Document ID: SEC-2017-1551-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-09-18T04:00Z

[Federal Register Volume 82, Number 179 (Monday, September 18, 2017)]
[Notices]
[Pages 43609-43611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19812]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81603; File No. SR-NYSEARCA-2017-102]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend NYSE Arca 
Rule 7.35-E, NYSE Arca Rule 7.31-E and NYSE Arca Rule 7.23-E

September 13, 2017.
    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 31, 2017, 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 (i) NYSE Arca Rule 7.35-E (Auctions) 
to provide that Market-on-Open (``MOO''), Limit-on-Open (``LOO'') 
Orders, and Imbalance Offset (``IO'') Orders would be cancelled if the 
Re-Opening Time for a Trading Halt Auction would be in the last ten 
minutes of trading before the end of Core Trading Hours; (ii) NYSE Arca 
Rule 7.31-E (Orders and Modifiers) regarding IO Orders; and (iii) NYSE 
Arca Rule 7.23-E (Obligations of Market Makers) to amend obsolete cross 
references. 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 (i) NYSE Arca Rule 7.35-E (Auctions) 
(``Rule 7.35-E'') to provide that MOO, LOO, and IO Orders would be 
cancelled if the Re-Opening Time for a Trading Halt Auction would be in 
the last ten minutes of trading before the end of Core Trading Hours; 
(ii) NYSE Arca Rule 7.31-E (Orders and Modifiers) (``Rule 7.31-E'') 
regarding IO Orders; and (iii) NYSE Arca Rule 7.23-E (Obligations of 
Market Makers) (``Rule 7.23-E'') to amend obsolete cross references.
    Rule 7.35-E(e)(10) provides that if the Reopening Time for a 
Trading Halt Auction would be in the last ten minutes of trading before 
the end of Core Trading Hours, the Exchange will not conduct a Trading 
Halt Auction in that security, will not transition to continuous 
trading, will remain paused, and will conduct a Closing Auction in such 
security as provided for in Rule 7.35-E(d). Rule 7.35-E(e)(10)(A) 
further provides that in such circumstances, MOO Orders, LOO Orders, 
and IO Orders entered during the pause or halt will not participate in 
the Closing Auction and will expire at the end of the Core Trading 
Session.
    The Exchange proposes to amend Rule 7.35-E(e)(10)(A) to provide 
that in such circumstances, MOO Orders, LOO Orders, and IO Orders 
entered during the pause or halt will not participate in the Closing 
Auction and will be cancelled. This proposed rule change is not 
intended to make any functional changes to when MOO Orders, LOO Orders, 
and IO Orders are eligible to trade at the Exchange; these orders still 
would not participate in a Closing

[[Page 43610]]

