[Federal Register Volume 79, Number 71 (Monday, April 14, 2014)]
[Notices]
[Pages 20957-20959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-08281]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71898; File No. SR-NYSEMKT-2014-27]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending Rule 13--
Equities Governing Pegging Interest
April 8, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on March 25, 2014, NYSE MKT LLC (``NYSE MKT'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C.78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 13--Equities (Orders and
Modifiers) governing Pegging Interest. The text of the proposed rule
change is available on the Exchange's Web site at www.nyse.com, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 13--Equities (Orders and
Modifiers) (``Rule 13'') to (i) remove DMM interest as eligible to be
set as pegging interest; (ii) remove Market Pegging Interest; and (iii)
remove the ability to add an offset value to be specified for pegging
interest.
The Exchange notes that it recently amended its rules governing
pegging interest to move the rule text that provided for pegging on the
Exchange from Rule 70.26--Equities (Pegging for d-Quotes and e-Quotes)
\3\ to Rule 13 and amend such text to (i) permit DMM interest to be set
as pegging interest; (ii) change references from NBB, NBO and NBBO to
PBB, PBO and PBBO, respectively; (iii) permit pegging interest to peg
to the opposite side of the market
[[Page 20958]]
(``Market Pegging Interest''); and (iv) provide for an offset value to
be specified for pegging interest.\4\ When it moved the pegging
interest rule text to Rule 13, the Exchange also made several other
changes to the rule text so that the proposed substantive changes could
be incorporated in a logical and transparent manner and to streamline
the rule in a non-substantive manner. The Exchange notes that the
proposed rule change would revert rules governing pegging interest to
the prior functionality, but would maintain the changes to move the
rule text to Rule 13, to reference the PBBO instead of the NBBO, and to
streamline the rule text.
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\3\ E-Quotes are Floor broker agency interest files. D-Quotes
are e-Quotes for which a Floor broker has entered discretionary
instructions as to size and/or price.
\4\ See Securities Exchange Act Release No. 68305 (Nov. 28,
2012), 77 FR 71853 (Dec. 4, 2012) (SR-NYSEMKT-2012-67) (the ``2012
pegging filing'').
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In the 2012 pegging filing, the Exchange stated that it would
announce the implementation date of that proposed rule change in a
Trader Update no later than 90 days after publication of the notice in
the Federal Register, and the implementation date would be no later
than 90 days following publication of the Trader Update announcing
publication of the notice in the Federal Register. Following the
effective date of the 2012 pegging filing, the Exchange was undergoing
a number of complex technology changes, including introducing
technology to implement the Regulation NMS Plan to Address
Extraordinary Market Volatility (the ``Plan''),\5\ which began
implementation on April 8, 2013, and moving the Exchange's matching
engine to the Universal Trading Platform. During that time, the
Exchange prioritized its technology implementation schedule to assure
timely compliance with the Plan's implementation schedule. As a result,
in the Spring of 2013, the Exchange moved back the planned
implementation of the pegging interest changes.
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\5\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631) (Approval Order
of the Plan), as amended.
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During this same period, the Exchange maintained communications
Floor brokers and Designated Market Makers (``DMM'') regarding its
technology plans. After taking into consideration both the ongoing
technology changes that the Exchange implemented in 2013, including
implementation of both Phase I of the Plan in April 2013 and
implementation of Phase II of the Plan in August and September of 2013,
and feedback from Floor brokers and DMMs, the Exchange did not
introduce the functionality described in the 2012 pegging filing to
expand pegging interest to DMMs, introduce the Market Pegging Interest,
or make available the ability to add an offset value. The Exchange did,
however, implement the pegging functionality to peg to the PBBO instead
of the NBBO.
The Exchange now proposes to conform its rules to the pegging
functionality that is currently available. Accordingly, the Exchange
proposes to amend Rule 13 governing pegging interest to (i) delete the
reference to DMMs in paragraph (a)(1) of the Rule 13 text governing
pegging interest; (ii) delete paragraph (b) of the Rule 13 text
governing pegging interest, which discusses offset values; and (iii)
delete paragraph (d) of the Rule 13 text governing pegging interest,
which discusses the Market Pegging Interest. The Exchange believes it
is appropriate to maintain the balance of the rule text governing
pegging interest in Rule 13 for the same reasons expressed in the 2012
pegging filing. Specifically, as described in detail in the 2012
pegging filing, the remainder of the Rule 13 rule text governing
pegging interest covers the same functionality as the rule text
previously found in Rule 70.26--Equities, but with non-substantive
changes to make the rule text more focused and streamlined.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\6\ in general, and
furthers the objectives of Section 6(b)(5),\7\ in particular, because
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to, and perfect the
mechanism of, a free and open market and a national market system and,
in general, to protect investors and the public interest. The proposed
rule change is also not designed to permit unfair discrimination.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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The Exchange believes removing rule text that relates to
functionality that the Exchange did not implement will remove
impediments to, and perfect the mechanism of a free and open market and
national market system and, in general, protect investors and the
public interest by assuring that the Exchange's rules are transparent
regarding how the Exchange operates. In addition, the Exchange believes
that maintaining the balance of the rule text in Rule 13 governing
pegging interest promotes clarity and transparency by adding greater
specificity with respect to the interest to which pegging interest may
peg. Additionally, the removal would reduce potential confusion that
may result from having unavailable functionality in the Exchange's
rulebook. In addition, the continuation of the realignment and
consolidation of former Rule 70.26--Equities rule text governing
pegging interest with other orders and modifiers in Rule 13 has
resulted in a clearer rule, which benefits all member organizations as
well as others that read the rule.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed change is not
designed to address any competitive issue but rather would delete
unavailable functionality in the Exchange's rulebook, thereby reducing
confusion and making the Exchange's rules easier to understand and
navigate.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\8\ 15 U.S.C. 78s(b)(3)(A)(iii).
\9\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if
[[Page 20959]]
it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \10\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\10\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEMKT-2014-27 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-NYSEMKT-2014-27. 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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make publicly available. All
submissions should refer to File Number SR-NYSEMKT-2014-27 and should
be submitted on or before May 5, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08281 Filed 4-11-14; 8:45 am]
BILLING CODE 8011-01-P