Document ID: SEC-2016-1491-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2016-08-24T04:00Z

[Federal Register Volume 81, Number 164 (Wednesday, August 24, 2016)]
[Notices]
[Pages 57986-57992]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20209]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78615; File No. SR-NYSEArca-2016-117]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend NYSE Arca 
Equities Rules 7.35P, 7.34P, 7.18P and 7.31P Regarding Order Processing 
Following an Auction or When Transitioning From One Trading Session to 
Another

August 18, 2016.
    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 August 15, 2016, 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 amend NYSE Arca Equities Rule 7.35P 
(Auctions), Rule 7.34P (Trading Sessions), Rule 7.18P (Halts), and 
7.31P (Orders and Modifiers) regarding order processing following an 
auction or when transitioning from one trading sessions to another. 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.

[[Page 57987]]

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 NYSE Arca Equities Rule 7.35P 
(Auctions) (``Rule 7.35P''), Rule 7.34P (Trading Sessions) (``Rule 
7.34P''), Rule 7.18P (Halts) (``Rule 7.18P''), and 7.31P (Orders and 
Modifiers) (``Rule 7.31P'') regarding order processing following an 
auction or when transitioning from one trading session to another. 
These proposed changes would revise how the Exchange processes orders 
on the Pillar trading platform only.
Overview
    Currently, under Rule 7.35P(g), during the Auction Processing 
Period,\4\ new orders, requests to cancel, and requests to cancel and 
replace an order that are received during the Auction Processing Period 
will be accepted but will not be processed until after the applicable 
auction concludes. In addition, a request to cancel and replace an 
order that was entered during the Auction Processing Period for an 
order that was also entered during the Auction Processing Period will 
be rejected.
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    \4\ The ``Auction Processing Period'' means the period during 
which the applicable auction is being processed. See Rule 
7.35P(a)(2).
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    When the Exchange transitions to continuous trading, either after 
auction processing concludes or when transitioning from one trading 
session to another, the Exchange transitions to continuous trading 
pursuant to the steps specified in Rule 7.35P(h). Specifically, the 
Exchange will first expire orders that are no longer eligible to trade. 
Next, orders that are designated for a trading session and that were 
received during a prior trading session or during the Auction 
Processing Period, and that did not participate in the auction, will 
become eligible to trade. Then, before continuous trading will begin, 
the Exchange will process any order instructions received either during 
the Auction Imbalance Freeze or Auction Processing Period, which 
includes new orders and requests to cancel, will next adjust the 
display price and working price of orders based on the PBBO or NBBO, 
and if orders are marketable, will trade and/or route such orders based 
on price-time priority. After marketable orders have routed or traded, 
the Exchange will publish a quote for the next trading session.
    With respect to order entry for the Core Trading Session, Rule 
7.34P(c)(1)(C) currently provides that Limit Orders designated IOC and 
Cross Orders entered before or during the Early Trading Session and 
designated for the Core Trading Session will be rejected if entered 
before the Core Open Auction concludes. As such, a Limit Order 
designated IOC that is entered after 9:30:00, but before the Core Open 
Auction concludes, would be rejected.
    Finally, Rule 7.18P(c)(2) provides that during a halt or pause in 
an Exchange-listed security, the Exchange retains resting orders in the 
NYSE Arca Book and assigns Limit Orders a working price and display 
price that is equal to the limit price of the order. The Exchange 
proposes to amend order and order instruction processing following an 
auction or when transitioning from one trading session to another to:
     Evaluate the status of orders that were live before the 
