreased by,
the proposal? Would the proposal create
informational advantages for certain
market participants? If so, please detail
these advantages and describe whether
and how such information could be
utilized to a market participant’s own
advantage. Would such informational
advantages differ from information
asymmetries that exist in the markets
today? If so, please describe. Would the
proposal affect surveillance for
manipulation negatively or positively,
and are existing surveillance tools
adequate to monitor any increased risk?
Please explain. If commenters believe
the proposal would increase or decrease
the potential for manipulative activity,
to the extent possible please provide
specific data, analyses, or studies for
support.
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8. What are the potential impacts of
the proposal for listed issuers? For
example, would the proposal impact the
liquidity of an issuer’s stock? If so, how?
Would the proposal affect an issuer’s
decision as to whether to list their
securities on a national securities
exchange? If so, how? Would any
impacts of the proposal affect small and
mid-sized listed companies differently
from larger listed companies? If so,
please describe how. What other
impacts, if any, could the proposal have
on various other market participants,
such as market makers and floor
brokers, and in particular, their roles in
the closing? If commenters believe the
proposal would impact listed issuers or
other market participants, to the extent
possible please provide specific data,
analyses, or studies for support.
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–
BatsBZX–2017–34 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BatsBZX–2017–34. The 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
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Primary Counties: Addison, Bennington,
Caledonia, Orange, Rutland,
Washington, Windsor
The Interest Rates are:
identifying information from
submissions. You should submit only
information that you wish to make
publicly available. All submissions
should refer to File Number SR–
BatsBZX–2017–34 and should be
submitted on or before September 14,
2017. Rebuttal comments should be
submitted by September 28, 2017.
Percent
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.133
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017–17909 Filed 8–23–17; 8:45 am]
For Physical Damage:
Non-Profit Organizations With
Credit Available Elsewhere ...
Non-Profit Organizations Without Credit Available Elsewhere .....................................
For Economic Injury:
Non-Profit Organizations Without Credit Available Elsewhere .....................................
2.500
2.500
SMALL BUSINESS ADMINISTRATION
The number assigned to this disaster
for physical damage is 15251B and for
economic injury is 152520.
[Disaster Declaration #15251 and #15252;
Vermont Disaster Number VT–00033]
(Catalog of Federal Domestic Assistance
Number 59008)
Presidential Declaration of a Major
Disaster for Public Assistance Only for
the State of Vermont
James E. Rivera,
Associate Administrator for Disaster
Assistance.
[FR Doc. 2017–17900 Filed 8–23–17; 8:45 am]
U.S. Small Business
Administration.
ACTION: Notice.
rmajette on DSKBCKNHB2PROD with NOTICES
BILLING CODE 8025–01–P
This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of Vermont (FEMA–4330–DR),
dated August 16, 2017.
DATES: Issued on 08/16/2017.
Physical Loan Application Deadline
Date: 10/16/2017.
Economic Injury (EIDL) Loan
Application Deadline Date: 05/16/2018.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW., Suite 6050,
Washington, DC 20416, (202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
President’s major disaster declaration on
08/16/2017, Private Non-Profit
organizations that provide essential
services of a governmental nature may
file disaster loan applications at the
address listed above or other locally
announced locations.
Incident: Severe Storms and Flooding.
Incident Period: 06/29/2017 through
07/01/2017.
The following areas have been
determined to be adversely affected by
the disaster:
SUMMARY:
133 17
CFR 200.30–3(a)(57) and (58).
VerDate Sep<11>2014
15:29 Aug 23, 2017
Jkt 241001
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #15247 and #15248;
Kentucky Disaster Number KY–00065]
Administrative Declaration of a
Disaster for the State of Kentucky
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
PO 00000
Frm 00083
Fmt 4703
Sfmt 4703
For Physical Damage:
Homeowners With Credit Available Elsewhere ......................
Homeowners Without Credit
Available Elsewhere ..............
Businesses With Credit Available Elsewhere ......................
Businesses
Without
Credit
Available Elsewhere ..............
Non-Profit Organizations With
Credit Available Elsewhere ...
Non-Profit Organizations Without Credit Available Elsewhere .....................................
For Economic Injury:
Businesses & Small Agricultural
Cooperatives Without Credit
Available Elsewhere ..............
Non-Profit Organizations Without Credit Available Elsewhere .....................................
3.500
1.750
6.610
3.305
2.500
2.500
3.305
2.500
The number assigned to this disaster
for physical damage is 15247 B and for
economic injury is 15248 0.
The States which received an EIDL
Declaration # are Kentucky Ohio.
(Catalog of Federal Domestic Assistance
Number 59008)
This is a notice of an
Administrative declaration of a disaster
for the State of KENTUCKY.
Dated: 08/15/2017.
DATES: Issued on: 08/15/2017.
Physical Loan Application Deadline
Date: 10/16/2017.
Economic Injury (EIDL) Loan
Application Deadline Date: 05/15/2018.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW., Suite 6050,
Washington, DC 20416, (202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
Administrator’s disaster declaration,
applications for disaster loans may be
filed at the address listed above or other
locally announced locations.
Incident: Torrential Rains, Flash
Flooding and Mudslides.
SUMMARY:
Percent
2.500
BILLING CODE 8011–01–P
AGENCY:
Incident Period: 07/23/2017.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Mason
Contiguous Counties:
Kentucky: Bracken, Fleming, Lewis,
Robertson
Ohio: Adams, Brown
The Interest Rates are:
Dated: August 15, 2017.
Linda E. McMahon,
Administrator.
[FR Doc. 2017–17917 Filed 8–23–17; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #15224 and #15225;
California Disaster Number CA–00275]
Administrative Declaration
Amendment of Disaster for the State of
California
U.S. Small Business
Administration.
ACTION: Amendment 1.
AGENCY:
This is an amendment of the
Administrative declaration of a disaster
for the State of CALIFORNIA dated 08/
11/2017.
DATES: Issued on 08/11/2017.
Physical Loan Application Deadline
Date: 09/29/2017.
Economic Injury (EIDL) Loan
Application Deadline Date: 05/01/2018.
SUMMARY:
E:\FR\FM\24AUN1.SGM
24AUN1
]]>Agencies
[Federal Register Volume 82, Number 163 (Thursday, August 24, 2017)]
[Notices]
[Pages 40202-40212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17909]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81437; File No. SR-BatsBZX-2017-34]
Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change To Introduce Bats Market Close, a Closing Match
Process for Non-BZX Listed Securities Under New Exchange Rule 11.28
August 18, 2017.
I. Introduction
On May 5, 2017, Bats BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (the
``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt Bats Market Close, a closing match
process for non-BZX listed securities. The Commission published notice
of filing of the proposed rule change in the Federal Register on May
22, 2017.\3\ On July 3, 2017, the Commission designated a longer period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether the
proposed rule change should be disapproved.\4\ As of August 16, 2017,
the Commission has received forty-six comment letters on the Exchange's
proposed rule change, including a response from the Exchange.\5\ This
order
[[Page 40203]]
institutes proceedings under Section 19(b)(2)(B) of the Exchange Act
\6\ to determine whether to approve or disapprove the proposed rule
change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 80683 (May 16,
2017), 82 FR 23320 (``Notice'').
\4\ See Securities Exchange Act Release No. 81072, 82 FR 31792
(July 10, 2017).
\5\ See Letters to Brent J. Fields, Secretary, Commission, from:
(1) Donald K. Ross, Jr., Executive Chairman, PDQ Enterprise, LLC,
dated June 6, 2017 (``PDQ Letter''); (2) Edward S. Knight, Executive
Vice President and General Counsel, Nasdaq, Inc., dated June 12,
2017 (``NASDAQ Letter''); (3) Ray Ross, Chief Technology Officer,
Clearpool Group, dated June 12, 2017 (``Clearpool Letter''); (4)
Venu Palaparthi, SVP, Compliance, Regulatory and Government Affairs,
Virtu Financial, dated June 12, 2017 (``Virtu Letter''); (5)
Theodore R. Lazo, Managing Director and Associate General Counsel,
SIFMA, dated June 13, 2017 (``SIFMA Letter''); (6) Elizabeth K.
King, General Counsel and Corporate Secretary, New York Stock
Exchange, dated June 13, 2017 (``NYSE Letter 1''); (7) John M.
Bowers, Bowers Securities, dated June 14, 2017 (``Bowers Letter'');
(8) Jonathan D. Corpina, Senior Managing Partner, Meridian Equity
Partners, dated June 16, 2017 (``Meridian Letter''); (9) Fady
Tanios, Chief Executive Officer, and Brian Fraioli, Chief Compliance
Officer, Americas Executions, LLC, dated June 16, 2017 (``Americas
Executions Letter''); (10) Ari M. Rubenstein, Co-Founder and Chief
Executive Officer, GTS Securities LLC, dated June 22, 2017 (``GTS
Securities Letter''); (11) John Ramsay, Chief Market Policy Officer,
Investors Exchange LLC, dated June 23, 2017 (``IEX Letter''); (12)
Jay S. Sidhu, Chairman, Chief Executive Officer, Customers Bancorp,
Inc., dated June 27, 2017 (``Customers Bancorp Letter''); (13)
Joanne Freiberger, Vice President, Treasurer, Masonite International
Corporation, dated June 27, 2017 (``Masonite International
Letter''); (14) David B. Griffith, Investor Relations Manager, Orion
Group Holdings, Inc., dated June 27, 2017 (``Orion Group Letter'');
(15) Kieran O'Sullivan, Chairman, President and CEO, CTS
Corporation, dated June 28, 2017 (``CTS Corporation Letter''); (16)
Sherri Brillon, Executive Vice-President and Chief Financial
Officer, Encana Corporation, dated June 29, 2017 (``Encana
Letter''); (17) Steven C. Lilly, Chief Financial Officer, Triangle
Capital Corporation, dated June 29, 2017 (``Triangle Capital
Letter''); (18) Robert F. McCadden, Executive Vice President and
Chief Financial Officer, Pennsylvania Real Estate Investment Trust,
dated June 29, 2017 (``Pennsylvania REIT Letter''); (19) Andrew
Stevens, General Counsel, IMC Financial Markets, dated June 30, 2017
(``IMC Letter''); (20) Daniel S. Tucker, Senior Vice President and
Treasurer, Southern Company, dated July 5, 2017 (``Southern Company
Letter''); (21) Cole Stevens, Investor Relations Associate, Nobilis
Health, dated July 6, 2017 (``Nobilis Health Letter''); (22) Mehmet
Kinak, Head of Global Equity Market Structure & Electronic Trading,
et al., T. Rowe Price Associates, Inc., dated July 7, 2017 (``T.
