
[Federal Register Volume 81, Number 22 (Wednesday, February 3, 2016)]
[Notices]
[Pages 5809-5810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01930]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76994; File No. SR-NYSEArca-2015-121]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving 
Proposed Rule Change To Provide for Price Collar Thresholds for Trading 
Halt Auctions

January 28, 2016.

I. Introduction

    On December 7, 2015, NYSE Arca, Inc. (``Exchange'') 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 amend Exchange 
Rule 1.1(s) to provide for price collar thresholds for Trading Halt 
Auctions. The proposed rule change was published for comment in the 
Federal Register on December 24, 2015.\3\ The Commission received three 
comment letters on 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. 76690 (December 18, 
2015), 80 FR 80430 (``Notice'').
    \4\ See letters from David LaValle, US Head of SPDR ETF Capital 
Markets, State Street Global Advisors, dated January 14, 2016 
(``SSGA Letter''); Joanne Medero, US Head of Government Relations & 
Public Policy, Samara Cohen, US Head of iShares Capital Markets, 
Hubert De Jesus, Co-Head of Market Structure and Electronic Trading, 
BlackRock, Inc., dated January 14, 2016 (``BlackRock Letter''); and 
Eric Swanson, General Counsel & Secretary, BATS Global Markets, 
Inc., dated January 22, 2016 (``BATS Letter'').
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II. Description of the Proposed Rule Change

    The Exchange currently conducts Trading Halt Auctions under 
Exchange Rule 7.35(f).\5\ To respond to market

[[Page 5810]]

events on August 24, 2015, the Exchange proposes to adopt specified 
price collar thresholds for Trading Halt Auctions.\6\
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    \5\ See Exchange Rule 7.35(f); see also Notice, supra note 3, at 
80431.
    \6\ See Notice, supra note 3, at 80431. Currently, the 
Exchange's rules do not provide for price collar thresholds for 
Trading Halt Auctions. See Exchange Rules 1.1(s) and 7.35(f); see 
also Notice, supra note 3, at 80430-31.
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    According to the Exchange, on August 24, 2015, it applied price 
collar thresholds to 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.\7\ The Exchange states its belief 
that these thresholds were too narrow, but that it is appropriate to 
have protections in place for Trading Halt Auctions to ensure that a 
re-opening trade will not deviate significantly from prior prices, even 
taking into consideration natural price movements for a security.\8\
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    \7\ See Notice, supra note 3, at 80431.
    \8\ See id.
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    Proposed new Rule 1.1(s)(B) would provide that, when the Trading 
Halt Auction Price is established by Rule 7.35(f)(4)(A), the Limit 
Orders eligible for determining the Indicative Match Price would be 
limited by specified price collar thresholds away from the last 
consolidated sale price before the Trading Halt Auction.\9\ As 
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.\10\ These proposed price collar thresholds would 
be in effect until six months after the operative date of the proposed 
rule change.\11\
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    \9\ See proposed Rule 1.1(s)(B).
    \10\ See id. The Exchange states that these proposed percentages 
are based on the ``numerical guideline'' percentages set forth in 
the Exchange's Clearly Erroneous Executions rule for the Core 
Trading Session. See Notice, supra note 3, at 80431 and Exchange 
Rule 7.10(c)(1). The Exchange further states that its proposal is 
similar in certain respects to how BATS Exchange, Inc. prices its 
Halt Auctions for ETPs. See Notice, supra note 3, at 80431-32.
    \11\ See proposed Rule 1.1(s)(B).
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    In the proposal, the Exchange represents that it will be conducting 
an analysis to identify what changes, if any, would be appropriate to 
balance the need to allow 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.\12\ The Exchange 
states that, following this analysis, it will propose to make the price 
collar thresholds in this proposal permanent or propose other or 
additional changes to its re-opening auction process.\13\
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    \12\ See Notice, supra note 3, at 80431.
    \13\ See id. For a more detailed description of the proposed 
rule change, see Notice, supra note 3.
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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 and the rules and 
regulations thereunder applicable to a national securities 
exchange.\14\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\15\ 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.
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    \14\ 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).
    \15\ 15 U.S.C. 78f(b)(5).
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    As noted above, the Commission received three comment letters on 
the proposed rule change.\16\ One commenter supports the proposed rule 
change and states its belief that price collars are an important 
investor protection, which will help avoid potentially clearly 
erroneous trades and strengthen market participants' confidence.\17\ 
This commenter also states its belief that the proposed rule change 
will help rebuild investor confidence in the efficient functioning of 
the marketplace in the wake of the volatility experienced in August 
2015.\18\ Another commenter also supports the proposed rule change and 
states its belief that the proposed change will mitigate the recurrence 
of some of the pricing disruption witnessed on August 24, 2015.\19\ One 
commenter is broadly supportive of the proposed rule change and its 
proactive response toward improving market resiliency, and states that 
this proposed rule change is a step in the right direction.\20\
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    \16\ See supra note 4.
    \17\ See SSGA Letter.
    \18\ See id.
    \19\ See BATS Letter, at 1. At the same time, this commenter 
notes that there are additional related measures that the Commission 
and all of the exchanges should implement to prevent the recurrence 
of the disruptions of August 24, 2015. See id., at 1-2.
    \20\ See BlackRock Letter. This commenter also states that the 
events of August 24, 2015 have demonstrated that there is a need to 
enhance and revise the trading mechanisms that aim to protect the 
market from extraordinary volatility. See id. This commenter urges 
the Commission to accelerate the adoption of holistic measures to 
improve the resiliency of the U.S. equity market. See id.
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    The Commission believes that the proposed rule change, which would 
widen the Exchange's price collar thresholds for Trading Halt Auctions, 
is appropriate as an interim measure to protect investors and the 
public interest.\21\ As noted above, the Exchange will conduct an 
analysis to determine whether to make the proposed price collar 
thresholds permanent or to propose other or additional changes to its 
re-opening process.\22\ In addition, the Commission believes that the 
proposed rule change will provide transparency with respect to the 
Exchange's Trading Halt Auction process and enhance investors' 
understanding of the operation of price collars during Trading Halt 
Auctions. For these reasons, the Commission believes that the proposed 
rule change is consistent with the Act.
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    \21\ As noted above, the proposed price collar thresholds would 
sunset six months after the operative date of this proposed rule 
change. See proposed Rule 1.1(s)(B).
    \22\ See Notice, supra note 3, at 80431.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\23\ that the proposed rule change (SR-NYSEArca-2015-121) be, and 
hereby is, approved.
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    \23\ 15 U.S.C. 78s(b)(2)
    \24\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01930 Filed 2-2-16; 8:45 am]
 BILLING CODE 8011-01-P