auction or in the earlier trading session and are eligible to trade 
after the auction/next trading session to assess whether to publish a 
new quote;
     After the Auction Processing Period ends, process orders 
that become eligible to trade in time sequence with specified cancel 
request; and
     Distinguish when requests to cancel, cancel and replace, 
and modify an order would be processed on arrival based on whether the 
impacted order was previously eligible to trade.
    The Exchange believes that these proposed changes would simplify 
the transition to continuous trading following an auction or the 
transition from one trading session to another. Specifically, rather 
than waiting for all marketable orders to be traded or routed in price/
time priority before publishing a quote, the Exchange would be 
evaluating orders at an earlier stage to determine whether to publish a 
quote. After publishing a quote, orders that become eligible to trade 
and related order instructions would be traded, routed, or quoted in 
time sequence. These proposed order processing changes would facilitate 
the Exchange in applying Price Bands, as defined in the Regulation NMS 
Plan to Address Extraordinary Market Volatility (``LULD Plan''),\5\ 
immediately following an auction in Exchange-listed securities, rather 
than waiting for the securities information processor (``SIP'') to 
publish such Price Bands based on the reference price provided by the 
Exchange for such securities.
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    \5\ See Securities Exchange Act Release No. 77679 (April 21, 
2016), 81 FR 24908 (April 27, 2016) (File No. 4-631) (Order 
approving 10th Amendment to the LULD Plan) and Rule 7.11P.
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    To effect the rule change, the Exchange proposes to amend Rules 
7.35P(g) and (h) to specify order and order instruction processing both 
during the Auction Processing Period and when transitioning to 
continuous trading. The Exchange also proposes to amend Rules 7.31P and 
7.34P to specify that Limit Orders designated IOC and Cross Orders 
would be accepted during the Auction Processing Period. Finally, the 
Exchange proposes to amend Rule 7.18P to specify that orders that were 
on the NYSE Arca Book before a halt or pause would retain their last 
working and display price.
Proposed Rule Change
    To effect the changes to how order instructions would be processed 
during the Auction Processing Period, the Exchange proposes to amend 
Rule 7.35P(g). As proposed, Rule 7.35P(g) would provide that new orders 
received during the Auction Processing Period would be accepted but 
would not be processed until after the Auction Processing Period. This 
proposed rule text is based on current Rule 7.35P(g), with a non-
substantive change to specify that the processing would be ``after the 
Auction Processing Period'' rather than ``until after the applicable 
auction concludes.'' The proposed change is designed to use consistent 
terminology throughout proposed Rule 7.35P(g) and (h) without any 
change to its meaning.
    Proposed Rule 7.35P(g) would further provide that for purposes of 
paragraphs (g) and (h) of that rule, an ``order instruction'' refers to 
a request to cancel, cancel and replace, or modify an order. The 
current rule text does not currently specify how the Exchange would 
process requests to modify an order during the Auction Processing 
Period. However, because requests to modify an order would be handled 
in the same manner as requests to cancel or requests to cancel and 
replace and [sic] order, the Exchange proposes to include modifying an 
order in the definition of ``order instruction.'' As further proposed, 
during the Auction Processing Period, order instructions would be 
processed as described in proposed Rules 7.35P(g)(1)-(2), which would 
replace the remainder of the current text of Rule 7.35P(g).
     Proposed Rule 7.35P(g)(1) would provide that an order 
instruction received during the Auction Processing Period would not be 
processed until after the Auction Processing Period if it relates to an 
order that was received before the Auction Processing Period. This 
proposed text is based on current Rule 7.35P(g) with no substantive 
changes, but with revised text to use consistent terminology. The 
proposed

