Document ID: SEC-2015-1083-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2015-06-30T04:00Z

[Federal Register Volume 80, Number 125 (Tuesday, June 30, 2015)]
[Notices]
[Pages 37343-37346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15973]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75289; File No. SR-NYSEArca-2015-54]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Rule 1.1 
Governing Definitions and Various Equity Trading Rules in Order To 
Eliminate Obsolete References

June 24, 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 June 22, 2015, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 1.1 governing Definitions and 
various equity trading rules in order to eliminate obsolete references. 
The text of the proposed rule change is available on the Exchange's Web 
site at www.nyse.com, at the principal office of the Exchange, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received 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 1.1 governing Definitions and 
various equity trading rules in order to eliminate obsolete references. 
These proposed rule changes represent current functionality and would 
not propose any substantive changes to functionality. The Exchange has 
separately filed proposed rule changes to support the implementation of 
Pillar, which is an integrated trading technology platform designed to 
use a single specification for connecting to the equities and options 
markets operated by NYSE Arca and its affiliates, New York Stock 
Exchange LLC (``NYSE'') and NYSE MKT LLC (``NYSE MKT'').\4\ The Pillar 
I Filing proposed to adopt new rules relating to Trading Sessions, 
Order Ranking and Display, and Order Execution.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 74951 (May 13, 
2015), 80 FR 28721 (May 19, 2015) (SR-NYSEArca-2015-38) (Notice) 
(``Pillar I Filing''). In the Pillar I Filing, the Exchange 
described its proposed implementation of Pillar, including that it 
would be submitting more than one rule filing to correspond to the 
anticipated phased migration to Pillar.
---------------------------------------------------------------------------

    In anticipation of the implementation of Pillar, the Exchange has 
reviewed its rules governing equity trading and has identified a number 
of rules that could be streamlined both for the current trading 
platform and for Pillar.\5\

[[Page 37344]]

Specifically, the Exchange proposes to amend NYSE Arca Equities Rules 
1.1 (Definitions) (``Rule 1.1''), 7.5 (Trading Units) (``Rule 7.5''), 
7.6 (Trading Differentials) (``Rule 7.6''), 7.8 (Bid or Offer Deemed 
Regular Way) (``Rule 7.8''), 7.12 (Trading Halts Due to Extraordinary 
Market Volatility) (``Rule 7.12''), and 7.32 (Order Entry) (``Rule 
7.32''). The proposed changes to these rules are non-substantive and 
would streamline the existing rule text and eliminate obsolete terms.
---------------------------------------------------------------------------

    \5\ The Exchange has filed several rule filings to streamline 
its rules, but these filings generally addressed rules that describe 
the functionality associated with the Exchange's order types, and 
more specifically, how different order types may interact. See 
Securities Exchange Act Release Nos. 71331 (Jan. 16, 2014), 79 FR 
3907 (Jan. 23, 2014) (SR-NYSEArca-2013-92) (Approval order for 
filing that updated rules relating to order types and modifiers); 
72942 (Aug. 28, 2014), 79 FR 52784 (Sept. 4, 2014) (SR-NYSEArca-
2014-75) (Approval order for filing that eliminated specified order 
types, modifiers, and related references); and 74796 (April 23, 
2015), 80 FR 12537 (March 9, 2015) (SR-NYSEArca-2015-08) (Approval 
order for filing to clarify Exchange rules governing order types) 
(``2015 Order Type Filing''). The Exchange filed the 2015 Order Type 
Filing in part to respond to a request by the SEC's Division of 
Trading and Markets that equity exchanges conduct a comprehensive 
review of their order types and how they operate in practice, and as 
part of that review, consider appropriate rule changes. This rule 
filing addresses equity rules other than those addressing orders and 
modifiers.
---------------------------------------------------------------------------

    Because these proposed changes are applicable to the current 
trading platform, the Exchange would implement these changes as soon as 
this rule filing is effective.
Proposed Amendments to Rule 1.1
    Rule 1.1 sets forth definitions in Exchange rules. The Exchange 
proposes to amend Rule 1.1 to revise definitions to eliminate obsolete 
references, make clarifying changes to existing definitions, add new 
short-hand terms for existing definitions, and propose non-substantive 
changes to replace the terms ``shall refer to'' or ``shall mean'' with 
the term ``means.'' The Exchange is not proposing any substantive 
changes to these rules.
    The proposed amendments to Rule 1.1 would be:
     Amend the definition of ``BBO'' set forth in Rule 1.1(h) 
to add that the term ``BB'' would mean the best bid on the NYSE Arca 
Marketplace and the term ``BO'' would mean the best offer on the NYSE 
Arca Marketplace. The Exchange proposes to add these short-hand terms 
to the definition of BBO because the Exchange would be using these 
terms in its proposed Pillar rules. These are not novel terms and 
therefore the Exchange proposes to adopt these terms before the 
implementation of Pillar.
     Delete the definition of ``Limited Price Order'' in Rule 
1.1(t) as obsolete and replace it with ``reserved.'' In the 2015 Order 
Type Filing, the Exchange eliminated use of the term ``Limited Price 
Order'' in Rules 7.36 and 7.37.\6\ Because the term is not used in any 
other rules and the Exchange would not be proposing to use this term in 
rules governing trading in Pillar, the Exchange proposes to delete the 
definition.
---------------------------------------------------------------------------

