Document ID: SEC-2017-1837-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-11-08T05:00Z

[Federal Register Volume 82, Number 215 (Wednesday, November 8, 2017)]
[Notices]
[Pages 51890-51892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-24255]

[[Page 51890]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82004; File No. SR-NYSEArca-2017-126]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend NYSE Arca 
Rules 7.31-E and 7.35-E

November 2, 2017.
    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 October 20, 2017, NYSE Arca, Inc. (``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 NYSE Arca Rules 7.31-E (Orders and 
Modifiers) and 7.35-E (Auctions) to establish a minimum dollar 
threshold into the price protection mechanisms provided for in the 
respective rules; (2) clarify the order processing specified in Rule 
7.35-E(e)(8)(C); and (3) make technical non-substantive changes to 
Rules 7.31-E and 7.35-E. 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: (1) Amend NYSE Arca Rules 7.31-E (Orders 
and Modifiers) and NYSE Arca Rule 7.35-E (Auctions) to establish a 
minimum dollar threshold into the price protection mechanisms provided 
for in the respective rules; (2) clarify the order processing specified 
in Rule 7.35-E(e)(8)(C); and (3) make technical non-substantive changes 
to Rules 7.31-E and 7.35-E.
Proposed Changes To Establish a Minimum Dollar Threshold for Price 
Protection Mechanisms
    Rule 7.31-E(a)(1)(B) describes the price protection mechanism for 
Market Orders, i.e., Trading Collars. Currently, Rule 7.31-
E(a)(1)(B)(i) provides that the Trading Collar will be based on a price 
that is a specified percentage away from the consolidated last sale 
price. Rule 7.31-E (a)(1)(B)(i) further provides that the upper (lower) 
boundary of the Trading Collar is the consolidated last sale price 
increased (decreased) by the specified percentage truncated to the 
minimum price variation (``MPV'') for the security.
    Additionally, Rule 7.31-E(a)(2)(B) describes the price protection 
mechanism for Limit Orders, i.e. Limit Order Price Protection. 
Currently, Rule 7.31-E(a)(2)(B) provides that a Limit Orders to buy 
(sell) will be rejected if it is priced at or above (below) a specified 
percentage away from the National Best Offer (National Best Bid) 
(``NBO'' and ``NBB'', respectively).
    Rule 7.35-E(a)(10) describes the price protection mechanism for 
Auctions, i.e., Auction Collar. Currently, Rule 7.35-E(a)(10)(A) 
provides that the Auction Collar for the Core Open Auction and Closing 
Auction is based on a price that is a specified percentage away from 
the Auction Reference Price for the applicable auction. The upper 
(lower) boundary of the Auction Collar is the Auction Reference Price 
increased (decreased) by the specified percentage, truncated to the 
MPV.
    The Exchange proposes to amend these price protection mechanisms to 
introduce a minimum dollar threshold for lower-price securities, as 
follows:
     Trading Collar: The Exchange proposes to amend Rule 7.31-
E(a)(1)(B)(i) to introduce a minimum dollar threshold, of $0.15, into 
the calculation of the Trading Collar. As such, the proposed rule would 
provide that the Trading Collar would be based on a price that is the 
greater of $0.15, or a specified percentage away from the consolidated 
last sale. Accordingly, the upper boundary and lower boundary of the 
Trading Collar would be the consolidated last sale price increased and 
decreased, respectively, by the greater of $0.15 or the specified 
percentage.
     Limit Order Price Protection: The Exchange proposes to 
amend Rule 7.31-E(a)(2)(B) to introduce the same proposed minimum 
dollar threshold that is specified above for the Trading Collar, of 
$0.15, into the Limit Order Price Protection calculation. Accordingly, 
the proposed rule would provide that a Limit Order to buy (sell) would 
be rejected if it was priced at or above (below) the greater of $0.15 
or a specified percentage away from the NBO (NBB). The Exchange 
believes that the introduction of a minimum dollar threshold enhances 
the Limit Order Price Protection and encourages price continuity 
specifically in lower priced illiquid securities.
     Auction Collar: Similarly, the Exchange also proposes to 
amend Rule 7.35-E(a)(10)(A) to provide that the Auction Collar for the 
Core Open Auction and Closing Auction would be based on a price that is 
the greater of $0.15 or a specified percentage away from the Auction 
Reference Price. Accordingly, the proposed rule would provide that the 
upper (lower) boundary of the Auction Collar would be the Auction 
Reference Price increased (decreased) by the greater of $0.15 or the 
specified percentage.
    The Exchange believes that adding a minimum dollar threshold to the 
Trading Collar, Limit Order Price Protection, and Auction Collar 
calculations would enhance the respective price protection mechanisms 
for securities with a reference price below $1.50 because using a 
percentage multiplier for such securities would result in too narrow of 
a price protection mechanism. This proposed rule change is consistent 
with how other exchanges specify static price collar thresholds for 
lower-price securities. Also, the Auction Collar applicable for Trading 
Halt Auctions, described in Rule 7.35-E(e)(7), provides that for 
securities with an Auction reference price under $3.00, the price 
collar threshold for auction collars would be a static $0.15 instead of 
5 percent.\4\
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    \4\ See also Nasdaq Stock Market LLC (``Nasdaq'') Rule 4703(d) 
(providing that ``any portion of a Primary Pegging Order or Market 
Pegging Order that would execute . . . at a price more than $0.25 or 
5 percent worse that the NBBO . . . will be cancelled)'' and Bats 
BZX Exchange, Inc. (``BZX'') Rule 27.2, Interpretations and Policies 
.01 and Bats Rule 11.13 (stating that BZX ``will not execute any 
portion of a bid at a price more than the greater of 5 cents or 0.5 
percent higher than the lowest Protected Offer'').

