
[Federal Register Volume 80, Number 142 (Friday, July 24, 2015)]
[Notices]
[Pages 44170-44172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18128]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75494; File No. SR-NYSEArca-2015-38]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change Adopting New Equity Trading Rules Relating to 
Trading Sessions, Order Ranking and Display, and Order Execution To 
Reflect the Implementation of Pillar, the Exchange's New Trading 
Technology Platform

July 20, 2015.

I. Introduction

    On April 30, 2015, NYSE Arca, Inc. (the ``Exchange'' or ``Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
adopt new equity trading rules relating to Trading Sessions, Order 
Ranking and Display, and Order Execution to reflect the implementation 
of Pillar, the Exchange's new trading technology platform. The proposed 
rule change was published for comment in the Federal Register on May 
19, 2015.\3\ The Commission received no comment letters on the proposed 
rule change. On June 23, 2015, pursuant to section 19(b)(2) of the 
Act,\3\ the Commission designated a longer period within which to 
approve the proposed rule change, disapprove the proposed rule change, 
or institute proceedings to determine whether to approve or disapprove 
the proposed rule change.\4\ This order approves the proposed rule 
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4
    \3\ See Securities Exchange Act Release No. 74951 (May 13, 
2015), 80 FR 28721 (``Notice'').
    \3\ 15 U.S.C. 78s(b)(2).
    \4\ See Securities Exchange Act Release No. 75273, 80 FR 37033 
(June 29, 2015).
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II. Description of the Proposed Rule Change

    The Exchange proposes to adopt new equity trading rules relating to 
the implementation of Pillar, the Exchange's new trading technology 
platform. The Exchange proposes to adopt the following new Pillar 
rules: (1) NYSE

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Arca Equities Rule 7.34P (``Rule 7.34P'') related to trading session; 
(2) NYSE Arca Equities Rule 7.36P (``Rule 7.36P'') related to order 
ranking and display; and NYSE Arca Equities Rule 7.37P (``Rule 7.37P'') 
related to order execution. According to the Exchange, these three 
rules would set forth the foundation of the Exchange's equity trading 
model in Pillar, including the hours of operation, how orders would be 
ranked and displayed, and how orders would be executed.\5\
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    \5\ See Notice at 28722.
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A. Background

    The Exchange represents that Pillar is an integrated trading 
technology platform designed to use a single specification for 
connecting to the equities and options markets operated by Arca and its 
affiliates, New York Stock Exchange LLC and NYSE MKT LLC. NYSE Arca 
Equities will be the first trading system to migrate to Pillar.\6\ The 
Exchange states that during the first phase of Pillar implementation, 
it will roll out the new technology platform over a period of time 
based on a range of symbols.\7\ Because orders entered in symbols not 
yet migrated to Pillar would continue to operate under current rules, 
the Exchange will keep its current rules, pending complete migration of 
symbols to Pillar and retirement of the current trading system, and 
will add new rules that would be applicable to symbols that trade on 
the Pillar trading platform.\8\
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    \6\ See Notice at 28722; see also Trader Update dated January 
29, 2015, available here: http://www1.nyse.com/pdfs/Pillar_Trader_Update_Jan_2015.pdf.
    \7\ See Notice at 28722.
    \8\ Id.
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    As proposed, the new rules governing trading on Pillar would have 
the same numbering as current rules, but with the modifier ``P'' 
appended to the rule number. The Exchange proposes that rules with a 
``P'' modifier would operate for symbols that are trading on the Pillar 
trading platform. If a symbol is trading on the Pillar trading 
platform, a rule with the same number as a rule with a ``P'' modifier 
would no longer operate for that symbol and the Exchange would announce 
by Trader Update when symbols are trading on the Pillar trading 
platform. Definitions that do not have a companion version with a ``P'' 
modifier would continue to operate for all symbols. The Exchange has 
stated that once all symbols have migrated to the Pillar platform, it 
will file a rule proposal to delete rules that are no longer 
operative.\9\
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    \9\ Id.
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B. Proposed Modifications