    \6\ See 2015 Order Type Filing, infra, note 5.
---------------------------------------------------------------------------

     Amend the definition of ``Marketable'' in Rule 1.1(u) to 
mean for a Limit Order, an order that can be immediately executed or 
routed. The Exchange believes that this proposed definition better 
describes the term ``marketable,'' which is currently defined for 
Limited Price Orders as when the price matches or crosses the NBBO on 
the other side of the market. The proposed definition reflects more 
accurately circumstances of when an order would be marketable, which 
for a Limit Order, includes if the limit price is equal to or better 
than the contra-side PBBO or for Inside Limit Orders, includes if the 
limit price is equal to or better than the contra-side NBBO. The 
proposed new definition would also include in the definition of 
marketable if an order would be required to route, because it is priced 
through the PBBO or NBBO, or if it would be eligible to trade with non-
displayed interest that is priced better than the PBBO or NBBO that may 
be on the NYSE Arca Book. The Exchange also proposes a non-substantive 
difference to capitalize the term ``Market Order.''
     Delete the definition of ``NASD'' in Rule 1.1(y) as 
obsolete and replace it with ``reserved.''
     Amend the definition of ``Nasdaq'' in Rule 1.1(z) to 
update the name of Nasdaq to its current official name, which is ``The 
Nasdaq Stock Market LLC,'' instead of ``The Nasdaq Stock Market, Inc.''
     Delete the definitions of ``Nasdaq Security,'' ``Nasdaq 
System,'' and ``Nasdaq System BBO'' in Rules 1.1(aa), 1.1(bb) and 
1.1(cc) and replace them with ``reserved.'' The Exchange no longer uses 
these terms in its rules and therefore proposes to delete the 
definitions as obsolete for purposes of Exchange rules.
     Amend the definition of ``NBBO, Best Protected Bid, Best 
Protected Offer, Protected Best Bid and Offer (PBBO)'' in Rule 1.1(dd) 
to add new short-hand defined terms. As proposed, the term ``NBB'' 
would mean the national best bid and the term ``NBO'' would mean the 
national best offer. The Exchange also proposes to add the short-hand 
terms of ``PBB'' to correlate to ``Best Protected Bid'' and ``PBO'' to 
correlate to ``Best Protected Offer.'' The Exchange proposes to add 
these terms, which are not novel, because the Exchange would be 
proposing to use them in its proposed Pillar rules.
Proposed Amendments to Equity Trading Rules
    The Exchange proposes to amend Rules 7.5 (Trading Units), 7.6 
(Trading Differentials), 7.8 (Bid or Offered Deemed Regular Way), 7.12 
(Trading Halts due to Extraordinary Market Volatility), and 7.32 (Order 
Entry) to eliminate obsolete references and streamline the rule text. 
The Exchange is not proposing any substantive changes to these rules.
    Rule 7.5: Rule 7.5 sets forth Trading Units and currently provides:
    The unit of trading in stocks shall be 1 share and the unit of 
trading in bonds shall be $1,000 in par value thereof unless otherwise 
designated by the Corporation. For stocks, 100 shares shall constitute 
a ``round lot,'' any amount less than 100 shares shall constitute an 
``odd lot,'' and any amount greater than 100 shares that is not a 
multiple of a round lot shall constitute a ``mixed lot.'' For bonds, a 
designated unit of trading shall constitute a ``round lot'' and any 
lesser amount shall constitute an ``odd lot.''
    The Exchange proposes non-substantive amendments to Rule 7.5 to 
streamline the rule text and eliminate obsolete references to bonds, 
which do not trade on the Exchange. As proposed, the amended rule would 
provide:

The unit of trading in stocks is 1 share. A ``round lot'' is 100 
shares, unless specified by the primary listing market to be fewer than 
100 shares. Any amount less than a round lot will constitute an ``odd 
lot,'' and any amount greater than a round lot that is not a multiple 
of a round lot will constitute a ``mixed lot.''