Rowe Price Letter''); (23) David L. Dragics, Senior Vice President,
Investor Relations, CACI International Inc., dated July 7, 2017
(``CACI Letter''); (24) Mark A. Stegeman, Senior Vice President &
CFO, Turning Point Brands, Inc., dated July 12, 2017 (``Turning
Point Letter''); (25) Jon R. Moeller, Vice Chair and Chief Financial
Officer, and Deborah J. Majoras, Chief Legal Officer and Secretary,
The Proctor & Gamble Company, dated July 12, 2017 (``P&G Letter'');
(26) Christopher A. Iacovella, Chief Executive Officer, Equity
Dealers of America, dated July 12, 2017 (``EDA Letter''); (27) Rob
Bernshteyn, Chief Executive Officer, Chairman Board of Directors,
Coupa Software, Inc., dated July 12, 2017 (``Coupa Software
Letter''); (28) Sally J. Curley, Senior Vice President, Investor
Relations, Cardinal Health, Inc., dated July 14, 2017 (``Cardinal
Health Letter''); (29) Mickey Foster, Vice President, Investor
Relations, FedEx Corporation, dated July 14, 2017 (``FedEx
Letter''); (30) Alexander J. Matturri, CEO, S&P Dow Jones Indices,
dated July 18, 2017 (``SPDJI Letter''); (31) John L. Killea, Chief
Legal Officer, Stewart Information Services, dated July 19, 2017
(``Stewart Letter''); (32) M. Farooq Kathwari, Chairman, President &
CEO, Ethan Allen Interiors, Inc., dated July 24, 2017 (``Ethan Allen
Letter''); (33) Jeff Green, Founder, Chief Executive Officer and
Chairman of the Board of Directors, The Trade Desk Inc., dated July
26, 2017 (``Trade Desk Letter''); (34) James J. Angel, Associate
Professor, McDonough School of Business, Georgetown University,
dated July 30, 2017 (``Angel Letter''); (35) Jon Stonehouse, CEO,
and Tom Staab, CFO, BioCryst Pharmaceuticals, Inc., dated July 31,
2017 (``BioCryst Letter''); (36) Peter Campbell, Chief Financial
Officer, Mimecast, dated July 31, 2017 (``Mimecast Letter''); (37)
Joanne Moffic-Silver, Executive Vice President, General Counsel, and
Corporate Secretary, Bats Global Markets, Inc., dated August 2, 2017
(``BZX Letter''); (38) David M. Weisberger, Head of Equities,
ViableMkts, dated August 3, 2017 (``ViableMkts Letter''); (39)
Charles Beck, Chief Financial Officer, Digimarc Corporation, dated
August 3, 2017 (``Digimarc Letter''); (40) Elizabeth K. King,
General Counsel and Corporate Secretary, New York Stock Exchange,
dated August 9, 2017 (``NYSE Letter 2''); (41) Representative Sean
P. Duffy and Representative Gregory W. Meeks, dated August 9, 2017
(``Duffy/Meeks Letter''); (42) Michael J. Chewens, Senior Executive
Vice President & Chief Financial Officer, NBT Bancorp Inc., dated
August 11, 2017 (``NBT Bancorp Letter''); (43) Barry Zwarenstein,
Chief Financial Officer, Five9, Inc., dated August 11, 2017 (``Five9
Letter''); (44) William A. Backus, Chief Financial Officer &
Treasurer, Balchem Corporation, dated August 15, 2017 (``Balchem
Letter''); (45) Raiford Garrabrant, Director, Investor Relations,
Cree, Inc., dated August 15, 2017 (``Cree Letter''); and (46) Steven
Paladino, Executive Vice President & Chief Financial Officer, Henry
Schein, Inc., dated August 16, 2017 (``Henry Schein Letter''). All
comments on the proposed rule change are available at: https://www.sec.gov/comments/sr-batsbzx-2017-34/batsbzx201734.htm.
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Summary of the Proposed Rule Change
As described in more detail in the Notice, the Exchange proposes to
introduce Bats Market Close, a closing match process for non-BZX listed
securities. For non-BZX listed securities only, the Exchange's System
\7\ would seek to match buy and sell Market-On-Close (``MOC'') \8\
orders designated for participation in Bats Market Close at the
official closing price for such security published by the primary
listing market.
---------------------------------------------------------------------------
\7\ The term ``System'' is defined as ``the electronic
communications and trading facility designated by the Board through
which securities orders of Users are consolidated for ranking,
execution and, when applicable, routing away.'' See Exchange Rule
1.5(aa).
\8\ The term ``Market-On-Close'' or ``MOC'' means a BZX market
order that is designated for execution only in the Closing Auction.
See Exchange Rule 11.23(a)(15). The Exchange proposed to amend the
description of Market-On-Close orders to include orders designated
to execute in the proposed Bats Market Close.
---------------------------------------------------------------------------
Members \9\ would be able to enter, cancel or replace MOC orders
designated for participation in Bats Market Close beginning at 6:00
a.m. Eastern Time up until 3:35 p.m. Eastern Time (``MOC Cut-Off
Time'').\10\ Members would not be able to enter, cancel or replace MOC
orders designated for participation in the proposed Bats Market Close
after the MOC Cut-Off Time.
---------------------------------------------------------------------------
\9\ The term ``Member'' is defined as ``any registered broker or
dealer that has been admitted to membership in the Exchange.'' See
Exchange Rule 1.5(n).
\10\ Currently, the NYSE designates the cut-off time for the
entry of Market At-the-Close Orders as 3:45 p.m. Eastern Time. See
NYSE Rule 123C. Nasdaq, in turn, designates the ``end of the order
entry period'' as 3:50 p.m. Eastern Time. See Nasdaq Rule 4754.
---------------------------------------------------------------------------
At the MOC Cut-Off Time, the System would match for execution all
buy and sell MOC orders entered into the System based on time
priority.\11\ Any remaining balance of unmatched shares would be
cancelled back to the Member(s). The System would disseminate, via the
Bats Auction Feed,\12\ the total size of all buy and sell orders
matched per security via Bats Market Close. All matched buy and sell
MOC orders would remain on the System until the publication of the
official closing price by the primary listing market. Upon publication
of the official closing price by the primary listing market, the System
would execute all previously matched buy and sell MOC orders at that
official closing price.\13\
---------------------------------------------------------------------------
\11\ As set forth in proposed Interpretation and Policy .02, the
Exchange would cancel all MOC orders designated to participate in
Bats Market Close in the event the Exchange becomes impaired prior
to the MOC Cut-Off Time and is unable to recover within 5 minutes
from the MOC Cut-Off Time. The Exchange states that this would
provide Members time to route their orders to the primary listing
market's closing auction. Should the Exchange become impaired after
the MOC Cut-Off Time, proposed Interpretation and Policy .02 states
that it would retain all matched MOC orders and execute those orders
at the official closing price once it is operational.
\12\ The Bats Auction Feed disseminates information regarding
the current status of price and size information related to auctions
conducted by the Exchange and is provided at no charge. See Exchange
Rule 11.22(i). The Exchange also proposed to amend Exchange Rule
11.22(i) to reflect that the Bats Auction Feed would also include
the total size of all buy and sell orders matched via Bats Market
Close.
\13\ The Exchange would report the execution of all previously
matched buy and sell orders to applicable securities information
processor and will designate such trades as ``.P'', Prior Reference
Price. See Notice, supra note 3, at 23321.
---------------------------------------------------------------------------
The Exchange would utilize the official closing price published by
the exchange designated by the primary listing market in the case where
the primary listing market suffers an impairment and is unable to
perform its closing auction process.\14\ In addition, proposed
Interpretation and Policy .03, specifies that up until the closing of
the applicable securities information processor at 8:00 p.m. Eastern
Time, the Exchange intends to monitor the initial publication of the
official closing price, and any subsequent changes to the published
official closing price, and adjust the price of such trades
accordingly. If there is no initial official closing price published by
8:00 p.m. Eastern Time for any security, the Exchange would cancel all
matched MOC orders in such security.
---------------------------------------------------------------------------
\14\ See proposed Interpretation and Policy .01.
---------------------------------------------------------------------------
The Exchange states that it is proposing to adopt Bats Market Close
in response to requests from market participants, particularly buy-side
firms,
[[Page 40204]]
for an alternative to the primary listing markets' closing auctions
that still provides an execution at a security's official closing
price.\15\ Moreover, the Exchange contends that the proposal would not
compromise the price discovery function performed by the primary
listing markets' closing auctions because Bats Market Close would only
accept MOC orders, and not limit orders, and the Exchange would only
execute those matched MOC orders that naturally pair off and
effectively cancel each other out.\16\
---------------------------------------------------------------------------
\15\ See Notice, supra note 3, at 23321. The Exchange
represented that should the Commission approve the proposed rule
change, it would file a separate proposal to offer executions of MOC
orders at the official closing price, to the extent matched on the
Exchange, at a rate less than the fee charged by the applicable
primary listing market. The Exchange also represented that it
intends for such fee to remain lower than the fee charged by the
applicable primary listing market. See id.