[[Page 57988]]

rule would further provide that any subsequent order instructions 
relating to such order would be rejected. This would be new 
functionality. The Exchange proposes to reject such subsequent order 
instructions because they may conflict with the previously-entered 
order instruction.\6\ To avoid such a scenario, the Exchange proposes 
that any subsequent order instructions would be rejected.
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    \6\ For example, assume that during the Auction Processing 
Period, an ETP Holder sends a request to cancel and replace an 
order. While still in the Auction Processing Period, the ETP Holder 
then sends a request to cancel the original order. When those order 
instructions are processed in time sequence, the first instruction 
would result in a cancellation of the original order and a new 
order. The second instruction would be a cancellation of a non-
existing order.
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     Proposed Rule 7.35P(g)(2) would provide that an order 
instruction received during the Auction Processing Period would be 
processed on arrival if it relates to an order that was received during 
the Auction Processing Period. This proposed rule text represents a 
substantive change from current Rule 7.35P(g), which provides that the 
Exchange rejects a request to cancel and replace an order that was 
entered during the Auction Processing Period. The Exchange believes 
that if the Exchange receives an order during the Auction Processing 
Period, because such order would not be eligible to participate in an 
auction and because such order is not yet eligible to trade following 
the auction or in the next trading session, there should be no 
restrictions on cancelling, replacing, or modifying such non-live 
order.
    The Exchange also proposes to amend which orders may be entered 
during the Auction Processing Period. Currently, Rule 7.34P(c)(1)(C) 
provides that Limit Orders designated IOC and Cross Orders entered 
before or during the Early Trading Session and designated for the Core 
Trading Session will be rejected if entered before the Core Open 
Auction concludes. Because of the changes to order processing following 
the Auction Processing Period to process orders that are received 
during the Auction Processing Period in time sequence (as described in 
greater detail below), the Exchange proposes to accept Limit Orders 
designated IOC and Cross Orders during the Auction Processing Period. 
Because the Auction Processing Period occurs after 9:30 a.m. Eastern 
Time, an ETP Holder may be timing to send Limit Orders designated IOC 
as soon after 9:30 a.m. Eastern Time as feasible and would not know the 
precise time when the Exchange has transitioned to continuous trading. 
To avoid rejecting orders designated for the Core Trading Session that 
were entered during Core Trading Hours,\7\ the Exchange proposes to 
amend Rule 7.34P(c)(1)(C) to provide that Limit Orders designated IOC 
and Cross Orders entered before or during the Early Trading Session and 
designated for the Core Trading Session would be rejected if entered 
before the Auction Processing Period for the Core Open Auction. The 
Exchange similarly proposes to amend Rules 7.31P(b)(2) and (g), which 
currently provide that a Limit Order with an IOC Modifier or a Limit 
IOC Cross Order will be cancelled if it arrives during auction 
processing, to delete the phrase ``and it if arrives during auction 
processing, it will be cancelled.''
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    \7\ ``Core Trading Hours'' means the hours of 9:30 a.m. Eastern 
Time through 4:00 p.m. Eastern Time or such other hours as may be 
determined by the Corporation from time to time. See Rule 1.1(j).
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    The Exchange further proposes to amend Rule 7.34P(c)(2) to add new 
subparagraph (C) that would provide that Limit Orders designated IOC 
and Cross Orders entered before and during the Core Trading Session and 
designated for the Late Trading Session would be rejected if entered 
before the Auction Processing Period for the Closing Auction. 
Currently, the rule is silent on the treatment of Limit Orders 
designated IOC and Cross Orders that are designated for the Late 
Trading Session only and entered during the Core Trading Session or 
earlier, but the treatment is the same as provided for in current Rule 
7.34P(c)(1)(C). The Exchange proposes to codify the treatment of such 
orders entered during the Core Trading Session, and in so doing, make 
the same substantive change as proposed for Rule 7.34P(c)(1)(C).
    To effect the changes to how the Exchange would transition to 
continuous trading, the Exchange proposes to amend Rule 7.35P(h). The 
Exchange proposes a non-substantive clarifying change to the text of 
Rule 7.35P(h) to replace the phrase ``the Exchange will transition to 
continuous trading session for the applicable trading session'' with 
the phrase ``the Exchange will transition to continuous trading 
following an auction or when transitioning from one trading session to 
another'' to specify that Rule 7.35P(h) governs both trading session 
transition (which may involve an auction) and transition to continuous 
trading following a Trading Halt Auction. Rule 7.35P(h)(1), which is 
not changing, and proposed Rules 7.35P(h)(2)-(3), which will be new 
rule text, would specify how orders and order instructions would be 
processed as the Exchange transitions to continuous trading. The 
Exchange proposes to delete current Rule 7.35P(h)(2), (h)(3), and 
(h)(3)(A)-(D) (with the exception of the second sentence of current 
Rule 7.35P(h)(3)(B), which, as described below, will be included in 
proposed Rule 7.35P(h)(3)(C)).
    Proposed Rule 7.35P(h)(2) would specify how the Exchange would 
process order instructions during the transition to continuous trading:
     Proposed Rule 7.35P(h)(2)(A) would provide that an order 
instruction received during the Auction Imbalance Freeze,\8\ the 
transition to continuous trading, or the Auction Processing Period 
under paragraph (g)(1) of this Rule would be processed in time sequence 
with the processing of orders as specified in proposed Rule 
7.35P(h)(3)(A) or (B) if it relates to an order that was received 
before the Auction Processing Period. As proposed, these order 
instructions would be processed in time sequence with the processing of 
orders as they become eligible to trade, as described below. Similar to 
proposed Rule 7.35P(g)(1), any subsequent order instructions relating 
to such order would be rejected. This proposed rule is based in part on 
current Rule 7.35P(h)(2)(A) [sic], which provides that any order 
instructions received during either the Auction Imbalance Freeze or 
Auction Processing Period that were not processed will be processed. 
The proposed changes are designed to provide more specificity that the 
specified order instructions would be processed in time sequence with 
all other order processing.
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    \8\ The ``Auction Imbalance Freeze'' means the period that 
begins before the scheduled time for the Early Open Auction, Core 
Open Auction, or Closing Auction, as specified in Rules 7.35P(b), 
(c), and (d), and that ends once the Auction Processing Period 
begins. See Rule 7.35P(a)(3).
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     Proposed Rule 7.35P(h)(2)(B) would provide that an order 
instruction received during the transition to continuous trading would 
be processed on arrival if it relates to an order that was entered 
during the Auction Processing Period or the transition to continuous 
trading. This proposed processing would therefore apply to orders that 
were not previously live and were entered after the Auction Processing 
Period began. Similar to proposed Rule 7.35P(g)(2), because these 
orders have not yet been processed, the Exchange believes it is 
appropriate to apply order instructions against such orders 
immediately.
    Proposed Rule 7.35P(h)(3) would specify how orders would be 
processed when transitioning to continuous

