
[Federal Register Volume 81, Number 218 (Thursday, November 10, 2016)]
[Notices]
[Pages 79081-79084]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27152]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79242; File No. SR-NYSEMKT-2016-97]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Adopting New Rules To 
Reflect the Implementation of Pillar, the Exchange's New Trading 
Technology

November 4, 2016.
    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 October 25, 2016, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') 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 adopt new rules to reflect the 
implementation of Pillar, the Exchange's new trading technology. 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
    On January 29, 2015, the Exchange announced the implementation of 
Pillar, which is an integrated trading technology platform designed to 
use a single specification for connecting to the equities and options 
markets operated by the Exchange and its affiliates, NYSE Arca, Inc. 
(``NYSE Arca'') and New York Stock Exchange LLC (``NYSE'').\4\ NYSE 
Arca Equities, Inc. (``NYSE Arca Equities), which operates the equities 
trading platform for NYSE Arca, was the first trading system to migrate 
to Pillar.\5\ In connection with the NYSE Arca implementation of 
Pillar, NYSE Arca filed four rule proposals relating to Pillar.\6\
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    \4\ See Trader Update dated January 29, 2015, available here: 
http://www1.nyse.com/pdfs/Pillar_Trader_Update_Jan_2015.pdf.
    \5\ NYSE Arca Equities is a wholly-owned corporation of NYSE 
Arca and operates as a facility of NYSE Arca.
    \6\ See Securities Exchange Act Release Nos. 74951 (May 13, 
2015), 80 FR 28721 (May 19, 2015) (Notice) and 75494 (July 20, 
2015), 80 FR 44170 (July 24, 2015) (SR-NYSEArca-2015-38) (Approval 
Order of NYSE Arca Pillar I Filing, adopting rules for Trading 
Sessions, Order Ranking and Display, and Order Execution); 
Securities Exchange Act Release Nos. 75497 (July 21, 2015), 80 FR 
45022 (July 28, 2015) (Notice) and 76267 (October 26, 2015), 80 FR 
66951 (October 30, 2015) (SR-NYSEArca-2015-56) (Approval Order of 
NYSE Arca Pillar II Filing, adopting rules for Orders and Modifiers 
and the Retail Liquidity Program); Securities Exchange Act Release 
Nos. 75467 (July 16, 2015), 80 FR 43515 (July 22, 2015) (Notice) and 
76198 (October 20, 2015), 80 FR 65274 (October 26, 2015) (SR-
NYSEArca-2015-58) (Approval Order of NYSE Arca Pillar III Filing, 
adopting rules for Trading Halts, Short Sales, Limit Up-Limit Down, 
and Odd Lots and Mixed Lots); and Securities Exchange Act Release 
Nos. 76085 (October 6, 2015), 80 FR 61513 (October 13, 2015) 
(Notice) and 76869 (January 11, 2016), 81 FR 2276 (January 15, 2016) 
(Approval Order of NYSE Arca Pillar IV Filing, adopting rules for 
Auctions).
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    To streamline and simplify trading across the Exchange, NYSE Arca, 
and NYSE, the Exchange proposes to adopt the rule numbering framework 
of the NYSE Arca Equities rules for Exchange trading on the Pillar 
trading platform. The Exchange believes that if it and its affiliates 
are operating on the same trading platform, using the same rule 
numbering scheme across all markets will make it easier for members, 
the public, and the Commission to navigate the rules of each market. 
The Exchange therefore proposes to adopt a framework of rule numbering 
that is based on the current NYSE Arca Equities rules. The Exchange 
proposes to place this framework of rules following current Rule 0--
Equities. As proposed, this framework would use the current rule 
numbering scheme of NYSE Arca Equities, and would consist of proposed 
Rules 1E-13E. Accordingly, the Exchange proposes to add a new heading 
following Rule 0 that would provide ``Pillar Platform Rules (Rules 1E-
Rule 13E).''
    To explain that the proposed rules would only be applicable to 
trading in a security once that security is trading on the Pillar 
platform, the Exchange proposes to state that Rules 1E-13E would be 
operative for securities that are trading on the Pillar equities 
trading platform. The Exchange would further provide that the Exchange 
would announce by Trader Update when securities are trading on the 
Pillar trading platform. Because there will be a period when specified 
securities that trade on the Exchange would continue to trade on the 
current trading platform, while other securities would be trading on 
the Pillar platform, the Exchange would not delete current Exchange 
rules when it adopts Pillar rules that cover the same topic as a 
current Exchange rule. Unless specified in this list of rules, current 
Exchange rules would continue to be applicable to trading in a security 
on the Pillar platform.
    The Exchange proposes to denote the Pillar rules with the letter 
``E'' to distinguish such rules from current Exchange rules with the 
same numbering. Except as described below, at this time, the Exchange 
would be adopting the framework for only these rule numbers and would 
designate the proposed rules as ``Reserved.'' Through a series of 
subsequent rule filings, the Exchange will propose to populate the 
individual rules with the rule text to

