Document ID: SEC-2015-1219-0001
Agency: sec
Document Type: Notice
Title: Self-RegulatoryOrganizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2015-07-21T04:00Z

[Federal Register Volume 80, Number 139 (Tuesday, July 21, 2015)]
[Notices]
[Pages 43141-43143]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17759]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75460; File No. SR-NYSEMKT-2015-48]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Extending the Pilot 
Period Applicable to the Customer Best Execution Auction per Rule 
971.1NY Until July 18, 2016

July 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 July 2, 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 extend the pilot period applicable to the 
Customer Best Execution Auction (``CUBE''), per Rule 971.1NY, until 
July 18, 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, 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 extend the pilot period applicable to 
certain aspects of the Customer Best Execution--or CUBE--Auction, which 
is currently set to expire on July 17, 2015, until July 18, 2016.
Background
    Rule 971.1NY sets forth an electronic crossing mechanism for 
single-leg orders with a price improvement auction on the Exchange, 
referred to as the CUBE Auction.\4\ The CUBE Auction, which was 
approved in April 2014, is designed to provide price improvement for 
paired orders of any size.\5\ Two aspects of the CUBE were approved on 
a pilot basis--Rule 971.1NY(b)(1)(B), which establishes the permissible 
range of executions for CUBE Auctions for fewer than 50 contracts; and 
Rule 971.1NY(b)(8), which establishes that the minimum size for a CUBE 
Auction is one contract (together, the ``CUBE Pilot'').
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    \4\ See generally Rule 971.1NY (Electronic Cross Transactions).
    \5\ See Securities Exchange Act Release No. 72025 (April 25, 
2014), 79 FR 24779 (May 1, 2014) (NYSEMKT-2014-17) (the ``CUBE 
Approval Order'').
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    An ATP Holder may initiate a CUBE Auction by electronically 
submitting for execution a limit order it represents as agent on behalf 
of a public customer, broker dealer, or any other entity (``CUBE 
Order'') against principal interest or against any other order it 
represents as agent, provided the initiating ATP Holder complies with 
Rule 971.1NY.\6\ Rule 971.1NY(b)(1) sets forth the permissible range of 
executions for a CUBE Order.\7\ Pursuant to the CUBE Pilot, a CUBE 
Order for fewer than 50 contracts is subject to tighter ranges of 
execution than larger CUBE Orders to maximize price improvement.\8\ 
Specifically, if the CUBE Order is for fewer than 50 contracts, the 
range of permissible execution will be equal to or better than the 
National Best Bid/Offer (``NBBO''), provided that such price must be at 
least one cent better than any displayed interest in the Exchange's 
Consolidated Book.\9\
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    \6\ In addition, CUBE provides for the automatic execution, 
under certain conditions, of a crossing transaction where there is a 
public customer order in the same options series on each side.
    \7\ Subject to specified exceptions, a CUBE Order to buy (sell) 
may execute at prices equal to or between the initiating price as 
the upper (lower) bound and the National Best Bid (``NBB'') 
(National Best Offer (``NBO'')) as the lower (upper) bound. See Rule 
971.1NY(b).
    \8\ See Rule 971.1NY(b)(1)(B). Rule 971.1NY(b)(8), also subject 
to the pilot period, provides that the minimum size for a CUBE 
Auction is one contract.
    \9\ See Rule 971.1NY(b)(1)(B).
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    The CUBE Pilot was initially approved for a one-year pilot.\10\ 
Pursuant to Commentary .01 to Rule 971.1NY, the CUBE Pilot would, if 
not amended, end on July 17, 2015. In connection with the CUBE Pilot, 
the Exchange agreed to submit certain data to provide supporting 
evidence that, among other things, there is meaningful competition for 
all size orders and that there is an active and liquid market 
functioning on the Exchange outside of the CUBE Auction.\11\
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    \10\ See CUBE Approval Order, supra, n. 5. The CUBE Pilot was 
subsequently extended, until July 17, 2015, in order to align the 
expiration of the pilot period with that of other competing options 
exchange that offer electronic price improvement auctions similar to 
the CUBE. See Securities Exchange Act Release No. 74695 (April 9, 
2015), 80 FR 20274 (April 15, 2015) (SR-NYSEMKT-2015-28).
    \11\ See CUBE Approval Order, supra, n. 5 at 79 FR 24779, at 
24785-86, fn. 94-95. See also Commentary .01 to Rule 971.1NY.
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Proposal To Extend the Operation of the CUBE Pilot
    The Exchange implemented the CUBE Auction to provide an electronic 
crossing mechanism for single-leg orders with a price improvement 
auction. The CUBE Pilot was designed to create tighter markets and 
ensure that each order receives the best possible price. The Exchange 
believes that the CUBE Pilot attracts order flow and promotes 
competition and price improvement opportunities for CUBE Orders of 
fewer than 50 contracts. The Exchange believes that extending the pilot 
period is appropriate because it

