Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices 3273 

39See supra n. 4. 

40For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 41 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

would meet the Commission’s 

previously stated expectation that the 

Exchange discontinue its LRPs.39

Furthermore, the Exchange states its 

belief that meeting this expectation as 

soon as the technology becomes 

available, which the Exchange 

represents would be before the end of 

the operative-delay period, is consistent 

with the protection of investors and the 

public interest because it would 

implement the discontinuation of its 

LRPs as expeditiously as possible. 

Finally, the Exchange asserts that the 

proposed rule change would also add 

market collars that are similar to 

existing mechanisms on other markets 

and would reduce the potential of a 

clearly erroneous execution occurring 

on the Exchange. The Exchange, 

therefore, concludes that waiver of the 

operative delay so that it can implement 

market collars as soon as the technology 

is available is not only consistent with 

the protection of investors and the 

public interest, but would also benefit 

investors and the public interest. 

Because the proposed rule change 

would eliminate the Exchange’s LRPs, 

consistent with the adoption of the Plan, 

and because the proposed rule change is 

designed to prevent clearly erroneous 

order executions, the Commission 

believes that waiver of the operative 

delay is consistent with investor 

protection and the public interest. 

Accordingly, the Commission hereby 

waives the 30-day operative delay and 

designates the proposal operative upon 

filing.40

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 rule-comments@

sec.gov. Please include File Number S 

SR–NYSE–2015–01 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–2015–01. 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 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal offices 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– 

2015–01, and should be submitted on or 

before February 12, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.41

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–00966 Filed 1–21–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74064; File No. SR– 

NYSEMKT–2015–02] 

Self-Regulatory Organizations; NYSE 

MKT LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Add a Price Protection 

Mechanism To Prevent the Automatic 

Execution of Incoming Market Orders 

and Marketable Limit Orders Outside a 

Specified Parameter and Eliminate 

Liquidity Replenishment Points and 

the Gap Quote Policy 

January 15, 2015. 

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 January 8, 

2015, NYSE MKT LLC (the ‘‘Exchange’’ 

or ‘‘NYSE MKT’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to (i) amend 

Rule 1000 to add a price protection 

mechanism to prevent the automatic 

execution of incoming market orders 

and marketable limit orders outside a 

specified parameter and (ii) eliminate its 

Exchange-specific volatility 

mechanisms—Liquidity Replenishment 

Points (‘‘LRPs’’) and its Gap Quote 

Policy—and to delete any references 

thereto from the Exchange rules. 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, 


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4See Securities Exchange Act Release No. 67091 

(May 31, 2012), 77 FR 33498, 33510, n. 182 (June 

6, 2012) (File No. 4–631) (Order Approving, on a 

Pilot Basis, the Plan) (The Commission ‘‘expects, 

that upon implementation of the Plan, such 

exchange-specific volatility mechanisms would be 

discontinued by the respective exchanges.’’) See 

also Securities Exchange Act Release No 71649 

(March 5, 2014), 79 FR 13696 (March 11, 2014) (File 

No. 4–631) (the Seventh Amendment to the Plan). 

5Automatic executions may also be against orders 

on the Display Book®, Floor broker agency file 

interest, Floor broker proprietary file interest, 

Designated Market Maker (‘‘DMM’’) interest, and 

interest placed in the Exchange’s systems by DMMs 

pursuant to a Capital Commitment Schedule in 

accordance with, and to the extent provided by, 

Exchange rules and shall be immediately reported 

as Exchange transactions. See Rule 1000(a). 

6See Securities Exchange Act Release No. 53539 

(March 22, 2006), 71 FR 16353 (March 31, 2006) 

(SR–NYSE–2004–05); see also Securities Exchange 

Act Release Nos. 58265 (July 30, 2008), 73 FR 46075 

(Aug. 7, 2008) (notice); 58705 (October 1, 2008), 73 

FR 58995 (October 8, 2008) (SR–Amex–2008–63) 

(approval order for the adoption of NYSE Rules 1– 

1004 on the Exchange). 

7See Securities Exchange Act Release No. 69294 

(April 4, 2013), 78 FR 21441 (April 10, 2013) (SR– 

NYSEMKT–2013–33). 

8 Id. 

9See Securities Exchange Act Release No. 67091 

(May 31, 2012), 77 FR 33498, 33510, n. 182 (June 

6, 2012). 

