[Federal Register Volume 80, Number 14 (Thursday, January 22, 2015)]
[Notices]
[Pages 3273-3278]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00967]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74064; File No. SR-NYSEMKT-2015-02]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Add a Price 
Protection Mechanism To Prevent the Automatic Execution of Incoming 
Market Orders and Marketable Limit Orders Outside a Specified Parameter 
and Eliminate Liquidity Replenishment Points and the Gap Quote Policy

January 15, 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 January 8, 2015, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. 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 (i) amend Rule 1000 to add a price 
protection mechanism to prevent the automatic execution of incoming 
market orders and marketable limit orders outside a specified parameter 
and (ii) eliminate its Exchange-specific volatility mechanisms--
Liquidity Replenishment Points (``LRPs'') and its Gap Quote Policy--and 
to delete any references thereto from the Exchange rules. 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,

[[Page 3274]]

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 1000--Equities to add a price 
protection mechanism to prevent the automatic execution of incoming 
market orders and marketable limit orders outside a specified parameter 
(referred to as a ``Trading Collar''). The Exchange also proposes to 
eliminate its Exchange-specific volatility mechanisms--LRPs and Gap 
Quote Policy--and to delete any references thereto from the Exchange 
rules. The Exchange believes that the proposed Trading Collars would 
assist with the maintenance of fair and orderly markets by mitigating 
the risks associated with orders sweeping through multiple price 
points, resulting in executions at prices that are away from the best 
bid or offer and potentially erroneous. As discussed further below, the 
discontinuation of the Exchange-specific volatility mechanisms were 
anticipated changes following implementation of the Regulation NMS Plan 
to Address Extraordinary Market Volatility (the ``Plan'').\4\
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    \4\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498, 33510, n. 182 (June 6, 2012) (File No. 4-631) 
(Order Approving, on a Pilot Basis, the Plan) (The Commission 
``expects, that upon implementation of the Plan, such exchange-
specific volatility mechanisms would be discontinued by the 
respective exchanges.'') See also Securities Exchange Act Release No 
71649 (March 5, 2014), 79 FR 13696 (March 11, 2014) (File No. 4-631) 
(the Seventh Amendment to the Plan).
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Background: Liquidity Replenishment Points and Gapping the Quote
    Rule 1000--Equities provides for the basic operative principles 
regarding the immediate, automatic execution of market orders and 
marketable limit orders against the Exchange's published quotation.\5\ 
The Rule also lists instances in which automatic execution would not be 
available due to certain market conditions, including when Exchange-
specific volatility mechanisms, specifically LRPs and gapping the 
quote, have been triggered.
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    \5\ Automatic executions may also be against orders on the 
Display Book[supreg], Floor broker agency file interest, Floor 
broker proprietary file interest, Designated Market Maker (``DMM'') 
interest, and interest placed in the Exchange's systems by DMMs 
pursuant to a Capital Commitment Schedule in accordance with, and to 
the extent provided by, Exchange rules and shall be immediately 
reported as Exchange transactions. See Rule 1000(a).
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Liquidity Replenishment Points
    In March 2006, the Exchange implemented the LRP mechanism to 
address market volatility on the New York Stock Exchange, LLC 
(``NYSE'') and, in 2008, adopted LRPs for use on the Exchange.\6\ The 
Exchange has utilized LRPs, which are triggered by rapid price 
movements over a short period of time, to moderate volatility in a 
security by temporarily converting the electronic market for the 
security into an auction market to afford new trading interests the 
opportunity to add liquidity.\7\ The Exchange believes that LRPs were 
effective in moderating some of the impact from the events of May 6, 
2010 for Exchange trading customers, as evidenced by the lack of 
