[Federal Register Volume 81, Number 101 (Wednesday, May 25, 2016)]
[Notices]
[Pages 33278-33283]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12241]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77860; File No. SR-NYSE-2016-35]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending NYSE Rule 13 and Related Rules Regarding Market Orders

May 19, 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 May 16, 2016, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') 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 NYSE Rule 13 (Orders and Modifiers) 
and related rules regarding Market Orders. 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 13 (Orders and Modifiers) and 
related rules relating to Market Orders. The proposed changes are 
designed to simplify the Exchange's offering of order types by 
harmonizing the behavior of Market Orders with how similar orders 
operate on NYSE Arca Equities, Inc. (``NYSE Arca Equities''), the 
Exchange's affiliated equities marketplace, and by eliminating 
specified combinations of orders and modifiers.\4\
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    \4\ NYSE Arca Equities is a wholly-owned subsidiary of NYSE 
Arca, Inc., which is a national securities exchange.
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Overview
    Currently, Market Orders are defined in Rule 13(a)(1) as 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 Exchange systems. If a Market Order to sell has exhausted all 
eligible buy interest, any unfilled balance of the Market Order to sell 
will be cancelled. Market Orders may include an immediate-or-cancel 
(``IOC'') time-in-force modifier.\5\ In addition, a Market Order may 
include an instruction to either buy ``minus'' or sell ``plus.'' \6\
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    \5\ See Rule 13(b)(3).
    \6\ See Rule 13(f)(A) and (C).
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    The Exchange proposes to simplify how Market Orders would function 
on the Exchange by harmonizing the behavior of Market Orders with how 
they operate on the Pillar trading platform on NYSE Arca Equities and 
by eliminating the ability to combine a Market Order with an IOC, buy 
``minus,'' or sell ``plus'' instruction, which are not available on the 
NYSE Arca Equities trading platform. The Exchange believes that 
eliminating these order type combinations would streamline its rules 
and reduce complexity among its order type offerings.\7\
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    \7\ See, e.g., Mary Jo White, Chair, Securities and Exchange 
Commission, Speech at the Sandler O'Neill & Partners, L.P. Global 
Exchange and Brokerage Conference (June 5, 2014) (available at 
www.sec.gov/News/Speech/Detail/Speech/1370542004312#.U5HI-fmwJiw).
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Proposed Amendments to Market Orders
    To effect the proposed changes to how Market Orders would operate, 
the Exchange proposes to amend Rule 13(a)(1) to provide that a Market 
Order that is eligible for automatic execution would be an unpriced 
order to buy or sell a stated amount of a security that is to be traded 
at the best price obtainable without trading through the NBBO. This 
proposed rule text is based on the first sentence of NYSE Arca Equities 
Rule 7.31P(a)(1), which provides that a Market Order is an unpriced 
order to

[[Page 33279]]