10See supra n. 7; See Securities Exchange Act 

Release No. 69696 (June 4, 2013) 78 FR 34687 (June 

10, 2013) (SR–NYSEMKT–2013–46). 

11See Securities and Exchange Act Release No. 

71649 (March 5, 2014), 79 FR 13696 (March 11, 

2014) (File No. 4–631) (the Seventh Amendment to 

the Plan). The Exchange notes that rights and 

warrants are not subject to the Plan, and therefore 

continue to be subject to LRPs. 

12See Information Memo 94–32 (August 9, 1994), 

filed as SR–NYSE–93–48. See Securities Exchange 

Act Release No. 34303 (July 1, 1994), 59 FR 35157 

(July 8, 1994). See also Information Memorandum 

10–3 (January 7, 2010), filed as NYSEAmex–2010– 

05. See Securities and Exchange Act Release No. 

61402 (January 22, 2010), 75 FR 4602 (January 28, 

2010) (changing the minimum size and value 

requirements for use of gap quotes). 

13See Securities Exchange Act Release No. 61049 

(November 23, 2009), 74 FR 62851 (SR– 

NYSEAmex–2009–82) (December 1, 2009). 

14A market order is an ‘‘order to buy or sell a 

stated amount of a security at the most 

advantageous price obtainable after the order is 

represented in the Trading Crowd or routed to the 

Display Book®.’’ See Rule 13—Equities. A 

marketable limit order is defined as ‘‘a limit order 

to buy (sell) priced at or above (below) the 

Exchange best offer (bid) at the time such order is 

routed to the Display Book®.’’ Id. Because a stop 

order becomes a market order when elected, the 

Exchange believes it is appropriate to provide that 

elected stop orders would be subject to the 

proposed Trading Collar. 

15See proposed Rule 1000(c)(ii)—Equities. Both 

market orders and marketable limit orders are ‘‘auto 

ex orders’’ that initiate automatic executions 

immediately upon entry into the Exchange systems. 

See Rule 13—Equities. Trading Collars would not 

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 

Rule 1000—Equities to add a price 

protection mechanism to prevent the 

automatic execution of incoming market 

orders and marketable limit orders 

outside a specified parameter (referred 

to as a ‘‘Trading Collar’’). The Exchange 

also proposes to eliminate its Exchangespecific volatility mechanisms—LRPs 

and Gap Quote Policy—and to delete 

any references thereto from the 

Exchange rules. The Exchange believes 

that the proposed Trading Collars would 

assist with the maintenance of fair and 

orderly markets by mitigating the risks 

associated with orders sweeping 

through multiple price points, resulting 

in executions at prices that are away 

from the best bid or offer and potentially 

erroneous. As discussed further below, 

the discontinuation of the Exchangespecific volatility mechanisms were 

anticipated changes following 

implementation of the Regulation NMS 

Plan to Address Extraordinary Market 

Volatility (the ‘‘Plan’’).4

Background: Liquidity Replenishment 

Points and Gapping the Quote 

Rule 1000—Equities provides for the 

basic operative principles regarding the 

immediate, automatic execution of 

market orders and marketable limit 

orders against the Exchange’s published 

quotation.5 The Rule also lists instances 

in which automatic execution would 

not be available due to certain market 

conditions, including when Exchangespecific volatility mechanisms, 

specifically LRPs and gapping the quote, 

have been triggered. 

Liquidity Replenishment Points 

In March 2006, the Exchange 

implemented the LRP mechanism to 

address market volatility on the New 

York Stock Exchange, LLC (‘‘NYSE’’) 

and, in 2008, adopted LRPs for use on 

the Exchange.6 The Exchange has 

utilized LRPs, which are triggered by 

rapid price movements over a short 

period of time, to moderate volatility in 

a security by temporarily converting the 

electronic market for the security into 

an auction market to afford new trading 

interests the opportunity to add 

liquidity.7 The Exchange believes that 

LRPs were effective in moderating some 

of the impact from the events of May 6, 

2010 for Exchange trading customers, as 

evidenced by the lack of erroneous 

trades on the Exchange.8 In 2012, in 

approving the Plan, the Commission 

noted the ‘‘potential for unnecessary 

complexity that could result if the Plan 

were adopted, and exchange-specific 

volatility mechanisms were retained’’; 