erroneous trades on the Exchange.\8\ In 2012, in approving the Plan, 
the Commission noted the ``potential for unnecessary complexity that 
could result if the Plan were adopted, and exchange-specific volatility 
mechanisms were retained''; thus, the Commission stated its 
``expect[ation], that upon implementation of the Plan, such exchange-
specific volatility mechanisms would be discontinued by the respective 
exchanges.'' \9\
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    \6\ See Securities Exchange Act Release No. 53539 (March 22, 
2006), 71 FR 16353 (March 31, 2006) (SR-NYSE-2004-05); see also 
Securities Exchange Act Release Nos. 58265 (July 30, 2008), 73 FR 
46075 (Aug. 7, 2008) (notice); 58705 (October 1, 2008), 73 FR 58995 
(October 8, 2008) (SR-Amex-2008-63) (approval order for the adoption 
of NYSE Rules 1-1004 on the Exchange).
    \7\ See Securities Exchange Act Release No. 69294 (April 4, 
2013), 78 FR 21441 (April 10, 2013) (SR-NYSEMKT-2013-33).
    \8\ Id.
    \9\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498, 33510, n. 182 (June 6, 2012).
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    In 2013, to coincide with the implementation of the Plan, the 
Exchange filed amendments to Rule 1000 that provided for the phasing 
out of the functionality associated with LRPs as the Plan was phased in 
across all NMS Stocks.\10\ The Plan was fully implemented across all 
NMS Stocks on February 24, 2014, and as such, pursuant to Rule 
1000(a)(iv)(A), the Exchange has discontinued the use of LRPs for all 
NMS Stocks that are subject to the Plan.\11\
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    \10\ See supra n. 7; See Securities Exchange Act Release No. 
69696 (June 4, 2013) 78 FR 34687 (June 10, 2013) (SR-NYSEMKT-2013-
46).
    \11\ See Securities and Exchange Act Release No. 71649 (March 5, 
2014), 79 FR 13696 (March 11, 2014) (File No. 4-631) (the Seventh 
Amendment to the Plan). The Exchange notes that rights and warrants 
are not subject to the Plan, and therefore continue to be subject to 
LRPs.
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Gapping the Quote
    When an imbalance in a particular security exists, the manual 
process known as ``gapping the quote'' occurs--specifically, the DMM 
for the security widens the spread between the bid and offer and 
publishes a new gapped quote. Order imbalances may occur when the 
Exchange receives a sudden influx of orders for a particular security 
on the same side of the market within a short time interval, or when 
one or more large-size orders for a security are entered, and there is 
insufficient offsetting interest. The Exchange first implemented its 
policies and procedures for gapping the quote in 1994 and updated the 
Gap Quote Policy in 2010.\12\ As stated in the Policy, a DMM gaps a 
quote to ``provide public notice of order imbalances for securities, 
facilitate price discovery, and minimize short-term price dislocation, 
by allowing for the entry of offsetting orders or the cancellation of 
orders on the side.'' \13\ A DMM may gap a quote after an LRP has been 
reached. A gapped quote is not available for automatic execution.
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    \12\ See Information Memo 94-32 (August 9, 1994), filed as SR-
NYSE-93-48. See Securities Exchange Act Release No. 34303 (July 1, 
1994), 59 FR 35157 (July 8, 1994). See also Information Memorandum 
10-3 (January 7, 2010), filed as NYSEAmex-2010-05. See Securities 
and Exchange Act Release No. 61402 (January 22, 2010), 75 FR 4602 
(January 28, 2010) (changing the minimum size and value requirements 
for use of gap quotes).
    \13\ See Securities Exchange Act Release No. 61049 (November 23, 
2009), 74 FR 62851 (SR-NYSEAmex-2009-82) (December 1, 2009).
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Proposed Trading Collar
    The Exchange proposes to amend Rule 1000--Equities to add a price 
protection mechanism to prevent the automatic execution or routing of 
incoming market orders, including elected stop orders, and marketable 
limit orders \14\ outside a specified parameter (referred to as a 
``Trading Collar''). As proposed, an incoming market order or 
marketable limit order to buy (sell) would not execute or route to 
another market center at a price above (below) the Trading Collar. 
Trading Collars would be applicable only when automatic executions are 
in effect.\15\ As

