[Federal Register Volume 81, Number 53 (Friday, March 18, 2016)]
[Notices]
[Pages 14902-14905]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06090]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77363; File No. SR-NYSE-2016-20]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List Effective March 1, 2016
March 14, 2016.
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 March 1, 2016, 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,
II, and III 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 14903]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Price List to exclude from its
average daily volume and certain other calculations any trading day on
which the Exchange is not open for the entire trading day and/or a
disruption affects an Exchange system that lasts for more than 60
minutes during regular trading hours. The Exchange proposes to
implement the fee change effective March 1, 2016. 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, on the
Commission's Web site at http://www.sec.gov, 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Price List to exclude from its
average daily volume (``ADV'') \4\ and certain other calculations any
trading day on which the Exchange is not open for the entire trading
day and/or a disruption affects an Exchange system that lasts for more
than 60 minutes during regular trading hours. The Exchange proposes to
implement the fee change effective March 1, 2016.
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\4\ The defined term ``ADV'' is used here as defined in footnote
2 to the Price List.
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As provided in the Exchange's Price List, many of the Exchange's
transaction fees and credits are based on trading, quoting and
liquidity thresholds that member organizations, including Designated
Market Makers (``DMMs''), Supplemental Liquidity Providers (``SLPs''),
and Retail Liquidity Providers (``RLPs''), must satisfy in order to
qualify for the particular rates. The Exchange believes that trading
suspensions or disruptions can prevent member organizations, including
DMMs, SLPs and RLPs, from engaging in normal trading, quoting and
liquidity in their assigned securities, leading to decreased quoting
and trading volume compared to ADV. Accordingly, for purposes of
determining transaction fees and credits for these market participants
based on quoting and/or liquidity levels, ADV, and consolidated ADV
(``CADV''),\5\ the Exchange proposes to add a new footnote to the Price
List designated with an asterisk that would permit the Exchange to
exclude any trading day on which (1) the Exchange is not open for the
entire trading day and/or (2) a disruption affects an Exchange system
that lasts for more than 60 minutes during regular trading hours. The
Exchange's proposal is consistent with the rules of the options trading
facility of its affiliates NYSE MKT LLC \6\ and NYSE Arca, Inc.\7\
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\5\ NYSE CADV is defined in the Price List as the consolidated
average daily volume of NYSE-listed securities.
\6\ See NYSE Amex Options Fee Schedule (``The Exchange may
exclude from its monthly calculations of contract volume any day
that (1) the Exchange is not open for the entire trading day and/or
(2) a disruption affects an Exchange system that lasts for more than
60 minutes during regular trading hours'').
\7\ See NYSE Arca Options Fees and Charges (``The Exchange may
exclude from the calculation of ADV contracts traded any day that
(1) the Exchange is not open for the entire trading day and/or (2) a
disruption affects an Exchange system that lasts for more than 60
minutes during regular trading hours (``Exchange System
Disruption'')).
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The proposed change would allow the Exchange to exclude days where
the Exchange declares a trading halt in all securities or honors a
market-wide trading halt declared by another market. The Exchange's
proposal would be similar to the current provision in the Price List
whereby, for purposes of transaction fees and SLP credits, ADV
calculations can exclude early closing days.\8\ Generally, this applies
to certain days before or after a holiday observed by the Exchange.\9\
The Exchange's proposal is consistent with the rules of other self-
regulatory organizations.\10\
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\8\ See footnote 4 in the Price List.
\9\ For example, the Exchange is closed on Thanksgiving Day and
closes early on the Friday immediately following Thanksgiving Day
(e.g., Friday, November 25, 2016).
\10\ See notes 6-7, supra; see also NASDAQ Stock Market LLC Rule
7018(j) (``For purposes of determining average daily volume and
total consolidated volume under this rule, any day that the market
is not open for the entire trading day will be excluded from such
calculation.''); International Securities Exchange, LLC Fee Schedule
(``For purposes of determining Priority Customer ADV, any day that
the regular order book is not open for the entire trading day or the
Exchange instructs members in writing to route their orders to other
markets may be excluded from such calculation; provided that the
Exchange will only remove the day for members that would have a
lower ADV with the day included.'').
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The Exchange believes that artificially low volumes of trading on
days when the Exchange is not open for the entire trading day reduces
the average daily activity of member organizations both daily and
monthly. Given the decreased trading volumes, the numerator for the
monthly calculation (e.g., trading volume) would be correspondingly
lower, but the denominator for the threshold calculations (e.g., the
number of trading days) would not necessarily be decreased, and could
result in an unintended increase in the cost of trading on the
Exchange, a result that is unintended and undesirable to the Exchange
and its member organizations. The Exchange believes that the authority
to exclude days when the Exchange is not open for the entire trading
day would provide member organizations with greater certainty as to
their monthly costs and diminish the likelihood of an effective
increase in the cost of trading.\11\
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\11\ See, e.g., Securities Exchange Act Release No. 70657
(October 10, 2013), 78 FR 62899 (October 22, 2103) (SR-ISE-2013-51).
