[Federal Register Volume 80, Number 72 (Wednesday, April 15, 2015)]
[Notices]
[Pages 20274-20276]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-08549]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74695; File No. SR-NYSEMKT-2015-28]


Self-Regulatory Organizations; NYSE MKT, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Extend the Pilot 
Period Applicable to the Customer Best Execution Auction per Rule 971.1 
NY, Until July 17, 2015

April 9, 2015.
    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 April 7, 2015, 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

[[Page 20275]]

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 extend the pilot period applicable to the 
Customer Best Execution Auction (``CUBE''), per Rule 971.1NY, until 
July 17, 2015. 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 the 
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 extend the pilot period applicable to 
certain aspects of the Customer Best Execution--or CUBE--Auction, which 
is currently set to expire on April 24, 2015, until July 17, 2015.\4\
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    \4\ The Exchange notes that the proposed extension would align 
the expiration of the pilot period with that of other competing 
options exchanges that offer electronic price improvement auctions 
similar to the CUBE. See, e.g., ISE Rule 723 Supplementary Material 
.03 (pilot period for price improvement mechanism extended until 
Friday, July 17, 2015); PHLX Rule 1080(n)(vii); (pilot period for 
price improvement mechanism extended until Saturday, July 18, 2015); 
CBOE Rule 6.74A Interpretation and Policies .03 (same); BOX IM-7150-
1 (same). Because July 18, 2015 is a Saturday and the Exchange is 
not open, the Exchange proposes to extend the pilot until Friday, 
July 17, 2015.
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Background
    Rule 971.1NY sets forth an electronic crossing mechanism for 
single-leg orders with a price improvement auction on the Exchange, 
referred to as the CUBE Auction.\5\ The CUBE Auction, which was 
approved in April 2014, is designed to provide price improvement for 
paired orders of any size.\6\ Two aspects of the CUBE were approved for 
a one-year pilot period--Rule 971.1NY(b)(1)(B), which establishes the 
permissible range of executions for CUBE Auctions for fewer than 50 
contracts; and Rule 971.1NY(b)(8), which establishes that the minimum 
size for a CUBE Auction is one contract (together, the ``CUBE Pilot'').
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    \5\ See generally Rule 971.1NY (Electronic Cross Transactions).
    \6\ See Securities Exchange Act Release No. 72025 (April 25, 
2014), 79 FR 24779 (May 1, 2014) (NYSEMKT-2014-17) (the ``CUBE 
Approval Order'').
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    An ATP Holder may initiate a CUBE Auction by electronically 
submitting for execution a limit order it represents as agent on behalf 
of a public customer, broker dealer, or any other entity (``CUBE 
Order'') against principal interest or against any other order it 
represents as agent, provided the initiating ATP Holder complies with 
Rule 971.1NY.\7\ Rule 971.1NY(b)(1) sets forth the permissible range of 
executions for a CUBE Order.\8\ Pursuant to the CUBE Pilot, a CUBE 
Order for fewer than 50 contracts is subject to tighter ranges of 
execution than larger CUBE Orders to maximize price improvement.\9\ 
Specifically, if the CUBE Order is for fewer than 50 contracts, the 
range of permissible execution will be equal to or better than the 
National Best Bid/Offer (``NBBO''), provided that such price must be at 
least one cent better than any displayed interest in the Exchange's 
Consolidated Book.\10\
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    \7\ In addition, CUBE provides for the automatic execution, 
under certain conditions, of a crossing transaction where there is a 
public customer order in the same options series on each side.
    \8\ Subject to specified exceptions, a CUBE Order to buy (sell) 
may execute at prices equal to or between the initiating price as 
the upper (lower) bound and the National Best Bid (``NBB'') 
(National Best Offer (``NBO'')) as the lower (upper) bound. See Rule 
971.1NY(b).
    \9\ See Rule 971.1NY(b)(1)(B). Rule 971.1NY(b)(8), also subject 
to the pilot period, provides that the minimum size for a CUBE 
Auction is one contract. See Rule (b)(8).
    \10\ See Rule 971.1NY(b)(1)(B).
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    The CUBE Pilot was initially approved for a one-year pilot.\11\ 
Pursuant to Commentary .01 to Rule 971.1NY, the CUBE Pilot would, if 
not amended, end on April 24, 2015.\12\ In connection with the CUBE 
Pilot, the Exchange agreed to submit certain data to provide supporting 
evidence that, among other things, there is meaningful competition for 
all size orders and that there is an active and liquid market 
functioning on the Exchange outside of the CUBE Auction.\13\
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    \11\ See CUBE Approval Order, supra, n. 6.
    \12\ See also Commentary .01 to Rule 971.1NY (establishing one-
year pilot period for Rules 971.1NY(b)(1)(B) and 971.1NY(b)(8)).
    \13\ See CUBE Approval Order, supra, n. 6 at 79 FR 24779, at 
24785-86, fn. 94-95. See also Commentary .01 to Rule 971.1NY.
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Proposal To Extend the Operation of the CUBE Pilot
    The Exchange implemented the CUBE Auction to provide an electronic 
crossing mechanism for single-leg orders with a price improvement 
auction. The CUBE Pilot was designed to create tighter markets and 
ensure that each order receives the best possible price. The Exchange 
believes that the CUBE Pilot attracts order flow and promotes 
competition and price improvement opportunities for CUBE Orders of 
fewer than 50 contracts. The Exchange believes that extending the pilot 
period is appropriate because it will allow the Exchange and the 
Commission additional time to analyze data regarding the CUBE Pilot 
that the Exchange has committed to provide.\14\ As such, the Exchange 
believes that it is appropriate to extend the current operation of the 
Pilot. Through this filing, the Exchange seeks to amend Commentary .01 
to Rule 971.1NY and extend the current pilot period until July 17, 
2015.\15\ The Exchange notes that it would retain the text of Rules 
971.1NY(b)(1)(B) and 971.1NY(b)(8). In further support of this proposed 
rule change, the Exchange would continue to submit to the Commission 
detailed data from, and analysis of, the CUBE Pilot.
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    \14\ Id.
    \15\ See proposed Commentary .01 to Rule 971.1NY.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \16\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \17\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote 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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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that extending the pilot period is consistent 
with these principles because the CUBE Pilot is reasonably designed to 
create tighter markets and ensure that each order receives the best 
possible price, which benefits investors by increasing competition 
thereby maximizing opportunities for price improvement. The proposed 
extension would allow