    The Exchange represents that it is not proposing that the core 
functionality of rules applicable to trading on Pillar would be 
different from rules applicable to trading on the current NYSE Arca 
Equities trading system.\10\ As described in detail in the Notice, 
Rules 7.34P, 7.36P, and 7.37P incorporate much of the substance of 
current NYSE Arca Rules 7.34, 7.36, and 7.37, respectively. However, 
with Pillar, the Exchange would introduce new terminology, reorganize 
and redraft certain provisions to improve clarity, and provide 
additional detail to other current provisions being redesignated.\11\ 
The Exchange also proposes to make several changes that are more 
substantive in nature, as follows:
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    \10\ Id.
    \11\ See id. at 28723-31.
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     The Core Open Auction would occur during the Core Trading 
Session, rather than during Early Trading Session; \12\
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    \12\ See proposed rule 7.34P(a)(2); see also Notice at 28723.
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     Tracking Orders would now be permitted to participate in 
the Early Trading Session; \13\
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    \13\ See current rule 7.34(d)(1)(C), which would not be carried 
over to proposed 7.34P; see also Notice at 28724.
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     during the Early Trading Session, for securities that are 
not eligible for an auction on the Exchange, all Market Orders 
designated for the Core Trading Session and Auction-Only Orders would 
be routed to the primary listing market on arrival (unless the market 
is not accepting orders), whereas currently this only occurs if orders 
include a ``Primary Only'' designation; \14\
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    \14\ See proposed rule 7.34P(c)(1)(D); see also Notice at 28724.
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     Market Orders in securities that are not eligible for the 
Core Open Auction will be routed to the primary listing market until 
the first print of any size (the current rule does not specify that the 
first opening print can include an odd-lot transaction) on the primary 
listing market, and the Exchange would now stop routing Market Orders 
to the primary listing market and begin processing those orders on the 
Exchange at 10am EST; \15\
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    \15\ See proposed rule 7.34P(c)(2)(A); see also Notice at 28725.
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     during the Core Trading Session, Auction-Only Orders in 
securities that are not eligible for an auction on Arca would be 
accepted and routed directly to the primary listing market,\16\ whereas 
currently this only occurs if orders include a ``Primary Only'' 
designation;
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    \16\ See proposed rule 7.34P(c)(2)(B); see also Notice at 28725.
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     Tracking Orders would now be eligible to participate in 
the Late Trading Session; \17\ and
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    \17\ See current rule 7.34(d)(3)(C), which would not be carried 
over to proposed 7.34P; see also Notice at 28725.
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     an order marked ``short'' when a short sale price test 
restriction is in effect would not be routed and would be repriced or 
cancelled.\18\
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    \18\ See proposed rule 7.37P(b)(8); see also Notice at 28730.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act \19\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.\20\ In particular, the Commission finds that the proposed 
rule change is consistent with section 6(b)(5) of the Act,\21\ which 
requires, among other things, that the rules of a national securities 
exchange be 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 and that the 
rules are not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \19\ 15 U.S.C. 78f.
    \20\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \21\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the Exchange believes that the proposed 
rules would remove impediments to and perfect the mechanism of a free 
and open market because the proposed rule set would promote 
transparency by simplifying the structure of Exchange rules and using 
consistent terminology governing equities trading, and by clearly 
denoting the rules that govern once a symbol has been migrated to the 
Pillar platform.\22\ With respect to proposed Rule 7.34P, the Exchange 
represents that it believes that the proposed changes to functionality 
would remove impediments to and perfect the mechanism of a fair and 
orderly market.\23\ With respect to proposed Rules 7.36P and 7.37P, the 
Exchange stated that it believes that the

[[Page 44172]]

proposed rule text promotes transparency through the use of consistent 
terminology that will serve as the foundation for additional Pillar-
related rule proposals, and by providing notice of when orders would be 
accepted, routed, rejected, cancelled, or be assigned a working time by 
the Exchange.\24\
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    \22\ See Notice at 28732.
    \23\ See id.
    \24\ See id.
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    Based on the Exchange's representations, the Commission believes 
that the proposed rule change does not raise any novel regulatory 
considerations and should provide greater specificity with respect to 
the functionality available on the Exchange as symbols are migrated to 
the Pillar platform. For these reasons, the Commission believes that 
the proposal should help 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, in general, protect investors and the 
public interest.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\25\ that the proposed rule change (SR-NYSEArca-2015-38) be, and 
hereby is, approved.
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    \25\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-18128 Filed 7-23-15; 8:45 am]
 BILLING CODE 8011-01-P