thus, the Commission stated its 

‘‘expect[ation], that upon 

implementation of the Plan, such 

exchange-specific volatility mechanisms 

would be discontinued by the respective 

exchanges.’’ 9

In 2013, to coincide with the 

implementation of the Plan, the 

Exchange filed amendments to Rule 

1000 that provided for the phasing out 

of the functionality associated with 

LRPs as the Plan was phased in across 

all NMS Stocks.10 The Plan was fully 

implemented across all NMS Stocks on 

February 24, 2014, and as such, 

pursuant to Rule 1000(a)(iv)(A), the 

Exchange has discontinued the use of 

LRPs for all NMS Stocks that are subject 

to the Plan.11

Gapping the Quote 

When an imbalance in a particular 

security exists, the manual process 

known as ‘‘gapping the quote’’ occurs— 

specifically, the DMM for the security 

widens the spread between the bid and 

offer and publishes a new gapped quote. 

Order imbalances may occur when the 

Exchange receives a sudden influx of 

orders for a particular security on the 

same side of the market within a short 

time interval, or when one or more 

large-size orders for a security are 

entered, and there is insufficient 

offsetting interest. The Exchange first 

implemented its policies and 

procedures for gapping the quote in 

1994 and updated the Gap Quote Policy 

in 2010.12 As stated in the Policy, a 

DMM gaps a quote to ‘‘provide public 

notice of order imbalances for securities, 

facilitate price discovery, and minimize 

short-term price dislocation, by 

allowing for the entry of offsetting 

orders or the cancellation of orders on 

the side.’’ 13 A DMM may gap a quote 

after an LRP has been reached. A 

gapped quote is not available for 

automatic execution. 

Proposed Trading Collar 

The Exchange proposes to amend 

Rule 1000—Equities to add a price 

protection mechanism to prevent the 

automatic execution or routing of 

incoming market orders, including 

elected stop orders, and marketable 

limit orders 14 outside a specified 

parameter (referred to as a ‘‘Trading 

Collar’’). As proposed, an incoming 

market order or marketable limit order 

to buy (sell) would not execute or route 

to another market center at a price above 

(below) the Trading Collar. Trading 

Collars would be applicable only when 

automatic executions are in effect.15 As 


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Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices 3275 

be applicable to Set Slow Stocks, or to pre-opening, 

opening, closing or manual transactions, and are 

not in effect during a halt, suspension, or pause in 

trading. Trading Collars would apply, and be 

determined, when discretionary pricing 

instructions are triggered. Trading Collars would 

not be displayed. 

16 If, however, an order that routed to an away 

market returns to the Exchange unexecuted, the 

Trading Collar based on the NBBO in place at the 

time of execution would be used for that incoming 

(now returning) order, not the Trading Collar based 

on the NBBO in place at the time of the original 

arrival of the order. 

17See Rule 128(c)(1)—Equities. 

18See NYSE Arca Equities Rule 7.31(a)(2). 

19See Rule 62—Equities. 

20See Rule 80C—Equities. 

21See Rule 440B(b)—Equities. 

22 17 CFR part 242.201. 

discussed below, on arrival, a buy/sell 

order would be automatically executed 

up/down to (and including, but not 

beyond) the Trading Collar and any 

remaining interest shall be cancelled. 

Unless it is a non-routable order, the 

order would route to all markets at or 

better than the Trading Collar.16

Pursuant to proposed Rule 1000(c)(i), 

a Trading Collar would be a specified 

percentage away from the National Best 

Bid or Offer (‘‘NBBO’’), depending on 

whether it is a buy or sell order, and the 

specified percentage would vary 

depending on the NBBO at the time the 

order arrives and/or is executed. For 

buy orders, the Trading Collar would be 

a specified percentage above the 

National Best Offer (‘‘NBO’’). For sell 

orders, the Trading Collar would be a 

specified percentage below the National 

Best Bid (‘‘NBB’’). The proposed 

Trading Collars are set forth in the table 

below. 

