
[Federal Register Volume 80, Number 86 (Tuesday, May 5, 2015)]
[Notices]
[Pages 25743-25744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10405]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74838; File No. SR-NYSEMKT-2015-33]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 15--
Equities To Reflect That Exchange Systems Will Not Publish Order 
Imbalance Information on the Initial Public Offering of a Security

April 29, 2015.
    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 April 21, 2015, NYSE MKT LLC (``Exchange'' or ``NYSE MKT'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III 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 15--Equities to reflect that 
Exchange systems will not publish Order Imbalance Information on the 
initial public offering (``IPO'') of a security. 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 15--Equities (``Rule 15'') to 
reflect that Exchange systems will not publish Order Imbalance 
Information if a security is an IPO.
    Rule 15(c) currently provides that Exchange systems may make 
available, from time to time and as the Exchange shall determine, Order 
Imbalance Information \4\ prior to the opening of a security on the 
Exchange. Rule 15(c)(2)(i) provides that Order Imbalance Information 
will use the last reported sale price in the security on the Exchange 
as the reference price to indicate the number of shares required to 
open the security with an equal number of shares on the buy side and 
sell side of the market. For circumstances when there is no last 
reported sale in a security on the Exchange, i.e., IPOs or transferred 
securities, Rule 15(c)(2)(ii)(D) and (E) specify a different reference 
price, which for IPOs is the offering price.
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    \4\ Order Imbalance Information reflects real-time order 
imbalances that accumulate prior to the opening transaction on the 
Exchange and the price at which interest eligible to participate in 
the opening transaction may be executed in full. Order Imbalance 
Information disseminated pursuant to Rule 15(c) includes all 
interest eligible for execution in the opening transaction of the 
security in Exchange systems, i.e., electronic interest, including 
Floor broker electronic interest, entered into Exchange systems 
prior to the opening. Order Imbalance Information is disseminated on 
the Exchange's proprietary data feeds. See Rule 15(c)(1). As 
discussed below, during IPOs there is significant non-electronic 
pre-opening interest in the form of oral orders by Floor brokers 
that would not be captured by the Exchange's order imbalance feed.
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    To reduce confusion regarding pricing of an IPO, the Exchange 
proposes to discontinue publishing Order Imbalance Information if a 
security is an IPO. The Exchange believes that the Order Imbalance 
Information currently published for IPOs may not be the most accurate 
indication of the state of the market for individual IPO securities. In 
calculating Order Imbalance Information for IPOs, Exchange systems do 
not have access to interest represented in the crowd by Floor brokers, 
i.e., orally bid or offered at the point of sale on the trading Floor, 
which in the case of IPOs can represent significant interest. 
Similarly, Exchange systems do not have access to DMM interest. In the 
case of IPOs, both types of interest play an important role in 
determining the initial opening price, which can fluctuate 
significantly during the price discovery process leading up to the 
opening transaction. The Exchange believes it is therefore appropriate 
to discontinue publishing Order Imbalance Information for a security 
that is an IPO.
    The Exchange notes that indications as required pursuant to Rules 
15(a) and/or 123D(1)--Equities, if applicable,\5\ would still be 
published, if warranted. Because the DMM, who does have knowledge of 
Floor-based trading interest for an IPO, is responsible for publishing 
indications pursuant to Rules 15(a) and/or 123D(1)--Equities, the 
Exchange believes that such indications represent a truer state of the 
market for an IPO. The Exchange believes that discontinuing Order 
Imbalance Information would reduce any confusion in the market if there 
is a difference between the Order

[[Page 25744]]

Imbalance Information and pricing information that may be published 
pursuant to a Rule 15(a) or Rule 123D(1)--Equities indication.
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    \5\ Rule 15(a) provides that if the opening transaction in a 
security will be at a price that represents a change of more than 
the ``applicable price change'' specified in the Rule (representing 
a numerical or percentage change from the security's closing price 
per share or, in the case of an IPO, the security's offering price), 
the DMM arranging the opening transaction or the Exchange shall 
issue a pre-opening indication (a ``Rule 15 Indication''), which is 
represents a range of where a security may open. The Rule 15 
Indication is a one-time snapshot that is published on the 
Exchange's proprietary data feeds prior to the scheduled 9:30 a.m. 
opening time. A Rule 15 Indication includes the security and the 
price range within which the DMM anticipates the opening transaction 
will occur, and would include any orally-represented Floor broker 
interest for the open. In contrast, because Exchange systems would 
not have access to orally-represented interest in the trading crowd, 
Rule 15 Indications published by the Exchange would not reflect 
Floor broker orally-represented crowd interest For this reason, DMM-
entered Rule 15 Indications have priority over Exchange-generated 
Rule 15 Indications and therefore if a DMM issues a Rule 15 
Indication, the Exchange would not publish a Rule 15 Indication in 
that security. See Exchange Act Release No. 34-73351 (October 15, 
2014), 79 FR 62991, 62991 (October 21, 2014). Rule 123D(1)--Equities 
requires the dissemination of one or more indications in connection 
with any delayed opening where a security has not opened or been 
quoted by 10 a.m. In addition, Rule 123D(1)--Equities provides that 
dissemination of one or more indication is mandatory for an opening 
which will result in a ``significant'' price change from the 
previous close. For securities priced under $10, such indications 
are mandatory if the price change is one dollar of more; for 
securities between $10 and $99.99, indications are required for 
price movements of the lesser of 10% or three dollars; and for 
securities over $100, indications are required for price movements 
of five dollars or more. These guidelines are applicable to IPOs 
based on the offering price. The Rule provides specific guidelines 
for both the number of indications and length of time between 
indications. The DMM is responsible for publishing the Rule 123D--
Equities mandatory indication and when determining the price range 
for the indication, takes into consideration Floor broker interest 
that has been orally entered and what, at a given time, the DMM 
anticipates the dealer participation in the opening transaction 
would be. All indications pursuant to Rule 123D--Equities require 
the supervision and approval of a Floor Official and are published 
to the Consolidated Tape.
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    To effectuate this change, the Exchange proposes to delete the rule 
text in subpart (D) of Rule 15(c)(2)(ii), which requires the Exchange 
to use the IPO offering price as the reference price for automated 
Order Imbalance Information, and renumber current Rule 15(c)(2)(ii)(E) 
as new Rule 15(c)(2)(ii)(D). No other changes to the Exchange's rules 
are necessary.
    Because of the technology changes associated with the proposed rule 
change, the Exchange proposes to announce the implementation date via 
Trader Update
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\7\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and protect investors and the public interest. The 
Exchange believes that discontinuing publishing Order Imbalance 
Information for a security that is an IPO would remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system by eliminating a source of information that may not 
accurately reflect the market for such securities, and which may differ 
from indications published by the DMM pursuant to either Rule 15(a) or 
Rule 123D(1)--Equities, as may be applicable. The Exchange further 
believes that discontinuing publishing such information would advance 
the efficiency and transparency of the opening process, thereby 
fostering accurate price discovery at the open of trading. For the same 
reasons, the proposal is also designed to protect investors as well as 
the public interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 
not intended to address competitive issues but rather improve the 
current process of providing pre-market information to customers and 
the investing public about a security that is an IPO.

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.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\11\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
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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) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 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-NYSEMKT-2015-33 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-2015-33. 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 available publicly. All 
submissions should refer to File Number SR-NYSEMKT-2015-33 and should 
be submitted on or before May 26, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-10405 Filed 5-4-15; 8:45 am]
 BILLING CODE 8011-01-P


