[Federal Register Volume 81, Number 142 (Monday, July 25, 2016)]
[Notices]
[Pages 48477-48482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17444]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78357; File No. SR-NYSEArca-2016-94]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Equities Rule 1.1 To Establish an Official Closing Price for Exchange-
Listed Securities if the Exchange Is Unable To Conduct a Closing
Auction
July 19, 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 July 6, 2016, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE
Arca'') 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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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend NYSE Arca Equities Rule 1.1(ggP) to
establish an Official Closing Price for Exchange-listed securities if
the Exchange is unable to conduct a Closing Auction. 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 is proposing to amend its rules to specify back-up
procedures for determining an Official Closing Price for Exchange-
listed securities if it is unable to conduct a Closing Auction in one
or more securities due to a systems or technical issue.\4\
Specifically, the Exchange proposes to amend NYSE Arca Equities Rule
1.1(ggP) (``Rule 1.1(ggP)'') to establish an Official Closing Price for
Exchange-listed securities if the Exchange is impaired.
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\4\ See New York Stock Exchange press release dated July 22,
2015, available here: http://ir.theice.com/press-and-publications/press-releases/all-categories/2015/07-22-2015.aspx.
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The proposed changes are based on approved rules of the New York
Stock Exchange, LLC (``NYSE'') and NYSE MKT LLC (``NYSE MKT'').\5\
Those markets, together with the Exchange and the NASDAQ Stock Market
LLC (``Nasdaq''), developed the back-up procedures after taking into
consideration feedback from discussions with industry participants,
including
[[Page 48478]]
meeting the following key goals important to market participants:
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\5\ See Securities Exchange Act Release No. 78015 (June 8,
2016), 81 FR 38747 (June 14, 2016) (SR-NYSE-2016-18) and (SR-
NYSEMKT-2016-31) (``OCP Approval Order'').
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Providing a pre-determined, consistent solution that would
result in a closing print to the applicable securities information
processor (``SIP'') within a reasonable time frame from the normal
closing time;
Minimizing the need for industry participants to modify
their processing of data from the SIPs; and
Providing advance notification of the applicable closing
contingency plan to provide sufficient time for industry participants
to route any closing interest to an alternate venue to participate in
that venue's closing auction.
The Exchange also proposes to amend Rule 1.1(ggP) to specify that,
for a UTP Security,\6\ the Exchange would use the official closing
price as disseminated by the primary listing exchange to determine the
Trading Collar \7\ for such security if there is no consolidated last
sale price on the same trading day, or the Auction Reference Price \8\
for such security.
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\6\ As defined in NYSE Arca Equities Rule 1.1(ii), the term
``UTP Security'' means a security that is listed on a national
securities exchange other than the Exchange and that trades on the
NYSE Arca Marketplace pursuant to unlisted trading privileges.
\7\ See NYSE Arca Equities Rule 7.31P(a)(1)(B)(i).
\8\ See NYSE Arca Equities Rule 7.35P(a)(8)(A).
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Background
Current Rule 1.1(ggP) describes how the Exchange establishes the
``Official Closing Price,'' which is the reference price to determine
the closing price in a security for purposes of Rule 7 Equities
Trading. Rule 1.1(ggP) provides that the Official Closing Price is
determined as follows:
As provided for in Rule 1.1(ggP)(1), for securities listed
on the Exchange, the Official Closing Price is the price established in
a Closing Auction of one round lot or more on a trading day. If there
is no Closing Auction or if a Closing Auction trade is less than a
round lot on a trading day, the Official Closing Price is the most
recent consolidated last sale eligible trade during Core Trading Hours
on that trading day. If there were no consolidated last sale eligible
trades during Core Trading Hours on that trading day, the Official
Closing Price will be the prior trading day's Official Closing Price.
As provided for in Rule 1.1(ggP)(2), for securities listed
on an exchange other than the Exchange, the Official Closing Price is
the official closing price disseminated by the primary listing market
for that security via a public data feed on a trading day. If the
primary listing market does not disseminate an official closing price
on a trading day, the Official Closing Price is the most recent
consolidated last sale eligible trade during Core Trading Hours on that
trading day. If there were no consolidated last sale eligible trades
during Core Trading Hours on that trading day, the Official Closing
Price will be the prior trading day's Official Closing Price.