buy or sell a stated amount of a security that is to be traded at the 
best price obtainable without trading through the NBBO.
    The Exchange proposes one difference for the NYSE version of the 
rule, which is to provide that the proposed definition is intended only 
for orders eligible for automatic execution. Rule 1000(a) provides that 
an automatically executing order shall receive an immediate, automatic 
execution against orders reflected in the Exchange published quotation 
and orders in the Exchange book. However, automatic executions are not 
available for securities if the closing price for a security, or if the 
security did not trade, the closing bid price of the security on the 
immediate previous trading day is $10,000 or more (i.e., ``high-priced 
securities'').\8\ Because the proposed new functionality relating to 
Market Orders would not be available for high-priced securities, the 
Exchange proposes to keep the current definition of Market Orders as 
proposed subsection (D) of Rule 13(a)(1) and specify that this 
subsection of the rule is only for Market Orders that are not eligible 
for automatic execution.
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    \8\ See Rule 1000(a)(iii). There is currently one high-priced 
security listed on the Exchange, Berkshire Hathaway Inc. Class A 
(BRK-A). Automatic executions are also not available when trading in 
a security has been halted or if a block-sized transaction, as 
defined in Rule 127.10 that involves orders in the Exchange book is 
being reported manually. See Rule 1000(a)(i)-(ii).
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    Proposed Rule 13(a)(1)(A) would define certain terms for purposes 
of Market Orders. Specifically, because the Exchange is proposing to 
adopt rule text based on NYSE Arca Equities Rule 7.31P(a)(1), which 
uses terms defined in the NYSE Arca Equities rules, the Exchange 
proposes to add the following defined terms to Rule 13:
     Proposed Rule 13(a)(1)(A)(i) would define the term ``Away 
Market,'' for purposes of Market Orders, to mean any exchange with 
which the Exchange maintains an electronic linkage and which provides 
instantaneous responses to orders routed from the Exchange. This 
proposed definition is based on NYSE Arca Equities Rule 1.1(ffP), which 
defines the term ``Away Market'' to mean any exchange, alternative 
trading system (``ATS'') or other broker-dealer (1) with which the NYSE 
Arca Marketplace maintains an electronic linkage and (2) which provides 
instantaneous responses to order routed from the NYSE Arca Marketplace. 
Because the Exchange does not route to any ATSs or other broker-dealers 
for execution, the Exchange would not include a reference to ATSs or 
broker-dealers in its definition of Away Market.
     Proposed Rule 13(a)(1)(A)(ii) would define the term 
``NBBO'' to mean the national best bid or offer and the terms ``NBB'' 
to mean the national best bid and ``NBO'' to mean the national best 
offer. These proposed definitions are identical to those definitions in 
NYSE Arca Equities Rule 1.1(dd).
     Proposed Rule 13(a)(1)(A)(iii) would define the term 
``working price'' to mean the price at which an order is eligible to 
trade at any given time. This proposed definition is based on NYSE Arca 
Equities Rule 7.36P(a)(3), which defines the term ``working price'' to 
mean the price at which an order is eligible to trade at any given 
time, which may be different from the limit price or display price of 
the order. The Exchange does not propose to include the last clause of 
the NYSE Arca Equities definition because the Exchange is proposing the 
definition of working price only for purposes of Market Orders, which 
do not include a limit price and which are not displayed.
     Proposed Rule 13(a)(1)(A)(iv) would define the term 
``MPV'' to mean the minimum price variation for quoting and entry of 
orders as specified in Supplementary Material .10 to Rule 62. The 
Exchange uses the same pricing increments as NYSE Arca Equities.\9\
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    \9\ See NYSE Arca Equities Rule 7.6 (defining minimum price 
variation as $0.01, with the exception of securities that are priced 
less than $1.00, for which the MPV for quoting and entry is 
$0.0001).
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    Proposed Rule 13(a)(1)(B) would specify how a Market Order would 
operate during continuous trading. The Exchange would specify how 
Market Orders would participate in auctions in proposed Rule 
13(a)(1)(C), described in greater detail below.
    As proposed in Rule 13(a)(1)(B)(i), a Market Order would be 
rejected on arrival or cancelled if resting if there is no contra-side 
NBBO or if the best protected quotations are or become crossed. This 
proposed rule text is based on the second sentence of NYSE Arca 
Equities Rule 7.31P(a)(1), which provides that a Market Order must be 
designated Day and will be rejected on arrival or cancelled if resting 
if there is no contra-side NBBO. Because of technology differences 
between how the Exchange operates and how NYSE Arca Equities operates 
on the Pillar trading platform, the Exchange proposes that if protected 
quotations are or become crossed, the Exchange would reject newly 
arriving Market Orders or cancel resting unexecuted Market Orders.
    Proposed Rule 13(a)(1)(B)(ii) would provide that:
    On arrival, a Market Order to buy (sell) is assigned a working 
price of the NBO (NBB) and will trade with all sell (buy) orders on the 
Exchange priced at or below (above) the NBO (NBB) before routing to the 
NBO (NBB) on an Away Market. The quantity of a Market Order to buy 
(sell) not traded or routed will remain undisplayed on the Exchange at 
a working price of the NBO (NBB) and be eligible to trade with incoming 
sell (buy) orders at that price. When the NBO (NBB) is updated, the 
Market Order to buy (sell) will be assigned a new working price of the 
updated NBO (NBB) and will trade with all sell (buy) orders on the 
Exchange priced at or below (above) the updated NBO (NBB) before 
routing to the updated NBO (NBB) on an Away Market. Such assessment 
will continue at each new contra-side NBBO until the order is filled or 
a Trading Collar is reached. If the NBBO becomes locked or crossed 
either on arrival or while the order is held undisplayed, the Market 
Order to buy (sell) will be assigned a working price of the NBB (NBO).
    This proposed rule text is based on NYSE Arca Equities Rule 
7.31P(a)(1)(A), which provides:

