[Federal Register Volume 82, Number 215 (Wednesday, November 8, 2017)]
[Notices]
[Pages 51890-51892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-24255]
[[Page 51890]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82004; File No. SR-NYSEArca-2017-126]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend NYSE Arca
Rules 7.31-E and 7.35-E
November 2, 2017.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on October 20, 2017, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') 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 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 Substance
of the Proposed Rule Change
The Exchange proposes to amend NYSE Arca Rules 7.31-E (Orders and
Modifiers) and 7.35-E (Auctions) to establish a minimum dollar
threshold into the price protection mechanisms provided for in the
respective rules; (2) clarify the order processing specified in Rule
7.35-E(e)(8)(C); and (3) make technical non-substantive changes to
Rules 7.31-E and 7.35-E. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to: (1) Amend NYSE Arca Rules 7.31-E (Orders
and Modifiers) and NYSE Arca Rule 7.35-E (Auctions) to establish a
minimum dollar threshold into the price protection mechanisms provided
for in the respective rules; (2) clarify the order processing specified
in Rule 7.35-E(e)(8)(C); and (3) make technical non-substantive changes
to Rules 7.31-E and 7.35-E.
Proposed Changes To Establish a Minimum Dollar Threshold for Price
Protection Mechanisms
Rule 7.31-E(a)(1)(B) describes the price protection mechanism for
Market Orders, i.e., Trading Collars. Currently, Rule 7.31-
E(a)(1)(B)(i) provides that the Trading Collar will be based on a price
that is a specified percentage away from the consolidated last sale
price. Rule 7.31-E (a)(1)(B)(i) further provides that the upper (lower)
boundary of the Trading Collar is the consolidated last sale price
increased (decreased) by the specified percentage truncated to the
minimum price variation (``MPV'') for the security.
Additionally, Rule 7.31-E(a)(2)(B) describes the price protection
mechanism for Limit Orders, i.e. Limit Order Price Protection.
Currently, Rule 7.31-E(a)(2)(B) provides that a Limit Orders to buy
(sell) will be rejected if it is priced at or above (below) a specified
percentage away from the National Best Offer (National Best Bid)
(``NBO'' and ``NBB'', respectively).
Rule 7.35-E(a)(10) describes the price protection mechanism for
Auctions, i.e., Auction Collar. Currently, Rule 7.35-E(a)(10)(A)
provides that the Auction Collar for the Core Open Auction and Closing
Auction is based on a price that is a specified percentage away from
the Auction Reference Price for the applicable auction. The upper
(lower) boundary of the Auction Collar is the Auction Reference Price
increased (decreased) by the specified percentage, truncated to the
MPV.
The Exchange proposes to amend these price protection mechanisms to
introduce a minimum dollar threshold for lower-price securities, as
follows:
Trading Collar: The Exchange proposes to amend Rule 7.31-
E(a)(1)(B)(i) to introduce a minimum dollar threshold, of $0.15, into
the calculation of the Trading Collar. As such, the proposed rule would
provide that the Trading Collar would be based on a price that is the
greater of $0.15, or a specified percentage away from the consolidated
last sale. Accordingly, the upper boundary and lower boundary of the
Trading Collar would be the consolidated last sale price increased and
decreased, respectively, by the greater of $0.15 or the specified
percentage.
Limit Order Price Protection: The Exchange proposes to
amend Rule 7.31-E(a)(2)(B) to introduce the same proposed minimum
dollar threshold that is specified above for the Trading Collar, of
$0.15, into the Limit Order Price Protection calculation. Accordingly,
the proposed rule would provide that a Limit Order to buy (sell) would
be rejected if it was priced at or above (below) the greater of $0.15
or a specified percentage away from the NBO (NBB). The Exchange
believes that the introduction of a minimum dollar threshold enhances
the Limit Order Price Protection and encourages price continuity
specifically in lower priced illiquid securities.
Auction Collar: Similarly, the Exchange also proposes to
amend Rule 7.35-E(a)(10)(A) to provide that the Auction Collar for the
Core Open Auction and Closing Auction would be based on a price that is
the greater of $0.15 or a specified percentage away from the Auction
Reference Price. Accordingly, the proposed rule would provide that the
upper (lower) boundary of the Auction Collar would be the Auction
Reference Price increased (decreased) by the greater of $0.15 or the
specified percentage.
The Exchange believes that adding a minimum dollar threshold to the
Trading Collar, Limit Order Price Protection, and Auction Collar
calculations would enhance the respective price protection mechanisms
for securities with a reference price below $1.50 because using a
percentage multiplier for such securities would result in too narrow of
a price protection mechanism. This proposed rule change is consistent
with how other exchanges specify static price collar thresholds for
lower-price securities. Also, the Auction Collar applicable for Trading
Halt Auctions, described in Rule 7.35-E(e)(7), provides that for
securities with an Auction reference price under $3.00, the price
collar threshold for auction collars would be a static $0.15 instead of
5 percent.\4\
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\4\ See also Nasdaq Stock Market LLC (``Nasdaq'') Rule 4703(d)
(providing that ``any portion of a Primary Pegging Order or Market
Pegging Order that would execute . . . at a price more than $0.25 or
5 percent worse that the NBBO . . . will be cancelled)'' and Bats
BZX Exchange, Inc. (``BZX'') Rule 27.2, Interpretations and Policies
.01 and Bats Rule 11.13 (stating that BZX ``will not execute any
portion of a bid at a price more than the greater of 5 cents or 0.5
percent higher than the lowest Protected Offer'').
