Document ID: SEC-2014-1550-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT, LLC
Posted Date: 2014-09-15T04:00Z

[Federal Register Volume 79, Number 178 (Monday, September 15, 2014)]
[Notices]
[Pages 55061-55063]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-21875]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73029; File No. SR-NYSEMKT-2014-75]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 49--
Equities, Which Addresses the Exchange's Emergency Powers Revising How 
Certain Messages Are Disseminated

September 9, 2014.
    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 August 27, 2014, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 49--Equities, which addresses 
the Exchange's emergency powers, to revise how certain messages are 
disseminated. 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

[[Page 55062]]

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 49--Equities, which addresses 
the Exchange's emergency powers, to revise how certain messages are 
disseminated.
Background
    In 2013, the Exchange adopted Rule 49--Equities, based on already-
existing New York Stock Exchange (``NYSE'') Rule 49 to provide the 
Exchange with the authority to declare an Emergency Condition with 
respect to trading on or through the systems and facilities of the 
Exchange and to act as necessary in the public interest and for the 
protection of investors.\4\ The Exchange adopted Rule 49--Equities 
based on corresponding NYSE Rule 49 to align its authority with its 
affiliates and mitigate the possibility of having to close in the event 
of a future emergency condition.\5\ The authority in Rule 49--Equities 
may be exercised when, due to an Emergency Condition, the Exchange's 
systems and facilities located at 11 Wall Street, New York, New York, 
including the NYSE MKT Trading Floor, cannot be utilized. If such an 
Emergency Condition is declared, a qualified Exchange officer may 
designate NYSE Arca, Inc. (``NYSE Arca'') the Exchange's affiliate, to 
serve as a backup facility so that the Exchange, as a self-regulatory 
organization (``SRO''), can remain operational.\6\ NYSE Arca also would 
continue to operate simultaneously. In approving Rule 49--Equities, the 
Securities and Exchange Commission (``Commission'') approved text, 
based on a corresponding amendment to NYSE Rule 49, that was designed 
to more effectively delineate the SRO functions of the Exchange and 
NYSE Arca during an Emergency Condition, reflect the operational 
preferences of the industry, and reflect the structure of member 
organization connectivity to and system coding for exchange systems.\7\ 
To date, the Exchange has not invoked Rule 49--Equities.
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    \4\ See Securities Exchange Act Release No. 70822 (November 6, 
2013), 78 FR 68128 (November 13, 2013) (SR-NYSE-2013-54; SR-NYSEMKT-
2013-66; SR-NYSEArca-2013-77). This release approved the Exchange's 
adoption of Rule 49--Equities as well as amendments to already-
existing NYSE Rule 49.
    \5\ See Securities Exchange Act Release No. 61177 (December 16, 
2009), 74 FR 68643 (December 28, 2009) (SR-NYSE-2009-105). See also 
SR-NYSE-2013-54, supra note 3. Under current Rule 49--Equities, an 
``Emergency Condition'' means an emergency as defined in Section 
12(k)(7) of the Act, which is ``(A) a major market disturbance 
characterized by or constituting--(i) sudden and excessive 
fluctuations of securities prices generally, or a substantial threat 
thereof, that threaten fair and orderly markets; or (ii) a 
substantial disruption of the safe or efficient operation of the 
national system for clearance and settlement of transactions in 
securities, or a substantial threat thereof; or (B) a major 
disturbance that substantially disrupts, or threatens to 
substantially disrupt--(i) the functioning of securities markets, 
investment companies, or any other significant portion or segment of 
the securities markets; or (ii) the transmission or processing of 
securities transactions.'' 15 U.S.C. 78l(k)(7).
    \6\ NYSE Arca trades equity securities on the systems and 
facilities of its wholly owned subsidiary, NYSE Arca Equities, Inc., 
referred to as the ``NYSE Arca Marketplace.'' For the purposes of 
this filing and in the text of Rule 49--Equities, these shall be 
referred to collectively as the systems and facilities of NYSE Arca, 
or simply NYSE Arca.
    \7\ See supra note 4.
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    Under current Rule 49(b)(2)(A)--Equities, beginning on the next 
trading day following the declaration of an Emergency Condition, NYSE 
Arca would, on behalf of and at the direction of the Exchange, 
disseminate (i) the official opening, re-opening, and closing trades of 
Exchange-listed securities to the Consolidated Tape as messages of the 
Exchange, and (ii) any notification for Exchange-listed securities to 
the Consolidated Quotation System (``CQS'') of a regulatory halt and 
resumption of trading thereafter, trading pause and resumption of 
trading thereafter, and Short Sale Price Test trigger and lifting 
thereafter, as messages of both the Exchange and NYSE Arca.
    Under current Rule 49(b)(2)(B)--Equities, bids and offers for 
Exchange-listed securities entered on or through the systems and 
facilities of NYSE Arca during the Emergency Condition would be 
reported to the CQS as bids and offers of NYSE Arca, except that the 
opening quote and any re-opening quote would be reported to the CQS as 
a bid and/or offer of both the Exchange and NYSE Arca. Bids and offers 
for Exchange-listed securities executed on or through the systems and 
facilities of NYSE Arca during the Emergency Condition would be 
reported to the Consolidated Tape as executions of NYSE Arca, except 
for executions in the opening, re-opening, or closing auctions, which 
would be reported as Exchange executions and Exchange volume only.
Proposed Rule Change
    After further review, the Exchange has determined that it is not 
feasible for certain notifications that are disseminated via CQS to be 
disseminated as messages of both the Exchange and NYSE Arca. 
Specifically, CQS can only process notifications of a regulatory halt 
and resumption of trading thereafter, trading pause and resumption of 
trading thereafter, and Short Sale Price Test trigger and lifting from 
a single market. Because the Exchange is the primary market for NYSE 
MKT-listed securities, the Exchange believes that it is more 
appropriate to continue to disseminate these notifications as NYSE MKT 
market messages during an Emergency Condition. As such, the Exchange 
proposes to amend Rule 49(b)(2)(A)(ii)--Equities so that the messages 
would only be disseminated as NYSE MKT messages.
    For similar reasons, CQS supports dissemination of re-opening quote 
messages from only a single market. Specifically, in order to support a 
re-opening quote, a single market must disseminate a ``resume'' trading 
message, which then signals CQS to accept and display quotes from all 
other markets. Because the Exchange is the primary market for NYSE MKT-
listed securities, the Exchange believes it is appropriate to 
disseminate notifications of re-opening quotes and related ``resume'' 
messages as an NYSE MKT market message during an Emergency 
Condition.\8\ As such, the Exchange proposes to amend Rule 
49(b)(2)(B)--Equities so that any re-opening quote would only be 
reported to the CQS as a bid and/or offer of the Exchange.
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    \8\ By contrast, CQS supports the receipt of opening quotes of 
both the Exchange and NYSE Arca. The Exchange believes it is 
appropriate to disseminate the opening quote as messages of both the 
Exchange and NYSE Arca in order to signal to those market 
participants that are looking for a primary market message as a cue 
that NYSE MKT-listed securities are open for trading.
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    The Exchange notes that it has conducted two tests with customers 
to disseminate messages as proposed.\9\
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    \9\ The Exchange conducted customer tests on September 21, 2013 
and March 22, 2014. See http://markets.nyx.com/nyse/trader-updates/view/12682 and http://markets.nyx.com/nyse/trader-updates/view/13092, respectively.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ in particular, because it 
is designed to promote just and equitable principles of trade and to 
remove impediments to and perfect the mechanism of a free and open 
market

