Document ID: SEC-2015-2069-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT, LLC,
Posted Date: 2015-12-15T05:00Z

[Federal Register Volume 80, Number 240 (Tuesday, December 15, 2015)]
[Notices]
[Pages 77680-77683]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31442]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76601; File No. SR-NYSEMKT-2015-98]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 123C--
Equities To Define the Term ``Official Closing Price''

 December 9, 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 November 25, 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 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 123C--Equities to define the 
term ``Official Closing Price.'' 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 amend Rule 123C--Equities (``Rule 123C'') 
to define the term ``Official Closing Price'' and specify how the 
Exchange would determine the Official Closing Price for all securities 
listed on the Exchange.
    Currently, if the Exchange does not conduct a closing transaction 
in a security, it does not specify any closing price information about 
that security.\4\ The Exchange proposes to amend Rule 123C to define 
the term ``Official Closing Price'' and specify how such price would be 
determined. The Exchange's proposed rule is similar to rules of other 
listing exchanges, which similarly define an Official Closing Price.\5\
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    \4\ For example, if there is insufficient interest, e.g., the 
highest price order to buy is priced lower than the lowest price 
order to sell and there are no market orders for the closing 
transaction, the Exchange will not hold a closing auction. 
Similarly, if a security is subject to a regulatory halt as of 4:00 
p.m. Eastern Time, the Exchange will not conduct a closing auction 
in that security.
    \5\ See, e.g., NYSE Arca Equities, Inc. (``NYSE Arca Equities'') 
Rule 1.1(ggP) (defining the term ``Official Closing Price''); NASDAQ 
Stock Market LLC (``Nasdaq'') Rules 4754(b)(4) and (b)(6)(A)(ii) 
(defining the term ``Official Closing Price''); and BATS Exchange, 
Inc. (``BATS'') Rule 11.23(c)(2)(B) (determining the BATS Official 
Closing Price).

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[[Page 77681]]

    As proposed, Rule 123C(1)(e) would provide that the Official 
Closing Price of a security listed on the Exchange would be determined 
as set forth in proposed Rules 123C(1)(e)(i) and (ii). Proposed Rule 
123C(1)(e)(i) would provide that the Official Closing Price would be 
the price established in a closing transaction under paragraphs (7) and 
(8) of Rule 123C of one round lot or more. As further proposed, if 
there is no closing transaction in a security or if a closing 
transaction is less than one round lot, the Official Closing Price 
would be the most recent last-sale eligible trade in such security on 
the Exchange on that trading day. For example, there would not be a 
closing transaction in a security if there is insufficient trading 
interest for a closing transaction of a round lot or more or because 
the security has been halted as of 4:00 p.m. Eastern Time. If there 
were no closing transaction and no last-sale eligible trades on the 
Exchange on that trading day, the Exchange proposes that the Official 
Closing Price would be the prior day's Official Closing Price. As such, 
the Exchange would carry over the prior day's Official Closing Price 
for a security until such time that there is either a closing 
transaction on the Exchange or a last-sale eligible trade on the 
Exchange in such security.
    For example, if on Monday, a security trades on the NYSE at 3:00 
p.m. for $10.00, but there is no closing transaction, the Official 
Closing Price for that security on Monday would be $10.00. If on 
Tuesday there are no trades in that security on the Exchange and no 
closing transaction, Tuesday's Official Closing Price would be the 
Official Closing Price for the prior day, which was $10.00. Similarly, 
if on Wednesday, there are still no trades on the Exchange in that 
security, Wednesday's Official Closing Price would be Tuesday's 
Official Closing Price, which was $10.00. The Official Closing Price 
for the security would continue to be $10.00 until there is either a 
closing transaction or a last-sale eligible trade on the Exchange on a 
trading day in the security.
    As further proposed, Rule 123C(1)(e)(ii) would provide that if the 
Exchange were unable to conduct a closing transaction due to a systems 
or technical issue, the Official Closing Price would be the last 
consolidated last-sale eligible trade during regular trading hours on 
that trading day.\6\ This proposed rule is similar to New York Stock 
Exchange LLC (``NYSE'') Rule 440B(c)(3), which provides that the NYSE 
will use the consolidated last sale price for determining whether to 
trigger a Short Sale Price Test under that rule if there is no closing 
transaction due to a systems or technical issue. Similar to the NYSE, 
the Exchange proposes to use the consolidated last sale price rather 
than the Exchange last sale price when there is a systems or technical 
issue preventing the Exchange from conducting an auction because 
trading may be continuing on other markets while the Exchange's systems 
are impaired, and therefore the Exchange's last sale price may not be 
reflective of the most recent price of a security.
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    \6\ The Exchange is in the process of working with Nasdaq and 
NYSE Arca to establish back-up procedures if one or more of these 
markets is unable to conduct an auction. See NYSE press release 
dated July 22, 2015, available here: http://ir.theice.com/press-and-publications/press-releases/all-categories/2015/07-22-2015.aspx. In 
connection with this initiative, the Exchange notes that it will 
file a separate proposed rule change to amend the definition of 
``Official Closing Price'' to address how the markets would serve as 
alternate back-up venues. Until such time, the Exchange proposes to 
use the last consolidated last-sale eligible price as the Official 
Closing Price if the Exchange is unable to conduct an auction 
because of systems or technical issues.
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    Proposed Rule 123C(1)(e)(ii) would further provide that if there 
were no consolidated last-sale eligible trades in a security on a 
trading day when the Exchange is unable to conduct a closing 
transaction in a security or securities due to a systems or technical 
issue, the Official Closing Price of such security would be the prior 
day's Official Closing Price. The Exchange notes that this proposal 
differs from NYSE Rule 440B(c)(3), which provides that if trading is 
interrupted on the Exchange because of a systems or technical issue and 
not restored on that trading day, the Exchange would use the most 
recent consolidated last sale price for that security on the most 
recent day on which the security traded for purposes of determining 
whether the short sale price test restrictions of Rule 201 of 
Regulation SHO are triggered. The Exchange believes that using the last 
Official Closing Price from the prior trading day instead of the most 
recent consolidated last-sale price would incorporate the Exchange's 
proposed new methodology for determining the Official Closing Price, as 
described above.
    For example, assuming the same facts as the scenario described 
above, when $10.00 is the Official Closing Price on Tuesday and 
Wednesday, if on Thursday, the Exchange experiences a systems issue and 
is not able to conduct a closing transaction in that security and there 
is no consolidated last sale for that trading day, the Official Closing 
Price would again be $10.00.
    The Exchange also proposes to change Rule 123C(8) to use the term 
``closing transaction,'' instead of ``closing print.'' This change 
would conform the terminology in Rule 123C(8) to Rule 123C(7) and 
proposed Rule 123C(1)(e).
    Finally, the Exchange proposes to make conforming amendments to 
Rule 440B--Equities (``Rule 440B''), which governs Short Sales. Rule 
440B(b) currently sets forth the procedures for a Short Sale Price Test 
and provides that Exchange systems will not execute or display a short 
sale order with respect to a covered security at a price that is less 
than or equal to the current national best bid if the price of that 
security decreases by 10% of more, as determined by the listing market 
for the security, from the security's closing price on the listing 
market as of the end of regular trading hours on the prior day 
(``Trigger Price''). If the Exchange does not have a closing 
transaction in a security, it currently uses the last sale price on the 
Exchange as the Trigger Price. Rule 440B(c)(2) further provides that if 
a covered security did not trade on the Exchange on the prior trading 
day (due to a trading halt, trading suspension, or otherwise) the 
Exchange's determination of the Trigger Price shall be based on the 
last sale price on the Exchange for that security on the most recent 
day on which the security traded.
    The Exchange proposes to use the new definition of ``Official 
Closing Price'' in Rule 440B. As proposed, Rule 440B(b) would provide 
that Exchange systems would not execute or display a short sale order 
with respect to a covered security at a price that is less than or 
equal to the current national best bid if the price of that security 
decreases by 10% or more, as determined by the listing market for that 
security, from the security's Official Closing Price, as defined in 
Rule 123C--Equities as of the end of regular trading hours on the prior 
day (``Trigger Price''). (emphasis added)
    As discussed above, the proposed new definition of Official Closing 
Price would incorporate what price the Exchange would use in 
circumstances when there is no closing auction. Consistent with current 
Rule 440B(c)(2), proposed Rule 123C(1)(e)(i) would provide that if 
there is no auction in a security, the last-sale eligible trade on the 
Exchange would be the Official Closing Price. In addition, similar to 
NYSE Rule 440B(c)(3), proposed Rule 123C(1)(e)(ii) would provide that 
if the Exchange is unable to conduct a closing auction because of a 
systems or