NBB/NBO 

Percentage 

away from 

the NBB/

NBO 

Greater than $0.00, up to and 

including $25.00 .................... 10 

Greater than $25.00, up to and 

including $50.00 .................... 5 

Greater than $50.00 ................. 3 

The Exchange notes that these 

proposed percentages are based on the 

current numerical guidelines for 

determining whether a clearly erroneous 

execution has occurred.17 The Exchange 

further notes that the proposed 

percentages are the same as the 

percentages applicable to similar trading 

collar functionality on NYSE Arca 

Equities, Inc. (‘‘NYSE Arca Equities’’).18

The Exchange believes that the 

proposed specified percentages are 

appropriate because the Trading Collar 

is designed to reduce the risk of, and to 

potentially prevent, the automatic 

execution of orders at prices that may be 

considered clearly erroneous. Because 

the specified percentage may extend 

multiple decimal points, the Exchange 

proposes to truncate Trading Collars to 

the nearest minimum price variation 

(‘‘MPV’’) for the security.19

Consider an example where the NBBO 

is $24.95 × 25.01. In such scenario, the 

Trading Collar for buy orders would be 

$26.26 (i.e., $25.01 + 5% = $26.2605, 

truncated to $26.26) and the Trading 

Collar for sell orders would be $22.44 

[sic] (i.e., $24.95 ¥ 10% = $22.455, 

truncated to $22.45). 

The Exchange proposes that if the 

NBBO is crossed, the Exchange would 

use the Exchange Best Offer (‘‘BO’’) 

instead of the NBO for buy orders, and 

the Exchange Best Bid (‘‘BB’’) instead of 

the NBB for sell orders. 

The Exchange believes it is 

appropriate to use the BB/BO when the 

NBBO is crossed as a crossed NBBO is 

generally indicative of an erroneously 

priced or stale bid and/or offer, and may 

not be appropriate reference prices for 

calculating Trading Collars. The 

Exchange believes that this practice will 

help ensure that market participants 

obtain timely executions of their market 

orders and marketable limit orders 

while still being afforded the price 

protection benefit of the Trading 

Collars. As proposed, in the event there 

is no NBB or BB, the lower boundary of 

the Trading Collar would be zero 

because there would be no reference 

price against which to determine the 

appropriate Trading Collar. Similarly, in 

the event there is no NBO or BO, the 

upper boundary of the Trading Collar 

would be set to the maximum price that 

the System could handle. 

Notwithstanding the Trading Collar, any 

incoming market orders or marketable 

limit orders would still be subject to the 

Plan and could not execute outside of 

the Upper (Lower) Price Band, as 

defined in Rule 80C—Equities. 

Pursuant to proposed Rule 1000(c)(ii), 

an incoming market order, including an 

elected stop order, or marketable limit 

order would execute and/or route up or 

down to (and including) the Trading 

Collar and any remaining interest would 

be cancelled. The Exchange believes 

that Trading Collars, working in 

conjunction with the Plan, could help 

limit potential harm from extreme price 

volatility by preventing executions that 

could occur at a price significantly away 

from the contra side. As proposed, if the 

Trading Collar for incoming buy (sell) 

interest is lower (higher) than or equals 

the Upper (Lower) Price Band 20, the 

Exchange would cancel any remaining 

interest. The Plan, however, would take 

priority over the Trading Collars where 

the Plan affords more price protection to 

incoming orders. Specifically, if the 

Upper (Lower) Price Band is lower 

(higher) than the Trading Collar, the 

order would execute at the more 

restrictive Upper (Lower) Price Band 

and not beyond and any remaining 

interest would be displayed or repriced 

to the Price Band, consistent with Rule 

80C(a)(5)—Equities. 

The Exchange notes that if there is no 

execution opportunity at the Exchange 

for an incoming buy (sell) order at a 

price above (below) the NBO (NBB), the 

Exchange would not be obligated to 

route the order to an away market 

protected offer (bid) because the 

incoming order would not be trading 

through such protected quotation. The 

Exchange therefore proposes that if 

there is no execution opportunity at the 

Exchange for an incoming buy (sell) 

order at a price above (below) the NBO 

(NBB) and at or below (above) the 

Trading Collar, a buy (sell) order that is 

priced at or above (below) the Trading 

Collar would be cancelled. The 

Exchange further proposes that a 

similarly-priced, partially-executed 

order would also be cancelled. 

For example, assume the NBO is 

10.00, based on a quote from an away 

market, and therefore the proposed 

Trading Collar is 11.00. Assume further 

that the Exchange’s best offer is 11.05 

and with these conditions, the Exchange 

receives an incoming buy order priced 

at 11.02. Because there is no execution 

opportunity for the incoming buy order 

above the NBO and at or below the 

Trading Collar, and because the order’s 

limit price exceeds the Trading Collar, 

the incoming buy order would be 

cancelled. The buy order would cancel 

rather than route because the Exchange 

would not trade through another 

market. Similarly, assuming the same 

facts, but the Exchange has nondisplayed interest to sell priced at 9.99. 