[[Page 79082]]

operate the Exchange on the Pillar platform.
    In addition to adopting a framework of rule numbering, the Exchange 
also proposes to adopt specified rules that would be operative to 
trading on Pillar. The proposed rules would be based on NYSE Arca 
Equities rules, but with non-substantive differences to use the term 
``Exchange'' instead of the terms ``NYSE Arca Marketplace'' or 
``Corporation,'' and to use the terms ``mean'' or ``have the meaning'' 
instead of the terms ``shall mean'' or ``shall have the meaning.'' The 
Exchange has selected these rules because they are either definitional 
or the same substantively across all markets today and would not change 
when the Exchange migrates to Pillar.
    First, the Exchange proposes certain definitions in Rule 1.1E. The 
terms defined in these proposed rules, unless the context requires 
otherwise, would have the meaning specified.
     Proposed Rule 1.1E(h) would define the term ``BBO'' as the 
best bid or offer on the Exchange and the term ``BB'' to mean the best 
bid on the Exchange and the term ``BO'' to mean the best offer on the 
Exchange. This proposed rule text is based on NYSE Arca Equities Rule 
1.1(h) and current Exchange Rule 7, which defines the term ``Exchange 
BBO'' as the best bid or offer disseminated to the Consolidated 
Quotation System (``CQS'') by the Exchange.
     Proposed Rule 1.1E(l) would define the term ``Eligible 
Security'' as any equity security (i) either listed on the Exchange or 
traded on the Exchange pursuant to a grant of unlisted trading 
privileges under Section 12(f) of the Exchange Act and (ii) specified 
by the Exchange to be traded on the Exchange or other facility, as the 
case may be. This proposed rule text is based on NYSE Arca Equities 
Rule 1.1(l). The term Eligible Security is not currently used in 
Exchange rules.
     Proposed Rule 1.1E(o) would define the term ``FINRA'' as 
the Financial Industry Regulatory Authority, Inc. This proposed rule 
text is based on NYSE Arca Equities Rule 1.1(o). The term ``FINRA'' is 
used in current Exchange rules, but is not defined separately.
     Proposed Rule 1.1E(dd) would define the term ``NBBO'' as 
the national best bid or offer, the term ``NBB'' as the national best 
bid, the term ``NBO'' as the national best offer, the terms ``Best 
Protected Bid'' or ``PBB'' as the highest Protected Bid, the terms 
``Best Protected Offer'' or ``PBO'' as the lowest Protected Offer, and 
the term ``Protected Best Bid and Offer'' (``PBBO'') as the Best 
Protected Bid and Best Protected Offer. This proposed rule text is 
based on NYSE Arca Equities Rule 1.1(dd). These terms are used in 
current Exchange rules, but are not defined separately.
     Proposed Rule 1.1E(ff) would define the term ``Away 
Market'' as any exchange, alternative trading system (``ATS'') or other 
broker-dealer (1) with which the Exchange maintains an electronic 
linkage and (2) that provides instantaneous responses to orders routed 
from the Exchange. As further proposed, the Exchange would designate 
from time to time those ATSs or other broker-dealers that qualify as 
Away Markets. This proposed rule text is based on NYSE Arca Equities 
Rule 1.1(ff). This term is not currently defined in Exchange rules 
because, on the current trading platform, the Exchange only maintains 
electronic linkage with those markets that display protected 
quotations.
     Proposed Rule 1.1E(ii) would define the term ``UTP 
Security'' as a security that is listed on a national securities 
exchange other than the Exchange and that trades on the Exchange 
pursuant to unlisted trading privileges. This proposed rule text is 
based on NYSE Arca Equities Rule 1.1(ii). This term is not currently 
defined in Exchange rules.
     Proposed Rule 1.1E(jj) would define the term ``UTP Listing 
