Document ID: SEC-2016-0068-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2016-01-13T05:00Z

[Federal Register Volume 81, Number 8 (Wednesday, January 13, 2016)]
[Notices]
[Pages 1668-1670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00463]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76845; File No. SR-NYSE-2016-07]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 132.30(9) To Conform the Exchange's Rules to Industry-Wide 
Standards for Recording the Capacity in Which a Member Organization 
Executes a Transaction

January 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 January 4, 2016, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') 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 Rule 132.30(9) to conform the 
Exchange's rules to industry-wide standards for the recording the 
capacity in which a member organization executes a transaction. 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 Supplementary Material .30 of Rule 
132 to conform the Exchange's rules to industry-wide standards for 
recording the capacity in which a member organization executes a 
transaction. To effect this change, the Exchange would eliminate the 
current requirement to identify the account for which an order was 
executed and require instead that clearing members and member 
organizations submit account type indicators (``ATI'') reflecting the 
capacity in which the member organization executed a transaction (e.g., 
agency, principal or riskless principal). The Exchange believes that 
the proposed rule change would align the Exchange's rules with 
industry-wide conventions focusing on the capacity in which a broker-
dealer acts in effecting a transaction and, by eliminating the complex 
set of ATIs developed over the years, significantly simplify order 
entry on the Exchange.
Background
    Rule 132 requires clearing member organizations submitting 
transactions to comparison to include the audit trail data elements set 
forth in Supplementary Material .30. Rule 132.30(9) requires that all 
orders submitted to the Exchange include specified trade data elements, 
including ``[w]hether the account for which the order was executed was 
that of a member or member organization or of a non-member or non-
member organization.'' The Exchange has periodically published guidance 
regarding the ATIs that can be used to satisfy this requirement.\4\
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    \4\ See, e.g., Information Memos 85-37 (Nov. 12, 1985); 88-29 
(Oct. 19, 1988); 92-34 (Nov. 13, 1992); 96-36 (Dec. 5, 1996); 02-59 
(Dec. 17, 2002); 09-31 (June 24, 2009); 12-25 (October 9, 2012); 14-
04 (January 30, 2014). The current list contains 24 distinct ATIs.
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    ATIs are included as part of the audit trail data reported for each 
transaction on the Exchange. The Exchange also uses ATIs to capture 
program trade information for those portions of the program trades that 
are submitted to and executed on the Exchange.\5\ Since 2009, the 
Exchange has used ATI data to report program trading statistics for 
portions of program trades executed on the Exchange to the Commission 
on a weekly basis.\6\
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    \5\ Prior to 2009, member organizations reported program trading 
activity to the Exchange via the Daily Program Trading Report 
(``DPTR''). See Securities Exchange Act Release No. 60179 (June 26, 
2009), 74 FR 31786, 31786 (July 2, 2009) (SR-NYSE-2009-61). The DPTR 
requirement was decommissioned in July 2009. See id. at 31787.
    \6\ See id. Since the decommissioning of DPTR in 2009, weekly 
statistics regarding program trades the Exchange provides to media 
outlets have also been derived from ATI data. Id.
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Proposed Rule Change
    The Exchange proposes to amend the current requirement in 
subsection (9) of Rule 132.30 that clearing member organizations 
identify whether the account for which an order was executed was that 
of a member or member organization or of a non-member or non-member 
organization. The current requirement can be satisfied by entering the 
appropriate ATI from a list of ATIs that have evolved over the past 30 
years.\7\
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    \7\ See note 4, supra.
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    In place of this cumbersome process, the Exchange proposes to 
require member organizations to identify the capacity in which the 
member organization executed the transaction as follows: Agency, 
principal or riskless principal.\8\ The ``principal'' category would 
include proprietary trades by a member on the trading Floor relating to 
the member's error account pursuant to Rule 134.\9\
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    \8\ In general, the term ``capacity'' refers to whether a 
broker-dealer acts as agent, i.e., directly on behalf of a customer, 
or whether the broker-dealer acts as principal, i.e., for its own 
account, in a transaction. A riskless principal transaction is one 
where a broker-dealer receives a customer order and then immediately 
executes an identical order in the marketplace, while taking on the 
role of principal, in order to fill the customer order pursuant to 
Rule 5320.
    \9\ Rule 134 requires a member or member organization who 
acquires or assumes a security position resulting from an error 
transaction to clear such error transaction in the member's or 
member organization's error account, or in the error account 
established for a group of members. Rule 123.22 further requires 
members to enter orders executed to offset transactions made in 
error into an electronic system and sends a copy of such order to an 
electronic system on the Floor within 60 seconds of execution. See 
also Rule 123(e) (defining system entry). This type of proprietary 
trade is currently identified by the ``Q'' account type indicator, 
which would be retained to identify these trading Floor-based 
executions.
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    By requiring member organizations to identify the capacity in which 
a broker-dealer enters an order, the Exchange would be harmonizing its 
order entry requirements with those of other

