Document ID: SEC-2016-0494-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2016-03-21T04:00Z

[Federal Register Volume 81, Number 54 (Monday, March 21, 2016)]
[Notices]
[Pages 15139-15141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06229]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77371; File No. SR-NYSEMKT-2016-33]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Change To Amend Its Price List 
Effective March 1, 2016

March 15, 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 March 1, 2016, 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, II, 
and III 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 its Price List to exclude from its 
average daily volume and certain other calculations any trading day on 
which the Exchange is not open for the entire trading day and/or a 
disruption affects an Exchange system that lasts for more than 60 
minutes during regular trading hours. The Exchange proposes to 
implement the fee change effective March 1, 2016. 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, on the 
Commission's Web site at http://www.sec.gov, 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 its Price List to exclude from its 
average daily volume (``ADV'') and certain other calculations any 
trading day on which the Exchange is not open for the entire trading 
day and/or a disruption affects an Exchange system that lasts for more 
than 60 minutes during regular trading hours. The Exchange proposes to 
implement the fee change effective March 1, 2016.
    As provided in the Exchange's Price List, many of the Exchange's 
transaction fees and credits are based on trading, quoting and 
liquidity thresholds that member organizations, including

[[Page 15140]]

Designated Market Makers (``DMMs''), Supplemental Liquidity Providers 
(``SLPs''), and Retail Liquidity Providers (``RLPs''), must satisfy in 
order to qualify for the particular rates. The Exchange believes that 
trading suspensions or disruptions can prevent member organizations, 
including DMMs, SLPs and RLPs, from engaging in normal trading, quoting 
and liquidity in their assigned securities, leading to decreased 
quoting and trading volume compared to ADV. Accordingly, for purposes 
of determining transaction fees and credits for these market 
participants based on quoting and/or liquidity levels, ADV, and 
consolidated ADV (``CADV''), the Exchange proposes to add text to 
current footnote 1 to the Price List that would permit the Exchange to 
exclude any trading day on which (1) the Exchange is not open for the 
entire trading day and/or (2) a disruption affects an Exchange system 
that lasts for more than 60 minutes during regular trading hours. The 
Exchange's proposal is consistent with the rules of its options trading 
facility \4\ and its affiliate NYSE Arca, Inc.\5\
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    \4\ See NYSE Amex Options Fee Schedule (``The Exchange may 
exclude from its monthly calculations of contract volume any day 
that (1) the Exchange is not open for the entire trading day and/or 
(2) a disruption affects an Exchange system that lasts for more than 
60 minutes during regular trading hours'').
    \5\ See NYSE Arca Options Fees and Charges (``The Exchange may 
exclude from the calculation of ADV contracts traded any day that 
(1) the Exchange is not open for the entire trading day and/or (2) a 
disruption affects an Exchange system that lasts for more than 60 
minutes during regular trading hours (``Exchange System 
Disruption'').
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    The proposed change would allow the Exchange to exclude days where 
the Exchange declares a trading halt in all securities or honors a 
market-wide trading halt declared by another market. The Exchange's 
proposal would be similar to the current provision in the Price List 
whereby, for purposes of DMM liquidity credits based on the CADV in all 
Exchange-listed stocks in a current month, ADV calculations can exclude 
early closing days.\6\ Generally, this applies to certain days before 
or after a holiday observed by the Exchange.\7\ The Exchange's proposal 
is consistent with the rules of other self-regulatory organizations.\8\
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    \6\ See footnote 4 in the Price List.
    \7\ For example, the Exchange is closed on Thanksgiving Day and 
closes early on the Friday immediately following Thanksgiving Day 
(e.g., Friday, November 25, 2016).
    \8\ See notes 6-7, supra; see also NASDAQ Stock Market LLC Rule 
7018(j) (``For purposes of determining average daily volume and 
total consolidated volume under this rule, any day that the market 
is not open for the entire trading day will be excluded from such 
calculation.''); International Securities Exchange, LLC Fee Schedule 
(``For purposes of determining Priority Customer ADV, any day that 
the regular order book is not open for the entire trading day or the 
Exchange instructs members in writing to route their orders to other 
markets may be excluded from such calculation; provided that the 
Exchange will only remove the day for members that would have a 
lower ADV with the day included.'').
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    The Exchange believes that artificially low volumes of trading on 
days when the Exchange is not open for the entire trading day reduces 
the average daily activity of member organizations both daily and 
monthly. Given the decreased trading volumes, the numerator for the 
monthly calculation (e.g., trading volume) would be correspondingly 
lower, but the denominator for the threshold calculations (e.g., the 
number of trading days) would not necessarily be decreased, and could 
result in an unintended increase in the cost of trading on the 
Exchange, a result that is unintended and undesirable to the Exchange 
and its member organizations. The Exchange believes that the authority 
to exclude days when the Exchange is not open for the entire trading 
day would provide member organizations with greater certainty as to 
their monthly costs and diminish the likelihood of an effective 
increase in the cost of trading.\9\
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    \9\ See, e.g., Securities Exchange Act Release No. 70657 
(October 10, 2013), 78 FR 62899 (October 22, 2103) (SR-ISE-2013-51).
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    Similarly, the Exchange proposes to modify its Price List to permit 
the Exchange to exclude from the above calculations shares traded on a 
trading day where a disruption affects an Exchange system that lasts 
for more than 60 minutes during regular trading hours even if such 
disruption would not be categorized as a complete outage of the 
Exchange's system. Such a disruption may occur where a certain 
securities traded on the Exchange are unavailable for trading due to an 
Exchange system issue or where, while the Exchange may be able to 
perform certain functions with respect to accepting and processing 
orders, the Exchange may be experiencing a failure to another 
significant process, such as routing to other market centers, that 
would lead member organizations that rely on such process to avoid 
utilizing the Exchange until the Exchange's entire system was 
operational. Once again, the Exchange's proposal is consistent with the 
rules of other self-regulatory organizations.\10\
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    \10\ See notes 6-7, supra; see also BATS BZX Exchange Fee 
Schedule (``The Exchange excludes from its calculation of ADAV and 
ADV shares added or removed on any day that the Exchange's system 
experiences a disruption that lasts for more than 60 minutes during 
regular trading hours (``Exchange System Disruption''), on any day 
with a scheduled early market close and on the last Friday in June 
(the ``Russell Reconstitution Day'').
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    The Exchange is not proposing any changes to the level of rebates 
currently being provided on the Exchange, or to the thresholds required 
to achieve each rebate tier.
    The proposed change is also not otherwise intended to address any 
other issues, and the Exchange is not aware of any problems that member 
organizations would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\12\ in 
particular, because it provides for the equitable allocation of 
reasonable dues, fees, and other charges among its members, issuers and 
other persons using its facilities and does not unfairly discriminate 
between customers, issuers, brokers or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that it is reasonable to permit the Exchange 
to eliminate from the calculation days on which the market is not open 
the entire trading day because it preserves the Exchange's intent 
behind adopting volume-based pricing. Similarly, the Exchange believes 
that its proposal is reasonable because it will help provide member 
organizations with a greater level of certainty as to their level of 
rebates and costs for trading in any month where the Exchange 
experiences such a system disruption on one or more trading days. The 
Exchange is not proposing to amend the thresholds member organizations 
must achieve to become eligible for, or the dollar value associated 
with, the tiered rebates or fees. By eliminating the inclusion of a 
trading day on which a system disruption occurs, the Exchange would 
almost certainly be excluding a day that would otherwise lower members' 
and member organizations' trading volume, thereby making it more likely 
for member organizations to meet the minimum or higher tier thresholds 
and thus incentivizing member organizations to increase their 
participation on the Exchange in order to meet the next highest tier.
    The Exchange further believes that the proposal is reasonable 
because the proposed exclusion seeks to avoid penalizing member 
organizations that might otherwise qualify for certain tiered pricing 
but that, because of a significant Exchange system problem,