Auction. However, as proposed, if a trading pause or halt extends past 
3:50 p.m., these orders would be cancelled back to the entering firm at 
3:50 p.m. instead of remaining on the Exchange Book and expiring after 
Core Trading Hours concludes. The Exchange believes this proposed 
change would provide ETP Holders with more timely information regarding 
the status of pending orders.
    The Exchange also proposes to amend Rule 7.31-E(c)(5), which 
defines the term IO Order, to provide that such orders would be 
available only to ETP Holders using Pillar phase II protocols.\4\ The 
Exchange previously filed a proposed rule change describing that when 
it implements Pillar phase II protocols, the Exchange will be able to 
support new order functionality.\5\ Because there will be a period when 
both Pillar phase I and Pillar phase II protocols will be available to 
ETP Holders, the Exchange amended its rules to describe how an ETP 
Holder's orders would behave depending on the protocol that an ETP 
Holder chooses to use. Because IO Orders would be available only via 
Pillar phase II protocols, the Exchange proposes to amend Rule 7.31-
E(c)(5) to specify this requirement.
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    \4\ The Exchange established IO Orders in the Reopening Filing, 
infra note 5 [sic].
    \5\ See Securities Exchange Act Release No. 79688 (December 23, 
2016), 82 FR 96534 (December 30, 2016) (SR-NYSEArca-2016-170) 
(Notice of Filing). The Pillar phase II protocols were implemented 
on August 21, 2017. See Trader Update dated August 17, 2017, 
available here: https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/Pillar_Update_NYSE_Arca_August_17_2017.pdf.
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    The Exchange proposes to implement the proposed amendments to Rules 
7.35-E and 7.31-E at the same time that it implements previously-
approved changes to Rule 7.35-E and 7.31-E, which the Exchange 
previously stated that it anticipated implementing in the third quarter 
of 2017.\6\ As described in greater detail in the Reopening Filing, the 
Exchange amended its rules relating to the reopening of trading in 
conjunction with the twelfth amendment to the Regulation NMS Plan to 
Address Extraordinary Market Volatility (``Plan''), which the 
Commission approved.\7\ The Exchange proposes to implement the changes 
described in the Reopening Filing, as amended by this proposed rule 
change, at the same time that the twelfth amendment to the Plan is 
implemented, which, subject to technology changes and effectiveness of 
the extension of the implementation date for the changes made in the 
twelfth amendment to the Plan, is anticipated to be in the fourth 
quarter of 2017.
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    \6\ See Securities Exchange Act Release No. 79846 (January 19, 
2017), 82 FR 8548 (January 26, 2017) (SR-NYSEArca-2016-130) 
(Approval Order) (the ``Reopening Filing'').
    \7\ See Securities Exchange Act Release No. 79845 (January 19, 
2017), 82 FR 8551 (January 26, 2017) (File No. 4-631) (Order 
approving twelfth amendment to the Plan).
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    The Exchange also proposes to amend NYSE Arca Equities Rules 7.23-
E(a)(1)(B)(iii) and (iv) to remove obsolete cross references and to 
reflect that the applicable percentages are based on how a security is 
designated under the Plan.\8\ Rule 7.23-E(a)(1)(B) sets forth among 
other things, the obligation of Market Makers to maintain a bid (offer) 
not more than the ``Designated Percentage'' away from the then current 
National Best Bid (Offer) (``NBBO'') and if the NBBO changes such that 
the Market Maker's bid/offer is more than the ``Defined Limit'' away 
from the NBBO, the Market Maker must enter an updated bid (offer). The 
Exchange proposes to amend Rule 7.23-E(a)(1)(B)(iii) and Rule 7.23-
E(a)(1)(B)(iv) to remove cross-references to Rule 7.11-E and instead 
use Plan definitions for specifying which securities are subject to 
which ``Designated Percentages'' and ``Defined Limits.'' Accordingly, 
as proposed:
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    \8\ The Exchange's affiliated equities exchange has adopted a 
similar change to its rules. See Securities Exchange Act Release No. 
80577 (May 2, 2017), 82 FR 21446 (May 8, 2017) (SR-NYSEMKT-2017-04) 
(Order approving NYSE American LLC (``NYSE American'') Rule 
7.23E(a)(1)(B)(iii) and (iv)). The proposed rule changes are also 
based on Bats BZX, Inc. (``BZX'') Rule 11.8(d)(2)(D) and (E).
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     The phrase ``securities subject to Rule 7.11-E(a)(i)'' 
would be replaced with the phrases ``Tier 1 NMS Stocks under the Limit 
Up-Limit Down Plan'' or ``Tier 1 NMS Stocks;''
     the phrase ``securities subject to Rule 7.11-E(a)(ii)'' 
would be replaced with the phrases ``Tier 2 NMS Stocks under the Limit 
Up-Limit Down Plan with a price equal to or greater than $1.00'' or 
``Tier 2 NMS Stocks with a price equal to or greater than $1.00;''
     the phrase ``securities subject to Rule 7.11-E(a)(iii)'' 
would be replaced with the phrase ``Tier 2 NMS Stocks with a price 
lower than $1.00;'' and
     the phrase ``when Rule 7.11-E is not in effect'' would be 
deleted.
    Because rights and warrants are not subject to the Plan, but are 
subject to market maker quoting requirements, the Exchange proposes to 
provide that for purposes of Rule 7.23-E(a)(1)(B)(iii) and (iv), rights 
and warrants would be considered Tier 2 NMS Stocks. This proposed rule 
text is consistent with current practice and the now-obsolete cross 
references to Rule 7.11.\9\ The Exchange also proposes a non-
substantive amendment to Rules 7.23-E(a)(1)(B)(iii) and (iv) to change 
references from Pacific Time to Eastern Time.
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    \9\ Securities previously subject to Rule 7.11(a)(ii) were all 
NMS Stocks, other than securities included in the S&P 500[supreg] 
Index, Russell 1000[supreg] Index, and a pilot list of Exchange 
Traded Products, with a price equal to or greater than $1 and 
securities previously subject to Rule 7.11(a)(iii) were all NMS 
Stocks, other than securities included in the S&P 500[supreg] Index, 
Russell 1000[supreg] Index, and a pilot list of Exchange Traded 
Products, with a price less than $1.00. See Securities Exchange Act 
Release No. 64422 (May 6, 2011), 76 FR 27691 (May 12, 2011) (SR-
NYSEArca-2011-26) (Notice of filing).
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    The Exchange also proposes a non-substantive amendment to Rule 
7.23-E(a)(2) to replace the current reference to ``Rule 4.1-E'' with a 
reference to ``the provisions of Rule 15c3-1 under the Securities 
Exchange Act of 1934.'' Rule 4.1-E requires ETP Holders to maintain 
minimum net capital in accordance with the provisions of Rule 15c3-1 
under the Act. Accordingly, by referencing Rule 15c3-1 under the Act 
instead of Rule 4.1-E, the proposed rule change to Rule 7.23-E(a)(2) 
would not make any substantive changes to the rule. This proposed rule 
change is based on NYSE American Rule 7.23E(a)(2).
    The Exchange proposes that the amendments to Rule 7.23-E would be 
operative upon the operative date of this proposed rule change.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\10\ in general, and 
furthers the objectives of Section 6(b)(5),\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendments to Rule 7.35-E 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because the proposed rule 
change would provide ETP Holders with timely information regarding the 
status of MOO Orders, LOO Orders, and IO Orders, which are intended to 
participate in a Trading Halt Auction, if there is a trading pause or 
halt that extends past the last ten minutes of trading of Core Trading 
Hours. In such

[[Page 43611]]

case, because the Exchange would not be conducting a Trading Halt 
Auction, the Exchange would provide ETP Holders with more timely 
information about the status of their orders. The proposed rule change 
would not make any substantive differences regarding how such orders 
would execute on the Exchange. Accordingly, the proposed rule change is 
designed to enhance transparency.
    The Exchange believes that the proposed amendment to Rule 7.31-E 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because the proposed rule 
change would provide transparency to ETP Holders regarding which 
communication protocol should be used for entering IO Orders.
    The Exchange believes that the proposed amendments to Rule 7.23-E 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because the proposed rule 
change is designed to remove obsolete cross references. The proposed 
rule change is based on the rules of NYSE American and BZX.

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 provide ETP Holders with more timely information 
about the status of orders intended for a Trading Halt Auction and 
which communication protocol to use for entering IO Orders. In 
addition, the proposed rule change is designed to remove obsolete cross 
references and is based on the rules of NYSE American and BZX.

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 Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEARCA-2017-102 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-2017-102. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; 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-2017-102 and should 
be submitted on or before October 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19812 Filed 9-15-17; 8:45 am]
BILLING CODE 8011-01-P