[[Page 1669]]

national securities exchanges.\10\ The proposed change would also 
simplify the order entry process at the Exchange and eliminate the 
requirement for member organizations to use order entry requirements 
unique to the Exchange, thereby reducing complexity in the marketplace. 
This proposed amendment would not alter a member organization's 
obligation to meet order audit trail system requirements, as set forth 
in the Rule 7400 Series.
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    \10\ See, e.g., BATS Exchange, Inc. (``BATS'') Rule 11.21; BATS 
Y-Exchange, Inc. (``BATS-Y'') Rule 11.21; EDGA Exchange, Inc. 
(``EDGA'') Rule 11.5; EDGX Exchange, Inc. Rule 11.5; and NASDAQ 
Stock Market LLC (``NASDAQ'') Rule 4611(a)(6).
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    In connection with this proposed rule change, the Exchange proposes 
to retire the unique ATIs used to capture program trading 
information.\11\ The Exchange currently uses program trading ATIs to 
capture program trading information in order to provide weekly 
statistics regarding program trading to both the Commission and the 
public. However, no other national securities exchange either captures 
program trading information in the same manner or has an obligation to 
report weekly statistics regarding program trading. Given the 
fragmentation in the equities market, the Exchange believes that the 
statistics published by the Exchange regarding program trading are 
incomplete and potentially misleading regarding the scope of program 
trading occurring in equities markets. Accordingly, the Exchange 
believes it would benefit investors and the public for the Exchange to 
cease publishing program trading information, because such information 
is no longer representative of program trading in the equities market 
and could cause confusion regarding the true scope of program trading 
in the U.S. equities markets.
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    \11\ ``Program Trading'' means either (1) index arbitrage, or 
(2) any trading strategy involving the related purchase or sale of a 
basket or group of 15 or more stocks. See Rule 7410(m).
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    The Exchange will publish an Information Memo advising member 
organizations of the proposed change that will provide guidance of 
which ATIs should be submitted in connection with agency, principal, or 
riskless principal capacity.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\13\ in particular, because it 
is designed to promote just and equitable principles of trade and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. The Exchange believes that the 
proposed rule change would remove impediments to and perfect the 
mechanism of a free and open market and national market system because 
it would provide greater harmonization between order entry on the 
Exchange and other marketplaces, resulting in greater uniformity and 
more efficient order entry to enable member organizations to use the 
same order-market conventions across all equities markets. As such, the 
proposed rule change would foster cooperation and coordination with 
persons engaged in facilitating transactions in securities and would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. In addition, the Exchange believes 
that the proposed change to cease providing program trading statistics 
to the Commission and the public based on current ATIs would benefit 
investors and the public because no other market provides similar 
statistics regarding program trading on their markets. Because of the 
fragmentation of trading in the equities market, the Exchange believes 
that the proposed change would eliminate a source of incomplete 
information about program trading that could potentially be misleading 
regarding the scope of program trading in the U.S. equities markets.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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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 rule change is 
not intended to address competitive issues, but rather it is designed 
to provide greater harmonization between Exchange and other markets in 
the marking of orders, resulting in less burdensome and more efficient 
order entry.

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 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).
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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-NYSE-2016-07 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-NYSE-2016-07. This file

[[Page 1670]]

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-NYSE-2016-07and should be 
submitted on or before February 3, 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. 2016-00463 Filed 1-12-16; 8:45 am]
BILLING CODE 8011-01-P