The rule further provides that an Official Closing Price may be
adjusted to reflect corporate actions or a correction to a closing
price, as disseminated by the primary listing market for the security.
In Rule 7, the Exchange uses the Official Closing Price for three
purposes: (1) To determine the Auction Reference Price for a security,
as provided for in Rule 7.35P(a)(8)(A); (2) to determine the Trading
Collar for a security if there is no consolidated last sale price on
the same trading day, as provided for in Rule 7.31P(a)(1)(B)(i); and
(3) for securities listed on the Exchange only, for purposes of
determining whether to trigger a Short Sale Price Test, as defined
under Rule 7.16P(f)(2).\9\
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\9\ The Exchange disseminates to the SIP the Official Closing
Price as an ``M'' value. For a description of all sale conditions
that are reportable to the SIP for Exchange-listed securities,
including the ``M'' value, see the Consolidated Tape System
Participant Communications Interface Specification, dated November
16, 2015, at 86, available here: https://www.ctaplan.com/publicdocs/ctaplan/notifications/trader-update/cts_input_spec.pdf.
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Proposed Amendments
The Exchange proposes to amend Rule 1.1(ggP) to establish how the
Exchange would determine an Official Closing Price if the Exchange is
unable to conduct a Closing Auction in an NYSE Arca-listed security or
securities due to a systems or technical issue. To reflect this change,
the Exchange proposes to add new rule text as proposed Rules
1.1(ggP)(2)-(4) and re-number current Rule 1.1(ggP)(2) as proposed Rule
1.1ggP(5), as described in greater detail below.
Proposed Rules 1.1(ggP)(2)-(4) are based on NYSE Rules
123C(1)(e)(ii)-(iv) and NYSE MKT Rules 123C(1)(e)(ii)-(iv)--Equities
with non-substantive differences to use NYSE Arca Equities terminology
instead of NYSE terminology, as follows: ``Corporation'' or ``NYSE Arca
Marketplace'' instead of ``Exchange,'' ``Closing Auction'' instead of
``closing transaction,'' ``Core Trading Hours'' instead of ``regular
trading hours,'' and ``ETP Holder'' instead of ``member organization.''
\10\ In addition, as under the NYSE and NYSE MKT rules, the Exchange
proposes that the back-up procedures specified in proposed Rules
1.1(ggP)(2)-(4) would be applicable to Exchange-listed securities only.
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\10\ See NYSE Arca Equities Rules 1.1(k) (defining the term
``Corporation''); 1.1(e) (defining the term ``NYSE Arca
Marketplace''); 7.35P(d) (defining the term ``Closing Auction'');
1.1(j) (defining the term ``Core Trading Hours''); and 1.1(n)
(defining the term ``ETP Holder'').
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As proposed, Rule 1.1(ggP)(2) would provide that if the Exchange
determines at or before 3:00 p.m. Eastern Time that it is unable to
conduct a Closing Auction in one or more NYSE Arca-listed securities
due to a systems or technical issue, the Exchange would designate an
alternate exchange for such security or securities. The Exchange would
publicly announce the exchange designated as the alternate exchange via
Trader Update. In such case, the Official Closing Price of each
security would be determined on the following hierarchy:
Proposed Rule 1.1(ggP)(2)(A) would provide that the
Official Closing Price would be the official closing price for such
security under the rules of the designated alternate exchange. For
example, if the Exchange designates Nasdaq as the alternate exchange,
the Official Closing Price would be based on Nasdaq Rule 4754, which
defines how Nasdaq establishes an official closing price.
The proposed 3:00 p.m. cut off time was selected in part based on
discussions with market participants regarding their capability to re-
direct closing-only interest in Exchange-listed securities in time to
participate in the closing auction of an alternate venue. By
designating an alternate exchange before 3:00 p.m. Eastern Time, the
Exchange believes that market participants would be more likely to have
sufficient notice to direct any closing-only interest in Exchange-
listed securities to the designated alternate exchange. By providing
market participants sufficient time, when possible, to route closing-
only interest to an alternate venue for participation in that
exchange's closing auction process, that alternate exchange's closing
auction would be more likely to result in a closing price that reflects
market value for such security.
If there were insufficient interest for a closing auction on the
designated alternate exchange, the Exchange believes that the rules of
Nasdaq provide for an appropriate hierarchy of which price to use to
determine the Official Closing Price.
