4006 Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Notices 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Rule 123C(7) (Order of Execution at the 

Close). Rule 123C(7)(a) specifies the type of interest 

that must be executed in whole or in part in the 

closing transaction, and the allocation order of such 

interest. 

5See Rule 123C(8). 

6The proposed amendment contemplates that a 

DMM’s inability to close securities either manually 

or electronically would be related to business 

continuity disruptions such as the physical closing 

of the Exchange Trading Floor or equipment and 

connectivity breakdowns that prevent the DMM 

from closing a security either manually or 

electronically. When a DMM is unable to close 

securities manually or electronically, the DMM’s 

affirmative obligations under Rule 104 would not 

apply. 

7See Rule 104(a)(3)—Equities and 104(f)(iii)— 

Equities. 

8Rule 128—Equities defines a clearly erroneous 

execution as an execution with an obvious error in 

any term, such as price, number of shares or other 

unit of trading, or identification of the security. 

Under the numerical guidelines set forth in Rule 

128—Equities, an execution may be found to be 

clearly erroneous only if the price of the transaction 

to buy is greater, or less in the case of a sale, than 

the reference price by an amount that equals or 

exceeds the numerical guidelines for a particular 

transaction category. In determining whether an 

execution is clearly erroneous, the Exchange 

generally utilizes the consolidated last sale as the 

Reference Price. 

9Manually-entered Floor interest includes 

interest entered by the DMM on behalf of a Floor 

broker and the DMM interest entered manually. The 

Exchange notes that, under regular trading 

conditions, if manually-entered Floor interest has 

been entered into Exchange systems, Exchange 

systems will not permit a DMM to close a stock 

electronically and the DMM would instead be 

required to close the security manually. The 

Exchange proposes to make this explicit in the text 

of Supplementary Material .10. 

10Rule 123C(7)(a) sets forth the interest that must 

be executed or cancelled as part of the closing 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74094; File No. SR– 

NYSEMKT–2015–05] 

Self-Regulatory Organizations; NYSE 

MKT LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending Rule 123C— 

Equities To Specify That Exchange 

Systems May Close One or More 

Securities Electronically If a 

Designated Market Maker Registered in 

a Security or Securities Cannot 

Facilitate the Close of Trading as 

Required by Exchange Rules 

January 20, 2015. 

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 January 

13, 2015, NYSE MKT LLC (the 

‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the selfregulatory organization. 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 

Rule 123C—Equities to specify that 

Exchange systems may close one or 

more securities electronically if a 

Designated Market Maker registered in a 

security or securities cannot facilitate 

the close of trading as required by 

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, 

on the Commission’s Web site at 

www.sec.gov, and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Rule 123C—Equities (‘‘Rule 123C’’) to 

specify that Exchange systems may 

close one or more securities 

electronically if a Designated Market 

Maker (‘‘DMM’’) registered in a security 

or securities cannot facilitate the close 

of trading as required by Exchange 

rules. 

Rule 123C specifies the procedures to 

be followed at the close of trading on 

the Exchange, including procedures for 

the execution of closing interest,4 which 

interest is guaranteed to participate in 

the closing transaction,5 and the 

determination of the closing print(s) to 

be reported to the Consolidated Tape for 

each security. Supplementary Material 

.10 to Rule 123C (‘‘Rule 123C.10’’) 

currently provides that closings may be 

effectuated manually or electronically. 

However, the current rule contemplates 

that closings would be facilitated by the 

DMM, as provided for in Rule 

104(a)(3)—Equities. 

The Exchange proposes to amend 

Rule 123C.10 to provide that, if a DMM 

cannot facilitate the close of trading for 

one or more securities for which the 

DMM is registered, the Exchange would 

close those securities electronically.6

Unlike DMMs, who have the obligation 

to trade for their own account to supply 

liquidity as needed to facilitate the 

close,7 the Exchange would not supply 

any liquidity when effectuating an 

electronic close. Without the addition of 

liquidity to offset an imbalance, the 

closing price may not be reasonably 

related to the last sale. To avoid closing 

at a price too far away from the last sale, 

the Exchange proposes to establish 

numerical guidelines to provide 

parameters regarding the price a 

security may close when the Exchange 

closes such security. 

As proposed, the closing price of a 

security closed by the Exchange would 

not be greater than or less than the last 

sale price on the Exchange (the 

‘‘Reference Price’’) by an amount within 

the Closing Numerical Guidelines set 

forth below: 

Reference Price 

Closing Numerical Guideline (Closing 

Price % Difference from 

the Reference 

Price) 

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 proposed numerical guidelines 

are the same as those currently utilized 

in determining whether an execution 

qualifies as clearly erroneous under 

Rule 128—Equities.8 The Exchange 

believes that using the same guidelines 

when the Exchange closes a security 

electronically is appropriate because it 

would reduce the potential for the 

closing price on the Exchange to be 

considered erroneous. 

