Document ID: SEC-2015-2137-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.,
Posted Date: 2015-12-24T05:00Z

[Federal Register Volume 80, Number 247 (Thursday, December 24, 2015)]
[Notices]
[Pages 80430-80432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32386]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76690; File No. SR-NYSEARCA-2015-121]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To Amend Rule 1.1(s) To Provide for Price 
Collar Thresholds for Trading Halt Auctions

December 18, 2015.
    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 December 7, 2015, 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.
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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 1.1(s) to provide for price 
collar thresholds for Trading Halt Auctions. 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 1.1(s) to provide for price 
collar

[[Page 80431]]

thresholds for Trading Halt Auctions.\4\ The Exchange conducts Trading 
Halt Auctions under Rule 7.35(f).
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    \4\ Rule 1.1(s) defines the Indicative Match Price for the 
Opening Auction, the Market Order Auction, the Closing Auction, and 
the Trading Halt Auction. Rule 1.1(s)(A) further provides that when 
the Market Order Auction Price or Closing Auction Price is 
established by NYSE Arca Equities Rule 7.35(c)(3)(A)(1) or 
7.35(e)(3), the Limit Orders eligible for determining the Indicative 
Match Price shall be limited by the price collar thresholds 
established by the Corporation. The rule further provides that the 
Corporation shall set and modify such thresholds from time to time 
upon prior notice to ETP Holders.
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    The Exchange proposes to amend Rule 1.1(s) to respond to market 
events on August 24, 2015, by adopting price collar thresholds for 
Trading Halt Auctions. On August 24, 2015, the market experienced 
extreme trading volatility, which resulted in a significantly higher 
number of trading pauses under the Plan to Address Extraordinary Market 
Volatility (the ``Plan'') than the average trading day. Because of the 
volume of trading interest that the Exchange received during these 
trading pauses, the Exchange reopened trading following those pauses 
with Trading Halt Auctions. On that day, the Exchange applied price 
collar thresholds for Trading Halt Auctions that were 5% for securities 
with a consolidated last sale price of $25.00 or less, 2% for 
securities with a consolidated last sale price greater than $25.00 but 
less than or equal to $50.00, and 1% for securities with a consolidated 
last sale price greater than $50.00.\5\
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    \5\ The price collar thresholds were last modified on April 13, 
2015 and September 8, 2015. See NYSE Arca Trader Update, ``NYSE Arca 
Equities Enhancements to Auction Collars,'' dated April 10, 2015, 
and NYSE Arca Trader Update, ``NYSE Arca Equities Enhancements to 
Auction Collars,'' dated September 4, 2015, available here: https://www.nyse.com/trader-update/history and here: https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Trader_Update_Auction_Collars_Sept_2015.pdf.
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    The Exchange believes that these parameters were too narrow. The 
Exchange also believes, however, that it is appropriate to have 
protections in place for Trading Halt Auctions to assure that a 
reopening trade will not deviate significantly from prior prices, even 
taking into consideration natural price movements for a security. The 
Exchange will therefore be conducting an analysis to identify what 
changes, if any, would be appropriate to balance allowances for natural 
price movement in a Trading Halt Auction, while at the same time 
avoiding significant price deviations that would not be in line with 
the fair value of securities listed on the Exchange, which are all 
Exchange Traded Products (``ETP''). Following this analysis, the 
Exchange will propose to make the price collar thresholds proposed 
herein permanent or propose other or additional changes to the re-
opening auction process.
    Pending such analysis, the Exchange proposes to amend Rule 1.1(s) 
on an interim basis to add to the rule price collar thresholds for 
Trading Halt Auctions that would be based on the thresholds for 
determining whether an execution is clearly erroneous. The Exchange 
proposes that this proposed rule change will sunset six months after 
the operative date of this rule change.
    For such interim measure, the Exchange proposes new Rule 1.1(s)(B) 
to specify that when the Trading Halt Auction Price is established by 
NYSE Arca Equities Rule 7.35(f)(4)(A), the Limit Orders eligible for 
determining the Indicative Match Price would be limited by specified 
price collar thresholds. As further proposed, the specified percentage 
for the price collar thresholds for Trading Halt Auctions would be 10% 
for securities with a consolidated last sale price of $25.00 or less, 
5% for securities with a consolidated last sale price greater than 
$25.00 but less than or equal to $50.00, and 3% for securities with a 
consolidated last sale price greater than $50.00. These proposed 