\16\ See id.
---------------------------------------------------------------------------
III. Summary of the Comments
As of August 16, 2017, the Commission has received forty-six
comment letters on the proposal, including a response from the
Exchange.\17\ Six commenters supported the proposal,\18\ and thirty-six
commenters opposed the proposal.\19\
---------------------------------------------------------------------------
\17\ See supra note 5.
\18\ See PDQ Letter, supra note 5; Clearpool Letter, supra note
5; Virtu Letter, supra note 5; SIFMA Letter, supra note 5; IEX
Letter, supra note 5; and ViableMkts Letter, supra note 5.
\19\ See NASDAQ Letter, supra note 5; NYSE Letter 1, supra note
5; Bowers Letter, supra note 5; Meridian Letter, supra note 5;
Americas Executions Letter, supra note 5; GTS Securities Letter,
supra note 5; Customers Bancorp Letter, supra note 5; Masonite
International Letter, supra note 5; Orion Group Letter, supra note
5; CTS Corporation Letter, supra note 5; Encana Letter, supra note
5; Triangle Capital Letter, supra note 5; Pennsylvania REIT Letter,
supra note 5; IMC Letter, supra note 5; Southern Company Letter,
supra note 5; Nobilis Health Letter, supra note 5; T. Rowe Price
Letter, supra note 5; CACI Letter, supra note 5; Turning Point
Letter, supra note 5; P&G Letter, supra note 5; EDA Letter, supra
note 5; Coupa Software Letter, supra note 5; Cardinal Health Letter,
supra note 5; FedEx Letter, supra note 5; SPDJI Letter, supra note
5; Stewart Letter, supra note 5; Ethan Allen Letter, supra note 5;
Trade Desk Letter, supra note 5; BioCryst Letter, supra note 5;
Mimecast Letter, supra note 5; Digimarc Letter, supra note 5; NYSE
Letter 2, supra note 5; NBT Bancorp Letter, supra note 5; Five9
Letter, supra note 5; Balchem Letter, supra note 5; Cree Letter,
supra note 5; and Henry Schein Letter, supra note 5. In addition,
one commenter urged the Commission to conduct a close analysis of
the proposal and stated that if the Bats proposal would seriously
degrade the quality of the closing price, then it should be
rejected. See Angel Letter, supra note 5. Other commenters expressed
concern that the proposal could disrupt the closing auction process
on the primary listing markets and asked the Commission to carefully
consider the impacts of the proposal and whether such impacts would
be necessary and helpful to public companies. See Duffy/Meeks
Letter, supra note 5, at 1-2.
---------------------------------------------------------------------------
Six commenters supported the proposal and stated that it would
increase competition among exchanges for executions of orders at the
close.\20\ These commenters asserted that increased competition could
result in reduced fees for market participants.\21\ Three commenters
characterized the primary listing markets as maintaining a ``monopoly''
on orders seeking a closing price with no market competition, which
they argued has, and would continue to, result in a continual increase
in fees for such orders if the proposal were not approved.\22\ In
addition, IEX argued that the proposal does not unduly burden
competition as exchanges often attempt to compete by adopting
functionality or fee schedules developed by competitors.\23\ ViableMkts
also asserted that the proposal is not fully competitive with closing
auctions, as it does not accept priced orders or disseminate imbalance
information.\24\ Rather, the proposal competes with other un-priced
orders in closing auctions, which in its view, is not destructive to
the mission of the closing auction.\25\
---------------------------------------------------------------------------
\20\ See PDQ Letter, supra note 5; Clearpool Letter, supra note
5, at 2; Virtu Letter, supra note 5, at 2; SIFMA Letter, supra note
5, at 2; IEX Letter, supra note 5, at 1; and ViableMkts Letter,
supra note 5, at 1-2.
\21\ See PDQ Letter, supra note 5; Clearpool Letter, supra note
5, at 2; Virtu Letter, supra note 5, at 2; SIFMA Letter, supra note
5, at 2; IEX Letter, supra note 5, at 1; and ViableMkts Letter,
supra note 5, at 1.
\22\ See IEX Letter, supra note 5, at 3; Clearpool Letter, supra
note 5, at 2; and ViableMkts Letter, supra note 5, at 1-2. However,
one commenter also stated that it believes the fees charged by NYSE
and NASDAQ for participating in their closing auctions are not
excessive and there is no need for additional fee competition for
executing orders at the official closing price. See GTS Letter,
supra note 5, at 5.
\23\ See IEX Letter, supra note 5, at 3.
\24\ See ViableMkts Letter, supra note 5, at 5.
\25\ See id. ViableMkts also argued that the effect of this
competition will most likely be increased volumes at the closing
price because of lower marginal costs and the potential to attract
new types of investors to transact at the closing price. See id.
---------------------------------------------------------------------------
In contrast, other commenters argued that the proposal would impede
fair competition, including by ``free-riding'' on the investments the
primary listing markets have made in their closing auctions.\26\
Specifically, NYSE asserted that the proposal is an unnecessary and
inappropriate burden on competition as it would allow BZX to use the
closing prices established through the auction of a primary listing
market, without bearing any of the costs or risks associated with
conducting a closing auction.\27\ NYSE added that the existing exchange
fees for closing auctions reflect the value created by the primary
listing exchange's complex procedures and technology to determine the
official closing price of a security.\28\ NYSE emphasized that it has
invested significantly in intellectual property and software to
implement systems that facilitate orderly price discovery in the
closing auction, as well as surveillance tools necessary to monitor
activity leading up to, and in, the closing process.\29\ NYSE also
noted that the proposal differs from the NASDAQ and NYSE Arca competing
auctions in securities not listed on their exchanges in that such
auctions compete on a level playing field because they do not rely on
prices established by the primary listing exchange and they serve as an
alternative method of establishing an official closing price if a
primary listing exchange is unable to conduct a closing auction due to
a technology issue.\30\
---------------------------------------------------------------------------
\26\ See NYSE Letter 1, supra note 5, at 9-10; NASDAQ Letter,
supra note 5, at 6 & 9; BioCryst Letter, supra note 5, at 2;
Digimarc Letter, supra note 5, at 1-2; NBT Bancorp Letter, supra
note 5, at 2; Balchem Letter, supra note 5, at 2; and Cree Letter,
supra note 5, at 2. See also Angel Letter, supra note 5, at 3
(calling for a rationalization of intellectual property protection
in order to foster productive innovation).
\27\ See NYSE Letter 1, supra note 5, at 9 and NYSE Letter 2,
supra note 5, at 1-3 (adding that the proposal is anti-competitive
because it is proposing to sell at a lower price the closing prices
produced through resources expended by NYSE).
\28\ See NYSE Letter 1, supra note 5, at 9. NYSE also argued
that the proposal impacts competition for listings, as issuers
choose where to list their securities based on how primary listing
exchanges are able to centralize liquidity and perform closing
auctions. See infra note 116 and accompanying text.
\29\ See NYSE Letter 2, supra note 5, at 2. Moreover, NYSE
stated that it dedicates resources to providing systems to
designated market makers (``DMMs'') necessary to facilitate the
closing of trading as well as to floor brokers to enter and manage
their customers' closing interest. See id.
\30\ See NYSE Letter 1, supra note 5, at 6 and NYSE Letter 2,
supra note 5, at 3-4.
---------------------------------------------------------------------------
NASDAQ also argued that the proposal would burden competition.
Specifically, NASDAQ believed that the proposal undermines intra-market
competition, by removing orders from NASDAQ's auction book and
prohibiting those orders from competing on NASDAQ, which NASDAQ argued
is necessary for the exchange to arrive at the most accurate closing
price.\31\ NASDAQ also stated that, by diverting orders away from NYSE
and NASDAQ, the proposal would detract from robust price competition
and discovery that closing auctions ensure.\32\ NASDAQ further argued
that in order for BZX to meaningfully enhance competition, it would
have to generate its own closing price, as opposed to merely utilizing
the closing price generated by a primary listing market.\33\
---------------------------------------------------------------------------
\31\ See NASDAQ Letter, supra note 5, at 9.
\32\ See NASDAQ Letter, supra note 5, at 10. See also infra
notes 45-81 and accompanying text (discussing comments on the
proposal's impact on price discovery).
\33\ See id., at 13.
---------------------------------------------------------------------------
[[Page 40205]]
In addition, both NYSE and NASDAQ referenced the Commission's
disapproval of NASDAQ's proposal to create a Benchmark Order as support
that BZX has not sufficiently satisfied its obligation to justify that
the proposal is consistent with the Act and not an inappropriate burden
on competition. NYSE argued that BZX essentially proposes to compete
with broker-dealer agency order matching services.\34\ NYSE asserted
that the Commission disapproved NASDAQ's Benchmark Order, in part
because it would provide an exchange with an unfair advantage over
competing broker-dealers, which was not consistent with Section 6(b)(8)
of the Act.\35\ NASDAQ further argued that the disapproval of its
Benchmark Order proposal supports the assertion that an exchange must
articulate how a proposed service is consistent with the policy goals
of the Act with respect to national securities exchanges.\36\
---------------------------------------------------------------------------
\34\ See NYSE Letter 1, supra note 5, at 8.