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[[Page 51891]]
Proposed Change To Clarify Order Processing as Specified in Rule 7.35-E
Rule 7.35-E(e)(8) describes the Trading Halt Auction Imbalance
Freeze and provides that if a pause or halt is extended, the Trading
Halt Auction Imbalance Freeze for the prior period will end, new orders
and order instructions received during the prior period's Trading Halt
Auction Freeze will be processed, and the Exchange will accept order
entry and cancellation as provided for in Rule 7.18-E(c) until the next
Trading Halt Auction Imbalance Freeze. The Exchange proposes to amend
Rule 7.35-E(e)(8)(C) to clarify that requests to cancel and requests to
cancel and replace Market Orders, LOO Orders, Limit Orders, and IO
Orders will be accepted but not processed until either after the
Trading Halt Auction concludes (current rule text) or, if a pause or
halt is extended, when the Trading Halt Auction Imbalance Freeze for
the prior period ends (proposed rule text). Accordingly Rule 7.35-
E(e)(8)(C) would read as follows (proposed additions italicized):
Requests to cancel and requests to cancel and replace Market
Orders, LOO Orders, Limit Orders, and IO Orders will be accepted but
not processed until either after the Trading Halt Auction concludes,
as provided for in paragraph (h) of this Rule, or, if a pause or
halt is extended, when the Trading Halt Auction Imbalance Freeze for
the prior period ends.
The Exchange believes that the proposed changes clarify when
requests to cancel and requests to cancel and replace Market Orders,
LOO Orders, Limit Orders, and IO Orders would be processed if a pause
or halt is extended, and that in such circumstances, the Exchange would
not wait until the end of the Trading Halt Auction to process these
messages.
Proposed Changes To Make Technical and Conforming Updates to Rules
7.31-E and 7.35-E
The Exchange proposes to replace the word ``truncated'' with the
words ``rounded down'' \5\ in Rules 7.31-E(a)(1)(B)(i) and 7.35-
E(a)(10)(A). The Exchange believes that conforming the terminology used
within Rules 7.31-E \6\ and 7.35-E and elsewhere in Exchange's rules
promotes clarity and transparency.
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\5\ See Rule 7.46-E(f)(2)(A), which provides that references to
truncating to the MPV in Exchange rules instead mean rounding down
to the applicable quoting MPV for tick pilot securities.
\6\ See Rule 7.31-E(a)(2)(B) which provides that ``Limit Order
Price Protection . . . will be rounded down to the nearest price at
the applicable MPV.''
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Finally, the Exchange proposes a non-substantive, technical
amendment to Rule 7.31-E(c)(5)(C) to correct a typographical error by
adding the word ``be'' and replacing the word ``that'' with ``than.''
Implementation
The Exchange anticipates implementing the proposed changes to
establish a minimum dollar threshold into the Trading Collar, Limit
Order Price Protection, and Auction Collar in the fourth quarter of
2017 and will announce by Trader Update the implementation date of
those proposed rule changes. All other proposed changes would be
implemented upon effectiveness of this filing.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Exchange Act,\7\ in general, and with Section
6(b)(5),\8\ 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.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed changes relating to adding a
minimum price threshold to Rules 7.31-E(a)(1)(B)(i), 7.31-E(a)(2)(B),
and 7.35-E(a)(10)(A) would 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, because they
would enhance the Exchange's price protection mechanisms, which protect
from aberrant prices and reduce the likelihood of halts, thus improving
continuous trading and price discovery. Further, the proposal to
enhance the price protection mechanisms by adding a minimum dollar
threshold would assist with the maintenance of fair and orderly markets
because such mechanisms protect investors from potentially receiving
executions away from the prevailing market prices at any given time.
The proposed changes to introduce the $0.15 minimum dollar threshold is
not novel and is similar in nature to that of other national securities
exchanges which incorporate dollar thresholds into the calculation of
the respective price protection mechanisms.\9\
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\9\ See supra note 4.
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The Exchange believes that the proposed amendment to Rules 7.35-
E(e)(8) to clarify order processing would remove impediments to and
perfect the mechanism of a free and open market and a national market
system because the proposed rule changes are designed to promote
clarity, consistency, and transparency in Exchange rules.
The Exchange also believes that replacing the term ``truncated''
with the term ``rounded down'' in Rules 7.31-E(a)(1)(B)(i) and, 7.35-
E(a)(10)(A) would remove impediments to and perfect the mechanism of a
free and open market and a national market system because they are
designed to promote clarity, consistency, and transparency in Exchange
rules.
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 intended to address competitive issues but rather would (1) provide
for a more effective price protection mechanism, specifically for
lower-priced securities; (2) clarify the order processing in Rule 7.35-
E(e)(8)(C) to promote clarity, consistency, and transparency; and (3)
make technical non-substantive changes to Rules 7.31-E and 7.35-E.
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 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 \10\ and Rule 19b-4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
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. The Exchange has satisfied this requirement.
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[[Page 51892]]
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 shall 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-NYSEArca-2017-126 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-NYSEArca-2017-126. 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. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2017-126 and should
be submitted on or before November 29, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-24255 Filed 11-7-17; 8:45 am]
BILLING CODE 8011-01-P