[Federal Register Volume 79, Number 150 (Tuesday, August 5, 2014)]
[Notices]
[Pages 45511-45513]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-18384]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72710; File No. SR-NYSE-2014-38]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Clarifying the Exchange's Use of Certain Data Feeds for Order Handling
and Execution, Order Routing, and Regulatory Compliance
July 29, 2014.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on July 18, 2014, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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[[Page 45512]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to clarify the Exchange's use of certain data
feeds for order handling and execution, order routing, and regulatory
compliance. 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
On June 5, 2014, in a speech entitled ``Enhancing Our Market Equity
Structure,'' [sic] Mary Jo White, Chair of the Securities and Exchange
Commission (``SEC'' or the ``Commission'') requested the equity
exchanges to file with the Commission the data feeds used for purposes
of (1) order handling and execution (e.g., with pegged or midpoint
orders); (2) order routing, and (3) regulatory compliance, if
applicable.\4\ Subsequent to the Chair's speech, the Division of
Trading and Markets stated that it ``believes there is a need for
clarity regarding whether (1) the SIP data feeds, (2) proprietary data
feeds, or (3) a combination thereof,'' are used for these purposes and
requested that proposed rule changes be filed that disclose such
information.\5\ The stated goal of disclosing this information is to
provide broker-dealers and investors with enhanced transparency to
better assess the quality of an exchange's execution and routing
services.
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\4\ See Mary Jo White, Chair, Securities and Exchange
Commission, Speech at the Sandler, O'Neill & Partners, L.P. Global
Exchange and Brokerage Conference (June 5, 2014) (available at
www.sec.gov/News/Speech/Detail/Speech/1370542004312#.U5HI-fmwJiw).
\5\ See Letter from James Burns, Deputy Director, Division of
Trading and Markets, Securities and Exchange Commission, to Jeffrey
C. Sprecher, Chief Executive Officer, Intercontinental Exchange,
Inc., dated June 20, 2014.
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The data feeds available for the purposes of order handling and
execution, order routing, and regulatory compliance include the
exclusive securities information processor (``SIP'') data feeds \6\ or
proprietary data feeds from individual market centers.
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\6\ The SIP feeds are disseminated pursuant to effective joint-
industry plans as required by Rule 603(b) of Regulation NMS. 17 CFR
242.603(b). The three joint-industry plans are: (1) The CTA Plan,
which is operated by the Consolidated Tape Association and
disseminates transaction information for securities with the primary
listing market on exchanges other than NASDAQ Stock Market LLC
(``Nasdaq''); (2) the CQ Plan, which disseminates consolidated
quotation information for securities with their primary listing on
exchanges other than Nasdaq; and (3) the Nasdaq UTP Plan, which
disseminates consolidated transaction and quotation information for
securities with their primary listing on Nasdaq.
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(i) Overview of Exchange Rules Governing Order Handling, Execution, and
Routing
Before executing any arriving or resting interest, the Exchange
evaluates whether the execution would trade through a protected
quotation \7\ in violation of Rule 611 of Regulation NMS (``Rule
611''),\8\ and if so, whether it is eligible for an exception to Rule
611. The Exchange also evaluates whether displaying a bid or offer
would result in locking or crossing a protected quotation in violation
of Rule 610(d) of Regulation NMS (``Rule 610(d)''),\9\ or if it is
eligible for an exception to Rule 610(d).
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\7\ A ``protected bid'' or ``protected offer'' means a quotation
in an NMS stock that (i) is displayed by an automated trading
center; (ii) is disseminated pursuant to an effective national
market system plan; and (iii) is an automated quotation that is the
best bid or best offer of a national securities exchange, the best
bid or best offer of The Nasdaq Stock Market, Inc., or the best bid
or best offer of a national securities association other than the
best bid or best offer of The Nasdaq Stock Market, Inc. 17 CFR
242.600(b)(57). A ``protected quotation'' means a protected bid or a
protected offer. See 17 CRF 242.600(b)(58).
\8\ 17 CFR 242.611.
\9\ 17 CFR 242.610(d).
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If any protected quotation is superior to the Exchange's best bid
or offer, the Exchange may route a marketable order as an Intermarket
Sweep Order (``ISO'') \10\ (if consistent with the order's
instructions), unless a trade-through exception applies under Rule
611(b). Likewise, if the display of an order would lock or cross a
protected quotation, the Exchange may route such interest to one or
more protected quotations, if consistent with the order's instructions.
The Exchange notes that it only routes to away markets for purposes of
compliance with Rules 611 and 610(d). The Exchange further notes that
its routing brokers do not have any discretion about where to route
such interest.\11\
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\10\ An ISO is defined as a limit order for a NMS Stock that (i)
when routed to a trading center, is identified as an ISO; and (ii)
simultaneously with the routing of the ISO, one or more additional
limit orders, as necessary, are routed to execute against the full
displayed size of any protected bid, in the case of a limit order to
sell, or the full displayed size of any protected offer, in the case
of a limit order to buy, for the MNMS [sic] stock with a price that
is superior to the limit price of the ISO.
\11\ See NYSE Rule 17(c)(1)(A)(i).
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(ii) Exchange's Stated Policy, Practice, or Interpretation With Respect
to the Meaning, Administration, or Enforcement of an Existing Rule
Regarding how and for what Purpose it Uses Data Feeds
The Exchange uses the SIP data feeds to determine protected
quotations on markets other than the Exchange for purposes of
compliance with Rule 611 and Rule 610(d), including identifying where
to route ISOs, to calculate the PBBO for purposes of order types that
are priced based on the PBBO, and to determine the national best bid
(``NBB'') \12\ for purposes of compliance with Rule 201 of Regulation
SHO and Rule 440B.\13\
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\12\ The NBBO is defined as the best bid and best offer of an
NMS security that is calculated and disseminated on a current and
continuing basis by a plan processor pursuant to an effective
national market system plan. 17 CFR 242.600(b)(3). The Exchange
notes that the NBB may differ from the PBB because the NBB includes
Manual Quotations, which are defined as any quotation other than an
automated quotation. 17 CFR 242.600(b)(37). By contrast, a protected
quotation is an automated quotation that is the best bid or offer of
a national securities exchange. 17 CFR 242.60)(b)(57)(iii) [sic].
\13\ NYSE Rule 440B(b) requires that Exchange systems not
execute or display a short sale order with respect to a covered
security at a price that is less than or equal to the current NBB if
the price of that security decreases by 10% or more, as determined
by the Exchange, from the security's closing price on the Exchange
at the end of regular trading hours on the prior day.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\14\ in general, and
furthers the objectives of Section 6(b)(5),\15\ 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 Exchange
believes
[[Page 45513]]
that the proposed rule change removes impediments to and perfects the
mechanism of a free and open market because it provides enhanced
transparency to better assess the quality of an exchange's execution
and routing services.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
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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 provide the
public and investors with information about what data feeds that the
Exchange uses for execution and routing decisions.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Commission deems this requirement to have been met.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2014-38 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-NYSE-2014-38. 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 the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSE-2014-38 and should be
submitted on or before August 26, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18384 Filed 8-4-14; 8:45 am]
BILLING CODE 8011-01-P