[[Page 57989]]

trading, as provided for in proposed Rules 7.35P(h)(3)(A)-(C):
     Proposed Rule 7.35P(h)(3)(A) would provide that a quote 
would be published based on unexecuted orders that were eligible to 
trade in the trading sessions both before and after the transition or 
auction, i.e., previously-live orders. This represents a substantive 
change from current Rule 7.35P(h)(3)(D), which provides that the 
Exchange will publish a quote only after all marketable orders have 
routed or traded. As proposed, the Exchange would publish a quote 
before evaluating the orders that were not previously eligible to 
trade. Proposed Rules 7.35P(h)(3)(A)(i) and (ii) would provide 
specificity regarding how such quote would be determined.
    Proposed Rule 7.35P(h)(3)(A)(i) would provide that before 
publishing a quote when transitioning from a prior trading session or 
following the Early Open Auction, Core Open Auction, or Closing 
Auction: (1) Previously-live orders that are marketable would be 
traded, routed, or cancelled in time sequence; (2) a new quote would be 
published only if different from the last-published quote; \9\ and (3) 
if the new published quote would be worse than the previously-published 
quote and would lock or cross the PBBO, the display price of Limit 
Orders would be adjusted consistent with Rule 7.31P(a)(2)(C).
    Because the Exchange does not currently update its quote solely 
because it transitions from one trading session to another, the 
Exchange would not be changing that behavior when evaluating whether to 
publish a quote. When assessing whether previously-live orders are 
marketable, the Exchange would re-price them first, as provided for in 
proposed Rule 7.35P(h)(3)(C). If such orders would become marketable 
against each other or a protected quote, they would be traded or 
routed, as applicable. In addition, because such orders would be 
subject to LULD Plan Price Bands, such orders may be cancelled if 
priced through a Price Band.\10\
    With respect to proposed cross reference to Rule 7.31P(a)(2)(C), 
that rule describes how the Exchange would not publish a new BBO that 
would lock or cross a PBBO that initially had locked or crossed our 
previously-displayed quote. Because of updates to the PBBO during the 
Auction Processing Period, a similar set of facts and circumstances 
could arise, and rather than publishing a new quote that would lock or 
cross the PBBO, the Exchange would adjust the display price of Limit 
Orders as provided for in Rule 7.31P(a)(2)(C) until such time that the 
limit price of such orders no longer locks or crosses the PBBO.\11\
    Proposed Rule 7.35P(h)(3)(A)(ii) would provide that before 
publishing a quote following a Trading Halt Auction: (1) Previously-
live Limit Orders that are designated with a Proactive if Locked/
Crossed Modifier or that would be the result of reserve interest 
replenishing the fully-executed display quantity of a routable Reserve 
Order would route, if marketable against protected quotations on Away 
Markets; (2) previously-live orders marketable against other orders in 
the NYSE Arca Book that would not trade-through a protected quotation 
would trade; and (3) the display price of all other orders that are 
marketable against a protected quotation on an Away Market would be 
adjusted consistent with Rule 7.31P(a)(2)(C). The Exchange proposes 
this difference in processing following a Trading Halt Auction to avoid 
locking or crossing a protected quotation, the Exchange proposes to re-
price the display price of such orders as provided for in Rule 
7.31P(a)(2)(C). In addition, unlike a trading session transition 
change, because the Exchange would not have a published quote during a 
halt or pause, if there is sufficient interest, the Exchange would 
publish a quote at this stage following a Trading Halt Auction.
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    \9\ For example, assume that at 9:29 a.m. Eastern Time, NYSE 
Arca publishes a quote in XYZ of 100 shares 10.04 x 10.05 100 
shares. Assume that after the Auction Processing Period, based on 
the orders that were previously eligible to trade, the quote would 
be 100 shares 10.04 x 10.05 100 shares. Because the quote has not 
changed, the Exchange would not republish that quote. By contrast, 
if the new quote is 100 shares 10.03 x 10.05 100 shares, the 
Exchange would publish a new quote.
    \10\ See Rule 7.11P(a)(5) (specifying when the Exchange would 