[[Page 55063]]

and a national market system. Specifically, the Exchange believes that 
the proposed rule change will assist in facilitating trading in 
Exchange-listed securities in the event of an Emergency Condition and 
would help to avoid a future market-wide closure. The proposed change 
will take into account CQS system limitations while still providing for 
the appropriate dissemination of primary market messages. The Exchange 
believes that the proposed rule change would strengthen business 
continuity planning for itself and its member organizations, thereby 
benefiting market participants and investors generally.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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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 
designed to facilitate trading in Exchange-listed securities on NYSE 
Arca during an Emergency Condition and remove a duplicative 
notification that cannot, upon further review, be feasibly achieved. As 
such, the Exchange believes that the proposed rule change would promote 
competition for the benefit of market participants and investors 
generally because it provides transparency in Exchange rules of how 
NYSE Arca would disseminate messages on behalf of the Exchange during 
an Emergency Condition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
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.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange states that such waiver is consistent with the 
protection of investors and the public interest because it would permit 
the Exchange and its member organizations to more quickly adopt 
effective business continuity plans that will help avoid market 
closures in the event of an emergency, thereby maintaining liquidity 
for the benefit of market participants and investors generally. In 
support of the requested waiver, the Exchange notes that it has already 
successfully conducted two tests with customers to disseminate messages 
in the proposed manner, each time without negative results or 
feedback.\14\ Additionally, the Exchange's affiliates, NYSE and NYSE 
Arca, have filed similar proposals to account for these same proposed 
changes.\15\ For these reasons, the Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest. Therefore, the Commission designates 
the proposed rule change to be operative upon filing.\16\
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    \14\ See supra note 9.
    \15\ See SR-NYSE-2014-48 and SR-NYSEArca-2014-96.
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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)\17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(2)(B).
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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-2014-75 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-2014-75. 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 Section, 100 F Street, 
NE., Washington, DC 20549-1090. Copies of the filing will also be 
available for Web site viewing and printing at the NYSE's principal 
office and on its Internet Web site at www.nyse.com. 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-2014-75 and should 
be submitted on or before October 6, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21875 Filed 9-12-14; 8:45 am]
BILLING CODE 8011-01-P