[Federal Register Volume 80, Number 181 (Friday, September 18, 2015)]
[Notices]
[Pages 56515-56517]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23415]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75917; File No. 4-631]


Joint Industry Plan; Notice of Filing of the Ninth Amendment to 
the National Market System Plan To Address Extraordinary Market 
Volatility by BATS Exchange, Inc., BATS Y-Exchange, Inc., Chicago Board 
Options Exchange, Inc., Chicago Stock Exchange, Inc., EDGA Exchange, 
Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, 
Inc., NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The Nasdaq Stock Market 
LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE 
MKT LLC, and NYSE Arca, Inc.

September 14, 2015.

I. Introduction

    On July 31, 2015, the New York Stock Exchange LLC (``NYSE''), on 
behalf of the following parties to the National Market System Plan to 
Address Extraordinary Market Volatility (the ``Plan''): \1\ BATS 
Exchange, Inc., BATS Y-Exchange, Inc., Chicago Board Options Exchange, 
Incorporated (``CBOE''), Chicago Stock Exchange, Inc., EDGA Exchange, 
Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, 
Inc., NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, the Nasdaq Stock Market 
LLC, and National Stock Exchange, Inc., NYSE MKT LLC, and NYSE Arca, 
Inc. (collectively with the NYSE, the ``Participants''), filed with the 
Securities and Exchange Commission (``Commission'') pursuant to Section 
11A of the Securities Exchange Act of 1934 (``Act'') \2\ and Rule 608 
thereunder,\3\ a proposal to amend the Plan.\4\ The proposal reflects 
changes unanimously approved by the Participants. The Amendment to the 
Plan proposes to extend the pilot period of the Plan from October 23, 
2015 to April 22, 2016. A copy of the Plan, as proposed to be amended 
is attached as Exhibit A hereto. The Commission is publishing this 
notice to solicit comments from interested persons on the Amendment to 
the Plan.\5\
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    \1\ On May 31, 2012, the Commission approved the Plan, as 
modified by Amendment No. 1. See Securities Exchange Act Release No. 
67091, 77 FR 33498 (Jun. 6, 2012) (File No. 4-631). On February 26, 
2013, the Commission published for immediate effectiveness the 
Second Amendment to the Plan. See Securities Exchange Act Release 
No. 68953 (Feb. 20, 2013), 78 FR 13113. On April 3, 2013, the 
Commission approved the Third Amendment to the Plan. See Securities 
Exchange Act Release No. 69287, 78 FR 21483 (Apr. 10, 2013). On 
September 3, 2013, the Commission published for immediate 
effectiveness the Fourth Amendment to the Plan. See Securities 
Exchange Act Release No. 70273 (Aug. 27, 2013), 78 FR 54321 (Fourth 
Amendment). On September 26, 2013, the Commission approved the Fifth 
Amendment to the Plan. See Securities Exchange Act Release No. 
70530, 78 FR 60937 (Oct. 2, 2013). On January 13, 2014, the 
Commission published for immediate effective the Sixth Amendment to 
the Plan. See Securities Exchange Act Release No. 71247 (Jan. 7, 
2014), 79 FR 2204 (Sixth Amendment). On April 3, 2014, the 
Commission approved the Seventh Amendment to the Plan. See 
Securities Exchange Act Release No. 71851, 79 FR 19687 (Apr. 9, 
2014). On February 19, 2015, the Commission approved the Eight 
Amendment to the Plan. See Securities Exchange Act Release No. 
74323, 80 FR 10169 (Feb. 25, 2015).
    \2\ 15 U.S.C. 78k-1.
    \3\ 17 CFR 242.608.
    \4\ See Letter from Elizabeth King, General Counsel, NYSE, to 
Brent Fields, Secretary, Commission, dated July 31, 2015 
(``Transmittal Letter'').
    \5\ 17 CFR 242.608.
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II. Description of the Plan

    Set forth in this Section II is the statement of the purpose and 
summary of the Amendment, along with the information required by Rule 
608(a)(4) and (5) under the Exchange Act,\6\ prepared and submitted by 
the Participants to the Commission.\7\
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    \6\ See 17 CFR 242.608(a)(4) and (a)(5).
    \7\ See Transmittal Letter, supra note 3.
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A. Statement of Purpose and Summary of the Plan Amendment

    The Participants filed the Plan on April 5, 2011, to create a 
market-wide limit up-limit down mechanism intended to address 
extraordinary market volatility in NMS Stocks, as defined in Rule 
600(b)(47) of Regulation NMS under the Exchange Act. The Plan sets 
forth procedures that provide for market-wide limit up-limit down 
requirements that would prevent trades in individual NMS Stocks from 
occurring outside of the specified price bands. These limit up-limit 
down requirements are coupled with Trading Pauses, as defined in 
Section I(Y) of the Plan, to accommodate more fundamental price moves. 
In particular, the Participants adopted this Plan to address the type 
of sudden price movements that the market experienced on the afternoon 
of May 6, 2010.
    As set forth in more detail in the Plan, all trading centers in NMS 
Stocks, including both those operated by Participants and those 
operated by members of Participants, shall establish, maintain, and 
enforce written policies and procedures that are reasonably designed to 
comply with the limit up-limit down requirements specified in the Plan. 
More specifically, the single plan processor responsible for 
consolidation of information for an NMS Stock pursuant to Rule 603(b) 
of Regulation NMS under the Exchange Act will be responsible for 
calculating