\35\ See id.
\36\ See NASDAQ Letter, supra note 5, at 5.
---------------------------------------------------------------------------
In response to commenters' contentions that the proposal would
burden competition, BZX asserted that the proposal would enhance rather
than burden competition.\37\ In this regard, BZX argued that its
proposal would promote competition in the use of MOC orders at the
official closing price.\38\ Further, it asserted that the Commission
has approved the operation of competing closing auctions, noting in
particular the closing auctions on NASDAQ, NYSE Arca, and the American
Stock Exchange.\39\ BZX further argued that there is precedent for an
exchange to execute orders solely at reference prices while not also
displaying priced orders for that security.\40\
---------------------------------------------------------------------------
\37\ See BZX Letter, supra note 5, at 10-11.
\38\ See id., at 10. BZX further argued that NASDAQ's assertion
that the proposal would undermine competition amongst orders is
misplaced because BZX believes that paired MOC orders, which are
beneficiaries of price discovery and not price-setting orders do not
impact interactions that take place on another exchange. See id., at
11.
\39\ See BZX Letter, supra note 5, at 6. In addition, in
response to NASDAQ's contention that it is aware of no regulator in
any jurisdiction that has sanctioned a diversion of orders from the
primary market close, BZX noted the Ontario Securities Commission's
approval of a similar proposal by Chi-X Canada ATS, which it said is
currently owned by NASDAQ, to match MOC orders at the closing price
established by the Toronto Stock Exchange. See NASDAQ Letter, supra
note 5, at 10; BZX Letter, supra note 5, at 7 (stating that the
Ontario Securities Commission stated that the proposal would not
threaten the integrity of the price formation process and would
pressure the Toronto Stock Exchange to competitively price
executions during their closing auction).
\40\ See id. at 6 (describing NYSE's after hours crossing
sessions which executes orders at the NYSE official closing price
and the ISE Stock Exchange functionality that only executed orders
at the midpoint of the NBBO and did not display orders).
---------------------------------------------------------------------------
BZX also argued that, rather than looking to compete with broker-
dealer services, it is seeking to compete on price with the primary
listing markets' closing auctions.\41\ In addition, BZX argued that,
contrary to the assertions by NYSE and NASDAQ, its proposal does not
implicate the same issues as NASDAQ's Benchmark Order proposal.\42\
---------------------------------------------------------------------------
\41\ See BZX Letter, supra note 5, at 10.
\42\ See id., at 11 (asserting that the disapproval of that
proposal was primarily because it raised issues under the Market
Access Rule).
---------------------------------------------------------------------------
BZX also challenged the assertion that it was ``free-riding'' on
the primary listing exchanges' closing auctions.\43\ In this regard,
BZX argued that instead it was, on balance, providing a ``a materially
better value to the marketplace'' in two ways: By not diverting price-
forming limit orders away from the primary listing market; and by
providing users with the official closing price because any other price
would be undesirable to market participants and potentially harmful to
price formation.\44\
---------------------------------------------------------------------------
\43\ See BZX Letter, supra note 5, at 5.
\44\ See id.
---------------------------------------------------------------------------
The majority of commenters addressed the potential impacts of the
proposal on price discovery in the closing auctions on the primary
listing markets. Seven commenters stated that the proposal would not
negatively impact price discovery in the primary listing markets'
closing auctions.\45\ These commenters asserted that because Bats
Market Close would only execute paired MOC orders, and not limit-on-
close orders, it would not impede the price discovery mechanisms of the
primary listing markets' closing auctions. Three commenters referenced
the current NASDAQ and NYSE Arca closing auction processes for
securities listed on other exchanges, stating that these competing
closing auction processes, which have been permitted by the Commission,
may attract limit orders from the primary listing market and impede
price discovery, unlike the BZX proposal which is limited to market
orders.\46\ In addition, five commenters argued that, because BZX will
publish the size of matched MOC orders in advance of the primary
market's cut-off time, market participants would have available
information needed to make further decisions regarding order execution
and thus price discovery would not be impaired.\47\ Two commenters also
asserted that many brokers already provide market-on-close pricing to
customers through products that match orders internally, and the
proposal may provide incentives for these brokers to send such orders
to an exchange, thereby increasing transparency, reliability and price
discovery at the close.\48\
---------------------------------------------------------------------------
\45\ See PDQ Letter, supra note 5; Clearpool Letter, supra note
5, at 3; Virtu Letter, supra note 5, at 2; SIFMA Letter, supra note
5, at 2; IEX Letter, supra note 5, at 1-2; Angel Letter, supra note
5, at 4; and ViableMkts Letter, supra note 5, at 3-4.
\46\ See Clearpool, supra note 5, at 3; IEX Letter, supra note
5, at 2; and Angel Letter, supra note 5, at 4.
\47\ See Clearpool Letter, supra note 5, at 3; SIFMA Letter,
supra note 5, at 2; IEX Letter, supra note 5, at 2; Angel Letter,
supra note 5, at 4; and ViableMkts Letter, supra note 5, at 3.
\48\ See Clearpool, supra note 5, at 3; and ViableMkts Letter,
supra note 5, at 4-5. One commenter further argued that to the
extent BZX accrues market share as a result of the proposal it will
likely result from less MOC pairing executed off-exchange. See Angel
Letter, supra note 5, at 4.
---------------------------------------------------------------------------
Thirty-two commenters stated that the proposal would further
fragment the markets and harm price discovery in the closing auctions
on the primary listing markets.\49\ For example, NASDAQ argued that
BZX's MOC orders would be incapable of contributing to price discovery,
and instead would further fragment the market by drawing orders and
quotations away from primary closing auctions and undermine the
mechanisms used to set closing prices.\50\ Specifically, NASDAQ
expressed concern that the availability of Bats Market Close could
cause a reduction in the number of limit-on-close orders
[[Page 40206]]
submitted to the primary listing markets' closing auctions, which
NASDAQ asserted would harm price discovery at the market close.\51\
Moreover, NASDAQ argued that even if the proposal only resulted in
fewer market-on-close orders submitted to NASDAQ closing auctions,
investors would be harmed because the official closing price could
potentially represent a stale or undermined price.\52\ NASDAQ asserted
that its closing cross is designed to maximize the number of shares
that can be executed at a single price and that the number of market-
on-close orders impacts the number of shares able to execute in a
closing cross.\53\ Accordingly, NASDAQ argued that any attempt to
divert trading interest, including market-on-close orders, from its
closing auction would be detrimental to investors as it would inhibit
NASDAQ's closing auction from functioning as intended and would
negatively affect the quality of the official closing price.\54\ In
addition, NASDAQ stated that it considered, but chose not to, disclose
segmented information, such as matched MOC or LOC shares, for its
closing auction in a piece-meal fashion, because NASDAQ believed it
would lead to unintended consequences and undermine price discovery in
the closing auction.\55\
---------------------------------------------------------------------------
\49\ See NASDAQ Letter, supra note 5; NYSE Letter 1, supra note
5; Bowers Letter, supra note 5; Meridian Letter, supra note 5;
Americas Executions Letter, supra note 5; GTS Securities Letter,
supra note 5; Customers Bancorp Letter, supra note 5; Masonite
International Letter, supra note 5; Orion Group Letter, supra note
5; CTS Corporation Letter, supra note 5; Encana Letter, supra note
5; Triangle Capital Letter, supra note 5; Pennsylvania REIT Letter,
supra note 5; IMC Letter, supra note 5; Southern Company Letter,
supra note 5; Nobilis Health Letter, supra note 5; T. Rowe Price
Letter, supra note 5; CACI Letter, supra note 5; Turning Point
Letter, supra note 5; P&G Letter, supra note 5; EDA Letter, supra
note 5; Coupa Software Letter, supra note 5; Cardinal Health Letter,
supra note 5; FedEx Letter, supra note 5; Trade Desk Letter, supra
note 5; BioCryst Letter, supra note 5; Mimecast Letter, supra note
5; Digimarc Letter, supra note 5; NBT Bancorp Letter, supra note 5;
Balchem Letter, supra note 5; Cree Letter, supra note 5; and Henry
Schein Letter, supra note 5. See also Duffy/Meeks Letter, supra note
5, at 1 (noting that public companies are expressing concern that
the proposal will further fragment the market and cause harm to the
pricing of their companies' shares at the close, and as such, they
are concerned the proposal may disrupt the process for determining
the closing price on the primary listing market, which is viewed as
``an incredibly well-functioning part of the capital markets'').
\50\ See NASDAQ Letter, supra note 5, at 8 (noting that, for
this reason NASDAQ did not believe the proposal promotes fair and
orderly markets in accordance with Sections 6 and 11A of the
Exchange Act).
\51\ See NASDAQ Letter, supra note 5, at 5 and 11. NASDAQ
asserted that the impact of the proposal on the use of limit-on-
close orders that may be submitted to NYSE and NASDAQ should be
studied and carefully analyzed.
\52\ See NASDAQ Letter, supra note 5, at 12. NASDAQ also stated
that a credible independent study of the potential risk to price
discovery is essential in order to consider whether the proposal is
consistent with the Act. See id.
\53\ See id., at 11.
\54\ See id. NASDAQ also notes that while BZX does not have a
responsibility to contribute to price discovery in NASDAQ's closing
auction, it also is obligated to avoid affirmatively undermining
price discovery. See id., at 5.
\55\ See id., at 4.