[[Page 20276]]

the CUBE Pilot to continue uninterrupted, thereby avoiding any 
potential investor confusion that could result from a temporary 
interruption in the CUBE Pilot. Because the CUBE Pilot is applicable to 
all CUBE Orders for fewer than 50 contracts, and to the requirement 
that the minimum size of the CUBE Auction is one contract, the proposal 
to extend the pilot merely acts to maintain status quo on the Exchange, 
which promotes just and equitable principles of trade and removes 
impediments to, and perfects the mechanism of, a free and open market 
and a national market system. The extension of the pilot period will 
allow the Commission and the Exchange to continue to monitor the CUBE 
Pilot to ascertain whether there is meaningful competition for all size 
orders and whether there is an active and liquid market functioning on 
the Exchange outside of the CUBE Auction.

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 proposed rule change simply 
extends an established pilot program for an additional period and would 
allow for further analysis of the CUBE Pilot. In addition, the proposed 
extension would allow the CUBE Pilot to continue uninterrupted, thereby 
avoiding any potential investor confusion that could result from a 
temporary interruption in the CUBE Pilot. Thus, the proposal would also 
serve to promote regulatory clarity and consistency, thereby reducing 
burdens on the marketplace and facilitating investor protection.

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 \18\ and Rule 19b-4(f)(6) thereunder.\19\ 
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, 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.
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    \18\ 15 U.S.C. 78s(b)(3)(A)(iii). Rule 19b-4(f)(6) requires a 
self-regulatory organization to give the Commission written notice 
of its intent to file 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.
    \19\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \20\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\21\ 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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    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Commission believes that waiver of the operative delay is 
consistent with the protection of investors and the public interest 
because such waiver will allow the pilot program to continue without 
interruption. Therefore, the Commission designates the proposal 
operative upon filing.\22\
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    \22\ 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 under 
Section 19(b)(2)(B) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \23\ 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 [email protected]. Please include 
File Number SR-NYSEMKT-2015-28 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-2015-28. 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 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-2015-28, and should 
be submitted on or before May 6, 2015.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-08549 Filed 4-14-15; 8:45 am]
 BILLING CODE 8011-01-P