    The Exchange believes that the proposed rule text streamlines the 
rule and provides greater transparency of what is considered a round 
lot or an odd lot. In addition, to reflect that a primary listing 
market may have securities with a trading unit fewer than 100 
shares,\7\ the Exchange proposes to amend the rule to provide that a 
``round lot'' would be 100 shares, unless specified by the primary 
listing market to be fewer than 100 shares. Because a round lot would 
no longer be set at 100 shares, and instead would reflect the unit of 
trading designated by the primary listing Exchange, the Exchange 
proposes to delete the additional references to ``100 shares'' and 
instead provide that any amount less than a round lot would constitute 
an ``odd lot,'' and any amount greater than a round lot that is not a

[[Page 37345]]

multiple of a round lot would constitute a mixed lot. The Exchange also 
proposes non-substantive amendments to change the term ``shall'' to 
``will.''
---------------------------------------------------------------------------

    \7\ For example, Biglari Holdings Inc. (symbol: BH), an NYSE-
listed security, has a 10-share round lot parameter.
---------------------------------------------------------------------------

    The Exchange believes the proposed changes would provide 
transparency regarding trading units on the Exchange and reduce 
confusion regarding the types of securities available to trade on the 
Exchange. Specifically, because the Exchange does not trade bonds, the 
proposed amendment to delete the reference to bonds represents current 
functionality.
    Rule 7.6: Rule 7.6 sets forth the Exchange's Trading Differentials, 
also referred to as the minimum price variation (``MPV'') for quoting 
and entry of orders, and currently provides:
    (a) The Corporation shall determine the trading differentials for 
equity securities traded on the Corporation.
    Commentary:
    .01 The Corporation may only change the trading differentials for 
equity securities traded on the Corporation by filing a rule change 
proposal with the SEC, pursuant to section 19(b)(3)(A) of the 
Securities Exchange Act of 1934 (effective upon filing); provided that 
no change in the trading differentials may be made while the industry 
wide Decimalization Implementation Plan is in effect.
    .02 Notwithstanding Commentary .01, the Corporation may allow 
trading at smaller increments in order to match bids and offers 
displayed by other markets for the purpose of preventing Intermarket 
Trading System trade-throughs.
    .03 The minimum price variation (``MPV'') for quoting and entry of 
orders in equity securities traded on the NYSE Arca Marketplace is 
$0.01, with the exception of securities that are priced less than $1.00 
for which the MPV for order entry is $0.0001, provided, however, that 
the Corporation shall round the bid down to the next whole penny or the 
offer up to the next whole penny and display the rounded bid or offer 
in the consolidated quotation system.
    (b) Bonds. Bids or offers in bonds shall not be made at a lesser 
variation than 1/8 of 1% of the principal amount, except that the 
Corporation may fix a lesser variation in specific issues.
    The Exchange proposes non-substantive amendments to Rule 7.6 to 
eliminate obsolete references to the Decimalization Implementation 
Plan, Intermarket Trading System (``ITS''), and bonds, and instead have 
the rule simply provide what are the Exchange's trading differentials 
for equity securities.
    Because Commentaries .01 and .02 refer to how trading differentials 
could be set before the industry-wide Decimalization Implementation 
Plan was in effect and to comply with the now-obsolete ITS 
requirements, respectively, the Exchange proposes to delete those two 
commentaries as obsolete text. The Exchange also proposes to delete the 
text that currently follows paragraph (a) of the Rule because the 
Exchange does not determine the trading differentials; these are now 
industry-wide standards. The Exchange also proposes to delete paragraph 
(b) of the rule, which relates to the MPV for bonds, because the 
Exchange does not trade bonds.
    The Exchange proposes that current Commentary .03 would become the 
sole rule text, without any subparagraph number. The Exchange would 
amend the text currently set forth in Commentary .03 to delete the term 
``equity'' as unnecessary, conform the rule text to use the clause 
``quoting and entry of orders'' for securities priced less than $1.00, 
and delete the last clause in the commentary regarding rounding as an 
obsolete requirement.\8\
---------------------------------------------------------------------------

    \8\ The Exchange publishes bids and offers priced under $1.00 in 
sub-penny increments to the public data feeds and no longer rounds 
such quotes to the whole penny.
---------------------------------------------------------------------------

