
[Federal Register Volume 81, Number 230 (Wednesday, November 30, 2016)]
[Notices]
[Pages 86365-86368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28779]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79389; File No. SR-NYSEMKT-2016-107)]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 15--
Equities Relating to Pre-Opening Indications

November 23, 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 November 17, 2016, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') filed with the Securities and Exchange

[[Page 86366]]

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 amend Rule 15--Equities relating to pre-
opening indications. 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'') 
relating to pre-opening indications. The proposed rule changes would 
restore the obligation for a DMM to publish a pre-opening indication if 
a security has not opened by 10:00 a.m. Eastern Time and add a new 
parameter for when a pre-opening indication should be published for 
lower-priced securities.
Background
    The Exchange recently amended Exchange rules to consolidate and 
amend requirements relating to pre-opening indications in Rule 15.\4\ 
Rule 15(a) provides that a pre-opening indication will include the 
security and the price range within which the opening price is 
anticipated to occur and that a pre-opening indication will be 
published via the securities information processor and proprietary data 
feeds. Rule 15(b) specifies the conditions for publishing a pre-opening 
indication, and Rule 15(b)(1) provides that a DMM will publish a pre-
opening indication, as described in Rule 15(e), before a security opens 
if the opening transaction on the Exchange is anticipated to be at a 
price that represents a change of more than the ``Applicable Price 
Range'' from a specified ``Reference Price'' before the security opens.
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    \4\ See Securities Exchange Act Release No. 78673 (August 25, 
2016), 81 FR 60038 (August 31, 2016) (SR-NYSEMKT-2016-79) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change) 
(``Opening Filing''). The Exchange implemented the changes described 
in the Opening Filing on September 12, 2016.
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    Under Rule 15(c), the Reference Price for a security, other than an 
ADR, is the securities last reported stale price on the Exchange, the 
security's offering price in the case of an initial public offering 
(``IPO''), or the security's last reported sale price in the securities 
market from which the security is being transferred to the Exchange. 
Rule 15(d)(1) provides that, except under conditions set forth in Rule 
15(d)(2), the Applicable Price Range for determining whether to publish 
a pre-opening indication will be 5%. Rule 15(d)(2) provides that if as 
of 9:00 a.m. Eastern Time, the E-mini S&P 500 Futures are +/-2% from 
the prior day's closing price of the E-mini S&P 500 Futures, when 
reopening trading following a market-wide trading halt under Rule 80B--
Equities, or if the Exchange determines that it is necessary or 
appropriate for the maintenance of a fair and orderly market, the 
Applicable Price Range for determining whether to publish a pre-opening 
indication will be 10%.
Proposed Rule Change
    The Exchange proposes to amend Rule 15(b)(1) to add another 
condition for when a DMM would be required to publish a pre-opening 
indication. As proposed, a DMM would be required to publish a pre-
opening indication if a security has not opened by 10:00 a.m. Eastern 
Time. This requirement was previously set forth in rule text in Rule 
123D(b)--Equities that was deleted in the Opening Filing.\5\ The 
Exchange proposes to restore this requirement, as modified. 
Specifically, the Exchange would not retain the prior rule text that 
required Executive Floor Governor approval to extend the 30-minute time 
frame. The Exchange believes that current Rule 15(e)(1), which requires 
a Floor Governor to supervise and approve the publication of a pre-
opening indication, provides for appropriate oversight of the 
publication of a pre-opening indication, including if such publication 
would be after 10:00 a.m.
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    \5\ See Opening Filing, supra note 4 at 60039. Before being 
amended in the Opening Filing, Rule 123D(b)--Equities provided: ``If 
an indication is disseminated after the opening bell, it must be 
considered a delayed opening. In addition, any stock that is not 
opened with a trade or a reasonable quotation within 30 minutes 
after the opening of business must be considered a delayed opening 
(except for IPOs) and requires Floor Official supervision, as well 
as an indication. That 30-minute time frame may only be extended by 
an Executive Floor Governor on a Floor-wide basis.''
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    The Exchange believes that restoring the requirement to publish a 
pre-opening indication if a security is not opened by 10:00 a.m. 
Eastern Time would promote transparency in the opening process for 
securities that do not open on either a trade or a quote by such time. 
The Exchange believes that there are limited circumstances when a 
security would not be opened by 10:00 a.m. and for which a pre-opening 
indication has not already been published. For example, if the reason a 
security has not opened by 10:00 a.m. is due to an order imbalance, the 
DMM would have already published a pre-opening indication, as required 
by current Rule 15(b)(1). By contrast, if there is no trading interest 
in a security, such as the first day of trading of a security listed on 
a when issued basis, the proposed requirement to publish a pre-opening 
indication for such security would provide investors with additional 
information regarding the indicative price for such security so they 
can evaluate whether to submit trading interest to participate in the 
opening. The Exchange believes that 10:00 a.m. is an appropriate time 
threshold for publishing a pre-opening indication in such circumstances 
as it would provide sufficient time for the DMM to gather pricing 
information for a security that may otherwise have no trading 
interest.\6\
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    \6\ For example, a security that is listed on a when issued 
basis generally does not have an offering document that specifies a 
price for such security. In the absence of trading interest to 
provide an indication of how market participants would price such a 
security, a DMM would have to look to other sources, such as 
research analyst reports, to identify the appropriate pricing. The 
Exchange notes that in such scenarios, there may be wide 
fluctuations on the estimated price. The first published pre-opening 
indication therefore may be wide, but would serve the purpose of 
providing transparency regarding the potential pricing for such a 
security.
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    To effect this proposed change, the Exchange proposes to amend Rule 
15(b)(1) to add sub-numbering within the paragraph, delete the phrase 
``before the security opens'' as duplicative of a prior reference to 
the same phrase, and add the new text, as follows (new text is in 
italics, deleted text bracketed):
    (b) Conditions for publishing a pre-opening indication:

[[Page 86367]]

    (1) A DMM will publish a pre-opening indication, as described in 
paragraph (e), (i) before a security opens if the opening transaction 
on the Exchange is anticipated to be at a price that represents a 
change of more than the ``Applicable Price Range,'' as specified in 
paragraph (d) of this Rule, from a specified ``Reference Price,'' as 
specified in paragraph (c) of this Rule[, before the security opens]; 
or (ii) if a security has not opened by 10:00 a.m. Eastern Time.
    The Exchange also proposes to amend Rule 15(d) to add a new 
Applicable Price Range for securities priced $3.00 and lower. As 
proposed, for these securities, the Applicable Price Range would be 
$0.15 on regular trading days. To effect this proposed change, the 
Exchange proposes to amend Rule 15(d)(1) to provide that, except under 
the conditions set forth in Rule 15(d)(2), the Applicable Price Range 
for determining whether to publish a pre-opening indication would be 5% 
for securities with a Reference Price over $3.00 and $0.15 for 
securities with a Reference Price equal to or lower than $3.00. The 
Exchange proposes to make a related change to Rule 15(d)(2) to provide 
for what the Applicable Price Range would be for securities priced 
$3.00 and lower if as of 9:00 a.m. Eastern Time, the E-mini S&P 500 
Futures are +/- 2% from the prior day's closing price of the E-mini S&P 
500 Futures, when reopening trading following a market-wide trading 
halt under Rule 80B [sic], or if the Exchange determines that it is 
necessary or appropriate for the maintenance of a fair and orderly 
market. As proposed, in such case, the Applicable Price Range would be 
$0.30.
    The Exchange believes a price range movement of more than $0.15 for 
lower-priced securities on regular trading days, and more than $0.30 
price range movement on more volatile trading days, would better 
reflect when an opening price for such securities is significantly away 
from the Reference Price, thus warranting a pre-opening indication. By 
contrast, the Exchange believes that the current 5% Applicable Price 
Range applicable to securities priced $3.00 and below is too narrow and 
would result in a disproportionate number of pre-opening indications 
for these securities as compared to how many pre-opening indications 
are required for securities priced above $3.00. Requiring pre-opening 
indications when they would not otherwise be warranted would also 
reduce the number of securities that would be eligible to be opened by 
a DMM electronically. For example, based on Exchange data from January 
2016 through October 2016, if the Exchange had applied the 5% 
Applicable Price Range, there would have been 18 securities requiring a 
pre-opening indication. By contrast, using a $0.15 Applicable Price 
Change for this same period would have resulted in only two securities 
requiring a pre-opening indication.\7\ This reduced number of required 
pre-opening indications would mean that more securities would have been 
eligible to be opened electronically by the DMM. The Exchange further 
notes that the proposed break point of which parameter would be used is 
based on the current price buckets used in the Regulation NMS Plan to 
Address Extraordinary Market Volatility (``LULD Plan'') (providing that 
securities priced $3.00 and below are subject to wider percentage 
parameters than securities priced above $3.00).\8\
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    \7\ When applying the proposed double-wide Applicable Price 
Change for volatile trading days, as provided for in Rule 15(d)(2), 
to trade data from August 25, 2015, the change to a $0.30 Applicable 
Price Change instead of a 10% Applicable Price Change would have 
resulted in four securities requiring pre-opening indications 
instead of 63. Similarly, applying these Applicable Price Changes to 
June 24, 2016, a 10% move would have resulted in 55 securities 
requiring pre-opening indications, whereas a $0.30 parameter would 
have resulted in one security requiring pre-opening indication.
    \8\ See Securities Exchange Act Release No. 77679 (April 21, 
2016), 81 FR 24908 (April 27, 2016) (File No. 4-631) (Order 
approving 10th Amendment to the LULD Plan).
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* * * * *
    There are no technology changes associated with this proposed rule 
change. However, because the proposed rule change would require DMMs to 
change behavior, the Exchange will announce the operative date by a 
Trader Update that describes the proposed changes. The Exchange will 
publish this Trader Update no later than 10 days after the operative 
date of this filing.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\10\ 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 amending Rule 15(b)(1) to restore the 
requirement that a pre-opening indication be published if a security 
has not opened by 10:00 a.m. Eastern Time would remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system because it would provide additional transparency to the 
opening process if a security has not opened by 10:00 a.m. As such, the 
Exchange believes that the proposal 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange further believes that providing for a $0.15 Applicable 
Price Range for securities priced $3.00 and lower on regular trading 
days, and a $0.30 Applicable Price Range for such securities on more 
volatile trading days, would remove impediments to and perfect a free 
and open market and a national market system because it would require a 
wider range of price movement before a pre-opening indication must be 
published for these lower-priced securities. The Exchange believes that 
these proposed changes would balance the goal of providing price 
transparency if there would be significant price dislocation in the 
opening price of a security compared to the Reference Price with the 
manual process involved with publishing pre-opening indications. 
Moreover, the Exchange believes that any reduction in number of pre-
opening indications published for these lower-priced securities would 
not result in less transparency because the Exchange would continue to 
publish Order Imbalance Information for such securities, as provided 
for in Rule 15(g).

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 promote greater 
efficiency and transparency at the open of trading on the Exchange.

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

[[Page 86368]]

19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
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.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 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 Exchange has satisfied this 
requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\15\ 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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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 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-2016-107 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-2016-107. 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-2016-107 and should 
be submitted on or before December 21, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-28779 Filed 11-29-16; 8:45 am]
 BILLING CODE 8011-01-P