    On arrival, a Market Order to buy (sell) is assigned a working 
price of the NBO (NBB) and will trade with all sell (buy) orders on 
the NYSE Arca Book priced at or below (above) the NBO (NBB) before 
routing to the NBO (NBB) on an Away Market. The quantity of a Market 
Order to buy (sell) not traded or routed will remain undisplayed on 
the NYSE Arca Book at a working price of the NBO (NBB) and be 
eligible to trade with incoming sell (buy) orders at that price. 
When the updated NBO (NBB) is displayed, the Market Order to buy 
(sell) will be assigned a new working price of the updated NBO (NBB) 
and will trade with all sell (buy) orders on the NYSE Arca Book 
priced at or below (above) the updated NBO (NBB) before routing to 
the updated NBO (NBB) on an Away Market. Such assessment will 
continue at each new contra-side NBBO until the order is filled or a 
Trading Collar is reached. If the NBBO becomes locked or crossed 
while the order if held undisplayed, the Market Order to buy (sell) 
will be assigned a working price of the NBB (NBO).

    The Exchange proposes a non-substantive difference to use the term 
``Exchange'' instead of ``NYSE Arca Book'' in proposed Rule 
13(a)(1)(B)(ii). The Exchange also proposes a change from the NYSE Arca 
Equities Rule to specify that a Market Order would be priced to the 
same-side NBBO when the NBBO is crossed both on arrival and when 
resting. To this point, as described above, if the protected quotations 
are crossed, a resting Market Order would be cancelled, which differs 
from current NYSE Arca Equities behavior. However,

[[Page 33280]]

