Document ID: SEC-2015-2101-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC,
Posted Date: 2015-12-21T05:00Z

[Federal Register Volume 80, Number 244 (Monday, December 21, 2015)]
[Notices]
[Pages 79382-79385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31926]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76655; File No. SR-NYSEMKT-2015-103]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 13 
Equities To Eliminate Good Til Cancelled Orders and Stop Orders, and 
Make Conforming Changes to Equities Rules 49, 61, 70, 104, 115A, 116, 
118, 123, 123A, 123C, 123D, 501, 1000, 1004, and 6140

December 15, 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 December 7, 2015, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 13--Equities to eliminate Good 
til Cancelled (``GTC'') Orders and Stop Orders, and (2) make conforming 
changes to Rules 49--Equities, 61--Equities, 70--Equities, 104--
Equities, 115A--Equities, 116--Equities, 118--Equities, 123--Equities, 
123A--Equities, 123C--Equities, 123D--Equities, 501--Equities, 1000--
Equities, 1004--Equities, and 6140--Equities. 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 13--Equities (``Rule 13'') to 
eliminate GTC Orders (which are also defined as ``Open'' Orders) and 
Stop Orders, and make conforming changes to Rules 49--Equities, 61--
Equities, 70--Equities, 104--Equities, 115A--Equities, 116--Equities, 
118--Equities, 123--Equities, 123A--Equities, 123C--Equities, 123D--
Equities, 501--Equities, 1000--Equities, 1004--Equities, and 6140--
Equities. The Exchange proposes to eliminate these order types in order 
to streamline its rules and reduce complexity among its order type 
offerings.\4\
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    \4\ See, e.g., Mary Jo White, Chair, Securities and Exchange 
Commission, Speech at the Sandler O'Neill & Partners, L.P. Global 
Exchange and Brokerage Conference (June 5, 2014) (available at 
www.sec.gov/News/Speech/Detail/Speech/1370542004312#.U5HI-fmwJiw).
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    Because of the technology changes associated with the proposed rule 
change, the Exchange proposes to announce the implementation date of 
the elimination of the order types via Trader Update.
Elimination of GTC Orders and Stop Orders (Rule 13)
    The Exchange proposes to eliminate, and thus delete from its rules, 
the GTC Order defined in Rule 13(b)(2). A GTC Order is a limit order 
that remains in effect until it is either executed or cancelled.\5\ To 
reflect this elimination, the Exchange proposes to delete all 
references to GTC or Open Orders and any related modifiers in Rule 13 
as follows:
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    \5\ GTC orders are not eligible to be executed in any Off-Hours 
Trading Facility and may not be transmitted to Floor broker hand-
held devices or Floor broker systems. See Rule 13(b)(2).
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     Delete Rule 13(b)(2), which defines the GTC Order;
     delete Rule 13(d)(1)(B)(iv), which provides that interest 
designated as GTC may not be designated as a Mid-Point Passive 
Liquidity (``MPL'') Order; \6\
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    \6\ A MPL Order is an undisplayed limit order that automatically 
executes at the mid-point of the protected best bid or offer. See 
Rule 13(d)(1)(A). The Exchange also proposes to re-number Rule 
13(d)(1)(B)(v) to reflect the deletion of subsection (iv).
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     delete Rules 13(f)(1) and (2), which describes the Do Not 
Reduce (``DNR'') and Do Not Increase (``DNI'') modifiers,

[[Page 79383]]