[[Page 3275]]

discussed below, on arrival, a buy/sell order would be automatically 
executed up/down to (and including, but not beyond) the Trading Collar 
and any remaining interest shall be cancelled. Unless it is a non-
routable order, the order would route to all markets at or better than 
the Trading Collar.\16\
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    \14\ A market order is an ``order to buy or sell a stated amount 
of a security at the most advantageous price obtainable after the 
order is represented in the Trading Crowd or routed to the Display 
Book[supreg].'' See Rule 13--Equities. A marketable limit order is 
defined as ``a limit order to buy (sell) priced at or above (below) 
the Exchange best offer (bid) at the time such order is routed to 
the Display Book[supreg].'' Id. Because a stop order becomes a 
market order when elected, the Exchange believes it is appropriate 
to provide that elected stop orders would be subject to the proposed 
Trading Collar.
    \15\ See proposed Rule 1000(c)(ii)--Equities. Both market orders 
and marketable limit orders are ``auto ex orders'' that initiate 
automatic executions immediately upon entry into the Exchange 
systems. See Rule 13--Equities. Trading Collars would not be 
applicable to Set Slow Stocks, or to pre-opening, opening, closing 
or manual transactions, and are not in effect during a halt, 
suspension, or pause in trading. Trading Collars would apply, and be 
determined, when discretionary pricing instructions are triggered. 
Trading Collars would not be displayed.
    \16\ If, however, an order that routed to an away market returns 
to the Exchange unexecuted, the Trading Collar based on the NBBO in 
place at the time of execution would be used for that incoming (now 
returning) order, not the Trading Collar based on the NBBO in place 
at the time of the original arrival of the order.
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    Pursuant to proposed Rule 1000(c)(i), a Trading Collar would be a 
specified percentage away from the National Best Bid or Offer 
(``NBBO''), depending on whether it is a buy or sell order, and the 
specified percentage would vary depending on the NBBO at the time the 
order arrives and/or is executed. For buy orders, the Trading Collar 
would be a specified percentage above the National Best Offer 
(``NBO''). For sell orders, the Trading Collar would be a specified 
percentage below the National Best Bid (``NBB''). The proposed Trading 
Collars are set forth in the table below.

------------------------------------------------------------------------
                                                             Percentage
                          NBB/NBO                             away from
                                                             the NBB/NBO
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Greater than $0.00, up to and including $25.00............           10
Greater than $25.00, up to and including $50.00...........            5
Greater than $50.00.......................................            3
------------------------------------------------------------------------

