Document ID: SEC-2018-0313-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2018-02-21T05:00Z

[Federal Register Volume 83, Number 35 (Wednesday, February 21, 2018)]
[Notices]
[Pages 7517-7519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03454]

[[Page 7517]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82716; File No. SR-NYSEARCA-2018-12]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Temporarily 
Amend Rule 7.35-E(a)(8) Relating to the Auction Reference Price for the 
Trading Halt Auction for ProShares Short VIX Short-Term Futures ETF

February 14, 2018.
    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 February 6, 2018, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') 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 temporarily amend Rule 7.35-E(a)(8) 
relating to the Auction Reference Price for the Trading Halt Auction 
for ProShares Short VIX Short-Term Futures ETF (SVXY), which would be 
operative for February 6, 2018 only. The proposed rule change is 
available on the Exchange's website 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 temporarily amend Rule 7.35-E(a)(8) 
relating to the Auction Reference Price for the Trading Halt Auction 
for ProShares Short VIX Short-Term Futures ETF (SVXY), which would be 
operative for February 6, 2018 only.
    On February 5, 2018, both the U.S. and global markets experienced 
increased selling pressure and the Dow Jones Industrial Average 
(``DJIA'') closed 4.6% down over the prior closing day. In addition, on 
February 5, 2018, the Cboe Volatility Index (``VIX''), which is a 
common measure of volatility, more than doubled from its prior close of 
17.16 to 37.32. On the morning of February 6, 2018, the level of VIX 
continued to fluctuate significantly, reaching both a high of 50.30 and 
a low of 22.42 before noon.
    SVXY, which is listed on the Exchange, seeks daily investment 
results that correspond to the inverse (-1X) of the daily performance 
of the S&P 500 VIX Short-term Futures Index. On February, 5, 2018, the 
Official Closing Price for SVXY was $71.82. The price of SVXY declined 
in after-market trading on February 5, 2018, and the last reported 
extended-hours trade price on that day was $14.90. Because of the 
volatility in pricing for SVXY and because the NAV for February 5, 2018 
was not yet publicly available, on February 6, 2018, NYSE Arca halted 
trading in SVXY before the Early Trading Session began at 4:00 a.m. 
Eastern Time.\4\ Thereafter, the NAV was published at $3.96. While the 
security was halted, an Intraday Indicative Value (``IIV'') was 
published under the ticker SVXY.IV, and as of 11:00 a.m. Eastern Time 
on February 6, 2018, the IIV was $11.4111.
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    \4\ See Rule 8.200-E(d)(2)(F) and Securities Exchange Act 
Release Nos. 65134 (August 15, 2011), 76 FR 52034 (August 19, 2011) 
(SR-NYSEArca-2011-23) (Approval Order) and 64460 (May 11, 2011), 76 
FR 28493, 28496 (May 17, 2011) (SR-NYSEArca-2011-23) (Notice) 
(``With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. Trading may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable'', including if the NAV with 
respect to SVXY is not disseminated to all market participants at 
the same time).
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    As set forth in Rule 7.35-E(a)(8)(A), the Auction Reference Price 
for a Trading Halt Auction is either the last consolidated round-lot 
price of that trading day and, if none, the prior day's Official 
Closing Price. Pursuant to Rule 7.35-E(e)(7), for a Trading Halt 
Auction, the Price Collar Threshold for Auction Collars is the Auction 
Reference Price multiplied by 5 percent. Accordingly, consistent with 
these rules, for the Trading Halt Auction for SVXY, which would also be 
the first trade on February 6, 2018, the Auction Reference Price would 
be $71.82 and the Price Collar Thresholds would be $68.23 and $75.41.
    However, because of market events unique to the circumstances of 
February 5, 2018 and February 6, 2018, and the impact on pricing of 
SVXY, the Exchange does not believe that SVXY's Official Closing Price 
would be an appropriate Auction Reference Price for the Trading Halt 
Auction for that security. The Exchange believes that the significant 
difference between the Official Closing Price on the one hand, and the 
last reported extended-hours sale price, NAV, and IIV for that security 
on the other hand indicates that the Official Closing Price does not 
reflect the value of the security and would not be an appropriate 
Auction Reference Price.
    The Exchange believes that it would be consistent with fair and 
orderly markets and the protection of investors and the public to 
temporarily amend Rule 7.35-E(a)(8) and set a different Auction 
Reference Price for SVXY. The Exchange believes that given the unique 
circumstances for SVXY, including the selling pressure on February 5, 
2018 and the fluctuating prices relating to SVXY overnight, an IIV 
identified shortly before the Trading Halt Auction would more closely 
correlate to the value of SVXY as of the time of the Trading Halt 
Auction. More specifically, the Exchange believes that using an Auction 
Reference Price based on an IIV for SVXY that is identified prior to 
the Trading Halt Auction would reduce the potential for volatility in 
trading after the security resumes trading.
    Accordingly, the Exchange proposes to temporarily amend Rule 7.35-
E(a)(8) so that the Auction Reference Price for SVXY would be $11.4111. 
Because this proposed amendment would be operative for only one trading 
day and for only one symbol, the Exchange does not believe it is 
necessary to amend the rule text to effect this change. The Exchange 
proposes to provide notice of the amended Auction Reference Price and 
related Auction Collars via a Trader Update, to be published before the 
Trading Halt Auction in SVXY.