An incoming buy order priced at 11.02 

would execute against that 9.99 nondisplayed sell interest, and then any 

remainder of the buy order would 

similarly be cancelled because there is 

no execution opportunity priced above 

the NBO of 10.00 or at or below the 

Trading Collar of 11.00. 

Finally, pursuant to proposed Rule 

1000(c)(iii), during a Short Sale Price 

Test,21 if the NBBO is crossed, short sale 

orders that would be re-priced to a 

Trading Collar would be cancelled. 

Under Rule 201 of Regulation SHO,22

when the NBBO is crossed, a short sale 

order in a covered security may be 

displayed or executed at a price that is 

less than or equal to the current national 


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23See SEC Division of Trading and Markets: 

Responses to Frequently Asked Questions 

Concerning Rule 201 of Regulation Show, FAQ 6.1, 

available at: http://www.sec.gov/divisions/

marketreg/rule201faq.htm. 

24See proposed Rule 70.25(b)(i). 

25The Trading Collar applies to d-Quotes in the 

same manner as other order types. See supra n. 15 

(Trading Collars apply when discretionary pricing 

instructions are triggered, but do not apply to 

openings, re-openings, or closing trades). 

26Current Rule 512—Equities states that LRPs 

will not apply to UTP Securities. See Information 

Memo 10–34 (July 12, 2010) (explaining that the 

Nasdaq Securities newly-listed on the Exchange 

would ‘‘be more thinly traded on the Exchange, 

with lower volume and less liquidity than its listed 

securities, and that prices for Nasdaq Securities will 

therefore be more volatile’’ and thus ‘‘in order to 

avoid triggering too many ‘slow’ trading situations, 

the Exchange removed the application of LRP 

parameters for trading Nasdaq Securities.’’). In 

2014, the Exchange expanded the UTP Program 

beyond Nasdaq securities. See Securities Exchange 

Act Release No. 71952 (April 16, 2014) 79 FR 22558 

(April 22, 2014) (SR–NYSEMKT–2014–32). 

27As proposed, the final sentence of Rule 60(d) 

would state the following: ‘‘When the Exchange’s 

highest bid or lowest offer has been executed or 

cancelled in its entirety, the Exchange will 

autoquote a new bid or offer reflecting the total size 

of displayable orders at the next highest (in the case 

of a bid) or lowest (in the case of an offer) price.’’ 

28 15 U.S.C. 78f(b)(5). 

29See e.g., NYSE Arca Equities Rule 7.31(a)(2). 

See also BATS Exchange, Inc. (‘‘BATS) Rule 

11.9(a)(2); BATS Y-Exchange, Inc. (‘‘BATS–Y’’) 

Rule 11.9(a)(2); EDGA Exchange, Inc. (‘‘EDGA’’) 

Rule 11.8(a)(7); EDGX Exchange, Inc. (‘‘EDGX’’) 

best bid.23 Accordingly, if the NBBO is 

crossed, a short sale order priced at or 

below the Trading Collar could be repriced to the Trading Collar, which is by 

definition a price below the NBB. In the 

spirit of Rule 201 of Regulation SHO, 

which is to prevent the display or 

execution of short sale orders at prices 

equal to or below the NBB, the 

Exchange believes that it is appropriate 

during a crossed market to cancel a 

short sale order that would be re-priced 

to a Trading Collar rather than display 

the order at that price. 