    The Exchange notes that these proposed percentages are based on the 
current numerical guidelines for determining whether a clearly 
erroneous execution has occurred.\17\ The Exchange further notes that 
the proposed percentages are the same as the percentages applicable to 
similar trading collar functionality on NYSE Arca Equities, Inc. 
(``NYSE Arca Equities'').\18\ The Exchange believes that the proposed 
specified percentages are appropriate because the Trading Collar is 
designed to reduce the risk of, and to potentially prevent, the 
automatic execution of orders at prices that may be considered clearly 
erroneous. Because the specified percentage may extend multiple decimal 
points, the Exchange proposes to truncate Trading Collars to the 
nearest minimum price variation (``MPV'') for the security.\19\
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    \17\ See Rule 128(c)(1)--Equities.
    \18\ See NYSE Arca Equities Rule 7.31(a)(2).
    \19\ See Rule 62--Equities.
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    Consider an example where the NBBO is $24.95 x 25.01. In such 
scenario, the Trading Collar for buy orders would be $26.26 (i.e., 
$25.01 + 5% = $26.2605, truncated to $26.26) and the Trading Collar for 
sell orders would be $22.44 [sic] (i.e., $24.95 - 10% = $22.455, 
truncated to $22.45).
    The Exchange proposes that if the NBBO is crossed, the Exchange 
would use the Exchange Best Offer (``BO'') instead of the NBO for buy 
orders, and the Exchange Best Bid (``BB'') instead of the NBB for sell 
orders.
    The Exchange believes it is appropriate to use the BB/BO when the 
NBBO is crossed as a crossed NBBO is generally indicative of an 
erroneously priced or stale bid and/or offer, and may not be 
appropriate reference prices for calculating Trading Collars. The 
Exchange believes that this practice will help ensure that market 
participants obtain timely executions of their market orders and 
marketable limit orders while still being afforded the price protection 
benefit of the Trading Collars. As proposed, in the event there is no 
NBB or BB, the lower boundary of the Trading Collar would be zero 
because there would be no reference price against which to determine 
the appropriate Trading Collar. Similarly, in the event there is no NBO 
or BO, the upper boundary of the Trading Collar would be set to the 
maximum price that the System could handle. Notwithstanding the Trading 
Collar, any incoming market orders or marketable limit orders would 
still be subject to the Plan and could not execute outside of the Upper 
(Lower) Price Band, as defined in Rule 80C--Equities.
    Pursuant to proposed Rule 1000(c)(ii), an incoming market order, 
including an elected stop order, or marketable limit order would 
execute and/or route up or down to (and including) the Trading Collar 
and any remaining interest would be cancelled. The Exchange believes 
that Trading Collars, working in conjunction with the Plan, could help 
limit potential harm from extreme price volatility by preventing 
executions that could occur at a price significantly away from the 
contra side. As proposed, if the Trading Collar for incoming buy (sell) 
interest is lower (higher) than or equals the Upper (Lower) Price Band 
\20\, the Exchange would cancel any remaining interest. The Plan, 
however, would take priority over the Trading Collars where the Plan 
affords more price protection to incoming orders. Specifically, if the 
Upper (Lower) Price Band is lower (higher) than the Trading Collar, the 
order would execute at the more restrictive Upper (Lower) Price Band 
and not beyond and any remaining interest would be displayed or 
repriced to the Price Band, consistent with Rule 80C(a)(5)--Equities.
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    \20\ See Rule 80C--Equities.
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    The Exchange notes that if there is no execution opportunity at the 
Exchange for an incoming buy (sell) order at a price above (below) the 
NBO (NBB), the Exchange would not be obligated to route the order to an 
away market protected offer (bid) because the incoming order would not 
be trading through such protected quotation. The Exchange therefore 
proposes that if there is no execution opportunity at the Exchange for 
an incoming buy (sell) order at a price above (below) the NBO (NBB) and 
at or below (above) the Trading Collar, a buy (sell) order that is 
priced at or above (below) the Trading Collar would be cancelled. The 
Exchange further proposes that a similarly-priced, partially-executed 
order would also be cancelled.
    For example, assume the NBO is 10.00, based on a quote from an away 
market, and therefore the proposed Trading Collar is 11.00. Assume 
further that the Exchange's best offer is 11.05 and with these 
conditions, the Exchange receives an incoming buy order priced at 
11.02. Because there is no execution opportunity for the incoming buy 
order above the NBO and at or below the Trading Collar, and because the 
order's limit price exceeds the Trading Collar, the incoming buy order 
would be cancelled. The buy order would cancel rather than route 
because the Exchange would not trade through another market. Similarly, 
assuming the same facts, but the Exchange has non-displayed interest to 
sell priced at 9.99. An incoming buy order priced at 11.02 would 
execute against that 9.99 non-displayed sell interest, and then any 
remainder of the buy order would similarly be cancelled because there 
is no execution opportunity priced above the NBO of 10.00 or at or 
below the Trading Collar of 11.00.
    Finally, pursuant to proposed Rule 1000(c)(iii), during a Short 
Sale Price Test,\21\ if the NBBO is crossed, short sale orders that 
would be re-priced to a Trading Collar would be cancelled. Under Rule 
201 of Regulation SHO,\22\ when the NBBO is crossed, a short sale order 
in a covered security may be displayed or executed at a price that is 
less than or equal to the current national

[[Page 3276]]