[[Page 56516]]

and disseminating a lower price band and upper price band, as provided 
for in Section V of the Plan. Section VI of the Plan sets forth the 
limit up-limit down requirements of the Plan, and in particular, that 
all trading centers in NMS Stocks, including both those operated by 
Participants and those operated by members of Participants, shall 
establish, maintain, and enforce written policies and procedures that 
are reasonably designed to prevent trades at prices that are below the 
lower price band or above the upper price band for an NMS Stock, 
consistent with the Plan.
    The Plan was initially approved for a one-year pilot period, which 
began on April 8, 2013.\8\ Accordingly, the pilot period was scheduled 
to end on April 8, 2014. As initially contemplated, the Plan would have 
been fully implemented across all NMS Stocks within six months of 
initial Plan operations, which meant there would have been full 
implementation of the Plan for six months before the end of the pilot 
period. However, pursuant to the fourth amendment to the Plan,\9\ the 
Participants modified the implementation schedule of Phase II of the 
Plan to extend the time period as to when the Plan would fully apply to 
all NMS Stocks. Accordingly, the Plan was not implemented across all 
NMS Stocks until December 8, 2013. Pursuant to the sixth amendment to 
the Plan,\10\ which further modified the implementation schedule of 
Phase II of the Plan, the date for full implementation of the Plan was 
moved to February 24, 2014.
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    \8\ See Section VIII of the Plan.
    \9\ See Fourth Amendment, supra note 1.
    \10\ See Sixth Amendment, supra note 1.
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    In addition, pursuant to the seventh amendment to the Plan,\11\ the 
pilot period was extended from April 8, 2014 to February 20, 2015, and 
submission of the assessment of the Plan operations was accordingly 
extended to September 30, 2014. Without such extension, the Plan would 
have been in effect for the full trading day for less than two months 
before the end of the pilot period. The Participants believed that this 
short period of full implementation of the Plan would have provided 
insufficient time for both the Participants and the Commission to 
assess the impact of the Plan and determine whether the Plan should be 
modified prior to approval on a permanent basis.
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    \11\ See Securities Exchange Act Release No. 71851 (April 3, 
2014), 79 FR 19687 (April 9, 2014).
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    On September 29, 2014, the Participants submitted a Participant 
Impact Assessment,\12\ which provided the Commission with the 
Participants' initial observations in each area required to be 
addressed under Appendix B to the Plan. On May 28, 2015, the 
Participants submitted a Supplemental Joint Assessment, in which the 
Participants recommended that the Plan be adopted as permanent with 
certain modifications, and discussed the areas of analysis set forth in 
Appendix B to the Plan.\13\ These areas are intended to capture the key 
measures necessary to assess the impact of the Plan and to support 
recommendations relating to the calibration of the Percentage 
Parameters to help ensure that the stated objectives of the Plan are 
achieved--particularly: Liquidity when approaching price bands; clearly 
erroneous trades; the appropriateness of the percentage parameters; the 
attributes of limit states; the impact of limit states on the options 
markets; whether process adjustments are needed when entering/exiting a 
limit state; and the length of trading pauses.
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    \12\ See Joint SROs letter to Brent J. Fields, Secretary, SEC, 
dated September 29, 2014 (``Participant Impact Assessment'').
    \13\ See Letter from Christopher B. Stone, Vice President, 
FINRA, to Brent J. Fields, Secretary, SEC, dated May 28, 2015.
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    The Participants propose to amend Section VIII(C) of the Plan to 
extend the pilot period through April 22, 2016, to allow the 
Participants to conduct, and the Commission to consider, further 
analysis of data in support of the recommendations made in the 
Supplemental Joint Assessment, including around the attributes of limit 
states; the length of trading pauses; the use of an alternative 
reference price at the open of trading; and the alignment of the 
percentage parameters with the Clearly Erroneous Execution (CEE) 
thresholds (with the goal of largely eliminating the Participants' CEE 
authority). Thus, an extension of the pilot period would allow the 
Participants to finalize and file with the Commission any proposed 
amendments to the Plan resulting from such recommendations and further 
analysis. The Participants believe that extending the pilot period is 
appropriate in the public interest, for the protection of investors and 
the maintenance of a fair and orderly market because it provides 
Participants with additional time to perform further analysis on the 
appropriateness of current Plan components and parameters, and to 
finalize and propose recommended modifications to the Plan.
    The Participants believe that the proposed amendment is consistent 
with Section 11A of the Securities Exchange Act of 1934 and Rule 608, 
of Regulation NMS thereunder,\14\ which authorizes the Participants to 
act jointly in preparing, filing and implementing national market 
system plans. The Participants further believe that extending the pilot 
period will be beneficial in that it allows ``the public, the 
Participants, and the Commission to assess the operation of the Plan 
and whether the Plan should be modified prior to approval on a 
permanent basis.'' \15\
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    \14\ 17 CFR 242.608.
    \15\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498, 33508 (June 6, 2012).
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    The Participants note that the amended version of the Plan also 
includes the revised Appendix A--Schedule 1, which was updated for 
trading beginning July 1, 2015. As set forth in Appendix A--Percentage 
Parameters, the Primary Listing Exchange updates Schedule 1 to Appendix 
A semi-annually based on the fiscal year, and such updates do not 
require a Plan amendment.
1. Chicago Board Options Exchange, Incorporated Withdrawal
    On March 30, 2015, CBOE provided written notice to Participants of 
CBOE's intent to withdraw from the Plan. Notice of withdrawal was made 
pursuant to Section IX of the Plan.
    CBOE became a Participant due to the operation of the CBOE Stock 
Exchange, LLC (``CBSX''), a facility of the CBOE. CBSX engaged in NMS 
stock transactions. The last day of trading on CBSX was April 30, 2014. 
Because CBOE no longer operates a facility engaged in NMS stock 
transactions, CBOE would have no additional NMS stock data to provide 
nor any reason to avail itself of any further right under the Plan. 
Accordingly, CBOE proposes to be removed from the Plan.