---------------------------------------------------------------------------
NYSE similarly argued that even though Bats Market Close would only
accept MOC orders, it could materially impact official closing prices
determined through a NYSE closing auction.\56\ First, NYSE emphasized
the importance of the centralization of orders during the closing
auction on the primary listing exchange, noting that it allows for
investors to find contra-side liquidity and assess whether to offset
imbalances, and for orders to be priced based on the true supply and
demand in the market.\57\ NYSE explained that its designated market
makers (``DMMs''), which have an obligation to facilitate the close of
trading in their assigned securities, factor in the size of paired-off
volume, and the composition of the closing interest, in assessing the
appropriate closing price.\58\ NYSE asserted that under the proposal,
DMMs would lose full visibility into the size and composition of MOC
interest, and thus would likely have to make more risk-adverse closing
decisions, resulting in inferior price formation.\59\
---------------------------------------------------------------------------
\56\ See NYSE Letter 1, supra note 5, at 3.
\57\ See NYSE Letter 1, supra note 5, at 4.
\58\ See NYSE Letter 1, supra note 5, at 4. In response to this
assertion, ViableMkts argues that use of Bats Market Close is
voluntary. Accordingly, if a market participant wanted a DMM to be
aware of their closing activity they could still send their orders
to the NYSE closing auction. See ViableMkts Letter, supra note 5, at
4.
\59\ See NYSE Letter 1, supra note 5, at 4.
---------------------------------------------------------------------------
Second, NYSE argued that the proposal would also detrimentally
impact price discovery on the NYSE Arca and NYSE American automated
closing auctions. NYSE stated that in the last six months there were
130 instances where the official closing price determined through a
NYSE Arca closing auction was based entirely on paired-off market order
volume.\60\ In those instances, pursuant to NYSE Arca rules, the
official closing price is the midpoint of the auction NBBO as of the
time the auction is conducted. NYSE stated that if all market orders
for a NYSE Arca listed security were sent to BZX, the official closing
price would instead be the consolidated last sale price, which can
differ from the midpoint of the auction NBBO by as much as 3.2%.\61\
---------------------------------------------------------------------------
\60\ See NYSE Letter 1, supra note 5, at 5. NYSE represented
that once NYSE American transitions to Pillar technology, it will
conduct a closing auction in an identical manner to NYSE Arca.
\61\ See id.
---------------------------------------------------------------------------
Several other commenters similarly explained how the proposal may
impact the integrity of official closing prices. In particular, GTS, a
DMM on NYSE, argued that market-on-close orders are a vital component
of closing prices and, should those orders be diverted away from the
primary listing markets as a result of the proposal, it could undermine
the official closing prices.\62\ Multiple commenters stated that one of
the benefits of a centralized closing auction conducted by the primary
listing market is that it allows market participants to fairly assess
supply and demand such that the closing prices reflect both market
sentiment and total market participation.\63\ Because the proposal may
cause orders to be diverted away from the primary listing exchanges,
these commenters argued that it would negatively affect the reliability
and value of closing auction prices.
---------------------------------------------------------------------------
\62\ See GTS Securities Letter, supra note 5, at 2-3.
\63\ See Bowers Letter, supra note 5; Americas Executions
Letter, supra note 5; and FedEx Letter, supra note 5. See also Coupa
Software Letter, supra note 5; Trade Desk Letter, supra note 5; and
Mimecast Letter, supra note 5 (arguing that gathering liquidity in a
single venue ensures that the market reaches an accurate and
reliable closing price for their stocks).
---------------------------------------------------------------------------
Some commenters further argued that because the proposal undermines
the reliability of the closing process and/or the official closing
price it also poses a risk to listed companies and its
shareholders.\64\ In addition, one commenter, SPDJI, argued that the
proposal may also impact confidence in the pricing of benchmark indices
as confidence in closing prices is a prerequisite for market
participants to maintain confidence in the pricing of benchmark
indices.\65\ Accordingly, SPDJI asserted that because the closing price
is a critical data point for investors, great caution should be taken
in any changes to the closing auction.\66\
---------------------------------------------------------------------------
\64\ See NYSE Letter 1, supra note 5, at 3 (arguing that the
proposal is indifferent to the potential risks to public companies
and that the closing is the most important data point for
shareholders); IMC Financial Letter, supra note 5, at 1-2; Nobilis
Health Letter, supra note 5; EDA Letter, supra note 5, at 1-2; Coupa
Software Letter, supra note 5; Ethan Allen Letter, supra note 5;
Trade Desk Letter, supra note 5; BioCryst Letter, supra note 5;
Digimarc Letter, supra note 5; Duffy/Meeks Letter, supra note 5, at
1-2 (stating that public companies are concerned the proposal will
have an unforeseen effect on the pricing of their companies' shares
at the close, ultimately harming a critical measure of the company's
value and harming its shareholders); NBT Bancorp Letter, supra note
5; Five9 Letter, supra note 5; Balchem Letter, supra note 5; Cree
Letter, supra note 5; and Henry Schein Letter, supra note 5. Several
issuers also asserted that decentralizing closing auctions will
increase volatility, reduce visibility, and negatively impact
liquidity for equity securities. See e.g., Customers Bancorp Letter,
supra note 5; Orion Group Letter, supra note 5; Nobilis Health
Letter, supra note 5; Cardinal Health Letter, supra note 5; and
Stewart Letter, supra note 5.
\65\ See SPDJI Letter, supra note 5, at 3 (stating that it
relies solely on primary market auction prices to calculate the
official closing index values, and that these closing index values
play an important role in the markets, including use by portfolio
managers to measure their funds' value and for use in calculating
settlement prices for certain products); see also Coupa Software
Letter, supra note 5; Trade Desk Letter, supra note 5; and Henry
Schein Letter, supra note 5 (stating that the official closing price
is used to value their stocks for purposes of various indexes and
mutual funds).
\66\ See SPDJI Letter, supra note 5, at 2. In contrast, one
commenter acknowledged that while impacting the quality of the
closing price is an objection that deserves close analysis, as the
closing price is ``the most important price of the day,'' and would
warrant rejection of the proposal, the commenter does not believe
the proposal would harm the quality of the closing price. See Angel
Letter, supra note 5, at 4.
---------------------------------------------------------------------------
Moreover, some commenters argued that the centralization of
liquidity at the open and close of trading, and how primary listing
markets perform during the opening and closing, are important factors
for issuers in determining where to list their securities, and the
additional risk posed to listed
[[Page 40207]]
companies from an unreliable or unrepresentative closing price and/or
process could impact an issuer's decision where to list and/or cause
companies to forgo going public.\67\
---------------------------------------------------------------------------
\67\ See NYSE Letter 1, supra note 5, at 3 and 9 (noting that no
single data point is more important than the closing price to the
company or its shareholders); GTS Securities Letter, supra note 5,
at 3-5; EDA Letter, supra note 5, at 1; Duffy/Meeks Letter, supra
note 5, at 1 (stating that the closing price is a critical measure
of a company's value and that public companies view the closing
auction on the listing exchange as a critical aspect of listing).
See also infra note 116 and accompanying text.
---------------------------------------------------------------------------
In response to concerns regarding the impact of the proposal on the
price discovery process, BZX argued that, because the proposal would
only match MOC orders and would require the Exchange to publish the
number of matched shares in advance of the primary listing markets'
cut-off times, BZX believes it would avoid any impact on price
discovery.\68\ In addition, BZX offered to disseminate more information
with regard to Bats Market Close and to disseminate such information
via the applicable securities information processor, in addition to the
Bats Auction Feed.\69\ BZX further challenged commenters' concerns that
Bats Market Close could pull all MOC orders away from the primary
listing markets and alter the calculation of the closing price, noting
that such a scenario could occur today as a result of competing closing
auctions and broker-dealers that offer internal MOC order matching
solutions.\70\ Furthermore, BZX argued that the competing auctions run
by NASDAQ and NYSE Arca could not only pull all MOC interest away from
the primary listing markets but could also divert all price-setting
limit-on-close interest from those markets as well.\71\ BZX also
asserted that such competing closing auctions often may produce bad
auction prices on the non-primary market, as compared to the proposed
Bats Market Close which would ensure that market participants receive
the official closing price.\72\ Accordingly, BZX contends that the
proposal would not impose fragmentation on the market at the close that
does not already exist today.\73\
---------------------------------------------------------------------------
\68\ See BZX Letter, supra note 5, at 3-4.
\69\ See id., at 4 and 12. BZX further asserted that it believed
modern software can easily and simply add this data to data
disseminated by the primary listing markets. See id., at 4.
\70\ See id., at 4-5 (noting that neither NYSE nor NASDAQ
prohibits their members from withholding MOC orders from their
closing auctions). In response, NYSE stated that it believed such
broker-dealer services degrade the public price and size discovery
of the primary listing exchanges' closing auctions, but that such
activities are not held to the same standards under the Act as
national securities exchanges and against which the BZX proposal
must be evaluated. See NYSE Letter 2, supra note 5, at 4.
\71\ See BZX Letter, supra note 5, at 5. BZX provided evidence
of 14 instances in June 2017 where a NASDAQ-listed security had no
volume in NASDAQ's closing auction but did have volume in NYSE
Arca's closing auction. See id. In response, NYSE argued that it
believed it was misleading to compare the proposal to the competing
closing auctions because BZX would be offering neither a competing
closing auction nor a facility to establish the official closing
price should a primary listing exchange invoke its closing auction
contingency plan. See NYSE Letter 2, supra note 5, at 3.
\72\ See id. at 4. BZX asserted that 86% of closing auctions
conducted by NASDAQ for NYSE-listed securities in June 2017 resulted
in closing prices different from the official closing price and 84%
of competing closing auctions conducted by NYSE Arca for NASDAQ-
listed securities in June 2017 resulted in closing prices different
from the official closing price.
\73\ See id. at 7-8.
