[Federal Register Volume 81, Number 22 (Wednesday, February 3, 2016)]
[Notices]
[Pages 5809-5810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01930]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76994; File No. SR-NYSEArca-2015-121]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving
Proposed Rule Change To Provide for Price Collar Thresholds for Trading
Halt Auctions
January 28, 2016.
I. Introduction
On December 7, 2015, NYSE Arca, Inc. (``Exchange'') filed with the
Securities and Exchange Commission (``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 amend Exchange
Rule 1.1(s) to provide for price collar thresholds for Trading Halt
Auctions. The proposed rule change was published for comment in the
Federal Register on December 24, 2015.\3\ The Commission received three
comment letters on the proposed rule change.\4\ This order approves the
proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 76690 (December 18,
2015), 80 FR 80430 (``Notice'').
\4\ See letters from David LaValle, US Head of SPDR ETF Capital
Markets, State Street Global Advisors, dated January 14, 2016
(``SSGA Letter''); Joanne Medero, US Head of Government Relations &
Public Policy, Samara Cohen, US Head of iShares Capital Markets,
Hubert De Jesus, Co-Head of Market Structure and Electronic Trading,
BlackRock, Inc., dated January 14, 2016 (``BlackRock Letter''); and
Eric Swanson, General Counsel & Secretary, BATS Global Markets,
Inc., dated January 22, 2016 (``BATS Letter'').
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II. Description of the Proposed Rule Change
The Exchange currently conducts Trading Halt Auctions under
Exchange Rule 7.35(f).\5\ To respond to market
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events on August 24, 2015, the Exchange proposes to adopt specified
price collar thresholds for Trading Halt Auctions.\6\
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\5\ See Exchange Rule 7.35(f); see also Notice, supra note 3, at
80431.
\6\ See Notice, supra note 3, at 80431. Currently, the
Exchange's rules do not provide for price collar thresholds for
Trading Halt Auctions. See Exchange Rules 1.1(s) and 7.35(f); see
also Notice, supra note 3, at 80430-31.
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According to the Exchange, on August 24, 2015, it applied price
collar thresholds to Trading Halt Auctions that were 5% for securities
with a consolidated last sale price of $25.00 or less, 2% for
securities with a consolidated last sale price greater than $25.00 but
less than or equal to $50.00, and 1% for securities with a consolidated
last sale price greater than $50.00.\7\ The Exchange states its belief
that these thresholds were too narrow, but that it is appropriate to
have protections in place for Trading Halt Auctions to ensure that a
re-opening trade will not deviate significantly from prior prices, even
taking into consideration natural price movements for a security.\8\
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\7\ See Notice, supra note 3, at 80431.
\8\ See id.
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Proposed new Rule 1.1(s)(B) would provide that, when the Trading
Halt Auction Price is established by Rule 7.35(f)(4)(A), the Limit
Orders eligible for determining the Indicative Match Price would be
limited by specified price collar thresholds away from the last
consolidated sale price before the Trading Halt Auction.\9\ As
proposed, the specified percentage for the price collar thresholds for
Trading Halt Auctions would be 10% for securities with a consolidated
last sale price of $25.00 or less, 5% for securities with a
consolidated last sale price greater than $25.00 but less than or equal
to $50.00, and 3% for securities with a consolidated last sale price
greater than $50.00.\10\ These proposed price collar thresholds would
be in effect until six months after the operative date of the proposed
rule change.\11\
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\9\ See proposed Rule 1.1(s)(B).
\10\ See id. The Exchange states that these proposed percentages
are based on the ``numerical guideline'' percentages set forth in
the Exchange's Clearly Erroneous Executions rule for the Core
Trading Session. See Notice, supra note 3, at 80431 and Exchange
Rule 7.10(c)(1). The Exchange further states that its proposal is
similar in certain respects to how BATS Exchange, Inc. prices its
Halt Auctions for ETPs. See Notice, supra note 3, at 80431-32.
\11\ See proposed Rule 1.1(s)(B).
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In the proposal, the Exchange represents that it will be conducting
an analysis to identify what changes, if any, would be appropriate to
balance the need to allow for natural price movement in a Trading Halt
Auction, while at the same time avoiding significant price deviations
that would not be in line with the fair value of securities listed on
the Exchange, which are all Exchange Traded Products.\12\ The Exchange
states that, following this analysis, it will propose to make the price
collar thresholds in this proposal permanent or propose other or
additional changes to its re-opening auction process.\13\
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\12\ See Notice, supra note 3, at 80431.
\13\ See id. For a more detailed description of the proposed
rule change, see Notice, supra note 3.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\14\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\15\ 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 foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest.
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\14\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\15\ 15 U.S.C. 78f(b)(5).
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As noted above, the Commission received three comment letters on
the proposed rule change.\16\ One commenter supports the proposed rule
change and states its belief that price collars are an important
investor protection, which will help avoid potentially clearly
erroneous trades and strengthen market participants' confidence.\17\
This commenter also states its belief that the proposed rule change
will help rebuild investor confidence in the efficient functioning of
the marketplace in the wake of the volatility experienced in August
2015.\18\ Another commenter also supports the proposed rule change and
states its belief that the proposed change will mitigate the recurrence
of some of the pricing disruption witnessed on August 24, 2015.\19\ One
commenter is broadly supportive of the proposed rule change and its
proactive response toward improving market resiliency, and states that
this proposed rule change is a step in the right direction.\20\
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\16\ See supra note 4.
\17\ See SSGA Letter.
\18\ See id.
\19\ See BATS Letter, at 1. At the same time, this commenter
notes that there are additional related measures that the Commission
and all of the exchanges should implement to prevent the recurrence
of the disruptions of August 24, 2015. See id., at 1-2.
\20\ See BlackRock Letter. This commenter also states that the
events of August 24, 2015 have demonstrated that there is a need to
enhance and revise the trading mechanisms that aim to protect the
market from extraordinary volatility. See id. This commenter urges
the Commission to accelerate the adoption of holistic measures to
improve the resiliency of the U.S. equity market. See id.
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The Commission believes that the proposed rule change, which would
widen the Exchange's price collar thresholds for Trading Halt Auctions,
is appropriate as an interim measure to protect investors and the
public interest.\21\ As noted above, the Exchange will conduct an
analysis to determine whether to make the proposed price collar
thresholds permanent or to propose other or additional changes to its
re-opening process.\22\ In addition, the Commission believes that the
proposed rule change will provide transparency with respect to the
Exchange's Trading Halt Auction process and enhance investors'
understanding of the operation of price collars during Trading Halt
Auctions. For these reasons, the Commission believes that the proposed
rule change is consistent with the Act.
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\21\ As noted above, the proposed price collar thresholds would
sunset six months after the operative date of this proposed rule
change. See proposed Rule 1.1(s)(B).
\22\ See Notice, supra note 3, at 80431.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\23\ that the proposed rule change (SR-NYSEArca-2015-121) be, and
hereby is, approved.
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\23\ 15 U.S.C. 78s(b)(2)
\24\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01930 Filed 2-2-16; 8:45 am]
BILLING CODE 8011-01-P