best bid.\23\ Accordingly, if the NBBO is crossed, a short sale order 
priced at or below the Trading Collar could be re-priced to the Trading 
Collar, which is by definition a price below the NBB. In the spirit of 
Rule 201 of Regulation SHO, which is to prevent the display or 
execution of short sale orders at prices equal to or below the NBB, the 
Exchange believes that it is appropriate during a crossed market to 
cancel a short sale order that would be re-priced to a Trading Collar 
rather than display the order at that price.
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    \21\ See Rule 440B(b)--Equities.
    \22\ 17 CFR part 242.201.
    \23\ See SEC Division of Trading and Markets: Responses to 
Frequently Asked Questions Concerning Rule 201 of Regulation Show, 
FAQ 6.1, available at: http://www.sec.gov/divisions/marketreg/rule201faq.htm.
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    The Exchange also proposes to amend Rule 70.25(b)(i)--Equities, 
regarding price discretion or ``d-Quotes,'' which states that ``[a] 
Floor broker may set a discretionary price range that specifies the 
prices at which the Floor broker is willing to trade.'' Specifically, 
the Exchange proposes to amend this Rule to provide that d-Quotes are 
subject to the Trading Collar and/or the Price Bands and, thus, 
pursuant to the amended rule, Floor Brokers may use discretion to 
initiate or participate in a trade with interest capable of trading at 
a price within the discretionary price range ``unless the interest 
reaches a Trading Collar or Price Band, whichever is reached first.'' 
\24\ The Exchange believes it is appropriate to similarly afford 
Trading Collar price protection to d-Quotes to prevent the execution of 
orders with discretionary price instructions at prices outside the 
prevailing market price from causing significant price dislocation in 
the market.\25\
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    \24\ See proposed Rule 70.25(b)(i).
    \25\ The Trading Collar applies to d-Quotes in the same manner 
as other order types. See supra n. 15 (Trading Collars apply when 
discretionary pricing instructions are triggered, but do not apply 
to openings, re-openings, or closing trades).
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    The Exchange also proposes to amend Rule 512--Equities to state 
that Trading Collars would apply to UTP Securities.\26\ Although LRPs 
do not apply to UTP Securities, the Exchange believes it is appropriate 
to afford these securities Trading Collar protection because 
application of the Trading Collar is a straightforward and objective 
process that does not raise the same issue as was at issue for UTP 
Securities, i.e., identifying appropriate LRP values for actively-
traded symbols that have low volume on the Exchange.
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    \26\ Current Rule 512--Equities states that LRPs will not apply 
to UTP Securities. See Information Memo 10-34 (July 12, 2010) 
(explaining that the Nasdaq Securities newly-listed on the Exchange 
would ``be more thinly traded on the Exchange, with lower volume and 
less liquidity than its listed securities, and that prices for 
Nasdaq Securities will therefore be more volatile'' and thus ``in 
order to avoid triggering too many `slow' trading situations, the 
Exchange removed the application of LRP parameters for trading 
Nasdaq Securities.''). In 2014, the Exchange expanded the UTP 
Program beyond Nasdaq securities. See Securities Exchange Act 
Release No. 71952 (April 16, 2014) 79 FR 22558 (April 22, 2014) (SR-
NYSEMKT-2014-32).
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Proposed Elimination of LRPs and Gap Quote Policy
    As noted above, by rule, the Exchange has already discontinued the 
use of LRPs for any security subject to the Plan. However, LRPs 
continue to be available for rights and warrants, which are not subject 
to the Plan. The Exchange believes that with the introduction of 
Trading Collars it will have in place appropriate price protections for 
