51890 Federal Register / Vol. 82, No. 215 / Wednesday, November 8, 2017 / Notices 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See 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 

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. 

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 nonsubstantive 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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Federal Register / Vol. 82, No. 215 / Wednesday, November 8, 2017 / Notices 51891 

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’’). 

5See 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. 

6See 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.’’ 

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(5). 

9See supra note 4. 

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 

Continued 

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. 

Finally, the Exchange proposes a nonsubstantive, 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. 

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

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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51892 Federal Register / Vol. 82, No. 215 / Wednesday, November 8, 2017 / Notices 

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. 

12 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. 81667 

(September 21, 2017), 82 FR 45106 (September 27, 

2017) (SR–DTC–2017–016; SR–NSCC–2017–016; 

SR–FICC–2017–020) (‘‘Notice’’). 

4 Id. 

5 Id. at 45107. 

6Certain securities may not be priced daily, and 

others may only be priced once each business day. 

Id. 

7 Id. 

8 Id. 

9 Id. 

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– 

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

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–24255 Filed 11–7–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–82006; File Nos. SR–DTC– 

2017–016; SR–NSCC–2017–016; SR–FICC– 

2017–020] 

Self-Regulatory Organizations; The 

Depository Trust Company; National 

Securities Clearing Corporation; Fixed 

Income Clearing Corporation; Order 

Approving Proposed Rule Changes To 

Adopt the Clearing Agency Securities 

Valuation Framework 

November 2, 2017. 

I. Introduction 

On September 8, 2017, The 

Depository Trust Company (‘‘DTC’’), 

National Securities Clearing Corporation 

(‘‘NSCC’’), and Fixed Income Clearing 

Corporation (‘‘FICC,’’ each a ‘‘Clearing 

Agency,’’ and together with DTC and 

NSCC, the ‘‘Clearing Agencies’’), filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule changes SR–DTC–2017–016, SR– 

NSCC–2017–016, and SR–FICC–2017– 

020, respectively, pursuant to Section 

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder.2 The proposed rule changes 

were published for comment in the 

Federal Register on September 27, 

2017.3 The Commission did not receive 

any comment letters on the proposed 

rule changes. For the reasons discussed 

below, the Commission approves the 

proposed rule changes. 

II. Description of the Proposed Rule 

Changes 

The Clearing Agencies propose to 

adopt the Clearing Agency Securities 

Valuation Framework (‘‘Framework’’) of 

the Clearing Agencies, as described 

below. 

A. Overview of the Framework 

The Framework would address the 

manner in which the Clearing Agencies 

select and review ‘‘Pricing Vendors’’ 

and value securities that the Clearing 

Agencies process or otherwise hold. The 

proposed rule changes would set forth 

the securities valuation practices 

adopted by the Clearing Agencies for 

securities eligible for clearance and 

settlement processing by the applicable 

Clearing Agency; and in the case of 

FICC and NSCC, as central 

counterparties (‘‘CCPs’’), securities 

eligible to be held in their respective 

clearing funds.4

B. Selection of Pricing Vendors 

Each Clearing Agency would price 

securities for both end-of-day and 

intraday value primarily through pricing 

data supplied by third-party pricing 

vendors (‘‘Pricing Vendors’’).5 For most 

securities, Pricing Vendors would 

supply the Clearing Agencies with 

intraday pricing data on at least an 

hourly basis.6 Pricing Vendors would be 

selected by each Clearing Agency based 

on a review of their service, including, 

at a minimum, a review of Pricing 

Vendors’ securities coverage and a price 

quality check.7

The Framework would provide that 

each security be assigned a primary 

source Pricing Vendor (‘‘Primary Pricing 

Vendor’’) and a secondary source 

Pricing Vendor (‘‘Secondary Pricing 

Vendor’’).8 In the event that the Primary 

Pricing Vendor becomes unavailable, 

unreliable, or otherwise unusable with 

respect to a security, the Secondary 

Pricing Vendor would be designated as 

the replacement for the Primary Pricing 

Vendor with respect to such security.9

Each Clearing Agency would perform 

due diligence on each Pricing Vendor 

prior to engagement, and at least 

annually thereafter, to assess the 


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