[[Page 15141]]

would not participate to the extent that they might have otherwise 
participated. The Exchange believes that certain systems disruptions 
could preclude some member organizations from submitting orders to the 
Exchange even if such issue is not actually a complete systems outage.
    Finally, the Exchange believes that the proposal is equitable and 
not unfairly discriminatory because the methodology for the monthly 
calculations would apply equally to all member organizations and to all 
volume tiers. The Exchange notes that, although unlikely, there is some 
possibility that a certain small proportion of member organizations may 
have a higher ADV as a percentage of average daily volume with their 
activity included from days where the Exchange experiences a system 
disruption. The Exchange believes that the proposal would still be 
equitable and not unfairly discriminatory given that the impacted 
universe is potentially quite small and that the proposal would benefit 
the overwhelming majority of market participants and would make the 
overall cost of trading on the Exchange more predictable for the 
membership as a whole.
    For the foregoing reasons, the Exchange believes that the proposal 
is consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\13\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \13\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that, with respect to monthly calculations 
for rebates, there are very few instances where the exclusion would be 
invoked, and if invoked, would have little or no impact on trading 
decisions or execution quality. On the contrary, the Exchange believes 
that the proposal fosters competition by avoiding a penalty to member 
organizations for days when trading on the Exchange is disrupted for a 
significant portion of the day and would result in lower total costs to 
end users, a positive outcome of competitive markets. Further, other 
options exchanges have adopted rules that are substantially similar to 
the change in ADV calculation being proposed by the Exchange.\14\
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    \14\ See note 5, supra.
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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 foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \15\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \16\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(2).
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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) \17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 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-2016-33 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-2016-33. 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-NYSEMKT-2016-33 and should 
be submitted on or before April 11, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-06229 Filed 3-18-16; 8:45 am]
 BILLING CODE 8011-01-P