Document ID: SEC-2016-1844-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2016-10-14T04:00Z

[Federal Register Volume 81, Number 199 (Friday, October 14, 2016)]
[Notices]
[Pages 71127-71129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24839]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79068; File No. SR-NYSEArca-2016-136]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Amending NYSE Arca Equities Rule 7.35P To 
Provide for Widened Price Collar Thresholds for the Core Open Auction 
on Volatile Trading Days

October 7, 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 September 28, 2016, 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 NYSE Arca Equities Rule 7.35P to 
provide for widened price collar thresholds for the Core Open Auction 
on volatile trading days. 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 NYSE Arca Equities Rule 7.35P 
(``Rule 7.35P'') to provide for widened price collar thresholds for the 
Core Open Auction on volatile trading days. The Exchange believes that 
widening the Auction Collars for the Core Open Auction during periods 
of market-wide volatility would assist the Exchange in conducting fair 
and orderly auctions for its listed securities.
    As set forth in Rule 7.35P(a)(10), the price collar thresholds for 
the Core Open Auction are currently set at 10% for securities with an 
Auction Reference Price of $25.00 or less, 5% for securities with an 
Auction Reference Price greater than $25.00 but less than or equal to 
$50.00, and 3% for securities with an Auction Reference Price greater 
than $50.00.\4\
---------------------------------------------------------------------------

    \4\ The Auction Reference Price for the Core Open Auction is the 
midpoint of the Auction NBBO or, if the Auction NBBO is locked, the 
locked price. If there is no Auction NBBO, the prior trading day's 
Official Closing Price. The Auction Reference Price for the Trading 
Halt Auction is the last consolidated round-lot price of that 
trading day, and if none, the prior trading day's Official Closing 
Price. See NYSE Arca Equities Rule 7.35P(a)(8).
---------------------------------------------------------------------------

    The Exchange proposes to widen the applicable Auction Collars for 
the Core Open Auction on days with market-wide volatility to 10% for 
all Auction-Eligible Securities,\5\ regardless of the Auction Reference 
Price. The Exchange believes that for securities priced greater than 
$25.00, the proposed wider price collar threshold would allow for 
additional price movements during periods of market-wide volatility, 
while continuing to prevent auctions from occurring at prices 
significantly away from the applicable Auction Reference Price.\6\ The 
proposed 10% price collar threshold for the Core Open Auction is the 
same as currently used by the

[[Page 71128]]

Nasdaq Stock Market LLC (``Nasdaq'') for its opening crosses.\7\
---------------------------------------------------------------------------

    \5\ For the Core Open Auction, Auction-Eligible Securities are 
all securities for which the Exchange is the primary listing market 
and UTP Securities designated by the Exchange. See NYSE Arca 
Equities Rule 7.35P(a)(1)(A).
    \6\ On June 24, 2016, the Exchange temporarily widened Auction 
Collars for the Core Open Auction for all Auction-Eligible 
Securities to 10% in response to the a temporary basis [sic] 
referendum vote by the United Kingdom (``UK'') to leave the European 
Union, which resulted in an extraordinary level of global market 
activity, including the pricing of the ETPs traded on the Exchange. 
See Securities Exchange [sic] Release No. 78152 (June 24, 2016), 81 
FR 42781 (June 30, 2016) (SR-NYSEArca-2016-90).
    \7\ See Nasdaq Rule 4752(d)(2)(E) and http://www.nasdaqtrader.com/content/productsservices/trading/crosses/openclose_faqs.pdf.
---------------------------------------------------------------------------

    To determine whether there is market-wide volatility, the Exchange 
proposes to use the same standard that its affiliated exchange, the New 
York Stock Exchange LLC (``NYSE''), recently added to determine whether 
there is market-wide volatility.\8\ As proposed, the Exchange would 
widen its Auction Collars for the Core Open Auction if, as of 9:00 a.m. 
Eastern Time, the E-mini S&P 500 Futures are +/- 2% from the prior 
day's closing price of the E-mini S&P 500 Futures or the Exchange 
determines that it is necessary or appropriate for the maintenance of a 
fair and orderly market. Market-wide volatility applies similar pricing 
pressure to all eligible securities and, in addition to the empirical 
measurement of the E-mini S&P 500 Futures, the Exchange proposes that 
it would have the power to widen the Auction Collars if it determines 
that it is necessary or appropriate for the maintenance of a fair and 
orderly market.\9\
---------------------------------------------------------------------------

    \8\ See NYSE Rules 15(d)(2) and 123D(a)(1)(B)(ii); see also 
Securities Exchange [sic] Release No. 78228 (July 5, 2016), 81 FR 
44907 (July 11, 2016) (SR-NYSE-2016-24) (Approval Order).
    \9\ Volatility affecting the Core Open Auction can emanate from 
many sources, including the previous day's trading session, 
overnight trading, trading in the foreign markets before the 
opening, substantial activity in the futures market before the 
opening, government actions or announcements, global news and 
events, and changes to the E-mini S&P Futures after 9:00 a.m. 
Eastern Time.
---------------------------------------------------------------------------

    The Exchange believes that widening the Auction Collars for the 
Core Open Auction during periods of market-wide volatility would 
promote greater efficiency and transparency on such trading days by 
specifying uniform parameters for how the Core Open Auction would be 
effectuated for all Auction-Eligible securities on trading days 
experiencing market-wide volatility.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\10\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\11\ 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, 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).
---------------------------------------------------------------------------

    In particular, the Exchange believes that applying the same Auction 
Collars of 10% to all Eligible Auction Securities during periods of 
market-wide volatility, regardless of the Auction Reference Price, 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system, and in general, protect 
investors and the public interest, because it would promote fair and 
orderly auctions during periods when market-wide volatility is causing 
pricing dislocation across all securities. The Exchange further 
believes that widening the price collar thresholds for all securities 
would remove impediments to and perfect the mechanism of a national 
market system because it is designed to allow for greater price 
movement, while at the same time preventing auction trades from 
occurring at prices significantly away from the applicable Auction 
Reference Price. Accordingly, investors would be protected from 
executions significantly away from the last sale in a security or other 
applicable reference price, but natural price fluctuations resulting 
from the market volatility would be permitted. In addition, the 
Exchange believes that widening the Auction Collars could reduce the 
possibility of securities triggering multiple trading pauses under the 
Regulation NMS Plan to Address Market Volatility.
    The Exchange further believes that by specifying the standards for 
when Auction Collars would be widened, the proposal would advance the 
efficiency and transparency of the opening process, thereby fostering 
accurate price discovery at the open of trading. For the same reasons, 
the proposal is also designed to protect investors as well as the 
public interest.

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

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not designed to address competitive issues but rather is designed to 
ensure a fair and orderly market by widening the price collar 
thresholds for the Core Open Auction on trading days with market-wide 
volatility and therefore will not create a burden on competition. The 
proposed rule change is not intended to address competitive issues but 
rather promote greater efficiency and transparency at the open of 
trading on the Exchange.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be 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-2016-136 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-2016-136. 
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

[[Page 71129]]

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-2016-136 and should 
be submitted on or before November 4, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-24839 Filed 10-13-16; 8:45 am]
 BILLING CODE 8011-01-P