rights and warrants and the Exchange will no longer need LRPs for those 
securities. Accordingly, the Exchange proposes to complete the 
Exchange's discontinuation of LRPs in their entirety by deleting 
references to LRPs in the following Equities Rules: 60, 79A, 104, 128, 
501, 508, 512, and 1000.
    For similar reasons, the Exchange believes it appropriate to 
discontinue the Gap Quote Policy. Accordingly, the Exchange proposes to 
eliminate its Gap Quote Policy in its entirety and to delete references 
thereto in the following Equities Rules: 60, 79A, 104, 501, 508, and 
1000.
    Relatedly, the Exchange also proposes to amend Rule 1000(e) 
(Executions at and Outside the Exchange Best Bid or Offer) to add 
references to Trading Collars and/or Price Bands, in certain cases to 
replace deleted references to LRPs. The Exchange believes these 
proposed changes will add transparency and clarity to the Exchange's 
rules.
Other Proposed Amendments
    In connection with the addition of the Trading Collar, the Exchange 
also proposes to amend the definition of market order, in Rule 13--
Equities, to state that if a market order to sell has exhausted all 
eligible buy interest, any unfilled balance of the market order to sell 
will be cancelled. The Exchange believes that this is appropriate 
because it assures that a market order to sell will not be held at a 
price that it is not executable, i.e., $0.00.
    Finally, unrelated to issues raised in present filing, the Exchange 
is also proposing technical, non-substantive edits to delete from the 
Exchange rules the outdated/obsolete references to securities operating 
in ``Non-Firm Mode,'' including in Rule 60(c)(ii)(A) and Rule 
1000(a)(i), or the block template, referred to in Rule 60(ii)(B), which 
is the ``manual reporting of a block-sized transaction.'' The Exchange 
also proposes to delete the reference to ``S-quotes'' in Rule 60(d), 
1000(a) and 1000(e)(iii)(A), as DMM interest is no longer solely 
referred to in this manner and the Exchange believes the proposed 
amendment will remove this outmoded and narrow reference. The Exchange 
also proposes to amend the last sentence of Rule 60(d), regarding 
``[a]utoquoting of highest bid/lowest offer,'' to account for the 
impact of the Trading Collars.\27\ In addition, the Exchange proposes 
to amend Rule 1000(e)(iii)(A)(4) to replace an incorrect reference to 
NYSE with a reference to the Exchange. The Exchange proposes to delete 
Rule 79A.15(ii)(C)(6), which is an outmoded reference to bonds that 
does not conform to how bonds currently operate on the Exchange or the 
NYSE, and to renumber the remaining subparts of this rule accordingly. 
Finally, the Exchange proposes to delete an erroneous reference in Rule 
1000(e)(iv) to paragraph (d)(iii), as there is no such paragraph in the 
Rule.
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    \27\ As proposed, the final sentence of Rule 60(d) would state 
the following: ``When the Exchange's highest bid or lowest offer has 
been executed or cancelled in its entirety, the Exchange will 
autoquote a new bid or offer reflecting the total size of 
displayable orders at the next highest (in the case of a bid) or 
lowest (in the case of an offer) price.''
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Implementation
    The Exchange will announce the implementation date of the proposed 
rule change by Trader Update.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \28\ that an Exchange have rules that 
are designed to promote the just and equitable principles of trade, 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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    \28\ 15 U.S.C. 78f(b)(5).
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    As an initial matter, the Exchange notes that the proposed Trading 
Collar, which is designed to designed to promote the just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, is similar to 
the price protection features offered on other markets, including NYSE 
Arca Equities.\29\ As noted above, the specified