Market'' as the primary listing market for a UTP Security. This 
proposed rule text is based on NYSE Arca Equities Rule 1.1(jj).
     Proposed Rule 1.1E(ddd) would define the term ``NMS 
Stock'' as any security, other than an option, for which transaction 
reports are collected, processed, and made available pursuant to an 
effective transaction reporting plan. This proposed rule text is based 
on NYSE Arca Equities Rule 1.1(ddd). This term is not currently defined 
in Exchange rules.
     Proposed Rule 1.1E(eee) would define the terms ``Protected 
Bid'' or ``Protected Offer'' as a quotation in an NMS stock that is (i) 
displayed by an Automated Trading Center; (ii) disseminated pursuant to 
an effective national market system plan; and (iii) an Automated 
Quotation that is the best bid or best offer of a national securities 
exchange or the best bid or best offer of a national securities 
association. The proposed rule would further define the term 
``Protected Quotation'' as a quotation that is a Protected Bid or 
Protected Offer and would provide that, for purposes of the foregoing 
definitions, the terms ``Automated Trading Center,'' ``Automated 
Quotation,'' ``Manual Quotation,'' ``Best Bid,'' and ``Best Offer,'' 
would have the meanings ascribed to them in Rule 600(b) of Regulation 
NMS under the Securities Exchange Act. This proposed rule text is based 
on NYSE Arca Equities Rule 1.1(eee). These terms are used in current 
Exchange rules, but not separately defined.
     Proposed Rule 1.1E(fff) would define the term ``trade-
through'' as the purchase or sale of an NMS stock during regular 
trading hours, either as principal or agent, at a price that is lower 
than a Protected Bid or higher than a Protected Offer. This proposed 
rule text is based on NYSE Arca Equities Rule 1.1(fff). This term is 
not currently defined in Exchange rules.
     Proposed Rule 1.1E(hhh) would define the terms ``effective 
national market system plan'' and ``regular trading hours'' as having 
the meanings set forth in Rule 600(b) of Regulation NMS under the 
Securities Exchange Act of 1934. This proposed rule text is based on 
NYSE Arca Equities Rule 1.1(hhh). These terms are not currently defined 
in Exchange rules.
    The Exchange proposes the remaining rule numbers that correspond to 
the sub-numbering of NYSE Arca Equities Rule 1.1E on a ``reserved'' 
basis.
    Next, the Exchange proposes rules that would be grouped under 
proposed Rule 7E--EQUITIES TRADING. With the exception of Rules 7.5E, 
7.6E, and 7.12E the Exchange proposes Rules 7.1E-Rule 7.46E on a 
``Reserved'' basis.
     Proposed Rule 7.5E would be entitled ``Trading Units'' and 
would specify that the unit of trading in stocks is 1 share. The rule 
would further provide that a ``round lot'' is 100 shares, unless 
specified by the primary listing market to be fewer than 100 shares. 
The rule would also provide that any amount less than a round lot would 
constitute an ``odd lot'' and any amount greater than a round lot that 
is not a multiple of a round lot would constitute a ``mixed lot.'' This 
proposed rule text is based on NYSE Arca Equities Rule 7.5 without any 
differences. The substance of this proposed rule is currently set forth 
in Rules 55 and 56. The Exchange proposes a non-substantive difference 
to use the term ``mixed lot'' instead of ``partial round lot'' or 
``PRL.''
     Proposed Rule 7.6E would be entitled ``Trading 
Differentials'' and would provide that the minimum price variation 
(``MPV'') for quoting and entry of securities traded on the Exchange 
would be $0.01, with the exception of securities that are priced less 
than $1.00 for which the MPV for quoting and entry of orders would be 
$0.0001. This proposed rule text is based on NYSE Arca Equities Rule 
7.6 without any differences. The substance of this proposed rule is 
currently set forth in Rule 62.