---------------------------------------------------------------------------
In response to NYSE's arguments regarding the impact on a DMM's
ability to price the close, BZX argued that this point highlights what
it believes to be an additional benefit of allowing it to compete with
NYSE's closing auction.\74\ Specifically, BZX argued that its proposal
would provide an alternative liquidity pool that would allow users to
avoid the ``subjective decision making of the DMMs.'' \75\
---------------------------------------------------------------------------
\74\ See id. at 10.
\75\ Id. In response, NYSE argued that BZX's claims regarding
the role of the DMM were not germane to whether the proposal is
consistent with the Act and stated that it believed the scale of its
closing auction and the low levels of volatility observed in the
auction demonstrate its effectiveness. See NYSE Letter 2, supra note
5, at 4.
---------------------------------------------------------------------------
With regard to concerns about the impact of the proposal on issuers
and their shareholders, BZX reaffirmed that the proposal is designed
not to impact the trading environment for issuers and their securities
or the price discovery function of the primary listing markets' closing
auction.\76\
---------------------------------------------------------------------------
\76\ See BZX Letter, supra note 5, at 2 and 4.
---------------------------------------------------------------------------
In arguing that the proposal would cause fragmentation and thus
impair the closing price, NYSE and NASDAQ also asserted that the
proposal contradicts the Commission's approval of recent amendments to
the National Market System Plan to Address Extraordinary Market
Volatility (the ``LULD Plan'') which, they argue, centralize re-opening
auction liquidity at the primary listing exchange by prohibiting other
market centers from re-opening following a trading pause until the
primary listing exchange conducts a re-opening auction.\77\
Specifically, these commenters asserted that it would be inconsistent
for the Commission to find it in the public interest to consolidate
trading in a re-opening auction, while sanctioning fragmentation of
trading in a closing auction.\78\
---------------------------------------------------------------------------
\77\ See NASDAQ Letter, supra note 5, at 6; NYSE Letter 1, supra
note 5, at 3.
\78\ See NYSE Letter 1, supra note 5, at 3.
---------------------------------------------------------------------------
In response, BZX argued that this comparison is misplaced.\79\
Specifically, BZX said the amendment to the LULD Plan cited by NYSE and
NASDAQ granted the primary listing market the ability set the re-
opening price but did not mandate the consolidation of orders at the
primary listing market following a trading halt.\80\ Accordingly, BZX
believes the proposal is consistent with the LULD Plan as it seeks to
avoid producing a ``bad'' or ``outlier'' closing price and does not
affect the centralization of price-setting closing auction orders.\81\
---------------------------------------------------------------------------
\79\ See BZX Letter, supra note 5, at 8-9.
\80\ See id.
\81\ See id.
---------------------------------------------------------------------------
Several commenters addressed the potential impact of the proposal
on market complexity and operational risk as a result of increased
market fragmentation. Some of these commenters believed that the
proposal would not introduce significant additional complexity or
operational risk. For example, two commenters argued that the proposal
could enhance the resiliency of the closing auction process by
providing market participants an additional mechanism through which to
execute orders at the official closing price in the event of a
disruption at a primary listing market.\82\ Another commenter argued
that exchanges already have many market data feeds that firms must
purchase to ensure that they have all of the information necessary to
make informed execution decisions and that adding another data feed
will not add complexity given the small amount of information that goes
into the closing data feed and the current capabilities of market
participants to re-aggregate multiple data feeds.\83\
---------------------------------------------------------------------------
\82\ See SIFMA Letter, supra note 5, at 2 and ViableMkts Letter,
supra note 5, at 3 (further noting that once BZX is able to process
MOC orders, they would be in a position to develop the capability to
offer a full backup closing auction process).
\83\ See Clearpool Letter, supra note 5, at 2.
---------------------------------------------------------------------------
In contrast, other commenters argued that the proposal would add
unnecessary market complexity and operational risk. In particular, two
commenters noted that the proposal would require market participants to
monitor an additional data feed, the Bats Auction Feed, one noting that
if additional exchanges adopted similar functionality to Bats Market
Close, it would require monitoring of even more data feeds.\84\ These
commenters argued that monitoring an additional data feed could
increase operational risk by creating another point of failure at a
[[Page 40208]]
critical time of the trading day.\85\ One commenter also noted the
increased complexity involved in sending order flow to more than one
exchange in short periods of time near the close of the trading
day.\86\ This commenter argued that the proposal increases operational
risk and complexity at a critical point of the trading day by forcing
market participants whose orders did not match in Bats Market Close to
quickly send MOC orders from one exchange to another before the cut-off
time at the primary market closing auction.\87\ This added complexity,
GTS argued, puts additional stress on the systems of exchanges and
increases the potential for disruptions.\88\ Lastly, two commenters
argued that the proposal could encourage other exchanges, broker-
dealers, and alternative trading systems to offer similar processes,
which would introduce undesirable fragmentation to the market and lead
to operational challenges for investors and traders.\89\
---------------------------------------------------------------------------
\84\ See NYSE Letter 1, supra note 5, at 7; IMC Letter, supra
note 5, at 1.
\85\ See IMC Letter, supra note 5, at 1 and NYSE Letter 1, supra
note 5, at 7. See also Ethan Allen Letter, supra note 5 (arguing the
proposal would add a layer of complexity).
\86\ See GTS Letter, supra note 5, at 6.
\87\ See GTS Letter, supra note 5, at 6. Furthermore, NYSE
argued that in certain situations, investors may not be able to
participate in a closing auction on NYSE American or NYSE Arca if
they wait until after their order was cancelled by BZX to send in a
market-on-close order to closing auctions on NYSE Arca and NYSE
American. NYSE explained that in situations where there is an order
imbalance priced outside the Auction Collars, orders on the side of
the imbalance are not guaranteed to participate in the closing
auctions on those two exchanges. Earlier submitted market-on-close
orders have priority. See NYSE Letter 1, supra note 5, at 8.
\88\ See GTS Letter, supra note 5, at 6.
\89\ See T. Rowe Price Letter, supra note 5, at 1-2. See also
NASDAQ Letter, supra note 5, at 8 (noting that other exchanges may
propose similar offerings but choose different pairing cut-off times
which could further complicate investors' decisions and programming
requirements).
---------------------------------------------------------------------------
In response, BZX argued that the proposal would not increase
operational risks, but rather would provide a way to address the single
point of failure risk that exists for closing auctions conducted on the
primary listing markets.\90\ BZX argued that despite the current system
of designated auction backups, market participants can be confused
about whether an exchange is in fact able to conduct a closing
auction.\91\ BZX believes Bats Market Close could provide an
alternative option for market participants to route orders, in the
event there is an impairment at the primary listing market, and still
receive the official closing price.\92\
---------------------------------------------------------------------------
\90\ See BZX Letter, supra note 5, at 12.
\91\ See id.
\92\ See id.
---------------------------------------------------------------------------
In addition, as noted above, BZX stated that it would be willing to
disseminate information regarding matched MOC orders, not only via the
Bats Auction Feed, but also via the applicable securities information
processor, if permissible.\93\ BZX added that modern software can
easily and simply add volume data disseminated by the primary listing
markets regarding the closing auction and data regarding matched MOC
orders from the Bats Market Close.\94\
---------------------------------------------------------------------------
\93\ See id., at 4 and 12.
\94\ See id., at 4.
---------------------------------------------------------------------------
Several commenters addressed the issue of whether the proposal
would facilitate manipulation of both the closing auctions on the
primary listing markets, as well as continuous trading during the final
minutes of the trading day. Some commenters did not believe it would do
so. For example, one commenter noted that incentives to manipulate the
closing price already exist and it is unlikely the proposal would
result in increased manipulation of the market close.\95\ In addition,
IEX argued that the proposal would make manipulation of closing crosses
more conspicuous.\96\ IEX also claimed that the Consolidated Audit
Trail would provide a new tool for detecting any such manipulation.\97\
---------------------------------------------------------------------------
\95\ See Angel Letter, supra note 5, at 5.
\96\ See IEX Letter, supra note 5, at 2.
\97\ See id., at 2-3.
---------------------------------------------------------------------------
In contrast, several commenters asserted that the proposal raises a
risk of manipulation, in part due to the asymmetry of information that
would be disseminated, which would allow market participants to utilize
informational advantages to their own benefit. For example, NASDAQ
argued that information concerning the amount of orders matched through
Bats Market Close, would represent tradable information that market
participants could use to ``game'' the closing crosses on the primary
listing markets and undermine fair and orderly markets.\98\ In
particular, NASDAQ argued that its closing auction was designed to
carefully balance the amount and timing of data released so as to
reduce the risk of gaming, but that this new information regarding
paired MOC orders could be used to gauge the depth of the market, the
direction of existing imbalances, and the likely depth remaining at
NASDAQ, creating gaming opportunities.\99\ NYSE similarly argued that
the proposal would increase potential manipulation.\100\ First, NYSE
asserted that the potential for manipulative activity at the close
would increase because primary listing exchange auctions would decrease
in size and thus be easier to manipulate.\101\ NYSE also argued that
the proposal facilitates manipulative activity by providing an
incentive for market participants to inappropriately influence the
closing price when they know they have been successfully paired-off on
BZX.\102\ NYSE further asserted that the proposal could potentially
provide some market participants, such as professional traders, with
useful information that other market participants do not have, such as
the direction of an imbalance, which could be used to influence the
official closing price.\103\
---------------------------------------------------------------------------
\98\ See NASDAQ Letter, supra note 5, at 8.
\99\ See NASDAQ Letter, supra note 5, at 8.
\100\ See NYSE Letter 1, supra note 5, at 6. See also Americas
Executions Letter, supra note 5 (stating that the proposal creates
new opportunities to possibly manipulate the close).