[[Page 77682]]

technical issue, the last consolidated last-sale eligible trade on that 
trading day would be the Official Closing Price. Accordingly, the 
Exchange proposes a substantive difference to provide that if there is 
no consolidated last-sale price, the Exchange would use the prior day's 
Official Closing Price. Because the proposed definition of Official 
Closing Price would address the circumstances specified in Rule 
440B(c)(2), the Exchange proposes to delete Rule 440B(c)(2) as 
redundant of the proposed use of ``Official Closing Price'' in Rule 
440B(b).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\8\ in particular, in that 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, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because it would provide transparency in how 
the Exchange would determine the Official Closing Price in all 
Exchange-listed securities, regardless of whether there was a closing 
transaction. The Exchange believes that using the Exchange's last sale 
price as the Official Closing Price if there is no closing transaction 
would remove impediments to and perfect the mechanism of a free and 
open market because if there is insufficient trading interest for an 
auction, the last sale price on the Exchange in such security would 
likely reflect the most recent price for that security. The Exchange 
further believes that using the consolidated last sale price as the 
Official Closing Price if the Exchange is experiencing a system or 
technical issue that impairs the ability to conduct a closing 
transaction would remove impediments to and perfect the mechanism of a 
free and open market because if the Exchange's systems are not 
functioning, but other markets are trading, the consolidated last sale 
price on a trading day would likely reflect the most recent price for 
that security.
    The Exchange believes that amending Rule 440B to similarly use the 
term Official Closing Price would remove impediments to and perfect the 
mechanism of a free and open market and a national market system 
because it would promote transparency and consistency across Exchange 
rules. In particular, Rule 440B references the closing price on the 
listing market at the end of the regular trading hours for purposes of 
determining the Trigger Price under that rule. By using the term 
``Official Closing Price'' in Rule 440B(b), the Exchange would be using 
a defined term and would obviate the need to separately describe the 
events currently set forth in Rule 440B(c)(2).

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 designed to address any competitive issues, but rather to provide 
greater transparency in Exchange rules regarding how the Exchange would 
determine the Official Closing Price for all securities listed on the 
Exchange.

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 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 if consistent with the protection of 
investors and the public interest, provided that the self-regulatory 
organization has given the Commission written notice of its intent to 
file 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,\9\ the proposed rule change 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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    \9\ The Exchange has fulfilled this requirement.
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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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) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 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-2015-98 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2015-98. 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

[[Page 77683]]

business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing will also be available for inspection and copying 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-2015-
98 and should be submitted on or before January 5, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-31442 Filed 12-14-15; 8:45 am]
 BILLING CODE 8011-01-P