cancel buy (sell) orders priced above (below) the Upper (Lower) 
Price Band).
    \11\ For example, assume that before the Core Open Auction, the 
Exchange publishes a quote of 10.04 x 10.05, which is the NBBO. 
During the Auction Processing Period, an Away Market publishes a new 
protected offer of 10.02, which crosses the Exchange's best bid. 
That bid can stand its ground. However, if after the Auction 
Processing Period, the new Exchange best bid would be 10.03, because 
this is worse than the Exchange's last published best bid and would 
cross the new PBO of 10.02, the Exchange would adjust the display 
price of the Limit Order representing the best bid to 10.01 and the 
working price would be priced at 10.02.
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     Proposed Rule 7.35P(h)(3)(B) would provide that next, 
unexecuted orders that were not eligible to trade in the prior trading 
session (or were received during a halt or pause) or that were received 
during the Auction Processing Period, would be assigned a new working 
time at the end of the Auction Processing Period in time sequence 
relative to one another based on original entry time. This would be new 
processing of such orders. Currently, as provided for in Rule 
7.36P(f)(1), an order is assigned a working time based on its original 
order entry time. That would remain true for such orders for purposes 
of participation in the applicable auction.\12\ However, as proposed, 
after the Auction Processing Period, the Exchange would assign a new 
working time to such orders, i.e., orders that were not previously 
live. This proposed change is similar to how Bats BZX Exchange, Inc. 
(``Bats'') and the Nasdaq Stock Market LLC (``Nasdaq'') process orders 
following an auction that were not previously live.\13\ By assigning a 
new working time, in continuous trading, such orders would no longer 
have time priority over orders that were entered later, but were 
eligible to trade in the prior trading session.\14\
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    \12\ See Rule 7.35P(a)(6) (describing Auction Ranking, which is 
based on the price-time priority of such orders as specified in 
Rules 7.36P(c)-(g)).
    \13\ See Bats Rules 11.23(b)(3)(A) and (B) and (c)(3)(A) 
(previously-live orders, i.e., ``Limit order shares on the 
Continuous Book that are not executed in'' an auction, will remain 
on the Bats' book and thus will be represented in the quote and 
orders that were not previously live, i.e., ``RHO Orders'' will be 
added to the Bats' book at the conclusion of the Opening Auction); 
Nasdaq Rules 4752(c) and 4753(c)(1) (If no opening or trading halt 
cross, orders are added to the book, i.e., the previously published 
quote, in time priority).
    \14\ For example, assume a Limit Order to buy for 10.00 
designated for the Core Trading Session only (Order A) is entered at 
8:00 a.m. Eastern Time. Assume next that a Limit Order to buy for 
10.00 designated for both the Early and Core Trading Sessions (Order 
B) is entered at 9:00 a.m. Eastern Time, and is eligible to trade on 
arrival. Assume that Order B is not executed in the Early Trading 
Session. In the Core Trading Auction, Order A will have time 
priority over Order B. However, after the Auction Processing Period 
for the Core Open Auction ends, Order A will be assigned a new 
working time. In continuous trading Order B, which was eligible to 
trade earlier than Order A, would have time priority over Order A.
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     Proposed Rule 7.35P(h)(3)(C) would provide that when 
processing orders, the display price and working price of an order 
would be adjusted based on the PBBO or NBBO, as provided for in Rule 
7.31P. This rule text is based on the first sentence of current Rule 
7.31P(h)(3)(B). The second sentence of proposed Rule 7.35P(h)(3)(C) 
would retain the second sentence of current Rule 7.35P(h)(3)(B), which 
states that ``when transitioning to continuous trading, the display 
price and working price of Day ISOs will be adjusted in the same manner 
as Arca Only Orders until the Day ISO is either traded in full or 
displayed at its limit price.''
    The Exchange also proposes to amend Rule 7.18P regarding order 
handling during a halt or pause. During a UTP Regulatory Halt, the 
Exchange cancels any unexecuted portions of Market Orders. The Exchange 
proposes to add that the Exchange would also cancel

