[Federal Register Volume 81, Number 163 (Tuesday, August 23, 2016)]
[Notices]
[Pages 57632-57634]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20062]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78601; File No. SR-NYSEArca-2016-113]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Extending the Pilot 
Period for the Exchange's Retail Liquidity Program

August 17, 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 August 8, 2016, NYSE Arca, Inc. (the

[[Page 57633]]

``Exchange'' or ``NYSE Arca'') 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 extend the pilot period for the Exchange's 
Retail Liquidity Program (the ``Retail Liquidity Program'' or the 
``Program''), which is currently scheduled to expire on August 31, 
2016, until December 31, 2016. 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 purpose of this filing is to extend the pilot period of the 
Retail Liquidity Program, currently scheduled to expire on August 31, 
2016, until December 31, 2016.
Background
    In December 2013, the Commission approved the Retail Liquidity 
Program on a pilot basis.\4\ The Program is designed to attract retail 
order flow to the Exchange, and allows such order flow to receive 
potential price improvement. The Program is currently limited to trades 
occurring at prices equal to or greater than $1.00 per share. Under the 
Program, Retail Liquidity Providers (``RLPs'') are able to provide 
potential price improvement in the form of a non-displayed order that 
is priced better than the Exchange's best protected bid or offer 
(``PBBO''), called a Retail Price Improvement Order (``RPI''). When 
there is an RPI in a particular security, the Exchange disseminates an 
indicator, known as the Retail Liquidity Identifier, indicating that 
such interest exists. Retail Member Organizations (``RMOs'') can submit 
a Retail Order to the Exchange, which would interact, to the extent 
possible, with available contra-side RPIs.
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    \4\ See Securities Exchange Act Release No. 71176 (December 23, 
2013), 78 FR 79524 (December 30, 2013) (SR-NYSEArca-2013-107) (``RLP 
Approval Order'').
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    The Retail Liquidity Program was approved by the Commission on a 
pilot basis. Pursuant to NYSE Arca Equities Rule 7.44(m), the pilot 
period for the Program was originally scheduled to end twelve months 
after the date of implementation. Because the Program was implemented 
on April 14, 2014, the first pilot period for the Program ended on 
April 14, 2015 and the Exchange extended the pilot period to August 31, 
2016.\5\ In 2015, the Exchange adopted NYSE Arca Equities Rule 7.44P, 
which will govern the Retail Liquidity Program when the Exchange 
implements its Pillar trading platform.\6\
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    \5\ The Exchange announced the implementation date by Trader 
Update, which is available here: https://www.nyse.com/publicdocs/nyse/notifications/trader-update/2014_04_07_Arca_RLP%20GO%20LIVE.pdf. See Securities Exchange Act 
Release No. 77425 (March 23, 2016), 81 FR 17523 (March 29, 2016) 
(SR-NYSEArca-2016-47).
    \6\ See Securities Exchange Act Release No. 76267 (Oct. 26, 
2015), 80 FR 66951 (Oct. 30, 2015) (SR-NYSEArca-2015-56) (``Pillar 
Approval Order'').
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Proposal To Extend the Operation of the Program
    The Exchange established the Retail Liquidity Program in an attempt 
to attract retail order flow to the Exchange by potentially providing 
price improvement to such order flow. The Exchange believes that the 
Program promotes competition for retail order flow by allowing Exchange 
members to submit RPIs to interact with Retail Orders. Such competition 
has the ability to promote efficiency by facilitating the price 
discovery process and generating additional investor interest in 
trading securities, thereby promoting capital formation. The Exchange 
believes that extending the pilot is appropriate because it will allow 
the Exchange and the Commission additional time to analyze data 
regarding the Program that the Exchange has committed to provide.\7\ As 
such, the Exchange believes that it is appropriate to extend the 
current operation of the Program.\8\ Through this filing, the Exchange 
seeks to amend NYSE Arca Equities Rule 7.44(m) and Rule 7.44P(m) and 
extend the current pilot period of the Program until December 31, 2016.
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    \7\ See RLP Approval Order, supra n. 4, 78 FR at 79529.
    \8\ Concurrently with this filing, the Exchange has submitted a 
request for an extension of the exemption under Regulation NMS Rule 
612 previously granted by the Commission that permits it to accept 
and rank the undisplayed RPIs. See Letter from Martha Redding, Asst. 
Corporate Secretary, NYSE Group, Inc. to Brent J. Fields, Secretary, 
Securities and Exchange Commission, dated August 8, 2016.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\9\ in general, and furthers the objectives of Section 6(b)(5),\10\ 
in particular, in that it is designed 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. The Exchange 
believes that extending the pilot period for the Retail Liquidity 
Program is consistent with these principles because the Program is 
reasonably designed to attract retail order flow to the exchange 
environment, while helping to ensure that retail investors benefit from 
the better price that liquidity providers are willing to give their 
orders. Additionally, as previously stated, the competition promoted by 
the Program may facilitate the price discovery process and potentially 
generate additional investor interest in trading securities. The 
extension of the pilot period will allow the Commission and the 
Exchange to continue to monitor the Program for its potential effects 
on public price discovery, and on the broader market structure.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 
simply extends an established pilot program for an additional six 
months, thus allowing the Retail Liquidity Program to enhance 
competition for retail order flow and contribute to the public price 
discovery process.

[[Page 57634]]

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 \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
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 \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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) \15\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\16\ 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 proposed 
rule change may become operative before the expiration of the current 
pilot period. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest, because waiver would allow the pilot period to continue 
uninterrupted after its current expiration date of August 31, 2016, 
thereby avoiding any potential investor confusion that could result 
from temporary interruption in the pilot program. For this reason, the 
Commission hereby waives the 30-day operative delay and designates the 
proposal operative upon filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2016-113 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-NYSEArca-2016-113. 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-NYSEArca-2016-113 and should 
be submitted on or before September 12, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-20062 Filed 8-22-16; 8:45 am]
 BILLING CODE 8011-01-P