if the NBBO is crossed, but the best protected quotations are not 
crossed, the Exchange would price the Market Order based on the same-
side NBBO, which is how Market Orders operate on NYSE Arca 
Equities.\10\ Finally, the Exchange proposes a change from the NYSE 
Arca Equities rule to provide that a Market Order will be assigned a 
new working price when the NBBO is updated, and not when an updated 
NBBO is displayed. The proposed Exchange functionality is identical to 
that of NYSE Arca Equities, but the Exchange believes its proposed rule 
language clarifies that it would incorporate updates to the NBBO based 
on executions at the Exchange that have not yet been displayed.
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    \10\ The NBBO may differ from the best protected quotations 
(``PBBO'') because the NBBO includes manual quotations, which are 
defined as any quotation other than an automated quotation. 17 CFR 
242.600(b)(37). By contrast, a protected quotation is an automated 
quotation that is the best bid or offer of a national securities 
exchange. 17 CFR 242.600(b)(57)(iii). In addition, when the Exchange 
routes interest to protected quotations, it adjusts the PBBO, but 
does not adjust the NBBO. See Securities Exchange Act Release No. 
74410 (March 2, 2015), 80 FR 12240 (March 6, 2015) (SR-NYSE-2015-
09).
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    Proposed Rule 13(a)(1)(B)(iii) would provide that unexecuted Market 
Orders that are held undisplayed in Exchange systems would not be 
available to the DMM either as part of aggregated interest at a price 
point or in disaggregated form and would not participate in intra-day 
manual executions. The Exchange proposes this rule text to reflect the 
Exchange's unique trading model, which, unlike NYSE Arca Equities, 
includes a DMM assigned to each security that trades on the 
Exchange.\11\ Unless otherwise specified, DMMs have access to specified 
order information while on the Trading Floor.\12\ Because unexecuted 
Market Orders would be held undisplayed at the contra-side NBBO, the 
Exchange proposes to treat such unexecuted orders similarly to other 
undisplayed orders and would not make information about them available 
to the DMM during intra-day trading. Accordingly, proposed Rule 
13(a)(1)(B)(iii) is based on Rule 70(f)(ii) regarding the information 
available to a DMM regarding a Non-Display Reserve e-Quote that has 
been designated to be excluded from the DMM. In addition, because 
information about unexecuted Market Orders would not be available to 
DMMs when the Exchange is open for continuous trading, the Exchange 
further proposes to provide that such orders would not participate in 
intra-day manual executions, i.e., executions facilitated by the DMM 
while on the Trading Floor.\13\
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    \11\ See Rule 2(i) (defining the term ``Designated Market 
Maker'' or ``DMM'' to mean an individual member, officer, partner, 
employee or associated person of a DMM unit who is approved by the 
Exchange to act in the capacity of a DMM).
    \12\ See Rule 104(j)(ii).
    \13\ By contrast, the Exchange proposes that the participation 
of Market Orders would not change for auctions on the Exchange, 
including that availability of Market Orders would be made known to 
the DMM. See proposed Rule 13(a)(1)(C)(ii). DMMs are responsible for 
facilitating openings and reopenings and the close of trading. To 
comply with this requirement, the Exchange makes available to DMMs 
and DMM unit algorithms aggregate order information. See NYSE Rule 
104(a)(2) and (3).
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    Proposed Rule 13(a)(1)(C) would specify how Market Orders would 
participate in auctions. Because auctions on the Exchange are 
facilitated by DMMs, the Exchange proposes that Market Orders that have 
not been assigned a working price based on the contra-side NBBO or, 
during a halt, pause or trading suspension, have not yet traded, would 
continue to participate in an auction as Market Orders currently do and 
would continue to be included in the information made available to DMMs 
and the public no differently than today. Accordingly, as proposed in 
Rule 13(a)(1)(C)(i), a Market Order that was entered before the opening 
of trading, or was entered before or during a halt, pause or suspension 
in trading, would be made available to the DMM as provided for in Rule 
104(a)(2) and (3) and would be included in Order Imbalance Information 
\14\ and allocated in the applicable auction as a Market Order. This 
would include all opening and reopening auctions,\15\ and closing 
auctions that follow a halt, pause or suspension in trading.\16\ In 
addition, if a Market Order arrives during continuous trading, is held 
undisplayed and assigned a working price, and then that security enters 
a halt or pause, such Market Order will revert and be considered an 
unpriced Market Order for purposes of allocation in the reopening 
auction.
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    \14\ See Rules 15(c) and 123C(6).
    \15\ See Rule 115A(a)(i).
    \16\ See Rule 123C(7).
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    By contrast, because a Market Order entered during continuous 
trading that remains unexecuted when the Exchange transitions to the 
closing transaction would have been assigned a working price, the 
Exchange proposes to handle such unexecuted Market Orders more 
similarly to a Limit Order in the closing transaction. Accordingly, as 
proposed in Rule 13(a)(1)(C)(ii), a Market Order that was entered 
during continuous trading and remains unexecuted for the close would be 
made available to the DMM as provided for in Rule 104(a)(3) and would 
be included in Order Imbalance Information and allocated in the closing 
transaction as a Limit Order with its limit price being the last 
working price assigned to the unexecuted Market Order.
    The Exchange proposes to address how short sale Market Orders would 
be allocated in an auction in proposed Rule 13(a)(1)(C)(iii). Similar 
to unexecuted Market Orders that would participate in the closing 
transaction as a Limit Order, during a Short Sale Period, as defined in 
Rule 440B(d), a short sale Market Order would also participate in any 
auction as a Limit Order, but with the limit price being the last 
Permitted Price before the applicable transaction. Accordingly, 
proposed Rule 13(a)(1)(C)(iii) would provide that during a Short Sale 
Period, as defined in Rule 440B(d), a short sale Market Order re-priced 
to a Permitted Price, as defined in Rule 440B(e), would be made 
available to the DMM as provided for in Rules 104(a)(2) and (3) and 
would be included in Order Imbalance Information and allocated in the 
applicable auction as a Limit Order. This proposed behavior would be 
applicable for any auction.\17\
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    \17\ This proposed behavior for short sale Market Orders on the 
Exchange is based on Commentary .01(a) to NYSE Arca Equities Rule 
7.35P, which provides that for purposes of pricing an auction and 
ranking orders for allocation in an auction, sell short Market 
Orders that are adjusted to a Permitted Price (as defined in Rule 
7.16P(f)) will be processed as Limit Orders ranked Priority 2-
Display Orders and will not be included in the Market Imbalance.
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    The Exchange also proposes to amend Rule 72 to specify how an 
unexecuted Market Order would be allocated. First, the Exchange 
proposes to amend Rule 72(c)(i), which currently provides that an 
automatically executing order will trade first with displayable bids 
(offers) and if there is insufficient displayable volume to fill the 
order, will trade next with non-displayable interest. The Exchange 
proposes to amend this rule to provide that an automatically executing 
order would trade first with any unexecuted Market Orders, which would 
be allocated in time priority, and then with displayable bids (offers).
    Second, the Exchange proposes to amend Rule 72(c)(iii), which 
currently describes how in any execution at the Exchange BBO, a 
participant who has established priority under Rule 72(a) will receive 
fifteen percent of the volume of such executed amount or a minimum of 
one round lot, whichever is greater, until such setting interest has 
received a complete execution of its eligible priority interest. The 
Exchange proposes to amend this rule text to add that such priority 
allocation would be