Proposed Rule 1.1(ggP)(2)(B) would provide if the
designated alternate exchange does not have an official closing price
in a security, the Official
[[Page 48479]]
Closing Price would be the volume-weighted average price (``VWAP'') of
the consolidated last-sale eligible prices of the last five minutes of
trading during Core Trading Hours up to the time that the VWAP is
processed. The VWAP would include any closing transactions on an
exchange and would take into account any trade breaks or corrections up
to the time the VWAP is processed. Because the VWAP would include any
last-sale eligible trades, busts, or corrections that were reported up
to the time that the SIP calculates the VWAP, the Exchange believes
that the VWAP price would reflect any pricing adjustments that may be
reported after 4:00 p.m. ET.
As discussed above, the manner by which exchanges calculate their
respective official closing prices provide for an official closing
price in the absence of a closing transaction. Accordingly, the
Exchange believes that in circumstances when the Exchange designates an
alternate exchange, the VWAP calculation would rarely be used to
determine the Official Closing Price for an Exchange-listed security.
Proposed Rule 1.1(ggP)(2)(C) would provide that if the
designated alternate exchange does not have an official closing price
in a security and there were no consolidated last-sale eligible trades
in the last five minutes of trading during Core Trading Hours in such
security, the Official Closing Price would be the last consolidated
last-sale eligible trade during Core Trading Hours on that trading day.
Proposed Rule 1.1(ggP)(2)(D) would provide that if the
designated alternate exchange does not have an official closing price
in a security and there were no consolidated last-sale eligible trades
in a security on a trading day in such security, the Official Closing
Price would be the prior day's Official Closing Price.
Finally, proposed [sic] 1.1(ggP)(2)(E) would provide that
if an Official Closing Price for a security cannot be determined under
(A), (B), or (C) of proposed Rule 1.1(ggP)(2) and there is no prior
day's Official Closing Price, the Exchange would not publish an
Official Closing Price for such security.
The Exchange would use the hierarchy set forth in proposed Rule
1.1(ggP)(2)(B)-(E) only if the designated alternate exchange did not
disseminate an official closing price in a security. In addition, the
Exchange proposes to add as paragraph (E) of Rule 1.1(ggP)(2) what
would happen if there were no Official Closing Price published on the
prior trading day (i.e., the Exchange would not publish an Official
Closing Price). The Exchange believes not publishing an Official
Closing Price would be a rare occurrence, and is most likely to occur
for a thinly-traded security, such as a when issued security, right, or
warrant, that has been listed for trading but does not have any
consolidated last-sale eligible trades.
If the Corporation determines that it is impaired at or before 3:00
p.m. and the Official Closing Price for an Exchange-listed security is
determined pursuant to proposed Rule 1.1(ggP)(2), the SIP would publish
the Official Closing Price for such security no differently than how
the SIP publishes the Official Closing Price for an Exchange-listed
security pursuant to Rule 1.1(ggP)(1).\11\ Accordingly, if the Official
Closing Price is determined pursuant to proposed Rule 1.1(ggP)(2),
recipients of SIP data would not have to make any changes to their
systems because the SIP would publish the ``M'' last sale condition as
an Exchange Official Closing Price for any impacted Exchange-listed
securities.
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\11\ The Operating Committees of the CTA Plan, CQ Plan, and the
Joint Self-Regulatory Organization Plan Governing the Collection,
Consolidation, and Dissemination of Quotation and Transaction
Information for Nasdaq-Listed Securities Traded on Exchanges on an
Unlisted Trading Privileges Basis approved the Impaired Market
Contingency Plan under which the SIPs would print an impaired
primary listing exchange's contingency Official Closing Price as the
Official Closing Price of that primary listing exchange as provided
for in the rules of respective primary listing exchanges.
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As further proposed, Rule 1.1(ggP)(3) would describe how the
Corporation would determine the Official Closing Price for a security
if the Corporation determines after 3:00 p.m. Eastern Time that it is
unable to conduct a Closing Auction in one or more NYSE Arca-listed
securities due to a systems or technical issue. Based on input from
market participants, the Exchange believes that, if the Exchange were
to announce after 3:00 p.m. Eastern Time that it is impaired and unable
to conduct a Closing Auction, market participants would not have
sufficient time to re-direct closing-only orders to an alternate venue.