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[[Page 51891]]

Proposed Change To Clarify Order Processing as Specified in Rule 7.35-E
    Rule 7.35-E(e)(8) describes the Trading Halt Auction Imbalance 
Freeze and provides that if a pause or halt is extended, the Trading 
Halt Auction Imbalance Freeze for the prior period will end, new orders 
and order instructions received during the prior period's Trading Halt 
Auction Freeze will be processed, and the Exchange will accept order 
entry and cancellation as provided for in Rule 7.18-E(c) until the next 
Trading Halt Auction Imbalance Freeze. The Exchange proposes to amend 
Rule 7.35-E(e)(8)(C) to clarify that requests to cancel and requests to 
cancel and replace Market Orders, LOO Orders, Limit Orders, and IO 
Orders will be accepted but not processed until either after the 
Trading Halt Auction concludes (current rule text) or, if a pause or 
halt is extended, when the Trading Halt Auction Imbalance Freeze for 
the prior period ends (proposed rule text). Accordingly Rule 7.35-
E(e)(8)(C) would read as follows (proposed additions italicized):

    Requests to cancel and requests to cancel and replace Market 
Orders, LOO Orders, Limit Orders, and IO Orders will be accepted but 
not processed until either after the Trading Halt Auction concludes, 
as provided for in paragraph (h) of this Rule, or, if a pause or 
halt is extended, when the Trading Halt Auction Imbalance Freeze for 
the prior period ends.

    The Exchange believes that the proposed changes clarify when 
requests to cancel and requests to cancel and replace Market Orders, 
LOO Orders, Limit Orders, and IO Orders would be processed if a pause 
or halt is extended, and that in such circumstances, the Exchange would 
not wait until the end of the Trading Halt Auction to process these 
messages.
Proposed Changes To Make Technical and Conforming Updates to Rules 
7.31-E and 7.35-E
    The Exchange proposes to replace the word ``truncated'' with the 
words ``rounded down'' \5\ in Rules 7.31-E(a)(1)(B)(i) and 7.35-
E(a)(10)(A). The Exchange believes that conforming the terminology used 
within Rules 7.31-E \6\ and 7.35-E and elsewhere in Exchange's rules 
promotes clarity and transparency.
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    \5\ See Rule 7.46-E(f)(2)(A), which provides that references to 
truncating to the MPV in Exchange rules instead mean rounding down 
to the applicable quoting MPV for tick pilot securities.
    \6\ See Rule 7.31-E(a)(2)(B) which provides that ``Limit Order 
Price Protection . . . will be rounded down to the nearest price at 
the applicable MPV.''
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    Finally, the Exchange proposes a non-substantive, technical 
amendment to Rule 7.31-E(c)(5)(C) to correct a typographical error by 
adding the word ``be'' and replacing the word ``that'' with ``than.''
Implementation
    The Exchange anticipates implementing the proposed changes to 
establish a minimum dollar threshold into the Trading Collar, Limit 
Order Price Protection, and Auction Collar in the fourth quarter of 
2017 and will announce by Trader Update the implementation date of 
those proposed rule changes. All other proposed changes would be 
implemented upon effectiveness of this filing.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Exchange Act,\7\ in general, and with Section 
6(b)(5),\8\ 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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed changes relating to adding a 
minimum price threshold to Rules 7.31-E(a)(1)(B)(i), 7.31-E(a)(2)(B), 
and 7.35-E(a)(10)(A) would 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, because they 
would enhance the Exchange's price protection mechanisms, which protect 
from aberrant prices and reduce the likelihood of halts, thus improving 
continuous trading and price discovery. Further, the proposal to 
enhance the price protection mechanisms by adding a minimum dollar 
threshold would assist with the maintenance of fair and orderly markets 
because such mechanisms protect investors from potentially receiving 
executions away from the prevailing market prices at any given time. 
The proposed changes to introduce the $0.15 minimum dollar threshold is 
not novel and is similar in nature to that of other national securities 
exchanges which incorporate dollar thresholds into the calculation of 
the respective price protection mechanisms.\9\
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    \9\ See supra note 4.
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    The Exchange believes that the proposed amendment to Rules 7.35-
E(e)(8) to clarify order processing would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system because the proposed rule changes are designed to promote 
clarity, consistency, and transparency in Exchange rules.
    The Exchange also believes that replacing the term ``truncated'' 
with the term ``rounded down'' in Rules 7.31-E(a)(1)(B)(i) and, 7.35-
E(a)(10)(A) would remove impediments to and perfect the mechanism of a 
free and open market and a national market system because they are 
designed to promote clarity, consistency, and transparency in Exchange 
rules.

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 would (1) provide 
for a more effective price protection mechanism, specifically for 
lower-priced securities; (2) clarify the order processing in Rule 7.35-
E(e)(8)(C) to promote clarity, consistency, and transparency; and (3) 
make technical non-substantive changes to Rules 7.31-E and 7.35-E.

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 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 \10\ and Rule 19b-4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
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. The Exchange has satisfied this requirement.

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[[Page 51892]]

    At any time within 60 days of the filing of the 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 to 
determine whether the proposed rule change should be approved or 
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 [email protected]. Please include 
File Number SR-NYSEArca-2017-126 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-2017-126. 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 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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2017-126 and should 
be submitted on or before November 29, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-24255 Filed 11-7-17; 8:45 am]
 BILLING CODE 8011-01-P