[[Page 33281]]

after any unexecuted Market Orders have been satisfied.
    Both of these proposed amendments to Rule 72(c) are based on NYSE 
Arca Equities Rule 7.31P(a)(1), which provides that unexecuted Market 
Orders are ranked Priority 1--Market Orders. As defined in NYSE Arca 
Equities Rule 7.36P(e), at each price point, unexecuted Market Orders 
that are ranked Priority 1--Market Orders have priority over all other 
same-side orders with the same working price. The Exchange proposes to 
provide similar priority ranking of unexecuted Market Orders, which 
would harmonize how Market Orders behave on the two markets.
    To further harmonize the behavior of Market Orders on the Exchange 
with the behavior of Market Orders on NYSE Arca Equities, the Exchange 
proposes to amend Rule 80C(a)(5)(A) regarding how Market Orders would 
be handled if they cannot be fully executed at or within the Limit Up-
Limit Down Price Bands.\18\ Currently, the Exchange would display the 
unexecuted portion of a buy (sell) market order at the Upper (Lower) 
Price Band if it cannot be fully executed at or within the Price Bands. 
The Exchange proposes to amend this Rule to provide that the Exchange 
would cancel the unexecuted portion of the buy (sell) market order if 
it cannot be fully executed at or within the Price Bands and would 
notify the member organization of the reason for such cancellation. 
This proposed rule text is based on NYSE Arca Equities Rule 
7.11P(a)(5)(A), which provides that any untraded quantity of Market 
Orders that cannot be traded at prices at or within the Price Bands 
will be cancelled and the ETP Holder will be notified of the reason for 
such cancellation. In addition, because the Exchange does not offer 
Market Pegging Interest, the Exchange proposes a non-substantive change 
to delete the text in Rule 80C(a)(5)(E) relating to Market Pegging 
Interest and replace it with the text ``Reserved.'' \19\
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    \18\ See Rule 80C.
    \19\ The Exchange also proposes a non-substantive amendment to 
Rule 80C(a)(5)(A) to capitalize the term ``Market Order.''
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    In addition, the Exchange proposes to harmonize the behavior of 
sell short Market Orders during a Short Sale Period with how such 
orders are handled on NYSE Arca Equities. Currently, Rule 440B(e) 
provides that short sale market orders will be re-priced by Exchange 
systems one minimum price increment above the current national best bid 
(``Permitted Price.''). Because the Exchange proposes that unexecuted 
Market Orders would not be displayed, the Exchange proposes to amend 
Rule 440B(e) to provide that any unexecuted or any unexecuted portion 
of a short sale Market Order re-priced to a Permitted Price would rest 
on the Exchange's Book and be non-displayed and that they would be re-
priced upward to a Permitted Price to correspond with a rise in the 
national best bid.\20\ This proposed rule change is based on NYSE Arca 
Equities Rule 7.16P(f)(5)(C), which provides that Market Orders will 
have a working price adjusted to a Permitted Price and will 
continuously adjust to a Permitted Price as the NBB moves both up and 
down.
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    \20\ The Exchange also proposes a non-substantive amendment to 
Rule 440B(e) to capitalize the term ``Market Order.''
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    The Exchange also proposes to amend how Trading Collars would 
operate for Market Orders. Because of technology differences between 
the Exchange and NYSE Arca Equities, the Exchange proposes to keep the 
current behavior for Trading Collars, which use the NBBO as a reference 
price, rather than adopt the NYSE Arca Equities manner of determining 
Trading Collars, which use the consolidated last sale price as the 
reference price. Currently, Rule 1000(c) provides that Trading Collars 
are applicable to incoming market orders. Because as proposed, Market 
Orders would be re-evaluated for an execution or routing opportunity 
with each update to the NBBO, the Exchange proposes to apply the 