which are modifiers that are used only in connection with GTC Orders. 
In addition to being used for GTC Orders, these modifiers are also used 
for Stop Orders, which the Exchange is also proposing to eliminate; \7\ 
and
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    \7\ In connection with the deletion of Rule 13(f)(1) & (2), the 
Exchange proposes to renumber the Rule as follows: Rule 13(f)(3) 
(Pegging Interest) would become Rule 13(f)(1); Rule 13(f)(4) (Retail 
Modifier) would become Rule 13(f)(2); Rule 13(f)(5) (Self-Trade 
Prevention Modifier) would become Rule 13(f)(3); and Rule 13(f)(6) 
(Sell ``Plus''--Buy ``Minus'' Instruction) would become Rule 
13(f)(4). As discussed below, the Exchange proposes to delete Rule 
13(f)(7) which defines Stop Orders.
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     amend Rule 13(f)(5)(B), which provides that the Exchange 
shall reject GTC Orders with an Self-Trade Prevention (``STP'') 
modifier.
    Second, the Exchange proposes to eliminate Stop Orders. A Stop 
Order is an order to buy or sell a stock at the market once the price 
of the stock reaches a specified price known as the ``stop price.'' 
Specifically, a Stop Order to buy becomes a market order when a 
transaction in the security occurs at or above the stop price after the 
order is received into Exchange systems or is manually represented by a 
Floor broker. A Stop Order to sell becomes a market order when a 
transaction in the security occurs at or below the stop price after the 
order is received into Exchange systems or manually represented by a 
Floor broker.\8\ To effectuate this elimination, the Exchange proposes 
to amend Rule 13 as follows:
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    \8\ See Rule 13(f)(7)(A) & (B). Elected Stop Orders also become 
Market Orders and are eligible for automatic execution in accordance 
with Rules 116.40--Equities, 123C--Equities and 1000--1004--
Equities. Stop Orders that would be elected by the price of the 
opening transaction on the Exchange are included in the opening 
transaction as Market Orders. See id. at (C). Odd-lot size 
transactions are not considered transactions eligible to elect Stop 
Orders on the Exchange. See id. at (D).
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     Delete Rule 13(f)(7), which defines a Stop Order;
     delete Rule 13(f)(1) and (2), which describes the DNR and 
DNI modifiers as noted above; and
     amend Rule 13(f)(5), which provides that the STP modifier 
is available for Stop Orders.
Conforming Amendments
    The Exchange proposes certain conforming amendments to Rules 49--
Equities, 61--Equities, 70--Equities, 104--Equities, 115A--Equities, 
116--Equities, 118--Equities, 123--Equities, 123A--Equities, 123C--
Equities, 123D--Equities, 501--Equities, 1000--Equities, 1004--
Equities, and 6140--Equities to reflect the elimination of GTC Orders 
and Stop Orders as described above as follows:
     The Exchange proposes to amend Rule 49--Equities 
(Emergency Powers), which addresses the Exchange's emergency powers, to 
delete subsection (b)(1)(B), which permits the Exchange to accept 
cancellations of GTC orders during an emergency condition.
     The Exchange proposes to amend Rule 61--Equities 
(Recognized Quotations), which governs bids and offers in securities. 
Under Rule 61(a)(ii)--Equities, transactions in part of a round lot are 
published to the Consolidated Tape and may elect Stop Orders. The 
Exchange proposes to eliminate the reference to electing Stop Orders.
     The Exchange proposes to amend Rule 70--Equities 
(Execution of Floor Broker Interest), governing execution of Floor 
broker interest known as e-Quotes. Under Rule 70(a)(1)--Equities, e-
Quotes cannot include, among others, unelected Stop Orders or a GTC, 
DNR and DNI modifier. The Exchange proposes to delete these references.
     The Exchange proposes to amend 104--Equities (Dealings and 
Responsibilities of DMMs), which prohibits DMM units from entering, 
among others, GTC Modifiers, DNR Modifiers, DNI Modifiers, and Stop 
Orders. The Exchange proposes to delete these references to GTC, DNR 
and DNI modifiers and Stop Orders in subsection (b)(vi).
     The Exchange proposes to amend Rule 115A--Equities (Orders 