[[Page 79083]]

     Proposed Rule 7.12E would be entitled ``Trading Halts Due 
to Extraordinary Market Volatility'' and would specify the Exchange's 
procedures for halting trading in all stocks. The proposed text is 
based on NYSE MKT Rule 80B--Equities without any differences.
    Because trading on Pillar would be under the above-described rules, 
the Exchange proposes to specify that Rules 7--Equities, 55--Equities, 
56--Equities, 62--Equities, and 80B--Equities would not be applicable 
to trading on the Pillar trading platform.
* * * * *
    As discussed above, because of the technology changes associated 
with the migration to the Pillar trading platform, the Exchange will 
announce by Trader Update when rules with an ``E'' modifier will become 
operative and for which symbols. Accordingly, the Exchange is not 
proposing to delete rules applicable to trading on the current platform 
until all securities are trading on Pillar.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\7\ in general, and 
furthers the objectives of Section 6(b)(5),\8\ 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 that the proposed rules to support Pillar on the Exchange 
would remove impediments to and perfect the mechanism of a free and 
open market because the proposed rule set would promote transparency in 
Exchange rules by using consistent rule numbers with NYSE Arca 
Equities, which was the first market to migrate to the Pillar trading 
platform. The Exchange believes that using a common framework of rule 
numbers for the markets that operate on the Pillar trading platform 
will better allow members, regulators, and the public to navigate the 
Exchange's rulebook and better understand how equity trading is 
conducted on the Exchange and its affiliated exchanges. Adding new 
rules with the modifier ``E'' to denote those rules that would be 
operative for the Pillar trading platform would remove impediments to 
and perfect the mechanism of a free and open market by providing 
transparency of which rules govern trading once a symbol has been 
migrated to the Pillar platform.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange further believes that adopting specified definitions 
in proposed Rule 1E and proposed Rules 7.5E, 7.6E, and 7.12E under 
proposed Rule 7E would remove impediments to and perfect the mechanism 
of a free and open market and national market system because the 
proposed rules are definitional and are based on approved rules of NYSE 
Arca Equities without any substantive differences and would be 
operative once the Exchange migrates to Pillar.

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 adopt new rules 
to support the Exchange's new Pillar trading platform. As discussed in 
detail above, with this rule filing, the Exchange is not proposing to 
change its core functionality but rather to adopt a rule numbering 
framework based on the rules of NYSE Arca Equities. The Exchange 
believes that the proposed rule change would promote consistent use of 
terminology to support the Pillar trading platform on both the Exchange 
and its affiliate NYSE Arca Equities, thus making the Exchange's rules 
easier to navigate.

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 \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
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, it has become effective pursuant to 
Section 19(b)(3)(A)(iii) of the Act \11\ and subparagraph (f)(6) of 
Rule 19b-4 thereunder.\12\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \13\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
states that it believes the proposed rule change will not significantly 
affect the protection of investors or the public interest or impose any 
significant burden on competition because the proposed rule change is 
not designed to make any substantive changes to how the Exchange 
operates. Rather, the Exchange believes that the proposed rule change 
would promote transparency in Exchange rules by adopting a rule-
numbering framework based on the rules of NYSE Arca Equities, which was 
the first market to migrate to the Pillar trading platform, so that 
when the Exchange migrates to the Pillar trading platform, its rules 
will follow the same numbering scheme of NYSE Arca Equities. Because 
the proposed rule change makes no substantive changes to how the 
Exchange operates, the Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission hereby waives the operative 
delay and designates the proposed rule change operative upon 
filing.\15\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in

[[Page 79084]]

the public interest; (ii) for the protection of investors; or (iii) 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule 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-NYSEMKT-2016-97 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2016-97. 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-NYSEMKT-2016-97 and should 
be submitted on or before December 1, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-27152 Filed 11-9-16; 8:45 am]
 BILLING CODE 8011-01-P