Trading Collar evaluation with each evaluation to trade or route an 
unexecuted Market Order. Accordingly, the Exchange proposes to amend 
Rule 1000(c) to provide that an unexecuted Market Order would be 
subject to a Trading Collar upon each evaluation to trade or route such 
order.\21\
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    \21\ The Exchange also proposes a non-substantive amendment to 
Rule 1000(c) to capitalize the terms ``Market Order'' and ``Limit 
Order.''
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    Finally, the Exchange proposes to amend Supplementary Material .10 
to Rule 13 to specify how unexecuted Market Orders would be included in 
the definitions of ``best-priced sell interest'' and ``best-priced buy 
interest.'' These terms are used to describe how a Limit Order 
designated with an Add Liquidity Only (``ALO'') Modifier will be re-
priced when such Limit Order, at the time of entry, is marketable 
against Exchange interest or would lock or cross a protected 
quotation.\22\ Specifically, a Limit Order designated ALO that, at the 
time of entry, is marketable against Exchange interest will be re-
priced and displayed one MPV below the best-priced sell interest (for 
bids) or above the best-priced buy interest (for offers). Supplementary 
Material .10 to Rule 13 provides that the term best-priced sell (buy) 
interest refers to the lowest-priced sell (highest-priced buy) interest 
against which incoming buy (sell) interest would be required to execute 
with and/or route to, including Exchange displayed offers, Non-Display 
Reserve Orders, Non-Display Reserve e-Quotes, odd-lot sized sell (buy) 
interest, and protected offers (bids) on away markets, but does not 
include non-displayed sell (buy) interest that is priced based on the 
PBBO. The Exchange proposes to amend Supplementary Material .10 to Rule 
13 to add unexecuted Market Orders to the list of interest that would 
be included in the term ``best-priced sell interest'' and ``best-priced 
buy interest.'' Accordingly, if there is an unexecuted Market Order 
being held undisplayed at a price, an incoming opposite-side Limit 
Order designated ALO would be re-priced and displayed one MPV away from 
the working price of such unexecuted Market Order.
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    \22\ See Rule 13(e)(1)(B).
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Proposed Deletions
    The Exchange proposes to reduce complexity by reducing order type 
combinations that are infrequently used. As proposed, the Exchange 
proposes to eliminate the functionality to combine a Market Order with 
an IOC, buy ``minus,'' or sell ``plus'' instruction.
    First, to eliminate IOC instructions for Market Orders, the 
Exchange proposes to amend Rules 13(b)(3)(A) (renumbered as Rule 
13(b)(2)(A)) regarding Regulation NMS-compliant IOC Orders and 
13(b)(3)(B) (renumbered as Rule 13(b)(2)(B)) regarding NYSE IOC Orders 
to delete the references to Market Orders in the rule text. The 
Exchange further proposes to clarify Rule 13(b)(1) regarding the Day 
Modifier to specify that Market Orders can be designated Day, which is 
current functionality. The Exchange also proposes non-substantive, 
technical changes to change the subsection numbering from Rule 13(b)(3) 
to Rule 13(b)(2) and to capitalize the term ``Order'' in Rule 
13(b)(2)(A).
    Second, to eliminate tick sensitive instructions for Market Orders, 
the Exchange proposes to amend Rule 13(f)(4) to delete references to 
Market Orders and to make other non-substantive changes. Rule 
13(f)(4)(A) currently provides:

    A Market Order to sell ``plus'' is a Market Order to sell a 
stated amount of a stock provided that the price to be obtained is 
not lower than the last sale if the last sale was a ``plus'' or 
``zero plus'' tick, and is not lower than the last sale plus the 
minimum fractional change in the stock if the last sale

[[Page 33282]]

was a ``minus'' or ``zero minus'' tick. A Limit Order to sell 
``plus'' would have the additional restriction of stating the lowest 
price at which it could be executed.