at Opening), which governs orders at the opening, to remove subsection 
(a), which prohibits DMMs, trading assistants and anyone acting on 
their behalf from using the Exchange Display Book system in a manner 
designed to discover inappropriately information about unelected stop 
orders when arranging the open or to otherwise attempt to obtain 
information regarding unelected stop orders and to renumber the rule 
accordingly.
     The Exchange proposes to delete Supplementary Material 
.40(A) and .50 of Rule 116--Equities (`Stop' Constitutes Guarantee), 
which provides that an agreement by a member to ``stop'' stock at a 
specified price constitutes a guarantee of a purchase or sale by the 
member of the security at that price. Supplementary Material .40(A) 
provides that Stop Orders elected based on the closing price are 
automatically and systemically converted to market orders and included 
in the total number of market-at-the-close orders executed at the 
close. Supplementary Material .50, similar to Rule 104(b)(vi)--
Equities, prohibits DMMs, trading assistants and anyone acting on their 
behalf from using the Display Book system in a manner designed to 
discover inappropriately information about unelected stop orders when 
arranging the close or to otherwise attempt to obtain information 
regarding unelected stop orders.
     The Exchange proposes to delete Rule 118--Equities (Orders 
To Be Reduced and Increased on Ex-Date), which governs the adjustment 
of GTC buy orders \9\ and open Stop Orders, i.e., GTC Stop Orders, to 
sell when a security is quoted ex-dividend, ex-distribution, ex-rights 
or ex-interest.
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    \9\ Rule 118--Equities uses the term ``Open buying orders''. An 
Open Order is another term for a GTC Order. See Rule 13(a)(2). Since 
Rule 118--Equities applies only to GTC Orders and Stop Orders, the 
Exchange proposes to delete the rule in its entirety.
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     The Exchange proposes to amend Rule 123--Equities (Record 
of Orders), which imposes certain recordkeeping and order entry 
requirements, to eliminate the reference to Stop Orders in subsection 
(e)(iii)(7) and stop price in paragraph (e)(iii)(8) of Rule 123--
Equities. The Exchange also proposes to delete outdated references to 
auction market and auction limit orders in Rule 123(e)(iii)(7)--
Equities, which the Exchange either eliminated or did not 
implement.\10\
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    \10\ See Securities Exchange Act Release No. 67686 (August 17, 
2012), 77 FR 51596 (August 24, 2012) (SR-NYSEMKT-2012-13) (deleting 
the auction market order). Auction limit orders do not appear to 
have been implemented.
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     The Exchange proposes to amend Supplementary Material .20 
of Rule 123A--Equities (Miscellaneous Requirements), which governs 
changes in day orders, to remove the final clause of the first 
paragraph requiring members to request that customers and 
correspondents file GTC Orders wherever possible rather than repeating 
the same order each morning. The Exchange also proposes to delete the 
second paragraph of Supplementary Material .20 in its entirety, which 
provides that a Day Order changed to an Open Order is considered a new 
order and must be added to the Exchange's Book after other orders 
previously received at the same price. As noted above, an Open Order is 
another term for a GTC Order.\11\ Finally, the Exchange proposes to 
rename Supplementary Material .20 ``Day Orders'' by deleting the 
preceding words ``Changes In''.
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    \11\ See note 9, supra.
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     The Exchange proposes to amend Rule 123C--Equities (The 
Closing Procedures), which specifies the procedures to be followed at 
the close of trading on the Exchange, to delete references to Stop 
Orders in paragraphs 6(a)(i)(C) and 6(a)(ii) of Rule 123C--Equities. 
The Exchange also proposes to delete paragraph 8(a)(iv) of Rule 123C--
Equities, which describes election of Stop Orders as part of the 
Closing Print.