    Accordingly, as proposed, amended Rule 7.6 would provide that the 
MPV for quoting and entry of orders in securities traded on the NYSE 
Arca Marketplace would be $0.01, with the exception of securities that 
are priced less than $1.00, for which the MPV for quoting and entry of 
orders would be $0.0001. The Exchange believes that the proposed 
streamlined rule would promote transparency in Exchange rules to 
identify the MPVs applicable to securities trading on the Exchange.
    Rule 7.8: Rule 7.8 sets forth how bids or offers are deemed regular 
way, which relates to the settlement instructions for an order, and 
provides that ``[b]ids and offers made without stated conditions shall 
be considered to be `regular way.' `Regular way' bids or offers have 
priority over conditional bids or offers.''
    The Exchange proposes non-substantive amendments to Rule 7.8 to 
eliminate obsolete rule text. Because the Exchange currently only 
accepts bids and offers made regular way, and does not accept any bids 
or offers with stated conditions, the Exchange proposes non-substantive 
amendments to delete text relating to stated conditions or that 
``regular way'' bids or offers have priority over conditional bids or 
offers. Accordingly, as proposed, amended Rule 7.8 would provide that 
Bids and offers would be considered ``regular way.'' The Exchange 
believes the proposed rule change would reduce confusion by eliminating 
references to functionality that is not available on the Exchange.
    Rule 7.12: Rule 7.12 sets forth the market-wide rule relating to 
trading halts due to extraordinary market volatility.\9\ In the Pillar 
I Filing, the Exchange has proposed to replace references from Pacific 
Time to Eastern Time, and the Exchange believes that this proposed 
change should be made to rules that would not otherwise be amended for 
Pillar. Accordingly, the Exchange proposes non-substantive amendments 
to Rule 7.12 to replace Pacific Time references with Eastern Time 
references. The Exchange believes that references to Eastern Time 
rather than Pacific Time would reduce confusion because all other 
equity exchanges that have a rule similar to Rule 7.12, which was 
adopted on a market-wide basis, use Eastern Time references.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (Approval order of amendments to 
all equity exchange rules relating to trading halts due to 
extraordinary market volatility, including Rule 7.12).
---------------------------------------------------------------------------

    Rule 7.32: Rule 7.32 sets forth the Exchange's rules relating to 
order entry and currently provides:
Users may enter into the NYSE Arca Marketplace the types of orders 
listed in Rule 7.31; provided, however, no User may enter an order 
other than a PNP Order unless the User or the User's Sponsoring ETP 
Holder has entered into a Routing Agreement. Orders entered that are 
greater than five million shares in size shall be rejected. Upon at 
least 24 hours advance notice to market participants, the Exchange may 
decrease the maximum order size on a security-by-security basis.

    The Exchange proposes to delete the first sentence of the current 
rule because in order to enter orders at the Exchange, an ETP Holder 
must have entered into a routing agreement, which is part of the ETP 
Holder's agreement to become a member of the Exchange. Because there is 
no possibility of being able to enter any orders at the Exchange 
without being approved as an ETP Holder and once approved as an ETP 
Holder, there is no limitation on the types of orders or modifiers that 
may be entered by that ETP Holder, the Exchange believes that the first 
sentence of the current rule text is no longer necessary and represents 
obsolete requirements. The Exchange also believes the proposed rule 
change would reduce confusion because it would streamline the rule to 
focus on

[[Page 37346]]

the size of orders that may be entered at the Exchange.
    With respect to the second sentence of the current rule, the 
Exchange proposes a non-substantive amendment to change the term 
``shall'' to ``will.'' As amended, Rule 7.32 would therefore provide 
that Orders entered that are greater than five million shares in size 
would be rejected and upon at least 24 hours advance notice to market 
participants, the Exchange may decrease the maximum order size on a 
security-by-security basis.
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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule changes would remove 
impediments to and perfect the mechanism of a free and open market 
because they would not make any substantive changes to Exchange rules, 
but rather are designed to reduce confusion by eliminating obsolete 
references and terms and therefore streamline the Exchange's rules. The 
Exchange further believes that the proposed changes would remove 
impediments to and perfect a free and open market because the proposed 
changes would simplify the structure of the Exchange's rules and permit 
the use of consistent terminology throughout numerous rules, without 
changing the underlying functionality. The Exchange therefore believes 
that the proposed rule amendments would promote transparency in 
Exchange rules by using consistent terminology governing equities 
trading, thereby ensuring that members, regulators, and the public can 
more easily navigate the Exchange's rulebook and better understand how 
equity trading is conducted on 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 proposed change is not 
designed to address any competitive issue but rather to make non-
substantive changes to streamline the Exchange's rules in order to 
promote transparency and reduce potential confusion, thereby making the 
Exchange's rules easier to navigate.

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, if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to section 19(b)(3)(A) of the Act 
\12\ and Rule 19b-4(f)(6)(iii) thereunder.\13\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give 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. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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-2015-54 on the subject line.

Paper comments

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

All submissions should refer to File Number SR-NYSEArca-2015-54. 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 such filing will also be available 
for inspection and copying at the principal office of the Exchange 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-NYSEArca-2015-54 and should be submitted 
on or before July 21, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-15973 Filed 6-29-15; 8:45 am]
 BILLING CODE 8011-01-P