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Similarly, the Exchange proposes to modify its Price List to permit
the Exchange to exclude from the above calculations shares traded on a
trading day where a disruption affects an Exchange system that lasts
for more than 60 minutes during regular trading hours even if such
disruption would not be categorized as a complete outage of the
Exchange's system. Such a disruption may occur where a certain
securities traded on the Exchange are unavailable for trading due to an
Exchange system issue or where, while the Exchange may be able to
perform certain functions with respect to accepting and processing
orders, the Exchange may be experiencing a failure to another
significant process, such as routing to other market centers, that
would lead member organizations that rely on such process to avoid
utilizing the Exchange until the Exchange's entire system was
operational. Once again, the Exchange's proposal is consistent with the
rules of other self-regulatory organizations.\12\
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\12\ See notes 6-7, supra; see also BATS BZX Exchange Fee
Schedule (``The Exchange excludes from its calculation of ADAV and
ADV shares added or removed on any day that the Exchange's system
experiences a disruption that lasts for more than 60 minutes during
regular trading hours (``Exchange System Disruption''), on any day
with a scheduled early market close and on the last Friday in June
(the ``Russell Reconstitution Day'').
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The Exchange is not proposing any changes to the level of rebates
currently being provided on the Exchange, or to
[[Page 14904]]
the thresholds required to achieve each rebate tier.
The proposed change is also not otherwise intended to address any
other issues, and the Exchange is not aware of any problems that member
organizations would have in complying with the proposed change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\13\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\14\ in
particular, because it provides for the equitable allocation of
reasonable dues, fees, and other charges among its members, issuers and
other persons using its facilities and does not unfairly discriminate
between customers, issuers, brokers or dealers.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that it is reasonable to permit the Exchange
to eliminate from the calculation days on which the market is not open
the entire trading day because it preserves the Exchange's intent
behind adopting volume-based pricing. Similarly, the Exchange believes
that its proposal is reasonable because it will help provide member
organizations with a greater level of certainty as to their level of
rebates and costs for trading in any month where the Exchange
experiences such a system disruption on one or more trading days. The
Exchange is not proposing to amend the thresholds member organizations
must achieve to become eligible for, or the dollar value associated
with, the tiered rebates or fees. By eliminating the inclusion of a
trading day on which a system disruption occurs, the Exchange would
almost certainly be excluding a day that would otherwise lower member
organization's trading volume, thereby making it more likely for member
organizations to meet the minimum or higher tier thresholds and thus
incentivizing member organizations to increase their participation on
the Exchange in order to meet the next highest tier.
The Exchange further believes that the proposal is reasonable
because the proposed exclusion seeks to avoid penalizing member
organizations that might otherwise qualify for certain tiered pricing
but that, because of a significant Exchange system problem, would not
participate to the extent that they might have otherwise participated.
The Exchange believes that certain systems disruptions could preclude
some member organizations from submitting orders to the Exchange even
if such issue is not actually a complete systems outage.
Finally, the Exchange believes that the proposal is equitable and
not unfairly discriminatory because the methodology for the monthly
calculations would apply equally to all member organizations and to all
volume tiers. The Exchange notes that, although unlikely, there is some
possibility that a certain small proportion of member organizations may
have a higher ADV as a percentage of average daily volume with their
activity included from days where the Exchange experiences a system
disruption. The Exchange believes that the proposal would still be
equitable and not unfairly discriminatory given that the impacted
universe is potentially quite small and that the proposal would benefit
the overwhelming majority of market participants and would make the
overall cost of trading on the Exchange more predictable for the
membership as a whole.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\15\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\15\ 15 U.S.C. 78f(b)(8).
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The Exchange believes that, with respect to monthly calculations
for rebates, there are very few instances where the exclusion would be
invoked, and if invoked, would have little or no impact on trading
decisions or execution quality. On the contrary, the Exchange believes
that the proposal fosters competition by avoiding a penalty to member
organizations for days when trading on the Exchange is disrupted for a
significant portion of the day and would result in lower total costs to
end users, a positive outcome of competitive markets. Further, other
options exchanges have adopted rules that are substantially similar to
the change in ADV calculation being proposed by the Exchange.\16\
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\16\ See note 5, supra.
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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 foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \17\ of the Act and subparagraph (f)(2) of Rule
19b-4 \18\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(2).
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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 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) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\19\ 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-NYSE-2016-20 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2016-20. 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
[[Page 14905]]
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-2016-20 and should be submitted on or before April
8, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Robert W. Errett,
Deputy Secretary.
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\20\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-06090 Filed 3-17-16; 8:45 am]
BILLING CODE 8011-01-P