[[Page 43142]]

will allow the Exchange and the Commission additional time to analyze 
data regarding the CUBE Pilot that the Exchange has committed to 
provide.\12\ As such, the Exchange believes that it is appropriate to 
extend the current operation of the Pilot. Through this filing, the 
Exchange seeks to amend Commentary .01 to Rule 971.1NY and extend the 
current pilot period until July 18, 2016.\13\ The Exchange notes that 
it would retain the text of Rules 971.1NY(b)(1)(B) and 971.1NY(b)(8). 
In further support of this proposed rule change, the Exchange would 
continue to submit to the Commission detailed data from, and analysis 
of, the CUBE Pilot. Further, the Exchange represents that it will 
provide certain additional data requested by the Commission regarding 
trading in the CUBE Auction for the six (6) month period from January 
1, 2015 through June 30, 2015. The Exchange agrees to provide this data 
by January 18, 2016 and to make the summary of the data provided to the 
Commission publicly available. The Exchange continues to believe that 
there remains meaningful competition for all size orders and that there 
is an active and liquid market functioning on the Exchange outside of 
the CUBE Auction. The Exchange believes the additional data will 
substantiate the Exchange's belief and provide further evidence in 
support of permanent approval of the CUBE Pilot.
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    \12\ Id.
    \13\ See proposed Commentary .01 to Rule 971.1NY.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \14\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \15\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that extending the pilot period is consistent 
with these principles because the CUBE Pilot is reasonably designed to 
create tighter markets and ensure that each order receives the best 
possible price, which benefits investors by increasing competition 
thereby maximizing opportunities for price improvement. The proposed 
extension would allow the CUBE Pilot to continue uninterrupted, thereby 
avoiding any potential investor confusion that could result from a 
temporary interruption in the CUBE Pilot. Because the CUBE Pilot is 
applicable to all CUBE Orders for fewer than 50 contracts, and to the 
requirement that the minimum size of the CUBE Auction is one contract, 
the proposal to extend the pilot merely acts to maintain status quo on 
the Exchange, which promotes just and equitable principles of trade and 
removes impediments to, and perfects the mechanism of, a free and open 
market and a national market system. The extension of the pilot period 
will allow the Commission and the Exchange to continue to monitor the 
CUBE Pilot to ascertain whether there is meaningful competition for all 
size orders and whether there is an active and liquid market 
functioning on the Exchange outside of the CUBE Auction.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change simply 
extends an established pilot program for an additional period and would 
allow for further analysis of the CUBE Pilot. In addition, the proposed 
extension would allow the CUBE Pilot to continue uninterrupted, thereby 
avoiding any potential investor confusion that could result from a 
temporary interruption in the CUBE Pilot. Thus, the proposal would also 
serve to promote regulatory clarity and consistency, thereby reducing 
burdens on the marketplace and facilitating investor protection.

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 prior to 
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 and Rule 19b-
4(f)(6)(iii) thereunder.\16\
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    \16\ 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 under Rule 19b-4(f)(6) \17\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\18\ the Commission 
may 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, stating that the proposed 
rule change simply extends an established pilot program and that the 
waiver would allow the pilot to continue uninterrupted, thereby 
avoiding potential confusion for investors. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposed rule change operative upon filing.\19\
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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ For purposes only of waiving the 30-day operative delay, 
the Commission has 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 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) \20\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \20\ 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

[[Page 43143]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2015-48 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-2015-48. 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 Section, 100 F Street, 
NE., Washington, DC 20549-1090. Copies of the filing will also be 
available for inspection and copying at the NYSE's principal office 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-NYSEMKT-2015-48 and should be submitted 
on or before August 10, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-17759 Filed 7-20-15; 8:45 am]
 BILLING CODE 8011-01P