[[Page 7518]]

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\5\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\6\ 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, and in general, to protect 
investors and the public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that it would promote the protection of 
investors and the public interest to temporarily amend Rule 7.35-
E(a)(8) to set a different Auction Reference Price for SVXY for the 
Trading Halt Auction that would resume trading in that security on 
February 6, 2018. In particular, the Exchange believes that the unique 
circumstances of the market-wide trading volatility on February 5 and 
6, 2018, and related impact on the various prices relating to SVXY, 
using the Official Closing Price as the Auction Reference Price could 
result in extreme market volatility for that security after the 
security resumes trading on February 6, 2018. Specifically, the 
difference between the Official Closing Price on the one hand, and the 
NAV, last reported extended-hours sale price, and IIV on the morning of 
February 6, 2018 on the other hand, indicate that the Official Closing 
Price no longer reflects the value of SVXY.
    By contrast, the Exchange believes that for this unique 
circumstance, using an IIV identified shortly before the Trading Halt 
Auction would more closely reflect the value of SVXY and would reduce 
the potential for volatile trading after the security resumes trading. 
Accordingly, the Exchange believes that it would remove impediments 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, 
to temporarily amend Rule 7.35-E(a)(8) to provide that the Auction 
Reference Price for SVXY on February 6, 2018 only would be based on an 
IIV as of 11:00 a.m. Eastern Time.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
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 is designed 
to ensure a fair and orderly market by temporarily amending the Auction 
Reference Price that would be used for the Trading Halt Auction to 
resume trading in SVXY on February 6, 2018 only.

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 \7\ and Rule 19b-4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6)(iii) requires the 
Exchange to provide the Commission with 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 
requested that the Commission waive this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \9\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \10\ permits the 
Commission to 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 five-day prefiling requirement, 
as well the 30-day operative delay, so that the proposal may become 
operative on February 6, 2018. According to the Exchange, waiver of the 
operative delay would allow it to use an Auction Reference Price for 
the Trading Halt Auction to resume trading on SVXY on February 6, 2018, 
that more closely correlates to the value of that security, thereby 
reducing the potential of volatility after the security resumes 
trading. The Commission waives the prefiling requirement and finds that 
the 30-day operative delay is consistent with the protection of 
investors and the public interest because the proposed rule change is 
designed to facilitate the orderly reopening of trading in SVXY. 
Therefore, the Commission hereby waives the operative delay and 
designates the proposal operative upon filing.\11\
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    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ 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) \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 [email protected]. Please include 
File Number SR-NYSEARCA-2018-12 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-NYSEARCA-2018-12. 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 website (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

[[Page 7519]]

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 website 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-2018-12 and should 
be submitted on or before March 14, 2018.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-03454 Filed 2-20-18; 8:45 am]
 BILLING CODE 8011-01-P