The Exchange also proposes to amend 

Rule 70.25(b)(i)—Equities, regarding 

price discretion or ‘‘d-Quotes,’’ which 

states that ‘‘[a] Floor broker may set a 

discretionary price range that specifies 

the prices at which the Floor broker is 

willing to trade.’’ Specifically, the 

Exchange proposes to amend this Rule 

to provide that d-Quotes are subject to 

the Trading Collar and/or the Price 

Bands and, thus, pursuant to the 

amended rule, Floor Brokers may use 

discretion to initiate or participate in a 

trade with interest capable of trading at 

a price within the discretionary price 

range ‘‘unless the interest reaches a 

Trading Collar or Price Band, whichever 

is reached first.’’ 24 The Exchange 

believes it is appropriate to similarly 

afford Trading Collar price protection to 

d-Quotes to prevent the execution of 

orders with discretionary price 

instructions at prices outside the 

prevailing market price from causing 

significant price dislocation in the 

market.25

The Exchange also proposes to amend 

Rule 512—Equities to state that Trading 

Collars would apply to UTP 

Securities.26 Although LRPs do not 

apply to UTP Securities, the Exchange 

believes it is appropriate to afford these 

securities Trading Collar protection 

because application of the Trading 

Collar is a straightforward and objective 

process that does not raise the same 

issue as was at issue for UTP Securities, 

i.e., identifying appropriate LRP values 

for actively-traded symbols that have 

low volume on the Exchange. 

Proposed Elimination of LRPs and Gap 

Quote Policy 

As noted above, by rule, the Exchange 

has already discontinued the use of 

LRPs for any security subject to the 

Plan. However, LRPs continue to be 

available for rights and warrants, which 

are not subject to the Plan. The 

Exchange believes that with the 

introduction of Trading Collars it will 

have in place appropriate price 

protections for rights and warrants and 

the Exchange will no longer need LRPs 

for those securities. Accordingly, the 

Exchange proposes to complete the 

Exchange’s discontinuation of LRPs in 

their entirety by deleting references to 

LRPs in the following Equities Rules: 

60, 79A, 104, 128, 501, 508, 512, and 

1000. 

For similar reasons, the Exchange 

believes it appropriate to discontinue 

the Gap Quote Policy. Accordingly, the 

Exchange proposes to eliminate its Gap 

Quote Policy in its entirety and to delete 

references thereto in the following 

Equities Rules: 60, 79A, 104, 501, 508, 

and 1000. 

Relatedly, the Exchange also proposes 

to amend Rule 1000(e) (Executions at 

and Outside the Exchange Best Bid or 

Offer) to add references to Trading 

Collars and/or Price Bands, in certain 

cases to replace deleted references to 

LRPs. The Exchange believes these 

proposed changes will add transparency 

and clarity to the Exchange’s rules. 

Other Proposed Amendments 

In connection with the addition of the 

Trading Collar, the Exchange also 

proposes to amend the definition of 

market order, in Rule 13—Equities, to 

state that if a market order to sell has 

exhausted all eligible buy interest, any 

unfilled balance of the market order to 

sell will be cancelled. The Exchange 

believes that this is appropriate because 

it assures that a market order to sell will 

not be held at a price that it is not 

executable, i.e., $0.00. 

Finally, unrelated to issues raised in 

present filing, the Exchange is also 

proposing technical, non-substantive 

edits to delete from the Exchange rules 

the outdated/obsolete references to 

securities operating in ‘‘Non-Firm 

Mode,’’ including in Rule 60(c)(ii)(A) 

and Rule 1000(a)(i), or the block 

template, referred to in Rule 60(ii)(B), 

which is the ‘‘manual reporting of a 

block-sized transaction.’’ The Exchange 

also proposes to delete the reference to 

‘‘S-quotes’’ in Rule 60(d), 1000(a) and 

1000(e)(iii)(A), as DMM interest is no 

longer solely referred to in this manner 

and the Exchange believes the proposed 

amendment will remove this outmoded 

and narrow reference. The Exchange 

also proposes to amend the last sentence 

of Rule 60(d), regarding ‘‘[a]utoquoting 

of highest bid/lowest offer,’’ to account 

for the impact of the Trading Collars.27

In addition, the Exchange proposes to 

amend Rule 1000(e)(iii)(A)(4) to replace 

an incorrect reference to NYSE with a 

reference to the Exchange. The 

Exchange proposes to delete Rule 

79A.15(ii)(C)(6), which is an outmoded 

reference to bonds that does not 

conform to how bonds currently operate 

on the Exchange or the NYSE, and to 

renumber the remaining subparts of this 

rule accordingly. Finally, the Exchange 

proposes to delete an erroneous 

reference in Rule 1000(e)(iv) to 

paragraph (d)(iii), as there is no such 

paragraph in the Rule. 

Implementation 

The Exchange will announce the 

implementation date of the proposed 

rule change by Trader Update. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 28 that an 

Exchange have rules that are designed to 

promote the just and equitable 

principles of trade, 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. 