\101\ See NYSE Letter 1, supra note 5, at 6.
\102\ See NYSE Letter 1, supra note 5, at 6.
\103\ See id. However, ViableMkts argued that because these
market participants would not know the full magnitude of the
imbalance, it does not believe the proposal creates an incremental
risk of manipulation. See ViableMkts Letter, supra note 5, at 5.
---------------------------------------------------------------------------
Although not citing concerns regarding manipulation specifically,
T. Rowe Price similarly argued that the proposal would lead to
information asymmetries that could result in changes in continuous
trading behavior leading into the market close as some market
participants could be trading on information gathered from Bats Market
Close pairing results.\104\ T. Rowe Price asserted that a market
participant that is aware of the composition of volume paired through
Bats Market Close at 3:35 p.m. would be in a position to use that
information to influence its trading behavior over the next ten to
fifteen minutes leading in to the closing auction cut-off times on NYSE
and NASDAQ respectively.\105\ T. Rowe Price argued that, as a result,
the proposal could not only impact price discovery in closing auctions
on the primary listing markets it could also impact continuous trading
behavior.\106\
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\104\ See T. Rowe Price Letter, supra note 5, at 2-3.
\105\ See id.
\106\ See id.
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NYSE also stated that identifying manipulative activity would also
become more difficult under the proposal due to the time difference
between the Bats Market Close and primary market closing auctions and
the cross-market nature of the manipulation.\107\ GTS similarly argued
that the proposal would make surveillance of the market close more
difficult and expensive due to
[[Page 40209]]
fragmentation of order flow across multiple markets.\108\
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\107\ See NYSE Letter 1, supra note 5, at 6.
\108\ See GTS Securities Letter, supra note 5, at 6.
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In response, BZX argued that it does not believe that the proposal
creates a potential for increased manipulation.\109\ Should the
Commission approve the proposal, BZX notes that both it and FINRA as
well as other exchanges would continue to surveil for manipulative
activity and ``seek to punish those that engage in such behavior.''
\110\ Furthermore, BZX argued that information asymmetries are inherent
in trading, including the primary listing markets closing
auctions.\111\ For example, BZX argued that the current operation of d-
Quotes on NYSE carries a risk of manipulation as it provides an
informational advantage to NYSE DMMs and floor brokers, and allows d-
Quotes to be entered, modified or cancelled up until 3:59:50 p.m. while
other market participants are prohibited from entering, modifying or
cancelling on-close orders after 3:45 p.m.\112\ Lastly, BZX argued that
the information disseminated through the Bats Auction Feed would not
provide an indication of whether the cancelling of a particular side of
an order is meaningful, which limits its potential to impact the
official closing price.\113\
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\109\ See BZX Letter, supra note 5, at 11-12.
\110\ See id., at 11
\111\ See id., at 11-12.
\112\ See id., at 12. BZX also requested that the Commission
review the appropriateness of NYSE's use of the d-Quote and its
potential for price manipulation of NYSE's closing prices. See id.,
at 9.
\113\ See id.
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Several commenters also addressed the potential impacts of the
proposal on market participants that they assert play important roles
in facilitating closing auctions on NYSE. Specifically, three
commenters asserted that the proposal would have potentially
detrimental impacts on NYSE floor brokers.\114\ Eighteen commenters
asserted that the proposal would make it more difficult for Designated
Market Makers to facilitate an orderly close of NYSE listed securities
as they would lose the ability to continually assess the composition of
market-on-close interest.\115\ Many of these commenters that are
issuers asserted that one of the reasons they chose to list on NYSE was
the ability to have access to a DMM that is responsible for
facilitating an orderly closing auction.\116\
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\114\ See Bowers Letter, supra note 5; Meridian Letter, supra
note 5; and Americas Executions Letter, supra note 5.
\115\ See NYSE Letter 1, supra note 5, at 4; GTS Securities
Letter, supra note 5, at 2-3; Customers Bancorp Letter, supra note
5; Masonite International Letter, supra note 5; Orion Group Letter,
supra note 5; CTS Corporation Letter, supra note 5; Encana Letter,
supra note 5; Triangle Capital Letter, supra note 5; Pennsylvania
REIT Letter, supra note 5; IMC Letter, supra note 5, at 1-2;
Southern Company Letter, supra note 5; Nobilis Health Letter, supra
note 5; CACI Letter, supra note 5; Turning Point Letter, supra note
5; P&G Letter, supra note 5; Cardinal Health Letter, supra note 5;
FedEx Letter, supra note 5; and Stewart Letter, supra note 5. See
also supra notes 57-59 and accompanying text.
\116\ See GTS Securities Letter, supra note 5, at 2-3; Masonite
International Letter, supra note 5; Encana Letter, supra note 5;
Triangle Capital Letter, supra note 5; Pennsylvania REIT Letter,
supra note 5; Nobilis Health Letter, supra note 5; CACI Letter,
supra note 5; Turning Point Letter, supra note 5; P&G Letter, supra
note 5; Cardinal Health Letter, supra note 5; FedEx Letter, supra
note 5; and Stewart Letter, supra note 5.
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Several commenters stated that the proposal could harm issuers,
particularly small and mid-cap companies.\117\ Many of these
commenters, some of which are issuers, stated that the current
centralized closing auctions on the primary listing markets contribute
meaningful liquidity to a company's stock, facilitates investment in
the company, and helps to lower the cost of capital. Accordingly, these
commenters expressed concern that potential fragmentation caused by the
proposal could negatively impact liquidity during the closing auction,
causing detrimental effects to listed issuers.\118\ Several commenters
further argued that centralized closing auctions provide better
opportunities to fill large orders with relatively little price
impact.\119\
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\117\ See NASDAQ Letter, supra note 5, at 6-7; NYSE Letter 1,
supra note 5, at 3; GTS Securities Letter, supra note 5, at 2-5;
Customers Bancorp Letter, supra note 5; Orion Group Letter, supra
note 5; CTS Corporation Letter, supra note 5; IMC Financial Letter,
supra note 5, at 1-2; Southern Company Letter, supra note 5; Nobilis
Health Letter, supra note 5; EDA Letter, supra note 5, at 1-2; Coupa
Software Letter, supra note 5; Trade Desk Letter, supra note 5;
Duffy/Meeks Letter, supra note 5, at 1; and Henry Schein Letter,
supra note 5.
\118\ See Customers Bancorp Letter, supra note 5; Orion Group
Letter, supra note 5; CTS Corporation Letter, supra note 5; Southern
Company Letter, supra note 5; Duffy/Meeks Letter, supra note 5, at
1-2 (noting that the proposal could cause a disruption to the
closing auction process, which could lead to discouraging investors
from participating in and having confidence in our markets); and
Five9 Letter, supra note 5.
\119\ See e.g., Bowers Letter, supra note 5; Americas Executions
Letter, supra note 5; Customers Bancorp Letter, supra note 5; Orion
Group Letter, supra note 5; and Southern Company Letter, supra note
5.
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In contrast, one commenter argued that the proposal would improve
aggregate liquidity at the official closing price.\120\ Specifically,
this commenter asserted that the lower aggregate cost of trading would
likely spur incremental increases in trading volumes.\121\ In addition,
this commenter stated that the ability to enter MOC orders into Bats
Market Close with little risk of information leakage may attract an
additional source of liquidity.\122\
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\120\ See ViableMkts Letter, supra note 5, at 2.
\121\ See id.
\122\ See id.
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Finally, some commenters identified areas that they believed were
not adequately addressed by the proposal and/or made suggestions for
modifications to the Exchange's proposal. For example, one commenter
suggested that BZX extend the proposed MOC Cut-Off Time to closer to
the primary market close.\123\ Another commenter suggested that, as an
alternative, NYSE and NASDAQ should voluntarily review and reduce their
auction fee structures, or, alternatively, the Commission should impose
a cap on transaction fees for closing auctions.\124\ Lastly, NASDAQ
also noted several areas, or scenarios, that it believed were not
adequately explained by the proposal.\125\
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\123\ See Clearpool Letter, supra note 5, at 4.
\124\ See T. Rowe Price Letter, supra note 5, at 3.
\125\ See NASDAQ Letter, supra note 5, at 13. Specifically,
NASDAQ provides several scenarios to illustrate areas in which it
believes how the Bats Market Close would operate is unclear,
including where: (1) NASDAQ does not conduct a closing cross; (2)
the official closing price for a NASDAQ-listed security is the
consolidated last sale price, which is an inferior price to the NBBO
at 4:00 p.m.; and (3) the official closing price would trade through
the Bats resting limit order book. In addition, NASDAQ argues that
BZX did not adequately explain how it would avoid using a possibly
``stale'' price if there were no orders and thus no auction on a
primary listing market, but there were MOC orders in Bats Market
Close.
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IV. Proceedings To Determine Whether To Approve or Disapprove the BZX
Proposal
The Commission hereby institutes proceedings pursuant to Section
19(b)(2) of the Act \126\ to determine whether the Exchange's proposed
rule change should be approved or disapproved. Further, pursuant to
Section 19(b)(2)(B) of the Act,\127\ the Commission is hereby providing
notice of the grounds for disapproval under consideration. The
Commission believes it is appropriate to institute proceedings at this
time in view of the legal and policy issues raised by the proposal.
Institution of proceedings does not indicate, however, that the
Commission has reached any
[[Page 40210]]
conclusions with respect to any of the issues involved.
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\126\ 15 U.S.C. 78s(b)(2).
\127\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act
also provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
See id. The time for conclusion of the proceedings may be extended
for up to 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding, or if the
exchange consents to the longer period. See id.