Further, the Exchange proposes to 

amend Rule 123C.10 to specify the 

eligible interest to be considered in an 

Exchange electronic close. Specifically, 

as proposed, no manually-entered Floor 

interest would participate in an 

Exchange electronic close, and if 

previously entered, would be ignored.9

Further, in performing a close under the 

proposed rule, the Exchange would 

consider all interest eligible to trade in 

the close consistent with Rule 123C(7) 10


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Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Notices 4007 

transaction as well as the order of execution. Rule 

123C(7)(b) sets forth the interest that may be used 

to offset a closing imbalance and the order of 

execution (i.e., interest that is not guaranteed to 

participate in the closing transaction). 

11Rule 123C(8) governs printing of the closing 

transaction where there is an order imbalance (Rule 

123C(8)(a)) and where there is no order imbalance 

(Rule 123C(8)(b)). 

12 15 U.S.C. 78f(b). 

13 15 U.S.C. 78f(b)(5). 

14 15 U.S.C. 78s(b)(3)(A)(iii). 

15 17 CFR 240.19b–4(f)(6). 

16 17 CFR 240.19b–4(f)(6). 

and 123C(8)(a).11 Under no 

circumstances, however, would the 

Exchange close a security if the closing 

price would be greater than or less than 

the Reference Price by an amount 

outside the Closing Numerical 

Guidelines. Accordingly, interest 

specified in Rule 123C(7)(a) would not 

participate in a closing trade if such 

interest would cause a closing price to 

be outside the Closing Numerical 

Guidelines. 

The proposed rule would also specify 

that the provisions of Rule 123C(9)(a)(1) 

and 123C(9)(b) would be suspended if 

the Exchange closes a security 

electronically. Rule 123C(9)(a)(1) 

permits the Exchange, on a security-bysecurity basis, to temporarily suspend 

the hours of operation under Rule 52— 

Equities so that offsetting interest may 

be solicited from both on-Floor and offFloor participants and entered after 4:00 

p.m. ET to reduce the size of the 

imbalance. Rule 123C(9)(b) specifies 

that only the DMM may request the 

temporary suspensions available under 

Rule 123C(9)(a). As proposed, if the 

Exchange closes a security 

electronically, the assigned DMM would 

not have the authority to invoke Rule 

123C(9)(a)(1). 

Similarly, the proposed rule would 

specify that only the Exchange would be 

able to invoke Rule 123C(9)(a)(2) if the 

Exchange closes a security 

electronically. Rule 123C(9)(a)(2) 

permits temporary suspensions of the 

prohibition on the cancellation or 

reduction of a Market on Close 

(‘‘MOC’’)/Limit on Close (‘‘LOC’’) order 

after 3:58 p.m. where there is a 

legitimate error in such an order and 

execution of the order would cause 

significant price dislocation at the close. 

Only the assigned DMM can request 

relief under Rule 123C(9)(a)(2). Under 

the proposed rule, in an electronic close 

by the Exchange, Rule 123C(9)(a)(2) 

would be in effect but the assigned 

DMM would not have authority to 

temporarily suspend cancellation; only 

the Exchange would be able to invoke 

a temporary suspension under the rule. 

Because of the technology changes 

associated with the proposed rule 

change, the Exchange proposes to 

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, because it is 

designed to prevent fraudulent and 

manipulative acts and practices, 

promote just and equitable principles of 

trade, remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and protect investors and the 

public interest. The Exchange believes 

that permitting the Exchange to 

automatically close trading would 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system by 

ensuring an orderly close if the 

registered DMM cannot manually or 

electronically facilitate the close of 

trading as required by Exchange rules. 

Similarly, the proposal promotes just 

and equitable principles of trade and 

removes impediments to and perfects 

the mechanism of a free and open 

market by providing customers and the 

investing public with the certainty of a 

close in circumstances where business 

continuity disruptions or other 

emergencies would prevent the assigned 

DMMs from closing a security. For the 

same reasons, the proposal is also 

designed to protect investors as well as 

the public interest. 

The Exchange believes that the 

proposed amendment to Rule 123C.10 

to provide that closings effectuated by 

the Exchange would be within a 

proposed numerical guideline would 

remove impediments to and perfect the 

mechanism of a free and open market 

because having such guidelines 

provides transparency regarding the 

range of potential prices that a security 

may close in such scenario. The 

Exchange further believes that the 

proposed numerical guidelines, which 

are based on existing guidelines for 

clearly erroneous executions, would 

remove impediments to and perfect the 

mechanism of a fair and orderly market 

because in the absence of a DMM 

supplying liquidity, the proposed 

guidelines would reduce the possibility 

for closing prices to be executed at 

potentially erroneous prices, thereby 

protecting investors and the public. 