As an initial matter, the Exchange 

notes that the proposed Trading Collar, 

which is designed to designed to 

promote the just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, is similar 

to the price protection features offered 

on other markets, including NYSE Arca 

Equities.29 As noted above, the specified 


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Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices 3277 

Rule 11.8(a)(7); Nasdaq Stock Market LLC 

(‘‘Nasdaq’’) Rule 4751(f)(13). 

30See supra nn. 17–18. 

31See supra nn. 4, 7–9. 

32 15 U.S.C. 78s(b)(3)(A)(iii). 

33 17 CFR 240.19b–4(f)(6). 

34 15 U.S.C. 78s(b)(3)(A). 

35 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 Exchange 

has satisfied this requirement. 

36 17 CFR 240.19b–4(f)(6). 

37 17 CFR 240.19b–4(f)(6)(iii). 

38See supra n. 4. 

percentages relating to the Trading 

Collar are based on the current 

numerical guidelines for determining 

whether a clearly erroneous execution 

has occurred and are the same as the 

approved specified percentages 

applicable to similar trading collar 

functionality on NYSE Arca Equities.30

Moreover, the Exchange believes that 

the proposed Trading Collar assists with 

the maintenance of fair and orderly 

markets by helping to mitigate the risks 

associated with orders sweeping 

through multiple price points, thereby 

resulting in executions that are 

potentially erroneous, which, in turn, 

protects investors from potentially 

receiving executions away from the 

prevailing prices at any given time. 

Specifically, the Exchange believes the 

Trading Collars will remove 

impediments to and perfect the 

mechanisms of a free and open market 

because the Trading Collars will operate 

in tandem with the Plan and will only 

execute/route incoming market orders 

or marketable limit orders priced within 

the Trading Collars or within the Upper 

(Lower) Band set forth in the Plan, if the 

latter is more conservative. The 

Exchange believes this mechanism will 

mitigate the risk of potentially 

erroneous executions, which protects 

investors and the public interest. 

The Exchange also believes its use of 

the BB/BO when the NBBO is crossed 

assists with the maintenance of fair and 

orderly markets as a crossed NBBO is 

generally indicative of an erroneously 

priced bid and/or offer, and should not 

be considered reliable for the purposes 

of determining the specified percentages 

for a Trading Collar. The Exchange 

believes that this practice will help 

ensure that market participants obtain 

timely executions of their market orders 

and marketable limit orders while still 

being afforded the price protection 

benefit of Trading Collar functionality, 

which protects investors and the public 

interest. 

Similarly, the Exchange believes that 

affording Trading Collar price 

protection to d-Quotes as well as to UTP 

Securities would remove impediments 

to and perfect the mechanism of a free 

and open market as the Trading Collar 

would prevent the execution of dQuotes and UTP Securities that are 

priced far away from the prevailing 

market price from causing significant 

price dislocation in the market, which, 

in turn, benefits investors and is in the 

public interest. 

The Exchange believes that the 

technical, non-substantive proposed 

amendments and/or deletions related to 

the Trading Collar in rules other than 

Rule 1000—Equities, as described 

above, remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system and, in general, protect investors 

and the public interest. Specifically, the 

Exchange believes that the proposed 

changes add transparency and clarity to 

the Exchange’s rules and will enhance 

the understanding of market 

participants by reducing potential 

confusion that the obsolete references 

would otherwise create. 

Finally, the Exchange previously 

committed to discontinue the Exchangespecific volatility mechanisms; thus, the 

elimination of LRPs and the Exchange’s 

Gap Quote Policy are expected 

changes.31 Moreover, the 

implementation of the Plan, together 

with the proposed Trading Collars 

eliminates the necessity for these 

Exchange-specific volatility 

mechanisms, as the Exchange will have 

in place appropriate price protections 

for all securities traded on the 

Exchange, including for rights and 

warrants. 

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 not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange believes the adding of Trading 

Collar protection will provide market 

participants with additional protection 

from anomalous executions. Thus, the 

Exchange does not believe the proposal 

creates any significant impact on 

competition. 