B. Governing or Constituent Documents

    The governing documents of the Processor, as defined in Section 
I(P) of the Plan, will not be affected by the Plan, but once the Plan 
is implemented, the Processor's obligations will change, as set forth 
in detail in the Plan.

C. Implementation of Plan

    The initial date of the Plan operations was April 8, 2013.

D. Development and Implementation Phases

    The Plan was initially implemented as a one-year pilot program in 
two Phases, consistent with Section VIII of the Plan: Phase I of Plan

[[Page 56517]]

implementation began on April 8, 2013 and was completed on May 3, 2013. 
Implementation of Phase II of the Plan began on August 5, 2013 and was 
completed on February 24, 2014. Pursuant to this proposed amendment, 
the Participants propose to extend the pilot period so that it is set 
to end April 22, 2016.

E. Analysis of Impact on Competition

    The proposed amendment to the Plan does not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Exchange Act. The Participants do not believe that the 
proposed Plan introduces terms that are unreasonably discriminatory for 
the purposes of Section 11A(c)(1)(D) of the Exchange Act.

F. Written Understanding or Agreements Relating to Interpretation of, 
or Participation in the Plan

    The Participants have no written understandings or agreements 
relating to interpretation of the Plan. Section II(C) of the Plan sets 
forth how any entity registered as a national securities exchange or 
national securities association may become a Participant.

G. Approval of Amendment of the Plan

    Each of the Plan's Participants has executed a written amended 
Plan.

H. Terms and Conditions of Access

    Section II(C) of the Plan provides that any entity registered as a 
national securities exchange or national securities association under 
the Exchange Act may become a Participant by: (1) Becoming a 
participant in the applicable Market Data Plans, as defined in Section 
I(F) of the Plan; (2) executing a copy of the Plan, as then in effect; 
(3) providing each then-current Participant with a copy of such 
executed Plan; and (4) effecting an amendment to the Plan as specified 
in Section III(B) of the Plan.

I. Method of Determination and Imposition, and Amount of, Fees and 
Charges

    Not applicable.

J. Method and Frequency of Processor Evaluation

    Not applicable.

K. Dispute Resolution

    Section III(C) of the Plan provides for each Participant to 
designate an individual to represent the Participant as a member of an 
Operating Committee. No later than the initial date of the Plan, the 
Operating Committee shall designate one member of the Operating 
Committee to act as the Chair of the Operating Committee. Any 
recommendation for an amendment to the Plan from the Operating 
Committee that receives an affirmative vote of at least two-thirds of 
the Participants, but is less than unanimous, shall be submitted to the 
Commission as a request for an amendment to the Plan initiated by the 
Commission under Rule 608.
    On July 30, 2015, the Operating Committee, duly constituted and 
chaired by Ms. Karen Lorentz of the NYSE, on behalf of Committee 
Chairman Mr. Christopher B. Stone of FINRA, met and voted unanimously 
to amend the Plan as set forth herein in accordance with Section III(C) 
of the Plan. The Plan Advisory Committee was notified in connection 
with the Ninth Amendment and was in favor.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed 
Ninth Amendment 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 4-631 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 4-631. 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 Plan that are filed with the Commission, 
and all written communications relating to the Plan 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 
Participants' principal offices. 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 4-631 and should be submitted on or before October 9, 2015.

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2015-23415 Filed 9-17-15; 8:45 am]
BILLING CODE 8011-01-P