Accordingly, in such scenario, the Exchange proposes to use the
following hierarchy for determining the Official Closing Price for a
security:
Proposed Rule 1.1(ggP)(3)(A) would provide that the
Official Closing Price would be the VWAP of the consolidated last-sale
eligible prices of the last five minutes of trading during Core Trading
Hours up to the time that the VWAP is processed, including any closing
transactions on an exchange. The VWAP would take into account any trade
breaks or corrections up to the time of [sic] the VWAP is processed.
This VWAP would be calculated in the same manner as set forth in
proposed in Rule 1.1(ggP)(2)(B), described above. However, if the
Exchange's determination that it is unable to conduct a Closing Auction
is after 3:00 p.m. ET, the proposed VWAP calculation would be the
primary means for determining the Official Closing Price for a
security. In such case, the Exchange believes that the VWAP would
appropriately reflect the pricing of a security because it would
include, in a volume-weighted manner, the price and volume of closing
transactions on other exchanges if market participants are able to
route closing interest in Exchange-listed securities to an alternate
venue for participation in a closing auction.
Proposed Rule 1.1(ggP)(3)(B) would provide that if there
were no consolidated last-sale eligible trades in the last five minutes
of trading during Core Trading Hours in such security, the Official
Closing Price would be the last consolidated last-sale eligible trades
[sic] during Core Trading Hours on that trading day. This proposed rule
text is the same as proposed Rule 1.1(ggP)(2)(C).
Proposed Rule 1.1(ggP)(3)(C) would provide that if there
were no consolidated last-sale eligible trades in such security on a
trading day, the Official Closing Price would be the prior day's
Official Closing Price. This proposed rule text is the same as proposed
Rule 1.1(ggP)(2)(D).
Finally, proposed Rule 1.1(ggP)(3)(D) would provide that
if an Official Closing Price for a security cannot be determined under
(A), (B), or (C) of proposed Rule 1.1(ggP)(3) and there is no prior
day's Official Closing Price, the Exchange would not publish an
Official Closing Price for such security. This proposed rule text is
based on proposed Rule 1.1(ggP)(2)(E).
Similar to how the Official Closing Price would be published under
proposed Rule 1.1(ggP)(2), if the Exchange determines that it is
impaired after 3:00 p.m. and the Official Closing Price is determined
pursuant to proposed Rule 1.1(ggP)(3), the SIP would publish the
Official Closing Price for such security no differently than how the
SIP publishes the Official Closing Price for an Exchange-listed
security pursuant to Rule 1.1(ggP)(1). Accordingly, if the Official
Closing Price is determined pursuant to proposed Rule 1.1(ggP)(3),
recipients of SIP data would not have to make any changes to their
systems because the SIP would publish the ``M'' last sale condition as
an Exchange Official Closing Price for
[[Page 48480]]
any impacted Exchange-listed securities.
For purposes of Rule 7.16P(f)(2) and determining whether to trigger
a Short Sale Price Test under that rule, the Official Closing Price for
Exchange-listed securities would still be determined based on Rule
1.1(ggP)(1). If the Exchange is impaired and cannot conduct a Closing
Auction, similar to NYSE and NYSE MKT, the Official Closing Price as
defined in proposed Rules 1.1(ggP)(2) and (3) would be used for
purposes of determining whether a Short Sale Price Test is triggered
under Rule 7.16P(f)(2) in an Exchange-listed security the next trading
day.
Proposed Rule 1.1(ggP)(4) would provide that if the Exchange
determines the Official Closing Price under paragraphs (2) or (3) of
proposed Rule 1.1(ggP), the Exchange would publicly announce the manner
by which it would determine its Official Closing Price and the
designated alternate exchange, if applicable, and all open interest
designated for the Exchange close residing in the NYSE Arca Marketplace
would be deemed cancelled to give ETP Holders the opportunity to route
their closing interest to alternate execution venues. This proposed
rule would make clear that any determination that the Exchange would
make under proposed Rules 1.1(ggP)(2) or (3) would be publicly
announced so that market participants would have an opportunity to
route their closing interest accordingly. In addition, the proposed
rule change would make clear that any interest designated for the
Exchange close, i.e., MOC Orders and LOC Orders, would be cancelled by
the Exchange so ETP Holders may route such interest to alternate
execution venues.