    The Exchange proposes to delete references to Market Orders in the 
first sentence. In addition, the Exchange proposes to delete the last 
sentence and instead incorporate the concept of that sentence into the 
prior sentence. The proposed new rule text would provide:

    An order with an instruction to sell ``plus'' will not trade at 
a price [sic] lower than the last sale if the last sale was a 
``plus'' or ``zero plus'' tick, and is not [sic] lower than the last 
sale plus the minimum fractional change in the stock if the last 
sale was a ``minus'' or ``zero minus'' tick, subject to the limit 
price of an order, if applicable.

    The Exchange proposes a similar change to Rule 13(f)(4)(C), which 
currently provides:

    A Market Order to buy ``minus'' is a Market Order to buy a 
stated amount of a stock provided that the price to be obtained is 
not higher than the last sale if the last sale was a ``minus'' or 
``zero minus'' tick, and is not higher than the last sale minus the 
minimum fractional change in the stock if the last sale was a 
``plus'' or ``zero plus'' tick. A Limit Order to buy ``minus'' would 
have the additional restriction of stating the highest price at 
which it could be executed.

    The proposed new rule text, which would be set forth in Rule 
13(f)(4)(B), would provide:

    An order with an instruction to buy ``minus'' will not trade at 
a price [sic] higher than the last sale if the last sale was a 
``minus'' or ``zero minus'' tick, and is not [sic] higher than the 
last sale minus the minimum fractional change in the stock if the 
last sale was a ``plus'' or ``zero plus'' tick, subject to the limit 
price of an order, if applicable.

    The Exchange further proposes to streamline the rule by deleting 
current Rule 13(f)(4)(B) and combining it with current Rule 
13(f)(4)(D), which would be re-numbered as Rule 13(f)(4)(C).\23\ 
Proposed Rule 13(f)(4)(C) would also specify which orders may be 
combined with sell ``plus'' and buy ``minus'' instructions. 
Accordingly, as proposed, Rule 13(f)(4)(C) would provide:
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    \23\ Consistent with the proposed re-numbering of Rule 13(f)(4), 
current Rule 13(f)(4)(E) would be re-numbered as Rule 13(f)(4)(D), 
with no changes to the rule text.

    Sell ``plus'' and buy ``minus'' instructions are available for 
Limit Orders, LOO Orders, LOC Orders, and MOC Orders. Orders with a 
buy ``minus'' or sell ``plus'' instruction that are systemically 
delivered to Exchange systems will be eligible to be automatically 
executed in accordance with, and to the extent provided by, Rules 
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1000-1004, consistent with the order's instructions.