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 Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 32 and Rule 

19b–4(f)(6) thereunder.33 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 

prior to 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, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 34 and Rule 19b–4(f)(6)(iii) 

thereunder.35

A proposed rule change filed under 

Rule 19b–4(f)(6) 36 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),37 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. The Exchange has asked the 

Commission to waive the 30-day 

operative delay. The Exchange asserts 

that the rule change proposed herein 

would meet the Commission’s 

previously stated expectation that the 

Exchange discontinue its LRPs.38

Furthermore, the Exchange states its 

belief that meeting this expectation as 

soon as the technology becomes 

available, which the Exchange 

represents would be before the end of 

the operative-delay period, is consistent 

with the protection of investors and the 

public interest because it would 

implement the discontinuation of its 

LRPs as expeditiously as possible. 

Finally, the Exchange asserts that the 

proposed rule change would also add 

market collars that are similar to 

existing mechanisms on other markets 

and would reduce the potential of a 

clearly erroneous execution occurring 

on the Exchange. The Exchange, 

therefore, concludes that waiver of the 

operative delay so that it can market 

collars as soon as the technology is 

available is not only consistent with the 

protection of investors and the public 

interest, but would also benefit 

investors and the public interest. 

Because the proposed rule change 

would eliminate the Exchange’s LRPs, 

consistent with the adoption of the Plan, 

and because the proposed rule change is 

designed to prevent clearly erroneous 

order executions, the Commission 


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3278 Federal Register / Vol. 80, No. 14 / Thursday, January 22, 2015 / Notices 

39For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

40 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Specialists and Market Makers are subject to a 

‘‘Monthly Market Maker Cap’’ of $550,000 for: (i) 

Electronic and floor Option Transaction Charges; 

(ii) QCC Transaction Fees (as defined in Exchange 

Rule 1080(o) and Floor QCC Orders, as defined in 

1064(e)); and (iii) fees related to an order or quote 

that is contra to a PIXL Order or specifically 

responding to a PIXL auction. The trading activity 

of separate Specialist and Market Maker member 

organizations is aggregated in calculating the 

Monthly Market Maker Cap if there is Common 

Ownership between the member organizations. All 

dividend, merger, short stock interest, reversal and 

conversion, jelly roll and box spread strategy 

executions (as defined in Section II) are excluded 

from the Monthly Market Maker Cap. 

4A Specialist is an Exchange member who is 

registered as an options specialist pursuant to Rule 

1020(a). An options Specialist includes a Remote 

Specialist which is defined as an options specialist 

in one or more classes that does not have a physical 

presence on an Exchange floor and is approved by 

the Exchange pursuant to Rule 501. 

5A ‘‘market maker’’ includes Registered Options 

Traders (Rule 1014(b)(i) and (ii)), which includes 

Streaming Quote Traders (see Rule 1014(b)(ii)(A)) 

and Remote Streaming Quote Traders (see Rule 

1014(b)(ii)(B)). Directed Participants are also market 

makers. 

6This includes options overlying equities, ETFs, 

ETNs and indexes which are Multiply Listed. 

believes that waiver of the operative 

delay is consistent with investor 

protection and the public interest. 

Accordingly, the Commission hereby 

waives the 30-day operative delay and 

designates the proposal operative upon 

filing.39

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 rule-comments@

sec.gov. Please include File Number SR– 

NYSEMKT–2015–02 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–NYSEMKT–2015–02. 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 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal offices 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– 

NYSEMKT–2015–02, and should be 

submitted on or before February 12, 

2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.40

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–00967 Filed 1–21–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74062; File No. SR–Phlx– 

2015–06] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Amendments to Sections II and IV of 

the Pricing Schedule 

January 15, 2015. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that, on January 

13, 2015, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I, II, 

and III, below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

Monthly Market Maker Cap 3 and 

certain transaction fees applicable to 

Specialists 4 and Market Makers 5 that 

have reached the Monthly Market Maker 

Cap, which are located in the 

Exchange’s Pricing Schedule at Section 

II, entitled ‘‘Multiply Listed Options.’’ 6

The Exchange also proposes to make 

conforming and clarifying amendments 

to Section IV, Part A of the Pricing 

Schedule entitled ‘‘PIXL Pricing.’’ 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://

nasdaqomxphlx.cchwallstreet.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 

Exchange 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 these 

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 aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of this filing is to amend 

certain Specialist and Market Maker 

pricing located in the Exchange’s 

Pricing Schedule in Section II, entitled 

‘‘Multiply Listed Options’’ in order to 


tkelley on DSK3SPTVN1PROD with NOTICES