Document ID: SEC-2014-1540-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2014-09-15T04:00Z

[Federal Register Volume 79, Number 178 (Monday, September 15, 2014)]
[Notices]
[Pages 55036-55038]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-21873]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73027; File No. SR-NYSEArca-2014-96]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Rule 
2.100, Which Addresses the Exchange's Emergency Powers Revising How 
Certain Messages Are Disseminated

September 9, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on August 27, 2014, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``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 2.100, which addresses the 
Exchange's emergency powers, to revise how certain messages are 
disseminated. 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 amend Rule 2.100, which addresses the 
Exchange's emergency powers, to revise how certain messages are 
disseminated.\4\
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    \4\ NYSE Arca trades equity securities on the systems and 
facilities of its wholly owned subsidiary, NYSE Arca Equities, 
referred to as the ``NYSE Arca Marketplace.'' For the purposes of 
this filing and in the text of Rule 2.100, these shall be referred 
to collectively as the systems and facilities of NYSE Arca, or 
simply NYSE Arca or the Exchange.
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Background
    In 2009, the Exchange adopted Rule 2.100 to provide the New York 
Stock Exchange LLC (``NYSE''), which is an affiliate of the Exchange 
(``Affiliated Exchange''), with the authority to declare an Emergency 
Condition \5\ with respect to trading on or through the systems and 
facilities of the Affiliated Exchange and to act as necessary in the 
public interest and for the protection of investors.\6\ As amended in 
2013, the term ``Affiliated Exchange'' means NYSE, NYSE MKT LLC (``NYSE 
MKT''), or a national securities exchange otherwise designated by the 
Exchange as an affiliated entity.\7\ The authority in Rule 2.100 may be 
exercised when, due to an Emergency Condition, an Affiliated Exchange's 
systems and facilities cannot be utilized. If such an Emergency 
Condition is declared, a qualified Exchange officer may designate the 
Exchange to serve as a backup facility to receive and process bids and 
offers and to execute orders on behalf of the Affiliated Exchanges so 
that the Affiliated Exchanges, as self-regulatory organizations 
(``SROs''), can remain operational. During such an Emergency Condition, 
the Exchange also would continue to operate simultaneously.
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    \5\ The definition of ``Emergency Condition'' is the one used in 
Section 12(k)(7) of the Act and is also used by and the Affiliated 
Exchanges and the Securities and Exchange Commission 
(``Commission''). Section 12(k)(7) defines an emergency to mean 
``(A) a major market disturbance characterized by or constituting--
(i) sudden and excessive fluctuations of securities prices 
generally, or a substantial threat thereof, that threaten fair and 
orderly markets; or (ii) a substantial disruption of the safe or 
efficient operation of the national system for clearance and 
settlement of transactions in securities, or a substantial threat 
thereof; or (B) a major disturbance that substantially disrupts, or 
threatens to substantially disrupt--(i) the functioning of 
securities markets, investment companies, or any other significant 
portion or segment of the securities markets; or (ii) the 
transmission or processing of securities transactions.'' 15 U.S.C. 
Sec.  78l(k)(7).
    \6\ See Securities Exchange Act Release No. 61178 (December 16, 
2009), 74 FR 68434 (December 24, 2009) (SR-NYSEArca-2009-90). The 
text of Rule 2.100 refers to the ``Corporation,'' which is NYSE Arca 
Equities. See NYSE Arca Equities Rule 1.1(k).
    \7\ See Securities Exchange Act Release No. 70822 (November 6, 
2013), 78 FR 68128 (November 13, 2013) (SR-NYSEArca-2013-77; SR-
NYSE-2013-54; SR-NYSEMKT-2013-66). This release approved the 
amendment to Rule 2.100 as well as amendments to NYSE Rule 49 and 
adoption of NYSE MKT Rule 49--Equities.
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    In November 2013, the Commission approved amendments to Rule 2.100 
that were designed to more effectively delineate the SRO functions of 
the Exchange and its Affiliated Exchanges during an Emergency 
Condition, reflect the operational preferences of the industry, and 
reflect the structure of Affiliated Exchange member organization 
connectivity to and system coding for Affiliated Exchange systems.\8\ 
To date, the Exchange has not invoked Rule 2.100 nor have the 
Affiliated Exchanges invoked their respective rules.
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    \8\ See supra n. 7.
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    Under current Rule 2.100(b)(2)(A), beginning on the next trading 
day following the declaration of an Emergency Condition, NYSE Arca 
would, on behalf of and at the direction of the Affiliated Exchange, 
disseminate (i) the official opening, re-opening, and closing trades of 
Affiliated Exchange-listed securities to the Consolidated Tape as 
messages of the Affiliated Exchange, and (ii) any notification for 
Affiliated Exchange-listed securities to the Consolidated Quotation 
System (``CQS'') of a regulatory halt and resumption of trading 
thereafter, trading pause and resumption of trading thereafter, and 
Short Sale Price Test trigger and lifting thereafter, as messages of 
both the Affiliated Exchange and NYSE Arca.
    Under current Rule 2.100(b)(2)(B), bids and offers for Affiliated 
Exchange-listed securities entered on or through the systems and 
facilities of NYSE Arca during the Emergency Condition would

