Document ID: SEC-2014-0621-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2014-04-14T04:00Z

[Federal Register Volume 79, Number 71 (Monday, April 14, 2014)]
[Notices]
[Pages 20957-20959]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08281]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71898; File No. SR-NYSEMKT-2014-27]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 13--
Equities Governing Pegging Interest

April 8, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 25, 2014, NYSE MKT LLC (``NYSE MKT'' or ``Exchange'') 
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 Exchange. 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\ 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 Rule 13--Equities (Orders and 
Modifiers) governing Pegging Interest. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 13--Equities (Orders and 
Modifiers) (``Rule 13'') to (i) remove DMM interest as eligible to be 
set as pegging interest; (ii) remove Market Pegging Interest; and (iii) 
remove the ability to add an offset value to be specified for pegging 
interest.
    The Exchange notes that it recently amended its rules governing 
pegging interest to move the rule text that provided for pegging on the 
Exchange from Rule 70.26--Equities (Pegging for d-Quotes and e-Quotes) 
\3\ to Rule 13 and amend such text to (i) permit DMM interest to be set 
as pegging interest; (ii) change references from NBB, NBO and NBBO to 
PBB, PBO and PBBO, respectively; (iii) permit pegging interest to peg 
to the opposite side of the market

[[Page 20958]]

(``Market Pegging Interest''); and (iv) provide for an offset value to 
be specified for pegging interest.\4\ When it moved the pegging 
interest rule text to Rule 13, the Exchange also made several other 
changes to the rule text so that the proposed substantive changes could 
be incorporated in a logical and transparent manner and to streamline 
the rule in a non-substantive manner. The Exchange notes that the 
proposed rule change would revert rules governing pegging interest to 
the prior functionality, but would maintain the changes to move the 
rule text to Rule 13, to reference the PBBO instead of the NBBO, and to 
streamline the rule text.
---------------------------------------------------------------------------

    \3\ E-Quotes are Floor broker agency interest files. D-Quotes 
are e-Quotes for which a Floor broker has entered discretionary 
instructions as to size and/or price.
    \4\ See Securities Exchange Act Release No. 68305 (Nov. 28, 
2012), 77 FR 71853 (Dec. 4, 2012) (SR-NYSEMKT-2012-67) (the ``2012 
pegging filing'').
---------------------------------------------------------------------------

    In the 2012 pegging filing, the Exchange stated that it would 
announce the implementation date of that proposed rule change in a 
Trader Update no later than 90 days after publication of the notice in 
the Federal Register, and the implementation date would be no later 
than 90 days following publication of the Trader Update announcing 
publication of the notice in the Federal Register. Following the 
effective date of the 2012 pegging filing, the Exchange was undergoing 
a number of complex technology changes, including introducing 
technology to implement the Regulation NMS Plan to Address 
Extraordinary Market Volatility (the ``Plan''),\5\ which began 
implementation on April 8, 2013, and moving the Exchange's matching 
engine to the Universal Trading Platform. During that time, the 
Exchange prioritized its technology implementation schedule to assure 
timely compliance with the Plan's implementation schedule. As a result, 
in the Spring of 2013, the Exchange moved back the planned 
implementation of the pegging interest changes.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631) (Approval Order 
of the Plan), as amended.
---------------------------------------------------------------------------

    During this same period, the Exchange maintained communications 
Floor brokers and Designated Market Makers (``DMM'') regarding its 
technology plans. After taking into consideration both the ongoing 
technology changes that the Exchange implemented in 2013, including 
implementation of both Phase I of the Plan in April 2013 and 
implementation of Phase II of the Plan in August and September of 2013, 
and feedback from Floor brokers and DMMs, the Exchange did not 
introduce the functionality described in the 2012 pegging filing to 
expand pegging interest to DMMs, introduce the Market Pegging Interest, 
or make available the ability to add an offset value. The Exchange did, 
however, implement the pegging functionality to peg to the PBBO instead 
of the NBBO.
    The Exchange now proposes to conform its rules to the pegging 
functionality that is currently available. Accordingly, the Exchange 
proposes to amend Rule 13 governing pegging interest to (i) delete the 
reference to DMMs in paragraph (a)(1) of the Rule 13 text governing 
pegging interest; (ii) delete paragraph (b) of the Rule 13 text 
governing pegging interest, which discusses offset values; and (iii) 
delete paragraph (d) of the Rule 13 text governing pegging interest, 
which discusses the Market Pegging Interest. The Exchange believes it 
is appropriate to maintain the balance of the rule text governing 
pegging interest in Rule 13 for the same reasons expressed in the 2012 
pegging filing. Specifically, as described in detail in the 2012 
pegging filing, the remainder of the Rule 13 rule text governing 
pegging interest covers the same functionality as the rule text 
previously found in Rule 70.26--Equities, but with non-substantive 
changes to make the rule text more focused and streamlined.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\6\ in general, and 
furthers the objectives of Section 6(b)(5),\7\ in particular, because 
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, 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. The proposed 
rule change is also not designed to permit unfair discrimination.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes removing rule text that relates to 
functionality that the Exchange did not implement will remove 
impediments to, and perfect the mechanism of a free and open market and 
national market system and, in general, protect investors and the 
public interest by assuring that the Exchange's rules are transparent 
regarding how the Exchange operates. In addition, the Exchange believes 
that maintaining the balance of the rule text in Rule 13 governing 
pegging interest promotes clarity and transparency by adding greater 
specificity with respect to the interest to which pegging interest may 
peg. Additionally, the removal would reduce potential confusion that 
may result from having unavailable functionality in the Exchange's 
rulebook. In addition, the continuation of the realignment and 
consolidation of former Rule 70.26--Equities rule text governing 
pegging interest with other orders and modifiers in Rule 13 has 
resulted in a clearer rule, which benefits all member organizations as 
well as others that read the rule.

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 change is not 
designed to address any competitive issue but rather would delete 
unavailable functionality in the Exchange's rulebook, thereby reducing 
confusion and making the Exchange's rules easier to understand and 
navigate.

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 \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if

[[Page 20959]]

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) \10\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2014-27 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-NYSEMKT-2014-27. 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 such 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 publicly available. All 
submissions should refer to File Number SR-NYSEMKT-2014-27 and should 
be submitted on or before May 5, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08281 Filed 4-11-14; 8:45 am]
BILLING CODE 8011-01-P