[[Page 79384]]

     The Exchange proposes to amend Rule 123D--Equities 
(Openings and Halts in Trading), which specifies that Exchange systems 
may open one or more securities electronically if a DMM cannot 
facilitate the opening of trading as required by Exchange rules. First, 
the Exchange proposes to replace the references to Rule 115A(b)--
Equities with references to Rule 115A(a)--Equities. Second, the 
Exchange proposes to delete subsection (a)(3)(C)(ii), which provides 
that Stop Orders elected based on the opening price would trade second 
in time priority when interest that is otherwise guaranteed to 
participate in an opening trade would cause an opening price to be 
outside the Opening Price Range (as defined therein). Third, to reflect 
the deletion of subsection (a)(3)(C)(ii) and the removal of Stop Orders 
from second in time priority, the Exchange proposes to re-number 
subsections (a)(3)(C)(iii) through (v) and re-order priority for Limit 
Orders (current subsection (a)(3)(C)(iii)) from third to second, for G-
quotes (current subsection (a)(3)(C)(iv)) from fourth to third, and for 
all other limit interest priced equal to the open (current subsection 
(a)(3)(v)) from fifth to fourth.
     The Exchange proposes to amend Rule 501--Equities 
(Definitions), which sets forth the definitions for the Rules 500-525--
Equities Series governing the trading of ``UTP Securities'' on the 
Exchange pursuant to unlisted trading privileges. The Exchange proposes 
to delete subsection (d)(1)(A) of Rule 501--Equities, which defines a 
GTC or Open Order for a UTP Security. The Exchange also proposes to 
delete subsection (d)(2)(E) of Rule 501--Equities, which lists Stop 
Order as one of the order types not accepted for trading in UTP 
Securities.
     The Exchange proposes to amend Rule 1000--Equities 
(Automatic Executions), which provides for automatic executions by 
Exchange systems. Rule 1000(c)--Equities provides that incoming market 
orders, including an elected stop order, or marketable limit order to 
buy (sell) will not execute or route to another market center at a 
price above (below) the Trading Collar applicable when automatic 
executions are in effect and calculated pursuant to Rule 1000(c)(i)--
Equities. The Exchange proposes to delete the reference to elected stop 
order in paragraph (c) of Rule 1000--Equities.
     The Exchange proposes to amend Rule 1004--Equities 
(Election of Buy Minus, Sell Plus and Stop Orders), which provides that 
automatic executions of transactions reported to the Consolidated Tape 
shall elect, among others, stop orders electable at the price of such 
executions and that any stop order so elected shall be automatically 
executed as market orders pursuant to Exchange rules. The Exchange 
proposes to delete the references to Stop Orders, including in the 
heading.
     Finally, the Exchange proposes to amend Rule 6140--
Equities (Other Trading Practices), which governs a number of 
prohibited trading practices. First, the Exchange proposes to delete 
Rule 6140(h)(1)--Equities, which provides that a member or member 
organization may, but is not obligated to, accept a stop order in 
designated securities, and defines buy stop orders (Rule 
6140(h)(1)(A)--Equities) and sell stop orders (Rule 6140(h)(1)(B)--
Equities). Second, the Exchange proposes to delete Rule 6140(h)(2)--
Equities, which provides that a member or member organization may, but 
is not obligated to, accept stop limit orders in designated securities 
and that when a transaction occurs at a stop price, the stop limit 
order to buy or sell becomes a limit order at the limit price. Current 
subsection (i) of Rule 6140--Equities would become new subsection (h).
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \12\ of 
the Act, in general, and furthers the objectives of Section 
6(b)(5),\13\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that eliminating GTC Orders and 
Stop Orders removes impediments to and perfects a national market 
system by simplifying functionality and complexity of its order types. 
The Exchange believes that eliminating these order types would not be 
inconsistent with the public interest and the protection of investors 
because investors will not be harmed and in fact would benefit from the 
removal of complex functionality. Because Stop Orders, when elected, 
can exacerbate market volatility and result in executions in declining 
markets at prices significantly different than the quoted price, the 
Exchange believes that eliminating them would reduce the potential for 
orders on the Exchange to cause significant price dislocation. The 
Exchange also believes that eliminating GTC Orders would benefit 
investors because it shifts the responsibility to monitor best 
execution obligations on behalf of a customer to the member 
organization entering the order, rather than leaving a GTC order at the 
Exchange until it gets executed.
    The Exchange further believes that deleting corresponding 
references in Exchange rules to deleted order types also removes 
impediments to and perfects the mechanism of a free and open market by 
ensuring that members, regulators and the public can more easily 
navigate the Exchange's rulebook and better understand the orders types 
available for trading on the Exchange. Removing obsolete cross 
references also furthers the goal of transparency and adds clarity to 
the Exchange's rules.

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 would rather remove 
complex functionality and obsolete cross-references, thereby reducing 
confusion and making the Exchange's rules easier to understand and 
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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\ 
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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the

[[Page 79385]]

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 and Rule 19b-
4(f)(6)(iii) thereunder.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and 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 satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\17\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
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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) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2015-103 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEMKT-2015-103. 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 also will be available 
for inspection and copying at the principal offices 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-NYSEMKT-2015-
103, and should be submitted on or before January 11, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-31926 Filed 12-18-15; 8:45 am]
BILLING CODE 8011-01-P