To reflect that the Exchange could be designated as an alternate
exchange by another primary listing market, the Exchange proposes to
amend Rule 1.1(ggP)(1) to specify that the rule would be applicable to
Auction-Eligible Securities, as defined in Rule 7.35P(a)(1), rather
than only be applicable for securities listed on NYSE Arca. With this
proposed change, if NYSE, NYSE MKT, or Nasdaq designate the Exchange as
its designated alternate exchange under their respective back-up rules,
Rule 1.1(ggP)(1) would govern how the Exchange would determine the
Official Closing Price for Auction-Eligible Securities.
The Exchange also proposes to amend Rule 1.1(ggP)(1) to specify how
the Exchange would determine the Official Closing Price for a security
that has transferred its listing to the Exchange or is a new listing
and does not have any consolidated last-sale eligible trades on its
first day of trading on the Exchange. This proposed rule change is
based on NYSE Rule 123C(1)(e)(i) and NYSE MKT Rule 123C(1)(e)(i)--
Equities. As proposed, for a security that has transferred its listing
to the Exchange and does not have any consolidated last-sale eligible
trades on its first trading day, the Official Closing Price would be
the prior day's closing price disseminated by the primary listing
market that previously listed such security. In addition, for a
security that is a new listing and does not have any consolidated last-
sale eligible trades on its first trading day, the Official Closing
Price would be based on a derived last sale associated with the price
of such security before it begins trading on the Exchange. The Exchange
believes the proposed rule text would provide transparency in Exchange
rules of how the Exchange would determine the Official Closing Price
for a security that has transferred its listing to the Exchange, and
thus did not have a prior day's Official Closing Price on the Exchange,
or is a new listing that did not have any trades on its first trading
day.
Finally, the Exchange proposes to amend proposed Rule 1.1(ggP)(5)
(which is current Rule 1.1(ggP)(2)) to clarify that this rule text
would continue to specify how the Exchange would determine the Official
Closing Price for UTP Securities for purposes of establishing Trading
Collars if there is no consolidated last sale price on the same trading
day, or Auction Reference Prices. For these purposes only, the Exchange
would continue to use the official closing price as disseminated by the
primary listing market for that security via a public data feed on a
trading day for these purposes. The proposed change to the rule text is
designed to make clear that the Exchange would continue to use the
official closing price of the primary listing market as the Official
Closing Price for UTP Securities for these specific purposes, while at
the same time, providing for the Exchange to publish a ``M'' value for
Auction-Eligible Securities based on an Official Closing Price
determined pursuant to 1.1(ggP)(1), as proposed. In addition, if
another primary listing market designates the Exchange as its
designated alternate exchange under its official closing price rules,
any Official Closing Price published by the Exchange in such securities
would be published by the SIP as the official closing price of the
primary listing exchange. Accordingly, proposed Rule 1.1(ggP)(5) would
use that Official Closing Price as well.
To effect this amendment, the Exchange proposes to delete the
phrase ``For securities listed on an exchange other than NYSE Arca,''
and replace it with ``For purposes of Rules 7.31P(a)(1)(B)(i) and
7.35P(a)(8)(A) for UTP Securities only''. The remaining text of the
rule would be unchanged. The Exchange believes that for UTP Securities,
the official closing price as disseminated by the primary listing
market would be a better price to use to determine the next day's
Trading Collars or Auction Reference Price rather than using the
Exchange-determined Official Closing Price under Rule 1.1(ggP)(1).
Because of the technology changes associated with this proposed
rule change, the Exchange will implement the proposed back-up
procedures for determining an Official Closing Price no later than 120
days after the operative date of this proposed rule change and will
announce the implementation date via Trader Update.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\12\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\13\ in particular, in that 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, and to remove impediments to and perfect
the mechanism of a free and open market and a national market system.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would provide transparency in how
the Exchange would determine the Official Closing Price in Exchange-
listed securities when the Exchange is unable to conduct a Closing
Auction due to a systems or technical issue. The Exchange believes that
the proposed amendments would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because the proposed determination of an Official Closing Price was
crafted in response to input from industry participants and would:
[[Page 48481]]
Provide a pre-determined, consistent solution that would
result in a closing print to the SIP within a reasonable time frame
from the normal closing time;
minimize the need for industry participants to modify
their processing of data from the SIP; and
provide advance notification of the applicable closing
contingency plan to provide sufficient time for industry participants
to route any closing interest to an alternate venue to participate in
that venue's closing auction
More specifically, the Exchange believes the proposed hierarchy for
determining the Official Closing Price if the Exchange determines that
it is impaired at or before 3:00 p.m. Eastern Time would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because the proposal, which is based on input
from market participants and the approved rules of NYSE and NYSE MKT,
would provide sufficient time for market participants to direct
closing-only interest to a designated alternate exchange in time for
such interest to participate in a closing auction on such alternate
venue in a meaningful manner. The Exchange further believes that
relying on the official closing price of a designated alternate
exchange would provide for an established hierarchy for determining an
Official Closing Price for an Exchange-listed security if there is
insufficient interest to conduct a closing auction on the alternate
exchange. In such case, the rules of Nasdaq already provide a mechanism
for determining an official closing price for securities that trade on
that market.
