[Federal Register Volume 81, Number 13 (Thursday, January 21, 2016)]
[Notices]
[Pages 3530-3532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01057]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76907; File No. SR-NYSEMKT-2016-07]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 
132.30(9)--Equities To Conform the Exchange's Rules to Industry-Wide 
Standards for Recording the Capacity in Which a Member Organization 
Executes a Transaction

January 14, 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 January 11, 2016, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 132.30(9)--Equities to conform 
the Exchange's rules to industry-wide standards for recording the 
capacity in which a member organization executes a transaction. 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 Supplementary Material .30 of Rule 
132--Equities (``Rule 132'') to conform the Exchange's rules to 
industry-wide standards for recording the capacity in which a member 
organization executes a transaction. To effect this change, the 
Exchange proposes to eliminate the current requirement to identify the 
account for which an order was executed and require instead that 
clearing members and member organizations submit account type 
indicators (``ATI'') reflecting the capacity in which the member 
organization executed a transaction (e.g., agency, principal or 
riskless principal). The Exchange believes that the proposed rule 
change would align the Exchange's rules with industry-wide conventions 
focusing on the capacity in which a broker-dealer acts in effecting a 
transaction and, by eliminating the complex set of ATIs developed over 
the years, significantly simplify order entry on the Exchange.
Background
    Rule 132 requires clearing member organizations submitting 
transactions to comparison to include the audit trail data elements set 
forth in Supplementary Material .30. Rule 132.30(9) requires that all 
orders submitted to the Exchange include specified trade data elements, 
including ``[w]hether the account for which the order was executed was 
that of a member or member organization or of a non-member or non-
member organization.'' The Exchange's affiliate, New York Stock 
Exchange LLC (``NYSE''), which has the same rule,\4\ has periodically 
published guidance regarding the ATIs that can be used to satisfy this 
requirement.\5\ ATIs are included as part of the audit trail data 
reported for each transaction on the Exchange. The Exchange also uses 
ATIs to capture program trade information \6\ for those portions of the 
program trades that are submitted to and executed on the Exchange. In 
connection with this proposed rule change, the Exchange proposes to 
retire the unique ATIs used to capture program trading information.\7\
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    \4\ See NYSE Rule 132.30(9). The NYSE has filed to amend its 
rule relating to ATIs to conform to industry-wide standards for 
recording the capacity in which a member organization executes a 
transaction. See SR-NYSE-2016-07 (``NYSE ATI Filing'').
    \5\ See, e.g., Information Memos 85-37 (Nov. 12, 1985); 88-29 
(Oct. 19, 1988); 92-34 (Nov. 13, 1992); 96-36 (Dec. 5, 1996); 02-59 
(Dec. 17, 2002); 09-31 (June 24, 2009); 12-25 (October 9, 2012); 14-
04 (January 30, 2014). The current list contains 24 distinct ATIs.
    \6\ ``Program Trading'' means either (1) index arbitrage, or (2) 
any trading strategy involving the related purchase or sale of a 
basket or group of 15 or more stocks. See Rule 7410(m)--Equities.
    \7\ See NYSE ATI Filing, supra note 3. Prior to 2009, NYSE 
member organizations reported program trading activity to the NYSE 
via the Daily Program Trading Report (``DPTR''). Following 
decommissioning of the DPTR requirement in July 2009, the NYSE has 
used ATI data to report program trading statistics to the Securities 
and Exchange Commission (``Commission'') and the public. See 
Securities Exchange Act Release No. 60179 (June 26, 2009), 74 FR 
31786, 31786-87 (July 2, 2009) (SR-NYSE-2009-61). Unlike the NYSE, 
the Exchange does not have a requirement to provide weekly 
statistics regarding program trading activity to either the 
Commission or the public. In addition, the Exchange did not adopt 
the DPTR requirement and uses ATIs to capture program trade 
information.
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Proposed Rule Change
    The Exchange proposes to amend the current requirement in 
subsection (9) of Rule 132.30 that clearing member organizations 
identify whether the account for which an order was executed was that 
of a member or member organization or of a non-member or non-member 
organization. The current requirement can be satisfied by entering the 
appropriate ATI from a list of ATIs that have evolved over the past 30 
years.\8\
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    \8\ See note 5, supra.
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    In place of this cumbersome process, the Exchange proposes to 
require member organizations to identify the capacity in which the 
member organization executed the transaction as follows: agency, 
principal or riskless principal.\9\ The ``principal'' category would 
include proprietary trades by a member on the trading Floor relating to 
the member's error account pursuant to Rule 134--Equities.\10\
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    \9\ In general, the term ``capacity'' refers to whether a 
broker-dealer acts as agent, i.e., directly on behalf of a customer, 
or whether the broker-dealer acts as principal, i.e., for its own 
account, in a transaction. A riskless principal transaction is one 
where a broker-dealer receives a customer order and then immediately 
executes an identical order in the marketplace, while taking on the 
role of principal, in order to fill the customer order pursuant to 
Rule 5320--Equities.
    \10\ Rule 134--Equities requires a member or member organization 
who acquires or assumes a security position resulting from an error 
transaction to clear such error transaction in the member's or 
member organization's error account, or in the error account 
established for a group of members. Rule 123.22--Equities further 
requires members to enter orders executed to offset transactions 
made in error into an electronic system and sends a copy of such 
order to an electronic system on the Floor within 60 seconds of 
execution. See also Rule 123(e)--Equities (defining system entry). 
This type of proprietary trade is currently identified by the ``Q'' 
account type indicator, which would be retained to identify these 
trading Floor-based executions.

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    By requiring member organizations to identify the capacity in which 
a broker-dealer enters an order, the Exchange would be harmonizing its 
order entry requirements with those of other national securities 
exchanges and the NYSE.\11\ The proposed change would also simplify the 
order entry process at the Exchange and eliminate the requirement for 
member organizations to use order entry requirements unique to the 
Exchange, thereby reducing complexity in the marketplace. This proposed 
amendment would not alter a member organization's obligation to meet 
order audit trail system requirements, as set forth in the Rule 7400 
Series--Equities.
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    \11\ See, e.g., BATS Exchange, Inc. (``BATS'') Rule 11.21; BATS 
Y-Exchange, Inc. (``BATS-Y'') Rule 11.21; EDGA Exchange, Inc. 
(``EDGA'') Rule 11.5; EDGX Exchange, Inc. Rule 11.5; and NASDAQ 
Stock Market LLC (``NASDAQ'') Rule 4611(a)(6).
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    The Exchange will publish an Information Memo advising member 
organizations of the proposed change that will provide guidance of 
which ATIs should be submitted in connection with agency, principal, or 
riskless principal capacity.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\13\ in particular, because it 
is designed to promote just and equitable principles of trade and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. The Exchange believes that the 
proposed rule change would remove impediments to and perfect the 
mechanism of a free and open market and national market system because 
it would provide greater harmonization between order entry on the 
Exchange and other marketplaces, resulting in greater uniformity and 
more efficient order entry to enable member organizations to use the 
same order-market conventions across all equities markets. As such, the 
proposed rule change would foster cooperation and coordination with 
persons engaged in facilitating transactions in securities and would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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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 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 it is designed 
to provide greater harmonization between Exchange and other markets in 
the marking of orders, resulting in less burdensome and more efficient 
order entry.

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\14\ and Rule 19b-4(f)(6) thereunder.\15\ 
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.\16\
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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 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)\17\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ 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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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 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)\19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 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-2016-07 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-2016-07. 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-2016-07 and should 
be

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submitted on or before February 11, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01057 Filed 1-20-16; 8:45 am]
 BILLING CODE 8011-01-P