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In particular, the Commission is instituting proceedings to allow
for additional analysis of the proposed rule change's consistency with:
(1) Section 6(b)(5) of the Act which requires, among other things, that
the rules of a national securities exchange be designed ``to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, . . . to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public
interest;'' \128\ and (2) Section 6(b)(8) of the Act, which requires
that the rules of a national securities exchange ``not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of [the Act].'' \129\
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\128\ 15 U.S.C. 78f(b)(5).
\129\ 15 U.S.C. 78f(b)(8).
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As described above, BZX proposes to introduce Bats Market Close, a
closing match process for non-BZX listed securities that would match
MOC orders submitted to the Bats Market Close at the official closing
price for such security published by the primary listing market. Under
the proposal, Members would be able to submit, cancel, and replace MOC
orders designated for the Bats Market Close up until the MOC Cut-Off
Time at 3:35 p.m., after which time orders would be matched for
execution and any remaining imbalance would be cancelled back to the
Member(s). BZX would disseminate, via the Bats Auction Feed, the total
size of all buy and sell orders matched for each security. The Exchange
asserts that its proposal would increase competition and decrease fees
for market participants, without impacting the price discovery process.
The Commission has consistently recognized the importance of
closing auctions of the primary listing markets. For example, in its
adoption of Regulation SCI, the Commission identified systems used to
support closings on the primary market as ``critical SCI systems,''
stating that ``reliable . . . closings on the primary listing markets
are key to the establishment of fair and orderly markets,'' and noting
that ``closing auctions at the primary listing markets attract
widespread participation, and the closing prices they establish are
commonly used as benchmarks.'' \130\ Accordingly, the Commission is
considering whether the proposal removes impediments to and perfects
the mechanism of a free and open market and a national market system,
and what its impact would be on the primary listing markets' closing
auctions, including their important price discovery functions, or the
reliability and integrity of the closing prices that they establish.
Further, the Commission is considering whether the proposal imposes any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act, including the potential competitive burdens
that may be created when an exchange offers market participants the
ability to execute orders at a lower cost at the closing price
established by another exchange, without incurring the costs of
developing and operating the closing auctions from which the price is
derived. In addition, the Commission is considering whether the
proposal is designed to prevent fraudulent and manipulative acts and
practices and, in particular, whether it would provide increased
incentives or opportunities for inappropriate utilization of
information to manipulate the closing price. Finally, the Commission is
considering whether the proposal would have additional impacts on the
markets, including increased complexity and operational risk, that
would be inconsistent with the protection of investors and the public
interest.
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\130\ Securities Exchange Act Release No. 73639 (November 19,
2014), 79 FR 72255, 72278 (December 5, 2014).
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V. Commission's Solicitation of Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other relevant concerns they
may have with the proposal. In particular, the Commission invites the
written views of interested persons concerning whether the proposal is
consistent with Sections 6(b)(5) and 6(b)(8) of the Act, or any other
provision of the Act or rule or regulation thereunder. Although there
do not appear to be any issues relevant to approval or disapproval
which would be facilitated by an oral presentation of views, data, and
arguments, the Commission will consider, pursuant to Rule 19b-4, any
request for an opportunity to make an oral presentation.\131\
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\131\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Such comments should be submitted by September 14, 2017. Rebuttal
comments should be submitted by September 28, 2017. The Commission asks
that commenters address the sufficiency and merit of the Exchange's
statements in support of the proposal, which are set forth in the
Notice,\132\ in addition to any other comments they may wish to submit
about the proposed rule change. In particular, the Commission seeks
comment, including, where relevant, any specific data, statistics, or
studies, on the following:
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\132\ See Notice, supra note 3.
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1. Would the proposed rule change affect price discovery in the
closing auction process on each primary listing exchange? If so, how?
Would any such impact be the same at each of the primary listing
exchanges? What information do market participants need going into the
closing auction? Would the proposed rule change affect the information
available to market participants during the closing auction process? If
so, how? If commenters believe the proposal would harm price discovery
in the closing auction process, to the extent possible please provide
specific data, analyses, or studies for support.
2. To what extent, if at all, would the availability of the Bats
Market Close impact market participants' use of limit-on-close orders
in the closing auction processes on the primary listing exchanges,
including with respect to size and price? Please explain. Would market
participants use MOC orders in the Bats Market Close as a substitute
for using limit orders to participate in the closing auction processes
at the primary listing exchanges? Would any such impacts be the same
for each of the primary listing exchanges? Are there differences
between the closing auction processes at each of the primary listing
exchanges whereby the proposed Bats Market Close would have differing
effects on each primary listing exchange? If so, please explain. How
does information available in the closing auction process affect market
participants' order submissions and/or determination of the closing
price? Would the proposed rule change affect market participants'
trading strategies in closing auctions? If so, how? If commenters
believe the proposal would impact the use of limit-on-close orders in
closing auctions, to the extent possible please provide specific data,
analyses, or studies for support.
[[Page 40211]]
3. What analyses of available data could provide information about
relationships between information disseminated during closing auctions,
trading strategies in closing auctions, and closing prices? How would
such analyses help estimate the impact, if any, of any changes in the
availability of information under the proposed rule change on trading
strategies and closing prices? In this regard, to the extent possible,
please provide specific data, analyses, or studies in support.
4. What amount of trading volume at the close occurs on venues
other than the primary listing exchanges (such as competing closing
auctions and/or broker-dealer internal matching processes for MOC
orders) and how does such closing volume compare with that of the
primary listing exchanges? How does that volume impact the closing
auction process on each of the primary listing exchanges? If commenters
believe the proposal would impact volume in the closing auction
process, to the extent possible please provide specific data, analyses,
or studies for support. How does the Bats Market Close proposal differ
from such existing processes (i.e., competing closing auctions and/or
broker-dealer internal MOC matching processes)? Would the proposal
affect the existing level of fragmentation in the market? If so, how?
Please describe. Would the proposal impact the aggregate liquidity at
the primary listing markets during the closing auctions? If so, how? If
commenters believe the proposal would impact the existing level of
fragmentation in the market or aggregate liquidity at the primary
listing markets during the closing auction, to the extent possible
please provide specific data, analyses, or studies for support. Would
the matching of a significant amount of MOC orders at a venue other
than the primary listing market affect the integrity or reliability of
the official closing auction and the resulting closing price? If so,
how? Please describe in detail and provide examples if possible.
Further, if commenters believe the proposal would affect the integrity
or reliability of the official closing auction and the resulting
closing price, to the extent possible please provide specific data,
analyses, or studies for support.
5. Would the proposal have a positive, negative, or neutral impact
on competition? Please explain. How would any impact on competition
from the proposal benefit or harm the national market system and/or the
various market participants? Please describe and explain how, if at
all, aspects of the national market system and/or different market
participants would be affected. What are the current costs associated
with a primary listing market developing and operating a closing
auction, and to what extent (and if so, how) are these costs passed on
to market participants today? How do the fixed costs associated with
developing closing auctions compare to the variable costs of conducting
closing auctions? How do the revenues collected from closing auctions
compare to these costs? Would the proposal impact the current fees
charged by the primary listing markets for participation in their
closing auctions? If so, how? If commenters believe the proposal would
impact competition, to the extent possible please provide specific
data, analyses, or studies for support.
6. What effect would the proposal have on market complexity and/or
operational risk, if any? If commenters believe the proposal would
impact market complexity and operational risk, to the extent possible,
please provide specific data, analyses, or studies for support. Would
the daily process of cancelling unmatched MOC orders back to members so
that they can be routed to the primary listing markets before the
closing auction cut-off times create operational or other risks for the
markets or market participants? If so, please describe. Would any such
risks be different than the risks that currently exist now for market
participants? Are there alternative ways of managing unmatched orders
that would have different implications for the operational risks of the
proposal? If so, please describe. Would the monitoring of an additional
data feed be difficult or increase risk for market participants? Why or
why not?
7. Would the proposal affect the potential for manipulation and, if
so, what types of manipulative activity might result from, or be
decreased by, the proposal? Would the proposal create informational
advantages for certain market participants? If so, please detail these
advantages and describe whether and how such information could be
utilized to a market participant's own advantage. Would such
informational advantages differ from information asymmetries that exist
in the markets today? If so, please describe. Would the proposal affect
surveillance for manipulation negatively or positively, and are
existing surveillance tools adequate to monitor any increased risk?
Please explain. If commenters believe the proposal would increase or
decrease the potential for manipulative activity, to the extent
possible please provide specific data, analyses, or studies for
support.
8. What are the potential impacts of the proposal for listed
issuers? For example, would the proposal impact the liquidity of an
issuer's stock? If so, how? Would the proposal affect an issuer's
decision as to whether to list their securities on a national
securities exchange? If so, how? Would any impacts of the proposal
affect small and mid-sized listed companies differently from larger
listed companies? If so, please describe how. What other impacts, if
any, could the proposal have on various other market participants, such
as market makers and floor brokers, and in particular, their roles in
the closing? If commenters believe the proposal would impact listed
issuers or other market participants, to the extent possible please
provide specific data, analyses, or studies for support.
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-BatsBZX-2017-34 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BatsBZX-2017-34. The
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
[[Page 40212]]
identifying information from submissions. You should submit only
information that you wish to make publicly available. All submissions
should refer to File Number SR-BatsBZX-2017-34 and should be submitted
on or before September 14, 2017. Rebuttal comments should be submitted
by September 28, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\133\
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\133\ 17 CFR 200.30-3(a)(57) and (58).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-17909 Filed 8-23-17; 8:45 am]
BILLING CODE 8011-01-P