[[Page 55037]]

be reported to the CQS as bids and offers of NYSE Arca, except that the 
opening quote and any re-opening quote would be reported to the CQS as 
a bid and/or offer of both the Affiliated Exchange and NYSE Arca. Bids 
and offers for Affiliated Exchange-listed securities executed on or 
through the systems and facilities of NYSE Arca during the Emergency 
Condition would be reported to the Consolidated Tape as executions of 
NYSE Arca, except for executions in the opening, re-opening, or closing 
auctions, which would be reported as Affiliated Exchange executions and 
Affiliated Exchange volume only.
Proposed Rule Change
    After further review, the Exchange has determined that it is not 
feasible for certain notifications that are disseminated via CQS to be 
disseminated as messages of both the Affiliated Exchange and NYSE Arca. 
Specifically, CQS can only process notifications of a regulatory halt 
and resumption of trading thereafter, trading pause and resumption of 
trading thereafter, and Short Sale Price Test trigger and lifting from 
a single market. Because the Affiliated Exchanges are the primary 
markets for NYSE- or NYSE MKT-listed securities, the Exchange believes 
that it is more appropriate to continue to disseminate these 
notifications as Affiliated Exchange market messages during an 
Emergency Condition. As such, the Exchange proposes to amend Rule 
49(b)(2)(A)(ii)--Equities [sic] so that these messages would only be 
disseminated as Affiliated Exchange messages.
    For similar reasons, CQS supports dissemination of re-opening quote 
messages from only a single market. Specifically, in order to support a 
re-opening quote, a single market must disseminate a ``resume'' trading 
message, which then signals CQS to accept and display quotes from all 
other markets. Because the Affiliated Exchanges are the primary markets 
for NYSE- and NYSE MKT-listed securities, the Exchange believes it is 
appropriate to disseminate notifications of re-opening quotes and 
related ``resume'' messages as an Affiliated Exchange market message 
during an Emergency Condition.\9\ As such, the Exchange proposes to 
amend Rule 2.100(b)(2)(B) so that any re-opening quote would only be 
reported to the CQS as a bid and/or offer of the Affiliated Exchange.
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    \9\ By contrast, CQS supports the receipt of opening quotes of 
both the Affiliated Exchange and NYSE Arca. The Exchange believes it 
is appropriate to disseminate the opening quote as messages of both 
the Affiliated Exchange and NYSE Arca in order to signal to those 
market participants that are looking for a primary market message as 
a cue that NYSE- and NYSE MKT-listed securities are open for 
trading.
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    The Exchange notes that it has conducted two tests with customers 
to disseminate messages as proposed.\10\
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    \10\ The Exchange conducted customer tests on September 21, 2013 
and March 22, 2014. See http://markets.nyx.com/nyse/trader-updates/view/12682 and http://markets.nyx.com/nyse/trader-updates/view/13092, respectively.
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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 Section 6(b)(5) of the Act,\12\ 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. Specifically, the Exchange 
believes that the proposed rule change will assist in facilitating 
trading in Affiliated Exchange-listed securities in the event of an 
Emergency Condition and would help to avoid a future market-wide 
closure. The proposed change will take into account CQS system 
limitations while still providing for the appropriate dissemination of 
primary market messages. The Exchange believes that the proposed rule 
change would strengthen business continuity planning for itself and 
Affiliated Exchange member organizations, thereby benefiting market 
participants and investors generally.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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 
designed to facilitate trading in Affiliate Exchange-listed securities 
on NYSE Arca during an Emergency Condition and remove a duplicative 
notification that cannot, upon further review, be feasibly achieved. As 
such, the Exchange believes that the proposed rule change would promote 
competition for the benefit of market participants and investors 
generally because it provides transparency in Exchange rules of how the 
Exchange would disseminate messages on behalf of Affiliated Exchanges 
during an Emergency Condition.

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 foregoing 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 for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange states that such waiver is consistent with the 
protection of investors and the public interest because it would permit 
the Exchange, the Affiliate Exchanges, and the Affiliate Exchanges' 
member organizations to more quickly adopt effective business 
continuity plans that will help avoid market closures in the event of 
an emergency, thereby maintaining liquidity for the benefit of market 
participants and investors generally. In support of the requested 
waiver, the Exchange notes that it has already successfully conducted 
two tests with customers to disseminate messages in the proposed 
manner, each time without negative results or feedback.\15\ 
Additionally, the Affiliated Exchanges, NYSE and NYSE MKT, have filed 
similar proposals to account for these same proposed changes.\16\ For 
these reasons, the Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission designates

[[Page 55038]]

the proposed rule change to be operative upon filing.\17\
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    \15\ See supra note 10.
    \16\ See SR-NYSE-2014-48 and SR-NYSEMKT-2014-75.
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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) \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-NYSEArca-2014-96 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2014-96. 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 Web site viewing and printing 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-NYSEArca-2014-96 and should 
be submitted on or before October 6, 2014.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21873 Filed 9-12-14; 8:45 am]
BILLING CODE 8011-01-P