[[Page 57990]]

orders not eligible to trade in the current trading session on the NYSE 
Arca Book. For example, assume there is a UTP Regulatory Halt at 8:00 
a.m. Eastern Time. If the Exchange receives notice of such halt, it 
would cancel any orders in the impacted security resting on the NYSE 
Arca Book that are designated for the Core Trading Session only or 
designated for the Core and Late Trading Sessions, i.e., are not 
eligible to trade in the Early Trading Session, which is for purposes 
of this example, the current trading session. Because the Exchange does 
not conduct a Trading Halt Auction for UTP Securities, the Exchange 
proposes to cancel such non-live orders in order to reduce the 
potential for such orders to lock or cross a protected quotation if 
trading resumes in that security in the next trading session.
    The Exchange also proposes to amend how orders are maintained on 
the NYSE Arca Book during a halt or pause. As proposed, rather than 
assign Limit Orders a working price and display price that is equal to 
the limit price of the Order, the Exchange proposes to amend Rule 
7.18P(c)(2) to provide that during a halt or pause in Exchange-listed 
securities, it would maintain resting orders on the NYSE Arca Book at 
their last working price and display price. This proposed change would 
not alter how such orders would participate in a Trading Halt Auction, 
which would continue to be based on their limit price, and not their 
last working price.\15\ Nor would it alter how they would be priced 
when transitioning to continuous trading, because as proposed in Rule 
7.35P(h)(3)(C), the working price and display price of such orders 
would be adjusted based on any changes to the PBBO or NBBO, as provided 
for in Rule 7.31P. This proposed rule change would therefore not alter 
any priority for such orders, but would streamline order processing for 
the Exchange by eliminating an extra processing step. For consistency, 
the Exchange proposes to add the same clause to Rule 7.18P(b)(2).\16\ 
Finally, the Exchange proposes to amend Rule 7.18P(c)(5) to provide 
more specificity of when the rules governing order acceptance during a 
halt or pause ends. Currently, the rule provides that the Exchange 
accepts all other incoming order instructions until the security has 
reopened. Because acceptance of orders and order instructions during 
the Auction Processing Period is governed by Rule 7.35P(g), the 
Exchange proposes to revise Rule 7.18P(c)(5) to provide that the 
Exchange would accept all other incoming order instructions until the 
Auction Processing Period for the Trading Halt Auction, at which point, 
Rule 7.35P(g) would govern the entry of incoming orders and order 
instructions.
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    \15\ See Rule 7.35P(a)(6)(A) (Limit Orders, LOO Orders, and LOC 
orders will be ranked based on their limit price and not the price 
at which they would participate in the auction).
    \16\ The Exchange also proposes a non-substantive, technical 
amendment to fix a typographical error in Rule 7.18P(c) to use the 
term ``Marketplace'' instead of ``Markeplace.''
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* * * * *
    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce by Trader Update the 
implementation date.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\17\ in general, and 
furthers the objectives of Section 6(b)(5),\18\ 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.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed changes 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 are designed to simplify order and order 
instruction processing both during the Auction Processing Period and 
when transitioning to continuous trading. Specifically, the Exchange 
believes that publishing a quote based on orders that were previously 
live before the new trading session or auction would result in the 
Exchange publishing an updated quote sooner than under current rules. 
In addition, the proposed change to process orders that become live 
after an auction or in a new trading session in time sequence rather 
than in price/time priority would similarly simplify order processing 
by processing such orders in the order they were received. The Exchange 
also believes that assigning a new working time to orders that were not 
live prior to the transition to continuous trading would preserve the 
time priority of those orders that were eligible to trade in an earlier 
trading session or before the auction. This proposed rule change is 
also based on how Bats and Nasdaq assign time priority to orders that 
were not live prior to an auction and that are added to the book after 
an auction.\19\
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    \19\ See supra note 13.
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    The Exchange also believes that the proposed changes to when the 
Exchange would process order instructions, both during the Auction 
Processing Period and when transitioning to continuous trading, are 
designed to provide consistent treatment of when order instructions 
would be processed, which would be based on when an order was entered. 
The Exchange believes that waiting to process order instructions that 
relate to an order that was entered before the Auction Processing 
Period (including order instructions entered during the Auction 
Imbalance Freeze that were not yet processed) would remove impediments 
to and perfect a free and open market and a national market system 
because it would ensure that a customer's order instructions would be 
processed in time sequence with the underlying order. Likewise, the 
Exchange believes that the proposed change to reject subsequent order 
instructions when order instructions are not processed on arrival, as 
provided for in proposed Rules 7.35P(g)(1) and 7.35P(2)(A) [sic], would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system because it would reduce the 
potential for conflicting order instructions being entered for the same 
order. By contrast, the Exchange believes that if a new order is 
entered during a transition phase, such as the Auction Processing 
Period or the transition to continuous trading, ETP Holders do not have 
an expectation that such orders would be processed yet, and therefore 
processing order instructions relating to such new orders on arrival 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system by ensuring that the most 
recent instruction for such not-yet-live order is available when the 
order will be processed in time sequence with other orders.
    The Exchange also believes that the proposed change to accept Limit 
Orders designated IOC and Cross Orders during the Auction Processing 
Period would remove impediments to and perfect the mechanism of a free 
and open market and a national market system. Specifically, the 
Exchange believes that ETP Holders that enter such orders after 9:30 
a.m. Eastern Time or after 4:00 p.m. Eastern Time have an expectation 
that