Similarly, the Exchange believes that 

excluding interest eligible for the close 

that would cause an execution to occur 

outside the proposed numerical 

guidelines, even if such interest would 

otherwise be required to be included in 

a close effectuated by a DMM, and 

permitting the Exchange to cancel or 

reduce an MOC/LOC order after 3:58 

p.m. where there is a legitimate error 

and execution of the order would cause 

significant price dislocation at the close, 

would remove impediments to and 

perfect the mechanism of a fair and 

orderly market because it would assure 

that the Exchange could effectuate the 

close within the proposed specified 

price ranges. The proposed rule 

therefore promotes just and equitable 

principles of trade because it provides 

transparency to entering firms of 

whether interest would be eligible to 

participate in a closing transaction 

effectuated by the Exchange. 

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 

enable the Exchange to close trading 

where circumstances would prevent a 

DMM from facilitating a close. 

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 14 and Rule 

19b–4(f)(6) thereunder.15 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 and Rule 19b–4(f)(6)(iii) 

thereunder. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 16 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 


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4008 Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Notices 

17 17 CFR 240.19b–4(f)(6)(iii). 

18 15 U.S.C. 78s(b)(2)(B). 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 73739 

(November 12, 2014), 79 FR 73382 (‘‘Notice’’). 

4The term ‘‘Nasdaq Opening Cross’’ is defined in 

Chapter VI, Section 8(a)(3) of the Exchange’s rules. 

As is discussed infra, this definition is among those 

that the Exchange has proposed to revise. 

5Unless otherwise noted, all citations herein to 

Sections of the Exchange’s rules are citations to 

Sections of Chapter VI of its rules. 

6See proposed Sections 1(e)(7) and 1(g)(1). 

7The term ‘‘Eligible Interest’’ is defined in 

Section 8(a)(4) and, as discussed below, is a term 

that the Exchange proposes to modify. 

8See Section 8(a)(2). The Exchange proposes to 

provide itself with the ability to disseminate the 

Order Imbalance Indicator more frequently than the 

five second intervals currently required. See 

proposed Section 8(b)(3). The Exchange also 

proposes to specify that the dissemination interval, 

in addition to the start of dissemination, would be 

posted on its Web site. Id. 

9See Section 8(a)(2)(A). 

10See proposed Section 8(a)(2)(A). The Exchange 

states that the revised definition of Current 

Reference Price would be substantively similar to 

the current definition, but with the opening cross 

price determined pursuant to Section 8(b). See 

Notice, 79 FR at 73383. 

to Rule 19b–4(f)(6)(iii),17 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 18 of the Act 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–2015–05 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–2015–05. 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– 

NYSEMKT–2015–05 and should be 

submitted on or before February 17, 

2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–01247 Filed 1–23–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74096; File No. SR– 

NASDAQ–2014–116] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Order 

Approving a Proposed Rule Change 

Relating to the NASDAQ Opening and 

Halt Cross 

January 20, 2015. 

I. Introduction 

On November 21, 2014, The NASDAQ 

Stock Market LLC (‘‘Nasdaq’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change 

relating to its process for opening 

trading on Nasdaq Options Market, LLC 

(‘‘NOM’’) at the beginning of the trading 

day and following a trading halt. The 

proposed rule change was published for 

comment in the Federal Register on 

December 10, 2014.3 The Commission 

received no comments on the proposal. 

This order approves the proposed rule 

change. 

II. Description of the Proposal 

The Exchange proposes to modify its 

process for opening option trading on 

NOM at the beginning of the trading day 

and following a trading halt. The 

Exchange proposes to accomplish this 

by revising definitional terms set forth 

in Chapter VI, Sections 1 and 8(a) of its 

rules, and by revising the description of 

the processing of the Nasdaq Opening 

Cross 4 set forth in Chapter VI, Section 

8(b) of its rules. The Exchange also 

proposes to revise the language set forth 

in Chapter VI, Section 8(c) describing 

what occurs in the absence of an 

opening cross.5

Definitions—Sections 1 and 8(a) 

The Exchange proposes to add an ‘‘On 

the Open Order’’ or ‘‘OPG’’ as a new 

order type and time-in-force condition 

defined in Section 1. As proposed, any 

order designated as such would be 

executable only during the Nasdaq 

Opening Cross, with any portion not so 

executed cancelled back to the entering 

participant.6

In addition, the Exchange proposes to 

make the following definitional changes 

to Section 8(a): 

• ‘‘Order Imbalance Indicator’’ is 

currently defined as a message 

disseminated by electronic means 

containing information about ‘‘Eligible 

Interest’’ 7 and the price in penny 

increments at which such interest 

would execute at the time of 

dissemination.8 The ‘‘Current Reference 

Price’’ is one piece of information 

disseminated as part of the Order 

Imbalance Indicator and, as currently 

defined, is determined based on three 

price parameters.9 The Exchange 

proposes to delete these price 

parameters and to simplify the 

definition of ‘‘Current Reference Price’’ 

to be: An indication of what the opening 

cross would be at a particular point in 

time.10 Additionally, the indicative 

prices at which the Nasdaq Opening 


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