The Exchange further believes that if the Exchange determines after
3:00 p.m. that it is impaired and unable the conduct a Closing Auction,
the proposed VWAP calculation would remove impediments to and perfect
the mechanism of a free and open market and a national market system
because it would provide for a mechanism to determine the value of an
affected security for purposes of determining an Official Closing
Price. By using a volume-weighted calculation that would include the
closing transactions on an affected security on alternate exchanges as
well as any busts or corrections that were reported up to the time that
the SIP calculates the value, the Exchange believes that the proposed
calculation would reflect the correct price of a security. In addition,
by using a VWAP calculation rather than the last consolidated last-sale
eligible price as of the end of Core Trading Hours, the Exchange would
reduce the potential for an anomalous trade that may not reflect the
true price of a security from being set as the Official Closing Price
for a security.
The Exchange further believes that the proposed rule change would
remove impediments to and perfect the mechanism of a free and open
market and a national market system because the proposal would have
minimal impact on market participants. As proposed, from the
perspective of market participants, even if the Exchange were impaired,
the SIP would publish an Official Closing Price for Exchange-listed
securities on behalf of the Exchange in a manner that would be no
different than if the Exchange were not impaired. If the Exchange
determines that it is impaired after 3:00 p.m., market participants
would not have to make any system changes. If the Exchange determines
that it is impaired before 3:00 p.m. Eastern Time and designates an
alternate exchange, market participants may have to do systems work to
re-direct closing-only orders to the alternate exchange. However, the
Exchange understands, based on input from market participants, that
such changes would be feasible based on the amount of advance notice.
In addition, the Exchange believes that designating an alternate
exchange when there is sufficient time to do so would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would allow for the price-discovery
mechanism of a closing auction to be available for impacted Exchange-
listed securities.
In addition, the Exchange believes that the proposed amendments to
Rule 1.1(ggP)(1) would remove impediments to and perfect the mechanism
of a free and open market and a national market system because the
proposed rule change would enable the Exchange to serve as a designated
alternate exchange under the respective rules of NYSE, NYSE MKT, or
Nasdaq. Specifically, by expanding the reach of Rule 1.1(ggP)(1) to all
Auction-Eligible Securities on the Exchange, and not just Exchange-
listed securities, the hierarchy for determining an Official Closing
Price specified in Rule 1.1(ggP) would be available to all securities
that trade on the Exchange. Because the Exchange would be determining
an Official Closing Price for UTP Securities under the proposed
amendments to Rule 1.1(ggP)(1) for purposes of disseminating an ``M''
value to the SIPs, the Exchange further believes that the proposed
amendments to Rule 1.1(ggP)(5) would be consistent with the protection
of investors and the public interest by using the official closing
price as determined by the primary listing market for UTP Securities
for purposes of determining the next day's first Trading Collar (in the
absence of a consolidated last sale price) or Auction Reference Price.
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 rule change is
not designed to address any competitive issues, but rather to provide
for how the Exchange would determine an Official Closing Price for
Exchange-listed securities if it is impaired and cannot conduct a
closing transaction due to a systems or technical issue. The proposal
has been crafted with input from market participants, Nasdaq, and the
SIPs, and is designed to reduce the burden on competition by having
similar back-up procedures across all primary listing exchanges if such
exchange is impaired and cannot conduct a closing auction.
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, it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\14\
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\14\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the 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.
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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
[[Page 48482]]
the purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule 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-NYSEArca-2016-94 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-NYSEArca-2016-94. 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 available publicly. All
submissions should refer to File Number SR-NYSEArca-2016-94, and should
be submitted on or before August 15, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-17444 Filed 7-22-16; 8:45 am]
BILLING CODE 8011-01-P