[[Page 57991]]

such orders would be eligible to trade consistent with the IOC 
instruction. Because an ETP Holder would not be able to pinpoint the 
precise timing of the Auction Processing Period for a security and 
because the Exchange would be processing orders in time sequence 
following the Auction Processing Period, the Exchange believes that the 
applicable IOC instruction would in essence be processed on arrival.
    The Exchange believes that the proposed changes to Rule 7.18P would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system because they are designed to 
streamline order processing during a halt or pause. The Exchange 
further believes that the proposed change during a UTP Regulatory Halt 
to cancel orders that are not eligible to trade in the current trading 
session would remove impediments and perfect the mechanism of a free 
and open market and a national market system because the changes are 
designed to reduce the potential for such orders to lock or cross a 
protected quotation if trading resumes in that security in the next 
trading session.
    The Exchange further believes that the proposed changes would 
remove impediments to and perfect the mechanism of a free and open 
market and in general, to protect investors and the public interest 
because the proposed changes would facilitate the Exchange in applying 
Price Bands under the LULD Plan to Exchange-listed securities 
immediately following the transition to the Core Trading Session or 
following a Trading Halt Auction during Core Trading Hours without 
waiting for such Price Bands to be published by the SIP based on the 
reference price provided 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 Exchange believes that 
the proposed rule change is not designed to address any competitive 
issues, but rather, to streamline and simplify order and order 
instruction processing both during and immediately after the Auction 
Processing Period.

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 \20\ and Rule 19b-4(f)(6) thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \22\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \23\ 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 30-day operative delay so that 
the proposal may become operative immediately upon filing. According to 
the Exchange, the proposed rule change would help the Exchange in 
providing more information about orders on the Arca Book at an earlier 
stage, would simplify certain order processing, and would facilitate 
the Exchange in applying LULD Price Bands immediately following an 
auction in Exchange-listed securities, rather than waiting for the SIP 
to publish such Price Bands based on a reference price provided by the 
Exchange. The Exchange further stated that it expects to be able to 
implement the technology changes supporting this proposed rule change 
in less than 30 days from filing. The Commission believes the waiver of 
the operative delay is consistent with the protection of investors and 
the public interest. Therefore, the Commission hereby waives the 
operative delay and designates the proposal operative upon filing.\24\
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ 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 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-2016-117 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-2016-117. 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.,

[[Page 57992]]

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-NYSEArca-2016-117, and 
should be submitted on or before September 14, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-20209 Filed 8-23-16; 8:45 am]
 BILLING CODE 8011-01-P