
[Federal Register Volume 79, Number 150 (Tuesday, August 5, 2014)]
[Notices]
[Pages 45511-45513]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18384]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72710; File No. SR-NYSE-2014-38]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Clarifying the Exchange's Use of Certain Data Feeds for Order Handling 
and Execution, Order Routing, and Regulatory Compliance

July 29, 2014.
    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 July 18, 2014, 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 
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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[[Page 45512]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to clarify the Exchange's use of certain data 
feeds for order handling and execution, order routing, and regulatory 
compliance. 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
    On June 5, 2014, in a speech entitled ``Enhancing Our Market Equity 
Structure,'' [sic] Mary Jo White, Chair of the Securities and Exchange 
Commission (``SEC'' or the ``Commission'') requested the equity 
exchanges to file with the Commission the data feeds used for purposes 
of (1) order handling and execution (e.g., with pegged or midpoint 
orders); (2) order routing, and (3) regulatory compliance, if 
applicable.\4\ Subsequent to the Chair's speech, the Division of 
Trading and Markets stated that it ``believes there is a need for 
clarity regarding whether (1) the SIP data feeds, (2) proprietary data 
feeds, or (3) a combination thereof,'' are used for these purposes and 
requested that proposed rule changes be filed that disclose such 
information.\5\ The stated goal of disclosing this information is to 
provide broker-dealers and investors with enhanced transparency to 
better assess the quality of an exchange's execution and routing 
services.
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    \4\ See Mary Jo White, Chair, Securities and Exchange 
Commission, Speech at the Sandler, O'Neill & Partners, L.P. Global 
Exchange and Brokerage Conference (June 5, 2014) (available at 
www.sec.gov/News/Speech/Detail/Speech/1370542004312#.U5HI-fmwJiw).
    \5\ See Letter from James Burns, Deputy Director, Division of 
Trading and Markets, Securities and Exchange Commission, to Jeffrey 
C. Sprecher, Chief Executive Officer, Intercontinental Exchange, 
Inc., dated June 20, 2014.
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    The data feeds available for the purposes of order handling and 
execution, order routing, and regulatory compliance include the 
exclusive securities information processor (``SIP'') data feeds \6\ or 
proprietary data feeds from individual market centers.
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    \6\ The SIP feeds are disseminated pursuant to effective joint-
industry plans as required by Rule 603(b) of Regulation NMS. 17 CFR 
242.603(b). The three joint-industry plans are: (1) The CTA Plan, 
which is operated by the Consolidated Tape Association and 
disseminates transaction information for securities with the primary 
listing market on exchanges other than NASDAQ Stock Market LLC 
(``Nasdaq''); (2) the CQ Plan, which disseminates consolidated 
quotation information for securities with their primary listing on 
exchanges other than Nasdaq; and (3) the Nasdaq UTP Plan, which 
disseminates consolidated transaction and quotation information for 
securities with their primary listing on Nasdaq.
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(i) Overview of Exchange Rules Governing Order Handling, Execution, and 
Routing
    Before executing any arriving or resting interest, the Exchange 
evaluates whether the execution would trade through a protected 
quotation \7\ in violation of Rule 611 of Regulation NMS (``Rule 
611''),\8\ and if so, whether it is eligible for an exception to Rule 
611. The Exchange also evaluates whether displaying a bid or offer 
would result in locking or crossing a protected quotation in violation 
of Rule 610(d) of Regulation NMS (``Rule 610(d)''),\9\ or if it is 
eligible for an exception to Rule 610(d).
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    \7\ A ``protected bid'' or ``protected offer'' means a quotation 
in an NMS stock that (i) is displayed by an automated trading 
center; (ii) is disseminated pursuant to an effective national 
market system plan; and (iii) is an automated quotation that is the 
best bid or best offer of a national securities exchange, the best 
bid or best offer of The Nasdaq Stock Market, Inc., or the best bid 
or best offer of a national securities association other than the 
best bid or best offer of The Nasdaq Stock Market, Inc. 17 CFR 
242.600(b)(57). A ``protected quotation'' means a protected bid or a 
protected offer. See 17 CRF 242.600(b)(58).
    \8\ 17 CFR 242.611.
    \9\ 17 CFR 242.610(d).
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    If any protected quotation is superior to the Exchange's best bid 
or offer, the Exchange may route a marketable order as an Intermarket 
Sweep Order (``ISO'') \10\ (if consistent with the order's 
instructions), unless a trade-through exception applies under Rule 
611(b). Likewise, if the display of an order would lock or cross a 
protected quotation, the Exchange may route such interest to one or 
more protected quotations, if consistent with the order's instructions. 
The Exchange notes that it only routes to away markets for purposes of 
compliance with Rules 611 and 610(d). The Exchange further notes that 
its routing brokers do not have any discretion about where to route 
such interest.\11\
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    \10\ An ISO is defined as a limit order for a NMS Stock that (i) 
when routed to a trading center, is identified as an ISO; and (ii) 
simultaneously with the routing of the ISO, one or more additional 
limit orders, as necessary, are routed to execute against the full 
displayed size of any protected bid, in the case of a limit order to 
sell, or the full displayed size of any protected offer, in the case 
of a limit order to buy, for the MNMS [sic] stock with a price that 
is superior to the limit price of the ISO.
    \11\ See NYSE Rule 17(c)(1)(A)(i).
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(ii) Exchange's Stated Policy, Practice, or Interpretation With Respect 
to the Meaning, Administration, or Enforcement of an Existing Rule 
Regarding how and for what Purpose it Uses Data Feeds
    The Exchange uses the SIP data feeds to determine protected 
quotations on markets other than the Exchange for purposes of 
compliance with Rule 611 and Rule 610(d), including identifying where 
to route ISOs, to calculate the PBBO for purposes of order types that 
are priced based on the PBBO, and to determine the national best bid 
(``NBB'') \12\ for purposes of compliance with Rule 201 of Regulation 
SHO and Rule 440B.\13\
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    \12\ The NBBO is defined as the best bid and best offer of an 
NMS security that is calculated and disseminated on a current and 
continuing basis by a plan processor pursuant to an effective 
national market system plan. 17 CFR 242.600(b)(3). The Exchange 
notes that the NBB may differ from the PBB because the NBB includes 
Manual Quotations, which are defined as any quotation other than an 
automated quotation. 17 CFR 242.600(b)(37). By contrast, a protected 
quotation is an automated quotation that is the best bid or offer of 
a national securities exchange. 17 CFR 242.60)(b)(57)(iii) [sic].
    \13\ NYSE Rule 440B(b) requires that Exchange systems not 
execute or display a short sale order with respect to a covered 
security at a price that is less than or equal to the current NBB if 
the price of that security decreases by 10% or more, as determined 
by the Exchange, from the security's closing price on the Exchange 
at the end of regular trading hours on the prior day.
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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''),\14\ in general, and 
furthers the objectives of Section 6(b)(5),\15\ 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 Exchange 
believes

[[Page 45513]]

that the proposed rule change removes impediments to and perfects the 
mechanism of a free and open market because it provides enhanced 
transparency to better assess the quality of an exchange's execution 
and routing services.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 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 change is not 
designed to address any competitive issue but rather would provide the 
public and investors with information about what data feeds that the 
Exchange uses for execution and routing decisions.

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 if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
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 
Commission deems this requirement to have been met.
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    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 will 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 rule-comments@sec.gov. Please include 
File Number SR-NYSE-2014-38 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-NYSE-2014-38. 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; 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-2014-38 and should be 
submitted on or before August 26, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18384 Filed 8-4-14; 8:45 am]
BILLING CODE 8011-01-P