    As noted above, sell ``plus'' and buy ``minus'' instructions, also 
referred to as ``tick-sensitive instructions,'' are currently available 
for Market Orders, but are also available for MOO and LOO Orders \24\ 
and MOC and LOC Orders.\25\ The Exchange proposes to clarify proposed 
Rule 13(f)(4)(C) to specify which orders could include tick-sensitive 
instructions. As proposed, Limit Orders, LOO Orders, LOC Orders and MOC 
Orders would continue to be eligible to be combined with a tick-
sensitive instruction. As noted above, Market Orders would not be 
eligible to include tick-sensitive instructions, and the Exchange 
proposes to also exclude MOO Orders from including tick-sensitive 
instructions. To reflect these changes, the Exchange also proposes to 
amend Rule 13(c)(5) and Rule 115A(a)(1)(A) and (B) to delete references 
to tick-sensitive market and MOO orders. The Exchange also proposes a 
non-substantive amendment to Rule 115A(1)(A) to capitalize the term 
``Market Order.''
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    \24\ See Rule 115A(1)(A) and (B).
    \25\ See Rule 123C(7).
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* * * * *
    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce by Trader Update the 
implementation date.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\26\ in general, and 
furthers the objectives of Section 6(b)(5),\27\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, 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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    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because it would simplify how Market Orders 
would function on the Exchange by harmonizing the behavior of Market 
Orders with how they operate on the Pillar trading platform on NYSE 
Arca Equities. The Exchange further believes that the proposed changes 
would protect investors and the public interest because they are 
designed to prevent a Market Order from sweeping through multiple price 
points on the Exchange book, which may result in a Market Order 
executing at prices away from the prevailing quote. As proposed, a 
Market Order would be held undisplayed at the last contra-side NBBO 
price and wait for a pricing update before being eligible to trade or 
route again, thus reducing the potential for a Market Order to sweep 
through multiple price points on the Exchange's book. Instead, by 
waiting for updates to the NBBO before becoming eligible to trade 
again, a Market Order would have additional opportunity to route to 
Away Markets before sweeping through multiple price points on the 
Exchange's book.
    The Exchange further believes that eliminating IOC and tick-
sensitive instructions for Market Orders would remove impediments to 
and perfect a national market system by simplifying functionality and 
complexity of its order types. Specifically, these are order type 
combinations that are infrequently used. For example, year-to-date, the 
Exchange and its affiliated exchange NYSE MKT LLC (``NYSE MKT''), which 
has identical rules, have not received any MOO Orders with tick-
sensitive instructions, have not received any Market Orders with sell 
plus instructions, and have received only 17 Market Orders with buy 
minus instructions. Similarly, year-to-date, the Exchange and NYSE MKT 
have received only 20 Market Orders with IOC instructions. Accordingly, 
the Exchange believes that eliminating these order types would be 
consistent with the public interest and the protection of investors 
because investors will not be harmed and in fact would benefit from the 
removal of complex functionality.
    The Exchange further believes that deleting corresponding 
references in Exchange rules to deleted order types also would remove 
impediments to and perfect the mechanism of a free and open market by 
ensuring that members, regulators and the public can more easily 
navigate the Exchange's rulebook and better understand the orders types 
available for trading on the Exchange. Removing obsolete cross 
references also furthers the goal of transparency and adds clarity to 
the Exchange's rules.

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 change is not 
designed to address any competitive issue but

[[Page 33283]]

would rather harmonize the treatment of Market Orders between the 
Exchange and NYSE Arca Equities and remove complex functionality and 
obsolete cross-references, thereby reducing confusion and making the 
Exchange's rules easier to understand and navigate.

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) of the Act \28\ and Rule 19b-4(f)(6) thereunder.\29\ 
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.
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    \28\ 15 U.S.C. 78s(b)(3)(A).
    \29\ 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) \30\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\31\ 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 so that the proposal 
may become operative immediately upon filing. The Exchange believes 
that waiving the operative delay would promote the protection of 
investors and the public interest because the proposed rule change 
would reduce the potential for a Market Order to trade at prices away 
from the prevailing quote and at potentially worse prices for the 
investor. Likewise, the Exchange believes that eliminating IOC and 
tick-sensitive instructions for Market Orders, without delay, would be 
consistent with the protection of investors and the public interest 
because these instructions are rarely used and their elimination would 
simplify the Exchange's offering of order types. The Commission 
believes that the proposed rule change is consistent with the 
protection of investors and the public interest, because the proposal 
would diminish the likelihood of Market Orders trading at prices that 
would be disadvantageous to investors, and because it would simplify 
the Exchange's order types by eliminating rarely used complex order 
functionality. Accordingly, the Commission hereby waives the 30-day 
operative delay and designates the proposal operative upon filing.\32\
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    \30\ 17 CFR 240.19b-4(f)(6).
    \31\ 17 CFR 240.19b-4(f)(6)(iii).
    \32\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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) \33\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \33\ 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-NYSE-2016-35 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-NYSE-2016-35. 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-NYSE-2016-35 and should be 
submitted on or before June 15, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-12241 Filed 5-24-16; 8:45 am]
 BILLING CODE 8011-01-P