[[Page 3277]]

percentages relating to the Trading Collar are based on the current 
numerical guidelines for determining whether a clearly erroneous 
execution has occurred and are the same as the approved specified 
percentages applicable to similar trading collar functionality on NYSE 
Arca Equities.\30\
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    \29\ See e.g., NYSE Arca Equities Rule 7.31(a)(2). See also BATS 
Exchange, Inc. (``BATS) Rule 11.9(a)(2); BATS Y-Exchange, Inc. 
(``BATS-Y'') Rule 11.9(a)(2); EDGA Exchange, Inc. (``EDGA'') Rule 
11.8(a)(7); EDGX Exchange, Inc. (``EDGX'') Rule 11.8(a)(7); Nasdaq 
Stock Market LLC (``Nasdaq'') Rule 4751(f)(13).
    \30\ See supra nn. 17-18.
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    Moreover, the Exchange believes that the proposed Trading Collar 
assists with the maintenance of fair and orderly markets by helping to 
mitigate the risks associated with orders sweeping through multiple 
price points, thereby resulting in executions that are potentially 
erroneous, which, in turn, protects investors from potentially 
receiving executions away from the prevailing prices at any given time. 
Specifically, the Exchange believes the Trading Collars will remove 
impediments to and perfect the mechanisms of a free and open market 
because the Trading Collars will operate in tandem with the Plan and 
will only execute/route incoming market orders or marketable limit 
orders priced within the Trading Collars or within the Upper (Lower) 
Band set forth in the Plan, if the latter is more conservative. The 
Exchange believes this mechanism will mitigate the risk of potentially 
erroneous executions, which protects investors and the public interest.
    The Exchange also believes its use of the BB/BO when the NBBO is 
crossed assists with the maintenance of fair and orderly markets as a 
crossed NBBO is generally indicative of an erroneously priced bid and/
or offer, and should not be considered reliable for the purposes of 
determining the specified percentages for a Trading Collar. The 
Exchange believes that this practice will help ensure that market 
participants obtain timely executions of their market orders and 
marketable limit orders while still being afforded the price protection 
benefit of Trading Collar functionality, which protects investors and 
the public interest.
    Similarly, the Exchange believes that affording Trading Collar 
price protection to d-Quotes as well as to UTP Securities would remove 
impediments to and perfect the mechanism of a free and open market as 
the Trading Collar would prevent the execution of d-Quotes and UTP 
Securities that are priced far away from the prevailing market price 
from causing significant price dislocation in the market, which, in 
turn, benefits investors and is in the public interest.
    The Exchange believes that the technical, non-substantive proposed 
amendments and/or deletions related to the Trading Collar in rules 
other than Rule 1000--Equities, as described above, 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. Specifically, the Exchange believes that the proposed changes 
add transparency and clarity to the Exchange's rules and will enhance 
the understanding of market participants by reducing potential 
confusion that the obsolete references would otherwise create.
    Finally, the Exchange previously committed to discontinue the 
Exchange-specific volatility mechanisms; thus, the elimination of LRPs 
and the Exchange's Gap Quote Policy are expected changes.\31\ Moreover, 
the implementation of the Plan, together with the proposed Trading 
Collars eliminates the necessity for these Exchange-specific volatility 
mechanisms, as the Exchange will have in place appropriate price 
protections for all securities traded on the Exchange, including for 
rights and warrants.
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    \31\ See supra nn. 4, 7-9.
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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 not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes the 
adding of Trading Collar protection will provide market participants 
with additional protection from anomalous executions. Thus, the 
Exchange does not believe the proposal creates any significant impact 
on competition.

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 \32\ and Rule 19b-4(f)(6) thereunder.\33\ 
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 \34\ and Rule 19b-
4(f)(6)(iii) thereunder.\35\
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    \32\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \33\ 17 CFR 240.19b-4(f)(6).
    \34\ 15 U.S.C. 78s(b)(3)(A).
    \35\ 17 CFR 240.19b-4(f)(6). 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) \36\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\37\ the Commission 
may 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. The Exchange 
asserts that the rule change proposed herein would meet the 
Commission's previously stated expectation that the Exchange 
discontinue its LRPs.\38\ Furthermore, the Exchange states its belief 
that meeting this expectation as soon as the technology becomes 
available, which the Exchange represents would be before the end of the 
operative-delay period, is consistent with the protection of investors 
and the public interest because it would implement the discontinuation 
of its LRPs as expeditiously as possible. Finally, the Exchange asserts 
that the proposed rule change would also add market collars that are 
similar to existing mechanisms on other markets and would reduce the 
potential of a clearly erroneous execution occurring on the Exchange. 
The Exchange, therefore, concludes that waiver of the operative delay 
so that it can market collars as soon as the technology is available is 
not only consistent with the protection of investors and the public 
interest, but would also benefit investors and the public interest. 
Because the proposed rule change would eliminate the Exchange's LRPs, 
consistent with the adoption of the Plan, and because the proposed rule 
change is designed to prevent clearly erroneous order executions, the 
Commission

[[Page 3278]]

believes that waiver of the operative delay is consistent with investor 
protection and the public interest. Accordingly, the Commission hereby 
waives the 30-day operative delay and designates the proposal operative 
upon filing.\39\
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    \36\ 17 CFR 240.19b-4(f)(6).
    \37\ 17 CFR 240.19b-4(f)(6)(iii).
    \38\ See supra n. 4.
    \39\ 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 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 to 
determine whether the proposed rule change 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 [email protected]. Please include 
File Number SR-NYSEMKT-2015-02 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-2015-02. 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 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal offices 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-2015-02, and should 
be submitted on or before February 12, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
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    \40\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-00967 Filed 1-21-15; 8:45 am]
BILLING CODE 8011-01-P