percentages are based on the corresponding ``numerical guideline'' 
percentages set forth in paragraph (c)(1) of Rule 7.10 (Clearly 
Erroneous Executions) for the Core Trading Session.\6\
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    \6\ As set forth in Rule 7.10(c)(1), for securities priced 
between $0.00 and $25.00, the numerical guideline is 10%, for 
securities priced between $25.01 and $50.00, the numerical guideline 
is 5%, and for securities priced greater than $50.00, the numerical 
guideline is 3%.
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    The Exchange believes that by adopting price collar thresholds for 
Trading Halt Auctions based on the clearly erroneous execution 
guidelines, the Exchange would be widening the thresholds from their 
current percentages, thereby ending the use of the current overly-
narrow price collar thresholds. The Exchange further believes that 
using temporary price collar thresholds tied to the clearly erroneous 
execution guidelines is appropriate because an auction trade is subject 
to these guidelines for purposes of determining whether such execution 
is clearly erroneous. In addition, the Exchange's proposed rule change 
is similar to how BATS Exchange, Inc. (``BATS'') prices its Halt 
Auctions for ETPs. Like BATS, the Exchange is the primary listing 
market only for ETPs and would, therefore only have Trading Halt 
Auctions for ETPs. BATS Rule 11.23(d)(2)(C) provides that BATS executes 
orders in ETPs in a Halt auction at a price level within a ``Collar 
Price Range'' that maximizes the number of shares executed in the 
auction. Similar to the Exchange's proposal, BATS uses Collar Price 
Ranges that are based on the numerical guidelines set forth in the 
market-wide clearly erroneous execution rules.\7\ The Exchange's 
proposal differs from BATS's pricing mechanism because the Exchange 
would use the consolidated last sale price as the reference price, 
rather than the midpoint of a ``Valid NBBO.'' The Exchange believes 
that using the consolidated last sale price tracks the market-wide 
clearly erroneous execution rules, which similarly use the consolidated 
last sale price for determining whether an execution is clearly 
erroneous.
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    \7\ As set forth in BATS Rule 11.23(a)(6), the Collar Price 
Range is 10% for securities with a Collar Midpoint of $25.00 or 
less, 5% for securities with a Collar Midpoint is [sic] greater than 
$25.00 but less than or equal to $50.00, and 3% for securities with 
a Collar Midpoint greater than $50.00. BATS Rule 11.23(a)(6) defines 
the Collar Midpoint as the Volume Based Tie Breaker, which is 
defined in BATS Rule 11.23(a)(23) as the midpoint of the NBBO if it 
is a Valid NBBO, with a Valid NBBO being less than the Maximum 
Percentage away from both the NBB and the NBO.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\8\ in general, and 
furthers the objectives of Section 6(b)(5),\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendment to add Rule 
1.1(s)(B) would remove impediments to and perfect the mechanism of a 
fair and orderly market because it would provide for price collar 
thresholds that are wider than the current thresholds used by the 
Exchange, but yet are based on an existing standard for assessing 
whether an auction trade is clearly erroneous. In particular, the 
proposed rule change responds to market events of August 24, 2015 by 
aligning the price collar thresholds applicable to Trading Halt 
Auctions with the clearly erroneous execution guidelines. The Exchange

[[Page 80432]]

believes the proposed price collar thresholds, which would be based on 
the numerical guidelines set forth in Rule 7.10(c)(1), would also 
remove impediments to and perfect the mechanism of a fair and orderly 
market and protect investors and the public interest because they would 
reduce the potential for a Trading Halt Auction to be a clearly 
erroneous execution. To this end, the Exchange's proposal is similar to 
how BATS prices its Halt Auctions, which are also subject to collar 
price ranges that are based on the numerical guidelines for clearly 
erroneous executions. The Exchange further believes that using the last 
consolidated sale price as the reference price for the Trading Halt 
Auction price collar thresholds would remove impediments to and perfect 
the mechanism of a fair and orderly market because determinations of 
whether an execution is clearly erroneous are also based on price 
movements away from the consolidated last sale prices.

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 to provide for a 
price protection mechanism to prevent Trading Halt Auctions from 
occurring at prices that could be a clearly erroneous execution.

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 the 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-2015-121 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-2015-121. 
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 will also be 
available for inspection and copying 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-2015-121 and should be 
submitted on or before January 14, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-32386 Filed 12-23-15; 8:45 am]
 BILLING CODE 8011-01-P